<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 March 26, 1999
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 April 30, 1999 was 13,109,860.
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 26, December 25,
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 38,467,038 $ 30,611,955
Cash - restricted 299,228 297,236
Accounts Receivable - trade, net of allowance for doubtful accounts
of $1,286,790 in 1999 and $1,399,200 in 1998. 26,681,776 27,535,016
Inventory 29,509,876 30,128,680
Prepaid expenses and other current assets 400,614 385,992
Deferred income taxes 1,459,000 1,498,000
---------------- ----------------
Total current assets 96,817,532 90,456,879
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $5,009,612 in 1999 and $4,740,501 in 1998. 4,549,813 4,183,348
GOODWILL, net of accumulated amortization of $1,132,859 in 1999 and $973,445 in 1998. 21,974,446 22,133,860
INTANGIBLE ASSETS AND OTHER, Net 4,877,984 4,921,704
---------------- ----------------
TOTAL ASSETS $ 128,219,775 $ 121,695,791
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 500,000 $ 1,208,518
Accounts payable 14,385,097 11,991,661
Accrued expenses and other current liabilities 5,827,373 4,294,425
Income taxes payable 2,104,270 412,160
---------------- ----------------
Total current liabilities 22,816,740 17,906,764
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;
13,294,760 shares issued and outstanding in 1999
13,389,827 shares issued and outstanding in 1998 103,624,195 103,568,743
Retained earnings 3,272,590 220,284
---------------- ----------------
106,896,785 103,789,027
Less: Treasury stock, at cost (100,000 shares in 1999) (1,493,750)
---------------- ----------------
Total stockholders' equity 105,403,035 103,789,027
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 128,219,775 $ 121,695,791
================ ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
<PAGE>
<TABLE>
<CAPTION>
WILMAR INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
For the Three For the Three
Months Ended Months Ended
March 26, March 27,
1999 1998
--------------- ---------------
<S> <C> <C>
NET SALES $ 48,747,114 $ 43,545,255
COST OF SALES 34,051,856 30,936,072
--------------- ---------------
Gross profit 14,695,258 12,609,183
OPERATING EXPENSES:
Operating and selling expenses 7,173,587 6,112,922
Corporate general and administrative expenses 2,911,218 2,642,110
--------------- ---------------
Total operating expenses 10,084,805 8,755,032
--------------- ---------------
Operating income 4,610,453 3,854,151
INTEREST INCOME, NET 352,653 382,740
--------------- ---------------
Income before income taxes 4,963,106 4,236,891
PROVISION FOR INCOME TAXES 1,910,800 1,563,400
--------------- ---------------
Net income $ 3,052,306 $ 2,673,491
=============== ===============
Net income per share - Basic $ 0.23 $ 0.20
=============== ===============
Net income per share - Diluted $ 0.23 $ 0.20
=============== ================
</TABLE>
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>
(Accumulated
Deficit) / Total
Common Stock Retained Treasury Stockholders'
Shares Amount Earnings Stock (Deficit) Equity
---------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 26, 1997 13,335,754 $102,793,984 $(12,244,900) $ -- $ 90,549,084
Exercised Stock Options 48,350 360,446 360,446
Tax Benefit from Exercised Stock Options 283,600 283,600
Issuance of Common Stock - Apartment Cleaning Acquisition 5,723 130,713 130,713
Net income 12,465,184 12,465,184
---------- ------------ ----------- ----------- ---------------
BALANCE, DECEMBER 25, 1998 13,389,827 $103,568,743 $ 220,284 $ -- $103,789,027
Exercised Stock Options 4,933 37,772 37,772
Tax Benefit from Exercised Stock Options 17,680 17,680
Repurchase of Common Stock (100,000) (1,493,750) (1,493,750)
Net income 3,052,306 3,052,306
---------- ------------ ----------- ----------- ---------------
BALANCE, MARCH 26, 1999 13,294,760 $103,624,195 $3,272,590 $ (1,493,750) $105,403,035
========== ============ =========== ============ ===============
</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 Three For the Three
Months Ending Months Ending
March 26, 1999 March 27, 1998
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES :
Net Income $ 3,052,306 $ 2,673,491
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 548,234 455,898
Deferred income taxes 39,000 (26,000)
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable 853,240 138,507
Inventory 618,804 (1,070,996)
Prepaid expenses and other current assets (16,614) (132,699)
Intangible assets and other (75,989) (40,321)
Accounts payable 2,393,436 400,507
Accrued expenses and other current liabilities 1,532,948 687,245
Income taxes payable 1,709,790 1,199,617
----------- -----------
Net cash provided by operating activities 10,655,155 4,285,249
----------- -----------
INVESTING ACTIVITIES :
Purchase of property and equipment (635,576) (345,989)
Acquisition of businesses, including escrow - (175,212)
----------- -----------
Net cash used in investing activities (635,576) (521,201)
----------- -----------
FINANCING ACTIVITIES :
Repayment of notes payable (708,518) (25,000)
Purchases of stock for treasury (1,493,750)
Net proceeds from exercise of stock options 37,772 80,794
----------- -----------
Net cash (used in) provided by financing activities (2,164,496) 55,794
----------- -----------
NET INCREASE IN CASH 7,855,083 3,819,842
CASH, BEGINNING OF PERIOD 30,611,955 30,723,746
----------- -----------
CASH, END OF PERIOD $38,467,038 $34,543,588
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for :
Interest $ 13,340 $ 1,066
=========== ===========
Income taxes $ 193,250 $ 100,458
=========== ===========
</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 31, 1999. 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 25, 1998.
