FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT # 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended _____June 30, 1994___
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 1-7441
_________________Sunshine-Jr. Stores, Inc.__________________
(Exact name of registrant as specified in its charter)
_________________Florida__________ _____59-0669576_______
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_____109 West Fifth Street, Panama City, FL 32402___________
(Address of principal offices) (Zip Code)
(Registrant's telephone number, including area code)
_____(904) 769-1661_________________________________
________________________(Not Applicable)____________________
(Former name, former address and former fiscal year, if
changed since last report)
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 for 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 August 5, 1994.
Common Stock $.10 Par Value 1,701,650 shares
<PAGE>
<TABLE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
Sunshine-Jr. Stores, Inc.
(Unaudited)
<CAPTION>
13 Wks Ended 13 Wks Ended 26 Wks Ended 26 Wks Ended
June 30, 1994 July 1,1993 June 30,1994 July 1, 1993
(as restated) (as restated)
<S> <C> <C> <C> <C>
NET REVENUE $44,647,519 $58,194,874 $85,706,670 $107,468,818
Cost of sales and expenses:
Cost of goods sold....................... 34,819,761 46,261,992 66,478,153 85,284,645
Selling, general, and administrative..... 9,502,160 10,973,394 18,641,592 21,537,763
Interest expense, net ofinterest income
of $143,857 and $7,467 for the second
quarters of 1994 and 1993 and $234,509
and $15,875 for year to date 1994 and
1993, respectively..................... 333,358 82,538 686,144 209,230
44,655,279 57,317,924 85,805,889 107,031,638
INCOME (LOSS) BEFORE REORGANIZATION ITEMS
AND PROVISION FOR INCOME TAXES.......... (7,760) 876,950 (99,219) 437,180
REORGANIZATION ITEMS:
Professional fees...................... 358,147 690,152 648,576 1,690,091
Net gain from sale of property and
equipment............................. (1,036,564) (12,604) (2,107,629) (14,684)
Restructuring (recoveries) charges..... (56,691) 28,616 (15,369) 82,679
(735,108) 706,164 (1,474,422) 1,758,086
INCOME(LOSS) BEFORE PROVISION FOR
INCOME TAXES............................ 727,348 170,786 1,375,203 (1,320,906)
PROVISION FOR INCOME TAXES:
Current.................................. 63,470 0 167,041 0
Deferred................................. 0 0 0 0
63,470 0 167,041 0
NET INCOME (LOSS)........................ $663,878 $170,786 $1,208,162 ($1,320,906)
INCOME(LOSS) PER COMMON SHARE:
Net Income(Loss)....................... $0.39 $0.10 $0.71 ($0.78)
</TABLE>
*See notes to condensed financial statements.
<PAGE>
<TABLE>
BALANCE SHEETS
Sunshine-Jr. Stores, Inc.
(Unaudited)
<CAPTION>
June 30 December 30
1994 1993
(as restated)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Unrestricted cash and cash equivalents...... $13,820,587 $10,243,371
Restricted cash............................. 1,052,168 3,497,602
Accounts receivable, less allowances for
doubtful accounts of $17,000 and $18,000
in 1994 and 1993, respectively............ 1,946,948 2,277,532
Inventories:
Inventories - FIFO basis.................. 9,879,213 9,610,600
Less LIFO reserve......................... (2,589,730) (2,506,325)
Total inventories......................... 7,289,483 7,104,275
Properties held for sale.................... 637,576 3,809,108
Deferred income tax asset................... 894,000 894,000
Prepaid expenses and other current assets... 1,104,287 1,761,005
TOTAL CURRENT ASSETS....................... 26,745,049 29,586,893
PROPERTY AND EQUIPMENT, at cost:
Land........................................ 6,927,040 7,459,790
Buildings................................... 12,036,993 13,442,282
Fixtures and equipment...................... 22,378,768 26,102,620
Leaseholds and improvements................. 4,053,499 4,985,764
45,396,300 51,990,456
Less allowances for depreciation and
amortization............................... (24,074,236) (27,864,894)
21,322,064 24,125,562
OTHER ASSETS:
Properties held for sale, net............... 3,716,877 3,777,876
Other....................................... 633,356 417,195
$52,417,346 $57,907,526
</TABLE>
*See notes to condensed financial statements.
<PAGE>
<TABLE>
BALANCE SHEETS
Sunshine-Jr. Stores, Inc.
