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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (734) 439-4200
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C> <C>
Common Stock, $0.01 par value Nasdaq SmallCap Market
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Securities registered pursuant to Section 12(g) of the Act: None
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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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _X_
Number of shares outstanding of the registrant's Common Stock, $0.01 par
value (excluding shares of treasury stock) as of March 22, 1999: 24,518,326
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant based on the closing price on the Nasdaq
SmallCap Market on March 22, 1999: $4,489,590.
Documents and Information Incorporated by Reference: Items 10, 11, 12 and
13 are incorporated by reference from the registrant's definitive Proxy
Statement for Annual Meeting of Shareholders to be held May 7, 1999
Items Omitted Pursuant to Rule 12b-25: Items 6, 7, 7A and 8
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PART I
ITEM 1. BUSINESS
THE COLONEL'S INTERNATIONAL, INC.
The Colonel's International, Inc. (the "Company") is a holding
company with no independent operations of its own. Its three active wholly
owned subsidiaries are The Colonel's Truck Accessories, Inc. ("CTA"), The
Colonel's Rugged Liner, Inc. (formerly named Rugged Liner, Inc.) ("CRL")
and The Colonel's Brainerd International Raceway, Inc. (formerly named
Brainerd International Raceway, Inc.) ("BIR"). In addition, The Colonel's
Dealers Choice ("Dealers Choice") is a wholly owned subsidiary of CTA.
Finally, The Colonel's, Inc. ("The Colonel's") is an inactive
subsidiary of the Company, having sold substantially all of its assets
in December 1998, as described below. References to "the Company"
herein should be read to include the Company and its subsidiaries as a
whole, unless the context otherwise indicates.
The Company is a Michigan business corporation and is the
successor to Brainerd International, Inc. ("Brainerd"). Effective
December 31, 1995, Brainerd merged with and into the Company, with the
Company being the surviving corporation. Pursuant to that merger,
shares of Brainerd common stock were converted into the same number of
shares of the Company's common stock, $0.01 par value per share
("Common Stock"). Also effective December 31, 1995, Brainerd Merger
Corporation, a wholly owned subsidiary of Brainerd, merged with and
into The Colonel's. The Colonel's was the surviving corporation in
that merger and, as a result, became a wholly owned subsidiary of the
Company. At the same time, Brainerd transferred all of its operating
assets to BIR, which became a subsidiary of the Company.
The truck accessory division of The Colonel's was incorporated
under Michigan law as The Colonel's Truck Accessories, Inc. Effective
January 1, 1997, The Colonel's transferred its truck bedliner assets
and operations to CTA.
CRL was formed in March 1998 in connection with the April 1998
acquisitions of four Pennsylvania corporations engaged in the truck
accessory business.
On December 17, 1998, The Colonel's completed the sale of
substantially all of its assets used in the business of manufacturing
and selling plastic replacement bumpers, facias and related parts.
The buyer of these assets was AutoLign Manufacturing Group, Inc.
(formerly known as Colonel's Acquisition Corp.) ("AutoLign"), a newly
formed Delaware corporation affiliated with an investor group led by
Philip B. Storm.
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Prior to the sale of the assets of The Colonel's, the Company
operated in three industry segments: manufacture of automotive bumpers
and other miscellaneous reinforcement beams and brackets (The
Colonel's), manufacture of bedliners and sale of these bedliners and
other truck accessories at retail stores throughout the country (CTA,
CRL and Dealers Choice), and operation of a multi-purpose motor sports
facility (BIR). Due to the sale of The Colonel's assets, the Company
now operates in only two industry segments. A description of the
business of the Company's subsidiaries follows.
THE COLONEL'S TRUCK ACCESSORIES, INC.
GENERAL
In 1995, the Company determined that it believed there to be an
opportunity in the new and used vehicle accessories market. This
opportunity was considered to be attractive for the Company because
many of such accessories are produced from plastics that are already
an integral part of The Colonel's current manufacturing capability and
because such accessories share like, though not identical,
distribution systems.
As a result of this analysis, the Company formed CTA and launched
the first accessory product to be manufactured and distributed by CTA:
a truck bedliner. CTA has also started to manufacture shells and
tonneau covers.
Once the decision to enter this market was made, CTA required
only 13 months to bring the manufacturing plant on line. The plant
began operations in May 1996 and successfully commenced marketing and
distribution in the last two quarters of that year. Prior to 1997,
these operations were conducted by The Colonel's former truck
accessory division. Effective January 1, 1997, however, The Colonel's
transferred its truck bedliner operations to CTA.
PRODUCTS
Truck bedliners are plastic inserts that are placed into the rear
beds of pickup trucks. Owners purchase these inserts to protect the
paint and structural integrity of their truck beds. Many
manufacturer/distributors of this product are already in the
marketplace. Products range in quality from very poor to excellent.
Poor liners have bad fit and finish, may require special drilling into
the vehicle to support mounting attachments and are of thinner gauge
plastic. Excellent products do not have these deficiencies. Other
differentiating features of better products include side wall
reinforcements, drainage channels and other features. In the
Company's opinion, CTA makes a highly competitive product.
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Shells are caps, made of fiberglass, that enclose the pickup
truck bed. Shells are usually as high as the cab. Tonneau covers are
flat fiberglass covers that cover the truck bed box at the rail level.
Both the shells and tonneau covers are generally custom painted to
match the color of the vehicle. Because these products are usually
special ordered, the products are often sold before they are
manufactured.
CTA's accessory product line currently consists mainly of truck
bedliners that are made to fit a number of different models. CTA
produces both under-the-rail and over-the-rail products. CTA
manufactures approximately 47 different liners and also manufactures
fiberglass tonneau covers for all makes and models of pickup trucks,
as well as shells and caps. CTA currently purchases additional
products, such as tool boxes, running boards, tires, wheels, mats, bug
shields, visors, grill covers, light covers, trim pieces, running
lights and racks for distribution through retail sales and
distribution stores. However, CTA may begin to manufacture many of
these products in the future.
MANUFACTURING
CTA uses plastic sheet extrusion machines (2) and rotary vacuum
formers (6) to produce liners. Raw materials, supplied by Phillips
Petroleum, are maintained in large vessels in CTA's Owosso, Michigan
plant. Keeping these materials inside avoids temperature and humidity
changes that affect the extrusion process and the quality of the
plastic sheet and reduces variations in the quality of CTA's extruded
sheets.
CTA believes that it is unique among all United States bedliner
manufacturers in the type of equipment and the control of product
employed in this operation. The Company believes that CTA's ability
to control every element of production, from raw materials to finished
product, makes CTA's operation highly competitive.
CTA's extruded plastic sheets are inserted into rotary vacuum
formers in order to produce truck bedliners. After the product is
made by the vacuum formers, it is hand trimmed and checked for quality
assurance. The product is then inventoried against shipment to
customers. Inventory is held within the Owosso plant facility and
shipped by CTA's fleet of tractors and trailers.
Total annual production capacity in the plant is estimated at
over 700,000 units, assuming three shifts of operation. The facility
currently runs two shifts per day.
