1
UNITED STATES 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 July 2, 1998
--------------------------------------------
[ ] 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 1-11556
----------------------------------------------------
UNI-MARTS, INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1311379
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
477 East Beaver Avenue, State College, PA 16801-5690
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(8l4) 234-6000
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(Registrant's telephone number, including area code)
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(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 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
----- -----
6,860,149 Common Shares were outstanding at August 7, 1998.
This Document Contains 99 Pages.
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UNI-MARTS, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
- ------------------------------ PAGE(S)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
July 2, 1998 and September 30, 1997 3-4
Condensed Consolidated Statements of Operations -
Quarter Ended and Three Quarters Ended
July 2, 1998 and July 3, 1997 5
Condensed Consolidated Statements of Cash Flows -
Three Quarters Ended July 2, 1998 and
July 3, 1997 6-7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II. OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15-16
Exhibit Index 18
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
July 2, September 30,
1998 1997
---------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 4,167,593 $ 5,993,388
Marketable equity securities (at market,
cost $4,300 and $277,200) 4,966 407,475
Accounts receivable - less allowances of
$159,100 and $132,600 2,647,841 3,377,554
Tax refunds receivable 46,163 1,819,100
Inventories 10,819,088 15,683,330
Prepaid and current deferred taxes 2,996,134 3,359,490
Property held for sale 4,223,237 5,643,006
Prepaid expenses and other 826,575 796,668
Loan due from officer - current portion 200,000 150,000
----------- -----------
TOTAL CURRENT ASSETS 25,931,597 37,230,011
PROPERTY, EQUIPMENT AND IMPROVEMENTS -
at cost, less accumulated depreciation and
amortization of $47,667,900 and
$46,474,100 62,918,717 69,055,846
LOAN DUE FROM OFFICER 564,844 674,768
NET INTANGIBLE AND OTHER ASSETS 6,067,412 6,633,157
----------- ------------
TOTAL ASSETS $95,482,570 $113,593,782
=========== ============
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UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
July 2, September 30,
1998 1997
----------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $11,513,917 $ 14,462,174
Gas taxes payable 2,446,078 2,424,641
Accrued expenses 4,401,668 6,806,632
Credit line payable 5,500,000 0
Current maturities of long-term debt 890,596 12,722,649
Current obligations under capital leases 67,587 87,320
----------- -----------
TOTAL CURRENT LIABILITIES 24,819,846 36,503,416
LONG-TERM DEBT, less current maturities 33,599,086 39,852,947
OBLIGATIONS UNDER CAPITAL LEASES,
less current maturities 499,638 533,551
DEFERRED TAXES 3,940,400 4,036,000
DEFERRED INCOME AND OTHER LIABILITIES 2,899,378 3,120,923
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, par value $.10 per share:
Authorized 15,000,000 shares
Issued 7,316,797 and 7,286,657
shares, respectively 731,680 728,666
Additional paid-in capital 24,275,787 24,341,999
Retained earnings 7,682,505 8,254,538
----------- -----------
32,689,972 33,325,203
Less treasury stock, at cost - 494,099
and 639,980 shares of Common Stock,
respectively ( 2,965,750) ( 3,778,258)
----------- ------------
29,724,222 29,546,945
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $95,482,570 $113,593,782
=========== ============
See notes to consolidated financial statements
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UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
QUARTER ENDED THREE QUARTERS ENDED
July 2, July 3, July 2, July 3,
1998 1997 1998 1997
----------- ----------- ------------ ------------
REVENUES:
Merchandise sales $37,410,269 $50,334,225 $116,223,019 $139,415,716
