<PAGE> 1
CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-542
GROSSMAN'S INC.
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-0524830
----------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
in corporation or organization) Identification No.)
200 Union Street
Braintree, Massachusetts 02184
----------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(617) 848-0100
-----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
-----------------------------------------------------------------------------
(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 Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock - $.01 Par Value - 25,856,211 shares as of August 14, 1995,
exclusive of 124,136 shares held as treasury shares.
<PAGE> 2
<TABLE>
GROSSMAN'S INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
INDEX
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
GROSSMAN'S INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1995, December 31, 1994 and June 30, 1994............. 3
Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1995 and 1994....... 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994........................ 6
Notes to Unaudited Interim Consolidated Financial Statements..... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 9
PART II. OTHER INFORMATION
--------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 18
SIGNATURES.......................................................... 19
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1995 1994 1994
--------- ------------ --------
S <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,838 $ 3,034 $ 5,168
Receivables, less allowance of
$3,673 in 1995, $4,157 at
December 31, 1994 and $3,730
at June 30, 1994 for doubtful
accounts 22,155 19,449 23,665
Inventories 135,111 116,602 146,600
Other current assets 9,361 9,048 8,067
-------- -------- --------
Total current assets 169,465 148,133 183,500
PROPERTY, PLANT AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION OF $56,347
ON JUNE 30, 1995, $61,435 ON
DECEMBER 31, 1994 AND $61,878 ON
JUNE 30, 1994 97,207 114,897 125,877
INVESTMENT IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATE 893 1,896 1,955
OTHER ASSETS 1,529 1,694 2,191
-------- -------- --------
$269,094 $266,620 $313,523
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 4
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1995 1994 1994
-------- ------------ --------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $101,403 $ 89,816 $127,683
Accrued interest 1,134 1,555 545
Current portion of long-term debt and
capital lease obligations
14% Debentures, due January 1, 1996 16,201 - -
Mortgage notes and capital lease
obligations 6,147 13,278 16,830
-------- -------- ---------
Total current liabilities 124,885 104,649 145,058
REVOLVING TERM NOTE PAYABLE 46,748 29,888 32,668
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS 7,724 30,039 34,679
PENSION LIABILITY 3,790 4,348 15,398
OTHER LIABILITIES 15,244 17,051 14,539
-------- -------- ---------
Total liabilities 198,391 185,975 242,342
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT
Common stock, $.01 par value,
Shares authorized - 50,000
Shares issued - 26,137 in 1995 and 1994 261 261 261
Additional paid-in-capital 155,816 155,840 155,842
Retained earnings (accumulated
deficit) (73,624) (64,008) (63,476)
Minimum pension liability (10,576) (10,576) (20,528)
Cumulative foreign currency translation
adjustment (872) - -
Less shares in treasury, at cost -
124 in 1995,
359 at December 31, 1994 and
378 at June 30, 1994 (302) (872) (918)
--------- --------- ---------
Total Stockholders' Investment 70,703 80,645 71,181
--------- --------- ---------
Total Liabilities and Stockholders'
Investment $269,094 $266,620 $313,523
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 5
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $193,673 $220,145 $320,443 $355,221
COST OF SALES 149,358 165,105 245,135 266,570
--------- --------- --------- ---------
Gross Profit 44,315 55,040 75,308 88,651
OPERATING EXPENSES
Selling and administrative 38,790 42,826 76,492 80,161
Depreciation and amortization 2,853 3,213 5,864 6,370
Store preopening expense 10 440 145 632
--------- --------- --------- ---------
41,653 46,479 82,501 87,163
--------- --------- --------- ---------
OPERATING INCOME 2,662 8,561 (7,193) 1,488
OTHER EXPENSES (INCOME)
Interest expense 2,130 1,903 4,327 3,784
Other (768) (595) (1,160) (852)
-------- --------- --------- ---------
1,362 1,308 3,167 2,932
EQUITY IN NET LOSS OF
UNCONSOLIDATED AFFILIATE 127 82 325 82
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 1,173 7,171 (10,685) (1,526)
PROVISION (CREDIT) FOR INCOME
TAXES 117 717 (1,069) (153)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 1,056 $ 6,454 $ (9,616) $ (1,373)
========= ========= ========= =========
PER COMMON SHARE (PRIMARY
AND FULLY DILUTED)
Net income (loss) $0.04 $0.25 $(0.37) $(0.05)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES AND
EQUIVALENT SHARES OUTSTANDING
Primary 25,935 26,134 25,857 25,743
========= ========= ========= =========
Fully Diluted 26,026 26,134 25,857 25,743
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 6
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,616) $ (1,373)
Adjustments to reconcile net loss to net
cash (used for) operating activities:
Depreciation and amortization 5,864 6,370
Net (gain) on disposals of property (198) (252)
Provision for losses on accounts receivable 797 805
Undistributed loss of unconsolidated affiliate 325 (1,469)
(Increase) decrease in assets:
Receivables (3,503) (3,719)
Inventories (18,509) (24,780)
Other assets (123) (683)
Increase in accounts payable and accrued
liabilities and interest 8,754 21,229
--------- ---------
Total adjustments (6,593) (2,499)
NET CASH (USED FOR) OPERATING ACTIVITIES (16,209) (3,872)
INVESTING ACTIVITIES
Capital expenditures (2,122) (2,639)
Proceeds from sales of property, net 15,707 5,128
Investment in unconsolidated affiliate (194) -
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 13,391 2,489
FINANCING ACTIVITIES
Payments on long-term debt and capital lease
obligations (14,784) (5,730)
Proceeds from mortgage financings 502
Net borrowings from revolving term note payable 16,860 9,430
Issuance of common stock as payment for
Directors' fees 537 -
Issuance of other common stock 9 186
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,622 4,388
Net increase (decrease)in cash and cash
equivalents (196) 3,005
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,034 2,163
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,838 $ 5,168
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
<PAGE> 7
GROSSMAN'S INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying Unaudited Interim Consolidated Financial Statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis and, in the opinion of management, include
all adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results for the interim periods. The results of
operations for the interim periods are not necessarily indicative of
results to be expected for the year.
These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Annual Report on Form 10-K of Grossman's Inc. for the
year ended December 31, 1994. The balance sheet as of December 31, 1994
has been derived from the audited financial statements as of that date.
The Unaudited Interim Consolidated Financial Statements include the
accounts of Grossman's Inc. and its wholly-owned subsidiaries (the
"Company") after elimination of intercompany balances and transactions.
The Company's fiscal year end is December 31. The Company records
activity in quarterly accounting periods of equal length, ending on the
last Saturday of each quarter. The differences in amounts presented and
those which would have been presented using actual quarter end dates are
not material.
Certain amounts in the consolidated financial statements for prior periods
have been reclassified to conform to the current period classification.
Such reclassifications had no effect on previously reported results of
operations.
