<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 29, 1995
----------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________ to
___________
Commission file number 0-12202
-------
TRAK AUTO CORPORATION
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1281465
--------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3300 75th Avenue, Landover, Maryland, 20785
-------------------------------------------------------
(Address of principal executive office)
(Zip Code)
(301) 731-1200
-------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------
(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 12, 1995, the registrant had 6,332,249 shares of Common Stock, $.01 par
value per share, outstanding.
Page 1 of 15 pages
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Certain 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
28, 1995.
2
<PAGE> 3
TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 29, April 30,
1995 1994
------------ ------------
<S> <C> <C>
Sales $ 79,611,000 $ 88,387,000
Interest and other income 455,000 267,000
------------ ------------
80,066,000 88,654,000
------------ ------------
Expenses:
Cost of sales, store occupancy and
warehousing 59,124,000 64,654,000
Selling and administrative 16,935,000 17,495,000
Depreciation and amortization 1,343,000 1,623,000
Interest expense 895,000 881,000
------------ ------------
78,297,000 84,653,000
------------ ------------
Income before income taxes 1,769,000 4,001,000
Income taxes 653,000 1,471,000
------------ ------------
Net Income $ 1,116,000 $ 2,530,000
============ ============
Weighted average common shares and
common share equivalents outstanding 6,038,000 6,086,000
============ ============
Net Income per share $ .18 $ .42
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
April 29, January 28,
1995 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 4,354,000 $ 5,196,000
Short-term instruments 6,590,000 18,938,000
Marketable debt securities 10,291,000 10,133,000
Accounts receivable, trade 5,549,000 5,330,000
Merchandise inventories 99,455,000 89,797,000
Deferred income taxes 6,553,000 6,842,000
Other current assets 354,000 1,070,000
------------ ------------
Total Current Assets 133,146,000 137,306,000
------------ ------------
Property and Equipment, at cost:
Furniture, fixtures and equipment 50,626,000 49,008,000
Leasehold improvements 9,503,000 9,185,000
Property under capital leases 23,667,000 23,667,000
------------ ------------
83,796,000 81,860,000
Accumulated Depreciation
and Amortization 39,046,000 37,638,000
------------ ------------
44,750,000 44,222,000
------------ ------------
Other Assets 232,000 247,000
------------ ------------
Deferred Income Taxes 5,931,000 5,874,000
------------ ------------
Total Assets $184,059,000 $187,649,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE> 5
TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited) (Audited)
April 29, January 28,
1995 1995
------------ ------------
<S> <C> <C>
Current Liabilities:
Accounts payable, trade $ 49,741,000 $ 50,403,000
Income taxes payable 861,000 393,000
Accrued expenses -
Salary and benefits 8,876,000 10,054,000
Taxes other than income 5,242,000 5,053,000
Other 12,455,000 8,944,000
Current portion of obligations under
capital leases 204,000 261,000
Due to affiliate 526,000 185,000
------------ ------------
Total Current Liabilities 77,905,000 75,293,000
------------ ------------
Obligations Under Capital Leases 26,606,000 26,541,000
------------ ------------
Reserve for Closed Stores and
Restructuring 4,473,000 5,029,000
------------ ------------
Other 194,000 227,000
------------ ------------
Total Liabilities 109,178,000 107,090,000
------------ ------------
Stockholders' Equity:
Common stock, par value $.01 per
share; 15,000,000 shares authorized;
6,331,458 and 6,271,630 shares issued,
respectively 63,000 63,000
Paid-in capital 45,206,000 45,206,000
Unrealized losses on short-term
investments (22,000) (110,000)
Retained earnings 38,332,000 37,216,000
Treasury stock, 528,190 and 217,812 shares
of common stock, at cost, respectively (8,698,000) (1,816,000)
------------ ------------
Total Stockholders' Equity 74,881,000 80,559,000
------------ ------------
Total Liabilities and Stockholders'
Equity $184,059,000 $187,649,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
<PAGE> 6
TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------
April 29, April 30,
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,116,000 $ 2,530,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,343,000 1,623,000
Change in assets and liabilities:
Accounts receivable, trade (279,000) 1,124,000
Accounts receivable, other 25,000 345,000
Merchandise inventories (9,658,000) 1,945,000