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CTA manufactures shells and tonneau covers at its Riverside,
California facility. This modern fiberglass plant uses traditional
hand laid up fiberglass molding techniques to produce highly polished
fiberglass surfaces. The four station paint line preparation,
painting, baking and drying allow the products to be custom painted to
match each truck color.
DISTRIBUTION AND SALES
Because of their size, shells and tonneau covers are transported
to customers on specially designed trailers that carry a maximum of 24
shells.
Distribution is made to a highly fragmented network of
distributors and dealers across the United States. CTA has acquired
some of these fragmented distributors and started its own distribution
network.
CTA is also testing retail sales points for its liners coupled
with other accessory products produced by other manufacturers. The
test market for retail sales is Los Angeles, California, one of the
largest markets in the United States. The Los Angeles market has the
largest number of truck registrations in the United States. This
model proved successful and the Company has spread this success to
other key regions such as San Francisco and New Mexico.
Sales are directed from the Owosso facility through the marketing
manager to coordinated district outside salespeople. CTA expanded
this sales department in 1997 to sustain the momentum created by the
initial liner introduction and to penetrate new distribution channels.
During 1997, CTA expanded distribution in areas where
distributors were weak. In February, 1997, CTA purchased certain of
the assets of Truckware, Inc. in Baldwin Park, California. This
purchase was the first in a series of purchases that allow CTA
increased access to distribution channels to facilitate retail sales
and expand its direct truck dealership sales of its manufactured
products.
In December, 1997, CTA purchased certain assets of Eastern Off
Road, which has sales outlets in Pennsylvania, Maryland, Virginia and
West Virginia. Eastern Off Road is an established truck accessories
outlet chain that has been in the marketplace for over 20 years.
By the end of 1997, CTA purchased three additional
retail/wholesale stores in California and started its own distribution
warehouse in North Carolina.
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During 1998, CTA added retail stores in Flint, Michigan;
Nashville, Tennessee; St. Louis, Missouri; Thousand Oaks, California;
Franklin, Tennessee; Santa Clara, California; Roseville, California;
South Sacramento, California; El Paso, Texas; and Roswell, Las Cruces,
and Ruidoso, New Mexico. See "Properties" below.
MARKET
The market for liners is estimated at approximately 50% of the
total volume of new pickups sold in the United States, both foreign
and domestic, and is estimated to be 1.5 million units per year. The
pickup truck and sport utility vehicle market, which constitutes a
substantial percentage of all vehicles sold, continues to grow. As
this market expands, so does the auxiliary equipment market. CTA's
truck accessories sold at retail targets this market. In addition,
CTA has the ability to install all of the products that it
manufactures at each of its retail outlet stores.
COMPETITION
CTA estimates that there are approximately ten other manufacturers
of bedliners in the United States. The two largest, Durakon
Industries, Inc. and PENDA Corporation, manufacture and sell the
majority of all bedliners in the United States. The eight remaining
manufacturers accounted for the remainder before CTA's entrance in the
market. CTA estimates that it is currently the third largest
manufacturer in this market.
EMPLOYEES
CTA employs approximately 271 people, including approximately 267
contract employees leased through Simplified Employment Services
("SES"), an employment brokerage service. Management of CTA includes
two former Durakon employees with long experience in this industry
sector. John Carpenter, who is CTA's President, was formerly national
sales manager for Durakon. Dennis Bills was formerly a production
manager for Durakon and holds a similar position in CTA. The Company
believes that these two individuals, along with CTA's other management
personnel, bring a strong background to CTA's management team.
PROPERTIES
CTA manufactures bedliners in its Owosso, Michigan plant, which
is leased from a company owned by Donald and Patsy Williamson, the
majority shareholders of the Company. The plant has 240,000 square
feet of space, which CTA believes is adequate for current operations
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and planned expansion, and has 85 full-time employees. This facility,
which also houses CTA's executive offices, is located at 951 Aiken
Road, Owosso, Michigan 48867.
The Baldwin Park, California facility serves as CTA's main retail
sales point and warehouse facility on the west coast. It also serves
as the office of CTA's west coast sales manager and has seven full-
time employees. The warehouse is 24,000 square feet and is located at
12907 Garney. Baldwin Park is in north central Los Angeles.
The Riverside, California manufacturing facility is 40,440 square
feet on 2.87 acres and is located at 6727 Columbus Avenue. Riverside
is on the southwest side of Los Angeles. The Riverside plant
manufactures shells and tonneau covers and employs 47 full-time
employees.
The Charlotte, North Carolina facility is 15,500 square feet and
acts as the southwestern regional warehouse. It operates as a
wholesale warehouse and retail sales and installation center. It is
located at 2116 Wilkinson Boulevard and has five full-time employees.
The Flint, Michigan facility serves as CTA's home retail store.
Located adjacent to the area's largest mall and car dealership
complex, this old Firestone tire store of 14,000 square feet will
allow for installation of all products that the store sells. This
facility has six employees and is located at 30993 Linden Road.
The Upland, California facility, located northeast of Los
Angeles, operates under the name CTA-Wild Bills and performs
installation from bay doors located at the rear of the facility. Its
1,940 square feet serve mainly as a retail sales outlet. It has four
full-time employees and is located at 567 Central Avenue. It is
supplied by the Baldwin Park warehouse.
The Los Angeles, California facility operates under the name CTA-
Bedliner Kingdom and is located in the warehouse district in downtown
Los Angeles. This facility mainly stocks and installs liners and bed
mats. This 4,600 square foot facility, located at 1907 E. 7th Street,
acts as a retail sales point. It employs two full-time employees.
The Pomona, California facility, located at 4187 E. Mission
Boulevard, operates under the name CTA-Southland Shell. This 2.4 acre
open air corner lot houses outside displays of bedliners, caps, shells
and tonneau covers. The offices are housed in a trailer. The
facility employs one part-time and two full-time employees.
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The Uniontown Central Warehouse, located on Route 119 in
Uniontown, Pennsylvania, is a 20,000 square foot leased facility that
acts as a central warehouse for all the CTA-Eastern Off Road retail
outlets. It acts as a central shipping and receiving point. It
employs three full-time warehouse employees.
Another location in Uniontown, Pennsylvania, is a CTA-Eastern Off
Road retail sales point of 5,000 square feet, located on Route 40.
The facility employs five full-time employees.
The Robinson Township, Pennsylvania CTA-Eastern Off Road retail
sales store is 2,400 square feet, and is located on Route 60 and Moon
Run on the outskirts of Pittsburgh. It employs three full-time
employees.
The Greensburg, Pennsylvania facility, a CTA-Eastern Off Road
retail store, consists of 3,500 square feet and is located on Route 3.
It employs two full-time employees.
The Morgantown, West Virginia facility is a CTA-Eastern Off Road
retail sales point of 2,350 square feet, located at 57 S. University
Avenue. It employs three full-time employees.
The Glen Bernie, Maryland facility is a CTA-Eastern Off Road
retail sales point of 2,400 square feet, located at 706 N. Cran
Highway and Dorsey Road. It employs three full-time employees.
