SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001 Commission File Number 0-15708
HANDY HARDWARE WHOLESALE, INC.
(Exact Name of Registrant)
TEXAS 74-1381875
(State of incorporation or organization) I.R.S. Employer
Identification Number)
8300 Tewantin Drive
Houston, Texas 77061
(713) 644-1495
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $100.00 par value
(Title of Class)
Class B Common Stock, $100.00 par value
(Title of Class)
Preferred Stock, $100.00 par value
(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part Ill of this Form 10-K or in any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant (computed by reference to the price at which the stock was sold) was
$1,031,000 as of February 28, 2002.
The number of shares outstanding of each of the Registrant's classes of
common stock as of February 28, 2002, was 10,400 shares of Class A Common Stock,
$100 par value, and 71,451 shares of Class B Common Stock, $100 par value.
Documents Incorporated by Reference
Document Incorporated as to
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Notice and Proxy Statement for the Part III, Items 10, 11, 12 and 13
Annual Meeting of Stockholders
to be held April 22, 2002
TABLE OF CONTENTS
PART I
Item 1. Business........................................................................................1
Item 2. Properties......................................................................................6
Item 3. Legal Proceedings...............................................................................7
Item 4. Submission of Matters to a Vote of Security Holders.............................................7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...........................7
Item 6. Selected Financial Data.........................................................................8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...........9
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.....................................14
Item 8. Financial Statements and Supplementary Data....................................................14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........36
PART III
Item 10.* Directors and Executive Officers of the Registrant.............................................36
Item 11.* Executive Compensation.........................................................................36
Item 12.* Security Ownership of Certain Beneficial Owners and Management.................................36
Item 13.* Certain Relationships and Related Transactions.................................................36
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................36
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* Included in the Company's proxy statement to be delivered to the
Company's shareholders within 120 days following the Company's fiscal year end.
FORWARD LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K ("Annual
Report") that are not historical facts are forward-looking statements as that
term is defined in Section 21E of the Securities and Exchange Act of 1934, as
amended, and therefore involve a number of risks and uncertainties. Such
forward-looking statements may be or may concern, among other things, sales
levels, the general condition of retail markets, levels of costs and margins,
capital expenditures, liquidity, and competition. Such forward-looking
statements generally are accompanied by words such as "plan," "budget,"
"estimate," "expect," "predict," "anticipate," "projected," "should," "believe,"
or other words that convey the uncertainty of future events or outcomes. Such
forward-looking information is based upon management's current plans,
expectations, estimates and assumptions and is subject to a number of risks and
uncertainties that could significantly affect current plans, anticipated
actions, the timing of such actions and the Company's financial condition and
results of operations. As a consequence, actual results may differ materially
from expectations, estimates or assumptions expressed in or implied by any
forward-looking statements made by or on behalf of the Company, including those
regarding the Company's financial results, levels of revenues, capital
expenditures, and capital resource activities. Among the factors that could
cause actual results to differ materially are: fluctuations of the prices
received for or demand for the Company's goods, amounts of goods sold for
reduced or no mark-up, a need for additional labor or transportation costs for
delivery of goods, requirements for capital; general economic conditions or
specific conditions in the retail hardware business; weather conditions;
competition; as well as the risks and uncertainties discussed in this Annual
Report, including, without limitation, the portions referenced above and the
uncertainties set forth from time to time in the Company's other public reports,
filings, and public statements.
PART I
Item 1. Business
General Development of Business
Handy Hardware Wholesale, Inc. ("Handy Hardware" or the "Company) was
incorporated as a Texas corporation on January 6, 1961. Its principal executive
offices and warehouse are located at 8300 Tewantin Drive, Houston, Texas 77061.
Handy Hardware was formed by 13 independent hardware dealers in response to
competitive pressure from larger businesses and chain discount stores. The
purpose of the Company is to provide the warehouse facilities and centralized
purchasing services that allow participating independent hardware dealers
("Member-Dealers") to compete more effectively in areas of price and service.
Handy Hardware has grown from 13 Member-Dealers and sales of $150,000 in 1961 to
1,187 active Member-Dealers and sales of more than $178,500,000 in 2001. The
Company is owned entirely by its Member-Dealers and former Member-Dealers.
Handy Hardware is currently engaged in the sale to its Member-Dealers of
products used in retail hardware, building material and home center stores as
well as in plant nurseries, marine, industrial and automotive stores. In
addition, the Company offers advertising and other services to Member-Dealers.
The Company utilizes a central warehouse and office facility located in Houston,
Texas, and maintains a fleet of 46 trailers owned by the Company and 50 leased
power units and trailers which are used for merchandise delivery. The Company
offers merchandise to its Member-Dealers at its cost plus a markup charge,
resulting generally in a lower price than an independent dealer can obtain on
its own. Member-Dealers may buy merchandise from any source they desire, and
Member-Dealers are not required to make any minimum levels of purchases from
Handy Hardware. As of December 31, 2001, Handy Hardware's Member-Dealers were
located in Texas, Louisiana, Oklahoma, Arkansas, Alabama, Mississippi, Florida,
Colorado, New Mexico, Mexico and Central America. Information as to revenues,
operating profit and identifiable assets of the Company's single industry
segment is presented under "Item 6. Selected Financial Data."
Products and Distribution
The Company buys merchandise from vendors in large quantity lots,
warehouses the merchandise and resells it in smaller lots to its Member-Dealers.
During the Company's fiscal year ended December 31, 2001, 723 of the Company's
Member-Dealers were located in Texas, 207 in Louisiana, 103 in Oklahoma, 89 in
Arkansas, 12 in Alabama, 26 in Mississippi, 10 in Florida, 1 in Colorado, 8 in
New Mexico, 6 in Mexico and 2 in Central America. No individual Member-Dealer
accounted for more than 2.4% of the sales of the Company during fiscal 2001. The
loss of a single Member-Dealer or several Member-Dealers would not have a
material adverse effect on the Company.
Often Member-Dealers may desire to purchase products that are not
warehoused by the Company. In this instance, Handy Hardware will, when
requested, purchase the product from the vendor and have it shipped directly to
the Member-Dealer. Direct shipments from the vendor to Member-Dealers accounted
for approximately 36% of the Company's total sales during 2001, 37% in 2000 and
39% in 1999, while warehouse shipments accounted for approximately 64% of total
sales in 2001, 63% in 2000 and 61% in 1999.
The Company's total sales include 14 different major classes of
merchandise. In 2001, 2000 and 1999, the Company's total sales and total
warehouse sales were divided among classes of merchandise listed below.
1
Total Sales1 Warehouse Sales
------------ ---------------
Class of Merchandise 2001 2000 1999 2001 2000 1999
- -------------------- ---- ---- ---- ---- ---- ----
Plumbing Supplies 18% 19% 17% 22% 23% 21%
Building Materials 12 12 12 2 2 2
General Hardware 11 11 11 12 12 12
Paint Sundries 11 10 11 13 13 14
Electrical Supplies 10 10 10 13 13 13
Hand Tools 8 9 9 7 8 9
Lawn and Garden Products 8 8 8 10 10 10
Paint 4 3 4 4 4 4
Power Tools 4 4 5 2 2 2
Housewares & Related Supplies 3 3 3 4 3 3
Fasteners 2 2 2 1 1 1
Automotive After Market 2 2 2 3 3 3
Outdoor Products 2 2 2 2 1 2
Miscellaneous 5 5 4 5 5 4
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
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(1) These amounts include direct sales and warehouse sales.
Warehouse sales normally carry a markup of 9%, excluding any purchase
discounts and manufacturer's rebates. As an incentive to Member-Dealers to make
direct sale purchases, since June 1, 1989, direct sales have been sold at the
Company's cost with no markup, excluding purchase discounts and manufacturers'
rebates. The Company maintains a list of price-sensitive, high volume items on
which the markup is reduced from 9 percent to 2 or 4 percent. This program was
developed in order to allow Handy Hardware Member-Dealers to become more
competitive in the markets they serve. The price-sensitive items are reviewed
every six months and additions and deletions are made based on Member-Dealer
input and as the market dictates. Because the primary purpose of the Company is
to provide its Member-Dealers with a low cost buying program, markups are kept
as low as possible, although at a level sufficient to provide adequate capital
to pay the expenses of the Company, improve the quality of services provided to
the Member-Dealers and finance the increased inventory and warehouse capacity
required to support the growth of the Company.
Most Member-Dealers have a computer terminal at their hardware store that
provides a direct link to the offices of the Company. Each Member-Dealer is
assigned a day of the week on which it is to transmit its orders through the
computer terminal. Orders placed by Member-Dealers go directly into the Company
computer where they are compiled and processed on the day received. The
appropriate merchandise is gathered from the warehouse during the day following
receipt of each order, and on the next day, the merchandise leaves the warehouse
for delivery to the Member- Dealer. Generally, merchandise shipped from the
Company's warehouse arrives at the Member-Dealer's store the same day it is
shipped.
In 2001 the Company maintained a 94.5 percent service level (the measure of
the Company's ability to meet Member-Dealer orders out of current stock), as
compared to service levels of 94.8 percent in 2000 and 95.0 percent in 1999.
2
This slight decline in service level in 2001 can be attributed to crowded work
areas during the first six months of the year as the Company awaited the opening
of the new expanded warehouse facility. Inventory turnover was 6.3 times during
2001 and 6.1 times in 2000. This rate of inventory turnover is primarily the
result of tight control of the product mix, increase in depth of inventory and
continued high service level. No policy of inventory shrinkage has been
implemented or is planned.
Member-Dealer Services and Advertising
The Company employs a staff of nine full-time account representatives who
visit Member-Dealers to advise them on display techniques, location surveying,
inventory control, promotional sales, advertising programs and other
Member-Dealer services available to them through the Company.
The Company offers Member-Dealers an electronic ordering system that can
assist them in placing orders, receiving price changes, tracking promotions and
processing invoice transactions electronically. In addition, the Company
provides Member-Dealers with an inventory catalog which is available in paper or
CD-ROM format.
The Company has participated in newspaper advertising programs, and has
assisted in the preparation and distribution of sales circulars utilized by
Member-Dealers. The Company has a computerized circular program which allows the
Member-Dealer to customize its own unique advertising circular, utilizing its
individual inventory and targeting its particular market. In addition, the
system tracks available vendor cooperative funds, allowing the Member-Dealer to
deduct such cooperative claims from the cost of the circular program. The
Company estimates that approximately $866,503 was expended in 2001 for
Member-Dealer advertising activities. These advertising costs were completely
offset by contributory payments by participating Member-Dealers and cooperative
advertising allowances by participating manufacturers.
Suppliers
The Company purchases merchandise from various vendors, depending upon
product specifications and Member-Dealer requirements. Approximately 2,100
vendors supplied merchandise to the Company during 2001. The Company has no
significant long-term contract with any vendor. Most of the merchandise
purchased by the Company is available from several vendors and manufacturers,
and no single vendor or manufacturer accounted for more than 2.4% of the
Company's total purchases during 2001. The Company has not in the past
experienced any significant difficulties in obtaining merchandise and does not
anticipate any such difficulty in the foreseeable future.
The Company is a member of PRO Group, Inc., of Englewood, Colorado, an
independent hardware merchandising group. PRO Group, Inc. is a merchandising
organization with 31 wholesale hardware distributors as members. The size of the
organization generally provides greater buying power than that of any individual
member. The Company became a member of PRO Group, Inc. in order to take
advantage of this buying power, which gives PRO Group, Inc. and its members
access to potentially lower prices, bigger discounts, extended terms and other
purchasing advantages. The Company may participate in other benefits available
to PRO Group, Inc. members, but is under no obligation to do so. The Company
currently does not participate in such benefits because these benefits generally
are already provided by the Company to its Member-Dealers.
