-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, By3jPtVnZF7+QGdvO75X6wkCeARXVBTzpomauQFE0iCUV4yCdSaZZ6Wc8cRxOQvF kJvxX4ZlDwH7vf0usexLZQ== 0000950124-94-001739.txt : 19941116 0000950124-94-001739.hdr.sgml : 19941116 ACCESSION NUMBER: 0000950124-94-001739 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941001 FILED AS OF DATE: 19941115 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COTTER & CO CENTRAL INDEX KEY: 0000025095 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94560324 BUSINESS ADDRESS: STREET 1: 2740 N CLYBOURN AVE CITY: CHICAGO STATE: IL ZIP: 60614 BUSINESS PHONE: 3129752700 MAIL ADDRESS: STREET 2: 2740 N CLYBOURN AVE CITY: CHICAGO STATE: IL ZIP: 60614 10-Q 1 QUARTERLY REPORT 1 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 October 1, 1994 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 October 29, 1994. Class A Common Stock, $100 Par Value. 63,560 Shares. Class B Common Stock, $100 Par Value. 1,054,934 Shares. -1- 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted)
October 1, January 1, 1994 1994 ---------- ---------- (UNAUDITED) ASSETS - ------ Current assets: Cash and cash equivalents $ 1,917 $ 1,314 Accounts and notes receivable 334,206 276,585 Inventories 377,134 336,066 Prepaid expenses 10,326 6,969 -------- -------- Total current assets 723,583 620,934 Properties owned, less accumulated depreciation 166,391 164,319 Properties under capital leases, less accumulated amortization 5,156 6,769 Other assets 11,367 11,506 -------- -------- TOTAL ASSETS $906,497 $803,528 ======== ========
See Notes to Condensed Consolidated Financial Statements. -2- 3 COTTER & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (000's Omitted)
October 1, January 1, 1994 1994 ---------- ---------- (UNAUDITED) LIABILITIES AND CAPITALIZATION - ------------------------------ Current liabilities: Accounts payable and accrued expenses $373,886 $294,142 Short-term borrowings 35,832 23,287 Current maturities of notes, long-term debt and lease obligations 60,028 61,685 Patronage dividends payable in cash (Estimated at October 1, 1994) 13,273 16,614 -------- -------- Total current liabilities 483,019 395,728 -------- -------- Long-term debt and obligations under capital leases 67,420 69,201 -------- -------- Capitalization: Estimated patronage dividends to be distributed principally by the issuance of promissory (subordinated) notes and redeemable Class B nonvoting common stock 26,633 -- Promissory (subordinated) and instalment notes 213,125 217,996 Redeemable Class A common stock and partially paid subscriptions (Authorized 100,000 shares; issued and fully paid, 63,670 and 65,880 shares) 6,405 6,633 Redeemable Class B nonvoting common stock and paid-in capital (Authorized 2,000,000 shares; issued and fully paid, 1,058,303 and 1,019,640 shares; issuable as partial payment of patronage dividends, 75,780 shares as of January 1, 1994) 106,932 110,773 Retained earnings 3,704 3,867 -------- -------- 356,799 339,269 Foreign currency translation adjustment (741) (670) -------- -------- Total capitalization 356,058 338,599 -------- -------- TOTAL LIABILITIES AND CAPITALIZATION $906,497 $803,528 ======== ========
See Notes to Condensed Consolidated Financial Statements. -3- 4 COTTER & COMPANY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (000's Omitted) (UNAUDITED)
FOR THE THIRTEEN FOR THE THIRTY-NINE WEEKS ENDED WEEKS ENDED ------------------------ ------------------------ October 1, October 2, October 1, October 2, 1994 1993 1994 1993 ---------- ---------- ---------- ---------- Revenues $653,827 $601,781 $1,931,744 $1,806,275 -------- -------- ---------- ---------- Cost and expenses: Cost of revenues 596,469 544,260 1,759,640 1,637,995 Warehouse, general and administrative 33,491 31,653 104,912 100,331 Interest paid to members 5,696 6,023 17,180 18,250 Other interest expense 2,070 1,892 5,715 5,647 Gain on sale of properties -- (76) -- (4,501) Other expense(income), net 461 (470) (212) (968) Income tax expense 188 105 428 2,087 -------- -------- ---------- ---------- 638,375 583,387 1,887,663 1,758,841 -------- -------- ---------- ---------- Net margins $ 15,452 $ 18,394 $ 44,081 $ 47,434 ======== ======== ========== ==========
See Notes to Condensed Consolidated Financial Statements. -4- 5 COTTER & COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDED (000's Omitted) (UNAUDITED)
