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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 March 28, 1998
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/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-6169
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WOLOHAN LUMBER CO.
(Exact name of registrant as specified in its charter)
Michigan 38-1746752
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1740 Midland Road, Saginaw, Michigan 48603
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(Address of principal executive offices)
(517) 793-4532
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(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 /X/ 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 -- 6,764,312 shares as of April 30, 1998.
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<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
WOLOHAN LUMBER CO.
CONDENSED BALANCE SHEETS
MAR. 28, DEC. 27,
1998 1997
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(Unaudited) (Note)
(000's omitted)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 20,057 $ 25,333
Trade receivables 26,459 30,064
Inventories - at average cost 59,156 52,630
Reduction to LIFO cost (13,683) (13,421)
--------- ---------
Inventories at the lower of LIFO
cost or market 45,473 39,209
Other current accounts 4,225 4,305
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TOTAL CURRENT ASSETS 96,214 98,911
NET PROPERTIES 49,440 51,008
OTHER ASSETS 7,508 7,544
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TOTAL ASSETS $ 153,162 $ 157,463
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 13,428 $ 10,814
Employee compensation and
accrued expenses 10,005 13,787
Current portion of long-term debt 3,670 2,240
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TOTAL CURRENT LIABILITIES 27,103 26,841
LONG-TERM DEBT, less current portion 18,988 20,443
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TOTAL LIABILITIES 46,091 47,284
SHAREOWNERS' EQUITY
Common stock 6,774 6,910
Additional capital 20,181 21,819
Retained earnings 80,116 81,450
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TOTAL SHAREOWNERS' EQUITY 107,071 110,179
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TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 153,162 $ 157,463
========= =========
</TABLE>
Note: The balance sheet at December 27, 1997, 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.
page 2
<PAGE>
<TABLE>
<CAPTION>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MAR. 28, MAR. 29,
1998 1997
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(000's omitted, except per share data)
<S> <C> <C>
NET SALES $ 73,195 $ 77,354
Cost of sales 56,020 58,631
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Gross profit 17,175 18,723
Other operating income 492 489
-------- --------
Total operating income 17,667 19,212
OPERATING EXPENSES:
Selling, general and
administrative 17,031 17,899
Depreciation 2,093 2,488
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Total operating expenses 19,124 20,387
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LOSS FROM OPERATIONS (1,457) (1,175)
OTHER (EXPENSES) INCOME:
Interest expense (470) (541)
Interest income 258 109
Gain on sale of properties 245 26
-------- --------
Other (expenses) income, net 33 (406)
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LOSS BEFORE INCOME TAXES (1,424) (1,581)
Income tax credit 570 650
-------- --------
NET LOSS $ (854) $ (931)
======== ========
Average shares outstanding 6,864 6,916
Net loss per share, basic $ (.12) $ (.13)
Net loss per share, assuming dilution $ (.12) $ (.13)
Dividends per share $ .07 $ .07
</TABLE>
See notes to condensed financial statements.
page 3
<PAGE>
<TABLE>
<CAPTION>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
-------------------
MAR. 28, MAR. 29,
1998 1997
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(000's omitted)
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (2,522) $ (6,346)
NET CASH USED IN INVESTING ACTIVITIES (415) (967)
NET CASH USED IN FINANCING ACTIVITIES (2,339) (2,009)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (5,276) (9,322)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 25,333 15,485
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,057 $ 6,163
======== ========
</TABLE>
See notes to condensed financial statements.
page 4
<PAGE>
WOLOHAN LUMBER CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 28, 1998
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 ended March 28, 1998 are not
necessarily indicative of the results that may be expected for the
entire year ending December 26, 1998.
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 27, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Certain information contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations may be
deemed to be forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995 and are subject to
the Act's safe harbor provisions. These statements are based on
current expectations and involve a number of risks and
uncertainties. Actual results could differ materially and adversely
from those described in the forward-looking statements as a result
of various factors outside the control of the Company, including,
but not limited to the following: fluctuations in customer demand
and spending, expectations of future volumes and prices for the
Company's products, prevailing economic conditions affecting the
retail lumber and building materials markets and seasonality of
operating results.
Results Of Operations
Sales totaled $73.2 million in fiscal first-quarter 1998, a
5-percent decline from fiscal first-quarter 1997. The lower sales
resulted primarily from the impact of lower selling prices of lumber
products (down approximately 8 percent from fiscal first-quarter
1997) and six fewer stores than in fiscal first-quarter 1997. The
fiscal first-quarter 1998 net loss was $854,000 (12 cents per share)
versus a $931,000 loss (13 cents per share) for fiscal first-quarter
1997. The improvement resulted primarily from a pre-tax gain of
$245,000 recorded on the sale of excess property.
