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SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For the Quarterly Period Ended June 29, 2002 Number 1-14967
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WICKES INC.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3554758
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
706 North Deerpath Drive, Vernon Hills, Illinois 60061
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
847-367-3400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of June 29, 2002, the Registrant had 8,288,845 shares of Common Stock, par
value $.01 per share outstanding.
2
WICKES INC. AND SUBSIDIARIES
INDEX
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Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 29, 2002 (Unaudited), December 29, 2001 and
June 30, 2001 (Unaudited) 3
Condensed Consolidated Statements of Operations (Unaudited)-
For the three months and six months ended
June 29, 2002 and June 30, 2001 4
Condensed Consolidated Statements of Cash Flows (Unaudited)-
For the six months ended June 29, 2002 and June 30, 2001 5
Notes to Condensed Consolidated
Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities and Use of Proceeds 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 28
3
WICKES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 29, 2002, December 29, 2001 and June 30, 2001
(in thousands except share data)
June 29, December 29, June 30,
2002 2001 2001
-------------- ------------- -------------
ASSETS (UNAUDITED) (UNAUDITED)
Current assets:
Cash $ 172 $ 198 $ 204
Accounts receivable, less allowance for doubtful
accounts of $2,152 in June 2002, $2,119 in December 2001,
and $2,174 in June 2001 88,937 83,369 110,609
Note receivable from affiliate 425 430 359
Inventory 94,150 100,118 131,219
Deferred tax asset 8,230 7,474 9,606
Prepaid expenses and other assets 6,319 5,058 5,577
-------------- ------------- -------------
Total current assets 198,233 196,647 257,574
-------------- ------------- -------------
Note receivable from affiliate - - 134
Property, plant and equipment, net 53,803 58,690 58,581
Trademark (net of accumulated amortization of $11,163 in June
2002 and December 2001, $11,052 in June 2001) 5,856 5,856 5,968
Deferred tax asset 16,559 16,559 12,990
Rental equipment (net of accumulated depreciation of $2,115 in June
2002, $2,186 in December 2001, and $1,945 in June 2001) 1,695 2,287 2,723
Goodwill (net of accumulated amortization of $2,575 in June 12,229 12,229 12,550
2002 and December 2001, $2,404 in June 2001)
Other assets (net of accumulated amortization of $12,629 in June
2002, $11,881 in December 2001, and $11,082 in June 2001) 4,781 4,805 7,786
-------------- ------------- -------------
Total assets $ 293,156 $ 297,073 $ 358,306
============== ============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 10,096 $ 9,157 $ 8,687
Accounts payable 53,932 43,956 63,402
Accrued liabilities 16,070 20,563 15,771
-------------- ------------- -------------
Total current liabilities 80,098 73,676 87,860
-------------- ------------- -------------
Long-term debt, less current maturities 184,391 193,253 238,132
Other long-term liabilities 3,267 3,373 3,988
Stockholders' equity:
Common stock, $0.01 par (8,288,845, 8,281,585,
8,275,985 shares issued and outstanding, respectively) 83 83 83
Other comprehensive loss - (93) (89)
Additional paid-in capital 87,155 87,134 87,113
Accumulated deficit (61,838) (60,353) (58,781)
-------------- ------------- -------------
Total stockholders' equity 25,400 26,771 28,326
-------------- ------------- -------------
Total liabilties and stockholders' equity $ 293,156 $ 297,073 $ 358,306
============== ============= =============
The accompanying notes are an integral part of the consolidated financial
statements.
4
WICKES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands except share and per share data)
Three Months Ended Six Months Ended
------------------ ----------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $ 234,610 $ 274,093 $ 420,434 $ 458,919
Cost of sales 183,965 215,456 331,404 358,351
----------- ----------- ----------- -----------
Gross profit 50,645 58,637 89,030 100,568
----------- ----------- ----------- -----------
Selling, general and administrative expenses 42,048 50,239 79,899 94,869
Depreciation, goodwill and trademark amortization 1,328 1,602 2,746 3,105
Provision for doubtful accounts 180 35 617 643
Store closing costs 785 - 1,747 -
Other operating income (1,930) (723) (2,495) (1,113)
----------- ----------- ----------- -----------
42,411 51,153 82,514 97,504
----------- ----------- ----------- -----------
Income from operations 8,234 7,484 6,516 3,064
Interest expense 4,115 5,511 8,491 11,394
----------- ----------- ----------- -----------
Income (loss) before taxes 4,119 1,973 (1,975) (8,330)
Income tax expense (benefit) 1,779 991 (490) (2,828)
----------- ----------- ----------- -----------
Net income (loss) $ 2,340 $ 982 $ (1,485)$ (5,502)
=========== =========== =========== ===========
Net income (loss) per common share- basic $ 0.28 $ 0.12 $ (0.18)$ (0.66)
=========== =========== =========== ===========
Net income (loss) per common share- diluted $ 0.28 $ 0.12 $ (0.18)$ (0.66)
=========== =========== =========== ===========
Weighted average common shares- basic 8,288,761 8,275,934 8,286,837 8,274,432
=========== =========== =========== ===========
Weighted average common shares- diluted 8,459,051 8,430,362 8,286,837 8,274,432
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
5
WICKES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended
----------------
June 29, June 30,
2002 2001
-------------- --------------
Cash flows from operating activities:
Net loss $ (1,485) $ (5,502)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation expense 3,572 3,650
Amortization of trademark - 111
Amortization of goodwill - 349
Amortization of deferred financing costs 772 677
Provision for doubtful accounts 617 643
(Gain) loss on sale of assets and other items (1,261) 49
Deferred tax benefit (756) (2,859)
Changes in assets and liabilities:
(Increase) in accounts receivable (6,185) (34,566)
Decrease (increase) in inventory 5,661 (13,465)
Increase in accounts payable and accrued liabilities 5,470 20,773
(Increase) in prepaids and other assets (1,824) (3,326)
-------------- --------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,581 (33,466)
-------------- --------------
Cash flows from investing activities:
Purchases of property, plant and equipment (705) (5,898)
Proceeds from sales of property, plant and equipment 4,016 17
Payments for acquisitions - (759)
Increase (decrease) in notes receivable 5 (10)
-------------- --------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,316 (6,650)
Cash flows from financing activities:
Net (repayments) borrowings under revolving line of credit (5,574) 40,077
Repayments of term loan (2,349) -
-------------- --------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (7,923) 40,077
-------------- --------------
NET DECREASE IN CASH (26) (39)
Cash at beginning of period 198 243
-------------- --------------
CASH AT END OF PERIOD $ 172 $ 204
============== ==============
Supplemental schedule of cash flow information:
Interest paid $ 8,341 $ 10,412
Income taxes paid $ 469 $ 491
Supplemental non-cash operating and investing activities: The Company
purchased net assets in conjunction with acquisitions made during the
period. In connection with these acquisitions, assets and liabilities were
assumed as follows:
Assets acquired $ - $ 1,789
Liabilities assumed $ - $ 1,030
Cash paid $ - $ 759
The accompanying notes are an integral part of the consolidated financial
statements.
