<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 26, 1998
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
Yes X No ____________
--------
The number of shares of the registrant's common stock, no par value,
outstanding as of July 31, 1998 was 13,383,760.
<PAGE>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, December 26,
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 30,217,762 $ 30,723,746
Cash - restricted 290,503 283,655
Accounts Receivable - trade, net of allowance for doubtful accounts
of $1,443,300 in 1998 and $1,359,800 in 1997. 27,708,078 23,801,733
Inventory 32,055,286 24,979,935
Prepaid expenses and other current assets 1,288,076 898,255
Deferred income taxes 1,453,000 1,227,000
-------------- --------------
Total current assets 93,012,705 81,914,324
PROPERTY AND EQUIPMENT, net 3,898,361 3,540,889
GOODWILL, net of accumulated amortization of $698,318 in 1998 and $426,066 in 1997. 18,481,900 18,121,121
INTANGIBLE ASSETS AND OTHER, Net 4,852,530 4,538,971
-------------- --------------
TOTAL ASSETS $ 120,245,496 $ 108,115,305
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 700,000 $ 725,000
Accounts payable 18,002,870 13,244,918
Accrued expenses and other current liabilities 4,154,315 2,875,484
Income taxes payable 7,000 220,819
-------------- --------------
Total current liabilities 22,864,185 17,066,221
NOTES PAYABLE 500,000 500,000
-------------- --------------
Total liabilities 23,364,185 17,566,221
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;
13,381,577 shares issued and outstanding in 1998
13,335,754 shares issued and outstanding in 1997 103,344,175 102,793,984
Accumulated deficit (6,462,864) (12,244,900)
-------------- --------------
Total stockholders' equity 96,881,311 90,549,084
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 120,245,496 $ 108,115,305
============== ==============
</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 26, June 27, June 26, June 27,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 49,658,989 $ 36,409,392 $ 93,204,244 $ 69,618,567
COST OF SALES 35,356,091 25,639,353 66,292,163 48,853,508
------------- ------------- ------------- -------------
Gross profit 14,302,898 10,770,039 26,912,081 20,765,059
OPERATING EXPENSES:
Operating and selling expenses 6,761,759 5,029,959 12,874,681 9,771,000
Corporate general and administrative expenses 2,878,776 2,588,337 5,520,886 4,920,725
------------- ------------- ------------- -------------
Total operating expenses 9,640,535 7,618,296 18,395,567 14,691,725
------------- ------------- ------------- -------------
Operating income 4,662,363 3,151,743 8,516,514 6,073,334
INTEREST INCOME (392,182) (426,325) (774,922) (808,295)
------------- ------------- ------------- -------------
Income before income taxes 5,054,545 3,578,068 9,291,436 6,881,629
PROVISION FOR INCOME TAXES 1,946,000 1,331,200 3,509,400 2,562,900
------------- ------------- ------------- -------------
Net income $ 3,108,545 $ 2,246,868 $ 5,782,036 $ 4,318,729
============= ============= ============= =============
Net income per share - Basic $ 0.23 $ 0.17 $ 0.43 $ 0.33
============= ============= ============= =============
Net income per share - Diluted $ 0.23 $ 0.17 $ 0.43 $ 0.33
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Stock Accumulated Stockholders'
Shares Amount Deficit Equity
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 27, 1996 13,048,371 $ 96,978,776 $ (21,479,162) $ 75,499,614
Exercised Stock Options 131,485 1,305,796 1,305,796
Tax Benefit from Exercised Stock Options 660,000 660,000
Issuance of Common Stock - Mile High Acquisition 4,652 100,024 100,024
Issuance of Common Stock - Mangement Supply Acquisition 151,246 3,749,388 3,749,388
Net income 9,234,262 9,234,262
----------- ------------- ------------- -------------
BALANCE, DECEMBER 26, 1997 13,335,754 $ 102,793,984 $ (12,244,900) $ 90,549,084
Exercised Stock Options 40,100 283,978 283,978
Tax Benefit from Exercised Stock Options 135,500 135,500
Issuance of Common Stock - Apartment Cleaning 5,723 130,713 130,713
Net income 5,782,036 5,782,036
----------- ------------- ------------- -------------
BALANCE, JUNE 26, 1998 13,381,577 $ 103,344,175 $ (6,462,864) $ 96,881,311
=========== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDING MONTHS ENDING
JUNE 26, JUNE 27,
1998 1997
----------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 5,782,035 $ 4,318,729
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 992,508 585,714
Deferred income taxes (226,000) (39,000)
Loss on disposition of property and equipment 11,704
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable (3,591,166) (3,995,611)
Inventory (6,870,716) (2,017,932)
Prepaid expenses and other current assets (396,669) 117,102