(Unaudited)
<CAPTION>
June 30 December 30
1994 1993
(as restated)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses....... $17,699,896 $17,229,055
Current portion of long-term debt........... 911,763 0
TOTAL CURRENT LIABILITIES.................. 18,611,659 17,229,055
LIABILITIES SUBJECT TO COMPROMISE............ 0 29,402,891
DEFERRED INCOME TAXES........................ 894,000 894,000
NONCURRENT LIABILITIES....................... 568,969 770,000
LONG-TERM DEBT, less current portion......... 21,522,976 0
COMMITMENTS AND CONTINGENCIES
(Note I)
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; 3,000,000
shares authorized, 1,701,650 shares issued
and outstanding............................ 170,165 170,165
Additional paid-in capital.................. 5,124,245 5,124,245
Retained earnings........................... 5,525,332 4,317,170
TOTAL STOCKHOLDERS' EQUITY 10,819,742 9,611,580
$52,417,346 $57,907,526
</TABLE>
*See notes to condensed financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
Sunshine-Jr. Stores, Inc.
<CAPTION>
13 Wks Ended 13 Wks Ended 26 Wks Ended 26 Wks Ended
June 30,1994 July 1, 1993 June 30, 1994 July 1, 1993
(as restated) (as restated)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $663,878 $170,786 $1,208,162 ($1,320,906)
Adjustments to reconcile net loss to
net cash provided by operating
activities before reorganization and
restructuring items:
Depreciation and amortization............ 701,739 902,227 1,397,332 1,817,619
Pre-confirmation interest expense
on Class 7 Notes Payable................ 301,526 0 705,890 0
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable............................ 97,959 (670,208) 330,584 (621,307)
(Increase) decrease in inventories...... 70,703 (1,507,159) (185,208) (910,355)
Decrease in prepaid expenses and
other assets........................... 80,236 86,349 408,870 626,782
Increase in accounts payable
and accrued expenses................... 1,986,544 1,362,762 166,969 1,060,207
Decrease in noncurrent liabilities...... (201,031) (162,417) (201,031) (653,409)
Total adjustments before reorganization
and restructuring items.................. 3,037,676 11,554 2,623,406 1,319,537
Adjustments due to reorganization and
restructuring items:
Gain on sale of property and equipment... (1,036,564) (12,604) (2,107,629) (14,684)
Restructuring (recoveries) charges....... (56,691) 28,616 (15,369) 82,679
Payment of restructuring items and
professional fees related to
reorganization.......................... (78,397) 0 (334,533) 0
Professional fees incurred related
to reorganization....................... 358,147 690,152 648,576 1,690,091
Total adjustments due to reorganization
and restructuring items.................. (813,505) 706,164 (1,808,955) 1,758,086
Total adjustments......................... 2,224,171 717,718 814,451 3,077,623
Net cash provided by operating
activities............................. 2,888,049 888,504 2,022,613 1,756,717
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........ (614,555) (382,935) (832,539) (527,187)
Proceeds from sale of property and
equipment related to reorganization
items................................... 1,913,891 14,700 6,931,006 28,400
Collections of notes and loans
receivable, net......................... 2,923 71,693 31,687 76,063
Net cash provided by (used in)
investing activities................... 1,302,259 (296,542) 6,130,154 (422,724)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt. 0 0 0 0
Payments on long-term debt and
capital lease obligations............... (6,992,535) 0 (7,020,985) 0
Net cash used in financing activities... (6,992,535) 0 (7,020,985) 0
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS......................... (2,802,227) 591,962 1,131,782 1,333,993
UNRESTRICTED AND RESTRICTED CASH AND
CASH EQUIVALENTS, BEGINNING OF PERIOD.... 17,674,982 2,669,751 13,740,973 1,927,720
UNRESTRICTED AND RESTRICTED CASH AND
CASH EQUIVALENTS, END OF PERIOD.......... $14,872,755 $3,261,713 $14,872,755 $3,261,713
</TABLE>
*See note to condensed financial statements.
<PAGE>
SUNSHINE-JR. STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1994
Note A: Basis of Presentation
The accompanying unaudited financial statements of Sunshine-
Jr. Stores, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion
of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
thirteen week period ended June 30, 1994 are not necessarily
indicative of the results that may be expected for the year
ending December 29, 1994. Certain reclassifications have
been made in the 1993 financial statements to conform to the
1994 presentation. For further information, refer to the
audited financial statements and footnotes attached thereto
included in the Company's annual report on Form 10-K for the
year ended December 30, 1993.
Note B: Restatement of Previously Reported Amounts
Subsequent to the issuance of its financial statements for
the thirteen weeks ended June 30, 1994, the Company
discovered an error in the workers' compensation expense
accrual. Accordingly, the June 30, 1994 financial
statements have been restated to correct this error, the
effect of which changed the previously reported results from
a net loss of $516,122, or $.30 per share to a net income of
$663,878, or $.39 per share. For the twenty-six week period
ended June 30, 1994, the previously reported net loss of
$371,838, or $.22 per share changed to a net profit of
$1,208,162, or $.71 per share.
