UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Under Section 13 or 15 (d) of the Securities and Exchange
Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number: 0-25164
LUCOR, INC.
Florida 65-0195259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
790 Pershing Road, Raleigh, NC 27608
(Address of principal executive offices) (Zip Code)
(919) 828-9511
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last
reported)
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 and Exchange Act
of 1934 during the preceding twelve 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 ninety days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Date: August 5, 1997 Class A Common Stock, par value $.02 per share
Shares Outstanding: 2,144,733
Class B Common Stock, par value $.02 per share
Shares Outstanding: 702,155
LUCOR, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 1
Consolidated Statements of Income
Three Months Ended June 30, 1997
and June 30, 1996 and Six Months Ended
June 30, 1997 and June 30, 1996 2
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and
June 30, 1996 3
Notes to Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operation 4
PART II - Other Information
Item 1. Legal Proceedings 6
Item 2. Changes in Securities 6
Item 3. Defaults Upon Senior Securities 6
Item 4. Submission of Matters to a Vote of
Security Holders 6
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K 6
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS 30-June-97 31-December-96
___________ ______________
Current assets:
Cash $ 2,048,980 $ 2,052,417
Accounts Receivable 573,409 491,154
Assets Held for Resale 875,177 0
Income Tax Receivable 340,608 556,364
Inventory 2,184,227 1,832,658
Prepaid charges 312,432 280,688
___________ ___________
Total Current assets 6,334,833 5,213,281
___________ ___________
Property, plant & equipment, net
of accumulated depreciation 22,084,910 22,506,488
___________ ___________
Other assets:
Goodwill, licenses, application,
area development and organization
costs, net of accumulated
amortization 4,400,867 4,543,603
Security deposits and pre-opening
expenses, net of accumulated
amortization 242,228 364,237
__________ ___________
Total other assets 4,643,095 4,907,840
__________ ___________
Total assets $33,062,838 $32,627,609
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 912,747 $ 969,893
Current portion of capital lease 24,030 22,664
Accounts payable 4,255,208 2,803,146
Accrued expenses 1,184,894 1,504,497
Preferred dividend payable 35,000 35,000
__________ ___________
Total current liabilities 6,411,879 5,335,200
__________ ___________
Long term debt, net of
current portion 15,543,816 15,831,727
Capital lease, net of
current portion 36,798 49,110
Deferred Taxes 423,594 423,594
__________ ___________
Total Long Term Liabilities 16,004,208 16,304,431
__________ ___________
Redeemable preferred stock 2,000,000 2,000,000
__________ ___________
Stockholders' equity 8,646,751 8,987,978
__________ ___________
Total liabilities, equity $33,062,838 $32,627,609
=========== ===========
(1)
LUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MOS THREE MOS SIX MOS SIX MOS
ENDED ENDED ENDED ENDED
30-JUN-97 30-JUN-96 30-JUN-97 30-JUN-96
__________ _________ ___________ ___________
Full service cars 300,234 255,504 580,643 477,891
========== ========== =========== ===========
Net sales $10,777,687 $ 9,413,850 $20,796,065 $17,310,453
Cost of sales 2,531,315 2,231,139 4,841,248 4,116,960
__________ __________ ___________ ___________
Gross profit 8,246,372 7,182,711 15,954,817 13,193,493
__________ __________ ___________ ___________
Costs and expenses:
Direct 3,961,229 3,533,359 7,799,926 6,446,272
Operating 2,232,817 1,978,528 4,332,306 3,697,650
Depreciation 507,625 429,859 1,126,012 754,199
Selling, general, and
administrative 1,456,627 1,222,824 2,824,839 2,420,515
__________ __________ ___________ ___________
8,158,298 7,164,570 16,083,083 13,318,636
__________ __________ ___________ ___________
Income(loss) from operations 88,074 18,141 (128,266) (125,143)
__________ __________ ___________ ___________
Other income 14,641 29,967 24,320 97,729
Interest expense (367,607) (265,493) (724,144) (474,159)
__________ __________ ___________ ___________
Loss before provision
for income taxes (264,892) (217,385) (828,090) (501,573)
Income tax benefit (95,331) (41,591) (298,112) (153,469)
__________ __________ ___________ ___________
Net loss (169,561) (175,794) (529,978) (348,104)
Preferred dividend accrued ( 35,000) ( 35,000) (70,000) (70,000)
__________ __________ ___________ ___________
Net loss available to
common shareholders ($ 204,561) ($ 210,794) ($599,978) ($418,104)
========== ========== =========== ===========
Weighted average number of
shares outstanding 2,846,888 2,545,729 2,839,388 2,245,570
========== ========== =========== ===========
Net income per common
share outstanding ($ 0.07) ($ 0.08) ($0.21) ($0.19)
========== ========== =========== ===========
(2)
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
30-Jun-97 30-Jun-96
___________ ___________
Cash flow from operations:
Net loss $ (529,978) $ (348,104)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Gain on sale of property
and equipment 0 (47,942)
Depreciation and amortization
of property and equipment 674,406 642,134
Amortization of intangible
assets and pre-operating costs 451,606 160,007
Changes in assets and liabilities:
Increase in accounts receivable (82,255) (114,041)
Increase in inventories (351,569) (579,809)
Increase in prepaid expenses (31,744) (103,988)
Decrease(increase) in income
tax receivable 215,756 (229,705)
Increase in assets held for sale (875,177) 0
Increase in accounts payable and
accrued expenses 1,132,459 2,511,972
___________ ___________
Net cash provided by operating
activities 603,504 1,890,524
___________ ___________
Cash flow from investing activities:
