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EXHIBIT 99.A
TRUSERV CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
MARCH 31, DECEMBER 31,
2001 2000
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(000'S OMITTED)
Current assets:
Cash and cash equivalents ........................................... $ 14,259 $ 18,316
Restricted cash ..................................................... 1,000 1,000
Accounts and notes receivable, net of allowance for doubtful
accounts of $8,338,000 and $7,170,000 ......................... 373,658 396,587
Inventories (Note 5) ................................................ 452,168 443,663
Other current assets ................................................ 18,160 12,274
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Total current assets .......................................... 859,245 871,840
Properties, net ........................................................ 210,782 216,146
Goodwill, net .......................................................... 93,323 94,051
Other assets ........................................................... 48,310 53,977
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Total assets .................................................. $1,211,660 $1,236,014
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See Notes to Unaudited Condensed Consolidated Financial Statements
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TRUSERV CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND CAPITALIZATION
MARCH 31, DECEMBER 31,
2001 2000
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(000'S OMITTED)
Current liabilities:
Accounts payable ........................................................... $ 395,156 $ 356,196
Outstanding checks ......................................................... 50,312 129,490
Accrued expenses ........................................................... 87,986 85,161
Short-term borrowings ...................................................... 178,449 138,085
Current maturities of notes, long-term debt and capital lease
obligations ............................................................. 61,828 61,350
Patronage dividend payable in cash ......................................... 1,770 10,558
----------- -----------
Total current liabilities ............................................ 775,501 780,840
Long-term debt, including capital lease obligations, less current maturities .. 287,267 288,929
Deferred credits .............................................................. 9,553 9,821
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Total liabilities and deferred credits ........................................ 1,072,321 1,079,590
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Minority interest ............................................................. 4,624 4,999
Commitments and contingencies ................................................. -- --
Members' capitalization:
Promissory (subordinated) and installment notes ............................ 62,819 65,846
Members' equity:
Redeemable Class A voting common stock, $100 par value; 750,000 shares
authorized; 444,240 and 411,180 shares issued and fully paid; 65,820 and
98,880 shares issued (net of subscriptions receivable of
$1,748,000 and $1,922,000) ............................................. 49,264 49,084
Redeemable Class B non-voting common stock and paid-in capital, $100
par value; 4,000,000 shares authorized; 1,732,968 and 1,732,962 shares
issued and fully paid .................................................. 174,596 174,596
Loss allocation (Note 4) ................................................ (92,460) (92,460)
Deferred patronage ...................................................... (27,195) (27,288)
Retained deficit ........................................................ (31,410) (17,381)
Accumulated other comprehensive loss .................................... (899) (972)
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Total members' equity ................................................ 71,896 85,579
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Total members' capitalization ................................... 134,715 151,425
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Total liabilities and members' capitalization .............. $ 1,211,660 $ 1,236,014
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See Notes to Unaudited Condensed Consolidated Financial Statements
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TRUSERV CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN
WEEKS ENDED
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MARCH 31, APRIL 1,
2001 2000
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(000'S OMITTED)
Revenues ............................................... $ 654,350 $ 1,027,605
Costs and expenses:
Cost of revenues .................................... 603,700 964,939
Logistics and manufacturing expenses (Note 2) ....... 20,648 23,829
Selling, general and administrative expenses (Note 2) 29,167 34,159
Interest paid to members ............................ 1,953 2,815
Other interest expense .............................. 13,404 11,600
Gain on sale of properties .......................... (62) (103)
Other income, net ................................... (560) (765)
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668,250 1,036,474
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Net loss before income taxes ........................... (13,900) (8,869)
Income tax expense ..................................... 36 55
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Net loss ............................................... $ (13,936) $ (8,924)
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See Notes to Unaudited Condensed Consolidated Financial Statements.
