<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark one)
---
X Annual Report Pursuant to Section 13 or 15(d) of
---
the Securities Exchange Act of 1934
For the fiscal year ended January 29, 1994
----------------
---
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 0-12497
DAIRY MART CONVENIENCE STORES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2497894
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE VISION DRIVE, ENFIELD, CT 06082
-------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 741-4444
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock (Par Value $.01)
Class B Common Stock (Par Value $.01)
(Title of class)
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 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 April 1, 1994, 2,747,104 shares of Class A Common Stock and 2,780,058
shares of Class B Common Stock were outstanding, and the aggregate market value
of both classes of Common Stock outstanding of DAIRY MART CONVENIENCE STORES,
INC., held by nonaffiliates was approximately $23,700,000.
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This Form 10-K/A Amendment No. 1 amends the Form 10-K of Dairy Mart
Convenience Stores, Inc. (the "Company") filed for the fiscal year ended
January 29, 1994, as follows: (i) a subsection of Item 1 has been added
entitled "EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY", and Item 1 is
filed in its entirety as amended; and (ii) the information required by Items
10, 11, 12 and 13 of Part III is no longer incorporated by reference from the
Company's definitive proxy statement for its 1994 annual meeting of
shareholders, as such proxy statement will not be filed within 120 days after
the fiscal year ended January 29, 1994; the information required by such items
is now set forth in full in Part III and is filed herewith.
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None
PART I
------
ITEM 1. BUSINESS
GENERAL
Dairy Mart Convenience Stores, Inc., and its subsidiaries (the "Company"
or "Dairy Mart"), operates one of the nation's largest convenience store
chains. Founded in 1957, the Company operates or franchises approximately
1,000 stores under the "Dairy Mart" name in 11 states located in the
Northeast, Midwest and Southeast. Approximately 420 stores sell gasoline and
approximately 335 stores are franchised. The Company also manufactures,
processes and distributes certain dairy and other products.
Dairy Mart stores offer a wide range of products and services which cater
to the convenience needs of its customers, including milk, ice cream,
groceries, beverages, snack foods, candy, deli products, publications, health
and beauty aids, tobacco products, lottery tickets and money orders. The
stores are typically located in densely populated, suburban areas on sites
which are easily accessible to customers and provide ample parking. Dairy Mart
stores are generally free standing structures which are well-lit and are
designed to encourage customers to purchase high profit margin products, such
as deli items, coffee, fountain drinks and other fast food items.
The Company's facilities in Enfield, Connecticut and Cuyahoga Falls, Ohio
manufacture and process milk, fruit juices, and other non-carbonated beverages
which are distributed to stores in the Northeast and the Midwest regions. The
dairy plant in Ohio manufactures and distributes ice cream to most stores. In
the Southeast region, the Company distributes dairy products, tobacco
products, candy and certain other merchandise to stores in Kentucky and
Indiana.
The Company's primary growth strategy is to increase its retail gasoline
presence. As a result, almost all of the stores recently opened by the Company
are retail units, known as "super pumper" stores, which have approximately
four times the gasoline retailing capacity and a significantly larger in-store
size than the Company's traditional convenience stores. The Company plans to
open approximately 20 new super pumper stores in the fiscal year ending
January 28, 1995 and approximately 30 new super pumper stores per year
thereafter for the foreseeable future.
The Company is incorporated in Delaware and maintains its principal
executive offices at One Vision Drive, Enfield, Connecticut 06082. The
Company's telephone number is (203) 741-4444.
STORES
The Company's stores are generally located in densely populated suburban
areas, and are situated close to single-family homes and apartments to attract
neighborhood shoppers. Store location, design, lighting and layout are
intended to cater to customers' desire for fast and convenient access.
Approximately
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420 locations also sell gasoline, which the Company believes is an important
convenience for customers. Shelving and displays, including refrigeration
units, deli and other fast food counters and displays, are designed to
encourage customers to purchase high profit margin products including impulse
purchase items such as candy, fountain drinks and ice cream novelties. Stores
are located on sites which are well-lit, easily accessible by customers and
provide ample parking. All of the Company's stores also offer extended hours
for additional convenience, with over one-half of the stores open 24 hours per
day. A traditional Dairy Mart store is typically 2,400 square feet and most
are free standing structures.
As of January 29, 1994, the Company operated and franchised retail
convenience stores in the following three regions of the United States:
<TABLE>
<CAPTION>
NUMBER OF
NORTHEAST REGION STORES
---------
<S> <C>
Massachusetts.............................................. 73
Connecticut................................................ 67
New York................................................... 37
Rhode Island............................................... 25
-----
Total Northeast Stores................................ 202
-----
MIDWEST REGION
Ohio....................................................... 518
Michigan................................................... 49
Pennsylvania............................................... 41
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Total Midwest Stores.................................. 608
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SOUTHEAST REGION
Kentucky................................................... 169
Indiana.................................................... 18
Tennessee.................................................. 14
North Carolina............................................. 11
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Total Southeast Stores................................ 212
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Total Stores...................................... 1,022
=====
</TABLE>
SUPER PUMPER STORES
Super pumper stores are an important part of the Company's strategy to
expand and increase its profitability. Super pumper stores have approximately
four times the gasoline retailing capacity of traditional gasoline convenience
stores. Generally 2,700 square feet, super pumper stores are significantly
larger than the Company's traditional convenience stores. The stores are
designed to devote a greater amount of space to fast food counters, deli areas
and refrigeration display units which attract customers to high profit margin
products such as fountain drinks and fresh made sandwiches. Super pumper stores
are generally located at high-traffic intersections to provide convenient access
to customers, and all have
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canopies to shield gasoline customers from inclement weather. As of January 29,
1994, the Company had 34 super pumper stores, a majority of which have been
opened since February, 1992 and all of which have been opened since the
beginning of fiscal 1990.
UPGRADING EXISTING STORE BASE
Over the next four fiscal years, the Company plans to upgrade and remodel
up to 400 stores in order to modernize the stores' look, upgrade their
equipment and increase the space devoted to higher profit margin items, such
as fountain drinks and fast food and deli items. Management expects that this
remodeling program will favorably impact the amount of maintenance capital
expenditures required on its existing store base due to the installation of
newer, more reliable equipment. The Company also intends to convert
approximately 40 traditional gasoline convenience stores to super pumper
status over the same period. Stores recently upgraded to super pumper status
have shown significantly higher inside store and gasoline sales.
