Item 1. BUSINESS
(a) General Development of Business
Grossman's Inc. (the "Company") was first incorporated in Michigan in 1919 as E.S. Evans and Co., Inc., then was reincorporated in Delaware in 1923. In 1931 the Company's name was changed to Evans Products Company. In 1986, in conjunction with the reorganization of the Company described herein, the Company adopted the name Grossman's Inc.
On March 11, 1985, Evans Products Company ("Evans") and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida. On November 19, 1986, the Company emerged from the Chapter 11 proceedings. Under a court approved Reorganization Plan, the following transactions took place in 1986. Substantially all of Evans' assets, other than those of the retail building materials business conducted by Evans' wholly-owned subsidiary, Grossman's Inc. ("Old Grossman's"), were transferred to Evans Asset Holding Company ("EAHC") and a trust (collectively "AHC"), each beneficially owned by the lenders to Evans and one of its subsidiaries (the "Lenders") for the purpose of liquidating such assets. Evans and its filing subsidiaries (including Old Grossman's) were discharged from substantially all of their pre-Chapter 11 petition indebtedness. All of Evans' outstanding shares of common stock and preferred stock were cancelled. Old Grossman's was then merged into Evans, which adopted the name Grossman's Inc. (the "Company"), and the Company distributed to its creditors or to a trust or reserve for unpaid and unliquidated claims, $60,000,000 of its 13% Debentures, which matured in 1991, $73,000,000 of its 14% Debentures due 1996, $105,200,000 face value of its Zero Coupon Notes, which matured and the final installment paid in January 1993, and 20,000,000 shares of its Common Stock (of which 1,859,852 shares were sold by the trust and the Company in a private placement in December, 1986).
On July 31, 1987, the Company completed a public offering of 11,000,000 shares of its Common Stock. Of the shares offered, 6,131,347 shares were sold by the Company, with the net proceeds of $45,092,000 used to purchase 13% and 14% Debentures. The remaining 4,868,653 shares sold in the offering were sold by stockholders.
On February 1, 1989, the Company announced that it had engaged Shearson Lehman Hutton Inc. as the Company's financial adviser to assist the Company in reviewing strategic alternatives to realize the values inherent in its business. As a result of this effort, on September 12, 1989, the Company sold the assets and business of its Moore's Division to Harcros Lumber & Building Supplies Inc., an indirect wholly-owned subsidiary of Harrisons & Crosfield plc of London, England. The Moore's Division consisted of 59 retail building materials stores and yards located in Maryland, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and West Virginia.
Independent of the Shearson engagement, on August 25, 1989, the Company sold its Northwest Division, consisting of 28 retail building materials stores located in California to GNW Partners, L.P., a California limited partnership. Certain of the former management employees of the Northwest Division were partners in GNW.
Net proceeds from the 1989 sales of the Moore's and Northwest Divisions totalled $105.7 million. Such proceeds were principally used for the retirement of long-term debt.
In September 1993, the Company announced plans to close 22 Eastern Division stores. In September 1994, the Company announced plans to close an additional 15 Eastern Division stores. The closings were completed in the respective fourth quarters.
(b) Financial Information About Industry Segments
The Company's operations during the last three years have been entirely in the retail building materials industry.
(c) Narrative Description of Business
Grossman's is a retailer of lumber, building materials, and other home improvement products emphasizing sales to its target customers; contractors, remodelers and serious do-it-yourselfers. The Company operates 106 stores, under the names "Grossman's", "Contractors' Warehouse" and "Mr. 2nd's Bargain Outlets", as listed in Item 2
Item 2. PROPERTIES
The Company's stores are generally located on or adjacent to major transportation arteries to be convenient to urban and suburban markets. The Company seeks to match the size of a store to market sales potential. The typical store in smaller markets contains 49,000 square feet of selling space, 24,000 square feet under roof and the remainder in a merchandised outdoor lumber yard. In larger markets, the Company's stores may have as much as 100,000 square feet of selling space, up to 60,000 square feet of which is enclosed and the remainder in an adjacent lumber yard. Most stores have an adjacent outdoor sales area with storage buildings to dispense lumber and other building materials.
The Company's dual yard stores, which cater to consumers, builders and contractors, are typically located on three or more acres of land and have approximately 45,000 square feet under roof, including showroom and warehouse space. Dual yards also have large outside selling and storage areas (40,000 to 60,000 square feet) to service the contractor business.
BUILDER'S MART ______________
MEXICO - ------ Monterrey
The Company owns 60 of its stores and leases 46 stores, of which 27 have leases that expire without renewal or purchase options within the next ten years. Historically, leases without renewal options have been actively negotiated and renewed by the Company prior to expiration.
Four leases have options for the Company to purchase the stores from the lessors at various times at an aggregate purchase price estimated to be below aggregate current market value.
During 1993 and 1994, a total of 38 Eastern Division stores were closed. Of the 21 owned stores within this group, one was sold in 1993, eight were sold in 1994, four are under agreement to be sold, and two were designated to be reopened as Mr. 2nd's Bargain Outlets, the first of which recently opened. Of the 17 leased properties within this group, 8 leases have been terminated and 4 leases are due to be terminated in 1995 upon sales of property under contract.
In addition to the Company's stores, the Company owns and operates two distribution centers, a data processing center and two office facilities, one of which includes the Company's corporate office.
The net book value of the Company's owned real properties as of December 31, 1994 is approximately $64.4 million. Mortgage debt of approximately $15.8 million is outstanding on nine of the Company's owned properties.
The Company's properties are considered well maintained and are in good condition. Since 1986, the Company has invested $126.1 million in capital assets in its Eastern and Contractors' Warehouse Division stores and distribution centers.
Item 3.
Item 3. LEGAL PROCEEDINGS
The Company is a party to litigation incidental to the conduct of its business, most of which is covered by insurance and none of which is expected to have a material adverse effect on the Company.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Part II
No cash dividends have been paid on the Company's Common Stock since its initial issuance on November 19, 1986.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Grossman's Inc. financial condition at December 31, 1994 reflects efforts to consolidate Eastern Division operations and redeploy capital assets toward the addition of new Contractors' Warehouse stores, modifications to Eastern Division stores with potential to improve operational performance and investment in other ventures with higher projected long-term returns. Significant 1994 events affecting year end financial condition are as follows:
/// Certain Eastern Division stores were closed, as current operating results and future expectations did not meet performance criteria. In 1994, 16 stores were closed, following 22 closings in 1993.
