-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F+sedMCw1VLAO9IMfDyZBSZZZWcUpw6W9bqD+EZBfr7NuPfrG6wONU83gYy3B4kq iKJr+TaCcF76W5bkK7gZ3w== 0000002024-94-000017.txt : 19940822 0000002024-94-000017.hdr.sgml : 19940822 ACCESSION NUMBER: 0000002024-94-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACE HARDWARE CORP CENTRAL INDEX KEY: 0000002024 STANDARD INDUSTRIAL CLASSIFICATION: 5070 IRS NUMBER: 360700810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-55860 FILM NUMBER: 94543647 BUSINESS ADDRESS: STREET 1: 2200 KENSINGTON COURT CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7089906600 10-Q 1 FORM 10-Q 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 Quarter ended June 30, 1994 Commission File Number 2-63880 ACE HARDWARE CORPORATION (Exact name of registrant as specified in itscharter) DELAWARE 36-0700810 State or other jurisdiction of (I.R.S.Employer Incorporation or organization) Identification No.) 2200 Kensington Court, Oak Brook, IL 60521 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (708) 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 June 30, 1994 Class A Voting Stock - $1,000 par value 3,934 shares Class B Stock - $1,000 par value 3,312 shares Class C Stock - $ 100 par value 1,677,833 shares ACE HARDWARE CORPORATION INDEX Part I. - Financial Information: Page No. Balance Sheet - June 30, 1994 and December 31, 1993 1 Statement of Earnings - Six Months and Three Months Ended June 30, 1994 and 1993 2 Statement of Cash Flows - Six Months Ended June 30, 1994 and 1993 3 Notes to Financial Statements 4 Management's Discussion and Analysis of Financial Condition and Results of Operations 5 & 6 Part II. - Other Information 7 PART I FINANCIAL INFORMATION ACE HARDWARE CORPORATION BALANCE SHEET
JUNE 30, DECEMBER 31, 1994 1993 (000'S OMITTED) ASSETS Current assets: Cash $ -- $ 4,142 Accounts receivable, net 284,487 212,604 Merchandise inventory 270,077 263,576 Prepaid expenses and other current assets 6,412 6,869 Total current assets 560,976 487,191 Property and equipment, net 173,273 166,137 Other assets 15,472 14,160 Total assets $ 749,721 $ 667,488 LIABILITIES AND MEMBER DEALERS' EQUITY Current liabilities: Current installments of long-term debt 5,436 10,707 Short-term borrowings 108,000 38,500 Accounts payable 267,930 234,190 Patronage dividends payable in cash 14,475 25,766 Patronage refund certificates payable 1,324 11,059 Accrued expenses 32,952 33,682 Total current liabilities 430,117 353,904 Long-term debt: Notes Payable 66,480 69,552 Industrial development revenue and variable rate bonds 750 1,000 Capitalized leases 510 734 Total long-term debt 67,740 71,286 Patronage refund certificates payable 60,610 56,270 Member dealers' equity: Class A stock of $1,000 par value 4,059 3,946 Class B stock of $1,000 par value 6,499 6,499 Class C stock of $100 par value 171,561 153,155 Class C stock of $100 par value, issuable to dealers for patronage dividends 9,874 19,064 Additional stock subscribed, net of unpaid portion 542 613 Retained Earnings 5,701 5,622 Contributed Capital 3,295 3,295 201,531 192,194 Less: Treasury stock, at cost 10,277 6,166 191,254 186,028 Total liabilities and member dealers' equity $ 749,721 $ 667,488
See accompanying notes to financial statements. -1- ACE HARDWARE CORPORATION STATEMENT OF EARNINGS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1994 1993 1994 1993 (000's omitted) (000's omitted) Net Sales $626,786 $537,878 $1,142,616 $980,982 Cost of Sales 580,101 498,982 1,057,818 908,042 Gross Profit 46,685 38,896 84,798 72,940 Operating expenses: Warehouse and distribution 6,816 7,716 13,518 16,687 Selling, general and administrative 18,028 13,329 32,940 25,312 Total operating expenses 24,844 21,045 46,458 41,999 Operating income 21,841 17,851 38,340 30,941 Interest expense (3,395) (2,402) (6,370) (4,642) Other income, net 678 285 1,020 808 Earnings before patronage dividends 19,124 15,734 32,990 27,107 Patronage dividends (Note 2) 19,071 16,457 32,911 28,445 Net earnings $ 53 $ (723) $ 79 $ (1,338)
See accompanying notes to financial statements. -2- ACE HARDWARE CORPORATION STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, (000's OMITTED) 1994 1993 OPERATING ACTIVITIES: Earnings before patronage dividends $ 32,990 $ 27,107 Patronage dividends (32,911) (28,445) Net earnings 79 (1,338) Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation 8,376 7,982 Loss on sale of property & equipment 55 348 Changes in operating assets and liabilities: Increase in accounts receivable, net (71,883) (37,885) Increase in inventories (6,501) (9,522) Decrease in prepaids and other current assets 457 680 Increase in accounts payable and accrued expenses 33,010 57,535 NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES (36,407) 17,800 INVESTING ACTIVITIES: Purchases of property and equipment (15,706) (7,027) Proceeds from sale of property and equipment 139 202 Increase in other assets (1,312) (2,343) NET CASH USED IN INVESTING ACTIVITIES (16,879) (9,168) FINANCING ACTIVITIES: Proceeds from short-term borrowings 69,500 10,500 Principal payments on long-term debt and patronage refund certificates (21,880) (18,088) Patronage dividends payable in cash 14,475 12,339 Patronage refund certificates 6,583 6,730 Class C stock issuable to dealers for patronage dividends 9,874 8,973 Proceeds from sale of common stock 469 457 Repurchase of common stock (4,111) (4,149) Payment of cash portion of patronage dividends (25,766) (27,538) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 49,144 (10,776) Decrease in Cash and Cash Equivalents (4,142) (2,144) Cash and Cash Equivalents at Beginning of Period 4,142 2,144 Cash and Cash Equivalents at End of Period $ -- $ --
