Document/Exhibit Description Pages Size
1: 10-K Dart Group Form 10-K Period Ended January 31, 1994 105 449K
2: EX-2.F Asset Purchase Agreement - Exhibit 2(F) 45 165K
3: EX-3.B Dart Group by Laws - Exhibit 3(B) 29 64K
4: EX-10.5E Employment Agreement - Exhibit 10(Eeeee) 11 52K
5: EX-10.5F Chantilly Lease Agreement - Exhibit 10(Fffff) 44 247K
6: EX-10.5G Landmark Lease Agreement - Exhibit 10(Ggggg) 43 230K
7: EX-10.5H Bull Run Plaza Lease Agreement - Exhibit 10(Hhhhh) 43 243K
8: EX-10.5I Loan Agreement - Exhibit 10(Iiiii) 54 252K
9: EX-10.5L Lease Agreement - Exhibit 10(Lllll) 45 151K
10-K ˇ Dart Group Form 10-K Period Ended January 31, 1994
Document Table of Contents
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] for the fiscal year ended January 31, 1994
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
---------- to ----------
Commission file number 0-1946
------
DART GROUP CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0242973
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3300 75th Avenue, Landover, Maryland 20785
------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-1200
---------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $1.00 per share
-----------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x . No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
At April 29, 1994, registrant had 1,453,423 shares of Class A Common Stock
outstanding, and the aggregate market value of such shares held by
non-affiliates of the registrant was approximately $98,026,000. The Class B
Common Stock, of which there are 302,952 shares outstanding, is the only voting
stock and is not publicly traded.
All the Registrant's voting stock, Class B Common Stock, is held by affiliates.
The exhibit index begins at page 102 of this Form 10-K.
Page 1
PART I
Item 1. Business
Dart Group Corporation (the "Corporation") operates retail discount auto
parts stores through Trak Auto Corporation ("Trak Auto"), retail discount book
stores through Crown Books Corporation ("Crown Books"), retail discount grocery
stores through Shoppers Food Warehouse Corp. ("Shoppers Food"), retail discount
beverage stores through Total Beverage Corporation ("Total Beverage"), a real
estate company through Cabot-Morgan Real Estate Company ("CMREC"), and a
financial business which purchases bankers' acceptances through Dart Group
Financial Corporation ("Dart Financial"). The Corporation, Trak Auto, Crown
Books, Shoppers Food, Total Beverage, CMREC, Dart Financial and the
Corporation's other direct and indirect wholly-owned and majority-owned
subsidiaries and majority owned partnerships are referred to collectively as
the "Company". The Corporation owns 65% of the common stock of Trak Auto, 51%
of the common stock of Crown Books, in excess of 50% of the common stock of
Shoppers Food, 100% of the common stock of Total Beverage, 100% of the common
stock of CMREC and 100% of the common stock of Dart Financial. The common
stock of Trak Auto and Crown Books is traded on the National Association of
Securities Dealers Automated Quotations Systems ("NASDAQ") national market
under the symbols TRKA and CRWN, respectively.
On January 31, 1994, there were 314 Trak Auto, 240 Crown Books, and 35
Shoppers Food stores; CMREC owned a 75% interest in two real estate
partnerships which own and operate two shopping centers and 51% of three real
estate partnerships which own and operate two shopping centers and an office
building; and there were three Total Beverage stores. On such date, Dart
Financial owned approximately $62,307,000 of bankers' acceptances.
Trak Auto Operations
Trak Auto operates retail discount specialty stores in the Washington,
D.C., Richmond, Virginia, Chicago, Illinois and Los Angeles, California
metropolitan areas.
Trak Auto is engaged in the retail sale of a wide range of automobile
parts and accessories for the do-it-yourself market. Trak Auto products
include "hard parts" (such as alternators, starters, shock absorbers, fan
belts, spark plugs, mufflers, thermostats, and wheel bearings), as well as
motor oil, oil filters, headlights, batteries, waxes, polishes, car stereos,
anti-freeze and windshield wipers. A typical store normally carries 10,000
different item numbers or SKU's. Trak Auto does not sell tires and does not
provide automotive service or installation.
During the year ended January 30, 1993, Trak Auto organized Super Trak
Corporation. Super Trak was organized as a Delaware corporation to operate
retail auto part stores and is a wholly-owned subsidiary of Trak Auto. Super
Trak stores are similar to the Trak Auto stores described above, however, the
stores provide additional services and merchandise. Super Trak stores carry
approximately 5,000 more SKU's, concentrated primarily in application parts
categories. Additionally, the stores feature special order services permitting
customers access to virtually any automotive part, including engines. The
stores also offer extensive technical assistance through computerized parts
look-up, instruction for repairs, free use of specialized tools, and factory
trained parts people. Trak Auto is planning a conversion to the Super Trak
concept through the opening of new stores and the conversion, relocation and
expansion of its existing stores.
2
Trak Operations (Continued)
Trak Auto's merchandise is generally purchased directly from a large
number of manufacturers and suppliers. Trak Auto's distribution system is
computerized utilizing an automated replenishment and perpetual inventory
system to generate shipments of product from distribution centers in Landover,
Md., Bridgeview, Ill. and Ontario, California. The required items are
generally assembled and packaged for delivery in the order in which they will
be unpacked and displayed on the shelves at the retail stores, promoting store
efficiency. Inventories are monitored both at stores and in the distribution
centers to determine purchase requirements. Trak Auto has a computerized point
of sale ("POS") register system in every store. Trak Auto uses scanners to
identify most merchandise at the register and uses a price look-up function to
price the sale. Most merchandise is pre-labeled with bar codes by the
manufacturers.
Trak Auto's merchandising philosophy is to develop strong consumer
recognition and acceptance of its name by use of mass-media advertising to
promote a broad selection of products at low prices. Trak Auto emphasizes
quality customer service through knowledgeable personnel and advanced
technology such as electronic parts look-up, POS and computerized
do-it-yourself aids.
Trak Auto stores are approximately 5,000 to 6,000 square feet and Super
Trak stores range from 6,000 to 11,000 square feet. Trak Auto's stores use
modern fixtures and equipment and the interiors have been standardized, so that
the interiors of new stores can be assembled quickly. The stores are open
seven days a week.
The following table indicates Trak Auto's store locations and the number
of stores opened, closed and remodeled for the last five years.
ˇ Download Table
Number of Stores
at end of fiscal year
--------------------------------
Metropolitan Area 1990 1991 1992 1993 1994
----------------- ---- ---- ---- ---- ----
Washington, D.C. ............ 74 77 81 84 86
Baltimore, Maryland ......... 14 14 6 0 0
Richmond, Virginia .......... 14 14 15 15 15
Chicago, Illinois ........... 93 100 99 99 97
Los Angeles, California ..... 113 119 121 119 116
San Diego, California........ - 7 11 0 0
---- ---- ---- ---- ----
Total .............. 308 331 333 317 314
==== ==== ==== ==== ====
Super Trak Stores
-----------------
Opened during the year....... - - - 1 10
Closed during the year....... - - - - 1
Classic Trak Stores
-------------------
Opened during the year....... 36 26 19 6 1
Closed during the year....... 2 3 17 23 13
Converted to Super Trak
during the year............ - - - 11 52
Remodeled during the year.... - 4 - - -
Super Trak Stores - - - 12 73
Classic Trak Stores 308 331 333 305 241
3
Trak Auto Operations (continued)
Trak Auto had 15 stores substantially damaged or completely destroyed in
the Los Angeles civil disturbances at the end of the first fiscal quarter of
1993. Eleven of these stores have subsequently reopened and four stores remain
closed. The Los Angeles earthquake in January of 1994 damaged two Trak Auto
stores and one Super Trak resulting in their closing. The Super Trak reopened
shortly after year-end while the two Trak Auto stores remain closed.
Trak Auto has closed certain stores in various markets. At January 29,
1994, Trak Auto had an accrual for closed stores of approximately $1,000,000
which represents estimated unrecoverable lease costs (net of sublease), the
remaining book value of leasehold improvements and certain other costs. The
net charge (income) was $(943,000), $500,000, and $3,162,000 during fiscal
1994, 1993, and 1992, respectively. Income during the year ended January 29,
1994 was the result of early lease terminations, net of cash buyouts. Trak
Auto continually reviews store operations and expects to close additional
underperforming stores in the future.
A restructuring charge of $7,400,000 was recorded in 1993 for the
anticipated costs associated with closing, relocating, expanding and converting
existing stores to the new Super Trak concept. During the year ended January
29, 1994, approximately $600,000 was charged to this reserve. No store
contributed more than 1.0% to Trak Auto's consolidated sales during the year
ended January 29, 1994.
Crown Books Operations
Crown Books operates specialty retail book stores offering popular
hardback books, paperbacks and magazines below the publishers' suggested retail
prices.
Crown Books responds to the demand for books at prices below the
publishers' suggested retail prices and at the same time provides quality
service to its customers. Crown Books sells hardbacks on The New York Times
best seller list at 40% below the publishers' suggested retail prices,
paperbacks on The New York Times best seller list at 25% below the publishers'
suggested retail prices, other new books at 10% to 25% below the publishers'
suggested retail prices, and magazines at 10% below the publishers' suggested
retail prices. Crown Books sells publishers' over-stock, reprints and former
best sellers at significant discounts from the publishers' original suggested
retail prices. In addition, Crown Books allows customers at all stores to
special order books not stocked in inventory at discount pricing. This
merchandise is generally purchased directly from a large number of publishers
and suppliers and Crown Books is not dependent on any single publisher or
supplier.
Crown Books advertises intensively, primarily through newspapers, seasonal
radio and television and direct mail, stressing its pricing policy. Crown
Books satisfies regional and local consumer preferences by tailoring the
selections and quantities of books that it makes available in individual
stores. Crown Books clusters its stores in selected market areas to maximize
the efficiency of advertising, publicity, management and distribution. Within
those areas, Crown Books generally locates its stores in convenient strip
shopping centers and urban street locations. These locations typically may be
rented at more favorable rates than locations in large enclosed malls and
provide for increased consumer awareness and convenience of the store
locations.
4
Crown Books Operations (continued)
All major merchandising decisions concerning pricing, advertising and
promotional campaigns, as well as the initial ordering of inventory for each
store, are managed centrally at Crown Books' headquarters in Landover,
Maryland. Over 80% of the merchandise is shipped directly from publishers to
the stores. Best sellers and other hardback books which are purchased in large
quantities are often shipped directly from the publishers to Crown Books'
regional warehouses for distribution to the stores. Inventories are monitored
both at stores and in the central office in Landover, Maryland, to determine
purchase requirements. In general, unsold books and magazines can be returned
to the publishers for credit.
During the year ended January 31, 1990, Crown Books organized Super Crown
Books Corporation ("Super Crown Books"). Super Crown Books was organized as a
Delaware corporation to operate retail book superstores and is a wholly-owned
subsidiary of Crown Books. The first Super Crown Books store opened in May of
1990 and Crown Books has been expanding the Super Crown concept since. The
stores carry as many as 70,000 titles, nearly seven times the number of titles
as a classic Crown Books store. Super Crown Books stores provide enhanced
service as well as value to its customers, wider aisles, a children's play
area, and benches and chairs to sit and relax.
The following table indicates the locations of Crown Books' stores and the
number of stores opened, closed and remodeled by Crown Books for the last five
years:
ˇ Download Table
Number of Stores
at end of fiscal year
------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
Washington, D.C. ........... 62 63 61 59 60
Los Angeles, California .... 75 80 79 76 68
Chicago, Illinois .......... 44 44 43 43 43
San Francisco, California .. 30 31 30 30 31
San Diego, California ...... 19 19 20 20 17
Houston, Texas ............. 8 6 5 3 6
Seattle, Washington ........ 15 16 16 16 15
---- ---- ---- ---- ----
Total..................... 253 259 254 247 240
==== ==== ==== ==== ====
Super Crown Books stores:
-------------------------
Opened during the year.... - 6 9 13 37
Closed during the year.... - - - - 4
Classic Crown Books stores:
---------------------------
Opened during the year.... 33 10 4 - 5
Closed during the year.... - 10 18 20 45
Remodeled during the year. - 16 7 2 -
Super Crown Books stores.... - 6 15 28 61
Classic Crown Books stores.. 253 253 239 219 179
Classic Crown Books stores are approximately 2,000 to 3,000 square feet
and Super Crown Books stores are approximately 6,500 to 35,000 square feet, and
all use specially-designed display fixtures. The Company's new prototype
stores, such as the Super Crown White Flint in Rockville, Maryland, generally
range from approximately 12,000 to 35,000 square feet. The new prototype
stores permit more effective and economic utilization of space. The interior
5
Crown Books Operations (continued)
of the stores is standardized, so that the stores can be assembled quickly.
Most of the stores are open seven days a week.
Currently, all Super Crown Books stores and all classic Crown Books
stores have computerized point of sale and inventory management systems
("systems"). Crown Books implemented systems in new stores and in the
remaining classic Crown Books stores during fiscal 1994. The systems enable
store personnel to scan bar coded merchandise resulting in less time to process
the sales transaction and more accurate pricing. The systems also provide
detailed inventory information on an item basis to store management and the
central office providing for better informed reordering and merchandising
decisions.
Crown Books believes systems will enhance customer service as well as
store operating efficiency.
The majority of Crown Books' stores are located in strip shopping centers
anchored by supermarkets and drug stores.
Crown Books has closed certain stores in various markets. At January 29,
1994, Crown Books had a reserve for closed stores of approximately $1,000,000,
which represents the estimated unrecoverable lease costs, and certain other
incidental costs. Crown Books recorded net charges (income) of $(631,000),
$513,000 and $1,106,000 during the fiscal years 1994, 1993 and 1992 for closed
stores. Income during the year ended January 29, 1994 was the result of early
lease terminations, net of cash buyouts. Crown Books continues to review store
operations and may close additional stores in the future.
Crown Books recorded a restructuring charge of $6,600,000 during the year
ended January 30, 1993 for anticipated costs associated with closing,
relocating, expanding and converting existing classic stores to the Super Crown
Books concept. At January 29, 1994, Crown Books had charged approximately
$840,000 against this reserve. These charges consisted primarily of
unrecoverable lease costs (including buyouts of remaining lease terms) and the
remaining book value of leasehold improvements and store fixtures for stores
which have closed.
Crown Books continues to test various concepts (principally related to the
size of the store) in the Super Crown Books prototypes. As a result of these
test stores, Crown Books has determined that a number of the smaller Super
Crown Books stores opened in previous years (typically 6,000 - 10,000 square
feet) are not a competitive format in the current market environment. These
stores have been negatively impacted by the industry's roll out of the larger
stores. Accordingly, Crown Books recorded an additional restructuring charge
of $6,200,000 in the year ended January 29, 1994, representing the anticipated
costs (unrecoverable lease costs and the remaining book value of leasehold
improvements and store fixtures subsequent to management's estimate of the
stores' closing dates) associated with closing, relocating and converting these
stores to the new, larger prototype.
No store contributed more than 2.0% to Crown Books' consolidated sales
during the year ended January 29, 1994.
6
Shoppers Food Operations
Shoppers Food operates retail discount grocery stores that sell groceries,
meats, produce, beer and wine, baked goods, cigarettes, health and beauty aids
and have a deli department. The stores are located in the Washington, D. C.
metropolitan area and the warehouses and office facilities are located in
Lanham, Maryland. The Corporation acquired in excess of 50% of the common
stock of Shoppers Food (see Note 3 to the Consolidated Financial Statements)
during fiscal 1989.
Shoppers Food's stores are operated on a high volume discount pricing
marketing strategy. Shoppers Food stores are operated primarily on a
self-service basis and customers bag or box their own groceries. The stores
sell popular brand names at discount prices as well as manufacturers' or
distributors' specials.
The following table indicates the number of stores and the number of
stores opened, closed and remodeled for the last five years.
ˇ Download Table
Number of Stores
January 31,
------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
Total Open..................... 21 24 31 34 35
Opened during the year......... 4 3 7 4 2
Closed during the year......... 1 - - 1 1
Remodeled during the year...... 1 - 1 1 2
Total Beverage Corporation
Total Beverage operates retail discount beverage superstores in the
Washington, D.C. metropolitan area. The stores carry a wide range of foreign
and domestic beers and wines as well as non-alcoholic beverages. The
Corporation organized Total Beverage Corporation on January 26, 1993 and
purchased the assets for the first store on February 27, 1993 from Shoppers
Food for approximately $1,494,000. In October 1993 Total Beverage opened two
additional stores and is seeking locations for additional stores.
Cabot-Morgan Real Estate Company
CMREC, a wholly-owned subsidiary, was organized under the laws of Delaware
as a real estate development company. CMREC owns the majority interest in five
real estate partnerships that own four shopping centers and an office building
in the Washington, D.C. metropolitan area. CMREC owns 75% of two of these
partnerships (each owning a shopping center) and 51% of the other three
partnerships (two owning shopping centers and one owning an office building).
The remaining partnership interests are owned by partnerships in which the
partners are members of the Haft family. Combined Properties, Inc., a Haft
controlled entity, manages the shopping centers and office building for the
partnerships. Trak Auto, Crown Books, Shoppers Food and Total Beverage have
stores in some of these shopping centers.
7
Dart Financial Operations
Dart Financial is engaged in the business of buying and holding bankers'
acceptances. Dart Financial acquires institutional size transactions of
typically $5,000,000. All of the outstanding bankers' acceptances are
obligations of Japanese banks with a minimum credit rating of A1/P1 and are
secured further by the underlying commodities.
A bankers' acceptance is a short-term instrument drawn on and accepted by
a bank that, by accepting the draft, assumes the obligation to pay the draft at
maturity. By purchasing bankers' acceptances, the purchaser assists in
financing purchases of merchandise by commercial businesses. Obligations to
the holders of bankers' acceptances typically are secured by the merchandise
being purchased. While there is an active market for bankers' acceptances,
such market is not regulated by any governmental agency.
Fluctuations in market interest rates and the creditworthiness of the
accepting bank are the major factors which affect the value of a bankers'
acceptance. Accordingly, management has established certain criteria for
buying and holding bankers' acceptances, including limiting purchases to
acceptances which have maturities of six months or less, limiting purchases to
acceptances of banks selected from a periodically reviewed list which
management believes are creditworthy, purchasing acceptances that are "with
recourse" obligations for which the drawer is contingently liable and
diversifying purchases among the selected group of banks.
It is management's belief that the foregoing criteria provide an
appropriate basis for financing commercial transactions through the purchase
and holding of bankers' acceptances and afford an opportunity for reasonable
profit relative to the risks incurred.
During the year ended January 31, 1994 Dart Financial purchased bankers'
acceptances at face value of approximately $442,125,000, sold bankers'
acceptances of approximately $2,000,000 at face value, and held bankers'
acceptances of approximately $468,250,000 at face value to maturity. On
January 31, 1994, Dart Financial held bankers acceptances of approximately
$62,525,000 at face value compared to $90,650,000 one year ago.
Competition
The market for the products and services provided by the Corporation's
retail discount specialty operations is highly competitive. The stores compete
with retail outlets, including drug stores, supermarkets, department stores,
hardware stores, variety stores, auto parts stores and book stores.
Competitors range from small independent stores to large regional and national
chains, many of which have greater resources than the Corporation and its
subsidiaries. The stores encounter strong competition with respect to the
prices at which they sell their products and services. Many companies are
engaged in the financial business through dealing in bankers' acceptances and
many have greater assets than Dart Financial. Many companies are engaged in
real estate development and many have greater resources than CMREC.
Employees
On January 31, 1994, the Company and its subsidiaries employed
approximately 6,580 full time and 4,590 part time persons. The Company
considers its relations with employees to be good.
8
Changes in Management
Robert M. Haft's employment as President and Chief Operating Officer of
the Corporation terminated in June 1993. In August 1993, Ronald S. Haft was
elected President and Chief Operating Officer of the Corporation. Robert M.
Haft's employment as Chief Executive Officer and President of Crown Books
concluded in November 1992 upon the employment and election of Glenn Hemmerle
to those two positions. Robert Haft continued to serve as Chairman of Crown
Books until June 25, 1993, when he was removed as a director by action of the
Corporation pursuant to its rights under Delaware corporation law. Thereafter,
Herbert H. Haft resumed the position of Chairman of the Board of Crown Books.
The Board of Directors of each of the Corporation, Crown Books and Trak
Auto was reconstituted in 1993 to include five new directors, four of whom are
neither officers or employees of the Company. Bonita A. Wilson and Douglas M.
Bregman were elected directors of the Corporation, Crown Books and Trak Auto in
June 1993. Ronald S. Haft became President and Chief Operating Officer of the
Corporation on August 1, 1993 and a director of the Corporation, Crown Books
and Trak Auto on July 28, 1993. H. Ridgely Bullock and Larry G. Schafran were
elected as directors by the respective boards of the Corporation, Crown Books
and Trak Auto pursuant to each company's bylaws on December 20, 1993. Robert
M. Haft and Gloria G. Haft ceased to be directors of the Corporation, Crown
Books and Trak Auto in June 1993.
These changes have affected the Company's operations in two respects.
First, current management's review of Crown Books' operations and market
position concluded that many of the Super Crown stores opened under the
direction of the former Chairman were not in a competitive format in the the
current market environment, in which competitors have opened larger stores.
Current management has moved in a direction towards the conversion of many of
Crown Books' classic Crown and Super Crown Books stores to larger Super Crown
Books stores, and the elimination of a number of stores, requiring a
restructuring charge of $6.2 million and increased capital expenditures over
the next three to five years. Second, litigation, principally that initiated
by Robert Haft, has required management to divert significant time and expense
to defend against the claims. See Note 6 to the Consolidated Financial
Statements.
Segment Information
See Note 16 to the Consolidated Financial Statements.
9
Item 2. Properties
The Corporation has a lease with a private partnership in which members of
the Haft family own all of the beneficial interests for a headquarters building
and distribution center of approximately 271,000 square feet in Landover,
Maryland. The Corporation has sublet 210,000 square feet of the headquarters
building and distribution center to Trak Auto and 28,000 square feet to Crown
Books. In addition, the Corporation has a lease agreement with the
aforementioned partnership for land, identified for future Trak Auto expansion,
adjacent to the headquarters building and distribution center. Trak Auto has
agreed to bear the annual carrying cost for the land.
Trak Auto
All of Trak Auto's 314 stores are leased. As of January 31, 1994, the
total minimum payments for Trak Auto's retail stores and equipment under leases
aggregated approximately $85,555,000 to lease expiration dates. The lease
expiration dates (without regard to renewal options) range from 1994 to 2013.
Twenty-three of these leases, are with entities in which members of the Haft
family have all or substantially all the beneficial interest, two are with
CMREC shopping centers and two are subleased from Crown Books.
Trak Auto leases a 176,000 square foot distribution center located in
Bridgeview, Illinois, and a 317,000 square foot distribution center located in
Ontario, California, from private partnerships in which members of the Haft
family own all of the beneficial interests.
Crown Books
All of Crown Books' 240 stores are leased. As of January 31, 1994, the
total minimum payments for Crown Books' retail stores and equipment aggregated
approximately $114,297,000 to the lease expiration dates. The lease expiration
dates (without regard to renewal options) range from 1994 to 2009. Thirteen of
these leases are with entities in which members of the Haft family have all or
substantially all the beneficial interest and three are with CMREC shopping
centers.
Shoppers Food
Shoppers Food leases 34 stores and owns one store. As of January 31,
1994, the total minimum payments for Shoppers Food's 34 retail stores and
equipment under lease aggregated approximately $165,902,000 to the lease
expiration dates. The lease expiration dates (without regard to renewal
options) range from 1994 to 2013. Seven of these leases are with entities in
which members of the Haft family have all or substantially all the beneficial
interest and one is with a CMREC shopping center.
Shoppers Food has a lease agreement with a limited partnership in which
members of the Haft family and the owners of the minority interest in Shoppers
Food own all of the beneficial interests for approximately 86,000 square feet
of space in an office building in Lanham, Maryland. Shoppers Food has sublet
approximately 25,000 square feet of the office to unaffiliated third parties.
10
Total Beverage
Total Beverage's three stores are leased. As of January 31, 1994, the
total minimum payments for Total Beverage's retail stores under lease
aggregated approximately $10,947,000 to the lease expiration dates. The lease
expiration dates (without regard to renewal options) range from 1994 to 2008.
One lease agreement is with a partnership in which members of the Haft family
have all or substantially all the beneficial interest and two are with CMREC
shopping centers.
CMREC
As of January 31, 1994, CMREC owned a 75% interest in two shopping centers
located in Greenbelt and Silver Spring, Maryland, a 51% interest in a shopping
center and office building located in Fairfax, Virginia and 51% interest in a
shopping center located in Prince William County, Virginia. The remaining
interests in these properties are owned by partnerships in which members of the
Haft family own all the beneficial interests. At January 31, 1994, the total
minimum rental revenues for these properties aggregated approximately
$113,853,000 to the lease expiration dates, which range from 1994 to 2011.
Warehouse Facility
During fiscal 1991, the Corporation, because of its guarantee as part of
the sale of its drug store division in fiscal 1985, reassumed the lease
obligations for certain warehouse and office facility leases. The leases, with
private partnerships in which members of the Haft family own all of the
beneficial interests, are for 533,800 square feet of warehouse and office
facility space in Landover, Maryland. Trak Auto has a sublease agreement for
6,500 square feet of the facility for a term of one year with nine one year
option periods and Shoppers Food currently subleases, on a month to month
basis, approximately 6,000 square feet of the facility. The Corporation is
actively marketing the remaining space for lease to unaffiliated parties.
