UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 1, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .............to ............
Commission File Number 1-7013
SLOAN'S SUPERMARKETS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1829183
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
823 Eleventh Avenue, New York, New York 10019
(Address of Principal Executive Offices)
(212) 956-5803
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
At July 16, 1997, the registrant had issued and outstanding 3,132,289 shares of
common stock.
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 1, 1997
and March 2, 1997 Page 3
Consolidated Statements of Operations for
the thirteen weeks ended June 1, 1997
and June 2, 1996 Page 4
Consolidated Statements of Stockholders' Equity for the
thirteen weeks ended June 1, 1997 and the year ended
March 2, 1997 Page 5
Consolidated Statements of Cash Flows for
the thirteen weeks ended June 1, 1997
and June 2, 1996 Page 6
Notes to Consolidated Financial Statements Page 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations Page 9
Page 2
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Item 1
Financial Statements
<TABLE>
<CAPTION>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 1, March 2,
ASSETS 1997 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................................................. $ 65,481 $ 70,237
Accounts receivable - net of allowance for doubtful accounts
of $30,000 at June 1, and March 2, 1997 ....................................... 741,709 501,916
Inventory ........................................................................ 5,706,520 5,873,991
Prepaid expenses and other current assets ........................................ 208,717 299,887
Due from related parties ......................................................... 1,668,982 1,830,127
------------ ------------
Total current assets .................................................... 8,391,409 8,576,158
------------ ------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment ................................................ 5,466,455 5,466,456
Leaseholds and leasehold improvements ............................................ 11,706,905 11,704,425
------------ ------------
17,173,360 17,170,881
Less accumulated depreciation and amortization ................................... 4,921,753 4,527,506
------------ ------------
Net property and equipment .............................................. 12,251,607 12,643,375
Receivable from officer .......................................................... 342,129 337,304
Deposits and other assets ........................................................ 492,824 313,585
Deferred costs ................................................................... 111,220 115,489
Noncompete agreement - net of accumulated amortization of
$331,324 at June 1, 1997 and $311,567 at March 2, 1997 ........................ 458,992 478,749
Deferred finance costs - net of accumulated amortization of
$42,320 at June 1, 1997 and $35,048 at March 2, 1997 .......................... 376,528 350,801
------------ ------------
TOTAL ...................................................................................... $ 22,424,709 $ 22,815,461
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade .......................................................... $ 6,641,583 $ 6,593,412
Accrued payroll, vacation and withholdings ....................................... 345,805 491,857
Accrued expenses and other current liabilities ................................... 230,201 377,431
Revolving credit facility ........................................................ 1,000,000 1,000,000
Current portion of long term debt ................................................ 1,200,000 1,200,000
------------ ------------
Total current liabilities ............................................... 9,417,589 9,662,700
Long-term debt ................................................................... 3,900,000 4,200,000
Deferred rents ................................................................... 846,887 794,645
------------ ------------
Total liabilities ....................................................... 14,164,476 14,657,345
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $50 par, - shares authorized 500,000; none issued
Common stock, $.02 par, - shares authorized 10,000,000; outstanding
3,132,289 shares issued at June 1, and March 2, 1997 ...................... 62,646 62,646
Additional paid-in capital ....................................................... 18,248,286 18,248,286
Accumulated deficit .............................................................. (10,050,699) (10,152,816)
------------ ------------
Total stockholders' equity .............................................. 8,260,233 8,158,116
------------ ------------
TOTAL ...................................................................................... $ 22,424,709 $ 22,815,461
============ ============
See accompanying notes.
</TABLE>
Page 3
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<TABLE>
<CAPTION>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
13 WEEKS ENDED JUNE 1, 1997 AND JUNE 2, 1996
13 weeks 13 weeks
ended ended
June 1, June 2,
1997 1996
------------ ------------
<S> <C> <C>
Sales .................................................................. $ 12,254,700 $ 13,538,008
Cost of sales .......................................................... 7,506,416 8,113,439
------------ ------------
Gross profit ........................................................... 4,748,284 5,424,569
Store operating, general and
administrative expense ............................................... 4,238,262 4,655,726
Management fee ......................................................... 150,829 169,225
------------ ------------
Store operating profit ................................................. 359,193 599,618
Non-store operating expense ............................................ 65,046 88,218
------------ ------------
Operating profit ....................................................... 294,147 511,400
------------ ------------
Other income (expense)
Interest income ........................................................ 5,466 6,385
Other income ........................................................... (5,554) 4,495
Interest expense ....................................................... (187,442) (178,021)
------------ ------------
(187,530) (167,141)
------------ ------------
Income from continuing operations
before income taxes .................................................. 106,617 344,259
Provision for income taxes ............................................. 4,500 14,006
------------ ------------
Net income ............................................................. $ 102,117 $ 330,253
============ ============
Income per share ....................................................... $ 0.03 $ 0.10
============ ============
Weighted average number of shares and
equivalents outstanding ................................................ 3,132,000 3,151,000
============ ============
See accompanying notes
</TABLE>
Page 4
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<TABLE>
<CAPTION>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
13 WEEKS ENDED JUNE 1, 1997 AND FOR THE YEAR ENDED MARCH 2, 1997
Additional Total
Common stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at March 3, 1996 ..................... 3,132,289 $ 62,646 $ 18,248,286 $(11,312,494) $ 6,998,438
Net income for the year ended
March 2, 1997 ............................. 1,159,678 1,159,678
------------ ------------ ------------ ------------ ------------
Balance at March 2, 1997 ..................... 3,132,289 62,646 18,248,286 (10,152,816) 8,158,116
Net income for the thirteen weeks
ended June 1, 1997 ........................ 102,117 102,117
------------ ------------ ------------ ------------ ------------
Balance at June 1, 1997 ...................... 3,132,289 $ 62,646 $ 18,248,286 $(10,050,699) $ 8,260,233
============ ============ ============ ============ ============
See accompanying notes.
