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 September 26, 1998 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 October 30, 1998, the Registrant had 8,207,268 shares of Common Stock, par
value $.01 per share, and no shares of Class B Non-Voting Common Stock, par
value $.01 per share, outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
WICKES INC. AND SUBSIDIARIES
INDEX
-----
Page
Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 26, 1998 and December 27, 1997 (Unaudited) 3
Condensed Consolidated Statements of Operations
For the three months and nine months ended
September 26, 1998 and September 27, 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 26, 1998 and
September 27, 1997 (Unaudited) 5
Notes to Condensed Consolidated
Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 27
</TABLE>
2
<PAGE> 3
WICKES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands except share data)
<TABLE>
<CAPTION>
September 26, December 27,
1998 1997
------------ -----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 645 $ 79
Accounts receivable, less allowance for doubtful
accounts of $4,383 in 1998 and $3,765 in 1997 104,835 81,788
Notes receivable 1,221 3,200
Inventory 113,127 102,706
Deferred tax asset 9,260 8,955
Prepaid expenses 2,305 1,246
--------- ---------
Total current assets 231,393 197,974
--------- ---------
Property, plant and equipment, net 44,691 46,763
Trademark (net of accumulated amortization of
$10,441 in 1998 and $10,274 in 1997) 6,579 6,745
Deferred tax asset 17,054 17,054
Rental equipment (net of accumulated depreciation
of $471 in 1998 and $176 in 1997) 1,923 2,030
Other assets (net of accumulated amortization of
$9,121 in 1998 and $8,053 in 1997) 11,065 12,786
--------- ---------
$ 312,705 $ 283,352
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 22 $ 46
Accounts payable 47,742 41,190
Accrued liabilities 22,160 22,279
--------- ---------
Total current liabilities 69,924 63,515
--------- ---------
Long-term debt, less current maturities 217,525 193,061
Other long-term liabilities 2,876 2,775
Commitments and contingencies (Note 4)
Common stockholders' equity:
Common stock (8,202,264 shares issued and
outstanding in 1998 and 8,176,205 shares 82 82
issued and outstanding in 1997)
Additional paid-in capital 86,771 86,675
Accumulated deficit (64,473) (62,756)
--------- ---------
Total common stockholders' equity 22,380 24,001
--------- ---------
$ 312,705 $ 283,352
========= =========
</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 Nine Months Ended
------------------ -----------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 261,137 $ 266,324 $ 667,024 $ 662,978
Cost of sales 200,925 206,048 509,740 511,448
--------- --------- --------- ---------
Gross profit 60,212 60,276 157,284 151,530
--------- --------- --------- ---------
Selling, general and administrative
expenses 49,516 51,063 135,935 135,752
Depreciation, goodwill and
trademark amortization 1,296 1,123 3,846 3,540
Provision for doubtful accounts 551 301 1,760 884
Restructuring and unusual items 501 - 5,932 -
Other operating income (1,240) (2,056) (5,045) (4,534)
--------- --------- --------- ---------
50,624 50,431 142,428 135,642
--------- --------- --------- ---------
Income from operations 9,588 9,845 14,856 15,888
Interest expense 5,571 5,491 16,482 15,902
Equity in loss of affiliated company - 704 - 1,470
--------- --------- --------- ---------
Income (loss) before income taxes 4,017 3,650 (1,626) (1,484)
Provision for income taxes 1,721 1,817 91 531
--------- --------- --------- ---------
Net income (loss) $ 2,296 $ 1,833 $ (1,717) $ (2,015)
========= ========= ========= =========
Basic income (loss) per common share $ 0.28 $ 0.22 $ (0.21) $ (0.25)
========= ========= ========= =========
Diluted income(loss) per common share $ 0.28 $ 0.22 $ (0.21) $ (0.25)
========= ========= ========= =========
Weighted average common shares -
for basic 8,201,710 8,169,643 8,194,446 8,166,325
========= ========= ========= =========
Weighted average common shares -
for diluted 8,258,803 8,203,082 8,194,446 8,166,325
========= ========= ========= =========
</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>
Nine Months Ended
-----------------
Sept. 26, Sept. 27,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,717) $ (2,015)
Adjustments to reconcile net loss to
net cash used in operating activities:
Equity in loss of affiliated company - 1,470
Depreciation expense 3,495 3,190
Amortization of trademark 167 167
Amortization of goodwill 184 184
Amortization of deferred financing costs 1,127 1,026
Provision for doubtful accounts 1,760 884
Gain on sale of assets (1,574) (1,354)
Deferred tax benefit (305) (579)
Changes in assets and liabilities:
Increase in accounts receivable (24,807) (33,482)
Decrease in notes receivable 1,979 -
Increase in inventory (10,421) (17,298)
Increase in accounts payable and accrued liabilities 6,534 10,904
Increase in other assets (838) (1,838)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (24,416) (38,741)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (3,184) (4,966)
Proceeds from sales of property, plant and equipment 3,629 7,946
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 445 2,980
-------- --------
Cash flows from financing activities:
Net borrowing under revolving line of credit 24,481 33,974
Reductions of notes payable (40) (115)
Net proceeds from issuance of common stock 96 47
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,537 33,906
-------- --------
NET INCREASE/(DECREASE) IN CASH 566 (1,855)
Cash at beginning of period 79 1,933
-------- --------
CASH AT END OF PERIOD $ 645 $ 78
======== ========
Supplemental schedule of cash flow information:
Interest paid $ 12,919 $ 12,137
Income taxes paid $ 769 $ 1,052
</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
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Restatement
-----------
The Company has restated the condensed consolidated balance sheets as of
September 26, 1998 and the condensed consolidated statements of operations for
the three-month and nine-month periods ended September 26, 1998 to reflect a
pre-tax non-cash charge of approximately $844,000 for a one time barter
transaction (see Note 10).
