-----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, WWjeVko980g7tqkbhVxe+bQ0HP311wEmTU8hlOeJa7+UDlni59uXTUD22+s+xO2Y xkfAhGUKxROLstBySC6JbA== 0000950152-97-007890.txt : 19971114 0000950152-97-007890.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950152-97-007890 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-21768 FILM NUMBER: 97714957 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 10-Q 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 27, 1997 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 27, 1997 - --------------------------- ----------------------------------- Common Stock, no par value 7,633,859 2 D.I.Y. HOME WAREHOUSE, INC. INDEX PAGE NO. -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheet - September 27, 1997 and December 28, 1996............................. 3 Condensed Statement of Income - Three and Nine Months Ended September 27, 1997 and September 28, 1996............................ 4 Condensed Statement of Shareholders' Equity - Nine Months Ended September 27, 1997............................... 5 Condensed Statement of Cash Flows - Nine Months Ended September 27, 1997 and September 28, 1996................................. 6 Notes to Condensed Financial Statements............................................. 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 9-12 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K....................... 13-14 2 3 PART I - FINANCIAL INFORMATION D.I.Y. HOME WAREHOUSE, INC. CONDENSED BALANCE SHEET
September 27, 1997 December 28, 1996 ------------------ ----------------- Assets (Unaudited) Current assets: Cash and cash equivalents $ 729,954 $ 161,360 Accounts receivable, trade 117,783 51,812 Refundable federal income taxes 248,688 Merchandise inventories 46,068,608 38,462,125 Deferred income taxes 140,105 280,791 Prepaid expenses and other assets 653,611 850,113 ------------ ------------ Total current assets 47,710,061 40,054,889 ------------ ------------ Property and equipment, at cost 50,470,326 49,518,669 Less accumulated depreciation and amortization (12,651,175) (10,186,763) ------------ ------------ Property and equipment, net 37,819,151 39,331,906 Other assets 497,554 577,442 ------------ ------------ Total assets $ 86,026,766 $ 79,964,237 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Note payable, affiliate $ 600,000 $ 900,000 Current maturities of long-term debt 860,224 798,377 Accounts payable 16,323,201 12,278,455 Accrued expenses and other 5,535,444 5,189,499 ------------ ------------ Total current liabilities 23,318,869 19,166,331 ------------ ------------ Revolving credit 6,500,000 6,000,000 Long-term debt 14,529,889 16,030,953 Deferred income taxes 1,648,177 1,512,923 Shareholders' equity: Preferred stock, authorized 1,000,000 shares, none issued -- -- Common stock, no par value, authorized 10,000,000 shares, 7,633,859 and 7,630,685 shares outstanding as of September 27, 1997 and December 28, 1996, respectively 22,955,462 22,942,005 Retained earnings 17,074,369 14,312,025 ------------ ------------ Total shareholders' equity 40,029,831 37,254,030 ------------ ------------ Total liabilities and shareholders' equity $ 86,026,766 $ 79,964,237 ============ ============
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 For the nine months ended September 27, September 28, September 27, September 28, 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Net sales $ 56,461,962 $ 56,806,258 $ 162,971,238 $ 164,118,831 Cost of sales 41,373,105 41,902,330 118,837,657 121,563,227 ------------- ------------- ------------- ------------- Gross profit 15,088,857 14,903,928 44,133,581 42,555,604 Store operating, general and administrative expenses 12,437,544 12,406,072 37,269,744 35,599,517 Store development costs 706,671 -- 923,275 -- ------------- ------------- ------------- ------------- Total operating expenses 13,144,215 12,406,072 38,193,019 35,599,517 ------------- ------------- ------------- ------------- Operating income 1,944,642 2,497,856 5,940,562 6,956,087 Other expense, net (448,526) (518,589) (1,274,824) (1,718,170) ------------- ------------- ------------- ------------- Income before income taxes 1,496,116 1,979,267 4,665,738 5,237,917 Income taxes 613,408 791,706 1,903,394 2,129,564 ------------- ------------- ------------- ------------- Net income $ 882,708 $ 1,187,561 $ 2,762,344 $ 3,108,353 ============= ============= ============= ============= Earnings per share $ 0.12 $ 0.16 $ 0.36 $ 0.41 ============= ============= ============= ============= Weighted average common shares outstanding 7,633,859 7,626,125 7,633,812 7,625,375 ============= ============= ============= =============
See accompanying notes to condensed financial statements. 4 5 D.I.Y. HOME WAREHOUSE, INC. CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997 (Unaudited)
Total Retained Shareholders' Shares Amount Earnings Equity ----------- ----------- ----------- ------------ Balances at December 28, 1996 7,630,685 $22,942,005 $14,312,025 $37,254,030 Shares issued under the Retainer Stock Plan for Non-employee Directors 3,174 13,457 13,457 Net income 2,762,344 2,762,344 ----------- ----------- ----------- ----------- Balances, September 27, 1997 7,633,859 $22,955,462 $17,074,369 $40,029,831 =========== =========== =========== ===========
