<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 3, 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: 33-41791
SPARTAN STORES, INC.
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-0593940
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
850 76TH STREET, S.W.
P.O. BOX 8700
GRAND RAPIDS, MICHIGAN 49518
(Address of Principal Executive Offices) (Zip Code)
(616) 878-2000
(Registrant's Telephone Number, Including Area Code)
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
--- ---
As of January 31, 1998, the issuer had 11,627,340 outstanding shares of
Class A Common Stock, $2 par value.
_____________________
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
THIRD QUARTER (16 WEEKS) ENDED
--------------------------------
JANUARY 3, JANUARY 4,
1998 1997
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
NET SALES $766,769,552 $755,133,697
COSTS AND EXPENSES
Cost of sales 689,095,592 682,553,539
Operating and administrative 69,313,767 65,350,620
Interest expense 3,617,766 3,070,718
Interest income (525,028) (1,404,773)
Gain on sale of property and equipment (1,570,249) (241,916)
------------ ------------
TOTAL COSTS AND EXPENSES 759,931,848 749,328,188
------------ ------------
EARNINGS BEFORE TAXES ON INCOME 6,837,704 5,805,509
TAXES ON INCOME 2,437,000 2,071,000
------------ ------------
NET EARNINGS $ 4,400,704 $ 3,734,509
============ ============
BASIC AND DILUTED EARNINGS PER CLASS A SHARE $ 0.38 $ 0.31
WEIGHTED AVERAGE NUMBER OF CLASS A
SHARES OUTSTANDING 11,697,780 12,079,295
DIVIDENDS DECLARED PER CLASS A SHARE $ 0.0125 $ 0.0125
</TABLE>
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<PAGE>
<TABLE>
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
THREE QUARTERS (40 WEEKS) ENDED
-----------------------------------
JANUARY 3, JANUARY 4,
1998 1997
(UNAUDITED) (UNAUDITED)
-------------- --------------
<S> <C> <C>
NET SALES $1,920,148,043 $1,912,989,947
COSTS AND EXPENSES
Cost of sales 1,727,145,798 1,728,550,713
Operating and administrative 174,594,781 167,961,922
Interest expense 8,363,614 7,696,476
Interest income (1,942,650) (3,527,117)
Gain on sale of property and equipment (3,670,577) (1,613,294)
-------------- --------------
TOTAL COSTS AND EXPENSES 1,904,490,966 1,899,068,700
-------------- --------------
EARNINGS BEFORE TAXES ON INCOME 15,657,077 13,921,247
TAXES ON INCOME 5,612,000 4,900,000
-------------- --------------
NET EARNINGS $ 10,045,077 $ 9,021,247
============== ==============
BASIC AND DILUTED EARNINGS PER CLASS A SHARE $ 0.85 $ 0.74
WEIGHTED AVERAGE NUMBER OF CLASS A
SHARES OUTSTANDING 11,850,749 12,173,052
DIVIDENDS DECLARED PER CLASS A SHARE $ 0.0375 $ 0.0375
</TABLE>
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<PAGE>
<TABLE>
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
JANUARY 3,
1998 MARCH 29,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25,095,186 $ 34,198,752
Marketable securities 22,161,331 17,605,880
Accounts receivable 66,795,012 67,045,013
Refundable taxes on income 2,718,442 6,026,221
Inventories 104,860,881 85,209,192
Prepaid expenses 7,243,385 7,867,173
Deferred taxes on income 5,508,000 5,751,000
------------ ------------
TOTAL CURRENT ASSETS 234,382,237 223,703,231
OTHER ASSETS 8,106,924 6,918,350
PROPERTY AND EQUIPMENT 312,298,880 308,996,573
Less accumulated depreciation and amortization 145,493,439 135,988,572
------------ ------------
NET PROPERTY AND EQUIPMENT 166,805,441 173,008,001
------------ ------------
TOTAL ASSETS $409,294,602 $403,629,582
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 27,500,000 $ 33,500,000
Accounts payable 75,546,264 78,130,484
Insurance reserves 17,754,811 17,172,342
Current maturities of long-term debt 5,857,229 6,598,927
Current obligations under capital leases 640,403 593,078
Other current liabilities 27,998,347 27,035,106
------------ ------------
TOTAL CURRENT LIABILITIES 155,297,054 163,029,937
-4-
<PAGE>
DEFERRED GAIN ON SALE OF PROPERTY AND EQUIPMENT 339,933 213,198
DEFERRED TAXES ON INCOME 2,807,000 2,807,000
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 4,545,483 4,545,483