Due from affiliate - 20,000
Other current assets 716,000 (17,000)
Deferred income taxes 197,000 (495,000)
Other assets 15,000 (12,000)
Accounts payable, trade (662,000) (6,676,000)
Accrued expenses 2,587,000 2,794,000
Due to affiliate 341,000 160,000
Income taxes payable 468,000 1,827,000
Reserve for closed stores (524,000) (88,000)
------------ ------------
Net cash provided by (used for)
operating activities $ (4,315,000) $ 5,080,000
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures $ (1,936,000) $ (1,903,000)
Purchase of United States Treasury
Notes - (14,249,000)
Sale of United States Treasury
Notes - 11,454,000
Purchase of corporate notes - -
Purchase of municipal securities - (1,297,000)
Sale of municipal securities - 500,000
------------ ------------
Net cash used for
investing activities $ (1,936,000) $( 5,495,000)
------------ ------------
</TABLE>
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TRAK AUTO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------
April 29, April 30,
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Financing Activities:
Principal payments under capital
lease obligations $ (57,000) $ (53,000)
Acquisition of treasury shares (6,882,000) -
Proceeds from exercise of stock
options - 10,000
------------ ------------
Net cash used for
financing activities $ (6,939,000) $ (43,000)
------------ ------------
Net Decrease in Cash and
Equivalents $(13,190,000) $ (458,000)
Cash and Equivalents at
Beginning of Year 24,134,000 16,318,000
Cash and Equivalents at ------------ ------------
End of Quarter $ 10,944,000 $ 15,860,000
============ ============
Supplemental Disclosures of Cash Flow
Information:
Cash paid during quarter for:
Interest $ 895,000 $ 881,000
Income taxes 8,000 51,000
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
TRAK AUTO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 29, 1995 AND APRIL 30, 1994
(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 29, 1995 and April 30, 1994
reflect, in the opinion of management, all adjustments (normal and recurring in
nature) necessary to present fairly the consolidated financial position as of
April 29, 1995 and April 30, 1994 and the results of operations and cash flows
for the periods indicated.
The results of operations for the quarter ended April 29, 1995 are not
necessarily indicative of the results to be achieved for the full fiscal year.
(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 29, 1995 and January 28, 1995, inventories
determined on a first-in, first-out basis would have been greater by $6,141,000
and $5,870,000, respectively.
The Company takes a physical count of its store 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 29, 1995.
8
<PAGE> 9
TRAK AUTO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 29, 1995 AND APRIL 30, 1994
(Unaudited)
(4) Short-term Instruments and Marketable Debt Securities:
The Company's short-term instruments included United States Treasury
Bills and money market funds. Marketable debt securities included United
States Treasury Notes, corporate notes and municipal securities.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities,
effective January 30, 1994.
Management determines the appropriate classification of its investments
in debt securities at the time of purchase and reevaluates such determination
at each balance sheet date. Debt securities for which the Company does not
have the intent or ability to hold to maturity are classified as available for
sale. Securities available for sale are carried at fair value, with the
unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity. At April 29, 1995, market value was $22,000 less than
cost, net of income taxes. At April 29, 1995, the Company had no investments
that qualified as trading or held to maturity.
The amortized cost of debt securities classified as available for sale
is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization and interest are included in interest income.
Realized gains and losses are included in interest and other income. The cost
of securities sold is based on the specific identification method.
(5) Credit Agreements:
The Company has entered into a $10 million revolving credit facility
with Dart Group Corporation ("Dart"), which owns 68.3% of the Company's common
stock. The credit facility is intended to be used for the Company's short-term
working capital purposes. Any advance under this credit facility bears
interest at an annual rate equal to the prime rate as set forth in the "Money
Rates" column of the Wall Street Journal, as such rate may change from time to
time, plus one percent (1%). Interest must be paid monthly in arrears and the
agreement expires May 1, 1996.
