<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT
For the transition period from ____ to ____
Commission File Number 0-9812
GREASE MONKEY HOLDING CORPORATION
(Name of small business issuer in its charter)
Utah 87-0321320
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
216 16th Street Mall, Suite 1100
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (303) 534-1660
Check whether issuer (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS APRIL 30, 1996
Common Stock, $0.03 par value 4,359,888 shares
Transitional Small Business Disclosure Format Yes No X
<PAGE>
GREASE MONKEY HOLDING CORPORATION
Commission File Number: 0-9812
Quarter Ended March 31, 1996
FORM 10-QSB
Part I FINANCIAL INFORMATION
Consolidated Statements of Operations. . . . . . . Page 1
Consolidated Balance Sheets. . . . . . . . . . . . Page 2
Consolidated Statements of Stockholders' Equity. . Page 4
Consolidated Statements of Cash Flows. . . . . . . Page 5
Notes to Consolidated Financial Statements . . . . Page 8
Management's Discussion and Analysis or Plan . . .
of Operation . . . . . . . . . . . . . . . . . . Page 10
Part II OTHER INFORMATION
Legal Proceedings. . . . . . . . . . . . . . . . . Page 15
Exhibits and Reports on Form 8-K . . . . . . . . . Page 15
Signatures . . . . . . . . . . . . . . . . . . . . Page 16
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
------ ------
Operating Revenue:
Royalty fees $ 751,142 788,405
Franchise sales - center openings - 157,000
Product and equipment revenue 171,975 362,936
Sales by Company-owned Centers 3,285,272 2,846,681
Leasing revenue 357,558 348,773
Other 67,242 67,356
----------- ---------
4,633,189 4,571,151
----------- ---------
Operating Expenses:
Franchise costs - center openings - 28,784
Product and equipment costs 56,759 242,357
Company-owned Centers 2,848,499 2,579,719
Leasing expense 354,440 350,311
General and administrative expenses 1,090,133 1,000,590
Provision for credit losses 30,000 22,500
Depreciation 156,947 159,804
Amortization 47,510 38,832
----------- ---------
4,584,288 4,422,897
----------- ---------
Operating income (loss) 48,901 148,254
----------- ---------
Other income (expense):
Gain (loss) on sale/disposition of centers (33,119) (27,659)
Undeveloped franchise licenses canceled - 4,000
Interest income 3,018 9,642
Interest expense (140,840) (123,776)
----------- ---------
(170,941) (137,793)
----------- ---------
Net income (loss) $ (122,040) 10,461
----------- ---------
----------- ---------
Earnings (loss) per common share $ (0.04) *
----------- ---------
----------- ---------
Weighted average shares outstanding 4,344,959 4,334,176
----------- ---------
----------- ---------
* Less than $.01 per share.
(UNAUDITED)
1
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
--------- --------
ASSETS
Current Assets:
Cash $ 441,139 385,167
Restricted cash including certificates of
deposit 34,385 32,232
Accounts receivable, net of allowance for
doubtful accounts of $312,823 at March 31,
1996, and $399,141 at December 31, 1995 990,366 1,123,267
Current portion of notes receivable,
net of allowance for uncollectible amounts 82,712 105,584
Current portion of net investment
in direct financing leases 189,554 187,195
Inventories 788,022 697,383
Prepaid expenses and supplies 179,227 155,661
---------- ----------
TOTAL CURRENT ASSETS 2,705,405 2,686,489
---------- ----------
Property and Equipment, at Cost, Pledged:
Land 152,079 152,079
Buildings (including buildings under capital
leases) 5,770,443 5,294,542
Furniture and fixtures 542,390 486,648
Leasehold improvements 618,198 630,073
Machinery and equipment 1,623,657 1,454,289
---------- ----------
8,706,767 8,017,631
Less accumulated depreciation and
amortization (3,076,005) (3,061,632)
---------- ----------
NET PROPERTY AND EQUIPMENT 5,630,762 4,955,999
---------- ----------
Other Assets:
Net investment in direct financing leases 3,554,516 3,331,596
Notes receivable, net of allowance for
uncollectible amounts 301,392 99,036
Deferred franchising costs 161,935 159,788
