<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
OR
[ ] 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
UNI-MARTS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 25-1311379
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
477 EAST BEAVER AVENUE 16801-5690
STATE COLLEGE, PA (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (814) 234-6000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, $.10 Par Value American Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock which consists solely of shares
of common stock held by non-affiliates of the registrant as of December 3, 1999,
computed by reference to the closing sale price of the registrant's common stock
on such date: $3,779,959.
6,957,914 shares of Common Stock were outstanding at December 3, 1999.
This Document Contains 42 Pages.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
COMPANY OVERVIEW
Uni-Marts, Inc. (the "Company" or "Uni-Marts") is an independent operator
of convenience stores and discount tobacco stores. At September 30, 1999, the
Company operated 234 convenience stores and 22 Choice Cigarette Discount Outlets
("Choice") stores in Pennsylvania, New York, Delaware, Maryland and Virginia, of
which 182 convenience stores and 12 Choice stores sold gasoline. See
"Business -- Merchandising and Marketing." Most of the stores are located in
small towns and rural locations where costs of operation are generally lower
than in urban areas. Most Company stores located in urban and suburban areas
have been acquired and are generally leased on a long-term basis.
The Company currently purchases gasoline for 32 locations from Exxon and
Mobil and for 161 locations from other independent suppliers. Gasoline is sold
at one location on a commission basis.
The size of the Company's stores generally ranges from approximately 1,200
to 3,300 square feet with newer stores generally having over 3,000 square feet.
The Company's largest location is 10,000 square feet in size. Typically, the
stores offer a complete line of over 2,500 popular consumer items. In addition,
the Company offers products designed to increase store traffic, such as branded
fast foods, as well as services, including the sale of lottery tickets, the
acceptance of personal checks and automated teller machines ("ATMs").
The Company commenced its convenience store operations in 1972 and was
incorporated in Delaware in 1977. In 1986, the Company's shares were distributed
in a tax-free spin-off to the holders of the stock of Unico Corporation,
formerly the Company's parent. The Company's executive offices are located at
477 East Beaver Avenue, State College, PA 16801-5690, and its phone number is
(814) 234-6000.
THE CONVENIENCE STORE INDUSTRY
The convenience store industry is a retail, service-oriented industry. It
is distinguished from other retail businesses by its emphasis on location and
convenience and a commitment to customers who need to purchase items quickly at
extended hours. Convenience stores feature a wide variety of items, including
groceries, dairy products, tobacco products, beverages, prepared and
self-service fast foods and health and beauty aids. In addition, many of the
stores sell gasoline on a self-service basis. The stores are generally designed
with ample customer parking and quick checkout procedures to maximize
convenience, as well as to encourage impulse buying of high margin items.
The convenience store industry is extremely fragmented. Currently, there
are many external forces exerting pressure on owners of independent and small
convenience store chains. One of the major forces is the need to comply with
environmental regulations for underground storage tanks. The large capital
expenditures required to comply with environmental regulations are also
affecting many operators of gasoline service stations. As a result of these
forces, there have been and continue to be significant opportunities for
consolidation in the industry.
Recent competitive trends across many retail sectors are having a positive
influence on the convenience store industry as it changes the typical
convenience store's merchandise mix in reaction to market conditions and
customer preferences. In addition, convenience stores compete not only with
other convenience stores, but with gasoline distributors which have converted
retail outlets to convenience stores. To compete for a broader customer base,
convenience stores are adding prepared foods and new services and improving
store layouts to attract new customers. As consumer preferences and government
regulations put pressure on tobacco sales, convenience store operators are
improving
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gasoline dispensing facilities and installing branded fast-food outlets and
ATMs. In addition, many convenience store operators have aggressively closed or
remodeled underperforming stores.
STRATEGY
In fiscal year 1999, the Company reevaluated several of its key strategies
to enhance its current operations. The Company's key strategies include the
following:
Development of a New Image for the Company and its Stores. The Company has
designed a new logo and is working on the development of new exterior and
interior store designs. New proprietary products have been and continue to be
developed. The Company and its marketing firm continue to develop new
advertising messages and design.
Enhancement of Store Accessibility. Store sites will be easy to locate
with easy ingress and egress and ample parking. Stores are designed to speed
transactions and be equipped with modern, low maintenance machinery.
Merchandising and Marketing. The Company has enhanced its category
maintenance capabilities to deliver appealing, high quality, reasonably priced
packaged products for ease of use. Foodservice products are being developed to
lower employee involvement in preparation and lower customer efforts in
selection and purchase.
Upgrade Business Process Efficiency. The Company intends to update its
business systems and technology to streamline key business processes. Completion
of this process will allow more effective and efficient store management and
provide greater flexibility to respond quickly to marketplace changes.
Evaluation of Underperforming Stores. The Company has converted 22
underperforming locations to Choice stores to enhance the profitability of these
locations. In fiscal year 1999, the Company closed or sold 20 locations. In
fiscal year 2000, the Company is planning to convert 16 locations to Choice
stores and will convert or close other locations as conditions warrant.
The Company is continuing its emphasis on customer satisfaction, upgrading
retail gasoline facilities and developing stores in small towns and rural areas.
MERCHANDISING AND MARKETING
The Company's merchandising and marketing programs are designed to promote
convenience through store location, hours of operation, parking, customer
service, product selection and checkout procedures. Store hours are intended to
meet customer needs and the characteristics of the community in which each store
is located. Approximately 80% of the Company's convenience stores are open 24
hours per day, while the majority of the remaining stores are open from 6:00
a.m. to 12:00 midnight. To alleviate checkout congestion, most of the Company's
products and services are sold on a self-service basis. Most Company stores
provide parking for customers.
Uni-Marts has a merchandising and marketing department which develops and
implements promotional and advertising programs, sometimes in conjunction with
suppliers. In November 1998, the Company retained a marketing and communications
firm experienced in the convenience store industry. Television, radio, billboard
and newspaper advertisements are designed to generate sales, increase customer
traffic and promote the Company's name and image. The Company maintains an
employee training program which emphasizes the importance of service to
customers and the development of merchandising and marketing skills for its
store managers and store personnel.
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Convenience Store Merchandise Sales. The Company's stores offer dry
grocery items, health and beauty aids, newspapers and magazines, dairy products,
candy, frozen foods, beverages, tobacco products, fountain drinks and
freshly-ground coffee and cappuccino products. In recent years, the Company has
emphasized new merchandise products such as prepared foods and branded fast
foods to increase sales volume and customer traffic. In addition, the Company
continues to add customer services, such as ATMs, prepaid telephone cards, the
acceptance of personal checks and lottery ticket and money order sales, all of
which are designed to increase customer traffic. Many stores also offer a
variety of prepared and self-service fast foods, including freshly made
sandwiches, hot dogs, pizzas, fresh baked goods and nachos.
In fiscal year 1994, as part of its strategy to increase sales of branded
fast foods, the Company entered into an agreement with Blimpie International
("Blimpie"). The Company presently operates 30 Blimpie locations and has
franchised 24 locations with third parties. The Company receives a commission on
these franchise sales.
Convenience Store Gasoline Sales. Convenience store operations and
merchandise sales are enhanced by self-service gasoline facilities, which the
Company plans to include in as many new locations as possible. Sales of gasoline
products at the Company's stores are affected by wholesale and retail price
volatility, competition and marketing decisions. At September 30, 1999, the
Company had 194 locations offering gasoline, with 129 of these locations also
offering kerosene.
The Company offers Exxon gasoline at 21 locations, Mobil gasoline at 11
locations and Uni-Mart branded gasoline at most other locations. One location
sells branded gasoline on a commission basis.
Choice Cigarette Discount Outlets. During fiscal year 1999, the Company
converted two underperforming convenience store locations to discount tobacco
stores operating under the name of Choice Cigarette Discount Outlet. At
September 30, 1999, the Company operated 22 Choice stores, with 12 of these
locations offering unleaded gasoline. The Company expects to sell gasoline at
converted locations if gasoline was sold there prior to conversion. Other
convenience store locations will be converted if conditions warrant. In general,
profitability has improved at locations converted to Choice stores.
COMPANY OPERATIONS
Store Management. Each Company-operated store is managed by a store
manager. All Company stores are divided into groups of approximately nine stores
by geographic area. Each group is managed by a store supervisor. A regional
manager is responsible for a number of groups and their store supervisors. The
regional managers report directly to the Senior Vice President of Operations,
who oversees the day-to-day operations of the stores. Managers, supervisors and
regional managers are compensated in part through incentive programs which
provide for quarterly bonuses based primarily on increased profitability of the
stores. The number of full-time and part-time employees per store depends on the
sales volume of the store and its hours of operation.
Franchises. At September 30, 1999, the Company had ten franchise stores
which operate under various franchise agreements. Under all franchise
agreements, the franchisee pays a royalty, which varies depending upon the
agreement and whether the Company or the franchisee owns the convenience food
store equipment. The royalty is based on the store's merchandise sales volume.
As part of its services to nine franchise locations, the Company provides
accounting services, merchandising and advertising assistance, store layout and
design guidance, supplier and product selection and ongoing operational
assistance. These franchisees are required to use the same internal control
systems that the Company uses for the stores it operates. The Company does not
provide these
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services for one franchise location. The Company has periodically closed
franchised stores and does not intend to grant new franchises except in
connection with new acquisitions or in other special circumstances.
SEASONALITY
The Company's business generally has been subject to moderate seasonal
influences with higher sales in the third and fourth quarters of each fiscal
year, since customers tend to purchase more convenience items and gasoline
during the warmer months. Due to adverse weather conditions, merchandise sales
for the second fiscal quarter have generally been lower than other quarters. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality and Unaudited Quarterly Results."
DISTRIBUTION AND SUPPLY
All stores are serviced at least weekly by vendors. The Company does not
distribute products to its stores itself. In order to minimize costs and
facilitate deliveries, the Company utilizes a single wholesale distributor for
most in-store merchandise, pursuant to a six-year supply agreement that expires
in July 2004. The Company believes that it could easily replace this distributor
with one or more other distributors. Certain products, such as bakery items,
dairy products, snacks, soft drinks, magazines and perishable products, are
distributed by wholesale route salespeople. As part of the sale of its dairy
operation in fiscal 1994, the Company entered into a 10-year supply agreement
with the purchaser which provides for the Company's purchase of all dairy
products sold at most of its Pennsylvania stores. In fiscal year 1998, the
Company entered into 10-year gasoline supply agreements with Exxon and Mobil for
stores that sell approximately 28% of the Company's gasoline volume. Gasoline is
purchased for the remaining stores from various suppliers. A gasoline shortage,
although unlikely, could adversely affect the Company's ability to sell gasoline
at these locations.
MANAGEMENT CONTROLS AND INFORMATION SYSTEMS
The company developed an internal automation system that includes
point-of-sale ("POS") scanning. The system is designed to improve the timeliness
and accuracy of management information, reduce paperwork at the store level and
enhance cash, pricing and inventory controls. As of September 30, 1999,
installation of this new POS scanning system was completed in 38 of the
company's convenience stores and 22 Choice stores. A new store back office
system is currently being evaluated and a planned pilot test of that software
will take place in fiscal 2000.
The Company utilizes its current computer systems for inventory and
accounting control, financial record-keeping and management reporting, allowing
management to monitor and evaluate store operations. The Company's computer
systems are also programmed to identify variances from budgeted amounts by store
on a monthly and year-to-date basis. In addition, profit and loss statements by
store compare the current year's results for the month and year-to-date to the
previous year's comparable periods.
Store managers are responsible for placing orders for grocery, tobacco,
frozen food and non-food items directly into the central computer system of the
Company's wholesale supplier. The computer systems are designed to compare
current orders with historical order levels and to reject orders that appear to
be incorrect. Orders and receiving reports are reviewed by store supervisors.
Invoices are reviewed and compared to receiving reports by the Company's
accounting personnel and are paid centrally.
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The Company believes that its automated accounting and inventory control
systems provide the information required for management decisions and expense
control. An internal review has been conducted by the Company of all software
used in its data processing equipment to determine its exposure, if any, to the
"year 2000 problem." This problem may cause significant difficulties with the
electronic processing of information in the year 2000 and subsequent years due
to the inability of many computer programs to differentiate between the years
1900 and 2000. The incremental costs to make the necessary corrections to
prevent any such difficulties did not have a material effect on the Company's
consolidated financial statements. As discussed more fully in "Management's
Discussion and Analysis of Financial Condition and Results of Operation--Impact
of the Year 2000 ("Y2K") Problem," the Company does not expect material
difficulties with the Y2K problem in its internal computer systems and other
systems affecting the operation of its stores.
The Company believes that its existing and planned systems and controls can
accommodate significant expansion in the number of Company stores.
COMPETITION
The convenience store industry is highly competitive, fragmented and
regionalized. It is characterized by a few large companies, some medium-sized
companies, such as the Company, and many small independent companies. Several
competitors are substantially larger and have greater resources than the
Company. The Company's primary competitors include national chains such as A-
Plus and 7-Eleven and regional chains such as Sheetz, WaWa, Stop-N-Go,
Convenient Food Mart, Turkey Hill, Coastal and Co/Go. The Company also competes
with other convenience stores, small supermarkets, grocery stores and major and
independent gasoline distributors who have converted units to convenience
stores.
Competition for gasoline sales is based on price and location. The Company
competes primarily with self-service gasoline stations operated by independent
dealers and major oil companies in addition to other convenience stores.
ENVIRONMENTAL COMPLIANCE AND REGULATION
The Company's gasoline operations are subject to federal, state and local
environmental laws and regulations primarily relating to the underground storage
tanks. The United States Environmental Protection Agency (the "EPA") has
established standards for owners and operators of underground storage tanks
("USTs") relating to, among other things: (i) maintaining leak detection
systems; (ii) upgrading UST systems; (iii) implementing corrective action in
response to releases; (iv) closing out-of-use USTs to prevent future releases;
(v) maintaining appropriate records; and (vi) maintaining evidence of financial
responsibility for corrective action and compensating third parties for bodily
injury and property damage resulting from UST releases. All states in which the
Company operates also have adopted these regulatory programs.
Under current federal and certain state regulatory programs, the Company
was obligated to upgrade or replace all noncomplying underground storage tanks
it owns or operates to meet corrosion protection and overfill/spill containment
standards by December 1998. The Company has evaluated each of its stores which
sell gasoline to determine the type of expenditures required to comply with
these and other requirements under the federal and state UST regulatory
programs.
Management believes that the Company is currently in material compliance
with all applicable federal and state laws and regulations. In the last eleven
years, the Company has spent substantial amounts of money to upgrade its
underground storage tanks to meet the applicable standards and requirements. The
Company does not expect expenditures in fiscal year 2000 to maintain compliance
at
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its locations to have a material adverse effect on the Company's financial
position, results of operations or cash flows. The Company has adopted a program
to ensure that new gasoline installations comply with federal and state
regulations and that existing locations are upgraded if required under these
regulations.
GOVERNMENTAL REGULATION
In addition to the laws and regulations referred to under "Environmental
Compliance and Regulation," certain other aspects of the Company's business are
governed by federal, state and local statutes. As a franchisor, the Company is
also subject to federal and state laws governing franchising, which include,
among other matters, the commencement and termination of franchises.
A significant portion, approximately 29%, of the Company's merchandise
sales is derived from the sale of tobacco products at its convenience stores and
Choice stores. If the government were to impose significant regulations or
restrictions on the sale of tobacco products, it could have a material adverse
effect on the Company.
Management believes that the Company is currently in material compliance
with all applicable federal and state laws and regulations.
TRADEMARKS
The name "UNI-MART" and the Company's UNI-MART logo were registered with
the U.S. Patent and Trademark Office as of May 13, 1997, and are owned by and
licensed from Uni-Marts of America, Inc., a wholly owned subsidiary of the
Company.
EMPLOYEES
As of September 30, 1999, the Company had approximately 2,000 employees,
approximately 900 of whom were full-time. The Company believes that its employee
relations are good. None of the Company's employees are covered by a collective
bargaining agreement.
ITEM 2. PROPERTIES.
The following table sets forth certain information with respect to
administrative and storage facilities owned or leased by the Company as of
September 30, 1999:
<TABLE>
<CAPTION>
TYPE OF SQUARE
LOCATION OWNERSHIP FOOTAGE USE
-------- --------- ------- ---
<S> <C> <C> <C>
State College, PA Leased 26,500 Administrative offices
State College, PA Owned 5,400 Administrative offices
Oak Hall, PA Leased 19,400 Storage facility
Pittsburgh, PA Leased 2,700 Regional office and storage facility
Camp Hill, PA Leased 3,700 Regional office and storage facility
Bradford, PA Leased 500 Regional office
</TABLE>
The Company's above-referenced leased administrative offices and storage
facility in State College and Oak Hall, Pennsylvania, respectively, are leased
from HFL Corporation. HFL Corporation is controlled by Henry D. Sahakian, the
Company's Chairman of the Board and Chief Executive Officer, and his brother,
Daniel D. Sahakian, a Director of the Company.
Of the Company's 234 convenience store locations, 118 are owned by the
Company, 6 are leased from affiliated parties and 110 are leased from
unaffiliated parties. Most leases are for initial terms of
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five to ten years with renewal terms of five years available at the Company's
option. Under most leases, the Company is responsible for the payment of
insurance, taxes and maintenance. Of the leased locations, 10 are subleased to
franchisees. Of the Company's 22 discount tobacco locations, six are owned by
the Company, one is leased from an affiliated party and 15 are leased from
unaffiliated parties. The Company also owns five gasoline service stations,
which are leased to unaffiliated operators. As of September 30, 1999, the
Company had no stores under construction.
The Company's store leases expire as follows:
<TABLE>
<CAPTION>
FISCAL YEAR OF
LEASE EXPIRATION (1) NUMBER OF FACILITIES
-------------------- --------------------
<S> <C>
2000 12
2001 9
2002 6
2003 7
2004 and later 98
</TABLE>
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(1) Most of the Company's leases have one or more renewal options at an agreed
upon rental or fair market rental at the end of their initial terms.
The Company has generally renewed its leases prior to their expiration.
Where renewals have not been available or the Company otherwise determines to
change location, the Company generally has been able to locate acceptable
alternative facilities.
The lease for the Company's administrative offices in State College,
Pennsylvania, expires in December 2000.
Management considers all properties currently in use, owned or leased, to
be in good condition, well-maintained and suitable for current operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is listed on the American Stock Exchange under
the symbol "UNI." The transfer agent and registrar for shares of the Company's
Common Stock is ChaseMellon Shareholder Services, L.L.C., Ridgefield Park, New
Jersey. As of December 3, 1999, the Company had 6,957,914 shares of its Common
Stock outstanding.
Set forth below is a table which shows the high and low sale prices as
reflected on the American Stock Exchange and dividends paid on Common Stock for
each quarter in the two most recent fiscal years.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1999
Cash Dividends per share.................... $.00 $.00 $.00 $.00
Price Range:
High..................................... 3 3/8 3 2 3/8 1 15/16
Low...................................... 2 5/8 2 1/4 1 3/8 1 1/8
1998
Cash Dividends per share.................... $.00 $.00 $.00 $.00
Price Range:
High..................................... 5 1/2 5 1/4 4 9/16 3 7/8
Low...................................... 3 1/2 3 1/2 3 3/8 2 5/8
</TABLE>
In April 1997, the Company's Board of Directors elected to temporarily
suspend the quarterly dividends on its Common Stock. The dividend will be
considered for reinstatement upon the Company's return to profitability.
However, there can be no assurance of future dividends because they are
dependent not only on future earnings, but also capital requirements and
financial condition. Certain of the Company's debt agreements require the
Company to maintain a minimum tangible net worth of $24 million, which could
possibly restrict the Company's ability to pay dividends on its Common Stock in
the future.
At December 3, 1999, the Company had approximately 354 stockholders of
record of Common Stock. The Company believes that approximately 44 percent of
its Common Stock is held in street or nominee names.
