<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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: 2-98277C
THE COLONEL'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-3262264
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
620 SOUTH PLATT ROAD, MILAN, MICHIGAN 48160
(Address of principal executive offices) (Zip code)
(734) 439-4200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No _____
Number of shares of the registrant's Common Stock, $0.01 par value,
outstanding as of May 13, 1998: 24,631,832
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements required under Item 1 or Part I are set
forth in Appendix A to this Report on Form 10-Q and are herein incorporated
by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
BACKGROUND
As discussed herein, The Colonel's International, Inc. (the "Company")
has four subsidiaries: The Colonel's, Inc. ("The Colonel's"), The Colonel's
Truck Accessories, Inc. ("CTA"), The Colonel's Rugged Liner, Inc. (now
renamed Rugged Liner, Inc.) ("CRL") and Brainerd International Raceway,
Inc. ("BIR"). CRL was formed in March 1998, in connection with the
acquisition of four Pennsylvania corporations engaged in the truck
accessories business. This acquisition was completed in April 1998.
THE COLONEL'S, INC.
The Colonel's was organized in 1982 and began producing and selling
plastic bumpers and facias in 1983. By the start of 1996, The Colonel's
had grown through acquisitions, joint ventures and normal expansion to two
manufacturing plants, five distribution warehouses (located in Dallas,
Texas; Houston, Texas; Glendale (Phoenix), Arizona; West Memphis, Arkansas;
and Totowa, New Jersey), and a network of independent distributors that
sell The Colonel's products throughout the United States, Canada, Mexico,
Puerto Rico, the Bahamas and the District of Columbia.
THE COLONEL'S TRUCK ACCESSORIES, INC.
CTA manufactures and sells pickup truck bedliners and tail gate covers
through a distributor network. In March 1997, CTA finalized its purchase
out of bankruptcy of the assets of Truckware, Inc., a truck accessories
warehouse and distributor located in California. Truckware was in the
business of selling such items to wholesale subdistributors and dealerships
and also offering installation services and direct sales to retail
customers. CTA plans to continue these activities and also to sell CTA's
manufactured bedliners and other truck accessories.
CTA opened other Truckware outlet stores in Charlotte, North Carolina
and Flint, Michigan. In 1997, CTA purchased certain assets of Eastern Off
Road Equipment, Inc. with retail outlet stores located in Pennsylvania,
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Maryland, Virginia and West Virginia. Recently, CTA purchased the assets
of the following: Road and Truck, which is located in Thousand Oaks,
California; a two-thirds interest in Dealers Choice, which is located in
Collinsville, Illinois and serves the St. Louis area; Duraliner of
Nashville in Nashville, Tennessee; Wild Bills Truck Accessories in Upland,
California; Bedliner Kingdom in Los Angeles, California; and Southland
Shell in Pomona, California. These facilities will warehouse and sell
bedliners, caps, tonneau covers and other purchased truck accessory
products to the wholesale and retail markets.
Additionally, CTA purchased the assets of Horizon Coach, Inc., a
manufacturing company located in Riverside, California. This facility
manufactures custom pick-up truck caps, sport tops and tonneau covers. CTA
operates this facility under the name The Colonel's Truck Accessories,
Inc., and uses it to supply products to CTA's truck accessory outlet
stores.
These various acquisitions are not material to the financial position
or results of operations of the Company.
THE COLONEL'S RUGGED LINER, INC.
CRL was formed in March 1998 in connection with the acquisition by
merger of four Pennsylvania corporations: Rugged Liner, Inc., Triad
Management Group, Inc., Aerocover, Inc., and Ground Force, Inc.
(collectively, the "Rugged Liner Companies"). In this acquisition, which
was consummated in April 1998, each of the Rugged Liner Companies merged
with and into CRL, with CRL being the surviving corporation. The Rugged
Liner Companies, which are located in Uniontown, Pennsylvania, manufacture
non-skid bedliners and bed mats, as well as ground lowering kits for sport
utility vehicles (SUVs). CRL, as successor to the Rugged Liner Companies,
will concentrate its efforts on export sales.
