<PAGE> 1
UNITED STATES
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 THE QUARTERLY PERIOD ENDED April 30, 1994
-------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ---------- to
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Commission file number 0-12202
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TRAK AUTO CORPORATION
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1281465
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
</TABLE>
3300 75th Avenue, Landover, Maryland, 20785
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(Address of principal executive office)
(Zip Code)
(301) 731-1200
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report
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
------ -----
At June 13, 1994, registrant had 6,053,818 shares of Common Stock
outstanding.
Page 1 of 14 pages
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements included herein have been prepared by
Trak Auto Corporation ("Trak Auto"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although Trak Auto believes
that the disclosures are adequate to make the information presented not
misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in Trak Auto's report on Form 10-K for the fiscal year ended January
29, 1994.
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TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 30, May 1,
1994 1993
------------ ------------
<S> <C> <C>
Sales $ 88,387,000 $ 77,883,000
Interest and other income 267,000 399,000
------------ ------------
88,654,000 78,282,000
------------ ------------
Expenses:
Cost of sales, store occupancy and
warehousing 64,654,000 57,753,000
Selling and administrative 17,495,000 17,943,000
Depreciation and amortization 1,623,000 1,543,000
Interest expense 881,000 904,000
------------ ------------
84,653,000 78,143,000
------------ ------------
Income before income taxes 4,001,000 139,000
Income taxes 1,471,000 47,000
------------ ------------
Net Income $ 2,530,000 $ 92,000
============ ============
Weighted average common shares and
common share equivalents outstanding 6,086,000 6,145,000
============ ============
Per share data:
Net Income $ .42 $ .01
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
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TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 29,
1994 1994
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 5,753,000 $ 4,931,000
Short-term instruments 10,107,000 11,387,000
Marketable debt securities 12,143,000 8,689,000
Accounts receivable, trade 4,446,000 5,570,000
Accounts receivable, other 419,000 764,000
Merchandise inventories 91,517,000 93,462,000
Deferred income taxes 3,299,000 3,992,000
Due from affiliate - 20,000
Other current assets 1,007,000 990,000
------------ ------------
Total Current Assets 128,691,000 129,805,000
------------ ------------
Property and Equipment, at cost:
Furniture, fixtures and equipment 44,489,000 43,435,000
Leasehold improvements 10,134,000 9,269,000
Property under capital leases 23,667,000 23,667,000
------------ ------------
78,290,000 76,371,000
Accumulated Depreciation
and Amortization 34,280,000 32,608,000
------------ ------------
44,010,000 43,763,000
------------ ------------
Other Assets 251,000 239,000
------------ ------------
Deferred Income Taxes 6,530,000 5,342,000
------------ ------------
Total Assets $179,482,000 $179,149,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
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TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 29,
1994 1994
------------ ------------
<S> <C> <C>
Current Liabilities:
Accounts payable, trade $ 43,250,000 $ 49,926,000
Income taxes payable 2,982,000 1,155,000
Accrued expenses -
Salary and benefits 8,794,000 8,008,000
Taxes other than income 4,803,000 5,572,000
Other 13,517,000 10,865,000
Current portion of obligations under
capital leases 211,000 211,000
Due to affiliate 160,000 -
------------ ------------
Total Current Liabilities 73,717,000 75,737,000
------------ ------------
Obligations Under Capital Leases 26,403,000 26,331,000
------------ ------------
Reserve for Closed Stores and
Restructuring 6,959,000 7,047,000
------------ ------------
Other 326,000 359,000
------------ ------------
Total Liabilities 107,405,000 109,474,000
------------ ------------
Stockholders' Equity:
Common stock, par value $.01 per
share; 15,000,000 shares authorized;
6,271,630 and 6,270,497 shares issued,
respectively 63,000 63,000
Paid-in capital 44,487,000 44,477,000
Unrealized losses on short-term
investments (138,000) -
