1
FORM 10-K/A
AMENDMENT NO. 3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended FEBRUARY 1, 1997
[ ] 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 0-12497
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DAIRY MART CONVENIENCE STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2497894
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 BROADWAY EAST, CUYAHOGA FALLS, OHIO 44222
(Address of principal executive offices)
Registrant's telephone number, including area code (330) 923-0421
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock (Par Value $.01)
Class B Common Stock (Par Value $.01)
(Titles of class)
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. [ ]
As of April 1, 1997, 2,987,951 shares of Class A Common Stock and 2,783,060
shares of Class B Common Stock were outstanding, and the aggregate market value
of both classes of Common Stock outstanding of DAIRY MART CONVENIENCE STORES,
INC., held by nonaffiliates was approximately $18,036,470.00.
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This Form 10-K/A Amendment No. 3 amends the Form 10-K of Dairy Mart Convenience
Stores, Inc. (the "Company") filed for the fiscal year ended February 1, 1997
to amend and restate the following in their entirety: (i) subsection of Item 1
entitled "Executive Officers and Directors of the Company," and (ii) the
information required by Items 10, 11, 12 and 13 of Part III.
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None.
PART I
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ITEM 1. BUSINESS
GENERAL
Dairy Mart Convenience Stores, Inc., and its subsidiaries (the "Company"
or "Dairy Mart"), operates one of the nation's largest convenience store chains.
Founded in 1957, the Company operates or franchises approximately 811 stores
under the "Dairy Mart" name in 11 states located in the Northeast, Midwest and
Southeast. Approximately 360 stores sell gasoline and approximately 268 stores
are franchised.
In March 1997, the Company announced that it had agreed to sell its 161
convenience store locations in Connecticut, Rhode Island, Massachusetts and New
York to the DB Companies, Inc., a Rhode Island based convenience store operator
and gasoline wholesaler and retailer for approximately $39.7 million. This
transaction is subject to certain contingencies but is expected to close on or
about May 15, 1997.
Dairy Mart stores offer a wide range of products and services which
cater to the convenience needs of its customers, including milk, ice cream,
groceries, beverages, snack foods, candy, deli products, publications, health
and beauty aids, tobacco products, lottery tickets and money orders. The stores
are typically located in densely populated, suburban areas on sites which are
easily accessible to customers and provide ample parking. Dairy Mart stores are
generally free standing structures which are well-lit and are designed to
encourage customers to purchase high profit margin products, such as deli items,
coffee, fountain drinks and other fast food items.
The Company is incorporated in Delaware and maintains its principal
executive offices at 210 Broadway East, Cuyahoga Falls, Ohio 44222. The
Company's telephone number is (330) 923-0421.
STORES
The Company's stores are generally located in densely populated suburban
areas, and are situated close to single-family homes and apartments to attract
neighborhood shoppers. Store location, design, lighting and layout are intended
to cater to customers' desire for fast and convenient access. Approximately 360
locations also sell gasoline, which the Company believes is an important
convenience for customers. Shelving and displays, including refrigeration units,
deli and other fast food counters and displays, are designed to encourage
customers to purchase high profit margin products including impulse purchase
items such as candy, fountain drinks and ice cream novelties. Stores are located
on sites which are well-lit, easily accessible by customers and provide ample
parking. All of the Company's stores also offer extended hours for additional
convenience, with over one-half of the stores open 24 hours per day. A typical
Dairy Mart store ranges between 2,400 and 3,700 square feet and is a free
standing structure.
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As of February 1, 1997, the Company operated and franchised retail
convenience stores in the following three regions of the United States:
NUMBER OF
NORTHEAST REGION STORES
-----------
Massachusetts ................................................... 58
Connecticut...................................................... 52
New York ........................................................ 35
Rhode Island..................................................... 16
--------
Total Northeast Stores...................................... 161
--------
MIDWEST REGION
Ohio............................................................. 401
Michigan......................................................... 33
Pennsylvania..................................................... 34
--------
Total Midwest Stores........................................ 468
--------
SOUTHEAST REGION
Kentucky......................................................... 142
Indiana.......................................................... 20
Tennessee........................................................ 13
North Carolina................................................... 7
--------
Total Southeast Stores...................................... 182
--------
Total Stores............................................ 811
========
UPGRADE AND REMODEL OF EXISTING STORE BASE AND CLOSING
UNDERPERFORMING STORES
The Company has an ongoing program to upgrade and remodel the Company's
retail and gasoline locations to cater to the always changing convenience needs
of today's customer. The program includes modernizing and re-imaging the store's
appearance, upgrading the gasoline facilities and installing the most modern
environmental protection equipment.
The Company has historically evaluated the performance of each of its
stores in order to determine its contribution to the Company's overall
profitability. Management has raised the acceptable level that a store's
performance must meet in order for the store to be eligible for on-going capital
expenditure support from the Company. Accordingly, in fiscal year 1997, the
Company closed 75 of its retail convenience stores and 24 of its retail gasoline
facilities due to their inability to meet the Company's economic and
non-economic criteria for long-term stability and growth.
NEW STORES
A major component in the Company's growth strategy is to continue to
build new stores and increase its level of gasoline sales. All new store
locations have significantly expanded gasoline retailing capacity and devote a
greater amount of selling space to high profit margin products.
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TECHNOLOGICAL UPGRADE
The Company's Information Systems group will begin rolling out in June
1997 a comprehensive store automation program which will significantly improve
the efficiency of the existing store operations and corporate support functions.
These enhancements, once implemented, will provide more detailed and timely
information regarding store operations, including composition of sales,
inventory levels and product pricing and profit analysis.
