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,
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 September 30, 1999, was 9,170 shares of Class A Common Stock, $100
par value, and 57,847 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 September 30, 1999
and December 31, 1998.............................3-4
Condensed Statement of Earnings - Three Months and
Nine Months Ended September 30, 1999 and 1998.......5
Condensed Statement of Cash Flows - Nine Months
Ended September 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 ............14-21
Item 3. Quantitative and Qualitative Disclosures about Market
Risk.............................................None
PART II Other Information
Items 1. Legal Proceedings 22
Item 2.-6. None 22
Signatures 23
<PAGE>
<TABLE>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
- --------------
Cash $ 1,679,209 $ 1,113,122
Accounts Receivable, net of 15,655,450 10,335,445
subscriptions receivable in
the amount of $78,297 for 1999
and $51,735 for 1998
Notes Receivable (Note 3) 11,687 10,174
Inventory 16,120,072 14,106,010
Other Current Assets 371,870 477,206
----------- -----------
$33,838,288 $26,041,957
----------- -----------
PROPERTY, PLANT AND EQUIPMENT (NOTE 2)
- --------------------------------------
At Cost Less Accumulated Depreciation
of $5,249,748 (1999) and $4,517,166 (1998) $10,413,090 $ 9,516,835
----------- -----------
OTHER ASSETS
- ------------
Notes Receivable (Note 3) $ 155,704 $ 130,362
Deferred Compensation Funded 352,848 329,084
Other Noncurrent Assets -0- 23,959
----------- -----------
$ 508,552 $ 483,405
----------- -----------
TOTAL ASSETS $44,759,930 $36,042,197
- ------------ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
- -------------------
Notes Payable-Stock (Note 4) $ 41,200 $ 26,750
Notes Payable-Capital Lease 45,038 58,308
Accounts Payable-Trade 22,318,557 14,912,983
Other Current Liabilities 1,371,966 896,390
----------- -----------
$23,776,761 $15,894,431
----------- -----------
NONCURRENT LIABILITIES
- ----------------------
Notes Payable-Stock(Note 4) $ 833,000 $ 521,280
Notes Payable-Capital Lease 28,815 66,864
Notes Payable-Vendor 146,509 114,707
Deferred Compensation Payable 352,848 329,084
Deferred Income Taxes Payable (Note 5) 243,939 248,033
----------- -----------
$ 1,605,111 $ 1,279,968
----------- -----------
TOTAL LIABILITIES $25,381,872 $17,174,399
- ----------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET (CONTINUED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
STOCKHOLDERS' EQUITY
- --------------------
Common Stock, Class A,
authorized 20,000 shares, $100
par value per share, issued
9,480 & 8,930 shares $ 948,000 $ 893,000
Common Stock, Class B,
authorized 100,000 shares, $100
par value per share, issued
61,136 & 55,667 shares 6,113,600 5,566,700
Common Stock, Class B
Subscribed 4,486.74 & 4,309.98
shares 448,674 430,998
Less Subscription Receivable (39,149) (25,867)
Preferred Stock 10% Cumulative, authorized 100,000 shares,
100 par value per share, issued 63,915.75 &
58,246.50 shares 6,391,575 5,824,650
Preferred Stock, Subscribed
4,486.74 & 4,309.98 shares 448,674 430,998
Less Subscription Receivable (39,149) (25,868)
Paid in Surplus 354,070 339,238
------------ ------------
$ 14,626,295 $ 13,433,849
Less: Cost of Treasury Stock
7,089.25 & -0- shares 708,925 -0-
------------ ------------
$ 13,917,370 $ 13,433,849
Retained Earnings exclusive of other
comprehensive earnings (Note 7) 5,381,016 5,368,885
Retained Earnings applicable to other
Comprehensive earnings (Note 7) 79,672 65,064
------------ ------------
5,460,688 5,433,949
------------ ------------
Total Stockholders' Equity $ 19,378,058 $ 18,867,798
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 44,759,930 $ 36,042,197
- -------------------- ============ ============
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
QUARTER NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
- --------
Net Sales $ 42,386,346 $ 39,642,425 $ 123,450,163 $ 112,698,449
Sundry Income 545,612 781,168 1,223,228 1,200,647
