ITEM 1. BUSINESS.
Cotter & Company (the "Company") was organized as a Delaware corporation in 1953. Upon its organization, it succeeded to the business of Cotter & Company, an Illinois corporation organized in 1948. The Company's principal executive offices are located at 2740 North Clybourn Avenue, Chicago, Illinois, 60614. Its telephone number is (312) 975-2700.
The Company is a Member-owned wholesaler of hardware, variety and related merchandise. It is the largest wholesaler of hardware and related items in the United States. The Company also manufactures paint, paint applicators, outdoor power equipment, heaters and hardware related products. For reporting purposes, the Company operates in a single industry as a Member-owned wholesaler cooperative.
Membership entitles a Member to use certain Company trademarks and trade names, including the federally registered collective membership trademarks indicating membership in "True Value Hardware Stores" and "V&S Variety Stores". The "True Value" collective membership mark has a present expiration date of January 2, 2003 and the "V&S Variety Stores" collective membership mark has a present expiration date of July 22, 1995.
The Company serves approximately 7,500 True Value Hardware Stores throughout the United States, including approximately 900 combination True Value Hardware and V&S Variety Stores and 1,000 V&S Variety Stores. Primary concentrations of Members exist in California (approximately 8%), New York (approximately 7%), Illinois (approximately 6%), Pennsylvania and Texas (approximately 5% each) and Michigan and Ohio (approximately 4% each).
The Company's total sales of merchandise to its U.S. Members were divided among the following general classes of merchandise:
The Company serves its Members by purchasing products in quantity lots and selling them to Members in smaller lots, passing along any savings to Members in the form of lower prices and/or patronage dividends. The Company holds conventions and meetings for its Members in order to keep them better informed as to industry trends and as to new merchandise available. The Company also provides each of its Members with an illustrated price catalog showing the products available from the Company. The Company's sales to its Members are divided into three categories, as follows: (1) warehouse shipment sales (approximately 47% of total sales); (2) direct (drop shipment) sales (approximately 41% of total sales); and (3) relay sales (approximately 12% of total sales). Warehouse shipment sales are sales of products purchased, warehoused, and resold by the Company upon orders from the Members. Direct shipment sales are sales of products purchased by the Company but delivered directly to Members from manufacturers. Relay sales are sales of products purchased by the Company in response to the requests of several Members for a product which is not normally held in inventory and is not susceptible to direct shipment. Generally, the Company will give notice to all Members of its intention to purchase products for relay shipment and then purchases only so many of such products as the Members order. When the product shipment arrives at the Company, it is not warehoused; rather, the Company breaks up the shipment and "relays" the appropriate quantities to the Members who placed orders.
The Company also manufactures paint, paint applicators, outdoor power equipment, heaters and hardware related products. The principal raw materials used by the Company include chemicals, engines and steel. All raw materials are purchased from outside sources. The Company has been able to obtain adequate sources of raw materials and other items used in production and no shortages of such materials which will materially impact operations are currently anticipated.
The Company annually sponsors two "markets" (one in the Spring and one in the Fall). In fiscal year 1994, these markets will be held in St. Louis, Missouri. Members are invited to the markets and generally place substantial orders for delivery during the period prior to the next market. During such markets, new merchandise and seasonal merchandise for the coming season is displayed to attending Members.
As of February 26, 1994 and February 27, 1993, the Company had a comparable backlog of orders (including relay orders) believed to be firm of approximately $23,000,000. It is anticipated that the entire backlog existing at February 26, 1994 will be filled by April 30, 1994. The Company's backlog at any given time is made up of two principal components: (i) normal resupply orders and (ii) market orders for future delivery. Resupply orders are orders from Members for merchandise to keep inventories at normal levels. Generally, such orders are filled the day following receipt, except that relay orders for future delivery (which are in the nature of resupply orders) are not intended to be filled for several months. Market orders for future delivery are orders for new or seasonal merchandise given by Members during the Company's two markets, for delivery during the several months subsequent to the markets. Thus, the Company will have a relatively high backlog at the end of each market which will diminish in subsequent months until the next market.
The retail hardware and variety industry is characterized by intense competition. Independent retail hardware and variety businesses, as served by the Company, have met increased competition from chain stores, discount stores, home centers, and warehouse operations. Increased operating expenses for the retail stores, including increased costs due to longer open-store hours and higher rental costs of shopping center locations, have cut into operating margins and brought pressures for lower merchandise costs, to which the Company has been responsive. The Company competes with other Member-owned and non-member-owned wholesalers as a source of supply and merchandising support for independent retailers. Competitive factors considered by independent retailers in choosing a source of supply include pricing, servicing capabilities, promotional support and merchandise quality. General increased operating costs and decreased margins have resulted in the withdrawal from business of several non-member-owned wholesalers or conversion to Member-owned status.
During fiscal year 1992, the Company acquired a majority equity interest in Cotter Canada Hardware and Variety Cooperative, Inc., a Canadian wholesaler of hardware, variety and related merchandise. This cooperative serves 336 MacLeod's True Value and Stedman's V&S Variety Stores, all located in Canada. The cooperative has approximately 330 employees and generated less than 5% of the Company's consolidated revenue in fiscal year 1993.
The Company operates several other subsidiaries, most of which are engaged in businesses providing additional services to the Company's Members. In the aggregate, these subsidiaries are not significant to the Company's results of operations.
The Company employs approximately 4,300 persons in the United States on a full-time basis. Due to the widespread geographical distribution of the Company's operations, employee relations are governed by the practices prevailing in the particular area and are generally dealt with locally. Approximately 40% of the Company's hourly-wage employees are covered by collective bargaining agreements which are generally effective for periods of three years. In general, the Company considers its relationship with its employees to be good.
