<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _______________
Commission File No. 0-27424
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WILMAR INDUSTRIES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2232386
---------------------- -----------------
(State of incorporation or (I.R.S. Employer
organization) Identification No.)
303 Harper Drive
Moorestown, New Jersey 08057
---------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 439-1222
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 X * No _______
--------
The number of shares of the registrant's common stock, no par value,
outstanding as of October 31, 1996 was 13,004,025.
* Registrant has filed all reports required to be filed by Section 13 or
15(d) but has only been subject to filing requirements since January 23, 1996.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (Unaudited)
<TABLE>
<CAPTION>
DECEMBER 29, SEPTEMBER 27,
1995 1996
-------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 25,043 $ 37,924,428
Cash - Restricted 200,000 707,579
Cash - Investments 4,122,641
Accounts Receivable - trade, net of allowance for doubtful accounts
of $236,700 in 1995 and $754,800 in 1996. 9,575,307 17,064,995
Inventory 12,699,376 17,319,432
Prepaid expenses and other current assets 244,798 549,083
Deferred income taxes 408,000 742,000
------------- -------------
Total current assets 23,152,524 78,430,158
PROPERTY AND EQUIPMENT, Net 1,337,308 2,408,969
OTHER ASSETS 2,380,672 6,294,101
------------- --------------
TOTAL ASSETS $ 26,870,504 $ 87,133,228
============= ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (Unaudited), Continued
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DECEMBER 29, SEPTEMBER 27,
1995 1996
-------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Demand notes payable - bank $ 9,922,510 $ 36,100
Current portion of long-term debt:
Banks 666,668 78,547
Related parties 2,107,050
Capital leases 73,888
Accounts Payable 7,889,405 10,232,146
Accrued expenses and other current liabilities 1,387,524 2,648,768
Accrued interest 212,823
Income taxes payable 1,020,991 1,241,610
-------------- -------------
Total current liabilities 23,206,971 14,311,059
LONG-TERM DEBT - Net of current portion:
Banks 833,331 78,609
Related parties 833,872
Capital leases 72,174
Subordinated debentures 4,000,000
-------------- -------------
Total liabilities 28,874,174 14,461,842
-------------- -------------
COMMITMENTS AND CONTINGENT LIABILITIES
Mandatorily Redeemable Series A Senior Preferred Stocks, $.01 par value;
129,450 shares, authorized, issued and outstanding with a redemption
value of $100 per share, plus accrued dividends 13,782,110
-------------- -------------
Mandatorily Redeemable Series B Junior Preferred Stocks, $.01 par value;
105,914 shares, authorized, issued and outstanding with a redemption
value of $100 per share, plus accrued dividends 11,276,311
-------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued
Common stock, no par value - 50,000,000 shares authorized;
13,004,025 shares issued and outstanding in 1996,
5,320,000 shares issued and outstanding in 1995 124,231 95,978,776
Retained Earnings (accumulated deficit) (27,186,322) (23,307,390)
-------------- -------------
Total stockholders' equity (deficit) (27,062,091) 72,671,386
-------------- -------------
TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY $ 26,870,504 $ 87,133,228
============== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)
<TABLE>
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 29, September 27, September 29, September 27,
1995 1996 1995 1996
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
SALES $ 16,381,442 $ 30,711,875 $ 44,463,934 $ 71,435,451
COST OF SALES 11,274,284 21,994,223 30,577,107 50,228,909
-------------- --------------- -------------- --------------
Gross profit 5,107,158 8,717,652 13,886,827 21,206,542
OPERATING EXPENSES:
Operating and selling expenses 2,373,478 3,977,333 6,575,167 10,085,418
Corporate general and administrative expenses 894,958 1,966,548 2,847,949 4,688,408
-------------- --------------- -------------- --------------