Goodwill and covenants not to compete, net
of accumulated amortization of $789,312
at March 31, 1996, and $746,793 at
December 31, 1995 2,600,985 1,588,348
Real estate held for sale 173,500 173,500
Other assets, net of accumulated
amortization of $125,704 at March 31, 1996,
and $120,713 at December 31, 1995 132,933 150,877
---------- ----------
TOTAL OTHER ASSETS 6,925,261 5,503,145
---------- ----------
$15,261,428 13,145,633
---------- ----------
---------- ----------
(UNAUDITED)
(continued on next page)
2
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
MARCH 31, DECEMBER 31,
1996 1995
-------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,041,727 773,983
Accrued salaries and wages 195,210 191,116
Other accrued liabilities 207,502 218,426
Current portion of long-term debt 478,188 420,887
Current portion of obligations
under capital leases 421,062 363,209
------------ ----------
TOTAL CURRENT LIABILITIES 2,343,689 1,967,621
------------ ----------
Long-term Debt 3,256,403 2,223,817
Obligations Under Capital Leases 7,097,986 6,374,027
Deferred Franchise Sales Revenue 749,753 655,553
Stockholders' Equity:
Series C Preferred stock, issued and
outstanding 20,896 shares and 20,958
shares at March 31, 1996 and December
31, 1995, respectively, stated value
of $100.00 2,089,638 2,095,838
Common stock, par value $.03, 10,000,000
shares authorized, 4,349,689, and 4,336,764,
shares issued and outstanding at March 31,
1996 and December 31, 1995, respectively 130,491 130,103
Capital in excess of par value 5,790,082 5,773,248
Accumulated deficit (6,196,614) (6,074,574)
------------ ----------
TOTAL STOCKHOLDERS' EQUITY 1,813,597 1,924,615
Commitments and Contingencies
------------ ----------
$15,261,428 13,145,633
------------ ----------
------------ ----------
(UNAUDITED)
3
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
PREFERRED STOCK COMMON STOCK
-------------------- --------------------------------
CAPITAL IN
NUMBER OF NUMBER OF EXCESS OF ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PAR VALUE DEFICIT TOTAL
--------- ------ --------- ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 22,205 $2,220,500 4,305,359 $129,161 5,707,382 (6,312,764) 1,744,279
Issuance of common stock
pursuant to employee benefit
plan - - 11,542 346 20,682 - 21,028
Conversion of Series C Preferred
stock to common stock, including
payment of accumulated dividends (1,247) (124,662) 49,863 1,496 113,224 - (9,942)
Offering costs of Series C
Preferred stock - - - - (7,500) - (7,500)
Common stock reacquired and
canceled - - (30,000) (900) (60,540) - (61,440)
Net income - - - - - 238,190 238,190
------- --------- --------- ------- --------- ---------- ---------
Balance at December 31, 1995 20,958 2,095,838 4,336,764 130,103 5,773,248 (6,074,574) 1,924,615
Issuance of common stock pursuant
to employee benefit plan - - 10,445 314 11,437 - 11,751
Conversion of Series C Preferred
stock to common stock, including
payment of accumulated dividends (62) (6,200) 2,480 74 5,397 - (729)
Net loss - - - - - (122,040) (122,040)
------- --------- --------- ------- --------- ---------- ---------
Balance at March 31, 1996 20,896 $2,089,638 4,349,689 $130,491 5,790,082 (6,196,614) 1,813,597
------- --------- --------- ------- --------- ---------- ---------
------- --------- --------- ------- --------- ---------- ---------
</TABLE>
(UNAUDITED)
4
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
---------- --------
Cash flows from operating activities:
Net income (loss) $(122,040) 10,461
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Increase in deferred franchise
sales revenue 175,200 30,000
Franchise sales revenue recognized-
center openings - (157,000)
Increase in deferred franchising costs (17,999) (20,530)
Franchise costs recognized - center
openings - 28,784
Provision for credit losses 30,000 22,500
Net loss realized on retirement of
property and equipment - 11,132
Depreciation and amortization 204,457 198,636
Loss on sale of centers 30,619 27,659
