=============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 25, 1999.
/ / 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
As of March 1, 2000, 4,953,836 shares of Common Stock of the registrant were
outstanding and the aggregate market value of the shares of Common Stock held
by non-affiliates (including certain officers and non-officer directors) of
the registrant was approximately $39,000,000.
Documents Incorporated by Reference
Portions of the Annual Report of the registrant to its shareholders for the
year ended December 25, 1999 are incorporated by reference into Part II.
Portions of the definitive Proxy Statement of the registrant, dated March 30,
2000, filed pursuant to Regulation 14A are incorporated by reference into
Part III.
=============================================================================
PART I
Item 1. Business.
Wolohan Lumber Co. (the "registrant") is engaged in the retail sale
of a full-line of lumber and building materials and related products,
through a chain of 48 building supply stores located in Illinois,
Indiana, Kentucky, Michigan and Ohio.
During 1999 the registrant restructured its stores into two divisions
comprised of the contractor-focused Wolohan division and the CML
division targeting retail project sales and sales to professional
homebuilders. CML is the operating name of Central Michigan Lumber
acquired by the registrant in 1998.
The registrant sells to contractor builders and remodelers and to the
"do-it-yourself" market consisting principally of homeowners. These
customer types accounted for approximately 64% and 36%, respectively,
of the registrant's sales for 1999.
The registrant sells more than 27,000 different products which are
purchased from approximately 1,500 suppliers. No supplier accounts
for more than 4% of total purchases. The registrant purchases lumber
products primarily from lumber and plywood mills and more than half
of all other merchandise from original producers or manufacturers.
The business of the registrant is not dependent upon a single
customer or a few customers for any significant portion of sales.
The registrant believes that backlogs are not significant to its
business.
The registrant is engaged in only one line of business - retail sales
of lumber and building materials and related items. The classes of
products include dimension lumber; sheathing plywood; building
materials; building hardware; millwork; plumbing, heating and
electrical; kitchen cabinets and vanities; home decorations; trusses
and components, including storage barns; and other forest products,
such as fencing and treated lumber.
The business of the registrant is highly competitive, and it
encounters competition from both national and regional chains and
from local independent merchants, as well as integrated department
stores. Because of the variety of competition faced by the registrant
and the wide range of products it sells, it is virtually impossible
to determine the registrant's competitive position in the markets it
serves.
The registrant holds no material patents, trademarks, licenses,
franchises or concessions.
The registrant's business, like the retail lumber business, generally
is subject to seasonal influences. The second and third quarters are
generally the periods of highest sales volumes while the first
quarter is usually the period of lowest sales volume.
The registrant had approximately 1,390 full-time employees at
December 25, 1999.
To the best of the registrant's knowledge, it is complying with all
federal, state and local environmental protection provisions.
2
Item 2. Properties.
The administrative offices of the registrant are located in a
28,000-square-foot, two-story brick face building situated on three
acres of land owned by the registrant in Saginaw, Michigan.
As of March 1, 2000, the registrant operated 48 building supply
stores in the states of Illinois, Indiana, Kentucky, Michigan and
Ohio. The showroom selling space in the stores averages 23,000 square
feet. In addition, total warehouse and storage space (under roof)
ranges in size from 6,000 square feet to 66,000 square feet (average
of 26,000 square feet).
All of the building supply stores are owned in fee by the registrant
with the exception of three leased stores.
The registrant believes that all of its building supply stores and
the display, warehouse and storage facilities and equipment located
thereon are well maintained and adequate for the purpose for which
they are used. A fleet of approximately 280 trucks is owned by the
registrant for the delivery of its retail merchandise.
Item 3. Legal Proceedings.
Various lawsuits arising during the normal course of business are
pending against the Company. In the opinion of management, the
ultimate liability, if any, resulting from these matters will have no
significant effect on the Company's results of operations, liquidity
or financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
3
Executive Officers of the Registrant
The executive officers of the registrant are as follows:
<TABLE>
<CAPTION>
Has Served
In Position
Name Position Since Age
- -------------------- --------------------------------------------- ----------- ---
<S> <C> <C> <C>
James L. Wolohan Chairman of the Board, 1994 48
President and 1986
Chief Executive Officer 1987
John A. Sieggreen Executive Vice President and 1999 37
Chief Operating Officer
David G. Honaman Senior Vice President and President of the 1999 48
Wolohan Division,
Secretary and Chief 1995
Financial Officer
Curtis J. LeMaster Senior Vice President and Chief Information 1999 50
Officer
Dan P. Rogers Senior Vice President--General Merchandise 1999 49
Manager and President of the CML Division
Edward J. Dean Corporate Controller 1984 49
James R. Krapohl Treasurer and 1978 54
Assistant Secretary
</TABLE>
Officers of the registrant are elected each year in April at the Annual
Meeting of the Board of Directors to serve for the ensuing year and until
their successors are elected and qualified.
All of the officers of the registrant named above have held various positions
with the registrant for more than five years, with the exception of John A.
Sieggreen and Dan P. Rogers. Mr. Sieggreen served as Marketing Director of
the registrant until he resigned in February 1994. Thereafter, he was
employed by BMC West until April 1997 when he rejoined the registrant as Vice
President--Operations. Mr. Rogers served as Vice President--Merchandising of
Central Michigan Lumber Company prior to its acquisition by the registrant in
June 1998. Thereafter he served as President of Central Michigan Lumber until
elected to his current position in 1999.
4
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters.
The information set forth under the caption "Common Stock Data" on
page 4 of the 1999 Annual Report of the registrant to its
shareholders, is incorporated herein by reference.
Item 6. Selected Financial Data.
The five year selected financial data set forth under the caption
"Five Year Performance" on page 6 of the 1999 Annual Report of the
registrant to its shareholders, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information set forth on pages 7, 8 and 9 of the 1999 Annual
Report of the registrant to its shareholders, is incorporated herein
by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable
Item 8. Financial Statements and Supplementary Data.
The report of management, report of independent auditors, and
financial statements included on pages 10 through 20 of the 1999
Annual Report of the registrant to its shareholders, are incorporated
herein by reference.
The information set forth under the caption "Quarterly Summaries" on
page 4 of the 1999 Annual Report of the registrant to its
shareholders, is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
5
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Information About
Nominees As Directors" on pages 4 and 5 of the definitive Proxy
Statement of the registrant, dated March 30, 2000, filed with the
Securities and Exchange Commission pursuant to Regulation 14A is
incorporated herein by reference for information as to directors of
the registrant.
Reference is made to Part I of this Report for information as to
executive officers of the registrant.
Item 11. Executive Compensation.
The information set forth under the captions "Compensation Committee
Report" on pages 5, 6 and 7 and "Executive Compensation" on pages 7,
8 and 9 of the definitive Proxy Statement of the registrant, dated
March 30, 2000, filed with the Securities and Exchange Commission
pursuant to Regulation 14A is incorporated herein by reference.
Item 12. Security ownership of Certain Beneficial Owners and Management.
The information set forth under the caption "Security Ownership" on
pages 2 and 3 of the definitive Proxy Statement of the registrant,
dated March 30, 2000, filed with the Securities and Exchange
Commission pursuant to Regulation 14A is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
None.
6
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) and (2) -- The response to this portion of Item 14 is
submitted as a separate section of this report.
(3) Listing of Exhibits -- The exhibit marked by one asterisk
below was filed as an exhibit to Form 10-K of the registrant
for the year ended December 31, 1980; the exhibits marked
with three asterisks below were filed as exhibits to Form
10-Q of the registrant for the quarter ended June 30, 1987;
the exhibit marked with four asterisks below was filed as an
exhibit to Form 10-K of the registrant for the year ended
December 31, 1988; the exhibit marked with five asterisks
below was filed as an exhibit to Form 10-Q of the registrant
for the quarter ended June 30, 1990; the exhibit marked with
six asterisks below was filed as an exhibit to Form 10-Q of
the registrant for the quarter ended June 30, 1991, the
exhibit marked with seven asterisks below was filed as an
exhibit to Form 10-K of the registrant for the year ended
December 31, 1991; and the exhibit marked with eight
asterisks below was filed as an exhibit to Form 10-K of the
registrant for the year ended December 31, 1994 (file number
0-6169), and are incorporated herein by reference, the
exhibit number in parenthesis being those in such Form 10-K
or 10-Q reports.
Exhibit (3) (a) *Articles of Incorporation (1)
Exhibit (3) (b) ***Amendment to Articles of Incorporation
(3) (a)
Exhibit (3) (c) *****Amendment to Articles of
Incorporation (6) (a) (1)
Exhibit (3) (d) ****By-laws (3) (c)
Exhibit (4) (a) ***Note Agreement dated as of May 1,
1987, between registrant and
Massachusetts Mutual Life Insurance
Company (4)
Exhibit (4) (b) *******Note Agreement dated as of January
15, 1992, between registrant and
Principal Mutual Life Insurance Company
Exhibit (10) (a) ******1991 Long-Term Incentive Plan of
Wolohan Lumber Co. (6) (a) (1) (X)
Exhibit (10) (b) ********Stock Option Plan for
Non-Employee Directors (10) (b) (X)
(X) A compensatory plan required to be filed as an exhibit.
