SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 22, 1995
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 0-549
SCHULTZ SAV-O STORES, INC.
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-0600405
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization) Identification No.)
2215 UNION AVENUE 53082-0419
SHEBOYGAN, WISCONSIN (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number
including area code 414-457-4433
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (of for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days.
Yes X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes NO
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the
latest practicable date.
As of May 30, 1995, 2,401,789 shares of common stock,
$0.05 par value, were issued and outstanding.
<PAGE>
SCHULTZ SAV-O STORES, INC.
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION:
Item 1. - Financial Statements
Condensed Balance Sheets 3
Unaudited Condensed Statements of Earnings 4
Unaudited Statements of Cash Flows 5
Notes to Unaudited Financial Statements 6
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K. 9
SIGNATURES 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SCHULTZ SAV-O STORES, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
April 22 December 31
ASSETS 1995 1994
CURRENT ASSETS:
Cash and equivalents $17,247,000 $14,310,000
Accounts receivable 8,590,000 7,453,000
Inventories 20,264,000 21,327,000
Prepaid expenses and other 2,296,000 2,344,000
Deferred income taxes 4,868,000 3,875,000
---------- ----------
Total currents assets 53,265,000 49,309,000
OTHER ASSETS, net 1,302,000 1,331,000
AMOUNTS RECEIVABLE UNDER
CAPITAL SUBLEASE AGREEMENTS 9,784,000 9,943,000
LEASED PROPERTY UNDER CAPITAL
LEASES, net 3,285,000 3,372,000
PROPERTY AND EQUIPMENT, net 23,861,000 25,144,000
----------- -----------
Total assets $91,497,000 $89,099,000
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $14,215,000 $11,356,000
Accrued liabilities-
Salaries and wages 513,000 532,000
Vacation pay 2,090,000 1,710,000
Retail facilities and operations 4,872,000 5,046,000
Insurance related 2,172,000 2,316,000
Other 4,477,000 6,115,000
Current maturities of long-term debt 304,000 323,000
Current obligations under capital
leases 714,000 714,000
----------- -----------
Total current liabilities 29,357,000 28,112,000
----------- -----------
DEFERRED INCOME TAXES 2,427,000 1,428,000
LONG-TERM DEBT 3,968,000 4,056,000
CAPITAL LEASE OBLIGATIONS 13,826,000 14,046,000
SHAREHOLDERS' INVESTMENT:
Preferred stock 300,000 300,000
Common stock 146,000 146,000
Additional paid-in capital 12,680,000 12,680,000
Retained earnings 37,261,000 36,179,000
----------- -----------
Total 50,387,000 49,305,000
Less treasury stock (8,468,000) (7,848,000)
----------- ----------
Total shareholders' investment $41,919,000 $41,457,000
----------- -----------
Total liabilities and
shareholders' investment $91,497,000 $89,099,000
========== ===========
<PAGE>
SCHULTZ SAV-O STORES, INC.
UNAUDITED CONDENSED STATEMENTS OF EARNINGS
For the 16-Weeks Ended
April 22 April 23
1995 1994
NET SALES $132,278,000 $135,180,000
COSTS AND EXPENSES:
Cost of products sold 110,989,000 113,078,000
Operating and administrative expenses 19,255,000 20,193,000
Interest expense, net 22,000 152,000
----------- -----------
Earnings before income taxes 2,012,000 1,757,000
PROVISION FOR INCOME TAXES 775,000 647,000
----------- ------------
Net earnings $ 1,237,000 $ 1,110,000
=========== ===========
NET EARNINGS PER SHARE - PRIMARY
AND FULLY DILUTED $ 0.50 $ 0.41
=========== ===========
CASH DIVIDENDS PAID PER SHARE
OF COMMON STOCK $ 0.06 $ 0.04
=========== ===========
AVERAGE OUTSTANDING COMMON AND
EQUIVALENT SHARES 2,492,000 2,729,000
========== ===========
<PAGE>
SCHULTZ SAV-O STORES, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
For the 16-Weeks Ended
April 22 April 23
1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings $ 1,237,000 $ 1,110,000
Adjustments to reconcile net
earnings to net cash flows from
operating activities-
Depreciation and amortization 1,408,000 1,464,000
Other non-cash items 154,000 -
Changes in assets and liabilities-
(Increase) in receivables (1,137,000) (1,932,000)
Decrease in inventories 1,063,000 2,388,000
Decrease (increase) in prepaid
and other assets 48,000 (358,000)
Increase in accounts payable 2,859,000 273,000
(Decrease) increase in accrued
liabilities (1,614,000) 578,000
------------ -----------
Net cash flows from
operating activities 4,018,000 3,523,000
------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and
equipment (716,000) (703,000)
Proceeds from asset sales 559,000 -
Receipt of principal amounts under
capital sublease agreements and
notes receivable 159,000 182,000
------------ -----------
Net cash flows from
investing activities 2,000 (521,000)
---------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment for acquisition of treasury
stock (620,000) (448,000)
Principal payments under capital
lease obligations (220,000) (254,000)
Payment of cash dividends (155,000) (117,000)
Principal payments on long-term debt (88,000) (88,000)
----------- -----------
Net cash flows from
financing activities (1,083,000) (907,000)
----------- -----------
CASH AND EQUIVALENTS:
Net increase 2,937,000 2,095,000
Balance, beginning of period 14,310,000 6,014,000
------------ ------------
Balance, end of period $17,247,000 $ 8,109,000
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period for-
Interest, net $ 27,000 $ 168,000
Income taxes, net of refunds 2,043,000 314,000
========== ===========
<PAGE>
SCHULTZ SAV-O STORES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Basis of Presentation
The financial statements included herein have been prepared by the
Company, without audit. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted,
although the Company believes that the disclosures are adequate to make
the information presented not misleading. The interim financial statements
furnished with this report reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for
the interim periods presented. It is suggested that these financial
statements be read in conjunction with the audited financial statements
and the notes thereto included in the Company's 1994 annual report to
shareholders, as incorporated by reference in the Company's Form 10-K for
the fiscal year ended December 31, 1994.
