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 March 31, 1998
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: April 30, 1998 Class A Common Stock, par value $.02 per share
Shares Outstanding: 2,345,733
Class B Common Stock, par value $.02 per share
Shares Outstanding: 502,155
LUCOR, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 1
Consolidated Statements of Loss
Three Months Ended March 31, 1998 and March
31, 1977 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and
March 31, 1997 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
1
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS 31-March-97 31-December-97
_______________ ______________
Current assets:
Cash $ 4,049,995 $ 1,548,418
Accounts Receivable 992,731 2,267,809
Income Tax Receivable 794,006 466,523
Inventory 1,974,417 2,138,180
Prepaid charges 309,909 193,444
___________ ___________
Total Current assets 8,121,058 6,614,374
___________ ___________
Property, plant & equipment, net
of accumulated depreciation 21,703,278 21,839,319
___________ ___________
Other assets:
Goodwill, licenses, application,
area development and organization
costs, net of accumulated
amortization 4,696,165 4,679,531
Security deposits and pre-opening
expenses, net of accumulated
amortization 84,736 87,056
__________ ___________
Total other assets 4,780,901 4,766,587
__________ ___________
Total assets $34,605,237 $33,220,280
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 453,897 $ 305,578
Current portion of capital lease 26,235 25,478
Accounts payable 3,123,842 2,949,018
Accrued expenses 1,487,451 1,442,682
Preferred dividend payable 0 35,000
__________ ___________
Total current liabilities 5,091,425 4,757,756
__________ ___________
Long term debt, net of
current portion 20,274,360 18,642,480
Capital lease, net of
current portion 16,781 23,634
Deferred Taxes 189,000 189,000
__________ ___________
Total Long Term Liabilities 20,480,141 18,855,114
__________ ___________
Redeemable preferred stock 2,000,000 2,000,000
__________ ___________
Stockholders' equity 7,033,671 7,607,410
__________ ___________
Total liabilities, equity $34,605,237 $33,220,280
=========== ===========
(1)
2
LUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
THREE MOS THREE MOS
ENDED ENDED
31-MAR-98 31-MAR-97
__________ _________
Net sales $10,728,483 $10,018,378
Cost of sales 2,521,806 2,309,933
__________ __________
Gross profit 8,206,677 7,708,445
__________ __________
Costs and expenses:
Direct 4,255,216 3,838,697
Operating 2,352,948 2,099,489
Depreciation 398,563 618,387
Selling, general, and
administrative 1,602,954 1,368,212
__________ __________
8,609,681 7,924,785
__________ __________
Loss from operations (403,004) (216,340)
__________ __________
Other income 30,845 9,679
Interest expense (449,158) (356,537)
__________ __________
Loss before provision
for income taxes (821,317) (563,198)
Income tax benefit (282,578) (202,781)
__________ __________
Net loss (538,739) (360,417)
Preferred dividend ( 35,000) ( 35,000)
__________ __________
Loss available to
common shareholders ($ 573,739) ($ 395,417)
========== ==========
Weighted average number of
shares outstanding - Basic 2,847,888 2,831,888
========== ==========
Weighted average number of
shares outstanding - Dilutive 2,847,888 2,831,888
========== ==========
Basic loss per common
share outstanding ($ 0.20) ($ 0.14)
========== ==========
Diluted loss per common
share outstanding ($ 0.20) ($ 0.14)
========== ==========
(2)
3
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
31-Mar-98 31-Mar-97
___________ ___________
Cash flow from operations:
Net loss $ (538,739) $ (360,417)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and amortization
of property and equipment 309,266 319,344
Amortization of intangible
assets and pre-operating costs 88,164 299,043
Changes in assets and liabilities:
Decrease(increase)in accounts
receivable 1,275,078 (8,128)
Increase in inventories 163,763 (273,606)
Increase in prepaid expenses (116,465) (22,347)
Decrease(increase) in income
tax receivable (327,483) (239,303)
Increase (decrease) in accounts
payable and accrued expenses 184,593 246,315
___________ ___________
Net cash provided by operating
activities 1,038,177 (39,099)
___________ ___________
Cash flow from investing activities:
Purchase of property and equipment (269,111) (355,265)
Decrease in construction
in progress 95,886 (570,702)
Franchise fees, goodwill, etc. (102,478) (33,055)
___________ __________
Net cash used in
investing activities (275,703) (959,022)
____________ ____________
Cash flows from financing activities:
Repayments of debt and obligations under
capital leases (12,897) (523,238)
Proceeds from borrowings 1,787,000 400,000
Pennzoil preferred share dividend paid (35,000) (35,000)
Proceeds from issuance of common stock 0 258,750
____________ ___________
Cash provided by (used in)
financing activities 1,739,103 100,512
____________ ___________
Increase (decrease) in cash 2,501,577 (897,609)
Cash at beginning of period 1,548,418 2,052,417
____________ ____________
Cash at end of period $ 4,049,995 $ 1,154,808
============ ============
(3)
4
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
Designated Market Areas (DMA'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 March 31, 1998 the
Company had 102 centers in operation; as of December 31, 1997, 100 centers
were in operation; and as of March 31, 1997 96 centers were in operation.
