SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
FOR FISCAL YEAR ENDED MARCH 2, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------------- ---------------
Commission File No. 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, NY 10019-3535
(Address of principal executive offices) (Zip code)
(212) 541-5534
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.02 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of May 22, 1997, 3,132,289 shares of the registrant's common stock, $0.02 par
value, were outstanding. The aggregate market value of the common stock held by
nonaffiliates of the registrant (i.e., excluding shares held by executive
officers, directors, and control persons as defined in Rule 405) on that date
was $4,374,371 computed at the closing price on that date.
Documents Incorporated by Reference: None
<PAGE>
ITEM 1. BUSINESS.
GENERAL
The Company is a Delaware corporation whose principal executive offices are
located at 823 Eleventh Avenue, New York, New York 10019-3535. Unless the
context otherwise requires, the terms "Company" or "Registrant" as used herein
refer to Sloan's Supermarkets, Inc. (which is a holding corporation) and its
wholly-owned subsidiaries.
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 supermarkets are located in Manhattan and one supermarket and one
health and beauty aids store is located in Brooklyn). The Company leases all of
its Supermarket locations.
The Company competes on the basis of providing customer convenience, service and
a wide assortment of food products, including those that are appealing to the
clientele in the neighborhoods where its Supermarkets are located. The Company's
Supermarkets, like most Manhattan supermarkets, are smaller than their suburban
counterparts, ranging in size from approximately 5,000 to 16,000 square feet of
selling space and averaging 9,700 square feet of selling space.
The Supermarkets offer, at competitive prices, broad lines of merchandise,
including nationally and regionally advertised brands, private label and generic
brands. Merchandise sold includes food items such as fresh meats, produce, dry
groceries, dairy products, baked goods, poultry and fish, fresh fruits and
vegetables, frozen foods, delicatessen and gourmet foods, as well as many
non-food items such as cigarettes, soaps, paper products, and health and beauty
aids. Check-cashing services are available to qualified customers holding
check-cashing cards and, for a small fee, the Company will deliver groceries to
a customer's apartment door. The Supermarkets accept payment by Mastercard,
Visa, American Express and Discover credit cards. All of the Supermarkets are
open fourteen hours per day, seven days a week and on holidays, including
Christmas, New Year's and Thanksgiving. Most of the Supermarkets close two hours
earlier on Sundays.
The Company's predecessor was incorporated in 1956 in New York. In 1985, the
Company's domicile was changed to Delaware by merging the predecessor
corporation into a newly formed Delaware corporation, incorporated for such
purpose. The Company became a public company in 1968 and listed its Common Stock
on the American Stock Exchange in 1972. Until 1992, the Company engaged in the
jewelry business, operating under the name Designcraft Industries, Inc. for most
of such time. The Company changed its name to Sloan's Supermarkets, Inc. in
September 1993 to reflect its current business.
2
<PAGE>
GROWTH STRATEGY
In May 1994, the Company completed its phase one store remodeling program, which
consisted of installation of new lighting fixtures, retiling of floors and
replacement of refrigeration equipment in its stores. The program was instituted
to improve the appearance of the Supermarkets, attract new customers, increase
overall customer satisfaction and thereby increase revenues and profitability.
The Company believes that its phase one store remodeling program, combined with
more effective merchandising, will continue to have a positive effect on the
Company's profitability.
In April of 1996, the Company began its phase two remodeling program, which
consists of installation of state of the art point of sale scanning terminals,
and automated ordering, merchandise receiving, and reporting equipment. Such
technology, when fully installed, is expected to increase gross margins, as well
as increase customer satisfaction by reducing check-out time. Phase two
remodeling also includes re-engineering certain stores by converting back
storage rooms into retail selling space and utilizing lower level space more
effectively for storage and replacing certain refrigeration with new more
energy-efficient units.
The Company may also expand its operations through acquisitions of supermarkets
and/or businesses which the Company believes would complement its core
supermarket business. The Company is continuing to pursue the possibility of
purchasing additional supermarkets from other companies owned by John
Catsimatidis.
ADMINISTRATION
Red Apple Group, Inc. ("Red Apple"), a corporation wholly owned and controlled
by Mr. Catsimatidis, supervises all operations of the Supermarkets pursuant to a
management agreement entered into in March 1993 (the "Management Agreement").
The initial term of the Management Agreement ran until March 19, 1994. The
current term expires on March 19, 1998. Unless terminated by either party, the
Management Agreement is automatically renewed for successive one-year terms. The
Management Agreement requires the Company to pay to Red Apple a quarterly fee
equal to 1-1/4% of all sales made in or from the Supermarkets and to reimburse
Red Apple for all reasonable expenses incurred by Red Apple in the performance
of services thereunder. Mr. Catsimatidis and Red Apple have over 20 years of
experience in operating supermarkets in the New York City metropolitan area
("NYC Area").
MARKETING
The Company advertises in local newspapers on a weekly basis. The Company's
advertising emphasizes competitive prices and variety of merchandise. Newspaper
advertising for the Supermarkets is frequently pooled with advertising for other
supermarkets which are not owned by the Company but which are operated by Red
Apple and its affiliates other than the Company under the Sloan's name. In such
cases, the Company pays a portion of such advertising expenses based upon the
number of Supermarkets and supermarkets of other companies covered in the
advertisements. The Company believes that the pooling arrangement provides
benefits to the Company because the size of typical advertisements with respect
to the Supermarkets that may be placed may be larger and the number of
advertisements that may be run may be greater as a result of the spreading of
advertising costs over a greater number of supermarkets. Some
3
<PAGE>
of the Company's vendors offer cooperative advertising allowances (in some
instances as part of a pooling arrangement with Red Apple and its affiliates),
which the Company receives for advertising particular products in its newspaper
advertisements.
COMPETITION
The Company's retail business is subject to intense competition, characterized
by low profit margins and requiring regular advertising. All of the Supermarkets
are in direct competition with Food Emporium, D'Agostino, A&P, Pathmark and
independent supermarket/grocery operators which do business under the names
"Pioneer", "Key Food" and "Associated", many of which are larger and have
substantially greater resources than the Company. Red Apple Supermarkets, Inc.,
Supermarket Acquisition Corp. ("SAC") and Gristede's Supermarkets, Inc., all
affiliates of Red Apple, operate an additional 34 stores in the NYC area, 13
under the tradename "Sloans", 20 under "Gristedes" and one under "Pioneer
Supermarkets". These affiliates of Red Apple also compete with the Company's
retail business. The Supermarkets also compete with other outlets which sell
products sold by supermarkets in New York City. Those outlets include gourmet
food stores, health and beauty aid stores, drug stores, produce stores, bodegas,
delicatessens and other retail food establishments. In addition, several of the
Company's competitors have announced plans to open larger stores.
SOURCES OF SUPPLY
During the fiscal year ended March 2, 1997, the Company obtained 45% of the
merchandise sold in its stores from one principal merchandise supplier, White
Rose Foods, and the balance from other vendors, none of which accounted for more
than 10% of merchandise purchased by the Company. The Company believes that its
supplier relationships are currently satisfactory. The Company is not dependent
on these supplier relationships since merchandise is readily available from
numerous sources under different brand names, subject to conditions affecting
food supplies generally.
ACQUISITION OF SUPERMARKETS
Eleven Supermarkets were acquired in March 1993 from CKMR Corporation ("CKMR"),
a privately-held corporation unaffiliated with the Company. The total
consideration paid by the Company for the acquisition of the Supermarkets (the
"Supermarket Acquisition") was approximately $13,800,000 including payment under
non-competition agreements with certain principals of CKMR and the assumption of
certain accounts payable of CKMR aggregating $5,000,000 which the Company agreed
to pay. The Company has paid virtually all of such assumed debt.
In October 1995, the Company acquired three Supermarkets from SAC. The total
consideration paid by the Company for the acquisition of the three Supermarkets
was $5,000,000 plus the cost of inventory. The purchase price was based on a
fair market evaluation performed by an independent third party. The acquisition
was financed by a new term loan from a bank in the amount of $7,000,000, which
also refinanced existing debt. An additional $1,000,000 line of credit was also
provided by the bank for working capital. The balance of this loan is
approximately $6,400,000 at March 2, 1997. (See Item 13. "Certain Relationships
and Related Transactions").
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<PAGE>
TRADENAME
At the closing of the Supermarket Acquisition, the Company entered into a
license agreement with SAC (the "License Agreement") under which the Company
obtained for a nominal consideration a non-exclusive license from SAC throughout
the NYC Area to use the name "Sloan's" in connection with the Company's
supermarket operations for a period of five years. The Sloan's name has an
established reputation in the areas served by the Supermarkets for convenience,
competitive prices, service and a wide variety of quality produce and
merchandise.
While the Company is not aware that its use of the tradename infringes upon the
rights of any persons, SAC has not obtained any federal or state trademark
registration for the tradename. The assertion by a third party of superior
rights in the tradename or the loss of the Company's right to use the tradename
could have a material adverse effect on the Company.
