0000025095-95-000010.txt : 19950815 0000025095-95-000010.hdr.sgml : 19950815 ACCESSION NUMBER: 0000025095-95-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950814 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: 95563011 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 July 1, 1995 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.) 2740 North Clybourn Avenue Chicago, Illinois 60614 (Address of principal executive offices) (Zip Code) (312) 975-2700 (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 APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of each of the issuer's classes of common stock, as of July 29, 1995. Class A Common Stock, $100 Par Value. 56,440 Shares. Class B Common Stock, $100 Par Value. 1,093,096 Shares. 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted)
July 1, December 31, 1995 1994 -------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 1,634 $ 1,831 Accounts and notes receivable 312,998 294,663 Inventories 345,759 384,747 Prepaid expenses 15,737 7,861 -------- -------- Total current assets 676,128 689,102 Properties owned, less accumulated depreciation 165,302 164,261 Properties under capital leases, less accumulated amortization 4,043 4,691 Other assets 11,077 10,731 -------- -------- TOTAL ASSETS $856,550 $868,785 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted)
July 1, December 31, 1995 1994 -------- ------------ (UNAUDITED) LIABILITIES AND CAPITALIZATION Current liabilities: Accounts payable and accrued expenses $318,319 $379,772 Short-term borrowings 69,548 9,329 Current maturities of notes, long-term debt and lease obligations 60,533 60,564 Patronage dividends payable in cash (Estimated at July 1, 1995) 6,430 18,383 -------- -------- Total current liabilities 454,830 468,048 -------- -------- Long-term debt and obligations under capital leases 73,783 75,756 -------- -------- Capitalization: Estimated patronage dividends to be distributed principally by the issuance of promissory (subordinated) notes and redeemable Class B nonvoting common stock 11,869 -- Promissory (subordinated) and instalment notes 195,181 199,099 Redeemable Class A common stock and partially paid subscriptions (Authorized 100,000 shares; issued and fully paid, 58,270 and 63,350 shares) 5,871 6,370 Redeemable Class B nonvoting common stock and paid-in capital (Authorized 2,000,000 shares; issued and fully paid, 1,110,042 and 1,047,756 shares; issuable as partial payment of patronage dividends, 104,275 shares as of December 31, 1994) 112,395 116,663 Retained earnings 3,474 3,764 -------- -------- 328,790 325,896 Foreign currency translation adjustment (853) (915) -------- -------- Total capitalization 327,937 324,981 -------- -------- TOTAL LIABILITIES AND CAPITALIZATION $856,550 $868,785 ======== ========
See Notes to Condensed Consolidated Financial Statements. 4 COTTER & COMPANY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (000's Omitted) (UNAUDITED)
FOR THE THIRTEEN FOR THE TWENTY-SIX WEEKS ENDED WEEKS ENDED -------------------- ----------------------- July 1, July 2, July 1, July 2, 1995 1994 1995 1994 -------- -------- ---------- ---------- Revenues $619,916 $670,617 $1,245,855 $1,277,917 -------- -------- ---------- ---------- Cost and expenses: Cost of revenues 568,988 608,607 1,142,253 1,163,171 Warehouse, general and administrative 29,906 35,269 67,004 71,421 Interest paid to members 5,212 5,725 10,429 11,484 Other interest expense 2,765 1,849 5,279 3,645 Other income, net (263) (761) (484) (673) Income tax expense 115 135 230 240 -------- -------- ---------- ---------- 606,723 650,824 1,224,711 1,249,288 -------- -------- ---------- ---------- Net margins $ 13,193 $ 19,793 $ 21,144 $ 28,629 ======== ======== ========== ==========
See Notes to Condensed Consolidated Financial Statements. 5 COTTER & COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED (000's Omitted) (UNAUDITED)
July 1, July 2, 1995 1994 ------- ------- Operating activities: Net margins $21,144 $28,629 Adjustments to reconcile net margins to cash and cash equivalents from operating activities: Statement of operations components not affecting cash and cash equivalents 12,652 13,887 Net change in working capital components (59,495) (30,288) ------- ------- Net cash and cash equivalents provided by (used for) operating activities (25,699) 12,228 ------- ------- Investing activities: Additions to properties owned (10,921) (11,203) Proceeds from sale of properties owned -- 216 Changes in other assets (346) (417) ------- ------- Net cash and cash equivalents used for investing activities (11,267) (11,404) ------- ------- Financing activities: Proceeds from short-term borrowings 60,219 20,230 Payment of annual patronage dividend (18,383) (16,614) Payment of notes, lease obligations, and Class A common stock (5,067) (4,295) ------- ------- Net cash and cash equivalents provided by (used for) financing activities 36,769 (679) ------- ------- Net increase (decrease) in cash and cash equivalents (197) 145 Cash and cash equivalents at beginning of the year 1,831 1,314 ------- ------- Cash and cash equivalents at end of the period $ 1,634 $ 1,459 ======= =======
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 July 1, 1995 and the condensed consolidated statement of operations and statement of cash flows for the period ended July 2, 1994 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 31, 1994 included in the Company's 1994 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. It is estimated that, based on past experience, the 1995 annual patronage dividend will be 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. The estimated patronage dividend for the twenty-six weeks ended July 1, 1995 is $21,434,000 compared to $28,503,000 for the corresponding period in 1994. NOTE 3 - INVENTORIES
Inventories consisted of: July 1, December 31, 1995 1994 ------- ------------ (UNAUDITED) (000's Omitted) Manufacturing inventories: Raw materials $ 7,444 $ 12,986 Work-in-process and finished goods 40,439 60,094 -------- -------- 47,883 73,080 Merchandise inventories 297,876 311,667 -------- -------- $345,759 $384,747 ======== ========