CLOSING UNDER PERFORMING STORES
The Company continually evaluates the performance of each of its stores in
order to identify actions aimed at improving the Company's overall
profitability. Based upon these evaluations, the Company continues to sell or
close certain under performing stores. The Company considers various factors in
deciding to sell or close stores, including store location, lease term, rental
and other obligations and store performance. Sales or closures of stores, while
reducing revenues, generally do not have an adverse effect on overall results,
since a majority of such stores operate at a loss. The Company sold or closed
approximately 60 stores in fiscal 1994.
GASOLINE OPERATIONS
A major part of the Company's growth strategy is to continue to increase
its level of gasoline sales. This strategy enables the Company to
significantly increase a store's total level of sales without a commensurate
increase in overhead. The Company believes that the sale of gasoline at its
stores offers a significant competitive advantage and that customers value
this additional convenience. Gasoline sales accounted for approximately 37% of
total revenues of the Company for each of the past three fiscal years. As of
January 29, 1994, 419 stores sold gasoline. Financial information related to
the Company's gasoline operations for the last three fiscal years is set forth
in Note 9 to the Consolidated Financial Statements on page F-15.
The Company's gasoline pricing strategy is designed, in part, to provide
value to customers by offering the same quality gasoline offered by major oil
companies at prices which are generally below nationally advertised brands and
comparable to other convenience store chains. The Company obtains its gasoline
from major oil company suppliers, primarily through spot market purchases, and
believes that there are adequate supplies of fuel available from a number of
sources at competitive prices.
Gasoline profit margins have an impact on the Company's income. Such
profit margins could be adversely influenced by factors beyond the Company's
control, such as volatility in the wholesale gasoline market due to supply
interruptions. In addition, gasoline profit margins are continually influenced
by competition in each local market area. Substantial decreases in gasoline
profit margins, or the volume of gasoline sold, may have an adverse impact on
the Company's earnings.
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PRODUCT SELECTION
All stores generally offer more than 3,000 food and non-food items limited
to a few, well-known brand names as well as the Company's private label
products. Most of these items would typically be offered in supermarkets. Food
items include a wide variety of products, including canned foods and groceries,
dairy products, beverages, snack items, candy, baked goods and food service
items, such as fountain soft drinks, coffee, hot dogs, deli meats and deli
sandwiches and similar foods. Non-food products and services include gasoline,
cigarettes, health and beauty aids, publications, lottery tickets and money
orders. In addition to selling well-known brand name products, the stores offer
many products that bear the "Dairy Mart" private label, including milk, bakery
products, juices and other non-carbonated beverages, ice cream and other dairy
products such as dips and cheeses.
In recent years, the Company has been altering the mix of products to
emphasize the sale of items carrying higher profit margins. Central to these
efforts has been the Company's installation of fast food counters, the "Hot Dog
Central" program which includes hot dog grills and related equipment and/or deli
areas in approximately 500 stores over the last three fiscal years. Fast food
items not only carry higher profit margins but also tend to lead to the purchase
of other high profit margin products and impulse items, including salty-snacks,
candy and beverages. Dairy Mart has introduced a number of new private label
products, including ice cream products and juices, which generally carry a
higher gross profit margin than the Company's average gross profit margin on
comparable products. These private label products include Dairy Mart's "Party
Time" (R) and "Special Occasion" (R) ice cream.
POS SYSTEM
The Company has initiated a program to install a Point-of-Sale (POS) system
in all stores within three years. The Company anticipates that, upon completion
of this program, each store will be equipped with a scanner and with a dedicated
personal computer, into which sales, inventory and other data will be input at
scheduled daily intervals, and then automatically transmitted to the Company's
headquarters. The Company believes that the POS system will: (i) provide more
accurate and timely information regarding store operations, including sales and
merchandising, and inventory levels and composition; (ii) reduce paperwork for
store managers, thereby allowing them to spend more time interacting with
customers and improving operations; (iii) decrease administrative overhead,
since the input and verification of data will be automated at both the store and
office level; and (iv) improve verification of product costs and retail pricing.
The cost of the POS system, including new cash registers and personal computers,
is currently estimated to be approximately $7.0 million to $9.0 million, and is
anticipated to be funded by third-party equipment financing. The Company
believes it will be among the first of the larger convenience store chains to
implement a chain-wide POS system.
MANUFACTURING AND DISTRIBUTION OPERATIONS
The Company supplies its stores and most franchised stores through a
product distribution system which includes the Company's own manufacturing,
distribution and processing facilities, and other distributors. Through its
manufacturing, processing and distribution facilities in Connecticut and Ohio,
the Company supplies all of the milk and a substantial portion of the ice cream,
juices and non-carbonated beverages for the stores in the Northeast and the
Midwest. Many other products which are not produced by the Company are supplied
to the Northeast and Midwest regions by one wholesale distributor under a ten-
year contract entered into in February, 1988. The Company supplies the Southeast
region stores in large part through its 35,000 square foot distribution facility
located in Louisville, Kentucky.
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In fiscal 1993, the Company reversed a prior policy and began to actively
market its excess manufacturing and processing capacity to third parties, such
as wholesalers and supermarkets. These efforts have resulted in a wholesale
arrangement with a regional brand name ice cream distributor which has more
than doubled the utilization of the Company's ice cream production capacity
since the beginning of fiscal 1993. To accommodate additional growth in the sale
of ice cream to third party purchasers, the Company invested approximately $1.4
million to further enhance product quality and to improve the efficiency and
capacity of its ice cream production. The Company also intends to continue to
pursue sales to third parties of other products produced at its manufacturing
and processing facilities.
FRANCHISE OPERATIONS
The Company franchises approximately 335 stores throughout its three
geographic regions. Franchise stores generally follow the same operating
policies as Company stores, and are subject to Company supervision under
franchise agreements. Company operated and franchise stores are of the same
basic store design and sell substantially the same products. The Company
currently franchises only existing stores. Most franchisees purchase milk, ice
cream, dairy products, fruit juices and other non-carbonated beverages
distributed by the Company and generally purchase other products through the
same suppliers used by the Company.
The Company offers two types of franchising arrangements- the "full"
franchise and the "limited" franchise. Under a full franchise agreement, the
franchisee purchases and owns both the merchandise inventory and the equipment
located in the store, and leases or subleases the store from the Company. Under
a limited franchise agreement, the franchisee owns only the merchandise
inventory while the Company retains ownership of the store equipment. Franchise
fees are higher for limited franchisees. As of January 29, 1994, there were 161
full franchise locations and 174 limited franchise locations.
The Company has recently revised its franchising strategy in order to: (i)
improve the level of retail experience of its new franchisees; and (ii) increase
the level of financial commitment by new franchisees. As part of this strategy,
new franchisees are now required to undergo more rigorous and thorough
interviews and background checks, receive increased levels of financial and
retail training, and typically make larger initial cash payments.
