UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 5, 2002.
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: 000-31127
SPARTAN STORES, INC.(Exact Name of Registrant as Specified in Its Charter)
Michigan(State or Other Jurisdictionof Incorporation or Organization)
38-0593940(I.R.S. EmployerIdentification No.)
850 76th Street, SWP.O. Box 8700Grand Rapids, Michigan(Address of Principal Executive Offices)
49518(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 February 1, 2002, the registrant had 19,763,069 outstanding shares of common stock, no par value.
PART IFINANCIAL INFORMATION
ITEM 1.
Financial Statements
SPARTAN STORES, INC. AND SUBSIDIARIESConsolidated Balance Sheets(In thousands)
ASSETS
January 5,2002
March 31,2001
(Unaudited)
Current assets:
Cash and cash equivalents
$
12,622
21,577
Marketable securities
10,392
21,978
Accounts receivable, net
96,142
87,565
Inventories
208,655
179,589
Prepaid expenses
9,386
9,076
Deferred income taxes
1,521
3,894
Total current assets
338,718
323,679
Other assets:
Goodwill, net
156,756
155,737
Other, net
30,110
36,139
Total other assets
186,866
191,876
Property and equipment, net
271,545
285,988
Total assets
797,129
801,543
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
107,753
116,105
Accrued payroll and benefits
29,347
37,158
Insurance reserves
16,833
20,602
Other accrued expenses
30,808
31,715
Current maturities of long-term debt
33,704
38,478
Total current liabilities
218,445
244,058
10,545
13,840
Postretirement benefits
11,477
12,853
Other long-term liabilities
10,338
5,747
Long-term debt
310,445
306,632
Shareholders' equity:
Common stock, voting, no par value; 50,000 shares
Authorized; 19,763 and 19,262 shares outstanding
115,700
109,868
Preferred stock, non-voting, no par value;
10,000 shares authorized; no shares issued or outstanding
-
Accumulated other comprehensive loss
(3,239
)
Retained earnings
123,418
108,545
Total shareholders' equity
235,879
218,413
Total liabilities and shareholders' equity
SPARTAN STORES, INC. AND SUBSIDIARIESConsolidated Statements of Earnings(In thousands, except per share data)(Unaudited)
Third Quarter (16 Weeks) Ended
December 30,2000
Net sales
1,062,758
1,135,844
Cost of goods sold
885,892
947,304
Gross margin
176,866
188,540
Other costs and expenses
Selling, general and administrative
169,924
168,220
Interest expense
8,442
9,682
Interest income
(722
(1,912
Other (gains) losses, net
(810
854
Total other costs and expenses
176,834
176,844
Earnings before income taxes and discontinued operations
32
11,696
Income taxes
12
4,667
Earnings before discontinued operations
20
7,029
Earnings from discontinued insurance segment (net of taxes)
34
274
Net earnings
54
7,303
Basic and diluted earnings per share:
Earnings from continuing operations
0.00
0.36
Earnings from discontinued operations
0.01
0.37
Weighted average shares outstanding:
Basic
19,758
19,498
Diluted
20,009
Year-to-Date (40 Weeks) Ended
2,736,390
2,640,306
2,265,021
2,238,065
471,369
402,241
431,789
351,881
21,035
23,626
(1,874
(3,412
Other gains, net
(2,330
(2,361
448,620
369,734
22,749
32,507
7,650
12,789
15,099
19,718
(Loss) earnings from discontinued insurance segment (net of taxes)
(226
325
14,873
20,043
Basic earnings per share:
0.77
1.18
(Loss) earnings from discontinued operations
(0.01
0.02
0.76
1.20
Diluted earnings per share:
0.75
19,483
16,677
19,748
16,678
SPARTAN STORES, INC. AND SUBSIDIARIESConsolidated Statements of Shareholders' Equity(In thousands)
CommonStock
Class ACommonStock
AdditionalPaid-InCapital
AccumulatedOtherComprehensiveIncome (Loss)
RetainedEarnings
Total
Balance -- March 26, 2000
19,838
14,240
91,929
126,007
Class A common stock transactions:
53 shares issued
105
596
701
1 shares purchased
(2
(11
(13
Cash dividends - $0.0125 per share
(125
Stock dividend -- 0.336 per share
6,701
(6,701
Conversion to no par common stock
41,467
(26,642
(14,825
Common stock transactions:
6,270 shares issued
70,957
330 shares purchased
(2,556
23,442
Balance -- March 31, 2001
505 shares issued
5,865
4 shares purchased
(33
Comprehensive income:
Other comprehensive income (loss), net of tax:
Cumulative effect of change in accounting
- -
(1,588
Unrealized gain on securities
327
Minimum pension liability adjustment
Net loss on interest rate swap agreement
(1,853
Total other comprehensive loss
Total comprehensive income (loss)
11,634
Balance -- January 5, 2002(unaudited)
SPARTAN STORES, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(In thousands)(Unaudited)
Year-to-Date(40 Weeks) Ended
Cash flows from operating activities:
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
36,396
28,699
(1,589
1,812
Deferred taxes on income
833
(252
Other gains
(2,329
(2,362
Change in operating assets and liabilities:
11,574
(152
Accounts receivable
(8,577
6,040
(29,066
(15,138
(310
(2,339
(8,352
(6,627
(7,811
(547
(3,769
400
4,466
(6,178
Net cash provided by operating activities
6,339
23,399
Cash flows from investing activities:
Purchases of property and equipment
(26,622
(13,555
Proceeds from the sale of property and equipment
13,261
9,153
Acquisition of Seaway Food Town, Inc.
