annual report - Do it Best Corp.

Transcription

ANNUAL REPORT
2014
2014
ANNUAL
REPORT
PHILOSOPHY
Serving others as we would like to be served
MISSION
Making the best even better®
GOAL
Helping our members grow
FROM THE
CHAIRMAN
GROWING WITH A COMMITMENT TO SERVICE
AND PERFORMANCE.
TOM LAMBERTH
Chairman of the Board
DO IT BEST CORP.
CONTINUES TO
EXEMPLIFY THE
QUALITIES OF A TRUE
MEMBERS-FIRST
ORGANIZATION.
As I conclude my second year as your Chairman of the Board of Directors, I want
to say what a tremendous honor it has been to witness the operational excellence that
defines this entire organization and the unwavering commitment the team at Do it Best Corp.
demonstrates to their mission of making the best even better for their member-owners.
In my nine years on the board, I have seen firsthand the countless ways this co-op
distinguishes itself and outperforms its competitors. Above all is its determination to maintain
a strong financial position, which is the solid foundation that supports sustainable growth for
its members. With no long-term debt and the remarkable discipline to maintain the industry’s
lowest cost of operations, Do it Best Corp. continues to exemplify the qualities of a true
members-first organization.
I am extremely proud of the fact that we’ve recorded the 11th consecutive year distributing
more than $100 million in rebates to members – representing well over $1 billion in just the
last decade. This distinction puts Do it Best Corp. in a class by itself and says volumes about
the consistency of performance, regardless of the economic conditions, and the values that
guide the co-op year after year.
This success can only come through the strong leadership of the executive team and staff
of Do it Best Corp. I salute their consistently high level of performance, as well as the close
engagement of the Do it Best Corp. Board of Directors. It has been my honor and privilege to
work alongside such talented and dedicated individuals. I commend them all for their focus on
the challenges we’ve faced as an industry and their steadfast stewardship of the resources
you’ve entrusted to them to ensure that your co-op has an eye fixed on the future, making the
most of every new opportunity.
Leadership strength and continuity are important to the
success of every organization, and Do it Best Corp. has an
enviably long record of successfully recruiting and retaining
senior leaders who are as skilled as they are principled.
This past year, we saw a smooth transition in a key role as
John Snider, Vice President of Retail Logistics, announced
his retirement after 29 years with the company. Thanks to
outstanding leadership development and planning, the best
candidate was close at hand and ready to step into this role.
Tim Miller, our Vice President of Marketing, had previously
served as our National Logistics Director and easily
transitioned to Vice President of Retail Logistics while
we promoted Rich Lynch from Retail Marketing Director
to Vice President of Marketing.
With a strong team in
DO IT BEST CORP. SUPPORTS
place, the co-op managed
ITS MEMBER-OWNERS WITH
significant advancement in two
HIGH-QUALITY, FULLYimportant initiatives that have
INTEGRATED MARKETING
a direct impact on its ability
to provide industry-leading
MATERIALS SO THEY CAN
service to its members. The
CHOOSE FOR THEMSELVES
first was the construction
THE MOST EFFECTIVE
of the 550,000-square-foot
state-of-the-art retail service
WAYS TO REACH THEIR
center in Sikeston, Missouri.
CUSTOMERS, DRIVE SALES
Representing a $34 million
AND BUILD LOYALTY.
investment, the new RSC
is equipped to achieve new
levels of efficiency and is primed to support the growth
of members across the United States.
The second major development was the rollout of an entirely
new online member catalog. Built on a more robust, contentrich platform, the new mydoitbestcatalog.com delivers
enhanced product search features and a contemporary,
intuitive user experience. It’s all designed to help members
better serve their customers’ product needs with greater
speed and accuracy.
members create and build their own local brand that’s bestsuited to their individual markets. Rather than charging high
fees for national advertising, Do it Best Corp. supports its
member-owners with high-quality, fully-integrated marketing
materials so they can choose for themselves the most effective
ways to reach their customers, drive sales and build loyalty.
Closer to home, I have experienced these same opportunities
in our own business. As President and CEO of Russell
Lands, the parent company of Russell Building Supply
and Russell Do it Centers® of Alabama, we appreciate the
flexibility to grow our businesses the way we see fit and
to build a strong local brand in the communities we serve.
It’s this support for independent entrepreneurs that helped
us persevere throughout the recession and position us for
growth as the economy improved. It continues to be very
important to us that we’re aligned with a co-op that shares
our values and the best practices we stress in our own
businesses every day.
Indeed, Russell Lands’ home center operations stand as
a great example of an independent business that has
been able to accomplish far more as a member-owner
of Do it Best Corp. than we ever could have on our own.
Time and again, I hear my fellow members echo this same
sentiment as they encourage prospective members to explore
how Do it Best Corp. can benefit their businesses as well.
I encourage you to read our members’ success stories
captured within the pages of this annual report and discover
the many ways they leverage our financial strength, retail
expertise, proven programs and supply chain excellence
to grow and prosper.
I thank you for the opportunity to serve on the Board of
Directors. As I complete my term of service, I extend to
you my good wishes for a successful year to come.
Another important way I see our co-op supporting the
membership every day is through its commitment to help
5
FROM THE
PRESIDENT
DRIVEN BY A CLEAR AND
STEADY FOCUS ON OUR #1 GOAL...
HELPING OUR MEMBERS GROW.
BOB TAYLOR
President and CEO
With the detailed planning and coordination that was
essential to opening our new Sikeston, Missouri, retail
service center on time and under budget, the incredible
efforts to keep members supplied with winter goods
during last winter’s Polar Vortex and the uninterrupted and
continued focus forward on our key initiatives, this past year
demanded an exceptional effort from the Do it Best Corp.
team. Once again, their drive, determination and agility
ensured our success, and we are now well positioned to
capitalize on the opportunities in the year ahead.
Housing, oil and gas development, extreme weather and
e-commerce drove member activity this past year and
are expected to do the same in the year ahead. While
our pro-yard members have seen a significant increase in
activity, many are still only now returning to their pre-2008
sales level. They are nevertheless very optimistic about the
opportunities ahead. Our industrial-commercial InCom®
members enjoyed an exceptional year on top of last year’s
strong performance, up 16%, paced by strong growth
among our online e-tailer members. And, our international
membership continues to grow, with operations now in 53
countries, and sales up 7.3%.
Gross sales for the year finished up 2.63%. Lumber led
the way, up 6.21%, and that’s on the back of a pricingdriven 32% increase last year. Direct shipments were
ahead slightly, up 0.22%, while RSC sales grew by
3.76%. That RSC increase is our largest bump in a 52-week
year since 2006! It was a strong overall sales effort that
could have been even better if the spring weather had been
a bit more cooperative. Continued close discipline helped
us hold total operating expenses for the year at just 2.05%
after inventory capitalization, enabling another strong profit
year for Do it Best Corp., and a year-end rebate to members
of $115.4 million. This is our eleventh consecutive year with
a rebate above $100 million…that’s over $1 billion returned
to members in just the last decade! Classic enhanced
rebate members will receive an average 12.25% rebate on
their regular warehouse purchases, while Vision enhanced
rebate members will receive
an average 6.67% regular
THIS IS OUR ELEVENTH warehouse rebate.
CONSECUTIVE YEAR
WITH A REBATE ABOVE The consistency and
dependability of those rebates
$100 MILLION.
provide Do it Best Corp. members
across the country and around the
world an important “second profit” to help fuel the development
of new stores or the expansion and remodeling of existing ones.
And, with the addition of our new RSC/VIP! (Volume Incentive
Program) members can now earn an additional 3% incentive on
their year-over-year increase in warehouse purchases, fueling
additional growth and development.
Judging from the record number of projects initiated this past
year, members are increasingly confident in the housing market
and the activity at retail, and are eager to better position their
operations for that opportunity. With the strong support of our
Retail Performance team at Do it Best Corp., our members
have quick and ready access to both the programs and the
expertise to ensure their project is a success. Programs like
RetailSTART!® and RetailPLUS!® provide members with access
to market and site analysis, inventory discounts and dating
programs, merchandising assistance and professional project
management at every step along the way. And, our Signature™
Store Design program continues to provide the very best in
both retail and pro-yard development, with a design team that
works closely with each member to match our efforts to the
needs of their operation and their community. With the option
of a Fully-Branded, Co-Branded or Member-Branded approach,
we help our members accent their unique strengths and build
their brand in their local community. The results are impressive,
driving an average 17% increase in sales.
As you’ll see from the stories in this year’s report, Do it Best Corp.
is fortunate to enjoy a broad diversity of operations among its
membership, everything from hardware stores to pro lumberyards,
from single locations to multi-site operations, and from InCom and
online-only merchants to international members. That demands
that every program, every service and every solution we offer
must be both flexible and scalable in order to meet the differing
needs of the members and the markets they serve. And, that
offering is importantly presented without mandates, but rather in a
menu-driven format so that members can select and pay for only
those programs that are a fit for their business. It keeps our team
focused on developing the very best offerings possible in order to
earn that support.
The exceptionally strong marketing and promotional tools
available to Do it Best Corp. members are a great example
of that important flexibility and scalability. It’s about matching
the message with the member and effectively targeting their
customer base. Our comprehensive ADpakSM advertising
program provides all the tools, including monthly circulars
that members can plan online through our OASIS program,
up to and including full customization. The Spring and Fall
Catalogs help members present a broad product offering and
are also supported by a $1,000 customer shopping spree at
each participating member location. Specialty catalogs target
key business segments like Farm & Ranch, Home Décor and
Outdoor Living. And, our Best RewardsSM loyalty program helps
members build an even stronger, one-to-one connection with
their very best customers.
With 67,000 items available through distribution, over 1,400
no-adder vendor drop ship programs and our global sourcing
initiatives with two offices in China, Do it Best Corp. members
have access to an incredible array of products at very
competitive prices. And, with over 1,900 planograms available
across hundreds of categories, our merchandising team helps
members effectively match their assortment to their market. We
take that one step further with our Category Solutions program
which provides Do it Best Corp. members with significant
discounts and dating on key merchandise assortments
throughout their store. The program also includes an automated
alert system for members whenever an item is deleted from
or added to one of their Category Solutions assortments. To
date, over 27,000 of these merchandise planograms have been
placed in member stores, making it one of our most successful
offerings ever. Member support is also rapidly growing among
our private-branded offerings Home Impressions and Steel Pro,
as well as with our exclusively licensed line of Channellock®
products where activity climbed 26% this past year. And,
to help members add even more punch to their promotional
efforts, we introduced a monthly PriceBusters promotion this
year to provide members with timely access to popular product
offerings at deeply discounted, traffic driving prices.
Getting products out to our over 3,800 member locations each
week, on time and with a high fill rate is core to our operations
at Do it Best Corp. We invested significantly in our supply
chain this past year with the opening of our new Sikeston retail
service center. This state-of-the-art 550,000-square-foot facility
features voice-picking and a new ASRS (automated storage
and retrieval system) high density module that automates the
processing for 5,000 items. With a great team effort, the center
opened on time and under budget, with a first day fill rate of
over 98%. Our yearlong fill rate finished at 96.7% across all
of our eight RSCs, down just slightly due to the exceptional
demand for winter product. In fact, over 44.5 million pounds
of ice melt, or more than 1,000 truckloads, were shipped
to Do it Best Corp. members through distribution. That was
supplemented by another 12 tons or 535 truckloads that were
drop shipped directly to members from our vendors. That effort
helped Do it Best Corp. members stay in stock when others
were not, providing important support to their communities in a
critical time of need. The other logistical impact point this past
year was the rapid growth in our small parcel shipments, up
30% with the continued growth in online sales. We expect that
strong pace to continue in the year ahead.
With their tremendous contributions across all divisions of
the company, it comes as little surprise that the IT crew at
Do it Best Corp. was recognized by Information Week magazine
in their Top 100 companies list, well ahead of such notables as
GM, Procter & Gamble and even Verizon Wireless. Our team’s
ability to advance technology through innovation, including earning
our first ever patent, helped us secure an admirable #62 spot.
We continue to invest significantly in our IT infrastructure and
in new mobile technologies to keep our members connected
with the information they need, when and where they need it.
That included the launch this year of our newest online product
catalog, mydoitbestcatalog.com.