The Wexford, Pennsylvania facility is a CTA-Eastern Off Road
retail sales point of 2,000 square feet, located on Route 19 at Route
910. It employs two full-time employees.
The Norfolk, Virginia facility is a CTA-Eastern Off Road retail
sales point of 6,000 square feet, located at 6320 Virginia Beach
Boulevard. It employs three full-time employees.
The Thousand Oaks, California facility was purchased in 1998.
This 3,500 square foot facility operates under the name CTA-Road N
Truck. It is a full retail sales and installation facility located
approximately 80 miles north of Los Angeles. The facility employs
four full-time employees and is located at 3234 E. Thousand Oaks
Boulevard.
The Nashville, Tennessee store was acquired in 1998. This 13,000
square foot facility, located at 85 Cleveland Street, acts as both a
wholesale dealership and a retail sales point for the Nashville area.
Installations are performed in an installation facility adjacent to
the newly constructed retail sales center. The facility employs nine
full-time employees.
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The Collinsville, Illinois facility was purchased in 1998. It is
located approximately 30 minutes from downtown St. Louis, Missouri,
and operates under the banner of CTA-Dealer's Choice. This 15,000
square foot, newly renovated facility serves as a wholesale
distribution point and retail sales store for the St. Louis area.
Located on Route 159 at 775 W. Morrison Avenue, it employs 19 full-
time employees.
The Franklin, Tennessee facility was purchased in July 1998 and
operates under the name Colonel's Sunshade Custom. This 4,800 square
foot retail sales store is located at 277 Mallary Station Road, Suite
107 and acts as a remote sales outlet for the Nashville facility.
Installations are performed at the back of the building. In addition
to the traditional truck accessories that are sold by other similar
stores, this facility also sells and installs window tinting for
autos, commercial buildings and residential homes. It employs seven
people.
The Santa Clara, California facility was purchased in September
1998 and operates under the name Colonel's Accessories Plus. This
22,000 square foot warehouse and 6,000 square foot retail outlet store
sells the complete line of truck accessory products under the name CTA
- - Accessories Plus. It is located at 2555 Lafayette Street and
employs ten people.
The Roseville, California facility was purchased in September 1998 and
operates under the name Colonel's Truck Stuff. This 4,200 square foot
facility serves as a retail outlet store. It is located at 106 N.
Sunrise Ave and employs two people.
The South Sacramento, California location was purchased in
September 1998 and operates under the name CTA - Truck Stuff. This
6,800 square foot facility sells to both retail and wholesale
customers including dealerships and body customizing shops. It is
located at 15-B Quinta Court and employs four people.
The El Paso, Texas facility was purchased in September 1998 and
operated under the name CTA-Camper Place/Truck Parts Warehouse. This
6,400 square feet facility sells to both retail and wholesale, and has
installation facilities. It is located at 9821 Montana Ave.
The Las Cruces, New Mexico facility was purchased in September
1998 and operates under the name CTA- Camper Place/Truck Parts
Warehouse. This 7,000 square feet facility sells to both retail and
wholesale, and has installation facilities. It is located at 1575 El
Paseo Ave.
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The Ruidoso, New Mexico facility was purchased in September 1998
and operates under the name CTA- Camper Place/Truck Parts Warehouse.
This 5,500 square feet facility sells to both retail and wholesale,
and has installation facilities. It is located at 109 Highway 70 East
The Roswell, New Mexico facility was purchased in September 1998
and operates under the name CTA- Camper Place/Truck Parts Warehouse.
This 7,500 square feet facility sells to both retail and wholesale,
and has installation facilities. It is located at 2114 West 2nd Ave.
All of the foregoing properties of CTA, except for Collinsville,
Illinois, are leased from third parties. The Collinsville location is
owned by CTA.
THE COLONEL'S RUGGED LINER, INC.
GENERAL
CRL was formed in March 1998 in connection with the April 1998
acquisitions 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 these
acquisitions, which were consummated in April 1998, each of the Rugged
Liner Companies merged with and into CRL, with CRL being the surviving
corporation. In these mergers, CRL's name was changed to "Rugged
Liner, Inc." However, in early 1999, CRL changed its name back
to "The Colonel's Rugged Liner, Inc."
PRODUCTS
CRL, which is located in Uniontown, Pennsylvania, manufactures
non-skid bedliners and bed mats, ground lowering kits for SUVs, and a
sliding three piece tonneau cover. These products complement CTA's
similar products to give customers a greater choice in their
purchases.
MANUFACTURING
At CRL's facility in Uniontown, Pennsylvania, extruded plastic
sheets are inserted into a rotary vacuum former to produce truck
bedliners. After the products are made by the vacuum formers, they
are hand trimmed and checked for quality assurance. The products are
then inventoried against shipment to customers. Inventory is held
within the CRL facility and shipped by CRL's fleet of tractors and
trailers and by common carrier. Total annual production capacity in
the plant is estimated at over 250,000 units, assuming three shifts of
operation. The facility currently runs one shift per day.
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MARKET
CRL sells through a distributor network, through CTA retail
stores, and manufacturer's representatives. It primarily targets
export markets such as Central and South America and the Middle East.
The Company does not have reliable data concerning the world market
for bedliners.
COMPETITION
CRL estimates that there are approximately ten other
manufacturers of bedliners in the United States. The two largest,
Durakon Industries, Inc. and PENDA Corporation, manufacture and sell
the majority of all bedliners in the United States. The eight
remaining manufacturers accounted for the remainder before CTA's
entrance in the market. CRL estimated that it was the fourth largest
manufacturer in this market before it was purchased by the Company.
CTA and CRL combined are believed to be third in overall sales.
EMPLOYEES
CRL employs approximately 46 people, including approximately 45
contract employees leased through SES. In connection with the
acquisition of the Rugged Liner Companies, Mark German, formerly the
President and majority shareholder of each of the Rugged Liner
Companies, became the President of CRL and was appointed President of
the Company in May 1998. The Company believes that Mr. German's long-
term standing in the industry, along with CTA's management personnel,
bring a strong complementing background to the Company's management
team.
PROPERTIES
CRL has two leased properties. CRL manufactures bedliners for
export and SUV ground lowering kits in a 160,000 square foot building
located on Route 119 in Uniontown, Pennsylvania, about one hour
southeast of Pittsburgh, Pennsylvania. This facility also serves as a
master warehouse for the Eastern Off Road retail outlet stores. CRL
also has a 150,000 square foot distribution warehouse/service center
located at 2090 South Hellman, Ontario, California
THE COLONEL'S BRAINERD INTERNATIONAL RACEWAY, INC.
GENERAL OPERATIONS
BIR and its predecessors have operated the Brainerd
International Raceway, which is located at 4343 Highway 371 North,
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Brainerd, Minnesota 56401 (the "Raceway"), since June 1973. At the
Raceway, BIR organizes and promotes various spectator events such as
road and drag races, including races for sports cars, motorcycles and
go-karts, and derives a substantial portion of its revenues from
ticket sales and spectator attendance. In addition, BIR permits the
use of the Raceway by others who organize and promote racing events,
and by individuals or commercial organizations who may use the Raceway
for things such as automobile road testing or filming. All racing
events, whether or not organized by BIR, are conducted over a two to
four-day period, usually encompassing a weekend.