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 condensed consolidated balance sheet as of September 26, 1998, the
condensed consolidated statements of operations for the three-month and nine-
month periods ended September 26, 1998 and September 27, 1997 and the condensed
consolidated statements of cash flows for the nine-month periods ended September
26, 1998 and September 27, 1997 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 September 26, 1998 and for all periods
presented have been made. The results for the three-month and nine-month periods
ended September 26, 1998 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 27, 1997, filed
with the Securities and Exchange Commission.
Share Data
----------
During the nine-month period ended September 26, 1998 the Company issued
11,210 shares of Common Stock to members of its board of directors as
compensation and 14,849 shares of Common stock upon exercise of employee
warrants and options. Unexercised warrants for 3,068 shares of the Company's
common stock expired in May 1998.
On April 13, 1998, all 499,768 outstanding shares of Class B Non-Voting
Common Stock, par value $.01 per share, were converted to 499,768 shares of
Common Stock, par value $.01 per share.
6
<PAGE> 7
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. LONG-TERM DEBT
--------------
Long-term debt is comprised of the following at September 26, 1998 (in
thousands):
<TABLE>
<S> <C>
Revolving line of credit $ 117,525
Senior subordinated notes 100,000
Other 22
Less current maturities (22)
-------
Total long-term debt $ 217,525
=======
</TABLE>
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 September 26, 1998 was $12.2 million.
On March 20, 1998, the Company and its lenders entered into a third amendment
to the Company's revolving credit agreement. This amendment includes a
modification to the fixed charge ratio covenant to reflect the restructuring
announced by the Company in February 1998 and includes the lenders' consent to
the Company's sale of its Iowa facilities and its internet and utilities
marketing operations. The lenders have waived the non-compliance by the Company
with the fixed charge ratio at September 26, 1998.
3. INCOME TAXES
------------
The provision for income taxes for the nine-month period ended September 26,
1998 was $0.1 million compared to $0.5 million for the nine-month period ended
September 27, 1997. An effective federal income tax rate of 39.0% was used to
calculate federal income taxes for the first nine months of 1998, compared with
an effective rate of 39.1% for the first nine months of 1997. In addition to
the effective federal tax rate, state income and franchise taxes were calculated
separately and are included in the provision reported.
4. COMMITMENTS AND CONTINGENCIES
-----------------------------
At September 26, 1998, the Company had accrued $500,000 (included in accrued
liabilities at September 26, 1998) 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
7
<PAGE> 8
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. It is possible that the Company could incur additional
losses in excess of current reserves but an estimate of these losses cannot be
made. Since 1988, the Company has incurred approximately $1.9 million of net
costs with respect to the filling or removing of underground storage tanks and
related investigatory and remedial actions.
The Company is one of many defendants in approximately 60 actions, each of
which seeks unspecified damages, brought since 1993, 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. The number of outstanding
claims has continued to decline over the last two years. Since 1993, the
Company has settled 11 claims for insignificant amounts, another 185 of these
actions have been dismissed.
On November 3, 1995, a complaint styled Wolfson v. Riverside Group, Inc., et
al., was filed against the Company, its Directors and Riverside Group, Inc. in
the Court of Chancery of the State of Delaware in and for New Castle County
(C.A. No. 14678). As amended, this complaint alleges, among other things, that
the sale in 1995 by the Company of 2 million newly issued shares of its common
stock to Riverside Group, Inc. was unfair and constituted a waste of Wickes'
assets and that Wickes and Riverside breached their fiduciary duties in their
approval of this transaction. The amended complaint, among other things, seeks
on behalf of a purported class of the Company's shareholders to enjoin, or to
obtain unspecified damages with respect to, the transaction.
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.
8
<PAGE> 9
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
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
-----------------------------------------
Reporting Comprehensive Income. Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income," establishes standards for reporting
and display of comprehensive income and its components in a full set of general-
purpose financial statements. The term comprehensive income is defined as the
change in the equity of a business. Comprehensive income includes net income as
well as other components (revenues, expenses, gains, and losses) that under
generally accepted accounting principles are excluded from net income but
affect equity. The statement was effective for fiscal years beginning after
December 15, 1997, however, as the Company has no items of other comprehensive
income, this statement is not applicable to the Company.
Disclosure about Segments. Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information,"
changes Statement of Financial Accounting Standards No. 14 by requiring a new
framework for segment reporting and includes the disclosure of financial
information related to each segment. The statement was effective for fiscal
years beginning after December 15, 1997, however, adoption of this statement is
not required in interim statements in the initial year of application. The
Company is currently evaluating the effects of this pronouncement.
Employers' Disclosures About Pensions and Other Postretirement Benefits.