See Note 4 to the Consolidated Financial Statements for further
information regarding leases with related parties.
11
Item 3. Legal Proceedings
See Note 6 to the Corporation's Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The following table shows the high and low sale prices for the common
stock in the over-the-counter market for the fiscal quarters indicated, as
reported by NASDAQ.
Class A Common Stock
ˇ Download Table
Dividends
Quarter Ended High Low Paid
------------- ---- --- ---------
April 30, 1992 78 69 .03 1/3
July 31, 1992 74 67 .03 1/3
October 31, 1992 74 1/2 68 1/2 .03 1/3
January 31, 1993 87 66 1/2 .03 1/3
April 30, 1993 87 74 .03 1/3
July 31, 1993 88 76 .03 1/3
October 31, 1993 88 1/2 77 .03 1/3
January 31, 1994 88 1/2 79 .03 1/3
ˇ Download Table
Approximate Number of Record
Title of Class Holders (As of March 31, 1994)
-------------- ------------------------------
Class A Common Stock $1.00 Par Value 390
Class B Common Stock $1.00 Par Value 4
12
Item 6. Selected Financial Data
Income Statement Data: (in thousands, except per share and sales % data)
ˇ Enlarge/Download Table
Fiscal Year
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Revenues $1,376,543 $1,272,677 $1,195,148 $1,083,583 $ 943,050
Unusual items - 3,894 - 1,829 -
Income (loss) before
minority interests (225) 11,652 18,113 18,623 20,876
Minority interests
(1), (2), (3) and
(4) (6,512) (8,143) (11,802) (10,473) (8,976)
Income before extra-
ordinary items and
cumulative effect of
accounting change - 3,509 6,311 8,150 11,900
Extraordinary items:
Repurchase of
debentures (5) - (885) (1,589) 104 (223)
Cumulative effect of
change in accounting
principle (6) - 1,135 - - -
---------- ---------- ---------- ---------- ----------
Net Income (loss) $ (6,737) $ 3,759 $ 4,722 $ 8,254 $ 11,677
========== ========== ========== ========== ==========
Earnings per share:
Income (loss) before
extraordinary items
and cumulative effect
of accounting
change $ (4.10) $ 1.91 $ 3.46 $ 4.36 $ 6.27
Extraordinary items:
Repurchase of
debentures - (.48) (.87) .06 (.12)
Cumulative effect of
change in accounting
principle - .62 - - -
---------- ---------- ---------- ---------- ----------
Net Income (loss) $ (4.10) $ 2.05 $ 2.59 $ 4.42 $ 6.15
========== ========== ========== ========== ==========
Cash dividends
declared per
share of Class A
common stock $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13
========== ========== ========== ========== ==========
ˇ Download Table
Balance Sheet Data: (in thousands)
-------------------
Fiscal Year
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Working capital $ 281,242 $ 267,801 $ 260,374 $ 369,061 $ 363,595
Total assets (4) 802,898 722,379 696,395 704,080 658,274
Long-term
obligations
(4) and (5) 151,818 120,231 92,096 178,310 180,061
Stockholders'
Equity 274,307 279,239 276,476 271,896 263,528
13
Item 6. Selected Financial Data (Continued)
(1) The Corporation owns 65% of the common stock of Trak Auto.
(2) The Corporation owns 51% of the common stock of Crown Books.
(3) The Corporation owns in excess of 50% of the common stock of Shoppers
Food.
(4) On December 31, 1989, partnerships in which CMREC holds a 75%
interest purchased two shopping centers. The operating results of
these partnerships are reported from January 1, 1990. On March 12,
1991 CMREC acquired a 51% interest in two partnerships that own the
Greenbriar Town Center. The operating results of these partnerships
are reported from March 12, 1991. In January 1993, CMREC acquired a
51% interest in a partnership that owns Bull Run Plaza. The
operating results of this partnership are reported from January 1,
1993.
(5) See Note 14 to the Consolidated Financial Statements.
(6) The 1993 cumulative effect of a change in accounting principles was
the result of Trak Auto's adopting Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes.
Note: See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Cash, including short-term instruments, U.S. government and other
marketable debt securities and bankers' acceptances, is the Company's primary
source of liquidity. Cash, including short-term instruments, U.S. government
and other marketable debt securities and bankers' acceptances, increased by
$10,300,000 to $287,377,000 at January 31, 1994 from $277,077,000 at January
31, 1993. This increase was primarily due to funds provided by operations,
proceeds from a mortgage obtained by CMREC for Bull Run Plaza, stock option
exercises, a stock option purchase and funds received from Trak Auto's
insurance carrier as a result of the 1993 civil disturbances in Los Angeles.
The increase was offset by capital expenditures for superstore expansion by
Trak Auto and Crown Books, the acquisition of, and subsequent capital
expenditures for Total Beverage, and cash paid by CMREC for construction and
renovation of Bull Run Plaza.
For the year ended January 31, 1994, the Company realized a pretax yield
of approximately 3.2% on the bankers' acceptances, and 3.2% on United States
Treasury Bills, and realized an annualized total return of approximately 5.4%
on marketable debt securities.
Operating activities provided $38,402,000 in funds to the Company for the
year ended January 31, 1994, compared to $25,223,000 for the same period one
year ago. The increase is primarily a result of the timing of payments for
merchandise inventory and other accrued liabilities which had the effect of
extending payments to after January 31, 1994 and to a decrease in income tax
payments as a result of lower taxable income.
Investing activities used $71,327,000 of the Company's funds during the
year ended January 31, 1994, compared to using $11,212,000 of such funds
for the same period one year ago. The primary use of funds was the conversion
of Trak Auto and Crown Books United States Treasury Bills to marketable debt
securities. Capital expenditures increased $7,644,000 over the prior year as a
result of continuing Trak Auto's and Crown Books' expansion to Super Trak and
Super Crown formats, respectively, and Total Beverage store openings. In
addition, Crown Books completed the purchase and installation of point-of-sale
equipment in all stores.
Financing activities provided $18,797,000 to the Company during the year
ended January 31, 1994, compared to $3,699,000 one year ago. The primary
source of these funds in both years was borrowings secured by real estate
mortgages (as discussed below), which were partially offset in fiscal 1993 by
the repurchase of the Corporation's remaining outstanding debentures.
The Corporation, together with Crown Books and Trak Auto, has a $6,000,000
revolving credit facility agreement. As of January 31, 1994 there has been no
borrowing under this credit agreement (see Note 7 to the Consolidated Financial
Statements).
During fiscal 1994, CMREC (through the Bull Run Plaza partnership)
obtained a $9,750,000 mortgage which was used to repay the Corporation the
bridge loan it advanced to that partnership for the purchase of its shopping
center and the Briggs Chaney partnership refinanced two mortgages at Briggs
Chaney Shopping Center into one $16,000,000 mortgage bearing interest at 8.5%
15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
for a term of ten years, secured by the land and building at that shopping
center. During fiscal 1993, CMREC (through the Greenbriar Retail partnership)
obtained a $38,000,000 mortgage, which may be increased to $40,600,000 upon
meeting additional lease criteria.
At January 31, 1994, Crown Books had eleven signed leases for Super Crown
stores, Trak Auto had eleven signed leases for new stores and 13 signed
agreements for additional space in existing stores for Super Trak stores,
Shoppers Food had two signed leases for new stores and CMREC's Bull Run Plaza
is undergoing renovation and expansion.
The Company anticipates that funds necessary to fund these capital
expenditures, as well as purchase inventory for new stores, meet the Company's
long-term lease obligations, and pay current liabilities, will come from
operations, existing current assets and, if necessary, the aforementioned
credit agreement.
The liquid assets maintained by the Company are intended to fund the
expansion of the Company's retail business through opening stores in new
markets, converting selected existing stores to superstores, and opening
additional stores in existing markets.
At January 31, 1994:
Working capital increased by $13,441,000 to $281,242,000 at January 31,
1994 from $267,801,000 at January 31, 1993. The increase was primarily due to
an increase in cash (see discussion of cash above). Increased inventory levels
were offset by increased accounts payable, trade.
At January 31, 1993:
Working capital increased by $7,427,000 to $267,801,000 at January 31,
1993 from $260,374,000 at January 31, 1992. The increase was primarily due to
funds received from the Greenbriar mortgage, current operating results,
increased inventory for new Super Trak and Super Crown stores which was more
than increased accounts payable as a result of the timing of inventory
purchases, and the timing of payments for other current liabilities. The
increase was partially offset by the redemption of the outstanding debentures,
additional investment in real estate partnerships by CMREC and increased
capital expenditures.
16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
RESULTS OF OPERATIONS
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
Trak Auto
Sales of $334,798,000 in fiscal 1994 increased by $19,005,000 or 6.0% from
the prior fiscal year primarily due to increased sales for stores converted
from classic to Super Trak stores. Sales for stores open more than one year
increased 1.3% for the year ended January 29, 1994. Super Trak sales increased
to $78,054,000 from $6,775,000 one year ago and comparable Super Trak sales
decreased 4.0%. Classic Trak Auto store sales decreased to $256,744,000 from
$309,018,000 as a result of converting over 50 classic stores to Super Traks.
Comparable sales for classic Trak Auto stores increased 1.4%. Sales for Super
Trak stores represented 23.3% and 2.1% of total sales for the year ended
January 29, 1994 and January 30, 1993, respectively.
During the year ended January 29, 1994, Trak Auto opened ten Super Trak
stores, converted 52 classic stores to Super Traks and opened one classic Trak
store while closing one Super Trak (temporarily due to the January 1994 Los
Angeles earthquake), and 13 classic Trak stores. Super Trak stores have
generated increased sales at converted locations as well as increased gross
margin as a result of the change in product mix (increased hard parts). Trak
Auto believes that by leasing larger stores it can obtain more favorable lease
rates and that as the stores mature, operating expenses as a percentage of
sales will decrease. The increased sales and margins together with the
knowledge acquired during the current year to control operating expenses are
expected to have a positive impact on future operating results.
Interest and other income decreased by $197,000 during the year ended
January 29, 1994 compared to the year ended January 30, 1993. The decrease was
primarily due to decreased sublease income as a result of the expiration of the
primary lease and was partially offset by an increase in interest income as a
result of increased average balance on funds available for short-term
investment.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales increased to 76.4% for the year ended January 29, 1994, compared to 73.9%
for the year ended January 30, 1993. This increase was primarily the result of
decreased margins as a result of Trak Auto's marketing strategy of reducing
prices to meet increased competition and increased advertising costs resulting
from utilizing alternative advertising media.
Selling and administrative expenses, as a percentage of sales, were 21.2%
of sales for the year ended January 29, 1994 compared to 20.9% for the year
ended January 30, 1993. The increase was primarily due to increased payroll
costs associated with opening and operating Super Trak stores. The increase
was partially offset by favorable settlement of future lease obligations of
$943,000 for stores closed in prior years and by decreased insurance costs as a
result of Trak Auto's safety programs, which have reduced workers compensation
claims.
Depreciation and amortization increased $727,000 when compared to fiscal
1993. The increase was due primarily to the increase in fixed assets resulting
from conversions to Super Trak.
17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
Interest expense increased $40,000 for the year ended January 29, 1994
compared to the year ended January 30, 1993 due to amounts owed under capital
lease obligations.
During the year ended January 29, 1994, Trak Auto recorded a tax benefit
of $545,000 as a result of its current book net operating loss and the effect
of certain permanent book/tax differences.
Crown Books
Sales of $275,125,000 for the year ended January 29, 1994 increased by
$34,443,000 or 14.3% compared to the year ended January 30, 1993. Sales for
stores open more than one year decreased 0.6% for the year ended January 29,
1994. Sales for Super Crown Books stores represented 39.8% and 21.0% of total
sales for the twelve months ended January 29, 1994 and January 30, 1993,
respectively. Super Crown Books stores sales of $109,637,000 increased 116.7%
over the prior year and sales for comparable Super Crown Book stores increased
1.2%. Classic Crown Books stores sales of $164,886,000 decreased 13.3% over
the prior year and sales for comparable classic Crown Books stores decreased
1.0%. As a result of the adoption of a 52/53 week fiscal year in December of
1992, fiscal 1994 has one less day than fiscal 1993. If prior year sales are
adjusted to reflect the 52/53 week fiscal year, total sales increased 14.5% for
the year ended January 29, 1994 and comparable sales decreased 0.3%.
During the twelve months ended January 29, 1994, Crown Books opened 37
Super Crown Books stores, five expanded classic Crown Books stores and one
store that primarily sells remainders, while closing 45 classic Crown Books
stores and four Super Crown Books stores. At January 29, 1994, Crown Books had
a total of 240 stores and subsequent to that date, opened five Super Crown
Books stores and closed eight classic Crown Books stores.
Interest and other income increased by $58,000 when compared to the prior
fiscal year. The increase was primarily due to increased income from magazine
distributors for displays in new stores. Interest income decreased $193,000 as
a result of decreased funds available for short term investment.
Cost of sales, store occupancy, and warehousing as a percentage of sales
was 80.4% for the year ended January 29, 1994 compared to 78.5% the prior
fiscal year. The increase was primarily due to a decrease in store margins, as
a result of a less favorable sales mix, increased purchasing from wholesalers
at a higher cost and the impact of closed store liquidation sales, and to an
increase in store occupancy costs for Super Crown Books stores.
18
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
Selling and administrative expenses as a percentage of sales were 17.1%
for the year ended January 29, 1994 compared to 16.0% for the same period one
year ago. The increase was due primarily to increased payroll costs at both
the store and administrative levels, largely the result of expansion of Super
Crown Books stores, and to increased legal fees (see Note 6 to the Consolidated
Financial Statements) including the accrual of future estimated legal costs to
be incurred in relation to certain litigation. The increases were partially
offset by decreased insurance costs as a result of Crown Books' efforts to
reduce workers compensation cost.
Depreciation and amortization expense increased by $1,568,000 for the year
ended January 29, 1994 when compared to the prior fiscal year. This increase
was primarily due to the acquisition and installation of a point-of-sale system
in all stores and to the purchase of fixed assets for new Super Crown Books
stores.
Interest expense decreased by $68,000 in fiscal 1994 compared to fiscal
1993 due to the reduction of amounts owed under capital lease obligations.
During the year ended January 29, 1994, Crown Books recorded a
restructuring charge of $6,200,000 before income taxes. The charge includes
the anticipated costs associated with closing, relocating, expanding and
converting smaller existing Super Crown Books to a new larger prototype store.
This charge reflects the cost of implementing a decision of current management
to close smaller Super Crown Books stores opened over the past three years
which have proved to be too small to compete effectively. These costs are
primarily unrecoverable lease obligations and the remaining book value of
leasehold improvements.
Crown Books recorded a $276,000 tax benefit during the year ended January
29, 1994.
Shoppers Food
Shoppers Food sales increased $30,177,000 or 4.4% to $718,144,000 during
the twelve months ended January 31, 1994 when compared to the same period in
the prior year. The increase is primarily due to the opening of two new stores
during 1994. Sales on a comparable basis decreased 3.8% largely due to new
stores opening near existing stores.
Interest and other income increased $1,022,000 during the twelve months
ended January 31, 1994 as a result of increased funds available for short-term
investment.
Cost of sales, store occupancy and warehousing, as a percentage of sales,
decreased to 82.1% during the twelve months ended January 31, 1994 compared to
83.8% for the same period last year. The decrease is primarily due to
increased margins as a result of a lessening of competitive pricing pressure in
the Washington, D.C. grocery market.
19
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
Selling and administrative expenses, as a percentage of sales, increased
to 14.0% from 12.9% during the twelve months ended January 31, 1994. The
increase resulted primarily from increased payroll and insurance costs and from
a $1,000,000 charge for a closed store reserve.
Depreciation and amortization decreased $599,000 during the twelve months
ended January 31, 1994 when compared to the same period last year. The
decrease is primarily the result of an increase in fixed assets last year and
Shoppers Food recording a full year depreciation at that time.
Shoppers Foods' effective income tax was 39.2% for the year ended January
31, 1994 compared to 39.0% in the prior year.
Total Beverage
Total Beverage purchased the assets of a discount beverage superstore in
February 1993 and opened two additional stores in October 1993. During the
year ended January 31, 1994, Total Beverage sales were $15,273,000 and Total
Beverage recorded a net operating loss of $5,512,000 which included legal
expenses of approximately $3,800,000 (see Note 6 to the Consolidated Financial
Statements).
Cabot-Morgan Real Estate
Revenues from real estate properties increased by $5,005,000 during the
year ended January 31, 1994 when compared to the same period in the prior year.
The increase is the result of the acquisition of Bull Run Plaza in January 1993
and Greenbriar Town Center's increased occupancy for the whole year.
During the twelve months ended January 31, 1993, Greenbriar Town Center
completed renovation and expansion and the center became fully operational. As
a result, and combined with the acquisition of Bull Run Plaza, CMREC's
administrative expenses increased to $6,107,000 from $3,957,000 and
depreciation expense increased to $4,338,000 from $3,190,000 during the twelve
months ended January 31, 1994.
Interest expense increased by $2,774,000 to $7,683,000 during the twelve
months ended January 31, 1994, primarily due to the full year impact of the
mortgage for Greenbriar Town Center and to the mortgage at Bull Run Plaza.
CMREC is included in the Corporation's federal income tax return but files
separate state returns. Accordingly, CMREC has recorded a $16,000 tax
provision.
Dart Financial and Other Corporate
Income from bankers' acceptances decreased $871,000 during the year ended
January 31, 1994 when compared to the same period in the prior year. The
decrease is due to a decrease in the bankers' acceptances portfolio as a result
of funds used for the redemption of the Corporation's debentures in
20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1994 Compared to the Year Ended January 31, 1993
(Continued)
July 1992 and to the Corporation converting bankers' acceptances to higher
yielding instruments in fiscal 1994.
Interest and other income increased $270,000 during the year ended January
31, 1994 when compared to the same period in the prior year. In its efforts to
maximize total interest income, the Corporation has invested funds where it
believes they will generate the highest return consistent with minimizing
principal risk. Accordingly, the Corporation transferred bankers' acceptances
to marketable debt securities.
Administrative expenses for the Corporation increased $2,777,000 during
the year ended January 31, 1994, due primarily to increased payroll and legal
costs (see Note 6 to the Consolidated Financial Statements).
Interest expense for the Corporation decreased by $1,787,000 during the
year ended January 31, 1994 when compared to the same period in the prior year.
The decrease is the result of the Corporation's redemption of the remaining
debentures in July 1992.
Trak Auto, Crown Books and Shoppers Food file separate income tax returns.
CMREC, Total Beverage and Dart Financial are included in the Corporation's
income tax returns. The Corporation's current net operating loss was not tax
benefitted as a result of the complete utilization of all available carrybacks.
As a result of the Corporation's operating loss for the year ended January
31, 1994, a net tax operating loss carryforward of $7,090,000 was created.
The Corporation's cumulative total net tax operating loss carryforward is
$8,643,000. All net operating loss carryforwards will expire by fiscal 2009.
In addition, the Corporation has an Alternative Minimum Tax ("AMT") credit
carryforward of approximately $1,010,000.
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
Trak Auto
Sales of $315,793,000 in fiscal 1993 decreased by $3,842,000 or 1.2% from
the prior fiscal year primarily due to the closure of 11 underperforming stores
in San Diego during the second quarter as well as the continuing impact of the
stores destroyed or damaged during the civil disturbances in Los Angeles during
the first quarter. Trak Auto's decision to close the San Diego stores was
largely due to those stores inability to generate the sales volume necessary to
meet expenses. In Los Angeles, the six stores that remain closed and the nine
stores that subsequently reopened contributed to the decrease in sales. These
decreases were partially offset by three new Super Trak stores and increased
sales at nine stores converted to Super Trak stores and a 2.6% increase in
sales for stores open more than one year.
Interest and other income increased by $614,000 during the year ended
January 31, 1993 compared to the twelve months ended January 31, 1992. The
increase was due to increased interest income as a result of increased funds
21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
available for short-term investments, partially offset by lower interest rates,
and to increased rental income from subleases.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales decreased to 73.9% for the year ended January 31, 1993, compared to 76.0%
for the year ended January 31, 1992. This decrease was primarily the result of
strong margins throughout 1993 compared to 1992 when first quarter margins were
low due to competitive market pressures, and was partially offset by a small
increase in store occupancy costs. Margins for stores open less than one year
did not vary significantly from stores open more than one year.
Selling and administrative expenses were 20.9% of sales for the year ended
January 31, 1993 compared to 20.3% for the year ended January 31, 1992. The
increase was primarily due to increased payroll costs, largely a result of
costs associated with the opening of Super Trak stores, and increased insurance
costs associated with Trak Auto's casualty program covering general
liability, auto liability and workers compensation and increased health
insurance costs.
Depreciation and amortization decreased $459,000 when compared to fiscal
1992. The decrease was due primarily to the write-off of fixed assets as a
result of utilization of net operating loss carryforwards, of negative goodwill
amortization and to last year's retroactive adjustment to the useful lives of
certain leasehold improvements.
Interest expense decreased $28,000 for the year ended January 31, 1993
compared to the year ended January 31, 1992 due to the reduction of amounts
owed under capital lease obligations.
During the year ended January 30, 1993, Trak Auto recorded a one-time
restructuring charge of $7,400,000, before income taxes. The charge includes
the anticipated costs associated with store closing, relocating, expanding and
converting to the new Super Trak concept. These costs are primarily
unrecoverable lease obligations.
As a result of the stores destroyed or damaged in the Los Angeles
disturbances discussed above, Trak Auto had received payments from insurance
carriers of approximately $6,400,000 and recorded a receivable for an
additional $3,500,000 which represent settlement of Trak Auto's insurance
claims. The payments and receivable, less related expenses and the cost of the
related inventory and fixed assets lost, have been recorded as a gain,
classified as an unusual item during the year ended January 30, 1993.
The effective income tax rate was 32.5% for the year ended January 30,
1993 compared to 31.4% in the prior year. Trak Auto's effective income tax
rate was less than the statutory rates as a result of differences in
depreciation between the book and tax basis of the assets acquired from Trak
Auto West, Inc. ("Trak West").
22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Trak Auto adopted Statement of Financial Accounting Standards ("SFAS") No.
109, Accounting for Income Taxes, effective February 1, 1992. At that time,
the Company had existing unrecoverable tax benefits of net operating loss
carryforwards of approximately $6,500,000 representing both preacquisition
losses of Trak West and its own operating losses in 1991. In conjunction with
the adoption of the standard, Trak Auto recorded $1,658,000 as the cumulative
effect of recognizing that portion of the previously unrecognized tax benefits
that it concluded would more likely than not be recognized and established a
valuation reserve of $728,000.
Crown Books
Sales of $240,682,000 for the year ended January 31, 1993 increased by
$8,198,000 or 3.5% compared to the year ended January 31, 1992. Sales for
stores open more than one year increased 2.6% for the year ended January 31,
1993. Sales for Super Crown Books stores represented 21.1% and 11.1% of total
sales for the twelve months ended January 31, 1993 and 1992, respectively.
Super Crown Books stores sales of $50,756,000 increased 96.7% over the prior
year and sales for comparable Super Crown Books stores increased 3.4%.
During the twelve months ended January 30, 1993, Crown Books opened 13
Super Crown Books stores and closed 19 classic Crown Books stores. In
addition, in September 1992, one classic Crown Books store was completely
destroyed in a fire. Crown Books recorded a partial insurance claim receivable
of approximately $260,000 which consisted of the net book value of destroyed
fixed assets and inventory, at cost and as such, no gain or loss has been
recognized. At January 31, 1993, Crown Books had received a partial settlement
of $250,000 from its insurance carrier. At January 31, 1993, Crown Books had a
total of 247 stores.
Interest and other income decreased by $1,032,000 when compared to the
prior fiscal year. The decrease, due to continuing lower interest rates, was
partially offset by increased funds available for short-term investment for
most of the year.
Cost of sales, store occupancy, and warehousing as a percentage of sales
was 78.5% for the year ended January 31, 1993 compared to 78.1% the prior
fiscal year. The increase was primarily due to greater store occupancy costs
for Super Crown Books stores, as a percentage of sales, and was partially
offset by increased margin as a result of the increasing contribution of Super
Crown Books stores margins due to Super Crown Books stores' more favorable
sales mix.
Selling and administrative expenses as a percentage of sales were 16.0%
for the year ended January 31, 1993 compared to 15.3% for the same period one
year before. The increase was due primarily to payroll increases greater than
sales and to increased administrative payroll largely the result of opening
Super Crown Books stores. Mature Super Crown Books stores payroll costs are
lower than classic Crown Books stores, as a percentage of sales.
23
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Depreciation and amortization expense increased by $238,000 for the year
ended January 31, 1993 when compared to the prior fiscal year. This increase
was primarily due to additional fixed assets in new and remodeled stores,
primarily Super Crown Books stores.
Interest expense decreased by $79,000 in fiscal 1993 compared to fiscal
1992 due to the reduction of amounts owed under capital lease obligations.
During the year ended January 31, 1993, Crown Books recorded a
restructuring charge of $6,600,000 before income taxes. The charge includes
the anticipated costs associated with store closings, relocating, expanding and
converting to the Super Crown Books concept. These costs are primarily
unrecoverable lease obligations and the remaining book value of leasehold
improvements.
The effective income tax rate was 37.9% for the year ended January 31,
1993 compared to 38.0% for the year ended January 31, 1992.
Crown Books adopted SFAS No. 109, Accounting for Income Taxes, effective
February 1, 1992. Implementation of the standard had no significant effect on
the financial statements.