Other assets 223,300 (632,231)
Accounts Payable 4,757,952 4,001,986
Accrued expenses and other current liabilities 1,278,831 615,598
Income taxes payable (78,319) 52,447
------------- -------------
Net cash provided by operating activities 1,883,460 3,006,802
------------- -------------
INVESTING ACTIVITIES :
Purchase of property and equipment (901,290) (983,103)
Proceeds from sale of short-term investments 3,395,861
Acquisition of business, including escrow (1,747,132) (3,988,455)
Proceeds from escrow settlement 82,000
------------- -------------
Net cash used in investing activities (2,648,422) (1,493,697)
------------- -------------
FINANCING ACTIVITIES :
Repayment of note payable (25,000) (260,000)
Net proceeds from exercise of stock options 283,978 799,798
------------- -------------
Net cash provided by financing activities 258,978 539,798
------------- -------------
NET INCREASE (DECREASE) IN CASH (505,984) 2,052,903
CASH, BEGINNING OF PERIOD 30,723,746 38,228,710
------------- -------------
CASH, END OF PERIOD $ 30,217,762 $ 40,281,613
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for :
Interest $ 1,673 $ 19,802
============= =============
Income taxes $ 4,030,149 $ 2,669,100
============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of Common Stock in connection with the purchase of :
Apartment Cleaning Supply and Pool Supply, Inc. $ 130,713
Issuance of Note in connection with the purchase of :
Pier-Angeli $ 75,000
</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. 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 25, 1998. 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 26, 1997.
NOTE 2 - ACCOUNTING POLICIES
- ----------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and disclosure of
comprehensive income. The Company adopted this statement during the first
quarter of fiscal year 1998. Adoption of this statement had no impact on the
Company's consolidated financial statements.
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. SFAS No. 131 is required to be applied to interim
financial statements in the initial year of application. Reclassification of
segment information for earlier periods presented for comparative purposes are
required under SFAS No. 131. As this statement only requires additional
disclosures in the Company's consolidated financial statements, its adoption
will not have any impact on the Company's consolidated financial position,
results of operations or cash flows. The Company will adopt SFAS No. 131 in its
December 25, 1998 annual financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". This statement, which revises
certain disclosure requirements for the Company's pension assets and
obligations, is effective for the fiscal periods beginning after December 15,
1997. Restatement of prior years' information is required, where available. As
this statement only requires a change in methods of disclosure and not any
change in accounting methods, it will not have any impact on the Company's
consolidated financial position, results of operations or cash flows. The
Company will adopt SFAS No. 132 in its December 25, 1998 annual financial
statements.
In March 1998, the AICPA issued Statement of Position ("SOP") 98-1, Accounting
For the Costs of Computer Software Developed For or Obtained for Internal-Use.
The SOP is effective for the Company in 1999. The SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. The Company
currently capitalizes certain external consulting costs and expenses all other
costs as incurred. The Company has not yet assessed what the impact of the SOP
will be on the Company's future earnings or financial position.
NOTE 3 - ACQUISITION
- --------------------
In March 1998, the Company acquired certain assets of the California based
company American Maintenance Supply, Inc. ("AMS-CA") and in June 1998, the
Company acquired certain assets of the Nevada based company American Maintenance
Supply, Inc. ("AMS-NV"), both are distributors of plumbing supplies primarily to
the multi-family industry or apartment housing market. The total purchase price
of both acquisitions was paid in cash. Goodwill recorded in connection with
these acquisitions is being amortized on a straight-line basis over 40 years.
In June 1998, the Company acquired certain assets of Apartment Cleaning Supply
and Pool Supply, Inc. ("ACSPS"), a distributor of both janitorial and pool
chemicals, supplies and equipment primarily to the multi-family industry or
apartment housing market in the Phoenix area. The purchase price of this
acquisition consisted of cash and common stock of the company. Goodwill and
other intangibles recorded in connection with this acquisition are being
amortized on a straight-line basis over 5 to 40 years.
