===========================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 2, 1999.
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: 33-41791
SPARTAN STORES, INC.
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-0593940
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
850 76TH STREET, S.W.
P.O. BOX 8700
GRAND RAPIDS, MICHIGAN 49518
(Address of Principal Executive Offices (Zip Code)
(616) 878-2000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
As of January 30, 1999, the issuer had 10,866,620 outstanding shares of
Class A Common Stock, $2 par value.
_____________________
===========================================================================
This Quarterly Report on Form 10-Q/A (Amendment No. 1) is filed for the
purpose of correcting the Deferred Taxes on Income line item in the
Consolidated Statements of Cash Flows in Item 1 of Part I of the
registrant's previously filed Quarterly Report on Form 10-Q for the
quarterly period ended January 2, 1999.
-2-
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 2,
1999 MARCH 28,
(UNAUDITED) 1998
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 35,906,455 $ 37,026,640
Marketable securities 20,566,735 18,333,323
Accounts receivable 70,990,385 74,549,520
Inventories 87,078,096 92,706,414
Prepaid expenses 6,150,824 6,885,828
Deferred taxes on income 7,179,000 7,277,000
------------ ------------
TOTAL CURRENT ASSETS 227,871,495 236,778,725
NOTES RECEIVABLE 3,889,199 6,539,412
OTHER ASSETS 1,685,991 1,703,110
PROPERTY AND EQUIPMENT
Land and improvements 33,223,362 33,098,220
Buildings 136,295,635 136,496,867
Equipment 139,773,105 138,663,310
------------ ------------
309,292,102 308,258,397
Less accumulated depreciation and amortization 154,199,388 147,146,529
------------ ------------
NET PROPERTY AND EQUIPMENT 155,092,714 161,111,868
------------ ------------
TOTAL ASSETS $388,539,399 $406,133,115
============ ============
-3-
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 3,000,000 $ 38,500,000
Accounts payable 88,124,897 81,690,574
Accrued payroll and benefits 15,504,570 13,447,559
Insurance reserves 15,061,870 15,799,160
Other accrued expenses 20,414,172 19,759,049
Current maturities of long-term debt and capital
lease obligation 8,099,416 6,544,777
------------ ------------
TOTAL CURRENT LIABILITIES 150,204,925 175,741,119
DEFERRED TAXES ON INCOME 1,994,500 3,750,000
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 5,034,200 4,784,200
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION 102,840,208 107,665,545
OTHER LONG-TERM LIABILITIES 5,301,936
SHAREHOLDERS' EQUITY
Class A common stock, voting, par value
$2 a share; authorized 20,000,000 shares;
outstanding 10,877,219 and 11,443,985 shares 21,754,438 22,887,970
Additional paid-in capital 13,669,684 16,431,937
Retained earnings 87,739,508 74,872,344
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 123,163,630 114,192,251
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $388,539,399 $406,133,115
============ ============
-4-
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THIRD QUARTER (16 WEEKS) ENDED
-------------------------------------
JANUARY 2, JANUARY 3,
1999 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
NET SALES $841,097,922 $766,769,552
COSTS AND EXPENSES
Cost of sales 752,471,276 689,095,592
Operating and administrative 70,626,982 69,313,767
Restructuring charge 5,301,936
Interest expense 2,529,188 3,617,766
Interest income (780,640) (525,028)
Gain on sale of property and equipment (54,927) (1,570,249)
------------ ------------
TOTAL COSTS AND EXPENSES 830,093,815 759,931,848
------------ ------------
EARNINGS BEFORE INCOME TAXES 11,004,107 6,837,704
INCOME TAXES 4,085,000 2,437,000
------------ ------------
NET EARNINGS $ 6,919,107 $ 4,400,704
============ ============
BASIC AND DILUTED NET EARNINGS PER
CLASS A SHARE $ 0.63 $ 0.38
============ ============
BASIC WEIGHTED AVERAGE CLASS A SHARES 10,989,089 11,697,780
============ ============
DILUTED WEIGHTED AVERAGE CLASS A SHARES 10,993,528 11,700,674
============ ============
DIVIDENDS DECLARED PER CLASS A SHARES $ 0.0125 $ 0.0125
============ ============
-5-
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEAR TO DATE (40 WEEKS) ENDED
---------------------------------------
JANUARY 2, JANUARY 3,
1999 1998
(UNAUDITED) (UNAUDITED)
-------------- --------------
NET SALES $2,044,622,088 $1,920,148,043
COSTS AND EXPENSES
Cost of sales 1,834,625,555 1,727,145,798
Operating and administrative 175,791,444 174,594,781
Restructuring charge 5,301,936
Interest expense 6,569,006 8,363,614
Interest income (2,109,912) (1,942,650)
Gain on sale of property and equipment (1,243,133) (3,670,577)
-------------- --------------
TOTAL COSTS AND EXPENSES 2,018,934,896 1,904,490,966
-------------- --------------
