UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1 TO
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 16, 1999
LUCOR, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 0-25164 65-0195259
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
790 Pershing Road, Raleigh, North Carolina 27608
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 919-828-9511
This is an amendment to a Form 8-K of Lucor, Inc. dated December 16, 1999
filed with the Securities and Exchange Commission on January 3, 2000.
Item 2. Acquisition or Disposition of Assets
On December 16, 1999, Lucor, Inc. (the "Company") executed a Stock Purchase
Agreement with Quick 10 Corporation ("Quick 10"). The Company has agreed to
purchase for cash all of the outstanding stock of Quick 10 for a purchase price
of approximately $18,000,000.
<PAGE>
The Company operated 196 "Jiffy Lube" service centers in eight different
states comprising nine different geographic DMA's ("Designated Marketing Areas")
as of December 16, 1999. Quick 10 operates 23 quick lube service centers in the
Raleigh/Durham DMA and 4 quick lube service centers in the Greensboro and
Winston Salem, North Carolina area under the brand name "Quick 10".
The purchase price was funded primarily through funds borrowed through a
series of loan and security agreements with Enterprise Mortgage Acceptance
Company, LLC. The loans totaled $16.1 million and carry an interest rate of
9.79%. All but $1,248,000 is to be repaid in 180 months with the remaining
amount repaid in 108 months. The remaining funds came from cash resources
held by Quick 10.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired. Attached to this report are
the unaudited financial statements of Quick 10 Corporation for the nine months
ended September 30, 1999 and audited financial statements as of and for the
years ended December 31, 1997 and 1998.
(b) Pro Forma Financial Information. Attached to this report are the pro forma
combined balance sheet as of September 30, 1999 and the pro forma combined
statements of income (loss) for the nine months ended September 30, 1999 and
for the year ended December 31, 1998.
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 under-
signed hereunto duly authorized.
Dated: March 3, 2000 Lucor, Inc.
By: /s/ Kendall A. Carr
___________________________________
Kendall A. Carr
Chief Financial Officer
<PAGE>
QUICK 10 CORPORATION
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Quick 10 Corporation:
We have audited the accompanying consolidated balance sheets of Quick 10 Cor-
poration as of December 31, 1998 and 1997, and the related consolidated state-
ments of operations and retained earnings (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibil-
ity of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Quick 10 Corporation
as of December 31, 1998 and 1997, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
-------------------
KPMG LLP
January 21, 2000
<PAGE>
<TABLE>
QUICK 10 CORPORATION
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998 and 1997
(unaudited)
9/30/99 12/31/98 12/31/97
----------- ---------- ----------
ASSETS
Current Assets
<S> <C> <C> <C>
Cash and cash equivalents $ 3,409,042 $ 4,170,730 $ 2,744,884
Accounts and notes receivable 141,265 106,465 105,957
Inventories 431,037 330,610 338,515
Other 5,207 5,660 46,640
------------ ------------ ------------
3,986,551 4,613,465 3,235,996
------------ ------------ ------------
Property and Equipment (Note 2) 4,121,854 3,117,248 5,170,915
Less accumulated depreciation
and amortization 1,992,427 1,705,301 1,562,056
------------ ------------ ------------
2,129,427 1,411,947 3,608,859
------------ ------------ ------------
Other Assets
Financing lease receivable
(Notes 4 and 9) -- -- 838,749
Notes receivable (Note 9) 18,136 353,986 364,334
Deferred income taxes (Note 5) (24,029) 66,390 111,910
Other (Notes 8 and 10) 442,893 414,362 430,647
------------ ------------ ------------
437,000 834,738 1,745,640
------------ ------------ ------------
$ 6,552,978 $ 6,860,150 $ 8,590,495
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of note
payable (Note 3) $ 10,135 $ 9,550 $ 8,818
Accounts payable 940,385 525,052 452,278
Due to affiliates 30,866 32,290 32,941
Accrued salaries and wages 663,394 605,186 462,729
Other accrued liabilities 545,085 633,866 301,118
------------ ------------ ------------
2,189,865 1,805,944 1,257,884
------------ ------------ -----------
Note Payable (Note 3) 49,731 57,407 66,927
------------ ------------ ------------
Other Long-term Liabilities
(Notes 8, 9 and 11) 1,534,117 1,603,154 1,825,206
------------ ------------ -------------
Commitments and Contingent
Obligations (Notes 4 and 9)
