UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Under Section 13 or 15 (d) of the Securities and Exchange
Act of 1934
For the quarterly period ended June 30, 1998
Commission File Number: 0-25164
LUCOR, INC.
Florida 65-0195259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
790 Pershing Road, Raleigh, NC 27608
(Address of principal executive offices) (Zip Code)
(919) 828-9511
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last
reported)
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 and Exchange Act
of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past ninety days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Date: July 31, 1998 Class A Common Stock, par value $.02 per share
Shares Outstanding: 2,306,233
Class B Common Stock, par value $.02 per share
Shares Outstanding: 502,155
<PAGE>
LUCOR, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 1
Consolidated Statements of Income
Three Months Ended June 30, 1998 and June 30,
1977 and Six Months Ended June 30, 1998 and
June 30, 1997 2
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and
June 30, 1997 3
Notes to Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operation 4
PART II - Other Information
Item 1. Legal Proceedings 6
Item 2. Changes in Securities 6
Item 3. Defaults Upon Senior Securities 6
Item 4. Submission of Matters to a Vote of
Security Holders 6
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K 6
<PAGE>
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS 30-June-98 31-December-97
_______________ ______________
Current assets:
<S> <C> <C>
Cash $ 4,139,524 $ 1,548,418
Accounts Receivable 518,290 2,267,809
Income Tax Receivable 489,876 466,523
Inventory 2,493,005 2,138,180
Prepaid charges 520,148 193,444
___________ ___________
Total Current assets 8,160,843 6,614,374
___________ ___________
Property, plant & equipment, net
of accumulated depreciation 24,666,853 21,839,319
___________ ___________
Other assets:
Goodwill, licenses, application,
area development and organization
costs, net of accumulated
amortization 15,483,667 4,679,531
Security deposits and pre-opening
expenses, net of accumulated
amortization 114,528 87,056
__________ ___________
Total other assets 15,598,195 4,766,587
__________ ___________
Total assets $48,425,891 $33,220,280
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 924,530 $ 305,578
Current portion of capital lease 27,014 25,478
Accounts payable 3,594,754 2,949,018
Accrued expenses 1,854,185 1,442,682
Preferred dividend payable 35,000 35,000
__________ ___________
Total current liabilities 6,435,483 4,757,756
__________ ___________
Long term debt, net of
current portion 33,032,640 18,642,480
Capital lease, net of
current portion 9,729 23,634
Deferred Taxes - 189,000
__________ ___________
Total Long Term Liabilities 33,042,369 18,855,114
__________ ___________
Redeemable preferred stock 2,000,000 2,000,000
__________ ___________
Stockholders' equity 6,948,039 7,607,410
__________ ___________
Total liabilities, equity $48,425,891 $33,220,280
=========== ===========
</TABLE>
(1)
<PAGE>
<TABLE>
LUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MOS THREE MOS SIX MOS SIX MOS
ENDED ENDED ENDED ENDED
30-JUN-98 30-JUN-97 30-JUN-98 30-JUN-97
__________ _________ ___________ ___________
<S> <C> <C> <C> <C>
Net sales $14,966,493 $10,777,687 $25,694,976 $20,796,065
Cost of sales 3,384,144 2,531,315 5,905,950 4,841,248
__________ __________ ___________ ___________
Gross profit 11,582,349 8,246,372 19,789,026 15,954,817
__________ __________ ___________ ___________
Costs and expenses:
Direct 5,390,603 3,961,229 9,645,819 7,799,926
Operating 2,817,039 2,232,817 5,169,987 4,332,306
Depreciation 581,499 507,625 980,062 1,126,012
Selling, general, and
administrative 1,809,513 1,456,627 3,412,467 2,824,839
__________ __________ ___________ ___________
10,598,654 8,158,298 19,208,335 16,083,083
__________ __________ ___________ ___________
Income(loss) from operations 983,695 88,074 580,691 (128,266)
__________ __________ ___________ ___________
Other income 102,572 14,641 133,417 24,320
Interest expense (741,269) (367,607) (1,190,427) (724,144)
__________ __________ ___________ ___________
Income(loss) before provision
for income taxes 344,998 (264,892) (476,319) (828,090)
Income tax expense (benefit) 120,630 (95,331) (161,948) (298,112)
__________ __________ ___________ ___________
Net income (loss) 224,368 (169,561) (314,371) (529,978)
Preferred dividend ( 35,000) ( 35,000) (70,000) (70,000)
__________ __________ ___________ ___________
Net income (loss) available
to common shareholders $ 189,368 ($ 204,561) ($384,371) ($599,978)
========== ========== =========== ===========
Weighted average number of
shares outstanding 2,821,388 2,846,888 2,834,388 2,839,388
========== ========== =========== ===========
Net income (loss) per
common share outstanding $ 0.07 ($ 0.07) ($0.14) ($0.21)
========== ========== =========== ===========
(2)
</TABLE>
<PAGE>
<TABLE>