6
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Financial Statement Presentation
-----------------------------------------
The condensed consolidated financial statements present the results of
operations, financial position, and cash flows of Wickes Inc. and its
consolidated subsidiaries (the "Company"). The condensed consolidated financial
statements are prepared in accordance with accounting principles generally
accepted in the United States of America, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K (the "Form 10-K") for the fiscal
year ended December 29, 2001. The condensed consolidated financial statements
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for the fair presentation of the
financial results for the interim period. The results of operations for interim
periods are not necessarily indicative of results for the entire year.
The Company has determined that it operates in one business segment, that being
the supply and distribution of lumber, building materials and manufactured
components to building professionals and do-it-yourself customers, principally
in the Midwest, Northeast, and Southern United States. All information required
by Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information", is included in the
Company's consolidated financial statements.
Share Data
----------
The Company issued 7,260 shares of Common Stock to members of its board of
directors in lieu of cash compensation during the six months ended June 29, 2002
pursuant to the Company's Director Incentive Plan.
7
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Stock Options
-------------
The Company periodically grants stock options to key personnel. Generally,
compensation cost on these options is measured at the date of grant by comparing
the quoted market price of the Company's stock to the price the employee has to
pay to acquire the stock. Any resulting compensation cost would be recognized
over the employee's vesting period.
Reclassifications and Eliminations
----------------------------------
Certain reclassifications have been made to prior year amounts to conform to the
current presentation. All material intercompany balances and transactions have
been eliminated.
2. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
------------------------------------------
Effective at the beginning of fiscal 2002, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets". Upon adoption of SFAS 142, goodwill
amortization ceased. In addition, the Company has determined that its trademark
life is indefinite and also ceased related amortization. Goodwill is now subject
to fair-value based impairment tests performed on an annual basis. The Company
has determined that it has only one reporting unit as defined in accordance with
SFAS No. 142. The fair value of the reporting unit was primarily estimated using
the expected present value of associated future cash flows and market values of
comparable businesses, where available. The Company determined based upon its
assessment of fair value that no impairment of the Company exists. The Company's
net book value of goodwill is $12.2 million and an annual impairment test will
be performed in each year in October. As required under SFAS 142 the following
table provides net earnings (losses) and per share data adjusted for the effect
of amortization of goodwill and other indefinite lived intangible assets.
8
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Three Months Ended Six Months Ended
------------------ ----------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Reported net income (loss) $ 2,340 $ 982 $ (1,485) $ (5,502)
Goodwill amortization 177 349
Trademark amortization 56 111
--------- ---------- ----------- ----------
Adjusted net income (loss) 2,340 1,215 (1,485) (5,042)
--------- ---------- ----------- ----------
Net income (loss) per
common share -
Basic and diluted:
Reported net income (loss) $ 0.28 $ 0.12 $ (0.18) $ (0.66)
Goodwill amortization - 0.02 - 0.04
Trademark amortization - 0.01 - 0.01
--------- ---------- ----------- ----------
Adjusted net income (loss)
Basic $ 0.28 $ 0.15 $ (0.18) $ (0.61)
Diluted $ 0.28 $ 0.14 $ (0.18) $ (0.61)
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144
resolves certain implementation issues related to SFAS No. 121 and establishes a
single accounting model for long-lived assets to be disposed of by sale. SFAS
144 was adopted by the Company at the beginning of 2002.
3. COMPREHENSIVE INCOME (LOSS)
---------------------------
The components of comprehensive income (loss) are as follows (in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Reported net income (loss) $ 2,340 $ 982 $ (1,485) $ (5,502)
Effect of adoption of
SFAS 133, net of tax of $40 (66)
Change in fair value of
Interest rate swap (89) (89)
Reclassifications to earnings 66
------------ ------------ ------------ -----------
Comprehensive income (loss) $ 2,340 $ 893 $ (1,485) $ (5,591)
------------ ------------ ------------ -----------
9
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
4. LONG-TERM DEBT
--------------
Long-term debt is comprised of the following (in thousands):
June 29, June 30,
2002 2001
----- -----
Revolving credit facility:
Revolving notes $ 94,324 $ 133,326
Term notes 36,207 49,537
Senior subordinated notes 63,956 63,956
Less current maturities (10,096) (8,687)
---------- ----------
Total long-term debt $ 184,391 $ 238,132
------------ ----------
Under the Company's revolving credit agreement, the Company may borrow against
certain levels of accounts receivable and inventory. Unused availability under
the revolving credit agreement at June 29, 2002 was $29.7 million. The Company
was in compliance with all covenants as of June 29, 2002.
