SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 2004.
Commission File Number 0-15708
HANDY HARDWARE WHOLESALE, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 74-1381875
(State of incorporation) (I.R.S. Employer
Identification No.)
8300 Tewantin Drive, Houston, Texas 77061
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number: (713) 644-1495
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
------- -------
The number of shares outstanding of each of the Registrant's classes of common
stock as of July 31, 2004, was 10,230 shares of Class A Common Stock, $100 par
value, and 84,070 shares of Class B Common Stock, $100 par value.
HANDY HARDWARE WHOLESALE, INC.
INDEX
PART I Financial Information Page No.
-------
Item 1. Financial Statements
Condensed Balance Sheet June 30, 2004
and December 31, 2003 ....................... 3 - 4
Condensed Statement of Earnings - Six Months
Ended June 30, 2004 and 2003................. 5
Condensed Statement of Cash Flows - Six Months
Ended June 30, 2004 and 2003................. 6
Notes to Condensed Financial Statements........... 7 - 12
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations............ 13 - 18
Item 3. Quantitative & Qualitative Disclosures About
Market Risk.................................... 18
Item 4. Controls and Procedures.............................. 18
PART II Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities, Use of Proceeds
And Issuer Purchases of Equity Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 20
Item 6. Exhibits 20
Signatures 21
2
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET
JUNE 30, DECEMBER 31,
2004 2003
----------- -----------
ASSETS
------
CURRENT ASSETS
--------------
Cash $ 2,061,045 $ 1,066,679
Accounts Receivable, net of 13,166,015 11,573,826
subscriptions receivable and
allowance for doubtful accounts
Notes Receivable (Note 3) 7,265 9,099
Inventory 21,980,168 20,552,365
Other Current Assets 839,333 100,754
Prepaid Income Tax -0- 183,205
Deferred Compensation Funded 73,743 73,743
----------- -----------
$38,127,569 $33,559,671
----------- -----------
PROPERTY, PLANT AND EQUIPMENT (Note 2)
-------------------------------------
At Cost Less Accumulated Depreciation
of $7,968,709(2004) and $7,508,201 (2003) $14,944,476 $15,106,190
----------- -----------
OTHER ASSETS
------------
Notes Receivable (Note 3) $ 220,045 $ 244,002
Intangible Assets Less Accumulated Amortization
$1,048 (2004) and $724 (2003) 8,657 8,981
Deferred Compensation Funded 115,882 147,485
Other Noncurrent Assets -0- 31,814
----------- -----------
$ 344,584 $ 432,282
----------- -----------
TOTAL ASSETS $53,416,629 $49,098,143
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
-------------------
Notes Payable - Line of Credit $ 3,150,000 $ 2,430,000
Notes Payable-Stock (Note 4) 74,760 358,200
Notes Payable-Capital Lease 9,985 12,244
Accounts Payable - Trade 18,666,377 19,319,296
Other Current Liabilities 1,371,367 452,995
Deferred Compensation Payable 73,743 73,743
Federal Income Taxes Payable (Note 5) 5,771 -0-
----------- -----------
$23,352,003 $22,646,478
----------- -----------
NONCURRENT LIABILITIES
----------------------
Notes Payable - Line of Credit $ 3,150,000 $ -0-
Notes Payable-Stock (Note 4) 248,700 235,820
Notes Payable-Capital Lease 10,601 22,393
Notes Payable-Vendor 219,374 242,759
Deferred Compensation Payable 115,882 147,485
Deferred Income Taxes Payable (Note 5) 360,477 349,934
----------- -----------
$ 4,105,034 $ 998,391
----------- -----------
TOTAL LIABILITIES $27,457,037 $23,644,869
----------------- ----------- -----------
The accompanying notes are an integral part of the Condensed Financial Statements.
3
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET (CONTINUED)
JUNE 30, DECEMBER 31,
2004 2003
----------- -----------
STOCKHOLDERS' EQUITY
--------------------
Common Stock, Class A,
authorized 30,000 shares, $100
par value per share, issued
10,650 & 10,200 shares $ 1,065,000 $ 1,020,000
Common Stock, Class B,
authorized 200,000 shares, $100
par value per share, issued
88,015 & 82,762 shares 8,801,500 8,276,200
Common Stock, Class B
Subscribed 4,798.15 & 5,174.65
shares 479,815 517,465
Less Subscription Receivable (42,493) (32,938)
Preferred Stock 7% Cumulative,
authorized 200,000 shares, $100
par value per share, issued
90,957.25 & 85,550 shares 9,095,725 8,555,000
Preferred Stock, Subscribed
4,798.15 & 5,174.65 shares 479,815 517,465
Less Subscription Receivable (42,493) (32,938)
Paid in Surplus 583,630 508,609
----------- -----------
$20,420,499 $19,328,863
Less: Cost of Treasury Stock
9,313.00 and -0- shares (931,300) -0-
----------- -----------
$19,489,199 $19,328,863
Retained Earnings exclusive of other
comprehensive loss (Note 6) 6,475,119 6,132,015
Retained Earnings applicable to other
comprehensive loss (Note 6) (4,726) (7,604)
----------- -----------
6,470,393 6,124,411
----------- -----------
Total Stockholders' Equity $25,959,592 $25,453,274
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $53,416,629 $49,098,143
-------------------- =========== ===========
The accompanying notes are an integral part of the Condensed Financial Statements.
4
HANDY HARDWARE WHOLESALE, INC.
CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
QUARTER SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------- ---------------------------------
2004 2003 2004 2003
---- ---- ---- ----
REVENUES
- --------
Net Sales $ 48,690,876 $ 46,362,123 $100,965,188 $95,336,410
Sundry Income 757,137 991,776 2,700,846 2,626,394
------------ ------------ ------------ -----------
TOTAL REVENUES $ 49,448,013 $ 47,353,899 $103,666,034 $97,962,804
- -------------- ------------ ------------ ------------ -----------
EXPENSE
- -------
Net Mat'l. Costs $ 42,603,125 $ 40,728,187 $ 89,168,711 84,983,834
Payroll Costs 2,515,584 2,370,202 4,970,216 4,746,634
Other Operating Costs 3,777,486 3,633,635 8,047,186 7,251,328
Interest Expense 30,389 34,733 53,873 63,579
------------ ------------ ------------ -----------
TOTAL EXPENSE $ 48,926,584 $ 46,766,757 $102,239,986 $97,045,375
- ------------- ------------ ------------ ------------ -----------
EARNINGS BEFORE
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX $ 521,429 $ 587,142 $ 1,426,048 $ 917,429
- ----------------- ------------ ------------ ------------ -----------
PROVISIONS FOR
ESTIMATED FEDERAL
INCOME TAX (Note 5) (194,733) (209,942) (510,220) (329,059)
- ------------------ ------------ ------------ ------------ -----------
NET EARNINGS $ 326,696 $ 377,200 $ 915,828 $ 588,370
- ------------
LESS ESTIMATED
DIVIDENDS ON
PREFERRED STOCK (143,181) (131,048) (286,362) (262,096)
- --------------- ------------ ------------ ------------ -----------
NET EARNINGS
APPLICABLE
TO COMMON
STOCKHOLDERS $ 183,515 $ 246,152 $ 629,466 $ 326,274
- ------------ ============ ============ ============ ===========
NET EARNINGS
PER SHARE OF
COMMON STOCK,
CLASS A &
CLASS B (Note 1) $ 1.84 $ 2.64 $ 6.36 $ 3.55
- --------------- ============ ============ ============ ===========
OTHER COMPREHENSIVE EARNINGS (LOSS)
- ----------------------------------
Unrealized Earnings (Loss)
on Securities (Note 6) $ 517 $ 20,501 $ 4,360 $ 16,467
Provision for Federal
Income Tax (Note 5) (175) (6,971) (1,482) (5,599)
------------ ------------ ------------ -----------
Other Comprehensive
Earnings (Loss) Net
of Tax $ 342 $ 13,530 $ 2,878 $ 10,868
------------ ------------ ------------ -----------
TOTAL COMPREHENSIVE
EARNINGS (NOTE 6) $ 183,857 $ 259,682 $ 632,344 $ 337,142
---------------- ------------ ------------ ------------ -----------
The accompanying notes are an integral part of the Condensed Financial Statements.
5
HANDY HARDWARE WHOLESALE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-----------------------------------------
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITY
- ----------------------------------
Net Earnings Plus Other Comprehensive
Earnings (Note 7) $ 918,706 $ 599,238
------------ -----------
Adjustments to Reconcile Net
Earnings to Net Cash Provided by
Operating Activities:
Amortization $ 324 $ 441
Depreciation 465,092 512,527
Gain on Sale of Property, Plant &
Equipment (4,584) (8,673)
Increase(Decrease)in Deferred Income Tax 10,543 (2,224)
Unrealized gain (increase) decrease
In fair market value of securities (4,360) 28,634
Deferred Compensation Funded 36,871 -0-
Changes in Assets and Liabilities
Increase in Accounts Receivable $ (1,592,189) $(1,039,771)
(Increase) Decrease in Notes Receivable 25,791 (9,469)
Increase in Inventory (1,427,803) (2,849,073)
Increase in Other Assets (706,765) (409,810)
Decrease in Prepaid Income Tax 183,205 115,456
Increase (Decrease) in Note Payable-Vendor (23,385) 9,741
Decrease in Accounts Payable (652,919) (694,417)
Increase (Decrease) in Other Liabilities 918,372 (284,028)
Increase in Federal Income
Taxes Payable 5,771 122,276
Decrease in Deferred Compensation
Payable (31,603) (11,319)
------------ -----------
TOTAL ADJUSTMENTS $ (2,797,639) $(4,519,709)
------------ -----------
NET CASH USED FOR
OPERATING ACTIVITIES $ (1,878,933) $(3,920,471)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital Expenditures $ (357,483) $ (196,669)
Sale of Property, Plant & Equipment 58,689 64,448
Reinvested dividends, interest & capital gains (908) (2,281)
------------ -----------
NET CASH USED FOR INVESTING ACTIVITIES $ (299,702) $ (134,502)
-------------------------------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in Note Payable - Line of Credit $ 3,870,000 $ 4,915,000
Decrease in Notes Payable - Stock (270,560) (206,260)
Decrease in Notes Payable - Capital Lease (14,051) (4,890)
Increase in Subscription Receivable (19,110) (22,652)
Proceeds From Issuance of Stock 1,110,746 945,701
Purchase of Treasury Stock (931,300) (211,700)
Dividends Paid (572,724) (524,193)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 3,173,001 $ 4,891,006
------------ -----------
NET INCREASE
IN CASH & CASH EQUIVALENTS $ 994,366 $ 836,033
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,066,679 1,394,324
------------ -----------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 2,061,045 $ 2,230,357
============ ===========
ADDITIONAL RELATED DISCLOSURES TO THE STATEMENT OF CASH FLOWS
- -------------------------------------------------------------
Interest Expense Paid $ 53,873 $ 63,579
Income Taxes Paid 495,388 214,606
The accompanying notes are an integral part of the Condensed Financial Statements.
