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 June 30, 1999.
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 June 30, 1999, was 9,120 shares of Class A Common Stock, $100 par
value, and 56,739 shares of Class B Common Stock, $100 par value.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
INDEX
PART I Financial Information Page No.
Item 1. Financial Statements
Condensed Balance Sheet June 30, 1999
and December 31, 1998 .......................... 3-4
Condensed Statement of Earnings - Three Months &
Six Months Ended June 30, 1999 and 1998......... 5
Condensed Statement of Cash Flows - Six Months
Ended June 30, 1999 and 1998................... 6
Notes to Condensed Financial Statements.............. 7-13
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations............ 14-19
Item 3. Quantitative & Qualitative Disclosures About
Market Risk.................................... 19
PART II Other Information
Item 1 Legal Proceedings.............................. 20
Items 2-3 None
Items 4 Submission of Matters to a Vote of
Security Holders..................................... 20
Items 5-6 None
Signatures 21
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,410,732 $ 1,113,122
Accounts Receivable, net of
subscriptions receivable in
the amount of $66,924 for 1999
and $51,735 for 1998 11,937,568 10,335,445
Notes Receivable (Note 3) 11,511 10,174
Inventory 14,921,072 14,106,010
Other Current Assets 259,584 371,322
Prepaid Income Tax -0- 105,884
----------- -----------
$ 28,540,467 $26,041,957
----------- -----------
PROPERTY, PLANT AND EQUIPMENT (Note 2)
At Cost Less Accumulated Depreciation
of $4,991,915(1999) and $4,517,166 (1998) $10,464,461 $ 9,516,835
----------- -----------
OTHER ASSETS
Notes Receivable (Note 3) $ 133,310 $ 130,362
Deferred Compensation Funded 353,687 329,084
Other Noncurrent Assets -0- 23,959
----------- -----------
$ 486,997 $ 483,405
----------- -----------
TOTAL ASSETS $39,491,925 $36,042,197
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable-Line of Credit $ 445,000 $ -0-
Notes Payable-Stock (Note 4) 51,350 26,750
Notes Payable-Capital Lease 48,656 58,308
Accounts Payable - Trade 16,751,043 14,912,983
Other Current Liabilities 1,118,574 896,390
----------- -----------
$18,414,623 $15,894,431
----------- -----------
NONCURRENT LIABILITIES
Note Payable-Line of Credit $ 445,000 $ -0-
Notes Payable-Stock (Note 4) 822,800 521,280
Notes Payable-Capital Lease 52,883 66,864
Notes Payable-Vendor 121,127 114,707
Deferred Compensation Payable 353,687 329,084
Deferred Income Taxes Payable (Note 5) 245,188 248,033
----------- -----------
$ 2,040,685 $ 1,279,968
----------- -----------
TOTAL LIABILITIES $20,455,308 $17,174,399
=========== ===========
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
STOCKHOLDERS' EQUITY
Common Stock, Class A,
authorized 20,000 shares, $100
par value per share, issued
9,340 & 8,930 shares $ 934,000 $ 893,000
Common Stock, Class B,
authorized 100,000 shares, $100
par value per share, issued
59,486 & 55,667 shares 5,948,600 5,566,700
Common Stock, Class B
Subscribed 4,274.67 & 4,309.98
shares 427,467 430,998
Less Subscription Receivable (33,462) (25,867)
Preferred Stock 10% Cumulative,
authorized 100,000 shares, $100
par value per share, issued
62,245.75 & 58,246.50 shares 6,224,575 5,824,650
Preferred Stock, Subscribed
4,274.67 & 4,309.98 shares 427,467 430,998
Less Subscription Receivable (33,462) (25,868)
Paid in Surplus 345,675 339,238
----------- -----------
$14,240,860 $13,433,849
Less: Cost of Treasury Stock
5,885.25 & -0- shares 588,525 -0-
----------- -----------
$13,652,335 $13,433,849
Retained Earnings exclusive of other
comprehensive earnings (Note 7) 5,303,699 5,368,885
Retained Earnings applicable to other
comprehensive earnings (Note 7) 80,583 65,064
----------- -----------
5,384,282 5,433,949
---------- -----------
Total Stockholders' Equity $19,036,617 $18,867,798
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $39,491,925 $36,042,197
=========== ===========
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------------- -----------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net Sales $ 37,604,020 $ 35,351,671 $ 81,063,817 $ 73,056,024
Sundry Income 201,898 205,586 677,616 753,905
------------- ------------- ------------ ------------
TOTAL REVENUES $ 37,805,918 $ 35,557,257 $ 81,741,433 $ 73,809,929
------------- ------------ ------------ ------------
EXPENSE
Net Mat'l. Costs $ 33,417,040 $ 31,402,517 $ 73,110,516 $ 65,524,643
Payroll Costs 1,776,319 1,704,982 3,548,542 3,336,075
Other Operating Costs 2,185,199 2,178,754 4,287,751 4,075,739
Interest Expense 13,767 7,034 32,770 12,689
------------- ------------ ------------ ------------
TOTAL EXPENSE $ 37,392,325 $ 35,293,287 $ 80,979,579 $ 72,949,146
------------- ------------ ------------ ------------
NET EARNINGS BEFORE
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX $ 413,593 $ 263,970 $ 761,854 $ 860,783
------------- ----------- ------------ ------------
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX (Note 5) (147,907) (97,040) (272,694) (305,054)
------------- ----------- ------------ ------------
NET EARNINGS $ 265,686 $ 166,930 $ 489,160 $ 555,729
OTHER COMPREHENSIVE EARNINGS
Unrealized Gain on
Securities (Note 7) $ 22,450 $ -0- $ 23,513 $ -0-
Provision for Federal
Income Tax (Note 5) (7,633) -0- (7,994) -0-
------------ ----------- ------------ ------------
Other Comprehensive
Earnings Net of Tax $ 14,817 $ -0- $ 15,519 $ -0-