<TABLE>
NOTE 2 - LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT
------------------------------------------------------
Long-term debt consists of the following (in thousands):
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1995 1994 1994
-------- ------------ --------
<S> <C> <C> <C>
14% Debentures, due January 1, 1996 $16,201 $16,201 $16,201
Mortgage notes 4,398 15,759 20,431
Capital lease obligations 9,473 11,357 14,877
------- ------- -------
30,072 43,317 51,509
Less current portion 22,348 13,278 16,830
------- ------- -------
$ 7,724 $30,039 $34,679
======= ======= =======
</TABLE>
In March 1995, available borrowings, including letters of credit up to $15
million, under the Company's loan and security agreement with BankAmerica
<PAGE> 8
NOTE 2 - LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT (CONTINUED)
------------------------------------------------------------------
Business Credit, Inc., were increased from $60 million to $75 million. At
June 30, 1995, cash borrowings under this revolving credit agreement
totalled $46.7 million and outstanding letters of credit totalled $12.2
million. The maximum total borrowings under this agreement during the six
months ended June 30, 1995 were $63.1 million, including letters of credit
of $11.8 million. The weighted average annual interest rate on borrowings
during the six months ended June 30, 1995 and 1994 was 9.5% and 6.9%,
respectively.
In March 1995, the Company sold its Manchester, Connecticut distribution
center and repaid outstanding debt on the property of $4.2 million.
Additional related secured debt on this property totalling $657 thousand
was paid in May 1995. Mortgage payments related to sales of closed store
properties totalled $11.3 million in the six months ended June 30, 1995
<TABLE>
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
-------------------------------------------------
Accounts payable and accrued liabilities consist of the following (in
thousands):
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1995 1994 1994
-------- ------------ --------
<S> <C> <C> <C>
Accounts payable $ 73,846 $59,383 $ 93,679
Accrued salaries, wages, commissions
and related taxes 5,743 6,007 6,725
Accrued taxes other than income and
franchise 3,839 3,107 4,221
Accrued store closing costs 1,470 2,240 2,513
Accrued insurance 8,713 10,618 9,493
Other accrued liabilities 7,792 8,461 11,052
-------- ------- --------
$101,403 $89,816 $127,683
======== ======= ========
</TABLE>
<TABLE>
NOTE 4 - OTHER LIABILITIES
--------------------------
Other long-term liabilities consist of the following (in thousands):
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1995 1994 1994
--------- ------------ --------
<S> <C> <C> <C>
Accrued insurance claims $ 8,675 $ 8,014 $ 9,424
Accrued store closing costs 5,965 8,307 4,344
Other accrued liabilities 604 730 771
------- ------- -------
$15,244 $17,051 $14,539
======= ======= =======
</TABLE>
NOTE 5 - EMPLOYEE STOCK OPTION PLANS
------------------------------------
A nonqualified stock option plan covers officers and other key management
employees ("1986 Plan"). The 1986 Plan provides for nonqualified options
to purchase a total of 3,750,000 shares of Common Stock.
<PAGE> 9
NOTE 5 - EMPLOYEE STOCK OPTION PLANS (CONTINUED)
------------------------------------------------
A nonqualified stock option plan covers key management employees who are
not officers ("1993 Plan"). The 1993 Plan provides for nonqualified
options to purchase a total of 600,000 shares of Common Stock, with a
maximum of 5,000 shares per employee. The maximum number of options which
may be granted in any calendar year is 300,000.
The 1995 Non-Employee Directors' Stock and Option Plan (the "Directors'
Plan") was approved by stockholders in April 1995, covering Directors who
are not employees of the Company. The Directors' Plan provides for the
issuance of shares of Common Stock, or the granting of nonstatutory stock
options for shares of Common Stock, up to an aggregate total of 700,000
shares. The number of shares issued is determined based upon the fair
market value of shares as of the payment date. During the quarter ended
June 30, 1995, 74,035 shares of Common Stock were issued to Directors for
services rendered since November 23, 1994. Stockholders also approved the
grant of options to purchase 25,000 shares of Common Stock to each
non-employee Director and an additional grant of options to purchase
50,000 shares to the Chairman of the Board. A total of 275,000 options to
purchase shares were granted, 55,000 of which are currently exercisable,
with the remainder exercisable in four equal annual installments from date
of grant.
<TABLE>
<CAPTION>
A summary of option transactions for the six months ended June 30, 1995 is
as follows:
<S> <C>
Options outstanding, January 1 2,954,100
Price range $2.25-$4.50
Options granted 483,950
Price range $2.13-$2.41
Options exercised 3,750
Price range $2.31
Options cancelled 284,400
Price range $2.31-$4.50
-----------
Option outstanding, June 30 3,149,850
Price range $2.13-$4.50
===========
Option exercisable, June 30 1,816,213
Price range $2.13-$4.50
===========
</TABLE>
All options granted are ten-year nonqualified options and were granted at
market value. Of the options outstanding under the 1986 and 1993 Plans,
200,000 were exercisable when issued, and the balance become exercisable
in either three or four equal annual installments following the respective
dates of grant. All outstanding options become exercisable upon a change
in control, as defined in the option agreements. At June 30, 1995,
4,678,465 shares of Common Stock were reserved for issuance under the
three plans.
<PAGE> 10
<TABLE>
NOTE 6 - INVESTMENT IN UNCONSOLIDATED AFFILIATE
-----------------------------------------------
The Company has a 50% interest in a Mexican retailer of building materials
and related products. Summarized operational information for this joint
venture, which began operations in the second quarter of 1994, is as
follows (in thousands):
<CAPTION>
Three months ended Six months ended
June 30, 1995 June 30, 1995
------------------ ----------------
<S> <C> <C>
Gross revenue $2,004 $4,411
Cost of sales and expenses 2,258 5,062
------- ------
Net loss $ (254) $ (651)
======= ======
Company's interest in net loss $ (127) $ (325)
======= ======
</TABLE>
During the first quarter of 1995, the Company reduced its investment in
this joint venture by $872 thousand, and recorded a corresponding
adjustment to stockholders' investment, to reflect a devaluation of the
Mexican peso in relation to the U.S. dollar.
NOTE 7 - SALE OF PROPERTY
--------------------------
In June 1995, the Company announced it had received notice of satisfaction
of contingencies and an additional $2.0 million deposit toward the sale of
its 35 acre headquarters site in Braintree, Massachusetts. The Company is
preparing to vacate the premises, close the transaction and record a gain,
expected to be in excess of $14.0 million. The purchase price for the
property is $32.0 million; $2.2 million has been paid in cash in advance
of the closing, $14.0 million will be received in cash on the closing
date, and the remaining $15.8 million will be paid in the form of a note.
The note is due in two installments; $8.0 million is due 16 months
following the closing date and the remainder is due two years following
the closing date, provided, prepayments are required upon the occurrence
of certain events. The note bears interest at 1% over Prime Rate during
the note's final eight month period.
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FINANCIAL CONDITION
-------------------
JUNE 30, 1995 COMPARED WITH DECEMBER 31, 1994
---------------------------------------------
Financial condition at June 30, 1995 reflects the seasonal buildup of
inventory and a related increase in payables and term financing, and the
net year to date operating loss. In addition, during the first half of
1995, the Company completed certain property sales and related paydowns on
long-term debt.
Working capital at June 30, 1995 was $44.6 million, an increase of $1.1
million from the prior year end. This increase is primarily the result of
an increase in inventory of $18.5 million, an increase in accounts
receivable of $2.7 million and a decrease in the current portion of
mortgage notes and capital lease obligations of $7.1 million, offset by an
increase in payables of $11.6 million and a $16.2 million reclassification
to current maturity of 14% Debentures, due January 1, 1996. Historically
a decline in working capital has been experienced during the first six
months of the year, primarily due to large capital outlays during this
period in preparation for the spring/summer selling season. Capital
spending in 1995 was below historic levels, as changes to stores in 1995
were primarily merchandise mix related and not capital intensive.