BRAINERD INTERNATIONAL RACEWAY, INC.
BIR operates a motor sports facility located approximately six miles
northwest of Brainerd, Minnesota. Substantially all of BIR's revenues are
obtained from motor sports racing events at the raceway. BIR schedules
racing and other events held at the racetrack during weekends in the months
of May through September of each year.
COMBINED OPERATIONS
The Colonel's Milan bumper manufacturing plant is a 350,000 square
foot facility (plus a 45,000 square foot covered crane bay) situated on a
62 acre site on the outskirts of Milan, Michigan. Milan is located
approximately 10 miles south of Ann Arbor, Michigan, 60 miles west of
Detroit, and 25 miles northwest of Toledo, Ohio. The Colonel's
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manufactures aftermarket bumper facias at the Milan facility, which has
sufficient expansion room. This facility is leased from a company owned by
Donald and Patsy Williamson, the majority shareholders of the Company.
CTA's bedliner manufacturing facility occupies a 210,000 square foot
building located on 27 acres on the outskirts of Owosso, Michigan. Owosso
is located about 100 miles northwest of Milan, Michigan and about 30 miles
northeast of Lansing, Michigan. The building has power capacities
exceeding current use and would permit expansion if necessary. This plant
manufactures truck accessories. It is also leased from a company owned by
Donald and Patsy Williamson.
CRL manufactures bedliners for export and SUV ground lowering kits in
a 160,000 square foot building in Uniontown, Pennsylvania. This facility
also serves as a master warehouse for the Eastern Off Road retail outlet
stores.
BIR owns and operates a three-mile race track including a one-quarter
mile drag strip located approximately six miles northwest of Brainerd,
Minnesota. BIR's premises feature several buildings, including a four-
story tower with twelve executive viewing suites, a control tower, various
single story buildings containing concession stands, rest rooms and storage
and service facilities located throughout the property. The buildings are
concrete or wood frame and are suitable for warm weather use only.
Grandstand bleachers for approximately 18,000 spectators are primarily
located along the drag strip.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated current assets increased from $16,267,000
at December 31, 1997 to $18,257,000 at March 31, 1998. Consolidated
current liabilities increased from $13,160,000 at December 31, 1997 to
$14,818,000 at the end of the first quarter of 1998.
Cash decreased from $1,723,000 at December 31, 1997 to $983,000 at
March 31, 1998, primarily due to the sale of the Company's Boynton Beach,
Florida property, which occurred on the last day of December, 1997. The
proceeds from this sale ($1,025,000) were used to pay down accounts payable
and other debt.
The accounts receivable balance at March 31, 1998 increased by
approximately $691,000 compared to December 31, 1997, primarily due to
additional businesses that were acquired or started during the first
quarter of 1998.
A note receivable from the majority shareholder was established during
the third quarter of 1997 for $1,060,000. The note receivable bears
interest at 8 percent annually.
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The inventory balance increased from $9,214,000 at December 31, 1997
to $11,180,000 as of March 31, 1998. This was primarily due to the
addition of new locations and the broadening of inventories at Eastern Off
Road to a more optimum level.
Prepaid expenses increased by $42,000 from December 31, 1997 to March
31, 1998, due to the normal expense of prepaid insurance, offset by advance
rentals and security deposits for new CTA warehouses.
Property, plant and equipment decreased by $925,000 between December
31, 1997 and March 31, 1998. During the first quarter of 1998, The
Colonel's added $200,000 in assets. Depreciation expense was approximately
$1,171,000 for the three months ended March 31, 1998. A $745,000 investment
in land was made during this period.
Deposits increased from $630,000 at December 31, 1997 to $655,000 at
March 31, 1998. The $25,000 increase relates to progress payments toward
various new tools that are on order for The Colonel's and CTA. The Company
holds payments toward uncompleted tools in deposits until the tool is
completed, at which time the tool is transferred to property, plant and
equipment.
Notes Payable increased by $945,000 as the Company drew down on the
line of credit to purchase 36 acres of real estate in Genesee County,
Michigan, Road and Truck (as described above), and a controlling interest
in Dealers Choice (described above).
