SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarter ended September 28, 1996
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 (I.R.S. Employer
incorporation or organization) Identification Number)
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.
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 -- 6,296,017 shares as of October 26, 1996.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED BALANCE SHEETS
<CAPTION>
Sept. 28 Dec. 31
1996 1995
<S> (Unaudited) (Note)
ASSETS (000's omitted)
CURRENT ASSETS
<C> <C>
Cash and cash equivalents $ 9,204 $ 13,919
Trade receivables 39,907 26,471
Inventories - at current cost 62,300 61,375
Reduction to LIFO cost (13,436) (12,836)
Inventories at the lower of last in,
first out cost or market 48,864 48,539
Other current accounts 2,136 3,112
TOTAL CURRENT ASSETS 100,111 92,041
OTHER ASSETS 1,760 2,149
NET PROPERTIES 66,295 68,250
TOTAL ASSETS $168,166 $162,440
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 19,914 $ 15,258
Employee compensation and accrued expenses 14,462 11,810
Current portion of long-term debt 3,490 4,342
TOTAL CURRENT LIABILITIES 37,866 31,410
LONG-TERM DEBT, less current portion 22,960 26,674
SHAREOWNERS' EQUITY
Common stock 6,929 6,989
Additional capital 22,031 22,534
Retained earnings 78,380 74,833
TOTAL SHAREOWNERS' EQUITY 107,340 104,356
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $168,166 $162,440
<FN>
Note: The balance sheet at Dec. 31, 1995, 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>
<PAGE>
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
SEPT. 28 SEPT. 30
1996 1995
(000's omitted, except per share data)
<S>
<C> <C>
NET SALES $ 132,850 $ 122,638
Cost of sales 101,628 93,831
Gross Profit 31,222 28,807
OPERATING EXPENSES:
Selling, general and administrative 23,167 24,096
Depreciation 2,505 2,319
25,672 26,415
OPERATING INCOME 5,550 2,392
OTHER EXPENSES (INCOME):
Interest expense 583 694
Gain from sale of properties (47) (34)
Other (796) (717)
(260) (57)
INCOME BEFORE INCOME TAXES 5,810 2,449
Income taxes 2,324 888
NET INCOME $ 3,486 $1,561
Average shares outstanding 6,953 7,090
Net income per share $.50 $.22
Dividends per share $.07 $.07
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPT. 28 SEPT. 30
1996 1995
(000's omitted, except per share data)
<S>
<C> <C>
NET SALES $ 325,496 $ 321,144
Cost of sales 246,696 244,969
Gross Profit 78,800 76,175
OPERATING EXPENSES:
Selling, general and administrative 63,873 63,470
Depreciation 7,323 6,795
71,196 70,265
OPERATING INCOME 7,604 5,910
OTHER EXPENSES (INCOME):
Interest expense 1,907 2,253
Gain from sale of properties (676) (342)
Other (1,983) (1,978)
(752) (68)
INCOME BEFORE INCOME TAXES 8,356 5,978
Income taxes 3,344 2,301
NET INCOME $ 5,012 $ 3,677
Average shares outstanding 6,983 7,132
Net income per share $.72 $.52
Dividends per share $.21 $.21
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPT 28 SEPT 30
1996 1995
(000's omitted, except per share data)
<S>
<C> <C>
NET CASH FROM OPERATING ACTIVITIES $ 6,025 $ 2,532
NET CASH USED IN INVESTING ACTIVITIES (4,709) (4,277)
NET CASH USED IN FINANCING ACTIVITIES (6,031) (3,376)
DECREASE IN CASH AND CASH EQUIVALENTS (4,715) (5,121)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 13,919 22,072
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,204 $ 16,951
<FN>
See notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
WOLOHAN LUMBER CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 28, 1996
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 third-quarter 1996 sales period included two fewer days than
1995, reflecting the Company's change to a 13-week reporting
period, with the quarter ending Sept. 28, 1996. The Company's
business is seasonal in nature and subject to general economic
conditions and outside factors and, accordingly, its operating
results for the three months and nine months ended Sept. 28, 1996
are not necessarily indicative of the results that may be expected
for the entire year ending Dec. 28, 1996.
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 Dec. 31, 1995.
NOTE B - EARNINGS PER SHARE
The Company calculates earnings per share based on the average
number of shares outstanding for the period. Common stock
equivalents had no material dilutive effect for the periods
presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results Of Operations
Net income for the third quarter of 1996 improved to $3.5 million
(50 cents per share), versus $1.6 million (22 cents per share) for
the third quarter of 1995. Store- closing costs (pre-tax) in the
third quarter totaled $.5 million in 1996 and $1.9 million in 1995
and reduced earnings per share by 4 cents and 17 cents for the
1996 and 1995 periods, respectively. The improvement in net
income was a result of higher sales, lower expenses and margins
unchanged from third-quarter 1995. For the first nine months of
1996, net income improved 36 percent to $5 million (72 cents per
share), compared with $3.7 million (52 cents per share) for the
nine months of 1995.
