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 July 18, 1998
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 53081
SHEBOYGAN, WISCONSIN (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number
including area code 920-457-4433
________________________________________
Former name, former address and former fiscal year,
if changed since last report
Indicate by checkmark 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 checkmark 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 August 24, 1998, 6,812,779 shares of Common Stock, $0.05 par
value, were issued and outstanding.
<PAGE>
SCHULTZ SAV-O STORES, INC.
FORM 10-Q INDEX
PAGE
NUMBER
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Earnings 4
Unaudited Consolidated Statements of Cash Flows 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SCHULTZ SAV-O STORES, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
Assets July 18, 1998 January 3, 1998
Current assets:
Cash and equivalents $ 31,160,000 $23,124,000
Receivables 8,547,000 9,718,000
Inventories 20,917,000 21,741,000
Other current assets 4,052,000 3,635,000
Deferred income taxes 4,496,000 4,131,000
------------ -----------
Total current assets 69,172,000 62,349,000
Noncurrent receivable under
capital subleases 7,000,000 7,270,000
Property under capital leases, net 2,631,000 2,786,000
Other noncurrent assets 3,821,000 3,782,000
Property and equipment, net 21,579,000 22,679,000
------------ -----------
Total Assets $104,203,000 $98,866,000
============ ===========
Liabilities and Shareholders'
Investment
Current liabilities:
Accounts payable $ 23,289,000 $21,305,000
Accrued salaries and benefits 4,781,000 4,395,000
Accrued insurance 3,588,000 3,095,000
Retail repositioning reserve 772,000 610,000
Other accrued liabilities 3,291,000 2,861,000
Current obligations under
capital leases 711,000 665,000
Current maturities of
long-term debt 131,000 201,000
------------ -----------
Total current liabilities 36,563,000 33,132,000
Long-term obligations under
capital leases 10,773,000 11,177,000
Long-term debt 3,078,000 3,165,000
Deferred income taxes 880,000 1,008,000
Shareholders' investment:
Common stock 438,000 438,000
Additional paid-in capital 14,111,000 13,940,000
Retained earnings 54,080,000 51,299,000
Treasury stock (15,720,000) 15,293,000)
------------ -----------
Total shareholders' investment 52,909,000 50,384,000
Total Liabilities and Shareholders'
Investment $104,203,000 $98,866,000
============ ===========
<PAGE>
<TABLE>
SCHULTZ SAV-O STORES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
For the 12-weeks ended For the 28-weeks ended
July 18, July 12, July 18, July 12,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $114,068,000 $109,844,000 $256,210,000 $248,670,000
Costs and expenses:
Cost of products sold 95,618,000 92,647,000 214,697,000 209,396,000
Operating and administrative expenses 15,244,000 14,364,000 35,545,000 33,864,000
------------ ------------ ------------ ------------
Operating income 3,206,000 2,833,000 5,968,000 5,410,000
Interest income 285,000 274,000 590,000 540,000
Interest expense (182,000) (195,000) (453,000) (458,000)
------------ ------------ ------------ ------------
Earnings before income taxes 3,309,000 2,912,000 6,105,000 5,492,000
Provision for income taxes 1,284,000 1,121,000 2,369,000 2,114,000
------------ ------------ ------------ ------------
Net earnings $ 2,025,000 $ 1,791,000 $ 3,736,000 $ 3,378,000
============ ============ ============ ============
Basic earnings per share $0.30 $0.26 $0.55 $0.49
===== ===== ===== =====
Diluted earnings per share $0.29 $0.25 $0.53 $0.47
===== ===== ===== =====
Cash dividends paid per share $0.07 $0.066 $0.14 $0.13
===== ===== ===== =====
Average common and equivalent shares 7,014,000 7,051,000 7,013,000 7,081,000
============ ============ ============ ============
</TABLE>
<PAGE>
SCHULTZ SAV-O STORES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 28-weeks ended
July 18, July 12,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,736,000 $ 3,378,000
Adjustments to reconcile net
earnings to net cash flows from
operating activities
Depreciation and amortization 2,713,000 2,193,000
Changes in assets and liabilities
Receivables 1,171,000 4,678,000)
Inventories 824,000 2,479,000
Other current assets (663,000) (518,000)
Accounts payable 1,984,000 1,818,000
Accrued liabilities 1,149,000 325,000
---------- ----------
Net cash flows from
operating activities 10,914,000 4,997,000
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment (1,282,000) (887,000)
Receipt of principal amounts
under capital sublease agreements 239,000 271,000
Proceeds from asset sales 61,000 117,000
---------- ----------
Net cash flows from
investing activities (982,000) (499,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends (954,000) (924,000)
Payment for acquisition of
treasury stock (659,000) 1,666,000)
Principal payments under
capital lease obligations (358,000) (377,000)
Proceeds from exercise of
stock options 232,000 164,000
Principal payments on
long-term debt (157,000) (167,000)
---------- ----------
Net cash flows from
financing activities (1,896,000) (2,970,000)
---------- ----------
CASH AND EQUIVALENTS:
Net increase 8,036,000 1,528,000
Balance, beginning of period 23,124,000 27,531,000
---------- ----------
Balance, end of period $31,160,000 $29,059,000
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 458,000 $ 491,000
Income taxes paid 1,985,000 2,997,000
<PAGE>
SCHULTZ SAV-O STORES, INC.
