<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended September 30, 1995.
Commission File Number 0-15708
HANDY HARDWARE WHOLESALE, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 74-1381875
(State of incorporation) (I.R.S. Employer
Identification No.)
8300 Tewantin Drive, Houston, Texas 77061
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number: (713) 644-1495
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
----- -----
The number of shares outstanding of each of the Registrant's classes of common
stock as of September 30, 1995, was 7980 shares of Class A Common Stock, $100
par value, and 42,934 shares of Class B Common Stock, $100 par value.
Page #1 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
INDEX
PART I Financial Information Page No.
Item 1. Financial Statements
Condensed Balance Sheet - September 30, 1995
and December 31, 1994....................... 3 - 4
Condensed Statement of Income - Nine Months
Ended September 30, 1995 and 1994........... 5
Condensed Statement of Cash Flows - Nine Months
Ended September 30, 1995 and 1994........... 6 - 7
Notes to Condensed Financial Statements........ 8 - 13
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations......... 14 - 22
PART II Other Information
Items 1. - 6. 23
Signatures 24
Page #2 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,823,868 $ 688,935
Accounts Receivable, net of 11,805,409 7,341,670
subscriptions receivable in
the amount of $63,050 for 1995
and $39,444 for 1994
Inventory 13,274,957 12,980,262
Other Current Assets 388,506 208,536
----------- -----------
$27,292,740 $21,219,403
----------- -----------
PROPERTY, PLANT AND EQUIPMENT (Note 2)
At Cost Less Accumulated Depreciation
of $3,838,170(1995) and $3,179,972 (1994) $ 9,920,598 $ 7,334,774
----------- -----------
OTHER ASSETS
Notes Receivable (Note 3) $ 109,742 $ 75,866
Deferred Compensation Funded 162,762 162,762
Other Noncurrent Assets 0 42,523
----------- -----------
$ 272,504 $ 281,151
----------- -----------
TOTAL ASSETS $37,485,842 $28,835,328
- ----------------------------------------------- =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Mortgage Payable $ 308,204 $ 308,204
Notes Payable-Stock(Note 4) 12,960 24,160
Notes Payable-Capital Lease 106,405 88,381
Accounts Payable - Trade 18,727,632 11,238,594
Other Current Liabilities 965,240 430,988
----------- -----------
$20,120,441 $12,090,327
----------- -----------
NONCURRENT LIABILITIES
Mortgage Payable $ 2,592,153 $ 2,823,307
Notes Payable-Stock(Note 4) 105,810 69,610
Notes Payable-Capital Lease 182,105 157,888
Notes Payable-Vendor 108,013 73,720
Deferred Compensation Payable 162,762 162,762
Deferred Income Taxes Payable
(Note 5) 351,861 292,887
----------- -----------
$ 3,502,704 $ 3,580,174
----------- -----------
TOTAL LIABILITIES $23,623,145 $15,670,501
- ----------------------------------------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page #3 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
STOCKHOLDERS' EQUITY (NOTE 6)
Common Stock, Class A,
authorized 20,000 shares, $100
par value per share, issued
8,420 & 7,790 shares $ 842,000 $ 779,000
Common Stock, Class B,
authorized 100,000 shares, $100
par value per share, issued
44,736 & 40,205 shares 4,473,600 4,020,500
Common Stock, Class B
Subscribed 3,927.92 & 3,898.97
shares 392,792 389,897
Less Subscription Receivable (31,525) (19,722)
Preferred Stock 10% Cumulative,
authorized 100,000 shares, $100
par value per share, issued
47,329 & 42,569 shares 4,732,900 4,256,900
Preferred Stock, Subscribed
3,927.92 & 3,898.97 392,792 389,897
Less Subscription Receivable (31,525) (19,722)
Paid in Surplus 265,271 239,162
------------ ------------
$ 11,036,305 $ 10,035,912
Less: Cost of Treasury Stock
4,171.50 & -0- shares (417,150) -0-
------------ ------------
$ 10,619,155 $ 10,035,912
Retained Earnings 3,243,542 3,128,915
------------ ------------
Total Stockholders' Equity $ 13,862,697 $ 13,164,827
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 37,485,842 $ 28,835,328
- ------------------------------------- ============ ============
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page #4 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Net Sales $ 31,011,952 $ 27,509,319 $ 90,110,220 $ 82,332,877
Sundry Income 139,510 95,949 417,369 390,202
------------ ------------ ------------ ------------
TOTAL INCOME $ 31,151,462 $ 27,605,268 $ 90,527,589 $ 82,723,079
------------ ------------ ------------ ------------
EXPENSE
Net Mat'l. Costs $ 27,991,499 $ 24,536,851 $ 80,442,240 $ 73,215,070
Payroll Costs 1,477,781 1,453,765 4,424,676 3,901,075
Other Operating
Costs 1,531,404 1,461,874 4,680,727 4,675,061
Interest Expense 57,772 61,729 175,528 185,151
------------ ------------ ------------ ------------
TOTAL EXPENSE $ 31,058,456 $ 27,514,219 $ 89,723,171 $ 81,976,357
- ---------------------------------- ------------ ------------ ------------ ------------
INCOME BEFORE
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX $ 93,006 $ 91,049 $ 804,418 $ 746,722
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX (Note 5) (35,843) (35,087) (288,636) (266,229)
- ---------------------------------- ------------ ------------ ------------ ------------
NET INCOME $ 57,163 $ 55,962 $ 515,782 $ 480,493
- ----------------------------------
LESS ACCRUED
DIVIDENDS ON
PREFERRED STOCK $ (100,289) $ (109,664) $ (300,866) $ (328,992)
- --------------------------------- ------------ ------------ ------------ ------------
NET INCOME
APPLICABLE
TO COMMON
STOCKHOLDERS $ (43,126) $ (53,702) $ 214,916 $ 151,501
- --------------------------------- ============ ============ ============ ============
EARNINGS PER
SHARE OF
COMMON STOCK,
CLASS A &
CLASS B (Note 1) $ (0.80) $ (1.08) $ 4.06 $ 3.11
- --------------------------------- ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page #5 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT 30,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITY
Net Income $ 515,782 $ 480,493
----------- -----------
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Depreciation $ 670,123 $ 589,080
Increase in Deferred
Income Tax 58,974 29,006
Changes in Assets and Liabilities
Increase in Accounts Receivable (4,463,739) (3,402,181)
Increase in Notes Receivable (33,876) (7,667)
Increase in Inventory (294,695) (816,012)
(Increase) Decrease in Other Assets (137,447) 7,410
Increase in Notes Payable -Vendor 34,293 8,214
Increase in Accounts Payable 7,489,038 2,654,051
Increase in Other Liabilities 534,252 718,485
----------- -----------
TOTAL ADJUSTMENTS $ 3,856,923 $ (219,614)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 4,372,705 $ 260,879
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $(3,258,272) $ (649,086)
Disposition of Fixed Assets 2,325 1,525
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES $(3,255,947) $ (647,561)
----------- -----------
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page #6 of 24 Pages
<PAGE>
STATEMENT OF CASH FLOWS (UNAUDITED) Cont.