Shoppers Food
Shoppers Food sales increased $77,910,000 or 12.8% to $687,967,000 during
the twelve months ended January 31, 1993 when compared to the same period in
the prior year. The increase is primarily due to the opening of four new
stores and was partially offset by the closing of one underperforming store.
Sales on a comparable basis decreased 6.6%, largely due to the new stores
opening near existing stores.
Cost of sales, store occupancy and warehousing, as a percentage of sales,
increased to 83.8% during the twelve months ended January 31, 1993 compared to
82.7% for the same period last year. The increase is primarily due to
decreased margins resulting from competitive pressures in its market.
Selling and administrative expenses, as a percentage of sales, decreased
to 12.9% from 13.1% during the twelve months ended January 31, 1993. The
decrease, as a percentage of sales resulted from cost controls implemented
during the year.
Depreciation and amortization increased $3,107,000 during the twelve
months ended January 31, 1993 when compared to the same period last year. The
increase is primarily the result of additional fixed assets in new stores.
Shoppers Foods' effective income tax was 39.0% for the year ended January
31, 1993 compared to 38.1% in the prior year.
Shoppers implemented SFAS No. 109, Accounting for Income Taxes, effective
February 1, 1992. Adoption of the new statement did not have a material effect
on financial statements.
24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Cabot-Morgan Real Estate
Revenues from real estate properties increased by $4,471,000 during the
year ended January 31, 1993 when compared to the same period in the prior year.
The increase is the result of the acquisition of Greenbriar Town Center in
March 1991 and that center's increased occupancy, increased rental income at
Greenway Center, as well as the acquisition of Bull Run Plaza in January 1993.
During the twelve months ended January 31, 1993, Greenbriar Town Center
completed renovation and expansion and the center became fully operational. As
a result, CMREC's administrative expenses increased to $3,957,000 from
$3,352,000 and depreciation expense increased to $3,190,000 from $2,688,000
during the twelve months ended January 31, 1993.
Interest expense increased by $1,336,000 to $4,909,000 during the twelve
months ended January 31, 1993 primarily due to the $38,000,000 mortgage
obtained by Greenbriar (see Note 8 to the Consolidated Financial Statements).
CMREC is included in the Corporation's federal income tax return but files
separate state returns. Accordingly, CMREC has recorded a $71,000 tax
provision.
Dart Financial and Other Corporate
Income from bankers' acceptances decreased $7,026,000 during the year
ended January 31, 1993 when compared to the same period in the prior year. The
decrease is due to continued lower interest rates and to a decrease in the size
of the bankers' acceptances portfolio, largely the result of funds used for the
redemption of the Corporation's outstanding debentures.
Interest and other income decreased $2,011,000 during the year ended
January 31, 1993 when compared to the same period in the prior year. The
decrease was primarily due to continuing lower interest rates.
Administrative expenses for the Corporation increased $248,000 during the
year ended January 31, 1993, due primarily to the result of higher payroll and
insurance expenses.
Interest expense decreased by $12,258,000 during the year ended January
31, 1993 when compared to the same period in the prior year. The decrease is
the result of the Corporation's repurchase or redemption of $75,000,000 in face
amount of its outstanding debentures in fiscal 1992 and the redemption of the
remaining debentures in July of the current fiscal year.
During the year ended January 31, 1993, the Corporation redeemed all of
its outstanding debentures, face amount of $29,120,000, resulting in a loss
classified as an extraordinary item of $885,000.
25
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year Ended January 31, 1993 Compared to the Year Ended January 31, 1992
(Continued)
Trak Auto, Crown Books and Shoppers Food file separate income tax returns.
CMREC and Dart Financial are included in the Corporation's income tax returns.
The Corporation's current net operating loss was not tax benefitted.
As a result of the Corporation's operating loss for the year ended January
31, 1993, a net tax operating loss carryforward of $4,305,000 was created.
This net operating loss carryforward expires in fiscal 2008. In addition, the
Corporation had an AMT credit carryforward of approximately $622,000.
The Corporation adopted SFAS No. 109, Accounting for Income Taxes,
effective February 1, 1992. Implementation of the standard had no significant
impact on the financial statements.
EFFECT OF NEW FINANCIAL ACCOUNTING STANDARDS
The Company is required to adopt SFAS No. 112, Employer's Accounting for
Postretirement Benefits, no later than fiscal year ending January 31, 1995.
The Company does not expect that implementing the standard will have a
significant impact on the financial statements.
The Company is required to adopt SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, in fiscal 1995. The Company does
not expect that implementing the standard will have a material effect on the
financial statements.
SEASONALITY
Crown Books' sales, net income and increase in working capital for quarter
ended January 31 have historically been substantially higher than for any of
the previous three quarters. Crown Books inventory and payables have
historically been higher at the end of the third quarter than for any other
quarter for the year. The fourth quarter results of operations have
historically been sufficient to satisfy to a substantial degree the third
quarter accounts payable requirements. Management does not believe the
Corporation's other partially or wholly-owned businesses are affected by
seasonality to any material extent.
EFFECTS OF INFLATION
Inflation in the past three years has had no significant impact on the
Corporation's business. The Corporation believes that Trak Auto, Crown Books,
Shoppers Food and Total Beverage will recover most cost increases due to
inflation with increasing selling prices.
26
Item 8. Financial Statements and Supplementary Date
ˇ Download Table
Page No.
--------
Report of Independent Public Accountants 28
Consolidated Balance Sheets
January 31, 1994 and 1993 29-30
Consolidated Statements of Income
Years ended January 31, 1994, 1993 and 1992 31-32
Consolidated Statements of Stockholders' Equity
Years ended January 31, 1994, 1993 and 1992 33
Consolidated Statements of Cash Flows
Years ended January 31, 1994, 1993 and 1992 34-37
Notes to Consolidated Financial Statements 38-69
27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO DART GROUP CORPORATION:
We have audited the accompanying consolidated balance sheets of Dart Group
Corporation (a Delaware corporation) and subsidiaries as of January 31, 1994
and 1993 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended January
31, 1994. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dart Group Corporation and
subsidiaries as of January 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three fiscal years in the
period ended January 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the Consolidated Financial Statements, effective
February 1, 1992, the Company changed its method of accounting for income
taxes.
ARTHUR ANDERSEN & CO.
Washington, D. C.,
April 27, 1994.
28
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
ˇ Download Table
January 31,
--------------------------
1994 1993
------------ ------------
Current Assets:
Cash $ 17,955,000 $ 14,084,000
Short-term instruments, including
$133,315,000 and $156,277,000 held
by majority owned subsidiaries
in 1994 and 1993, respectively 138,278,000 172,624,000
Marketable debt securities 68,837,000 -
Bankers' acceptances 62,307,000 90,369,000
Accounts receivable, trade 15,351,000 11,156,000
Accounts receivable, other 1,044,000 3,652,000
Merchandise inventories 203,036,000 161,794,000
Deferred income tax benefit 6,522,000 3,247,000
Other current assets 4,048,000 3,117,000
------------ ------------
Total Current Assets 517,378,000 460,043,000
------------ ------------
Property and Equipment, at cost:
Furniture, fixtures and equipment 128,982,000 102,779,000
Buildings and leasehold improvements 166,250,000 144,954,000
Land 33,396,000 33,550,000
Property under capital leases 35,792,000 42,885,000
------------ ------------
364,420,000 324,168,000
Accumulated Depreciation and Amortization 104,137,000 82,536,000
------------ ------------
260,283,000 241,632,000
Other Assets 9,369,000 8,081,000
------------ ------------
Excess of Purchase Price Over Net Assets
Acquired net of accumulated
amortization of $6,074,000 and
$5,064,000, in 1994 and 1993,
respectively 3,659,000 4,537,000
------------ ------------
Deferred Income Tax Benefit 12,209,000 8,086,000
------------ ------------
Total Assets $802,898,000 $722,379,000
============ ============
The accompanying notes are an integral part of these balance sheets.
29
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
ˇ Download Table
January 31,
--------------------------
1994 1993
------------ ------------
Current Liabilities:
Current portion of mortgage payable $ 988,000 $ 14,893,000
Accounts payable, trade 154,926,000 111,439,000
Income taxes payable 4,968,000 2,272,000
Accrued salaries and employee benefits 22,791,000 17,621,000
Accrued taxes other than income taxes 11,831,000 9,629,000
Other accrued liabilities 40,287,000 35,880,000
Current portion of obligations under
capital leases 345,000 508,000
------------ ------------
Total Current Liabilities 236,136,000 192,242,000
------------ ------------
Mortgage Payable 80,709,000 53,491,000
------------ ------------
Obligations Under Capital Leases 39,295,000 38,786,000
------------ ------------
Reserve for Closed Facilities and
Restructuring 28,595,000 24,662,000
------------ ------------
Other Long-term Liabilities 3,219,000 3,292,000
------------ ------------
Commitments and Contingencies
Minority Interests 140,637,000 130,667,000
------------ ------------
Stockholders' Equity:
Class A common stock, non-voting, par
value $1.00 per share; 3,000,000
shares authorized; 1,655,763
and 1,649,013 shares issued,
in 1994 and 1993, respectively 1,656,000 1,649,000
Class B common stock, voting, par value
$1.00 per share; 500,000 shares
authorized; 302,952 shares issued
and outstanding 303,000 303,000
Paid-in capital 65,323,000 63,332,000
Retained earnings 208,774,000 215,704,000
Treasury stock, 202,340 shares of
Class A common stock, at cost (1,749,000) (1,749,000)
------------ ------------
Total Stockholders' Equity 274,307,000 279,239,000
------------ ------------
Total Liabilities and Stockholders' Equity $802,898,000 $722,379,000
============ ============
The accompanying notes are an integral part of these balance sheets.
30
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
ˇ Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Sales $1,343,340,000 $1,244,442,000 $1,162,176,000
Income from bankers'
acceptances 2,588,000 3,459,000 10,485,000
Real estate revenue 18,658,000 13,653,000 9,182,000
Other interest and
other income 11,957,000 11,123,000 13,305,000
-------------- -------------- --------------
1,376,543,000 1,272,677,000 1,195,148,000
-------------- -------------- --------------
Expenses:
Cost of sales, store
occupancy and
warehousing 1,079,553,000 998,894,000 928,563,000
Selling and
administrative 242,286,000 204,813,000 191,090,000
Depreciation and
amortization 28,022,000 25,096,000 21,741,000
Interest 13,513,000 12,549,000 23,520,000
Restructuring charge 6,200,000 14,000,000 -
Unusual item - (3,894,000) -
-------------- -------------- --------------
1,369,574,000 1,251,458,000 1,164,914,000
-------------- -------------- --------------
Income before income
taxes and minority
interests 6,969,000 21,219,000 30,234,000
Income taxes 7,194,000 9,567,000 12,121,000
-------------- -------------- --------------
Income (loss) before
minority interests (225,000) 11,652,000 18,113,000
Minority interests in
income of consoli-
dated subsidiaries
and partnerships (6,512,000) (8,143,000) (11,802,000)
-------------- -------------- --------------
Income (loss) before extra-
ordinary item and
cumulative effect of
Trak Auto's change
in accounting
principle (6,737,000) 3,509,000 6,311,000
(continued on following page)
31
CONSOLIDATED STATEMENTS OF INCOME (Continued)
ˇ Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Extraordinary item:
Loss on
reacquisition of
debentures, net
of income tax
benefit of
$819,000 for
1992 - (885,000) (1,589,000)
Cumulative effect of
change in Trak Auto's
accounting principle,
net of minority
interest - 1,135,000 -
Net Income (Loss) $ (6,737,000) $ 3,759,000 $ 4,722,000
============== ============= ==============
Earnings per share:
Income (loss) before
extraordinary item
and cumulative effect
of change in accounting
principle $ (4.10) $ 1.91 $ 3.46
Extraordinary item:
Loss on
reacquisition of
debentures - (.48) (.87)
Cumulative effect of
change in Trak Auto's
accounting principle,
net of minority
interest - .62 -
-------------- -------------- --------------
Net Income (Loss) $ (4.10) $ 2.05 $ 2.59
============== ============== ==============
The accompanying notes are an integral part of these statements.
32
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ˇ Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Common Stock:
Class A:
Balance, beginning
of period $ 1,649,000 $ 1,648,000 $ 1,646,000
Stock options
exercised 7,000 1,000 2,000
-------------- -------------- --------------
Balance, end of period $ 1,656,000 $ 1,649,000 $ 1,648,000
============== ============== ==============
Class B:
Balance, beginning
and end of period $ 303,000 $ 303,000 $ 303,000
============== ============== ==============
Paid-in Capital:
Balance, beginning
of period $ 63,332,000 $ 64,136,000 $ 64,088,000
Stock options
exercised 469,000 96,000 40,000
Purchase of stock option 985,000 - -
Effect of subsidiary
stock options
exercised 537,000 (900,000) 8,000
-------------- -------------- --------------
Balance, end of period $ 65,323,000 $ 63,332,000 $ 64,136,000
============== ============== ==============
Treasury Stock:
Balance, beginning and
end of period $ (1,749,000) $ (1,749,000) $ (1,749,000)
============== ============== ==============
Retained Earnings:
Balance, beginning of
period $ 215,704,000 $ 212,138,000 $ 207,608,000
Net Income (6,737,000) 3,759,000 4,722,000
Dividends paid (193,000) (193,000) (192,000)
-------------- -------------- --------------
Balance, end of period $ 208,774,000 $ 215,704,000 $ 212,138,000
============== ============== ==============
Dividends paid per share of
Class A Common Stock $ .13 $ .13 $ .13
============== ============== ==============
Class B Common Stock $ - $ - $ -
============== ============== ==============
The accompanying notes are an integral part of these statements.
33
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
ˇ Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Cash Flows from Operating
Activities:
Net income (loss) $ (6,737,000) $ 3,759,000 $ 4,722,000
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and
amortization 28,022,000 25,096,000 21,741,000
Gain on sale
of fixed assets - (22,000) -
Utilization of Trak
Auto Corporation
net operating
loss and investment
tax credit carry-
forwards - - 531,000
Cumulative effect of
change in accounting
principle - (1,135,000) -
Amortization of bond
discount and
debenture costs - 41,000 318,000
Write off of debenture
costs and unamortized
discount included in
extraordinary loss - 344,000 1,015,000
Provision for closed
facilities including
restructuring charge 4,626,000 23,736,000 3,866,000
Change in assets and
liabilities, net
of effects from
acquisitions by
Cabot Morgan Real
Estate Company in
1993 and 1992:
Accounts receivable,
trade (4,195,000) 3,065,000 (2,842,000)
Accounts receivable,
other 2,608,000 (3,652,000) -
Merchandise inventories (41,242,000) (9,309,000) (3,656,000)
Income taxes refundable - - 2,957,000
(continued on following page)
34
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
ˇ Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Other current assets (931,000) 231,000 (741,000)
Deferred income tax
benefit (7,398,000) (5,640,000) (1,836,000)
Other assets (1,288,000) (1,186,000) 25,000
Accounts payable, trade 43,487,000 4,519,000 7,163,000
Income taxes payable 2,696,000 (10,296,000) (2,341,000)
Accrued salaries and
employee benefits 5,170,000 1,349,000 1,452,000
Accrued taxes other
than income taxes 2,202,000 1,036,000 1,796,000
Other accrued
liabilities 6,662,000 (13,889,000) 22,974,000
Accrued interest - (1,529,000) (3,937,000)
Deferred income (73,000) 3,292,000 -
Reserve for closed
facilities (1,719,000) (2,730,000) (1,513,000)
Minority interest 6,512,000 8,143,000 13,302,000
-------------- -------------- --------------
Net cash provided
by operating
activities $ 38,402,000 $ 25,223,000 $ 64,996,000
-------------- -------------- --------------
Cash Flows from Securities and
Capital Investment Activities:
Capital expenditures $ (45,805,000) $ (38,161,000) $ (39,096,000)
Purchase of subsidiary
common stock (1,094,000) - -
Dispositions of bankers'
acceptances - 22,264,000 9,928,000
Maturities of bankers'
acceptances 470,250,000 517,650,000 1,207,260,000
Purchase of bankers'
acceptances (442,188,000) (495,370,000) (1,156,921,000)
Dispositions of United
States Treasury Bills 296,962,000 298,610,000 882,011,000
Purchase of United States
Treasury Bills (290,671,000) (305,308,000) (830,400,000)
Purchases of marketable
debt securities (209,328,000) - -
Dispositions of marketable
debt securities 141,263,000 - -
Maturities of marketable
debt securities 9,284,000 - -
Cash paid for purchase of
real estate partnership
interest - (10,897,000) (21,355,000)
-------------- -------------- --------------
Net cash provided
by (used for)
securities and
capital invest-
ment activities $ (71,327,000) $ (11,212,000) $ 51,427,000
-------------- -------------- --------------
(continued on following page)
35
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
ˇ Enlarge/Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Cash Flows from Financing Activities:
Borrowings from real estate
mortgage $ 13,590,000 $ 38,000,000 $ -
Cash dividends (193,000) (193,000) (192,000)
Repurchase of debentures - (29,120,000) (75,000,000)
Stock options exercised 925,000 5,254,000 282,000
Contribution (distribution)
paid to minority
shareholders 3,418,000 (7,368,000) -
Proceeds from the option
to acquire common stock 985,000 - -
Proceeds from redemption
of note receivable 833,000 - -
Principal payments under
mortgage obligations (277,000) (1,452,000) (232,000)
Principal payments under
capital lease obli-
gations (484,000) (1,422,000) (1,133,000)
-------------- -------------- --------------
Net cash provided by
(used for) financing
activities $ 18,797,000 $ 3,699,000 $ (76,275,000)
-------------- -------------- --------------
Net Increase (Decrease)
in Cash and Cash
Equivalents $ (14,128,000) $ 17,710,000 $ 40,148,000
Cash and Cash Equivalents
at Beginning of Year 170,361,000 152,651,000 112,503,000
-------------- -------------- --------------
Cash and Cash Equivalents
at End of Year $ 156,233,000 $ 170,361,000 $ 152,651,000
============== ============== ==============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 13,570,000 $ 13,673,000 $ 25,291,000
Income taxes 12,457,000 20,506,000 12,780,000
Reconciliation of Cash and
Cash Equivalents to
Balance Sheet Captions:
Cash $ 17,955,000 $ 14,084,000 $ 6,895,000
Short-term investment of
majority-owned sub-
sidiaries utilized in
their operating cash
management 138,278,000 156,277,000 145,756,000
-------------- -------------- --------------
$ 156,233,000 $ 170,361,000 $ 152,651,000
============== ============== ==============
(continued on following page)
36
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Supplemental Disclosures of Noncash Investing and Financing Activities:
Dart Group Corporation, through its wholly-owned subsidiary, Cabot-Morgan Real
Estate Company, in fiscal 1993 and 1992 acquired a 51% interest in real estate
partnerships for $10,897,000 (including a $8,250,000 promissory note to Bull
Run Joint Venture) and $21,355,000, respectively. In conjunction with these
acquisitions, liabilities (including the minority interest portion) were
assumed as follows:
ˇ Download Table
Years Ended January 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Fair value of assets
acquired $ - $ 14,632,000 $ 42,138,000
Cash paid - 10,897,000 21,355,000
Minority interest not
acquired - 2,543,000 20,517,000
-------------- -------------- --------------
Liabilities Assumed $ - $ 1,192,000 $ 266,000
-------------- -------------- --------------
See Note 4 re: capital leases.
The accompanying notes are an integral part of these statements.
37
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(1) SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation: The accompanying consolidated financial
statements reflect the accounts of Dart Group Corporation (the "Corporation")
and its direct and indirect, wholly-owned and majority-owned subsidiaries and
majority-owned partnerships, including Trak Auto Corporation ("Trak Auto"),
Crown Books Corporation ("Crown Books"), Shoppers Food Warehouse Corp.
("Shoppers Food"), Total Beverage Corporation ("Total Beverage"), Cabot-Morgan
Real Estate Company ("CMREC") and Dart Group Financial Corporation ("Dart
Financial"). The accounts of CMREC, through partnerships in which it owns the
majority interest, are included from the date of their purchase. The accounts
of Total Beverage are included from the date of its purchase on February 28,
1993. The Corporation, Trak Auto, Crown Books, Shoppers Food, Total Beverage,
CMREC, Dart Financial and the Corporation's other direct and indirect wholly-
owned and majority-owned subsidiaries and majority-owned partnerships are
referred to collectively as the "Company". All significant intercompany
accounts and transactions have been eliminated.
Short-Term Instruments and Marketable Debt Securities:
At January 31, 1994, The Company's short-term instruments included United
States Treasury Bills and Overnight Repurchase Agreements (collateralized by
United States Treasury obligations), and marketable debt securities included
United States Treasury Notes, corporate notes, municipal securities and United
States Agency Securities Acceptances. These short-term instruments and
marketable debt securities are recorded at lower of cost or market. At January
31, 1994 the difference between cost and market was not significant.
Bankers' Acceptances: As of January 31, 1994, the Corporation, through
its wholly-owned subsidiary, Dart Financial, held bankers' acceptances of
approximately $62,307,000 stated at cost, adjusted for discount amortization,
which approximates market. All of the outstanding bankers' acceptances are
obligations of Japanese banks with a minimum credit rating of A1/P1 and are
further secured by the underlying commodity.
Fair Value of Financial Instruments: The fair values of current assets
and current liabilities are approximately equal to the reported carrying
amounts. The carrying amounts of the Company's mortgage payables are based on
outstanding principal, and the fair values of these mortgages were estimated
based on borrowing rates currently available for bank loans with similar terms
(see Note 8). No value has been placed on the Company's line of credit
facility as any borrowings would bear interest at market rates.
Statement of Cash Flows: For purposes of the statements of cash flows,
the Corporation considers the short-term instruments, consisting of United
States Treasury Bills, purchased with an original maturity of less than one
year held by its majority owned subsidiaries to be cash equivalents. The
Company's United States Treasury Bills primarily consist of instruments with a
maturity of less than four months. These highly liquid instruments are
considered to be an integral part of the operating cash management program of
the subsidiaries.
38
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued):
Merchandise Inventories and Cost of Sales: Trak Auto and Shoppers Food
inventories are priced at the lower of last-in, first- out (LIFO) cost or
market. At January 31, 1994, 1993 and 1992 inventories would have been greater
by $7,187,000, $6,453,000 and $5,890,000 respectively, if they had been valued
on the lower of first-in, first-out (FIFO) cost or market basis. Crown Books'
inventories are priced at the lower of FIFO cost or market.
Property and Equipment and Depreciation: The Company depreciates
furniture, fixtures and equipment generally over a ten-year period using the
straight-line method. Computer software is charged to expense in the year of
acquisition. Computer equipment is depreciated over a five-year period using
the straight-line method. All stores are leased except one store owned by
Shoppers Food. Improvements to leased premises are amortized generally over a
ten-year period, or the term of the lease, whichever is shorter. Assets
financed through asset-based financing arrangements are depreciated over the
lives of the leases.
Income Taxes: Trak Auto, Crown Books and Shoppers Food file separate
income tax returns. CMREC, Total Beverage and Dart Financial are consolidated
in the Corporation's income tax returns.
The Company implemented Statement of Financial Accounting Standards
("SFAS") No. 109, Accounting for Income Taxes, effective February 1, 1992.
Adoption of the new standard resulted in recognition of a net deferred tax
asset associated with the expected realization of Trak Auto's cumulative
temporary differences not previously recognized (classified as the cumulative
effect of a change in accounting principle). Prior to that date the Company
accounted for income taxes under Accounting Principles Board No. 11.
Adoption of New Accounting Pronouncements: The Company is required to
adopt SFAS No. 112, Employers' Accounting for Postemployment Benefits, no later
than its fiscal year ending January 31, 1995. The Company does not expect that
implementing the standard will have a significant effect on the financial
statements or results of operations.
The Company is required to adopt SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, no later than its fiscal year ending
January 31, 1995. The Company does not expect that implementing the standard
will have a significant effect on the financial statements.
Pre-Opening Expenses: All costs of a noncapital nature incurred in
opening a new store are charged to expense during the year as incurred.
Fiscal Year: The Corporation's fiscal year ends on January 31 each year.
Trak Auto, Crown Books, Shoppers Food and Total Beverage are reported to the
Saturday closest to January 31.
39
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued):
Excess of Purchase Price Over Net Assets Acquired: The Company amortizes
excess of purchase price over net assets acquired over a ten-year period using
the straight-line method. However, Trak Auto has elected to amortize negative
goodwill (arising from the utilization of a preacquisition net operating loss
carryforward) over a five-year period since Trak Auto has utilized such net
operating loss over the preceding five years.
Industry Segments: The Company operates specialty retail stores, grocery
and beverage stores, a real estate company and a financial business that deals
primarily in bankers' acceptances.
Earnings Per Share: Earnings per share is based on the weighted average
number of the Corporation's Class A and Class B common stock and common stock
equivalents (certain stock options) outstanding during the period. In
reporting earnings per share, the Corporation's interest in the earnings of its
majority-owned subsidiaries is adjusted for the dilutive effect, if any, of
these subsidiaries' outstanding stock options. The difference between primary
earnings per share and fully diluted earnings per share is not significant for
any period. Weighted average shares and share equivalents for the three years
ended January 31, 1994, 1993 and 1992 were 1,867,000, 1,837,000 and 1,825,000,
respectively.
