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 1, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11556
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UNI-MARTS, INC.
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(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
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(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
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6,910,222 Common Shares were outstanding at August 6, 1999.
This Document Contains 19 Pages.
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UNI-MARTS, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
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PAGE(S)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
July 1, 1999 and September 30, 1998 3-4
Condensed Consolidated Statements of Operations -
Quarter Ended and Three Quarters Ended
July 1, 1999 and July 2, 1998 5
Condensed Consolidated Statements of Cash Flows -
Three Quarters Ended July 1, 1999 and July 2, 1998 6-7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 16-17
Exhibit Index 19
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, September 30,
1999 1998
------------ -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 1,530,600 $ 5,838,318
Accounts receivable - less allowances of
$425,700 and $384,900 2,634,138 2,296,187
Tax refunds receivable 1,416,363 1,416,363
Inventories 10,795,467 10,628,307
Prepaid and current deferred taxes 2,267,434 1,975,802
Property held for sale 1,630,009 1,729,598
Prepaid expenses and other 798,632 929,304
Loan due from officer - current portion 60,000 200,000
----------- -----------
TOTAL CURRENT ASSETS 21,132,643 25,013,879
PROPERTY, EQUIPMENT AND IMPROVEMENTS -
at cost, less accumulated depreciation and
amortization of $49,890,600 and
$47,978,600 61,077,038 63,960,971
LOAN DUE FROM OFFICER 550,679 450,800
NET INTANGIBLE AND OTHER ASSETS 5,455,939 5,582,989
----------- -----------
TOTAL ASSETS $88,216,299 $95,008,639
=========== ===========
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UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
July 1, September 30,
1999 1998
------------ -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,629,696 $11,120,972
Gas taxes payable 2,161,036 2,324,299
Accrued expenses 5,265,826 5,304,579
Credit line payable 2,500,000 3,500,000
Current maturities of long-term debt 946,367 1,107,818
Current obligations under capital leases 70,810 70,810
----------- -----------
TOTAL CURRENT LIABILITIES 20,573,735 23,428,478
LONG-TERM DEBT, less current maturities 33,416,311 33,846,812
OBLIGATIONS UNDER CAPITAL LEASES,
less current maturities 422,901 474,826
DEFERRED TAXES 3,401,200 4,131,400
DEFERRED INCOME AND OTHER LIABILITIES 2,514,418 3,086,948
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, par value $.10 per share:
Authorized 15,000,000 shares
Issued 7,325,492 and 7,316,797
shares, respectively 732,549 731,680
Additional paid-in capital 24,131,619 24,189,258
Retained earnings 5,631,585 7,882,583
----------- -----------
30,495,753 32,803,521
Less treasury stock, at cost - 427,090
and 455,545 shares of Common Stock,
respectively ( 2,608,019) ( 2,763,346)
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27,887,734 30,040,175
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $88,216,299 $95,008,639
=========== ===========
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 1, July 2, July 1, July 2,
1999 1998 1999 1998
----------- ----------- ------------ ------------
REVENUES:
Merchandise sales $37,735,120 $37,410,269 $107,821,078 $116,223,019
Gasoline sales 26,594,447 25,046,889 73,668,757 83,386,599
Other income 271,062 822,265 1,487,195 1,873,718
----------- ----------- ------------ ------------
64,600,629 63,279,423 182,977,030 201,483,336
----------- ----------- ------------ ------------
COSTS AND EXPENSES:
Cost of sales 47,946,108 46,624,112 133,445,197 147,711,411
Selling 13,014,567 12,051,996 39,569,045 41,479,736
General and administrative 1,840,045 1,496,423 5,522,451 4,873,237
Depreciation and amortization 1,452,492 1,565,323 4,537,187 4,791,897
Interest 960,797 883,850 2,943,348 3,032,673
Provision for asset impairment 100,000 0 200,000 0
----------- ----------- ------------ ------------
65,314,009 62,621,704 186,217,228 201,888,954
----------- ----------- ------------ ------------
EARNINGS (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM ( 713,380) 657,719 ( 3,240,198)( 405,618)
INCOME TAX PROVISION (BENEFIT) ( 180,200) 281,500 ( 989,200)( 77,900)
----------- ----------- ------------ ------------
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM ( 533,180) 376,219 ( 2,250,998)( 327,718)
EXTRAORDINARY ITEM-LOSS FROM DEBT
