<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 June 28, 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. O-27424
--------
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 July 31, 1996
was 10,442,160.
* 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, June 28,
1995 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 25,043 $ 4,245,176
Cash - Restricted 200,000 205,130
Cash - Investments
Accounts Receivable - trade, net of allowance
for doubtful accounts of $236,700 in 1995 and
$488,000 in 1996. 9,575,307 11,322,991
Inventory 12,699,376 13,741,648
Prepaid expenses and other current assets 244,798 481,011
Deferred income taxes 408,000 626,000
----------- -----------
Total current assets 23,152,524 30,621,956
PROPERTY AND EQUIPMENT, Net 1,337,308 1,534,352
OTHER ASSETS 2,380,672 3,486,536
----------- -----------
TOTAL ASSETS $26,870,504 $35,642,844
=========== ===========
</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, June 28,
1995 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Demand notes payable - bank $ 9,922,510 $
Current portion of long-term debt:
Banks 666,668
Related parties 2,107,050
Accounts Payable 7,889,405 6,982,751
Accrued expenses and other current liabilities 1,387,524 1,687,998
Accrued interest 212,823
Income taxes payable 1,020,991 859,241
------------ ------------
Total current liabilities 23,206,971 9,529,990
LONG-TERM DEBT - Net of current portion:
Banks 833,331
Related parties 833,872
Subordinated debentures 4,000,000
------------ ------------
Total liabilities 28,874,174 9,529,990
------------ ------------
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; 10,374,545 shares issued and
outstanding in 1996, 5,320,000 shares issued
and outstanding in 1995 124,231 51,277,122
Retained Earnings (accumulated deficit) (27,186,322) (25,164,268)
------------ ------------
Total stockholders' equity (deficit) (27,062,091) 26,112,854
------------ ------------
TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY $ 26,870,504 $ 35,642,844
============ ============
</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 Six For the Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 28, June 30, June 28,
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $14,624,974 $21,415,017 28,082,492 40,723,576
COST OF SALES 10,090,786 14,861,733 19,302,823 28,234,686
----------- ----------- ----------- -----------
Gross profit 4,534,188 6,553,284 8,779,669 12,488,890
OPERATING EXPENSES:
Operating and selling expenses 2,186,264 3,120,840 4,201,689 6,108,085
Corporate general and administrative expenses 893,179 1,479,815 1,952,991 2,721,860
----------- ----------- ----------- -----------
3,079,443 4,600,655 6,154,680 8,829,945
----------- ----------- ----------- -----------
Operating income 1,454,745 1,952,629 2,624,989 3,658,945
INTEREST EXPENSE (INCOME), NET 304,964 (51,745) 505,933 28,959
----------- ----------- ----------- -----------
Income before income taxes 1,149,781 2,004,374 2,119,056 3,629,986
PROVISION FOR INCOME TAXES (REFUNDS) 576,596 786,000 521,965(1) 1,452,000
----------- ----------- ----------- -----------
Net income $ 573,185 $ 1,218,374 1,597,091 2,177,986
=========== =========== =========== ===========
Net income per share $ 0.11 $ 0.21
=========== ===========
Weighted average shares outstanding 10,660,956 10,308,783
=========== ===========
PRO FORMA DATA
Income before income taxes $ 1,149,781 $ 2,119,056
Provision for income taxes 461,000(2) 850,000(2)
----------- -----------
Pro forma net income 688,781(2) 1,269,056(2)
=========== ===========
Pro forma net income per share $ 0.09(2) $ 0.16(2)
=========== ===========
Weighted average shares outstanding 7,674,793 8,135,549
=========== ===========
</TABLE>
(1) Upon termination of its S Corporation status on March 1, 1995, the Company
became subject to federal income taxes and certain additional state income
taxes and, in connection therewith, recorded a deferred tax asset of
approximately $230,000 in accordance with FAS 109.