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits," standardizes the disclosure
requirements for pensions and other postretirement benefits, requires additional
information on changes in the benefit obligation and fair values of plan assets
and eliminates certain disclosures that are no longer useful. This statement is
effective for fiscal years beginning after December 15, 1997. The Company
believes that the adoption of this statement will not have a significant impact
on its financial statements.
9
<PAGE> 10
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accounting for Derivative Instruments and Hedging Activities.
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities," establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments imbedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
also requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. This statement is
effective for fiscal years beginning after June 30, 1999. The Company believes
that the adoption of this statement will not have a significant impact on its
financial statements.
6. EARNINGS PER SHARE
------------------
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128. As required by this statement the
Company has adopted the standard for computing and presenting earnings per
share, and for all prior period earnings per share data presented. The
following is the reconciliation of the numerators and denominators of the basic
and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Numerators:
Net loss - for basic and
diluted EPS $ 2,296,000 $ 1,833,000 $ (1,717,000) $ (2,015,000)
Denominators:
Weighted average common
shares - for basic EPS 8,201,710 8,169,643 8,194,446 8,166,325
Common shares from warrants - 9,214 - 9,214
Common shares from options 57,093 24,225 68,022 24,098
--------- --------- --------- ---------
Weighted average common
shares - for diluted EPS 8,258,803 8,203,082 8,262,468 8,199,637
</TABLE>
In years where net losses are incurred, diluted weighted average common
shares are not used in the calculation of diluted earnings per share as it would
have an anti-dilutive effect on EPS. In addition, options to purchase 411,320
and 316,420 additional weighted average shares of common stock during the nine
months of 1998 and 1997 were not included in the diluted EPS as the options'
exercise prices were greater than the average market price and the effect would
be antidilutive.
10
<PAGE> 11
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. OPERATIONAL RESTRUCTURING
-------------------------
In February of 1998, the Company announced a restructuring plan, the "1998
Plan", which included the closing or consolidation of eight sales and
distribution facilities and two component manufacturing facilities in February,
the sale of two additional sales and distribution facilities in March, and
further reductions in headquarters staffing. The Company recorded a
restructuring charge of $5.4 million, which included $3.7 million in anticipated
losses on the disposition of closed center assets and liabilities, $2.0 million
in severance and post employment benefits related to the 1998 Plan, and a
benefit of $300,000 for adjustments to prior years' restructuring accruals. The
$3.7 million in anticipated losses includes the write-down of assets, net
realizable value, of $3.4 million and $300,000 in real estate carrying costs.
The $2,000,000 in severance and post employment benefits covered approximately
250 employees that were released as a result of reductions in headquarters
staffing and the closing or consolidation of the ten operating facilities. The
$300,000 benefit from prior years was a result of accelerated sales of
previously closed facilities during the fourth quarter of 1997 and the first
quarter of 1998. The acceleration of these sales resulted in a change in the
estimate of facility carrying costs for the sold facilities. No restructuring
or unusual items were recorded in the first nine months of 1997.
In the third quarter of 1998, the Company recorded additional restructuring
expense of $500,000 as a result of certain costs, including facility carrying
costs and severance costs, that were in excess of estimates or unknown at the
time the plan was announced, but incurred as a result of the 1998 Plan.
8. RELATED PARTY TRANSACTION
-------------------------
In February 1998, as part of the determination made by the Company to
discontinue or sell non-core programs, the Company sold certain operations to
its majority stockholder for a three-year $870,000 unsecured promissory note and
10% of future net income of these operations (subject to a maximum of $429,249
plus interest). At November 1, 1998, the Company's majority stockholder had
made payments of $115,752 under the promissory note but was delinquent with
respect to required payments of approximately $88,854 of principal and interest.
11
<PAGE> 12
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUBSEQUENT EVENT
----------------
On July 16, 1998, the Company announced an agreement in principle to acquire
Eagle Industries Inc., an Indianapolis, Indiana component manufacturer with 1997
sales of $10.5 million. Eagle Industries manufactures and distributes roof
trusses, wall panels and other building materials to the home building industry.
The transaction has been substantially completed.
10. BARTER TRANSACTION
------------------
In September of 1998, the Company entered into a one-time transaction in
which it exchanged clearance merchandise, with a book value of $1.2 million, for
barter credits at a stated value of $1.6 million. No effect to earnings was
recorded at that time and the barter credits were recorded as a prepaid expense
with a value of $1.2 million. The Company has restated its September 1998
financial statements upon receiving written confirmation from a second "Big-
Five" accounting firm and after careful review and concurrence of its Board of
Directors Audit Committee. A non-cash charge of $844,000 has now been recorded
to reduce the value of the inventory exchanged, and the resulting book value of
the barter credits, from $1.2 million to $350,000. As a result of this change,
the Company would record increased future earnings for each dollar of barter
credits used in excess of $350,000.
The following table reconciles the amounts previously reported to the
amounts currently being reported in the condensed consolidated statements of
operations for the three months ended September 26, 1998 (amounts in thousands,
except per share data).
<TABLE>
<CAPTION>
Restatement
Previously for Barter
Reported Transaction As Restated
---------- ----------- -----------
<S> <C> <C> <C>
Income (loss) before income taxes $ 4,861 $ (844) $ 4,017
Provision for income taxes 2,051 (330) 1,721
------ ------ ------
Net income (loss) $ 2,810 $ (514) $ 2,296
====== ====== ======
Basic and diluted income (loss)
per common share $ 0.34 $ (0.06) $ 0.28
====== ====== ======
</TABLE>
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the year
ended December 27, 1997.
