-----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, U1sXqP8K7VrPIzQH/1dFqOWMEdTQ/mx0Lnvs31Kbeys35g+NDAuQ4e6K7LoFcftC tlG+0QMxWXG6DOi/zM+lHQ== 0000002024-00-000012.txt : 20000516 0000002024-00-000012.hdr.sgml : 20000516 ACCESSION NUMBER: 0000002024-00-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000401 FILED AS OF DATE: 20000515 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: 633219 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 2000 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 1, 2000 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 ___________________________________NONE___________________________________ 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 1, 2000 - ------------------------------------- ----------------------------- Class A Voting Stock - $1,000 par value 3,816 shares Class B Stock - $1,000 par value 2,380 shares Class C Stock - $ 100 par value 2,594,392 shares ACE HARDWARE CORPORATION INDEX Part I. - Financial Information: Page No. -------- Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - April 1, 2000 and January 1, 2000 1 Condensed Consolidated Statements of Earnings and Condensed Consolidated Statements of Comprehensive Income - Thirteen Weeks Ended April 1, 2000 and April 3, 1999 2 Condensed Consolidated Statements of Cash Flows - Thirteen Weeks Ended April 1, 2000 and April 3, 1999 3 Notes to Condensed Consolidated Financial Statements 4 - 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 - 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 8 Part II. - Other Information Item 6. Exhibits and Reports on Form 8-K 9 PART I. FINANCIAL INFORMATION ACE HARDWARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS April 1, January 1, 2000 2000 --------------- --------------- (000's omitted) ASSETS Current Assets: Cash $ 32,024 $ 35,422 Accounts Receivable, Net 406,753 370,879 Merchandise Inventory 415,154 373,090 Prepaid Expenses and Other Current Assets 14,020 13,341 --------------- --------------- Total Current Assets 867,951 792,732 Property and Equipment, Net 250,012 247,174 Other Assets 48,977 41,578 --------------- --------------- Total Assets $ 1,166,940 $ 1,081,484 =============== =============== LIABILITIES AND MEMBER DEALERS' EQUITY Current Liabilities: Current Installment of Long-Term Debts $ 2,970 $ 4,067 Short-Term Borrowings 88,840 49,869 Accounts Payable 499,917 449,497 Patronage Dividends Payable in Cash 44,431 38,173 Patronage Refund Certificates Payable 4,825 373 Accrued Expenses 58,881 69,990 --------------- --------------- Total Current Liabilities 699,864 611,969 Notes Payable 111,221 111,895 Patronage Refund Certificates Payable 53,740 55,257 Other Long-Term Liabilities 22,748 22,400 --------------- --------------- Total Liabilities 887,573 801,521 Member Dealers' Equity: Class A Stock of $1,000 Par Value 3,915 3,856 Class B Stock of $1,000 Par Value 6,499 6,499 Class C Stock of $100 Par Value 241,476 241,226 Class C Stock of $100 Par Value, Issuable 25,977 21,648 Additional Stock Subscribed, Net of Unpaid Portion 510 498 Retained Earnings (541) 594 Contributed Capital 13,485 13,485 Accumulated Other Comprehensive Income 235 291 --------------- --------------- Total Member Dealers' Equity 291,556 288,097 Less: Treasury Stock, at Cost 12,189 8,134 --------------- --------------- Total Member Dealers' Equity 279,367 279,963 Total Liabilities and Member Dealers Equity $ 1,166,940 $ 1,081,484 =============== =============== See accompanying notes to condensed consolidated financial statements. ACE HARDWARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Thirteen Weeks Ended Thirteen Weeks Ended April 1, April 3, 2000 1999 ---------------- ---------------- (000's omitted) Net Sales $ 701,009 $ 774,225 Cost of Sales 633,951 711,050 ---------------- ---------------- Gross Profit 67,058 63,175 Operating Expenses: Warehouse and Distribution 11,026 10,295 Selling, General and Administrative 23,602 22,699 Retail Success and Development 17,029 10,969 ---------------- ---------------- Total Operating Expenses 51,657 43,963 ---------------- ---------------- Operating Income 15,401 19,212 Interest Expense (4,702) (3,844) Other Income, Net 3,137 2,191 Income Taxes 510 (250) ---------------- ---------------- Net Earnings $ 14,346 $ 17,309 ================ ================ Distribution of Net Earnings: Patronage Dividend $ 15,481 $ 18,738 Retained Earnings (1,135) (1,429) ---------------- ---------------- Net Earnings $ 14,346 $ 17,309 ================ ================