Gasoline sales 25,046,889 40,895,705 83,386,599 121,433,727
Other income 822,265 730,943 1,873,718 1,936,058
----------- ----------- ------------ ------------
63,279,423 91,960,873 201,483,336 262,785,501
----------- ----------- ------------ ------------
COSTS AND EXPENSES:
Cost of sales 46,624,112 70,400,583 147,711,411 198,180,380
Selling 12,051,996 16,837,944 41,479,736 51,633,297
General and administrative 1,496,423 1,728,812 4,873,237 5,462,813
Depreciation and amortization 1,565,323 1,875,629 4,791,897 5,506,179
Interest 883,850 1,110,687 3,032,673 3,123,443
----------- ----------- ------------ ------------
62,621,704 91,953,655 201,888,954 263,906,112
----------- ----------- ------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 657,719 7,218 ( 405,618) ( 1,120,611)
INCOME TAXES 281,500 2,929 ( 77,900) ( 392,869)
----------- ----------- ------------ ------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 376,219 4,289 ( 327,718) ( 727,742)
EXTRAORDINARY ITEM-LOSS FROM DEBT
EXTINGUISHMENT, NET OF INCOME TAX
BENEFIT OF $125,800 244,315 0 244,315 0
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
NET OF INCOME TAX BENEFIT OF $725,800 0 0 0 ( 1,468,140)
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) $ 131,904 $ 4,289 ($ 572,033) ($ 2,195,882)
=========== =========== ============ ============
BASIC EARNINGS (LOSS) PER SHARE:
EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $ 0.06 $ 0.00 ($ 0.05) ($ 0.11)
LOSS PER SHARE FROM EXTRAORDINARY
ITEM ( 0.04) 0.00 ( 0.04) 0.00
LOSS PER SHARE FROM CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 0.00 0.00 0.00 ( 0.22)
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) PER SHARE $ 0.02 $ 0.00 ($ 0.09) ($ 0.33)
=========== =========== ============ ============
DILUTED EARNINGS (LOSS) PER SHARE:
EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $ 0.06 $ 0.00 ($ 0.05) ($ 0.11)
LOSS PER SHARE FROM EXTRAORDINARY
ITEM ( 0.04) 0.00 ( 0.04) 0.00
LOSS PER SHARE FROM CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 0.00 0.00 0.00 ( 0.22)
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) PER SHARE $ 0.02 $ 0.00 ($ 0.09) ($ 0.33)
=========== =========== ============ ============
DIVIDENDS PER SHARE $ 0.00 $ 0.00 $ 0.00 $ 0.06
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,820,870 6,642,289 6,736,062 6,640,229
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ASSUMING DILUTION 6,827,468 6,678,326 6,736,062 6,640,229
=========== =========== ============ ============
See notes to consolidated financial statements
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UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE QUARTERS ENDED
July 2, July 3,
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and others $201,654,328 $261,985,907
Cash paid to suppliers and employees ( 194,344,142) ( 255,224,744)
Net receipts for sales and purchases
of trading equity securities 831,886 0
Dividends and interest received 62,168 35,931
Interest paid (net of capitalized interest
of $0 and $57,400) ( 3,737,095) ( 3,163,046)
Income taxes received 2,244,393 1,867,325
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,711,538 5,501,373
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sale of capital assets 5,483,802 179,654
Purchase of property, equipment and
improvements ( 2,192,161) ( 10,650,294)
Payments for purchases of available-for-sale
securities 0 ( 183,667)
Note receivable from officer 59,924 ( 809,674)
Cash advanced for intangible and other
assets ( 258,000) ( 311,105)
Cash received for intangible and other
assets 375,184 143,769
------------ ------------
NET CASH PROVIDED (USED) IN INVESTING
ACTIVITIES 3,468,749 ( 11,631,317)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings on revolving credit
agreement ( 10,000,000) 3,000,000
Additional long-term borrowings 34,266,686 10,000,000
Borrowings on credit line 5,500,000 0
Principal payments on debt ( 42,461,983) ( 3,301,656)
Purchases of treasury stock ( 49,285) ( 354,905)
Proceeds from issuance of common stock 738,500 0
Dividends paid to stockholders 0 ( 398,173)
------------ ------------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES ( 12,006,082) 8,945,266