In September of 1999, the Company amended this filing as a result of a
change in the accounting for a barter transaction which occured in September of
1998. For a description of the transaction and the resulting changes see Note
10 of Notes to Condensed Consolidated Financial Statements included elsewhere
herein.
RESULTS OF OPERATIONS
---------------------
GENERAL
-------
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain expense and income items. This information
includes the results from all sales and distribution and component manufacturing
facilities operated by the Company, including those closed or sold during the
period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 23.1% 22.6% 23.6% 22.8%
Selling, general and
administrative expense 19.0% 19.2% 20.4% 20.5%
Depreciation, goodwill and
trademark amortization 0.5% 0.4% 0.6% 0.5%
Provision for doubtful
accounts 0.2% 0.1% 0.3% 0.1%
Restructuring and unusual
items 0.2% -- 0.9% --
Other operating income (0.5)% (0.8)% (0.8)% (0.7)%
Income from operations 3.7% 3.7% 2.2% 2.4%
</TABLE>
13
<PAGE> 14
Net Earnings
- ------------
The first nine months of 1998 presented favorable economic conditions for the
building materials supply industry, despite significant deflation in lumber
prices. Single family housing starts were up 10.1% over the first nine months
of 1997. During the first quarter of 1998, the positive effects of the mild
winter in the Company's Midwest region, the Company's primary region, were
partially offset by increased precipitation in the Northeast and South. Weather
conditions during the first quarter of 1997 were closer to historical seasonal
averages.
Net income for the three months ended September 26, 1998 was $2,296,000
compared with income of $1,833,000 for the three months ended September 27,
1997. The increase in the net income for the three month period is primarily the
result of reductions in selling, general and administrative ("SG&A") expense,
and the elimination of equity in losses of an affiliated company. The
impact of these changes was partially offset by a reduction in other
operating income, increases in interest expense, depreciation, restructuring
and unusual items and provision for doubtful accounts, and a slight decrease in
gross profit.
Net loss for the first nine months of 1998 was $1,717,000 compared with a
loss of $2,015,000 for the first nine months of 1997. The improvement in net
loss is primarily the result of increases in sales and gross profit margin, the
elimination of equity in losses of an affiliated company, and increases in other
operating income. The impact of these improvements was partially offset by a
$5.9 million charge for restructuring and unusual items and increases in the
provision for doubtful accounts, depreciation, interest expense, and SG&A
expense.
Operational Restructuring
- -------------------------
In the first quarter of 1998, the Company announced a plan for additional
restructuring activities (the "1998 Plan"). The Company recorded charges of
$5.4 million in the first quarter of 1998 and $0.5 million in the third quarter
of 1998 as a result of the 1998 Plan. For a description of the 1998 Plan see
Note 7 of "Notes to Condensed Consolidated Financial Statements."
Three Months Ended September 26, 1998 Compared
----------------------------------------------
with the Three Months September 27, 1997
----------------------------------------
Net Sales
- ---------
Sales for the third quarter of 1998 of $261.1 million decreased 1.9% from the
$266.3 million recorded in the third quarter of 1997. The Company estimates
that approximately $7.8 million of this decrease (or approximately 3.0% of third
quarter 1997 sales) can be attributed to lumber price deflation. Despite the
lumber price deflation, same store sales increased 4.9% compared with the same
period last year. Same store sales to the Company's primary customers, building
professionals, also increased 7.1%, while consumer same store sales decreased
8.1%. As of September 26, 1998 the Company operated 101 sales and distribution
facilities, 10 less than it operated at the end of the third quarter of 1997.
14
<PAGE> 15
The Company believes that its investments in its target major markets and re-
merchandised conventional market sales and distribution facilities, as well as
favorable economic conditions have offset the reduction in operating facilities
and commodity lumber deflation. Same store sales increased 20% in the Company's
nine target major markets, while same store sales increased 12% in the 11 sales
and distribution facilities which the Company had finished remerchandising by
the end of the second quarter of 1998. Single family housing starts were
approximately 9.8% higher, nationally, in the third quarter of 1998 than in the
comparable period of 1997. In the Company's primary geographical market, the
Midwest, single family housing starts were up 5.1%.
Gross Profit
- ------------
1998 third quarter gross profit decreased to $60.2 million from $60.3
million for the third quarter of 1997, a 0.1% decrease. Gross profit as a
percentage of sales increased to 23.1% for the third quarter of 1998 from 22.6%
in 1997. The increase in gross profit as a percentage of sales is primarily
attributable to improved margins on the Company's internally manufactured
products and lower product costs. These improvements were partially offset by
the effects of lumber deflation, estimated to have reduced gross profit by $1.7
million for the quarter when compared with third quarter of 1997 and a $844,000
charge for the revaluation of a portion of the Company's inventory as the result
of a barter transaction (see Note 10 of Notes to Condensed Consolidate Financial
Statements included elsewhere herein). Sales to building professionals, as a
percentage of total sales, increased to 86.5% from 84.7% for the third quarter
of 1997. Lumber and building materials accounted for 90.3% of sales in the third
quarter of 1998, compared with 89.0% in the third quarter of 1997.
