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Page 1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

(Mark One)

S   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

       EXCHANGE ACT OF 1934

 

For the quarterly period ended July 4, 2002

 

£   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 1-11556

UNI-MARTS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

25-1311379

(State or other jurisdiction of

(I.R.S. Employer

Incorporation or organization)

Identification No.)

477 East Beaver Avenue

State College, PA

16801-5690

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code (814) 234-6000

 

                                                                                                                                                

(Former name, former address and former fiscal year, if changed since last report.)

 

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 S      No £

 
 

7,119,079 Common Shares were outstanding at August 9, 2002.

 
 
 
 
 
 
 

This Document Contains 22 Pages.

 
 

PAGE 2

UNI-MARTS, INC. AND SUBSIDIARIES

INDEX

   
   

PART I - FINANCIAL INFORMATION

 
   

PAGE(S)

     

Item 1.

Financial Statements (Unaudited)

 
     
 

Condensed Consolidated Balance Sheets -

 
 

  July 4, 2002 and September 30, 2001

  3-4

     
 

Condensed Consolidated Statements of Operations -

 
 

  Quarter Ended and Three Quarters Ended

 
 

  July 4, 2002 and July 5, 2001

    5

     
 

Condensed Consolidated Statements of Cash Flows -

 

  Three Quarters Ended July 4, 2002 and July 5, 2001

  6-7

     
 

Notes to Condensed Consolidated Financial Statements

  8-13

     

Item 2.

Management's Discussion and Analysis of Financial

 
 

  Condition and Results of Operations

14-18

     

Item 3.

Quantitative and Qualitative Disclosures

 

  about Market Risk

  19

     

PART II - OTHER INFORMATION

 
     

Item 6.

Exhibits and Reports on Form 8-K

  20

     

Exhibit Index

  22


PAGE 3

PART I - FINANCIAL INFORMATION

 

ITEM 1 - Financial Statements

 
 

UNI-MARTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
 

July 4,

September 30,

 

      2002        

         2001        

       

ASSETS

     
       

CURRENT ASSETS:

     

  Cash

$    5,982

 

$ 5,075

  Accounts receivable - less allowances of $169 and $225

6,782

 

7,156

  Inventories

19,585

 

18,471

  Prepaid and current deferred taxes

1,668

 

1,672

  Property held for sale

1,442

 

3,137

  Prepaid expenses and other

         863

 

      1,448

       

    TOTAL CURRENT ASSETS

36,322

 

36,959

       

PROPERTY, EQUIPMENT AND IMPROVEMENTS -

     

  at cost, less accumulated depreciation and

     

  amortization of $62,882 and $59,166

99,767

 

103,488

       

LOAN DUE FROM OFFICER

360

 

420

       

NET INTANGIBLE AND OTHER ASSETS

      7,445

 

      7,763

       

    TOTAL ASSETS

$143,894

$148,630

=======

=======

(Continued)


PAGE 4




UNI-MARTS, INC. AND SUBSIDIARIES

   

CONDENSED CONSOLIDATED BALANCE SHEETS

   

(In thousands, except share and per share data)

   

(CONTINUED)

   

(Unaudited)

   

   

July 4,

September 30,

   
   

      2002      

 

         2001         

   
             

LIABILITIES AND STOCKHOLDERS' EQUITY

           

CURRENT LIABILITIES:

           

  Accounts payable

 

$  14,177

 

$  16,239

   

  Gas taxes payable

 

3,981

 

3,360

   

  Accrued expenses

 

6,401

 

6,820

   

  Current maturities of long-term debt

 

2,968

 

2,920

   

  Current obligations under capital leases

 

         166

 

         391

   

    TOTAL CURRENT LIABILITIES

 

27,693

 

29,730

   

LONG-TERM DEBT, less current maturities

 

79,685

 

80,912

   

OBLIGATIONS UNDER CAPITAL LEASES,

           

  less current maturities

 

253

 

361

   

DEFERRED TAXES

 

2,312

 

2,917

   

DEFERRED INCOME AND OTHER LIABILITIES

 

5,506

 

5,217

   

COMMITMENTS AND CONTINGENCIES

           

STOCKHOLDERS' EQUITY:

           

  Preferred Stock, par value $1.00 per share:

           

    Authorized 100,000 shares

           

    Issued none

 

0

 

0

   

  Common Stock, par value $.10 per share:

           

    Authorized 16,000,000 shares

           

    Issued 7,419,928 and 7,388,083 shares, respectively

 

742

 

739

   

Additional paid-in capital

 

23,837

 

23,833

   

Retained earnings

 

      5,805

 

      6,978

   

   

30,384

 

31,550

   

  Less treasury stock, at cost - 300,849 and

           

    323,275 shares of Common Stock, respectively

(

      1,939

)

(

      2,057

)

 

   

    28,445

 

    29,493

   

    TOTAL LIABILITIES AND STOCKHOLDERS'

      EQUITY

 

$143,894

 

$148,630

   

      

 

=======

 

=======

   

See notes to consolidated financial statements


PAGE 5

 


 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands, except per share data)

 

(Unaudited)