The second quarter of the year is a period which encompasses the
spring/summer selling season. As a result, inventory levels are
historically highest in the months of May and June. Inventory at June 30,
1995 totalled $135.1 million, an $18.5 million or 15.9% increase from year
end and a $11.5 million or 7.8% decrease from one year ago. The decrease
in inventory from one year ago is principally due to the closing of 18
Eastern Division stores in 1994 and a downsizing of the Eastern Division's
Distribution facility, partially offset by Contractors' Warehouse store
openings in June 1994 and January 1995 and two Mr. 2nd's Bargain Outlet
store openings in December 1994 and March 1995.
In June 1995, the Company announced it had received notice of satisfaction
of contingencies and an additional $2.0 million deposit toward the sale of
its 35 acre headquarters site in Braintree, Massachusetts. The Company is
preparing to vacate the premises, close the transaction and record a gain,
expected to be in excess of $14.0 million. The purchase price for the
property is $32.0 million; $2.2 million has been paid in cash in advance
of the closing, $14.0 million will be received in cash on the closing
date, and the remaining $15.8 million will be paid in the form of a note.
The note is due in two installments; $8.0 million is due 16 months
following the closing date and the remainder is due two years following
the closing date, provided, prepayments are required upon the occurrence
of certain events. The note bears interest at 1% over Prime Rate during
the note's final eight month period. The initial cash proceeds from the
sale will be used to retire the 14% Debentures due January 1, 1996.
During the first half of 1995, the Company sold its Eastern Division
Distribution Center and certain closed store properties, and repaid
related outstanding debt totalling $11.3 million. The Company continues
to market properties vacated as a result of closing a total of 40 stores.
<PAGE> 12
FINANCIAL CONDITION
-------------------
JUNE 30, 1995 COMPARED WITH DECEMBER 31, 1994 (CONTINUED)
---------------------------------------------------------
since 1993. Of the 22 owned stores within this group, nine were sold
prior to 1995, five were sold in 1995 and one was reopened as a Mr. 2nd's
Bargain Outlet. Of the 18 leased properties within this group, 10 leases
have been terminated, three leases are due to expire in 1995, and one
store was reopened as a Mr. 2nd's Bargain Outlet. Proceeds received in
the first half of 1995 from the sale of the distribution center, the
deposit on the sale of the Braintree property and the sale of the closed
store properties totalled $15.7 million. It is anticipated that sales of
the remaining owned properties will be sold over a period of years,
resulting in a liquidity improvement at the time of each respective sale.
Property, plant and equipment declined by $17.7 million since year end,
reflecting property sales, a reclassification of the Braintree property
under agreement to be sold to current assets, offset by $2.1 million in
capital expenditures. Capital expenditures were made principally to
support the store openings.
During the first quarter of 1995, an adjustment of $872 thousand was
recorded, reducing the investment in its 50% owned Mexican joint venture,
to reflect a devaluation of the Mexican peso in relation to the U.S.
dollar. A corresponding adjustment was made to stockholders' equity.
Total long-term debt, including the 14% Debentures and capital lease
obligations, decreased a total of $13.2 million. This is the result of
the $11.3 million payments associated with sold properties, and continuing
scheduled payments, offset by an increase in capital lease obligations,
principally for equipment in new stores.
RESULTS OF OPERATIONS
---------------------
Six months ended June 30, 1995 compared with six months ended
-------------------------------------------------------------
June 30, 1994
-------------
A gross profit decline of $13.3 million, due to both sales declines and
margin rate decreases, was in excess of the operating expense savings of
$4.7 million, resulting in a net loss of $9.6 million for the first six
months of 1995, compared to a net loss of $1.4 million in 1994. Affecting
results were industry wide housing starts and turnover rates, which
declined during the first six months of 1995, continuing slow market
conditions, particularly in the Northeast, and declining selling prices
and margins for commodity lumber products.
<PAGE> 13
RESULTS OF OPERATIONS
---------------------
<TABLE>
Six months ended June 30, 1995 compared with six months ended
-------------------------------------------------------------
June 30, 1994 (CONTINUED)
-------------------------
The following table shows comparative sales results by division and store
type during each quarter and for the total six months (dollars in
millions):
<CAPTION>
Three Months Three Months Six Months
Ended March Ended June Ended June
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SALES
Grossman's Stores
Retail Sales $ 32.1 $ 43.4 $ 63.2 $ 94.0 $ 95.3 $137.4
Professional Sales 33.3 34.9 50.5 58.7 83.8 93.6
------ ------ ------ ------ ------ ------
Total Grossman's Stores 65.4 78.3 113.7 152.7 179.1 231.0
Mr. 2nd's Bargain Outlet
Stores 10.3 8.5 14.6 12.7 24.9 21.2
------ ------ ------ ------ ------ ------
Total Eastern Division 75.7 86.8 128.3 165.4 204.0 252.2
Contractors' Warehouse
Division 51.1 48.3 65.3 54.7 116.4 103.0
------ ------ ------ ------ ------ ------
Total Grossman's Inc. $126.8 $135.1 $193.6 $220.1 $320.4 $355.2
====== ====== ====== ====== ====== ======
% OF TOTAL SALES
Grossman's Stores
Retail Sales 25.4 % 32.1 % 32.6 % 42.6 % 29.7 % 38.6 %
Professional Sales 26.2 25.8 26.1 26.7 26.2 26.4
------ ------ ------ ------ ------ ------
Total Grossman's Stores 51.6 57.9 58.7 69.3 55.9 65.0
Mr. 2nd's Bargain Outlet
Stores 8.1 6.3 7.5 5.8 7.8 6.0
------ ------ ------ ------ ------ ------
Total Eastern Division 59.7 64.2 66.2 75.1 63.7 71.0
Contractors' Warehouse
Division 40.3 35.8 33.8 24.9 36.3 29.0
------ ------ ------ ------ ------ ------
Total Grossman's Inc. 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
====== ====== ====== ====== ====== ======
</TABLE>
<PAGE> 14
RESULTS OF OPERATIONS
---------------------
<TABLE>
<PAGE> 14
Six months ended June 30, 1995 compared with six months ended
-------------------------------------------------------------
June 30, 1994 (CONTINUED)
-------------------------
<CAPTION>
(TABLE CONTINUED)
Three Months Three Months Six Months
Ended March Ended June Ended June
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SALES % INCREASE (DECREASE)
VERSUS PRIOR YEAR
Grossman's Stores
Retail Sales (26.0)% (18.1)% (32.8)% (22.6)% (30.6)% (21.3)%
Professional Sales (4.6) (16.5) (14.0) (13.3) (11.1) (14.5)
------ ------ ------ ------ ------ ------
Total Grossman's Stores (16.5) (17.4) (25.5) (19.3) (22.4) (18.7)
Mr. 2nd's Bargain Outlet
Stores 21.2 (7.6) 15.0 (10.7) 17.5 (9.5)
------ ------ ------ ------ ------ ------
Total Eastern Division (12.8) (16.5) (22.4) (18.7) (19.1) (18.0)
Contractors' Warehouse
Division 5.8 28.5 19.4 10.0 13.0 17.9
------ ------ ------ ------ ------ ------
Total Grossman's Inc. (6.1)% (4.6)% (12.0)% (13.0)% (9.8)% (10.0)%
====== ====== ====== ====== ====== ======
COMPARABLE STORE SALES %
INCREASE (DECREASE)
VERSUS PRIOR YEAR
Grossman's Stores
Retail Sales (5.3)% (3.4)% (15.5)% (8.1)% (12.3)% (6.6)%
Professional Sales 14.8 13.3 2.9 16.2 7.3 15.1
------ ------ ------ ------ ------ ------
Total Grossman's Stores 4.0 3.4 (8.2) 0.0 (4.1) 1.1
Mr. 2nd's Bargain Outlet
Stores 12.9 (4.9) 2.4 1.7 6.6 (1.0)
------ ------ ------ ------ ------ ------
Total Eastern Division 5.0 2.6 (7.2) 0.1 (3.0) 1.0
Contractors' Warehouse
Division (6.6) 0.3 3.5 (9.2) (1.3) (5.0)
------ ------ ------ ------ ------ ------
Total Grossman's Inc. 0.3 % 1.9 % (4.2)% (2.0)% (2.4)% (0.6)%
====== ====== ====== ====== ====== ======
TOTAL NUMBER OF STORES
Grossman's Stores 72 89 72 89
Mr. 2nd's Bargain
Outlet Stores 20 18 20 18
Contractors' Warehouse
Division 13 11 13 12
------ ------ ------ ------
Total Number of Stores 105 118 105 119
====== ====== ====== ======
</TABLE>
<PAGE> 15
Six months ended June 30, 1995 compared with six months ended
-------------------------------------------------------------
June 30, 1994 (CONTINUED)
-------------------------
Total sales results reflect the 18 Eastern Division stores closed in late
1994 and a Contractors' Warehouse opening in early 1995. Additionally,
one Contractors' Warehouse store opened late in the second quarter of 1994
and had a minimal effect on sales in the first half of 1994.