/// Capital from sales of closed store properties was redeployed into enhancements to Eastern Division stores and two Contractors' Warehouse store openings, one in 1994 and one shortly after year end. New business ventures included the first store opening by the Company's 50% owned Mexican joint venture and the development of Project-Pro's Inc., the Company's 80% owned installed sales subsidiary.
/// A $10.0 million non-cash increase to stockholders' investment was recorded to reflect improvement in the difference between the accumulated pension benefit obligation and the estimated value of pension assets. The adjustment resulted from an increase in the discount rate assumption used to compute actuarially the cost of the pension obligation.
Other ongoing events which will have an effect on future liquidity are as follows:
/// In November 1994, site plan approval was given by the Town of Braintree Planning Board for the sale of the Company's 35-acre headquarters to Kmart Corporation. Completion of the transaction will greatly improve liquidity, add working capital and provide cash resources for additional investment in growth initiatives.
/// Modifications designed to attract professional sales are being made in all Grossman's stores in the East prior to the 1995 spring selling season. These modifications will focus primarily on merchandise mix changes.
/// Installation of Eastern Division point-of-sale register systems will be completed in 1995 in time for the spring selling season.
/// Subject to site availability, up to four new Contractors' Warehouse stores are planned to open in the Midwest during 1995. The first such store opened in Indianapolis in January.
/// The Company will continue to expand into international markets with a planned second store opening in the Monterrey, Mexico market by its joint venture and exploration of licensing arrangements with international partners.
Triggered by lower than planned 1994 operating performance, in the third quarter the Company reviewed all Eastern Division stores to identify capital which could be redeployed to growth initiatives expected to
generate more attractive long-term returns. These initiatives include the aggressive Midwest expansion of the Company's Contractors' Warehouse concept and the continued repositioning of Eastern Division stores to enhance their appeal to target customers. Consideration was given to past and future expectations of individual store and market operating performance, as well as the estimated real estate value of each location. Following this review, at the end of the third quarter, the Company closed 15 stores, nine owned and six leased. A $6.5 million pre-tax charge was recorded related to closing costs, lease expenses, inventory writedowns, other expenses and the expected net recovery of property, plant and equipment. The store closings were completed during the fourth quarter and proceeds from the liquidation of inventory were used to reduce related accounts payable and borrowings under the revolving credit agreement.
During 1993 and 1994, a total of 38 Eastern Division stores were closed. Of the 21 owned stores within this group, one was sold in 1993, eight were sold in 1994, four are under agreement to be sold, and two were designated to be reopened as Mr. 2nd's Bargain Outlets, the first of which recently opened. Net proceeds from the disposal of these properties exceeded $13.6 million in 1994 and remaining unsold properties continue to be actively marketed. It is anticipated that sales of some or all of the remaining properties will occur over a period of years, resulting in a liquidity improvement at the time of each respective sale.
Capital expenditures in 1994 totalled $4.8 million, as compared to $15.0 million in 1993, with $1.5 million related to Project-Pro's, the Company's 80% owned subsidiary which began operations in 1994, and the remainder principally related to Contractors' Warehouse store openings and Eastern Division point-of-sale register systems. Within the Contractors' Warehouse Division, its second Midwest store was opened in Dayton, Ohio in June 1994 and its third store, located in Indianapolis, Indiana, opened shortly after year end 1994. Subject to site availability and financing, up to three more Midwest stores are planned for openings in 1995 and additional stores are planned for future years. In the Eastern Division, the first of the two closed store properties designated for reopening as Mr. 2nd's Bargain Outlets opened in Woonsocket, Rhode Island in December 1994, and the second store is scheduled for a spring 1995 opening in Schenectady, New York.
Reflected in the year end balance sheet are two new ventures; Project-Pro's, an 80% owned consolidated subsidiary, and Construcentro, a 50% owned unconsolidated joint venture. Project-Pro's opened its first three home-improvement showrooms and began operations during 1994. Franchising of the concept to professional contractors began in the fourth quarter. Approximately $2.4 million has been invested in Construcentro, which opened its first store in May 1994 in Monterrey, Mexico, under the name Builder's Mart. The investment in Construcentro has been accounted for under the equity method of accounting. A second store in the Monterrey market is presently planned. Recent economic instability in Mexico, including significant devaluation of the peso, may result in market changes, insufficient sales or supply shortages, at which time expansion plans may be reassessed.
At December 31, 1994, the actuarial assumption for the discount rate used to value pension benefit obligations was changed from 7.0% to 8.5%, on par with current yields for appropriate high-quality debt instruments. As a result, a non-cash adjustment of $10.5 million was recorded reducing the minimum pension liability, the intangible pension asset was reduced by
$552 thousand to equal unrecognized prior service cost, and the difference of $10.0 million was recorded as an increase to stockholders' investment. The minimum liability, intangible asset and adjustment to stockholders' investment will be measured annually and will change based upon interest rate assumptions, changes in the benefit obligation and changes in the value of plan assets.
In 1993, the Company announced an agreement to sell its 35-acre headquarters site in Braintree, Massachusetts to Kmart Corporation. The Town of Braintree Planning Board approved Kmart's site plan in November 1994. Under the terms of the Company's agreement with Kmart, the closing for this transaction is to occur by October 4, 1995, subject to a six- month extension option at Kmart's election. The Company is currently discussing a closing timetable with representatives of Kmart and is unable to predict when this transaction will be consummated. Financial reporting of the transaction will be deferred until sale consummation. Proceeds from the sale will initially be used to reduce borrowings under the revolving term note payable and, in the future, will be used for capital expenditures, operating needs and, if available, retirement of the $16.2 million of 14% Debentures due January 1996.
Inventory at December 31, 1994 totalled $116.6 million, a $5.2 million decrease from the prior year end. Inventory declines as a result of Eastern Division store closings were offset in part by inventory in newly opened Contractors' Warehouse stores. The Eastern Division's automated, integrated replenishment system, with virtually all lines of merchandise now being automatically replenished, contributed to more efficient inventory management in 1994. Also related to the inventory decrease, accounts payable declined by $1.2 million from the prior year end, offset in part due to timing of payments.
Declines in property, plant and equipment reflect the sale of closed store properties offset in part by the capital expenditures described above. The decline in long-term debt and capital lease obligations also reflect the property sales. Of the total $14.2 million in payments on long-term debt and capital lease obligations, $4.2 million was related to closed store properties. Also impacting capital lease obligations was a decline in capital intensive Eastern Division store renovations. Capital lease additions in 1994 totalled $813 thousand compared to $7.3 million in 1993. Reformatting of stores in 1995 to better serve professional customers is not expected to be capital intensive, due to most changes being related to inventory mix, as opposed to store renovations.
