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 November 30, 1999
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 (IRS Employer
of incorporation) Identification No.)
3838 N. Sam Houston Pkwy E. #600
HOUSTON, TEXAS 77032
(Address of principal executive offices) (Zip code)
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 January 14, 2000, 5,186,613 shares of common stock were outstanding.
<PAGE>
RANKIN AUTOMOTIVE GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - November 30, 1999 (unaudited) and
February 25, 1999
Condensed Statements of Income - Three months and nine months
ended November 30, 1999 and November 25, 1998 (unaudited)
Condensed Statements of Cash Flows - Nine months ended November
30, 1999 and November 25, 1998 (unaudited)
Notes to Condensed Financial Statements - Nine months ended
November 30, 1999 and November 25, 1998 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market and Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and reports on form 8-K
SIGNATURES
<PAGE>
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, 1999 FEBRUARY 25, 1999
----------------- -----------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash .......................................... $ 505,228 $ 346,913
Accounts receivable
Trade, net of allowance
for doubtful accounts
of $1,326,724 and $344,512 .................. 10,986,505 3,738,763
Inventories ................................... 51,451,779 16,481,982
Prepaid expenses and other .................... 310,133 539,960
------------ ------------
Total current assets ...................... 63,253,645 21,107,618
Property and equipment, net ..................... 4,144,058 2,155,927
Goodwill, net ................................... 8,286,938 582,484
Deferred financing costs, net ................... 478,527 --
------------ ------------
$ 76,163,168 $ 23,846,029
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ....................... $ 19,730,792 $ 3,747,589
Accrued expenses .............................. 4,375,289 817,045
Current portion of long-term debt ............. 2,307,597 182,525
Income taxes payable .......................... 305,786 --
------------ ------------
Total current liabilities ................. 26,719,464 4,747,159
Long-term debt, less current portion ............ 34,240,173 7,148,085
------------ ------------
Total liabilities ......................... 60,959,637 11,895,244
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
issued, respectively .......................... 52,016 45,500
Additional paid-in capital .................... 14,513,154 13,083,830
Retained earnings (deficit) ................... 833,361 (983,545)
Less: Treasury stock (15,000 shares at cost) .. (195,000) (195,000)
------------ ------------
Total stockholders' equity ................ 15,203,531 11,950,785
------------ ------------
$ 76,163,168 $ 23,846,029
============ ============
</TABLE>
See Notes to Condensed Financial Statements
<PAGE>
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- ----------------------------------------
NOVEMBER 30, 1999 NOVEMBER 25, 1998 NOVEMBER 30, 1999 NOVEMBER 25, 1998
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Sales ................................. $29,224,502 $ 9,778,502 $95,255,164 $30,270,094
Cost of goods sold ........................ 18,235,506 5,950,366 60,254,797 19,327,445
----------- ----------- ----------- -----------
Gross profit .............................. 10,988,996 3,828,136 35,000,367 10,942,649
Operating, selling, general and
administrative expenses ................. 9,915,221 3,590,152 30,867,531 10,416,129
----------- ----------- ----------- -----------
Income from operations .................... 1,073,775 237,984 4,132,836 526,520
Interest expense .......................... 711,939 121,877 1,992,191 244,200
----------- ----------- ----------- -----------
Income before income taxes ................ 361,836 116,107 2,140,645 282,320
Income taxes .............................. 126,643 -- 323,739 --
----------- ----------- ----------- -----------
Net income ................................ $ 235,193 $ 116,107 $ 1,816,906 $ 282,320
=========== =========== =========== ===========
Earnings per share ........................ $ 0.05 $ 0.03 $ 0.35 $ 0.06
=========== =========== =========== ===========
Earnings per share-assuming
dilution ................................ $ 0.05 $ 0.03 $ 0.35 $ 0.06
=========== =========== =========== ===========
Weighted average common shares outstanding:
Average common shares outstanding ......... 5,186,613 4,535,000 5,157,071 4,535,000
Dilutive effect of stock option ........... -- -- 500 --
----------- ----------- ----------- -----------
Average common shares outstanding-
assuming dilution ....................... 5,186,613 4,535,000 5,157,571 4,535,000
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Financial Statements
<PAGE>
RANKIN AUTOMOTIVE GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------------
NOVEMBER 30, 1999 NOVEMBER 25, 1998
----------------- -----------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings ............................................ $ 1,816,906 $ 282,320
Adjustments to reconcile
net income to net cash provided by
(used in) operating activities:
Depreciation ............................................ 681,931 380,638
Amortization ............................................ 261,030 --
Provisions for bad debts ................................ 283,136 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable .............. 1,993,265 216,334