Selling, General and Administrative Expense
- -------------------------------------------
SG&A expense decreased to 19.0% of net sales in the third quarter of 1998
compared with 19.2% of net sales in the third quarter of 1997. Much of the
reduction can be attributed to expense reductions as part of the Company's 1998
Plan and the completion of most of the Company's remerchandising programs during
or prior to the end of the second quarter of 1998.
Decreases as a percentage of sales in general office, travel, employee
relocation, professional fees, and remerchandising expenses were partially
offset by increases in salaries and wages, and real estate rent expense.
Salaries, wages and employee benefits increased as a percentage of sales by
0.3%. As of September 26, 1998, the Company had 3,948 full time and part time
employees, a decrease of 5.3% from September 27, 1997. Salaries and wages for
the fourth quarter will be adversely affected by approximately $600,000 as a
result of a payment made to a former executive officer in connection with his
separation from the Company.
15
<PAGE> 16
Depreciation, Goodwill and Trademark Amortization
- -------------------------------------------------
Depreciation, goodwill and trademark amortization increased to $1.3 million
for the third quarter of 1998 compared with $1.1 million for the same period in
1997. This increase is primarily due to depreciation on rental equipment and
the additional equipment and facilities implemented as a result of the Company's
major market and remerchandising programs.
Provision for Doubtful Accounts
- -------------------------------
The Company recorded an expense from the provision for doubtful accounts of
$0.6 million in the third quarter of 1998, compared with an expense of $0.3
million in the third quarter of 1997.
Restructuring and Unusual Items
- -------------------------------
In the third quarter of 1998, the Company recorded additional restructuring
expense of $500,000 as a result of certain costs, including facility carrying
costs and severance costs, that were in excess of estimates or unknown at the
time the plan was announced, but incurred as a result of the 1998 Plan. For a
description of the 1998 Plan see Note 7 of "Notes to Condensed Consolidated
Financial Statements."
Other Operating Income
- ----------------------
Other operating income for the third quarter of 1998 was $1.2 million
compared with $2.1 million for the third quarter of 1997. During the third
quarter of 1997, the Company recorded gains of approximately $700,000 on the
sale of previously closed sales and distribution facilities. There were no
significant sales of real estate in the third quarter of 1998.
Interest Expense
- ----------------
In the third quarter of 1998 interest expense increased to $5.6 million from
$5.5 million for the third quarter of 1997, resulting primarily from an increase
in average total long term debt of approximately $3.8 million, partially offset
by a decrease in the effective borrowing rate on total long term debt of
approximately 10 basis points. The decrease in the effective borrowing rate is
primarily due to a small reduction in the LIBOR rate. Approximately 94% of the
Company's third quarter average borrowings on its revolving credit facility were
LIBOR-based.
16
<PAGE> 17
Equity in Loss of Affiliated Company
- ------------------------------------
In the third quarter of 1997 the Company recorded equity in loss of
affiliated company of $704,000. The Company's net equity in this affiliate was
reduced to zero at December 31, 1997 thus no additional equity losses for this
affiliate were recorded in 1998.
Provision for Income Taxes
- --------------------------
The Company recorded income tax expense of $1.7 million for the third quarter
of 1998 compared with an expense of $1.8 million in the third quarter of 1997.
An effective federal income tax rate of 39.0% was used to calculate federal
income taxes for the third quarter of 1998, compared with an effective rate of
39.1% for the third quarter of 1997. In addition to the effective federal tax
rate, state income and franchise taxes were calculated separately and are
included in the provision reported for both years.
The Company continues to review future earnings projections to determine that
there is sufficient support for its deferred tax assets and valuation allowance.
In spite of the losses incurred during 1995 and 1997, management believes that
it is more likely than not that the Company will receive full benefit of its
deferred tax asset and that the valuation allowance is properly stated. This
assessment constitutes Forward-Looking Information made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 and is
inherently subject to uncertainty and dependent upon the Company's future
profitability, which in turn depends upon a number of important risk factors
including but not limited to: the effectiveness of the Company's operational
efforts, cyclicality and seasonality of the Company's business, the effects of
the Company's substantial leverage and competition.
17
<PAGE> 18
Nine Months Ended September 26, 1998 Compared
---------------------------------------------
with the Nine Months Ended September 27, 1997
---------------------------------------------
Net Sales
- ---------
Although net sales for the first nine months of 1998 increased 0.6% to $667.0
million from $663.0 million for the first nine months of 1997, same store sales
increased 6.7% compared with the same period last year, despite deflation in
lumber prices which the Company estimates reduced sales by approximately $23.2
million, or approximately 3.5%, compared with 1997 comparable period pricing.
Same store sales to the Company's primary customers, building professionals,
also increased 8.3% when compared with the first nine months of 1997. Consumer
same store sales decreased 6.6% for the first nine months. As of September 26,
1998 the Company operated 101 sales and distribution facilities, 10 less than it
operated at the end of the third quarter of 1997.