All of the Company's products are warranted to various levels by the
manufacturers, whose warranties are passed on to the Member-Dealers. In
addition, the Company maintains product liability insurance which the Company
believes is sufficient to meet its needs.
Employees
As of December 31, 2001, the Company had 323 full-time employees, of which
60 were in management or administrative positions and 263 in warehouse, office
or delivery operations. Company employees are not represented by any labor
unions. The Company believes its employee relations are satisfactory and it has
experienced no work stoppage as a result of labor disputes.
3
Trade Names
The Company has a trade name, "Handy Hardware Stores," that it licenses to
Member-Dealers at no additional charge. This trade name has been registered in
all the states in which the Company's Member-Dealers are located. This trade
name is displayed by many of the Member-Dealers on storefronts and inside stores
and is used in advertising programs organized by Handy Hardware. The Company
believes that this trade name is useful to its operations, but also believes
that the loss of ability to utilize this trade name would not have a material
adverse effect upon the business of the Company.
Capitalization by Member-Dealers
In order to become a Handy Hardware Member-Dealer, an independent hardware
dealer must enter into a Dealer Contract with the Company. In addition, a
Member-Dealer must enter into a Subscription Agreement with the Company for the
purchase of 10 shares of Handy Hardware Class A Common Stock, $100 par value per
share ("Class A Common Stock"), with an additional agreement to purchase a
minimum number of shares of Class B Common Stock, $100 par value per share
("Class B Common Stock"), and Preferred Stock, $100 par value per share
("Preferred Stock"), calculated as detailed below. All shares of the Company's
stock have a purchase price of $100 per share.
Purchase of Class A Common Stock
At the time an independent hardware dealer becomes a Member-Dealer, that
dealer is required to purchase, in cash, 10 shares of Class A Common Stock at
$100 per share. Handy Hardware does not permit a Member-Dealer to purchase more
than 10 shares of Class A Common Stock.
Purchases of Class B Common Stock and Preferred Stock by Member-Dealers
Process for Collecting Funds from Member-Dealers to Purchase Class B Common
Stock and Preferred Stock. The Company prepares a semi-monthly statement for
each Member-Dealer stating that Member-Dealer's total merchandise purchases made
during the preceding half month. Total merchandise purchases include both the
Member- Dealer's warehouse purchases from the Company's inventory and that
Member-Dealer's purchases directly from the manufacturer that are billed through
the Company. An additional charge equal to 2% of the Member-Dealer's warehouse
purchases from the Company's inventory is invoiced on each statement. The
Company's board may, but traditionally does not, include the amount of purchases
made by a Member-Dealer directly from the manufacturer when adding the 2%
charge. The Company accumulates the funds from this 2% charge for each
Member-Dealer to use for its purchase of Class B Common Stock and Preferred
Stock. When a Member-Dealer's accumulated funds total at least $2,000, the
Company applies $2,000 to the purchase of 10 shares of Class B Common Stock and
10 shares of Preferred Stock and retains any amounts above $2,000 until the
accumulated amounts again equal the $2,000 required for additional purchases.
Formula for Calculating the Desired Stock Ownership Level of each
Member-Dealer. In April of each year, the Company calculates each
Member-Dealer's desired stock ownership level, which must be at least $10,000.
The Company bases each Member-Dealer's desired stock ownership level on the
amount of its total merchandise purchases made during the previous calendar
year. The formula for calculating a Member-Dealer's desired stock ownership
level compares the Member-Dealer's actual stock ownership as of December 31 of
the previous year to that Member-Dealer's level of merchandise purchases in the
prior year. Actual stock ownership includes all shares of Class A Common Stock,
Class B Common Stock and Preferred Stock owned by a Member-Dealer, with each
share valued at its $100 par value. Each Member-Dealer's desired stock ownership
level is calculated based on the applicable formula set forth in the following
table:
4
Actual Stock Formula for Calculating
Ownership Desired Stock Ownership Level
- ----------------------------------------------------------------------------------------------------------------
$1 to $31,249 $1.00 for every $ 8.00 of total purchases
$31,250 to $56,249 $1.00 for every $ 8.00 of total purchases from $1 to $250,000
+ $1.00 for every $10.00 of total purchases over $250,000
$56,250 to $74,999 $1.00 for every $ 8.00 of total purchases from $1 to $250,000
+ $1.00 for every $10.00 of total purchases from $250,001 to $500,000
+ $1.00 for every $13.33 of total purchases over $500,000
$75,000 to $87,499 $1.00 for every $ 8.00 of total purchases from $1 to $250,000
+ $1.00 for every $10.00 of total purchases from $250,001 to $500,000
+ $1.00 for every $13.33 of total purchases from $500,001 to $750,000
+ $1.00 for every $20.00 of total purchases over $750,000
$87,500 and above $1.00 for every $ 8.00 of total purchases from $1 to $250,000
+ $1.00 for every $10.00 of total purchases from $250,001 to $500,000
+ $1.00 for every $13.33 of total purchases from $500,001 to $750,000
+ $1.00 for every $20.00 of total purchases from $750,001 to $1,000,000
+ $1.00 for every $40.00 of total purchases over $1,000,000
Example of How to Calculate a Member-Dealer's Desired Stock Ownership
Level. On December 31, a Member-Dealer's actual stock ownership totaled $32,000
and total merchandise purchases made from January 1 to December 31 amounted to
$300,000. For the first $250,000 of total merchandise purchases, the
Member-Dealer should own $1.00 of stock for each $8.00 of total merchandise
purchases, or $31,250. For the remaining $50,000 of total merchandise purchases,
the Member-Dealer should own an additional $1.00 of stock for each $10.00 of
total merchandise purchases, or $5,000, for a total desired stock ownership of
$36,250 [$31,250 plus $5,000]. The Member-Dealer's desired stock ownership level
of $36,250 is $4,250 higher than the Member-Dealer's actual stock ownership of
$32,000 on December 31. Thus, the Company will require this Member-Dealer to
make additional purchases of Class B Common Stock and Preferred Stock during the
twelve month period beginning April 1 of the following year using the funds the
Company collects from the 2% charges on this Member-Dealer's semi-monthly
invoice statement.
When Actual Stock Ownership is Less than Desired Stock Ownership. In April
of each year, the Company calculates the desired stock ownership level for each
Member-Dealer. If the Company determines that a Member-Dealer's actual stock
ownership on the previous December 31 was less than its desired stock ownership
level, then starting in April the Company will begin to collect funds for the
Member-Dealer's purchase of additional Class B Common Stock and Preferred Stock.
The Company collects these funds by adding the 2% charge described above to the
Member- Dealer's semi-monthly invoice statements. The Company will continue to
collect these funds for one year until the next March 31, even if the
Member-Dealer attains its desired stock ownership level before March 31. Until
funds for a Member-Dealer total $2,000 and are applied to purchase Class B
Common Stock and Preferred Stock, the Company uses that Member-Dealer's funds
for working capital.
When Actual Ownership is Greater than Desired Ownership. If a
Member-Dealer's actual stock ownership at year-end is equal to or exceeds its
desired stock ownership level, it is overinvested and is not required to make
additional purchases of Class B Common Stock and Preferred Stock during the
twelve month period beginning April 1 of the following year. However, a
Member-Dealer may voluntarily continue to make additional purchases of Class B
Common Stock and Preferred Stock by paying to the Company amounts equal to 2% of
the Member-Dealer's warehouse purchases invoiced on each semi-monthly statement.
Repurchases from Overinvested Member-Dealers. During the past ten years,
the Company has repurchased certain shares of Class B Common Stock and Preferred
Stock from Member-Dealers whose actual stock ownership exceeded their desired
stock ownership by $4,000 or more. Each year the Company has offered to
repurchase from each overinvested Member-Dealer one-fourth of the excess amount,
equally divided between shares of Class B Common Stock and Preferred Stock,
repurchased at the full initial sales price of $100 per share. In 2001,
5
approximately 19% of the shares eligible for repurchase from overinvested
Member-Dealers were submitted for repurchase, for which the Company expended
$46,200.
When the Company began the repurchase program in 1991, the total
overinvested amount for all Member- Dealers was $93,600, and as of December 31,
2001, the total amount was $245,000 (excluding shares held by the Texas, Alabama
and Louisiana State Treasury Unclaimed Property Divisions). The overinvested
amount varies over time due to repurchases and additional Member-Dealers
becoming overinvested because of additional stock purchases. Additionally,
because stock purchases are based on each Member-Dealer's desired stock
ownership, which fluctuates depending on the total dollar amount of annual
purchases of merchandise from the Company, some Member-Dealers who were
overinvested in one year may no longer be overinvested in the following year.
Over the ten years of the repurchase program, the Company has repurchased a
total of $447,700 of shares from Member-Dealers. The Company currently intends,
but is not required, to continue offering to repurchase from Member-Dealers
overinvested amounts eligible for repurchase. The Company's ability to conduct
such repurchases, however, will depend upon the Company's future results of
operations, liquidity, capital needs and other financial factors.
Affiliated Member-Dealers
If one or more individuals who control an existing Member-Dealer open a new
store which will also be a Member-Dealer, the new Member-Dealer is required to
make an initial purchase of 10 shares of Preferred Stock rather than 10 shares
of Class A Common Stock. In all other respects, however, the Company will treat
the new Member-Dealer as an entirely separate entity for purposes of determining
required stock purchases. The Company will calculate a separate desired stock
ownership for the new Member-Dealer and will maintain a separate account for
purchase funds paid by the new Member-Dealer.
Competition
The wholesale hardware industry in which the Company operates is highly
competitive. The Company competes primarily with other dealer-owned wholesalers,
cooperatives and independent wholesalers. The business of the Company is
characterized by a small number of national companies that dominate the market,
and a larger number of regional and local companies that compete for a limited
share of the market. The Company considers itself a regional competitor.
Competition is based primarily on price, delivery service, product performance
and reliability. The Company's management believes that it competes effectively
in each of these areas, and that proximity to the markets it serves is of
special importance to its ability to attract business in those regions.
Seasonality
The Company's quarterly net earnings traditionally vary based on the timing
of events which affect the Company's sales. Traditionally, first and third
quarter earnings have been negatively affected by the increased level of direct
sales (with no markup) resulting from the Company's semiannual trade show always
held in the first and third quarters. However, the Company's overall sales
levels often increase during the trade shows, which, in some years, offsets the
negative effect of the increased level of direct sales. In addition, the timing
difference in the receipt of discounts, rebates and miscellaneous income, as
well as changes in the weather and economic conditions in the Company's selling
territories, can cause the Company's net earnings per quarter to vary
substantially from year to year. For example, during 2001 the cumulative effect
of timing differences, together with overall economic conditions, contributed to
the decrease in 2001 net earnings. Sales during the fourth quarter are often
lower, as hardware sales are slowest during the winter months preceding ordering
for significant sales in the spring. In most years, however, this decrease in
sales is offset by the corrections to inventory made at year-end, causing fourth
quarter net earnings to vary from year to year.
Item 2. Properties
The Company's warehouse and administrative and marketing offices are
located on 25.2 acres of land in Houston, Texas. During 2001, the Company
completed its warehouse expansion project, increasing the size of its warehouse
from 297,000 square feet to 538,000 square feet. The building is of tilt wall
construction.
6
In January 1999 the Company purchased an additional 29.96 acres of land
located across the street from its warehouse facility. This land was used to
relocate the Company's retention pond, to provide additional parking facilities
and to allow for the Company's warehouse expansion project. Total capital
expenditures for the Company's recently completed expansion project were
$8,872,075, of which $4,146,718 (53.9%) was spent in 2001. The entire amount
drawn on the Company's line of credit during 2000 to fund the project was repaid
by the Company during the course of that year from cash flow. In 2001, the
expansion project was partially funded from cash flow. These funds were
supplemented by draws on the line of credit during the third quarter, with
$3,960,000 outstanding at September 30, 2001. By December 31, 2001, the amount
outstanding had been reduced to $2,700,000 by payments from cash flow.