3,268,436 5,943,881 9,423,116 14,773,826
-------------- --------------- -------------- --------------
Operating income 1,838,722 2,773,771 4,463,711 6,432,716
INTEREST EXPENSE (INCOME), NET 303,007 (182,107) 808,940 (153,148)
-------------- --------------- -------------- --------------
Income before income taxes 1,535,715 2,955,878 3,654,771 6,585,864
PROVISION FOR INCOME TAXES (REFUNDS) 766,383 1,099,000 1,288,348 (1) 2,551,000
-------------- --------------- -------------- --------------
Net income $ 769,332 $ 1,856,878 $ 2,366,423 $ 4,034,864
============== =============== ============== ==============
Net income per share $ 0.15 $0.37
=============== ==============
Weighted average shares outstanding 12,293,141 10,980,406
=============== ==============
PRO FORMA DATA
Income before income taxes $ 1,535,715 $ 3,654,771
Provision for income taxes 615,000 (2) 1,465,000
--------------- --------------
Pro forma net income 920,715 (2) 2,189,771 (2)
=============== ==============
Pro forma net income per share $0.12 (2) $ 0.27 (2)
=============== ==============
Weighted average shares outstanding 7,717,585 7,996,229
=============== ==============
</TABLE>
<PAGE>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) -(Unaudited)
<TABLE>
<CAPTION>
Retained Total
Earnings Stockholders'
Common Stock (Accumulated Equity
Shares Amount Deficit) (Deficit)
------------ ----------- ---------------- -----------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 29, 1995 5,320,000 $124,231 $(27,186,322) $(27,062,091)
Accretion of Mandatorily Redeemable
Preferred Stock (155,932) (155,932)
Conversion of Series B Preferred Stock 454,545 5,000,000 5,000,000
Issuance of Common Stock - Initial Public Offering 4,600,000 46,152,891 46,152,891
Issuance of Common Stock - HMA Acquisition 63,980 1,522,000 1,522,000
Issuance of Common Stock - Secondary Offering 2,565,500 43,179,654 43,179,654
Net income 4,034,864 4,034,864
------------ ------------- -------------- -------------
BALANCE, SEPTEMBER 27, 1996 13,004,025 $ 95,978,776 $(23,307,390) $72,671,386
============ ============= ============== =============
</TABLE>
<PAGE>
WILMAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
---------------------------------------
September 29, 1995 September 27, 1996
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES :
Net Income $ 2,366,423 $ 4,034,864
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 215,989 457,529
Deferred income taxes (340,000) (209,000)
Gain on disposition of property and equipment (237)
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable (3,022,083) (3,744,841)
Inventory (1,983,802) (773,584)
Prepaid expenses and other current assets (69,019) (105,980)
Other assets (24,257) 123,982
Accounts Payable 2,316,500 (2,087,849)
Accrued expenses and other current liabilities 177,380 592,339
Accrued interest 152,533 (212,823)
Income taxes payable 617,994 220,619
------------------ ------------------
Net cash provided by (used in) operating activities 407,658 (1,704,981)
------------------ ------------------
INVESTING ACTIVITIES :
Purchase of property and equipment (331,512) (976,731)
Proceeds from sale of property and equipment 3,750
Purchase of short-term investments (4,122,641)
Acquisition of businesses, including escrows (6,090,682)
------------------ ------------------
Net cash used in investing activities (331,512) (11,186,304)
------------------ ------------------
FINANCING ACTIVITIES :
Net proceeds (repayment) of demand notes payable - Bank 5,854,386 (9,922,510)
Proceeds of long-term debt - bank 2,000,000
Principal payments on long-term debt :
Banks (6,076,968) (1,517,564)
Related parties (76,217) (2,940,922)
Capital leases (12,132)
Proceeds from long-term Capital leases 65,606
Issuance of common stock 55,000
Repurchase of common stock (15,117,000)
Repurchase of Series A Preferred Stock, plus accrued dividends (13,870,928)
Repurchase of Series B Preferred Stock. plus accrued dividends (6,343,425)
Proceeds from the issuance (repayment) of subordinated debentures 4,000,000 (4,000,000)
Net Proceeds from Issuance of Common Stock - Initial Public Offering 46,152,891
