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 September 1, 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
---------------------------------------------
(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 October 15, 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 September
1, 1996 and March 3, 1996 Page 3
Consolidated Statements of Operations for
the quarter and six months ended
September 1, 1996 and September 3,
1995 Page 4
Consolidated Statements of Stockholders'
Equity for the quarter and six months
ended September 1, 1996 and
September 3, 1995 Page 5
Consolidated Statements of Cash Flows for
the six months ended September 1,
1996 and September 3, 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
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 1, March 3,
ASSETS 1996 1996
============ ============
<S> <C> <C>
CURRENT ASSETS:
Cash $ 85,188 $ 71,242
Accounts receivable - net of allowance for doubtful accounts
of $30,000 at Sept 1, and March 3, 1996 343,619 282,182
Inventory 5,869,674 5,461,283
Prepaid expenses and other current assets 329,533 167,512
Due from related parties 960,220 527,694
------------ ------------
Total current assets 7,588,234 6,509,913
------------ ------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 5,460,924 5,461,146
Leaseholds and leasehold improvements 11,708,027 11,657,126
------------ ------------
17,168,951 17,118,272
Less accumulated depreciation and amortization 3,735,399 2,947,116
------------ ------------
Net property and equipment 13,433,552 14,171,156
Due from affiliate 327,655 318,005
Deposits and other assets 313,585 301,230
Deferred costs 120,981 115,358
Noncompete agreement - net of accumulated amortization of
$272,051 at Sept 1, 1996 and $232,535 at March 3, 1996 518,265 557,781
Deferred finance costs - net of accumulated amortization of
$22,120 at Sept 1, 1996 and $9,190 at March 3, 1996 107,175 120,105
------------ ------------
TOTAL $ 22,409,447 $ 22,093,548
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 6,025,307 $ 5,591,948
Accrued payroll, vacation and withholdings 469,480 703,785
Accrued expenses and other current liabilities 664,483 473,506
Revolving credit facility 1,000,000 1,000,000
Current portion of long term debt 1,200,000 1,200,000
------------ ------------
Total current liabilities 9,359,270 8,969,239
Long-term debt 4,800,000 5,400,000
Deferred credits 113,757 172,442
Deferred rents 682,099 553,429
------------ ------------
Total liabilities 14,955,126 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 Sept 1, and March 3, 1996 62,646 62,646
Additional paid-in capital 18,248,286 18,248,286
Accumulated deficit (10,856,611) (11,312,494)
------------ ------------
Total stockholders' equity 7,454,321 6,998,438
------------ ------------
TOTAL $ 22,409,447 $ 22,093,548
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND QUARTERS ENDED SEPTEMBER 1, 1996 AND SEPTEMBER 3, 1995
<TABLE>
<CAPTION>
13 weeks 14 weeks 26 weeks 27 weeks
ended ended Ended Ended
Sept. 1, Sept. 3, Sept. 1, Sept. 3,
1996 1995 1996 1995
============ ============ ============ ============
<S> <C> <C> <C> <C>
Sales $ 11,984,838 $ 11,481,525 $ 25,522,846 $ 23,584,884
Cost of sales 6,965,651 7,204,691 15,079,090 14,773,449
------------ ------------ ------------ ------------
Gross profit 5,019,187 4,276,834 10,443,756 8,811,435
Store operating, general and
administrative expense 4,462,869 4,000,009 9,118,595 7,998,989
Management fee 149,812 143,519 319,037 294,811
------------ ------------ ------------ ------------
Store operating profit 406,506 133,306 1,006,124 517,635
Non-store operating expense 80,894 154,595 169,112 279,166
------------ ------------ ------------ ------------
Operating profit 325,612 (21,289) 837,012 238,469
------------ ------------ ------------ ------------
Other income (expense)
Gain on sale of leasehold 1,001,397 0 1,001,397
Interest income 4,825 8,677 11,210 17,520
Other income (6,850) 0 (2,355) 0
Management fee income 0 0 0 50,000
Interest expense (186,970) (86,994) (364,991) (182,229)
------------ ------------ ------------ ------------
(188,995) 923,080 (356,136) 886,688
------------ ------------ ------------ ------------
Income from continuing operations
before income taxes 136,617 901,791 480,876 1,125,157
Provision for income taxes 10,987 67,500 24,993 70,000
------------ ------------ ------------ ------------
Income from continued operations 125,630 834,291 455,883 1,055,157
------------ ------------ ------------ ------------
Loss from discontinued operations 0 1,000 0 3,572
Net income $ 125,630 $ 833,291 $ 455,883 $ 1,051,585
============ ============ ============ ============
