SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For the Quarterly Period Ended March 27, 1999 Number 0-22468
-------------- -------
WICKES INC.
-----------
(Exact name of registrant as specified in its charter)
Delaware 36-3554758
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
706 North Deerpath Drive, Vernon Hills, Illinois 60061
- ------------------------------------------------ -------
(Address of principal executive offices) (Zip Code)
847-367-3400
------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---
As of April 30, 1999, the Registrant had 8,214,776 shares of Common Stock,
par value $.01 per share outstanding.
<PAGE> 2
WICKES INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 27, 1999 and December 26, 1998 (Unaudited) 3
Condensed Consolidated Statements of Operations
For the three months ended March 27, 1999 and
March 28, 1998 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
For the three months ended March 27, 1999 and
March 28, 1998 (Unaudited) 5
Notes to Condensed Consolidated
Financial Statements (Unaudited) 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
WICKES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands except share data)
<TABLE>
<CAPTION>
March 27, December 26,
1999 1998
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 65 $ 65
Accounts receivable, less allowance for doubtful
accounts of $4,524 in 1999 and $4,393 in 1998 86,769 92,926
Notes receivable 863 1,095
Inventory 127,597 103,716
Deferred tax asset 10,582 8,857
Prepaid expenses 2,454 2,808
------- -------
Total current assets 228,330 209,467
------- -------
Property, plant and equipment, net 46,679 45,830
Trademark (net of accumulated amortization of
$10,552 in 1999 and $10,496 in 1998) 6,468 6,523
Deferred tax asset 17,482 17,482
Rental equipment (net of accumulated depreciation
of $684 in 1999 and $572 in 1998) 1,866 1,883
Other assets (net of accumulated amortization of
$9,905 in 1999 and $9,502 in 1998) 12,808 10,998
------- -------
Total assets $313,633 $292,183
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 10 $ 16
Accounts payable 63,429 54,017
Accrued liabilities 18,567 20,089
------- -------
Total current liabilities 82,006 74,122
------- -------
Long-term debt, less current maturities 208,751 191,961
Other long-term liabilities 2,988 2,952
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock (no shares issued)
Common stock (8,210,947 shares issued and
outstanding in 1999 and 8,207,268 shares
issued and outstanding in 1998) 82 82
Additional paid-in capital 86,803 86,787
Accumulated deficit (66,997) (63,721)
------- -------
Total stockholders' equity 19,888 23,148
------- -------
Total liabilities & stockholders' equity $313,633 $292,183
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
WICKES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 27, March 28,
1999 1998
--------- ---------
<S> <C> <C>
Net sales $ 191,110 $ 168,746
Cost of sales 145,203 127,763
------- -------
Gross profit 45,907 40,983
------- -------
Selling, general and administrative expenses 44,643 40,595
Depreciation, goodwill and trademark amortization 1,432 1,266
Provision for doubtful accounts 448 1,333
Restructuring and unusual items - 5,431
Other operating income (889) (2,386)
------- -------
45,634 46,239
------- -------
Income (loss) from operations 273 (5,256)
Interest expense 5,302 5,422
------- -------
Loss before income tax benefit (5,029) (10,678)
Provision for income tax benefit (1,753) (3,879)
------- -------
Net loss $ (3,276) $ (6,799)
======= =======
Basic and diluted loss per common share $ (0.40) $ (0.83)
======= =======
Weighted average common shares - for basic & diluted 8,210,179 8,181,850
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
WICKES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 27, March 28,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,276) $ (6,799)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation expense 1,315 1,149
Amortization of trademark 56 56
Amortization of goodwill 61 61
Amortization of deferred financing costs 342 538
Provision for doubtful accounts 448 1,333
Gain on sale of assets (29) (1,399)
Deferred tax benefit (1,725) (4,166)
Changes in assets and liabilities:
Decrease in accounts receivable 5,709 5,630
Decrease in notes receivable 232 2,138
Increase in inventory (23,881) (11,959)
Increase in accounts payable, accrued liabilities
and other long term liabilities 7,926 8,099
Increase in other assets (1,954) (491)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (14,776) (5,810)
------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment (2,102) (799)
Proceeds from sales of property, plant and equipment 78 2,724
------- -------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (2,024) 1,925
------- -------
Cash flows from financing activities:
Net borrowings under revolving line of credit 16,790 3,877
Reductions of note payable (6) (15)
Net proceeds from issuance of common stock 16 16
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,800 3,878
------- -------
NET DECREASE IN CASH - (7)
Cash at beginning of period 65 79
------- -------
CASH AT END OF PERIOD $ 65 $ 72
======= =======
Supplemental schedule of cash flow information:
Interest paid $ 1,794 $ 2,159
Income taxes paid $ 217 $ 82
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------
Restatement
-----------
The condensed consolidated balance sheets as of March 27, 1999 and
December 26, 1998 have been restated to reflect an after-tax charge of
$514,000 related to a barter transaction entered into in the third quarter
of 1998, see Note 9. Barter Transaction.
