Dairy Mart Reports Results For Fiscal 2001 Third Quarter; Updates Status of Strategic Alternative Review.Business Editors HUDSON Hudson, towns, United States Hudson. 1 Industrial town (1990 pop. 17,233), Middlesex co., E central Mass., on the Assabet River, in an apple-growing region; settled c.1699, inc. 1866. , Ohio--(BUSINESS WIRE)--Dec. 12, 2000 Dairy Mart Convenience Stores The following is a list of convenience stores organized by geographical location. Stores are grouped by the lowest heading that contains all locales in which the brands have significant presence. , Inc. (AMEX AMEX See: American Stock Exchange :DMC DMC Devil May Cry (video game) DMC Detroit Medical Center DMC Darryl McDaniels (rapper) DMC Destination Management Company DMC Del Mar College (Corpus Christi, TX) ) today announced significantly reduced operating results for its third quarter ended October October: see month. 28, 2000. The Company also announced the current status of its ongoing effort to review all of its strategic options, including a potential sale of the Company. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. B. Stein Stein , William Howard 1911-1980. American biochemist. He shared a 1972 Nobel Prize for pioneering studies of ribonuclease. , Jr., the Company's Chairman, President and Chief Executive Officer is currently pursuing a proposal to acquire the Company. Third Quarter and Year-to-Date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Results Dairy Mart, as in recent fiscal quarters, continues to be impacted by three significant operating trends: 1) lower gasoline gasoline or petrol, light, volatile mixture of hydrocarbons for use in the internal-combustion engine and as an organic solvent, obtained primarily by fractional distillation and "cracking" of petroleum, but also obtained from natural gas, by margins; 2) lower merchandise gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. ; and 3) increases in store operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. related primarily to store labor. The Company also incurred additional pre-tax expenses of $0.5 million in the third quarter associated with the sale or closing of non-strategic or underperforming stores, $1.3 million associated with the settlement of certain litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and $0.3 million associated with corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. activities including the ongoing review of strategic alternatives. Revenues for the third quarter increased 16%, to $180.7 million from $156.4 million for the same period last year. Revenue growth occurred primarily from an increase in the amount of gasoline gallons sold and the average retail price per gallon gallon: see English units of measurement. . Merchandise sales of company-operated stores open at least a year increased less than 1% in the quarter. Gasoline revenues increased 36%, to $85.6 million compared with $63.1 million in the prior-year quarter. The average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of gasoline increased 24 cents per gallon, and total gallons of gasoline sold increased 13% percent, to 58.7 million gallons from 51.8 million gallons in the same quarter last year. Net loss for the quarter was $4.1 million, or $0.83 per share, compared with net income of $0.5 million, or $0.11 per share, in the prior year. On an operating basis, earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
"The third quarter was an exceptionally hard quarter for us," said Robert B. Stein, Jr., Dairy Mart's Chairman, President and Chief Executive Officer. "It was especially difficult because gasoline gross margins, which continue to be impacted by the relatively high level of crude oil prices and wholesale gasoline costs, were 4 cents per gallon below last year. Based on our volume, we estimate that this reduction in margins caused our results to be down $2.3 million from normal levels. Operating expenses again reflected rising wages, employee benefits and payroll taxes Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. and the Company was not able to sustain a level of merchandise sales growth or an increase in merchandise gross margin to offset these quickly escalating costs. As we have previously said, we continue to emphasize the sale of higher-margin food service products and to review our in-store merchandise looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. opportunities to increase some product prices while remaining competitive." For the first three-quarters of fiscal 2001 revenues increased 25% to $549.5 million from $438.2 million for the same period last year. Merchandise sales of company-operated stores open at least a year increased 3.7%. Gasoline revenues increased 56%, to $263.0 million compared with $168.6 million in the prior-year. The average selling price of gasoline increased 36 cents per gallon, and total gallons of gasoline sold increased 18% percent, to 179.3 million gallons from 151.7 million gallons in the same period last year. On a year-to-date basis, the company recorded a net loss of $6.9 million, or $1.41 per share, compared with net income of $1.8 million, or $0.37 per share, in the first three-quarters of last year. Results for this year, however, include pre-tax expenses of $1.7 million associated with the sale or closing of 47 non-strategic or underperforming stores, $1.3 million associated with the settlement of certain litigation and $0.9 million associated with corporate governance activities including the ongoing review of strategic alternatives. Prior year-to-date results include a $1.2 million non-recurring gain associated with the sale of certain assets. On an operating basis, EBITDA were $12.3 million for the first three-quarters of fiscal 2001 compared to $19.1 million for the same period last year. Status of Strategic Alternative Review During the summer and fall of 2000, the Company has been conducting a process of reviewing its strategic