(Increase) decrease in inventories ...................... (5,306,234) 165,083
Increase (decrease) in accounts payable
and accrued expenses .................................... 5,226,857 1,086,943
(Increase) decrease in other, net ....................... 442,598 (108,379)
Increase (decrease) in income tax payable ............... 305,786 --
------------ ------------
Net cash provided by (used in) operating activities ..... 5,705,275 2,022,939
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net ................ (872,272) (469,564)
Purchase of businesses, net of cash acquired ............ (17,517,267) (5,800,466)
------------ ------------
Net cash (used in) investing activities ................. (18,389,539) (6,270,030)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving line of credit .............. 22,602,082 1,916,537
Proceeds from (repayments on) other long-term obligations (11,436,789) 212,709
Issuance of common stock, net of discount ............... 1,435,840 --
Issuance of debt ........................................ 773,597 --
Deferred financing costs incurred ....................... (532,151) --
Repayment of other short-term obligations ............... -- (1,448,383)
------------ ------------
Net cash provided by financing activities ............... 12,842,579 680,863
------------ ------------
Net increase (decrease) in cash ......................... 158,315 (3,566,228)
Cash, beginning of period ............................... 346,913 3,962,065
------------ ------------
Cash, end of period ..................................... $ 505,228 $ 395,837
============ ============
</TABLE>
See Notes to Condensed Financial Statements
<PAGE>
RANKIN AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 30, 1999 (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 nine months ended
November 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended February 29, 2000.
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 25, 1999. Additionally, refer to the Company's Forms
8-K and 8-K/A filed on March 25, 1999 and May 24, 1999, respectively,
concerning information on the Company's new 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:
NOVEMBER 30, FEBRUARY 25,
1999 1999
------------ ------------
Borrowings under revolving line of credit .... $ 29,357,151 $ 6,755,071
Bank term loans .............................. 5,286,310 --
Other notes payable .......................... 1,904,309 575,539
------------ ------------
36,547,770 7,330,610
Less current maturities ...................... (2,307,597) (182,525)
------------ ------------
$ 34,240,173 $ 7,148,085
============ ============
At February 25, 1999, the Company's $ 7.5 million line of credit was with
Hibernia National Bank. On March 10, 1999, the Company entered into a new
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 and the revolving
line of credit expires in March 2004. The interest rate on the revolving line
of credit is, at the Company's option, either LIBOR plus 2.25 percent or
prime. The interest rates on the term loans are .5 percent to .75 percent
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's existing revolving line of credit and to fund the
acquisitions referred to below.
<PAGE>
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 the
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 $5.6 million to repay certain of USP'S obligations), issuance
of a note payable for $40,000, the assumption of certain liabilities
estimated at $4.5 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, $3.4 million of cash, the
assumption of certain liabilities estimated at $1.2 million and certain other
consideration.
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 $8.4 million to repay certain of Allied's
obligations), the assumption of certain liabilities estimated at $7.5 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.
The Company has recorded as goodwill the acquisition costs in excess of net
assets purchased. These amounts have been recorded on a preliminary basis
pending final determination of the fair value of net assets acquired.
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 nine months ended November 30, 1999
give effect to the acquisitions as though they had occurred as of February
25, 1999 (in thousands except per share data):
Net sales ............................. $104,255
Net earnings .......................... 1,807
Basic and diluted earnings per share .. .35
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 25, 1999 or of future results of operations of the
combined businesses.
4. Change in reporting periods
The Company has elected to change its financial reporting period from the
25th of each month to the calendar month end. This change became effective
beginning with the three months ended May 31, 1999. Future quarters will be
reported based on results as of May 31, August 31, November 30 and February
28 or 29, as applicable.
<PAGE>
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 70 stores and six distribution centers that supply over
300 independent operators in Texas, Louisiana, Mississippi, Alabama and
Arkansas. This growth has been the result of the Company's ongoing acquisition
program and selective new store openings.
The Company's expansion during 1999 was primarily attributable to the
acquisition of assets of US Parts Corporation of Houston, Texas (USP),
Automotive and Industrial Supply Co., Inc. of Shreveport, Louisiana (A&I) and
Allied Distributing Company of Houston, Texas (Allied).