See accompanying notes to financial statements. -3- ACE HARDWARE CORPORATION NOTES TO FINANCIAL STATEMENTS 1) General The accompanying financial statements have not been examined by independent public accountants except for the December 31, 1993 balance sheet but in the opinion of the Company reflect all adjustments necessary to present fairly the financial position as of June 30, 1994 and 1993 and the results of operations and cash flows for the six months 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 dealers based on the earnings derived from business done with such dealers. It has been the practice of the Company to distribute substantially all earnings in the form of patronage dividends. Earnings before patronage dividends and patronage dividends will normally be the same with approximately 99% of the Company's patronage sourced net earnings being paid to consenting member dealers. International dealers signed under an International Retail Merchant Agreement are not eligible for patronage dividends and related earnings 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 1994. -4- ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended June 30, 1994 compared to Three Months Ended June 30, 1993. Results of Operations Net sales increased 16.5% as a result of an increase in the volume to existing members and increased International sales. Gross profit increased 20% and as a percent of sales due to the strong sales results, particularly in the warehouse sales categories. Warehouse and distribution expenses decreased vs. 1993 and as a percent of sales due to increased traffic revenues and reduced building costs due to the closing of a facility in 1993. Selling, general and administrative expenses increased vs. 1993 and as a percent of sales due to higher field support personnel costs and reduced net advertising income. Interest expense increased as a result of increased borrowing levels to meet sales growth demands and rising interest rates. Other income, net increased due to increased interest income related to member financing programs and 1993 losses on asset disposals at a replaced facility which did not reoccur in 1994. Liquidity and Capital Resources In the second quarter of 1994, the Company established an unsecured revolving credit facility with a group of banks. 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. -5- ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended June 30, 1994 compared to Six Months Ended June 30, 1993. Results of Operations Net sales increased 16.5% as a result of an increase in the volume to existing members and increased International sales. Increased advertising activity has increased promotional sales, largely through warehouse sales programs. Gross profit increased and was comparable as a percent of sales due to the strong sales results, with a slight shift in sales mix on a year to date basis. Warehouse and distribution expenses decreased vs. 1993 and as a percent of sales due to increased traffic revenues and reduced building costs due to the closing of a facility in 1993. Distribution costs also declined as a percent of sales due to the 1993 facility closing. Selling, general and administrative expenses increased vs. 1993 and as a percent of sales due to reduced net advertising income and higher field support personnel costs. Interest expense increased as a result of increased borrowing levels to meet sales growth demands and higher interest rates. Other income, net increased due to increased interest income related to member financing programs and 1993 losses on asset disposals at a replaced facility which did not reoccur in 1994. Liquidity and Capital Resources In the second quarter of 1994, the Company established an unsecured revolving credit facility with a group of banks. 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. -6- PART II. OTHER INFORMATION ACE HARDWARE CORPORATION Item 4. Submission of Matters to a Vote of Security Holders The following information is furnished with respect to matters submitted to a vote of the stockholders of the registrant at a meeting thereof held during the quarter covered by this report: (a) Date of meeting: June 6, 1994 - said meeting was an annual meeting. (b) The following director was elected at said meeting: For a three year term expiring in 1997: Jennifer C. Anderson. (c) The following directors were reelected at said meeting: For a three year term expiring in 1997: Mark Jeronimus, Ray W. Osborne and Don S. Williams. The names of each of the other directors other than the above elected directors whose terms of office as directors continue after the meeting are: Richard E. Laskowski; Lawrence R. Bowman; James R. Williams; Howard J. Jung; Jon R. Weiss; John E. Kingrey Item 6. Exhibits and Reports on Form 8-K. (b) There were no reports on Form 8-K filed for the three month period ended June 30, 1994. -7- SIGNATURES Pursuant to the regulations of the Securities and Exchange Commission, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACE HARDWARE CORPORATION RITA D. KAHLE DATE Rita D. Kahle Vice President, Finance (Principal Financial Officer, and duly authorized Officer of the registrant) -----END PRIVACY-ENHANCED MESSAGE-----