SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
OR
__ 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 0-549
SCHULTZ SAV-O STORES, INC.
(Exact name of registrant
as specified in its charter)
Wisconsin 39-0600405
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
2215 Union Avenue
Sheboygan, Wisconsin 53081
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number,
including area code: (414) 457-4433
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act:
Title of Class
Common Stock, $0.05 par value
Common Stock Purchase Rights
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of the
registrant as of March 18, 1997: $66,960,590*
Number of shares outstanding of the registrant's Common Stock as of March
18, 1997: 4,623,098
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
1996 Annual Report to Shareholders (incorporated by reference into
Parts II and IV to the extent indicated therein).
Definitive Proxy Statement for 1997 annual meeting of shareholders
(to be filed with the Commission under Regulation 14A within 120 days
after the end of the registrant's fiscal year and, upon such filing,
to be incorporated by reference into Part III to the extent indicated
therein).
_______________
* Only excludes shares beneficially owned by directors and officers of
the registrant.
PART I
Item 1. Business.
General
Schultz Sav-O Stores, Inc. ("Company") is engaged in distributing
food and related products at wholesale and retail. As of December 28,
1996, the Company franchised 68 and owned 16 retail supermarkets under the
Piggly Wiggly/R/ name in its Eastern Wisconsin and Northeastern Illinois
market area. While the Company has a presence in some larger metropolitan
areas, it has attempted to develop a niche for serving the food shopping
needs of customers in smaller and suburban communities within its market
areas.
The Company is the primary supplier to its 84 franchised and
corporate owned Piggly Wiggly supermarkets. The Company also serves as a
wholesaler to a number of small, independently operated retail
supermarkets and convenience stores in its market area.
The Company believes it has established itself as a niche food
marketer in small to mid-size markets by delivering the product variety,
quality of perishable products, pricing and promotional programs
traditionally found only in large metropolitan markets, evolving into a
unique hybrid of retailer and wholesaler which it believes has become a
"virtual chain" of retail stores served by a vertically integrated
wholesaler. All Piggly Wiggly supermarkets, both franchised and owned,
participate in a single, coordinated advertising and merchandising program
which typically includes a weekly newspaper ad insert, outdoor boards,
television and radio spots, sponsorship of entertainment and charitable
events, and the Company's Piggly Wiggly Preferred Club Card/R/. The
Company believes that this coordinated program allows it to leverage the
combined buying power of all its franchised and owned stores and deliver a
powerful and effective promotional vehicle for its participating vendor
partners. Additionally, the Company believes it provides its franchised
stores with cost effective administrative support services and financial
resources that enable the operation of efficient, contemporary
supermarkets, while the independent retail ownership of the franchisee
provides the entrepreneurial spirit and community involvement that is an
integral part of marketing in smaller markets. The successful combination
of these elements creates the partnership between the Company and its
franchisee retailers that results in a virtual chain with its franchisees,
of coordinated and integrated retail food distribution. The Company,
operating as a virtual chain, is able to achieve superior performance
compared to traditional wholesalers, yet avoids having to make large
direct capital investments at the retail level to grow its business. The
franchisee retailer, as part of the virtual chain, benefits from lower
costs of product and the coordinated promotional activity normally
associated only with larger retail grocery chains. The Company believes
this structure enables it to leverage the favorable elements of both a
wholesaler and a retailer, giving the Company and its franchisees a unique
advantage in its marketplace. The Company believes this advantage has
been a key component in its success over the past few years as the virtual
chain concept has evolved. This concept will continue to be a cornerstone
of the Company's growth strategy.
The Company supplies a variety of products to its franchised and
corporate supermarkets and other wholesale customers primarily from its
warehouse and distribution center in Sheboygan, Wisconsin. The Company
also provides its franchised and corporate supermarkets and other
customers with fresh, frozen and processed meat, eggs and deli products
from a third-party distribution facility in Milwaukee, Wisconsin on a
contract basis. Additionally, the Company bottles carbonated soft drinks,
fruit drinks and drinking and distilled water under its Springtime/TM/
label and supplies these products to its customers.
