<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period (16 weeks) ended June 15, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from to
----------------- ---------------------
Commission file number 1-10876
-------
SHOPKO STORES, INC.
(Exact name of registrant as specified in its Charter)
Minnesota 41-0985054
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
700 Pilgrim Way, Green Bay, Wisconsin 54304
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 497-2211
------------------------------
Former name, former address and former fiscal year, if changed since last
report:
N/A
- - --------------------------------------------------------------------------------
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of Common
Stock as of June 15, 1996 is as follows:
Title of Each Class Shares Outstanding
------------------- ------------------
Common Shares 32,078,280
Exhibit Index Page 1 of Page 19
on Page 14
<PAGE> 2
SHOPKO STORES, INC.
FORM 10-Q
FOR THE 16 WEEKS ENDED JUNE 15, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I Item 1 - Financial Statements
Consolidated Statements of Earnings for the 16 weeks 3
ended June 15, 1996 and June 17, 1995
Consolidated Balance Sheets as of June 15, 4
1996, June 17, 1995 and February 24, 1996
Consolidated Statements of Cash Flows for the 16 5
weeks ended June 15, 1996 and June 17, 1995
Consolidated Statements of Shareholders' Equity for 6
the 16 weeks ended June 15, 1996 and for the
year ended February 24, 1996
Notes to Consolidated Financial Statements 7-8
Item 2 - Management's Discussion and Analysis of Financial 9-12
Condition and Results of Operations
Part II Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
ShopKo Stores, Inc. and Subsidiaries First Quarter (16 Weeks) Ended
- - -----------------------------------------------------------------------------------------------
(In thousands, except per share data)
June 15, June 17, % Increase
1996 1995 (Decrease)
- - -----------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Net sales $ 610,911 $ 560,472 9.0
Licensed department rentals and other income 3,831 4,382
----------- -----------
614,742 564,854 8.8
Costs and expenses:
Cost of sales 464,520 417,113
Selling, general and administrative expenses 113,388 110,310
Depreciation and amortization expenses 17,827 17,565
----------- -----------
595,735 544,988 9.3
Income from operations 19,007 19,866 (4.3)
Interest expense 9,522 11,025
----------- -----------
Earnings before income taxes 9,485 8,841 7.3
Provision for income taxes 3,726 3,473
----------- -----------
Net earnings $ 5,759 $ 5,368 7.3
=========== ===========
Net earnings per common share $ 0.18 $ 0.17
=========== ===========
Weighted average number of common shares
outstanding 32,020 32,005
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
ShopKo Stores, Inc. and Subsidiaries First Quarter as of Fiscal Year End
- - -----------------------------------------------------------------------------------------------------
(In thousands)
June 15, June 17, February 24,
ASSETS 1996 1995 1996
- - -----------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 118,014 $ 23,144 $ 89,469
Receivables, less allowance for losses of
$3,644, $2,592 and $3,212, respectively 44,834 37,763 55,514
Merchandise inventories 343,969 356,366 322,433
Other current assets 18,031 16,235 8,775
---------- ---------- ----------
Total current assets 524,848 433,508 476,191
Other assets and deferred charges 24,738 23,344 24,621
Property and equipment at cost:
Land 107,917 108,342 107,915
Buildings 481,220 464,421 479,124
Equipment 293,412 285,321 286,763
Leasehold improvements 49,636 51,305 49,306
Property under construction 5,984 2,701 10,585
Property under capital leases 21,968 17,539 21,968
---------- ---------- ----------
960,137 929,629 955,661
Less accumulated depreciation and amortization:
Property and equipment 348,182 311,677 331,541
Property under capital leases 7,749 6,210 6,972
---------- ---------- ----------
Net property and equipment 604,206 611,742 617,148
---------- ---------- ----------
Total assets $1,153,792 $1,068,594 $1,117,960
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - -----------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable - trade $ 183,294 $ 139,941 $ 144,638
Accrued compensation and related taxes 23,002 21,818 25,290
Accrued other liabilities 63,270 57,397 72,943
Accrued income and other taxes 21,407 20,990 16,797
Current portion of long-term obligations 1,090 755 1,127
---------- ---------- ----------