DISTRIBUTION OF PATRONAGE DIVIDENDS
The Company operates on a cooperative basis with respect to business done with or for Members. All Members are entitled to receive patronage dividend distributions from the Company on the basis of gross margins of merchandise and/or services purchased by each Member. In accordance with the Company's By-Laws, the annual patronage dividend is paid to Members out of the gross margins from operations and
other patronage source income, after deduction for expenses and provisions authorized by the Board of Directors.
Patronage dividends are usually paid to Members within 60 days after the close of the Company's fiscal year; however, the Internal Revenue Code permits distribution of patronage dividends as late as the 15th day of the ninth month after the close of the Company's fiscal year, and the Company may elect to distribute the annual patronage dividend at a later time than usual in accordance with the provisions of the Internal Revenue Code.
The Company's By-Laws provide for the payment of year-end patronage dividends, after payment of at least 20% of such patronage dividends in cash, in qualified written notices of allocation including (i) Class B nonvoting Common Stock based on book value thereof, to a maximum of 2% of the Member's net purchases of merchandise from the Company for the year (except in unusual circumstances of individual hardships, in which case the Board of Directors reserves the right to make payments in cash), (ii) Promissory (Subordinated) Notes, and (iii) other property. The Company may also issue nonqualified written notices of allocation to its Members as part of its annual patronage dividend.
A Member's required investment in Class B Common Stock of the Company is currently limited to an amount in the aggregate not exceeding an amount (computed on the basis of par value thereof and to the nearest multiple of $100) equal to (i) two percent (2%) of a Member's net purchases of direct (drop shipment) sales from the Company and purchases of direct (drop shipment) sales of 'Competitive Edge Program Lumber' materials computed separately at one percent (1%), (ii) four percent (4%) of a Member's net purchases of relay sales from the Company and (iii) eight percent (8%) of a Member's net warehouse purchases from the Company in the year of the highest total net purchases of the three preceding years. The Board of Directors anticipates maintaining these percentages. In that each member has equal voting power (voting rights being limited to Class A Common Stock), acquisition of Class B Common Stock as patronage dividends results in the larger volume Members having greater Common Stock equity in the Company but a lesser proportionate voting power per dollar of Common Stock owned than smaller volume Members.
PAYMENT OF PATRONAGE DIVIDENDS IN ACCORDANCE WITH THE INTERNAL REVENUE CODE
The Internal Revenue Code (the 'Code') specifically provides for the taxation of cooperatives (such as the Company) and their patrons (such as the Company's Members) so as to ensure that the business earnings of cooperatives are currently taxable either to the cooperatives or to the patrons.
The shares of Class B Common Stock and the Promissory (Subordinated) Notes distributed by the Company to its Members as partial payment of the patronage dividend are 'written notices of allocation' within the meaning of that term as used in the Code. In order that such written notices of allocation shall be deducted from earnings in determining taxable income of the Company, it is necessary that the Company pay 20% or more of the annual patronage dividend in cash and that the Members consent to having the allocations (at their stated dollar amount) treated as being constructively received by them and includable in their gross income. These conditions being met, the shares of Class B Common Stock and the Promissory (Subordinated) Notes distributed in payment of patronage dividends become 'qualified written notices of allocation' as that term is used in the Code. Section 1385(a) of the Code provides, in substance, that the amount of any patronage dividend which is paid in money or in qualified written notices of allocation shall be included in the gross income of the patron (Member) for the taxable year in which he receives such money or such qualified written notices of allocation.
Thus, every year each Member will receive, as part of the Member's patronage dividend, non-cash items ('written notices of allocation') including Class B Common Stock and Promissory (Subordinated) Notes, the stated dollar amount of which must be recognized as gross income for the taxable year in which received. The portion of the patronage dividend paid in cash (at least 20%) may be insufficient, depending on the tax bracket in each Member's case, to provide funds for the payment of income taxes for which the Member will be liable as a result of the receipt of the entire patronage dividend, including cash, Class B Common Stock and Promissory (Subordinated) Notes.
In response to the provisions of the Code, the Company's By-Laws provide for the treatment of the shares of Class B Common Stock, Promissory (Subordinated) Notes and such other notices as the Board of Directors may determine, distributed in payment of patronage dividends as 'qualified written notices of allocation.' The By-Laws provide in effect:
(i) for payment of patronage dividends partly in cash, partly in qualified written notices of allocation (including the Class B Common Stock and Promissory (Subordinated) Notes as described above), other property or in nonqualified written notices of allocation, and
(ii) that membership in the organization (i.e. the status of being a Member of the Company) shall constitute consent by the Member to take the qualified written notices of allocation or other property into account in the Member's gross income as provided in Section 1385(a) of the Code.
Under the provisions of the Code, persons who become or became Members of the Company or who retained their status as Members after adoption of the By-Laws providing that membership in the organization constitutes consent, and after receiving written notification and a copy of the By-Laws are deemed to have consented to the tax treatment of the cash and the qualified written notices of allocation in which the patronage dividends are paid, in accordance with Section 1385(a) of the Code. Written notification of the adoption of the By-Laws and its significance, and a copy of the By-Laws, were sent to each then existing Member and have been, and will continue to be, delivered to each party that became, or becomes a Member thereafter. Such consent is then effective except as to patronage occurring after the distributee ceases to be a Member of the organization or after the By-Laws of the organization cease to contain the provision with respect to the above described consent.
Each year since 1978, the Company has paid its Members 30% of the annual patronage dividend in cash in respect to patronage (excluding nonqualified written notices of allocation) occurring in the preceding year. It is the judgment of management that the payment of 30% of patronage dividends in cash will not have a material adverse effect on the operations of the Company or its ability to maintain adequate working capital for the normal requirements of its business. However, the Company is obligated to distribute only 20% of the annual patronage dividend (excluding nonqualified written notices of allocation) in cash and it may distribute this lesser percentage in future years.
ITEM 2.
ITEM 2. PROPERTIES.
The Company's national headquarters is located at 2740 North Clybourn Avenue, Chicago, Illinois. Information with respect to the Company's owned and leased warehousing and office facilities is set forth below:
No location owned by the Company (with the exception of Woodland) is subject to a mortgage.