The following table sets forth the number of stores, on both a Company
operated and franchise operated basis, that were opened or acquired, closed or
sold, and transferred between Company operated and franchise operated, during
the last three fiscal years:
<TABLE>
<CAPTION>
January 29, 1994 January 30, 1993 February 2, 1992
----------------------------- ----------------------------- -----------------------------
Company Franchise Company Franchise Company Franchise
Operated Operated Total Operated Operated Total Operated Operated Total
--------- ---------- ------ --------- ---------- ------ --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
At beginning of period.... 709 370 1,079 685 449 1,134 725 465 1,190
Opened or acquired........ 4 -- 4 6 -- 6 6 -- 6
Closed or sold............ (50) (11) (61) (34) (27) (61) (48) (14) (62)
Transferred (net)......... 24 (24) -- 52 (52) -- 2 (2) --
--- --- ----- --- --- ----- --- --- -----
At end of period.......... 687 335 1,022 709 370 1,079 685 449 1,134
=== === ===== === === ===== === === =====
</TABLE>
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<PAGE>
INTERNATIONAL OPERATIONS
The Company conducts business outside the United States as a joint-
venturer, licensor or consultant. Currently, the Company is a party to two
agreements with convenience store operators in South Korea and Mexico, and
continues to pursue similar arrangements in other countries. As with the
Company's prior international arrangements, both such agreements require a
specified commitment of Company personnel, but do not require any significant
commitment of capital.
ADVERTISING
To promote a uniform image for all stores, the Company designs and
coordinates advertising for all stores to complement its marketing strategy,
which is derived, in part, from market surveys and research. Largely in response
to such research, the Company launched a new advertising program entitled "Close
to Home" which emphasizes the high percentage of neighborhood locations
throughout Dairy Mart's operating regions. In-store, newspaper, and direct-mail
advertising, special promotions and seasonal radio and television advertising
usually feature certain items which can be purchased at the stores, and
frequently include national brand items for which advertising costs are often
supplemented by the national brand suppliers. Sales promotions are generally
established and maintained on a bi-weekly or monthly basis.
COMPETITION
The convenience store and retail gasoline industries are highly
competitive. The number and type of competitors vary by location. The Company
presently competes with other convenience stores, large integrated gasoline
service station operators, supermarket chains, neighborhood grocery stores,
independent gasoline service stations, fast food operations and other similar
retail outlets, some of which are well recognized national or regional retail
chains. Some of the Company's competitors have greater financial resources than
the Company. Key competitive factors include, among others, location, ease of
access, store management, product selection, pricing, hours of operation, store
safety, cleanliness, product promotions and marketing.
SEASONALITY
Weather conditions have a significant effect on the Company's sales, as
convenience store customers are more likely to go to stores to purchase
convenience goods and services, particularly higher profit margin items such as
fast food items, fountain drinks and other beverages, when weather conditions
are favorable. Accordingly, the Company's stores generally experience higher
revenues and profit margins during the warmer weather months, which fall within
the Company's second and third fiscal quarters.
EMPLOYEES
As of January 29, 1994, exclusive of franchisees and franchisees'
employees, the Company employed, on a full-time or part-time basis,
approximately 5,000 employees.
ENVIRONMENTAL COMPLIANCE
The Company incurs ongoing costs to comply with federal, state and local
environmental laws and regulations, including costs for assessment, compliance,
remediation and certain capital expenditures
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relating to its gasoline operations. These laws and regulations relate primarily
to underground storage tanks ("USTs"). The United States Environmental
Protection Agency has established standards for, among other things: (i)
maintaining leak detection; (ii) upgrading UST systems; (iii) taking corrective
action in response to releases; (iv) closing USTs to prevent future releases;
(v) keeping appropriate records; and (vi) maintaining evidence of financial
responsibility for taking corrective action and compensating third parties for
bodily injury and property damage resulting from releases. A number of states in
which the Company operates also have adopted UST regulatory programs.
In the ordinary course of business, the Company periodically detects
releases of gasoline or other regulated substances from USTs it owns or
operates. As part of its program to manage USTs, the Company is involved in
environmental assessment and remediation activities with respect to releases of
regulated substances from its existing and previously operated retail gasoline
facilities. The Company accrues its estimates of all costs to be incurred for
assessment and remediation for known releases. These accruals are adjusted if
and when new information becomes known. Additionally, the Company records as
receivables the expected reimbursements of a portion of the total costs from
various state environmental trust funds which have provisions for sharing or
reimbursing certain costs incurred by UST owners or operators based upon
compliance with the terms and conditions of such funds. Due to the nature of
such releases, the actual costs of assessment and remediation activities may
vary significantly from year to year.
Under current federal and state regulatory programs, the Company also will
be obligated by December 22, 1998 to upgrade or replace most existing USTs it
owns or operates to meet certain corrosion-, overfill- and spill-protection and
leak-detection requirements. The Company currently is evaluating each site on an
individual basis to determine the type of expenditures required to comply with
these and other requirements under the federal and state UST regulatory
programs.
In addition to ongoing assessment and remediation costs, the Company
presently estimates that it will be required to make capital expenditures,
including those requiring upgrading or replacing of existing USTs, ranging from
approximately $16.0 million to $20.0 million in the aggregate over the next five
fiscal years to comply with current federal and state UST regulations, which
capital expenditures could be reduced for locations (especially low volume
locations) which may be closed in lieu of the capital costs of compliance.
The Company's estimates of costs to be incurred for environmental
assessment and remediation and for UST upgrading and other regulatory compliance
are based on factors and assumptions that could change due to modifications of
regulatory requirements, detection of unanticipated environmental conditions, or
other unexpected circumstances. As a result, the actual costs incurred may vary
significantly from the estimates noted above.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Set forth below are the Company's executive officers, directors and persons
nominated for election as a director for the first time at the Company's 1994
annual meeting of shareholders. Each executive officer is appointed by the
Board of Directors and serves for a one year term, and each director serves
for a one year term and until the election and qualification of his successor.
