<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 26, 1997
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
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, 1997 were 13,335,754.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 26, December 27,
1997 1996
------------------ ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 31,943,545 $ 38,228,710
Cash - restricted 280,243 719,185
Investments - 3,927,276
Accounts Receivable - trade, net of allowance for doubtful accounts
of $1,551,300 in 1997 and $ 806,300 in 1996. 27,594,299 16,140,693
Inventory 21,847,313 17,669,441
Prepaid expenses and other current assets 456,319 656,588
Deferred income taxes 1,253,000 768,000
------------------ ------------------
Total current assets 83,374,719 78,109,893
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $3,745,811 in 1997
$2,486,092 in 1996. 3,681,271 2,460,748
GOODWILL, net of accumulated amortization of $293,375 in 1997 and $ 100,756 in 1996 18,385,102 4,932,050
OTHER ASSETS 4,877,047 2,806,452
------------------ ------------------
TOTAL ASSETS $ 110,318,139 $ 88,309,143
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 600,000 $ 285,000
Accounts payable 16,196,368 8,537,019
Accrued expenses and other current liabilities 5,270,374 2,053,350
Income taxes payable 203,417 1,934,160
------------------ ------------------
Total current liabilities 22,270,159 12,809,529
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COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY :
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued
Common stock, no par value - 50,000,000 shares authorized;
13,335,754 shares issued and outstanding in 1997
13,048,371 shares issued and outstanding in 1996 102,793,984 96,978,776
Retained Earnings (accumulated deficit) (14,746,004) (21,479,162)
------------------ ------------------
Total stockholders' equity 88,047,980 75,499,614
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 110,318,139 $ 88,309,143
================== ==================
</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 26, September 27, September 26, September 27,
1997 1996 1997 1996
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
SALES $ 40,184,412 $ 30,711,875 $ 109,802,979 $ 71,435,451
COST OF SALES 28,472,789 21,994,223 77,326,297 50,228,909
---------------- ---------------- ---------------- ----------------
Gross profit 11,711,623 8,717,652 32,476,682 21,206,542
OPERATING EXPENSES:
Operating and selling expenses 5,588,799 3,977,333 15,359,799 10,085,418
Corporate general and administrative expenses 2,434,389 1,966,548 7,355,114 4,688,408
Non-recurring severance expense 259,000 259,000
---------------- ---------------- ---------------- ----------------
8,282,188 5,943,881 22,973,913 14,773,826
---------------- ---------------- ---------------- ----------------
Operating income 3,429,435 2,773,771 9,502,769 6,432,716
INTEREST (INCOME) EXPENSE, NET (413,394) (182,107) (1,221,689) (153,148)
---------------- ---------------- ---------------- ----------------
Income before income taxes 3,842,829 2,955,878 10,724,458 6,585,864
PROVISION FOR INCOME TAXES 1,428,400 1,099,000 3,991,300 2,551,000
---------------- ---------------- ---------------- ----------------
Net income $ 2,414,429 $ 1,856,878 $ 6,733,158 $ 4,034,864
================ ================ ================ ================
Net income per share $ 0.18 $ 0.15 $ 0.50 $ 0.37
================ ================ ================ ================
Weighted average shares outstanding 13,476,579 12,293,141 13,386,268 10,980,406
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
WILMAR INDUSTRIES, INC.