- -----------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in Mortgage Payable $ (231,154) $ (231,154)
Increase in Notes Payable-Stock 25,000 28,550
Increase in Notes Payable-Capital Lease 42,241 66,514
Increase in Subscription Receivable (17,816) (37,323)
Proceeds From Issuance of Stock 1,018,209 1,009,982
Purchase of Treasury Stock (417,150) (374,850)
Dividends Paid (401,155) (438,654)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 18,175 $ 23,065
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 1,134,933 $ (363,617)
CASH & CASH EQUIVALENTS AT
BEGINNING OF PERIOD 688,935 666,387
----------- -----------
CASH & CASH EQUIVALENTS AT END OF
PERIOD $ 1,823,868 $ 302,770
=========== ===========
</TABLE>
Additional Related Disclosures to the Statement of Cash Flows
Interest Expense Paid $ 175,528 $ 185,151
Income Taxes Paid 370,010 277,591
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page #7 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
(1) General Information-
The condensed consolidated financial statements included herein have been
prepared by Handy Hardware Wholesale, Inc. (the "Company"). The financial
statements reflect all adjustments, which were all of a recurring nature,
which are, in the opinion of management, necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). The Company
believes that the disclosures made are adequate to make the information
presented not misleading. The condensed consolidated financial statements
should be read in conjunction with the audited financial statements and
the notes thereto included in the latest Form 10-K Annual Report.
(2) Earnings Per Share -
Earnings per common share (Class A and Class B Combined) are based on the
weighted average number of shares outstanding in each period after giving
effect to the stock issued, stock subscribed, accrued dividends on
preferred stock, and treasury stock as set forth by Accounting Principles
Board Opinion No. 15 as follows:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Calculation of Earnings Per Share
of Common Stock
Net Income $ 57,163 $ 55,962 $ 515,782 $ 480,493
Less: Accrued Dividends
on Preferred Stock (100,289) (109,664) (300,866) (328,992)
--------- --------- --------- ---------
$ (43,126) $ (53,702) $ 214,916 $ 151,501
Weighted Average
Shares of Common Stock
(Class A & Class B)
outstanding 53,985 49,911 52,980 48,787
Income (Loss) Per Share
of Common Stock $ (0.80) $ (1.08) $ 4.06 $ 3.11
========= ========= ========= =========
</TABLE>
Page #8 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(3) Revenue Recognition
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles. Accordingly, revenues and
expenses are accounted for using the accrual basis of accounting. Under
this method of accounting, revenues are recognized when a receivable
exists and expenses are recognized when the liability is incurred.
(4) Accounting for Dividends on Preferred Stock
The Company pays dividends on Preferred Stock during the first quarter of
each fiscal year. Only Shareholders of Preferred Stock on the record date
for the payment of the dividend are entitled to receive dividends.
Dividends are prorated for the portion of the twelve-month period ending
January 31, during which the Preferred Stock was held.
Because the Company is unable to anticipate the amount of the Preferred
Stock dividends, it does not accrue a liability for the payment of those
dividends on its balance sheet. To more properly reflect income, however,
on the Condensed Statement of Income included herein, the Company has
accrued an estimated portion of the dividends to be paid in the first
quarter of 1996 based on the dividends paid in the first quarter of 1995.
When dividends on Preferred Stock are actually paid, there is a reduction
of retained earnings. Retained earnings on the Condensed Balance Sheet for
the nine months ended September 30, 1995, contained herein, therefore, are
net of dividends actually paid during the first quarter of 1995.
NOTE 2 - PROPERTY, PLANT & EQUIPMENT
Property, Plant & Equipment Consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Land $ 2,027,797 $ 2,027,797
Building & Improvements 7,653,880 5,026,886
Furniture, Computer, Warehouse 3,452,843 2,842,862
Transportation Equipment 624,248 617,201
------------ ------------
$ 13,758,768 $ 10,514,746
Less: Accumulated Depreciation (3,838,170) (3,179,972)
------------ ------------
$ 9,920,598 $ 7,334,774
============ ============
</TABLE>
Page #9 of 24 Pages
<PAGE>
NOTE 3 - NOTES RECEIVABLE
<TABLE>
<CAPTION>
CURRENT PORTION NONCURRENT PORTION
-------------------- ---------------------
SEPT. 30, DEC. 31, SEPT. 30, DEC. 31,
DEBTOR COLLATERAL 1995 1994 1995 1994
- ------ ---------- ----- ----- -------- -------
<S> <C> <C> <C> <C> <C>
Alamo Heights Hdwe. - $ -0- $ -0- $ 5,893 $ 5,893
Breed & Co., Inc. - -0- -0- 3,090 -0-
Broadway Hdwe. - -0- -0- 21,333 -0-
Decatur Hdwe. - -0- -0- 2,340 2,340
Doug Ashy Bldg.
Material Inc. - -0- -0- 1,912 -0-
Grandbury Farm
& Ranch - -0- -0- 1,219 1,219
Handyman Hdwe. - -0- -0- 13,l65 13,165
Henckel's Hwy. 6
Ace Home Ctr. - -0- -0- 5,446 5,446
Island Hdwe. - -0- -0- 2,807 2,807
J & B Auto - -0- -0- 2,171 2,171
Jackson Hdwe.
