-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EFcxzH4Gl6g8UBmURMFsgw34PJH0pEfVQSVXkc2L2UF8W9fy+bb/WRfTQWXFOD/7 9T5lvBRvDXNyb4V2q0LY5Q== 0000025095-96-000019.txt : 19961113 0000025095-96-000019.hdr.sgml : 19961113 ACCESSION NUMBER: 0000025095-96-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COTTER & CO CENTRAL INDEX KEY: 0000025095 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-HARDWARE [5072] IRS NUMBER: 362099896 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-20910 FILM NUMBER: 96658040 BUSINESS ADDRESS: STREET 1: 2740 N CLYBOURN AVE CITY: CHICAGO STATE: IL ZIP: 60614 BUSINESS PHONE: 3129752700 MAIL ADDRESS: STREET 1: 2740 N CLYBOURN AVE CITY: CHICAGO STATE: IL ZIP: 60614 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 1996 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 2-20910 COTTER & COMPANY (Exact name of registrant as specified in its charter) DELAWARE 36-2099896 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8600 West Bryn Mawr Avenue Chicago, Illinois 60631-3505 (Address of principal executive offices) (Zip Code) (773) 695-5000 (Registrant's telephone number, including area code) not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of each of the issuer's classes of common stock, as of October 26, 1996. Class A Common Stock, $100 Par Value. 48,660 Shares. Class B Common Stock, $100 Par Value. 1,053,052 Shares. 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted) September 28, December 30, 1996 1995 ------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 1,570 $ 22,473 Accounts and notes receivable 302,196 287,888 Inventories 368,612 315,311 Prepaid expenses 16,796 11,180 ------- ------- Total current assets 689,174 636,852 Properties owned, less accumulated depreciation 167,811 165,683 Properties under capital leases, less accumulated amortization 4,026 5,393 Other assets 7,675 11,648 ------- ------- TOTAL ASSETS $868,686 $819,576 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted) September 28, December 30, 1996 1995 ------------- ------------ (UNAUDITED) LIABILITIES AND CAPITALIZATION Current liabilities: Accounts payable and accrued expenses $340,190 $351,247 Short-term borrowings 78,039 2,657 Current maturities of notes, long-term debt and lease obligations 61,198 61,634 Patronage dividends payable in cash (Estimated at September 28, 1996) 7,075 18,315 ------- ------- Total current liabilities 486,502 433,853 ------- ------- Long-term debt and obligations under capital leases 75,551 79,213 ------- ------- Capitalization: Estimated patronage dividends to be distributed principally by the issuance of promissory (subordinated) notes and redeemable Class B nonvoting common stock 13,642 -- Promissory (subordinated) and installment notes 179,124 186,335 Redeemable Class A common stock and partially paid subscriptions (Authorized 100,000 shares; issued and fully paid, 48,810 and 52,710 shares) 4,902 5,294 Redeemable Class B nonvoting common stock and paid-in capital (Authorized 2,000,000 shares; issued and fully paid, 1,059,707 and 1,055,700 shares; issuable as partial payment of patronage dividends, 62,005 shares as of December 30, 1995) 107,072 113,062 Retained earnings 2,712 2,661 ------- ------- 307,452 307,352 Foreign currency translation adjustment (819) (842) ------- ------- Total capitalization 306,633 306,510 ------- ------- TOTAL LIABILITIES AND CAPITALIZATION $868,686 $819,576 ======== ========
See Notes to Condensed Consolidated Financial Statements. 4 COTTER & COMPANY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (000's Omitted) (UNAUDITED) FOR THE THIRTEEN FOR THE THIRTY-NINE WEEKS ENDED WEEKS ENDED -------------------- ---------------------- September September September September 28, 30, 28, 30, 1996 1995 1996 1995 --------- --------- --------- ---------- Revenues $599,893 $594,808 $1,822,901 $1,840,663 -------- -------- ---------- ---------- Cost and expenses: Cost of revenues 548,983 544,407 1,673,480 1,686,660 Warehouse, general and administrative 31,773 29,676 103,787 96,680 Interest paid to Members 4,393 5,047 13,778 15,476 Other interest expense 2,721 2,083 7,606 7,362 Other income, net 311 18 135 (466) Income tax expense 160 130 480 360 ------- -------- --------- --------- 588,341 581,361 1,799,266 1,806,072 ------- -------- --------- --------- Net margins $ 11,552 $ 13,447 $ 23,635 $ 34,591 ======== ========= ========== ==========
