<PAGE> 1
FORM 10-Q/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended AUGUST 2, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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
incorporation or organization) Identification No.)
210 BROADWAY EAST, CUYAHOGA FALLS, OHIO 44222
(Address of principal executive offices)
Registrant's telephone number, including area code (330) 923-0421
--------------------
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
SHARES OF CLASS A COMMON STOCK OUTSTANDING AUGUST 2, 1997 - 3,042,283
SHARES OF CLASS B COMMON STOCK OUTSTANDING AUGUST 2, 1997 - 2,783,060
<PAGE> 2
This Form 10-Q/A Amendment No. 1 amends the Form 10-Q of Dairy Mart Convenience
Stores, Inc. (the "Company") filed for the fiscal quarter ended August 2, 1997
to amend and restate the following in their entirety: (i.) the notes to the
consolidated financial statements in Part I; and (ii.) exhibit 27.1.
-2-
<PAGE> 3
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 2, 1997
(Unaudited)
The unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules
and regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. The information
furnished reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented, and which are of a normal, recurring nature. It is suggested that
these financial statements be read in conjunction with the financial statements
and the notes thereto included in the Company's Form 10-K, filed with the
Securities and Exchange Commission on May 1, 1997.
1. Accounting Policies
-------------------
The financial statements included herein have been prepared in
accordance with the accounting policies described in Note 1 to the February 1,
1997 audited consolidated financial statements included in the Company's Form
10-K. Certain prior year amounts have been reclassified to conform to the
presentation used for the current year.
2. Supplemental Balance Sheet Information
--------------------------------------
The composition of the Company's accrued expenses in the Consolidated
Balance Sheets is as follows:
<TABLE>
<CAPTION>
August 2, February 1,
1997 1997
-------------------------------
<S> <C> <C>
Accrued salaries and wages $ 4,049 $ 4,089
Accrued environmental assessment and
remediation 3,668 1,782
Accrued income taxes 2,634 (563)
Other accrued expenses 8,663 7,859
------- -------
Accrued Expenses $19,014 $13,167
------- -------
</TABLE>
3. Changes in Capital Accounts
---------------------------
An analysis of the capital stock accounts for the first two fiscal
quarters ended August 2, 1997 follows:
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES PAID-IN CAPITAL
ISSUED AT ISSUED AT IN EXCESS OF
$.01 PAR VALUE $.01 PAR VALUE AMOUNT PAR VALUE
-------------- -------------- --------- ---------------
<S> <C> <C> <C> <C>
Balance February 1, 1997 3,509,576 2,959,017 $ 64,686 $ 30,560,173
Employee stock purchase plan 11,082 - 111 42,934
Stock options exercised 43,250 - 433 121,105
---------- ---------- --------- -------------
Balance August 2, 1997 3,563,908 2,959,017 $ 65,230 $ 30,724,212
---------- ---------- --------- -------------
</TABLE>
-3-
<PAGE> 4
As of August 2, 1997, there were 521,625 shares of Class A Common Stock
and 175,957 shares of Class B Common Stock held as treasury stock at an
aggregate cost of $5,004,847, leaving 3,042,283 Class A shares and 2,783,060
Class B shares outstanding.
4. Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share is based on the weighted average number of
shares outstanding, including the dilutive effect of stock options, if
appropriate, during each period. The Company's note receivable from DM
Associates Limited Partnership is secured by 1,220,000 shares of the Company's
Class B Common Stock, which shares are treated similar to treasury stock for
earnings (loss) per share purposes.
During 1997, the Financial Accounting Standards Board issued SFAS 128,
"Earnings per Share". The statement will revise the methods and disclosures
regarding earnings per share. The Company is required to adopt SFAS 128 in the
fourth quarter of fiscal 1998.