The Company believes that existing funds, funds generated from operations, proceeds to be received from the sale of properties and funds available under the $60 million loan and security agreement will be sufficient to satisfy debt service requirements, to pay other liabilities in the normal course of business and to finance planned capital expenditures.
RESULTS OF OPERATIONS
1994 Compared with 1993
The 1994 net loss of $1.9 million compared to a net loss of $68.3 million in 1993, with non-recurring items occurring in each year. The 1994 results include a $6.5 million provision for the closing of 15 Eastern Division stores. One additional store was closed earlier in the year. The 1993 results include a $34.3 million provision for the closing of 22 Eastern Division stores and a non-cash adjustment to the provision for income taxes of $30.2 million to record a valuation allowance against previously recorded deferred tax assets. Excluding these non-recurring items, operating income improved to $10.7 million in 1994 from $5.2 million in 1993. Negatively impacting the 1994 results were start up costs of the Company's 80% owned subsidiary, Project-Pro's, and the Company's 50% share of initial operating losses of its Mexican joint venture.
Total sales results were impacted by Eastern Division store closings and Contractors' Warehouse store openings in both 1993 and 1994.
Within Grossman's stores, comparable store sales results are indicative of the Company's strategy to strengthen the appeal of stores to target customers - contractors, remodelers and serious do-it-yourselfers. Comparable increases in professional sales have offset a decline in retail sales, reflective of increasingly competitive conditions. Contractors' Warehouse comparable store sales results in 1994 were impacted by division-wide promotional activities in March and June 1993, prior to and concurrent with three store openings, and throughout 1994 by a slowing economy in the Southern California market in which 8 of the division's 12 stores operate.
Gross profit declined by $25.8 million as the result of the sales decline and a decline in gross margin from 25.3% in 1993 to 24.6% in 1994. The decline in gross margin reflects the increase in sales mix toward professional sales, including Contractors' Warehouse, from 51.6% of total sales in 1993 to 56.1% in 1994. Overall gross margin reductions will continue as the sales mix continues to shift toward professional customers, who receive discounts from normal retail pricing, and as additional Contractors' Warehouse stores are opened. Contractors' Warehouse stores operate at higher per store sales volume with lower gross margins. Efforts are ongoing to improve margins on products sold to the growing professional sales base, by expanding the inventory product mix in all Grossman's stores prior to the spring selling season. Competitive market conditions and volatile lumber prices, expected to continue in the future, have also impacted retail margins. Competitive conditions continue to cause lumber margins to be below historical levels.
Selling and administrative expenses declined in 1994 by $31.3 million, or 16.1%, reflecting reduced overhead as a result of closed stores and additional Eastern Division staff reductions which occurred in the latter periods of 1993. As a percent of sales, selling and administrative expenses declined from 23.0% in 1993 to 21.4% in 1994. Included in selling and administrative expenses is pension expense, which increased from $1.8 million in 1993 to $4.5 million in 1994 as the result of changes in assumptions used to actuarially determine the pension liability and expense. As a result of assumption changes at December 31, 1994 and a decline in workforce, pension expense in 1995 is expected to decline to $2.3 million. In 1995, additional expenses incurred in the first quarter related to Eastern Division store modifications are expected to be recovered during the balance of the year.
At the end of the third quarter in both 1993 and 1994, non-recurring charges for store closings were recorded to cover costs related to leases, severance and outplacement expenses, inventory writedowns, other anticipated expenses and the net unrecoverable amount of property, plant and equipment. In 1993, the Company closed 22 Eastern Division stores and $34.3 million was provided, and in 1994 15 Eastern Division stores were closed and $6.5 million was provided. One additional store was closed in early 1994. Sales from stores closed represented 20.3% and 5.4%, respectively, of total sales in 1993 and 1994.
Included in operating expenses in 1994 are $5.3 million of expenses related to the development and start-up of Project-Pro's, the Company's 80% owned subsidiary, which opened its first three project centers in 1994. Development activities and expenses should significantly decline
in the future, as franchising of Project-Pro's territories began in the 1994 fourth quarter. Store preopening expense, related to Contractors' Warehouse store openings, increased by $200 thousand due to continued openings.
Interest expense declined from $8.4 million in 1993 to $7.4 million in 1994, reflecting a reduction in average borrowings, offset in part by an increase in the average interest rate. In 1995, rising interest rates and an increase in average borrowings until consummation of the Braintree property sale, will result in additional interest expense.
Reflected in the statement of operations in 1994 is a $490 thousand net loss on the operations of Construcentro, the Company's 50% unconsolidated joint venture, which opened its first store, located in Monterrey, Mexico, during the 1994 second quarter. Recent economic instability in the Mexican economy, including devaluation of the peso, may result in market changes, insufficient sales or supply shortages, impacting future results.
In 1993, based on unanticipated operating losses and a reassessment of future expectations, the Company established a valuation allowance to reduce the carrying value of the deferred tax assets to zero. Tax credits recorded earlier in 1993 were also reversed, resulting in a provision for income taxes of $30.2 million. In 1994, income taxes were insignificant.
Other than the effects of unstable lumber prices, as previously discussed, the Company's business was not materially affected by inflation in any of the years presented.
1993 Compared with 1992
The 1993 net loss of $68.3 million compared to net income of $6.2 million in 1992. The 1993 results included a $34.3 million provision for store closings and a non-cash adjustment of $30.2 million to deferred tax assets.
In both 1992 and 1993, the Company's strategy was to emphasize sales to the professional customer. In both years, comparable retail sales declines were offset by comparable professional sales increases. In 1993, Eastern Division retail sales declines; however, were not fully offset by professional sales increases. Sales in the first four months of 1993 were negatively affected by severe weather conditions and prolonged wet ground conditions, partially offset by sales improvements in subsequent months.
Gross margin declined from 26.8% in 1992 to 25.3% in 1993. Throughout 1993, margin declines occurred as the result of the increase in sales to professional customers, who receive discounts from normal retail pricing, and the growth in Contractors' Warehouse stores, which operate at higher per stores sales volume with lower gross margins. Margin declines were also due to competitive market conditions and rising lumber prices. Economic and competitive conditions did not fully allow these price increases to be passed on to customers. Gross profit declined from $223.4 million in 1992 to $212.9 million in 1993, reflecting the combination of the overall sales and gross margin declines.