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<TABLE>
<CAPTION>
Name and Age Title
- - ------------ -----
<S> <C>
Frank Colaccino (44) President and Chief Executive
Officer, and a Class B Director
since 1988
John W. Everets, Jr. (48) Nominee for election as a
Class B Director for the
first time
Mitchell J. Kupperman (42) Executive Vice President-Human
Resources, Secretary, and a
Class B Director since 1988
Gregory G. Landry (36) Executive Vice President, Chief
Financial Officer, and a Class
B Director since 1991
Charles Nirenberg (70) Chairman of the Company, and a
Class B Director since 1972
Robert B. Stein, Jr. (36) Executive Vice President-Store
Operations, and a Class B
Director since 1992
Frank W. Barrett (54) Class A Director since 1983
Theodore W. Leed (67) Class A Director since 1983
David A Beckman (47) Vice President-Operations
(Midwest North Region)
Patricia A Cascarelli (41) Vice President-Field Human Resources
Thomas A Chicoine (44) Vice President-Manufacturing
and Distribution
Edward M. Doyle (40) Vice President-Strategic
Marketing
Gregg O. Guy (45) Vice President-Operations
(Southeast Region)
David J. Jeffco (41) Vice President-Field Marketing
Jeffrey W. Jones (32) Vice President-Controller
Lawrence R. Pellegrini (52) Vice President-Real Estate and
Construction
Scott A. Stein (35) Vice President-Administration
and Management Information
Systems
Dennis J. Tewell (37) Vice President-Operations
(Northeast Region)
Daniel W. Wallace (45) Vice President-Operations
(Midwest Central Region)
Gregory Wozniak (46) Vice President-Corporate
Counsel
Elizabeth A Yopko (35) Vice President-Corporate
Communications
</TABLE>
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Except as noted below, each of the executive officers of the Company has been
employed by the Company for more than the last five (5) years, in areas similar
to or encompassed by their current responsibilities.
Mr. Colaccino was elected Chief Executive Officer in March 1992 and has
served as President since January 1989. He joined the Company in 1976 and was
named Vice President-Real Estate in 1979, and Vice President-Corporate
Development in 1985. He is a Vice Chairman of the National Association of
Convenience Stores' (NACS) Board of Directors and serves on the Board of
Trustees for Western New England College, Springfield, Massachusetts.
Mr. Everets has been Chairman of the Board and Chief Executive Officer of
HPSC, Inc., a publicly held company which provides financing for health care
equipment, since July 1993 and has been a director of HPSC, Inc. since 1983. He
was Chairman of the Board of T.O. Richardson Co., Inc., a financial services
company, from January 1990 until July 1993. Previously, he was Executive
Vice President of Advest, Inc., an investment banking firm from 1983 to January
1990. Mr. Everets also served as Chairman of the Board of Billings and Co.,
Inc., a real estate investment banking firm, and Chairman of Advest Credit
Corp., both subsidiaries of Advest Group, Inc. Mr. Everets is Vice Chairman of
the Connecticut Development Authority and Chairman of the Loan Committee of the
Connecticut Development Authority. He is also a director of Eastern Company, a
publicly held company.
Dr. Kupperman joined the Company in 1983 as Director of Human Resources and
was named Vice President-Human Resources in 1985. He was elected Executive
Vice President-Human Resources and Secretary of the Company in January 1989.
Prior to joining the Company, Dr. Kupperman attended the University of
Connecticut where he obtained a doctoral degree in Educational Administration.
Mr. Landry was named Executive Vice President of the Company in April 1992
and has served as Chief Financial Officer since August 1990. Mr. Landry joined
the Company in October 1985 and served in various financial positions until he
was named Treasurer of the Company in July 1989 and served in this capacity
until April 1991. He is a certified public accountant and is a member of the
American Institute of Certified Public Accountants.
Mr. Nirenberg is the founder of the Company. He served as its Chief Executive
Officer and President since its formation in 1957 until January 1989, when Mr.
Nirenberg resigned as President of the Company, and until March 1992, when Mr.
Nirenberg resigned as Chief Executive Officer. Mr. Nirenberg continues to serve
as Chairman of the Company. Additionally, Mr. Nirenberg is Dr. Kupperman's
father-in-law.
Mr. Stein was named Executive Vice President-Store Operations in April
1992. He joined the Company in 1983 and served in various positions until
serving as Treasurer of the Company from January 1989 until June 1989.
Subsequently, Mr. Stein served as General Manager of the Company's Midwest
Region from July 1989 until March 1992. He is a member of the Ohio Association
of Convenience Stores' Board of Directors.
Mr. Barrett has served as Senior Vice President for Springfield Institution
for Savings since January 1994. He previously served as Senior Vice President
for Bank of Ireland First Holdings, Inc. from September 1990 to December 1993,
as Senior Vice President for Connecticut National Bank from May 1990 to
September 1990, and as Senior Vice President for Shawmut Bank, N.A. from
January 1988 to May 1990. Mr. Barrett also served as President and Chief
Executive Officer of Shawmut Home Bank in Hartford, Connecticut from April 1987
to December 1987 and prior to that was Executive Vice President for Shawmut
Worcester County Bank in Worcester, Massachusetts.
Dr. Leed has been, for more than five years, a professor (and is currently a
professor emeritus) of food marketing at the University of Massachusetts and a
lecturer, author and consultant to numerous companies on the subject of food
merchandising. He holds a doctoral degree in agricultural economics from Ohio
State University. Dr. Leed is a principal of Group 7, Inc., a management
consulting company.
Mr. Beckman was named Vice President-Operations for the Midwest North Region
in January 1991. He previously held the position of Director of
Operations-Midwest North Region from March 1990 to December 1990. Prior to
joining the Company, Mr. Beckman had served as Vice President of Operations,
Operations Manager and Zone Manager during 14 years with Stop-N-Go Foods, Inc.
Ms. Cascarelli was named Vice President-Field Human Resources in December
1992. She joined the Company in 1973 as a store manager and has served as Vice
President-Human Resources, Human Resources Director of the Southeast
Region, Human Resources Manager of the Midwest Region, and a Field
Trainer.
Mr. Chicoine was named Vice President-Manufacturing and Distribution in
July 1989. He previously served the Company in the same capacity from 1985 to
1987. Mr. Chicoine also served in managerial capacities at Massachusetts-based
dairies prior to 1982 and during a period between 1987 and 1989 before
rejoining the Company. He was also Vice President-Manufacturing of the Lawson
Company from 1982 to 1985. Mr. Chicoine serves on the Board of the
International Dairy Food Association, and is a member of the Milk Industry
Foundation, Connecticut Food Association and the Southern Association of Dairy
Food Manufacturers.
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Mr. Doyle was named Vice President-Strategic Marketing in February 1993.
Since joining the Company in August 1990, he has served as acting Corporate
Director of Marketing and Corporate Director of Food Services. Prior to
joining the Company, he served as Chief Operating Officer for 6-Twelve
Convenient Mart, Inc., and Director of Beverage Programs for the Circle K
Corporation.