 
   
   

QUARTER ENDED

   

THREE QUARTERS ENDED

 
   

July 4,

   

July 5,

   

July 4,

   

July 5,

 
   

    2002    

   

    2001    

   

    2002    

   

    2001    

 

REVENUES:

                       

  Merchandise sales

 

$  58,075

   

$  53,734

   

$166,904

   

$151,335

 

  Gasoline sales

 

50,240

   

58,088

   

131,685

   

165,789

 

  Other income

 

         465

   

         442

   

      1,375

   

     1,510

 
                         
   

  108,780

   

  112,264

   

  299,964

   

 318,634

 

COSTS AND EXPENSES:

                       

  Cost of sales

 

86,036

   

88,434

   

233,358

   

251,204

 

  Selling

 

17,068

   

16,827

   

50,926

   

49,898

 

  General and administrative

 

2,122

   

2,021

   

6,165

   

5,628

 

  Depreciation and amortization

 

2,070

   

2,056

   

6,199

   

6,064

 

  Interest

 

1,684

   

1,952

   

5,094

   

5,937

 

  Provision for asset impairment

             0

           24

             0

          24

                         

 

  108,980

   

  111,314

   

  301,742

   

 318,755

 
                         

EARNINGS (LOSS) BEFORE

                       

  INCOME TAXES

(

200

)

 

950

 

(

1,778

)

(

121

)

INCOME TAX PROVISION (BENEFIT)

(

           56

)

 

         323

 

(

         605

)

(

           41

)

                         

NET EARNINGS (LOSS)

(

$       144

)

 

$       627

 

(

$    1,173

)

(

$         80

 
    =======     =======     =======     =======

)

BASIC EARNINGS (LOSS) PER SHARE

(

$      0.02

)

$      0.09

(

$      0.17

)

(

$      0.01

)

   

=======

   

=======

   

=======

   

=======

 

DILUTED EARNINGS (LOSS) PER

(

$      0.02

)

 

$      0.09

 

(

$      0.17

)

(

$      0.01

)

  SHARE

 

=======

   

=======

   

=======

   

=======

 
                         

WEIGHTED AVERAGE NUMBER OF

                       

  COMMON SHARES OUTSTANDING

 

      7,112

   

      7,062

   

      7,092

   

      7,049

 
   

=======

   

=======

   

=======

   

=======

 

WEIGHTED AVERAGE NUMBER OF

                       

  COMMON SHARES OUTSTANDING

                       

  ASSUMING DILUTION

 

      7,112

   

      7,097

   

      7,092

   

      7,049

 
   

=======

   

=======

   

======

   

=======

 
                         
                         
                         
                         
                         
                         

See notes to consolidated financial statements

 

PAGE 6

 


 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

   
   
 

THREE QUARTERS ENDED

 

July 4,

July 5,

   

      2002      

   

      2001      

 
             

CASH FLOWS FROM OPERATING ACTIVITIES:

           

  Cash received from customers and others

 

$302,550

   

$318,010

 

  Cash paid to suppliers and employees

(

292,263

)

(

311,307

)

  Dividends and interest received

 

35

   

62

 

  Interest paid (net of capitalized interest

           

    of $0 and $287)

(

5,411

)

(

6,256

)

  Income taxes received (paid)

 

              4

 

(

            78

)

             

    NET CASH PROVIDED BY OPERATING
      ACTIVITIES

 

4,915

   

431

 

             

CASH FLOWS FROM INVESTING ACTIVITIES:

           

  Receipts from sale of capital assets

 

130

   

389

 

  Purchase of property, equipment and

           

    improvements

(

2,447

)

(

9,940

)

  Note receivable from officer

 

60

   

60

 

  Cash advanced for intangible and other assets

(

158

)

(

177

)

  Cash received for intangible and other assets

 

            59

   

           56

 
             

    NET CASH USED IN INVESTING ACTIVITIES

(

2,356

)

(

9,612

)

             

CASH FLOWS FROM FINANCING ACTIVITIES:

           

  Borrowings on revolving credit agreement

 

1,252

   

4,769

 

  Additional long-term borrowings

 

0

   

4,900

 

  Principal payments on debt

(

2,933

)

(

2,420

)

  Proceeds from issuance of common stock

 

            29

   

             9

 
             

    NET CASH (USED IN) PROVIDED BY

           

      FINANCING ACTIVITIES

(

       1,652

)

 

      7,258

 
             

NET INCREASE (DECREASE) IN CASH

 

907

 

(

1,923

)

             

CASH:

           

  Beginning of period

 

       5,075

   

      7,882

 
             

  End of period

 

$     5,982

   

$    5,959

 
   

=======

   

=======

 
             

PAGE 7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(CONTINUED)

(Unaudited)

   
 

    THREE QUARTERS ENDED

   

July 4,

   

July 5,

 
   

   2002   

   

   2001   

 
             

RECONCILIATION OF NET LOSS TO NET CASH

           

  PROVIDED BY OPERATING ACTIVITIES:

           
             

NET LOSS

(

$1,173

)

(

$     80

)

             

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH

           