Note C: Bankruptcy Proceeding and Restructuring
On December 18, 1992, the Company filed a voluntary petition
in the U.S. Bankruptcy Court for the Middle District of
Florida (Tampa Division) (the "Bankruptcy Court") for
reorganization under Chapter 11 of the Bankruptcy Code. On
August 27, 1993, the Company filed a Plan of Reorganization
which was later amended on January 7, 1994 and March 3, 1994
("Plan of Reorganization"). On April 26, 1994, the Plan of
Reorganization was confirmed by the Bankruptcy Court, and
the official confirmation order became effective on May 12,
1994. The Effective Date of the Plan of Reorganization (the
"Effective Date") occurred 40 days later on June 21, 1994.
The Plan of Reorganization provides for full payment of all
outstanding liabilities over specified periods with
interest, and allows shareholders to retain their equity
interests.
According to the Plan of Reorganization, administrative
claims as defined in the Bankruptcy Code were paid on or
about June 29, 1994, except for approximately $4,706,000 of
claims that will be paid within ten days after the entry of
a final order allowing such administrative claim. Priority
tax claims will be paid, together with post-confirmation
interest at seven (7%) percent per annum, over six years
from the date of assessment of each claim, or five years
from the Effective Date, whichever occurs first.
The secured claim of 7-Shine Corporation concerning ten
Mississippi convenience stores was handled by issuing three
secured promissory notes (A-Note, B-Note and Contingency
Note). The A-Note is in the original principal amount of
$1,821,917. It bears interest commencing September 1, 1993,
at the rate of seven (7%) percent per annum, and is payable
in equal monthly installments of principal and interest of
$12,121. The note will mature on September 2, 2000, at which
time all remaining principal and interest will be due. The
Company has been making monthly payments in the amount of
$12,121 since September 1, 1993, and the balance of the A-
Note has been reduced by the $15,332 portion of such
payments attributable to principal. The B-Note is in the
original amount of $633,726. Commencing September 1, 1994,
the B-Note will bear interest at the rate of seven (7%)
percent per annum, and no interest will accrue prior to
September 1, 1994. Commencing October 1, 1994, the Company
will pay monthly installments of principal and interest of
$4,259. The note will mature on September 1, 2000, at which
time all remaining principal and interest will be due.
The Contingency Note is in the original principal amount
of $667,643. The original liability and related asset have
been reduced by the amount of the Contingency Note and the
amounts have been excluded from the accompanying statements
of cash flows. No amounts will be due under this note
unless there is a default of either the A-Note or the B-
Note. Upon such a default, the entire principal balance and
accrued interest at the rate of seven (7%) percent per annum
would be due.
Unsecured claims of $1,000 or less were paid in full on June
30, 1994. Creditors with unsecured claims greater than
$1,000 received promissory notes on June 30, 1994, for their
principal balance at the petition date plus accrued
interest. These notes were issued pursuant to a trust
indenture and are secured by certain real and personal
property owned by the Company. The notes call for the
following: (i) quarterly payments of interest at prime plus
1%, (ii) quarterly principal payments from available
proceeds of asset sales, if any, after certain deductions
described in the Plan of Reorganization, (iii) minimum
principal payments (including those from asset sales) of
$4,250,000 within six months of the confirmation date and
$6,700,000 cumulative within twelve months of the
confirmation date, (iv) annual principal payments beginning
April 30, 1995 of 75% of "Free Cash Flow" from the previous
fiscal year as specifically defined in the Plan of
Reorganization and (v) beginning one year after
confirmation, minimum quarterly payments of principal and
interest using a 20 year amortization schedule. The Company
paid the entire required first year principal payment of
$6,700,000 on these promissory notes on June 30, 1994. In
accordance with the Plan of Reorganization, institutional
lenders (banks) received 36% of the payment, which was
approximately 19% of the principal amount of their notes.
Non-institutional creditors received 64% of the payment,
which was approximately 39% of the principal amount of their
notes. The notes will mature five years from the
confirmation date. They have been issued under an indenture
governed by the Trust Indenture Act of 1939, and this
indenture requires the Company to comply with certain
financial and other covenants until the notes are paid in
full.
The original total long-term debt balance of approximately
$29.4 million was reclassed from liabilities subject to
compromise to long-term debt. This transaction has been
excluded from the accompanying statements of cash flows.