LABOR CONTRACTS
All of the employees of the Company other than three executives and 12 store
managers are represented by unions. The Company has entered into a collective
bargaining agreement with Retail, Wholesale & Chain Store Food Employees Union,
Local 338 and Amalgamated Meat Cutters and Retail Food Store Employees Union,
Local 342-50 for terms expiring on October 3, 1998 and October 23, 1999,
respectively. The Company has entered into collective bargaining agreements with
United Food and Commercial Workers International Union, Local 174 for a term
expiring on December 19, 1998.
GOVERNMENTAL APPROVALS
All of the stores have obtained all necessary governmental approvals, licenses
and permits to operate the Supermarkets.
EMPLOYEES
At May 22, 1997, the Company had approximately 385 employees. Other than for
three executive officers, all employees of the Company are employed at the
Supermarkets, and approximately 137 were employed on a full-time basis.
ITEM 2. PROPERTIES.
The Company leases all fifteen Supermarket locations. Eight of such leases
expire on dates from 2001 through 2010, and seven of such leases expire on dates
from 2013 through 2018. Thirteen of the Supermarkets are located in Manhattan
and two are located in Brooklyn, New York. The Supermarkets range in size from
approximately 5,000 to 16,000 square feet of selling space, averaging 10,500
square feet of selling space.
All of the stores are air-conditioned, have all necessary fixtures and equipment
and are suitable for the retail operations conducted thereat. The Company has
completed phase one of a remodeling program to refurbish the Supermarkets (see
Item 1. "Business - Growth Strategy").
5
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
In June 1994, the United States Federal Trade Commission (the "FTC") commenced
an action alleging that the mergers by John Catsimatidis, the Company and three
other entities controlled by Mr. Catsimatidis (collectively, the "companies") of
32 Sloan's Supermarkets between 1991 and 1993 violated Federal antitrust laws
because the effect of the mergers might be substantially to lessen competition
among supermarkets within four Manhattan residential neighborhoods. The
complaint indicated that the FTC could seek divestiture of up to ten
supermarkets owned by the companies.
In order to avoid the costs of protracted litigation in the matter and without
admitting that any antitrust law was violated as alleged in the complaint, on
November 21, 1994, the companies entered into a settlement agreement with the
Acting Director of the Bureau of Competition of the FTC regarding the claims
made by the FTC against them (the "Settlement Agreement"). The companies agreed
in the Settlement Agreement that within twelve months from the date of a final
order in the proceeding they would divest themselves of an aggregate of six
supermarkets in Manhattan, chosen by them from a list of sixteen supermarkets
specifically designated in the Settlement Agreement (none of which are owned by
the Company) and certain alternate supermarkets referenced in the Settlement
Agreement (five of which were then owned by the Company). Nothing in the
Settlement Agreement required the Company to divest itself of any of its
supermarkets, but divestiture of supermarkets owned by the Company would count
towards satisfaction of the divestiture obligations.
An order embodying the Settlement Agreement was made effective March 6, 1995
(the "Order"). Pursuant to that Order, for a period of 10 years from March 6,
1995, the companies cannot, without prior FTC approval, acquire any interest in
any existing supermarket in a designated area. The order does not restrict the
companies from acquiring an interest in a supermarket by leasing or purchasing a
new location that at the time of merger (and for six months prior to the merger)
is not being operated as a supermarket.
In March 1996, an application (the "Application") was made to modify the Order
so as to lift the divestiture requirements other than with respect to one store
on the Upper West Side which was not owned by the Company. The FTC approved the
divestiture of that store and its divestiture was completed on May 9, 1996. On
April 29, 1996, the Application was revised; and it was further revised in
August and September so as to seek relief solely with respect to the
requirements of divestiture of any supermarkets in the Chelsea section of
Manhattan.
On September 13, 1996, the FTC granted the Application as modified, and deleted
the requirements of divestiture in Chelsea. Simultaneously, the FTC appointed a
trustee to divest four supermarkets pursuant to the Order, as modified. The
trustee was not granted any authority to divest until the FTC approved a trustee
agreement between the trustee and the companies. An agreement was entered into
with the trustee which would have been effective upon approval by the FTC.
Subsequent to the modification of the Order, SAC, Gristede's and RAS sold an
aggregate of four stores in compliance with the divestiture provisions of the
Order, as modified. Based thereon, the trustee agreement will not become
effective.
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<PAGE>
A settlement of FTC claims relating to the divestiture provisions of the Order
has been agreed to pursuant to which $600,000 has been paid to the FTC. No
portion of such amount was borne by the companies.
On August 8, 1994, a lawsuit against the Company and Mr. Catsimatidis was
instituted in the United States District Court for the Southern District of New
York by RMED International, Inc. ("RMED"), a former stockholder of the Company.
The complaint alleges, among other things, that RMED and a purported class
consisting of persons who purchased the Company's common stock on or after March
19, 1993 were damaged by alleged nondisclosures in certain filings made by the
Company with the Securities and Exchange Commission between January 1993 and
June 1994 relating to an investigation by the FTC. The complaint alleges that
such nondisclosures constituted violations of Federal and New York State
securities laws, as well as common law fraud and seeks damages (including
punitive damages) in an unspecified amount (although in discovery proceedings
the named plaintiff has claimed that its damages were approximately $800,000),
as well as costs and disbursements of the action. On June 2, 1994, the Company
issued a press release which disclosed the FTC action.
On September 30, 1994, the defendants filed a motion to dismiss for failure
to state a cause of action and for lack of subject matter jurisdiction over the
state claims. The motion was denied. In June 1995, RMED filed a motion for class
certification, and discovery was held in abeyance pending disposition of that
motion. The motion was granted in March 1996 and discovery is now proceeding.
Management believes that the lawsuit is without merit and intends to defend the
action vigorously; however, the outcome cannot be determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
NONE
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is listed and traded on the American Stock Exchange
under stock symbol "SLO." For the two fiscal years ended March 2, 1997 and March
3, 1996, the quarterly high and low price range for such common stock is shown
in the following tabulation:
1997 1996
- --------------------------------------------------------------------------------
Quarter High Low High Low
- --------------- ------------------------------ --------------------------------
First 3-3/4 2-7/8 5-1/4 4-1/16
Second 3-1/2 2-1/2 5-3/4 3-5/8
Third 3-3/8 2-1/4 5 3-5/8
Fourth 3-1/16 1-7/8 4 3-1/8
- --------------------------------------------------------------------------------
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<PAGE>
The approximate number of holders of record of the Company's Common Stock on May
22, 1997 was 236. The Company believes that there are a significant number of
shares of the Company's Common Stock held in street name and, consequently, the
Company is unable to determine the actual number of beneficial owners.
The Company has never paid a cash dividend on its Common Stock and does not
expect to pay a cash dividend in the near future.
Under its Loan and Security Agreement with European American Bank ("EAB"), the
Company is restricted from paying dividends on its Common Stock so long as there
is outstanding indebtedness to EAB. As of March 2, 1997, the outstanding
indebtedness to EAB under the agreement was approximately $6,400,000.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997
(49 weeks) (52 weeks) (53 weeks) (52 weeks)
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Sales ......................................... -- $ 44,975 $ 48,367 $ 50,279 51,793
Cost of sales ................................. -- 29,591 30,919 31,036 31,184
- -----------------------------------------------------------------------------------------------------------------------------------
Gross profit ......................... -- 15,384 17,448 19,243 20,609
Store operating, general and
administrative expenses .................. -- 14,172 15,624 16,811 17,740
Management fee ................................ -- 562 605 629 645
- -----------------------------------------------------------------------------------------------------------------------------------
Store operating profit ............... -- 650 1,219 1,803 2,224
Nonstore operating expense .................... -- 266 395 414 288
- -----------------------------------------------------------------------------------------------------------------------------------
Operating profit ..................... -- 384 824 1,389 1,936
- -----------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income .......................... 149 24 34 37 23
Other income (expense) ................... (524) 28 7 17 (41)
Interest expense ......................... -- (342) (405) (551) (710)
Gain on sale of leasehold
interests ............................ -- -- -- 1,001 --
- -----------------------------------------------------------------------------------------------------------------------------------
(375) (290) (364) 504 (728)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
provision for
income taxes,
discontinued
operations and
extraordinary
item(1) ......................... (375) 94 460 1,893 1,208
Provision for income taxes .................... -- 10 80 62 48
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
discontinued
operations and
extraordinary
item(1) ......................... (375) 84 380 1,831 1,160
Income (loss) from discontinued
operations ............................... (296) 78 (18) -- --
Extraordinary item(1) ......................... -- -- -- (89) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ............................. $ (671) $ 162 $ 362 $ 1,742 $ 1,160
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) per share of
common stock:
Before discontinued
operations and
extraordinary item ............. $ (.16) $ .03 $ .13 $ .58 $ .37
Discontinued operations .............. (.12) .03 (.01) -- --
Extraordinary item(1) ................ -- -- -- (.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
$ (.28) $ .06 $ .12 $ .55 $ .37
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividend paid ............................ $ -- $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance sheet data:
Working capital (deficit) ................ $ 3,336 $ (3,241) $ (3,025) $ (2,458) $ (1,087)
Total assets ............................. 4,332 17,624 16,391 22,094 22,815
Long-term debt ........................... -- 4,158 2,743 5,400 4,200
Stockholders' equity ..................... 3,957 4,119 5,256 6,998 8,158
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
- --------
1 Extraordinary item is a loss on early extinguishment of long-term debt.
</FN>
</TABLE>
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
COMPANY BACKGROUND
The fiscal year ended February 26, 1995 consisted of 52 weeks. The fiscal year
ended March 3, 1996 consisted of 53 weeks. The fiscal year ended March 2, 1997
consisted of 52 weeks.