Stockholders' Equity (Notes 6 and 7)
Preferred Stock - par value $100;
Authorized 1,000,000 shares;issued
and outstanding
13,000 shares of 7% Series B
Cumulative Preferred Stock,
6,500 shares redeemed in 1998
and in 1997 -- -- 650,000
27,500 shares of 7% Series C
Cumulative Preferred Stock,
23,500 shares redeemed in 1998 -- 400,000 2,750,000
10,000 shares of 7% Series D
Cumulative Preferred Stock -- 1,000,000 1,000,000
Common Stock - par value of $.01;
Authorized 1,000,000 shares;
200,000 shares, issued and
outstanding 2,000 2,000 2,000
Additional paid-in capital 1,048,200 1,048,200 1,048,200
Retained earnings (deficit) 1,729,065 943,445 (9,722)
------------ ------------ ------------
2,779,265 3,393,645 5,440,478
------------ ------------- ------------
$ 6,552,978 $ 6,860,150 $ 8,590,495
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
QUICK 10 CORPORATION
Consolidated Statements of Operations and Retained Earnings (Deficit)
For The Nine Months Ended September 30, 1999 and The Years Ended
December 31, 1998 and 1997
(unaudited)
9/30/99 12/31/98 12/31/97
------- -------- --------
<S> <C> <C> <C>
Net Sales $ 10,691,132 $ 12,221,493 $ 11,116,207
Franchise Revenue -- 2,173 11,640
------------- ------------- -------------
10,691,132 12,223,666 11,127,847
------------- ------------- -------------
Operating Expenses
Product costs 2,317,905 2,669,877 2,560,002
Operating expenses 5,669,169 6,318,699 6,008,197
Administrative expenses 952,002 1,265,862 988,637
Gain on disposal of properties -- (402,061) --
Depreciation and amortization 316,833 409,124 439,396
------------- ------------- -------------
9,255,909 10,261,501 9,996,232
------------- ------------- -------------
Operating Income 1,435,223 1,962,165 1,131,615
------------- ------------- -------------
Interest Expense 6,936 5,921 55,461
------------- ------------- -------------
Income Before Income Taxes 1,428,287 1,956,244 1,076,154
Income Taxes (Note 5) 585,500 787,000 307,000
------------- ------------- -------------
Net Income 842,787 1,169,244 769,154
Retained Earnings
(Deficit)-Beginning 943,445 (9,722) (460,192)
Preferred Stock Dividends Paid (57,167) (216,077) (318,684)
------------- ------------- -------------
Retained Earnings
(Deficit)-Ending $ 1,729,065 $ 943,445 $ (9,722)
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
QUICK 10 CORPORATION
Consolidated Statements of Cash Flows For The Nine Months Ended
September 30, 1999 and The Years Ended December 31, 1998 and 1997
(unaudited)
9/30/99 12/31/98 12/31/97
------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Earnings $ 842,787 $ 1,169,244 $ 769,154
Noncash and Other Items Included in Earnings
Depreciation and amortization 316,833 409,124 439,396
Deferred income taxes 90,419 45,520 121,917
Gain on disposal of property and equipment -- (402,061) --
Increase (Decrease) In Cash Due To Changes In
Receivables (34,800) (508) (64,067)
Inventories (100,427) 7,905 (64,856)
Other current assets 453 40,980 8,463
Accounts payable 415,333 72,774 187,046
Payables to affiliates (1,424) (651) (6,561)
Accrued salaries and wages 58,208 142,457 136,774
Other liabilities (88,781) 332,748 46,299
----------- ----------- ------------
1,498,601 1,817,532 1,573,565
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of property and equipment -- 2,203,485 625,146
(Increase) decrease in other assets 277,612 823,929 (64,394)
Purchase of property and equipment (1,004,606) (369,803) (445,045)
----------- ----------- ------------
(726,994) 2,657,611 115,707
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock -- -- 850,000
Redemption of preferred stock (1,400,000) (3,000,000) (650,000)
Payment of long-term debt (7,091) (8,788) (1,021,973)
Increase in other long-term liabilities (69,037) 175,568 1,214,071
Preferred stock dividends paid (57,167) (216,077) (318,684)
----------- ----------- ------------
(1,533,295) (3,049,297) 73,414
----------- ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (761,688) 1,425,846 1,762,686
CASH AND CASH EQUIVALENTS, BEGINNING 4,170,730 2,744,884 982,198
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, ENDING $ 3,409,042 $ 4,170,730 $ 2,744,884
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
QUICK 10 CORPORATION
Notes To Consolidated Financial Statements
December 31, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
At December 31, 1998, Quick 10 Corporation was a 60% owned subsidiary of
Investors Management Corporation ("IMC") and operated twenty-two oil change
centers in North Carolina. These financial statements include Quick 10
Franchising Systems, Inc., a wholly-owned subsidiary. All intercompany
balances and transactions have been eliminated.