GASOLINE OPERATIONS
Gasoline sales enable the Company to significantly increase a store's
total level of sales without a commensurate increase in overhead. Gasoline sales
accounted for approximately 42% of total revenues of the Company in fiscal year
1997, approximately 40% for fiscal year 1996 and approximately 35% in fiscal
year 1995. As of February 1, 1997, 360 stores sold gasoline. Financial
information related to the Company's gasoline operations for the last three
fiscal years is set forth in Note 11 to the Consolidated Financial Statements.
The Company's gasoline pricing strategy is designed, in part, to provide
value to customers by offering the same quality gasoline offered by major oil
companies at prices which are generally below nationally advertised brands and
comparable to other convenience store chains. The Company obtains its gasoline
from major oil company suppliers, primarily through spot market purchases, and
believes that there are adequate supplies of fuel available from a number of
sources at competitive prices.
Gasoline profit margins have a significant impact on the Company's
income. Such profit margins could be adversely influenced by factors beyond the
Company's control, such as volatility in the wholesale gasoline market due to
supply interruptions. In addition, gasoline profit margins are continually
influenced by competition in each local market area.
PRODUCT SELECTION
All stores generally offer more than 3,000 food and non-food items
limited to well-known brand names, as well as the Company's private label
products. Most of these items would typically be offered in supermarkets. Food
items include a wide variety of products, including canned foods and groceries,
dairy products, beverages, snack items, candy, baked goods and food service
items, such as fountain soft drinks, coffee, hot dogs, deli meats and deli
sandwiches and similar foods. Non-food products and services include gasoline,
cigarettes, health and beauty aids, publications, lottery tickets and money
orders. In addition to selling well-known brand name products, the stores offer
many products that bear the "Dairy Mart" private label, including milk, bakery
products, juices and other non-carbonated beverages, ice cream and other dairy
products such as dips and cheeses.
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In recent years, the Company has been altering the mix of products to
emphasize the sale of items carrying higher profit margins. Fast food items not
only carry higher profit margins but also tend to lead to the purchase of other
high profit margin products and impulse items, including salty-snacks, candy and
beverages. Dairy Mart has introduced a number of private label products, which
generally carry a higher gross profit margin than the Company's average gross
profit margin on comparable products.
FRANCHISE OPERATIONS
The Company franchises 268 stores throughout its three geographic
regions. Franchise stores generally follow the same operating policies as
Company stores, and are subject to Company supervision under franchise
agreements. Company operated and franchise stores are of the same basic store
design and sell substantially the same products. Most franchisees purchase their
products through the same supplier used by the Company.
The Company offers two types of franchising arrangements- the "full"
franchise and the "limited" franchise. Under a full franchise agreement, the
franchisee purchases and owns both the merchandise inventory and the equipment
located in the store, and leases or subleases the store from the Company. Under
a limited franchise agreement, the franchisee owns only the merchandise
inventory while the Company retains ownership of the store equipment. Franchise
fees are higher for limited franchisees. As of February 1, 1997, there were 118
full franchise locations and 150 limited franchise locations.
The Company's franchising strategy seeks to: (i) improve the level of
retail experience of its new franchisees; and (ii) increase the level of
financial commitment by new franchisees. As part of this strategy, new
franchisees are now required to undergo more rigorous and thorough interviews
and background checks, receive increased levels of financial and retail
training, and typically make larger initial cash payments.
The following table sets forth the number of stores, on both a Company
operated and franchise operated basis, that were opened or acquired, closed or
sold, and transferred between Company operated and franchise operated, during
the last three fiscal years:
February 1, 1997 February 3, 1996 February 3, 1995
--------------------------- --------------------------- ---------------------------
Company Franchise Company Franchise Company Franchise
Operated Operated Total Operated Operated Total Operated Operated Total
-------- -------- ----- -------- -------- ----- -------- -------- -----
At beginning of period... 587 290 877 644 317 961 687 335 1,022
Opened or acquired...... 9 - 9 8 - 8 10 1 11
Closed or sold.......... (55) (20) (75) (68) (24) (92) (57) (15) (72)
Transferred (net)....... 2 (2) -- 3 (3) -- 4 (4) --
----- ----- ----- ----- ----- ----- ----- ----- -----
At end of period........ 543 268 811 587 290 877 644 317 961
===== ===== ===== ===== ===== ===== ===== ===== =====
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INTERNATIONAL OPERATIONS
The Company conducts business outside the United States as a licensor or
as a consultant. Currently, the Company is a party to two agreements with
convenience store operators in South Korea and Malaysia. As with the Company's
prior international arrangements, both agreements require a specified commitment
of Company personnel, but do not require any significant commitment of capital.
ADVERTISING
To promote a uniform image for all stores, the Company designs and
coordinates advertising for all stores to complement its marketing strategy,
which is derived, in part, from market surveys and research. In-store,
newspaper, and direct-mail advertising, special promotions and seasonal radio
and television advertising usually feature certain items which can be purchased
at the stores, and frequently include national brand items for which advertising
costs are often supplemented by the national brand suppliers. Sales promotions
are generally established and maintained on a bi-weekly or monthly basis.
COMPETITION
The convenience store and retail gasoline industries are highly
competitive. The number and type of competitors vary by location. The Company
presently competes with other convenience stores, large integrated gasoline
service station operators, supermarket chains, neighborhood grocery stores,
independent gasoline service stations, fast food operations and other similar
retail outlets, some of which are well recognized national or regional retail
chains. Some of the Company's competitors have greater financial resources than
the Company. Key competitive factors include, among others, location, ease of
access, store management, product selection, pricing, hours of operation, store
safety, cleanliness, product promotions and marketing.
SEASONALITY
Weather conditions have a significant effect on the Company's sales, as
convenience store customers are more likely to go to stores to purchase
convenience goods and services, particularly higher profit margin items such as
fast food items, fountain drinks and other beverages, when weather conditions
are favorable. Accordingly, the Company's stores generally experience higher
revenues and profit margins during the warmer weather months, which fall within
the Company's second and third fiscal quarters.