Sales totaled $132.9 million in the third quarter of 1996, an 8-
percent increase from third-quarter 1995. The third-quarter 1996
sales period included two fewer days than 1995, reflecting the
Company's change to a 13-week reporting period, with the quarter
ending Sept. 28, 1996. The sales improvement in the third quarter
resulted from a 24-percent increase in contractor builder and
remodeler sales, offset in part by an 8-percent decrease in
consumer (DIY) sales. Sales at comparable stores (stores in
operation prior to July 1, 1995) increased 5 percent from the
third quarter of 1995, and resulted from an 18-percent increase in
contractor sales and a 9-percent decrease in consumer sales. For
the first nine months of 1996, sales were $325.5 million
compared with $321.1 million for the first nine months of 1995, an
increase of 1 percent. Contractor sales increased 16 percent and
consumer sales decreased 13 percent for the nine-month period.
Comparable store sales for the 1996 nine-month period were down 1
percent.
The sales mix for the third quarter of 1996 was 42-percent
consumer sales and 58-percent contractor sales compared with 50/50
mix for the third quarter of 1995. The 1996 sales mix for the
nine months was 43 percent consumer sales and 57 percent
contractor sales, versus a 50/50 mix in 1995.
Gross margins of 23.5 percent for the 1996 third quarter were
equal to 1995's third quarter. The Company recorded a Lifo charge
of $.4 million in the third quarter of 1996, reflecting cost
increases in lumber products, versus deflation in costs in 1995
and a resulting reduction of $.7 million to Lifo in third quarter
1995. Total margin dollars were $2.4 million higher compared with
1995's third quarter.
Selling, general and administrative expenses in third quarter of
1996 (excluding the costs related to store closings) were 17.3
percent of sales compared with 18.2 percent of sales for the
corresponding period of 1995. Expenses in the third quarter of
1996 included approximately $.3 million ($1.2 million for the nine-
month period) related to the Company's information-technology
upgrade which is nearly completed.
During the third quarter of 1996, the Company closed its stores in
Cape Girardeau, Mo. and Dayton, Ohio.
The effective tax rate (federal and state) for third quarter and
nine-month periods of 1996 was 40 percent, compared with 36.3 percent
and 38.5 percent for the same periods of 1995.
Financial Condition
At Sept. 28, 1996, the Company's balance sheet remained strong.
Net working capital at Sept. 28, 1996, totaled $62.2 million,
compared with $63.8 million at Sept. 30, 1995, and $60.6 million
at Dec. 31, 1995. The current ratio at Sept. 28, 1996, was 2.6 to
1, compared with 2.8 to 1 at Sept. 30, 1995, and 2.9 to 1 at Dec.
31, 1995.
Cash and cash equivalents were $9.2 million at Sept. 28, 1996,
compared to $17.0 million at Sept. 30, 1995, and $13.9 million at
Dec. 31, 1995. The liquidity ratio at Sept. 28, 1996, was .24 to
1, compared to .47 to 1 at Sept. 30, 1995, and .44 to 1 at Dec.
31, 1995. Cash and cash equivalents decreased $2.1 million during
the 1996 third quarter. Operating activities produced $8.6
million of cash in the third quarter of 1996 which was used to pay
off all short-term borrowings, $8 million, reduce long-term debt,
$.8 million, and for net property additions of $1.6 million.
The Company expects that net cash from operating activities and
available lines of credit should be adequate to meet future
working capital needs. The Company continues to seek
opportunities for growth through acquisitions of additional
stores.
Invested capital (long-term debt and shareowner's equity) was
equal to 77% of total assets at Sept. 28, 1996, compared to 78% at
Sept. 30, 1995, and 81% at year- end 1995. The total debt-to-asset
ratio was lowered to .14:1 at Sept. 28, 1996, from .16:1 at year-
end 1995. The ratio of equity to total assets was .64 to 1 at
Sept. 28, 1996, the same as year-end 1995. The Company purchased
55,300 shares of its common stock during the third quarter of 1996
(85,300 shares for the nine-month period).
Outlook
The Company is excited about the outlook for the fourth quarter of
1996 and expects to show significant improvement in fourth-quarter
earnings compared with 1995.
The Company intends to sell to contractors a more complete package
of home construction products which should improve both sales and
gross margins. The Company is working aggressively to improve
consumer sales by executing strategies to improve sales of major
projects including kitchen and bath, decks, sheds, pole barns,
garages, and major remodeling projects. The Company is strongly
focused on the priorities of market-share improvement, people
development and improved profitability.
PART II -- OTHER INFORMATION
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
The Company 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 4, 1996 David G. Honaman
David G. Honaman
Vice President - Administration
and Chief Financial Officer
Date: November 4, 1996 Edward J. Dean
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-28-1996
<CASH> 9,204,000
<SECURITIES> 0
<RECEIVABLES> 39,907,000
<ALLOWANCES> 0
<INVENTORY> 48,864,000
<CURRENT-ASSETS> 100,111,000
<PP&E> 124,311,000
<DEPRECIATION> (58,016,000)
<TOTAL-ASSETS> 168,166,000
<CURRENT-LIABILITIES> 37,866,000
<BONDS> 0
0
0
<COMMON> 6,929,000
<OTHER-SE> 100,411,000
<TOTAL-LIABILITY-AND-EQUITY> 168,166,000
<SALES> 325,496,000
<TOTAL-REVENUES> 81,215,000
<CGS> 246,696,000
<TOTAL-COSTS> 63,361,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 512,000
<INTEREST-EXPENSE> 1,907,000
<INCOME-PRETAX> 8,356,000
<INCOME-TAX> 3,344,000
<INCOME-CONTINUING> 5,012,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,012,000
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