6
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
NOTE 1 - ACCOUNTING POLICIES
- ----------------------------
(1) Description of Business:
-----------------------
Handy Hardware Wholesale, Inc., ("Handy"), was incorporated as a Texas
corporation on January 6, 1961. Our principal executive offices and
warehouse are located at 8300 Tewantin Drive, Houston, Texas 77061. We are
owned entirely by our member-dealers and former member-dealers.
We sell to our member-dealers products primarily for retail hardware,
lumber and home center stores. In addition, we offer advertising and other
services to member-dealers. We wholesale hardware to our member-dealers in
Texas, Oklahoma, Louisiana, Alabama, Mississippi, Arkansas, Florida,
Colorado, New Mexico, Tennessee, Mexico and Belize.
(2) General Information:
-------------------
The condensed consolidated financial statements included herein have been
prepared by us. The financial statements reflect all adjustments, which
were all of a recurring nature, and which are, in the opinion of
management, necessary for a fair presentation. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). We believe that the disclosures made are adequate to make
the information presented not misleading. The condensed consolidated
financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the latest Form 10-K
Annual Report.
(3) Cash:
----
For purposes of the statement of cash flows, we consider all highly liquid
debt instruments purchased with a maturity of three months or less to be
cash equivalents.
(4) 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.
(5) Earnings Per Share:
------------------
Net 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 the stock issued, stock subscribed, accrued dividends on
Preferred Stock, and treasury stock as set forth by Accounting Principles
Board Opinion No. 15 as follows:
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ---------------------------
2004 2003 2004 2003
---- ---- ---- ----
Calculation of Net Earnings Per Share
of Common Stock
- -------------------------------------
Net Earnings Before Preferred
Dividends $ 326,696 $ 377,200 $ 915,828 $ 588,370
Less: Estimated Dividends
on Preferred Stock (143,181) (131,048) (286,362) (262,069)
--------- --------- --------- ---------
Net Earnings (Loss) Applicable
to Common Shareholders $ 183,515 $ 246,152 $ 629,466 $ 326,274
Weighted Average
Shares of Common Stock
(Class A & Class B)
outstanding 99,667 93,131 98,945 91,989
Net Earnings Per Share
of Common Stock $ 1.84 $ 2.64 $ 6.36 $ 3.55
========= ========= ========= =========
7
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------
(6) 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.
(7) Accounting for Dividends on Preferred Stock:
-------------------------------------------
We pay dividends on Preferred Stock during the first quarter of each fiscal
year. Only holders of Preferred Stock on the record date for the payment of
the dividend are entitled to receive dividends. Dividends are prorated for
the portion of the twelve-month period ending January 31 during which the
Preferred Stock was held.
Because we are unable to anticipate the amount of the Preferred Stock
dividends to be paid in the first quarter of 2005, we do not accrue a
liability for the payment of those dividends on our balance sheet. To more
properly reflect net earnings, however, on the Condensed Statement of
Earnings included herein, we show an estimated portion of the annual
dividends to be paid in the first quarter of 2005 based on one-half
($286,362) of the annual dividends paid in the first quarter of 2004.
When dividends on Preferred Stock are actually paid, there is a reduction
of retained earnings. Retained earnings on the Condensed Balance Sheet for
the six months ended June 30, 2004 contained herein, therefore, are net of
dividends actually paid during the first quarter of 2004 in the amount of
$572,724.
NOTE 2 - PROPERTY, PLANT & EQUIPMENT
- ------------------------------------
Property, Plant & Equipment consists of:
JUNE 30, DECEMBER 31,
2004 2003
----------- -----------
Land $ 3,207,866 $ 3,207,866
Building & Improvements 15,505,854 15,490,838
Furniture, Computer, Warehouse 3,672,099 3,388,830
Transportation Equipment 527,366 526,857
----------- -----------
$22,913,185 $22,614,391
Less: Accumulated Depreciation (7,968,709) (7,508,201)
----------- -----------
$14,944,476 $15,106,190
=========== ===========
8
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------
NOTE 3 - NOTES RECEIVABLE
- -------------------------
Notes receivable reflect amounts due to us from our member-dealers under
deferred payment agreements and installment sale agreements as well as amounts
due from former member-dealers on amounts still owing on their accounts.
Under the deferred agreement, we supply 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 us. If a
member-dealer ceases to purchase lamp inventory or sells or closes his business,
then General Electric invoices us for the member-dealer's initial order and the
member-dealer's note becomes immediately due and payable in full to us.
Under the installment sale agreements, we sell member-dealers computer hardware,
the purchase price of which is due and payable by member-dealers to us in
thirty-six monthly installments of principal and interest.
Additionally, as of June 30, 2004, there was one note receivable from a former
member-dealer for amounts owed on its account, which bears interest at an
annualized rate of 10%. Monthly payments on this note, including interest, total
$1,000.00.
Notes Receivable are classified as follows:
CURRENT PORTION NONCURRENT PORTION
------------------------ ----------------------------
JUNE 30, DEC. 31, JUNE 30, DEC. 31,
2004 2003 2004 2003
---- ---- ---- ----
Note from Former Member-Dealer $ 6,141 $ 8,015 $ -0- $ -0-
Deferred Agreements -0- -0- 219,374 242,759
Installment Sale Agreements 1,124 1,084 671 1,243
------- ------- -------- --------
$ 7,265 $ 9,099 $220,045 $244,002
======= ======= ======== ========
NOTE 4 - NOTES PAYABLE STOCK
- ----------------------------
The five year, interest bearing notes payable - stock reflect amounts due from
us to former member-dealers for our repurchase of shares of Handy 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 range from
3.0% to 6.0%.