SOURCES OF REVENUE
BIR derives its revenues from four principal sources: (i) ticket
sales; (ii) camping fees, concession sales, and track rentals; (iii)
entry fees; and (iv) sponsorship fees. Sponsors promote their names
and products at and in connection with the racing events. Sponsorship
fees are contracted for and often paid in whole or in part several
months prior to the commencement of each racing season. Entry fees
are received from race participants usually at the start of each race
event.
BIR permits overnight camping during racing events on the Raceway
grounds. Camping revenues were received by BIR for only five
spectator events in 1998. A local non-profit organization managed the
camping activities on a commission basis for BIR in 1998 and is
expected to do so again in 1999.
Beer, soft drinks, candy and fast food items such as hot dogs,
barbecued chicken and ribs are served at concession stands at various
locations around the Raceway, but principally near the grandstand
area. BIR allowed both for-profit and nonprofit organizations to
operate the concession stands for the five principal spectator events
in 1998. BIR receives a percentage of the gross sales of all
concessions, but neither BIR nor any affiliate of BIR operates any of
the food or beer concession stands. BIR currently plans to continue
its practice of allowing independent for-profit and nonprofit
organizations to operate the food and beer concession stands.
BIR rents the Raceway to other organizations to conduct races,
hold driving schools or to test or film motor vehicle operations. BIR
has also rented the Raceway for use as the site of a camping
convention. The fee charged for such uses varies and is negotiated in
each case.
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EVENTS AND ACTIVITIES
During 1998, BIR organized and promoted several major spectator
events, including two drag races (the "Federal-Mogul Drag Racing
Series" and the NHRA "Visioneer Northstar Nationals"), two special
events (the "Tires Plus Show & Go" and the "Tires Plus Muscle Car
Shoot-Out"), one motorcycle race (the "AMA Hitching Post Classic") and
one "Cruisin' to Lakes" hot rod custom car show.
The Federal-Mogul Drag Racing Series, held on June 6 and 7, 1998,
was a drag racing event sponsored nationally by Federal-Mogul
Corporation. A drag race is generally conducted between two vehicles
from a standing start over a one-quarter mile track, using
sophisticated starting and timing systems. The Federal-Mogul Drag
Racing Series was sanctioned by the National Hot Rod Association (the
"NHRA") and was one of a series of five events in the Central States
Division of the NHRA. The Federal-Mogul Drag Racing Series was
organized and promoted jointly by BIR and the NHRA, and included both
professional and amateur drivers who paid BIR an entry fee. A
similarly sponsored event has been held at the Raceway annually since
1977, with the exception of 1984, when there was a scheduling
conflict. The Sponsorship Agreement with Federal-Mogul Corporation
for this event will expire in 2002.
The Tires Plus Show & Go event, held on July 4 and 5, 1998, was
sponsored by Tires Plus under an agreement which extends through 2002.
This event featured "street rods," "street machines," antiques and
other classic cars that participated in both a car show and drag races
emphasizing a "back-to-the-fifties" style. The drag racing portion of
the event was sanctioned by the NHRA. The Tires Plus Muscle Car
Shoot-Out was held on July 5, 6, 1998. As with the Show & Go event,
this event is both a car show and a drag race. The Muscle Car Shoot-
Out involves 1955 to 1974 model year vehicles.
The AMA Hitching Post Classic, co-sponsored by Coca-Cola and held
on July 31 through August 2, 1998, was one of a series of nine races
conducted throughout the United States pursuant to the sanction of the
American Motorcyclist Association (the "AMA"). The event, previously
known as the Suzuki Classic, featured six races of motorcycles
operating on the road course. The races involved motorcycles of
250cc, 600cc, 750cc and the Harley Davidson Twin Sport and Superbike
classes.
The Northstar Nationals event, held on August 20 through 23,
1998, was sponsored by Visioneer, Inc. under an agreement with the
NHRA. This event features mainly professional drivers, most of whom
have national reputations, and was one of a series of drag races
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conducted throughout the United States under the national sponsorship
of the R.J. Reynolds Tobacco Company and the sanction of the NHRA.
The four-day event features a series of drag races in the following
classes: Top Pull Dragster, Funny Car, Pro Stock, Pro Truck, Pro
Stock Motorcycle, Alcohol Drag, Alcohol Funny, all Sportsman's
categories and Muscle Sled Snowmobile Drags. The Northstar Nationals
are organized and promoted by the NHRA. The NHRA sanctions the
Raceway from BIR for a fixed fee, as determined in the sanction
agreement. Profits are earned primarily through the receipt of
promotional fees and ticket sales. BIR's responsibilities in this
event are, among other things, to provide the Raceway, ticket takers
and security personnel, and to assist in the management and operation
of the event. The lease agreement with the NHRA is for one year with
three three-year extensions (10 years total) at a fixed fee. Under
the sanction agreement, BIR is not permitted to conduct any drag races
at the Raceway that are not sanctioned by the NHRA.
BIR also organized and sponsored four weekend drag racing
"bracket" events in 1998, primarily for non-professional drivers from
Minnesota and surrounding states. In bracket racing, each driver
attempts to predict his car's performance; whether he wins or loses a
particular race will depend partially on how much his actual time over
a one-quarter mile distance exceeds his predicted time. While
spectators are encouraged to attend these drag racing events and BIR
receives revenues from ticket sales, camping fees and concessions,
they are not highly promoted.
In addition to the spectator events and the bracket races
discussed above, there are racing events conducted on approximately 20
other weekends that are primarily for nonprofessional drivers and are
often organized and sponsored by local and regional racing clubs, some
of which may be members of or affiliated with national sanctioning
organizations. While spectators attend these events, BIR does not
receive any revenues from ticket sales or engage in any significant
promotion of these events.
In 1998, two weekend events involved sports car racing and were
sponsored by the "Land O' Lakes" regional affiliate of The Sports Car
Club of America (the "SCCA"), which sanctions these events. In
addition, in 1998, four motorcycle racing events were held, each of
which was sponsored by the Central Roadracing Association, a club
located in the Minneapolis/St. Paul, Minnesota area and associated
with the AMA. During 1998, the Northland Region Karting Association,
affiliated with the World Karting Association (the "WKA"), organized
and sponsored several go-kart racing events, and the Nord Stern
Regional Club of the Porsche Club of America organized four weekend
racing events for Porsche cars. A similar schedule has been
established for 1999.
14
<PAGE>
BIR will rent the Raceway to various individuals or organizations
for their own unsanctioned events. Companies and other organizations
use the track for winter cold weather testing, driving schools and to
test or film the operation of various motor vehicles.
In addition to attempting to continue to schedule the events
discussed above, BIR is also seeking to establish additional revenue
producing uses for the Raceway. Events under consideration include
additional spectator racing events and music festivals.