Total current liabilities 292,063 240,901 260,795
Long-term obligations 415,026 413,382 415,138
Deferred income taxes 22,729 18,709 20,396
Shareholders' equity:
Common stock 321 320 320
Additional paid-in capital 243,954 242,843 242,843
Retained earnings 179,699 152,439 178,468
---------- ---------- ----------
Total shareholders' equity 423,974 395,602 421,631
---------- ---------- ----------
Total liabilities and shareholders' equity $1,153,792 $1,068,594 $1,117,960
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
ShopKo Stores, Inc. and Subsidiaries Year to Date (16 weeks) Ended
- - -------------------------------------------------------------------------------
(In thousands)
June 15, June 17,
1996 1995
- - -------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,759 $ 5,368
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 17,827 17,565
Provision for losses on receivables 57 21
Gain on sale of property and equipment (1,031)
Deferred income taxes 1,563 1,615
Change in assets and liabilities:
Receivables 10,623 4,283
Merchandise inventories (21,536) 44,257
Other current assets (8,486) (3,108)
Other assets (478) (768)
Accounts payable 38,656 (9,352)
Accrued liabilities (3,830) (16,220)
- - -------------------------------------------------------------------------------
Net cash provided by operating activities 40,155 42,630
- - -------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for property and equipment (4,476) (11,196)
Proceeds from the sale of property and equipment 1,386
- - -------------------------------------------------------------------------------
Net cash (used in) investing activities (4,476) (9,810)
- - -------------------------------------------------------------------------------
Cash flows from financing activities:
Change in short-term debt (15,000)
Proceeds from the sale of common stock
under option plans 100
Dividend payment (7,050) (7,041)
Reduction in capital lease obligations (184) (233)
- - -------------------------------------------------------------------------------
Net cash (used in) financing activities (7,134) (22,274)
- - -------------------------------------------------------------------------------
Net increase in cash and cash equivalents 28,545 10,546
Cash and cash equivalents at beginning of year 89,469 12,598
- - -------------------------------------------------------------------------------
Cash and cash equivalents at end of first quarter $ 118,014 $ 23,144
===============================================================================
Supplemental cash flow information:
Noncash investing and financial activities -
Restricted stock issued $ 1,012
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
ShopKo Stores, Inc. and Subsidiaries
- - ----------------------------------------------------------------------------
(In thousands, except per share data)
Common Stock Capital in
---------------- Excess of Retained
Shares Amount Par Value Earnings
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCES AT FEBRUARY 25, 1995 32,005 $ 320 $242,843 $154,112
Net earnings 38,439
Cash dividend declared on common
stock - $0.44 per share (14,083)
-----------------------------------------
BALANCES AT FEBRUARY 24, 1996 32,005 320 242,843 178,468
Sale of common stock under
option plans 8 100
Issuance of restricted stock 65 1 1,011 (1,012)
Restricted stock expense 12
Net earnings 5,759
Cash dividend declared on common
stock - $0.11 per share (3,528)
-----------------------------------------
BALANCES AT JUNE 15, 1996 32,078 $ 321 $243,954 $179,699
=========================================
</TABLE>
Interim data subject to year end audit.
See notes to consolidated financial statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies:
The 1996 annual report contains a summary of significant accounting policies in
the notes to the consolidated financial statements. The same accounting
policies are followed in the preparation of interim reports.
During the current fiscal year, the Company adopted Statements of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." The adoption of SFAS No. 123 will have no effect on net
earnings. The Company will continue to measure compensation cost for stock
compensation plans under Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees."
Inventories:
The Company uses the LIFO method for substantially all inventories. If the
first-in, first-out (FIFO) method had been used, these inventories would have
been $40.3 million and $38.6 million higher at June 15, 1996 and at June 17,
1995, respectively.
