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 March 1, 1998.
[ ] 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
GRISTEDE'S SLOAN'S, 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 May 31, 1998, the registrant had issued and outstanding 19,636,574 shares of
common stock.
<PAGE>
GRISTEDE'S SLOAN'S, INC. AND SUBSIDIARIES
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 1, 1998 and November 30, 1997 Page 3
Consolidated Statements of Operations for
the quarter ended
March 1, 1998 and March 2, 1997 Page 4
Consolidated Statements of Stockholders'
Equity for the quarter ended
March 1, 1998 Page 5
Consolidated Statements of Cash Flows for
the quarter ended
March 1, 1998 and March 2, 1997 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
- 2 -
<PAGE>
Item 1
Financial Statements
<TABLE>
<CAPTION>
GRISTEDE'S SLOAN'S, INC.
CONSOLIDATED BALANCE SHEETS
March 1, November 30,
ASSETS 1998 1997
Unaudited Audited
=========== ============
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................................................... $ 113,458 $ 88,970
Accounts receivable - net of allowance for doubtful accounts
of $300,000 at March 1, 1998 and November 30, 1997 .............................. 5,926,069 5,110,026
Inventory .......................................................................... 17,382,740 16,221,465
Prepaid expenses and other current assets .......................................... 850,342 914,544
Notes receivable- current portion .................................................. 607,381 584,912
----------- -----------
Total current assets ...................................................... 24,879,990 22,919,917
----------- -----------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment .................................................. 14,151,349 13,393,803
Capitalized equipment leases ....................................................... 5,574,369 5,574,369
Leaseholds and leasehold improvements .............................................. 31,624,178 30,296,510
----------- -----------
51,349,896 49,264,682
Less accumulated depreciation and amortization ..................................... 24,770,212 23,567,986
----------- -----------
Net property and equipment ................................................ 26,579,684 25,696,696
Due from affiliate ................................................................. 356,603 351,778
Deposits and other assets .......................................................... 715,262 717,429
Deferred costs ..................................................................... 2,081,880 1,515,004
Notes receivable - noncurrent portion .............................................. 1,357,528 1,504,731
----------- -----------
$55,970,947 $52,705,555
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade ............................................................ $15,636,456 $15,671,962
Accrued payroll, vacation and withholdings ......................................... 861,137 1,276,535
Accrued expenses and other current liabilities ..................................... 1,210,767 947,395
Capitalized lease obligation - current portion ..................................... 421,180 389,809
Current portion of long term debt .................................................. 1,714,284 1,714,284
----------- -----------
Total current liabilities ................................................. 19,843,824 19,999,985
Long-term debt ..................................................................... 14,607,145 11,285,716
Due to affiliate ................................................................... 4,000,000 4,000,000
Deferred advertising ............................................................... 346,154 378,654
Capitalized lease obligation - non current portion ................................. 1,252,533 1,377,194
Deferred rent ...................................................................... 1,190,310 993,984
----------- -----------
Total liabilities ......................................................... 41,239,966 38,035,533
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $50 par, - shares authorized 500,000; none issued
Common stock, $.02 par, - shares authorized 25,000,000; outstanding
19,636,574 shares issued at November 30, 1997 and March 1, 1998 ............. 392,732 392,732
Additional paid-in capital ......................................................... 14,167,595 14,136,674
Retained earnings .................................................................. 170,654 140,616
----------- -----------
Total stockholders' equity ................................................ 14,730,981 14,670,022
----------- -----------
$55,970,947 $52,705,555
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
GRISTEDE'S SLOAN'S, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 1, 1998 AND MARCH 2, 1997
13 weeks 13 weeks
ended ended
March 1, March 2,
1998 1997
============= ============
Sales ......................................... $ 39,420,880 $ 26,123,871
Cost of sales ................................. 23,513,947 16,245,331
------------ ------------
Gross profit .................................. 15,906,933 9,878,540
Store operating, general and
administrative expenses ....................... 13,290,951 8,780,586
