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 25, 2000
--------------------------------------------
|_| 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
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(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 |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 -- 4,833,847 shares as of April 30, 2000.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
WOLOHAN LUMBER CO.
CONSOLIDATED BALANCE SHEETS
(in thousands)
MAR. 25, DEC. 25,
2000 1999
--------- ---------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,144 $ 3,217
Trade receivables, net 28,703 33,741
Builder Finance Program receivables 4,602 5,220
Inventories - at average cost 50,393 48,796
Reduction to LIFO cost (13,023) (12,943)
--------- ---------
Inventories at the lower of LIFO cost or market 37,370 35,853
Other current accounts 7,570 5,385
--------- ---------
TOTAL CURRENT ASSETS 79,389 83,416
NET PROPERTIES 42,534 43,344
OTHER ASSETS 12,916 13,886
--------- ---------
TOTAL ASSETS $ 134,839 $ 140,646
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 15,080 $ 12,467
Employee compensation and accrued expenses 11,810 14,458
Short-term bank borrowings 1,000 --
Current portion of long-term debt 2,211 4,189
--------- ---------
TOTAL CURRENT LIABILITIES 30,101 31,114
LONG-TERM DEBT, less current portion 10,480 12,593
--------- ---------
TOTAL LIABILITIES 40,581 43,707
SHAREOWNERS' EQUITY
Common stock 4,938 5,031
Additional capital -- 673
Retained earnings 89,320 91,235
--------- ---------
TOTAL SHAREOWNERS' EQUITY 94,258 96,939
--------- ---------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 134,839 $ 140,646
========= =========
<FN>
Note: The consolidated balance sheet at December 25, 1999, 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 consolidated financial statements.
</TABLE>
page 2
WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per-share amounts)
THREE MONTHS ENDED
------------------
MAR. 25, MAR. 27,
2000 1999
-------- --------
NET SALES $ 66,834 $ 73,148
Cost of sales 51,032 56,128
-------- --------
Gross profit 15,802 17,020
Other operating income 643 721
-------- --------
Total operating income 16,445 17,741
OPERATING EXPENSES:
Selling, general and administrative 16,378 18,312
Store closing costs 445 --
Depreciation and amortization 1,837 1,741
-------- --------
Total operating expenses 18,660 20,053
-------- --------
LOSS FROM OPERATIONS (2,215) (2,312)
OTHER INCOME (EXPENSES):
Interest expense (266) (425)
Interest income 95 82
Gain on sale of properties 393 1,107
-------- --------
Other income, net 222 764
-------- --------
LOSS BEFORE INCOME TAXES (1,993) (1,548)
Income tax credit 787 616
-------- --------
NET LOSS $ (1,206) $ (932)
======== ========
Average shares outstanding 4,981 5,423
Net loss per share, basic $ (.24) $ (.17)
Net loss per share, assuming dilution $ (.24) $ (.17)
Dividends per share $ .07 $ .07
See notes to condensed consolidated financial statements.
page 3
<TABLE>
<CAPTION>
WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(UNAUDITED)
(in thousands)
COMMON SHARES TOTAL
------------- ADDITIONAL RETAINED SHAREOWNERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balances at December 25, 1999 5,031 $ 5,031 $ 673 $ 91,235 $ 96,939
Net loss (1,206) (1,206)
Cash dividends--$.07 per share (347) (347)
Shares issued under Long-Term
Incentive Plan 10 10 129 139
Shares purchased and retired (103) (103) (802) (362) (1,267)
-------- -------- -------- -------- --------
Balances at March 25, 2000 4,938 $ 4,938 $ 0 $ 89,320 $ 94,258
======== ======== ======== ======== ========
</TABLE>
page 4
WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
THREE MONTHS ENDED
------------------
MAR. 25, MAR. 27,
2000 1999
-------- --------
Operating Activities
Net loss $ (1,206) $ (932)
Adjustments to reconcile net loss to
cash provided by (used in) operating activities:
Depreciation 1,762 1,673
Amortization 75 68
Provision for losses on accounts receivable 27 20
Gain on sale of properties (393) (1,107)
Changes in operating assets & liabilities
net of effects of sale of stores to
Stock Lumber in 1999
Accounts receivable 5,011 7,711
Builder Finance Program receivables 618 (1,414)
Other assets (1,766) (655)
Inventories (1,517) (5,993)
Accounts payable & accrued expenses 105 (4,449)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,716 (5,078)
-------- --------
INVESTING ACTIVITIES
Additions to properties (1,065) (1,216)
Proceeds from sale of stores to Stock Lumber -- 9,956
Proceeds from the sale of properties 982 1,512
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (83) 10,252
-------- --------
FINANCING ACTIVITIES
Net credit lines borrowings (repayments) 1,000 (2,000)
Payments on long-term debt (4,092) (1,934)
Purchase of common stock (1,267) (2,818)
Dividends paid (347) (375)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (4,706) (7,127)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (2,073) (1,953)
Cash and cash equivalents at beginning of period 3,217 3,166
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,144 $ 1,213
======== ========
See notes to condensed consolidated financial statements.