Income Taxes:
The provision for income tax expense for the first quarter of fiscal 1997 was
$3.7 million, of which $2.1 million is current and $1.6 million is deferred tax
expense, respectively. Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Net Earnings Per Common Share:
Net earnings per common share are computed by dividing net earnings by the
weighted average number of common shares outstanding. Outstanding stock
options do not have a significant dilutive effect on earnings per share.
7
<PAGE> 8
Statement of Registrant:
The data presented herein is unaudited, but in the opinion of management,
includes all adjustments (which consist only of normal recurring accruals)
necessary for a fair presentation of the consolidated financial position of the
Company and its subsidiaries at June 15, 1996 and June 17, 1995 and the results
of their operations and cash flows for the periods then ended. These interim
results are not necessarily indicative of the results of the fiscal years as a
whole because the operations of the Company are highly seasonal. The third and
fourth fiscal quarters contribute a significant part of the Company's earnings
due to the Christmas selling season.
8
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth items from the Company's unaudited consolidated
financial statements for the first quarter of fiscal 1997 and 1996 as a
percentage of net sales:
<TABLE>
<CAPTION>
First Quarter
-------------
Fiscal Fiscal
1997 1996
------ ------
<S> <C> <C>
Revenues
Net sales 100.0% 100.0%
Licensed department rentals and other income 0.6 0.8
----- -----
100.6 100.8
Costs and expenses
Cost of sales 76.0 74.4
Selling, general and administrative expenses 18.6 19.7
Depreciation and amortization expenses 2.9 3.1
----- -----
97.5 97.2
Income from operations 3.1 3.6
Interest expense 1.6 2.0
----- -----
Earnings before income taxes 1.5 1.6
Provision for income taxes 0.6 0.6
----- -----
Net earnings 0.9% 1.0%
===== =====
</TABLE>
Net Sales
The following table presents the Company's consolidated net sales for the first
quarter of fiscal 1997 and fiscal 1996:
<TABLE>
<CAPTION>
% INCREASE/
FIRST QUARTER ------------
------------- (DECREASE)
------------
FISCAL FISCAL
1997 1996 TOTAL COMP
-------- -------- ------ ------
<S> <C> <C> <C> <C>
General Merchandise $423.5 $426.6 (0.7)% (0.5)%
Health Services 187.4 133.9 40.0 39.9
------ ------ ---- ----
Consolidated $610.9 $560.5 9.0% 9.3%
====== ====== ==== ====
</TABLE>
9
<PAGE> 10
The decrease in general merchandise sales is primarily attributable to
unseasonable spring weather throughout the ShopKo markets.
The increase in health services sales is primarily due to growth in the
prescription benefit management business and increases in the retail pharmacy
and optical departments. Health services comparable sales are based upon sales
generated from healthcare services provided in retail stores which were open
for the entire preceding fiscal year and from the pharmacy mail service sales,
prescription benefit management and claims processing activities.
Consolidated comparable sales are based upon those facilities (both store and
non-store) which were open for the entire preceding fiscal year. Retail
comparable store sales, which are based on retail facilities which were open
the entire preceding fiscal year, increased 1.4 percent in the first quarter.
Since the first quarter of last year, the Company has opened one new store (in
the third quarter of fiscal 1996) and remodeled 12 stores (six in the third
quarter of fiscal 1996 and six in the first quarter of fiscal 1997) under the
Vision 2000 format.
Gross Margin:
The following table sets forth gross margin as a percent of net sales:
<TABLE>
<CAPTION>
First Quarter
----------------
Fiscal Fiscal
1997 1996
------- -------
<S> <C> <C>
Gross margin percent 24.0% 25.6%
Gross margin percent
prior to LIFO charge 24.1% 25.9%
</TABLE>
The decrease in the gross margin percentage is primarily due to the impact of
lower gross margins in the prescription benefit management business and the
retail pharmacies as a result of increased managed care business. The gross
margin percentages reflect LIFO charges of $1.1 million this year versus $1.6
million last year.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses as a percent of sales were 18.6%
for the first quarter of fiscal 1997, compared to 19.7% for the same period
last year. The decrease is primarily due to increased sales related to the
prescription benefit management business.
