<PAGE> 1
FORM 10-Q
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 OCTOBER 31, 1998
[ ] 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.)
ONE DAIRY MART WAY, 300 EXECUTIVE PARKWAY WEST, HUDSON, OHIO 44236
(Address of principal executive offices)
Registrant's telephone number, including area code (330) 342-6600
-----------------------------------------------------------------
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 OCTOBER 31, 1998 - 3,177,587
SHARES OF CLASS B COMMON STOCK OUTSTANDING OCTOBER 31, 1998 - 1,521,799
-1-
<PAGE> 2
PART I. FINANCIAL INFORMATION
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
FOR THE THIRD FISCAL FOR THE THREE FISCAL
QUARTER ENDED QUARTERS ENDED
--------------------------- ---------------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1,
1998 1997 1998 1997
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . $ 126,183 $ 118,313 $ 362,161 $ 394,410
------------ ----------- ------------ ---------
Cost of goods sold and expenses:
Cost of goods sold . . . . . . . . . . 88,721 86,095 257,754 288,195
Operating and administrative expenses. 33,658 30,163 94,803 96,667
Interest expense . . . . . . . . . . . 2,695 2,607 8,027 8,066
----------- ----------- ------------ ---------
125,074 118,865 360,584 392,928
------------ ----------- ------------ ---------
Income (loss) before incomes taxes . . . 1,109 (552) 1,577 1,482
(Provision) benefit for income taxes . . (508) 242 (723) (653)
----------- ----------- ------------ ---------
Net income . . . . . . . . . . . . . . $ 601 $ (310) $ 854 $ 829
- - ------------------------------------------------------------ ---------------- ----------------- ----------------- ---------
Earnings (loss) per share - Basic . . . $ 0.13 $ (0.07) $ 0.18 $ 0.18
Earnings (loss) per share - Diluted . . $ 0.13 $ (0.07) $ 0.18 $ 0.17
- - ------------------------------------------------------------ ---------------- ----------------- ----------------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 3
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
OCTOBER 31, 1998 JANUARY 31, 1998
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 6,037 $ 3,806
Short-term investments . . . . . . . . . . . . . . 2,543 3,629
Accounts and notes receivable. . . . . . . . . . . 19,591 14,970
Inventory. . . . . . . . . . . . . . . . . . . . . 19,370 16,808
Prepaid expenses and other current assets. . . . . 1,648 2,231
Deferred income taxes. . . . . . . . . . . . . . . 821 1,048
-------------- -----------
Total current assets. . . . . . . . . . . . . . 50,010 42,492
Assets Held For Sale . . . . . . . . . . . . . . . 10,094 10,715
Property and Equipment, net. . . . . . . . . . . . 88,703 82,589
Intangible Assets, net . . . . . . . . . . . . . . 15,367 16,017
Other Assets, net. . . . . . . . . . . . . . . . . 15,434 13,291
-------------- -----------
Total assets . . . . . . . . . . . . . . . . . . . $ 179,608 $ 165,104
- - -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term obligations. . . . $ 3,353 $ 2,056
Accounts payable . . . . . . . . . . . . . . . . . 39,835 31,297
Accrued expenses . . . . . . . . . . . . . . . . . 15,483 18,177
Accrued interest . . . . . . . . . . . . . . . . . 1,427 3,567
-------------- -----------
Total current liabilities. . . . . . . . . . . . 60,098 55,097
Long-Term Obligations, less current portion above . . 104,186 94,392
Other Liabilities . . . . . . . . . . . . . . . . . . 7,811 9,170
Stockholders' Equity:
Preferred Stock (serial) . . . . . . . . . . . . . - -
Class A Common Stock . . . . . . . . . . . . . . . 37 36
Class B Common Stock . . . . . . . . . . . . . . . 29 29
Paid-in capital. . . . . . . . . . . . . . . . . . 31,015 30,802
Retained deficit . . . . . . . . . . . . . . . . . (8,563) (9,417)
Treasury stock, at cost. . . . . . . . . . . . . . (15,005) (15,005)
------------- ------------
Total stockholders' equity. . . . . . . . . . . 7,513 6,445
-------------- -----------
Total liabilities and stockholders' equity. . . . . . $ 179,608 $ 165,104
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-3-
<PAGE> 4
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
FOR THE THREE FISCAL QUARTERS ENDED
-----------------------------------
OCTOBER 31, 1998 NOVEMBER 1, 1997
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 854 $ 829
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . 8,008 8,351
Change in deferred income taxes . . . . . . . . . . . 454 435
(Gain) loss on disposition of properties, net . . . . 615 (1,765)
Net change in assets and liabilities:
Accounts and notes receivable . . . . . . . . . . . (4,621) (3,492)
Inventory . . . . . . . . . . . . . . . . . . . . . (2,562) (505)
Accounts payable. . . . . . . . . . . . . . . . . . 8,538 3,655
Accrued interest. . . . . . . . . . . . . . . . . . (2,140) (2,363)
Other assets and liabilities. . . . . . . . . . . . (3,356) 2,833
- - --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities . . . . . . . . 5,790 7,978
- - --------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of and increase in short-term investments . . 1,086 (5,747)
Purchase of property and equipment . . . . . . . . . . (37,174) (22,427)
Proceeds from sale of property, equipment and
assets held for sale . . . . . . . . . . . . . . . . 22,056 31,277
Increase in long-term notes receivable . . . . . . . . (1,097) (419)
Proceeds from collection of long-term notes receivable 798 639
(Increase) decrease in intangibles and other assets. . (419) 1,706
- - --------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities . . . (14,750) 5,029
- - --------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in revolving loan, net . . . . . . 12,800 (10,280)
Repayment of long-term obligations . . . . . . . . . . (1,823) (3,613)
Issuance of common stock . . . . . . . . . . . . . . . 214 220
- - --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities . . . 11,191 (13,673)
- - --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash . . . . . . . . . . . . . . . . 2,231 (666)
Cash at beginning of fiscal year. . . . . . . . . . . . . 3,806 9,290
- - --------------------------------------------------------------------------------------------------------------------------------
Cash at end of third fiscal quarter . . . . . . . . . . . $ 6,037 $ 8,624
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1998
(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. These financial statements should 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,
1998.
