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, 1998
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, LA 71302
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(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, 1998, 4,535,000 shares of common stock were outstanding.
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RANKIN AUTOMOTIVE GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - February 25, 1998 and May 25,
1998 (unaudited)
Condensed Statements of Operations - Three months ended
May 25, 1997 and 1998 (unaudited)
Condensed Statements of Cash Flows - Three months ended
May 25, 1997 and 1998 (unaudited)
Notes to Condensed Financial Statements - Three months ended
May 25, 1997 and 1998 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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PART II - OTHER INFORMATION
Other Information
Item 1 Legal Proceedings
On May 28, 1998, petition No. 98-CI-04310 was filed
in the District Court, 150 Judicial District, in
Bexar County, Texas. The plaintiff, Bob Beadle, is
suing the defendants, Nichols, Safina, Lerner & Co.,
Inc.; Rankin Automotive Group, Inc.; Randall B.
Rankin; Harris Lake Smith; Jr.; Charles E. Elliott;
Ricky D. Gunn; Ricky L. Sooter; and Otis Al Cannon,
Jr. The petition is a securities class action
alleging violations of the Texas law and the
Securities Act of 1933 arising out of alleged
misrepresentations and omissions regarding the
Company's operations and future prospects.
The Company vehemently denies the allegations and
will vigorously defend the Company, its Board of
Directors and Officers.
Item 2 - 5 None
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
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
July 7, 1998 /s/ Deborah N. Eddlemon
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Deborah N. Eddlemon, Chief Financial Officer
and Treasurer
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PART I.
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED BALANCE SHEETS
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FEBRUARY 25, MAY 25,
ASSETS 1998* 1998
------------ ------------
UNAUDITED
CURRENT ASSETS
Cash $ 3,962,065 $ 4,080,916
Accounts Receivable
Trade, net of allowance for doubtful accounts 2,317,873 2,777,476
Related party 18,904 18,328
Inventories 12,874,352 13,557,369
Prepaid Expenses and other current assets 167,924 306,011
------------ ------------
Total Current Assets 19,341,118 20,740,100
PROPERTY AND EQUIPMENT, NET 1,994,265 2,046,919
INTANGIBLE ASSETS, NET 629,112 617,455
------------ ------------
TOTAL ASSETS $ 21,964,495 $ 23,404,474
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable, Trade $ 3,383,715 $ 3,541,649
Accrued Expenses 593,477 595,961
Current Portion of Long-Term Debt 155,186 194,076
------------ ------------
Total Current Liabilities 4,132,378 4,331,686
LONG-TERM DEBT, less current portion 5,188,160 6,293,009
------------ ------------
Total Liabilities 9,320,538 10,624,695
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value, 2,000,000 shares authorized,
none issued 0 0
Common Stock, $.01 par value, 10,000,000 shares authorized,
4,550,000 shares issued 45,500 45,500
Additional paid-in capital 13,083,830 13,083,830
Accumulated Deficit (290,373) (154,551)
Less: Treasury Stock (15,000 shares at cost) (195,000) (195,000)
------------ ------------
Total Stockholders' Equity 12,643,957 12,779,779
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,964,495 $ 23,404,474
============ ============
* The balance sheet at February 25, 1998 has been taken from the audited balance
sheet at that date.
See notes to condensed financial statements.
