SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter ended June 30, 1995 Commission file no. 0-6215
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Republic Automotive Parts, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 38-1455545
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(State of incorporation) (I.R.S. Employer Identification No.)
500 Wilson Pike Circle, Suite 115, Brentwood, Tennessee 37027
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(Address of principal executive offices) (Zip code)
(615) 373-2050
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such short 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
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Number of shares (common) outstanding at June 30, 1995: 3,318,586
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Republic Automotive Parts, Inc.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994
Consolidated Statements of Income and Retained Earnings for the three
months and six months ending June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the six months ending
June 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
<PAGE>
PART I Item 1. Financial Statements
Republic Automotive Parts, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share data) June 30, December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 3,002 $ 2,675
Accounts and notes receivable, less allowance
for doubtful accounts of $566 and $518 13,535 12,289
Inventories 41,530 42,075
Deferred income taxes 2,664 2,424
Prepaid expenses and other current assets 2,376 1,098
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Total current assets 63,107 60,561
PROPERTY, PLANT AND EQUIPMENT, NET 6,499 6,785
LONG TERM NOTES RECEIVABLE, less allowance
for doubtful accounts of $60 and $53 877 920
DEFERRED PENSION ASSET 3,230 3,140
GOODWILL AND OTHER INTANGIBLES, less accumulated
amortization of $1,463 and $1,275 6,431 6,852
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$80,144 $78,258
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and long-term debt due
within one year $ 608 $ 625
Accounts payable 10,355 10,727
Accrued compensation and employee benefits 1,714 2,401
Accrued taxes and other liabilities 5,277 2,170
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Total current liabilities 17,954 15,923
LONG-TERM DEBT 19,712 18,925
DEFERRED INCOME TAXES 457 1,435
OTHER LONG-TERM LIABILITIES 1,674 1,860
STOCKHOLDERS' EQUITY
Preferred stock of $1.00 par value:
Authorized - 150,000, Issued - none
Junior Participating Cumulative Preferred
Stock at $1.00 par value:
Authorized - 50,000 shares, Issued - none
Common stock of $0.50 par value:
Authorized - 5,000,000 shares
Issued - 3,391,751 shares 1,696 1,696
Additional paid-in capital 23,948 23,948
Retained earnings 15,508 15,276
Treasury stock, at cost: 73,165 shares (805) (805)
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40,347 40,115
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Commitments and contingencies
$80,144 $78,258
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The accompanying notes are an integral part of these financial statements.
<PAGE>
PART I Item 1. Financial Statements: (Continued)
Republic Automotive Parts, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
Three Months Six Months
(in thousands, except June 30, June 30,
per share data) 1995 1994 1995 1994
NET SALES $36,413 $37,808 $69,321 $68,366
COSTS AND EXPENSES
Cost of products sold 23,129 24,399 43,658 44,167
Selling, general and administrative
expenses 11,064 11,113 22,149 20,929
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34,193 35,512 65,807 65,096
OPERATING INCOME 2,220 2,296 3,514 3,270
Interest income 88 109 192 208
Interest expense (374) (218) (747) (353)
Other income and expense (Note 4) (2,587) 24 (2,575) 43
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INCOME (LOSS) BEFORE INCOME TAXES (653) 2,211 384 3,168
Provision (benefit) for income taxes (258) 852 152 1,220
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NET INCOME (LOSS) (395) 1,359 232 1,948
RETAINED EARNINGS at beginning
of period 15,903 11,617 15,276 11,028
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RETAINED EARNINGS at end of period $15,508 $12,976 $15,508 $12,976
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EARNINGS PER COMMON SHARE:
Net income (loss) $(0.11) $0.39 $0.07 $0.56
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Weighted Average Common Shares
Outstanding 3,493 3,458 3,493 3,460
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The accompanying notes are an integral part of these financial statements.
<PAGE>
PART I Item 1. Financial Statements: (Continued)
Republic Automotive Parts, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six
months ended (Unaudited)
(in thousands) June 30,
1995 1994
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 232 $1,948
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 889 778
Amortization 421 385
Provision for losses on accounts receivable 118 134
Provision for deferred pension income (90) ( 30)
Loss (gain) on disposal of property, plant and equipment 3 (22)
Deferred income taxes (1,218) (141)
Change in assets and liabilities net of
effects from acquisitions:
Accounts and notes receivable (1,364) (1,840)
Inventories 545 (4,202)
Prepaid expenses and other current assets (1,278) (8)
Accounts payable (372) 1,029
Accrued compensation and employee benefits (687) (188)
Accrued taxes and other liabilities 3,107 635
Other long-term liabilities (186) (256)
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Net cash provided (used) by operating activities 120 (1,778)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment 65 80
Acquisitions, net of cash acquired (3,105)
Capital expenditures (671) (871)
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Net cash used in investing activities (606) (3,896)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing on revolving credit agreement 2,875 12,900
Payments under revolving credit agreement (2,075) (1,900)
Payments on long-term debt and notes payable (30) (5,999)
Decrease in long-term notes receivable 43 11
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Net cash provided by financing activities 813 5,012
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 327 (662)
Cash and cash equivalents at beginning of year 2,675 3,524
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Cash and cash equivalents at end of period $3,002 $2,862
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 751 $ 245
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Income taxes $ 972 $1,077
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<PAGE>
PART I Item 1. Financial Statements: (Continued)
Republic Automotive Parts, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
Supplemental schedule of noncash investing and financing activities:
The Company purchased all of the outstanding common stock of Fenders & More,
Inc. in January 1994 for 255,000 shares of the Company's common stock. The
Company also purchased certain assets of Piston Service Company of Indiana,
Inc. in April 1994 for cash. In conjunction with these acquisitions,
liabilities were assumed as follows:
Fair value of assets acquired, other than cash $12,737
Common stock issued (2,805)
Note payable issued (661)
Liabilities assumed (6,166)
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Cash paid $ 3,105
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The accompanying notes are an integral part of these financial statements.