EMPLOYEES
As of February 1, 1997 exclusive of franchisees and franchisees'
employees, the Company employed, on a full-time or part-time basis,
approximately 4,100 employees.
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ENVIRONMENTAL COMPLIANCE
The Company incurs ongoing costs to comply with federal, state and local
environmental laws and regulations, including costs for assessment, compliance,
remediation and certain capital expenditures relating to its gasoline
operations. These laws and regulations relate primarily to underground storage
tanks ("USTs"). The United States Environmental Protection Agency has
established standards for, among other things: (i) maintaining leak detection;
(ii) upgrading UST systems; (iii) taking corrective action in response to
releases; (iv) closing USTs to prevent future releases; (v) keeping appropriate
records; and (vi) maintaining evidence of financial responsibility for taking
corrective action and compensating third parties for bodily injury and property
damage resulting from releases. A number of states in which the Company operates
also have adopted UST regulatory programs.
In the ordinary course of business, the Company periodically detects
releases of gasoline or other regulated substances from USTs it owns or
operates. As part of its program to manage USTs, the Company is involved in
environmental assessment and remediation activities with respect to releases of
regulated substances from its existing and previously operated retail gasoline
facilities. The Company accrues its estimates of all costs to be incurred for
assessment and remediation for known releases. These accruals are adjusted if
and when new information becomes known. Additionally, the Company records as
receivables the estimated reimbursements of a portion of the total costs from
various state environmental trust funds which have provisions for sharing or
reimbursing certain costs incurred by UST owners or operators based upon
compliance with the terms and conditions of such funds. Due to the nature of
such releases, the actual costs of assessment and remediation activities may
vary significantly from year to year. Under current federal and state regulatory
programs, the Company also will be obligated by December 22, 1998 to upgrade or
replace most existing USTs it owns or operates to meet certain corrosion,
overfill- and spill-protection and leak-detection requirements. The Company has
been evaluating each site on an individual basis to determine the type of
expenditures required to comply with these and other requirements under the
federal and state UST regulatory programs.
In addition to ongoing assessment and remediation costs, the Company
presently estimates that it will be required to make capital expenditures,
including those requiring upgrading or replacing of existing USTs, ranging from
approximately $7.0 to $8.0 million in the aggregate over the next two fiscal
years to comply with current federal and state UST regulations, which capital
expenditures could be reduced for locations (especially low volume locations)
which may be closed in lieu of the capital costs of compliance (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - Environmental Responsibility").
The Company's estimate of costs to be incurred for environmental
assessment and remediation and for UST upgrading and other regulatory compliance
are based on factors and assumptions that could change due to modifications of
regulatory requirements, detection of unanticipated environmental conditions, or
other unexpected circumstances. As a result, the actual costs incurred may vary
significantly from the estimate noted above.
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BUSINESS OUTLOOK
This Form 10-K contains forward-looking statements within the meaning of
the "safe-harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include plans and objectives to upgrade
and remodel store locations, to build new stores and increase gasoline sales, to
improve certain aspects of the franchisee program, to sell or lease certain
assets, as well as the availability of supplies of gasoline, the estimated costs
for environmental remediation and the sufficiency of the Company's liquidity and
the availability of capital. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. Such factors and uncertainties include, but are not
limited to, the availability of financing and additional capital to fund the
Company's business strategy on acceptable terms, if at all, the future
profitability of the Company, the availability of desirable store locations, the
Company's ability to negotiate and enter into lease, acquisition and supply
agreements on acceptable terms, competition and pricing in the Company's market
area, volatility in the wholesale gasoline market due to supply interruptions,
modifications of environmental regulatory requirements, detection of
unanticipated environmental conditions, the timing of reimbursements from state
environmental trust funds, the Company's ability to manage its long-term
indebtedness, weather conditions, the favorable resolution of certain pending
and future litigation, and general economic conditions. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Set forth below are the Company's executive officers and directors. Each
executive officer is appointed by the Board of Directors and serves for a one
year term, and each director serves for a one year term and until the election
and qualification of his successor.
Name and (Age) Title
-------------- -----
Frank W. Barrett (57) Director since 1983
J. Kermit Birchfield, Jr. (57) Director since 1996
John W. Everets, Jr. (51) Director since 1994
Gregory G. Landry (39) Executive Vice President,
Chief Financial Officer, and
a Director since 1991
Robert B. Stein, Jr. (39) President, Chief Executive
Officer, Chairman of the Board
and a Director since 1992
Thomas W. Janes (41) Director since 1995
Truby G. Proctor, Jr. (61) Director since 1996
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Alice R. Guiney (43) Vice President-Human
Resources
Robert J. Pietrick (48) Senior Vice President-Corporate
Marketing and Gasoline
Operations
Michael L. Poole (50) Vice President-Construction
and Planning
James M. Schulte (36) Vice President and Treasurer
Scott A. Stein (38) Vice President-Management
Information Systems
Dennis J. Tewell (40) Vice President-Business
Development
Gregory Wozniak (50) Vice President-Corporate
Counsel
Except as noted below, each of the executive officers of the Company has
been employed by the Company for more than the last five (5) years, in areas
similar to or encompassed by their current responsibilities.
FRANK W. BARRETT
Mr. Barrett is Executive Vice President of Springfield Institution for Savings.
He previously served as Senior Vice President for Bank of Ireland First
Holdings, Inc. from September 1990 to December 1993, as Senior Vice President
for Connecticut National Bank from May 1990 to September 1990, and as Senior
Vice President for Shawmut Bank, N.A. from January 1988 to May 1990.
J. KERMIT BIRCHFIELD, JR.
Mr. Birchfield is Chairman of the Board of Displaytech, Inc., a manufacturer of
high resolution ferrite liquid crystal. From June 1990 to November 1994 he
served as Senior Vice President and General Counsel of M/A-COM, Inc., a
telecommunications company. Mr. Birchfield is a member of the Board of
Directors of HSPC, Inc., a publicly held company that provides financing for
the purchase of health care equipment, Intermountain Gas Company, Inc., an
Idaho public utility company, and MFS, Inc. a wholly-owned subsidiary of Sun
Life of Canada, a registered mutual funds company.
