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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- - - - - - - - - - - - - -
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 15, 1999
D.I.Y. Home Warehouse, Inc.
---------------------------
(Exact name of registrant as specified in charter)
Ohio 0-21768 38-2560752
- ---- ------- ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) I.D. No.)
Incorporation)
5811 Canal Road, Valley View, Ohio 44125
----------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-328-5100
Not Applicable
--------------
(Former name or former address, if changed since last
report.)
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ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On June 15, 1999, the Company announced the closing of three stores located in
Mansfield, Ohio; Akron, Ohio; and Boardman, Ohio. Concurrent with the
announcement, the Company sold the land and building of its Mansfield store and
its previously closed Canton store for $8,600,000. The Company also assigned its
lease in the West Akron location to the same purchaser of the Canton and
Mansfield properties. The Boardman location, which had a lease commitment
through September 2008 for approximately $600,000 per year, was amended to
terminate on September 30, 1999. The Company paid $414,173 in consideration for
the reduced lease term.
The Company also entered into an Agreement (the Agreement) with a third party to
act as its agent to sell the merchandise inventories located at the closed
stores. The Company will receive a guaranteed amount from the inventory
liquidation based on a formula outlined in the Agreement.
The unaudited pro forma condensed financial statements included in this Current
Report on Form 8-K as listed under Item 7(b) below are presented for
informational purposes only with respect to the pro forma financial effects, as
determined in accordance with the financial reporting rules of the Securities
and Exchange Commission (the "Commission"), of the closed stores and sale of
real estate. Such financial statements do not purport to be indicative of the
financial position which would have actually existed, or the results of
operations which would have actually been attained if the closed stores and sale
of real estate had occurred in the periods indicated. The financial statements
also do not purport to be indicative of the financial position or results of
operations which may exist or be attained in the future. For a discussion of the
risks and other important factors which may affect the Company's future
business, operating results and financial and other condition, including, but
not limited to, the possible effects of the closed stores and sale of real
estate, reference should be made to the discussion of such risks and other
factors as included from time to time in the Registrant's filings with the
Commission.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
The following unaudited pro forma financial information of the
Registrant is attached as Appendix A to this Current Report on Form 8-K
and by this reference incorporated herein:
(i) Introduction;
(ii) Pro Forma Condensed Balance Sheet (Unaudited) at April 3,
1999;
(iii) Pro Forma Condensed Statement of Operations (Unaudited) for
the year ended January 2, 1999;
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(iv) Pro Forma Condensed Statement of Operations (Unaudited) for
the three months ended April 3, 1999; and
(v) Notes to Unaudited Pro Forma Condensed Financial Statements.
(c) Exhibit
3
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APPENDIX A
DIY Home Warehouse, Inc.
Introduction to Unaudited Pro Forma Condensed Financial Statements
The following unaudited pro forma condensed balance sheet as of April 3, 1999,
gives effect to: (i) the sale of the Canton and Mansfield store properties,
termination of the Boardman store lease, assignment of the lease in West Akron
as described in Note (A) of the Notes to Unaudited Pro Forma Condensed Financial
Statements (the Notes), and (ii) the related pro forma adjustments described in
the Notes thereto. This balance sheet is presented as though the transactions
occurred at April 3, 1999.
The following unaudited pro forma condensed statements of operations for the
fiscal year ended January 2, 1999, and for the three months ended April 3, 1999,
give effect to: (i) the elimination of the results of operations of the
Registrant's closed stores as described in Note (E) and (F), and (ii) the
related pro forma adjustments described in the Notes thereto. The pro forma
statements of operations are presented as though the transactions occurred on
January 2, 1998.
The unaudited pro forma condensed balance sheet and statements of operations
should be read in conjunction with the Notes thereto and with the historical
financial statements of DIY Home Warehouse, Inc. as included in the reports
filed by the Registrant with the Commission from time to time.
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<TABLE>
<CAPTION>
DIY HOME WAREHOUSE, INC.