Note 2 - Accounting Policies
- ----------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as "derivatives") and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Management has not yet
determined what effect, if any, this statement will have on the Company.
Note 3 - 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 4 - 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." 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
Months Ended Months Ended
March 26, 1999 March 27, 1998
---------------- ----------------
<S> <C> <C>
Net Income $3,052,306 $2,673,491
========== ==========
Weighted Average Shares Outstanding - Basic 13,384,915 1,336,380
Effect of Dilutive Stock Options 118,581 152,601
---------- ----------
Weighted Average Shares Outstanding - Diluted 13,503,496 13,488,441
========== ==========
</TABLE>
Options to purchase 211,600 and 51,600 shares of common stock that were
outstanding during the three months ended March 26, 1999 and March 27, 1998,
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 5 - 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.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
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, failure to locate and acquire acquisition candidates, 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
Three Months Ended March 26, 1999 Compared to Three Months Ended March 27, 1998
Net Sales. Net sales increased by $5.2 million, or 12.0%, to $48.7 million for
the three months ended March 26, 1999 from $43.5 million for the corresponding
period in 1998. This increase was attributable to the maturation of the existing
sales force, sales force additions, the Company's telesales effort and increased
sales to national accounts. Sales attributable to the existing sales force
(salesmen employed for all of both periods) increased 10.0%. In addition, the
acquisitions of certain assets of Apartment Cleaning Supply and Pool Supply,
Inc. ("ACSPS"), the California-based American Maintenance Supply, Inc. ("AMS-
CA"), the Nevada-based American Maintenance Supply, Inc. ("AMS-NV") and Kurzon
Supply Company, Inc. ("Kurzon"), which occurred in June 1998, March 1998, May
1998 and November 1998, respectively, also contributed to the Company's growth.
Price increases during both periods were modest and made only on selected items.
During the three months ended March 26, 1999, Wilmar generated approximately
$2.4 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.
Gross Profit. Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs. As a percentage of net sales, gross profit was
30.1% for the three months ended March 26, 1999 compared to 29.0% for the
corresponding period in 1998. The increase is attributable to the July 1998
divestiture of our high-end appliance division, as well as the Company's
continuing merchandising efforts.
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
$1.1 million, or 17.4%, to $7.2 million for the three months ended March 26,
1999 from $6.1 million for the corresponding period in 1998. As a percentage of
net sales, these expenses represented 14.7% for the three months ended March 26,
1999 compared to 14.0% for the corresponding period in 1998. This increase was
primarily due to the Company's continual investment in its field sales force.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $269,000, or 10.2%, to $2.9 million for the
three months ended March 26, 1999 from $2.6 million for the corresponding period
in 1998. 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 6.0% for the three months ended
March 26, 1999 compared to 6.1% for the corresponding period in 1998.
Operating Income. Operating income increased by $756,000 million or 19.6%, to
$4.6 million for the three months ended March 26, 1999 from $3.9 million for the
corresponding period in 1998. As a percentage of net sales, operating income
was 9.5% for the three months ended March 26, 1999 and 8.9% for the
corresponding period in 1998.
Interest Income. Net interest income for the three months ended March 26, 1999
was $353,000 and $383,000 for the corresponding period in 1998. The interest
income occurred as a result of the investment income from the proceeds received
from sales of its securities, as well as cash generated from ongoing operations.
<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 March 26, 1999 Compared to Three Months Ended March 27, 1998
Liquidity and Capital Resources
Historically, Wilmar's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its bank line of credit to support
increases in accounts receivable and inventory, net of accounts payable, and the
public sale of its securities.
On March 19, 1999, the Company announced that its Board of Directors had
approved a stock buyback program whereby it may repurchase up to one million
shares of its common stock. Such repurchases may be made from time to time in
open market transactions at prevailing prices or in privately negotiated
transactions on terms mutually agreed upon. As of May 5, 1999, the Company has
repurchased 607,000 shares at an average price of $13.46 per share.
