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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): August 14, 2000
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D.I.Y. Home Warehouse, Inc.
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(Exact name of registrant as specified in charter)
Ohio 0-21768 38-2560752
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) I.D. No.)
Incorporation)
5811 Canal Road, Valley View, Ohio 44125
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-328-5100
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Not Applicable
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(Former name or former address, if changed since last report.)
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ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On August 14, 2000, D.I.Y. Home Warehouse, Inc. (the "Company") announced the
closing of its North Randall, Ohio store, located at 4601 Northfield Road, and
its Tallmadge Avenue location in Akron, Ohio. In connection with these store
closings, the Company entered into an agreement (the "Agreement") with a
third-party to act as its agent in the liquidation of the merchandise
inventories located at the aforementioned 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 store closings. 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 store closings 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, 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 July 1, 2000;
(iii) Pro Forma Condensed Statement of Operations (Unaudited) for
the year ended January 1, 2000;
(iv) Pro Forma Condensed Statement of Operations (Unaudited) for
the six months ended July 1, 2000; and
(v) Notes to Unaudited Pro Forma Condensed Financial Statements.
(c) Exhibit
10.8 Sale of Merchandise Agreement (North Randall and Tallmadge
Ave.) between D.I.Y. Home Warehouse, Inc. and Schottenstein
Bernstein Capital Group, LLC, dated August 4, 2000, filed
herewith.
99.1 Press Release Announcing Closing of Two Locations dated
August 14, 2000, filed herewith.
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APPENDIX A
D.I.Y. Home Warehouse, Inc.
Introduction to Unaudited Pro Forma Condensed Financial Statements
The following unaudited pro forma condensed balance sheet as of July 1, 2000,
gives effect to: (i) the closure of the North Randall and Tallmadge Ave. stores
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 as of July 1, 2000.
The following unaudited pro forma condensed statements of operations for the
fiscal year ended January 1, 2000 and for the six months ended July 1, 2000 give
effect to: (i) the elimination of the results of operations of the Registrant's
closed stores as described in Notes (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 as of January 3,
1999, the first day of fiscal year 1999.
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 D.I.Y. Home Warehouse, Inc. as included in the reports
filed by the Registrant with the Commission from time to time.
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D.I.Y. HOME WAREHOUSE, INC.
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
July 1, 2000
<TABLE>
<CAPTION>
As
Previously Pro Forma Pro Forma
Reported Adjustments Results
----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 214,984 $ -- $ 214,984
Refundable federal income taxes 606,170 -- 606,170
Merchandise inventories 25,797,584 (4,255,150) (A) 21,542,434
Deferred income taxes 1,607,048 -- 1,607,048
Prepaid expenses and other assets 954,925 (5,402) (B) 949,523
----------------- ------------------ ---------------
Total current assets 29,180,711 (4,260,552) 24,920,159
----------------- ------------------ ---------------
Property and equipment, at cost 39,211,629 (2,816,640) (C) 36,394,989
Less accumulated depreciation and amortization 16,469,801 (2,085,352) (C) 14,384,449
----------------- ------------------ ---------------
Property and equipment, net 22,741,828 (731,288) 22,010,540
Other assets 153,745 -- 153,745
----------------- ------------------ ---------------
Total assets $52,076,284 $(4,991,840) $47,084,444
================= ================== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 188,900 $ -- $ 188,900
Accounts payable 3,993,812 (658,979) (A) 3,334,833
Accrued expenses and other 2,003,450 2,067,693 (D) 4,071,143
----------------- ------------------ ---------------
Total current liabilities 6,186,162 1,408,714 7,594,876
Revolving credit 8,383,304 (2,968,723) (A), (E) 5,414,581
Long-term debt 6,753 -- 6,753
Deferred income taxes 2,862,798 496,060 (F) 3,358,858
----------------- ------------------ ---------------
Total liabilities 17,439,017 (1,063,949) 16,375,068
Stockholders' equity:
Preferred stock, authorized 1,000,000 shares, none
issued -- -- --
Common stock, no par value, 10,000,000 authorized
shares, 7,633,859 shares issued as of July 1, 2000
22,955,462 -- 22,955,462
Retained earnings 11,883,246 (3,927,891) (A) - (F), (I) 7,955,355
Treasury stock, 357,800 shares at cost (201,441) -- (201,441)
----------------- ------------------ ---------------
Total stockholders' equity 34,637,267 (3,927,891) 30,709,376