  PROVIDED BY OPERATING ACTIVITIES:

           

  Depreciation and amortization

 

6,199

   

6,064

 

  Loss on sale of capital assets and other

 

389

   

309

 

  Provision for asset impairment

 

0

   

24

 

  Changes in assets and liabilities:

           

    (Increase) decrease in:

           

      Accounts receivable

 

373

 

(

90

)

      Inventories

(

1,114

)

(

1,384

)

      Prepaid expenses and other

 

2,413

   

288

    Increase (decrease) in:

           

      Accounts payable and accrued expenses

(

1,861

)

(

4,113

)

      Deferred income taxes and other liabilities

(

     311

)

(

     587

)

             

    TOTAL ADJUSTMENTS TO NET LOSS

 

  6,088

   

     511

 
             

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

$4,915

   

$   431

 
   

=====

   

=====

 
             
             
             
             

             
             
             
             
             
             
             
             

See notes to consolidated financial statements


PAGE 8

UNI-MARTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

A.     FINANCIAL STATEMENTS:

The consolidated balance sheet as of July 4, 2002, the consolidated statements of operations and
the consolidated statements of cash flows for the quarter ended and three quarters ended July 4,
2002 and July 5, 2001, respectively, have been prepared by Uni-Marts, Inc. (the "Company")
without audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of the Company at July 4,
2002 and the results of operations and cash flows for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have
been condensed or omitted. It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2001. Certain reclassifications have
been made to the September 30, 2001 financial statements to conform to classifications used in
fiscal year 2002. The results of operations for the interim periods are not necessarily indicative of
the results to be obtained for the full year.

B.     INTANGIBLE AND OTHER ASSETS:

        Intangible and other assets consist of the following (in thousands):

   July 4,

July 5,

 

    2002   

 

    2001  

         

Goodwill

$8,874

   

$8,874

         

Lease acquisition costs

315

378

         

Noncompete agreements

250

   

250

       

Other intangible assets

     215

   

     218

         
 

9,654

   

9,720

         

Less accumulated amortization

  3,282

   

  2,888

         
 

6,372

   

6,832

         

Other assets

  1,073

   

  1,054

         
 

$7,445

   

$7,886

 

=====

   

=====


PAGE 9

B.     INTANGIBLE AND OTHER ASSETS (CONTINUED):

Goodwill represents the excess of costs over the fair value of net assets acquired in business
combinations and is amortized on a straight-line basis over periods of 13 to 40 years. Lease
acquisition costs are the bargain element of acquired leases and are being amortized on a straight-
line basis over the related lease terms. It is the Company's policy to periodically review and
evaluate the recoverability of the intangible assets by assessing current and future profitability and
cash flows and to determine whether the amortization of the balances over their remaining lives
can be recovered through expected future results and cash flows.

C.     REVOLVING CREDIT AGREEMENT:

On April 20, 2000, the Company executed a 3-year, secured $10.0 million revolving loan
agreement (the "Agreement") with $3.5 million available for letters of credit. Provisions of the
Agreement require the maintenance of certain covenants relating to minimum tangible net worth,
interest and fixed-charge coverage ratios, as measured on a quarterly basis. In addition, the
Agreement places limitations on capital expenditures, additional debt and payment of dividends.
In the second quarter of fiscal year 2001, the Agreement was amended to increase the total credit
line to $13.0 million, with $3.5 million available for letters of credit, and to amend certain
financial covenants. During the first quarter of fiscal year 2002, the Agreement was amended to
extend the maturity date to April 20, 2004, to amend certain covenants and to provide an
additional $2.0 million for borrowing on a seasonal basis. The Company was in compliance with
these covenants as of July 4, 2002. Borrowings of $7.0 million and letters of credit of $3.0
million were outstanding at July 4, 2002. This facility bears interest at the Company's option
based on a rate of either prime plus 1.0% or LIBOR plus 3.0%. The blended interest rate at July
4, 2002 was 5.49%. The Agreement is collateralized by substantially all of the Company's
inventories, receivables, other personal property and selected real properties. The net book value
of these selected real properties at July 4, 2002 was $2.5 million.


PAGE 10

D. LONG-TERM DEBT:

 

July 4,

 

September 30,

 

      2002      

 

          2001          

 

(In thousands)

Mortgage Loan. Principal and interest will be
  paid in 194 remaining monthly installments. At
  July 4, 2002, the coupon rate was 9.08% and the
  effective interest rate was 9.78%, net of unamortized
  fees of $1,235,529 ($1,329,757 in 2001).





$31,690

   





$32,331

         

Mortgage Loan. Principal and interest will be
  paid in 215 remaining monthly installments. The
  loan bears interest at LIBOR plus 3.75%. At July 4,
  2002, the coupon rate was 5.59% and the
  effective interest rate was 6.04%, net of
  unamortized fees of $374,658 ($403,779 in 2001).






20,586

   






21,249

         

Mortgage Loan. Principal and interest will be
  paid in 215 remaining monthly installments. At
  July 4, 2002, the coupon rate was 10.39% and the
  effective interest rate was 10.70%, net of unamortized
  fees of $117,237 ($124,901 in 2001).