Notes payable - stock are classified as follows:
CURRENT PORTION NONCURRENT PORTION
------------------------ ----------------------------
JUNE 30, DEC. 31, JUNE 30, DEC. 31,
2004 2003 2004 2003
---- ---- ---- ----
$74,760 $358,200 $248,700 $235,820
Principal payments due over the next five years are as follows:
2004 33,480
2005 41,280
2006 26,600
2007 150,440
2008 17,500
Thereafter 54,160
--------
$323,460
========
9
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------
NOTE 5 - INCOME TAXES
- ---------------------
The Company accounts for income taxes in accordance with FASB Statement No. 109,
"Accounting for Income Taxes," which requires the recognition of deferred income
taxes for differences between the basis of assets and liabilities for financial
statement and income tax purposes.
QUARTER ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2004 2003
----------- -----------
Excess of tax over book depreciation $ 1,746,433 $ 1,733,731
Allowance for Bad Debt (41,570) (41,570)
Inventory - Ending inventory adjustment
for tax recognition of Sec. 263A
Uniform Capitalization Costs (453,471) (435,814)
Deferred Compensation (191,166) (227,128)
----------- ------------
Total $ 1,060,226 $ 1,029,219
Statutory Tax Rate 34% 34%
----------- ------------
Cumulative Deferred Income Tax Payable $ 360,477 $ 349,934
=========== ============
Classified as:
Current Liability $ -0- $ -0-
Noncurrent Liability 360,477 349,934
----------- ------------
$ 360,477 $ 349,934
=========== ============
Reconciliation of income taxes on the difference between tax and financial
accounting is as follows:
QUARTER ENDED QUARTER ENDED
JUNE 30, JUNE 30,
2004 2003
----------- -------------
Principal Components of Income Tax Expense
Federal:
Current
-------
Income tax paid $ 312,182 $ 99,150
Carry-over of prepayment
from prior year 183,206 115,456
Refund received for overpayment
from prior year -0- -0-
----------- -------------
$ 495,388 $ 214,606
Federal Income Tax Payable 5,771 122,276
Carry-over to subsequent year -0- -0-
----------- -------------
Income tax for tax reporting
at statutory rate of 34% $ 501,159 $ 336,882
Deferred
--------
Adjustments for financial reporting:
Depreciation 4,319 1,113
263A Uniform Capitalization Costs (6,003) (3,337)
Other 12,227 -0-
----------- -------------
Provision for federal income tax $ 511,702 $ 334,658
=========== =============
We are not exempt from income tax except for municipal bond interest earned
in the amount of $908.
We are not classified as a nonexempt cooperative under the provisions of
the Internal Revenue Code and are not entitled to deduct preferred dividends in
determining our taxable income.
10
HANDY HARDWARE WHOLESALE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------
NOTE 6 - COMPONENTS OF COMPREHENSIVE EARNINGS (LOSS)
1. Deferred compensation funded in the amount of $189,625 on the Balance Sheet
as a current asset in the amount of $73,743 and as a non-current asset in
the amount of $115,882 at June 30, 2004, includes equity securities
classified as investments available for sale in the amount of $189,625 at
fair market value. The $189,625 includes $1,541 unrealized loss on
securities resulting from the decrease in fair market value. The cost of
the equity securities is $191,166.
2. Changes in Equity securities
Quarter Ended
June 30, 2004 Since Inception
------------- ---------------
Beginning Balance-January 1, 2004 $ 221,228 $ -0-
Purchases -0- 117,400
Dividends, interest and capital gains 908 170,770
Deferred Compensation Funded (36,871) (97,005)
Unrealized gains (losses) on securities
resulting from increase (decrease)
in fair market value 4,360 (1,540)
----------- ----------
Balance-June 30, 2004 $ 189,625 $ 189,625
=========== ==========
3. Components of Net Earnings plus Other Comprehensive Earnings and Components
of Total Comprehensive Earnings for the six months ended June 30, 2004:
Other Comprehensive Net Earnings Plus Other
Net Earnings Earnings Comprehensive Earnings
------------ ------------------- -----------------------
Earnings Before Provision Unrealized Earnings
For Federal Income Tax $1,426,048 on Securities $ 4,360 Net Earnings $915,828
Provision for Provision for Other Comprehensive
Federal Income Tax (510,220) Federal Income Tax (1,482) Earnings 2,878
---------- ------- --------
Net Earnings Plus Other
Other Comprehensive Comprehensive
Net Earnings $ 915,828 Earnings $ 2,878 Earnings $918,706
========== ======= ========
Net Earnings Applicable to Other Comprehensive Total Comprehensive
Common Stockholders Earnings Earnings
-------------------------- ------------------- -------------------
Unrealized Earnings Net Earnings Applicable to
Net Earnings $ 915,828 on Securities $ 4,360 Common Stockholders $629,466
Less Estimated Dividends Provision for Other Comprehensive
On Preferred Stock (286,362) Federal Income Tax (1,482) Earnings 2,878
---------- -------- --------
Net Earnings Applicable Other Comprehensive Total Comprehensive
to Common Stockholders $ 629,466 Earnings $ 2,878 Earnings $632,344
========== ======= ========
4. Components of Retained Earnings
Retained Earnings Retained Earnings
Exclusive of Other Applicable to Other
Comprehensive Earnings (Loss) Comprehensive Earnings (Loss) Total
----------------------------- ---------------------------- -----
Balance-January 1, 2004 $6,132,015 $ (7,604) $6,124,411
Add: Net earnings
6 months ended
June 30, 2004 915,828 2,878 918,706
Deduct: Cash Dividends on
Preferred Stock (572,724) (-0-) (572,724)
----------- ----------- -----------
Balance-June 30, 2004 $6,475,119 $ (4,726) $6,470,393
=========== =========== ==========
11
NOTE 7 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable are net of subscriptions receivable and allowance for
doubtful accounts.