----------------- ------------------ ---------------
Total liabilities and stockholders' equity $52,076,284 $(4,991,840) $47,084,444
================= ================== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
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D.I.Y. HOME WAREHOUSE, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
for the year ended January 1, 2000
<TABLE>
<CAPTION>
As Previously Pro Forma Adjustments Pro Forma
Reported (Note G) (Note E and F) Results
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Net sales $128,477,523 $(23,534,249) $ -- $104,943,274
Cost of sales 94,829,103 (18,962,399) -- 75,866,704
------------- ------------ ----------- -------------
Gross profit 33,648,420 (4,571,850) -- 29,076,570
Store operating, general and
administrative expenses 33,372,877 (6,967,864) -- 26,405,013
Store closing and development costs 2,082,542 (1,732,543) -- 349,999
------------- ------------ ----------- -------------
Operating (loss) income (1,806,999) 4,128,557 -- 2,321,558
Other (expense) income, net (918,288) 133,859 568,225 (216,204)
------------- ------------ ----------- -------------
(Loss) income before income taxes (2,725,287) 4,262,416 568,225 2,105,354
Income tax (benefit) expense (1,093,702) 1,710,549 228,034 844,881
------------- ------------ ----------- -------------
Net (loss) income $(1,631,585) $2,551,867 $ 340,191 $ 1,260,473
============= ============ =========== =============
(Loss) earnings per common
share, basic and diluted $(0.22) $ 0.17
============= =============
Weighted average common shares
outstanding, basic and diluted
7,276,059 7,276,059
============= =============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
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D.I.Y. HOME WAREHOUSE, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
for the six months ended July 1, 2000
<TABLE>
<CAPTION>
As Previously Pro Forma Adjustments Pro Forma
Reported (Note H) (Note E and F) Results
-------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
Net sales $43,363,646 $(5,347,717) $ -- $38,015,929
Cost of sales 31,124,153 (3,906,029) -- 27,218,124
------------ ----------- ------------ ------------
Gross profit 12,239,493 (1,441,688) -- 10,797,805
Store operating, general and
administrative expenses 14,129,500 (1,855,427) 12,274,073
------------ ----------- ------------ ------------
Operating (loss) income (1,890,007) 413,739 -- (1,476,268)
Other (expense) income, net (381,154) -- 329,752 (51,402)
------------ ----------- ------------ ------------
(Loss) income before income taxes
(2,271,161) 413,739 329,752 (1,527,670)
Income tax (benefit) expense (901,348) 154,200 140,867 (606,281)
------------ ----------- ------------ ------------
Net (loss) income $(1,369,813) $259,539 $188,885 $(921,389)
============ =========== ============ ============
(Loss) earnings per common
share, basic and diluted $(0.19) $(0.13)
============ ============
Weighted average common
shares outstanding, basic and
diluted 7,276,059 7,276,059
============ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
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D.I.Y. HOME WAREHOUSE, INC.
Notes to Unaudited Pro Forma Condensed Financial Statements
-----------------------------------------------------------
Basis of Presentation
---------------------
On August 14, 2000, D.I.Y Home Warehouse, Inc. (the "Company" or "D.I.Y.")
announced the closing of its North Randall, Ohio store, located at 4601
Northfield Road, and its Tallmadge Avenue location in Akron, Ohio. In connection
with these store closings, the Company entered into an agreement (the
"Agreement") with a third-party to act as its agent in the liquidation of the
merchandise inventories located at the aforementioned 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 Mansfield, Ohio store, its
West Market Street store in Akron, Ohio and its Boardman, Ohio store on June 15,
1999. The Company had also announced the closing of its Bedford, Ohio and
Canton, Ohio stores on November 26, 1998.
D.I.Y. will continue to operate nine warehouse-format home centers in the
Northeast Ohio marketplace.
The As Previously Reported column in the pro forma condensed balance sheet at
July 1, 2000 represents the actual financial position of D.I.Y. Home Warehouse,
Inc. as of July 1, 2000. The As Previously Reported column in the pro forma
condensed statements of operations for the fiscal year ended January 1, 2000,
and for the six months ended July 1, 2000 represents the actual results of
operations of D.I.Y. Home Warehouse, Inc. for the full twelve and six month
periods, respectively.
Note (A)
--------
The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record the estimated net proceeds of $2,729,725 to be
received from the sale of the North Randall and Tallmadge Ave. stores'
merchandise inventories as a $658,979 reduction to accounts payable and a
$2,070,746 reduction in the Company's outstanding revolving credit facility
balance. The inventory markdowns associated with the sale of merchandise
inventories are recorded as a reduction to retained earnings.