</TABLE>
Page 5
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<TABLE>
<CAPTION>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
13 WEEKS ENDED JUNE 1, 1997 AND JUNE 2, 1996
June 1, June 2,
1997 1996
-------- --------
<S> <C> <C>
Net income ............................................................. 102,117 330,253
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization .......................................... 425,545 423,786
Changes in operating assets and liabilities:
Accounts receivable - net .............................................. (239,793) 43,287
Inventory .............................................................. 167,471 (108,956)
Prepaid expenses and other current assets .............................. 91,170 (14,899)
Receivable from related party - net .................................... 161,145 (345,399)
Due from related parties ............................................... (4,825) (4,825)
Other assets ........................................................... (212,238) (12,354)
Deferred credits ....................................................... (23,867)
Accounts payable, trade ................................................ 48,171 (167,912)
Accrued payroll, vacation and withholdings ............................. (146,052) (155,856)
Accrued expenses and other current liabilities ......................... (147,230) 305,770
Deferred rents ......................................................... 52,242 64,338
-------- --------
Net cash provided by operating activities ...................... 297,723 333,363
-------- --------
Capital expenditures - net ............................................. (2,479) (29,837)
-------- --------
Net cash used in investing activities .......................... (2,479) (29,837)
-------- --------
Repayments of bank loan ................................................ (300,000) (300,000)
-------- --------
Net cash used in financing activities ......................... (300,000) (300,000)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .................. (4,756) 3,523
CASH AND CASH EQUIVALENTS, begining of period .......................... 70,237 71,242
-------- --------
CASH AND CASH EQUIVALENTS, end of period ............................... 65,481 74,765
======== ========
See accompanying notes.
</TABLE>
Page 6
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Business - The Company owns and operates fourteen supermarkets and one health
and beauty aids store (the "Supermarkets") under the "Sloan's" name in New York
City (thirteen are located in Manhattan and two are located in Brooklyn). Eleven
Supermarkets were acquired in March 1993 from CKMR Corporation ("CKMR"),a
privately-held corporation unaffiliated with the Company. In August 1995, the
Company sold the leasehold of one of its supermarkets; in October 1995, the
Company purchased three other Supermarkets from Supermarket Acquisition
Corp.("SAC"), a company owned and controlled by the Company's Chairman of the
Board and Chief Executive Officer, John Catsimatidis. In February 1996, the
Company opened one new Supermarket and on March 7, 1996, the Company opened a
health and beauty aids store. The Company leases all of its Supermarket
locations.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All material
intercompany accounts and transactions have been eliminated in consolidation.
Quarter End - The Company operates using the conventional retail 52/53 week
fiscal year. The fiscal quarter ends on the Sunday closest to the end of the
quarter.
Inventory - Store inventories are valued principally at the lower of cost or
market with cost determined under the retail first in, first out (FIFO) method.
Property and Equipment - Depreciation of furniture, fixtures and equipment is
computed by the straight-line method over the estimated useful lives of the
assets.
Leases - The Company charges the cost of noncancelable operating lease payments
and beneficial leaseholds to operations on a straight-line basis over the lives
of the leases.
Provision for income taxes - Income taxes reflect Federal and State alternative
minimum tax only, as all regular income taxes have been offset by utilization of
the Company's net operating loss carry forward.
Page 7
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Income Per share - Per share data are based on the weighted average number of
shares of common stock and equivalents outstanding during each quarter. Income
per share is computed by the treasury stock method; primary and fully diluted
income per share are the same.
Supplemental Disclosures of Cash Flow Information-
Cash paid during the three months ended:
June 1, 1997 June 2, 1996
------------ ------------
Interest $186,572 $178,021
Income taxes $ 29,000 $ 20,000
In the opinion of management, the information furnished reflects all adjustments
(consisting of normal recurring adjustments) which are necessary for a fair
statement of the results of operations for the interim period. The interim
figures are not necessarily indicative of the results to be expected for the
fiscal year.