Operating losses during the first quarter, which are normal due to the seasonality of the Company's business, were higher in 1993 due to the severe weather conditions in the Northeast and West, the Company's two
principal operating markets. In the first quarter of 1993, the operating loss was $11.3 million, compared to a $4.8 million loss in the comparable period of 1992. In the 1993 second quarter, as conditions improved, operating income of $11.7 million compared favorably to the 1992 level of $10.7 million.
In the 1993 third quarter, the Company's operating income prior to recognition of store closing expense was $2.9 million, as compared to $9.8 million for the same period in 1992. The decline in operating income was principally due to Eastern Division store results. Steps taken to react to diminishing store performance, including price reductions, inventory management, and promotional activities, did not counteract the declining operational results, particularly in those stores most greatly affected by competition. As the third quarter progressed, management performed a review of each Eastern Division store and a determination was made to close 22 marginally performing stores. Store closing expense of $34.3 million was provided at the end of the quarter to cover costs related to the leases of 11 of the stores to be closed, severance and outplacement expenses, inventory writedowns, other expenses and the expected net recovery of property, plant and equipment.
Selling and administrative expenses in 1993 approximated the 1992 level, but varied significantly by quarter, with a first quarter increase of $3.6 million, a second quarter decrease of $2.6 million, a third quarter increase of $2.2 million and a fourth quarter decrease of $3.3 million. The first quarter increase was primarily due to activities in support of strategic initiatives. Expenses related to these activities were higher in the second quarter of 1992 than in the same period in 1993, the principal reason for the second quarter decline. At the end of the second quarter, the Company announced a restructuring of the Eastern Division, largely as a result of the continued implementation of the automated replenishment system. In the third quarter of 1993, staff reductions were effected and selling and administrative expenses included severance payments, outplacement services and other expenses related to the restructuring, resulting in the overall expense increase.
Depreciation and amortization increased by $1.8 million in 1993, related to ongoing capital spending in support of strategic initiatives. Preopening expense, associated with the development, opening, expansion and modernization of stores, decreased from $3.5 million in 1992 to $630 thousand in 1993, as the result of a curtailment of the repositioning of Eastern Division stores. Interest expense remained relatively constant from 1992 to 1993. Interest expense savings related to the retirement of high-interest rate debt were offset by $1.3 million of interest expense on borrowings under the Company's revolving credit agreement. There were no revolving credit borrowings in 1992.
At September 30, 1993, based upon unanticipated operating losses and a reassessment of future expectations, the Company established a valuation allowance to reduce the carrying value of deferred tax assets to zero. Tax credits recorded earlier in 1993 were also reversed, resulting in a total provision for income taxes of $30.2 million.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Board of Directors Grossman's Inc.
We have audited the accompanying consolidated balance sheets of Grossman's Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' investment, and cash flows for each of the three years in the period ended December 31, 1994. Our audits included the financial statement schedule listed in the index of Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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 Grossman's Inc. and subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts January 31, 1995
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
GROSSMAN'S INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - --------------------------- The consolidated financial statements present the results of operations, financial position and cash flows of Grossman's Inc. and its subsidiaries (the "Company"). The investment in an unconsolidated affiliate is accounted for on the equity method. All significant intercompany balances and transactions have been eliminated.
Fiscal Periods - -------------- The Company's year end is December 31. The Company records activity in quarterly accounting periods of equal length ending on the last Saturday of each quarter. Differences in amounts presented and those which would have been presented using actual quarter-end dates are not material.
Fiscal years 1994 and 1992 contained 52 weeks while fiscal year 1993 contained 53 weeks. The additional week in 1993 was included in the fourth quarter.
Cash Equivalents - ---------------- All highly liquid investments, with a maturity of three months or less at date of purchase, are considered to be cash equivalents.
Accounts Receivable - ------------------- Credit is extended on open account to qualified contractors and remodelers.
Finance charge income, included in other income, amounted to $513.0 thousand, $587.4 thousand and $619.6 thousand in 1994, 1993 and 1992, respectively.
Inventories - ----------- Merchandise inventories are valued at the lower of cost, as determined by the average cost method, or market.
Property, Plant and Equipment - ----------------------------- Property, plant and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements, which range up to 20 years. Ranges of useful lives by principal classification for property, plant and equipment are as follows:
Buildings 20 - 33 years Machinery and equipment 3 - 7 years Furniture and fixtures 3 - 10 years
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ----------------------------------------------------
Accrued Insurance Claims - ------------------------ Insurance coverage is maintained for general liability and workers' compensation risks under contractual arrangements which retroactively adjust premiums for claims paid subject to specified limitations. Expenses associated with such risks are accrued as amounts required to cover incurred incidents can be estimated.
Leases - ------ Capital leases, those leases which transfer substantially all benefits and risks of ownership, are accounted for as acquisitions of assets and incurrences of obligations. Capital lease amortization is included in depreciation and amortization expense, with the amortization period restricted to the lease term. Interest on the related obligation is recognized over the lease term at a constant periodic rate.
Income Taxes - ------------ Tax provisions and credits are recorded at statutory rates for taxable items included in the consolidated statements of operations regardless of the period for which such items are reported for tax purposes. Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities. Deferred tax assets are reduced by a valuation allowance when the determination cannot be made that it is more likely than not that some portion or all of the related tax asset will be realized.
Pension Plan - ------------ A noncontributory retirement plan is sponsored for the benefit of substantially all employees. Pension costs are funded in accordance with the Employee Retirement Income Security Act. Prior service costs, the unrecognized net transition asset, and gains and losses, whether realized or unrealized, are amortized over estimated average remaining service periods.
Preopening Expense - ------------------ Expenses associated with the opening of new stores and facilities and the expansion or major remodeling of existing stores are expensed as incurred.
Store Closing Expense - --------------------- Store closing costs, net of amounts expected to be recovered, are recorded when the decision to close a store is made. Store closing costs include estimated losses, lease payments, other expenses and the net unrecoverable amount from sales of property, plant and equipment.
Earnings Per Common Share - ------------------------- Earnings per common share are computed based on the weighted average number of common shares outstanding, less shares in treasury, plus common share equivalents attributable to stock options, when dilutive.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ----------------------------------------------------
Business Segment - ---------------- The Company operates in one business segment: the retail sale, distribution and installation of building materials and related products.
Classification - -------------- Certain amounts in the consolidated financial statements for prior years have been reclassified to conform to the current year presentation. Such reclassifications had no effect on previously reported results of operations.