It’s been improved at every touch
FOR NEARLY SEVENTY
point. It’s faster, cleaner and it gets
YEARS THEY HAVE
members what they want most
– quick results for the products
DEMONSTRATED
they’re searching for. We’ll soon
AN UNWAVERING
be rolling out a fully-mobile version
COMMITMENT TO OUR #1
for tablets and smart phones, so
members can take their Do it Best
GOAL OF HELPING OUR
catalog with them anywhere.
MEMBERS GROW.
I continue to take great pride in
counting myself as a member of the
very special team we enjoy at Do it Best Corp. They encourage
and support one another, they are invested in their communities,
and for nearly seventy years they have demonstrated an
unwavering commitment to our #1 Goal of Helping Our
Members Grow. You’ll see some wonderful examples of that
commitment within the covers of this year’s annual report, and
you’ll hear from our independent member-owners how impactful
it has been in helping them grow their businesses and achieve
their dreams. Working together, we continue to make the best
even better.
7
WOODLAND
DO IT BEST®
HOME & HARDWARE
Kelly Rodarmel, Owner
Woodland Park, CO
Member since 1997
from left to right
GENE RODARMEL, Former Owner
KELLY RODARMEL, Owner
Signature™ Store Design
Enhanced traffic flow, signage
and added space through
Signature Store Design.
Signature Store Design offers a flexible,
comprehensive approach to help
members design the right business for
their market. The program incorporates
three branding strategies: fully-branded
Do it Centers; co-branded Do it Best
stores; and member-branded locations.
Other Do it Best Corp.
programs used:
RetailStart!2®
Category Solutions
ADpakSM
IT FEELS GOOD TO KNOW YOUR CO-OP PARTNER CARES
ABOUT YOUR BUSINESS AS MUCH AS YOU DO.
My father started the company in 1987, and as we’ve expanded over the
years, we often encountered limitations to growth in our original location.
The store’s floor plan made it awkward to merchandise, and despite
several renovations, we were stuck at 11,700 square feet. We serve our
mountain community north of Pikes Peak, and competition from the
Colorado Springs metro area started to grow closer. We knew we had to
make a bold move to keep our customers shopping close to home.
The turning point came when I purchased the company from my parents.
With the help of the retail specialists at Do it Best Corp., we started to look at
potential new locations. We took our time to get it right, collaborating closely
with our co-op at every step, and this past February, we opened a completely
new store three blocks from our old location that is two-and-a-half times bigger!
In developing the new store, we had a number of unique considerations,
and the Do it Best Corp. team was invaluable in helping us find solutions.
We worked together to overcome exterior signage restrictions in our
community and to develop a store layout that takes advantage of our
great view of Pikes Peak. Of course, the team also provided merchandise
expertise, helping us to expand into a number of new product categories,
including farm and ranch, lawn and garden, apparel and much more.
We implemented the Signature™ Store Design program with our unique
brand front and center, and the result is that with well-organized aisles,
plenty of open space and great signage, the store is very shopper-friendly.
Our customers are thrilled with what we’ve done, and the proof is in the initial
upswing in our numbers: in the first three months, we saw nearly 30% sales
increases compared to the same time period in the previous two years.
Because ours was a multi-year project, I had the opportunity to really get
to know a number of people on the Do it Best Corp. team. I can tell you
first-hand that this co-op is truly a family. From the top leadership to the
retail experts on the ground, they sincerely care about my success.
8
DO IT BEST CORP. ANNUAL REPORT 2014
9
GILLMAN
DO IT BEST®
HOME CENTERS
Charlie Gillman, Owner
Batesville, IN
Member since 2002
Do it Best Corp. programs:
ADpakSM
Best RewardsSM
Do it Best Rental Center™
RetailSTART!®
Preference Share Redemption
DO IT BEST CORP. DOES BUSINESS THE SAME WAY I DO –
WITH HONESTY, RESPECT AND A COMMITTED FOCUS
ON THE CUSTOMER.
My father was a contractor in my hometown of Brookville, Indiana,
and he owned a small lumberyard for his own ease of access to
materials and wholesale buying. I worked as a designer and contractor
for years before I realized the potential of making a retail store
out of my father’s lumberyard. That first store really took off, and I
think my in-depth knowledge as a builder really helped us become
successful. We opened a second store and continued to grow.
Looking back, I realize that the co-op we were part of in the beginning
never really fit our model. The territory manager from Do it Best Corp.
had been talking to us for five years, and six weeks before we were
scheduled to open a third store, I decided it was time to act. We cancelled
our product orders with the other co-op, and with a lot of help from the
Do it Best team and mine, we opened that new location on time as a
co-branded Do it Best store, then converted the others over the next
few months. We chose to co-brand our stores to leverage our family
name, which has been a part of this community for years, as well as
the reputation of the Do it Best name. It’s the best of both worlds.
For us, it all comes down to serving the customer. We aim to be a full-service
hardware store and lumberyard, the one-stop shop for both contractors
and do-it-yourselfers. We’re not afraid of the competition because we’re
supported by Do it Best Corp. programs that really work. Our co-op team
has helped us develop the right brand for our audience across all our stores,
and combined with our great customer service, ADpakSM, Best RewardsSM
and the Do it Best Rental Center™ programs keep customers coming back.
We’ve been Do it Best member-owners for 12 years now. We just opened our
seventh location in central Indiana, and construction will start soon on our
eighth, which we plan to open next March. I’m proud of the growth we’ve
seen, and I know it’s been a whole lot simpler because of the support
from Do it Best Corp.
10
11
TAYLOR’S
DO IT CENTERS®
Joe Taylor, Owner
Greater Virginia Beach, VA
Member since 1990
2014 Hardware Retailing
Top Gun
from left to right
JOE TAYLOR & RUSS TAYLOR
Do it Best Corp. programs:
RetailSTART!®
ADpakSM
Category Solutions
WE’VE CONTINUED TO LOOK FOR GROWTH
OPPORTUNITIES THROUGH OUR CO-OP – AND
TODAY, OUR FUTURE IS EVEN BRIGHTER.
Taylor’s Do it Centers grew out of Fuel, Feed & Building Supplies Corp., a
business started by my grandfather in 1927 along the Virginia coastline. We’d
been with another co-op, but it was only when we joined Do it Best Corp.
in 1990 that we really began our growth and evolution as a strong, local
business. Along the way, we’ve added new locations, moved some stores
and even closed a few as the marketplace changed. Today, we have grown to
11 locations, and my brother Russ and I run Taylor’s Do it Centers along with
our father Dawson, who at 91 continues to serve as chairman. My brother
Bob left the family business in 2000 to work directly for Do it Best Corp.
One of the things we’ve been most proud of is our growth. As we’ve added
locations, we’ve moved away from large store footprints to smaller stores
that take advantage of the strengths of the fully-branded Do it Center®
identity with colors and signage that have proven shopper-friendly
appeal. Our stores are also neighborhood-based, to really maximize our
convenience factor. This means our customers always have the option
to shop with us first, and to encourage that, we offer an engaging mix
of categories like outdoor living, lawn and garden and other smaller
niches. Taylor’s also has a long reputation for being impeccably clean,
which appeals to female shoppers and really helps our brand.
Our membership with Do it Best Corp. has benefited our business in so
many ways over the years. All of our new stores have been RetailSTART!®
projects that began with comprehensive market analysis to make sure
we were focusing on the right locations. Then, we’ve partnered with the
Do it Best Corp. merchandising experts who have store design and layout
down to a science. And on a day-to-day basis, we rely on the ADpakSM
program to get the most from our advertising dollars. We’ve found
Category Solutions to be a great way to offer new items without having
to carry too much inventory. Of course, the consistently high rebate is
also important to our business and helps fuel our continual growth.
12
Yes, we participate in a lot of Do it Best Corp. programs, because they give
us the freedom to be out on the sales floor, not in the back room dealing
with the details of buying or pricing or advertising. Those are the things
Do it Best Corp. takes care of for us, so we have more time to spend with our
customers…which, after all, is how we’ve been successful in growing our business.
13
IVEY’S
LUMBER & BUILDING
MATERIALS
Josh & Mitch Johnson, Owners
Haughton & Mansfield, LA
Member since 1996
Retail Performance
Loan Program
The Retail Performance Loan Program
is designed for members who are
seeking to add a location or enhance
their retail space. Eligible members
can receive low-interest financing for a
RetailPLUS!® or RetailSTART!® project
with SignatureTM Store Design.
programs used:
RetailStart!2®
Category Solutions
ADpakSM
Ecommerce
DO IT BEST CORP. FINANCING PROGRAMS PROVIDE US
THE FUEL WE NEED TO REACH NEW HEIGHTS.
Our company was founded in 1969 by Mack Ivey, who opened retail hardware
stores and lumberyards in rural eastern Louisiana. For many years the business
has been centered in Mansfield, where we’ve continued to expand since we
took ownership in 1989. We joined Do it Best Corp. in 1996, and that has really
helped us serve our customers and build our brand. We’ve always believed
that we are the experts in our market, so it has been very important to us to
have the flexibility to make our own decisions. That said, one of the biggest
strengths we get from Do it Best Corp. is learning from the experiences of
other member-owners and getting good input from our territory manager.
The other thing that is critical to our success is having a local brand, and
that’s why we chose the member-branded option. Sure, we’re likely the
most convenient choice for our customers, but they really think of us
first because we’re the people they see every day, whether it’s at church,
school functions or playing softball. Of course, the key is being able to get
what they need, and that’s where Do it Best Corp. gives us the advantage.
Our customers might not appreciate all our co-op does for us, but they
do know that if we don’t have a particular item, we can walk over to the
online catalog, find it for them and get it quickly at no extra charge.
A big part of our business is shipping residential lumber packs to the
Shreveport area where builders are most active. A couple of years ago, we
decided we needed a location closer to that area, so we started looking for
opportunities. We discovered that on the edge of Bossier City, the community
of Haughton had no hardware store, so we began the process of building
a new ground-up location. As it turned out, we were able to finance the
project through the Retail Performance Loan Program. This is something no
other co-op offers: very favorable terms, plus the ability to leave our rebate
intact. Opening a second store can put a lot of stress on your cash flow,
and being able to still count on our rebate was a huge advantage for us.
In Haughton, we also entered a market with a more affluent demographic,
so we relied on the merchandising expertise of the Do it Best Corp. team. We
knew we didn’t have the experience to predict what items would be successful,
so we collaborated with them on every category throughout the store.
14
If you’re thinking about expanding in a new market, our advice is to be prepared to
work very hard. It’s been quite a challenge, but with Do it Best Corp. on our side,
it’s also been extremely rewarding. It feels like just the beginning of what we
can accomplish.
15
MEEK’S
THE BUILDER’S
CHOICE
Eric Sachse,
Director of Marketing
Midwest Division
Springfield, MO
Member since 1971
2014 NLBMDA ProDealer
of the Year
RetailPLUS!®
Currently updating 5 stores per
year with RetailPLUS!.
RetailPLUS! provides total project
management and attractive incentives for
members who undertake a comprehensive
improvement project. Customizable
to fit each store’s specific needs,
RetailPLUS! projects include market and
site analysis, inventory review, fixture
assessments, professional merchandising
assistance, pricing analysis and more.
programs used:
Margin Master
Category Solutions
16
GREAT PROGRAMS HELP US GROW,
SO WE INVEST MORE IN OUR CO-OP. EVERYBODY WINS.
Charles Meek, Sr., opened our first lumberyard in Lockwood, Missouri, in 1920.
Then, in 1951, Charles, Jr., set off for northern California to open the first yard
in our West Coast Division. Under our fourth generation of family-owned
leadership, we’re up to 46 retail locations across the nation and still growing.
We’re still primarily a lumberyard, with a heavy emphasis on millwork and
building materials. Most of our stores are geared toward professional
contractors, remodelers, plumbers and electricians. On the materials side,
Do it Best Corp. has been a big influence on the products we carry and
the programs we offer.
One of the stores we purchased in 2010 doesn’t have a big box retailer within
30 miles. We knew we could lead the retail business in that community, but
the product mix was not deep enough. To capitalize on that location, we
partnered with Do it Best Corp., implementing the SignatureTM Store Design
program as well as RetailPLUS!®. The overall feel and flow of the store is
much better than we could have created on our own, and we were able
to experiment with a lot of new items to explore growth opportunities.
After a year, the numbers spoke for themselves, and we started on an
aggressive path of implementing RetailPLUS! at five to six stores per
year. We’ve completed ten in the last year, and looking at year-over-year
growth, our top stores are the ones we have remodeled and reset.