Accounts payable decreased from $1,837,000 at December 31, 1997 to
$1,110,000 at March 31, 1998. The $725,000 decrease is a result of
management's decision to borrow on the Company's line of credit and use the
proceeds from the sale of the Florida property to reduce the accounts
payable balance and take advantage of early-pay discounts.
Accrued expenses increased $516,000 due to a credit for merchandise
granted in connection with an asset acquisition and an increase in advance
sales by BIR.
OUTSTANDING DEBT
In May 1997, the Company's primary lending institution granted
additional financing. The Company entered into a $7,000,000 term note
which requires monthly payments of $167,000 plus interest at prime plus .25
percent. The term note has a maturity date of November 1, 2000. The loan
is secured by all of the Company's assets and had a balance of $5,330,000
at March 31, 1998.
The Company's line of credit was also renegotiated in April 1998. The
Company's $6,000,000 line of credit was increased to $8,000,000 and now
expires in May 1999. The line of credit is secured by all of the Company's
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assets. Interest is paid at prime on a monthly basis. From time to time
the Company funds its line of credit with Eurodollars that allow the Company
to borrow at a rate below prime for a fixed period of time. The outstanding
balance on the line of credit was $6,945,489 at March 31, 1998.
BIR has a $300,000 line of credit which is secured by all of its assets;
however, there was no outstanding balance on this line of credit at March 31,
1998.
BIR has a mortgage with a balance of $300,000 at March 31, 1998, which
is secured by property. This loan requires quarterly interest payments at
2 percent above prime and a single $50,000 principal payment in the third
quarter of each year through 2004.
In 1996, The Colonel's acquired three capital leases to finance equipment
for CTA. The Colonel's leased $6,435,000 worth of equipment under a six-year
agreement with monthly payments of approximately $100,000. Each lease
includes an option to purchase the equipment for $1.00 upon expiration of the
lease term. The leases are collateralized by the machinery. At March 31,
1998, the balance due on these three capital leases was $5,017,000.
During 1997, the Company also entered into a 24-month lease extension
on the semi-tractor trailers that it was already leasing from its lending
institution. Pursuant to the extension agreement, the Company continues to
lease the vehicles for an aggregate monthly payment of $15,987. Under the
extension agreement, the Company has an option to buy the trailers for
$1.00 upon completion of the extended term. The balance on this capital
lease was $226,744 at March 31, 1998.
In April 1998, the Company secured a $7,500,000 acquisition line of
credit with its primary lending institution, part of which was utilized in
the acquisition of the Rugged Liner Companies. The Company will pay interest
only on the outstanding balance until December 1998 when the balance will be
rolled into a term note where monthly payments of both principal and interest
will be due. The interest rate is equal to prime. As the line of credit was
secured in April 1998, there was no outstanding balance at March 31, 1998.
The Company anticipates that future capital requirements and acquisitions
will be financed through earnings from operations, amounts under its line of
credit, and amounts available on the acquisition line of credit.
RESULTS OF OPERATIONS
Revenues for the Company were $11,630,000 for the quarter ending
March 31, 1998, compared to $10,937,000 for the same period in 1997. The
increase in 1998 was primarily due to increased sales by CTA, which went from
$1,122,000 at March 31, 1997 to $3,862,000 at the end of the first quarter of
1998. Revenues of The Colonel's for the first quarter of 1998 were $2,000,000
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less than the first quarter of 1997, primarily due to unseasonably warm winter
conditions which resulted in less than normal snowfall.
Cost of sales increased from 69 percent of sales for the three months
ended March 31, 1997, to 71 percent for the same three-month period in
1998. This increase is primarily due to poor bumper sales resulting from
mild conditions in the snow belt during the 1997-1998 winter.
Selling, general and administrative expenses as a percentage of sales
for the first quarter of 1998 remained the same at 14 percent of sales as
compared to the same period of 1997.
Net income reflected an increase of $35,000 from March 31, 1997 to
March 31, 1998.
Interest expense increased by $25,000 for the three months ending
March 31, 1998, over the same period of 1997. The increase is the result
of a higher average outstanding balance under the new term note added in
May 1997 which replaced the previous term note.