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ITEM 6. SELECTED FINANCIAL DATA.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE, PER GALLON AND NUMBER OF STORES DATA)
The following table of selected consolidated financial data of the Company,
except for Operating Data and pro forma information, has been derived from the
financial statements and related notes of the Company which have been audited by
Deloitte & Touche LLP, Independent Auditors, as indicated in their report
relating to the fiscal years ended September 30, 1999, 1998 and 1997, included
elsewhere in this report. The data should be read in conjunction with the
financial statements, related notes and other financial information included
elsewhere in this report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA: (1)
Sales and other income by the
Company and its franchisees:
Merchandise sales............ $146,718 $154,097 $188,936 $182,482 $180,343
Gasoline sales............... 103,418 109,425 160,701 148,829 143,690
Other income................. 2,170 2,847 2,563 2,501 2,978
-------- -------- -------- -------- --------
Total..................... 252,306 266,369 352,200 333,812 327,011
Cost of sales..................... 185,285 194,704 267,325 247,458 240,164
-------- -------- -------- -------- --------
Gross profit...................... 67,021 71,665 84,875 86,354 86,847
Selling........................... 52,569 54,267 69,271 65,823 64,416
General and administrative........ 7,509 6,981 8,181 6,971 6,915
Depreciation and amortization..... 5,968 6,388 7,339 6,058 5,533
Interest.......................... 3,951 4,042 4,234 2,854 3,323
Provision for loss on disposal.... 0 0 1,625 0 0
Provision for asset impairment.... 208 352 1,063 0 0
-------- -------- -------- -------- --------
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of accounting
change......................... (3,184) (365) (6,838) 4,648 6,660
Income tax provision (benefit).... (948) (237) (2,262) 1,677 2,506
-------- -------- -------- -------- --------
Earnings (loss) before
extraordinary item and
cumulative effect of accounting
change......................... (2,236) (128) (4,576) 2,971 4,154
Extraordinary item-loss from debt
extinguishment, net of income
tax benefit of $125,800........ 0 (244) 0 0 0
Cumulative effect of accounting
change, net of income tax
benefit of $725,800............ 0 0 (1,468) 0 0
-------- -------- -------- -------- --------
Net earnings (loss)............... $ (2,236) $ (372) $ (6,044) $ 2,971 $ 4,154
======== ======== ======== ======== ========
Earnings (loss) per share before
extraordinary item and
cumulative effect of accounting
change......................... $ (.32) $ (.02) $ (.69) .46 $ .66
Loss per share from extraordinary
item........................... .00 (.03) .00 .00 .00
Loss per share from cumulative
effect of accounting change.... .00 .00 (.22) .00 .00
-------- -------- -------- -------- --------
Net earnings (loss) per share..... $ (.32) $ (.05) $ (.91) $ .46 $ .66
======== ======== ======== ======== ========
Dividends per share............... $ .0000 $ .0000 $ .0600 $ .1175 $ .1100
======== ======== ======== ======== ========
Weighted average shares
outstanding.................... 6,887 6,764 6,642 6,509 6,297
======== ======== ======== ======== ========
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (RETAIL LOCATIONS
ONLY):
Average, per store, for stores
open two full years:
Merchandise sales............ $ 552 $ 492 $ 474 $ 456 $ 448
Gasoline sales............... $ 520 $ 492 $ 526 $ 492 $ 478
Gallons of gasoline sold..... 623 566 496 477 468
Gross profit per gallon of
gasoline....................... $ .103 $ .108 $ .112 $ .120 $ .132
Total gallons of gasoline sold.... 122,130 123,144 150,005 144,059 139,842
Number of stores open at year
end............................ 234 256 384 405 414
Stores added...................... 0 0 2 2 3
Stores closed/divested............ 20 126 9 11 6
Stores converted to Choice
locations...................... 2 2 14 0 0
BALANCE SHEET DATA:
Working capital................... $ (541) $ 1,590 $ 727 $ 1,663 $ 2,330
Total assets...................... 88,475 95,009 113,594 105,038 95,670
Long-term obligations............. 34,141 34,322 40,386 38,964 33,343
Stockholders' equity.............. 27,946 30,040 29,547 36,062 32,579
</TABLE>
- ---------------
(1) In fiscal year 1997, the Company changed its method of calculating ending
merchandise inventories under the retail inventory method. The cumulative
effect of this accounting change, net of the income tax benefit, was
approximately $1.5 million. The pro forma effect as if the accounting change
was in effect in each of the years presented is as follows:
<TABLE>
<CAPTION>
PRO FORMA FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues................................... $352,200 $333,812 $327,011
Gross profit............................... 84,875 85,097 86,629
Net earnings (loss)........................ (4,576) 2,168 4,018
Earnings (loss) per share.................. (.69) .33 .64
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Matters discussed below should be read in conjunction with "Statements of
Operations Data" and "Operating Data (Retail Locations Only)" on the preceding
pages.
The Company's revenues are derived primarily from sales of merchandise and
gasoline at its convenience and discount tobacco stores. Revenues from both the
sale of merchandise and gasoline at the Company's stores declined in fiscal year
1999 due to fewer stores in operation. However, average annual merchandise sales
for stores open two full years increased to $552,000 in fiscal year 1999 from
$492,000 in fiscal year 1998 and $474,000 in fiscal year 1997. Average gallons
of gasoline sold at the Company's stores open two full years were 623,000
gallons in fiscal year 1999 compared to 566,000 gallons in fiscal year 1998 and
496,000 gallons in fiscal year 1997.
This merchandise sales growth trend is primarily the result of increased
sales of fast-food items and the addition of in-store traffic enhancing
services, such as the sale of lottery tickets, money orders and prepaid
telephone cards; ATMs; and the acceptance of personal checks. Tobacco sales
represented approximately 29% of total merchandise sales in each of the last
three fiscal years. There has been volatility in selling prices as a result of
competition among cigarette manufacturers. Since the Company expects this
volatility to continue, it has sought increased sales of other merchandise to
offset the uncertainty in cigarette sales.
Convenience stores selling gasoline have been heavily affected by
environmental regulations, principally concerning underground storage tanks,
which require large capital expenditures in order to achieve compliance. In the
late 1980s, the Company began making significant expenditures to meet, and
exceed, applicable standards. Management believes that the Company is currently
in compliance with all applicable federal and state environmental laws and
regulations and expects minimum expenditures in fiscal year 2000 to maintain
compliance. In addition, the Company has adopted a program to ensure that new
gasoline installations comply with federal and state regulations.
The Company terminated its relationship with Getty Petroleum Corp.
("Getty") and its affiliates during fiscal year 1998. The Company is no longer
required to purchase petroleum products from Getty and no longer operates 105
stores which were leased to the Company by Getty. In fiscal year 1998, these
stores generated merchandise sales of $9.1 million and sold 7.9 million gallons
of gasoline for total sales of $17.7 million. In fiscal year 1997, these stores
generated merchandise sales of $44.8 million and sold 38.3 million gallons of
gasoline, for total sales of $88.8 million.
Termination of the relationship with Getty permits the Company to purchase
petroleum products from a variety of competing sources. The Company sells
gasoline at 194 locations, including one location where gasoline is sold on a
commission basis. Branded gasoline is purchased under supply agreements for 32
locations and gasoline is purchased from various sources for 161 locations.
These arrangements provide for purchases of gasoline at cost levels which are
less than those offered by Getty. However, gasoline margins have historically
been volatile and there can be no assurance that the Company's gasoline margins
will be enhanced by purchasing such products from competitive sources. In
addition, the Company has suspended its program of capital expenditures for
branded fast-food installations and currently does not anticipate adding new
installations in the near future.
12
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
expense items to total revenues. It should be noted that the primary factors
influencing the percentage relationship of cost of sales to revenues are the
volatility of gasoline prices, gross profits and a proportional increase in the
number of stores selling gasoline. On a percentage basis, the gross profit on
gasoline sales is significantly less than the gross profit on merchandise sold
in the convenience stores.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
-----------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Revenues:
Merchandise sales......................................... 58.1% 57.9% 53.6%
Gasoline sales............................................ 41.0 41.0 45.6
Other income.............................................. 0.9 1.1 0.8
----- ----- -----
Total revenues.................................... 100.0 100.0 100.0
Cost of sales............................................... 73.4 73.1 75.9
----- ----- -----
Gross profit:
Merchandise (as a percentage of merchandise sales)........ 35.5 35.8 34.2
Gasoline (as a percentage of gasoline sales).............. 12.5 12.5 10.7
Total gross profit................................ 26.6 26.9 24.1
Costs and expenses:
Selling................................................... 20.8 20.4 19.7
General and administrative................................ 3.0 2.6 2.3
Depreciation and amortization............................. 2.4 2.4 2.1
Interest.................................................. 1.6 1.5 1.2
Provision for loss on disposal............................ 0.0 0.0 0.5
Provision for asset impairment............................ 0.1 0.1 0.3
----- ----- -----
Total expenses.................................... 27.9 27.0 26.1
----- ----- -----
Loss before income taxes, extraordinary item and cumulative
effect of accounting change............................... (1.3) (0.1) (2.0)
Income tax benefit.......................................... (0.4) (0.1) (0.6)
----- ----- -----
Loss before extraordinary item and cumulative effect of
accounting change......................................... (0.9) 0.0 (1.4)
Extraordinary item-loss from debt extinguishment, net of
income tax benefit........................................ 0.0 (0.1) 0.0
Cumulative effect of accounting change, net of income tax
benefit................................................... 0.0 0.0 (0.4)
----- ----- -----
Net loss.................................................... (0.9)% (0.1)% (1.8)%
===== ===== =====
</TABLE>
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
The Company operated 234 convenience stores and 22 discount tobacco stores
at September 30, 1999. During fiscal year 1999, the Company closed or sold 20
convenience stores and converted two convenience stores to discount tobacco
stores. Total revenues in fiscal year 1999 were $252.3 million, a decline of
$14.1 million, or 5.3%, in comparison to total revenues in fiscal year 1998 of
$266.4 million. This decline is due largely to the operation of fewer stores and
lower retail gasoline prices during fiscal year 1999.
Merchandise sales in fiscal year 1999 were $146.7 million compared to
$154.1 million in fiscal year 1998, a decline of $7.4 million, or 4.8%. This
decline is primarily the result of fewer stores in operation. Merchandise sales
at comparable stores increased 5.8%.
13
<PAGE> 14
Gasoline sales declined $6.0 million, or 5.5%, from $109.4 million in
fiscal year 1998 to $103.4 million in fiscal year 1999, primarily as a result of
lower sales prices per gallon sold. Gasoline gallons sold at comparable stores
increased 8.1% in fiscal year 1999.
Gross profits on merchandise sales in fiscal year 1999 declined $3.1
million compared to fiscal year 1998. The decline of 5.7% was primarily the
result of the lower sales volumes caused by the operation of fewer stores.
Merchandise gross profits were $52.1 million in fiscal year 1999 and $55.2
million in fiscal year 1998.
Gasoline gross profits declined in fiscal year 1999 by $819,000, or 6.0%,
in comparison to fiscal year 1998. The decrease from $13.7 million in fiscal
year 1998 to $12.9 million in fiscal year 1999 is the result of lower gross
profits per gallon of gasoline sold and, to a lesser degree, a slight decline in
the total number of gallons sold. These decreases are the result of competitive
pressures and fewer stores in operation. Although the total number of gallons
sold declined slightly, gallons sold at comparable stores increased 8.1% in
fiscal year 1999.
Selling expenses were $52.6 million in fiscal year 1999 compared to $54.3
million in fiscal year 1998, a decline of $1.7 million, or 3.1%. This decline is
the result of fewer stores in operation. Expense levels per average store
increased, however, due to higher labor and maintenance costs. On average, labor
cost per store increased 15.4% and maintenance cost per store almost doubled.
General and administrative expense increased $528,000, or 7.6%. Certain
executive officers were hired near the end of fiscal year 1998 and their
salaries were reflected in expense for a full year in 1999 compared to a partial
year in 1998. Officer salaries were approximately $450,000 higher in fiscal year
1999 compared to 1998. Depreciation and amortization expense declined by
$420,000, or 6.6%, due to the operation of fewer stores. Interest expense also
declined by $91,000, or 2.3%, primarily as a result of lower borrowing levels.
The Company recorded a $208,000 provision for impairment of long-lived assets in
fiscal year 1999 compared to $352,000 in fiscal year 1998.
The Company recorded a pre-tax loss of $3.2 million in fiscal year 1999
compared to a pre-tax loss of $365,000 in fiscal year 1998. The income tax
benefit of these losses was $948,000 in fiscal year 1999 and $237,000 in fiscal
year 1998. In connection with refinancing most of its long-term debt in fiscal
year 1998, the Company recorded an extraordinary loss from debt extinguishment
of $244,000, net of the income tax benefit of $126,000. The net loss for fiscal
year 1999 was $2.2 million, or $0.32 per share, compared to a net loss in fiscal
year 1998 of $372,000, or $0.05 per share.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
At September 30, 1998, the Company operated 126 fewer stores than operated
one year previously. The Company formerly leased 105 of these stores, including
ten franchised locations, from Getty, and these stores were returned to Getty.
During fiscal year 1998, 21 other stores were closed or sold by the Company
including ten franchised locations. Also, two convenience stores were converted
to discount tobacco stores and one franchised location was converted to a
Company-operated store. Total revenues in fiscal year 1998 were $266.4 million
compared to $352.2 million in fiscal year 1997. This decline of $85.8 million,
or 24.4%, is primarily the result of fewer stores in operation, as well as lower
retail prices for gasoline.
Merchandise sales declined $34.8 million, or 18.4%, from $188.9 million in
fiscal year 1997 to $154.1 million in fiscal year 1998, primarily as a result of
fewer stores in operation. Merchandise sales at comparable stores increased
0.7%. Sales of $12.4 million and $4.8 million at discount tobacco stores are
included in merchandise sales for fiscal years 1998 and 1997, respectively.
14
<PAGE> 15
Gasoline sales in fiscal year 1998 were $109.4 million compared to $160.7
million in fiscal year 1997, a decline of $51.3 million, or 31.9%. This decrease
is the result of a decline of 26.9 million gallons sold due to fewer stores in
operation and lower sales prices per gallon sold. Gasoline gallons sold at
comparable stores increased 3.4%.
Gross profits on merchandise sales declined $10.0 million, or 15.4%, due
largely to the decline in sales volume. Merchandise sales gross profits were
$55.2 million in fiscal year 1998 compared to $65.2 million in fiscal year 1997.
The gross profit decline from reduced sales volume was offset to some degree by
higher gross profit rates due to changing product mix and improved purchasing
arrangements.
Gasoline gross profits were $13.7 million in fiscal year 1998 compared to
$17.2 million in fiscal year 1997, a decline of $3.5 million, or 20.1%. This
decrease is due to less total gallons sold due to fewer stores in operation and
lower gross profits per gallon of gasoline sold due to competitive pressures.
Selling expenses were $54.3 million in fiscal year 1998, a decrease of
$15.0 million, or 21.7%, compared to $69.3 million in fiscal year 1997. This
decline is primarily due to the fewer number of stores in operation in the
current year. General and administrative expense in fiscal year 1998 declined
$1.2 million, or 14.7%, due primarily to lower professional fees and staffing
levels. Depreciation and amortization decreased by $951,000, or 13.0%, due to
the disposal of equipment at stores closed during fiscal year 1998. Interest
expense declined by $193,000, or 4.6%, due primarily to lower borrowing levels.
The decline was reduced to some degree by higher interest rates.
In fiscal year 1997, the Company recorded a provision for loss on disposal
of certain assets to Getty of $1.6 million, with no similar provision in fiscal
year 1998.
The Company recorded a provision for the impairment of long-lived assets at
certain closed and underperforming stores of $352,000 in fiscal year 1998
compared to an impairment provision in fiscal year 1997 of $1.1 million.
The Company incurred a loss before income taxes, extraordinary item and
cumulative effect of an accounting change of $365,000 in fiscal year 1998
compared to a loss of $6.8 million in fiscal year 1997. The net change of $6.5
million is the result of a $13.2 million decline in gross profits offset by a
$19.7 million decrease in various expense categories. The Company recorded a
$237,000 income tax benefit in fiscal year 1998 compared to an income tax
benefit of $2.3 million in fiscal year 1997. This decline is due to the lower
loss level, as well as changes in state income tax laws regarding the carry
forward of net operating losses. In fiscal year 1998, the Company recorded a
loss from debt extinguishment of $244,000, net of income tax benefit of
$126,000. In fiscal year 1997, the Company recorded the cumulative effect of an
accounting change of $1.5 million, net of income tax benefit of $0.7 million.
The Company incurred a net loss of $372,000, or $0.05 per share, in fiscal year
1998, compared to a net loss in fiscal year 1997 of $6.0 million, or $0.91 per
share.
15
<PAGE> 16
SEASONALITY AND UNAUDITED QUARTERLY RESULTS
The Company's business generally has been subject to moderate seasonal
influences with higher sales in the third and fourth fiscal quarters of each
year, since customers tend to purchase more convenience items, such as ice,
beverages and fast food, and more gasoline during the warmer months. Due to
adverse weather conditions, merchandise sales for the second fiscal quarter have
generally been lower than other quarters. However, because of price volatility,
gasoline profit margins fluctuate significantly throughout the year. When the
Company's relationship with Getty was terminated at the end of the first quarter
of fiscal year 1998, it no longer operated 105 stores formerly leased from
Getty. The loss of these stores reduced sales and operating expenses for the
remainder of fiscal year 1998 and the closing of 20 stores in fiscal year 1999
had a similar effect.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR 1998 FISCAL YEAR 1999
QUARTER ENDED QUARTER ENDED
----------------------------------------- ------------------------------------------
JAN. 1, APR. 2, JULY 2, SEP. 30, DEC. 31, APR. 1, JULY 1, SEP. 30,
1998 1998 1998 1998 1998 1999 1999 1999
------- ------- ------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales...... $45,255 $33,558 $37,410 $37,874 $35,399 $34,687 $37,735 $38,897
Gasoline sales......... 36,381 21,959 25,047 26,038 25,321 21,753 26,595 29,749
Other income........... 556 496 822 973 429 787 271 683
------- ------- ------- ------- ------- ------- ------- -------
Total revenues... 82,192 56,013 63,279 64,885 61,149 57,227 64,601 69,329
Cost of sales............ 61,564 39,524 46,624 46,992 43,970 41,529 47,946 51,840
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............. 20,628 16,489 16,655 17,893 17,179 15,698 16,655 17,489
Costs and expenses:
Selling................ 16,697 12,731 12,052 12,787 13,217 13,337 13,015 13,000
General &
administrative....... 1,711 1,666 1,496 2,108 1,780 1,903 1,840 1,986
Depreciation &
amortization......... 1,585 1,641 1,565 1,597 1,572 1,512 1,452 1,432
Interest............... 1,126 1,023 884 1,009 1,009 974 961 1,007
Provision for asset
impairment............. 0 0 0 352 0 100 100 8
------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before
income taxes and
extraordinary item..... (491) (572) 658 40 (399) (2,128) (713) 56
Income tax provision
(benefit).............. (217) (142) 282 (160) (110) (699) (180) 41
------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before
extraordinary item..... (274) (430) 376 200 (289) (1,429) (533) 15
Extraordinary item-debt
extinguishment, net of
income tax benefit of
$126................... 0 0 (244) 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)...... $ (274) $ (430) $ 132 $ 200 $ (289) $(1,429) $ (533) $ 15
======= ======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share
before extraordinary
item................... $ (0.04) $ (0.06) $ 0.06 $ 0.03 $ (0.04) $ (0.21) $ (0.08) $ 0.00
Loss per share from
extraordinary item..... 0.00 0.00 (0.04) 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss) per
share.................. $ (0.04) $ (0.06) $ 0.02 $ 0.03 $ (0.04) $ (0.21) $ (0.08) $ 0.00
======= ======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding............ 6,655 6,734 6,827 6,848 6,866 6,877 6,894 6,911
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
16
<PAGE> 17
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 generally require
large amounts of working capital. From time to time, the Company utilizes
substantial portions of its cash to acquire and construct new stores and
renovate existing locations.
On December 30, 1998, the Company entered into a secured $10.0 million
revolving loan agreement with a bank, with $3.0 million reserved for letters of
credit. The Company utilized $3.5 million of this facility to pay its existing
revolving credit facility and property loan. The Company also used this facility
to replace its outstanding letter of credit which expired June 30, 1999. The
revolving credit facility is subject to renewal at December 31, 1999. As of
December 29, 1999, the bank has committed to an extension of up to nine months
on a revolving credit facility subject to the Company's compliance with certain
restrictive covenants at March 30, 2000 and June 29, 2000. The restrictive
covenants include a minimum debt service coverage ratio, a minimum level of
tangible net worth, a maximum debt to tangible net worth ratio, and a limit on
unfunded capital expenditures. These covenants are unchanged from the existing
credit agreement, except that the bank has agreed to reduce the required minimum
tangible net worth covenant from $24 million at December 31, 1999 and September
30, 2000, to $23 million at March 31, 2000 and June 30, 2000. An additional
covenant requirement of the extension agreement is that the Company's results
from operations for the six and nine-month periods ending March 30, 2000 and
June 29, 2000 must meet or exceed the budgeted amounts provided to the bank.
Management is currently evaluating their refinancing alternatives and has
obtained approval from its existing mortgage lender for a $10 million one-year
revolving line of credit secured by real estate and store equipment. The terms
of this loan are subject to completion of a formal commitment, but would include
certain provisions which would require the Company to maintain a minimum net
worth of $20 million and an aggregate fixed charge ratio of 1.25:1. If the
Company elects to close on this facility, the bank loan would be repaid from the
proceeds.