Do it Best Corp. makes a tremendous amount of resources available to
us, helping us find a balance between catering to the pro customer and
remaining accessible to the retail customer. They work closely with us
so we can become what we always envisioned ourselves to be. If you
ask me, that’s what being part of a members-first co-op is all about.
from left to right
CHARLIE MEEK, General Manager
MIKE MEEK, General Counsel & CFO
17
ALLIED
DO IT BEST®
HOME CENTER
Simon Alexander, Owner
San Fernando, Trinidad
Member since 2012
from left to right
SHERRY ALEXANDER, Owner
SIMON ALEXANDER, Owner
RetailSTART!®
RetailSTART! provided project and
merchandising assistance for a
new retail space.
For members looking to add a new
location or rebuild their retail space,
the RetailSTART! program provides
comprehensive support, including project
management, market research, special
dating and discounts, and professional
merchandising assistance. In short,
everything from the initial business
plan on through to the grand opening.
programs used:
DO IT BEST CORP. SHARES MY CAN-DO ATTITUDE. IF YOU
WANT TO EXPAND AND GROW, THERE’S NO BETTER PARTNER.
Back in 2000, I started an industrial supply business that served San Fernando,
Trinidad and the surrounding region. Typical of such businesses in the Caribbean,
it had only counter service for customers, and behind that was a large warehouse.
Over a period of time, I began to think that we could transform the business
by adding a retail home improvement section and putting it all under one roof.
But as I thought about what would need to go into such a project, I quickly
realized that for me to succeed, I would need the support of a strong co-op.
I was familiar with a number of different distributors and co-ops, so I began
to review which one might be a good fit for my vision. In 2010, I spoke with the
international team at Do it Best Corp., and right away, I felt the communication
was different. They had a very positive attitude about what I wanted to do, and
they were very approachable. Most importantly, they alone offered the buying
power and large product selection as a single-source supplier — something
that I believe is critical. So in 2012, we became Do it Best member-owners,
and side-by-side we began to build the new Allied Do it Best Home Center.
The new store was a RetailSTART!® project, and from the beginning I really
listened to the Do it Best Corp. team and tapped into their experience and
expertise. I trusted them for everything, from layout to merchandising to the
Signature™ Store Design, and I’m very proud of the result. The store has an
ambience that is very positive and uplifting — it has a great sense of energy.
We opened in September 2013, and from the beginning we’ve been extremely
well received. I knew that we had considerable equity in the Allied Industrial
brand, but I didn’t realize that people would translate that expertise into knowing
how to help them with home improvement projects. In fact, beyond carrying
the products they need, we’ve built a reputation as a knowledge resource
for our customers. We’ve also become a community hub, as we regularly
host health drives with free blood pressure checks and other screenings.
What we’ve done with Allied Home Center is something that is not easy to build
here in Trinidad, and I thank the team at Do it Best Corp. for helping to make it
happen. I’ve learned that when you have a co-op that aligns with your goals and
vision, anything is possible.
18
19
ESCALANTE
DO IT BEST®
HOME CENTER
Greg Pace, Owner
Loa and Escalante, UT
Member since 2001
RetailSTART!2®
PEOPLE WERE SKEPTICAL THAT WE COULD BUILD
AND OPEN A NEW LOCATION IN LESS THAN 4 MONTHS.
BUT WE HAD DO IT BEST CORP. ON OUR SIDE.
Built a new location from the
ground up in less than 4 months
with the help of RetailSTART!2.
Our family bought Loa Building Supply in 1984, and from the beginning, my brothers
and I have helped our parents run the business. Loa is a community of just 750 in a
county that is 97% federally-owned land, including national parks and forests. Our
customers are a mix of farmers, ranchers and contractors who serve the market for
second homes. We joined a co-op in the 1990s, but by 2000, it was clear that they
were downsizing in our area, while we were planning to grow. So we began to look at
other options and quickly realized Do it Best Corp. was the best fit for us. We became
Do it Best member-owners in 2001, and in 2002, our new co-op played an important
role in helping us build, design and merchandise a new ground-up store in Loa.
RetailSTART!2 is a program tailored
specifically to assist members with a
single store in opening a second location.
Services include market and site analysis,
project management, and assistance
with inventory, financing and promotional
materials. From start to finish, it is a
proven blueprint for successful growth.
programs used:
ADpakSM
Category Solutions
Ecommerce Ship-To-Store Program
Over time, we continued to seek ways to expand our business. For many years, we
had a truck that made weekly deliveries of building materials to other communities.
One of those was Escalante, 85 miles on the other side of a mountain range near
Bryce Canyon National Park. A couple of years ago, the town’s tiny hardware
store closed, and we began to do our homework about building a location there.
We met with the Retail Performance team in May 2013, and less than 4 months
later, we opened the doors of our new Escalante Do it Best Home Center.
The Retail Performance team provided us with a market analysis and profitability
report, and once the project was underway, they helped us expand our
merchandise mix from hardware and LBM into farm and ranch supplies and
a greenhouse. As the only farm and ranch supplier for 140 miles, we knew it
would be a huge opportunity to meet the needs of the community. In fact, the
response to the new store has been tremendous and we are already exceeding
our sales projections. Because our retail space is only 6,000 square feet, we
promote the “It’s in Our Warehouse” campaign, so that people know we can
get anything from the Do it Best catalog at no extra charge. That means they
now have access to virtually all of their product needs in a one-stop shop.
I really enjoy the relationship we have with Do it Best Corp. They do a great job of
providing us the tools we need to be successful, without forcing us to use or pay for
services we don’t need. Plus, they have the same conservative financial values
that we do, with no long-term debt. They’re stewards of their members’ resources,
and I admire that.
20
Thirty years later, my dad still takes his turn driving the delivery truck, and my young
kids are around here preparing to be the third generation. There are some unique
challenges to working in a family business, but when you step back and look at how
far you’ve come, there’s no better feeling.
21
BTU DO IT CENTER®
Wayne Sonchar, Owner
Las Vegas, NM
Member since 1988
ADpakSM
Drives traffic and sales with
ADpak advertising elements.
The customizable ADpak program
includes an array of promotions to
help drive traffic, develop customer
loyalty, and build each member’s
local brand. An advertising service
representative is assigned to help
with all marketing needs and assist in
creating an effective promotional plan.
programs used:
RetailSTART!®
Retail Performance Loan Program
Best RewardsSM
Do it Best Rental Center™
22
A FRESH LOOK, INTEGRATED
ADVERTISING AND UPDATED
PRODUCTS GAVE US THE EDGE WE
NEEDED TO STAY COMPETITIVE.
We’re in our 30th year at this location, but in
the last few years, our growth had stagnated. Competition
moved into town, and I felt we weren’t doing a great job of servicing our
customers. They left the store empty-handed more often than I liked,
and as I looked around at the retail industry, I saw how important it was
to have a fresh look with updated product and service offerings.
To make sure our thinking aligned with our customers’, we commissioned
a comprehensive survey through Do it Best Corp. in late 2012. Some of the
results were surprising. We found that we were more concerned about price
perceptions than our customers were, and while we thought we were strong in
plumbing and tools, our shoppers said we needed to build up those categories.
We had positive feedback on our customer service, but we all agreed our
store’s look needed an update. And it turns out the free popcorn we had been
offering for 20 years was more valuable than we would have imagined.
Collaborating with our territory manager, we came up with a strategy and
merchandising plan. The Retail Performance Loan Program was a no-brainer to
fund the updates. Personally, I think it’s one of the most important new programs
at Do it Best Corp., because it reinvests money into the member-owners, helping
them grow their businesses. So with the tools available through RetailSTART!®, we
moved every single item in our store; not an office chair or nail stayed where it was.
The circular we put together for our grand re-opening in November 2013 drove
traffic as well as record sales. Advertising is as important today as it was when we
chose Do it Best Corp. in 1988. The ADpakSM team worked with us to personalize
our advertising, putting our logo, branding and unique items like Stihl front and
center in all our promotional materials and circulars to really differentiate us
from the competition. We’ve already had a tremendous community response.
Our contractor sales have held steady, and we’ve seen a significant increase
in our DIY and cash business. Customer counts are up by 10%, sales per ticket
are up by $4 on average and our margins are up a couple points. All in all, we’re
back on track for growth, and we thank Do it Best Corp. for making it possible.
23
from left to right
TAYLOR HUSKEY, Millwork Manager
JIM HUSKEY, Owner
AUSTIN HUSKEY, Purchase Manager
LUMBER
& BUILDING
MATERIALS
The Do it Best Corp. Lumber and
Building Materials Division’s sales
and buying team leads the industry
& Murfreesboro Store Manager
HUSKEY BUILDING SUPPLY
Jim Huskey, Owner I
Franklin, TN
I
Member since 1988
in market expertise and serves as
trusted advisors in assisting with
pricing and product selection and
identifying market opportunities.
• Competitive drop shipment
JUST LIKE DO IT BEST CORP., WE SUCCEED BY
HAVING THE MOST KNOWLEDGEABLE PEOPLE
IN THE LBM INDUSTRY.
programs for building
materials and millwork
• Nationwide partnerships with
top lumber and building
materials distributors
• Product merchandising
and planograms tailored
to the pro lumber dealers
I’m the second-generation owner of a business that started with my uncle around
1945. It has evolved a great deal over the years, and today we have three locations in
Tennessee: a lumberyard millwork operation in Franklin, a lumberyard in
Mt. Juliet and a state-of-the-art truss plant and lumberyard in Murfreesboro.
There are all kinds of different strategies in this business. From everything we’ve
seen, Do it Best Corp. really has a knack for helping member-owners succeed,
whether they’re traditional hardware stores, home centers, pro yards, e-tailers
or upscale specialty stores. When we became Do it Best members back in
1988, we had more of a hardware focus. As it happened, at the same time our
lumber business grew, so did the co-op’s LBM services and expertise. Today,
it’s a very good partnership because of all the ways our business aligns with
their strengths. To begin with, we stake our reputation on quality materials.
Like Do it Best Corp., we only want to do business with quality mills. Plus,
we handle a lot of big jobs, so having predictable availability and delivery is
critical to our operations. That’s where services like reserve inventory and
reload centers really help us maintain our reputation for dependability.
When you deal with a commodity like lumber, you need to understand the market
and have a good grasp of all of the factors that affect pricing and availability.
The LBM team at Do it Best Corp. is extremely experienced, and we depend
on them for their market analysis and valuable insights. It really helps me with
my decision making on a day-to-day basis. Of course, we also
appreciate being part of a co-op that has the lowest
cost of operations and, as a result, can return
the highest rebate to its members.
As we look to the future, I’m lucky to
have two sons who are now poised to
take over the business. They had to start
at the bottom to learn the ropes, but I
enjoy knowing their futures are bright.
24
25
BEST
REWARDSSM
Stanford incentivizes employees
with a quarter bonus for every
new Best Rewards registration.
Best Rewards helps members build
customer loyalty and increase
revenue by developing long-term,
value-added customer relationships.
Customers, in turn, enjoy real rewards
and an implied “thank you” for their
business. The program also allows
members to learn more about their
customer’s buying habits and compile
data that can lead to more effective
merchandising and advertising.
programs used:
Margin Master
RetailPLUS!®
Channellock®
STANFORD HOME CENTERS
Susie Piekarski Reese, President I
Plum Boro, PA
I
Member since 2009
BY OFFERING REAL BENEFITS FOR CUSTOMER
LOYALTY, BEST REWARDS HAS BECOME THE MOST
POWERFUL SALES TOOL IN OUR STORE.
As the third-generation owner of Stanford Home
Centers, we’ve been big believers in the concept of
rewards programming for years. It’s an effective,
sensible way to grow customer loyalty and
increase average ticket sales. Plus, you get a
high return on investment from the valuable
customer information collected at the register.
We found that the rewards program of our previous
co-op was taking money from our bottom line;
they were giving away inventory and spending
our money to do it. With Do it Best Corp., the
benefits of membership are a true reflection of
loyalty: customers earn their rewards, and we no
longer give away inventory. In fact, we drive additional
sales through Best RewardsSM. For example,
earlier this year we ran a promo for Best Rewards
members only. Using the email addresses provided
at sign-up, we sent out an email blast that offered
a percentage off an item of a certain dollar amount
or more. We had more than 200 customers redeem
the offer, and we spent zero dollars on advertising.