------------- ------------- ------------- -------------
TOTAL REVENUES $ 42,931,958 $ 40,423,593 $ 124,673,391 $ 113,899,096
- -------------- ------------- ------------- ------------- --------------
EXPENSE
- -------
Net Mat'l. Costs $ 38,712,201 $ 36,328,871 $ 111,822,717 $ 101,778,721
Payroll Costs 1,846,607 1,821,775 5,395,149 5,157,850
Other Operating Costs 2,229,709 2,390,264 6,517,460 6,206,370
Interest Expense 16,956 8,743 49,726 21,432
------------- ------------- ------------- -------------
TOTAL EXPENSE $ 42,805,473 $ 40,549,653 $ 123,785,052 $ 113,164,373
- ------------- ------------- ------------- ------------- -------------
NET EARNINGS BEFORE
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX $ 126,485 $ (126,060) $ 888,339 $ 734,723
- ------------------- ------------- ------------- ------------- -------------
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX (NOTE 5) (49,168) 36,219 (321,862) (268,835)
- ------------------- ------------- ------------- ------------- -------------
NET EARNINGS $ 77,317 $ (89,841) $ 566,477 $ 465,888
- ------------
OTHER COMPREHENSIVE EARNINGS
- ----------------------------
Unrealized Gain on
Securities (Note 7) $ (1,380) $ -0- $ 22,133 $ -0-
Provision for Federal
Income Tax (Note 5) 469 -0- (7,525) -0-
------------- ------------- ------------- -------------
Other Comprehensive
Earnings Net of Tax $ (911) $ -0- $ 14,608 $ -0-
------------- ------------- ------------- -------------
TOTAL COMPREHENSIVE
EARNINGS $ 76,406 $ (89,841) $ 581,085 $ 465,888
- ------------------- ------------- ------------- ------------- -------------
LESS ACCRUED
DIVIDENDS ON
PREFERRED STOCK (138,586) (170,592) (415,758) (511,776)
- --------------- ------------- ------------- ------------- -------------
NET EARNINGS
APPLICABLE
TO COMMON
STOCKHOLDERS $ (62,180) $ (260,433) $ 165,327 $ (45,888)
- ------------ ============= ============= ============= =============
NET EARNINGS PER
SHARE OF
COMMON STOCK,
CLASS A &
CLASS B (NOTE 1) $ (0.88) $ (3.86) $ 2.37 $ (0.69)
- ---------------- ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPT. 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITY
- ----------------------------------
Net Earnings $ 566,477 $ 465,888
----------- -----------
Adjustments to Reconcile Net
Earnings to Net Cash Provided by
Operating Activities:
Depreciation $ 760,156 $ 677,365
Increase (Decrease)in Deferred Income Tax (4,094) 10,183
Unrealized gain (loss)-(increase or decrease
in fair market value of securities) 14,608 -0-
Changes in Assets and Liabilities
Increase in Accounts Receivable $(5,320,005) $(4,391,315)
Increase in Notes Receivable (26,855) (23,325)
(Increase) Decrease in Deferred Compensation Investment (23,764) -0-
Increase in Inventory (2,014,062) (2,767,908)
(Increase) Decrease in Other Assets 129,295 (95,579)
Increase in Notes Payable - Vendor 31,802 4,776
Increase in Accounts Payable 7,405,574 6,649,175
Increase (Decrease) in Other Liabilities 475,576 272,251
Decrease in Federal Income Taxes Payable -0- (45,253)
Increase (Decrease) in Deferred Compensation Payable 23,764 -0-
----------- -----------
TOTAL ADJUSTMENTS $ 1,451,995 $ 18,119
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 2,018,472 $ 484,007
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital Expenditures $(1,656,411) $ (782,004)
Disposition of Fixed Assets -0- -0-
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES $(1,656,411) $ (782,004)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Notes Payable-Stock $ 326,170 $ 310,280
Increase (Decrease)in Notes Payable-Capital Lease (51,319) (40,672)
Increase in Subscription Receivable (26,563) (32,751)
Proceeds From Issuance of Stock 1,219,009 1,125,216
Purchase of Treasury Stock (708,925) (587,300)
Dividends Paid (554,346) (682,368)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 204,026 $ 92,405
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 566,087 $ (205,592)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,113,122 1,123,842
----------- -----------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 1,679,209 $ 918,250