& Supply Co. - -0- -0- 2,297 2,297
Katy Mason Hdwe. - -0- -0- 3,427 3,427
Kilgore Hdwe. - -0- -0- 3,556 3,556
King Feed & Hdwe. - -0- -0- 4,255 4,255
Liberty Auto - -0- -0- 2,880 2,880
Marchand's Inc. - -0- -0- 2,830 2,830
Mardis Auto Parts
& Hdwe. - -0- -0- 2,619 2,619
Max Squires - -0- -0- 1,729 2,146
Mike's Hardware - -0- -0- 1,511 -0-
Overall Lumber - -0- -0- 3,362 3,362
Pitts Hdwe. - -0- -0- 1,772 1,772
RBC Hdwe. - -0- -0- 2,549 2,549
Sawyer Brothers - -0- -0- 4,840 4,840
Sealy Ace Hdwe. - -0- -0- 4,920 4,920
Stifer Lbr. - -0- -0- 3,087 -0-
Trahan Hdwe. - -0- -0- 1,372 1,372
Wagner Hdwe. - -0- -0- 3,360 -0-
----- ----- -------- -------
$ -0- $ -0- $109,742 $75,866
===== ===== ======== =======
</TABLE>
The notes reflected in the above table (except the note due from Max Squires)
reflect amounts due to the Company from its Member-Dealers under a deferred
payment agreement with the Company. Under this agreement, the Company supplies
Member-Dealers with an initial order of General Electric lamps. The payment
for this order is deferred so long as the Member-Dealer continues to purchase
General Electric lamps through the Company. If a Member-Dealer ceases to
purchase lamp inventory or sells or closes his business, then General Electric
bills the Company for the Member-Dealer's initial order and the note becomes
immediately due and payable in full to the Company.
Page #10 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - NOTES PAYABLE - STOCK
<TABLE>
<CAPTION>
CURRENT PORTION NONCURRENT PORTION
-------------------- -------------------
INTEREST MATURITY SEPT. 30, DEC. 31, SEPT. 30, DEC. 31,
PAYEE RATE COLLATERAL DATE 1995 1994 1995 1994
- ------------------ -------- ---------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Alamo Lbr. Co. 6.25% None 2000 $ -0- $ -0- $ 3,000 $ -0-
Beere Hdwe 6% None 1997 -0- -0- 1,100 1,100
C & S Hdwe., Inc. 8% None 1995 -0- 4,200 -0- -0-
C & S Hdwe., Inc. 8% None 1995 -0- 3,800 -0- -0-
Cleveland Hdwe 6% None 1997 -0- -0- 21,760 21,760
Community Hdwe 6.25% None 2000 -0- -0- 6,400 -0-
D.A.D.S
Whsle.,Inc 6.25% None 2000 -0- -0- 5,000 -0-
Dan's Home Ctr 6% None 1999 -0- -0- 8,600 8,600
Gulfway Lbr. Co. 6.25% None 2000 -0- -0- 12,800 -0-
Hawkins Hdwe 6% None 1999 -0- -0- 2,150 2,150
Hometown Hdwe 6% None 1997 -0- -0- 1,000 1,000
J & B Builders 6% None 1998 -0- -0- 7,000 7,000
Ken's Hdwe 6% None 1999 -0- -0- 5,000 5,000
Morrison Lbr 8% None 1995 12,960 12,960 -0- -0-
Patterson Hdwe 6% None 1999 -0- -0- 12,000 12,000
Rockdale Bldg
Ctr 6.25% None 2000 -0- -0- 3,000 -0-
Space City Hdwe 6% None 1999 -0- -0- 9,000 9,000
Terrebonne Hdwe 8% None 1995 -0- 3,200 -0- -0-
Yeager Hdwe 6% None 1999 -0- -0- 2,000 2,000
Yeager Hdwe 7% None 2000 -0- -0- 6,000 -0-
------- ------- -------- -------
$12,960 $24,160 $105,810 $69,610
======= ======= ======== =======
</TABLE>
The five-year, interest bearing notes listed in the above table reflect amounts
due from the Company to former Member-Dealers for the Company's repurchase of
shares of Company stock owned by these former Member-Dealers. According to the
terms of the note, only interest is paid on the outstanding balance of the note
during the first four years. In the fifth year, both interest and principal are
paid.
Principal payments due over the next five years are as follows:
1995 $12,960
1996 $ -0-
1997 $23,860
1998 $ 7,000
1999 $38,750
Page #11 of 24 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - INCOME TAXES
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes,"
effective January 1, 1993, on a prospective basis. The major categories of
deferred income tax provisions are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
Excess of tax over book depreciation $ 1,514,800 $ 1,310,183
Inventory - Ending inventory adjustment
for tax recognition of Sec. 263A
Uniform Capitalization Costs (307,153) (285,988)
Deferred Compensation (172,762) (162,762)
----------- -----------
Total $ 1,034,885 $ 861,433
Statutory Tax Rate 34% 34%
----------- -----------
Cumulative Deferred Income Tax Payable $ 351,861 $ 292,887
=========== ===========
Classified as:
Current Liability $ -0- $ -0-
Noncurrent Liability 351,861 292,887
----------- -----------
$ 351,861 $ 292,887
=========== ===========
</TABLE>
Reconciliation of income taxes on the difference between tax and financial
accounting is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
----------- ----------
<S> <C> <C>
Principal components of income tax expense
Federal:
Current
Income tax paid $ 369,811 $ 212,268
Carry-over of prepayment from
prior year 93,583 65,323
Refund received for overpayment
from prior year (93,377) -0-
----------- ----------
$ 370,017 $ 277,591
Federal Income Tax Receivable (140,355) (40,368)
Carry-over to subsequent year -0- -0-
Income tax for tax reporting
at statutory rate of 34% $ 229,662 $ 237,223
Deferred
Adjustments for financial reporting:
Depreciation $ 69,570 $ 42,390
263A Uniform Capitalization Costs (7,196) (9,984)
Other (3,400) (3,400)
----------- ----------
Provision for federal income tax $ 288,636 $ 266,229
=========== ==========
</TABLE>
Page #12 of 24 Pages
<PAGE>
NOTE 6 - STOCKHOLDERS'S EQUITY
Both classes of Common Stock and Preferred Stock are reported on the
Condensed Balance Sheet including shares that have been issued, but have been
repurchased by the Company as treasury stock. The number of shares of each class
for each of the periods presented that have been issued, the number that have
been repurchased as treasury stock and the number that remain outstanding are as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- ----------
<S> <C> <C>
Common Stock, Class A
Issued 8,420 7,790
Held as Treasury 440 -0-
-------- ------
Outstanding 7,980 7,790
======== ======
Common Stock, Class B
Issued 44,736 40,205
Held as Treasury 1,802 -0-
-------- ------
Outstanding 42,934 40,205
======== ======
Preferred Stock
Issued 47,329 42,569
Held as Treasury 1,929.5 -0-
-------- ------
Outstanding 45,399.5 42,569
======== ======
</TABLE>
Page #13 of 24 Pages
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company continued its steady growth during the third quarter of 1995 while
continuing to meet its goal of providing quality goods to its MemberDealers at
its cost plus a reasonable markup charge. During the third quarter and the first
nine months of 1995, total sales were 12.7 percent higher and 9.4 percent higher
than during the same periods in 1994. This increase was generated from all of
the Company's selling territories. More specifically, all seven sales
territories showed increases over last year.
