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 December 1, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .............to ............
Commission File Number 1-7013
SLOAN'S SUPERMARKETS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1829183
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
823 Eleventh Avenue, New York, New York 10019
(Address of Principal Executive Offices)
(212) 956-5803
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
At January 15, 1997, the registrant had issued and outstanding 3,132,289 shares
of common stock.
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December
1, 1996 and March 3, 1996 Page 3
Consolidated Statements of Operations for the quarters and
nine months ended December 1, 1996 and December 3,
1995 Page 4
Consolidated Statements of Stockholders'
Equity for the quarters and nine months
ended December 1, 1996 and
December 3, 1995 Page 5
Consolidated Statements of Cash Flows for
the nine months ended December 1,
1996 and December 3, 1995 Page 6
Notes to Consolidated Financial Statements Page 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations Page 10
-2-
<PAGE>
Item 1
Financial Statements
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 1, March 3,
1996 1996
===================== =====================
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 13,750 $ 71,242
Accounts receivable - net of allowance for doubtful accounts
of $30,000 at Dec 1, and March 3, 1996 404,330 282,182
Inventory 6,200,553 5,461,283
Prepaid expenses and other current assets 239,341 167,512
Due from related parties 1,305,310 527,694
--------------------- ---------------------
Total current assets 8,163,284 6,509,913
--------------------- ---------------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 5,466,136 5,461,146
Leaseholds and leasehold improvements 11,705,657 11,657,126
--------------------- ---------------------
17,171,793 17,118,272
Less accumulated depreciation and amortization 4,130,588 2,947,116
--------------------- ---------------------
Net property and equipment 13,041,205 14,171,156
Receivable from officer 332,480 318,005
Deposits and other assets 313,585 301,230
Deferred costs 355,786 115,358
Noncompete agreement - net of accumulated amortization of
$291,809 at Dec 1, 1996 and $232,535 at March 3, 1996 498,507 557,781
Deferred finance costs - net of accumulated amortization of
$28,584 at Dec 1, 1996 and $9,190 at March 3, 1996 100,711 120,105
--------------------- ---------------------
TOTAL $ 22,805,558 $ 22,093,548
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 6,332,754 $ 5,591,948
Accrued payroll, vacation and withholdings 521,432 703,785
Accrued expenses and other current liabilities 660,601 473,506
Revolving credit facility 1,000,000 1,000,000
Current portion of long term debt 1,200,000 1,200,000
--------------------- ---------------------
Total current liabilities 9,714,787 8,969,239
Long-term debt 4,500,000 5,400,000
Deferred credits 59,234 172,442
Deferred rents 742,403 553,429
--------------------- ---------------------
Total liabilities 15,016,424 15,095,110
--------------------- ---------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $50 par, - shares authorized 500,000; none issued
Common stock, $.02 par, - shares authorized 10,000,000; outstanding
3,132,289 shares issued at Sept 1, and March 3, 1996 62,646 62,646
Additional paid-in capital 18,248,286 18,248,286
Accumulated deficit (10,521,798) (11,312,494)
--------------------- ---------------------
Total stockholders' equity 7,789,134 6,998,438
--------------------- ---------------------
TOTAL $ 22,805,558 $ 22,093,548
===================== =====================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTERS ENDED DECEMBER 1, 1996 AND DECEMBER 3, 1995
<TABLE>
<CAPTION>
13 weeks 13 weeks 39 weeks 40 weeks
ended ended Ended Ended
Dec. 1, Dec 3, Dec. 1, Dec 3,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales ............................... $ 13,158,507 $ 12,463,386 $ 38,681,353 $ 36,048,270
Cost of sales ....................... 7,972,639 7,649,723 23,051,729 22,423,172
Gross profit ........................ 5,185,868 4,813,663 15,629,624 13,625,098
Store operating, general and
administrative expense ............ 4,433,144 3,967,874 13,551,738 11,966,863
Management fee ...................... 162,435 155,792 481,471 450,603
Total operating expenses ............ 4,595,579 4,123,666 14,033,209 12,417,466
Store operating profit .............. 590,289 689,997 1,596,415 1,207,632
Non-store operating expense ......... 78,612 121,204 247,725 400,370
Operating profit .................... 511,677 568,793 1,348,690 807,262
Other income (expense)
Gain on sale of leasehold ........... 0 0 0 1,001,397
Interest income ..................... 5,524 12,825 16,734 30,345
Other income ........................ 13,123 0 10,768 0
Management fee income ............... 0 0 0 50,000
Interest expense .................... (174,674) (172,000) (539,665) (354,229)
(156,027) (159,175) (512,163) 727,513