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JOHN W. EVERETS, JR.
Mr. Everets has been Chairman of the Board and Chief Executive Officer of HSPC,
Inc., a publicly held company that provides financing for health care equipment,
since July 1993 and has been a director of HSPC, Inc. since 1983. He was
Chairman of the Board of T.O. Richardson Co., Inc., a financial services
company, from January 1990 until July 1993. Mr. Everets is also a director of
Eastern Company, a publicly held manufacturing company and Crown Northcorp, a
publicly held company that holds real estate.
THOMAS W. JANES
Mr. Janes has been a Managing Director since 1990 of Triumph Capital Group,
Inc., a firm engaged in investment banking and investment management. He is also
a general partner of Triumph-Connecticut Capital Advisors, Limited Partnership,
the general partner of Triumph-Connecticut Limited Partnership, and a limited
partner of Triumph-California Advisors, L.P., the general partner of
Triumph-California Limited Partnership.
GREGORY G. LANDRY
Mr. Landry has served as Chief Financial Officer since August 1990 and was named
Executive Vice President of the Company in April 1992. Mr. Landry joined the
Company in October 1985 and served in various financial positions, including
Treasurer. Mr. Landry is a certified public accountant and a member of the
American Institute of Certified Public Accountants.
TRUBY G. PROCTOR, JR.
Mr. Proctor is Chairman and Chief Executive Officer of Lee-Moore Oil Company,
located in Sanford, North Carolina, a privately held North Carolina based oil
jobber. From August 1987 to July 1994, Mr. Proctor served as Chairman and Chief
Executive Officer of The Pantry Inc., a privately held 460 store convenience
chain headquartered in North Carolina.
ROBERT B. STEIN, JR.
Mr. Stein was elected President of the Company in September 1994, Chief
Executive Officer in June 1995 and Chairman of the Board of Directors in
December 1995. He joined the Company in 1983 and served in various positions,
including Treasurer, General Manager of the Midwest Region, and Executive Vice
President-Operations and Marketing.
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ALICE R. GUINEY
Ms. Guiney was named Vice President Human Resources in November 1996. Prior to
joining the Company, Ms. Guiney directed corporate and field operational
disciplines of human resources for Sunglass Hut International in Coral Gables,
Florida. Ms. Guiney also held the positions of Director of Merchandising and
Director of Administration during her tenure with Burdines Department Stores.
ROBERT J. PIETRICK
Mr. Pietrick was named Senior Vice President of Marketing and Gasoline Retailing
in July 1996. Prior to joining the Company, Mr. Pietrick served as Manager of
Merchandising and Business Development for British Petroleum. During this 26
year tenure at British Petroleum, formerly Standard Oil (Ohio), Mr. Pietrick
served in retail management and strategic planning positions including Manager,
BP Express Development and Retail Manager for Singapore and Malaysia.
MICHAEL L. POOLE
Mr. Poole was named Vice President Construction and Planning in April 1996.
Prior to joining the Company, Mr. Poole was Director of Store Design and
Construction for Crabtree and Evelyn, Ltd., in Woodstock, Connecticut, and
Director of Design and Construction for Edison Brothers Stores, Inc., in St.
Louis, Missouri. Prior to his position with Edison Brothers Stores, Mr. Poole
was owner and President of The Poole Group, an architectural company.
JAMES M. SCHULTE
Mr. Schulte was named Vice President and Treasurer in December 1996. Prior to
joining the Company, Mr. Schulte served as Treasurer of Figgie International,
Inc. Prior to joining Figgie International in 1991, Mr. Schulte was an
International Tax Consultant for Ernst & Young and Manager of International
Taxes for Maytag Corporation. Mr. Schulte is a certified public accountant and a
member of the American Institute of Certified Public Accountants.
SCOTT A. STEIN
Mr. Stein was named Vice President Management Information Systems (MIS) in
November 1994. Since joining the Company in September 1992, Mr. Stein has served
as Director of Store Automation, MIS Director, and Vice President-Administration
and MIS. From February 1989 to August 1992, Mr. Stein was Director of Open
Systems Distributed Computing for Technology Investment Strategies Corporation,
an information technology consulting company. Mr. Stein is the brother of
Robert B. Stein, Jr., President, Chief Executive Officer and Chairman of the
Board.
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DENNIS J. TEWELL
Mr. Tewell was named Vice President-Business Development in 1996. Mr. Tewell
joined the former CONNA Corporation, now the Company's Southeast Region, in
1985. He previously served as Vice President-Operations for the Company's
Northeast Region, Vice President-Store Operations, Director of Operations,
Strategic Planning Coordinator in the Southeast Region, and special consultant
for the Company's international operations in Europe.
GREGORY WOZNIAK
Mr. Wozniak was named Vice President-Corporate Counsel in December 1992. In
1981, Mr. Wozniak became General Counsel for the Lawson Company, which was
later acquired by Dairy Mart in 1985. Mr. Wozniak is admitted to practice law
in Ohio and Connecticut and is a member of the Ohio State and American Bar
Associations.
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PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding directors and executive
officers of the Company is set forth under the caption "Executive Officers And
Directors Of The Company" in Item 1 of this Form 10-K/A Amendment No. 3 and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS' COMPENSATION
The following table provides certain information for the Company's past
three fiscal years regarding the cash and other compensation paid to, earned by,
or awarded to those persons who, during the last fiscal year, (i) served as the
Company's Chief Executive Officer or in a similar capacity, (ii) were the three
most highly compensated executive officers whose total annual salary and bonus
exceeded $100,000 and (iii) one additional individual for whom disclosure would
have been provided had he been serving as executive officer of the Company as of
the filing date of this form 10-K/A Amendment No. 3.