SANCTIONING ORGANIZATIONS
Most racing events conducted at the Raceway, including the five
principal spectator events held by BIR in 1998, are sanctioned by an
organization which establishes, publishes and enforces rules relating
to a specific class or type of participating vehicle. These rules
generally relate to the specifications that each class of car or other
vehicle must meet to be eligible to race, to driver conduct and to
other racing matters. BIR enters into agreements annually with the
various applicable sanctioning bodies with respect to each race it
organizes and promotes. These agreements provide that the appropriate
sanctioning organization will sanction the race and provide personnel
to interpret and enforce its rules. The sanctioning bodies include
the SCCA (governing sports cars), the NHRA (governing drag racing),
the AMA (governing motorcycles) and the WKA (governing go-karts).
COMPETITION
The closest comparable race track which conducts road racing
events similar to those conducted by BIR is located at Elkhart Lake,
Wisconsin, which is approximately 75 miles northwest of Milwaukee,
Wisconsin, approximately 475 miles from the Raceway and approximately
350 miles from Minneapolis/St. Paul, Minnesota. While there are drag
race strips in Fargo, North Dakota, and Eau Claire, Wisconsin, the
closest drag race strips that own equipment and conduct major drag
race events comparable with that owned or conducted by BIR are located
in Indianapolis, Indiana and Chicago, Illinois. While other regional
race tracks are not generally considered competitive with BIR, other
events in BIR's market area, such as sporting events, festivals and
concerts, may tend to attract persons who might otherwise attend BIR's
racing events. BIR does not generally consider the schedules of other
spectator events when scheduling its own events.
SEASONAL BUSINESS/WEATHER
Substantially all of BIR's revenues arise from operation of the
Raceway during the period of April through October of each year.
15
<PAGE>
BIR's revenues are derived primarily from ticket sales for racing
events, and adverse weather could materially diminish the revenues
that might otherwise be received by BIR. While sports car, stock car
and motorcycle races may be conducted in nearly all weather
conditions, spectator attendance is significantly reduced when it
rains. A drag racing event cannot be held in rain and adverse weather
could require the rescheduling of such events or the cancellation of
the event and the return of ticket sale proceeds to ticket Buyers. A
substantial majority of BIR's revenues arise from drag racing events.
In addition to adversely affecting attendance and concession sales,
adverse weather requires rescheduling of events, which results in
increased operating costs for the events. For example, the Brainerd
200 snowmobile race, held over the 1994-1995 New Years' weekend, was
adversely affected by limited snowfall occurring prior to the event,
which reduced the number of snowmobile riders who traditionally visit
the Brainerd area during that weekend. Bad weather was not a
significant factor in 1998.
EMPLOYEES
BIR employs four full-time employees. From April through
October, BIR employs four full-time grounds and track maintenance
personnel. In addition, BIR engages various independent contractors
to handle matters such as public relations, drag racing events,
perimeter and grounds security, ticket sales and ticket handling,
emergency medical service, concessions and camping. None of the
independent contractors engaged by BIR are affiliated with BIR as an
officer or director.
PROPERTIES
BIR owns and operates a three-mile race track, including a one-
quarter mile drag strip, located approximately six miles northwest of
Brainerd, Minnesota. The Raceway was initially constructed and first
utilized for competitive racing in 1968. The site of the Raceway
consists of approximately 611 acres. The terrain of the site is
slightly rolling and partially wooded. The track and various access
roads are composed of blacktop.
The Raceway is enclosed by a five-foot chain link fence. The
site provides camping facilities and parking for approximately 15,000
vehicles. The Raceway contains several buildings, including a four-
story tower containing eleven executive viewing suites, a control
tower, three enclosed racing maintenance buildings divided into stalls
for participant repairs and various single story buildings containing
concession stands, restrooms and storage and service facilities
16
<PAGE>
located throughout the property. The buildings are concrete or wood
frame construction. Grandstand bleachers for approximately 36,000
spectators are primarily located along the dragstrip.
BIR made substantial improvements to the Raceway during the past
two years. In connection with the drag racing facility, BIR spent
approximately $600,000 on the following: replacement and upgrading of
the concrete guard rail on the straightaway, construction of a new
restroom facility in pit area, construction of a new administration
building behind the grand stands, construction of additional office
space and renovation of the Winston suites, installation of irrigation
and drainage and new paved roads, replacement of the burn out boxes,
replacement of retention walls to new heights for safety, construction
of more bathrooms, garage area pads, and improvement of the bridge and
improvement of concession and camping areas.
BIR's executive offices are located at 17113 Minnetonka
Boulevard, Suite 214, Minnetonka, Minnesota 55345, where BIR leases
approximately 1,100 square feet of office space. The lease term
expires in February 2002.
THE COLONEL'S, INC.
GENERAL
As noted above, on December 17, 1998, The Colonel's completed the
sale of substantially all of its assets to AutoLign. The sale was
conducted pursuant to an Amended and Restated Asset Purchase Agreement
dated November 23, 1998, as amended by a First Amendment to Amended
and Restated Asset Purchase Agreement dated December 17, 1998
(collectively, the "Asset Purchase Agreement"). The sale and the
other transactions contemplated by the Asset Purchase Agreement were
approved by the Company's shareholders at a special meeting held on
December 17, 1998 at the Company's headquarters.
Under the Asset Purchase Agreement, the price for the purchased
assets was $38,000,000. In addition, at the closing of the sale, the
buyer assumed approximately $712,000 of accounts payable and certain
of The Colonel's other obligations of approximately $223,000. Under
the terms of the Asset Purchase Agreement, $250,000 of the purchase
price was deposited in escrow for the purpose of satisfying certain
environmental investigation and potential cleanup obligations of Seller
following the closing. The purchase price and the other terms of the
Asset Purchase Agreement were arrived at pursuant to arms' length
negotiations between the Company and Buyer.
Prior to the sale, the Colonel's was a leading domestic
manufacturer of plastic replacement bumpers and facias for the
17
<PAGE>
automotive aftermarket industry in North America. The Colonel's
designed, manufactured and distributed plastic bumpers, facias,
support beams and brackets for application as replacement collision
parts for domestic automobile models. In addition, The Colonel's
resold plastic replacement bumpers and facias for use as replacement
collision parts on import automobile models and for models
manufactured domestically by foreign-based automobile manufacturers.
The Colonel's also manufactured parts for these models to a limited
extent. The Colonel's manufactured its products through the use of
reaction injection molding and plastic injection molding technology at
its former facility in Milan, Michigan.
The Company believes that AutoLign will carry on the operations
previously conducted by The Colonel's. The following discusses the
business of The Colonel's as conducted prior to the December 1998
sale.
PRODUCTS
The products manufactured and sold by The Colonel's were
primarily plastic molded front and rear bumper panels designed for
application to specific automobile makes and models. Each product
that The Colonel's manufactured or distributed was designed for
application to an automobile or truck of a specific make, model and
year. The Colonel's products were sold for distribution to collision
repair shops, dealers and others in the automobile aftermarket
collision industry and used for the replacement of damaged automobile
bumpers and related components. During the years ended December 31,
1998, 1997 and 1996, products which were manufactured by The Colonel's
represented 86%, 88% and 89%, respectively, of The Colonel's's sales
and products which were purchased by The Colonel's from other
manufacturers have represented 14%, 12% and 11%, respectively, of The
Colonel's's sales during those years.