<PAGE>
WILMAR INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4 - INCOME TAXES
- ---------------------
The Company provides for income taxes based upon 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 BASIC AND DILUTED NET INCOME PER SHARE
- --------------------------------------------------------------
Net income per share presented for all periods have been computed in accordance
with SFAS No. 128, "Earnings per Share." Data for 1997 has been restated to
conform to SFAS No. 128. Basic net income per share is computed by dividing net
income by the weighted-average number of shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the weighted-
average number of shares outstanding during the period, assuming dilution.
The amounts used in calculating net income per share data are as follows:
<TABLE>
<CAPTION>
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
June 26, 1998 June 27, 1998 June 27, 1998 June 27, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income $ 3,108,545 $ 2,246,868 $ 5,782,036 $ 4,318,729
============= ============= ============= =============
Weighted Average Shares
Outstanding - Basic 13,362,415 13,078,743 13,349,921 13,063,481
Effective of Dilutive Stock Options 144,735 189,247 146,982 174,784
------------- ------------- ------------- -------------
Weighted Average Shares
Outstanding - Diluted 13,507,150 13,267,990 13,496,903 13,238,265
============= ============= ============= =============
</TABLE>
Options to purchase 48,200 and 8,500 shares of common stock that were
outstanding during the three months ended June 26, 1998 and June 27,1997
respectively, as well as the option to purchase 45,825 and 8,500 shares of
common stock that were outstanding during the six months ended June 26, 1998 and
June 27,1997 respectively, were not included in the computation of weighted
average shares outstanding - Diluted because the options' exercise price was
greater than the average market price of common shares.
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 or financial position.
<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
SIX MONTHS ENDED JUNE 26, 1998 COMPARED TO SIX MONTHS ENDED JUNE 27, 1997.
Net Sales. Net sales increased by $23.6 million, or 33.9%, to $93.2 million for
the six months ended June 26, 1998 from $69.6 million for the corresponding
period in 1997. This increase was attributable to the maturation of the
existing sales force, sales force additions, the Company's telesales effort,
increased sales to national accounts 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). The Company's sales force at the end of the second quarter of 1998
was 201 an increase of 51 when compared with the corresponding quarter of 1997.
Sales attributable to the existing sales force (salesmen employed for all of
both periods) increased 16%. In addition the acquisitions of Management Supply
Company ("MSC") and certain assets of ACSPS, AMS-CA and AMS-NV which occurred in
September 1997, June 1998, March 1998 and June 1998 respectively, also
contributed significantly to the Company's growth. Price increases during both
periods were modest and made only on selected items. During the six months
ended June 26, 1998, Wilmar generated approximately $3.7 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
28.9% for the six months ended June 26, 1998 compared to 29.8% for the
corresponding period in 1997. This expected decrease in the gross margin
resulted from the acquisition of MSC. MSC's gross margins reflect a product mix
that includes a larger volume of major appliance sales, that yield a lower gross
margin percentage. In addition, the 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
Charlotte, San Antonio, Phoenix, Las Vegas and Boston, also contributed to the
decrease in gross margin when compared with the first six months of 1997.
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
$3.1 million, or 31.8 %, to $12.9 million for the six months ended June 26, 1998
from $9.8 million for the corresponding period in 1997. As a percentage of net
sales, these expenses represented 13.8% for the six months ended June 26, 1998
compared to 14.0% for the corresponding period in 1997. This decrease was
primarily attributable to the assimilation of the HMA acquisition in July 1997,
and in addition the acquisition of MSC, which though it had not yet been fully
assimilated into our system until May 1998, had been operated very efficiently
as a stand-alone company.
<PAGE>
WILMAR INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 26, 1998 COMPARED TO SIX MONTHS ENDED JUNE 27, 1997
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $600,000 or 12.2%, to $5.5 million for the
six months ended June 26, 1998 from $4.9 million for the corresponding period in
1997. This increase is primarily the result of the enhanced staffing required to
manage a larger volume of business. As a percentage of net sales, corporate
general and administrative expenses represented 5.9% for the six months ended
June 26, 1998 compared to 7.1% for the corresponding period in 1997. During the
first six months of 1998, the Company incurred approximately $116,000 in
expenses related to the assimilation of MSC and pre-opening expenses for its new
San Antonio, Las Vegas and Boston distribution centers, (the "assimilation and
pre-opening expenses"). The Company expenses all distribution center pre-opening
and acquisition assimilation costs when incurred. Excluding these expenses,
corporate general and administrative expenses as a percentage of net sales would
have been 5.8% for the six months ended June 26, 1998 compared to 6.8% for the
corresponding period in 1997.