Net Proceeds from Issuance of Common Stock - Secondary Public Offering 43,179,654
Issuance of Series A Preferred Stock 12,945,000
Distributions to stockholders (3,722,710)
------------------ ------------------
Net cash provided by (used in) financing activities (138,509) 50,790,670
------------------ ------------------
NET (DECREASE) INCREASE IN CASH (62,363) 37,899,385
CASH, BEGINNING OF PERIOD 91,117 25,043
------------------ ------------------
CASH, END OF PERIOD $ 28,754 $ 37,924,428
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for :
Interest $ 657,048 $ 384,081
================== ==================
Income taxes $ 670,354 $ 2,449,352
================== ==================
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Accretion of mandatorily redeemable Series A Senior and
Series B Junior Preferred Stock redemption values $ 1,051,293 $ 155,932
Distribution of mandatorily redeemable Series B Junior
Preferred Stock to stockholder $ 10,591,400 $
Conversion of Series B Junior Preferred stock into
454,545 shares of Common Stock $ -- $ 5,000,000
Issuance of Common Stock in connection with the purchase
of HMA Enterprises,Inc. $ -- $ 1,522,000
</TABLE>
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The condensed consolidated financial statements include the accounts of Wilmar
Industries, Inc. ("Wilmar" or the "Company") and its subsidiaries One Source
Supply, Inc. from November 17, 1995, the date of its acquisition, Mile High
Maintenance Supply, Inc. from May 10, 1996, the date of its acquisition, and HMA
Enterprises, Inc. from July 8, 1996, the date of its acquisition.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, such interim statements reflect all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods presented. The results of operations for these interim periods are not
necessarily indicative of the results to be expected for the full year ending
December 27, 1996. These financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes included in the
Company's Form 10-K for the year ended December 29, 1995.
NOTE 2 - ACCOUNTING POLICIES
- ----------------------------
Impairment of Long-Lived Assets - On January 1, 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this standard had no impact on the Company's financial
statements.
Accounting for Stock-Based Compensation - In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which was effective for the Company beginning January 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its stock
based compensation awards to employees and will disclose the required pro forma
effect on net income in the fiscal year end December 27, 1996 financial
statements.
NOTE 3 - PUBLIC OFFERINGS
- -------------------------
INITIAL PUBLIC OFFERING
On January 24, 1996, the Company completed an initial public offering of
4,600,000 shares of its Common Stock for $11.00 per share resulting in net
proceeds (after deducting underwriters' discounts and issuance costs) of
$47,058,000.
The proceeds of the offering were used as follows:
Redemption of Preferred Stock and accumulated dividends $20,188,000
Repayment of bank debt and interest 12,987,000
Repayment of Subordinated Debentures and interest 4,037,000
Repayment of notes payable and interest 2,967,000
Working capital and IPO costs 6,879,000
------------
$47,058,000
============
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Prior to the offering, $5,000,000 of the Mandatorily Redeemable Series B Junior
Preferred Stock was converted into $5,000,000 of Series B Junior Preferred Stock
with conversion rights. Upon consummation of the offering, $5,000,000 of the
Series B Junior Preferred Stock with conversion rights was converted into
454,545 shares of Common Stock.
SECONDARY PUBLIC OFFERING
On July 31, 1996, the Company completed a public offering of 4,335,500 shares of
its Common Stock at a price of $17.875 per share. Of the shares offered,
2,565,500 shares were sold by the Company and 1,770,000 were sold by selling
shareholders. The Company received net proceeds (after deducting underwriters'
discounts and issuance costs) of $43,575,000.