9
<PAGE> 10
TRAK AUTO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 29, 1995 AND APRIL 30, 1994
(Unaudited)
(5) Credit Agreements, (Continued):
Together with Dart and Crown Books Corporation (an affiliate of Dart),
the Company is party to a $6 million revolving credit agreement with a bank.
The $6 million 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. This line of credit expires on July 1, 1995.
At April 29, 1995, there were no borrowings under these credit
agreements.
(6) Tender Offer:
On December 21, 1994, Trak Auto offered to buy back from its
shareholders approximately 24% of its outstanding Common Stock, or 1,500,000
shares, at a price of $17.50 per share. On February 6, 1995, Trak Auto amended
the offer by increasing the purchase price to $20.50 per share, and made
certain other changes. When the offer expired on February 28, 1995, Trak Auto
had repurchased approximately 310,000 shares for a total consideration of
$6,363,000 plus expenses of approximately $520,000.
10
<PAGE> 11
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 $13,190,000 to
$10,944,000 at April 29, 1995 from $24,134,000 at January 28, 1995. This
decrease was due primarily to the repurchase of outstanding Common Stock and
payments for increased merchandise inventory.
Operating activities used $4,315,000 of the Company's funds during the
thirteen weeks ended April 29, 1995 compared to providing $5,080,000 for the
same period one year ago. The primary use of funds during the thirteen weeks
ended April 29, 1995 was for payments for increased merchandise inventory and
was partially offset by operating results.
Investing activities used $1,936,000 of the Company's funds during the
thirteen weeks ended April 29, 1995 compared to $ 5,495,000 for the thirteen
weeks April 30, 1994. The primary use of funds during the thirteen weeks ended
April 29, 1995 was for capital expenditures for new Super Trak stores. The
Company's position in marketable debt securities remained nearly the same
during the thirteen weeks ended April 29, 1995.
Financing activities used $6,939,000 of the Company's funds primarily for
the repurchase of outstanding shares of its Common Stock (see note 6 to the
Consolidated Financial Statements).
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 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 54 Super Trak or Super
Trak Warehouse stores will be opened or converted from classic stores in fiscal
1996 and anticipates closing approximately 17 classic stores. At April 29,
1995, the Company had 116 Super Trak and Super Trak Warehouse stores and nine
signed leases for new Super Trak or Super Trak Warehouse stores and one signed
amendment to an existing lease for expansion to a Super Trak store.
The Company has a $6,000,000 revolving line of credit available that it
shares with Dart and Crown Books. In addition, the Company has entered into an
agreement with Dart for a $10,000,000 revolving line of credit. This line is
intended to be used for the Company's short-term working capital needs. The
Company has not borrowed any funds against these lines of credit.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Liquidity and Capital Resources, Continued
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.
Results of Operations
During the thirteen weeks ended April 29, 1995, the Company opened two new
Super Trak stores and one new Super Trak Warehouse store, and closed 13 classic
Trak stores. At April 29, 1995, the Company had 272 stores, including 108
Super Trak stores and 8 Super Trak Warehouse stores.
Sales of $79,611,000 during the thirteen weeks ended April 29, 1995
decreased by $8,776,000 or 9.9% over the same period one year ago. The
decrease was primarily attributable to the mild winter in the Chicago and
Washington, D.C. metropolitan areas, the continuing rains and floods in the Los
Angeles area and to a net decrease in the number of stores. Comparable sales
(stores open more than one year) decreased 8.0% for the thirteen weeks ended
April 29, 1995. Sales for comparable Super Trak Stores decreased 6.7% and
sales for comparable classic Trak stores decreased 9.0%. Sales for Super Trak
stores represented 52.8% of total sales during the thirteen weeks ended April
29, 1995 compared to 36.1% for the thirteen weeks ended April 30, 1994.
Interest and other income increased by $188,000 when compared to the prior
year, largely due to an increase in the average balance in funds available for
short-term investment and to higher interest rates.