Within Grossman's stores, increases in comparable store sales results to
professionals is indicative of the strategy to target these customers.
These increases occurred despite the declining selling prices for
commodity lumber products, which account for over 25% of the total sales
mix. For the six month period, these increases, however, were not enough
to offset the continuing erosion of the retail customer comparable sales.
Contractors' Warehouse comparable store sales decreased for the first six
months of 1995 by 1.3%. First quarter declines related to heavy rain in
California were not fully offset by second quarter increases.
The gross profit decline of $13.3 million was the result of the sales
decline and a decline in gross margin from 25.0% in 1994 to 23.5% in 1995,
reflecting the decline in commodity lumber margins. Margin declines also
continue to occur as a result of sales increases to professional
customers, who receive discounts from retail pricing and as Contractors'
Warehouse stores continue to open. Total professional sales, including
Contractors' Warehouse, increased from 55.4% in the six month period ended
June 30, 1994 to 62.5% in the comparable period in 1995.
Operating expenses decreased by $4.7 million for the six month period in
1995 compared with the same period in 1994. This is the result of
continued expense control and downsizing in selling and administrative
expense areas, which account for $3.7 million of the decrease, reduction
in depreciation and amortization of $506 thousand, due to the closing of
18 Eastern Division stores in the fall of 1994, the sale of the Eastern
Division Distribution Center in 1995, and a reduction in store preopening
expense of $487 thousand. The reduction in selling and administrative
expenses were tempered by additional costs, principally payroll, incurred
during the first quarter related to Eastern Division store modifications.
Operating expenses related to the development of Project Pro's, Inc., the
Company's 80% owned subsidiary, totalled $1.8 million for the first six
months of 1995, compared to $2.3 million in 1994.
Interest expense increased from $3.8 million during the first six months
of 1994 to $4.3 million during the first six months of 1995, reflecting
both an increase in average revolving credit and the rate on such
borrowings. The weighted average rate on revolver borrowings increased
from 6.9% in 1994 to 9.5% in 1995.
The 1995 first six months include a $325 thousand net loss related to the
Company's 50% owned Mexican joint venture, compared with an $82 thousand
loss in 1994, when the venture began operations midway through the second
quarter.
<PAGE> 16
Three months ended June 30, 1995 compared with three months ended
------------------------------------------------------------------
June 30, 1994
-------------
The net income of $1.1 million for the second quarter of 1995 compared
with net income of $6.5 million in 1994. Affecting results were industry
wide housing starts and turnover rates, which declined during the quarter,
continuing slow market conditions, particularly in the Northeast, and
declining selling prices and margins for commodity lumber products.
Second quarter sales results reflect the 18 Eastern Division stores closed
in late 1994 and a Contractors' Warehouse opening in early 1995.
Additionally, one Contractors' Warehouse store opened late in the second
quarter of 1994, which had minimal effect on sales in the first half of
1994.
Within Grossman's stores, comparable store sales results to professionals
is indicative of the strategy to target these customers. These increases
occurred despite the declining selling prices for commodity lumber
products, which account for over 25% of the total sales mix. In the
second quarter, these increases, however, were not enough to offset the
continuing erosion of the retail customer comparable sales. The Mr. 2nd's
Bargain Outlet stores continued to show comparable sales increase with
growth of 2.4% in the second quarter of 1995. Contractors' Warehouse
comparable store sales increased by 3.5% in the second quarter of 1995,
following a decrease in comparable sales in the first quarter due to
extremely inclement weather experienced in California, where most of these
stores are located.
The gross profit decline of $10.7 million was the result of the sales
decline and a decline in gross margin from 25.0% in 1994 to 22.9% in 1995,
reflecting the decline in commodity lumber margin. Additionally, margin
declines continue to occur as a result of sales increases to professional
customers, who receive discounts from retail pricing and as Contractors'
Warehouse stores continue to open. During the second quarter, total
professional sales, including Contractors' Warehouse, increased from 51.6%
in 1994 to 59.9% in 1995.
Operating expenses decreased by $4.8 million for the quarter ended June
1995 compared with the same period in 1994. This is the result of
continued expense control and downsizing in selling and administrative
expense areas, which account for $4.0 million of the decrease, reduction
in depreciation and amortization of $360 thousand, due to the closing of
18 Eastern Division stores, the sale of the Eastern Division Distribution
Center in 1995 and a reduction in store preopening expense of $430
thousand. Operating expenses related to Project Pro's, the Company's 80%
owned subsidiary, totalled $970 thousand for the second quarter of 1995,
as compared to $1.4 million for the second quarter of 1994.
Interest expense increased from $1.9 million during the second quarter of
1994 to $2.1 million during the second quarter of 1995, reflecting both an
increase in average revolving credit and the rate on such borrowings. The
weighted average rate on revolver borrowings increased from 7.2% in 1994
to 9.6% in 1995.
The 1995 second quarter includes a $127 thousand net loss related to the
Company's 50% owned Mexican joint venture, compared with an $82 thousand
loss in 1994, when the venture began operations midway through the second
quarter.
<PAGE> 17
PART II - OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The date of the meeting and whether it was an
annual or special meeting.
The Annual Meeting of Stockholders of
Grossman's Inc. was held on April 25, 1995.
(b) All nominees as directors were elected as set
forth in paragraph (c) below.
(c) A brief description of each matter voted upon
at the meeting and state the number of votes
cast for, against or withheld, as well as the
number of abstentions and broker nonvotes, as
to each such matter, including a separate
tabulation with respect to each nominee for
office.
<TABLE>
The following matters were voted upon at the Annual
Meeting of Stockholders of Grossman's Inc.
