0000002024-95-000051.txt : 19950816 0000002024-95-000051.hdr.sgml : 19950816 ACCESSION NUMBER: 0000002024-95-000051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950815 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: 1934 Act SEC FILE NUMBER: 002-55860 FILM NUMBER: 95564145 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 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, 1995 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 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, 1995 Class A Voting Stock - $1,000 par value 3,900 shares Class B Stock - $1,000 par value 3,140 shares Class C Stock - $ 100 par value 1,828,817 shares ACE HARDWARE CORPORATION INDEX Part I. - Financial Information: Page No. Balance Sheets - June 30, 1995 and December 31, 1994 1 Statements of Earnings - Six Months and Three Months Ended June 30, 1995 and 1994 2 Statements of Cash Flows - Six Months Ended June 30, 1995 and 1994 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 SHEETS
JUNE 30, DECEMBER 31, 1995 1994 (000'S OMITTED) ASSETS Current assets: Cash and cash equivalents $ 102 $ 4,868 Accounts receivable, net 319,164 259,611 Merchandise inventory 261,146 270,391 Prepaid expenses and other current assets 6,878 6,810 Total current assets 587,290 541,680 Property and equipment, net 184,225 177,098 Other assets 8,595 6,703 Total assets $ 780,110 $ 725,481 LIABILITIES AND MEMBER DEALERS' EQUITY Current liabilities: Current installments of long-term debt 7,477 7,369 Short-term borrowings 76,000 30,000 Accounts payable 311,401 293,088 Patronage dividends payable in cash 12,561 27,302 Patronage refund certificates payable 12,771 1,315 Accrued expenses 35,971 38,627 Total current liabilities 456,181 397,701 Long-term debt: Notes and bonds payable 60,583 64,030 Capitalized leases 549 257 Total long-term debt 61,132 64,287 Patronage refund certificates payable 52,758 63,666 Member dealers' equity: Class A stock of $1,000 par value 4,039 3,924 Class B stock of $1,000 par value 6,499 6,499 Class C stock of $100 par value 187,165 164,666 Class C stock of $100 par value, issuable to dealers for patronage dividends 14,313 21,766 Additional stock subscribed, net of unpaid portion 553 555 Retained Earnings 5,314 5,624 Contributed Capital 3,295 3,295 221,178 206,329 Less: Treasury stock, at cost 11,139 6,502 210,039 199,827 Total liabilities and member dealers' equity $ 780,110 $ 725,481
See accompanying notes to financial statements. -1- ACE HARDWARE CORPORATION STATEMENTS OF EARNINGS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1995 1994 1995 1994 (000's omitted) (000's omitted) Net Sales $643,982 $626,786 $1,203,469 $1,142,616 Cost of Sales 594,967 580,101 1,113,088 1,057,818 Gross Profit 49,015 46,685 90,381 84,798 Operating expenses: Warehouse and distribution 7,691 6,778 15,977 13,442 Selling, general and administrative 20,728 18,066 37,526 33,016 Total operating expenses 28,419 24,844 53,503 46,458 Operating income 20,596 21,841 36,878 38,340 Interest expense (3,363) (3,395) (6,430) (6,370) Other income, net 1,380 798 2,526 1,422 Income taxes (130) (120) (503) (402) Net earnings 18,483 19,124 32,471 32,990 Distribution of net earnings Patronage Dividends 18,524 19,071 32,781 32,911 Retained earnings ( 41) 53 (310) 79 Net earnings $ 18,483 $ 19,124 $ 32,471 $ 32,990
See accompanying notes to financial statements. -2- ACE HARDWARE CORPORATION STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, (000's OMITTED) 1995 1994 Operating activities: Net earnings $ 32,471 $ 32,990 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation 8,456 8,376 Loss on sale of property and equipment 1 55 Increase in accounts receivable, net (59,553) (71,883) (Increase) Decrease in inventory 9,245 (6,501) (Increase) Decrease in prepaids and other current assets (68) 457 Increase in accounts payable and accrued expenses 15,659 33,010 Net cash provided by (used in) operating activities 6,211 (3,496) Investing activities: Purchases of property and equipment (15,585) (15,706) Proceeds from sale of property and equipment 2 139 Increase in other assets (1,892) (1,312) Net cash used in investing activities (17,475) (16,879) Financing activities: Proceeds from short-term borrowings 46,000 69,500 Principal payments on long-term debt (3,047) (8,816) Payments on refund certificates and patronage financing programs (5,361) (15,043) Proceeds from sale of common stock 845 469 Repurchase of common stock (4,637) (4,111) Payments of cash portion of patronage dividend (27,302) (25,766) Net cash provided by financing activities 6,498 16,233 Decrease in cash and cash equivalents (4,766) (4,142) Cash and cash equivalents at beginning of period 4,868 4,142 Cash and cash equivalents at end of period $ 102 $ --