See Notes to Condensed Consolidated Financial Statements. 5 COTTER & COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDED (000's Omitted) (UNAUDITED) September 28, September 30, 1996 1995 Operating activities: Net margins $ 23,635 $ 34,591 Adjustments to reconcile net margins to cash and cash equivalents from operating activities: Statement of operations components not affecting cash and cash equivalents 18,828 18,475 Net change in working capital components (100,410) (9,856) -------- ------- Net cash and cash equivalents provided by (used for) operating activities (57,947) 43,210 -------- ------- Investing activities: Additions to properties owned (16,487) (15,998) Proceeds from sale of properties owned 210 4,160 Changes in other assets 3,973 (1,042) -------- ------- Net cash and cash equivalents used for investing activities (12,304) (12,880) -------- ------- Financing activities: Proceeds (payments) of short-term borrowings 75,382 (1,287) Payment of annual patronage dividend (18,315) (18,383) Payment of notes, long term debts, lease obligations and Class A common stock (7,719) (10,933) ------- ------- Net cash and cash equivalents provided by (used for) financing activities 49,348 (30,603) ------- ------- Net decrease in cash and cash equivalents (20,903) (273) Cash and cash equivalents at beginning of the year 22,473 1,831 ------- ------- Cash and cash equivalents at end of the period $ 1,570 $ 1,558 ======== =========
See Notes to Condensed Consolidated Financial Statements. 6 COTTER & COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - GENERAL The condensed consolidated balance sheet, statement of operations and statement of cash flows at and for the period ended September 28, 1996 and the condensed consolidated statement of operations and statement of cash flows for the period ended September 30, 1995 are unaudited and, in the opinion of the management of Cotter & Company (the Company), include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of financial position, results of operations and cash flows for the respective interim periods. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. This financial information should be read in conjunction with the consolidated financial statements for the year ended December 30, 1995 included in the Company's Post-Effective Amendment No.5 to Form S-2 Registration Statement (No. 33-39477) and in the Company's 1995 Annual Report on Form 10-K. NOTE 2 - ESTIMATED PATRONAGE DIVIDENDS Patronage dividends are declared and paid by the Company after the close of each fiscal year. The 1995 annual patronage dividend was distributed through a payment of 30% of the total distribution in cash, with the balance being paid through the issuance of the Company's Class B nonvoting common stock and five-year promissory (subordinated) notes. Such patronage dividends, consisting of substantially all of the Company's patronage source income, have been paid since 1949. Annually, the Board of Directors reviews the annual patronage dividend to ensure that the Company is adequately capitalized. The estimated patronage dividend for the thirty-nine weeks ended September 28, 1996 is $23,584,000 compared to $35,009,000 for the corresponding period in 1995. NOTE 3 - INVENTORIES Inventories consisted of: September 28, December 30, 1996 1995 ------------- ------------ (UNAUDITED) (000's Omitted) Manufacturing inventories: Raw materials $ 3,126 $ 2,139 Work-in-process and finished goods 21,942 19,407 -------- -------- 25,068 21,546 Merchandise inventories 343,544 293,765 -------- -------- $368,612 $315,311 ======== ========
7 Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1996 COMPARED TO THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 1995 RESULTS OF OPERATIONS: Revenues decreased by $17,762,000 or 1.0% compared to the same period last year. The decrease was attributable to the phase out of the V&S Variety division and the sale of the General Power Equipment manufacturing division. Comparable shipments to Member stores increased 3.6% compared with the prior year. Gross margins decreased by $4,582,000 or 3.0%. Gross margins as a percentage of revenues declined to 8.2% from 8.4% for the same period last year. The decrease in gross margin was primarily attributable to the expanded Pinpoint Pricing program and the resigned business of the V&S Variety division and the General Power Equipment manufacturing division. Warehouse, general and administrative expenses increased by $7,107,000 or 7.4% and as a percentage of revenues was 5.7% compared to 5.3% for the same period last year. The increase was primarily the result of moving expenses, organizational improvements in the area of management information services and member incentives connected with the trueAdvantage program. Interest paid to Members decreased by $1,698,000 or 11.0% primarily due to a lower principal balance and lower average interest rates. Other interest expense increased by $244,000 or 3.3% compared to the same period last year primarily due to higher short-term borrowings partially offset by a lower average interest rate. Net margins were $23,635,000 compared to $34,591,000 for the same period last year. THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 30, 1995 LIQUIDITY AND CAPITAL RESOURCES: The Company has a seasonal need for cash. During the first nine months of the year, as seasonal inventories are purchased for resale or manufacture and shipment, cash and cash equivalents are used for operating activities. The Company anticipates that cash and cash equivalents will be provided by operating activities and financing activities, if necessary, for the remainder of the year. At the end of the third quarter of 1996, inventories increased by $53,301,000 to support anticipated future orders of seasonal merchandise. Accounts and notes receivable increased by $14,308,000 due to the seasonal payment terms extended to the Company's Members. Short-term borrowings increased by $75,382,000 in support of the increased inventories and accounts receivables combined with a decrease of $11,057,000 in accounts payable and accrued expenses. At September 28, 1996, net working capital remained comparable at $202,672,000 compared to $203,000,000 at December 30, 1995. The current ratio decreased to 1.42 at September 28, 1996 compared to 1.47 at December 30, 1995. The Company has various short-term lines of credit available under informal agreements with lending banks, cancelable by either party under specific circumstances. The Company has also established a $125,000,000 five-year revolving credit facility with a group of banks. Borrowings under these agreements were $78,039,000 at September 28, 1996. 8 The Company's capital is primarily derived from redeemable Class A common stock and retained earnings, together with promissory (subordinated) notes and redeemable nonvoting Class B common stock issued in connection with the Company's annual patronage dividend. The Company believes the funds derived from these capital resources, as well as operations and the credit facilities noted above, will be sufficient to satisfy capital needs. Total capital expenditures, including those made under capital leases, were $16,487,000 for the thirty-nine weeks ended September 28, 1996 compared to $15,998,000 during the comparable period in 1995. These capital expenditures relate to additional equipment and technological improvements at the regional distribution centers and the National Headquarters. Funding of any additional 1996 capital expenditures is anticipated to come from operations and external sources, if necessary. THIRTEEN WEEKS ENDED SEPTEMBER 28, 1996 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 30, 1995 RESULTS OF OPERATIONS: Revenues increased by $5,085,000 or 0.9% compared to the same period last year. This increase was the result of increased merchandise shipments to existing True Value Members from the Company's regional distribution network and manufacturing facilities. Gross margins increased by $509,000 or 1.0% and as a percentage of revenues remained comparable with the same period last year at 8.5%. The increase in gross margin was the result of the increased sales and change in product mix. Warehouse, general and administrative expenses increased by $2,097,000 or 7.1% and as a percentage of revenues, increased to 5.3% compared to 5.0% for the same period last year. The increase was primarily the result of improvements in the area of management information services and member incentives connected with the trueAdvantage program. Interest paid to Members decreased by $654,000 or 13.0% primarily due to a lower principal balance and lower average interest rates. Other interest expense increased by $638,000 or 30.6% compared to the same period last year due to higher short-term borrowings. Net margins were $11,552,000 compared to $13,447,000 for the same period last year. PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 4. Instruments defining the rights of security holders, including indentures; incorporated herein by reference those items included as Exhibits 4A through 4G, inclusive, in the Company's Post-Effective Amendment No. 5 to Form S-2 Registration Statement (No. 33-39477) filed with the Securities and Exchange Commission on March 21, 1996. (b) Reports on Form 8-K No reports on Form 8-K have been filed during the period for which this report is filed. 9 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. COTTER & COMPANY Date:November 12, 1996 By /s/ KERRY J. KIRBY Kerry J. Kirby Vice President, Treasurer and Chief Financial Officer (Mr. Kirby is the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.) EX-27 2 FINANCIAL DATA SCH
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-28-1996 SEP-28-1996 1,570 0 302,196 0 368,612 689,174 369,694 197,857 868,686 486,502 75,551 0 0 111,974 194,659 868,686 1,822,901 1,822,901 1,673,480 1,673,480 0 0 21,384 24,115 480 23,635 0 0 0 23,635 0 0
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