<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-21768
D.I.Y. Home Warehouse, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
State of Ohio 38-2560752
(State of Incorporation) (I.R.S. Employer I.D. No.)
5811 Canal Road
Valley View, Ohio 44125
(216) 328-5100
(Address of principal executive offices and telephone number)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 29, 1997
- -------------------------- -----------------------------
Common Stock, no par value 7,633,859
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DIY HOME WAREHOUSE, INC.
INDEX PAGE NO.
----- --------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet -
March 29, 1997 and
December 28, 1996.......................................... 3
Condensed Statement of Income -
Three months Ended March 29, 1997
and March 30, 1996......................................... 4
Condensed Statement of Shareholders'
Equity - Three Months Ended
March 29, 1997............................................. 5
Condensed Statement of Cash Flows -
Three Months Ended March 29, 1997
and March 30, 1996......................................... 6
Notes to Condensed Financial Statements.................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................................. 8 - 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 10 - 11
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
DIY HOME WAREHOUSE, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
March 29, 1997 December 28, 1996
-------------- -----------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $703,793 $161,360
Accounts receivable, trade 103,808 51,812
Refundable federal income taxes -- 248,688
Merchandise inventories 49,686,175 38,462,125
Deferred income taxes 280,791 280,791
Prepaid expenses and other assets 1,601,919 850,113
----------- -----------
Total current assets 52,376,486 40,054,889
----------- -----------
Property and equipment, at cost 49,281,899 49,518,669
Less accumulated depreciation and amortization 10,997,164 10,186,763
----------- -----------
Property and equipment, net 38,284,735 39,331,906
Other assets 547,556 577,442
----------- -----------
Total assets $91,208,777 $79,964,237
=========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Note payable, affiliate $900,000 $900,000
Current maturities of long-term debt 816,374 798,377
Accounts payable 18,249,828 12,278,455
Accrued expenses and other 4,736,781 5,189,499
----------- -----------
Total current liabilities 24,702,983 19,166,331
----------- -----------
Revolving credit 12,000,000 6,000,000
Long-term debt 15,815,000 16,030,953
Deferred income taxes 1,512,923 1,512,923
Shareholders' equity:
Preferred stock, authorized 1,000,000 shares,
none issued -- --
Common stock, no par value, authorized
10,000,000 shares, 7,633,859 and 7,630,685
shares outstanding as of March 29, 1997
and December 28, 1996, respectively 22,955,462 22,942,005
Retained earnings 14,222,409 14,312,025
----------- -----------
Total shareholders' equity 37,177,871 37,254,030
----------- -----------
Total liabilities and shareholders' equity $91,208,777 $79,964,237
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
DIY HOME WAREHOUSE, INC.
CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 29, March 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $39,652,011 $39,143,905
Cost of sales 27,990,581 28,378,802
----------- -----------
Gross profit 11,661,430 10,765,103
Store operating, general and
administrative expenses 11,501,540 10,370,512
----------- -----------
Operating income 159,890 394,591
Other expense, net (311,782) (575,913)
----------- -----------
Loss before income taxes (151,892) (181,322)
Income tax expense (benefit) (62,276) (72,531)
----------- -----------
Net loss $ (89,616) $ (108,791)
=========== ============
Earnings (loss) per share $ (0.01) $ (0.01)
=========== ===========
Weighted average
common shares
outstanding 7,633,719 7,625,000
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
DIY HOME WAREHOUSE, INC.
