SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{Mark One}
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For quarterly period ended May 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission File No: 0-28812
RANKIN AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-0838383
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
3838 N. Sam Houston Parkway E., #600
Houston, Tx 77032
- ------------------------------------ ----------
(Address of principal executive (Zip code)
offices)
(281) 618-4000
--------------------------------------------------
Registrant's telephone number, including Area Code
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ].
As of July 14, 2000, 5,186,613 shares of common stock were outstanding.
RANKIN AUTOMOTIVE GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - May 31, 2000 (unaudited) and
February 29, 2000
Condensed Statements of Income -Three months ended May 31, 2000
and 1999 (unaudited)
Condensed Statements of Cash Flows -Three months ended May 31,
2000 and 1999 (unaudited)
Notes to Condensed Financial Statements -Three months ended May
31, 2000 and 1999 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED BALANCE SHEETS
MAY 31, FEBRUARY 29,
ASSETS 2000 2000
- ------ --------------- ---------------
(UNAUDITED) (AUDITED)
Current assets:
Cash ................................................................................. $ 730,105 $ 957,119
Accounts receivable, net of allowance for doubtful
accounts of $1,411,597 and $1,380,000, respectively ........................... 9,924,568 9,458,057
Related party receivable ......................................................... 18,115 22,205
Amounts receivable from vendors ...................................................... 4,836,985 4,989,484
Inventories .......................................................................... 43,310,739 47,395,741
Prepaid expenses and other current assets ............................................ 652,979 785,968
--------------- ---------------
Total current assets ............................................................. 59,473,491 63,608,574
Property and equipment, net .............................................................. 4,345,260 4,469,750
Goodwill, net ............................................................................ 8,188,720 8,249,920
Deferred financing costs, net ............................................................ 406,110 433,111
--------------- ---------------
Total assets ..................................................................... $ 72,413,581 $ 76,761,355
--------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................................................... $ 27,140,149 $ 26,131,010
Accrued expenses ..................................................................... 1,239,022 2,447,813
Current portion of long-term debt .................................................... 30,158,724 2,146,448
--------------- ---------------
Total current liabilities ........................................................ 58,537,895 30,725,271
Long-term debt, less current portion ..................................................... 251,862 31,641,605
Commitments and contingencies ............................................................ -- --
Stockholders' equity:
Preferred stock, no par value, 2,000,000 shares
authorized, none issued .......................................................... -- --
Common stock, $.01 par value, 10,000,000 shares
authorized, 5,201,613 and 4,550,000 shares, respectively ......................... 52,016 52,016
Additional paid-in capital ........................................................... 14,513,154 14,513,154
Retained earnings (deficit) .......................................................... (746,346) 24,309
Less: Treasury stock 15,000 shares at cost .......................................... (195,000) (195,000)
--------------- ---------------
Total stockholders' equity ....................................................... 13,623,824 14,394,479
--------------- ---------------
Total liabilities and stockholders' equity ....................................... $ 72,413,581 $ 76,761,355
--------------- ---------------
See Notes to Condensed Financial Statements.
3
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MAY 31,
----------------------------
2000 1999
------------ ------------
Net sales ......................................... $ 29,223,938 $ 28,349,495
Cost of goods sold ................................ 18,233,657 17,656,902
------------ ------------
Gross profit ...................................... $ 10,990,281 $ 10,692,593
Operating, selling, general and
administrative expenses ....................... 10,545,021 9,327,537
------------ ------------
Income from operations ............................ 445,260 1,365,056
Interest expense .................................. 1,215,915 583,127
------------ ------------
Income (loss) before income taxes ................. (770,655) 781,929
Income taxes ...................................... -- --
------------ ------------
Net income (loss) ................................. $ (770,655) 781,929
------------ ------------
Earnings (loss) per share ......................... $ (0.15) $ 0.15
------------ ------------
Earnings (loss) per share - assuming dilution ..... $ (0.15) $ 0.15
------------ ------------
Weighted average common shares outstanding:
Average common shares outstanding ................. 5,186,613 5,097,988
Dilutive effective of stock options ............... -- 1,500
------------ ------------
Average common shares outstanding-assuming dilution 5,186,613 5,099,488
------------ ------------
See Notes to Condensed Financial Statements.
