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, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
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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 shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirement for the past 90 days.
Yes X No
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Number of shares (common) outstanding at September 30, 1997: 3,395,818
<PAGE> 1
REPUBLIC AUTOMOTIVE PARTS, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended September 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30,
1997 (unaudited) and December 31, 1996 3
Consolidated Statements of Income and Retained
Earnings for the three months and nine months
ending September 30, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the
nine months ending September 30, 1997
and 1996 (unaudited) 5 - 6
Condensed Notes to Consolidated
Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE PAGE 10
EXHIBIT INDEX 11
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<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Republic Automotive Parts, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
(in thousands, except per share data) September 30, December 31,
1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................ $ 2,526 $ 2,898
Accounts and notes receivable, less allowance
for doubtful accounts of $811 and $658........... 17,158 14,897
Inventories...................................... 56,069 57,087
Deferred income taxes............................ 4,247 3,324
Prepaid expenses and other current assets........ 4,043 2,779
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Total current assets............................ 84,043 80,985
PROPERTY, PLANT AND EQUIPMENT, NET................. 8,126 9,286
LONG TERM NOTES RECEIVABLE......................... 415 499
DEFERRED PENSION ASSET............................. 3,002 3,137
GOODWILL AND OTHER INTANGIBLES, less accumulated
amortization of $2,952 and $2,530................ 10,747 11,810
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$106,333 $105,717
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and long-term debt due
within one year................................. $ 3,805 $ 1,997
Accounts payable................................. 11,738 11,210
Accrued compensation and employee benefits....... 2,414 3,480
Accrued taxes and other liabilities.............. 3,161 3,020
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Total current liabilities....................... 21,118 19,707
LONG-TERM DEBT..................................... 30,600 34,884
DEFERRED INCOME TAXES.............................. 2,049 1,704
OTHER LONG-TERM LIABILITIES........................ 1,162 1,329
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 - 3,468,983 and 3,460,983 shares......... 1,734 1,730
Additional paid-in capital...................... 25,024 24,913
Retained earnings................................ 25,451 22,255
Treasury stock, at cost: 73,165 shares........... (805) (805)
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51,404 48,093
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$106,333 $105,717
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</TABLE>
See condensed notes to consolidated financial statements.
<PAGE> 3
Republic Automotive Parts, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
(in thousands, except September 30, September 30,
per share data) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES.............................. $50,258 $47,238 $146,234 $139,856
COSTS AND EXPENSES
Cost of products sold.................. 30,270 28,708 87,629 85,767
Selling, general and administrative
expenses.............................. 17,648 15,487 51,711 46,170
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47,918 44,195 139,340 131,937
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OPERATING INCOME....................... 2,340 3,043 6,894 7,919
Interest income........................ 111 146 362 382
Interest expense....................... (612) (551) (1,812) (1,652)
Other income and expense............... 3 12 8 72
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INCOME BEFORE INCOME TAXES............. 1,842 2,650 5,452 6,721
Provision for income taxes............. 762 1,078 2,256 2,752
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NET INCOME............................. 1,080 1,572 3,196 3,969
RETAINED EARNINGS at beginning
of period............................. 24,371 19,557 22,255 17,160
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RETAINED EARNINGS at end of period..... $25,451 $21,129 $ 25,451 $21,129
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EARNINGS PER SHARE - FULLY-DILUTED..... $ 0.30 $ 0.44 $ 0.89 $ 1.11
==== ==== ==== ====
Weighted Average Common and Common
Equivalent Shares Outstanding......... 3,600 3,586 3,600 3,570
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</TABLE>
See condensed notes to consolidated financial statements.