Retained earnings 29,481,000 26,951,000
Treasury stock, 217,812 shares
of common stock, at cost (1,816,000) (1,816,000)
------------ ------------
Total Stockholders' Equity 72,077,000 69,675,000
------------ ------------
Total Liabilities and Stockholders'
Equity $179,482,000 $179,149,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
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TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 30, May 1,
1994 1993
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,530,000 $ 92,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,623,000 1,543,000
Provision for closed stores,
including restructuring charge - (243,000)
Change in assets and liabilities:
Accounts receivable, trade 1,124,000 171,000
Accounts receivable, other 345,000 3,478,000
Merchandise inventories 1,945,000 (8,483,000)
Prepaid income taxes - 241,000
Due from affiliate 20,000 (32,000)
Other current assets (17,000) (196,000)
Deferred income taxes (495,000) (199,000)
Other assets (12,000) 43,000
Accounts payable, trade (6,676,000) 8,532,000
Accrued expenses 2,794,000 3,427,000
Due to affiliate 160,000 (35,000)
Income taxes payable 1,827,000 -
Reserve for closed stores (88,000) (308,000)
------------ ------------
Net cash provided by
operating activities $ 5,080,000 $ 8,031,000
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures $ (1,903,000) $ (3,581,000)
Purchase of United States Treasury
Notes (14,249,000) (8,379,000)
Sale of United States Treasury
Notes 11,454,000 5,137,000
Purchase of corporate notes - (399,000)
Purchase of municipal securities (1,297,000) (3,275,000)
Sale of municipal securities 500,000 -
------------ ------------
Net cash used for
investing activities $( 5,495,000) $(10,497,000)
------------ ------------
Cash Flows from Financing Activities:
Principal payments under capital
lease obligations $ (53,000) $ (49,000)
Proceeds from exercise of stock
options 10,000 17,000
------------ ------------
Net cash used for
financing activities $ (43,000) $ (32,000)
------------ ------------
</TABLE>
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TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 30, May 1,
1994 1993
------------ ------------
<S> <C> <C>
Net (Decrease) in Cash and
Cash Equivalents $ (458,000) $ (2,498,000)
Cash and Cash Equivalents at
Beginning of Year 16,318,000 32,547,000
------------ ------------
Cash and Cash Equivalents at
End of Quarter $ 15,860,000 $ 30,049,000
============ ============
Supplemental Disclosures of Cash
Flow Information:
Cash paid during quarter for:
Interest $ 881,000 $ 904,000
Income taxes 51,000 27,000
</TABLE>
The accompanying notes are an integral part of these statements.
7
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TRAK AUTO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1994 and May 1, 1993
(Unaudited)
(1) General:
The accompanying consolidated financial statements reflect the accounts of
Trak Auto Corporation ("Trak Auto") and its wholly-owned subsidiaries. Trak
Auto and its wholly-owned subsidiaries are referred to collectively as the
"Company". All significant intercompany accounts and transactions have been
eliminated. The Company is engaged in the business of operating specialty
retail stores. The unaudited statements as of April 30, 1994 and May 1, 1993
reflect, in the opinion of management, all adjustments (normal and recurring in
nature) necessary to present fairly the consolidated financial position as of
April 30, 1994 and May 1, 1993 and the results of operations and cash flows for
the periods indicated.
(2) Net Income Per Common Share and Common Share Equivalents:
Net income per common share has been computed using the weighted average
number of shares of common stock and common stock equivalents (certain stock
options) outstanding during the periods. The difference between primary net
income per common share and fully diluted net income per common share is not
significant for the periods presented.
(3) Interim Inventory Estimates:
The Company's inventories are priced at the lower of last-in, first-out
(LIFO) cost or market. At April 30, 1994 and January 29, 1994, inventories
determined on a first-in, first-out basis would have been greater by $5,670,000
and $5,520,000, respectively.
The Company takes a physical count of its store and warehouse inventories
semiannually and the Company uses a gross profit method combined with available
perpetual inventory information to determine inventories for quarters when
complete physical counts are not taken. The Company did not take a physical
inventory for the quarter ended April 30, 1994.