In December 1983, the Company completed construction of a 150,000 square foot addition to its regional distribution center in Manchester, New Hampshire. This addition was financed with the proceeds from the sale of $4,000,000 State of New Hampshire Industrial Development Authority Revenue Bonds (Cotter & Company Project) Series 1982. The 5.94% interest rate will be adjusted based on a bond index on October 1, 1994 and every three-year period thereafter. These bonds may be redeemed at face value at either the option of the Company or the bondholders on October 1, 1994 and every three-year period thereafter until maturity in 2003.
In July 1985, the Company completed construction of a regional distribution center in Woodland, California. The construction of the regional distribution center was financed with the proceeds from the sale of Industrial Development Revenue Bonds issued by the City of Woodland, California. At January 1, 1994, the total outstanding debt was $1,150,000. These bonds bear interest at 8.25%. Final principal payment of $1,150,000 is due in fiscal year 1994.
In February 1993, the Company completed the sale of a facility that it previously owned in Pomona, California.
The Company's facility in Denver, Colorado is currently leased through June 30, 1994. The Company is moving this operation to a 360,000 square feet facility in Denver, Colorado, that is leased through June 30, 1999.
Information with respect to the Company's manufacturing facilities is set forth below:
The Company's facilities are suitable for their respective uses and are, in general, adequate for the Company's present needs.
The Company owns and leases transportation equipment for use at its regional distribution centers for the primary purpose of delivering merchandise from the Company's regional distribution centers to its Members. Additional information concerning these leases can be found in Notes 3 and 5 to the consolidated financial statements included elsewhere herein.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no existing market for the Common Stock of the Company and there is no expectation that any market will develop. The Company's Class A Common Stock is owned almost exclusively by retailers of hardware, variety and related products each of whom is a Member of the Company and purchases ten shares of the Company's Class A Common Stock (the only class of voting stock) upon becoming a Member. The Company is organized and operates as a cooperative corporation. The shares of the Company's Class B Common Stock now outstanding were issued to Members in partial payment of the annual patronage dividend to which they became entitled as a result of patronage business done by such Members with the Company. In accordance with the Company's By-Laws, the annual patronage dividend is paid to Members out of the gross margins from operations and other patronage source income, after deduction for expenses and provisions authorized by the Board of Directors.
The number of holders of record (as of February 26, 1994) of each class of stock of the Company is as follows:
Dividends (other than patronage dividends) upon the Class A Common Stock and Class B Common Stock, subject to the provisions of the Company's Certificate of Incorporation, may be declared out of gross margins of the Company, other than gross margins from operations with or for Members and other patronage
source income, after deduction for expenses and provisions authorized by the Board of Directors. Dividends may be paid in cash, in property, or in shares of the Common Stock, subject to the provisions of the Certificate of Incorporation. Other than the payment of patronage dividends, including the redemption of all nonqualified written notices of allocation, the Company has not paid dividends on its Class A Common Stock or Class B Common Stock. The Board of Directors does not plan to pay dividends on either of said classes of stock. See the discussion of patronage dividends under Item 1 - -Business.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA
- --------------- (a) The book value per share of the Company's Class A Common Stock and Class B Common Stock is the value, determined in accordance with generally accepted accounting principles, of such shares as shown by the respective year-end consolidated balance sheets of the Company, included elsewhere herein as reported on by the Company's independent auditors, after eliminating therefrom all value for goodwill, and other intangible assets and any retained earnings specifically appropriated by the Company's Board of Directors.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
FISCAL YEAR 1993 COMPARED TO FISCAL YEAR 1992
Revenues increased $64,259,000 or 2.7% compared to the previous year. The majority of this revenue gain resulted from increased direct shipment sales to Members. Contributing to the increased direct shipments were strong increases of 15.6% from Lumber and Building Materials and a 20.5% increase from the Company's manufacturing division, General Power Equipment Company. Another significant portion of the Company's revenue increase was due to Cotter Canada Hardware and Variety Cooperative, Inc. ("Cotter Canada"). With its growth in membership and its first full year of operations, Cotter Canada shipments to Canadian members increased by 36.4%.
Consolidated gross margins increased $1,313,000 but as a percentage of revenue decreased to 9.0% from 9.2% reflecting the change in sales mix from warehouse to direct shipments.
Warehouse, general and administrative expenses increased by $9,430,000 or 7.7% due to higher manufacturing and logistic costs, increases associated with a full year of operations at Cotter Canada and
non-recurring expenses related to the decentralization of functions previously performed at the Company's National Headquarters.
Interest paid to Members decreased $1,258,000 or 4.9% primarily due to a lower average interest rate.
Other interest expense increased by $156,000 or 2.1% due to a long-term financing agreement entered into by the Company during the second quarter of fiscal year 1992 to finance the expansion of the Company's distribution network and entry into Canada. This increase was partially offset by a decrease in short-term borrowings and the average rate of interest compared to the corresponding period last year.
The gain on sale of properties owned of $5,985,000 and the corresponding increase in income tax expense of $2,193,000 resulted primarily from the disposition of a regional distribution center in Pomona, California and real estate located in Chicago, Illinois.
Net margins were $57,023,000 for the year ended January 1, 1994 compared to $60,629,000 for the year ended January 2, 1993.
FISCAL YEAR 1992 COMPARED TO FISCAL YEAR 1991
Revenues for fiscal year 1992 increased by $216,581,000 or 10.1%. This represents the highest single year dollar increase in the Company's history. The majority of the revenue growth resulted from a 7.8% increase in merchandise shipments to the True Value and V&S Variety Members from the Company's regional distribution network and manufacturing facilities. All general classes of merchandise experienced revenue gains, reflecting Member confidence in merchandising programs and regional assortments. Another significant influence on revenues was the Company's expansion into the Canadian market. Shipments to Canadian Members by Cotter Canada exceeded $65,000,000.
