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 September 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 September 30, 1995: 3,387,818
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<PAGE>
Republic Automotive Parts, Inc.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994
Consolidated Statements of Income and Retained Earnings for the three months
and nine months ending September 30, 1995 and 1994.
Consolidated Statements of Cash Flows for the nine months ending
September 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 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) September 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,952 $ 2,675
Accounts and notes receivable, less allowance
for doubtful accounts of $683 and $518 15,028 12,289
Inventories 51,431 42,075
Deferred income taxes 3,739 2,424
Prepaid expenses and other current assets 1,245 1,098
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Total current assets 74,395 60,561
PROPERTY, PLANT AND EQUIPMENT, NET 8,273 6,785
LONG TERM NOTES RECEIVABLE, less allowance
for doubtful accounts of $60 and $53 737 920
DEFERRED PENSION ASSET 3,258 3,140
GOODWILL AND OTHER INTANGIBLES, less accumulated
amortization of $1,628 and $1,275 12,356 6,852
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$99,019 $78,258
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and long-term debt due
within one year $ 1,570 $ 625
Accounts payable 16,364 10,727
Accrued compensation and employee benefits 1,801 2,401
Accrued taxes and other liabilities 6,179 2,170
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Total current liabilities 25,914 15,923
LONG-TERM DEBT 27,128 18,925
DEFERRED INCOME TAXES 1,452 1,435
OTHER LONG-TERM LIABILITIES 1,940 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: 1,730 1,696
Authorized - 5,000,000 shares
Issued - 3,460,983 shares in 1995
and 3,391,751 shares in 1994
Additional paid-in capital 24,913 23,948
Retained earnings 16,747 15,276
Treasury stock, at cost: 73,165 shares (805) (805)
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42,585 40,115
Commitments and contingencies
$99,019 $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 Nine Months
September 30, September 30,
(in thousands, except per share data) 1995 1994 1995 1994
NET SALES $43,752 $36,578 $113,073 $104,944
COSTS AND EXPENSES
Cost of products sold 27,458 23,066 71,116 67,233
Selling, general and administrative
expenses 13,749 11,176 35,898 32,105
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41,207 34,242 107,014 99,338
OPERATING INCOME 2,545 2,336 6,059 5,606
Interest income 110 95 302 303
Interest expense (498) (284) (1,245) (636)
Other income and expense (Note 4) 12 18 (2,563) 60
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INCOME BEFORE INCOME TAXES 2,169 2,165 2,553 5,333
Provision for income taxes 930 833 1,082 2,053
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NET INCOME 1,239 1,332 1,471 3,280
RETAINED EARNINGS at beginning of period 15,508 12,976 15,276 11,028
------ ------ ------ ------
RETAINED EARNINGS at end of period $16,747 $14,308 $16,747 $14,308
====== ====== ====== ======
EARNINGS PER COMMON SHARE:
Net income $0.35 $0.39 $0.42 $0.95
==== ==== ==== ====
Weighted Average Common
Shares Outstanding 3,507 3,455 3,507 3,455
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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 (Unaudited)
For the nine months
ended September 30,
(in thousands) 1995 1994
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 1,471 $ 3,280
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 1,424 1,146
Amortization 720 594
Provision for losses on accounts receivable 298 200
Provision for deferred pension income (118) (217)
Loss (gain) on disposal of property, plant and equipment 8 (31)
Deferred income taxes (1,298) (78)
Change in assets and liabilities, net of
effects from acquisitions:
Accounts and notes receivable (1,128) (609)
Inventories 397 (3,194)
Prepaid expenses and other current assets (113) (852)
Accounts payable 2,936 (837)
Accrued compensation and employee benefits (919) (397)
Accrued taxes and other liabilities 3,292 524
Other long-term liabilities (338) (363)
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Net cash provided (used) by operating activities 6,632 (834)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment 81 177
Acquisitions, net of cash acquired (11,606) (3,105)
Capital expenditures (1,199) (1,246)
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Net cash used in investing activities (12,724) (4,174)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings on revolving credit agreement 10,875 14,200
Payments under revolving credit agreement (4,075) (3,700)
Payments on long-term debt and notes payable ( 614) (6,233)
Decrease in long-term notes receivable 183 18
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Net cash provided by financing activities 6,369 4,285
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 277 (723)
Cash and cash equivalents at beginning of year 2,675 3,524
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Cash and cash equivalents at end of period $ 2,952 $ 2,801
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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
(Unaudited)
For the nine months
ended September 30,
(in thousands) 1995 1994
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 1,328 $ 659
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Income taxes $ 1,840 $ 1,813
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Supplemental schedule of noncash
investing and financing activities:
The Company purchased certain assets of Beacon Auto Parts Company in July 1995.