See accompanying notes to condensed financial statements. 5 6 D.I.Y. HOME WAREHOUSE, INC. CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
For the nine months ended September 27, 1997 September 28, 1996 ------------------ ------------------ Cash flows from operating activities: Net income $ 2,762,344 $ 3,108,353 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,508,142 2,445,041 Deferred income tax expense 275,940 Shares issued under Retainer Stock Plan 13,457 29,484 Gain on sale of property (262,668) Changes in operating assets and liabilities: Accounts receivable, trade (65,971) 69,115 Refundable federal income taxes 248,688 Merchandise inventories (7,606,483) (1,578,776) Prepaid expenses and other assets 276,390 (48,435) Accounts payable 4,044,746 1,962,299 Accrued expenses and other current liabilities 345,945 463,518 ----------- ----------- Net cash provided by operating activities 2,540,530 6,450,599 ----------- ----------- Cash flows from investing activities: Acquisition of property and equipment (1,560,320) (1,271,656) Proceeds from sale of property 850,911 ----------- ----------- Net cash (used in) investing activities (709,409) (1,271,656) ----------- ----------- Cash flows from financing activities: Principal payments under capital lease obligations (107,012) (77,069) Principal payments of note payable, affiliate (300,000) Proceeds from revolving credit 9,000,000 4,000,000 Principal payments of revolving credit (8,500,000) (8,800,000) Principal payments of long-term debt (1,355,515) (441,223) ----------- ----------- Net cash (used in) financing activities (1,262,527) (5,318,292) ----------- ----------- Net increase (decrease) in cash and cash 568,594 (139,349) equivalents Cash and cash equivalents, beginning of period 161,360 1,468,897 ----------- ----------- Cash and cash equivalents, end of period $ 729,954 $ 1,329,548 =========== ===========
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 27, 1997 and the results of operations and cash flows for the three and nine months ended September 27, 1997 and September 28, 1996. 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. 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. 3. Sale of Property: During the first half of fiscal 1997, the Company sold property, resulting in net proceeds of approximately $851,000 and net gains of $263,000. The net proceeds were used to reduce the principal outstanding on the mortgage loans. 4. Note Payable, Affiliate: In April 1997, the Company made a principal payment of $300,000 on the Note payable, affiliate to Edgemere Enterprise, Inc., an entity owned by the Company's majority shareholder, in accordance with the terms of the subordination agreement with the Company's banks. 5. Stock Options The Company has a Long Term Incentive Plan (the "Plan") which reserves 1,350,000 shares of the Company's authorized common stock for issuance. The Plan provides for the granting of incentive stock options to purchase shares of common stock at a price not less than 100% of the fair market value of the stock on the dates options are granted. 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. On May 21, 1997, the Company's Board of Directors authorized an amendment to outstanding stock option awards to reprice such stock options at an exercise price equal to the fair market value of the stock as of that date. As a result, 796,000 options with a weighted-average exercise price per share of $8.92 were repriced at the fair market value on May 21, 1997 of $3.56. The vesting period of such options was re-established to vest over 3 years at a rate of one-third per year. 7 8 5. Stock Options (Continued) A summary of stock options is as follows:
PERIOD ENDED ------------------------------------------------------------------------ SEPTEMBER 27, 1997 DECEMBER 28, 1996 DECEMBER 30, 1995 ------------------ ----------------- ----------------- Options outstanding, beginning of period 801,000 673,000 503,000 Granted 237,500 159,000 205,000 Cancelled (36,500) (31,000) (35,000) Cancelled in connection with stock option repricing (796,000) Granted in connection with stock option repricing 796,000 - - --------- ------- ------- Options outstanding, end of period 1,002,000 801,000 673,000 ========= ======= ======= Options exercisable, September 27, 1997 10,800 286,300 163,500 --------- ------- -------