Prior to the sale of its assets, The Colonel's manufactured and
distributed molded plastic replacement components for approximately
418 automotive applications and purchased and distributed replacement
components for approximately 1,863 automotive applications.
The Colonel's believes that it offered its automotive replacement
components at lower prices than those offered by OEMs for comparable
replacement components and that its products were equivalent in
quality, durability and function to OEM-manufactured replacement
components.
18
<PAGE>
MANUFACTURING
The Colonel's used two chemical processes to manufacture its
plastic products. The production cycle for each process was similar.
Raw materials were introduced into a machine press that contained a
machined tool or mold. Heat and pressure were applied to the raw
materials, forcing them into the shape of the mold. The resulting
plastic molded part was then removed from the mold to an adjacent work
station where excess plastic was trimmed from each part. After
trimming, the part was cleaned and placed on a conveyor belt leading
to the paint application room. There, the part was typically painted
with a water-based black primer finish. After the finish was dried in
infrared ovens on the conveyor belt, each part was labeled and placed
in a plastic bag, packaged in a box and shipped or stored for
shipment.
The primary manufacturing process used by The Colonel's is
referred to as Reaction Injection Molding or the "RIM" process. The
raw materials for the RIM process, consisting of polyol and
polyisocyanate, were stored in two large closed tanks and are
distributed to the presses by a computer-regulated flow monitoring
system. In the RIM process, two reactive streams are mixed together
under controlled temperatures and pressures while being injected into
the tooling attached to each press. The RIM tool is filled to
approximately 90% of capacity during the injection process. A
chemical reaction causes the material to heat and expand, forcing air
out through a vent and allowing the material to fill the mold
completely. The result is a microcellular plastic elastomeric or
polyurethane part.
An alternative process used by The Colonel's is referred to as
injection molding. In injection molding, small pellets containing
reactive polymers and catalysts are melted through heat and pressure.
The melted material is forced into the mold until it is completely
filled. The result is a thermoplastic olefin polypropylene part.
DISTRIBUTION AND SALES; PROPERTIES
The Colonel's products were distributed nationally from its
manufacturing facility located at 620 South Platt Road, Milan,
Michigan and from affiliated warehouse facilities. Products were
shipped directly to customers or to distribution warehouses operated
by The Colonel's or its distributors.
All of The Colonel's bumper and auto collision parts
manufacturing was conducted at the Milan facility. The Milan facility
was leased from a company owned by Donald and Patsy Williamson and is
19
<PAGE>
approximately 350,000 square feet. This facility was also sold to
AutoLign in December 1998.
The Colonel's also operated warehouse distribution facilities in
Houston, Texas; Dallas, Texas; Glendale, Arizona; and Totowa, New
Jersey, all of which were leased from third parties in
December 1998. The leases for these facilities were transferred to
AutoLign in December 1998. In addition, AutoLign entered into a one-
year lease of The Colonel's facility in West Memphis, Arkansas.
The Colonel's maintained a fleet of 17 trucks for the
transportation and distribution of its products. These trucks were
not sold to AutoLign. The Colonel's leases these trucks to AutoLign
as part of the transition per the Asset Purchase Agreement. The
balance of the trucks have been re-assigned to CTA and CRL.
The Colonel's products were principally marketed through
independent distributors and sold primarily to automobile collision
body shops, automobile aftermarket supply stores and to regional and
national chain stores that sell automobile aftermarket parts.
COMPETITION
The automotive aftermarket for plastic replacement bumpers and
facias is highly competitive. The market is dominated by OEMs such as
General Motors Corporation; Ford Motor Company; Chrysler Corporation;
Toyota Motor Sales, USA, Inc. and Nissan Motor Corp., USA. These OEMs
are more established and have greater financial resources than did The
Colonel's. These larger OEMs, however, also generally charge higher
prices than did The Colonel's for their products and generally
distribute their products through their own automobile dealership
networks rather than through independent distributors and body shops.
Automobile insurance companies have successfully advocated the use of
less expensive parts by body shops, and OEMs have lost market share in
the collision parts market as a result.
In addition, The Colonel's competed with other non-OEM
manufacturers of plastic bumpers for the automotive aftermarket
industry in North America, as well as certain recycling companies and
auto salvage companies.
EMPLOYEES
Prior to the December 1998 asset sale, The Colonel's had
approximately 147 full-time employees (including leased employees as
described below).
20
<PAGE>
Of the total number of employees, 100 were in manufacturing, and the
rest were in sales, marketing, administrative and executive positions.
Approximately 137 of the hourly workers at the Milan facility were
leased from SES. AutoLign assumed The Colonel's obligations under
this lease with SES.
ITEM 2. PROPERTIES
The Company is a holding company with no independent operations.
The properties of CTA, CRL, BIR and The Colonel's are addressed below.
CTA. The properties of CTA are discussed in "Item 1--THE
COLONEL'S TRUCK ACCESSORIES, INC.--Properties."
BIR. The properties of BIR are discussed in "Item 1--BRAINERD
INTERNATIONAL RACEWAY, INC.--Properties."
CRL. The properties of CRL are discussed in "Item 1--THE
COLONEL'S RUGGED LINER, INC.--Properties."
THE COLONEL'S. The properties of The Colonel's are discussed in
"Item 1--THE COLONEL'S, INC.--Distribution and Sales; Properties."
ITEM 3. LEGAL PROCEEDINGS
The Company has been served with three complaints, filed in 1995
and 1996, pertaining to a class action suit arising from the
production of bedliners. These three lawsuits have been consolidated
in the United States District Court for the Southern District of
Mississippi. The suits, which were brought against The Colonel's,
CTA, CRL and various other bedliner manufacturers and seek money
damages, allege that the bedliners insulate a gas can when filled in
the back of a truck which may allow a static charge that may result in
a fire. Although the class action suit targets bedliner
manufacturers, the Company believes that other organizations should
also be involved, such as the service stations, gas can manufacturers,
gas pump manufacturers, etc. The Company has formed a coalition with
the other bedliner manufacturers to defend this class action suit.
The coalition currently is in settlement negotiations with the
plaintiffs and has reached a tentative settlement whereby the
Company's liability would be $150,000. The Company does not believe
that any liability resulting from these lawsuits will significantly
affect its financial position, results of operations, or cash flows.
21
<PAGE>
The Company is involved in various other legal proceedings that
have arisen in the normal course of its operations. While the results
of such proceedings and those discussed in the preceding paragraph
cannot be predicted with certainty, management believes that any
amounts that may be required to be paid in connection with the final
outcome of such matters, in addition to amounts presently accrued,
will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's shareholders approved the sale of the assets of The
Colonel's to AutoLign twice during the fourth quarter of 1998, once on
October 30, 1998 and again on December 17, 1998. The second approval
was required because, following the initial shareholder approval, the
Asset Purchase Agreement was substantially amended, thus requiring
additional shareholder approval under applicable law.