Dividends: The holders of Class A Common stock are entitled to receive,
when and as declared by the board of directors, noncumulative preferential
dividends of up to thirty cents per share. If Class A dividends reach thirty
cents per share, in any fiscal year, holders of Class B common stock are
entitled to receive dividends not exceeding thirty cents per share. Any
dividends cumulatively in excess of thirty cents per share would be shared as
if they constituted a single class of stock. During the years ended January
31, 1994, 1993 and 1992, the Corporation paid dividends to the holders of Class
A Common Stock at $.13 per share and has not paid dividends to holders of Class
B Common Stock.
40
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(2) INCOME TAXES:
The provision for income taxes on income before extraordinary items
includes current income tax provision and deferred income tax provision as
follows:
ˇ Download Table
- In Thousands -
--------------------------------------
Fiscal Years
--------------------------------------
1994 1993 1992
-------- -------- --------
Current income tax provision:
Federal $ 8,590 $ 11,706 $ 11,571
State 2,236 2,701 2,575
-------- -------- --------
10,826 14,407 14,146
Deferred income tax provision: (3,632) (4,840) (2,025)
-------- -------- --------
$ 7,194 $ 9,567 $ 12,121
======== ======== ========
As a result of the Corporation's operating loss for the year ended January
31, 1994, a tax net operating loss carryforward of $7,090,000 was created. At
January 31, 1994, the corporation's cumulative net tax operating loss
carryforwards were $8,643,000 expiring by fiscal 2009. In addition, the
Corporation has an Alternative Minimum Tax credit carryforward of approximately
$1,010,000.
As a result of the adoption of SFAS No. 109, Accounting for Income Taxes,
the Corporation has determined that it required an initial valuation allowance
of $3,369,000 during the year ended January 31, 1993. During the year ended
January 31, 1994, the Corporation increased the valuation allowance by
$3,824,000 to $7,193,000. The valuation allowance was for tax net operating
loss carryforwards and alternative minimum tax credit carryforwards, which are
not able to be utilized at January 31, 1994 and certain temporary differences
that the Corporation believe are not likely to be realizable.
At February 2, 1992, Trak Auto had existing unrecognized tax benefits on
book net operating loss carryforwards of approximately $6,500,000 representing
both preacquisition losses of Trak Auto West, Inc. ("Trak West"), and its own
operating losses in 1991. In conjunction with the adoption of SFAS No. 109,
Accounting for Income Taxes, Trak Auto recorded $1,658,000 as the cumulative
effect of recognizing that portion of the previously unrecognized tax benefits
that it concluded would more likely than not be realized and established a
valuation reserve of $728,000.
The Company will evaluate the continuing need for its valuation reserves
on a periodic basis.
41
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(2) INCOME TAXES (Continued):
The effective income tax rate on income before income taxes, minority
interest, extraordinary items and cumulative change in accounting principle is
reconciled to the Federal statutory rate as follows:
ˇ Download Table
- In Thousands -
--------------------------------------
Fiscal Years
--------------------------------------
1994 1993 1992
---------- ---------- ----------
Federal statutory rate 34% 34% 34%
Income taxes at Federal statutory
rate $ 2,439 $ 7,214 $ 10,280
Increase (decrease) in taxes
resulting from--
Federal net operating loss
carryforward not benefitted 4,092 1,077 45
State income taxes, net of
Federal income tax benefit 838 1,287 1,583
Permanent tax difference due
to stock options exercised - - (27)
Effect of Total Beverage
twenty five percent loss
sharing 65 - -
Effect of tax exempt municipal
bond interest (295) - -
Effect of utilization of former
Trak West net operating loss (219) (209) (192)
Other 274 198 432
---------- ---------- ----------
Income taxes $ 7,194 $ 9,567 $ 12,121
========== ========== ==========
Effective tax rate 103.2% 45.1% 40.1%
========== ========== ==========
42
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(2) INCOME TAXES (Continued):
Temporary differences and tax carryforwards which give rise to deferred
tax assets and liabilities on a consolidated basis are as follows:
ˇ Download Table
(in thousands)
------------------------
Deferred Tax Assets: January 31, January 31,
-------------------- ----------- -----------
1994 1993
----------- -----------
Reserves for other liabilities $ 2,572 $ 748
Capitalized leases treated as operating
leases for tax purposes 3,288 2,506
Depreciation 701 -
Uniform capitalization of inventory
costs 2,381 1,531
Deferred gain from insurance gain 422 -
Closed store reserve 8,722 7,159
Accrued rent 1,169 792
Deferred income 1,022 1,687
Certain officers bonuses 1,617 628
Tax loss carryforwards 3,164 1,463
Tax credit carryforwards 1,018 622
Basis adjustment as a result of purchase
accounting for Trak West 659 638
Other 42 4
------- -------
Gross Deferred Tax Assets 26,777 17,778
Valuation allowance (7,921) (4,097)
------- -------
Net Deferred Tax Assets 18,856 13,681
Deferred Tax Liabilities:
-------------------------
Depreciation - 1,750
Reserves relating to insurance gain - 490
Other 125 108
------- -------
Gross Deferred Tax Liabilities 125 2,348
------- -------
Net Deferred Tax Asset $18,731 $11,333
======= =======
43
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(3) TRANSACTIONS WITH AFFILIATES:
Shoppers Food Warehouse Corp.
In fiscal 1989 the Corporation acquired in excess of 50% of the common
stock of Shoppers Food, which operates the Shoppers Food Warehouse discount
grocery chain in the Washington, D.C. metropolitan area. As a result of the
allocation of the net purchase price, the Corporation recorded approximately
$11,160,000 as excess of purchase price over net assets acquired. The
Corporation and Shoppers Food have a buy/sell agreement whereby either
shareholder has the right, at any time, to initiate procedures under which the
initiating party offers both to sell to or buy from the other party the
initiating party's or the other party's shares in Shoppers Food at the offer
price. The recipient of the offer has the alternative of accepting the offer
to sell or the offer to buy. The Corporation is unable to determine the effect
that would result if either party initiates this procedure.
During the year ended January 31, 1992, Shoppers Food acquired two Basics
Supermarkets from Super Rite Foods, Inc. ("Super Rite"). In connection with
the purchase of the Basics Supermarkets, Shoppers Food entered into a separate
wholesale grocery multiyear supply agreement with Super Rite to supply the
Shoppers Food Chain, in exchange for receipt of approximately $4,700,000 in
cash and other considerations. This amount is being amortized over the 51
month term of the supply agreement.
Total Beverage Corporation:
On January 26, 1993, the Corporation organized Total Beverage under the
laws of Delaware as a wholly-owned subsidiary. On February 27, 1993, Total
Beverage purchased the assets of a discount beverage superstore located in
Chantilly, Virginia for approximately $1,494,000 from Shoppers Food. In
October 1993, Total Beverage opened two additional stores located in Alexandria
and Manassas, Virginia. The stores sell beer, wine and non-alcoholic
beverages.
Exercise of Subsidiary Stock Options
In each of the three years ended January 31, 1994, Trak Auto and Crown
Books stock options have been exercised. As these options are exercised, the
number of minority shares outstanding, and accordingly the minority share of
the ownership of Trak Auto and Crown Books, increases. The difference
attributable to the Corporation's change in ownership percentage for these
subsidiaries is reflected in Paid-in Capital.
Crown Books Corporation
The Corporation purchased 50,000 additional shares of Crown Books common
stock during the year ended January 31, 1994 that increased its ownership to
51.35%.
44
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS:
Description of Leasing Arrangements
The Company leases stores, warehouses, leasehold improvements, fixtures
and equipment. Renewal options are available on the majority of leases. In
some instances, store leases require the payment of contingent rentals and
license fees based on sales in excess of specified minimums. Certain
properties are subleased with various expiration dates. Certain capital leases
have purchase options at fair market value at the end of the lease.
Following is a schedule by fiscal year of future minimum payments under
capital leases, license agreements and non-cancelable operating leases having
initial or remaining terms in excess of one year at January 31, 1994. The
imputed interest rate on the capital leases is 14.74% in the aggregate.
ˇ Download Table
- In Thousands -
---------------------------------------
Capital Leases
------------------------
Fixtures
Fiscal and Operating
Year Buildings Equipment Leases
------ --------- --------- ---------
1995 $ 4,925 $ 398 $ 54,108
1996 5,286 298 49,277
1997 5,575 - 43,749
1998 5,891 - 37,255
1999 6,243 - 29,605
2000-2017 115,840 165,658
-------- --------- ---------
143,760 696 $ 379,652
=========
Less-Imputed interest 104,750 66
-------- ---------
Present value of net minimum 39,010 630
lease payments
Less-Current maturities - 345
-------- ---------
Long-term capital lease
obligations $ 39,010 $ 285
-------- ---------
Rent expense for operating leases and license arrangements are as follows:
ˇ Download Table
Year Ended January 31,
------------------------------------------
1994 1993 1992
------------ ------------ ------------
Minimum rentals $ 51,158,000 $ 44,330,000 $41,531,000
Contingent rentals 529,000 537,000 591,000
------------ ------------ -----------
$ 51,687,000 $ 44,867,000 $42,122,000
============ ============ ===========
45
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS (Continued):
Capital Lease Arrangements
The Corporation has a lease with a private partnership in which Haft
family members own all of the partnership interests, for a 271,000 square foot
headquarters building and distribution center in Landover, Maryland. The lease
is for 30 years and six months, commenced in October 1985, and provides for
increasing rental payments over the term of the lease. The current annual
rental is $1,819,000. The lease requires the payment for maintenance,
utilities, insurance and taxes. The distribution center was constructed by the
partnership at a cost of approximately $8,300,000. The Corporation has sublet
approximately 238,000 square feet to Trak Auto and Crown Books at a per square
foot charge which is equal to the Corporation's per square foot cost under the
master lease. The Corporation has a lease agreement with the aforementioned
partnership for land, identified for future Trak Auto expansion, adjacent to
the headquarters building and distribution center. The lease is for the same
period as the headquarters building and distribution center lease. The lease
provides for current annual rental of $33,000 with increases of three percent
per year. The rent will be renegotiated upon commencement of construction of
any improvements. Trak Auto has agreed to bear the annual carrying cost for
the land.
The Corporation's majority-owned subsidiary, Trak Auto, entered into an
agreement to lease a 176,000 square foot distribution center in Bridgeview,
Illinois from a private partnership in which Haft family members own all of the
partnership interests. The lease is for 30 years and six months, commenced
April 1984 and provides for rental payments increasing approximately 15% every
five years over the term of the lease. The current annual rental is $588,000.
The lease requires payment of maintenance, utilities, insurance and taxes. The
Corporation is jointly and severally liable for the lease obligations. The
partnership purchased the warehouse on March 12, 1984 for approximately
$3,100,000.
The Corporation's majority-owned subsidiary, Trak Auto, has an agreement
to lease a distribution center in Ontario, California from a private
partnership in which Haft family members own all of the partnership interests.
The lease is for 20 years and commenced in December 1989. The lease also
provides for increasing rental payments, based upon the Consumer Price Index
for the Los Angeles area, over the term of the lease. The current annual
rental is $1,130,000. The lease requires payment of maintenance, utilities,
insurance and taxes. The partnership purchased the distribution center for
approximately $10,800,000.
46
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS (Continued):
The Corporation's majority-owned subsidiary, Shoppers Food, has a lease
agreement for a 86,000 square foot office building in Lanham, Maryland from a
private partnership in which Haft family members and the owners of the minority
interest in Shoppers Food own all of the partnership interests. The lease is
for 20 years and commenced January 9, 1991. The lease provides for yearly
increasing rental payments, based upon the Consumer Price Index for the
Washington, D.C. Metropolitan Statistical Area, however the increases shall not
be more than 6% or less than 3%. The current annual rental is $1,225,000. The
lease requires payment of maintenance, utilities, insurance and taxes. The
partnership purchased the office building for approximately $8,700,000 in July
1990. There are currently four unaffiliated subtenants in the office building.
These subtenants are leasing approximately 36,000 square feet for a current
annual rent of $518,000.
The capital lease arrangements described above are all included in the
lease commitment table.
Lease Guarantee
The Corporation, because of its guarantee as part of the sale of its drug
store division in 1985, reassumed its lease obligations for its former 533,800
square foot executive office facility and warehouse in Landover, Maryland. The
leases are with a private partnership in which Haft family members own all of
the partnership interests. The leases expire September 30, 2016 and provide
for increasing rental payments over the term of the leases based on Consumed
Price Index increases from a base period. The current annual rental is
$845,326. The lease requires payment of maintenance, utilities, insurance and
taxes. The Corporation has reserved $9.6 million which represents the present
value of its estimated future costs under this guarantee.
Trak Auto has an agreement with the Corporation to sublease 6,500 square
feet of the facility. The term of the sublease is one year (with nine one-year
option periods). The annual rental is $21,000 and will increase to $24,000 for
each of the last five option periods. The sublease requires Trak Auto to pay
approximately $6,000 annually for its share of common area maintenance, real
estate taxes and insurance premiums. In addition, Shoppers Food has an
agreement with the Corporation to rent (on a month to month basis) 6,000 square
feet of the above facility for approximately $2,000 a month. The Corporation
is actively marketing the remaining space for lease to unaffiliated parties.
47
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(4) LEASE AND LICENSE COMMITMENTS (Continued):
Store Operating Leases
During the fiscal years ended January 31, 1994, 1993 and 1992,
respectively, Trak Auto made rental payments of approximately $2,180,000,
$2,008,000 and $1,848,000, Crown Books made rental payments of approximately
$1,780,000, $1,410,000 and $1,433,000, and Shoppers Food made rental payments
of approximately $2,873,000, $2,873,000 and $2,538,000 and Total Beverage made
rental payments of approximately $361,000 during the year ended January 31,
1994 to CMREC shopping centers and to partnerships in which members of the Haft
family own all or substantially all of the beneficial interests. Two of the
stores involved were acquired by the partnerships within the past two years.
Store Closing Costs
The costs associated with store closings are charged to expense when
management makes the decision to close a store. Such costs consist primarily
of future lease obligations (including rent, real estate taxes and common area
maintenance charges), after the closing date, net of estimated sublease income,
and the remaining book value of leasehold improvements.
Trak Auto, Crown Books and Shoppers Food have closed stores in various
markets with leases expiring through 2002. Net charges (income) of
approximately $(574,000), $1,013,000 and $4,268,000 were recorded in fiscal
1994, 1993 and 1992, respectively, representing estimated unrecoverable lease
costs, net of sublease the remaining book value of leasehold improvements and
certain costs for these stores. Income during the year ended January 31, 1994
was the result of Trak Auto and Crown Books early terminations of lease
agreements by Trak Auto and Crown Books, net of cash buyouts. Any settlements
of lease obligations at amounts originally estimated are recorded at the time
of settlement. Trak Auto, Crown Books and Shoppers Food continue to review
store operations and may close additional underperforming stores in the future.
(5) CERTAIN EVENTS:
Employment of Ronald S. Haft
On August 1, 1993, the Board of Directors of the Corporation approved an
employment agreement with Ronald S. Haft (the "Agreement"), pursuant to which
he was employed by the Corporation as its President and Chief Operating Officer
for a term initially ending on January 31, 1997. The term is to be extended
for one year on each February 1 that Ronald S. Haft is employed under the
Agreement. The Agreement also provides that Ronald S. Haft will be nominated
to the Board of Directors of the Corporation at each opportunity during the
term of the Agreement; he was elected as a director of the Corporation July 28,
1993. Ronald S. Haft also was elected as a Director of the Corporation's
subsidiaries. Under the terms of the Agreement, Ronald S.
48
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(5) CERTAIN EVENTS (Continued):
Haft may engage, directly or indirectly, in any other business activities so
long as they do not interfere with his duties to the Corporation.
Sale of Options to Ronald S. Haft
Under the Agreement, Ronald S. Haft acquired for $5.00 per share options
(the "Options") to purchase 197,048 shares of the Corporation's Class B Common
Stock, par value $1.00 ("Dart Class B Stock"). All issued and outstanding Dart
Class B Stock, which is the only class of common stock of the Corporation with
voting rights, is held by members of the Haft family. The total acquisition
price for the Options, which has been paid, was $985,240.
The exercise price for the Options is $89.65 per share, which as required
by the Agreement is 110% of the reported closing price for shares of the
Corporation's Class A Common Stock, par value $1.00, on the last trading date
prior to the authorization of the Agreement. The Options were immediately
exercisable as of the date of the Agreement and expire August 1, 2008. The
Options may be exercised by notice to the Corporation, with payment in cash
following within 30 days of the notice. Further, if Ronald S. Haft's
employment is terminated other than for conviction of an offense involving
moral turpitude or for conviction of a felony, he will have the right to
exercise all of the Options prior to or at such time; in the event of his
death, his personal representative shall have the right to exercise the Options
within 60 days thereof.
Under the Agreement, the Corporation also agreed to loan to Ronald S. Haft
the full amount of the exercise price of any Options which he may exercise.
Any such loan is to bear interest at the Prime Rate charged as of the date of
the loan by NationsBank or its successor. Principal and interest on any such
loan is to be due separately upon the earlier of (i) the sale of shares of Dart
Class B Stock purchased with the loan proceeds, (ii) the fifth anniversary of
the loan, or (iii) 90 days from the termination of Ronald S. Haft's employment
under the Agreement.
Sale of Class B Common Shares to Ronald S. Haft
On July 28, 1993, Herbert H. Haft sold his 172,730 shares of Dart Class
B Stock to Ronald S. Haft for the purchase price of $80.00 per share, and
Ronald S. Haft granted to Herbert H. Haft an irrevocable proxy to vote those
shares until his death or incapacity. The total acquisition price for these
shares was $13,818,400, of which $2,763,680 was paid at closing; the remaining
$11,054,720 was paid for with a promissory note bearing interest at 6.61%, the
applicable federal rate, as announced in the Federal Register on July 28, 1993,
with the principal amount and any accrued but unpaid interest due and payable
on August 1, 2013. Accordingly, as of January 31, 1994, there were 302,952
issued and outstanding shares of Dart Class B Stock, of which Ronald S. Haft
owned 25,246 shares (or 8.33%), and another 172,730 shares (or 57.02%) without
the power to vote, for a total of 197,976
49
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(5) CERTAIN EVENTS (Continued):
shares (or 65.35%). If all of the shares of Dart Class B Stock covered by the
Options were issued, there would be 500,000 issued and outstanding shares of
Dart Class B Stock, of which Ronald S. Haft would then own 395,024 shares (or
79.00%), with voting power over 222,294 shares (or 44.46%), and Herbert H. Haft
would have voting power over 172,730 shares (or 34.54%).
(6) LITIGATION:
Robert M. Haft Employment Litigation
In August 1993, Robert M. Haft filed a lawsuit in the United States
District Court for the District of Delaware naming as defendants the
Corporation and two of its subsidiaries, Crown Books and Trak Auto. The
complaint, as amended, alleges breach of contract regarding various employment,
stock option, stock incentive and loan agreements and seeks declaratory
judgment regarding a stock incentive agreement (see Note 10 to the Consolidated
Financial Statements) and a possible right by Robert M. Haft to acquire an
interest in Total Beverage Corporation, a wholly-owned subsidiary of the
Corporation. The complaint, as amended, seeks unspecified damages, costs and
attorneys fees.
Under the terms of the employment agreements, if upheld by the Court, the
Corporation and Crown Books could be required to pay stated compensation plus
incentives based on operating or other financial factors. Minimum payments by
the Company could be as much as $31.8 million over a nine year period ($16.0
million on an after tax basis, discounted at a 10% rate).
Management believes that the Corporation and its subsidiaries have strong
defenses to these allegations and intends to contest such claims vigorously.
Discovery in the litigation is complete and cross motions for summary judgment
have been filed regarding virtually all significant claims. Although the
ultimate outcome of this action cannot be ascertained at this time, it is the
opinion of management that the resolution will not have a material adverse
effect on the Corporation's and its subsidiaries' financial condition or
results of operations.
Derivative Litigation
In September 1993, Alan R. Kahn and Tudor Trust, shareholders of the
Corporation, filed a lawsuit in the Delaware Court of Chancery for New Castle
County naming as defendants Herbert H. Haft, Ronald S. Haft, Douglas M.
Bregman, Bonita A. Wilson, Combined Properties, Inc. ("CPI"), Combined
Properties Limited Partnership ("Combined"), and Capital Resources Limited
Partnership. The suit is brought derivatively and names as nominal defendants
the Corporation and five of its subsidiaries, Trak Auto, Crown Books, Shoppers
Food, Total Beverage, and CMREC. The complaint alleges waste, breach of
fiduciary duty, and entrenchment in connection with various lease agreements
between the Combined Properties defendants and the Corporation and
50
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(6) LITIGATION (Continued):
its subsidiaries, the compensation paid Ronald S. Haft and Herbert H. Haft, the
Corporation's Agreement with Ronald S. Haft, and the sale of Dart Class B Stock
by Herbert H. Haft to Ronald S. Haft. Plaintiffs seek an accounting of
unspecified damages incurred by the Corporation, voiding of the options sold to
Ronald S. Haft, and costs and attorneys' fees.
In November 1993, Robert M. Haft filed another lawsuit in the Delaware
Court of Chancery for New Castle County. The lawsuit names as defendants
Herbert H. Haft, Ronald S. Haft, Douglas M. Bregman, and Bonita A. Wilson, and
also names the Corporation as a nominal defendant. The complaint derivatively
alleges interested director transactions, breach of fiduciary duty and waste in
connection with the Corporation's Agreement with Ronald S. Haft. Robert M.
Haft also brings individual claims for breach of contract and dilution of
voting rights in connection with the sale of Dart Class B Stock by Herbert H.
Haft and the Corporation's Agreement with Ronald S. Haft. The complaint seeks
rescission of the sale of Dart Class B Stock and the options Agreement,
unspecified damages from the individual directors, and costs and attorneys'
fees.
In both of these lawsuits, a Special Litigation Committee consisting of
two outside, independent directors has been appointed by the Board of Directors
to assess, on behalf of the Corporation, whether to pursue, settle or abandon
the claims. Given that the law suits are brought in the name of the
Corporation, recovery in them would inure to the benefit of the Corporation if
the claims in them are successfully litigated or settled. It is therefore the
opinion of management that the resolution of these actions will not have a
material adverse effect on the consolidated financial condition or annual
results of operations of the Corporation.
Total Beverage Litigation
In October 1993, the Corporation and two of its wholly-owned subsidiaries,
Total Beverage and Total Beverage G.B., Inc., filed a lawsuit in the United
States District Court for the Eastern District of Virginia styled The Dart
Group Corporation v. The Globe Distributing Company of Virginia, Inc., d/b/a
The Forman Distributing Company of Virginia, Inc., et al., CA No. 93-1307-A
(E.D. Va.). The lawsuit names as defendants The Globe Distributing Company,
Inc. d/b/a The Forman Distributing Company of Virginia, Inc. ("Forman"), four
other Virginia wine wholesalers, and several of their principals. The
complaint, as amended, alleges violations of the federal and Virginia state
antitrust laws and intentional tortious interference with contract by reason of
an alleged conspiracy among the wholesalers to divide territories and allocate
customers. The complaint, as amended, seeks injunctive relief and unspecified
damages, costs and attorneys' fees. In January 1994, the defendants filed
counterclaims against the plaintiffs for defamation, conspiracy to injure in
reputation, trade and business, conspiracy to coerce and compel, tortious
interference with contractual relations and business expectancies, and
violation of the Lanham Act.
51
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(6) LITIGATION (Continued):
Subsequent to January 31, 1994, all claims and counterclaims in these
actions were settled. The terms and conditions of the settlement agreements
will not have a material adverse effect on the consolidated financial condition
or operating results of the Corporation.
The Corporation and its subsidiaries have recorded expenses of
approximately $8.0 million during the year ended January 31, 1994 for legal
expenses incurred during the year. This includes an estimated future amount
considered to resolve all legal matters discussed above.
Other
In the normal course of business, the Company is involved in various
claims and litigation. It is the opinion of management and counsel that the
disposition of these matters will not materially affect the Company's financial
position.
(7) CREDIT AGREEMENT:
The Corporation is party to a revolving credit agreement, together with
Trak Auto and Crown Books, for a $6,000,000 revolving line of credit. The
$6,000,000 is an aggregate amount and not specifically allocated to any of the
parties. The line is intended to be used for the issuance of standby and trade
letters of credit. At January 31, 1994, there had been no borrowings under the
credit agreement. This line of credit expires May 1, 1995.
(8) CABOT-MORGAN REAL ESTATE COMPANY:
In September 1989, the Corporation organized CMREC, a wholly-owned
subsidiary. CMREC was organized under the laws of Delaware as a real estate
development company.
In December 1989, CMREC and Combined Properties/Briggs Chaney Plaza
Limited Partnership ("Combined/Briggs Chaney"), a Delaware limited partnership
of which the partners are members of the Haft family, formed CM/CP Briggs
Chaney Plaza Joint Venture ("CM/CP Briggs Chaney"). On December 31, 1989,
CM/CP Briggs Chaney purchased Briggs Chaney Plaza Shopping Center located in
Silver Spring, Maryland, for approximately $30,000,000, of which land was
approximately $5,986,000, building and improvements was approximately
$24,066,000, including the assumption of mortgages. There have been no
material additions or improvements to land and building and improvements since
acquisition and the carrying amount of these assets was $27,189,000 at January
31, 1994.