Depreciation and amortization ................. 1,053,960 451,083
------------ ------------
1,562,022 646,871
Non-store operating expenses .................. 1,190,924 1,502,848
------------ ------------
Operating profit/(loss) ....................... 371,098 (855,977)
------------ ------------
Other income (expense)
Interest income ............................... 51,007 17,791
Interest expense .............................. (379,567) (126,625)
------------ ------------
(328,560) (108,834)
------------ ------------
Income/(loss) before provision for income taxes 42,538 (964,811)
Provision for income taxes .................... 12,500 0
------------ ------------
Net income/(loss) ............................. $ 30,038 $ (964,811)
============ ============
Net income per share .......................... $0.00 N/A
============ ============
Weighted average number of shares and
equivalents outstanding ....................... 19,636,574 N/A
============ ============
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
GRISTEDE'S SLOAN'S, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
QUARTER ENDED MARCH 1, 1998
Additional Total
Common stock Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
=========== =========== =========== =========== ===========
<S> <C> <C> <C> <C> <C>
Balance at November 30 , 1997 .............. 19,636,574 392,732 14,136,674 140,616 14,670,022
To reflect acquisition of new store
#53 on February 6, 1998 .................... 30,921 30,921
Net income for the quarter
ended March 1, 1998 ........................ 30,038 30,038
----------- ----------- ----------- ----------- -----------
Balance at March 1, 1998 ................... 19,636,574 $ 392,732 $14,167,595 $ 170,654 $14,730,981
=========== =========== =========== =========== ===========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
-5-
<PAGE>
GRISTEDE'S SLOAN'S, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 1, 1998 AND MARCH 2, 1997
13 weeks 13 weeks
ended ended
March 1, March 2,
1998 1997
========== ===========
Net income/(loss) ................................. $ 30,038 $ (964,811)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ...................... 1,053,960 451,083
Changes in operating assets and liabilities:
Accounts receivable - net .......................... (816,043) (521,308)
Inventory .......................................... (1,161,275) 760,734
Prepaid expenses and other current assets .......... 64,202
Notes receivable ................................... 124,734
Receivable from officer ............................ (4,825)
Other assets ....................................... (564,709)
Accounts payable, trade ............................ (35,506) (1,503,426)
Accrued payroll, vacation and withholdings ......... (760,390)
Accrued expenses and other current liabilities ..... 608,364
Accrued rent leveling .............................. 196,326
Capitalized lease obligations ...................... (93,290)
Other credits ...................................... (32,500)
---------- ----------
Net cash (used)/ provided by operating activities (1,390,914) (1,777,728)
---------- ----------
Capital expenditures - net ......................... (1,906,027) 502,580
---------- ----------
Net cash used in investing activities ........... (1,906,027) 502,580
---------- ----------
Proceeds from bank loan ............................ 3,750,000
Repayments of bank loan ............................ (428,571)
---------- ----------
Net cash provided /(used) in financing activities 3,321,429 0
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ......... 24,488 0
CASH AND CASH EQUIVALENTS, beginning of period ...... 88,970 0
---------- ----------
CASH AND CASH EQUIVALENTS, end of period ........... $ 113,458 $ 0
========== ==========
INCREASE IN NET ASSETS PURCHASED ................... $ *761,420
* The Unaudited Consolidated Statement of Cash Flows for the Quarter Ended
March 2, 1997 reflects the difference between the Statement of Assets to be
Purchased and Liabilities to be Assumed at March 2, 1997 as compared to December
1, 1996. No cash was transferred as part of the acquisition. The increase in Net
Assets Purchased was $ 761,420.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
----------
Cash paid for interest ..................... $ 369,164 241,449
Cash paid for taxes ......................... 10,429 9,572
NONCASH TRANSACTIONS
----------
Acquisition of new store .................... $ 30,921 --
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE>
GRISTEDE'S SLOAN'S, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - On November 4, 1997, Sloan's Supermarkets, Inc. ("Sloan's") changed
its name to Gristede's Sloan's, Inc. ("GRI" or the "Company"). On November 10,
1997, GRI acquired certain assets, net of liabilities, of 29 selected
supermarkets and a wholesale distribution business ("The Food Group") controlled
by Mr. John Catsimatidis, Chairman and 37% stockholder of Sloan's. The
transaction was accounted for as the acquisition of Sloan's by The Food Group
pursuant to Emerging Issues Task Force 90-13 as a result of The Food Group
obtaining control of Sloan's after the transaction. The assets and liabilities
of The Food Group were recorded at their historical cost. Sloan's assets and
liabilities were recorded at their fair value to the extent acquired.