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
April 3, 1999
As
Previously Pro Forma Pro Forma
Reported Adjustments Results
----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 514,731 -- $ 514,731
Refundable federal income taxes 706,545 -- 706,545
Merchandise inventories 39,041,030 $ (6,783,000) (D) 32,258,030
Deferred income taxes 1,542,590 -- 1,542,590
Prepaid expenses and other assets 859,974 -- 859,974
------------ ------------ ------------
Total current assets 42,664,870 (6,783,000) 35,881,870
------------ ------------ ------------
Property and equipment, at cost 53,903,946 (14,382,343) (A) (B) 39,521,603
Less accumulated depreciation and amortization 18,762,752 (5,402,103) (A) (B) 13,360,649
------------ ------------ ------------
Property and equipment, net 35,141,194 (8,980,240) 26,160,954
Other assets 359,637 -- 359,637
------------ ------------ ------------
Total assets $ 78,165,701 $(15,763,240) $ 62,402,461
============ ============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Note payable, affiliate $ 300,000 -- $ 300,000
Current maturities of long-term debt 1,319,350 $ (1,141,877) (A) 177,473
Accounts payable 13,119,357 (2,280,660) (D) 10,838,697
Accrued expenses and other 4,129,541 71,736 (E) 4,201,277
------------ ------------ ------------
Total current liabilities 18,868,248 (3,350,801) 15,517,447
Revolving credit 15,501,562 (6,990,560) (A)(C)(D)(E)(F) 8,511,002
Long-term debt 4,002,962 (3,761,890) (A) 241,072
Deferred income taxes 2,887,269 (667,602) (G) 2,219,667
------------ ------------ ------------
Total liabilities 41,260,041 (14,770,853) 26,489,188
Shareholders' equity:
Preferred stock -- -- --
Common stock 22,955,462 -- 22,955,462
Retained earnings 14,151,639 (992,387) (A) - (G) 13,159,252
------------ ------------ ------------
37,107,101 (992,387) 36,114,714
Less common stock in treasury, at cost (201,441) -- (201,441)
------------ ------------ ------------
Total shareholders' equity 36,905,660 (992,387) 35,913,273
------------ ------------ ------------
Total liabilities and shareholders' equity $ 78,165,701 $(15,763,240) $ 62,402,461
============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial
statements.
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<TABLE>
<CAPTION>
DIY HOME WAREHOUSE, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
for the year ended January 2, 1999
As Previously Pro Forma Adjustments Pro Forma
Reported Results
(Note H) (Note I)
----------------- ------------------------------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 172,600,414 $ (36,126,878) -- $ 136,473,536
Cost of sales 127,215,341 (27,622,408) $ 1,583,000 101,175,933
------------- ------------- ------------- -------------
Gross profit 45,385,073 (8,504,470) (1,583,000) 35,297,603
Store operating, general and
administrative expenses 45,336,514 (9,678,872) -- 35,657,642
Store closing and
development costs 2,143,394 (1,875,518) 1,391,183 1,659,059
------------- ------------- ------------- -------------
Operating income (loss) (2,094,835) 3,049,920 (2,974,183) (2,019,098)
Other income (expense) net (1,760,746) 455,699 1,117,905 (187,142)
------------- ------------- ------------- -------------
Income (loss) before income
taxes (3,855,581) 3,505,619 (1,856,278) (2,206,240)
Income tax expense (benefit) (1,556,130) 1,414,884 (748,080) (889,326)
------------- ------------- ------------- -------------
Net income (loss) $ (2,299,451) $ 2,090,735 $ (1,108,198) $ (1,316,914)
============= ============= ============= =============
Earnings (loss) per common
share, basic and diluted $ (0.30) $ 0.28 $ (0.15) $ (0.17)
============= ============= ============= =============
Weighted average common shares
outstanding 7,594,540 7,594,540 7,594,540 7,594,540
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial
statements.