5. INCOME TAXES
------------
The provision for income taxes for the three-month period ended June 29, 2002
was $1.8 million, compared to $1.0 million for the same period in the prior
year. An effective federal and state income tax rate of 39.1% was used to
calculate income taxes for the three-month period ended June 29, 2002 compared
to 38.1% for the same period in the prior year. The calculated tax rate in the
financial statements of 43.2% for the three-month period ended June 29, 2002
compared to 50.2% for the same period in the prior year, differs from the
effective federal and state income tax rate due to state franchise taxes being
calculated separately. State franchise taxes were $0.2 million for the
three-month period ended June 29, 2002 compared to $0.3 million for the same
period in the prior year.
10
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The provision for income taxes for the six-month period ended June 29, 2002 was
a benefit of $0.5 million compared to a benefit of $2.8 million for the same
period in the prior year. An effective federal and state income tax rate of
39.2% was used to calculate income taxes for the six-month period ended June 29,
2002 compared to 38.7% for the same period in the prior year. The calculated tax
rate in the financial statements of 24.8% for the six-month period ended June
29, 2002 compared to 34.0% for the same period in the prior year, differs from
the effective federal and state income tax rate due to state franchise taxes
being calculated separately. State franchise taxes were $0.4 million for the
six-month period ended June 29, 2002 compared to $0.5 million for the same
period in the prior year.
6. COMMITMENTS AND CONTINGENCIES
-----------------------------
At June 29, 2002, the Company had approximately $132,000 accrued for remediation
of certain environmental and product liability matters.
Many of the sales and distribution facilities presently and formerly operated by
the Company at one time contained underground petroleum storage tanks. All such
tanks known to the Company and located on facilities owned or operated by the
Company have been filled or removed in accordance with applicable environmental
laws in effect at the time. As a result of reviews made in connection with the
sale or possible sale of certain facilities, the Company has found petroleum
contamination of soil and ground water on several of these sites and has taken,
and expects to take, remedial actions with respect thereto. In addition, it is
possible that similar contamination may exist on properties no longer owned or
operated by the Company, the remediation of which the Company could, under
certain circumstances, be held responsible. Since 1988, the Company has incurred
approximately $2.0 million of costs, net of insurance and regulatory recoveries,
with respect to the filling or removing of underground storage tanks and related
investigatory and remedial actions. Insignificant amounts of contamination have
been found on excess properties sold over the past five years.
The Company is one of many defendants in two class action suits filed in August
of 1996 by approximately 200 claimants for unspecified damages as a result of
health problems claimed to have been caused by inhalation of silica dust, a
byproduct of concrete and mortar mix, allegedly generated by a cement plant with
which the Company has no connection other than as a customer. The Company has
entered into a cost-sharing agreement with its insurers, and any liability is
not expected to be material.
11
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The Company is one of many defendants in approximately 434 actions, each of
which seeks unspecified damages, primarily in Michigan state courts against
manufacturers and building material retailers by individuals who claim to have
suffered injuries from products containing asbestos. The Company is aggressively
defending these actions and does not believe that these actions will have a
material adverse effect on the Company. Since 1993, the Company has settled 50
similar actions for insignificant amounts, and another 253 of these actions have
been dismissed. None of these suits have made it to trial.
Losses in excess of the $132,000 reserved as of June 29, 2002 are possible, but
an estimate of these amounts cannot be made.
The Company is involved in various other legal proceedings that are incidental
to the conduct of its business. Certain of these proceedings involve potential
damages for which the Company's insurance coverage may be unavailable. While the
Company does not believe that any of these proceedings will have a material
adverse effect on the Company's financial position, annual results of operations
or liquidity, there can be no such assurance.
7. EARNINGS PER SHARE
------------------
The Company calculates earnings per share in accordance with SFAS No. 128. In
periods where net losses are incurred, dilutive common stock equivalents are not
used in the calculation of diluted EPS as they would have an anti-dilutive
effect on EPS. For the six-month periods ended June 29, 2002 and June 30, 2001,
common stock equivalents of 116,000 and 154,000 shares, respectively, were
excluded as they were anti-dilutive. In addition, options to purchase 440,000
and 589,000 weighted average shares of common stock at June 29, 2002 and June
30, 2001, respectively, had an exercise price greater than the average market
price.
8. RELATED PARTY TRANSACTIONS
--------------------------
Approximately 34% of the Company's outstanding shares of common stock is owned
by Riverside Group, Inc. and approximately 13% is owned by Imagine Investments,
Inc. and its parent, Stone Investments, Inc.
12
WICKES INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
In February 2002, the Company entered into an agreement with Cybermax, Inc., a
wholly-owned subsidiary of Riverside Group, Inc. The agreement calls for
Cybermax to design, develop and support a web based system that will aid the
Company in marketing and selling product. For the six months ended June 29,
2002, the Company paid approximately $59,000 to Cybermax, Inc.
In March 2000, the Company entered into an agreement with Buildscape, Inc., an
entity then affiliated with Riverside Group, Inc. and Imagine Investments, Inc.