Management believes that cash from operations and the available credit
facilities will be sufficient to meet the Company's obligations for the fiscal
year ending September 30, 2000.
Capital requirements for debt service and capital leases for fiscal year
2000 are approximately $1.2 million. The Company anticipates capital
expenditures of approximately $3.0 million in fiscal year 2000 for acquisition
of real estate, remodeling of stores and upgrades of store equipment and
gasoline-dispensing equipment. These expenditures are expected to be funded from
cash flows from operations. The Company also is considering the start of a $4.0
million project pending the availability of funding. Approximately $1.25 million
of the $4.0 million is committed contractually.
IMPACT OF THE YEAR 2000 ("Y2K") PROBLEM
BACKGROUND
Many computer systems in use today were designed to utilize just two digits
to represent a year rather than four digits. If a system element uses the
two-digit convention for dates and the system is date sensitive, the system will
malfunction when it first encounters the date January 1, 2000. The Company uses
a variety of computers and computer software programs to operate and manage its
business. The functioning of these systems is subject to problems if it does not
properly interpret dates in the year 2000 and beyond. The Company also utilizes
certain date-sensitive electronic equipment with embedded microchips such as
cash registers and credit card readers. In addition, the Company deals with
numerous suppliers of merchandise and services whose Y2K failure could be
disruptive to the Company's business. The Company has been involved since early
1997 in developing and completing a program to deal with the Y2K problem.
17
<PAGE> 18
THE COMPANY'S Y2K PROGRAM
The Company's Y2K program involved identification of Y2K problems in its
various computer systems and date-sensitive electronic equipment, replacement or
modification of the computer systems and software as required and extensive
testing of the replacements and modifications. This portion of the Company's Y2K
program has been completed. The Company has ranked its suppliers of goods and
services according to the probability and impact of a Y2K problem with each
vendor. The Company has contacted all suppliers except noncritical or
nonessential suppliers to request written statements from them regarding their
Y2K compliance. With the exception of some utility providers, positive responses
have been received from over 95% of the other suppliers contacted. The Company
has also completed contingency plans to handle Y2K problems with critical
suppliers. Although the Company's Y2K program has been essentially completed,
testing of systems and plans will continue until December 31, 1999. The total
cost of the program will be approximately $400,000 most of which was expended
prior to September 30, 1999.
SUMMARY
Based on its assessment and corrective efforts to date, the Company does
not expect material difficulties with the Y2K problem in its internal computer
systems. In addition, the Company does not expect material Y2K problems with
other date-sensitive hardware or materially disruptive Y2K failures of its
suppliers of merchandise and services. The Company's stores are geographically
dispersed and it has a diverse supplier base. Although the Company does have a
diverse supplier base, it does deal with a limited number of large suppliers
whose Y2K failure could have a material effect on the Company's business. The
Company believes that it could find alternative suppliers or handle developing
Y2K problems with its current contingency plans. The Company's contingency plans
were developed to mitigate possible Y2K failures. In management's opinion, the
largest Y2K risks facing the Company are the inability of the Company's stores
to process retail sales transactions or obtain merchandise to sell, as well as
potential failure of public utility systems.
IMPACT OF INFLATION
The Company believes that inflation has not had a material effect on its
results of operations in recent years. Generally, increases in the Company's
cost of merchandise can be quickly reflected in higher prices of goods sold.
However, any upward movement of gasoline costs may have short-term negative
effects on profit margins, since the Company's ability to raise gasoline prices
can be limited due to competition from other self-service gasoline outlets. In
addition, fluctuation of gasoline prices can limit the ability of the Company to
maintain stable gross margins.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are forward looking, such as
statements regarding the Company's plans and strategies or future financial
performance. Although the Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge, investors and
prospective investors are cautioned that such statements are only projections
and that actual events or results may differ materially from those expressed in
any such forward-looking statements. In addition to the factors discussed
elsewhere in this report, the Company's actual consolidated quarterly or annual
operating results have been affected in the past, or could be affected in the
future, by additional factors, including, without limitation, general economic,
business and market conditions; environmental, tax and tobacco legislation or
regulation; volatility of gasoline prices, margins and supplies; merchandising
margins; customer traffic; weather conditions; labor costs and the level of
capital expenditures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Uni-Marts, Inc.
State College, Pennsylvania
We have audited the accompanying consolidated balance sheets of Uni-Marts,
Inc. and subsidiary (the "Company"), as of September 30, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Uni-Marts, Inc. and subsidiary
as of September 30, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1999,
in conformity with generally accepted accounting principles.
As discussed in Note C, the Company changed its method of accounting for
inventory in 1997.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche, LLP
Philadelphia, Pennsylvania
November 11, 1999 (December 29, 1999 as to Note F)
19
<PAGE> 20
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 1,944,358 $ 5,838,318
Accounts receivable -- less allowances of $288,000 and
$384,900............................................... 2,524,734 2,296,187
Tax refunds receivable.................................... 0 1,416,363
Inventories............................................... 11,737,029 10,628,307
Prepaid and current deferred taxes........................ 2,079,155 1,975,802
Property held for sale.................................... 1,410,810 1,729,598
Prepaid expenses and other................................ 1,099,484 929,304
Loan due from officer -- current portion.................. 60,000 200,000
----------- -----------
Total Current Assets.............................. 20,855,570 25,013,879
Net Property, Equipment and Improvements.................... 61,713,278 63,960,971
Loan Due from Officer....................................... 480,000 450,800
Net Intangible and Other Assets............................. 5,425,771 5,582,989
----------- -----------
Total Assets...................................... $88,474,619 $95,008,639
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $10,967,476 $11,120,972
Gas taxes payable......................................... 2,183,410 2,324,299
Accrued expenses.......................................... 5,222,855 5,304,579
Credit line payable....................................... 1,800,000 3,500,000
Current maturities of long-term debt...................... 958,811 1,107,818
Current obligations under capital leases.................. 264,310 70,810
----------- -----------
Total Current Liabilities......................... 21,396,862 23,428,478
Long-Term Debt, less current maturities..................... 33,264,639 33,846,812
Obligations under Capital Leases, less current maturities... 875,977 474,826
Deferred Taxes.............................................. 2,561,500 4,131,400
Deferred Income and Other Liabilities....................... 2,429,835 3,086,948
Commitments and Contingencies
Stockholders' Equity:
Common Stock, par value $.10 a share:
Authorized 15,000,000 shares
Issued 7,327,088 and 7,316,797 shares, respectively.... 732,709 731,680
Additional paid-in capital................................ 24,030,665 24,189,258
Retained earnings......................................... 5,646,956 7,882,583
----------- -----------
30,410,330 32,803,521
Less treasury stock, at cost -- 400,962 and 455,545 shares
of Common Stock, respectively.......................... (2,464,524) (2,763,346)
----------- -----------
27,945,806 30,040,175
----------- -----------
Total Liabilities and Stockholders' Equity........ $88,474,619 $95,008,639
=========== ===========
</TABLE>
See notes to consolidated financial statements
20
<PAGE> 21
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Merchandise sales............................. $146,718,301 $154,097,184 $188,935,939
Gasoline sales................................ 103,417,555 109,424,633 160,700,946
Other income.................................. 2,169,901 2,846,896 2,563,490
------------ ------------ ------------
252,305,757 266,368,713 352,200,375
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales................................. 185,285,307 194,703,534 267,324,567
Selling....................................... 52,568,471 54,267,079 69,270,631
General and administrative.................... 7,508,747 6,981,006 8,181,303
Depreciation and amortization................. 5,968,188 6,388,426 7,339,206
Interest...................................... 3,950,533 4,041,719 4,234,440
Provision for loss on disposal................ 0 0 1,624,550
Provision for asset impairment................ 208,338 351,989 1,063,203
------------ ------------ ------------
255,489,584 266,733,753 359,037,900
------------ ------------ ------------
Loss before income taxes, extraordinary item and
cumulative effect of accounting change........ (3,183,827) (365,040) (6,837,525)
Income tax benefit.............................. (948,200) (237,400) (2,261,600)
------------ ------------ ------------
Loss before extraordinary item and cumulative
effect of accounting change................... (2,235,627) (127,640) (4,575,925)
Extraordinary item-loss from debt
extinguishment, net of income tax benefit of
$125,800...................................... 0 (244,315) 0
Cumulative effect of accounting change, net of
income tax benefit of $725,800................ 0 0 (1,468,140)
------------ ------------ ------------
Net loss........................................ $ (2,235,627) $ (371,955) $ (6,044,065)
============ ============ ============
Loss per share:
Loss per share before extraordinary item and
cumulative effect of accounting change..... $ (0.32) $ (0.02) $ (0.69)
Loss per share from extraordinary item........ 0.00 (0.03) 0.00
Loss per share from cumulative effect of
accounting change.......................... 0.00 0.00 (0.22)
------------ ------------ ------------
Basic and diluted net loss per share.......... $ (0.32) $ (0.05) $ (0.91)
============ ============ ============
Basic and diluted weighted average number of
common shares outstanding..................... 6,886,774 6,763,768 6,641,926
============ ============ ============
</TABLE>
See notes to consolidated financial statements
21
<PAGE> 22
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
PAR VALUE $.10
A SHARE
AUTHORIZED 15,000,000
SHARES UNREALIZED ADDITIONAL TREASURY STOCK
---------------------- LOSS ON PAID-IN RETAINED ----------------------
SHARES AMOUNT SECURITIES CAPITAL EARNINGS SHARES AMOUNT
---------- --------- ---------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- OCTOBER 1, 1996....... 7,279,684 $727,968 $(54,401) $24,287,858 $14,696,776 621,197 $(3,595,790)
Purchase of treasury stock..... 50,500 (365,994)
Issuance of common stock....... 6,973 698 54,141 (31,717) 183,526
Unrealized gain on
securities................... 54,401
Net loss....................... (6,044,065)
Dividends ($.0600 per share)... (398,173)
--------- -------- -------- ----------- ----------- -------- -----------
BALANCE -- SEPTEMBER 30, 1997.... 7,286,657 728,666 0 24,341,999 8,254,538 639,980 (3,778,258)
Purchase of treasury stock..... 12,421 (49,285)
Issuance of common stock....... 30,140 3,014 (152,741) (196,856) 1,064,197
Net loss....................... (371,955)
--------- -------- -------- ----------- ----------- -------- -----------
BALANCE -- SEPTEMBER 30, 1998.... 7,316,797 731,680 0 24,189,258 7,882,583 455,545 (2,763,346)
Purchase of treasury stock..... 4,119 (9,364)
Issuance of common stock....... 10,291 1,029 (158,593) (58,702) 308,186
Net loss....................... (2,235,627)
--------- -------- -------- ----------- ----------- -------- -----------
BALANCE -- SEPTEMBER 30, 1999.... 7,327,088 $732,709 $ 0 $24,030,665 $ 5,646,956 400,962 $(2,464,524)
========= ======== ======== =========== =========== ======== ===========
</TABLE>
See notes to consolidated financial statements
22
<PAGE> 23
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and others......... $ 250,705,501 $ 266,814,682 $ 351,614,420
Cash paid to suppliers and employees............ (247,104,574) (256,330,886) (340,898,407)
Net receipts for sales and purchases of trading
equity securities............................ 0 831,826 0
Dividends and interest received................. 111,774 138,277 80,172
Interest paid (net of capitalized interest of
$0, $0 and $57,400).......................... (3,640,701) (4,359,976) (4,157,146)
Income taxes received........................... 691,310 2,245,025 1,005,600
------------- ------------- -------------
Net Cash Provided by Operating
Activities.............................. 763,310 9,338,948 7,644,639
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sale of capital assets............ 2,313,119 7,567,051 170,473
Purchase of property, equipment and
improvements................................. (4,800,187) (4,234,049) (11,844,707)
Net payments for sales and purchases of
available-for-sale securities................ 0 0 (183,667)
Note receivable from officer.................... 110,800 173,968 (824,768)
Cash advanced for intangible and other assets... (508,752) (359,800) (506,164)
Cash received for intangible and other assets... 238,678 813,535 236,651
------------- ------------- -------------
Net Cash (Used) Provided by Investing
Activities.............................. (2,646,342) 3,960,705 (12,952,182)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings on revolving credit
agreement.................................... 0 (10,000,000) 5,000,000
Additional long-term borrowings................. 721,618 34,895,954 10,000,000
(Payments) borrowings on line of credit......... (1,700,000) 3,500,000 0
Principal payments on debt...................... (1,026,123) (42,647,892) (4,145,456)
Purchases of treasury stock..................... (9,364) (49,285) (365,994)
Proceeds from issuance of common stock.......... 2,941 846,500 2,625
Dividends paid to stockholders.................. 0 0 (398,173)
------------- ------------- -------------
Net Cash (Used) Provided by Financing
Activities.............................. (2,010,928) (13,454,723) 10,093,002
------------- ------------- -------------
Net (decrease) increase in cash................... (3,893,960) (155,070) 4,785,459
Cash at beginning of year......................... 5,838,318 5,993,388 1,207,929
------------- ------------- -------------
Cash at end of year............................... $ 1,944,358 $ 5,838,318 $ 5,993,388
============= ============= =============
</TABLE>
23
<PAGE> 24
UNI-MARTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Loss............................................ $(2,235,627) $ (371,955) $(6,044,065)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities:
Depreciation and amortization.................. 5,968,188 6,388,426 7,339,206
Provision for loss on disposal................. 0 0 1,624,550
Provision for asset impairment................. 208,338 351,989 1,063,203
Net unrealized holding loss (gain) on trading
securities................................... 0 130,355 (130,323)
Gain on sale of trading equity securities...... 0 (110,662) (97,107)
Gain on sale of available-for-sale
securities................................... 0 0 (3,001)
(Gain) loss on sale of capital assets and
other........................................ (378,418) (348,209) 282,836
Cumulative effect of accounting change......... 0 0 1,468,140
Change in assets and liabilities:
(Increase) decrease in:
Trading equity securities................. 0 383,520 0
Accounts receivable....................... (228,547) 1,223,694 (102,361)
Tax refunds receivable.................... 1,416,363 402,737 (1,819,100)
Inventories............................... (1,108,722) 5,055,023 (69,272)
Prepaid expenses.......................... (171,790) (267,486) 1,238,136
Increase (decrease) in:
Accounts payable and accrued expenses..... (376,109) (4,943,597) 2,219,399
Deferred income taxes and other
liabilities............................. (2,330,366) 1,445,113 674,398
----------- ----------- -----------
Total Adjustments to Net Loss.................. 2,998,937 9,710,903 13,688,704
----------- ----------- -----------
Net Cash Provided by Operating Activities........... $ 763,310 $ 9,338,948 $ 7,644,639
=========== =========== ===========
</TABLE>
Supplemental Schedule of Noncash Operating Activity:
During fiscal year 1997, the Company sold marketable securities for $448,300 and
recognized a gain of $97,100. The cash proceeds from the sale were not received
until after September 30, 1997.
See notes to consolidated financial statements
24
<PAGE> 25
UNI-MARTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company is an independent operator of convenience stores and discount
tobacco stores located in Pennsylvania, New York, Delaware, Maryland and
Virginia.
(1) Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary.
All material intercompany balances and transactions have been
eliminated.
(2) Inventories -- The Company values its merchandise inventories at the
lower of cost (first-in, first-out method) or market, as determined by
the retail inventory method. Gasoline inventories are valued at the
lower of cost (first-in, first-out method) or market (see Note C).
(3) Property, Equipment and Improvements -- Depreciation and amortization
are calculated using the straight-line method over the useful lives of
the related assets. Amortization of improvements to leased properties
is based on the remaining terms of the leases or the estimated useful
lives of such improvements, whichever is shorter. Interest costs
incurred on borrowed funds during the period of construction of capital
assets are capitalized as a component of the cost of acquiring those
assets. The amount of interest capitalized in fiscal year 1997 was
$57,400. No interest was capitalized in fiscal years 1999 and 1998.
(4) Intangible and Other Assets -- Intangible and other assets consist of
the following:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK USEFUL
COST AMORTIZATION VALUE LIVES
---------- ------------ ---------- ------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED SEPTEMBER 30, 1999:
Goodwill................................ $ 145,399 $ 125,188 $ 20,211 13-21
Goodwill................................ 5,658,044 1,944,765 3,713,279 29-40
Lease acquisition costs................. 674,570 519,489 155,081 12-25
Other intangibles....................... 99,111 44,949 54,162 15-16
Other assets............................ 1,483,038 0 1,483,038
---------- ---------- ----------
$8,060,162 $2,634,391 $5,425,771
========== ========== ==========
FOR THE YEAR ENDED SEPTEMBER 30, 1998:
Goodwill................................ $ 145,399 $ 115,278 $ 30,121 13-21
Goodwill................................ 5,658,044 1,769,629 3,888,415 29-40
Lease acquisition costs................. 827,465 595,009 232,456 12-25
Other intangibles....................... 91,879 87,953 3,926 15-16
Other assets............................ 1,423,809 0 1,423,809
---------- ---------- ----------
$8,146,596 $2,567,869 $5,578,727
========== ========== ==========
</TABLE>
Goodwill represents the excess of cost over the fair value of net
assets acquired in business combinations and is amortized on a
straight-line basis. Lease acquisition costs are the bargain element of
acquired leases and are being amortized on a straight-line basis over
the related lease terms. Amortization expense was $267,500 (1999),
$439,500 (1998) and $431,200 (1997).
(5) Asset Impairment -- It is the Company's policy to periodically review
and evaluate the recoverability of fixed and intangible assets by
assessing current and future profitability and cash flows and to
determine whether the depreciation or amortization of the balances over
their
25
<PAGE> 26
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
remaining lives can be recovered through expected future results and
cash flows. The Company recorded provisions of $208,300 (1999),
$352,000 (1998) and $1,063,200 (1997) for asset impairment for certain
real estate, leasehold improvements, store and gasoline equipment and
goodwill at certain closed or underperforming stores. Fair value was
determined based on a review of historical and projected cash flows.
The Company also recorded a provision for loss on disposal of
$1,624,600 in fiscal year 1997 for certain assets that were sold in
January 1998.
(6) Self-Insurance Reserves -- The Company assumes the risks for general
liability and workers' compensation insurance exposures up to certain
loss thresholds set forth in separate insurance contracts. The Company
has established self-insurance reserves for these risks, which are
recorded on a present value basis using a risk-free discount rate of
7.0%, using actuarial valuations provided by independent companies. At
September 30, 1999 and 1998, the Company had self-insurance reserves
totaling $2,868,900 and $2,551,500, respectively.
(7) Income Taxes -- The Company recognizes deferred tax assets and
liabilities for temporary differences between the financial statement
and tax basis of assets and liabilities using enacted tax rates.
(8) Deferred Income and Other Liabilities -- The Company generally records
revenues when products are sold or services rendered. In certain
instances, the Company receives advance payments for purchase
commitments or other services and records revenue from such payments in
accordance with the terms of the related contractual arrangements.
Deferred income and other liabilities includes the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 1998
---------- ----------
<S> <C> <C>
Deferred income.......... ........................ $2,165,651 $2,559,061
Deferred compensation............................. 237,571 487,499
Other noncurrent liabilities...................... 26,613 40,388
---------- ----------
$2,429,835 $3,086,948
========== ==========
</TABLE>
(9) Earnings Per Share -- Earnings per share for the years ended September
30, 1999, 1998 and 1997 were calculated based on the weighted average
number of shares of common stock outstanding. Although there were
potentially dilutive stock options for 576,441, 535,566 and 555,035
shares outstanding in fiscal years 1999, 1998 and 1997, respectively,
they were not included as the effect was antidilutive.
(10) Advertising Costs -- The Company expenses advertising costs in the
period in which they are incurred. The Company incurred advertising
costs of $1,894,600, $2,084,800 and $1,885,500 in fiscal years 1999,
1998 and 1997, respectively.
(11) Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates and assumptions.
(12) New Accounting Pronouncements -- In fiscal year 1999, the Company
adopted Statement Nos. 130, 131 and 132 of the Financial Accounting
Standards Board ("FASB"). FASB
26
<PAGE> 27
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Statement No. 130, "Reporting Comprehensive Income," was adopted
although the Company had no transactions involving other comprehensive
income in any of the periods presented. FASB Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
was adopted by the Company although the Company does not have more than
one segment on which to report. FASB Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," was
adopted by the Company although its disclosures were in compliance with
this statement.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Statement establishes accounting and reporting
standards for derivative instruments. The Company is not required to
adopt this standard until fiscal year 2001. At this time, the Company
has not determined the impact this standard will have on the Company's
financial statements.
(13) Reclassifications -- Certain reclassifications have been made to the
1998 and 1997 financial statements to conform to the classifications
used in 1999.