4
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MAY 31,
------------------------------------
2000 1999
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ............................................................................. $ (770,655) $ 781,929
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation ..................................................................... 195,000 197,268
Amortization ..................................................................... 88,200 72,690
Provisions for bad debts ......................................................... 31,597 77,650
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ....................................... (341,519) 363,715
(Increase) decrease in inventories ............................................... 4,085,002 (2,207,320)
Increase (decrease) in accounts payable
and accrued expenses ........................................................... (199,652) 1,213,755
(Increase) decrease in other, net ................................................ 132,989 37,025
--------------- ---------------
Net cash provided by operating activities ................................................ 3,220,962 536,712
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net ................................................. (70,509) (589,315)
Purchase of businesses, net of cash acquired ............................................. -- (13,029,645)
Proceeds from sale of assets ............................................................. -- 12,852
--------------- ---------------
Net cash (used in) investing activities .............................................. (70,509) (13,606,108)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from (repayments on) revolving line of credit ................................. (2,866,651) 22,024,062
Proceeds from (repayments on) other long-term obligations ................................ (510,816) (10,599,353)
Issuance of common stock, net of discount ................................................ -- 1,435,840
Issuance of debt ......................................................................... -- 470,080
Deferred financing costs incurred ........................................................ -- (339,625)
--------------- ---------------
Net cash provided by (used in) financing activities .................................. (3,377,467) 12,991,004
--------------- ---------------
Net decrease in cash ..................................................................... (227,014) (78,392)
Cash, beginning of period ................................................................ 957,119 346,913
--------------- ---------------
Cash, end of period ...................................................................... $ 730,105 $ 268,521
--------------- ---------------
See Notes to Condensed Financial Statements
5
RANKIN AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 31, 2000 (UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Rankin Automotive Group, Inc. (the "Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three months ended May 31, 2000 are not
necessarily indicative of the results that may be expected for the year
ended February 28, 2001.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report
on Form 10-K for the year ended February 29, 2000. Additionally, refer to
the Company's Form 8-K and 8-K/A filed on March 25, 1999 and May 24,
1999, respectively, concerning information on the Company's financing
agreement and acquisitions finalized during the three months ended May
31, 1999.
Certain reclassifications have been made to prior period amounts to
conform to the current year presentation.
2. Long-Term Debt
Long-term debt consists of the following:
FEBRUARY 29,
MAY 31, 2000 2000
------------- -------------
Borrowings under revolving
line of credit $ 24,500,046 $ 27,366,696
Bank term loans 4,743,452 5,014,882
Other notes payable 1,167,088 1,406,475
------------- -------------
30,410,586 33,788,053
Less current maturities (30,158,724) (2,146,448)
------------- -------------
$ 251,862 $ 31,641,605
------------- -------------
On March 10, 1999, the Company entered into a financing agreement
with Heller Financial, Inc. ("Heller"). The agreement provides for term
loans in the aggregate amount of $6.0 million and a revolving line of
credit with a maximum amount of $39.0 million. Drawings under the line of
credit are limited to a certain percentage of eligible trade accounts
receivable and inventory. The term loans require minimum monthly
principal payments totaling approximately $90,000. The term loans and the
revolving line of credit expire in March 2004. The interest rate on the
revolving line of credit is, at the Company's option, either LIBOR plus
3.00% or prime plus .75%. The interest rates on the term loans are .5% to
.75% higher than on the revolving line of credit. During 2000, the
interest rate ranged from 7.15% to 9.87% and the weighted-average
interest rate was 8.3%, The line of credit and term loans are
collateralized by the accounts receivable, inventory and fixed assets of
the Company. The financing agreement contains certain financial covenants
relating to, among other things, "tangible net worth", "ratio of
indebtedness to tangible net worth", "fixed-charge coverage" and "capital
expenditures", all of which are as defined in the financing agreement and
were waived during fiscal 2000 by the lenders. Initial borrowings under
this financing agreement were used to repay the Company's existing
revolving line of credit and to fund the acquisitions referred to in
Note 3.