The proceeds of the offering were used as follows:
Repayment of bank debt and interest $ 2,012,000
Working capital and offering expenses 41,563,000
-----------
$43,575,000
===========
The pro forma effects of the above transactions for the related balance sheet
accounts are summarized below. Pro forma balance sheet information is presented
as though the transactions occurred on December 29, 1995 (in 000's):
PRO FORMA
AS REPORTED (UNAUDITED)
----------- -----------
Current assets $ 23,153 $74,398
Property and equipment, net 1,337 1,337
Other assets 2,381 2,133
-------- -------
Total Assets $ 26,871 $77,868
======== =======
Current liabilities $ 23,207 $10,297
Long-term debt 5,667 ---
-------- -------
Total Liabilities $ 28,874 $10,297
Mandatorily redeemable preferred stock $ 25,059 ---
Stockholders' equity (27,062) $67,571
-------- -------
Total liabilities, mandatorily redeemable
preferred stock and stockholders equity $ 26,871 $77,868
======== =======
NOTE 4 - ACQUISITION
- --------------------
On July 8, 1996, the Company acquired 100% of the capital stock of HMA
Enterprises Inc. ("HMA"), a distributor of repair and maintenance supplies,
based in Houston, Texas, for a cash payment of $6.0 million and $1.6 million in
common stock of the Company, subject to adjustments based upon the final closing
balance sheet, plus contingent consideration to the owners based on the future
performance of HMA. Goodwill recorded in connection with this
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
acquisition totaled $1.7 million, and will be amortized on a straight line basis
over 30 years.
NOTE 5 - INCOME TAXES
- ------------------------
Prior to February 24, 1995, the Company had elected to be taxed as an S
Corporation under provisions of the Internal Revenue Code. As such, current
taxable income had been included on the income tax returns of the sole
shareholder for federal income tax purposes and no provision had been made for
federal income taxes. However, the Company changed its election to be taxed as a
C Corporation under the Internal Revenue Code, and in connection with this
change in tax reporting, taxes on income are provided based upon Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to financial accounting
and reporting for income taxes.
NOTE 6 - COMPUTATION OF NET INCOME PER SHARE AND PRO FORMA NET INCOME PER SHARE
- -------------------------------------------------------------------------------
Net income per share and pro forma net income per share represents net income
and pro forma net income (after a pro forma provision for income taxes as if the
Company had been subject to federal and state income taxation as a C Corporation
since inception) divided by the weighted average number of shares of Common
Stock and Common Stock equivalents outstanding during the period plus the number
of shares of Common Stock required to be sold at the assumed initial public
offering price to raise sufficient proceeds to redeem the mandatorily redeemable
Preferred Stock (including accrued but unpaid dividends thereon). Net income
and pro forma net income are not reduced by the provision for accretion of
Preferred Stock redemption values of $470,728 for the three months ended
September 29, 1995 and $155,932 and $1,051,293 for the nine months ended
September 27, 1996 and September 29, 1995, respectively, because the calculation
assumes the related Common Stock was outstanding in lieu of the Preferred Stock.
Common Stock equivalents include shares from the exercise of stock options
(using the treasury stock method). Pursuant to the rules of the Securities and
Exchange Commission, common stock issued and stock options granted at prices
lower than the assumed initial public offering price within a one year period
prior to an initial public offering are included in the calculation (using the
treasury stock method and the assumed initial public offering price) as if they
were outstanding for all periods presented.
NOTE 7 - CONTINGENCIES
- ----------------------
The Company is involved in various legal proceedings in the ordinary course of
its business which are not anticipated to have a material adverse effect on the
Company's results of operations or financial position.
NOTE 8 - SUBSEQUENT EVENTS
- --------------------------
On November 11, 1996, the Company acquired, for approximately $2.6 million, the
assets of Aaron Distributing, Inc. ("Aaron") and an entity affiliated with
Aaron, suppliers of repair and maintenance products and HVAC products to multi-
unit apartment complexes and HVAC contractors in the Dallas-Fort Worth market.
