SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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 February 24, 1996 Commission File
number 0-80.
( ) Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from
to
SEAWAY FOOD TOWN, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-4471466
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
1020 Ford Street, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
419/893-9401
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 4, 1996
Common stock, without par 2,199,201 shares
value (stated value $2.00 per share)
<PAGE>
PART I. FINANCIAL INFORMATION
Summarized Financial Information:
The following consolidated statements of income, condensed consolidated
balance sheets, and condensed consolidated statements of cash flows are
unaudited, but include all adjustments, consisting only of normal recurring
accruals, which the Company considers necessary for a fair presentation of
its financial position, results of operations and cash flows for the periods
and the dates indicated. Since the unaudited financial statements have been
prepared in accordance with instructions to Form 10-Q, they do not contain
all disclosures normally provided in annual financial statements; they
should be read in conjunction with the consolidated financial statements
and notes thereto appearing in the Company's 1995 Annual Report to
Shareholders.
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (CONTINUED)
Consolidated Statements of Income
(Thousands of Dollars - Except
Average Share and Per-Share Data)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
February 24, February 25, February 24, February 25,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $152,826 $143,953 $297,038 $280,941
Cost of Merchandise sold 113,910 107,452 222,143 210,096
----------- ----------- ----------- -----------
Gross profit 38,916 36,501 74,895 70,845
Selling, general and
administrative expenses 35,530 33,128 69,952 65,290
----------- ----------- ----------- -----------
Operating profit 3,386 3,373 4,943 5,555
Interest expense (1,136) (1,150) (2,274) (2,333)
Other income - net 168 293 470 1,112
----------- ----------- ----------- -----------
Income before income taxes 2,418 2,516 3,139 4,334
Provision for income taxes (954) (982) (1,224) (1,691)
----------- ----------- ----------- -----------
Net Income $ 1,464 $ 1,534 $ 1,915 $ 2,643
=========== =========== =========== ===========
Per common share:
Net income $.66 $.70 $.87 $1.20
=========== =========== =========== ===========
Dividends paid $.10 $.10 $.20 $.19
=========== =========== =========== ===========
Average number of shares
outstanding 2,197,942 2,184,378 2,195,647 2,199,633
=========== =========== =========== ===========
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
<CAPTION>
February 24, August 26,
1996 1995
(NOTE)
ASSETS ------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,653 $ 7,402
Notes and accounts receivable 7,784 7,037
Less allowance for doubtful accounts (450) (450)
Merchandise inventories (Note B) 65,270 62,221
Less LIFO reserve (18,205) (18,157)
Prepaid expenses, including deferred
income taxes 6,005 5,582
------------ -------------
68,057 63,635
Other assets 6,172 6,366
Property and equipment:
Cost 195,422 188,420
Less accumulated depreciation and
amortization (110,835) (104,420)
------------ -------------
Net property and equipment 84,587 84,000
------------ -------------
$158,816 $154,001
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $41,136 $38,889
Income taxes 914 1,027
Accrued liabilities 13,722 14,080
Long-term debt due within one year 4,272 3,553
------------ -------------
Total current liabilities 60,044 57,549
Long-term debt 49,520 48,399
Deferred income taxes 5,276 5,276
Deferred other 1,536 2,046
Shareholder's equity:
Common stock 4,413 4,387
Capital in excess of stated value 1,024 680
Retained earnings 37,003 35,664
------------ -------------
Total shareholders' equity 42,440 40,731
------------ -------------
$158,816 $154,001
============ =============
NOTE: The balance sheet at August 26, 1995 has been derived from the
audited financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Statements of Cash Flows
(Thousands of Dollars)
Twenty-Six Weeks Ended
February 24, February 25,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES-net cash provided $6,845 $9,815
INVESTING ACTIVITIES
Expenditures for property and equipment (7,484) (5,155)
Proceeds from sale of property and other assets 88 2,913
Other 180 460
------------- -------------
Net cash used in investing activities (7,216) (1,782)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 7,200 1,281
Payments of long-term debt (5,414) (7,391)
Payments for acquisition of common shares (166) (807)
Dividends paid (438) (412)
Decrease in deferred other (560) (505)
------------- -------------
Net cash provided by (used in) financing activities 622 (7,834)
------------- -------------
Increase in cash and cash equivalents 251 199
Cash and cash equivalents at beginning of period 7,402 7,137
------------- -------------
Cash and cash equivalents at end of period 7,653 $7,336
============= =============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $2,370 $2,351
============= =============
Income Taxes $1,336 $283
============= =============
See notes to consolidated financial statements
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
Notes to Financial Statements
Note A. Net income per common share is based on the weighted average number of
shares outstanding during the periods.
Note B. Meat, produce and pharmacy inventories are valued at the lower of
cost using the first-in, first-out (FIFO) method, or market. All
other merchandise inventories (including store inventories which are
determined by the retail inventory method) are valued at the lower
of cost using, the last-in, first-out (LIFO) method, or market.