Note D: Inventories
<TABLE>
Inventories consist of the following:
<CAPTION>
Jun 30, 1994 Dec 30, 1993
<S> <C> <C>
Merchandise $7,571,960 $7,255,543
Gasoline 2,307,253 2,355,057
Total Inventories FIFO Basis 9,879,213 9,610,600
Excess of FIFO cost over LIFO values (2,589,730) (2,506,325)
Total Inventories LIFO Basis $7,289,483 $7,104,275
</TABLE>
Note E: Accounting Policies
There have been no changes in accounting policies from those
stated in the 1993 annual report.
<PAGE>
Note F: Long-Term Debt:
<TABLE>
Long-term debt consisted of the following at June 30, 1994:
<CAPTION>
<S> <C>
Secured notes payable to holders of Class 7
General Unsecured Claims as defined in the
Company's Plan of Reorganization. $16,043,121
Estimated Class 7 General Unsecured Claims that
are contested as of June 30, 1994. 468,353
Notes payable to holders of Class 2 Priority
Tax Claims as defined in the Company's Plan of
Reorganization with quarterly principal payments
through December 1998, interest at 7.0%. 3,482,954
Secured notes payable with monthly principal
payments and interest at 7.0% for the purchase
of 10 stores previously leased under capitalized
leases. 2,440,311
$22,434,739
Less Current Portion (911,763)
Total $21,522,976
</TABLE>
See Note C to the Condensed Financial Statements for a more
detailed discussion of the above note issuances.
Note G: Accounts Payable and Accrued Expenses
As of June 30, 1994, accounts payable and accrued expenses
include Chapter 11 administrative professional fees totaling
$4,706,000 which will be required to be paid within ten days
after the entry of a final order allowing such
administrative claim.
Note H: Litigation
In January 1991, the Company was named in a lawsuit filed in
the Circuit Court of Montgomery County, Alabama, under the
caption of Wright vs. Winn Dixie, et al. The complaint
brings a class action on behalf of all consumers who have
purchased either beer, wine or tobacco products against
virtually every retailer in the State of Alabama which sells
these products. The complaint alleges that a substantial
portion of the "retail price" of beer, wine and tobacco
products is state beer, wine or tobacco taxes. The
complaint alleges that these state taxes are customarily
incorporated into the "retail price" of such products. The
defendants each charged consumer state and local sales taxes
on the "retail price" without first deducting other state
taxes which the complaint alleges results in "double
taxation" in violation of state law. The complaint seeks
injunctive relief and money damages. There is no specific
amount requested in the plaintiff's complaint. The court
granted the plaintiffs a summary judgment by ruling that the
Company, as well as the other defendants, had been
improperly assessing sales tax upon excise taxes. However,
the court did not have sufficient facts to determine if the
plaintiffs had a legal remedy and, therefore, did not award
damages. The Supreme Court of Alabama affirmed the trial
court decision and remanded the case to the trial court for
further proceedings. In April 1992, after the court's
decision, the Alabama legislature passed an act, effective
immediately and to be applied retroactively, clarifying that
retailers, have historically collected sales tax in the
proper manner and are to continue to collect sales tax in
the same manner. The application of this act to the Company
and other defendants is in doubt due to the judgment
previously entered against the Company in this case. The
defendants have filed third-party complaints against the
State of Alabama, Department of Revenue, so that if the
Company were liable for damages, relief can be sought from
the State. A Settlement Agreement has been signed on behalf
of all of the parties which will resolve this case without
any additional material out-of-pocket cost to the Company,
as the state will allow the Company a credit against sales
taxes due to the state and the amount of the credit will be
paid by the Company to settle the case. Accordingly, no
provision for any liability that may result has been made in
the accompanying financial statements. The Settlement
Agreement has been approved by the Bankruptcy Court but has
not yet received final approval by the Alabama trial court.
Four of the Company's former officers have filed
administrative claims totaling approximately $850,000
against the Company resulting from the alleged breach of
employment contracts. The Company has filed objections to
the claims and these matters are still pending before the
Bankruptcy Court. The Bankruptcy Court has denied the
Motions for Administrative Claims of Mike Dreggors and James
Burkhalter. Messrs. Dreggors and Burkhalter have filed a
Motion for Leave to File an Interlocutory Appeal. This
Motion is pending before the Bankruptcy Court. Cross-
motions for summary judgment are also pending before the
Bankruptcy Court with regard to the administrative claim of
Lenard Miller, the Company's former President. The Company
has tentatively reached a settlement with regard to the
claim of Peter Freix. In the event the Bankruptcy Court
determines that Messrs. Miller's or Freix's claims are
administrative claims or in the event Messrs. Dreggors and
Burkhalter's Motion is granted and they prevail on appeal,
the claims will be entitled to priority status for purposes
of payment under the Company's Plan or Reorganization
confirmed by the Bankruptcy Court on May 12, 1994. In the
event the Bankruptcy Court finds that the claims are not
entitled to administrative priority status, then the claims
will be treated as general unsecured claims and may be
subject to certain reductions by virtue of the limitations
imposed by the Bankruptcy Code or other applicable law.