The Company's Form 10-K for the year ended March 2, 1997 contains information
which should be read in conjunction herewith.
2. RELATED PARTY TRANSACTIONS
The Company has advanced funds to a company owned by the Chairman of the Board
who is also the principal stockholder of the Company. As of June 1, 1997 the
Company is owed $342,129 including accrued interest. As of March 2, 1997,
advances and accrued interest totaled $337,304.
Red Apple Group, Inc. (Red Apple), a company wholly owned by the Company's
Chairman of the Board, supervises all operations of the Company under a
management agreement. The agreement requires the Company to pay to Red Apple one
and one quarter percent of sales as a management fee. Management fees for the 13
weeks ended June 1, 1997 and June 2, 1996 were $150,829 and $169,225
respectively.
Page 8
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
2. RELATED PARTY TRANSACTIONS (Continued)
Red Apple also operates 34 supermarkets in the New York metropolitan area under
the Sloan's, Gristede's and Pioneer banners. The Company's advertising program
is combined with all of these Red Apple entities. Consistent with this shared
advertising program the Company is allocated advertising income and expense by
Red Apple based on the Company's portion of sales to total Red Apple sales.
Certain direct store advertising expense is charged on a store by store basis.
The Company purchases produce and certain sundry items from a subsidiary of Red
Apple at prices consistent with those charged to other Red Apple entities as
well as non-affiliated customers. Purchases for the 13 weeks ended June 1, 1997
and June 2, 1996 were $1,133,614 and $1,283,769 respectively.
Legal fees incurred by the Company to a law firm, of which a director of the
Company is a member, were $64,944 and $36,000 for the 13 weeks ended June 1,
1997 and June 2, 1996, respectively.
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of
Operations For the 13 weeks ended
June 1, 1997 and June 2, 1996
FINANCIAL CONDITION
The Company's working capital deficiency decreased by approximately
$62,400 during the 13 weeks ended June 1, 1997.
Long term debt decreased by $300,000 reflecting scheduled principal
payments during the period.
Page 9
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
Liquidity and Capital Resources
The Company believes that it will be able to satisfy its bank loan
agreement and supermarket operating requirements from internally generated
funds. In addition, the Company has in place a $1 million dollar revolving
credit facility to provide short term working capital. As of June 1, 1997 the
revolving credit facility was fully utilized.
RESULTS OF OPERATIONS
Net income was $102,117 for the 13 weeks ended June 2, 1997 as compared
to $330,253 for the 13 weeks ended June 1, 1996.
Sales were $12,254,700 in the 1997 period compared to $13,538,008 for
the same period in 1996. The decline in sales was primarily due to a delay in
the commencement of the Company's remodeling program, which was originally
scheduled to start earlier this year. In addition, deflationary pressures in
food prices also contributed to the decrease in sales in the 1997 period as
compared to the 1996 period.
The Company has embarked on a substantial remodeling program under
which 4 stores will be extensively remodeled and refixtured during the next 8
months. The remodels will also result in the expansion of the sales areas in
these stores. It is anticipated that we will experience appreciable sales
increases in the remodeled stores based on prior history.
Gross profit as a percentage of sales was 38.75% for the 13 weeks ended
June 1, 1997 compared to 40.07% for the 13 weeks ended June 2, 1996. The
decrease in gross profit margin was mainly due to a curtailment of our long-term
forward buying program in the 1997 period as compared to the 1996 period, due to
the temporary lack of suitable available product. It is anticipated that forward
buying opportunities will once again be available in future periods.
Store operating, general and administrative expenses were $4,238,262 or
34.59% of sales in 1997 compared with $4,655,726 or 34.39% of sales in 1996.
Operating expenses as a percentage of sales increased in the 1997 period due to
the fact that fixed costs, including occupancy costs, utility costs and
depreciation and amortization expenses remained constant notwithstanding the
decrease in sales.
Non-store operating expenses were $65,046 for the 13 weeks ended June
1, 1997 as compared with $88,218 for the same period in 1996, mainly as a result
of lower legal expenses. The decrease in legal expenses was a result of the
Company's reduced need during the quarter for the services of outside legal
counsel in connection with litigation, real estate and general corporate
matters.
Page 10
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS (continued)
Other income decreased during the 13 weeks ended June 1, 1997 by
$10,049 as compared with the 13 weeks ended June 2, 1996. The decline was
primarily due to a decrease in delivery income.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Page 11
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sloan's Supermarkets, Inc.
By: /s/ John A. Catsimatidis
------------------------
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: July 16, 1997
By: /s/ Mark S. Kassner
-----------------------
Mark S. Kassner
Vice President and
Chief Financial Officer
Dated: July 16, 1997
