<PAGE> 1
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 August 31, 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 October 14, 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
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Consolidated Balance Sheets as of
August 31, 1997 and March 2, 1997 Page 3
Consolidated Statements of Operations for
the six months and quarter ended
August 31, 1997 and September 1, 1996 Page 4
Consolidated Statements of Stockholders'
Equity for the six months ended
August 31, 1997 Page 5
Consolidated Statements of Cash Flows for
the six months and quarter ended
August 31, 1997 and September 1, 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
</TABLE>
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ITEM 1
FINANCIAL STATEMENTS
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
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August 31, March 2,
ASSETS 1997 1997
CURRENT ASSETS:
Cash $ 80,683 $ 70,237
Accounts receivable - net of allowance
for doubtful accounts
of $30,000 at August 31, and March 2,1997 818,531 501,916
Inventory 5,771,989 5,873,991
Prepaid expenses and other current assets 418,007 299,887
Due from related parties 1,902,010 1,830,127
Total current assets 8,991,220 8,576,158
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 5,523,137 5,466,456
Leaseholds and leasehold improvements 11,705,905 11,704,425
17,229,042 17,170,881
Less accumulated depreciation and amortization 5,316,350 4,527,506
Net property and equipment 11,912,692 12,643,375
Receivable from officer 346,954 337,304
Deposits and other assets 389,709 313,585
Deferred costs 106,952 115,489
Noncompete agreement - net of
accumulated amortization of
$351,082 at August 31, 1997 and $311,567
at March 2, 1997 439,234 478,749
Deferred finance costs - net of
accumulated amortization of
$50,285 at August 31, 1997 and $35,048
at March 2, 1997 429,620 350,801
TOTAL $ 22,616,381 $ 22,815,461
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 5,660,111 $ 6,593,412
Accrued payroll, vacation and withholdings 419,792 491,857
Accrued expenses and other current liabilities 198,917 377,431
Revolving credit facility 1,000,000 1,000,000
Current portion of long term debt 2,700,000 1,200,000
Total current liabilities 9,978,820 9,662,700
Long-term debt 3,600,000 4,200,000
Deferred rents 894,929 794,645
Total liabilities 14,473,749 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 Sept 1, and
March 2, 1997 62,646 62,646
Additional paid-in capital 18,248,286 18,248,286
Accumulated deficit (10,168,300) (10,152,816)
Total stockholders' equity 8,142,632 8,158,116
TOTAL $ 22,616,381 $ 22,815,461
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND QUARTERS ENDED AUGUST 31, 1997 AND SEPTEMBER 1, 1996
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13 weeks 13 weeks 26 weeks 26 weeks
ended ended Ended Ended
August 31, Sept 1, August 31, Sept. 1,
1997 1996 1997 1996
Sales $ 10,913,697 $ 11,984,838 $ 23,168,397 $ 25,522,846
Cost of sales 6,418,791 6,965,651 13,925,207 15,079,090
Gross profit 4,494,906 5,019,187 9,243,190 10,443,756
Store operating, general and
administrative expense 4,243,088 4,462,869 8,481,350 9,118,595
Management fee 134,416 149,812 285,245 319,037
Store operating profit 117,402 406,506 476,595 1,006,124
Non-store operating expense 66,138 80,894 131,184 169,112
Operating profit 51,264 325,612 345,411 837,012
Other income (expense)
Interest income 4,824 4,825 10,290 11,210
Other income (1,692) (6,850) (7,246) (2,355)
Interest expense (169,497) (186,970) (356,939) (364,991)
(166,365) (188,995) (353,895) (356,136)
(Loss) / income from operations
before income taxes (115,101) 136,617 (8,484) 480,876
Provision for income taxes 2,500 10,987 7,000 24,993
Net (loss) / income $ (117,601) $ 125,630 $ (15,484) $ 455,883
(Loss) / income per share ($0.04) $0.04 ($0.00) $0.14
Weighted average number of
shares and
equivalents outstanding 3,132,000 3,151,000 3,132,000 3,151,000
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1997
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Additional Total
Common stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
Balance at March 2, 1997 3,132,289 62,646 18,248,286 (10,152,816) 8,158,116
Net loss for the twenty
six weeks
ended August 31, 1997 (15,484) (15,484)
Balance at August 31, 1997 3,132,289 $ 62,646 $ 18,248,286 $ (10,168,300) $ 8,142,632
</TABLE>
See accompanying notes.
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 1997 AND SEPTEMBER 1, 1996
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26 weeks 26 weeks
ended ended
August 31, Sept 1,
1997 1996
Net (loss) / income $ (15,484) $ 455,883
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 788,844 840,729
Changes in operating assets and liabilities:
Accounts receivable - net (316,615) (61,437)
Inventory 102,002 (408,391)
Prepaid expenses and other current assets (118,120) (162,021)
Receivable from related party - net (71,883) (432,526)
Due from related parties (9,650) (9,650)
Other assets (76,124) (12,355)
Deferred credits (30,767) (64,308)
Accounts payable, trade (933,301) 433,359
Accrued payroll, vacation and withholdings (72,065) (234,305)
Accrued expenses and other current liabilities (178,514) 190,977
Deferred rents 100,284 128,670
Net cash (used) / provided by operating activities (831,393) 664,625
Capital expenditures - net (58,161) (50,679)
Net cash used in investing activities (58,161) (50,679)
Proceeds from bank loan 1,500,000 0
Repayments of bank loan (600,000) (600,000)
Net cash provided / (used) in financing activities 900,000 (600,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,446 13,946
CASH AND CASH EQUIVALENTS, begining of period 70,237 71,242
CASH AND CASH EQUIVALENTS, end of period $ 80,683 $ 85,188
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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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.