The Company believes that its investments in its target major markets and re-
merchandised conventional market sales and distribution facilities, as well as
favorable economic and weather conditions have offset the reduction in number of
operating facilities and commodity lumber deflation. Same store sales increased
25% in the Company's nine target major markets, while same store sales increased
18% in the 11 sales and distribution facilities the Company finished
remerchandising by the end of the second quarter of 1998. Single family
housing starts were 10.1% higher, nationally, in the first nine months of 1998
than in the comparable period of 1997. In the Company's primary geographical
market, the Midwest, single family housing starts were up 6.8%. During the
first quarter of 1998, the positive effects of the mild winter in the Company's
Midwest region, the Company's primary region, were partially offset by increased
precipitation in the Northeast and South. Weather conditions during the first
quarter of 1997 were closer to historical seasonal averages.
Gross Profit
- ------------
Gross profit during the first nine months of 1998 increased to $157.3 million
from $151.5 million for the first nine months of 1997, a 3.8% increase. Gross
profit as a percentage of sales increased to 23.6% for the first nine months of
1998 from 22.8% in 1997. The increase in gross profit as a percentage of sales
is primarily attributable to improved product costs, increased margins on
internally manufactured products and a reduction in costs associated with
physical inventory count adjustments. These improvements were partially offset
by the effects of lumber deflation, estimated to have reduced gross profit by
$7.8 million for the first nine months when compared with the first nine months
of 1997 and a $844,000 charge for the revaluation of a portion of the Company's
inventory as the result of a barter transaction (see Note 10 of Notes to
Condensed Consolidated Financial Statements included elsewhere herein). Sales
to building professionals, as a percentage of total sales, increased to 87.8%
for the first nine months of 1998 from 86.2% for the same period in 1997. Lumber
and building materials accounted for 89.3% of sales in the first half of 1998,
compared with 88.8% in the first nine months of 1997.
18
<PAGE> 19
Selling, General and Administrative Expense
- -------------------------------------------
SG&A expense as a percent of sales decreased slightly, to 20.4% of net sales
in the first nine months of 1998 compared with 20.5% of net sales in the first
nine months of 1997. Increased expenses attributable to major market expansion
programs and remerchandising of sales and distribution facilities were more than
offset through reductions in other areas, primarily the reduction of costs
anticipated under the Company's operational restructuring plan, implemented in
the first quarter of 1998.
Decreases as a percentage of sales in professional fees, marketing, travel
and general office expense were partially offset by increases in salaries and
wages, and real estate rental expenses. Salaries, wages and employee benefits
for the first nine months of 1998, increased as a percentage of sales by 0.4%
when compared with the first nine months of 1997.
18
<PAGE> 19
Depreciation, Goodwill and Trademark Amortization
- -------------------------------------------------
Depreciation, goodwill and trademark amortization increased to $3.8 million
for the first nine months of 1998 compared with $3.5 million for the same period
in 1997. This increase is primarily due to depreciation on rental equipment and
the additional equipment and facilities implemented as a result of the Company's
major market and remerchandising programs, partially offset by reduced
depreciation on vehicles. The Company's tool rental program was initiated
during 1997 and no depreciation on rental equipment was recorded in the first
half of 1997.
Provision for Doubtful Accounts
- -------------------------------
The provision for doubtful accounts increased to $1.8 million for the first
nine months of 1998 from $0.9 million in the first nine months of 1997. The
primary reason for the increase is the better than historical collection
performance achieved during the first nine moths of 1997, expense of only 0.1%
of total sales.
Restructuring and Unusual Items
- -------------------------------
Through the first nine months of 1998 the Company has recorded $5.9 million
in restructuring charges as a result of the 1998 Plan. For a description of the
1998 Plan see Note 7 of "Notes to Condensed Consolidated Financial Statements."
19
<PAGE> 20
Other Operating Income
- ----------------------
Other operating income for the first nine months of 1998 was $5.0 million
compared with $4.5 million for the first nine months of 1997. During the first
nine months of 1998, the Company recorded a gain of approximately $1.8 million
on the sale of two sales and distribution facilities located in Iowa, two other
closed facilities, and excess equipment. A gain of $180,000 on the difference
between insured replacement cost and book value of inventory, as a result of a
fire at one of its sales and distribution facilities was also recorded in the
first half of 1998. In the first nine months of 1997, the Company recorded
gains of approximately $1.3 million on the sale of five previously closed sales
and distribution facilities.
Interest Expense
- ----------------
In the first nine months of 1998, interest expense increased to $16.5 million
from $15.9 million during the first nine months of 1997, resulting primarily
from an increase in average total long term debt of approximately $10.7 million,
partially offset by a decrease in the effective borrowing rate on total long
term debt of approximately 25 basis points. The decrease in the effective
borrowing rate is primarily due to a reduction in the interest rate on the
Company's revolving line of credit, effective April 11, 1997. Approximately 94%
of the Company's average borrowings on its revolving credit facility during the
first nine months of 1998 were LIBOR-based.
Equity in Loss of Affiliated Company
- ------------------------------------
In the first nine months of 1997 the Company recorded equity in loss of
affiliated company of $1.5 million. The Company's net equity in this affiliate
was reduced to zero at December 31, 1997 thus no additional equity losses for
this affiliate were recorded in 1998.
Provision for Income Taxes
- --------------------------
The Company recorded an income tax expense of $91,000 for the first nine
months of 1998 compared with an expense of $531,000 in the first nine months of
1997. An effective federal income tax rate of 39.0% was used to calculate
federal income taxes for the first nine months of 1998, compared with an
effective rate of 39.1% for the first nine months of 1997. In addition to the
effective federal tax rate, state income and franchise taxes were calculated
separately and are included in the provision reported for both years.