7
Exhibit (13) Annual Report of registrant to its
shareholders for the year ended
December 25, 1999
Exhibit (21) Subsidiaries of the registrant
Exhibit (23) Consent of Independent Auditors
(b) Reports on Form 8-K filed in the fourth quarter of 1999.
None
(c) Exhibits -- The response to this portion of item 14 is submitted
as a separate section of this report.
(d) Financial Statement Schedules -- The response to this portion of
Item 14 is submitted as a separate section of this report.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 24,
2000.
WOLOHAN LUMBER CO.
By /s/ James L. Wolohan
-----------------------------------------------
James L. Wolohan
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
By /s/ David G. Honaman
-----------------------------------------------
David G. Honaman
Senior Vice President, Chief Financial Officer
and Secretary (Principal Financial Officer)
By /s/ Edward J. Dean
-----------------------------------------------
Edward J. Dean
Corporate Controller (Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 24, 2000.
Signature Title Signature Title
- --------- ----- --------- -----
/s/ Hugo E. Braun, Jr. Director /s/ John A. Sieggreen Director
- ---------------------- ---------------------
Hugo E. Braun, Jr. John A. Sieggreen
/s/ Leo B. Corwin Director /s/ Charles R. Weeks Director
- ---------------------- ---------------------
Leo B. Corwin Charles R. Weeks
/s/ Lee A. Shobe Director /s/ James L. Wolohan Director
- ---------------------- ---------------------
Lee A. Shobe James L. Wolohan
9
ANNUAL REPORT ON FORM 10-K
Item 14 (a) (1) and (2), (c) and (d)
Lists of Financial Statements and Financial Statement Schedules
Certain Exhibits
Financial Statement Schedules
Year-Ended December 25, 1999
WOLOHAN LUMBER CO.
SAGINAW, MICHIGAN
10
FORM 10-K -- Item 14 (a) (1) and (2)
WOLOHAN LUMBER CO.
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements, included in the 1999 Annual
Report of the registrant to its shareholders for the year ended December 25,
1999, are incorporated by reference in Item 8:
Consolidated Balance sheets -- December 25, 1999 and December 26,
1998.
Consolidated Statements of income -- Years ended December 25, 1999,
December 26, 1998 and December 27, 1997.
Consolidated Statements of shareowners' equity -- Years ended
December 25, 1999, December 26, 1998 and December 27, 1997.
Consolidated Statements of cash flows -- Years ended December 25,
1999, December 26, 1998 and December 27, 1999.
Notes to consolidated financial statements as of and for the three
years in the period ended December 25, 1999.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.
11
EXHIBIT INDEX
The exhibit marked by one asterisk below was filed as an exhibit to Form 10-K
of the registrant for the year ended December 31, 1980; the exhibits marked
with three asterisks below were filed as exhibits to Form 10-Q of the
registrant for the quarter ended June 30, 1987; the exhibit marked with four
asterisks below was filed as an exhibit to Form 10-K of the registrant for
the year ended December 31, 1988; the exhibit marked with five asterisks
below was filed as an exhibit to Form 10-Q of the registrant for the quarter
ended June 30, 1990; the exhibit marked with six asterisks below was filed as
an exhibit to Form 10-Q of the registrant for the quarter ended June 30,
1991, the exhibit marked with seven asterisks below was filed as an exhibit
to Form 10-K of the registrant for the year ended December 31, 1991; and the
exhibit marked with eight asterisks below was filed as an exhibit to Form
10-K of the registrant for the year ended December 31, 1994 (file number
0-6169), and are incorporated herein by reference, the exhibit number in
parenthesis being those in such Form 10-K or 10-Q reports.
Page Number
Sequential
Exhibit Numbering
Number System
- ------- -----------
Exhibit (3) (a) *Articles of Incorporation (1)
Exhibit (3) (b) ***Amendment to Articles of Incorpora-
tion (3)(a)
Exhibit (3) (c) *****Amendment to Articles of Incorpora-
tion (6)(a)(1)
Exhibit (3) (d) ****By-laws (3)(c)
Exhibit (4) (a) ***Note Agreement dated as of May 1, 1987,
between registrant and Massachusetts Mutual
Life Insurance Company (4)
Exhibit (4) (b) *******Note Agreement dated as of
January 15, 1992 between registrant and
Principal Mutual Life Insurance Company
Exhibit (10) (a) ******1991 Long-Term Incentive Plan of
Wolohan Lumber Co. (6)(a)(1)
Exhibit (10) (b) ********Stock Option Plan for Non-Employee
Directors
Exhibit (13) Annual Report of registrant to its 13-36
shareholders for the year ended
December 25, 1999
Exhibit (21) Subsidiaries of the registrant 37
Exhibit (23) Consent of Independent Auditors 38
12
Wolohan Lumber Co.
1999 Annual Report
"Quality Home Builders And Remodelers Build With Wolohan"
Company Profile
Wolohan Lumber Co., is a full-line retailer of lumber, building
materials and related products used primarily for new-home construction and
home-improvement projects.
Headquartered in Saginaw, Mich., the Company was founded in 1964
with three stores and at year-end 1999, 48 stores were in operation under the
names Wolohan Lumber, CML and Weber Lumber. Each store provides a strong
offering of quality materials, competitive prices and expert and personal
service. Each location includes a retail sales area (with most stores having
significant square footage devoted to displays of kitchens, baths, doors and
windows and other building materials), under-roof storage areas and an
outside lumberyard area with displays of pole barns, garages, decks and
storage buildings. In addition, the Company has one truss plant, a specialty
millwork operation, two wall-panel facilities and several stores with
door-assembly capabilities.
The Company's primary customer focus is the single-family
homebuilder, commercial and multi-family builder, remodeler and
project-oriented consumer. The Company offers a wide range of services
including house design, delivery, installation, various financing options and
job-site contractor sales representatives with experienced store support
coordination.
Table of Contents
- -----------------
Corporate and Financial Highlights .................... 1
Shareholders' Address ................................. 2
Common Stock Data ..................................... 4
Quarterly Summaries ................................... 4
Sales Mix ............................................. 5
5-Year Performance .................................... 6
Management's Discussion and Analysis of
Results of Operations and Financial Condition ........ 7
Reports of Management and Independent Auditors ........ 10
Financial Statements
Consolidated Balance Sheets ...................... 11
Consolidated Statements of Income ................ 12
Consolidated Statements of Shareowners'
Equity ......................................... 12
Consolidated Statements of Cash Flows ............ 13
Notes to Consolidated Financial Statements ....... 14
Corporate Information.....................(Inside Back Cover)
Corporate Highlights
o The Company announced a realignment of its operations into two operating
divisions in preparation for accelerated growth. The two divisions
comprise a core group of high-performing, contractor-focused Wolohan
stores and a CML Division targeting retail project sales and sales to
professional homebuilders. CML is the operating name of Central Michigan
Lumber, acquired by the Company in 1998. Up to 27 stores currently
operating under the Wolohan Lumber name are expected to be converted to
the CML model over the next several years.
o Earnings per share improved to $1.19 per share from $1.05 per share in
1998.
o The Company repurchased 539,000 shares of its common stock at an average
of $12.76 per share, which was in addition to 1,370,000 shares
repurchased in 1998. The combination of the stock-repurchase program and
earnings retention has increased the Company's book value per share from
$15.94 at year-end 1997 to $19.27 at year-end 1999.
o Sales totaled $404 million for 1999 with comparable-store sales
increasing 5 percent.
o Net income totaled $6.3 million.
o Capital expenditures of $8.6 million included the addition of a
wall-panel manufacturing facility and the relocation of one store.
o The Company completed the installation of a new point-of-sale computer
system.