The Company issued 69,232 shares of common stock in conjunction with this
purchase. The Company purchased certain assets of PartsNet Incorporated in
August 1995 for cash. 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 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 $19,723 $12,737
Common stock issued (1,000) (2,805)
Note payable issued (3,380) (661)
Cash paid 11,606 3,105
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Liabilities assumed $ 3,737 $ 6,166
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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 nine months ended September 30, 1995 and
1994 are not necessarily indicative of the results expected for the full year.
Note 2 - Earnings Per Share
Earnings per share were computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the periods.
Note 3 - Business Combinations
The Company acquired certain assets of Beacon Auto Parts Company, a
privately-held distributor of automotive replacement parts and supplies in
metropolitan Pittsburgh, Pennsylvania on July 7, 1995. The purchase price
was $12,622,000 based on assumed levels and valuations of closing date
inventory and an estimated statement of assets and liabilities. In addition,
the Company assumed $3,341,000 of trade payables and accrued expenses. The
purchase price is subject to a definitive post-closing calculation and
adjustment at the settlement date to occur within 180 days of the closing
date. Management of the Company expects that the post-closing adjustments to
the purchase price, if any, will not be material. Of the purchase price,
$1,000,000 was paid through the issuance of 69,232 shares of common stock,
$2,000,000 by the issuance of a subordinated promissory note, $8,660,000 in
cash paid at closing and $962,000 to be paid following settlement. The Company
also entered into a non-competition undertaking providing for payments
aggregating $500,000 over five years. Direct acquisition costs of $168,000
were also incurred. The assets acquired were recorded at their estimated
fair values of $9,118,000 for inventory, $1,631,000 for accounts receivable,
$1,502,000 for equipment, furniture, fixtures and vehicles subject to
adjustment based on the results of an independent appraisal, $41,000 for
prepaid expenses and petty cash, $418,000 for non-competition undertaking and
$3,839,000 for goodwill, which is being amortized on a straight-line basis
over 15 years. The acquisition was accounted for under the purchase method
with the results of Beacon Auto Parts Company included in the Consolidated
Statements of Income and Retained Earnings from the acquisition date.
<PAGE>
PART I. Item 1. Financial Statements: (Continued)
Republic Automotive Parts, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma summary of financial information has been
prepared as though Beacon Auto Parts Company had been acquired at the beginning
of 1995 (in thousands, except per share data). Pro forma results of operations
are not necessarily indicative of the actual results that would have occurred
had the purchase been made at the beginning of the year, or of the results
which may occur in the future.
Nine months ended
September 30, 1995
Net sales $126,644
Income before income taxes 3,071
Net income 1,782
Earnings per common share $0.51
The Company also purchased certain assets of PartsNet Incorporated, a
privately-held distributor of automotive crash parts based in Austin, Texas
with additional facilities in San Antonio and Harlingen, Texas on August 31,
1995. The consideration was given in the form of cash ($2,957,000) and the
undertaking of certain liability payments in the amount of $186,000. Direct
acquisition costs of $42,000 were incurred. The assets acquired were recorded
at their estimated fair values of $635,000 for inventory, $278,000 for
accounts receivable, $300,000 for equipment, furniture, fixtures and vehicles,
$5,000 for prepaid expenses and supplies and $1,967,000 for goodwill, which is
being amortized on a straight-line basis over 15 years.
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.
PART I. Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS:
Results of Operations
Net sales increased 7.8% for the first nine months of 1995 compared to the
same period in 1994. Net sales increased 19.6% for the third quarter of 1995
compared to the same period in 1994. These sales increases are due
principally to the inclusion of sales from acquisitions made in July 1995
<PAGE>
PART I. Item 2.
Republic Automotive Parts, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (continued)
(one distribution center and twenty-three jobber stores) and August 1995 (three
distribution centers). Sales for units owned continuously during 1995 and
1994 decreased 3.5% due to generally soft demand by consumers for automotive
replacement parts and service. Cost of goods sold increased 5.8% in
conjunction with the increase in net sales during the first nine months of
1995. Cost of goods sold increased 19.0% in conjunction with the increase in
net sales during the third quarter of 1995. The overall increase in cost of
goods sold was primarily a result of the acquisitions described above.
Selling, general and administrative expenses increased by 11.8% for the first
nine months in 1995 compared to the same period in 1994 due principally to
the above described acquisitions. Operating income increased 8.1% for the
first nine months in 1995 compared to the same period in 1994.
Interest expense in 1995 increased 95.8% from the prior year due to higher
debt levels resulting from acquisitions and higher interest rates. The
results for the first nine 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 $2,780,000 for the first nine months
of 1995 over the same period last year. Earnings of $0.42 cents per share
were reported for the first nine months of 1995 compared to $0.95 per share
for the same period in 1994.
Financial Condition and Liquidity
The Company's ratio of current assets to current liabilities was 2.9 at the
end of the third quarter of 1995 compared to 3.8 at December 31, 1994.
Working capital at September 30, 1995 was $48,481,000 compared with
$44,638,000 at December 31, 1994. Cash increased by $277,000 from $2,675,000
at December 31, 1994 to $2,952,000 at September 30, 1995.