Pursuant to this agreement, the Company and Buildscape, Inc. are jointly
conducting an Internet distribution program. Buildscape is an Internet service
designed for builders that allows the Company's customers to buy products and
materials from Wickes and other suppliers. It provides real-time online access
to the professional builders' specific Wickes price list, bill of materials and
trade account. Wickes paid Buildscape approximately $104,000 in the six months
ended June 29, 2002. In July 2002, Dow Chemical Company acquired 100% ownership
of Buildscape, Inc. The Company will continue to use the Buildscape, Inc.
internet distribution program to sell products to its customers.
In February 1998, as part of the determination made by the Company to
discontinue or sell non-core programs, the Company sold certain operations to
Riverside Group, Inc. In exchange for these assets, the Company received a
three-year $870,000 unsecured promissory note and 10% of future net income of
these operations (subject to a maximum of $429,000 plus interest). In March
2000, the Company extended the terms of its note receivable from Riverside
Group, Inc. Under the revised terms, all previously accrued interest was paid to
the Company by Riverside Group, Inc. on March 31, 2000. Repayment of the
remaining principal balance was deferred for one year, with quarterly principal
payments commencing on April 1, 2001 and ending June 30, 2002. On December 28,
2001 the Company amended the terms of its note receivable with Riverside Group,
Inc. in an agreement that extended the payment of principal and interest, due in
full, on December 28, 2002. As of June 29, 2002 the remaining principal balance
was approximately $402,000, with accrued interest of approximately $23,000.
For the six months ended June 29, 2002, the Company paid approximately $547,000
in reimbursements to affiliates of the Company's Chairman primarily for use of a
corporate aircraft as well as office space and office support services.
13
WICKES INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
------------------------------------------------------------------------
OF OPERATIONS
- -------------
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001.
This Discussion and Analysis contains statements which, to the extent that they
are not recitations of historical fact, constitute Forward Looking Statements
that are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and are inherently subject to uncertainty. A
number of important factors could cause the Company's business and financial
results and financial condition to be materially different from those stated in
the Forward Looking Statements.
Among the factors that could cause actual results to differ materially are the
following: effects of seasonality and cyclicality; effects of competition;
interest rates and the Company's ability to service and comply with the terms of
its debt; lumber prices; the success of the Company's operational initiatives;
and the outcome of the contingencies discussed in Note 6 of the Company's
Consolidated Financial Statements included elsewhere herein.
INTRODUCTION
------------
Wickes Inc. and its consolidated subsidiaries ("Wickes" or the "Company") is a
leading supplier of lumber, building materials and manufactured building
components in the United States. The Company sells its products and services
primarily to residential and commercial building professionals, repair and
remodeling contractors and, to a lesser extent, project do-it-yourself consumers
involved in major home improvement projects. At June 29, 2002, the Company
operated 91 sales and distribution facilities and 24 component manufacturing
facilities in 22 states in the Midwest, Northeast, and South.
The Company's mission is to be the premier provider of building materials and
services and manufactured building components to the professional segments of
the building and construction industry.
14
The Company focuses on the professional builder and contractor market. The
Company targets five customer groups: the production or volume builder; the
custom builder; the tradesman; the repair and remodeler; and the commercial
developer. Its marketing approach encompasses three channels of distribution:
Major Markets, Conventional Markets, and Wickes Direct. These channels are
supported by the Company's network of building component manufacturing
facilities. In Major Markets, the Company serves the national, regional, and
large local builder in larger markets with a total solutions approach and
specialized services. In Conventional Markets, the Company provides the smaller
building professional in less-populous markets with tailored products and
services. Wickes Direct provides materials flow and logistics management
services to commercial customers. The Company also serves building professionals
through its network of 24 component manufacturing facilities that produce
value-added, wood framed wall panels, roof and floor truss systems, and pre-hung
interior and exterior doors.
RESULTS OF OPERATIONS
---------------------
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain expense and income items. This information
includes the results from all sales and distribution and component manufacturing
facilities operated by the Company, including those closed or sold during the
period.
Three Months Ended Six Months Ended
------------------ ----------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 21.6% 21.4% 21.2% 21.9%
Selling, general and
administrative expense 17.9% 18.3% 19.0% 20.7%
Depreciation, goodwill and
trademark amortization 0.6% 0.6% 0.7% 0.7%
Provision for doubtful accounts 0.1% 0.0% 0.2% 0.1%
Store closing costs 0.3% - 0.4% -
Other operating income (0.8)% (0.3)% (0.6)% (0.2)%
Income from operations 3.5% 2.7% 1.6% 0.7%
Certain reclassifications have been made to prior year amounts to conform to the
current presentation. All material intercompany balances and transactions have
been eliminated.
15
The Company's results of operations are historically affected by, among other
factors, weather conditions, interest rates, lumber prices, and housing starts.
Weather conditions in the Company's markets were generally warmer than average
temperatures and below normal precipitation in the first quarter. In the second
quarter of 2002, generally average temperatures but much above normal
precipitation were experienced. The Company's average rate of interest decreased
to 7.66% during the second quarter compared to 9.01% for the same period last
year. The year-to-date weighted-average interest rate decreased to 8.18%
compared to 9.32% for the same period last year. The second quarter and
year-to-date results were affected by lower commodity lumber prices, down 14.2%
and 3.2%, respectively, from last year. Housing starts in the Company's primary
market, the Midwest, were down 2.2% from the first half of 2001. During the
first six months of 2002, the Company experienced reductions in selling, general
and administrative ("SG&A") expense and gains on the sale of assets as a direct
result of a plan to reduce certain overhead programs and under-performing
assets.