1. Accounting Policies
-------------------
The financial statements included herein have been prepared in accordance with
the accounting policies described in Note 1 to the January 31, 1998 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. Changes in Capital Accounts
---------------------------
An analysis of the capital stock accounts for the first three fiscal quarters
ended October 31, 1998 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 January 31, 1998 3,622,663 2,924,006 $ 65,458 $ 30,800,680
Employee stock purchase plan 17,174 - 172 64,026
Stock options exercised 53,125 - 531 149,901
Exchange of Class B Shares
for Class A Shares 6,250 (6,250) - -
---------- ---------- --------- --------------
Balance October 31, 1998 3,699,212 2,917,756 $ 66,161 $ 31,014,607
---------- ---------- --------- -------------
</TABLE>
-5-
<PAGE> 6
As of October 31, 1998, there were 521,625 shares of Class A Common Stock and
1,395,957 shares of Class B Common Stock held as treasury stock at an aggregate
cost of $15,004,847, leaving 3,177,587 Class A shares and 1,521,799 Class B
shares outstanding.
3. 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 weighted average number of shares used in the
calculation of basic earnings per share was 4,681,970 and 4,618,126 for the
third fiscal quarter ended October 31, 1998 and November 1, 1997, respectively,
and 4,671,518 and 4,597,042 for the three fiscal quarters ended October 31, 1998
and November 1, 1997, respectively. The weighted average number of shares used
in the calculation of diluted earnings per share was 4,729,095 and 4,618,126 for
the third fiscal quarter ended October 31, 1998 and November 1, 1997,
respectively, and 4,743,704 and 4,796,350 for the three fiscal quarters ended
October 31, 1998 and November 1, 1997, respectively.
4. Seasonality
-----------
The results of operations for the first three fiscal quarters ended October 31,
1998 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.
5. Unaudited Pro Forma Information
-------------------------------
In fiscal year 1998, the Company sold 156 convenience store and gasoline
locations in the northeastern United States for $39.1 million. The principal
assets sold by the Company included inventories, convenience store and gasoline
fixtures and equipment, land, buildings, and building and leasehold
improvements. In fiscal year 1998, the Company also sold a former office and
-6-
<PAGE> 7
manufacturing facility in Ohio for $4.1 million. The resulting net pre-tax gain
of $3.6 million recognized in the fiscal year ended January 31, 1998 has been
excluded from the pro forma results shown below. The following unaudited pro
forma information of the Company for the fiscal year ended January 31, 1998 and
the first three fiscal quarters ended October 31, 1998, has been prepared
assuming that the asset sales had occurred as of the beginning of the fiscal
year ended January 31, 1998. 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 January 31,
1998, 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 assets 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 assets had been received at the beginning of the fiscal year ended
January 31, 1998, and also reflects the elimination of the estimated income tax
effect of the associated excluded results of operations for the assets sold. The
unaudited pro forma information is as follows:
<TABLE>
<CAPTION>
(Unaudited)
(in thousands, except per share amounts)
FOR THE THREE FISCAL FOR THE FISCAL
QUARTERS ENDED YEAR ENDED
-------------------- --------------
OCTOBER 31, JANUARY 31,
1998 1998
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues. . . . . . . . . . . . . . . $ 362,161 $ 459,348
--------------- -------------
Income (loss) before income taxes . . 1,577 (6,358)
--------------- --------------
Net income (loss) . . . . . . . . . . $ 854 $ (4,519)
- - --------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share - Basic . . $ 0.18 $ (0.98)
Earnings (loss) per share - Diluted . $ 0.18 $ (0.98)
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE> 8
6. 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, statements of operations, balance sheets and
cash flow information for the Company ("Parent Company"), 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 omitted accordingly.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method for purposes 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.