The Company's property has convenient access to the major freeways
necessary for the shipment of products to and from the warehouse facility.
Management believes that the current facility will be sufficient to serve the
needs of the Company for the foreseeable future.
Item 3. Legal Proceedings
To the Company's knowledge, there are no pending or threatened legal
proceedings which would have a material effect on the Company's financial
position, results of operation or its assets.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of security holders,
through the solicitation of proxies or otherwise, during the fourth quarter of
2001.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
There is no established public trading market for any class of Handy
Hardware's capital stock. Each Member-Dealer enters into a Subscription
Agreement with the Company whereby it purchases 10 shares of Class A Common
Stock or, in certain cases, 10 shares of Preferred Stock, from the Company. In
addition, the Member-Dealer agrees to purchase a minimum number of shares of
Class B Common Stock and Preferred Stock pursuant to a formula based upon
merchandise purchased by the Member-Dealer from Handy Hardware. See "Item 1.
Business -- Capitalization by Member-Dealers" above. Holders of Class A Common
Stock may not transfer those shares to a third party without first offering to
sell them back to the Company. There are no restrictions on the transfer of the
Company's Class B Common Stock or Preferred Stock. All shares of the equity
securities of the Company are, to the best knowledge of the Company, owned by
Member-Dealers or former Member-Dealers of the Company or affiliates of such
Member-Dealers. In the past the Company has acquired all the stock that former
Member-Dealers have offered back to the Company, paying par value in cash for
the Class A Common Stock and acquiring Class B Common Stock and Preferred Stock
at par value on an installment sale basis. There is no assurance that Handy
Hardware will maintain such practices, which could be discontinued without
notice at any time. Other than as described above, the Company is not aware of
the existence of a trading market for any class of its equity securities.
Shares of the Company's Class A Common Stock are the only shares of capital
stock with voting rights. A Member-Dealer receives one vote for each share of
Class A Common Stock it owns. The number of record holders of each class of the
Company's Common Stock at February 28, 2002, was as follows:
Description Number of Holders
----------- -----------------
Class A Common Stock (Voting), $100 par value 1,012
Class B Common Stock (Non-Voting), $100 par value 891
The Company has never paid cash dividends on either class of its Common
Stock and does not intend to do so in the foreseeable future. For information
concerning dividends paid on the Company's Preferred Stock, see Items 6 and 8
below.
7
Item 6. Selected Financial Data
The following table provides selected financial information for the five
years ended December 31, 2001, derived from financial statements that have been
examined by independent public accountants. The table should be read in
conjunction with "Management's Discussion and Analysis" below and the financial
statements and the notes thereto included in Item 8.
Year Ended December 31,
----------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Operating Income Data:
Total Revenues $ 182,617,439 $ 171,826,695 $ 161,375,588 $ 149,362,454 $ 128,966,073
Net Sales 178,503,543 168,108,099 158,066,302 146,009,972 128,112,754
Total Expenses 182,006,236 170,655,442 159,894,033 147,999,775 126,796,355
Net Earnings
after Tax 389,075 749,664 950,902 877,149 1,408,203
Preferred Stock
Dividends Paid 635,737 585,925 554,346 682,368 620,812
Net Earnings Per Share $ (3.03) $ 2.20 $ 5.66 $ 2.92 $ 12.54
of Class A and Class B
Common Stock
Year Ended December 31,
----------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Balance Sheet Data:
Current Assets ....... $31,814,422 $27,290,088 $27,247,000 $26,041,957 $24,821,508
Property
(Net of Accumulated
Depreciation) ..... 16,776,391 13,204,168 10,756,483 9,516,835 9,408,768
Other Assets ......... 698,012 753,462 677,547 483,405 477,010
----------- ----------- ----------- ----------- -----------
Total Assets ......... $49,288,825 $41,247,718 $38,681,030 $36,042,197 $34,707,286
=========== =========== =========== =========== ===========
Current Liabilities .. $25,055,255 $18,137,338 $16,969,588 $15,894,431 $15,705,578
Long Term Liabilities 1,647,733 1,716,416 1,696,595 1,279,968 1,015,855
Stockholders' Equity . 22,585,837 21,393,964 20,014,847 18,867,798 17,985,853
----------- ----------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $49,288,825 $41,247,718 $38,681,030 $36,042,197 $34,707,286
=========== =========== =========== =========== ===========
8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Results of Operations
The U.S. economic environment, which rapidly deteriorated in the fourth
quarter of 2000 and eroded even further in the first quarter of 2001, did not
fully recover during 2001, despite rebounding slightly in the second and fourth
quarters of 2001. Although the overall economic climate for 2001 was not as
strong, the Company maintained its steady growth while continuing to meet its
goal of providing quality goods to its Member-Dealers at its cost plus a
reasonable mark-up charge.
Net Sales. Despite the overall economy and consumer confidence still
showing signs of weakness, the stock market remaining below 2000 levels and
pressure from retail warehouses continuing, throughout 2001 the Company's sales
growth remained fairly constant when compared to the same period in 2000. Net
sales in 2001 increased 6.2% ($10,395,444) over 2000 net sales, increasing only
slightly less than the 6.4% growth rate ($10,041,797) of net sales in 2000 over
1999.
Net sales growth during 2001 was mainly attributable to the increase in
inventory available for sale. Additionally, net sales were increased by the
continuing growth in the number of new Member-Dealers, with the Company adding
109 new Member-Dealers during 2001. The Company expects that the addition of
these and future Member-Dealers will continue to offset decreased levels of
purchases which occur in the selling territories, due to factors such as loss of
current Member-Dealers, negative economic factors or poor weather conditions.
Although the annual sales growth has been relatively steady for the past
three years, during those periods, sales within individual selling territories
began to exhibit wide variances. During 1999 and 2000, several selling
territories added a disproportionate number of new Member-Dealers compared to
the other selling territories. Therefore, in order to insure that each regional
district manager could adequately service all of his Member-Dealers, at the
beginning of 2001 the Company reorganized five selling territories by
reallocating the Member-Dealers among the Houston Area, the Austin, Brenham and
Central Texas Area, the Southern Louisiana Area, the Arkansas Area and the Baton
Rouge, New Orleans and Gulf Coast East Area. Because of this reorganization,
comparing sales in these selling territories for 2001 versus 2000 and 1999 may
not yield meaningful conclusions because the data does not necessarily reflect
sales by the same Member-Dealers, or even the same number of Member-Dealers.
9
The following table summarizes the Company's sales during 2001, 2000 and
1999 by sales territory:
2001 2000 1999
---------------------------------------------- -------- -----
% Increase
(Decrease)
in Sales % of % of % of
from Prior Total Total Total
Sales Territory Sales Year Sales Sales Sales
----------------------------------------- ---------------- ---------- -------- ------- ------
Houston Area(*) $ 39,952,284 (0.7%) 22.4% 23.9% 25.2%
Victoria, San Antonio, Corpus 36,711,346
Christi & Rio Grande Valley Area(1) 7.0% 20.6% 20.5% 19.5%
North Texas, Dallas & Fort Worth 21,543,256 7.0% 12.1% 11.9% 11.1%
Area
Austin, Brenham & Central Texas 22,025,817 6.0% 12.4% 12.4% 12.8%
Area(*)
West Texas & Eastern New Mexico(2) 3,564,346 318.0% 2.0% 0.5% 0.0%
Southern Louisiana Area(*) 14,398,411 (17.0%) 8.1% 10.3% 12.8%
Baton Rouge, New Orleans, 14,825,010 10.0% 8.3% 8.0% 8.1%
Mississippi, Alabama & Florida
Area(*)
Arkansas Area(*) 13,018,577 33.0% 7.3% 5.8% 4.0%
Oklahoma Area 12,242,575 9.0% 6.9% 6.7% 6.5%
----------- ----- ----- ----
Totals: $ 178,281,622(3) 100.0% 100.0% 100.0%
=========== ===== ===== =====
* Indicates a selling territory which was reorganized by the
Company in 2001. Therefore year to year comparisons may not yield
meaningful results.
(1) Includes sales to Member-Dealers in Colorado, Mexico and Central
America.
(2) Sales for the West Texas and Eastern New Mexico area commenced in
June of 2000.
(3) Total does not include miscellaneous sales to employees.
Net Material Costs and Rebates. Net material costs during 2001 were
$160,236,413, compared to $150,557,247 in 2000 and $141,831,398 in 1999. Net
material costs for 2001 increased 6.4% over those costs in 2000, compared to an
increase in net material costs in 2000 of 6.2% over 1999 levels. For 2001, the
increase in net material costs (6.4%) was slightly more than the increase in net
sales (6.2%). For 2000, however, the increase in net material costs( 6.2%) was
slightly less than the increase in net sales (6.4%). Net material costs as a
percentage of net sales have remained fairly constant, with such costs totaling
89.8% of net sales in 2001 as compared to 89.6% of net sales for the same period
in 2000 and 89.7% in 1999. Two factors were primarily responsible for the 0.2%
rise in net material costs as a percentage of net sales for 2001. A decrease in
amounts of factory rebates and purchase discounts credited against net material
costs in 2001, when compared to amounts credited for 2000, led to a higher
growth rate in net material costs for 2001. Rebates for 2001 decreased $231,677
or 4.2% (2001 - $5,282,436 vs. 2000 - $5,514,113) while purchase discounts for
2001 decreased $79,235 or 2.3% (2001 - $3,386,270 vs. 2000 - $3,465,505).
Additionally, as discussed above, net sales for 2001 experienced a weaker growth
rate than in 2000 (6.2% in 2001 compared to 6.4% in 2000). The combined effect
caused net material costs for 2001 to represent a larger percentage of net sales
for 2001 than net material costs represented in 2000.
Payroll Costs. With unemployment at relatively low levels, the U.S. labor
market in 2001 remained tight, as the Company has seen, for example, with the
ongoing shortage of qualified truck drivers. The increase in 2001 payroll costs
resulted primarily from salary increases needed to attract or retain
high-quality employees. In addition, due to a 7.9% increase in warehouse sales
in 2001 (2001 - $114,121,098 vs. 2000 - $105,716,840), the Company increased its
number of employees by 19% (2001 - 323 vs. 2000 - 272), primarily in the
10
warehouse and delivery departments. As a result, payroll costs during 2001
increased $1,059,380, a 12.5% increase over 2000 levels, compared to a more
modest increase of $682,045 (8.7%) during 2000 over 1999 levels. Despite the
appreciable escalation in 2001 payroll costs, payroll costs as a percentage of
each of total expenses and net sales remained fairly constant, at approximately
5.3%, 5.1% and 5.0% for 2001, 2000 and 1999, respectively. The continuing
stability in payroll costs, especially considering the sustained pressure on
wages, has been a result of an ongoing effort to maintain employee productivity.
Other Operating Costs. In 2001, other operating costs increased $546,880
(4.7%) over 2000 levels, while in 2000 the Company experienced a much more
sizable increase of $1,334,570 (13.1%) over 1999 levels. The modest increase in
other operating costs, when compared to the increase for 2000, was due mainly to
a decline of $277,200 in retirement accruals, a reduction of charges of $52,982
for offsite warehouse rental space and a reduction $45,398 in travel and
entertainment expenses (a combined reduction of $375,380), which offset the
increases in building depreciation, insurance, property taxes and warehouse and
delivery expenses (a combined total of $1,069,177). Other operating costs for
2001 were 6.6% of total expenses in 2001, as compared to 6.7% in 2000 and 6.4%
in 1999.