Sales The following table compares the Company's sales during the first
nine months of 1995 to sales during the same period of 1994, by sales territory:
<TABLE>
<CAPTION>
Nine Months Nine Months
1995 1994
------------------------------ -----------------------
% Increase
in Sales
From Nine % of % of
Month Total Total
Sales Territory Sales 1994 Sales Sales Sales
- --------------- ----------- ---- ------ ----------- ------
<S> <C> <C> <C> <C> <C>
Houston Area $23,435,837 8% 26.4% $21,616,162 26.5%
Victoria, San Antonio,
Corpus Christi & Rio Grande
Valley Area* 17,084,539 2% 19.3% 16,807,991 20.6%
North Texas, Dallas
& Fort Worth Area 14,451,939 8% 16.3% 13,419,704 16.4%
Austin, Brenham & Central
Texas Area 8,854,646 9% 10.0% 8,114,430 9.9%
Southern Louisiana Area 9,727,655 22% 11.0% 7,961,551 9.8%
Baton Rouge, New Orleans,
Mississippi, Alabama &
Florida 7,986,018 11% 9.0% 7,222,461 8.9%
Oklahoma & Arkansas Area 7,054,131 9% 8.0% 6,461,724 7.9%
----------- ----- ----------- -----
Totals: $88,594,765(1) 100.0% $81,604,023(1) 100.0%
=========== ====== =========== =====
</TABLE>
- ----------------------------------
* Includes sales to Mexico dealers
(1) Total does not include sales to dealers who were no longer Member-Dealers
at the end of period.
Page #14 of 24 Pages
<PAGE>
In the Houston territory, independent hardware stores have regained some of the
market share previously lost to retail warehouses. This has resulted from
independent dealers developing new strategies to compete with the aggressive
marketing programs of the retail warehouses. This is evidenced by the much
larger increase in sales in the Houston territory in the first nine months of
1995 over the same period of 1994 (8%), as compared to 1994 over 1993 (2%) and
1993 over 1992 (4%). Additionally, a significant increase of 22 percent in sales
in the Southern Louisiana territory during the first nine months of 1995 over
the first nine months of 1994 has resulted from increased marketing efforts by
Company employees in that territory.
The recent expansion of retail warehouses to the North Texas/ Dallas/ Fort Worth
and Baton Rouge/ New Orleans/ East Gulf Coast territories, however, has begun to
erode the market share of independent hardware stores in those territories.
Increases in sales in these territories are not as large as in recent years. For
the first nine months of 1995 sales in the North Texas/ Dallas/ Fort Worth/
territory increased 8 percent over the same 1994 period, as compared to a 13
percent increase in both 1994 over 1993 and 1993 over 1992. In the Baton Rouge/
New Orleans/ East Gulf Coast territory sales increased 11 percent, 20 percent
and 17 percent, respectively, in the nine months ended September 30, 1995, 1994,
and 1993. Further, the devaluation of the Mexican peso is continuing to pressure
sales in the Victoria/ San Antonio/ Corpus Christi/ Valley territory. In that
territory, sales for the first nine months of 1995 increased 2 percent over the
same 1994 period as compared to 12 percent for 1994 over 1993 and 11 percent for
1993 over 1992. The Company believes that an increase in promotional sales
activities and inventory available for orders, plus low-cost dealer buying
programs, and a general strengthening of the economy in the Company's sales
territories were key elements of the Company's sales growth.
Net Material Costs and Rebates Net material costs for the third quarter and
the first nine months of 1995 were $27,991,499 and $80,442,240 respectively,
compared to $24,536,851 and $73,215,070, respectively, for the same periods in
1994. The increase of 9.9 percent in net material costs for the first nine
months of 1995 closely parallels the increase of 9.4 percent in sales for the
same period. Net material costs as a percentage of sales remained relatively
stable: 89.3 percent in the first nine months of 1995 and 88.9 percent for the
same period in 1994. Net material costs
Page #15 of 24 Pages
<PAGE>
for the third quarter of 1995 increased 14.1 percent which is greater than the
12.7 percent increase in sales. Net material costs as a percentage of sales were
90.2 percent in the third quarter of 1995 as compared to 89.2 percent for the
same period in 1994. The slightly higher net material cost as a percentage of
sales for the first nine months and the third quarter of 1995 over the same
period in 1994 is the result of a change in accounting procedures. In 1995,
damaged inventory was recognized monthly. Prior to 1995, this adjustment was not
recognized until the Company took a physical inventory, always in the latter
part of the fourth quarter.
Despite this accounting change, the stability of net material costs as a
percentage of sales is maintained by the relative stability of purchase
discounts and factory rebates as a percentage of net material costs. Both were
taken by the Company as a credit against material costs. Purchase discount
income during the first nine months of 1995 was $1,737,018 (2.2% of material
costs) as compared to $1,579,793 (2.2% of material costs) during the same 1994
period. Factory rebate income during the same two periods was $2,818,394 (3.5%
of material costs) and $2,474,542 (3.4% of material costs), respectively.