(2,106
(51,792
Other
674
98
Net cash used in investing activities
(14,793
(56,096
Cash flows from financing activities:
Net proceeds from Revolving Credit Facility
27,300
Proceeds from long-term borrowings
3,988
64,557
Repayment of long-term debt
(32,540
(20,017
Proceeds from sale of common stock
784
Class A common stock purchased
Common stock purchased
(1,297
Dividends paid
Net cash (used in) provided by financing activities
(501
43,819
Net (decrease) increase in cash and cash equivalents
(8,955
11,122
Cash and cash equivalents at beginning of period
36,422
Cash and cash equivalents at end of period
47,544
SPARTAN STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
Note 1Accounting Policies
The Consolidated Financial Statements include the accounts of Spartan Stores, Inc. and its subsidiaries ("Spartan Stores"). All significant intercompany accounts and transactions have been eliminated.
The interim information contained in the Consolidated Financial Statements is unaudited. The statements reflect all adjustments which, in the opinion of management, are necessary for the fair presentation of the results of the interim periods presented. All such adjustments are of a normal, recurring nature.
The accounting policies followed in the presentation of interim financial results are the same as those followed on an annual basis. These policies are presented in Note 1 to the Consolidated Financial Statements included in Spartan Stores' Annual Report on Form 10-K for the fiscal year ended March 31, 2001, filed with the Securities and Exchange Commission on June 20, 2001.
Comprehensive income is net earnings adjusted for the net loss on interest rate swap agreements, including the cumulative effect of change in accounting, unrealized gain on securities and minimum pension liability.
Certain prior year amounts have been reclassified to conform to current year classifications.
Note 2Cumulative Effect of Change in Accounting Principle
Spartan Stores uses interest rate swap agreements that effectively convert a portion of variable rate debt to a fixed rate basis. These agreements are considered to be a hedge against changes in future cash flow. Accordingly, the interest rate swap agreements are reflected in the Consolidated Balance Sheet and the related gain or loss on these contracts are deferred in shareholders' equity as a component of other comprehensive income. There was no impact on earnings as all existing cash flow hedges are highly effective and, assuming the swap agreement continues to qualify as a hedge on the related debt, Spartan Stores expects no material impact on earnings in the next twelve months.
Spartan Stores recorded a cumulative transition adjustment loss of $1.6 million in other comprehensive income on April 1, 2001 (net of related income tax of $.8 million) and a current year-to-date loss of $1.9 million in other comprehensive income (net of related income tax of $1 million) pertaining to its interest rate swap agreements in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be reported on the balance sheet at fair value. If the derivative is designated in a cash-flow hedge,
Note 3New Accounting Standards
The Financial Accounting Standards Board ("FASB") recently issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Adoption of these statements will become effective for Spartan Stores on March 31, 2002, and is expected to result in significant modifications relating to Spartan Stores' accounting for intangible assets. Specifically, Spartan Stores will cease amortizing goodwill and certain other intangible assets beginning March 31, 2002. For the forty weeks ended January 5, 2002 and December 30, 2000, total intangible asset amortization was $3.7 and $2.7 million, respectively. Intangible assets, including goodwill, will also be subjected to new impairment testing criteria. Spartan Stores is currently evaluating the impact of adopting these statements on its financial statements.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which replaces SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of segments of a business. The statement creates one accounting model, based on the framework established in SFAS No. 121, to be applied to all long-lived assets including discontinued operations. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Spartan Stores determined that its current accounting policy for the impairment of long-lived assets is consistent with SFAS No. 144.
