-----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, GRhoIjfaRiWUhwycSFSG0ReRycID3h/A2sbQ2Z++Hp8h9+noHLyrngIkQt/OQCs9 9ZMyg7dBmzCpJ8LjAzOlEA== 0000002024-96-000020.txt : 19960816 0000002024-96-000020.hdr.sgml : 19960816 ACCESSION NUMBER: 0000002024-96-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 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: 96615657 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, 1996 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 (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 June 30, 1996 Class A Voting Stock - $1,000 par value 3,919 shares Class B Stock - $1,000 par value 2,968 shares Class C Stock - $ 100 par value 2,006,247 shares ACE HARDWARE CORPORATION INDEX Part I. - Financial Information: Page No. Balance Sheets - June 30, 1996 and December 31, 1995 1 Statements of Earnings - Six Months and Three Months Ended June 30, 1996 and 1995 2 Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 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, 1996 1995 (000'S OMITTED) ASSETS Current Assets: Cash $ 2,138 $ 12,853 Accounts Receivable, Net 369,175 287,078 Merchandise Inventory 287,114 254,451 Prepaid Expenses and Other Current Assets 14,624 9,324 Total Current Assets 673,051 563,706 Property and Equipment, Net 203,051 191,504 Other Assets 4,090 3,923 Total Assets $ 880,192 $ 759,133 LIABILITIES AND MEMBER DEALERS' EQUITY Current Liabilities: Current Installments of Long-Term Debt 7,053 7,378 Short-Term Borrowings 48,000 13,000 Accounts Payable 433,378 338,577 Patronage Dividends Payable in Cash 11,852 23,522 Patronage Refund Certificates Payable 14,300 12,641 Accrued Expenses 42,848 34,234 Total Current Liabilities 557,431 429,352 Notes Payable 54,884 57,795 Patronage Refund Certificates Payable 43,736 54,741 Total Liabilities 656,051 541,888 Member Dealers' Equity: Class A Stock of $1,000 Par Value 4,051 3,905 Class B Stock of $1,000 Par Value 6,499 6,499 Class C Stock of $100 Par Value 205,936 177,817 Class C Stock of $100 Par Value, Issuable to Dealers for Patronage Dividends 13,497 27,506 Additional Stock Subscribed, Net of Unpaid Portion 532 515 Retained Earnings and Contributed Capital 6,130 7,945 Total Member Dealers' Equity 236,645 224,187 Less: Treasury stock, at cost 12,504 6,942 Total Member Dealers' Equity 224,141 217,245 Total Liabilities and Member Dealers' Equity $ 880,192 $ 759,133
See accompanying notes to financial statements. -1- ACE HARDWARE CORPORATION STATEMENTS OF EARNINGS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 (000's omitted) (000's omitted) Net Sales $714,437 $643,982 $1,307,623 $1,203,469 Cost of Sales 659,512 592,205 1,211,253 1,108,009 Gross Profit 54,925 51,777 96,370 95,460 Operating Expenses: Warehouse and Distribution 8,998 7,515 17,504 15,978 Selling, General and Administrative 16,664 16,634 32,478 31,282 Retail Success and Development 6,019 6,360 11,927 10,125 Total Operating Expenses 31,681 30,509 61,909 57,385 Operating Income 23,244 21,268 34,461 38,075 Interest Expense (2,393) (3,828) (4,865) (7,200) Other Income, Net 1,087 1,173 2,306 2,099 Income Taxes (408) (130) (794) (503) Net Earnings 21,530 18,483 31,108 32,471 Distribution of Net Earnings: Patronage Dividends 22,456 18,524 32,923 32,781 Retained Earnings (926) (41) (1,815) (310) Net Earnings $ 21,530 $ 18,483 $ 31,108 $ 32,471
See accompanying notes to financial statements. -2- ACE HARDWARE CORPORATION STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 1995 (000'S OMITTED) Operating Activities: Net Earnings $ 31,108 $ 32,471 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 8,160 8,456 Loss (Gain) on sale of property and equipment (22) 1 Increase in accounts receivable, net (82,097) (59,793) Decrease (Increase) in merchandise inventory (32,663) 9,245 Decrease (Increase) in prepaids and other current assets (5,300) 147 Increase in accounts payable and accrued expenses 103,415 15,574 Net cash Provided by Operating Activities 22,601 6,101 Investing Activities: Purchases of property and equipment (19,736) (15,588) Proceeds from sale of property and equipment 51 2 Increase in other assets (167) (1,779) Net cash Used in Investing Activities (19,852) (17,365) Financing Activities: Proceeds from short-term borrowings 35,000 46,000 Principal payments on long-term debt (3,236) (3,047) Payments on refund certificates and patronage financing programs (16,920) (5,361) Proceeds from sale of common stock 776 845 Repurchase of common stock (5,562) (4,637) Payments of cash portion of patronage dividend (23,522) (27,302) Net Cash Provided by (Used in) Financing Activities (13,464) 6,498 Decrease in Cash and Cash Equivalents (10,715) (4,766) Cash and Cash Equivalents at Beginning of Period 12,853 4,868 Cash and Cash Equivalents at End of Period $ 2,138 $ 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, 1995 balance sheet but in the opinion of the Company reflect all adjustments necessary to present fairly the