7 NOTE 4 - DISPOSITION OF ASSETS On January 13, 1995, the Company announced the sale of certain inventory of its V&S Variety division to a national wholesaler who has also agreed to supply the majority of the V&S stores. Also, on January 31, 1995, the Company agreed to sell certain assets of its outdoor power equipment manufacturing division to a nationally recognized company and secured a favorable supply agreement for such equipment. These transactions will not have a material impact on the Company's results of operations or financial position. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TWENTY-SIX WEEKS ENDED JULY 1, 1995 COMPARED TO TWENTY-SIX WEEKS ENDED JULY 2, 1994 RESULTS OF OPERATIONS: Revenues decreased by $32,062,000 or 2.5% compared to the same period last year. The decrease was attributable to the phase out of the V&S Variety division, lower pricing of lumber related products and unusual weather conditions. Gross margins decreased by $11,144,000 or 9.7%. Gross margins as a percentage of revenues declined to 8.3% from 9.0% for the same period last year. Warehouse, general and administrative expenses decreased by $4,417,000 or 6.2% and as a percentage of revenues, decreased to 5.4% from 5.6% for the same period last year. Both decreases were primarily due to the phase out of the V&S Variety division and the outdoor power equipment division during the second quarter of the year. The majority of the impact to the gross margin from this phase out was completed by the second quarter, but the benefits to warehouse, general and administrative expenses will continue for the remainder of the year. Interest paid to Members decreased by $1,055,000 or 9.2% primarily due to a lower principal balance and lower average interest rates. Other interest expense increased by $1,634,000 or 44.8% compared to the same period last year primarily due to higher short-term borrowings and a higher average interest rate. Net margins were $21,144,000 compared to $28,629,000 for the same period last year. TWENTY-SIX WEEKS ENDED JULY 1, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994 LIQUIDITY AND CAPITAL RESOURCES: Cash and cash equivalents were comparable at July 1, 1995 and December 31, 1994. Cash flows for the twenty-six weeks ended July 1, 1995 of $25,699,000 were used for operating activities. Accounts and notes receivable increased by $18,335,000 due to seasonal payment terms for merchandise extended to the Company's Members. Accounts payable and accrued expenses decreased by $61,453,000 primarily due to the decrease in inventory of $38,988,000. The decrease in inventory is due to the phase out of the V&S Variety division and the outdoor power equipment division. 8 Cash flows for the twenty-six weeks ended July 1, 1995 of $11,267,000 were used for investing activities. Total capital expenditures, including those made under capital leases, were $10,921,000 for the twenty-six weeks ended July 1, 1995 compared to $11,203,000 during the comparable period in 1994. These capital expenditures were related to additional equipment and technological improvements at the regional distribution centers and the National Headquarters. Funding of any additional 1995 capital expenditures is anticipated to come from operations and external sources, if necessary. Cash flows for the twenty-six weeks ended July 1, 1995 of $36,769,000 were provided by financing activities. Short-term lines of credit under informal agreements with lending banks, cancelable by either party under specific circumstances, totaled $113,117,000 at July 1, 1995. Borrowings under these agreements were $69,548,000 at July 1, 1995. 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. Funds derived from these capital resources are usually sufficient to satisfy long-term capital needs. At July 1, 1995, net working capital increased slightly to $221,298,000 from $221,054,000 at December 31, 1994. The current ratio is 1.49 compared to 1.47 at December 31, 1994. The effects of all recent tax legislation have been reflected in the condensed consolidated financial statements included elsewhere herein. Additionally, the Company has reviewed the impact of all new accounting standards issued as of July 1, 1995 that will be adopted at a future date, and has determined that these will not have a material impact on the Company's operating results and financial position. THIRTEEN WEEKS ENDED JULY 1, 1995 COMPARED TO THIRTEEN WEEKS ENDED JULY 2, 1994 RESULTS OF OPERATIONS: Revenues decreased by $50,701,000 or 7.6% compared to the same period last year. The decrease was attributable to the phase out of the V&S Variety division, lower pricing of lumber related products and unusual weather conditions. Gross margins decreased by $11,082,000 or 17.9% compared to the same period last year. Gross margins as a percentage of revenues declined to 8.2% from 9.2% for the same period last year. Warehouse, general and administrative expenses decreased by $5,363,000 or 15.2% and as a percent of revenues, decreased to 4.8% from 5.3% for the same period last year. Both decreases were primarily due to the phase out of the V&S Variety division and the outdoor power equipment division. Interest paid to Members decreased by $513,000 or 9.0% primarily due to a lower principal balance and a lower average interest rate. Other interest expense increased by $916,000 or 49.5% compared to the same period last year primarily due to higher short-term borrowings and a higher average interest rate. Net margins were $13,193,000 compared to $19,793,000 for the same period last year. 9 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.4 to form S-2 Registration Statement (No. 33- 39477) filed with the Securities and Exchange Commission on March 18, 1995. (b) Reports on Form 8-K No reports on Form 8-K have been filed during the period for which this report is filed. 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: August 14, 1995 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 1,000 DEC-30-1995 JAN-01-1995 JUL-01-1995 6-MOS $ 1,634 0 312,998 0 345,759 676,128 371,624 202,279 856,550 454,830 73,783 118,266 0 0 209,671 856,550 1,245,855 1,245,855 1,142,253 1,142,253 66,520 0 15,708 21,374 230 21,144 0 0 0 21,144 0 0