(4) Short-term Instruments and Marketable Debt Securities:
At April 30, 1994, the Company's short-term instruments included United
States Treasury Bills and Overnight Repurchase Agreements (collateralized by
United States Treasury Obligations) and marketable debt securities included
United States Treasury Notes, corporate notes and municipal securities.
Additionally, $1,000,000 of United States Treasury Notes serve as a security
for a reverse repurchase agreement, the liability for which has been netted
against the associated assets in the accompanying balance sheet. The Company
adopted Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities, effective January 30, 1994
and accordingly these short-term instruments and marketable debt securities are
classified as available for sale securities and are recorded at fair value,
with unrealized gains and losses recorded as a separate component of
stockholders' equity. At April 30, 1994, market value was $138,000 less than
cost, net of income taxes.
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TRAK AUTO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1994 and May 1, 1993
(Unaudited)
(5) Credit Agreement:
The Company is party to a revolving credit agreement, together with Dart
Group Corporation ("Dart"), which owns 65.5% of the Company's outstanding
common stock, and Crown Books Corporation ("Crown Books"), an affiliate of
Dart, for a $6,000,000 revolving line of credit. The $6,000,000 is an
aggregate amount and not specifically allocated to any of the parties. The
line is intended to be used for the issuance of standby and trade letters of
credit. At April 30, 1994, there had been no borrowings under the credit
agreement. This line of credit expires May 1, 1995.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash, including short-term instruments, is the Company's primary source of
liquidity. Cash, including short-term instruments, decreased by $458,000 to
$15,860,000 at April 30, 1994 from $16,318,000 at January 29, 1994. This
decrease was due primarily to the net acquisition of marketable debt securities
and capital expenditures and was partially offset by operations.
Operating activities provided $5,080,000 in funds to the Company for the
thirteen weeks ended April 30, 1994 compared to providing $8,031,000 for the
same period one year ago. The primary source of funds during the thirteen
weeks ended April 30, 1994 was operating results offset by payments on January
29, 1994 accounts payable, trade. During the thirteen weeks ended May 1, 1993,
the Company received $3,478,000 from insurance carriers as a result of the
settlement of the Company's claims arising from the Los Angeles civil
disturbances of May 1992.
Investing activities used $5,495,000 of the Company's funds during the
thirteen weeks ended April 30, 1994 compared to $10,947,000 for the thirteen
weeks May 1, 1993. The primary use of funds was for capital expenditures and
the net acquisition of marketable debt securities. Compared to the prior
fiscal year, investing activities for capital expenditures and acquisition of
marketable debt securities, were lower due to fewer conversions to Super Trak
stores and funds necessary for operations, respectively.
Financing activities used $43,000 of the Company's funds for principal
payments under capital lease obligations and was partially offset by $10,000
from the exercise of stock options.
The Company intends to open new stores as Super Trak or Super Trak
Warehouse stores and to convert or expand existing stores to Super Trak or
Super Trak Warehouse stores. The Company anticipates approximately 45 Super
Trak stores will be opened or converted from classic stores in fiscal 1995 and
anticipates closing approximately 33 classic stores. At April 30, 1994, the
Company had 85 Super Trak stores and eleven signed leases for new Super Trak
stores and 13 signed amendments to existing leases for expansion to Super Trak
or Super Trak Warehouse.
The Company has a $6,000,000 revolving line of credit available that it
shares with Dart and Crown Books. The Company has not borrowed any funds
against this line of credit.
The Company anticipates that the funds necessary for capital expenditures
for new store openings and remodelings, inventory purchases for new stores, and
to meet the Company's long-term lease obligations and current liabilities
(including current and long-term closed store reserves and restructuring
reserves) will come from operations and existing current assets.