6,532

   





6,628

         

Mortgage Loans. Principal and interest are paid in
  monthly installments. The loans expire in 2009,
  2010, 2020 and 2021. Interest ranges from the
  prime rate to LIBOR plus 3.75%. At July 4, 2002,
  the blended coupon rate was 6.42% and the
  effective interest rate was 6.84%, net of
  unamortized fees of $146,391 ($151,688 in 2001).







7,256

   







7,496

         

Revolving Credit Agreement. Interest is paid
  monthly. The blended interest rate at July 4, 2002 was
  5.49%. (See Note C)



7,010

   



5,758

         

Equipment Loans. Principal and interest will be
  paid in monthly installments. The loans expire
  in 2010 and 2011 and bear interest at LIBOR plus
  3.75%. At July 4, 2002, the blended coupon rate was
  5.59% and the effective interest rate was 6.00%, net of
  unamortized fees of $145,159 ($174,996 in 2001).






8,643

   






9,375

         

Equipment Loan. Principal and interest will be
  paid in 96 remaining monthly installments. The loan
  expires in 2010. At July 4, 2002, the coupon rate was
  10.73% and the effective interest rate was 11.19%,
  
net of unamortized fees of $14,613 ($17,124 in 2001).





       936

   





       995

         
 

82,653

   

83,832

Less current maturities

    2,968

   

    2,920

         
 

$79,685

   

$80,912

 

======

   

======


PAGE 11

D.    LONG-TERM DEBT (CONTINUED):

The mortgage loans are collateralized by $69,087,100 of property, at net book value, and the
equipment loans are collateralized by $5,199,200 of equipment, at net book value.

Aggregate maturities of long-term debt (net of loan fee amortization) during the next five years
are as follows (in thousands):

September 30,

 

     2002

$     588

     2003

2,923

     2004

10,107

     2005

3,357

     2006

3,640

Thereafter

  62,038

$82,653

======


E.    RELATED PARTY TRANSACTIONS:

       
Certain directors and officers of the Company are also directors, officers or controlling
        shareholders of other entities from which the Company leases its corporate headquarters and
        various store and other locations under agreements classified as operating leases. Aggregate
        rentals in connection with all such leases for the three quarters ended July 4, 2002 and July 5,
        2001 were $906,200 and $507,000. In addition, two new store locations are under construction
        and are to be leased from entities controlled by, or from persons related to, certain directors and
        officers of the Company. The aggregate amount of rentals associated with these properties will
        not be determined until completion of the construction.

        The Company charges an affiliate for general and administrative services provided. Such charges
        amounted to $8,400 and $8,400 in the three quarters ended July 4, 2002 and July 5, 2001, respectively.

        During the first three quarters of fiscal years 2002 and 2001, the Company made payments of
        $59,600 and $59,300, respectively, to a director of the Company for consulting fees and
        reimbursement of expenses.


PAGE 12

F.    NEW ACCOUNTING PRONOUNCEMENTS:

In June 2001, the Financial Accounting Standards Board issued SFAS No. 142 and, in
August 2001, issued SFAS No. 144. SFAS No. 142, "Goodwill and Other Intangible Assets,"
requires that such assets with indefinite lives not be amortized but be tested annually for
impairment and provides specific guidance for such testing. This statement also requires
disclosure of information regarding goodwill and other assets that was previously not required.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," provides
additional guidance for impairment testing and determination of when an asset is considered to be
for sale. The Company is not required to adopt these accounting standards until fiscal year 2003.
At this time, the Company has not determined the impact these standards will have on the
Company's financial statements.


G.    COMMITMENTS AND CONTINGENCIES:

(1)     Leases -- The Company leases its corporate headquarters, 131 of its store locations and
         certain equipment. Future minimum lease payments under capital leases and
         noncancellable operating leases with initial or remaining terms in excess of one year at
         July 4, 2002 are shown below. Some of the leases provide for additional rentals when
         sales exceed a specified amount and contain variable renewal options and escalation
         clauses.

 

Capital

 

Operating

 

Rental

 
 

 Leases 

 

   Leases   

 

 Income 

 
     

(In thousands)

   
           

Three months ending

  September 30, 2002

$  73

 

$  1,669

 

$    210

 

Fiscal Year 2003

180

 

6,279

 

700

 

Fiscal Year 2004

140

 

5,439

 

525

 

Fiscal Year 2005

31

 

4,227

 

304

 

Fiscal Year 2006

31

 

2,921

 

217

 

Thereafter

    52

 

    9,915

 

     430

 
             

Total future minimum

           

  lease payments

507

 

$30,450

 

$2,386

 
     

======

 

=====

 

Less amount representing

         

  interest

    88

       
           

Present value of future

         

  payments

419

       
           

Less current maturities

  166

       
           
 

$253

       
 

====

       


PAGE 13

G.    COMMITMENTS AND CONTINGENCIES (CONTINUED):

(2)     Litigation -- The Company is involved in litigation and other legal matters which have
         arisen in the normal course of business. Although the ultimate results of these matters are
         not currently determinable, management does not expect that they will have a material
         adverse effect on the Company's consolidated financial position, results of operations or
         cash flows.