The Company is a Wisconsin corporation organized in 1912.
Wholesale Operations
For several years the Company has been emphasizing its more
profitable wholesale distribution business and the associated expansion of
its franchise store base which, combined with its unique marketing and
merchandising program, has created an effective and efficient virtual
chain, while also effecting changes to its corporate retail operations to
improve profitability.
The Company believes one of the competitive advantages it provides to
its franchised supermarkets through its "virtual chain" strategy is its
value-oriented customer merchandising and community-specific marketing
support program, pursuant to which franchisees participate with corporate
stores in systemwide promotions and other merchandising events. Through a
variety of partnering, merchandising and marketing programs, the Company
benefits its franchisees through additional sales resulting from
heightened consumer name recognition and in-store merchandising programs,
combined with special promotional pricing. Additional services include
retail accounting, preparation of store payrolls, preparation of print,
electronic and outdoor media advertising (including various point-of-sale
materials), assistance in the selection and analysis of store locations,
lease negotiations, store design, floor layout, merchandising planning,
equipment selection, engineering and architectural services, retail
technology implementation and support, labor planning and scheduling and
product category supervision. Certain of such services are provided as
part of the franchise relationship, and other services are provided for a
separate fee intended to cover the Company's costs.
As part of implementing its corporate strategy to improve the
profitability of its corporate retail operations, the Company has sold and
converted 12 underperforming corporate retail stores into franchise units
and added 15 new replacement or new market franchise supermarkets since
1991. In 1996, there were three franchise expansion projects resulting in
one completed expansion and two expansions that will be completed in early
1997. Additionally, in 1996, two replacement stores were completed and
two replacement stores are projected to be completed in 1997. Finally, in
1996, one new market franchise unit was completed and three new market
franchise units are projected to be completed in 1997. These expansion,
replacement and new market franchise projects added approximately 49,400
square feet of store space in 1996, and are projected to add approximately
150,000 square feet in 1997 if all scheduled projects are completed.
The following table shows the Company's development of, and changes
in, its franchised and corporate retail supermarkets for the periods
presented:
Franchise Supermarkets Corporate Supermarkets
Number of
Supermarkets 1992 1993 1994 1995 1996 1992 1993 1994 1995 1996
Beginning of Year 51 59 64 65 66 32 26 21 20 19
New Market Supermarkets(a) 2 1 -- 1 1 -- -- -- -- --
Replacement Supermarkets(b) 3 1 1 3 2 -- -- -- -- --
Converted to Franchise(c) 6 4 1 -- 1 (6) (4) (1) -- (1)
Terminated Operations(d) (4) (3) (1) (3) (2) -- (1) -- (1) (2)
New Franchises(e) 1 2 -- -- -- -- -- -- -- --
End of Year 59 64 65 66 68 26 21 20 19 16
== == == == == == == == == ==
Remodeled Supermarkets(f) 3 1 5 6 1 1 3 -- -- --
_______________
(a) New market supermarkets are newly constructed supermarkets in market areas
not recently served by the Company.
(b) Replacement supermarkets are newly constructed supermarkets whose opening
corresponds with the closure of a nearby franchised or corporate supermarket
of the Company.
(c) Corporate supermarkets which become franchise units are included as
reductions to corporate supermarket totals and additions to franchised
supermarket totals in this category.
(d) Terminated operations represent supermarkets which are no longer going
concerns, including replaced supermarkets.
(e) New franchises are additions to the Company's franchise group, other than
through conversion from corporate supermarkets.
(f) Remodeled supermarkets represent supermarkets which have undergone
substantial expansion and/or remodeling totaling at least $250,000.
During 1996, the Company established new earnings records on
increased sales from the previous year. The increase in earnings was
principally the result of continued improvements in the Company's
wholesale operations, where the lower gross margins associated with
wholesale sales were offset by the decreased operating and administrative
expenses associated with previously sold retail operations.