EXTINGUISHMENT, NET OF INCOME
TAX BENEFIT OF $125,800 0 244,315 0 244,315
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) ($ 533,180) $ 131,904 ($ 2,250,998)($ 572,033)
=========== =========== ============ ============
BASIC EARNINGS (LOSS) PER SHARE:
EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM ($ 0.08) $ 0.06 ($ 0.33)($ 0.05)
LOSS PER SHARE FROM EXTAORDINARY
ITEM 0.00 ( 0.04) 0.00 ( 0.04)
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) PER SHARE ($ 0.08) $ 0.02 ($ 0.33)($ 0.09)
=========== =========== ============ ============
DILUTED EARNINGS (LOSS) PER SHARE:
EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM ($ 0.08) $ 0.06 ($ 0.33)($ 0.05)
LOSS PER SHARE FROM EXTAORDINARY
ITEM 0.00 ( 0.04) 0.00 ( 0.04)
----------- ----------- ------------ ------------
NET EARNINGS (LOSS) PER SHARE ($ 0.08) $ 0.02 ($ 0.33)($ 0.09)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,893,660 6,820,870 6,878,710 6,736,062
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ASSUMING
DILUTION 6,893,660 6,827,468 6,878,710 6,736,062
=========== =========== =========== ===========
See notes to consolidated financial statements
-5-
UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE QUARTERS ENDED
July 1, July 2,
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and others $180,983,962 $201,654,328
Cash paid to suppliers and employees ( 179,368,165) ( 194,344,142)
Net receipts for sales and purchases
of trading equity securities 0 831,886
Dividends and interest received 91,904 62,168
Interest paid ( 3,001,273) ( 3,737,095)
Income taxes (paid) received ( 32,632) 2,244,393
------------ ------------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES ( 1,326,204) 6,711,538
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sale of capital assets 1,727,882 5,483,802
Purchase of property, equipment and
improvements ( 2,744,848) ( 2,192,161)
Note receivable from officer 40,121 59,924
Cash advanced for intangible and other
assets ( 458,481) ( 258,000)
Cash received for intangible and other
assets 238,678 375,184
------------ ------------
NET CASH (USED) PROVIDED IN INVESTING
ACTIVITIES ( 1,196,648) 3,468,749
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under revolving credit agreement ( 1,000,000) ( 4,500,000)
Additional long-term borrowings 0 34,266,686
Principal payments on debt ( 778,337) ( 42,461,983)
Purchases of treasury stock ( 6,529) ( 49,285)
Proceeds from issuance of common stock 0 738,500
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES ( 1,784,866) ( 12,006,082)
------------ ------------
NET DECREASE IN CASH ( 4,307,718) ( 1,825,795)
CASH:
Beginning of period 5,838,318 5,993,388
------------ ------------
End of period $ 1,530,600 $ 4,167,593
============ ============
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UNI-MARTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
THREE QUARTERS ENDED
July 1, July 2,
1999 1998
------------ ------------
RECONCILIATION OF NET LOSS TO NET CASH (USED)
PROVIDED BY OPERATING ACTIVITIES:
NET LOSS ($2,250,998) ($ 572,033)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
(USED) PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 4,537,187 4,791,897
Net unrealized holding loss on trading
securities 50 129,673
Gain on sale of trading equity securities 0 ( 110,744)
Gain on sale of capital assets and other ( 148,740) ( 6,350)
Provision for asset impairment 200,000 0
Changes in assets and liabilities:
(Increase) decrease in:
Trading equity securities 0 383,580
Accounts receivable ( 337,951) 874,926
Tax refunds receivable 0 1,772,937
Inventories ( 167,160) 4,864,242
Prepaid expenses 129,062 ( 131,017)
Increase (decrease) in:
Accounts payable and accrued expenses ( 1,654,539) ( 5,331,784)
Deferred income taxes and other
liabilities ( 1,633,115) 46,211
---------- ----------
TOTAL ADJUSTMENTS TO NET LOSS 924,794 7,283,571
---------- ----------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES ($1,326,204) $6,711,538
========== ==========
See notes to consolidated financial statements
-7-
UNI-MARTS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. FINANCIAL STATEMENTS:
The consolidated balance sheet as of July 1, 1999, the consolidated
statements of operations and the consolidated statements of cash flows for
the three quarters ended July 1, 1999 and July 2, 1998 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 1, 1999 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, 1998. Certain
reclassifications have been made to the September 30, 1998 financial
statements to conform to classifications used in fiscal year 1999. The
results of operations for the interim periods are not necessarily indicative
of the results to be obtained for the full year.