o The Company ended 1999 with a strong balance sheet highlighted by a sound
working capital position and a low debt ratio.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(in thousands, except per-share amounts, ratios and percentages)
1999 1998
vs vs
1999 1998 1997 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATISTICS
Net sales $404,032 $449,904 $424,503 -10% +6%
Gross profit 91,628 102,492 101,583 -11% +1%
Income before income taxes 10,377 11,186 7,247 -7% +54%
Net Income 6,276 6,779 4,332 -7% +56%
Per share, basic:
Net income 1.19 1.05 .63 +13% +67%
Dividends .28 .28 .28 -- --
-------- -------- -------- --- ---
BALANCE SHEET STATISTICS
Working capital $ 52,302 $ 53,202 $ 72,070 -2% -26%
Total assets 140,646 157,511 157,463 -11% --
Long-term debt, net of current portion 12,593 17,091 20,443 -26% -16%
Total liabilities 43,707 58,840 47,284 -26% +24%
Shareowners' equity 96,939 98,671 110,179 -2% -10%
Book value per share 19.27 17.78 15.94 +8% +12%
-------- -------- -------- --- ---
KEY RATIOS AND PERCENTAGES
Current ratio 2.7:1 2.3:1 3.7:1 +17% -41%
Liquidity ratio .10:1 .08:1 .94:1 +25% -91%
Gross profit margin 22.7% 22.8% 23.9% -- -5%
Pre-tax profit margin 2.6% 2.5% 1.7% +4% +47%
Return on sales 1.6% 1.5% 1.0% +7% +50%
Return on average assets 4.2% 4.2% 2.7% -- +56%
Return on beginning shareowners' equity 6.4% 6.2% 4.0% +3% +55%
======== ======== ======== === ===
</TABLE>
1
JAMES L. WOLOHAN [ PICTURE OMITTED ]
Chairman of the Board,
President and Chief
Executive Officer
JOHN A. SIEGGREEN
Executive Vice President
and Chief Operating Officer
Shareowners' Address
In 1999, Wolohan Lumber marked another year of progress in meeting
the objectives set forth in its strategic plan. Broadly, this strategic plan
focuses on three key areas of our business: market share growth to
professional and project-oriented customers, leadership through quality store
management with highly productive salespeople, and financial performance. The
Company's primary measure of financial performance is Economic Value Added
(EVA(TM)), which rewards investors through improvement in net income relative
to the net assets employed in business operations.
Although the Company must continue to make strides toward realizing
the strategic plan objectives, we are nonetheless encouraged by our 1999
results. Sales of $404 million were 10 percent lower than 1998 levels;
comparable-store sales, however, rose 5 percent from 1998. Net income for
1999 was down 7 percent from the prior year but earnings per share increased
13 percent, to $1.19, in 1999, compared with $1.05 in 1998. This marked the
36th consecutive year of profitability for Wolohan Lumber Co. The increase in
earnings per share was affected by a 19-percent decline in average shares
outstanding, reflective of the Company's aggressive stock repurchases.
Wolohan repurchased 539,000 shares of common stock in 1999 at an average of
$12.76 per share and 1,370,000 shares in 1998 at an average of $12.07 per
share.
We were able to achieve these results even as the industry and the
Company continue to experience dramatic and unprecedented change. Externally,
competitive forces continue to be the growth of large warehouse chains in
ever-smaller markets, coupled with rapid consolidation on the part of leading
industry players on the professional side of the business.
Internally, the Company executed several initiatives representing
significant change. Each of these initiatives is consistent with the key
elements of the strategic plan.
o In the first quarter of 1999, we closed or divested all remaining
operations in northern Illinois and Wisconsin. The 1998 sales and
operating income from the stores that were eliminated totaled
approximately $90 million and $1.5 million, respectively. We took this
bold action because we believe our best growth opportunity and
competitive positioning lies in the three "core" states of Michigan,
Indiana, and Ohio, where we already have significant market share with
target customers. In Michigan, for example, we operate more than 30
locations, all outside the
2
metropolitan Detroit market area. As we make incremental investments in
value-added manufacturing facilities to support stores in our core
markets, we will be able to leverage this market presence to create a
larger internal distribution area through which to market these
manufactured products. We will also be able to gain greater efficiency in
other areas of our business such as purchasing and marketing.
"Quality Home Builders
and Remodelers
Build with Wolohan"
o We bolstered our value-added manufacturing capacity within our core
market area in 1999. Incremental investments to increase production
capacity in our western Michigan truss and wall-panel facility and a new
investment in a state-of-the-art panelizing plant in Dayton, Ohio
position us to improve market share and gross margins to professional
customers.
o We completed the installation of our new fourth-generation language (4GL)
point-of-sale computer system during 1999. This gives the Company a
platform for further expanding its commitment to technology, including
use of electronic commerce and other internet applications. Curt
LeMaster, promoted to Senior Vice President and Chief Information Officer
in 1999, will lead our efforts in these areas. He was formerly Vice
President of Marketing, Purchasing and Systems.
o The most exciting of our 1999 initiatives, however, came in October, when
we announced plans to restructure our stores into two operating divisions
in preparation for accelerated growth. The two divisions comprise our
core group of high-performing, contractor-focused Wolohan stores and a
CML Division targeting retail project sales and sales to professional
customers. CML is the operating name of Central Michigan Lumber, acquired
in mid-1998. CML has a highly centralized operating model specializing in
sales of large-ticket packages such as post-frame buildings, garages,
shell homes, decks and storage buildings. The market for these types of
major packages presents a real growth opportunity for the Company and is
not a primary area of focus for other marketplace competitors. Over the
next two to three years, we will convert up to 27 stores to the CML model
through complete remodeling and repositioning of the facilities and
extensive associate training in packages and projects. Eight stores are
slated for conversion in 2000.
To provide hands-on leadership to each of the two operating
divisions, we have named Dan Rogers president of the CML Division and Dave
Honaman president of the Wolohan Division. Rogers and Honaman, both Senior
Vice Presidents of Wolohan Lumber Co., will also serve in the roles of
General Merchandise Manager and Chief Financial Officer, respectively. Rogers
has served as CML president since the date of the acquisition and has been
instrumental in maintaining the stores' strong performance.
One corporate administrative team will serve the varying needs of
both the Wolohan and CML divisions. For example, one common purchasing and
marketing team will develop programs and implement initiatives for both
divisions, although product mixes will differ. We have also combined all of
our associate programs in areas such as health-care benefits, retirement
benefits and vacation. Our goal is to ensure that all associates, whether in
the Wolohan Division, the CML Division, or at our corporate offices,
understand that, even with multiple operating divisions, we are still all a
part of one Company.
The creation of two operating divisions and the corresponding
changes in executive responsibilities better position our Company to achieve
growth in comparable-store sales as well as growth through acquisitions.
Acquisitions would be added to one of the two operating divisions depending
on their characteristics and where they would best fit.
Heading into the year 2000, the future for Wolohan Lumber is very
promising. The strength of the Wolohan Division and the CML Division
conversion strategy will provide the necessary incremental growth in our core
base of operations. We will continue to scour our market area for acquisition
opportunities. Additional investment in value-added capacity remains a top
priority. Our executive team is dedicated to bringing the strategic plan
objectives to completion.
Finally, we thank all Wolohan associates for their outstanding
efforts in 1999. Managing and working through change is never easy, but it is
necessary to continue our rich history as a strong industry competitor. We
look forward to continued progress in 2000.
/s/ Jim Wolohan
James L. Wolohan, Chairman of the Board,
President and Chief Executive Officer
/s/ John A. Sieggreen
John A. Sieggreen, Executive Vice President
and Chief Operating Officer
3
<TABLE>
<CAPTION>
COMMON STOCK DATA
1999 1998
---------------------------------------- ----------------------------------------
MARKET RANGE CASH DIVIDENDS MARKET RANGE CASH DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
---- --- -------------- ---- --- --------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $13 $12 1/4 $.07 $13 5/8 $11 $.07
Second Quarter 12 7/8 10 3/4 .07 13 1/4 11 1/4 .07
Third Quarter 13 3/4 12 3/4 .07 13 7/16 11 .07
Fourth Quarter 13 3/16 11 5/8 .07 13 5/16 8 13/16 .07
Year 13 3/4 10 3/4 $.28 13 5/8 8 13/16 $.28
</TABLE>
The Company's common stock trades on The Nasdaq Stock Market(TM)
under the symbol WLHN. The approximate number of record holders of the
Company's stock at Dec. 25, 1999 was 719.
<TABLE>
<CAPTION>
QUARTERLY SUMMARIES
(in thousands, except per-share amounts)
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
1999
Net sales $ 73,148 $117,414 $118,727 $ 94,743 $404,032
Gross profit 17,020 26,477 27,014 21,117 91,628
Net income:
Amount (932) 3,215 3,608 385 6,276
Per share, basic (.17) .60 .68 .08 1.19
-------- -------- -------- -------- --------
1998
Net sales $ 73,195 $112,856 $143,117 $120,736 $449,904
Gross profit 17,175 27,206 31,678 26,433 102,492
Net income:
Amount (854) 2,800 3,075 1,758 6,779
Per share, basic (.12) .41 .46 .30 1.05
-------- -------- -------- -------- --------
</TABLE>
4
SALES MIX
BY CUSTOMER SEGMENT
(in thousands, except percentages) 1999 Mix 1998 Mix
- ---------------------------------- ---- --- ---- ---
Contractor Builder and Remodeler $258,256 64% $285,497 63%
Project-Oriented Consumer 145,776 36% 164,407 37%
------- -- ------- --
Total Sales $404,032 100% $449,904 100%
======== === ======== ===
Single-family homebuilders, remodelers and commercial/industrial
accounts are all part of the contractor builder and remodeler segment of the
Company's sales. Project selling is the Company's focus regarding the
consumer/DIY customer.