B. OPERATIONS AND FINANCING:
The Company has experienced net losses for each of the three years in the period
ended September 30, 1999. The Company's ability to continue to operate beyond
the immediate future will ultimately depend upon its ability to achieve levels
of revenues necessary to support the Company's cost structure, reduce the costs
of operating its stores and maintain adequate financing.
Management's plans include the renewal or refinancing of its existing working
credit facility (see Note F) and improved operating efficiencies resulting from
the management and operational changes made during fiscal year 1999. The changes
include the reduction of certain fixed expenses, the implementation of
merchandising programs designed to improve gross margins and the closing or
divesting of 20 underperforming stores.
Management believes that cash from operations and the available credit facility
will be sufficient to meet the Company's obligations for the fiscal year ending
September 30, 2000.
C. INVENTORIES:
The following is a summary of inventories at September 30:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Merchandise...................................... $ 9,549,642 $ 8,754,773
Gasoline......................................... 2,187,387 1,873,534
----------- -----------
$11,737,029 $10,628,307
=========== ===========
</TABLE>
During fiscal year 1997, the Company changed its method of calculating ending
merchandise inventories under the retail inventory method. Prior to 1997, the
Company utilized an average cost-to-retail ratio to value ending inventory. In
fiscal year 1997, the Company began utilizing a method that weights the
cost-to-retail ratio using multiple inventory categories. Management believes
that this change in accounting improves the measurement of the Company's
profitability based upon a changing product mix.
27
<PAGE> 28
C. INVENTORIES (CONTINUED):
The cumulative effect of this accounting change was a charge to earnings of
approximately $1,468,000, net of the related income tax benefit of $725,000. The
pro forma effect as if the accounting change was in effect in the year presented
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1997
------------------
<S> <C>
Net earning (loss):
As reported............................................... $ (6,044,065)*
Pro forma................................................. $ (4,575,925)
Net earnings (loss) per share:
As reported............................................... $ (0.91)
Pro forma................................................. $ (0.69)
</TABLE>
- ---------------
* Includes cumulative effect of accounting change of $1,468,140.
D. PROPERTY HELD FOR SALE:
Property held for sale is carried at the lower of cost or net realizable value.
The properties have been classified as current assets because the Company
expects the properties to be sold within the next fiscal year. The properties
are undeveloped land, a vacant rental property and closed convenience stores.
E. PROPERTY, EQUIPMENT AND IMPROVEMENTS -- AT COST:
<TABLE>
<CAPTION>
ESTIMATED
ACCUMULATED NET BOOK LIFE IN
COST DEPRECIATION VALUE YEARS
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1999:
Land................................... $ 15,268,264 $ 0 $15,268,264
Buildings.............................. 43,036,470 15,106,372 27,930,098 29-35
Machinery and equipment................ 34,210,894 23,641,022 10,569,872 3-10
Machinery and equipment................ 6,300,426 3,062,605 3,237,821 11-20
Capitalized property and equipment
leases............................... 1,452,816 577,431 875,385 5-25
Leasehold improvements................. 10,603,225 7,674,710 2,928,515 1-10
Leasehold improvements................. 461,053 362,555 98,498 11-20
Construction in progress............... 804,825 0 804,825
------------ ----------- -----------
$112,137,973 $50,424,695 $61,713,278
============ =========== ===========
YEAR ENDED SEPTEMBER 30, 1998:
Land................................... $ 15,170,920 $ 0 $15,170,920
Buildings.............................. 42,131,243 13,666,374 28,464,869 29-35
Machinery and equipment................ 35,057,292 23,134,977 11,922,315 3-10
Machinery and equipment................ 6,469,607 2,914,240 3,555,367 11-20
Capitalized property and equipment
leases............................... 731,197 522,507 208,690 5-25
Leasehold improvements................. 10,559,147 7,399,401 3,159,746 1-10
Leasehold improvements................. 466,344 341,092 125,252 11-20
Construction in progress............... 1,353,812 0 1,353,812
------------ ----------- -----------
$111,939,562 $47,978,591 $63,960,971
============ =========== ===========
</TABLE>
Depreciation expense in fiscal years 1999, 1998 and 1997 was $5,700,700,
$5,948,900 and $6,908,000, respectively, including the amortization of
capitalized property and equipment leases.
28
<PAGE> 29
F. SHORT-TERM CREDIT FACILITIES:
The Company has a short-term credit facility which is a secured $10.0 million
revolving loan agreement with $3.0 million reserved for letters of credit.
Borrowings of $1.8 million and letters of credit of $2.7 million were
outstanding at September 30, 1999. This facility bears interest at a floating
rate of LIBOR plus 2.8%. The interest rate at September 30, 1999 was 8.175%. The
revolving credit facility is subject to renewal at December 31, 1999.
The Company's revolving loan agreement contains covenants which provide for the
maintenance of minimum tangible net worth as well as limitations on future
indebtedness, sales and leasebacks and dispositions of assets, among other
things. This agreement may restrict the Company's ability to declare and pay
dividends on common stock.
As of December 29, 1999, the bank has committed to an extension of up to nine
months on a revolving credit facility subject to the Company's compliance with
certain restrictive covenants at March 30, 2000 and June 29, 2000. The
restrictive covenants include a minimum debt service coverage ratio, a minimum
level of tangible net worth, a maximum debt to tangible net worth ratio, and a
limit on unfunded capital expenditures. These covenants are unchanged from the
existing credit agreement, except that the bank has agreed to reduce the
required minimum tangible net worth covenant from $24 million at December 31,
1999 and September 30, 2000, to $23 million at March 31, 2000 and June 30, 2000.
An additional covenant requirement of the extension agreement is that the
Company's results from operations for the six and nine-month periods ending
March 30, 2000 and June 29, 2000 must meet or exceed the budgeted amounts
provided to the bank.
Management is currently evaluating their refinancing alternatives and has
obtained approval from its existing mortgage lender for a $10 million one-year
revolving line of credit secured by real estate and store equipment. The terms
of this loan are subject to completion of a formal commitment, but would include
certain provisions which would require the Company to maintain a minimum net
worth of $20 million and an aggregate fixed charge ratio of 1.25:1. If the
Company elects to close on this facility, the bank loan would be repaid from the
proceeds.
G. LONG-TERM DEBT:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Mortgage Loan. Principal and interest will be paid in 226
monthly installments. The loan bears interest at a rate of
9.08%....................................................... $33,630,236 $34,140,001
Equipment Loan. Principal and interest are paid in monthly
installments. The loan expires in 2001 and bears interest
at the prime rate plus 1.5%. The interest rate at
September 30, 1999 was 9.75%.............................. 384,553 594,309
Mortgage Loan. Principal and interest are paid in monthly
installments. The loan expires in 2010 and bears interest
at the prime rate, adjustable annually. The interest rate
at September 30, 1999 was 7.75%........................... 208,661 220,320
----------- -----------
34,223,450 34,954,630
Less current maturities..................................... 958,811 1,107,818
----------- -----------
$33,264,639 $33,846,812
=========== ===========
</TABLE>
The mortgage loans are collateralized by $48,211,900 of property, at cost.
29
<PAGE> 30
G. LONG-TERM DEBT (CONTINUED):
Aggregate maturities of long-term debt during the next five years are as
follows:
<TABLE>
<S> <C>
September 30,
2000................................................ $ 958,811
2001................................................ 870,800
2002................................................ 772,000
2003................................................ 855,300
2004................................................ 946,800
Thereafter.......................................... 29,819,739
-----------
$34,223,450
===========
</TABLE>
On June 30, 1998, the Company completed a 20-year mortgage financing with
Franchise Finance Corporation of America ("FFCA") pursuant to which the Company
received long-term financing of $36.0 million. The Company repaid all of its
long-term debt with these funds except for one mortgage with a balance of
$220,300.
Certain provisions of the loan agreements with FFCA require the Company's
maintenance of a minimum net worth of $20 million and an aggregate fixed charge
ratio of 1.25:1. This agreement could possibly restrict the Company's ability to
declare and pay dividends on its common stock.
H. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate fair
value:
CASH -- Cash is carried at fair value.
CREDIT LINE PAYABLE -- Credit line payable is carried at fair value.
LONG-TERM DEBT -- Fair value of the Company's long-term debt is estimated
based on quoted market prices for the same or similar issues or on the
current rates offered to the Company for similar debt.
OBLIGATIONS UNDER CAPITAL LEASES -- Fair value of capital lease obligations
is estimated based on current rates offered to the Company for similar
debt.
The estimated fair values of the Company's financial instrument liabilities are
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Long-term debt............... $34,223,450 $35,087,637 $34,954,630 $38,754,840
Obligations under capital
leases..................... 1,140,288 1,181,204 545,636 595,619
</TABLE>
I. COMMITMENTS AND CONTINGENCIES:
(1) Leases -- The Company leases its corporate headquarters, approximately
one-half of its store locations and certain equipment. Future minimum lease
payments under capital leases and noncancellable operating leases with
initial or remaining terms in excess of one year at September 30, 1999 are
shown below. Some of the leases provide for additional rentals when sales
exceed a specified amount and contain variable renewal options and
escalation clauses. Rental
30
<PAGE> 31
I. COMMITMENTS AND CONTINGENCIES (CONTINUED):
income in connection with the leases of certain properties is also provided.
Such rental income was $549,100 in 1999, $1,330,000 in 1998 and $1,299,700
in 1997.
<TABLE>
<CAPTION>
CAPITAL OPERATING RENTAL
LEASES LEASES INCOME
---------- ----------- ----------
<S> <C> <C> <C>
2000.......................................... $ 372,600 $ 3,890,100 $ 724,100
2001.......................................... 357,000 3,167,900 486,500
2002.......................................... 329,000 2,786,900 422,600
2003.......................................... 146,300 2,429,500 313,600
2004.......................................... 140,100 1,284,000 170,600
Thereafter.................................... 114,400 3,849,400 333,000
---------- ----------- ----------
Total future minimum lease
payments.......................... 1,459,400 $17,407,800 $2,450,400
=========== ==========
Less amount representing interest............. 319,113
----------
Present value of future payments.............. 1,140,287
Less current maturities....................... 264,310
----------
$ 875,977
==========
</TABLE>
Rental expense under operating leases was as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Minimum rentals............................... $4,539,000 $5,929,900 $9,890,200
Contingent rentals............................ 45,000 39,000 63,300
---------- ---------- ----------
$4,584,000 $5,968,900 $9,953,500
========== ========== ==========
</TABLE>
(2) Change of Control Agreements -- The Company has change of control agreements
with its executive officers pursuant to which each executive officer will
receive remuneration of 2.99 times his base compensation if his employment
is terminated due to a change of control as defined in the agreements.
Remuneration which might be payable under these agreements has not been
accrued in the consolidated financial statements as a change of control has
not occurred.
(3) Pursuant to ten-year agreements with two gasoline suppliers, the Company
receives from the suppliers partial funding of the cost of the aboveground
gasoline equipment and rebates for the purchase of gasoline. As of September
30, 1999, the total funding subject to this arrangement is $1,176,000. If
the Company terminates these agreements before the expiration of the ten
years, part of this funding must be repaid to the suppliers.
(4) The Company has an agreement to purchase a property in Milroy, Pennsylvania,
for $800,000, which is due on January 15, 2000. In addition, the Company is
obligated to site work cost of approximately $450,000.
(5) Litigation -- The Company is involved in litigation and other legal matters
which have arisen in the normal course of business. Although the ultimate
results of these matters are not currently determinable, management does not
expect that they will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
31
<PAGE> 32
J. INCOME TAXES:
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current tax expense (benefit):
Federal........................ $ 0 $(1,362,300) $(2,739,700)
State.......................... (18,200) 18,400 (72,500)
----------- ----------- -----------
(18,200) (1,343,900) (2,812,200)
----------- ----------- -----------
Deferred tax expense (benefit):
Federal........................ (1,020,300) 1,259,300 (190,400)
State.......................... 90,300 (278,600) 15,200
----------- ----------- -----------
(930,000) 980,700 (175,200)
----------- ----------- -----------
(948,200) (363,200) (2,987,400)
Less portion included in accounting
change............................ 0 0 725,800
Less portion included in
extraordinary
item.............................. 0 125,800 0
----------- ----------- -----------
$ (948,200) $ (237,400) $(2,261,600)
=========== =========== ===========
</TABLE>
The tax provision for fiscal year 1999 includes the benefit of net operating
loss carryforwards of $2,204,400 for federal income tax purposes and $441,500
for state income tax purposes. During fiscal year 1999, the Company received tax
refunds of approximately $753,700 resulting from the filing of its tax returns
for fiscal years 1998 and 1997.
Deferred tax liabilities (assets) are comprised of the following at September
30:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Depreciation...................... $ 6,087,200 $ 5,907,400 $ 5,251,700
----------- ----------- -----------
Gross deferred tax liabilities.... 6,087,200 5,907,400 5,251,700
----------- ----------- -----------
Insurance reserves................ (1,212,000) (1,093,800) (1,143,100)
Change in accounting method....... (444,100) (667,200) (882,300)
Capital leases.................... (80,300) (96,800) (92,500)
Deferred compensation............. (22,800) (107,700) (330,700)
Deferred income................... (876,600) (1,037,700) (761,100)
Intangible assets................. 0 (82,400) (178,100)
Accrued expenses.................. 0 0 (394,700)
Net operating loss carryforward... (3,098,500) (707,100) (197,800)
Prepaid expenses.................. 0 0 (181,000)
Other............................. (278,900) (253,100) (104,800)
----------- ----------- -----------
Gross deferred tax assets......... (6,013,200) (4,045,800) (4,266,100)
Less valuation allowance.......... 452,600 302,500 197,800
----------- ----------- -----------
Net deferred tax assets........... (5,560,600) (3,743,300) (4,068,300)
----------- ----------- -----------
$ 526,600 $ 2,164,100 $ 1,183,400
=========== =========== ===========
</TABLE>
The financial statements include noncurrent deferred tax liabilities of
$2,561,500 and $4,131,400 in 1999 and 1998, respectively, and current deferred
tax assets of $2,034,900 and $1,967,300 which are included in prepaid and
current deferred taxes.
32
<PAGE> 33
J. INCOME TAXES (CONTINUED):
A reconciliation of the provision for income taxes to an amount determined by
application of the statutory federal income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1999 1998 1997
----------- --------- -----------
<S> <C> <C> <C>
Statutory rate...................... $(1,082,500) $(250,000) $(3,070,700)
Increase (decrease) resulting from:
Tax credits.................... 0 0 (3,200)
Nondeductible items............ 68,500 67,500 125,000
State taxes (net).............. 59,600 (171,700) (37,800)
Other (net).................... 6,200 (9,000) (700)
----------- --------- -----------
Tax provision (benefit)............. $ (948,200) $(363,200) $(2,987,400)
=========== ========= ===========
</TABLE>
K. RELATED PARTY TRANSACTIONS:
During fiscal year 1997, the Company granted a loan of $800,000 to the Company's
Chairman of the Board and Chief Executive Officer. Beginning in January 1999,
the loan bears interest at the brokerage call rate plus 0.5% (7.5% at September
30, 1999) and requires payments of $60,000 plus interest on November 1, 1999,
2000, 2001, 2002 and 2003. A final payment of $300,000 is due on November 1,
2004. The loan is collateralized by 303,397 shares of the Company's Common Stock
and 73,000 shares of the common stock of Unico Corporation.
Certain directors and officers of the Company are also directors, officers and
shareholders of Unico Corporation ("Unico"), formerly the Company's parent, and
other affiliated companies. The following is a summary of significant
transactions with these entities:
(1) The Company leases three stores and certain other locations from Unico
and leases its corporate headquarters and four additional locations
from affiliates of Unico. Aggregate rentals in connection with these
leases were $646,300 (1999), $629,800 (1998) and $672,600 (1997).
(2) The Company charges an affiliate of Unico for general and
administrative services provided. Such charges amounted to $12,300
(1999), $8,500 (1998) and $11,700 (1997).
The Company received commissions from TeleBeam Incorporated ("TeleBeam") for
coin-operated telephones installed at convenience store locations and for the
sale of prepaid telephone cards. Payments received from TeleBeam were $213,900
(1999), $296,700 (1998) and $428,800 (1997). The Company also made payments to
TeleBeam for discounted prepaid telephone cards and telephone service. Payments
made to TeleBeam were $1,199,600 (1999), $748,700 (1998) and $577,000 (1997).
The majority of the stock of TeleBeam is beneficially owned or controlled by
persons related to the Company's Chairman and Chief Executive Officer.
In fiscal year 1997, the Company purchased a property for $1,500,000 from a
partnership in which a former director is also a partner. Prior to the purchase,
the Company paid rents to the partnership of $35,500 (1997).
The Company made payments of approximately $81,000 to a director of the Company
during fiscal year 1999 for consulting fees and reimbursement of expenses.
33
<PAGE> 34
L. RETIREMENT SAVINGS AND INCENTIVE PLAN:
The Company has a contributory retirement savings plan covering all employees
meeting minimum age and service requirements. The Company will match one-half of
employee contributions up to 3% of the employee's compensation. The Company's
contributions are invested in the Company's Common Stock. The Board of Directors
may elect to make additional contributions to be allocated among all eligible
employees in accordance with provisions of the plan. The retirement savings plan
expense, which is funded currently, was $96,600 (1999), $110,300 (1998) and
$127,000 (1997).
M. DEFERRED COMPENSATION PLAN AND PERFORMANCE UNIT PLAN:
The Company has a nonqualified deferred compensation plan which permits key
executives to elect annually (via individual contracts) to defer a portion of
their compensation until their retirement, death or disability. The Company
makes a 50% matching contribution not exceeding $5,000 annually per executive.
The deferred compensation expense was $21,300, $15,600 and $25,700 for the years
ended September 30, 1999, 1998 and 1997, respectively.
The Company has recorded the assets and liabilities for the deferred
compensation plan in the consolidated balance sheets because such assets and
liabilities belong to the Company rather than to any plan or trust. The asset
and matching liability of $237,600 and $487,500 at September 30, 1999 and 1998,
respectively, include employee deferrals, accrued earnings and matching
contributions of the Company. The asset amount is included in net intangible and
other assets and the liability amount is included in deferred income and other
liabilities. Subsequent to September 30, 1999, the deferred compensation plan
assets were distributed to participants in satisfaction of plan liabilities.
Liabilities for the deferred compensation plan at December 1, 1999 were $0.
The Company also has a Performance Unit Plan to provide long-term incentives to
senior executives. Under the Performance Unit Plan, the amount of compensation
is determined over the succeeding three-year period based upon performance of
the Company as well as individual goals for the senior executives. Compensation
expense recognized under this plan was $0, $29,000 and $0 for fiscal years 1999,
1998 and 1997, respectively.
N. EQUITY COMPENSATION PLANS:
The Company has an Equity Compensation Plan, pursuant to which no additional
stock options may be granted, and a 1996 Equity Compensation Plan, which became
effective November 1, 1996. The Company has reserved 122,080 shares of common
stock which can be issued in accordance with the terms of the Equity
Compensation Plan and 1,000,000 shares of common stock which can be issued in
accordance with the terms of the 1996 Equity Compensation Plan.
Both the Equity Compensation Plan and the 1996 Equity Compensation Plan are
collectively discussed as the "Plans" below.
A committee of the Board of Directors has authority to administer the Plans, and
the committee may grant qualified incentive stock options to employees of the
Company, including officers, whether or not they are directors. The Plans also
provide that all nonemployee directors will receive annual non-qualified stock
option grants for 2,000 shares of common stock plus 500 shares for each full
year the director has served as a member of the board, up to a maximum of 4,000
shares per grant, on the date of each annual meeting. In addition, newly
appointed or elected nonemployee directors receive an initial grant for 5,000
shares. Nonemployee directors will also receive grants of stock equal in value
to and in lieu of two-thirds of the retainer due to such director. The Company
granted options to purchase 14,000, 32,000 and 26,000 shares of common stock to
nonemployee directors under the Plans during
34
<PAGE> 35
N. EQUITY COMPENSATION PLANS (CONTINUED):
fiscal years 1999, 1998 and 1997, respectively. The Company also granted 8,695,
7,140 and 6,223 shares of common stock to nonemployee directors during fiscal
years 1999, 1998 and 1997, respectively, as part of their annual retainer.
The exercise price of all options granted under the Plans may not be less than
the fair market value of the common stock on the date of grant, and the maximum
allowable term of each option is ten years. For qualified stock options granted
to any person who holds more than 10% of the voting power of the outstanding
stock, the exercise price may not be less than 110% of the fair market value,
and the maximum allowable term is five years. Options granted under the Plans
generally have various vesting schedules.
Information regarding outstanding options is presented below. All options
outstanding are exercisable according to their vesting schedule.