Mr. Guy was named Vice President-Operations for the Southeast Region in
December 1992, and had served as Vice President and General Manager of the
Southeast Region since December 1989. He also served as an international
consultant for the Company from December 1986 through December 1988. Prior to
joining the Company, Mr. Guy had served as Vice President of Operations and
Corporate Vice President of Marketing for the CONNA Corporation. Mr. Guy is a
member of the Board of Directors of the Kentucky Retail Federation.
Mr. Jeffco was named Vice President-Field Marketing in February 1993. He
joined the Company in December 1990 and served as Director and Vice
President-Marketing for the Midwest Region. Prior to joining the Company, Mr.
Jeffco served as Vice President of Merchandising and Marketing, Assistant to
the Vice President of Operations, and Director of Merchandising and Marketing
with Uni-Marts, Inc.
Mr. Jones was named Vice President-Controller in October 1993. He joined the
Company in February 1988 as Assistant Controller of the Southeast Region, and
was later named Controller of that region. He has also served as Controller,
Assistant Treasurer and Treasurer of the Company. He is a certified public
accountant and is a member of the American Institute of Certified Public
Accountants.
Mr. Pellegrini joined the Company in December 1992 as Vice President-Real
Estate. In March 1993, he was named Vice President-Real Estate and
Construction. He was formerly a partner in the consulting firm of Pellegrini &
Blair in Springfield, Massachusetts and Director of Real Estate-Northeast
Division for the Friendly Ice Cream Corporation.
Mr. Stein was named Vice President-Administration and Management Information
Systems (MIS) in April 1994. He joined the Company in September 1992 as
Director of Store Automation, and his role was later expanded to MIS Director.
Prior to joining the Company, Mr. Stein was Director-Client/Server Computing
for Technology Investment Strategies Corporation. Mr. Stein also has
consulting, training and systems analysis experience through former roles with
Orion Group, Inc. and the Hartford Insurance Group.
Mr. Tewell was named Vice President-Operations for the Northeast Region in
September 1992. He previously served as Vice President-Store Operations for
the Southeast Region. Mr. Tewell has also served in the positions of Strategic
Planning Coordinator, Director of Operations, and special consultant for the
Company's international operations in Europe.
Mr. Wallace was named Vice President-Operations for the Midwest Central
Region in December 1992. He had served as Director of Operations for the
Midwest Central Region since December 1991. Mr. Wallace has also served as
Corporate Operations Coordinator for the Company's Point-of-Sale (POS)
project, Division Manager, Supervisor and Store Manager. He also spent two
years as a special consultant for the Company's international operations.
Mr. Wozniak was named Vice President-Corporate Counsel in December 1992. He
is an attorney and has served as counsel to the Company since the Company's
1985 acquisition of the Lawson Company. In 1989, he was promoted to Corporate
Counsel.
Ms. Yopko was named Vice President-Corporate Communications in April 1991.
She joined the Company in June 1988 as Vice President-Human Resources of the
Midwest Region with responsibilities encompassing public relations. Prior to
joining the Company, Ms. Yopko acted as a consultant and advisor to the
Company in the area of corporate communications, and as an employee or
proprietor of various public relations firms. She is a member of the Public
Relations Society of America and of the Ohio Association of Convenience
Stores' Board of Directors.
RECENT DEVELOPMENTS
SALE OF SENIOR SUBORDINATED NOTES
On March 3, 1994, the Company issued $75 million of 10.25% Senior
Subordinated Notes due 2004 (the "Notes") through a public offering underwritten
by Bear, Stearns & Co., Inc. (the "Underwriter").
The Company used part of the net proceeds from the sale of the Notes: (1)
to repay the entire indebtedness outstanding of approximately $34.0 million
under the Company's credit agreement with
-12-
<PAGE>
Chemical Bank (as successor to Manufacturers Hanover Trust Company) as agent
lender, along with other lenders party thereto, dated as of January 9, 1991, as
amended (the "Existing Credit Agreement"); and (2) to redeem all of the
Company's outstanding 14.25% Subordinated Debentures Due 2000 ("Subordinated
Debentures") in the aggregate principal amount of $27.9 million, which amount
includes a premium for early redemption, and which redemption was completed on
April 4, 1994. The net proceeds of the sale of the Notes remaining after the
payment of the indebtedness under the Existing Credit Agreement, the redemption
of the Subordinated Debentures, the payment of the Underwriter's discount, and
the payment of fees and expenses was approximately $11.0 million and will be
used for working capital and general corporate purposes.
In connection with the above transaction, the Company entered into a senior
revolving credit facility with Fleet Bank, National Association ("Fleet") and
Society National Bank ("Society") (the "New Credit Agreement"). The New Credit
Agreement provides for the availability of up to $30.0 million in revolving
credit loans reduced by letters of credit not to exceed $15.0 million in the
aggregate. All outstanding indebtedness, if any, under the New Credit Agreement
will be due and payable in full on March 1, 1997; however, provided no default
exists under the New Credit Agreement, the Company may extend such due date for
up to two additional one-year periods, with the consent of the lenders.
All amounts outstanding under the New Credit Agreement are secured by the
pledge of all of the outstanding capital stock of most of the Company's direct
and indirect subsidiaries, and by amounts payable to the Company which arise by,
from, or were created by, loans or other extensions of credit by the Company to
any of its subsidiaries. Loans under the New Credit Agreement will generally
bear interest, at the Company's option, at the per annum rate of either (1)
0.25% above Fleet's then current prime rate and/or (2) from 2.00% to 2.50% above
LIBOR.
-13-
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding directors and executive
officers of the Company is set forth under the caption "EXECUTIVE OFFICERS AND
DIRECTORS OF THE COMPANY" in Item 1 of this Form 10-K/A Amendment No. 1 and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS' COMPENSATION
The following table provides certain information for the Company's past
three fiscal years regarding the cash and other compensation paid to, earned
by, or awarded to those persons who were, as of January 29, 1994, (i) the
Company's Chief Executive Officer and (ii) the four most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000 for
the last fiscal year:
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------- -------------
Total Securities
Salary Underlying All Other
Name and Principal Fiscal and Options/SAR's Compensation
Position Year Salary Bonus Bonus (#) (a) (b)
- - ---------------------- ------ -------- ------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frank Colaccino, 1994 $300,000 $25,000 $325,000 10,000 $27,828
President and Chief 1993 286,442 0 286,442 -- 13,942
Executive Officer (c) 1992 254,038 50,000 304,038 60,000 --
Mitchell J. Kupperman, 1994 205,000 7,500 212,500 5,000 12,794
Executive Vice 1993 215,000 0 215,000 -- 6,899
President--Human 1992 187,308 35,000 222,308 30,000 --
resources
Gregory G. Landry, 1994 160,000 12,500 172,500 6,500 8,758
Executive Vice 1993 143,654 0 143,654 -- 4,923
President and Chief 1992 107,885 30,000 137,885 30,000 --
Financial Officer
Charles Nirenberg, 1994 500,000 0 500,000 -- --
Chairman of the 1993 500,000 0 500,000 -- 567
Company (d) 1992 500,000 0 500,000 -- --
Robert B. Stein, Jr., 1994 175,000 12,500 187,500 7,500 11,633
Executive Vice 1993 160,481 0 160,481 -- 6,657
President--Store 1992 131,923 30,000 161,923 30,000 --
Operations
</TABLE>
- - --------
(a) Pursuant to the transitional provisions of the Securities and Exchange
Commission's revised rules on disclosure of executive compensation, amounts
of "All Other Compensation" have not been included in the table above for
the fiscal year ended February 1, 1992.