Basis of Financial Statement Presentation
-----------------------------------------
The condensed consolidated financial statements present the results of
operations, financial position, and cash flows of Wickes Inc. and its
consolidated subsidiaries (the "Company"). The Company has determined that
it operates in one business segment, that being the supply and distribution
of lumber and building materials to building professionals and do-it-
yourself customers, primarily in the Midwest, Northeast, and South. All
information required by SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", is included in the Company's financial
statements.
The condensed consolidated balance sheet as of March 27, 1999, the
condensed consolidated statements of operations and the condensed
consolidated statements of cash flows for the three-month periods ended
March 27, 1999 and March 28, 1998 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at March 27, 1999 and for
all periods presented have been made. The results for the three-month
period ended March 27, 1999 are not necessarily indicative of the results
to be expected for the full year or for any interim period.
The year-end condensed consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 26, 1998, filed with the Securities and Exchange
Commission.
Share Data
----------
The Company issued 3,679 shares of Common Stock to members of its board
of directors as compensation during the three-months ended March 27, 1999.
2. LONG-TERM DEBT
- -------------------
Long-term debt is comprised of the following at March 27, 1999 (in
thousands):
<TABLE>
<S> <C>
Revolving line of credit $ 108,751
Senior subordinated notes 100,000
Other 10
Less current maturities (10)
-------
Total long-term debt $ 208,751
=======
</TABLE>
6
<PAGE> 7
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Under the revolving line of credit, the Company may borrow against
certain levels of accounts receivable and inventory. The unused amount
available for borrowing at March 27, 1999 was $33.9 million.
On February 17, 1999 the Company entered into a new revolving credit
agreement with a group of financial institutions. The new revolving line
of credit provides for up to $160 million of revolving credit loans and
credits.
3. INCOME TAXES
- -----------------
The provision for income taxes for the three-month period ended March
27, 1999 was a benefit of $1.8 million compared to a benefit of $3.9
million for the three-month period ended March 28, 1998. An effective
federal and state income tax rate of 40.5% was used to calculate income
taxes for the first three months of 1999, compared with an effective rate
of 39.0% for the first three months of 1998. In addition to the effective
income tax rate, state franchise taxes were calculated separately and are
included in the provision reported.
4. COMMITMENTS AND CONTINGENCIES
- ---------------------------------
At March 27, 1999, the Company had accrued approximately $152,000
(included in accrued liabilities at March 27, 1999) for remediation of
certain environmental and product liability matters, principally
underground storage tank removal.
Many of the sales and distribution facilities presently and formerly
operated by the Company contained underground petroleum storage tanks. All
such tanks known to the Company located on facilities owned or operated by
the Company have been filled or removed in accordance with applicable
environmental laws in effect at the time. As a result of reviews made in
connection with the sale or possible sale of certain facilities, the
Company has found petroleum contamination of soil and ground water on
several of these sites and has taken, and expects to take, remedial actions
with respect thereto. In addition, it is possible that similar
contamination may exist on properties no longer owned or operated by the
Company the remediation of which the Company could under certain
circumstances be held responsible. Since 1988, the Company has incurred
approximately $2.0 million of costs, net of insurance and regulatory
recoveries, with respect to the filling or removing of underground storage
tanks and related investigatory and remedial actions. Insignificant amounts
of contamination have been found on excess properties sold over the past
four years. The Company has currently reserved $60,000 for estimated clean-
up costs at 15 of its locations.