Purchase of property and equipment (623,745) (2,959,129)
(Increase) decrease in construction
in progress 370,917 (3,112,780)
Acquisition of additional service centers (1,798,191)
Franchise fees, goodwill, etc. (186,861) 51,587
___________ __________
Net cash used in
investing activities (439,689) (7,818,513)
____________ ____________
Cash flows from financing activities:
Repayments of debt (756,003) (169,290)
Proceeds from borrowings 400,000 3,608,389
Pennzoil preferred share dividend (70,000) (70,000)
Proceeds from issuance of common stock 258,751 5,590,313
____________ ___________
Cash provided by (used in)
financing activities (167,252) 8,959,412
____________ ___________
Increase (decrease) in cash (3,438) 3,031,423
Cash at beginning of period 2,052,417 2,344,484
____________ ____________
Cash at end of period $ 2,048,980 $ 5,375,907
============ ============
(3)
LUCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company
Lucor, Inc. and its subsidiaries have license agreements with Jiffy Lube
International, Inc. ("JLI") to operate Jiffy Lube service centers in the Areas
of Dominant Influence (ADI's) of Raleigh-Durham, North Carolina, Cincinnati,
Ohio (including northern Kentucky), Pittsburgh, Pennsylvania, Dayton, Ohio,
Toledo, Ohio, Lansing, Michigan, and Nashville, Tennessee. These service
centers provide rapid lubrication, oil changes and related services for
automobiles, light duty trucks and other vehicles. As of June 30, 1997 the
Company had 99 centers in operation; as of December 31, 1996, 94 centers were
in operation; and as of June 30, 1996 76 centers were in operation.
The financial information as of June 30, 1997 and June 30, 1996 included
herein is unaudited. However, such information reflects all adjustments which
are, in the opinion of Management, necessary for a fair presentation of the
results for the interim periods. Financial statement information as of
December 31, 1996 has been extracted from audited financial statements. All
of the above financial information should be read in conjunction with the
Company's annual audited financial statements (and notes thereto) included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Certain statements in this Form 10-Q "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward looking statements. Such factors include, among others, the
following: competition, success of operating initiative, advertising and
promotional efforts, adverse publicity, acceptance of new product offerings,
availability, locations and terms of sites for store development, changes in
business strategy or development plan, availability and terms of capital,
labor and employee benefit costs, changes in government regulation, regional
weather conditions, and other factors specifically referred to in this 10-Q.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the six months and three months ended June 30, 1997 compared with June 30,
1996
Consolidated net sales for the first six months of 1997 rose 20% when
compared to the first six months of 1996. Consolidated net sales for the
quarter ended June 30, 1997 rose 14% when compared to the second quarter of
1996. Full service sales for the six months ended June 30 were 580,643 and
477,891 for 1997 and 1996, respectively. Full service sales for the second
quarter were 300,234 and 255,504 for 1997 and 1996, respectively. Cars
serviced per day per service center averaged 34 cars in 1997 compared with 41
cars during 1996. Management believes that a majority of the decrease in the
number of cars per day is due to the impact of the new stores opened this
year, which traditionally have lower car counts in the first 24 months of
operation. Of the 99 stores open as of June 30, 1997, 54 stores (54%) have
been open less than 24 months. There are 24 stores (24%) that have been open
less than one year.
Net revenue per car serviced declined slightly from $36.22 to $35.82
when comparing the first six months of 1996 with the first six months of 1997.
Net revenue per car decreased from $36.84 to $35.90 when comparing the second
quarter of 1996 with the second quarter of 1997. The decrease in the net
revenue per car can be attributed to several factors including:
1. Management has increased couponing to drive up car counts and increase
market share.
2. Fleet sales have increased which results in increased discounts.
3. The ratio of service centers in the Raleigh North Carolina ADI versus all
other ADI's has decreased. The Raleigh, North Carolina service centers
have a higher net revenue per car due to the inspection business done in
North Carolina.
4. The addition of service centers in Sears Auto Service Centers during late
1996 which are restricted in some of the ancillary sales that can be
offered.
5. The base price for a full service oil change was decreased from $26.99 to
$24.99 in our Toledo, Ohio market.
Cost of sales decreased as a percent of sales from 23.8% to 23.3% for
the first six months ended June 30, 1996 versus June 30, 1997. This same ratio
decreased from 23.7% for the second quarter of 1996 to 23.5% for the second
quarter of 1997. The Company has been able to obtain lower prices for some of
its major inventory items through quantity purchasing and other negotiations
which is reflected in the lower cost of sales. Management believes that the
new lower prices will continue to lower cost of sales for the entire year when
compared to 1996. Direct costs rose slightly as a percent of sales reflecting
the fixed store management costs associated with running a store operation
which, as a percent of sales, is higher during the initial periods of a
store's operation (See discussion above regarding new stores). Operating costs
increased less rapidly than sales during the period. Depreciation and
amortization charges increased for the period reflecting the Company's
increased capital investment for store improvements and new store development.