All options issued were granted at 100 percent of the fair market value of the Company's common stock on the date of grant. Options outstanding as of September 27, 1997 had a weighted-average exercise price of $3.68 and will expire at various dates between January 1, 1999 and February 21, 2002. At September 27, 1997, there were 348,000 shares of common stock reserved for future grant. 6. Store Development Costs The Company incurred $707,000 and $923,000 related to store development costs for the three and nine months ended September 27, 1997, respectively. During 1997, management assessed the business strategies and opportunities of the Company to differentiate itself in the warehouse-format home improvement retail market. This comprehensive process resulted in the development of new merchandising, marketing and other strategic initiatives to strengthen the Company's market position. Select marketing and merchandising programs were implemented on a Company-wide basis during the second and third quarters of 1997. In addition, a comprehensive renovation of one store location was completed in the third quarter. Certain of the costs incurred to date relate to the development and creative design of these strategic concepts while other costs pertain to implementation including marketing, advertising, promotions and payroll costs. The Company will incur additional costs in the fourth quarter of 1997 and into 1998 to implement various of these concepts in selected store locations. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS - Three Months Ended September 27, 1997 Compared to Three Months Ended September 28, 1996 Net sales for the quarter ended September 27, 1997 were $56,462,000 compared to $56,806,000 for the comparable quarter of fiscal 1996. Comparable sales decreased 1.0% for the third quarter of fiscal 1997. Comparable store sales were below expectations due to conservative consumer spending patterns. Gross profit increased by $185,000, or 1.2%, to $15,089,000 in the third quarter of fiscal 1997 from $14,904,000 in the third quarter of fiscal 1996. As a percentage of net sales, gross profit increased to 26.7% in the quarter ended September 27, 1997 compared to 26.2% in the comparable quarter of fiscal 1996. This increase is due primarily to comprehensive programs and initiatives underway aimed at improving margins, such as freight and logistics programs and enhanced information systems which provide tools to better manage this aspect of the business. Store operating, general and administrative expenses were $12,437,000 for the quarter ended September 27, 1997 compared to $12,406,000 for the quarter ended September 28, 1996. As a percentage of net sales, operating expenses were 22.0% in the third quarter of fiscal 1997 compared to 21.8% in the comparable quarter of fiscal 1996. The Company incurred $707,000 related to store development programs for the quarter ended September 27, 1997. During 1997, management assessed the business strategies and opportunities of the Company to differentiate itself in the warehouse-format home improvement retail market. This comprehensive process resulted in the development of new merchandising, marketing and other strategic initiatives to strengthen the Company's market position. Select marketing and merchandising programs were implemented on a Company-wide basis during the second and third quarters of 1997. In addition, a comprehensive renovation of one store location was completed in the third quarter. Certain of the costs incurred to date relate to the development and creative design of these strategic concepts while other costs pertain to implementation including marketing, advertising, promotions and payroll costs. The Company will incur additional costs in the fourth quarter of 1997 and into 1998 to implement various of these concepts in selected store locations. Other expense, net, decreased from $519,000 in the quarter ended September 28, 1996 to $449,000 in the quarter ended September 27, 1997 due primarily to a decrease in interest expense of $85,000 associated with the benefits of reduced debt levels as average amounts outstanding under the revolving credit facility were approximately $4,832,000 and $9,462,000 in the third quarters of fiscal 1997 and 1996, respectively. 9 10 OPERATIONS - Nine Months Ended September 27, 1997 Compared to Nine Months Ended September 28, 1996 Net sales for the nine months ended September 27, 1997 were $162,971,000 compared to $164,119,000 for the nine months ended September 28, 1996. Comparable store sales for the nine months ended September 27, 1997 decreased by less than 1.0% reflecting reduced sales due to conservative consumer spending patterns. Gross profit increased by $1,578,000, or 3.7%, to $44,134,000 for the nine months ended September 27, 1997 from $42,556,000 for the nine months ended September 28, 1996. As a percentage of net sales, gross profit increased to 27.1% in the first nine months of fiscal 1997 compared to 25.9% in the first nine months of fiscal 1996. The increase in gross margin percentage of 1.2% is a result of the Company's continued emphasis on implementing programs to improve margins, such as freight and logistics programs and enhanced information systems which provide tools to better manage this aspect of the business. Store operating, general and administrative expenses were $37,270,000 for the first nine months of fiscal 1997 compared to $35,600,000 for the first nine months of fiscal 1996. As a percentage of sales, operating expenses increased to 22.9% in the first nine months of fiscal 1997 compared to 21.7% in the first nine months of fiscal 1996. Operating expenses for the nine months ended September 28, 1996 were favorably impacted by the reversal of bonus provisions as a result of a decision