Annual Report Project
Tiffany Mullins
Professor Aisha Meeks
Accounting II
March 2nd 2013

Ace Hardware
Fiscal Year 2011

Ace Hardware was founded in 1924 by a small group of Chicago hardware store owners, Ace changed the retail landscape by allowing individual stores to purchase merchandise in bulk to save money and buy at the lowest possible price enabling the smaller retail stores to compete with the larger competition in their market. Ace Hardware was a privately held company until 1976 when it became a retailer-owned cooperative in which each store is owned and operated by local entrepreneurs. Ace hardware is currently the largest retailer-owned cooperative and a leader in the convenience segment of the hardware industry. Ace’s store generates annual retail sales of approximately $12 billion with 4,600 stores operating in more than 60 countries.
The guidelines and management of Ace Hardware is established by Ace’s Board of Directors. With positions of anywhere from 9-12 on the board there is a minimum of eight that must be retailer directors and a maximum of 25% of the directors may be non-retailer directors. A system of internal accounting controls are maintained by the company and are supported by an internal audit program which safeguards the company’s assets and assures properly recorded transactions. The current financial position of the Ace Hardware Company is positive. The financial statements show this company is growing and will continue to grow. The Company’s total cash flow equaled $15.8 million which consisted of $96.4 million provided by operating activities, $26.2 million used from Investing activities and a use of $63.8 million in Financing activities. The Net cash provided by operating activities was $96.4 million compared to net cash used in operating activities of $28.2 million in the prior year. The company states that the increase was due to a smaller increase in inventories and due to fewer receivables less cash was used in 2011 compared to 2010. Net cash used in investing activities was primarily due to continued capital investments related to the Company’s supply chain initiative. The increase of Net cash used in financing activities was primarily due to the repayment of borrowings under the Company’s revolving line of credit facility. In 2010 and 2011, the Company approved two new store financing programs that would provide for loans to retailers. During 2011 and 2010, the Company issued loans totaling $9.8 and $14.3 million under these programs.
No shares of stock in the corporation are publicly traded because Ace Hardware is s a retailer-owned cooperative and wholly owned by its independently operated store owners. When retailers affiliate with Ace, they purchase shares of company stock, which gives them voting rights in the cooperative. The cooperative members receive patronage distributions based on the volume of purchases by member retailers during the period. Patronage distributions are allocated on a fiscal year basis with issuance in the following year. The Company’s Patronage distributions come in the form of cash, class C stock, patronage refund certificates, financing deduction, and variance allocation account funds. A cash patronage distribution in the amount of $29.2 million was paid in 2010 an increase of about $13.6 million from the prior year distribution.
Based on the fact that Ace Hardware is not a publically traded company there is only one way to invest in the company and that is to open a store and become part of the retail-owned cooperative. After reviewing the financial statements this company has shown that they are a sustainable company and I believe that the people who have invested in this company have made a good decision. Even during the current recession Ace Hardware has shown growth and reliability to all cooperative partners involved.

References http://ourcompany.acehardware.com/pdfs/2011-financial.pdf http://www.acehardware.com/corp/index.jsp?clickid=footerlink_aboutus_txt&page=about http://ourcompany.acehardware.com/ http://ourcompany.acehardware.com/history.asp