SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 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 0-6215
Republic Automotive Parts, Inc.
(Exact name of registrant as specified in its charter)
Delaware 38-1455545
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
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)
- ---------------------------------------------------------------------
(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
----- -----
Number of shares (common) outstanding at March 31, 1998: 3,412,231
<PAGE> 1
Republic Automotive Parts, Inc.
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<CAPTION>
PART I. FINANCIAL INFORMATION
Page No.
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Item 1. Financial Statements:
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Income and
Retained Earnings for the three months
ended March 31, 1998 and 1997. 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1998
and 1997. 5
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 7
SIGNATURE PAGE 8
EXHIBIT INDEX 9
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<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Republic Automotive Parts, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
(Dollars in thousands) 1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,836 $ 2,283
Accounts and notes receivable, less allowance
for doubtful accounts of $683 and $786 14,016 14,023
Inventories 47,687 49,028
Deferred income taxes 3,907 3,249
Income taxes recoverable 399 1,087
Prepaid expenses and other current assets 2,373 2,832
------ ------
Total current assets 73,218 72,502
------ ------
PROPERTY, PLANT AND EQUIPMENT, NET 7,075 7,402
LONG-TERM NOTES RECEIVABLE 216 240
DEFERRED PENSION ASSET 2,937 2,982
GOODWILL AND OTHER INTANGIBLES, less accumulated
amortization of $3,331 and $3,134 10,217 10,450
-------- --------
$ 93,663 $ 93,576
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and long-term debt
due within one year $ 672 $ 784
Accounts payable 7,239 7,761
Accrued compensation and employee benefits 2,148 3,034
Accrued taxes and other liabilities 3,657 3,329
------ ------
Total current liabilities 13,716 14,908
------ ------
LONG-TERM DEBT 24,500 24,500
DEFERRED INCOME TAXES 1,848 1,487
OTHER LONG-TERM LIABILITIES 1,234 1,125
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 $.50 par value:
Authorized - 5,000,000 shares
Issued - 3,491,483 shares in 1998 and
3,474,983 shares in 1997 1,746 1,737
Additional paid-in capital 25,342 25,111
Retained earnings 26,182 25,513
Treasury stock, at cost: 79,252 shares in 1998 and
73,165 shares in 1997 (905) (805)
------ ------
52,365 51,556
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$ 93,663 $ 93,576
======== ========
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See condensed notes to consolidated financial statements.
<PAGE> 3
Republic Automotive Parts, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(unaudited)
Three months ended
March 31,
(Dollars in thousands, except per-share data) 1998 1997
<S> <C> <C>
NET SALES $41,140 $45,785
COSTS AND EXPENSES
Cost of products sold 23,332 27,126
Selling, general and administrative expenses 16,410 16,784
------ ------
OPERATING INCOME 1,398 1,875
Interest income 108 116
Interest expense (453) (585)
Other income 52 7
------ ------
INCOME BEFORE INCOME TAXES 1,105 1,413
Provision for income taxes 436 593
------ ------
NET INCOME 669 820
RETAINED EARNINGS at beginning of year 25,513 22,255
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RETAINED EARNINGS at end of quarter $26,182 $23,075
====== ======
EARNINGS PER COMMON SHARE - BASIC $0.20 $0.24
==== ====
EARNINGS PER COMMON SHARE - DILUTED $0.19 $0.23
==== ====
Weighted Average Common Shares Outstanding 3,412 3,388
Common Equivalent Shares Outstanding 185 214
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Weighted Average Common Shares Outstanding and
Common Equivalent Shares Outstanding 3,597 3,602
===== =====
</TABLE>
See condensed to consolidated financial statements.
<PAGE> 4
Republic Automotive Parts, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
(Dollars in thousands) 1998 1997
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 669 $ 820
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 579 680
Amortization of intangibles 233 319
Provision for losses on accounts receivable 9 67
Provision for deferred pension expense 45 45
Gain on disposal of property, plant and equipment (47) (4)
Deferred income taxes (298) (170)
Change in assets and liabilities:
Accounts and notes receivable (2) (579)
Income taxes recoverable 688
Inventories 1,341 17
Prepaid expenses and other current assets 459 (160)
Accounts payable (522) 1,187
Accrued compensation and employee benefits (886) (1,524)
Accrued taxes and other liabilities 328 1,030
Other long-term liabilities 110 47
----- -----
Net cash provided by operating activities 2,706 1,775
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment 82 11
Capital expenditures (287) (274)
----- -----
Net cash used in investing activities (205) (263)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing from revolving credit agreement 750 3,950
Repayment of revolving credit agreement (750) (7,450)
Increase in short-term debt and notes payable 3,000
Proceeds from issuance of common stock 140
Repayments on long-term debt and notes payable (112) (21)
Decrease in long-term notes receivable 24 96
----- -----
Net cash provided (used) by financing activities 52 (425)
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,553 1,087
Cash and cash equivalents at beginning of year 2,283 2,898
----- -----
Cash and cash equivalents at end of period $4,836 $3,985
===== =====
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 451 $ 572
===== =====
Income taxes $ 17 $ 213
===== =====
</TABLE>
See condensed notes to consolidated financial statements.