Summary Compensation Table
Long Term
Annual Compensation(a) Compensation
--------------------------------------- ----------------------
Awards(b)
----------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Principal Fiscal Compensation Awards Options Compensation
Position Year Salary Bonus (c) (d) (e) (f)
----------------------- ----- -------- -------- ------------ ---------- ---------- ------------
Robert B. Stein, Jr., 1997 $282,700 $ 22,500 $ 1,412 $ -- -- $ 9,435
President, Chief 1996 254,808 162,500 -- 230,000 95,555 9,533
Executive Officer and 1995 199,808 35,000 -- -- 96,945 11,588
Chairman of the Board
Gregory G. Landry, 1997 226,346 18,900 47,795 -- -- 8,670
Executive Vice President 1996 214,038 131,500 -- 115,000 55,332 8,670
and Chief Financial 1995 179,041 35,000 -- -- 70,543 9,118
Officer
Gregory Wozniak, 1997 116,541 14,900 58,345 -- -- 485
Vice President-Corporate 1996 112,122 16,500 -- 57,500 6,250 528
Counsel 1995 108,754 15,000 20,033 -- 2,500 592
Scott A. Stein, 1997 113,077 9,000 774 -- -- 1,216
Vice President-Management 1996 100,098 15,000 926 57,500 5,000 173
Information Systems 1995 92,311 10,000 291 -- 14,000 --
Gregg O. Guy, 1997 166,346 18,500 108,479 -- -- 505
Former Executive Vice 1996 152,885 22,500 37,554 86,250 -- 645
President - Operations(g) 1995 131,860 20,000 -- -- 50,000 1,263
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(a) Annual compensation does not include non-cash compensation
that in the aggregate does not exceed the lesser of $50,000
or 10% of the total annual salary and bonus of each named
executive officer.
(b) The Company did not grant any stock appreciation rights and
make any long-term incentive plan payments during fiscal
1997, 1996 or 1995.
(c) Other annual compensation for the following named executive
officers includes the following amounts paid on behalf of, or
received by, each officer (i) $46,488 in relocation expense
for Mr. Landry in fiscal 1997, (ii) $108,277 and $28,801 in
relocation expense for Mr. Guy in fiscal 1997 and 1996,
respectively, (iii) $57,554 in relocation expense for Mr.
Wozniak in fiscal 1997, and (iv) a $11,250 gain related to an
exercised stock option to purchase 6,000 shares of Common
Stock and $5,771 for automobile expenses for Mr. Wozniak in
fiscal 1995.
(d) In January 1996, the Company awarded restricted stock to
certain executive officers under the Company's 1995 Stock
Option and Incentive Award Plan. Robert B. Stein, Jr.,
Gregory G. Landry, Gregory Wozniak, Scott A. Stein and Gregg
O. Guy were awarded 40,000, 20,000, 10,000, 10,000 and
15,000 shares of Class A Common Stock, respectively. The
restricted shares will vest equally over a three year period
following the grant date, if the closing price of the
Company's Class A Common Stock, as reported on the American
Stock Exchange (AMEX) achieves price targets, in each case
for a consecutive ten day period, $9.00, $11.00 and $13.00,
respectively, during the first, second, and third years from
the date of the grant. Dividends will not be paid on
unvested restricted stock awards. These named executive
officers have not received any other restricted stock
awards.
(e) The Company did not grant options to purchase shares of the
Company's common stock in fiscal year 1997 to any of the
named executive officers.
(f) Includes amounts contributed for the benefit of the Company's
executive officers to the Company's qualified profit sharing
plan and premiums paid by the Company for split-dollar and
life insurance for the benefit of certain executive officers
during the applicable years. Company contributions to the
qualified profit sharing plan for each of the 1997, 1996, and
1995 fiscal years, respectively, included $555, $645 and
$1,984 for Robert B. Stein, Jr.; $0, $0 and $448 for Gregory
G. Landry; $505, $645 and $1,263 for Gregg O. Guy; $485, $528
and $592 for Gregory Wozniak; and $1,216, $173 and $0 for
Scott A. Stein. Premiums paid on split-dollar and life
insurance for each of the 1997, 1996 and 1995 fiscal years,
respectively, included $8,880, $8,888 and $9,604 for Robert
B. Stein, Jr. and $8,670, $8,670 and $8,670 for Gregory G.
Landry.
(g) Mr. Guy's employment with the Company was terminated as of
May 16, 1997. Mr. Guy had an employment agreement with the
Company pursuant to which the Company paid to Mr. Guy
$318,750 in severance costs.
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16
OPTIONS GRANTS IN LAST FISCAL YEAR
The Company did not grant options in fiscal year 1997 to any of the
executive officers listed in the Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The table below sets forth information regarding stock options that were
exercised, if any, during the past fiscal year, and unexercised stock options
held as of February 1, 1997, by the executive officers listed in the Summary
Compensation Table above:
Number of Value of
Shares Underlying Unexercised
Unexercised In-the-Money
Number of Options at Options at
Shares Acquired FY-End FY-End (1)
on Exercise of Exercisable (E)/ Exercisable (E)/
Name Options Value Realized Unexercisable (U) Unexercisable (U)
- -------------------------- ---------------- -------------- ----------------- ---------------------
Robert B. Stein, Jr....... 12,500 $21,875 94,236 (E) $260,278 (E)
85,764 (U) 193,055 (U)
Gregory G. Landry......... -- -- 75,417 (E) 213,230 (E)
50,458 (U) 114,146 (U)
Gregory Wozniak........... -- -- 15,813 (E) 45,914 (E)
6,938 (U) 16,555 (U)
Scott A. Stein............ -- -- 9,000 (E) 25,094 (E)
11,000 (U) 28,906 (U)
Gregg O. Guy.............. -- -- 33,375 (E) 98,156 (E)
16,625 (U) 47,906 (U)
- ---------------------------
<FN>
(1) Values are calculated for options "in the money" by subtracting the
exercise price per share from the closing price per share of the
applicable class of the Company's Class A and Class B Common Stock on
February 1, 1997, which amounts were each $5.75 per share,
respectively. Certain of the executive officers have options to
purchase shares of Common Stock at exercise prices greater than the
fair market value of the applicable class of Common Stock as of
February 1, 1997. Such options are not "in the money" and their value
is, therefore, not disclosed above.