Approximately $1,000,000 of the purchase price was paid in common stock of the
Company and the balance was paid in cash. Also on November 11, 1996, the Company
sold the HVAC business acquired from Aaron to a third party for approximately
$250,000.
<PAGE>
WILMAR INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 27, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 29,
1995
Net Sales. Net sales increased by $26.9 million, or 60.7%, to $71.4 million for
the nine months ended September 27, 1996 from $44.5 million for the
corresponding period in 1995. This increase was primarily attributable to the
acquisitions of One Source Supply Inc. ("One Source"), Mile High Maintenance
Supply, Inc. ("Mile High"), HMA Enterprises, Inc. ("HMA"), and the assets of Sun
Valley Maintenance Supply , Inc. ("Sun Valley") which occurred on November 17,
1995, May 10, 1996, July 8, 1996, and May 28, 1996, respectively. In addition,
the maturation of the existing sales force, the two distribution centers
(Columbus and Seattle) opened between August 1, 1995 and December 29, 1995 and a
substantial investment in "line-hauling" (the use of third party trucks to ship
multiple orders from a distribution center to other markets overnight followed
by next day local delivery), also contributed significantly to the Company's
growth. The Company's sales force at the end of the third quarter of 1996 was
113, an increase of 49 when compared with the corresponding quarter of 1995.
Sales attributable to the existing sales force (salesman employed for all of
both periods) increased 21%. The Company's telesales effort and increased sales
to national accounts also contributed to the growth. Price increases during
both periods were modest and made only on selected items. During the nine
months ended September 27, 1996, Wilmar generated approximately $1.4 million in
net sales to new end markets as a result of the Company's decision to target
customers outside its core apartment housing market beginning in the first
quarter of 1995.
Gross Profit. Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs. As a percentage of net sales, gross profit was
29.7% for the nine months ended September 27, 1996 compared to 31.2% for the
corresponding period in 1995. This planned decrease in the gross margin
resulted from the acquisition of HMA, whose historic gross margins have been
lower due to increased competition in the Texas market as well as a higher
volume of less profitable HVAC sales. Increased delivery expenses associated
with "line-hauling" to new markets, higher relative occupancy costs relating to
the operation of two immature, less efficient distribution centers opened after
July of 1995 (Columbus and Seattle) and a decrease in vendor allowances and
discounts also contributed to the decrease in gross margin when compared with
the first nine months of 1995.
Operating and Selling Expenses. Operating and selling expenses consist of labor
and other costs associated with opening and operating a distribution center as
well as selling expenses and commissions. The Company expenses all distribution
center pre-opening costs when incurred. Operating and selling expenses
increased by $3.5 million, or 53.4% , to $10.1 million for the nine months ended
September 27, 1996 from $6.6 million for the corresponding period in 1995. As a
percentage of net sales, these expenses represented 14.1% for the nine months
ended September 27, 1996 compared to 14.8% for the corresponding period in 1995.
The decrease resulted primarily from the acquisition of HMA which operates three
mature distribution centers and employs a mature sales force. Historically, the
Company's operating and selling expenses as a percentage of sales have been
higher than HMA's due to the Company's investment in new distribution centers as
well as the rapid expansion of the sales force.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $1.9 million, or 64.6%, to $4.7 million for
the nine months ended September 27, 1996 from $2.8 million for the corresponding
period in 1995 primarily as a result of the increased staffing required to
manage a larger volume of business. During the first nine months of 1995, the
Company incurred $207,000 in expenses related to the 1995 Recapitalization.
Excluding the expenses associated with the 1995 Recapitalization, corporate
general and administrative expenses as a percentage of net sales were 6.6% for
the nine months ended September 27, 1996 compared to 5.9% for the corresponding
period in 1995.