Cost of sales, store occupancy and warehousing expenses as a percentage
of sales was 74.3% for the thirteen weeks ended April 29, 1995 compared to
73.2% for the same period in the prior year. The increase was primarily due to
increased occupancy costs as a percentage of sales (although the dollars spent
for such costs remained approximately the same) and reduced advertising credits
from automotive vendors. These increases were partially offset by increased
store margins as a result of a continuing favorable change in sales mix.
Selling and administrative expenses were 21.3% and 19.8% as a percentage of
sales for the thirteen weeks ended April 29, 1995 and April 30, 1994,
respectively. The increase was due primarily to increased payroll costs, as a
percentage of sales (actual payroll dollars remained virtually the same as last
year) and to costs associated with the continuing shareholder
12
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Results of Operations, Continued
litigation and executive committee activity.
Depreciation and amortization expenses decreased $280,000 for the
thirteen weeks ended April 29, 1995 compared to the same period one year ago.
The decrease was due to store closing and to the point-of-sale register systems
being fully depreciated.
The effective income tax rate was 36.9.% for the thirteen weeks ended
April 29, 1995 compared to 36.8% for the thirteen weeks ended April 30, 1994.
The Company is required to adopt the Statement of Financial Accounting
Standards No. 114 ("SFAS No. 114"), Accounting by Creditors for Impairment of a
Loan. Implementation of the standard is not expected to have a significant
impact on the financial statements.
The Company is required to adopt SFAS No. 121, Accounting for Long Lived
Assets, no later than its fiscal year ending January 25, 1997. The Company has
not determined the impact of this recently issued accounting standard on the
Company's consolidated financial statements.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending against Trak Auto other
than such proceedings described in its Annual Report on Form 10-K for the year
ended January 28, 1995 (the "Annual Report"). There have been no material
developments in any legal proceeding reported in the Annual Report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K
Trak Auto Corporation filed two Current Reports on Form 8-K during the
quarter ended April 29, 1995.
1. Trak Auto filed a Current Report on Form 8-K on March 1, 1995,
reporting the February 22, 1995, opinion of the Federal District Court
in Robert M. Haft v. Dart Group Corporation, et al., D. Del. Civil
Action No. 93-384-SLR.
2. Trak Auto filed a Current Report on Form 8-K on March 13, 1995,
reporting (1) the response of the Executive Committee to the settlement
agreement proposed by Ronald S. Haft and defendants-intervenors Alan R.
Kahn and the Tudor Trust in Ronald S. Haft v. Dart Group Corporation,
Del. Ch., C.A. No. 13736; and (2) the defendants-intervenors' withdrawal
from such proposed settlement on March 10, 1995.
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<PAGE> 15
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 13, 1995 By R. Keith Green
------------------------ ----------------------------
R. KEITH GREEN
President
Date June 13, 1995 Robert A. Marmon
------------------------ ------------------------------
ROBERT A. MARMON
Principal Financial Officer
Date June 13, 1995 David B. MacGlashan
------------------------ ----------------------------
DAVID B. MACGLASHAN
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> APR-29-1995
<CASH> 10,944
<SECURITIES> 10,291
<RECEIVABLES> 5,549
<ALLOWANCES> 0
<INVENTORY> 99,455
<CURRENT-ASSETS> 133,146
<PP&E> 83,796
<DEPRECIATION> 39,046
<TOTAL-ASSETS> 184,059
<CURRENT-LIABILITIES> 77,905
<BONDS> 26,606
<COMMON> 63
0
0
<OTHER-SE> 74,818
<TOTAL-LIABILITY-AND-EQUITY> 184,059
<SALES> 79,611
<TOTAL-REVENUES> 80,066
<CGS> 59,124
<TOTAL-COSTS> 59,124
<OTHER-EXPENSES> 18,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 895
<INCOME-PRETAX> 1,769
<INCOME-TAX> 653
<INCOME-CONTINUING> 1,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,116
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