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
Issuance of Common Stock - Aaron Acquisition 44,346 1,000,000 1,000,000
Net income 5,863,092 5,863,092
-------------- --------------- ---------------- -----------------
BALANCE, DECEMBER 27, 1996 13,048,371 $ 96,978,776 $ (21,479,162) $ 75,499,614
Excercised Stock Options 131,485 1,305,796 1,305,796
Tax Benefit from Excercised Stock Options 660,000 660,000
Issuance of Common Stock - Mile High Acquisition 4,652 100,024 100,024
Issuance of Common Stock - Management Supply Acquisition 151,246 3,749,388 3,749,388
Net income 6,733,158 6,733,158
-------------- --------------- ---------------- -----------------
BALANCE, SEPTEMBER 26, 1997 13,335,754 $ 102,793,984 $ (14,746,004) $ 88,047,980
============== =============== ================ =================
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
<PAGE>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 26, 1997 September 27, 1996
--------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES :
Net Income $ 6,733,158 $ 4,034,864
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 931,716 457,529
Deferred income taxes (260,000) (209,000)
Tax benefit from excercise of Stock Options 660,000 -
Gain on disposition of property and equipment (237)
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable (6,576,004) (3,744,841)
Inventory (1,383,658) (773,584)
Prepaid expenses and other current assets 238,376 (105,980)
Other assets (118,965) 123,982
Accounts Payable 5,181,876 (2,087,849)
Accrued expenses and other current liabilities 1,944,766 592,339
Accrued interest (212,823)
Income taxes payable (2,129,743) 220,619
--------------------- --------------------
Net cash provided by (used in) operating activities 5,221,522 (1,704,981)
--------------------- --------------------
INVESTING ACTIVITIES :
Purchase of property and equipment (1,295,984) (976,731)
Proceeds from sale of property and equipment 3,750
Proceeds from (purchase of) short-term investments 3,927,276 (4,122,641)
Acquisitions of businesses, including escrow (15,267,275) (6,090,682)
Proceeds from escrow settlement 82,000 -
--------------------- --------------------
Net cash used in investing activities (12,553,983) (11,186,304)
--------------------- --------------------
FINANCING ACTIVITIES :
Net proceeds (repayments) of demand notes payable - Bank (9,922,510)
Repayment of note payable (260,000) -
Principal payments on long-term debt :
Banks (1,517,564)
Related parties (2,940,922)
Capital leases (12,132)
Proceeds from long-term Capital leases 65,606
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)
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
Net proceeds from exercise of stock options 1,305,796 -
--------------------- --------------------
Net cash provided by financing activities 1,045,796 50,790,670
--------------------- --------------------
NET (DECREASE) INCREASE IN CASH (6,286,665) 37,899,385
CASH, BEGINNING OF PERIOD 38,230,210 25,043
--------------------- --------------------
CASH, END OF PERIOD $ 31,943,545 $ 37,924,428
===================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 25,748 $ 384,081
===================== ====================
Income taxes $ 5,586,850 $ 2,449,352
===================== ====================
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Accretion of mandatorily redeemable Series A Senior and
Series B Junior Preferred Stock redemption values $ 155,932
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
Management Supply Company $ 3,749,388
Mile High Maintenance Supply $ 100,024
Issuance of Note in connection with the purchase of :
Pier-Angeli $ 75,000 -
Management Supply Company $ 500,000
</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 subsidiaries. Material
inter-company balances and transactions have been eliminated.
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 26,
1997. 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 27, 1996.
During the third quarter of 1997, the Company negotiated and settled two
employee severance contracts. Other than the impact on current earnings, the
Company believes operations will not be negatively impacted as a result of these
actions.
Note 2 - Accounting Policies
- ----------------------------
Earnings Per Share - In February, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per
Share". This pronouncement will be effective for financial statements for both
interim and annual periods ending after December 15, 1997. The Company
anticipates that this statement will not have a material impact on its financial
statements.
Disclosures About Segments of an Enterprise and Related Information - In June
1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." This statement which establishes standards for the
reporting of information about operating segments and requires the reporting of
selected information about operating segments in interim financial statements,
is effective for fiscal years beginning after December 15, 1997, although
earlier application is permitted. Reclassification of segment information for
earlier periods presented for comparative purposes is required under SFAS No.
131. The Company does not expect adoption of this statement to result in
significant changes to its presentation of financial data by business segment.
The Company expects to adopt SFAS No. 131 effective January 1, 1998.
Note 3 - Acquisitions
- ---------------------
In January 1997, the Company acquired certain assets of Pier-Angeli Group, Inc.