-8-
<PAGE> 9
Supplemental Consolidating Statement of Operations
for the Three Fiscal Quarters Ended October 31, 1998
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . $ 76 $ 361,750 $ 335 $ - $ 362,161
Cost of goods sold and expenses:
Cost of goods sold. . . . . . . . . . - 257,754 - - 257,754
Operating and administrative expenses 201 94,586 16 - 94,803
Interest expense. . . . . . . . . . . 7,326 456 245 - 8,027
----------------------------------------------------------------------------
7,527 352,796 261 - 360,584
----------------------------------------------------------------------------
Income (loss) before income taxes
and equity in income of consolidated
subsidiaries . . . . . . . . . . . . (7,451) 8,954 74 - 1,577
Benefit from (provision for)
income taxes. . . . . . . . . . . . 3,428 (4,117) (34) - (723)
-
----------------------------------------------------------------------------
Income (loss) before equity in
income of consolidated subsidiaries (4,023) 4,837 40 - 854
Equity in income of consolidated
subsidiaries. . . . . . . . . . . . . 4,877 40 - (4,917) -
----------------------------------------------------------------------------
Net income. . . . . . . . . . . . . $ 854 $ 4,877 $ 40 $ (4,917) $ 854
=============================================================================================================================
</TABLE>
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<PAGE> 10
Supplemental Consolidating Balance Sheets
as of October 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . $ 100 $ 5,785 $ 152 $ - $ 6,037
Short-term investments . . . . . . . - 3 2,540 - 2,543
Accounts and notes receivable. . . . 890 18,128 573 - 19,591
Inventory. . . . . . . . . . . . . . - 19,370 - - 19,370
Prepaid expenses and other
current assets . . . . . . . . . . 15 1,633 - - 1,648
Deferred income taxes. . . . . . . . 953 (132) - - 821
--------------------------------------------------------------------------------
Total current assets . . . . . . . 1,958 44,787 3,265 - 50,010
Assets Held For Sale. . . . . . . . . . - 10,094 - - 10,094
Property and Equipment, net . . . . . . - 88,703 - - 88,703
Intangible Assets, net. . . . . . . . . - 15,367 - - 15,367
Other Assets, net . . . . . . . . . . . 1,552 12,106 1,776 - 15,434
Investment in and Advances to
subsidiaries . . . . . . . . . . . . 129,291 1,828 297 (131,416) -
--------------------------------------------------------------------------------
Total assets. . . . . . . . . . . . . . $ 132,801 $ 172,885 $ 5,338 $(131,416) $ 179,608
- - -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term
obligations. . . . . . . . . . . . $ 3,094 $ 259 $ - $ - $ 3,353
Accounts payable . . . . . . . . . . 20,235 19,600 - - 39,835
Accrued expenses . . . . . . . . . . 170 15,301 12 - 15,483
Accrued interest . . . . . . . . . . 1,356 - 71 - 1,427
--------------------------------------------------------------------------------
Total current liabilities. . . . . 24,855 35,160 83 - 60,098
--------------------------------------------------------------------------------
Long-Term Obligations, less
current portion above. . . . . . . . 100,433 623 3,130 - 104,186
Other Liabilities . . . . . . . . . . . - 7,811 - - 7,811
Stockholders' Equity. . . . . . . . . . 7,513 129,291 2,125 (131,416) 7,513
--------------------------------------------------------------------------------
Total liabilities and
stockholders' equity . . . . . . . . $ 132,801 $ 172,885 $ 5,338 $(131,416) $ 179,608
===============================================================================================================================
</TABLE>
-10-
<PAGE> 11
Supplemental Consolidating Statement of Cash Flows
for the Three Fiscal Quarters Ended October 31, 1998
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities . . . . . . . . . . $ (1,589) $ 7,287 $ 92 $ - $ 5,790
--------------------------------------------------------------------------------
Cash flows from investing activities: -
Decrease in short-term investments . . - - 1,086 - 1,086
Purchase of property and equipment . - (37,174) - - (37,174)
Net proceeds from sale of property,
equipment and assets held for sale - 22,056 - - 22,056
Investment in and advances to
subsidiaries . . . . . . . . . . . (10,486) 10,646 (160) - -
Increase in long-term notes
receivables. . . . . . . . . . . . - (1,097) - - (1,097)
Proceeds from collection of
long-term receivables. . . . . . . - 798 - - 798
Increase in intangibles and
other assets . . . . . . . . . . . (355) (64) - - (419)
--------------------------------------------------------------------------------
Net cash provided by (used by)
investing activities . . . . . . . . (10,841) (4,835) 926 - (14,750)
--------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of long-term obligations. . - - - - -
Increase in revolving loan, net. . . 12,800 - - - 12,800
Repayment of long-term obligations . (484) (239) (1,100) - (1,823)
Issuance of common stock . . . . . . 214 - - - 214
--------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities . . . . . . . . 12,530 (239) (1,100) - 11,191
--------------------------------------------------------------------------------
Increase (decrease) in cash . . . . . 100 2,213 (82) - 2,231
Cash at beginning of fiscal year . . . - 3,572 234 - 3,806
--------------------------------------------------------------------------------
Cash at end of third fiscal quarter. . $ 100 $ 5,785 $ 152 $ - $ 6,037
================================================================================================================================
</TABLE>
-11-
<PAGE> 12
Supplemental Consolidating Statement of Operations
for the Three Fiscal Quarters Ended November 1, 1997