B. INTANGIBLE AND OTHER ASSETS:
Intangible and other assets consist of the following:
July 1, September 30,
1999 1998
---------- -------------
Goodwill $5,803,443 $5,803,443
Lease acquisition costs 712,276 827,465
Other intangible assets 123,834 91,879
Other assets 1,446,204 1,428,071
---------- ----------
8,085,757 8,150,858
Less accumulated amortization 2,629,818 2,567,869
---------- ----------
$5,455,939 $5,582,989
========== ==========
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
-8-
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.
C. SHORT-TERM CREDIT FACILITIES:
The Company has a short-term credit facility which is a secured $10.0
million revolving loan agreement with $3.0 million reserved for letters of
credit. The revolving credit facility is subject to renewal at December 31,
1999. Borrowings of $2.5 million and letters of credit of $2.7 million were
outstanding at July 1, 1999. This facility is renewable annually and bears
interest at a floating rate of LIBOR plus 2.75%. The interest rate at
July 1, 1999 was 7.74%. On July 1, 1999, the revolving loan agreement was
modified to state that the lender would not consider noncompliance with the
tangible net worth covenant to be an event of default for the quarter then
ended. In return, the Company agreed to an increase of 5 basis points
(0.05%) in the loan's interest rate. Effective July 2, 1999, the facility
bears interest at a floating rate of LIBOR plus 2.80%. The interest rate at
July 2, 1999 was 7.79%.
D. LONG-TERM DEBT:
July 1, September 30,
1999 1998
------------ -------------
Mortgage Loan. Principal and interest will
be paid in 228 monthly installments. The
loan bears interest at a rate of 9.08%. $33,713,976 $34,140,001
Equipment Loan. Principal and interest are
paid in monthly installments. The loan
expires in 2001 and bears interest at
a rate of 9.5%. 436,992 594,309
Mortgage Loan. Principal and interest are
paid in monthly installments. The loan
expires in 2010 and bears interest at the
prime rate, adjustable annually. The
interest rate at July 1, 1999 was 7.75%. 211,710 220,320
----------- -----------
34,362,678 34,954,630
Less current maturities 946,367 1,107,818
----------- -----------
$33,416,311 $33,846,812
=========== ===========
The mortgage loans are collateralized by $47,580,600 of property, at cost.
-9-
E. NEW ACCOUNTING PRONOUNCEMENTS:
Effective October 1, 1998, the Company adopted Statement Nos. 130 and 132 of
the Financial Accounting Standards Board ("FASB"). FASB Statement
No. 130, "Reporting Comprehensive Income," was adopted although the Company
had no transactions involving other comprehensive income in any of the
periods presented. FASB Statement No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," was adopted by the Company
although its prior disclosures were in compliance with this statement. The
Financial Accounting Standards Board 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 stockholders. 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 the end of 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 June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The Statement establishes accounting and reporting standards for derivative
instruments. The Company is not required to adopt this standard until
fiscal year 2001 but expects that the adoption will have a minimal effect on
the Company's financial statements.
