Total housing starts in the United States were relatively unchanged in 1997 compared with 1996. Starts in Wickes' primary geographical market, the Midwest, decreased approximately 5.5%. Wickes' two other geographical markets, the Northeast and South, experienced increases in 1997 housing starts of 3.5% and 1.3%, respectively. Nationally, single family housing starts, which generate the majority of Wickes' sales to building professionals, experienced a decrease of 2.4%, from 1.16 million starts in 1996 to 1.13 million starts in 1997.
After extensive review of the 1995 Plan, and changes in business conditions in certain markets in which Wickes operates, Wickes made adjustments to the 1995 Plan and incurred other one time costs resulting in a net $0.7 million charge to results of operations in the fourth quarter of 1996 for restructuring and unusual items. These adjustments included (i) the determination that three of the centers identified in the 1995 Plan for closure will remain open, resulting in a $1.5 million credit to restructuring expense, (ii) the extension of the 1995 plan to include the closing (substantially completed by the end of 1996) of two building centers not previously included, resulting in a $1.3 million charge for the write down of assets and liabilities to their net realizable value and a $0.1 million charge for severance and post-employment benefits, (iii) a $1.1 million charge for impairment in the carrying value of real estate held for sale at closed centers, and (iv) a $0.3 million credit with respect to the resolution of a claim at below the reserved amount.
The Company's real estate investments consist of $9,664,000 in Georgia properties, $4,592,000 in Florida properties and $73,000 in other states.
Realized gains on sales of property and casualty insurance investments included in discontinued operations were $31,000 in 1995.
Accounts receivable at the end of 1997 were $10.6 million, or 14.9%, higher than at year end 1996 as a result of an increase in accounts with extended terms, a reduction in allowance for doubtful accounts, and a receivable established for a property insurance loss. Inventory at the end of December 1997 was $2.0 million higher than at the end of 1996, primarily as a result of an increase in the number of sales and distribution centers. The amount of Wickes' accounts payable on any balance sheet date may vary from the average accounts payable throughout the period due to the timing of payments and will tend to increase or decrease in conjunction with an increase or decrease in inventory. Wickes' use of funds of approximately $3.4 million in other assets was primarily the purchase of $2.2 million in rental equipment to establish rental programs at 25 of its sales and distribution facilities and $0.9 million in additional transaction costs to amend and restate Wickes' revolving credit agreement on April 11, 1997.
A second amendment and restatement of Wickes' revolving credit agreement was completed on April 11, 1997. Among other things, this amendment and restatement (i) extended the life of the facility to March 2001, (ii) reduced the interest rate premiums over LIBOR and over prime by 75 basis points, (iii) included provisions for further interest rate premium reductions if certain performance levels are achieved, (iv) modified certain covenants, and (v) provided for increases in the amount of capital expenditures allowed by the agreement equal to the proceeds received from the sale of certain excess real estate. On December 24, 1997, the second amended and restated revolving credit agreement was amended to incorporate, among other things, a reduction in the fixed charge and net worth levels for the fourth quarter of 1997 and first quarter of 1998. A third amendment which, among other things, further reduced the fixed charge ratio requirement for the first three quarters of 1998 and allowed Wickes to proceed with its 1998 Restructuring plan, was completed in March of 1998. See Note 16 of Notes to Consolidated Financial Statements included elsewhere herein. Wickes currently has excess availability under its revolving credit facility and anticipates that funds provided by operations and under this facility will be adequate for Wickes' future needs.