("Pier-Angeli"), a distributor of plumbing and electrical supplies primarily to
the multi-family industry or apartment housing market. The total purchase price
of the acquisition was paid in cash, including costs of acquisition. Goodwill
and other intangibles recorded in connection with this acquisition are being
amortized on a straight-line basis over 3 to 30 years.
In August, 1997, the Company acquired certain assets of Lindley Plumbing and
Supply Company ("Lindley"), a distributor of plumbing supplies primarily to the
multi-family industry or apartment housing market. The total purchase price of
the acquisition was paid in cash. Goodwill and other intangibles recorded in
connection with this acquisition are being amortized on a straight-line basis
over 3 to 40 years.
In September, 1997, the Company acquired 100% of the capital stock of Management
Supply Company ("MSC"), a distributor of repair and maintenance supplies, based
in Farmington Hills, Michigan. The purchase price of this acquisition consisted
of cash and common stock of the company and has been allocated to the assets
acquired based upon their estimated fair market values. The accompanying
financial statements reflect the preliminary allocation of purchase price as the
purchase price allocation has not been finalized. Goodwill and other intangibles
recorded in connection with this acquisition are being amortized on a
straight-line basis over 3 to 40 years.
Each of the Acquisitions described above have been accounted for using the
Purchase Method. Goodwill recorded in these transactions totaled $12.8 million.
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note 4 - Income Taxes
- ---------------------
The Company provides for income taxes 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 5 - Computation of Net Income Per Share
- --------------------------------------------
Net income per share represents net income 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 is not reduced by the provision for accretion of Preferred
Stock redemption values of $ 155,932 for the nine months ended September 27,
1996 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 6 - 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, financial position or cash flows.
<PAGE>
WILMAR INDUSTRIES, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
This document contains certain forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements include certain information
relating to future growth plans, the anticipated costs associated with those
plans, the Company's liability and capital resources, as well as information
contained elsewhere in this report where statements are preceded by, followed by
or include the words "believes," "expects," "anticipates" or similar
expressions. For such statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including without limitation, general market conditions, increased
competition, and factors discussed elsewhere in this report and in the documents
incorporated herein by reference. The following discussion should be read in
conjunction with the interim financial statements and the notes thereto
contained elsewhere in this report on Form 10-Q.
Results of Operations
Nine Months Ended September 26, 1997 Compared to Nine Months Ended September 27,
1996.
Net Sales. Net sales increased by $ 38.4 million, or 53.7%, to $ 109.8 million
for the nine months ended September 26, 1997 from $ 71.4 million for the
corresponding period in 1996. This increase was primarily attributable to the
acquisitions of Mile High Maintenance Supply, Inc. ("Mile High"), HMA
Enterprises, Inc. ("HMA"), Management Supply Company ("MSC"), and certain assets
of Sun Valley Maintenance Supply, Inc. ("Sun Valley"), Aaron Distributing, Inc.
("Aaron"), Pier-Angeli Group, Inc. ("Pier-Angeli"), and Lindley Plumbing and
Supply Company ("Lindley"), which occurred in May, 1996, July, 1996, September,
1997, May, 1996, November, 1996, January, 1997, and August, 1997, respectively.
In addition, the maturation of the existing sales force, the Company's telesales
effort, increased sales to national accounts and a continuing 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 1997 was 154, an increase of 41
when compared with the corresponding quarter of 1996. Sales attributable to the
existing sales force (salesmen employed for all of both periods) increased 21%.
Price increases during both periods were modest and made only on selected items.
During the nine months ended September 26, 1997, Wilmar generated approximately
$3.5 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
29.6% for the nine months ended September 26, 1997 compared to 29.7% for the
corresponding period in 1996. This expected 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 equipment and major appliance sales. In addition,
the acquisition of MSC, whose historic gross margins reflects their higher
volume in lower margin major appliances, the increase in delivery expenses
associated with "line-hauling" to new markets, as well as higher relative
occupancy costs relating to the operation of the Company's new distribution
centers in Chicago, Dallas, Phoenix and Charlotte also contributed to the
decrease in gross margin when compared with the first nine months of 1996.