Selling, general and administrative expenses (SGA) increased 17%
($404,324) over the comparable six month period of 1996, but decreased as a
percent of sales and on a per car serviced basis. SGA increased by 19% for
the second quarter ($233,803). Marketing costs increased by $459,000 when
comparing the six months of 1996 with 1997 and $303,977 when comparing the
second quarter of 1996 with 1997, which is more than the total SGA increased
in both of these periods. The Company has increased its marketing in
conjunction with opening new stores to increase traffic flow into its new
stores. Included in SGA in 1996 was the cost of operating duplicate
accounting departments associated with the move of the accounting department
from Boca Raton, Florida to Raleigh, North Carolina. The duplicate costs of
running the two departments are estimated to be $64,000, most of which
occurred in the second quarter of 1996.
Other income decreased from the prior year. Other income in 1996
included a gain of $47,942 from the sale of the Company's former office in
Raleigh, North Carolina.
Interest expense increased, reflecting the higher level of borrowing to
support the Company's capital expenditure program. Provision for income taxes
was negative reflecting the negative taxable income. A charge for dividend
payments due on the Company's redeemable preferred stock was made for each
period.
Funds provided by financing activities include the placement of debt of
$400,000. This debt is payable as interest only until February 1, 1999 at
which time the entire principal is due. The note carries an interest rate of
12%. The Company issued Class A common stock in the first quarter to two of
the Company's Directors at market price for $258,750.
Liquidity and capital resources:
Working capital, current assets less current liabilities, increased by
$44,873 since the end of 1996. The increase in working capital has been
possible due to the positive cash flow associated with operations and the
reduction in the rate of new store development by the Company. Cash flow from
operations amounted to $603,504, of which $252,828 was used in the purchase of
property and equipment (a result of a $623,745 increase in property and
equipment offset by a decrease of $370,917 in construction in progress). The
accounts payable balance has increased over the end of 1996 due to the
increased number of stores, a general increase in inventory required to
service our customers during the busier months in the year, plus construction
invoices associated with service centers. The asset held for sale on the
balance sheet is a service center that was sold in a sale leaseback
transaction that was consummated in early July, 1997. Additional funding has
been provided by the private placement of stock to directors of the Company
and new debt issued in financing the construction of a service center, offset
by the repayment of current debt obligations.
The Company has nearly completed its current expansion program and it is
expected that current funds on hand plus cash provided by operations will
provide the immediate capital requirements of the Company.
PART II - Other Information
Item 1. Legal Proceedings: The Company is involved in lawsuits and claims
arising in the normal course of business. Although the outcome of these
lawsuits and claims are uncertain, Management believes that these lawsuits and
claims are adequately covered by insurance or they will not (singly or in the
aggregate) have a material adverse affect on the Company's business, financial
condition, or operations. Those lawsuits and claims against the Company which
have not been resolved and which can be estimated and are probable to occur,
have been accounted for in the Company's financial statements.
Item 2. Changes in Securities: On February 7, 1997 the Company sold for
cash 45,000 shares of Class A common stock to two of its directors at a price
of $5.75 per share. This issuance of stock is exempt from registration under
Regulation D, Section 4(2) of the Security Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of
Security Holders:
The annual meeting of Lucor, Inc. was held on May 14, 1997. At that
meeting the following directors were re-elected with the indicated number of
shares voted:
In Favor Withheld
Stephen P. Conway 2,264,561
Jerry B. Conway 2,264,561
D. Fredrico Fazio 2,264,551 10
Anthony J. Beisler 2,264,551 10
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
(6)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on the 14th day of August 1997.
LUCOR, INC.
/s/ Stephen P. Conway
________________________
Stephen P. Conway
Chairman, Chief Executive Officer,
and Director
/s/Kendall A. Carr
________________________
Kendall A. Carr
Chief Financial Officer
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] JUN-30-1997
[CASH] 2,048,980
[SECURITIES] 0
[RECEIVABLES] 607,654
[ALLOWANCES] 34,245
[INVENTORY] 2,184,227
[CURRENT-ASSETS] 6,334,833
[PP&E] 25,944,428
[DEPRECIATION] 3,859,518
[TOTAL-ASSETS] 33,062,838
[CURRENT-LIABILITIES] 6,411,879
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 2,000,000
[COMMON] 56,928
[OTHER-SE] 8,589,823
[TOTAL-LIABILITY-AND-EQUITY] 33,062,838
[SALES] 20,796,065
[TOTAL-REVENUES] 20,796,065
[CGS] 4,819,248
[TOTAL-COSTS] 16,083,083
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 724,144
[INCOME-PRETAX] (828,090)
[INCOME-TAX] (298,112)
[INCOME-CONTINUING] (529,978)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (529,978)
[EPS-PRIMARY] (0.211)
[EPS-DILUTED] (0.211)