More than 97.9% of 2001's increase in other operating costs resulted from
increases in warehouse and delivery expenses. Delivery expenses (net of payroll)
increased from $3,291,899 in 2000 to $3,550,156 for in 2001, an increase of
$258,257 (7.8%). In particular, a 28.8% increase in contract delivery expenses
and a 9.8% increase in rental truck expenses to meet increased delivery demand
in 2001 resulted in much higher delivery expenses. Further, warehouse expenses
during 2001 increased $276,677 (13.2%) as a result of an increase in the cost of
workers compensation insurance (35.6%), an increase in the cost of building and
equipment repairs (43.7%) and an increase in the cost of warehouse security,
which more than doubled (114.4%). These increases in warehouse expenses were
only partially offset by an $85,786 (109.4%) increase in freight rebates.
Net Earnings
While net sales for 2001 increased $10,395,444 (6.2%) over net sales in
2000, net material costs for 2001 grew by $9,679,166 (6.4%) from levels in 2000,
causing gross margin for 2001 to increase by only $716,278 (4.1%) compared to an
increase in gross margin during 2000 of $1,315,948 (8.1%). Additionally, the
increase in gross margin during 2001 was largely offset by a considerable
increase in payroll costs of $1,059,380 (12.5%) and a notable rise in other
operating costs of $546,880 (4.7%). Thus pretax net earnings, combined with
other comprehensive losses, decreased 51.0% (from $1,103,351 for 2000 to
$541,090 in 2001) while after-tax net earnings, combined with other
comprehensive losses, decreased by 51.4%.
Net earnings for 2001 decreased primarily due to factors previously
discussed. However, the first quarter of 2001 accounted for approximately 94.2%
of the total decline in net earnings for 2001, principally due to a sharp
decrease in gross margin, coupled with a considerable increase in payroll costs.
Net earnings per share for 2001 decreased 237.7% as compared to 2000
levels, from net earnings per share of $2.20 in 2000, to a net loss per share of
$3.03 in 2001. The 2001 net loss per share is primarily due to 2001 net earnings
being approximately one-half of those in 2000, together with an approximate
$50,000 increase in dividends accrued in 2001 over 2000 levels. In 2001,
dividends accrued exceeded net earnings by $246,662 (63.4%), resulting in a net
loss applicable to the shareholders. By comparison, net earnings for 2000
exceeded dividends accrued by $163,739 (27.9%), resulting in net earnings
applicable to shareholders.
The variation in the Company's earnings per share from year to year results
from the Company's commitment to price its merchandise in order to deliver the
lowest cost buying program for Member-Dealers, although this often results in
lower net earnings for the Company. Because virtually all of the Company
shareholders are also Member- Dealers, these trends benefit the individual
shareholders of the Company who purchase the Company's merchandise. Therefore,
there is no demand from shareholders that the Company focus greater attention
upon earnings per share.
Material Changes in Financial Condition and Liquidity
In 2001, Handy Hardware maintained its financial condition and its ability
to generate adequate amounts of cash while continuing to make significant
11
investments in inventory, warehouse facilities, computer software and hardware,
as well as delivery equipment, to better meet the needs of its Member-Dealers.
However, net cash provided by the Company's operating activities may vary
substantially from year to year. These variations result from (i) the state of
the regional economy in the Company's selling territories, (ii) payment terms
the Company offers to its Member-Dealers, (iii) payment terms available to the
Company from its suppliers, and (iv) the timing of promotional activities such
as the Company's fall trade show.
During 2001 there was an increase of $189,308 in the Company's cash and
cash equivalents. The Company generated cash flow from operating activities of
$1,528,266, compared to $3,112,053 of cash from operations during 2000 and
$1,928,910 in 1999. The decrease in cash flow in 2001 was principally
attributable to a significant decrease in the combined total of net earnings and
other comprehensive losses, as well as major increases in inventory and accounts
receivable, as compared to 2000. These negative influences on cash flow were
only partially offset by the positive effects on cash flow from increases in
accounts payable, depreciation and accrued expenses payable. Net cash provided
by financing activities was $3,554,799 in 2001,as compared to only $551,965 in
2000 and $443,170 in 1999. This difference was principally attributable to
borrowings on the line of credit to fund the Company's warehouse expansion
project, which was completed in 2001, and a decline in the repurchase of stock.
In 2001 net earnings and other comprehensive losses combined were $362,049
less than combined net earnings and other comprehensive losses in 2000 (2001 -
$342,800 vs. 2000 - $704,849). This 51.4% decrease was mainly attributable to a
12.5% increase in payroll costs and a 4.7% increase in other operating expenses
during 2001, largely due to increased warehouse and delivery expenses, as well
as higher costs for insurance and property tax.
In 2001 inventory increased $2,240,641 compared to a modest increase of
only $819,972 in 2000. This 173% increase followed the completion of the
Company's warehouse expansion project, which added 241,000 square feet of
warehouse space during 2001. The Company ended 2001 with approximately 38,431
stockkeeping units.
Accounts receivable in 2001 increased by $1,897,429 as compared to a
decrease of $780,104 in 2000, a net variance of $2,677,533. The increase in the
levels of accounts receivable during the last year is attributable to extended
payment terms offered to Member-Dealers at the fall trade show, the sizable
addition of inventory available for purchase following completion of the
warehouse expansion, as well as delays in receipts of remittances due to
heightened scrutiny of mail following the September 11th tragedy.
Accounts payable increased $3,619,253 during 2001 compared to an increase
of $1,963,384 in 2000. This 84.3% increase is primarily attributable to the
extended dating terms for payment offered to the Company by suppliers, together
with making additional inventory available for purchase by the Company's
Member-Dealers.
Depreciation expense in 2001 was $1,312,553 as compared to $1,104,347
during the same 2000 period. The increase of $208,206 in depreciation expense in
2001 is mainly attributable to depreciating larger warehouse capital cost upon
completion of the warehouse expansion project, as well as the acquisition of
additional racking for storage of expanded inventory.
Accrued expenses payable increased by $572,646 in 2001 as compared to a
decrease of $711,940 in the same 2000 period, a net variance of $1,284,586,
mainly attributable to an increase in accruals for the spring 2002 market,
increased accruals for property taxes and increased accruals for truck rental
expenses.
12
The Company's continuing ability to generate cash to fund its activities is
highlighted by three key liquidity measures -- working capital, current ratio
(current assets to current liabilities) and long-term debt as a percentage of
capitalization, as shown in the following table:
December 31,
2001 2000 1999
---- ---- ----
Working Capital $6,759,167 $9,152,750 $10,277,412
Current Ratio 1.27 to 1 1.50 to 1 1.61 to 1
Debt as Percentage of Capitalization 7.3% 8.0% 8.5%
These key liquidity measures have remained relatively constant over the
past few years. However, in 2001 these ratios were negatively affected by the
capital expenditures, and borrowings on our line of credit, for completion of
our warehouse expansion project.
In 2001, the Company expects to further expand its existing customer base
in Arkansas, Oklahoma, West Texas, New Mexico, Louisiana and Mississippi. The
Company will finance this expansion with anticipated growth in revenues from
sales to the new Member-Dealers in these territories, and with receipts from
sales of stock to new and current Member-Dealers. The Company expects that
expansion in these selling territories will have a beneficial effect on its
ability to generate cash to meet its funding needs.
Capital Resources
Over the past five years, the Company's investments in plant and equipment
have amounted to more than $12.7 million, and have provided the Company with the
capacity for growth to meet the increasing demand for merchandise and expanded
services. Management intends to continue to invest prudently at levels
commensurate with the anticipated market expansion and needs of current
Member-Dealers.
During 2001, the Company invested $4,884,777 in plant and equipment, with
$4,146,718 (84.9%) used for the Company's warehouse expansion project, including
capital improvements such as a parking lot security system and a fence
($51,185). The remainder was used to purchase warehouse equipment ($454,131), to
upgrade computer equipment and purchase order entry terminals ($135,293), to
upgrade the Company's auto fleet ($113,062), to purchase office furniture and
equipment ($21,343) and to purchase one remodeled flatbed trailer ($14,230).
In April 2001 the Company's unsecured revolving line of credit with J P
Morgan Chase Bank (formerly known as Chase Bank of Texas) was $10,000,000 and
its maturity date was extended to April 2003. This line is used from time to
time for brief periods for working capital and other financing needs of the
Company. At September 30, 2001 there was an outstanding balance on this line of
credit of $3,960,000, which had been reduced to $2,700,000 as of December 31,
2001. The current interest rate on funds borrowed on the line of credit is
3.25%.
The Company has budgeted approximately $366,000 for 2002 capital
expenditures. Of this amount, the Company will use approximately $61,000 to make
building improvements, $80,000 to purchase warehouse equipment, $88,000 to
improve the Company's fleet of automobiles, $110,000 to upgrade the Company's
computer equipment and $27,000 to upgrade office furniture and equipment.
The Company's cash position of $1,411,096 at December 31, 2001 is
anticipated to be sufficient to fund the budgeted year 2002 capital
expenditures, although the Company may utilize some third party financing,
including the Company's existing credit sources, to increase inventory to meet
Member-Dealer needs.
13
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
14
HANDY HARDWARE WHOLESALE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2001
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Handy Hardware Wholesale, Inc.
Houston, Texas
We have audited the accompanying balance sheets of Handy Hardware Wholesale,
Inc., as of December 31, 2001 and 2000, and the related statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Handy Hardware Wholesale, Inc., as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with generally accepted accounting principles.
/s/ Clyde D. Thomas & Company, P.C.
---------------------------------------
CLYDE D. THOMAS & COMPANY, P. C.
Certified Public Accountants
February 6, 2002
Pasadena, Texas
HANDY HARDWARE WHOLESALE, INC.
BALANCE SHEETS
DECEMBER 31,
-------------------------------------
2001 2000
-------------- --------------
ASSETS
------
CURRENT ASSETS
- --------------
Cash $ 1,411,096 $ 1,221,788
Accounts receivable - trade, net of subscriptions receivable and
allowance for doubtful accounts 11,748,607 9,851,178
Inventory 18,207,690 15,967,049
Note receivable 935 6,904
Prepaid expenses 213,461 172,387
Prepaid income tax 201,897 70,782
Deferred compensation funded 30,736 -
-------------- --------------
Total Current Assets 31,814,422 27,290,088
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
At cost, less accumulated depreciation of
$6,088,346 (2001) and $5,549,306 (2000) 16,776,391 13,204,168
-------------- --------------
OTHER ASSETS
- ------------
Notes receivable 334,157 310,910
Deferred compensation funded 338,093 426,712
Prepaid expenses 25,762 15,840
-------------- --------------
698,012 753,462
-------------- --------------
TOTAL ASSETS $ 49,288,825 $ 41,247,718
------------ ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- -------------------
Notes payable - line of credit $ 2,700,000 $ -
Notes payable - stock - current portion 32,800 57,000
Notes payable - capital leases 27,371 7,889
Accounts payable - trade 21,034,254 17,415,001
Accrued expenses payable 1,230,094 657,448
Deferred compensation payable - current 30,736 -
-------------- --------------
Total Current Liabilities 25,055,255 18,137,338
-------------- --------------
NONCURRENT LIABILITIES
- ----------------------
Notes payable - stock - noncurrent portion 750,360 756,560
Notes payable - capital leases 34,235 17,591
Notes payable - vendor consignment merchandise 334,157 309,975
Deferred compensation payable 338,093 426,712
Deferred income taxes payable 190,888 205,578
-------------- --------------
1,647,733 1,716,416
-------------- --------------
Total Liabilities $ 26,702,988 $ 19,853,754
-------------- --------------
HANDY HARDWARE WHOLESALE, INC.