LONG-TERM DEBT 132,600,428 124,010,394
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 1,262,456 1,765,996
SHAREHOLDERS' EQUITY
Class A common stock, voting, par value
$2 per share 23,294,316 24,065,700
Additional paid-in capital 17,137,572 18,406,969
Retained earnings 72,010,360 64,784,905
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 112,442,248 107,257,574
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $409,294,602 $403,629,582
============ ============
</TABLE>
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<PAGE>
<TABLE>
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
THREE QUARTERS (40 WEEKS) ENDED
--------------------------------
JANUARY 3, JANUARY 4,
1998 1997
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 10,045,077 $ 9,021,247
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 16,429,657 15,126,745
Deferred taxes on income 243,000 143,000
Gain on sale of property and equipment (3,670,577) (1,613,294)
Change in assets and liabilities:
Marketable securities (4,555,451) 320,426
Accounts receivable 250,001 4,330,617
Refundable taxes on income 3,307,779 7,787,536
Inventories (19,651,689) (9,047,064)
Prepaid expenses 623,788 (2,207,954)
Accounts payable (2,584,220) 8,042,221
Insurance reserves 582,469 (483,891)
Other accrued expenses 963,241 (8,471,425)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,983,075 22,948,164
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (21,263,703) (36,002,250)
Proceeds from the sale of property and equipment 14,707,184 7,876,157
Other (1,099,847) 1,620,299
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (7,656,366) (26,505,794)
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in notes payable (6,000,000) 15,000,000
Proceeds from long-term borrowings 28,684,569 26,907,660
Repayment of long-term debt (20,836,233) (38,580,223)
Reduction of obligations under capital leases (456,215) (458,134)
Proceeds from sale of common stock 2,583,679 2,509,225
Common stock purchased (6,962,055) (7,357,250)
Dividends paid (444,020) (455,531)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (3,430,275) (2,434,253)
------------ ------------
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<PAGE>
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,103,566) (5,991,883)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 34,198,752 39,796,018
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF THIRD QUARTER $ 25,095,186 $ 33,804,135
============ ============
</TABLE>
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<PAGE>
<TABLE>
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
CLASS A ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE - MARCH 30, 1996 $24,920,960 $19,622,472 $58,043,279
CLASS A COMMON STOCK TRANSACTIONS
801,410 shares purchased (1,602,820) (4,367,053) (2,355,162)
373,780 shares issued 747,560 3,151,550
NET EARNINGS 9,702,725
CASH DIVIDENDS - $.05 PER SHARE (605,937)
----------- ----------- -----------
BALANCE - MARCH 29, 1997 24,065,700 18,406,969 64,784,905
CLASS A COMMON STOCK TRANSACTIONS
619,202 shares purchased (1,238,404) (3,386,056) (2,375,602)
233,510 shares issued 467,020 2,116,659
NET EARNINGS 10,045,077
CASH DIVIDENDS - $.0375 PER SHARE (444,020)
----------- ----------- -----------
BALANCE - JANUARY 3, 1998 $23,294,316 $17,137,572 $72,010,360
=========== =========== ===========
</TABLE>
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The 1997 annual report contains a summary of significant accounting
policies in the notes to consolidated financial statements. The Company
follows the same accounting policies in the preparation of interim
financial statements.
ACCOUNTS RECEIVABLE
Accounts receivable include the current portion of notes receivable and are
shown net of allowances for credit losses of $3,440,000 and $3,160,000 at
January 3, 1998 and March 29, 1997, respectively.
INVENTORIES
Inventories are stated at the lower of cost or market using the LIFO (last-
in, first-out) method. If replacement cost had been used, inventories
would have been $46,213,000 and $44,986,000 higher at January 3, 1998 and
March 29, 1997, respectively.