Income from continuing operations
before income taxes ............... 355,650 409,618 836,527 1,534,775
Provision for income taxes .......... 20,839 32,500 45,831 102,500
Income from continued operations .... 334,811 377,118 790,696 1,432,275
Loss from discontinued operations ... 0 2,000 0 5,572
Net income .......................... $ 334,811 $ 375,118 $ 790,696 $ 1,426,703
Income per share .................... $ 0.11 $ 0.12 $ 0.25 $ 0.45
Weighted average number of shares and
equivalents outstanding ............. 3,151,000 3,185,000 3,151,000 3,185,000
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED DECEMBER 1, 1996
<TABLE>
<CAPTION>
Additional Total
Common stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance at March 3, 1996 .. 3,132,289 62,646 18,248,286 (11,312,494) 6,998,438
Net income for 39 weeks
ended December 1, 1996 . 790,696 790,696
Balance at December 1, 1996 3,132,289 $ 62,646 $ 18,248,286 $(10,521,798) $ 7,789,134
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 1, 1996 AND DECEMBER 3, 1995
<TABLE>
<CAPTION>
39 weeks 39 weeks
ended ended
Dec 1, Dec 3,
1996 1995
---- ----
<S> <C> <C>
Net income ............................................................. $ 790,696 $ 1,426,703
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain on sale of leasehold .............................................. 0 (1,001,397)
Depreciation and amortization .......................................... 1,262,140 933,223
Changes in operating assets and liabilities:
Restricted cash ........................................................ 0 26,952
Accounts receivable - net .............................................. (122,148) 24,068
Inventory .............................................................. (739,270) (1,220,771)
Prepaid expenses and other current assets .............................. (71,829) (161,200)
Receivable from related party - net .................................... (777,616) 121,460
Due from related parties ............................................... (14,475) (15,814)
Other assets ........................................................... (12,355) (202,261)
Deferred credits ....................................................... (353,636) 0
Accounts payable, trade ................................................ 740,806 (572,601)
Accounts payable, assumed at acquisition ............................... 0 (97,446)
Accrued payroll, vacation and withholdings ............................. (182,353) 0
Accrued expenses and other current liabilities ......................... 187,095 236,056
Deferred rents ......................................................... 188,974 0
Net proceeds on sale of leasehold ...................................... 0 1,604,660
Net cash provided by operating activities ...................... 896,029 1,101,632
Payment for purchase of supermarkets ................................... 0 (5,000,000)
Capital expenditures - net ............................................. (53,521) (157,038)
Net cash used in investing activities .......................... (53,521) (5,157,038)
Proceeds from bank loan ................................................ 0 8,000,000
Repayments of bank loan ................................................ (900,000) (3,895,614)
Net cash used in financing activities ......................... (900,000) 4,104,386
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... (57,492) 48,980
CASH AND CASH EQUIVALENTS, beginning of period ......................... 71,242 75,503
CASH AND CASH EQUIVALENTS, end of period ............................... $ 13,750 $ 124,483
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Business - The Company owns and operates fourteen supermarkets and one health
and beauty aids store (the "Supermarkets") in New York City (thirteen are
located in Manhattan and two are located in Brooklyn). Fourteen are operated
under the Sloan's name and one is operated under the Gristede's name. Eleven
Supermarkets were acquired in March 1993 from CKMR Corporation ("CKMR"),a
privately-held corporation unaffiliated with the Company. In August 1995, the
Company sold the leasehold of one of its supermarkets; in October 1995, the
Company purchased three other Supermarkets from Supermarket Acquisition
Corp.("SAC"), a company owned and controlled by the Company's Chairman of the
Board and Chief Executive Officer, John Catsimatidis. In February 1996, the
Company opened one new Supermarket and on March 7, 1996, the Company opened a
health and beauty aids store. The Company leases all of its Supermarket
locations.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All material
intercompany accounts and transactions have been eliminated in consolidation.
Quarter End - The Company operates using the conventional retail 52/53 week
fiscal year. The fiscal quarter ends on the last Sunday of the quarter.
Inventory - Store inventories are valued principally at the lower of cost or
market with cost determined under the retail first in, first out (FIFO) method.