By using Sneak Peek buys and PriceBusters monthly
specials, we also offer a wide selection of items
each month at a reduced price to Best Rewards
members; we don’t sacrifice margin, but customers still feel like they’re getting
a deal. This increases loyalty as well as individual ticket sales, and the proof
is in the numbers: our average Best Rewards customer spends $38.40 per
ticket, versus $21.80 for non-members. Today, we have nearly 48,000 Best
Rewards members between our two stores, resulting in nearly 75% of our
total sales. I can say from experience, Do it Best Corp. does their rewards
program right, and we wouldn’t be where we are without their support.
26
CATEGORY
SOLUTIONS
Category Solutions helps
members increase sales
volume and maximize return
on inventory investment in
key merchandise categories.
Each category comes with a
well-organized planogram and
special pricing incentives, to
both meet customers’ needs
and improve profitability.
programs used:
RetailPLUS!®
SOUTHERN WHOLESALE DO IT BEST®
Matthew Fox & Aimee Blanton, Owners I
Harlan, KY
I
Member since 1992
WITH CATEGORY SOLUTIONS, DO IT BEST CORP.
TAKES THE GUESSWORK OUT OF MERCHANDISING.
We are third-generation owners of a family hardware and lumber business
in the heart of Kentucky coal country. Record-high unemployment has
had an enormous impact on the local economy, but we’re continuing to
adapt our business to best serve our customers and our community.
As part of taking the reins from the second-generation owners, we realized
our primary location in Harlan needed to be updated inside and out. We
began a RetailPLUS!® project that included implementing Signature™
Store Design and a complete reset. Thanks to the terms and dating
available from Do it Best Corp., we were able to take a comprehensive
approach to the project and make some very dramatic improvements.
One of the most important aspects was the addition of 6,000 new SKUs. We
have always been heavy users of the Category Solutions program, and we
certainly relied on that for nearly 40 different categories as we remerchandised
our store. Because of the economy, we have chosen to focus on DIY homeowners,
so we have expanded our plumbing, electrical and paint departments to
give them the tools they need. We like how easy Category Solutions is to use
– it comes to us very well organized and simple to set up. And because we
don’t have to carry a huge inventory, we can try different items to see what
works in our market. It was a great way to expand a section from 4 feet to
12 feet without having to worry about choosing every SKU separately.
We are very proud of the fact that we’re still in business after more than 50 years,
and we credit that to the advantages we get from consolidating our purchases with
Do it Best Corp. Not only does that maximize our rebate, it gives us muscle whenever
we have an issue with a vendor. It all proves that there really is strength in numbers.
27
ALL AMERICAN DO IT CENTER®
Brian Buswell, Owner
Tomah, WI I Member since 1994
DO IT BEST
RENTAL CENTERTM
Members who participate in the
Do it Best Rental Center program
gain access to equipment vendor
programs, marketing materials,
training and support, and other
tools to help drive additional
traffic, sales and profits.
programs used:
Best RewardsSM
INCOM Distributor SupplySM
Margin Master
ADpakSM
RetailPLUS!
®
Retail Performance Loan Program
CORE® & DiBU
28
THE PROGRAMS AT DO IT BEST CORP.
ARE DESIGNED TO DRIVE OUR
PROFITABILITY – AND THEY WORK.
We had been in business for more than 10 years when we began noticing
a lot of customers coming in asking if we had equipment to rent. As Do it
Best member-owners, we took that question to the October market, and
the rental team performed a feasibility study that showed us we definitely
had potential in that area. We learned that there wasn’t a rental store in our
town of Tomah or the surrounding region, which was good, but it also meant
people didn’t really recognize the benefits. To help us understand how a
rental program should be run, three of us went to the rental school held at
the company headquarters in Fort Wayne. The experts at Do it Best Corp.
took all the guesswork out of starting our new Do it Best Rental CenterTM.
Since then, rental has never been a secondary business. In our experience,
the profitability of the department is such that if we do $100,000 in rental,
it equates to doing $1 million in building materials sales. It’s far more
profitable percentage-wise. For that reason, we actively promote rental
through local TV ads and in our circulars. For contractors, we have large
telehandler and site forklifts, aerial lifts, skid steers and regular and mini
excavators. For homeowners, we have tillers, drywall jacks, trenchers,
stump grinders and chainsaws. We thoroughly maintain our equipment,
test it before each rental and turn it over when it hits a 1-to-1 ratio, just as
the Do it Best Corp. team teaches, so customers don’t ever have to worry
about it breaking down. It still looks new. And if they do have an issue, we
give them our personal phone numbers so we can quickly respond.
Today, there are things you just can’t do as a lone independent. As we wrap
up construction on our third store, I know we couldn’t have done it without
our co-op. From site analysis and the Rental Center to ADpakSM, Channellock®
and Margin Master, we take full advantage of just about every program
Do it Best Corp. has to offer, because we know we couldn’t survive without them.
MALONE DO IT BEST® LUMBER & RENTAL
Paul Gabbard, Owner I
Greenville, KY
I
Member since 1982
FOR 20 YEARS, DO IT BEST CORP. HAS
HELPED US BECOME THE LEADING
RENTAL CENTER FOR MILES AROUND.
I’m the third-generation owner of a general lumber company that traces its history
back to the 1940s. Through the years, I’ve grown the business by constantly
adapting to meet the needs of our rural community. One important way we’ve
done that is by offering rental equipment to provide our customers everything
they need for their projects. We started small with a few power tools, but once
Do it Best Corp. developed its rental center program 20 years ago, the department
really took off. We were there from the beginning,
attending one of the first Rental Center Training
School sessions at Do it Best Corp. headquarters.
programs used:
ADpakSM
Home Décor Program
RetailPLUS!®
Over the years, we’ve continued to expand the
rental center to include larger equipment and
even party tents and supplies. I’m proud of the
fact that many of our customers drive a long way and pass other rental places
to get to us. They do it because we have a great selection, our department is
well organized and our equipment is reliable. For us, we benefit not only from
the consistent, highly profitable rental revenue, but also from the fact that each
rental generates two positive customer visits to the store. These visits give us the
opportunity to sell products that go along with the rental customer’s project.
I believe that a successful rental department comes down to the two things that
Do it Best Corp. emphasizes: training and equipment management. In addition
to the comprehensive training school, Do it Best Corp. has sent rental experts
here for on-site analysis and education. They not only talk about the basics,
they also focus on making the department profitable. And that helps my team
understand why we do things the way we do. And the co-op’s philosophy
on turning equipment regularly ensures that we’re offering quality equipment
while maximizing our return on investment.
All of the Do it Best Corp. retail programs set the co-op above the rest. This, in turn,
helps us better serve our community and earn the loyalty of our customers. But
most importantly, the people at Do it Best Corp. understand that my business is
built on taking care of my customers, and in that same spirit, they take care of me.
29
A.M. SUPPLY
Do it Best Corp. provides dedicated
support to help member-owners
Tim Knecht & Jim Noel, Co-Owners I
become key suppliers to commercial
Kalamazoo, MI
I
Member since 1993
and industrial customers. The InCom
®
team provides comprehensive
services, including product and bid
assistance. For members without a
retail storefront, the True Industrial
WE’VE GROWN THIS BUSINESS THROUGH OUR
PARTNERSHIP WITH INCOM, AND NOW WE’RE
PRIMED TO TAKE IT TO THE NEXT LEVEL.
Commercial program offers solutions
to meet specific needs, including:
• Ongoing training
• Market analysis
• Niche catalogs
• Line cards with a quick glimpse
at all major vendors
• Comprehensive product catalogs
• Flexible ecommerce website
with customer logins for
customized pricing
A.M. Supply was started in 1991 with the realization that no one in our area
was serving the needs of apartment management companies. We began to
catch on quickly through relationships with key customers, and in 1993, we
joined INCOM Distributor SupplySM. With InCom®, we have seen tremendous
growth, going from sales of $477,000 in 1996 to over $4 million in 2014.
Our motto is “Getting the right stuff to the right place at the right time,” and
InCom supports every aspect of that. To begin with, Do it Best Corp. gives us
unbeatable buying power and access to a huge range of vendors. This is a
big advantage, because serving our niche market, particularly in college
towns, means having large quantities of certain items like builder-basic
appliances, doors and mini-blinds.
Having a reliable supply chain is also critical for us. We have four trucks
on the road serving customers within a roughly three-hour drive, and for
customers who are farther away, we ship orders from our Do it Best retail
service centers. This allows us to provide same-day truck deliveries in many
cases, and also to reach customers virtually anywhere in the country.
We also appreciate the fact that we can count on Do it Best Corp. to
maintain sufficient inventory levels and be extremely reliable with ontime, accurate deliveries. Most importantly, as our business has grown,
InCom has been continually responsive to our needs by stocking items
that help us maximize our margins and better serve our customers.
As we look to the future, we see enormous opportunities for growth
by expanding our customer base. And it’s great to know that through
our relationship with InCom we’re scalable on both the product
and distribution sides — so we can truly say the sky’s the limit.
30
ECOMMERCE
At Do it Best Corp., ecommerce
is about more than just
selling products online; it’s
TOOL DISTRICT
Vince Bogucki, CEO I
Blackwood, NJ
I
Member since 2010
about empowering members
with the ability to provide
the very best customer
service and convenience.
programs used:
INCOM Distributor SupplySM
WITH DO IT BEST CORP., YOU DON’T HAVE TO BE A
TRADITIONAL BRICK-AND-MORTAR BUSINESS TO
GET THE BUYING POWER YOU NEED TO SUCCEED.
Tool District is a family company that started out in 2004 with a couple
of niche markets before evolving into hardware sales. We initially had a
small storefront, but we soon began to focus primarily on ecommerce,
working directly with manufacturers. In 2010, we were introduced to
Do it Best Corp., and that’s when our business really began to grow.
Unlike many e-tailers, Tool District is all about building relationships
and providing great customer service. We have a strong sales force
that constantly follows up on online orders and works to expand the
account. That’s why so much of our business is repeat customers.
Of course, pricing and product availability are the ultimate keys to our success,
and Do it Best Corp. supports those in many ways. To begin with, we have
the ability to offer our customers, whether they are individuals or industrialcommercial entities, every item in our Do it Best retail service centers. That
makes us a one-stop-shop with unbeatable convenience. Distribution is
also key, and the strategic locations of the RSCs make it possible to deliver
products in two days using ground shipping to keep costs low. Do it Best Corp.
offers a wide range of other flexible delivery options, and we can drop-ship
from more than 5,000 vendors who have relationships with our co-op.
Because of the continually evolving nature of the ecommerce
environment, we appreciate that the team at Do it Best Corp. stays out
in front and comes to us with new programs and services. Their support
allows us to streamline our operations and spend our time on what
matters most — driving sales and taking care of our customers.
31
The licensing partnership between
Do it Best Corp. and Channellock,
Inc. helps members broaden
their merchandise mix with the
professional grade products
backed by the Channellock® brand.
programs used:
RetailSTART!®
RetailPLUS!®
ADpakSM
Preference Share Redemption
ALAMO LUMBER COMPANY
Bob Vaughan, CEO I
San Antonio, TX
I
Member since 1984
EXCLUSIVE CHANNELLOCK® BRANDED PRODUCTS ARE
ANOTHER GREAT WAY DO IT BEST CORP. HELPS US
DRIVE SALES AND INCREASE OUR PROFITABILITY.
Alamo Lumber Company is a family company dating back to 1903, and my
brothers and I are 4th generation owners. For many years, our parent
company’s efforts were divided between wholesale and retail businesses, but
in the late 1980s, we made the strategic decision to concentrate more fully on
the retail hardware and lumber business. It was at that time we decided to join
Do it Best Corp., not only for their retail merchandising expertise, but also for
their help in streamlining our operations to focus less on buying and more on selling.
Since then, we’ve grown our business substantially through our relationship with
Do it Best Corp., expanding to 13 locations across rural south Texas. Over the
years, we’ve established a high level of confidence in the programs developed
and offered by our co-op, so when they launched the Channellock® exclusive
branded product partnership a few years ago, we knew we wanted to introduce
it to our customers. Even though we knew it’d be good, we’ve been surprised by
just how well the products have performed. We don’t have a specific Channellock
section — each item is located among others in its category. But there are always
good promotional buys, which we advertise each month, so I believe growth
has come from committing to the program, stocking the range of products
and successfully promoting them. Of course, it’s a huge plus that the brand is
well-regarded by our customers and the products are exclusive to Do it Best
member-owners — giving our customers one more reason to be loyal to us.
