<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1997
------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ------------------------
Commission file number 1-11556
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UNI-MARTS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1311379
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
477 East Beaver Avenue, State College, PA 16801-5690
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(Address of principal executive offices) (Zip Code)
(8l4)234-6000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
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
----- -----
6,646,806 Common Shares were outstanding at August 8, 1997.
This Document Contains 24 Pages.
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UNI-MARTS, INC. AND SUBSIDIARY
INDEX
<CAPTION>
PART I. FINANCIAL INFORMATION
- ------------------------------ PAGE(S)
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -
July 3, 1997 and September 30, 1996 3-4
Consolidated Statements of Earnings -
Quarter Ended and Three Quarters Ended
July 3, 1997 and July 4, 1996 5
Consolidated Statements of Cash Flows -
Three Quarters Ended July 3, 1997 and
July 4, 1996 6-7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 15
Exhibit Index 17
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 3, September 30,
1997 1996
------------- -------------
(Unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,023,251 $ 1,207,929
Marketable equity securities (at market,
cost $628,400 and $441,700) 570,614 387,282
Accounts receivable, less allowances
of $131,900 and $74,600 3,470,679 2,826,887
Inventories 20,463,489 17,807,998
Prepaid and current deferred taxes 2,981,344 2,491,978
Prepaid expenses and other 1,609,329 1,560,816
------------ ------------
TOTAL CURRENT ASSETS 33,118,706 26,282,890
PROPERTY, EQUIPMENT AND IMPROVEMENTS -
at cost, less accumulated depreciation
and amortization of $45,634,900 and
$41,815,400 77,087,441 71,794,100
LOAN TO OFFICER 809,674
NET INTANGIBLE AND OTHER ASSETS 6,770,703 6,960,752
------------ ------------
TOTAL ASSETS $117,786,524 $105,037,742
============ ============
</TABLE>
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<TABLE>
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<CAPTION>
July 3, September 30,
1997 1996
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 18,482,067 $ 15,389,440
Accrued expenses 5,645,614 5,852,143
Current maturities of long-term debt 6,465,184 3,272,957
Current obligations under capital leases 90,128 105,071
------------ ------------
TOTAL CURRENT LIABILITIES 30,682,993 24,619,611
LONG-TERM DEBT, less current maturities 44,928,867 38,343,024
OBLIGATIONS UNDER CAPITAL LEASES,
less current maturities 556,088 620,871
DEFERRED TAXES 3,873,150 2,394,700
DEFERRED INCOME AND OTHER LIABILITIES 3,000,558 2,997,125
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, par value $.10 a share:
Authorized 15,000,000 shares
Issued 7,285,907 and 7,279,684 shares,
respectively 728,591 727,968
Additional paid-in capital 24,341,231 24,287,858
Retained earnings 13,517,876 14,696,776
Less unrealized loss on securities ( 57,737)( 54,401)
------------ ------------
38,529,961 39,658,201
Less Treasury Stock, at cost -
641,001 and 621,197 shares of
Common Stock, respectively ( 3,785,093)( 3,595,790)
------------ ------------
34,744,868 36,062,411
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $117,786,524 $105,037,742
============ ============
</TABLE>
See notes to consolidated financial statements
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<TABLE>
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
July 3, July 4, July 3, July 4,
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Merchandise sales $50,334,225 $47,512,698 $139,415,716 $135,924,921
Gasoline sales 40,895,705 40,833,381 121,433,727 111,602,294
Other income 730,943 478,753 1,936,058 2,029,707
----------- ----------- ------------ ------------
91,960,873 88,824,832 262,785,501 249,556,922
----------- ----------- ------------ ------------
COSTS AND EXPENSES:
Cost of sales 70,091,209 66,351,177 198,241,696 184,036,105
Selling 16,837,944 16,636,013 51,633,297 49,430,372
General and
administrative 1,728,812 1,826,097 5,462,813 4,983,743
Depreciation and
amortization 1,875,629 1,497,681 5,506,179 4,418,012
Interest 1,110,687 792,788 3,123,443 2,350,977
----------- ----------- ------------ ------------
91,644,281 87,103,756 263,967,428 245,219,209
----------- ----------- ------------ ------------
EARNINGS (LOSS) BEFORE
INCOME TAXES 316,592 1,721,076 ( 1,181,927) 4,337,713
INCOME TAXES 130,700 609,269 ( 401,200) 1,573,400
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) $ 185,892 $ 1,111,807 ($ 780,727) $ 2,764,313
=========== =========== ============ ============
EARNINGS (LOSS) PER
SHARE $ 0.03 $ 0.16 ($ 0.12) $ 0.41
=========== =========== ============ ============
DIVIDENDS PER SHARE $ .0000 $ .0300 $ .0600 $ .0875