Income per share $ 0.04 $ 0.26 $ 0.14 $ 0.33
============ ============ ============ ============
Weighted average number of shares and
equivalents outstanding 3,151,000 3,185,000 3,151,000 3,185,000
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 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 March 3, 1996 3,132,289 62,646 18,248,286 (11,312,494) 6,998,438
Net income for 26 weeks
ended September 1, 1996 455,883 455,883
------------ ------------ ------------ ------------ ------------
Balance at September 1, 1996 3,132,289 $ 62,646 $ 18,248,286 $(10,856,611) $ 7,454,321
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 1, 1996 AND SEPTEMBER 3, 1995
26 weeks 27 weeks
ended ended
Sept 1, Sept 3,
1996 1995
=========== ===========
Net income $ 455,883 $ 1,051,585
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of leasehold 0 (1,001,397)
Depreciation and amortization 840,729 573,128
Changes in operating assets and liabilities:
Restricted cash 0 9,950
Accounts receivable - net (61,437) 130,370
Inventory (408,391) 10,215
Prepaid expenses and other current assets (162,021) (160,409)
Receivable from related party - net (432,526) (116,557)
Due from affiliate (9,650) (10,735)
Other assets (12,355) (84,694)
Deferred credits (64,308) 0
Accounts payable, trade 433,359 (770,494)
Accrued payroll, vacation and withholdings (234,305) 0
Accrued expenses and other current liabilities 190,977 171,350
Deferred rents 128,670 0
Net proceeds on sale of leasehold 0 1,604,660
----------- -----------
Net cash provided by operating activities 664,625 1,406,972
----------- -----------
Capital expenditures - net (50,679) (21,343)
----------- -----------
Net cash used in investing activities (50,679) (21,343)
----------- -----------
Repayments of bank loan (600,000) (1,276,316)
----------- -----------
Net cash used in financing activities (600,000) (1,276,316)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,946 109,313
CASH AND CASH EQUIVALENTS, begining of period 71,242 75,503
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 85,188 $ 184,816
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
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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") in New York City (thirteen are
located in Manhattan and two are located in Brooklyn). Fourteen are operated
under the Sloan's name and one is operated under the Gristede's name. 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 and six months ended September 3, 1995 to conform to the
presentation for the quarter and six months ended September 1, 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 six months ended:
September 1, 1996 September 3, 1995
----------------- -----------------
Interest $307,331 $191,129
Income taxes $ 29,471 $ 50,912
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 September 1, 1996
the Company is owed $327,655 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 were for
quarter and six months ended September 1, 1996 were $149,812 and $319,037,
respectively. For the quarter and six months ended September 3, 1995, management
fees were $143,519 and $294,811, respectively.
Red Apple periodically provides maintenance services for the Company which are
not covered by the management agreement. During both the quarter and six months
ended September 1, 1996, there were no such
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
2. RELATED PARTY TRANSACTIONS (Continued)
services rendered. During both the quarter and six months ended September 1,
1995, approximately $1,200 of such services were rendered.
Red Apple also operates 34 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 quarter and six months ended
September 1, 1996 were $1,283,769 and $2,633,630, respectively. For the quarter
and six months ended September 1, 1995, the purchases were $677,855 and
$1,390,644, 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 $58,171, respectively for the quarter and
six months ended September 1, 1996. For the quarter and six months ended
September 1, 1995, these legal fees were $79,000 and $153,000, respectively.
-9-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
For the quarter and six months ended
September 1, 1996 and September 3, 1995
FINANCIAL CONDITION
The Company's working capital deficiency decreased by approximately
$689,000 during the six months ended September 1, 1996, continuing a trend from
the previous quarter. The major changes in the components of working capital are
as follows:
Due from related parties increased by approximately $433,000, primarily
reflecting the billing for advertising income and volume achievement discounts
by Red Apple on behalf of the Company.