NOTES TO UNAUDITED CONSOLIDATED 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 of a normal recurring
nature, 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 1997 annual report to shareholders, as incorporated by reference
in the Company's Form 10-K for the fiscal year ended January 3, 1998.
(2) Interest Expense
For the 12-weeks ended For the 28-weeks ended
July 18, July 12, July 18, July 12,
1998 1997 1998 1997
Imputed - capital leases $109,000 $115,000 $254,000 $268,000
Long-term debt 73,000 80,000 173,000 190,000
Other - - 26,000 -
-------- -------- -------- --------
Interest expense $182,000 $195,000 $453,000 $458,000
======== ======== ======== ========
(3) Other Current Assets
July 18, January 3,
1998 1998
Property held for resale $2,131,000 $1,663,000
Prepaid expenses 1,055,000 1,209,000
Receivable under capital subleases 474,000 443,000
Other assets 392,000 320,000
---------- ----------
Other current assets $4,052,000 $3,635,000
========== ==========
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 12-weeks ended For the 28-weeks ended
July 18, July 12, July 18, July 12,
1998 1997 1998 1997
Cost of products sold 83.8% 84.3% 83.8% 84.2%
Operating and administrative
expenses 13.4 13.1 13.9 13.6
Earnings before income taxes 2.9 2.7 2.4 2.2
Net earnings 1.8 1.6 1.5 1.4
-----------------------------------------------------------------------
Net Sales
Net sales for the 12- and 28-week periods ended July 18, 1998 were
$114,068,000 and $256,210,000, respectively, compared to $109,844,000 and
$248,670,000 in the same periods ended July 12, 1997, respectively. The
increases of $4,224,000 and $7,540,000, or 3.8% and 3.0% were due
primarily to increased wholesale business volume resulting from the
Company's continued additions and enhancements to the "virtual chain" base
of franchised and corporate retail supermarkets. Since July 12, 1997, the
Company has completed one new market corporate store, one new market
franchise store, two replacement franchise stores, and three additions to
existing franchise stores. These completed projects, located in Appleton,
Poynette, Evansville, Lomira, Waterloo, Howards Grove, and Waupaca,
Wisconsin added approximately 108,000 square feet of aggregate store
selling space.
In addition to improved wholesale business volume, corporate retail sales
also increased. Corporate stores open more than one year continued to
show improved sales volume compared to the prior year. Retail sales also
increased due to additional corporate stores in Appleton and Oshkosh,
Wisconsin since July 12, 1997. The sales increase clearly shows a
positive trend, and with the absence of price inflation, represents real
growth. As of July 18, 1998, the Company had 69 franchised and 18
corporate supermarkets compared to 70 franchised and 16 corporate
supermarkets at July 12, 1997. On August 19, 1998, the Company opened a
new 32,000 square foot corporate store in Appleton, Wisconsin. This
renovated store facility was one of the stores that Company acquired from
Nash Finch Company in 1997. With the opening of this store, the Company
closed its older corporate store on North Oneida Street in Appleton.
The Company expects that the level of its wholesale and retail sales will
continue to be strong for the remainder of 1998. Currently, there are
expansion or renovation projects at five franchise retail operations in
various phases of planning or construction. These projects involve four
additions to existing store operations and one replacement supermarket.
On an aggregate basis, these projects are expected to yield an additional
40,000 square feet of selling space.