H.     CHANGES IN SECURITIES:

On February 6, 2002, the Company adopted a shareholder rights plan and declared a dividend
distribution of one Common Stock Purchase Right on each outstanding share of its common stock.
Pursuant to the rights plan, the Company distributed to all shareholders of record on February 19,
2002, as a dividend on each outstanding share of common stock, a right to purchase two-thirds of
a share of common stock for a purchase price of $10.67. The rights, however, are exercisable
(subject to limited grandfathering provisions for certain shareholders who currently beneficially
own more than 15% of the Company's stock) only if: (1) a person or group acquires 15% or more
of the Company's common stock, other than through an offer for all shares of the common stock at
a price and on terms determined by the Board of Directors to be fair to all shareholders, or (2) a
person or group commences a tender or exchange offer for 15% or more of the Company's
common stock. If the rights become exercisable, the rights will be modified automatically to
entitle the rightholders (other than the acquiring person or group) to purchase shares of the
Company's common stock at a 50% discount from the then market value. In addition, if the
Company is acquired in a merger or other transaction after such person or group has acquired a
15% common stock interest, the rightholders (other than such person or group) will be entitled to
purchase shares of common stock of the surviving company at the same discount from market
value. Initially, the rights will be represented by existing Uni-Marts stock certificates. Should the
rights become exercisable, the Company will issue separate rights certificates to all holders. Uni-
Marts can redeem the rights at any time before (but not after) a person or group has acquired 15%
or more of the Company's common stock as described above. If not redeemed prior to January 31,
2012, the rights will expire on that date. Terms of the Shareholder Rights Plan are set forth in a
Rights Agreement dated as of February 6, 2002 between the Company and Mellon Investor
Services LLC, as Rights Agent, which was filed as an exhibit to an amendment to the Registration
Statement on Form 8-A pursuant to which the Company's common stock, par value $0.10, is
registered under the Securities Exchange Act of 1934.


PAGE 14
 

ITEM 2


 

 

UNI-MARTS, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Set forth below are selected unaudited consolidated financial data of the Company for the periods indicated:

     
 

QUARTER ENDED

THREE QUARTERS ENDED

   

July 4,
    2002    

   

July 5,
    2001    

   

July 4,
    2002    

   

July 5,
    2001    

 

Revenues:

  Merchandise sales

53.4

  %

47.9

%

55.6

  %

47.5

%

  Gasoline sales

46.2

51.7

43.9

52.0

  Other income

    0.4

    0.4

    0.5

    0.5

Total revenues

100.0

100.0

100.0

100.0

Cost of sales

  79.1

  78.8

  77.8

  78.8

Gross profit:

  Merchandise (as a percentage of
    merchandise sales)

30.5

32.1

30.9

32.5

  Gasoline (as a percentage of
    gasoline sales)

9.1

10.6

10.4

10.1

Total gross profit

20.9

21.2

22.2

21.2

Costs and expenses:

  Selling

15.7

15.0

17.0

15.6

  General and administrative

2.0

1.8

2.0

1.8

  Depreciation and amortization

1.9

1.8

2.1

1.9

  Interest

1.5

1.7

1.7

1.9

  Provision for asset impairment

    0.0

    0.0

    0.0

    0.0

Total expenses

21.1

20.3

22.8

21.2

                         

Earnings (loss) before income taxes

(

0.2

)

0.9

(

0.6

)

0.0

                       

Income tax provision (benefit)

(

    0.1

)  

    0.3

  (

    0.2

)  

    0.0

 

                       

Net earnings (loss)

(

   0.1

)%  

    0.6

%

(

    0.4

)%  

    0.0

%

====

====

====

====

OPERATING DATA (RETAIL LOCATIONS ONLY):
(In thousands, except per gallon data)

 Average, per store, for stores open two

   full comparable periods:

     Merchandise sales

$     191

$     182

$       550

$       518

     Gasoline sales

$     199

$     235

$       509

$       665

     Gallons of gasoline sold

178

176

504

520

 Total gallons of gasoline sold

45,194

43,858

131,321

130,532

 Gross profit per gallon of

   gasoline

$  0.101

$  0.140

$    0.105

$    0.128

STORE INFORMATION:

 Company-operated stores

296

294

296

294

 Franchisee-operated stores

5

7

5

7

 Locations with self-service gasoline

239

237

239

237

 


PAGE 15

RESULTS OF OPERATIONS:

Matters discussed below should be read in conjunction with "Operating Data (Retail Locations Only)"
on the preceding page. Certain statements contained in this report are forward looking, such as
statements regarding the Company's plans and strategies or future financial performance. Although
the Company believes that its expectations are based on reasonable assumptions within the bounds of
its knowledge, investors and prospective investors are cautioned that such statements are only
projections and that actual events or results may differ materially from those expressed in any such
forward-looking statements. In addition to the factors discussed elsewhere in this report, the
Company's actual consolidated quarterly or annual operating results have been affected in the past, or
could be affected in the future, by additional factors, including, without limitation, general economic,
business and market conditions; environmental, tax and tobacco legislation or regulation; volatility of
gasoline prices, margins and supplies; merchandising margins; customer traffic; weather conditions;
labor costs and the level of capital expenditures.