alternatives, including a potential sale of the Company. As part of that process, the Company received two formal indications of interest at the end of July, 2000. These parties conducted further due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. on the Company. One of these bidders declined to make a definitive offer. At the request of the other bidder, the Company's Board of Directors (the "Board") twice extended the deadline for submission of definitive offers to October 13, 2000. Approximately one week before the deadline, a new bidder also offered to submit a proposal on the due date. At a meeting of the Board on October 12, 2000, Mr. Stein, the Chairman, President and Chief Executive Officer of the Company, expressed his concern that, based upon comments by the bidders in the due diligence process, the level of the anticipated bids would be disappointing. He further informed the Board that he might be interested in making a proposal to acquire the Company for a price higher than what the other bidders might offer. The Board determined to isolate isolate /iso·late/ (i´sah-lat) 1. to separate from others. 2. a group of individuals prevented by geographic, genetic, ecologic, social, or artificial barriers from interbreeding with others of their kind. Mr. Stein from the third-party proposals and authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: Mr. Stein to try to put together a proposal to acquire the Company. On October 13, 2000 the Company's advisors received two third-party proposals, one of which still required extensive due diligence. On October 17, 2000, after an indication by Mr. Stein that he intended to submit a proposal to acquire the Company, the Board formed a special committee of independent directors to review and evaluate all proposals for the Company, including Mr. Stein's which was subsequently received on October 23, 2000. Mr. Stein's proposal offered the highest price but was subject to certain contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. . Each of these proposals required further clarification and refinement. The Special Committee's advisors engaged in extensive discussions with these bidders in order to clarify and improve each of these proposals. One third-party bidder requested a 60-day exclusive opportunity to conduct due diligence and secure financing. The Special Committee declined to accept this request. On November 20, 2000, the other third-party bidder, which had conducted extensive due diligence, withdrew its original offer citing the recent negative operating trends of the Company. On December 6, 2000, upon the receipt of a revised proposal from Mr. Stein, the Special Committee authorized Mr. Stein to continue to attempt to complete an acquisition of the Company with the full support of the Board, the Company and its advisors. Mr. Stein is currently in the process of finalizing the structure of an investment group that would pursue a proposal to acquire the Company. Mr. Stein is negotiating with various parties to provide funds for the proposed acquisition. Mr. Stein has advised the Committee that he currently has commitments for up to $110 million of financing and that active discussions with the Company's existing subordinated debtholders have begun. No assurance can be given that Mr. Stein will be able to complete this proposal, or if it can be completed, what form it may take or the ultimate value stockholders may realize. Dairy Mart owns or operates approximately 564 retail stores in seven states located in the Midwest and Southeast. For more information, visit Dairy Mart's web site at www.dairymart.com. Any statements contained in this release that are not historical facts, including those relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future operating results; improved gasoline and other gross margins; and possible strategic alternatives of the Company, including a possible sale of the Company to Mr. Stein or any other party, that may be considered forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are subject to risks, uncertainties and other factors that could cause actual results to differ materially. Factors that could cause actual results to differ from those forward-looking statements include competition, general economic conditions, current and anticipated gasoline market conditions and the impact on anticipated gasoline margins, the ability to find one or more suitable buyers for individual stores or the Company as a whole at acceptable prices, the ability of such buyers to finance the store purchases or the Company as a whole and other factors discussed in periodic reports filed by the Company with the Securities and Exchange Commission. (Table Follows)
Dairy Mart Convenience Stores, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
FOR THE THIRD FISCAL FOR THE THREE FISCAL
QUARTER ENDED QUARTERS ENDED
---------------------------------------
Oct. 28, Oct. 30, Oct. 28, Oct. 30,
2000 1999 2000 1999
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Revenues $180,723 $156,424 $549,467 $438,211
Cost of goods sold
and expenses:
Cost of goods sold 144,276 118,138 435,631 328,156
Operating and
administrative expenses 39,986 34,711 116,138 98,624
Interest expense 3,372 2,627 9,794 8,058
-------- -------- -------- --------
187,634 155,476 561,563 434,838
-------- -------- -------- --------
Income (loss)
before income taxes (6,911) 948 (12,096) 3,373
Benefit from (provision for)
income taxes 2,763 (437) 5,157 (1,593)
-------- -------- -------- --------
Net income (loss) $ (4,148) $ 511 $ (6,939) $ 1,780
-------- -------- -------- --------
-------- -------- -------- --------
Earnings (loss) per
basic share $ (0.83) $ 0.11 $ (1.41) $ 0.37
Earnings (loss) per
diluted share $ (0.83) $ 0.10 $ (1.41) $ 0.36
Weighted average number
of basic shares 4,980 4,866 4,931 4,861
Weighted average number
of diluted shares 5,353 5,000 5,131 4,946
AMEX TRADING SYMBOL - DMC
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