Note 4Discontinued Operations
In January 2001, Spartan Stores' board of directors approved management's plan to discontinue the operations of the insurance segment. Accordingly, the results of operations of the insurance segment have been reported as discontinued operations. On December 31, 2001, Spartan Stores paid approximately $5 million to transfer a portion of its reinsurance loss portfolio to an unrelated entity. This transaction has allowed Spartan Stores to reduce its outstanding letters of credit by $4.6 million with an additional reduction of $1.6 million expected within 60 to 120 days after December 31, 2001.
After the aforementioned transaction, Spartan Stores has approximately $6.5 million remaining in insurance reserves for claims related to policies retained. Spartan Stores will remain obligated under these policies until all claims are closed and has retained an independent third party administrator to manage these claims.
Note 5Operating Segment Information
The following tables set forth segment information in thousands.
January 5, 2002(Unaudited)
December 30, 2000(Unaudited)
Retail grocery
439,310
433,723
Grocery store distribution
356,208
428,450
Convenience store distribution
265,583
271,687
Real estate
1,657
1,984
1,121,643
823,377
917,136
1,104,481
692,538
705,398
5,073
7,050
Earnings (loss) before income taxes anddiscontinued operations
(8,539
4,116
5,194
4,351
2,399
2,427
978
802
Earnings before income taxes anddiscontinued operations
906
8,177
13,332
12,377
6,809
7,307
1,702
4,646
March 31, 2001
494,309
482,937
569,985
560,229
90,589
83,297
48,936
56,951
Discontinued operations -- insurance segment
30,144
31,067
Less -- eliminations
(436,834
(412,938
Note 6Contingencies
In May 1997, a complaint was filed by individual plaintiffs on behalf of the state of Tennessee and its taxpayers against the leading cigarette manufacturers operating in the United States and certain wholesalers and distributors, including J.F. Walker Company, Inc., a subsidiary of Spartan Stores. The plaintiffs in the case are seeking compensatory, punitive and other damages, reimbursement of medical and other expenditures and equitable relief. In 1998, J.F. Walker was voluntarily dismissed as a defendant. The federal district court dismissed the case for lack of standing. In April 2000, the court of appeals affirmed the lower court's decision.
On June 20, 2000, the plaintiffs filed an amended complaint, which included J.F. Walker as a defendant. On August 17, 2000, the court entered an order dismissing with prejudice all plaintiffs' claims brought by or on behalf of the state of Tennessee and its taxpayers, including claims against J.F. Walker. On August 21, 2001, the court entered an order dismissing the plaintiffs' motion to file another amended complaint and reaffirming the dismissal of the case. The court ruled that it lacked jurisdiction to hear plaintiffs' motion to file a second amended complaint after remand and that the motion should be denied even if the court had jurisdiction.
Due to certain procedural issues, this action may not at this time be completely resolved. However, management believes that the ultimate outcome of this action should not have a material adverse effect on the consolidated financial position, results of operations or liquidity of Spartan Stores. In addition, one of the cigarette manufacturers named as a defendant in this action has agreed to indemnify J.F. Walker from damages arising out of this action.
Various other lawsuits and claims, arising in the ordinary course of business, are pending or have been asserted against Spartan Stores. 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, results of operations or liquidity of Spartan Stores.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The following table sets forth Spartan Stores' Consolidated Statements of Earnings as percentages of net sales:
January 5,2002(Unaudited)
December 30,2000(Unaudited)
100.0
%
16.6
17.2
15.2
Less:
16.0
14.8
15.8
13.3
0.8
0.9
(0.1
(0.2
0.1
15.6
16.4
14.0
1.0
1.2
0.4
0.3
0.5
0.6
0.7
Net Sales
Net sales for the quarter ended January 5, 2002 declined 6.4 percent to $1,062.8 million from $1,135.8 million in the prior year quarter. Net sales for the year-to-date period increased 3.6 percent to $2,736.4 million from $2,640.3 million in the prior year.