Property and Equipment - Depreciation of furniture, fixtures and equipment is
computed by the straight-line method over the estimated useful lives of the
assets.
Leases - The Company charges the cost of noncancelable operating lease payments
and beneficial leaseholds to operations on a straight-line basis over the lives
of the leases.
Reclassifications - Certain reclassifications have been made to the presentation
of the quarter and nine months ended December 3, 1995 to conform to the
presentation for the quarter and nine months ended December 1, 1996 and fiscal
1996.
Provision for income taxes - Income taxes reflect Federal and State alternative
minimum tax only, as all regular income taxes have been offset by utilization of
the Company's net operating loss carryforward.
-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 nine months ended:
December 1, 1996 December 3, 1995
---------------- ----------------
Interest $486,228 $275,792
Income taxes $ 41,286 $ 61,727
In the opinion of management, the information furnished reflects all adjustments
(consisting of normal recurring adjustments) which are necessary for a fair
statement of the results of operations for the interim period. The interim
figures are not necessarily indicative of the results to be expected for the
fiscal year.
The Company's Form 10-K for the year ended March 3, 1996 contains information
which should be read in conjunction herewith.
2. RELATED PARTY TRANSACTIONS
The Company has advanced funds to a company owned by the Chairman of the Board
who is also the principal stockholder of the Company. As of December 1, 1996 the
Company is owed $332,480 including accrued interest. As of March 3, 1996,
advances and accrued interest totaled $318,005.
Red Apple Group, Inc. (Red Apple), a company wholly-owned by the Company's
Chairman of the Board, supervises all operations of the Company under a
management agreement. The agreement requires the Company to pay to Red Apple one
and one quarter percent of sales as a management fee. Management fees for
quarter and nine months ended December 1, 1996 were $162,435 and $481,471,
respectively. For the quarter and nine months ended December 3, 1995, management
fees were $155,792 and $450,603 respectively.
-8-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
2. RELATED PARTY TRANSACTIONS (Continued)
Red Apple also operates 35 supermarkets in the New York metropolitan area under
the Sloan's and Gristede's banners. The Company's advertising program is
combined with all of these Red Apple supermarket entities. Consistent with this
shared advertising program the Company is allocated advertising income and
expense by Red Apple based on the Company's portion of sales to total Red Apple
supermarket sales. Certain direct store advertising expense is charged on a
store by store basis.
The Company purchases produce and certain sundry items from a subsidiary of Red
Apple at prices consistent with those charged to other Red Apple entities` as
well as non-affiliated customers. Purchases for the quarter and nine months
ended December 1, 1996 were $1,474,955 and $4,108,585, respectively. For the
quarter and nine months ended December 3, 1995, the purchases were $676,000 and
$2,066,000 respectively.
Legal fees incurred by the Company to a law firm, of which a director of the
Company is a member, were $160,814 and $218,985, respectively for the quarter
and nine months ended December 1, 1996. For the quarter and nine months ended
December 3, 1995, these legal fees were $83,600 and $236,600 respectively.
-9-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
PART I
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
For the quarters and nine months ended
December 1, 1996 and December 3, 1995
FINANCIAL CONDITION
The Company's working capital deficiency decreased by approximately
$908,000 during the nine months ended December 1, 1996. The major changes in the
components of working capital are as follows:
Due from related parties increased by approximately $778,000, primarily
reflecting the billing for advertising income and volume achievement discounts
by Red Apple on behalf of the Company.
Inventory increased by approximately $739,000, reflecting management's
continued desire to take advantage of volume achievement allowances and bulk
purchases.
Accounts payable increased $741,000 primarily as a result of the
increase in inventory.
Other significant changes in the Company's financial position are as
follows:
Deferred costs increased $240,000. The increase consists primarily of
legal and accounting fees incurred as a result of the Company's pursuit of
suitable acquisitions of other related food industry entities.
Long term debt decreased by $900,000 reflecting scheduled principal
payments during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it will be able to satisfy its bank loan
agreement and supermarket operating requirements from internally generated
funds. In addition, the Company has in place a $1,000,000 Revolving Credit
Facility to provide short term working capital, as of December 1, 1996 the
Revolving Credit Facility was fully utilized.
-10-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The quarter and nine months ended December 1, 1996 contain thirteen and
thirty-nine weeks, respectively, compared to thirteen and forty weeks,
respectively, for the quarter and nine months ended December 3, 1995.