------------- ----------- ------------ ------------
TOTAL COMPREHENSIVE
EARNINGS $ 280,503 $ 166,930 $ 504,679 $ 555,729
------------- ----------- ------------ ------------
LESS ACCRUED
DIVIDENDS ON
PREFERRED STOCK (138,586) (170,592) (277,173) (341,184)
------------- ----------- ------------ ------------
NET EARNINGS
APPLICABLE
TO COMMON
STOCKHOLDERS $ 141,917 $ (3,662) $ 227,506 $ 214,545
============ =========== ============ ============
NET EARNINGS PER
SHARE OF
COMMON STOCK,
CLASS A &
CLASS B (Note 1) $ 2.01 $ (0.05) $ 3.27 $ 3.24
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITY
Net Earnings $ 489,160 $ 555,729
----------- -----------
Adjustments to Reconcile Net
Earnings to Net Cash Provided by
Operating Activities:
Depreciation $ 494,117 $ 425,189
Increase (Decrease) in Deferred
Income Tax (2,845) 3,982
Unrealized gain (increase in fair
market value of securities) 15,519 -
Changes in Assets and Liabilities
Increase in Accounts Receivable $(1,602,123) $ (822,024)
Increase in Notes Receivable (4,285) (8,038)
Increase in Deferred Compensation
Investment (24,603) -
Increase in Inventory (815,062) (379,952)
Decrease in Other Assets 241,581 90,938
Increase in Note Payable-Vendor 6,420 8,038
Increase in Accounts Payable 1,838,060 630,716
Increase in Other Liabilities 222,184 314,843
Decrease in Federal Income
Taxes Payable -0- (45,253)
Increase in Deferred Compensation
Payable 24,603 -
----------- -----------
TOTAL ADJUSTMENTS $ 393,566 $ 218,439
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 882,726 $ 774,168
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $(1,441,743) $ (321,014)
Disposition of Fixed Assets -0- -0-
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES $(1,441,743) $ (321,014)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase Note Payable - Line of Credit $ 890,000 $ -0-
Increase in Notes Payable - Stock 326,120 214,160
Decrease in Notes Payable - Capital Lease (23,633) (28,855)
Increase in Subscription Receivable (15,189) (20,581)
Proceeds From Issuance of Stock 822,200 713,388
Purchase of Treasury Stock (588,525) (379,600)
Dividends Paid (554,346) (682,368)
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES $ 856,627 $ (183,856)
----------- ------------
NET INCREASE
IN CASH & CASH EQUIVALENTS $ 297,610 $ 269,298
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,113,122 1,123,842
----------- -----------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 1,410,732 $ 1,393,140
=========== ===========
ADDITIONAL RELATED DISCLOSURES TO THE STATEMENT OF CASH FLOWS
Interest Expense Paid $ 32,770 $ 12,689
Income Taxes Paid 295,979 315,693
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
(1) Description of Business:
Handy Hardware Wholesale, Inc., ("Handy"), was incorporated as a Texas
corporation on January 6, 1961. Its principal executive offices and
warehouse are located at 8300 Tewantin Drive, Houston, Texas 77061.
Handy is owned entirely by its member-dealers and former
member-dealers.
Handy sells to its member-dealers products primarily for retail
hardware, lumber and home center stores. In addition, Handy offers
advertising and other services to member-dealers.
(2) General Information:
The condensed consolidated financial statements included herein have
been prepared by Handy. 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). Handy 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.
(3) Cash:
For purposes of the statement of cash flows, Handy considers all highly
liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
(4) Inventories:
Inventories are valued at the lower of cost or market method,
determined by the first in, first out method, with proper adjustment
having been made for any old or obsolete merchandise.
(5) Earnings Per Share:
Net 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Calculation of Net Earnings Per Share
of Common Stock
Net Earnings $ 280,503 $166,930 $504,679 $555,729
Less: Accrued Dividends
on Preferred Stock (138,586) (170,592) (277,173) (341,184)
--------- -------- -------- --------
$ 141,917 $ (3,662) $227,506 $214,545
Weighted Average
Shares of Common Stock
(Class A & Class B)
outstanding 70,447 66,657 69,677 66,296
Net Earnings Per Share
of Common Stock $ 2.01 $ (0.05) $ 3.27 $ 3.24
========= ========= ======= ========
</TABLE>
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(6) 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 and receivables are recognized when
merchandise is shipped or services are rendered and expenses are
recognized when the liability is incurred.
(7) Accounting for Dividends on Preferred Stock:
Handy pays dividends on Preferred Stock during the first quarter of each
fiscal year. Only holders of Preferred Stock on January 31 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 Handy is unable to anticipate the amount of the Preferred Stock
dividends, Handy does not accrue a liability for the payment of those
dividends on its balance sheet. To more properly reflect net earnings,
however, on the Condensed Statement of Earnings included herein, Handy
shows an estimated portion of the dividends to be paid in the first
quarter of 2000 based on the dividends paid in the first quarter of 1999.
When dividends on Preferred Stock are actually paid, there is a reduction
of retained earnings. Retained earnings on the Condensed Balance Sheet for
the six months ended June 30, 1999, contained herein, therefore, are net
of dividends actually paid during the first quarter of 1999 in the amount
of $554,346.