The Company is the primary supplier to all of its franchised and
corporate supermarkets. The Company also serves as a wholesaler to other
small independent retail stores in its market area, although less than 3%
of the Company's 1996 net sales was derived from such operations.
Franchisees pay fees to the Company determined by the retail sales of
their supermarkets. The Company does not charge an initial fee to the
franchisee for granting a franchise. Consistent with industry practice,
in certain situations, the Company provides credit enhancements to certain
qualified franchisees by (i) leasing the franchisee's supermarket premises
and, in turn, subleasing the premises to the franchisee and/or (ii)
guaranteeing a portion of the franchisee's bank borrowings.
The Company owns the right to grant Piggly Wiggly franchises in its
market areas, which includes designated counties in Eastern Wisconsin,
Northeastern Illinois and the Upper Peninsula of Michigan. The Company's
right to grant franchises is exclusive in these areas, except that if
there are less than 40 supermarkets in the franchise territory operated
under the Piggly Wiggly and certain other names, the current franchisor
has the right to operate for its own account, or to franchise,
supermarkets in the territory under those names. As of December 28, 1996,
there were 84 supermarkets operated in the Company's territory that
satisfied this requirement. The Company's franchise rights are of
unlimited duration and are not subject to any specific termination
provision. The Company is not required to pay any additional franchise or
other fees to the current franchisor. The only material obligation
imposed on the Company is that the supermarkets operated under the Piggly
Wiggly and other names must comply with the standards imposed on
supermarkets in the Piggly Wiggly system. The Company believes its own
franchised and corporate store standards exceed the Piggly Wiggly system
standards.
Retail Operations
The Company's franchised and corporate supermarkets stock a
comprehensive selection of groceries, frozen foods, prepared foods, fresh
produce, meat, poultry, eggs and dairy products. The Company's franchised
and corporate supermarkets also allocate display space to non-food items,
such as health and beauty aids, housewares, magazines and periodicals,
video cassette rentals, flowers and plants, greeting cards and general
merchandise. The Company's franchised and corporate supermarkets carry a
broad range of branded merchandise and private label product alternatives
to branded merchandise. In general, the private label products carried by
the Company's franchised and corporate supermarkets have lower selling
prices, but higher gross profit margins, than branded merchandise.
Consistent with trends generally within the industry, the Company
continues to experience increases in retail customer demand for private
label store brands and believes its Topco line of private label products
is satisfying this consumer trend. See "Purchasing and Distribution."
Based on the Company's internal wholesale price index, management does not
believe that inflation had a significant effect on sales between 1996 and
1995.
In 1996, same store sales increased as the Company continued the
introduction of the Piggly Wiggly Preferred Club Card/R/, a customer-
friendly card-based marketing program. During 1996, the Piggly Wiggly
Preferred Club Card program was installed in 39 stores, bringing the
number of installations to 50 stores with the remaining 33 stores
schedules for installation during 1997. The Piggly Wiggly Preferred Club
Card is intended to reward current customers and attract new customers by
offering "clipless coupons" on weekly advertised specials and "automatic"
savings on monthly store specials. The card also doubles as a check-
cashing and video rental identification card. Additionally, the Piggly
Wiggly Preferred Club Card program includes the ability to issue point of
sale coupons redeemable on future purchases. The Company believes that
the Piggly Wiggly Preferred Club Card and the coordinated marketing and
merchandising program it supports are key components driving the increase
in same store sales in 1996.
The Company's franchised supermarkets range in size from 8,340 square
feet to 47,000 square feet, with an average of 24,070 square feet. The
Company's corporate supermarkets range in size from 19,980 square feet to
46,250 square feet, with an average of 31,100 square feet. All of the
Company's franchised and corporate supermarkets contain several perishable
or specialty service departments, such as fresh and processed meat; take-
home entrees and snacks; produce; fresh seafood; delicatessen; flowers and
plants; and baked goods. Most supermarkets also contain or provide for
one or more of the following: wine and spirit sales; video rentals; photo
processing services; TicketMaster/R/ ticket centers; in-house banking
services; automated teller machines; and on-line debit and credit card
check-out services.