Cost of Products Sold
Cost of products sold, as a percent of sales, decreased nominally to 83.8%
for both the 12-and 28-week periods ended July 18, 1998, compared to the
84.3% and 84.2%, respectively, for the same periods in 1997. This
decrease was a direct result of an increase in higher margin retail sales
from additional corporate stores in Appleton and Oshkosh, Wisconsin opened
since July 12, 1997. With these additional corporate stores, the
Company's percentage of higher margin retail sales volume continued to
increase relative to the lower margin wholesale sales.
Operating and Administrative Expenses
Operating and administrative expenses, as a percent of sales, amounted to
13.4% and 13.9% for the 12- and 28-week periods ended July 18, 1998,
compared to 13.1% and 13.6% for the same periods in 1997. Total operating
and administrative expenses increased primarily because of increased
wages, benefits and general operating costs for the new corporate
supermarkets in Appleton and Oshkosh, Wisconsin. Additionally, the
Company incurred and expensed certain store pre-opening and administrative
costs in the newly-renovated and opened corporate store in Appleton,
Wisconsin.
Due to the highly competitive nature of the industry, certain Company
franchise operators and corporate retail supermarkets continue to
experience operational difficulties in their respective marketplaces. The
Company continues to evaluate various business alternatives relating to
underperforming operations. The Company's business alternatives include,
but are not limited to, the sale and subsequent conversion of corporate
stores to franchise units, closing stores, or implementing other
operational changes. Similar to certain prior periods, the Company has
incurred certain repositioning charges regarding the termination costs of
replaced, closed or sold stores. These actions can negatively impact net
earnings in the short-term, but management believes that such actions will
help improve the Company's long-term profitability.
Net Earnings
After applying the effective tax rate to earnings before income taxes, net
earnings for the 12-and 28-week periods ended July 18, 1998, compared to
the same periods in 1997, increased 13.1% and 10.6% to $2,025,000 and
$3,736,000, respectively. Diluted earnings per share for the 12-and 28-
week periods ended July 18, 1998 increased 16.0% to $0.29 compared with
$0.25 in 1997, and 12.8% to $0.53 compared with $0.47 in 1997. The number
of consecutive quarters showing increases in net earnings over the prior
year's quarter has been extended to 22.
Liquidity and Capital Resources
The Company's favorable 1998 year to date operating results continued to
enhance its strong financial position. As was the case in the prior year,
the primary source of liquidity for the 28-week period ended July 18, 1998
was cash generated from operating activities. Cash provided by operating
activities was $10,914,000, an increase of $5,917,000 over the prior year
28-week period ended July 12, 1997 cash inflow of $4,997,000. The
increase in cash flows from operations was due primarily to the timing of
cash receipts, cash payments, and changes in short-term financing to its
wholesale customers for the purchase of new equipment.
Net cash outflows from investing activities for the 28-week period ended
July 18, 1998 totaled $982,000, compared to $499,000 during the same
period in 1997. The change was due primarily to an increase in capital
expenditures compared to the same period in 1997. The Company has a 1998
capital budget of $4,300,000, of which approximately $3,000,000 remains
available for future expenditures. The Company anticipates financing
these needs from internally generated capital.
Net cash outflows from financing activities for the 28-week period ended
July 18, 1998 was $1,896,000, compared to $2,970,000 during the same
period in 1997. The decrease in cash outflows was due principally to the
reduction in common stock repurchased by the Company during the first half
of 1998, compared to the first half of 1997. The Company maintains a
revolving credit facility agreement with two lending institutions to
provide up to $16 million of borrowings at rates not to exceed the bank's
prime rates. At July 18, 1998 and July 12, 1997, the Company had no
borrowings outstanding under these agreements.
The Company's Board of Directors declared a 14.3% increase in its third
quarter cash dividend on common stock. Cash dividends will increase to
$0.08 from $0.07 per share. The dividend will be payable on September 11,
1998 to shareholders of record as of August 28, 1998. Robert W. Baird &
Co., Inc. reported in its 1998 Financial Briefs of Wisconsin that Schultz
Sav-O Stores' 31.0% annual dividend growth rate over the last five years
ranks first among all Wisconsin publicly-held companies.
In summary, cash and equivalents increased $8,036,000 during the first
half of 1998, compared to an increase of $1,528,000 during the same period
in 1997. Due to the Company's significant cash and other liquid assets,
its consistent ability to generate cash flows from operations and
availability of external financing, the Company foresees no difficulty in
providing financing necessary to fund its capital commitments and working
capital needs for the foreseeable future.