Outstanding Options for Shares of Common Stock:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OUTSTANDING EXERCISE EXERCISE PRICE
OPTIONS PRICE PER SHARE PER SHARE
----------- --------------- ----------------
<S> <C> <C> <C>
Balance, October 1, 1996........ 326,277 $2.50 to $8.50 $5.79
Granted......................... 110,140 $5.63 to $6.88 $6.23
Exercised....................... (750) $3.50 $3.50
Canceled........................ (30,632) $2.50 to $7.00 $5.30
--------
Balance, September 30, 1997..... 405,035 $2.50 to $8.50 $5.95
Granted......................... 318,556 $3.13 to $5.78 $3.82
Exercised....................... (23,000) $2.50 to $3.50 $2.76
Canceled........................ (165,025) $3.50 to $8.50 $6.29
--------
Balance, September 30, 1998..... 535,566 $2.50 to $8.50 $4.70
Granted......................... 156,500 $1.38 to $2.89 $1.52
Canceled........................ (115,625) $3.13 to $7.00 $4.50
--------
Balance, September 30, 1999:
363,250 $1.38 to $3.75 $2.62
122,266 $3.76 to $6.13 $5.36
90,925 $6.14 to $8.50 $6.86
--------
576,441 $1.38 to $8.50 $3.87
--------
Exercisable at September 30,
1999.......................... 295,718 $2.50 to $8.50 $5.03
========
Balance of Shares Reserved for
Grant at September 30, 1999... 523,581
========
</TABLE>
The weighted average fair value of the stock options granted during fiscal years
1999, 1998 and 1997 were $1.03, $1.88 and $2.97, respectively. The fair value of
each stock option granted is estimated on
35
<PAGE> 36
N. EQUITY COMPENSATION PLANS (CONTINUED):
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions used for grants in the years ended
September 30,
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rate.................... 5.9% 4.8% 6.3%
Expected volatility........................ 52.2% 37.9% 29.3%
Expected life in years..................... 9.0 7.9 8.2
Contractual life in years.................. 10.0 8.9 9.0
Fair value of options granted.............. $160,620 $597,578 $327,163
</TABLE>
The Company accounts for the Plans in accordance with Accounting Principles
Board Opinion No. 25, under which no compensation cost has been recognized for
stock option awards. Had compensation cost for the Plans been determined in
accordance with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS 123), the Company's pro forma net earnings
(loss) and earnings (loss) per share for the fiscal years ended September 30,
1999, 1998 and 1997 would have been as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- -----------
<S> <C> <C> <C>
Net earnings (loss):
As reported........................... $(2,235,627) $(371,955) $(6,044,065)
Pro forma........................ $(2,243,113) $(466,503) $(6,262,937)
Basic earnings (loss) per share:
As reported...................... $ (0.32) $ (0.05) $ (0.91)
Pro forma........................ $ (0.33) $ (0.07) $ (0.94)
Diluted earnings (loss) per share:
As reported...................... $ (0.32) $ (0.05) $ (0.91)
Pro forma........................ $ (0.33) $ (0.07) $ (0.94)
</TABLE>
O. EMPLOYEE STOCK PURCHASE PLAN:
In February 1999, the Company's stockholders approved a stock purchase plan.
Under the stock purchase plan, eligible employees may purchase common stock in
quarterly offering periods through payroll deductions of up to 25% of
compensation. The price per share is 90% of the average market price throughout
the quarter but not less than 90% of the lower of the market price at the
beginning or end of the market period. The stock purchase plan provides for
purchases by employees of up to an aggregate of 500,000 shares. During fiscal
year 1999, employees purchased 2,004 shares pursuant to the stock purchase plan.
P. NONQUALIFIED STOCK OPTIONS:
On February 26, 1993, the Company made a one-time, special grant of
non-qualified stock options to each of Henry D. Sahakian and Daniel D. Sahakian
to purchase 150,000 shares of common stock of the Company at a price of $4.50
per share in exchange for their relinquishment of effective voting control of
the Company as a result of the elimination of the super-majority voting
provisions of the Class B Common Stock. These nonqualified stock options are not
related to the Company's Equity Compensation Plan. Henry D. Sahakian exercised
his option during fiscal year 1996 by exchanging 84,375 shares of the Company's
Common Stock valued at $675,000. Daniel D. Sahakian exercised his option during
fiscal year 1998 for a cash payment to the Company of $675,000.
36
<PAGE> 37
SUPPLEMENTARY FINANCIAL INFORMATION
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1999
Revenues............................. $61,149,025 $57,227,376 $64,600,629 $69,328,727
Gross Profits........................ 17,179,263 15,698,049 16,654,521 17,488,617
Net Earnings (Loss).................. $ (289,126) $(1,428,692) $ (533,180) $ 15,371
=========== =========== =========== ===========
Net Earnings (Loss) Per Share........ $ (0.04) $ (0.21) $ (0.08) $ 0.00
=========== =========== =========== ===========
YEAR ENDED SEPTEMBER 30, 1998
Revenues............................. $82,191,301 $56,012,612 $63,279,423 $64,885,377
Gross Profits........................ 20,627,858 16,488,756 16,655,311 17,893,254
Earnings (Loss) Before Extraordinary
Item............................... (274,243) (429,694) 376,219 200,078
Extraordinary Item-Loss From Debt
Extinguishment..................... 0 0 (244,315) 0
----------- ----------- ----------- -----------
Net Earnings (Loss).................. $ (274,243) $ (429,694) $ 131,904 $ 200,078
=========== =========== =========== ===========
Earnings (Loss) Per Share Before
Extraordinary Item................. $ (0.04) $ (0.06) $ 0.06 $ 0.03
Loss Per Share From Extraordinary
Item............................... 0.00 0.00 (0.04) 0.00
----------- ----------- ----------- -----------
Net Earnings (Loss) Per Share........ $ (0.04) $ (0.06) $ 0.02 $ 0.03
=========== =========== =========== ===========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
37
<PAGE> 38
PART III
In accordance with Instruction G(3), the information called for by Items
10, 11, 12 and 13 is incorporated by reference from the Registrant's Definitive
Proxy Statement pursuant to Regulation 14A, to be filed with the Commission not
later than 120 days after September 30, 1999, the end of the fiscal year covered
by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS AND SCHEDULES
The Financial Statements listed below are filed as part of this Annual Report on
Form 10-K.
(1) Financial Statements
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
Report of Deloitte & Touche LLP, Independent Auditors....... 19
Consolidated Balance Sheets -- September 30, 1999 and
1998...................................................... 20
Consolidated Statements of Operations for the years ended
September 30, 1999, 1998 and 1997......................... 21
Consolidated Statements of Stockholders' Equity for the
years ended September 30, 1999, 1998 and 1997............. 22
Consolidated Statements of Cash Flows for the years ended
September 30, 1999, 1998 and 1997......................... 23-24
Notes to Consolidated Financial Statements.................. 25-36
Supplementary Financial Information -- Selected Quarterly
Financial Data (Unaudited)................................ 37
</TABLE>
(2) Financial Statement Schedules
The following financial statement schedule should be read in conjunction with
the financial statements and notes thereto included in this report. Schedules
not included below have been omitted because they are not applicable or required
or because the required information is not material or is included in the
financial statements or notes thereto.
The following schedule for the years ended September 30, 1999, 1998 and 1997 is
included in this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts............ 42
</TABLE>
(B) REPORTS ON FORM 8-K
Uni-Marts, Inc. filed no reports on Form 8-K with the Securities and Exchange
Commission during the last quarter of the fiscal year ended September 30, 1999.
38
<PAGE> 39
(C) EXHIBITS
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Company (Filed as Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the period ended March 30, 1995 and
incorporated herein by reference thereto).
3.2 By-Laws of the Company (Filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 30, 1995 and incorporated herein by reference
thereto).
4.1 Form of the Company's Common Stock Certificate (Filed as
Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q
for the period ended April 1, 1993, File No. 1-11556, and
incorporated herein by reference thereto).
10.1 Uni-Marts, Inc. Amended and Restated Equity Compensation
Plan (Filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the period ended March 30, 1995 and
incorporated herein by reference thereto).
10.2 Uni-Marts, Inc. Retirement Savings & Incentive Plan (Filed
as Exhibit 4.2 to the Company's Registration Statement on
Form S-8, File No. 33-9807, filed on July 10, 1991, and
incorporated herein by reference thereto).
10.3 Form of Indemnification Agreement between Uni-Marts, Inc.
and each of its Directors (Filed as Exhibit A to the
Company's Definitive Proxy Statement for the February 25,
1988 Annual Meeting of Stockholders, File No. 0-15164, and
incorporated herein by reference thereto).
10.4 Uni-Marts, Inc. Deferred Compensation Plan (Filed as Exhibit
10.8 to the Annual Report of Uni-Marts, Inc. on Form 10-K
for the year ended September 30, 1990, File No. 0-15164, and
incorporated herein by reference thereto).
10.5 Uni-Marts, Inc. Executive Annual Bonus Plan (Filed as
Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q
for the period ended December 31, 1998 and incorporated
herein by reference thereto).
10.6 Uni-Marts, Inc. Performance Unit Plan (Filed as Exhibit 10.9
to the Annual Report of Uni-Marts, Inc. on Form 10-K for the
year ended September 30, 1994 and incorporated herein by
reference thereto).
10.7 Composite copy of Change of Control Agreements between
Uni-Marts, Inc. and its executive officers (Filed as Exhibit
10.10 to the Annual Report of Uni-Marts, Inc. on Form 10-K
for the year ended September 30, 1994 and incorporated
herein by reference thereto).
10.8 Uni-Marts, Inc. 1996 Equity Compensation Plan (Filed as
Exhibit A to the Company's Definitive Proxy Statement for
the February 22, 1996 Annual Meeting of Stockholders and
incorporated herein by reference thereto).
10.9 Amendment 1998-1 to the Uni-Marts, Inc. Equity Compensation
Plan (Filed as Exhibit 10.10 to the Annual Report of
Uni-Marts, Inc. on Form 10-K for the year ended September
30, 1998 and incorporated herein by reference thereto).
10.10 Amended and Restated Note between Henry D. Sahakian and
Uni-Marts, Inc. dated January 25, 1999 (Filed as Exhibit
10.10 to the Company's Quarterly Report on Form 10-Q for the
period ended April 1, 1999 and incorporated herein by
reference thereto).
10.11 Loan Agreement between FFCA Acquisition Corporation and
Uni-Marts, Inc. dated June 30, 1998 (Filed as Exhibit 10.10
to the Company's Quarterly Report on Form 10-Q for the
period ended July 2, 1998 and incorporated herein by
reference thereto).
10.12 Revolving Credit Loan Agreement between U.S. Bank and
Uni-Marts, Inc. dated December 30, 1998 (Filed as Exhibit
10.13 to the Company's Quarterly Report on Form 10-Q for the
period ended December 31, 1998 and incorporated herein by
reference thereto).
10.12(a) Revolving Credit Loan Agreement Modification Agreement
between U.S. Bank and Uni-Marts, Inc. dated July 1, 1999
(Filed as Exhibit 10.12(a) to the Company's Quarterly Report
on Form 10-Q for the period ended July 1, 1999 and
incorporated herein by reference thereto).
</TABLE>
39
<PAGE> 40
<TABLE>
<S> <C>
10.13 Uni-Marts, Inc. Employee Stock Purchase Plan (Filed as
Exhibit A to the Company's Definitive Proxy Statement for
the February 25, 1999 Annual Meeting of Stockholders and
incorporated herein by reference thereto).
10.14 Retirement Agreement and General Release between Uni-Marts,
Inc. and J. Kirk Gallaher dated March 19, 1999.
10.15 Separation Agreement and General Release between Uni-Marts,
Inc. and D. Gregory Graves dated August 12, 1999.
11 Statement regarding computation of per share earnings.
21 Subsidiary of the registrant.
23 Consent of Deloitte & Touche LLP.
27 Financial data schedule.
99 Report on Form 11-K.
</TABLE>
(D) SCHEDULES
The schedules listed in Item 14(A) are filed as part of this Annual Report on
Form 10-K.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNI-MARTS, INC.
(Registrant)
By: /s/ HENRY D. SAHAKIAN
------------------------------------
Henry D. Sahakian
Chairman of the Board
(Principal Executive Officer)
By: /s/ N. GREGORY PETRICK
------------------------------------
N. Gregory Petrick
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
(Principal Financial Officer)
Dated: December 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HENRY D. SAHAKIAN Chairman of the Board December 29, 1999
- -----------------------------------
Henry D. Sahakian
/s/ M. MICHAEL ARJMAND Director December 29, 1999
- -----------------------------------
M. Michael Arjmand
/s/ HERBERT C. GRAVES Director December 29, 1999
- -----------------------------------
Herbert C. Graves
/s/ STEPHEN B. KRUMHOLZ Director December 29, 1999
- -----------------------------------
Stephen B. Krumholz
/s/ JACK G. NAJARIAN Director December 29, 1999
- -----------------------------------
Jack G. Najarian
/s/ ANTHONY S. REGENSBURG Director December 29, 1999
- -----------------------------------
Anthony S. Regensburg
/s/ DANIEL D. SAHAKIAN Director December 29, 1999
- -----------------------------------
Daniel D. Sahakian
/s/ GEROLD C. SHEA Director December 29, 1999
- -----------------------------------
Gerold C. Shea
</TABLE>
41
<PAGE> 42
UNI-MARTS, INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
-----------------------
CHARGED CHARGED TO
BALANCE AT TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE(1) PERIOD
- ----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1999:
Allowance for doubtful accounts..... $384,900 $ 58,600 $0 ($155,500) $288,000
======== ======== == ========= ========
YEAR ENDED SEPTEMBER 30, 1998:
Allowance for doubtful accounts..... $132,600 $304,500 $0 ($ 52,200) $384,900
======== ======== == ========= ========
YEAR ENDED SEPTEMBER 30, 1997:
Allowance for doubtful accounts..... $ 74,600 $105,200 $0 ($ 47,200) $132,600
======== ======== == ========= ========
</TABLE>
- ---------------
(1) Specific account or note receivable written off to allowance.
42
<PAGE> 43
UNI-MARTS, INC. AND SUBSIDIARY
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------
<S> <C>
10.14 Retirement Agreement and General Release between Uni-Marts, Inc. and J.
Kirk Gallaher dated March 19, 1999.
10.15 Separation Agreement and General Release between Uni-Marts, Inc. and D.
Gregory Graves dated August 12, 1999.
11 Statement regarding computation of per share earnings for the years ended
September 30, 1999, 1998 and 1997.
21 Subsidiary of the registrant.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
99 Report on Form 11-K.
</TABLE>
43
<PAGE> 1
EXHIBIT (10.14)
RETIREMENT AGREEMENT AND GENERAL RELEASE
----------------------------------------
This Retirement Agreement and General Release (the "Agreement") dated
March 19, 1999, between Uni-Marts, Inc. (the "Company") and J. Kirk Gallaher
(the "Executive").
WHEREAS, the Executive has been employed as an officer of the Company
and is currently serving as Executive Vice President and Chief Financial
Officer.
WHEREAS, the Company and the Executive mutually desire to provide for
an orderly transfer of the Executive's duties and responsibilities, and for his
ultimate retirement from the Company.
WHEREAS, the parties wish to settle all their mutual rights and
obligations arising from, or related to, the Executive's employment with the
Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive,
intending to be legally bound, agree as follows:
Section 1. Retirement and Retirement Payment.
(a) The Executive agrees that he will terminate his employment
with and retire from the Company on February 29, 2000 (the "Retirement Date").
Subject to the last sentence of this Section 1 and Section 6 below, the Company
agrees to pay the Executive his regular salary through February 29, 2000.
Executive will resign as Executive Vice President and Chief Financial Officer
and as a member of the Board of Directors as of June 30, 1999. From June 30,
1999, until the "Retirement Date," the Executive shall have such duties as
assigned to him by the CEO, including but not limited to providing assistance on
financial issues, investor issues, orientation of a new CFO and performance of
special projects. Except as provided below,
<PAGE> 2
such payment shall be in lieu, and in complete discharge, of all obligations
owed by the Company to Executive, except (i) for any claim to which the
Executive is entitled to indemnification from the Company for any acts or
omissions in his capacity as an officer of the Company (except for criminal
wrongdoing or acts outside the scope of his employment) and (ii) as set forth
herein. Nothing herein shall affect Executive's rights with respect to his
interests in any and all retirement and welfare benefit plans maintained by the
Company, including the Company's 401(k) Plan and deferred compensation plan. The
Company may withhold from the foregoing payment and pay over to the applicable
tax authorities all amounts required to be withheld in accordance with
applicable federal, state and local tax withholding laws.
Section 2. Other Payments and Benefits.
(a) The Company agrees to continue to allow Executive to
retain and utilize the automobile provided to him by the Company until the
Retirement Date at which time Executive shall deliver such automobile to the
Company or to such other location as directed by the Company. In accordance with
existing policy and practice, the Company shall reimburse Executive for any and
all reasonable costs and expenses associated with the operation of the
automobile, including, but not limited to, fuel, repairs and insurance.
(b) As of June 30, 1999, Executive will cease to be eligible
to participate in Uni-Marts' group long-term disability insurance plan, 401(k)
plan or group life insurance plan. Regarding long-term disability insurance, the
Company will purchase an individual contract to provide the Executive with
similar long term disability benefits for the period July 1, 1999 through the
Retirement Date.
(c) Executive will be permitted to continue to participate in
the Company's
-2-
<PAGE> 3
deferred compensation plan through December 31, 1999. The Company will continue
to match the Executive's contribution on a 50% basis up to the maximum of
$10,000 of his salary deferral. Upon the Retirement Date, the Executive will be
entitled to receive all monies due him from the plan in accordance with its
terms.
(d) The Company agrees to keep in effect the "split dollar
life insurance" agreement between the Company and the Executive. The Executive
is authorized to cause the cash surrender value to be used to convert the policy
into a paid-up life insurance policy. Upon the Executive's death, the Company
shall receive the full amount of all premiums it paid to carry the policy during
the Executive's employment by the Company from the proceeds of the death benefit
from the insurance necessary or appropriate to effect this agreement.
(e) The Executive shall be allowed to exercise stock options
which have vested until the Retirement Date of February 29, 2000, but only to
the extent that those stock options have vested on or prior to the Retirement
Date.
(f) The parties agree that the Change of Control Agreement
between the Company and the Executive will remain in effect until January 31,
2000, after which such Agreement will terminate and the Executive shall not be
entitled to any compensation and benefits pursuant to such Agreement unless
already due pursuant to the terms of the Agreement.
Section 3. No Further Obligations of the Company; Releases. Except as
provided in Sections 1 and 2 hereof, the Company shall have no further
obligations whatsoever to the Executive and the Executive hereby releases the
Company as set forth in Exhibit A hereto and the Company hereby releases the
Executive as set forth in Exhibit B hereto.
Section 4. Conditions of Benefits. The Company shall provide to the
Executive the
-3-
<PAGE> 4
rights, payments and benefits set forth in Sections 1 and 2 hereof as
consideration for and contingent upon (i) the Executive's execution,
non-revocation and honoring of a release of claims and covenant not to sue in
favor of the Company in the form attached hereto as Exhibit "A" and (ii) the
Executive's continued compliance with the provisions of Sections 5, 6 and 7 and
8 hereof. If the Executive is in breach of any of such Sections, the Company may
terminate its obligations under Sections 1 and 2 above. Moreover, the Executive
agrees to execute, not revoke and honor a General Release Agreement, similar to
Exhibit A, on his Retirement Date.
Section 5. Non-Disclosure. The Executive hereby agrees that he shall
not, during or after his employment, disclose or use for any purpose
confidential information or proprietary data of the Company (or any of its
subsidiaries), except as required by applicable law or legal process; provided,
however, that confidential information shall not include any information known
generally to the public or ascertainable from public or published sources (other
than as a result of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons engaged in the same
business or a business similar to that conducted by the Company. The Executive
acknowledges and agrees that the Company will suffer irreparable injury in the
event of any material breach of this Section 5, that damages resulting from such
injury will be incapable of being precisely measured, and that the Company will
not have an adequate remedy at law to redress the harm which such violation
shall cause. Therefore, the Executive agrees that the Company shall have the
rights and remedies of specific performance and injunctive relief, in addition
to any other rights or remedies that may be available at law or in equity or
under this Agreement, in respect of any failure, or threatened failure, on the
part of the Executive to comply with the provisions of this Section 5,
including,
-4-
<PAGE> 5
but not limited to, temporary restraining orders and temporary injunctions to
restrain any violation or threatened violation of this Section 5 by the
Executive.
Section 6. Return of Company Property. The Executive acknowledges that
all records, files, documents and equipment, all information relating to
employees, Company members and suppliers, and any other materials that in any
way relate to the business of the Company which the Executive has accumulated
during his employment by the Company, other than information and documents
publicly known or disseminated, are the property of the Company, including all
duplicates and copies of any of the foregoing, and that all such property shall
be returned to the sole possession of the Company on or before the Retirement
Date.