6
Effective May 26, 2000, the Company amended its financing agreement
and received waivers of all continuing defaults prior to that date. The
amendment changed all financial covenant tests to levels congruent with
the Company's then existing financial performance, reduced the revolving
portion of the credit facility to $30.0 million and increased pricing by
0.25% with additional increases of up to 0.50% depending upon the
Company's leverage. Although the Company was in compliance with the
amended financing agreement as of May 31, 2000, the Company anticipates
that it will not be in compliance with certain covenants as of June 30,
2000. The Company expects to restructure its senior credit facility in
order to be in compliance with such facility during periods after May 31,
2000. If such restructuring would not occur, the Company's lenders could
refuse to permit the Company to continue to draw on the revolving line of
credit or could elect to accelerate any or all of the outstanding loans.
If this were to occur, the Company would have to seek additional sources
of funding to finance its operations. There can be no assurance that such
financing would be available on acceptable terms.
3. Acquisitions of Assets
On March 10, 1999, the Company acquired from US Parts Corporation
("USP") its auto parts distribution center located in Houston, Texas, as
well as seventeen stores that it operated throughout Houston. The total
purchase price included 600,000 shares of the Company's common stock,
$13.6 million of cash (including $5.7 million to repay certain USP's
obligations), issuance of a note payable for $40,000, the assumption of
certain liabilities estimated at $6.9 million and certain other
consideration.
On March 11, 1999, the Company acquired from Automotive & Industrial
Supply Co., Inc. ("A&I") its auto parts distribution center located in
Shreveport, Louisiana, as well as the three stores that it operates in
Shreveport and the store it operates in Marshall, Texas. The total
purchase price included 51,613 shares of the Company's Common Stock, $3.2
million of cash (including $2.1 million to repay certain of A&I's
obligations), the assumption of certain liabilities at $1.9 million and
certain other considerations.
On April 27, 1999, the Company acquired from Allied Distributing
Company of Houston, Inc. and its subsidiary, Auto Parts Investment Group,
Inc., its auto parts distribution center and automotive paint division
located in Houston, Texas, its auto parts distribution center in San
Antonio and nine stores that operate throughout Central and South Texas.
The total purchase price included $10.5 million cash (including $8.5
million to repay certain of Allied's obligations), the issuance of notes
payable for $.7 million, the assumption of certain liabilities estimated
at $7.4 million and certain other consideration.
The cash portion of the purchase price for the three acquisitions
referred to above was paid using funds drawn under the revolving line of
credit with Heller.
These acquisitions were accounted for as purchases, and accordingly,
the purchase prices were allocated to the assets and liabilities based
upon their estimated fair values at the date of acquisition. The Company
has recorded as goodwill the acquisition costs in excess of net assets
purchased and is amortizing this amount over a 40-year life.
The results of operations of each acquisition are included in the
Company's statement of income from the dates of acquisition. The
following unaudited pro forma results of operations for the three months
ended May 31, 1999, give effect to the acquisitions as though they had
occurred as of February 25, 1999 (in thousands except per share data):
Net sales $34,684
Net earnings 773
Basic and diluted earnings per share .15
The unaudited pro forma information is not necessarily indicative of
the results of operations that would have occurred had the purchases been
made as of February 25, 1999.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since its founding in 1968, the Company has grown from a single store in
Alexandria, Louisiana, to 65 stores and five distribution centers which supply
approximately 310 independent operators in Texas, Louisiana, Mississippi,
Alabama and Arkansas.
