<PAGE>
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 June 28, 1997
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 (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 -- 6,914,308 shares as of July 31, 1997.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
<TABLE>
WOLOHAN LUMBER CO.
CONDENSED BALANCE SHEETS
<CAPTION>
JUNE 28, DEC. 28,
1997 1996
(Unaudited) (Note)
ASSETS (000's omitted)
CURRENT ASSETS
<C> <C>
Cash and cash equivalents $ 6,864 $ 15,485
Trade receivables 40,593 32,722
Inventories - at current cost 67,707 59,455
Reduction to LIFO cost (14,974) (14,702)
Inventories at the lower of last in,
first out cost or market 52,733 44,753
Other current accounts 2,331 3,762
TOTAL CURRENT ASSETS 102,521 96,722
OTHER ASSETS 2,868 2,311
NET PROPERTIES 61,252 63,676
TOTAL ASSETS $ 166,641 $162,709
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 21,053 $ 15,565
Employee compensation and accrued expenses 12,941 12,678
Current portion of long-term debt 6,040 6,790
TOTAL CURRENT LIABILITIES 40,034 35,033
LONG-TERM DEBT, less current portion 17,693 19,883
SHAREOWNERS' EQUITY
Common stock 6,914 6,912
Additional capital 21,856 21,828
Retained earnings 80,144 79,053
TOTAL SHAREOWNERS' EQUITY 108,914 107,793
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 166,641 $162,709
<FN>
Note: The balance sheet at Dec. 28, 1996, 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>
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<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
JUNE 28, JUNE 30,
1997 1996
(000's omitted, except per share data)
<C> <C>
NET SALES $ 126,827 $ 119,193
Cost of sales 96,801 89,399
Gross Profit 30,026 29,794
OPERATING EXPENSES:
Selling, general and administrative 22,813 22,263
Depreciation 2,473 2,424
Total operating expenses 25,286 24,687
OPERATING INCOME 4,740 5,107
OTHER EXPENSES (INCOME):
Interest expense 571 690
Gain from sale of properties (32) (48)
Other (815) (696)
(276) (54)
INCOME BEFORE INCOME TAXES 5,016 5,161
Income taxes 2,027 2,065
NET INCOME $ 2,989 $3,096
Average shares outstanding 6,915 6,990
Net income per share $.43 $.44
Dividends per share $.07 $.07
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
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<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
JUNE 28, JUNE 30,
1997 1996
(000's omitted, except per share data)
<C> <C>
NET SALES $ 204,181 $ 192,646
Cost of sales 155,432 145,068
Gross Profit 48,749 47,578
OPERATING EXPENSES:
Selling, general and administrative 40,712 40,706
Depreciation 4,961 4,818
Total operating expenses 45,673 45,524
OPERATING INCOME 3,076 2,054
OTHER EXPENSES (INCOME):
Interest expense 1,112 1,324
Gain from sale of properties (58) (629)
Other (1,413) (1,187)
(359) (492)
INCOME BEFORE INCOME TAXES 3,435 2,546
Income taxes 1,377 1,020
NET INCOME $ 2,058 $ 1,526
Average shares outstanding 6,915 6,998
Net income per share $.30 $.22
Dividends per share $.14 $.14
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
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<TABLE>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
JUNE 28, JUNE 30,
1997 1996
(000's omitted, except per share data)
<C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (2,233) $ (2,608)
NET CASH USED IN INVESTING ACTIVITIES (2,480) (3,230)
NET CASH FROM (USED IN) FINANCING ACTIVITIES (3,908) 3,286
DECREASE IN CASH AND CASH EQUIVALENTS (8,621) (2,552)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 15,485 13,919
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,864 $ 11,367
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
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WOLOHAN LUMBER CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 28, 1997
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 only 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 outside factors and, accordingly,
its operating results for the three months and six months ended
June 28, 1997 are not necessarily indicative of the results that
may be expected for the entire year ending Dec. 27, 1997.
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. 28, 1996.
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.
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share. SFAS 128 simplifies the standards for
computing earnings per share and makes them comparable to
international EPS standards. It also replaces the presentation of
primary EPS with a presentation of basic EPS. Implementation of SFAS
128 is not expected to have an impact on the Company's reporting of
EPS. SFAS 128 is required to be implemented for periods ending after
Dec. 15, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results Of Operations
Net income for the second quarter of 1997 was $3 million (43 cents
per share), versus $3.1 million (44 cents per share) for the same
period of 1996. The slight decline in second-quarter earnings was
due to a decline in the gross margin percentage. Net income for
the first six months of 1997 increased 35 percent to $2.1 million
(30 cents per share) compared with $1.5 million (22 cents per
share) for the same period of 1996.
Sales totaled $126.8 million in the second quarter of 1997, a 6-
percent increase from second-quarter 1996. The sales increase in
the 1997 second quarter resulted from an 18-percent increase in
contractor (builder and remodeler) sales which more than offset a
7-percent decline in consumer (DIY) sales. Comparable-store sales
in second quarter 1997 increased 7 percent from the same period of
1996. Approximately 30 percent of the overall sales increase in
1997's second quarter was a result of higher average selling
prices of lumber compared with the same period of 1996. For the
first six months of 1997, sales increased 6 percent to $204.2
million from the same period of 1996. Contractor sales increased
15 percent and consumer sales decreased 6 percent for the six-
month period. Comparable store sales for the 1997 six-month
period were up 6 percent from 1996.