The following table compares the major components of the results of
operations for the 1996 periods to the results for the 1995 periods:
Quarter Nine months
------- -----------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Sales ................. $ 13,159 $ 12,463 $ 38,681 $ 36,048
Gross profit .......... 5,186 4,814 15,630 13,625
Gross profit margin ... 39.41% 38.62% 40.41% 37.80%
Store operating expense 4,596 4,124 14,033 12,417
Non-store operating
expense ...... 78 121 248 400
Other income (expenses) (156) (159) (512) 728
Net income ............ 335 377 791 1,432
Net income was $334,811 for the quarter and $790,696 for the nine
months ended December 1, 1996 compared to $375,118 for the quarter and
$1,426,703 for the nine months ended December 3, 1995. The results for the nine
months in 1995 include a gain of $1,001,397 on the sale of a leasehold.
Sales totaled $13.2 million for the quarter in 1996 compared to $12.5
million for the quarter in 1995. For the nine months in 1996, sales were $38.7
million compared to $36.0 million for the nine months in 1995. The increase in
total sales during both periods of 1996 was primarily due to the operation of
additional stores, which were purchased or opened during the third and fourth
fiscal quarters of 1996. Same store sales actually decreased approximately
$925,000 during the quarter and approximately $2.5 million during the nine
months ended December 1, 1996 compared to the same periods in 1995 on a
pro-rata, thirteen and thirty-nine week basis, respectively. The decrease in
sales was primarily due to management's decision to increase gross profit
margins as well as to a substantial reduction in beverage sales during the
second quarter in 1996 as compared to the 1995 quarter. Beverage sales, which
ordinarily represent approximately 17.0% of summer sales, were negatively
impacted by the abnormally cool weather in the New York area.
-11-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
Gross profit as a percentage of sales increased to 39.41% for the quarter
in 1996 from 38.62% for the quarter in 1995 and to 40.41% for the nine months in
1996 from 37.80% for the nine months in 1995. Gross profit margins benefitted
from the implementation of a better-buying initiative, utilizing a distribution
center of an affiliate, thereby obtaining discounts on bulk purchases, and by
adjusting the product mix with an increased focus on selling higher margin
value-added products. Additionally, prices were selectively increased.
Store operating expenses were $4.6 million (34.9% of sales) for the quarter
in 1996 compared to $4.1 million (33.1% of sales) in the 1995 quarter. For the
nine months in 1996, these expenses were $14.0 million (36.3% of sales) compared
to $12.4 million (34.4% of sales) for the nine months in 1995. The primary
reasons for the increase in these expenses are the additional stores operating
in the 1996 periods and the extra costs associated with the start-up of the new
stores.
Non-store operating expenses decreased in both periods in 1996 compared to
1995, primarily reflecting lower legal fees.
During the 1996 periods, other income (expenses) consists primarily of
interest expense on the additional borrowings incurred to finance the purchase
of the stores in 1995. As noted above, during the 1995 periods, other income
(expenses) included a gain of $1.0 million on the sale of a leasehold.
-12-
<PAGE>
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
None
-13-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sloan's Supermarkets, Inc.
By: /s/ John A. Catsimatidis
------------------------
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: January 15, 1997
By: /s/ Mark S. Kassner
-----------------------
Mark S. Kassner
Vice President and
Chief Financial Officer
Dated: January 15, 1997
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Mar-02-1997
<PERIOD-START> Mar-04-1996
<PERIOD-END> Dec-01-1996
<CASH> $13,750
<SECURITIES> $0
<RECEIVABLES> $404,330
<ALLOWANCES> $30,000
<INVENTORY> $6,200,553
<CURRENT-ASSETS> $8,163,284
<PP&E> $17,171,793
<DEPRECIATION> $4,130,588
<TOTAL-ASSETS> $22,805,558
<CURRENT-LIABILITIES> $9,714,787
<BONDS> $0
$0
$0
<COMMON> $62,646
<OTHER-SE> $18,248,286
<TOTAL-LIABILITY-AND-EQUITY> $22,805,558
<SALES> $38,681,353
<TOTAL-REVENUES> $38,681,353
<CGS> $23,051,729
<TOTAL-COSTS> $23,051,729
<OTHER-EXPENSES> $14,033,209
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $539,665
<INCOME-PRETAX> $836,527
<INCOME-TAX> $45,831
<INCOME-CONTINUING> $836,527
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $79,696
<EPS-PRIMARY> $.25
<EPS-DILUTED> $.25
</TABLE>