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Russell Cox 21,269,010 1,309,721
John R. Grey 21,261,845 1,316,886
Maurice Grossman 21,253,840 1,324,891
Leo Kahn 20,492,035 2,086,696
Sydney L. Katz 21,257,545 1,321,186
W. Wallace McDowell, Jr. 21,268,850 1,309,881
Stephen B. Oresman 21,277,510 1,301,221
Robert K. Swanson 21,270,850 1,307,881
Harold Tanner 21,293,685 1,285,046
</TABLE>
An aggregate of 3,203,445 were not present at the
meeting in person or by proxy and were not voted on the
election of directors.
<PAGE> 18
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS (CONTINUED)
<TABLE>
(ii) A Directors' Stock and Option Plan providing for
Directors' compensation in part in the form of
Registrant's stock and stock options in lieu of cash was
submitted to stockholders at the Annual Meeting of
Stockholders
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C>
18,676,893 3,666,029 222,458
</TABLE>
<TABLE>
(iii) Approval of Restricted Stock Plan providing for salary
increase for key management personnel and certain other
compensation in the form of restricted stock
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C>
17,770,034 4,395,501 246,625
</TABLE>
An aggregate of 3,203,445 were not present at the meeting
in person or by proxy and were not voted on the approval
of the restricted stock plan.
<TABLE>
(iv) Approval of Ernst & Young LLP as independent auditors for
the Registrant for 1995
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C>
21,961,993 492,155 124,583
</TABLE>
An aggregate of 3,203,445 were not present at the meeting
in person or by proxy and were not voted on the approval
of Ernst & Young LLP as independent auditors.
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10(p) 1995 Directors' Stock and Option Plan, filed
herewith.
10(q) 1995 Restricted Stock Plan, filed herewith.
11(a) Statement re computation of earnings per share,
filed herewith.
(b) REPORTS ON FORM 8-K
The Company filed a Form 8-K with the Securities and
Exchange Commission, dated and filed June 23, 1995,
reporting on Item 2 - Acquisition or Disposition of Assets,
pertaining to the sale of the Registrant's 35 acre
headquarter site.
<PAGE> 19
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.
GROSSMAN'S INC.
Company
by /s/ Sydney L. Katz
--------------------------------------
Sydney L. Katz
President and Chief Executive Officer
DATE: August 14, 1995
<PAGE> 1
ANNEX A
GROSSMAN'S INC.
1995 DIRECTORS' STOCK AND OPTION PLAN
1. PURPOSE
The purpose of this Plan is to (1) encourage ownership of
Company Stock by non-employee directors and thereby align such
directors' interests more closely with the interests of
stockholders of the Company, and (2) assist the Company in securing
and retaining highly qualified persons to serve as non-employee
directors, in which position they may contribute to the long-term
growth and profitability of the Company, by affording such persons
an opportunity to acquire Stock.
2. DEFINITIONS
Whenever used in this Plan, the following terms will have the
respective meanings set forth below:
(a) "Board" means the Company's Board of Directors as
constituted from time to time.
(b) A "Change of Control" will be deemed to have occurred
if (i) any corporation, person or entity (other than the Company,
a majority-owned subsidiary of the Company or an employee benefit
plan maintained by the Company or any of its subsidiaries) or any
"group" as defined in Section 13(d)(3) of the Exchange Act becomes
the beneficial owner of stock representing more than twenty-five
percent of the voting power of the Company; (ii) the stockholders
of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation other than
a majority-owned subsidiary of the Company, to sell or otherwise
dispose of all or substantially all of the Company's assets or to
liquidate the Company, or (iii) within any 24 consecutive month
period, persons who were members of the Board immediately prior to
such 24-month period, together with any persons who were first
elected as directors (other than as a result of any settlement of
a proxy or consent solicitation contest or any action taken to
avoid such a contest) during such 24-month period by or upon the
recommendation of persons who were members of the Board immediately
prior to such 24-month period and who constituted a majority of the
Board at the time of such election, cease to constitute a majority
of the Board.
(c) "Committee" means the committee described in Section
4.
(d) "Company" means Grossman's Inc., a Delaware
corporation, or any successor thereto by merger, consolidation, or
statutory share exchange.
<PAGE> 2
(e) "Exchange Act" means the Securities Exchange Act of
1934, as amended. References to any provision of the Exchange Act
or rule thereunder will be deemed to include successor provisions
thereto and rules thereunder.
(f) "Fair Market Value" of the Stock means average of the
official closing prices of the Stock on the Nasdaq National Market
System or such other automated quotation system or securities
exchange on which the Stock shall be primarily traded at the time
of such determination on the ten trading days preceding the day on
which Fair Market Value is being determined on which Stock
transactions took place, as reported in The Wall Street Journal --
Eastern Edition.
(g) "Option" means the right, granted to a Participant
under Section 6(a), to purchase Stock pursuant to the relevant
provisions of this Plan at the exercise price specified in Section
6(c) for a specified period of time, not to exceed ten years from
the date of grant, which period of time shall be subject to earlier
termination prior to exercise in accordance with Section 6.
A-1
<PAGE> 3
(h) "Participant" means a non-employee director who is
eligible to receive, and is granted, Options or Stock under the
Plan.
(i) "Plan" means this 1995 Directors' Stock and Option
Plan.
(j) "Retainer" means the annual retainer payable to a
non-employee director of the Company for a full year's service on
the Board, or such lesser amount as may be payable to any
non-employee director in respect of service on the Board of less
than a full year, excluding any annual retainer payable for service
on any standing or ad hoc committee of the Board or for service as
Chairman of any committee of the Board, and excluding meeting fees
payable for attendance at meetings of the Board or committees for
that year.
(k) "Stock" means the Common Stock, par value $.01 per
share, of the Company, and such other securities of the Company as
may be substituted for Stock pursuant to Section 9.
3. NUMBER AND SOURCE OF SHARES AVAILABLE UNDER THE PLAN
The total number of shares of Stock reserved and available for
issuance under the Plan is 700,000, subject to adjustment as
provided in Section 9 below. Such shares may be previously issued
and outstanding shares of Stock reacquired by the Company and held
in its treasury, or may be authorized but unissued shares of Stock,
or may consist partly of each. If any Option expires or terminates
for any reason without having been exercised in full, the
unpurchased shares subject to the Option will again be available
for purposes of the Plan. Furthermore, if the holder of an Option
delivers shares of Stock to the Company on exercise of an Option,
pursuant to Section 6(f)(ii), such shares will again be available
for purposes of the Plan.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee (the
"Committee") of the Board designated by the Board for that purpose.
Unless and until a Committee is appointed, the Plan shall be
administered by the entire Board, and references in the Plan to the
"Committee" shall be deemed references to the Board. The Committee
shall have authority, not inconsistent with the express provisions
of the Plan, (a) to grant Options and/or issue Stock in accordance
with the formulas set forth in this Plan to such directors as are
eligible to receive Options and/or Stock; (b) to prescribe the form
of forms of instruments evidencing Options and any other
instruments required under the Plan and to change such forms from
time to time; (c) to adopt, amend and rescind rules and regulations
for the administration of the Plan; and (d) to interpret the Plan
and to decide any questions and settle all controversies and
disputes that may arise in connection with the Plan. Any such
determinations made by the Committee shall be conclusive and shall
bind all parties.