In the last twelve months, the Company continued its store evaluation and strategic initiative program
by converting convenience store locations to Choice Cigarette Discount Outlets ("Choice") or closing
locations. During that period, 11 convenience stores were converted to Choice stores and three
convenience stores were closed. The Company also expanded its store base during this period by
constructing two convenience stores and one Choice location. The Company intends to
aggressively pursue the conversion of convenience stores to Choice outlets to achieve additional
improvement to store profitability. As previously announced, in April 2002 the Company hired
financial advisors to assist the Company in the exploration and evaluation of all of its strategic
alternatives to enhance stockholder value. If this evaluation leads to the disposition of assets in excess
of certain amounts, Messrs. Sahakian, Kervandjian and Petrick will be eligible to receive bonuses
pursuant to a Transaction Success Bonus Plan adopted by the Company. The aggregate amount of
such bonuses will be based upon the total consideration received for such assets.


Quarters Ended July 4, 2002 and July 5, 2001

For the third quarter of fiscal 2002, ended July 4, 2002, total revenues were $108.8 million, a decline
of $3.5 million, or 3.1%, compared to total revenues of $112.3 million for the third quarter of fiscal
2001, ended July 5, 2001. Revenues declined due to a $7.9 million, or 13.5%, decline in gasoline sales
to $50.2 million for the current fiscal quarter compared to gasoline sales of $58.1 million in the third
quarter of fiscal 2001. This decline is the result of a 21.3 cent per gallon decline in the average
retail price per gallon of petroleum sold at the Company's locations in the third quarter of fiscal 2002
compared to the same quarter of fiscal 2001. Merchandise sales for the current fiscal quarter increased
by $4.3 million, or 8.1%, to $58.1 million, while other income increased by $23,000, or 5.2%, to
$465,000 compared to the third quarter of fiscal 2001. Merchandise sales at comparable stores
increased by 4.6% and gasoline gallons sold at comparable stores increased by 1.2% for the third
quarter of fiscal 2002 compared to the same quarter of fiscal 2001. Seasonably warm weather
conditions, combined with increased consumer travel in the current fiscal quarter, contributed to the
growth in comparable store sales.


PAGE 16
 

Gross profits on merchandise sales increased by $485,000, or 2.8%, to $17.7 million compared to
$17.2 million in the third quarter of fiscal 2001, despite a 1.6% decline in the gross margin rate for the
current fiscal quarter. Gasoline gross profits declined by $1.6 million, or 25.9%, to $4.6 million, while
gasoline gallons sold in the current fiscal quarter increased by 1.3 million gallons, or 3.1%, to 45.2
million gallons sold. Gasoline gross profit per gallon declined by 3.9 cents per gallon for the current
fiscal quarter when compared to the third quarter of fiscal 2001. In the third quarter of fiscal 2002, the
Company improved merchandise gross profit and gasoline gallon sales levels; however, the gasoline
gross margin per gallon sold declined due to competitive gasoline market conditions in the Company's
operating area.

In the third quarter of fiscal 2002, selling, general and administrative, and depreciation and
amortization expenses increased marginally, while interest expense declined when compared to the
third quarter of fiscal 2001. Selling expenses increased by $241,000, or 1.4%, to $17.1 million due to
additional operating leases for store improvements and higher insurance reserves. General and
administrative expense increased by $101,000, or 5.0%, to $2.1 million due to increased legal and
professional fees, in part associated to the Company's hiring of its financial advisors. Depreciation and
amortization expense increased by $14,000, or 0.7%, to $2.1 million as the result of depreciation of
new equipment for store improvements. Interest expense declined by $268,000, or 13.7%, to $1.7
million for the third quarter of fiscal 2002 due to lower borrowing levels and lower interest rates.

Losses before income taxes were $200,000 in the third quarter of fiscal 2002 compared to a pre-
tax profit of $950,000 in the third quarter of fiscal 2001. Lower gasoline margins, which were partially offset by increases in merchandise margins, were the leading factors in the Company's financial
performance for the third quarter of fiscal 2002. The provision for income taxes remained the same as
a percentage of earnings before income taxes for the comparable quarters. Net losses were $144
thousand, or $0.02 per share, for the quarter ended July 4, 2002, compared to a net profit of $627,000,
or $0.09 per share, for the quarter ended July 5, 2001.

Three Quarters Ended July 4, 2002 and July 5, 2001

Total revenues for the first three quarters of fiscal 2002 were $300.0 million, a decline of $18.6
million, or 5.9%, compared to total revenues of $318.6 million for the first three quarters ended July 5,
2001. The decline in revenues was due to a $34.1 million, or 20.6%, decline in gasoline sales to
$131.7 million compared to gasoline sales of $165.8 million reported in the first nine months of fiscal
2001. A 26.7 cent per gallon decline in the Company's average retail price per gallon of petroleum
sold in its markets for the first three quarters of fiscal 2002 when compared to the same period of fiscal
2001 resulted in lower gasoline dollar sales. Merchandise sales increased by $15.6 million, or 10.3%,
to $166.9 million from $151.3 million in the first nine-month period of fiscal 2001. Other income was
$1.4 million, a decline of $135,000, or 8.9%, when compared to the first three quarters of fiscal 2001.
At comparable stores, merchandise sales increased by 6.2%, while gasoline gallons sold declined by
3.0%, for the first three quarters of fiscal 2002 compared to the same period of fiscal 2001.