(b) Includes amounts contributed for the benefit of the Company's executive
officers to its qualified profit sharing plan and premiums paid by the
Company for split-dollar and term life insurance for the benefit of
certain executive officers during the fiscal years ended January 29, 1994
and January 30, 1993. Company contributions to its qualified profit
sharing plan for each of the 1994 and 1993 fiscal years, respectively,
included $2,263 and $567 for Frank Colaccino, $661 and $531 for Mitchell
J. Kupperman, $88 and $358 for Gregory G. Landry, $0 and $567 for Charles
Nirenberg, and $650 and $467 for Robert B. Stein, Jr.,. Premiums paid on
split-dollar and term life insurance for each of the 1994 and 1993 fiscal
years, respectively, included $25,565 and $13,375 for Frank Colaccino,
$12,133 and $6,368 for Mitchell J. Kupperman, $8,670 and $4,565 for
Gregory G. Landry, and $10,983 and $6,190 for Robert B. Stein, Jr.
-14-
<PAGE>
(c) Mr. Colaccino was elected Chief Executive Officer of the Company effective
on March 12, 1992. Prior to that date, he served as President of the
Company since January 1, 1989.
(d) Mr. Nirenberg has an employment agreement with the Company pursuant to
which Mr. Nirenberg is employed as Chairman of the Company for a five year
term that began on February 1, 1992 and ends on January 31, 1997, unless
terminated earlier. Under the employment agreement, Mr. Nirenberg receives
an annual salary of $500,000, payable in installments according to the
Company's normal compensation policy, plus customary fringe benefits. If
Mr. Nirenberg dies during the term of the employment agreement, his
designated beneficiary is entitled to receive his salary for the remainder
of the term. The Company has purchased insurance insuring the life of Mr.
Nirenberg and has designated itself as beneficiary.
Option/SAR Grants In Last Fiscal Year
The table below provides certain information regarding stock options granted
during the Company's last fiscal year to the executive officers listed in the
Summary Compensation Table above:
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Number of
Securities Potential Realizable
Underlying Value at Assumed
Options/ % Of Total Exercise Annual Rates of Stock
SARs Options/SARs or Base Price Appreciation
Granted Granted to Price Per Expiration for Option Term
(#) Employees in Share Date ----------------------
Name (a) Fiscal Year (b) (a) 5% 10%
---- ---------- ------------ --------- ----------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Frank Colaccino......... 10,000 10.0 $5.25 February 23, 2003 $33,017 $83,671
Mitchell J. Kupperman... 5,000 5.0 5.25 February 23, 2003 16,508 41,836
Gregory G. Landry....... 6,500 6.5 5.25 February 23, 2003 21,461 54,386
Charles Nirenberg....... -- -- -- -- -- --
Robert B. Stein, Jr..... 7,500 7.5 5.25 February 23, 2003 24,763 62,754
</TABLE>
- - --------
(a) Each option becomes fully exercisable over four years, with 25% of the
shares subject to the option becoming exercisable on each anniversary of
the option grant date. All options expire ten years from the date of grant,
unless sooner terminated by, for example, the failure to exercise an
option, to the extent it is then exercisable, before three months after
termination of employment, except for termination in the case of death, in
which case, the option is exercisable within one year from the date of
death by the optionee's executor, administrator or personal representative,
to the extent it is then exercisable.
(b) All options were granted at an exercise price per share equal to the fair
market value of the Common Stock on the date of grant, as quoted on the
NASDAQ.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The table below sets forth information regarding stock options that were
exercised, if any, during the past fiscal year, and unexercised stock options
held as of January 29, 1994, by the executive officers listed in the Summary
Compensation Table above:
-15-
<PAGE>
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End (2)
--------------- ----------------
Shares Acquired Exercisable(e)/ Exercisable (e)/
on Exercise Unexercisable Unexercisable
Name of Options (#) Value Realized (U) (U)
---- --------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Frank Colaccino......... 15,250 $22,875 (1) 106,250 (E) $ 51,000 (E)
43,750 (U) 19,625 (U)
Mitchell J. Kupperman... -- -- 80,750 (E) 105,630 (E)
22,500 (U) 11,000 (U)
Gregory G. Landry....... -- -- 33,125 (E) 9,563 (E)
22,750 (U) 10,500 (U)
Charles Nirenberg....... -- -- -- (E) -- (E)
-- (U) -- (U)
Robert B. Stein, Jr..... -- -- 48,875 (E) 15,563 (E)
24,375 (U) 12,938 (U)
</TABLE>
- - --------
(1) Reflects the market value as of January 29, 1994 of the 15,250 shares of
Class B Common Stock acquired by Mr. Colaccino upon exercise of a stock
option, minus the exercise price. However, Mr. Colaccino did not realize
any cash value upon exercise of the stock option as he did not sell any
shares of the Class B Common Stock acquired through the exercise.
(2) Values are calculated for options "in the money" by subtracting the
exercise price per share from the closing price per share of the applicable
class of the Company's Class A and Class B Common Stock on January 29,
1994, which amounts were $6.50 and $7.00 per share, respectively. Each of
the executive officers has options to purchase shares of Common Stock at
exercise prices greater than the fair market value of the applicable class
of Common Stock as of January 29, 1994. Such options are not "in the
money" and their value is, therefore, not disclosed above.
DIRECTORS' COMPENSATION
Mr. Leed and Mr. Barrett received directors' fees of $17,000 each for the
fiscal year ended January 29, 1994. The annual fee for outside directors for
the 1995 fiscal year is $12,000 plus $1,000 for each regular or special meeting
of the Board attended. The remaining directors, who are employees of the
Company, receive no directors' fees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning beneficial
ownership of the Company's Common Stock by each shareholder known by the
Company to be the beneficial owner of 5% or more of either class of Common
Stock as of April 26, 1994. This information is furnished in accordance with
the Securities and Exchange Commission ("SEC") regulations relating to any
persons known by the Company to be the beneficial owners of 5% or more of
Common Stock. In preparing the following table, the Company has relied on
information filed by such persons with the SEC, and in some cases, other
information provided to the Company by such persons.