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TRUSERV CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
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MARCH 31, APRIL 1,
2001 2000
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(000'S OMITTED)
Operating activities:
Net loss ................................................................ $(13,936) $ (8,924)
Adjustments to reconcile net loss to cash and
cash equivalents provided by (used for) operating activities:
Depreciation and amortization ........................................ 10,702 11,314
Provision for allowance for doubtful accounts ........................ 1,340 2,097
Net change in working capital components ............................. 47,957 (44,574)
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Net cash and cash equivalents provided by (used for) operating activities: 46,063 (40,087)
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Investing activities:
Additions to properties owned ........................................... (3,212) (3,389)
Proceeds from sale of properties owned .................................. 25 1,143
Changes in other assets ................................................. 4,182 (219)
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Net cash and cash equivalents provided by (used for)
investing activities .................................................. 995 (2,465)
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Financing activities:
Payment of patronage dividend ........................................... (8,788) --
Proceeds from long-term borrowings ...................................... -- 791
Payment of notes, long-term debt and lease obligations .................. (3,693) (4,472)
Increase (decrease) in outstanding checks ............................... (79,178) (46,355)
Proceeds from short-term borrowings, net of repayments .................. 40,364 93,509
Purchase of common stock ................................................ -- (1,505)
Proceeds from Class A common stock subscription receivables ............. 180 145
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Net cash and cash equivalents provided by (used for) financing activities (51,115) 42,113
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Net decrease in cash and cash equivalents .................................. (4,057) (439)
Cash and cash equivalents at beginning of period ........................... 18,316 1,815
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Cash and cash equivalents at end of period ................................. $ 14,259 $ 1,376
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See Notes to Unaudited Condensed Consolidated Financial Statements.
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TRUSERV CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The condensed consolidated balance sheet at March 31, 2001 and December 31, 2000
and the condensed consolidated statement of operations and statement of cash
flows for the thirteen weeks ended March 31, 2001 and April 1, 2000 are
unaudited and, in the opinion of the management of the company, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of financial position at the balance sheet dates and the
results of operations and cash flows for the respective interim periods. The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America 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. These financial
statements should be read in conjunction with the unaudited consolidated
financial statements for the year ended December 31, 2000 included in the
Company's Current Report on Form 8-K.
NOTE 2 - RECLASSIFICATIONS
Certain reclassifications have been made to prior period financial statements to
conform with the current year's presentation. These reclassifications had no
effect on net margin (loss) for any period.
NOTE 3 - ESTIMATED PATRONAGE DIVIDENDS
If financial and operating conditions permit, patronage dividends are declared
and paid by the company after the close of each fiscal year. Patronage dividends
in the amount of $34,952,000 were paid on March 31, 2001 relating to the fiscal
year ended December 31, 2000, approximately thirty percent of which were paid in
cash (TruServ by-laws and the IRS require the payment of at least twenty percent
of patronage dividends be in cash). The remainder was paid through the issuance
of the company's Redeemable Class B non-voting common stock and, in certain
cases, a small portion of the dividend was paid by means of Promissory
(Subordinated) Notes of the company. The Redeemable Class B non-voting common
stock issued as part of the December 31, 2000 patronage dividend has been
designated as qualified notices of allocation. There is no estimated patronage
dividend for the period ended March 31, 2001 and there was no patronage dividend
estimated for the corresponding period in 2000.
NOTE 4 - LOSS ALLOCATION TO MEMBERS
During the third quarter of fiscal year 2000, company management developed, and
the Board of Directors approved, a plan to equitably allocate to members the
loss incurred in 1999. This loss was previously recorded as a reduction of
retained earnings. The company has allocated the 1999 loss by establishing a
loss allocation account as a contra-equity account in the unaudited condensed
consolidated balance sheet with the offsetting credit recorded to retained
earnings / (deficit). The loss allocation account reflects the sum of each
member's proportionate share of the 1999 loss, after being reduced by certain
amounts that are not allocable to members. The loss allocation account is not a
receivable from members and does not represent an amount currently due from
members. Rather, the loss allocation account will be satisfied, on a member by
member basis, by withholding the portion of future patronage dividends that
would have been paid in qualified Redeemable Class B non-voting common stock, at
par value, and applying such amount as a reduction in the loss allocation
account until the individual member's loss allocation account has been fully
satisfied. Members' stock ownership will not be reduced to satisfy the loss
allocation account. However, in the event a member should terminate as a
stockholder of the company, any unsatisfied portion of that member's loss
allocation account will be satisfied by reducing the redemption amount paid for
the member's stock investment in the company.
