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 27, 1995 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 6, 1995
Common stock, without par 2,193,438 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 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 1994 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 May 28, May 27, May 28,
27,1995 1994 1995 1994
---------- ---------- ---------- ----------
Net Sales $139,160 $136,191 $420,101 $408,095
Cost of Merchandise sold 104,170 101,528 314,266 306,421
---------- ---------- ---------- ----------
Gross Profit 34,990 34,663 105,835 101,674
Selling, general and admin-
istrative expenses 33,222 32,346 98,512 96,616
---------- ---------- ---------- ----------
Operating profit 1,768 2,317 7,323 5,058
Interest expense (1,095) (1,031) (3,428) (3,369)
Other income - net 290 315 1,402 948
---------- ---------- ---------- ----------
Income before income
taxes, extraordinary
items and cumulative
effect of change in
accounting for income taxes
963 1,601 5,297 2,637
Provision for income taxes 374 (638) (2,065) (949)
---------- ---------- ---------- ----------
Income before extra-
ordinary item and
cumulative effect of
change in accounting
for income taxes 589 963 3,232 1,688
Extraordinary item -
loss from early
retirement of debt,
less applicable
income taxes of $39 --- (70) --- (70)
Cumulative effect of
change in accounting
for income taxes (Note C) --- --- --- (256)
---------- ---------- ---------- ----------
Net Income $ 589 $ 893 $ 3,232 $ 1,362
========== ========== ========== ==========
Per common share:
Income before extra-
ordinary item and
cumulative effect of
change in accounting
for income taxes $0.27 $0.42 $1.47 $0.73
Extraordinary item --- ( 0.03) --- ( 0.03)
Cumulative effect --- --- --- ( 0.11)
--------- --------- --------- ---------
Net income $0.27 $0.39 $1.47 $0.59
========== ========== ========== ==========
Dividends paid $0.10 $0.09 $0.29 $0.27
========== ========== ========== ==========
Average number of
shares outstanding 2,193,799 2,295,246 2,197,688 2,318,569
========== ========== ========== ==========
See notes to financial statements
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
May 27, August 27,
1995 1994
(NOTE)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $8,365 $7,137
Income tax recoverable --- 600
Notes and accounts receivable 6,227 6,077
Less allowance for doubtful accounts (450) (450)
Merchandise inventories (Note B) 62,728 62,325
Less LIFO reserve (17,944) (17,576)
Prepaid expenses, including deferred
income taxes 5,358 5,308
------------ ------------
64,284 63,421
Other assets 5,929 6,436
Property and equipment:
Cost 184,809 184,825
Less accumulated depreciation and
amortization (101,678) (99,479)
------------ ------------
Net property and equipment 83,131 85,346
------------ ------------
$153,344 $155,203
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $39,694 $36,318
Income taxes 161 407
Accrued liabilities 15,596 14,418
Long-term debt due within one year 3,360 3,341
------------ ------------
Total current liabilities 58,811 54,484
Long-term debt 47,697 55,060
Deferred income taxes 5,235 5,495
Deferred other 1,893 2,579
Shareholder's equity:
Common stock 4,388 4,485
Capital in excess of stated value 680 434
Retained earnings 34,640 32,666
------------ ------------
Total shareholders' equity 39,708 37,585
------------ ------------
$153,344 $155,203
============ ============
NOTE: The balance sheet at August 27, 1994 has been derived from the audited
financial statements at that date but does not include all of the inform-
ation and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to financial statements
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Statements of Cash Flows
(Thousands of Dollars)
Thirty-Nine Weeks Ended
May 27, May 28,
1995 1994
----------- -----------
OPERATING ACTIVITIES-net cash provided $16,848 $18,341
INVESTING ACTIVITIES
Expenditures for property and equipment (8,767) (9,254)
Proceeds from sale of property and other
assets 2,968 170
Other 590 (231)
----------- -----------
Net cash used in investing activities (5,209) (9,315)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,375 13,775
Payments of long-term debt (9,657) (19,398)
Payments for acquisition of common shares (811) (847)
Dividends paid (632) (628)
Decrease in deferred other (686) (637)
----------- -----------
Net cash used in financing activities (10,411) (7,735)
----------- -----------
Increase in cash and cash equivalents 1,228 1,291
Cash and cash equivalents at beginning of period 7,137 7,530
----------- -----------
Cash and cash equivalents at end of period $8,365 $8,821
=========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $3,252 $3,363
=========== ===========
Income Taxes $1,838 $338
=========== ===========
See notes to financial statements
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.
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 the
adoption date was a reduction in net income of $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 1995 were $139,160,000 or 2.2%
higher than the same quarter of 1994. On a year to date basis, net sales
were $420,101,000 or 2.9% higher than 1994. Most of this net increase was
attributable to increased drugstore and supermarket sales resulting, in part,
from one more drugstore in operation as of the end of the quarter as compared
to the same quarter of the prior year along with some decreased supermarket
price competition in the Company's market area. Sales from stores in
operation both this past quarter as well as the same quarter a year ago
increased 1.18% in the current year.
Gross margins, as a percent of sales, decreased .31% in the third quarter of
fiscal 1995 compared to the same quarter in fiscal 1994. This decrease
resulted from increased product costs which, given that the Company records
a substantial portion of its inventory on the LIFO cost method, results in
a direct reduction of gross margin. The LIFO charge increased for the Third
Quarter, 1995 ($234,000 versus $18,000 for Third Quarter, 1994).
On a year to date basis, these margins increased .28% between 1995 and 1994.
Gross margins have rebounded this year after a period of reduced margins
resulting from promotions associated with the expansion of drugstores into
new markets and planned promotional activity in the supermarket area in
early 1994.
As a percent of sales, selling, general and administrative expenses increased
.12% in the third quarter, and decreased .22% on a year to date basis as
compared to 1994. The increases from the corresponding quarter in 1994 is
due to higher wages, supplies and other costs. The decrease from the prior
year to date period is a result of sales increasing at a rate greater than
such costs.
Interest expense remained consistent with the prior year as higher interest
rates were offset by lower outstanding borrowings.
Other income - net, increased by $454,000 on a year-to-date basis due
primarily to a gain recognized on the sale of the company's dairy operations
during the first quarter of fiscal 1995, offset somewhat by losses on sales
of other 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" in the first
quarter of fiscal 1994. The cumulative effect of this standard decreased
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 1995, the Company's working
capital decreased $3,464,000 as compared to August 27, 1994. The working
capital ratio was 1.09 to 1 at the end of this quarter compared to 1.16 to
1 at August 27, 1994 and 1.13 to 1 at February 25, 1995. During the first
thirty-nine weeks of fiscal 1995, the Company generated $16,848,000 in
cash from operations which, along with the cash proceeds from the sale of
the Company's dairy operations, was used primarily to finance capital
expenditures, repurchase some of the Company's common shares and reduce
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 agreements which have been
arranged primarily through institutional lenders. The Company is not aware
of any trends, demands, committments 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 1995 the company borrowed against
revolving credit agreements with the maximum amount outstanding under such
agreements amounting to $24,025,000.
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 hereunto duly authorized.
SEAWAY FOOD TOWN, INC.
Registrant
Date July 10, 1995 By /s/Richard B. Iott
Richard B. Iott, President
Date July 10, 1995 By /s/Waldo E. Yeager
Waldo E. Yeager,
Chief Financial Officer,
Treasurer