October 1, October 2, 1994 1993 ---------- ---------- Operating activities: Net margins $ 44,081 $ 47,434 Adjustments to reconcile net margins to cash and cash equivalents from operating activities: Statement of operations components not affecting cash and cash equivalents 19,127 14,112 Net change in working capital components (35,256) (110,112) -------- -------- Net cash and cash equivalents provided by (used for) operating activities 27,952 (48,566) -------- -------- Investing activities: Additions to properties owned (16,796) (10,710) Proceeds from sale of properties owned 313 12,455 Changes in other assets 139 (1,251) -------- -------- Net cash and cash equivalents provided by (used for) investing activities (16,344) 494 -------- -------- Financing activities: Proceeds from short-term borrowings, net 12,545 44,468 Payment of annual patronage dividend (16,614) (18,570) Payment of long-term debt, notes, lease obligations, and Class A common stock (6,936) (14,316) -------- -------- Net cash and cash equivalents provided by (used for) financing activities (11,005) 11,582 -------- -------- Net increase (decrease) in cash and cash equivalents 603 (36,490) Cash and cash equivalents at beginning of the year 1,314 37,603 -------- -------- Cash and cash equivalents at end of the period $ 1,917 $ 1,113 ======== ========
See Notes to Condensed Consolidated Financial Statements. -5- 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 October 1, 1994 and the condensed consolidated statement of operations and statement of cash flows for the period ended October 2, 1993 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 January 1, 1994 included in the Company's Post-Effective Amendment No. 3 to Form S-2 Registration Statement (No. 33-39477) and in the Company's 1993 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 1994 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 (since 1985, the promissory (subordinated) notes were for a term of seven years). 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 October 1, 1994 is $44,244,000 compared to $44,668,000 for the corresponding period in 1993. NOTE 3 - INVENTORIES
Inventories consisted of: October 1, January 1, 1994 1994 ---------- ---------- (UNAUDITED) (000's Omitted) Manufacturing inventories: Raw materials $ 12,748 $ 14,795 Work-in-process and finished goods 52,714 54,992 -------- -------- 65,462 69,787 Merchandise inventories 311,672 266,279 -------- -------- $377,134 $336,066 ======== ========
NOTE 4 - SUBSEQUENT EVENT Through a prospectus dated November 8, 1994, the Company has offered variable denomination fixed rate redeemable term notes to be issued January 1, 1995 to current holders of certain Company promissory (subordinated) notes maturing on December 31, 1994, who are not holders of the Company's Class A Common Stock in exchange for such promissory (subordinated) notes. -6- 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRTY-NINE WEEKS ENDED OCTOBER 1, 1994 COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 2, 1993 RESULTS OF OPERATIONS: Revenues increased by $125,469,000 or 6.9% compared to the same period last year. The improvement resulted from increased merchandise shipments to existing True Value(R) and V&S(R) Members from the Company's regional distribution network and manufacturing facilities. Gross margins increased by $3,824,000 or 2.3%. Gross margins as a percentage of revenues declined to 8.9% from 9.3% for the same period last year, due to a change in the Company's sales mix, pricing strategy, and more promotionally-oriented merchandising programs. Warehouse, general and administrative expenses increased by $4,581,000 or 4.6% but as a percent of revenues, decreased to 5.4% from 5.6% for the same period last year. The decrease resulted from the Company's continuing efforts to reduce operating costs. Interest paid to Members decreased by $1,070,000 or 5.9% primarily due to a lower average interest rate. Net margins were $44,081,000 compared to $47,434,000 for the same period last year. The 1993 net margins included a one time gain on the sale of properties of $4,501,000 offset by the related income tax of $1,936,000. THIRTY-NINE WEEKS ENDED OCTOBER 1, 1994 COMPARED WITH THE YEAR ENDED JANUARY 1, 1994 LIQUIDITY AND CAPITAL RESOURCES: Cash flows for the thirty-nine