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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 March 31, 2001
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file number 0-6169
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WOLOHAN LUMBER CO.
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(Exact name of registrant as specified in its charter)
Michigan 38-1746752
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1740 Midland Road, Saginaw, Michigan 48603
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(Address of principal executive offices)
(989) 793-4532
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(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 -- 3,302,089 shares as of April 30, 2001.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
WOLOHAN LUMBER CO.
CONSOLIDATED BALANCE SHEETS
(in thousands)
MAR. 31, DEC. 31,
2001 2000
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(Unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,087 $ 1,705
Certificates of deposit 3,000 10,000
Trade receivables, net 17,480 17,457
Builder Finance Program receivables 1,062 1,478
Inventories - at average cost 32,200 32,524
Reduction to LIFO cost (9,397) (9,397)
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Inventories at the lower of LIFO cost or market 22,803 23,127
Other current assets 2,665 2,765
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TOTAL CURRENT ASSETS 53,097 56,532
NET PROPERTIES AND EQUIPMENT 33,473 36,557
OTHER ASSETS 14,128 13,468
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TOTAL ASSETS $ 100,698 $ 106,557
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LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 9,905 $ 6,318
Employee compensation and accrued expenses 8,144 9,882
Current portion of long-term debt 3,703 7,482
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TOTAL CURRENT LIABILITIES 21,752 23,682
LONG-TERM DEBT, less current portion 2,385 5,111
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TOTAL LIABILITIES 24,137 28,793
SHAREOWNERS' EQUITY
Common stock 3,351 3,388
Retained earnings 73,210 74,376
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TOTAL SHAREOWNERS' EQUITY 76,561 77,764
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TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 100,698 $ 106,557
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Note: The consolidated balance sheet at December 31, 2000, 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 consolidated financial statements.
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WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per-share amounts)
THREE MONTHS ENDED
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MAR. 31, MAR. 25,
2001 2000
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NET SALES $ 44,380 $ 66,834
Cost of sales 33,964 51,032
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Gross profit 10,416 15,802
Other operating income 704 643
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Total operating income 11,120 16,445
OPERATING EXPENSES
Selling, general and administrative 11,549 16,378
Store closing costs (recoveries) (41) 445
Depreciation and amortization 1,687 1,837
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Total operating expenses 13,195 18,660
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LOSS FROM OPERATIONS (2,075) (2,215)
OTHER INCOME (EXPENSES)
Interest expense (190) (266)
Interest income 168 95
Gain on sale of properties 1,073 393
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Other income, net 1,051 222
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LOSS BEFORE INCOME TAXES (1,024) (1,993)
Income tax benefit 409 787
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NET LOSS $ (615) $ (1,206)
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Average shares outstanding 3,373 4,981
Net loss per share, basic $ (.18) $ (.24)
Net loss per share, assuming dilution $ (.18) $ (.24)
Dividends per share $ .07 $ .07
See notes to condensed consolidated financial statements.
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WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(UNAUDITED)
(in thousands)
COMMON SHARES TOTAL
------------- ADDITIONAL RETAINED SHAREOWNERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
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Balances at December 31, 2000 3,388 $ 3,388 $-- $ 74,376 $ 77,764
Net loss (615) (615)
Cash dividends--$.07 per share (237) (237)
Shares issued under Long-Term
Incentive Plan 10 10 85 -- 95
Shares purchased and retired (47) (47) (85) (314) (446)
------ ------- ---- -------- --------
Balances at March 31, 2001 3,351 $ 3,351 $-- $ 73,210 $ 76,561
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See notes to condensed consolidated financial statements.
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WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
THREE MONTHS ENDED
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MAR. 31, MAR. 25,
2001 2000
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OPERATING ACTIVITIES
Net loss $ (615) $(1,206)
Adjustments to reconcile net loss to
cash provided by operating activities
Depreciation 1,612 1,762
Amortization 75 75
Provision for losses on accounts receivable 86 27
Gain on sale of properties (1,073) (300)
Gain on sale of fixed assets (266) (93)
Changes in operating assets and liabilities
Accounts receivable (109) 5,011
Builder Finance Program receivables 416 618
Other assets 142 (1,766)
Inventories 324 (1,517)
Accounts payable and accrued expenses 1,989 105
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NET CASH PROVIDED BY OPERATING ACTIVITIES 2,581 2,716
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INVESTING ACTIVITIES
Proceeds from maturities of certificates of deposit 7,000 --
Purchases of property and equipment (147) (1,065)
Proceeds from the sale of properties 2,181 982
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 9,034 (83)
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FINANCING ACTIVITIES
Net credit lines borrowings -- 1,000
Payments on long-term debt (6,505) (4,092)
Purchase of common stock (491) (1,267)
Dividends paid (237) (347)
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NET CASH USED IN FINANCING ACTIVITIES (7,233) (4,706)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,382 (2,073)
Cash and cash equivalents at beginning of period 1,705 3,217
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,087 $ 1,144
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See notes to condensed consolidated financial statements.
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WOLOHAN LUMBER CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2001
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 only 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 outside factors and, accordingly, its operating
results for the three months ended March 31, 2001 are not necessarily
indicative of the results that may be expected for the entire year
ending December 31, 2001.
For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations.
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Certain information contained in Management's Discussion and Analysis
of Financial Condition and Results of Operations may be deemed to be
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995 and are subject to the Act's safe harbor
provisions. These statements are based on current expectations and
involve a number of risks and uncertainties. Actual results could
differ materially and adversely from those described in the
forward-looking statements as a result of various factors outside the
control of the Company, including, but not limited to the following:
fluctuations in customer demand and spending, expectations of future
volumes and prices for the Company's products, prevailing economic
conditions affecting the retail lumber and building materials markets
and seasonality of operating results.