<PAGE> 4
5. ELIGIBILITY
Each director of the Company, who on any date on which an
Option or Stock is to be granted (as specified in Sections 6 and 7)
is not an employee of the Company or any parent or subsidiary of
the Company (an "Eligible Director"), will be eligible to receive
Options or Stock under the Plan. No person other than those
specified in this Section 5 will be eligible to participate in the
Plan.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Number of Options. On the date that this Plan is approved
by the Company's stockholders, each Eligible Director shall be
awarded an Option covering 25,000 shares of Stock; thereafter, on
the date that any new director is elected to the Board who is an
Eligible Director, each such new Eligible Director shall be awarded
an Option covering 25,000 shares of Stock.
A-2
<PAGE> 5
(b) Additional Options to Chairman of the Board. On the date
that this Plan is approved by the Company's stockholders, Robert K.
Swanson, the Chairman of the Board of the Company, shall be awarded
an option covering 50,000 shares of Stock in addition to the Option
awarded to Mr. Swanson under Section 6(a).
(c) Exercise Price. The exercise price of each option granted
under (a) and (b) above (collectively, the "Director Options")
shall be 100% of the Fair Market Value per share of the Stock at
the time the Director Options are granted. In no event, however,
shall the exercise price be less, in the case of an original issue
of authorized stock, than the par value per share of the stock.
(d) Duration of Director Options. The latest date on which
any of the Director Options may be exercised (the "Final Exercise
Date") shall be the date which is ten years from the date the
Director Options were granted.
(e) Exercise of Director Options.
(1) Each Director Option granted pursuant to this Section
6 shall be immediately exercisable to the extent of 20% of the
shares of Stock covered thereby on the date of grant, and shall
become exercisable to the extent of an additional 20% of the shares
of Stock covered thereby on each of the first, second, third and
fourth anniversaries of such date.
(2) Any exercise of a Director Option shall be in
writing, signed by the proper person and delivered or mailed to the
Company, accompanied by (i) any documentation required by the Board
and (ii) payment in full for the number of shares for which the
Director Option is exercised.
(3) If a Director Option is exercised by the executor or
administrator of a deceased director, or by the person or persons
to whom the Director Option has been transferred by the director's
will or the applicable laws of descent and distribution, the
Company shall be under no obligation to deliver Stock pursuant to
such exercise until the Company is satisfied as the authority of
the person or persons exercising the Director Option.
(f) Payment for and Delivery of Stock. Stock purchased under
the Plan pursuant to the exercise of Director Options shall be paid
for as follows: (i) in cash or by check (acceptable to the Company
in accordance with guidelines established by the Committee for this
purpose), bank draft or money order payable to the order of the
Company; (ii) through the delivery of shares of Stock (which, in
the case of shares of Stock acquired from the Company, shall have
been outstanding for at least six months) having a Fair Market
Value on the date of exercise equal to the purchase price; (iii) by
delivery of an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay
the exercise price; or (iv) by any combination of the foregoing
forms of payment; provided that if the Stock issued upon exercise
of the Director Option is an original issue of authorized Stock, at
least so much of the exercise price as represents the par value of
such Stock shall be paid in cash or cash equivalents.
<PAGE> 6
The holder of a Director Option shall not have any rights as
a stockholder, except as to Stock actually received by him or her
upon exercise of a Director Option or otherwise under the Plan.
(g) Nontransferability of Director Options. To the extent
required by Rule 16b-3 under the Exchange Act as from time to time
in effect, no Director Option may be transferred other than by will
or by the laws of descent and distribution, and during a director's
lifetime a Director Option may be exercised only by him or her.
(h) Death. Upon the death of any Participant to whom Director
Options have been granted under this Plan, all Director Options not
then exercisable shall terminate. All Director Options held by the
Participant that are exercisable immediately prior to death may be
exercised by his or her executor or administrator, or by
A-3
<PAGE> 7
the person or persons to whom the Director Option is transferred by
will or the applicable laws of descent and distribution, at any
time within one year after the Participant's death (subject,
however, to the limitations of Section 6(d) regarding the maximum
exercise period for such Director Option). At the end of such
one-year period, such Director Options shall terminate to the
extent not previously exercised or terminated.
(i) Other Termination of Status as Eligible Director. If an
Eligible Director's service with the Company terminates, or if a
director otherwise ceases to be an Eligible Director, for any
reason other than death, all Director Options (or portions thereof)
held by the director that are not then exercisable shall terminate.
Director Options that are exercisable on the date of termination
shall continue to be exercisable for a period of six months
(subject to Section 6(d)). At the end of such six-month period,
such Director Options shall terminate to the extent not previously
exercised or terminated.
(j) Change of Control. In the event of a Change of Control of
the Company, all Director Options granted under the Plan will
immediately become fully exercisable; except that, if the Change of
Control involves a consolidation or merger in which the Company is
not the surviving corporation or which results in the acquisition
of all or substantially all the Stock then outstanding by a single
person or entity or by a group of persons and/or entities acting in
concert (each, a "Merger"), all Director Options granted under the
Plan will either (i) terminate and no longer be exercisable;
provided, that 20 days prior to the effective date of the Merger,
all Director Options outstanding hereunder that are not otherwise
exercisable shall become fully exercisable, or (ii) if there is an
acquiring corporation and the consideration to be received in the
Merger consists of voting securities of the acquiring corporation
or an affiliate, and the acquiring corporation so elects, be
assumed by the acquiring corporation, subject to consummation of
the Merger, and be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable prior to the
Merger, the voting securities received in the transaction by the
stockholders of the Company, with appropriate adjustments to the
exercise price and the number of shares subject to the Director
Option to preserve the value of the Director Option.
7. STOCK IN LIEU OF RETAINER
In lieu of the annual cash Retainer payable to each Eligible
Director, Stock will be issued in the amount of such Retainer each
year for so long as this Plan is in effect, to the extent and
subject to the terms and conditions set forth below:
(a) Annual Stock Payment. The number of shares of Stock
to be issued under this Section 7 will be equal to (i) the amount
of the annual Retainer payable to each Eligible Director at the
rate then in effect divided by (ii) the Fair Market Value of Stock
as determined on the date of issuance. No fractional shares of
<PAGE> 8
Stock will be issued; instead, the cash remainder will be paid to
the Participant. The delivery of Stock hereunder shall be
contingent upon service by the Participant through the date of the
first meeting of the Board of Directors in that year. On the date
30 days after the date of the annual meeting of stockholders at
which directors are elected (or, in the case of a director elected
by the Board, the date 30 days after such election) or as promptly
as practicable thereafter, the Company will deliver to the
Participant one or more certificates representing such Stock,
registered in the name of the Participant (or, if directed by the
Participant, in joint names of the Participant and his or her
spouse).
(b) Rights of the Participant. Except for the terms and
conditions set forth in this Plan, a Participant who is issued
Stock in lieu of the annual cash Retainer will have all of the
rights of a holder of the Stock, including the right to receive
dividends paid on such Stock and the right to vote the Stock at
meetings of stockholders of the Company. Upon delivery, such Stock
will be nonforfeitable.