Operating activities provided $6,632,000 of the Company's cash flows during
the first nine months of 1995 compared to operating activities using $834,000
of cash flows for the same period in 1994. Favorable terms from the Company's
suppliers and maintaining inventory at 1994 levels (excluding the effect of
acquisitions) were the primary factors contributing to the increase in cash
flows provided by operating activities.
Investing activities used $12,724,000 of the Company's cash flows during the
first nine months of 1995 compared to $4,174,000 for the same period in 1994.
Larger asset acquisitions in 1995 compared to 1994 accounted for the increase
in cash flows used by investing activities.
The Company anticipates future growth through possible acquisitions and
openings of new distribution and jobber store locations. The Company's
acquisition of Beacon Auto Parts Company on July 7, 1995 and PartsNet
Incorporated on August 31, 1995 is expected to add approximately $27,000,000
and $6,000,000, respectively, in annual sales to the Company. A new
<PAGE>
PART I. Item 2.
Republic Automotive Parts, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS: (continued)
distribution center for Fenders & More, Inc., the Company's distributor of
automotive crash parts, was opened in St. Louis, Missouri in September 1995.
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.
Financing activities provided $6,369,000 of the Company's cash flows during
the first nine months of 1995 compared to $4,285,000 for the same period in
1994. The primary use of these cash flows was the acquisitions made in July
and August 1995 (see Note 3 for additional information). At September 30,
1995, the company had available cash resources of $35,000,000 under its
revolving bank credit facility of which $25,000,000 was being utilized.
Current financial resources (expected cash from operations, working capital
and short-term borrowings) 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.
PART II. Other Information
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits - 3(ii), 4.2.1 By-Laws of the Company, as amended.
(b) Reports on Form 8-K - A Current Report on Form 8-K was filed with the
Securities and Exchange Commission on July 24,
1995 reporting the acquisition of certain assets
of Beacon Auto Parts Company. An Amended Report
on Form 8-K/A was filed with the Securities and
Exchange Commission on September 21, 1995 regarding
the acquisition of certain assets of Beacon Auto
Parts Company.
<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 November 9, 1995
---------------------------------------------
President, Chief Executive Date
Officer and Director
By /S/ DONALD B. HAUK November 9, 1995
---------------------------------------------
Executive Vice President, Chief Date
Financial Officer and Director
<PAGE>
<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 September 30, 1995 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,952
<SECURITIES> 0
<RECEIVABLES> 15,028
<ALLOWANCES> 683
<INVENTORY> 51,431
<CURRENT-ASSETS> 74,395
<PP&E> 18,053
<DEPRECIATION> 9,780
<TOTAL-ASSETS> 99,019
<CURRENT-LIABILITIES> 25,914
<BONDS> 0
<COMMON> 1,730
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 99,019
<SALES> 113,073
<TOTAL-REVENUES> 113,073
<CGS> 71,116
<TOTAL-COSTS> 71,116
<OTHER-EXPENSES> 35,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,245
<INCOME-PRETAX> 2,553
<INCOME-TAX> 1,082
<INCOME-CONTINUING> 1,471
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,471
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
Exhibit 3(ii), 4.2.1 By-Laws of the Company, as amended.
Amendment to the By-Laws of Republic Automotive Parts, Inc. adopted by the
Board of Directors on September 14, 1995.
The By-Laws of Republic Automotive Parts, Inc. as heretofore amended have
been amended as follows:
(1) Section 1 of Article III of the By-Laws of the Corporation is amended
to delete the third and fourth sentences thereof and replace them with
the following:
The directors shall have the power from time to time, and at any time,
when the stockholders as such are not assembled in a meeting, regular
or special, to increase or decrease the minimum or maximum number of
directors by an amendment to these By-Laws. If the number of directors
be increased, whether by resolution of the Board of Directors or by
amendment to these By-Laws, the additional directors may be elected by
a majority of the directors in office at the time of the increase, or
if not so elected prior to the next annual meeting of the stockholders,
they shall be elected by the stockholders.
(2) Section 3 of Article III of the By-Laws of the Corporation is amended
to delete the first sentence thereof and replace it with the following:
The Board of Directors may, in its discretion, by the affirmative vote
of a majority of the whole Board of Directors, appoint committees,
including, without limitation, an Executive Committee, which shall have
and may exercise such powers as shall be conferred or authorized by the
resolutions appointing them or these By-Laws.
(3) Section 3 of Article III of the By-Laws of the Corporation is amended
to add the following paragraph to the end thereof:
Without limiting the foregoing, the Board of Directors has and shall
have specific authority to appoint an Executive Committee which shall
be authorized to exercise and shall be delegated and have all the powers
and authority of the Board of Directors in the management of the
business and affairs of the corporation, subject to such limitations on
such powers as set forth in the General Corporation Law of Delaware, but
expressly including among its powers and authority the power and
authority to declare a dividend, to authorize the issuance of stock of
the corporation and to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of Delaware.