Cash provided by operating activities was $10.7 million during the three months
ended March 26, 1999 compared to $4.3 million of cash provided by operating
activities during the corresponding period in 1998. Cash provided by operating
activities during the three months ended March 26, 1999 consisted of $3.1
million of net income before adding back depreciation and amortization and other
non-cash charges, increased $7.0 million by changes in operating assets and
liabilities. This primarily resulted from a $5.6 million increase in accounts
payable, accrued expenses and income tax payable offset by an decrease in the
accounts receivable and inventory of $1.5 million.
Cash used in investing activities during the three months ended March 26, 1999
was $636,000, which was used strictly for the purchase of property and
equipment.
Cash used in financing activities during the first three months of 1999 was
approximately $2.2 million, consisting of approximately $709,000 used for
repayment of notes, $1.5 million for the purchase of stock for treasury offset
by proceeds of $38,000 received from the exercise of stock options.
Capital expenditures were $636,000 for the three months ended March 26, 1999
compared to $346,000 for the corresponding period in 1998. Capital expenditures
for the first three months of 1999 were primarily for the improvement and
updating of the Company's distribution centers, and the integration of its new
supply fulfillment system. 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 $15 million. These lines of credit had zero balances at March 26,1999.
In 1999, 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 $5 million unsecured bank line of credit, which bears
interest at the bank's prime rate. These credit facilities expire in September
1999. The Company anticipates renewing these credit facilities as they expire.
The Company 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 1999. However, if the Company were
to make any significant acquisitions for cash, it might be necessary for the
Company to obtain additional debt or equity financing.
<PAGE>
WILMAR INDUSTRIES, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations, Continued
Year 2000 Compliance
The Company recognizes that the arrival of the Year 2000 (Y2K) poses a worldwide
challenge to the ability of all systems to recognize the date change from
December 31, 1999 to January 1, 2000. The Company continues to assess how the
Y2K problem will impact its operations. Considerable progress has been achieved
in the areas of identifying, remediating, testing, and implementing Y2K
compliant products and services, which are critical to the business computing
systems infrastructure. Inventory of all in-house software has been completed
and is currently being reviewed for compliance. The Company's core business
application software does not utilize a "MMDDYY" date format and is therefore
substantially unaffected by the Y2K issue. The Company is in the process of
attempting to identify critical third party vendors whose inability to reach Y2K
compliance may impact business connectivity and viability. Hardware systems have
been examined and appropriate paths charted to ensure complete Y2K
compatibility. The goal for completing Y2K compliance for all critical computing
system environments is mid calendar year 1999.
All costs associated with the Y2K project to date have been expensed as
incurred. These costs have not been and are not anticipated to be material to
the Company's financial position, results of operations or cash flows in any
given year, and such cost have been and is expected to continue to be funded
from the Company's operations. The Company's total estimated cost of the Y2K
compliance program is approximately $50,000 to $100,000. A significant portion
of these costs are not likely to be incremental costs to the Company, but rather
will represent the redeployment of existing information technology resources.
Based upon current benchmarks, the Company believes that it has the necessary
resources in-house to complete all required Y2K remediation. In the event that
internal resources are insufficient to complete the project in a timely manner,
out-sourcing the Y2K project, either in part or whole, to a Y2K Service Provider
may be necessary.
Until all inventory and analysis phases are completed, the Company will not know
with absolute certainty how the transition from 1999 to 2000 will affect its
operations. Moreover, there is no guarantee that computing systems and
associated applications of other companies with which the Company conducts
business will be converted on a timely basis or that a failure by said companies
to address their Y2K compliance problems would not have a material adverse
impact on the Company.
To date, the Company has not established a formal contingency plan for dealing
with a failure by either the Company or its third party vendors to achieve Year
2000 compliance. However, it recognizes the need to develop contingency plans
and expects to have these plans secured, where applicable by the end of Fiscal
1999.
<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 March 26, 1999.
<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/ William Sanford
--------------------------------
William Sanford
Senior Vice President and
Chief Financial Officer
(Duly authorized and Principal
financial officer)
Date: May 10, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-26-1999
<CASH> 38,766,266
<SECURITIES> 0
<RECEIVABLES> 28,080,976
<ALLOWANCES> (1,399,200)
<INVENTORY> 29,509,876
<CURRENT-ASSETS> 96,817,532
<PP&E> 9,290,314
<DEPRECIATION> (4,740,501)
<TOTAL-ASSETS> 128,219,775
<CURRENT-LIABILITIES> 22,816,740
<BONDS> 0
0
0
<COMMON> 103,624,195
<OTHER-SE> 3,272,590
<TOTAL-LIABILITY-AND-EQUITY> 128,219,775
<SALES> 48,747,114
<TOTAL-REVENUES> 48,747,114
<CGS> 34,051,856
<TOTAL-COSTS> 34,051,856
<OTHER-EXPENSES> 10,084,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (352,653)
<INCOME-PRETAX> 4,963,106
<INCOME-TAX> 1,910,800
<INCOME-CONTINUING> 3,052,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,052,306
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