The USP acquisition on March 10, 1999 and the A&I acquisition 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's business 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 upon a
preliminary estimate of their fair values as of the dates of acquisition. The
Company paid approximately $27.5 million in cash, assumed liabilities of
approximately $13.2 million and issued 651,613 shares of the Company's Common
Stock in connection with the three acquisitions. The Company also entered into
employment and stock option agreements with certain officers of the acquired
businesses. 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 nine months ended November 30,
1999 give effect to the acquisitions as though they had occurred as of February
25, 1999 (in thousands except per share data):
Net sales ............................. $104,255
Net earnings .......................... 1,807
Basic and diluted earnings per share .. .35
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 25, 1999 or of future results of operations of the combined businesses.
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.
<PAGE>
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 described above are included from the date of acquisition.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------ ------------------------------------
NOVEMBER 30,1999 NOVEMBER 25,1998 NOVEMBER 30,1999 NOVEMBER 25,1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net Sales ....................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .............. 62.4% 60.9% 63.3% 63.8%
----- ----- ----- -----
Gross Profit .................... 37.6% 39.1% 36.7% 36.2%
Operating, SG&A expenses ........ 33.9% 36.7% 32.4% 34.4%
----- ----- ----- -----
Income from operations .......... 3.7% 2.4% 4.3% 1.8%
Interest expense ................ 2.4% 1.2% 2.1% 0.8%
----- ----- ----- -----
Income before income taxes ...... 1.3% 1.2% 2.2% 1.0%
----- ----- ----- -----
</TABLE>
THREE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
NOVEMBER 25, 1998
Net sales of $29.2 million for the three months ended November 30,1999
increased approximately $19.4 million, or 198.0%, from approximately $9.8
million for the three months ended November 25,1998. The increase in net sales
was primarily attributable to the acquired businesses, which was offset by a
decrease in sales of $1.3 million of the 40 Rankin Stores then operating.
Cost of goods sold for the three months ended November 30,1999 was
approximately $18.2 million, or 62.4% of net sales, compared to approximately
$6.0 million, or 60.9% of net sales, for the three months ended November
25,1998. The increase was primarily attributable to the increase in net sales.
Cost of goods sold as a percentage of net sales decreased 1.5% for the period,
primarily as a result of a higher percentage of sales to lower margin volume
customers.
Operating, selling, general and administrative expenses for the three
months ended November 30, 1999 were approximately $9.9 million, or 33.9% of net
sales, compared to $3.6 million, or 36.7% of net sales, for the three months
ended November 25,1998. The increase was primarily attributable to the larger
operating scope of the Company as a result of the acquisitions.
Interest expense for the three months ended November 30,1999 was $.7
million compared to $.1 million for the three months ended November 25,1998.
Interest expense increased as a result of higher debt levels required for the
acquisitions, which was partially offset by lower pricing on outstanding
indebtedness.
Income taxes for the three months-ended November 30,1999 were recorded at
an effective tax rate of 35.0%. For the three months ended November 25, 1998, no
income taxes were recorded as the Company recognized net operating losses from
prior periods. Without the net operating loss carry forward, the Company would
have recorded income tax expense of approximately $40,000 in the three months
ended November 25,1998.
<PAGE>
NINE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
NOVEMBER 25, 1998
Net sales of $95.3 million for the nine months ended November 30, 1999
increased approximately $65.0 million, or 214.5%, from approximately $30.3
million for the nine months ended November 25, 1998. The increase in net sales
was primarily attributable to the acquired businesses, which was offset by a
decrease in sales of $2.5 million of the 40 Rankin stores then operating.
Cost of goods sold for the nine months ended November 30, 1999 was
approximately $60.3 million, or 63.3% of net sales, compared to approximately
$19.3 million, or 63.8% of net sales, for the nine months ended November 25,
1998. The increase was primarily attributable to the increase in net sales. Cost
of goods sold as a percentage of net sales decreased .5% for the period,
primarily as a result of economies of scale related to the larger combined
business, including volume rebates, product mix and product changeovers.
Operating, selling, general and administrative expenses for the nine
months ended November 30, 1999 were approximately $30.9 million, or 32.4% of net
sales, compared to $10.4 million, or 34.4% of net sales, for the nine months
ended November 25, 1998. The increase was primarily attributable to the larger
operating scope of the Company as a result of the acquisitions.
Interest expense for the nine months ended November 30, 1999 was $2.0
million compared to $0.2 million for the nine months ended November 25,1998.