Undeveloped franchise licenses canceled - (4,000)
Interest on litigation award - 5,621
Other, net (25,458) 149
Change in assets and liabilities:
Increase in accounts receivable (255,297) (189,459)
(Increase) decrease in notes
receivable (26,521) 12,542
(Increase) decrease in inventories (42,836) 17,106
Increase in prepaid expenses and supplies (23,566) (48,152)
(Decrease) increase in accounts payable 225,097 (161,735)
(Decrease) increase in accrued
salaries and wages and other liabilities (7,962) 22,381
---------- --------
Net cash provided by (used in)
operating activities $ 143,694 (193,905)
---------- --------
(UNAUDITED)
(continued on next page)
5
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
---------- ---------
Cash flows from investing activities:
Principal receipts on direct financing
leases $ 44,757 44,595
Acquisition of centers (394,389) -
Sale of centers 21,673 -
Capital expenditures (110,299) (29,992)
(Increase) decrease in other assets 12,954 (9,286)
---------- --------
Net cash provided by (used in)
investing activities (425,304) 5,317
---------- --------
Cash flows from financing activities:
Proceeds from long-term debt 522,000 -
Principal payments on long-term debt (112,614) (82,517)
Principal payments on capital lease
obligations (78,922) (72,232)
Payment of accumulated dividends
upon conversion of preferred stock
to common stock (729) (8,700)
Decrease (increase) in restricted cash (2,153) 155,154
Increase in lease deposit obligations 10,000 2,500
---------- --------
Net cash provided by (used in)
financing activities 337,582 (5,795)
---------- --------
Net increase (decrease) in cash 55,972 (194,383)
Cash, beginning of period 385,167 256,631
---------- --------
Cash, end of period $ 441,139 62,248
---------- --------
---------- --------
Supplemental disclosures of cash flow
information -
Cash paid during the period for interest $ 249,968 218,459
---------- --------
---------- --------
(UNAUDITED)
(continued on next page)
6
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Supplemental Schedule of Non-cash Investing and Financing Activities:
The following table sets forth, by period, the amount and nature of amounts
paid and received for the acquisition/purchase and foreclosure and sale
(refranchising) of Company-owned Centers.
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
--------- -------
Acquisitions/Purchases and Foreclosures:
Number of Centers acquired/purchased 2 *
---------- --------
---------- --------
Number of Centers foreclosed 4 *
---------- --------
---------- --------
Receivables applied (net of related
allowance) $ 181,929
Liabilities assumed 1,195,513
Cash paid 394,389
----------
Cost of assets acquired $1,771,831
----------
----------
Sales:
Number of Centers refranchised 2 1
---------- --------
---------- --------
Cash received $ 21,673 -
Notes received - 5,500
Liabilities assumed by purchaser 19,500 -
(Gain) Loss on sale 30,619 27,659
Operating/Marketing subsidies granted
purchaser (49,750) -
Franchise fee revenue 28,000 -
Franchise costs (5,000) (7,500)
---------- --------
Net book value of centers refranchised $ 45,042 25,659
---------- --------
---------- --------
* There were no acquisitions/purchases or foreclosures in the first quarter
of 1995.
During the quarters ended March 31, 1996 and 1995, non-cash transactions
consisted of the Company issuing 10,445 and 2,701 shares of common stock at
an average value of $1.13 and $2.12 per share respectively, in accordance
with its matching requirement under the Company's 401(k) plan. Other
non-cash transactions during the first quarter of 1996 included: a
settlement agreement with a franchisee, who owned two centers, whereby,
$109,439 of net receivables, ($7,000) of lease deposits and one undeveloped
license of ($16,312), were exchanged for a note receivable of $86,127 upon
the sale of the centers to a new franchisee; and a direct financing lease and
the related capital lease obligation of $368,000 were recorded upon the
opening of a new center.
