-----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, CyD0Y97spbRs6o4rO5+sdn5GX6Up4uvC+AxvTXqpK0dP1MfIYRhVzLEkGltsZ8pZ zXwlK/DDaBbs0JYng0Phtg== 0000950152-96-005800.txt : 19961111 0000950152-96-005800.hdr.sgml : 19961111 ACCESSION NUMBER: 0000950152-96-005800 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIY HOME WAREHOUSE INC CENTRAL INDEX KEY: 0000899595 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] 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: 96657225 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, INC. QUARTERLY REPORT 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 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 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 September 28, 1996 - -------------------------- --------------------------------- Common Stock, no par value 7,630,685 2 DIY HOME WAREHOUSE, INC. INDEX PAGE NO. ----- -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheet - September 28, 1996 and December 30, 1995.............................................. 3 Condensed Statement of Income - Three and Nine Months Ended September 28, 1996 and September 30, 1995................................ 4 Condensed Statement of Shareholders' Equity - Nine Months Ended September 28, 1996........................................................... 5 Condensed Statement of Cash Flows - Nine Months Ended September 28, 1996 and September 30, 1995......................................... 6 Notes to Condensed Financial Statements........................ 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 9-11 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................. 12 2 3 PART I - FINANCIAL INFORMATION DIY HOME WAREHOUSE, INC. CONDENSED BALANCE SHEET
September 28, 1996 December 30, 1995 ------------------ ----------------- Assets (Unaudited) Current Assets: Cash and cash equivalents $ 1,329,548 $ 1,468,897 Accounts receivable, trade 28,469 97,584 Merchandise inventories 41,507,569 39,928,793 Deferred income taxes 685,312 685,312 Prepaid expenses and other assets 794,468 662,991 ------------ ------------ Total current assets 44,345,366 42,843,577 ------------ ------------ Property and equipment, at cost 49,688,789 46,956,706 Less accumulated depreciation and amortization (9,430,694) (6,985,653) ------------ ------------ Property and equipment, net 40,258,095 39,971,053 Other assets 602,138 685,180 ------------ ------------ Total assets $ 85,205,599 $ 83,499,810 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Note payable, affiliate $ 900,000 $ 900,000 Current maturities of long-term debt 835,492 552,670 Accounts payable 15,030,198 13,067,899 Accrued expenses and other 5,489,230 5,025,712 ------------ ------------ Total current liabilities 22,254,920 19,546,281 ------------ ------------ Revolving credit 8,500,000 13,300,000 Long-term debt 16,774,466 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, 7,630,685 and 7,625,000 shares outstanding as of September 28, 1996 and December 30, 1995, respectively 22,942,005 22,912,521 Retained earnings 13,635,192 10,526,839 ------------ ------------ Total shareholders' equity 36,577,197 33,439,360 ------------ ------------ Total liabilities and shareholders' equity $ 85,205,599 $ 83,499,810 ============ ============
See accompanying notes to condensed financial statements. 3 4 DIY HOME WAREHOUSE, INC. CONDENSED STATEMENT OF INCOME (Unaudited)
For the three months ended For the nine months ended -------------------------- ------------------------- September 28, September 30, September 28, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net Sales $ 56,806,258 $ 47,308,171 $ 164,118,831 $ 135,977,087 Cost of Sales 41,902,330 35,080,294 121,563,227 98,269,144 ------------- ------------- ------------- ------------- Gross profit 14,903,928 12,227,877 42,555,604 37,707,943 Store operating, general and administrative expenses 12,406,072 10,978,461 35,599,517 30,071,939 Store preopening costs -- 206,429 -- 1,491,989 ------------- ------------- ------------- ------------- Operating income 2,497,856 1,042,987 6,956,087 6,144,015 Other expense, net (518,589) (284,594) (1,718,170) (1,010,359) ------------- ------------- ------------- ------------- Income before income taxes 1,979,267 758,393 5,237,917 5,133,656 Income taxes 791,706 309,733 2,129,564 2,046,743 ------------- ------------- ------------- ------------- Net income $ 1,187,561 $ 448,660 $ 3,108,353 $ 3,086,913 ============= ============= ============= ============= Earnings per share $0.16 $0.06 $0.41 $0.40 ===== ===== ===== ===== Weighted average common shares outstanding 7,626,125 7,625,000 7,625,375 7,625,000 ============= ============= ============= =============
See accompanying notes to condensed financial statements. 4 5 DIY HOME WAREHOUSE, INC. CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 (Unaudited)
Common Stock ------------ Retained Shareholders' Shares Amount Earnings Equity ------ ------ -------- ------------ Balances at December 30, 1995, as previously 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 Shares issued under the Retainer Stock Plan for Non-employee Directors 5,685 29,484 29,484 Net income 3,108,353 3,108,353 ----------- ----------- ----------- ----------- Balances, September 28, 1996 7,630,685 $22,942,005 $13,635,192 $36,577,197 =========== =========== =========== ===========
See accompanying notes to condensed financial statements. 5 6 DIY HOME WAREHOUSE, INC. CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