7
<PAGE> 8
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company has been identified as having used two landfills which are
now Superfund clean-up sites, for which it has been requested to reimburse
a portion of the clean-up costs. Based on the amounts claimed and the
Company's prior experience, the Company has established a reserve of
$45,000 for these matters.
The Company is one of many defendants in two class action suits filed in
August of 1996 by approximately 200 claimants for unspecified damages as a
result of health problems claimed to have been caused by inhalation of
silica dust, a byproduct of concrete and mortar mix, allegedly generated by
a cement plant with which the Company has no connection other than as a
customer. The Company has entered into a cost sharing agreement with its
insurers, and any liability is expected to be minimal.
The Company is one of many defendants in approximately 100 actions, each
of which seeks unspecified damages, in various Michigan state courts
against manufacturers and building material retailers by individuals who
claim to have suffered injuries from products containing asbestos. Each of
the plaintiffs in these actions is represented by one of two law firms.
The Company is aggressively defending these actions and does not believe
that these actions will have a material adverse effect on the Company.
Since 1993, the Company has settled 16 similar actions for insignificant
amounts, and another 186 of these actions have been dismissed. As of April
30, 1999 none of these suits have made it to trial.
Losses in excess of the $152,000 reserved as of March 27, 1999 are
possible but an estimate of these amounts cannot be made.
On November 3, 1995, a complaint styled Morris Wolfson v. J. Steven
-----------------------------
Wilson, Kenneth M. Kirschner, Albert Ernest, Jr., Claudia B. Slacik, Jon F.
- ---------------------------------------------------------------------------
Hanson, Robert E. Mulcahy, Frederick H. Schultz, Wickes Lumber Company and
- ---------------------------------------------------------------------------
Riverside Group, Inc. was filed in the Court of Chancery of the State of
- ----------------------
Delaware in and for New Castle County (C.A. No. 14678). As amended, this
complaint alleged, among other things, that the sale by the Company in 1996
of 2 million newly-issued shares of the Company's Common Stock to Riverside
Group, Inc., the Company's largest stockholder, was unfair and constituted
a waste of assets and that the Company's directors in connection with the
transaction breached their fiduciary duties. In March 1999, by stipulation
among the parties, this complaint was dismissed without prejudice.
The Company is involved in various other legal proceedings which are
incidental to the conduct of its business. The Company does not believe
that any of these proceedings will have a material adverse effect on the
Company.
The Company's assessment of the matters described in this note and other
forward-looking statements in this Form 10-Q are made pursuant to the safe
8
<PAGE> 9
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
harbor provisions of the Private Securities Litigation Reform Act of 1995
("Forward-Looking Information") and are inherently subject to uncertainty.
The outcome of the matters described in this note may differ from the
Company's assessment of these matters as a result of a number of factors
including but not limited to: matters unknown to the Company at the
present time, development of losses materially different from the Company's
experience, the Company's ability to prevail against its insurers with
respect to coverage issues to date, the financial ability of those insurers
and other persons from whom the Company may be entitled to indemnity, and
the unpredictability of matters in litigation.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- ---------------------------------------------
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," standardizes the accounting
for derivative instruments by requiring that all derivatives be recognized
as assets and liabilities and measured at fair value. The statement is
effective for fiscal years beginning after June 15, 1999. The Company
believes adoption of the statement will not have a material effect on its
financial statements.