BY PRODUCT CATEGORY
(percent of total sales)
1999 1998
---- ----
Dimension Lumber 20.6 18.1
Sheathing Plywood 11.4 10.0
Other Forest Products 11.3 11.0
Building Materials 17.6 17.5
Hardware 5.6 6.0
Home Decorations 1.7 2.0
Millwork 15.7 17.1
Kitchen Cabinets and Vanities 6.0 6.4
Plumbing, Heating, and Electrical 2.0 4.8
Trusses and Components 8.1 7.1
--- ---
Total Sales 100 100
=== ===
Wolohan Lumber Co. will focus on selling more product to its large
base of homebuilders and remodelers while also expanding market share by
developing new customers. The Company continues to invest in value-added
services such as wall panelization, truss manufacturing, door and window
assembly, construction financing, specialized delivery equipment, product
installation and house design. These capabilities will help increase market
share of builder and remodeler sales. These value-added services demonstrate
the Company's commitment to the professional builder.
Project-oriented sales, such as doors and windows, kitchens and
baths, decks, fences and storage buildings, continue to be the focus of the
Company for its DIY customers. Knowledgeable sales associates are utilizing
up-to-date displays, computerized drawings and special financing programs to
enhance and improve the market share of this segment of the Company's sales.
5
<TABLE>
<CAPTION>
5-YEAR PERFORMANCE
(In thousands, except per-share amounts, ratios and percentages)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statistics
Net sales $ 404,032 $ 449,904 $ 424,503 $ 430,358 $ 418,058
Gross profit 91,628 102,492 101,583 103,375 99,989
Store closing costs 1,304 1,966 3,800 921 3,317
Interest expense 1,541 1,828 2,212 2,457 2,919
Income before income taxes 10,377 11,186 7,247 10,511 6,498
Income taxes 4,101 4,407 2,915 4,340 2,763
Net income 6,276 6,779 4,332 6,171 3,735
Net income per share, basic 1.19 1.05 .63 .89 .53
Cash dividends declared:
Amount per share .28 .28 .28 .28 .28
Percent of net income 23.4% 26.6% 44.7% 31.6% 53.2%
Average shares outstanding 5,271 6,474 6,912 6,968 7,100
--------- --------- --------- --------- ---------
Balance Sheet Statistics
Current assets $ 83,416 $ 94,951 $ 98,911 $ 96,722 $ 92,041
Other assets 13,886 18,121 7,544 2,311 2,149
Properties (net) 43,344 44,439 51,008 63,676 68,250
Total assets 140,646 157,511 157,463 162,709 162,440
Working capital 52,302 53,202 72,070 61,689 60,631
Long-term debt, net of current portion 12,593 17,091 20,443 19,883 26,674
Total liabilities 43,707 58,840 47,284 54,916 58,084
Shareowners' equity:
Amount 96,939 98,671 110,179 107,793 104,356
Book value per share 19.27 17.78 15.94 15.60 14.93
--------- --------- --------- --------- ---------
Key Operating Percentages
Gross profit margin 22.7% 22.8% 23.9% 24.0% 23.9%
Pre-tax profit margin 2.6% 2.5% 1.7% 2.4% 1.6%
Return on sales 1.6% 1.5% 1.0% 1.4% 0.9%
Return on average assets 4.2% 4.2% 2.7% 3.7% 2.2%
Return on average working capital 11.9% 10.8% 6.5% 10.1% 6.0%
Return on beginning shareowners' equity 6.4% 6.2% 4.0% 5.9% 3.6%
Return on average total invested capital 5.6% 5.5% 3.4% 4.8% 2.8%
--------- --------- --------- --------- ---------
Key Financial Ratios and Measures
Sales to average working capital 7.7:1 7.2:1 6.3:1 7.0:1 6.7:1
Sales to average shareowners' equity 4.1:1 4.3:1 3.9:1 4.1:1 4.0:1
Sales to average total invested capital 3.6:1 3.7:1 3.3:1 3.3:1 3.2:1
Current ratio 2.7:1 2.3:1 3.7:1 2.8:1 2.9:1
Quick ratio 1.2:1 1.1:1 2.1:1 1.4:1 1.3:1
Liquidity ratio .10:1 .08:1 .94:1 .44:1 .44:1
Debt to total assets ratio .09:1 .11:1 .13:1 .12:1 .16:1
Capitalization ratio .11:1 .15:1 .16:1 .16:1 .20:1
Shareowners' equity to total assets ratio .69:1 .63:1 .70:1 .66:1 .64:1
Inventory turnover 7.30 7.68 6.73 6.30 5.89
Asset turnover 2.71 2.81 2.62 2.58 2.47
--------- --------- --------- --------- ---------
Stores
Number of stores at end of year 48 55 55 61 60
========= ========= ========= ========= =========
</TABLE>
6
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Certain information contained in Management's Discussion and
Analysis of Results of Operations and Financial Condition 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 standards 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 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
Net income in 1999 totaled $6.3 million ($1.19 per basic share),
compared with $6.8 million ($1.05 per basic share) in 1998. The improvement
in earnings per share resulted primarily from a 19-percent decrease in
average shares outstanding as a result of the Company's repurchase program.
The decline in 1999 net income reflects the elimination of $1.5 million of
operating income associated with stores divested in late 1998 and early 1999
and a 10-percent drop in total sales.
Other significant items affecting 1999 net income included: (1) a
gain on the sale of properties of $3.5 million (compared with $2.9 million in
1998); (2) a LIFO charge of $809,000 (compared with a LIFO credit of $1.3
million in 1998); and (3) store closing costs of $1.5 million (compared with
$3.5 million in 1998).
Net income in 1998 increased 56 percent from 1997 net income of $4.3
million due to the positive contribution of Central Michigan Lumber ("CML"),
acquired on June 29, 1998; gains from selling idle properties; a lower
operating expense factor and a 6-percent increase in total sales. Included in
the 1998 results were approximately $4.6 million (pre-tax) of costs related
to restructuring activities. Of this total restructuring charge, $3.5 million
was related to store closings.
Sales of $404 million in 1999 were 10 percent lower than 1998 sales
of $449.9 million, which were 6 percent higher than 1997 sales. Sales in 1998
included $90.6 million from seven stores closed in late 1998 and six stores
sold in February 1999. Comparable-store sales increased 5 percent in 1999
from 1998. Higher selling prices for lumber and structural panel products
accounted for approximately half of the increase in comparable-store sales
for 1999. The sales mix by customer type was 64 percent contractor builder
and remodeler sales and 36 percent project consumer sales in 1999, compared
with 63 and 37 percent, respectively, for 1998 and 61 and 39 percent,
respectively, for 1997. The higher mix of sales to the contractor customer
reflects the Company's strategy to focus on selling products to the builder,
remodeler and project-oriented customer, versus selling general
home-improvement merchandise to individual consumers.
The gross profit margin in 1999 was 22.7 percent, compared with 22.8
percent in 1998 and 23.9 percent in 1997. Gross profit margin results in 1999
included a LIFO charge of $809,000, compared with a LIFO credit of $1.3
million in 1998 and 1997. The decline in gross profit margins in 1998
compared with 1997 was due primarily to the impact of liquidating inventories
at closed stores and the recording of an allowance for obsolete inventory.
The allowance for obsolete inventory totaled approximately $1.9 million at
year-end 1999 and will be used to offset liquidation efforts in 2000 as the
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Sales Net Income Net Income Per Share Net Return of Sales
7
Company continues to bring product mix in balance with its customer focus.
The gross profit margin in 1999, excluding the provision for LIFO, was 22.9
percent, compared to 22.5 percent in 1998 and 23.6 percent in 1997.
Other operating income, which is primarily revenue from installed
labor income, finance charges related to receivables and rental income,
increased to $3.7 million in 1999 from $3 million in 1998 and $2.7 million in
1997.
Selling, general, and administrative expenses (excluding
store-closing costs) declined 8 percent in 1999 to $78.7 million from $85.7
million in 1998 and $81.9 million in 1997, resulting in an expense factor of
19.5 percent of sales in 1999 compared with 19.0 percent and 19.3 percent in
1998 and 1997, respectively. The higher 1999 expense factor was primarily due
to the combination of the 10-percent sales decline, a higher provision for
uncollectible trade receivables, training costs related to the installation
of a new point-of-sale computer system and other costs related to the
execution of the Company's strategic plan. The lower 1998 expense factor was
primarily due to lower provision for uncollectible trade receivables and
marketing expense.