June 30, 2004 December 31, 2003
------------- ----------------
Accounts Receivable $13,292,570 $11,681,272
Subscription Receivable (84,985) (65,876)
Allowance for Doubtful Accounts (41,570) (41,570)
----------- -----------
Accounts Receivable, Net of
Subscription Receivable and
Allowance for Doubtful Accounts $13,166,015 $11,573,826
=========== ===========
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
- --------
For the first six months of 2004, we continued to widen our offering of
products in order to give member-dealers more variety in what they can offer to
their customers. In addition, we also explored expanding our presence
geographically to increase the number of member-dealers as a means of continuing
the growth of net sales. The first quarter of 2004 generated 63.4% of pre-tax
income for the first half of 2004 due to unusually high rebates in the first
quarter and due to trade show income. Overall, for the first six months of 2004,
we strove to maintain our steady growth while continuing to meet our goals of
providing quality goods to our member-dealers.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------
NET SALES Net sales in the second quarter of 2004 increased 5.0%
($2,328,753) from net sales during the same period in 2003, while decreasing
1.2% ($574,430) between the respective second quarters of 2002 and 2003. Net
sales during the first six months of 2004 increased 5.9% ($5,628,778) compared
to a decrease in sales of 0.9% ($855,220) for the same period in 2002 and 2003.
Net sales growth during the second quarter and first six months of 2004 was
mainly attributable to strong increases in both regular sales and sales
generated from our spring trade show, as well as sales from other marketing
initiatives which helped member-dealers maintain their competitiveness in their
selling territories.
NET MATERIAL COSTS AND REBATES Net material costs for the second quarter
and first six months of 2004 were $42,603,125 and $89,168,711, respectively,
compared to $40,728,187 and $84,983,834, respectively, for the same periods in
2003. Net material costs for the second quarter and first six months of 2004
increased 4.6 percent and 4.9 percent, respectively, from the same periods in
2003. The increases in net material costs were less than the increases in net
sales for the same periods. As a result, net material costs were 87.5 percent of
net sales in the second quarter of 2004, as compared to 87.8 percent of sales
for the same period in 2003, while for the first six months of 2004 and 2003 net
materials costs were 88.3 percent and 89.1 percent of sales, respectively. The
relative stability in net material costs as a percentage of net sales, was
primarily the result of continued improvements in warehouse efficiencies and a
timing difference in the recognition of factory rebates which are offset against
net material costs. Factory rebates increased from $2,778,811 in the first six
months of 2003 to $2,861,973 for the same period in 2004.
PAYROLL COSTS Payroll costs for the second quarter of 2004 increased by
$145,382 from the second quarter of 2003 level, and increased by $223,582 for
the first six months of 2004 from the same period in 2003, resulting from salary
increases needed to attract or retain high-quality employees.
Despite the pressure on wages, payroll costs as a percentage of both total
expenses and net sales remained fairly constant. Payroll costs for the second
quarter of 2004 and 2003 constituted 5.1 percent of both net sales and total
expenses. Payroll costs were 4.9 percent of both net sales and total expenses
for the first six months of both 2004 and 2003. The relative stability in
payroll costs has been a result of a continuing effort to maintain employee
productivity.
OTHER OPERATING COSTS During the second quarter and the first six months of
2004, other operating costs increased by $143,851 (4.0%) and $795,858 (11.0%),
respectively, compared to the same periods of 2003. Other operating costs
decreased slightly as a percentage of total expenses, accounting for 7.7% of
total expenses in the second quarter of 2004 as compared to 7.8% of total
expenses for the second quarter of 2003. For the six month period ending June
30, 2004, other operating costs were 7.9% of total expenses as compared to 7.5%
of total expenses during the same period in 2003.
The increase in other operating costs in the first six months of 2004, from
the first six months of 2003, can be attributed to an increase in warehouse and
delivery expense, most notably an increase of $509,949 in fuel costs, contract
driver costs and rental equipment costs, an increase of $200,000 in the accrual
for year end employee bonuses, and an increase of $105,996 in health insurance
expenses.
13
NET EARNINGS AND EARNINGS PER SHARE
- -----------------------------------
NET EARNINGS - SECOND QUARTER Net sales for the second quarter of 2004
increased by $2,328,753 (5.0%), net material costs for the same period increased
by $1,874,938 (4.6%) compared in both cases to levels in the second quarter of
2003, resulting in an increase in gross margin of $453,815 (8.1%). The
significant increase in gross margin, was offset by a substantial decrease in
sundry income of $234,639, an increase in payroll costs of $145,382 (6.1%) and
an increase in other operating costs of $143,851 (4.0%). Thus after tax net
earnings decreased $50,504 (13.4%), from $377,200 in the second quarter of 2003
to $326,696 for the same 2004 period. After tax net earnings, combined with
estimated dividends on preferred stock and other comprehensive gains resulted in
total comprehensive earnings for 2004's second quarter of $183,857, compared to
total comprehensive earnings of $259,682 for the same 2003 period, for an
overall decrease of $75,825.