Gross margins increased by $18,863,000 or 9.5%. As a percentage of revenues, gross margins remained comparable to last year.
Warehouse, general and administrative expenses increased by $11,404,000 or 10.2% but as a percentage of revenues remained comparable with the prior year. The Company was able to maintain this percentage, even though the Company increased the number of items stocked in regional distribution centers and member ordering patterns continued to shift away from direct (drop shipment) sales. Additionally, fiscal year 1992 was the first full fiscal year of operating the Kingman, Arizona regional distribution center, and the year the Company began its Canadian operation.
Interest paid to Members decreased slightly due to a decrease in the average interest rate partially offset by an increase in the balance of the promissory (subordinated) and instalment notes.
Other interest expense increased by $4,807,000 due to long-term financing agreements entered into by the Company during fiscal year 1992, to finance the expansion of the Company's distribution network and entry into Canada.
Other income, net decreased by $1,502,000 due to a reduction in interest income compared to fiscal year 1991. Interest income decreased due to a reduction in the notes receivable and short-term investment amounts held during the year as well as lower rates of interest earned on these balances.
Net margins were $60,629,000 and $59,425,000 for fiscal years 1992 and 1991, respectively. The difference resulted primarily from increased merchandise shipments to Members.
LIQUIDITY AND CAPITAL RESOURCES
At January 1, 1994, net working capital decreased to $225.2 million from $230.2 million at January 2, 1993. The current ratio increased to 1.57 in fiscal year 1993 compared to 1.56 in fiscal year 1992. Current assets decreased $18.0 million, primarily due to the Company's change in cash position, offset by an increase of $22.2 million in receivables due to increased sales and offering Members favorable payment terms received by the Company from its vendors. Current liabilities decreased $13.0 million primarily due to a decrease in
accounts payable as a result of decreased wholesale merchandise inventory offset by an increase in current maturities of long-term obligations and short-term borrowings.
Historically, cash flow from operations together with proceeds of short-term borrowings have sufficiently funded the Company's operations. In an attempt to improve Members' cash flow, the Company continued to offer Members extended terms on purchases during fiscal year 1993 thereby increasing extended term receivables by 24.7%. During fiscal year 1994, the Company anticipates that cash provided by operating activities will increase due to forecasted improvement in the relationship between inventories and accounts payable.
Cash and cash equivalents decreased to $1.3 million at January 1, 1994 compared to $37.6 million at January 2, 1993. Short-term lines of credit available under informal agreements with lending banks, cancelable by either party under specific circumstances, amounted to $56.5 million at January 1, 1994. There were $23.3 million of borrowings outstanding under these agreements at January 1, 1994 compared to $0.3 million at January 2, 1993.
The Company's capital is primarily derived from redeemable Class A Common Stock and retained earnings, together with promissory (subordinated) notes and redeemable nonvoting Class B Common Stock issued in connection with the Company's annual patronage dividend. Funds derived from these capital resources are usually sufficient to satisfy long-term capital needs.
Net capital expenditures, including those made under capital leases, were $5.6 million in fiscal year 1993 compared to $27.0 million in fiscal year 1992 and $30.5 million in fiscal year 1991. These capital expenditures were principally related to additional equipment and technological improvements at the regional distribution centers and National Headquarters. Additionally, a wholly-owned subsidiary of the Company acquired certain assets of a hardware and variety wholesaler based in Canada for approximately $13.1 million in fiscal year 1992. In fiscal year 1991, capital expenditures included the construction of a new regional distribution center in Kingman, Arizona. Funding of capital expenditures in fiscal year 1994 is anticipated to come from operations and external sources, if necessary.
The effects of all recent tax legislation have not had a material effect on the Company's financial position and results of operations.
Effective January 3, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes". As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of this adoption does not have a material effect on the consolidated financial statements. Additionally, the Company has reviewed the impact of all new accounting standards issued as of the filing date of this report, that will be adopted at a future date, and has determined that these will not have a material impact on the Company's operating results and financial position.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated financial statements and consolidated financial statement schedules covered by the report of the Company's independent auditors are listed on Page.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are:
- --------------- During the past five years, the principal occupation of each director of the Company, other than Daniel A. Cotter, was the operation of retail hardware stores.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
PENSION AND COMPENSATION COMMITTEE
The Pension and Compensation Committee of the Board of Directors (the "Committee") consists of three non-employee directors: Kenneth O. Cayce, Jr. (Chairman), Lewis W. Moore and Michael P. Cole. In addition, Jerrald T. Kabelin, Chairman of the Board of Directors, and Daniel A. Cotter, President and Chief Executive Officer, served as ex-officio members of the Committee. The Committee assists the Board of Directors in fulfilling its responsibilities for setting and administering the policies which govern annual compensation and monitoring the Company's pension plans. It meets in executive session and with ex-officio members and the Chief Financial Officer concerning executive compensation matters. The Committee calls upon outside consultants for assistance, as necessary.
The Committee meets at least annually. In fiscal year 1993, the Committee met on four occasions. Primary responsibilities of the Committee include:
- Establishing the President's salary and annual and long-term incentive opportunities.
- Approving other executive officer salaries recommended by the President.
- Setting performance goals for the annual incentive plan and long-term incentive plan.
- Assessing performance achievement relative to goals and approving incentive payments.
- Determining which individuals, upon recommendation of the President, will participate in the annual incentive plan and the long-term incentive plan and the level of incentive awards which will be available to each participant.
- Approving any revisions proposed for executive compensation.
The Committee makes recommendations to the Board of Directors regarding compensation of the Company's executive officers. The philosophy of the Committee is to maintain an executive compensation program to help the Company attract, retain and motivate the executive resources it needs to maintain industry leadership, provide high levels of service to Members, and achieve the financial objectives as determined by the Board of Directors.
To achieve its stated goals, the Company has developed three executive compensation policies.
- The Company provides levels of salaried compensation that are competitive.
