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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 June 30, 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 -- 3,305,206 shares as of June 30, 2001.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
WOLOHAN LUMBER CO.
CONSOLIDATED BALANCE SHEETS
(in thousands)
JUNE 30, DEC. 31,
2001 2000
---- ----
(Unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,093 $ 1,705
Certificates of deposit 7,000 10,000
Trade receivables, net 21,355 17,457
Builder Finance Program receivables 578 1,478
Inventories - at average cost 32,142 32,524
Reduction to LIFO cost (9,397) (9,397)
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Inventories at the lower of LIFO cost or market 22,745 23,127
Other current accounts 2,473 2,765
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TOTAL CURRENT ASSETS 58,244 56,532
NET PROPERTIES AND EQUIPMENT 29,960 36,557
OTHER ASSETS 14,782 13,468
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TOTAL ASSETS $ 102,986 $ 106,557
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LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 12,611 $ 6,318
Employee compensation and accrued expenses 9,128 9,882
Current portion of long-term debt 3,703 7,482
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TOTAL CURRENT LIABILITIES 25,442 23,682
LONG-TERM DEBT, less current portion 359 5,111
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TOTAL LIABILITIES 25,801 28,793
SHAREOWNERS' EQUITY
Common stock 3,305 3,388
Retained earnings 73,880 74,376
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TOTAL SHAREOWNERS' EQUITY 77,185 77,764
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TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 102,986 $ 106,557
========= =========
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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JUNE 30, JUNE 24,
2001 2000
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NET SALES $ 68,257 $ 91,019
Cost of sales 52,783 69,461
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Gross profit 15,474 21,558
Other operating income 725 870
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Total operating income 16,199 22,428
OPERATING EXPENSES
Selling, general and administrative 12,679 18,278
Store closing costs (recoveries) (62) 40
Depreciation and amortization 1,576 1,787
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Total operating expenses 14,193 20,105
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INCOME FROM OPERATIONS 2,006 2,323
OTHER INCOME (EXPENSES)
Interest expense (101) (262)
Interest income 99 141
Gain on sale of properties 83 12
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Other income (expense), net 81 (109)
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INCOME BEFORE INCOME TAXES 2,087 2,214
Income taxes 792 752
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NET INCOME $ 1,295 $ 1,462
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Average shares outstanding 3,306 4,829
Net income per share, basic $ .38 $ .29
Net income per share, assuming dilution $ .38 $ .29
Dividends per share $ .07 $ .07
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)
SIX MONTHS ENDED
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JUNE 30, JUNE 24,
2001 2000
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NET SALES $ 112,637 $ 157,853
Cost of sales 86,747 120,493
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Gross profit 25,890 37,360
Other operating income 1,429 1,643
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Total operating income 27,319 39,003
OPERATING EXPENSES
Selling, general and administrative 24,261 34,489
Store closing costs (recoveries) (103) 485
Depreciation and amortization 3,263 3,624
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Total operating expenses 27,421 38,598
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(LOSS) INCOME FROM OPERATIONS (102) 405
OTHER INCOME (EXPENSES)
Interest expense (291) (529)
Interest income 267 200
Gain on sale of properties 1,156 312
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Other income (expense), net 1,132 (17)
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INCOME BEFORE INCOME TAXES 1,030 388
Income taxes 350 132
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NET INCOME $ 680 $ 256
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Average shares outstanding
3,339 4,905
Net income per share, basic $ .20 $ .05
Net income per share, assuming dilution $ .20 $ .05
Dividends per share $ .14 $ .14
See notes to condensed consolidated financial statements.