During 1996, certain of the Company's corporate retail stores
continued to not meet financial performance goals. The Company converted
one corporate retail store to a franchise retail store in February 1996
and closed two smaller, outdated and underperforming corporate retail
stores in September and October 1996, respectively. In order to improve
the Company's results of operations, the Company continues to evaluate
various business alternatives relating to these underperforming
operations, including the sale and subsequent conversion of these stores
into franchise units, closing the stores or implementing other operational
changes.
Purchasing and Distribution
The Company purchases groceries in sufficient volume to qualify for
favorable price brackets for most items. The Company purchases brand name
grocery merchandise directly from the manufacturers or processors and
purchases substantially all of its private label items through Topco
Associates, Inc. ("Topco"). The Company purchases produce, meat and
seafood from a variety of sources. Topco is a national purchasing
cooperative whose member-owners consist of 40 regional supermarket chains
and food services organizations who collectively operate approximately
3,500 stores. According to Topco data, its member-owners accounted for
approximately 14% of United States grocery store sales volume in 1996. In
1996, purchases through Topco accounted for approximately 14% of the
Company's total inventory purchases. The Company also purchases store and
warehouse equipment and supplies, primarily bags and packaging material,
through Topco. Topco's size and purchasing power enable it to employ
large-volume, low-cost purchasing techniques on behalf of its
member-owners, including the Company.
Approximately 77% of the products supplied to the Company's stores in
1996 were supplied from the Company and its direct contract third-party
distribution centers. The remainder were supplied by direct store
delivery vendors. The Company owns its 364,000 square foot distribution
center in Sheboygan, Wisconsin. With the exception of fresh, frozen and
processed meat, eggs and deli products, all products supplied by the
Company are distributed from its Sheboygan facility. While the Company
performs the buying function, a third-party contractor in Milwaukee,
Wisconsin performs the distribution services for the Company's meat
operations. The Company believes this arrangement has provided it with
operating cost efficiencies and has enabled it to expand its wholesale
product offerings and better satisfy wholesale customer delivery schedules
through improved capacity.
As described above under "Wholesale Operations," the Company believes
one of its competitive advantages is the community-oriented marketing
programs provided to franchisees as part of its "virtual chain" strategy.
Coordinated weekly newspaper ad inserts, high visibility outdoor billboard
advertising and television and radio advertising stress the value and
customer service provided by the Company's local Piggly Wiggly
supermarkets. The Company also sponsors local events and festivals
throughout the marketing area to improve its Piggly Wiggly name
recognition, such as the Midwest's largest fireworks display at
Milwaukee's Summerfest lakefront music festival.
The Company operates a leased, full service trucking fleet, which
consists of 22 tractors and 40 refrigerated trailers. The Company
augments its transportation requirements with temporary leasing
arrangements as conditions warrant. PW Trucking, Inc., a wholly-owned
subsidiary of the Company, provides contract and common carrier services
throughout the Company's operating territory. Revenues from unrelated
parties generated by this business were nominal in 1996 and are expected
to be nominal in 1997.
The Company bottles carbonated soft drinks, fruit drinks and drinking
and distilled water under its Springtime/TM/ label. The Company supplies
these products to its franchised and corporate supermarkets and
independent supermarket customers. The Company's bottling facility
occupies approximately 5,000 square feet within its Sheboygan distribution
center. The sale of these products accounted for less than 1% of the
Company's 1996 net sales.
