1
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 25, 1997
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 incorporation) (I.R.S. Employer Identification No.)
3709 S. MacArthur Drive,
Alexandria, Louisiana 71302
- ---------------------------------------------- ------------------------------------
(address of principal executive offices) (Zip Code)
(318) 487-1081
-----------------------------------------------------
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 May 25, 1997, 4,550,000 shares of Common Stock were outstanding.
2
RANKIN AUTOMOTIVE GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - February 25, 1997 and
May 25, 1997 (unaudited)
Condensed Statements of Operations -
Three months ended May 25,
1996 and 1997. (unaudited)
Condensed Statements of Cash Flows - Three months ended
May 25, 1996 and 1997 (unaudited)
Notes to Condensed Financial Statements - Three months
ended May 25, 1996 and 1997 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
3
RANKIN AUTOMOTIVE GROUP, INC.
PART II - OTHER INFORMATION
Part II - Other Information
Item 1 - 5 None
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule (for SEC use only)
SIGNATURE
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
July 9, 1997 /s/ Deborah N. Eddlemon
- --------------------------- ------------------------------------------
DATE Deborah N. Eddlemon, Chief Financial Officer
and Treasurer
4
PART I. FINANCIAL INFORMATION
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED BALANCE SHEETS
- ------------------------------------------------------------------------------
ASSETS FEBRUARY 25, MAY 25,
1997* 1997
(UNAUDITED)
CURRENT ASSETS: $ 4,022,287 $ 4,103,075
Cash
Accounts receivable:
Trade, net of allowance for doubtful accounts of $9,000 2,125,352 2,389,058
Related party 20,035 14,858
Inventories 10,249,572 11,321,520
Prepaid expenses and other current assets 117,526 122,364
----------- -----------
Total current assets 16,534,772 7,950,875
PROPERTY AND EQUIPMENT, Net 1,342,526 1,487,639
INTANGIBLE ASSETS, Net 651,260 648,602
----------- -----------
TOTAL 18,528,558 20,087,116
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 2,552,371 $ 2,865,742
Accrued expenses 714,994 636,781
Current portion of long-term debt 114,378 116,210
----------- -----------
Total current liabilities 3,381,743 3,618,733
LONG-TERM DEBT, less current portion 1,519,022 2,718,295
----------- -----------
Total liabilities 4,900,765 6,337,028
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,
4,550,000 shares issued and outstanding 45,500 45,500
Additional paid-in capital 13,083,830 13,083,830
Retained earnings 498,463 620,758
----------- -----------
13,627,793 13,750,088
----------- -----------
TOTAL $18,528,558 $20,087,116
----------- -----------
*The balance sheet at February 25, 1997 has been taken from the audited balance
sheet at that date.
See notes to condensed financial statements.
5
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------------------------
THREE MONTHS ENDED
MAY 25,
------------------------------
1996 1997
NET SALES $ 6,884,777 $ 9,906,887
COST OF GOODS SOLD 4,479,075 6,542,025
----------- -----------
Gross profit 2,405,702 3,364,862
OPERATING, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 1,954,539 3,199,472
Earnings from operations 451,163 165,390
NET INTEREST (EXPENSE) INCOME (132,479) 19,905
----------- -----------
EARNINGS BEFORE INCOME TAXES 318,684 185,295
INCOME TAXES 115,000 63,000
----------- -----------
NET EARNINGS $ 203,684 $ 122,295
----------- -----------
NET EARNINGS PER COMMON SHARE $ .07 $ .03
----------- -----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 3,050,000 4,550,000
----------- -----------
See notes to condensed financial statements.
6
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------
THREE MONTHS ENDED
MAY 25
-------------------------------
1996 1997
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 203,684 $ 122,295
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 53,415 101,694
Changes in assets and liabilities:
(Increase) in accounts receivable (367,654) (258,529)
(Increase) in inventories (627,525) (1,071,948)
Increase in accounts payable and accrued
expenses 565,629 235,158
Other, net (3,925) (4,838)
----------- -----------
Net cash (used in) operating activities (176,376) (876,168)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (25,878) (244,149)
----------- -----------
Net cash used in investing activities (25,878) (244,149)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit 7,081,626 5,367,678
Repayments of borrowings under revolving line
of credit (6,752,674) (4,148,768)
Repayments of long-term obligations (81,388) (17,805)
Increase in notes payable to stockholder 4,675 --
----------- -----------
Net cash provided by financing activities 252,239 1,201,105
----------- -----------
NET INCREASE IN CASH 49,985 80,788
CASH, BEGINNING OF PERIOD 309,144 4,022,287
----------- -----------
CASH, END OF PERIOD $ 359,129 $ 4,103,075
----------- -----------
See notes to condensed financial statements.
7
RANKIN AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 25, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and
Rule 10-01 of Regulation S-X. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for interim periods are not necessarily indicative of the
results that may be expected for the entire year. These condensed
financial statements should be read in conjunction with Company's
annual financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended February 25, 1997.
2. ACQUISITION OF BUSINESSES
On May 4, 1996, the Company acquired one auto parts store. The Company
incurred debt to the seller of approximately $540,000 in exchange for
assets with a purchase price of approximately $540,000.
On July 25, 1996, the Company acquired one auto parts store. The
Company incurred debt to the seller of approximately $400,000 in
exchange for assets with a purchase price of approximately $400,000.