RESULTS OF OPERATIONS (1997 COMPARED TO 1996)
Net income was $1,159,678 for the fiscal year ended March 2, 1997 as compared to
$1,742,266 for the fiscal year ended March 3, 1996. The 1996 income included a
gain of $1,001,397 on the sale of the leasehold of one supermarket during the
year.
Sales for the 1997 fiscal year were $51,792,539 as compared to $50,279,245 for
fiscal year 1996. The increase in sales was primarily due to the fact that three
stores acquired during 1996 were open for the entire 1997 year, as well as the
opening of two additional stores at the beginning of the 1997 year. The increase
in sales generated by the additional stores was partially offset by the fact
that the prior year consisted of 53 weeks as compared with 52 weeks in 1997 as
well as a decline in same store sales of $3,949,350 (after adjusting 1996 same
store sales downward to reflect a comparable 52 week period). Same store sales
declined due to (a) management's decision to seek higher margins over sales, (b)
a decrease in the selling price of cereals and (c) a reduction in beverage sales
during the summer months of 1997 as compared to the same period in 1996.
Beverage sales, which ordinarily represent approximately 17% of summer sales,
were negatively impacted by the abnormally cool weather in the New York area.
Gross profit was $20,608,413 (39.79% of sales) in 1997 as compared to
$19,243,125 (38.27% of sales) in 1996. The improvement in the 1997 period mainly
reflects the implementation of the better buying program utilizing the
distribution center of an affiliate to make bulk purchases, on a direct basis at
better prices, as well as the expansion of the sales of value-added, higher
margin products. Additionally, prices were selectively increased.
Store operating, general and administrative expenses were $17,739,680 in 1997
(34.25% of sales) as compared to $16,811,184 (33.44% of sales) in 1996. The
primary reasons for the increase were the expenses associated with the
additional stores operating in the 1997 year and the extra costs incurred with
the start-up of the new stores.
Nonstore operating expense decreased to $287,966 in 1997 as compared to $414,165
in 1996, mainly as a result of lower legal expense.
Interest expense was $709,454 in 1997 as compared with $551,631 in 1996. The
increase is attributable to the additional borrowing incurred to finance the
purchase of the three stores acquired during fiscal 1996.
RESULTS OF OPERATIONS (1996 COMPARED TO 1995)
Net income was $1,742,266 for the year ended March 3, 1996 compared to $362,088
for the year ended February 26, 1995. The 1996 income includes a gain of
$1,001,397 on the sale of the leasehold of one of its supermarkets during the
year.
10
<PAGE>
Sales in 1996 were $50,279,245 compared to $48,366,513 in 1995. The increase in
sales is primarily due to 1996 having 53 weeks compared to 52 weeks in 1995 and
the fact that three additional stores were operated for part of 1996.
Gross profit was $19,243,125 (38.27%) in 1996 compared to $17,447,668 (36.07%)
in 1995. Gross profit has continued to increase as a result of improved cost
controls, more efficient inventory purchasing and a better product mix.
Advertising and volume achievement allowances from vendors continued to be a
significant portion of gross profit. During 1996, the Company recognized as
income approximately $1,141,000 of these allowances from vendors compared to
approximately $1,350,000 during 1995. This decrease is primarily the result of
fewer new products being introduced by vendors during fiscal 1996 as compared to
fiscal 1995. The deferred portion of the advertising income was approximately
$172,000 at March 3, 1996 compared to approximately $354,000 at February 26,
1995.
Store operating, general and administrative expenses increased to $16,811,184 in
1996 from $15,623,576 in 1995. As a percentage of sales, these expenses were
33.4% and 32.3% for 1996 and 1995, respectively. The increase is primarily due
to additional depreciation and amortization applicable to the Supermarkets
acquired, the additional costs incurred in opening the new Supermarket and
additional payroll costs associated with a new union contract, which took effect
during fiscal 1996.
Nonstore operating expenses increased to $414,165 in 1996 compared to $395,400
in 1995. As a percentage of sales, nonstore operating expenses remained fairly
constant. Interest expense increased to $551,631 in 1996 from $406,193. The
increase is primarily the result of the additional bank loan for the purchase of
the three Supermarkets.
LIQUIDITY AND CAPITAL RESOURCES
During the fiscal year ended March 2, 1997, the Company reduced its working
capital deficiency by approximately $1,373,000 and reduced its long-term debt by
$1,200,000.
Sales and gross profits have increased in each of the last three years and
management anticipates that this trend will continue, along with the continued
generation of significant cash flows from operations.
INFLATION
The Company does not believe that inflation has had, or will have in the
foreseeable future, a material impact upon the Company's operating results.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page No.
--------
Report of independent certified public accountants F-1
Consolidated financial statements:
Balance sheets F-2 - F-3
Statements of operations F-4
Statements of stockholders' equity F-5
Statements of cash flows F-6
Notes to consolidated financial statements F-7 - F-24
12
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders of
Sloan's Supermarkets, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Sloan's
Supermarkets, Inc. and subsidiaries as of March 2, 1997 and March 3, 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended March 2, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sloan's
Supermarkets, Inc. and subsidiaries as of March 2, 1997 and March 3, 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended March 2, 1997, in conformity with generally accepted
accounting principles.
May 30, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
Sloan's Supermarkets, Inc.
and Subsidiaries
Consolidated Balance Sheets
March 2, 1997 March 3, 1996
----------- -----------
<S> <C> <C>
Assets
Current:
Cash $ 70,237 $ 71,242
Accounts receivable - net of allowance for doubtful accounts of
$30,000 in both years ............................................................ 501,916 282,182
Inventory ........................................................................... 5,873,991 5,461,283
Prepaid expenses and other current assets ........................................... 299,887 167,512
Due from related parties ............................................................ 1,830,127 527,694
----------- -----------
Total current assets ........................................................... 8,576,158 6,509,913
----------- -----------
Property and equipment:
Furniture, fixtures and equipment ................................................... 5,466,456 5,461,146
Leasehold interests and improvements ................................................ 11,704,425 11,657,126
----------- -----------
17,170,881 17,118,272
Less: Accumulated depreciation and amortization .................................... 4,527,506 2,947,116
----------- -----------
Net property and equipment ..................................................... 12,643,375 14,171,156
----------- -----------
Due from affiliates .................................................................... 337,304 318,005
----------- -----------
Deposits and other assets .............................................................. 313,585 301,230
----------- -----------
Deferred costs ......................................................................... 115,489 115,358
----------- -----------
Noncompete agreement - net of accumulated amortization of
$311,567 and $232,535, respectively ................................................. 478,749 557,781
----------- -----------
Deferred finance costs - net of accumulated amortization of
$35,048 and $9,190, respectively .................................................... 350,801 120,105
----------- -----------
$22,815,461 $22,093,548
----------- -----------
See accompanying notes to consolidated financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
Sloan's Supermarkets, Inc.
and Subsidiaries
Consolidated Balance Sheets
March 2, 1997 March 3, 1996
------------ ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current:
Accounts payable, trade ......................................................... $ 6,593,412 $ 5,591,948
Accrued payroll, vacation and withholdings ...................................... 491,857 703,785
Accrued expenses and other current liabilities .................................. 377,431 473,506
Revolving credit facility ....................................................... 1,000,000 1,000,000
Current portion of long-term debt ............................................... 1,200,000 1,200,000
------------ ------------
Total current liabilities .................................................. 9,662,700 8,969,239
Long-term debt ..................................................................... 4,200,000 5,400,000
Deferred credits ................................................................... -- 172,442
Deferred rent ...................................................................... 794,645 553,429
------------ ------------
Total liabilities .......................................................... 14,657,345 15,095,110
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $50 par - shares authorized 500,000; none
issued ....................................................................... -- --
Common stock, $0.02 par - shares authorized 10,000,000;
outstanding 3,132,289 ........................................................ 62,646 62,646
Additional paid-in capital ...................................................... 18,248,286 18,248,286
Accumulated deficit ............................................................. (10,152,816) (11,312,494)
------------ ------------
Total stockholders' equity ................................................. 8,158,116 6,998,438
------------ ------------
$ 22,815,461 $ 22,093,548
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
Sloan's Supermarkets, Inc.