(2) Interest Expense, net
Interest expense, net consists of the following:
For the 16-Weeks Ended
April 22 April 23
1995 1994
Interest expense:
Long-term debt $ 131,000 $ 40,000
Imputed - capital leases 156,000 179,000
Interest income (265,000) (67,000)
---------- ---------
Interest expense, net $ 22,000 $ 152,000
========== ==========
(3) Prepaid Expenses and Other
Prepaid expenses and other consists of following:
April 22 December 31
1995 1994
Land and building held for resale $ 824,000 $ 733,000
Prepaid expenses and other assets 1,472,000 1,611,000
---------- ----------
Prepaid expenses and other $2,296,000 $2,344,000
=========== ==========
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Selected costs and results as a percent of net sales:
For the 16-Weeks Ended
April 22 April 23
1995 1994
Cost of products sold . . . . . . . . . . . 83.9% 83.6%
Operating and administrative expenses . . . 14.6 14.9
Earnings before income taxes . . . . . . . 1.5 1.3
Net earnings . . . . . . . . . . . . . . . 0.9 0.8
Net sales for the 16-week period ended April 22, 1995 were $132,278,000
compared to the 16-week period ended April 23, 1994 net sales of
$135,180,000. The decrease of $2,902,000, or 2.1%, was due primarily to
the continuing increase in the relative percentage of wholesale sales to
retail sales, as the Company continues to dispose of underperforming or
noncompetitive corporate retail stores through conversion to franchise
units or closures. In February 1994, the Company terminated its
relationship with one multi-store wholesale customer. Since April 23,
1994, the Company sold one corporate retail supermarket and converted it
into a franchised unit. The Company closed its underperforming corporate
Palatine, Illinois retail supermarket in February 1995 after the Company
determined that the supermarket was likely to continue incurring
significant operating losses. These actions were the principal factors
underlying the Company's reduced sales levels, in addition to continued
intense retail competition. As of April 22, 1995, the Company had 65
franchised and 19 corporate supermarkets compared to 64 franchised and 21
corporate supermarkets at April 23, 1994 and 60 franchised and 26
corporate supermarkets at April 24, 1993.
Consistent with the Company's business strategy to expand its wholesale
business volume, the Company expects that the level of its wholesale sales
will continue to increase relative to its total sales for the remainder of
1995. Towards this end, there are expansion or renovation projects at
seven franchise retail projects currently in various phases of planning or
construction, with completions scheduled from the second quarter of 1995
through the fourth quarter of 1995. These projects involve five additions
to existing stores, one replacement supermarket and one new market
franchise unit. Upon completion, the aggregate increase in size of these
stores will exceed 74,000 square feet.
Cost of products sold, as a percent of sales, increased by 0.3% to 83.9%
for the 16-week period ended April 22, 1995, compared to the same period
in 1994. While the percentage increased, total cost of products sold
decreased $2,089,000 for the first quarter of 1995 compared to the first
quarter of 1994. The increased percentage was a direct result of a
reduction in the amount of higher margin retail sales compared to lower
margin wholesale sales. The lower margins associated with wholesale sales
continued in the first quarter of 1995 to be more than offset by
significantly reduced operating and administrative expenses realized from
the prior closure or sale of underperforming corporate retail
supermarkets.
Operating and administrative expenses, as a percent of sales, decreased by
0.3% to 14.6% for the 16-week period ended April 22, 1995, compared to the
same period in 1994. The decrease of $938,000 was due primarily to the
elimination of operating expenses (consisting of payroll, supplies, rent,
utilities, depreciation and other administrative expenses) associated with
the corporate retail supermarkets that have either been closed or sold and
converted into franchise units.
