SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
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 November 27, 1993 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 December 29, 1993
Common stock, without par 2,335,920 shares
value (stated value $2.00
per share)
PART I. FINANCIAL INFORMATION
Summarized Financial Information
The following consolidated statements of income, condensed
consolidated balance sheets, and condensed consolidated state-
ments 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 state-
ments 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 1993 Annual Report to Shareholders.
PART I. FINANCIAL INFORMATION (Continued)
--------------------------------------------
Consolidated Statements of Income
---------------------------------
(Thousands of Dollars - Except
Average Share and Per-share Data)
Thirteen Weeks Ended
-------------------------
November 27, November 28,
1993 1992
----------- -----------
Net sales $132,500 $140,400
Cost of merchandise sold 99,933 107,157
----------- -----------
Gross profit 32,567 33,243
Selling, general and administrative
expenses 31,876 31,854
----------- -----------
Operating profit 691 1,389
Interest expense (1,179) (1,151)
Other income - net 111 314
----------- -----------
Income (loss) before income taxes and (377) 552
cumulative effect of change in
accounting for income taxes
Provision (credit) for income taxes (128) 204
----------- -----------
Income (loss) before cumulative effect of
change in accounting for income taxes (249) 348
Cumulative effect of change in
accounting for income taxes (Note C) (256)
----------- -----------
Net income (loss) ($505) $348
=========== ===========
Per common share:
Income (loss) before cumulative effect of
change in accounting for income taxes ($0.11) $0.15
======= =======
Net income (loss) ($0.22) $0.15
======= =======
Dividends paid $0.09 $0.09
======= =======
Ave. number of shares outstanding 2,336,829 2,329,904
=========== ===========
PART I. FINANCIAL INFORMATION (Continued)
---------------------------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(Thousands of Dollars)
November 27, August 28,
1993 1993
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $8,644 $7,530
Income tax recoverable 500 427
Notes and accounts receivable 7,347 6,995
Less allowance for doubtful accounts (400) (400)
Merchandise inventories (Note B) 67,553 61,913
Less LIFO reserve (17,593) (17,594)
Prepaid expenses, including deferred
income taxes (Note C) 5,407 2,466
----------- -----------
Total current assets 71,458 61,337
Other assets 5,569 5,781
Property and equipment:
Cost 177,925 176,291
Less accumulated depreciation and
amortization (92,229) (90,638)
----------- -----------
Net property and equipment 85,696 85,653
----------- -----------
$162,723 $152,771
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $39,158 $35,904
Income taxes 265 377
Accrued liabilities 13,868 14,946
Long-term debt due within one year 3,403 3,555
----------- -----------
Total current liabilities 56,694 54,782
Long-term debt 61,868 55,705
Deferred income taxes (Note C) 4,548 1,772
Deferred other 3,057 3,339
Shareholders' equity:
Common stock 4,672 4,728
Capital in excess of stated value 433 470
Retained earnings 31,518 32,500
Unallocated common shares held by ESOP (67) (525)
----------- -----------
Total shareholders' equity 36,556 37,173
----------- -----------
$162,723 $152,771
=========== ===========
PART I. FINANCIAL INFORMATION (Continued)
-------------------------------------------
Condensed Consolidated Statements of Cash Flows
-------------------------------------------------
(Thousands of Dollars)
Thirteen Weeks Ended
----------------------------
November 27, November 28,
1993 1992
----------- -----------
OPERATING ACTIVITIES-net cash
(used) provided ($1,039) $2,451
INVESTING ACTIVITIES:
Expenditures for property and equipment (3,213) (3,100)
Proceeds from sale of property and other assets 41 ---
Other 216 (785)
----------- -----------
Net cash used in investing activities (2,956) (3,885)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 7,600 3,700
Payments of long term debt (1,666) (922)
Payments for acquisition of common shares (331) (92)
Dividends paid (212) (210)
Contributions to ESOP --- (4)
Decrease in deferred other (282) (278)
----------- -----------
Net cash provided by financing activities: 5,109 2,194
----------- -----------
Increase in Cash and Cash Equivalents 1,114 760
Cash & cash equivalents at beginning of period 7,530 7,403
----------- -----------
Cash and cash equivalents at end of period $8,644 $8,163
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $929 $949
=========== ===========
Income Taxes $65 $0
=========== ===========
PART I. FINANCIAL INFORMATION (Continued)
Notes to Summarized Financial Information
Note A.
Net income per common share is based on the weighted average
number of shares outstanding during the periods adjusted for
unallocated shares of the ESOP. Shares issuable under outstanding
stock options were not included in the per-share computations
since inclusion would not result in any significant dilution
or would be anti-dilutive.
Note B.
Meat, produce and pharmacy inventoreis 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 deter-
mined by the retail inventory method) are valued at the lower of cost
using, the last-in, first-out (LIFO) method, or market.
Note C.
