-----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, GTBhcJwyRTbzK8SzQa1GlOPizyKitd56BvccGJyYMMdA+wrho66YS5s19gHTfs6m atGrN+YeJ3jJpA8Pgc8NkQ== 0000002024-98-000020.txt : 19980518 0000002024-98-000020.hdr.sgml : 19980518 ACCESSION NUMBER: 0000002024-98-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACE HARDWARE CORP CENTRAL INDEX KEY: 0000002024 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-HARDWARE & PLUMBING & HEATING EQUIPMENT & SUPPLIES [5070] IRS NUMBER: 360700810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-55860 FILM NUMBER: 98624621 BUSINESS ADDRESS: STREET 1: 2200 KENSINGTON COURT CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7089906600 MAIL ADDRESS: STREET 1: 1300 KENSINGTON RD CITY: OAKBROOK STATE: IL ZIP: 60521 10-Q 1 FORM 10-Q, 1ST QUARTER 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Period ended April 4, 1998 Commission File Number 2-63880 ACE HARDWARE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 36-0700810 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2200 Kensington Court, Oak Brook, IL 60523 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (630) 990-6600 2200 Kensington Court, Oak Brook, IL 60521, January 1, 1997-December31, 1997 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 XX NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding at April 4, 1998 Class A Voting Stock - $1,000 par value 3,850 shares Class B Stock - $1,000 par value 2,670 shares Class C Stock - $ 100 par value 2,107,880 shares ACE HARDWARE CORPORATION INDEX Part I. - Financial Information: Page No. Consolidated Balance Sheets - April 4, 1998 and December 31, 1997 1 Consolidated Statements of Earnings - Thirteen Weeks Ended April 4, 1998 and Three Months Ended March 31, 1997 2 Consolidated Statements of Cash Flows - Thirteen Weeks Ended April 4, 1998 and Three Months Ended March 31, 1997 3 Notes to Consolidated Financial Statements 4 & 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Part II. - Other Information 7 PART I. FINANCIAL INFORMATION ACE HARDWARE CORPORATION CONSOLIDATED BALANCE SHEETS April 4, December 31, 1998 1997 (000's omitted) ASSETS Current Assets: Cash $ 22,715 $ 14,171 Accounts Receivable, Net 407,229 363,634 Merchandise Inventory 349,190 338,509 Prepaid Expenses and Other Current Assets 14,578 12,873 -------------- -------------- Total Current Assets 793,712 729,187 Property and Equipment, Net 242,427 242,979 Other Assets 6,832 4,405 -------------- -------------- Total Assets $ 1,042,971 $ 976,571 ============== ============== LIABILITIES AND MEMBER DEALERS' EQUITY Current Liabilities: Current Installment of Long-Term Debt $ 7,496 $ 7,515 Short-Term Borrowings 64,904 42,000 Accounts Payable 451,615 423,499 Patronage Dividends Payable in Cash 34,452 29,943 Patronage Refund Certificates Payable 11,552 13,636 Accrued Expenses 52,568 53,583 -------------- -------------- Total Current Liabilities 622,587 570,176 Notes Payable 118,924 96,815 Patronage Refund Certificates Payable 39,565 49,044 Other Long-Term Liabilities 15,688 14,722 -------------- -------------- Total Liabilities 796,764 730,757 Member Dealers' Equity: Class A Stock of $1,000 Par Value 3,932 3,874 Class B Stock of $1,000 Par Value 6,499 6,499 Class C Stock of $100 Par Value 214,557 213,609 Class C Stock of $100 Par Value, Issuable 25,773 22,366 Additional Stock Subscribed, Net of Unpaid Portion 246 383 Retained Earnings and Contributed Capital 6,439 6,649 -------------- -------------- Total Member Dealers' Equity 257,446 253,380 Less: Treasury Stock, at Cost 11,239 7,566 -------------- -------------- Total Member Dealers' Equity 246,207 245,814 -------------- -------------- Total Liabilities and Member Dealers Equity $ 1,042,971 $ 976,571 ============== ============== See accompanying notes to consolidated financial statements. ACE HARDWARE CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS Thirteen Weeks Ended Three Months Ended April 4, March 31, 1998 1997 (000's omitted) Net Sales $ 721,403 $ 642,137 Cost of Sales 668,897 595,858 -------------- ------------- Gross Profit 52,506 46,279 Operating Expenses: Warehouse and Distribution 11,101 11,468 Selling, General