Registration No. 33-58191
Filed Pursuant to Rule 424(b)(3)
Prospectus Supplement Dated June 29, 2001
(To Prospectus dated March 30, 2001)
698 Shares Class A (Voting) Stock, $1,000 par value
23,239 Shares Class C (Nonvoting) Stock, $100 par value
Set forth below is certain financial information of Ace Hardware Corporation with respect to the thirteen week period ended March 31, 2001.
ACE HARDWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted)
March 31, | December 30, | ||
2001 | 2000 | ||
(Unaudited) | |||
ASSETS | |||
Current Assets: | |||
Cash and Cash Equivalents | $ 23,470 | $ 24,644 | |
Short-Term Investments | 12,723 | 12,772 | |
Accounts Receivable, Net | 380,951 | 372,971 | |
Merchandise Inventory | 405,107 | 395,565 | |
Prepaid Expenses and Other | 14,871 | 15,105 | |
Current Assets | |||
Total Current Assets | 837,122 | 821,057 | |
Property and Equipment, Net | 264,228 | 261,890 | |
Other Assets | 42,435 | 40,863 | |
Total Assets | $1,143,785 | $ 1,123,810 | |
Liabilities and Member Dealers' Equity | |||
Current Liabilities: | |||
Current Installment of Long-Term Debt | $ 6,834 | $ 6,904 | |
Short-Term Borrowings | 119,500 | 81,500 | |
Accounts Payable | 443,108 | 448,766 | |
Patronage Dividends Payable in Cash | 37,776 | 34,764 | |
Patronage Refund Certificates Payable | 9,121 | 4,795 | |
Accrued Expenses | 58,048 | 63,224 | |
Total Current Liabilities | 674,387 | 639,953 | |
Long-Term Debt | 105,620 | 105,891 | |
Patronage Refund Certificates Payable | 60,705 | 68,385 | |
Other Long-Term Liabilities | 25,934 | 24,923 | |
Total Liabilities | 866,646 | 839,152 | |
Member Dealers' Equity: | |||
Class A Stock of $1,000 Par Value | 3,819 | 3,783 | |
Class B Stock of $1,000 Par Value | 6,499 | 6,499 | |
Class C Stock of $100 Par Value | 250,758 | 250,480 | |
Class C Stock of $100 Par Value, Issuable | 26,220 | 24,267 | |
Additional Stock Subscribed, Net | |||
Of Unpaid Portion | 345 | 351 | |
Retained Deficit | (8,725) | (5,551) | |
Contributed Capital | 13,485 | 13,485 | |
Accumulated Other Comprehensive Income | (1,003) | (162) | |
291,398 | 293,152 | ||
Less: Treasury Stock, at Cost | (14,259) | (8,494) | |
Total Member Dealers' Equity | 277,139 | 284,658 |
Total Liabilities and Member Dealers' Equity | $1,143,785 | $ 1,123,810 | |
ACE HARDWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(000'S OMITTED)
Unaudited
Thirteen Weeks Ended |
March 31, | April 1, | ||
2001 | 2000 | ||
Net Sales | $ 695,595 | $ 701,009 | |
Cost of Sales | 600,917 | 638,250 | |
Gross Profit | 58,678 | 62,759 | |
Operating Expenses | |||
Warehouse and Distribution | 9,598 | 7,974 | |
Selling, General and Administrative | 23,304 | 23,385 | |
Retail Success and Development | 18,575 | 16,648 | |
Total Operating Expenses | 51,477 | 48,007 | |
Operating Income | 7,201 | 14,752 | |
Interest Expense | (5,603) | (4,702) | |
Other Income, Net | 3,210 | 3,786 | |
Income Taxes | 228 | 510 | |
Net Earnings | $ 5,036 | $ 14,346 | |
Distribution of Net Earnings | |||
Patronage Dividends | $ 8,210 | $ 15,481 | |
Retained Earnings | (3,174) | (1,135) | |
Net Earnings | $ 5,036 | $ 14,346 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
000's Omitted |
(Unaudited) |
Thirteen Weeks Ended |
March 31, | April 1, | ||
2001 | 2000 | ||
Net Earnings | $ 5,036 | $ 14,346 | |
Unrealized Gains on Securities | 339 | - | |
Foreign Currency Translation, Net | (1,180) | (56) | |
Comprehensive Income | $ 4,195 | $ 14,290 | |
See accompanying notes to condensed consolidated financial statements. |
ACE HARDWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
(Unaudited)
Thirteen Weeks Ended |
March 31, | April 1, | ||
2001 | 2000 |
Operating Activities: | |||
Net Earnings | $ 5,036 | $ 14,346 | |
Adjustments to reconcile net earnings to | |||
net cash used in operating activities: | |||
Depriciation and amortization | 6,788 | 6,116 | |
Increase in accounts receivable, net | (9,726) | (37,869) | |
Increase in inventories | (9,542) | (42,064) | |
Increase (decrease) in other current | |||
assets | 234 | (679) | |
Increase (decrease) in accounts payable | |||
And accrued expenses | (10,834) | 39,280 | |
Increase in other long-term liabilities | 1,011 | 348 | |
Net Cash Used in Operating Activities | (17,033) | (20,521) | |
Investing Activities: | |||
Purchase of property and equipment | (9,126) | (8,811) | |
Increase in other assets | (2,364) | (7,598) | |
Net Cash Used in Investing Activities | (11,490) | (16,409) | |
Financiang Activities: | |||
Proceeds of short-term borrowings | 38,000 | 38,971 | |
Principal payments on long-term debt | (341) | (1,772) | |
Payments of patronage refund certificates | (4,853) | (89) | |
Proceeds from sale of common stock | 308 | 477 | |
Repurchase of common stock | (5,765) | (4,055) | |
Net Cash Provided By Financing Activities | 27,349 | 33,532 | |
Decrease in Cash and Cash Equivalents | (1,174) | (3,398) | |
Cash and Cash Equivalents at Beginning of | |||
Period | 24,644 | 35,422 | |
Cash and Cash Equivalents at End of Period | $ 23,470 | $ 32,024 | |
See accompanying notes to condensed consolidated financial statements. |
1) General
The condensed consolidated interim period financial statements presented herein do not include all of the information and disclosures required in annual financial statements and have not been audited, as permitted by the rules and regulations of the Securities and Exchange Commission. The condensed consolidated interim period financial statements should be read in conjunction with the annual financial statements included in the Ace Hardware Corporation Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 22, 2001. In the opinion of management, these financial statements have been prepared in conformity with generally accepted accounting principles and reflect all adjustments necessary for a fair statement of the results of operations and cash flows for the interim periods ended March 31, 2001 and April 1, 2000 and of it's financial position as of March 31, 2001. All such adjustments are of a normal recurring nature. The results of operations for the thirteen week periods ended March 31, 2001 and April 1, 2000 are not necessarily indicative of the results of operations for a full year.