10
<PAGE> 11
Interest Expense:
Interest expense for the first quarter was 1.6% of sales versus 2.0% of sales
in the first quarter of last year. This decrease is primarily due to increased
investment income.
Liquidity and Capital Resources:
The Company relies primarily on cash generated from its operations, with its
remaining funding requirements being met from short-term and long-term
borrowings. Cash provided from operating activities was $40.2 million for the
first quarter of fiscal 1997 compared to $42.6 million for the same period last
year. The Company had no borrowings outstanding under its revolving credit
agreement at the end of the first quarters of fiscal 1997 and fiscal 1996,
respectively. Also, the Company had unrestricted cash balances of $118 million
and $23 million at the end of the first quarters of fiscal 1997 and fiscal
1996, respectively.
Funds generated from operations, and if necessary, the existing $175 million
revolving credit agreement are expected to fund the projected working capital
needs and total capital expenditures through fiscal 1997. The existing
revolving credit agreement will expire October 4, 1996, subject to an extension
for an additional year. The Company anticipates exercising this extension.
The Company's principal use of cash is for the purchase of property, equipment
and systems technology. The Company spent $4.5 million on capital expenditures
in the first quarter of fiscal 1997, compared to $11.2 million for the same
period last year. The Company's total capital expenditures for fiscal 1997 for
new stores, remodels, management information systems and other expenditures
(excluding acquisitions) are expected to range from $45.0 to $55.0 million.
The Company plans to open two new stores in fiscal 1997, one of which is a
relocation. The Company's store expansion and remodel plans for fiscal 1998 and
after are under review. The Company may consider the acquisition of existing
retail stores or businesses, or health services businesses, or the construction
or acquisition of stores which vary from the Company's existing stores. Such
plans may be reviewed and revised from time to time in light of changing
conditions. If the Company were to under take a large acquisition, additional
capital may be required.
With respect to store remodels, the Company completed six remodels under the
Vision 2000 format during fiscal 1997. As with store expansion plans,
remodeling plans are subject to change and normal delays.
11
<PAGE> 12
In addition to the above capital expenditures, the Company may be required to
make additional payments of up to $12.3 million over the next several years as
a result of its fiscal 1995 acquisition of Bravell, Inc. These payments are
contingent upon future results of Bravell's operation.
Subsequent Event:
On July 17, 1996, the Company signed an agreement to acquire the assets of
CareStream Scrip Card from FoxMeyer Health Corporation. The text of the
Company's press release dated July 17, 1996 is attached as exhibit 99 hereto,
and is incorporated herein by reference.
Inflation:
Inflation has and is expected to have only a minor effect on the results of
operations of the Company and its internal and external sources of liquidity.
Forward-Looking Statements:
Item 2 of this Form 10-Q, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," including information incorporated by
reference into Item 2, contains forward-looking statements. The Company's
actual results may differ materially from those contained in the
forward-looking statements. Factors which may cause such differences are
identified in the Company's Annual Report on Form 10-K for the fiscal year
ended February 24, 1996, and are incorporated herein by reference.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
11 Computation of Earnings Per Common and Common
Equivalent Share.
12 Statements Re Computation of Ratios.
27 Financial Data Schedule.
99 Press Release Dated July 17, 1996.
(b) Reports on Form 8-K. None.
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.
SHOPKO STORES, INC. (Registrant)
Date: July 22, 1996 By: /s/ Richard D. Schepp
---------------------------------
Richard D. Schepp
Vice President Legal Affairs/Secretary
(Duly Authorized Officer of Registrant)
Date: July 22, 1996 By: /s/ Lawrence J. Clark
----------------------------------
Lawrence J. Clark
Vice President, Finance and Treasurer
(Chief Accounting Officer and Duly
Authorized Officer of Registrant)
13
<PAGE> 14
EXHIBIT INDEX
SHOPKO STORES, INC.