NOTE 2 - PROPERTY, PLANT & EQUIPMENT
Property, Plant & Equipment Consists of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
Land $ 3,201,569 $ 2,027,797
Building & Improvements 7,871,224 7,859,100
Furniture, Computer, Warehouse 3,956,189 3,721,832
Transportation Equipment 427,394 425,272
----------- -----------
$15,456,376 $14,034,001
Less: Accumulated Depreciation (4,991,915) (4,517,166)
----------- -----------
$10,464,461 $ 9,516,835
=========== ===========
</TABLE>
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - NOTES RECEIVABLE
Notes receivable reflect amounts due to Handy from its member-dealers under a
deferred payment agreement and an installment sale agreement.
Under the deferred payment agreement, Handy 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 Handy. If a member-dealer ceases to purchase lamp inventory or sells or
closes his business, then General Electric bills Handy for the member-dealer's
initial order and the note becomes immediately due and payable in full to Handy.
Under the installment sale agreement, Handy sells computer hardware to
member-dealers, the purchase price of which is due and payable by member-dealers
to Handy in thirty-six monthly installments of principal and interest.
Notes Receivable are classified as follows:
<TABLE>
<CAPTION>
CURRENT PORTION NONCURRENT PORTION
------------------ ---------------------------
JUNE 30, DEC. 31, JUNE 30, DEC. 31,
------- ------- ------- -------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Deferred Agreement $ -0- $ -0- $121,127 $114,707
Installment Sale Agreement 11,511 10,174 12,183 15,655
------- ------- -------- --------
$11,511 $10,174 $133,310 $130,362
======= ======= ======== ========
</TABLE>
NOTE 4 - NOTES PAYABLE STOCK
The five year, interest bearing notes payable - stock reflect amounts due from
Handy to former member-dealers for the repurchase of shares of Handy stock owned
by these former member-dealers. According to the terms of the notes, only
interest is paid on the outstanding balance of the notes during the first four
years. In the fifth year, both interest and principal are paid. Interest rates
range from 5.25% to 7.0%.
Notes Payable - Stock are classified as follows:
<TABLE>
<CAPTION>
CURRENT PORTION NONCURRENT PORTION
------------------ ---------------------------
JUNE 30, DEC. 31, JUNE 30, DEC. 31,
------- ------- ------- -------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
$51,350 $26,750 $822,800 $521,280
</TABLE>
Principal payments due over the next five years are as follows:
1999 $ 51,350
2000 74,000
2001 57,000
2002 32,800
2003 324,280
--------
$539,430
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - INCOME TAXES
Handy adopted FASB Statement No. 109, "Accounting for Income Taxes," effective
January 1, 1993. The adoption of this standard changed our method of accounting
for income taxes from the deferred method to the liability method.
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
-------------- ------------
<S> <C> <C>
Excess of tax over book depreciation $ 1,269,126 $ 1,270,884
Allowance for Bad Debt (7,195) (7,195)
Inventory - Ending inventory adjustment
for tax recognition of Sec. 263A
Uniform Capitalization Costs (293,618) (292,008)
Deferred Compensation (247,173) (242,173)
------------ ------------
Total $ 721,140 $ 729,508
Statutory Tax Rate 34% 34%
------------ ------------
Cumulative Deferred Income Tax Payable $ 245,188 $ 248,033
============ ============
Classified as:
Current Liability $ -0- $ -0-
Noncurrent Liability 245,188 248,033
------------ ------------
$ 245,188 $ 248,033
============ ============
</TABLE>
Reconciliation of income taxes on the difference between tax and financial
accounting is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
-------------- ------------
<S> <C> <C>
Principal Components of Income Tax Expense
Federal:
Current
Income tax paid $ 190,095 $ 315,693
Carry-over of prepayment
from prior year 105,884 -0-
Refund received for overpayment
from prior year -0- -0-
------------ -----------
$ 295,979 $ 315,693
Federal Income Tax Payable (12,446) (14,621)
Carry-over to subsequent year -0- -0-
------------ -----------
Income tax for tax reporting
at statutory rate of 34% $ 283,533 $ 301,072
Deferred
Adjustments for financial reporting:
Depreciation (598) (1,109)
263A Uniform Capitalization Costs (547) 6,724
Other (1,700) (1,633)
------------ -----------
Provision for federal income tax $ 280,688 $ 305,054
============ ===========
</TABLE>
Handy is not exempt from income tax except for municipal bond interest
earned in the amount of $549.
Handy's not classified as a nonexempt cooperative under the provisions of
the Internal Revenue Code and is not entitled to deduct preferred dividends in
determining its taxable income.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - STOCKHOLDERS' EQUITY
(1) Terms of Capital Stock
The holders of Class A Common Stock are entitled to one vote for each
share held of record on each matter submitted to a vote of
shareholders. Holders of Class A Common Stock must be engaged in the
retail sale of goods and merchandise, and may not be issued or retain
more than ten shares of Class A Common Stock at any time. The holders
of Class B Common Stock are not entitled to vote on matters submitted
to a vote of shareholders except in those circumstances of matters
which would change their rights as shareholders.
The holders of Preferred Stock are entitled to cumulative dividends.
Handy's Articles of Incorporation require the Board of Directors to
declare a dividend each year of not less than 7 percent nor more than
20 percent of the par value ($100.00 per share) of the shares of
Preferred Stock. The Preferred Stock has a liquidation value of $100
per share. The holders of Preferred Stock are not entitled to vote on
matters submitted to a vote of shareholders except in matters which
would change their rights as shareholders. The shares of Preferred
Stock are not convertible, but are subject to redemption (at the
option of Handy) by vote of Handy's Board of Directors, in exchange
for $100 per share and all accrued unpaid dividends.
