-2-
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 quarter ended September 30, 1995
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange
Act of 1934
For the transition period from to
Commission file number 0-6169
WOLOHAN LUMBER CO.
(Exact name of registrant as specified in its charter)
Michigan 38-1746752
(State or other jurisdiction of (Identification Number)
(I.R.S. Employer incorporation
or organization)
1740 Midland Road, Saginaw, Michigan 48603
(Address of principal executive offices)
(517) 793-4532
(Registrant's telephone number, including area code)
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.
X Yes No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common stock, $1 par value -- 7,086,578 shares as of October 31,
1995.
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<CAPTION>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Information
WOLOHAN LUMBER CO.
CONDENSED BALANCE SHEETS
Sept 30 Dec 31
1995 1994
(Unaudited)
<S>)
ASSETS (000's omitted)
CURRENT ASSETS
<C> <C>
Cash and cash equivalents $ 16,951 $ 22,072
Trade receivables 30,330 25,961
Inventories - at current cost 65,083 64,555
Reduction to LIFO cost (14,038) (14,549)
Inventories at the lower of last-in,
first-out cost or market 51,045 50,006
Other current accounts 1,909 2,832
TOTAL CURRENT ASSETS 100,235 100,871
OTHER ASSETS 2,613 2,174
NET PROPERTIES 65,801 68,002
TOTAL ASSETS $168,649 $171,047
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 19,559 $ 21,789
Employee compensation and accrued expenses 12,627
12,345
Current portion of long-term debt 4,262 1,970
TOTAL CURRENT LIABILITIES 36,448 36,104
LONG-TERM DEBT, less current portion 25,865 30,035
DEFERRED INCOME TAXES 697 697
SHAREOWNERS' EQUITY
Common stock 7,086 7,146
Additional capital 23,288 23,979
Retained earnings 75,265 73,086
TOTAL SHAREOWNERS' EQUITY 105,639 104,211
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $168,649 $171,047
<FN>
Note: The balance sheet at December 31, 1994, has been derived from
the audited financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See notes to condensed financial statements.
</FN>
</TABLE>
<TABLE>
<PAGE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
SEPT 30
1995 1994
(000's omitted, except per share data)
<S> <C> <C>
NET SALES $ 122,638 $ 132,624
Cost of sales 93,831 100,341
28,807 32,283
Other income 717 647
Gain from sale of properties 34 1071
Gross income 29,558 34,001
OPERATING EXPENSES:
Selling, general and administrative 24,096 22,968
Depreciation 2,319 2,095
Interest 694 827
27,109 25,890
INCOME BEFORE INCOME TAXES 2,449 8,111
Income taxes 888 3,202
NET INCOME $ 1,561 $ 4,909
Average shares outstanding 7,090 7,146
Net income per share $.22 $.69
Dividends per share $.07 $.07
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPT 30
1995 1994
(000's omitted, except per share data)
<S> <C> <C>
NET SALES $ 321,144 $ 342,837
Cost of sales 244,969 260,987
76,175 81,850
Other income 1,979 1,773
Gain from sale of properties 342 1,220
Gross Income 78,496 84,843
OPERATING EXPENSES:
Selling, general and administrative 63,470 62,857
Depreciation 6,795 5,968
Interest 2,253 2,400
72,518 71,225
INCOME BEFORE TAXES 5,978 13,618
Income taxes 2,301 5,311
NET INCOME $ 3,677 $ 8,307
Average shares outstanding 7,132 7,146
Net income per share $.52 $1.16
Dividends per share $.21 $.21
<PAGE>
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPT 30
1995 1994
(000's omitted, except per share data)
<S> <C> <C>
NET CASH FROM/(USED IN) OPERATING ACTIVITIES $ 2,532 $ (3,027)
NET CASH USED IN INVESTING ACTIVITIES (4,277) (7,702)
NET CASH FROM/(USED IN) FINANCING ACTIVITIES (3,376) 5,871
DECREASE IN CASH AND CASH EQUIVALENTS (5,121) (4,858)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 22,072 22,303
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,951 $ 17,445
<PAGE>
See notes to condensed financial statements.