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . $ 1,098 $ 392,977 $ 335 $ - $ 394,410
Cost of goods sold and expenses:
Cost of goods sold . . . . . . . . . - 288,195 - - 288,195
Operating and administrative expenses 204 96,439 24 - 96,667
Interest expense . . . . . . . . . . 7,308 494 264 - 8,066
--------------------------------------------------------------------------------
7,512 385,128 288 - 392,928
Income (loss) before income taxes
and equity in income of
consolidated subsidiaries. . . . . (6,414) 7,849 47 - 1,482
Benefit from (provision for)
income taxes . . . . . . . . . . . 2,822 (3,454) (21) - (653)
--------------------------------------------------------------------------------
Income (loss) before equity in
income of consolidated
subsidiaries . . . . . . . . . . (3,592) 4,395 26 - 829
Equity in income of
consolidated subsidiaries. . . . 4,421 26 - (4,447) -
--------------------------------------------------------------------------------
Net income . . . . . . . . . . $ 829 $ 4,421 $ 26 $ (4,447) $ 829
================================================================================================================================
</TABLE>
-12-
<PAGE> 13
Supplemental Consolidating Balance Sheets
as of January 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . $ - $ 3,572 $ 234 - $ 3,806
Short-term investments . . . . . . . - 3 3,626 - 3,629
Accounts and notes receivable. . . . 1,254 13,040 676 - 14,970
Inventory. . . . . . . . . . . . . . - 16,808 - - 16,808
Prepaid expenses and other
current assets . . . . . . . . . . 69 2,162 - - 2,231
Deferred income taxes. . . . . . . . 852 196 - - 1,048
--------------------------------------------------------------------------------
Total current assets . . . . . . . 2,175 35,781 4,536 - 42,492
--------------------------------------------------------------------------------
Assets Held For Sale. . . . . . . . . . - 10,715 - - 10,715
Property and Equipment, net . . . . . . - 82,589 - - 82,589
Intangible Assets, net. . . . . . . . . - 16,017 - - 16,017
Other Assets, net . . . . . . . . . . . 1,580 9,929 1,782 - 13,291
Investment in and Advances to
Subsidiaries . . . . . . . . . . . . 118,672 1,948 137 (120,757) -
--------------------------------------------------------------------------------
Total assets. . . . . . . . . . . . . . $122,427 $ 156,979 $ 6,455 $(120,757) $ 165,104
- - --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of
long-term obligations. . . . . . . $ 637 $ 319 $ 1,100 $ - $ 2,056
Accounts payable . . . . . . . . . . 20,138 11,159 - - 31,297
Accrued expenses . . . . . . . . . . 1,297 16,857 23 - 18,177
Accrued interest . . . . . . . . . . 3,450 - 117 - 3,567
--------------------------------------------------------------------------------
Total current liabilities. . . . . 25,522 28,335 1,240 - 55,097
--------------------------------------------------------------------------------
Long-Term Obligations, less
current portion above. . . . . . . . 90,460 802 3,130 - 94,392
Other Liabilities . . . . . . . . . . . - 9,170 - - 9,170
Stockholders' Equity. . . . . . . . . . 6,445 118,672 2,085 (120,757) 6,445
--------------------------------------------------------------------------------
Total liabilities and
stockholders' equity . . . . . . . . $122,427 $ 156,979 $ 6,455 $ (120,757) $ 165,104
================================================================================================================================
</TABLE>
-13-
<PAGE> 14
Supplemental Consolidating Statement of Cash Flows
for the Three Quarters Ended November 1, 1997
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries FINOP Eliminations Consolidated
------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by operating
activities . . . . . . . . . . . . . . $ (577) $ 8,283 $ 272 $ - $ 7,978
--------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of and increase in
short-term investments . . . . . . - (4,905) (842) - (5,747)
Purchase of property and equipment . - (22,427) - - (22,427)
Net proceeds from sale of property,
equipment and assets held for sale - 31,277 - - 31,277
Investment in and advances to
subsidiaries . . . . . . . . . . . 15,631 (16,420) 789 - -
Increase in long-term notes
receivables. . . . . . . . . . . . - (419) - - (419)
Proceeds from collection of
long-term receivables. . . . . . . - 429 210 - 639
Decrease in intangibles and
other assets . . . . . . . . . . . 29 1,671 6 - 1,706
--------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities . . . . . . . . 15,660 (10,794) 163 - 5,029
--------------------------------------------------------------------------------
Cash flows from financing activities:
Decrease in revolving loan, net. . . (10,280) - - - (10,280)
Repayment of long-term obligations . (1,913) (1,700) - - (3,613)
Issuance of common stock . . . . . . 220 - - - 220
--------------------------------------------------------------------------------
Net cash used in financing
activities . . . . . . . . . . . . . (11,973) (1,700) - - (13,673)
--------------------------------------------------------------------------------
Increase (decrease) in cash. . . . . . 3,110 (4,211) 435 - (666)
Cash at beginning of fiscal year . . . 100 8,018 1,172 - 9,290
--------------------------------------------------------------------------------
Cash at end of third fiscal quarter. . $ 3,210 $ 3,807 $ 1,607 $ - $ 8,624
===============================================================================================================================
</TABLE>
-14-
<PAGE> 15
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
During fiscal year 1998, the Company sold 156 convenience store and retail
gasoline locations based in the northeastern United States for $39.1 million.
