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 16, 1995
or
[ ] 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: 0-1234-8
ADVANTAGE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 48-1156618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9323 East 37th Street North, Wichita, Kansas 67226-2000
(Address of principal executive office) (Zip Code)
Registrants telephone number, including area code:
(316) 634-0333
_________________________________________________________________
(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 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 [ ]
4,236,438 common shares were outstanding as of April 16, 1995.
<PAGE>
<TABLE>
Part 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ADVANTAGE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
April 16, 1995 January 22, 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,400,373 $ 2,304,731
Rental merchandise, net 19,278,565 18,517,632
Property and equipment, net 8,481,091 8,130,184
Franchise fees, net 1,005,616 1,008,947
Deferred income tax benefit 2,218,133 2,218,133
Prepaid expenses 611,112 311,721
Accounts receivable and other 386,144 411,255
__________ _________
$34,381,034 $32,902,603
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Accounts payable $ 1,916,663 $ 1,239,867
Accrued liabilities 1,608,381 1,648,441
Accrued compensation 1,783,837 2,765,218
Income taxes payable 1,149,632 355,802
Note payable -- 500,000
_________ _________
6,458,513 6,509,328
STOCKHOLDERS' EQUITY
Preferred stock 1,400,000 1,400,000
Common stock 43,740 43,740
Paid-in capital 5,439,075 5,445,075
Retained earnings 22,994,435 21,509,190
__________ __________
29,877,250 28,398,005
Less treasury stock, at cost -
(137,562 at April 16, 1995, and
141,562 at January 22, 1995) 1,954,729 2,004,730
27,922,521 26,393,275
__________ __________
$34,381,034 $32,902,603
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
ADVANTAGE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
Twelve Weeks Ended
April 16, 1995 April 17, 1994
<S> <C> <C>
Revenues
Rental income $16,310,541 $15,521,497
Sales of merchandise 1,205,984 1,132,166
__________ _________
17,516,525 16,653,663
Costs and operating expenses
Cost of merchandise sold 906,444 701,915
Depreciation and amortization
Rental merchandise 4,526,175 4,133,775
Other 609,934 535,179
Salaries and wages 3,890,453 3,447,794
Advertising 904,707 860,727
Other operating expenses 4,255,130 4,124,593
_________ _________
15,092,843 13,803,983
Operating income 2,423,682 2,849,680
Net interest income 35,166 19,342
Earnings before income taxes 2,458,848 2,869,022
Income taxes 931,603 1,082,052
__________ __________
NET EARNINGS $ 1,527,245 $ 1,786,970
Earnings per common share - primary
and fully diluted $ .30 $ .35
Weighted average common and
common equivalent shares
outstanding 5,030,640 5,068,287
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
ADVANTAGE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Increase (decrease) in cash and cash equivalents
<CAPTION>
Twelve Weeks Ended
April 16, 1995 April 17, 1994
<S> <C> <C>
Net cash flows provided
by operating activities $6,173,676 $4,705,897
__________ _________
Cash flows from investing
activities
Purchase of rental merchandise (5,857,413) (5,835,049)
Purchase of property and equipment (906,805) (504,228)
Payment of initial franchise fees (49,500) --
Proceeds from sales of rental
merchandise 1,205,984 1,132,166
Proceeds from sales of
property and equipment 27,699 45,524
_________ _________
Net cash used in
investing activities (5,580,035) (5,161,587)
__________ _________
Cash flows from financing activities
Purchase of treasury stock -- (890,864)
Repayment of notes payable (500,000) --
Issuance of common stock 44,001 179,250
Payment of preferred stock dividends (42,000) (42,000)
Net cash used in financing activities (497,999) (753,614)
Net increase (decrease) in cash
and cash equivalents 95,642 (1,209,394)
Cash and cash equivalents
at beginning of period 2,304,731 2,226,210
__________ _________
Cash and cash equivalents
at end of period $2,400,373 $1,016,906
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
ADVANTAGE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet of Advantage Companies, Inc.
("Advantage" or the "Registrant") as of April 16, 1995, the
consolidated statements of earnings for the twelve week period
then ended and for the twelve week period ended April 17, 1994,
and the consolidated statements of cash flows for the periods
then ended have been prepared by the Company, without audit. In
the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
consolidated financial position, results of operations and cash
flows at April 16, 1995, and for all periods presented have been
made.
The consolidated balance sheet at January 22, 1995 has been
taken from the audited consolidated financial statements at that
date, and condensed. Certain other information and footnote
disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these condensed consolidated financial statements
be read in conjunction with the Company's audited consolidated
financial statements and notes thereto included in its January
22, 1995 annual report to shareholders. The consolidated results
of operations for the period ended April 16, 1995, are not
necessarily indicative of the consolidated operating results for
the full year.
B. INCOME TAXES
The Internal Revenue Service (IRS) has examined COMCOA's
January 27, 1991 federal income tax return and proposed
additional taxes of $1,132,571. The issue concerns the
depreciation method for rental merchandise. For income tax
reporting purposes, the Company uses the income forecasting
method of depreciation for rental merchandise which is widely
used throughout the rental-purchase industry and which the
Company believes accurately matches its depreciation expenses to
revenues. The IRS disallowance was based upon its determination
that depreciation expressed in terms of years must instead be
utilized.