First quarter expansion during 1999 was driven by the acquisitions of US
Parts Corporation of Houston, Texas ("USP"), Automotive and Industrial Supply
Co., of Shreveport, Louisiana ("A&I") and Allied Distributing Company of
Houston, Texas (Allied).
The acquisition of USP on March 10, 1999 and A&I on March 11, 1999, were
closed concurrently with a $45.0 million financing. The syndicated financing was
led by Heller Financial, Inc. ("Heller"). Proceeds from the financing were used
to repay then outstanding indebtedness of the Company, finance the above
acquisitions, and provide working capital for the combined business. On April
28, 1999, the Company acquired Allied by again drawing upon the Heller facility.
The above acquisitions were accounted for as purchases and, accordingly,
the purchase prices were allocated to the assets and liabilities based on their
fair values as of the dates of acquisition. The Company paid approximately $27.3
million in cash, issued notes payable of approximately $.8 million, assumed
liabilities of approximately $16.2 million and issued 651,613 shares of the
Company's common stock in connection with those acquisitions. The Company also
entered into employment and stock option agreements with certain officers of the
acquired companies. The results of operations of each acquisition are included
in the Company's statements of income from the dates of acquisition. The
following unaudited pro forma results of operations for the three months ended
May 31, 1999, give effect to the acquisitions as though they had occurred as of
February 25, 1999 (in thousands except for per share data):
Net sales $34,684
Net earnings 773
Basic and diluted earnings per share .15
The unaudited pro forma information is not necessarily indicative of the
results of operations that would have occurred had the purchases been made as of
February 25, 1999.
Subsequent to the completion of the Company's acquisitions during the
quarter ended May 31, 1999, the Company has focused chiefly on integration of
its operations. During the quarter ended May 31, 2000, the Company continued to
concentrate its efforts on integration of its operations. The Company closed one
store and completed the consolidation of its two warehouses in Houston, Texas.
The combined warehouse will serve as a master warehouse for the Company's
operations. Additionally, the Company converted the master warehouse and most of
its Texas locations to a common computerized system during this period. The
Company anticipates that all Texas locations will be on the same computer system
by the end of the second quarter. These changes should allow for improved
inventory management and customer service while enabling the Company to further
reduce its operating costs.
A major aspect of the Company's integration efforts is determining and
implementing programs to stock the appropriate inventory levels at each of its
locations. These programs have allowed the Company to reduce its inventory
levels from year-end by approximately $4.0 million, with further reductions
anticipated.
The Company is disappointed with the first quarter results and is
reviewing strategic alternatives in order to improve the Company's financial
position and regain profitability. Management sees improvements in key areas of
the Company and believes the completion of the integration and repositioning of
the Company will provide a strong basis for improving future operations and
shareholder value. The Company expects to restructure its senior credit facility
in order to be in compliance with
8
such facility during periods after May 31, 2000.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
The statements contained in this report, in addition to historical
information, are forward-looking statements based on the Company's current
expectations, and actual results may vary materially. Forward-looking statements
often include words like "believe", "plan", "expect", "intend", or "estimate".
The Company's business and financial results are subject to various risks and
uncertainties, including the Company's continued ability to expand its
operations and to successfully integrate the recent acquisitions, the results of
operations of the recently acquired businesses, competition, and other risks
generally affecting the industry in which the Company operates. Many of these
risks and uncertainties are beyond the Company's ability to control or predict.
These forward-looking statements are provided as a framework for the Company's
results of operations. The Company does not intend to provide updated
information other than as otherwise required by applicable law.
RESULTS OF OPERATIONS
The following table sets forth certain selected historical operating
results for the Company as a percentage of net sales. Operating results of the
acquisitions discussed above are included from the date of acquisition.