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 29, 1997
(Unaudited)
<TABLE>
<CAPTION>
Total
Retained Shareholders'
Shares Amount Earnings Equity
--------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Balances at December 28,
1996 7,630,685 $22,942,005 $14,312,025 $37,254,030
Shares issued under the
Retainer Stock Plan for
Non-employee Directors 3,174 13,457 13,457
Net loss (89,616) (89,616)
--------- ----------- ----------- -----------
Balances, March 29, 1997 7,633,859 $22,955,462 $14,222,409 $37,177,871
========= =========== ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
DIY HOME WAREHOUSE, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 29, 1997 March 30, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (89,616) $ (108,791)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 837,489 778,331
Shares issued under Retainer Stock Plan 13,457 --
Gain on sale of property (225,000) --
Changes in operating assets and liabilities:
Accounts receivable, trade (51,996) 12,368
Refundable federal income taxes 248,688 --
Merchandise inventories (11,224,050) (10,700,240)
Prepaid expenses and other assets (721,920) 52,617
Accounts payable 5,971,373 6,511,783
Accrued expenses and other current liabilities (452,718) (755,076)
----------- -----------
Net cash used in operating activities (5,694,293) (4,209,008)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (371,464) (585,860)
Proceeds from sale of property 806,146 --
----------- -----------
Net cash provided by (used in) investing
activities 434,682 (585,860)
----------- -----------
Cash flows from financing activities:
Principal payments under capital lease
obligations (34,271) (14,092)
Proceeds from revolving credit 6,000,000 4,000,000
Principal payments of long-term debt (163,685) (142,357)
----------- -----------
Net cash provided by financing activities 5,802,044 3,843,551
----------- -----------
Net increase (decrease) in cash and cash
equivalents 542,433 (951,317)
Cash and cash equivalents, beginning of period 161,360 1,468,897
----------- -----------
Cash and cash equivalents, end of period $ 703,793 $ 517,580
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
6
<PAGE> 7
D.I.Y. HOME WAREHOUSE, INC.
Notes to Condensed Financial Statements
(Unaudited)
1. Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as of
March 29, 1997 and the results of operations and cash flows for the three months
ended March 29, 1997 and March 30, 1996. The condensed financial statements
should be read in conjunction with the financial statements and notes contained
in the Company's Annual Report filed on Form 10-K. The results of operations for
any interim period should not necessarily be considered indicative of the
results of operations for the full year.
2. Earnings Per Share:
Earnings per share are computed using the weighted average number of
shares of common stock outstanding for the periods. Earnings per share have not
been adjusted for the effect of stock options as the dilutive effect would be
less than three percent for each period.
3. Sale of Property:
In March 1997, the Company sold a parcel of property, resulting in net
proceeds of approximately $806,000 and a net gain of $225,000.
4. Subsequent Event:
In April 1997, the Company made a principal payment of $300,000 on the
Note payable, affiliate to Edgemere Enterprise, Inc., an entity owed by the
Company's majority shareholder.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS - Three Months Ended March 29, 1997
Compared to Three Months Ended March 30, 1996
Net sales increased by approximately $508,000, or 1.3%, to $39,652,000
in the first quarter of fiscal 1997, from $39,144,000 in the first quarter of
fiscal 1996.
Gross profit increased by $896,000, or 8.3%, to $11,661,000 in the
first quarter of fiscal 1997 from $10,765,000 in the first quarter of fiscal
1996. As a percentage of net sales, gross profit increased to 29.4% in the
quarter ended March 29, 1997 compared to 27.5% in the comparable quarter of
fiscal 1996. This increase is primarily due to comprehensive programs and
initiatives underway aimed at improving margins, such as freight and logistics
programs and enhanced information systems which provide tools to better manage
this aspect of the business.
Store operating, general and administrative expenses were $11,502,000
for the quarter ended March 29, 1997 compared to $10,371,000 for the quarter
ended March 30, 1996. As a percentage of net sales, operating expenses increased
to 29.0% in the first quarter of fiscal 1997 compared to 26.5% in the comparable
quarter of fiscal 1996. Operating expenses in the first quarter of fiscal 1996
were favorably impacted by the reversal of bonus provisions as a result of a
decision in that quarter to eliminate the discretionary store and management
bonus provision which had been expensed in prior periods. Further, operating
expenses in the first quarter of 1997 increased over the comparable quarter of
1996 as the result of general increases in certain expenses including rent, real
estate tax and personal property assessments and insurance, among others. In
addition, operating expenses in the quarter ended March 29, 1997 include
expenses of new information systems implemented in the second half of fiscal
1996 which will provide long-term benefits to the Company.
Other expense, net, decreased from $576,000 in the quarter ended March
30, 1996 to $312,000 in the quarter ended March 29,1997 due primarily to a
$225,000 gain on the sale of a parcel of property in the first quarter of 1997
and a decrease in interest expense of $121,000 due to the benefits of reduced
debt level as average amounts outstanding under the Revolving Credit Agreement
were approximately $9.5 million and $15.5 million in the first quarters of
fiscal 1997 and 1996, respectively.