<PAGE> 4
Republic Automotive Parts, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the nine
(in thousands) months ended September 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income.............................................. $ 3,196 $ 3,969
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation........................................... 1,993 1,969
Amortization of intangibles............................ 1,063 959
Provision for losses on accounts receivable............ 315 240
Provision for deferred pension expense (income)........ 135 (108)
Loss on disposal of property, plant and equipment...... (199) (13)
Deferred income taxes.................................. (578) (355)
Change in assets and liabilities, net of affects of
acquisitions and dispositions:
Accounts and notes receivable.......................... (1,576) (1,339)
Income taxes recoverable............................... 1,452
Inventories............................................ (999) (1,171)
Prepaid expenses and other current assets.............. (1,269) (1,682)
Accounts payable....................................... 528 (1,671)
Accrued compensation and employee benefits............. (1,066) (139)
Accrued taxes and other liabilities.................... 141 226
Other long-term liabilities............................ (167) (466)
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Net cash provided by operating activities.............. 1,517 1,871
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment 102 119
Acquisitions, net of cash acquired..................... (910)
Dispositions, net of cash received..................... 1,272
Capital expenditures................................... (986) (1,931)
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Net cash provided (used) in investing activities....... 388 (2,722)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from revolving credit agreement............. 6,750 5,900
Repayments of revolving credit agreement............... (10,250) (3,500)
Increase in short-term debt and notes payable.......... 3,000
Repayments of long-term debt and notes payable......... (1,976) (1,713)
Proceed from exercise of stock options................. 115
Decrease in long-term notes receivable................. 84 131
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Net cash (used) provided by financing activities....... (2,277) 818
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NET DECREASE IN CASH AND CASH EQUIVALENTS............... (372) (33)
Cash and cash equivalents at beginning of year......... 2,898 2,798
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Cash and cash equivalents at end of period............. $ 2,526 $ 2,765
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense...................................... $ 1,782 $ 1,720
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Income taxes.......................................... $ 1,148 $ 1,701
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<PAGE> 5
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. In conjunction with this
acquisition, cash was paid by the Company as follows:
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<CAPTION>
For the nine
(in thousands) months ended September 30,
1997 1996
<S> <C> <C>
Fair value of assets acquired, other than cash $ 1,682
Note payable issued (405)
Liabilities assumed (367)
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Cash paid $ 910
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</TABLE>
The Company sold certain assets at its Tacoma, Washington distribution center
on September 29, 1997 for cash and notes receivable. In conjunction with this
sale, cash was received by the Company as follows:
<TABLE>
<CAPTION>
For the nine
(in thousands) months ended September 30,
1997 1996
<S> <C> <C>
Fair value of assets sold $ 2,272
Notes receivable issued (1,000)
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Cash received $ 1,272
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</TABLE>
See condensed notes to consolidated financial statements.
<PAGE> 6
Republic Automotive Parts, Inc. and Subsidiaries
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared according to the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles.
However, management believes all adjustments necessary to a fair statement of
operations of the interim period have been made. These adjustments are of a
normal recurring nature.
The results of operations for the nine months ended September 30, 1997 and 1996
are not necessarily indicative of the results expected for the full year.
Note 2 - Subsequent Event
On November 3, 1997, the Company closed the sale of certain operating assets at
its three distribution centers and one jobber store in North and South
Carolina. Proceeds of the sale were approximately $8.1 million in cash plus
the buyer assumed certain liabilities. The sales price is subject to certain
post-closing adjustments. The Company expects to incur a nominal loss on this
transaction.
<PAGE> 7
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
This report contains certain forward-looking statements. Specifically, the
forward-looking statements relate to anticipated future growth through
acquisitions and openings of new distribution centers by the Company's
subsidiary, Fenders & More, Inc. The ability of the Company to achieve the
expectations expressed in these forward-looking statements will be subject to
several factors that could cause actual results to differ materially from
those expressed in the forward-looking statements, such as the cost of
acquired businesses and new distribution centers, difficulties in integrating
newly-acquired businesses and the availability of capital to finance both
acquisitions and openings of new distribution centers. Actual results
achieved may differ from expected results included in such statements.
