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 May 25, 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 July 5, 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 Thirty-Nine Weeks Ended
May May May May
25,1996 27,1995 25,1996 27,1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $145,911 $139,160 $442,949 $420,101
Cost of Merchandise sold 108,576 104,170 330,719 314,266
--------- --------- --------- ---------
Gross Profit 37,335 34,990 112,230 105,835
Selling, general and
administrative expenses 34,322 33,222 104,274 98,512
--------- --------- --------- ---------
Operating profit 3,013 1,768 7,956 7,323
Interest expense (1,110) (1,095) (3,384) (3,428)
Other income - net 87 290 557 1,402
--------- --------- --------- ---------
Income before income taxes 1,990 963 5,129 5,297
Provision for income taxes (826) (374) (2,050) (2,065)
--------- --------- --------- ---------
Net Income $ 1,164 $ 589 $ 3,079 $ 3,232
========= ========= ========= =========
Per common share:
Net income $.53 $.27 $1.40 $1.47
========= ========= ========= =========
Dividends paid $.10 $.10 $ .30 $.29
========= ========= ========= =========
Average number of shares
outstanding 2,200,250 2,193,799 2,197,182 2,197,688
========= ========= ========= =========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
<CAPTION>
May 25, August 26,
1996 1995
(NOTE)
ASSETS ------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $9,547 $7,402
Notes and accounts receivable 6,663 7,037
Less allowance for doubtful accounts (450) (450)
Merchandise inventories (Note B) 65,149 62,221
Less LIFO reserve (18,120) (18,157)
Prepaid expenses, including deferred
income taxes 5,370 5,582
------------- -------------
68,159 63,635
Other assets 5,844 6,366
Property and equipment:
Cost 195,138 188,420
Less accumulated depreciation and
amortization (112.552) (104,420)
------------- -------------
Net property and equipment 82,586 84,000
------------- -------------
$156,589 $154,001
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $39,961 $38,889
Income taxes 756 1,027
Accrued liabilities 15,281 14,080
Long-term debt due within one year 4,164 3,553
------------- -------------
Total current liabilities 60,162 57,549
Long-term debt 46,603 48,399
Deferred income taxes 5,276 5,276
Deferred other 1,290 2,046
Shareholder's equity:
Common stock 4,399 4,387
Capital in excess of stated value 1,017 680
Retained earnings 37,842 35,664
------------- -------------
Total shareholders' equity 43,258 40,731
------------- -------------
$156,589 $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 financial statements
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Statements of Cash Flows
(Thousands of Dollars)
Thirty-Nine Weeks Ended
May 25, May 27,
1996 1995
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES-net cash provided $13,513 $16,848
INVESTING ACTIVITIES
Expenditures for property and equipment (9,067) (8,767)
Proceeds from sale of property and other assets 192 2,968
Other 527 590
------------ -----------
Net cash used in investing activities (8,348) (5,209)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 7,200 1,375
Payments of long-term debt (8,439) (9,657)
Payments for acquisition of common shares (292) (811)
Dividends paid (658) (632)
Decrease in deferred other (831) (686)
------------ -----------
Net cash used in financing activities (3,020) (10,411)
------------ -----------
Increase in cash and cash equivalents 2,145 1,228
Cash and cash equivalents at beginning of period 7,402 7,137
------------ -----------
Cash and cash equivalents at end of period $9,547 $8,365
============ ===========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $3,270 $3,252
============ ===========
Income Taxes $2,103 $1,838
============ ===========
See notes to 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
(Thousands of Dollars)
Results of Operations
As of May 25, 1996, Seaway Food Town, Inc. operated 66 retail stores,
43 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, 23 of which were Food Town Plus stores and
22 Pharm deep discount drugstores as of May 27, 1995.
Net sales for the third quarter of fiscal 1996 were $145,911 or 4.85% higher
than the same quarter of 1995. On a year to date basis, net sales were
$442,949 or 5.44% higher than 1995. Most of this net increase was
attributable to increased drugstore and supermarket sales resulting from one
more drugstore, and one less supermarket 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 4.12% in the current year.
Gross margins, as a percent of sales, increased .45% in the third quarter of
fiscal 1996 compared to the same quarter of 1995. Margins increased slightly
in the supermarkets and decreased slightly in the Pharms for the third
quarter of 1996 compared to 1995. On a year to date basis, these margins
followed the same pattern between 1996 and 1995. Warehousing and
transportation costs, which are included in cost of sales, declined slightly
from quarter to quarter and remained constant on a year to date basis.
As a percent of sales, selling, general and administrative expenses decreased
.35% in the third quarter, and increased .09% on a year to date basis as
compared to 1995. The decrease on a quarter to quarter comparison is due to
increased sales levels which offset actual dollar increases in costs
associated with wages and the enhancement of management information systems.
The increase, on a year-to-date basis, is a result of increased wages, supply
costs, utilities, advertising and costs associated with the company's
continuing program of enhancing management information systems.
Interest expense remained consistent with the prior year as slightly higher
interest rates were offset by lower outstanding borrowings for the third
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 $203 over the same quarter in 1995. This
decrease is due primarily to losses on the sale of company assets during
this quarter compared to 1995. On a year to date basis, other income -
net decreased by $845, primarily due to a gain of $632, recognized on
the sale of the Company's dairy operation in the first quarter of Fiscal 1995,
and losses on assets sold during 1996.
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 thirty-nine weeks of fiscal 1996, the Company's working
capital increased $1,911 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 1.13 to 1 at February 24, 1996. During the first
thirty-nine weeks of fiscal 1996, the Company generated $13,513 in cash from
operations which was used primarily to finance capital expenditures, make
dividend payments, reduce debt, and repurchase some of the Company's common
shares.
The long-term debt to shareholders equity ratio was 1.08 to 1 at May 25, 1996
compared to 1.20 to 1 at May 27, 1995.
Measures of liquidity at May 25, 1996 and May 27, 1995 were as follows:
1996 1995
------- --------
Working Capital (1) 26.1 million 23.4 million
Current Ratio (1) 1.43 to 1 1.40 to 1
Unused Lines of Credit 15.8 million 18.3 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 third quarter of 1996 the Company borrowed against revolving
credit agreements with the maximum amount outstanding under such agreements
amounting to $24.6 million.
<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
Date July 8, 1996 By /s/ Richard B. Iott
Richard B. Iott, President
and CEO
Date July 8, 1996 By /s/ Waldo E. Yeager
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> MAY-25-1996
<CASH> 9,547
<SECURITIES> 0
<RECEIVABLES> 6,663
<ALLOWANCES> 450
<INVENTORY> 47,029
<CURRENT-ASSETS> 68,159
<PP&E> 195,138
<DEPRECIATION> 112,552
<TOTAL-ASSETS> 156,589
<CURRENT-LIABILITIES> 60,162
<BONDS> 46,603
<COMMON> 4,399
0
0
<OTHER-SE> 38,859
<TOTAL-LIABILITY-AND-EQUITY> 156,589
<SALES> 145,911
<TOTAL-REVENUES> 145,911
<CGS> 108,576
<TOTAL-COSTS> 108,576
<OTHER-EXPENSES> 34,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,110
<INCOME-PRETAX> 1,990
<INCOME-TAX> 826
<INCOME-CONTINUING> 1,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,164
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