Operating and Selling Expenses. Operating and selling expenses consist of labor
and other costs associated with operating a distribution center as well as
selling expenses and commissions. Operating and selling expenses increased by
$5.3 million, or 52.3%, to $ 15.4 million for the nine months ended September
26, 1997 from $ 10.1 million for the corresponding period in 1996. As a
percentage of net sales, these expenses represented 14.0% for the nine months
ended September 26, 1997 compared to 14.1% for the corresponding period in 1996.
The decrease resulted primarily from the acquisition of HMA, which operates
three mature distribution centers and employs a mature sales force. The
improvement resulting from the HMA acquisition was offset by the Company's
continual 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
Nine Months Ended September 26, 1997 Compared to Nine Months Ended
September 27, 1996
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $ 2.7 million or 56.9%, to $7.4 million for
the nine months ended September 26, 1997 from $4.7 million for the corresponding
period in 1996. This increase is primarily the result of the enhanced staffing
required to manage a larger volume of business and an increase in amortization
expense attributable to the acquisitions completed since the first quarter of
1996. As a percentage of net sales, these expenses represented 6.7% for the nine
months ended September 26, 1997 compared to 6.6% for the corresponding period in
1996. The Company expenses all distribution center pre-opening costs when
incurred. During the first nine months of 1997, the Company incurred
approximately $ 292,000 in expenses related to the assimilation of HMA, Aaron
and Pier-Angeli and pre-opening expenses for its new Chicago, Dallas, Phoenix
and Charlotte distribution centers, (the "assimilation and pre-opening
expenses"). Excluding these expenses, corporate general and administrative
expenses as a percentage of net sales would have been 6.4% for the nine months
ended September 26, 1997 compared to 6.5% for the corresponding period in 1996.
Operating Income. Operating income increased by $3.1 million, or 47.7%, to $9.5
million for the nine months ended September 26, 1997 from $6.4 million for the
corresponding period in 1996. As a percentage of net sales, operating income was
8.7% for the nine months ended September 26, 1997 compared to 9.0% for the
corresponding period in 1996. During the third quarter of 1997, operating income
was impacted by a non-recurring severance charge of $259,000. Excluding the non-
recurring charge, as well as the assimilation and pre-opening expenses,
operating income would have increased by $3.6 million, or 55.0% for the first
nine months of 1997. As a percentage of net sales, operating income, excluding
these expenses, would have been 9.2% for the first nine months in 1997 compared
to 9.1% for the first nine months of 1996.
Interest Income (Expense) Net. Net interest income increased by $ 1.1 million to
$1.2 million of net interest income for the nine months ended September 26, 1997
from $ 153,000 of net interest income for the corresponding period in 1996. This
occurred as a result of the reduction in debt made from the proceeds of the
initial public offering and the investment income from the proceeds of the
secondary public offering completion in July, 1996.
Three Months Ended September 26, 1997 Compared to Three Months Ended
September 27, 1996
Net Sales. Net sales increased by $ 9.5 million, or 30.8%, to $40.2 million for
the three months ended September 26, 1997 from $30.7 million for the
corresponding period in 1996. This increase was primarily attributable to the
acquisitions of MSC, and certain assets of Aaron , Pier-Angeli , and Lindley. In
addition, the maturation of the existing sales force, the Company's telesales
effort, increased sales to national accounts and a continuing investment in
"line-hauling", also contributed significantly to the Company's growth. Price
increases during both periods were modest and made only on selected items.
During the three months ended September 26, 1997, 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.