Consideration for the transaction was based on an aggregate of $36,000,000 in
market value of the Company's common stock and the assumption of $4,000,000 of
liabilities. 16,504,298 shares of common stock were issued on the date of the
acquisition based on a market price of $2.18 per share.
The Company presently operates 42 supermarkets and one health and beauty aids
store (the "Supermarkets"). 37 Supermarkets are located in Manhattan, New York,
three Supermarkets are located in Westchester County, New York, two
Supermarkets, are located in Brooklyn, New York and one Supermarket is located
in Long Island, New York. 23 of the Supermarkets are operated under the
"Sloan's" name and 20 are operated under the "Gristede's" name. The Company
leases all of its Supermarket locations.
The Company also owns City Produce Operating Corp., a corporation which operates
a warehouse and distribution center primarily for fresh produce on leased
premises in the Bronx, New York.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. 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. The Company's fiscal year ends on the Sunday closest to November 30.
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.
- 7 -
<PAGE>
GRISTEDE'S SLOAN'S, 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.
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 Annual Report on Form 10-K for the transition 9 month period ended
November 30, 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 March 1, 1998, the
Company is owed $356,603 including accrued interest. As of November 30, 1997,
advances and accrued interest totaled $351,778.
Advertising services are provided to the Company by an affiliated company MCV
Advertising Associates, Inc. For the quarters ended March 1, 1998 and March 2,
1997 the costs incurred were $295,758 and $174,121, respectively.
The Company has entered into capital and operating leases with an affiliate, Red
Apple Leasing, Inc. Such leases are primarily for store operating equipment.
Obligations under capital leases at March 1, 1998 were $1,134,683 and require
monthly payments of $35,114 through March 1, 2001. Obligations under operating
leases require monthly payments of $41,675.
Legal fees incurred by the company to a law firm, of which a director of the
Company is a member, were $35,177 and $26,034 for the quarters ended March 1,
1998 and March 2, 1997, respectively.
- 8 -
<PAGE>
GRISTEDE'S SLOAN'S, INC. AND SUBSIDIARIES
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 1, 1998 AND
MARCH 2, 1997
RESULTS OF OPERATIONS
As a result of the reverse acquisition which occurred on November 10, 1997 the
following discussion of the Results of Operations encompasses the operations of
29 Supermarkets plus the City Produce operation for the quarter ended March 2,
1997 and the operations of such 29 Supermarkets and the City Produce operation
combined with the operations of an additional 15 Supermarkets for the quarter
ended March 1, 1998.
Sales for the quarter ended March 1, 1998 were $39,420,880 as compared with
$26,123,871 for the quarter ended March 2, 1997. The sales increase was mainly
attributable to the 15 additional stores included in the 1998 quarter. Sales for
the same 29 stores were $26,222,307 for the quarter ended March 1, 1998 as
compared with $24,894,966 for the quarter ended March 2, 1997, an increase of
5.33%. The increase in sales for the 29 stores in the 1998 period was primarily
the result of the Company's remodeling program, which is continuing.