Gross profits on merchandise sales for the first three quarters of fiscal 2002 increased by $2.3 million,
or 4.6%, to $51.5 million compared to merchandise gross profits of $49.2 million for the first three
quarters of the prior fiscal year. The merchandise gross margin rate declined by 1.7% for the current
nine-month period. The Company achieved increases in gasoline gallon sales during the first three


PAGE 17

quarters of fiscal 2002, however realized lower gross margins per gallon sold during this period as a
result of a competitive gasoline market environment. Gasoline gallon sales increased by 789,000
gallons, or 0.6%, to 131.3 million gallons sold, while gross profit per gallon declined by 2.3 cents per
gallon in the first three quarters ended July 4, 2002 compared to the same period ended July 5, 2001.
Gasoline gross profit margins declined by $3.0 million, or 17.8%, to $13.7 million for the first three
quarters of fiscal 2002.

Selling expenses increased by $1.0 million, or 2.1%, to $50.9 million due primarily to additional store
operating leases and increased insurance reserves. General and administrative expense increased by
$537,000, or 9.5%, to $6.2 million primarily as the result of increased legal and professional fees and
additional salaried positions. Depreciation and amortization expense for the first nine months of fiscal
2002 increased by $135,000, or 2.2%, to $6.2 million due to depreciation of new equipment and
improvements at existing stores and stores converted to Choice Cigarette Discount Outlets. Lower
borrowing levels and lower interest rates levels resulted in a $843,000, or 14.2%, decline in interest
expense to $5.1 million for the first three quarters ended July 4, 2002.

Losses before income taxes were $1.8 million for the first three quarters of fiscal 2002, compared to a
pre-tax loss of $121,000 for the first three quarters of fiscal 2001. Improved merchandise sales at
comparable stores were offset by lower gasoline gross margins due to a competitive petroleum market
in the Company's operating area during the current nine-month reporting period. The provision for
income taxes remained relatively the same as a percentage of earnings before income taxes for the
comparable reporting periods. Net losses for the first three quarters of fiscal 2002 were $1.2 million,
or $0.17 per share, compared to net losses of $80,000, or $0.01 per share, for the first three quarters of
fiscal 2001.


LIQUIDITY AND CAPITAL RESOURCES:

Most of the Company's sales are for cash and its inventory turns over rapidly. As a result, the
Company's daily operations do not generally require large amounts of working capital. From time to
time, the Company utilizes a portion of its cash to acquire and construct new stores and
renovate existing locations.

Capital requirements for debt service and capital leases for the remainder of fiscal year 2002 are
approximately $700,000. Anticipated capital expenditures in the balance of the fiscal year are
approximately $200,000 for the replacement of store equipment and upgrading the Company's data
processing systems.

Operating lease commitments for the balance of fiscal year 2002 are approximately $1.7 million.
These commitments for fiscal years 2003, 2004, 2005 and 2006 are approximately $6.3 million, $5.4
million, $4.2 million, and $2.9 million, respectively.

Management believes that cash from operations and its available credit facility will be sufficient to
meet the Company's obligations for the foreseeable future.


PAGE 18

NEW ACCOUNTING PRONOUNCEMENTS:

In June 2001, the Financial Accounting Standards Board issued SFAS No. 142 and, in August 2001,
issued SFAS No. 144. SFAS No. 142, "Goodwill and Other Intangible Assets," requires that such
assets with indefinite lives not be amortized but be tested annually for impairment and provides
specific guidance for such testing. This statement also requires disclosure of information regarding
goodwill and other assets that was previously not required. SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," provides additional guidance for impairment testing
and determination of when an asset is considered to be for sale. The Company is not required to adopt
these accounting standards until fiscal year 2003. At this time, the Company has not determined the
impact these standards will have on the Company's financial statements.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate
our estimates, including those related to self insured liabilities, impairment and income taxes. We base
our estimates on historical experience, current and anticipated business conditions, the condition of the
financial markets, and various other assumptions that are believed to be reasonable under existing
conditions. Actual results may differ from these estimates.

We believe that the following critical accounting policies affect our more significant judgements and
estimates used in the preparation of our consolidated financial statements:

Self insurance liabilities -- We record estimates for self insured worker's compensation and general
liability insurance coverage. Should a greater amount of claims occur compared to what was
estimated, or costs increase beyond what was anticipated, reserves recorded may not be sufficient, and
additional expense may be recorded.