Section 7. Business Goodwill. At all times following date hereof, the
Executive shall make no comments or take any other actions, direct or indirect,
that will reflect adversely on the Company or its officers and directors in such
capacity or adversely affect their business reputation or goodwill. At all times
following the date hereof, the Board of Directors will take reasonable efforts
to instruct its members and each officer of the Company not to make comments or
take any other actions, direct or indirect, that will reflect adversely on the
Executive or adversely affect his business reputation or goodwill. The Executive
hereby agrees that he shall cooperate with the Company and its agents and
representatives with respect to reasonable requests for information with respect
to the Company and its financial statements that the Company and its agents and
representatives request and in taking such other reasonable action with respect
to the Company and its financial statements as the Company and its agents and
representatives may request. The Executive further agrees to assist the Company
at any time in the future, with respect to all reasonable requests to testify in
connection with any legal
-5-
<PAGE> 6
proceeding or matter relating to the Company, including but not limited to any
federal, state or local audit, proceeding or investigation, other than
proceedings relating to the enforcement of this Retirement Agreement or other
proceedings in which the Executive is a named party whose interests are adverse
to those of the Company.
Section 8. Miscellaneous.
(a) Complete Agreement. This Retirement Agreement constitutes
the entire agreement between the parties and cancels and supersedes, with the
exception of the Indemnification Agreement dated February 18, 1988, all other
agreements and understandings, whether written or oral, between the parties
which may have related to the subject matter contained in this Retirement
Agreement.
(b) Modification; Agreement; Waiver. No modification,
amendment or waiver of any provisions of this Retirement Agreement shall be
effective unless approved in writing by both parties. The failure at any time to
enforce any of the provisions of this Retirement Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of
either party thereafter to enforce each and every provision hereof in accordance
with its terms.
(c) Governing Law; Jurisdiction.
This Retirement Agreement and performance under it, and
all proceedings that may ensue from its breach, shall be construed in accordance
with and under the laws of the Commonwealth of Pennsylvania.
(d) Severability. Whenever possible, each provision of this
Retirement Agreement shall be interpreted in such manner as to be effective and
valid under applicable law,
-6-
<PAGE> 7
but if any provision of this Retirement Agreement shall be held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Retirement Agreement;
provided, however, that the invalidity of the release contained in Exhibit A,
either executed on the date hereof or on the Retirement Date, shall nullify the
Company's obligation to provide, and the Company shall be entitled to a return
of, any and all payments made pursuant to this Retirement Agreement.
(e) Assignment. The rights and obligations of the parties
under this Retirement Agreement shall be binding upon and inure to the benefit
of their respective successors, assigns, executors, administrators and heirs,
provided, however, that neither the Company nor the Executive may assign any
duties under this Retirement Agreement without the prior written consent of the
other.
(f) Notices. All notices and other communications under this
Retirement Agreement shall be in writing and shall be given in person or by
telegraph, telefax or first class mail, certified or registered with return
receipt requested, and shall be deemed to have been duly given when delivered
personally or three days after mailing or one day after transmission of a
telegram or telefax, as the case may be, to the respective persons named below:
If to the Company: Uni-Marts, Inc.
477 E. Beaver Avenue
State College, PA 16801-5690
Attn: Chief Executive Officer
-7-
<PAGE> 8
If to the Executive: J. Kirk Gallaher
694 Earl Drive
State College, PA 16803
(g) Advice of Counsel. The Executive acknowledges that he has
been advised by the Company to consult with his own legal counsel with respect
to the subject matter and the terms of this Agreement, that he has had the
opportunity to do so and that this Agreement is the product of negotiations
between the Company and the Executive.
(h) Confidentiality. The Executive and the Company agree to
keep confidential the existence of this Agreement and the terms unless otherwise
required by law, rule or regulation, Executive hereby recognizes that this
Agreement may be required to be filed as an exhibit to a periodic report filed
by the Company under federal securities laws.
IN WITNESS WHEREOF, the parties have executed this Retirement Agreement
as of the day and year first above written.
UNI-MARTS, INC.
/s/ Henry D. Sahakian
---------------------------
By: Henry D. Sahakian
Chief Executive Officer
/s/ J. Kirk Gallaher
---------------------------
By: J. Kirk Gallaher
Executive
-8-
<PAGE> 9
EXHIBIT "A"
-----------
GENERAL RELEASE AGREEMENT
-------------------------
I, J. Kirk Gallaher, for myself, my heirs, executors, administrators
and assigns, if any, for and in consideration of the rights, payments and
benefits under the Retirement Agreement and General Release Agreement between
the undersigned and Uni-Marts, Inc. ("Uni-Marts") dated March 19, 1999 (the
"Agreement") hereby agrees as follows:
1. I waive, release and forever discharge Uni-Marts, and its
subsidiaries and affiliates, and each of their directors, officers and employees
and each of their successors and assigns (hereinafter the "Released Parties"),
of and from any and all past or present causes of action, suits, agreements or
other claims which I have against the Released Parties upon or by reason of any
matter, cause or thing whatsoever, including, without limitation, claims for any
alleged violation of the Civil Rights Act of 1964 and 1991, the Equal Pay Act of
1963, the Age Discrimination in Employment Act of 1967, the Rehabilitation Act
of 1973, the Older Workers Benefit Protection Act of 1990, the Americans with
Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the
Pennsylvania Human Relations Act and any other federal or state law, regulation
or ordinance, or public policy, contract or tort law having any bearing
whatsoever on the terms and conditions of employment or Retirement of
employment, and I promise not to file a lawsuit to assert any such claims;
provided, however, that this release shall not apply to A) the payments and
benefits set forth in the Agreement, B) any benefit payable under the terms of
any employment benefit plan maintained by the Released Parties, except that it
will apply to any Retirement benefits that otherwise might be payable outside of
the Agreement, or C) any claim to which I am entitled to indemnification from
Uni-Marts for any
<PAGE> 10
acts or omissions in my capacity as an officer of Uni-Marts, except for criminal
wrongdoing and acts outside the scope of my employment.
2. I acknowledge that I have carefully read and fully understand the
provisions of this General Release Agreement, that I have had twenty-one (21)
days from the date I received a copy of this General Release Agreement in which
to consider entering into this General Release Agreement that if I sign and
return this General Release Agreement before the end of that twenty-one (21) day
period then I will have voluntarily waived my right to consider the Agreement
for the full twenty-one (21) days and that I have executed this General Release
Agreement voluntarily and with full knowledge of its significance, meaning and
binding effect. I also acknowledge that Uni-Marts has advised me in writing to
consult with an attorney of my own choosing with regard to entering into this
General Release Agreement and that I have had an opportunity to do so.
3. I acknowledge that I may revoke this General Release Agreement
within seven (7) days of my execution of this document by submitting a written
notice of my revocation to the Secretary of Uni-Marts' offices in State College,
Pennsylvania. I also understand that this General Release Agreement shall not
become effective or enforceable until the expiration of that seven (7) day
period.
4. I acknowledge that in my decision to enter into this General
Release Agreement, I have not relied on any representations, promises or
agreements of any kind, including oral statements by representatives of
Uni-Marts, except as set forth in this General Release
<PAGE> 11
Agreement, the General Release Agreement executed by Uni-Marts or in the
Agreement.
IN WITNESS WHEREOF, and with the intention of being legally bound
hereby, I have executed this General Release Agreement on March 19, 1999.
/s/ J. Kirk Gallaher
-------------------------
J. Kirk Gallaher
<PAGE> 12
EXHIBIT B
---------
GENERAL RELEASE AGREEMENT
-------------------------
UNI-MARTS, INC., for itself, and its subsidiaries and affiliates, and
each of their directors, and officers and each of their successors and assigns,
if any, ("Uni-Marts"), for and in consideration of the rights under the
Agreement between the undersigned and J. Kirk Gallaher dated March 19, 1999 (the
"Agreement") hereby agrees as follows:
1. Uni-Marts waives, releases and forever discharges Gallaher and
his heirs, executors, administrators and assigns (hereinafter the "Released
Parties"), of and from any and all past or present causes of action, suits,
agreements or other claims which it has, ever had or hereinafter may arise
against the Released Parties upon or by reason of any matter, cause or thing
whatsoever, including, without limitation, any federal or state law, regulation
or ordinance, or public policy, contract or tort law whether having any bearing
whatsoever on Gallaher's employment and it promises not to file a lawsuit to
assert any such claims; provided, however, that this release shall not apply to
the obligations set forth in the Agreement or for any act involving criminal
wrongdoing or outside the scope of his employment.
2. Uni-Marts acknowledges that it has carefully read and fully
understands the provisions of this General Release Agreement, that it has had
sufficient time in which to consider entering into this General Release
Agreement and that it has executed this General Release Agreement voluntarily
and with full knowledge of its significance, meaning and binding effect.
Uni-Marts also acknowledges that it has consulted with an attorney of its own
choosing with regard to entering into this General Release Agreement.
3. Uni-Marts acknowledges that in its decision to enter into this
General Release Agreement, it has not relied on any representations, promises or
agreements of any kind,
<PAGE> 13
including oral statements by Gallaher or his representatives, except as set
forth in this General Release Agreement, in the Agreement or in the General
Release Agreement executed by Gallaher.
IN WITNESS WHEREOF, and with the intention of being legally bound
hereby, an authorized representative of Uni-Marts has executed this General
Release Agreement on March 19, 1999.
UNI-MARTS, INC.
By: /s/ Henry D. Sahakian
------------------------------
Henry D. Sahakian,
Chief Executive Officer
<PAGE> 1
EXHIBIT (10.15)
SEPARATION AGREEMENT AND GENERAL RELEASE
----------------------------------------
This Separation Agreement and General Release (the "Agreement") dated
August 12, 1999, between Uni-Marts, Inc. (the "Company") and D. Gregory Graves
(the "Executive").
WHEREAS, the Executive has been employed as an officer of the Company
and is currently serving as Chief Operating Officer.
WHEREAS, the Company and the Executive mutually desire to provide for
an orderly transfer of the Executive's duties and responsibilities, and for his
departure from the Company.
WHEREAS, the Company has offered to extend certain additional payment
and benefits to Executive as detailed below to which he is not otherwise
entitled under the existing policies and practices of the Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive,
intending to be legally bound, agree as follows:
Section 1. Termination and Payments and Benefits
(a) Executive shall be relieved of all employment duties with
the Company effective August 10, 1999, which shall be entered in the records of
the Company as his Termination Date.
(b) The Company shall pay Executive $75,000, subject to
deductions required by law, which is equivalent to six months of pay (severance
period). The Company shall also provide health benefits to the Executive during
this severance period, after which the Company shall have no further obligation
to furnish this coverage at its expense and at which point Executive shall be
entitled to COBRA for the remaining 12-month period. It is understood and
<PAGE> 2
agreed that this arrangement will provide Executive with compensation and
benefits in excess of that to which the Executive would otherwise be entitled
under the existing policies of the Company.
(c) The Company agrees to transfer to the Executive title to
the automobile which has been provided to him by the Company subject to
Executive satisfying the payment of any deductions required by law. The
Executive shall have all obligations with respect to this vehicle after the date
of the transfer.
(d) Except as provided below, such payment and benefits shall
be in lieu, and in complete discharge, of all obligations owed by the Company to
Executive, except (i) for any claim to which the Executive is entitled to
indemnification from the Company for any acts or omissions in his capacity as an
officer of the Company (except for criminal wrongdoing or acts outside the scope
of his employment) and (ii) as set forth herein. Nothing herein shall affect
Executive's rights with respect to his interests in any and all welfare benefit
plans maintained by the Company, the Company's 401(k) Plan and deferred
compensation plan, but shall be in lieu of any payment under the Company's
Severance Plan.
Section 2. Payment Upon Change in Control
(a) If there is a Change of Control of the Company within a
period of six months after the date of this Agreement, the Company shall pay to
the Executive, within 15 days after the date of the Change of Control, an amount
in cash equal to 2.99 times the Executive's Base Compensation.
(b) For purposes of this section, the following terms shall
have the meanings set forth below:
2
<PAGE> 3
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
"Base Compensation" shall mean the total cash remuneration
received by the Executive in all capacities with the Company, and its affiliates
(as defined in Section 1504 of the Code without regard to subsection (b)
thereof), as reported for Federal income tax purposes on Form W-2, together with
any and all salary reduction authorized amounts under any of the Company's
benefit plans or programs, for the 12-month period from August 1998 through July
1999.
"Beneficial Owner" of any securities shall mean:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of any
3
<PAGE> 4
security under this subsection (ii) as a result of an oral or written agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) where voting securities are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subsection (ii) above) or disposing of any voting
securities of the Company;
(iv) provided, however, that nothing in this definition shall
cause a Person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
"Change of Control" shall be deemed to have taken place if (i)
any Person (except Henry Sahakian, Daniel Sahakian, or their respective
families, the Company or any employee benefit plan of the Company or of any
Affiliate, any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 30% or more of the equity of the Company
then outstanding or (ii) any Person
4
<PAGE> 5
(except Henry Sahakian, Daniel Sahakian, or their respective families), together
with all Affiliates and Associates of such Person purchases substantially all of
the assets of the Company.
The execution of any agreement, letter of intent or memorandum
to effect a change of control which occurs within the six-month period that
actually culminates in a change of control that occurs at a later time shall be
deemed as a change of control within a period of six months after August 10,
1999.
"Person" shall mean any individual, firm, corporation,
partnership or other entity.
Section 3. No Further Obligations of the Company; Releases.
Except as provided in Sections 1 and 2 hereof, the Company
shall have no further obligations whatsoever to the Executive and the Executive
hereby releases the Company as set forth in Exhibit A hereto.
Section 4. Conditions of Benefits.
The Company shall provide to the Executive the rights,
payments and benefits set forth in Sections 1 and 2 hereof as consideration for
and contingent upon (i) the Executive's execution, non-revocation and honoring
of a release of claims and covenant not to sue in favor of the Company in the
form attached hereto as Exhibit "A" and (ii) the Executive's continued
compliance with the provisions of Sections 5, 6, 7 and 8 hereof. If the
Executive is in breach of any of such Sections, the Company shall be entitled to
a repayment of any amounts paid pursuant to Sections 1 and 2 above.
Section 5. Non-Disclosure.
The Executive hereby agrees that he shall not, during or after
his employment, disclose or use for any purpose confidential information or
proprietary data of the Company (or any of its subsidiaries), except as required
by applicable law or legal process; provided, however,
5
<PAGE> 6
that confidential information shall not include any information known generally
to the public or ascertainable from public or published sources (other than as a
result of unauthorized disclosure by the Executive) or any information of a type
not otherwise considered confidential by persons engaged in the same business or
a business similar to that conducted by the Company. The Executive acknowledges
and agrees that the Company will suffer irreparable injury in the event of any
material breach of this Section 5, that damages resulting from such injury will
be incapable of being precisely measured, and that the Company will not have an
adequate remedy at law to redress the harm which such violation shall cause.
Therefore, the Executive agrees that the Company shall have the rights and
remedies of specific performance and injunctive relief, in addition to any other
rights or remedies that may be available at law or in equity or under this
Agreement, in respect of any failure, or threatened failure, on the part of the
Executive to comply with the provisions of this Section 5, including, but not
limited to, temporary restraining orders and temporary injunctions to restrain
any violation or threatened violation of this Section 5 by the Executive.
Section 6. Return of Company Property.
The Executive acknowledges that all records, files, documents
and equipment, all information relating to employees, Company members and
suppliers, and any other materials that in any way relate to the business of the
Company which the Executive has accumulated during his employment by the
Company, other than information and documents publicly known or disseminated,
are the property of the Company, including all duplicates and copies of any of
the foregoing, and that all such property shall be immediately returned to the
sole possession of the Company.
6
<PAGE> 7
Section 7. Business Goodwill.
At all times following the date hereof, the Executive shall
make no comments or take any other actions, direct or indirect, that will
reflect adversely on the Company or its officers and directors in such capacity
or adversely affect their business reputation or goodwill. At all times
following the date hereof, the Board of Directors will take reasonable efforts
to instruct its members and each officer of the Company not to make comments or
take any other actions, direct or indirect, that will reflect adversely on the
Executive or adversely affect his business reputation or goodwill. The Executive
hereby agrees that he shall cooperate with the Company and its agents and
representatives with respect to reasonable requests for information with respect
to the Company and its financial statements that the Company and its agents and
representatives request and in taking such other reasonable action with respect
to the Company and its financial statements as the Company and its agents and
representatives may request. The Executive hereby represents to the Company that
he has disclosed fully to the Company the terms and conditions of all
arrangements, contracts and understandings, whether written or oral, with all of
the Company's suppliers or vendors. The Executive further agrees to assist the
Company at any time in the future, with respect to all reasonable requests to
testify in connection with any legal proceeding or matter relating to the
Company, including but not limited to any federal, state or local audit,
proceeding or investigation, other than proceedings relating to the enforcement
of this Separation Agreement or other proceedings in which the Executive is a
named party whose interests are adverse to those of the Company.
Section 8. Non-Solicitation of Employees
Executive agrees that for six (6) months from the date of
execution of this Agreement, Executive shall not directly or indirectly solicit,
or contact with a view to the
7
<PAGE> 8
engagement or employment of, any person or entity of any person who is an
employee of Company.
Section 9. Miscellaneous.
Complete Agreement. This Separation Agreement constitutes the
entire agreement between the parties and cancels and supersedes all other
agreements and understandings, whether written or oral, between the parties
which may have related to the subject matter contained in this Separation
Agreement.
(a) Modification; Agreement; Waiver. No modification,
amendment or waiver of any provisions of this Separation Agreement shall be
effective unless approved in writing by both parties. The failure at any time to
enforce any of the provisions of this Separation Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of
either party thereafter to enforce each and every provision hereof in accordance
with its terms.
(b) Governing Law; Jurisdiction. This Separation Agreement and
performance under it, and all proceedings that may ensue from its breach, shall
be construed in accordance with and under the laws of the Commonwealth of
Pennsylvania.
(c) Severability. Whenever possible, each provision of this
Separation Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Separation Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Separation Agreement; provided, however, that the
invalidity of the release contained in
8
<PAGE> 9
Exhibit A, shall nullify the Company's obligation to provide, and the Company
shall be entitled to a return of, any and all payments made pursuant to this
Separation Agreement.
(d) Assignment. The rights and obligations of the parties
under this Separation Agreement shall be binding upon and inure to the benefit
of their respective successors, assigns, executors, administrators and heirs,
provided, however, that neither the Company nor the Executive may assign any
duties under this Separation Agreement without the prior written consent of the
other.
(e) Notices. All notices and other communications under this
Separation Agreement shall be in writing and shall be given in person or by
telegraph, telefax or first class mail, certified or registered with return
receipt requested, and shall be deemed to have been duly given when delivered
personally or three days after mailing or one day after transmission of a
telegram or telefax, as the case may be, to the respective persons named below:
If to the Company: Uni-Marts, Inc.
477 East Beaver Avenue
State College, PA
16801-5690
Attn: Chief Executive Officer
If to the Executive: D. Gregory Graves
434 Hunter Avenue
State College, PA 16801
(f) Advice of Counsel. The Executive acknowledges that he has
been advised by the Company to consult with his own legal counsel with respect
to the subject matter and the terms of this Agreement, that he has had the
opportunity to do so and that this Agreement is the product of negotiations
between the Company and the Executive.
(g) Confidentiality Agreement. The Executive and the Company
agree to keep confidential the existence of this Agreement and the terms unless
otherwise required by
9
<PAGE> 10
law, rule or regulation. Executive hereby recognizes that this Agreement may be
required to be filed as an exhibit to a periodic report filed by the Company
under federal securities laws.
IN WITNESS WHEREOF, the parties have executed this Separation Agreement
as of the day and year first above written.
UNI-MARTS, INC.
By: /s/ Henry D. Sahakian
------------------------------
Henry D. Sahakian
Its Chief Executive Officer
By: /s/ D. Gregory Graves
------------------------------
D. Gregory Graves
Executive
10
<PAGE> 11
EXHIBIT "A"
-----------
GENERAL RELEASE AGREEMENT
-------------------------
I, D. Gregory Graves, for myself, my heirs, executors, administrators
and assigns, if any, for and in consideration of the rights, payments and
benefits under the Separation Agreement and General Release between the
undersigned and Uni-Marts, Inc. ("Uni-Marts") dated August 12, 1999 (the
"Agreement") hereby agrees as follows:
1. I waive, release and forever discharge Uni-Marts, and its
subsidiaries and affiliates, and each of their directors, officers and employees
and each of their successors and assigns (hereinafter the "Released Parties"),
of and from any and all past or present causes of action, suits, agreements or
other claims which I have against the Released Parties upon or by reason of any
matter, cause or thing whatsoever, including, without limitation, claims for any
alleged violation of the Civil Rights Act of 1964 and 1991, the Equal Pay Act of
1963, the Age Discrimination in Employment Act of 1967, the Rehabilitation Act
of 1973, the Older Workers Benefit Protection Act of 1990, the Americans with
Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the
Pennsylvania Human Relations Act and any other federal or state law, regulation
or ordinance, or public policy, contract or tort law having any bearing
whatsoever on the terms and conditions of employment, and I promise not to file
a lawsuit to assert any such claims; provided, however, that this release shall
not apply to A) the payments and benefits set forth in the Agreement, B) any
benefit payable under the terms of any employment benefit plan maintained by the
Released Parties, or C) any claim to which I am entitled to indemnification from
Uni-Marts for any acts or omissions in my capacity as an officer of Uni-Marts,
except for criminal wrongdoing and acts outside the scope of my employment.