The Company's income tax liability for the first quarter of 1998 was
approximately $590,000. This amount was reduced by a refund of $250,000 to
be received as a result of an IRS audit of 1996 operations. As a result,
the Company's effective tax rate for the first quarter of 1998 was 24%.
Earnings per share remained the same during the first quarter of 1998,
as compared to the first quarter of 1997, at $0.04 per share.
FORWARD-LOOKING STATEMENTS
With the exception of historical matters, the matters discussed in
this Report on Form 10-Q include certain statements that may be considered
forward-looking statements under securities laws. These statements are
subject to a number of important risks and uncertainties that could cause
actual results to differ materially including, but not limited to,
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices. The Company
undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or
otherwise.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following exhibits are filed as part of this
report.
EXHIBIT
NUMBER
2.1 Agreement and Plan of Merger by and among The Colonel's
International, Inc., The Colonel's Rugged Liner, Inc., Rugged
Liner, Inc., Triad Management Group, Inc., Aerocover, Inc.,
Ground Force, Inc., and certain shareholders of the foregoing,
dated March 13, 1998. Incorporated by reference to Exhibit 2(a)
to the Registrant's Current Report on Form 8-K dated May 8, 1998.
2.2 First Amendment to Agreement and Plan of Merger, by and among The
Colonel's International, Inc., The Colonel's Rugged Liner, Inc.,
Rugged Liner, Inc., Triad Management Group, Inc., Aerocover,
Inc., Ground Force, Inc., and certain shareholders of the
foregoing, dated April 23, 1998. Incorporated by reference to
Exhibit 2(b) to the Registrant's Current Report on Form 8-K dated
May 8, 1998.
3.1 Articles of Incorporation of the Company, as amended.
Incorporated by reference from Exhibit 3.1 to the Company's
Report on Form 10-Q for the period ended March 31, 1997.
3.2 Bylaws, as amended. Incorporated by reference from Exhibit 3.2
to the Company's Report on Form 10-Q for the period ended March
31, 1997.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. The Registrant did not file any
reports on Form 8-K during the quarter ended March 31, 1998.
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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.
THE COLONEL'S INTERNATIONAL, INC.
Dated: May 19, 1998 By: /S/ RICHARD S. SCHOENFELDT
Richard S. Schoenfeldt
Vice President-Finance and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer of the Registrant)
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APPENDIX A
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<TABLE>
THE COLONEL'S INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 983,047 $ 1,723,652
Accounts receivable - trade (net of allowance
for doubtful accounts of $600,000 and $575,000
at March 31, 1998 and December 31, 1997,
respectively) 4,664,440 3,973,528
Note receivable from majority shareholder (Note 2) 200,000 200,000
Inventories (Note 3) 11,180,734 9,214,557
Prepaid expense 447,822 425,476
Deferred taxes - current 686,000 635,000
Current portion of deferred compensation 95,667 95,667
----------- -----------
Total current assets 18,257,710 16,267,880
PROPERTY, PLANT, & EQUIPMENT - Net (Note 4) 25,356,779 26,328,039
OTHER ASSETS:
Note receivable from majority shareholder (Note 2) 844,956 844,956
Long-term portion of deferred compensation 236,559 255,857
Deposits 654,663 630,486
Goodwill 384,616 379,816
Investment in land 745,000
Other 391,122 233,246
----------- -----------
Total other assets 3,256,916 2,344,361
TOTAL ASSETS $46,871,405 $44,940,280
=========== ===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable (Note 6) $ 6,945,489 $ 6,000,000
Current portion of long-term obligations 3,158,439 3,166,741
Accounts payable - trade 1,110,387 1,837,528
Accrued expenses (Note 5) 2,128,507 1,134,637
Current portion of deferred compensation 95,667 95,677
Income taxes payable 1,379,573 925,549
----------- -----------
Total current liabilities 14,818,062 13,160,122
LONG-TERM OBLIGATIONS, NET OF
CURRENT PORTION (Note 7) 8,133,851 8,844,055
LONG-TERM PORTION OF DEFERRED
COMPENSATION 236,559 255,857
DEFERRED TAXES - LONG-TERM 3,765,000 3,828,000
SHAREHOLDERS' EQUITY:
Common stock: 35,000,000 shares authorized
at $0.01 par value, 24,177,805 shares issued