(2) Prior to March 1, 1995, the Company elected to be taxed as an S Corporation
for federal (and certain state) income tax purposes. Pro forma information
has been computed as if the Company had been subject to federal income taxes
and all applicable state corporate income taxes for each period presented.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<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
Net income 2,177,986 2,177,986
----------- ----------- ------------ -----------
BALANCE, JUNE 28, 1996 10,374,545 $51,277,122 $(25,164,268) $26,112,854
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
WILMAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------------
June 30, 1995 June 28, 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 1,597,091 $ 2,177,986
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 120,030 235,764
Deferred income taxes (230,000) (218,000)
Gain on sale of property and equipment (2,036)
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable (1,589,330) (1,296,091)
Inventory (788,291) (705,592)
Prepaid expenses and other current assets 147,039 (194,483)
Other assets (5,789) 141,493
Accounts Payable 682,092 (1,325,094)
Accrued expenses and other current liabilities 177,306 79,503
Accrued interest 185,724 (212,823)
Income taxes payable 100,000 (161,750)
------------ ------------
Net cash provided by (used in) operating activities 395,872 (1,481,123)
------------ ------------
INVESTING ACTIVITIES:
Purchase of property and equipment (170,246) (306,172)
Proceeds from sale of property and equipment 3,000
Acquisition of businesses, including escrows (1,570,679)
------------ ------------
Net cash used in investing activities (170,246) (1,873,851)
------------ ------------
FINANCING ACTIVITIES:
Net proceeds (repayment) of demand notes payable - Bank 1,997,665 (9,922,510)
Principal payments on long-term debt:
Banks (396,301) (1,499,999)
Related parties (50,494) (2,940,922)
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
Issuance of Series A Preferred Stock 12,945,000
Distributions to stockholders (3,722,710)
------------ ------------
Net cash provided by (used in) financing activities (288,840) 7,575,107
------------ ------------
NET (DECREASE) INCREASE IN CASH (63,214) 4,220,133
CASH, BEGINNING OF PERIOD 91,117 25,043
------------ ------------
CASH, END OF PERIOD $ 27,903 $ 4,245,176
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 320,847 $ 356,325
============ ============
Income taxes $ 651,965 $ 1,831,750
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Accretion of mandatorily redeemable Series A Senior and
Series B Junior Preferred Stock redemption values $ 580,565 $ 155,932
Conversion of Series B Junior Preferred stock into
454,545 shares of Common Stock $ -- $ 5,000,000
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<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 subsidiary One Source
Supply, Inc. from November 17, 1995, the date of its acquisition and its
subsidiary Mile High Maintenance Supply, Inc. from May 10, 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 issues 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 - 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:
<TABLE>
<S> <C>
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
</TABLE>
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.
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):
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note 3 - Initial Public Offering - Continued
- --------------------------------------------
<TABLE>
<CAPTION>
As Pro Forma
Reported (Unaudited)
--------- -----------
<S> <C> <C>
Current assets $ 23,153 $30,823
Property and equipment, net 1,337 1,337
Other assets 2,381 2,133
-------- -------
Total Assets $ 26,871 $34,293
======== =======
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) 23,996
-------- -------
Total liabilities, mandatorily redeemable
preferred stock and stockholders equity $ 26,871 $34,293
======== =======
</TABLE>
Note 4 - Acquisitions
- ---------------------
During May 1996, the Company acquired the net assets of Sun Valley Maintenance
Supply, Inc. and 100% of the capital stock of Mile High Maintenance Supply, Inc.
for a combined purchase price of $1.6 million. Goodwill recorded in connection
with these acquisitions totaled $1.2 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 June 30, 1995 and
$155,932 and $580,565 for the six months ended June 28, 1996 and June 30, 1995,
respectively, because the calculation assumes the related Common Stock was
outstanding in lieu of the Preferred Stock.
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note 6 - Computation of Net Income Per Share and Pro Forma Net Income Per Share
- -------------------------------------------------------------------------------
- - Continued
- -----------
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 July 31, 1996, the Company completed a public offering of 3,770,000 shares of
common stock closed at a price of $17.875 per share. Of the shares offered,
2,000,000 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 $35,970,000. In connection with the offering,
the Company granted the underwriters an option, exercisable not later than
August 29, 1996, to purchase an additional 565,500 shares of common stock at the
price to the public, less underwriters discounts and commissions.
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
the Company's stock, plus contingent consideration to the owners based on the
future performance of HMA.