EMPLOYMENT AGREEMENTS
In June 1995, the Company entered into employment agreements (the
"Employment Agreements") with Messrs. Stein and Landry. The Employment
Agreements are initially for two (2) year terms, but such terms are
automatically extended each year for an additional year unless the Company or
the employee gives notice that it or he does not desire to have the term
extended before February 28th of each year.
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17
Under the Employment Agreements, Messrs. Stein and Landry receive
annual salaries that may be increased, but may not be decreased. In addition,
Employment Agreements provide that the Board of Directors, or a committee
thereof, may award each employee annual bonuses if performance criteria to be
determined by the Board are met.
Under the Employment Agreements, if the employee's employment is
terminated for any reason, other than by the Company without cause or by the
employee for good reason, or as a result of death or disability, then the
employee will receive his salary and bonus through the date of termination. If
the employee dies or is disabled, he will also receive any additional benefits
that are provided under the Company's death and disability programs in effect at
the time of death or disability. In addition, if an employee is disabled and
there is no disability program in effect or if an employee dies, then the
employee's beneficiary will receive 100% of the employee's annual salary and
amount equal to the highest of the aggregate bonus payments earned by the
employee for any of the last three twelve month periods prior to the date of
termination.
The Employment Agreements provide that if the employee's termination is
by the Company without cause or by the employee for good reason, and not as a
result of the employee's death or disability, the employee will receive his full
salary and bonus through the date of termination. The amount of the employee's
bonus will be the highest of the aggregate bonus payments earned by the employee
for any of the last three twelve month periods prior to the date of termination.
The Agreements also provide that after such termination, each of Messrs. Stein
and Landry will also receive a severance payment equal to two (2) times the sum
of his full base salary and annual bonus. If any payment in connection with the
termination of the employee's employment under the Employment Agreements would
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), then the Company will pay the employee an
additional payment equal to the amount of any excise tax the employee as a
result of the employee's receipt of the additional payment.
DIRECTORS' COMPENSATION
Messrs. Barrett, Birchfield, Everets, Janes and Proctor received
directors, fees of $19,000, $19,000, $19,000, $18,000, and $19,000,
respectively, for the fiscal year ended February 1, 1997. The annual fee for
outside directors for the 1997 fiscal year is $12,000 plus $1,000 for each
regular or special meeting of the Board attended. The remaining directors, who
are employees of the Company, receive no directors' fees. In addition to the
forgoing fees, on February 1, 1997, Messrs. Barrett, Birchfield, Everets, Janes
and Proctor each received an option to purchase 3,500 shares of Class A Common
Stock at $5.75 per share pursuant to the Company's 1995 Stock Option Plan for
Outside Directors.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during the last fiscal year were Messrs. Barrett, Birchfield, and
Everets. None of these individuals was at any time during fiscal year 1997, or
at any other time, an officer or employee of the Company. No executive officer
of the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
INFORMATION REGARDING DM ASSOCIATES AND THE SETTLEMENT AGREEMENT
STOCK OWNED BY DM ASSOCIATES
DM Associates Limited Partnership ("DM Associates") is the owner of
record of 1,858,743 shares of Class B Common Stock of the Company, representing
approximately 66.8% of the issued and outstanding shares of Class B Common
Stock, and 60.2% of the total voting power of both classes of the Common Stock.
The general partner of DM Associates is New DM Management Associates I ("DM
Management I"), which is a general partnership. The general partners of DM
Management I are Robert B. Stein, Jr., a Director and the Chairman, Chief
Executive Officer and President of the Company, and Gregory G. Landry, a
Director and the Executive Vice President and Chief Financial Officer of the
Company.
In March 1992, DM Associates financed part of the purchase of its
1,858,743 shares of Class B Common Stock by obtaining a $7,100,000 loan (the
"Limited Partnership Loan") from the Connecticut Development Authority ("CDA").
The Limited Partnership Loan is secured by DM Associates' collateral pledge of
1,220,000 shares of the Class B Common Stock owned by DM Associates,
representing 43.8% of the issued and outstanding shares of Class B Common Stock
and 39.5% of the total voting power of both classes of Common Stock. In
September 1994, FCN Properties Corporation, a corporation owned and controlled
by Charles Nirenberg, a former stockholder, Director and executive officer of
the Company, purchased all of the CDA's right, title and interest in and to the
Limited Partnership Loan. In December 1995, FCN Properties Corporation sold the
Limited Partnership Loan to the Company.
The limited partnership agreement of DM Associates provides that if the
term of the limited partnership is extended beyond September 12, 1997, any
limited partner whose percentage interest in DM Associates is greater than 30%
may sell all or a portion of his or its interest, subject to DM Associates right
of first refusal to purchase such interest. If DM Associates and such limited
partner do not agree on the terms of acquiring such limited partner's interest,
and there is not a third party purchaser, such limited partner has the right to:
(i) demand the dissolution of DM Associates and the distribution of its assets
to its partners; or (ii) cause such assets to be sold. The limited partnership
agreement also requires DM Management I to consult with a certain limited
partner of DM Associates before voting any shares at a meeting of the Company's
shareholders or exercising any consensual
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19
rights of such shares. If DM Management I votes or exercises consensual rights
of such shares in a manner in which such limited partner does not agree, the
limited partner may dissolve DM Associates. As DM Associates' principal asset is
its 1,858,743 shares of Class B Common Stock, if such a dissolution or sale
occurs, a change in control of the Company could result.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning
beneficial ownership of the Company's Common Stock by each shareholder known by
the Company to be the beneficial owner of 5% or more of either class of Common
Stock as of May 3, 1997. This information is furnished in accordance with the
Securities and Exchange Commission ("SEC") regulations relating to any persons
known by the Company to be the beneficial owners of 5% or more of Common Stock.