<PAGE>
WILMAR INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 27, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 29,
1995
Operating Income. Operating income increased by $1.9 million , or 44.1%, to
$6.4 million for the nine months ended September 27, 1996 from $4.5 million for
the corresponding period in 1995. As a percentage of net sales, operating
income was 9.0% for the nine months ended September 27, 1996 compared to 10.0%
for the corresponding period in 1995. Excluding the one-time expenses
associated with the 1995 Recapitalization, operating income would have increased
by $1.7 million, or 37.7% for the nine months ended September 27, 1996. As a
percentage of net sales, operating income (excluding the 1995 Recapitalization
expenses) would have been 10.5% for the first nine months of 1995 compared to
9.0% for the first nine months of 1996.
Interest Expense (Income), Net. Net interest expense decreased by $962,000 to
$153,000 net interest income for the nine months ended September 27, 1996 from
$809,000 of net interest expenses for the corresponding period in 1995 as a
result of the reduction in debt made from the proceeds of the initial public
offering.
THREE MONTHS ENDED SEPTEMBER 27, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
29, 1995
Net Sales. Net sales increased by $14.3 million, or 87.5%, to $30.7 million for
the quarter ended September 27, 1996 from $16.4 million for the corresponding
quarter in 1995, The increase was primarily attributable to the acquisitions of
One Source, Mile High, HMA, and the assets of Sun Valley, which occurred on
November 17, 1995, May 10, 1996, July 8, 1996, and May 28, 1996 respectively.
In addition, the maturation of the existing sales force, the two distribution
centers (Columbus and Seattle) opened between August 1, 1995 and December 29,
1995 and a substantial investment in "line-hauling", also contributed
significantly to the Company's growth. Sales attributable to the existing sales
force (salesman employed for all of both periods) increased 18%. The Company's
telesales effort and increased sales to national accounts also contributed to
the growth. Price increases during both quarters were modest and made only on
selected items. During the quarter ended September 27, 1996, Wilmar generated
approximately $521,000 in net sales to new end markets as a result of the
Company's decision to target customers outside its core apartment housing market
beginning in the first quarter of 1995.
Gross Profit. Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs. As a percentage of net sales, gross profit was
28.4% for the quarter ended September 27, 1996 compared to 31.2% for the
corresponding quarter in 1995. This planned decrease in the gross margin
resulted from the acquisition of HMA, whose historic gross margins have been
lower due to increased competition in the Texas market as well as a higher
volume of less profitable HVAC sales. Increased delivery expenses associated
with "line-hauling" to new markets, higher relative occupancy costs relating to
the operation of two immature, less efficient distribution centers opened after
the first quarter of 1995 (Columbus and Seattle) also contributed to the
decrease in gross margin.
Operating and Selling Expenses. Operating and selling expenses consist of labor
and other costs associated with opening and operating a distribution center as
well as selling expenses and commissions. The Company expenses all distribution
center pre-opening costs when incurred. Operating and selling expenses
increased by $1.6 million, or 67.6%, to $4.0 million for the quarter ended
September 27, 1996 from $2.4 million for the corresponding quarter in 1995. As
a percentage of net sales, these expenses represented 13.0% for the quarter
ended September 27, 1996 compared to 14.5% for the corresponding quarter in
1995. The decrease resulted primarily from the acquisition of HMA which operates
three mature distribution centers and employs a mature sales force.
Historically, the Company's operating and selling expenses as a percentage of
sales have been higher than HMA's due to the Company's investment in new
distribution centers as well as the rapid expansion of the sales force.
<PAGE>
WILMAR INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $1.1 million, or 119.7%, to $2.0 million
for the quarter ended September 27, 1996 from $895,000 for the corresponding
quarter in 1995, primarily as a result of the increased staffing required to
manage a larger volume of business, as well as first time public company
expenses and approximately $40,000 of expenses incurred in connection with the
Mile High assimilation. Corporate general and administrative expenses as a
percentage of net sales were 6.4% for the quarter ended September 27, 1996
compared to 5.5% for the corresponding quarter in 1995.