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
As of February 24, 1996, Seaway Food Town, Inc. operated 67 retail stores,
44 supermarkets, 25 of which are large combination stores operating as
Food Town Plus stores and 23 deep discount drugstores operating as the Pharm.
This compares to 44 supermarkets, 20 of which were Food Town Plus stores and
22 Pharm deep discount drugstores as of February 25, 1995.
Net sales for the second quarter of fiscal 1996 were $152,826 or 6.2% higher
than the same quarter of 1995. On a year to date basis, net sales were
$297,038 or 5.7% higher than 1995. Most of this net increase was attributable
to increased drugstore and supermarket sales resulting from one more
drugstore in operation at the end of the quarter as compared to the same
quarter of the prior year along with increased promotional activity in both
the supermarkets and drugstores. Sales from stores in operation both this
past quarter as well as the same quarter a year ago increased 4.99% in the
current year.
Gross margins, as a percent of sales, increased .10% in the second quarter of
fiscal 1996 compared to the same quarter of 1995. Margins declined slightly
in the supermarkets and increased slightly in the Pharms for the second
quarter of 1996 compared to 1995. On a year to date basis, these margins
remained constant between 1996 and 1995. Warehousing and transportation
costs, which are included in cost of sales, remained constant from quarter
to quarter and on a year to date basis.
As a percent of sales, selling, general and administrative expenses increased
.24% in the second quarter, and .31% on a year to date basis as compared to
1995. This increase is a result of increased wages, supply costs, utilities,
advertising and costs associated with enhancing management information
systems.
Interest expense remained consistent with the prior year as slightly lower
interest rates were offset by higher outstanding borrowings for the second
quarter of fiscal 1996 compared to the same quarter of 1995. On a year to
date basis, slightly higher interest rates were offset by slightly lower
borrowings.
Other income - net decreased $125,000 over the same quarter in 1995. This
decrease is due primarily to decreased gains on the sale of company assets
during this quarter compared to 1995. On a year to date basis, other
income - net decreased by $642,000, primarily due to a gain of $632,000
recognized on the sale of the Company's dairy operation in the first
quarter of Fiscal 1995.
Income taxes as a percent of pre-tax income approximates the statutory tax
rates in effect.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources
During the first twenty-six weeks of fiscal 1996, the Company's working
capital increased $1,927,000 as compared to August 26, 1995. The working
capital ratio was 1.13 to 1 at the end of this quarter compared to 1.11 to
1 at August 26, 1995 and 1.12 to 1 at November 25, 1995. During the first
twenty-six weeks of fiscal 1996, the Company generated $6,845,000 in cash
from operations which, supplemented with increased borrowings, was used
primarily to finance capital expenditures, make dividend payments, and
repurchase some of the Company's common shares.
The long-term debt to shareholders equity ratio was 1.17 to 1 at February 24,
1996 compared to 1.25 to 1 at February 25, 1995.
Measures of liquidity at February 24, 1996 and February 25, 1995 were as
follows:
1996 1995
------- --------
Working Capital (1) 26.2 million 25.2 million
Current Ratio (1) 1.44 to 1 1.44 to 1
Unused Lines of Credit 13.6 million l7.0 million
(1) Includes add-back of gross lifo reserve
The funds required by the Company on a continuing basis for both working
capital, capital expenditures, and other needs are generated principally
through operations, long-term borrowings and capital leases, supplemented
by borrowings under revolving credit note agreements which have been
arranged primarily through institutional lenders. The Company is not
aware of any trends, demands, commitments or uncertainties which will
result or which are reasonably likely to result in a material change in
the Company's liquidity. During the second quarter of 1996 the Company
borrowed against revolving credit agreements with the maximum amount
outstanding under such agreements amounting to $28,050,000.
<PAGE>
Item 6. - Exhibits and Reports on Form 8 K.
6(b) Reports on Form 8 K.
There were no Form 8 K reports required to be filed by the Company
during any of the months included in the most recently completed
fiscal quarter.
Signature
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEAWAY FOOD TOWN, INC.
Registrant
/s/ Richard B. Iott
Date April 4, 1996 By ___________________________
Richard B. Iott, President
and Chief Operating Officer
/s/ Waldo E. Yeager
Date April 4, 1996 By ____________________________
Waldo E. Yeager,
Chief Financial Officer,
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> FEB-24-1996
<CASH> 7,653
<SECURITIES> 0
<RECEIVABLES> 7,784
<ALLOWANCES> 450
<INVENTORY> 47,065
<CURRENT-ASSETS> 68,057
<PP&E> 195,422
<DEPRECIATION> 110,835
<TOTAL-ASSETS> 158,816
<CURRENT-LIABILITIES> 60,044
<BONDS> 49,520
<COMMON> 4,413
0
0
<OTHER-SE> 38,027
<TOTAL-LIABILITY-AND-EQUITY> 158,816
<SALES> 152,826
<TOTAL-REVENUES> 152,826
<CGS> 113,910
<TOTAL-COSTS> 113,910
<OTHER-EXPENSES> 35,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,136
<INCOME-PRETAX> 2,418
<INCOME-TAX> 954
<INCOME-CONTINUING> 1,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,464
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