52
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
In December 1989, CMREC and Combined Properties/Greenway Center Limited
Partnership ("Combined/Greenway"), a Delaware limited partnership of which the
partners are members of the Haft family, formed CM/CP Greenway Center Joint
Venture ("CM/CP Greenway"). On December 31, 1989, CM/CP Greenway purchased
Greenway Center located in Greenbelt, Maryland, for approximately $39,300,000,
of which land was approximately $7,813,000, building and improvements was
approximately $31,376,000, including the assumption of mortgages. There have
been no material additions or improvements to land and building and
improvements since acquisition and the carrying amount of these assets was
$35,688,000 at January 31, 1994.
CMREC owns 75% of CM/CP Briggs Chaney and 75% of CM/CP Greenway. The
remaining 25% interests are owned by the aforementioned limited partnerships.
CPI, which is owned by members of the Haft family, provides certain services to
the shopping centers at a cost comparable to that available from unaffiliated
parties.
On March 12, 1991, CMREC acquired from an entity owned by Haft family
members, a 51% interest in CM/CP Greenbriar Retail Joint Venture ("CM/CP
Greenbriar Retail") and a 51% interest in CM/CP Greenbriar Office Joint Venture
("CM/CP Greenbriar Office"), which own Greenbriar Town Center Shopping Center
and Greenbriar Town Center Office Building, respectively, located in Fairfax,
Virginia. The purchase price for the Corporation's interest in CM/CP
Greenbriar Retail and CM/CP Greenbriar Office was approximately $20,000,000,
which represents 51% of the original cost to the seller of the entire center
plus interest and other net holding period costs of approximately $1,350,000
(buyers share). The outside members of CMREC's board of directors approved
this transaction. In addition, the Corporation paid fees to CPI for leasing,
acquisition and development of the Center at a cost comparable to that
available from unaffiliated parties. The Corporation's portion of these fees
was approximately $1,300,000. The seller acquired the property on October 24,
1989. The Haft family entity continues to own the remaining 49% interest and
CPI manages CM/CP Greenbriar Retail and CM/CP Greenbriar Office. The initial
cost of land and building and improvements in CM/CP Greenbriar Retail and CM/CP
Greenbriar Office was approximately $41,392,000. Greenbriar Town Center
completed renovation and expansion in fiscal 1993 and the carrying amount of
land and building and improvements was $69,653,000 at January 31, 1994.
On January 18, 1993, CMREC and CP/Bull Run Limited Partnership
("Combined/Bull Run"), a Maryland limited partnership of which the partners
are members of the Haft family, formed CM/CP Bull Run Joint Venture ("CM/CP
Bull Run"). CMREC owns 51% of CM/CP Bull Run and Combined/Bull Run owns 49%.
On January 18, 1993, CM/CP Bull Run purchased a shopping center known as
Festival at Bull Run located in Prince William County, Virginia, for
approximately $14,097,000 of which land was approximately $5,938,000 and
building and improvements was approximately $8,187,000. CMREC's share of the
cash portion of the purchase price was approximately $2,647,000. In addition,
CMREC has a loan agreement with CM/CP Bull Run for up to $15,450,000, of which
53
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
$8,250,000 had been utilized toward the purchase price of the center and was
considered a bridge loan until CM/CP Bull Run could secure other financing.
Subsequently, CM/CP Bull Run secured other financing and the $8,250,000 was
repaid. The remaining $7,200,000 is intended to fund the construction of
certain improvements to the center. At January 31, 1994, CM/CP Bull Run had
borrowed $5,123,000 against the remaining $7,200,000. CM/CP Bull Run has an
agreement with CPI that engages CPI to manage the center.
CPI charged the four properties for management and related services
$3,264,000, $2,365,000, and $3,438,000 in fiscal 1994, 1993 and 1992,
respectively.
Trak Auto, Crown Books, Shoppers Food and Total Beverage have leases in
several of the properties in which CMREC has an interest. Rental payments on
these leases were $1,765,000, $332,000, and $232,000 in 1994, 1993 and 1992,
respectively. The future lease commitments on these leases excluding option
periods are $21,591,000 expiring on dates through 2013.
Each of these CMREC partnerships contains a buy/sell option under which
the partners have the right, at any time, to initiate procedures under which
the initiating party offers both to sell to or buy from the other party the
initiating party's or the other party's shares in the partnership at the offer
price. The recipient of the offer has the alternative of accepting the offer
to sell or the offer to buy. The Corporation is unable to determine the effect
that would result if either party initiates this procedure.
During the year ended January 31, 1994, CM/CP Briggs Chaney refinanced two
mortgages at Briggs Chaney Shopping Center into one $16,000,000 mortgage and
CM/CP Bull Run obtained a $9,750,000 mortgage. All mortgages payable are
secured by the land and buildings and leasehold improvements. Based on
borrowing rates currently available for bank loans with similar terms, the fair
value of the mortgages are $87,699,000.
54
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
Mortgage payable at January 31, 1994, consists of the following:
ˇ Download Table
CM/CP Briggs Chaney
-------------------
Mortgage payable, bearing interest at 8.5% per annum
principal due December 1, 2003; collateralized
by first mortgage on land and buildings $15,949,000
CM/CP Greenway
--------------
Mortgage payable, bearing interest at 10.4% per annum,
payments made on a monthly basis with the last
payment due July 1, 2011; collateralized by first
mortgage on land and buildings 9,611,000
Mortgage payable, bearing interest at 9.75% per annum,
payments made on a monthly basis with the last
payment due December 1, 1996; collateralized by
second mortgage on land and buildings 6,037,000
CM/CP Greenbriar
----------------
Mortgage payable, bearing interest at 9.5% per annum,
payments made on a monthly basis with the last
payment due May 1, 2003; secured by the land and
building at the shopping center 40,350,000
CM/CP Bull Run
--------------
Mortgage payable, bearing interest at 8.0% the first
year, 8.5% the second year, and 9.0% the third year,
principal due May 21, 1996; secured by the land and
building at the shopping center. 9,750,000
------------
Total 81,697,000
Current portion of mortgage payable 988,000
------------
Mortgage payable $ 80,709,000
============
55
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(8) CABOT-MORGAN REAL ESTATE COMPANY (Continued):
Maturities of the mortgages payable as of January 31, 1994 are as follows:
ˇ Download Table
Fiscal Mortgage
Year Payable
------ -----------
1995 988,000
1996 1,140,000
1997 16,587,000
1998 1,182,000
1999 1,297,000
2000 - 2011 60,503,000
-----------
Total $81,697,000
===========
Description of Leasing Arrangements
Renewal options are available to the majority of the tenants of CMREC
properties and the leases require payment of contingent rentals and license
fees based on sales in excess of specified minimums. The net book value of the
property held for lease by CMREC included in land, building and leasehold
improvements on the accompanying balance sheet at January 31, 1994 was
$156,714,000 and the mortgage payable (current and long-term) of $81,697,000 is
in connection with these CMREC assets.
The following is a schedule by fiscal year of future minimum rental income
under these leases having initial or remaining terms in excess of one year at
January 31, 1994.
ˇ Download Table
Fiscal
Year Minimum Rental Income
------ ---------------------
1995 14,705,000
1996 14,062,000
1997 13,048,000
1998 11,450,000
1999 10,853,000
2000 - 2011 49,735,000
------------
Total $113,853,000
============
56
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(9) RESTRUCTURING CHARGE
Trak Auto
During the year ended January 30, 1993, Trak Auto recorded a restructuring
charge of $7,400,000, before income taxes. The restructuring charge is divided
into two categories consisting of the estimated cost of relocating or expanding
an estimated 126 stores to Super Trak stores and discontinuing operations in an
estimated 38 stores. The restructuring charge for the two components consists
of unrecoverable lease obligations (rent, real estate taxes and common area
charges) after the projected closing date of the store or upon remodel or
expansion, the write-off of leasehold improvements and costs associated with
changing store fixtures for new product lines and cost associated with
inventory conversion, as follows:
ˇ Download Table
Lease Fixtures &
Category# Stores Obligations Leaseholds Inventories
--------- ------ ----------- ---------- -----------
Relocation or
Expansion to
Super Trak 126 $3,560,000 $ - $1,000,000
Discontinued 38 2,780,000 60,000 -
--- ---------- ----------- ----------
164 $6,340,000 $ 60,000 $1,000,000
The above lease obligations are for basic lease terms of from one to 74
months. In the case of relocations/expansions, the reserve has been estimated
at 50% of the total lease obligations because Trak Auto believes that certain
alternatives to abandonment may be available. These alternatives include
leasing different or additional space from the same landlord, subletting the
existing space, lease termination and lease buy-out. Therefore, no provision
for leasehold improvement write-off has been made, and only one-half of the
full lease obligation has been provided.
The amount of unrecoverable lease costs relating to properties under
related party leases is approximately $823,000.
57
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(9) RESTRUCTURING CHARGE (Continued):
During the year ended January 29, 1994, Trak Auto charged approximately
$600,000 against the restructuring reserve, primarily for the write-off of the
net book value fixed assets in stores that were converted to Super Traks.
The following table indicates the fiscal years in which the restructuring
reserve is expected to be utilized.
ˇ Download Table
Fiscal Year Amount
----------- ----------
1994 $ 600,000
1995 600,000
1996 3,000,000
1997 2,390,000
1998 505,000
1999-2001 305,000
----------
$7,400,000
Crown Books
During the year ended January 30, 1993, Crown Books recorded a
restructuring charge of $6,600,000 before income taxes. The charge includes
the anticipated costs associated with closing, relocating, expanding and
converting existing stores to the Super Crown Books concept. These costs are
primarily unrecoverable lease obligations and the remaining book value of
leasehold improvements from the estimated closing date. During the year ended
January 29, 1994, Crown Books charged approximately $840,000 against this
reserve.
Crown Books continues to test various concepts (principally related to the
size of the store) in its Super Crown Books prototypes. As a result of these
test stores, Crown Books has determined that a number of the smaller Super
Crown Books stores opened in previous years (typically 6,000 - 10,000 square
feet) are not a competitive format in the current environment. These stores
have been negatively impacted by the industry's roll out of larger stores.
Accordingly, Crown Books recorded an additional restructuring charge of
$6,200,000 in the year ended January 29, 1994, representing the anticipated
costs (unrecoverable lease costs and the remaining book value of leasehold
improvements and store fixtures subsequent to management's estimate of the
stores' closing dates) associated with closing, relocating and converting these
smaller Super Crown Books stores to the new, larger Super Crown Books
prototype.
58
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(9) RESTRUCTURING CHARGE (Continued):
The restructuring reserve as of January 29, 1994 of approximately
$11,960,000 is comprised of the following components:
ˇ Download Table
Lease Leaseholds
Year Ended Stores Obligations & Fixtures
----------------- ------ ----------- ----------
January 30, 1993 26 $ 5,150,000 $ 610,000
January 29, 1994 7 5,100,000 1,100,000
------ ----------- ----------
33 $10,250,000 $1,710,000
The above lease obligations are for primary terms from 16 to 126 months.
The amount of unrecoverable lease costs relating to properties under
related party is approximately $708,200.
The following table indicates the fiscal years in which the restructuring
reserve is expected to be utilized.
ˇ Download Table
Fiscal Year Amount
----------- -------------
1994 $ 840,000
1995 1,305,000
1996 2,392,000
1997 2,587,000
1998 1,984,000
1999 to 2005 3,692,000
-------------
$ 12,800,000
=============
59
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(10) INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(See Notes 4 and 8):
Leasing Agreements
The Corporation's subsidiaries, Trak Auto, Crown Books, Shoppers Food and
Total Beverage lease certain real property from CMREC and Haft family owned
partnerships. The leased properties consist of 54 stores and four warehouses.
These leases provide for various termination dates, which, assuming renewal
options are exercised, range from 1994 to 2033 and require the payment of
minimum rentals aggregating approximately $318,932,000 to the lease expiration
dates. Minimum rentals under these leases are approximately $115,203,000 to
the expiration of their original terms. Certain of these leases also require
the payment of a percentage of sales in excess of a stated minimum, as well as
real estate tax increases.
Prior to January 29, 1994, the outside members of the board of directors
of the Corporation, Trak Auto and Crown Books approved each related party
lease. After January 29, 1994, the Real Estate Committee (composed of one
independent director) of the Board of Directors approves these transactions.
The board of directors are provided with a fairness opinion attesting that the
proposed lease is representative of market rent for the subject property. Haft
family members do not vote on these leases.
Employment Agreement
The Corporation has ten-year employment agreements with Mr. Herbert H.
Haft and Mrs. Gloria G. Haft, which are automatically extended for an
additional year on each January 31 in the absence of an election not to extend
the contract. The agreements provide for salaries for Mr. and Mrs. Haft of
$1,281,000 and $195,000, $1,154,000 and $177,000, $1,038,000 and $161,000,
respectively for the years ended January 31, 1994, 1993 and 1992, respectively,
with certain annual cost of living increases based on the CPI (with a minimum
increase of 10% annually plus $12,000 for Mr. Haft and 10% annually for Mrs.
Haft). Both Mr. Haft and Mrs. Haft elected not to receive the increases in
fiscal 1993 and 1992 and therefore their annual salaries remained at $933,000
and $146,000, respectively, for those years. In addition, the agreements
provide life insurance coverage and certain other benefits. Mr. Haft's
agreement also provides for an annual bonus equal to 1-1/2% of the Company's
consolidated pretax profit not reduced as a result of transactions which are
not ordinary, while Mrs. Haft's agreement provides for an annual bonus equal to
3/8 of 1% of the Company's consolidated pretax profit. Further, the
Corporation has agreed to lend to Mr. Haft the funds necessary to purchase a
$3,000,000 life insurance policy on his life or on the life of Mrs. Haft or any
combination thereof, at his discretion. The Corporation has also agreed to
lend Mrs. Haft the funds necessary to purchase a $1,000,000 life insurance
policy on her life. At January 31, 1994, Mr. Haft had purchased a $1,000,000
life insurance policy on the life of Mrs. Haft. Mr. Robert M. Haft (the
Corporation's former President and Chief Operating Officer) had purchased
two $3,000,000 life insurance policies on his life under similar terms with
funds
60
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(10) INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(See Notes 4 and 8) (Continued):
loaned by the Corporation and Crown Books. At January 31, 1994, the loan
balance for these policies was approximately $288,000 and $477,000 for Herbert
H. Haft and Robert M. Haft respectively, and was collateralized by the cash
surrender values. The Corporation has elected not to charge interest on these
loans.
Herbert H. Haft's agreement provides for a supplemental bonus related to
years beginning February 1, 1984 based on certain performance criteria for the
three year period ended January 31, 1985 and each three-year period thereafter.
The supplemental bonus payable to him equals the greatest of (i) 3% of the
increase in the aggregate market value of the Class A Common Stock on the last
day of the three-year period over such market value on the first day of such
period; (ii) 3% of any excess in consolidated stockholders' equity (based on
generally accepted accounting principles) on the last day of the three-year
period over such stockholders' equity on the first day of such period; (iii) 3%
of the aggregate consolidated net income during the three-year period; and (iv)
his base salary and annual bonus for the last year of the three-year period.
The amount accrued under this supplemental bonus plan was approximately
$1,531,000 for the three years ended January 31, 1994. The annual bonuses
accrued for Herbert and Gloria Haft for the year ended January 31, 1994 was
approximately $129,000 and $32,000, respectively. Mr. Herbert H. Haft may
elect to receive all or part of the compensation in the future in the form of
an option for shares of the Corporation's Class A Common Stock or defer
receipt of such income.
On August 1, 1993, the Board of Directors of the Corporation approved an
employment agreement with Ronald S. Haft (the "Agreement"), pursuant to which
he was employed by the Corporation as its President and Chief Operating Officer
for a term initially ending on January 31, 1997. The term is to be extended
for one year on each February 1, that Ronald S. Haft is employed under the
Agreement. Ronald S. Haft's annual base salary is $400,000 and shall be
increased annually effective February 1, 1995 and each February 1 through the
term of the agreement based on review and performance appraisal by the
Corporation's Board of Directors. The Agreement provides for a supplemental
bonus beginning February 1, 1994 and ending January 31, 1997 with terms similar
to Mr. Herbert H. Haft's supplemental bonus and provides for an annual bonus
equivalent to Mr. Herbert H. Haft's. The annual bonus accrued for Ronald S.
Haft for the year ending January 31, 1994 was approximately $129,000. Mr.
Ronald S. Haft may elect to receive all or part of the compensation in the
future in the form of an option for shares of the Corporation's Class A Common
Stock or defer receipt of such income.
In fiscal 1988, the Corporation's Board of Directors concluded that it
would be appropriate for Herbert H. Haft and Robert M. Haft each to
participate individually in acquisitions of other companies by the Corporation
on the same terms and conditions as management of the acquired company might
participate or by the purchase of each of ten percent (10%) of the
Corporation's interest in the acquired company on an equivalent basis as is
paid by the Corporation.
The Corporation's interest in Shoppers Food is held through a wholly
61
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(10) INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(See Notes 4 and 8) (Continued):
owned subsidiary, Dart/SFW Corp. In fiscal 1990, the Corporation granted both
Herbert H. Haft and Robert M. Haft an option to purchase up to ten shares of
the common stock of Dart/SFW Corp., or 10 percent of such stock on a fully
diluted basis, for approximately $192,688 per share. Each such option is
exercisable in whole or in part during the period beginning on August 8, 1994
and ending on August 8, 2004; provided that such options become immediately
exercisable in the event of a Major Business Change (as defined in the option
agreement) and for a period of ten years thereafter. At any time within three
years after receipt of the Dart/SFW shares pursuant to the exercise of an
option, Herbert Haft or Robert Haft, as the case may be, may require the
Corporation to purchase all or part of such shares at their then fair market
value, as determined by an independent appraiser selected by the Corporation's
Board of Directors. Pursuant to agreements dated January 11, 1990, Herbert H.
Haft assigned and transferred his option to acquire ten shares of Dart/SFW
Corp. to his two children, Ronald S. Haft and Linda G. Haft, and Robert M. Haft
assigned and transferred his option to acquire six shares of Dart/SFW Corp to
Trusts established for the benefit of his two children, Michael A. Haft and
Nicholas G. Haft.
Incentive Stock Agreement
In fiscal 1990, Crown Books entered into an incentive stock agreement with
Robert M. Haft, the former President of Crown Books. Under the terms of the
agreement, Crown Books issued 100,000 shares of stock to Mr. Haft in return for
a non-interest bearing promissory note, discounted at an 11% effective interest
rate, of $203,750, due January 2, 2004. The agreement provides that the stock
certificate representing the 100,000 shares state that the shares are subject
to certain transfer restrictions. Crown Books has the right, expiring ratably
over the period from January 2, 1999 to January 2, 2001, to repurchase all or a
portion of the shares, subject to certain conditions, in the event Mr. Haft
voluntarily terminated employment with Crown Books. Crown Books believes that
conditions exist which so entitle Crown Books to exercise its right to purchase
all or part of the shares issued to Mr. Haft under the agreement at their
original issuance price. This matter is in litigation discussed below. As of
January 31, 1994, Crown Books had not elected to exercise its right under the
agreement to purchase the shares. Purchase of the shares issued to Mr. Haft
would result in Crown Books recording a pre-tax gain of approximately $900,000
(on a consolidated basis $462,000 after minority interest) reflecting recovery
of compensation previously recognized by Crown Books.
In August 1993, Robert M. Haft filed a lawsuit in the United States
District Court for the District of Delaware styled Robert M. Haft v. Dart Group
et al. (see Note 6 to the Consolidated Financial Statements). Robert M. Haft
seeks, among other requests, that Crown Books reissue to Robert M. Haft the
stock certificate representing the 100,000 shares without any stated
restrictions on the use or transfer of the shares. Reissuance of the shares
without restriction would result in Crown Books recording a pre-tax loss of
62
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
approximately $1,300,000 (on a consolidated basis $668,000 after minority
interest) reflecting the write-off of deferred compensation recorded in Crown
Books financial statements on January 31, 1994.
(11) MINORITY INTERESTS:
The $140,637,000 of minority interests reflected in the Consolidated
Balance Sheet as of January 31, 1994 represents the portion of real estate
partnerships' equity owned by the Haft family partnerships, the portion of Trak
Auto and Crown Books equity owned by the public shareholders of Trak Auto and
Crown Books, respectively, and the portion of Shoppers Food equity owned by the
shareholders of Shoppers Food (other than the Corporation). Income attributed
to the minority shareholders of Trak Auto was $27,000, $1,529,000 and $655,000
for the years ended January 31, 1994, 1993 and 1992, respectively. Income
(loss) attributed to the minority shareholders of Crown Books was $(101,000),
$2,014,000, and $4,825,000 for the years ended January 31, 1994, 1993 and
1992, respectively. Income attributed to the minority ownership of Shoppers
Food for the year ended January 31, 1994, 1993 and 1992 was $6,203,000,
$4,120,000, and $6,189,000, respectively. Income (loss) attributed to the
minority ownership of real estate partnerships was $383,000, $1,003,000, and
$133,000 for the years ended January 31, 1994, 1993 and 1992, respectively.
(12) STOCK OPTION PLANS:
Dart Group Corporation 1992 Stock Option Plan
The Corporation has adopted a stock option plan (the "1992 Plan") for
officers, key employees and directors. The total number of shares that may be
issued under the 1992 Plan is 400,000 and the 1992 Plan will terminate June 2,
2002. Options granted pursuant to the 1992 Plan may be incentive stock
options, as defined in Section 422 of the Internal Revenue Code or may be
non-qualified options. Based on options outstanding at January 31, 1994, the
maximum shares issuable under options exercisable over the next five years are:
19,207 in 1995, 41,332 in 1996, 45,750 in 1997 and 1998 and 32,000 in 1999.
Information concerning stock options under the 1992 Plan is as follows:
ˇ Download Table
No. of Option Price
Shares Per Share
-------- ---------------
Outstanding at January 31, 1992 - $ -
Granted 28,750 74.00 - 81.00
-------- ---------------
Outstanding at January 31, 1993 28,750 74.00 - 81.40
Granted 32,000 81.50 - 89.65
Exercised (1,500) 74.00
Expired (13,500) 74.00 - 81.40
-------- ---------------
Outstanding at January 31,1994 45,750 $ 74.00 - 89.65
======== ===============
63
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(12) STOCK OPTION PLANS (Continued):
Options for 352,750 shares remain available for grant and 4,583 options
were exercisable at January 31, 1994.
Dart Group Corporation 1981 Stock Option Plan
The Corporation has a 1981 stock option plan (the "1981 Plan") in which
directors, officers and key employees participate. Based on outstanding
options, on January 31, 1993 the maximum number of shares subject to options
exercisable in each of the next three years is 42,500 in 1995, 28,750 in 1996
and 15,000 in 1997. The 1981 Plan terminated December 4, 1991 and no more
options may be granted under the 1981 Plan.
Information concerning stock options under the 1981 Plan is as follows:
ˇ Download Table
No. of Option Price
Shares Per Share
-------- ---------------
Outstanding at January 31, 1992 204,838 $ 65.00 -104.50
Exercised (1,268) 68.25 - 77.25
Expired (94,320) 68.25 - 75.08
-------- ---------------
Outstanding at January 31, 1993 109,250 65.00 -104.50
Exercised (5,250) 65.00 - 77.25
Expired (61,500) 65.00 -104.50
-------- ---------------
Outstanding at January 31,1994 42,500 $ 65.00 -104.50
======== ===============
At January 31, 1994 there were 36,746 options exercisable under the 1981
Plan.
The Board of Directors of the Corporation has authorized certain officers
and directors of the Corporation to apply for loans from the Corporation to
exercise their vested stock options. Under the plan approved by the board, the
loans must bear interest at the prime rate, adjusted annually, must be secured
by all of the stock acquired by exercise of the options, must be repaid out of
the first proceeds of sale of stock or at the end of three years, whichever is
earlier, and the borrower must demonstrate to the Corporation's chief financial
officer both that it would be difficult to dispose of the number of shares on
the open market and that he or she presents a reasonable credit risk to the
Corporation. The Board of Directors for both Trak Auto and Crown Books have
authorized such loans to certain officers and directors of Trak Auto and Crown
Books.
In May 1983, the Corporation adopted an executive non-qualified stock
option Plan (the "Plan"), amended in September 1983, which provides that a
total of 199,500 shares of Class A Common Stock may be issued. Options for
177,500 shares were granted under this Plan when it was adopted. The exercise
price at the time of the grant was equal to 100% of the fair market value
($82.50 per share) of the Class A Common Stock. The Plan provides that in the
64
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(12) STOCK OPTION PLANS (Continued):
event of a "major business change" the exercise price of options held by
persons who are employees of the Corporation on the day immediately preceding
such a change is reduced to $20.00 per share. The sale of the Corporation's
drug store division in 1985 constituted a major business change as defined
by the Plan. Accordingly, outstanding options for 154,500 shares are
exercisable at $20.00 per share and options for 3,990 shares are exercisable at
$82.50 per share. Options granted under the Plan are exercisable until 1998.
The Corporation may lend to each optionee, without interest, as long as he/she
is an employee of the Corporation, the funds necessary to exercise the options
until the earlier of three years, the sale of the shares thereby acquired or
termination of the optionee's association with the Corporation or the
Corporation may permit the optionee to pay for the shares acquired on exercise
with shares of the Corporation's Class A Common Stock valued at the market
price on the date of exercise. The options are only transferable by will or by
the laws of descent and distribution. Options for 100, and 2,000 shares were
exercised during the fiscal years ended January 31, 1993 and 1992,
respectively. No options were exercised in fiscal 1994.