BALANCE SHEETS
DECEMBER 31
-----------------------------------
2001 2000
------------- -------------
STOCKHOLDERS' EQUITY
- --------------------
Common stock, Class A, authorized 20,000 shares, $100
par value per share, issued 10,510 and 10,020 shares $ 1,051,000 $ 1,002,000
Common stock, Class B, authorized 100,000 shares, $100
par value per share, issued 70,753 and 64,053 shares 7,075,300 6,405,300
Common stock, Class B subscribed, 5,093.62 and
4,804.89 shares 509,362 480,489
Less subscriptions receivable for Class B Common stock (22,502) (25,475)
Preferred stock, 7% cumulative, authorized 100,000 shares $100 par value
per share, issued 73,622
and 66,826 shares 7,362,200 6,682,600
Preferred stock subscribed, 5,093.62 and 4,804.89 shares 509,362 480,489
Less subscriptions receivable for Preferred stock (22,502) (25,475)
Paid in surplus 426,007 403,489
------------- -------------
16,888,227 15,403,417
------------- -------------
Retained earnings exclusive of other comprehensive earnings 5,682,518 5,929,180
Retained earnings applicable to other comprehensive earnings 15,092 61,367
------------- -------------
Total retained earnings 5,697,610 5,990,547
------------- -------------
Total Stockholders' Equity $22,585,837 $21,393,964
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 49,288,825 $ 41,247,718
------------------------------------------ ============= =============
See accompanying summary of accounting policies and notes to financial
statements.
HANDY HARDWARE WHOLESALE, INC.
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31,
-----------------------------------------------
2001 2000 1999
---- ---- ----
REVENUE
- -------
Net sales $ 178,503,543 $ 168,108,099 $ 158,066,302
Sundry income 4,113,896 3,718,596 3,309,286
------------- ------------- -------------
Total Revenue 182,617,439 171,826,695 161,375,588
------------- ------------- -------------
EXPENSES
- --------
Net material costs 160,236,413 150,557,247 141,831,398
Payroll costs 9,560,011 8,500,631 7,818,586
Other operating costs 12,057,265 11,510,385 10,175,815
Interest expense 152,547 87,179 68,234
------------- ------------- -------------
Total Expenses 182,006,236 170,655,442 159,894,033
------------- ------------- -----------
EARNINGS BEFORE PROVISION FOR FEDERAL
INCOME TAX 611,203 1,171,253 1,481,555
- -------------------------------------
PROVISION FOR FEDERAL INCOME TAX 222,128 421,589 530,653
- -------------------------------- ------------- ------------- -------------
NET EARNINGS 389,075 749,664 950,902
- ------------
LESS DIVIDENDS ON PREFERRED STOCK 635,737 585,925 554,346
- ---------------------------------
NET EARNINGS (LOSS) APPLICABLE
TO COMMON STOCKHOLDERS $ (246,662) $ 163,739 $ 396,556
- ------------------------------ ============= ============= =============
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
CLASS A & CLASS B $ (3.03) $ 2.20 $ 5.66
- --------------------------------------------- ============= ============= =============
OTHER COMPREHENSIVE EARNINGS (LOSS)
- ----------------------------------
Unrealized gain (loss) on securities (70,113) (67,902) 62,300
Provision for federal income tax
Other comprehensive earnings (loss)
net of tax (23,838) (23,087) 21,182
------------- ------------- -------------
(46,275) (44,815) 41,118
------------- ------------- -------------
COMPREHENSIVE EARNINGS (LOSS) $ (292,937) $ 118,924 $ 437,674
- ---------------------------- ============= ============= =============
See accompanying summary of accounting policies and notes to financial
statements.
HANDY HARDWARE WHOLESALE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2001 2000 1999
---- ---- ----
COMMON STOCK, CLASS A $100 PAR VALUE
- ------------------------------------
Balance at January 1, $ 1,002,000 $ 919,000 $ 893,000
Stock issued (year 2001 - 910 shares) 91,000 127,000 79,000
Stock canceled (year 2001 - 420 shares) (42,000) (44,000) (53,000)
---------------- --------------- --------------
Balance at December 31, 1,051,000 1,002,000 919,000
---------------- --------------- --------------
COMMON STOCK, CLASS B, $100 PAR VALUE
- -------------------------------------
Balance at January 1, 6,405,300 5,876,800 5,566,700
Stock issued (year 2001 - 8,077 shares) 807,700 759,200 702,900
Stock canceled (year 2001 - 1,377 shares) (137,700) (230,700) (392,800)
---------------- --------------- --------------
Balance at December 31, 7,075,300 6,405,300 5,876,800
---------------- --------------- --------------
COMMON STOCK, CLASS B, SUBSCRIBED
- ---------------------------------
Balance at January 1, 480,489 449,824 430,998
Stock subscribed 831,173 778,265 687,326
Transferred to stock (802,300) (747,600) (668,500)
---------------- --------------- --------------
Balance at December 31, 509,362 480,489 449,824
Less subscription receivable (22,502) (25,475) (27,242)
---------------- --------------- ---------------
Total 486,860 455,014 422,582
---------------- --------------- --------------
PREFERRED STOCK, 7% CUMULATIVE $100 PAR VALUE
- ---------------------------------------------
Balance at January 1, 6,682,600 6,138,650 5,824,650
Stock issued (year 2001 - 8,257 shares) 825,700 792,200 728,925
Stock canceled (year 2001 - 1,461 shares) (146,100) (248,250) (414,925)
---------------- --------------- --------------
Balance at December 31, 7,362,200 6,682,600 6,138,650
---------------- --------------- --------------
PREFERRED STOCK, 7% CUMULATIVE SUBSCRIBED
- -----------------------------------------
Balance at January 1, 480,489 449,824 430,998
Stock subscribed 831,173 778,265 687,326
Transferred to stock (802,300) (747,600) (668,500)
---------------- --------------- --------------
Balance at December 31, 509,362 480,489 449,824
Less subscription receivable (22,502) (25,475) (27,242)
---------------- --------------- --------------
Total 486,860 455,014 422,582
---------------- --------------- --------------
PAID IN CAPITAL SURPLUS
- -----------------------
Balance at January 1, $ 403,489 $ 363,610 $ 339,238
Additions 22,518 39,879 24,372
---------------- --------------- --------------
Balance at December 31, $ 426,007 $ 403,489 $ 363,610
---------------- --------------- --------------
TREASURY STOCK, AT COST
- -----------------------
COMMON STOCK, CLASS A, AT COST
------------------------------
Balance at January 1, $ - $ - $ -
Stock reacquired (42,000) (44,000) (53,000)
Stock canceled 42,000 44,000 53,000
Stock issued - - -
---------------- --------------- --------------
Balance at December 31, $ - $ - $ -
---------------- --------------- --------------
HANDY HARDWARE WHOLESALE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Page 2
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2001 2000 1999
---- ---- ----
COMMON STOCK, CLASS B, AT COST
------------------------------
Balance at January 1, $ - $ - $ -
Stock reacquired (137,700) (230,700) (392,800)
Stock canceled 137,700 230,700 392,800
Stock issued - - -
--------------- --------------- ---------------
Balance at December 31, - - -
--------------- --------------- ---------------
PREFERRED STOCK, 7% CUMULATIVE AT COST
--------------------------------------
Balance at January 1, - - -
Stock reacquired (146,100) (248,250) (414,925)
Stock canceled 146,100 248,250 414,925
Stock issued - - -
--------------- --------------- ---------------
Balance at December 31, - - -
--------------- --------------- ---------------
TOTAL TREASURY STOCK - - -
-------------------- --------------- --------------- ---------------
RETAINED EARNINGS
- -----------------
Balance at January 1 5,990,547 5,871,623 5,433,949
Add: Net earnings year ending December 31 389,075 749,664 950,902
Other comprehensive earnings (loss) (46,275) (44,815) 41,118
Deduct: Cash dividends on Preferred Stock 635,737 585,925 554,346
--------------- --------------- ---------------
Balance at December 31, 5,697,610 5,990,547 5,871,623
--------------- --------------- ---------------
TOTAL STOCKHOLDERS' EQUITY $ 22,585,837 $ 21,393,964 $ 20,014,847
- -------------------------- =============== =============== ===============
See accompanying summary of accounting policies and notes to financial
statements.
HANDY HARDWARE WHOLESALE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
2001 2000 1999
--------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net earnings and other comprehensive earnings (loss) $ 342,800 $ 704,849 $ 992,020
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 1,312,553 1,104,347 1,034,733
Deferred income tax (14,690) (23,697) (18,758)
(Gain) Loss on sale of property, plant, and equipment (3,250) (979) (1,232)
Unrealized gain (increase) decrease in fair market
value of securities 70,114 67,902 (62,300)
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable (1,897,429) 780,104 (295,837)
(Increase) Decrease in notes receivable (17,278) (72,356) (104,922)
(Increase) Decrease in inventory (2,240,641) (819,972) (1,041,067)
(Increase) Decrease in prepaid expenses (182,111) 38,284 203,872
Increase (Decrease) in note payable for vendor
consignment merchandise 24,182 85,103 110,165
Increase (Decrease) in accounts payable 3,619,253 1,963,384 766,875
Increase (Decrease) in accrued expenses payable 572,646 (711,940) 244,757
Increase (Decrease) in deferred
compensation payable (57,883) (2,976) 100,604
--------------- ------------ ------------
Net Cash Provided by (Used for) Operating Activities 1,528,266 3,112,053 1,928,910
--------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital expenditures for property, plant, and equipment (4,884,777) (3,552,032) (2,284,387)
Investment in deferred compensation funded (9,770) (9,650) (9,650)
Sale of property, plant and equipment 3,250 979 11,238
Reinvested dividends, interest, and capital gains (2,460) (55,276) (28,654)
--------------- ------------ ------------
Net Cash Provided by (Used for ) Investing Activities (4,893,757) (3,615,979) (2,311,453)
--------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Note Payable - line of credit borrowings 54,955,000 22,306,000 15,937,543
Note Payable - line of credit repayments (52,255,000) (22,306,000) (15,937,543)
Increase (Decrease) in notes payable - lease 36,126 (41,383) (58,309)
Increase (Decrease) in notes payable - stock (30,400) (80,920) 346,450
(Increase) Decrease in subscription receivable 5,946 3,534 (2,749)
Proceeds from issuance of stock 1,804,664 1,779,609 1,572,849
Purchase of treasury stock (325,800) (522,950) (860,725)
Dividends paid (635,737) (585,925) (554,346)
--------------- ------------ ------------
Net Cash Provided by (Used for) Financing Activities 3,554,799 551,965 443,170
--------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 189,308 48,039 60,627
- -----------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,221,788 1,173,749 1,113,122
- ---------------------------------------------- --------------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,411,096 $ 1,221,788 $ 1,173,749
- ---------------------------------------- =============== ============ ============
ADDITIONAL RELATED DISCLOSURES TO THE
STATEMENT OF CASH FLOWS
- -------------------------------------
Interest expense paid $ 152,547 $ 87,179 $ 68,234
Income tax payments 344,094 392,646 565,043
See accompanying summary of accounting policies and notes to financial
statements.
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ACCOUNTING POLICIES
- ----------------------------
Nature of Business
------------------
Handy Hardware Wholesale, Inc., (the "Company"), was incorporated as a
Texas corporation on January 6, 1961. Its principal executive offices and
warehouse are located at 8300 Tewantin Drive, Houston, Texas 77061. The
Company is owned entirely by its Member-Dealers and former Member-Dealers.