In the normal course of conducting its business, the Company
is involved in various other litigation arising from general
liability, workers' compensation, equal employment and other
claims. In the opinion of management, the resolution of
these cases will not have a material adverse effect on the
financial position, liquidity or results of operations of
the Company.
Note I: Commitments and Contingencies
Reorganization Proceeding Under Chapter 11
See Note C.
Environmental Compliance
The ownership and/or operation of USTs is subject to
federal, state and local laws and regulations. Federal
regulations include requirements for (a) maintaining a
release detection system, (b) upgrading tank systems, (c)
taking corrective action in response to releases, (d)
closing tanks to prevent future releases, (e) keeping
appropriate records and (f) maintaining evidence of
financial responsibility for taking corrective action and
compensating third parties for bodily injury and property
damage resulting from a release.
The Company is required under EPA regulations to maintain
evidence of financial responsibility for taking corrective
action and compensating third parties for bodily injury and
property damage resulting from releases in the amount of $1
million per occurrence, with an annual aggregate coverage
limit of $2 million. The Company has third-party
environmental insurance coverage in the State of Florida.
Third party liability coverage is provided by trust funds in
the other states in which the Company operates.
The Company estimates that it will incur approximately
$3,500,000 in capital expenditures related to tank
replacements, overfill and spill protection and release
detectors during the next five years to comply with UST
detection and prevention requirements at all of the
Company's stores in operation at December 30, 1993. The
Company estimates $650,000 of these expenditures will be
spent in fiscal 1994. The Company's estimated cost to
comply with the UST requirements may increase if certain
prevention efforts at particular sites fail, thus requiring
the subsequent replacement of USTs at these sites.
During 1992, the Company engaged an environmental
engineering firm to perform an assessment of its sites. As
a result of this firm's findings, the Company has accrued
approximately $1,115,000 at June 30, 1994 for costs to be
incurred by the Company for site assessment and remediation
services which are not eligible for reimbursement under the
state trust funds. The Company's accrual is based on
estimates made by the independent environmental engineering
firm and internal environmental staff with regard to the
cost of assessment and remediation required at particular
sites. As of June 30, 1994, future costs are estimated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Remainder of 1994 $345,000
1995 410,000
1996 120,000
1997 120,000
1998 120,000
Total $1,115,000
In addition to the above, the Company's outside
environmental engineering and consulting firm has estimated
that total costs for assessment and remediation services at
open and closed sites which are eligible for reimbursement
under the state trust funds will total approximately
$18,300,000 through 1998. These costs relate primarily to
existing contamination from overfill, spill and release
incidents. The Company has executed agreements with two
third party remediation contractors (the "Contractors")
which will be responsible for assessment and remediation of
these contaminated sites as well as filing the appropriate
applications for state trust fund reimbursements. Under the
terms of the agreements, the Contractors will be compensated
for services out of the state trust fund reimbursements and
the Company will only be responsible for the payment of
interest for costs the Contractors have invested if certain
contingencies occur under a state trust fund which would
preclude interest payments by the fund, and for assessment
and remediation costs for sites determined to be ineligible
for trust fund reimbursement.
Note J: Gain on Sale of Property and Equipment
The second quarter 1994 gain on sale of property and
equipment of $1,037,000 is primarily a result of the
Company's closing and sale of assets of 21 of its store
locations and the disposal of the Company aircraft. Eleven
of these 21 locations were sold as a group to Express Lane,
a Panama City based convenience store chain, in June. A
similar gain of $1,071,000 was recognized by the Company in
first quarter 1994 when the Company sold the assets at 25
locations located primarily in the central Florida area.
Note K: Reorganization Items
In connection with its Chapter 11 filing, the Company
recorded second quarter reorganization items which included
a gain on sale of property and equipment (See Note J),
$358,000 in professional fees related to the Company's
reorganization efforts, and a credit to other restructuring
charges of $57,000 resulting from the Company's continued
process of reconciliation of creditor claims.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
FINANCIAL CONDITION AND LIQUIDITY
Cash flow for the second quarter of 1994 was approximately a
negative $2,802,000, after the use of approximately
$6,992,000 for payment of long-term debt. This decrease was
partially offset by an increase in cash from operating
activities of approximately $2,888,000, a result of an
increase in accounts payable and accrued expenses, coupled
with an increase in cash from investing activities of
approximately $1,302,000, principally from the sale of
assets for $1,900,000 in cash.