ACCOUNTS PAYABLE
Accounts payable include approximately $16,000,000 and $15,523,000 at
January 3, 1998 and March 29, 1997, respectively, representing checks which
have been issued and have not cleared the Company's controlled disbursing
bank accounts.
SHAREHOLDERS' EQUITY
On May 28, 1997, the Board of Directors approved an amendment to the
Restated Articles of Incorporation to increase the authorized capital stock
to 20,000,000 shares of Class A common stock and 5,000,000 shares of Class
B common stock and authorized a ten-for-one stock split for shareholders of
record on May 31, 1997. The stock split was subject to approval of the
amendment by the Company's shareholders. The amendment was approved by the
shareholders and became effective on July 15, 1997. Accordingly, share and
per share amounts have been restated throughout the consolidated financial
statements.
RECLASSIFICATIONS
Certain reclassifications relating to service revenues and pass-through
billings have been made to the prior year's financial statements to conform
to the third quarter and first forty weeks of fiscal 1998 presentation.
Previously, service revenues were netted against the related costs and
pass-through billings were recorded as sales and cost of sales. These
reclassifications did not affect net earnings as previously reported.
-9-
<PAGE>
STATEMENT OF REGISTRANT
The data presented herein is unaudited, but in the opinion of management
includes all adjustments (which consist solely of normal recurring
accruals) necessary for a fair presentation of the consolidated financial
position of the Company and its subsidiaries at January 3, 1998 and the
results of their operations and the changes in cash flows for the periods
ended January 3, 1998 and January 4, 1997. These interim results are not
necessarily indicative of the results of the fiscal years as a whole.
CONTINGENCIES
On December 12, 1997, the Company agreed to accept a mediation award to
settle a lawsuit involving alleged racial harassment incidents that took
place several years ago in one of the Company's warehouses. Under the
mediation decision, the Company agreed to pay $1.3 million in damages,
which has been accrued in its entirety at January 3, 1998.
On August 21, 1996, the Attorney General for the State of Michigan filed
an action in Michigan circuit court against the leading cigarette manu-
facturers operating in the United States, twelve wholesalers and distribu-
tors of tobacco products in Michigan (including three Company subsidiaries)
and others seeking certain injunctive relief, the reimbursement of $4
billion in Medicaid and other expenditures incurred or to be incurred by
the State of Michigan to treat diseases allegedly caused by cigarette
smoking and punitive damages of $10 billion. Subsequent to the end of
fiscal year 1997, two separate actions have been filed in the state courts
in Tennessee on behalf of the individual plaintiffs and as a class action
in one case and on behalf of the State of Tennessee and its taxpayers in
the other case, and sixteen separate actions have been filed by individual
plaintiffs in state courts in Pennsylvania, against the leading cigarette
manufacturers operating in the United States and certain wholesalers and
distributors, including a subsidiary of the Company. In these separate
cases, the plaintiffs are seeking compensatory, punitive and other damages,
reimbursement of medical and other expenditures and equitable relief. The
Company believes that its subsidiaries have valid defenses to these legal
actions. These actions will be vigorously defended. One of the cigarette
manufacturers named as a defendant in each action has agreed to indemnify
the Company's subsidiaries from damages arising out of these actions.
Management believes that the ultimate outcome of these actions should not
have a material adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.
Various other lawsuits and claims, arising in the ordinary course of
business, are pending or have been asserted against the Company. While the
ultimate effect of such actions cannot be predicted with certainty,
management believes that their outcome will not result in a material
adverse effect on the consolidated financial position, operating results or
liquidity of the Company.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth items from the Company's Consolidated
Statements of Earnings as percentages of net sales:
<TABLE>
<CAPTION>
THIRD QUARTER (16 WEEKS) ENDED THREE QUARTERS (40 WEEKS) ENDED
------------------------------ -------------------------------
JANUARY 3, JANUARY 4, JANUARY 3, JANUARY 4,
1998 1997 1998 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 10.1 9.6 10.0 9.7
Less:
Operating and administrative
expenses 9.0 8.7 9.1 8.8
Interest expense .5 .4 .4 .4
Interest income (.1) (.2) (.1) (.2)
Gain on sale of property and
equipment (.2) (.1) (.2) (.1)
----- ----- ----- -----
Total 9.2 8.8 9.2 8.9
----- ----- ----- -----
Earnings before income taxes .9 .8 .8 .8
Taxes on income .3 .3 .3 .3
----- ----- ----- -----
Net earnings .6% .5% .5% .5%
===== ===== ===== =====
</TABLE>
NET SALES
Net sales for the third quarter and first forty weeks of fiscal 1998
increased by approximately $11.6 million and $7.2 million, respectively,
compared to the same periods in the prior year.