- The Company provides annual incentive compensation for executives that vary in a consistent and predictable manner with the performance of the Company.
- The Company provides an incentive program which enables selected executives to achieve incentive awards based on the long-term (multiple year) performance of the Company.
The combination of these three compensation policies is intended to provide competitive earnings opportunities when performance reaches desired levels. The annual incentive program and the long-term incentive program are cancelable by the Board of Directors at any time.
The Company provides salary levels that are competitive with the median (50th percentile) of the executive marketplace. The industry comparison groups used to evaluate competitiveness include: member owned organizations, wholesale distribution firms, mass merchandising firms and general industry and manufacturing organizations. Competitiveness is measured using data from a number of sources, including published information, proxies and surveys by consulting firms.
The annual incentive plan is designed to ensure that executive compensation varies in relation to achievement of annual performance goals. In fiscal year 1993, the plan's overall Company goal was based on achieving Member payout objectives. Each executive had at least a portion of their incentive award determined by Member payout results. The President's entire incentive award is based upon Member payout results. Those executives with departmental responsibilities are measured against department goals in addition to Member payout.
The long-term incentive plan assures a continuing focus on the Company's future. Goals are set for performance achievement over three-year intervals. A new performance period starts each year and goals for each three-year cycle currently underway are related to achievement of revenue growth.
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid to the Company's five most highly compensated executive officers during fiscal year 1993 and Paul F. Fee, who ceased to be an officer of the
Company, during fiscal year 1993, and the total compensation paid to each such individual for the Company's two previous fiscal years:
SUMMARY COMPENSATION TABLE
- --------------- (1) Annual bonus amounts are earned and accrued during the fiscal years indicated, and paid subsequent to the end of each fiscal year.
(2) Other compensation consists primarily of Company contributions to the Cotter & Company Employee's Savings and Compensation Deferral Plan (the "Savings Plan"). Under the Savings Plan, each participant may elect to make a contribution in an amount of up to ten percent (10%) of his annual compensation, not to exceed $30,000 (including Company contributions) a year, of which $8,994 of the executive officer's salary in fiscal year 1993 may be deferred. The Company's contribution to the Savings Plan is equal to seventy-five percent (75%) of the participant's contribution, but not to exceed four and one-half percent (4 1/2%) of the participant's annual compensation. Mr. Fee's other compensation in fiscal year 1993 consists of payments pursuant to an employment agreement. Mr. Nolawski's other compensation includes $4,443 and $27,427 of relocation payments in fiscal year 1992 and 1993, respectively. Mr. Porter's other compensation consists of $11,944 of relocation payments in fiscal year 1993.
(3) Mr. Cotter and Mr. Fee earned transition awards during the initial first two fiscal years of the long-term incentive program initiated in fiscal year 1991. No long-term incentive awards were earned in fiscal year 1993.
Daniel A. Cotter is employed under a long-term contract which commenced January 1, 1985 for a period of 15 years terminating December 31, 1999. Mr. Cotter agreed, in 1990, to revise his contract to conform his compensation to that applicable to all other executives. His base salary has not changed since 1990.
The Company has a severance policy providing termination benefits based upon annual compensation and years of service.
No reportable loans were made by the Company to its executive officers or to its directors during the last three fiscal years.
LONG-TERM PERFORMANCE CASH AWARDS
Beginning in fiscal year 1991, the Board of Directors adopted a long-term incentive program for selected senior executive officers of the Company. The plan covers three-year periods beginning in 1991 through 1993. Senior executives of the Company are eligible for cash payouts ranging from 20% to 50% of their average annual salary if performance goals established for the plan are met. Performance goals for the current plans relate to the achievement of revenue growth.
A new plan starts each year with goals set for the next three-year period. A range of estimated payouts which could be earned by the individuals listed in the Summary Compensation Table in fiscal year 1994, and paid in fiscal year 1995 is shown in the following table:
DEFINED BENEFIT RETIREMENT PLANS
The Company has a defined benefit pension plan, the Cotter & Company Pension Plan (the "Plan"), which is qualified under the Internal Revenue Code. The amount of the Company's annual contribution to the Plan is determined for the total of all participants covered by the Plan, and the amount of payment with respect to a specified person is not and cannot readily be separated or individually calculated by the actuaries for the Plan. The Plan provides fully vested unreduced monthly benefits to eligible employees who have retired at or after age 65 or served a minimum of five years of service and reached age 62. Each of the executive officers listed in the foregoing Summary Compensation Table is a participant in the Plan. The Plan has been amended to be a Social Security "excess" plan instead of being a Social Security "integrated" plan. The benefits provided by the Plan are calculated in the form of a single annuity.
The formula of the benefit for the service completed before January 1, 1989 is one and two-thirds percent of the participant's "average compensation" multiplied by the person's years of service thru December 31, 1988 up to a maximum of thirty such years, minus one and two-thirds percent of the participant's primary Social Security benefit multiplied by the person's years of service thru December 31, 1988 up to a maximum of thirty such years.
For service completed after January 1, 1989, the benefit formula is one and one-twentieth percent of the participant's "average compensation" equal to one-third of the retirement year Taxable Wage Base multiplied by the person's years of service after January 1, 1989 up to a maximum of thirty such years, plus one and one-half percent of the participant's "average compensation" over one-third of the retirement year Taxable Wage Base multiplied by the person's years of service after January 1, 1989 up to a maximum of thirty such years.
A third benefit formula for service completed prior to January 1, 1992 is one and two-thirds percent of the participant's "average compensation" multiplied by the person's years of service thru December 31, 1991 up to a maximum of thirty such years, minus one and two-thirds percent of the participant's primary Social Security benefit multiplied by the person's years of service thru December 31, 1991 up to a maximum of thirty such years. The third formula will be used only if the benefit calculated is higher than the combination of the first two formulas.