Net sales for the quarter and year-to-date periods ended January 5, 2002 in the retail grocery segment increased 1.3 and 36.2 percent or $5.6 and $298.3 million, respectively, compared to the prior year. The increase reflects additional sales from the merger with Food Town in the second quarter of fiscal year 2001 and the acquisition of Prevo's Family Market, Inc. ("Prevo's") during the fourth quarter of fiscal year 2001. Partially offsetting the increase was a 5.2 and 2.5 percent
In response to the retail sales declines, Spartan Stores began the implementation of plans to improve operations in Ohio. The plans focus on the in-store experience, product offerings and quality of physical facilities. Management continues to evaluate other acquisition opportunities in the retail grocery industry and expects acquisitions to contribute to future sales growth.
Net sales for the quarter and year-to-date periods ended January 5, 2002 in the grocery store distribution segment declined 16.9 and 17.0 percent or $72.2 and $187.3 million, respectively, compared to the prior year. The decrease primarily resulted from Spartan Stores' acquisition of Prevo's, a grocery distribution segment customer, during fiscal year 2001 (requiring the elimination of sales to this customer), the loss of one customer in the third quarter of fiscal year 2000 and one late in the second quarter of this year, and declines in sales of grocery products due to continued competitive market conditions existing with its independent retail customers, partially offset by increased perishables sales.
Net sales for the quarter and year-to-date periods ended January 5, 2002 in the convenience store distribution segment decreased 2.2 and 1.8 percent or $6.1 and $12.9 million, respectively, compared to the corresponding periods ended December 30, 2000. The decline was primarily due to decreases in cigarette sales volume to grocery stores as a result of higher cigarette prices, the competition of discount tobacco stores and wholesale clubs and the impact of customers lost in fiscal year 2001, partially offset by the increase in cigarette prices and new business obtained in 2002.
Gross Margin
Gross margin, as a percentage of net sales, for the quarter and year-to-date periods ended January 5, 2002 was 16.6 and 17.2 percent, respectively, compared to 16.6 and 15.2 percent for the prior year. The year-to-date increase primarily reflects the increased percentage of retail sales (which carry a higher margin than grocery distribution sales) in the business mix. This increase was partially offset by the lower retail gross margins resulting primarily from competitive pricing conditions in the Ohio market and a lower convenience store distribution gross margin resulting from a shift in the timing of inventory gains related to cigarette price increases. Additionally, due to the current economic decline, layoff announcements and uncertain employment conditions have caused grocery customers to migrate toward lower margin food products. Spartan Stores expects these conditions to extend through the fourth quarter.
In response to the margin deterioration at the retail stores, Spartan Stores has begun initiatives designed to improve efficiencies in the supply chain and improve the category management function. Spartan Stores expects that these initiatives, coupled with the previously mentioned store operations improvements, should begin to reverse this situation over the course of the next few quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter and year-to-date periods ended January 5, 2002 were 16.0 and 15.8 percent of net sales, respectively, compared to 14.8 and 13.3 percent for the prior year. The increase was primarily due to the growth of Spartan Stores' retail grocery segment, which generates a higher selling, general and administrative expense percentage than the distribution segments, and lower than anticipated sales volumes.
Subsequent to the end of the quarter, asAs part of the final integration stages of the Food Town acquisition and a continuing focus on reducing its operating cost structure, Spartan Storesthe Company announced a corporate restructuring which resultedresulting in an approximate five-percent reduction in corporate and administrative staff in January 2002. Spartan StoresThe Company expects the staff reductions to yield annual after-taxpre-tax cost savings of $2.03.1 to $2.53.9 million on an annualized basis. At the time Food Town was acquired, a reserve was established to cover restructuring charges related to its integration. Any costs not anticipated by the reserve will be charged to expense in the fourth quarter. Costs exceeding the reserves previously established for these actions are estimated to range from $.1 to $.3 million on an after-tax basis and will be recognized in the fourth quarter. These costs are estimated to range from $.2 to $.5 million on a pre-tax basis.
Interest Expense
Interest expense was .8 percent of net sales for the quarter and year-to-date periods ended January 5, 2002, compared to .9 percent for both of the same periods last year. The decrease is primarily the result of lower interest rates in fiscal year 2002, partially offset by an increase in average borrowings.
Interest Income
Interest income was .1 percent for the quarter and year-to-date periods ended January 5, 2002, compared to .2 and .1 percent for the same periods last year. In the second quarter of fiscal year 2002, $.4 million in interest was received related to federal income tax refunds for prior years' filings. Interest income has been adversely affected by lower interest rates in fiscal year 2002 and Spartan Stores' reduced excess cash and marketable securities position.