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 6,642,289 6,775,661 6,640,229 6,703,148
=========== =========== ============ ============
</TABLE>
See notes to consolidated financial statements
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<TABLE>
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
THREE QUARTERS ENDED
July 3, July 4,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and others $261,985,907 $250,684,043
Cash paid to suppliers and employees ( 255,224,744) ( 238,139,575)
Net receipts for sales and purchases of
trading equity securities 455,332
Dividends and interest received 35,931 29,375
Interest paid (net of capitalized interest
of $54,700 in 1997) ( 3,163,046) ( 2,738,445)
Income taxes paid 1,867,325 ( 1,609,750)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,501,373 8,680,980
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sale of capital assets 179,654 236,927
Purchase of property, equipment and
improvements ( 10,650,294) ( 8,938,306)
(Payments) receipts for sales and purchases
of available-for-sale securities ( 183,667)
Note receivable from officer ( 809,674)
Cash advanced for intangible and other
assets ( 311,105) ( 292,447)
Cash received for intangible and other
assets 143,769 76,087
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ( 11,631,317) ( 8,917,739)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) under revolving credit
agreement 3,000,000 ( 1,000,000)
Additional long-term borrowings 10,000,000 3,000,000
Principle payments on debt ( 3,301,656) ( 3,382,403)
Purchases of treasury stock ( 354,905)
Proceeds from issuance of common stock 1,010,220
Dividends paid to stockholders ( 398,173) ( 569,217)
------------ ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 8,945,266 ( 941,400)
------------ ------------
NET INCREASE (DECREASE) IN CASH 2,815,322 ( 1,178,159)
------------ ------------
CASH:
Beginning of period 1,207,929 7,325,513
------------ ------------
End of period $ 4,023,251 $ 6,147,354
============ ============
</TABLE>
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<TABLE>
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
<CAPTION>
THREE QUARTERS ENDED
July 3, July 4,
1997 1996
------------ ------------
<S> <C> <C>
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET EARNINGS (LOSS) ($ 780,727) $2,764,313
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 5,506,179 4,418,012
Gain on sale of available-for-sale securities ( 3,001)
Loss on sale of capital assets and other 235,603 100,519
Change in assets and liabilities:
(Increase) decrease in:
Trading equity securities 434,508
Accounts receivable ( 643,792) ( 556,214)
Inventories ( 2,655,491) ( 2,866,593)
Prepaid expenses ( 500,554) ( 745,347)
Increase (decrease) in:
Accounts payable and accrued expenses 2,886,098 3,233,616
Deferred income taxes and other
liabilities 1,457,058 1,898,166
---------- ----------
TOTAL ADJUSTMENTS TO NET EARNINGS 6,282,100 5,916,667
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $5,501,373 $8,680,980
========== ==========
</TABLE>
See notes to consolidated financial statements
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<PAGE>
UNI-MARTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. FINANCIAL STATEMENTS:
The consolidated balance sheet as of July 3, 1997, the consolidated
statements of earnings and the consolidated statements of cash flows for
the quarters ended July 3, 1997 and July 4, 1996 have been prepared by
Uni-Marts, Inc. (the "Company") without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of the
Company at July 3, 1997 and the results of operations and cash flows
for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1996.
The results of operations for the interim periods are not necessarily
indicative of the results to be obtained for the full year.
B. INTANGIBLE AND OTHER ASSETS:
Intangible and other assets consist of the following:
July 3, September 30,
1997 1996
------------ -------------
Goodwill $ 5,998,351 $ 6,498,671
Lease acquisition costs 1,187,174 1,296,637
Non-competition agreements 1,213,040 1,213,040
Other 2,131,177 1,986,989
----------- -----------
10,529,742 10,995,337
Less accumulated amortization 3,759,039 4,034,585
----------- -----------
$ 6,770,703 $ 6,960,752
=========== ===========
Goodwill represents the excess of costs over the fair value of net
assets acquired in business combinations and is amortized on a straight-
line basis over periods of 13 to 40 years. Lease acquisition costs are
the bargain element of acquired leases and are being amortized on a
straight-line basis over the related lease terms. Non-competition
agreements are amortized over the terms of the particular agreements.
It is the Company's policy to periodically review and evaluate the
recoverability of the intangible assets by assessing current and future
profitability and cash flows and to determine whether the amortization of
the balances over their remaining lives can be recovered through expected
future results and cash flows.