At the first meeting, the proposal to approve the Asset Purchase
Agreement between AutoLign (then named Colonel's Acquisition Corp.),
the Company, The Colonel's and Donald J. Williamson, who is the
Chairman of the Board and Chief Executive Officer and a major
shareholder of the Company was approved by approximately 98.2% of the
outstanding shares of the Company's common stock as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For 24,180,236
Against 0
Authority Withheld 250
Broker Non-Votes 0
</TABLE>
At the second meeting, the proposal to approve an amended and
restated Asset Purchase Agreement was approved by approximately 97.5%
of the outstanding shares of the Company's common stock as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For 24,019,366
Against 27
Authority Withheld 90
Broker Non-Votes 0
</TABLE>
22
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's Common Stock has been traded on The Nasdaq SmallCap
Market since January 2, 1996. The number of holders of record of
Common Stock in the Company on March 22, 1999 was 251.
The table below sets forth the high and low bid prices by
calendar quarter for the Company's Common Stock for 1998 and 1997.
Such prices reflect inter-dealer prices, without retail mark-up, mark-
down or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1998 1997
---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
January-March $ 9.25 $5.75 $11.00 $4.75
April-June $9.375 $7.75 $11.00 $4.25
July-September $8.125 $6.00 $ 5.50 $3.25
October-December $7.125 $3.00 $ 9.50 $3.75
</TABLE>
During 1998 and 1997 the Company did not declare or pay any cash
dividends on its Common Stock. The Company does not anticipate
declaring or paying any dividends in the foreseeable future.
Management intends to apply earnings, if any, to the development of
the business of its subsidiaries. The Company's loan agreements
prohibit the Company from paying dividends without the prior consent
of the Company's lending institution.
On April 23, 1998, the Company acquired by merger the Rugged
Liner Companies. The mergers were conducted pursuant to an Agreement
and Plan of Merger dated March 13, 1998, as amended by a First
Amendment to Merger Agreement dated April 23, 1998 (collectively, the
"Merger Agreement"). Under the Merger Agreement, the former
shareholders of the Rugged Liner Companies were to receive cash in an
aggregate amount of $4,250,000 and a number of shares of the Company's
common stock, $0.01 par value per share ("Common Stock") equal to
$4,250,000 divided by the Average Trading Price (as defined in the
Merger Agreement), all subject to the adjustments set forth in the
Merger Agreement. After adjustments, the former shareholders of the
Rugged Liner Companies received certain amounts of cash and 454,027
23
<PAGE>
shares of Common Stock. This offering was conducted pursuant to
Section 4(2) under the Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA.
This item has been omitted pursuant to Rule 12b-25 under the
Securities Exchange Act (the "Exchange Act"). The information
required by this item will be filed pursuant to an amendment to this
Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This item has been omitted pursuant to Rule 12b-25 under the
Exchange Act. The information required by this item will be filed
pursuant to an amendment to this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item has been omitted pursuant to Rule 12b-25 under the
Exchange Act. The information required by this item will be filed
pursuant to an amendment to this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This item has been omitted pursuant to Rule 12b-25 under the
Exchange Act. The information required by this item will be filed
pursuant to an amendment to this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated by
reference from the sections entitled "Board of Directors," "Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting
24
<PAGE>
Compliance" in the Company's definitive proxy statement relating to
its Annual Meeting of Shareholders to be held May 7, 1999.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by
reference from the sections entitled "Compensation of Directors," and
"Executive Compensation" in the Company's definitive proxy statement
relating to its Annual Meeting of Shareholders to be held May 7, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is incorporated by
reference from the section entitled "Voting Securities" in the
Company's definitive proxy statement relating to its Annual Meeting of
Shareholders to be held May 7, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by
reference from the section entitled "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement relating to
its Annual Meeting of Shareholders to be held May 7, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON
FORM 8-K
ITEM 14(A)(1). FINANCIAL STATEMENTS.
The following consolidated financial statements of The Colonel's
International, Inc. and subsidiaries are omitted pursuant to Rule 12b-
25, but will be filed pursuant to an amendment to this Form 10-K:
* Auditors' Report
* Consolidated Balance Sheets as of December 31, 1998 and
1997
* Consolidated Statements of Income for years ended
December 31, 1998, 1997 and 1996
* Consolidated Statements of Stockholders' Equity for
years ended December 31, 1998, 1997 and 1996
25
<PAGE>
* Consolidated Statements of Cash Flows for years ended
December 31, 1998, 1997 and 1996
* Notes to Consolidated Financial Statements for years
ended December 31, 1998, 1997 and 1996
* Independent Auditors' Report on Schedule II
* Schedule II - Valuation and Qualifying Accounts
* Report of Management
ITEM 14(A)(2). FINANCIAL STATEMENT SCHEDULES. Not applicable.
ITEM 14(A)(3). EXHIBITS. The following exhibits are filed as
part of this report.
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger between The Colonel's, Inc. and
Brainerd Merger Corporation and joined in by Brainerd
International, Inc. Incorporated by reference from Exhibit
A to the Proxy Statement of Brainerd International, Inc. for
the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
2.2 Agreement and Plan of Reorganization among Brainerd
International, Inc. and The Colonel's Holdings, Inc.
Incorporated by reference from Exhibit D to the Proxy
Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held
on November 21, 1995.
2.3 Amended and Restated Asset Purchase Agreement by and between
Colonel's Acquisition Corp. (later renamed AutoLign
Manufacturing Group, Inc.), The Colonel's International,
Inc., The Colonel's, Inc. and Donald J. Williamson dated
November 23, 1998. Incorporated by reference to Appendix A
to the Company's Definitive Proxy Statement filed with the
Securities and Exchange Commission on December 7, 1998.
2.4 First Amendment to Amended and Restated Asset Purchase
Agreement by and between AutoLign Manufacturing Group, Inc.
(formerly known as Colonel's Acquisition Corp.), The
Colonel's International, The Colonel's, Inc. and Donald J.
Williamson dated December 17, 1998. Incorporated by
reference to Exhibit 2(b) to the Company's Report on Form 8-
K filed with the Securities and Exchange Commission on
December 30, 1998.
26
<PAGE>
2.5 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.
2.6 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 of the Company, 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.
4.1 Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
10.1 1995 Long-Term Incentive Plan, as amended. Incorporated by
reference from Exhibit A to the Company's Proxy Statement
for the 1997 Annual Meeting of Shareholders.<F*>
10.2 June 22, 1992 Title Rights Sponsorship Agreement between
Champion Auto Stores, Inc. and National Hot Rod Association,
Inc. Incorporated by reference from Brainerd International,
Inc.'s Registration Statement on Form S-1 (Registration No.
33-055876).
10.3 Loan Agreement between The Colonel's International, Inc. and
subsidiaries and Comerica Bank dated May 28, 1997.
Incorporated by reference from the Company's Report on Form
10-K for the year ended December 31, 1997.