=========== ===========
ADDITIONAL RELATED DISCLOSURES TO THE STATEMENT OF CASH FLOWS
- -------------------------------------------------------------
Interest Expense Paid $ 49,726 $ 21,432
Income Taxes Paid $ 464,365 $ 425,792
</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 NINE MONTHS ENDED
------------------------ -------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CALCULATION OF NET EARNINGS PER SHARE
OF COMMON STOCK
- -------------------------------------
Net Earnings $ 76,406 $ (89,841) $ 581,085 $ 465,888
Less: Accrued Dividends
on Preferred Stock (138,586) (170,592) (415,758) (511,776)
--------- --------- --------- ---------
$ (62,180) $(260,433) $ 165,327 $ (45,888)
Weighted Average
Shares of Common Stock
(Class A & Class B)
outstanding 70,380 67,479 69,855 66,527
Net Earnings Per Share
of Common Stock $ (0.88) $ (3.86) $ 2.37 $ (0.69)
========= ========= ========= =========
</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 nine months ended September 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>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -----------
<S> <C> <C>
Land $ 3,201,569 $ 2,027,797
Building & Improvements 7,990,721 7,859,100
Furniture, Computer, Warehouse 4,010,325 3,721,832
Transportation Equipment 460,223 425,272
------------ ------------
$ 15,662,838 $ 14,034,001
Less: Accumulated Depreciation (5,249,748) (4,517,166)
------------ ------------
$ 10,413,090 $ 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.
In September, 1999, virtually the same type of deferred payment agreement was
put into effect with Chicago Specialty, a manufacturer of plumbing supplies.
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
------------------------ -----------------------
SEPT. 30, DEC. 31, SEPT.30, DEC. 31,
1999 1998 1999 1998
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Deferred Agreements $ -0- $ -0- $146,509 $114,707
Installment Sale Agreement 11,687 10,174 9,195 15,655
-------- -------- -------- --------
$ 11,687 $ 10,174 $155,704 $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 NON-CURRENT PORTION
----------------------- -----------------------
SEPT. 30, DEC. 31, SEPT. 30, DEC. 31,
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
$41,200 $26,750 $833,000 $521,280
</TABLE>
Principal payments due over the next five years are as follows:
1999 $ 41,200
2000 71,000
2001 57,000
2002 32,800
2003 324,280
--------
$526,280
<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
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Excess of tax over book depreciation $ 1,271,257 $ 1,270,884
Allowance for Bad Debt (7,195) (7,195)
Inventory - Ending inventory adjustment
for tax recognition of Sec. 263A
Uniform Capitalization Costs (294,423) (292,008)
Deferred Compensation (252,173) (242,173)
----------- -----------
Total $ 717,466 $ 729,508
Statutory Tax Rate 34% 34%
----------- -----------
Cumulative Deferred Income Tax Payable $ 243,939 $ 248,033
=========== ===========
Classified as:
Current Liability $ -0- $ -0-
Noncurrent Liability 243,939 248,033
----------- -----------
$ 243,939 $ 248,033
=========== ===========
</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,
1999 1998
------------- -------------
<S> <C> <C>
Principal Components of Income Tax Expense
Federal:
Current
-------
Income tax paid $ 358,481 $ 377,273
Carry-over of prepayment
from prior year 105,884 24,759
Refund received for overpayment
from prior year -0- -0-
----------- ------------
$ 464,365 $ 402,032
Federal Income Tax Payable (Receivable) (130,884) (23,225)
Carry-over to subsequent year - 0 - -0-
Income tax for tax reporting
at statutory rate of 34% $ 333,481 $ 378,807
Deferred
--------
Adjustments for financial reporting:
Depreciation 127 3,511
263A Uniform Capitalization Costs (821) 14,765
Other (3,400) (1,700)
----------- ------------
Provision for federal income tax $ 329,387 $ 395,383
=========== ============
</TABLE>
Handy is not exempt from income tax except for municipal bond interest
earned in the amount of $1630.