</TABLE>
<PAGE>
WOLOHAN LUMBER CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 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, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
The Company's business is seasonal in nature and subject to
general economic conditions and other outside factors and,
accordingly, its operating results for the three months and nine
months ended September 30, 1995, are not necessarily indicative of
the results that may be expected for the entire year ending
December 31, 1995.
For further information, refer to the financial statements and
footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results Of Operations
Net income for the third quarter of 1995 was $1.6 million, (22
cents per share) versus $4.9 million (69 cents per share) for the
same period of 1994. The decline in third-quarter earnings
resulted from lower sales, tighter margins, and costs related to
the closing of two stores ($1.9 million or 17 cents per share).
1994's third quarter included a 9-cent per share gain on the sale
of a closed store. For the first nine months of 1995, net income
was $3.7 million, (52 cents per share) compared with $8.3 million
($1.16 per share) for the same period of 1994.
Sales totaled $122.6 million in the third quarter of 1995, an 8-
percent decline from third quarter 1994 sales of $132.6 million.
The sales decline in the 1995 third quarter resulted from a 6-
percent decrease in consumer (do-it-yourself) sales and a 9-
percent decline in professional contractor sales. Sales at
comparable stores (stores in operation at September 30, 1995 and
opened prior to July 1, 1994) were down 12 percent, which resulted
from a 13-percent decline in consumer sales and a 10-percent
decrease in contractor sales. The sales mix ratio for the third
quarter of 1995 was 50% consumer and 50% contractor sales,
compared with 49% consumer and 51% contractor for the third
quarter 1994. For the first nine months of 1995, sales were
$321.1 million compared with $342.8 million in the same period of
1994, a decrease of 6 percent.
Contractor sales decreased 8 percent and consumer sales decreased
5 percent for the 1995 nine-month period. Comparable store sales
for the 1995 nine-month period were down 12 percent. The 1995
sales mix for nine months was 50% consumer sales and 50%
contractor sales versus 49% and 51%, respectively for 1994. Fewer
housing starts, lower lumber prices, sluggish consumer spending
and additional competition continue to be the factors that are
negatively affecting sales in 1995.
Gross margins were 23.5 percent in the 1995 third quarter, a
decline of 80 basis points compared with 1994's third quarter.
Competitive pressures in both the consumer and contractor segments
of the Company's business negatively affected the third-quarter
margins.
Selling, general and administrative expenses in third quarter of
1995 (excluding the costs related to store closings) were 18.2
percent of sales compared with 17.3 percent of sales for the
corresponding period of 1994. Depreciation expense increased
$224,000, or 11 percent, from third quarter 1994 and reflects the
two new stores added during 1994's third quarter and the two added
in the first half of 1995.
During the third quarter of 1995, the Company closed its stores in
Niles, Mich. And New Philadelphia, Ohio, resulting in a pre-tax
charge to earnings of $1.9 million.
The Company continues to evaluate its under-performing stores and
will close stores and re-deploy the assets as appropriate. The
Company will close its Richmond, Ind. store in November. Costs
relating to this closing will approximate $1.0 million, or 9 cents
per share.
The effective tax rate (federal and state) for third quarter 1995
was 36.3%, compared to 39.5% for third quarter 1994 and for the
nine-month period 38.5% vs 38.9% in 1994. The lower effective tax
rate for third quarter 1995 resulted primarily from the reduction
in earnings compared to third quarter 1994 and the resultant lower
statutory federal income tax rate.
Financial Condition
At Sept. 30, 1995, the Company's balance sheet remains strong.