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, 1994 balance sheet but in the opinion of the Company reflect all adjustments necessary to present fairly the financial position as of June 30, 1995 and 1994 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 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 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 1995. -4- ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended June 30, 1995 compared to Three Months Ended June 30, 1994. Results of Operations Net sales increased 2.7% as a result of an increase in the volume to existing members, partially offset by lower International sales. Net sales were effected by the economic slowdown, late spring weather effecting lawn and garden seasonal sales and the Mexican peso decline. Gross profit increased 5.0% vs. 1994 and as a percent of sales due to sales mix shifts toward warehouse sales categories and increased vendor allowances. Warehouse and distribution expenses increased vs. 1994 due to increased building costs partially offset by a reduction in distribution labor costs resulting from improved productivity. Selling, general and administrative expenses increased vs. 1994 and increased as a percent of sales due to higher field support personnel costs, increased data processing costs and reduced net advertising income. Other income increased primarily due to growth in dealer financing programs. -5- ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended June 30, 1995 compared to Six Months Ended June 30, 1994. Results of Operations Net sales increased 5.3% in 1995 primarily due to increases in volume from existing dealers and new store development and conversions. International sales declined, primarily in Mexico due to the peso decline and resulting decreases in export sales to that country. Gross profit increased 6.6% vs. 1994 and as a percent of sales due to sales mix shifts and increased vendor allowances, partially offset by an increased LIFO provision. Warehouse and distribution expenses increased vs. 1994 and as a percent of sales due to reduced traffic revenues, increased building costs, and distribution cost increases to support the sales growth. Selling, general and administrative expenses increased vs. 1994 and as a percent of sales due to increased personnel costs for field retail support and new business development, increased data processing costs, and reduced advertising income. Interest expense increased slightly as a result of higher interest rates vs. 1994. Other income increased primarily due to growth in dealer financing programs. 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 future capital expenditures. The Company believes that these sources, along with retail growth of the membership leading to patronage stock growth, will provide adequate liquidity for the long-term. -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 5, 1995 - said meeting was an annual meeting. (b) 1. The following director was elected at said meeting for a three year term expiring in 1998: Roger E. Peterson 2. The following directors were reelected at said meeting for a three year term expiring in 1998: Lawrence R. Bowman Richard E. Laskowski James R. Williams 3. The names of the other directors other than the above elected directors whose terms of office as directors continue after the meeting are: Howard J. Jung Jon R. Weiss John E. Kingery Jennifer C. Anderson Mark Jeronimous Ray W. Osborne Don S. Williams (c) Matters voted upon and approved at the meeting were: Amendment to the By-laws, limiting the number of directors elected or appointed to office who are non-dealer directors to 25%. 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, 1995. -7- 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 RITA D. KAHLE DATE Rita D. Kahle Vice President, Finance (Principal Financial and Accounting Officer, and duly authorized Officer of the registrant) EX-27 2 ART.5 FDS FOR SECOND QTR 10-Q
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 6-MOS DEC-31-1995 JUN-30-1995 102 0 321,220 2,056 261,146 587,290 313,160 128,935 780,110 456,181 0 212,569 0 0 8,609 780,110 1,203,469 1,203,469 1,113,088 1,113,088 53,503 0 6,430 32,974 503 32,471 0 0 0 32,471 0 0