<PAGE>
WILMAR INDUSTRIES, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Six Months Ended June 28, 1996 Compared to Six Months Ended June 30, 1995
Net Sales. Net sales increased by $12.6 million, or 45.0%, to $40.7 million for
the six months ended June 28, 1996 from $28.1 million for the corresponding
period in 1995. Of this increase, 33.8% was attributable to higher sales volumes
shipped from distribution centers open for all of both periods, and the balance
was attributable to the two distribution centers (Columbus and Seattle) opened
between August 1, 1995 and December 29, 1995 and the acquisitions of One Source
Supply Inc. ("One Source"), Mile High Maintenance Supply, Inc. ("Mile High") and
the assets of Sun Valley Maintenance Supply , Inc. ("Sun Valley") which occurred
on November 17, 1995, May 10, 1996 and May 28, 1996, respectively. The higher
net sales from distribution centers open during all of both periods resulted
primarily from the increased experience of the Company's direct sales and
telesales forces and increased sales to national accounts. The Company's sales
force at the end of the second quarter of 1996 was 89, an increase of 34 when
compared with the corresponding quarter of 1995. Price increases during both
periods were modest and made only on selected items. During the six months ended
June 28, 1996, Wilmar generated approximately $905,000 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
30.7% for the six months ended June 28, 1996 compared to 31.3% for the
corresponding period in 1995. This decrease in the gross margin resulted from
increased delivery expenses associated with "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) to new markets, higher relative
occupancy costs relating to the operation of two immature, less efficient
distribution centers opened after June of 1995 (Columbus and Seattle) and a
decrease in vendor allowances and discounts when compared with the first six
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 $1.9 million, or 45.4%, to $6.1 million for the six months ended June 28,
1996 from $4.2 million for the corresponding period in 1995. As a percentage of
net sales, these expenses represented 15.0% for the six months ended June 28,
1996 and June 30, 1995. The relative increase resulted primarily from increased
commissions related to higher sales volumes, higher relative costs associated
with the distribution centers opened after the first quarter of 1995, the
distribution centers acquired from One Source (Miami), Mile High (Denver), and
Sun Valley (Las Vegas) and an expanded sales force and higher operating costs
associated with increased sales volumes at the other distribution centers.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $769,000, or 39.4%, to $2.7 million for the
six months ended June 28, 1996 from $2.0 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 six 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 6.7% for the six months ended June
28, 1996 compared to 6.2% for the corresponding period in 1995.
Operating Income. Operating income increased by $1.0 million, or 39.4%, to $3.6
million for the six months ended June 28, 1996 from $2.6 million for the
corresponding period in 1995. As a percentage of net sales, operating income was
9.0% for the six months ended June 28, 1996 compared to 9.3% for the
corresponding period in 1995. Excluding the one-time expenses associated with
the 1995 Recapitalization, operating income would have increased by $827,000, or
29.2% from the six months of 1995 to the first six months of 1996. As a
percentage of net sales, operating income (excluding the 1995 Recapitalization
expenses) would have been 10.1% for the six months in 1995 compared to 9.0% for
the first six months of 1996.
Interest Expense (Income), Net. Net interest expense decreased by $477,000 to
$29,000 for the six months ended June 28, 1996 from $506,000 for the
corresponding period in 1995 as a result of the reduction in debt made from the
proceeds of the initial public offering.
<PAGE>
WILMAR INDUSTRIES, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations, Continued
Results of Operations
Three Months Ended June 28, 1996 Compared to Three Months Ended June 30, 1995
Net Sales. Net sales increased by $6.8 million, or 46.4%, to $21.4 million for
the quarter ended June 28, 1996 from $14.6 million for the corresponding quarter
in 1995. Of this increase, 31.0% was attributable to higher sales volumes
shipped from distribution centers open for all of both periods, and the balance
was attributable to the two distribution centers (Columbus and Seattle) opened
between August 1, 1995 and December 29, 1995 and the acquisitions of One Source
Supply, Inc., ("One Source"), Mile High Maintenance Supply, Inc. ("Mile High")
and the assets of Sun Valley Maintenance Supply, Inc. ("Sun Valley") which
occurred on November 17, 1995, May 10, 1996 and May 28, 1996 respectively. The
higher net sales from distribution centers open during all of both periods
resulted primarily from the increased experience of the Company's direct sales
and telesales forces and increased sales to national accounts. Price increases
during both quarters were modest and made only on selected items. During the
quarter ended June 28, 1996, Wilmar generated approximately $469,000 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
30.6% for the quarter ended June 28, 1996 compared to 31.0% for the
corresponding quarter in 1995. This decrease in the gross margin resulted from
increased delivery expenses associated with "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) 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).
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 $935,000, or 42.7%, to $3.1 million for the quarter ended June 28, 1996 from
$2.2 million for the corresponding quarter in 1995. As a percentage of net
sales, these expenses represented 14.6% for the quarter ended June 28, 1996
compared to 15.0% for the corresponding quarter in 1995. The relative increase
resulted primarily from increased commissions related to higher sales volumes,
costs associated with the distribution centers opened after the first quarter of
1995, the distribution centers acquired from One Source (Miami), Mile High
(Denver) , and Sun Valley (Las Vegas) and an expanded sales force and higher
operating costs associated with increased sales volumes at the other
distribution centers.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $587,000, or 65.7%, to $1.5 million for the
quarter ended June 28, 1996 from $893,000 for the corresponding quarter in 1995,
primarily as a result of the increased staffing required to manage a larger
volume of business. Corporate general and administrative expenses as a
percentage of net sales were 6.9% for the quarter ended June 28, 1996 compared
to 6.1% for the corresponding quarter in 1995.