NET EARNINGS - FIRST SIX MONTHS Net sales for the first six months of 2004
increased by $5,628,778 (5.9%), net material costs for the same period increased
by $4,184,877 (4.9%) compared in both cases to levels in the first six months of
2003, resulting in an increase in gross margin of $1,443,901 (13.9%). The
increase in gross margin, as well as the increase in sundry income of $74,452
from the first six months of 2003, were only partially offset by an increase of
$223,582 in payroll costs (4.7%) and a substantial increase in other operating
costs of $795,858 (11.0%). Thus after tax net earnings increased by $327,458
(55.7%), from $588,370 in the first half of 2003 to $915,828 for the same 2004
period. After tax net earnings, combined with estimated dividends on preferred
stock and other comprehensive gains resulted in total comprehensive earnings for
the first half of 2004 of $632,344, compared to total comprehensive earnings of
$337,142 for the same 2003 period, for an overall increase of $295,202 (87.6%).
EARNINGS PER SHARE Our earnings per share decreased by 30.3% in the
comparative second quarters of 2004 and 2003 but increased by 79.2% for the
first six months of 2004 as compared to the same period of 2003, from net
earnings per share of $2.64 for the 2003 second quarter, to net earnings per
share of $1.84 for the same 2004 period and an increase in six months earnings
per share from $3.55 per share in the 2003 period to $6.36 per share for the
2004 period. The increase in 2004 is due to the factors previously discussed, as
well as estimated dividends accrued in the second quarter of 2004 which
represented a larger percentage of 2004 net earnings while the estimated
dividends in the first six months of 2004 represented a smaller percentage of
2004 net earnings than estimated dividends accrued in the same 2003 periods
(second quarter 2004-43.8% versus second quarter 2003-34.7%; and first six
months of 2004-31.3% versus first six months of 2003-44.5%).
SEASONALITY Quarter-to-quarter variations in our earnings per share (in
addition to the factors discussed above) reflect our commitment to lower pricing
of our merchandise in order to deliver the lowest cost buying program to our
member-dealers, even though this often results in lower net earnings. Because
virtually all of our stockholders are also member-dealers, these trends benefit
our individual stockholders who purchase our merchandise. Therefore, our
shareholders do not demand that we focus greater attention upon earnings per
share.
Our quarterly net earnings generally vary based on the timing of events
which affect our sales. Except for the first quarter of 2004, traditionally our
first and third quarter earnings are negatively affected by the increased level
of direct sales (with no markup) during our semiannual trade show which is
always held in those quarters. Generally, there is an overall increase in sales
during the trade shows which typically offsets the effect of increased direct
sales with no markup. Additionally, net earnings per quarter may vary
substantially from year to year due to the timing difference in the receipt of
discounts, rebates and miscellaneous income, as well as changes in the weather
conditions and the economic conditions in our selling territories. For example,
during the first quarter of 2004, the cumulative effect of the various timing
differences, as well as improved economic conditions, caused a dramatic increase
in net earnings for that period.
14
SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
- --------------------------------------------
The following is a summary of selected quarterly financial data for each
quarterly period beginning September 1, 2002 and ending June 30, 2004;
Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended
09-30-02 12-31-02 03-31-03 06-30-03 09-30-03 12-31-03 03-31-04 06-30-04
Sales $45,337,615 $44,920,202 $48,974,287 $46,362,123 $49,947,734 $43,784,516 $52,274,312 $48,690,876
Net
Mat'l
Costs 40,609,542 39,404,595 44,255,647 40,728,187 44,879,936 38,302,519 46,565,586 42,603,125
Gross
Margin 4,728,073 5,515,607 4,718,640 5,633,936 5,067,798 5,481,997 5,708,726 6,087,751
Other
Operating
Expenses(1) 5,229,594 7,840,146 6,022,971 6,038,570 6,446,809 6,090,815 6,747,816 6,323,459
Sundry
Income(1) 790,345 2,510,195 1,634,618 991,776 1,705,174 693,239 1,943,709 757,137
Pre-Tax Net
Earnings(2) 288,824 185,656 330,287 587,142 326,163 84,421 904,619 521,429
- ------------------------
(1) Historically, sundry income has included income generated from our trade
shows offset by expenses incurred from our trade shows. Starting with the
quarter ended 12/31/02, we began to include expenses incurred from our trade
shows in other operating expenses rather than offsetting sundry income.
Therefore, in order to provide the data for other operating expenses and sundry
income using a consistent calculation method, for each quarter in the table
above, we have included expenses incurred from our trade shows in other
operating expenses rather than offsetting sundry income. This change has no
effect on pre-tax net earnings.
(2) Excludes other comprehensive income/(loss).
Trends
- ------
As reflected in our numbers for the first six months of 2004, our insurance
premium expenses have steadily increased. We expect that the trend toward
increased insurance costs will continue for the foreseeable future, as part of a
general nationwide trend in increased insurance premiums due to factors such as
the events of September 11, 2001, recent insurance company losses, and insurance
company risk assessments. In addition, our property taxes are continuing to
increase and may increase in the future, due to the completion of our warehouse
expansion project and general increases in tax assessments. Furthermore, with
the current unstable environment in the Middle East and additional Department of
Transportation regulations, we expect delivery costs to continue to increase in
the foreseeable future.