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Thirteen Weeks Ended Thirteen Weeks Ended April 1, April 3, 2000 1999 ---------------- ---------------- (000's omitted) Net Earnings $ 14,346 $ 17,309 Foreign currency translation, net (56) 44 ---------------- ---------------- Comprehensive Income $ 14,290 $ 17,353 ================ ================ See accompanying notes to condensed consolidated financial statements. ACE HARDWARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Thirteen Weeks Ended Thirteen Weeks Ended April 1, April 3, 2000 1999 ---------------- ---------------- (000's omitted) Operating Activities: Net Earnings $ 14,346 $ 17,309 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 6,116 5,580 Increase in accounts receivable, net (35,874) (57,100) Increase in merchandise inventory (42,064) (36,447) Decrease (Increase) in prepaid expenses (679) 922 and other current assets Increase in accounts payable and accrued expense 39,311 50,873 Increase in other long-term liabilities 348 606 ---------------- ---------------- Net Cash Used In Operating Activities (18,496) (18,257) Investing Activities: Purchases of property and equipment, net (8,954) (4,864) Decrease (Increase) in other assets (7,455) (4,453) ---------------- ---------------- Net Cash Used In Investing Activities (16,409) (9,317) Financing Activities: Proceeds of short-term borrowings, net 38,971 36,000 Principal payments on long-term debt (1,772) (3,280) Payments on refund certificates and patronage financing programs (2,114) (23,641) Proceeds from sale of common stock 477 466 Repurchase of common stock (4,055) (3,830) ---------------- ---------------- Net Cash Provided By Financing Activities 31,507 5,715 ---------------- ---------------- Decrease in Cash and Cash Equivalents (3,398) (21,859) Cash and Cash Equivalents at Beginning of Period 35,422 53,901 ---------------- ---------------- Cash and Cash Equivalents at End of Period $ 32,024 $ 32,042 ================ ================ See accompanying notes to condensed consolidated financial statements.
ACE HARDWARE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1) General The condensed consolidated interim period financial statements presented herein do not include all of the information and disclosures customarily provided in annual financial statements and they have not been audited, as permitted by the rules and regulations of the Securities and Exchange Commission. The consolidated interim period financial statements should be read in conjunction with the annual financial statements included in the Annual Report on Form 10-K. In the opinion of management, these financial statements have been prepared in conformity with generally accepted accounting principles and reflect all adjustments necessary for a fair statement of the results of operations and cash flows for the interim periods ended April 1, 2000 and April 3, 1999 and of it's financial position as of April 1, 2000. All such adjustments are of a normal recurring nature. The results of operations for the thirteen week periods ended April 1, 2000 and April 3, 1999 are not necessarily indicative of the results of operations for a 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 losses 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 2000. -4- 4) Segments The Company is principally engaged as a wholesaler of hardware and related products and manufactures paint products. The Company identifies segments based on management responsibility and the nature of the business activities of each component of the Company. The Company measures segments earnings as operating earnings including an allocation for administrative expenses, interest expense and income taxes. Information regarding the identified segments and the related reconciliation to consolidated information is as follows: Thirteen Weeks Ended April 1, 2000 ---------------------------------------------------------------------- Elimination Paint Intersegment Wholesale Manufacturing Other Activities Consolidated --------- ------------- ----- ---------- ------------ Net Sales from External Customers 686,781 5,001 9,227 - 701,009 Intersegment Sales 4,535 23,372 - (27,725) - Segment Earnings (Loss) 13,123 2,171 (893) (55) 14,346 Thirteen Weeks Ended April 3, 1999 ---------------------------------------------------------------------- Elimination Paint Intersegment Wholesale Manufacturing Other Activities Consolidated --------- ------------- ----- ---------- ------------ Net Sales from External Customers 765,624 4,515 4,086 - 774,225 Intersegment Sales 4,999 27,596 - (32,595) - Segment Earnings (Loss) 15,554 2,679 (804) (102) 17,309