(UNAUDITED)
7
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments necessary for a fair statement of (a) the
results of operations for the three-month periods ended March 31, 1996
and March 31, 1995, (b) the financial position at March 31, 1996, (c)
the statements of cash flows for the three-month periods ended March
31, 1996 and 1995, and (d) the changes in stockholders' equity for the
three- month period ended March 31, 1996, have been made.
2. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for financial statements. For further information, refer to
the audited consolidated financial statements and notes thereto for the
year ended December 31, 1995, included in the Company's Form 10-KSB
filed with the Securities and Exchange Commission on March 29, 1996.
3. The results for the three-month period ended March 31, 1996, are not
necessarily indicative of the results to be expected for the entire
fiscal year of 1996.
4. STOCKHOLDERS' EQUITY
The Company's Series C, 6% cumulative, preferred stock is redeemable at
the option of the Company upon 60 days prior written notice after
December 31, 1996. At the option of the holder, at any time prior to
the close of business on the redemption date, each share of Series C
Preferred stock, plus any accumulated unpaid dividends, may be
converted into shares of common stock at a conversion price of $2.50
per share of common stock. On March 31, 1996, accumulated unpaid
dividends totaled $287,104.
The Company has an employee deferred compensation 401(k) plan and
matches employee contributions to this plan in an amount equal to 50%
of the employees' contribution, up to a maximum of 6% of the employees'
compensation. The Company's contribution is paid with its $0.03 par
value common stock (net of forfeitures) valued at market on the date of
the contribution. During the first quarter of 1996 and 1995, the
Company contributed 10,445 and 2,701 shares to this plan at an average
of $1.13 and $2.12 per share, respectively.
5. EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is determined based on the number of
common and common equivalent shares outstanding and is adjusted for the
assumed conversion of shares issuable upon exercise of options and
warrants, after the assumed repurchase of common shares with the
related proceeds (anti-dilutive for the periods presented). Earnings
(loss) per share for all periods was computed after reduction for
preferred stock dividends ($31,303 in 1996 and $31,873 in 1995). The
assumed conversion of preferred stock was also anti-dilutive.
(continued)
8
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
The Company leases Grease Monkey Center sites under capital lease
agreements. These sites are either subleased to franchisees or operated
as Company-owned Centers. The typical lease period is 15 to 20 years
and some leases contain renewal options. These leases are accounted for
as capital leases and are capitalized using interest rates appropriate
at the inception of each lease.
The Company is a party to legal proceedings including claims by
franchisees against the Company that arise in the ordinary course of
business. In the opinion of management, the outcome of these matters
will not have a material effect on the financial condition, results of
operations or cash flows of the Company.
7. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF (SFAS 121) was issued in March 1995, by the Financial Accounting
Standards Board. It requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The adoption of
SFAS 121 by the Company in the first quarter of 1996 did not have an
effect on the Company's financial statements.
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION (SFAS 123), was issued by the Financial
Accounting Standards Board in October 1995. SFAS 123 establishes
financial accounting and reporting standards for stock-based employee
compensation plans as well as transactions in which an entity issues its
equity instruments to acquire goods and services from non-employees.
This statement defines a fair value based method of accounting for
employee stock option or similar equity instruments, and encourages all
entities to adopt that method of accounting for all of their employee
stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value
based method of accounting prescribed by APB Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES. Entities electing to remain with the
accounting in Opinion 25 must make pro forma disclosures on net income
and, if presented, earning per share, as if the fair value based method
of accounting defined by SFAS 123 had been applied. The Company adopted
SFAS 123 in the first quarter of 1996 and elected to continue accounting
for its equity instruments using the accounting prescribed by Opinion
25. The Company will include the disclosures required by SFAS 123 in
the Company's 1996 annual report.
9
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company reported a net loss of ($122,040) for the first quarter of
1996, as compared to net income of $10,461 for the first quarter of 1995.