Using the Channellock program is just one of the ways we strive to consolidate
purchases through Do it Best Corp. and increase our volume. We have a staff
profit-sharing plan, so we make our team members aware of our partnership
with the co-op and the importance of the rebate to our bottom line. Everyone at
Alamo Lumber knows we’re stronger because we’re members of Do it Best Corp.
32
SAFETY
At its foundation,
the Do it Best Corp.
commitment to safety is
anchored by our company
philosophy. Our investment
in training and awareness
demonstrates our
dedication to the long-term
quality of life for our entire
team. Fewer accidents
lead to richer lives for our
team and their loved ones.
And the tremendous drop
in incidents and claims
has helped us live out our
mission of continuous
improvement, resulting
in the lowest cost of
operations among the
co-ops and fewer service
interruptions to our
valued member-owners.
RECOGNITION FOR
EXCELLENCE IN SAFETY
Across all our facilities, Do it Best Corp. employs rigorous and comprehensive
measures to proactively prevent and reduce the risks associated with workplace
injuries, and we’re proud of the achievements these practices have delivered.
The Waco, Texas, RSC was recognized for recording four consecutive years without
a lost time incident or accident, demonstrating an unwavering commitment to
safety. “Four years with zero accidents does not happen without a lot of teamwork
and deliberate effort. I’m really proud of the safety-first mentality we’ve developed,
which ensures that each team member
returns home without an accident or injury,”
“ FOUR YEARS WITH ZERO
said Brent Watts, the Waco RSC Manager.
ACCIDENTS DOES NOT
This is the longest safety streak logged
HAPPEN WITHOUT A
by any RSC in the company’s history, and
LOT OF TEAMWORK AND
it’s the direct result of the comprehensive
DELIBERATE EFFORT.”
awareness and training programs
Brent Watts, Waco RSC Manager
implemented by Do it Best Corp. at all
facilities within our distribution system.
Morning stretches, safety tips and peer-to-peer observations have become
a part of the Waco team’s work culture to proactively prevent potential
incidents, and their results set the standard for all of our facilities.
33
RETAIL
LOGISTICS
Our Retail Logistics network is
designed to support our memberowners with the products they
need in the most cost efficient,
streamlined manner possible.
From daily operations to
emergency responses, we’re here
to help, no matter the need.
Do it Best Corp. serves
members through a network
of eight retail service centers,
operating year-round:
• Dixon, IL
• Lexington, SC
• Medina, OH
• Mesquite, NV
• Montgomery, NY
• Sikeston, MO
• Waco, TX
• Woodburn, OR
More than 200 Do it Best Corp.
delivery trucks log 20.1 million
miles annually.
34
“I COULDN’T BE HAPPIER WITH THE OPENING OF THE
SIKESTON RSC. I’M PROUD TO BE A MEMBER-OWNER
OF A CO-OP THAT IS SUCH A GOOD STEWARD OF OUR
INVESTMENT AND COMMITTED TO MAINTAINING THE
LOWEST COST OF OPERATIONS IN OUR INDUSTRY.”
Frank Blair, Owner I Schnarr’s Hardware Company
Ladue, MO I Member since 2000
This winter season was among the harshest on record, characterized by recordlow temperatures and severe snowstorms in many parts of the nation, and
drought and high temperatures in others. When harsh conditions made items
like shovels, snow blowers, generators and ice melt a necessity, many Do it Best
member-owners thrived; some even garnered local and national media attention,
hailed as the only store in town with critical items in stock. This ability to rise
to the occasion can be credited to the logistics excellence of Do it Best Corp.
Whether members are performing a routine restock or facing a weather
emergency, Do it Best Corp. meets each individual business’ needs through a
network of delivery trucks and eight strategically located Retail Service Centers
(RSCs). This March, Do it Best Corp. celebrated the grand opening of a new
RSC in Sikeston, Missouri. As the co-op’s strategic hub for product distribution
to members throughout the Midwest and central US, the 550,000-squarefoot state-of-the-art facility stocks $22 million in inventory and employs 130
team members. The $34 million investment is intended to drive even greater
efficiency in the region and set the stage for future growth. The integration of new
technology and improved processes is already showing great promise, as the
Sikeston RSC delivered a 98% fill rate on its very first day. For Do it Best Corp., it’s
another way we’re demonstrating our unwavering commitment to our members.
35
NRHA
YOUNG RETAILERS
OF THE YEAR
Each year, the North American Retail Hardware Association (NRHA) presents its Young Retailer
of the Year Awards to a new generation of industry leaders. For 2014, Do it Best Corp. members
were once again proudly represented by two outstanding winners: Zach Coblentz of Hartville
Hardware in Hartville, Ohio, and James Coté of Osterville House & Garden in Osterville, Maine.
Each of these exemplary young retailers was chosen in his respective category for his hard
work, dedication and innovative approach to retailing.
ZACH COBLENTZ
Outdoor Power Equipment Division Manager
Hartville Hardware
Hartville, OH
OVER $2 MILLION IN ANNUAL SALES
Zach oversees some of Hartville Hardware’s largest and most visible
departments, including outdoor power equipment, tool parts and
repair, service and rental. He had a major hand in the design of those
areas when Hartville opened its new store in 2012, and he constantly
searches for new categories to boost sales in his departments.
“ THE SIGN OF A TRUE
LEADER IS HAVING
SOMEONE FOLLOW HIM,
AND ZACH HAS BUILT A
TEAM WHO RESPECTS
HIM AND IS WILLING TO
WORK HARD FOR HIM.”
Howard Miller,
President of Hartville Hardware
He managed the development and growth of the store’s exceptional
partnership with John Deere while adding other marquee brands like Stihl
and Honda. Zach also researched and introduced several new product
categories into his department – including toys, compact utility tractors,
utility vehicles and utility trailers – that have all been very profitable. Zach
significantly streamlined operations for parts, rental, and repair, creating
a faster, more efficient system that has increased margin and improved
customer satisfaction. And he’s led the implementation of the store’s rental
department, creating a steady and significant revenue source in the process.
Through his leadership and determination, Zach has increased power
equipment sales by double digits every year since he took over management
of that department. He aggressively brings in new product lines, skillfully
merchandises his departments and builds a strong team committed to
customer service. “The sign of a true leader is having someone follow him, and
Zach has built a team who respects him and is willing to work hard for him,”
says Howard Miller, president of Hartville Hardware. “Under Zach’s leadership,
sales in power equipment have nearly doubled in the last five years.”
ZACH COBLENTZ
JAMES COTÉ
JAMES COTÉ
Owner
Osterville House & Garden
Osterville, MA
UNDER $2 MILLION IN ANNUAL SALES
When he was just 24 years old and six months out of college, James
purchased a struggling hardware store that was about to go out of
business. He saw opportunity where others saw disaster and he was
willing to risk his future by trusting in his ability to turn the store around.
“ I THINK IT’S IMPORTANT
TO GIVE BACK TO THE
COMMUNITY THAT GIVES
SO MUCH TO ME.”
James Coté
In his first year, James focused on replenishing the mostly empty shelves
and paying his employees. James believed in his plan for the store,
and he put his money where his mouth was—he didn’t give himself a
paycheck for the first 8 months he owned the store, instead investing
in the business he was determined to make a success. He doubled
the number of products he carried, remodeled the front counter and
entryway, and significantly expanded the housewares department.
James’ first year was an unqualified success. Not only did he save the store
from going out of business, he increased sales by 48 percent and grew
customer counts by 19 percent. James continued to improve the store’s
selection and make it more profitable by increasing margin. During his first
three years, James used his leadership and vision to rebuild the store’s
credibility with the community and increased sales by 76 percent.
He has also been involved in local politics, holding a seat on the town
council and working on legislation to improve his community. “I think
it’s important to give back to the community that gives so much to me,”
he says. “I want to make sure people know that we are a lot more than
just a brick-and-mortar store; we are a part of the community.”
BOARD OF
DIRECTORS
Back row, left to right
KARENA REUSSER
MODERN HOME & HARDWARE
HOWARD MILLER
HARTVILLE HARDWARE
JOHN HOLMES
HOLMES BUILDING MATERIALS
TOM BROWN
AMERICAN HOME & HARDWARE
BRAD MCDANIEL
MCDANIEL’S DO IT CENTER®
Front row, left to right
Woodsfield, OH
Member since 1981 I 1 location
Elkton, MD
SCOTT PARKER
PARKER DO IT BEST® LUMBER
Beaumont, TX
Member since 1975 I 22 locations
CHAIRMAN
TOM LAMBERTH
RUSSELL DO IT CENTER®
Alexander City, AL
38
Hartville, OH
Snohomish, WA
TOM NOBLE
NOBLE SALES
Rockland, MA
BRIAN BUSWELL
ALL AMERICAN DO IT CENTER®
Tomah, WI
Baton Rouge, LA
VICE CHAIRMAN
JIM LEHRER
BROWNSBORO HARDWARE & PAINT
Louisville, KY
SECRETARY
RANDY SKINNER
TAHLEQUAH LUMBER
Tahlequah, OK
TREASURER
ROBERT ASHLEY
TRIPLE “A” BUILDING CENTER
Canton, NY
EXECUTIVE
STAFF
Standing, left to right
Seated, left to right
GARY FURST
JAY BROWN
Vice President of Human Resources
and General Counsel
Vice President of Sales and
Business Development
QUENT ONDRICEK
RICH LYNCH
Vice President of Lumber
and Building Materials
Vice President of Marketing
TIM MILLER
Vice President of Finance and CFO
DOUG ROTH
Vice President of Retail Logistics
MIKE ALTENDORF
Vice President of Information Technology
DAN STARR
Executive Vice President and COO
STEVE MARKLEY
Vice President of Merchandising
We’d like to recognize our
June 2014 retiree:
JOHN SNIDER
FORMER VICE PRESIDENT
OF RETAIL LOGISTICS
39
BY THE
NUMBERS
FISCAL YEAR
2014
FINANCIALS
2.87 BILLION GROSS
$
MEMBER PURCHASES
Up 2.63%, RSC Sales up 3.76%
Largest 52-week increase since 2006
115.4 MILLION
$
REBATE
11th consecutive year over $100 million
0 LONG-TERM DEBT
$
MEMBERS
3 ENTREPRENEURS
OF THE YEAR
LBM Journal Magazine
40
2 YOUNG RETAILERS
OF THE YEAR
North American Retail Hardware Association
INDEPENDENT AUDITOR’S REPORT
42
FINANCIAL STATEMENTS
OPERATIONS
2.05%OPERATING COST
95.6%ON-TIME DELIVERY
98.69%ORDER ACCURACY
96.7%FILL RATE
CONSOLIDATED BALANCE SHEETS
43
CONSOLIDATED STATEMENTS OF INCOME
44
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) 45
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY 46
CONSOLIDATED STATEMENTS OF CASH FLOWS
47
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
48
We state and attest that:
1. To the best of our knowledge, based
upon a review of the following
reports of Do it Best Corp.
(a)No report contained an untrue
statement of a material fact
as of the end of the period
covered by such report; and
(b)No report omitted to state a
material fact necessary to make
the statements in the report, in
light of the circumstances under
which they were made, not
misleading as of the end of the
period covered by such report.
2. We have reviewed the contents of this
statement with the Do it Best Corp.
board of directors.
Robert N. Taylor
President and CEO
1 GOLDEN HAMMER
RECIPIENT
J. Douglas Roth
Vice President of Finance and CFO
41
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Member-Shareholders
Do it Best Corp.
Fort Wayne, Indiana
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying consolidated financial statements of Do it Best Corp. (“the Company”), which comprise
the consolidated balance sheets as June 28, 2014 and June 29, 2013, and the related consolidated statements of income,
comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended June
28, 2014, and the related notes to the financial statements.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Do it Best Corp. as of June 28, 2014 and June 29, 2013, and the results of its operations and its cash flows
for each of the three years in the period ended June 28, 2014 in accordance with accounting principles generally accepted
in the United States of America.