Handy is 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 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 listing
total purchases made during the covered billing period, with an
additional charge ("Purchase Funds") equal to 2 percent of the
member-dealer's warehouse purchases until the member- dealer's Desired
Stock Ownership is attained. Although the Subscription Agreement
entitles Handy to collect 2 percent of total purchases, since May 1,
1983, 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 $352,848 on the Balance
Sheet as a non-current asset at September 30, 1999, includes equity
securities classified as investments available for sale in the amount
of $307,332 at fair market value. The $309,578 includes $120,715
unrealized gain on securities resulting from the increase in fair
market value.
2. Changes in Equity securities
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 Cumulative
------------------ ----------
<S> <C> <C>
Beginning Balance-January 1, 1999 $ 279,644 $ -0-
Purchases 6,170 105,060
Dividends, interest and capital gains 1,630 83,803
Unrealized gains on securities
resulting from increase in
fair market value 22,134 120,715
----------- ----------
Balance-September 30, 1999 $ 309,578 $ 309,578
=========== ==========
</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 $ 910,472 $ 22,133 $ 888,339
Provision for
Federal Income Tax (329,387) (7,525) (321,862)
----------- --------- --------
Net Earnings $ 581,085 $ 14,608 $ 566,477
=========== ========= ==========
</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> <C>
Balance-January 1, 1999 $5,433,949 $ 65,064 $5,368,885
Add: Net earnings nine months
ended Sept. 30, 1999 581,085 14,608 566,477
Deduct: Cash Dividends on
Preferred Stock 554,346 -0- 554,346
---------- ---------- ----------
Balance-Sept. 30, 1999 $5,460,688 $ 79,672 $5,381,016
========== ========== ==========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
We maintained our steady growth in the third 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 third quarter of
1999 increased 6.9% ($2,743,921) over sales during the same period in 1998,
compared to a 22.6% growth rate ($7,341,670) in the third quarter of 1998 over
1997's third quarter.
Net sales during the first nine months of 1999 increased $10,751,714
compared to the same period in 1998. For the first nine months of 1999, net
sales increased 9.5% over 1998, as compared to a 17.9% increase for the same
period in 1998 over 1997. However, sales in the second and third quarters of
1999 were not as robust as in the first quarter of the year, with over 50% of
the 1999 net sales occurring in the first quarter. The softening sales can be
attributed to a decline in oil prices which impacts overall business conditions
in our selling territories, labor and material shortages in the building
industry and a general softening of the economy in some of our selling
territories.
NET SALES Strong economic growth and a positive response to our lumber and
building materials program have resulted in higher rates of sales growth during
the first nine months of 1999 than experienced in previous periods, evidenced by
increased sales in all but one of our selling territories. 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 $2,798,190
(35.3%) of the increase in net sales between the 1998 and 1999 first nine month
periods.
