-2-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarter ended June 30, 1995
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange
Act of 1934
For the transition period from to
Commission file number 0-6169
WOLOHAN LUMBER CO.
(Exact name of registrant as specified in its charter)
Michigan 38-1746752
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
1740 Midland Road, Saginaw, Michigan 48603
(Address of principal executive offices)
(517) 793-4532
(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 (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common stock, $1 par value -- 7,091,488 shares as of July 31, 1995.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Information
WOLOHAN LUMBER CO.
CONDENSED BALANCE SHEETS
June 30 December 31
1995 1994
(Unaudited) (Note)
ASSETS (000's omitted)
CURRENT ASSETS
Cash and cash equivalents $ 15,871 $ 22,072
Trade receivables 27,859 25,961
Inventories - at current cost 71,335 64,555
Reduction to LIFO cost (14,736) (14,549)
Inventories at the lower of last-in,
first-out cost or market 56,599 50,006
Other current accounts 1,856 2,832
TOTAL CURRENT ASSETS 102,185 100,871
OTHER ASSETS 2,353 2,174
NET PROPERTIES 67,966 68,002
TOTAL ASSETS $172,504 $171,047
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 20,480 $ 21,789
Employee compensation and accrued expenses 10,973 12,345
Short-term debt 5,000
Current portion of long-term debt 4,301 1,970
TOTAL CURRENT LIABILITIES 40,754 36,104
LONG-TERM DEBT, less current portion 26,420 30,035
DEFERRED INCOME TAXES 697 697
SHAREOWNERS' EQUITY
Common stock 7,091 7,146
Additional capital 23,342 23,979
Retained earnings 74,200 73,086
TOTAL SHAREOWNERS' EQUITY 104,633 104,211
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $172,504 $171,047
<FN>
Note: The balance sheet at December 31, 1994, has been derived from
the audited financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See notes to condensed financial statements.
</FN>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
JUNE 30
1995 1994
(000's omitted, except per share data)
NET SALES $ 123,089 $ 133,685
Cost of sales 93,820 101,427
29,269 32,258
Other income 756 653
Gain from sale of properties 83 121
Gross Income 30,108 33,032
OPERATING EXPENSES:
Selling, general and administrative 22,230 22,602
Depreciation 2,276 1,988
Interest 847 809
25,353 25,399
INCOME BEFORE INCOME TAXES 4,755 7,633
Income taxes 1,902 2,928
NET INCOME $ 2,853 $ 4,705
Average shares outstanding 7,152 7,146
Net income per share $.40 $.66
Dividends per share $.07 $.07
<FN>
See notes to condensed financial statements.
</FN>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
SIX MONTHS ENDED
JUNE 30
1995 1994
(000's omitted, except per share data)
NET SALES $ 198,506 $ 210,213
Cost of sales 151,138 160,646
47,368 49,567
Other income 1261 1,127
Gain from sale of properties 307 148
Gross Income 48,936 50,842
OPERATING EXPENSES:
Selling, general and administrative 39,371 39,889
Depreciation 4,476 3,873
Interest 1,560 1,573
45,407 45,335
INCOME BEFORE TAXES 3,529 5,507
Income taxes 1,413 2,109
NET INCOME $ 2,116 $ 3,398
Average shares outstanding 7,153 7,145
Net income per share $.30 $.48
Dividends per share $.14 $.14
<FN>
See notes to condensed financial statements.
</FN>
WOLOHAN LUMBER CO.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
JUNE 30
1995 1994
(000's omitted, except per share data)
NET CASH USED IN OPERATING ACTIVITIES $ (4,772) $ (10,136)
NET CASH USED IN INVESTING ACTIVITIES (4,143) (6,125)
NET CASH FROM FINANCING ACTIVITIES 2,714 6,959
DECREASE IN CASH AND CASH EQUIVALENTS (6,201) (9,302)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 22,072 22,303
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,871 $ 13,001
<FN>
See notes to condensed financial statements
</FN>
WOLOHAN LUMBER CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
The Company's business is seasonal in nature and subject to
general economic conditions and other outside factors and,
accordingly, its operating results for the three months and six
months ended June 30, 1995, are not necessarily indicative of the
results that may be expected for the entire year ending December
31, 1995.
For further information, refer to the financial statements and
footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results Of Operations
Net income for the second quarter of 1995 was $2.9 million, (40
cents per share) versus $4.7 million (66 cents per share) for the
same period of 1994. The decline in second-quarter earnings
resulted from lower sales and tighter margins. For the first six
months of 1995, net income was $2.1 million, (30 cents per share)
compared with $3.4 million (48 cents per share) for the same
period of 1994.