Sales in the Distribution segment for the third quarter and first forty
weeks of fiscal 1998 increased by approximately $12.0 million and $8.0
million, respectively. Approximately $4.0 million of the increases
resulted from the acquisition of a small convenience store distributor.
Additional increases resulted from sales of pharmacy products, the rising
prices of cigarettes and fees earned on services provided to retailers.
-11-
<PAGE>
These increases were partially offset by declines in the sale of grocery
and general merchandise products to grocery retailers.
In November 1997, one of the Company's subsidiaries acquired certain
inventory, accounts receivable and customer lists of another convenience
store distribution company resulting in increased sales volumes as noted
earlier. This increase was offset partially by a reduction of volumes
resulting from strong competition in food distribution from warehouse
discount stores, supermarkets and pharmacies entering the Company's
markets.
Sales in the grocery and general merchandise commodities have declined due
to highly competitive market conditions, primarily in the Eastern Michigan
region, as competitors' supermarkets continue to increase square footage.
Additionally, some of the Company's customers have increased purchases of
these types of products directly from manufacturers and have reduced
existing shelf space due to the continued success of discount stores that
are beginning to carry these products. Like unit sales of grocery and
other related products to grocery retailers have declined by approximately
2% in both the third quarter and forty weeks ended January 3, 1998, when
compared to the same periods in the prior year. This decline along with
lost business was offset by new business. As a result, year to date sales
to grocery retailers are comparable with those in the same periods of the
prior year. Management anticipates that sales for the fourth quarter of
fiscal 1998 will remain at the previous year's levels.
Sales in the Insurance segment for the third quarter and first forty weeks
of fiscal 1998 have decreased approximately $.4 million and $.9 million,
respectively. The decline reflects increased competitive pressures in the
property and casualty insurance markets. While the Company has been
successful in retaining existing accounts, it has reduced premiums and
accepted lower commissions to accomplish the retention.
Sales in the Real Estate and Finance segment for the third quarter and
first forty weeks of fiscal 1998 were similar to comparable periods in the
prior year.
GROSS PROFIT
Gross profit as a percentage of net sales for the third quarter and first
forty weeks of fiscal 1998 has increased to 10.1% and 10.0%, respectively,
compared to 9.6% and 9.7%, respectively, for the comparable periods in the
prior year. The improvement in gross profit for the third quarter and
first forty weeks of fiscal 1998 was primarily attributable to increases in
information technology service fees and hardware and software sales. Also,
the Company has experienced gains associated with the sale of cigarette
inventories purchased prior to recent price increases. The Company has
been building cigarette inventories but anticipates that certain quantities
-12-
<PAGE>
will be reduced by the end of the fiscal year. Management expects gross
profit to continue to be positively impacted by increases in service fee
income and hardware and software sales during the fourth quarter of fiscal
1998.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses as a percentage of net sales for the
third quarter and the first forty weeks of fiscal 1998 were 9.0% and 9.1%,
respectively, compared to 8.7% and 8.8%, respectively, for the comparable
periods in the prior year.
Several factors contributed to the increases in operating and
administrative expenses during fiscal 1998. The Company has incurred
significant Information Technology costs to address Year 2000. The Company
is upgrading and replacing existing software. Additionally, communication
with customers, suppliers and financial institutions is currently taking
place to assess their plans for Year 2000 and how they may impact the
Company. The Company has spent approximately $2.5 million and expects to
incur an additional $3.5 million over the next two fiscal years to address
the Year 2000 issues. The Company believes that due to its current efforts
and future plans to upgrade and replace existing software, the Year 2000
problem will not pose significant operational problems for the Company's
computer systems. If such modifications and conversions to software were
not completed timely, however, or if the Company's customers, suppliers or
financial institutions should fail adequately to modify their computer
systems, the Year 2000 problem could have a material adverse impact on the
Company's ability to order and distribute product efficiently.