------------ ------------
NET (DECREASE) INCREASE IN CASH ( 1,825,795) 2,815,322
CASH:
Beginning of period 5,993,388 1,207,929
------------ ------------
End of period $ 4,167,593 $ 4,023,251
============ ============
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UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
THREE QUARTERS ENDED
July 2, July 3,
1998 1997
---------- ----------
RECONCILIATION OF NET EARNINGS (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET EARNINGS (LOSS) ($ 572,033) ($2,195,882)
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 4,791,897 5,506,179
Net unrealized holding loss on trading
securities 129,673 0
Gain on sale of trading equity securities ( 110,744) 0
Gain on sale of available-for-sale securities 0 ( 3,001)
(Gain) loss on sale of capital assets and other ( 6,350) 235,603
Cumulative effect of accounting change 0 1,468,140
Changes in assets and liabilities:
(Increase) decrease in:
Trading equity securities 383,580 0
Accounts receivable 874,926 ( 643,792)
Tax refunds receivable 1,772,937 0
Inventories 4,864,242 ( 2,716,807)
Prepaid expenses ( 131,017) ( 500,554)
Increase (decrease) in:
Accounts payable and accrued expenses ( 5,331,784) 2,886,098
Deferred income taxes and other
liabilities 46,211 1,465,389
---------- ----------
TOTAL ADJUSTMENTS TO NET EARNINGS (LOSS) 7,283,571 7,697,255
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $6,711,538 $5,501,373
========== ==========
See notes to consolidated financial statements
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UNI-MARTS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. FINANCIAL STATEMENTS:
The consolidated balance sheet as of July 2, 1998, the consolidated
statements of operations and the consolidated statements of cash flows
for the three quarters ended July 2, 1998 and July 3, 1997 have been
prepared by Uni-Marts, Inc. (the "Company") without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of the
Company at July 2, 1998 and the results of operations and cash flows for
all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1997. The
results of operations for the interim periods are not necessarily
indicative of the results to be obtained for the full year.
B. CHANGE IN ACCOUNTING METHOD:
In fiscal year 1997, the Company changed its method of valuing its
merchandise inventories. The Company formerly valued its merchandise
inventories at the lower of cost (first-in, first-out method) or market,
as determined by the retail inventory method utilizing a single category
of merchandise. The Company now values its merchandise inventories at
the lower of cost (first-in, first-out method) or market, as determined
by the retail inventory method utilizing eight categories of merchandise.
This change caused a one-time charge to earnings of $1,468,140, net of the
income tax benefit of $725,800. The statements of operations for the first
three quarters of fiscal year 1997 have been restated to reflect
retroactive application of this change.
C. INTANGIBLE AND OTHER ASSETS:
Intangible and other assets consist of the following:
July 2, September 30,
1998 1997
---------- -------------
Goodwill $5,998,351 $ 5,998,351
Lease acquisition costs 933,956 1,187,174
Non-competition agreements 0 1,213,040
Other 1,933,471 2,268,850
---------- -----------
8,865,778 10,667,415
Less accumulated amortization 2,798,366 4,034,258
---------- -----------
$6,067,412 $ 6,633,157
========== ===========
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Goodwill represents the excess of costs over the fair value of net
assets acquired in business combinations and is amortized on a straight-
line basis over periods of 13 to 40 years. Lease acquisition costs are
the bargain element of acquired leases and are being amortized on a
straight-line basis over the related lease terms. It is the Company's
policy to periodically review and evaluate the recoverability of the
intangible assets by assessing current and future profitability and cash
flows and to determine whether the amortization of the balances over
their remaining lives can be recovered through expected future results
and cash flows.