5. Seasonality
-----------
The results of operations for the first two fiscal quarters ended
August 2, 1997 are not necessarily indicative of results to be expected for the
full fiscal year. The convenience store industry in the Company's marketing
areas experiences a higher percentage of revenues and profit margins during the
summer months than during the winter months. Historically, the Company has
achieved more favorable financial results in its second and third fiscal
quarters, as compared to its first and fourth fiscal quarters.
-4-
<PAGE> 5
6. Unaudited Pro Forma Information
-------------------------------
On June 21, 1997, the Company completed the sale of the assets relating
to 156 convenience store and retail gasoline locations in Connecticut,
Massachusetts, Rhode Island, and New York. The principal assets sold by the
Company include inventories, convenience store and gasoline fixtures and
equipment, land, buildings, and building and leasehold improvements. The
following unaudited pro forma information of the Company for the fiscal year
ended February 1, 1997 and the first two fiscal quarters ended August 2, 1997,
has been prepared assuming that the sale of the 156 convenience store and
retail gasoline locations had occurred as of the beginning of the fiscal year
ended February 1, 1997. The unaudited pro forma information is not necessarily
indicative of the results which would have been reported if the transaction had
occurred at the beginning of the fiscal year ended February 1, 1997, or which
may be reported in the future. The unaudited pro forma information reflects the
exclusion, for both fiscal periods shown, of historical revenues, cost of goods
sold, operating expenses, and direct and indirect administrative expenses
associated with the 156 retail locations sold. Additionally, the unaudited pro
forma information reflects the elimination of historical interest expense
related to debt retired based on the assumption that proceeds from the sale of
the 156 retail locations had been received at the beginning of the fiscal year
ended February 1, 1997, and also reflects the elimination of the estimated
income tax effect of the associated excluded results of operations for the 156
retail locations sold. The unaudited pro forma information is as follows:
-5-
<PAGE> 6
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
FOR THE TWO FISCAL FOR THE FISCAL
QUARTERS ENDED YEAR ENDED
------------------ --------------
AUGUST 2, FEBRUARY 1,
1997 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues................................ $ 234,044 $ 471,969
---------- ---------
Loss before income taxes................ (1,192) (4,012)
---------- ----------
Net loss................................ $ (667) $ (2,889)
----------------------------------------------------------------------------------------------------------
Loss per share.......................... $ (0.15) $ (0.65)
----------------------------------------------------------------------------------------------------------
</TABLE>
7. Supplemental Consolidating Financial Information (unaudited)
------------------------------------------------------------
The Company's payment obligations under the Series A and Series B
Senior Subordinated Notes are guaranteed by certain of the Company's
subsidiaries ("Guarantor Subsidiaries"). The Notes are fully and unconditionally
guaranteed on an unsecured, senior subordinated, joint and several basis by each
of the guarantor subsidiaries. The following supplemental financial information
sets forth, on a consolidating basis, statement of operations, balance sheet,
and cash flow information for the Company ("Parent Company Only"), for the
Guarantor Subsidiaries and for Financial Opportunities, Inc. ("FINOP"), the
Company's non-guarantor subsidiary. Separate complete financial statements of
the respective Guarantor Subsidiaries would not provide additional information
which would be useful in assessing the financial condition of the Guarantor
Subsidiaries, and are accordingly omitted.
Investments in subsidiaries are accounted for by the Parent Company on
the equity method for purpose of the supplemental consolidating presentation.
Earnings of the subsidiaries are, therefore, reflected in the Parent Company's
investment accounts and earnings. The principle elimination entries eliminate
the Parent Company's investments in subsidiaries and intercompany balances and
transactions.