In September 1987, the Corporation adopted the 1987 Executive
Non-Qualified Stock Option Plan ("1987 Plan"). The 1987 Plan provides for the
grant of options to purchase, in the aggregate, 199,500 shares of Class A
Common Stock and granting to each of Herbert H. Haft and Robert M. Haft options
to purchase 99,750 shares of Class A Common Stock at an exercise price of
$148.50 per share, or fair market value at the time of the grant. (On December
9, 1987, when the 1981 Plan exercise prices were reduced, the exercise price
for the 1987 Plan was reduced to $68.25 per share.) The 1987 Plan provides
that in the event of a "major business change" the exercise price of options
held by persons who are employees of the Corporation on the day immediately
preceding such change is reduced to $36.00 per share. (On December 9, 1987,
the exercise price in the event of a "major business change", which has not
occurred, was reduced to $16.40 per share.) Options granted under the 1987
Plan are exercisable on or after April 1, 1988 and prior to September 30, 2002.
The Corporation may lend to each optionee, without interest, as long as he is
an employee of the Corporation, the funds necessary to exercise the options
until the earlier of three years, the sale of the shares thereby acquired or
termination of the optionee's association with the Corporation or the
Corporation may permit the optionee to pay for the shares acquired on exercise
with shares of the Corporation's Class A Common Stock valued at the market
price on the date of exercise. The options are only transferable by will or by
the laws of descent and distribution.
Stock options granted for Trak Auto and Crown Books would not, if
exercised, have a material dilutive effect on the Corporation's equity interest
in those entities.
Stock options granted for Crown Books would, if all were exercised, reduce
the Corporation's ownership percentage to 48.9%.
65
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(13) EMPLOYEES' PROFIT-SHARING PLAN
The Corporation, Trak Auto and Crown Books maintain separate
non-contributory profit-sharing plans for all full-time employees with one year
of continuous employment. Annual contributions to the plans are based on a
discretionary percentage of net income, as defined in the respective plan, and
as determined by the respective board of directors. Contributions are
allocated to individual employees based on each employee's salary in relation
to the total salaries of all eligible employees. Contributions paid or accrued
for the Corporation's, Trak Auto's and Crown Books' plans for the years ended
January 31, 1994, 1993 and 1992 were $400,000, $1,175,000, and $870,000,
respectively.
Shoppers Food maintains a non-contributory profit sharing plan with
discretionary contributions to qualified employees. Generally, employees who
complete one year of service are eligible to participate in the plan. The
Board of Directors of Shoppers Food authorized contributions of $300,000 to the
plan for the 1993 plan year. No contribution was authorized for the 1992 plan
year.
(14) 14% SUBORDINATED DEBENTURES:
During the years ended January 31, 1993 and 1992, the Corporation redeemed
its outstanding 14% Subordinated Debentures in face amounts of $29,120,000 and
$75,000,000, respectively. The after tax losses associated with these
redemptions, including unamortized discount and issue costs, $885,000 and
$1,589,000 have been classified as an extraordinary item. As of January 31,
1993, all of the Corporation's debentures had been redeemed.
(15) UNUSUAL ITEM:
Trak Auto had 15 stores substantially damaged or completely destroyed in
the Los Angeles civil disturbances in May of 1992. Eleven of these stores have
subsequently reopened and four remain closed. At January 31, 1993, Trak Auto
had received payments from insurance carriers of approximately $6,400,000 and
recorded a receivable of an additional $3,600,000 which represent settlement of
Trak Auto's insurance claims. Trak Auto received these funds during the first
quarter of fiscal 1994. The payment and receivable, less related expenses and
the cost of the related inventory and fixed assets lost, have been recorded as
a gain, classified as an unusual item during the year ended January 31, 1993.
66
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(16) SEGMENT INFORMATION:
The Company's four primary business segments are retail specialty, retail
grocery, a real estate company and a financial company. The following is a
summary of selected consolidated information for the business segments during
January 31, 1994, 1993 and 1992:
ˇ Download Table
(in thousands)
Year Ended January 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
Revenue:
Retail, specialty $ 614,558 $ 561,249 $ 557,311
Retail, grocery and beverage 739,081 692,595 614,772
Real estate 19,011 14,339 9,534
Financial company 2,588 4,152 11,771
Other 1,305 342 1,760
------------ ------------ ------------
1,376,543 $ 1,272,677 $ 1,195,148
============ ============ ============
Income from operations:
Retail, specialty $ (670) $ 8,101 $ 19,229
Retail, grocery and beverage 14,680 13,784 19,712
Real estate 8,458 6,859 3,175
Financial company (1) 2,322 3,253 10,263
------------ ------------ ------------
Total operating profit 24,790 31,997 52,379
------------ ------------ ------------
Interest income 6,813 6,122 7,986
Interest expense (13,513) (10,412) (9,125)
------------ ------------ ------------
Earnings before
unusual item and
income taxes $ 18,090 $ 27,707 $ 51,240
============ ============ ============
Identifiable assets:
Retail, specialty $ 389,426 $ 330,537 $ 304,837
Retail, grocery and beverage 136,839 117,143 111,071
Real estate 172,808 160,332 126,599
Financial company 226,803 224,411 221,808
Other (2) (122,978) (110,044) (67,920)
------------ ------------ ------------
$ 802,898 $ 722,379 $ 696,395
============ ============ ============
(1) Includes income from bankers' acceptances.
(2) Includes consolidating eliminations and adjustments.
67
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(16) SEGMENT INFORMATION (Continued):
ˇ Download Table
(in thousands)
Year Ended January 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
Depreciation and Amortization
Expense:
Retail, specialty $ 10,742 $ 8,447 $ 8,668
Retail, grocery and beverage 11,587 12,127 9,020
Real estate 4,338 3,190 2,688
Other 1,355 1,332 1,365
------------ ------------ ------------
28,022 $ 25,096 $ 21,741
============ ============ ============
Capital Expenditures:
Retail, specialty $ 27,403 $ 11,655 $ 7,733
Retail, grocery and beverage 6,152 9,576 16,647
Real estate 12,491 29,555 55,968
Other 193 67 19
------------ ------------ ------------
$ 46,239 $ 50,853 $ 80,367
============ ============ ============
68
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 31, 1994, 1993 and 1992
(17) INTERIM FINANCIAL DATA (Unaudited):
Selected interim financial data for the fiscal years ended 1994 and 1993
are as follows:
ˇ Download Table
-- In Thousands Except Per Share Data --
Three months ended: JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
1994 1993 1993 1993
---------- ---------- ---------- ----------
Revenue $ 390,282 $ 331,512 $ 334,538 $ 320,211
Gross profit (1) 72,577 62,105 66,659 62,446
Net Income (Loss) (3) $ (7,282) $ (687) $ 682 $ 550
========== ========== ========== ==========
Earnings per share
Net Income (Loss) (2) $ (3.98) $ (.44) $ .28 $ .24
========== ========== ========== ==========
ˇ Download Table
Three months ended: JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
1993 1992 1992 1992
---------- ---------- ---------- ----------
Revenue $ 345,826 $ 311,975 $ 314,463 $ 300,413
Gross profit (1) 68,019 60,457 56,648 60,424
Income (Loss) before
extraordinary items (1,603) 1,693 1,040 2,379
Extraordinary items (3) - - (885) -
Cumulative effect of
change in accounting
principle - - - 1,135
---------- ---------- ---------- ----------
Net Income (Loss) $ (1,603) $ 1,693 $ 155 $ 3,514
========== ========== ========== ==========
Earnings per share
Income (Loss) before
extraordinary items
and in accounting
principle (.87) $ .93 $ .57 $ 1.30
Extraordinary items - - (.48) -
Cumulative effect of
change in accounting
principle - - - .61
---------- ---------- ---------- ----------
Net Income (Loss) (2) $ (.87) $ .93 $ .09 $ 1.91
========== ========== ========== ==========
(1) After deduction for cost of sales, store occupancy and warehousing
expenses.
(2) The sum of these amounts does not equal the annual amount because of the
changes in the average number of shares outstanding during the year.
(3) After deduction in 4th Quarter for restructuring charge.
Financial data for the year ended January 31, 1994, has been restated to
reflect the adoption of SFAS No. 109, Accounting for Income Taxes, effective
February 1, 1992.
69
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
70
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Corporation are as follows.
ˇ Download Table
Name Age Position with the Registrant
---- --- ----------------------------
Herbert H. Haft 73 Chairman of the Board of Directors
and Chief Executive Officer
Ronald S. Haft 35 President, Chief Operating Officer
and Director
Ron Marshall 40 Senior Vice President and
Chief Financial Officer
Dennis N. Weiss 48 Executive Vice President, Real Estate
Bonita Wilson 52 Director
Douglas Bregman 44 Director
H. Ridgely Bullock 60 Director
Larry G. Schafran 55 Director
Directors are elected annually by the holders of the Class B Common Stock.
All of the foregoing officers have served in the positions stated in the
previous table for more than five years, except as stated below. Officers
serve at the discretion of the Board of Directors.
Mr. Herbert H. Haft, the founder of the Corporation, has been Chief
Executive Officer and Chairman of the Board of the Corporation since 1960. He
was Co-Chairman or Chairman of the Board of Directors of Crown Books from its
organization until December 1991, when he became Chairman of the Executive
Committee. Mr. Haft became Chairman of the Board of Directors of Crown Books,
again, in June 1993. Mr. Haft has been Chairman of the Board of Directors and
Chief Executive Offficer of Trak Auto since its organization in March 1983.
Mr. Haft has been a director of Shoppers Food since April 1989.
Mr. Ronald S. Haft joined the Corporation as President and Chief Operating
Officer August 1, 1993. Prior to joining the Corporation, Mr. Haft was
President of Combined Properties, Inc., a real estate management company, from
1984, and continues to hold that position. Mr. Haft has been a director of the
Corporation, Trak Auto, Crown Books and Shoppers Food since July 28, 1993.
Mr. Marshall joined the Corporation in November 1991 as Senior Vice
President and Chief Financial Officer. At the same time he was appointed
Treasurer and Principal Financial Officer of Trak Auto and Treasurer and Chief
Financial Officer of Crown Books. Prior to joining the Corporation, Mr.
Marshall was Chief Financial Officer at Barnes and Noble Bookstores Inc., a
national retailer of college bookstores, from 1988 to 1991. Prior to that, he
was Vice President of Finance at The Office Place Inc., a subsidiary of NBI,
Inc.
71
Item 10. Directors and Executive Officers of the Registrant - Continued
Mr. Weiss joined the Corporation in August 1981, as Director of Real
Estate. He was appointed Vice President, Real Estate, in June 1983, Senior
Vice President, Real Estate, in September 1986, and Executive Vice President,
Real Estate in December 1987.
Ms. Bonita A. Wilson has been a retailing executive with Saks Jandel
since February 1994. Prior to that she was a retailing executive with the May
Company. Ms. Wilson serves on the board of directors of Wedgewood Financial
Management, Inc. Ms. Wilson was elected to serve as a director of the
Corporation since June 1993 and was elected to be a director of Trak Auto and
Crown Books on June 30, 1993.
Mr. Douglas M. Bregman is a partner in the law firm of Bregman, Berbert &
Schwarts, specializing in commercial real estate law. Mr. Bregman is also an
Adjunct Professor of Law at the Georgetown University Law Center. Mr. Bregman
was elected to serve as a director of the Corporation since June 1993 and was
elected to be a director of Trak Auto and Crown Books on June 30, 1993.
Mr. H. Ridgely Bullock is president of Montchanin Management Corporation,
a management and financial consulting firm, and president and director of
Michel Vineyards. Mr. Bullock is an attorney in New York. Mr. Bullock
previously served as chairman and chief executive officer of Bank of New
England Corporation and UniDynamics Corporation. Mr. Bullock was elected a
director of the Corporation, Trak Auto and Crown Books on December 20, 1993.
Mr. Larry G. Schafran is managing general partner of L.G. Schafran and
Associates, a New York based investment advisory firm, and is a director of
Publicker Industries, Inc., Capsure Holdings, Corp. and OXIGENE, Inc. Mr.
Schafran has previously held the positions of vice president and director of
Webb & Knapp, Inc. and its successor General Property Corp. Mr. Schafran was
elected a director of the Corporation, Trak Auto and Crown Books on December
20, 1993.
The other officers of the Corporation are:
Mr. Robert F. Ampula rejoined the Corporation in November 1988 as Vice
President, Information Services, a position he held from January 1985 until
July 1986. Prior to rejoining the Corporation he was most recently with Coca
Cola Enterprises.
Mr. Elliot R. Arditti joined the Corporation in January 1984 as Associate
Counsel. He was appointed Assistant Vice President, Corporate Counsel in
September 1986 and Vice President, Corporate Counsel in December 1987. Prior
to joining the Corporation, he was an associate with the law firm of Pascal,
Weiss, Peartree and Habbert.
Mrs. Gloria G. Haft is Vice President of the Corporation and was a
director of the Corporation, Trak Auto and Crown Books until June 1993.
Herbert H. Haft and Gloria G. Haft are husband and wife. They are the
parents of Ronald S. Haft and Robert M. Haft. There is no other family
relationship between any director and executive officer of the Corporation.
72
Item 10. Directors and Executive Officers of the Registrant - Continued
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Corporation's officers and directors, and persons who beneficially
own more than ten percent of a registered class of the Corporation's equity
securities, to file reports of ownership of the Corporation's securities and
changes in such ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon its review of such forms received by it, the Company
believes that during the fiscal year ended January 31, 1994, all filing
requirements applicable to its officers, directors and ten percent shareholders
were complied with, except that each of Herbert H. Haft, Robert M. Haft, Gloria
G. Haft, Ron Marshall, Warren Tydings, Charles M. Farkas and Claudine B.
Malone, did not file one Form 5 on a timely basis, reporting the granting
of stock options on July 31, 1992 pursuant to the Corporation's stock option
plan. The granting of such options was reported by each such person, except
Robert M. Haft and Warren Tydings (deceased), on Forms 5 filed on March 15,
1994, or for Claudine B. Malone, on or about March 23, 1994.
73
Item 11. Executive Compensation
Summary Compensation Table
The Summary Compensation Table is intended to provide an overview of both
annual and long-term compensation for each of Herbert H. Haft, Ronald S. Haft,
Ron Marshall, Dennis N. Weiss, and Robert M. Haft (the "Executive Group"). It
requires separate, line-by- line entries for compensation paid to each member
of the Executive Group for the last three years, including compensation from
subsidiaries.
ˇ Download Table
Long Term
Compensation
Payouts Annual Compensation Awards
------- ----------------------------- -------------
Other
Annual Stock All other
Name of Compen- Options Compen-
Principal sation Granted sation
Position Year Salary($) Bonus($) ($) (1) (#) ($) (2)
---- --------- --------- ------- -------- ----------
Herbert H. Haft 1994 1,491,000 129,000 386,000 50,000 37,000
----
Chief Executive 1993 1,183,000 246,000 61,000 40,000 43,000
----
Officer 1992 1,183,000 139,000 61,000 40,000 39,000
----
Ronald S. Haft 1994 185,000 129,000 128,000 30,000 15,000
----
President (4) 1993 - - - - -
----
1992 - - - - -
----
Ron Marshall 1994 248,000 60,000 5,000 5,000 5,000
----
Chief Financial 1993 233,000 50,000 6,000 1,500 -
----
Officer (3) 1992 35,000 - - 5,000 -
----
Dennis N. Weiss 1994 240,000 - - 2,825 5,000
----
Executive Vice 1993 229,000 - - 750 10,000
----
President 1992 224,000 - - 750 7,000
----
Robert M. Haft 1994 599,000 - 357,000 - 57,000
----
Former (4) 1993 1,134,000 1,371,000 251,000 40,000 72,000
----
President 1992 1,134,000 399,000 251,000 40,000 73,000
----
----------------
(1) Includes Board of Directors fees. Members of the Corporation, Trak
Auto and Crown Books Board of Directors are paid $15,000 per year
(Trak Auto and Crown Books fees were increased from $10,000 during
fiscal 1994). Members of Dart Financial Board of Directors are paid
$10,000 per year. In addition, includes: $16,000 for Mr. Herbert H.
Haft's auto usage; $206,000 for Mr. Robert M. Haft's compensation
associated with the incentive stock agreement; cumulative Shoppers
Food Board of Directors fees paid in fiscal 1994 to Mr. Herbert H.
Haft, Mr. Ronald S. Haft and Mr. Robert M. Haft of $320,000, $96,000
and $140,000, respectively, for three years ended 1994; and Mr.
Ronald S. Haft's and Mr. Marshall's auto allowance.
(2) Includes allocations to the accounts of certain members of the
Executive Group pursuant to the Profit-Sharing Plans of the
Corporation and Subsidiaries and $32,000 and $52,000 to Herbert H.
Haft and Robert M. Haft each year for interest on life insurance
loans.
(3) Mr. Marshall became Senior Vice President and Chief Financial Officer
of the Corporation in November 1992.
(4) Mr. Ronald S. Haft became President of the Corporation August 1, 1993
and Robert M. Haft's employment was terminated in June 1993.
74
Item 11. Executive Compensation - Continued
Option Grants in Last Fiscal Year
This table provides information with respect to grants of options for
shares of the Corporation and Subsidiaries Common Stock, to the Executive Group
during the prior fiscal year and the exercise or base price, expiration date
and estimates of the potential realizable values of such options.
ˇ Download Table
Individual Grants
--------------------------------------------------------
Potential Real-
% of Total izable Value at
Options Assumed Annual
Granted Rates of Stock
to Emp- Exer- Price Appreci-
loyees cise Market ation for Option
Options in or Base Price Expir- Term (5)
Granted Fiscal Price Date of ation -----------------
Name (#) (5) Year ($/Sh) Grant Date 5% ($) 10% ($)
---- ------- ------- ------ ------- ------- ------- -------
Herbert H. 1,115 (1a) 3.5 89.65 81.50 7/31/98 16,000 46,400
Haft 8,885 (1b) 27.8 81.50 81.50 7/31/98 200,100 442,100
20,000 (3) 16.6 23.00 23.00 7/31/98 127,000 280,800
20,000 (4) 21.6 12.50 12.50 7/31/98 69,000 152,600
Ronald S. 1,115 (1a) 3.5 89.65 81.50 7/31/98 16,000 46,400
Haft 8,885 (1b) 27.8 81.50 81.50 7/31/98 200,100 442,100
197,048 (2) 100.0 89.65 81.50 8/01/08 2,831,600 8,199,200
10,000 (3) 8.3 12.50 12.50 7/31/98 63,500 140,400
10,000 (4) 10.8 23.00 23.00 7/31/98 34,500 76,300
Ron 2,500 (1) 7.8 81.50 81.50 7/31/98 56,300 124,400
Marshall 1,250 (3) 1.0 23.00 23.00 7/31/98 7,900 17,600
1,250 (4) 1.4 12.50 12.50 7/31/98 4,300 9,500
Dennis N. 800 (1) 2.5 81.50 81.50 7/31/98 18,000 39,800
Weiss 1,250 (3) 1.0 23.00 23.00 7/31/98 7,900 17,600
800 (4) .9 12.50 12.50 7/31/98 2,800 6,100
Robert M. NONE
Haft
-----------------
(1) Represents options for Class A Shares
a. Incentive Stock Options
b. Nonqualified Stock Options
(2) Represents options for Class B shares that Mr. Ronald S. Haft
purchased for $985,000 exercisable on date of purchase.
(3) Represents options for Trak Auto Common Stock.
(4) Represents options for Crown Books Common Stock.
(5) Class A, Trak Auto and Crown Books options become exercisable over
time. One-third will become exercisable one year from the date of
grant, an additional one-third will become exercisable two years from
the date of grant and the last third will become exercisable three
years from the date of grant. Options expire five years from the
date of grant. Options are granted at market price on the date of
grant except for incentive stock options ("ISO's") granted to the
Hafts which have been granted at 110% of market price. All options
granted to
75
Item 11. Executive Compensation - Continued
executive officers are ISO's under the Internal Revenue Code
except for 8,885 options for the Corporation's Class A Shares and all
Trak Auto and Crown Books options to each of Herbert and Ronald Haft
which are non-qualified options. ISO's entitle the option holder to
special tax treatment provided that the option holder satisfies
certain holding periods with respect to shares acquired on the
exercise of options. In general, if the holding periods are
satisfied, the option holder will incur no taxable income by reason
of exercise of the option, and the Corporation will not receive an
income tax deduction by reason of the exercise. The option holder
will recognize gain or loss upon a subsequent sale of the common
stock, based on the difference between the amount for which the stock
is sold, and the option price paid.
(6) Potential realizable value is based on an assumption that the price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the five year
option term. These numbers are calculated based on the rules and
regulations promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price
growth.
76
Item 11. Executive Compensation - Continued
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-
End Option Values
This table provides information regarding the exercise of options during
the fiscal year and the number and value of unexercised options held at year
end.
ˇ Download Table
Value of
Number of Unexercisable
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
---- --------------- ------------ ------------- -------------
Herbert H. Haft - (1) - 139,749 2,453,000
20,001 105,000
- (2) - 49,998 115,000
40,002 39,000
- (3) - 29,999 -
30,001 -
Ronald S. Haft - (1) - - -
10,000 33,000
- (2) - - -
10,000 -
- (3) - - -
10,000 -
Ron Marshall 2,250 (1) 39,000 1,582 25,000
5,168 51,000
- (2) - - -
1,250 -
- (3) - 333 -
1,917 -
Dennis N. Weiss - (1) - 2,250 13,000
1,550 14,000
- (2) - 1,000 2,000
2,000 2,000
- (3) - - -
800 -
Robert M. Haft - (1) - 219,750 (4) 9,526,000
- -
-------------------
(1) Represents options for Class A Shares
(2) Represents options for Trak Auto Common Stock.
(3) Represents options for Crown Books Common Stock.
(4) Does not include 40,000 options for Class A Shares, 40,000 options
for Trak Auto Common Stock or 80,000 options for Crown Books Common
Stock, which the Company maintains expired by virtue of Mr. Haft's
termination of employment. Mr. Haft has contested this in
litigation. See Note 6 to the Consolidated Financial Statements.
77
Item 11. Executive Compensation - Continued
Compensation of Directors
Members of the Board of Directors of the Corporation, Trak Auto and Crown
Books are each paid $15,000 per year. Members of the Board of Directors of
Dart Financial are each paid $10,000 per year. Ms. Wilson and Mr. Bregman are
members of the profit sharing and audit committees for the Corporation, Trak
Auto and Crown Books and are compensated $5,000 per year for each committee.
Mr. Bullock and Mr. Schafran are members of the special litigation committee
and are compensated $250 per hour plus expenses.
The Dart Group Corporation's, Trak Auto and Crown Books Stock Option
Plans specify that each director who is not an employee shall receive 1,500,
1,500 and 2,500 options each year. The options will expire five years from the
date of grant.
In September 1987, the Corporation adopted the 1988 Dart Group Corporation
Deferred Compensation Plan for Directors, effective January 1, 1988 (the
"Compensation Plan"). The Compensation Plan permits the Corporation's
directors to defer the payment of all or a specified part of future
compensation payable for services as director, including fees for serving on or
attending meetings of committees of the board of directors. Each director may
elect, on or before January 31 of any year to defer payment of compensation,
payable on or after the February 1st following such election, for services to
be performed during the twelve-month period commencing on such February 1 and
ending on January 31 of the following calendar year (the "Plan Year"). After
such an election, all subsequent compensation will be deferred until the
director notifies the Corporation, prior to the commencement of any Plan Year,
that compensation for future Plan Years is to be paid on a current basis.
Deferred compensation will not be paid to the director as earned, but will
be held in the Corporation's general funds and credited to a bookkeeping
account maintained by the Corporation in the name of the director. Each
participating director will be treated as a creditor of the Corporation with
respect to such funds. Deferred compensation will be paid to directors in a
lump sum on the February 15th of the Plan Year after retirement, unless the
director elects, at the time he exercises the deferral option, to be paid in up
to ten annual installments.
During the year ended January 31, 1994, the former directors of the
Corporation, Trak Auto, Crown Books and Dart Financial received board fees on a
quarterly basis until June 1993. In addition, the Corporation, Trak Auto and
Crown Books purchased the outstanding in-the-money stock options held by
Claudine B. Malone ($74,000), Charles Farkas ($40,000) and James G. Leonard
($73,000) (a former director of Trak Auto and Crown Books) at the market price
per share. Mr. Leonard also received, at his election, the first two of three
payments under the Compensation Plan. The Company also agreed to provide certain
retirement benefits to Mr. Leonard of approximately $50,000. The Company agreed
to continue the former directors full rights to indemnification as a director.
Employment Contracts
See Note 5 and 10 to the Consolidated Financial Statements.
78
Item 11. Executive Compensation - Continued
Compensation Committee Interlocks and Insider Participation
None of the Boards of Directors of the Corporation, Crown Books or Trak
Auto has a compensation committee, and policies regarding executive
compensation are formulated by the respective Boards of those companies. This
section sets forth certain relationships among the members of the respective
Boards.
Certain members of the Board are directors, officers or employees of the
Corporation and its subsidiaries, as follows: Herbert H. Haft is Chairman of
the Board and Chief Executive Officer of the Corporation, Chairman of the Board
of Crown Books, Chairman of the Board and Chief Executive Officer of Trak Auto,
and Chairman of the Board and Chief Executive Officer of Total Beverage.
Ronald S. Haft is President and Chief Operating Officer and a Director of the
Corporation a Director of Crown Books and Trak Auto.