Net income for the second quarters ended June 29, 2002 and June 30, 2001 were
$2.3 million and $1.0 million, respectively. Net losses for the six-months ended
June 29, 2002 and June 30, 2001 were $1.5 million and $5.5 million,
respectively.
Three Months Ended June 29, 2002 Compared
with the Three Months Ended June 30, 2001
-----------------------------------------
Net Sales
- ---------
Net sales for the second quarter of 2002 decreased 14.4%, to $234.6 million
compared to $274.1 million for the second quarter of 2001. The Company closed,
consolidated or sold a total of eight locations this year. Same store sales
decreased 7.3% from the comparable period last year. To the Company's primary
building professional customers: same store sales increased 0.3% to the new home
builder, decreased 25.3% to the commercial developer, and decreased 9.2% to the
repair and remodeler. The new home builder represents 66.4% of total sales
compared to 62.6% last year. Total sales to building professionals represent
91.2% of total sales compared to 90.8% last year. As of June 29, 2002, the
Company operated 91 sales and distribution facilities, compared to 100 at the
end of the second quarter of 2001.
16
The Company believes that sales decreases for the three months ended June 29,
2002 primarily resulted from the decline in the number of locations, lumber
deflation and a decline in housing starts. In the Company's primary market, the
Midwest, housing starts were down 2.2% in the second quarter of 2002 compared
with 2001. The Company estimates that the effect of lumber deflation for the
second quarter of 2002 decreased total sales by approximately $13.0 million
compared with the same period last year. Lumber and building materials accounted
for 84.5% of total sales in the second quarter of 2002 compared with 85.6% in
2001.
Products that exhibited the greatest change in sales dollars for the period
ended June 29, 2002 versus the comparable prior year period were: lumber and
plywood (down 24.0%), trusses and engineered wood products (down 10.5%), treated
wood (down 17.7%), roofing and roofing material (down 13.5%) and specialty wood
products (down 20.2%).
Gross Profit
- ------------
Gross profit decreased to $50.6 million in the second quarter of 2002 from $58.6
million in the second quarter of 2001, a 13.6% decrease. Gross profit as a
percentage of sales increased in the second quarter 2002 to 21.6% from 21.4% for
the second quarter of 2001. The Company believes that the increase in gross
profit as a percentage of sales is the result of increased sales of internally
manufactured components. In the second quarter of 2002, the Company's production
of building components increased to approximately 62% of total sales of
manufactured components from approximately 60% in the second quarter of 2001.
The Company believes that the decrease in gross profit dollars resulted
primarily from the reduction in the number of facilities, and lower margins on
lumber products (down 70 basis points). Using "Random Length Price Indices" and
other commodity price measurements, the Company estimates that deflation in
commodity lumber prices decreased gross profit for the second quarter of 2002 by
approximately $2.4 million when compared with commodity lumber price levels
experienced during the second quarter of 2001.
17
Selling, General and Administrative Expense ("SG&A")
- ----------------------------------------------------
SG&A expense decreased to 17.9% of net sales in the second quarter of 2002
compared with 18.3% of net sales in the second quarter of 2001. SG&A dollars
decreased to $42.0 million in the second quarter of 2002 from $50.2 million in
the second quarter of 2001, a decrease of $8.2 million. Reductions in SG&A
expenses are due to decreases in salaries (down 15%), decreases in marketing
expenses (down 42%), and decreased delivery expenses (down 16%). These
reductions are the result of both a reduction in the number of facilities as
well as the Company's initiatives to reduce SG&A costs.
Depreciation, Goodwill and Trademark Amortization
- -------------------------------------------------
Depreciation, goodwill and trademark amortization decreased to $1.3 million for
the second quarter of 2002 compared to $1.6 million for the same period in 2001.
The decrease in depreciation, goodwill and amortization is primarily due to
implementation of SFAS 142.
Provision for Doubtful Accounts
- -------------------------------
The provision for doubtful accounts was $180,000 in the second quarter of 2002,
compared with $35,000 in the second quarter of 2001.
Store Closing Costs
- -------------------
During the second quarter of 2002, the Company sold two of its distributions
centers. Store closing costs associated with these activities typically include
employee termination costs, non-cancelable lease obligations and other exit
costs incurred as a direct result of closing or selling facilities. These store
closing costs for the second quarter of 2002 were $785,000. In addition to the
costs above, the Company also incurred charges related to the write down of
inventory and receivables to their net realizable value. These charges have been
recorded in cost of sales and provision for doubtful accounts. The Company has
accrued in current liabilities approximately $72,000 for estimated future costs
associated with these closings.
18
Other Operating Income
- ----------------------
Other operating income for the second quarter of 2002 was $1.9 million compared
with $0.7 million for the second quarter 2001. Other operating income primarily
includes the sale or disposal of property, plant and equipment, service charges
assessed customers on past due accounts receivable, and casualty gains/losses.
The increase in operating income primarily is due to the sale of two centers and
their related assets, which resulted in $0.9 million gain. No properties were
sold in the second quarter of 2001.
Interest Expense
- ----------------
In the second quarter of 2002, interest expense decreased to $4.1 million from
$5.5 million during the second quarter of 2001. The Company's average rate of
interest decreased to 7.66% during the second quarter compared to 9.01% for the
same period last year.
The Company's second quarter average debt levels decreased significantly, down
$37.8 million or 16.2% over the comparable period in 2001. The Company continues
to maximize its use of LIBOR contracts to minimize its overall interest expense.
In the second quarter of 2002, approximately 91.6% of the Company's average
borrowing on its revolving credit facility was LIBOR-based as compared with
95.0% during the second quarter of 2001.