Software amortization expense has increased as a result of the
capitalization of several projects associated with BASE (Business
Automation Support Environment). Management has committed significant
funds to process improvement initiatives primarily in the technology area
in an attempt to increase the overall efficiency of operations.
On December 12, 1997, the Company agreed to accept a mediation award to
pay approximately $1.3 million in damages, as discussed in the notes to
consolidated financial statements. The entire amount has been accrued as
of January 3, 1998 and was paid subsequent to that date.
Additionally, late in the second quarter, the Company discontinued the use
of labor standards in the warehouses in accordance with a renegotiated
labor contract. As a result of this discontinuance, warehouse efficiency
initially declined. However, management has seen improvements to previous
levels and expects further improvements through the use of an incentive
program.
-13-
<PAGE>
INTEREST EXPENSE AND INCOME
Interest expense for the third quarter and the first forty weeks of fiscal
1998 has increased approximately $.5 million and $.7 million, respectively,
compared to the same periods in the prior year. The increase in interest
expense was due to additional borrowings under the Company's bank credit
agreement due primarily to higher cigarette inventories being held by the
Company and, to a lesser extent, the development of retail properties.
Management expects interest expense to decline as a percentage of sales in
future periods due to the anticipated reduction in cigarette inventories and
the continued sale of retail properties.
Interest income for the third quarter and for the first forty weeks of
fiscal 1998 decreased by approximately $.9 million and $1.6 million
compared to the same periods in the prior year. The reduction in interest
income was due primarily to a decrease in notes receivable. In addition,
finance fees earned on past due accounts decreased as a result of a
reduction in delinquent accounts.
GAIN ON SALE OF PROPERTY AND EQUIPMENT
The gain on sale of property and equipment of $3.7 million for the first
forty weeks of fiscal 1998 was due primarily to the sale of eight retail
properties. The gain on sale of property and equipment of $1.6 million
reported for the first forty weeks of fiscal 1997 was due primarily to the
sale of retail properties in both the first and second quarters and the
sale of a distribution facility during the first quarter. Management
expects to complete the sale of additional retail properties during the
fourth quarter of fiscal 1998.
NET EARNINGS
Net earnings for the third quarter and first forty weeks of fiscal 1998
increased approximately $.7 million and $1.0 million over the comparable
periods in the prior year.
Net earnings in the Distribution segment for the third quarter and first
forty weeks of fiscal 1998 were approximately the same as those in the same
periods of the prior year.
Net earnings in the Real Estate and Finance segment for the third quarter
and first forty weeks of fiscal 1998 increased by approximately $.8 million
and $1.8 million, respectively, compared to the same periods in the prior
year. The improvement in net earnings is primarily the result of sales of
real estate holdings that generated gains.
Net earnings in the Insurance segment for the third quarter and first forty
weeks of fiscal 1998 decreased by $.3 million and $.6 million,
-14-
<PAGE>
respectively, compared to the same periods in the prior year. The
reduction in net earnings is primarily the result of the decline in sales
due to competitive market conditions in the property and casualty insurance
industry.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flows from operating
activities and borrowings under a bank credit agreement. At January 3,
1998, the Company had approximately $36 million in additional bank
borrowings available. Also, the Company is permitted to sell unsecured
notes under a note offering with a total principal amount of $100,000,000.
As of January 3, 1998, approximately $14.5 million of these notes were
outstanding and the Company had approximately $56 million in availability
under this offering.
Net cash provided by operations was $2.0 million for the first forty weeks
of fiscal 1998 compared to $22.9 million for the same period last year.
The decrease in cash provided by operations resulted primarily from an
increase in cigarette inventories.
The Company has improved its current ratio from 1.37:1 at March 29, 1997
to 1:51:1 at January 3, 1998. The improvement can be attributed to the
reduction in notes payable and increases in long-term borrowings.