Interest expense increased as a result of higher debt levels required for the
acquisitions, which was partially offset by lower pricing on outstanding
indebtedness.
Income taxes - For the nine months ended November 30, 1999 and November
25, 1998, the Company recognized net operating losses from prior periods. This
resulted in the Company having an effective tax rate of 15.1% for the nine
months ended November 30, 1999 and 0.0% for the nine months ended November 25,
1998. Without the net operating loss carry forward, the Company would have
recorded income tax expense of approximately $749,000 in the nine months ended
November 30,1999 and $99,000 in the nine months ended November 25, 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $5.6 million, for the nine
months ended November 30, 1999 compared to net cash provided by operating
activities of $ 2.0 million for the nine months ended November 25, 1998. This
change was primarily the result of an increase in net income and accounts
payable and accrued expenses but offset by an increase in inventory
Net cash used in investing activities was $18.4 million and $ 6.3 million
for the nine months ended nine November 30, 1999 and November 25, 1998,
respectively. In 1999, cash was used primarily for purchasing assets of the
previously described acquisitions, which were funded through the Company's new
financing agreement with Heller.
Net cash provided by financing activities was $12.9 million and $.7
million for the nine months ended November 30, 1999 and November 25, 1998,
respectively. These borrowings were used primarily for the acquisitions
described 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 $1.4 during the nine months ended November
30, 1999 as part of the consideration for the acquisitions. Of these shares,
600,000 were issued to the Company's Chief Operating Officer. Such shares are
subject to a lock-up agreement and were discounted by approximately 33% to
reflect the impact of the lock-up. In connection with the acquisitions the
Company also assumed indebtedness of $16.9 million and paid a portion of the USP
and Allied purchase price with unsecured obligations of the Company totaling $.8
million.
The purchase agreements related to the asset acquisitions of USP, A&I and
Allied require various acquisition adjustments. These adjustments are currently
being finally determined.
The Company has 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 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 is, at the Company's option, either LIBOR plus
2.25 percent or the prime interest rate. The interest rates on the term loans
are .5 percent to .75 percent 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's prior lender and to finance the
acquisitions referred to above.
Approximately $.5 million of costs were incurred in connection with closing the
above financing agreement.
Amounts outstanding at November 30, 1999 were $5.3 million under the term
loan agreements and $29.4 million under the revolving credit agreement.
Additionally, the Company had availability of $2.5 million at November 30, 1999.
<PAGE>
IMPACT OF YEAR 2000
The Company did not encounter any problems that would have a material
impact on its financial condition or results of operations relating to year 2000
in its computer applications.
INFLATION AND SEASONALITY
The 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).
<PAGE>
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 intrest 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 November 30, 1999, approximately
96.2 % (35.2 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 $.4 million. At
November 30, 1999, the fair value of the company's fixed rate debt is
approximately 1.4 million based upon discounted future cash flows using current
market prices.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any litigation that management considers
to be of a material nature. The Company settled a legal proceeding, case
No. 98C1-04310 originally filed on May 28, 1998 in the 150th Judicial
District Court, in Bexar County, Texas. The plaintiff had filed a
securities class action alleging violations of the Texas Securities Act
and Securities Act of 1933 arising out of alleged misrepresentations and
omissions regarding the Company's operations and future prospects. The
Company denied all wrong doing alleged in the suit. The terms of the
settlement did not have a material effect on the Company's operating
results or financial position.
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
<PAGE>
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
JANUARY 14, 2000 /s/ STEVE A SATERBAK
Steve A Saterbak, Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> NOV-30-1999
<CASH> 505,228
<SECURITIES> 0
<RECEIVABLES> 10,986,505
<ALLOWANCES> 1,326,724
<INVENTORY> 51,451,779
<CURRENT-ASSETS> 63,253,645
<PP&E> 6,321,728
<DEPRECIATION> 2,177,670
<TOTAL-ASSETS> 76,163,168
<CURRENT-LIABILITIES> 26,719,464
<BONDS> 34,240,173
0
0
<COMMON> 52,016
<OTHER-SE> 15,151,515
<TOTAL-LIABILITY-AND-EQUITY> 76,163,168
<SALES> 29,224,502
<TOTAL-REVENUES> 29,224,502
<CGS> 18,235,506
<TOTAL-COSTS> 28,150,727
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 711,939
<INCOME-PRETAX> 361,836
<INCOME-TAX> 126,643
<INCOME-CONTINUING> 235,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235,193
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>