<PAGE>
PART I Item 1. Financial Statements: (Continued)
Republic Automotive Parts, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The financial information included herein is unaudited. In addition, the
financial information does not include all disclosures required under
generally accepted accounting principles because certain note information
included in the Company's annual report has been omitted; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary to a fair
statement of the results for the interim period.
The results of operations for the six months ended June 30, 1995 and 1994 are
not necessarily indicative of the results expected for the full year.
Note 2 - Earnings Per Share
Earnings per share are computed by dividing net income (loss) by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the periods.
Note 3 - Subsequent Event
The Company acquired certain assets of Beacon Auto Parts Company, a
privately-held distributor of automotive replacement parts based in
Pittsburgh, Pennsylvania on July 7, 1995. The purchase price was
approximately $12.6 million. A combination of cash, notes payable and 69,232
shares of the Company's common stock comprised the consideration given. Terms
also included additional payments contingent upon the future performance of
the acquired operations. In anticipation of the acquisition, the Company
increased the availability under its revolving bank credit facility with
Comerica Bank from $20 million to $35 million. The acquisition will be
accounted for under the purchase method.
Note 4 - Litigation
During the second quarter of 1995, the Company recognized a provision of
$2,600,000 ($1,573,000 or $0.45 per share after tax) for a damage award of
$955,000 (plus estimated interest and legal costs) affirmed by a Michigan
State Appellate Court. The litigation involved a former executive's claim of
breach of contract in connection with his discharge by the Company in 1986.
The Company is seeking further appeal of this decision.
<PAGE>
PART II Item 2.
Republic Automotive Parts, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS:
Results of Operations
Net sales increased 1.1% for the first six months of 1995 compared to the same
period in 1994. Net sales decreased 3.7% for the second quarter of 1995
compared to the same period in 1994. The sales decrease in the second quarter
is due principally to sluggish demand created by lackluster economic
conditions. Sales for units owned continuously during 1995 and 1994 also
decreased 4.0%. Cost of goods sold decreased 1.2% during the first six months
of 1995 compared to the same period in 1994. The cost of goods sold decrease
is primarily a result of the change in sales mix between sales made by the
Company's distribution centers versus its jobber stores, the sales of which are
at higher gross profit margins. Selling, general and administrative expenses
increased by 5.8% for the first six months in 1995 compared to the same period
in 1994 due principally to the inclusion of expenses from acquisitions made in
January and April 1994 and the opening in 1995 of two distribution centers by
the Company's subsidiary, Fenders & More, Inc.. Interest expense increased
111.6% for the first six months of 1995 compared to the same period in 1994
due to increased debt levels and higher interest rates. The results for the
first six months of 1995 also include a charge related to an adverse decision
during the second quarter in an appeal of an earlier litigation verdict
(see Note 4 above).
As a result of the above actions, income before income taxes decreased by
$2,784,000 for the first six months of 1995 over the same period last year.
Earnings of $0.07 cents per share were reported for the first six months of
1995 compared to $0.56 per share for the same period in 1994.
Financial Condition and Liquidity
The Company's ratio of current assets to current liabilities was 3.5 at June
30, 1995 compared to 3.8 at December 31, 1994. Working capital at June 30,
1995 was $45,153,000 compared with $44,638,000 at December 31, 1994.
Current financial resources (expected cash from operations, working capital
and short-term borrowing) available to the Company are expected to be
adequate to meet future cash requirements for capital expenditures and
anticipated debt reduction which are payable over the next several years for
various notes made in connection with acquisitions. At June 30, 1995, the
company had utilized $19 million of its available cash resources under its
revolving bank credit facility. In anticipation of the acquisition discussed
in Note 3 above, the Company increased the availability in July under its
revolving bank credit facility with Comerica Bank from $20 million to $35
million.
<PAGE>
PART II Item 2.
Republic Automotive Parts, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (Continued)
The Company anticipates growth through possible acquisitions and openings of
new distribution and jobber locations. The Company acquired certain assets
of Beacon Auto Parts Company, a privately-held distributor of automotive
replacement parts based in Pittsburgh, Pennsylvania on July 7, 1995. This
acquisition was financed primarily through additional borrowing on the
Company's revolving bank credit facility. The Company also opened its fourth
and fifth Fenders & More, Inc. distribution centers in Jackson, Mississippi
and Jackson, Tennessee in January and May 1995, respectively. A sixth
distribution center in the St. Louis, Missouri area is expected to be opened
before the end of the third quarter.
Although no other definitive agreements have been reached, it is expected that
cash generated from operations, other changes in working capital and existing
credit facilities will be sufficient to support cash outlays for anticipated
acquisitions and openings, if any.
PART II
Republic Automotive Parts, Inc.
Item 4.
Submission of Matters to a Vote of Security Holders
On June 8, 1995 the Company held its annual meeting of stockholders. The
following directors' term of office continued after the meeting: William F.
Ballhaus, Edgar R. Berner, Richard O. Berner, Nicholas A. Fedoruk, Oliver R.
Grace, Donald B. Hauk, Leroy M. Parker, M.D., Douglas R. Stern and Keith M.
Thompson.
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REPUBLIC AUTOMOTIVE PARTS, INC.
(Registrant)
By /S/ KEITH M. THOMPSON August 11, 1995
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President, Chief Executive Date
Officer and Director
By /S/ DONALD B. HAUK August 11, 1995
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Executive Vice President, Chief Date
Financial Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REPUBLIC AUTOMOTIVE PARTS, INC. FOR THE QUARTER
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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