Operating Income. Operating income increased by $498,000, or 34.2%, to $2.0
million for the quarter ended June 28, 1996 from $1.5 million for the
corresponding quarter in 1995. As a percentage of net sales, operating income
was 9.1% for the quarter ended June 28, 1996 compared to 9.9% for the
corresponding quarter in 1995.
Interest Expense (Income), Net. Net interest expense decreased by $357,000 to
$52,000 of net interest income for the quarter ended June 28, 1996 from $305,000
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.
<PAGE>
WILMAR INDUSTRIES, INC.
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 3,770,000
shares of common stock (of which the Company issued 2,000,000 shares) for
$17.875 per share resulting in net proceeds to the Company (after deducting
underwriters' discounts and issuance costs) of $35,970,000.
Cash used in operating activities was $1.5 million during the six months ended
June 28, 1996 compared to $396,000 of cash provided by operating activities
during the corresponding period in 1995. Cash used in operating activities
during the six months ended June 28, 1996 consisted of $2.2 million of net
income before depreciation and amortization and other non-cash charges, offset
by $3.7 million of changes in operating assets and liabilities primarily
resulting from a $1.3 million decrease in accounts payable and increases in the
Company's accounts receivable and inventory of $2.0 million, consistent with its
higher volume of business.
Cash used in investing activities during the six months ended June 28, 1996 was
$1.9 million, related to the acquisitions of Mile High and Sun Valley and the
purchase of property and equipment compared to $170,000 for the corresponding
period in 1995. Cash provided by financing activities during the first quarter
of 1996 was $7.6 million, consisting primarily of the net proceeds of an initial
public offering less the repayment of all debt and the redemption of the
outstanding preferred stock.
Capital expenditures were $306,000 for the six months ended June 28, 1996
compared to $170,000 for the corresponding period in 1995. The Company expects
to spend approximately $150,000 on capital expenditures in the remaining two
quarters of fiscal 1996 primarily for office, computer and distribution center
equipment. Additionally, the Company expects to spend approximately $500,000 in
the third quarter to equip its new Philadelphia distribution center in
connection with a lease agreement entered into on April 29, 1996. Historically,
capital expenditures have been primarily for similar items, 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 June 28, 1996, having been
repaid with a portion of the proceeds of the initial public offering. 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.
<PAGE>
WILMAR INDUSTRIES, INC.
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
----------
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company did not file a report on Form 8-K during the quarter
ended June 28, 1996.
13
<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: August 11, 1996
14
<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 Six Months Six Months
Ended Ended Ended Ended
June 30, 1995 June 28, 1996 June 30, 1995 June 28, 1996
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Income Before Income Taxes $1,149,781 $ 2,004,374 2,119,056 $3,629,986
Provision for Income Taxes (2) 461,000 786,000 850,000 1,452,000
----------- ----------- ---------- -----------
Net Income (2) $ 688,781 $ 1,218,374 $1,269,056 $2,177,986
=========== =========== ========== ==========
Weighted Average Shares Outstanding 5,320,000 10,374,545 5,488,000 9,672,526
Common Shares Equivalents:
Preferred Stock 2,182,466 1,450,222 390,486
Items issued within one year of IPO: (1)
Common Stock 1,025,000
Stock Options 172,327 286,411 172,327 245,771
----------- ----------- ---------- -----------
Total Weighted Average Shares Outstanding 7,674,793 10,660,956 8,135,549 10,308,783
========== =========== ========== ===========
Net Income Per Share (2) $ 0.09 $ 0.11 $ 0.16 $ 0.21
========== ========== ========== ===========
</TABLE>
(1) 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 (see Notes 2 and 4).
(2) The provision for income taxes, net income, and net income per share
amounts reflected for the period ended March 31, 1995 represent 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> 6-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> JUN-28-1996
<CASH> $4,450,306
<SECURITIES> $0
<RECEIVABLES> $11,810,991
<ALLOWANCES> ($488,000)
<INVENTORY> $13,741,648
<CURRENT-ASSETS> $30,621,956
<PP&E> $3,028,546
<DEPRECIATION> ($1,494,194)
<TOTAL-ASSETS> $35,642,844
<CURRENT-LIABILITIES> $9,529,990
<BONDS> $0
$0
$0
<COMMON> $51,277,122
<OTHER-SE> ($25,164,268)
<TOTAL-LIABILITY-AND-EQUITY> $35,642,844
<SALES> $40,723,576
<TOTAL-REVENUES> $40,723,576
<CGS> $28,234,686
<TOTAL-COSTS> $8,829,945
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $168,169
<INTEREST-EXPENSE> $28,959
<INCOME-PRETAX> $3,629,986
<INCOME-TAX> $1,452,000
<INCOME-CONTINUING> $2,177,986
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $2,177,986
<EPS-PRIMARY> $0.00
<EPS-DILUTED> $0.21
</TABLE>