For the nine months ended September 28, 1996 September 30, 1995 ----------------- ------------------ Cash flows from operating activities: Net income $ 3,108,353 $ 3,086,913 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,445,041 1,641,364 Deferred income tax expense and other 29,484 56,000 Changes in operating assets and liabilities: Accounts receivable, trade 69,115 82,449 Merchandise inventories (1,578,776) (10,476,525) Prepaid expenses and other assets (48,435) (45,846) Accounts payable 1,962,299 10,196,420 Accrued expenses and other current liabilities 463,518 1,284,974 ------------ ------------ Net cash provided by operating activities 6,450,599 5,825,749 ------------ ------------ Cash flows from investing activities: Acquisition of property and equipment (1,271,656) (15,829,963) ------------ ------------ Net cash used in investing activities (1,271,656) (15,829,963) ------------ ------------ Cash flows from financing activities: Principal payments under capital lease obligations (77,069) -- Principal payments, note payable -- (687,176) Proceeds from revolving credit 4,000,000 7,300,000 Principal payments of revolving credit (8,800,000) -- Proceeds from long-term debt -- 3,375,000 Principal payments of long-term debt (441,223) (199,267) ------------ ------------ Net cash (used in) provided by financing activities (5,318,292) 9,788,557 ------------ ------------ Net decrease in cash and cash equivalents (139,349) (215,657) Cash and cash equivalents, beginning of period 1,468,897 937,477 ------------ ------------ Cash and cash equivalents, end of period $ 1,329,548 $ 721,820 ============ ============
Supplemental schedule of non-cash investing and financing activities: Capital lease obligations of $1,460,427 were incurred when the Company entered into leases for vehicles and computer hardware and software in 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 September 28, 1996 and the results of operations and cash flows for the three and nine months ended September 28, 1996 and September 30, 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 Internal Revenue Service granted permission to the Company to change to the FIFO method of inventory valuation for income tax purposes. The effect of the change in accounting method increased net income as previously reported $69,000 for the three and nine months ended September 30, 1995, and $0.01 per share for the three months ended September 30, 1995. The effect of the change in accounting method did not impact earnings per share as previously reported for the nine months ended September 30, 1995. 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 shares of the Company's authorized common stock for issuance. On May 22, 1996, the Company's shareholders authorized an increase of the number of shares authorized for issuance under the Plan from 850,000 shares to 1,350,000 shares. Options granted under the Plan vest over five years at the rate of 20% each year and expire no more than ten years from the date of grant. A summary of activity under the Plan for the nine months ended September 28, 1996 is as follows: 7 8
Average Shares Subject Option Price to Options Per Share ---------- --------- Outstanding December 30, 1995 673,000 $ 10.18 Granted 158,000 $ 4.50 Canceled (25,000) $ 8.63 ------ Outstanding September 28, 1996 806,000 $ 9.14 =======
At September 28, 1996, 288,100 options were exercisable and 544,000 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 the 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 Nine months ended ------------------ ----------------- September 28, September 30, September 28, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Statutory federal income tax rate 34.0% 34.0% 34.0% 34.0% State and local income taxes, net of federal benefit 6.9 6.3 6.9 6.1 Tax credits and other (0.9) 0.5 (0.2) (0.2) ------ ----- ------ ----- Effective income tax rate 40.0% 40.8% 40.7% 39.9% ===== ===== ===== =====
8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS - Three Months Ended September 28, 1996 Compared to Three Months Ended September 30, 1995 Net sales increased by $9.5 million, or 20%, to $56.8 million in the third quarter of fiscal 1996, from $47.3 million in the third quarter of fiscal 1995. This increase in net sales was attributable primarily to a comparable store sales increase of 14%. Gross profit increased by $2.7 million, or 22%, to $14.9 million in the third quarter of fiscal 1996 from $12.2 million in the third quarter of fiscal 1995. As a percentage of net sales, gross profit increased to 26.2% in the quarter ended September 28, 1996 compared to 25.8% in the comparable quarter of fiscal 1995, due primarily to continued Company focus on enhancing its gross profit margin. Store operating, general and administrative expenses were $12.4 million for the quarter ended September 28, 1996 compared to $11.0 million for the quarter ended September 30, 1995. As a percentage of net sales, operating expenses decreased to 21.8% in the third quarter of fiscal 1996 compared to 23.2% in the third quarter of fiscal 1995, reflecting the benefit of sales leveraging and continuing expense reduction programs. There were no store preopening costs in the third quarter of fiscal 1996, as there were no new stores under development during this period. Store preopening costs were approximately $206,000 in the third quarter of fiscal 1995 relative to one store under development during this period. Other expense, net, increased from $285,000 in the quarter ended September 30, 1995 to $519,000 in the quarter ended September 28, 1996 due primarily to a $208,000 gain on the sale of a land parcel recorded in the third quarter of 1995. 