The Company also sold a former office and manufacturing facility for $4.1
million. The following discussion and analysis of Results of Operations is based
on unaudited Pro Forma Consolidated Statements of Operations, as shown below,
for the current year first three fiscal quarters and current year third fiscal
quarter as compared to the corresponding periods of the prior fiscal year. The
unaudited Pro Forma Consolidated Statements of Operations as presented below
reflect exclusion, for all comparative fiscal periods shown, of the historical
revenues, cost of goods sold, operating expenses, direct and indirect
administrative expenses, and the pre-tax gain associated with the assets sold.
Additionally, the unaudited Pro Forma Consolidated Statements of Operations
reflect the elimination of historical interest expense related to the debt
retired based on the assumption that proceeds from the asset sales had been
received as of the beginning of the prior fiscal year, and also reflect the
elimination of the estimated income tax effect of the associated excluded
results of operations for the assets sold. The unaudited Pro Forma Consolidated
Statements of Operations for the comparative third fiscal quarter and the first
three fiscal quarters are as follows:
-15-
<PAGE> 16
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
FOR THE THIRD FISCAL FOR THE THREE FISCAL
QUARTER ENDED QUARTERS ENDED
-------------------- --------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31 NOVEMBER 1,
1998 1997 1998 1997
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 126,183 $ 118,297 $ 362,161 $ 352,346
------------ ----------- ------------ ---------
Cost of goods sold and expenses:
Cost of goods sold . . . . . . . . . . 88,721 86,018 257,754 256,678
Operating and administrative expenses. 33,658 30,273 94,803 89,676
Interest expense . . . . . . . . . . . 2,695 2,606 8,027 7,784
----------- ----------- ------------ ---------
$ 125,074 $ 118,897 $ 360,584 $ 354,138
----------- ----------- ------------ ---------
Income (loss) before incomes taxes . . . 1,109 (600) 1,577 (1,792)
(Provision) benefit for income taxes . . (508) 264 (723) 788
----------- ----------- ------------ ---------
Net income (loss). . . . . . . . . . . $ 601 $ (336) $ 854 $ (1,004)
- - ----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share - Basic . . . $ 0.13 $ (0.07) $ 0.18 $ (0.22)
Earnings (loss) per share - Diluted . . $ 0.13 $ (0.07) $ 0.18 $ (0.22)
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
REVENUES
Revenues for the current year first three fiscal quarters increased by $9.9
million from the prior year first three fiscal quarters, and revenues for the
current year third fiscal quarter increased by $7.9 million from the prior year
third fiscal quarter. A summary of revenues by functional area for the
comparative third fiscal quarter and the first three fiscal quarters is as
follows:
-16-
<PAGE> 17
<TABLE>
<CAPTION>
FOR THE THIRD FISCAL FOR THE THREE FISCAL
QUARTERS ENDED QUARTER ENDED
--------------------------- ----------------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1,
(IN MILLIONS) 1998 1997 1998 1997
- - -------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
CONVENIENCE STORES $ 80.8 $ 73.9 $ 236.5 $ 216.9
GASOLINE 41.9 43.1 121.3 132.9
OTHER 3.5 1.3 4.4 2.5
-------------------------- --------------------------
TOTAL $ 126.2 $ 118.3 $ 362.2 $ 352.3
========================== ==========================
</TABLE>
Convenience store revenues increased $19.6 million, or 9.0%, in the current year
first three fiscal quarters as compared to the prior year first three fiscal
quarters, and convenience store revenues for the current year third fiscal
quarter increased by $6.9 million, or 9.3%, as compared to the prior year third
fiscal quarter. These increases were primarily due to increases in comparable
company-operated store sales. The increase in comparable company-operated store
sales in the current year three fiscal quarters was 9.4%, and the increase in
comparable company-operated store sales for the current year third fiscal
quarter was 8.6%. In addition to these increases in comparable company-operated
store sales, the Company has opened sixteen new stores in the last twelve
months. These increases are partially offset by the closure and/or sale of 35
underperforming stores in the last twelve months. Although the reduction in
stores has a negative impact on revenues, it does not have a material adverse
effect on results of operations, because the majority of these stores closed
and/or sold had been operating at a loss.