Provision for Income Taxes
- --------------------------
The Company recorded income tax expense of $1.8 million for the second quarter
of 2002 compared with expense of $1.0 million in the second quarter of 2001. An
effective federal and state income tax rate of 39.1% was used to calculate
income taxes for the second quarter of 2002, compared with an effective rate of
38.1% for the second quarter of 2001. The calculated tax rate in the financial
statements of 43.2% for the second quarter of 2002 compared to 50.2% for the
second quarter of 2001, differs from the effective federal and state income tax
rate due to state franchise taxes being calculated separately. State franchise
taxes were $0.2 million and $0.3 million for the second quarter of 2002 and
2001, respectively.
The Company continues to review future earnings projections to determine that
there is sufficient support for its deferred tax assets and valuation allowance.
Management believes that it is more likely than not that the Company will
receive full benefit of its net deferred tax asset and that the valuation
allowance is properly stated.
19
This assessment constitutes Forward-Looking Information made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
and is inherently subject to uncertainty and dependent upon the Company's future
profitability, which in turn depends upon a number of important risk factors
including but not limited to: the effectiveness of the Company's operational
efforts, cyclicality and seasonality of the Company's business, the effects of
the Company's substantial leverage, and competition.
Six Months Ended June 29, 2002 Compared
with the Six Months Ended June 30, 2001
---------------------------------------
Net Sales
- ---------
Net sales for the first six months of 2002 decreased 8.4% to $420.4 million from
$458.9 million for the first six months of 2001. Since the beginning of the
year, the Company has closed, consolidated or sold a total of eight locations.
Same store sales decreased 2.2% from the comparable period last year. To the
Company's primary building professional customers: same store sales increased
4.1% to the new home builder, decreased 13.8% to the commercial developer, and
decreased 3.5% to the repair and remodeler. The new home builder represents
65.9% of total sales compared to 63.1% last year. Total sales to these building
professionals represent 91.9% of total sales compared to 91.6% last year. As of
June 29, 2002, the Company operated 91 sales and distribution facilities,
compared to 100 at June 30, 2001.
The Company believes that same store sales decrease for the six months ended
June 29, 2002 primarily results from lumber deflation and housing start
declines. The Company estimates that the net effect of lumber deflation for the
first six months of 2002 decreased total sales by approximately $7.3 million
compared with the same period last year. Lumber and building materials accounted
for 84.0% of total sales this year compared with 85.0% last year. Housing starts
in the first six months of 2002 compared to 2001 were down 2.2% in the Midwest,
the Company's primary market.
Products that exhibited the greatest change in sales dollars for the first six
months of 2002 versus the comparable period in the prior year were: lumber and
plywood (down 17.7%), truss and engineered wood products (down 6.9%), roofing
and roofing materials (down 10.6%), specialty wood products (down 15.2%),
kitchen and bath (up 11.0%) and windows and doors (up 3.2%).
20
Gross Profit
- ------------
Gross profit for the first six months of 2002 decreased to $89.0 million from
$100.6 million for the first six months of 2001, an 11.5% decrease. Gross profit
as a percentage of sales decreased to 21.2% for the first six months of 2002
from 21.9% in 2001. The Company believes that the decrease in gross profit
dollars resulted primarily from the reduction in the number of facilities, and
lower margins on lumber products (down 80 basis points). The Company estimates
that deflation in commodity lumber prices decreased gross profit for the first
six months of 2002 by approximately $1.3 million when compared with lumber
commodity price levels experienced during the first six months of 2001. In
addition, a change in the nature of the Company's co-operative marketing
programs with its vendors from primarily purchase based programs to primarily
co-operative marketing and cost recovery programs also resulted in lowering both
gross profit and selling, general and administrative expense.
Selling, General and Administrative Expense
- -------------------------------------------
SG&A expense decreased to 19.0% of net sales in the first six months of 2002
compared with 20.7% of net sales in the first six months of 2001. SG&A dollars
decreased to $79.9 million in the first six months of 2002 from $94.9 million in
the first six months of 2001, a decrease of $15.0 million or 15.8%. Reductions
in SG&A expense are due to decreases in salaries (down 14.5%), decreases in
marketing expenses (down 41.5%) and decreased delivery expenses (down 16.1%).
These decreases are the result of both a reduction in the number of facilities
as well as the Company's initiatives to reduce SG&A costs. Decreases were
partially offset by increases in employee benefits (up 25%) primarily from the
rising cost of insurance.
Depreciation, Goodwill and Trademark Amortization
- -------------------------------------------------
Year to date 2002, depreciation, goodwill and trademark amortization is $2.7
million compared to $3.1 million for 2001. The decrease in depreciation,
goodwill and amortization is primarily due to implementation of SFAS 142.
Provision for Doubtful Accounts
- -------------------------------
The provision for doubtful accounts was approximately $0.6 million, or 0.1% of
net sales for the first six months of 2002 similar to the amount and percent of
net sales reported for the first six months of 2001.
21
Store Closing Costs
- -------------------
During the first six months of 2002, the Company closed, consolidated, or sold
seven distributions centers and one component plant. Store closing costs
associated with these activities typically include employee termination costs,
non-cancelable lease obligations and other exit costs incurred as a direct
result of closing facilities. These store closing costs for the first six months
of 2002 were $1.7 million. In addition to the costs above, the Company also
incurred charges related to the write down of inventory and receivables to their
net realizable value. These charges have been recorded in cost of sales and
provision for doubtful accounts. The Company has accrued in current liabilities
approximately $72,000 for estimated future costs associated with these closings.