Crowe Horwath LLP
Fort Wayne, Indiana
August 29, 2014
42
CONSOLIDATED BALANCE SHEETS
See accompanying notes to the consolidated financial statements
June 28, 2014 and June 29, 2013
20142013
(Amounts in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 79,869
$ 108,013
Accounts and notes receivable, less allowance for doubtful
accounts of $494 in 2014 and $1,374 in 2013 292,329
271,034
Income tax receivable – 1,846
Merchandise inventories 245,543229,894
Prepaid expenses and deferred charges 965
908
Investments – 7,050
Deferred income taxes 4,236 3,075
Total current assets 622,942 621,820
Property and equipment, net 116,785 99,964
Accounts and notes receivable, less current maturities Deferred income taxes Other assets
Total assets 2,156 2,839
16,036 16,816
7,060 1,445
$ 764,979 $
742,884
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 397,845 $ 389,192
Income tax payable
230
–
Accrued expenses 49,884 42,326
Total current liabilities 447,959 431,518
Long-term portion of accrued pension and other postretirement liabilities 34,001 36,683
Shareholders’ equity
Common stock, voting Common stock, non-voting Preference stock Accumulated other comprehensive loss Retained earnings 3,131 483 291,534 (15,144) 3,015 3,201
469
284,342
(15,968)
2,639
Total shareholders’ equity 283,019 274,683
Total liabilities and shareholders’ equity $ 764,979 $
742,884
43
CONSOLIDATED STATEMENTS OF INCOME
Years ended June 28, 2014, June 29, 2013 and June 30, 2012
(Amounts in thousands)
Gross sales 2014 2013 2012
$ 2,873,108 $ 2,799,515 $ 2,682,198
Returns and allowances 93,919 92,815 92,999
Net sales 2,779,189 2,706,700 2,589,199
Cost of sales 2,591,414 2,524,516 2,408,205
Gross profit 187,775 182,184 180,994
Selling, general and administrative expenses 58,941 52,379 54,557
Income before other income, profit sharing and pension
costs, shareholders’ refund and income taxes 128,834 129,805 126,437
Other income, net 1,951 1,847 2,351
Income before profit sharing and pension
costs, shareholders’ refund and income taxes 130,785 131,652 128,788
Profit sharing and pension costs 14,506 14,456 12,355
116,279 117,196 116,433
Income before shareholders’ refund and income taxes Shareholders’ refund
Cash 88,294 91,052 85,227
Preference stock 27,082 25,339 30,460
Total shareholders’ refund 115,376 116,391 115,687
Income before income taxes 903 805 746
Federal and state income taxes 527 433 235
376 372 511
44
Net income DO IT BEST CORP. ANNUAL REPORT 2014
$
$
$
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
2014 (Amounts in thousands)
Net income $
376 2013 $
Other comprehensive income (loss):
Change in defined benefit plans, net of tax 824 Unrealized holding gain on available-for-sale
securities, net of income tax effect – Total other comprehensive income (loss) Comprehensive income (loss) 824 $ 1,200 372 2012
$
511
7,976 (14,576)
416 –
8,392 (14,576)
$ 8,764 $ (14,065)
45
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
2012
Common stock, voting
Balance, beginning of year $
Shares issued Shares repurchased 3,201 $
111 (181) 3,285 $
120 (204) 3,345
125
(185)
3,131 3,201 3,285
483 469 Preference stock
Balance, beginning of year Shares issued Shares repurchased 284,342 27,082 (19,890) 280,083 25,339 (21,080) 275,404
30,460
(25,781)
291,534 284,342 280,083
(15,968) (24,360) (9,784)
– 824 416 7,976 –
(14,576)
Balance, end of year (15,144) (15,968) (24,360)
Retained earnings
Balance, beginning of year Net income 2,639 376 2,267 372 1,756
511
3,015 2,639 2,267
Balance, end of year Accumulated other comprehensive loss
Balance, beginning of year Unrealized holding gain on available-for-sale
securities, net of income tax effect Change in defined benefit plans, net of tax 469 488 475
16 –
31
(2) (19) (18)
Balance, end of year Balance, end of year Common stock, non-voting
Balance, beginning of year Shares issued Shares repurchased Balance, end of year Total shareholders’ equity 46
2013 DO IT BEST CORP. ANNUAL REPORT 2014
$ 283,019 $ 274,683 488
$ 261,763
CONSOLIDATED STATEMENTS OF CASH FLOWS
2013 2012
Cash flows from operating activities
Net income $
376 $
372 $
511
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 9,260 8,003 8,118
Provision for (benefit from) deferred income taxes (932) 742 (280)
Loss on sale of assets 95 5 103
Shareholder refunds in preference shares 27,082 25,339 30,460
Changes in operating assets and liabilities
Accounts and notes receivable, net (20,612) (16,231) 26,678
Merchandise inventories (15,649) 3,625 (11,438)
Other assets (5,672) (483) 1,615
Accounts payable 8,653 (6,817) 50,234
Accrued federal income taxes 2,076 (308) (1,136)
Accrued expenses 6,252 3,247 (16,986)
10,929 17,494 87,879
Cash flows from investing activities
Sale of long-term investment Proceeds from sale of property and equipment Capital expenditures 7,050 26 (26,203) – – (31,263) –
–
(4,579)
(19,127)
(31,263) (4,579)
111 (181) 16 (2) (19,890) 120 (204)
– (19) (21,080) 125
(185)
31
(18)
(25,781)
Net cash used in financing activities (19,946) (21,183) (25,828)
Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year (28,144) 108,013 (34,952) 142,965 57,472
85,493
Net cash provided by operating activities Net cash used in investing activities Cash flows from financing activities
Issuance of common shares Purchase of common shares Issuance of non-voting common shares Purchase of non-voting common shares Purchase of preference shares Cash and cash equivalents, end of year $ 79,869 $ 108,013 $ 142,965
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 28, 2014, June 29, 2013 and June 30, 2012 (Amounts in thousands, except share data)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: The consolidated financial
statements include the accounts of Do it Best Corp. and its
wholly-owned subsidiaries (the “Company” or “Do it Best”).
All significant intercompany accounts and transactions have
been eliminated in consolidation.
Nature of operations: Do it Best is a member-owned
wholesaler of hardware, lumber, builder supplies and related
products, operating as a wholesaler cooperative. Members
are located principally in the United States, with some member
locations abroad. Only dealers in hardware, lumber, builder
supplies and related products are eligible to hold shares in
the Company. Nearly all of the Company’s sales are to dealermembers, each of whom is required to purchase twenty voting
common shares at $50 per share on becoming a member
and, in some cases, shares of non-voting common stock.
Fiscal year: The Company’s fiscal year consists of 52 or 53
weeks ending on the last Saturday in June. A fifty-third week
will be added every five or six years. All references to “2014”,
“2013” and “2012” relate to the fiscal years ended June 28,
2014, June 29, 2013 and June 30, 2012.
Capital structure: The Company’s capital is primarily
derived from the issuance of voting common shares together
with the preference shares issued in connection with the
Company’s annual shareholders’ refund. The Articles of
Incorporation require that each member shareholder accept
preference shares in payment of refunds, under requirements
of the formula set forth in the By-Laws, and the payment of at
least twenty percent in cash.
Upon a member’s termination of membership with the Company
and demand for repurchase, the Company will repurchase
the voting and/or non-voting common shares held by such
shareholder at the lesser of cost or book value. After a holder
of voting or non-voting common shares requests repurchase of
those shares concurrently with termination of their relationship
with the Company as a member-shareholder, the Board of
Directors may also authorize purchase of the preference shares
held by such shareholder, subject to statutory and By-Law
restrictions, in sequence of termination, with the completion
of repurchases typically deferred for eighteen to twenty-four
months after Board of Directors approval.
48
Upon request of a shareholder, the Company may redeem
part of a shareholder’s preference shares where such
shareholder has experienced a substantial uninsured financial
loss through catastrophe, or where the member presents
a plan for a new retail business. Any request is subject to
standards and limitations imposed by the Board of Directors
or the Company.
Upon liquidation of the Company for any reason, the holders
of the preference shares shall be entitled to receive out of the
assets of the Company the sum of $100 per share before any
distribution is made to the holders of voting and non-voting
common shares.
Shareholder refund: At the end of each fiscal year, the
Company is obligated to refund to its member-shareholders
the gross profit on sales of merchandise to the membershareholders, less all operating expenses. Refunds are
required to be made to each member-shareholder in the
proportion of the gross profit on purchases to the total
gross profit on purchases made by all member-shareholders,
adjusted for participation in the Enhanced Rebate program.
Total cash shareholder refunds to be paid approximated
$88,300, $91,100 and $85,200 in 2014, 2013 and in
2012, respectively. These amounts are currently included in
accounts payable. The Company also issued preference stock
shareholder refunds of approximately $27,100, $25,300 and
$30,500 in 2014, 2013 and in 2012, respectively. These
amounts are included in equity.
Use of estimates: Preparation of the consolidated
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from these estimates, making it reasonably
possible that a change in certain of these estimates could
occur in the near term. Certain significant estimates and
assumptions used in the preparation of the Company’s
consolidated financial statements include those used for:
pension and postretirement benefit plans; allowances for
doubtful accounts; and inventory valuation.
NOTE 1: Continued
Income taxes and uncertain tax positions: The Company
accounts for income taxes under the asset and liability method.
The Company’s taxable income is determined after deducting
refunds to member-shareholders. Deferred tax assets and
liabilities are recognized for operating loss and tax credit
carryforwards and for the estimated future tax consequences
attributable to differences between consolidated financial
statement reporting basis of existing assets and liabilities and
their respective income tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates anticipated to
be in effect for the year in which those temporary differences
are expected to be recovered or settled. The measurement
of deferred tax assets is adjusted by a valuation allowance,
if necessary, to recognize, based on available evidence, the
future tax benefits that will more likely than not be realized.
The Company accounts for uncertainty in income taxes under
the provisions of Accounting Standards Codification (“ASC”)
740. A tax position is recognized as a benefit only if it is “more
likely than not” that the tax position would be sustained in a
tax examination, with a tax examination being presumed to
occur. The amount recognized is the largest amount of tax
benefit that is greater than 50% likely of being realized on
examination. For tax positions not meeting the “more likely
than not” test, no tax benefit is recorded. Management is
not aware of any uncertain tax positions. The Company is no
longer subject to examination by taxing authorities for years
before June 25, 2011.
The Company is subject to U.S. federal income tax, as well
as various state income taxes. The Company does not expect
the total amount of unrecognized tax benefits to significantly
change in the next 12 months. The Company recognizes
interest and/or penalties related to income tax matters in
income tax expense. The Company did not have any amounts
accrued for interest and penalties at June 28, 2014 and June
29, 2013, respectively.
Inventory valuation: Merchandise inventories are valued
at the lower of cost or market, with cost determined on a
first-in, first-out (FIFO) basis. Do it Best enters into various
purchase rebate programs with vendors, pursuant to binding
arrangements. Where the rebate or incentive is probable
and estimable, it is recognized as a reduction to cost of
each underlying transaction. If a rebate is not probable or
reasonably estimable, such rebates are recognized on their
achievement.
Shipping and handling fees and costs: The Company
includes shipping and handling fees billed to members in
gross sales. Shipping and handling costs associated with
inbound freight are included in cost of sales.
Comprehensive income (loss): Comprehensive income
(loss) is a more inclusive measurement of results, including
items that are not recognized in the measurement of net
income (loss). Comprehensive income (loss) represents
the change in the Company’s defined pension plans and the
change in unrealized gains and losses on securities available
for sale.
Accounts receivable and revenue recognition: Do it Best
sells to members using credit terms customary in its industry.
The Company determines delinquent accounts in accordance
with sales terms. When an invoice becomes delinquent, it is
generally subject to interest at 1.5% per month. Approximately
$4,140 and $3,358 of recorded trade receivables, past
due by 90 days, were accruing interest in 2014 and 2013,
respectively. Management establishes a reserve for losses on
its accounts based on historic loss experience and current
economic conditions. Losses are charged against the reserve
when management deems further collection efforts will not
produce additional recoveries. Do it Best has the right to set
off amounts owing by the Company to its members against
indebtedness owed the Company by its members.
Revenues from the sale of warehoused merchandise to
members are generally recognized when goods are shipped.
Sales revenues for goods acquired and sold to members under
drop-ship arrangements with vendors are generally recognized
in accordance with vendor terms as to title and risk of loss
passage. The Company provides cooperative advertising, among
other services, to its members. Revenues for such services are
recognized when the services are rendered.
49
NOTE 1: Continued
Fair value of financial instruments: The Company follows
guidance in ASC 820 which defines fair value, establishes a
framework for measuring fair value and expands disclosures
about fair value measurements. This requirement establishes a
fair value hierarchy regarding the assumptions used to measure
fair value and clarifies assumptions about risk and the effect
of a restriction on the sale or use of an asset. This fair value
hierarchy requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when
measuring fair value. The requirement describes three levels of
inputs that may be used to measure fair value. See Notes 8 and
10 for further discussion.