Gasoline revenues decreased $11.6 million in the current year first three fiscal
quarters as compared to the prior year first three quarters, and gasoline
revenues for the current year third fiscal quarter decreased $1.2 million as
compared to the prior year third fiscal quarter. The decrease in gasoline
revenues for the first three fiscal quarters was due to a decrease in the
average selling price of gasoline of 16.0 cents per gallon, partially offset by
an increase in total gallons sold of 7.0 million. The decrease in gasoline
revenue for the third fiscal quarter was due to a decrease in the average
selling price of gasoline of 18.5 cents per gallon, partially offset by an
increase in total gallons sold of 6.0 million.
-17-
<PAGE> 18
GROSS PROFITS
Gross profits for the current year first three fiscal quarters increased $8.7
million from the prior year first three fiscal quarters, and gross profits for
the current year third fiscal quarter increased $5.2 million from the prior year
third fiscal quarter. A summary of the gross profits by functional area for the
comparative third fiscal quarter and the first three fiscal quarters is as
follows:
<TABLE>
<CAPTION>
FOR THE THIRD FISCAL FOR THE THREE FISCAL
QUARTER ENDED QUARTERS ENDED
--------------------------- ------------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1,
(IN MILLIONS) 1998 1997 1998 1997
-------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C>
CONVENIENCE STORES $ 28.9 $ 26.3 $ 85.4 $ 78.5
GASOLINE 5.1 4.7 14.6 14.7
OTHER 3.5 1.3 4.4 2.5
--------------------------- ---------------------
TOTAL $ 37.5 $ 32.3 $ 104.4 $ 95.7
=========================== =====================
</TABLE>
Convenience store gross profits increased by $6.9 million in the current year
first three fiscal quarters as compared to the prior year first three fiscal
quarters, and convenience store gross profits increased $2.6 million in the
current year third fiscal quarter as compared to the prior year third fiscal
quarter. These increases are primarily due to the increase in comparable store
sales, as described above.
Gasoline gross profits decreased $0.1 million in the current year first three
fiscal quarters as compared to the prior year first three fiscal quarters, and
gasoline gross profits increased $0.4 million in the current year third fiscal
quarter as compared to the prior year third fiscal quarter. The decrease in the
current year first three fiscal quarters was due to a decrease in gasoline gross
profit of 0.7 cents per gallon as compared to the prior year first three fiscal
quarters, offset by an increase in gasoline gallons sold, as described above.
The increase in the current year third fiscal quarter was primarily due to an
increase in gasoline gallons sold of 6.0 million as compared to the prior year
third fiscal quarter, partially offset by a decrease in gasoline gross profit of
0.6 cents per gallon.
-18-
<PAGE> 19
Other gross profits increased by $1.9 million in the current year first three
fiscal quarters as compared to the prior year first three fiscal quarters, and
other gross profits increased $2.2 million in the current year third fiscal
quarter. These increases were primarily a result of a fee due the Company of
$3.0 million on the termination of a long-term ATM agreement. The Company's
former partner in the agreement has agreed to the termination fee in lieu of its
ongoing payment obligations under the agreement which were approximately
$130,000 per month. These increases were partially offset by the recognition
in the prior year third fiscal quarter of $0.6 million in interest income
associated with the retirement of the note receivable from DM Associates
Limited Partnership.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses for the current year first three fiscal
quarters increased $5.1 million from the prior year first three fiscal quarters,
and operating and administrative expenses for the current year third fiscal
quarter increased $3.4 million from the prior year third fiscal quarter. The
increase in the current year first three fiscal quarters was primarily due to
higher store labor and depreciation expenses and certain expenses related to the
relocation of the Company's information processing center from Connecticut to
Ohio, partially offset by lower environmental remediation-related expense. The
increase in the current year third fiscal quarter was primarily due to higher
store labor and depreciation expenses and certain expenses related to the
relocation of the Company's information processing center.
INTEREST EXPENSE AND TAXES
Pro forma interest expense increased $0.2 million in the current year first
three fiscal quarters as compared to the prior year first three fiscal quarters,
and interest expense increased $0.1 million in the current year third fiscal
quarter as compared to the prior year third fiscal quarter. The increase in
interest expense is a result of the Company's increased borrowings under its
revolving line of credit.