Historically, the Company's fiscal first quarter has the lowest
sales volume which has often resulted in a net loss for the quarter.
page 5
<PAGE>
Comparable-store sales in fiscal first-quarter 1998 increased 4
percent from fiscal first-quarter 1997 due to contractor (builder
and remodeler) sales increasing 10 percent and consumer (DIY) sales
decreasing 8 percent.
The sales mix for fiscal first-quarter 1998 was 69-percent
contractor sales and 31-percent consumer sales compared with a 66/34
mix, respectively, for fiscal first-quarter 1997.
Gross margins of 23.5 percent in fiscal first-quarter 1998 were 70
basis points lower, compared with fiscal first-quarter 1997. The
lower margins reflect, to some extent, the transition the Company is
making to concentrate on more project selling and builder and
remodeler sales with less emphasis on general home-improvement
merchandise.
The total operating expense factor was lowered 30 basis points due
primarily to lower depreciation expense.
The effective income tax rate (federal and state) for fiscal first-
quarter 1998 was 40 percent, compared with 41 percent for fiscal
first-quarter 1997.
Financial Condition
At March 28, 1998, the Company's balance sheet remained strong. Net
working capital at March 28, 1998, totaled $69.1 million, compared
with $61.5 million at March 29, 1997, and $72.1 million at Dec. 27,
1997. The current ratio at March 28, 1998, was 3.5 to 1, compared
with 2.7 to 1 at March 29, 1997, and 3.7 to 1 at Dec. 27, 1997.
Cash and cash equivalents were $20.1 million at March 28, 1998,
compared with $6.2 million at March 29, 1997, and $25.3 million at
Dec. 27, 1997. The liquidity ratio at March 28, 1998, was .74 to 1,
compared to .17 to 1 at March 29, 1997, and .94 to 1 at Dec. 27,
1997. Cash and cash equivalents decreased $5.3 million during the
1998 first quarter due primarily to the seasonal buildup of
inventories which increased $6.5 million from fiscal year-end 1997
and $1.8 million was used to buy back 143,000 shares of Company
stock.
The Company expects that net cash from operating activities and
available lines of credit should be adequate to meet future working
capital needs. There were no short-term borrowings outstanding at
the end of fiscal first-quarter 1998. The Company continues to seek
opportunities for growth through acquisitions of businesses aligned
with the Company's target customers (single-family builder,
remodeler and project-oriented consumer).
Invested capital (long-term debt and shareowners' equity) was equal
to 82% of total assets at March 28, 1998, compared with 83% at
fiscal year-end 1997. At March 28, 1998, the total debt-to-asset
ratio was .12, versus .13 at fiscal year-end 1997 and the ratio of
equity to total assets remained unchanged from fiscal year-end 1997
at .70:1.
page 6
<PAGE>
Outlook
We are committed to improving consumer sales with strategies to
increase sales of kitchens and baths, decks, sheds, garages, pole
barns and major remodeling projects. We continue to provide more
value-added services to improve market share of contractor business.
We held three regional builder shows during the first quarter and
are very pleased with the number of builders and remodelers who
attended and the volume of sales orders taken. We are working hard
to improve sales mix which will positively impact margins.
PART II -- OTHER INFORMATION
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
The registrant filed no reports on Form 8-K during
the quarter for which this Report is filed.
page 7
<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: May 10, 1998 David G. Honaman
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David G. Honaman
Vice President - Administration
and Chief Financial Officer
Date: May 10, 1998 Edward J. Dean
------------------------------ -------------------------------
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
page 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-28-1998
<CASH> $ 20,057,000
<SECURITIES> 0
<RECEIVABLES> 26,459,000
<ALLOWANCES> 0
<INVENTORY> 45,473,000
<CURRENT-ASSETS> 96,214,000
<PP&E> 112,485,000
<DEPRECIATION> 63,045,000
<TOTAL-ASSETS> 153,162,000
<CURRENT-LIABILITIES> 27,103,000
<BONDS> 0
<COMMON> 6,774,000
0
0
<OTHER-SE> 100,297,000
<TOTAL-LIABILITY-AND-EQUITY> 153,162,000
<SALES> 73,195,000
<TOTAL-REVENUES> 18,170,000
<CGS> 56,020,000
<TOTAL-COSTS> 16,776,000
<OTHER-EXPENSES> 2,093,000
<LOSS-PROVISION> 255,000
<INTEREST-EXPENSE> 470,000
<INCOME-PRETAX> (1,424,000)
<INCOME-TAX> 570,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (854,000)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