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
31-Jun-98 31-Jun-97
___________ ___________
<S> <C> <C>
Cash flow from operations:
Net loss $ (314,371) $ (529,978)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and amortization
of property and equipment 690,422 674,406
Amortization of intangible
assets and pre-operating costs 289,640 451,606
Changes in assets and liabilities:
Decrease(increase)in accounts
receivable 1,810,713 (82,255)
Decrease(increase) in inventories 70,177 (351,569)
Increase in prepaid expenses (283,201) (31,744)
Decrease(increase) in income
tax receivable (23,353) 215,756
Increase in assets held for resale 0 (875,177)
Increase in accounts payable and
accrued expenses 1,040,789 1,132,459
Decrease in deferred tax liability (189,000) 0
___________ ___________
Net cash provided by operating
activities 3,091,816 603,504
___________ ___________
Cash flow from investing activities:
Purchase of property and equipment (969,186) (623,745)
Decrease in construction
in progress 46,080 370,917
Acquisition of additional service centers (13,553,077) 0
Franchise fees, goodwill, etc. (676,270) (186,861)
___________ __________
Net cash used in
investing activities (15,152,453) (439,689)
____________ ____________
Cash flows from financing activities:
Repayments of debt and obligations under
capital leases (190,384) (756,003)
Proceeds from borrowings 15,187,127 400,000
Pennzoil preferred share dividend paid (70,000) (70,000)
Proceeds (receipts) from issuance/
repurchase of common stock (275,000) 258,751
____________ ___________
Cash provided by (used in)
financing activities 14,651,743 (167,252)
____________ ___________
Increase (decrease) in cash 2,591,106 (3,437)
Cash at beginning of period 1,548,418 2,052,417
____________ ____________
Cash at end of period $ 4,139,524 $ 2,048,980
============ ============
(3)
</TABLE>
<PAGE>
LUCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company
Lucor, Inc. and its subsidiaries have license agreements with Jiffy Lube
International, Inc. ("JLI") to operate Jiffy Lube service centers in the
Designated Market Areas (DMA's) of Raleigh-Durham, North Carolina, Cincinnati,
Ohio (including northern Kentucky), Pittsburgh, Pennsylvania, Dayton, Ohio,
Toledo, Ohio, Lansing, Michigan, Nashville, Tennessee, and Richmond/Tidewater,
Virginia. These service centers provide rapid lubrication, oil changes and
related services for automobiles, light duty trucks and other vehicles. As of
June 30, 1998 the Company had 125 centers in operation; as of December 31,
1997, 100 centers were in operation; and as of June 30, 1997 99 centers were
in operation.
As reported in the Company's 8-K dated April 1, 1998, the Company
acquired 23 Jiffy Lube service centers from Tidewater Lube Ventures, Inc, and
Lube Ventures East, Inc. The reader is referred to the Company's filing,
including amendments for details of the purchase. These operations reported a
profit for the second quarter of 1998.
The financial information as of June 30, 1998 and June 30, 1997 included
herein is unaudited. However, such information reflects all adjustments which
are, in the opinion of Management, necessary for a fair presentation of the
results for the interim periods. Financial statement information as of
December 31, 1997 has been extracted from audited financial statements. All
of the above financial information should be read in conjunction with the
Company's annual audited financial statements (and notes thereto) included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Certain statements in this Form 10-Q "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward looking statements. Such factors include, among others, the
following: competition, success of operating initiative, advertising and
promotional efforts, adverse publicity, acceptance of new product offerings,
availability, locations and terms of sites for store development, changes in
business strategy or development plan, availability and terms of capital,
labor and employee benefit costs, changes in government regulation, regional
weather conditions, and other factors specifically referred to in this 10-Q.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SECOND QUARTER
AND SIX MONTHS ENDED JUNE 30, 1997
Consolidated net sales for the three months ended June 30, 1998 rose 39%
when compared to the second quarter of 1997. The acquisition of the additional
stores noted above generated most of the increase. Without the acquisition,
sales increased 7% for the second quarter of 1998 in comparison to the second
quarter of 1997. Consolidated net sales for the six months ended June 30, 1998
rose 24% when compared to the first six months of 1997. Without the
acquisition on April 1, 1998, sales rose by 7% for the first six months of
1998 in comparison to the first six months of 1997. Discounts, due mainly to
higher couponing, increased from 8.2% of gross sales for the first six months
of 1997 to 9.7% for the first six months of 1998.