The liquid assets maintained by the Company are intended to fund the
expansion of the Company's retail business through opening stores in new
markets, converting classic stores to Super Trak stores, and opening additional
stores in existing markets, and to fund other corporate activities.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Results of Operations
Sales of $88,387,000 during the thirteen weeks ended April 30, 1994
increased by $10,504,000 or 13.5% over the same period one year ago. The
increase was primarily attributable to increased sales for Super Trak stores
converted from classic Trak stores and to a 7.7% increase in sales for all
stores open more than one year. Sales for comparable Super Trak stores open
more than one year increased 7.5% and sales for comparable classic Trak stores
open more than one year increased 7.7%. Sales for Super Trak stores
represented 36.1% of total sales during the thirteen weeks ended April 30, 1994
compared to 12.7% for the thirteen weeks ended May 1, 1993.
During the thirteen weeks ended April 30, 1994, the Company opened twelve
new Super Trak stores, and closed twenty classic Trak stores. At April 30,
1994, the Company had 306 stores, including 85 Super Trak stores.
Interest and other income decreased by $132,000 when compared to the prior
year, largely due to a decrease in funds available for short- term investment.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales was 73.2% for the thirteen weeks ended April 30, 1994 compared to 74.2%
for the same period in the prior year. The decrease was primarily due to an
increase in store margins as a result of higher merchandise margins and a
favorable change in sales mix (increased hard parts and decreased motor oils),
and was partially offset by decreased advertising credits from vendors.
Selling and administrative expenses were 19.8% and 23.0% as a percentage of
sales for the thirteen weeks ended April 30, 1994 and May 1, 1993,
respectively. The decrease was due primarily to decrease in payroll costs as a
result of the Company's efforts to control store hours and administrative
overhead and to Super Trak store maturity. Payroll costs during the thirteen
weeks ended May 1, 1993, were unusually high due to the opening of a large
number of Super Trak stores during the quarter.
Depreciation and amortization expenses increased $80,000 for the thirteen
weeks ended April 30, 1994 compared to the same period one year ago. The
increase was due to increasing fixed asset purchases for new and converted
Super Trak stores.
The effective income tax rate was 36.8% for the thirteen weeks ended April
30, 1994 compared to 33.8% for the thirteen weeks ended May 1, 1993. The
increase is primarily due to anticipated income before taxes for fiscal 1995 at
a higher Federal statutory rate and a lower portion of income before taxes that
is tax exempt municipal bond interest.
The Company does not offer any of the benefits covered under Statement of
Financial Accounting Standards ("SFAS") No. 106, Employer's Accounting for
Postretirement Benefits Other than Pensions, and as such the standard will have
no impact to the Company.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Results of Operations (Continued)
The Company has adopted the Statement of Financial Accounting Standards
No. 112 ("SFAS No. 112"), Employer's Accounting for Postemployment Benefits.
Implementation of the standard has not had a significant impact on the
financial statements.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 17, 1994, members of the Haft family settled all legal disputes
among themselves relating to, among other things, their ownership of and
restrictions on their holdings of Common Stock of Dart.
In addition, the settlement agreements, by providing that all claims
between the family and between members of the family and Dart, the Company and
Crown Books (except for the federal lawsuit between Robert M. Haft and Dart and
Crown Books over his termination) were settled, resolves insofar as possible
the direct and derivative claims asserted by Robert M. Haft in his lawsuit
filed in November 1993 in the Delaware Court of Chancery in New Castle County.
While Robert M. Haft's suit in the United States District Court for the
District of Delaware relating to his employment contracts has not been settled,
the parties have agreed to submit the claims to a non-binding mediation
process. The derivative lawsuit filed by Alan R. Kahn and Tudor Trust is not
affected by this settlement.
See the Company's Annual Report on Form 10-K for the period ended January
29, 1994, at pages 35-36 for a discussion of the litigation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended April 30, 1994.
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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.
TRAK AUTO CORPORATION
Date June 14, 1994 By R. Keith Green
------------------------ ---------------------------
R. KEITH GREEN
President
Date June 14, 1994 Ron Marshall
------------------------ ---------------------------
RON MARSHALL
Principal Financial Officer
Date June 14, 1994 David B. MacGlashan
------------------------ ---------------------------
DAVID B. MACGLASHAN
Principal Accounting Officer
14