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<TABLE>
<CAPTION>
DIY HOME WAREHOUSE, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
for the three months ended April 3, 1999
As Previously Pro Forma Adjustments Pro Forma
Reported Results
(Note J) (Note F and G)
------------------ --------------------------------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 29,162,507 $ (4,627,367) -- $ 24,535,140
Cost of sales 20,752,216 (3,502,179) -- 17,250,037
------------ ------------ ------------ ------------
Gross profit 8,410,291 (1,125,188) -- 7,285,103
Store operating, general and
administrative expenses 9,060,924 (1,464,966) -- 7,595,958
Store closing costs 259,656 (259,656) -- --
------------ ------------ ------------ ------------
Operating income (loss) (910,289) 599,434 -- (310,855)
Other income (expense) net (332,080) 40,670 $ 196,289 (95,121)
------------ ------------ ------------ ------------
Income (loss) before income
taxes (1,242,369) 640,104 196,289 (405,976)
Income tax expense (benefit) (509,364) 262,439 80,478 (166,447)
------------ ------------ ------------ ------------
Net income (loss) $ (733,005) $ 377,665 $ 115,811 $ (239,529)
============ ============ ============ ============
Earnings (loss) per common
share, basic and diluted $ (0.10) $ 0.05 $ 0.02 $ (0.03)
============ ============ ============ ============
Weighted average common
shares outstanding 7,276,059 7,276,059 7,276,059 7,276,059
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial
statements.
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DIY HOME WAREHOUSE, INC.
Notes to Unaudited Pro Forma Condensed Financial Statements
- -----------------------------------------------------------
Basis of Presentation
- ---------------------
On June 15, 1999, the Company announced the closing of three stores, located in
Mansfield, Akron and Boardman, Ohio. Concurrent with the announcement, the
Company sold the land and building of its Mansfield store and its previously
closed Canton store, for $8,600,000. The Company also assigned its lease in the
West Akron location to the same purchaser of the Canton and Mansfield
properties. The Boardman location, which had a lease commitment through
September 2008 for approximately $600,000 per year, was amended to terminate on
September 30, 1999. The Company paid $414,173 in consideration for the reduced
lease term.
The Company also entered into an Agreement (the Agreement) with a third party to
act as its agent to sell the merchandise inventories located at the closed
stores. The Company will receive a guaranteed amount from the inventory
liquidation based on a formula outlined in the Agreement.
The Company previously announced the closing of its Bedford and Canton, Ohio
locations on November 26, 1998.
DIY will continue to operate eleven warehouse-format home centers in the
Northeast Ohio marketplace.
The As Previously Reported column in the pro forma condensed balance sheet at
April 3, 1999, represents the actual financial position of DIY Home Warehouse,
Inc., as of April 3, 1999. The As Previously Reported column in the pro forma
condensed statements of operations for the fiscal year ended January 2, 1999,
and for the three months ended April 3, 1999, represents the actual results of
operations of DIY Home Warehouse, Inc. for the full twelve and three month
periods, respectively.
Note (A)
- --------
The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record the estimated proceeds of $8.6 million in cash
from the sale of the Canton and Mansfield properties and the estimated gain of
$1,827,094 as of March 1999 (net of estimated transaction expenses of $525,207).
The net cash proceeds are reflected as an adjustment to pay off all of the
Company's current and long-term Mortgage debt ($1,141,877 current, $3,761,890
long-term). The remaining net cash proceeds are reflected as an adjustment to
reduce the long-term borrowings outstanding under the Company's Revolving Credit
Agreement ($3,120,531). The actual cash proceeds and net gain to be recorded as
of the actual June 15, 1999 closing date may differ from the estimated pro forma
cash proceeds and net gain.
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Note (B)
- --------
The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record, a reduction of retained earnings of $2,532,541
for the estimated write off of the leasehold improvements and furniture and
fixtures associated with the closed stores.
Note (C)
- --------
The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record a reduction to retained earnings and an
increase in the Revolving Credit of $414,173 related to the termination of the
Boardman lease.
Note (D)
- --------
The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record the estimated net proceeds of $5,200,000 to be
received from the sale of the closed stores merchandise inventories as a
reduction to accounts payable ($2,280,660) and the Company's Revolving credit
($2,919,340). The inventory markdowns associated with the sale of merchandise
inventories are recorded as a reduction to retained earnings.
Note (E)
- --------
The Pro Forma Adjustment column of the pro forma balance sheet includes an
adjustment to record a net reduction to retained earnings for other various
closing costs of $271,563. The payment of these costs are reflected as a
borrowing under the Company's Revolving Credit Agreement and an increase in
accrued expenses.
Note (F)
- --------
The Pro Forma Adjustment column of the pro forma balance sheet includes an
adjustment to record an increase in retained earnings related to lower interest
expense as a result of a reduction of long-term debt and borrowings under the
Revolving Credit facility ($1,117,905 for the year ended January 2, 1999 and
$196,289 for the three months ended April 3, 1999).