THREE MONTHS ENDED MAY 31,
-----------------------------
MAY 31, 2000 MAY 31, 1999
------------ ------------
Net sales ............................... 100.0% 100.0%
Cost of goods sold ...................... 62.4% 62.3%
------------ ------------
Gross profit ............................ 37.6% 37.7%
Operating, SG&A expenses ................ 36.0% 32.9%
------------ ------------
Income from operations .................. 1.6% 4.8%
Interest (expense) income ............... 4.2% 2.1%
------------ ------------
Income (loss) before income taxes ....... (2.6)% 2.7%
Income taxes ............................ -- --
------------ ------------
Net income (loss) ....................... (2.6)% 2.7%
------------ ------------
THREE MONTHS ENDED MAY 31, 2000 COMPARED TO THREE MONTHS ENDED MAY 31, 1999
Net sales of $29.2 million for the three months ended May 31, 2000,
increased approximately $.9 million, or 3.1%, from approximately $28.3 million
for the three months ended May 31, 1999. The increase in net sales was primarily
attributable to the acquired businesses which was offset by a decrease in same
store sales of $3.6 million, or 13.1% of net sales.
Costs of goods sold for the three months ended May 31, 2000, amounted to
approximately $18.2 million, or 62.4% of net sales, compared to approximately
$17.7 million, or 62.3% of net sales, for the three months ended May 31, 1999.
The increase in the dollar amount was primarily attributable to the increased
dollar amount of net sales. Cost of goods sold as a percentage of net sales was
comparable between the periods.
Operating, selling, general and administrative expenses for the three
months ended May 31, 2000, amounted to approximately $10.6 million, or 36.0% of
net sales, compared to $9.3 million, or 32.9% of net sales, for the three months
ended May 31, 1999. The increase was primarily attributable to the larger
operating scope of the Company as a result of the acquisitions and the costs of
integrating the combined businesses.
9
Interest expense for the three months ended May 31, 2000, was $1.2 million
compared to $.6 million for the three months ended May 31, 1999. Interest
expense increased as a result of fees incurred in connection with changes to the
Company's financing agreement and increased pricing on the outstanding
indebtedness.
Income taxes - For the three months ended May 31, 2000, the Company did
not recognize or record deferred tax assets related to its current loss. This
resulted in the Company having an effective federal tax rate of 0%. Had the
Company recognized deferred tax assets, an income tax benefit of $269,000 would
have been recorded.
For the three months ended May 31, 1999, the Company recognized and
recorded deferred tax assets related to the realized net operating losses from
prior years. This resulted in the Company having an effective federal tax rate
of 0%. Without the net operating loss carry forward, the Company would have
recorded an income tax expense of $266,000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $3,220,962, primarily as a
result of a decrease in inventory offset by net loss for the quarter of
$770,655. Net cash provided by operating activities was $536,712 for the three
months ended May 31, 1999.
Net cash used in investing activities was $70,509 and $13,606,108 for the
three months ended May 31, 2000 and 1999, respectively. In 1999, cash was used
primarily for purchasing assets of the previously discussed acquisitions, which
were funded through the Company's new financing agreement with Heller.
Net cash used in financing activities was $3,377,467 for the three months
ended May 31, 2000. Net cash provided by financing activities was $12,991,004
for the three months ended May 31, 1999. The borrowings in 1999 were used
primarily for the acquisitions discussed above, repayment of indebtedness
previously outstanding or acquired and working capital purposes.
Additionally, the Company issued equity securities (common stock)
aggregating 651,613 shares valued at $1,435,840 as a result of the acquisitions
during the three months ended May 31, 1999. Of these shares, 600,000 were issued
to the Company's chief operating officer and are subject to a lock-up agreement
and discounted by approximately 33% to reflect the impact of the lock-up. The
Company also assumed indebtedness of $16,134,388 and paid a portion of the USP
and Allied purchase price with unsecured obligations of the Company totaling
$773,597.