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RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
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THREE MONTHS ENDED
MAY 25,
1997 1998
------------ ------------
NET SALES $ 9,906,887 $ 9,782,747
COST OF GOODS SOLD 6,542,025 6,326,510
------------ ------------
Gross Profit $ 3,364,862 $ 3,456,237
OPERATING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,199,472 3,260,383
------------ ------------
Earnings from Operations $ 165,390 $ 195,854
NET INTEREST (EXPENSE) INCOME 19,905 (60,031)
------------ ------------
EARNINGS BEFORE INCOME TAXES $ 185,295 $ 135,823
INCOME TAXES 63,000 0
------------ ------------
NET EARNINGS $ 122,295 $ 135,823
============ ============
NET EARNINGS PER COMMON SHARE $ 0.03 $ 0.03
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,550,000 4,535,000
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RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
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THREE MONTHS ENDED
MAY 25,
1997 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 122,295 $ 135,823
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 101,694 121,786
Changes in assets and liabilities
(Increase) in accounts receivable (258,529) (459,027)
(Increase) in inventories (1,071,948) (683,017)
Increase in accounts payable
and accrued expenses 235,158 160,418
Other, net (4,838) (138,087)
------------ ------------
Net cash (used in) operating activities ($ 876,168) ($ 862,104)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net ($ 244,149) ($ 162,783)
------------ ------------
Net cash (used in) investing activities ($ 244,149) ($ 162,783)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from revolving line of credit 5,367,678 5,165,664
Repayments of borrowings under revolving line of credit (4,148,768) (4,105,765)
Proceeds from other long-term obligations -- 127,289
Repayments of long-term obligations (17,805) (43,450)
------------ ------------
Net cash provided by financing activities $ 1,201,105 $ 1,143,738
------------ ------------
NET INCREASE IN CASH $ 80,788 $ 118,851
CASH, BEGINNING OF PERIOD 4,022,287 3,962,065
------------ ------------
CASH, END OF PERIOD $ 4,103,075 $ 4,080,916
============ ============
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RANKIN AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 25, 1998 (UNAUDITED)
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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-Q 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 the Company's annual financial
statements and notes thereto included in the Company's Form 10-KSB for
the year ended February 25, 1998.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
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The results of the first three months of operations (ended May 25,
1998) of the current fiscal year reflects relatively flat sales growth of
approximately $9.8 million compared to $9.9 million for the same period of the
prior year. Earnings were slightly higher ($135,823 for the quarter ended May
25, 1998 compared to $122,295 for the comparable period ended May 25, 1997) due
primarily to the income tax benefit of the operating loss carryover from the
fiscal year ended, February 25, 1998. During this period, one traditional store
was closed in Baton Rouge, Louisiana. This brings the total store count to 42
locations as of the end of the quarter.
The balance sheet continues to reflect a strong, solvent position with
debt to equity ratio of .52 to 1.00 and a current ratio of 4.78 to 1.00. Reserve
cash of approximately $4.0 million continues to be maintained in an investment
account for future growth strategy implementation.
Management has continued to improve the internal structure to
accommodate future growth. Costs of this program are still being incurred in the
current period S, G, & A costs. Management feels that the benefits from this
decision will be reflected in improved efficiencies and profitability.
RESULTS OF OPERATIONS
The following table sets forth certain selected historical operating
results for the Company as a percentage of Net Sales.
THREE MONTHS ENDED
MAY 25,
1997 1998
NET SALES............................. 100.0% 100.0%
COST OF GOODS SOLD.................... 66.1% 64.7%
GROSS PROFIT..................... 33.9% 35.3%
OPERATING, SG&A EXPENSES.............. 32.3% 33.3%
EARNINGS FROM OPERATIONS......... 1.6% 2.0%
INTEREST (EXPENSE) INCOME............. 0.2% (0.6)%
EARNINGS BEFORE INCOME TAXES.......... 1.8% 1.4%
INCOME TAXES.......................... 0.6% -
NET EARNINGS ......................... 1.2% 1.4%
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THREE MONTHS ENDED MAY 25, 1998 COMPARED TO THREE MONTHS ENDED MAY 25, 1997
NET SALES. Product sales decreased approximately $124,000, or 1.3%,
from approximately $9.9 million for the three months ended May 25, 1997 to $9.8
million for the comparable three month period of 1998. Total same store sales
for the period were down approximately $654,000 when compared to the same period
of the prior year. New store openings and acquisitions which occurred in June,
August, and September of 1997, generated sales of approximately $530,000, during
the three months ended May 25, 1998.
COST OF GOODS SOLD. Cost of Goods Sold for the three months ended May
25, 1998 amounted to approximately $6.3 million or 64.7% of Net Sales compared
to approximately $6.5 million or 66.1% for the same three month period ended May
25, 1997. The decrease in the dollar amount was primarily attributable to the
decreased dollar amount of Net Sales. The Cost of Goods Sold as a percentage of
Net Sales decreased 1.4% for the period, which is primarily attributable to
management control of inventory.
OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The OSG&A
expenses for the three months ended May 25, 1998 amounted to approximately $3.3
million or 33.3% of Net Sales compared to $3.2 million, or 32.3% of Net Sales,
for the same three month period of 1997. The increase is primarily attributable
to an increase in selling expenses resulting from employment of additional
personnel.
INTEREST (EXPENSE) INCOME. For the three months ended May 25, 1998, the
Company had ($60,031) of net Interest Expense compared to $19,905 net Interest
Income for the same period of the prior year.
INCOME TAXES. Income taxes were reflected at zero since the net
operating loss carryover from the fiscal year ended February 25, 1998 was
utilized to offset the approximately $46,000 of income taxes that the earnings
of $135,823 generated.
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
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27 Financial Data Schedule