and Subsidiaries
Consolidated Statements of Operations
March 2, March 3, February 26,
Year ended 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Sales ............................................................ $ 51,792,539 $ 50,279,245 $ 48,366,513
Cost of sales .................................................... 31,184,126 31,036,120 30,918,845
------------ ------------ ------------
Gross profit ............................................. 20,608,413 19,243,125 17,447,668
Store operating, general and administrative
expenses ...................................................... 17,739,680 16,811,184 15,623,576
Management fee ................................................... 644,811 628,491 604,582
------------ ------------ ------------
Store operating profit ................................... 2,223,922 1,803,450 1,219,510
Nonstore operating expense ....................................... 287,966 414,165 395,400
------------ ------------ ------------
Operating profit ......................................... 1,935,956 1,389,285 824,110
------------ ------------ ------------
Other income (expense):
Interest income ............................................... 22,581 36,671 34,364
Other income (expenses) - net ................................. (41,072) 17,218 7,365
Interest expense .............................................. (709,454) (551,631) (406,193)
Gain on sale of leasehold interests ........................... -- 1,001,397 --
------------ ------------ ------------
(727,945) 503,655 (364,464)
------------ ------------ ------------
Earnings before provision for income
taxes, discontinued operations and
extraordinary item .................................... 1,208,011 1,892,940 459,646
Provision for income taxes ....................................... 48,333 62,000 80,059
------------ ------------ ------------
Earnings before discontinued operations
and extraordinary item ................................ 1,159,678 1,830,940 379,587
Loss from discontinued operations ................................ -- -- (17,499)
Extraordinary loss on early extinguishment of
long-term debt ................................................ -- (88,674) --
------------ ------------ ------------
Net income ....................................................... $ 1,159,678 $ 1,742,266 $ 362,088
------------ ------------ ------------
Income (loss) per share of common stock:
Earnings before discontinued operations and ................... $ .37 $ .58 $ .13
extraordinary item
Discontinued operations ....................................... -- -- (.01)
Extraordinary item ............................................ -- (.03) --
------------ ------------ ------------
$ .37 $ .55 $ .12
------------ ------------ ------------
Weighted average common shares outstanding ....................... 3,132,000 3,171,000 2,919,000
============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Sloan's Supermarkets, Inc.
and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years ended March 2, 1997, March 3, 1996 and February 26, 1995
Common stock
------------------------------- Additional Total
Number of paid-in Accumulated Stockholders'
shares Amount capital deficit Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, February 27, 1994 ......... 2,397,605 $ 47,952 $ 15,850,610 $(11,779,478) $ 4,119,084
Exercise of stock options .......... 450,000 9,000 766,000 -- 775,000
Declaration of 10% stock
dividend ........................ 284,684 5,694 1,631,676 (1,637,370) --
Net income ......................... -- -- -- 362,088 362,088
------------ ------------ ------------ ------------ ------------
Balance, February 26, 1995 ......... 3,132,289 62,646 18,248,286 (13,054,760) 5,256,172
Net income ......................... -- -- -- 1,742,266 1,742,266
------------ ------------ ------------ ------------ ------------
Balance, March 3, 1996 ............. 3,132,289 62,646 18,248,286 (11,312,494) 6,998,438
Net income ......................... -- -- -- 1,159,678 1,159,678
------------ ------------ ------------ ------------ ------------
Balance, March 2, 1997 ............. 3,132,289 $ 62,646 $ 18,248,286 $(10,152,816) $ 8,158,116
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
Sloan's Supermarkets, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
Year ended March 2, March 3, February 26,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .......................................................... $ 1,159,678 $ 1,742,266 $ 362,088
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of leasehold interests ............................ -- (1,001,397) --
Depreciation and amortization .................................. 1,699,677 1,279,604 976,505
Extraordinary loss on early extinguishment of long-term
debt ........................................................ -- 88,674 --
Changes in operating assets and liabilities, net of effect
from acquisition of supermarkets:
Restricted cash .......................................... -- 26,952 6,323
Accounts receivable - net ................................ (219,734) (5,334) 262,758
Inventory ................................................ (412,708) (826,866) (318,607)
Prepaid expenses and other current assets ................ (132,375) 60,553 94,640
Due from related parties - net ........................... (1,302,433) (313,874) 237,485
Receivable from officer .................................. (19,299) (20,788) (17,906)
Other assets ............................................. (12,355) (34,084) (73,119)
Deferred credits ......................................... -- (5,605) 121,677
Accounts payable, trade .................................. 1,001,464 (269,174) 277,935
Accrued payroll, vacation and withholdings ............... (211,928) 112,836 (163,920)
Accrued expenses and other current liabilities ........... (96,075) 278,296 (268,061)
Accrued rent leveling .................................... 241,216 215,471 28,678
Other credits ............................................ (172,442) (181,213) (148,447)
--------- --------- ---------
Net cash provided by operating activities .............. 1,522,686 1,146,317 1,378,029
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of leaseholds - net .............................. -- 1,708,293 --
Acquisition of new stores ........................................... -- (5,781,000) --
Capital expenditures - net .......................................... (52,609) (763,527) (393,563)
--------- --------- ---------
Net cash used in investing activities .................. (52,609) (4,836,234) (393,563)
--------- --------- ---------
Cash flows from financing activities:
Deferred financing costs ............................................ (271,082) (118,730) --
Repayments of bank loan ............................................. (1,200,000) (4,195,614) (1,089,912)
Proceeds from bank loan ............................................. -- 8,000,000 --
--------- --------- ---------
Net cash provided by (used in) financing
activities .......................................... (1,471,082) 3,685,656 (1,089,912)
--------- --------- ---------
Net decrease in cash ................................................... (1,005) (4,261) (105,446)
Cash, beginning of year ................................................ 71,242 75,503 180,949
--------- --------- ---------
Cash, end of year ...................................................... $ 70,237 $ 71,242 $ 75,503
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................. $ 709,727 $ 551,608 $ 405,797
Cash paid for taxes ................................................. 52,971 46,080 155,499
--------- --------- ---------
Noncash transactions:
Exercise of cash options ............................................ $ -- $ -- $ 775,000
--------- --------- ---------
See accompanying notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
1. Business The operations of Sloan's Supermarkets, Inc. and
subsidiaries ("Sloan's" or the "Company") have
historically consisted of the manufacture of cast
component parts for the fine jewelry industry. The
Company changed its name from Designcraft
Industries, Inc. to its present name in 1993.
As a result of the sale of the assets of its
remaining jewelry businesses, the Company no
longer operates in the fine jewelry manufacturing
business. On March 19, 1993, Namdor Inc.
("Namdor"), a wholly-owned subsidiary of the
Company, purchased certain assets relating to 11
supermarkets in the New York metropolitan area
(the "Supermarkets") from CKMR Corporation. The
purchased assets included machinery and equipment,
furniture, fixtures, leasehold improvements,
inventory of supplies and merchandise located at
the Supermarkets and a noncompete agreement
(amortized on a straight-line basis over 10 years
- the life of the agreement). The net cash price
for the assets and the noncompete agreement was
approximately $8.8 million. In addition, at the
time of the purchase, Namdor assumed certain
accounts payable of the business's prior owners in
an amount of $5,000,000.
The acquisition of the Supermarkets by the Company
has been accounted for as a purchase transaction
in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations". As such,
the purchase price has been allocated to assets
acquired and liabilities assumed based on their
estimated fair values. The excess of the fair
value of assets acquired less liabilities assumed
over cost has been allocated to reduce
proportionately the values assigned to noncurrent
assets in determining their fair values.
On October 13, 1995, the Company purchased three
supermarket store locations including furniture
and fixtures, leasehold improvements and inventory
from a company owned by the Chairman of the Board.
The purchase price of $5,000,000 was based on a
fair market evaluation performed by an independent
third party. Such acquisition was financed with a
term loan. In addition, the Company purchased
inventory at the locations at a cost of $781,000.
F-7
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
On August 29, 1995, the Company sold one store
leasehold to a third party for approximately $1.7
million. The sale resulted in a net gain of
approximately $1.0 million. The store's
supermarket equipment was transferred to a new
store location which was opened during February
1996. In addition, the Company opened its first
health and beauty aid store during March 1996. As
of the date of this report, the Company operates
14 supermarkets and one health and beauty aid
store.
2. Summary of PRINCIPLES OF CONSOLIDATION
Significant
Accounting Policies The consolidated financial statements include the
accounts of Sloan's Supermarkets, Inc. and its
wholly-owned subsidiaries. All material
intercompany accounts and transactions have been
eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year is comprised of 52 or 53
weeks ending on the Sunday closest to the last day
of February. The 1997 year consisted of 52 weeks,
1996 of 53 weeks and 1995 of 52 weeks.
INVENTORIES
Store inventories are valued principally at the
lower of cost or market with cost determined under
the retail 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, with lives
ranging from seven to ten years. Leasehold
improvements are amortized over the shorter of
their estimated useful lives or the lease term by
the straight-line method.
F-8
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(a) 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.
Included in income for the fiscal year ended
February 26, 1995 are benefits of $143,000,
related to charges taken in the prior fiscal year
for deferred rents.
(b) DEFERRED ADVERTISING
Advertising rebates and space allocation
allowances are deferred and recognized over the
period of the agreement.
INCOME PER SHARE
Per share data are based on the weighted average
number of shares of common stock and common stock
equivalents outstanding during each year. Income
(loss) per share is computed by the treasury stock
method; primary and fully diluted income (loss)
per share are the same. The 10% stock dividend in
fiscal 1995 has been retroactively applied to all
periods presented.
INCOME TAXES
The Company follows Statement of Financial
Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"), which requires a
liability method of accounting for income taxes.
