SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended March 31, 1994 Commission File Number 2-63880
ACE HARDWARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-0700810
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Kensington Court, Oak Brook, IL 60521
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (708) 990-6600
NONE
Former name, former address and former
fiscal year, if changed since last report.
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 XX NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at March 31, 1994
Class A Voting Stock - $1,000 par value 3,949 shares
Class B Stock - $1,000 par value 3,380 shares
Class C Stock - $ 100 par value 1,519,517 shares
ACE HARDWARE CORPORATION
INDEX
Part I. - Financial Information: Page No.
Balance Sheet - March 31, 1994 and December 31, 1993 1
Statement of Earnings - Three Months Ended
March 31, 1994 and 1993 2
Statement of Cash Flows - Three Months Ended
March 31, 1994 and 1993 3
Notes to Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II. - Other Information 6
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PART I FINANCIAL INFORMATION
ACE HARDWARE CORPORATION
BALANCE SHEET
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
(000'S OMITTED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ -- $ 4,142
Accounts receivable, net 265,472 212,604
Merchandise inventory 277,539 263,576
Prepaid expenses and other current assets 5,811 6,869
Total current assets 548,822 487,191
Property and equipment, net 167,784 166,137
Other assets 14,784 14,160
Total assets $ 731,390 $ 667,488
LIABILITIES AND MEMBER DEALERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 3,937 $ 10,707
Short-term borrowings 108,000 38,500
Accounts payable 242,978 234,190
Patronage dividends payable in cash 32,091 25,766
Patronage refund certificates payable 1,350 11,059
Accrued expenses 27,364 33,682
Total current liabilities 415,720 353,904
Long-term debt:
Notes Payable 68,007 69,552
Industrial development revenue bonds 840 1,000
Capitalized leases 610 734
Total long-term debt 69,457 71,286
Patronage refund certificates payable 57,791 56,270
Member dealers' equity:
Class A stock of $1,000 par value 4,005 3,946
Class B stock of $1,000 par value 6,499 6,499
Class C stock of $100 par value - CR 153,457 153,155
Class C stock of $100 par value, issuable to
dealers for patronage dividends 23,463 19,064
Additional stock subscribed, net of unpaid portion 492 613
Retained Earnings 5,014 5,622
Contributed Capital 3,295 3,295
196,225 192,194
Less: Treasury stock, at cost 7,803 6,166
188,422 186,028
Total liabilities and member dealers' equity $ 731,390 $ 667,488
</TABLE>
See accompanying notes to financial statements.
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ACE HARDWARE CORPORATION
STATEMENT OF EARNINGS
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1994 1993
(000's omitted)
<S> <C> <C>
Net Sales $ 515,830 $ 443,104
Cost of Sales 477,718 409,060
Gross Profit 38,112 34,044
Operating expenses:
Warehouse and distribution 6,702 8,971
Selling, general and administrative 14,911 11,982
Total operating expenses 21,613 20,953
Operating income 16,499 13,091
Interest expense (2,975) (2,241)
Other income, net 342 523
Earnings before patronage dividends 13,866 11,373
Patronage dividends (Note 2) 14,474 11,988
Net earnings $ (608) $ (615)
See accompanying notes to financial statements.