Operating Income. Operating income increased by $2.4 million, or 40.2%, to $8.5
million for the six months ended June 26, 1998 from $6.1million for the
corresponding period in 1997. As a percentage of net sales, operating income
was 9.1% for the six months ended June 26, 1998 compared to 8.7% for the
corresponding period in 1997. Excluding the assimilation and pre-opening
expenses, operating income as a percentage of net sales would have been 9.3% for
the six months in 1998 compared to 9.0% for the first six months of 1997.
Interest Income. Net interest income for the six months ended June 26, 1998 was
$775,000 and $808,000 for the corresponding period in 1997. The interest income
occurred as a result of the investment income from the proceeds of the secondary
public offering completed in July 1996.
THREE MONTHS ENDED JUNE 26, 1998 COMPARED TO THREE MONTHS ENDED JUNE 27, 1997
Net Sales. Net sales increased by $13.3 million, or 36.4%, to $49.7 million
for the three months ended June 26, 1998 from $36.4 million for the
corresponding period in 1997. This increase was attributable to the maturation
of the existing sales force, sales force additions, the Company's telesales
effort, increased sales to national accounts and a substantial investment in
"line-hauling". Sales attributable to the existing sales force (salesmen
employed for all of both periods) increased 20%. In addition the acquisitions
of MSC and certain assets of ACSPS, AMS-CA and AMS-NV which occurred in
September 1997, June 1998, March 1998 and June 1998 respectively, 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 June 26, 1998, Wilmar generated approximately $2.1 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
28.8% for the three months ended June 26, 1998 compared to 29.6 % for the
corresponding period in 1997. This expected decrease in the gross margin was a
result of the following factors: (1) the acquisition of MSC, whose gross margins
reflect a product mix that includes a larger volume of major appliance sales,
that yield a lower gross margin percentage, (2) a larger volume of HVAC sales,
which are seasonal in nature and have lower gross margins, and (3) the higher
relative occupancy costs relating to the operation of the Company's new
distribution centers in San Antonio, Las Vegas and Boston also contributed to
the decrease in gross margin when compared with the three months ended June 27,
1997.
<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 26, 1998 COMPARED TO THREE MONTHS ENDED JUNE 27, 1997
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
$1.8 million, or 34.4%, to $6.8 million for the three months ended June 26, 1998
from $5.0 million for the corresponding period in 1997. As a percentage of net
sales, these expenses represented 13.6% for the three months ended June 26, 1998
compared to 13.8% for the corresponding period in 1997. This decrease was
primarily attributable to the assimilation of the HMA acquisition in July 1997,
and in addition the acquisition of MSC, which though it had not yet been fully
assimilated into our system until May 1998, had been operated very efficiently
as a stand-alone company.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $290,000, or 11.2%, to $2.9 million for the
three months ended June 26, 1998 from $2.6 million for the corresponding period
in 1997. This increase is primarily the result of the enhanced staffing required
to manage a larger volume of business. The Company expenses all distribution
center pre-opening costs when incurred. During the second quarter of 1998, the
Company incurred approximately $96,000 in expenses related to the assimilation
of MSC and pre-opening expenses for its new San Antonio, Las Vegas and Boston
distribution center. As a percentage of net sales, corporate general and
administrative expenses represented 5.8% for the three months ended June 26,
1998 compared to 7.1% for the corresponding period in 1997. Excluding
assimilation and pre-opening expenses, general and administrative expenses would
represent 5.6% for the three months ended June 26, 1998 and 6.9% for the
corresponding period in 1997.
Operating Income. Operating income increased by $1.5 million or 47.9%, to $4.7
million for the three months ended June 26, 1998 from $3.2 million for the
corresponding period in 1997. As a percentage of net sales, operating income
was 9.4% for the three months ended June 26, 1998 and 8.7% for the corresponding
period in 1997. Excluding assimilation and pre-opening expenses, operating
income as a percentage of net sales would have been 9.6% for the three month
ended June 26,1998 and 8.9% for the same period in 1997.