page 5
WOLOHAN LUMBER CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 25, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 25, 2000 are not
necessarily indicative of the results that may be expected for the
entire year ending December 31, 2000.
For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 25, 1999.
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
The first-quarter 2000 loss was $1.2 million (24 cents per share)
compared with a loss of $932,000 (17 cents per share) for
first-quarter 1999. The Company's business is subject to seasonal
influences, with lower sales historically recorded in the first
quarter, often resulting in a net loss.
The 2000 first-quarter results include a pre-tax charge of $445,000
related to closing one store. Pre-tax gains from selling idle
properties totaled $393,000 in first-quarter 2000 compared with $1.1
million in first-quarter 1999. Excluding these
page 6
infrequently occurring items and interest and taxes, the
first-quarter pre-tax loss was $1.7 million, compared with $2.2
million in 1999, an improvement of 25 percent. The improvement
resulted from a 30-basis-point increase in gross margins and a
20-basis-point decrease in net operating expenses, which together
combined to offset lower sales.
Sales totaled $66.8 million for the 2000 first quarter, compared
with $73.1 million for first-quarter 1999. Sales at comparable
stores decreased 3 percent in the 2000 first quarter.
Contractor-builder and remodeler sales accounted for approximately
70 percent of total sales in the first quarter of 2000, compared
with 72 percent for the same period of 1999.
The per-share loss for the 2000 first quarter was increased by a
reduction in outstanding common shares. The Company repurchased
103,000 shares during the first quarter of 2000 and repurchased
539,000 shares during 1999. Outstanding shares were 8-percent lower
compared with first-quarter 1999. This reduction in outstanding
shares will have the effect of increasing earnings per share for a
given level of income as the Company moves into positive
income-producing months of 2000.
Gross margins in first-quarter 2000 were 23.6 percent, compared with
23.3 percent in 1999's first quarter.
A key part of the Company's strategic plan is the conversion of
several Wolohan Lumber stores to the Central Michigan Lumber (CML)
format. The CML format is a cost-efficient model focused on project
customers and large building contractors. The Company expects to
convert eight stores in 2000 with the first two to be completed by
early May. Costs incurred in the first quarter related to these
conversions totaled approximately $70,000. The Company's
operating-expense ratio, including the conversion costs, was 27.2
percent in first quarter 2000, compared with 27.4 percent in 1999's
first quarter. Reductions in marketing expense and improved expense
control in other areas were the primary reasons for the lower
expense factor.
The effective income tax rate (federal and state) for fiscal
first-quarter 2000 was 39.5 percent, compared with 39.8 percent for
fiscal first-quarter 1999.
Financial Condition
At March 25, 2000, the Company's balance sheet remained strong. Net
working capital at March 25, 2000, totaled $49.3 million, compared
with $46.2 million at March 27, 1999, and $52.3 million at Dec. 25,
1999. The current ratio at March 25, 2000, was 2.6 to 1, compared
with 2.2 to 1 at March 27, 1999, and 2.7 to 1 at Dec. 25, 1999.