<PAGE>
Cost of sales decreased as a percent of sales from 23.5% to 22.6% for
the second quarter of 1997 versus the second quarter of 1998. Cost of sales
decreased for the first six months as well, decreasing from 23.3% to 23.0% for
1997 and 1998, respectively. The decrease in the cost of sales reflects the
Company's continued efforts to reduce costs of materials purchased and
increased sales of items that have little or no material costs such as tire
rotations. Efforts in decreasing costs were offset by the higher discounts
which, by themselves, would have increased the cost of sales percentage.
Direct costs declined for the second quarter as a percent of sales from
36.8% to 36.0% for 1997 and 1998, respectively. Direct costs for the first six
months remain the same as a percent of sales when compared to the prior year.
Higher volume at the service centers in the second quarter helped to reduce
the direct labor required as a percent of sales by spreading the fixed nature
of some of these costs over the higher volume. Additionally, direct costs for
the newly acquired service centers are lower due to the higher per service
center car counts at these service centers.
Operating costs decreased as a percent of net sales from 20.7% to 18.8%
for the second quarter of 1997 to the second quarter of 1998 and from 20.8% to
20.1% for the six months ended June 30, 1997 and 1998, respectively. This
decrease reflects the higher volumes at the service centers which lowers the
cost as a percent of net sales due to the fixed nature of some of these costs.
In addition, the Company received refund and dividend checks for Workers'
compensation insurance which lowered operating costs by 0.6% for the year and
1.0% for the quarter. The Company also re-negotiated its contract for waste
oil removal and currently receives a small payment per gallon of waste oil
recycled.
Depreciation and amortization charges increased $73,874 for the second
quarter of 1998 in comparison to the second quarter of 1997. These costs are
lower for the six month period ended June 30, 1998 versus the six month period
ended June 30, 1997 by $145,950. The lower costs on a year to date basis
reflects lower amortization of pre-opening costs which are lower due to fewer
new service centers built during the previous six months (pre-opening costs
are amortized over a six month period). The depreciation and amortization
expense for the second quarter are higher due to the acquisition of the service
centers noted above.
Selling, general and administrative (SG&A) expenses increased 14.5% or
$352,886 comparing the second quarter of 1998 with the second quarter of 1997.
These same expenses increased by $587,628 for the six months ended June 30,
1998 versus the six months ended June 30, 1997. Most of the increase
($464,571) occurred in marketing with other expenses increasing for district,
regional and administrative staffing to handle the additional service centers.
As a percent of net sales, SG&A expenses have decreased from 13.6% to 13.3%
for the first six months of 1998 versus the first six months of 1997.
Other income increased by $87,931 comparing the second quarter of 1998
with the second quarter of 1997, reflecting additional interest income and
commission income for the quarter. An increase of $109,097 in other income
is reflected for the six months ended June 30, 1998 over the six month period
ended June 30, 1997.
Interest expense increased by $373,662 for the three month period ended
June 30, 1998 compared to the three months ended June 30, 1997. Interest
expense increased by $466,283 for the six months ended June 30, 1998 compared
with the six months ended June 30, 1997. The increase reflects additional
borrowing required by the Company for its new service centers and for the
acquisition of the 23 service centers discussed earlier. Provision for income
taxes was negative reflecting negative taxable income. A charge for dividend
payments due on the Company's redeemable preferred stock was made for all
periods.