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NOTE 5 - INVENTORIES
INVENTORIES CONSISTED OF THE FOLLOWING:
MARCH 31, DECEMBER 31,
2001 2000
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(000'S OMITTED)
Manufacturing inventories:
Raw materials ............................ $ 4,004 $ 2,242
Work-in-process and finished goods ....... 32,032 30,705
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36,036 32,947
Merchandise inventories ........................ 416,132 410,716
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Total .................................... $452,168 $443,663
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Inventories are stated at the lower of cost, determined on the "first-in,
first-out" basis, or market. The cost of inventory also includes indirect costs
to bring inventory to its existing location for resale. The amount of indirect
costs included in ending inventory at March 31, 2001 and December 31, 2000 was
$28,802,000 and $29,144,000, respectively.
NOTE 6 - DEBT
The company's senior notes agreement and revolving credit facility require the
company to meet certain financial ratios and covenants. The company notified its
lenders that it had failed to achieve a required borrowing base ratio test
contained in both the senior notes agreement and the revolving credit facility
in February 2001. The company is in the course of renegotiating the senior notes
agreement and the revolving credit facility with its lending group, and, if
successful, will replace the current revolving credit facility, and possibly the
senior notes, with an asset-based lending agreement by approximately September
1, 2001. However, in the event the company is not successful in renegotiating
such an agreement, the senior notes would remain callable and would therefore be
reclassified from a long-term liability to a current liability.
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NOTE 7 - SEGMENT INFORMATION
The company is principally engaged as a wholesaler of hardware and related
products and is a manufacturer of paint products. The company identifies
segments based on management responsibility and the nature of the business
activities of each component of the company. The company measures segment
earnings as operating earnings including an allocation for interest expense and
income taxes. Information regarding the identified segments and the related
reconciliation to consolidated information are as follows:
QUARTER ENDED MARCH 31, 2001
(000'S OMITTED)
ELIMINATION
OF INTERSEGMENT CONSOLIDATED
HARDWARE PAINT OTHER ITEMS TOTALS
-------- ----- ----- ----- ------
Net sales to external customers $ 600,138 $ 28,449 $ 25,763 $ - $ 654,350
Intersegment sales - 547 - (547) -
Interest expense 13,942 1,279 136 - 15,357
Depreciation & amortization 10,092 437 173 - 10,702
Segment net margin/(loss) (16,663) 2,607 120 - (13,936)
Identifiable segment assets 1,121,899 61,105 28,656 - 1,211,660
Expenditures for long-lived assets 2,914 265 33 - 3,212
QUARTER ENDED APRIL 1, 2000
(000'S OMITTED)
ELIMINATION
OF INTERSEGMENT CONSOLIDATED
HARDWARE PAINT OTHER ITEMS TOTALS
-------- ----- ----- ----- ------
Net sales to external customers $ 969,483 $ 31,739 $ 26,383 $ - $ 1,027,605
Intersegment sales - 492 - (492) -
Interest expense 12,633 1,616 166 - 14,415
Depreciation & amortization 10,679 442 193 - 11,314
Segment net margin/(loss) (11,146) 2,205 17 - (8,924)
Expenditures for long-lived assets 2,982 334 73 - 3,389
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NOTE 8 - ASSET SALE
Effective December 29, 2000, the company sold the assets, primarily inventory,
of the Lumber and Building Material business to Builder Marts of America, Inc.
The Lumber and Building Materials business generated over 30% of the company's
revenue; however, the sale of the business will not materially impact net
margin.
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 2000, the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by FASB Statement No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." These new
standards require that all derivative instruments be recognized as either
assets or liabilities in the balance sheet and measured at their fair value.
The new standards also require changes in the fair value of derivatives to be
recorded in each period in current earnings or comprehensive income, depending
on the intended use of the derivatives. The adoption of these new standards had
no impact on the Company's results of operations, its financial position or its
cash flows.
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