(2) Capitalization
To become a member-dealer, an independent hardware dealer must enter
into a Subscription Agreement with Handy for the purchase of ten
shares of Handy Class A Common Stock, $100 par value per share, or ten
shares of Preferred Stock for any additional store, with an additional
agreement to purchase a minimum number of shares of Class B Common
Stock, $100 par value per share, and Preferred Stock, $100 par value
per share. Class B Common Stock and Preferred Stock are purchased
pursuant to a formula based upon total purchases of merchandise by the
member-dealer from Handy, which determines the "Desired Stock
Ownership" for each member-dealer. The minimum Desired Stock Ownership
is $10,000.
Each member-dealer receives from Handy a semimonthly statement of
Total Purchases made during the covered billing period and an
additional charge ("Purchase Funds") of 2 percent of warehouse
purchases until the member- dealer's Desired Stock Ownership is
attained. The Subscription Agreement entitles Handy to collect 2
percent of total purchases. Since May 1, 1983, however, the Board of
Directors has determined to collect 2 percent of warehouse purchases
only. On a monthly basis, Handy reviews the amount of unexpended
Purchase Funds being held for each member-dealer. If a member- dealer
has unexpended Purchase Funds of at least $2000, Handy applies such
funds to the purchase of ten shares of Class B Common Stock and ten
shares of Preferred Stock at $100 per share.
(3) Transferability
Holders of Class A Common Stock may not sell those shares to a third
party without first offering to sell them back to Handy. There are no
specific restrictions on the transfer of Class B Common or Preferred
Stock.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
(4) Membership Termination
Following written request, Handy will present to the Board of
Directors a member-dealer's desire to have his stock repurchased and
the member-dealer's Contract terminated. According to the current
procedures established by the Board of Directors, a member-dealer's
stock may be repurchased according to either of two options.
Option I The member-dealer's Class A Common Stock is repurchased at
$100 per share. Any funds remaining in the member-dealer's
Purchase Fund Account will be returned at the dollar value
of such account. Twenty percent or $3000, whichever is
greater, of the total value of the Class B Common and
Preferred Stock will be repurchased. The remaining value of
the Class B Common and Preferred Stock is converted to a
five-year interest bearing note. During the first four
years, this note only pays interest. In the fifth year, both
interest and principal are paid. The interest rate is
determined by Handy's Board of Directors at the same time
they approve the repurchase.
Option II Same as Option I except that the remaining value of the
Class B Common and Preferred Stock is discounted 15 percent
and reimbursed to the member-dealer immediately at the time
of repurchase.
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - COMPREHENSIVE EARNINGS
The following disclosures include those required by FASB 115 for financial
statements beginning after December 15, 1997.
1. Deferred compensation funded in the amount of $353,687 on the Balance
Sheet as a non-current asset at June 30, 1999, includes equity securities
classified as investments available for sale in the amount of $307,332 at
fair market value. The $307,332 includes $122,094 unrealized gain on
securities resulting from the increase in fair market value.
2. Changes in Equity securities
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Cumulative
---------------- ----------
<S> <C> <C>
Beginning Balance-January 1, 1999 $ 279,644 $ -0-
Purchases 3,085 101,975
Dividends, interest and capital gains 1,090 83,263
Unrealized gains on securities
resulting from increase in
fair market value 23,513 122,094
----------- ----------
Balance-June 30, 1999 $ 307,332 $ 307,332
=========== ==========
</TABLE>
3. Components of Comprehensive Earnings
<TABLE>
<CAPTION>
Total Other Comprehensive Net Earnings Exclusive
Comprehensive Earnings-Unrealized Of Other
Earnings Gains on Securities Comprehensive Earnings
------------- ------------------- ----------------------
<S> <C> <C> <C>
Net Earnings Before
Provision for
Federal Income Tax $ 808,880 $ 23,513 $ 785,367
Provision for
Federal Income Tax (288,682) (7,994) (280,688)
------------ ---------- ----------
Net Earnings $ 520,198 $ 15,519 $ 504,679
============ ========== ==========
</TABLE>
4. Components of Comprehensive Earnings
<TABLE>
<CAPTION>
Retained Earnings Retained Earnings
Applicable to Other Exclusive of Other
Total Comprehensive Earnings Comprehensive Earnings
----- ---------------------- ----------------------
<S> <C> <C> <C>
Balance-January 1, 1999 $5,433,949 $ 65,064 $5,368,885
Add: Net earnings year
Ended June 30, 1999 504,679 15,519 489,160
Deduct: Cash Dividends on
Preferred Stock 554,346 -0- 554,346
---------- ---------- ----------
Balance-June 30, 1999 $5,384,282 $ 80,583 $5,303,699
========== ========== ==========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
We maintained our steady growth in the second quarter of 1999 while
continuing to meet our goal of providing quality goods to our member-dealers at
our cost plus a reasonable mark-up charge. Net sales in the second quarter of
1999 increased 6.4% ($2,252,349) over sales during the same period in 1998,
compared to a 17.3% growth rate ($5,201,624) in the second quarter of 1998 over
1997's second quarter.
Net sales during the first six months of 1999 increased $8,007,793 compared
to the same period in 1998. However, sales in the second quarter of 1999 were
not as robust as in the first quarter of the year, contributing only 28% of the
net sales increase. The softening sales can be attributed to a decline in oil
prices which impacts overall business conditions in our selling territory and
labor and material shortages in the building industry. For the first six months
of 1999, net sales increased 11.0% over 1998, as compared to a 15.5% increase
for the same period in 1998 over 1997.