Handy Hardware Wholesale, Inc., sells to its Member-Dealers products
primarily for retail hardware, lumber and home center stores. In addition,
the Company offers advertising and other services to Member-Dealers. The
Company wholesales hardware to its dealers in Texas, Oklahoma, Louisiana,
Alabama, Mississippi, Arkansas, Florida, Colorado, New Mexico, Mexico, and
Central America.
Cash
----
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. The company maintains a checking account
which, at times, exceeds the FDIC coverage of $100,000 normally extended to
such accounts. At December 31, 2001, the balance of this account amounted
to $1,392,367.
Inventories
-----------
Inventories are valued at the lower of cost or market method, determined by
the first in, first out method, with proper adjustment having been made for
any old or obsolete merchandise.
Property, Plant, and Equipment
------------------------------
Property, plant, and equipment are carried at cost. Depreciation of
property accounts for financial statement presentation is based on
estimated useful lives and methods as follows:
Life Method of
Asset in Years Depreciation
------------------------------------------------------- --------------------- --------------------------
Building 30-39 Straight Line
Furniture and warehouse equipment including
computer and data processing equipment 3-7 Straight Line/MACRS
Transportation equipment 3-5 Straight Line
Property, plant and equipment consists of:
December 31,
------------
2001 2000
---- ----
Land $ 3,207,866 $ 3,207,866
Buildings & improvements 15,452,276 11,342,194
Furniture, computer, warehouse equipment 3,698,071 3,642,310
Transportation equipment 506,524 561,104
--------------- ----------------
$ 22,864,737 $ 18,753,474
Less: Accumulated depreciation 6,088,346 5,549,306
--------------- ----------------
$ 16,776,391 $ 13,204,168
=============== ================
Depreciation expense for the year ended December 31, 2001, amounted to
$1,312,553 compared with $1,104,347 for the year ended December 31, 2000.
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ACCOUNTING POLICIES (CONTINUED)
Changes in property, plant, and equipment for the year ended December 31, 2001,
are shown in the following schedule:
Balance Additions at Other Balance
1-1-2001 Cost Retirements Changes 12-31-2001
--------------- -------------- -------------- -------------- ---------------
Land $ 3,207,866 $ - $ - $ - $ 3,207,866
Construction in Progress-
warehouse expansion 2,107,122 4,044,192 - (6,151,314) -
Buildings and improvements 9,235,072 102,526 36,636 6,151,314 15,452,276
Furniture, computers and
warehouse equipment 3,642,310 610,767 555,006 - 3,698,071
Transportation equipment 561,104 132,084 186,664 - 506,524
--------------- -------------- -------------- -------------- ---------------
$ 18,753,474 $ 4,889,569 $ 778,306 $ - $ 22,864,737
=============== ============== ============== ============== ===============
Changes in property, plant, and equipment for the year ended December 31, 2000,
are shown in the following schedule:
Balance Additions at Other Balance
1-1-2001 Cost Retirements Changes 12-31-2001
--------------- -------------- -------------- -------------- ---------------
Land $ 3,202,572 $ 5,294 $ - $ - $ 3,207,866
Construction in Progress-
warehouse expansion - 2,107,122 - - 2,107,122
Buildings and improvements 8,549,156 692,571 6,655 - 9,235,072
Furniture, computers and
warehouse equipment 3,740,954 468,342 566,986 - 3,642,310
Transportation equipment 426,235 278,703 143,834 - 561,104
--------------- -------------- -------------- -------------- ---------------
$ 15,918,917 $ 3,552,032 $ 717,475 $ - 18,753,474
=============== ============== ============== ============== ===============
Changes in property, plant, and equipment for the year ended December 31, 1999,
are shown in the following schedule:
Balance Additions at Other Balance
1-1-2001 Cost Retirements Changes 12-31-2001
--------------- -------------- -------------- -------------- ---------------
Land $ 2,027,797 $ 1,174,775 $ - $ - $ 3,202,572
Buildings and improvements 7,859,100 690,056 - - 8,549,156
Furniture, computers and
warehouse equipment 3,721,832 348,494 329,372 - 3,740,954
Transportation equipment 425,272 71,063 70,100 - 426,235
--------------- -------------- -------------- -------------- ---------------
$ 14,034,001 $ 2,284,388 $ 399,472 $ - $ 15,918,917
=============== ============== ============== ============== ===============
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ACCOUNTING POLICIES (CONTINUED)
Changes in accumulated depreciation for property, plant, and equipment for the
year ended December 31, 2001, are shown in the following schedule:
Balance Additions at Other Balance
1-1-2001 Cost Retirements Changes 12-31-2001
--------------- -------------- -------------- ------------- ---------------
Land $ - $ - $ - $ - $ -
Buildings and improvements 2,755,238 590,789 36,636 - 3,309,391
Furniture, computers and
warehouse equipment 2,508,681 574,981 555,006 - 2,528,656
Transportation equipment 285,387 146,783 181,871 - 250,299
--------------- -------------- -------------- -------------- ---------------
$ 5,549,306 $ 1,312,553 $ 773,513 $ - $ 6,088,346
=============== ============== ============== ============== ===============
Changes in accumulated depreciation for property, plant, and equipment for the
year ended December 31, 2000, are shown in the following schedule:
Balance Additions at Other Balance
1-1-2000 Cost Retirements Changes 12-31-2000
--------------- -------------- -------------- ------------- ---------------
Land $ - $ - $ - $ - $ -
Buildings and improvements 2,357,085 404,808 6,655 - 2,755,238
Furniture, computers and
warehouse equipment 2,496,183 579,484 566,986 - 2,508,681
Transportation equipment 309,166 120,055 143,834 - 285,387
--------------- -------------- -------------- -------------- ---------------
$ 5,162,434 $ 1,104,347 $ 717,475 $ - $ 5,549,306
=============== ============== ============== ============== ===============
Changes in accumulated depreciation for property, plant, and equipment for the
year ended December 31, 1999, are shown in the following schedule:
Balance Additions at Other Balance
1-1-1999 Cost Retirements Changes 12-31-1999
--------------- -------------- -------------- ------------- ---------------
Land $ - $ - $ - $ - $ -
Buildings and improvements 2,093,539 263,546 - 2,357,085
Furniture, computers and
warehouse equipment 2,154,561 670,994 329,372 - 2,496,183
Transportation equipment 269,066 100,193 60,093 - 309,166
--------------- -------------- -------------- -------------- ---------------
$ 4,517,166 $ 1,034,733 $ 389,465 $ - $ 5,162,434
=============== ============== ============== ============== ===============
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------
Income Taxes
------------
Deferred income taxes are provided to reflect the tax effect of temporary
differences between financial statement and federal tax reporting arising
from the following:
1. Depreciation for federal income tax purposes is computed under the Straight
Line Method for assets acquired by December 31, 1986 and the Modified
Accelerated Cost Recovery System for assets acquired after December 31, 1986.
For financial statement purposes the Straight Line Method and Modified
Accelerated Cost Recovery System are being used. The following chart indicates
the difference in the depreciation calculations:
Annual Tax Depreciation Total
Tax Depreciation (Over) Under Book Accumulation
Over (Under) Book Depreciation for Tax Over Book
Year Depreciation Deleted Assets Depreciation
---- ------------ -------------- ------------
12-31-99 (22,129) 8,918 1,257,673
12-31-00 41,414 (197) 1,298,890
12-31-01 67,232 (23,769) 1,342,353
2. Deferred compensation is accrued as follows:
Balance, December 31, 2000 $ 426,712
Decrease for year ended December 31, 2001 57,883
---------------
Balance, December 31, 2001 $ 368,829
===============
The deferred compensation has not been deducted for income tax purposes.
3. Internal Revenue Code Section 263A requires certain costs to be capitalized
for inventory purposes. The following schedule shows the amount reported on the
tax return.
December 31,
-----------------------------------------
2001 2000
---------------- -----------------
Book inventory $ 18,207,690 $ 15,967,049
Adjustment for 263A uniform
capitalization costs 380,869 320,046
---------------- -----------------
Inventory for tax return $ 18,588,559 $ 16,287,095
================ =================
The Company accounts for any tax credits as a reduction of income tax expense in
the year in which such credits arise.
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------
Earnings Per Share of Common Stock
----------------------------------
Earnings per common share (Class A and Class B combined) are based on the
weighted average number of shares outstanding in each period after giving
effect to stock issued, stock subscribed, dividends on preferred stock, and
treasury stock as set forth by Accounting Principles Board Opinion No. 15
as follows:
Year ended December 31,
---------------------------------------------------
2001 2000 1999
----------- ------------- -----------
Net earnings $ 389,075 $ 749,664 $ 950,902
Less: Dividends on preferred stock 635,737 585,925 554,346
----------- ------------- -----------
Net earnings (loss) applicable to
common stockholders $ (246,662) $ 163,739 $ 396,556
Weighted average shares of common
stock (Class A and Class B outstanding) 81,415 74,492 70,101
Net earnings (loss) per share of
common stock $ (3.03) $ 2.20 $ 5.66
In prior years, earnings per share were calculated using Net Earnings and
Other Comprehensive Earnings (Loss) (previously identified as Total
Comprehensive Earnings), adjusted for dividends. Beginning in 2001,
earnings per share are calculated using net earnings, adjusted for
dividends. Net earnings per share of common stock for the years ended
December 31, 2000 and 1999 are restated as follows:
Year ended December 31,
------------------------------
2000 1999
------------- ----------
Prior calculation based on
Total comprehensive earnings $ 704,849 $ 992,020
Less: Dividends on preferred stock 585,925 554,346
------------- ----------
$ 118,924 $ 437,674
Weighted average shares of common stock (Class A
and Class B outstanding) 74,492 70,101
Net earnings (loss) per share of common stock 1.60 6.24
Adjusted for other comprehensive earnings (loss) net of tax (44,815) 41,118
Adjustment per share of common stock (.60) .58
Restated based on net earnings 749,664 950,902
Less: Dividends on preferred stock 585,925 554,346
------------- ----------
163,739 396,556
Net earnings (loss) per share of common stock $ 2.20 $ 5.66
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
Preferred Stock Dividends
- -------------------------
Cash dividends paid on the Company's outstanding preferred stock (par value
$100 per share) were 10% for 2001, 10% for 2000, and 10% for 1999,
pro-rated for the portion of a twelve-month period (ending January 31)
during which the preferred stock was held. The weighted average number of
preferred shares outstanding during each 12 month period was used to
calculate the per share cash dividends on preferred stock as reflected
below. Cash dividends have never been paid and are not anticipated to be
paid in the future on either class of the Company's outstanding common
stock.
SCHEDULE OF PREFERRED STOCK DIVIDENDS
During the
Year Ended Weighted Average Shares
December 31 Outstanding Per Share
---------------------- --------------------------- ------------
2001 73,980 $ 8.59
2000 67,602 8.67
1999 63,662 8.71
Revenue Recognition
- -------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. Accordingly, revenues and
expenses are accounted for using the accrual basis of accounting. Under
this method of accounting, revenues and receivables are recognized when
merchandise is shipped or services are rendered, and expenses are
recognized when the liability is incurred.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
NOTE 2 - NOTES RECEIVABLE
- -------------------------
Notes receivable reflect amounts due to the Company from its Member-Dealers
under deferred payment agreements.
Under the deferred agreement, the Company supplies Member-Dealers with an
initial order of General Electric Lamps. The payment for this order is
deferred so long as the Member-Dealer continues to purchase General
Electric lamps through the Company. If a Member-Dealer ceases to purchase
lamp inventory or sells or closes his business, then General Electric bills
the Company for the Member-Dealer's initial order and the note becomes
immediately due and payable in full to the Company. In September, 2000,
virtually the same type of deferred payment agreement was put into effect
with Chicago Specialty, a manufacturer of plumbing supplies.