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C. INTERIM CREDIT FACILITIES:
The Company has a $13.5 million revolving credit agreement with a bank
group at the bank's prime rate or a fixed rate option at the Company's
election, with a maximum of $3.5 million available for issuance of
letters of credit. The revolving credit facility is committed for a
two-year period expiring February 28, 1999 or a later date as approved by
the bank group. At July 3, 1997, borrowings of $8.0 million and letters
of credit of $2.7 million were outstanding under the agreement.
D. LONG-TERM DEBT:
July 3, September 30,
1997 1996
------------- -------------
Term Loan. Interest is paid at least
quarterly at the rate of 8.80%. Principal
on the note will be repaid in 16 quarterly
installments beginning October 31, 1997. $16,741,488 $16,741,488
Term Loan. Interest is paid at least
quarterly. Principal on the note will
be repaid in three quarterly installments
of $714,285 beginning in March 1999. The
final installment of $17,857,145 will be
payable on December 31, 1999. The blended
interest rate was 8.10% at July 3, 1997. 20,000,000 10,000,000
Senior Notes of the Company. Interest
is paid in quarterly installments
at a blended rate of 10.50%. Principal
on the notes will be repaid in six
quarterly installments beginning
August 1, 1997. 4,503,402 7,570,068
Revolving Credit Agreement. Interest is
paid quarterly at the bank's prime rate or a
fixed rate option at the Company's election.
The blended interest rate was 7.97% at
July 3, 1997. (See Note C) 8,000,000 5,000,000
Mortgage Loans Payable. Principal and
interest are paid in monthly installments.
The loans expire in years 1999 through
2010 with interest ranging from 8.50% to
8.75%. The blended interest rate was 8.54%
at July 3, 1997. 2,149,161 2,304,425
----------- -----------
51,394,051 41,615,981
Less current maturities 6,465,184 3,272,957
----------- -----------
$44,928,867 $38,343,024
=========== ===========
The mortgage loans are collateralized by $7,245,300 of property, at cost.
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Certain of the Company's debt agreements contain covenants which provide
for the maintenance of minimum working capital and net worth as well
as limitations on future indebtedness, sales and leasebacks and
dispositions of assets. These agreements may restrict the Company's
ability to declare and pay dividends on common stock. The amount of
retained earnings available for such dividends at July 3, 1997 was
$5,671,000.
Primarily due to lower gross profits on merchandise and gasoline sales
during part of fiscal year 1997 and lower than anticipated profit
contributions from newly constructed and remodeled stores during the
first three quarters of fiscal year 1997, the Company was not in
compliance with a financial covenant contained in its Senior Note
Agreements. These notes have a balance of $4,503,402 at July 3, 1997.
The Senior Note Agreements were previously amended in January and April
1997 to waive the noncompliance by altering the covenant requirements for
the quarters ended January 2, 1997 and April 3, 1997. The Senior Note
Agreements were further amended by the holders and the Company in July
1997 to waive the noncompliance by altering the covenant requirements for
all fiscal quarters in 1997 and 1998 until the final principal payment in
November 1998 and to require quarterly instead of semiannual payments of
principal beginning August 1, 1997.
E. EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share". This pronouncement will be
effective for financial statements for both interim and annual periods
ending after December 15, 1997. The Company anticipates that this
statement will not have a material effect on its financial statements.
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<TABLE>
ITEM 2.