-16-
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- - -------------- ------------------------------- -------------------------- -------------
<S> <C> <C> <C>
Class B DM Associates Limited 1,858,743 held in the 66.9 (1)
Common Stock Partnership and DM Management capacity set forth in
Associates footnote 1
One Vision Drive
Enfield, Connecticut
Frank Colaccino 1,918,125 held in the 68.7 (2)
One Vision Drive capacity set forth in
Enfield, Connecticut footnote 2
- - -------------------------------------------------------------------------------------------
Class A Heine Securities Corporation 225,250 held in the 8.2 (3)
Common Stock and Michael F. Price capacity set forth in
51 J.F.K. Parkway footnote 3
Short Hills, New Jersey
Wanger Asset Management L.P. 294,000 held in the 10.7 (4)
and Wanger Asset Management, capacity set forth in
LTD. footnote 4
227 West Monroe Street
Suite 3000
Chicago, Illinois
Acorn Investment Trust, Series 197,000 held in the See Footnote (4)
Designated Acorn Fund capacity set forth in
227 West Monroe Street footnote 4
Suite 3000
Chicago, Illinois
James Wilen and Wilen 251,073 held in the 9.1 (5)
Management Corporation capacity set forth in
2360 West Joppa Road footnote 5
Suite 226
Lutherville, Maryland
Eagle Asset Management, Inc. 414,300 held in the 15.1 (6)
880 Carillon Parkway capacity set forth in
St. Petersburg, Florida footnote 6
Heartland Advisors, Inc. 277,400 held in the 10.1 (7)
790 North Milwaukee Street capacity set forth in
Milwaukee, Wisconsin footnote 7
</TABLE>
- - ----------
Notes to Table
(1) DM Associates Limited Partnership ("DM Associates"), DM Management
Associates ("DM Management") and Frank Colaccino filed as a group a Schedule
13D with the SEC to report that on March 12, 1992, they acquired the beneficial
ownership of 1,858,743 shares of Class B Common Stock (see "Certain
Transactions" below). DM Associates is the direct beneficial owner of such
1,858,743 shares. DM Management is a general partnership which itself is the
general partner of DM Associates. As such general partner, DM Management has
the power to cause the voting and disposition of the 1,858,743 shares, and is
therefore an indirect beneficial owner of such shares. The 1,858,743 shares
represent approximately 33.6% of the total number of issued and outstanding
shares of both classes of the Company's Common Stock, and approximately 60.8%
of the total voting power of both classes of the Company's Common Stock.
(2) Mr. Colaccino is the managing general partner of DM Management (described
in footnote 1 above), and has the power to act on behalf of DM Management with
respect to its voting and other rights in relation to DM Associates, including
the voting of the 1,858,743 shares of Class B Common Stock beneficially owned
by DM Associates, subject to the right of the other partners of DM Management
to consent as to certain matters. Mr. Colaccino therefore shares voting and
dispositive power with respect to the 1,858,743 shares, and is an indirect
beneficial owner of such shares. In addition to such 1,858,743 shares, Mr.
Colaccino beneficially owns individually and directly 59,382 shares of Class B
Common Stock, 10,000 of which are beneficially owned by virtue of currently
exercisable options to purchase shares of Class B Common Stock. The 1,858,743
shares and the 59,382 shares aggregate 1,918,125 shares of Class B Common Stock
and represent approximately 34.6% of the total number of issued and outstanding
shares of both classes of the Company's Common Stock, and approximately 62.7%
of the total voting power of both classes of the Company's Common Stock.
-17-
<PAGE>
(3) A Schedule 13G was filed with the SEC by Heine Securities Corporation
("Heine") and Michael F. Price, in his capacity as President of Heine, to
report Heine's beneficial ownership, as an investment advisor to various
clients, of 225,250 shares of Class A Common Stock. Such number represents
approximately 4.1% of the total number of issued and outstanding shares of both
classes of the Company's Common Stock, and less than 1% of the total voting
power of both classes of the Company's Common Stock.
(4) Wanger Asset Management, L.P. ("WAM") and Wanger Asset Management, Ltd.
("WAM Ltd.") (collectively, "Wanger"), have reported in their Schedule 13G
filed with the SEC that they are the beneficial owners of 294,000 shares of
Class A Common Stock. WAM is a beneficial owner of such shares as it is an
investment advisor to various persons, and WAM, Ltd. is a beneficial owner of
such shares as it is the sole general partner of WAM. Of the 294,000 shares of
Class A Common Stock, Wanger has the sole power to dispose of or to direct the
disposition of 97,000 of such shares, and shares such dispositive power with
respect to the other 197,000 shares. WAM's power to dispose of 197,000 shares
is shared with the Acorn Investment Trust, Series Designated Acorn Fund
("Acorn"), a registered investment company, which separately reported its
beneficial ownership of such 197,000 shares. As WAM serves as an investment
advisor to Acorn and WAM has the power to manage Acorn's investment of such
shares, Wanger reported that it was also the beneficial owner of such 197,000
shares owned by Acorn. The 294,000 shares of Class A Common Stock represents
approximately 5.3% of the total number of issued and outstanding shares of both
classes of the Company's Common Stock and approximately 1% of the total voting
power of both classes of the Company's Common Stock. The 197,000 shares of
Class A Common Stock beneficially owned by Acorn represents approximately 7.2%
of the total number of issued and outstanding shares of Class A Common Stock.
(5) A Schedule 13G was filed with the SEC by Wilen Management Corporation
("Wilen") and James Wilen in his capacity as President and sole owner of Wilen,
to report Wilen's beneficial ownership as an investment advisor to various
clients, of 251,073 shares of Class A Common Stock. Such number represents
approximately 4.5% of the total number of issued and outstanding shares of both
classes of the Company's Common Stock, and less than 1% of the total voting
power of both classes of the Company's Common Stock.
(6) A Schedule 13G was filed with the SEC by Eagle Asset Management, Inc.,
("Eagle"), a registered investment advisor, to report Eagle's beneficial
ownership of 414,300 shares of Class A Common Stock. Such number represents
approximately 7.5% of the total number of issued and outstanding shares of both
classes of the Company's Common Stock, and approximately 1.4% of the total
voting power of both classes of the Company's Common Stock.