Gross profit as a percentage of sales was 40.35% for the quarter ended March 1,
1998 as compared with 37.81% for the quarter ended March 2, 1997. The quarter
ended March 1, 1998 includes the results of the additional 15 Sloan's stores
which traditionally achieved a higher gross margin (41.19% for the quarter ended
August 31, 1997).
Store operating general and administrative expenses as a percentage of sales
were 33.72% for the quarter ended March 1, 1998 as compared with 33.61% for the
quarter ended March 2, 1997. The increase was mainly due to increased payroll
costs associated with the remodeled stores as well as increased occupancy costs.
Nonstore operating expenses were 3.02% of sales for the quarter ended March 1,
1998 as compared to 5.75% of sales for the quarter ended March 2, 1997. The
decrease in nonstore operating expenses were mainly the result of a reduction in
administrative personnel and the reduced need for outside professional services.
Interest income was $51,007 for the quarter ended March 1, 1998 as compared to
$17,791 for the quarter ended March 2, 1997. The increase during the 1998 period
reflects interest on the notes received for the sale of various stores,
subsequent to March 2, 1997.
- 9 -
<PAGE>
Interest expense for the quarter ended March 1, 1998 was $379,567 as compared
with $126,625 for the quarter ended March 2, 1997. The increase in the 1998
quarter was primarily attributable to the borrowings under the new bank credit
facility which became effective November 10, 1997.
As a result of the items reviewed above the net income for the quarter ended
March 1, 1998 was $30,038 as compared to a net loss of $964,811 for the quarter
ended March 2, 1997.
LIQUIDITY AND CAPITAL RESOURCES
On November 10, 1997, the Company entered into an aggregate $25,000,000 five
year credit facility with a group of banks. The credit facility is comprised of
(i) a $12,000,000 five year term loan to refinance debt and general working
capital purposes, (ii) a $8,000,000 five year term loan to finance capital
improvements to its supermarkets, and (iii) a $5,000,000 two year revolving
credit for general working capital purposes. As of March 1, 1998, the Company
had drawn down the $12,000,000 term loan and $4,750,000 under the revolving
credit facility.
As of May 31, 1998, the Company still has available $4,650,000 under the capital
improvements line to finance the continuing major store remodeling program. It
is anticipated that the Company will generate sufficient cash flow to finance
its future working capital needs.
- 10 -
<PAGE>
GRISTEDE'S SLOAN'S, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
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
(a) Exhibits
27. Financial Data Schedule
(b) On January 13, 1998, the Company filed a Current Report on
Form 8-K to report the change in its fiscal year end to the Sunday
closest to November 30.
- 11 -
<PAGE>
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.
Gristede's Sloan's, Inc.
By: /s/ John A. Catsimatidis
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: June 10, 1998
By: /s/ Stuart Spivak
Stuart Spivak
Executive Vice President and
Chief Financial Officer
Dated: June 10, 1998
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE THREE MONTH PERIOD ENDED MARCH 1, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Nov-29-1998
<PERIOD-START> Dec-01-1997
<PERIOD-END> Mar-01-1998
<CASH> $113,458
<SECURITIES> $0
<RECEIVABLES> $5,926,069
<ALLOWANCES> $300,000
<INVENTORY> $17,382,740
<CURRENT-ASSETS> $24,879,990
<PP&E> $51,349,896
<DEPRECIATION> $24,770,212
<TOTAL-ASSETS> $55,970,947
<CURRENT-LIABILITIES> $19,843,824
<BONDS> $0
$0
$0
<COMMON> $392,732
<OTHER-SE> $14,167,595
<TOTAL-LIABILITY-AND-EQUITY> $55,970,947
<SALES> $39,420,880
<TOTAL-REVENUES> $39,420,880
<CGS> $23,513,947
<TOTAL-COSTS> $23,513,947
<OTHER-EXPENSES> $1,190,924
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $379,567
<INCOME-PRETAX> $42,538
<INCOME-TAX> $12,500
<INCOME-CONTINUING> $42,538
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $30,038
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