and outstanding 241,778 241,778
Additional paid-in-capital 5,606,239 5,606,239
Retained earnings 14,069,916 13,004,229
----------- -----------
Total shareholders' equity 19,917,933 18,852,246
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $46,871,405 $44,940,280
=========== ===========
</TABLE>
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<TABLE>
THE COLONEL'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
----------------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
SALES $11,630,953 $10,937,133
COST OF SALES 8,235,429 7,557,394
----------- -----------
GROSS PROFIT 3,395,524 3,379,739
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,627,608 1,522,712
----------- -----------
INCOME FROM OPERATIONS 1,767,916 1,857,027
OTHER INCOME (EXPENSE):
Interest expense (373,292) (349,165)
Interest income 18,592 23,762
Rental income 15,000 15,000
Other (22,504) 15,919
----------- -----------
Other (expense), net (362,204) (294,484)
NET INCOME BEFORE TAXES $ 1,405,712 $ 1,562,543
PROVISION FOR INCOME
TAXES 340,026 532,000
NET INCOME $ 1,065,686 $ 1,030,543
=========== ===========
BASIC AND DILUTED
EARNINGS PER SHARE (Note 9) $ 0.04 $ 0.04
=========== ===========
</TABLE>
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<TABLE>
THE COLONEL'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,065,686 $ 1,030,543
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 1,245,506 936,872
Deferred tax provision (114,000) 76,000
Gain on sale of property (14,407)
Changes in assets & liabilities that provided (used) cash:
Accounts receivable (690,912) 114,934
Inventories (1,966,177) (288,527)
Prepaid expenses (22,346) 130,294
Other current assets -- (587,810)
Accounts payable (727,142) 105,268
Accrued expenses 993,870 456,000
Goodwill (4,800)
Income taxes payable 454,024
Net cash provided by operating activities 233,709 1,959,167
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant & equipment (1,019,241) (641,354)
Proceeds from sale of property, plant & equipment 17,000
Net change in deposits (24,177) (684,417)
Investment in subsidiary (157,876)
Net cash used in investing activities (1,201,295) (1,308,771)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under notes payable 945,489 (50,000)
Principal payments on long-term debt (520,728) (564,982)
Principal payments on obligations under capital leases (197,781) (232,123)
Cash contribution from related party 86,785
Net cash provided by (used in) financing activities 226,980 (760,320)
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NET DECREASE IN CASH $ (740,605) $ (109,924)
=========== ===========
CASH, BEGINNING OF PERIOD 1,723,652 321,486
----------- -----------
CASH, END OF PERIOD $ 983,047 $ 211,562
=========== ===========
</TABLE>
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THE COLONEL'S INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 BASIS OF PRESENTATION
The financial information included herein is unaudited; however
such information reflects all adjustments (consisting solely of
normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the results of
operations, financial position and cash flows for the periods
presented.
The results of operations for the three months ended March 31,
1998 are not necessarily indicative of the results expected for
the full year.
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statements of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income", which is effective for
fiscal years beginning after December 15, 1997. The statement
changes the reporting of certain items currently reported in the
shareholders' equity section of the balance sheet and establishes
standards for reporting of comprehensive income and its components
in a full set of general purpose financial statements. The effect
of SFAS No. 130 is not material to the financial position or results
of operations of the Company.
SFAS No. 131 "Disclosures About Segments of an Enterprise and
Related Information" applies to all public entities and is
effective for financial statement periods beginning after December
15, 1997. However, SFAS No. 131 is not required to be applied to
interim financial statements in the initial year of application.
Therefore, the Company has elected not to adopt SFAS No. 131 at
this time.
Note 2 NOTE RECEIVABLE FROM MAJORITY SHAREHOLDER
During the third quarter of 1997, a note receivable from the
majority shareholder of $1,044,956 was established.