2) Patronage Dividends
The Company operates as a cooperative organization and will pay patronage dividends to consenting member dealers based on the earnings derived from business done with such dealers. It has been the practice of the Company to distribute substantially all patronage sourced earnings in the form of patronage dividends.
Net earnings and patronage dividends will normally be similar since patronage sourced net earnings is paid to consenting member dealers. International dealers signed under a Retail Merchant Agreement are not eligible for patronage dividends and related earnings or losses are not included in patronage sourced earnings.
3) Reclassifications
Certain financial statement reclassifications have been made to prior year and prior quarter amounts to conform to comparable classifications followed in 2001.
4) Segments
The Company is principally engaged as a wholesaler of hardware and related products and manufactures paint products. The Company identifies segments based on management responsibility and the nature of the business activities of each component of the Company. The Company measures segment earnings as operating earnings including an allocation for administrative expenses, interest expense and income taxes. Information regarding the identified segments and the related reconciliation to consolidated information is as follows:
Thirteen Weeks Ended |
March 31, 2001 | |||||
Elimination | |||||
Paint | Intersegment | ||||
Wholesale | Manufacturing | Other | Activities | Consolidated | |
Net Sales from External | |||||
Customers | $ 644,030 | $ 4,154 | $11,411 | $ - | $ 695,595 |
Intersegment Sales | 4,221 | 23,919 | - | (28,140) | - |
Segment Earnings (Loss) | 3,999 | 2,362 | (1,325) | - | 5,036 |
Thirteen Weeks Ended |
April 1, 2000 | |||||
Elimination | |||||
Paint | Intersegment | ||||
Wholesale | Manufacturing | Other | Activities | Consolidated | |
Net Sales from External | |||||
Customers | $ 686,781 | $ 5,001 | $ 9,227 | $ - | $ 701,009 |
Intersegment Sales | 4,353 | 23,372 | - | (27,725) | - |
Segment Earnings (Loss) | 13,123 | 2,171 | (325) | (55) | 14,346 |
5) Subsequent Event
Subsequent to March 31, 2001 the Company entered into a $100.0 million private placement Master Note Agreement of which $70.0 million was issued on April 26, 2001. These Senior Notes have an effective rate of 7.27% and mature April 30, 2013. Proceeds were used to reduce short-term borrowings and for other general corporate purposes.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Thirteen Weeks Ended March 31, 2001 compared to Thirteen Weeks Ended April 1, 2000.
Results of Operations
Consolidated sales decreased 5.9%. Domestic sales declined 4.0% while International sales were affected by a sale of Ace stores and reduced sales in Canada. The decline in domestic sales is primarily due to lower sales to our existing retailer base due to the softening economy and later spring weather partially offset by conversions of new stores to the Ace program.
Gross profit decreased $4.1 million and decreased slightly as a percent of total sales from 8.95% in 2000 to 8.90% in 2001. The decrease resulted primarily from lower handling charges, lower cash discounts due to lower sales and merchandise purchases and higher warehousing costs absorbed into inventory. Higher vendor rebates and margin from company-owned retail locations partially offset the gross profit decline.
Warehouse and distribution expenses increased $1.6 million over 2000 and increased as a percent of total handled sales from 1.63% in 2000 to 2.05% in 2001. Increased utilities and distribution expenses associated with the new Loxley, Alabama distribution facility and the start-up of the Prince George, Virginia facility drove the higher warehouse expenses.
Selling, general and administrative expenses remained flat due to continued cost control measures put in place.
Retail success and development expenses increased $1.9 million primarily due to costs associated with operating additional company-owned retail locations and investments made at retail to support our Vision 21 strategy. Increases in this category are directly related to retail support of the Ace retailer as the Company continues to make investments in our dealer base.
Interest expense increased $901,000 due to higher average borrowing levels. The increased borrowing levels result from completion of the construction of the Loxley, Alabama distribution center, the expansion of our LaCrosse, Wisconsin facility and increased retailer dating programs.
Other income decreased $576,000 primarily due to lower income realized on non-controlling investments in affiliates.
Liquidity and Capital Resources
The Company expects that existing and internally generated funds, along with new and established lines of credit and long-term financing, will continue to be sufficient in the foreseeable future to finance the Company's working capital requirements and patronage dividend and capital expenditures programs. The Company entered into a $100.0 million private placement Master Note Agreement. Proceeds were used to reduce short-term borrowings and for other general corporate purposes.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company's market risk during the thirteen week period ended March 31, 2001. For additional information, refer to Item 7a in the Company's Annual Report on Form 10-K for the year ended December 30, 2000.