UNI-MARTS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Set forth below are selected unaudited consolidated financial data of the Company for the
periods indicated:
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
July 3, July 4, July 3, July 4,
1997 1996 1997 1996
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
STATEMENTS OF EARNINGS DATA:
Sales and other income by the
Company and its franchisees:
Merchandise sales $50,334,225 $47,512,698 $139,415,716 $135,924,921
Gasoline sales 40,895,705 40,833,381 121,433,727 111,602,294
Other income 730,943 478,753 1,936,058 2,029,707
----------- ----------- ------------ ------------
Total 91,960,873 88,824,832 262,785,501 249,556,922
Cost of sales 70,091,209 66,351,177 198,241,696 184,036,105
----------- ----------- ------------ ------------
Gross Profit 21,869,664 22,473,655 64,543,805 65,520,817
Selling 16,837,944 16,636,013 51,633,297 49,430,372
General and administrative 1,728,812 1,826,097 5,462,813 4,983,743
Depreciation and amortization 1,875,629 1,497,681 5,506,179 4,418,012
Interest 1,110,687 792,788 3,123,443 2,350,977
----------- ----------- ------------ ------------
Earnings (loss) before income
taxes 316,592 1,721,076 ( 1,181,927) 4,337,713
Income taxes 130,700 609,269 ( 401,200) 1,573,400
----------- ----------- ------------ ------------
Net earnings (loss) $ 185,892 $ 1,111,807 ($ 780,727) $ 2,764,313
=========== =========== ============ ============
Earnings (loss) per share $ 0.03 $ 0.16 ($ 0.12) $ 0.41
=========== =========== ============ ============
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OPERATING DATA (CONVENIENCE STORES ONLY):
Average, per store, for stores open two
full comparable periods:
Merchandise sales $ 125,623 $ 121,570 $ 348,784 $ 343,342
Gasoline sales $ 135,285 $ 140,948 $ 404,697 $ 377,816
Gallons of gasoline sold 128,724 126,519 371,917 367,942
Total gallons of gasoline
sold 39,519,636 37,122,204 112,685,858 108,970,138
Gross profit per gallon
of gasoline $ 0.112 $ 0.124 $ 0.114 $ 0.119
C-Stores at beginning of period 398 407 405 414
C-Stores added 2
C-Stores converted to Choice
locations 7 10
C-Stores closed 3 2 9 9
C-Stores at end of period 388 405 388 405
Company-operated stores 356 369 356 369
Franchisee-operated stores 32 36 32 36
Choice Cigarette Discount
Outlets 13 13
Locations with self-service
gasoline 301 297 301 297
</TABLE>
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RESULTS OF OPERATIONS:
Matters discussed below should be read in conjunction with "Statements of
Earnings Data" and "Operating Data (Convenience Stores Only)" on the preceding
page. The Company operated 13 Choice Cigarette Discount Outlets at July 3,
1997 as discussed below. Merchandise sales, gasoline sales, selling expenses
and depreciation and amortization expense discussed below include sales and
expenses at these locations. Certain statements contained in this report are
forward-looking. Although Uni-Marts, Inc. believes that its expectations are
based on reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results will not
differ materially from its expectations. Factors that could cause actual
results to differ from expectations include general economic, business and
market conditions, volatility of gasoline prices, merchandise margins, customer
traffic, weather conditions, labor costs and the level of capital expenditures.
For other important factors that may cause actual results to differ materially
from expectations and underlying assumptions, see the Company's periodic
filings with the Securities and Exchange Commission.
QUARTERS ENDED JULY 3, 1997 AND JULY 4, 1996
- --------------------------------------------
Total revenues in the third quarter of fiscal year 1997 were $3.1 million, or
3.5%, higher than total revenues in the third quarter of fiscal year 1996.
Approximately 90% of this growth was in merchandise sales which were $50.3
million in the fiscal year 1997 third quarter compared to $47.5 million in the
corresponding quarter of fiscal year 1996, an increase of $2.8 million, or
5.9%. Comparable store merchandise sales increased 3.3%. Gasoline sales
increased $62,000, or 0.2%, in the quarter ended July 3, 1997 compared to the
quarter ended July 4, 1996. This slight increase is the net effect of a $0.06
per gallon sold retail price decline in the current year's quarter and
additional sales volume of 2.4 million gallons in the current year. Gasoline
gallons sold at comparable stores increased 1.7%. Other income increased by
$252,000.
Gross profits on merchandise sales in the third quarter of fiscal year 1997
were $16.7 million compared to $17.3 million in the same quarter of fiscal year
1996. The decline of $661,000, or 3.8%, is attributable to lower gross profit
rates reflecting efforts by the Company to attract new customers as well as
strong competition in the tobacco and soft drink markets. Gross profits on
gasoline sales also declined in the current year by $195,000, or 4.2%, as a
result of lower profit rates per gallon sold.
Selling expenses in the fiscal year 1997 third quarter increased by $202,000,
or 1.2%, in comparison to the third quarter of fiscal year 1996, due largely to
higher labor costs at newly added fast-food installations at the Company's
convenience stores. However, these costs declined in the third quarter
compared to the second quarter of fiscal year 1997. Management has instituted
tighter controls on these labor costs. General and administrative expense was
$1,729,000 in the third quarter of fiscal year 1997 compared to $1,826,000 in
the third quarter of fiscal year 1996, a decline of $97,000, or 5.3%. This
decline is the result of lower franchise taxes and reductions in other
miscellaneous expenses. Depreciation and amortization increased by $378,000,
or 25.2%, due to additional depreciation of remodeled and new convenience
stores. Interest expense increased by $318,000, or 40.1%, due to higher
borrowing levels and interest rates.
