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 28, 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 July 7, 1994
Common stock, without par 2,289,732 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, and 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 Thirty-Nine Weeks Ended
------------------------- -----------------------
May 28, May 29, May 28, May 29,
1994 1993 1994 1993
----------- ---------- ---------- ----------
Net sales $136,191 $141,745 $408,095 $430,591
Cost of merchandise sold 101,528 106,744 306,421 325,835
----------- ---------- ---------- ----------
Gross profit 34,663 35,001 101,674 104,756
Selling, general and admin-
istrative expenses 32,346 34,074 96,616 99,418
----------- ---------- ---------- ----------
Operating profit 2,317 927 5,058 5,338
Interest expense (1,031) (1,125) (3,369) (3,464)
Other income - net 315 228 948 800
----------- ----------- ---------- -----------
Income before income taxes, extraordinary
item and cumulative effect of change in
accounting for income
taxes 1,601 30 2,637 2,674
Provision for income taxes (638) --- (949) (1,031)
----------- ----------- ----------- -----------
Income before extraordinary item
and cumulative effect of change in
accounting for
income taxes 963 30 1,688 1,643
Extraordinary item -- loss from early
extinguishment of debt, less applicable
income taxes of $39 (70) --- (70) ---
Cumulative effect of change in
accounting for
income taxes (Note C) --- --- (256) ---
---------- ---------- ---------- ----------
Net income $ 893 $ 30 $ 1,362 $ 1,643
========== ========== ========== =========
Per common share:
Income before extraordinary item and
cumulative effect of change in
in accounting for
income taxes $ 0.42 $ 0.01 $ 0.73 $ 0.70
Extraordinary item ( 0.03) --- ( 0.03) ---
Cumulative effect --- --- ( 0.11) ---
Net income $ 0.39 $ 0.01 $ 0.59 $ 0.70
====== ====== ====== ======
Dividends paid $ 0.09 $ 0.09 $ 0.27 $ 0.27
====== ====== ====== ======
Ave. number of
shares outstanding 2,295,246 2,331,138 2,318,569 2,333,653
========= ========= ========= =========
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
May 28, August 28,
1994 1993
------------- -------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 8,821 $ 7,530
Income tax recoverable --- 427
Notes and accounts receivable 6,719 6,995
Less allowance for doubtful accounts (450) (400)
Merchandise inventories (Note B) 62,032 61,913
Less LIFO reserve (17,670) (17,594)
Prepaid expenses, including
deferred income taxes 5,258 2,466
------------- -------------
64,710 61,337
Other assets 6,034 5,781
Property and equipment:
Cost 182,733 176,291
Less accumulated depreciation
and amortization (97,395) (90,638)
-------------- ------------
Net property and equipment 85,338 85,653
------------- ------------
$156,082 $ 152,771
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,198 $ 35,904
Income taxes 638 377
Accrued liabilities 14,669 14,946
Long-term debt due within one year 3,346 3,555
------------- -------------
Total current liabilities 60,851 54,782
Long -term debt 50,143 55,705
Deferred income taxes 4,797 1,772
Deferred other 2,702 3,339
Shareholders' equity:
Common stock 4,587 4,728
Capital in excess of stated value 447 470
Retained earnings 32,555 32,500
Unallocated common shares held by ESOP -- (525)
------------- -------------
Total shareholders' equity 37,589 37,173
-------------- -------------
$156,082 $ 152,771
============ ============
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Statements of Cash Flows
(Thousands of Dollars)
Thirty-Nine Weeks Ended
---------------------------------------------------
May 28, May 29,
1994 1993
------------- -------------
OPERATING ACTIVITIES-
Net cash provided $18,341 $14,970
INVESTING ACTIVITIES
Expenditures for property and equipment (9,254) (11,635)
Proceeds from sale of property
and other assets 170 264
Other (231) (1,479)
------------- -------------
Net cash used in investing activities (9,315) (12,850)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 13,775 4,000
Payments of long-term debt (19,398) (3,306)
Payments for acquisition of common shares (847) (245)
Dividends paid (628) (631)
Contribution to ESOP --- (11)
Decrease in deferred other (637) (374)
------------- ------------
Net cash used in financing activities (7,735) (567)
------------- -------------
Increase in cash and cash equivalents 1,291 1,553
Cash and cash equivalents at
beginning of period 7,530 7,403
------------- -------------
Cash and cash equivalents at
end of period $ 8,821 $ 8,956
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 3,363 $ 3,262
======== ========
Income Taxes $ 338 $ 707
======== ========
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 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.
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 third fiscal quarter of 1994 were $136,191,000
or 3.9% lower than the same quarter of 1993. On a year to date
basis, net sales were $408,095,000 or 5.2% lower than 1993. Most
of this net decrease was attributable to decreased supermarket
sales resulting from increased competition in our market area and
one less supermarket in operation than a year ago. Sales from
stores in operation both this past quarter as well as the same
quarter a year ago were 4.01% less in the current year.
Gross margins, as a percent of sales, increased .8% in the third
quarter of fiscal 1994 compared to the same quarter in fiscal
1993. On a year to date basis, these margins increased .6%.
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 decreased .3% in the third quarter compared to a year ago
but increased .6% on a year to date basis as compared to 1993.
This percentage decrease in the third quarter is attributable to
lower administrative, advertising, and store expenses, including
labor, rents, taxes, supplies and utilities. The increase on the
year to date basis is attributable to lower sales levels
partially offset by reduced administrative, selling and
advertising expenses.
Interest expense decreased $94,000 compared to the third quarter
of 1993, and $95,000 on a year to date basis. This nominal
decrease is due primarily to lower outstanding borrowings.
Other income - net increased 38% over the same quarter in 1993
and 18.5% on a year to date basis. These increases are due
primarily to increased rental income and reduced losses on
disposals of assets compared to the prior year.
Income taxes as a percent of pre-tax income approximates the
statutory tax rates in effect. The company adopted the provi-
sions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" in the first quarter of fiscal
1994. The cumulative effect of this standard decreased net
income for the thirty-nine weeks ended May 28, 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 thirty-nine weeks of fiscal 1994, the Company's
working capital decreased $2,696,000 as compared to August 28,
1993. The working capital ratio was 1.06 to 1 at the end of this
quarter compared to 1.12 to 1 at August 28, 1993 and 1.13 to 1 at
May 28, 1994. During the first thirty-nine weeks of fiscal 1994,
the company generated $18,341,000 from operations which was used
primarily to finance capital expenditures and reduce outstanding
borrowings.
During 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.
In connection with these agreements, the company entered into 5
year interest rate cap agreements reducing the exposure relating
to these variable rate agreements. In addition, the company
completed the early extinguishment of certain higher cost
borrowings during the quarter.
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
financial institution lenders. During the third quarter of 1994
the company borrowed against revolving credit agreements with the
maximum amount outstanding under such agreements amounting to
$27,800,000.
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 July 11, 1994 By Richard B. Iott
Richard B. Iott, President
Date July 11, 1994 By Waldo E. Yeager
Waldo E. Yeager,
Chief Financial Officer,
Treasurer