Competition
The wholesale and retail food industry is highly competitive. At the
wholesale level, the Company competes with regional and national
wholesalers, such as Fleming Companies, Inc., SuperValu Inc., Roundy's,
Inc. and Nash Finch Co. In addition to price, product quality and
variety, competitive factors include credit support to customers and the
provision of various support services, such as advertising; accounting and
financial services; merchandising; facilities engineering, design and
project management; and retail technology support. The Company believes
that its distribution facilities and the wide range of support and
marketing services provided to its franchised and corporate retail
supermarkets allow it to provide prompt and efficient low-priced, high-
quality products and important supplemental services to its franchised and
corporate supermarkets and other customers.
The degree of competition at the retail level varies with store
location. In most of its franchised and corporate supermarket locations,
the Company competes primarily with local retail operators, virtually all
of whom are affiliated with competing wholesalers through arrangements
similar to the Company's franchisees. In its remaining supermarket
locations, the Company competes with national and regional retail chain
stores, such as Sentry Food Stores, Pick 'N Save, SuperSaver, Cub Foods,
Jewel Food Stores, Dominicks Finer Foods, Copp's Supermarkets and Kohl's
Food Stores. Other competitors include the general merchandise, wholesale
club and supercenter format stores of Wal-Mart Stores, Inc., K Mart Corp.
and ShopKo Stores, Inc. Principal retail competitive factors include
price, product quality and variety, store location and appearance and the
extent of a store's perishable product and service departments. The
Company believes its supermarkets' emphasis on low-cost, high-quality
products, community-based multi-media marketing and merchandising programs
and a high degree of in-store customer service and friendliness provide
its franchised and corporate supermarkets with a competitive advantage in
many of their retail market areas.
Certain of the Company's competitors at both the wholesale and retail
level may have a competitive advantage resulting from utilizing
lower-cost, non-union workforces. Certain of the Company's competitors
have greater financial resources and marketing budgets than the Company.
Also, certain competitors using the general merchandise, wholesale club
format or supercenter format may choose to carry and market a less
extensive variety of products for which they may choose to sell such items
at a lower per unit cost than the Company.
Employees
As of December 28, 1996, the Company employed approximately 1,550
persons, of whom approximately 1,050 were employed in the operation of the
Company's corporate retail supermarkets. A majority of the Company's
corporate retail employees are employed on a part-time basis. Of the
Company's remaining employees, approximately 200 are engaged in
warehousing and trucking activities and approximately 300 are corporate
and administrative personnel. Six separate collective bargaining
agreements covering a total of approximately 620 retail clerks and meat
cutters expire at different times throughout 1997. The Company does not
currently anticipate any strikes, work stoppages or slowdowns in
connection with renewing such agreements. The Company recently entered
into a new collective bargaining agreement covering the warehouse and
trucking employees at its Sheboygan distribution facility that expires in
February 2002.
Item 1A. Executive Officers of the Company.
Name and Age Positions and Offices with the Company
James H. Dickelman, 49 . Chairman of the Board, President and Chief
Executive Officer
John H. Dahly, 56 . . . . Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
Michael R. Houser, 45 . . Senior Vice President--Marketing and
Merchandising
William K. Jacobson, 46 . Senior Vice President--Retail Operations
Kenneth S. Folberg, 36 . Vice President--Logistics
Larry D. Hayes, 54 . . . Vice President--Meat, Bakery and Deli
Operations
John S. Kwas, 57 . . . . Vice President--Grocery Procurement
Thomas J. Timler, 39 . . Vice President--Business Systems Support
Group
Frank D. Welch, 56 . . . Vice President--Engineering and Assistant
Secretary
Messrs. Dickelman, Dahly, Houser and Jacobson are also members of the
Company's Board of Directors.
Executive officers are generally elected annually at the annual
meeting of the Board of Directors held on the date of the Company's annual
meeting of shareholders. Each executive officer holds office until his
successor has been elected or until his prior death, resignation or
removal.
All of the Company's executive officers have served in the positions
indicated or in other management positions with the Company for more than
the last five years.
Item 2. Properties.