in the first quarter of fiscal 1996 to eliminate the discretionary store and management bonus provision which had been expensed in prior periods. Further, operating expenses in the nine months of fiscal 1997 increased over the same period in fiscal 1996 as a result of general increases in certain expenses including rent, real estate tax and personal property tax assessments and insurance, among others. Lastly, operating expenses in the first nine months of 1997 include expenses of new information systems implemented in the second half of 1996 which will provide long-term benefits to the Company. These expenses commenced in the third quarter of 1996. The Company incurred store development costs of $923,000 for the first nine months of fiscal 1997. During 1997, management assessed the business strategies and opportunities of the Company to differentiate itself in the warehouse-format home improvement retail market. This comprehensive process resulted in the development of new merchandising, marketing and other strategic initiatives to strengthen the Company's market position. Select marketing and merchandising programs were implemented on a Company-wide basis during the second and third quarters of 1997. In addition, a comprehensive renovation of one store location was completed in the third quarter. Certain of the costs incurred to date relate to the development and creative design of these strategic concepts while other costs pertain to implementation including marketing, advertising, promotions and payroll costs. The Company will incur additional costs in the fourth quarter of 1997 and into 1998 to implement various of these concepts in selected store locations. 10 11 Other expenses, net, decreased by $443,000, from $1,718,000 for the nine months ended September 28, 1996 to $1,275,000 for the nine months ended September 27, 1997. The decrease is due primarily to gains of $263,000 from the sale of property in the first half of fiscal 1997 and a decrease in interest expense of $275,000 due to the benefits of reduced debt levels as average amounts outstanding under the Revolving Credit Agreement were approximately $7,748,000 and $13,110,000 in the first nine months of fiscal 1997 and 1996, respectively. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 27, 1997, operating activities provided net cash of $2,541,000. The primary source of cash from operations was $5,271,000 from net income plus depreciation and amortization. The primary use of cash for the nine months ended September 27, 1997 was $7,607,000 to fund increased merchandise inventory levels at existing stores offset by an increase of $4,045,000 in accounts payable. During the nine months ended September 28, 1996, operating activities provided net cash of $6,450,000. The primary source of cash from operations was $5,553,000 from net income plus depreciation and amortization. The primary use of cash for the nine months ended September 28, 1996 was $1,579,000 to fund increased merchandise inventory levels at existing stores offset by an increase of $1,962,000 in accounts payable. The increase in merchandise inventory levels for the nine months ended September 27, 1997 compared to the nine months ended September 28, 1996 is primarily due to a greater emphasis by management to maintain higher in-stock inventory levels to provide better customer service and inventory increases for certain new or expanded merchandising categories associated with the Company's strategic initiatives. Net cash used in investing activities was $709,000 for the nine months ended September 27, 1997, due primarily from the net proceeds of $851,000 from the sales of several parcels of property offset by cash used of $1,560,000 for remodeling initiatives and the acquisition of property and equipment. Net cash used in investing activities for the nine months ended September 28, 1996 was $1,272,000 due to remodeling initiatives in the Company's older stores. Net cash used in financing activities for the nine months ended September 27, 1997 was $1,263,000 as a result of principal payments on the mortgage notes, capital lease obligations and note payable, affiliate of $1,763,000 offset by an increase in the Company's revolving credit facility of $500,000. The Company used the net proceeds of approximately $863,000 from the sale of property in fiscal 1997 to reduce the outstanding principal on the variable mortgage loan. Net cash used in financing activities for the nine months ended September 28, 1996 totaled $5,318,000, as a result of net repayments to the Company's revolving credit facility of $4,800,000 and principal payments of debt and capital lease obligations of approximately $518,000. 