The effective income tax rate for the 16-week period ended April 22, 1995
increased to 38.5%, compared to 36.8% for the same period in 1994. The
provision for income taxes during the 16-week periods ended April 22, 1995
and April 23, 1994 was $775,000 and $647,000, respectively.
As a result of the foregoing, net earnings for the 16-weeks ended April
22, 1995 totaled $1,237,000, compared to $1,110,000 for the same period in
1994, or an increase of 11.4%. The Company's 1995 first quarter earnings
per share increased by $0.09, or 22.0%, compared to the same period in
1994. Earnings per share increased on a percentage basis more than net
earnings as a result of treasury share purchases during the first 16 weeks
of 1995 which reduced the number of average shares outstanding for the
quarter. The decrease in the average outstanding shares for the 16-week
periods ended April 22, 1995 and April 23, 1994 was partially reduced due
to the dilutive effect of stock options which were treated as common stock
equivalents under the treasury stock method.
Some of the Company's corporate retail supermarkets continue to be
underperforming or noncompetitive in their respective marketplaces and, as
a result, continue to incur operating losses. In order to further improve
the Company's results of operations, the Company is currently evaluating
various business alternatives relating to these operations, including, but
not limited to, selling these corporate stores and converting them into
franchise supermarkets, closing the stores or implementing other
operational changes. Similar to prior fiscal years, implementation of
these actions will likely result in the Company incurring certain
repositioning charges involving the termination costs of replaced, closed
or sold stores. While these charges may reduce the Company's reported net
earnings for the period or periods in which the actions are taken, the
Company believes that such actions will improve the Company's long-term
profitability.
Liquidity and Capital Resources
Net cash inflows from operating activities for the 16-week period ended
April 22, 1995 were $4,018,000, an increase of $495,000 over the prior
year 16-week period ended April 23, 1994. The increase was attributable
primarily to an increase in accounts payable due to timing of payments
and, to a lesser extent, the effect of higher net earnings. These
increases were offset by a reduction in accrued liabilities due to
significant tax payments made by the Company during the first quarter of
1995.
Net cash inflows from investing activities for the first quarter of 1995
totaled $2,000, compared to net cash outflows of $521,000 during the same
period in 1994. The change was due primarily to proceeds from asset sales
of $559,000 during the first quarter of 1995. Capital expenditures for
property and equipment during the first quarter of 1995 totaled $716,000,
which approximated 1994 same period total of $703,000.
Net cash outflows from financing activities for the 16-week period ended
April 22, 1995 were $1,083,000, compared to $907,000 during the same
period in 1994. The increase in cash outflows was due principally to the
$172,000 incremental cost of repurchasing common stock during the first
quarter of 1995, compared to the first quarter of 1994.
As a result of the foregoing, net cash increased $2,937,000 during the 16-
weeks ended April 22, 1995, compared to an increase of $2,095,000 during
the same period in 1994. The Company believes that its financial
condition provides it with adequate long-term flexibility to finance
anticipated capital requirements without adversely impacting its financial
position or liquidity. The Company is currently evaluating the purchase
of a computer system to improve its distribution capabilities.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) No reports of Form 8-K were filed by the Company during the first
quarter of fiscal 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCHULTZ SAV-O STORES, INC.
(Registrant)
May 31, 1995 /s/ John H. Dahly
(Date) John H. Dahly, Executive Vice
President, Chief Financial Officer
and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS OF SCHULTZ SAV-O STORES, INC. AS OF AND
FOR THE QUARTER ENDED APRIL 22, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER<F4>
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-22-1995
<CASH> 17,247,000
<SECURITIES> 0
<RECEIVABLES> 8,590,000<F3>
<ALLOWANCES> 0<F3>
<INVENTORY> 20,264,000
<CURRENT-ASSETS> 53,265,000
<PP&E> 55,907,000
<DEPRECIATION> 32,046,000
<TOTAL-ASSETS> 91,497,000
<CURRENT-LIABILITIES> 29,357,000
<BONDS> 3,968,000
<COMMON> 146,000
300,000
0
<OTHER-SE> 41,473,000
<TOTAL-LIABILITY-AND-EQUITY> 91,497,000
<SALES> 132,278,000
<TOTAL-REVENUES> 132,278,000
<CGS> 110,989,000
<TOTAL-COSTS> 0<F1>
<OTHER-EXPENSES> 19,255,000<F1>
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 22,000<F2>
<INCOME-PRETAX> 2,012,000
<INCOME-TAX> 775,000
<INCOME-CONTINUING> 1,237,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,237,000
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<FN>
<F1>Amounts included in "other costs and expenses."
<F2>Net of interest income.
<F3>Net of "allowances for doubtful accounts."
<F4>1st Quarter is 16 weeks.
</FN>
</TABLE>