For a description of the Company's successful emergence from
Chapter 11 of the Federal Bankruptcy Code and the
restructuring of the Company's liabilities effected by its
Plan of Reorganization, see Notes C and F of the Notes to
Condensed Financial Statements.
The Company's Plan of Reorganization calls for a smaller
reorganized entity, operating at lower relative overhead
levels. The Plan of Reorganization calls for the sale of
all of the Company's non-operating real property, the sale,
sublease or closure of approximately 34 more stores
beginning with the store count of 211 at June 30, 1994, and
full payment of all pre-petition creditors over time.
Payments to these creditors are to be made from the proceeds
of future asset sales, after deduction of certain items
described in the Plan of Reorganization, and from future
cash flow from operations. In furtherance of this Plan of
Reorganization, on February 1, 1994, the Company sold 21
stores in central Florida for aggregate consideration of
approximately $5,000,000. The Company also sold 11 stores
in Georgia on June 1, 1994, for aggregate consideration of
$1,200,000, and has sold several other individual stores for
small dollar amounts. The Company believes that its current
cash on hand and funds to be generated from operations and
asset sales will be adequate to cover its operations and
required Plan of Reorganization payments. Remaining Plan of
Reorganization payments include estimated Chapter 11
administrative items of approximately $4,706,000, which the
Company anticipates paying later in 1994. However, the
long-term liquidity and adequacy of the Company's capital
resources cannot be determined.
RESULTS OF OPERATIONS
Revenues
During the last two quarters of 1993 and the first two
quarters of 1994, no stores were opened while four
supermarkets and 65 convenience stores were closed or sold.
The average number of stores in operation during the second
quarter of 1994 was 227 compared to 276 in the second
quarter of 1993. Data discussed below as "same store"
includes data from the same stores during the comparable
periods. On June 30, 1994, the Company operated 211
convenience stores in Florida, Alabama, Mississippi, Georgia
and Louisiana.
<PAGE>
</TABLE>
<TABLE>
Total Revenues
(In Thousands)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 30, July 1, % of June 30, July 1, % of
1994 1993 Change 1994 1993 Change
<S> <C> <C> <C> <C> <C> <C>
Merchandise and
Other Revenue Items $24,119 $31,293 (22.9%) $45,863 $58,330 (21.4%)
Gasoline Revenues 20,529 26,902 (23.7%) 39,844 49,139 (18.9%)
Total Revenues $44,648 $58,195 (23.3%) $85,707 $107,469 (20.2%)
Gas Gallons 20,340 25,918 (21.5%) 40,306 47,877 (15.8%)
</TABLE>
During the thirteen weeks ended June 30, 1994, total
revenues decreased approximately $13,547,000 compared to the
same period of the previous year. Gasoline sales decreased
approximately $6,373,000 due primarily to a decrease in the
number of stores, coupled with a decrease in the average
retail selling price of gasoline. Merchandise revenues
decreased approximately $7,174,000 due primarily to the sale
of the Company's four supermarkets and the closing or sale
of 65 convenience stores.
Merchandise revenues include merchandise sales as well as
revenues from amusement machines, video rentals, service
charges, money order commissions, lottery commissions,
telephone commissions and other miscellaneous items. The
$7,174,000 decrease in merchandise revenues for the thirteen
week period is comprised of a $7,111,000 decrease in
merchandise sales coupled with a decrease in other revenue
items of approximately $63,000. On a same store basis,
merchandise revenues increased approximately $423,000 or
1.9% over the comparable period of the prior year. This
increase is comprised of an increase in merchandise sales of
approximately $381,000 and an increase in other revenue
items of approximately $42,000.
The increase in other revenue items is due primarily to an
increase in lottery commissions of approximately $95,000,
offset by decreases in video income and amusement machine
commissions of approximately $39,000 and $11,000,
respectively.
Gasoline revenues accounted for 46.0% of total revenues in
the second quarter of 1994 compared to 46.2% in the second
quarter of 1993. The 23.7% decrease in gasoline revenues
for the thirteen week period ended June 30, 1994, is due to
a decrease in volume and a reduced average retail selling
price. The decrease in volume is partially a result of
fewer locations selling gasoline. The number of gallons
sold decreased by approximately 5,578,000 gallons in the
second quarter of 1994 compared to the prior year. On a
same store basis, gasoline revenues decreased approximately
$1,459,000 or 7.0% and gasoline gallons decreased
approximately 759,000 or 3.8% over the comparable period of
1993.