11 12 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. The Company has an agreement with two banks which provide for borrowings under a revolving credit facility of up to $23,000,000 of which $6,500,000 was outstanding as of September 27, 1997. OTHER This Quarterly Report on Form 10-Q may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors. Accordingly, actual results may differ materially from those expressed in the forward-looking statements and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. Important risk factors include, but are not limited to, the following: general economic conditions; consumer spending and debt levels; housing turnover; weather; impact on sales and margins from both existing and new competition; changes in operating expenses; changes in product mix; interest rates; changes in and the application of accounting policies and practices; adverse results in significant litigation matters; adverse state and federal regulations and legislation; the occurrence of extraordinary events including events and acts of nature or accidents; and the risks described from time to time in the Company's Securities and Exchange Commission filings. 12 13 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 11, 1997 By: Marilyn A. Eisele -------------------------------------- Vice President - Administration and Finance, Chief Financial Officer 13 14 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------ ---------------------- 10 Material Contracts ------------------ 10.1 Third Amendment to Revolving Credit Agreement dated October 24, 1997 between D.I.Y. Home Warehouse, Inc., National City Bank of Columbus and Old Kent Bank 10.2 Third Amendment to Loan and Co-Lender Agreement dated October 24, 1997 between D.I.Y. Home Warehouse, Inc., National City Bank of Columbus and Old Kent Bank 10.3 Fourth Amendment to Line of Credit Agreement dated October 24, 1997 between D.I.Y. Home Warehouse, Inc., National City Bank of Columbus and Old Kent Bank 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 27, 1997 14 EX-10.1 2 EXHIBIT 10.1 1 EXHIBIT 10.1 THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT 2 THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT -------------------------- THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT ("Amendment") is made as of the 24th day of October, 1997, among D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation, with its principal place of business located at 5811 Canal Road, Suite 180, Valley View, Ohio 44125 (the "Borrower"), as borrower, NATIONAL CITY BANK OF COLUMBUS, formerly known as National City Bank, Columbus, a national banking association, with its principal office located at 155 East Broad Street, Columbus, Ohio 43251 ("NCBC"), and OLD KENT BANK, f/k/a Old Kent Bank and Trust Company, a Michigan banking corporation, with its principal office located at One Vandenberg Center, Grand Rapids, Michigan 49503 ("Old Kent"), as lenders, (NCBC and Old Kent each herein, separately, called a "Bank" and, collectively, called the "Banks"), and NCBC, as agent for itself and Old Kent (the "Agent"). RECITALS A. The Banks and the Borrower have entered into a certain Revolving Credit Agreement dated December 7, 1994, as amended by the First Amendment to Revolving Credit Agreement dated as of December 22, 1995, and as further amended by the Second Amendment to Revolving Credit Agreement dated as of December 23, 1996 (collectively, the "Loan Agreement"), pursuant to which the Banks have agreed to loan to the Borrower on a revolving credit basis ("Loan") an aggregate amount not to exceed Twenty-Three Million Dollars ($23,000,000.00). B. The Loan is evidenced by two (2) Amended and Restated Revolving Notes dated December 22, 1995, by the Borrower to each of NCBC and Old Kent, each in the principal amount of Ten Million Dollars ($10,000,000.00) and two (2) Amended and Restated Revolving Notes dated December 22, 1995, by the Borrower to each of NCBC and Old Kent, each in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) (collectively, the "Revolving Credit Notes"). C. The Banks and the Borrower have agreed to certain amendments with respect to the Loan. NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Banks agree as follows: 1. Acknowledgment of Extension of Maturity. The Borrower and the Banks hereby acknowledge that, pursuant to the terms of the Loan Agreement, the Original Commitment Maturity Date is extended to January 1, 2001, and the Supplemental Commitment Maturity Date is extended to December 1, 1998. The Original Commitment Maturity Date and the Supplemental Commitment Maturity Date may be further extended pursuant to the terms of the Loan Agreement as provided for therein. 3 2. MINIMUM TANGIBLE NET WORTH. Section 7.3 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.3 MINIMUM TANGIBLE NET WORTH. Permit its tangible net worth to be less than $33,500,000.00 plus the sum of all Net Income Adjustments as calculated quarterly commencing with the third quarter of fiscal year 1997. As used herein, "Net Income Adjustment" shall mean an amount equal to fifty percent (50%) of the Borrower's net income as measured at the end of each fiscal quarter commencing with the third quarter of fiscal year 1997. For purposes of this Agreement, losses shall be considered zero (0) net income for the determination of a change in the required minimum tangible net worth and tangible net worth shall be defined as shareholders' equity minus intangible assets such as goodwill, Restricted Investments, capitalized loan fees, underwriters' discounts, non-compete agreements and deferred costs. 