Note (G)
- --------
The Pro Forma Adjustment column of the pro forma balance sheet includes an
adjustment to record the tax effect of the transactions noted above. The
transactions are tax effected based on the Company's effective tax rates of
approximately 40.3% for the year ended January 2, 1999 and 41.0% for the three
months ended April 3, 1999. The net tax effect of the entries is reflected as an
adjustment to deferred income taxes.
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Note (H)
- --------
The Pro Forma Adjustment column of the pro forma condensed statement of
operations for the fiscal year ended January 2, 1999 includes adjustments to
eliminate the results of operations for the three stores closed in 1999 and the
two stores closed during the fourth quarter of 1998. The pro forma statement of
operations is presented as though the transaction of the five closed stores
occurred on January 2, 1998 (beginning of fiscal year 1998).
Note (I)
- --------
The Pro Forma Adjustment column of the pro forma condensed statement of
operations for the fiscal year ended January 2, 1999 includes the adjustments
from Notes (A) to (G).
Note (J)
- --------
The Pro Forma Adjustment column of the pro forma condensed statement of
operations for the three months ended April 3, 1999 includes adjustments to
record the elimination of the results of operations of the three stores closed
on June 15, 1999. The pro forma statement of operations is presented as though
the transaction occurred on January 2, 1998 (beginning of fiscal year 1998).
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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.
D.I.Y. HOME WAREHOUSE, INC.
(Registrant)
DATED: June 30, 1999
------------- /s/ Eric I. Glassman
----------------
BY: Eric I. Glassman
----------------
Vice President
Chief Financial Officer
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EXHIBIT INDEX
ITEM 7-C
1.1 Press Release Announcing Closing of Three Store Locations
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EXHIBIT 1.1
PRESS RELEASE
ANNOUNCING CLOSING OF THREE STORE LOCATIONS
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[DIY HOME WAREHOUSE, INC. Logo]
Contact: Clifford L. Reynolds, President 5811 Canal Road
and Chief Executive Officer; Valley View, Ohio 44125
Eric I. Glassman, Chief Financial Officer
DIY Home Warehouse, Inc.
Phone 216 328 5100
Fax 216 328 5134
PRESS RELEASE
DIY HOME WAREHOUSE, INC. ANNOUNCES CLOSING OF THREE STORE LOCATIONS
CLEVELAND, OHIO, JUNE 15, 1999 - D.I.Y. Home Warehouse, Inc. (OTC
BULLETIN BOARD: DIYH) today announced it will close three store locations at
2063 West 4th St., Mansfield; 1890 West Market St., Akron; and 550
Boardman-Poland Rd., Boardman. Liquidation sales at these locations are
scheduled to begin later this week, with closing expected later in the summer.
The Mansfield store, as well as a previously closed store at 5800
Whipple Ave., North Canton, are being sold to a single buyer. The Boardman store
lease is being terminated and will revert to the Landlord. Also, we are in the
process of assigning the West Market Street location to a third party.
"Although closing stores never is pleasant or easy, we took advantage
of an opportunity to divest several locations as a package at a price we believe
is favorable to DIY," said Clifford L. Reynolds, president and chief executive
officer. "Proceeds from this sale - as well as from liquidated inventories -
will be used to pay off the company's mortgage and working line of credit
obligations."
Reynolds noted that DIY's goal has been to become debt-free so it may
have the flexibility and resources to pursue new avenues of growth and expansion
in the future. "The sale of these locations and assignment of its leasehold
interests is a significant step toward achieving this goal," he said.
D.I.Y. Home Warehouse, Inc. will continue to operate eleven warehouse
format home centers in the Northeast Ohio marketplace which sell products to
do-it-yourself home repair and remodeling customers and contractors.
The statements contained in this news release may include certain
predictions and projections that may be considered forward-looking statements
under securities law. These statements involve a number of important risks and
uncertainties that could cause actual results to differ materially including,
but not limited to, the performance of the retail and home improvement industry,
as well as other economic, competitive and technological factors involving the
Company's operations, markets, products and prices.
- For Release June 15, 1999
- --------------------------------------------------------------------------------