(7) Heartland Advisors, Inc. reported on a Schedule 13G filed with the SEC
its beneficial ownership, as an investment advisor, of 277,400 shares of Class
A Common Stock representing approximately 5.0% of the total number of issued
and outstanding shares of both classes of the Company's Common Stock and less
than 1% of the total voting power of both classes of the Company's Common
Stock.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information furnished by the directors
and nominees for election as directors, certain executive officers, and all
directors and executive officers as a group concerning ownership of the
Company's Common Stock as of April 26, 1994:
<TABLE>
<CAPTION>
Shares (and Percent) of Common Stock
Name Beneficially Owned as of April 26, 1994
---- ----------------------------------------------------------------
Percent
Class B Class A of Total
Common Stock Common Stock Voting Power
----------------- -------------- --------------
<S> <C> <C> <C>
Frank Colaccino......... 1,918,125 (68.7%) 103,225 (3.6%) (62.7%) (1)
John W. Everets, Jr. ... 0 0 (2)
Mitchell J. Kupperman... 40,354 (1.4%) 60,545 (2.2%) (1.5%) (3)(4)
Gregory G. Landry....... 0 34,750 (1.2%) (*) (3)(5)
Charles Nirenberg....... 0 0 (3)(6)
Robert B. Stein, Jr. ... 750 (*) 54,270 (1.9%) (*) (3)(7)
Frank W. Barrett........ 1,250 (*) 2,500 (*) (*) (8)
Theodore W. Leed........ 1,552 (*) 2,500 (*) (*) (8)
<CAPTION>
All Directors and
Executive Officers as a
Group
-----------------------
<S> <C> <C> <C>
(21 persons)............ 1,974,781 (69.8%) 340,951 (11.1%) (64.1%) (9)
</TABLE>
-18-
<PAGE>
- - --------
(*) Owns less than 1% of the issued and outstanding class of Common Stock.
(1) Mr. Colaccino is the direct and individual beneficial owner of 59,382
shares of Class B Common Stock, 10,000 of which are beneficially owned by
virtue of currently exercisable incentive stock options to purchase Class B
Common Stock. In addition to such 59,382 shares, Mr. Colaccino is the
indirect beneficial owner of 1,858,743 shares of Class B Common Stock
beneficially owned by DM Associates and DM Management. See footnote (1)
under "Principal Shareholders" above. The 103,225 shares of Class A Common
Stock beneficially owned by Mr. Colaccino include currently exercisable
incentive stock options to purchase 98,750 shares of Class A Common Stock.
(2) Mr. Everets has been nominated for the first time for election as a
director at the Company's 1994 annual meeting of shareholders.
(3) Messrs. Kupperman, Landry and Stein are each partners of DM Management,
which is the general partner of DM Associates (described in footnote 1
above), and Mr. Nirenberg is a limited partner of DM Associates. However,
such persons do not deem themselves to be beneficial owners of any of the
1,858,743 shares of Class B Common Stock beneficially owned by DM
Associates or DM Management.
(4) Includes currently exercisable incentive stock options granted to Dr.
Kupperman to purchase 25,750 shares of Class B Common Stock and 56,250
shares of Class A Common Stock. Also includes shares of Common Stock owned
by Dr. Kupperman's wife and children.
(5) Represents currently exercisable incentive stock options granted to Mr.
Landry to purchase 34,750 shares of Class A Common Stock.
(6) Does not include shares of Class B Common Stock and shares of Class A
Common Stock owned by Mr. Nirenberg's children, the ownership of which Mr.
Nirenberg disclaims.
(7) Includes currently exercisable incentive stock options granted to Mr. Stein
to purchase 750 shares of Class B Common Stock and currently exercisable
incentive stock options to purchase 50,000 shares of Class A Common Stock.
(8) Includes currently exercisable non-qualified stock options granted to each
of Messrs. Barrett and Leed to purchase 2,500 shares of Class A Common
Stock. Such options were not granted pursuant to any stock option plan of
the Company.
(9) Includes currently exercisable stock options granted to all directors and
executive officers of the Company to purchase 49,250 shares of Class B
Common Stock and 334,627 shares of Class A Common Stock.
POTENTIAL CHANGE OF CONTROL OF THE COMPANY
DM Associates Limited Partnership ("DM Associates") beneficially owns
1,858,743 shares of Class B Common Stock of the Company, representing
approximately 66.9% of the issued and outstanding shares of Class B Common
Stock, and 60.8% of the total voting power of both classes of the Company's
Common Stock. DM Associates is controlled by its general partner, DM
Management Associates ("DM Management"), which itself is a general partnership.
The general partners of DM Management include four executive officers and
directors of the Company, including Frank Colaccino, President and Chief
Executive Officer, who is the managing general partner; Mitchell J.
Kupperman, Executive Vice President - Human Resources; Gregory G. Landry,
Executive Vice President and Chief Financial Officer; and Robert B. Stein, Jr.,
Executive Vice President - Store Operations.
DM Associates financed part of the purchase of its 1,858,743 shares of Class
B Common Stock by obtaining a $7,100,000 loan (the "CDA Loan") from the
Connecticut Development Authority ("CDA"). The CDA Loan is secured by DM
Associates' collateral pledge to the CDA of 1,220,000 shares of Class B Common
Stock owned by DM Associates (the "CDA Pledged Shares"), representing 43.9% of
the issued and outstanding shares of Class B Common Stock and 39.9% of the
total voting power of both classes of Common Stock.
The CDA Loan provides that a default of the CDA Loan will result upon certain
events occurring. If a default occurs under the CDA Loan, the CDA has the right
to sell or otherwise dispose of the CDA Pledged Shares which could result in a
change in control of the Company. Unless such a default occurs, DM Associates
has the right to vote the CDA Pledged Shares, subject to having received the
required consents of the CDA as set forth above with respect to certain
matters.
In addition, the limited partnership agreement of DM Associates provides that
if the term of the limited partnership is extended beyond September 12, 1997,
any limited partner whose percentage interest in DM Associates is greater than
30%, may sell all or a portion of his or its interest, subject to DM Associates
right of first refusal to purchase such interest. If DM Associates and such
limited partner do not agree on the terms of acquiring such limited partner's
interest, and there is not a third party purchaser, such limited partner has
the right to: (i) demand the dissolution of DM Associates and the distribution
of its assets to its partners; or (ii) cause such assets to be sold. As DM
Associates' principal asset is its 1,858,743 shares of Class B Common Stock, if
such a dissolution or sale occurs, a change of control of the Company could
result.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: May 31, 1994
DAIRY MART CONVENIENCE STORES, INC.
By /s/ Frank Colaccino By /s/ Gregory G. Landry
---------------------------- --------------------------
Frank Colaccino Gregory G. Landry
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
-20-