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Note 3 INVENTORIES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Inventories are summarized as follows: 1998 1997
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C> <C>
Finished products $10,503,648 $8,644,944
Raw materials 677,086 569,613
----------- ----------
Total inventories $11,180,734 $9,214,557
=========== ==========
</TABLE>
Note 4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized by major classification
as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C> <C>
Land and improvements $ 2,504,400 $ 2,504,400
Track 1,533,760 1,533,760
Buildings 930,393 930,393
Leasehold improvements 1,686,032 1,684,643
Bleachers & fencing 755,662 755,662
Equipment 15,030,501 15,016,019
Transportation equipment 1,166,632 1,090,030
Furniture & fixtures 846,885 741,373
Tooling 25,785,514 25,709,982
Construction in progress 89,685 88,956
------------ ------------
Total 50,329,464 50,055,218
Less accumulated depreciation (24,972,685) (23,727,179)
------------ ------------
Net property, plant and equipment $ 25,356,779 $ 26,328,039
============ ============
</TABLE>
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Note 5 ACCRUED EXPENSES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Accrued expenses consist of the following: 1998 1997
(UNAUDITED) (AUDITED)
---------- ------------
<S> <C> <C> <C>
Accrued legal $ 490,437 $ 513,977
Accrued environmental costs 100,000 100,000
Accrued taxes 50,231 55,301
Accrued liability for acquisition 516,246 0
Advance ticket sales 533,333 23,826
Other 438,263 441,533
---------- ----------
Total $2,128,507 $1,134,637
========== ==========
</TABLE>
Note 6 NOTE PAYABLE
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Note payable consists of the following: 1998 1997
(UNAUDITED) (AUDITED)
---------- ------------
<S> <C> <C> <C>
Line of credit with a bank, interest is due monthly
at the bank's prime rate (8.5% at March 31, 1998) $6,945,489 $6,000,000
---------- ----------
$6,945,489 $6,000,000
========== ==========
</TABLE>
The Company has a line of credit with a bank which was
renegotiated in April 1998 extending the maximum borrowing base
from $6,000,000 to $8,000,000, and expires in May 1999. The line
of credit is secured by all of the Company's assets. Remaining
availability under this line of credit at March 31, 1998 was
$1,054,511.
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Note 7 LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Long-term obligations consist of the following: 1998 1997
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C> <C>
Term note payable to a bank, monthly principal
payments of $167,000 plus interest at the bank's
prime rate plus 1/4% (effective rate of 8.75% at
March 31, 1998) through November 2000,
and secured by the Company's assets $ 5,330,000 $ 5,831,000
Mortgage payable to a bank, interest at the bank's
prime rate plus 2% (effective rate of 10.5% at
March 31, 1998), annual principal payments
of $50,000 plus interest due quarterly, through
September 2004. Secured by underlying property. 350,000 350,000
Capital lease obligations through December 2002;
monthly installments of $62,771 including interest
at rates between 7.5% and 8.75%, collateralized
by the related machinery and equipment 5,017,085 5,214,866
Capital lease obligation through March 1999;
monthly installments of $15,987 including interest
at 8.5% 226,744 226,744
Vehicle financing 196,506 212,065
Other 171,955 176,121
----------- -----------
Total 11,292,287 12,010,796
Less current portion (3,158,439) (3,166,741)
----------- -----------
Long-term portion $ 8,133,851 $ 8,844,055
=========== ===========
</TABLE>
On May 28, 1997, the Company executed a $7,000,000 term note which
requires monthly principal payments of $167,000 plus interest.
The proceeds from this term note were used to pay the remaining
balance due on the term note obtained in April 1995, to pay the
remaining balances due on a mortgage note payable and to pay a
$1,000,000 bridge note payable.
-19-
<PAGE>
Note 8 INCOME TAXES
The Company's income tax liability for the first quarter of 1998
was approximately $590,000. This amount was reduced by a refund
of $250,000 to be received as a result of an IRS audit of 1996
operations. As a result, the Company's effective tax rate for the
first quarter of 1998 was 24%.