Payroll Costs Payroll costs during the third quarter and nine months ended
September 30, 1995, increased to $1,477,781 and $4,424,676 respectively, from
$1,453,765 and $3,901,075 for the same 1994 period. The 1.7 percent third
quarter increase and the 13.4 percent nine-month increase in 1995 payroll costs
resulted primarily from regular salary increases for employees. In addition, the
payroll increase for the nine-month period ended September 30, 1995, over the
same period for 1994 was the result of a 19.7 percent increase in overtime
payroll associated with the Company's warehouse expansion program, most of which
occurred during the first quarter of 1995. Overtime payroll in both the third
quarter of 1995 and 1994 was approximately $149,000. Due to the lack of adequate
storage space for inventory, the Company was forced to lease additional
warehouse space in an offsite facility. The lack of proximity of the additional
space to the offices of the Company resulted in an increase in payroll costs.
Payroll costs for the third quarter of 1995 constituted 4.8 percent of both net
sales and total expenses, compared to 5.3 percent for the same quarter in 1994.
Payroll costs accounted for 4.9 percent of both sales and total expenses for the
first nine months of 1995 as compared to 4.7 percent for the same 1994 period.
Other Operating Costs During the third quarter in 1995, other operating costs
increased 4.7 percent compared to the same 1994 period. There was virtually no
increase in other operating costs when comparing the nine-month period ended
September 30, 1995, and
Page #16 of 24 Pages
<PAGE>
1994. Other operating costs for the third quarter of 1995 were $1,531,404 (4.9%
of sales) as compared to $1,461,874 (5.3% of sales) for the same 1994 period.
For the nine-month period ending September 30, 1995, other operating costs were
$4,680,727 (5.2% of sales) as compared to $4,675,061 of these costs for the same
period of 1994 (5.7% of sales). The flat costs have been due primarily to a
decline in insurance premiums and a decline in accruals for property tax offset
by a $55,000 increase in accruals for employee bonuses and retirement
contributions. More specifically, workers' compensation insurance premiums
declined 35 percent. Although property taxes are anticipated to increase in
1995, the accrual for these taxes is being allocated over a longer period of
time in 1995 than in 1994.
Net Income and Earnings Per Share While net sales for the third quarter of
1995 increased $3,502,633 (12.7 percent) and net material costs increased
$3,454,648 (14.1 percent), gross margin increased 1.6 percent. As a result,
pretax net income increased 2.1 percent, from $91,049 for the third quarter of
1994 to $93,006 in the same 1995 period, while after-tax net income increased
the same 2.1 percent. Pretax net income increased 7.7 percent from $746,722 for
the first nine months of 1994 to $804,418, during the same 1995 period.
After-tax net income for the first nine months of 1995 increased 7.3 percent
over the same period in 1994.
An increased percentage of drop shipment sales sold in September at the
Company's cost with no markup, resulting from an earlier fall trade show in
1995, put additional pressure on the Company's ability to generate gross margin
commensurate with the increase in sales. Drop shipments for the third quarter of
1995 and 1994 accounted for $10,848,482 (35 percent of total sales) and
$8,242,467 (30 percent of total sales) respectively, as compared to $29,986,141
(33.3 percent of total sales) and $25,267,139 (30.7 percent of total sales) for
the first nine months of 1995 and 1994, respectively. As a result, gross margin
during the 1995 third quarter increased 1.6 percent over the same period in 1994
and gross margin during the 1995 nine-month period ending September 30, 1995,
increased 6 percent from the same 1994 period. Further, gross margin as a
percentage of sales was 9.7 percent in the third 1995 quarter as compared to
10.8 percent during the same 1994 period. For the first nine months of 1995 and
1994, gross margin as a percentage of sales was 10.7 percent and 11.1 percent,
respectively. The Company anticipates that as a result of the fall trade show
being held earlier in the third quarter of 1995, sales and trade payables for
the fourth quarter of 1995 will be less than sales and trade payables for the
same period in 1994.
The increases in the Company's earning per share in the third
Page #17 of 24 Pages
<PAGE>
quarter and first nine months of 1995 as compared to the same periods of 1994
were due to a decline in the 1995 dividend paid on preferred stock. Dividends
accrued in the third quarter of 1995 represented a smaller percentage of 1995
net income than dividends accrued in the third quarter of 1994 and resulted in a
____ percent and a 30.5 percent increase, respectively, in earnings per share
for the third quarter and first nine months of 1995.
Quarter-to-quarter variations in the Company's earnings per share reflect (in
addition to the factors discussed above) the Company's pricing of its
merchandise in order to deliver the lowest cost buying program for
Member-Dealers (who own all of the stock of the Company), although this often
results in lower net income for the Company. Because these trends benefit the
individual stockholders of the Company who purchase its merchandise, there is no
demand from shareholders that the Company focus greater attention upon earnings
per share.
Seasonality The Company's quarterly net income traditionally has been subject
to two primary factors. First and third quarter earnings have been negatively
affected by the increased level of direct sales (with no markup) resulting from
the Company's semiannual trade show always held in the first and third quarters.
Secondly, sales during the fourth quarter have traditionally been lower, as
hardware sales are slowest during the winter months preceding ordering for
significant sales for the spring. However, net income has varied substantially
from year to year in the fourth quarter as a result of corrections to inventory
made at year-end.
FINANCIAL CONDITION AND LIQUIDITY
During the third quarter of 1995, the expansion of the Company's warehouse
facility continued to have the largest impact on the financial condition of the
Company. The project, which began in the fourth quarter of 1994, was completed
in August 1995. Of the approximately $3,200,000 total budget for the project,
approximately $2,852,100 (89%) has been expended to date, with $2,533,971
expended in the first nine months of 1995. With the remaining $346,581 due to be
paid on the completed project, the warehouse expansion has been successfully
completed just under budget. Although the Company secured a $3,500,000 revolving
line of credit for the expansion project, funds expended to date have been from
cash flow in an effort to avoid interest expense as long as possible. For more
information regarding the warehouse expansion project, see "Capital
Expenditures" below.
Page #18 of 24 Pages
<PAGE>
Cash Flow During the period ending September 30, 1995, Handy Hardware
generated adequate amounts of cash while continuing to make significant
investments in inventory, warehouse and data processing equipment, delivery
equipment, and software to better meet the needs of its Member-Dealers.