The sales mix for the second quarter of 1997 was 41-percent
consumer sales and 59-percent contractor sales compared with a
46/54 mix for the second quarter of 1996. For the six-month
period, contractor sales accounted for 62 percent of total sales
in 1997 versus 57 percent for 1996.
Gross margins declined 130 basis points to 23.7 percent in the
second quarter of 1997, compared with the second quarter of 1996
and were off 80 basis points for the six-month period compared
with 1996. The decline in gross margins can be attributed to the
Company's aggressive positioning in the marketplace, relative
competitive pressures and to a shift in sales mix favoring
contractor sales. Gross margin dollars increased $.2 million and
$1.2 million for the second quarter and six months, respectively,
compared with the corresponding periods of 1996.
The operating expense ratio for the 1997 second quarter was 19.9
percent, 80 basis points lower than second quarter 1996. For the
1997 six-month period, the operating expense ratio was 22.4
percent, 120 basis points lower compared with the same period of
1996.
The effective tax rate (federal and state) for second quarter 1997
was 40.4 percent, versus 40 percent for second quarter 1996. For
the six-month period, the effective tax rate was 40.1 percent for
both years.
Financial Condition
At June 28, 1997, the Company's balance sheet remains strong. Net
working capital at June 28, 1997, totaled $62.5 million, compared
with $59.2 million at June 30, 1996, and $61.7 million at Dec. 28,
1996. The current ratio at June 28, 1997, was 2.6 to 1, compared
with 2.4 to 1 at June 30, 1996, and 2.8 to 1 at Dec. 28, 1996.
Cash and cash equivalents were $6.9 million at June 28, 1997,
compared to $11.4 million at June 30, 1996, and $15.5 million at
Dec. 28, 1996. The liquidity ratio at June 28, 1997, was .17 to
1, compared to .27 to 1 at June 30, 1996, and .44 to 1 at Dec. 28,
1996. Cash and cash equivalents increased $.7 million during the
1997 second quarter with operating activities producing $4.1
million of cash. The major uses of cash in the 1997 second quarter
were for net property additions, $1.5 million, and reduction of
long-term debt of $1.4 million. The Company had no short-term
borrowings at June 28, 1997, compared with $8 million outstanding
at June 30, 1996.
The Company expects that net cash from operating activities and
available lines of credit should be adequate to meet future
working capital needs and capital expenditures for 1997. The
Company continues to seek opportunities for growth through
acquisitions of additional stores.
Invested capital (long-term debt and shareowners' equity) was
equal to 76% of total assets at June 28, 1997, compared to 75% at
June 30, 1996, and 78% at year-end 1996. The total debt-to-asset
ratio was lowered to .11:1 at June 28, 1997, from .12:1 at year-
end 1996. The ratio of equity to total assets was .65 to 1 at
June 28, 1997, compared to .66 to 1 at year-end 1996.
Outlook
The Company expects continued pressure on sales and gross margins
in the second half of 1997. In the Midwest, "big box" retailers will
continue to take market share of consumer sales and a modest
slowdown in new-home construction could negatively impact
contractor sales. July 1997 sales were 5-percent below last year
on a comparable-store basis.
The Company is committed to improving consumer sales with
strategies to increase sales of kitchens and baths, decks, sheds,
garages, pole barns and major remodeling projects. The Company
continues to provide more value-added services to improve market-
share of contractor business. A wall-panel line will be added to one
location and a truss-manufacturing plant will be added to another
facility in the third quarter. The Company added two more "boom"-
type delivery trucks during the second quarter.
PART II -- OTHER INFORMATION
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following information is furnished with respect to the
Annual Meeting of security holders of the Registrant held during April
1997:
(a) A meeting was held on April 24, 1997 and was an Annual
Meeting.
(b) Not Applicable
(c) At such meeting the following nominees for election
as directors were elected to hold office until the next
annual meeting of stockholders or until their
successors are elected and qualified. The votes cast with
respect to each nominee for director are as follows:
Votes to Withhold
Votes for Authority to Vote
Nominee Nominee for the Nominee
Ervin E. Wardlow 5,516,932 56,503
Hugo E. Braun, Jr. 5,516,943 56,492
James L. Wolohan 5,516,867 56,568
F.R. Lehman 5,517,031 56,404
Leo B. Corwin 5,517,174 56,261
Lee A. Shobe 5,517,273 56,261
Charles R. Weeks 5,517,174 56,162
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.
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: August 11, 1997 David G. Honaman
David G. Honaman
Vice President - Administration
and Chief Financial Officer
Date: August 11, 1997 Edward J. Dean
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
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: August 11, 1997 David G. Honaman
David G. Honaman
Vice President - Administration
and Chief Financial Officer
Date: August 11, 1997 Edward J. Dean
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
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<COMMON> 6914000
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<TOTAL-LIABILITY-AND-EQUITY> 166641000
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