Other Operating Income
- ----------------------
Other operating income for the first six months of 2002 was $2.5 million
compared with $1.1 million for the first six months of 2001. Other operating
income primarily includes the sale or disposal of property, plant and equipment,
service charges assessed customers on past due accounts receivables, and
casualty gains/losses. The increase in operating income primarily is due to the
sale of seven facilities during the first six months of 2002 for a net gain of
$1.3 million, while there were no facilities sold during the same period in
2001.
Interest Expense
- ----------------
In the first six months of 2002, interest expense decreased to $8.5 million from
$11.4 million during the first six months of 2001. Interest expense in the first
six months of 2001 included a charge of approximately $365,000 for the decline
in the fair value of an interest rate swap that did not qualify for hedge
accounting under SFAS No. 133. The Company benefited from a favorable change in
the swap value and recorded a $116,000 credit to interest expense in the first
six months of 2002. The interest rate swap agreement expired in February 2002.
The Company's year-to-date weighted-average interest rate decreased to 8.18%
compared to 9.32% last year. Average debt levels decreased significantly, down
$30.3 million or 13.7% over the comparable period in 2001. The Company continues
to maximize its use of LIBOR contracts to minimize its overall interest expense.
In the first six months of 2002, approximately 90.5% of the Company's average
borrowing on its revolving credit facility was LIBOR-based as compared with
95.3% during the first six months of 2001.
22
Provision for Income Taxes
- --------------------------
The Company recorded an income tax benefit of $0.5 million for the first six
months of 2002 compared with a benefit of $2.8 million for the same period in
the prior year. An effective federal and state income tax rate of 39.2% was used
to calculate income taxes for the first six months of 2002, compared to 38.7%
for the same period in the prior year. The calculated tax rate in the financial
statements of 24.8% for the first six-months of 2002 compared to 34.0% for the
same period in the prior year, differs due to state franchise taxes being
calculated separately. State franchise taxes were $0.4 million and $0.5 million
for the first six months of 2002 and 2001, respectively.
The Company continues to review future earnings projections to determine that
there is sufficient support for its deferred tax assets and valuation allowance.
Management believes that it is more likely than not that the Company will
receive full benefit of its net deferred tax asset and that the valuation
allowance is properly stated. This assessment constitutes Forward-Looking
Information made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and is inherently subject to
uncertainty and dependent upon the Company;s future profitability, which in turn
depends upon a number of important risk factors including but not limited to:
the effectiveness of the Company's operational efforts, cyclicality and
seasonality of the Company's business, the effects of the Company's substantial
leverage, and competition.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's principal sources of working capital and liquidity are earnings
and borrowings under its credit facility. The Company's assessment of its future
funds availability constitutes Forward-Looking Information made pursuant to the
Private Securities Litigation Reform Act of 1995 and is inherently subject to
uncertainty resulting from, among other things, the factors discussed under
"Results of Operations - Provision for Income Taxes". The Company anticipates
that funds provided by operations and under this facility will be adequate for
the Company's future needs. The Company's primary need for capital resources is
to finance inventory, accounts receivable, improvements to plant property and
equipment and insurance reserves.
23
During the first six months of 2002, net cash provided by operating activities
was $4.6 million compared with net cash used in operating activities of $33.5
for the first six months of 2001. The first six months of the Company's fiscal
year historically generates negative cash flows from operating activities. The
improvement made this year was the result of the Company's plan to improve
performance through a reduction in facilities and improvements in managing its
inventory and accounts receivables.
The Company's accounts receivable balance at June 29, 2002 decreased $21.6
million or 19.6% when compared to the balance at June 30, 2001. This decrease
primarily is the result of a reduction in the number of operating facilities
from 100 to 91, a 7.9% reduction in credit sales, and improved collection
efforts.
The Company's inventory balance at June 29, 2002 decreased $37.1 million or
28.2% when compared to the balance at June 30, 2001. This decrease primarily is
related to the Company's goal to improve inventory management, increasing
turnover for the first six months of 2002 to 6.5 from 5.6 for the same period
last year. As mentioned above, the number of operating facilities declined from
100 to 91 between June 30, 2001 and June 29, 2002. Accounts payable at June 29,
2002 decreased approximately $9.5 million from June 30, 2001.
The Company's capital expenditures consist primarily of the construction of
product storage facilities, the remodeling and reformatting of sales and
distribution facilities and component manufacturing facilities, and the purchase
of vehicles, equipment and management information systems for both existing and
new operations. The Company also may make expenditures to establish or acquire
operations to expand or complement its existing operations, especially in its
major markets. In the first six months of 2002, the Company spent approximately
$705,000 on capital expenditures, compared to $5.9 million for the same period
in 2001. Under the Company's bank revolving credit agreement, capital
expenditures during 2002 are currently limited to $7.0 million. In addition to
capital expenditures, this revolving credit agreement allows the Company to
spend up to $30 million, subject to certain restrictions, for acquisitions. The
Company expects to fund capital expenditures through borrowings and its
internally generated cash flow.
24
The Company maintained excess availability under its revolving credit agreement
throughout 2002. The Company's receivables and inventory typically increase in
the second and third quarters of the year due to higher sales in the peak
building season. In these same periods, the Company typically reaches its peak
utilization of its revolving credit agreement because of the increased inventory
and receivables needed for the peak building season. At June 29, 2002, the
Company had outstanding borrowings under its revolving credit agreement of $94.3
million, the minimum availability requirement was $25.0 million and the unused
availability was $29.7 million.
The Company's revolving credit agreement and the trust indenture relating to the
Company's 11-5/8% Senior Subordinated Notes contain certain covenants and
restrictions. Generally, the agreement and the trust indenture restrict, among
other things, capital expenditures, the incurrence of additional debt, certain
asset sales, dividends, investments, acquisitions and other restricted payments.