Impairment -- We evaluate long-lived assets, including stores, for impairment annually, or whenever
events or changes in circumstances indicate that the assets may not be recoverable. The impairment is
measured by calculating the estimated future cash flows expected to be generated by the store, and
comparing this amount to the carrying value of the store's assets. Cash flows are calculated utilizing
individual store forecasts and total company projections for the remaining estimated lease lives of the
stores being analyzed. Should actual results differ from those forecasted and projected, we may be
subject to future impairment charges related to these facilities.

Income taxes -- We currently have net operating loss ("NOL") carryforwards that can be utilized to
offset future income for federal and state tax purposes. These NOLs generate a significant deferred tax
asset. However, we have recorded a valuation allowance against this deferred tax asset as we have
determined that it is more likely than not that we will not be able to fully utilize the NOLs. Should our
assumptions regarding the utilization of these NOLs change, we may reduce some or all of this
valuation allowance, which would result in the recording of an income tax benefit.


PAGE 19

ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk

The Company uses its revolving credit facility and its mortgage and equipment loans to finance a
significant portion of its operations. These on-balance sheet financial instruments, to the extent they
provide for variable rates of interest, expose the Company to interest rate risk resulting from changes in
the LIBOR or prime rate.

To the extent that the Company's financial instruments expose the Company to interest rate risk, they
are presented in the table below. The table presents principal cash flows and related interest rates by
year of maturity for the Company's revolving credit facility, mortgage loans and equipment loans at
July 4, 2002.

The carrying amounts of cash and short-term debt approximate fair value. The Company estimates the
fair value of its long-term, fixed-rate debt generally using discounted cash flow analysis based on the
Company's current borrowing rates for debt with similar maturities. The Company estimates the fair
value of its long-term, variable-rate debt based on carrying amounts plus unamortized loan fees
associated with the debt.


Fiscal Year of Maturity

(dollar amounts in thousands)

             

Total

Fair

             

Due At

Value at

 

2002

2003

2004

2005

2006

Thereafter

Maturity

7/4/02

                 

Interest-rate sensitive assets:

               

Noninterest-bearing

               

  checking accounts

$2,820

$       0

$        0

$       0

$       0

$         0

$ 2,820

$ 2,820

                 

Interest-bearing

               

  checking accounts

$3,162

$       0

$        0

$       0

$       0

$         0

$ 3,162

$ 3,162

Average interest rate

1.55%

         

1.55%

         ---

 

__________________________________________________________________________________

 

$5,982

$       0

$        0

$       0

$       0

$         0

$ 5,982

$ 5,982

 

0.82%

         

0.82%

         ---

                 

Interest-rate sensitive liabilities:

               

Variable-rate borrowings

$   294

$1,803

$  8,862

$1,975

$2,108

$26,802

$41,844

$41,844

Average interest rate

5.57%

5.57%

5.57%

5.59%

5.59%

5.59%

5.59%

         ---

                 

Fixed-rate borrowings

$   294

$1,120

$  1,245

$1,382

$1,532

$35,236

$40,809

$45,283

Average interest rate

9.34%

9.34%

9.34%

9.34%

9.34%

9.34%

9.34%

         ---

 

___________________________ ______________________________________________________

 

$   588

$2,923

$10,107

$3,357

$3,640

$62,038

$82,653

$87,127

 

7.43%

7.43%

7.45%

7.66%

7.69%

7.72%

7.44%

         ---


PAGE 20

PART II - OTHER INFORMATION

ITEM 6 - Exhibits and Reports on Form 8-K

(a)

Exhibits

 

  3.1

Amended and Restated Certificate of Incorporation of the Company (Filed as exhibit
3.1 to the Company's Quarterly Report on Form 10-Q for the period ended April 4,
2002 and incorporated herein by reference thereto).

     
 

  3.2

Amended and Restated By-Laws of the Company (Filed as exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the period ended April 4, 2002 and
incorporated herein by reference thereto).

     
 

10.1

Composite copy of Change of Control Agreement between the Company and
its Senior Vice President, Facilities Development and its Senior Vice President,
Budgeting and Planning dated May 28, 2002.

     
 

11

Statement regarding computation of per share earnings (loss).

     
 

99.1

Certification of the Chairman and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

     
 

99.2

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

(b) Reports on Form 8-K

      The Company did not file any reports on Form 8-K during the quarter ended July 4, 2002.


PAGE 21

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.

 

Uni-Marts, Inc.

 

(Registrant)

 

________________________________

   
   

Date August 16, 2002

___/S/ HENRY D. SAHAKIAN____

 

Henry D. Sahakian

 

Chairman of the Board

 

(Principal Executive Officer)

   
   
   

Date August 16, 2002

___/S/ N. GREGORY PETRICK____

 

N. Gregory Petrick

 

Executive Vice President and

 

Chief Financial Officer

 

(Principal Accounting Officer)

 

(Principal Financial Officer)

   

PAGE 22

UNI-MARTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

 
 
 

Number

Description

   

  10.1

Composite copy of Change of Control Agreement between the Company and
its Senior Vice President, Facilities Development and its Senior Vice President,
Budgeting and Planning dated May 28, 2002.

   

  11

Statement regarding computation of per share earnings (loss).

  99.1

Certification of the Chairman and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  99.2

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.