F. CONTINGENCIES:
Litigation The Company is involved in litigation and other legal matters
which have arisen in the normal course of business. Although the ultimate
results of these matters are not currently determinable, management does not
expect that they will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
-10-
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 1, July 2, July 1, July 2,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Revenues:
Merchandise sales 58.4% 59.1% 58.9% 57.7%
Gasoline sales 41.2 39.6 40.3 41.4
Other income 0.4 1.3 0.8 0.9
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of sales 74.2 73.7 72.9 73.3
----- ----- ----- -----
Gross profit:
Merchandise (as a percentage of
merchandise sales) 35.2 35.2 35.4 35.8
Gasoline (as a percentage of
gasoline sales) 11.7 10.7 13.5 12.3
Total gross profit 25.8 26.3 27.1 26.7
Costs and expenses:
Selling 20.1 19.0 21.6 20.6
General and administrative 2.9 2.4 3.0 2.4
Depreciation and amortization 2.2 2.5 2.5 2.4
Interest 1.5 1.4 1.6 1.5
Provision for asset impairment 0.2 0.0 0.1 0.0
----- ----- ----- -----
Total expenses 26.9 25.3 28.8 26.9
Loss before income taxes and
extraordinary item ( 1.1) 1.0 ( 1.7) ( 0.2)
Income tax provision (benefit) ( 0.3) 0.4 ( 0.5) 0.0
----- ----- ----- -----
Earnings (loss) before
extraordinary item ( 0.8) 0.6 ( 1.2) ( 0.2)
Extraordinary item-loss from debt
extinguishment, net of income
tax benefit 0.0 0.4 0.0 0.1
----- ----- ----- -----
Net earnings (loss) ( 0.8)% 0.2% ( 1.2)% ( 0.3)%
===== ===== ===== =====
OPERATING DATA (CONVENIENCE STORES ("C-STORES") ONLY):
Average, per store, for stores open two
full comparable periods:
Merchandise sales $ 143,155 $ 135,071 $ 397,287 $ 377,574
Gasoline sales $ 134,839 $ 123,310 $ 365,524 $ 366,542
Gallons of gasoline sold 155,163 147,272 464,790 412,708
Total gallons of gasoline sold 30,295,783 29,591,815 92,205,944 90,973,473
Gross profit per gallon of
gasoline $ 0.101 $ 0.088 $ 0.104 $ 0.109
C-Stores at beginning of period 243 272 256 384
C-Stores added 0 0 0 0
C-Stores closed 4 9 16 119
C-Stores converted to Choice
locations 0 0 1 2
C-Stores at end of period 239 263 239 263
Company-operated stores 229 249 229 249
Franchisee-operated stores 10 14 10 14
Choice Cigarette Discount Outlets 21 20 21 20
Locations with self-service gasoline 196 207 196 207
-11-
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 page. Certain statements contained in this report are forward
looking, such as statements regarding the Company's plans and strategies or
future financial performance. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge, investors and prospective investors are cautioned that such
statements are only projections and that actual events or results may differ
materially from those expressed in any such forward-looking statements. In
addition to the factors discussed elsewhere in this report, the Company's
actual consolidated quarterly or annual operating results have been affected in
the past, or could be affected in the future, by additional factors, including,
without limitation, general economic, business and market conditions;
environmental, tax and tobacco legislation or regulation; volatility of
gasoline prices, margins and supplies; merchandising margins; customer,
traffic; weather conditions; labor costs and the level of capital expenditures.
QUARTERS ENDED JULY 1, 1999 AND JULY 2, 1998
- --------------------------------------------
Total revenues in the quarter ended July 1, 1999 were $64.6 million, an
increase of $1.3 million, or 2.1%, over revenues of $63.3 million in the same
quarter of fiscal year 1998. During the quarter, the Company closed four
underperforming store locations. Merchandise sales in the third quarter of
fiscal year 1999 increased $325,000 to $37.7 million compared to $37.4 million
in the same quarter of fiscal year 1998. Increases in merchandise sales per
store offset the sales loss resulting from fewer stores in operation.