15
MATERIAL CHANGES IN FINANCIAL CONDITION
- ---------------------------------------
FINANCIAL CONDITION AND LIQUIDITY During the period ending June 30, 2004,
we maintained our financial condition and ability to generate adequate amounts
of cash while continuing to make significant investments in inventory, warehouse
and computer equipment, software, and office furniture and equipment. However,
net cash provided by our operating activities often varies substantially from
year to year. These variations result from (i) the timing of promotional
activities such as our spring trade show, (ii) payment terms available to us
from our suppliers, (iii) payment terms we offer to our member-dealers, and (iv)
the state of the regional economy in our selling territories.
Although we generated $158,333 more cash in the first half of 2004 than in the
first half of 2003, our cash and cash equivalents at June 30, 2004 were $169,312
lower than at June 30, 2003; this compares to a decrease of $1,872,026 when
comparing the same 2003 period to that of 2002. During the first half of 2004,
we used cash flow for operating activities of $1,878,933, as compared to
$3,920,471 used in the first half of 2003. This decrease in cash used for
operating activities in the 2004 period was principally attributable to a
significantly smaller increase in inventory, which increased only 6.9% compared
to an increase of 20.7% for the same 2003 period, as well as an increase in
other liabilities and net earnings. These factors were offset by a larger
increase in accounts receivable.
We had approximately 43,000 stockkeeping units at June 30, 2004, which were
maintained as a result of management's strategy to increase the breadth and
depth of inventory to better meet the needs of our member-dealers. The increase
in inventory of $1,427,803 in the first six months of 2004 from 2003 levels was
significantly lower (49.9%) than the increase in inventory of $2,849,073 in the
same period in 2003, due to the fact that we had more accurately estimated the
level of warehouse inventory needed to meet our member-dealers' inventory
requirements.
In the first six months of 2004 and 2003, accounts receivable increased by
$1,592,189 from year-end 2003 levels and increased by $1,039,771 from year-end
2002 levels, respectively. For both periods, this variation in levels of
accounts receivable was mainly attributable to differences in extended payment
terms offered to member-dealers at the spring trade shows.
Other liabilities increased by $918,372 during the first six months of 2004 from
year-end 2003 levels. By comparison, other liabilities declined by $284,028
during the same period in 2003. This variance of $1,202,400 can be attributed to
the increase in delivery costs, the increase in insurance costs and an increase
in the accrual for employee bonuses, as previously discussed.
For the period ended June 30, 2004, net earnings plus other comprehensive
earnings were $918,706, compared to $599,238 for the same 2003 period. This
53.3% increase was mainly attributable to the increase in gross margin.
Net cash used for investing activities increased from $134,502 in the first half
of 2003 to $299,702 for the same period in 2004. The increase in the first half
of 2004 was mainly due to the replacement of a large section of the Company's
conveyor system.
Net cash provided by financing activities was $3,173,001 in the six month period
ending June 30, 2004 as compared to net cash provided by financing activities of
$4,891,006 during the same period in 2003. These funds were provided by draws on
the Company's line of credit which were made throughout 2003 and through the
first six months of 2004 offset by an increase in repurchases of Company stock
from former member-dealers (2004 - $931,300 versus 2003 - $211,700). This
increase in repurchases of Company stock was mainly attributable to the
repurchase of stock of two significant departing member-dealers.
Our continuing ability to generate cash for funding our activities is
highlighted by the relative constancy of 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:
JUNE 30, DECEMBER 31, JUNE 30,
2004 2003 2003
-------- ----------- --------
Working Capital $14,775,566 $10,913,193 $11,903,593
Current Ratio 1.6 to 1 1.5 to 1 1.5 to 1
Long-term Debt as Percentage
of Capitalization 15.8% 3.9% 14.1%
16
During the remainder of 2004, the Company expects to further expand its existing
customer base in its non-core selling territories. The Company will finance this
expansion with anticipated growth in revenues from sales to new member-dealers
in these territories, and with proceeds from the sale 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.
Off-Balance Sheet Arrangements
- ------------------------------
As of June 30, 2004, we did not have any off-balance sheet arrangements, as
defined by Item 303(a)(4) of Regulation S-K promulgated by the Securities and
Exchange Commission.
Contractual Commitments and Obligations
- ---------------------------------------
Our contractual obligations for the next five years and thereafter are as
follows:
Rest of Year Ended December 31,
-------------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
Contractual
Obligation(1):
Non-cancelable
Operating Leases $1,035,888 $ 943,271 $744,595 $646,648 $487,086 $399,838 $4,257,326
Credit Facility
which expires in
April 2006 (1) (1) (1) (1) - - -
Notes Payable -
Stock 33,480 41,280 26,600 150,440 17,500 54,160 323,460
Notes Payable -
Vendor
Consignment -0- -0- -0- -0- -0- 219,374 219,374
Non-cancelable
Capital Leases 6,725 9,780 4,081 -0- -0- -0- 20,586
$1,076,093 $994,331 $775,276 $797,088 $504,586 $673,372 $4,820,746
========== ======== ======== ======== ======== ======== ==========
(1) There was $2,430,000 outstanding on the Company's credit facility at
December 31, 2003 and $6,300,000 outstanding on June 30, 2004. The amounts
outstanding under the credit facility fluctuate on a daily basis.
Capital Resources
- -----------------
In the six month periods ending June 30, 2004 and June 30, 2003, our
investment in capital assets was $357,483 and $196,669, respectively.
Approximately 65.7 percent ($234,735) of the amount expended in the first six
months of 2004 was used to upgrade warehouse equipment, 16.4 percent ($58,536)
was used to purchase company vehicles and 7.8 percent ($27,873) was used to
purchase computer equipment. By comparison, of the total amount expended in the
first six months of 2003, $82,984 (42.2%) was used to purchase company vehicles,
$60,563 (30.8%) was used to upgrade warehouse equipment and $24,803 (12.6%) was
used to purchase computer equipment.