Total revenue increased by $62,038 (1%) for the first quarter of 1996,
compared to the first quarter of 1995. The increase is due primarily to an
increase in Company-owned Center revenue of $438,591, offset by decreases in
franchise sales - center openings revenue of $157,000; product and equipment
revenue of $190,961 and royalty revenue of $37,263.
Royalty fees are a percentage of gross sales paid monthly by all
franchised Grease Monkey Centers. Royalty fee revenue for the first quarter
of 1996 decreased by 5% over the first quarter of 1995 to $751,142. This
decrease is due to the termination of sixteen mature franchise centers
between 1995 and 1996. Based upon many factors, including the age of amounts
owed the Company, the extent of collateralization, and historical
performance, the Company may place certain financially troubled franchisees
on a non-accrual status. For the first quarter of 1996, estimated royalties
of $30,350 were not accrued under this policy, compared to $33,025 for the
first three months of 1995. The Company has a royalty rebate program for
franchisees under which eligible franchisees can receive a rebate of
royalties paid. The rebate accrued under this program for the quarter ended
March 31, 1996, was $60,927 as compared to $52,569 for the quarter ended
March 31, 1995. The rebate is recorded as a reduction of royalty revenue.
The royalty rebate program is not a requirement of the franchise agreement.
Continuation of the program is reviewed by management on an annual basis.
The 1996 Royalty Rebate Program runs through December 31, 1996.
Six franchise centers were opened in the first quarter of 1995
(including one refranchised center which was previously closed) and franchise
sales revenue of $157,000 was recognized. Franchise sales revenue represents
initial payments received by the Company from buyers of its franchise
licenses. The fee is recognized as revenue when the related franchise opens
for business.
At March 31, 1996, the Company operated 33 Centers as compared to 29
centers at March 31, 1995. For the first quarter of 1996 the Company
reported an operating margin (Company-owned Center sales less expenses
excluding interest, depreciation and amortization) of $436,773 on revenue of
$3,285,272 at Company-owned Centers, as compared to an operating margin of
$266,962 on revenue of $2,846,681 for the same quarter last year. These
results represent an increase of 15% in revenue and 64% in operating margin.
On a same center basis, those Company-owned Centers operated
continuously over the period January 1, 1995 through March 31, 1996,
representing 25 centers, had an operating margin of $340,710 on revenue of
$2,704,130 for the first quarter of 1996, as compared to first
(continued)
10
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
quarter 1995 results of an operating margin of $256,482 on revenue of
$2,562,317. These results represent an increase of 6% in revenue and 33% in
operating margin.
In the first quarter of 1996 the Company realized marketing allowances
and gross margins on product and equipment sales of $115,216, as compared to
$120,579 in the first quarter of 1995. Product and equipment revenue
represents the sale of fluid dispensing equipment and other supplies to
franchisees, and marketing allowances related to the sale of oil filters, air
filters, oil additives, and certain other products.
General and administrative expenses for the first quarter of 1996
increased by 9% as compared to the first quarter of 1995. The primary
factors causing this variance include increases in litigation legal fees,
franchise sales and advertising expenses and general and administrative
expenses at the Company-owned Center Division, as well as a real estate
settlement. These increases were offset by a reduction in losses realized on
the write-off of obsolete assets and decreases in franchise development and
legal expenses.