<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 September 26, 1997 Compared to Three Months Ended
September 27, 1996,
Gross Profit. Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs. As a percentage of net sales, gross profit was
29.1% for the three months ended September 26, 1997 compared to 28.4% for the
corresponding period in 1996. The increase resulted primarily from improved
margins in the Texas region. This improvement occurred through the realization
of the Company's purchasing power, as well as the decision to have HMA exit the
HVAC contractor business in late 1996. Increased delivery expenses associated
with "line-hauling" to new markets, as well as higher relative occupancy costs
relating to the operation of the Company's new distribution centers in Chicago,
Dallas and Charlotte offset the increase in gross margin when compared with the
three months ended September 27, 1996.
Operating and Selling Expenses. Operating and selling expenses consist of labor
and other costs associated with operating a distribution center as well as
selling expenses and commissions. Operating and selling expenses increased by $
1.6 million, or 40.5%, to $ 5.6 million for the three months ended September 26,
1997 from $ 4.0 million for the corresponding period in 1996. As a percentage of
net sales, these expenses represented 13.9% for the three months ended September
26, 1997 compared to 13.0% for the corresponding period in 1996. The increase
was a result of the Company's investment in new distribution centers and the
hiring of 41 additional sales representatives.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $468,000 or 23.8%, to $ 2.4 million for the
three months ended September 26, 1997 from $ 2.0 million for the corresponding
period in 1996. This increase is primarily the result of the enhanced staffing
required to manage a larger volume of business and an increase in amortization
expense attributable to the acquisitions completed since the first quarter of
1996. As a percentage of net sales, these expenses represented 6.1% for the
three months ended September 26, 1997 compared to 6.4% for the corresponding
period in 1996. The Company expenses all distribution center pre-opening costs
when incurred. During the three months ended September 26, 1997, the Company
incurred approximately $ 91,000 in expenses related to the assimilation of HMA
and pre-opening expenses for its new Phoenix distribution center. Excluding the
assimilation and pre-opening expenses, corporate general and administrative
expenses, as a percentage of net sales, would have been 5.8% for the three
months ended September 26, 1997, compared to 6.3% for the corresponding period
in 1996.
Operating Income. Operating income increased by $ 656,000, or 23.6%, to $ 3.4
million for the three months ended September 26, 1997 from $ 2.8 million for the
corresponding period in 1996. As a percentage of net sales, operating income was
8.5% for the three months ended September 26, 1997 compared to 9.0% for the
corresponding period in 1996. During the third quarter of 1997, operating income
was impacted by a non-recurring severance charge of $259,000. Excluding the
non-recurring charge, assimilation and pre-opening expenses, operating income
would have increased by $ 964,000, or 34.2% for the three months ended September
26, 1997. As a percentage of net sales, operating income (excluding the
non-recurring charge, assimilation and pre-opening expenses) would have been
9.4% for the three months ended September 26, 1997 compared to 9.2% for the
corresponding period in 1996.
Interest Income (Expense) Net. Net interest income increased by $ 231,000 to $
413,000 of net interest income for the three months ended September 26, 1997
from $ 182,000 of net interest income for the corresponding period in 1996. This
occurred as a result of the reduction in debt made from the proceeds of the
initial public offering and the investment income from the proceeds of the
secondary public offering completed in July 1996.
<PAGE>
WILMAR INDUSTRIES, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations, Continued
Liquidity and Capital Resources
Cash provided by operating activities was $3.8 million during the nine months
ended September 26, 1997 compared to $1.7 million of cash used in operating
activities during the corresponding period in 1996. Cash provided by operating
activities during the nine months ended September 26, 1997 consisted of $6.7
million of net income before adding back depreciation and amortization and other
non-cash charges. This amount was decreased $1.5 million by changes in operating
assets and liabilities primarily resulting from a $7.1 million increase in
accounts payable and accrued expenses offset by an increase in the accounts
receivable and inventory of $8.0 million, consistent with its higher volume of
business. Additionally, the Company's income tax liability was reduced by $1.7
million, net of the tax benefit from exercise of Stock Options.