Basis of Presentation - The consolidated statements of the Company are
presented on the accrual basis in conformity with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses during the reporting period, and contingent assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
Cash Equivalents - Cash investments with a remaining maturity of three months
or less at the date of acquisition are considered cash equivalents.
Inventories - Inventories are valued at the lower of first-in, first-out cost or
market. Inventory consists of oil, filters, and other automotive supplies.
Property and Equipment - Property and equipment are carried at cost and include
those improvements which materially increase the useful lives of the assets.
Depreciation and amortization are provided by the straight-line method over the
estimated useful lives of the respective assets as follows:
Building 15 years
Equipment 3-8 years
Leasehold improvements 15 years
Income Taxes - The Company and its wholly-owned subsidiary, Quick 10 Franchising
Systems, Inc., file a consolidated federal income tax return. Prior to July 1,
1997 the Company and its wholly-owned subsidiary were included in the consoli-
dated federal income tax returns of its parent company. Tax expense is
determined based on a tax-sharing agreement existing between the Company and
IMC. Deferred income taxes are determined based on temporary differences
between the consolidated financial statement and tax bases of assets and lia-
bilities using enacted tax rates expected to be in effect when such amounts
are realized or settled.
Long-lived Assets - The Company reviews long-lived assets and certain identifi-
able intangibles to be held and used by the Company for impairment whenever
events or changes in circumstances indicate that the carrying amount may not
be recoverable from future cash flows. If the carrying value is not
recoverable, related assets are written down to fair value as determined by
the present value of estimated future cash flows.
<PAGE>
2. PROPERTY AND EQUIPMENT
The cost of property and equipment at December 31 is summarized as follows:
1998 1997
-------- --------
Land $ - $ 1,297,267
Building 193,017 1,087,925
Equipment 2,817,755 2,664,402
Leasehold improvements 91,476 115,258
Construction in progress 15,000 6,063
------------- -------------
$ 3,117,248 $ 5,170,915
============= =============
3. NOTE PAYABLE
Note payable at December 31 consist of the following:
1998 1997
-------- --------
Note payable; interest at
8.0%; due in monthly
installments of $1,213
through 2004; partially
secured with equipment
costing $51,000 $ 66,957 $ 75,745
Less current portion 9,550 8,818
------------- -------------
$ 57,407 $ 66,927
============= =============
Scheduled maturities of note payable are as follows:
1999 $ 9,550
2000 10,343
2001 11,201
2002 12,131
2003 and after 23,732
-------------
$ 66,957
=============
Interest paid during 1998 and 1997 was $5,921 and $55,461, respectively. The
Company has available lines of credit under which it can borrow up to
$2,000,000. There were no amounts outstanding related to these lines of
credit as of December 31, 1998 and 1997.
<PAGE>
4. LEASING ARRANGEMENTS
Financing Lease Receivable
- --------------------------
During 1997 and part of 1998, the Company leased certain properties which are
accounted for as direct financing lease. Following is a summary of the net
investment in this lease:
1997
--------
Total minimum lease payments receivable $ 1,409,450
Less unearned income 549,442
------------
Net investment in lease 860,008
Less amounts classified as current 21,259
------------
Noncurrent portion of direct financing
lease receivable $ 838,749
============
Interest income from direct financing leases during 1998 and 1997 was approx-
imately $31,000 and $74,000, respectively. Refer to note 9 for additional
information.