The following table summarizes the Company's sales during the first nine
months of 1998 and 1999 by sales territory:
<TABLE>
<CAPTION>
First Nine Months 1999 First Nine Months 1998
------------------------------------------ ---------------------------
% Increase
in Sales
From First % of % of
Nine Months Total Total
Sales Territory Sales of 1998 Sales Sales Sales
- --------------- ----- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Houston Area $ 31,251,054 6% 25.5% $ 29,463,893 26.5%
Victoria, San Antonio, Corpus Christ &
Rio Grande Valley Area* 23,461,289 11% 19.2% 21,091,098 18.9%
North Texas, Dallas
& Fort Worth Area 13,267,519 -12% 10.8% 15,078,790 13.5%
Austin, Brenham &
Central Texas Area 15,743,854 22% 12.9% 12,897,120 11.6%
Southern Louisiana Area 15,737,760 18% 12.9% 13,345,966 12.0%
Baton Rouge, New Orleans,
Mississippi, Alabama &
Florida Area 10,104,765 15% 8.3% 8,823,943 7.9%
Arkansas Area 4,804,417 19% 3.9% 4,045,615 3.6%
Oklahoma Area 8,005,887 20% 6.5% 6,691,173 6.0%
------------ ---- ----- ------------ -----
Totals: $122,376,545 (1) 100.0% $111,437,598 (1) 100.0%
============ ====== ============ -----
<FN>
- ------------------------------------------------------
* Includes sales to Mexico and Central America member-dealers.
(1) Total does not include sales of $1,073,618 for the first nine months of 1999
and $1,260,851 for the same period in 1998 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 continue to erode the market share
of independent hardware stores. In addition, this territory lost one significant
member-dealer who generated $1,601,143 in sales during the first nine months of
1998.
NET MATERIAL COSTS AND REBATES Net material costs for the third quarter and
first nine months of 1999 were $38,712,201 and $111,822,717, respectively,
compared to $36,328,871 and $101,778,721, respectively, for the same periods in
1998. Net material costs for the third quarter and first nine months of 1999
increased 6.6 percent and 9.9 percent, respectively, over the same periods in
1998. Net material costs were 91.3 percent of sales in the third quarter of 1999
as compared to 91.6 percent of sales for the same period in 1998. For the first
nine months of 1999 and 1998 net material costs were 90.6 percent and 90.3
percent of sales, respectively, mainly as a result of an increase in the number
of inventory items sold at a lower gross margin. Sales with a markup ranging
from 0 to 5 percent for the first nine months of 1999 increased to $60,687,792
from $51,253,129 for the first nine months of 1998. Further, in order to promote
sales of lumber and building materials, we have foregone 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 third quarters and the first nine month periods of 1999 and
1998. Third quarter rebates increased $140,596 or 14.7 percent (1999 -
$1,094,862 vs. 1998 - $954,266), while rebates for the first nine months
increased $340,817 or 10.4 percent (1999 - $3,626,457 vs. 1998 - $3,285,641).
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 third
quarter and first nine months of 1999 resulted from salary increases needed to
attract or retain high-quality employees, offset during the same periods by a
decrease in overtime payroll costs of 46.5% and 33.0%, respectively. As a
result, payroll costs for the third quarter and first nine months of 1999
increased 1.4 percent and 4.6 percent, respectively, over the same periods in
1998. These increases in payroll costs remained much lower than the percentage
increases in net sales (6.9% and 9.5%, respectively) 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 third
quarter of 1999 constituted 4.3 percent of net sales and of total expenses,
compared to 4.5 percent of each for the same quarter of 1998. Payroll costs were
4.4 percent of net sales and of total expenses for the first nine months of
1999, as compared to 4.6 percent of each 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 third quarter of 1999, other operating
costs decreased 6.7 percent from the third quarter of 1998, while net sales
increased 6.9% and total expenses increased 5.6% for the same periods. For the
first nine months of 1999, other operating costs increased only 5.0 percent over
the same 1998 period, while net sales increased 9.5% and total expenses
increased 9.4% for the same periods. Other operating costs were 5.2% of total
expenses in the third quarter of 1999 as compared to 5.9% of total expenses for
the third quarter of 1998. For the nine month period ending September 30, 1999,
other operating costs were 5.3% of total expenses as compared to 5.5% of total
expenses during the same period in 1998.