D. SHORT-TERM CREDIT FACILITIES:
In conjunction with its long-term mortgage financing discussed in
Footnote F, the Company has a $3.0 million revolving credit facility,
a $2.5 million property loan and a $2.7 million letter-of-credit
facility. The revolving credit facility and property loan are due on
or before June 30, 1999 and bear interest at a floating rate of LIBOR
plus 3.25%. The letter-of-credit facility expires on June 30, 1999. At
July 2, 1998, borrowings of $5.5 million and a letter of credit of $2.7
million were outstanding under these facilities. On July 7, 1998, $2.0
million of the property loan was repaid. The interest rate was 9.16%
at July 2, 1998.
E. LONG-TERM DEBT:
July 2, September 30,
1998 1997
----------- -------------
Mortgage Loan. Principal and interest will
be paid in 240 monthly installments beginning
August 1, 1998. The interest rate at July 2,
1998 was 9.08%. $34,266,686 $ 0
Term Loan. Principal on the note was repaid
in June 1998. 0 20,000,000
Term Loan. Principal on the note was repaid
in June 1998. 0 16,741,488
Revolving Credit Agreement. Principal was
repaid in June 1998. 0 10,000,000
Senior Notes of the Company. Principal was
repaid in February 1998. 0 3,736,735
Mortgage Loans Payable. Principal and interest
are paid in monthly installments. The loan
expires in 2010. The interest rate at July 2,
1998 was 8.5%. 222,996 2,097,373
----------- -----------
34,489,682 52,575,596
Less current maturities 890,596 12,722,649
----------- -----------
$33,599,086 $39,852,947
=========== ===========
The mortgage loans are collateralized by $47,343,400 of property, at cost.
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On June 30, 1998, the Company completed a 20-year mortgage financing
with Franchise Finance Corporation of America ("FFCA") pursuant to which
the Company received long-term financing of $36.0 million. The Company
repaid all of its long-term debt with these funds except for one mortgage
with a balance of $223,000. This mortgage is expected to be repaid by
September 30, 1998.
Certain provisions of the loan agreements with FFCA require the Company's
maintenance of minimum net worth of $20 million and an aggregate fixed
charge ratio of 1.25 : 1. This agreement could possibly restrict the
Company's ability to declare and pay dividends on common stock.
F. NEW ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income," which will result in disclosure
of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. The
Company is not required to adopt this standard until fiscal year 1999. At
this time, the Company has not determined the impact this statement will
have on the Company's financial statements but expects that the effect will
not be material.
The Financial Accounting Standards Board also issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
in June 1997. The Statement establishes standards for the way public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company is not required to adopt this standard until fiscal year 1999. At
this time, the Company has not determined the impact this standard will
have on the Company's financial statements but does not expect the effect
to be material.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." The Statement standardizes the disclosure requirements for
pensions and other benefits to the extent practicable and requires
disclosure of certain other information. The Company is not required to
adopt this standard until fiscal year 1999 but expects that the adoption
will have a minimal effect on the Company's financial statements.
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ITEM 2.
UNI-MARTS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Set forth below are selected unaudited consolidated financial data of the Company
for the periods indicated:
QUARTER ENDED THREE QUARTERS ENDED
July 2, July 3, July 2, July 3,
1998 1997 1998 1997
----------- ----------- ------------ ------------
Revenues:
Merchandise sales 59.1% 54.7% 57.7% 53.1%
Gasoline sales 39.6 44.5 41.4 46.2
Other income 1.3 0.8 0.9 0.7
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of sales 73.7 76.6 73.3 75.4
----- ----- ----- -----
Gross profit:
Merchandise (as a percentage of
merchandise sales) 35.2 32.5 35.8 35.5