Certain former directors of the Board were directors, officers or
employees of the Corporation and its subsidiaries during the last fiscal year,
as follows: Robert M. Haft was until June 1993 President and Chief Operating
Officer and Director of the Corporation, Chairman of the Board of Crown Books,
and Vice Chairman of the Board of Directors of Trak Auto. Gloria G. Haft is a
Vice President of the Corporation and, until June 1993, was also Secretary and
Director of the Corporation, Secretary and Director of Crown Books, and Vice
President and Secretary and Director of Trak Auto.
Ronald S. Haft, Robert M. Haft, and Gloria G. Haft are all beneficial
owners of more than 5% percent of the Corporation's Class B Common Stock.
Herbert H. Haft holds an irrevocable proxy to vote certain Class B Common Stock
owned by Ronald S. Haft. See "Security Ownership of Certain Beneficial Owners
and Management." Herbert H. Haft and Gloria G. Haft are husband and wife.
Ronald S. Haft and Robert M. Haft are their sons. See "Certain Relations and
Related Transactions" for a description of certain relationships and
transactions between the Corporation or its subsidiaries and entities in which
members of the Haft family have an interest.
79
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial owners of more than 5% of the Corporation's outstanding voting
securities (Class B Common Stock) at January 31, 1994 and the number of shares
of Class A Common Stock (non- voting) and Class B Common Stock of the
Corporation, common stock of Trak Auto and common stock of Crown Books held
beneficially by each director, each member of the Executive Group and all
directors and officers as a group. Unless otherwise indicated, all shares are
held beneficially and of record.
Directors and Executive Officers:
--------------------------------
ˇ Download Table
Approximate
Title of No. of Percentage
Name Class Shares of Class
---- -------- ------- -----------
Herbert H. Haft Class A (1) 262,496 16.48
3300 75th Avenue Class B (7) 172,730 57.02
Landover, MD 20785 Trak Auto (2) 50,498 .83
Crown Books (3) 30,499 .56
Ronald S. Haft Class A (4) 62,347 4.29
3300 75th Avenue Class B (5)(6)(7) 395,024 79.00
Landover, MD 20785
Robert M. Haft Class A (4)(8)(9) 285,435 17.06
2346 Massachusetts Ave. Class B (6) 25,246 8.33
Washington, DC 20008 Trak Auto (10) 41,500 .69
Crown Books (11) 231,600 4.30
Ron Marshall Class A (12) 3,832 .26
Crown Books (13) 333 .01
Dennis N. Weiss Class A (14) 2,250 .15
Trak Auto (15) 1,000 .02
Bonita Wilson Class A (16) 375 .03
Trak Auto (17) 1,500 .02
Crown Books (18) 2,500 .05
Douglas Bregman Class A (16) 375 .03
Trak Auto (17) 1,500 .02
Crown Books (18) 2,500 .05
H. Ridgely Bullock None
Larry G. Schafran None
-----------------
All Directors and Class A (19) 617,110 33.97
Officer as a Group Class B (5) 420,270 84.05
(9 Persons) Trak Auto (20) 95,998 1.57
Crown Book (21) 267,432 4.93
80
Item 12. Security Ownership of Certain Beneficial Owners and Management -
(Continued)
Other Beneficial Owners:
-----------------------
ˇ Download Table
Approximate
Title of No. of Percentage
Name Class Shares of Class
---- -------- ------- -----------
Gloria G. Haft Class A (22) 15,790 1.08
2501 30th Street, NW Class B 54,484 17.98
Washington, DC 20008 Trak Auto (23) 5,000 .08
Crown Books (24) 7,999 .15
Linda G. Haft Class A (4)(25)(26) 75,185 5.17
7105 Armat Drive Class B (6) 25,246 8.33
Bethesda, MD 20817 Trak Auto 500 .01
Crown Books 500 .01
(1) Includes 139,749 shares subject to exercisable stock options.
(2) Includes 49,998 shares subject to exercisable stock options.
(3) Includes 29,999 shares subject to exercisable stock options.
(4) Includes one-third of 87,043 shares of Class A Common Stock owned by a
family partnership. The disposition of the shares is subject to the
vote of the partners.
(5) Includes 197,048 shares subject to exercisable stock options.
(6) Includes one-third of 75,738 shares of Class B Common Stock which were
distributed in 1993 by a family partnership to the individual partners.
That action has been challenged in litigation by two of the partners. The
Corporation has taken no position on this matter.
(7) Mr. Herbert H. Haft retains sole voting power over 172,730 Class B shares
(owned by Ronald S. Haft) or 57.02% of the outstanding Class B shares.
See Note 5 to the Consolidated Financial Statements.
(8) Includes 388 shares of Class A Common Stock held as custodian for his
children.
(9) Includes 219,750 shares subject to exercisable stock options.
(10) Includes 41,000 shares of Trak Auto held by his wife.
(11) Includes 81,100 shares of Crown Books held by his wife.
(12) Includes 1,582 shares subject to exercisable stock options.
(13) Includes 333 shares subject to exercisable stock options.
(14) Includes 2,250 shares subject to exercisable stock options.
(15) Includes 1,000 shares subject to exercisable stock options.
(16) Includes 375 shares subject to exercisable stock options.
(17) Includes 1,500 shares subject to exercisable stock options.
(18) Includes 2,500 shares subject to exercisable stock options.
(19) Includes 364,081 shares subject to exercisable stock options.
(20) Includes 53,998 shares subject to exercisable stock options.
(21) Includes 35,332 shares subject to exercisable stock options.
(22) Includes 6,500 shares subject to exercisable stock options.
(23) Includes 4,500 shares subject to exercisable stock options.
(24) Includes 7,499 shares subject to exercisable stock options.
(25) Includes 2,000 shares subject to exercisable stock options.
(26) Includes 8,488 shares of Class A Common Stock held as custodian for her
children.
81
Item 12. Security Ownership of Certain Beneficial Owners and Management
(Continued)
A legal dispute has arisen among members of the Haft family concerning
agreements that have previously been reported as restricting the ability of any
of them to transfer common stock of the Corporation owned by them among them or
to others who are not members of their family. Herbert H. Haft, the
Corporation's Chairman, and Ronald S. Haft, its current President, who in July
1993 transferred ownership of certain shares of Class B Common Stock between
them (see Note 5 to Consolidated Financial Statements), have taken the position
that no enforceable agreement precludes that or similar transfers. The
Corporation's former President, Robert M. Haft, has asserted a contrary
position. The Corporation, which is not party to any of the purported
agreements, has taken no position on the matter.
Item 13. Certain Relationships and Related Transactions (Continued)
See Notes 4,8 and 10 to the Consolidated Financial Statements for
descriptions of transaction involving the Company and entities owned by members
of the Haft family.
During the fiscal year ended January 31, 1994, the Corporation made
payments for certain non-business expenses of Herbert H. Haft. The total
amounts of such payments during the period was $407,000. As of January 31,
1994, there were no balances due the Corporation. Interest was charged at the
prime rate on the average outstanding balances. The Corporation's policy
relating to such balances is to require them to be paid in full on at least a
monthly basis. See Schedule II for additional information regarding amounts
due from related parties.
82
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A)
1. Financial Statements
See Item 8.
2. Schedules (Consolidated) -
Report of Independent Public Accountants on Schedules
I - Marketable Securities
II - Amounts Receivable from Related Parties
V - Consolidated Schedule of Property, Plant and
Equipment
VI - Consolidated Schedule of Accumulated Depreciation
of Property, Plant and Equipment
VIII - Valuation and Qualifying Accounts
X - Supplementary Income Statement Information
All other schedules are omitted because the required information is
inapplicable or it is presented in the consolidated financial statements or
related notes.
3. Exhibits...............................................
E (2a) Purchase agreement dated October 12,
1989 between Greenway Center Associates Limited Partnership and KANAM
Grundbesitz Gmbh, tenants in common and Mr. Ronald S. Haft, acting on behalf of
CM/CP Greenway Center Joint Venture. The exhibit includes a list identifying
the schedules to the agreement, but does not include the schedules themselves.
Copies of the omitted schedules will be furnished supplementally to the
Commission upon request.
E (2b) Purchase agreement dated October 12,
1989 between Briggs Chaney Associates Limited Partnership and Mr. Ronald S.
Haft, acting on behalf of CM/CP Briggs Chaney Plaza Joint Venture. The exhibit
includes a list identifying the schedules to the agreement, but does not
include the schedules themselves. Copies of the omitted schedules will be
furnished supplementally to the Commission upon request.
F (2c) Purchase agreement dated
March 12, 1991 between (i) Robert M. Haft, Ronald S. Haft and Linda G.
Haft and (ii) Cabot-Morgan Real Estate Company ("CMREC"). Amended and restated
agreement of Limited Partnership dated March 12, 1991 by and among (i) CM/CP
Greenbriar Retail Joint Venture ("CM/CP Greenbriar Retail"), (ii) CP Greenbriar
Retail, Inc. and (iii) Robert M. Haft, Ronald S. Haft and Linda G. Haft.
Joint venture agreement dated March 12, 1991 between CMREC and CP/Greenbriar
Retail Investments Limited Partnership. Exclusive development, leasing
management agreement dated March 12, 1991 between Combined
Properties/Greenbriar Limited Partnership ("CP/Greenbriar LP") and Combined
Properties Incorporated ("Combined"). Contribution agreement dated March 12,
1991 between CP/Greenbriar LP, CMREC and Linda G. Haft, Ronald S. Haft and
Robert M. Haft.
83
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
F (2d) Purchase agreement dated March 12,
1991 between (i) Robert M. Haft, Ronald S. Haft and Linda G. Haft and (ii)
CMREC. Amended and restated agreement of Limited Partnership dated March 12,
1991 by and among (i) CM/CP Greenbriar Office Joint Venture ("CM/CP Greenbriar
Office"), (ii) CP/Greenbriar Office, Inc. and (iii) Robert M. Haft, Ronald S.
Haft and Linda G. Haft. Joint venture agreement dated March 12, 1991 between
CMREC and CP/Greenbriar Office Investments Limited Partnership. Exclusive
development, leasing and management agreement dated March 12, 1991 between
Combined Properties/Greenbriar Office Limited Partnership ("CP/Greenbriar
Office LP") and Combined. Contribution agreement dated March 12, 1991 between
CP/Greenbriar Office LP, CMREC and Linda G. Haft, Ronald S. Haft and Robert M.
Haft.
H (2e) Purchase agreement dated January 18,
1993 between PS-One Real Estate Limited Partnership and CM/CP Bull Run Joint
Venture. Joint venture agreement dated January 18, 1993 between CMREC and
CP/Bull Run Limited Partnership. Exclusive leasing and management agreement
dated January 18, 1993 between CM/CP Bull Run Joint Venture and Combined.
Promissory note agreement between CMREC and CM/CP Bull Run Joint Venture dated
January 18, 1993.
(2f) Purchase agreement dated February 27,
1993 between Total Beverage G.B., Inc. (a wholly- owned subsidiary of the
Corporation) and Total Beverage VA Corp. (a wholly-owned subsidiary of Shoppers
Food Warehouse Corp.). Promissory Note between Total Beverage VA Corp. and
Total Beverage G.B. Inc.
* (3) Certificate of Incorporation,
incorporated herein by reference to Exhibit #3a to the Company's Form S-1
Registration Statement (File #2-99831) filed with the Securities and Exchange
Commission ("Dart 1985 S1").
B (3a) Certificate of Amendment of the
Certificate of Incorporation of Dart Group Corporation dated January 13, 1987.
(3b) Bylaws, amended and restated as of
September 14, 1993.
* (4) Indenture relating to $250,000,000
Subordinated Debentures Due 1995, incorporated herein by reference to Exhibit 4
to Dart 1985 S-1.
C (10a) Employment agreement with Mr. Herbert
H. Haft, as amended.
C (10b) Employment agreement with Mr. Robert
M. Haft, as amended.
B (10c) Employment agreement with Mrs. Gloria
G. Haft.
* (10f) Indemnity Agreement dated March 10,
1983 between Dart Drug Corporation and Trak Auto Corporation, incorporated by
reference to exhibit 10(b) filed with the Trak S-1.
84
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10h) Agreement for the Allocation of
United States and State Income Tax Liability and Benefits Among Members of the
Dart Drug Corporation Group, incorporated by reference to exhibit 10(d) filed
with the Trak S-1.
* (10i) Agreement, dated March 31, 1983,
between Dart Drug Corporation and Trak Auto East Corporation, incorporated by
reference to exhibit 10(ffff) filed with the Trak S-1.
* (10p) Dart Drug Corporation Executive
Non-Qualified Stock Option Plan, incorporated herein by reference to exhibit
(10o) to the Company's Form 10-K filed with the SEC on May 1, 1984.
* (10q) Agreement of Sale dated May 25, 1984
among Dart Drug Corporation, Dart Delaware Corporation and Dart Drug
Acquisition Corporation, incorporated herein by reference to exhibit (2) to the
Company's Form 8-K filed with the SEC on July 16, 1984.
A (10r) Lease dated December 26, 1984 between
Dart Group Corporation and Seventy-Fifth Avenue Associates.
A (10s) Sublease dated December 26, 1984
between Dart Group Corporation and Trak Auto Corporation.
A (10t) Sublease dated December 26, 1984
between Dart Group Corporation and Crown Books Corporation.
A (10u) Lease dated April 27, 1984 between
Trak Chicago Limited Partnership I and Trak Auto Corporation.
B (10w) Dart Group Corporation 1981 Stock
Option Plan, as amended.
* (10ff) Indemnity Agreement by and between
Dart Group Corporation and Crown books Corporation dated June 9, 1986
incorporated herein by reference to Exhibit 10(zzzz) to the Crown 10-K.
* (10gg) Employment Agreement between Crown
Books Corporation and Mr. Robert M. Haft dated February 28, 1987 incorporated
herein by reference to Exhibit 10(xxxx) to the Crown 10-K.
* (10hh) Agreement of Amendment, dated June
9, 1986, among Dart Group Corporation, Trak Auto Corporation, Trak Auto West,
Inc. and Thrifty Corporation, of the stockholders Agreement dated March 17,
1982 herein incorporated by reference to Exhibit 10(oooo) to the Trak 10-K.
* (10ii) Indemnity Agreement, dated June 9,
1986, by and between Dart Group Corporation and Trak Auto Corporation herein
incorporated by reference to Exhibit 10(pppp) to the Trak 10-K.
85
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10kk) Agreement of Merger dated May 28,
1987 between Trak Auto East Corporation and Trak Auto West, Inc. herein
incorporated by reference to Exhibit 10(qqqq) filed with Trak Auto Corporation
Fiscal Year 1988 Form 10-K, No. 0- 12202 ("Fiscal 1988 Trak 10-K").
C (10pp) Dart Group Corporation Deferred
Compensation Plan for Directors, effective January 1, 1988.
D (10qq) Lease agreement dated November 22,
1988 between Dart Group Corporation and Seventy-Fifth Avenue Associates.
* (10rr) Lease agreement dated January 27,
1989 between Trak Auto Corporation and Combined Properties/Ontario Limited
Partnership herein incorporated by reference to Exhibit 10(tttt) filed with
Trak Auto Corporation Fiscal Year 1989 Form 10-K, No. 0-12202 ("Fiscal 1989
Trak 10-K").
* (10ss) Lease agreement dated February 27,
1988 between Trak Corporation and Haft/Equities- General, herein incorporated
by reference to Exhibit 10(uuuu) filed with Fiscal 1989 Trak 10-K.
* (10tt) Lease agreement dated June 17, 1987
between Trak Auto West, Inc. and Haft/Equities/Rose Hill Limited Partnership,
herein incorporated by reference to Exhibit 10(vvvv) filed with Fiscal 1989
Trak 10-K.
D (10uu) Agreement dated May 17, 1988 among
Dart Group Corporation, Shoppers Food Warehouse Corp., Kenneth M. Herman and
Robert N. Herman incorporated herein by reference to Exhibit 1 filed with the
Corporation's Report on Form 8-K on July 15, 1988.
D (10vv) Amendment No. 1 to Stockholders'
Agreement (Exhibit D to Stock Purchase Agreement dated May 17, 1988, attached
as Exhibit 1 to the Corporation's Report on Form 8-K filed July 15, 1988) dated
as of August 24, 1988 herein.
* (10ww) Assignment and Assumption agreement
dated December 30, 1989 between Greenway Center Associates Limited Partnership
and CM/CP Greenway Center Joint Venture, and lease agreement dated March 13,
1980, between Greenway Center Associates Limited Partnership and Trak Auto
(612), herein incorporated by reference to Exhibit 10(wwww) filed with Trak
Auto Corporation Fiscal Year 1990 Form 10-K, No. 0-12202 ("Fiscal 1990 Trak
10-K").
* (10xx) Assignment and Assumption agreement
dated December 30, 1989 between Briggs Chaney Associates Limited Partnership
and CM/CP Briggs Chaney Plaza Joint Venture, and lease agreement dated June 26,
1981, between Western Development Corporation and Trak Auto Corporation (641),
herein incorporated by reference to Exhibit 10(xxxx) filed with Fiscal 1990
Trak 10-K.
86
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10yy) Trak Auto Amended Stock Option Plan,
herein incorporated by reference to Exhibit 10(yyyy) filed with Fiscal 1990
Trak 10-K.
* (10zz) Incentive stock agreement between
Mr. Robert M. Haft and Crown Books Corporation and promissory note from Mr.
Haft to Crown Books Corporation, both dated September 5, 1989, herein
incorporated by reference to Exhibit 10(ddddd) filed with Crown Books
Corporation Fiscal Year 1990 Form 10-K No. 0-11457 ("Fiscal 1990 Crown 10-K").
* (10ccc) Assignment and Assumption Agreement
dated December 30, 1989 between Briggs Chaney Associates Limited Partnership
and CM/CP Briggs Chaney Plaza Joint Venture, and lease agreement dated June 26,
1981 between Crown Books Corporation and Western Development Corporation,
herein incorporated by reference to Exhibit 10(ggggg) filed with Fiscal 1990
Crown 10-K.
* (10eee) Lease agreement dated January 5,
1990 between Combined Properties Limited Partnership and Crown Books
Corporation re: Turnpike Shopping Center (815), herein incorporated by
reference to Exhibit 10(iiiii) filed with Fiscal 1990 Crown 10-K.
* (10fff) Lease agreement dated January 5,
1990 between Combined Properties Limited Partnership and Crown Books
Corporation re: the Plaza at Landmark (165), herein incorporated by reference
to Exhibit 10(jjjjj) filed with Fiscal 1990 Crown 10-K.
* (10ggg) Lease agreement dated January 5,
1990 between Combined Properties Limited Partnership and Crown Books
Corporation re: Manaport Plaza Shopping Center (804), herein incorporated by
reference to Exhibit 10(kkkkk) filed with Fiscal 1990 Crown 10-K.
D (10hhh) Stock option agreement dated August 8, 1989 between
Dart/SFW Corp. and Mr. Herbert H. Haft.
D (10iii) Stock option agreement dated August
8, 1989 between Dart/SFW Corp. and Mr. Robert M. Haft.
* (10jjj) Lease agreement dated October 31,
1990 between CP Acquisitions Limited Partnership and Crown Books Corporation
re: McLean Shopping Center (803), herein incorporated by reference to Exhibit
10(lllll) Crown Books Corporation Fiscal Year 1991 Form 10-K No. 0-11457
("Fiscal 1991 Crown 10-K").
* (10kkk) Lease agreement dated May 11, 1990
between CM/CP Greenway Center Joint Venture and Crown Books Corporation re:
Greenway Center (822), herein incorporated by reference to Exhibit 10(mmmmm)
Fiscal 1991 Crown 10-K.
* (10lll) Lease agreement dated March 20,
1991 between Charles County Associates Limited Partnership and Crown Books
Corporation re: Charles County Plaza (833), herein incorporated by reference
to Exhibit 10(nnnnn) Fiscal 1991 Crown 10-K.
87
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10mmm) Lease agreement dated May 11, 1990
between Combined Properties/Greenbriar Limited Partnership and Crown Books
Corporation, the First Amendment dated September 13, 1990 and the Second
Amendment dated March 14, 1991 re: Greenbriar Town Center (104), herein
incorporated by reference to Exhibit 10(ooooo) Fiscal 1991 Crown 10-K.
* (10nnn) Lease agreement dated May 18, 1990
between Combined Properties Limited Partnership and Trak Corporation and Lease
Termination Agreement dated March 31, 1990 between Combined Properties Limited
Partnership, Retail Lease Acquisition Limited Partnership and Trak Corporation
re: Fair City Mall (605), herein incorporated by reference to Exhibit 10(zzzz)
Trak Auto Corporation Fiscal Year 1991 Form 10-K No. 0-12202 ("Fiscal 1991 Trak
10-K").
* (10ooo) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: Chantilly Plaza
(609), herein incorporated by reference to Exhibit 10(aaaaa) Fiscal 1991 Trak
10-K.
* (10ppp) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: College Plaza (610),
herein incorporated by reference to Exhibit 10(bbbbb) Fiscal 1991 Trak 10-K.
* (10qqq) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: Enterprise (614),
herein incorporated by reference to Exhibit 10(ccccc) Fiscal 1991 Trak 10-K.
* (10rrr) Lease agreement dated May 18, 1990
between Retail Lease Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement dated March 31, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re: Rolling Valley (630),
herein incorporated by reference to Exhibit 10(ddddd) Fiscal 1991 Trak 10-K.
* (10sss) Lease agreement dated May 18, 1990
between Combined Properties Limited Partnership and Trak Corporation and Lease
Termination Agreement dated March 31, 1990 between Combined Properties Limited
Partnership, Retail Lease Acquisition Limited Partnership and Trak Corporation
re: White Flint (632), herein incorporated by reference to Exhibit 10(eeeee)
Fiscal 1991 Trak 10-K.
* (10ttt) Lease agreement dated November 6,
1990 between CP Acquisition Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between CP Acquisitions Limited
Partnership and Trak Corporation re: Aspen Manor (615), herein incorporated by
reference to Exhibit 10(fffff) Fiscal 1991 Trak 10-K.
88
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* (10uuu) Lease agreement dated November 6,
1990 between CP Acquisition Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between CP Acquisitions Limited
Partnership and Trak Corporation re: Lee and Harrison (633), herein
incorporated by reference to Exhibit 10(ggggg) Fiscal 1991 Trak 10-K.
* (10vvv) Lease agreement dated November 6,
1990 between CP Acquisition Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between CP Acquisitions Limited
Partnership and Trak Corporation re: Penn Daw (642), herein incorporated by
reference to Exhibit 10(hhhhh) Fiscal 1991 Trak 10-K.
* (10www) Lease agreement dated November 6,
1990 between Combined Properties Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between Combined Properties Limited
Partnership and Trak Corporation re: Fairfax Circle (656), herein incorporated
by reference to Exhibit 10(iiiii) Fiscal 1991 Trak 10-K.
* (10xxx) Lease agreement dated March 23,
1990 between Combined Properties/Silver Hill Limited Partnership and Trak
Corporation and Termination Agreement dated April 13, 1990 between Combined
Properties/Silver Hill Limited Partnership and Trak Corporation re: Silver
Hill (619), herein incorporated by reference to Exhibit 10(jjjjj) Fiscal 1991
Trak 10- K.
* (10yyy) Lease agreement dated November 6,
1990 between Haft/Equities-Bladen Limited Partnership and Trak Corporation and
Lease Termination Agreement dated November 6, 1990 between Haft/Equities-Bladen
Limited Partnership and Trak Corporation re: Bladen Plaza (662), herein
incorporated by reference to Exhibit 10(kkkkk) Fiscal 1991 Trak 10-K.
F (10zzz) Lease agreement dated July 19, 1990
between Combined Properties/4600 Forbes Limited Partnership and Shoppers Food
Warehouse Corp.
F 10(aaaa) Lease Agreement dated December 27,
1982 between Combined Properties Limited Partnership and Jumbo Food Stores VA,
Inc., Amendment dated September 8, 1988 and Amendment dated September 25, 1990
re: Fair City Mall.
F 10(bbbb) Lease Agreement dated June 28,
1983 between Combined Properties Limited Partnership and Jumbo Food Stores VA,
Inc., Amendment dated September 8, 1988, Amendment May 10, 1990 and Amendment
dated September 25, 1990 re: Rolling Valley Mall.
F 10(cccc) Lease Agreement dated September
11, 1987 between Combined Properties Limited Partnership and Jumbo Food Stores
Md., Inc., Amendment dated September 25, 1990 re: Maryland City Plaza.
F 10(dddd) Lease Agreement dated July 7, 1989
between Combined Properties/Silver Hill Limited Partnership and Jumbo Food
Stores Md., Inc., Amendment dated May 10, 1990 and Amendment dated September
25, 1990 re: Silver Hill Plaza.
89
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
G 10(eeee) Lease agreement dated June 21,
1988 between Combined Properties Limited Partnership and Jumbo Food Stores Md.,
Inc., First Amendment dated July 7, 1989, Second Amendment dated September 25,
1990, re: Enterprise Plaza.
G 10(ffff) Letter of Agreement dated February
27, 1992 between Dart Group Corporation and Shoppers Food Warehouse Corp., re:
Whse 3, Pennsy Drive.
* 10(gggg) Lease agreement dated December 23,
1991 between Combined Properties Limited Partnership and Trak Corporation, re:
Manaport Plaza (607), herein incorporated by reference to Exhibit 10(lllll)
Trak Auto Corporation Fiscal Year 1992 Form 10-K No. 0-12202 ("Fiscal 1992 Trak
10-K").
* 10(hhhh) Amendment of lease dated December
24, 1991 between Haft/Equities-Bladen Limited Partnership and Trak Corporation,
re: Bladen Plaza (662), herein incorporated by reference to Exhibit 10(mmmmm)
filed with Fiscal 1992 Trak 10-K.