weeks ended October 1, 1994 were provided by operating activities through shipment of seasonal inventories to True Value(R) and V&S(R) Members, which were purchased or manufactured by the Company. The Company anticipates that cash and cash equivalents for the remaining period of the fiscal year will also be provided by operating activities and financing activities, if necessary. At the end of the third quarter of 1994, inventories increased by $41.1 million, to support anticipated future orders of seasonal merchandise. Short-term borrowings increased by $12.5 million and accounts payable and accrued expenses increased by $79.7 million in support of the increased inventories for anticipated future orders of seasonal merchandise and favorable seasonal terms obtained from vendors. Since the favorable seasonal terms were passed on to the Company's Members, accounts and notes receivable increased by $57.6 million. At October 1, 1994, net working capital increased to $240.6 million from $225.2 million at January 1, 1994. The current ratio decreased to 1.50 at October 1, 1994 compared to 1.57 at January 1, 1994. Short-term lines of credit utilized by the Company for normal operating activities are available under informal agreements with lending banks, cancelable by either party. At October 1, 1994, $51.0 million was available under these agreements, of which $35.8 million was outstanding. -7- 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. Funds derived from these capital resources are usually sufficient to satisfy long-term capital needs. Total capital expenditures, including those made under capital leases, were $16.8 million for the thirty-nine weeks ended October 1, 1994 compared to $10.7 million during the comparable period in 1993. These capital expenditures relate to additional equipment and technological improvements at the regional distribution centers and the National Headquarters. Funding of any additional 1994 capital expenditures is anticipated to come from operations and external sources, if necessary. 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 October 1, 1994 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 OCTOBER 1, 1994 COMPARED WITH THE THIRTEEN WEEKS ENDED OCTOBER 2, 1993 RESULTS OF OPERATIONS: Revenues increased by $52,046,000 or 8.6% compared to the previous year. The improvement resulted from increased merchandise shipments to existing True Value(R) and V&S(R) Members from the Company's regional distribution network and manufacturing facilities. Gross margins decreased slightly compared with the same period last year. Gross margins as a percentage of revenue declined to 8.8% compared to 9.6% for the same period last year. Lower margins resulted from a change in the Company's sales mix, pricing strategy, and more promotionally-oriented merchandising programs. Warehouse, general and administrative expenses increased by $1,838,000 or 5.8%, but as a percentage of revenues, decreased to 5.1% from 5.3% for the same period last year. The decrease resulted from the Company's continuing efforts to reduce operating costs. Interest paid to Members decreased by $327,000 or 5.4% due to a lower average interest rate. Net margins were $15,452,000 compared to $18,394,000 for the same period last year. PART II - OTHER INFORMATION Item 5. OTHER INFORMATION At the September 29, 1994 Board of Directors meeting, Mr. Michael P. Cole resigned as a director of the Company. The Company is seeking his replacement as director of the Company. -8- 9 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.3 to form S-2 Registration Statement (No. 33-39477) filed with the Securities and Exchange Commission on March 18, 1994. (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- 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 15, 1994 By /s/ Kerry J. Kirby Kerry J. Kirby Vice President, Secretary, Treasurer and Chief Financial Officer (Mr. Kirby is the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.) -10- EX-27 2 FINANCIAL DATA SCHEDULE
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-31-1994 JAN-02-1994 OCT-01-1994 1,917 0 334,206 0 377,134 723,583 359,510 187,963 906,497 483,019 67,420 113,337 0 0 242,721 906,497 1,931,744 1,931,744 1,759,640 1,759,640 104,700 0 22,895 44,509 428 44,081 0 0 0 44,081 0 0
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