<PAGE> 5
Republic Automotive Parts, Inc.
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 three months ended March 31, 1998 and 1997
are not necessarily indicative of the results expected for the full year.
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 decreased $4,645,000 or 10.1% from $45,785,000 in 1997 to $41,140,000
in 1998. Sales attributable to operations included in both 1998 and 1997 were
$39,528,000 and $39,776,000, respectively. Sales attributable to new locations
opened after the first quarter of 1997 were $1,611,000. Sales in the first
quarter of 1997 attributable to locations which were sold or closed in 1997
were $6,008,000. The gross profit margin increased from 40.8% in 1997 to 43.3%
in 1998 primarily from the shift in the Company's mix of sales from wholesale
to end user due the sale of four traditional automotive hard part distribution
centers in the latter part of 1997. Selling, general and administrative
expenses decreased by 2.2% for the first three months in 1998 compared with the
same period in 1997 due principally to the locations which were sold in the
latter part of 1997. Operating income decreased 25.4% for the first three
months in 1998 compared with the same period in 1997.
From the above actions, income before income taxes decreased by $308,000 for
the first three months of 1998 compared with the same period last year. The
Company reported earnings of $0.19 cents per diluted share for the first three
months of 1998 compared with earnings of $0.23 per diluted share for the same
period in 1997.
<PAGE> 6
Financial Condition and Liquidity
The Company's ratio of current assets to current liabilities was 5.3 at the
end of the first quarter of 1998 compared with 4.9 at December 31, 1997.
Working capital at March 31, 1998 was $59,502,000 compared with $57,594,000
at December 31, 1997. Cash increased by $2,553,000 from $2,283,000 at
December 31, 1997 to $4,836,000 at March 31, 1998.
Operating activities provided $2,706,000 of the Company's cash flows during
the first three months of 1998 compared with $1,775,000 of cash flows for the
same period in 1997. Investing activities used $205,000 of the Company's
cash flows during the first three months of 1998 compared with $263,000 for
the same period in 1997. Normal replacement of equipment accounted for the
cash flows used by investing activities.
The Company anticipates future growth through possible acquisitions and
openings of new locations. Fenders & More, Inc., the Company's distributor
of automotive crash parts, anticipates opening one new distribution center
during the second quarter of 1998. 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.
The Company sold some its distribution centers of traditional automotive
replacement parts in 1997. The Company anticipates additional distribution
centers may be sold which could provide additional cash for debt replacement
and/or anticipated acquisitions and openings, if any.
Financing activities provided $52,000 of the Company's cash flows during the
first three months of 1998 compared with using $425,000 for the same period
in 1998. Ther Company has available cash resources under its revolving credit
agreement of $50,000,000 of which $24,000,000 was being used at March 31, 1998.
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
reduction that 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) The following exhibits are filed as part of this report:
Exhibit 27 Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K - A Current Report on Form 8-K was filed with the
Securities and Exchange Commission on February 23, 1998 reporting that
Republic Automotive Parts, Inc. (the "Company") and Keystone Automotive
Industries, Inc. ("Keystone") entered into an Agreement and Plan of
Merger on February 17, 1998 pursuant to which Keystone will indirectly
acquire the Company through a merger with KAI Merger, Inc., a wholly-
owned subsidiary of Keystone, with and into the Company. In the
proposed merger, Keystone will issue 0.80 of a share of its common
stock in exchange for each outstanding share of the Company's stock.
<PAGE> 7
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 May 8, 1998
-----------------------------------------
President, Chief Executive Date
Officer and Director
By /S/ DONALD B. HAUK May 8, 1998
-----------------------------------------
Executive Vice President, Chief Date
Financial Officer and Director
<PAGE> 8
EXHIBIT INDEX
Exhibit
Number Description
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27 Financial Data Schedule, filed herewith
<PAGE> 9
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,836
<SECURITIES> 0
<RECEIVABLES> 14,699
<ALLOWANCES> 683
<INVENTORY> 47,687
<CURRENT-ASSETS> 73,218
<PP&E> 19,755
<DEPRECIATION> 12,680
<TOTAL-ASSETS> 93,663
<CURRENT-LIABILITIES> 13,716
<BONDS> 0
0
0
<COMMON> 1,746
<OTHER-SE> 50,619
<TOTAL-LIABILITY-AND-EQUITY> 93,663
<SALES> 41,140
<TOTAL-REVENUES> 41,140
<CGS> 23,332
<TOTAL-COSTS> 23,332
<OTHER-EXPENSES> 16,410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 453
<INCOME-PRETAX> 1,105
<INCOME-TAX> 436
<INCOME-CONTINUING> 669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 669
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.19
</TABLE>