The financial information as of March 31, 1998 and March 31, 1997
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, 1997 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, 1997.
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
FIRST QUARTER ENDED MARCH 31, 1998 AND MARCH 31, 1997
Consolidated net sales for the first three months of 1998 rose 7% when
compared to the first three months of 1997. This sales growth reflects the
increase in the number of stores opened in the periods. Discounts, due mainly
to higher couponing, increased from 7.1% of gross sales for the first quarter
of 1997 to 8.7% for the first quarter of 1998.
Cost of sales increased as a percent of sales from 23.1% to 23.5% for
the first three months ended March 31, 1997 versus March 31, 1998. The
increase in the cost of sales reflects the increased discounts taken by
customers through coupons and other discounts which lowers the total sales
revenue for the same services and thus increases the cost of sales percentage.
After accounting for the higher discounts, the cost of sales remained the
same.
Direct costs rose as a percent of sales from 38.3% for the first quarter
of 1997 to 39.7% for the first quarter of 1998. Labor costs accounted for a
majority of this increase, representing an increase of approximately 0.7% of
sales. The remaining increase in direct costs as a percent of sales relates
to the higher discounts referred to above.
Operating costs increased by $253,459 for the three months ended March
31, 1998 over same period in 1997. The increase in operating costs reflects
increased rental costs and real estate taxes for the service centers. Credit
card processing fees also increased slightly during the quarter.
Depreciation and amortization charges decreased $219,824 for the first
quarter of 1998 in comparison to the first quarter of 1997. The lower costs
are reflective of lower amortization of pre-opening costs, which are in turn
lower for the first quarter of 1998 due to fewer new service centers built
during the previous six months (pre-opening costs are amortized over a six
month period).
Selling, general and administrative expenses increased 17.2% or $234,742
over the comparable three month period of 1997. Administrative costs at the
district and regional level increased as the number of service centers have
increased. Marketing costs increased by $131,224 when comparing the first
three months of 1997 with the first three months of 1998. In addition,
administrative staffing was increased in preparation of the acquisition of 23
service centers in Eastern Virginia and North Carolina (See the Company's Form
8-K filed on April 15, 1998).
Other income increased from $9,679 to $30,845 for the first three
months. Other income increased due to larger amounts of cash invested.
Interest expense increased by $92,621 for the three month period ended
March 31, 1998 compared to the three months ended March 31, 1997. The
increase reflects additional borrowing required by the Company for its new
service centers. Additional borrowing was required to finance the 23 service
center acquisition referenced above. This acquisition was completed on April
1, 1998, and, consequently, is not reflected in this report. Provision for
income taxes was negative reflecting negative taxable income. A charge for
dividend payments due on the Company's redeemable preferred stock was made for
each period.
From February 1996 through January 1997, the Company opened up 16
facilities within Sears Automotive Service Centers, which are located at
shopping malls in five of its seven regions. Losses at the Sears operations
were a major contributor to the overall losses of the Company in 1997. The
Management of the Company remains focused on making these operations
profitable and in the first quarter of 1998, the Company reduced net losses
for all Sears operations. In November 1997, Sears and JLI, provided
incentives for use in marketing the Company's Sears operations for six months.
Recently, these incentives were extended an additional six months.
Liquidity and capital resources:
Since the end of 1997, working capital (current assets less current
liabilities) increased by $1,173,015. Cash flow from operations amounted to
$1,038,177. The positive cash flow has resulted from the release of funds
held in escrow on December 31, 1997 as part of the refinancing of our debt
with Citicorp Leasing, Inc. (see the Company's Form 10-K filed for the year
ended December 31, 1997). $275,703 in cash was used in procuring property and
equipment, and making payments for franchise fees for two stores opened since
the end of 1997.
In February of 1998, the Company borrowed additional funds through an
agreement with Enterprise Mortgage Acceptance Company, LLC (EMAC) totaling
$1,787,000. This loan carries an interest rate of approximately 8.55% and is
amortized over a 15 year period. The first three month's payments are
interest only. These funds were applied towards the purchase price of the 23
Jiffy Lube service centers referenced above.
Management believes that cash generated from its operations and cash on
hand will be sufficient to satisfy the Company's operating requirements for
the next twelve months. Any acquisitions or new service center sites will
require the Company to sell additional equity, debt securities, or obtain
additional credit facilities. Although the Company is reviewing these
possibilities there can be no assurance that such financing will be available.
The sales, if any, of additional equity could result in dilution to the
Company's stockholders.
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: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of
Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: The Company did not file any
reports on Form 8-K for the quarter, however as noted above, the Company did
file a report on Form 8-K on April 15, 1998 reporting the acquisition of 23
Jiffy Lube service centers from Tidewater Lube Ventures, Inc. and Lube
Ventures East, Inc.
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 15th day of May 1998.
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