The fair value of cash and cash equivalents, accounts and
notes receivable and accounts payable approximates carrying
value because of the short-term maturities of these financial
instruments, or underlying interest rates, where applicable,
approximate market for the same or similar issues.
Cash and cash equivalents: The Company considers all highly
liquid investments purchased with an initial maturity of three
months or less to be cash equivalents. The Company places its
cash with high credit quality financial institutions. Cash balances
generally exceed insurance provided on such deposits.
Property and equipment: Property and equipment are
stated at cost. Upon retirement or sale of assets, the cost of
the disposed assets and related accumulated depreciation
are removed from the accounts, and any resulting gain or
loss is credited or charged to income, respectively. Major
additions and improvements are capitalized, while minor items,
maintenance and repairs are expensed currently. Depreciation
is calculated using straight-line methods. Estimated useful lives
range from fifteen to forty years for building and improvements,
and from three to ten years for equipment and fixtures.
50
Advertising and promotion costs: Costs associated with
advertising and promotions are charged to operations in the
period incurred. The Company participates in cooperative
advertising arrangements with its vendors. Reimbursements
received under cooperative advertising arrangements with
vendors are recognized as a reduction of associated advertising
costs. Advertising and promotion costs charged to operations
in 2014, 2013 and 2012 were $16,806, $18,511 and $19,828,
respectively.
Reclassifications: Certain prior year amounts have been
reclassified to conform to the current year presentation. There
is no effect on net income as a result of these reclassifications.
Marketable securities: The Company has evaluated its
investment policies consistent with ASC 320, Investments–
Debt and Equity Securities, and determined that its investment
securities are to be classified as available-for-sale (“AFS”).
AFS securities are carried at fair value, with unrealized
gains and losses reported in shareholders’ equity under the
caption “accumulated other comprehensive loss.” Realized
gains and losses and declines in value judged to be otherthan temporary are recognized in earnings on occurrence,
with cost determined by the specific identification method.
During 2013, the Company determined that their auction rate
security had an other-than temporary loss due to the security
being in a loss position in excess of one year and, as such,
recorded an impairment charge of $450 against earnings.
Previously, the Company recorded this loss in accumulated
other comprehensive loss. The original cost of the auction rate
security approximated $7,500 and it had a maturity date of
December 1, 2047. During 2014, the Company liquidated the
auction rate security for $7,050.
NOTE 1: Continued
Subsequent Events: Management has performed an
analysis of the activities and transactions subsequent to June
28, 2014 to determine the need for any adjustments to and/or
disclosures within the consolidated financial statements for the
year ended June 28, 2014. Management has performed their
analysis through August 29, 2014, the date the consolidated
financial statements were available to be issued.
NOTE 2
CASH FLOWS
Supplemental disclosures of cash flow information for
the years ended 2014, 2013 and 2012 are as follows:
2014 Cash paid for income taxes $
–
2013 $
–
2012
$ 1,650
NOTE 3
CREDIT AGREEMENT
The Company has available an unsecured line of credit with
a commercial bank in the amount of $30,000, with a $4,000
sub-limit for letters of credit. This line of credit is reduced
in availability to $15,000 from April 1 to October 1. Interest
is payable monthly on outstanding balances at either prime
rate plus an applicable margin or Libor plus an applicable
margin. There were no borrowings against the line of credit at
June 28, 2014 or June 29, 2013. The line of credit agreement
expires on February 28, 2015. Outstanding letters of credit
approximated $1,000 and $580 at June 28, 2014 and June 29,
2013, respectively.
NOTE 4
PROPERTY AND EQUIPMENT
Property and equipment is summarized by major classification
as follows at June 28, 2014 and June 29, 2013:
2014 2013
Land, buildings
and site improvements $ 141,747 $ 108,702
Equipment and fixtures 68,633 53,266
Capitalized software
20,259 19,584
Construction in progress –
26,627
230,639 208,179
Less accumulated depreciation
and amortization 113,854 108,215
Property and equipment, net $ 116,785 $ 99,964
NOTE 5
OPERATING LEASES
The Company leases office space, data processing equipment,
software, office equipment, autos and delivery equipment
under operating leases expiring on various dates through
2018. Various agreements are cancelable at the option of the
Company upon fulfillment of certain conditions. Future annual
minimum lease payments under all non-cancelable operating
leases as of June 28, 2014 approximate $111, $93, $58, and
$2 in 2015, 2016, 2017, and 2018, respectively, and $264 in
the aggregate. Rents charged to operations under all operating
leases during 2014, 2013 and 2012 were $46,200, $45,800
and $46,100, respectively.
51
NOTE 6
CAPITAL STOCK SHARE DATA
Share data relevant to amounts reported in the consolidated statements of shareholders’ equity is as follows:
2014 2013 2012
Common stock, voting $50 par value, 990,000
shares authorized:
Shares outstanding, beginning of year Shares issued Shares repurchased 64,020 2,220 (3,620) 65,700 2,400 (4,080) 66,900
2,500
(3,700)
62,620 64,020 65,700
Common stock, non-voting $50 par value,
100,000 shares authorized:
Shares outstanding, beginning of year Shares issued Shares repurchased 9,370 310 (30) 9,750 – (380 ) 9,490
620
(360)
9,650 9,370 9,750
Preference shares, $100 par value, 4,000,000
shares authorized:
Shares outstanding, beginning of year Shares issued Shares repurchased 2,843,422 270,818 (198,905) 2,800,829 253,389 (210,796 ) 2,754,045
304,604
(257,820)
2,915,335 2,843,422 2,800,829
Shares outstanding, end of year Shares outstanding, end of year Shares outstanding, end of year NOTE 7
TRANSACTIONS WITH UNCONSOLIDATED EQUITY AFFILIATE
Do it Best is a 50% stakeholder in Alliance International, LLC (“the Alliance”), a hardware and related products purchasing
consortium consisting of Do it Best and an unrelated party engaged in the distribution and sale of hardware and related products.
The Alliance procures vendor purchase contracts to enable vendor pricing on a larger scale than that which would be available to
the individual companies. Virtually all purchases made by Do it Best are transacted through the Alliance.
Do it Best provides certain management services, including accounting assistance to the Alliance, for which the Alliance
reimburses Do it Best in accordance with the management services arrangement. The parties share in the expenses of the Alliance
proportionate to their benefit received. During 2014, 2013 and 2012, Do it Best was charged $167, $150 and $189, respectively,
by the Alliance for administrative costs. Do it Best was paid $37, $35 and $34, respectively, in 2014, 2013 and 2012 for
management services rendered to the Alliance.
52
NOTE 8
EMPLOYEE BENEFIT PLANS
Retirement plans: The Company has a defined benefit
pension plan and a defined contribution profit sharing plan (“the
Plans”), both covering substantially all employees. Benefits are
based on years of service and the employee’s compensation
during the last five years of employment.
The Company makes various discretionary contributions to
the Plans. Retirement plan costs related to the pension plan
approximated $6,800, $8,700 and $4,900 for 2014, 2013 and
2012, respectively. Benefits paid to employees related to this
plan approximated $5,800, $5,600 and $4,600 in 2014, 2013
and 2012, respectively. Cost related to the defined contribution
profit sharing plan approximated $7,700, $5,800 and $7,400
in 2014, 2013 and 2012, respectively.
The Company has a defined benefit supplemental retirement
plan with its executives, designed to provide benefits that
would have been received under the retirement plan were it
not for maximum limitations imposed by ERISA and the Internal
Revenue Code. Expense is incorporated into retirement plan
cost noted above.
Management estimates approximately $0 will be contributed
to the defined benefit pension plan by the Company during the
fiscal year ending June 27, 2015.
Expected benefit payments for the ensuing five years and
in the aggregate related to the defined benefit pension plan
approximate $7,000, $8,200, $8,100, $8,000, and $8,300
in 2015, 2016, 2017, 2018 and 2019, respectively. Expected
benefit payments from 2020 to 2024 approximate $47,600, for
an aggregate total of $87,200.
Postretirement medical benefit plan: The Company has
a postretirement medical benefit plan (“the Plan”). The Plan
covers retired employees who are less than 65 years of age
and have greater than 10 years of service with the Company.
Employees over 65 years of age are not covered beyond
benefits provided by Medicare. Costs (income) related to the
Plan approximated $(185), $(69) and $109 in 2014, 2013
and 2012, respectively. Participant contributions to the Plan
aggregated $33, $51 and $46 in 2014, 2013 and 2012,
respectively. Benefits paid to employees related to the Plan
aggregated $1,036, $1,224 and $969 in 2014, 2013 and
2012, respectively.
Management estimates approximately $280 will be contributed
to the Plan by the Company during the fiscal year ending June
27, 2015.
Expected benefit payments for the ensuing five years and in
the aggregate related to the Plan approximate $800, $700,
$700, $600, and $600 in 2015, 2016, 2017, 2018 and 2019,
respectively. Expected benefit payments from 2020 to 2024
approximate $2,200, for an aggregate total of $5,600.
Effective April 1, 2011, the Plan was frozen such that any
participants who were not retired as of that date, ceased
participation in the plan. As a result of this change, the plan
was re-measured as of March 31, 2011, a negative prior service
cost base was established equal to the reduction in APBO for
those individuals who ceased participation, and a curtailment
charge was recognized equal to the change in the plan’s
funded status due to the accelerated retirement.
The Plan contains an assumption about the annual rates of
change in the cost of health care benefits currently provided by
the Plan, due to factors other than changes in the composition of
the Plan population by age and dependency status, for each year
from the measurement date until the end of the period in which
benefits are expected to be paid. The health care cost trend rate
implicitly considers estimates of health care inflation, changes
in health care utilization or delivery patterns, technological
advances, and changes in the health status of the Plan
participants. Differing types of services, such as hospital care
and dental care, may have different trend rates. During 2012, the
trend rate was reset to 8.5% for fiscal year 2012, grading down
to an ultimate rate of 5.00% through and after 2021.
The following schedule shows changes in the benefit
obligation, plan assets and funded status of the Plans. Benefit
obligation balances presented below reflect the projected
benefit obligation for the Company’s retirement and pension
plans, and accumulated postretirement benefit obligations for
the postretirement medical plan. The measurement date used
to determine the benefit obligations were each June 30.
53
NOTE 8: Continued
Retirement and Pension Plan
Change in benefit obligation:
Beginning balance 2014 $ 98,386 2013 Postretirement Medical Plan
2012 $ 101,221 $ 75,971 2014 2013 $6,863 $ 8,120 2012
$
8,387
Service cost 5,880 6,222 4,685 – – –
Interest cost 4,530 4,242 4,089
279 301 422
Plan participants’ contributions – – –
33 51 46
Actuarial (gain)/loss 5,275 (7,695) 21,101 (278) (385) 234
Benefits paid (5,757) (5,604) (4,625) (1,036) (1,224) Ending balance (969)
$108,314
$ 98,386 $ 101,221 $5,861
$ 6,863 $
8,120
$65,405 $ 61,744 $ 56,857 $2,055 $ 2,074 $
2,066
Change in plan assets:
Beginning balance at fair value Actual return on plan assets 10,129 7,153 1,151 286 215 61
Company contributions 7,730 2,112 8,361 382 939 870
Plan participants’ contributions – – – 33 51 46
Benefits paid (5,757) (5,604) (4,625) (1,036) (1,224) Ending balance at fair value $77,507
$ 65,405 $ 61,744 $ 1,720 $ 2,055 Under funded status $ (30,807) $ (32,981) $ (39,477) $ (4,141) $ (4,808) $ (6,046)
$
$
2,074
Amounts recognized in statement of
financial position consist of:
Current liabilities $
Non-current liabilities Net liability recognized in
balance sheet 54
$
(969)
(667) (30,140) $ (30,807) (792) $
(249) (32,189) (39,228) $ (32,981) $(39,477) (280) $
(3,861) (314) $
(4,494) (353)
(5,693)
$ (4,141) $ (4,808) $ (6,046)
NOTE 8: Continued Retirement and Pension Plan
2014 2013 Postretirement Medical Plan
2012 2014 2013 2012
Reconciliation of amounts recognized in
accumulated other comprehensive (loss) income:
Prior service cost $
Net transition obligation (123) $
– (165) $
– (207) $3,586 $ 3,983 $ 4,379
– – – (26)
Net actuarial loss (27,200) (28,431) (41,450) (1,504) (2,000) (2,600)
Accumulated other comprehensive (loss) income (27,323) (28,596) (41,657) Prepaid (underfunded accrued) benefit cost Net liability recognized in balance sheet Change in accumulated
other comprehensive income (loss)
Beginning of year (no tax effect) Less amounts amortized during the year:
(3,484) (4,385) 2,082 1,983 1,753
2,180 (6,223) (6,791) (7,799)
$ (30,807) $ (32,981) $ (39,477) $ (4,141) $ (4,808) $ (6,046)
$ (28,596) $ (41,657) $ (17,851) $1,983 $ 1,753 $ 2,238
Net transition obligation – – – – (26) (65)
Prior service (cost) credit arising during the year (43) (41) (43) 396 396 396
Net (loss) gain arising during the year (1,618) (2,807) (910) (72) (139) (154)
10,213 (24,759) 423 461 (308)
End of year (27,323) (28,596) (41,657) 2,082 1,983 Deferred income taxes (833) (793) Accumulated other comprehensive (loss)
income, net of tax Occuring during the year:
Amortization of net (loss) gain (388) 10,930 11,438 16,663 $ (16,393) $ (17,158) $ (24,994) 1,753
(701)
$1,249 $ 1,190 $ 1,052
Estimated amounts to be amortized from accumulated
other comprehensive income over the next fiscal year:
Prior service credit (cost) (42) $
(42) $
Net transition obligation – – – – – (26)
Net acturial loss (1,408) (2,690) (2,733) (80) (130) (203)
(1,450) $ (2,732) $ (2,775) Total $
$
(42) $396 $
$316 $
396 $
266 $ 396
167
55
NOTE 8: Continued
As of June 28, 2014, the defined benefit pension plans and the postretirement medical plan had accumulated benefit obligations
of approximately $88,800 and $5,900, respectively. At June 29, 2013, the defined benefit pension plans and the postretirement
medical plan experienced accumulated benefit obligations of approximately $80,200 and $6,900, respectively. At June 30,
2012, the defined benefit pension plans and the postretirement medical plan experienced accumulated benefit obligations of
approximately $82,200 and $8,100, respectively.