(continued)
11
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
The following schedule summarizes the activity with regard to Grease
Monkey Company-owned Centers as well as Grease Monkey franchised centers for
the quarters ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED:
----------------------------------------------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------------------------- --------------------------------
COMPANY FRANCHISEE COMPANY FRANCHISEE
OWNED OWNED TOTAL OWNED OWNED TOTAL
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Centers open, beginning 29 181 210 29 176 205
Centers opened (A) 1 - 1 - 6 6
Centers purchased 2 (2) - - - -
Centers sold (2) 2 - - - -
Centers terminated or closed (B) - (3) (3) - (4) (4)
Centers reacquired 4 (4) - - - -
----- ----- ----- ----- ----- -----
Centers open, ending (C) 34 174 208 29 178 207
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Vehicles serviced (000's) 695 694
----- -----
----- -----
Franchise licenses issued (D) 9 1
----- -----
----- -----
Undeveloped franchise licenses (E) 48 52
----- -----
----- -----
Franchise applications outstanding (E) 18 27
----- -----
----- -----
Franchise license/application fees
received (F) $175,200 $30,000
--------- --------
--------- --------
</TABLE>
(A) 1995 includes one refranchised center which was previously closed. 1996
includes one franchised center which was involved in a settlement with GMI
which resulted in GMI assuming possession of the Center in April 1996 and
thus no franchise revenue was recognized.
(B) 1995 includes one center which was deidentified by the franchisee
in January 1995; subsequently, the Company acquired the center on May 1,
1995.
(C) Includes 16 franchised centers in Mexico in 1996 and 12 franchised
centers in Mexico in 1995.
(D) Represents the number of licenses issued during the period.
(E) Represents the number of licenses/applications outstanding at
March 31.
(F) Represents amounts received for franchise licenses/applications
during the period.
(continued)
12
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES
During April 1995, the Company entered into two agreements with a motor
oil supplier - a Loan Agreement and a Fast Lube Supply Agreement. Under the
Loan Agreement, a $2,400,000 line of credit was established. All loans drawn
under this line accrue interest at 9% per annum and are repaid in quarterly
installments over a ten year period from date of disbursement. The line is
secured by the assignment of leases and lubrication equipment of certain
Company-owned Centers. As of March 31, 1996, the Company had borrowed
approximately $1,900,000 under the line to refinance existing debt with the
motor oil supplier, for acquisitions and for working capital. The balance of
the funds available under the line are restricted to the acquisition or
construction of new fast lube centers. Under the Fast Lube Supply Agreement,
the Company is required to purchase at least 85% of the petroleum products
for such Centers from the supplier, the Company is required to meet certain
minimum annual purchase requirements and the Company is required to feature
the supplier's products in such Centers.
Another motor oil supplier has provided financing for Company-owned
Centers where the Company agrees to feature its products. The financing
ranges from $30,000 to $45,000 per Center depending on the expected usage at
the center. The advances are amortized based on the Company's purchases of
its products. Similar oil company financing is expected to be available for
any new Company-owned Centers acquired and existing Company-owned Centers
where the Company does not have a supply agreement or where the existing
supply agreement may be canceled.
The growth of the Grease Monkey system is dependent on the ability of
the Company and its franchisees to obtain real estate development capital.
Historically, Grease Monkey Centers have been built utilizing build-to-suit
services, whereby the land is purchased and the building is constructed to
GMI's specifications, then leased to GMI or to a franchisee, by a third
party. However, the franchisees have moved toward purchasing and developing
the real estate for their own account, thereby creating greater value in
their business. Development of GMI- owned Centers will continue to utilize
build-to-suit capital for expansion.
(continued)
13
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
LIQUIDITY
Cash provided by operations during the first quarter of 1996 was
$143,694 as compared to cash used in operations of ($193,905) in the first
quarter of 1995.
Cash used in investing activities was ($425,304) in the first quarter of
1996, as compared to cash provided by investing activities of $5,317 in the
first quarter of 1995. Cash provided in both quarters consisted primarily of
receipts on direct financing leases which remained constant over the periods.
Additional cash was received in the first quarter of 1996 with the
refranchising of two Company-owned Centers. Cash used in investing
activities for the first quarter of 1996 consisted primarily of cash used to
purchase two franchised Centers. Additional cash was used in both quarters
for capital expenditures, primarily computer systems and Company Center
equipment. Additionally, cash was used in the first quarter of 1996 for the
buy-out of leases of automobiles used by field employees.