Notes receivable are classified as follows:
December 31,
-----------------------------------
2001 2000
-------------- ---------------
Current $ 935 $ 6,904
Noncurrent 334,157 310,910
-------------- ---------------
Total $ 335,092 $ 317,814
============== ===============
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 3 - NOTES PAYABLE - STOCK
- ------------------------------
The five year, interest bearing notes payable - stock reflect amounts due
from the Company to former Member-Dealers for the Company's repurchase of
shares of Company stock owned by these former Member-Dealers. According to
the terms of the notes, only interest is paid on the outstanding balance of
the notes during the first four years. In the fifth year, both interest and
principal are paid. Interest rates on outstanding notes currently range
from 5.25% to 7.0%.
Notes payable - stock are classified as follows:
December 31,
-----------------------------------
2001 2000
-------------- ---------------
Current $ 32,800 $ 57,000
Noncurrent 750,360 756,560
-------------- ---------------
Total $ 783,160 $ 813,560
============== ===============
Principal payments applicable to the next five years are as follows:
2002 $ 32,800
2003 324,280
2004 358,200
2005 41,280
2006 26,600
-----------
$ 783,160
NOTE 4- INCOME TAXES
- --------------------
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes,"
effective January 1, 1993. The adoption of this standard changed the
Company's method of accounting for income taxes from the deferred method to
the liability method.
The major categories of deferred income tax provisions are as follows
(based on FASB 109):
Year ended December 31,
----------------------------------------------------
2001 2000 1999
-------------- -------------- -------------
Excess of tax over book depreciation $ 1,342,353 $ 1,298,890 $ 1,257,673
Allowance for doubtful accounts (44,001) (29,749) (7,195)
Inventory - ending inventory adjustment
for tax recognition of sec. 263A
uniform capitalization costs (380,869) (320,046) (296,130)
Deferred compensation (356,048) (344,453) (280,010)
--------------- --------------- --------------
Total 561,435 604,642 674,337
Statutory tax rate 34% 34% 34%
-------------- -------------- -------------
Cumulative deferred income tax payable $ 190,888 $ 205,578 $ 229,275
============== ============== =============
Classified as:
Current liability $ - $ - $ -
Noncurrent liability 190,888 205,578 229,275
-------------- -------------- -------------
$ 190,888 $ 205,578 $ 229,275
============== ============== =============
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 4- INCOME TAXES (CONTINUED)
- -------------------------------
Reconciliation of income taxes on difference between tax and financial
accounting:
Year ended December 31,
-----------------------------------------------------
2001 2000 1999
-------------- --------------- --------------
Principal components of income tax expense
Federal:
Current
Income tax paid $ 344,094 $ 392,646 $ 565,043
Carryover of prepayment from prior year 70,783 100,335 105,884
Current income tax payable - - -
-------------- -------------- --------------
$ 414,877 $ 492,981 $ 670,927
Less carryover to subsequent year (201,897) (70,783) (100,335)
-------------- -------------- --------------
Income tax for tax reporting at statutory rate of 34% $ 212,980 $ 422,198 $ 570,592
Deferred
Adjustments for financial reporting:
Depreciation 14,777 14,014 (4,492)
263A uniform capitalization costs (20,680) (8,131) (1,401)
Other (8,787) (29,579) (12,864)
-------------- -------------- --------------
Provision for federal income tax (U.S.) $ 198,290 $ 398,502 $ 551,835
============== ============== ==============
The Company is not exempt from income tax except for municipal bond
interest earned in an amount of $2,319.
Handy is not classified as a nonexempt cooperative under the provisions of
the Internal Revenue Code and is not entitled to deduct preferred dividends
in determining its taxable income.
NOTE 5 - LEASES
- ---------------
Operating Leases
----------------
The Company leases certain trucks and trailers under long-term operating
lease agreements. Leases expire in each of the years between 2001 and 2006.
The following is a schedule of future minimum lease payments for operating
leases as of December 31, 2001 and 2000 for the subsequent five years:
Year ended
December 31
------------------------------------
2001 2000
------------ --------------
2001 $ - $ 603,192
2002 617,080 359,873
2003 508,086 253,148
2004 489,487 219,239
2005 428,317 161,892
2006 280,692 -
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 5 - LEASES (CONTINUED)
- --------------------------
Capital Leases
--------------
The Company leases equipment as a capital lease. The following is an
analysis of the leased property under capital leases by major class:
Class of Property Year ended
----------------- December 31
------------------------------------------
2001 2000
-------------- -------------
Furniture, computers,
and warehouse equipment $ 128,650 $ 166,479
Less: Accumulated depreciation 92,566 154,547
------ -------
$ 36,084 $ 11,932
============== =============
The following is a schedule by year of future minimum lease payments for
capital leases.
Year ended
December 31
--------------------------------------------
2001 2000
------------- ----------------
2001 $ - $ 7,889
2002 27,371 17,591
2003 9,780 -
2004 9,780 -
2005 9,780 -
2006 4,895 -
------------- ----------------
Total $ 61,606 $ 25,480
============= ================
The lease payments at year-end 2001 are reflected in the Balance Sheet as
current and noncurrent obligations under capital leases of $27,371 and
$34,235, respectively. The estimated interest rates range from 4% to 9%.
Amortization of leased property is included in depreciation expense.
Rental Expenses
---------------
Rental expenses for the preceding three years are:
2001 $ 894,987
2000 1,328,764
1999 1,089,000
NOTE 6 - RELATED PARTY TRANSACTIONS
- -----------------------------------
None
The Company is owned entirely by its Member-Dealers and former
Member-Dealers. No shareholder is the beneficial owner of more than five
percent of any class of the Company's voting securities. Substantially all
sales are made to the Member-Dealers (Owners) of the Company.
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 7 - RETIREMENT PLAN - HANDY HARDWARE WHOLESALE, INC. 401(K) PROFIT SHARING
PLAN
- --------------------------------------------------------------------------------
During 1997, the Company transferred the former Profit Sharing and Savings
Plan to a 401(K)Profit Sharing Plan to help employees achieve financial
security during their retirement years. Employees are eligible to
participate in the plan if they have attained age 21 and have completed one
year of service with the Company. The Plan includes a 401(K) arrangement to
allow employees to contribute to the Plan a portion of their compensation,
known as elective deferrals. Each year, the Company will make matching
contributions in the percentage determined by the Board of Directors at its
discretion. The Board of Directors may choose not to make matching
contributions to the Plan for a particular year. During 2001, the employees
could contribute up to 6% of their gross annual compensation with 50% of
such contribution matched by the Company. In addition, the employees could
contribute an additional 9% with no Company matching contribution.
Employees are 100% vested at all times for elective deferrals in the Plan.
The Plan permits the Company to contribute a discretionary amount for a
plan year designated as qualified nonelective contributions. Company
qualified nonelective contributions are allocated to employees in the same
proportion that the number of points per employee bears to the total points
of all participants. Employees receive one point for each $1,000 of
compensation and one point for each year of service. Employees' interests
in the value of the contributions made to their account first partially
vest after three years of service at 20% and continue to vest an additional
20% each year until fully vested after seven years of service.
Participating employees who reach age 65 are fully vested without regard to
their number of years of service. Benefits are paid to eligible employees
under the plan in lump sum upon retirement, or at the direction of the
employee, pursuant to the terms of an annuity plan selected by the
employee. The amount of cost recognized during the years ended December 31,
is as follows:
Company Matching Company Qualified
Total Contribution Nonelective Contribution
----- ---------------- ------------------------
2001 $ 133,959 $ 133,959 $ -
2000 397,787 120,587 277,200
1999 551,311 106,811 444,500
NOTE 8 - STOCKHOLDERS' EQUITY
- -----------------------------
Terms of Capital Stock
----------------------
The holders of Class A Common Stock are entitled to one vote for each share
held of record on each matter submitted to a vote of shareholders. Holders
of Class A Common Stock must be engaged in the retail sale of goods and
merchandise, and may not be issued or retain more than ten shares of Class
A Common Stock at any time. The holders of Class B Common Stock are not
entitled to vote on matters submitted to a vote of shareholders except as
specifically provided by Texas law.
The holders of Preferred Stock are entitled to cumulative dividends of not
less than 7 percent per year nor more than 20 percent per year of the par
value ($100.00 per share) of the shares of Preferred Stock, as fixed by the
Board of Directors. The Preferred Stock has a liquidation value of $100 per
share. The holders of Preferred Stock are not entitled to vote on matters
submitted to a vote of shareholders except as specifically provided by
Texas law. The shares of Preferred Stock are not convertible, but are
subject to redemption (at the option of the Company) by vote of the
Company's Board of Directors, in exchange for $100 per share and all
accrued unpaid dividends.
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 8 - STOCKHOLDERS' EQUITY (CONTINUED)
- ----------------------------------------
Capitalization
--------------
To become a Handy Hardware Member-Dealer, an independent hardware dealer
must enter into a Subscription Agreement with the Company for the purchase
of ten shares of Handy Hardware Class A Common Stock, $100 par value per
share, and for any additional store, ten shares of Preferred Stock, with an
additional agreement to purchase a minimum number of shares of Class B
Common Stock, $100 par value per share, and Preferred Stock, $100 par value
per share. Class B Common Stock and Preferred Stock are purchased pursuant
to a formula based upon total purchases of merchandise by the Member-Dealer
from the Company, which determines the "Desired Stock Ownership" for each
Member-Dealer. The minimum Desired Stock Ownership is $10,000.
Each Member-Dealer receives from the Company a semimonthly statement of
Total Purchases made during the covered billing period, with an additional
charge ("Purchase Funds") equal to 2 percent of that Member-Dealer's
warehouse purchases until the Member-Dealer's Desired Stock Ownership for
that year is attained. Although the Subscription Agreement entitles the
Company to collect 2 percent of total purchases, since May 1, 1983, the
Board of Directors has determined to collect 2 percent of warehouse
purchases only. On a monthly basis, the Company reviews the amount of
unexpended Purchase Funds being held for each Member-Dealer. If a
Member-Dealer has unexpended Purchase Funds of at least $2,000, the Company
applies $2,000 to the purchase of ten shares of Class B Common Stock
($1,000) and ten shares of Preferred Stock ($1,000) each at $100 per share.
Transferability
---------------
Holders of Class A Common Stock may not sell those shares to a third party
without first offering to sell them back to the Company. There are no
specific restrictions on the transfer of the Company's Class B Common or
Preferred Stock.
Membership Termination
----------------------
Following written request, the Company will present to the Board of
Directors a Member-Dealer's desire to have his stock repurchased and the
Member-Dealer Contract terminated. According to the current procedures
established by the Board of Directors, a Member-Dealer's stock may be
repurchased according to either of two options.
Option I - The Member-Dealer's Class A Common Stock is repurchased at
$100 per share. Any funds remaining in the Member-Dealer's
Purchase Fund Account will be returned at the dollar value
of such account. Twenty percent or $3,000, whichever is
greater, of the total value of the Class B Common and
Preferred Stock will be repurchased. The remaining value of
the Class B Common and Preferred Stock is converted to a
five-year interest-bearing note. During the first four years
this note only pays interest. In the fifth year both
interest and principal are paid. The interest rate is
determined by the Company's Board of Directors at the same
time they approve the repurchase.
Option II - Same as Option I except that the remaining value of the
Class B Common and Preferred Stock is discounted 15 percent
and paid to the Member-Dealer immediately at the time of
repurchase.
Stock Repurchase
-----------------
In 2001 and 2000, the Board approved the continuation of its program of
repurchasing certain shares from those shareholders who are over-invested
in the Company's capital stock by $4,000 or more. The amount repurchased
each year was the amount of stock (based on purchase price of $100 per
share) equal to one fourth of the over-invested amount, equally divided
between shares of Preferred Stock and Class B Common Stock. In connection
with the repurchase, the minimum required investment in the Company's
capital stock is at least $10,000, but may be more based on the
shareholder's Desired Stock Ownership level. In 2001 and 2000, the Company
repurchased 462 and 217 shares for $46,200 and $21,700 respectively.