On October 25, 1996, the Company acquired 12 auto parts stores. The
Company incurred debt to the seller of approximately $2,510,000 in
exchange for assets with a purchase price of approximately $2,510,000.
These acquisitions were accounted for as purchases and, accordingly,
the purchase prices were allocated to the assets and liabilities based
upon estimates of their fair values as of the dates of acquisition.
The results of operations of each acquisition are included in the
accompanying Statements of Operations from the dates of acquisition.
The following unaudited pro forma results of operations give effect to
the acquisitions as though they had occurred on February 26, 1996:
THREE MONTHS ENDED
MAY 25,
---------------------------
1996 1997
Net sales $ 9,658 $ 9,907
Net earnings 191 122
Net earnings per share .06 .03
Weighted average of common shares outstanding 3,050,000 4,550,000
The unaudited pro forma information is not necessarily indicative
either of the results of operations that would have occurred had the
purchases been made as of February 26, 1996 or of future results of
operations of the combined companies.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The results of the first three months of operations (ended May 25,
1997) of the current fiscal year reflected a sales growth of 43.9%, from $6.9
million for the quarter ended May 25, 1996 to $9.9 million for the comparable
period of this year. Earnings were slightly lower ($203,684 for the quarter
ended May 25, 1996 compared to $122,295 for the comparable period ended May 25,
1997) due primarily to an increased level of OSG&A expenses resulting from the
15-store growth over that period. Company management is aggressively working to
reduce the payroll costs which contributed to the overall cost increase. During
the current period, two new stores were opened (Winnfield, LA and Jasper, TX)
to bring the total company locations to forty (40). Subsequent to the reported
period, the Company acquired another store location on June 25, 1997 in
Natchitoches, LA with two new store openings planned for the month of August,
1997.
The balance sheet items continue to reflect a strong, solvent position
with a debt to equity ratio of 0.2 to 1.0 and a current ratio of 5.0 to 1.0.
Reserve cash of approximately $4.0 million continues to be maintained in an
investment account for future growth strategy implementation.
Management has commenced improving the internal structure to
accommodate the anticipated growth. The strengthening of this internal
structure is in the form of additional financial and operational personnel
which needs to be in place before the next round of growth through acquisition
begins.
9
RESULTS OF OPERATIONS
The following table sets forth certain selected historical
consolidated operating results for the Company as a percentage of Net Sales.
THREE MONTHS
ENDED MAY 25
---------------------
1996 1997
------ ------
Net Sales ........................................ 100.0% 100.0%
Cost of goods sold ............................... 65.1 66.1
Gross profit............................... 34.9 33.9
Operating, SG&A expenses.......................... 28.4 32.3
Earnings from operations................... 6.5 1.6
Interest (expense) income......................... (1.9) .2
Income taxes...................................... 1.7 .6
Net earnings...................................... 2.9 1.2
Three Months Ended May 25, 1996 Compared to Three Months Ended May 25, 1997.
Net Sales. Product sales increased approximately $3.0 million, or
43.9%, from approximately $6.9 million for the three months ended May 25, 1996
to $9.9 million for the comparable three month period of 1997. Approximately
$3.1 million of the increase was due to the acquisitions which occurred in July
and October, 1996 and March, 1997. Same store sales experienced a slight
decrease of approximately $100,000 compared to the same period of the previous
year.
Cost of Goods Sold. Cost of Goods Sold increased from approximately
$4.5 million (65.1% of Net Sales) for the three months ended May 25, 1996 to
approximately $6.5 million (66.1% of Net Sales) for the comparable three months
of 1997. The increase in the dollar amount of cost of goods sold was
attributable to overall sales increases. The increase in cost of goods sold as
a percentage of net sales was primarily attributable to the mix of products
sold during the period compared to the same period of the prior year. Sales of
chemicals and equipment (lower profit margin items relative to other products)
were a larger portion of the total sales for the three months ended May 25,
1997 than they were for the three months ended May 25, 1996.
Operating, Selling, General, and Administrative Expenses. Operating,
selling, general and administrative expenses ("OSG&A") increased from
approximately $2.0 million (approximately 28.4% of Net Sales) for the three
months ended May 25, 1996 to approximately $3.2 million (32.3% of Net Sales)
for the comparable three months of 1997. The increase in OSG&A expenses as a
percentage of Net Sales resulted primarily from increased payroll costs. On May
25, 1996, the company owned 25 outlets from which business was conducted
compared with the 40 locations existing as of May 25, 1997. This 15-store
increase brought with it a higher OSG&A expense level which had the effect of
raising the corporate OSG&A percentages.
10
Interest Expense. Interest expense decreased from $132,479
(approximately 1.9% of Net Sales ) for the three months ended May 25, 1996 to a
Net Interest Income of $19,905 (.2% of Net Sales) for the comparable period for
1997. Some of the proceeds from the IPO in November, 1996 were used to retire
substantially all of the outstanding debt of the Company. Long-term debt as of
May 25, 1996 was approximately $6.7 million as compared to approximately $2.8
million as of March 25, 1997.
Income Taxes. Income taxes were recorded at approximately $63,000 (.6%
of Net Sales) for the three months ended March 25, 1997 compared to
approximately $115,000 (1.7% of Net Sales) for the same period of the prior
year.
11
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
27 Financial Data Schedule