"Average compensation" means the average of the compensation received by an eligible employee during the five highest consecutive calendar years within the ten consecutive calendar years immediately preceding the date of termination of employment. Compensation considered in determining benefits includes salary, overtime pay, commissions, bonuses and deferral contributions under the Savings Plan. The average compensation does not differ substantially from all of the compensation for the officers listed in the Summary Compensation Table.
The Company amended and restated in 1991 a Supplemental Retirement Plan (the "Supplemental Plan") for certain employees as designated by the Company's President and Chief Executive Officer. The benefits provided by the Supplemental Plan are calculated in the form of a single annuity in an amount per year which is equal to three percent of the participant's "average compensation" multiplied by years of service up to a maximum of twenty such years, minus any benefits provided to the participants by the Plan, and minus the participant's primary Social Security benefit. "Average Compensation" for the Supplemental Plan is defined the same as for the Plan, as discussed above. The Supplemental Retirement Plan is not a qualified plan under the Internal Revenue Code. Benefits payable under the Supplemental Plan will be financed through internal operations.
The estimated annual retirement benefits which may be payable pursuant to the Plan to the officers named in the Summary Compensation Table (except Mr. Cotter and Mr. Nolawski) is currently limited under the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") to $118,800 at retirement under various assumed conditions. Beginning in 1983, "TEFRA" limited the maximum annual retirement benefits payable to an individual under the Pension Plan to the higher of (a) $90,000 or (b) the participant's accrued benefits under the Pension Plan as of December 31, 1982. The limits of the "TEFRA" maximum annual retirement benefits are subject to the cost-of-living adjustments in 1994 for post-1986 cost-of-living increases.
The following table reflects the estimated annual retirement benefits which may be payable pursuant to the Plan to the officers named in the Summary Compensation Table (except to those officers currently limited under "TEFRA," as previously explained) at retirement under various assumed conditions. The benefit amounts are not subject to deduction for Social Security except as provided by the aforesaid benefit formula nor are said amounts subject to any other offset.
The present credited years of service for the officers listed in the above table are as follows: Daniel A. Cotter, 30 years; Paul F. Fee, 21 years; Robert A. Nolawski, 30 years; Kerry J. Kirby, 18 years, Daniel T. Burns, 13 years, and Steven J. Porter, 1 year.
There is no existing market for the Company's Common Stock and there is no expectation that any market will develop. There are no broad market or peer group indexes the Company believes would render meaningful comparisons. Accordingly, a performance graph of the Company's cumulative total shareholders return for the previous five years, with a performance indicator of the overall stock market for the Company's peer group, has not been prepared.
In fiscal year 1993 directors of the Company were each paid $1,000 per month. The Chairman of the Board is paid $1,000 per day to a maximum of $104,000 per year, when serving in the capacity as Chairman.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of February 26, 1994, each of the directors of the Company was the beneficial owner of 10 shares of Class A Common Stock of the Company comprising .2% of such shares issued and outstanding. Other than Daniel A. Cotter, no executive officer owns any shares of Class A Common Stock.
The directors own in the aggregate approximately 1.5% of Class B Common Stock as of February 26, 1994. No executive officer owns any shares of Class B Common Stock.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company uses Galaxy Travel Agency, Inc., a company engaged in providing normal travel business services, for Company officers, directors, employees, and Members. Daniel A. Cotter and his brother each own a one-half interest of Galaxy Travel. The total bookings placed by the Company with Galaxy Travel in fiscal year 1993 were approximately $2,300,000 and are estimated to be approximately the same in fiscal year 1994.
The Company believes the foregoing transactions are on no-less favorable terms to it than could have been obtained from an independent party.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS
The consolidated financial statements listed in the accompanying index (page) to the consolidated financial statements are filed as part of this annual report.
2. FINANCIAL STATEMENT SCHEDULES
The consolidated financial statement schedules listed in the accompanying index (page) to the consolidated financial statements are filed as part of this annual report.
3. EXHIBITS
The exhibits listed on the accompanying index to exhibits (pages E-1 and E-2) are filed as part of this annual report.
(B) REPORTS ON FORM 8-K
None.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
COTTER & COMPANY
By: /s/ KERRY J. KIRBY --------------------------------------- Kerry J. Kirby, Vice President, Secretary, Treasurer and DATED: March 17, 1994 Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS ANNUAL REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
ITEM 14(A). INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.
All other schedules have been omitted because the required information is not applicable or is not material in amounts sufficient to require submission of the schedule or because the required information is included in the consolidated financial statements or the notes thereto.
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REPORT OF INDEPENDENT AUDITORS
To the Members and the Board of Directors Cotter & Company
We have audited the accompanying consolidated balance sheets of Cotter & Company as of January 1, 1994 and January 2, 1993, and the related consolidated statements of operations, cash flows and capital stock and retained earnings for each of the three years in the period ended January 1, 1994. Our audits also included the consolidated financial statement schedules listed in the Index at item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cotter & Company at January 1, 1994 and January 2, 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 1, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG
Chicago, Illinois February 9, 1994
COTTER & COMPANY
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CONSOLIDATED BALANCE SHEET
ASSETS
See Notes to Consolidated Financial Statements.
COTTER & COMPANY
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CONSOLIDATED BALANCE SHEET
LIABILITIES AND CAPITALIZATION
See Notes to Consolidated Financial Statements.
COTTER & COMPANY
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CONSOLIDATED STATEMENT OF OPERATIONS
See Notes to Consolidated Financial Statements.
COTTER & COMPANY
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CONSOLIDATED STATEMENT OF CASH FLOWS
See Notes to Consolidated Financial Statements.
COTTER & COMPANY
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CONSOLIDATED STATEMENT OF CAPITAL STOCK AND RETAINED EARNINGS
FOR THE THREE YEARS ENDED JANUARY 1, 1994
- --------------- Subscribed Class A common stock amounts are net of unpaid amounts of $14,000 at January 1, 1994, $27,000 at January 2, 1993 and December 28, 1991, and $32,000 at December 29, 1990 (for 590, 760, 880, and 1,200 shares subscribed, respectively).