Note 9 EARNINGS PER SHARE
In accordance with SFAS 128, basic earnings per share for March
31, 1998 and 1997 calculated as net income divided by the weighted
average number of common shares outstanding (24,177,805). Diluted
earnings per share was calculated as net income divided by the
weighted average number of common shares outstanding (24,177,805)
increased by the number of additional common shares that would
have been outstanding if the dilutive shares had been issued (7,751)
and (701) for 1998 and 1997 respectively. Due to the small number
of additional potentially dilutive shares, there was no material
effect on earnings per share, therefore basic and diluted earnings
per share are the same.
Note 10 LITIGATION
No material developments in the litigation discussed in the
Company's Report on Form 10-K for the year ended December 31, 1997
occurred during the first quarter of 1998.
Note 11 ENVIRONMENTAL
No material developments in the environmental matters discussed in
the Company's Report on Form 10-K for the year ended December 31,
1997 occurred during the first quarter of 1998.
Note 12 SUBSEQUENT EVENTS
CRL was formed in March 1998 in connection with the acquisition by
merger of four Pennsylvania corporations: Rugged Liner, Inc., Triad
Management Group, Inc., Aerocover, Inc., and Ground Force, Inc.
(collectively, the "Rugged Liner Companies"). In this acquisition,
which was consummated in April 1998, each of the Rugged Liner
Companies merged with and into CRL, with CRL being the surviving
corporation. The Company paid $4,190,384 in cash and issued
$3,724,000 worth of its Common Stock in this acquisition. The
Rugged Liner Companies, which are located in Uniontown, Pennsylvania,
manufacture non-skid bedliners and bed mats, as well as ground
lowering kits for sport utility vehicles. CRL, as successor to the
Rugged Liner Companies, will concentrate its efforts on export sales.
-20-
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger by and among The Colonel's
International, Inc., The Colonel's Rugged Liner, Inc., Rugged Liner,
Inc., Triad Management Group, Inc., Aerocover, Inc., Ground Force,
Inc., and certain shareholders of the foregoing, dated March 13,
1998. Incorporated by reference to Exhibit 2(a) to the Registrant's
Current Report on Form 8-K dated May 8, 1998.
2.2 First Amendment to Agreement and Plan of Merger, by and among The
Colonel's International, Inc., The Colonel's Rugged Liner, Inc.,
Rugged Liner, Inc., Triad Management Group, Inc., Aerocover, Inc.,
Ground Force, Inc., and certain shareholders of the foregoing, dated
April 23, 1998. Incorporated by reference to Exhibit 2(b) to the
Registrant's Current Report on Form 8-K dated May 8, 1998.
3.1 Articles of Incorporation of the Company, as amended. Incorporated
by reference from Exhibit 3.1 to the Company's Report on Form 10-Q
for the period ended March 31, 1997.
3.2 Bylaws, as amended. Incorporated by reference from Exhibit 3.2 to
the Company's Report on Form 10-Q for the period ended March 31,
1997.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF INCOME, BALANCE SHEETS, AND STATEMENT
OF CASH FLOWS OF THE COLONEL'S INTERNATIONAL, INC. AND ITS SUBSIDIARIES
AS OF AND FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 983,047
<SECURITIES> 0
<RECEIVABLES> 4,664,440
<ALLOWANCES> 600,000
<INVENTORY> 11,180,734
<CURRENT-ASSETS> 18,257,710
<PP&E> 50,329,464
<DEPRECIATION> 24,972,685
<TOTAL-ASSETS> 46,871,405
<CURRENT-LIABILITIES> 14,818,062
<BONDS> 0
<COMMON> 241,778
0
0
<OTHER-SE> 19,676,155
<TOTAL-LIABILITY-AND-EQUITY> 46,871,405
<SALES> 11,630,953
<TOTAL-REVENUES> 11,630,953
<CGS> 8,235,429
<TOTAL-COSTS> 8,235,429
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 373,292
<INCOME-PRETAX> 1,405,712
<INCOME-TAX> 340,026
<INCOME-CONTINUING> 1,065,686
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,065,686
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