Operating Leases Payable
- ------------------------
Minimum lease payments due for operating leases for years ending December 31 are
as follows:
1999 $ 1,176,505
2000 1,187,878
2001 1,192,562
2002 1,197,033
2003 1,002,702
Later years 3,972,917
------------
Total minimum lease payments $ 9,729,597
============
Total minimum lease payments do not include contingent rentals paid. Such
rentals are based on a percentage of sales in excess of stated amounts. Contin-
gent rentals payable for the years ended December 31, 1998 and 1997 were
$122,600 and $72,800, respectively. Total lease payments charged to operations
for the years ended December 31, 1998 and 1997 totaled $1,006,312 and $928,033,
respectively.
<PAGE>
5. INCOME TAXES
The provision for income taxes in 1998 and 1997 consists of the following:
1998 1997
-------- --------
Current
Federal $ 605,059 $ 145,982
State 136,421 39,101
------------- -------------
741,480 185,083
------------- -------------
Deferred
Federal 39,409 79,531
State 6,111 42,386
------------- -------------
45,520 121,917
------------- -------------
$ 787,000 $ 307,000
============= =============
The reasons for the differences between total income tax expense and the amount
computed by applying the statutory federal income tax rate to earnings before
income taxes are as follows:
1998 % 1997 %
-------- --- -------- ---
Income taxes at federal statutory rates $ 684,686 35 $ 376,654 35
State income taxes, net of federal
income tax benefit 92,646 5 52,967 5
Benefit of tax loss to parent company - - (133,522) (12)
Increase in valuation allowance 4,480 - - -
Other 5,188 - 10,901 1
------------ --- ------------ ---
$ 787,000 40 $ 307,000 29
============ ============
Income taxes paid for 1998 and 1997 were $528,835 and $104,204, respectively.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 31, 1998 and 1997 are presented below:
1998 1997
-------- --------
Deferred tax assets:
Intangible assets $ 5,394 $ 11,525
State loss carryforwards 4,480 3,840
Deferred compensation 144,866 96,670
Deferred franchise revenue - 6,034
Estimated property disposal
costs 30,185 157,548
------------- -------------
184,925 275,617
Valuation allowance for state
losses of a subsidiary (4,480) -
------------- -------------
180,445 275,617
Deferred tax liability:
Fixed assets, principally
due to differences in
depreciation (114,055) (163,707)
------------- -------------
Total deferred tax assets $ 66,390 $ 111,910
============= =============
The valuation allowance is based upon uncertainty of utilizing certain state
loss carryforwards of a subsidiary. The net change in valuation allowance for
the year ended December 31, 1998 was an increase of $4,480. The state carry-
forwards of $95,000, expire in various years through 2013.
<PAGE>
6. COMMON STOCK
Stockholders have the right to require the Company to repurchase all or any por-
tion of their stock. The total number of shares redeemed shall not exceed an
amount having a total purchase price of ten percent of the Company's net
earnings during the year of redemption. These redemption rights are also sub-
ject to restrictions which prevent impairment of capital. The per share pur-
chase price to be paid in the event of this stockholder option is the book value
per share or six times the greater of earnings per share for the prior year
or average earnings per share for the preceding three years.
7. PREFERRED STOCK
During December 1993, the Company's board of directors authorized 1,000,000
shares of preferred stock to be issued in several series. The first four series
of cumulative preferred stock with warrants (5,500 Series A, 13,000 Series B,
27,500 Series C and 10,000 Series D shares) were sold to the Company's parent.
Series A, Series B, Series C and Series D cumulative preferred stock have a 7%
cumulative dividend payable quarterly. The warrants allow the holder to
purchase a maximum of 53,759 shares of the Company's common stock at $.06 per
share. The warrants expire December 2006. The Company has the right to repur-
chase portions of the warrants between January 1, 1994 and December 31, 2002.
The Series A preferred stock and related warrants were repurchased during 1996.
During 1997 the Company repurchased 6,500 shares of Series B preferred stock.
During 1998 the Company repurchased 6,500 shares of Series B preferred stock
and 23,500 shares of Series C preferred stock. In January, 1999, the Company
repurchased 4,000 shares of Series C preferred stock and 3,000 shares of Series
D preferred stock.