NOTE 3 - REVOLVING TERM NOTE PAYABLE - ------------------------------------
On December 15, 1993, the Company entered into a loan and security agreement with BankAmerica Business Credit, Inc., which provides for borrowings up to $60 million, including letters of credit up to $15 million, under a formula based arrangement based on a percentage of qualified inventory and accounts receivable. Borrowings pursuant to this agreement are secured by inventories, receivables and certain other assets. At December 31, 1994, cash borrowings under this agreement totalled $29.9 million and outstanding standby letters of credit, issued in the normal course of business, principally to guaranty payment of insurance obligations, totalled $9.7 million. The agreement has a three-year term, with one-year renewal periods thereafter. Interest is payable monthly at 1% over Prime Rate (8.5% at December 31, 1994), with a Eurodollar option available for borrowings in excess of $5 million. The agreement also provides for a 1/2% per annum commitment fee on the average daily unused amount under $50 million. The agreement grants the lender rights to seek to increase or decrease the percentages loaned upon, which
NOTE 3 - REVOLVING TERM NOTE PAYABLE (CONTINUED) - ------------------------------------------------
may affect availability, and contains various covenants which, among other things, require minimum levels of net worth, establish minimum interest and fixed charge coverage ratios, and establish maximum levels of capital expenditures.
The maximum borrowings and letters of credit in 1993, under this agreement, were $23.2 million and $12.1 million, respectively. The maximum borrowings and letters of credit in 1994, under this agreement, were $39.3 million and $13.1 million, respectively. The weighted average annual interest rate on such borrowings in 1993 and 1994 was 7.0% and 7.5%, respectively.
Upon entering into the loan and security agreement, the Company's prior revolving credit agreement with a group of banks was terminated. The maximum borrowings in 1993 under the prior revolving credit agreement was $36.0 million. The weighted average annual interest rate on such borrowings was 5.9%.
Interest on the 14% Debentures is payable semi-annually on January 1 and July 1. At any time prior to maturity, upon 30 days notice, the Company may redeem the 14% Debentures, in whole or in part, on any interest payment date, at 100% of principal (in minimum amounts of $5 million), plus a yield maintenance premium based upon quoted Treasury Constant Maturity Series yields.
Mortgage notes bear interest at a weighted average rate of 10.0% and are secured by real estate and equipment with a net book value of $32.3 million at December 31, 1994. The 14% Debentures, mortgage notes and certain lease agreements contain various covenants which, among other things, restrict dividends and distributions on and repurchases of Common Stock; require specified levels of net worth; limit capital expenditures; restrict liens, the incurrence of indebtedness and lease obligations; and
NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED) - -----------------------------------------------------------------
restrict loans and investments. Under the most restrictive of these agreements, the Company had no retained earnings available for the payment of dividends at December 31, 1994.
Interest paid during 1994, 1993 and 1992 amounted to (in thousands) $7,995, $7,639 and $8,286, respectively.
NOTE 5 - LEASE COMMITMENTS (IN THOUSANDS) - -----------------------------------------
Leases have been entered into for certain retail locations, office space, equipment and vehicles. The fixed terms of the leases range up to fourteen years and, in general, leases for retail locations contain multiple renewal options for various periods between one and ten years. Certain leases contain provisions which include additional payments based upon sales performance, operating and real estate tax escalations and purchase options.
Total rent expense charged to operations during 1994, 1993 and 1992 amounted to $5,698, $7,615 and $8,819, respectively. Total contingent rentals included in rent expense were $757, $923 and $999, respectively.
Included in property, plant and equipment as of December 31, 1994 and 1993 is $32,158 and $36,359, respectively, of machinery and equipment under capital leases. The related accumulated amortization is $23,673 and $24,049, respectively. Capital lease additions for machinery and equipment totalled $813 in 1994, $7,238 in 1993 and $2,739 in 1992.
NOTE 5 - LEASE COMMITMENTS (IN THOUSANDS) (Continued) - -----------------------------------------------------
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS - --------------------------------------------
Fair values are estimated based on the following assumptions: cash and cash equivalents are reported in the balance sheet at amounts which approximate fair value; and the carrying values of long-term debt and revolving term note payable are estimated using discounted cash flow analyses, based upon the Company's current incremental borrowing rates for similar types of borrowing arrangements.
NOTE 7 - SALE OF PROPERTY - -------------------------
In October 1993, the Company announced an agreement for the sale of its 35 acre headquarters site in Braintree, Massachusetts to Kmart Corporation. The Town of Braintree Planning Board approved Kmart's site plan in November 1994. Under the terms of the Company's agreement with Kmart, the closing for this transaction is to occur by October 4, 1995, subject to a six-month extension option at Kmart's election. The Company is currently discussing a closing timetable with representatives of Kmart and is unable to predict when this transaction will be consummated.
NOTE 8 - STOCKHOLDERS' INVESTMENT - ---------------------------------
The Company's Restated Certificate of Incorporation contains certain provisions restricting accumulations of Common Stock. Under these provisions, as modified by the Board of Directors and currently in effect, no person may acquire shares of Common Stock on or prior to December 31, 1996 (or such later date as may be fixed by the Board of Directors) if the number of shares actually and constructively owned by such person, as defined, would exceed 5% of the outstanding Common Stock on any date. Attempted acquisitions of Common Stock in excess of these limits will be null and void and all shares purportedly acquired in excess of these limits will have no rights, except the right to receive out of the proceeds of resale thereof an amount not in excess of the amount paid for such excess shares plus brokers' commissions. Such restrictions may be waived by the Board of Directors and are not applicable to an acquisition of more than 50% of the outstanding shares of Common Stock for cash pursuant to a tender offer, merger or other business combination in which all holders of Common Stock are afforded an opportunity to sell all their shares.
NOTE 9 - EMPLOYEE BENEFIT PLANS - -------------------------------
A noncontributory defined benefit pension plan, the Grossman's Inc. Retirement Plan (the "Retirement Plan"), is sponsored covering substantially all employees. Employees are eligible to participate in the Retirement Plan at age 21 with one year of service. Benefits through 1990 are based upon years of service multiplied by a percentage of reference earnings. Beginning in 1991, the benefit is based upon annual reference earnings.