The Company has assessed and continues to assess the impact of the Year
2000 issue on its operations, including estimates for development costs,
and the extent of programming changes required to address this issue. The
Company also continues to assess the impact of this issue with its key
vendors and suppliers. Although final cost estimates have not been fully
determined, based on current information available, the Company
anticipates that its Year 2000 costs will result in an immaterial increase
in the Company's expenses for the remainder of 1998.
-----------------------------------------------------------------------
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Form 10-Q are "forward-looking
statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such
because the context of the statement will include words such as the
Company "believes," "anticipates," "expects" or words of similar import.
Similarly, statements that describe the Company's future plans,
objectives, strategies or goals are also forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties
which are described in close proximity to such statements and which could
cause actual results to differ materially from those currently
anticipated. Shareholders, potential investors and other readers are
urged to consider these factors carefully in evaluating the forward-
looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements made herein
are only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
-----------------------------------------------------------------------
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1998 annual meeting of shareholders was held on Wednesday,
May 13, 1998. At the meeting, the shareholders re-elected James H.
Dickelman and William K. Jacobson and newly elected Steven R. Barth to the
Company's Board of Directors for three-year terms expiring at the
Company's 2001 annual meeting of shareholders and until their successors
are duly qualified and elected. As of the March 25, 1998 recorded date
for the annual meeting, 6,812,779 shares of Common Stock were outstanding
and eligible to vote. Of these, 5,595,282 shares of Common Stock voted at
the meeting in person or by proxy. The following votes were recorded for
each nominee:
For Withheld
Votes Percentage Votes Percentage
James H. Dickelman 5,576,351 99.7% 18,931 0.3%
William K. Jacobson 5,577,251 99.7% 18,031 0.3%
Steven R. Barth 5,572,338 99.6% 22,944 0.4%
The tabulation of votes for the election of directors resulted in no
broker non-votes or abstentions.
Of the 5,595,282 shares of Common Stock voted at the meeting in person or
by proxy, the following votes were recorded for approval of the
ratification of Arthur Andersen LLP as the Company's 1998 independent
public accountants:
For Against Abstained
Votes Percentage Votes Percentage Votes Percentage
5,568,888 99.5% 16,823 0.3% 9,571 0.2%
No other matters were brought before the meeting for a shareholder vote.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.13 Form of Amendment to Key Executive Employment and Severance
Agreement, dated as of July 27, 1998 between the Company
and each of James H. Dickelman, John H. Dahly, Michael R.
Houser and William K. Jacobson.
27 Financial Data Schedule.
(b) No reports of Form 8-K were filed by the Company during the
first half of fiscal 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCHULTZ SAV-O STORES, INC.
(Registrant)
August 26, 1998 /s/ Armand C. Go
(Date) Armand C. Go, Treasurer and
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
10.13 Form of Amendment to Key Executive Employment and Severance
Agreement, as of July 27, 1998 between the Company and each of
James H. Dickelman, John H. Dahly, Michael R. Houser and William
K. Jacobson.
27 Financial Data Schedule.
Exhibit 10.13
AMENDMENT TO
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AMENDMENT ("Amendment"), dated as of July 27, 1998, supplements
and amends the existing Key Employment and Severance Agreement
("Agreement") by and between SCHULTZ SAV-O STORES, INC., a Wisconsin
corporation ("Company"), and the named executive set forth above
("Executive"). All defined terms used herein and not defined shall have
the same meaning as in the Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to Section 19 of the Agreement, the Executive and
the Company desire to supplement and amend the Agreement as specifically
set forth in this Amendment.