Merchandise sales at stores open during both periods increased 6.0%. Gasoline
sales in the quarter ended July 1, 1999 increased $1.5 million, or 6.2%,
compared to the quarter ended July 2, 1998. This increase is due primarily to
the sale of an additional 704,000 gallons at the Company's gasoline locations
and an increase of 3.2 cents in the average retail price per gallon. Gasoline
gallons sold at locations open during both periods increased 5.4%. Other
income declined by $551,000, due to higher rents and gains on asset sales in
the third fiscal quarter of 1998.
Gross profits on merchandise sales increased slightly in the quarter ended
July 1, 1999 to $13.3 million from $13.2 million in the quarter ended July 2,
1998. This increase is due entirely to higher levels of merchandise sales.
Gross profits on gasoline sales increased $440,000, or 16.5%, in the same
period. This increase is primarily the result of an increase in the gross
profit rate per gallon sold of 1.3 cents.
Selling expenses increased $963,000, or 8.0%, due primarily to higher labor
costs resulting from increased staffing at stores and higher store equipment
maintenance costs. Selling expenses were $13.0 million in the quarter ended
July 1, 1999 compared to $12.1 million in the third quarter of fiscal year
1998. General and administrative expense in the third quarter of fiscal year
1999 compared to the same quarter of fiscal year 1998 increased by $344,000, or
23.0%, due to increased staffing and higher salary levels. Certain executive
officers where hired in 1998 to fill vacant positions and the merchandising
department has been expanded. Depreciation and amortization expense was
-12-
$113,000, or 7.2%, lower in the quarter ended July 1, 1999 compared to the
quarter ended July 2, 1998. Interest expense increased by $77,000, or 8.7%,
due to higher interest rates in the third quarter of fiscal year 1999. In the
third quarter of fiscal year 1999, the Company recorded a $100,000 provision
for impairment of long-lived assets to comply with provisions of FASB Statement
No. 121.
The Company incurred a pre-tax loss of $713,000 in the third quarter of fiscal
year 1999 compared to pre-tax profit of $658,000 in the third quarter of fiscal
year 1998. An income tax benefit of $180,000 was recorded in the current
year's third fiscal quarter compared to a provision of $282,000 in the same
quarter of fiscal year 1998. The effective tax rate in the current year is
lower because the Company cannot utilize current losses for state tax purposes.
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 in connection with refinancing most of it's long-term debt. The net
loss for the third quarter of fiscal year 1999 was $533,000, or $0.08 per
share, compared to a profit of $132,000, or $0.02 per share, in the third
quarter of fiscal year 1998.
THREE QUARTERS ENDED JULY 1, 1999 AND JULY 2, 1998
- --------------------------------------------------
Total revenues for the first three quarters of fiscal year 1999 were $183.0
million compared to $201.5 million in the first three quarters of fiscal year
1998, a decline of $18.5 million, or 9.2%. The Company terminated a lease
agreement for 105 stores with Getty Petroleum Corp. during the first half of
fiscal year 1998. In addition, the Company has closed 23 underperforming
convenience stores and converted one convenience store to a Choice location
since July 2, 1998. Merchandise sales in the first three quarters of fiscal
year 1999 were $107.8 million compared to $116.2 million in the same period of
fiscal year 1998, a decrease of $8.4 million, or 7.2%. This decline is due to
fewer stores in operation. Merchandise sales at stores open during both
periods increased 5.2%. Gasoline sales declined $9.7 million, or 11.7%, from
$83.4 million in the first three quarters of fiscal year 1998 to $73.7 million
in the comparable period of fiscal year 1999. This decline in gasoline dollar
sales is due to lower retail prices per gallon sold. Although gasoline was
sold at fewer locations, the Company sold 1.2 million additional gallons at its
stores in the first three quarters of fiscal year 1999 in comparison to the
same period of fiscal year 1998. Gasoline gallons sold at locations that were
open during both periods increased 12.6% in fiscal year 1999. Other income
declined by $387,000 due primarily to lower rental income.
Gross profits on merchandise sales declined $3.5 million, or 8.4%, due both to
lower aggregate sales volumes and lower gross profit rates. Gross profits on
gasoline sales declined by $342,000, or 3.3%, in the first three quarters of
fiscal year 1999 in comparison to the same period of fiscal year 1998 due to
lower gross profits per gallon sold.