Gasoline (as a percentage of
gasoline sales) 10.7 11.0 12.3 10.9
Total gross profit 26.3 23.4 26.7 24.6
Costs and expenses:
Selling 19.0 18.3 20.6 19.6
General and administrative 2.4 1.9 2.4 2.1
Depreciation and amortization 2.5 2.0 2.4 2.1
Interest 1.4 1.2 1.5 1.2
----- ----- ----- -----
Total expenses 25.3 23.4 26.9 25.0
Earnings (loss) before income taxes,
extraordinary item and cumulative
effect of accounting change 1.0 0.0 ( 0.2) ( 0.4)
Income taxes 0.4 0.0 0.0 ( 0.1)
----- ----- ----- -----
Earnings (loss) before cumulative
effect of accounting change 0.6 0.0 ( 0.2) ( 0.3)
Extraordinary item-loss from debt
extinguishment, net of income tax
benefit ( 0.4) 0.0 ( 0.1) 0.0
Cumulative effect of accounting change,
net of income tax benefit 0.0 0.0 0.0 ( 0.6)
----- ----- ----- -----
Net earnings (loss) 0.2% 0.0% ( 0.3)% ( 0.9)%
===== ===== ===== =====
OPERATING DATA (CONVENIENCE STORES ("C-STORES") ONLY):
Average, per store, for stores open two
full comparable periods:
Merchandise sales $ 128,481 $ 130,938 $ 359,829 $ 356,996
Gasoline sales $ 122,127 $ 148,750 $ 360,200 $ 428,426
Gallons of gasoline sold 145,739 146,173 403,594 405,904
Total gallons of gasoline sold 29,591,815 39,519,636 90,973,473 112,685,858
Gross profit per gallon of
gasoline $ 0.088 $ 0.112 $ 0.109 $ 0.114
C-Stores at beginning of period 272 398 384 405
C-Stores added 0 0 0 2
C-Stores closed 9 4 119 10
C-Stores converted to Choice
locations 0 6 2 9
C-Stores at end of period 263 388 263 388
Company-operated stores 249 356 249 356
Franchisee-operated stores 14 32 14 32
Choice Cigarette Discount Outlets 20 13 20 13
Locations with self-service gasoline 207 301 207 301
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RESULTS OF OPERATIONS:
Matters discussed below should be read in conjunction with "Statements of
Operations Data" and "Operating Data (Convenience Stores Only)" on the
preceding pages. Certain statements contained in this report are forward
looking. Although Uni-Marts, Inc. believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not differ
materially from its expectations. Factors that could cause actual results to
differ from expectations include general economic, business and market
conditions, volatility of gasoline prices, merchandise margins, customer
traffic, weather conditions, labor costs and the level of capital expenditures.
For other important factors that may cause actual results to differ materially
from expectations and underlying assumptions, see the Company's periodic
filings with the Securities and Exchange Commission.
QUARTERS ENDED JULY 2, 1998 AND JULY 3, 1997
- --------------------------------------------
Total revenues in the quarter ended July 2, 1998 were $63.3 million, a decline
of $28.7 million, or 31.2%, from total revenues in the same quarter of fiscal
year 1997. This decline is largely the result of 125 fewer convenience stores
in operation at July 2, 1998, 105 of which were formerly leased from Getty
Petroleum Corp. ("Getty") and 14 of which were converted to Choice Cigarette
Discount Outlets ("Choice"). The Company operated 20 Choice stores at July 2,
1998, and merchandise sales discussed herein include sales of tobacco products
at these locations. Merchandise sales declined by $12.9 million, or 25.7%, to
$37.4 million in the third quarter of fiscal year 1998 compared to $50.3
million in the third quarter of fiscal year 1997, primarily as a result of
fewer stores in operation. Gasoline sales declined by $15.8 million due to
lower volumes from fewer stores in operation as well as a significant decrease
in the average retail price per gallon sold. Other income increased by
$91,000.
Gross profits on merchandise sales declined due to the lower level of
merchandise sales, but at a lesser rate due to a 2.7% increase in the gross
profit rate on those sales. In the third quarter of fiscal year 1998, gross
profits on merchandise sales were $13.2 million compared to $16.4 million in
the corresponding quarter of the prior fiscal year, a decrease of $3.2 million,
or 19.4%. Gross profits on gasoline sales declined $1.8 million, or 40.4%, due
primarily to the sale of 9.9 million fewer gallons of gasoline at 94 fewer
stores as well as lower gross profits per gallon sold.