As is customary in the Company's industry, a substantial portion of
the Company's capital assets are leased. As of December 28, 1996, the
Company leased 15 of its corporate supermarkets and owned one supermarket.
The leased supermarkets range in size from 19,980 to 41,200 square feet,
with an average of 30,080 square feet.
The Company generally leases its supermarkets from nonaffiliated real
estate developers under long-term leases. Such leases generally contain
initial terms of 15 to 20 years with several five-year renewal options.
None of such existing lease arrangements contain Company repurchase
options nor is the land underlying any of such supermarkets owned by the
Company. No leases are scheduled to expire in 1997. As of December 28,
1996, the Company subleased 46 of its leased supermarkets, and leased one
owned supermarket, to independent operators who are wholesale customers of
the Company and, except for one, are also franchisees.
Renovations and expansions continue at six franchise retail
operations. These renovations involve two additions to existing franchise
stores, and four replacement franchise units. Additionally, three new
market franchise retail operations are expected to be completed in 1997.
These projects are expected to add approximately 150,000 square feet of
store space.
The Company owns its distribution center and headquarters complex in
Sheboygan, Wisconsin which occupies approximately nine acres of a 16-acre
site owned by the Company. The facility provides approximately 30,500
square feet of space for offices and related activities, approximately
364,000 square feet of warehouse space and approximately 5,000 square feet
for the Company's bottling facility. The Company also leases
approximately 14,500 square feet of office space in Sheboygan under a
four-year lease expiring in August 2000, which is used for customer
support services.
The Company owns approximately 17 acres of commercially zoned
property in two Wisconsin communities. The Company has entered into
brokerage arrangements for the sale of these properties.
Item 3. Legal Proceedings.
There are no material legal proceedings to which the Company is a
party or to which any of its property is subject, other than ordinary
routine litigation incidental to the Company's business. No material
legal proceedings were terminated during the fourth quarter of 1996.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of 1996.
PART II
Item 5. Market for the Company's Common Stock and Related Shareholder
Matters.
Pursuant to General Instruction G to Form 10-K ("Instruction G"), the
information required by this Item is incorporated herein by reference from
information included under the caption entitled "Common Stock Information"
set forth in the Company's 1996 Annual Report to Shareholders ("Annual
Report").
Item 6. Selected Financial Data.
Pursuant to Instruction G, the information required by this Item is
incorporated herein by reference from information included under the
caption entitled "Five-Year Financial Highlights" set forth in the Annual
Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Pursuant to Instruction G, the information required by this Item is
incorporated herein by reference from information included under the
caption entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" set forth in the Annual Report.
Item 8. Financial Statements and Supplementary Data.
Pursuant to Instruction G, the Consolidated Balance Sheets of the
Company as of December 28, 1996 and December 30, 1995, the Consolidated
Statements of Earnings, Cash Flows and Shareholders' Investment for each
of the three fiscal years in the period ended December 28, 1996, together
with the related Notes to Consolidated Financial Statements (including
supplementary financial data), are incorporated herein by reference from
information included under the captions having substantially the same
titles as set forth in the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company.
Pursuant to Instruction G, the information required by this Item
(other than such information regarding executive officers which appears in
Item 1A hereof and information required by Item 405 of Regulation S-K,
which is inapplicable) is incorporated by reference from information
included under the caption entitled "Election of Directors" set forth in
the Company's definitive Proxy Statement for its 1997 annual meeting of
shareholders ("Proxy Statement").*
* The Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation
14A within 120 days after the end of the Company's fiscal year.
Item 11. Executive Compensation.