Furthermore, the agreement considers a change in control, as defined, as an
event of default. In addition, upon a change in control of the Company, as
defined in the trust indenture, the Company must offer to purchase the 11-5/8%
Senior Subordinated Notes at 101% of the principal thereof, plus accrued
interest.
A commitment fee of 0.38% is payable on the unused amount of the revolving
credit agreement. Interest on amounts outstanding under the amended and restated
credit agreement bear interest at a spread of 0.75% above the base rate of Fleet
National Bank (5.50% at June 29, 2002) or 2.75% above the applicable LIBOR rate
(4.58% at June 29, 2002). Depending upon the Company's rolling four-quarter
interest coverage ratio and unused availability, as defined, amounts outstanding
will bear interest at a spread above the base rate from 0.0% to 0.75% or from
2.00% to 2.75% above the applicable LIBOR rate. At June 29, 2002, the Company
had designated $11.3 million and $83.0 million as base rate and LIBOR
borrowings, respectively. Amounts outstanding at June 29, 2002 under the $36.2
million term loan portion bear interest at a spread of 3.00% above the
applicable LIBOR rate. All interest is payable monthly.
The Company previously entered into an interest rate swap agreement that
effectively fixed the Company's borrowing cost at 5.75% plus the Company's LIBOR
borrowing spread on $40.0 million of the Company's amended and restated line of
credit borrowings. The interest rate swap agreement expired in February 2002.
25
Substantially all of the Company's accounts receivable, inventory and general
intangibles are pledged as collateral under the revolving credit agreement. In
addition, substantially all of the Company's owned real estate assets were
provided as additional collateral in connection with the term loan entered into
in December 2000. Availability is limited to 85.0% of eligible accounts
receivable plus 60.0% of eligible inventory, with these percentages subject to
change at the permitted discretion of the agent for the lenders.
The Company's weighted-average interest rate on all outstanding borrowings,
excluding amortization of debt issue costs, for the six months ended June 29,
2002 and June 30, 2001 was approximately 8.18% and 9.32%, respectively.
26
WICKES INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
For information of the Company's Quantitative and Qualitative Disclosures About
Market Risk, please see the Company's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001. There have been no material changes in the
Company's quantitative or qualitative exposure to market risk since the end of
fiscal 2001.
27
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
(a) None
(b) None
(c) Under the Company's Director Incentive Plan, directors may make
an annual irrevocable election to receive up to 100% of the
annual retainer and committee fees, payable quarterly, in the
form of stock. On April 2, 2002, the Company issued an aggregate
of 3,818 shares of common stock in lieu of $10,374 of such fees in
reliance upon the exemption afforded by Section 4(2) of the
Securities Act of 1933, as amended.
(d) None
Item 5. Other Information
-----------------
During the quarter, the Company received notice from Nasdaq that the Company's
common stock has not maintained the minimum market value of publicly held shares
("MVPHS"). Therefore, in accordance with Marketplace Rule 4450(e)(1), the
Company will be provided 90 calendar days, or until September 23, 2002, to
regain compliance. If, at anytime before September 23, 2002, the MVPHS of the
Company's common stock is $5,000,000 or greater for a minimum of 10 consecutive
trading days, Nasdaq will provide written notification that the Company complies
with the Rule. If compliance with this Rule cannot be demonstrated by September
23, 2002, Nasdaq will provide written notification that the Company's securities
will be delisted. At that time, the Company may appeal Nasdaq determination to a
Listing Qualifications Panel.
The Company may apply to transfer its securities to The Nasdaq SmallCap Market.
To transfer, the Company must satisfy the continued inclusion requirements for
that market. If the Company submits a transfer application and pays the
application listing fees by September 23, 2002, the initiation of the delisting
proceedings will be stayed pending Nasdaq's review of the application. If Nasdaq
does not approve the Company's transfer application, Nasdaq will provide written
notification that its securities will be delisted.
The Company believes that the publically held shares currently outstanding are
2,586,795, and that a market price of at least $1.93 per share for a minimum of
10 consecutive trading days is required to maintain compliance.
28
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 99.1 Certification of Chief Executive Officer
Exhibit 99.2 Certification of Chief Financial Officer
(b) Reports on Form 8-K
None
29
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.
WICKES INC.
By: /s/ J. Steven Wilson
--------------------
J. Steven Wilson
Chairman and Chief Executive Officer
By: /s/ James A. Hopwood
--------------------
James A. Hopwood
Chief Financial Officer
Date: August 13, 2002
30
Exhibit 99.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
-----------------------------------------------------------
I, J. Steven Wilson, Chief Executive Officer of Wickes Inc. (the "Registrant")
hereby certify, pursuant to 18 U.S.C. S~1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Quarterly Report on Form 10-Q for the period ending June 29, 2002 as
filed with/submitted to the U.S. Securities and Exchange Commission (the
"Report"), fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Dated: August 13, 2002
/s/ J. Steven Wilson
--------------------
J. Steven Wilson,
Chief Executive Officer
Wickes Inc.
31
Exhibit 99.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
-----------------------------------------------------------
I, James A. Hopwood, Chief Financial Officer of Wickes Inc. (the "Registrant")
hereby certify, pursuant to 18 U.S.C. S~1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Quarterly Report on Form 10-Q for the period ending June 29, 2002 as
filed with/submitted to the U.S. Securities and Exchange Commission (the
"Report"), fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Dated: August 13, 2002
/s/ James A. Hopwood
--------------------
James A. Hopwood,
Chief Financial Officer
Wickes Inc.