6. EARNINGS PER SHARE
- ----------------------
The Company calculates earnings per share in accordance with Statement
of Financial Accounting Standards No. 128. The following is the
reconciliation of the numerators and denominators of the basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 27, March 28,
1999 1998
---------- ----------
<S> <C> <C>
Numerators:
Net loss - for basic and
diluted EPS $(3,276,000) $(6,799,000)
---------- ----------
Denominators:
Weighted average common
shares - for basic EPS 8,210,179 8,181,850
Common share from warrants - 5,375
Common shares from options 65,933 -
---------- ----------
Weighted average common
shares - for diluted EPS 8,276,112 8,187,225
</TABLE>
9
<PAGE> 10
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In periods where net losses are incurred, diluted weighted average common
shares are not used in the calculation of diluted EPS as it would have an
anti-dilutive effect on EPS. In addition, options to purchase 379,732 and
668,283 weighted average shares of common stock during the first quarter of
1999 and 1998, respectively, were not included in the diluted EPS as the
options' exercise prices were greater than the average market price.
7. RESTRUCTURING
- -----------------
During the first quarter of 1998 the Company implemented a restructuring
plan which resulted in the closing or consolidation of eight sales and
distribution and two manufacturing facilities in February, the sale of two
sales and distribution facilities in March, and further reductions in
headquarters staffing. As a result of the 1998 Plan, the Company recorded
a restructuring charge of $5.4 million in the first quarter. The $5.4
million charge included $3.7 million in estimated losses on the disposition
of closed facility assets and liabilities, $2.0 million in severance and
postemployment benefits related to the 1998 plan, and a benefit of $300,000
for adjustments to prior years' restructuring accruals.
8. SUBSEQUENT EVENTS
- ----------------------
On March 29, 1999, the Company announced the acquisition of Porter
Building Products, a building components manufacturer based in Delaware
with 1998 reported sales of $10.8 million. Porter Building Products
produces roof trusses, floor trusses, and wall panels and has served the
builders in the Delaware, eastern Pennsylvania, southern New Jersey and
northern Maryland markets for more than 20 years.
10
<PAGE> 11
9. BARTER TRANSACTION
- ----------------------
This Amendment No. 1 is being filed as a result in the change of accounting
for a barter transaction that occurred in the third quarter of 1998. This
change affected the Company's condensed consolidated balance sheets at
March 27, 1999 and December 26, 1998. The following table reconciles the
amounts previously reported to the amounts currently being reported as of
March 27, 1999 (amounts in thousands).
<TABLE>
<CAPTION>
Restatement
Previously for Barter
Reported Transaction As Restated
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Prepaid expenses $ 3,298 $ (844) $ 2,454
Deferred tax asset 17,205 277 17,482
Total assets 314,200 (567) 313,633
LIABILITIES & STOCKHOLDERS' EQUITY
Accrued liabilities $ 18,620 $ (53) $ 18,567
Accumulated deficit (66,483) (514) (66,997)
Total liabilities &
stockholders' equity 314,200 (567) 313,633
</TABLE>
11
<PAGE> 12
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial data schedule (SEC use only).
(b) Reports on Form 8-K
None.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment No. 1
to Form 10-Q to be signed on its behalf by the undersigned, thereunto duly
authorized.
WICKES INC.
By: /s/ J. Steven Wilson
--------------------
J. Steven Wilson
Chairman and Chief Executive Officer
(Principal Executive and Financial Officer)
By: /s/ John M. Lawrence
--------------------
John M. Lawrence
Controller and Principal Accounting
Officer
Date: October 1, 1999
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
27, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> MAR-27-1999
<CASH> 65
<SECURITIES> 0
<RECEIVABLES> 91,293
<ALLOWANCES> 4,524
<INVENTORY> 127,597
<CURRENT-ASSETS> 228,330
<PP&E> 80,982
<DEPRECIATION> 34,303
<TOTAL-ASSETS> 313,633
<CURRENT-LIABILITIES> 82,006
<BONDS> 100,000
0
0
<COMMON> 82
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 313,633
<SALES> 191,110
<TOTAL-REVENUES> 191,110
<CGS> 145,203
<TOTAL-COSTS> 145,203
<OTHER-EXPENSES> 45,186
<LOSS-PROVISION> 448
<INTEREST-EXPENSE> 5,302
<INCOME-PRETAX> (5,029)
<INCOME-TAX> (1,753)
<INCOME-CONTINUING> (3,276)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,276)
<EPS-BASIC> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
