-----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, Hahv0hrrK+4M5cfO6KIskoGZ+F6TEZkYauRkcVkhCrJ7zHx474QakRRhY8yOIC6b 4jmDWs2Pq6ai3sYsuTNgEg== 0000025095-95-000014.txt : 19951119 0000025095-95-000014.hdr.sgml : 19951119 ACCESSION NUMBER: 0000025095-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 95590505 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 30, 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 (Present address of principal executive offices) (Zip Code) 8600 West Bryn Mawr Avenue Chicago, Illinois 60631 (Address of principal executive offices (Zip Code) after December 17, 1995) (312) 975-2700 (Registrant's present telephone number, including area code) (312) 695-5000 (Registrant's telephone number after December 15, 1995, 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 October 28, 1995. Class A Common Stock, $100 Par Value. 53,730 Shares. Class B Common Stock, $100 Par Value. 1,064,963 Shares. 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted)
September 30, December 31, 1995 1994 ------------ ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 1,558 $ 1,831 Accounts and notes receivable 319,654 294,663 Inventories 325,666 384,747 Prepaid expenses 13,781 7,861 ------- ------- Total current assets 660,659 689,102 Properties owned, less accumulated depreciation 161,747 164,261 Properties under capital leases, less accumulated amortization 5,843 4,691 Other assets 11,773 10,731 -------- -------- TOTAL ASSETS $840,022 $868,785 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted)
September 30, December 31, 1995 1994 ------------- ----------- (UNAUDITED) LIABILITIES AND CAPITALIZATION Current liabilities: Accounts payable and accrued expenses $358,569 $379,772 Short-term borrowings 8,042 9,329 Current maturities of notes, long-term debt and lease obligations 59,738 60,564 Patronage dividends payable in cash (Estimated at September 30, 1995) 10,503 18,383 -------- -------- Total current liabilities 436,852 468,048 -------- -------- Long-term debt and obligations under capital leases 74,904 75,756 -------- -------- Capitalization: Estimated patronage dividends to be distributed principally by the issuance of promissory (subordinated) notes and redeemable Class B nonvoting common stock 20,541 -- Promissory (subordinated) and instalment notes 191,340 199,099 Redeemable Class A common stock and partially paid subscriptions (Authorized 100,000 shares; issued and fully paid, 54,550 and 63,350 shares) 5,482 6,370 Redeemable Class B nonvoting common stock and paid-in capital (Authorized 2,000,000 shares; issued and fully paid, 1,071,574 and 1,047,756 shares; issuable as partial payment of patronage dividends, 104,275 shares as of December 31, 1994) 108,292 116,663 Retained earnings 3,346 3,764 -------- -------- 329,001 325,896 Foreign currency translation adjustment (735) (915) -------- -------- Total capitalization 328,266 324,981 -------- -------- TOTAL LIABILITIES AND CAPITALIZATION $840,022 $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 THIRTY-NINE WEEKS ENDED WEEKS ENDED ------------------------ ------------------------ September 30, October 1, September 30, October 1, 1995 1994 1995 1994 ------------ --------- ------------ --------- Revenues $594,808 $653,827 $1,840,663 $1,931,744 -------- -------- ---------- ---------- Cost and expenses: Cost of revenues 544,407 596,469 1,686,660 1,759,640 Warehouse, general and administrative 29,676 33,491 96,680 104,912 Interest paid to members 5,047 5,696 15,476 17,180 Other interest expense 2,083 2,070 7,362 5,715 Other expense (income), net 18 461 (466) (212) Income tax expense 130 188 360 428 -------- -------- ---------- ---------- 581,361 638,375 1,806,072 1,887,663 -------- -------- ---------- ---------- Net margins $ 13,447 $ 15,452 $ 34,591 $ 44,081 ======== ======== ========== ==========
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 30, October 1, 1995 1994 ------------ --------- Operating activities: Net margins $34,591 $44,081 Adjustments to reconcile net margins to cash and cash equivalents from operating activities: Statement of operations components not affecting cash and cash equivalents 18,475 19,127 Net change in working capital components ( 9,856) (35,256) ------- ------- Net cash and cash equivalents provided by operating activities 43,210 27,952 ------- ------- Investing activities: Additions to properties owned (15,998) (16,796) Proceeds from sale of properties owned 4,160 313 Changes in other assets (1,042) 139 ------- ------- Net cash and cash equivalents used for investing activities (12,880) (16,344) ------- ------- Financing activities: Proceeds (payments) of short-term borrowings (1,287) 12,545 Payment of annual patronage dividend (18,383) (16,614) Payment of notes, long-term debts, lease obligations, and Class A common stock (10,933) (6,936) ------- ------- Net cash and cash equivalents used for financing activities (30,603) (11,005) ------- ------- Net increase (decrease) in cash and cash equivalents (273) 603 Cash and cash equivalents at beginning of the year 1,831 1,314 ------- ------- Cash and cash equivalents at end of the period $ 1,558 $ 1,917 ======= =======