Under the liability method, deferred income taxes
are recognized for the tax consequences of
"temporary differences" by applying applicable
statutory tax rates to differences between the
financial statement carrying amounts and the tax
bases of existing assets and liabilities.
The Company files a consolidated Federal income
tax return that includes the accounts of its
subsidiaries. The Company and its subsidiaries
file separate state and local income tax returns.
F-9
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of financial instruments
including cash, accounts receivable, accounts
payable and due from related parties approximate
fair value at March 2, 1997 and March 3, 1996
because of the relative short maturities of these
instruments.
The aggregate fair value of the bank debt
approximates its carrying amount because of its
recent and frequent repricing based upon market
conditions.
RECLASSIFICATIONS
Certain reclassifications have been made to the
presentations for fiscal 1996 and 1995 to conform
to the presentation for fiscal 1997.
ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported amounts
of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
LONG-LIVED ASSETS
During 1995, Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to
Be Disposed Of" ("SFAS 121"), was issued. SFAS 121
requires the Company to review long-lived assets
and certain identifiable assets related to those
assets for impairment whenever circumstances and
situations change such that there is an indication
that the carrying amounts may not be recoverable.
If the undiscounted future cash flows of the
enterprise are less than their carrying amounts,
their carrying amounts are reduced to fair value
and an impairment loss is recognized. The adoption
of this pronouncement in fiscal 1997 did not have
a significant impact on the Company's financial
statements.
F-10
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
STOCK OPTIONS
The Company accounts for all transactions under
which employees receive shares of stock or other
equity instruments in the Company or the Company
incurs liabilities to employees in amounts based
on the price of its stock in accordance with the
provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to
Employees". The Company has not adopted the fair
value method encouraged but not required by
Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation".
Appropriate pro forma and other information has
been included herein.
3. Related Party The Company has advanced funds to companies owned
Transactions by the Chairman of the Board who is also the
principal stockholder of the Company. As of March
2, 1997 and March 3, 1996, the Company is owed
approximately $337,000 and $318,000, including
$133,304 and $114,005 of accrued interest,
respectively. Such advances bear interest at prime
plus 1.25% per annum (9.50% at March 2, 1997 and
9.50% at March 3, 1996).
F-11
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Red Apple Group, Inc. ("Red Apple"), a corporation
wholly owned and controlled by the Company's
Chairman of the Board, supervises all operations
of the Supermarkets pursuant to a management
agreement entered into in March 1993 (the
"Management Agreement"). The Management Agreement
is terminable by either party after March 19,
1998. The term of the agreement shall
automatically be extended for additional one-year
periods unless either party has given the other
notice of termination no later than 90 days prior
to the end of the previous term. As of the date of
this report, no such notice has been given. The
Management Agreement requires the Company to pay
to Red Apple a quarterly fee equal to 1.25% of all
sales made in or from the Supermarkets. The
quarterly fee payable under the Management
Agreement does not necessarily equal the costs
which would have been or may be incurred by the
Company on a stand-alone basis.
The Company has various amounts receivable from
supermarket companies owned by the Chairman of the
Board related to the allocation of volume,
advertising and other rebates to the Company.
Rebates, whether allocated or directly attributed
to the Company, are recorded as reductions to cost
of sales or advertising expense over the life of
the related agreement. Rebates recorded as
reductions to expenses approximated $1.7, $1.1 and
$1.4 million during fiscal 1997, 1996 and 1995,
respectively.
Red Apple also provides maintenance services for
the Company which are not covered by the
Management Agreement. Such services include
supermarket refrigeration, electrical and
equipment maintenance. During the 1997, 1996 and
1995 fiscal years, the Company incurred
approximately $-0-, $123,000 and $90,000,
respectively.
F-12
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
City Produce Distributors, Inc., a corporation
indirectly wholly owned and controlled by the
Chairman of the Board, sells produce and certain
grocery items to the Company at prices consistent
with other third parties. During the 1997, 1996
and 1995 fiscal years, such purchases aggregated
approximately $5,263,000, $3,618,000 and
$2,900,000, respectively.
Newspaper advertising for the Supermarkets is
frequently pooled with advertising for other
supermarkets which are not owned by the Company
but which are operated by Red Apple or its
affiliates under the Sloan's name. In such cases,
the Company pays a proportionate share of such
advertising expenses based upon its number of
Supermarkets covered in the advertisements. Such
amounts allocated to the Company approximated
$115,000, $136,000 and $139,000 during fiscal
1997, 1996 and 1995, respectively.
At March 2, 1997 and March 3, 1996, the net amount
due from related parties resulting from the above
transactions amounted to $1,830,127 and $527,694,
respectively.
Lowenthal, Landau, Fischer & Bring, P.C., a law
firm of which a director of the Company is a
member, was paid $219,000, $213,000 and $117,000
in fees for rendering legal services to the
Company during the fiscal years ended March 2,
1997, March 3, 1996 and February 26, 1995,
respectively.
4. Commitments and The Company operates primarily in leased
Contingencies facilities, under noncancelable operating leases
expiring at various dates through 2018. Certain
leases provide for contingent rents (based upon
store sales exceeding stipulated amounts or on the
Consumer Price Index), escalation clauses and
renewal options ranging from five to fifteen
years. The Company is obligated under all leases
to pay for taxes, insurance and common area
maintenance expenses.
F-13
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Rent expense under noncancelable operating leases,
including leases with related parties for the
fiscal years ended March 2, 1997, March 3, 1996
and February 26, 1995, respectively, is as
follows:
March 2, March 3, February 26,
Year ended 1997 1996 1995
- ----------------------------------------------------------------
Base rents $2,781,602 $2,350,162 $1,972,164
Contingent rents 30,000 30,000 30,000
- ----------------------------------------------------------------
Rent expense $2,811,602 $2,380,162 $2,002,164
- ----------------------------------------------------------------
Future minimum lease commitments under
noncancelable leases as of March 2, 1997 are:
Fiscal year ending
- ------------------------------------------------
1998 $ 2,215,556
1999 2,036,400
2000 1,962,441
2001 2,009,949
2002 1,946,376
Thereafter 20,559,901
- ------------------------------------------------
$30,730,623
- ------------------------------------------------
The Company may also expand its operations through
acquisitions of supermarkets and/or businesses
which the Company believes would complement its
core supermarket business. The Company is
continuing to pursue the possibility of purchasing
additional supermarkets from other companies owned
by John Catsimatidis.
F-14
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
5. Income Taxes The Company adopted SFAS 109 which, among other
things, requires a change from the deferred method
to the liability method of accounting for income
taxes and allows recognition of deferred tax
assets based on the likelihood of realization of a
tax benefit in future years. Pursuant to the
adoption of SFAS 109, deferred income taxes are
provided for the temporary differences between the
tax basis and financial accounting reporting basis
of the Company's net assets and liabilities.
Deferred tax expense or benefit is the change in
the computed tax asset or liability balance. As of
March 2, 1997, the Company had total deferred tax
assets of approximately $720,000, of which
approximately $680,000 is related to net operating
loss carryforwards which are available to offset
income earned in future years, and approximately
$230,000 in deferred tax liabilities related to
excess tax depreciation. The net deferred tax
assets at March 2, 1997 and March 3, 1996 were
offset by a valuation allowance of an equal
amount. Accordingly, no deferred income taxes were
recognized in any of the periods.
The Company utilized approximately $1,200,000,
$1,700,000 and $-0- of net operating loss
carryforwards during fiscal 1997, 1996 and 1995,
respectively, the benefit of which offsets current
income taxes payable. As of March 2, 1997, the
Company had available Federal net operating loss
carryforwards of approximately $2,000,000, of
which the tax benefits of $1,000,000 when and if
realized, will be credited directly to additional
paid-in capital.
The income tax expense amounts in the consolidated
statements of operations consist of state income
taxes and Federal alternative minimum taxes.
F-15
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
6. Debt CREDIT FACILITY AND TERM LOAN AGREEMENT
On October 13, 1995, the Company entered into a
five-year credit agreement with European American
Bank which replaced its previous credit agreement.
The new agreement includes a $1,000,000 revolving
credit facility and $7,000,000 term loan. The new
agreement, which permits borrowings based on the
prime rate plus 1.25%, contains covenants,
representations and events of default typical of
credit facility agreements, including financial
covenants which require the Company to meet, among
other things, debt service coverage ratios and
fixed charge coverage ratios and which limit
advances to affiliates. Similar to the Company's
prior credit agreements, the new revolving credit
facility and term loan is secured by equipment,
general intangibles and accounts receivable.
Long-term debt consists of the following:
March 2, March 3,
1997 1996
---------- ----------
Loan payable to bank at prime plus 1.25% per
annum (9.5% at March 2, 1997), interest
payable monthly in arrears, principal
payable in monthly installments of $100,000
beginning November 13, 1995
(collateralized by certain assets of the
Company, including store equipment and
leases) .................................... $ 5,400,000 $ 6,600,000
Less: Current portion ........................ (1,200,000) (1,200,000)
---------- ----------
$ 4,200,000 $ 5,400,000
=========== ============
Deferred financing costs related to the loan
payable to bank are being amortized over the life
of the related debt. As a result of the
refinancing of the credit agreement, the Company
wrote off deferred financing costs which pertained
to the previous credit agreement. The write-off of
$88,674 is reflected in the consolidated financial
statements as an extraordinary item.