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 9 - LINE OF CREDIT
- -----------------------
In April, 2001, JP Morgan Chase Bank, formerly known as Chase Bank of
Texas, N. A., ("the Bank") amended the Company's existing unsecured $10
million revolving line of credit to provide for an April 30, 2002, maturity
date. The interest rate is prime minus one and one-half percent (1.5%) or
the London Interbank Offering Rate ("LIBOR") plus one and one-quarter
percent (1.25%). The line has been used from time to time for working
capital and other financing needs of the Company. At December, 2001, the
outstanding balance due on the line of credit at the end of the year was
$2,700,000. The total of all the borrowings against and repayments of the
line of credit throughout the year were as follows.
Balance Borrowings Repayments Balance Interest Interest
1-01-01 Throughout 2001 Throughout 2001 12-31-01 Rate Paid
---------------- --------------------- --------------------- ----------------------- -------------------- ------------------
$- $54,955,000 $52,255,000 $2,700,000 7.5% to 3.25% $102,342
Terms of the line of credit require monthly payments of accrued interest
with the balance, if any, of the loan to be repaid on April 30, 2002.
NOTE 10 - COMPREHENSIVE EARNINGS
- --------------------------------
1. Deferred compensation funded in the amount of $368,829 on the Balance Sheet
as a current asset in the amount of $30,736 and as a non-current asset in
the amount of $338,093 at December 31, 2001, includes equity securities
classified as investments available for sale in the amount of $308,829 at
fair market value. The $308,829 includes $22,866 unrealized gain on
securities resulting from the increase in fair market value. The cost of
the equity securities is $285,963.
2. Changes in Equity Securities:
Year Ended
December 31, 2001 Cumulative
----------------- -------------------
Balance, January 1, 2001 $ 370,312 $ -
Purchases 6,170 117,400
Dividends, interest and capital gains 2,460 168,563
Unrealized gains (losses) on securities resulting from
Increase (decrease) in fair market value (70,113) 22,866
----------------- -------------------
Balance, December 31, 2001 $ 308,829 $ 308,829
================= ===================
3. Components of Comprehensive Earnings:
Net Earnings Other Comprehensive Net Earnings
and Other Earnings - Unrealized Exclusive of Other
Comprehensive Gains (Losses) Comprehensive
Earnings (Loss) on Securities Earnings
============== ================= =================
Net earnings(loss) before provision
for federal income tax $ 541,090 $ (70,113) $ 611,203
Provision for federal income tax 198,290 (23,838) 222,128
-------------- ---------------- -----------------
Net earnings and other
comprehensive earnings (loss) $ 342,800 $ (46,275) $ 389,075
============== ================ =================
HANDY HARDWARE WHOLESALE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 10 - COMPREHENSIVE EARNING (CONTINUED)
- ------------------------------------------
4. Components of Retained Earnings
Retained Earnings Retained Earnings
Applicable to Other Exclusive of Other
Comprehensive Comprehensive
Total Earnings Earnings
-------------- -------------- -------------
Balance, January 1, 2001 $ 5,990,547 $ 61,367 $ 5,929,180
Add: Net earnings year ended December 31, 2001 342,800 (46,275) 389,075
Deduct: Cash Dividends on preferred stock (635,737) - (635,737)
------ ------- -------------- -------------
Balance, December 31, 2001 $ 5,697,610 $ 15,092 $ 5,682,518
============== ============== =============
NOTE 11 - SUBSEQUENT EVENT
- --------------------------
Mr. James Tipton retired as president and chief executive officer in
January, 2002. The employment agreement between Mr. Tipton and the Company
provides that upon his retirement the Company shall pay Mr. Tipton in 120
substantially equal monthly installments, an amount equal to the fair
market value of the assets in the Deferred Compensation Account as of such
date. Each monthly installment shall include the earnings on the remaining
balance until the Account shall have been paid out in full. Notwithstanding
the foregoing, the total amount payable to Mr. Tipton shall be
appropriately increased or decreased, as the case may be, but not more than
semiannually, to reflect the appreciation or depreciation in value and the
net income or loss on the funds which remain invested in the Deferred
Compensation Account. The payments to Mr. Tipton will begin in March, 2002.
Following Mr. Tipton's retirement, Mr. Don Jameson, the Company's Executive
Vice President and Chief Operating Officer, was elected as President and
Chief Executive Officer of the Company.
NOTE 12 - LITIGATION
- --------------------
In the opinion of the Company, at December 31, 2001, there was no pending
or threatened litigation or environmental clean-up actions that would have
a material effect on the financial position or results of operations of the
Company at December 31, 2001.
NOTE 13 - OTHER DISCLOSURES
- ---------------------------
1. Costs incurred for advertising are expensed when incurred. The amount
charged to advertising expense in the prior three years are:
2001 $ 873,059
2000 855,173
1999 766,977
2. Accounts receivable are net of subscriptions receivable and allowance
for doubtful accounts in the following amounts.
December 31
----------------------------------
2001 2000
----------- -----------
Subscriptions receivable $ 45,004 $ 50,951
Allowance for doubtful accounts 44,001 29,749
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Items 10-13 are incorporated by reference to the Company's Proxy Statement
for its annual stockholders' meeting to be held April 22, 2002, which proxy
statement will be filed with the Securities and Exchange Commission within 120
days after the close of the Company's 2001 fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents Filed as Part of this Report
Page
(1) Financial Statements Reference
-------------------- ---------
Auditor's Report.............................................................................. 16
Balance Sheets at December 31,
2001 and 2000............................................................................... 17
Statements of Earnings for the
years ended December 31,
2001, 2000 and 1999 ........................................................................ 19
Statements of Stockholders' Equity
for the years ended December 31,
2001, 2000 and 1999 ........................................................................ 20
Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999 ........................................................... 22
Notes to Financial Statements................................................................. 23
(2) Financial Statement Schedules
Schedule V has been omitted because none of the items
reflected thereon was in excess of 1% of total sales for the
periods covered.
All other schedules are omitted because the information is not
required or because the information required is in the
financial statements or notes thereto.
36
(3) Exhibits
--------
Exhibit
Number
-------
3.1 Articles of Incorporation of Handy Hardware Wholesale, Inc.,
as amended (Filed as Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1995, and incorporated herein by reference).
3.2 Bylaws of Handy Hardware Wholesale, Inc. (Filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1983, and incorporated herein by
reference).
-> 3.3 Bylaws of Handy Hardware Wholesale, Inc., as amended May 9,
2001.
4.1 Specimen copy of certificate representing Class A Common
Stock (Filed as Exhibit 4.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1983, and
incorporated herein by reference).
4.2 Specimen copy of certificate representing Class B Common
Stock (Filed as Exhibit 4.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1983, and
incorporated herein by reference).
4.3 Specimen copy of certificate representing Preferred Stock
(Filed as Exhibit 4.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1983, and incorporated
herein by reference).
4.4 Form of Subscription to Shares of Handy Hardware Wholesale,
Inc. for Class A Common Stock, Class B Common Stock and
Preferred Stock (Filed as Exhibit 4.4 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1991, and incorporated herein by reference).
* 10.1 Employment Agreement, as amended, between Handy Hardware
Wholesale, Inc. and James D. Tipton (Filed as Exhibit 10.1
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1983, and incorporated herein by
reference).
10.2 Split-Dollar Agreement dated November 13, 1991 between the
Company and James D. Tipton (Filed as Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference).
10.3 Form of Dealer Contract (Alabama, Arkansas, Florida,
Louisiana, Oklahoma and Texas) (Filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference).
10.4 Form of Dealer Contract (Mississippi) (Filed as Exhibit 10.7
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by
reference).
10.5 Loan Agreement dated March 30, 1993, between Texas Commerce
Bank, N.A., and Handy Hardware Wholesale, Inc. (Filed as
Exhibit I to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993, and incorporated herein by
reference).
10.6 Amendment and Restatement of Credit Agreement between Handy
Hardware Wholesale, Inc. and Texas Commerce Bank, N.A.,
dated as of April 30, 1996. (Filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 and incorporated herein by
reference).
37
10.7 Second Amendment to Amendment and Restatement of Credit
Agreement between the Company and Chase Bank of Texas,
National Association dated April 30, 1998. (Filed as Exhibit
10.15 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, and incorporated herein by
reference).
10.8 Third Amendment to Amendment and Restatement of Credit
Agreement between the Company and Chase Bank of Texas,
National Association dated April 30, 1999. (Filed as Exhibit
10.16 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1999, and incorporated herein by
reference.)
10.9 Agreement for Wholesale Financing between the Company and
Deutsche Financial Services dated March 9, 1999. (Filed as
Exhibit 10.17 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999, and incorporated
herein by reference.)
* 10.10 Tenth Amendment to the Employment Agreement, as amended,
between Handy Hardware Wholesale, Inc. and James J. Tipton
dated December 27, 2000.
10.11 Fourth Amendment to Amendment and Restatement of Credit
Agreement between the Company and Chase Bank of Texas,
National Association dated April 30, 2000.
10.12 Form of Dealer Contract (New Mexico and Colorado).
*,-> 10.13 Employment Agreement between Handy Hardware Wholesale, Inc.
and Jerry Donald Jameson dated November 13, 2001.
-> 10.14 Fifth Amendment to Amendment and Restatement of Credit
Agreement between the Company and Chase Bank of Texas,
National Association dated April 30, 2001.
-> 10.15 Statement re Computation of Per Share Earnings.
- ------------------------------
* Management Contract
->Filed herewith.
The Company will furnish to any requesting shareholder a copy of any
exhibit upon payment of $.40 per page to cover the expense of furnishing such
copies. Requests should be directed to Tina S. Kirbie, Secretary and Treasurer,
Handy Hardware Wholesale, Inc., 8300 Tewantin Drive, Houston, Texas 77061.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the three months ended
December 31, 2001.
(c) Exhibits
Listed in Item 14(a)(3) above.
(d) Financial Statement Schedules
Listed in Item 14(a)(2) above.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Handy Hardware Wholesale, Inc., has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HANDY HARDWARE WHOLESALE, INC.
/s/ Don Jameson
-------------------------------------
DON JAMESON
President and Chief Executive Officer
March 7, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, Handy Hardware Wholesale, Inc., and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/Don Jameson President, Chief Executive March 7, 2002
- -------------------------------------------- Officer and Director
Don Jameson
/s/Tina S. Kirbie Chief Financial and March 7, 2002
- -------------------------------------------- Accounting Officer
Tina S. Kirbie
/s/Doug Ashy, Jr. Director March 11, 2002
- --------------------------------------------
Doug Ashy, Jr.
/s/Norman J. Bering, II Director March 7, 2002
- --------------------------------------------
Norman J. Bering, II
/s/Craig E. Blum Director March 11, 2002
- --------------------------------------------
Craig E. Blum
/s/Susie Bracht-Black Director March 7, 2002
- --------------------------------------------
Susie Bracht-Black
/s/William R. Hill Director March 11, 2002
- --------------------------------------------
William R. Hill
/s/Ben J. Jones Director March 8, 2002
- --------------------------------------------
Ben J. Jones
/s/Richard A. Lubke Director March 11, 2002
- --------------------------------------------
Richard A. Lubke
/s/Jimmy T. Pate Director March 8, 2002
- --------------------------------------------
Jimmy T. Pate
/s/Leroy Welborn Director March 7, 2002
- --------------------------------------------
Leroy Welborn
39