Pursuant to Instruction G, the information required by this Item is
incorporated by reference from information included under the caption
entitled "Executive Compensation" set forth in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Pursuant to Instruction G, the information required by this Item is
incorporated by reference from information included under the captions
entitled "Principal Shareholders" and "Election of Directors" set forth in
the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Pursuant to Instruction G, the information required by this Item is
incorporated by reference from information under the caption entitled
"Compensation Committee and Stock Option Committee Interlocks and Insider
Participation" set forth in the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this Form 10-K:
Page Reference
Page 1996 Annual
Reference Report
1. Financial Statements. Form 10-K to Shareholders
Consolidated Balance Sheets as of -- 13
December 28, 1996 and December 30,
1995
Consolidated Statements of -- 14-15
Earnings, Cash Flows and
Shareholders' Investment for the
fiscal years 1996, 1995 and 1994
Notes to Consolidated Financial -- 16-21
Statements
Report of Independent Public -- 12
Accountants
The additional information referred to under "Financial Statement
Schedules" below is filed as part of this Form 10-K and should be read in
conjunction with the financial statements referred to above.
2. Financial Statement Schedules.
Report of Independent Public F-1 --
Accountants
Schedule VIII - Valuation and F-2 --
Qualifying Accounts and Reserves
All other schedules have been omitted as not required or not
applicable or the information required to be shown thereon is included in
the financial statements and related notes.
3. Exhibits and Reports on Form 8-K.
(a) The Exhibits filed or incorporated by reference herewith
are as specified in the Exhibit Index included herein.
(b) No reports on Form 8-K were filed by the Company during the
fourth quarter of 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SCHULTZ SAV-O STORES, INC.
Date: March 20, 1997 By /s/ John H. Dahly
John H. Dahly
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Company in the capacities indicated as of the date indicated above.
/s/ James H. Dickelman /s/ Bernard S. Kubale
James H. Dickelman, Chairman of Bernard S. Kubale, Director
Board, President, Chief Executive Officer
and Director (Principal Executive Officer)
/s/ John H. Dahly /s/ Martin Crneckiy, Jr.
John H. Dahly, Executive Vice Martin Crneckiy, Jr., Director
President, Chief Financial Officer
and Director (Principal Financial and
Accounting Officer)
/s/ Howard C. Dickelman /s/ R. Bruce Grover
Howard C. Dickelman, Director R. Bruce Grover, Director
/s/ William K. Jacobson /s/ Michael R. Houser
William K. Jacobson, Director Michael R. Houser, Director
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Schultz Sav-O Stores, Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 5, 1997. Our audit was made
for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index to financial statements is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states
in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 5, 1997.
SCHULTZ SAV-O STORES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS 1996, 1995 AND 1994
Allowance for Doubtful Accounts--
Changes in the allowance for doubtful accounts are summarized as
follows:
1996 1995 1994
Balance, beginning of $2,565,000 $1,750,000 $1,750,000
year
Provision charged to
earnings 987,000 2,079,000 526,000
(Writeoffs)/recoveries,
net
98,000 (1,264,000) (526,000)
--------- --------- ---------
Balance, end of year $3,650,000 $2,565,000 $1,750,000
========= ========= =========
EXHIBIT INDEX
SCHULTZ SAV-O STORES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
Exhibit No. Description
3.1 Restated Articles of Incorporated, as amended.
[Incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1988.]
3.2 By-Laws, as amended and restated as of January
24, 1991. [Incorporated by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K
for the year ended December 29, 1990.]
4.1 Restated Articles of Incorporation, as amended
(included as Exhibit 3.1). [Incorporated by
reference to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the year ended December
31, 1988.]
4.2 Rights Agreement dated December 20, 1988 between
the Company and First Bank (N.A.), Milwaukee,
Wisconsin. [Incorporated by reference to
Exhibit 4 to the Company's Current Report on
Form 8-K dated December 21, 1988.]
4.3 Amendment to Rights Agreement dated February 2,
1989 between the Company and First Bank (N.A.),
Milwaukee, Wisconsin. [Incorporated by
reference to Exhibit 2 to the Company's Form 8
dated February 20, 1989.]
4.4 Letter dated June 30, 1992 constituting
appointment of Firstar Trust Company (f/k/a
First Wisconsin Trust Company) as the successor
rights agent under the Rights Agreement dated
December 20, 1988, as amended. [Incorporated by
reference to Exhibit 4.4 to the Company's Annual
Report on Form 10-K dated March 31, 1994.]