Selling expenses decreased $4.8 million, or 28.4%, in the third quarter of
fiscal year 1998 compared to the third quarter of fiscal year 1997 due to
fewer stores in operation. General and administrative expense declined by
$232,000, or 13.4%, largely as a result of previous staffing reductions and
other cost-cutting measures. Depreciation and amortization expense declined by
$310,000, or 16.5%, reflecting fewer stores in operation. Interest expense
declined by $227,000, or 20.4%, due largely to lower borrowing levels in the
third quarter of fiscal year 1998 compared to the third quarter of fiscal
year 1997.
Earnings before income taxes, an extraordinary item and cumulative effect of
accounting change were $658,000 in the third quarter of fiscal year 1998
compared to earnings of $7,000 in the third quarter of fiscal year 1997.
Earnings before the extraordinary item and the cumulative effect of accounting
change were $376,000, or $0.06 per share, in the quarter ended July 2, 1998
compared to earnings of $4,000, or $0.00 per share, in the quarter ended
July 3, 1997. In the third quarter of fiscal year 1998, the Company incurred
an extraordinary loss from debt extinguishment of $244,000, net of income tax
benefit of $126,000. Net earnings were $132,000, or $0.02 per share, in the
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quarter ended July 2, 1998 compared to net earnings of $4,000, or $0.00 per
share in the quarter ended July 3, 1997.
THREE QUARTERS ENDED JULY 2, 1998 AND JULY 3, 1997
- --------------------------------------------------
Total revenues in the first three quarters of fiscal year 1998 declined $61.3
million, or 23.3%, from total revenues in the same period of fiscal year 1997.
This decrease resulted from the operation of 125 fewer convenience stores, 105
of which were leased from Getty and seven of which were converted to Choice.
The Company operated 20 Choice stores at July 2, 1998, and merchandise sales
discussed herein include sales at these locations. Merchandise sales declined
$23.2 million, or 16.6%, in the first three quarters of fiscal year 1998
compared to the first three quarters of fiscal year 1997 primarily due to fewer
stores in operation. Merchandise sales at comparable stores increased by 0.8%.
The sale of 21.7 million fewer gallons of gasoline at the Company's stores and
a decline of $0.16 in the average retail price per gallons sold caused a
decline of $38.0 million in gasoline sales in the first three quarters of
fiscal year 1998 compared to the corresponding period of fiscal year 1997.
Other income declined $62,000.
In the first three quarters of fiscal year 1998, gross profits on merchandise
sales were $41.6 million compared to $49.5 million in the same period of fiscal
year 1997, a decline of $7.9 million, or 15.9%. This decline is largely the
result of lower merchandise sales. Gross profits on gasoline sales declined by
$2.9 million, or 22.0%, primarily as the result of fewer gallons sold.
Selling expenses were $41.5 million in the first three quarters of fiscal year
1998 compared to $51.6 million in the first three quarters of fiscal year 1997.
This decline of $10.1 million, or 19.7%, is primarily due to fewer stores in
operation. General and administration expense declined by $590,000, or 10.8%,
largely as a result of staff reductions. Depreciation and amortization expense
declined by $714,000, or 13.0%, reflecting fewer stores in operation. Interest
expense declined by $91,000, or 2.9%, in the first three quarters of fiscal
year 1998 due to lower borrowing levels.