financial position as of June 30, 1996 and 1995 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 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 1996. -4- ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended June 30, 1996 compared to Three Months Ended June 30, 1995. Results of Operations Net sales increased 10.9% in 1996 primarily due to increases in volume from existing dealers, targeted efforts on new store development and conversions to the Ace program. Gross profit increased 6.1% vs. 1995, but decreased as a percent of sales due to reduced levels of vendor and dealer price increases and increased warehouse costs absorbed into inventory. This decrease is partially offset by a lower LIFO provision and increased manufacturing gross profit. Warehouse and distribution expenses increased $1.5 million or 19.7% and as a percent of sales vs. 1995. 1996 start-up costs for the opening of two facilities and wages to support the sales increase are partially offset by increased levels of warehouse costs absorbed into inventory. Selling, general and administrative expenses are comparable to 1995 and decreased as a percent of sales. Corporate expense declines are offset by increased personnel costs for the start up facilities in 1996. Retail success and development expenses decreased $300,000 and as a percent of sales primarily due to increased corporate advertising income. Increased personnel costs for field retail support and new business development partially offset the second quarter expense declines. Interest expenses decreased 37.5% or $1.4 million vs. 1995 due primarily to inventory turnover improvements over the prior year. The use of both short-term borrowing and long-term financing is expected to continue to fund planned capital expenditures in 1996. -5- ACE HARDWARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended June 30, 1996 compared to Six Months Ended June 30, 1995. Results of Operations Net sales increased 8.7% in 1996 primarily due to increases in volume from existing dealers and targeted efforts on new store development and conversions to the Ace program. Gross profit increased 1.0% vs. 1995, but decreased as a percent of sales due to reduced levels of vendor and dealer price increases and increased warehouse costs absorbed into inventory. This decrease is partially offset by a lower LIFO provision. Warehouse and distribution expenses increased 9.6% and slightly as a percent of sales vs. 1995. 1996 start-up costs for the opening of two facilities, combined with increased wages to support the sales increase result in the expense increase. Increased warehouse costs absorbed into inventory partially offset the year-to-date expense increase. Selling, general and administrative expenses increased by 3.8% vs. 1995, but decreased as a percent of sales. The increase is primarily related to increased personnel and relocation costs for the start-up facilities and increased data processing expenses. Retail success and development expenses increased $1.8 million or 17.8% vs. 1995 and as a percent of sales due to increased personnel costs for field retail support and new business development and decreased computer systems income. Interest expenses decreased 32.4% or $2.3 million vs. 1995 due primarily to inventory turnover improvements versus the prior year. The use of both short-term borrowing and long-term financing is expected to continue to fund planned capital expenditures in 1996. Other income increased $207,000 vs. 1995 due primarily to the 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 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 3, 1996 - said meeting was an annual meeting. (b) 1. The following director was elected at said meeting for a three year term expiring in 1999: J. Thomas Glenn 2. The following directors were reelected at said meeting for a three year term expiring in 1999: Jon R. Weiss John E. Kingrey 3. The names of the other directors other than the above elected directors whose terms of office as directors continue after the meeting are: Roger E. Peterson Lawrence R. Bowman Richard E. Laskowski James R. Williams Jennifer C. Anderson Mark Jeronimous Ray W. Osborne Don S. Williams (c) Matters voted upon and approved at the meeting were: Amendment to the Corporation's restated Certificate of Incorporation increasing the number of shares of Class "C" nonvoting stock which the Corporation is authorized to issue from 2,000,000 to 4,000,000. 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, 1996. -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 AUGUST 14, 1996 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 entirely by reference to such financial statements. 1000 3-MOS DEC-31-1996 JUN-30-1996 2,138 0 371,527 2,352 287,114 673,051 346,940 143,889 880,192 557,431 0 0 0 229,983 6,662 880,192 714,437 714,437 659,512 659,512 30,594 0 2,393 21,938 408 21,530 0 0 0 21,530 0 0
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