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WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(UNAUDITED)
(in thousands)
COMMON STOCK TOTAL
------------ ADDITIONAL RETAINED SHAREOWNERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------- -------- ------
Balances at December 31, 2000 3,388 $ 3,388 $ -- $ 74,376 $ 77,764
Net loss (615) (615)
Cash dividends--$.07 per share (237) (237)
Shares issued under Long-Term
Incentive Plan 10 10 85 95
Shares repurchased and retired (47) (47) (85) (314) (446)
------ ------- ---- -------- --------
Balances at March 31, 2001 3,351 3,351 -- 73,210 76,561
Net income 1,295 1,295
Cash dividends--$.07 per share (231) (231)
Share issued under Long-Term
Incentive Plan 3 3 30 -- 33
Shares repurchased and retired (49) (49) (30) (394) (473)
------ ------- ---- -------- --------
Balances at June 30, 2001 3,305 $ 3,305 $ -- $ 73,880 $ 77,185
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WOLOHAN LUMBER CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
SIX MONTHS ENDED
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JUNE 30, JUNE 24,
2001 2000
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OPERATING ACTIVITIES
Net income $ 680 $ 256
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 3,113 3,474
Amortization 150 150
Provision for losses on accounts receivable 150 277
Gain on sale of properties (1,156) (312)
Loss (gain) on sale of equipment 124 (193)
Changes in operating assets & liabilities
Accounts receivable (4,048) 3,489
Builder Finance Program receivables 900 2,752
Other assets 50 262
Inventories 382 2,450
Accounts payable and accrued expenses 5,711 598
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NET CASH PROVIDED BY OPERATING ACTIVITIES 6,056 13,203
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INVESTING ACTIVITIES
Proceeds from maturities of certificates of deposit, net 3,000 --
Purchases of property and equipment (340) (3,063)
Proceeds from the sale of properties and equipment 3,634 1,696
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,294 (1,367)
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FINANCING ACTIVITIES
Net credit lines borrowings -- 1,000
Payments on long-term debt (8,531) (4,125)
Purchases of common stock (963) (3,616)
Dividends paid (468) (684)
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NET CASH USED IN FINANCING ACTIVITIES (9,962) (7,425)
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INCREASE IN CASH AND CASH EQUIVALENTS 2,388 4,411
Cash and cash equivalents at beginning of period 1,705 3,217
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,093 $ 7,628
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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)
JUNE 30, 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 and six months ended June 30, 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 OF OPERATIONS.
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
Net income was $1.3 million (38 cents per share) for the second-quarter
2001, compared with $1.5 million (29 cents per share) for the second
quarter of 2000. The earnings decline in second quarter 2001 resulted
from a 25.0 percent decrease in sales which was offset, in part, by a
29.4-percent decline in operating expenses. Net income for the first
half of 2001 totaled $680,000 (20 cents per share), compared with
$256,000 (5 cents per share) for the similar period of 2000. The
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2001 first-half results included 23 cents per share from gains on the
sale of properties, compared with 4 cents per share in the 2000 period.
In addition to the affect from the change in net income, earnings per
share were positively impacted by lower average shares outstanding in
the second-quarter of 2001 and the six-month period of 2001, compared
with the same periods of 2000. Average shares outstanding in the
second-quarter and first-half of 2001 were 3,306,000 and 3,339,000,
respectively, compared with 4,829,000 and 4,905,000, respectively, for
the same periods in 2000. The Board of Directors has authorized the
Company to repurchase from time to time on the open market shares of
the Company's common stock.
Sales totaled $68.3 million for the second-quarter 2001, falling 25.0
percent from the second-quarter 2000 sales of $91.0 million. Sales for
comparable stores declined 9 percent in the second quarter of 2001 from
the second quarter of 2000. Sales for the six-month period ended June
30, 2001 were $112.6 million, a 28.6-percent decrease from the
corresponding period a year earlier. Sales for comparable stores
declined 14 percent for the 2001 six-month period from the same period
in 2000. Sales in the second quarter and first half of 2001 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 sales mix for the second-quarter 2001 was approximately 57 percent
contractor-builder sales and 43 percent project-consumer sales,
compared with a 60/40 mix in the second-quarter 2000. For the six-month
period, builder sales accounted for approximately 62 percent of total
sales in 2001 and 64 percent in 2000.