As summarized in Notes (3) and (8) of the Notes
to Financial Statements incorporated by
reference from the Company's 1996 Annual Report
to Shareholders, as part of Parts II and IV of
this Form 10-K, the Company has various
outstanding long-term debt and capital lease
obligations. None of such obligations
individually exceeds 10% of the Company's total
assets. The Company hereby agrees to furnish to
the Commission, upon its request, a copy of each
instrument with respect to such obligations.
10.1 Master Franchise Agreement, dated April 23,
1982, between Commodores Point Terminal
Corporation and Piggly Wiggly Corporation.
[Incorporated by reference to Exhibit 10.1 to
the Company's Annual Report on Form 10-K for the
year ended January 1, 1982.]
10.2 Agreement, dated August 1, 1982, between the
Company and Commodores Point Terminal
Corporation. [Incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the year ended January 1, 1982.]
10.3 Amendment to Master Franchise Agreement, dated
October 15, 1982, between the Company and Piggly
Wiggly Corporation. [Incorporated by reference
to Exhibit 10.3 to the Company's Annual Report
on Form 10-K for the year ended January 1,
1982.]
10.4 Form of Director/Officer Indemnity Agreement.
[Incorporated by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the
year ended January 2, 1988.] This Agreement is
required to be filed as an exhibit to this
Form 10-K pursuant to Item 14(c) of Form 10-K.
10.5 Form of Key Executive Employment and Severance
Agreement, dated as of October 19, 1990, between
the Company and each of James H. Dickelman, John
H. Dahly, and Michael R. Houser, and dated as of
January 31, 1996, between the Company and
William K. Jacobson. [Incorporated by reference
to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the year ended December 29,
1990.] This Agreement is required to be filed
as an exhibit to this Form 10-K pursuant to
Item 14(c) of Form 10-K.
10.6 Membership and Licensing Agreement dated August
1, 1973 by and between Topco Associates, Inc.
(Cooperative) and the Company. [Incorporated by
reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended
December 30, 1995.]
10.7 Articles of Incorporation of Topco Associates,
Inc. (Cooperative). [Incorporated by reference
to Exhibit 10.12 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1988.]
10.8 Bylaws of Topco Associates, Inc. (Cooperative),
as amended through June 7, 1995. [Incorporated
by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended
December 30, 1995.]
10.9 1990 Stock Option Plan, as amended as of March
17, 1993. [Incorporated by reference to exhibit
10.10 to the Company's Annual Report on Form 10-
K for the year ended January 2, 1993.] This
Plan is required to be filed as an exhibit to
this Form 10-K pursuant to Item 14(c) of
Form 10-K.
10.10 1995 Equity Incentive Plan. [Incorporated by
reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the year December
31, 1994.] This Plan is required to be filed as
an exhibit to this Form 10-K pursuant to
Item 14(c) of Form 10-K.
10.11 Schultz Sav-O Stores, Inc. Executive Benefit
Restoration Plan. [Incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.]
This Plan is required to be filed as an exhibit
to this Form 10-K pursuant to Item 14(c) of
Form 10-K.
10.12 Schultz Sav-O Stores, Inc. Officer Annual
Incentive Plan. [Incorporated by reference to
Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.]
This Plan is required to be filed as an exhibit
to this Form 10-K pursuant to Item 14(c) of
Form 10-K.
13 Portions of the 1996 Annual Report to
Shareholders expressly incorporated by reference
into this Form 10-K.
21 Subsidiary of Registrant.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule (EDGAR version only).
99 Definitive Proxy Statement for 1997 Annual
Meeting of Shareholders (to be filed with the
Commission under Regulation 14A within 120 days
after the end of the Company's fiscal year and,
upon such filing, incorporated by reference
herein to the extent indicated in this Form 10-K).