There was a significant net increase of $1,134,933 in the Company's cash and
cash equivalents in the first nine months of 1995, compared to the same period
in 1994. The improvement in the Company's cash position was due to the fact that
the Company's operating activities provided net cash of $4,372,705 in the first
nine months of 1995 as compared to $260,879 in the same period of 1994. The
increase in cash flow from operating activities in the first nine months of 1995
as compared to the first nine months of 1994 was principally attributable to:
(i) a $7,489,038 increase in accounts payable in 1995 as compared to a
$2,654,051 increase in accounts payable for the same period in 1994 plus (ii) a
smaller increase in inventory ($294,695 in 1995 vs. $816,012 in 1994) offset by
an increase of $4,463,739 in accounts receivable in 1995 as compared to an
increase in accounts receivable of $3,402,181 for the same 1994 period and an
increase in 1995 in other assets, in particular, prepaid expenses of $137,447 as
compared to a decrease of $7,410 in 1994.
These factors were mostly the result of a timing difference in the recognition
of payables generated from the Company's fall trade show which was held two
weeks earlier in 1995 and also maintaining strict control of inventory during
the warehouse expansion.
The Company expended a net amount of $3,255,947 to purchase fixed assets
($2,280,414 of which was expended on the warehouse expansion project including
warehouse equipment) in the first nine months of 1995, which is significantly
more than the $647,561 expended in the same period of 1994. In the first nine
months of 1995, $18,175 of cash was provided by financing activities, which was
21.2 percent lower than the $23,065 provided in the first nine months of 1994.
The cash provided by financing activities in the 1995 period was increased by
(i) an increase in the proceeds from the issuance of stock of $8,227 over the
same period in 1994, which resulted in a positive cash flow of $1,018,209 (ii) a
smaller preferred stock dividend payment in the first quarter of 1995 ($401,155)
than in the 1994 period ($438,654), because of a decrease in the dividend rate
from 12 percent to 10 percent, and (iii) a smaller increase in subscription
receivables ($17,816 vs. $37,323). The cash provided by financing activities in
the first nine months of 1995 was decreased from the same period in 1994 by a
smaller increase in notes payable for capital leases ($42,241 vs. $66,514) and
an increase in the repurchase of Company stock ($417,150 vs. $374,850).
Page #19 of 24 Pages
<PAGE>
Working Capital The Company's continuing ability to generate cash to meet its
needs for funding its activities is highlighted by three key liquidity measures
shown in the following table:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31, SEPT. 30,
1995 1994 1994
---------- ---------- ----------
<S> <C> <C> <C>
Working Capital $7,172,299 $9,129,076 $8,997,649
Current Ratio 1.4 to 1 1.8 to 1 1.7 to 1
(Current Assets to
Current Liabilities)
Long-term Debt as percentage
of Capitalization 25.3 27.2 28.8
</TABLE>
Working capital has been principally generated from the sale of stock and
capital provided from operations. The major component of the Company's long-term
debt is bank indebtedness resulting from the Company's financing of the original
construction of its warehouse facility in 1986.
Texas Commerce Bank, Houston, Texas, currently extends the Company a $2,000,000
unsecured revolving line of credit. The Company is not currently utilizing this
line.
During the remainder of 1995 Handy Hardware expects to further expand its
existing customer base in Oklahoma and Arkansas. The Company will finance this
expansion with receipts from the sale of stock to new and current Member-Dealers
and with increased revenues from sales to Member-Dealers in Oklahoma and
Arkansas. The Company anticipates that this expansion will have a beneficial
effect on its ability to generate cash to meet its funding needs.
In the first nine months of 1995, the Company maintained a 92.5 percent service
level (the measure of the Company's ability to meet Member-Dealers' orders out
of current stock) as compared to a service level of 93.0 percent for the same
1994 period. This decrease in service level is the result of an inadequate
amount of storage for inventory which should be rectified for the remainder of
the year now that the warehouse expansion project is completed. Inventory
turnover was 5.9 times during the first nine months of both 1995 and 1994. This
high rate of inventory turnover, which is higher than the national industry
average, is primarily the result of tight control of the product mix, increase
in depth of inventory, continued high service level, and increased warehouse
sales.
The Company has an outstanding mortgage note payable to Texas
Page #20 of 24 Pages
<PAGE>
Commerce Bank with a principal balance as of September 30, 1995, of
approximately $2,900,357. The note is a result of a refinancing that occurred in
1993 and has a five-year fixed rate of interest of 7.2 percent. Although the
note is payable in full on March 31, 1998, the Company anticipates refinancing
the principal balance at that time.
The Company originally secured financing for the warehouse facility expansion
project in the form of a revolving line of credit through NationsBank,
evidenced by a Credit Agreement and Promissory Note which provide for a maximum
principal amount of $3,500,000 and which maximum principal amount declines
beginning April 1, 1996, based on a 20-year amortization to a maximum of
$3,150,000 on March 31, 1998. The revolving line of credit has three interest
rate options: the London Inter-Bank Euro Rate ("LIBOR rate") plus 150 basis
points, NationsBank's floating prime rate, and a treasury-based rate plus 180
basis points. The loan is secured by a second lien on the approximately 20 acres
of land owned by the Company on which Texas Commerce Bank has a first priority
lien. Only interest is payable during the first eighteen months of the loan;
thereafter interest and principal payments will be due based on a 20-year
amortization. Although the note is payable in full on March 31, 1998, the
Company anticipates refinancing any principal balance at that time, if needed.
It may not be necessary for the Company to use all or a significant portion of
this $3,500,000 line of credit if strong cash flow continues and the Company is
able to fund most of the warehouse expansion costs out of cash flow. Although
the Company has made very little use of either of its two lines of credit, these
have been maintained without payment of any commitment fee while providing
sources of liquidity if needed.
Capital Expenditures In the nine month periods ending September 30, 1995, and
September 30, 1994, the Company's investment in capital items was $3,255,947 and
$647,561 (net of dispositions), respectively. Approximately 80.4 percent
($2,618,068) of the amount expended in the first nine months of 1995 was used to
finance the costs of the 96,715 square foot addition to the Company's existing
warehouse facility. Thus far $2,936,197 has been funded from cash flow for the
expansion project including the additional equipment needed to make the
expansion functional. If needed, all or a portion of these expenditures will be
reimbursed from the proceeds of the loan discussed above or through the
utilization of the Company's unsecured line of credit with Texas Commerce Bank.
Further, 14.6 percent ($476,420) of the amount expended in the first nine months
of 1995 was invested in upgrading the warehouse equipment (including the
equipment used in the new addition.)