In connection with the acquisitions, the Company maintained a $45.0
million line of credit through syndicated financing led by Heller. The Company
entered into this financing agreement on March 10, 1999. The agreement provides
for term loans in the aggregate amount of $6.0 million and a revolving line of
credit with a maximum amount of $39.0 million. The term loans require minimum
monthly principal payments totaling approximately $90,000 and the revolving line
of credit expires March 2004. The interest rate on the revolving line of credit
was, at the Company's option, either LIBOR plus 3.00% or prime plus .75%. The
interest rates on the term loans are .5% to .75% higher than on the revolving
line of credit. The financing agreement contains certain financial covenants
relating to, among other things, "tangible net worth", "ratio of indebtedness to
tangible net worth", "fixed charge coverage" and "capital expenditures", all of
which are as defined in the financing agreement. Initial borrowings under this
financing agreement were used to repay the Company" prior lender and to fund the
acquisitions referred to above.
Effective May 26, 2000, the Company amended its financing agreement and
received waivers of all continuing defaults prior to that date. The amendment
changed all financial covenant tests to levels consistent with the Company's
then existing financial performance, reduced the revolving portion of the credit
facility to $30.0 million, increased pricing by 0.25% and provided for
additional increases of up to 0.50% depending upon the Company's leverage.
Although the Company was in compliance with the amended financing agreement as
of May 31, 2000, the Company anticipates that it will not be in compliance with
certain covenants as of June 30, 2000. The Company expects to restructure its
senior credit
10
facility in order to be in compliance with such facility during periods after
May 31, 2000. If such restructuring would not occur, the Company's lenders could
refuse to permit the Company to continue to draw on the revolving line of credit
or could elect to accelerate any or all of the outstanding loans. If this were
to occur, the Company would have to seek additional sources of funding to
finance its operations. There can be no assurance that such financing would be
available on acceptable terms.
Amounts outstanding at May 31, 2000 were $4.7 million under the term loan
agreements and $24.5 million under the revolving credit agreement. Additionally,
the Company had availability of $.8 million under the revolving line of credit
at May 31, 2000.
INFLATION AND SEASONALITY
This Company does not believe its operations are materially affected by
inflation. The Company has been successful in some cases, in reducing the
effects of merchandise cost increases principally by taking advantage of vendor
incentive programs, economies of scale resulting from increased volume of
purchases and selective forward buying.
Store sales have historically been somewhat higher in the first and second
quarters (March through August) than in the third and fourth quarters (September
through February).
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET AND RISK
In the normal course of business, the Company is exposed to market risk,
primarily from changes in interest rates. The Company continually monitors
exposure to market risk and develops appropriate strategies to manage this risk.
Accordingly, the Company may enter into certain derivative financial instruments
such as interest rate swap agreements. The Company does not use derivative
financial instruments for trading or to speculate on changes in interest rates.
INTEREST RATE EXPOSURE. The Company's exposure to market risk for changes in
interest rates relate primarily to the Company's long-term debt. At May 31,
2000, approximately 97.1% ($29.5 million) of the long-term debt was subject to
variable interest rates. The detrimental effect of a hypothetical 100 basis
point increase in interest rates would be to reduce income before taxes by $.3
million. At May 31, 2000, the fair value of the Company's fixed rate debt is
approximately $.9 million based upon discounted future cash flows using current
market prices.
PART II. OTHER INFORMATION
Other Information
Item 1. Legal Proceedings.
The Company is not a party to any litigation that management
considers to be of a material nature.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K - None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RANKIN AUTOMOTIVE GROUP, INC.
/S/ RANDALL B. RANKIN
-------------------------------------------
Randall B. Rankin, Chief Executive Officer
/S/ STEVEN A. SATERBAK
-------------------------------------------
Steven A. Saterbak, Vice President Finance
JULY 14, 2000 /S/ DANIEL L. HENNEKE
- --------------------------------- -------------------------------------------
Daniel L. Henneke, Chief Accounting Officer
12