F-16
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Principal maturities of long-term debt follow:
1998 ................... $1,200,000
1999 ................... 1,200,000
2000 ................... 1,200,000
2001 ................... 1,800,000
---------
$5,400,000
==========
7. Stockholders' Equity On November 16, 1994, the Company declared a 10%
stock dividend payable on January 20, 1995 to
stockholders of record on December 20, 1994.
Earnings per share and weighted average shares
outstanding have been restated to reflect the 10%
stock dividend.
8. Retirement Plans The Company participates in various defined
contribution multi- employer union pension plans
which are administered jointly by management and
union representatives and which sponsor most
full-time and certain part-time union employees.
The pension expense for these plans approximated
$630,000, $800,000 and $702,000 in fiscal 1997,
1996 and 1995, respectively. The Company could,
under certain circumstances, be liable for
unfunded vested benefits or other expenses of
jointly administered union/management plans.
F-17
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
9. Stock Option Plans During fiscal 1990, the Company granted to the
Chairman of the Board and principal stockholder of
the Company a nonqualified stock option to
purchase an aggregate of 200,000 shares of common
stock at a price of $5.00 per share. During fiscal
1993, the exercise price of these options had been
reduced to $2.00 per share (the fair market value
at that date) by approval of the Company's
stockholders. During fiscal 1991, the Company
granted the Chairman a nonqualified stock option
to purchase an aggregate of 250,000 shares of
common stock at a price of $1.50 per share. On
October 20, 1994, the options were exercised by
the Chairman. The purchase price for the options
exercised were paid for by offsetting loans
previously made to the Company by the Chairman or
by companies controlled by the Chairman.
On October 7, 1994, the Company granted the
Chairman an aggregate of 250,000 shares of common
stock at a price of $4.12 per share (the fair
market value at that date).
The Company currently has one incentive grant and
four nonqualified grants under which stock options
may be granted to officers, directors and key
employees of the Company - the 1994 Employee
Incentive Grant (the "1994 Grant"), the 1994
Nonqualified Grant (the "1994 NQ Grant"), the 1995
Chairman's Nonqualified Options (the "Chairman's
Grant"), the 1994 Director's Nonqualified Grant
(the "Directors' Grant"), and the 1994
Nonqualified Recruitment Grant (the "1994
Recruitment Grant"). The options to purchase
common shares generally are issued at fair market
value on the date of the grant, begin vesting on
the date of the grant, and expire ten years from
issuance and are conditioned upon continual
employment during the vesting period.
Under the 1994 Grant and the 1994 NQ Grant, the
Company granted options to purchase up to 100,000
and 35,000 shares of common stock, respectively.
In addition to the one incentive grant, the
Company has granted stock options to certain key
executives and directors. The vesting terms and
contractual lives of these grants are similar to
that of the incentive grant.
The Company applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations for its
stock option grants. Generally, compensation
expense is not recognized for stock option grants.
F-18
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
In accordance with Statement of Financial
Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), the Company
discloses the pro forma impact of recording
compensation expense utilizing the Black-Scholes
model. The Black-Scholes option valuation model
was developed for use in estimating the fair value
of traded options which have no vesting
restrictions and are fully transferable. In
addition, option valuation models require the
input of highly subjective assumptions including
the expected stock price volatility. Because the
Company's stock options have characteristics
significantly different from those of traded
options, and because changes in the subjective
input assumptions can materially affect the fair
value estimate, in management's opinion, the
Black-Scholes model does not necessarily provide a
reliable measure of the fair value of its stock
options.
The accounting provisions of SFAS No. 123 did not
have an effect on the Company's pro forma net
income and earnings per share and thus have not
been presented.
F-19
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
A summary of the status of the Company's stock
options is presented below:
Weighted Average
Shares Exercise Price
- --------------------------------------------------------------------------------
Balance, February 27, 1994 ................... -- $ --
Granted ................................... 473,000 4.29
Exercised ................................. -- --
Forfeited ................................. -- --
------- -------
Balance, February 26, 1995 ................... 473,000 4.29
Granted ................................... -- --
Exercised ................................. -- --
Forfeited ................................. (9,000) 5.63
------- -------
Balance, March 3, 1996 ....................... 464,000 4.27
Granted ................................... -- --
Exercised ................................. -- --
Forfeited ................................. (8,000) 5.63
------- -------
Balance March 2, 1997 ........................ 456,000 $ 4.24
======= =======
Options exercisable as of March 2, 1997, March 3,
1996 and February 26, 1995 were 442,800, 444,200
and 446,600, respectively.
F-20
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes information as of
March 2, 1997 concerning outstanding and
exercisable options:
- --------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------ -------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------------
$3.75 275,000 6.69 $3.75 275,000 $3.75
5.63 33,000 6.81 5.63 33,000 5.63
5.63 85,000 6.81 5.63 85,000 5.63
3.81 30,000 7.69 3.81 30,000 3.81
3.81 33,000 2.69 3.81 19,800 3.81
- --------------------------------------------------------------------------------
$3.75-5.63 456,000 6.50 4.24 442,800 4.24
- --------------------------------------------------------------------------------
10. Litigation In June 1994, the United States Federal Trade
Commission (the "FTC") commenced an action
alleging that the mergers by John Catsimatidis,
the Company and three other entities controlled by
Mr. Catsimatidis (collectively, the "companies")
of 32 Sloan's Supermarkets between 1991 and 1993
violated Federal antitrust laws because the effect
of the mergers might be substantially to lessen
competition among supermarkets within four
Manhattan residential neighborhoods. The complaint
indicated that the FTC could seek divestiture of
up to ten supermarkets owned by the companies.
F-21
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
In order to avoid the costs of protracted
litigation in the matter and without admitting
that any antitrust law was violated as alleged in
the complaint, on November 21, 1994, the companies
entered into a settlement agreement with the
Acting Director of the Bureau of Competition of
the FTC regarding the claims made by the FTC
against them (the "Settlement Agreement"). The
companies agreed in the Settlement Agreement that
within twelve months from the date of a final
order in the proceeding they would divest
themselves of an aggregate of six supermarkets in
Manhattan, chosen by them from a list of sixteen
supermarkets specifically designated in the
Settlement Agreement (none of which are owned by
the Company) and certain alternate supermarkets
referenced in the Settlement Agreement (five of
which were then owned by the Company). Nothing in
the Settlement Agreement required the Company to
divest itself of any of its supermarkets, but
divestiture of supermarkets owned by the Company
would count towards satisfaction of the
divestiture obligations.
An order embodying the Settlement Agreement was
made effective March 6, 1995 (the "Order").
Pursuant to that Order, for a period of 10 years
from March 6, 1995, the companies cannot, without
prior FTC approval, acquire any interest in any
existing supermarket in a designated area. The
order does not restrict the companies from
acquiring an interest in a supermarket by leasing
or purchasing a new location that at the time of
merger (and for six months prior to the merger) is
not being operated as a supermarket.
In March 1996, an application (the "Application")
was made to modify the Order so as to lift the
divestiture requirements other than with respect
to one store on the Upper West Side which was not
owned by the Company. The FTC approved the
divestiture of that store and its divestiture was
completed on May 9, 1996. On April 29, 1996, the
Application was revised; and it was further
revised in August and September so as to seek
relief solely with respect to the requirements of
divestiture of any supermarkets in the Chelsea
section of Manhattan.
F-22
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
On September 13, 1996, the FTC granted the
Application as modified, and deleted the
requirements of divestiture in Chelsea.
Simultaneously, the FTC appointed a trustee to
divest four supermarkets pursuant to the Order, as
modified. The trustee was not granted any
authority to divest until the FTC approved a
trustee agreement between the trustee and the
companies. An agreement was entered into with the
trustee which would have been effective upon
approval by the FTC.
Subsequent to the modification of the Order,
Supermarket Acquisition Corp. ("SAC"), Red Apple
Supermarket, Inc. ("RAS") and Gristedes
Supermarkets, Inc. ("Gristedes") sold an aggregate
of four stores in compliance with the divestiture
provisions of the Order, as modified. Based
thereon, the trustee agreement will not become
effective.
A settlement of FTC claims relating to the
divestiture provisions of the Order has been
agreed to pursuant to which $600,000 has been paid
to the FTC. No portion of such amount was borne by
the companies.
On August 8, 1994, a lawsuit against the Company
and Mr. Catsimatidis was instituted in the United
States District Court for the Southern District of
New York by RMED International, Inc. ("RMED"), a
former stockholder of the Company.
F-23
<PAGE>
Sloan's Supermarkets, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
The complaint alleges, among other things, that
RMED and a purported class consisting of persons
who purchased the Company's common stock on or
after March 19, 1993 were damaged by alleged
nondisclosures in certain filings made by the
Company with the Securities and Exchange
Commission between January 1993 and June 1994
relating to an investigation by the FTC. The
complaint alleges that such nondisclosures
constituted violations of Federal and New York
State securities laws, as well as common law fraud
and seeks damages (including punitive damages) in
an unspecified amount (although in discovery
proceedings the named plaintiff has claimed that
its damages were approximately $800,000), as well
as costs and disbursements of the action. On June
2, 1994, the Company issued a press release which
disclosed the FTC action.