See Notes to Consolidated Financial Statements.
COTTER & COMPANY
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--DESCRIPTION OF BUSINESS AND ACCOUNTING POLICIES
Cotter & Company (the Company) is a member-owned wholesaler of hardware, variety and related merchandise. The Company also manufactures paint, paint applicators, outdoor power equipment, heaters and hardware related products. The Company's goods and services are sold predominantly within the United States, primarily to retailers of hardware, variety and related lines, each of whom has purchased ten shares of the Company's Class A common stock on becoming a Member. The Company operates in a single industry as a member-owned wholesaler cooperative. In accordance with the Company's By-laws, the annual patronage dividend is paid to Members out of gross margins from operations and other patronage source income, after deduction for expenses and provisions authorized by the Board of Directors. The significant accounting policies of the Company are summarized below.
Consolidation. The consolidated financial statements include the accounts of the Company and all wholly-owned subsidiaries. In fiscal years 1992 and 1993, the consolidated financial statements also include the accounts of Cotter Canada Hardware and Variety Cooperative, Inc., a Canadian member-owned wholesaler of hardware, variety and related merchandise, in which the Company has a majority equity interest.
Capitalization. The Company's capital (Capitalization) is derived from redeemable Class A voting common stock and retained earnings, together with promissory (subordinated) notes and redeemable Class B nonvoting common stock issued in connection with the Company's annual patronage dividend. The By-laws provide for partially meeting the Company's capital requirements by payment of the year-end patronage dividend, of which at least twenty percent must be paid in cash, and the balance in promissory (subordinated) notes and redeemable $100 par value Class B common stock.
Membership may be terminated without cause by either the Company or the Member on sixty days written notice. In the event membership is terminated, the Company undertakes to purchase, and the Member is required to sell to the Company, all of the Member's Class A common stock and Class B common stock at book value. Payment for the Class A common stock will be in cash. Payment for the Class B common stock will be a note payable in five equal annual instalments bearing interest at the same rate per annum as the promissory (subordinated) notes most recently issued as part of the Company's patronage dividend.
Cash equivalents. The Company classifies its temporary investments in highly liquid debt instruments, with an original maturity of three months or less, as cash equivalents. The carrying amount reported in the consolidated balance sheets for cash and cash equivalents approximates fair value.
Inventories. Inventories are stated at the lower of cost, determined on the "first-in, first-out" basis, or market.
Properties. Properties are recorded at cost. Depreciation and amortization are computed by using the straight-line method over the following estimated useful lives: buildings and improvements--10 to 40 years; machinery, warehouse and office equipment--5 to 10 years; transportation equipment--3 to 7 years; and leasehold improvements--the life of the lease without regard to options for renewal.
Income Taxes. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," effective January 3, 1993. Under this standard, the liability method is used whereby deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities adjusting for the impact of tax credit carryforwards.
Retirement plans. The Company sponsors two noncontributory defined benefit retirement plans covering substantially all of its employees. Company contributions to union-sponsored defined contribution plans are
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
based on collectively bargained rates times hours worked. The Company's policy is to fund annually all tax-qualified plans to the extent deductible for income tax purposes.
Reporting year. The Company's reporting year-end is the Saturday closest to December 31.
NOTE 2--INVENTORIES
Inventories consisted of:
NOTE 3--PROPERTIES
Properties owned or leased under capital leases consisted of:
NOTE 4--LONG-TERM DEBT AND BORROWING ARRANGEMENTS
Long-term debt consisted of:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The proceeds from the 8.60% senior note were used for operations. Principal payments starting in 1995 are due in increasing amounts through maturity in 2007. Under the senior note agreement, the Company is required to meet certain financial ratios and covenants.
The two term loans relate to the Canadian acquisition and are due in 1997.
The 5.94% issuance of bonds relates to financing the expansion of a distribution center. On October 1, 1994 and every three-year period thereafter, the interest rate will be adjusted based on a bond index. These bonds may be redeemed at face value at either the option of the Company or the bondholders at October 1, 1994 and every three-year period thereafter until maturity in 2003. The 8.25% issuance of bonds relates to financing the construction of a distribution center.
Total maturities of long-term debt for fiscal years 1994, 1995, 1996, 1997, 1998, and thereafter are $1,150,000, $1,000,000, $2,000,000, $12,977,000, $4,000,000 and $44,000,000 respectively.
In addition, the Company has various short-term lines of credit available under informal agreements with lending banks, cancelable by either party under specific circumstances, which amount to $56,500,000 at January 1, 1994. There were $23,287,000 borrowings under these agreements at January 1, 1994. The Company pays commitment fees for these lines.
The fair value of the 8.6% senior note was approximately $54,375,000 and $51,250,000 at January 1, 1994 and January 2, 1993, respectively. The fair value was estimated using discounted cash flow analyses, based on the Company's incremental borrowing rate for similar borrowings. The carrying amounts of the Company's other long term borrowings and short-term lines of credit approximate fair value.
NOTE 5--CAPITAL LEASES AND OTHER LEASE COMMITMENTS
Capitalized leases expire at various dates and generally provide for purchase options but not renewals. Purchase options provide for purchase prices at either fair market value or a stated value which is related to the lessor's book value at expiration of the lease term.
The following is a schedule of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments, as of January 1, 1994:
The Company also is committed under cancelable operating leases for certain transportation equipment which, in certain cases, also provide for contingent rental arrangements and purchase options. The Company made contingent rental payments relating to operating leases of $575,000, $616,000 and $483,000 for fiscal years 1993, 1992 and 1991, respectively. Rental expense under operating leases for fiscal years 1993, 1992, and 1991 was $7,536,000, $6,850,000 and $5,583,000, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--CAPITALIZATION
Promissory (subordinated) and instalment notes consisted of:
The promissory notes are issued principally in payment of the annual patronage dividend. Promissory notes are subordinated to indebtedness to banking institutions, trade creditors and other indebtedness of the Company as specified by its Board of Directors. Notes to be issued relate to the patronage dividend which is distributed after the end of the year. Prior experience indicates that the maturities of a substantial portion of the notes due within one year are extended, for a three year period, at interest rates substantially equivalent to competitive market rates of comparable instruments. The Company anticipates that this practice will continue.