Note (B)
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The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record a $5,402 reduction in prepaid assets associated
with the North Randall and Tallmadge Ave. stores. The write-off of the prepaid
assets is recorded as a reduction to retained earnings.
Note (C)
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The Pro Forma Adjustment column of the pro forma condensed balance sheet
includes an adjustment to record a $731,288 reduction of retained earnings for
the estimated write off of the net leasehold improvements, equipment and
furniture and fixtures associated with the North Randall and Tallmadge Ave.
stores. Included in this total write-off amount is $102,072 related to leasehold
improvements at the North Randall store. The Company is currently in
negotiations to sublease this facility, at which point some portion the
leasehold improvements at the North Randall store may provide future benefit and
would not be required to be written off.
Note (D)
--------
The Pro Forma Adjustment column of the pro forma balance sheet includes an
adjustment to record an increase in accrued expenses for certain store closing
costs including future net rent expense of $1,782,093 related to the North
Randall store ($471,438 during fiscal year 1999, $462,584 during fiscal year
2000, $462,584 during fiscal year 2001 and $385,487 during fiscal year 2002) and
an estimated $285,600 in various other store closing costs for both the North
Randall and Tallmadge Ave. stores. These store closing costs are reflected as a
reduction to retained earnings.
As noted above, the Company is currently in negotiations to sublease the North
Randall store. Any sublease rental income generated by the North Randall store
will be recorded as a reduction to the future net rent expense detailed
previously.
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Note (E)
--------
The Pro Forma Adjustment column of the pro forma balance sheet includes an
adjustment to record a $897,977 increase in retained earnings related to lower
interest expense as a result of a reduction in borrowings under the Company's
revolving credit facility. The Pro Forma Adjustment column of the pro forma
condensed statement of operations for fiscal year 1999 and the first half of
fiscal year 2000 include adjustments of $568,225 and $329,752, respectively,
related to this reduction in interest expense.
Note (F)
--------
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 40.1% for fiscal year 1999 and 41.0% for the first half of fiscal
year 2000. The adjustments amounted to $228,034 and $140,867, respectively, and
are included in the Pro Forma Adjustment column of the pro forma condensed
statement of operations for fiscal year 1999 and the first half of fiscal year
2000. The net tax effect of these entries is reflected as an adjustment to
deferred income taxes and is consistent with the Company's historical tax
treatment and presentation.
Note (G)
--------
The Pro Forma Adjustment column of the pro forma condensed statement of
operations for fiscal year 1999 includes adjustments to eliminate the results of
operations of the two stores closed during fiscal year 2000, the three stores
closed during fiscal year 1999 and certain closing costs recorded during fiscal
year 1999 related to the two stores closed during fiscal year 1998. The pro
forma statement of operations is presented as though the transactions associated
with the closure of these seven stores occurred on the first day of fiscal year
1999.
Note (H)
--------
The Pro Forma Adjustment column of the pro forma condensed statement of
operations for the first six months of fiscal year 2000 includes adjustments to
record the elimination of the results of operations of the two stores closed
during fiscal year 2000. The pro forma statement of operations is presented as
though the transactions occurred on the first day of fiscal year 1999.
Note (I)
--------
The Pro Forma Adjustment column of the pro forma balance sheet includes
non-recurring adjustments of $1,525,425 associated with inventory markdowns
(See Note (A)), $5,402 of reduction in prepaid assets (See Note (B)), $731,288
of fixed assets write-offs (See Note (C)), $1,782,093 in future net rent expense
and $285,600 of estimated store closing costs (See Note (D)). These one-time
charges related to the closing of the North Randall and Tallmadge Ave. stores
are excluded from the pro forma condensed statements of operations in
accordance with financial reporting rules of the Commission. Such adjustments
will be reflected in the Company's third quarter fiscal year 2000 financial
statements.
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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: August 29, 2000 BY: /s/ Todd Ayers
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Controller
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INDEX TO EXHIBITS
D.I.Y. Home Warehouse, Inc.
Current Report on Form 8-K
(Earliest Event Reported: August 14, 2000)
10.8 Sale of Merchandise Agreement (North Randall and Tallmadge Ave.)
between D.I.Y Home Warehouse, Inc. and Schottenstein Bernstein
Capital Group, LLC, dated August 4, 2000, filed herewith.
99.1 Press Release Announcing Closing of Two Store Locations, dated
August 14, 2000, filed herewith.
10