WHEREAS, the Board of Directors of the Company believes it is in the
best interests of the Company to allow the Executive the right to exercise
a "discretionary termination" at any time within one year after a Change
in Control for any reason and be eligible to receive his Termination
Payment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein set forth, and for other valuable
consideration the parties hereto covenant and agree as follows:
1. The first paragraph of Section 1(m) and paragraph (E) of
Section 1(m) of the Agreement are each hereby amended and restated to read
in their respective entirety as follows:
"(o) Termination Date. For purposes of this Agreement,
except as otherwise provided in Section 10(b) and Section
17(a) hereof or as set forth below, the term `Termination
Date' means (i) if the Executive's employment is terminated
by the Executive's death, the date of death; (ii) if the
Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and
the Executive, the effective date of such early retirement
which is set forth in such written agreement; (iii) if the
Executive's employment is terminated by reason of
disability pursuant to Section 12 hereof, the earlier of
thirty (30) days after the Notice of Termination is given
or one day prior to the end of the Employment Period; (iv)
if the Executive's employment is terminated by the
Executive voluntarily (other than for Good Reason), the
date the Notice of Termination is given; (v) if the
Executive's employment is terminated by the Executive
pursuant to a Discretionary Termination, the date the
Notice of Termination is given, but not later than the
first anniversary after the occurrence of the Change in
Control of the Company; and (vi) if the Executive's
employment is terminated by the Company (other than by
reason of disability pursuant to Section 12 hereof) or by
the Executive for Good Reason, the earlier of thirty (30)
days after the Notice of Termination is given or one day
prior to the end of the Employment Period. Notwithstanding
the foregoing, ..." [Remainder of existing Section 1(m) to
remain as written in Agreement, except for paragraph (E) as
provided below.]
"(E) Except as provided in Paragraphs (B) and (C) above and
other than a Discretionary Termination (which cannot be
subject to dispute by the Company), if the party receiving
the Notice of Termination in good faith notifies the other
party that a dispute exists concerning the termination
within the fifteen (15) day period following receipt
thereof and it is finally determined that the reason
asserted in such Notice of Termination did not exist, then
(1) if such Notice was delivered by the Executive, the
Executive will be deemed to have voluntarily terminated his
employment and (2) if delivered by the Company, the Company
will be deemed to have terminated the Executive other than
by reason of death, disability or Cause."
2. New Section 1(n) of the Agreement is hereby added to the
Agreement in its entirety as follows:
"(n) Discretionary Termination. For purposes of this
Agreement, `Discretionary Termination' means the
determination by the Executive at any time during the one-
year period after the occurrence of a Change in Control of
the Company, as evidenced by the Executive's delivery to
the Company of a Notice of Termination during such period,
to terminate this Agreement and his employment hereunder
for any reason whatsoever in his sole discretion, with or
without good faith, and regardless of whether the Company
has terminated or is terminating Executive for any reason,
including for `Cause.'"
3. Section 3 of the Agreement is hereby amended and restated
in its entirety to read as follows:
"3. Employment Period. If a Change in Control of the
Company occurs when the Executive is employed by the
Company, the Company will continue thereafter to employ the
Executive during the Employment Period, and the Executive
will remain in the employ of the Company, in accordance
with and subject to the terms and provisions of this
Agreement (including, without limitation, the Executive's
right to exercise a Discretionary Termination), and the
terms of this Agreement shall expressly supersede the terms
and conditions of any other then existing employment
arrangement or agreement between the Company and the
Executive."
4. Section 7 of the Agreement is hereby amended and restated
in its entirety to read as follows:
"7. Termination For Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the
Executive's voluntarily terminating his employment, other
than for Good Reason or a Discretionary Termination (any
such terminations to be subject to the procedures set forth
in Section 13 hereof), then the Executive shall be entitled
to receive only Accrued Benefits pursuant to Section 9(a)
hereof."
5. Section 8(b) of the Agreement is hereby amended and
restated in its entirety to read as follows:
"(a) If there is a Covered Termination by the Executive
for Good Reason or a Discretionary Termination, or by the
Company other than by reason of (i) death, (ii) disability
pursuant to Section 12 hereof, or (iii) Cause, then the
Executive shall be entitled to receive, and the Company
shall promptly pay, Accrued Benefits pursuant to Section
9(a) hereof and, in lieu of further base salary for periods
following the Termination Date, as liquidated damages and
severance pay, the Termination Payment pursuant to
Section 9(b) hereof."
6. The first paragraph of Section 9(b) of the Agreement shall
be amended and restated in its entirety as follows:
"(b) Termination Payment. The Termination Payment shall
be an amount equal to the Executive's monthly base salary,
as in effect immediately prior to the Change in Control of
the Company, as adjusted upward from time to time pursuant
to Section 6 hereof, multiplied by the greater of the
number of months (which shall include fractions of months
rounded up to the next highest whole number) remaining in
the Employment Period or twelve (12). Except as otherwise
provided herein, the Termination Payment shall be paid to
the Executive in cash no later than ten (10) business days
after the Termination Date; provided, however, the
Termination Payment shall be paid immediately upon receipt
by the Company of a Notice of Termination relating to a
Discretionary Termination (regardless of any differing
effective date of the Executive's employment termination).