Interest Income. Net interest income for the three months ended June 26, 1998
was $392,000 and $426,000 for the corresponding period in 1997. The interest
income occurred as a result of the investment income from the proceeds of the
secondary public offering completed in July 1996.
LIQUIDITY AND CAPITAL RESOURCES
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. Since
its initial public offering in January 1996, additional liquidity has been
provided through the proceeds of the sale of its securities as well as
investment income from the proceeds of the secondary public offering completed
in July 1996.
Cash provided by operating activities was $1.9 million during the six months
ended June 26, 1998 compared to $3.0 million of cash provided by operating
activities during the corresponding period in 1997. Cash provided by operating
activities during the six months ended June 26, 1998 consisted of $5.8 million
of net income before adding back depreciation and amortization and other non-
cash charges, decreased $4.9 million by changes in operating assets and
liabilities. This primarily resulted from a $6.0 million increase in accounts
payable and accrued expenses offset by an increase in the accounts receivable,
inventory and prepaid expenses of $10.9 million, consistent with its higher
volume of business.
<PAGE>
WILMAR INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Cash used in investing activities during the six months ended June 26, 1998 was
$2.6 million, this consisted of approximately $901,000 for the purchase of
property and equipment and $1.7 million relating to the acquisitions of ACSPS,
AMS-CA and AMS-NV.
Cash provided by financing activities during the first six months of 1998 was
approximately $259,000, consisting of $284,000 of net proceeds received from the
exercise of stock options offset by $25,000 of repayment of a note payable.
Capital expenditures were $901,000 for the six months ended June 26, 1998
compared to $983,000 for the corresponding period in 1997. The Company spent
approximately $485,000 in the first six months of 1998 to equip its new Atlanta,
San Antonio, Las Vegas and Boston distribution centers, as well as upgrading the
existing MSC 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 facilities consist of two unsecured bank lines of credit
totaling $16 million. These lines of credit had zero balances at June 26, 1998.
In July 1998, 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 as well as a $6 million unsecured bank line of credit, which bears interest
at the bank's prime rate. These credit facilities will expire in October 1998.
The Company anticipates renewing these existing credit facilities prior to their
expiration date and believes it could increase the amount of these credit
facilities 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 1998. 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.
YEAR 2000 COMPLIANCE
The Company recognizes that the arrival of the Year 2000 poses a worldwide
challenge to the ability of all systems to recognize the date change from
December 31, 1999 to January 1, 2000, and like other companies, is assessing and
modifying its computer applications and business processes to provide for their
continued functionality. Many of the Company's systems include the new
hardware and software recently purchased from large vendors who have represented
that these systems are already Year 2000 compliant. The Company expects to
complete its Year 2000 assessment and remediation by 1999. However, there can
be no guarantee that the systems of other companies with which the Company
interfaces will be timely converted, or that a failure to convert by another
company would not have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 activities has not been and is
not anticipated to be material to its financial position, results of operations
or cash flows in any given year, and such cost has been and is expected to
continue to be funded from the Company's operations.
<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
--------
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 June 26, 1998.
<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 10, 1998
<TABLE> <S> <C>
<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-25-1998
<PERIOD-END> JUN-26-1998
<CASH> 30,508,265
<SECURITIES> 0
<RECEIVABLES> 29,151,378
<ALLOWANCES> (1,433,300)
<INVENTORY> 32,055,286
<CURRENT-ASSETS> 93,012,705
<PP&E> 8,300,074
<DEPRECIATION> (4,401,713)
<TOTAL-ASSETS> 120,245,496
<CURRENT-LIABILITIES> 22,864,185
<BONDS> 0
0
0
<COMMON> 103,344,175
<OTHER-SE> (6,462,864)
<TOTAL-LIABILITY-AND-EQUITY> 120,245,496
<SALES> 93,204,244
<TOTAL-REVENUES> 93,204,244
<CGS> 66,292,163
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<OTHER-EXPENSES> 18,395,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (774,922)
<INCOME-PRETAX> 9,291,436
<INCOME-TAX> 3,509,400
<INCOME-CONTINUING> 5,782,036
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