On September 30, 1994, the defendants filed a
motion to dismiss for failure to state a cause of
action and for lack of subject matter jurisdiction
over the state claims. The motion was denied. In
June 1995, RMED filed a motion for class
certification, and discovery was held in abeyance
pending disposition of that motion. The motion was
granted in March 1996 and discovery is now
proceeding. Management believes that the lawsuit
is without merit and intends to defend the action
vigorously; however, the outcome cannot be
determined.
F-24
<PAGE>
PART III
Item 9. CHANGES IN AND DISBURSEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES.
None
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information as of May 22, 1997 with respect to all
directors and executive officers of the Company.
Position with the Company or
Director Other Principal Occupation
Name and Age Since for the Past Five Years
- ------------ -------- --------------------------------------
John A. Catsimatidis 1988(2) Chairman of the Board, Chief Executive
(48) Officer and Treasurer of the Company
since July 28, 1988; President and
Chief Executive Officer of Red Apple
Group, Inc. (holding company for
supermarket chains) and Chairman of
the Board and Chief Executive Officer
and Director of United Refining
Company (a refiner and retailer of
petroleum products) for more than five
years. Director of News Communications
Inc., a public company whose stock is
traded over-the- counter, since
December 4, 1991.
Martin R. Bring 1988 Member of the law firm of Lowenthal,
(54) Landau, Fischer & Bring, P.C., New
York, N.Y. for more than five years;
Director of Hero Group, Ltd., a New
York Stock Exchange listed company
since 1991.
Frederick Selby 1978 Since 1990, Chairman of Selby Capital
(59) Partners (acquisition and sale of
privately owned firms and divisions of
public companies). Prior thereto,
Investment Banking Senior Vice
President, BAII Banking (Paris), Legg
Mason Wood Walker and Bankers Trust
Company.
- --------
(2) Mr. Catsimatidis also served as a director of the Company from November 4,
1986 to November 27, 1987.
13
<PAGE>
Leroy Hemingway II 1991 Chairman of the Board of The Famous
(65) Carpet Barns of Florida, Inc. (a firm
engaged in retail sales of carpets)
and Chairman of the Board of Hemingway
Properties, Inc. (an owner and
operator of shopping centers) for more
than five years.
Mark S. Kassner ---- Since 1991, Vice President, Chief
(36) Financial Officer and Secretary. Since
1987, executive officer of the Red
Apple Group, Inc. and certain of its
affiliates with primary responsibility
in the areas of accounting and
financial reporting.
Carmine Zappola ---- Since March 19, 1993, Director of
(60) Operations; Director of Operations for
CKMR from January 1, 1991 to March 18,
1993. Prior to 1991, Mr. Zappola was a
Supervisor for CKMR with
responsibility for 12-20 stores. Mr.
Zappola has over thirty (30) years
experience in the retail supermarket
industry.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires directors and officers of the Company and persons who own more
than 10 percent of the Company's common stock to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of the common stock. Directors, officers and more than
10 percent stockholders are required by the Exchange Act to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the year ended March 2, 1997, all Section 16(a)
filings applicable to its directors, officers and more than 10 percent
beneficial owners were timely filed.
14
<PAGE>
Item 11. EXECUTIVE COMPENSATION.
The following table sets forth for the three fiscal years ended March 2, 1997
certain information concerning the compensation paid or accrued to the Chief
Executive Officer of the Company. As of March 2, 1997 there were no persons
serving as executive officers of the Company whose total salary and bonus for
the fiscal year ended March 2, 1997 exceeded $100,000.
<TABLE>
<CAPTION>
Long-term Compensation
---------------------------------------------------
Annual Compensation Awards Payouts
---------------------------------- ----------------------- ---------------------
Other All
annual Restricted other
Name and compen- stock Options LTIP compen-
principal Salary Bonus sation award(s) /Sar's payouts sation
position Year ($) ($) ($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Catsimatidis, 1997 $ -- $ -- $ -- $ -- -- $ -- $ --
Chairman of the
Board, Chief
Executive
Officer
1996 $ -- $ -- $ -- $ -- -- $ -- $ --
1995 $ -- $ -- $ -- $ -- 275,000 $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTIONS
No stock options were granted to or exercised by Mr. Catsimatidis during the
fiscal year ended March 2, 1997. The following table sets forth certain
information with respect to options to purchase Common Stock held by John
Catsimatidis on March 2, 1997.
Number of Unexercised Value of Unexercised
Options Held on in-the-Money Options on
March 2, 1997 March 2, 1997
----------------------------- ----------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------------------------------------------------------------
John Catsimatidis 275,000/0 0/0
- --------------------------------------------------------------------------------
The closing sales price of the Common Stock on the American Stock Exchange on
February 28, 1997, the last trading day preceding March 2, 1997, was $3.06. On
March 3, 1996, Mr. Catsimatidis held options to purchase 275,000 shares of
Common Stock at $3.75 per share.
COMPENSATION OF DIRECTORS
Non-officer directors receive a quarterly stipend of $1,500 and $500 for each
meeting attended. Directors who serve on committees receive $250 for each
meeting attended.
15
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding ownership of Common
Stock on March 2, 1997 by: (i) each stockholder known to the Company to own
beneficially more than 5% of the outstanding shares of Common Stock; (ii) each
of the Company's directors; and (iii) all officers and directors of the Company
as a group. Except as otherwise indicated, the address of each person is c/o
Sloan's Supermarkets, Inc., 823 Eleventh Avenue, New York, N.Y. 10019-3535. The
Company believes that ownership of the shares by the persons named below is both
of record and beneficial and such persons have sole voting and investment power
with respect to the shares indicated.
Name and Address of Number of
Beneficial Owner Shares Percent of Class
- ---------------------------------- ------------------ ----------------
John Catsimatidis ........................ 1,452,552(1) 42.6%
Leroy Hemingway II ....................... 15,950(2) *
Frederick Selby .......................... 7,822(2) *
Martin Bring ............................. 6,600(2) *
All officers and directors as a
group (6 persons) ...................... 1,499,924(3)(2) 43.6%
- -----
* Less than 1%.
(1) Includes an aggregate of 25,730 shares held by corporations controlled by
Mr. Catsimatidis, 2,057 shares held by a profit sharing plan of which Mr.
Catsimatidis is a trustee, 605 shares held by Mr. Catsimatidis as a trustee
of individual retirement accounts and currently exercisable options to
purchase an aggregate of 275,000 shares of Common Stock. Does not include
options to purchase an aggregate of 250,000 shares of Common Stock which
the Board of Directors have granted to Mr. John Catsimatidis subject to
approval by the stockholders of the Company and which are not exercisable
unless and until such approval is given.
(2) Includes for each of Messrs. Selby, Hemingway and Bring an aggregate of
6,600 shares of Common Stock which may be purchased upon the exercise of
currently exercisable stock options.
(3) Includes an aggregate of 311,800 shares of Common Stock which may be
purchased upon the exercise of currently exercisable stock options.
16
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the time of the Supermarket Acquisition, the Company entered into a
Management Agreement with Red Apple pursuant to which Red Apple supervises all
operations of the Supermarkets subject to the policy goals and decisions
prescribed by a committee of the independent directors. On March 31, 1993, the
Board established an Oversight Committee and elected Frederick Selby and Leroy
Hemingway II as its initial members.
The Management Agreement requires the Company to pay Red Apple a quarterly fee
equal to 1-1/4% of all sales made in or from the Supermarkets and to reimburse
Red Apple for all reasonable expenses incurred by Red Apple in the performance
of its services thereunder. The initial term of the Management Agreement ran
until March 19, 1994. Unless terminated by either party, the Management
Agreement is automatically renewed for successive one year terms. The current
term expires March 19, 1998.
Red Apple also provides maintenance services to the Company which are not
covered by the Management Agreement. Such services include supermarket
refrigeration, electrical and equipment maintenance. During the year ended March
2, 1997, the Company did not incur expenses for such services.
As of March 2, 1997, the Company had an aggregate of approximately $1,830,000 in
due from related parties owned by Mr. Catsimatidis as a result of transactions
in the ordinary course of business.
City Produce Distributors, Inc., a corporation indirectly wholly owned and
controlled by John Catsimatidis, sells produce and certain grocery items to the
Company at prices consistent with those obtainable from non-affiliated third
parties. During the year ended March 2, 1997, such sales aggregated
approximately $5,263,000.
Newspaper advertising for the Supermarkets is frequently pooled with advertising
for other supermarkets which are not owned by the Company but which are operated
by Red Apple or its affiliates other than the Company under the Sloan's name. In
such cases, the Company pays a portion of such advertising expenses based upon
the number of Supermarkets and supermarkets of other companies covered in the
advertisements (see Item 1. "Description of Business - Marketing"). Such amounts
allocated to the Company approximated $115,000 during the year ended March 2,
1997.