-6-
<PAGE> 7
Supplemental Consolidating Statement of Operations
for the Two Fiscal Quarters Ended August 2, 1997
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues ............................. $ 267 $ 275,607 $ 219 $ -- $ 276,093
Cost of goods sold and expenses:
Cost of goods sold ............... -- 202,095 -- -- 202,095
Operating and administrative
expenses ....................... 139 67,983 15 -- 68,137
Interest expense ................. 4,883 401 176 -- 5,460
Gain on disposition of
properties, net ................ -- (1,633) -- -- (1,633)
--------- --------- ----- --------- ---------
5,022 268,846 191 -- 274,059
--------- --------- ----- --------- ---------
Income (loss) before income taxes
and equity in income of
consolidated subsidiaries ....... (4,755) 6,761 28 -- 2,034
(Provision for) benefit from
income taxes ........................ 2,092 (2,975) (12) -- (895)
--------- --------- ----- --------- ---------
Income (loss) before equity in
income of consolidated
subsidiaries ................... (2,663) 3,786 16 -- 1,139
Equity in income of
consolidated subsidiaries ........... 3,802 16 -- (3,818) --
--------- --------- ----- --------- ---------
Net income ........................ $ 1,139 $ 3,802 $ 16 $ (3,818) $ 1,139
========= ========= ===== ========= =========
</TABLE>
-7-
<PAGE> 8
Supplemental Consolidating Balance Sheets
August 2, 1997
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash ............................ $ 1,623 $ 3,836 $ 930 $ -- $ 6,389
Short-term investments .......... -- 19,878 2,334 -- 22,212
Accounts and notes receivable ... 103 14,285 562 -- 14,950
Inventory ....................... -- 17,638 -- -- 17,638
Prepaid expenses and
other current assets ........... 142 2,460 -- -- 2,602
Deferred income taxes ........... 2,272 2,346 -- -- 4,618
-------- -------- ------ ---------- --------
Total current assets ......... 4,140 60,443 3,826 -- 68,409
-------- -------- ------ ---------- --------
Assets Held For Sale ............... -- 5,386 -- -- 5,386
Property and Equipment, net ........ -- 74,533 -- -- 74,533
Intangible Assets, net ............. -- 15,988 -- -- 15,988
Other Assets, net .................. 1,251 7,246 1,978 -- 10,475
Investment in and Advances to
Subsidiaries ..................... 119,021 1,398 636 (121,055) --
-------- -------- ------ ---------- -------
Total assets ....................... $124,412 $164,994 $6,440 $(121,055) $174,791
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of
long-term obligations ......... $ 808 $ 347 $ -- $ -- $ 1,155
Accounts payable ................ 18,733 13,752 -- -- 32,485
Accrued expenses ................ 1,626 17,368 20 -- 19,014
Accrued interest ................ 3,435 -- 117 -- 3,552
-------- -------- ------ ---------- --------
Total current liabilities .... 24,602 31,467 137 -- 56,206
-------- -------- ------ ---------- --------
Long-Term Obligations,
less current portion above ........ 90,593 954 4,230 -- 95,777
Other Liabilities .................. -- 13,552 39 -- 13,591
Stockholders' Equity ............... 9,217 119,021 2,034 (121,055) 9,217
-------- -------- ------ ---------- --------
Total liabilities and
stockholders' equity ............. $124,412 $164,994 $6,440 $(121,055) $174,791
======== ======== ====== ========== ========
</TABLE>
-8-
<PAGE> 9
Supplemental Consolidating Statement of Cash Flows
for the Two Fiscal Quarters Ended August 2, 1997
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities ............................ $ 5,518 $ 8,191 $ 138 $ -- $ 13,847
-------- -------- -------- ------- -------
Cash flows from investing activities:
Purchase of and change in
short-term investments ............... -- (19,878) (801) -- (20,679)
Purchase of property and equipment .... -- (13,438) -- -- (13,438)
Net proceeds from sale of property,
equipment and assets held for sale ... -- 28,838 -- -- 28,838
Investment in and advances to