NOTE 9 - EMPLOYEE BENEFIT PLANS (CONTINUED) - -------------------------------------------
Statement of Financial Accounting Standards No. 87 ("FAS 87") requires the recognition of a minimum liability, to the extent that actuarially computed plan benefits exceed the fair value of plan assets, and the recognition of a related intangible asset, to the extent of any unfunded prior service cost. In 1993, the discount rate assumption was changed from 9.5% to 7.0%, resulting in a December 31, 1993 adjustment of $21,938 thousand, reducing the prepaid pension asset and establishing a minimum liability of $15,199 thousand. An intangible asset of $1,410 thousand was also recorded, equal to unrecognized prior service cost. The difference
NOTE 9 - EMPLOYEE BENEFIT PLANS (CONTINUED) - ------------------------------------------- between the minimum pension liability adjustment and the intangible asset was charged to stockholders' investment. The increase in net periodic pension cost from 1993 to 1994 was principally attributable to the discount rate assumption decrease at year end 1993. As of December 31, 1994, in accordance with the guidelines of FAS 87, the discount rate assumption was reevaluated and changed to 8.5%. As a result, an adjustment of $10,504 thousand was recorded to reduce the minimum pension liability, the intangible asset was reduced by $552 thousand to equal unrecognized prior service cost, and the difference of $9,952 thousand was credited to stockholders' investment.
A savings plan is also sponsored for the benefit of substantially all employees. The plan provides that employees may contribute up to 14% of their compensation, with a fully vested Company match of a portion of the contribution. The Company contributed $552 thousand in 1994, $574 thousand in 1993 and $555 thousand in 1992 to the plan.
NOTE 10 - OTHER LIABILITIES - ---------------------------
Standby letters of credit which guarantee general liability and workers' compensation insurance claims are outstanding under the Company's revolving term note payable.
NOTE 11 - EMPLOYEE STOCK OPTION PLANS - -------------------------------------
A nonqualified stock option plan covers officers and other key management employees ("1986 Plan"). The 1986 Plan provides for nonqualified options to purchase a total of 3,750,000 shares of Common Stock.
A nonqualified stock option plan covers key management employees who are not officers ("1993 Plan"). The 1993 Plan provides for nonqualified options to purchase a total of 600,000 shares of Common Stock, with a maximum of 5,000 shares per employee. The maximum number of options which may be granted in any calendar year is 300,000.
All options granted are ten-year nonqualified options and were granted at market value. Of the options outstanding at December 31, 1994, 200,000 were exercisable when issued, and the balance become exercisable in either three or four equal annual installments following the respective dates of grant. All outstanding options become exercisable upon a change in control, as defined in the option agreements. At December 31, 1994, 4,056,250 shares of Common Stock were reserved for future issuance under the plans.
NOTE 12 - INCOME TAXES - ----------------------
Income taxes are accounted for in accordance with statement of Financial Accounting Standards No. 109-Accounting for Income Taxes. This standard requires, among other things, recognition of future tax benefits, measured by enacted tax rates, attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities and net operating loss carryforwards to the extent that management assesses the utilization of such net operating loss carryforwards to be more likely than not. The statement also requires deferred tax assets to be reduced by a valuation allowance if, based on the weight of available evidence, management cannot make a determination that it is more likely than not that some portion or all of the related tax benefits will be realized. Furthermore, the statement requires that a valuation allowance be established or adjusted if a change in circumstances causes a change in judgment about the future realizability of the deferred tax assets.
At December 31, 1992, deferred tax assets were recorded totalling $30.2 million, with no related valuation allowance, based upon management's assessment at that time that taxable income would more likely than not be sufficient to utilize fully the net operating loss carryforwards prior to their ultimate expiration in the year 2001. At September 30, 1993, based upon unanticipated 1993 operating results and a reassessment of future expectations, the Company established a valuation allowance to reduce the carrying value of deferred tax assets to zero.
At December 31, 1994, the Company has net operating loss carryforwards of $117 million, expiring as follows: 1998-$15 million, 1999-$28 million, 2000-$23 million, 2001-$15 million, 2008-$28 million and 2009-$8 million.
NOTE 12 - INCOME TAXES (CONTINUED) - ----------------------------------
The Company's tax returns for years subsequent to 1982 have not been reviewed by the Internal Revenue Service ("IRS"). Availability of the net operating loss carryforwards might be challenged by the IRS upon review of such returns and may be limited under the Tax Reform Act of 1986 as a result of changes that may occur in the ownership of the Company's stock in the future, principally relating to a change in control.
The Company believes; however, that IRS challenges that would limit the utilization of available net operating loss carryforwards are unlikely, and that the adjustments to tax liability, if any, for years through 1994 will not have a material adverse effect on the Company's financial position.
Income and franchise taxes paid in 1994, 1993 and 1992 amounted to (in thousands) $423, $920 and $1,158, respectively.
NOTE 13 - INVESTMENT IN UNCONSOLIDATED AFFILIATE - ------------------------------------------------
Item 9.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item regarding Directors is hereby incorporated by reference to the Company's definitive proxy statement for its 1995 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. Information regarding the Company's Executive Officers is set forth above following Item 1 of Part I of this report.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference to the Company's definitive proxy statement for its 1995 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference to the Company's definitive proxy statement for its 1995 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference to the Company's definitive proxy statement for its 1995 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K.
Part IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 - Index to Financial Statements Page Number in this Report
Consolidated Balance Sheets December 31, 1994 and 1993................................... 27
Consolidated Statements of Operations Years Ended December 31, 1994, 1993 and 1992................. 29
Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992................. 30
Consolidated Statements of Changes in Stockholders' Investment Years Ended December 31, 1994, 1993 and 1992................. 31
Notes to Consolidated Financial Statements..................... 32
(a) 2 - Index to Financial Statement Schedules
The following consolidated financial statement schedules of Grossman's Inc. and Subsidiaries are included in Item 14(d) and filed herewith (page numbers refer to page numbers in this Form 10-K):
Schedule II - Valuation and Qualifying Accounts................ 56
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, and, therefore, have been omitted.
(b) Reports on Form 8-K
None.
(a) 3. and (c) - Exhibits
Exhibit Number
2(e) Final Decree and Order Closing Cases, dated October 2, 1987, of the United States Bankruptcy Court for the Southern District of Florida, filed as Exhibit 2(e) to the Company's Form 10-Q for the quarter ended September 30, 1987, is incorporated herein by reference.
2(f) Asset Purchase Agreement between GNW Partners, L.P. and Grossman's Inc., dated June 28, 1989, without exhibits, filed as Exhibit 2(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File 1-542), is incorporated herein by reference.
2(g) Asset Purchase Agreement between Harcros Lumber & Building Supplies Inc. and Grossman's Inc., dated August 14, 1989, without exhibits, filed as Exhibit 2(a) to the Company's Form 8-K, dated September 12, 1989, is incorporated herein by reference.
