SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
Commission file number 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 or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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, 1996: 3,387,818
<PAGE>
Republic Automotive Parts, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995
Consolidated Statements of Income and Retained Earnings for the three
months and nine months ending September 30, 1996 and 1995
Consolidated Statements of Cash Flows for the nine months ending
September 30, 1996 and 1995
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
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,
1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 2,765 $ 2,798
Accounts and notes receivable, less allowance
for doubtful accounts of $686 and $490 15,162 14,063
Inventories 55,183 52,732
Deferred income taxes 3,423 2,972
Income taxes recoverable 1,452
Prepaid expenses and other current assets 2,712 1,031
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Total current assets 79,245 75,048
PROPERTY, PLANT AND EQUIPMENT, NET 9,347 9,266
LONG-TERM NOTES RECEIVABLE 562 693
DEFERRED PENSION ASSET 3,406 3,298
GOODWILL AND OTHER INTANGIBLES, less accumulated
amortization of $2,348 and $1,802 10,702 11,483
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$103,262 $99,788
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and long-term debt due
within one year $1,039 $ 1,964
Accounts payable 14,487 15,800
Accrued compensation and employee benefits 2,337 2,467
Accrued taxes and other liabilities 3,302 3,076
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Total current liabilities 21,165 23,307
LONG-TERM DEBT 31,934 30,094
DEFERRED INCOME TAXES 1,778 1,682
OTHER LONG-TERM LIABILITIES 1,418 1,707
COMMITMENTS AND CONTINGENCIES
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 - 3,460,983 shares 1,730 1,730
Additional paid-in capital 24,913 24,913
Retained earnings 21,129 17,160
Treasury stock, at cost: 73,165 shares (805) (805)
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46,967 42,998
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$103,262 $99,788
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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
(in thousands, except September 30, September 30,
per-share data) 1996 1995 1996 1995
NET SALES $47,238 $43,752 $139,856 $113,073
COSTS AND EXPENSES
Cost of products sold 28,708 27,458 85,767 71,116
Selling, general and administrative
expenses 15,487 13,749 46,170 35,898
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44,195 41,207 131,937 107,014
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OPERATING INCOME 3,043 2,545 7,919 6,059
Interest income 146 110 382 302
Interest expense (551) (498) (1,652) (1,245)
Other income and expense (Note 2) 12 12 72 (2,563)
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INCOME BEFORE INCOME TAXES 2,650 2,169 6,721 2,553
Provision for income taxes 1,078 930 2,752 1,082
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NET INCOME 1,572 1,239 3,969 1,471
RETAINED EARNINGS at beginning
of period 19,557 15,508 17,160 15,276
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RETAINED EARNINGS at end of period $21,129 $16,747 $21,129 $16,747
====== ====== ====== ======
EARNINGS PER COMMON SHARE:
Net income $ 0.44 $ 0.35 $ 1.11 $ 0.42
==== ==== ==== ====
Weighted Average Common Shares
Outstanding 3,586 3,507 3,570 3,507
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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 nine
months ended
(in thousands)(unaudited) September 30,
1996 1995
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 3,969 $ 1,471
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 1,969 1,424
Amortization 959 720
Provision for losses on accounts receivable 240 298
Provision for deferred pension income (108) (118)
Loss (gain) on disposal of property, plant and equipment (13) 8
Deferred income taxes (355) (1,298)
Change in assets and liabilities, net of effects
from acquisitions:
Accounts and notes receivable (1,339) (1,128)
Income taxes recoverable 1,452
Inventories (1,171) 397
Prepaid expenses and other current assets (1,682) (113)
Accounts payable (1,671) 2,936
Accrued compensation and employee benefits (139) (919)
Accrued taxes and other liabilities 226 3,292
Other long-term liabilities (466) (338)
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Net cash provided by operating activities 1,871 6,632
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment 119 81
Acquisitions, net of cash acquired (910) (11,606)
Capital expenditures (1,931) (1,199)
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Net cash used in investing activities (2,722) (12,724)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing on revolving credit agreement 5,900 10,875
Payments under revolving credit agreement (3,500) (4,075)
Payments on long-term debt and notes payable (1,713) (614)
Decrease in long-term notes receivable 131 183
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Net cash provided by financing activities 818 6,369
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33) 277
Cash and cash equivalents at beginning of year 2,798 2,675
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Cash and cash equivalents at end of period $ 2,765 $ 2,952
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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 nine
months ended
(in thousands)(unaudited) September 30,
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 1,720 $ 1,328
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Income taxes $ 1,701 $ 1,840
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Supplemental schedule of noncash investing and financing activities:
The Company purchased certain assets of an affiliated group of companies based
in Davenport, Iowa on September 30, 1996 for cash. 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. In
conjunction with these acquisitions, liabilities were assumed as follows:
Fair value of assets acquired, other than cash $ 1,682 $19,723
Common stock issued (1,000)
Note payable issued (405) (3,380)
Cash paid (910) (11,606)
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Liabilities assumed $ 367 $ 3,737
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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, 1996 and
1995 are not necessarily indicative of the results expected for the full year.