9 10 OPERATIONS - Nine Months Ended September 28, 1996 Compared to Nine Months Ended September 30, 1995 Net sales for the nine months ended September 28, 1996 were $164.1 million, a 21% increase over net sales of $136.0 million for the nine months ended September 30, 1995. Comparable store sales increased 5% for the first nine months of fiscal 1996. In addition, the increase in net sales was partially attributable to the full period sales in 1996 for the five DIY locations which were opened in 1995. Gross profit for the nine months ended September 28, 1996 was $42.6 million compared to gross profit of $37.7 for the nine months ended September 30, 1995. Gross profit, as a percentage of net sales, decreased from 27.7% in the first nine months of fiscal 1995 to 25.9% in the comparable 1996 nine month period. This decline in gross margin percentage is due primarily to vendor discounts received in 1995 on the initial inventory orders for four new stores opened during the first nine months of 1995. No such discounts were realized in the first nine months of fiscal 1996 as there were no new store openings. Store operating expenses were 21.7% of net sales in the first nine months of fiscal 1996 as compared to 22.1% of net sales in the first nine months of fiscal 1995, reflecting the benefit of sales leveraging and continuing expense reduction programs. There were no store preopening costs for the nine months ended September 28, 1996 as there were no new stores under development during this period. Store preopening costs were $1.5 million for the nine months ended September 30, 1995 relative to four stores opened during this period. Other expense, net, increased from $1.0 million in the nine months ended September 30, 1995 to $1.7 million in the nine months ended September 28, 1996 due to interest expense incurred on higher levels of debt outstanding in the first nine months of 1996 compared to the comparable 1995 period. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 28, 1996, operating activities provided net cash of $6.5 million. The primary source of cash from operations was $5.5 million from net income plus depreciation and amortization. The primary use of cash was $1.6 million to fund increased merchandise inventory levels at existing stores offset by an increase of $2.0 million and $464,000 in accounts payable and accrued expenses and other current liabilities, respectively. During the nine months ended September 30, 1995, operating activities provided net cash of $5.8 million. The primary source of cash from operations was $4.7 million from net income plus depreciation and amortization. The primary use of cash was $10.5 million to finance increases in merchandise inventories resulting from new store openings in the first nine months of 1995 offset by a $10.2 million increase in accounts payable and a $1.3 million increase in accrued expenses and other current liabilities. 10 11 Net cash used in investing activities was approximately $1.3 million and $15.8 million during the nine months ended September 28, 1996 and September 30, 1995, respectively, due to remodeling initiatives in the Company's older stores in the first nine months of 1996 and the acquisition of property and equipment related to new store expansion in the first nine months of fiscal 1995. Net cash used in financing activities during the nine months ended September 28, 1996 totaled $5.3 million, as a result of net repayments to the Company's revolving credit facility of $4.8 million and principal payments of debt and capital lease obligations of approximately $500,000. Net cash provided by financing activities in the nine months ended September 30, 1995 totaled $9.8 million, due primarily to $7.3 million and $3.4 million from revolving credit borrowings and mortgage loans, respectively, offset by principal payments of debt and a note payable of approximately $900,000. 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. The effect of the change in accounting method increased net income, as previously reported, $69,000 for the three and nine months ended September 30, 1995, and $0.01 per share for the three months ended September 30, 1995. The effect of the change in accounting method did not impact earnings per share as previously reported for the nine months ended September 30, 1995. The Company entered into capital lease obligations of $815,988 for computer hardware and software and $644,439 for trucks in the second and first quarters of 1996, respectively. At September 28, 1996, the Company had $14.5 million available under its revolving credit facility. 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. 11 12 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: November 7, 1996 By: /s/ Marilyn A. Eisele ---------------------- Vice President - Administration and Finance, Chief Financial Officer 12 13 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------ ---------------------- 11 Earnings Per Share: ------------------- 11.1 Computation of Earnings Per Share 27 Financial Data Schedule: ------------------------ 27.1 Financial Data Schedule for the quarter ended September 28, 1996 13 EX-11.1 2 EXHIBIT 11.1 1 EXHIBIT 11.1 DIY HOME WAREHOUSE, INC. FORM 10-Q COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited)
Three Months Ended Nine Months Ended September 28, September 30, September 28, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Income applicable to common shares $1,187,561 $ 448,660 $3,108,353 $3,086,913 ========== ========== ========== ========== Weighted average common shares outstanding for the period 7,626,125 7,625,000 7,625,375 7,625,000 Dilutive effect of exercise of stock options -- -- -- -- ---------- ---------- ---------- ---------- Weighted average common shares, assuming issuance of the above securities 7,626,125 7,625,000 7,625,375 7,625,000 ========== ========== ========== ========== Earnings per common share: Primary $0.16 $0.06 $0.41 $0.40 Fully diluted $ -- $ -- $ -- $ --
EX-27 3 EXHIBIT 27
5 1000 9-MOS DEC-28-1996 DEC-31-1995 SEP-28-1996 1,330 0 28 0 41,508 44,345 49,689 9,431 85,205 22,255 25,274 0 0 22,942 13,635 85,205 164,118 164,118 121,563 121,563 0 0 1,911 5,238 2,130 3,108 0 0 0 3,108 0.41 0.41
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