Cash and cash equivalents were $1.1 million at March 25, 2000,
compared with $1.2 million at March 27, 1999, and $3.2 million at
Dec. 25, 1999. The liquidity ratio at March 25, 2000, was .04 to 1,
compared to .03 to 1 at March 27, 1999, and .1 to 1 at Dec. 25,
1999.
page 7
Cash and cash equivalents decreased $2.1 million during the 2000
first quarter. Operating activities provided net cash of $2.7
million in the first quarter of 2000, primarily from the seasonal
reduction in accounts receivable. Investing activities in
first-quarter 2000 included $1 million of proceeds from the sale of
a closed facility which nearly offset $1.1 million of additions to
properties. Financing activities in first-quarter 2000 used net cash
of $4.7 million and included $4.1 million for payments on long-term
debt, $1.2 million for the purchase of 103,000 shares of Company
common stock at an average price of $12.31 per share, $.4 million
for a dividend payment and net borrowings of $1 million under the
Company's credit lines.
The Company expects that net cash from operating activities and
available lines of credit should be adequate to meet future working
capital needs.
Invested capital (long-term debt and shareowners' equity) was equal
to 78% of total assets at March 25, 2000, the same as fiscal
year-end 1999. At March 25, 2000, the total debt-to-asset ratio was
.08, versus .09 at fiscal year-end 1999 and the ratio of equity to
total assets was .70:1 versus .69:1 at fiscal year-end 1999.
In 1997, the Company began testing a Builder Finance Program as a
way of improving market share and product mix of builder sales. The
program started out with Wolohan Lumber being the mortgage lender
and the Company utilized its working capital to fund the loans. The
average mortgage loan is for a six-month period, carries a
competitive interest rate and generally has a lower administrative
fee for the builder when compared to a commercially-offered
construction loan. A first mortgage is obtained as security for each
loan. The program has grown from financing three homes in 1997 to
over 100 homes in 1999. Because of the growth of the program, the
Company has partnered with a financial institution to fund the needs
of some Michigan builders using the Builder Finance Program. The
Company continues to be the mortgage lender for the program in Ohio
and Indiana. At the end of the first quarter 2000, the balance of
receivables in the Builder Finance Program totaled $4.6 million,
compared with $5.2 million at year-end 1999.
Outlook
The Company will continue to focus on improvement in both market
share and profitability in the year 2000.
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). Its strong balance sheet will allow the Company to take
advantage of growth and profit opportunities as they arise.
The Company is committed to improving its return-on-investment
ratios and will continue to analyze the profitability of all
locations from an economic value-added perspective.
page 8
PART II -- OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
The registrant filed a Form 8-K dated February 4, 2000.
page 9
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 8, 2000 David G. Honaman
---------------- ---------------------------------------------
David G. Honaman
Senior Vice President, Chief Financial Officer
and Secretary (Principal Financial Officer)
Date: May 8, 2000 Edward J. Dean
---------------- ---------------------------------------------
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
page 10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-26-1999
<PERIOD-END> MAR-25-2000
<CASH> $ 1,144,000
<SECURITIES> 0
<RECEIVABLES> 28,703,000
<ALLOWANCES> 0
<INVENTORY> 37,370,000
<CURRENT-ASSETS> 79,389,000
<PP&E> 104,959,000
<DEPRECIATION> (62,425,000)
<TOTAL-ASSETS> 134,839,000
<CURRENT-LIABILITIES> 30,101,000
<BONDS> 0
<COMMON> 4,938,000
0
0
<OTHER-SE> 89,320,000
<TOTAL-LIABILITY-AND-EQUITY> 134,839,000
<SALES> 66,834,000
<TOTAL-REVENUES> 16,933,000
<CGS> 51,032,000
<TOTAL-COSTS> 16,796,000
<OTHER-EXPENSES> 1,837,000
<LOSS-PROVISION> 27,000
<INTEREST-EXPENSE> 266,000
<INCOME-PRETAX> (1,993,000)
<INCOME-TAX> 787,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,206,000)
<EPS-BASIC> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