Net Sales. Strong economic growth, continuing strength in consumer
confidence and a positive response to our lumber and building materials program
have resulted in higher rates of sales growth during the first six months of
1999 than experienced in previous periods, evidenced by increased sales in all
but one territory. Through the building materials program we pass along to
member-dealers discounts we receive for early payment to building material
vendors. In addition member-dealers receive longer payment terms from us than if
they were to order such materials from vendors directly. These discounts in the
traditionally low margin area of building materials have caused member-dealers
to significantly increase their orders of these materials through us. Orders of
building materials account for $3,415,541 (42.7%) of the increase in net sales
between the 1998 and 1999 first six month periods.
The following table summarizes the Company's sales during 1998 and 1999 by
sales territory:
<TABLE>
<CAPTION>
First Six Months 1999 First Six Months 1998
----------------------------------------------- --------------------------
% Increase
in Sales
From First % of % of
Six Months Total Total
Sales Territory Sales of 1998 Sales Sales Sales
- --------------- ----- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Houston Area $21,105,239 9% 26.2% $19,427,149 26.5%
Victoria, San Antonio,
Corpus Christ &
Rio Grande Valley Area* 15,359,082 13% 19.0% 13,611,210 18.5%
North Texas, Dallas
& Fort Worth Area 8,703,961 -12% 10.8% 9,899,200 13.5%
Austin, Brenham &
Central Texas Area 10,104,374 18% 12.5% 8,542,344 11.6%
Southern Louisiana Area 10,504,939 20% 13.0% 8,759,685 11.9%
Baton Rouge, New Orleans,
Mississippi, Alabama &
Florida Area 6,922,992 14% 8.6% 6,069,377 8.3%
Arkansas Area 2,861,445 3% 3.5% 2,779,272 3.8%
Oklahoma Area 5,164,377 19% 6.4% 4,329,013 5.9%
---------- ---- ------ ----------- ------
Totals: $80,726,409 (1) 100.0% $73,417,250 100.0%
=========== ====== =========== -----
<FN>
- ------------------------------------------------------
* Includes sales to Mexico and Central America member-dealers.
(1) Total does not include sales to dealers who were no longer member-dealers at
end of period.
</FN>
</TABLE>
<PAGE>
The North Texas, Dallas and Fort Worth area continues to feel the pressure
from retail warehouses in their market which continues to erode the market share
of independent hardware stores. In addition, this territory lost one significant
member- dealer who generated $1,450,084 in sales during the first six months of
1998.
Net Material Costs and Rebates. Net material costs for the second quarter
and first six months of 1999 were $33,417,040 and $73,110,516, respectively,
compared to $31,402,517 and $65,524,643, respectively, for the same periods in
1998. Net material costs for the second quarter and first six months of 1999
increased 6.4 percent and 11.6 percent, respectively, over the same periods in
1998. Net material costs were 88.9 percent of sales in the second quarter of
1999 as compared to 88.8 percent of sales for the same period in 1998, while for
the first six months of 1999 and 1998 net materials costs were 90.2 percent and
89.7 percent of sales, respectively. These slight increases resulted from an
increase in the number of inventory items sold at a lower gross margin. Sales
with a markup ranging from 0 to 4 percent increased to $17,276,592 in the second
quarter of 1999 from $14,385,181 during the second quarter of 1998, while these
sales for the first six months of 1999 and 1998 were $39,591,104 and
$32,485,442, respectively. Further, in order to promote sales of lumber and
building materials, we are foregoing our manufacturer's purchase discount by
passing on the discount to our member-dealers. The negative impact of these
factors on net material costs were offset by the positive effect of an increase
in factory rebates which we took as a credit against material costs in both the
second quarters and first halves of 1999 and 1998. Second quarter rebates
increased $100,622 or 9.1 percent (1999 - $1,202,764 vs. 1998 - $1,102,142)
while rebates for the first six months increased $200,220 or 8.6 percent (1999 -
$2,531,595 vs. 1998 - $2,331,375).
Payroll Costs. With unemployment at a three decade low, the U.S. labor
market has seldom been tighter. The increases in payroll costs for the second
quarter and first six months of 1999 resulted from salary increases needed to
attract or retain high-quality employees. As a result, payroll costs for the
second quarter and first six months of 1999 increased 4.2 percent and 6.4
percent, respectively, over the same periods in 1998. However, these increases
in payroll costs remained much lower than the percentage increases in net sales
for the same periods. Despite the pressure on wages, payroll costs as a
percentage of both total expenses and net sales remained fairly constant.
Payroll costs for the second quarter of 1999 constituted 4.7 percent of
both net sales and total expenses, compared to 4.8 percent for the same quarter
of 1998. Payroll costs were 4.4 percent of both net sales and total expenses for
the first six months of 1999, as compared to 4.6 percent for the same period in
1998. The relative stability in payroll costs has been a result of a continuing
effort to maintain employee productivity.
Other Operating Costs. During the second quarter and for the first six
months of 1999 other operating costs remained fairly constant, increasing only
0.3 percent and 5.2 percent, respectively, compared to the same periods of 1998.
Other operating costs were 5.8% of total expenses in the 2nd quarter of 1999 as
compared to 6.2% of total expenses for the second quarter of 1998. For the six
month period ending June 30, 1999, other operating costs were 5.3% of total
expenses as compared to 5.6% of total expenses during the same period in 1998.