10-Q REPORT
<TABLE>
<CAPTION>
Exhibit Sequential
Number Exhibit Page Number
- - ------- ------- -----------
<S> <C> <C>
11 Computation of Earnings Per Common and
Common Equivalent Share.
12 Statements Re Computation of Ratios.
27 Financial Data Schedule.
99 Press Release Dated July 17, 1996.
</TABLE>
14
<PAGE> 1
Shopko Stores, Inc. and Subsidiaries
Exhibit 11 - Computation of Earnings Per Common and
Common Equivalent Share
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
First Quarters as of Fiscal Years Ended
-------------------------------------------------------------------------------
June 15 June 17 February 24, February 25, February 26,
1996 1995 1996 1995 1994
(16 Weeks) (16 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PRIMARY:
Net earnings $ 5,759 $ 5,368 $ 38,439 $ 37,790 $ 32,122
========== ========== ========== ========= =========
Weighted average number of
outstanding common shares 32,020 32,005 32,005 32,014 32,001
Number of common shares
issuable assuming exercise
of stock options 411 6 51 4
---------- ---------- ---------- --------- ---------
Weighted average number of
outstanding common and
common equivalent shares -
assuming primary 32,431 32,011 32,056 32,018 32,001
========== ========== ========== ========= =========
Net earnings per common
share - primary (1) $ 0.18 $ 0.17 $ 1.20 $ 1.18 $ 1.00
========== ========== ========== ========= =========
FULLY DILUTED:
Net earnings $ 5,759 $ 5,368 $ 38,439 $ 37,790 $ 32,122
========== ========== ========== ========= =========
Weighted average number of
outstanding common shares 32,020 32,005 32,005 32,014 32,001
Number of common shares
issuable assuming exercise
of stock options 625 11 73 4 8
---------- ---------- ---------- --------- ---------
Weighted average number of
outstanding common and
common equivalent shares -
assuming full dilution 32,645 32,016 32,078 32,018 32,009
========== ========== ========== ========= =========
Net earnings per common
share - assuming full dilution (1) $ 0.18 $ 0.17 $ 1.20 $ 1.18 $ 1.00
========== ========== ========== ========= =========
</TABLE>
(1) Earnings per share are computed by dividing net earnings by the weighted
average number of outstanding common and common equivalent shares.
<PAGE> 1
Shopko Stores, Inc. and Subsidiaries
Exhibit 12 - Statements Re Computation of Ratios
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
First Quarters as of Fiscal Years Ended
----------------------------------------------------------------
June 15, June 17, February 24, February 25, February 26,
1996 1995 1996 1995 1994
(16 Weeks) (16 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
----------------------------------
Computation of Earnings
1 Pretax Income $ 9,485 $ 8,841 $ 63,140 $ 62,418 $ 52,889
2 Add previously capitalized interest
amortized during the period 168 165 540 503 418
3 Less interest capitalized during
the period 128 81 249 1,309 2,140
--------- --------- --------- --------- ---------
4 Total earnings (sum of lines 1 to 3) 9,525 8,925 63,431 61,612 51,167
Computation of Fixed Charges
5 Interest (1) 9,650 11,106 34,531 30,351 23,557
6 Interest factor in rental expense 781 835 2,689 2,403 1,908
--------- --------- --------- --------- ---------
7 Total fixed charges (sum of lines
5 and 6) 10,431 11,941 37,220 32,754 25,465
8 TOTAL EARNINGS AND
FIXED CHARGES (line 4
plus line 7) $ 19,956 $ 20,866 $ 100,651 $ 94,366 $ 76,632
========= ========= ========= ========= =========
9 Ratio (line 8 divided by line 7) 1.9 1.7 2.7 2.9 3.0
</TABLE>
(1) Includes capitalized interest
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-22-1997
<PERIOD-START> FEB-25-1996
<PERIOD-END> JUN-15-1996
<CASH> 118,014
<SECURITIES> 0
<RECEIVABLES> 48,478
<ALLOWANCES> 3,644
<INVENTORY> 343,969
<CURRENT-ASSETS> 524,848