For the twenty-six week period ending June 30, 1994,
merchandise revenues decreased approximately $12,467,000, a
function of fewer operating locations. This decrease
consists of a decrease in merchandise sales of approximately
$11,919,000 or 21.2% and a decrease in other revenue items
of approximately $548,000 or 25.8%. On a same store basis,
merchandise revenues increased approximately $1,468,000.
This consists of an increase in merchandise sales of
approximately $1,585,000 or 4.0%, partially offset by a
decrease in other revenue items of approximately $117,000 or
8.6%.
For the twenty-six week period ending June 30, 1994,
gasoline revenues decreased approximately $9,295,000. The
number of gallons sold decreased by approximately 7,572,000
gallons. On a same store basis, gasoline revenues decreased
approximately $1,249,000 or 3.3% and gallons sold decreased
by approximately 203,000 gallons or .6%.
<PAGE>
Gross Profit
<TABLE>
Total Gross Margin Rate
<CAPTION>
Thirteen Twenty-Six
Weeks Ended Weeks Ended
June 30, July 1, June 30, July 1,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Merchandise and Other Revenue Items 33.1% 30.6% 33.0% 30.4%
Gasoline 9.0% 8.8% 10.2% 9.0%
Total 22.0% 20.5% 22.4% 20.6%
Gasoline Gross Margin/Gallon $0.091 $0.091 $0.101 $0.093
</TABLE>
Gross profit on merchandise sales and other revenue items
for the second quarter of 1994 decreased approximately
$1,587,000 as compared to the second quarter of 1993. The
decrease is a result of a decrease in gross profit from
merchandise sales of approximately $1,583,000, coupled with
a decrease in gross profit from other revenue items of
approximately $4,000. The decrease in gross profit as
compared to the prior year for merchandise sales is due
primarily to the sale of the Company's four supermarkets and
the closing or sale of 65 convenience stores which resulted
in a reduced sales base. However, the Company is
experiencing higher gross margin percentages due to the sale
of the supermarkets (which had significantly lower gross
margin percentages than the convenience stores), together
with actions and programs the Company began implementing in
the second half of 1993. These actions include developing
new product categories and expanding and improving the
product mix in existing product categories, changing store
and walk-in cooler layouts to encourage the purchase of
higher margin items and training of field and store
management on proper purchasing procedures to lower costs.
On a same store basis, gross profit on merchandise sales and
other revenue items increased approximately $373,000 or
5.2%. The increase is a result of an increase of
approximately $310,000 or 4.6% in merchandise sales coupled
with an increase of approximately $63,000 or 13.8% in other
revenue items.
Gross profit from gasoline sales decreased approximately
$518,000 in the second quarter of 1994 as compared to 1993.
This decrease is a function of a decrease in volume sold.
On a same store basis, gasoline gross profit decreased
approximately $127,000 or 6.5%. This decrease is a function
of reduced volume and a $.003 decrease in gross profit per
gallon. The gasoline market is significantly influenced by
external factors affecting world petroleum markets which
causes gross profit per gallon to be extremely volatile. A
similar decrease in gross profit per gallon was experienced
industry wide.
For the twenty-six week period ending June 30, 1994, gross
profit on merchandise sales and other revenue items
decreased approximately $2,598,000 or 14.6%. This decreased
is comprised of decreases in merchandise sales and other
revenue items of approximately $2,169,000 and $429,000,
respectively. On a same store basis, gross profit on
merchandise sales and other revenue items increased
approximately $890,000. This increase is comprised of an
increase in merchandise sales of approximately $964,000
partially offset by a decrease in other revenue items of
approximately $74,000.
For the twenty-six week period ending June 30, 1994, gross
profit from gasoline sales decreased approximately $357,000
or 8.0%. On a same store basis, gross profit from gasoline
sales decreased approximately $253,000 or 6.9%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 21.3% of
total revenues in the second quarter of 1994 compared to
18.9% during the same period of the previous year. This
increase is primarily due to an increase in salaries and
wages as a percent of total revenues, coupled with some loss
of economies of scale associated with the closing of 65
convenience stores. The increase in salaries and wages as a
percent of total revenues is primarily a result of increased
store labor hours added to support the sales plan, two clerk
coverage required in 30 additional stores by the Florida
Convenience Store Security Act of 1993 and additional labor
hours used to provide security in stores not mandated by the
Security Act. The increase is also attributable to an
increase in overhead salaries due to unfilled management
positions during the second quarter of 1993 which were
filled in the third quarter of 1993. As the Company
continues to downsize in accordance with the Plan of
Reorganization, additional overhead positions will be
eliminated. Management is also currently revising store
labor hour allocations in an effort to reduce store labor
costs.