The change in deferred taxes recognized in other comprehensive income (loss) approximated $(550), $(5,300), and $9,700
during 2014, 2013, and 2012, respectively.
The components of net periodic benefit (cost) income are as follows:
2014 Components of net periodic benefit (costs)/income:
Service cost $
Interest cost Expected return on plan assets Amortization Net periodic benefit (costs)/ income $
(5,880) $ (4,530) 5,243 (1,660) (6,827) $ 2013 2012 Postretirement Medical Plan
2014 2013 (6,222) $ (4,685) $
– $
– $
(4,242) (4,089) (279) (301) 4,634 4,809 139 138 (2,851) (952) 325 232 (8,681) $ (4,917) $ 185 $ 69 $
2012
–
(422)
135
178
(109)
Assumptions: Weighted-average actuarial assumptions used to determine pension and other postretirement obligations as of
year-end are as follows:
Discount rate Salary increase Current year trend Ultimate year trend Year of ultimate trend date 2014 2014 2013 2013 2012 2012
Retirement Retirement Retirement
andPost- and Post- andPostPensionretirement Pension retirement Pensionretirement
PlanMedical Plan Medical PlanMedical
4.50% 3.96% N/A N/A N/A 4.50% N/A 8.50% 5.00% 2021 4.75% 3.88% N/A N/A N/A 4.75% N/A 8.50% 5.00% 2021 4.25% 3.83% N/A N/A N/A 4.25%
N/A
8.50%
5.00%
2020
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate Salary increase Long-term rate of return on assets Current year trend Ultimate year trend Year of ultimate trend date 56
2014 2014 2013 2013 2012 2012
Retirement Retirement Retirement
andPost- and Post- andPostPensionretirement Pension retirement Pensionretirement
PlanMedical Plan Medical PlanMedical
4.75% 3.96% 7.75% N/A N/A N/A 4.75% N/A 7.75% 8.50% 5.00% 2021 4.25% 3.88% 7.75% N/A N/A N/A 4.25% N/A 7.75% 8.50% 5.00% 2020 5.50% 3.83% 8.00% N/A N/A N/A 5.50%
N/A
7.75%
9.00%
5.00%
2020
NOTE 8: Continued
Plan Assets: The investment policy and strategy is to invest plan assets in order to provide income and capital growth consistent
with reasonable risk tolerance. In determining pension expense, the Company, as fiduciary of the Plan, utilizes an expected long-term
rate of return that, over time, should approximate the actual long-term rate of return earned on plan assets, based upon historical
returns of plan assets and similar asset classes. The assumed rate for the long-term return on plan assets was determined based
upon target asset allocations and expected long-term rates of return by asset class. Plan fiduciaries set investment policies and
strategies for the trust. Long-term strategic investment objectives include preserving the funded status of the plan and balancing
risk and return. The plan fiduciaries oversee the investment allocation process, which includes selecting investment managers,
setting longterm strategic targets and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, and
occasionally plan fiduciaries will approve allocations above or below a target range.
All Plans’ assets are composed primarily of corporate equity and debt securities and U.S. government securities and, depending
on the plan, are directed either by the employer (the defined benefit pension plan and the postretirement medical benefit plan) or
employee (the defined contribution profit sharing plan). The defined benefit pension plan and the postretirement medical benefit
plan assets held consisted of the following at June 28, 2014, and June 29, 2013:
2014
Retirement Post- andretirement Target Allocation: Pension Plan Medical Target Allocation: Equity securities Debt securities Other Total 58% 34% 8% 100% 70% 23% 7% 100% 56% 31% 13% 100% 58% 34% 8% 100% 2013
Retirement and Pension Plan Postretirement
Medical
57% 27% 16% 100% 39%
24%
37%
100%
Financial Accounting Standards Board (“FASB”) ASC 820-10, Fair Value Measurements and Disclosures, establishes a framework
and provides guidance on measuring the fair value of assets in a pension plan and how an employer should disclose the same.
The framework establishes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value.
The three levels of fair value hierarchy are described as follows:
Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access
as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market
participants would use in pricing an asset or liability.
57
NOTE 8: Continued
In some cases, a valuation technique used to measure fair value may include inputs from multiple levels of the fair value hierarchy.
The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The following descriptions of the valuation methods and assumptions used by the Plan to estimate the fair values of investments
apply to investments held directly by the Plan.
Equity, debt and inflation-indexed securities: Fair values reflect the closing price reported in the active market in which the
security is traded (level 1 inputs).
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could
result in a different fair value measurement at the reporting date.
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis in accordance with ASC
820-10 as of June 28, 2014:
2014 Quoted prices
in active markets for identical assets (Level 1) Significant
other observable inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Mutual funds
Money Market $
Domestic Equity International Equity Domestic Fixed Managed Futures Large Blend Unconstrained Bond Domestic equity exchange traded $
173 $
28,893 20,328
13,987 2,755 5,685 3,461 2,225 77,507 $
173 $ 28,893 20,328 13,987
2,755
5,685
3,461
2,225
77,507 $ –
$ – –
–
–
–
–
–
–
$ –
–
–
–
–
–
–
–
–
–
$
– – – – – – –
$
–
–
–
–
–
–
–
–
Post-Retirement Medical Plan
Mutual funds
Money Market $
231 $
Domestic Equity 526 Domestic Fixed 529 International Equity 146 Equities- Common Stock 197
Domestic equity exchange traded 53 International equity exchange traded 38 $ 1,720 $ 58
231 $ 526
529
146
197
53
38
1,720 $ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: Continued
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis in accordance with
ASC 820-10 as of June 29, 2013:
2013 Quoted prices
in active markets for identical assets (Level 1) Significant
other observable inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Mutual funds
Money Market Domestic Equity International Equity Domestic Fixed Managed Futures
Large Blend
Unconstrained Bond
World Bond Domestic equity exchange traded $ 981 25,956 12,909
13,643 2,133
2,270
3,334
2,217 1,962 $ 65,405 $
$
$
$
981 25,956
12,909
13,643
2,133
2,270
3,334
2,217
1,962
65,405 $
763
516
499
70
113
59
35
2,055
$
$
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
$
$
–
–
–
–
–
–
–
–
–
–
Post-Retirement Medical Plan
Mutual funds
Money Market Domestic Equity Domestic Fixed International Equity Equities – Common Stock
Domestic equity exchange traded International equity exchange traded $
763 516 499 70 113
59 35 2,055 $
$
$
–
–
–
–
–
–
–
–
59
NOTE 9
INCOME TAXES
The provision for (benefit from) income taxes at June 28, 2014, June 29, 2013 and June 30, 2012, consisted of the following:
Current income tax provision (benefit) 2014 $ 930 2013 $ (222) 2012
$ 767
Deferred income tax benefit:
Accrued cooperative advertising Allowance for inventory obsolescence Deferred compensation Asset impairment Compensated absences Retirement plans Volume incentive accrual
Postretirement healthcare benefits Allowance for doubtful accounts Accrued self-insured claims Prepaids and other (399)
146 45
(64)
9 (38)
(15) (802) (570)
185 (185)
–
(62) (12) (19)
18 14 521
(841)––
232 414 304
369 1,188 (718)
108
(119)
–
66 2 (57)
(403) Net deferred taxes Provisions for income taxes $ 527 655 $ 433 $
(532)
235
Deferred income taxes are provided to recognize the effects of temporary differences between financial reporting and income
tax reporting. The more significant temporary differences arise from various accrued liabilities, which exceed currently deductible
amounts. Management believes it is more likely than not that deferred income tax assets will be realized in full. Accordingly, no
valuation allowance has been provided.
At June 28, 2014, components of net deferred income taxes recognized in the consolidated balance sheet included deferred income tax
assets of $22,740 and deferred income tax liabilities of $2,468. At June 29, 2013, components of net deferred income taxes recognized
in the consolidated balance sheet included deferred income tax assets of $22,944 and deferred income tax liabilities of $3,053.
State income tax obligations and the non-deductible expenses give rise to the difference between taxes computed at the U.S.
federal statutory income tax rate and the provision for income taxes recorded in the consolidated statements of income
60
NOTE 10
FAIR VALUE
ASC 820-10 as of June 28, 2014:
Cash equivalents 2014 Level 1 $ 20,318 $ 20,318 $ 20,318 $ 20,318 Level 2 $
$
–
–
Level 3
$
$
–
–
ASC 820-10 as of June 29, 2013:
2013 Cash equivalents $ 18,018 $
Marketable security 7,050 $ 25,068 $
Level 1 18,018 $
–
18,018 $
Level 2 –
$
7,050 7,050 $
Level 3
–
–
–
The Company’s marketable security is comprised of an auction rate security within their available-for-sale investment portfolio. The
fair value of the auction rate security was determined using a pricing model that used observable market data. For the Company’s
cash equivalents (money market accounts), fair value was determined using quoted market prices based on the closing price as
of the balance sheet date.
NOTE 11
COMMITMENTS AND CONTINGENCIES
The Company was contingently liable at June 28, 2014, under a loan guarantee program, which has a maximum borrowing capacity
of $5 million, with a Commercial Bank. Under the terms of the loan agreement in order to participate the Borrowers must be both,
Members of and approved by, the Company in order to participate in the program.
Under the terms of the program the Bank will provide a Member loan in the form of a term loan to be paid and amortized either over
84 equal monthly installments with any unpaid balance due at maturity or paid in 7 equal annual principal installments on a straight
line basis plus interest due monthly.
Interest on the loans will be payable at a fixed rate to be determined by the Bank at the time of funding and will be at the prime rate
minus 1%, fixed for a period of 7 years. At June 28, 2014 interest rates on the loans were 2.25%.
The risk of loss under these agreements is spread over many Members and is the estimated fair value considering both the
contingent loss due to default and the value of the Company’s guarantee. The Company believes that any potential loss under the
agreements in effect at June 28, 2014 will not be material to its financial position or results of operations.
The Company, in the ordinary course of business, is the subject of or party to various pending or threatened litigation. While it is
not possible to predict with certainty the outcome of these matters, management of the Company does not believe that they will
materially affect the financial position, or operating results or cash flows of the Company.
61
PHILOSOPHY
Serving others as we would like to be served
MISSION
Making the best even better®
GOAL
Helping our members grow
PO Box 868
Fort Wayne, Indiana 46801-0868
260-748-5300
doitbestcorp.com

annual report - Do it Best Corp.

Transcription

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