Results of Operations
Net sales increased 4.6% for the first nine months of 1997 compared to the
same period in 1996. Net sales increased 6.4% for the third quarter of 1997
compared to the same period in 1996. Sales for units owned continuously
during 1997 and 1996 increased 0.2% due to generally soft industry-wide
demand by consumers for replacement automotive parts. Gross profit margin
(net sales less cost of goods sold) increased 8.4% during the first nine months
of 1997 compared to the same period in 1996 primarily a result of the shift
in the Company's mix of sales between wholesale and end user. Selling,
general and administrative expenses increased by 12.0% for the first nine
months in 1997 compared to the same period in 1996 due principally to new
operating costs associated with the distribution centers and jobbers stores
opened or acquired in 1997 and 1996. Operating income decreased 12.9% for
the first nine months in 1997 compared with the same period in 1996.
As a result of the trends noted above, income before income taxes decreased
by $1,269,000 for the first nine months of 1997 compared with the same period
last year. The Company reported earnings of $0.89 cents per share for the
first nine months of 1997 compared to $1.11 per share for the same period in
1996.
Financial Condition and Liquidity
The Company's ratio of current assets to current liabilities was 4.0 at the
end of the third quarter of 1997 compared to 4.1 at December 31, 1996. Working
capital at September 30, 1997 was $62,925,000 compared with $61,278,000 at
December 31, 1996. Cash decreased by $372,000 from $2,898,000 at December 31,
1996 to $2,526,000 at September 30, 1997.
Operating activities provided $1,517,000 of the Company's cash flows during
the first nine months of 1997 compared with $1,871,000 of cash flows for the
same period in 1996. Investing activities provided $388,000 of the Company's
cash flows during the first nine months of 1997 compared with using $2,722,000
for the same period in 1996. The sale of the operating assets at the Company's
distribution center in Tacoma, Washington on September 29, 1997 accounted for
the increase in funds provided by investing activities. Normal replacement of
equipment accounted for the cash flows used by investing activities in the
prior year.
The Company anticipates future growth through possible acquisitions and
openings of new distribution centers and jobber locations. Fenders & More,
Inc., the Company's distributor of automotive crash parts, has opened five new
distribution centers in 1997, and anticipates opening two new distribution
centers during the fourth quarter of 1997. Although the Company has not
entered into any other definitive agreements, cash provided by operations,
changes in working capital and existing credit facilities will be sufficient
to support cash outlays for anticipated acquisitions and openings, if any.
Financing activities used $2,277,000 of the Company's cash flows during the
first nine months of 1997 compared with providing $818,000 for the same period
in 1996. Payments on long-term debt accounted primarily for the use of cash
in 1997.
Current financial resources (cash provided by operations, working capital
and short-term debt) available to the Company are expected to be adequate to
meet future cash requirements for capital expenditures and anticipated debt
reductions that are payable over the next several years for various notes made
in connection with acquisitions. As of September 30, 1997, the Company had
available cash resources of $50,000,000 under a revolving credit agreement of
which $30,100,000 was utilized.
<PAGE> 8
PART II. OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Exhibit 27 Financial Data Schedule (for SEC use only).
(b) No reports on Form 8-K were filed by the Registrant during the
quarter ended September 30, 1997.
<PAGE> 9
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 7, 1997
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President, Chief Executive Date
Officer and Director
By /S/ DONALD B. HAUK November 7, 1997
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Executive Vice President, Chief Date
Financial Officer and Director
<PAGE> 10
EXHIBIT INDEX
Exhibit
Number Description
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27 Financial Data Schedule, filed herewith
<PAGE> 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED
SEPTEMBER 30, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,526
<SECURITIES> 0
<RECEIVABLES> 17,969
<ALLOWANCES> 811
<INVENTORY> 56,069
<CURRENT-ASSETS> 84,043
<PP&E> 21,344
<DEPRECIATION> 13,218
<TOTAL-ASSETS> 106,333
<CURRENT-LIABILITIES> 21,118
<BONDS> 0
0
0
<COMMON> 1,734
<OTHER-SE> 49,670
<TOTAL-LIABILITY-AND-EQUITY> 106,333
<SALES> 146,234
<TOTAL-REVENUES> 146,234
<CGS> 87,629
<TOTAL-COSTS> 87,629
<OTHER-EXPENSES> 51,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,812
<INCOME-PRETAX> 5,452
<INCOME-TAX> 2,256
<INCOME-CONTINUING> 3,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,196
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