Net cash used in investing activities, primarily purchases of property
and equipment, was $7.7 million for the first forty weeks of fiscal 1998
compared to $26.5 million for the comparable period last year. The
reduction of cash used in investing activities during the first forty
weeks of fiscal 1998 compared to the same period last year was due to
lower levels of capital expenditures on BASE (Business Automation Support
Environment) projects.
Management expects that fiscal 1998 capital expenditures will be
approximately $25 million and expects to utilize cash flows from operations
to fund fourth quarter additions.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The matters discussed in this report include forward-looking statements
that describe the Company's plans, strategies, objectives, goals,
expectations or projections. These forward-looking statements are
identifiable by words or phrases indicating that the Company "expects,"
"anticipates," "projects," "plans" or "believes" that a particular
occurrence "may result" or "will likely result" or that a particular event
"may occur" or "will likely occur" in the future, or similarly stated
expectations. In addition to other risks and uncertainties described in
-15-
<PAGE>
connection with the forward-looking statements contained in this report,
there are many important factors that could cause actual results to be
materially different from the Company's current expectations.
Anticipated future sales are subject to competitive pressures from many
sources. The Company's Distribution segment competes with numerous
warehouse discount stores, supermarkets, pharmacies and product
manufacturers. The Company's Insurance segment is subject to intense
competition from numerous insurance agents and insurance companies,
especially in the property and casualty insurance markets. Competitive
pressures in these and other business segments may result in unexpected
reductions in sales volumes, product prices or service fees.
Operating and administrative expenses may be adversely affected by
unexpected costs associated with, among other factors: improvement
initiatives related to BASE (Business Automation Support Environment);
software modifications and upgrades to address Year 2000 issues;
unanticipated labor shortages, stoppages or disputes; business acquisitions
or divestitures; and the defense, settlement or adverse judgments in
connection with current or future legal or administrative proceedings. The
Company's future interest expense and income also may differ from current
expectations, depending upon: cigarette inventory reductions; retail
property sales; the volume of notes receivable; and the amount of fees
received on delinquent accounts, among other factors.
-16-
<PAGE>
The foregoing is intended to provide meaningful cautionary statements for
purposes of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The foregoing should not be construed as an exhaustive
list of all economic, competitive, governmental and technological factors
that could adversely affect the Company's expected consolidated financial
position, results of operations or liquidity. The Company disclaims any
obligation to update its forward-looking statements to reflect subsequent
events or circumstances.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of certain litigation, reference is made to
"Contingencies" in the Notes to Consolidated Financial Statements included
in Part I, Item 1, of this report, which is incorporated herein by
reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following documents are filed as exhibits to
this report on Form 10-Q:
EXHIBIT NUMBER DOCUMENT
-------------- --------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. No reports on Form 8-K have been filed
during the period for which this report is filed.
-17-
<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.
Date: February 17, 1998 SPARTAN STORES, INC.
(Registrant)
By /S/CHARLES B. FOSNAUGH
Charles B. Fosnaugh
Senior Vice President Business
Development and Finance
(Principal Financial Officer
and duly authorized signatory for
Registrant)
-18-
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT
- -------------- --------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SPARTAN
STORES, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED JANUARY 3,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER<F1>
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> JAN-03-1998
<CASH> 25,095
<SECURITIES> 22,161
<RECEIVABLES> 72,953
<ALLOWANCES> (3,440)
<INVENTORY> 104,861
<CURRENT-ASSETS> 234,382
<PP&E> 312,299
<DEPRECIATION> (145,493)
<TOTAL-ASSETS> 409,295
<CURRENT-LIABILITIES> 155,297
<BONDS> 133,863
<COMMON> 23,294
0
0
<OTHER-SE> 89,148
<TOTAL-LIABILITY-AND-EQUITY> 409,295
<SALES> 1,920,148
<TOTAL-REVENUES> 1,920,148
<CGS> 1,727,146
<TOTAL-COSTS> 1,727,146
<OTHER-EXPENSES> 167,774
<LOSS-PROVISION> 1,207
<INTEREST-EXPENSE> 8,364
<INCOME-PRETAX> 15,657
<INCOME-TAX> 5,612
<INCOME-CONTINUING> 10,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,045
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
<FN>
<F1>40-Week Period
</FN>
</TABLE>