EARNINGS BEFORE INCOME TAXES 25,687,192 15,657,077
INCOME TAXES 9,325,000 5,612,000
-------------- --------------
NET EARNINGS $ 16,362,192 $ 10,045,077
============== ==============
BASIC AND DILUTED NET EARNINGS PER
CLASS A SHARE $ 1.45 $ 0.85
============== ==============
BASIC WEIGHTED AVERAGE CLASS A SHARES 11,249,659 11,850,749
============== ==============
DILUTED WEIGHTED AVERAGE CLASS A SHARES 11,254,098 11,853,643
============== ==============
DIVIDENDS DECLARED PER CLASS A SHARE $ 0.0375 $ 0.0375
============== ==============
-6-
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CLASS A ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
----------- ----------- -----------
BALANCE - MARCH 29, 1997 $24,065,700 $18,406,969 $64,784,905
CLASS A COMMON STOCK TRANSACTIONS
895,256 shares purchased (1,790,512) (4,769,484) (3,559,471)
306,391 shares issued 612,782 2,794,452
NET EARNINGS 14,233,981
CASH DIVIDENDS - $.05 PER SHARE (587,071)
----------- ----------- -----------
BALANCE - MARCH 28, 1998 $22,887,970 $16,431,937 $74,872,344
CLASS A COMMON STOCK TRANSACTIONS
761,427 shares purchased (1,522,854) (4,712,830) (3,074,872)
194,661 shares issued 389,322 1,950,577
NET EARNINGS 16,362,192
CASH DIVIDENDS - $.0375 PER SHARE (420,156)
----------- ----------- -----------
BALANCE JANUARY 2, 1999 $21,754,438 $13,669,684 $87,739,508
=========== =========== ===========
-7-
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR TO DATE (40 WEEKS) ENDED
-------------------------------
JANUARY 2, JANUARY 3,
1999 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 16,362,192 $ 10,045,077
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 16,079,691 16,429,657
Postretirement benefits other than pensions 250,000 184,000
Deferred taxes on income (1,657,500) 243,000
Restructuring charge 5,301,936
Gain on sale of property and equipment (1,243,133) (3,670,577)
Change in assets and liabilities:
Marketable securities (2,233,412) (4,555,451)
Accounts receivable 3,559,135 3,557,780
Inventories 5,628,318 (19,651,689)
Prepaid expenses 735,004 439,788
Accounts payable 6,434,323 (2,584,220)
Accrued payroll and benefits 2,057,011 (1,985,666)
Insurance reserves (737,290) 582,469
Other accrued expenses 655,123 2,948,907
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 51,191,398 1,983,075
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (13,245,533) (21,263,703)
Proceeds from the sale of property and equipment 4,428,129 14,707,184
Other 2,667,332 (1,099,847)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (6,150,072) (7,656,366)
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in notes payable (35,500,000) (6,000,000)
Proceeds from long-term borrowings 14,852,254 28,684,569
Repayment of long-term debt and capital lease (18,122,952) (21,292,448)
Proceeds from sale of common stock 2,339,899 2,583,679
Common stock purchased (9,310,556) (6,962,055)
Dividends paid (420,156) (444,020)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (46,161,511) (3,430,275)
------------ ------------
-8-
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,120,185) (9,103,566)
ASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 37,026,640 34,198,752
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF THIRD QUARTER $ 35,906,455 $ 25,095,186
============ ============
-9-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The 1998 Annual Report on Form 10-K contains a summary of
significant accounting policies in the notes to consolidated
financial statements. The Company follows the same accounting
policies in the preparation of interim financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the March 28, 1998
presentation in order to conform to the January 2, 1999
presentation.
STATEMENT OF REGISTRANT
The data presented herein is unaudited, but in the opinion of
management includes all adjustments (which consist solely of
normal recurring accruals) necessary for a fair presentation of
the consolidated financial position of the Company and its
subsidiaries at January 2, 1999 and the results of their
operations and the changes in cash flows for the periods ended
January 2, 1999 and January 3, 1998. These interim results are
not necessarily indicative of the results of the fiscal years as
a whole.
CONTINGENCIES
On August 21, 1996, the Attorney General for the State of
Michigan filed an action in Michigan circuit court against the
leading cigarette manufacturers operating in the United States,
twelve wholesalers and distributors of tobacco products in
Michigan (including three Company subsidiaries) and others
seeking certain injunctive relief, the reimbursement of
$4 billion in Medicaid and other expenditures incurred or to be
incurred by the State of Michigan to treat diseases allegedly
caused by cigarette smoking and punitive damages of $10 billion.