Note 2 - 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
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. A settlement was reached in December 1995.
Note 3 - Business Combinations
The Company purchased certain assets of an affiliated group of privately-held
companies based in Davenport, Iowa on September 30, 1996. The consideration
was given in the form of of cash ($910,000), the undertaking of certain
liability payments ($367,000) and the issuance of notes payables ($405,000).
The assets acquired were recorded at their estimated fair values of $1,280,000
for inventory, $225,000 for equipment, furniture, fixtures and vehicles and
$177,000 for a non-compete agreement.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS:
Results of Operations
Net sales increased 23.7% for the first nine months of 1996 compared to the
same period in 1995. Net sales increased 8.0% for the third quarter of 1996
compared to the same period in 1995. These sales increases are due
principally to acquisitions made in July 1995 (one distribution center and
twenty-three jobber stores) and August 1995 (three distribution centers).
Sales for units owned continuously during 1996 and 1995 increased 1.0%.
Cost of goods sold increased 20.6% during the first nine months of 1996
compared to the same period in 1995. Gross margins improved in 1996 compared
to 1995 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 28.6% for the first nine months in 1996 compared to the
same period in 1995 due principally to the inclusion of expenses from the
aforementioned acquisitions and the opening in 1996 of additional distribution
centers by the Company's subsidiary, Fenders & More, Inc..
<PAGE>
Interest expense increased 32.7% for the first nine months of 1996 compared to
the same period in 1995 due to increased debt levels resulting from
acquisitions. The results for the first nine months of 1995 include a charge
related to an adverse decision during the second quarter in an appeal of an
earlier litigation verdict (see Note 2 above).
As a result of the above actions, income before income taxes increased by
$4,168,000 for the first nine months of 1996 over the same period last year.
Earnings of $1.11 cents per share were reported for the first nine months of
1996 compared to $0.42 per share for the same period in 1995.
Financial Condition and Liquidity
The Company's ratio of current assets to current liabilities was 3.7 at
September 30, 1996 compared to 3.2 at December 31, 1995. Working capital at
September 30, 1996 was $58,080,000 compared with $51,741,000 at December 31,
1995. Cash decreased by $33,000 from $2,798,000 at December 31, 1995 to
$2,765,000 at September 30, 1996.
Operating activities provided $1,871,000 of the Company's cash flows during
the first nine months of 1996 compared to operating activities providing
$6,632,000 of cash flows for the same period in 1995. Increases in accounts
receivable, inventories, prepaid expenses and other current assets and a
decrease in accounts payables accounted for the reduction in cash flows
provided by operating activities compared to the same period in 1995.
Investing activities used $2,722,000 of the Company's cash flows during the
first nine months of 1996 compared to $12,724,000 for the same period in 1995.
Acquisitions, normal replacement of equipment and additional equipment and
delivery trucks to support increased sales by Fenders & More, Inc. 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 locations. The Company opened its twelfth and
thirteenth Fenders & More, Inc. distribution centers in Macon, Georgia in
August, 1996 and Monroe, Louisiana in September, 1996, respectively. A
fourteenth distribution center was opened November 4, 1996 in Ft. Oglethorpe,
Georgia (near Chattanooga, Tennessee) upon the acquisition by the Company of
certain operating assets of Lewis Automotive Enterprises, Ltd.. 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 $818,000 of the Company's cash flows during
the first nine months of 1996 compared to $6,639,000 for the same period in
1995. New borrowing under the Company's revolving bank credit facility
reduced by payments on various notes payables accounted for the increase in
cash flows provided by financing activities. At September 30, 1996, the
company had available cash resources of $35,000,000 under its revolving bank
credit facility of which $30,400,000 was being utilized.
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 reductions which are payable over the next several years
for various notes made in connection with acquisitions.
<PAGE>
PART II. OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as part of this report:
Exhibit 27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REPUBLIC AUTOMOTIVE PARTS, INC.
(Registrant)
By /S/ KEITH M. THOMPSON November 8, 1996
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President, Chief Executive Date
Officer and Director
By /S/ DONALD B. HAUK November 8, 1996
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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 SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,765
<SECURITIES> 0
<RECEIVABLES> 15,848
<ALLOWANCES> 686
<INVENTORY> 55,183
<CURRENT-ASSETS> 79,245
<PP&E> 21,051
<DEPRECIATION> 11,704
<TOTAL-ASSETS> 103,262
<CURRENT-LIABILITIES> 21,165
<BONDS> 31,934
0
0
<COMMON> 1,730
<OTHER-SE> 45,237
<TOTAL-LIABILITY-AND-EQUITY> 103,262
<SALES> 139,856
<TOTAL-REVENUES> 139,856
<CGS> 85,767
<TOTAL-COSTS> 85,767
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<INTEREST-EXPENSE> 1,652
<INCOME-PRETAX> 6,721
<INCOME-TAX> 2,752
<INCOME-CONTINUING> 3,969
<DISCONTINUED> 0
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<NET-INCOME> 3,969
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
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