Other operating expenses in the third quarter of 1999 were positively
affected by a $183,956 decline in contract labor expenses. Over 72% of the 1999
first nine months increase in other operating costs resulted from an increase in
general and administrative expenses (an increase of $225,960 over 1998 levels),
while another 27.7% of the increase is the result of membership and marketing
expense increases (an increase of $86,271 over 1998 levels).
NET EARNINGS AND EARNINGS PER SHARE Net sales for the third quarter of 1999
increased $2,743,921 (6.9%)over net sales for the third quarter of 1998, net
material costs increased $2,383,330 (6.6%), while gross margin increased
$360,591 (10.9%). This increase in gross margin, offset by only slight increases
in payroll costs and interest expenses, and a decrease in other operating costs,
resulted in an increase in both pretax and after tax net earnings. Pretax net
earnings increased from a loss of $126,060 in the third quarter of 1998 to a
gain of $125,105 in the same 1999 period, while after tax net earnings increased
from a loss of $89,841 to net earnings of $76,406.
<PAGE>
Net sales for the first nine months of 1999 increased $10,751,714 (9.5%)
and net material costs increased $10,043,996 (9.9%) over levels in the first
nine months in 1998, resulting in gross margin increasing by $707,718 (6.5%).
This increase in gross margin was offset by less substantial increases in both
payroll costs (4.6%) and in other operating costs (5.0%). Thus pretax net
earnings increased 23.9 percent, from $734,723 for the first nine months of 1998
to $910,472 in the same 1999 period, while after-tax net earnings increased by
24.7 percent.
Our net loss per share declined significantly in the third quarter of 1999
from $3.86 per share in 1998 to $0.88 per share in 1999, resulting in earnings
per share of $2.37 in the first nine months of 1999 as compared to a net loss of
$0.69 per share in the same period of 1998. This decrease in net loss was due to
an increase in net earnings in the third quarter, as well as a decline in the
dividends accrued as a percentage of 1999 net earnings. In the first nine months
of 1999 total comprehensive earnings increased, while dividends accrued
represented a smaller percentage of 1999 net earnings than dividends accrued in
the first nine months of 1998 (71.5% in 1999 as compared to 109.8% 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, even though 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 September 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 fall trade show, (ii)
payment terms available to us from our suppliers, (iii) payment terms we offer
to our member-dealers, and (iv) the state of the regional economy in our selling
territories.
During the first nine months of 1999 there was an increase of $566,087 in
our cash and cash equivalents. During this period, we generated cash flow from
operating activities of $2,018,472, compared to $484,007 of cash from operations
during the first nine months a year earlier. The increase in cash flow in the
1999 period was principally attributable to variances in accounts receivable,
inventory and accounts payable.
Between the beginning of 1999 and September 30, 1999, accounts receivable
increased $5,320,005, an increase of 51.5%. This increase was mainly due to a
strong economy which gave member-dealers confidence to make significant
purchases at the fall trade show and to extended dating terms for payment
offered to member-dealers at this trade show.
Inventory increased by approximately 1500 stockkeeping units during the
first nine months of 1999, which were added in response to member-dealer demand
<PAGE>
for more breadth in inventory. As a result, inventory increased by $2,014,062
during the first nine months of 1999. As of September 30, 1999, we held
approximately 36,300 stockkeeping units in inventory.
Accounts payable increased by $7,405,574 during the first nine months of
1999, an increase of 49.7%, primarily attributable to the extended dating terms
for payment offered to us by suppliers.
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>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1999 1998 1998
------------- ------------ -------------
<S> <C> <C> <C>
Working Capital $10,061,527 $10,147,526 $9,618,933
Current Ratio 1.3 to 1 1.6 to 1 1.4 to 1
Long-term Debt as Percentage
of Capitalization 8.3% 6.8% 7.0%
</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 the expansion in these selling territories will have a
beneficial effect on its ability to generate cash to meet our funding needs.