3. CAPITAL EXPENDITURES. Section 7.4 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.4 CAPITAL EXPENDITURES. Make capital expenditures for real estate, machinery, equipment, vehicles, furniture, fixtures, leasehold improvements or any other fixed assets in an aggregate amount greater than Eleven Million Dollars ($11,000,000.00) during any one (1) fiscal year commencing with fiscal year 1997. No unused portion of any capital expenditure allowance provided for in this Section 7.4 for any fiscal year shall be available to the Borrower for use in any subsequent fiscal year. 4. RATIFICATION AND CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The Loan Agreement is in all respects ratified and confirmed by the parties hereto, and the Loan Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Except as modified herein, the Loan Agreement remains unchanged and in full force and effect. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Loan Agreement. The Borrower hereby acknowledges and certifies that all other representations and warranties made in the Loan Agreement continue to be true and correct as of the date hereof and that there are no defaults existing under the covenants or other terms of the Loan Agreement. The Borrower hereby ratifies and confirms the Borrower's obligations and all liability to the Banks under the terms and conditions of the Loan Agreement and the Revolving Credit Notes, and acknowledges that the Borrower has no defenses to or rights of setoff against the Borrower's obligations and all liability to the Banks thereunder. The Borrower hereby further acknowledges that the Banks have performed all of the Banks' obligations to date under the Loan Agreement. 5. REFERENCES TO CREDIT AGREEMENT. All references in each of the Revolving Credit Notes to the Credit Agreement shall mean and refer to the Loan Agreement, as amended by this Amendment. 2 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by each in manner and form sufficient to bind them and duly authorized in the premises as of the day and year first above written. NATIONAL CITY BANK OF COLUMBUS, D.I.Y. HOME WAREHOUSE, INC. formerly known as National City Bank, Columbus By: /s/ Joseph L. Kwasny, Jr. By: /s/ Marilyn A. Eisele ------------------------------- ----------------------------- Its: Assistant Vice President Its: Vice President ------------------------------- ----------------------------- OLD KENT BANK NATIONAL CITY BANK OF COLUMBUS, formerly known as National City Bank, Columbus, as Agent By: /s/ Timothy O'Rouke By: /s/ Joseph L. Kwasny, Jr. ------------------------------- ----------------------------- Its: Vice President Its: Assistant Vice President ------------------------------- ----------------------------- 3 EX-10.2 3 EXHIBIT 10.2 1 EXHIBIT 10.2 THIRD AMENDMENT TO LOAN AND CO-LENDER AGREEMENT 2 THIRD AMENDMENT TO LOAN AND CO-LENDER CREDIT AGREEMENT ----------------------------------- THIS THIRD AMENDMENT TO LOAN AND CO-LENDER CREDIT AGREEMENT ("Amendment") is made as of the 24th day of October, 1997, among D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation, with its principal place of business located at 5811 Canal Road, Suite 180, Valley View, Ohio 44125 (the "Borrower"), as borrower, NATIONAL CITY BANK OF COLUMBUS, formerly known as National City Bank, Columbus, a national banking association, with its principal office located at 155 East Broad Street, Columbus, Ohio 43251 ("NCBC"), and OLD KENT BANK, f/k/a Old Kent Bank and Trust Company, a Michigan banking corporation, with its principal office located at One Vandenberg Center, Grand Rapids, Michigan 49503 ("Old Kent"), as lenders, (NCBC and Old Kent each herein, separately, called a "Bank" and, collectively, called the "Banks"), and NCBC, as agent for itself and Old Kent (the "Agent"). RECITALS A. The Banks and the Borrower have entered into a certain Loan and Co-Lender Credit Agreement dated as of December 23, 1994, as amended by the First Amendment to Loan and Co-Lender Credit Agreement dated as of December 22, 1995, and as amended by the Second Amendment to Loan and Co-Lender Credit Agreement dated as of December 23, 1996 (collectively, the "Loan Agreement"), pursuant to which the Banks have loaned to the Borrower an aggregate amount not to exceed Nine Million Dollars ($9,000,000.00) ("Loan"). B. The Loan is evidenced by two (2) Mortgage Notes dated December 23, 1994, by the Borrower to each of NCBC and Old Kent, each in the original principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00) (collectively, the "Mortgage Notes"). C. The Banks and the Borrower have agreed to certain amendments with respect to the Loan. NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Banks agree as follows: 1. MINIMUM TANGIBLE NET WORTH. Section 7.3 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.3 MINIMUM TANGIBLE NET WORTH. Permit its tangible net worth to be less than $33,500,000.00 plus the sum of all Net Income Adjustments as calculated quarterly commencing with the third quarter of fiscal year 1997. As used herein, "Net Income Adjustment" shall mean an amount equal to fifty percent (50%) of the Borrower's net income as measured at the end of each fiscal quarter commencing with the third quarter of fiscal year 1997. For purposes of this Agreement, losses shall be 3 considered zero (0) net income for the determination of a change in the required minimum tangible net worth and tangible net worth shall be defined as shareholders' equity minus intangible assets such as goodwill, Restricted Investments, capitalized loan fees, underwriters' discounts, non-compete agreements and deferred costs. 