Selling expenses in the first three quarters of fiscal year 1999 were $1.9
million, or 4.6%, lower than in the first three quarters of fiscal year 1998.
This decline was primarily the result of the December 31, 1997 termination
agreement with Getty Petroleum Corp. for 105 stores and the sale or closure of
other underperforming stores. General and administrative expense increased by
-13-
$649,000, or 13.3%, in the three quarters ended July 1, 1999 compared to the
same period of fiscal year 1998. This increase is due primarily to staffing
increases and higher salary levels. Certain executive officers were hired in
1998 to fill vacant positions and the merchandising department has been
expanded. Depreciation and amortization declined $255,000, or 5.3%. Interest
expense also declined $89,000, or 2.9%, due to lower borrowing levels offset by
higher interest rates. The Company recorded a $200,000 provision for
impairment of long-lived assets to comply with provisions of FASB Statement
No. 121.
The Company recorded a pre-tax loss of $3.2 million in the first three quarters
of fiscal year 1999 compared to a $400,000 pre-tax loss in the same period of
fiscal year 1998. The income tax benefit of these losses was $989,000 in
fiscal year 1999 and $78,000 in fiscal year 1998. In the three quarters ended
July 2, 1998, the Company incurred an extraordinary loss from debt
extinguishment of $244,000, net of income tax benefit of $126,000 in connection
with refinancing most of it's long-term debt. The net loss for the first three
quarters of fiscal year 1999 was $2.3 million, or $0.33 per share, compared to
a net loss of $572,000, or $0.09 per share, in the first three quarters of
fiscal year 1998.
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.
On December 30, 1998, the Company entered into a $10.0 million revolving loan
agreement with a bank, with $3.0 million reserved for letters of credit. The
Company utilized $3.5 million of this facility to repay its existing revolving
credit facility and property loan. The Company also used this facility to
replace its outstanding $2.7 million letter of credit which expired June 30,
1999. The revolving credit facility is subject to renewal at December 31,
1999.
On July 1, 1999, the revolving loan agreement was modified to state that the
lender would not consider noncompliance with the tangible net worth covenant to
be an event of default for the quarter then ended. In return, the Company
agreed to an increase of 5 basis points (0.05%) in the loan's interest rate.
The noncompliance resulted from lower than anticipated operating results at the
Company's convenience and discount tobacco stores. The Company has begun a
cost-cutting review of certain expense categories and has reduced capital
expenditures by utilizing operating leases to obtain store equipment. The
Company's tangible net worth was approximately $23.9 million at July 1, 1999
and the covenant contained in the revolving loan agreement required a minimum
tangible net worth of $24 million. There can be no assurance that the Company
will be in compliance with this covenant at September 30, 1999. The Company
intends to meet with the bank in October 1999 to discuss covenant requirements
and renewal of the loan agreement. While the Company believes that the loan
will be renewed, there can be no assurance to such effect.
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Capital requirements for debt service and capital leases for the remainder of
fiscal year 1999 are approximately $168,000, and capital expenditures of
approximately $1.1 million for acquisition and development, remodeling costs
and upgrades of gasoline-dispensing equipment are anticipated. Funds for these
items will be supplied from internal cash from operations or financing.
Certain equipment replacement will be funded by operating leases. Management
believes that cash presently available, cash generated from operations, cash
from the Company's revolving line of credit (subject to its renewal) and new
financing or operating leases will be sufficient to fulfill its cash
requirements for the foreseeable future.
THE YEAR 2000 ("Y2K") PROBLEM:
Update on the Company's Y2K Program:
- -----------------------------------
The Company has completed identification of Y2K problems and modifications to
correct those problems in its mainframe computer hardware and related systems
software and applications software. Testing of these modifications is nearly
done with completion expected in September 1999. Personal computer hardware
and software located in the corporate offices has been tested and any needed
modifications or replacement is underway. Testing of personal computer
hardware and software located in stores and regional offices is underway.