In the first three quarters of fiscal year 1998, the Company incurred a loss
before income taxes, an extraordinary item and cumulative effect of accounting
change of $406,000 compared to a loss of $1,121,000 in the same period of
fiscal year 1997. In the same periods, the Company recorded an income tax
benefit of $78,000 in fiscal year 1998 and $393,000 in fiscal year 1997. The
disproportionate provision in fiscal year 1998 reflects an adjustment to
deferred tax assets. In the three quarters ended July 2, 1998, the Company
recorded a loss of $328,000, or $0.05 per share, before the extraordinary item
and cumulative effect of an accounting change compared to a loss in the same
period of fiscal year 1997 of $728,000, or $0.11 per share. In fiscal year
1998, the Company incurred an extraordinary loss from debt extinguishment of
$244,000, net of income tax benefit of $126,000. As the result of an
accounting change, in fiscal year 1997 the Company recorded a charge to
earnings of $1,468,000, net of income tax benefit of $726,000. Operating
results for the first three quarters of fiscal 1997 have been restated to
reflect the retroactive application of this change. The Company recorded a net
loss of $572,000, or $0.09 per share, in the first three quarters of fiscal
year 1998 compared to a loss of $2,196,000, or $0.33 per share, for the same
period of fiscal year 1997.
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LIQUIDITY AND CAPITAL RESOURCES:
Most of the Company's sales are for cash and its inventory turns over rapidly.
As a result, the Company's daily operations do not generally require large
amounts of working capital. From time to time, the Company utilizes
substantial portions of its cash to acquire and construct new stores and
renovate existing locations.
The Company recently completed a debt refinancing with Franchise Finance
Corporation of America ("FFCA"). This refinancing includes $36.0 million of
long-term mortgages, a $3.0 million revolving line of credit, $2.5 million in
short-term property loans and a $2.7 million letter-of-credit facility. The
$36.0 million mortgage facility will be amortized over 20 years and the
short-term facilities and letter-of-credit facility are available until
June 30, 1999. The property loans were used to provide funds on an interim
basis until two parcels of real estate are sold. The sale of one parcel was
completed in July 1998 and $2.0 million of the property loan was repaid.
Capital requirements for debt service and capital leases in the next twelve
months are approximately $6.5 million, of which $2.0 million was paid in July
1998. Another $500,000 will be repaid upon the closing of a second real estate
sale which is under a written agreement.
Through the long-term mortgage financing discussed above, the Company has
completed a matching of appropriate term financing with its long-term operating
assets. The Company is currently negotiating with various lenders to secure
equipment financing and to establish more appropriate short-term credit and
letter-of-credit facilities. Capital expenditure plans for fiscal year 1999
will be finalized upon completion of operational budgets and financing
commitments for new stores. Funds for renovations of stores and equipment
replacement will be supplied from available cash from operations. Management
believes that cash presently available, cash generated from operations and new
short-term financing will be sufficient to fulfill its cash requirements for
the foreseeable future.
YEAR 2000 COMPLIANCE:
An internal review has been conducted by the Company of all software used in
its data processing equipment to determine its exposure, if any, to the "year
2000 problem." Any problems detected have been corrected or will be corrected
within the next fiscal year. This problem may cause significant difficulties
with the electronic processing of information in the year 2000 and subsequent
years due to the inability of many computer programs to differentiate between
the years 1900 and 2000. Based on its review, the Company believes the
incremental costs to make the necessary corrections to prevent such
difficulties will not have a material effect on the Company's consolidated
financial statements.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Uni-Marts, Inc. was held on June 18, 1998
at which the following matters were voted upon:
(1) Election of two directors to serve until the Annual Meeting of
Stockholders in 2001.
(2) Ratification of the appointment of independent auditors.
The results of the votes on the matters considered at the Annual Meeting of
Stockholders are set forth below:
Election of Directors:
Votes Votes Broker
"For" "Withheld" Non-Votes
--------- ---------- ---------
J. Kirk Gallaher 4,849,033 868,359 0
Stephen B. Krumholz 4,847,333 870,059 0
Ratification of appointment of independent auditors:
Votes Votes Votes Broker
"For" "Withheld" "Abstain" Non-Votes
--------- ---------- --------- ---------
4,855,470 860,279 1,644 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation of the Company
(Filed as Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the period ended March 30, 1995 and incorporated herein
by reference thereto).
3.2 By-Laws of the Company (Filed as Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the period ended March 30,
1995 and incorporated herein by reference thereto).