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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 (CONTINUED)
Income Per share - Per share data are based on the weighted average number of
shares of common stock and equivalents outstanding during each quarter. Income
per share is computed by the treasury stock method; primary and fully diluted
income per share are the same.
Supplemental Disclosures of Cash Flow Information-
Cash paid during the six months ended:
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August 31, 1997 September 1,1996
--------------- ----------------
Interest $354,528 $307,331
Income taxes $34,580 $29,471
</TABLE>
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 August 31, 1997,
the Company is owed $346,954 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 quarter and six months ended August 31, 1997 were $134,416 and $285,245,
respectively. For the quarter and six months ended September 1, 1996,
management fees were $149,812 and $319,037, respectively.
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
2. RELATED PARTY TRANSACTIONS (CONTINUED)
Red Apple also operates 33 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 quarter and six months
ended August 31, 1997 were $971,178 and $2,104,792, respectively. For the
quarter and six months ended September 1, 1996 the purchases were $1,283,769
and $2,633,630, respectively.
Legal fees incurred by the Company to a law firm, of which a director of the
Company is a member, were $82,938 and $147,882 for the quarter and six months
ended August 31, 1997, respectively. For the quarter and six months ended
September 1, 1996, these legal fees were $36,000 and $58,171, respectively.
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER AND SIX
MONTHS ENDED AUGUST 31, 1997 AND SEPTEMBER 1, 1996
FINANCIAL CONDITION
During the quarter ended August 31, 1997 the Company took down a short
term bank loan in the amount of $1,500,000. This loan matures on October 31,
1997 and has been classified as current portion of long term debt on the
balance sheet.
The Company's working capital deficiency decreased by approximately
$98,900 during the six months ended August 31, 1997.
Long term debt decreased by $600,000 during the six month
period reflecting scheduled principal payments.
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LIQUIDITY AND CAPITAL RESOURCES
The Board of Directors of the Company has approved the
acquisition of 29 stores from various private companies owned by the
Chairman of the Board. Subject to stockholder approval of the
acquisition the Company has received commitment letters from a group of banks,
in the amount of $25,000,000 to finance the acquisition, capital improvements
and to provide working capital.
RESULTS OF OPERATIONS
Net loss was $117,601 for the quarter and $15,484 for the six
months ended August 31, 1997, as compared to net income of $125,630 for the
quarter and $455,883 for the six months ended September 1, 1996
Sales were $10,913,697 and $23,168,397 for the quarter and six months
ended August 31, 1997 as compared to $11,984,838 and $25,522,846 for the
quarter and six months ended September 1, 1996. The decline in sales was once
again indicative of the delay in the commencement of the Company's remodeling
program. The favorable summer weather in the New York City area resulting in
prolonged vacations, as well as continuing deflationary pressures in food
prices also contributed to the decrease in sales in the 1997 periods as
compared with the 1996 periods.
Gross profit as a percentage of sales was 41.19% and 39.90% for the
quarter and six months ended August 31, 1997 as compared to 41.88% and 40.92%
for the quarter and six months ended September 1, 1996. The decrease in gross
profit margin was mainly due to the continued curtailment of our long-term
forward buying program in the 1997 periods as compared to the 1996 periods, due
to the temporary lack of suitable available product.
Store operating, general and administrative expenses were $4,243,088 or
38.88% of sales and $8,481,350 or 36.61% of sales for the quarter and six
months ended August 31, 1997 as compared to $4,462,869 or 37.24% of sales and
$9,118,595 or 35.73% of sales for the quarter and six months ended September 1,
1996. Operating expenses as a percentage of sales increased in the 1997
periods mainly as a result of increased maintenance costs as well as the fact
that fixed costs including occupancy costs and depreciation and amortization
expenses remained
constant notwithstanding the decrease in sales.
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SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
Non-store operating expenses were $66,138 and $131,184 for the quarter and
six months ended August 31, 1997 as compared with $80,894 and $169,112 for the
quarter and six months ended September 1, 1996. The decrease for the 1997
periods was due mainly to a decrease in legal expenses resulting from the
Company's reduced need for the services of outside legal counsel in connection
with litigation, real estate, and general corporate matters.
PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
-----------------
None.
ITEM 2. CHANGE IN SECURITIES
--------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
-----------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
None.
</TABLE>
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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 S. Catsimatidis
------------------------
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: October 14, 1997
By: /s/ Mark S. Kassner
------------------------
Mark S. Kassner
Vice President and
Chief Financial Officer
Dated: October 14, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-01-1998
<PERIOD-START> JUN-02-1997
<PERIOD-END> AUG-31-1997
<CASH> 80,683
<SECURITIES> 0
<RECEIVABLES> 818,531
<ALLOWANCES> 0
<INVENTORY> 5,771,989
<CURRENT-ASSETS> 8,991,220
<PP&E> 17,229,042
<DEPRECIATION> 5,316,350
<TOTAL-ASSETS> 22,616,381
<CURRENT-LIABILITIES> 9,978,820
<BONDS> 0
<COMMON> 62,646
0
0
<OTHER-SE> 8,079,986
<TOTAL-LIABILITY-AND-EQUITY> 22,616,381
<SALES> 10,913,697
<TOTAL-REVENUES> 0
<CGS> 6,418,791
<TOTAL-COSTS> 4,443,642
<OTHER-EXPENSES> 166,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (115,101)
<INCOME-TAX> 2,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (117,601)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