Page #21 of 24 Pages
<PAGE>
Significant outlays of cash or cash equivalents foreseen for the remainder of
the year include the payment of accounts payable generated by the fall trade
show and the remaining cost of the 96,715 square foot addition to the existing
warehouse facility ($346,581), both of which will be paid from the Company's
cash flow or with proceeds from the unsecured line of credit or loan discussed
above. Additional cash outlays anticipated for the remainder of the year
include: the purchase of data processing equipment ($35,000), building
renovation ($41,000) and warehouse equipment ($65,000).
The Company's cash position of $1,823,868 at September 30, 1995, is anticipated
to be sufficient to fund all planned capital expenditures although, at some
future period, it may be necessary to utilize all or part of the financing
options available to the Company to replace funds expended from cash flow for
the warehouse expansion project.
Page #22 of 24 Pages
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits
(3) Restated Articles of Incorporation of Handy Hardware
Wholesale, Inc., as amended on July 10, 1995.
(b) Reports on Form 8-K
None.
Page #23 of 24 Pages
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY HARDWARE WHOLESALE, INC.
s/ James D. Tipton
------------------------------
JAMES D. TIPTON
President
(Chief Executive Officer)
s/ Tina S. Kirbie
-------------------------------
TINA S. KIRBIE
Senior Vice President, Finance
Secretary and Treasurer
(Chief Financial and Accounting Officer)
Date November 13, 1995
___________________________
Page #24 of 24 Pages
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
HANDY HARDWARE WHOLESALE, INC.
This instrument accurately copies the Articles of Incorporation of HANDY
HARDWARE WHOLESALE, INC., a Texas corporation, and all amendments thereto that
are in effect to date, and contains no change in any provision thereof except as
permitted by Texas Business Corporation Act article 4.07.B. These Restated
Articles of Incorporation supersede the original Articles of Incorporation and
all amendments thereto.
ARTICLE ONE
The name of the corporation is HANDY HARDWARE WHOLESALE, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purposes for which the corporation is organized are:
(a) To purchase, sell, exchange and deal in goods, wares and
merchandise, agricultural and farm products, hardware equipment and
supplies as a wholesale distributor, to represent any manufacturer as an
agent to distribute such goods, wares and merchandise as may be deemed
appropriate and to do all things necessary in the carrying on of a business
for such purposes.
(b) To purchase or otherwise acquire, hold, sell, exchange, pledge,
hypothecate, deal in and dispose of goods, wares and merchandise of all
kinds. To buy, sell and deal in personal property, real property and
services subject to Part Four of the Texas Miscellaneous Corporation Laws
Act.
(c) To acquire by purchase, lease or otherwise, and to improve and
develop buildings and other real property; to erect buildings, private or
public, of all kinds; to sell or lease said buildings and/or other real
property or any part thereof; to buy, sell, mortgage, exchange, lease or
hold for investment or otherwise, use and operate real estate of all kinds,
improved or unimproved, and any right or interest therein; all of the
foregoing subject, however, to the provisions of Part Four, Texas
Miscellaneous Corporation Laws Act, Article 1302-4.01 through 4.07,
Vernon's Annotated Texas Statutes.
(d) To do everything necessary, proper, advisable, or convenient for
the accomplishment of any of the purposes stated above; provided however,
that nothing herein shall be construed to authorize the corporation to
carry on any business, exercise any power, or do any act which the
corporation may not under the Texas Business Corporation Act lawfully carry
on, exercise or do, nor shall the corporation have banking
<PAGE>
privileges; nor shall any service be performed by the corporation or any
act performed by the corporation unless all legally required licenses
and/or permits have been obtained prior thereto.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority
to issue is 210,000, consisting of:
10,000 shares of Class A Common Stock, $100.00 par value each;
100,000 shares of Class B Common Stock, $100.00 par value each; and
100,000 shares of Preferred Stock, $100.00 par value each.
The terms on which these three classes of shares are created and the
particular character of the preference of the preferred shares and the
conditions and limitations applying thereto and to the common shares are as
follows:
(a) The holders of the preferred shares shall be entitled to receive,
when and as declared by the Board of Directors of this corporation,
cumulative dividends thereon from either of the following dates: (1) March
1, 1982, for the Preferred Shares which are issued and outstanding as of
March 1, 1982 or (2) the date of issuance, for Preferred Shares which are
issued subsequently to March 1, 1982, those cumulative dividends to be at a
rate fixed by the Board of Directors, which shall be not less than seven
per cent (7%) per annum and no more than twenty (20%) percent per annum,
payable out of the earned surplus of this corporation annually on the 1st
day of March of each year before any dividend shall be paid or set apart
for the common shares. Dividends on the preferred shares shall be
cumulative, so that if in any year dividends amounting to at least seven
per cent (7%) shall not have been paid on such shares, any deficiency of
less than seven percent (7%) per annum shall be paid before any dividends
shall be declared or paid upon or set apart for the Common Shares.
(b) This corporation may at any time, or from time to time as shall
be permitted under the laws of the State of Texas, redeem the whole or any
part of its preferred shares on any annual dividend date by paying therefor
in cash ONE HUNDRED AND NO/100 DOLLARS ($100.00) per share, and all accrued
unpaid dividends thereon at the date fixed for such redemption. At least
50 days' notice of every such redemption shall be given to the holders of
record of the shares to be redeemed, in such manner as shall be provided in
the by-laws of this corporation, or from time to time by resolution of its
Board of Directors. If at any time this corporation shall determine to
redeem less than the whole amount of its preferred shares then outstanding,
the particular shares to be redeemed shall be ascertained in such manner as
shall be provided in its by-laws, or from time to time by resolution of its
Board of Directors. Except as herein otherwise specified, the Board of
Directors shall have full discretion to prescribe and regulate from time to
time the procedure to be followed in and all details concerning the
redemption of the preferred shares.
2
<PAGE>
(c) Out of any earned surplus of the corporation remaining after the
payment of full dividends on the preferred shares for all previous dividend
periods and after full dividends thereon for the then current annual
dividend period shall have been declared and paid in full or provided for,
then, and not otherwise, dividends may be declared upon the common shares.