Gross margins for the second-quarter and six-month period of 2001 were
22.7 percent and 23.0 percent, respectively. Gross margins for the
second-quarter and six-month period of 2000 were 23.7 percent. The
lower margins in 2001 are attributed primarily to the more competitive
market place due, in part, to the overall slowdown in housing and
construction activity.
The operating expense ratio for the second-quarter of 2001 was 20.8
percent, compared with 22.1 percent for the same period in 2000. The
reduction reflects the emphasis placed on improving operating
efficiencies combined with the closure of non-productive store
locations. The ratio also showed improvement for the six-month period,
declining from 24.5 percent in 2000 to 24.3 percent in 2001.
In the Company's continuing effort to redeploy investments which do not
meet its strategic profit model, the Company has closed six stores in
the first half of 2001 (eight stores were closed during the full year
2000). Gains from the sale of properties related to closed stores
totaled $83,000 in the second-quarter 2001, compared with $12,000 for
second-quarter 2000. For the 2001 six-month period, gains from property
sales totaled $1,156,000, compared with $312,000 in the first half of
2000.
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The effective federal income tax rate for the six-month periods of 2001
and 2000 was 34 percent. Previous to 2001, the Company had included
certain state taxes with federal income taxes. Such taxes have been
reclassified as operating expenses in 2000. The reclassification has no
impact on net income. The reclassification increased operating expenses
for the second-quarter and six-month period of 2000 by $203,000 and
$36,000, respectively, and reduced income tax expense by the same
amounts.
Financial Condition
At June 30, 2001, the Company's balance sheet remained strong. Net
working capital at June 30, 2001, totaled $32.8 million, compared with
$32.9 million at Dec. 31, 2000. The current ratio at June 30, 2001, was
2.3 to 1, compared with 2.4 to 1 at Dec. 31, 2000.
Cash and cash equivalents were $4.1 million at June 30, 2001, compared
with $1.7 million at Dec. 31, 2000. The liquidity ratio at June 30,
2001, was .44 to 1, compared with .49 to 1 at Dec. 31, 2000. Cash and
cash equivalents increased $2.4 million during the first half of 2001.
Operating activities provided net cash of $6.1 million in the first
half of 2001, primarily from reductions in net working capital plus
depreciation. Investing activities in the first half of 2001 included
$3.6 million of proceeds from the sale of properties and equipment
(primarily closed facilities) and $3.0 million of proceeds from
maturities of certificates of deposit. Financing activities in the
first half of 2001 used net cash of $10.0 million and included $8.5
million for payments on long-term debt, $1.0 million for the purchase
of 96,000 shares of Company common stock at an average price of $10.03
per share and $.5 million for dividend payments.
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
75% of total assets at June 30, 2001, compared with 78% at year-end
2000. At June 30, 2001, the total long-term debt-to-asset ratio was
.003:1, versus .05:1 at year-end 2000 and the ratio of equity to total
assets was .75:1, versus .73:1 at year-end 2000.
Outlook
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 2001. 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.
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PART II -- OTHER INFORMATION
ITEM 3. 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 May 2001:
(a) A meeting was held on May 3, 2001 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
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Hugo E. Braun, Jr. 2,909,942 329,527
James L. Wolohan 2,909,663 329,806
Leo B. Corwin 2,908,142 331,327
Charles R. Weeks 2,908,042 331,427
Lee A. Shobe 2,908,042 331,427
John Sieggreen 2,907,983 331,486
Additionally, stockholders approved a proposal to amend the
Company's Long-Term Incentive Plan to increase by 150,000 the
number of shares of the Company's common stock which may be
issued thereunder. The vote cast with respect to the proposal
was 2,842,616 for and 388,801 against.
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: July 25, 2001 David G. Honaman
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David G. Honaman
Vice President - Administration
and Chief Financial Officer
Date: July 25, 2001 Edward J. Dean
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Edward J. Dean,
Corporate Controller
(Principal Accounting Officer)
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