Earnings before income taxes in the third quarter of fiscal year 1997 were
$317,000 compared to $1,721,000 in the third quarter of fiscal year 1996, a
decrease of $1,404,000, or 81.6%. This decline in profitability is due to
reduced gross profit levels discussed previously as well as increases in
selling, depreciation and amortization and interest expense. The Company has
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taken and will continue to take steps to increase store traffic and reduce
labor costs. Net earnings for the quarter ended July 3, 1997 were $186,000, or
$0.03 per share, compared to net earnings of $1,112,000, or $0.16 per share,
for the quarter ended July 4, 1996.
THREE QUARTERS ENDED JULY 3, 1997 AND JULY 4, 1996
- --------------------------------------------------
Total revenues for the three quarters ended July 3, 1997 were $262.8 million,
an increase of $13.2 million, or 5.3%, over total revenues of $249.6 million
for the three quarters ended July 4, 1996. Merchandise sales for this period
in fiscal year 1997 grew by $3.5 million, or 2.6%, from $135.9 million in the
first three quarters of fiscal year 1996 to $139.4 million in fiscal year 1997.
Merchandise sales at comparable stores increased 1.6%. Gasoline sales were
$121.4 million in the first three quarters of fiscal year 1997 compared to
$111.6 million in the corresponding period of fiscal year 1996, an increase of
$9.8 million, or 8.8%. This increase is due to higher retail prices per gallon
sold and an additional 3.7 million gallons sold at the Company's convenience
stores. Gasoline gallons sold at comparable stores increased 1.1%. Other
income declined by $94,000 in the current fiscal year's first three quarters.
Although merchandise sales increased, the gross profits on those sales
decreased due to lower gross profit rates caused by competitive pressures on
soft drinks and tobacco retail prices. Merchandise gross profits were $49.5
million in the first three quarters of fiscal year 1997, a decrease of
$624,000, or 1.2%, compared to merchandise gross profits of $50.1 million in
the same period of fiscal year 1996. Gross profits on gasoline sales also
declined due to lower gross profits on each gallon sold.
Selling expenses grew by $2.2 million, or 4.5%, due primarily to higher labor
costs at fast-food installations. General and administrative expense increased
by $479,000, or 9.6%, in the first three quarters of fiscal year 1997 in
comparison to the corresponding period of fiscal year 1996 largely as a result
of increased salaries and professional fees. Depreciation and amortization
grew over fiscal year 1996 levels by $1.1 million, or 24.6%, due to additional
depreciation of newly built and remodeled stores. Interest expense in the
first three quarters of fiscal year 1997 grew by $772,000 due to increased
borrowing levels and interest rates.
The Company incurred a pre-tax loss of $1.2 million in the first three quarters
of fiscal year 1997 compared to pre-tax earnings of $4.3 million in the
corresponding period of fiscal year 1996. The $5.5 million decline in
profitability during the first three quarters of fiscal year 1997 is the result
of lower gasoline profits during part of fiscal year 1997 and lower than
expected operating results from newly built and remodeled stores and fast-food
units at the Company's convenience stores. The Company has taken steps to
increase profitability at these locations including an advertising and
promotional program and reduction of labor costs at the branded fast-food
installations. The Company's operations produced a net loss of $781,000, or
$0.12 per share, for the first three quarters of fiscal year 1997 compared to
net earnings of $2,764,000, or $0.41 per share, in the corresponding period of
the prior fiscal year.
TERMINATION OF GETTY AGREEMENT:
On December 27, 1996, the Company notified Getty Petroleum Corp. and its
affiliates (collectively, "Getty") that, in accordance with their respective
terms, effective December 31, 1997, the Company will terminate certain
agreements with Getty, including leases and subleases and a gasoline supply
agreement pursuant to which the Company purchases substantially all of its
gasoline. The Company has had further discussions with Getty concerning
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<PAGE>
revised agreements, but there has been no resolution and no further discussions
are scheduled at this date. If no agreement is reached with Getty, the Company
will no longer operate approximately 100 stores after December 31, 1997. The
loss of these stores will have a material effect on the Company's revenues and
expenses. However, the Company anticipates that, on an ongoing basis, its cash
flows and net earnings will not be materially affected due to increased gross
profit rates on its remaining gasoline sales and reduced operating costs. If
no agreement is reached with Getty and Getty declines to exercise its option to
purchase in-store equipment and aboveground gasoline marketing equipment at the
stores subject to lease with Getty, the Company could have a one-time material
charge to net earnings in the amount of approximately $2.8 million, net of an
income tax benefit of $1.4 million. While there can be no assurance, the
Company believes that Getty will exercise its option to purchase this equipment
or the equipment will be sold to another party. Accordingly, the Company
believes that the earnings charge will not occur. This earnings charge would
not impact cash flows except for the income tax benefit realized.