(d) In the event of any liquidation, dissolution, or winding up of
the corporation, the holders of the preferred shares shall be entitled to
be paid in full the par value thereof, and all accrued unpaid dividends
thereon, before any sum shall be paid to, or any assets distributed among,
the holders of the common shares, but after payment to the holders of the
preferred shares of the amounts payable to them as hereinabove provided,
the remaining assets and funds of the corporation shall be paid to and
distributed among the holders of the common shares.
(e) All common stock outstanding as of October 26, 1971, is hereby
reclassified as Class A Common Stock. Only the Class A Common Stock shall
have voting rights. The holders of Class A Common Stock shall be entitled
to one vote for each and every share of Class A Common Stock standing in
his, her or its name on each matter submitted to a vote at any meeting of
stockholders. No holder of Class B Common Stock or Preferred Stock shall
be entitled to cast any vote on account of ownership of any such stock.
(f) Except as hereinabove provided with respect to voting rights,
neither of the two classes of common stock shall be entitled to any
preference or priority over the other in the event of the dissolution,
liquidation, or winding up of the corporation and in such event, as it may
be, the shares of Class A Common Stock and Class B Common Stock shall be
entitled in the same amounts per share without preference or priority of
one class over the other.
(g) No shares of Class A Common Stock shall be issued or sold except
in such units and under such circumstances as will assure that every holder
of Class A Common Stock shall own an identical number of said shares. The
number of shares of Class A Common Stock which shall comprise a unit of
ownership shall be fixed from time to time by the Board of Directors or in
the By-Laws. No shares of Class B Common Stock shall be issued except to
persons who are, at the time of such issuance, holders of shares of Class A
Common Stock.
(h) Except as provided in paragraph (g) of this Article IV, no holder
of any class of stock of the corporation shall have any pre-emptive or
preferential right to subscribe to or purchase any shares of stock of the
corporation or share or securities of any kind, including, but not limited
to, any notes, debentures, bonds or other securities either convertible
into or evidencing the right to purchase any shares of stock of the
corporation.
3
<PAGE>
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of two thousand dollars
($2,000.00) consisting of money, labor done or property actually received, which
sum is at least equal to ten per cent (10%) of the total capitalization of said
corporation and not less than $1,000.00
ARTICLE SIX
The address of its registered office is 8300 Tewantin Drive, Houston, Texas
77061 and the name of its registered agent at such address is James D. Tipton.
ARTICLE SEVEN
The number of directors currently constituting the board of directors is
ten (10) and the names and addresses of the persons who currently serve as
directors are:
James D. Tipton Houston, Texas
Norman J. Bering, II Houston, Texas
Weldon D. Bailey Houston, Texas
Truman Breed Austin, Texas
Virgil H. Cox Houston, Texas
Robert L. Eilers Mercedes, Texas
Fred E. Held Dallas, Texas
H. Keith Rutledge Brenham, Texas
James C. Tennison Jacksonville, Texas
Joe A. Wiatt, Jr. Houston, Texas
EXECUTED by the undersigned officer of the corporation as of the 21st day
of October, 1992.
/s/ James D. Tipton
----------------------------------------
JAMES D. TIPTON, President of Handy
Hardware Wholesale, Inc.
4
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
HANDY HARDWARE WHOLESALE, INC.
Pursuant to the provisions of Article 4.02 of the Texas Business
Corporation Act, Handy Hardware Wholesale, Inc., a Texas corporation, hereby
adopts the following Articles of Amendment to its Restated Articles of
Incorporation, as filed on October 22, 1992.
ARTICLE ONE
The name of the corporation is HANDY HARDWARE WHOLESALE, INC.
ARTICLE TWO
The introductory paragraph of Article Four of the Restated Articles of
Incorporation is amended to read in full as follows:
The aggregate number of shares which the corporation shall have
authority to issue is 220,000, consisting of:
20,000 shares of Class A Common Stock, $100.00 par value each;
100,000 shares of Class B Common Stock, $100.00 par value each; and
100,000 shares of Preferred Stock, $100.00 par value each.
ARTICLE THREE
The amendments set out above were adopted by the shareholders of the
corporation on May 10, 1995. As of March 21, 1995, the record date of such
meeting, the issued and outstanding shares of capital stock of the corporation
were as follows:
Class A Common Stock 7,860 shares
Class B Common Stock 40,971 shares
Preferred Stock 43,345 shares
Only the shares of Class A Common Stock have voting rights and were entitled to
vote on the amendments. No shares of the corporation were entitled to be voted
on the amendment as a class or series. The shares of Class A Common Stock were
voted as follows on the amendments:
In favor: 5,490 shares
Against: 160 shares
Abstain: 640 shares
<PAGE>
Dated: July 5, 1995
HANDY HARDWARE WHOLESALE, INC.
/s/ James D. Tipton
----------------------------------------
JAMES D. TIPTON, President
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information
extracted from the filer's operations as of
September 30, 1995,and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,823,868
<SECURITIES> 0
<RECEIVABLES> 11,805,409<F1>
<ALLOWANCES> 0
<INVENTORY> 13,274,957
<CURRENT-ASSETS> 27,292,740
<PP&E> 9,920,598
<DEPRECIATION> 3,838,170
<TOTAL-ASSETS> 37,485,842
<CURRENT-LIABILITIES> 20,120,441
<BONDS> 2,592,153<F2>
<COMMON> 5,452,667<F3>
0
4,901,217<F4>
<OTHER-SE> 3,508,813<F5>
<TOTAL-LIABILITY-AND-EQUITY> 37,485,842
<SALES> 90,110,220
<TOTAL-REVENUES> 90,527,589
<CGS> 80,442,240
<TOTAL-COSTS> 80,442,240
<OTHER-EXPENSES> 4,680,727<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175,528
<INCOME-PRETAX> 804,418
<INCOME-TAX> 288,636
<INCOME-CONTINUING> 515,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 515,782
<EPS-PRIMARY> 4.06
<EPS-DILUTED> 4.06
<FN>
<F1>Accounts Receivable and Current Notes Receivable.
<F2>Long-term mortgage payable.
<F3>Class A Common Stock and Class B Common Stock less
Treasury Stock and Subscription for Class B Common Stock
less Subscription Receivables.
<F4>Preferred Stock and Subscriptions less Subscription
Receivables and Treasury Stock.
<F5>Paid in Surplus and Retained Earnings.
<F6>Other Operating Costs. (Does not include payroll
costs of 4,424,676.)
</FN>
</TABLE>