A-4
<PAGE> 9
8. STOCK IN LIEU OF CONSULTING FEES
(a) If, while this Plan is in effect, an Eligible Director is
serving as Chairman of the Board (a "Non-Executive Chairman"), and
such Non-Executive Chairman has entered into an agreement with the
Company to provide consulting services to the Company (a
"Consulting Agreement"), then, in consideration of such services,
within thirty days after the end of each calendar quarter during
which such Consulting Agreement is in full effect, the
Non-Executive Chairman shall be issued a number of shares of Stock
equal to (i) $1,000 times the number of days that the Non-Executive
Chairman shall have spent working on the affairs of the Company
under the Consulting Agreement during such preceding calendar
quarter (whether or not this Plan was in effect during such
period), divided by (ii) the Fair Market Value of the Stock on the
last day of such calendar quarter. No fractional shares shall be
issued; instead, the remainder shall be paid to the Non-Executive
Chairman in cash. Upon delivery, such Stock shall be
nonforfeitable.
(b) In addition to any Stock issuable under Section 8(a), the
Company shall issue to Robert K. Swanson, Chairman of the Board of
the Company, subsequent to the approval of the Plan by the
stockholders of the Company but in any event not later than May 1,
1995, a number of whole shares of Stock (with fractional shares
rounded down) equal to $20,000 divided by the Fair Market Value of
the Stock on the date of such issuance, in consideration of
consulting services rendered by Mr. Swanson to the Company during
1994. Upon delivery, such Stock shall be nonforfeitable.
9. ADJUSTMENT PROVISIONS
In the event any recapitalization, reorganization, merger,
consolidation, spin-off, combination, repurchase, exchange of
shares or other securities of the Company, stock split or reverse
split, extraordinary dividend, liquidation, dissolution, or other
similar corporate transaction or event affects Stock such that an
adjustment is determined by the Board to be appropriate in order to
prevent dilution or enlargement of Participants' rights under the
Plan, then the Board shall, in a manner that is proportionate to
the change to the Stock and is otherwise equitable, adjust (i) any
or all of the number or kind of shares of Stock reserved for
issuance under the Plan and (ii) the number or kind of shares of
Stock to be subject to Director Options thereafter granted
automatically under Section 6, and (iii) the number and kind of
shares of Stock issuable upon exercises of outstanding Director
Options, and the exercise price per share thereof, provided that
the number of shares subject to any Director Option shall always be
a whole number.
<PAGE> 10
10. CHANGES TO THE PLAN AND AWARDS.
(a) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or authority to grant Options or
issue Stock under the Plan; provided, however, that, without the
consent of an affected Participant, no such amendment, alteration,
suspension, discontinuation, or termination may impair the rights
of such Participant under any Director Option theretofore granted
to him or her hereunder.
(b) Changes to Outstanding Awards. The Board may amend,
alter, suspend, discontinue, or terminate any Director Option
theretofore granted hereunder and any agreement relating thereto;
provided, however, that, without the consent of an affected
Participant, no such amendment, alteration, suspension,
discontinuation, or termination may impair the rights of such
Participant under or with respect to any Director Option
theretofore granted to him or her or any agreement relating
thereto.
11. GENERAL PROVISIONS
(a) Consideration for Grants; Agreements. Director Options
and Stock will be granted or paid under the Plan in consideration
of the services of Participants and, except for the payment of the
exercise price in the case of an Director Option, no other
consideration shall be required therefor. Grants of Director
Options will be evidenced by agreements executed by the Company and
the Participant containing the terms and conditions set forth in
the Plan together with such other terms and conditions not
inconsistent with the Plan as the Board may from time to time
approve.
A-5
<PAGE> 11
(b) Compliance with Securities Laws, Listing Requirements, and
Other Laws and Obligations. The Company shall not be obligated to
deliver any shares of Stock under this Plan, upon the exercise of
any Director Option granted under Section 6 or the issuance of
Stock under Section 7 or Section 8, (i) until, in the opinion of
the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (ii) if the outstanding Stock
is at the time listed on any stock exchange, or quoted on any
automated quotation system, until the shares to be delivered have
been listed or authorized to be listed or quoted on such exchange
or system upon official notice of issuance, and (iii) until all
other legal matters in connection with the issuance and delivery of
such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Act of
1933, as amended, the Company may require, as a condition to
exercise of the Director Option or the issuance of Stock, such
representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Stock bear an appropriate
legend restricting transfer.
(c) No Right to Continue as a Director. Nothing contained in
the Plan or any agreement hereunder will confer upon any
Participant any right to continue to serve as a director of the
Company.
(d) Governing Law. The validity, construction, and effect of
the Plan and any agreement hereunder will be determined in
accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal
law.
12. EFFECTIVE DATE AND DURATION OF PLAN
The Plan will become effective at the time that it is approved
by the Board, subject to approval by the stockholders of the
Company by the affirmative votes of the holders of a majority of
the securities of the Company present in person or represented by
proxy, and entitled to vote at a meeting of Company stockholders
duly held. The Plan will remain in effect until such time as the
Board may act to terminate the Plan pursuant to Section 10(a), or
until such time as no Stock remains available for issuance under
the Plan and the Company has no further rights or obligations under
the Plan with respect to Director Options granted or Stock issued
under the Plan.
A-6
<PAGE> 1
ANNEX B
GROSSMAN'S INC.
1995 RESTRICTED STOCK PLAN
I. Purpose. The purpose of this 1995 Restricted Stock Plan
(the "Plan") is to advance the interests of Grossman's Inc. (the
"Company") and its subsidiaries by enhancing the Company's ability
to reward officers and key employees for their contributions to the
success of the Company and its subsidiaries and to create an
incentive for their efforts to increase the profitability of the
Company and its subsidiaries.
II. Effective Date. This Plan shall become effective on the
date on which it is approved by the shareholders of the Company,
although awards may be made prior to that time subject to such
approval. Awards may thereafter be made pursuant to the terms of
this Plan until December 31, 2005.
III. Administration of the Plan. The Plan shall be
administered by the Compensation Committee of the Board of
Directors of the Company (the "Board") or by such other committee
as the Board shall appoint from among its members and designate to
administer the Plan (the "Committee"). The Committee shall be
authorized, subject to the express provisions of this Plan, to
adopt, amend and rescind rules for the administration of the Plan
and its own proceedings, and to take all action necessary or
appropriate to administer the Plan, to interpret its provisions,
and to decide all questions and resolve all disputes which may
arise in connection therewith. Such determinations of the Committee
shall be conclusive and shall bind all parties. The Committee shall
consist of not fewer than two members of the Board, all of whom
shall be "disinterested persons" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act").
IV. Eligibility. Officers and key employees of the Company
or its subsidiaries shall be eligible to receive awards pursuant to
the Plan ("Awards"). To the extent that their eligibility would
cause them to fail to be "disinterested persons" within the meaning
of Rule 16b-3 under the Exchange Act, members of the Committee and
directors who are not employees shall not be eligible to receive
Awards. Receipt of an Award shall not preclude an officer or
employee from receiving additional awards under this Plan or any
other plan of the Company.
V. Shares Subject to Plan. Awards made pursuant to the Plan
shall consist of shares of the Company's Common Stock, par value
$.01 per share (the "Shares"). Shares awarded pursuant to the Plan
shall in the discretion of the Committee be authorized but unissued
Shares or Shares held in treasury. The aggregate number of Shares
which may be issued under this Plan (excluding forfeited and
<PAGE> 2
reissued Shares described below) shall not exceed 250,000, subject
to adjustment by the Committee in the event of a stock dividend,
stock split, combination of Shares, recapitalization, or other
change in the Company's Common Stock. Shares which are forfeited as
provided herein may be reissued pursuant to this Plan.
