-----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, LkIgpjBIuCzVLnWCgDN/ICRNFdsDohPex8zmN0WmKa3fecxMzsqEOw6IUivadTWN 7lbxCxh9jMPvDUbj+6SBSw== 0000950152-96-002261.txt : 19960806 0000950152-96-002261.hdr.sgml : 19960806 ACCESSION NUMBER: 0000950152-96-002261 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIY HOME WAREHOUSE INC CENTRAL INDEX KEY: 0000899595 STANDARD INDUSTRIAL CLASSIFICATION: 5200 IRS NUMBER: 382560752 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21768 FILM NUMBER: 96559921 BUSINESS ADDRESS: STREET 1: 5811 CANAL RD STE 180 CITY: VALLEY VIEW STATE: OH ZIP: 44125 BUSINESS PHONE: 2163285100 MAIL ADDRESS: STREET 1: 5811 CANAL ROAD STREET 2: SUITE 180 CITY: VALLEY VIEW STATE: OH ZIP: 44125 10-Q 1 DIY HOME WAREHOUSE 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 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 0-21768 D.I.Y. HOME WAREHOUSE, INC. --------------------------- (Exact name of registrant as specified in its charter) STATE OF OHIO 38-2560752 (State of Incorporation) (I.R.S. Employer I.D. No.) 5811 CANAL ROAD VALLEY VIEW, OHIO 44125 (216) 328-5100 (Address of principal executive offices and telephone number) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at March 30, 1996 - - ------------------------------- ----------------------------- Common Stock, no par value 7,625,000 Total pages: Index to Exhibits: 2 D.I.Y. HOME WAREHOUSE, INC.
INDEX ----- PAGE NO. -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheet - March 30, 1996 and December 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Condensed Statement of Income - Three Months Ended March 30, 1996 and April 1, 1995 . . . . . . . . . . . . . . . . . . 4 Condensed Statement of Shareholders' Equity - Three Months Ended March 30, 1996 . . . . . . . . . . . . . . . 5 Condensed Statement of Cash Flows - Three Months Ended March 30, 1996 and April 1, 1995 . . . . . . . . . . . . . . . . . 6 Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 9 - 10 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 11 - 12
2 3 PART I - FINANCIAL INFORMATION D.I.Y. HOME WAREHOUSE, INC. CONDENSED BALANCE SHEET
March 30, 1996 December 30, 1995 -------------- ----------------- Assets (Unaudited) Current assets: Cash and cash equivalents $ 517,580 $ 1,468,897 Accounts receivable, trade 85,216 97,584 Merchandise inventories 50,629,033 39,928,793 Deferred income taxes 685,312 685,312 Prepaid expenses and other assets 640,339 662,991 ---------- ---------- Total current assets 52,557,480 42,843,577 ---------- ---------- Property and equipment, at cost 48,187,411 46,956,706 Less accumulated depreciation and amortization 7,763,984 6,985,653 ---------- ---------- Property and equipment, net 40,423,427 39,971,053 Other assets 655,215 685,180 ---------- ---------- Total assets $93,636,122 $83,499,810 ========== ========== Liabilities and Shareholders' Equity Current liabilities: Note payable, affiliate $ 900,000 $ 900,000 Current maturities of long-term debt 661,385 552,670 Accounts payable 19,579,682 13,067,899 Accrued expenses and other 4,270,636 5,025,712 ---------- ---------- Total current liabilities 25,411,703 19,546,281 ---------- ---------- Revolving credit 17,300,000 13,300,000 Long-term debt 16,494,834 16,115,153 Deferred income taxes 1,099,016 1,099,016 Shareholders' equity: Preferred stock, authorized 1,000,000 shares, none issued -- -- Common stock, no par value, authorized 10,000,000 shares, 7,625,000 shares outstanding 22,912,521 22,912,521 Retained earnings 10,418,048 10,526,839 ---------- ---------- Total shareholders' equity 33,330,569 33,439,360 ---------- ---------- Total liabilities and shareholders' equity $93,636,122 $83,499,810 ========== ==========
See accompanying notes to condensed financial statements. 3 4 D.I.Y. HOME WAREHOUSE, INC. CONDENSED STATEMENT OF INCOME (Unaudited)
For the three months ended March 30, April 1, 1996 1995 ---------- ---------- Net sales $ 39,143,905 $ 30,257,805 Cost of sales 28,378,802 21,070,348 ---------- ---------- Gross profit 10,765,103 9,187,457 Store operating, general and administrative expenses 10,370,512 7,447,880 Store preopening costs -- 646,758 ---------- ---------- Operating income 394,591 1,092,819 Other expense, net (575,913) (270,057) ---------- ---------- Income (loss) before income taxes (181,322) 822,762 Income taxes (72,531) 319,511 ---------- ---------- Net (loss) income $ (108,791) $ 503,251 ========== ========== Earnings (loss) per share $ (0.01) $ 0.07 ========== ========== Weighted average common shares outstanding 7,625,000 7,625,000 ========== ==========
See accompanying notes to condensed financial statements. 4 5 D.I.Y. HOME WAREHOUSE, INC. CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 30, 1996 (Unaudited)