subsidiaries ......................... 7,763 (7,970) 207 -- --
Increase in long-term notes receivable -- (18) -- -- (18)
Proceeds from collection of
long-term receivables ................ -- 21 210 -- 231
Increase in intangibles
and other assets ..................... 29 1,682 4 -- 1,715
-------- -------- -------- ------- --------
Net cash provided by (used by) investing
activities ............................ 7,792 (10,763) (380) -- (3,351)
-------- -------- -------- ------- --------
Cash flows from financing activities:
Decrease in revolving loan, net ....... (10,280) -- -- -- (10,280)
Repayment of long-term obligations .... (1,672) (1,610) -- -- (3,282)
Issuance of common stock .............. 165 -- -- -- 165
-------- -------- -------- ------- --------
Net cash used by
financing activities ................... (11,787) (1,610) -- -- (13,397)
-------- -------- -------- ------- --------
Increase (decrease) in cash .............. 1,523 (4,182) (242) -- (2,901)
Cash at beginning of fiscal year ......... 100 8,018 1,172 -- 9,290
-------- -------- -------- ------- -------
Cash at end of second fiscal quarter ..... $ 1,623 $ 3,836 $ 930 $ -- $ 6,389
======== ======== ======== ======= =======
</TABLE>
-9-
<PAGE> 10
Supplemental Consolidating Statement of Operations
for the Two Fiscal Quarters Ended August 3, 1996
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues ........................... $ 135 $ 297,056 $ 271 $ -- $297,462
Cost of goods sold and expenses:
Cost of goods sold .............. -- 219,542 -- -- 219,542
Operating and administrative
expenses ....................... 138 69,293 -- -- 69,431
Interest expense ................ 5,077 253 174 -- 5,504
Gain on disposition of
properties, net ................ -- (89) -- -- (89)
-------- --------- ------- --------- --------
5,215 288,999 174 -- 294,388
-------- --------- ------- --------- --------
Income (loss) before income taxes
and equity in income of
consolidated subsidiaries ... (5,080) 8,057 97 -- 3,074
(Provision for) benefit from
income taxes ...................... 2,037 (3,264) (6) -- (1,233)
-------- --------- ------- --------- --------
Income (loss) before equity in
income of consolidated
subsidiaries ................. (3,043) 4,793 91 -- 1,841
Equity in income of consolidated
subsidiaries ................. 4,884 91 -- (4,975) --
-------- --------- ------- --------- --------
Net income ...................... $ 1,841 $ 4,884 $ 91 $ (4,975) $ 1,841
======== ========= ======= ========= ========
</TABLE>
-10-
<PAGE> 11
Supplemental Consolidating Balance Sheets
February 1, 1997
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
-------- -------- ------ ---------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash ............................ $ 100 $ 8,018 $1,172 $ -- $ 9,290
Short-term investment ........... -- -- 1,533 -- 1,533
Accounts and notes receivable ... 20 12,897 671 -- 13,588
Inventory ....................... -- 20,184 -- -- 20,184
Prepaid expenses and
other current assets ........... 20 3,259 -- -- 3,279
Deferred income taxes ........... 933 878 -- -- 1,811
-------- -------- ------ ---------- --------
Total current assets ......... 1,073 45,236 3,376 -- 49,685
-------- -------- ------ ---------- --------
Assets Held For Sale ............... -- 9,543 -- -- 9,543
Property and Equipment, net ........ -- 89,448 -- -- 89,448
Intangible Assets, net ............. -- 17,039 -- -- 17,039
Other Assets, net .................. 1,389 6,209 2,192 -- 9,790
Investment in and Advances to
Subsidiaries ..................... 126,784 1,175 843 (128,802) --
-------- -------- ------ ---------- -------
Total assets ....................... $129,246 $168,650 $6,411 $(128,802) $175,505
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of
long-term obligations ......... $ 929 $ 454 $ -- $ -- $ 1,383
Accounts payable ................ 13,800 16,840 -- -- 30,640
Accrued expenses ................ 726 12,432 9 -- 13,167