The effective tax rate for the Company was a provision of 46% for both the
current year first three fiscal quarters and the current year third fiscal
-19-
<PAGE> 20
quarter, respectively, and a benefit of 44% for each of the corresponding
periods of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates substantial operating cash flow since most of its revenues
are received in cash. The amount of cash generated from operations significantly
exceeded the current debt service requirements of the Company's long-term
obligations. In May 1998 the Company received a $47.2 million forward commitment
that provides real estate sale/leaseback or mortgage financing on a long-term
basis. Additionally, the Company has a $30.0 million senior revolving credit
facility with $15.0 million available for issuance of letters of credit. The
Company uses the revolving line of credit to address the seasonality of
operations and the timing of capital expenditures and certain working capital
disbursements. As of October 31, 1998, the Company had $12.8 million in
outstanding revolving credit loans and had $7.9 million in outstanding letters
of credit.
The capital expenditures of the Company during the first three quarters of
fiscal year 1999 were funded by the borrowings under the Company's revolving
line of credit, proceeds from real estate sale/leasebacks, and excess operating
cash flow available after debt service. Management believes that the cash flow
from operations, the proceeds from the sale of assets held for sale or other
forms of long-term asset financing and/or leasing, supplemented by the
availability of the revolving credit facility, will provide the Company with
adequate liquidity and the capital necessary to achieve its expansion
initiatives in its retail operations (see "Capital Expenditures").
CASH PROVIDED BY OPERATING ACTIVITIES
Net cash provided by operating activities decreased $2.2 million in the current
year first three fiscal quarters as compared to the corresponding period of the
prior year primarily due to a net unfavorable change in other assets and
liabilities, partially offset by a change in working capital accounts. The
unfavorable change in other assets and liabilities is a result of an increase in
certain liabilities in the prior year related to the sale of the 156
Northeastern stores and the Company's former manufacturing facility,
-20-
<PAGE> 21
as described above. The net favorable change in working capital was primarily
due to the timing of payments to the issuers of money orders and an increase in
trade accounts payable, partially offset by an increase in the average store
inventory required to support the increases in comparable store sales, as
described above, and an increase in accounts and notes receivable.
CAPITAL EXPENDITURES
The Company anticipates spending approximately $20 to $25 million, net of
sale/leaseback transactions, for capital expenditures in fiscal year 1999 by
purchasing store and gasoline equipment for new stores, remodeling a certain
number of existing store and gasoline locations, implementing and/or upgrading
office and store technology and meeting the Company's requirements to comply
with federal and state underground gasoline storage tank regulations (see
"Environmental Responsibility"). These capital expenditures will be funded
primarily by excess cash generated from operations, the proceeds from the sale
of certain assets held for sale as of October 31, 1998 and other forms of
long-term equipment financing and/or leasing, supplemented by the availability
of the senior revolving credit facility, if necessary.
ENVIRONMENTAL RESPONSIBILITY
The Company accrues its estimate of all costs to be incurred for assessment and
remediation with respect to releases of regulated substances from existing and
previously operated retail gasoline facilities. As of October 31, 1998, the
Company had recorded an accrual of $5,057,000 for such costs, the majority of
which are anticipated to be spent over the next one to five years.
The Company is entitled to reimbursement of a portion of the above costs from
various state environmental trust funds based upon compliance with the terms and
conditions of such trust funds. As of October 31, 1998, the Company had recorded
a net state trust fund reimbursement receivable of $4,579,000. Although there
are no assurances as to the timing, the Company believes that it is probable
that reimbursements from the state environmental trust funds will be received
within one to five years from the payment of the reimbursable assessment and
remediation expenses.
-21-
<PAGE> 22
In addition, the Company estimates that future capital expenditure requirements
to comply with federal and state underground gasoline storage tank regulations
will be approximately $1.0 to $2.0 million in the aggregate through December
1998. These costs could be reduced for low volume retail gasoline locations
closed in lieu of the capital cost of compliance.
The Company's estimate of costs to be incurred for environmental assessment and
remediation and for required underground storage tank upgrading and other
regulatory compliance are based on factors and assumptions that could change due
to modifications of regulatory requirements or detection of unanticipated
environmental conditions.
YEAR 2000 COMPUTER COSTS
During fiscal year 1998 the Company undertook the implementation of its store
automation program in order to link its retail stores, which were previously not
automated, to the home office. The first phase of this program was completed in
fiscal year 1998, with the remaining two phases expected to be completed by the
end of fiscal year 2000. The store automation program, when fully implemented,
is expected to enhance accounting and management controls, improve retail
margins through centralized retail pricing, improve inventory management and
achieve efficiencies. In conjunction with the development of this and other
systems, the Company has been addressing the functionality of all the Company's
computer systems for the year 2000. The new systems implemented by the Company
are designed to be year 2000 compliant. The Company is also in the process of
evaluating the year 2000 compliance of various non-information technology
systems. Because the implementation and timing of the automation project were
not affected by year 2000 concerns, the Company does not consider the costs of
this project to be related to year 2000 compliance. The Company does not expect
to incur significant additional costs in the future that would have material
impact on Company's operating results.