Although selling, general and administrative expenses as a
percent of revenues increased, selling, general and
administrative expenses for the second quarter decreased
approximately $1,471,000 compared to the second quarter of
1993. Selling, general and administrative expenses for the
second quarter of 1994 were approximately $9,502,000
compared to approximately $10,973,000 for the second quarter
of 1993. The decrease is attributable to the closing of 65
convenience stores and the sale of the four supermarkets.
Decreases were experienced in salaries and wages,
depreciation, electricity, professional fees, workers'
compensation expense and payroll taxes included in selling,
general and administrative expenses of approximately
$471,000, $213,000, $183,000, $156,000, $136,000 and
$86,000, respectively, when compared to the previous year.
These decreases were coupled with smaller decreases in other
expense items.
Selling, general and administrative expenses for the twenty-
six week period ended June 30, 1994, decreased approximately
$2,896,000 compared to the same period of the previous year.
Interest Expense
Interest expense, net of interest income, in the second
quarter of 1994 increased by approximately $251,000 from the
second quarter of 1993. For the twenty-six week period
ending June 30, 1994, interest expense, net of interest
income, increased approximately $477,000 over the prior
year. In accordance with the Plan of Reorganization, during
1994 the Company is accruing interest on Class 7 General
Unsecured Claims. Beginning May 12, 1994, the Confirmation
Date, interest is also being accrued on notes payable to
holders of Class 2 Priority Tax Claims. See Note F of the
Notes to Condensed Financial Statements.
Reorganization Items
The reorganization expenses relate to the various
administrative and other costs of operating under Chapter
11. The Company recorded a gain on reorganization items of
approximately $735,000 for the second quarter of 1994
compared to an expense of approximately $706,000 for the
second quarter of 1993. The decrease is primarily
attributable to a decrease in professional fees of
approximately $332,000 and an increase in gain from sale of
property and equipment of approximately $1,024,000. For the
twenty-six week period ending June 30, 1994, the Company
recorded a gain on reorganization items of approximately
$1,474,000 compared to an expense of approximately
$1,758,000 in the previous year.
Income Taxes
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes",
effective January 1, 1993. SFAS No. 109 provides that
deferred tax assets and liabilities are recorded based on
the difference between the tax bases of assets and
liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences.
Deferred tax assets or liabilities at the end of each period
are determined using the currently enacted tax rates to
apply to taxable income in the periods in which the deferred
asset or liability is expected to be settled or realized.
The adoption of SFAS No. 109 had no impact on net income.
The Company recorded a provision for income taxes of
approximately $63,000 for the thirteen week period ended
June 30, 1994. The provision is due principally to the
Company's alternative minimum tax position. No provision
for income taxes was recorded for the thirteen week period
ended July 1, 1993 as the Company did not anticipate
incurring a tax liability in 1993. For the twenty-six week
period ending June 30, 1994, the Company recorded a
provision for income taxes of approximately $167,000.
Net Earnings/Loss
The Company reported a net income for the second quarter of
1994 of approximately $664,000 or $.39 per share compared to
net income of approximately $171,000 or $.10 per share in
the second quarter of 1993. The Company reported a net
income for the twenty-six week period ended June 30, 1994,
of approximately $1,208,000 compared to a net loss of
approximately $1,321,000 for the twenty-six week period
ended July 1, 1993. Earnings per share is based on average
outstanding common shares of 1,701,650 for all periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of the status of the Company's Chapter 11
proceeding, see Note C to Condensed Financial Statements.
ITEM 2. CHANGES IN SECURITIES
For information concerning $22,484,567 of secured notes
issued pursuant to an indenture governed by the Trust
Indenture Act of 1939, see Notes C and F of Notes to
Condensed Financial Statements included elsewhere herein.
This indenture contains various restrictions and
limitations, including among others: requirements that the
Company maintain Net Working Capital (as defined) greater
than $1 million at all times, minimum levels of operating
income and net worth, and minimum ratios of Debt (as
defined) to Consolidated Total Capitalization (as defined);
a limitation on capital expenditures; a prohibition against
dividends with respect to the Company's common stock; and a
prohibition against incurrence of certain liens and Debt.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
4.01 Trust Indenture dated June 21, 1994, between the
Company and NationsBank of Florida, N.A., as Trustee.
(b) Reports of Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on behalf by the undersigned thereunto duly
authorized
Sunshine-Jr. Stores, Inc.
Registrant
April 28, 1995 By: R. M. Shouse
_____________________________________
R. M. Shouse
President and Chief Executive Officer
April 28, 1995 By: Michael G. Ware
______________________________________
Michael G. Ware
Principal Financial and
Accounting Officer