Cash provided by financing activities was $337,582 in the first quarter
of 1996 as compared to cash used in financing activities of ($5,795) in the
first quarter of 1995. Cash provided by financing activities in the first
quarter of 1996 consisted primarily of proceeds from long-term debt related
to the purchase of automobiles (as described above), an advance from a motor
oil supplier, and a draw on a line of credit for the financing of the
acquisition of two franchised Centers. Cash provided by financing activities
in the first quarter of 1995 consisted primarily of the release of $155,154
of restricted cash to operating cash. Financing activities also included
cash used to reduce long-term debt and capital lease obligations of $191,536
in the first quarter of 1996 and $154,749 in the first quarter of 1995.
The Company does not have any material commitments for capital
expenditures. The Company believes it has the capital resources and
liquidity necessary to meet all of the obligations, debt maturities, and
commitments of the Company during 1996.
14
<PAGE>
GREASE MONKEY HOLDING CORPORATION
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED MARCH 31, 1996
FORM 10-QSB
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is a party to legal proceedings including claims by
franchisees against the Company that arise in the ordinary course of
business. In the opinion of management, the outcome of these matters will
not have a material effect on the financial condition, results of operations
or cash flows of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (numbered in accordance with Item 601 of regulation S-K)
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the period covered by this report.
15
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED MARCH 31, 1996
FORM 10-QSB
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GREASE MONKEY HOLDING CORPORATION
By: /s/ T. Timothy Kershisnik
------------------------------------------
T. Timothy Kershisnik
Controller, Treasurer and
Corporate Secretary
(Principal Financial and
Accounting Officer)
Denver, Colorado
May 10, 1996
16
<PAGE>
EXHIBIT 11
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
QUARTERS ENDED MARCH 31,
------------------------
1996 1995
---- ----
PRIMARY EARNINGS PER SHARE
Net income (loss) $ (122,040) 10,461
Dividends on preferred stock (31,303) (31,873)
------------ -----------
Net income (loss) applicable to common stock $ (153,343) (21,412)
------------ -----------
------------ -----------
Common shares outstanding 4,349,689 4,350,403
Effect of using weighted average common and
common equivalent shares outstanding (4,730) (16,227)
Effect of shares issuable under common
stock warrants using the treasury stock method * *
Effect of shares issuable under stock options
using the treasury stock method * *
------------ -----------
Shares used in computing primary earnings
per share 4,344,959 4,334,176
------------ -----------
------------ -----------
Primary earnings (loss) per common share $ (0.04) **
------------ -----------
------------ -----------
FULLY DILUTED EARNINGS PER SHARE
Net income (loss) $(122,040) 10,461
Dividends on preferred stock (31,303) (31,873)
------------ -----------
Net income (loss) as adjusted $(153,343) (21,412)
------------ -----------
------------ -----------
Shares used in computing primary
earnings per share 4,344,959 4,334,176
Effect of shares issuable upon conversion
of preferred stock * *
------------ -----------
Shares used in computing fully diluted
earnings per share 4,344,959 4,334,176
------------ -----------
------------ -----------
Fully diluted earnings (loss) per
common share $ (0.04) **
------------ -----------
------------ -----------
* Antidilutive
** Less than $.01 per share
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 1-3 OF THE COMPANY'S FORM-10QSB FOR THE YEAR-T0-DATE, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 441,139
<SECURITIES> 0
<RECEIVABLES> 1,687,293
<ALLOWANCES> 312,823
<INVENTORY> 788,022
<CURRENT-ASSETS> 2,705,405
<PP&E> 8,706,767
<DEPRECIATION> 3,076,005
<TOTAL-ASSETS> 15,261,428
<CURRENT-LIABILITIES> 2,343,689
<BONDS> 3,734,591
0
2,089,638
<COMMON> 130,491
<OTHER-SE> (406,532)
<TOTAL-LIABILITY-AND-EQUITY> 15,261,428
<SALES> 0
<TOTAL-REVENUES> 4,633,189
<CGS> 0
<TOTAL-COSTS> 4,584,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 140,840
<INCOME-PRETAX> (122,040)
<INCOME-TAX> 0
<INCOME-CONTINUING> (122,040)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,040)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