3(a) Restated Certificate of Incorporation of the Company, as in effect November 19, 1986, filed as Exhibit 3(a) to the Company's Form 8-K, dated November 19, 1986 (File No. 1-542), is incorporated herein by reference.
3(a)-1 Resolutions adopted by the Company's Board of Directors on December 15, 1987, modifying and extending restrictions on acquisition of Common Stock under Article Ninth of Company's Restated Certificate of Incorporation, filed as Exhibit 3(a)-1 to the Company's Form 8-K, dated December 15, 1987 (File 1-542), is incorporated herein by reference.
3(a)-2 Notice to Stockholders of modification and extension of restrictions on acquisition of Common Stock pursuant to Article Ninth of Company's Restated Certificate of Incorporation, filed as Exhibit 3(a)-2 to the Company's Form 8-K, dated December 15, 1987 (File 1-542), is incorporated herein by reference.
3(a)-3 Certificate of Designation Relating to Certain Restrictions on the Acquisition of Common Stock pursuant to Article Ninth of the Company's Restated Certificate of Incorporation, filed as Exhibit 3(1)-2 to the Company's Form 8-K dated November 19, 1986 (File No. 1-542), is incorporated herein by reference.
3(a)-4 Resolutions adopted by the Company's Board of Directors on October 23, 1990 extending restrictions on acquisition of Common Stock under Article Ninth of Company's Restated Certificate of Incorporation, filed as Exhibit 3(a)-4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-542), is incorporated herein by reference.
3(a)-5 Notice to Stockholders of extension of restrictions on acquisition of Common Stock pursuant to Article Ninth of the Company's Restated Certificate of Incorporation, filed as Exhibit 3(a)-5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-542), is incorporated herein by reference.
3(a)-6 Certificate of Designation Relating to Certain Restrictions on the Acquisition of Common Stock pursuant to Article Ninth of the Company's Restated Certificate of Incorporation, filed as Exhibit 3(a)-6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-542), is incorporated herein by reference.
3(a)-7 Notice to Stockholders of extension of restrictions on acquisition of Common Stock pursuant to Article Ninth of the Company's Restated Certificate of Incorporation, is incorporated herein by reference.
3(a)-8 Certificate of Designation Relating to Certain Restrictions on the Acquisition of Common Stock pursuant to Article Ninth of the Company's Restated Certificate of Incorporation, is incorporated herein by reference.
3(b) By-Laws of the Company, as in effect November 19, 1986, filed as Exhibit 3(b) to the Company's Form 8-K, dated November 19, 1986 (File No. 1-542), is incorporated herein by reference.
3(b)-1 Copy of the amendments to the Grossman's Inc. By-Laws as adopted by the Board of Directors of Grossman's Inc. on December 15, 1987, filed as Exhibit 3(b)-1 to the Company's Form 8-K, dated December 15, 1987 (File 1-542), is incorporated herein by reference.
4(c) Indenture, dated January 1, 1986, from the Company to United States Trust Company of New York, as Trustee, with respect to the Company's 14% Debentures due 1996, filed as Exhibit 4(c) to the Company's Form 8-K, dated November 19, 1986 (File No. 1-542), is incorporated herein by reference.
4(c)-1 First Supplemental Indenture, dated January 1, 1987, to Indenture, dated January 1, 1986 (Exhibit 4(c) above), for the Company's 14% Debentures due 1996, filed as Exhibit 4(h) to the Company's Registration Statement on Form S-1, No. 33-15107, is incorporated herein by reference.
4(c)-2 Second Supplemental Indenture, dated March 15, 1987, to Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(j) to the Company's Registration Statement on Form S-1, No. 33-15107, is incorporated herein by reference.
4(c)-3 Third Supplemental Indenture, dated June 15, 1987, to Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-3 to the Company's Form 8-K, dated July 15, 1988 (File No. 1-542), is incorporated herein by reference.
4(c)-4 Fourth Supplemental Indenture, dated June 15, 1987, to Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-4 to the Company's Form 8-K, dated July 15, 1988 (File No. 1-542), is incorporated herein by reference.
4(c)-5 Form of Waiver dated December 21, 1988 of certain provisions of Section 5.11 to the Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-5 to the Company's Form 8-K, dated December 13, 1988, is incorporated herein by reference.
4(c)-6 Fifth Supplemental Indenture, dated September 30, 1989, to Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-542), is incorporated herein by reference.
4(c)-7 Sixth Supplemental Indenture, dated March 1, 1990, to Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-7 to the Company's Form 10-Q for the quarter ended June 30, 1990, is incorporated herein by reference.
4(c)-8 Seventh Supplemental Indenture, dated May 17, 1991, to Indenture, dated January 1, 1986, for the Company's 14% Debentures due 1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-8 to the Company's Form 10-K for the year ended December 31, 1991 (File No. 1-542), is incorporated herein by reference.
4(e)-1 Amended and Restated Registration Rights and Transfer Restriction Agreement, dated April 30, 1987, among the Company; the Common Holders, Debt Holders, Offering Committee and Custodian named therein; and Herzog, Heine Geduld Inc., filed as Exhibit 4(e)-1 to the Company's Registration Statement on Form S-1, No. 33-15107, is incorporated herein by reference.
4(m) Term Loan and Security Agreement without Exhibits and Installment Note, dated October 15, 1991, between Grossman's Inc. and Sanwa Business Credit Corporation, filed as Exhibit 4(m) to the Company's Form 10-Q for the quarter ended September 30, 1991, is incorporated herein by reference.
4(n) First Amendment, dated December 14, 1993, to Term Loan and Security Agreement between Grossman's Inc. and Sanwa Business Credit Corporation, dated October 15, 1991, is incorporated herein by reference.
4(n)-1 Second Amendment, dated October 30, 1994, to Term Loan and Security Agreement between Grossman's Inc. and Sanwa Business Credit Corporation, dated October 15, 1991, filed as Exhibit 4(n)-1 to the Company's Form 10-Q for the quarter ended September 30, 1994 (File No. 1-542), is incorporated herein by reference.
4(n)-2 Third Amendment, dated January 31, 1995, to Term Loan and Security Agreement between Grossman's Inc. and Sanwa Business Credit Corporation, dated October 15, 1991 (without exhibit), filed herewith.
4(o) Loan and Security Agreement between Grossman's Inc. and BankAmerica Business Credit, Inc. dated December 15, 1993 (without exhibits), filed as Exhibit 4(o) to the Company's Form 10-K for the year ended December 31, 1993 (File No. 1-542), is incorporated herein by reference.