5) Business Combination On June 30, 1999 the Company entered into a business combination agreement with Builder Marts of America, Inc. (BMA) to combine the LBM Division of the Company with BMA. Under this agreement, the Company contributed defined business assets (primarily vendor rebate receivables, fixed assets and inventories) for a non-controlling interest in the combined entity. The investment in the combined entity is accounted for under the equity method of accounting. The accompanying consolidated financial statements include the financial results of the LBM Division through the closing date of August 2, 1999. Accordingly, the accompanying financial statements for the thirteen weeks ended April 1, 2000 do not include activity for the LBM Division of the Company. -5- ACE HARDWARE CORPORATION ------------------------ PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF ------------------------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Thirteen Weeks Ended April 1, 2000 compared to Thirteen Weeks - ------------------------------------------------------------- Ended April 3, 1999. - -------------------- Results of Operations - --------------------- The total sales decrease of 9.4% was affected by the business combination of Ace LBM with BMA. As a result of this transaction, LBM sales are not reported within the Company's sales results after August 2, 1999. Basic business sales increased 9.1% in 2000 primarily due to increased existing retailer volume, targeted efforts on new store development within our retailer base, conversions to the Ace program and additional sales to non-members. Domestic and International basic business sales increased 9.6% and .6%, respectively, for the first quarter. Gross profit increased $3.9 million and increased as a percent of total sales from 8.2% in 1999 to 9.6% in 2000. The increase as a percent of sales results primarily from the loss of lower margin LBM sales volume since August 1999. Basic business gross profit improved slightly for the quarter as a percent of basic business sales (9.0% in 2000 vs. 9.48% in 1999) due to higher vendor rebates, increased margin from retail operations and lower inventory adjustments. Higher costs absorbed into inventory partially offset this positive improvement for the quarter. Warehouse and distribution expenses increased $731,000 over 1999 and increased as a percent of total sales from 1.33% in 1999 to 1.57% in 2000. As a percent to basic business sales, these costs decreased from 1.60% in 1999 to 1.57% in 2000. Increased warehouse and distribution costs required to support increased sales through distribution centers along with pre-opening costs associated with a new distribution facility are partially offset by higher logistics income for the quarter. Selling, general and administrative expenses increased $903,000 or 4.0% and increased as a percent of total sales due to increased information technology costs partially offset by decreased LBM Division costs. Retail success and development expenses increased $6.1 million due to costs associated with additional company-owned stores, costs to support retail computer initiatives, increased retail field personnel costs and new business development costs. Interest expense increased $858,000 due to increased average borrowing levels and increased interest rates. The increase in borrowing levels is due primarily to the construction of a distribution center and increased retailer dating programs. Other income increased $946,000 primarily due to income realized on non-controlling investments in affiliates. -6- Income taxes decreased due to decreased income from non-patronage activities. Operating losses from non-patronage activities resulted in an income tax benefit for the quarter. Liquidity and Capital Resources - ------------------------------- The Company expects that existing and internally generated funds, along with new and established lines of credit and long-term financing, will continue to be sufficient in the foreseeable future to finance the Company's working capital requirements and patronage dividend and capital expenditures programs. -7- Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Company's market risk during the thirteen week period ended April 1, 2000. For additional information, refer to Item 7a in the Company's Annual Report on Form 10-K for the year ended January 1, 2000. -8- PART II. OTHER INFORMATION -------------------------- ACE HARDWARE CORPORATION ------------------------ Item 6. Exhibits and Reports on Form 8-K. (b) A Form 8-K was filed on May 2, 2000 containing: .Plan of Distribution of patronage dividends with respect to purchases of merchandise made from the Registrant from January 1, 1999 adopted by the Board of Directors, and .Notice of Annual Meeting of Stockholders on June 5, 2000 and Proxy solicited by Board of Directors and related information. -9- 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 Lori L. Bossmann Vice President, Finance (Principal Accounting Officer, and duly authorized Officer of the registrant) -10- EX-27 2 ART.5 FDS FOR 1ST QUARTER 2000
5 This schedule contains summary financial information extracted from the SEC Form 10-Q and is qualified in its entirety by reference to such financial statements. 1000 YEAR DEC-30-2000 APR-01-2000 32024 0 409588 2835 415154 867951 440116 190104 1166940 699864 0 0 0 277867 13689 1166940 701009 701009 633951 633951 0 0 4702 13836 510 14346 0 0 0 14346 0 0
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