8
<PAGE> 9
OPERATIONS - Three Months Ended March 29, 1997
Compared to Three Months Ended March 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 29, 1997 and March 30, 1996,
operating activities used net cash of $5,694,000 and $4,209,000, respectively.
The use of cash from operating activities for the three months ended March 29,
1997 and March 30, 1996 included $11,224,000 and $10,700,000, respectively, to
fund seasonal increases in inventories offset by an increase of $5,971,000 and
$6,512,000, respectively, in accounts payable.
Net cash provided by investing activities was $435,000 for the three
months ended March 29, 1997, due primarily from the net proceeds of $806,000
from the sale of a parcel of property offset by cash used of $371,000 for the
acquisition property and equipment. Net cash used in investing activities for
the three months ended March 30,1996 was $586,000 relative to the acquisition of
property and equipment.
Net cash provided by financing activities was $5,802,000 and $3,844,000
for the three months ended March 29, 1997 and March 30, 1996, respectively,
reflecting net borrowings primarily under the revolving credit facility.
Management believes cash on hand, cash from operations and cash
available through the Company's financing agreements will be sufficient to meet
short-term and long term working capital requirements.
OTHER
This Quarterly Report on form 10-Q may contain statements that are
forward-looking, as that term is defined by the Private Securities Litigation
Reform Act of 1995 or by the Securities and Exchange Commission in its rules,
regulations and releases. The Company intends that such forward-looking
statements be subject to the safe harbors created thereby. All forward-looking
statements are based on current expectations regarding important risk factors.
Accordingly, actual results may differ materially from those expressed in the
forward-looking statements and the making of such statements should not be
regarded as a representation by the Company or any other person that the results
expressed therein will be achieved. Important risk factors include, but are not
limited to, the following: general economic conditions; consumer spending and
debt levels; housing turnover; weather; impact on sales and margins from both
existing and new competition; changes in operating expenses; changes in product
mix; interest rates; changes in and the application of accounting policies and
practices; adverse results in significant litigation matters; adverse state and
federal regulations and legislation; the occurrence of extraordinary events
including events and acts of nature or accidents; and the risks described from
time to time in the Company's Securities and Exchange Commission filings.
9
<PAGE> 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
A list of the exhibits required by Item 601 of Regulation S-K to
be filed as a part of this Form 10-Q is shown on the "Exhibit
Index" filed herewith.
(b) Reports on Form 8-K:
None
Signature
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.
D.I.Y. HOME WAREHOUSE, INC.
(Registrant)
DATED: May 5, 1997
----------- By: Marilyn A. Eisele
-------------------------------------
Vice President - Administration
and Finance, Chief Financial Officer
10
<PAGE> 11
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
11 Earnings Per Share:
-------------------
11.1 Computation of Earnings Per Share
27 Financial Data Schedule:
------------------------
27.1 Financial Data Schedule for the quarter ended
March 29, 1997
11
<PAGE> 1
EXHIBIT 11
EARNINGS PER SHARE
<PAGE> 2
EXHIBIT 11.1
DIY HOME WAREHOUSE, INC.
FORM 10-Q
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 30,
1997 1996
---- ----
<S> <C> <C>
Loss applicable to common shares $(89,616) $(108,791)
========= ==========
Weighted average common shares
outstanding for the period 7,633,719 7,625,000
Dilutive effect of exercise of stock
options -- --
--------- ---------
Weighted average common shares, assuming
issuance of the above securities 7,633,719 7,625,000
========= =========
Earnings per common share:
Primary $(0.01) $(0.01)
Fully diluted $(0.01) $(0.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> MAR-29-1997
<CASH> 704
<SECURITIES> 0
<RECEIVABLES> 78
<ALLOWANCES> 0
<INVENTORY> 49,686
<CURRENT-ASSETS> 52,376
<PP&E> 49,282
<DEPRECIATION> 10,997
<TOTAL-ASSETS> 91,208
<CURRENT-LIABILITIES> 24,702
<BONDS> 27,815
<COMMON> 22,955
0
0
<OTHER-SE> 14,222
<TOTAL-LIABILITY-AND-EQUITY> 91,208
<SALES> 39,652
<TOTAL-REVENUES> 39,652
<CGS> 27,991
<TOTAL-COSTS> 11,502
<OTHER-EXPENSES> (248)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559
<INCOME-PRETAX> 0
<INCOME-TAX> (62)
<INCOME-CONTINUING> (90)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