Effective August 29, 1993, the Company adopted the provisions of the
Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes: (Statement 109). As permitted by Statement 109,
prior year financial statements have not been restated to reflect the
change in accounting method. The cumulative effect as of August 29, 1993
of adopting Statement 109 decreased net income by $256,000 or $.11 per
share.
Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected
to reverse. Prior to the adoption of Statement 109, income tax expense
was determined using the liability method prescribed by Statement 96,
which is superseded by Statement 109. Among other changes, Statement
109 changes the recognition and measurement criteria for deferred tax
assets and the classification criteria for deferred tax assets and
liabilities included in Statement 96.
After giving effect to the adoption of Statement 109, significant
components of the Company's deferred tax assets and liabilities at
August 29, 1993 are as follows (in thousands):
Net Current deferred tax assets:
Accrued expenses $2,907,000
Expenses inventoried for tax purposes 511,000
Other (84,000)
----------
$3,334,000
==========
PART I. FINANCIAL INFORMATION (Continued)
Notes to Summarized Financial Information (continued)
Net non-current deferred tax liabilities:
Excess tax depreciation $4,886,000
Deferred project costs 1,016,000
Tax credit carryforwards (1,461,000
----------
$4,441,000
==========
The Company has alternate minimum tax credits of $1,127,000 and
targeted jobs tax credits of $226,000 which can be applied against
regular tax liabilities in future years. Additionally, the Company
has contribution carryforwards of approximately $108,000 which can
be applied against taxable income in future years. The targeted jobs
tax credits expire in 2008 which the contribution carryforwards expire
in 1997 and 1998.
PART I. FINANCIAL INFORMATION (continued)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Oerations
Net sales for the first fiscal quarter of 1994 were $132,500,000
or 5.6% lower than the same quarter of 1993. Most of this net de-
crease is attributable to decreased supermarket sales resulting from
increased competition in our market area. There were three less
supermarkets in operation as of the end of the quarter as compared
to the same quarter of the prior year which also contributed to the
decrease in sales. Sales from stores in operation both this past
quarter as well as the same quarter a year ago were 3.49% less
in the current year.
Gross margins, as a percent of sales, increased .9% in the first
quarter of fiscal 1994 compared to the same quarter in fiscal 1993.
Gross margins have rebounded this year after a period of reduced
margins resulting from promotions associated with expansion of
drugstores into new markets and planned promotional activity in
the supermarket area in the prior year.
As a percent of sales, selling, general and administrative ex-
penses increased 1.4% in the first quarter compared to the same
quarter of 1993. This increase is attributable to the decrease
in net sales from the same quarter a year ago.
Interest expense increased $28,000 compared to the first quarter
of 1993. This increase is due primarily to increased borrowings
offset by lower interest rates.
Other income - net decreased 64.6% compared to the same quarter in 1993.
This decrease is due primarily to losses on the disposal of assets.
Income taxes as a percent of pre-tax income approximates the statutory
tax rates in effect. The company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
this quarter. The cumulative effect of this standard, as of the
beginning of this quarter, decreased income by $256,000 or $.11 per share.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources
At November 27, 1993, the Company's working capital has increased
$8,209,000 compared to August 28, 1993, and $1,635,000 from the
first quarter of the prior year. The working capital ratio was
1.26 to 1 at the end of this quarter compared to 1.12 to 1 at
August 28, 1993 and 1.24 to 1 at November 29, 1992. During the
first thirteen weeks of 1994, cash and cash equivalents increased
$1,114,000 to $8,644,000 which was largely due to increased
borrowings offset by increased inventory levels which increased
largely due to the time of year.
The funds required by the Company on a continuing basis for
working capital, capital expenditures, and other needs are gener-
ated principally through operations, long-term borrowings and
capital leases, supplemented by borrowings under revolving credit
note agreements which have been arranged primarily through insti-
tutional lenders. During the first quarter of 1994 it was neces-
sary to borrow against revolving credit agreements with the
maximum amount outstanding under such agreements being $29,600,000.
PART II. OTHER INFORMATION
Item 4.Results of votes of security holders
(a)
The Annual Meeting of Shareholders of Seaway Food Town, Inc. was
held on January 6, 1994.
(b)
The election of the Directors previously nominated and as set forth
in the Proxy Statement of December 10, 1993, which is incorporated
herein by reference, was by the following vote:
1,893,793 shares voted FOR
18,753 shares voted AUTHORITY TO VOTE WITHHELD
(c)
Pursuant to the proposal set forth in the Proxy Statement of
December 10, 1993, which is incorporated herein by reference,
approval of Ernst & Young as auditors for the fiscal year ending
August 27, 1994 was by the following vote:
1,888,871 shares voted FOR
18,028 shares voted AUTHORITY TO VOTE WITHHELD
5,647 shares voted AGAINST
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 thereunto duly author-
ized.
SEAWAY FOOD TOWN, INC.,
Registrant
Date January 7, 1994 By Richard B. Iott
Richard B. Iott, President
Date January 7, 1994 By Waldo E. Yeager
Waldo E. Yeager,
Chief Financial Officer,
Treasurer