<PP&E> 960,137
<DEPRECIATION> 355,931
<TOTAL-ASSETS> 1,153,792
<CURRENT-LIABILITIES> 292,063
<BONDS> 415,026
0
0
<COMMON> 321
<OTHER-SE> 423,653
<TOTAL-LIABILITY-AND-EQUITY> 1,153,792
<SALES> 610,911
<TOTAL-REVENUES> 614,742
<CGS> 464,520
<TOTAL-COSTS> 595,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,522
<INCOME-PRETAX> 9,485
<INCOME-TAX> 3,726
<INCOME-CONTINUING> 5,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,759
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
<PAGE> 1
[SHOPKO STORES, INC. LETTERHEAD]
Contact: Lawrence J. Clark
(414) 496-4113
SHOPKO ANNOUNCES PROVANTAGE AGREEMENT FOR ACQUISITION OF
FOXMEYER HEALTH'S PBM
GREEN BAY, WIS. (July 17, 1996) - ShopKo Stores, Inc., today announced
that its benefit management subsidiary, ProVantage, Inc., has signed an
agreement to acquire CareStream Scrip Card, FoxMeyer Health Corporation's
prescription benefit management business (PBM). CareStream Scrip Card will be
integrated with ProVantage's PBM, ProVantage Prescription Benefit Management
Services, Inc. after the acquisition is closed, which is expected to occur
within thirty days.
CareStream Scrip Card is a well-respected, nationally represented PBM
serving 1.3 million lives. The company's customer profile, which consists
primarily of small corporate customers and mid-size managed care organizations,
is highly complementary to the customer profile of ProVantage Prescription
Benefit Management Services, Inc. With the addition of these lives, ProVantage
will be providing PBM services to almost 4.0 million lives, doubling the number
of lives served by ProVantage since fiscal year end February 24, 1996. Under
the terms of the agreement, ProVantage, Inc. will pay FoxMeyer Health
Corporation $30.5 million with additional future payments up to a maximum of
$5.0 million. Assuming the transaction is completed on August 1, 1996, ShopKo
expects additional revenue in the range of $100 to $115 million from the
CareStream Scrip Card operations for its fiscal year ending February 22, 1997.
Mike Bettiga, Senior Vice President, Health Services of ShopKo Stores, and
the senior manager of ProVantage said, "The acquisition of CareStream Scrip
Card provides ProVantage with a number of strategic advantages. It broadens the
scope of our client base across the entire United States and helps solidify our
position as a strong provider of PBM services to the mid-size corporate,
insurance and HMO marketplaces. Finally, it strengthens our infrastructure by
integrating CareStream Scrip Card's excellent personnel with ours, particularly
in sales, marketing and customer service."
ShopKo Stores, Inc. is a leading regional retailer operating 130 stores in
15 states, concentrated in the Upper Midwest, Mountain and Pacific Northwest
states and ProVantage, Inc., which specializes in prescription benefit
management (PBM), vision benefit management (VBM) and health decision support
services (DSS). ShopKo stock is traded on the New York Stock Exchange under
the symbol "SKO".
FoxMeyer Health Corporation is a leading provider of health care products
and information-based services in North America. The company reported sales of
$5.5 billion for the year ended March 31, 1996.
<PAGE> 2
This press release contains forward-looking statements regarding projected
revenues from the CareStream Scrip Card transaction. ShopKo's actual results
may differ materially from those contained in the forward-looking statements.
Factors which may cause such differences are identified in ShopKo's Annual
Report on Form 10-K for the fiscal year ended February 24, 1996.
#####
For further information contact Larry Clark, Vice President of Finance, ShopKo
Stores, Inc. at (414) 496-4113, or Wade Hyde, Investor Relations, FoxMeyer
Health Corporation at (214) 446-4270.