The closing of seven stores in 1999 (including six stores which were
sold in February 1999) resulted in costs of $1.5 million, compared with $3.5
million recorded in 1998 and costs of $3.8 million recorded in 1997 related
to closing seven and six stores, respectively. A portion of the closing costs
in 1999 and 1998 ($200,000 and $1.5 million, respectively) was a charge to
cost of sales. The closing costs in 1999 were primarily related to
liquidating inventories and absorbing certain other ongoing fixed costs. The
closing costs in 1998 and 1997 were primarily related to liquidating
inventories, writing down of certain owned real property, expensing portions
of future lease payments on longer-term leases and writing off of leasehold
improvements. The Company will continue to evaluate performances of stores in
terms of meeting minimum return-on-investment criteria, and additional store
closings may result from this ongoing review.
Excluding store-closing costs, the net operating expense factor for
1999 increased to 21.3 percent of sales from 20.9 percent in 1998 and 21.6
percent in 1997. Depreciation and amortization expense in 1999 was reduced
$1.1 million from 1998 and $2.3 million from 1997.
Other income and expenses netted income of $2.4 million in 1999
compared with income of $1.7 million in 1998 and expense of $1.7 million in
1997. The improvement in both 1999 and 1998 was due primarily to the
significant amount of gain on sale of idle properties. In addition, interest
expense was reduced 16 percent to $1.5 million from $1.8 million in 1998 and
$2.2 million in 1997. The decrease reflects the reductions in long-term debt.
The effective income tax rate (federal and state combined) was 39.5
percent in 1999, compared with 39.4 percent in 1998 and 40.2 percent in 1997.
FINANCIAL CONDITION -
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $3.2 million at year-end 1999 and
1998. Net cash provided by operating activities totaled $4 million in 1999,
compared with $14.2 million in 1998. The 1999 reduction in net cash from
operations was primarily a result of lower accounts payable compared with
year-end 1998, reflecting reductions made in inventory levels.
Investing activities provided net cash of $10.5 million in 1999,
compared with cash used in investing activities of $16.9 million in 1998. The
increase in cash in 1999 was due primarily to the proceeds from the sale of
inventory, trade receivables and equipment related to the sale of six stores.
The decrease in 1998 was due to a $17.9 million cash outlay for the purchase
of CML.
Financing activities used net cash of $14.4 million in 1999 and
included $4.1 million for payments on long-term debt, $2 million for payment
of a short-term credit line, $1.5 million for dividend payments and $6.9
million used to repurchase 539,000 shares of Company common stock at an
average of $12.76 per share. In 1998, net cash used in financing activities
totaled $19.4 million and included $16.5 million for the
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Gross Margin Working Capital Debt to Equity Ratio Shareowners' Equity
8
repurchase of 1.37 million shares of Company common stock.
The Company has $50 million available in lines-of-credit
arrangements for short-term debt. There was no outstanding balance under
these arrangements at year-end 1999 and at year-end 1998 $2 million was
outstanding.
Working capital was $52.3 million at the end of 1999, compared with
$53.2 million at year-end 1998. The Company expects that net cash provided
from operating activities and available lines of credit will be adequate to
meet working-capital needs and capital expenditures for 2000 (estimated to be
$5.4 million) and beyond.
The long-term debt-to-asset ratio was lowered to .09:1 at Dec. 25,
1999, compared with .11:1 for year-end 1998.
Capital expenditures totaled $8.6 million in 1999 and included: (1)
the addition of a wall-panel plant facility, (2) the purchase of land and
buildings used to relocate an existing store, (3) costs related to converting
two stores to the CML format and (4) replacements and additions of equipment
at existing stores. Capital expenditures have totaled $35 million over the
last five years.
Invested capital (long-term debt and shareowners' equity) was 78
percent of total assets at Dec. 25, 1999, compared with 73 percent at Dec.
26, 1998. Shareowners' equity has been the principal financing factor over
the years and accounted for more than 85 percent of invested capital at
year-end 1999 and 1998.
EFFECT OF INFLATION
The Company does not measure precisely the effect of inflation on
its operations; however, it does not believe inflation had a material effect
on sales or results of operations.
ENVIRONMENTAL
The Company is subject to laws and regulations relating to the
protection of the environment. While it is not possible to quantify with
certainty the potential impact of actions regarding environmental matters,
particularly any future remediation and other compliance effects, in the
opinion of management, compliance with the present environmental-protection
laws will not have a material adverse effect on the financial condition of
the Company or on operating results or cash flows in any one year
READINESS FOR YEAR 2000
The Company's information technology (IT) systems as well as non-IT
systems such as embedded systems/microcontrollers have not experienced any
material adverse impacts as a result of the Year 2000 transition. In
addition, the Company experienced no material supply chain problems related
to the date transition.
OUTLOOK
Wolohan Lumber Co. enters 2000 with a strong consolidated balance
sheet and looks forward to the challenges and opportunities present in each
of its two operating divisions. Both divisions are committed to expanding
market share by building on their strengths in wood products, building
materials, millwork and kitchen and bath. During 2000, the Company plans to
convert eight more stores to the CML format which will cause some
interruption of normal business during the conversion process but will keep
the Company on target to have its stores positioned to serve its target
customers (single-family homebuilders, commercial and multi-family builders,
remodelers and project-oriented consumers) in a more effective manner. The
Company continues to emphasize its value-added services to the builder and
expects to increase the volume of wall-panel and truss manufacturing and will
continue to provide special delivery services, design and installation
services. The Company will continue to place strong emphasis on buying and
distribution strategies to improve its competitive position and will work
aggressively to lower its operating-expense ratios by focusing on training
and more-efficient systems. By proper execution of these strategies, the
Company expects to further improve profitability in 2000.
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Equity Per Share Total Assets Properties (Net) Equity to Asset RAtio
9
REPORTS OF MANAGEMENT AND
INDEPENDENT AUDITORS
REPORT OF MANAGEMENT
The accompanying consolidated financial statements of Wolohan
Lumber Co., together with the other financial information included in the
Annual Report, were prepared by management.
The responsibility for the integrity of the consolidated financial
statements, and other financial information included in this report, rests
with management. The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles appropriate in the
circumstances and, of necessity, include certain amounts which are based on
our best estimates and judgments. The other financial information included
herein is consistent with that reported in the consolidated financial
statements.
Wolohan Lumber Co. maintains internal accounting-control systems
that are designed to provide reasonable assurance that assets are safeguarded
from loss or unauthorized or illegal use and that transactions are executed
and recorded in accordance with management authorization. There are limits
inherent in all systems of internal control, based on the recognition that
costs of such a system should not exceed the benefits to be derived. We
believe the Company's system provides an appropriate balance.
The Board of Directors, through its Audit Committee, is
responsible for assuring that management fulfills its responsibilities in the
preparation of the consolidated financial statements. The Audit Committee
meets periodically with the independent auditors and representatives of
management to ensure that each is discharging its responsibilities. To ensure
complete independence, Rehmann Robson, P.C. has full and free access to meet
with the Audit Committee to discuss the results of their audit, the adequacy
of internal controls, the quality of financial reporting and other matters of
mutual interest.
/s/ David G. Honaman
David G. Honaman
Senior Vice President-- Secretary,
Chief Financial Officer and
President of the Wolohan Division
/s/ Edward J. Dean
Edward J. Dean
Corporate Controller
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareowners
Wolohan Lumber Co.
Saginaw, Michigan
We have audited the accompanying consolidated balance sheets of
Wolohan Lumber Co. as of December 25, 1999 and December 26, 1998, and the
related consolidated statements of income, changes in shareowners' equity and
cash flows for each of the three years in the period ended December 25, 1999.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Wolohan Lumber Co. as of December 25, 1999 and December 26, 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended December 25, 1999 in conformity with generally accepted
accounting principles.
/s/ Rehmann Robson, P.C.
Rehmann Robson, P.C.