In preparing the following table, the Company has relied on information filed by
such persons with the SEC, and in some cases, other information provided to the
Company by such persons.
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial owner Ownership of Class
- ------------------- --------------------------------- ------------------- ---------
Class B DM Associates Limited Partnership 1,858,743 (1) 66.8%
Common Stock One Vision Drive
Enfield, Connecticut
New DM Management Associates I 1,858,743 (1) 66.8%
One Vision Drive
Enfield, Connecticut
Robert B. Stein, Jr. 1,858,743 (1) 66.8%
One Vision Drive
Enfield, Connecticut
Gregory G. Landry 1,858,743 (1) 66.8%
One Vision Drive
Enfield, Connecticut
- ------------------------------------------------------------------------------------------------------
Class A James Wilen and Wilen Management 319,373 (2) 10.6%
Common Stock Corporation
2360 West Joppa Road
Suite 226
Lutherville, Maryland
Heartland Advisors, Inc. 530,000 (3) 17.5%
790 North Milwaukee Street
Milwaukee, Wisconsin
The IDS Mutual Fund Group 374,665 (4) 11.0%
IDS Tower 10
Minneapolis, Minnesota
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OKGBD & Co. 360,001 (5) 10.6%
c/o Bankers Trust
P.O. Box 704
Church Street Station
New York, NY 10015
Triumph-Connecticut Limited 765,000 (6) 20.2%
Partnership
60 State Street, 21st Floor
Boston, Massachusetts
- ------------
<FN>
Notes to Table
(1) DM Associates Limited Partnership ("DM Associates") is the owner of
record of 1,858,743 shares of Class B Common Stock, representing approximately
66.8% of the issued and outstanding shares of Class B Common Stock, and 60.2% of
the total voting power of both classes of the Common Stock. The general partner
of DM Associates is New DM Management Associates I ("DM Management I"), which is
a general partnership. The general partners of DM Management I are Robert B.
Stein, Jr., and Gregory G. Landry, each owning one half of the partnership
interest of DM Management I.
As the sole general partner of DM Associates and by virtue of the
provisions of the limited partnership agreement of DM Associates, DM Management
I has the power to vote and dispose of the 1,858,743 shares owned by DM
Associates, subject to the consent of the limited partners of DM Associates
being required for any sale of more than 360,000 shares. In addition, the
partnership agreement of DM Associates provides that, prior to voting the
1,858,743 shares, DM Management I shall consult with a certain limited partner
as to the voting of such shares. If, after consultation with the limited
partner, DM Management I votes the shares in a manner with which the limited
partner disagrees, the limited partner shall have the right to dissolve DM
Associates.
The partnership agreement of DM Management I provides that a majority
of the partnership interests of DM Management I determine how to vote 638,743 of
the shares of Class B Common Stock owned by DM Associates, and that the
remaining 1,220,000 shares of Class B Common Stock owned by DM Associates will
be voted for or against any stockholder motion or proposal in the same
proportion that all other shares of Class B Common Stock are voted for or
against such motion or proposal (including 638,743 shares voted by DM
Associates).
As the managing general partner of DM Management I, Mr. Stein has sole
indirect dispositive power with respect to the 1,858,743 shares owned by DM
Associates, and shares voting power with respect to the 1,858,743 shares with
Mr. Landry, as general partners of DM Management I. Mr. Stein and Mr. Landry, as
officers and directors of the Company, also share indirect voting and
dispositive power with respect to 1,220,000 of the 1,858,743 shares under a
stock pledge agreement executed by DM Associates in favor of the Company.
The number of shares set forth in the table above does not include
shares of Class A Common Stock that any of Messrs. Stein and Landry may
beneficially own.
(2) A Schedule 13G was filed with the SEC by Wilen Management
Corporation ("Wilen") and James Wilen in his capacity as President and sole
owner of Wilen, to report Wilen's beneficial ownership as an investment advisor
to various clients, of shares of Class A Common Stock. The 319,373 shares
represent approximately 5.5% of the total number of issued and outstanding
shares of both classes of the Company's Common Stock, and approximately 1.0% of
the total voting power of both classes of the Company's Common Stock.
(3) Heartland Advisors, Inc. reported on a Schedule 13G filed with the
SEC its beneficial ownership, as an investment advisor, of shares of Class A
Common Stock. The 530,000 shares represent approximately 9.1% of the total
number of issued and outstanding shares of both classes of the Company's Common
Stock and approximately 1.7% of the total voting power of both classes of the
Company's Common Stock.
(4) The IDS Mutual Fund Group, through nominees, holds currently
exercisable Warrants to purchase an aggregate of 374,665 shares of Class A
Common Stock. If the 374,665 shares underlying the Warrants were issued, they
would represent approximately 5.8% of the total number of issued and outstanding
shares of both classes of Common Stock, and approximately 1.2% of the total
voting power of both classes of Common Stock.
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(5) OKGBD & Co. and its affiliates hold currently exercisable Warrants
to purchase an aggregate of 360,001 shares of Class A Common Stock. If the
360,001 shares underlying the Warrants were issued, they would represent
approximately 5.8% of the total number of issued and outstanding shares of both
classes of Common Stock, and approximately 1.2% of the total voting power of
both classes of Common Stock.