Operating Income. Operating income increased by $935,000, or 50.9% to $2.8
million for the quarter ended September 27, 1996 from $1.8 million for the
corresponding quarter in 1995. As a percentage of net sales, operating income
was 9.0% for the quarter ended September 27, 1996 compared to 11.2% for the
corresponding quarter in 1995.
Interest Expense (Income), Net. Net interest expense decreased by $485,000 to
$182,000 of net interest income for the quarter ended September 27, 1996 from
$303,000 of net interest expense for the corresponding quarter in 1995 as a
result of a reduction in debt and an increase in cash and investments made from
the proceeds of the initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Wilmar's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its revolving bank line of credit
to support increases in accounts receivable and inventory, net of accounts
payable.
During the month of January 1996, the Company completed an initial public
offering of 4,600,000 shares of its common stock for $11.00 per share resulting
in net proceeds (after deducting underwriters' discounts and issuance costs) of
$47,058,000.
During July 1996, the Company completed a secondary public offering of 4,335,500
shares of common stock (of which the Company issued 2,565,500 shares) for
$17.875 per share resulting in net proceeds to the Company (after deducting
underwriters' discounts and issuance costs) of $43,575,000.
Cash used in operating activities was $1.7 million during the nine months ended
September 27, 1996 compared to $408,000 of cash provided by operating activities
during the corresponding period in 1995. Cash used in operating activities
during the nine months ended September 27, 1996 consisted of $4.0 million of net
income before adding back depreciation and amortization and other non-cash
charges, offset by $6.0 million of changes in operating assets and liabilities
primarily resulting from a $2.1 million decrease in accounts payable and
increases in the Company's accounts receivable and inventory of $4.5 million,
consistent with its higher volume of business.
Cash used in investing activities during the nine months ended September 27,
1996 was $11.3 million, consisting of $6.2 million related to the acquisitions
of Mile High, HMA, and Sun Valley, $4.1 million for the purchase of short-term
investments, and $977,000 for the purchase of property and equipment. Cash
provided by financing activities during the first quarter of 1996 was $50.8
million, consisting primarily of the net proceeds of two public offerings less
the repayment of all debt and the redemption of the outstanding preferred stock.
Capital expenditures were $977,000 for the nine months ended September 27, 1996
compared to $332,000 for the corresponding period in 1995. The Company spent
approximately $500,000 in the third quarter to equip its new
<PAGE>
WILMAR INDUSTRIES, INC.
Philadelphia distribution center. Historically, capital expenditures have been
primarily for office, computer and distribution center equipment, except for
1994 when the Company made additional capital expenditures related to the
relocation of its headquarters to its present Moorestown, New Jersey location.
The Company intends to finance its future capital expenditures with cash flow
from operations and possibly with a portion of the proceeds of the public
offering, term debt or capital leases.
Wilmar's credit facility consists of a $10.0 million unsecured bank line of
credit. This line of credit had a zero balance as of September 27, 1996, having
been repaid with a portion of the proceeds of both public offerings. In March
1996, the Company replaced its existing secured bank line of credit with the
$10.0 million unsecured bank line of credit, which bears interest at three
quarter percent below the bank's prime rate and expires March 1997.
A portion of the net proceeds of the initial public offering was used to repay
the revolving bank line of credit and the term debt and to redeem the $4.0
million of 11.5% Subordinated Debentures issued to certain of the Summit
Investors. The reduction in these borrowings and the increase in stockholders'
equity as a result of this offering decreased the Company's financial leverage.
The Company expects to renew its revolving line of credit when it expires in
March 1997 and believes it could increase the amount of this credit facility if
needed.
The Company believes that its existing cash balances, supplemented by borrowings
under the revolving line of credit, are adequate to meet planned operating and
capital expenditure needs at least through 1996. However, if the Company were
to make any significant acquisitions for cash, it may be necessary for the
Company to obtain additional debt or equity financing.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
<PAGE>
WILMAR INDUSTRIES, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1+ Stock Purchase Agreement dated June 28, 1996, among the Company,
Jerry Mendelson, Brian Mendelson, Ellis Atkinson, the HMA
Enterprises, Inc. Employee Stock Ownership Trust, and the
Mendelson Charitable Remainder Trust.