Results Of Operations
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The first-quarter 2001 loss was $615,000 (18 cents per share), compared
with a loss of $1.2 million (24 cents per share) for first-quarter
2000. The Company's business is subject to seasonal influences, with
lower sales historically recorded in the first quarter, often resulting
in a net loss.
The decline in the net loss for the quarter ended March 31, 2001,
compared with the first quarter of the prior year reflects:
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1. Operating losses of $441,000 associated with four discontinued
stores in 2001 (in the fourth quarter 2000, the Company also
accrued and expensed $492,000 of store closing costs associated
with these four stores), compared with $574,000 of operating
losses (inclusive of store closing costs of $445,000) incurred
from two discontinued stores in first-quarter 2000.
2. Gains from the sale of real estate properties of $1,073,000,
compared with $300,000 of gains in first-quarter 2000.
3. A $177,000 reduction in net interest expense.
Sales totaled $44.4 million for the 2001 first quarter, compared with
$66.8 million for first-quarter 2000. Sales at comparable stores
decreased 21 percent in the 2001 first quarter from first-quarter 2000.
Sales in the 2001 first quarter were negatively affected by significant
price deflation in lumber and structural panel products combined with
slower construction activity and the Company's previous decision in
2000 to reduce or eliminate certain product categories which are
inconsistent with the Company's long-term strategies.
The per-share loss for the 2001 first quarter was increased by a
reduction in outstanding common shares. The Company repurchased 47,000
shares during the first quarter of 2001 and repurchased 1,654,000
shares during the year ended December 31, 2000. Outstanding shares for
the 2001 first quarter were 32-percent lower compared with
first-quarter 2000. This reduction in outstanding shares will result in
increased earnings per share, then would have been realized, as the
Company moves into positive income-producing months of 2001.
Gross margins in first-quarter 2001 were 23.5 percent, compared with
23.6 percent in 2000's first quarter. The significant reduction in
sales revenue, however, resulted in a 34 percent decline in gross
margin dollars.
The Company reduced its operating expenses (excluding store closing
costs) from $18.2 million in first quarter 2000 to $13.2 million in
first quarter 2001. However, the impact of certain fixed and semi-fixed
operating costs being absorbed by lower sales volume caused the
operating expense ratio to rise to 29.8 percent in first quarter 2001,
compared with 27.2 percent for first quarter 2000.
The effective tax rate (federal and state) for first-quarter 2001 was
40 percent, compared with 39.5 percent for first-quarter 2000.
At March 31, 2001 the Company had 36 stores compared with 47 locations
at the end of the 2000 first quarter.
Financial Condition
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At March 31, 2001, the Company's balance sheet remained strong. Net
working capital at March 31, 2001, totaled $31.3 million, compared with
$49.3 million at March 25, 2000, and $32.9 million at Dec. 31, 2000.
The current ratio at March 31, 2001, was 2.4 to 1, compared with 2.6 to
1 at March 25, 2000, and 2.4 to 1 at Dec. 31, 2000.
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Cash and cash equivalents totaled $6.1 million at March 31, 2001,
compared with $1.1 million at March 25, 2000, and $1.7 million at Dec.
31, 2000. The Company also had certificates of deposit totaling $3
million at March 31, 2001 and $10 million at year-end 2000. The
liquidity ratio at March 31, 2001, was .42 to 1, compared to .04 to 1
at March 25, 2000, and .49 to 1 at Dec. 31, 2000.
Cash and cash equivalents increased $4.4 million during the 2001 first
quarter. Operating activities provided net cash of $2.6 million in the
first quarter of 2001. Investing activities in first-quarter 2001
included $7 million of proceeds from maturities of certificates of
deposit and $2.2 million of proceeds from the sale of properties,
primarily from two closed facilities. Financing activities in
first-quarter 2001 used net cash of $7.2 million and included $6.5
million for payments on long-term debt, $.5 million for the purchase of
47,000 shares of Company common stock at an average price of $10.34 per
share and $.2 million for a dividend payment.
The Company expects that net cash from operating activities and
available lines of credit should be adequate to meet future working
capital needs.
Invested capital (long-term debt and shareowners' equity) was equal to
78% of total assets at March 31, 2001, the same as fiscal year-end
2000. At March 31, 2001, the total long-term debt-to-asset ratio was
.02, versus .05 at fiscal year-end 2000 and the ratio of equity to
total assets was .76:1 versus .73:1 at fiscal year-end 2000.
Outlook
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The Company plans to continue to focus on revenue growth and operating
improvement at existing stores through the advancement of services to
its target customers and development of operating efficiencies.
However, a sluggish economy, low selling prices on lumber and
structural panel products and lower building starts may continue to
depress sales activity into the second half of the year. The Company
plans to work to further strengthen its balance sheet by improving
management of working capital at existing operations and redeploying
investments which do not meet its strategic profit model. The Company
has consistently utilized its strategic profit model to evaluate
overall performance of its assets and will continue to do so. Adherence
to this model may result in additional store closings or other asset
redeployments.
PART II -- OTHER INFORMATION
Item 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
The registrant filed no reports on Form 8-K during the quarter for
which this Report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
WOLOHAN LUMBER CO.
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Registrant
Date: May 9, 2001 /s/ David G. Honaman
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David G. Honaman
Senior Vice President, Chief Financial Officer
and Secretary (Principal Financial Officer)
Date: May 9, 2001 /s/ Edward J. Dean
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Edward J. Dean
Corporate Controller
(Principal Accounting Officer)
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