In July 1998, the court dismissed the claim for punitive
damages. On December 7, 1998, the State of Michigan and the
cigarette manufacturers settled the remaining claims and the case
was dismissed by the court without any payment by the Company or
its subsidiaries. Thirty actions have been filed in state courts
in Pennsylvania against the leading cigarette manufacturers operating
in the United States and certain wholesalers and distributors,
including a subsidiary of the Company. All of the Pennsylvania actions
were filed by individual plaintiffs pursuant to a special notice
procedure which does not include any formal complaint. In these
separate cases, the Company expects that the plaintiffs are seeking
-10-
compensatory, punitive and other damages, reimbursement of medical
and other expenditures and equitable relief. The Company believes
that its subsidiaries have valid defenses to these legal actions.
These actions are being vigorously defended. All but two of the
Pennsylvania actions have been dismissed without prejudice pursuant
to a Dismissal and Tolling Agreement under which the defendants have
agreed not to raise the defense of statute of limitations or laches if
an action is filed by a plaintiff before April 1, 1999. One of the
cigarette manufacturers named as a defendant in each action has
agreed to indemnify the Company's subsidiaries from damages
arising out of these actions. Management believes that the
ultimate outcome of these actions should not have a material
adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
Various other lawsuits and claims, arising in the ordinary course
of business, are pending or have been asserted against the
Company. While the ultimate effect of such actions cannot be
predicted with certainty, management believes that their outcome
will not result in a material adverse effect on the consolidated
financial position, operating results or liquidity of the
Company.
RESTRUCTURING CHARGE
On October 14, 1998, the Company's Board of Directors approved an
initiative to replace the Company's Plymouth distribution center
with a new multi-commodity distribution center in Northern Ohio.
The initiative includes the cessation of operations at the
Company's existing distribution center in Plymouth, Michigan by
April 2000 and would result in the displacement of approximately
300 associates in Plymouth and approximately 100 associates at
its Grand Rapids, Michigan distribution center. In connection
with the initiative, a $5,301,936 restructuring charge was
accrued as of January 2, 1999. The charge encompasses accruals
for contractual amounts to be paid under a collective bargaining
agreement, additional severance pay, and amounts due in
connection with withdrawal from the union pension plan.
RECENT AND SUBSEQUENT EVENTS
On December 3, 1998, the Company executed a letter of intent with
respect to the proposed purchase by the Company or one of its
subsidiaries of certain assets associated with the retail
grocery, pharmacy and transportation business of Glen's Market,
Inc., Catt's Realty Co. and Glen's Pharmacy, Inc. ("Glen's").
Glen's operates 23 retail grocery stores, 4 pharmacies and a
distribution center located primarily in Northern Michigan. The
-11-
Company continues to negotiate with these companies toward
execution of a definitive asset purchase agreement with respect
to the purchase of this business.
On January 4, 1999, the Company, through its wholly-owned
subsidiary, Valuland, Inc. ("Valuland"), acquired certain assets
and assumed certain liabilities of Ashcraft's Market, Inc., an
operator of eight retail grocery stores located primarily in mid-
Michigan.
On January 13, 1999, the Company executed a letter of intent with
respect to the proposed purchase by Valuland of all of the
issued and outstanding shares of Family Fare, Inc., Family Fare
Management Services, Inc. and Family Fare Trucking, Inc. ("Family
Fare"). Family Fare is an operator of thirteen retail grocery
stores, a bakery, a warehouse facility and a transportation
business located primarily in Western Michigan. The Company continues
to negotiate with these companies and their shareholders toward
execution of a definitive stock purchase agreement with respect to
the purchase of this business.
Upon consummation, each of these acquisitions will be accounted
for as a purchase. Accordingly, the total purchase price of each
transaction will be allocated to assets acquired and liabilities
assumed based upon their relative fair market values. Cost in
excess of the fair market value of the net assets acquired or to
be acquired in each of these transactions (goodwill) has not been
determined. Consummation of the transactions with Family Fare
and Glen's are subject to a number of conditions to closing,
including the receipt of necessary governmental approvals. Both
transactions are expected to be completed during the fourth
quarter of Fiscal 1999 or the first quarter of Fiscal 2000.
-12-
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.
Date: March 5, 1999 SPARTAN STORES, INC.
(Registrant)
By /S/CHARLES B. FOSNAUGH
Charles B. Fosnaugh
Vice President Development
(Principal Financial
Officer and duly authorized
signatory for Registrant)
-13-