11
<PAGE> 12
2. I acknowledge that in my decision to enter into this General
Release Agreement, I have not relied on any representations, promises or
agreements of any kind, including oral statements by representatives of
Uni-Marts, except as set forth in this General Release Agreement, the General
Release Agreement executed by Uni-Marts or in the Agreement.
IN WITNESS WHEREOF, and with the intention of being legally bound
hereby, I have executed this General Release Agreement on August 12, 1999.
/s/ D. Gregory Graves
-------------------------
D. Gregory Graves
12
<PAGE> 1
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 year ended September 30, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
WEIGHTED
SHARES OF NUMBER OF DAYS NUMBER OF NUMBER OF SHARES
COMMON STOCK OUTSTANDING SHARE DAYS OUTSTANDING
------------ ----------- ---------- -----------
1999
- ----
<S> <C> <C> <C> <C>
October 1 - September 30 6,861,252 365 2,504,356,980
Treasury Stock Purchases (4,119) Various (436,212)
Shares Issued 68,992 Various 9,751,910
--------- -------------
6,926,125 2,513,672,678 6,886,774
========= ============= =========
1998
- ----
October 1 - September 30 6,646,677 365 2,426,037,057
Treasury Stock Purchases (12,421) Various (1,854,115)
Shares Issued 226,996 Various 44,592,437
--------- -------------
6,861,252 2,468,775,379 6,763,768
========= ============= =========
1997
- ----
October 1 - September 30 6,658,487 365 2,430,347,718
Treasury Stock Purchases (50,500) Various (15,179,575)
Shares Issued 38,690 Various 9,134,740
--------- -------------
6,646,677 2,424,302,883 6,641,926
========= ============= =========
</TABLE>
<PAGE> 2
(B) Computation of Earnings (Loss) Per Share:
Computation of earnings (loss) per share is net earnings divided by the
weighted average number of shares of common stock outstanding for the
years ended September 30,
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Basic:
Weighted average number of shares
of common stock outstanding 6,886,774 6,763,768 6,641,926
----------- ----------- -----------
Earnings (loss) before extraordinary
item and cumulative effect of
accounting change $(2,235,627) $(127,640) $(4,575,925)
Extraordinary item-loss from debt
extinguishment 0 (244,315) 0
Cumulative effect of accounting
change 0 0 (1,468,140)
----------- ----------- -----------
Net earnings (loss) $(2,235,627) $(371,955) $(6,044,065)
----------- ----------- -----------
Earnings (loss) per share before
extraordinary item and cumulative
effect of accounting change $(0.32) $(0.02) $(0.69)
Loss per share from extraordinary
item 0.00 (0.03) 0.00
Loss per share from cumulative
effect of accounting change 0.00 0.00 (0.22)
----------- ----------- -----------
Net earnings (loss) per share $(0.32) $(0.05) $(0.91)
=========== =========== ===========
Assuming dilution:
Weighted average number of shares
of common stock outstanding 6,886,774 6,763,768 6,641,926
Net effect of dilutive stock
options-not included if the
effect was antidilutive 0 0 0
----------- ----------- -----------
Total 6,886,774 6,763,768 6,641,926
----------- ----------- -----------
Earnings (loss) before extraordinary
item and cumulative effect of
accounting change $(2,235,627) $(127,640) $(4,575,925)
Extraordinary item-loss from debt
extinguishment 0 (244,315) 0
Cumulative effect of accounting
change 0 0 (1,468,140)
----------- ----------- -----------
Net earnings (loss) $(2,235,627) $(371,955) $(6,044,065)
----------- ----------- -----------
Earnings (loss) per share before
extraordinary item and cumulative
effect of accounting change $(0.32) $(0.02) $(0.69)
Loss per share from extraordinary
item 0.00 (0.03) 0.00
Loss per share from cumulative
effect of accounting change 0.00 0.00 (0.22)
----------- ----------- -----------
Net earnings (loss) per share $(0.32) $(0.05) $(0.91)
=========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARY OF THE REGISTRANT
STATE OF
NAME INCORPORATION
- ---- -------------
Uni-Marts of America, Inc. Delaware
Uni-Marts of America, Inc. does business only under its legal corporate name.
<PAGE> 1
Exhibit (23)
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
Board of Directors and Stockholders of Uni-Marts, Inc.
State College, Pennsylvania
We consent to the incorporation by reference in Registration Statements No.
333-69136, No. 333-07697 and No. 333-24903 of Uni-Marts, Inc. on Form S-8 of our
report dated November 11, 1999 (December 29, 1999 as to Note F), appearing in
the Annual Report on Form 10-K of Uni-Marts, Inc. for the year ended September
30, 1999.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Uni-Marts, Inc., listed in
Item 14(a)(2). This financial statement schedule is the responsibility of
Uni-Marts, Inc.'s management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
December 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET DATED SEPTEMBER 30, 1999 AND THE STATEMENT OF OPERATIONS FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1999 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> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,944,358
<SECURITIES> 0
<RECEIVABLES> 2,812,734
<ALLOWANCES> 288,000
<INVENTORY> 11,737,029
<CURRENT-ASSETS> 20,855,570
<PP&E> 112,137,973
<DEPRECIATION> 50,424,695
<TOTAL-ASSETS> 88,474,619
<CURRENT-LIABILITIES> 21,396,862
<BONDS> 34,140,616
0
0
<COMMON> 732,709
<OTHER-SE> 27,213,097
<TOTAL-LIABILITY-AND-EQUITY> 88,474,619
<SALES> 250,135,856
<TOTAL-REVENUES> 252,305,757
<CGS> 185,285,307
<TOTAL-COSTS> 255,489,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,950,533
<INCOME-PRETAX> (3,183,827)
<INCOME-TAX> (948,200)
<INCOME-CONTINUING> (2,235,627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,235,627)
<EPS-BASIC> (.32)
<EPS-DILUTED> (.32)
</TABLE>
<PAGE> 1
Exhibit 99
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1999
-------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------------------ ------------------------
Commission file number 1-11556
----------------------------------------------------------
UNI-MARTS, INC. RETIREMENT SAVINGS & INCENTIVE PLAN
- --------------------------------------------------------------------------------
(Full title of the plan)
UNI-MARTS, INC.
- --------------------------------------------------------------------------------
(Name of issuer of the securities held pursuant to the plan)
477 East Beaver Avenue, State College, PA 16801-5690
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
This Document Contains 23 Pages.
Exhibit Index on Page 22.
1
<PAGE> 2
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1999 AND 1998 AND FOR EACH
OF THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1999:
Statements of Net Assets Available for Benefits 4-5
Statements of Changes in Net Assets Available for Benefits 6-11
Notes to Financial Statements 12-18
SUPPLEMENTAL SCHEDULES AS OF SEPTEMBER 30, 1999
AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 19
Item 27d - Schedule of Reportable Transactions 20
Supplemental schedules not included herein are omitted
because of the absence of conditions under which they are required.
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of
Uni-Marts, Inc. Retirement Savings & Incentive Plan
State College, Pennsylvania
We have audited the accompanying statements of net assets available for benefits
of Uni-Marts, Inc. Retirement Savings & Incentive Plan (the "Plan") as of
September 30, 1999 and 1998, and the related statements of changes in net assets
available for benefits for each of the three years in the period ended September
30, 1999. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of September 30,
1999 and 1998, and the changes in net assets available for benefits for each of
the three years in the period ended September 30, 1999 in conformity with
generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
Table of Contents are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental information by fund in the statements of net assets
available for benefits and statements of changes in net assets available for
benefits is presented for the purpose of additional analysis rather than to
present the net assets available for benefits and changes in net assets
available for benefits of the individual funds. The supplemental schedules and
supplemental information by fund are the responsibility of the Plan's
management. Such supplemental schedules and supplemental information by fund
have been subjected to the auditing procedures applied in our audits of the
basic financial statements and, in our opinion, except for the omission of
certain historical cost information in the supplemental schedules, are fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/S/ DELOITTE & TOUCHE LLP
December 14, 1999
3
<PAGE> 4
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
--------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
-----------------------------------------
NET ASSETS
Pooled Participant TOTAL Contributions AVAILABLE
ASSETS CASH Funds Loans INVESTMENTS Receivable FOR BENEFITS
----- ------ ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CONSERVATIVE LIFESTYLE OPTION $3 $63,410 $63,410 $411 $63,824
MORE MODERATE LIFESTYLE OPTION 2 109,785 109,785 506 110,293
MODERATE LIFESTYLE OPTION 16 892,585 892,585 2,806 895,407
AGGRESSIVE LIFESTYLE OPTION 41 774,048 774,048 2,241 776,330
VERY AGGRESSIVE LIFESTYLE OPTION 5 129,097 129,097 752 129,854
SPARTAN MONEY MARKET (LOAN ACCOUNT) 51,647 $65,522 117,169 117,169
FIDELITY CASH RESERVES FUND 3,207 140,153 140,153 374 143,734
BERNSTEIN INTERMEDIATE DURATION FUND (276) 56,072 56,072 261 56,057
VANGUARD ASSET ALLOCATION FUND 5,503 282,978 282,978 591 289,072
FIDELITY GROWTH & INCOME FUND 8,910 366,778 366,778 981 376,669
JANUS WORLDWIDE FUND 3,991 231,986 231,986 629 236,606
VANGUARD U.S. GROWTH FUND 6,677 273,201 273,201 761 280,639
PUTNAM VISTA FUND CLASS A 2,667 203,238 203,238 561 206,466
BARON ASSET FUND 4,614 249,400 249,400 740 254,754
UNI-MARTS, INC. COMMON STOCK FUND
190,526 SHARES 238,158 238,158 238,158
------- ---------- ------- ---------- ------- ----------
TOTAL $35,360 $4,062,536 $65,522 $4,128,058 $11,614 $4,175,032
======= ========== ======= ========== ======= ==========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
---------------------------------------------
NET ASSETS
Pooled Participant TOTAL Contributions AVAILABLE
ASSETS CASH Funds Loans INVESTMENTS Receivable FOR BENEFITS
---------- -------------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CONSERVATIVE LIFESTYLE OPTION $456 $60,809 $60,809 $364 $61,629
MORE MODERATE LIFESTYLE OPTION 8,080 96,147 96,147 591 104,818
MODERATE LIFESTYLE OPTION 20,715 957,747 957,747 3,750 982,212
AGGRESSIVE LIFESTYLE OPTION 12,023 845,100 845,100 2,750 859,873
VERY AGGRESSIVE LIFESTYLE OPTION 140 114,416 114,416 881 115,437
SPARTAN MONEY MARKET (LOAN ACCOUNT) 50,650 $73,294 123,944 123,944
FIDELITY CASH RESERVES FUND 54 182,757 182,757 445 183,256
BERNSTEIN INTERMEDIATE DURATION FUND 1,429 46,606 46,606 264 48,299
VANGUARD ASSET ALLOCATION FUND 75 292,081 292,081 604 292,760
FIDELITY GROWTH & INCOME FUND 607 327,393 327,393 888 328,888
JANUS WORLDWIDE FUND 1,394 246,269 246,269 700 248,363
VANGUARD U.S. GROWTH FUND 1,911 237,165 237,165 694 239,770
PUTNAM VISTA FUND CLASS A 1,166 175,697 175,697 559 177,422
BARON ASSET FUND 334 217,892 217,892 822 219,048
UNI-MARTS, INC. COMMON STOCK FUND
165,864 SHARES 518,326 518,326 518,326
------- ---------- ------- ---------- ------- ----------
TOTAL $48,384 $4,369,055 $73,294 $4,442,349 $13,312 $4,504,045
======= ========== ======= ========== ======= ==========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
PAGE 1 OF 2
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
-----------------------------------------------------------------------------------------------
ADDITIONS
NET ASSETS ----------------------------------------------------------------------------------
AVAILABLE FOR Net Appreciation
BENEFITS, Interest (Depreciation)
BEGINNING Participant Employer and Dividend in Fair Value Interfund TOTAL
OF YEAR Contributions Contributions Income of Plan Assets Transfers ADDITIONS
------------- ------------- ------------- ------------ ---------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSERVATIVE LIFESTYLE OPTION $61,629 $11,207 $4,742 $(2,874) $0 $13,075
MORE MODERATE LIFESTYLE OPTION 104,818 14,797 7,623 3,412 3,489 29,321
MODERATE LIFESTYLE OPTION 982,212 93,943 73,417 57,352 (43,722) 180,990
AGGRESSIVE LIFESTYLE OPTION 859,873 65,415 49,934 114,984 17,920 248,253
VERY AGGRESSIVE LIFESTYLE OPTION 115,437 21,800 6,575 18,144 24,947 71,466
SPARTAN MONEY MARKET (LOAN ACCOUNT) 123,944 7,446 0 9,461 16,907
FIDELITY CASH RESERVES FUND 183,256 10,977 8,477 0 (10,094) 9,360
BERNSTEIN INTERMEDIATE DURATION
FUND 48,299 7,228 3,486 (3,200) 2,825 10,339
VANGUARD ASSET ALLOCATION FUND 292,760 17,419 26,290 17,769 (6,273) 55,205
FIDELITY GROWTH & INCOME FUND 328,888 24,661 27,750 39,228 23,440 115,079
JANUS WORLDWIDE FUND 248,363 18,156 1,020 76,343 (8,173) 87,346
VANGUARD U.S. GROWTH FUND 239,770 19,411 18,568 45,733 2,907 86,619
PUTNAM VISTA FUND CLASS A 177,422 16,511 15,334 41,725 (4,234) 69,336
BARON ASSET FUND 219,048 20,408 330 69,079 (9,987) 79,830
UNI-MARTS, INC. COMMON STOCK FUND 518,326 14,034 $97,610 0 (333,070) (2,506) (223,932)
---------- -------- ------- -------- --------- -------- ---------
TOTAL $4,504,045 $355,967 $97,610 $250,992 $144,625 $0 $849,194
========== ======== ======= ======== ========= ======== =========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
UNI-MARTS, INC. PAGE 2 OF 2
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
-------------------------------------------------------------
DEDUCTIONS NET ASSETS
-------------------------------------------- (DECREASE) AVAILABLE FOR
Payments to TOTAL INCREASE IN BENEFITS,
Beneficiaries Other DEDUCTIONS NET ASSETS END OF YEAR
------------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
CONSERVATIVE LIFESTYLE OPTION $(10,880) $(10,880) $2,195 $63,824
MORE MODERATE LIFESTYLE OPTION (23,846) (23,846) 5,475 110,293
MODERATE LIFESTYLE OPTION (267,795) (267,795) (86,805) 895,407
AGGRESSIVE LIFESTYLE OPTION (331,796) (331,796) (83,543) 776,330
VERY AGGRESSIVE LIFESTYLE OPTION (57,049) (57,049) 14,417 129,854
SPARTAN MONEY MARKET (LOAN ACCOUNT) (23,682) (23,682) (6,775) 117,169
FIDELITY CASH RESERVES FUND (48,882) (48,882) (39,522) 143,734
BERNSTEIN INTERMEDIATE DURATION FUND (2,581) (2,581) 7,758 56,057
VANGUARD ASSET ALLOCATION FUND (58,893) (58,893) (3,688) 289,072
FIDELITY GROWTH & INCOME FUND (67,298) (67,298) 47,781 376,669
JANUS WORLDWIDE FUND (99,103) (99,103) (11,757) 236,606
VANGUARD U.S. GROWTH FUND (45,750) (45,750) 40,869 280,639
PUTNAM VISTA FUND CLASS A (40,292) (40,292) 29,044 206,466
BARON ASSET FUND (44,124) (44,124) 35,706 254,754
UNI-MARTS, INC. COMMON STOCK FUND (56,236) (56,236) (280,168) 238,158
----------- ----------- ----------- --------- ----------
TOTAL $(1,178,207) $0 $(1,178,207) $(329,013) $4,175,032
=========== =========== =========== ========= ==========
</TABLE>
See notes to financial statements.
7
<PAGE> 8
PAGE 1 OF 2
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
------------------------------------------------------------------------------------------------
ADDITIONS
NET ASSETS -----------------------------------------------------------------------------------
AVAILABLE FOR Net Appreciation
BENEFITS, Interest (Depreciation)
BEGINNING Participant Employer and Dividend in Fair Value Interfund TOTAL
OF YEAR Contributions Contributions Income of Plan Assets Transfers ADDITIONS
------------- ------------- ------------- ------------ ---------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSERVATIVE LIFESTYLE OPTION $94,567 $11,432 $5,883 $1,607 $0 $18,922
MORE MODERATE LIFESTYLE OPTION 238,104 15,725 11,682 1,482 (43,597) (14,708)
MODERATE LIFESTYLE OPTION 995,294 105,201 60,739 27,432 (22,865) 170,507
AGGRESSIVE LIFESTYLE OPTION 902,032 85,648 48,155 (12,265) (15) 121,523
VERY AGGRESSIVE LIFESTYLE OPTION 142,595 33,190 6,519 (1,887) 9,646 47,468
SPARTAN MONEY MARKET (LOAN ACCOUNT) 116,371 8,222 0 3,000 11,222
FIDELITY CASH RESERVES FUND 215,258 14,708 11,063 0 (5,422) 20,349
BERNSTEIN INTERMEDIATE DURATION
FUND 44,568 6,837 3,338 420 1,075 11,670
VANGUARD ASSET ALLOCATION FUND 309,982 16,562 24,843 22,046 (13,012) 50,439
FIDELITY GROWTH & INCOME FUND 483,957 30,443 20,873 40,765 2,562 94,643
JANUS WORLDWIDE FUND 264,987 21,679 17,762 (13,446) (15,348) 10,647
VANGUARD U.S. GROWTH FUND 252,507 19,977 10,352 32,934 (13,226) 50,037
PUTNAM VISTA FUND CLASS A 201,147 15,217 15,036 (18,296) (5,068) 6,889
BARON ASSET FUND 325,324 23,357 279 (40,865) (2,847) (20,076)
UNI-MARTS, INC. COMMON STOCK FUND 701,312 17,248 $110,045 0 (288,154) 105,117 (55,744)
---------- -------- -------- -------- --------- -------- --------
TOTAL $5,288,005 $417,224 $110,045 $244,746 $(248,227) $0 $523,788
========== ======== ======== ======== ========= ======== ========
</TABLE>
See notes to financial statements.
8
<PAGE> 9
UNI-MARTS, INC PAGE 2 OF 2
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
-------------------------------------------------------------
DEDUCTIONS NET ASSETS
--------------------------------------------- (DECREASE) AVAILABLE FOR
Payments to TOTAL INCREASE IN BENEFITS,
Beneficiaries Other DEDUCTIONS NET ASSETS END OF YEAR
------------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
CONSERVATIVE LIFESTYLE OPTION $(51,860) $(51,860) $(32,938) $61,629
MORE MODERATE LIFESTYLE OPTION (118,578) (118,578) (133,286) 104,818
MODERATE LIFESTYLE OPTION (183,589) (183,589) (13,082) 982,212
AGGRESSIVE LIFESTYLE OPTION (163,682) (163,682) (42,159) 859,873
VERY AGGRESSIVE LIFESTYLE OPTION (74,626) (74,626) (27,158) 115,437
SPARTAN MONEY MARKET (LOAN ACCOUNT) (3,649) (3,649) 7,573 123,944
FIDELITY CASH RESERVES FUND (52,351) (52,351) (32,002) 183,256
BERNSTEIN INTERMEDIATE DURATION FUND (7,939) (7,939) 3,731 48,299
VANGUARD ASSET ALLOCATION FUND (67,661) (67,661) (17,222) 292,760
FIDELITY GROWTH & INCOME FUND (249,712) (249,712) (155,069) 328,888
JANUS WORLDWIDE FUND (27,271) (27,271) (16,624) 248,363
VANGUARD U.S. GROWTH FUND (62,774) (62,774) (12,737) 239,770
PUTNAM VISTA FUND CLASS A (30,614) (30,614) (23,725) 177,422
BARON ASSET FUND (86,200) (86,200) (106,276) 219,048
UNI-MARTS, INC. COMMON STOCK FUND (127,242) (127,242) (182,986) 518,326
----------- ----------- ----------- --------- ----------
TOTAL $(1,307,748) $0 $(1,307,748) $(783,960) $4,504,045
=========== =========== =========== ========= ==========
</TABLE>
See notes to financial statements.