In April, 2004, JP Morgan Chase Bank amended the Company's existing unsecured
$10 million revolving line of credit to provide for an April 30, 2006 maturity
date. We use our unsecured $10 million revolving line of credit from time to
time for our working capital and other financing needs. During the first six
months of 2004, we borrowed $36,430,000 and repaid $30,130,000 from cash flow,
leaving an outstanding balance of $6,300,000 under our line of credit on June
30, 2004. Our average outstanding balance on our line of credit for the first
six months of 2004 was $2,191,099.
For the remaining six months of 2004, we anticipate significant cash outlays for
payment of accounts payable and increased inventory purchases. Additional cash
outlays anticipated for capital expenditures include approximately $105,000 to
purchase warehouse equipment, $100,000 to upgrade computer equipment, $60,000 to
improve our automobile fleet and $15,000 to purchase office furniture and
equipment.
17
Our cash position of $2,061,045 at June 30, 2004 is anticipated to be sufficient
to fund all planned capital expenditures and working capital needs, although
some third party financing, including draws on our line of credit, may be
needed.
CRITICAL ACCOUNTING POLICIES
----------------------------
For a discussion of our critical accounting policies which relate to
inventory, revenue recognition and allowance for doubtful accounts, and which
remain unchanged, see our annual report on Form 10-K for the year ended December
31, 2003.
FORWARD-LOOKING STATEMENTS
--------------------------
The statements contained in this 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, or 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 and insurance costs, as well as the risks and
uncertainties discussed in this 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. Interim
results are not necessarily indicative of those for a full year.
Item 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
Item 4. CONTROLS AND PROCEDURES
(a). Evaluation of Disclosure Controls and Procedures
The Company's chief executive officer and chief financial officer have
evaluated the Company's disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(the "Exchange Act") as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based on that evaluation, they have concluded that
such disclosure controls and procedures are effective, in all material
respects, in communicating to them on a timely basis material information
relating to the Company required under the Exchange Act to be disclosed in
this Quarterly Report.
(b). Changes in Internal Controls
There were no significant changes in the Company's internal controls over
financial reporting that occurred during the fiscal quarter covered by this
Quarterly Report that have materially affected, or are reasonably likely to
materially affect such internal controls over financial reporting.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
Issuer Purchases of Equity Securities
- ----------------------------------------------------------------------------------------------------------------------------
Period (a) Total (b) Average (c)Total Number (d) Maximum
Number of Price Paid of Shares (or Number (or
Shares (or Per Share Units) Purchased Approximate
Units) (or Unit) as Part of Dollar Value)
Purchased Publicly or Shares (or
Announced Plans Units) that May
or Programs Yet Be
Purchased Under
the Plans or
Programs
January 1-31, 2004 50 shares $100.00 0 0
February 1-29, 2004 1,122 shares $100.00 0 0
March 1-31, 2004 376 shares $100.00 0 0
April 1-30, 2004 520 shares $100.00 0 0
May 1-31, 2004 6,102.75 shares $100.00 0 0
June 1-30, 2004 1,142.25 shares $100.00 0 0
Total 9,313 shares $100.00 0 0
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Shareholders Meeting held on May 24, 2004, Doug Ashy,
Jr., Bobby Hill and Jimmy Pate were elected to serve as Directors of
the Company for three-year terms. Additionally, Don Jameson, President
of the Company, was elected to serve as Director for a one-year term.
The other Directors continuing to serve are: Susie Bracht-Black,
Suzanne Elliott and Ken Blackmon, whose terms will expire at the
Annual Shareholders Meeting to be held in April 2005, and Craig Blum,
Terrill Bartlett and Leroy Welborn, whose terms will expire at the
Annual Shareholders Meeting in April 2006.
No. of Votes No. of Votes No. of Votes
Nominees for Directors For Against Abstain Approval
- ---------------------- ------------ ------------ ------------ --------
Doug Ashy, Jr. 7340 290 -0- Yes
Bobby Hill 7330 300 -0- Yes
Jimmy Pate 5130 2500 -0- Yes
Don Jameson 7140 490 -0- Yes
A proposal to amend the Company's Articles of Incorporation to increase the
number of authorized shares of Class A Common stock from 20,000 shares to 30,000
shares, Class B Common Stock from 100,000 shares to 200,000 shares and Preferred
stock from 100,000 shares to 200,000 shares was approved by shareholders.
No. of Votes No. of Votes No. of Votes
Class of Stock For Against Abstain Approval
- -------------- --- ------------ ------------ ------------
Class A Common 6,980 240 410 Yes
Class B Common 65,195 1,084 2,975 Yes
Preferred 67,240.75 1,144 3,072.75 Yes
19
Item 5. Other Information - None
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits
Exhibit Number
--------------
* 3.1 Articles of Amendment to the Restated Articles of Incorporation of
Handy Hardware Wholesale, Inc.
*10.1 Revolving Promissory Note and Ninth Amendment to Amendment and
Restatement of Credit Agreement between the Company and JP Morgan
Chase Bank dated April 30, 2004.
*31.1 Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
*31.2 Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
*32 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Filed herewith
20
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY HARDWARE WHOLESALE, INC.
/s/ Don Jameson
------------------------------------------------
DON JAMESON
President
(Chief Executive Officer)
/s/ Tina S. Kirbie
-------------------------------------------------
TINA S. KIRBIE
Executive Vice President
Secretary and Treasurer
(Chief Financial and Accounting Officer)
Date: August 12, 2004
21