10.4 Master Revolving Note between Comerica Bank and The
Colonel's International, Inc. and subsidiaries dated March
17, 1998. Incorporated by reference from the Company's
Report on Form 10-K for the year ended December 31, 1997.
27
<PAGE>
10.5 Employment Agreement between The Colonel's, Inc. and John
Carpenter dated June 28, 1996. Incorporated by reference
from the Company's Report on Form 10-K for the year ended
December 31, 1997.<F*>
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors<F**>
24 Powers of Attorney
27 Financial Data Schedule<F**>
____________________
<F*> Management contract or compensatory plan or arrangement.
<F**>Omitted pursuant to Rule 12b-25 under the Exchange Act. These
exhibits will be filed pursuant to an amendment to this Form 10-K.
ITEM 14(B). REPORTS ON FORM 8-K.
The Company filed a Report on Form 8-K with the Securities and
Exchange Commission on December 30, 1998. This report announced the
closing of the sale of the assets of The Colonel's, Inc. to AutoLign
Manufacturing Group, Inc. and contained the following financial
statements of the Company: (1) unaudited pro forma condensed
consolidated balance sheet as of September 30, 1998; (2) unaudited pro
forma condensed consolidated statement of operations for the nine
months ended September 30, 1998 and (3) unaudited pro forma condensed
consolidated statement of operations for the year ended December 31,
1997.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 31, 1999 By:/S/ DONALD J. WILLIAMSON
Donald J. Williamson
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
By: /S/ RICHARD S. SCHOENFELDT
Richard S. Schoenfeldt
Vice President-Finance and Chief
Financial Officer
(Principal Financial Officer)
29
<PAGE>
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
/S/DONALD J. WILLIAMSON Chairman of the Board, March 31, 1999
Donald J. Williamson Chief Executive Officer
and Director
*/S/MARK GERMAN President and Director March 31, 1999
Mark German
*/S/J. DANIEL FRISINA Director March 31, 1999
J. Daniel Frisina
*/S/TED M. GANS Director March 31, 1999
Ted M. Gans
______________________ Director March __, 1999
Ben C. Parr
*/S/DONALD GORMAN Director March 31, 1999
Donald Gorman
*/S/MARK S. STEVENS Director March 31, 1999
Mark S. Stevens
*By /S/ RICHARD S. SCHOENFELDT
Richard S. Schoenfeldt
Attorney-in-fact
30
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger between The Colonel's, Inc. and
Brainerd Merger Corporation and joined in by Brainerd
International, Inc. Incorporated by reference from Exhibit
A to the Proxy Statement of Brainerd International, Inc. for
the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
2.2 Agreement and Plan of Reorganization among Brainerd
International, Inc. and The Colonel's Holdings, Inc.
Incorporated by reference from Exhibit D to the Proxy
Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held
on November 21, 1995.
2.3 Amended and Restated Asset Purchase Agreement by and between
Colonel's Acquisition Corp. (later renamed AutoLign
Manufacturing Group, Inc.), The Colonel's International,
Inc., The Colonel's, Inc. and Donald J. Williamson dated
November 23, 1998. Incorporated by reference to Appendix A
to the Company's Definitive Proxy Statement filed with the
Securities and Exchange Commission on December 7, 1998.
2.4 First Amendment to Amended and Restated Asset Purchase
Agreement by and between AutoLign Manufacturing Group, Inc.
(formerly known as Colonel's Acquisition Corp.), The
Colonel's International, The Colonel's, Inc. and Donald J.
Williamson dated December 17, 1998. Incorporated by
reference to Exhibit 2(b) to the Company's Report on Form 8-
K filed with the Securities and Exchange Commission on
December 30, 1998.
2.5 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.
31
<PAGE>
2.6 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 of the Company, 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.
4.1 Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
10.1 1995 Long-Term Incentive Plan, as amended. Incorporated by
reference from Exhibit A to the Company's Proxy Statement
for the 1997 Annual Meeting of Shareholders.<F*>
10.2 June 22, 1992 Title Rights Sponsorship Agreement between
Champion Auto Stores, Inc. and National Hot Rod Association,
Inc. Incorporated by reference from Brainerd International,
Inc.'s Registration Statement on Form S-1 (Registration No.
33-055876).
10.3 Loan Agreement between The Colonel's International, Inc. and
subsidiaries and Comerica Bank dated May 28, 1997.
Incorporated by reference from the Company's Report on Form
10-K for the year ended December 31, 1997.
10.4 Master Revolving Note between Comerica Bank and The
Colonel's International, Inc. and subsidiaries dated March
17, 1998. Incorporated by reference from the Company's
Report on Form 10-K for the year ended December 31, 1997.
10.5 Employment Agreement between The Colonel's, Inc. and John
Carpenter dated June 28, 1996. Incorporated by reference
from the Company's Report on Form 10-K for the year ended
December 31, 1997.<F*>
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors<F**>
32
<PAGE>
24 Powers of Attorney
27 Financial Data Schedule<F**>
____________________
<F*> Management contract or compensatory plan or arrangement.
<F**>Omitted pursuant to Rule 12b-25 under the Exchange Act. These
exhibits will be filed pursuant to an amendment to this Form 10-K.
33
<PAGE>
EXHIBIT 21
SUBSIDIARIES
The Company's subsidiaries are: (1) The Colonel's Truck Accessories,
Inc., a Michigan corporation, (2) The Colonel's Rugged, Inc., a
Pennsylvania corporation; (3) Brainerd International Raceway, Inc., a
Minnesota corporation; and (4) The Colonel's, Inc., a Michigan corporation.
All of these companies conduct business under their official names.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints DONALD J. WILLIAMSON and
RICHARD S. SCHOENFELDT, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Form 10-K of The Colonel's
International, Inc. for the year ended December 31, 1998, together with any
and all amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission or other regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: /s/Mark Stevens
Print Name: Mark Stevens
Title: Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints DONALD J. WILLIAMSON and
RICHARD S. SCHOENFELDT, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Form 10-K of The Colonel's
International, Inc. for the year ended December 31, 1998, together with any
and all amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission or other regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: /s/Ted M. Gans
Print Name: Ted. M. Gans
Title: Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints DONALD J. WILLIAMSON and
RICHARD S. SCHOENFELDT, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Form 10-K of The Colonel's
International, Inc. for the year ended December 31, 1998, together with any
and all amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission or other regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: /s/Donald R. Gorman
Print Name: Donald R. Gorman
Title: Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints DONALD J. WILLIAMSON and
RICHARD S. SCHOENFELDT, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Form 10-K of The Colonel's
International, Inc. for the year ended December 31, 1998, together with any
and all amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission or other regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: /s/J. Daniel Frisina
Print Name: J. Daniel Frisina
Title: Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints DONALD J. WILLIAMSON and
RICHARD S. SCHOENFELDT, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Form 10-K of The Colonel's
International, Inc. for the year ended December 31, 1998, together with any
and all amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission or other regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: /s/Mark German
Print Name: Mark German
Title: President and Director