Saginaw, Michigan
February 15, 2000
10
CONSOLIDATED BALANCE SHEETS
(in thousands, except per-share amounts) December 25, December 26,
1999 1998
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,217 $ 3,166
Trade receivables, net 33,741 41,837
Builder Finance Program
receivables, net 5,220 3,146
Inventories, net 35,853 40,903
Other current assets 5,385 5,899
--------- ---------
TOTAL CURRENT ASSETS 83,416 94,951
PROPERTIES
Land 6,910 7,595
Land improvements 11,629 13,177
Buildings 40,936 44,652
Equipment 45,361 47,473
--------- ---------
TOTAL PROPERTIES 104,836 112,897
Accumulated depreciation (61,492) (68,458)
--------- ---------
PROPERTIES, NET 43,344 44,439
OTHER ASSETS
Properties held for sale 8,207 9,805
Intangible assets, net 3,684 3,964
Other 1,995 4,352
--------- ---------
TOTAL ASSETS $ 140,646 $ 157,511
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 12,467 $ 20,123
Employee compensation and
accrued expenses 14,458 15,867
Short-term debt -- 2,000
Current portion of long-term debt 4,189 3,759
--------- ---------
TOTAL CURRENT LIABILITIES 31,114 41,749
LONG-TERM DEBT, net of current portion 12,593 17,091
--------- ---------
TOTAL LIABILITIES 43,707 58,840
SHAREOWNERS' EQUITY
Common stock, $1 par value
Authorized - 20,000 shares;
issued and outstanding -
5,031 shares (5,548 in 1998) 5,031 5,548
Additional capital 673 6,694
Retained earnings 91,235 86,429
--------- ---------
TOTAL SHAREOWNERS' EQUITY 96,939 98,671
--------- ---------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 140,646 $ 157,511
========= =========
BOOK VALUE PER SHARE $ 19.27 $ 17.78
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
11
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED
----------------------------------------
(in thousands, except per-share amounts) December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $404,032 $449,904 $424,503
Cost of sales 312,404 347,412 322,920
-------- -------- --------
Gross profit 91,628 102,492 101,583
Other operating income 3,661 3,007 2,711
OPERATING EXPENSES
Selling, general and administrative 78,655 85,660 81,920
Store closing costs 1,304 1,966 3,800
Depreciation and amortization 7,310 8,367 9,616
-------- -------- --------
Total operating expenses 87,269 95,993 95,336
-------- -------- --------
Income from operations 8,020 9,506 8,958
OTHER INCOME ( EXPENSES)
Interest expense (1,541) (1,828) (2,212)
Interest income 396 627 562
Gain (loss) from sale of properties 3,502 2,881 (61)
-------- -------- --------
Other income (expenses), net 2,357 1,680 (1,711)
-------- -------- --------
INCOME BEFORE INCOME TAXES 10,377 11,186 7,247
Income taxes 4,101 4,407 2,915
-------- -------- --------
NET INCOME $ 6,276 $ 6,779 $ 4,332
======== ======== ========
NET INCOME PER SHARE, basic $ 1.19 $ 1.05 $ 0.63
======== ======== ========
NET INCOME PER SHARE, assuming dilution $ 1.17 $ 1.03 $ 0.62
======== ======== ========
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Common Stock Total
(in thousands, except per-share amounts) ------------------ Additional Retained Shareowners'
Shares Amount Capital Earnings Equity
------ -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 28, 1996 6,912 $ 6,912 $ 21,828 $ 79,053 $107,793
Net income for 1997 4,332 4,332
Cash dividends - $.28 per share (1,935) (1,935)
Shares issued under Long-Term
Incentive Plan, net of related
tax benefit 8 8 104 112
Shares purchased and retired (10) (10) (113) (123)
------ -------- -------- -------- --------
BALANCE AT DECEMBER 27, 1997 6,910 6,910 21,819 81,450 110,179
Net income for 1998 6,779 6,779
Cash dividends - $.28 per share (1,800) (1,800)
Shares issued under Long-Term
Incentive Plan, net of
related tax benefit 8 8 52 60
Shares purchased and retired (1,370) (1,370) (15,177) (16,547)
------ -------- -------- -------- --------
BALANCES AT DECEMBER 26, 1998 5,548 5,548 6,694 86,429 98,671
Net income for 1999 6,276 6,276
Cash dividends - $.28 per share (1,470) (1,470)
Shares issued under Long-Term
Incentive Plan, net of
related tax benefit 22 22 317 339
Shares purchased and retired (539) (539) (6,338) (6,877)
------ -------- -------- -------- --------
BALANCES AT DECEMBER 25, 1999 5,031 $ 5,031 $ 673 $ 91,235 $ 96,939
====== ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
12
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED
--------------------------- ------------
(In thousands) December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Operating Activities
Net income $ 6,276 $ 6,779 $ 4,332
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 7,030 8,236 9,616
Amortization 280 131 --
Provision for losses on receivables 1,438 996 1,502
Provision for obsolete inventory -- 1,900 --
Effect of LIFO 809 (1,286) (1,281)
Deferred income taxes (benefit) (295) 70 (633)
(Gain) loss on sale of properties (3,502) (2,881) 61
Store closing costs related to properties -- 195 1,699
Common stock based compensation 339 60 112
Changes in assets and liabilities net of
effects in 1999 from sale of stores to
Stock Lumber and in 1998 from
purchase of CML
Trade receivables 912 (5,528) 1,156
Builder Finance Program receivables (2,174) (2,974) (322)
Other assets 1,758 (3,127) (43)
Inventories 192 6,628 6,825
Accounts payable and accrued expenses (9,065) 4,965 (3,925)
-------- -------- --------
Net Cash Provided By Operating Activities 3,998 14,164 19,099
Investing Activities
Additions to properties (8,605) (5,384) (3,680)
Payment for purchase of CML, net of cash acquired -- (17,912) --
Proceeds from sale of stores to Stock Lumber 9,956 -- --
Proceeds from the sale of properties 9,117 6,347 477
-------- -------- --------
Net Cash Provided By (Used In) Investing Activities 10,468 (16,949) (3,203)
Financing Activities
Net credit lines (repayments) borrowings (2,000) 2,000 --
Payments on long-term debt (4,068) (3,035) (3,990)
Dividends paid (1,470) (1,800) (1,935)
Purchases of common stock (6,877) (16,547) (123)
-------- -------- --------
Net Cash Used In Financing Activities (14,415) (19,382) (6,048)
-------- -------- --------
Increase (Decrease) In Cash and Cash Equivalents 51 (22,167) 9,848
-------- -------- --------
Cash and cash equivalents at beginning of year 3,166 25,333 15,485
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 3,217 $ 3,166 $ 25,333
======== ======== ========
Supplemental disclosure of cash flows information:
Interest paid $ 1,544 $ 2,117 $ 2,029
======== ======== ========
Income taxes paid $ 4,206 $ 5,670 $ 4,497
======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING PRACTICES
Organization. Wolohan Lumber Co.("WLC"), together with its wholly owned
subsidiaries Wolohan Lumber Co., LLC and Wolohan Lumber Co. of Michigan, LLC,
collectively the "Company", is engaged in the retail sale of a full line of
lumber and building materials and related merchandise through a chain of 48,
(55 in 1998 and 1999) building supply stores operated in Illinois, Indiana,
Kentucky, Michigan and Ohio. The stores operate primarily under the names
Wolohan Lumber or CML.
The Company sells to contractor builders and remodelers and to the
"do-it-yourself" market consisting principally of homeowners. The volume of
residential construction can be volatile and is highly dependent on general
economic conditions. A significant decrease in residential construction could
have an adverse effect on the Company's operating results.
Principles of Consolidation. The consolidated financial statements of the
Company include the accounts of WLC and its subsidiaries after elimination of
significant intercompany accounts and transactions.
Use of Estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
income and expenses during the reporting period. Significant estimates
include but are not limited to allowances for bad debts, self-insured medical
and workers' compensation accruals, carrying values and recovery period of
goodwill and fair value less cost to sell of assets held for sale. Actual
results could differ from those estimates.
Concentrations of Credit Risk. Financial instruments that potentially subject
the Company to significant concentrations of credit and other financial risk
consist principally of cash investments, trade accounts receivable and
Builder Finance Program receivables.
The Company maintains cash and cash equivalents including bank
money market funds and short-term tax exempt securities. Bank money market
funds are on deposit with financial institutions located primarily in
Michigan, and Company policy is designed to limit exposure to any one
institution.
The Company has deposits with financial institutions which exceed
federally insured limits. The Company performs periodic evaluations of the
relative credit standing of those financial institutions that are considered
in the Company's investment strategy. In management's opinion, the Company is
not subject to undue interest rate or financial risk as a result of these
concentrations.
The Company grants credit in the normal course of business related
to product sales and the financing of construction projects through the
Builder Finance Program. Concentrations of credit risk with respect to
accounts receivable from product sales and the Builder Finance Program are
limited because of the large number of businesses and individual customers
comprising the Company's customer base. The Company's receivables are
primarily from customers in the residential construction industry. Generally,
no collateral is required for trade receivables but security, in the form of
a first mortgage, is obtained for all Builder Finance Program receivables.
Cash and Cash Equivalents. The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents consist principally of money market funds and
short-term tax-exempt securities.
Inventories. Inventories are stated at the lower of cost, determined by the
last-in, first-out method ("LIFO"), or market. Current cost exceeded the LIFO
value of inventories by approximately $12,944,000 at December 25, 1999 and
$12,135,000 at December 26, 1998. The increase in the LIFO
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING PRACTICES (continued)
reserve in 1999 resulted in an $809,000 charge to cost of sales. In 1998 and
1997, the liquidation of certain LIFO layers decreased cost of sales by
$1,286,000 and $1,281,000, respectively.
Properties. Properties are stated at cost. Depreciation is provided on the
straight-line basis over the estimated useful life of the property.
Management reviews these assets quarterly to determine whether carrying
values have been impaired.
Start-Up Expenses. Expenses associated with the opening of new stores are
charged against income as incurred.
Advertising Expenses. The cost of advertising is expensed as incurred. The
Company incurred $3,637,000, $4,214,000 and $4,428,000 in advertising costs
during 1999, 1998 and 1997, respectively.