Due to the uncertainty of the ultimate maturities of the promissory notes, management believes it is impracticable to estimate their fair value. The carrying amount of the instalment notes at January 1, 1994 and January 2, 1993 approximates fair value.
Total maturities of promissory and instalment notes for fiscal years 1994, 1995, 1996, 1997, 1998, and thereafter are $58,292,000, $58,826,000, $56,812,000, $18,513,000, $29,266,000 and $54,579,000, respectively.
NOTE 7--INCOME TAXES
Effective January 3, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes" (See Note 1). As permitted under the new rules, prior years' financial statements have not been restated.
The cumulative effect of adopting SFAS No. 109 as of January 3, 1993 was not material to the consolidated financial statements of the Company.
At January 1, 1994, the Company has alternative minimum tax credit carryforwards of approximately $1,000,000 which do not expire. The carryforwards are available to offset future federal tax liabilities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Company's deferred tax assets and liabilities as of January 1, 1994 resulted primarily from alternative minimum tax credit carryforwards and temporary differences between income tax and financial reporting for depreciation, vacation pay and contributions to fund retirement plans.
Significant components of the provision (benefit) for income taxes are as follows:
The Company operates as a nonexempt cooperative and is allowed a deduction in determining its taxable income for amounts paid as patronage dividend based on margins from business done with or for Members. The reconciliation of income tax expense to income tax computed at the U.S. federal statutory tax rate of 35% in fiscal year 1993 and 34% in 1992 and 1991 is as follows:
NOTE 8--CASH FLOW
The Company's noncash financing and investing activities in fiscal years 1992 and 1991 include acquisitions of transportation and warehouse equipment by entering into capital leases. In fiscal year 1992, ownership of a distribution center previously under capital lease was transferred to the Company. Also in fiscal year 1992, a wholly-owned subsidiary of the Company acquired certain assets, in part, by assuming debt. In fiscal year 1991, the Company acquired a new distribution center by assuming debt. These transactions aggregate $12,527,000 and $11,382,000 in fiscal years 1992 and 1991, respectively. In addition, the annual
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
patronage dividend and promissory (subordinated) note renewals relating to noncash operating and financing activities are as follows:
Cash paid for interest during fiscal years 1993, 1992 and 1991, totalled $32,056,000, $31,638,000 and $28,668,000, respectively. Cash paid for income taxes during fiscal years 1993, 1992 and 1991 totalled $1,387,000, $1,771,000 and $2,380, 000, respectively.
NOTE 9--RETIREMENT PLANS
The components of net pension cost for the Company administered pension plans consisted of:
The discount rate and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7 1/2% and 4 1/2%, respectively, in fiscal year 1993 compared to 9% and 6%, respectively, in fiscal years 1992 and 1991. These changes in actuarial assumptions did not have a material impact on net pension cost for fiscal year 1993 and the Company does not anticipate that these changes will have a material impact on net pension cost in future years. In fiscal years 1993, 1992 and 1991, the expected long-term rate of return on assets was 9 1/2%.
Plan assets are composed primarily of corporate equity and debt securities. Benefits are based on years of service and the employee's compensation during the last ten years of employment, offset by a percentage of
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Social Security retirement benefits. Trusteed net assets and actuarially computed benefit obligations for the Company administered pension plans are presented below:
The Company also participates in union-sponsored defined contribution plans. Pension costs related to these plans were $702,000, $556,000 and $522,000 for fiscal years 1993, 1992 and 1991, respectively.
COTTER & COMPANY ------------------------
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 1, 1994 (000'S OMITTED)
- --------------- (1) Consists of notes receivable.
(2) Consists of promissory (subordinated) notes and installment notes.
(3) Consists of amounts reclassed to current.
(4) Includes promissory notes to be issued in payment of patronage dividends of $26,752, $28,863 and $30,707 in fiscal 1993, 1992 and 1991, respectively. Also includes installment notes related to the conversion of Class B stock of $3,444, $2,886 and $3,330 in fiscal 1993, 1992 and 1991, respectively.
(5) Includes amounts reclassed to current of $58,292, $45,240 and $35,406 in fiscal 1993, 1992 and 1991, respectively. Also includes amounts applied against member indebtedness of $5,876, $6,192 and $3,763 in fiscal 1993, 1992 and 1991, respectively.
COTTER & COMPANY ------------------
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 1, 1994 (000'S OMITTED)
OWNED
LEASED UNDER CAPITAL LEASES
- --------------- (a) Deductions are due to the effect of exchange rate changes on translating property, plant, and equipment of foreign subsidiaries in accordance with FASB Statement No. 52 "Foreign Currency Translation."
COTTER & COMPANY ------------------
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 1, 1994 (000'S OMITTED)
OWNED
LEASED UNDER CAPITAL LEASES
- --------------- (a) Deductions are due to the effect of exchange rate changes on translating property, plant, and equipment of foreign subsidiaries in accordance with FASB Statement No. 52 "Foreign Currency Translation."
COTTER & COMPANY
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SCHEDULE IX--SHORT-TERM BORROWINGS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 1, 1994 (000'S OMITTED)
- --------------- (a) For fiscal year 1992, the balance and weighted average interest rate at the end of the year is for borrowing by Cotter Canada Hardware and Variety Cooperative, Inc. for its Canadian operations.
The average amount outstanding for fiscal years 1993, 1992, and 1991 was computed by averaging the daily balances during the fiscal year. The weighted average interest rates were computed by dividing interest expense by the average amount outstanding.
INDEX TO EXHIBITS
E-1
E-2