In both comparisons, other operating costs have increased by a smaller
percentage than the percentage growth in net sales and total expenses.
Over 71.3% of the 1999 first six months increase in other operating costs
resulted from an increase in general and administrative expenses (an increase of
$151,266 over 1998 levels), while another 25.6% of the increase is the result of
warehouse expense increases (an increase of $54,242 over 1998 levels).
Net Earnings and Earnings Per Share. Net sales for the second quarter of
1999 increased $2,252,349 (6.4%)over net sales for the second quarter of 1998,
net material costs increased $2,014,523 (6.4%), while gross margin increased
$237,826 (6.0%). This increase in gross margin, offset by only slight increases
in payroll costs, other operating costs and interest expenses, resulted in a
56.7 percent increase in pretax net earnings, from $263,970 in the second
quarter of 1999 to $413,593 in the same 1999 period. After tax net earnings for
the second quarter of 1999 increased 68 percent over after tax net earnings for
the same 1998 period.
<PAGE>
Net sales for the first six months of 1999 increased $8,007,793 (11.0%) and
net material costs increased $7,585,873 (11.6%) from levels in the first six
months in 1998, resulting in gross margin increasing by $421,920 (5.6%). This
increase in gross margin was offset by more substantial increases in payroll
costs (6.4%) and in other operating costs (5.2%). Thus pretax net earnings
decreased 11.5 percent, from $860,783 for the first six months of 1998 to
$761,854 in the same 1999 period, while after-tax net earnings decreased by 9.2
percent. Net earnings in the first six months of 1999 decreased primarily due to
an increase in sales with markups of only 0 to 4 percent, with fewer sales
occurring with markups of 5 percent or greater, as previously discussed.
Our net earnings per share increased significantly in the second quarter of
1999, resulting in a slight increase in earnings per share in the first six
months of 1999 as compared to the same period of 1998. This increase was due to
an increase in net earnings in the second quarter, as well as a decline in the
dividends accrued as a percentage of 1999 net earnings. In the first six months
of 1999 total comprehensive earnings declined, while dividends accrued
represented a smaller percentage of 1999 net earnings than dividends accrued in
the first six months of 1998 (54.9% in 1999 as compared to 61.4% in 1998).
Quarter-to-quarter variations in our earnings per share (in addition to the
factors discussed above) reflect our commitment to lower pricing of our
merchandise in order to deliver the lowest cost buying program to our
member-dealers, (who own all of our stock), although this often results in lower
net earnings. Because virtually all of our stockholders are also member-dealers,
these trends benefit our individual stockholders who purchase our merchandise.
Therefore, there is no demand from shareholders that we focus greater
attention upon earnings per share.
Seasonality
Our quarterly net earnings traditionally have 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 our semiannual
trade show always held in the first and third quarters. Secondly, sales during
the fourth quarter traditionally have been lower, as hardware sales are slowest
during winter months preceding ordering for significant sales in the spring.
However, net earnings have varied substantially from year to year in the fourth
quarter as a result of corrections to inventory made at year-end.
MATERIAL CHANGES IN FINANCIAL CONDITION
Financial Condition and Liquidity. During the period ending June 30, 1999,
we maintained our financial condition and ability to generate adequate amounts
of cash while continuing to make significant investments in land, inventory,
warehouse and computer equipment, software and delivery equipment to better meet
the needs of our member-dealers. Net cash provided by our operating activities
may vary substantially from year to year. These variations result from (i) the
timing of promotional activities such as our spring trade show, (ii) payment
terms available to us from our suppliers, (iii) payment terms offered by us to
our member-dealers, and (iv) the state of the regional economy.
During the first six months of 1999 there was an increase of $297,610 in
our cash and cash equivalents as compared to an increase of $269,298 in the same
1998 period. Cash flow from operating activities increased during the first six
months of 1999 to $882,726, as compared to $774,168 in 1998. This increase in
cash flow was principally attributable to an increase in accounts payable as
compared to the same 1998 period. This increase in cash flow was offset by a
larger increase in accounts receivable in the first six months of 1999 than in
the first six months of 1998 and a greater growth of inventory as compared to
the same 1998 period.
Accounts payable increased $1,838,060 during the first six months of 1999
as compared to an increase of $630,716 during the same period in 1998. This
increase was due to extended dating terms for payment offered to us by
suppliers.
<PAGE>
Inventory had 35,524 stockkeeping units in the period ending June 30, 1999,
which were maintained in response to member-dealer demand for more breadth of
inventory. In addition, in the first six months of 1999, accounts receivable
increased $1,602,123 as compared to $822,024 during the first six months of
1998. This was mainly attributable to the strong economy, which gave
member-dealers confidence to make significant purchases at the spring trade show
and to extended dating terms for payment offered to member-dealers at this trade
show.
Net cash used for investing activities increased significantly in the first
six months of 1999. This increase was almost entirely due to the purchase of
thirty acres of land to be used for future warehouse expansion.
Net cash provided by financing activities was $856,627 in the period ending
June 30, 1999 as compared to net cash used for financing activities of $183,856
during the same period in 1998. This difference was principally attributable to
borrowing on our line of credit to meet short term cash requirements, as well as
a decline in dividends paid from $682,368 in the first quarter of 1998 to
$554,346 in the first quarter of 1999. In addition, notes payable to former
member-dealers increased $111,960 in the period ending June 30, 1999 as compared
to the same 1998 period as well as a $108,812 increase in the proceeds from
issuance of stock to member-dealers during this same period. These increases in
cash provided by financing activities was offset by a $208,925 increase in the
repurchase of our stock in the first six months of 1999 as compared to the same
1998 period.