Cash-Based Employee Benefit Plans. The Company has a 401(k) retirement
savings and profit sharing plan under which eligible employees may contribute
up to 15% of their wages. The Company matches the employees' contribution up
to one-third of the first 6% of wages. In addition, eligible employees
receive a Company contribution equal to 3% of wages. Prior to 1999, the
Company contributed up to a maximum of $500 per year for the matching portion
and made a profit-sharing contribution to the plan annually based on a
percentage of the Company's pre-tax profit. Consolidated profit-sharing
contributions approximated $730,000, $634,000 and $722,000 for 1999, 1998 and
1997, respectively, and consolidated contributions to the 401(k) plans were
approximately $468,000, $469,000 and $486,000 for 1999, 1998 and 1997,
respectively.
Earnings Per Share. Earnings-per-share information is based on the weighted
average number of shares outstanding for the year. The effect of the assumed
issuance of the performance-based incentive share awards and the assumed
exercise of outstanding stock options is presented in the following table.
This table presents a reconciliation of the denominator used in the
calculation of basic net income per share and net income per share assuming
dilution:
FOR THE YEAR ENDED
----------------------------------------
(in thousands) December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
Weighted average number of common
shares outstanding used for
basic calculation 5,271 6,474 6,912
Dilutive effect of assumed
exercise of common stock
options 98 104 108
----- ----- -----
Number of shares outstanding
assuming dilution 5,369 6,578 7,020
===== ===== =====
Reclassifications. Certain amounts as originally reported in the 1998 and
1997 financial statements have been reclassified to conform to their 1999
presentation.
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B--ACQUISITION OF CENTRAL MICHIGAN LUMBER
The Company acquired CML effective June 29, 1998 in a transaction
accounted for as a purchase. CML had eight locations throughout mid-Michigan
and operated as a wholly owned subsidiary of WLC until November 1999 when it
became a division of WLC. The purchase price of $17,933,000 was paid in cash
and allocated to the assets acquired and liabilities assumed based on their
fair values (see table at right).
(in thousands)
Total assets $ 21,469
Total liabilities (7,631)
Intangible assets 4,095
--------
Total purchase price 17,933
Less cash received (21)
--------
Net cash paid $ 17,912
========
The intangible assets which consist of goodwill, customer lists
and the trained employee work force are being amortized on a straight-line
basis over their expected lives, which is 5 to 15 years. Results of
operations are included in the consolidated financial statements since the
date of acquisition.
NOTE C--VALUATION ACCOUNTS
The following table presents a summary of the changes in the
allowances for doubtful receivables for each of the years in the three-year
period ended December 25, 1999:
(in thousands) 1999 1998 1997
---- ---- ----
Balance at beginning of year $ 2,197 $ 1,933 $ 1,250
Provisions for doubtful accounts 1,438 996 1,502
Amounts charged off (1,069) (732) (819)
------- ------- -------
Balance at end of year $ 2,566 $ 2,197 $ 1,933
======= ======= =======
During 1998, the Company recorded a valuation allowance for
obsolete inventory in the amount of approximately $1,900,000. No significant
changes were made to this allowance during 1999.
NOTE D-- SHAREOWNERS' EQUITY AND RELATED MATTERS
The Company's Long-Term Incentive Plan was established to enable
key employees to participate in the future growth and profitability of the
Company by offering them long-term performance-based incentive compensation
through issuance of stock options and performance share awards, which are
vested based on achievement of performance goals. Performance shares awarded
are earned and vested at the rate of 20% per year and become issuable 10
years after date of award. During 1999, 17,000 performance shares (19,500
shares in 1998 and 18,500 in 1997) were awarded at average weighted fair
values of $13.00 per share for 1999 and 1998 and $13.13 per share for 1997.
At December 25, 1999, there were 100,200 performance shares awarded but
unissued.
The Company also has a stock option plan for non-employee
directors in addition to the Long-Term Incentive Plan for key employees. The
following table summarizes information about stock-option transactions:
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE D-- SHAREOWNERS' EQUITY AND RELATED MATTERS (continued)
WEIGHTED AVERAGE
NUMBER EXERCISE PRICE EXERCISE PRICE
OF SHARES PER SHARE PER SHARE
--------- -------------- --------------
Outstanding at December 28, 1996 122,600 $9.25 - 14.50 $12.28
------- ------------- ------
Granted 16,800 12.00 - 13.38 12.52
Exercised (200) 9.25 9.25
Forfeited (21,700) 9.25 - 14.50 12.73
------- ------------- ------
Outstanding at December 27, 1997 117,500 9.25 - 14.50 12.24
------- ------------- ------
Granted 196,400 11.13 - 13.25 13.09
Exercised (1,000) 9.31 9.31
Forfeited (18,800) 9.25 - 14.50 12.80
------- ------------- ------
Outstanding at December 26, 1998 294,100 9.25 - 14.50 12.78
------- ------------- ------
Granted 36,300 11.88 - 12.25 12.11
Exercised (1,000) 9.31 9.31
Forfeited (17,300) 9.25 - 14.50 12.26
------- ------------- ------
Outstanding at December 25, 1999 312,100 9.25 - 14.50 12.75
======= ============= ======
The number of shares exercisable were 282,100, 134,100, and
117,500 as of the year-ends 1999, 1998 and 1997, respectively. The fair value
of options granted was $4.20 and $4.68 per share in 1999 and 1998,
respectively. Options outstanding at December 25, 1999 are composed of the
following:
OUTSTANDING EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
NUMBER OF AVERAGE WEIGHTED NUMBER OF WEIGHTED
SHARES AT REMAINING AVERAGE SHARES AT AVERAGE
RANGE OF DECEMBER 25, CONTRACTUAL EXERCISE DECEMBER 25, EXERCISE
EXERCISE PRICES 1999 LIFE PRICE 1999 PRICE
- --------------- ----------- ----------- -------- ----------- --------
$ 9.25 - 11.13 33,100 5.95 $ 9.31 33,100 $ 9.31
12.00 - 13.06 63,800 9.00 12.34 33,800 12.34
13.13 - 14.00 170,200 8.30 13.13 170,200 13.13
14.38 - 15.50 45,000 4.35 14.38 45,000 14.38
-------------- ------- ---- ------ ------- ------
$ 9.25 - 14.50 312,100 7.62 $12.74 282,100 $12.74
============== ======= ==== ====== ======= ======
All options expire 10 years after the date of grant. There are
120,000 shares reserved for future issuance under the Long-Term Incentive
Plan and 32,000 shares reserved for future issuance under the stock option
plan for non-employee directors.
Holders of common shares received a distribution of one right for
each common share held on February 15, 1990. The rights become exercisable
ten days after a person or group acquires or commences a tender or exchange
offer that could result in the acquisition of 25% of the Company's common
shares (except pursuant to an offer for all shares determined by the
non-officer Directors to be fair and in the best interest of the Company and
its shareowners). The rights also become exercisable 10 days after an
acquisition of 10% of the Company's common shares or more by a person or
group deemed by the Board of Directors to have interests adverse to those of
the
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE D-- SHAREOWNERS' EQUITY AND RELATED MATTERS (continued)
Company and its shareowners. Each right would, subject to certain adjustments
and alternatives, entitle the rightholder to purchase common shares of the
Company having a market value of $180 at a price equal to 50% of the fair
market value of the shares. The rights are nonvoting, may generally be
redeemed by the Company at a price of 1 cent per right and expire on February
15, 2000. The Company has reserved for issuance 6.6 million common shares for
this stock rights plan.
The Company has elected to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and, accordingly, stock options do not constitute compensation
expense in the determination of net income. Had stock option compensation
expense been determined pursuant to the methodology provided in Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the pro forma effect on results of operations would have been
a decrease in net income of $91,000, or 2 cents per common share in 1999, a
reduction of 2 cents per share in 1998 and a reduction of less than 1 cent
per share in 1997.
NOTE E DEBT-- AND LEASE TRANSACTIONS
The Company has available, under lines of credit arrangements with
several banks, $50 million in unsecured short-term borrowings. The interest
rate applicable when using these lines is dependent upon a variety of
formulae which utilize different money rate pricing indexes. In no case does
the interest rate exceed the Prime Rate and there are no commitment fees. The
terms of these credit arrangements are reviewed annually.
There were no borrowings outstanding under these arrangements at
year-end 1999 ($2 million was outstanding at year-end 1998). The Company also
has unused letters of credit in the amount of $5.3 million related to
liability coverage and bonds payable.
Long-term debt consisted of the following obligations
(in thousands) DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
Unsecured notes to insurance company, due in
annual installments ranging from $2,050 to
$4,060 with the final payment in 2002.