Cash used in investing activities during the nine months ended September 26,
1997 was $12.6 million, consisting of $15.3 million related to the acquisition
of Pier-Angeli, Lindley and MSC, $3.9 million in proceeds from the sale of
short-term investments, and $1.3 million for the purchase of property and
equipment.
Cash provided by financing activities during the nine months ended September 26,
1997 was $1.0 million, consisting of $1.3 million of net proceeds from exercise
of stock options, reduced by $260,000 for the repayment of a note payable.
Capital expenditures were $ 1.3 million for the nine months ended September 26,
1997 compared to $977,000 for the corresponding period in 1996. The Company
spent approximately $598,000 during the nine months ended September 26, 1997 to
equip its new Philadelphia, Dallas and Charlotte distribution centers. A typical
distribution center requires a capital investment of approximately $150,000 to
$200,000 for equipment and leasehold improvements and an initial commitment of
approximately $250,000 for working capital (net of accounts payable attributable
to new inventory). The Company typically incurs expenses of approximately
$60,000 before a new distribution center becomes operational. The Company
intends to finance its future capital expenditures with cash flow from
operations and possibly with a portion of the previous public offerings, term
debt or capital leases.
Wilmar's credit facility consists of two unsecured bank lines of credit totaling
$16 million. These lines of credit had zero balances as of September 26, 1997.
In April 1997, the Company renewed an existing $10 million unsecured bank line
of credit, which bears interest at three quarter percent below the bank's prime
rate. The renewed credit facility will expire in June 1998. The Company believes
it could increase the amount of this credit facility if needed, although there
can be no assurance that it could do so on equally or more favorable terms.
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 1997. 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* Computation of Earnings Per Share
27* Financial Data Schedule
- -------------------
* Filed herewith
(b) Reports on Form 8-K
-------------------
The Company did not file a Form 8-K during the quarter ended September 26,
1997.
<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 10, 1997
<PAGE>
Exhibit 11
WILMAR INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 26, 1997 September 27, 1996 September 26, 1997 September 27, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income Before Income Taxes $ 3,842,829 $ 2,955,878 $ 10,724,458 $ 6,585,864
Provision for Income Taxes 1,428,400 1,099,000 3,991,300 2,551,000
----------------- ----------------- ----------------- -----------------
Net Income $ 2,414,429 $ 1,856,878 $ 6,733,158 $ 4,034,864
================= ================= ================= =================
Weighted Average Shares Outstanding 13,197,822 12,020,511 13,108,694 10,466,024
Common Stock Equivalents :
Preferred Stock 238,276
Items issued within one year of IPO: (1)
Common Stock
Stock Options 278,757 272,630 277,574 276,106
----------------- ----------------- ----------------- -----------------
Total Weighted Average Shares Outstanding 13,476,579 12,293,141 13,386,268 10,980,406
================= ================= ================= =================
Net Income Per Share $ 0.18 $ 0.15 $ 0.50 $ 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.
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-26-1997
<PERIOD-END> SEP-26-1997
<CASH> 32,223,788
<SECURITIES> 0
<RECEIVABLES> 29,145,599
<ALLOWANCES> (1,551,300)
<INVENTORY> 21,847,313
<CURRENT-ASSETS> 83,374,719
<PP&E> 7,427,082
<DEPRECIATION> (3,745,811)
<TOTAL-ASSETS> 110,318,139
<CURRENT-LIABILITIES> 22,270,159
<BONDS> 0
0
0
<COMMON> 102,793,984
<OTHER-SE> (14,746,004)
<TOTAL-LIABILITY-AND-EQUITY> 110,318,139
<SALES> 109,802,979
<TOTAL-REVENUES> 109,802,979
<CGS> 77,326,297
<TOTAL-COSTS> 77,326,297
<OTHER-EXPENSES> 22,973,913
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,221,689)
<INCOME-PRETAX> 10,724,458
<INCOME-TAX> 3,991,300
<INCOME-CONTINUING> 6,733,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,733,158
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