In August 1996, Chase Bank of Texas ("the Bank") extended to us an
unsecured $7.5 million revolving line of credit at an interest rate of prime
minus one and one-half percent (1.5%) or, at our option, the London Interbank
Offering Rate ("LIBOR") plus one and one-quarter percent (1.25%). The maturity
date on the line of credit is April 30, 2001. The line of credit may be used
from time to time for working capital and other financing needs. On June 30,
1999, there was an outstanding balance on the line of credit of $890,000.
Our continuing ability to generate cash to fund our activities is
highlighted by the relative constancy of our three key liquidity measures -
working capital, current ratio (current assets to current liabilities) and
long-term debt as a percentage of capitalization, as shown in the following
table:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1999 1998 1998
---- ---- ----
<S> <C> <C> <C>
Working Capital $10,125,844 $10,147,526 $9,655,296
Current Ratio 1.5 to 1 1.6 to 1 1.6 to 1
Long-term Debt as Percentage
of Capitalization 10.7% 6.8% 6.7%
</TABLE>
During the remainder of 1999, we expect to further expand our existing
customer base in Oklahoma and Arkansas. We will finance this expansion with
receipts from the sale of stock to new and current member-dealers and with
anticipated increased revenues from sales to member-dealers in Oklahoma and
Arkansas. We expect that this expansion will have a beneficial effect on its
ability to generate cash to meet our funding needs.
In the first six months of 1999, we maintained a 95.0 percent service level
(the measure of our ability to meet member-dealers' orders out of current stock)
as compared to a service level of 95.3 percent for the same period of 1998.
Inventory turnover was 6.0 times during the first six months of 1999 and 6.1
times for the first six months of 1998. This rate of inventory turnover, which
is higher than the national industry average of 3.8, is primarily the result of
tight control of the product mix, increase in depth of inventory and continued
high service level.
<PAGE>
Capital Resources
In the six month periods ending June 30, 1999, and June 30, 1998, we
invested $1,441,743 and $321,014, respectively in capital assets (net of
dispositions). Approximately 79.3 percent ($1,143,772) of the amount expended in
the first six months of 1999 was used to complete the purchase of thirty acres
of land for future warehouse expansion and 9.45 percent ($136,304) was used to
purchase computer hardware and software. By comparison, of the total amount
expended in the first six months of 1998, $154,761 was used to purchase
warehouse equipment, $64,555 was for building improvements (including plans for
a future warehouse expansion), $53,221 was used to upgrade our fleet of
automobiles, $41,848 was used to purchase computer hardware and software and
$6,629 was used to purchase office furniture and equipment.
In January, 1999 we purchased from Catellus Development Corporation 29.96
acres of land located across the street from our current warehouse facility. The
purchase price for the land was $0.90 per square foot ($1,174,774). The land
will be used to relocate our retention pond, provide additional parking
facilities and allow for future expansion of our current warehouse facility. The
purchase was funded by drawing down on our line of credit.
For the remainder of the year, we anticipate significant outlays of cash
equivalents for payment of accounts payable and increased inventory purchases.
Additional cash outlays include: approximately $809,000 to relocate our current
retention pond, construct additional parking and outside storage as well as
prepare the site and begin construction on an expansion to our current warehouse
facility, approximately $25,000 to purchase warehouse equipment, $35,000 to
upgrade computer equipment, $35,000 to purchase office equipment and $45,000 to
improve our automobile fleet.
Our cash position of $1,410,732 at June 30, 1999, is anticipated to be
sufficient to fund all planned capital expenditures, although some third party
financing, including draws on our line of credit may be needed to fund all or a
portion of the expansion project.
Year 2000
The Year 2000 issue relates to the problems associated with the inability
of computer programs, computer hardware and other equipment to properly
calculate, store and use data after December 31, 1999. Hardware and software
systems which only use a two-digit convention for keeping track of dates would
improperly interpret the Year 2000 as the Year 1900. Errors of this type can
result in system failures, miscalculations and the disruption of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar business functions. Although the extent of
the problem is not yet known, the ramification of Year 2000 failures are
expected to have a global impact. In response to the Year 2000 issues, we have
developed a strategic plan divided into the following phases: assessment of
in-house systems and review of vendor representations, in-house testing and
implementation of remedial actions, third party communications and development
of a contingency plan, as needed.
The first phase of our Year 2000 assessment program began in 1997 at which
time we out-sourced the upgrade of all accounting software. In addition, we
upgraded our midrange hardware platform and midrange software. To date, all such
software has been upgraded and installed, and the licensor of our software
systems has certified that such software is programmed to properly address Year
2000 scenarios. In addition, our department of Management Information System
(the "MIS department") is continuing to evaluate our information and
non-information technology systems. This review is enabling the MIS department
to identify in-house software and non-information technology and equipment that
is date sensitive and should be forwarded for testing.
After upgrading our accounting software and midrange hardware platform, we
began conducting our in-house testing phase. In 1998 all upgraded midrange
software, recently purchased software and other operating systems identified for
testing were presented to our MIS department. The MIS department completed the
testing of our accounting and midrange software during the first quarter of
1999. We did not encounter any material system disruption as a result of the
Year 2000 during testing, and therefore, we expect that the performance of such
systems will not be substantially disrupted when addressing the Year 2000.
Testing of warehouse management software began during the second quarter of
1999.