Other Gains (Losses), Net
During fiscal year 2002, other gains (losses), net resulted primarily from sales of real estate and stock in a service provider. Fiscal year 2001 other gains (losses), net resulted from gains on sales of real estate offset by an impairment loss on certain technology-related equipment.
Income Taxes
The effective tax rate is 33.9 percent for the year-to-date period ended January 5, 2002 compared to 39.3 percent for the same period last year. During the second quarter a settlement was reached with the Internal Revenue Service regarding certain deductions taken by Spartan Stores in prior years. The resulting refund resulted in a reduction of income tax expense of $.7 million.
Net Earnings
Net earnings for the quarter and year-to-date periods ended January 5, 2002 were break-even and $14.9 million, compared with net earnings of $7.3 and $20.0 million for the prior year. Current year net earnings were negatively impacted by the sales decreases in the retail grocery and grocery distribution segments and margin deterioration in the retail grocery segment, as well as the other items specifically mentioned above.
As discussed above, Spartan Stores has taken steps designed to improve sales and profit levels; however, it is not likely that improving financial results will be seen until the second half of fiscal year 2003.
Liquidity and Capital Resources
Net cash from operating activities was $6.3 million for the year-to-date period ended January 5, 2002, compared to $39.9 million for the prior year. The decrease in net cash provided by operating activities is primarily the result of changes in working capital related to the timing of receivable collections and increased inventory levels.
Net cash used in investing activities was $14.8 million for the year-to-date period ended January 5, 2002, compared to $56.1 million for the prior year. Cash used in investing activities decreased primarily due to the acquisition of Food Town in the prior year, offset partially by increased capital expenditures for Spartan Stores' retail store remodeling campaign and systems integration during the current year.
Net cash used in financing activities was $.5 million for the year-to-date period ended January 5, 2002 due primarily to debt repayments, partially offset by borrowings on the Revolving Credit Facility, other long-term debt borrowings and proceeds from the sale of common stock. Net cash provided by financing activities was $43.8 million for the same period last year due to borrowings utilized for the Food Town acquisition, partially offset by debt repayments.
Spartan Stores' principal sources of liquidity are cash flows generated from operations and borrowings under a senior secured credit facility. The credit facility dated March 18, 1999, as amended, consists of (1) a $100 million six year Revolving Credit Facility, (2) a $100 million six year Term Loan A, (3) a $75 million seven year Acquisition Facility and (4) a $150 million eight year Term Loan B. At January 5, 2002, $308.6 million was outstanding under this credit facility. Management believes that cash flows generated from operations and available borrowings under the credit facility will likely be sufficient to support operations in the foreseeable future. Available borrowings under the credit facility are based on stipulated levels of earnings before interest, taxes, depreciation and amortization, as defined in the credit agreement.
Spartan Stores is also permitted to sell variable rate promissory notes under a "shelf" registration statement filed with the Securities and Exchange Commission, effective February 26, 2001, which provides for the issuance of up to $100 million of debt securities. Spartan Stores is currently offering non-subordinated variable rate promissory notes that are due March 31, 2003. These notes are offered in minimum denominations of $1,000 and may be issued by Spartan Stores at any time, although Spartan Stores' credit facility restricts the total amount of these notes outstanding to
Spartan Stores' current ratio at January 5, 2002 increased to 1.55 to 1.00 compared with 1.33 to 1.00 at March 31, 2001. Working capital increased 51.1 percent, or $40.7 million.
Spartan Stores' long-term debt to equity ratio at January 5, 2002 decreased to 1.32 to 1.00 compared with 1.40 to 1.00 at March 31, 2001. The decrease was primarily due to net income generated during the period.
Spartan Stores' total capital structure includes borrowings under the senior secured credit facility, variable rate promissory notes, various other debt instruments, leases, and shareholders' equity. Management continues to evaluate other acquisition opportunities, which, if consummated, could result in additional borrowings and additional leases being established.
Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
The matters discussed in this Quarterly Report on Form 10-Q include "forward-looking statements" about Spartan Stores' plans, strategies, objectives, goals, expectations or projections. These forward-looking statements are identifiable by words or phrases indicating that Spartan Stores or management "expects," "anticipates," "projects," "plans" or "believes" that a particular occurrence "may result" or "will likely result" or that a particular event "may occur" or "will likely occur" in the future, or similarly stated expectations. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this Report, Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2001 and other periodic reports filed with the Securities and Exchange Commission, there are many important factors that could cause ac tual results to be materially different from Spartan Stores' current expectations.