For a discussion of the Company's deferred tax assets and valuation
allowance, see the discussion above in the third quarter comparison under the
heading "Provision for Income Taxes."
20
<PAGE> 21
Recently Issued Accounting Pronouncements
- -----------------------------------------
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
The term comprehensive income is defined as the change in the equity of a
business. Comprehensive income includes net income as well as other components
(revenues, expenses, gains, and losses) that under generally accepted accounting
principles are excluded from net income but affect equity. The statement was
effective for fiscal years beginning after December 15, 1997, however, as the
Company has no items of other comprehensive income this statement is not
applicable to the Company.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information," changes Statement of
Financial Accounting Standards No. 14 by requiring a new framework for segment
reporting and includes the disclosure of financial information related to each
segment. The statement was effective for fiscal years beginning after December
15, 1997, however, adoption of this statement is not required in interim
statements in the initial year of application. The Company is currently
evaluating the effects of this pronouncement.
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits," standardizes the disclosure
requirements for pensions and other postretirement benefits, requires additional
information on changes in the benefit obligation and fair values of plan assets
and eliminates certain disclosures that are no longer useful. This statement is
effective for fiscal years beginning after December 15, 1997. The Company
believes that the adoption of this statement will not have a significant impact
on its financial statements.
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. This
statement is effective for fiscal years beginning after June 30, 1999. The
Company believes that the adoption of this statement will not have a significant
impact on its financial statements.
Year 2000
- ---------
The Year 2000 problem relates to the inability of certain computer programs
and computer hardware to properly handle dates after December 31, 1999. As a
result businesses may be at risk for miscalculations and systems failures.
21
<PAGE> 22
In response to the Year 2000 issue, the Company initiated a project in early
1997 to identify, evaluate and implement changes to its existing computerized
business systems. An inventory was developed of all items of concern including
vehicles, manufacturing equipment, and security, heating and electrical systems.
Upon completion of the inventory a plan was developed to evaluate the importance
of each item, the remediation necessary to make the item compliant (either
modification or replacement), the resources necessary to complete the
remediation, and a time frame for completion. The plan was then reviewed by an
outside party for completeness. The plan also includes the steps the Company is
taking to ensure it is not at risk for problems that may occur at its suppliers
or customers. The Company has surveyed its customers, suppliers, and other
service providers to determine whether they are actively involved in projects to
ensure that their products and business systems will be Year 2000 compliant.
Management is currently reviewing their responses and evaluating alternatives
for those that are not sufficiently addressing the Year 2000 issue.
The Company is addressing its software, hardware, and equipment issues
through a combination of modifications to existing programs and conversions to
Year 2000 compliant software and equipment. The Company believes that it is
21
<PAGE> 22
currently 90% complete with hardware and equipment related remediation or
replacement efforts, and 60% complete in software remediation or replacement.
The Company's plan is to be totally compliant by September of 1999. Certain
systems, which have critical dates prior to September, are scheduled for earlier
completion dates or have been completed. At the present time the remediation
process is proceeding as planned and there are no significant delays expected.
The estimated total cost of the project is expected to be $2.7 million.
$500,000 of this cost is for the replacement of systems and equipment which was
accelerated due to the Year 2000 problem, and which will be capitalized over the
systems estimated useful life. Through the end of the third quarter of 1998 the
Company has expended a total of $700,000 on Year 2000 remediation.
If modifications and conversions by the Company, and those it conducts
business with, are not made in a timely manner, the Year 2000 issue may have a
material adverse effect on the Company's business, financial condition, and
results of operations. The Company's greatest risk at this time is with its
store operating and accounts receivable systems and its inventory suppliers. If
the store operating system has problems the Company could experience disruption
in its basic distribution operations. A problem with the Company's accounts
receivable system could cause some short term working capital and cash flow
problems until the issue is resolved. While the Company has extended efforts to
receive assurances that its product suppliers are adequately addressing this
issue, the Company expects there will be some minimal interruptions in
replenishment from some suppliers, but these should be addressed quickly through
alternative sources.
22
<PAGE>23
The Company has evaluated each problem area for various contingency
responses to mitigate any disruption should remediation be incomplete. At
present senior management is reviewing critical items to ensure there is at
least one workable alternative to each of its key processes including inventory
replenishment, sales and accounts receivable, payroll, and manufacturing and
delivery equipment. Milestones for completion of critical systems are being
closely monitored to minimize the chances of a Year 2000 failure in the key
processes.
23
<PAGE> 24
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's principal sources of working capital and liquidity are earnings
and borrowings under its revolving credit facility. The Company's primary need
for capital resources is to finance inventory and accounts receivable.
During the first nine months of 1998 net cash used in operating activities
was $24.4 million, $14.3 million less than the $38.7 million used in the first
nine months of 1997. With the peak building season historically occurring in
the second and third quarters, the Company normally experiences increases in its
inventory levels during the first quarter to meet anticipated sales increases,
and in the second quarter increases in accounts receivable occur as a result of
the increased sales activity. The third quarter traditionally provides cash
through operating income and reductions in inventory as the Company begins its
seasonal adjustments. The Company did experience positive cash flow from both
activities during the third quarter of 1998, but an increase in accounts
receivable and reductions in accounts payable resulted in negative cash flow
from operations of $3.3 million for the quarter.