LIQUIDITY AND CAPITAL RESOURCES:
Most of the Company's sales are for cash and its inventory turns over rapidly.
As a result, the Company's daily operations do not require large amounts of
working capital. The Company has increased its store inventories by
approximately $2.7 million in the current fiscal year, primarily to increase
seasonal promotion items and to stock the Company's 13 Choice Cigarette
Discount Outlet locations. These locations are not included in the Company's
388 convenience store locations. This inventory increase was financed through
increases in trade payables. From time to time, the Company utilizes
substantial portions of its cash and interim credit facilities to acquire and
construct new stores and renovate existing locations.
Capital requirements for the balance of fiscal year 1997 include debt and
capital lease payments of approximately $829,000 and capital expenditures of
approximately $1.3 million to remodel existing stores and upgrade gasoline
marketing facilities. Capital requirements for fiscal year 1998 include debt
and capital lease payments of approximately $7.6 million and capital
expenditures of approximately $3.0 million. The Company anticipates that cash
presently available and cash generated from operations and bank credit
facilities will be sufficient to fulfill its cash requirements.
Primarily due to lower gross profits on merchandise and gasoline sales during
part of fiscal year 1997 and lower than anticipated profit contributions from
newly constructed and remodeled stores during the first three quarters of
fiscal year 1997, the Company was not in compliance with a financial covenant
contained in its Senior Note Agreements. These notes have a balance of
$4,503,402 at July 3, 1997. The Senior Note Agreements were previously amended
in January and April 1997 to waive the noncompliance by altering the covenant
requirements for the quarters ended January 2, 1997 and April 3, 1997. The
Senior Note Agreements were further amended by the holders and the Company in
July 1997 to waive the noncompliance by altering the covenant requirements for
all fiscal quarters in 1997 and 1998 until the final principal payment in
November 1998 and to require quarterly instead of semiannual payments of
principal beginning August 1, 1997.
CHOICE CIGARETTE DISCOUNT OUTLETS:
In the first three quarters of fiscal year 1997, the Company, on a test basis,
converted three closed and ten underperforming convenience store locations to
discount tobacco stores operating under the name of Choice Cigarette Discount
Outlet. The Company has since converted two other locations and may continue
this program should results prove favorable. The Company will continue to sell
gasoline at converted locations if gasoline was sold there prior to conversion.
-15-
<PAGE>
IMPACT OF ADOPTION OF CHANGES IN ACCOUNTING PRINCIPLES:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share". This pronouncement will be effective for
financial statements for both interim and annual periods ending after
December 15, 1997. The Company anticipates that this statement will not
have a material effect on its financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130 and Statement No. 131. Statement No. 130, "Reporting Comprehensive
Income", will be effective for fiscal years beginning after December 15, 1997.
Statement No. 131, "Disclosures about Segments of an Enterprise", will be
effective for interim and annual periods beginning after December 15, 1997.
The Company anticipates that the adoption of either statement will not have
a material effect on its financial statements.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10 Fourth Amendment to Senior Note Agreement between the Senior
Noteholders and Uni-Marts, Inc. dated as of July 28, 1997.
11 Statement regarding computation of per share earnings (loss).
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended July 3, 1997.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Uni-Marts, Inc.
-----------------------------------
(Registrant)
Date August 15, 1997 /S/ HENRY D. SAHAKIAN
--------------- -----------------------------------
Henry D. Sahakian
Chairman of the Board
(Principal Executive Officer)
Date August 15, 1997 /S/ J. KIRK GALLAHER
--------------- -----------------------------------
J. Kirk Gallaher
Executive Vice President, Director
and Chief Financial Officer
(Principal Accounting Officer)
(Principal Financial Officer)
-17-
<PAGE>
UNI-MARTS, INC. AND SUBSIDIARY
EXHIBIT INDEX
Number Description Page(s)
- ------ ----------- --------
10 Fourth Amendment to Senior Note Agreement between
the Senior Noteholders and Uni-Marts, Inc. dated
as of July 28, 1997 19-21
11 Statement regarding computation of per
share earnings (loss). 22-23
27 Financial Data Schedule. 24
-18-
<PAGE>
EXHIBIT (10)
FOURTH AMENDMENT TO NOTE AGREEMENT
Reference is made to the Note Agreement dated as of October 1, 1988 (as
amended, the "Note Agreement") between Uni-Marts, Inc. (the "Company") and
Massachusetts Mutual Life Insurance Company, Northern Life Insurance Company,
Northwestern National Life Insurance Company, American Investors Life Insurance
Company, The North Atlantic Life Insurance Company of America, and Commercial
Union Life Insurance Company (together, the "Holders").