Anticipated future sales are subject to competitive pressures from many sources. Spartan Stores' grocery store and convenience store retail and distribution businesses compete with many warehouse discount stores, supermarkets, pharmacies and product manufacturers. Additionally, future sales will be dependent on the number of retail stores owned and operated by Spartan Stores and competitive pressures in the retail industry. Sales volumes in Spartan Stores' convenience store distribution segment may continue to be negatively impacted by increased cigarette prices. Competitive pressures in these and other business segments may result in unexpected reductions in sales volumes, product prices or service fees.
Spartan Stores' operating and administrative expenses may be adversely affected by unexpected costs associated with, among other factors: the integration of the business operations of the retail stores and other businesses acquired by Spartan Stores; future business acquisitions, including additional retail stores; difficulties in the operation of the current business segments; difficulties in assimilation of acquired personnel, operations, systems or procedures; inability to realize synergies in the amounts or within the time frame expected by management; adverse effects on existing business relationships with independent retail grocery store customers; difficulties in the retention or
Spartan Stores' future interest expense and income also may differ from current expectations, depending upon, among other factors: the amount of additional borrowings necessary for retail store acquisitions; interest rate changes; cigarette inventory levels; retail property sales; the volume of notes receivable; and the amount of fees received on delinquent accounts. The availability of Spartan Stores' credit facility depends on its ability to meet negotiated financial criteria specified in the credit facility.
Furthermore, events resulting from the terrorist attacks of September 11, 2001 create considerable economic and political uncertainties which could have adverse effects on consumer buying behavior, fuel costs, shipping and transportation, product imports and other factors affecting Spartan Stores and the grocery industry generally.
This section is intended to provide meaningful cautionary statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This should not be construed as a complete list of all economic, competitive, governmental, technological and other factors that could adversely affect Spartan Stores' expected consolidated financial position, results of operations or liquidity. Spartan Stores disclaims any obligation or intention to update its forward-looking statements to reflect events or circumstances that occur after the date of this Report
ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk
There were no material changes in market risk of Spartan Stores in the period covered by this Report.
PART IIOTHER INFORMATION
Legal Proceedings
For a discussion of certain litigation, see Note 6 ("Contingencies") to the Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
ITEM 6.
Exhibits and Reports on Form 8-K
(a)
Exhibits: The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:
Exhibit Number
Document
3.1
Amended and Restated Articles of Incorporation of Spartan Stores, Inc. Previously filed as Annex B to the prospectus and joint proxy statement contained in Spartan Stores' Pre-Effective Amendment No. 1 to Registration Statement on Form S-4, filed on June 5, 2000. Here incorporated by reference.
3.2
Amended and Restated Bylaws of Spartan Stores, Inc. Previously filed as Annex B to the prospectus and joint proxy statement contained in Spartan Stores' Pre-Effective Amendment No. 1 to Registration Statement of Form S-4, filed on June 5, 2000. Here incorporated by reference.
10.1
Spartan Stores, Inc. Supplemental Executive Savings Plan. Previously filed as an exhibit to Spartan Stores' Form S-8 Registration Statement filed on December 21, 2001. Here incorporated by reference.
(b)
Reports on Form 8-K: Spartan Stores filed the following Current Reports on Form 8-K during the 16 weeks ended January 5, 2002.
Date of Report
Filing Date
Item(s) Reported
September 12, 2001
September 17, 2001
This Form 8-K included a press release that Spartan Stores and the dissenting Food Town shareholders signed definitive agreements to settle the dissenters' rights claims. No financial statements were included or required to be included in this Form 8-K.
October 11, 2001
This Form 8-K included a press release announcing Spartan Stores' fiscal 2002 second quarter financial results. It included a summary statement of earnings for that period (and the year-to-date period) and a summary balance sheet as of the end of that period.
December 6, 2001
This Form 8-K included a press release commenting on Spartan Stores' sales trends and earnings outlook for the third quarter. No financial statements were included or required to be included in this Form 8-K.
The Forms 8-K dated October 11, 2001 and December 6, 2001 were furnished pursuant to Regulation FD and are considered to have been "furnished" but not "filed" with the Securities and Exchange Commission.
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: February 19, 2002
SPARTAN STORES, INC.(Registrant)By /s/David M. Staples
EXHIBIT INDEX