10.2+ Registration Rights Agreement dated June 30, 1996, among the
Company, Jerry Mendelson, Brian Mendelson, Ellis Atkinson, and
the Mendelson Charitable Remainder Trust.
11.1* Computation of Earnings Per Share
27.1* Financial Data Schedule
___________________
* Filed herewith
+ Incorporated by reference to the Company's Current Report on Form 8-K, dated
July 8, 1996
(b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K dated July 8, 1996, reporting
the Company's acquisition of HMA Enterprises, Inc.
On August 30, 1996, the Company filed Amendment No. 1 to the Current Report
on Form 8-K, and included consolidated financial statements of HMA Enterprises,
Inc., and its subsidiaries, as well as pro forma financial statement information
reflecting the effect of the acquisition.
<PAGE>
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.
WILMAR INDUSTRIES, INC.
BY: /s/ Michael T. Toomey
----------------------------------------
Michael T. Toomey
Chief Financial Officer and Treasurer
(Duly authorized officer and
principal financial officer)
Date: November 12, 1996
<PAGE>
EXHIBIT 11.1
Wilmar Industries, Inc.
Statement regarding Computation of Net Income Per Share
PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 29,1995 SEPTEMBER 27, 1996 SEPTEMBER 29,1995 SEPTEMBER 27, 1996
------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Income Before Income Taxes $ 1,535,715 $ 2,955,878 $ 3,654,771 $ 6,585,864
Provision for Income Taxes (2) 615,000 1,099,000 1,465,000 2,551,000
--------------- ---------------- --------------- ----------------
Net Income (2) $ 920,715 $ 1,856,878 $ 2,189,771 $ 4,034,864
=============== ================ =============== ================
Weighted Average Shares Outstanding 5,320,000 12,020,511 5,432,000 10,466,024
Common Stock Equivalents :
Preferred Stock 2,225,258 1,708,569 238,276
Items issued within one year of IPO: (1)
Common Stock 683,333
Stock Options 172,327 272,630 172,327 276,106
--------------- ---------------- --------------- ----------------
Total Weighted Average Shares Outstanding 7,717,585 12,293,141 7,996,229 10,980,406
=============== ================ =============== ================
Net Income Per Share (2) $ 0.12 $ 0.15 $ 0.27 $ 0.37
=============== ================ =============== ================
</TABLE>
(1) Common stock issued and stock options granted at prices lower then the
assumed initial public offering price within a one year period prior to an
initial public offering are included in the calculation (using the treasury
stock method and the assumed initial public offering price) as if they were
outstanding for all periods presented (See Notes 2 and 6).
(2) The provision for income taxes, net income, and net income per share amounts
reflected for the period ended March 31, 1995 represents pro forma amounts as if
the Company had been subject to federal and state income taxation as a C
Corporation since inception.
FULLY DILUTED EARNINGS PER SHARE
Fully diluted earnings per share differs from primary earnings per share by less
than 3%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 38,632,007
<SECURITIES> 4,122,641
<RECEIVABLES> 17,819,795
<ALLOWANCES> (754,800)
<INVENTORY> 17,319,432
<CURRENT-ASSETS> 78,430,158
<PP&E> 4,593,784
<DEPRECIATION> (2,184,815)
<TOTAL-ASSETS> 87,133,228
<CURRENT-LIABILITIES> 14,311,059
<BONDS> 0
0
0
<COMMON> 95,978,776
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 87,133,228
<SALES> 71,435,451
<TOTAL-REVENUES> 71,435,451
<CGS> 50,228,909
<TOTAL-COSTS> 14,773,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153,148
<INCOME-PRETAX> 6,585,864
<INCOME-TAX> 2,551,000
<INCOME-CONTINUING> 4,034,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,034,864
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