Accrued interest ................ 3,520 -- 115 -- 3,635
-------- -------- ------ ---------- --------
Total current liabilities .... 18,975 29,726 124 -- 48,825
-------- -------- ------ ---------- --------
Long-Term Obligations,
less current portion above ........ 102,358 2,457 4,230 -- 109,045
Other Liabilities .................. -- 9,683 39 -- 9,722
Stockholders' Equity ............... 7,913 126,784 2,018 (128,802) 7,913
-------- -------- ------ ---------- --------
Total liabilities and
stockholders' equity ............. $129,246 $168,650 $6,411 $(128,802) $175,505
======== ======== ====== ========== ========
</TABLE>
-11-
<PAGE> 12
Supplemental Consolidating Statement of Cash Flows
for the Two Quarters Ended August 3, 1996
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used by) operating
activities ............................ $(5,215) $ 19,580 $ 74 $ -- $ 14,439
------- -------- ------- ---- --------
Cash flows from investing activities:
Purchase of and increase in
short-term investments ............... -- -- (1,532) -- (1,532)
Purchase of property and equipment .... -- (9,429) -- -- (9,429)
Net proceeds from sale of property,
equipment and assets held for sale ... -- 2,233 -- -- 2,233
Investment in and advances to
subsidiaries ......................... 9,606 (9,123) (483) -- --
Increase in long-term notes receivable -- (120) (1,248) -- (1,368)
Proceeds from collection of
long-term receivables ................ -- 60 911 -- 971
Increase in intangibles
and other assets ..................... -- (428) 3 -- (425)
------- -------- ------- ---- --------
Net cash provided by (used by) investing
activities ............................ 9,606 (16,807) (2,349) -- (9,550)
------- -------- ------- ---- --------
Cash flows from financing activities:
Increase in long-term obligations ..... 300 350 -- -- 650
Repayment of long-term obligations .... (463) (226) (8) -- (697)
Issuance of common stock .............. 158 -- -- -- 158
------- -------- ------- ---- --------
Net cash provided by (used by)
in financing activities ................ (5) 124 (8) -- 111
------- -------- ------- ---- --------
Increase (decrease) in cash ............. 4,386 2,897 (2,283) -- 5,000
Cash at beginning of fiscal year ........ 1,739 7,871 3,044 -- 12,654
------- -------- ------- ---- --------
Cash at end of second fiscal quarter .... $ 6,125 $ 10,768 $ 761 $ -- $ 17,654
======= ======== ======= ==== ========
</TABLE>
8. Subsequent Events
-----------------
During fiscal 1996, the Company acquired a $10,000,000 note
receivable ("Note") from DM Associates Limited Partnership collateralized by
1,220,000 shares of the Company's Class B Common Stock ("Pledged Shares"). The
Note has been recorded as a reduction to stockholders' equity on the
Consolidated Balance Sheets of the Company. Since the Note was not paid when
it became due and payable on July 31, 1997, the Company, subsequent to the
close of the current year second fiscal quarter, has received the Pledged
Shares in satisfaction of the Note.
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAIRY MART CONVENIENCE STORES, INC.
Date: September 26, 1997 /s/ Gregory G. Landry
---------------------
Gregory G. Landry
Executive Vice President
Chief Financial Officer
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 6,389
<SECURITIES> 22,212
<RECEIVABLES> 17,374
<ALLOWANCES> 2,424
<INVENTORY> 17,638
<CURRENT-ASSETS> 68,409
<PP&E> 102,771
<DEPRECIATION> 22,852
<TOTAL-ASSETS> 174,791
<CURRENT-LIABILITIES> 56,206
<BONDS> 95,777
<COMMON> 66
0
0
<OTHER-SE> 9,217
<TOTAL-LIABILITY-AND-EQUITY> 174,791
<SALES> 0
<TOTAL-REVENUES> 276,093
<CGS> 202,095
<TOTAL-COSTS> 274,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,460
<INCOME-PRETAX> 2,034
<INCOME-TAX> (895)
<INCOME-CONTINUING> 1,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,139
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