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ACE HARDWARE CORPORATION
STATEMENT OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(000's OMITTED)
1994 1993
<S> <C> <C>
OPERATING ACTIVITIES:
Earnings before patronage dividends $ 13,866 $ 11,373
Patronage dividends (14,474) (11,988)
Net earnings (608) (615)
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation 4,087 3,932
Loss on sale of property & equipment 118 8
Changes in operating assets and liabilities:
Increase in accounts receivable, net (52,868) (27,088)
Increase in inventories (13,963) (17,551)
Increase in prepaids and other current assets 1,058 1,048
Increase in accounts payable and accrued expenses 2,470 36,593
NET CASH USED IN OPERATING ACTIVITIES (59,706) (3,673)
INVESTING ACTIVITIES:
Purchases of property and equipment (5,850) (3,601)
Increase in other assets (624) (1,487)
NET CASH USED IN INVESTING ACTIVITIES (6,474) (5,088)
FINANCING ACTIVITIES:
Proceeds from short-term borrowings 69,500 14,500
Principal payments on long-term debt and patronage
refund certificates (19,810) (17,546)
Patronage dividends payable in cash 6,325 5,174
Patronage refund certificates 3,021 2,705
Class C stock issuable to dealers for patronage dividends 4,399 3,883
Proceeds from sale of common stock 240 233
Repurchase of common stock (1,637) (2,332)
NET CASH PROVIDED BY FINANCING ACTIVITIES 62,038 6,617
Decrease in Cash and Cash Equivalents (4,142) (2,144)
Cash and Cash Equivalents at Beginning of Period 4,142 2,144
Cash and Cash Equivalents at End of Period $ -- $ --
See accompanying notes to financial statements.
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ACE HARDWARE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1) General
The accompanying financial statements have not been examined by
independent public accountants except for the December 31, 1993
balance sheet but in the opinion of the Company reflect all
adjustments necessary to present fairly the financial position
as of March 31, 1994 and 1993 and the results of operations and
cash flows for the three months then ended. These interim
figures are not necessarily indicative of the results to be
expected for the full year.
2) Patronage Dividends
The Company operates as a cooperative organization and will pay
patronage dividends to consenting dealers on the earnings
derived from business done with such dealers. It has been the
practice of the Company to distribute substantially all
earnings in the form of patronage dividends. Approximately 99%
of the Company's patronage sourced earnings (before patronage
dividends and taxes) are paid to consenting member dealers.
International dealers signed under the International Retail
Merchant Agreement are not eligible for patronage dividends and
related earnings are not included in patronage sourced
earnings.
3) Statement of Cash Flows
The Company considers all highly liquid investments with an
original maturity of one month or less when purchased to be
cash equivalents.
A portion of the patronage refund certificates payable on
January 1, 1995 were paid on January 1, 1994 and accordingly,
were classified as current liabilities in the December 31, 1993
financial statements.
4) Reclassifications
Certain financial statement reclassifications have been made to
prior year amounts to conform to comparable classifications
followed in 1994.
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ACE HARDWARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1994 compared to Three Months Ended
March 31, 1993.
Results of Operations
Net sales increased 16.4% as a result of an increase in the volume
to existing members and increased International sales. Gross
profit, as a percent of sales, decreased as a result of reduced
handling charges due to a shift in sales mix, increased net
merchandise markdowns and increases in inventoriable distribution
costs, primarily receiving and storage costs, being absorbed into
cost of sales.
Warehouse and distribution expenses decreased vs. 1993 and as a
percent of sales due to increased traffic revenues, reduced
building costs due to the closing of a facility in 1993 and
increased distribution costs absorbed into cost of sales.
Selling, general and administrative expenses increased vs. 1993 and
as a percent of sales due to reduced net advertising income and
higher personnel costs.
Interest expense increased as a result of increased borrowing
levels to meet sales growth demands.
Other income, net decreased vs. 1993 due to reduced domestic dealer
penalty charges partially offset by increased interest income
related to member financing programs.
Liquidity and Capital Resources
The Company expects that internally generated funds, along with new
and established lines of credit and long-term financing, will be
the primary financing sources for capital expenditures in the
future.
PART II. OTHER INFORMATION
ACE HARDWARE CORPORATION
Item 6. Exhibits and Reports on Form 8-K.
(b) There were no reports on Form 8-K filed for the three
month period ended March 31, 1994.
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 thereunto duly authorized.
ACE HARDWARE CORPORATION
RITA D. KAHLE DATE MAY 12, 1994
Rita D. Kahle
Vice President, Finance
(Principal Financial Officer, and duly
authorized Officer of the registrant)