4(o)-1 Waiver and Second Amendment, dated as of July 11, 1994, to the Loan and Security Agreement between Grossman's Inc. and BankAmerica Business Credit, Inc., dated December 15, 1993, filed herewith.
10(iii)(g)-2 Separation Agreement, dated November 28, 1994, between Grossman's Inc. and Thomas R. Schwarz, filed herewith.
10(iii)(h)-2 Employment Agreement, dated December 1, 1994 between Grossman's Inc and Sydney L. Katz, filed herewith.
10(iii)(k) Amended and Restated Employment Agreement, dated July 1, 1991, between Grossman's Inc. and Robert L. Flowers, filed as Exhibit 10(iii)(k) to the Company's Annual Report on Form 10-K for year ended December 31, 1991 (File No. 1-542), is incorporated herein by reference.
10(iii)(k)-1 Amendment No. 1, dated September 26, 1994, to Amended and Restated Employment Agreement dated as of July 1, 1991, between Grossman's Inc. and Robert L. Flowers, filed as Exhibit 10(iii)(k)-1 to the Company Form 10-Q for the quarter ended September 30, 1994 (File No. 1-542), is incorporated herein by reference.
10(iii)(l) Amended and Restated Employment Agreement, dated July 1, 1991, between Grossman's Inc. and Richard E. Kent, filed as Exhibit 10(iii)(l) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-542), is incorporated herein by reference.
10(iii)(l)-1 Amendment No. 1, dated September 26, 1994, to Amended and Restated Employment Agreement dated as of July 1, 1991, between Grossman's Inc. and Richard E. Kent, filed as Exhibit 10(iii)(l)-1 to the Company's Form 10-Q for the quarter ended September 30, 1994 (File No. 1-542), is incorporated herein by reference.
10(iii)(m)-1 Severance Agreement, dated August 22, 1994, between Grossman's Inc. and Alan T. Kane, filed herewith.
10(iii)(n) Employment Agreement, dated June 8, 1992, between Grossman's Inc. and David Krawczyk, filed herewith.
10(iii)(n)-1 Amendment No. 1, dated September 26, 1994, to Employment Agreement dated as of June 8, 1992, between Grossman's Inc. and David Krawczyk, filed herewith.
10(iii)(o) Employment Agreement, dated November 23, 1994, between Grossman's Inc. and Robert K. Swanson, filed herewith.
10(b) Restated and Amended Grossman's Inc./Evans Asset Holding Company General Pension Plan, filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-542), is incorporated herein by reference.
10(c) Agreement Re General Pension Plan, dated November 18, 1986, among Evans Products Company, Grossman's Inc., Evans Financial Corp., Evans Transportation Company and Evans Asset Holding Company, filed as Exhibit 10(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-542), is incorporated herein by reference.
10(c)-1 Agreement Re Spin-off of General Pension Plan, dated January 1, 1987, among the Company, Evans Asset Holding Company, Evans Financial Corp. and Evans Transportation Company, filed as Exhibit 10(c)-1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987 (File No. 1-542), is incorporated herein by reference.
10(c)-2 Letter, dated December 30, 1987, documenting certain understandings reached among the Company, Grossman's Inc. Retirement Plan, Evans Asset Holding Company and Evans Asset Holding Company/Grossman's Inc. General Pension Plan, regarding the proper interpretation of the Agreement Re Spin-off of General Pension Plan (Exhibit 10(c)-1 above), filed as Exhibit 10(c)-2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987 (File No. 1-542), is incorporated herein by reference.
10(c)-8 Grossman's Inc. Restated Retirement Plan, dated February 15, 1995, filed herewith.
10(d) Claim Allocation Agreement, dated November 19, 1986, by and between Evans Asset Holding Company, EFC Mortgage Trust and Grossman's Inc., filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-542), is incorporated herein by reference.
10(e) EPC Asset Transfer Agreement, dated November 19, 1986, among Evans Products Company, Evans Asset Holding Company, EPC Properties Company, Minneapolis Electric Steel Castings Company, Racine Steel Castings Company, RSC Properties Company, Duluth Steel Castings Company, Aberdeen Forest Products Company and Evans Engineered Products Company, filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-542), is incorporated herein by reference.
10(f) EFC Asset Transfer Agreement, dated November 19, 1986, among Evans Financial Corp. and EFC Mortgage Trust, filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-542), is incorporated herein by reference.
10(g) Assumption Agreement, dated November 19, 1986, among Evans Asset Holding Company, EFC Mortgage Trust, Evans Products Company, Evans Financial Corp. and Bank of America National Trust and Savings Association, as agent, filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-542), is incorporated herein by reference.
10(h) Grossman's Inc. 1986 Nonqualified Stock Option Plan, filed as Exhibit A to the Company's Proxy Statement for the 1987 Annual Meeting of Stockholders, dated September 28, 1987, is incorporated herein by reference.
10(h)-1 Amendment, dated December 11, 1990, to 1986 Nonqualified Stock Option Plan, filed as Exhibit 10(h)-1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-542), is incorporated herein by reference.
10(h)-2 Amendment, dated January 28, 1992, to 1986 Nonqualified Stock Option Plan, filed as Exhibit 10(h)-2 to the Company's Form 10-Q for the quarter ended March 31, 1992 (File No. 1-542), is incorporated herein by reference.
10(i)-3 Grossman's Inc. Restated Executive Severance Plan, dated December 14, 1994, filed herewith.
10(m)-1 Grossman's Inc. Supplemental Executive Retirement Plan, dated January 1, 1992, filed as Exhibit 10(m)-1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1-542), is incorporated herein by reference.
10(n)-5 Grossman's Inc. Restated Savings and Profit Sharing Plan, dated February 15, 1995, filed herewith.
10(o) Grossman's Inc. 1993 Key Employee Stock Option Plan, dated April 27, 1993, filed as Exhibit 10(o) to the Company's Form 10-K for the year ended December 31, 1993 (File No. 1-542) is incorporated herein by reference.
11(a) Statement re computation of earnings per share, filed herewith.
22 Subsidiaries of the Company, filed as Exhibit 22 to the Company's Annual Report on Form 10-Q for the quarter ended September 30, 1991 (File No. 1-542), is incorporated herein by reference.
23 Consent of Ernst & Young LLP, Independent Auditors, filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GROSSMAN'S INC. --------------- Company
Date: March 16, 1995 By /s/ Steven L. Shapiro --------------------- Steven L. Shapiro Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.