The tradename "Sloan's" is used by the Company under a non-exclusive license
granted to the Company for a nominal consideration by SAC, a corporation wholly
owned by John Catsimatidis (see Item 1. "Description of Business - Tradenames").
In consideration of accommodations extended to the Company by H.S. Realty Corp.
("H.S. Realty"), a corporation wholly owned by John Catsimatidis which enabled
the Company to consummate the sale of assets of the Company's Howard H. Sweet &
Son Inc. subsidiary ("Sweet") to Tiffco Jewelry and Chain Crafts, Inc.
("Tiffco"), on January 23, 1990, the Company, among other things, advanced to
H.S. Realty approximately $204,000. The Company also agreed to pay to H.S.
Realty on a monthly basis an amount equal to the fixed monthly rent on the real
estate containing Sweet's manufacturing facilities (the "Sweet Property") under
H.S. Realty's lease with Tiffco so long as Tiffco was making such payments to an
escrow agent under an escrow agreement entered into between Sweet, the Company,
Tiffco and others at the closing of the sale of Sweet's assets to Tiffco.
17
<PAGE>
The $204,000 advance was originally to be repayable on the earlier of January
23, 1991 or five days after the sale by H.S. Realty to Tiffco of the Sweet
Property. Since January 23, 1991, the Board of Directors has extended the
repayment date of the advance on an annual basis, the most recent extension
being until January 23, 1998 or five days after the sale by H.S. Realty to
Tiffco of the Sweet Property. As of March 2, 1997, H.S. Realty was indebted to
the Company on account of the advance in the amount of $337,304 and such
indebtedness was accruing interest at the rate of 9.50% per annum (1- 1/4% per
annum over the prime rate of interest charged by Chemical Bank, N.A. as of March
3, 1996).
Effective as of January 1, 1994, the Company has entered into Indemnification
Agreements with each of its directors and officers. Said agreements supplement
the indemnification provisions of the Company's By-laws and the Delaware General
Corporation Law. The stockholders of the Company authorized the Company to enter
into such agreements with each of its directors at the Annual Meeting of
Stockholders held on August 21, 1987. The Board of Directors has authorized the
Company to enter into such agreements with each of its officers.
By virtue of his ownership of Common Stock (see Item 12 - "Security Ownership of
Certain Beneficial Owners and Management") and his position as Chairman of the
Board of the Company, John Catsimatidis may be deemed to be a "parent" of the
Company under rules promulgated by the Commission.
Lowenthal, Landau, Fischer & Bring, P.C., a law firm of which Martin Bring, a
director of the Company, is a member, received fees of approximately $218,675
for rendering legal services to the Company during the fiscal year ended March
2, 1997.
In October 1995, the Company acquired three Supermarkets from SAC. The total
consideration paid by the Company for the acquisition of the three Supermarkets
was $5,000,000 plus the cost of inventory. The purchase price was based on a
fair market evaluation performed by an independent third party. (See Item 1.
"Business - Acquisition of Supermarkets").
18
<PAGE>
PART IV
Item 14. EXHIBITS AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
A list of all financial statements filed as part of this report is
contained in the index to Item 8, which index is incorporated herein
by reference.
(2) Financial Statement Schedules
None.
(3) Exhibits
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of the
Registrant. Incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K of the fiscal year
ended February 28, 1990 (the "1990 10-K").
3.2. Certificate of Amendment to Amended and Restated Certificate
of Incorporation of the Registrant. Incorporated by
reference to Exhibit 3.2 to the Registrant's Annual Report
on Form 10-KSB for the fiscal year ended February 27, 1994
(the "1994 10-KSB").
3.3 Amended and Restated Bylaws of the Registrant. Incorporated
by reference to Exhibit 3.2 to the 1990 10-K.
10.1 Asset Purchase Agreement dated as of December 1, 1989 among
Tiffco, Tiffany, Sweet and the Registrant and Amendment No.
6 thereto, dated January 22, 1990. Incorporated by reference
to Exhibit 1 to the Registrant's Current Report on Form 8-K
dated February 5, 1990. Amendments No. 1 through 5 are
immaterial and are omitted. Exhibits (setting forth the form
of certain closing documents) and schedules (setting forth
lists of the purchased assets, excluded assets, assumed
liabilities, allocation of the purchase price and various
disclosure items) are omitted. The Registrant agrees to
furnish supplementally to the Commission upon request a copy
of any of the omitted Amendments, exhibits and schedules.
10.2 Environmental Indemnification Letter dated as of November 1,
1989 among BF, the Registrant and B.E. Realty. Incorporated
by reference to Exhibit 10.9 to the 1990 10-K.
10.3 Agreement dated as of January 23, 1990 among Sweet, the
Registrant and H.S. Realty. Incorporated by reference to
Exhibit 10.12 to the 1990 10-K.
10.4 Asset Purchase Agreement dated December 24, 1992, and
effective January 7, 1993, between CKMR Corporation ("CKMR")
and the Registrant (the "Asset Purchase Agreement").
Incorporated by reference to Exhibit 1 to the Registrant's
Current Report on Form 8-K dated March 19, 1993. Exhibits
setting forth the form of certain closing
19
<PAGE>
documents and schedules (setting forth lists of assumed
liabilities, real property lease assignments and various
disclosure items) are omitted. The Registrant agrees to
furnish supplementally to the Commission upon request a copy
of any of the omitted exhibits and schedules.
10.5 Management Agreement between Red Apple and Namdor Inc. dated
March 19, 1993. Incorporated by reference to Exhibit 10.11
to the Registrant's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1993.
10.6 License Agreement dated March 19, 1993 between SAC and the
Company. Incorporated by reference to Exhibit 10.10 to the
1994 10-KSB.
10.7 Form of Indemnification Agreement dated as of January 1,
1994 between the Registrant and each director of the
Registrant. Incorporated by reference to Exhibit 10.11 to
the 1994 10-KSB.
10.8 Form of Indemnification Agreement dated as of January 1,
1994 between the Registrant and each officer of the
Registrant. Incorporated by reference to Exhibit 10.12 to
the 1994 10-KSB.
10.9 1994 Stock Option Plan. Incorporated by reference to Exhibit
10.12 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 26, 1995 ("1995 10-KSB").
10.10 Director Stock Option Plan. Incorporated by reference to
Exhibit 10.13 of the Company's 1995 10-KSB.
10.11 Asset Purchase Agreement dated as of October 13, 1995
between SAC and the Company. Incorporated by reference to
Exhibit 1 to the Registrant's Current Report on Form 8-K
dated October 27, 1995 (the "10/27/95 8-K"). Exhibits
setting forth the form of certain closing documents and
schedules (setting forth lists of assumed liabilities,
assignments and various disclosure items) are omitted. The
Registrant agrees to furnish supplementally to the
Commission upon request a copy of any of the omitted
exhibits and schedules.
10.12 Loan and Security Agreement dated October 13, 1995 between
Namdor and European American Bank (the "Bank"). Incorporated
by reference to Exhibit 2 to the October 19, 1995 Form 8-K.
10.13 Guaranty dated October 13, 1995 from the Registrant to the
Bank. Incorporated by reference to Exhibit 3 to the October
19, 1995 Form 8-K.
10.14 Pledge Agreement dated October 13, 1995 from the Registrant
to the Bank. Incorporated by reference to Exhibit 4 to the
October 19, 1995 Form 8-K between Gristedes' Supermarkets,
Inc. and Namdor.
10.15 License Agreement dated October 13, 1995. Incorporated by
reference to Exhibit 5 to the October 19, 1995 Form 8-K.
20
<PAGE>
11. Statement re computation of per share income (loss). Not
required.
21. Listing of the Registrant's subsidiaries all of which are
wholly owned by the Registrant.
Subsidiaries State of Incorporation
------------ ----------------------
Namdor, Inc. New York
The Registrant has one other wholly-owned subsidiary, the
name of which is omitted herein because as of May 22, 1997
it did not constitute a significant subsidiary.
23. Consent of BDO Seidman, LLP Independent Certified Public
Accountants.
(b) Reports on Form 8-K
None
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SLOAN'S SUPERMARKETS, INC.
Dated: May 30, 1997 By: /s/ John A. Catsimatidis
--------------------------
John A. Catsimatidis
Chairman of the Board
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ John A. Catsimatidis Chairman of the Board (Chief May 30, 1997
- ------------------------ Executive Officer and Chief
John A. Catsimatidis Operating Officer) and
Treasurer
/s/ Martin Bring Director May 30, 1997
- ------------------------
Martin Bring
/s/ Frederick Selby Director May 30, 1997
- ------------------------
Frederick Selby
/s/ Leroy Hemingway II Director May 30, 1997
- ------------------------
Leroy Hemingway II
/s/ Mark Kassner Vice President and Secretary May 30, 1997
- ------------------------ (Chief Financial Officer and
Mark Kassner Chief Accounting Officer)
22
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Sloan's Supermarkets, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 dated January 23, 1996, relating to the consolidated
financial statements appearing in the Company's Annual Report on Form 10-K for
the year ended March 2, 1997.
BDO Seidman, LLP
New York, New York
May 30, 1997
23