and Administration 19,302 17,850 Retail Success and Development 6,810 5,946 -------------- -------------- Total Operating Expenses 37,213 35,264 Operating Income 15,293 11,015 Interest Expense (3,855) (3,607) Other Income, Net 1,623 1,204 Income Taxes (683) (310) -------------- -------------- Net Earnings $ 12,378 $ 8,302 ============== ============== Distribution of Net Earnings: Patronage Dividend $ 12,588 $ 8,221 Retained Earnings (210) 81 -------------- -------------- Net Earnings $ 12,378 $ 8,302 ============== ============== See accompanying notes to consolidated financial statements. ACE HARDWARE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Thirteen Weeks Ended Three Month Ended April 4, March 31, 1998 1997 (000's omitted) Operating Activities: Net Earnings $ 12,378 $ 8,302 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 5,260 4,620 Loss on sale of property and equipment - 113 Increase in accounts receivable, net (43,595) (19,384) (Increase) Decrease in merchandise inventory (10,681) 9,820 Increase in prepaid expenses and other (1,705) (370) Increase (Decrease) in accounts payable and accrued expenses 27,101 (19,688) Increase in other long-term liabilities 966 1,122 ----------- ---------- Net Cash Used In Operating Activities (10,276) (15,465) Investing Activities: Purchases of property and equipment (4,708) (12,239) Proceeds from sale of property and equipment - 135 Increase in other assets (2,427) (2,413) ----------- ---------- Net Cash Used In Investing Activities (7,135) (14,517) Financing Activities: Proceeds from short-term borrowings 22,904 15,968 Proceeds from notes payable 25,481 30,000 Principal payments on long-term debt (3,391) (1,055) Payments on refund certificates and patronage financing programs (16,235) (16,605) Proceeds from sale of common stock 869 474 Repurchase of common stock (3,673) (2,586) ----------- ----------- Net Cash Provided By Financing Activities 25,955 26,196 Increase (Decrease) in Cash and Cash Equivalents 8,544 (3,786) Cash and Cash Equivalents at Beginning of Period 14,171 12,657 ----------- ----------- Cash and Cash Equivalents at End of Period $ 22,715 $ 8,871 =========== =========== See accompanying notes to consolidated financial statements. ACE HARDWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) General The accompanying consolidated financial statements have not been examined by independent public accountants except for the December 31, 1997 balance sheet but in the opinion of the Company reflect all adjustments necessary to present fairly the financial position as of April 4, 1998 and March 31, 1997 and the results of operations and cash flows for the thirteen weeks then ended. These interim figures are not necessarily indicative of the results to be expected for the full year. 2) Patronage Dividends The Company operates as a cooperative organization and will pay patronage dividends to consenting member dealers based on the earnings derived from business done with such dealers. It has been the practice of the Company to distribute substantially all patronage sourced earnings in the form of patronage dividends. Net earnings and patronage dividends will normally be similar since patronage sourced net earnings is paid to consenting member dealers. International dealers signed under a Retail Merchant Agreement are not eligible for patronage dividends and related earnings or loss are not included in patronage sourced earnings. 3) Reclassifications Certain financial statement reclassifications have been made to prior year and prior quarter amounts to conform to comparable classifications followed in 1998. 4) Notes Payable In March 1998, the Company entered into a $25,000,000 loan agreement due February 9, 2010. The note bears interest at 6.61% per annum, payable annually. Annual principle payments commence on February 9, 2006 and continue through 2010. 5) Fiscal Year Effective January 1, 1998, the Board of Directors approved a change to the Company's fiscal year from December 31st to the Saturday nearest December 31st. Accordingly, the first quarter of 1998 consists of thirteen weeks ending April 4, 1998. 