Other date-sensitive hardware utilized by the Company will be tested and
replaced or modified as necessary. The Company identified suppliers of goods
and services whose Y2K failure could be disruptive to the Company's business
and solicited written statements from them regarding the status of their Y2K
compliance. The Company has received positive responses from 70% of its
suppliers of goods and 50% of its service providers. The balance of the
responses have not been received to date. The Company anticipates
the completion of testing, modifications and contingency planning in
September 1999. Total costs are expected to be approximately $400,000.
Risks/Contingency Plans:
- -----------------------
Based on its assessment and corrective efforts to date, the Company does not
expect material difficulties with the Y2K problem in its internal computer
systems. In addition, the Company does not expect material Y2K problems with
other date-sensitive hardware or materially disruptive Y2K failures of its
suppliers of merchandise and services. The Company's stores are geographically
dispersed, and it has a diverse supplier base. Although the Company has a
diverse supplier base, it does deal with a limited number of large suppliers
whose Y2K failure could have a material effect on the Company's business. The
Company believes that it could easily find alternative suppliers and that these
factors will moderate any material adverse effects of the Y2K problem. In
management's opinion, the largest risks facing the Company are the inability of
the Company's stores to process retail sales transactions or obtain merchandise
to sell, as well as the potential failure of public utility systems. The
Company has begun and expects to continue to develop appropriate contingency
plans pending the outcome of future events. The Company expects there to be
sufficient time to test any contingency plans so developed.
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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, File No. 1-11556, 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 thereto).
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, filed on July 10, 1991, and incorporated
herein by reference thereto).
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, File No. 0-15164, 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, File No. 0-15164, and
incorporated herein by reference thereto).
10.5 Uni-Marts, Inc. Executive Annual Bonus Plan (Filed as Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the
period ended December 31, 1998 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).
-16-
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 Amendment 1998-1 to the Uni-Marts, Inc. Equity Compensation Plan
(Filed as Exhibit 10.10 to the Annual Report of Uni-Marts, Inc.
on Form 10-K for the year ended September 30, 1998 and
incorporated herein by reference thereto).
10.10 Amended and Restated Note between Henry D. Sahakian and
Uni-Marts, Inc. dated January 25, 1999. (Filed as Exhibit 10.10
to the Company's Quarterly Report on Form 10-Q for the period
ended on April 1, 1999 and incorporated herein by reference
thereto).
10.11 Loan Agreement between FFCA Acquisition Corporation and
Uni-Marts, Inc. dated June 30, 1998 (Filed as Exhibit 10.10 to
the Company's Quarterly Report on Form 10-Q for the period ended
on July 2, 1998 and incorporated herein by reference thereto).
10.12 Revolving Credit Loan Agreement between U.S. Bank and Uni-Marts,
Inc. dated December 30, 1998 (Filed as Exhibit 10.13 to the
Company's Quarterly Report on Form 10-Q for the period ended on
December 31, 1998 and incorporated herein by reference thereto).
10.12(a) Revolving Credit Loan Agreement Modification Agreement between
U.S. Bank and Uni-Marts, Inc. dated July 1, 1999.
10.13 Uni-Marts, Inc. Employee Stock Purchase Plan (Filed as Exhibit A
to the Company's Definitive Proxy Statement for the February 25,
1999 Annual Meeting of Stockholders and incorporated herein by
reference thereto).
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 1, 1999.
-17-
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)
Date August 12, 1999 /S/ HENRY D. SAHAKIAN
--------------- ------------------------------------
Henry D. Sahakian
Chairman of the Board
(Principal Executive Officer)
Date August 12, 1999 /S/ N. GREGORY PETRICK
--------------- ------------------------------------
N. Gregory Petrick
Vice President, Finance
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)
- ------ ----------- -------
10.12(a) Revolving Credit Loan Agreement Modification
Agreement between U.S. Bank and Uni-Marts,
Inc. dated July 1, 1999. 20-21
11 Statement regarding computation of per
share earnings (loss). 22-23
27 Financial Data Schedule. 24
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