WHEREAS, the Company has advised the Holders of its continuing inability to
comply with Section 5.8A of the Note Agreement and has requested that Section
5.8A of the Note Agreement be amended;
WHEREAS, in consideration of the Holder's agreement to amend Section 5.8A, the
Company and the Holders have agreed (i) to amend the Note Agreement so as to
provide for quarterly payments of principal and interest and to add a cross-
default and (ii) to issue new Notes to the Holders reflecting such quarterly
payments;
WHEREAS, the Company represents and warrants to the Holders that, after giving
effect to this Fourth Amendment, no Default or Event of Default shall be
outstanding under the Note Agreement; and
WHEREAS, at the Company's request, the Company and the Holders are desirous of
amending the Note Agreement on the terms and conditions set forth below.
NOW THEREFORE, the Company and the Holders agree as follows:
1. Section 1.1 of the Note Agreement is hereby amended as follows:
(a) by inserting the numeral "(i)" between the references to
"payable semiannually" on the fourth and twelfth lines;
(b) by deleting the parenthetical "(commencing May 1, 1989)" from the
fifth and thirteenth lines and replacing such references with the following:
"commencing May 1, 1989 and continuing through May 1, 1997,
(ii) quarterly on the first day of each August, November,
February, and May commencing August 1, 1997 and continuing
through August 1, 1998"; and
(c) by inserting the numeral (iii) on the fifth and thirteenth lines
between the words "and" and "at" in both references to the words "and at
maturity".
2. Section 2.1 of the Note Agreement is hereby amended by changing the date
"May 1, 1998" to "May 1, 1997" and inserting the following new sentence between
the first and second sentences of said section:
"The Company further agrees that on the first day of February, May,
August, and November in each year, commencing August 1, 1997 and ending
August 1, 1998, it will prepay and apply and there shall become due and payable
(i) the sum of $575,000 on the principal indebtedness evidenced by the Series A
Notes and (ii) the sum of $191,666.66 on the principal indebtedness evidenced
by the Series B Notes."
-19-
<PAGE>
3. Section 5.8A of the Note Agreement is hereby amended in its entirety to
read as follows:
5.8A Fixed Charged Coverage. The Company will at all
---------------------------
times during the periods set forth below keep and maintain
the ratio Net Income Available for Fixed Charges to Fixed
Charges at the following levels:
(a) for the first quarter ending July 3, 1997: 1.0 to 1.0;
(b) for the fiscal quarter ending September 30, 1997: 1.05
to 1.0;
(c) for the fiscal quarter ending January 1, 1998: 1.10 to
1.0.
(d) for the four fiscal quarter period ending April 2, 1998:
1.0 to 1.0;
(e) for the four fiscal quarter period ending July 2, 1998;
1.10 to 1.0
(f) for the four fiscal quarter periods ending September 30,
1998 and for each four fiscal quarter period thereafter:
1.2 to 1.0.
4. Section 6.1(d) of the Note Agreement is hereby amended by inserting
" ; or " immediately after the words "may be issued" and deleting the balance
of said Section 6.1(d).
5. The capitalized terms used herein shall have the respective meanings
specified in the Note Agreement unless otherwise defined herein or if the
context hereof shall otherwise require.
6. Except as amended herein, the terms and provisions of the Note Agreement
are hereby ratified, confirmed and approved in all respects.
7. The effectiveness of this Fourth Amendment to Note Agreement is expressly
conditioned on the accuracy of the Company's representations and warranties set
forth above and upon the Holder's receipt of the new Notes described in the
second recital above.