VI. Terms and Conditions of the Plan.
A. Grant of Awards.
Subject to the express provisions of this Plan, the Committee
shall have the sole authority and discretion (i) to make Awards to
such eligible employees as the Committee shall select at such times
as the Committee shall determine, and (ii) to determine the size of
each such Award and the terms and conditions thereof (including any
provisions relating to forfeiture in addition to those required
herein). In making an Award, the Committee may require a cash or
other payment from the person to whom an Award is made (the
"Recipient"), unless it shall determine that the consideration from
the Recipient to the Company for services
B-1
<PAGE> 3
rendered in excess of the compensation otherwise paid to the
Recipient prior to or at the time of the Award is at least equal to
the par value of the Shares being issued. Each Recipient shall, as
a condition of receiving any Award hereunder, enter into a
Restricted Stock Agreement with the Company setting forth the terms
and conditions of the Award, including forfeiture provisions, in
such form as the Committee shall determine, and a stock certificate
registered in the name of the Recipient shall be issued under the
conditions set forth in Section V.C. below.
B. Terms of Awards.
An Award shall consist of a specified number of Shares, and
shall be subject to such terms and conditions as are set forth in
the Restricted Stock Agreement.
C. Stock Certificates.
Prior to the time specified in the Restricted Stock Agreement
when a portion of an Award ceases to be subject to forfeiture, the
stock certificates representing Shares constituting that portion of
the Award shall bear a legend indicating the restrictions thereon.
Recipients shall receive all dividends, stockholder communications
and proxy materials with regard to the Shares constituting Awards.
A certificate or certificates for forfeited Shares shall be
returned to the Company. A Recipient shall be entitled to any
dividends or other distributions attributable to forfeited Shares
paid after forfeiture of such Shares with respect to a record date
prior to forfeiture.
D. Payment.
On the date specified in the Restricted Stock Agreement that
a portion of an Award ceases to be subject to forfeiture, a
Recipient shall be entitled to delivery of unlegended certificates
representing Shares which have vested and the Shares represented
thereby shall cease to be subject to forfeiture.
VII. Nontransferability of Awards. No Shares, nor any
interest therein, shall be transferable by the Recipient (by sale,
pledge, gift or otherwise) prior to a Vesting Date, otherwise than
by will or by the laws of descent and distribution, and Shares
shall be delivered only to the Recipient or, in the case of his
death, to his estate.
VIII. Tax Matters. The Committee shall require a Recipient
receiving an Award hereunder to reimburse the Company for any taxes
required by any government to be withheld or otherwise deducted and
paid by the Company or any of its subsidiaries in respect of the
issuance of Shares pursuant to the Award. In lieu thereof, the
Company shall have the right to withhold the amount of such taxes
from any other sums due or to become due from the Company to the
Recipient upon such terms and conditions as the Committee shall
<PAGE> 4
prescribe. Subject to the consent of the Committee, a Recipient may
make an irrevocable election to have Shares otherwise issuable
under an Award withheld, tender back to the Company Shares received
pursuant to an Award or deliver to the Company previously acquired
Shares having a fair market value sufficient to satisfy all or part
of the Recipient's estimated tax obligations associated with the
transaction. Such election must be made by a Recipient prior to the
date on which the relevant tax obligation arises. The Committee may
disapprove of any election and may limit, suspend or terminate the
right to make such elections.
IX. Delivery of Shares. Recipients of Shares shall cooperate
to effect delivery thereof in accordance with the terms of all
federal and state laws and regulations as interpreted by counsel
for the Company. Without in any way limiting the generality of the
foregoing, the Company may require that the certificates
representing Shares awarded hereunder bear a legend restricting the
transfer thereof except upon compliance with the conditions of the
Award, as stated herein and in the Restricted Stock Agreement
relating thereto, and the federal and state securities laws; and
that each Recipient, as a condition of such delivery, make such
B-2
<PAGE> 5
representations or agreements, if any, as may be required in the
opinion of such counsel to avoid violation of any laws or
regulations, including without limitation the registration or other
provisions of the Securities Act of 1933.
X. Employment Rights. Neither the adoption of the Plan nor
the granting of Awards shall confer upon any Recipient the right to
continued employment with the Company or its subsidiaries, nor
affect in any way the right of the Company or its subsidiaries to
terminate the employment of any Recipient at any time.
XI. Adjustment, Amendment and Termination.
A. The Committee may adjust the number of Shares awarded to
Recipients and otherwise adjust the Plan to take into consideration
material changes in accounting practices or principles,
recapitalizations, mergers, consolidations, stock splits,
acquisitions or dispositions of stock or property, changes in
fiscal year, or other events, if it is determined by the Committee
that such adjustment is appropriate to avoid distortion in the
operation of the Plan.
B. The Committee may cease making awards hereunder at any
time, but in no event shall an Award be made after December 31,
2005. The Plan may be terminated, amended or modified at any time
by the Board; provided, however, that the Board may not, without
the affirmative vote of the shareholders, (i) increase the maximum
number of Shares which may be issued under the Plan in the
aggregate or to any one Recipient (except in the case of any
adjustment as provided in paragraphs V. and XI.A), (ii) extend
beyond December 31, 2005 the date after which Awards may no longer
be made, or (iii) provide for administration of the Plan other than
by a committee consisting of directors of the Company not eligible
to receive Awards under the Plan.
B-3
<PAGE> 1
Exhibit 11(a)
-------------
Statement re computation of earnings per share.
<PAGE> 2
<TABLE>
EXHIBIT 11(a)
-------------
GROSSMAN'S INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) for
primary and fully diluted
earnings per share $ 1,056 $ 6,454 $(9,616) $(1,373)
======== ======== ======== ========
Weighted average number
of shares outstanding 25,935 25,760 25,857 25,743
Net effect of dilutive
stock options - 374 - -
-------- -------- -------- --------
Total weighted average
shares outstanding and
common stock equivalents
used in primary
calculation of earnings
per share 25,935 26,134 25,857 25,743
Additional dilution from
stock options 91 - - -
-------- -------- -------- --------
Total weighted average
shares outstanding and
common stock equivalents
used in fully diluted
calculation of earnings
per share 26,026 26,134 25,857 25,743
======== ======== ======== ========
Primary earnings (loss)
per share $0.04 $0.25 $(0.37) $(0.05)
======== ======== ======== ========
Fully diluted earnings
(loss) per share $0.04 $0.25 $(0.37) $(0.05)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,838
<SECURITIES> 0
<RECEIVABLES> 25,828
<ALLOWANCES> 3,673
<INVENTORY> 135,111
<CURRENT-ASSETS> 169,465
<PP&E> 153,554
<DEPRECIATION> 56,347
<TOTAL-ASSETS> 269,094
<CURRENT-LIABILITIES> 124,885
<BONDS> 54,472
<COMMON> 261
0
0
<OTHER-SE> 70,442
<TOTAL-LIABILITY-AND-EQUITY> 269,094
<SALES> 193,673
<TOTAL-REVENUES> 193,673
<CGS> 149,358
<TOTAL-COSTS> 149,358
<OTHER-EXPENSES> 41,653
<LOSS-PROVISION> 797
<INTEREST-EXPENSE> 2,130
<INCOME-PRETAX> 1,173
<INCOME-TAX> 117
<INCOME-CONTINUING> 1,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,056
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