The Company is also in the process of reviewing the efforts being undertaken by
its third party suppliers and vendors to become year 2000 compliant to ensure
that no business interruption is experienced at the turn of the century. The
Company has sent questionnaires to all of its material vendors to
ascertain their state of year 2000 readiness and is in the process of receiving
and evaluating their responses. The Company hopes to complete its assessment of
its supplier and vendor year 2000 compliance in the next quarter.
Due to the Company's ongoing efforts to assess the year 2000 readiness of
suppliers and vendors, the Company is unable to determine a reasonable worst
case scenario at this time. Although currently considered unlikely, a material
interruption in the Company's business could result from the failure of the
Company's primary suppliers and vendors to receive orders and deliver goods and
services. The Company will determine whether a contingency plan is needed after
it has evaluated responses to its vendor and customer questionnaires.
BUSINESS OUTLOOK
Statements contained in this 10-Q that are not historical facts, including those
relating to future financial performance, capital expenditures, estimated costs
for environmental remediation, and year 2000 compliance, may constitute
forward-looking statements with respect to Dairy Mart's future performance.
Forward-looking statements are generally identified by the words "anticipate,"
"believe," "expect," "plan," "intend," "should," "estimate," and similar
expressions. Factors that could cause actual results to differ materially from
those in the forward-looking statements include competition, general economic
conditions, the availability of capital, the ability to obtain suitable
locations for new stores, construction delays, the ability to attract and retain
key personnel and other factors disclosed in this 10-Q and Dairy Mart's other
filings with the Securities and Exchange Commission.
-22-
<PAGE> 23
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION.
Pursuant to an amendment to Securities Exchange Act Rule 14a-4 ( c )(1)
which became effective June 29, 1998, the persons acting under proxies solicited
by the Company's Board of Directors in connection with the Company's 1999 annual
meeting of stockholders will have discretionary authority to vote the shares
represented thereby on any matter properly presented by a stockholder at such
meeting that is not specifically set forth in the notice of such meeting if the
Company does not have notice of such matter on or before April 15, 1999 (unless
the date of the 1999 annual meeting is changed by more than 30 days from June
17, 1999 in which event such persons will have such discretionary authority if
the Company does not have notice of such matter a reasonable time before the
Company mails its proxy materials for such meeting).
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
1. Exhibit (11)- Statement re Computation of Per-Share
Earnings.
2. Exhibit (27) - Financial Data Schedule.
Submitted in electronic format only.
b) Reports on Form 8-K
During the third quarter of fiscal year 1999, the Company filed no
reports on Form 8-K.
-23-
<PAGE> 24
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: December 15, 1998 /s/ Dale W. Fuller
---------------------------------------
Dale W. Fuller
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
-24-
<PAGE> 1
EXHIBIT 11
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATIONS OF PER-SHARE EARNINGS
(in thousands, except per share amounts)
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE THIRD FISCAL FOR THE THREE FISCAL
QUARTER ENDED QUARTERS ENDED
-------------------------------- --------------------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1,
1998 1997 1998 1997
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) . . . . . . . . . . . . $ 601 $ (310) $ 854 $ 829
Weighted average shares . . . . . . . . . 4,682 4,618 4,672 5,410
Dilutive options. . . . . . . . . . . . 47 - 72 199
Effect of DM Associates stock . . . . . - - - (813)
----------------------------------------------------------------------
Total shares for EPS purposes . . . . . . 4,729 4,618 4,744 4,796
- - -------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share - Basic . . . . $ 0.13 $ (0.07) $ 0.18 $ 0.18
Earnings (loss) per share - Diluted . . . $ 0.13 $ (0.07) $ 0.18 $ 0.17
===============================================================================================================================
</TABLE>
-25-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE 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> 9-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 6,037
<SECURITIES> 2,543
<RECEIVABLES> 21,727
<ALLOWANCES> (2,136)
<INVENTORY> 19,370
<CURRENT-ASSETS> 50,010
<PP&E> 140,727
<DEPRECIATION> (52,562)
<TOTAL-ASSETS> 179,608
<CURRENT-LIABILITIES> 60,098
<BONDS> 104,186
0
0
<COMMON> 66
<OTHER-SE> 7,447
<TOTAL-LIABILITY-AND-EQUITY> 179,608
<SALES> 0
<TOTAL-REVENUES> 362,161
<CGS> 257,754
<TOTAL-COSTS> 352,557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,027
<INCOME-PRETAX> 1,557
<INCOME-TAX> (723)
<INCOME-CONTINUING> 854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 854
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