6) Year 2000 A detailed plan has been established to identify and track progress on the identification of systems, changing of non-compliant systems and testing of those systems for Year 2000 compliance. Project completion is planned for the middle of 1999. In addition, a plan is being developed for all devices (time clocks, power systems, etc.) within the Company. The Company expects its Year 2000 date conversion project to be completed on a timely basis. The Company expects to incur internal staff costs as well as incremental consulting and other expenses related to infrastructure and facilities enhancements necessary to prepare the systems for the Year 2000. A significant portion of these costs will represent the re-deployment of existing information technology resources. Based upon an initial investigation, the Company estimates that such costs could range between $3,000,000 and $5,000,000. To date, correspondence has been received from the Company's primary vendors that plans are being developed to address processing of transactions in the Year 2000. However, there can be no assurance that the systems of other companies on which the Company's system rely will be converted timely or that any such failure to convert by another company would not have an adverse effect on the Company's systems. ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Thirteen Weeks Ended April 4, 1998 compared to Three Months Ended March 31, 1997. Results of Operations Net sales increased 12.3% in 1998 primarily due to increased existing dealer volume, targeted efforts on new store development and conversions to the Ace program. Additionally, four additional workdays are included in the 1998 results. Gross profit increased 13.5% vs. 1997, and increased as a percent of sales due to increased cash and vendor discounts, gross profit from the Company's retail operations, and reduced warehouse costs absorbed into inventory. Warehouse and distribution expenses decreased 3.2% or $367,000 vs. 1997 due to increased traffic and freight consolidations income, partially offset by increased distribution center costs to support increased warehouse sales. Selling, general and administrative expenses increased $1.5 million or 8.1%, however, decreased as a percent of sales due primarily to increased data processing expenses. Retail success and development expenses increased $864,000 or 14.5%, and increased slightly as a percent of sales. The increased expenses were due to additional store development costs partially offset by increased advertising income. Interest expense increased $248,000 vs. 1997 due to increased inventory levels, additional dealer dating programs and long-term debt issued during 1998 to fund long-term capital investments. Other income increased $419,000 vs. 1997 due to increased retailer financing interest income. Liquidity and Capital Resources The company expects that internally generated funds, along with new and established lines of credit and long-term financing, will be the primary financing sources for capital expenditures in the future. PART II. OTHER INFORMATION ACE HARDWARE CORPORATION Item 5. Other Information Effective January 1st, 1998, the Board of Directors approved a change to the Company's fiscal year from December 31st to the Saturday nearest to December 31st. Accordingly, the first quarter of 1998 consists of thirteen weeks ending April 4th, 1998. Item 6. Exhibits and Reports on Form 8-K. (b) There were no reports on Form 8-K filed for the thirteen weeks ended April 4th, 1998. 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. ACE HARDWARE CORPORATION LORI L. BOSSMANN DATE: 05/15/98 Lori L. Bossmann Vice President, Controller (Principal Accounting Officer, and duly authorized Officer of the registrant) EX-27 2 ART.5 FDS FOR 1ST QUARTER 1998
5 This schedule contains summary financial information extracted from SEC Form 10-Q and is qualified in its entirety by reference to such financial statements. 1000 OTHER JAN-2-1999 APR-4-1998 22715 0 409620 2391 349190 793712 400914 158487 1042971 622587 0 0 0 250761 6685 1042971 721403 721403 668897 668897 0 0 3855 13061 683 12378 0 0 0 12378 0 0
-----END PRIVACY-ENHANCED MESSAGE-----