The Executive shall not be required to mitigate the amount
of the Termination Payment by securing other employment or
otherwise, nor will such Termination Payment be reduced by
reason of the Executive securing other employment or for
any other reason."
[Remainder of existing Section 9(b) to remain as written in
the Agreement.]
7. Section 10(b) of the Agreement shall be amended and
restated in its entirety as follows:
"(b) In the event the Executive dies after a Notice of
Termination is given (i) by the Company, other than by
reason of disability, or (ii) by the Executive for Good
Reason or a Discretionary Termination, the Executive's
estate, heirs and beneficiaries shall be entitled to the
benefits described in Section 10(a) hereof and, subject to
the provisions of this Agreement, to such Termination
Payment as the Executive would have been entitled to had
the Executive lived. For purposes of this Section 10(b),
the Termination Date shall be the earlier of thirty (30)
days following the giving of the Notice of Termination or
one day prior to the end of the Employment Period, subject
to delay pursuant to Section 1(m) hereof."
8. Section 11 of the Agreement shall be amended and restated
in its entirety as follows:
"11. Retirement. If, during the Employment Period, the
Executive and the Company shall execute an agreement
providing for the early retirement of the Executive from
the Company, or the Executive shall otherwise give notice
that he is voluntarily choosing to retire early from the
Company, the Executive shall receive Accrued Benefits
through the Termination Date; provided, that if the
Executive's employment is terminated by the Executive for
Good Reason or a Discretionary Termination or by the
Company other than by reason of death, disability or Cause
and the Executive also, in connection with such
termination, elects voluntary early retirement, the
Executive shall also be entitled to receive a Termination
Payment pursuant to Section 9(b) hereof."
9. Section 13(a) and (d) of the Agreement shall be amended and
restated in their respective entirety as follows:
"(a) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in
reasonable detail the facts and circumstances alleged to
provide a basis for such termination. (No such detail need
be provided for a Discretionary Termination.)"
"(d) The recipient of the Notice of Termination shall
personally deliver or mail in accordance with Section 23
hereof written notice of any dispute relating to such
Notice of Termination to the party giving such Notice
within fifteen (15) days after receipt thereof; provided,
however, that a Notice of Termination relating to a
Discretionary Termination shall not be subject to dispute
for any reason by the Company or otherwise. After the
expiration of such fifteen (15) days (or immediately upon
receipt of a Notice of Termination relating to a
Discretionary Termination), the contents of the Notice of
Termination shall become final and not subject to dispute."
10. Except as specifically set forth above, all other terms and
conditions of the Agreement shall continue in full force and effect,
unaffected by this Amendment. This Amendment shall be effective for all
purposes immediately as of the date first written above.
IN WITNESS WHEREOF, the Executive and the Company have set their
hands hereto as of the date above.
EXECUTIVE SCHULTZ SAV-O STORES, INC.
________________ By:___________________________________
James H. Dickelman
Chairman, President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SCHULTZ SAV-O STORES,
INC. AS OF AND FOR THE PERIOD ENDED JULY 18, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER<F3>
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> JUL-18-1998
<CASH> 31,160,000
<SECURITIES> 0
<RECEIVABLES> 8,547,000<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 20,917,000
<CURRENT-ASSETS> 69,172,000
<PP&E> 58,594,000
<DEPRECIATION> 37,015,000
<TOTAL-ASSETS> 104,203,000
<CURRENT-LIABILITIES> 36,563,000
<BONDS> 3,078,000
0
0
<COMMON> 438,000
<OTHER-SE> 52,471,000
<TOTAL-LIABILITY-AND-EQUITY> 104,203,000
<SALES> 256,210,000
<TOTAL-REVENUES> 256,210,000
<CGS> 214,697,000
<TOTAL-COSTS> 0<F2>
<OTHER-EXPENSES> 35,545,000<F2>
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 453,000
<INCOME-PRETAX> 6,105,000
<INCOME-TAX> 2,369,000
<INCOME-CONTINUING> 3,736,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,736,000
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.53
<FN>
<F1>Net of "Allowances for doubtful accounts".
<F2>Amounts included in "Other costs and expenses".
<F3>Period is 28 weeks.
</FN>
</TABLE>