In the first nine months of 1999, we maintained a 94.9 percent service
level (the measure of our ability to meet member-dealers' orders out of current
stock) as compared to a service level of 94.4 percent for the same period of
1998. Inventory turnover was 6.0 times during the first nine months of 1999 and
6.1 times for the first nine 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 nine month periods ending September 30, 1999 and September 30, 1998,
we invested $1,656,411 and $782,004, respectively in capital assets (net of
dispositions). Approximately 78.8 percent ($1,305,393) of the amount expended in
the first nine months of 1999 was used to complete the purchase of thirty acres
of land for the future warehouse expansion program and associated costs, as
explained below. Approximately 10.0 percent ($165,730) was used to purchase
computer hardware and software. By comparison, of the total amount expended in
the first nine months of 1998, $315,276 was used to purchase computer equipment,
$246,500 was used for warehouse equipment, $137,680 was used for building
improvements, including plans for the warehouse expansion, and $75,917 was used
to upgrade our fleet of automobiles.
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 cash outlays for
payment of accounts payable and increased inventory purchases. Additionally,
anticipated capital expenditures include: approximately $690,000 to relocate our
current retention pond, construct additional parking and outside storage,
prepare the site and begin construction on an expansion to our current warehouse
facility, approximately $15,000 to purchase warehouse equipment, $10,000 to
upgrade computer equipment, $25,000 to purchase office equipment and $25,000 to
improve our automobile fleet.
Under our unsecured $7.5 million revolving line of credit with Chase Bank
of Texas which is used from time to time for working capital and other financing
needs, no balance was outstanding on September 30, 1999 or December 31, 1998.
The maturity date on the line of credit is April 30, 2001.
Our cash position of $1,679,209 at September 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 Management Information System department (the
"MIS department") evaluated our information and non-information technology
systems to identify in-house software and non-information technology and
equipment that required additional testing and, in some cases, remediation.
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. Testing of warehouse management software concluded during the third
quarter of 1999. We did not encounter any material system disruption as a result
of the Year 2000 testing, and therefore, we expect that the performance of such
systems will not be substantially disrupted when addressing the Year 2000.
<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 were identified
by our MIS department during testing. We began implementing remedial actions
relating to our warehouse management software and other in-house systems during
the third quarter of 1999, which may include upgrading or replacing software or
other technology before the end of 1999. We expect to complete all remedial
actions and any follow-up testing prior to January 1, 2000.
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 fourth 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, substitute vendors, purchasers or third party contractors
to provide services in order to maintain normal business operations in the event
that our regular providers are unable to perform services on which we rely.
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 September 30, 1999, the cost for implementing our Year 2000 program
is $407,000. 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. During the third quarter of 1999, the last of these three lawsuits was
settled. All lawsuits have been settled within insurance limits.
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 - NONE
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 November 12, 1999
-------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
filer's operations as of September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,679,209
<SECURITIES> 0
<RECEIVABLES> 15,667,137
<ALLOWANCES> 7,195
<INVENTORY> 16,120,072
<CURRENT-ASSETS> 33,838,288
<PP&E> 10,413,090
<DEPRECIATION> 5,249,748
<TOTAL-ASSETS> 44,759,930
<CURRENT-LIABILITIES> 23,776,761
<BONDS> 0
0
6,452,075
<COMMON> 7,111,225
<OTHER-SE> 5,614,758
<TOTAL-LIABILITY-AND-EQUITY> 44,759,930
<SALES> 81,063,817
<TOTAL-REVENUES> 123,450,163
<CGS> 111,822,717
<TOTAL-COSTS> 111,822,717
<OTHER-EXPENSES> 6,617,460
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,726
<INCOME-PRETAX> 910,472
<INCOME-TAX> 329,387
<INCOME-CONTINUING> 581,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 581,085
<EPS-BASIC> 2.37
<EPS-DILUTED> 2.37
</TABLE>