2. CAPITAL EXPENDITURES. Section 7.4 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.4 CAPITAL EXPENDITURES. Make capital expenditures for real estate, machinery, equipment, vehicles, furniture, fixtures, leasehold improvements or any other fixed assets in an aggregate amount greater than Eleven Million Dollars ($11,000,000.00) during any one (1) fiscal year commencing with fiscal year 1997. No unused portion of any capital expenditure allowance provided for in this Section 7.4 for any fiscal year shall be available to the Borrower for use in any subsequent fiscal year. 3. RATIFICATION AND CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The Loan Agreement is in all respects ratified and confirmed by the parties hereto, and the Loan Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Except as modified herein, the Loan Agreement remains unchanged and in full force and effect. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Loan Agreement. The Borrower hereby acknowledges and certifies that all other representations and warranties made in the Loan Agreement continue to be true and correct as of the date hereof and that there are no defaults existing under the covenants or other terms of the Loan Agreement. The Borrower hereby ratifies and confirms the Borrower's obligations and all liability to the Banks under the terms and conditions of the Loan Agreement and the Mortgage Notes, and acknowledges that the Borrower has no defenses to or rights of setoff against the Borrower's obligations and all liability to the Banks thereunder. The Borrower hereby further acknowledges that the Banks have performed all of the Banks' obligations to date under the Loan Agreement. 4. REFERENCES TO LOAN AGREEMENT. All references in each of the Mortgage Notes to the Loan Agreement shall mean and refer to the Loan Agreement, as amended by this Amendment. 2 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by each in manner and form sufficient to bind them and duly authorized in the premises as of the day and year first above written. NATIONAL CITY BANK OF COLUMBUS, D.I.Y. HOME WAREHOUSE, INC. formerly known as National City Bank, Columbus By: /s/ Joseph L. Kwasny, Jr. By: /s/ Marilyn A. Eisele ------------------------------- ------------------------------- Its: Assistant Vice President Its: Vice President ------------------------------- ------------------------------- OLD KENT BANK NATIONAL CITY BANK OF COLUMBUS, formerly known as National City Bank, Columbus, as Agent By: /s/ Timothy O'Rouke By: /s/ Joseph L. Kwasny, Jr. ------------------------------- ------------------------------- Its: Vice President Its: Assistant Vice President ------------------------------- ------------------------------- 3 EX-10.3 4 EXHIBIT 10.3 1 EXHIBIT 10.3 FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT 2 FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT ------------------------ THIS FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT ("Amendment") is made as of the 24th day of October, 1997, among D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation, with its principal place of business located at 5811 Canal Road, Suite 180, Valley View, Ohio 44125 (the "Borrower"), as borrower, NATIONAL CITY BANK OF COLUMBUS, formerly known as National City Bank, Columbus, a national banking association, with its principal office located at 155 East Broad Street, Columbus, Ohio 43251 ("NCBC"), and OLD KENT BANK, f/k/a Old Kent Bank and Trust Company, a Michigan banking corporation, with its principal office located at One Vandenberg Center, Grand Rapids, Michigan 49503 ("Old Kent"), as lenders, (NCBC and Old Kent each herein, separately, called a "Bank" and, collectively, called the "Banks"), and NCBC, as agent for itself and Old Kent (the "Agent"). RECITALS A. The Banks and the Borrower have entered into a certain Line of Credit Agreement for Real Estate Loans dated as of April 28, 1995, as amended by the First Amendment to Line of Credit Agreement dated as of September 15, 1995, as further amended by the Second Amendment to Line of Credit Agreement dated as of December 22, 1995, and as further amended by the Third Amendment to Line of Credit Agreement dated as of December 23, 1996 (collectively, the "Loan Agreement"), pursuant to which the Banks have loaned to the Borrower an aggregate principal amount of Seven Million Nine Hundred Seventy-Five Thousand Dollars ($7,975,000.00) ("Loan"). B. The Loan is evidenced by two (2) Mortgage Notes dated April 28, 1995, by the Borrower to each of NCBC and Old Kent, each in the original principal amount of One Million Six Hundred Eighty-Seven Thousand Five Hundred