<PAGE>
During the initial review and testing phase, we determined to take certain
actions to reduce the effects of Year 2000 related disruptions on our
activities. Beginning with upgrading the accounting software in 1997, we are
continuing to take preventive measures to address issues which are identified by
our MIS department during testing. Implementation of remedial actions relating
to our warehouse management software will commence during the third quarter of
1999, and will be followed by performance remedial actions in the third quarter
and fourth quarters. Remedial actions may include upgrading or replacing
software or other technology before the end of 1999.
In 1998 we began a third phase, which consists of informal communications
with our member-dealers, third party suppliers, service providers and
distributors, to evaluate the status of their Year 2000 readiness programs. We
have received and are relying on Year 2000 readiness reports and statements
periodically issued by third parties, such as telephone service carriers,
insurance carriers, financial services providers and various vendors and
licensors of our software programs. In addition, our MIS department responds to
all third party requests for information concerning the status of our Year 2000
review. All such third party communications are expected to be completed during
the third quarter of 1999. While there can be no guarantee that the systems of
other companies on which we rely will be timely converted or that the conversion
will be compatible with our systems, based on the representations received to
date, we do not foresee material disruptions in our business as a result of Year
2000 issues involving third parties.
Although we cannot predict with certainty all effects of Year 2000 issues,
we have developed contingency plans to the extent necessary to continue business
functions in the event an unforeseen material disruption occurs. We believe that
such event, at most, will require employees to manually complete otherwise
automated tasks or calculations, such as receiving, filling and shipping
customer orders. We do not expect that any additional training would be required
to perform these tasks on a manual basis, although performing such tasks may
require additional time or personnel. We have determined an alternate method for
member-dealers to forward purchase orders via telecopier, having received
favorable Year 2000 readiness reports from all third parties involved in
providing our telecopier service. In addition, we are continuing to identify, to
the extent possible, other vendors, purchasers or third party contractors to
provide services in order to maintain normal business operations.
Our core business activities consist of purchasing and warehousing hardware
inventory which is sold and shipped to member-dealers. We maintain a computer
system through which member-dealers transmit orders for goods directly to us. In
addition, our software catalogs inventory, receives purchase orders, performs
accounting functions and tracks shipping of inventory. Because our "mission
critical" equipment consists mainly of computer software and hardware, the most
reasonably likely worst case Year 2000 scenario for us would involve either a
failure of operating systems to properly address Year 2000 scenarios or a
prolonged disruption of power sources on which these systems rely. Such events
could result in a business interruption that could materially affect our
operations, liquidity or capital resources. We are continuing to test operating
systems to predict and reduce the effects of Year 2000 disruptions. However, no
economically feasible contingency plan has been developed for maintaining a
separate and duplicate secondary power supply for every major component of our
core equipment. We are relying upon representations by these third parties that
no material disruption of services is anticipated as a result of the Year 2000.
As of June 30, 1999, the cost for implementing our Year 2000 program is
$387,000. We will continue to utilize both internal and external resources to
anticipate and address the effects of Year 2000 scenarios.
QUANTITATIVE & QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS
Not Applicable
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings -
In August 1997, a Handy truck struck two passenger vehicles in a
multi-vehicle accident in Harris County, Texas. Three lawsuits were filed in the
District Court of Harris County, Texas, arising out of the accident, two
wrongful death actions by the parents of two women killed in the accident, and
one case for damages related to disabling injuries to a third person in the same
accident. All but one of the wrongful death actions have been settled within
insurance limits. The remaining wrongful death suit is scheduled to go to trial
in September 1999.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Shareholder Meeting held on May 12, 1999, Norman J. Bering,
Susie Bracht-Black and Richard A. Lubke were elected to serve as Directors of
the Company for three-year terms. James D. Tipton, President of the Company, was
elected to serve a one-year term. The other Directors continuing to serve are:
Virgil H. Cox, Robert L. Eilers and Leroy Welborn whose terms will expire at the
Annual Shareholders Meeting to be held in May 2000 and Weldon D. Bailey, Samuel
J. Dyson and Jimmy T. Pate whose terms will expire at the Annual Shareholders
Meeting in May 2001.
<TABLE>
<CAPTION>
No. of Votes No. of Votes Nominee
Nominees for Directors For Against Abstain Approval
- ---------------------- ------------ ------------ ------- --------
<S> <C> <C> <C> <C>
Norman J. Bering II 5150 50 -0- Yes
Susie Bracht-Black 5150 50 -0- Yes
Richard A. Lubke 5150 50 -0- Yes
James D. Tipton 5150 50 -0- Yes
</TABLE>
Item 5. Other Information - None
Item 6. Exhibits & Reports on Form 8-K - None
Item 7. Signatures
<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: August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
filer's operations as of June 30, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,410,732
<SECURITIES> 0
<RECEIVABLES> 11,956,274
<ALLOWANCES> 7,195
<INVENTORY> 14,921,072
<CURRENT-ASSETS> 28,540,467
<PP&E> 10,464,461
<DEPRECIATION> 4,991,915
<TOTAL-ASSETS> 39,491,925
<CURRENT-LIABILITIES> 18,414,623
<BONDS> 445,000
0
6,326,755
<COMMON> 6,979,905
<OTHER-SE> 5,729,957
<TOTAL-LIABILITY-AND-EQUITY> 39,491,925
<SALES> 81,063,817
<TOTAL-REVENUES> 81,741,433
<CGS> 73,110,516
<TOTAL-COSTS> 73,110,516
<OTHER-EXPENSES> 4,287,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,770
<INCOME-PRETAX> 785,367
<INCOME-TAX> 280,688
<INCOME-CONTINUING> 504,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504,679
<EPS-BASIC> 3.27
<EPS-DILUTED> 3.27
</TABLE>