8. This document shall be dated as of July 28, 1997.
-20-
ACCEPTED AND AGREED TO:
UNI-MARTS, INC. MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
/S/ J. KIRK GALLAHER /S/ KATHLEEN LYNCH
- --------------------------------- ------------------------------
By: J. Kirk Gallaher By: Kathleen Lynch
Its: Executive V.P. Its: Managing Director
NORTHERN LIFE NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY INSURANCE COMPANY
/S/ JAMES V. WITTICH /S/ JAMES V. WITTICH
- --------------------------------- ------------------------------
By: James V. Wittich By: James V. Wittich
Its: Assistant Treasurer Its: Authorized Representative
AMERICAN INVESTORS LIFE RELIASTAR BANKERS SECURITY
LIFE INSURANCE LIFE INSURANCE COMPANY as
Successor by Merger to
THE NORTH ATLANTIC LIFE
INSURANCE COMPANY OF AMERICA
/S/ JAMES V. WITTICH
- --------------------------------- ------------------------------
By: By: James V. Wittich
Its: Its: Vice President
COMMERCIAL UNION LIFE
INSURANCE COMPANY
- ---------------------------------
By:
Its:
-21-
<PAGE>
<TABLE>
EXHIBIT (11)
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (LOSS):
(A) Computation of the weighted average number of shares of common stock
outstanding for the periods indicated:
<CAPTION>
QUARTERS ENDED JULY 3, 1997 AND JULY 4, 1996
WEIGHTED
SHARES OF NUMBER OF DAYS NUMBER OF SHARES
COMMON STOCK OUTSTANDING SHARE DAYS OUTSTANDING
------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
Quarter Ended July 3, 1997
- --------------------------
April 4 - July 3 6,638,141 91 604,070,874
Treasury Stock Purchases ( 498) Various ( 1,994)
Shares Issued 7,263 Various 379,375
--------- -----------
6,644,906 604,448,255 6,642,289
========= =========== =========
Quarter Ended July 4, 1996
- --------------------------
April 5 - July 4 6,547,555 91 595,827,543
Treasury Stock Purchases ( 9,700) Various ( 307,830)
Shares Issued 40,843 Various 1,139,439
--------- -----------
6,578,698 596,659,152 6,556,694
========= =========== =========
<CAPTION>
THREE QUARTERS ENDED JULY 3, 1997 AND JULY 4, 1996
WEIGHTED
SHARES OF NUMBER OF DAYS NUMBER OF SHARES
COMMON STOCK OUTSTANDING SHARE DAYS OUTSTANDING
------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
Period Ended July 3, 1997
- -------------------------
October 1 - July 3 6,658,487 276 1,837,742,384
Treasury Stock Purchases ( 48,437) Various ( 10,450,515)
Shares Issued 34,856 Various 5,411,413
--------- -------------
6,644,906 1,832,703,282 6,640,229
========= ============= =========
Period Ended July 4, 1996
October 1 - July 4 6,345,465 278 1,764,039,388
Treasury Stock Purchases ( 9,700) Various ( 307,830)
Shares Issued 242,933 Various 33,656,513
--------- -------------
6,578,698 1,797,388,071 6,465,425
========= ============= =========
</TABLE>
-22-
<PAGE>
<TABLE>
(B) Computation of Earnings (Loss) Per Share:
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
July 3, July 4, July 3, July 4,
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding 6,642,289 6,556,694 6,640,229 6,465,425
Net effect of dilutive stock
options - based on the
treasury stock method 0 218,967 0 237,723
---------- ---------- ---------- ----------
Total 6,642,289 6,775,661 6,640,229 6,703,148
---------- ---------- ---------- ----------
Net earnings (loss) $ 185,892 $1,111,807 ($ 780,727) $2,764,313
---------- ---------- ---------- ----------
Per share amount $ 0.03 $ 0.16 ($ 0.12) $ 0.41
========== ========== ========== ==========
</TABLE>
-23-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET DATED JULY 3, 1997 AND THE STATEMENT OF EARNINGS FOR THE QUARTER ENDED
JULY 3, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000805020
<NAME> UNI-MARTS, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUL-03-1997
<CASH> 4,023,251
<SECURITIES> 570,614
<RECEIVABLES> 3,602,579
<ALLOWANCES> 131,900
<INVENTORY> 20,463,489
<CURRENT-ASSETS> 33,118,706
<PP&E> 122,722,341
<DEPRECIATION> 45,634,900
<TOTAL-ASSETS> 117,786,524
<CURRENT-LIABILITIES> 30,682,993
<BONDS> 45,484,955
0
0
<COMMON> 728,591
<OTHER-SE> 34,016,277
<TOTAL-LIABILITY-AND-EQUITY> 117,786,524
<SALES> 260,849,443
<TOTAL-REVENUES> 262,785,501
<CGS> 198,241,696
<TOTAL-COSTS> 263,967,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 78,000
<INTEREST-EXPENSE> 3,123,443
<INCOME-PRETAX> (1,181,927)
<INCOME-TAX> (401,200)
<INCOME-CONTINUING> (780,727)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (780,727)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