4.1 Form of the Company's Common Stock Certificate (Filed as Exhibit
4.3 to the Company's Quarterly Report on Form 10-Q for the
period ended April 1, 1993 and incorporated herein by reference
thereto).
10.1 Uni-Marts, Inc. Amended and Restated Equity Compensation Plan
(Filed as Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the period ended March 30, 1995 and incorporated herein
by reference hereto).
10.2 Uni-Marts, Inc. Retirement Savings & Incentive Plan (Filed as
Exhibit 4.2 to the Company's Registration Statement on Form S-8,
File No. 33-9807, and incorporated herein by reference thereto).
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10.3 Form of Indemnification Agreement between Uni-Marts, Inc. and
each of its Directors (Filed as Exhibit A to the Company's
Definitive Proxy Statement for the February 25, 1988 Annual
Meeting of Stockholders and incorporated herein by reference
thereto).
10.4 Uni-Marts, Inc. Deferred Compensation Plan (Filed as Exhibit
10.8 to the Annual Report of Uni-Marts, Inc. on Form 10-K for
the year ended September 30, 1990 and incorporated herein by
reference thereto).
10.5 Uni-Marts, Inc. Annual Bonus Plan (Filed as Exhibit 10.8 to the
Annual Report of Uni-Marts, Inc. on Form 10-K for the year ended
September 30, 1994 and incorporated herein by reference
thereto).
10.6 Uni-Marts, Inc. Performance Unit Plan (Filed as Exhibit 10.9 to
the Annual Report of Uni-Marts, Inc. on Form 10-K for the year
ended September 30, 1994 and incorporated herein by reference
thereto).
10.7 Composite copy of Change in Control Agreements between
Uni-Marts, Inc. and its executive officers (Filed as Exhibit
10.10 to the Annual Report of Uni-Marts, Inc. on Form 10-K for
the year ended September 30, 1994 and incorporated herein by
reference thereto).
10.8 Uni-Marts, Inc. 1996 Equity Compensation Plan (Filed as
Exhibit A to the Company's Definitive Proxy Statement for the
February 22, 1996 Annual Meeting of Stockholders and
incorporated herein by reference thereto).
10.9 Amended and Restated Note between Henry D. Sahakian and
Uni-Marts, Inc. dated January 7, 1998 (Filed as Exhibit 10.16 to
the Company's Annual Report on Form 10-K for the period ended
September 30, 1997 and incorporated herein by reference
thereto).
10.10 Loan Agreement between FFCA Acquisition Corporation and
Uni-Marts, Inc. dated June 30, 1998.
10.11 Revolving Loan Agreement between FFCA Acquisition Corporation
and Uni-Marts, Inc. dated June 30, 1998.
10.12 Property Loan Agreement between FFCA Acquisition Corporation
and Uni-Marts, Inc. dated June 30, 1998.
11 Statement regarding computation of per share earnings (loss).
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended July 2, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Uni-Marts, Inc.
-------------------------------------
(Registrant)
/S/ HENRY D. SAHAKIAN
Date August 14, 1998 -------------------------------------
----------------- Henry D. Sahakian
Chairman of the Board
(Principal Executive Officer)
/S/ J. KIRK GALLAHER
Date August 14, 1998 -------------------------------------
----------------- J. Kirk Gallaher
Executive Vice President, Director
and Chief Financial Officer
(Principal Accounting Officer)
(Principal Financial Officer)
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UNI-MARTS, INC. AND SUBSIDIARY
EXHIBIT INDEX
Number Description Page(s)
10.10 Loan Agreement between FFCA Acquisition
Corporation and Uni-Marts, Inc. 19-47
10.11 Revolving Loan Agreement between FFCA
Acquisition Corporation and Uni-Marts, Inc. 48-75
10.12 Property Loan Agreement between FFCA
Acquisition Corporation and Uni-Marts, Inc. 76-96
11 Statement regarding computation of per
share earnings (loss). 97-98
27 Financial Data Schedule. 99
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