The Company paid the additional federal tax, plus interest in
fiscal 1995 and anticipates paying additional state taxes.
Accordingly, a provision was included in the 1994 statements for
interest of $345,217 and federal and state taxes payable in the
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
amount of $1,250,767 with a corresponding increase in the
deferred income tax benefit. The Company filed a claim for
refund which has been disallowed by the IRS and anticipates
filing a suit for refund in the future.
C. EARNINGS PER SHARE
Class A preferred stock for the periods is included in the per
share computations. Primary and fully diluted earnings per
common share are considered equal in both twelve week periods
that are presented. The data used in the computation of earnings
per common share is as follows:
Quarter Ended
April 16, 1995 April 17, 1994
Weighted average common
shares outstanding 4,234,878 4,269,251
Add common stock equivalents:
Convertible preferred stock 700,000 700,000
Common stock options 95,762 99,036
_________ _________
5,030,640 5,068,287
D. CONTINGENCY
The Company was named as one of several defendants in a lawsuit
filed by THORN Americas, Inc. (THORN) concerning the Company's
Rent-A-Center franchise contract and development agreement with
THORN. The lawsuit was filed in response to the defendant's
involvement with AdvantEdge. The lawsuit seeks to enjoin the
defendants from disclosing propriety information, or operating or
performing any duty or act in relation to the operation of any
stores owned by AdvantEdge or any other rental-purchase stores
other than Rent-A-Center franchise stores. The suit also seeks
to enjoin the Company from employing or seeking to employ any
person who has worked for THORN in the last six months. It is
management's opinion that the Company has good defenses to all of
THORN's claims and that an unfavorable outcome appears unlikely.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The fiscal year-end of Advantage Companies, Inc. is based upon
a 52- to 53-week period which ends four weeks after the last
Sunday in December. The following discussion pertains to the
Company's results of operations for the twelve week period ended
April 16, 1995, and to its financial condition as of that date,
and as of the most recent fiscal year ended January 22, 1995.
<PAGE>
RESULTS OF OPERATIONS
At the end of the first quarterly period of the current fiscal
year, the Company owned and operated 94 Rent-A-Center stores and
two AdvantEdge Rental Purchase stores. During the same period in
the previous year, the Company owned and operated 91 Rent-A-
Center stores.
Total revenues increased $862,862 or 5% compared to the same
quarter last year. Approximately $99,000 of this increase was
attributable to the Company's subsidiary, AdvantEdge Rental
Purchase, Inc., which ended the quarter with two stores in
operation. The Company acquired this subsidiary in the fourth
quarter of last year. The balance of the revenue increase is
attributable to the Company's other subsidiary, COMCOA, Inc., and
its operations of Rent-A-Center stores. Following is a summary
of consolidated revenue changes grouped by store maturation:
SUMMARY OF FIRST QUARTER REVENUE CHANGES
ADVANTAGE COMPANIES, INC.
Fiscal Quarter ended Quarter ended Per-
No. of Year 4/16/95 4/17/94 centage
Stores Opened Revenues Revenues Increase Change
1 1996 $ 2,025 $ -- $ 2,025 N/A
6 1995 578,896 28,119 550,777 1958.7%
10 1994 1,574,750 1,097,607 477,143 43.5%
4 1993 720,871 665,384 55,487 8.3%
75 Prior to 1993 14,639,983 14,862,553 (222,570) (1.5%)
_____________________________________________________________________
96 TOTAL $17,516,525 $16,653,663 $862,862 5.2%
Costs and operating expenses increased 9% over the same
quarter in the previous year. Approximately 3% of this increase
is from AdvantEdge Rental Purchase, Inc., with the remainder due
to COMCOA's increase in revenues and the number of stores
operated.
Operating income decreased by $425,998 or 15% as compared to
the same quarter last year. Most of this decrease is
attributable to start-up losses in AdvantEdge Rental Purchase,
Inc., and added costs to the parent company directly attributable
to the new concept.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds to finance its business
have been its cash flow provided from operations and bank
borrowings. The funds have been used chiefly to purchase and
carry additional rental merchandise for existing Rent-A-Center
and AdvantEdge Rental Purchase, Inc. stores as well as rental
merchandise and the related assets required for the opening of
new stores.
<PAGE>
During the first quarterly period of fiscal 1996, the net cash
provided by operating activities totaled $6,173,676 compared to
$4,705,897 in the first twelve weeks of last year. The Company
currently has a revolving note payable agreement with a financial
institution that expires April 30, 1996. The note provides for a
maximum amount outstanding of $5 million. Management believes
that this resource, coupled with the anticipated cash flows from
operations, will be sufficient to provide capital to finance
existing stores and other planned capital expenditures for fiscal
1996.
PART II.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the twelve weeks
ended April 16, 1995.
ADVANTAGE COMPANIES, INC.
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.
ADVANTAGE COMPANIES, INC.
(Registrant)
Date: May 24, 1995 By: /s/ Daniel J. Taylor
Daniel J. Taylor
Chief Executive Officer
and Chairman of the Board
Date: May 24, 1995 By: /s/ William A. Simon
William A. Simon
Senior Vice President
Administration and
Chief Financial Officer