From February 1996 through January 1997, the Company opened up 16
facilities within Sears Automotive Service Centers, which are located at
shopping malls in five of its seven regions. Losses at the Sears operations
were a major contributor to the overall losses of the Company in 1997. The
Management of the Company remains focused on making these operations
profitable. Cash flow from these operations improved for the first six months
of 1998. This improvement over 1997 is reflective of the efforts by the
management of the Company to make these centers profitable plus an agreement
made with Jiffy Lube International and Sears in November 1997 which provided
incentives for use in marketing the Company's Sears operations for six months.
These incentives have been extended for an additional six months. The Company
is currently in negotiations to obtain additional incentives. There can be no
assurance, however, that these negotiations will result in additional
incentives.
Liquidity and capital resources:
Since the end of 1997, working capital (current assets less current
liabilities) decreased by $131,257. Cash flow from operations amounted to
$3,091,816.
The Company obtained an additional $15,187,127 in debt to finance the
acquisition of the 23 service centers noted above plus the addition of two
service centers that were built during the first six months of 1998. The
Company also repurchased 39,000 shares from Quick Lube, Inc. as part of an
agreement entered into in May 1996 as part of the purchase of 6 Jiffy Lube
service centers in the Lansing, Michigan area.
<PAGE>
In February of 1998, the Company borrowed additional funds through an
agreement with Enterprise Mortgage Acceptance Company, LLC (EMAC) totaling
$1,787,000. This loan carries an interest rate of approximately 8.55% and is
amortized over a 15 year period. The first three month's payments are
interest only. In March of 1998, the Company borrowed an additional
$13,274,000 through an agreement with EMAC. This loan carries an interest
rate of approximately 8.56% and is amortized over a 15 year period. These
funds were applied towards the purchase price of the 23 Jiffy Lube service
centers referenced above.
Management believes that cash generated from its operations and cash on
hand will be sufficient to satisfy the Company's operating requirements for
the next twelve months. Any acquisitions or new service center sites will
require the Company to sell additional equity, debt securities, or obtain
additional credit facilities. Although the Company is reviewing these
possibilities there can be no assurance that such financing will be available.
The sales, if any, of additional equity could result in dilution to the
Company's stockholders.
PART II - Other Information
Item 1. Legal Proceedings: The Company is involved in lawsuits and claims
arising in the normal course of business. Although the outcome of these
lawsuits and claims are uncertain, Management believes that these lawsuits and
claims are adequately covered by insurance or they will not (singly or in the
aggregate) have a material adverse affect on the Company's business, financial
condition, or operations. Those lawsuits and claims against the Company which
have not been resolved and which can be estimated and are probable to occur,
have been accounted for in the Company's financial statements.
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of
Security Holders:
<PAGE>
The annual meeting of Lucor, Inc. was held on May 11, 1998. At that meeting
all of the Company's directors were re-elected with the indicated number of
shares voted:
In Favor
Stephen P. Conway 2,722,806
Jerry B. Conway 2,722,806
D. Fredrico Fazio 2,722,806
Anthony J. Beisler 2,722,806
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: The Company filed a report on
Form 8-K on April 15, 1998 reporting the acquisition of 23 Jiffy Lube service
centers from Tidewater Lube Ventures, Inc. and Lube Ventures East, Inc. An
amendment to the Form 8-K was filed on June 15, 1998.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on the 14th day of August 1998.
LUCOR, INC.
/s/ Stephen P. Conway
________________________
Stephen P. Conway
Chairman, Chief Executive Officer,
and Director
/s/ Kendall A. Carr
________________________
Kendall A. Carr
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,139,524
<SECURITIES> 0
<RECEIVABLES> 561,605
<ALLOWANCES> 43,315
<INVENTORY> 2,493,005
<CURRENT-ASSETS> 8,160,843
<PP&E> 29,829,706
<DEPRECIATION> 5,162,853
<TOTAL-ASSETS> 48,425,891
<CURRENT-LIABILITIES> 6,435,483
<BONDS> 0
0
2,000,000
<COMMON> 56,177
<OTHER-SE> 6,891,862
<TOTAL-LIABILITY-AND-EQUITY> 48,425,891
<SALES> 25,694,976
<TOTAL-REVENUES> 25,694,976
<CGS> 5,905,950
<TOTAL-COSTS> 19,208,335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,190,427
<INCOME-PRETAX> (476,319)
<INCOME-TAX> (161,948)
<INCOME-CONTINUING> (314,371)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (314,371)
<EPS-PRIMARY> (0.136)
<EPS-DILUTED> (0.136)
</TABLE>
