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 February 26, 1994 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 7, 1994
Common stock, without par 2,293,532 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 Twenty-Six Weeks Ended
------------------------- -----------------------
February 26, February 27, February 26, February 27,
1994 1993 1994 1994
----------- ----------- ------------ ------------
Net sales $139,404 $148,446 $271,904 $288,846
Cost of merchandise sold 104,960 111,934 204,893 219,091
----------- ----------- -------- --------
Gross profit 34,444 36,512 67,011 69,755
Selling, general and
administrative expenses 32,394 33,490 67,270 65,344
----------- ----------- -------- --------
Operating profit 2,050 3,022 2,741 4,411
Interest expense (1,159) (1,188) (2,338) (2,339)
Other income - net 522 258 633 572
----------- ----------- -------- --------
Income before income taxes
and cumulative effect of
change in accounting for
income taxes 1,413 2,092 1,036 2,644
Provision for income taxes (439) (827) (311) (1,031)
----------- ----------- -------- --------
Income before cumulative
effect of change in
accounting for income taxes 974 1,265 725 1,613
Cumulative effect of change
in accounting for income
taxes (Note C) (256)
----------- ----------- -------- --------
Net income $974 $1,265 $469 $1,613
======== ======== ======= ======
Per common share:
Income before cumulative effect
of change in accounting for
income taxes $0.42 $0.54 $0.31 $0.69
======= ======= ====== ======
Net income $0.42 $0.54 $0.20 $0.69
======= ======= ====== ======
Dividends paid $0.09 $0.09 $0.18 $0.18
======= ======= ====== ======
Ave. number of shares
outstanding 2,323,631 2,339,833 2,330,230 2,334,910
=========== =========== ========= =========
PART I. FINANCIAL INFORMATION (Continued)
---------------------------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(Thousands of Dollars)
February 26, August 28,
1994 1993
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $7,608 $7,530
Income tax recoverable --- 427
Notes and accounts receivable 6,932 6,995
Less allowance for doubtful accounts (450) (400)
Merchandise inventories (Note B) 60,292 61,913
Less LIFO reserve (17,652) (17,594)
Prepaid expenses, including deferred
income taxes 5,469 2,466
----------- -----------
Total current assets 62,199 61,337
Other assets 5,627 5,781
Property and equipment:
Cost 178,282 176,291
Less accumulated depreciation and
amortization (94,389) (90,638)
----------- -----------
Net property and equipment 83,893 85,653
----------- -----------
$151,719 $152,771
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $38,782 $35,904
Income taxes 145 377
Accrued liabilities 13,032 14,946
Long-term debt due within one year 3,281 3,555
----------- -----------
Total current liabilities 55,240 54,782
Long-term debt 51,927 55,705
Deferred income taxes 4,663 1,772
Deferred other 2,869 3,339
Shareholders' equity:
Common stock 4,609 4,728
Capital in excess of stated value 450 470
Retained earnings 31,961 32,500
Unallocated common shares held by ESOP --- (525)
----------- -----------
Total shareholders' equity 37,020 37,173
----------- -----------
$151,719 $152,771
=========== ===========
PART I. FINANCIAL INFORMATION (Continued)
-------------------------------------------
Condensed Consolidated Statements of Cash Flows
-------------------------------------------------
(Thousands of Dollars)
Twenty-Six Weeks Ended
----------------------------
February 26, February 27,
1994 1993
----------- -----------
OPERATING ACTIVITIES
Net cash provided $9,978 $8,895
INVESTING ACTIVITIES
Expenditures for property and equipment (4,663) (7,879)
Proceeds from sale of property and
other assets 123 123
Other 167 (798)
----------- -----------
Net cash used in investing activities (4,373) (8,554)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 7,885 4,000
Payments of long term debt (11,791) (1,801)
Payments for acquisition of common shares (729) (149)
Dividends paid (422) (420)
Contributions to ESOP --- (7)
Decrease in deferred other (470) (517)
----------- -----------
Net cash provided by (used in)
financing activities (5,527) 1,106
----------- -----------
Increase in cash and cash equivalents 78 1,447
Cash & cash equivalents at
beginning of period 7,530 7,403
----------- -----------
Cash and cash equivalents at
end of period $7,608 $8,850
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $2,412 $2,377
=========== ===========
Income Taxes $161 $214
=========== ===========
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.
PART I. FINANCIAL INFORMATION (continued)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net sales for the second fiscal quarter of 1994 were $139,404,000
or 6.1% lower than the same quarter of 1993. On a year to date basis,
net sales were $271,904,000 or 5.9% lower than 1993. Most of this net de-
crease was attributable to decreased supermarket sales resulting from
three less supermarkets in operation as of the end of the quarter
as compared to the same quarter of the prior year along with increased
competition in our market area. There was also a small drop in drug-
store sales attributable to increased market competition. Sales from
stores in operation both this past quarter as well as the same quarter
a year ago were 3.71% less in the current year.
Gross margins, as a percent of sales, increased .11% in the second
quarter of fiscal 1994 compared to the same quarter in fiscal 1993. On
a year to date basis, these margins increased .50% between 1994 and 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 first quarter of 1993.
As a percent of sales, selling, general and administrative ex-
penses increased .68% in the second quarter and 1.02% on a year to
date basis as compared to 1993. This percentage increase is attributable
to lower sales levels offset somewhat by lower administrative, advertising,
and store expenses, including labor, rents, taxes, supplies and utilities.
Interest expense decreased $29,000 compared to the second quarter
of 1993, and $1,000 on a year to date basis. This decrease is due
primarily to lower interest rates on outstanding borrowings.
Other income - net increased 102.3% over to the same quarter in 1993 and
10.7% on a year to date basis. These increases are due primarily to current
year gains on disposals of assets.
Income taxes as a percent of pre-tax income are slightly less than the
statutory tax rates in effect due to utilization of tax credits. The
company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" in the first quarter.
The cumulative effect of this standard decreased income for the twenty-six
weeks ended February 26, 1994 by $256,000 or $.11 per share.
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 1994, the Company's working
capital increased $404,000 as compared to August 28, 1993. The working
capital ratio was 1.13 to 1 at the end of this quarter compared to 1.12
to 1 at August 28, 1993 and 1.21 to 1 at February 27, 1993. During the
first twenty-six weeks of fiscal 1994, the company generated $9,978,000
which was used primarily to finance capital expenditures and reduce
outstanding borrowings.
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 agree-
ments which have been arranged primarily through institutional
lenders. During the second quarter of 1994 the company borrowed
against revolving credit agreements with the maximum amount
outstanding under such agreements amounting to $30,800,000.
Subsequent to the end of this quarter, the company renewed its existing
revolving credit agreements and obtained an additional revolving credit
agreement, which together, provide $40,000,000 in available borrowings
through October 1, 1996, at which time any outstanding borrowings will
convert to term notes payable over four years.
Item 6. - Exhibits and Reports on Form 8 K.
6(b) Reports on Form 8K.
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 authorized.
SEAWAY FOOD TOWN, INC.,
Registrant
Date April 11, 1994 By Richard B. Iott
Richard B. Iott, President
Date April 11, 1994 By Waldo E. Yeager
Waldo E. Yeager,
Chief Financial Officer,
Treasurer