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 30, 1995 and the condensed consolidated statement of operations and statement of cash flows for the period ended October 1, 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 thirty-nine weeks ended September 30, 1995 is $35,009,000 compared to $44,244,000 for the corresponding period in 1994. NOTE 3 - INVENTORIES
Inventories consisted of: September 30, December 31, 1995 1994 ------------ ----------- (UNAUDITED) (000's Omitted) Manufacturing inventories: Raw materials $ 1,981 $ 12,986 Work-in-process and finished goods 18,489 60,094 -------- -------- 20,470 73,080 Merchandise inventories 305,196 311,667 -------- -------- $325,666 $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 THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 1995 COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 1, 1994 RESULTS OF OPERATIONS: Revenues decreased by $91,081,000 or 4.7% compared to the same period last year. The decrease was attributable to the phase out of the V&S Variety division and the outdoor power equipment manufacturing division and lower pricing of lumber related products. Gross margins decreased by $18,101,000 or 10.5%. Gross margins as a percentage of revenues declined to 8.4% from 8.9% for the same period last year. Warehouse, general and administrative expenses decreased by $8,232,000 or 7.8% and as a percentage of revenues, decreased to 5.3% from 5.4% 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 manufacturing 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 $1,704,000 or 9.9% primarily due to a lower principal balance and lower average interest rates. Other interest expense increased by $1,647,000 or 28.8% compared to the same period last year primarily due to higher borrowings and a higher average interest rate. Net margins were $34,591,000 compared to $44,081,000 for the same period last year. THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994 LIQUIDITY AND CAPITAL RESOURCES: Cash and cash equivalents were comparable at September 30, 1995 and December 31, 1994. Cash flows for the thirty-nine weeks ended September 30, 1995 of $43,210,000 were provided by operating activities. Accounts and notes receivable increased by $24,991,000 due to seasonal payment terms for merchandise extended to the Company's Members. Accounts payable and accrued expenses decreased by $21,203,000 primarily due to the decrease in inventory of $59,081,000 offset by favorable seasonal terms obtained from vendors which were passed on to the Company's Members. The decrease in inventory is due to the phase out of the V&S Variety division and the outdoor power equipment manufacturing division. 8 Cash flows for the thirty-nine weeks ended September 30, 1995 of $12,880,000 were used for investing activities. Total capital expenditures, including those made under capital leases of $2,470,000, were $18,468,000 for the thirty-nine weeks ended September 30, 1995 compared to $16,796,000 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 thirty-nine weeks ended September 30, 1995 of $30,603,000 were used for financing activities. Short-term lines of credit under informal agreements with lending banks, cancelable by either party under specific circumstances, totaled $63,000,000 at September 30, 1995. Borrowings under these agreements were $8,042,000 at September 30, 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 September 30, 1995, net working capital increased to $223,807,000 from $221,054,000 at December 31, 1994. The current ratio is 1.51 compared to 1.47 at December 31, 1994. The Company has reviewed the impact of all new accounting standards issued as of September 30, 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 SEPTEMBER 30, 1995 COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 1, 1994 RESULTS OF OPERATIONS: Revenues decreased by $59,019,000 or 9.0% compared to the same period last year. The decrease was attributable to the phase out of the V&S Variety division and the outdoor power equipment manufacturing division, and lower pricing of lumber related products. Gross margins decreased by $6,957,000 or 12.1% compared to the same period last year. Gross margins as a percentage of revenues declined to 8.5% from 8.8% for the same period last year. Warehouse, general and administrative expenses decreased by $3,815,000 or 11.4% and as a percent of revenues, decreased to 5.0% from 5.1% 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 manufacturing division. Interest paid to Members decreased by $649,000 or 11.4% primarily due to a lower principal balance and a lower average interest rate. Other interest expense remained comparable to the same period last year. Net margins were $13,447,000 compared to $15,452,000 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. 10 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 13, 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 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. 1,000 9-MOS DEC-30-1995 SEP-30-1995 1,558 0 319,654 0 325,666 660,659 356,934 189,344 840,022 436,852 74,904 113,774 0 0 214,492 840,022 1,840,663 1,840,663 1,686,660 1,686,660 95,214 0 22,838 34,951 360 34,591 0 0 0 34,591 0 0
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