(6) Triumph-Connecticut Limited Partnership ("Triumph"), Triumph's
general partner, Triumph-Connecticut Capital Advisors, Limited Partnership
("TCCALP"), and TCCALP's general partners, Triumph-Capital Group, Inc., Fredrick
W. McCarthy, Fredrick S. Moseley, IV, E. Mark Norman, Thomas W. Janes, John M.
Chapman and Richard J. Williams, reported on a Schedule 13D filed with the SEC
their shared beneficial ownership of currently exercisable Warrants to purchase
an aggregate of 765,000 shares of Class A Common Stock. If the 765,000 shares
underlying the Warrants were issued, they would represent approximately 11.6% of
the total number of issued and outstanding shares of both classes of Common
Stock, and approximately 2.4% of the total voting power of both classes of
Common Stock.
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STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information furnished by the
directors, certain executive officers, and all directors and executive officers
as a group concerning ownership of the Company's Common Stock as of May 3, 1997:
Shares (and Percent) of Common Stock
Name Beneficially Owned as of May 3, 1997
- ---------------------------- ----------------------------------------------------------------------
Percent
Director Class B Class A of Total
Class B Directors Since Common Stock Common Stock Voting Power
----------------- -------- ---------------- ---------------- ------------
Frank W. Barrett............ 1983 1,250 (*) 6,875 (*)(1) (*)
J. Kermit Birchfield, Jr.... 1996 2,000 (*) 5,875 (*)(2) (*)
John W. Everets, Jr......... 1994 10,000 (*) 4,375 (*)(3) (*)
Gregory G. Landry........... 1991 1,858,743 (66.8%) 75,417 (2.4%)(4)(5) (60.3%)
Robert B. Stein, Jr......... 1992 1,858,743 (66.8%) 113,911 (3.7%)(4)(6) (60.4%)
Class A Directors
-----------------
Thomas W. Janes............. 1995 0 765,875 (20.2%)(7)(8) (2.4%)
Truby G. Proctor, Jr........ 1996 13,000 (*) 875 (*)(9) (*)
Named Executive
Officers and Directors
---------------------------
Scott A. Stein.............. N/A 0 9,000 (*)(10) (*)
Greg Wozniak................ N/A 0 15,813 (*)(11) (*)
Gregg O. Guy................ N/A 0 43,328 (1.2%)(12) (*)
All Directors and Executive
Officers as a Group
---------------------------
(15 persons)................ 1,884,993 (67.7%) 1,054,293 (26.1%)(13) (62.5%)
<FN>
(*) Owns Less than 1% of the issued and outstanding class of Common Stock
or of the total voting power.
(1) Includes currently exercisable non-qualified stock options granted to
Mr. Barrett to purchase 6,875 shares of Class A Common Stock.
(2) Includes currently exercisable non-qualified stock options granted to
Mr. Birchfield to purchase 875 shares of Class A Common Stock.
(3) Includes currently exercisable non-qualified stock options granted to
Mr. Everets to purchase 4,375 shares of Class A Common Stock.
(4) Messrs. Stein and Landry are each partners of DM Management I
(described in footnote 1 to the Principal Shareholders table above).
The shares of Class B Common Stock set forth in this table for each of
such persons include the shares set forth for each person in the
Principal Shareholders table above.
(5) Includes currently exercisable incentive stock options granted to Mr.
Landry to purchase 75,417 shares of Class A Common Stock.
(6) Includes currently exercisable incentive stock options granted to Mr.
Stein to purchase 94,236 shares of Class A Common Stock.
(7) The shares of Class A Common Stock set forth in this table for Mr.
Janes include the shares set forth for Triumph in the Principal
Shareholders table above. Mr. Jane's pecuniary interest in the 765,000
shares is based upon his status as general partner of TCCALP, general
partner of Triumph, the entity holding the shares, and is not
discernible. Mr. Janes disclaims beneficial ownership of all shares
other than those attributable to him as a general partner of TCCALP.
(8) Includes currently exercisable non-qualified stock options granted to
Mr. Janes to purchase 875 shares of Class A Common Stock.
(9) Includes currently exercisable non-qualified stock options granted to
Mr. Proctor to purchase 875 shares of Class A Common Stock.
(10) Includes currently exercisable incentive stock options to Mr. Stein to
purchase 9,000 shares of Class A Common Stock.
(11) Includes currently exercisable incentive stock options to Mr. Wozniak
to purchase 15,813 shares of Class A Common Stock.
(12) Includes currently exercisable incentive stock options to Mr. Guy to
purchase 33,375 shares of Class A Common Stock.
(13) Includes currently exercisable stock options granted to all directors
and executive officers of the Company to purchase 252,216 shares of
Class A Common Stock and currently exercisable Warrants to purchase
765,000 shares of Class A Common Stock.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following executive officers and directors of the Company did not
timely file with the SEC, on certain occasions, their reports on Forms 3, 4 or 5
to report changes in their beneficial ownership of the Company's Common Stock:
Robert J. Pietrick (one report due upon becoming an executive officer); Michael
L. Poole (one report due upon becoming an executive officer); Frank W. Barrett
(one report for one transaction); J. Kermit Birchfield, Jr. (one report for one
transaction); John W. Everets, Jr. (one report for one transaction); Thomas W.
Janes (one report for one transaction); Truby G. Proctor, Jr. (one report for
one transaction); Robert B. Stein (two reports for two transactions); Robert J.
Pietrick (one report for one transaction); Michael L. Poole (one report for one
transaction); Gregg O. Guy (one report for one transaction); Scott A. Stein (one
report for one transaction); Gregory Wozniak (one report for one transaction);
and Dennis J. Tewell (two reports for two transactions).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
Dated: June 2, 1997
DAIRY MART CONVENIENCE STORES, INC.
By /s/ Robert B. Stein, Jr.
----------------------------------------
Robert B. Stein, Jr.
President, Chief Executive Officer
and Chairman of the Board of Directors
By /s/ Gregory G. Landry
----------------------------------------
Gregory G. Landry
Executive Vice President and
Chief Financial Officer
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