Common Stock Total ----------------------- Retained Shareholders' Shares Amount Earnings Equity --------- ----------- ----------- ----------- Balances at December 30, 1995, as previous- ly reported 7,625,000 $22,912,521 $10,252,424 $33,164,945 Adjustment for the cumulative effect of the change in accounting for merchandise inventories 274,415 274,415 --------- ----------- ----------- ----------- Balances at December 30, 1995, as adjusted 7,625,000 22,912,521 10,526,839 33,439,360 Net loss (108,791) (108,791) --------- ----------- ----------- ----------- Balances, March 30, 1996 7,625,000 $22,912,521 $10,418,048 $33,330,569 ========= =========== =========== ===========
See accompanying notes to condensed financial statements. 5 6 D.I.Y. HOME WAREHOUSE, INC. CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
For the three months ended March 30, April 1, 1996 1995 ----------- ----------- Cash flows from operating activities: Net (loss) income $ (108,791) $ 503,251 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 778,331 423,575 Changes in operating assets and liabilities: Accounts receivable, trade 12,368 (159,196) Merchandise inventories (10,700,240) (10,231,408) Prepaid expenses and other assets 52,617 24,642 Accounts payable 6,511,783 11,409,300 Accrued expenses and other current liabilities (755,076) 180,511 ----------- ----------- Net cash (used in) provided by operating activities (4,209,008) 2,150,675 ----------- ----------- Cash flows from investing activities: Acquisition of property and equipment (585,860) (7,084,888) ----------- ----------- Net cash used in investing activities (585,860) (7,084,888) ----------- ----------- Cash flows from financing activities: Principal payments under capital lease obligations (14,092) -- Principal payments, note payable -- (50,578) Proceeds from revolving credit 4,000,000 5,000,000 Principal payments of long-term debt (142,357) (45,079) ----------- ----------- Net cash provided by financing activities 3,843,551 4,904,343 ----------- ----------- Net decrease in cash and cash equivalents (951,317) (29,870) Cash and cash equivalents, beginning of period 1,468,897 937,477 ----------- ----------- Cash and cash equivalents, end of period $ 517,580 $ 907,607 =========== ===========
Supplemental schedule of non-cash investing and financing activities: Capital lease obligations of $644,845 were incurred when the Company entered into leases for vehicles during 1996. See accompanying notes to condensed financial statements. 6 7 D.I.Y. HOME WAREHOUSE, INC. Notes to Condensed Financial Statements (Unaudited) 1. Basis of Presentation: In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of March 30, 1996 and the results of operations and cash flows for the three months ended March 30, 1996 and April 1, 1995. The condensed financial statements should be read in conjunction with the financial statements and notes contained in the Company's Annual Report filed on Form 10-K. The results of operations for any interim period should not necessarily be considered indicative of the results of operations for the full year. 2. Summary of Significant Accounting Policies: During the first quarter of 1996, the Company changed its method of accounting for merchandise inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. As required by generally accepted accounting principles, the Company has retroactively adjusted prior years' financial statements for this change. The new method of accounting for inventory was adopted in recognition of industry practice and to provide for a better matching of costs and revenues. The Company will apply to the Internal Revenue Service to change to the FIFO method of inventory valuation for income tax purposes. The effect of the change in accounting method had no effect on net income or earnings per share as previously reported for the three months ended April 1, 1995. The Company will restate each of its 1995 quarters as well as its 1995 and 1994 annual results to provide retroactive application of the effect of the accounting change. Had the Company not changed its method of inventory costing, the impact on net income and earnings per share for the three months ended March 30, 1996 would not have been material. 3. Earnings Per Share: Earnings per share are computed using the weighted average number of shares of common stock outstanding for the periods. Earnings per share have not been adjusted for the effect of stock options as the dilutive effect would be less than three percent for each period. 4. Stock Options: The Company has a Long Term Incentive Plan (the Plan) which reserves 850,000 shares of the Company's authorized common stock for issuance. Options granted under the Plan vest over five years at the rate of 20% each year and 7 8 expire no more than ten years from the date of grant. A summary of activity under the Plan for the three months ended March 30, 1996 is as follows:
Average Option Shares Subject Price to Options Per Share ---------- --------- Outstanding December 30, 1995 673,000 $10.18 Granted 165,000 $ 4.59 Canceled (9,000) $ 5.68 ------- Outstanding March 30, 1996 829,000 $ 9.12 =======
At March 30, 1996, 184,600 options were exercisable and 21,000 shares were available for future grant. The Company does not expect to adopt the recognition provisions of recently issued SFAS No. 123, Accounting for Stock-Based Compensation. Disclosures required by new accounting standard will be included in future financial statements pursuant to the effective date criteria. 6. Income Taxes: A reconciliation of the Statutory federal income tax rate to the Company's effective income tax rate follows:
Three months ended -------------------- March 30, April 1, 1996 1995 -------- -------- Statutory federal income tax rate 34.0% 34.0% State and local income taxes, net of federal benefit 6.0% 6.0 Tax credits and other -- (1.2) -------- -------- Effective income tax rate 40.0% 38.8% ======== ========
8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION STATEMENT OF INCOME - Three Months Ended March 30, 1996 Compared to Three Months Ended April 1, 1995 Net sales increased by $8.9 million, or 29%, to $39.1 million in the first quarter of fiscal 1996, from $30.3 million in the first quarter of fiscal 1995. This increase in net sales was attributable primarily to the full period sales in 1996 for the five DIY locations which were opened in 1995. Comparable store sales decreased 4.0% for the quarter. Comparable store sales were below expectations due to severe winter weather. In addition, sales were further impacted by the announcement and commencement of the liquidation by a competitor which formerly was a large player in the Company's markets. Gross profit increased by $1.6 million, or 17%, to $10.8 million in the first quarter of fiscal 1996 from $9.2 million in the first quarter of fiscal 1995. As a percentage of net sales, gross profit decreased to 27.5% in the first quarter of fiscal 1996 compared to 30.4% in the first quarter of fiscal 1995, due primarily to vendor discounts received in 1995 on the initial inventory for new stores. No such discounts were realized in the first quarter of fiscal 1996 as there were no new store openings in the period. Store operating, general and administrative expenses were $10.4 million for the quarter ended March 30, 1996 compared to $7.4 million for the quarter ended April 1, 1995. As a percentage of net sales, operating expenses increased to 26.5% in the first quarter of fiscal 1996 compared to 24.6% in the first quarter of fiscal 1995 as the sales softness impacted the Company's ability to leverage expenses. There were no store pre-opening costs in the first quarter of fiscal 1996, compared to $646,758 in the first quarter of fiscal 1995 as a result of the timing of new store openings in the respective periods. Other expense, net, increased from $270,057 (0.9% of net sales) in the first quarter of fiscal 1995 to $575,913 (1.5% of net sales) in the quarter ended March 30, 1996 due to interest expense incurred on higher levels of debt outstanding in the first quarter of 1996. The effective income tax rate was 40.0% in the first quarter of fiscal 1996 up from 38.8% in the first quarter of fiscal 1995. This increase was due primarily to the legislative termination of the targeted jobs tax credit effective December 31, 1994. Final tax benefits relative to this tax credit were realized in the first quarter of 1995. 9 10 BALANCE SHEET - March 30, 1996 Merchandise inventories increased $10.7 million and accounts payable increased $6.5 million since December 30, 1995 due primarily to the seasonal increases in inventory levels. During the first quarter of fiscal 1996, the Company changed its method of accounting for inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. As required by generally accepted accounting principles, the Company has retroactively adjusted prior years' financial statements for this change. Property and equipment, at cost, increased approximately $600,000 due to remodeling and lighting projects in certain stores. Indebtedness under the Company's revolving credit facility increased $4.0 million since December 30, 1995 in order to finance the increase in merchandise inventories and property and equipment. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities was $4.2 million for the three months ended March 30, 1996. The primary use of cash from operating activities for the three months ended March 30, 1996 was $10.7 million to fund the seasonal increase in inventories offset by an increase of $6.5 million in accounts payable. Net cash used in investing activities was $1.2 million relative to the acquisition of property and equipment. Net cash provided by financing activities was $3.8 million reflecting net borrowings. Net cash provided by operating activities was $2.2 million for the three months ended April 1, 1995, and was provided by net income plus depreciation and amortization and an increase in accounts payable which exceeded the increase in merchandise inventories. Net cash used in investing activities of $7.1 million represents property and equipment acquisition relative to new stores. Net cash provided by financing activities was $4.9 million reflecting net borrowings to fund the acquisition of property and equipment. Management believes cash on hand, cash from operations and cash available through the Company's financing agreements will be sufficient to meet short-term and long-term working capital requirements. 10 11 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: A list of the exhibits required by Item 601 of Regulation S-K to be filed as a part of this Form 10-Q is shown on the "Exhibit Index" filed herewith. (b) Reports on Form 8-K: None 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. D.I.Y. HOME WAREHOUSE, INC. (Registrant) DATED: May 9, 1996 By: /s/ Marilyn A. Eisele ------------------------------------ Vice President - Administration and Finance, Chief Financial Officer 11 12 EXHIBIT INDEX Exhibit Number Description of Exhibit - - ------ ---------------------- 11 Earnings Per Share: ------------------ 11.1 Computation of Earnings Per Share 18 Change in Accounting Principles: ------------------------------- 18.1 Preferability Letter from Coopers & Lybrand L.L.P. dated April 17, 1996 regarding the change in accounting for merchandise inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. 27 Financial Data Schedule: ----------------------- 27.1 Financial Data Schedule for the quarter ended March 30, 1996. 12 EX-11.1 2 EXHIBIT 11.1 1 EXHIBIT 11.1 D.I.Y. HOME WAREHOUSE INC. FORM 10-Q COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited)
Three Months Ended March 30, April 1, 1996 1995 ---------- -------- Income applicable to common shares $(108,791) $503,251 ========= ========= Weighted average common shares outstanding for the period 7,625,000 7,625,000 Dilutive effect of exercise of stock options -- -- --------- --------- Weighted average common shares, assuming issuance of the above securities 7,625,000 7,625,000 ========= ========= Earnings per common share: Primary $(0.01) $ 0.07 Fully diluted $ -- $ --
EX-18.1 3 EXHIBIT 18.1 1 EXHIBIT 18.1 Coopers Coopers & Lybrand L.L.P. &Lybrand a professional services firm D.I.Y. Home Warehouse, Inc. 5811 Canal Road Suite 180 Valley View, Ohio 44125 We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant to Item 601 of Regulation S-K. We have read management's justification for the change in accounting from the last-in, first-out (LIFO) method of inventory valuation to the first-in, first-out (FIFO) method contained in the Company's Form 10-Q for the quarter ended March 30, 1996. Based on our reading of the data and discussions with the Company officials of the business judgment and business planning factors relating to the change, we believe management's justification is reasonable. Accordingly, in reliance on management's determination as regards elements of judgment and business planning, we concur that the newly adopted accounting principle described above is preferable in the Company's circumstances to the method previously applied. We have not audited any financial statements of D.I.Y. Home Warehouse, Inc. as of any date or for any period subsequent to December 30, 1995, nor have we audited the application of the change in accounting principle disclosed in the Form 10-Q of D.I.Y. Home Warehouse, Inc. for the three months ended March 30, 1996; accordingly, our comments are subject to revision on completion of an audit of the financial statements that include the accounting change. Coopers & Lybrand L.L.P. Cleveland, Ohio April 17, 1996 EX-27 4 EXHIBIT 27
5 1000 3-MOS DEC-28-1996 DEC-31-1995 MAR-30-1996 518 0 85 0 50,629 52,557 48,187 7,764 93,636 25,412 33,795 22,913 0 0 10,418 93,636 39,144 39,144 28,379 28,379 0 0 680 (181) (73) (109) 0 0 0 (109) (0.01) (0.01)
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