9
<PAGE> 10
UNI-MARTS, INC. Page 1 of 2
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
-----------------------------------------------------------------------------------
ADDITIONS
NET ASSETS ------------------------------------------------------------------------
AVAILABLE FOR Net Appreciation
BENEFITS, Interest (Depreciation)
BEGINNING Participant Employer and Dividend in Fair Value Liquidation
OF YEAR Contributions Contributions Income of Plan Assets Transfers
------------- ------------- ------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND $572,824 $3,593 $(495,341)
GOVERNMENT INCOME FUND 655,707 2,616 (799) (657,463)
CAPITAL GROWTH FUND 1,586,685 13 3,221 (1,589,949)
HIGH INCOME FUND 563,707 2,577 (1,707) (564,577)
CONSERVATIVE LIFESTYLE
OPTION 14,579 4,953 2,662 76,409
MORE MODERATE LIFESTYLE
OPTION 20,304 11,480 15,097 179,763
MODERATE LIFESTYLE OPTION 118,094 46,968 89,549 716,021
AGGRESSIVE LIFESTYLE OPTION 101,731 38,596 121,538 715,056
VERY AGGRESSIVE LIFESTYLE
OPTION 30,928 3,280 20,266 67,861
SPARTAN MONEY MARKET (LOAN
ACCOUNT) 6,813 0 0
FIDELITY CASH RESERVES FUND 25,826 10,477 0 383,112
BERNSTEIN INTERMEDIATE
DURATION FUND 7,523 2,159 601 31,708
VANGUARD ASSET ALLOCATION
FUND 18,014 21,289 41,766 217,822
FIDELITY GROWTH & INCOME
FUND 32,862 20,834 93,169 339,651
JANUS WORLDWIDE FUND 22,542 10,863 42,477 157,912
VANGUARD U.S. GROWTH FUND 22,067 15,148 36,252 186,591
PUTNAM VISTA FUND CLASS A 16,686 10,194 29,089 166,853
BARON ASSET FUND 27,435 400 81,096 224,581
UNI-MARTS, INC. COMMON
STOCK FUND 1,088,524 32,790 126,480 7,156 (312,633) (156,010)
---------- -------- -------- -------- -------- --------
TOTAL $4,467,447 $491,381 $126,480 $219,409 $261,644 $0
========== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
-----------------------
Interfund TOTAL
Transfers ADDITIONS
---------- ---------
<S> <C> <C>
MONEY MARKET FUND $(79,833) $(571,581)
GOVERNMENT INCOME FUND (61) (655,707)
CAPITAL GROWTH FUND 30 (1,586,685)
HIGH INCOME FUND (563,707)
CONSERVATIVE LIFESTYLE OPTION 6,436 105,039
MORE MODERATE LIFESTYLE OPTION 14,125 240,769
MODERATE LIFESTYLE OPTION 48,619 1,019,251
AGGRESSIVE LIFESTYLE OPTION (10,089) 966,832
VERY AGGRESSIVE LIFESTYLE OPTION 20,541 142,876
SPARTAN MONEY MARKET (LOAN ACCOUNT) 109,558 116,371
FIDELITY CASH RESERVES FUND (142,958) 276,457
BERNSTEIN INTERMEDIATE DURATION FUND 4,198 46,189
VANGUARD ASSET ALLOCATION FUND 15,905 314,796
FIDELITY GROWTH & INCOME FUND 3,904 490,420
JANUS WORLDWIDE FUND 41,839 275,633
VANGUARD U.S. GROWTH FUND 4,797 264,855
PUTNAM VISTA FUND CLASS A (15,348) 207,474
BARON ASSET FUND 2,304 335,816
UNI-MARTS, INC. COMMON STOCK FUND (23,967) (326,184)
------- ----------
TOTAL $0 $1,098,914
======= ==========
</TABLE>
See notes to financial statements.
10
<PAGE> 11
UNI-MARTS, INC. PAGE 2 OF 2
RETIREMENT SAVINGS & INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY INFORMATION BY FUND
-----------------------------------------------------------
DEDUCTIONS NET ASSETS
--------------------------------------------- (DECREASE) AVAILABLE FOR
Payments to TOTAL INCREASE IN BENEFITS,
Beneficiaries Other DEDUCTIONS NET ASSETS END OF YEAR
---------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUND $(1,243) $(1,243) $(572,824) $0
GOVERNMENT INCOME FUND 0 (655,707) 0
CAPITAL GROWTH FUND 0 (1,586,685) 0
HIGH INCOME FUND 0 (563,707) 0
CONSERVATIVE LIFESTYLE OPTION (10,472) (10,472) 94,567 94,567
MORE MODERATE LIFESTYLE OPTION (2,665) (2,665) 238,104 238,104
MODERATE LIFESTYLE OPTION (23,957) (23,957) 995,294 995,294
AGGRESSIVE LIFESTYLE OPTION (64,800) (64,800) 902,032 902,032
VERY AGGRESSIVE LIFESTYLE OPTION (281) (281) 142,595 142,595
SPARTAN MONEY MARKET (LOAN ACCOUNT) 0 116,371 116,371
FIDELITY CASH RESERVES FUND (61,199) (61,199) 215,258 215,258
BERNSTEIN INTERMEDIATE DURATION FUND (1,621) (1,621) 44,568 44,568
VANGUARD ASSET ALLOCATION FUND (4,814) (4,814) 309,982 309,982
FIDELITY GROWTH & INCOME FUND (6,463) (6,463) 483,957 483,957
JANUS WORLDWIDE FUND (10,646) (10,646) 264,987 264,987
VANGUARD U.S. GROWTH FUND (12,348) (12,348) 252,507 252,507
PUTNAM VISTA FUND CLASS A (6,327) (6,327) 201,147 201,147
BARON ASSET FUND (10,492) (10,492) 325,324 325,324
UNI-MARTS, INC. COMMON STOCK FUND (61,028) (61,028) (387,212) 701,312
--------- ------- --------- --------- ----------
TOTAL $(277,113) $(1,243) $(278,356) $820,558 $5,288,005
========= ======= ========= ========= ==========
</TABLE>
See notes to financial statements.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
- -------------------------------------------------------------------------------
1. THE PLAN
Uni-Marts, Inc. Retirement Savings & Incentive Plan (the "Plan"), a
defined contribution plan, was established October 1, 1983 to include
all full-time employees of the former parent of Uni-Marts, Inc. and
certain of its subsidiaries and related companies. Effective October 1,
1987, the Plan was amended and restated to include only the employees
of Uni-Marts, Inc. and its affiliates (the "Company"). The assets of
the Plan attributable to employees of the former parent and related
companies were spun off from the Plan effective the date of the
amendment. Uni-Marts, Inc. is the Trustee of the Plan.
The following is a summary description of the Plan. Participants should
refer to the Plan document for a complete description of the Plan.
Employees are eligible to participate after attainment of age 21 and
completion of at least 1,000 hours of service in one eligibility
computation period. Employees whose wages and conditions of employment
are subject to agreement with a collective bargaining agent are not
eligible to participate unless provided by the collective bargaining
agreement. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
All eligible employees may direct the Company to contribute from 1% to
3% of their compensation to the Plan on their behalf as a basic
contribution. An additional amount up to 12% of compensation may be
deposited as a supplemental contribution. Total individual employee
contributions may not exceed IRS imposed limits as provided in the
Plan. The Company will make matching contributions equal to $.50 for
each $1.00 of basic contribution and may make an optional contribution
at the discretion of the Board of Directors. No optional contributions
were made in the Plan years 1999, 1998 and 1997. Each participant has
at all times a 100% nonforfeitable interest in their account balance.
Each employee directs that his/her contribution be invested and
reinvested in one or more of the investment funds selected by the
Trustee and/or in the Company's common stock. The Trustee determines
how all amounts credited to a member's optional contribution account,
if any, will be invested. All income, expenses, gains or losses
attributable to assets held in each investment fund are reflected
therein exclusively.
Participants' accounts may be withdrawn upon separation from the
Company, death, disability or retirement (regular - age 65; early - age
55). Withdrawals, except for hardship withdrawals, are distributed in
lump sums, including earnings. A participant may request a loan or
apply for a hardship withdrawal in accordance with the provisions of
the Plan. The Company has the right to terminate the Plan subject to
the provisions of ERISA.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
12
<PAGE> 13
2. NEW ACCOUNTING PRONOUNCEMENT
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3, Accounting for and
Reporting of Certain Defined Contribution Plan Investments and other
Disclosure Matters. This statement is effective for financial
statements for plan years ending after December 15, 1999. Adoption of
the statement will eliminate the need for disclosure of the "by fund"
information for participant-directed funds. In addition, the Plan will
need to disclose information in the financial statements about the net
assets and significant components of the changes in net assets related
to the nonparticipant-directed program.
3. ADMINISTRATION OF THE PLAN
The Company is the administrator of the Plan. All fees related to the
Plan's administration and recordkeeping are paid by the Company and
therefore are not reported as an expense of the Plan.
4. INVESTMENTS
Investments representing units of funds maintained by diversified,
open-end management investment companies are stated at fair value as
determined by published market prices. Uni-Marts, Inc. common stock is
valued at the closing market price. Income and expenses relating to
these investments are recorded on the accrual basis of accounting.
Following is a brief description of the nine funds in which the Plan
was invested as of September 30, 1999:
Fidelity Cash Reserves Fund. Money market fund which seeks as high a
level of current income as is consistent with preservation of capital
and liquidity. The fund invests in high quality U.S. dollar denominated
money market instruments of U.S. and foreign issuers; yield will
fluctuate.
Bernstein Intermediate Duration Fund. Government/corporate bond fund
which seeks total return consistent with safety of principal. The fund
invests at least 65% of assets in fixed-income securities rated AA or
higher. The fund normally maintains an effective duration of three to
six years.
Vanguard Asset Allocation Fund. Asset allocation/balanced fund which
seeks total return. The fund allocates among a common-stock portfolio,
a bond portfolio, and money market instruments. It varies its mix
according to the relative attractiveness of the asset classes. There is
no limitation as to the amount of assets in each class.
Fidelity Growth & Income Fund. Large value stock fund which seeks
long-term growth, current income, and growth of income consistent with
reasonable investment risk. The fund invests primarily in
dividend-paying common stocks with growth potential. However, some
common stock selections may be made in securities not paying dividends.
13
<PAGE> 14
Janus Worldwide Fund. International/world stock fund which seeks
long-term growth of capital consistent with preservation of capital.
The fund invests primarily in foreign and domestic common stocks. Its
portfolio is usually spread across at least five different countries,
including the United States, though at times it may invest in a single
country.
Vanguard U.S. Growth Fund. Large growth stock fund which seeks capital
appreciation; income is incidental. The fund invests primarily in
common stocks and convertible securities issued by established U.S.
companies.
Putnam Vista Class A Fund. Mid-cap stock fund which seeks capital
appreciation. The fund invests primarily in common stocks issued by
companies of any size; it may also invest in preferred stocks, debt
securities, convertible securities, and warrants.
Baron Asset Fund. Aggressive/small growth stock fund which seeks
capital appreciation. The fund invests in smaller companies that the
advisor believes have undervalued assets or favorable growth prospects.
Uni-Marts, Inc. Common Stock Fund. Company stock fund which seeks
capital appreciation. The stock is traded on the American Stock
Exchange. The symbol for the stock is UNI.
At the discretion of the individual participant, contributions can be
allocated among the respective funds described above, or contributions
can be managed by Asset & Wealth Services, Inc. through the election of
Lifestyle Options. Lifestyle Options are professionally allocated,
managed and monitored portfolio investment pools for 401(k) Plans. The
Lifestyle Option portfolios are diversified across various asset
classes and investment styles. Participants choose an allocation,
ranging from Conservative to Very Aggressive, that fits their
individual risk and return objectives. The same mutual funds described
above are used in the Lifestyle Options.
During 1999, 1998 and 1997, the Plan purchased from Uni-Marts, Inc.
50,304; 31,872 and 28,738 shares of its common stock at a cost of
$111,645; $127,292 and $159,270, respectively. For the 1999, 1998 and
1997 Plan years, the price paid for the shares was as traded on the
American Stock Exchange.
14
<PAGE> 15
INVESTMENTS AT SEPTEMBER 30, ARE AS FOLLOWS:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CONSERVATIVE LIFESTYLE OPTION:
Fidelity Cash Reserves Fund 917 1,862
Bernstein Intermediate Duration Fund 55,153 53,773
Fidelity Growth & Income Fund 3,281 1,403
Vanguard U.S. Growth Fund 4,059 3,771
--------------- ---------------
63,410 60,809
--------------- ---------------
MORE MODERATE LIFESTYLE OPTION:
Fidelity Cash Reserves Fund 3,087 4,243
Bernstein Intermediate Duration Fund 74,482 55,123
Fidelity Growth & Income Fund 14,651 16,309
Vanguard U.S. Growth Fund 14,361 16,180
Baron Asset Fund 3,204 4,292
--------------- ---------------
109,785 96,147
--------------- ---------------
MODERATE LIFESTYLE OPTION:
Fidelity Cash Reserves Fund 14,571 5,110
Bernstein Intermediate Duration Fund 469,334 474,679
Fidelity Growth & Income Fund 174,428 183,387
Putnam Vista Fund Class A 58,604 85,486
Vanguard U.S. Growth Fund 175,648 180,079
Baron Asset Fund 0 29,006
--------------- ---------------
892,585 957,747
--------------- ---------------
AGGRESSIVE LIFESTYLE OPTION:
Fidelity Cash Reserves Fund 16,016 18,195
Bernstein Intermediate Duration Fund 224,457 262,821
Fidelity Growth & Income Fund 126,318 139,366
Putnam Vista Fund Class A 72,017 83,845
Vanguard U.S. Growth Fund 131,761 142,537
Baron Asset Fund 110,473 122,863
Janus Worldwide Fund 93,006 75,473
--------------- ---------------
774,048 845,100
--------------- ---------------
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
VERY AGGRESSIVE LIFESTYLE OPTION:
Fidelity Cash Reserves Fund 3,611 4,946
Bernstein Intermediate Duration Fund 28,393 32,292
Fidelity Growth & Income Fund 18,671 16,040
Putnam Vista Fund Class A 9,594 9,420
Vanguard U.S. Growth Fund 18,674 11,493
Baron Asset Fund 36,441 27,282
Janus Worldwide Fund 13,713 12,943
--------------- ---------------
129,097 114,416
--------------- ---------------
FIDELITY CASH RESERVES FUND 140,153 182,757
--------------- ---------------
BERNSTEIN INTERMEDIATE DURATION FUND 56,072 46,606
--------------- ---------------
VANGUARD ASSET ALLOCATION FUND 282,978 292,081
--------------- ---------------
SPARTAN MONEY MARKET (LOAN ACCOUNT) 51,647 50,650
--------------- ---------------
FIDELITY GROWTH & INCOME FUND 366,778 327,393
--------------- ---------------
JANUS WORLDWIDE FUND 231,986 246,269
--------------- ---------------
VANGUARD U.S. GROWTH FUND 273,201 237,165
--------------- ---------------
PUTNAM VISTA FUND CLASS A 203,238 175,697
--------------- ---------------
BARON ASSET FUND 249,400 217,892
--------------- ---------------
UNI-MARTS, INC. COMMON STOCK 238,158 518,326
--------------- ---------------
Investments 4,062,536 4,369,055
Participant Loans 65,522 73,294
--------------- ---------------
TOTAL INVESTMENTS $4,128,058 $4,442,349
=============== ===============
</TABLE>
16
<PAGE> 17
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
according to the financial statements to Form 5500:
<TABLE>
<CAPTION>
September 30,
1999 1998
---------- ----------
<S> <C> <C>
Net assets available for benefits per the financial
statements $4,175,032 $4,504,045
Amount receivable due to overpayment in
distribution to participant 0 50
Amounts allocated to withdrawing participants. 0 (9,636)
---------- ----------
Net assets available for benefits per Form 5500 $4,175,032 $4,494,459
========== ==========
</TABLE>
The following is a reconciliation of benefits paid to participants
according to the financial statements to Form 5500:
<TABLE>
<CAPTION>
Year Ended
September 30,
1999
-------------
<S> <C>
Benefits paid to participants per the financial statements $1,178,209
Add: Amounts allocated to withdrawing participants
at September 30, 1999 0
Less: Amounts allocated to withdrawing participants
at September 30, 1998 (9,636)
----------
Benefits paid to participants per Form 5500 $1,168,573
==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended
September 30,
1998
-------------
<S> <C>
Benefits paid to participants per the financial statements $1,307,748
Add: Amounts allocated to withdrawing participants
at September 30, 1998 9,636
Less: Amounts allocated to withdrawing participants
at September 30, 1997 (0)
----------
Benefits paid to participants per Form 5500 $1,317,384
==========
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
Year Ended
September 30,
1997
-------------
<S> <C>
Benefits paid to participants per the financial statements $ 277,113
Add: Amounts allocated to withdrawing participants
at September 30, 1997 0
Less: Amounts allocated to withdrawing participants
at September 30, 1996 (0)
-----------
Benefits paid to participants per Form 5500 $ 277,113
===========
</TABLE>
Amounts allocated to withdrawing participants are recorded on Form 5500
for benefit claims that have been processed and approved for payment
prior to September 30 but not yet paid as of that date.
6. TAX STATUS
The trust established under the Plan to hold the Plan's assets is
qualified pursuant to the appropriate section of the Internal Revenue
Code (IRC), and, accordingly, the trust's net investment income is
exempt from income taxes. The Plan obtained its latest determination
letter on September 9, 1993, in which the IRS stated that the Plan, as
then designed, was in compliance with the applicable requirements of
the IRC. The Plan has been amended since receiving the determination
letter. However, the Plan administrator and the Plan's tax counsel
believe that the Plan is currently designed and being operated in
compliance with the applicable requirements of the IRC.
*****
18
<PAGE> 19
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT INCLUDING
MATURITY DATE, RATE OF INTEREST, CURRENT
IDENTITY OF ISSUE COLLATERAL, PAR OR MATURITY VALUE COST VALUE
<S> <C> <C> <C>
Spartan Money Market (Loan Account) Money Market Account, 51,647 shares $51,647 $51,647
Fidelity Cash Reserves Fund Money Market Account, 178,355 shares 178,355 178,355
Bernstein Intermediate Duration Fund Government/Corporate Bond Mutual Fund, 71,657 shares * 907,892
Vanguard Asset Allocation Fund Asset Allocation/Balanced Mutual Fund, 11,737 shares * 282,977
Fidelity Growth & Income Fund Large Value Stock Mutual Fund, 16,333 shares * 704,127
Janus Worldwide Fund International/World Stock Mutual Fund, 6,183 shares * 338,705
Vanguard U.S. Growth Fund Large Growth Stock Mutual Fund, 16,191 shares * 617,704
Putnam Vista Fund Class A Mid-Cap Stock Mutual Fund, 24,376 shares * 343,452
Baron Asset Fund Aggressive/Small Growth Stock Mutual Fund, 7,747 shares * 399,517
Uni-Marts, Inc.** Common Stock Company Common Stock, 190,526 shares 606,539 238,160
Employee Loans Receivable Maturing 2001 - 2010, interest from 7% to 8.5% 65,522 65,522
-----------
Total $4,128,058
===========
</TABLE>
*Cost information is not available.
**Indicates party-in-interest to the Plan
19
<PAGE> 20
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENT VALUE
EXPENSE OF ASSET ON
IDENTITY OF PURCHASE SELLING INCURRED WITH COST OF TRANSACTION NET GAIN
PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE TRANSACTION ASSET DATE (LOSS)
<S> <C> <C> <C> <C> <C> <C> <C>
Uni-Marts, Inc. Uni-Marts, Inc. Various N/A None $111,644 $111,644 N/A
common stock
</TABLE>
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Annual Report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNI-MARTS, INC.
RETIREMENT SAVINGS & INCENTIVE PLAN
/S/ N. GREGORY PETRICK
--------------------------
N. Gregory Petrick
Senior Vice President and
Chief Financial Officer
21
<PAGE> 22
EXHIBIT INDEX
Page(s)
23 Consent of Independent Certified Public Accountants. 23
22
<PAGE> 23
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Stockholders of Uni-Marts, Inc.
State College, Pennsylvania
We consent to the incorporation by reference in Registration Statement No.
33-9807 of Uni-Marts, Inc. on Form S-8 of our report dated December 14, 1999,
appearing in the Annual Report on Form 11-K of Uni-Marts, Inc. Retirement
Savings and Incentive Plan for the year ended September 30, 1999.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
December 29, 1999
23