Net working capital at Sept. 30, 1995 was $63.8 million, compared
to $63.8 million at Sept. 30, 1994 and $64.8 million at Dec. 31,
1994. The current ratio at Sept. 30, 1995 was 2.8 to 1, compared
to 2.4 to 1 at Sept. 30, 1994, and 2.8 to 1 at Dec. 31, 1994. The
Company's debt-to-asset ratio was lowered to .15:1.
Cash and cash equivalents were $17.0 million at Sept. 30, 1995,
compared to $17.4 million at Sept. 30, 1994 and $22.1 million at
Dec. 31, 1994. The liquidity ratio was .48 to 1, compared to .38
to 1 at Sept. 30, 1994, and .62 to 1 at Dec. 31, 1994.
Cash and cash equivalents increased $1.1 million during the 1995
third quarter with operating activities producing $7.3 million of
cash. The major use of cash was to pay off remaining short-term
debt of $6.0 million.
The Company expects that funds from operations and available lines
of credit should be adequate to meet future working capital needs
and capital expenditures for 1995.
In October, the Company acquired the assets of Home Builder's
Warehouse, a two-store chain in northern Michigan. The assets
include inventory, customer receivables, equipment and the land
and buildings at one site (60,000 sq. feet of retail area, and
50,000 sq. feet of covered storage on 10 acres) while the second
store is under a lease arrangement and consists of a small
hardware store and lumber storage area.
Invested capital (long-term debt and shareowner's equity) was
equal to 78% of total assets at Sept. 30, 1995, compared to 78% at
year-end 1994. The ratio of equity to total assets was .63 to 1
at Sept. 30, 1995 and .61 to 1 at Dec. 31, 1994.The Company
purchased 5,000 shares of its common stock during the third
quarter of 1995.
Outlook
The Company anticipates some margin improvement in the fourth
quarter compared to the third quarter, but with sales continuing
to be sluggish, the Company expects fourth-quarter earnings to be
below 1994 levels.
The Company sees continued long-term growth in the demand for home
construction, repair and improvement products and has developed
strategies to improve its market share. The Company is focusing
its time and energy on improving the competency and commitment of
its associates to provide outstanding customer service. The
Company is striving to better execute its strategy of selling
project sales which involve the major purchases of products such
as lumber, basic building materials, millwork, and kitchen
cabinets. The Company is continuing to make significant
investments in technology to improve its inventory replenishment
system which currently requires considerable manual effort. The
Company is looking for further opportunities for greater
efficiencies in all segments of our operation.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) none
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the
quarter for which this Report is filed.
<PAGE>
SIGNATURES
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 thereto duly authorized.
WOLOHAN LUMBER CO.
Registrant
Date: November 10, 1995 David G. Honaman
David G. Honaman
Vice President Administration,
Chief Financial Officer
Date: November 10, 1995 Edward J. Dean
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
<PAGE>
SIGNATURES
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 thereto duly authorized.
WOLOHAN LUMBER CO.
Registrant
Date: November 10, 1995
David G. Honaman
Vice President Administration,
Chief Financial Officer
Date: November 10, 1995
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 16,951,000
<SECURITIES> 0
<RECEIVABLES> 30,330,000
<ALLOWANCES> 0
<INVENTORY> 51,045,000
<CURRENT-ASSETS> 100,235,000
<PP&E> 65,801,000
<DEPRECIATION> 6,795,000
<TOTAL-ASSETS> 168,649,000
<CURRENT-LIABILITIES> 36,448,000
<BONDS> 0
<COMMON> 7,086,000
0
0
<OTHER-SE> 98,553,000
<TOTAL-LIABILITY-AND-EQUITY> 168,649,000
<SALES> 321,144,000
<TOTAL-REVENUES> 78,496,000
<CGS> 244,969,000
<TOTAL-COSTS> 63,019,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 451,000
<INTEREST-EXPENSE> 2,253,000
<INCOME-PRETAX> 5,978,000
<INCOME-TAX> 2,301,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,677,000
<EPS-PRIMARY> .52
<EPS-DILUTED> 00
</TABLE>