Interest is payable quarterly at 8.65% $ 8,570 $10,000
Unsecured notes to insurance company, due in
annual installments of $2,000 in 2001 and 2002
Interest is payable semi-annually at 8.99% 4,000 6,000
Michigan Strategic Fund limited obligation revenue
bonds, payable in 2001. Interest varies weekly
at prevailing market rates for similar tax
exempt securities (average of 3.50% for 1999)
and is paid quarterly 3,300 3,300
Other 912 1,550
------- -------
Total long-term debt 16,782 20,850
Less amount due in one year 4,189 3,759
------- -------
Total long-term debt net of current maturities $12,593 $17,091
======= =======
Properties at December 25, 1999 with a net carrying value of
approximately $3,525,000 are pledged as collateral for the revenue bonds.
Maturities of long-term debt for each of the four years following
2000 approximate: $7,482,000 in 2001; $4,595,000 in 2002; $139,000 in 2003
and $143,000 in 2004.
The Company leases certain facilities under
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE E DEBT-- AND LEASE TRANSACTIONS (continued)
various operating leases. Lease expense for such facilities totaled
approximately $362,000 in 1999, $373,000 in 1998 and $522,000 in 1997. Future
minimum lease payments for each of the next five years approximate $304,000
and aggregate $1,987,000 thereafter.
NOTE F--INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets are: basis
differences in properties, compensation and employee benefits, allowances for
doubtful receivables, basis differences in inventories and store closing
costs.
The provision for income taxes consist of:
FOR THE YEAR ENDED
----------------------------------------
(in thousands) December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
Current
Federal $ 3,517 $3,273 $ 2,364
State 879 1,064 1,184
Deferred Federal and State (credit) (295) 70 (633)
------- ------ -------
Total provision for income taxes $ 4,101 $4,407 $ 2,915
======= ====== =======
A reconciliation of the income tax provisions and the amount
computed by applying the statutory federal income tax rate of 34% to income
before income taxes, is as follows:
FOR THE YEAR ENDED
----------------------------------------
(in thousands) December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
Computed amount $3,528 $ 3,803 $ 2,464
State income taxes, net of federal
income tax benefit 556 708 725
Tax exempt investment income -- (116) (111)
Other 17 12 (163)
------ ------- -------
Total provision for income taxes $4,101 $ 4,407 $ 2,915
====== ======= =======
NOTE G -- CLOSINGS AND SALES OF STORES
On February 1, 1999 the Company sold inventory, trade receivables
and equipment related to six of its stores to Stock Lumber Co. The selling
price, which approximated net book value was approximately $10 million.
Also during 1999, the Company closed one store which did not meet
the Company's strategic and financial expectations. Costs from store closings
approximated $1.5 million including $200,000 recorded as a charge to cost of
sales. The closing costs were primarily related to liquidating inventory and
absorbing certain other ongoing fixed costs.
Seven stores were closed in 1998 and six stores were closed in
1997. Closing costs totaled $3.5 million in 1998 including $1.5 million
recorded as a charge to cost of sales, and $3.8 million in 1997. Real estate
owned related to closed stores is held for sale and included with other
assets on the accompanying consolidated balance sheets.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE H--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments.
Cash and Cash Equivalents. The carrying amounts reported in the consolidated
balance sheets for cash and cash equivalents approximate their fair values.
Accounts Receivable and Accounts Payable. The carrying amounts reported in
the consolidated balance sheets for accounts receivable and accounts payable
approximate their fair values.
Long-Term Debt. The fair value of the Company's long-term debt is estimated
using discounted cash-flow analyses, based on the Company's current borrowing
rates for similar types of borrowing arrangements. The carrying amounts and
fair values of the Company's financial instruments are as follows:
DECEMBER 25, DECEMBER 26,
(in thousands) 1999 1998
---------------- ----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
Cash and cash equivalents $ 2,934 $ 2,934 $ 3,166 $ 3,166
Trade receivables 33,491 33,491 41,687 41,687
Builder Finance Program receivables 5,470 5,470 3,296 3,296
Accounts payable 12,184 12,184 20,123 20,123
Short-term debt -- -- 2,000 2,000
Long-term debt including current
portion 16,782 18,246 20,850 21,684
======= ======= ======= =======
NOTE I--CONTINGENCIES
Various lawsuits arising during the normal course of business are
pending against the Company. In the opinion of management based upon
discussion with legal counsel the ultimate liability, if any, resulting from
these matters will have no significant effect on the Company's consolidated
results of operations, liquidity or financial position.
20
Corporate Information
Annual Meeting
The Annual Meeting of shareowners of Wolohan Lumber Co. will be held
May 4, 2000, 2 p.m. at the Citizens Bank Building, 101 N. Washington Avenue,
Saginaw, Mich. You are cordially invited.
Form 10-K
Shareowners may obtain a copy of the Form 10-K annual report filed
with the Securities and Exchange Commission (SEC) free of charge by
writing to the Company's Investor Relations Dept., Wolohan Lumber Co.,
P.O. Box 3235, Saginaw, MI 48605.
Headquarters
Wolohan Lumber Co. Administrative Offices
1740 Midland Road
P.O. Box 3235
Saginaw, MI 48605
(517) 793-4532
Common Stock
Wolohan's common stock trades on The Nasdaq Stock Market(tm) under the symbol
WLHN.
Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
(800) 378-5948
General Counsel
Dickinson Wright PLLC
500 Woodward Avenue, Suite 4000
Detroit, MI 48226
Independent Auditors
Rehmann Robson, P.C.
5800 Gratiot
Saginaw, MI 48603
Board of Directors
James L. Wolohan
Chairman of the Board,
President and Chief Executive Officer;
Director since 1986
Hugo E. Braun, Jr.
Partner, Braun Kendrick Finkbeiner,
Attorneys-at-Law;
Director since 1984
Leo B. Corwin
President, Txcor, Inc.;
Director since 1992
Charles R. Weeks
Chairman and formerly Chief
Executive Officer of Citizens
Banking Corp.;
Director since 1996
Lee A. Shobe
formerly President and Chief
Executive Officer of Dow
Brands, Inc.;
Director since 1996
John A. Sieggreen
Executive Vice President and
Chief Operating Officer;
Director since 1999
Committees
Management Review Committee
Lee A. Shobe, Chairman
Hugo E. Braun, Jr.
Leo B. Corwin
Charles R. Weeks
Compensation Committee
Charles R. Weeks, Chairman
Hugo E. Braun, Jr.
Audit Committee
Hugo E. Braun, Jr., Chairman
Leo B. Corwin
Lee A. Shobe
Charles R. Weeks
Officers
James L. Wolohan
Chairman of the Board, President and Chief Executive Officer
John A. Sieggreen
Executive Vice President and Chief Executive Officer
David G. Honaman
Senior Vice President-Secretary, Chief Financial Officer
and President of the Wolohan Division
Daniel P. Rogers
Senior Vice President-General Merchandise Manager and
President of the CML Division
Curtis J. LeMaster
Senior Vice President-Chief Information Officer
Edward J. Dean
Corporate Controller
James R. Krapohl
Treasurer and
Assistant Secretary
[ LOGO ]
Wolohan Lumber Co. - 1740 Midland Road - P.O. Box 3235 -
Saginaw, MI 48605 - (517) 793-4532
Web Address: www.wolohan.com
Exhibit 21
Subsidiaries of the Registrant
Jurisdiction of
Name Incorporation
---- ---------------
Wolohan Lumber Co. of Michigan, LLC Michigan
Wolohan Lumber Co. LLC Indiana
Wolohan Indiana Co. Michigan
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-81566) pertaining to the 1991
Long-Term Incentive Plan of Wolohan Lumber Co. of our report dated February
15, 2000, with respect to the consolidated financial statements of Wolohan
Lumber Co. included in Annual Report (Form 10-K) for the year ended December
25, 1999.
Rehmann Robson, P.C.
March 24, 2000
Saginaw, Michigan
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
<CASH> $ 3,217,000
<SECURITIES> 0
<RECEIVABLES> 33,741,000
<ALLOWANCES> 0
<INVENTORY> 35,853,000
<CURRENT-ASSETS> 83,416,000
<PP&E> 104,836,000
<DEPRECIATION> (61,492,000)
<TOTAL-ASSETS> 140,646,000
<CURRENT-LIABILITIES> 31,114,000
<BONDS> 0
<COMMON> 5,031,000
0
0
<OTHER-SE> 91,908,000
<TOTAL-LIABILITY-AND-EQUITY> 140,646,000
<SALES> 404,032,000
<TOTAL-REVENUES> 99,187,000
<CGS> 312,404,000
<TOTAL-COSTS> 78,521,000
<OTHER-EXPENSES> 7,310,000
<LOSS-PROVISION> 1,438,000
<INTEREST-EXPENSE> 1,541,000
<INCOME-PRETAX> 10,377,000
<INCOME-TAX> 4,101,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,276,000
<EPS-BASIC> 1.19
<EPS-DILUTED> 1.17
</TABLE>