Inventory increased by approximately $408,000, reflecting management's
continued desire to take advantage of volume achievement allowances and bulk
purchases.
Accounts payable increased $433,000 primarily as a result of the increase
in inventory, while other current liabilities remained consistent with the prior
period.
Long term debt decreased by $600,000 reflecting scheduled principal
payments during the period.
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.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The quarter and six months ended September 1, 1996 contain the usual
thirteen and twenty-six weeks, respectively, compared to fourteen and
twenty-seven weeks, respectively, for the quarter and six months ended September
3, 1995.
The following table compares the major components of the results of
operations for the 1996 periods to the results for the 1995 periods:
Quarter Six months
------- ----------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
--------------
Sales $ 11,985 $ 11,482 $ 25,523 $ 23,585
Gross profit 5,019 4,277 10,444 8,811
Gross profit margin 41.9% 37.2% 40.9% 37.4%
Store operating expense 4,613 4,144 9,438 8,294
Non-store operating
expense 81 155 169 279
Other income (expenses) (189) 923 (356) 887
Net income 126 833 456 1,052
Net income was $125,630 for the quarter and $455,855 for the six months
ended September 1, 1996 compared to $833,291 for the quarter and $1,051,585 for
the six months ended September 3, 1995. However, excluding the gain of
$1,001,397 on the sale of a leasehold in the 1995 periods, the results of
operations for the quarter and six months ended September 3, 1995, would have
been a loss of $168,106 and a net income of $50,188, respectively.
Sales totaled $12.0 million for the quarter in 1996 compared to $11.5
million for the quarter in 1995. For the six months in 1996, sales were $25.5
million compared to $23.6 million for the six months in 1995. The increase in
total sales during both periods of 1996 was primarily due to the operation of
additional stores, which were purchased or opened during the third and fourth
fiscal quarters of 1996. Same store sales actually decreased approximately
$827,000 during the quarter and approximately $1.6 million during the six months
ended September 1, 1996 compared to the same periods in 1995 on a pro-rata,
thirteen and twenty-six weeks basis, respectively. The decrease in sales was
primarily due to management's decision to push up gross profit margins as well
as to a substantial reduction in beverage sales during the quarter in 1996 as
compared to the 1995 quarter. Beverage sales, which ordinarily represent
approximately 17.0% of summer sales, were negatively impacted by the abnormally
cool weather in the New York area.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
Gross profit as a percentage of sales increased to 41.9% for the quarter
in 1996 from 37.2% for the quarter in 1995 and to 40.9% for the six months in
1996 from 37.4% for the six months in 1995. Gross profit margins benefitted from
the implementation of a better-buying initiative, utilizing a distribution
center of an affiliate, thereby obtaining discounts on bulk purchases, and by
adjusting the product mix with an increased focus on selling higher margin
value-added products. Additionally, prices were selectively increased. The
overall positive impact of these measures on gross profit margins outweighs the
negative impact of decreased sales.
Store operating expenses were $4.6 million (38.5% of sales) for the
quarter in 1996 compared to $4.1 million (36.1% of sales) in the 1995 quarter.
For the six months in 1996, these expenses were $9.4 million (37.0% of sales)
compared to $8.3 million (35.2% of sales) for the six months in 1995. The
primary reasons for the increase in these expenses are the additional stores
operating in the 1996 periods and the extra costs associated with the start-up
of the new stores.
Non-store operating expenses decreased in both periods in 1996 compared to
1995, primarily reflecting lower legal fees.
During the 1996 periods, other income (expenses) consists primarily of
interest expense on the additional borrowings incurred to finance the purchase
of the stores in 1995. As noted above, during the 1995 periods, other income
(expenses) included a gain of $1.0 million on the sale of a leasehold in 1995.
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<PAGE>
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.
Item 6. Exhibits and Reports on Form 8-K
None.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
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: October 11, 1996
By: /s/ Mark S. Kassner
--------------------------------
Mark S. Kassner
Vice President and
Chief Financial Officer
Dated: October 11, 1996
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