Sales totaled $123.1 million in the second quarter of 1995, an 8-
percent decline from second quarter 1994. The sales decline in
the second quarter resulted from a 3-percent decrease in consumer
(do-it-yourself) sales and a 13-percent decline in professional
contractor sales. Sales at comparable stores (stores in operation
at June 30 and opened prior to April 1, 1994) were down 14
percent, which resulted from a 12-percent decline in consumer
sales and a 15-percent decrease in contractor sales. The sales
mix ratio for the second quarter of 1995 was 54% consumer and 46%
contractor sales, compared with 52% consumer and 48% contractor
for the second quarter 1994. For the first six months of 1995,
sales were $198.5 million compared with $210.2 million in the same
period of 1994, a decrease of 6 percent. Contractor sales
decreased 7 percent and consumer sales decreased 4 percent for the
six-month period. Comparable store sales for the 1995 six-month
period were down 12 percent. The 1995 sales mix for six months was
50% consumer sales and 50% contractor sales versus 49% and 51%,
respectively for 1994. Fewer housing starts, lower lumber prices,
sluggish consumer spending and additional competition continue to
be the factors that are negatively affecting sales in 1995.
Gross margins were 23.8 percent in the 1995 second quarter, a
decline of 30 basis points compared with 1994's second quarter.
Competitive pressures in both the consumer and contractor segments
of the Company's business negatively affected the second-quarter
margins.
Selling, general and administrative expenses in second quarter of
1995 were 18.1 percent of sales compared with 16.9 percent of
sales for the corresponding period of 1994. Depreciation expense
increased $290,000, or 14 percent, from second quarter 1994 and
reflects the six new stores opened in 1994 and the two added in
1995.
The effective tax rate (federal and state) for second quarter 1995
was 40%, compared to 38.4% for second quarter 1994. The effective
income tax rate is a function of the proportion of the Company's
tax-exempt interest and other non-deductible expenses in relation
to taxable income.
Financial Condition
At June 30, 1995, the Company's balance sheet remains strong. Net
working capital at June 30, 1995 was $61.4 million, compared to
$60.8 million at June 30, 1994 and $64.8 million at December 31,
1994. The current ratio at June 30, 1995 was 2.5 to 1, compared
to 2.1 to 1 at June 30, 1994, and 2.8 to 1 at December 31, 1994.
Cash and cash equivalents were $15.9 million at June 30, 1995,
compared to $13.0 million at June 30, 1994 and $22.1 million at
December 31, 1994. The liquidity ratio was .39 to 1, compared to
.24 to 1 at June 30, 1994, and .62 to 1 at December 31, 1994.
Cash and cash equivalents increased $1.7 million during the 1995
second quarter with operating activities producing $9.6 million of
cash. The major use of cash was for net property additions, $1.2
million, and reduction of short-term debt of $6 million.
The Company expects that funds from operations and available lines
of credit should be adequate to meet future working capital needs
and capital expenditures for 1995.
Invested capital (long-term debt and shareowner's equity) was
equal to 76% of total assets at June 30, 1995, compared to 78% at
year-end 1994. The ratio of equity to total assets was .61 to 1
at June 30, 1995 and December 31, 1994. The Company purchased
65,000 shares of its common stock during the second quarter of
1995.
Outlook
The Company anticipates continued softness in its markets during the
second half of 1995 together with strong competitive pressures which
will make sales and margin improvement difficult. The Company is
focusing its time and energy on improving the competency and commitment
of its people to provide outstanding customer service. The Company is
striving to better execute its strategy of selling project sales which
involve the major purchases of products such as lumber, basic building
materials, millwork, and kitchen cabinets. The Company is investing
more in technology. The Company's challenge is to become leaner and
stronger and better positioned for the future.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following information is furnished with respect to the
Annual Meeting of security holders of the Registrant held during April
1995:
(a) A meeting was held on April 27, 1995 and was an Annual
Meeting.
(b) Not Applicable
(c) At such meeting the following nominees for election
as directors were elected to hold office until the next
annual meeting of stockholders or until their
successors are elected and qualified. The votes cast with
respect to each nominee for director are as follows:
Votes to Withhold
Votes for Authority to Vote
Nominee Nominee for the Nominee
Richard V. Wolohan 4,985,429 121,118
David F. Wallace 4,985,559 120,988
Ervin E. Wardlow 4,985,349 121,198
Hugo E. Braun, Jr 5,069,890 36,657
James L. Wolohan 5,069,874 36,673
F.R. Lehman 5,069,899 36,648
Leo B. Corwin 5,069,331 37,216
Further at such meeting the stockholders approved the Stock
Option Plan for Non-Employee Directors. 4,682,727 affirmative
votes, 380,832 negative votes and 42,988 abstain votes were cast
with respect to such plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Stock Option Plan for Non-Employee Directors
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the
quarter for which this Report is filed.
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 thereto duly authorized.
WOLOHAN LUMBER CO.
Registrant
Date: August 11, 1995 James L. Wolohan
James L. Wolohan
Chairman of the Board,
President and Chief Executive
Officer
Date: August 11, 1995 Edward J. Dean
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
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 thereto duly authorized.
WOLOHAN LUMBER CO.
Registrant
Date: August 11, 1995
James L. Wolohan
Chairman of the Board,
President and Chief Executive
Officer
Date: August 11, 1995
Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)