* 10(iiii) Sublease agreement dated February
19, 1992 between Crown Books Corporation and Trak Corporation, re: Vienna
(616), herein incorporated by reference to Exhibit 10 (nnnn) filed with Fiscal
1992 Trak 10-K
* 10(jjjj) Sublease agreement dated February
12, 1992 between Crown Books Corporation and Trak Corporation, re: McLean
Shopping Center (627), herein incorporated by reference to Exhibit 10(ooooo)
filed with Fiscal 1992 Trak 10-K.
* 10(kkkk) Sublease agreement dated April 20,
1992 between Dart Group Corporation and Trak Corporation, re: Whse 3 Pennsy
Drive, herein incorporated by reference to Exhibit 10(ppppp) filed with Fiscal
1992 Trak 10-K.
* 10(llll) Lease agreement dated May 8, 1991
between Combined Properties Limited Partnership and Crown Books Corporation,
re: Montgomery Village (827), herein incorporated by reference to Exhibit
10(qqqqq) filed with Crown Books Corporation Fiscal Year 1992 Form 10-K No.
0-11457.
* 10(mmmm) Dart Group Corporation 1992 Stock
Option Plan incorporated herein by reference to Dart 1993 S-8 file No.
33-57010.
* 10(nnnn) Amendment of lease dated December
11, 1992 between Combined Properties Limited Partnership and Super Trak
Corporation re: Oxon Hill (606), herein incorporated by reference to Exhibit
10(qqqqq) filed with Trak Auto Corporation Fiscal Year 1993 Form 10-K No.
0-12202 ("Fiscal 1993 Trak 10-K").
* 10(oooo) Amendment of lease dated December
1, 1992 between Haft/Equities-Bladen Limited Partnership and Super Trak
Corporation re: Bladen Plaza (662), herein incorporated by reference to Exhibit
10(rrrrr) filed with Fiscal 1993 Trak 10-K.
90
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* 10(pppp) Amendment of lease dated January
8, 1993 between Retail Lease Acquisition Limited Partnership and Trak
Corporation re: Chantilly Plaza (609), herein incorporated by reference to
Exhibit 10(sssss) filed with Fiscal 1993 Trak 10-K.
* 10(qqqq) Note Receivable from Robert M.
Haft dated December 31, 1992, herein incorporated by reference to Exhibit
10(ttttt) filed with Fiscal 1993 Trak 10-K.
* 10(rrrr) Amendment of lease dated December
1, 1992 between Combined Properties/Montebello Limited Partnership and Super
Trak re: Montebello (520), herein incorporated by reference to Exhibit
10(uuuuu) filed with Fiscal 1993 Trak 10-K.
* 10(ssss) Third Amendment dated June 4, 1992
and Fourth Amendment dated June 15, 1992 to the Lease agreement between
Combined Properties Limited Partnership and Crown Books Corporation re:
Greenbriar Town Center (104), herein incorporated by reference to Exhibit
10(sssss) filed with Crown Books Corporation Fiscal Year 1992 Form 10-K No.
0-11457 ("Fiscal 1993 Crown 10-K").
* 10(tttt) Notes receivable from Mr. Robert
M. Haft dated December 31, 1992, herein incorporated by reference to Exhibit
10(vvvvv) filed with Fiscal 1993 Crown 10-K.
H 10(uuuu) Third Amendment dated June 17,
1992 to the Lease agreement between Combined Properties Limited Partnership and
Jumbo Food Stores MD., Inc., Re: Enterprise Plaza.
H 10(vvvv) Lease agreement dated January 21,
1993 between CM/CP Bull Run Joint Venture and Shoppers Food Warehouse VA
Corporation Re: Festival at Bull Run.
H 10(wwww) Lease agreement dated November 1,
1990 between Penn Daw Associates Limited Partnership (A Haft Controlled Entity)
and Shoppers Food Warehouse VA Corporation, the First Amendment dated February
13, 1991 Re: Penn Daw Shopping Center.
* 10(xxxx) Amendment of lease dated February
4, 1993 between Retail Lease Acquisition Limited Partnership and Super trak re:
College Plaza (610), herein incorporated by reference to Exhibit 10 (wwwww)
filed with Trak Auto Corporation Fiscal Year 1994 Form 10-K No 0-12202 ("Fiscal
1994 Trak 10-K").
* 10(yyyy) Amendment of lease dated
Setpember 13, 1993 between Combined Properties Limited Partnership and Super
Trak re: Fair City Mall (605), herein incorporated by reference to Exhibit
10(xxxxx) filed with Fiscal 1994 Trak 10-K.
* 10(zzzz) Amendment of lease dated
September 13, 1993 between Combined Properties Limited Partnership and Super
Trak re: Maryland City (623), herein incorporated by reference to Exhibit
10(yyyyy) filed with Fiscal 1994 Trak 10-K.
91
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
* 10(aaaaa) Second Amendment of lease dated
March 31, 1994 between Combined Properties Limited Partnership and Super Trak
Corporation re: Oxon Hill (606), herein incorporated by reference to Exhibit 10
(zzzzz) filed with Fiscal 1994 Trak 10-K.
* 10(bbbbb) Lease Amendment dated November
22, 1993 between Combined Properties Limited Partnership and Super Trak
Corporation re: Landmark (658), herein incorporated by reference to Exhibit
10(A) filed with Fiscal 1994 Trak 10-K.
* 10(ccccc) Second Amendment of Lease dated
August 19, 1993 and Third Amendment of lease dated August 30, 1993 between
Combined Properties Limited Partnership and Super Crown Books Corporation re:
Landmark (165), herein incorporated by reference to Exhibit 10(wwwww) filed
with Crown Books Corporation Fiscal Year 1994 Form 10-K No. 0-11457 ("Fiscal
1994 Crown 10-K").
* 10(ddddd) Lease Agreement dated August 19,
1993 between Retail Lease acquisition Limited Partnership and Super Crown Books
Corporation re: White Flint Plaza (132), herein incorporated by reference to
Fiscal 1994 Crown 10-K.
10(eeeee) Employment Agreement dated
August 1, 1993, between Ronald S. Haft and Dart Group Corporation.
10(fffff) Lease agreement dated April 2,
1991 between Combined Properties/Greenbriar Limited Partnership and Total
Beverage Corp. First Amendment dated February 15, 1993 between Combined
Properties/Greenbriar Limited Partnership and Total Beverage VA Corp. Second
amendment dated September 29, 1993 between Combined Properties/Greenbriar
Limited Partnership and Total Beverage G.B., Inc. re: Chantilly (201).
10(ggggg) Lease Agreement dated August 16,
1993 between Combined Properties Limited Partnership and Total Beverage Corp.
and First Amendment of Lease dated February 24, 1994 re: Landmark (203).
10(hhhhh) Lease Agreement dated August 16,
1993 between CM/CP Bull Run Joint Venture and Total Beverage Corp. and First
Amendment dated February 7, 1994 re: Bull Run Plaza (202).
10(iiiii) Loan Agreement dated May 21,
1993 between Cabot-Morgan Real Estate Company and CM/CP Bull Run Joint Venture.
* 10(jjjjj) Trak Auto 1993 Stock Option
Plan, herein incorporated by reference to Exhibit 10(vvvvv) filed with Fiscal
1994 10-K.
* 10(kkkkk) Crown Books 1993 Stock Option
Plan, herein incorporated by reference to Exhibit 10(yyyyy) filed with Fiscal
1994 Crown 10-K.
10(lllll) Lease agreement dated June 8,
1993 between Combined Properties/Greenbriar Office Limited Partnership and
Total Beverage Total Beverage Corp.
92
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
(11a) Statement on Computation of Per Share
Earnings.
(21) Subsidiaries of the Corporation.
(23) Consent to Incorporation by reference
to financial statements into Form S-8, 33-12149.
Note: Dart Drug Corporation changed its name to Dart Group Corporation on July
3, 1984.
The exhibits thus indicated were filed with the Forms as noted and are
hereby incorporated by reference.
A Incorporated by reference to Dart Fiscal Year 1986 Form 10-K.
B Incorporated by reference to Dart Fiscal Year 1987 Form 10-K.
C Incorporated by reference to Dart Fiscal Year 1988 Form 10-K.
D Incorporated by reference to Dart Fiscal Year 1989 Form 10-K.
E Incorporated by reference to Dart Fiscal Year 1990 Form 10-K.
F Incorporated by reference to Dart Fiscal Year 1991 Form 10-K.
G Incorporated by reference to Dart Fiscal Year 1992 Form 10-K.
H Incorporated by reference to Dart Fiscal Year 1993 Form 10-K.
(B) Reports on Form 8-K
During the fourth quarter of fiscal year end January 31,
1994, the Corporation filed one report on form 8-K.
1. Form 8-K dated December 20, 1993 (Item 5 - Other
events). The report did not contain financial
statements.
93
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
TO DART GROUP CORPORATION:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Dart Group Corporation and
subsidiaries included in this Form 10-K and have issued our report thereon
dated April 27, 1994. Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements taken as a whole. The
schedules listed in the index are the responsibility of the Corporation's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Washington, D.C.,
April 27, 1994.
Exhibit 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated April 27, 1994 included in this Form 10-K, into Dart Group
Corporation's previously filed Form S-8, File Number 33-57010.
ARTHUR ANDERSEN & CO.
Washington, D.C.,
April 27, 1994.
94
SCHEDULE I
Dart Group Corporation and Subsidiaries
SCHEDULE OF MARKETABLE SECURITIES
ˇ Download Table
BALANCE
PRINCIPAL SHEET
ISSUER AMOUNT COST MARKET VALUATION
---------- ------------ ------------ ------------ ------------
January 31, 1994
----------------
DEBT
----
Money Markets $ 26,528,000 $ 26,528,000 $ 26,528,000 $ 26,528,000
United States
Treasury Bills
(held by
majority owned
subsidiaries) 112,368,000 111,750,000 111,790,000 111,750,000
------------ ------------ ------------ ------------
Total Short-term
Instruments $138,896,000 $138,278,000 $138,318,000 $138,278,000
============ ============ ============ ============
United States
Treasury Bills $ 3,875,000 $ 3,783,000 $ 3,814,000 $ 3,783,000
United States
Treasury Notes 22,733,000 23,662,000 23,687,000 23,662,000
Corporate Securities 15,900,000 16,123,000 16,154,000 16,123,000
Government
Obligations 1,450,000 1,467,000 1,476,000 1,467,000
Municipals 21,860,000 23,802,000 23,835,000 23,802,000
------------ ------------ ------------ ------------
Total Marketable
Debt Securities $ 65,818,000 $ 68,837,000 $ 68,966,000 $ 68,837,000
============ ============ ============ ============
ˇ Download Table
Dart Group Financial Corporation
--------------------------------
Bankers'
Acceptances $ 62,525,000 $ 62,307,000 $ 62,704,000 $ 62,307,000
ˇ Download Table
January 31, 1993
----------------
DEBT
----
United States
Treasury Bills $173,817,000 $172,624,000 $172,670,000 $172,624,000
ˇ Download Table
Dart Group Financial Corporation
--------------------------------
Bankers'
Acceptances $ 90,650,000 $ 90,369,000 $ 90,369,000 $ 90,369,000
95
Schedule II
Dart Group Corporation and Subsidiaries
AMOUNTS RECEIVABLE FROM RELATED PARTIES
ˇ Download Table
Balance Deductions Balance End
Beginning Amounts of Period,
Name of Debtor of Period Additions Collected Current
-------------- --------- --------- ---------- ----------
Year Ended January 31, 1994
---------------------------
Herbert H. Haft $ - $ 407,000 $ 407,000 $ -
Robert M. Haft 914,000 12,000 (1) 834,000 (2) 92,000
Glenn E. Hemmerle 172,000 - 98,000 74,000
---------- ---------- ----------- ----------
$1,086,000 $ 419,000 $ 1,339,000 $ 166,000
========== ========== =========== ==========
ˇ Download Table
Year Ended January 31, 1993
---------------------------
Herbert H. Haft $ - $ 718,000 $ 718,000 $ -
Robert M. Haft 69,000 (1) 864,000 (2) 19,000 914,000
Glenn E. Hemmerle - 172,000 (3) - 172,000
R. Keith Green 100,000 - 100,000 -
---------- ---------- ----------- ----------
$ 169,000 $1,754,000 $ 837,000 $1,086,000
========== ========== =========== ==========
ˇ Download Table
Year Ended January 31, 1992
---------------------------
Herbert H. Haft $ - $1,126,000 $ 1,126,000 $ -
Robert M. Haft 58,000 (1) 45,000 34,000 69,000
R. Keith Green 100,000 - - 100,000
---------- ---------- ----------- ----------
$ 158,000 $1,171,000 $ 1,160,000 $ 169,000
========== ========== =========== ==========
See Item 13 for further information regarding amounts receivable from directors
and officers.
(1) Represents non-interest bearing Crown Books note receivable due
January 2, 2004.
(2) Includes $400,000 and $310,000 Crown Books notes receivable and
$123,000 Trak Auto note receivable due December 31, 1995 bearing
interest at prime and an increase of $11,000 in a non-interest
bearing Crown Books note receivable due January 2, 2004.
(3) Represents bridge loan to Mr. Hemmerle for the purchase of a home.
Mr. Hemmerle is President and Chief Executive Officer of Crown Books.
96
Schedule V
Dart Group Corporation and Subsidiaries
Consolidated Schedule of Property, Plant and Equipment
ˇ Download Table
BEGINNING ENDING
CLASSIFICATION BALANCE ADDITIONS RETIREMENTS BALANCE
-------------- ------------ ---------- ----------- ------------
YEAR ENDED JANUARY 31, 1994
---------------------------
Furniture,
fixtures and
equipment $102,779,000 34,367,000 8,164,000 $128,982,000
Buildings and
leasehold
improvements 144,954,000 24,456,000 3,160,000 166,250,000
Land 33,550,000 - 154,000 33,396,000
Leased property 42,885,000 - 7,093,000 35,792,000
------------ ---------- ---------- ------------
$324,168,000 58,823,000 18,571,000 $364,420,000
============ ========== ========== ============
ˇ Download Table
YEAR ENDED JANUARY 31, 1993
---------------------------
Furniture,
fixtures and
equipment $ 87,848,000 17,927,000 2,996,000 $102,779,000
Buildings and
leasehold
improvements 122,865,000 29,752,000 7,663,000 144,954,000
Land 27,612,000 5,938,000 - 33,550,000
Leased property 39,219,000 5,566,000 1,900,000 42,885,000
------------ ---------- ---------- ------------
$277,544,000 59,183,000 12,559,000 $324,168,000
============ ========== ========== ============
ˇ Download Table
YEAR ENDED JANUARY 31, 1992
---------------------------
Furniture,
fixtures and
equipment $ 64,068,000 24,727,000 947,000 $ 87,848,000
Buildings and
leasehold
improvements 73,402,000 51,150,000 1,687,000 122,865,000
Land 13,933,000 13,679,000 - 27,612,000
Leased property 44,888,000 1,504,000 7,173,000 39,219,000
------------ ---------- ---------- ------------
$196,291,000 91,060,000 9,807,000 $277,544,000
============ ========== ========== ============
97
Schedule VI
Dart Group Corporation and Subsidiaries
Consolidated Schedule of Accumulated Depreciation and Amortization
of Property, Plant and Equipment
ˇ Download Table
BEGINNING ENDING
CLASSIFICATION BALANCE ADDITIONS RETIREMENTS BALANCE
-------------- ------------ ---------- ----------- ------------
YEAR ENDED JANUARY 31, 1994
---------------------------
Furniture,
fixtures and
equipment $ 49,133,000 19,233,000 (3,158,000) $ 71,524,000
Buildings and
leasehold
improvements 17,692,000 7,376,000 1 633,000 23,435,000
Leased property 15,711,000 1,413,000 7,946,000 9,178,000
------------ ---------- ---------- ------------
$ 82,536,000 28,022,000 6,421,000 $104,137,000
============ ========== ========== ============
ˇ Download Table
YEAR ENDED JANUARY 31, 1993
---------------------------
Furniture,
fixtures and
equipment $ 36,026,000 17,664,000 4,557,000 $ 49,133,000
Buildings and
leasehold
improvements 13,507,000 4,810,000 625,000 17,692,000
Leased property 14,956,000 2,622,000 1,867,000 15,711,000
------------ ---------- ---------- ------------
$ 64,489,000 25,096,000 7,049,000 $ 82,536,000
============ ========== ========== ============
ˇ Download Table
YEAR ENDED JANUARY 31, 1992
---------------------------
Furniture,
fixtures and
equipment $ 23,153,000 14,032,000 1,159,000 $ 36,026,000
Buildings and
leasehold
improvements 9,318,000 4,625,000 436,000 13,507,000
Leased property 12,241,000 3,084,000 369,000 14,956,000
------------ ---------- ---------- ------------
$ 44,712,000 21,741,000 1,964,000 $ 64,489,000
============ ========== ========== ============
98
Schedule VIII
Dart Group Corporation and Subsidiaries
Valuation and Qualifying Accounts
ˇ Download Table
Additions
------------------------
Balance Charged Amounts Balance
Beginning Charged to to Other Paid or at end of
Description of Period Expense Accounts (1) Reversed Period
----------- ---------- ----------- ------------ ---------- -----------
As of Januray 31, 1994
----------------------
Reserve for
closed facil-
ities and re-
structuring
charges $28,887,000 $ 5,626,000 - $3,118,000 $31,395,000
Obsolete
inventory 854,000 - - 544,000 310,000
LIFO reserve 6,453,000 734,000 - - 7,187,000
ˇ Download Table
As of January 31, 1993
----------------------
Reserve for
closed facil-
ities and
restructuring
charges $ 7,835,000 $15,382,000 $8,400,000 $2,730,000 $28,887,000
Obsolete
inventory 1,134,000 550,000 - 830,000 854,000
LIFO Reserve 5,890,000 563,000 - - 6,453,000
ˇ Download Table
As of January 31, 1992
----------------------
Reserve for
closed facil-
ities $5,484,000 $ 3,866,000 $ - $1,515,000 $ 7,835,000
Obsolete inven-
tory 1,211,000 693,000 - 770,000 1,134,000
LIFO Reserve 5,945,000 386,000 - 441,000 5,890,000
(1) The 1993 addition was provided by the utilization of reserves related to
the sale of the drug store division in 1985.
99
Schedule X
Dart Group Corporation and Subsidiaries
SCHEDULE OF SUPPLEMENTARY INCOME STATEMENT INFORMATION
ˇ Download Table
Charged to Costs
and Expenses
-----------------------------------------
Years Ended January 31,
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
Advertising Costs $38,432,000 $34,101,000 $32,143,000
All other items do not exceed one percent of total sales.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DART GROUP CORPORATION
Date: May 2, 1994 By: Herbert H. Haft
--------------------------- ---------------------------------
Herbert H. Haft
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: May 2, 1994 /S/ Herbert H. Haft
--------------------------- -------------------------------------
Herbert H. Haft
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 2, 1994 /S/ Ronald S. Haft
-------------------------- -------------------------------------
Ronald S. Haft
President, Chief Operating Officer
and Director
Date: May 2, 1994 /S/ Bonita Wilson
--------------------------- -------------------------------------
Bonita Wilson
Director
Date: May 2, 1994 /S/ Douglas Bregman
--------------------------- -------------------------------------
Douglas Bregman
Director
Date: May 2, 1994 /S/ Larry G. Schafran
--------------------------- -------------------------------------
Larry G. Schafran
Director
Date: May 2, 1994 /S/ H. Ridgely Bullock
--------------------------- -------------------------------------
H. Ridgely Bullock
Director
Date: May 2, 1994 /S/ Ron Marshall
--------------------------- -------------------------------------
Ron Marshall
Principal Accounting and
Financial Officer
101
DART GROUP CORPORATION AND SUBSIDIARIES
ˇ Download Table
Exhibit Number Exhibit Index Page Number
-------------- ------------- -----------
(2f) Purchase agreement dated February 27, 1993
between Total Beverage G.B., Inc. (a
wholly-owned subsidiary of the Corporation)
and Total Beverage Va. Corp. (a wholly-owned
subsidiary of Shoppers Food Warehouse Corp.).
Promissory Note between Total Beverage VA
Corp. and Total Beverage G.B. Inc.
(3b) Bylaws, amended and restated as of September 14,
1993.
10(eeeee) Employment Agreement dated August 1, 1993,
between Ronald S. Haft and Dart Group
Corporation.
10(fffff) Lease agreement dated April 2, 1991 between
Combined Properties/Greenbriar Limited
Partnership and Total Beverage Corp. First
Amendment dated February 15, 1993 between
Combined Properties/Greenbriar Limited
Partnership and Total Beverage VA Corp.
Second amendment dated September 29, 1993
between Combined Properties/Greenbriar Limited
Partnership and Total Beverage G.B., Inc. re:
Chantilly (201).
10(ggggg) Lease agreement dated August 16, 1993 between
Combined Properties Limited Partnership and
Total Beverage Corp. and First Amendment of
Lease dated February 24, 1994 re: Landmark
(203).
10(hhhhh) Lease agreement dated August 16, 1993 between
CM/CP Bull Run Joint Venture and Total Beverage
Corp. and First Amendment dated February 7, 1994
re: Bull Run Plaza (202).
10(iiiii) Loan agreement dated May 21, 1993 between
Cabot-Morgan Real Estate Company and CM/CP
Bull Run Joint Venture.
10(lllll) Lease agreement dated June 8, 1993 between
Combined Properties/Greenbriar Office Limited
Partnership and Total Beverage Corp.
(11a) Statement on Computation of Per Share
Earnings.
(21) Subsidiaries of the Corporation.
(23) Consent of Independent Public Accountants.
102
Exhibit 11(a)
ˇ Download Table
Statement on Computation of
Per Share Earnings
Years Ended January 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
Weighted average common
shares outstanding
during the year 1,752,000 1,749,000 1,748,000
Effect of dilutive stock
options; net of shares
assumed repurchased at
average market 115,000 88,000 77,000
------------ ------------ ------------
Weighted average common
share and common
share equivalents 1,867,000 1,837,000 1,825,000
============ =========== ===========
Income (Loss) before
extraordinary item and
cumulative effect of change
in accounting principle $ (6,737,000) $ 3,509,000 $ 6,311,000
Extraordinary item
Income (Loss) on reacqui-
sition of debentures,
net of income tax
benefits of $819,000 and
$(54,000) for the years
ended January 31, 1992
and 1991 - (885,000) (1,589,000)
Cumulative effect of Trak
Auto's change in accounting
principle, net of minority
interest - 1,135,000 -
------------ ----------- -----------
Net Income (Loss) as reported (6,737,000) 3,759,000 4,722,000
============ =========== ===========
Adjustment for dilutive effect
of subsidiary stock options (918,000) - (1) - (1)
------------ ----------- -----------
Net (Loss) Income Per Earnings
Per Share Calculation $ (7,655,000) $ 3,759,000 $ 4,722,000
============ =========== ===========
Earnings per share
Income (Loss) before
extraordinary item $ (4.10) $ 1.91 $ 3.46
Extraordinary item:
Loss on reacquisition
of debentures - (.48) (.87)
Cumulative effect of Trak
Auto's change in accounting
principle, net of minority
interest - .62 -
------------ ----------- -----------
Net Income (Loss) as reported $ (4.10) $ 2.05 $ 2.59
============ =========== ===========
(1) Not dilutive.
103
Exhibit 21
SUBSIDIARIES OF THE COMPANY
ˇ Download Table
State of Incorporation
----------------------
Trak Auto Corporation (65%) Delaware
Crown Books Corporation (51%) Delaware
Shoppers Food Warehouse Corp. (50%) Delaware
Dart Delaware Corporation (100%) Delaware
Dart/SFW Corporation (100%) Delaware
Discount Books East, Inc. (100%) Delaware
Trak Auto East Holding Corporation (100%) Delaware
Dart Group Financial Corporation (100%) Delaware
Cabot-Morgan Real Estate Company (100%) Delaware
Trak Corporation (100%)(1) Delaware
Super Trak Corporation (100%)(1) Delaware
Trak DHC Corporation (100%)(1) Delaware
Trak Acquisition Corp (100%)(1) Delaware
Crown Books East Corporation (100%)(2) Delaware
Crown Books West Corporation (100%)(2) Delaware
Crown DHC Corporation (100%)(2) Delaware
Super Crown Books Corporation (100%)(2) Delaware
Total Beverage Corp. (100%) Delaware
Total Beverage G.B. (100%)(3) Delaware
(1) Wholly-owned by Trak Auto Corporation
(2) Wholly-owned by Crown Books Corporation.
(3) Wholly-owned by Total Beverage Corp.
104
EDGAR APPENDIX
Exhibit 10(fffff) printed version of this document contains a map of the
Greenbriar Town Center, Fairfax, Virginia. Printed version of this document
contains drawings of store sign criteria.
Exhibit 10(ggggg) printed version of this document contains a map of the Plaza
at Landmark, Alexandria, Virginia. Printed version of this document contains
floor plans. Printed version of this document contains a drawing of store sign
criteria.
Exhibit 10(hhhhh) printed version of this document contains a map of Bull Run
Plaza, Manassas, Virginia. Printed version of this document contains a drawing
of store sign criteria.
Exhibit 10(lllll) printed version of this document contains a map of the floor
plan as of June 8, 1993. Printed version of this document contains a map of
Greenbriar Town Center, Fairfax, Virginia.
Dates Referenced Herein and Documents Incorporated By Reference
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