The Company's accounts receivable balance at the end of the third quarter of
1998 increased $1.0 million when compared to the end of the third quarter of
1997, an increase of 1.0%. Approximately $456,000 of this increase is
attributable to increased credit sales during September 1998, compared with
September 1997.
Inventory at the end of the third quarter of 1998 was $4.8 million, or 4.1%,
lower than at the end of the third quarter of 1997. Approximately $11.2 million
in inventory reduction is attributable to the closing, consolidation, or sale of
10 sales and distribution facilities and two manufacturing facilities during the
first quarter of 1998. This reduction is partially offset by increased same
store inventory to accommodate the increase in same store sales. Accounts
payable at the end of the third quarter of 1998 decreased approximately $3.3
million, or 6.5% from the third quarter of 1997. This change is primarily
attributable to lower total inventory.
The Company's capital expenditures consist primarily of the construction of
storage facilities, the remodeling and reformatting of sales and distribution
facilities and component manufacturing facilities, and the purchase of vehicles,
equipment and management information systems for both existing and new
operations. In the first nine months of 1998 the Company spent $3.2 million on
capital expenditures compared to $5.0 million for the same period in 1997. The
Company expects to spend approximately $4.0 million for all of 1998. Under the
Company's bank revolving credit agreement, as amended, capital expenditures
during 1998 are limited to $6.0 million plus the proceeds from the sale of
certain excess real estate plus the portion of 1997's capital expenditures that
were not spent. The Company expects to fund capital expenditures through
borrowings and its internally generated cash flow.
24
<PAGE> 25
During the first three months of 1998, the Company closed, consolidated, or
sold ten sales and distribution facilities and two component manufacturing
facilities. At November 1, 1998 the Company operated 101 sales and distribution
facilities and 12 component manufacturing facilities compared with 111 sales and
distribution facilities and 12 component manufacturing facilities at October 30,
1997. The following table reconciles the number of sales and distribution
facilities and component manufacturing facilities operated by the Company,
through November 1, 1998:
<TABLE>
<CAPTION>
Sales and Component
Distribution Manufacturing
Facilities Facilities
<S> <C> <C>
As of December 27, 1997 111 11
Expansion - 2
Acquisition - 1
Sold (2) -
Closings (7) (2)
Consolidation (1) -
---- ----
As of November 1, 1998 101 12
==== ====
</TABLE>
In the first quarter of 1998 the Company opened a component manufacturing
operation at its Rochester, Michigan facility. In the third quarter a similar
facility was opened at the Company's Elkhorn, Wisconsin location.
On July 16, 1998, the Company announced an agreement in principle to acquire
Eagle Industries Inc., an Indianapolis, Indiana component manufacturer with 1997
sales of $10.5 million. Eagle Industries manufactures and distributes roof
trusses, wall panels and other building materials to the home building industry.
The acquisition has been substantially completed.
The Company maintained excess availability under its revolving line of credit
throughout the first nine months of 1998. At the end of the third quarter total
borrowings under the revolving line of credit were $7.2 million less than at the
end of the third quarter of 1997. At the end of the third quarter the Company
was not in compliance with the fixed charge coverage covenant contained in its
revolving line of credit. The Company's lenders have waived the non-compliance.
Under the current terms of the Company's bank revolving credit agreement the
Company believes that it will continue to have sufficient funds available for
its anticipated operations and capital expenditures. At September 26, 1998,
$117.5 million was outstanding under the Company's revolving line of credit, and
the unused availability was approximately $12.2 million. The Company's
assessment of its future funds availability constitutes Forward-Looking
Information made pursuant to the Private Securities Litigation Reform Act of
1995 and is inherently subject to uncertainty resulting from, among other
things, the factors discussed under "Results of Operations - Provision for
Income Tax Benefit".
25
<PAGE> 26
On March 20, 1998, the Company and its lenders entered into a third amendment
to the Company's revolving credit agreement. This amendment includes a
modification to the fixed charge ratio covenant to reflect the restructuring
announced by the Company in February 1998 and includes the lenders' consent to
the Company's sale of its Iowa facilities and its internet and utilities
marketing operations.
26
<PAGE> 27
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.
27
<PAGE>28
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, Chief Executive and
Financial Officer
By: /s/ John M. Lawrence
--------------------
John M. Lawrence
Controller and Principal Accounting
Officer
Date: October 1, 1999
28
<PAGE> 29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 26, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> SEP-26-1998
<CASH> 645
<SECURITIES> 0
<RECEIVABLES> 109218
<ALLOWANCES> 4383
<INVENTORY> 113127
<CURRENT-ASSETS> 231393
<PP&E> 77358
<DEPRECIATION> 32667
<TOTAL-ASSETS> 312705
<CURRENT-LIABILITIES> 69924
<BONDS> 100000
0
0
<COMMON> 82
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 312705
<SALES> 667024
<TOTAL-REVENUES> 667024
<CGS> 509740
<TOTAL-COSTS> 509740
<OTHER-EXPENSES> 140668
<LOSS-PROVISION> 1760
<INTEREST-EXPENSE> 16482
<INCOME-PRETAX> (1626)
<INCOME-TAX> 91
<INCOME-CONTINUING> (1717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1717)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