Dollars ($1,687,500.00) and two (2) Mortgages Notes dated September 15, 1995, by the Borrower to each of NCBC and Old Kent, each in the original principal amount of Two Million Three Hundred Thousand Dollars ($2,300,000.00) (collectively, the "Notes"). C. The Banks and the Borrower have agreed to certain amendments with respect to the Loan. NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Banks agree as follows: 1. MINIMUM TANGIBLE NET WORTH. Section 7.3 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.3 MINIMUM TANGIBLE NET WORTH. Permit its tangible net worth to be less than $33,500,000.00 plus the sum of all Net Income Adjustments as calculated quarterly commencing with the third quarter of fiscal year 1997. As used herein, "Net Income Adjustment" shall mean an amount equal to fifty percent (50%) of the 3 Borrower's net income as measured at the end of each fiscal quarter commencing with the third quarter of fiscal year 1997. For purposes of this Agreement, losses shall be considered zero (0) net income for the determination of a change in the required minimum tangible net worth and tangible net worth shall be defined as shareholders' equity minus intangible assets such as goodwill, Restricted Investments, capitalized loan fees, underwriters' discounts, non-compete agreements and deferred costs. 2. CAPITAL EXPENDITURES. Section 7.4 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.4 CAPITAL EXPENDITURES. Make capital expenditures for real estate, machinery, equipment, vehicles, furniture, fixtures, leasehold improvements or any other fixed assets in an aggregate amount greater than Eleven Million Dollars ($11,000,000.00) during any one (1) fiscal year commencing with fiscal year 1997. No unused portion of any capital expenditure allowance provided for in this Section 7.4 for any fiscal year shall be available to the Borrower for use in any subsequent fiscal year. 3. RATIFICATION AND CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The Loan Agreement is in all respects ratified and confirmed by the parties hereto, and the Loan Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Except as modified herein, the Loan Agreement remains unchanged and in full force and effect. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Loan Agreement. The Borrower hereby acknowledges and certifies that all other representations and warranties made in the Loan Agreement continue to be true and correct as of the date hereof and that there are no defaults existing under the covenants or other terms of the Loan Agreement. The Borrower hereby ratifies and confirms the Borrower's obligations and all liability to the Banks under the terms and conditions of the Loan Agreement and the Notes, and acknowledges that the Borrower has no defenses to or rights of setoff against the Borrower's obligations and all liability to the Banks thereunder. The Borrower hereby further acknowledges that the Banks have performed all of the Banks' obligations to date under the Loan Agreement. 4. REFERENCES TO LOAN AGREEMENT. All references in each of the Notes to the Loan Agreement shall mean and refer to the Loan Agreement, as amended by this Amendment. 2 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by each in manner and form sufficient to bind them and duly authorized in the premises as of the day and year first above written. NATIONAL CITY BANK OF COLUMBUS, D.I.Y. HOME WAREHOUSE, INC. formerly known as National City Bank, Columbus By: /s/ Joseph L. Kwasny, Jr. By: /s/ Marilyn A. Eisele ------------------------------- -------------------------------- Its: Assistant Vice President Its: Vice President ------------------------------- -------------------------------- OLD KENT BANK NATIONAL CITY BANK OF COLUMBUS, formerly known as National City Bank, Columbus, as Agent By: /s/ Timothy O'Rouke By: /s/ Joseph L. Kwasny, Jr. ------------------------------- -------------------------------- Its: Vice President Its: Assistant Vice President ------------------------------- -------------------------------- 3 EX-11 5 EXHIBIT 11 1 EXHIBIT 11.1 EARNINGS PER SHARE 2 D.I.Y. HOME WAREHOUSE, INC. FORM 10-Q COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- September 27, September 28, September 27, September 28, 1997 1996 1997 1996 ---- ---- ---- ---- Net income applicable to common shares $ 882,708 $1,187,561 $2,762,344 $3,108,353 ========== ========== ========== ========== Weighted average common shares outstanding for the period 7,633,859 7,625,125 7,633,812 7,625,375 Dilutive effect of exercise of stock options -- -- -- -- ---------- ---------- ---------- ---------- Weighted average common shares, assuming issuance of the above securities 7,633,859 7,625,125 7,633,812 7,625,375 ========== ========== ========== ========== Earnings per common share: Primary $0.12 $0.16 $0.36 $0.41 Fully diluted $0.12 $0.16 $0.36 $0.41
EX-27 6 EXHIBIT 27
5 1,000 9-MOS JAN-03-1998 DEC-29-1996 SEP-27-1997 730 0 118 0 46,069 47,710 50,470 12,651 86,027 23,319 21,030 0 0 22,955 17,074 86,027 162,971 162,971 118,838 38,193 (361) 0 1,636 4,665 1,903 2,762 0 0 0 2,762 .36 .36
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