8. DEFERRED COMPENSATION PLANS
The Company has adopted 401(k) and nonqualified deferred compensation plans for
its management and office personnel. Currently, the Company contributes an
amount equal to current year contributions for each of the plans' participants
up to 4% of their annual compensation as defined. The Company's contribu-
tions, which may change on an annual basis, are subject to a vesting schedule
outlined in the plans.
Employees who meet the 401(k) plan's eligibility requirements may contribute the
lesser of 15% of annual compensation or the maximum amount allowed as determined
by the Internal Revenue Code. The Company's contributions to the 401(k) plan
totaled $24,679 in 1998 and $14,918 in 1997. Any forfeitures of the Company's
contributions are used to reduce future funding requirements.
Eligible employees not covered by the 401(k) plan may defer up to 15% of their
annual compensation and earn a specified rate of return on the deferred amounts.
Deferred salaries and related expenses totaling $91,000 in 1998 and $63,000 in
1997 have been accrued but not funded, since participants are unsecured
creditors of the Company. The Company's expense for the nonqualified defer-
red compensation plans is accrued when earned by the plans' participants.
The Company has purchased whole-life insurance contracts covering participants
in the nonqualified deferred compensation plans. The insurance transactions
are summarized below:
1998 1997
-------- --------
Premiums paid $ 56,000 $ 42,000
============== =============
Cash surrender value included in
other assets $ 202,000 $ 177,000
============== =============
Liabilities relating to the above compensation plans are included in other long-
term obligations.
<PAGE>
9. DISPOSAL OF PROPERTIES
Effective September 30, 1996, the Company sold the land, buildings and selected
equipment at two oil change centers in the Atlanta, Georgia area. The sales
price was $1,300,000 of which $900,000 was received in cash, and the Company has
recorded a second mortgage on the properties for $400,000. The Company rec-
orded a loss of $149,453 on this sale. At the same time the Company leased 3
other oil change centers in Atlanta, including land, building and selected
equipment to the same operator. The lease was for 15 years and contained a
purchase option. The purchase option, if exercised in 1996, would have
resulted in a loss of approximately $325,000. This loss was recorded in 1996
and the lease was recorded as a direct financing lease for financial
reporting purposes.
During 1998, the lessee exercised its purchase option. The exercise of the pur-
chase option resulted in a gain of $146,026.
Two Virginia oil change centers were sold in 1998 for $1,200,000, resulting in
a gain of $256,035 which is included in gain on disposal of property and
equipment.
10. ACQUISITION
During February 1997, the Company acquired the assets of a quick lubrication
center in Fuquay-Varina, North Carolina. The acquisition resulted in the
purchase of approximately $55,000 of equipment, signing a non-competitive
agreement for $75,000 and entering into a long-term lease agreement for the
facilities' real estate.
During July 1997, the Company acquired the assets of a franchisee in
Winston-Salem, North Carolina. The acquisition resulted in the purchase of
$80,000 of equipment and entering into a long-term lease agreement for the
facilities' real estate. The Company's wholly-owned subsidiary, Quick 10
Franchising, Inc., refunded the $20,000 franchise fee which had been
recorded as revenue in 1995. The refund was recorded as a reduction in 1997
franchise revenue.
11. PURCHASE AGREEMENT
During 1997, the Company entered into a long-term purchase agreement for oil
and filters. The supplier provided the company with $1,250,000 of business
development funds which are reflected in other long-term obligations. The
business development funds are amortized based on the Company's purchases of
oil and filters. The Company can terminate the agreement by paying the
supplier the unamortized portion of the business development funds.
During 1998, the Company received $200,000 of additional business development
funds under the same purchase agreement, increasing the remaining purchase
obligation by an equal amount. As of December 31, 1998, the Company's
remaining purchase obligation totaled approximately $1,216,000. The
agreement requires that an annual minimum purchase requirement be met, with
such requirement ending in 2008. The Company met its minimum purchase
requirements in 1998 and 1997.
<PAGE>
12. RELATED PARTY TRANSACTIONS
The following summarizes transactions with related parties:
1998 1997
-------- --------
Amounts paid to affilates for
insurance costs, included in
operating expenses $ 204,444 $ 202,567
============= =============
Amounts paid to affiliates for
administrative expense $ 172,703 $ 156,340
============= =============
The Company receives insurance, office occupancy and other administrative type
services from Golden Corral Corporation, an affiliate. These costs are noted
above.
The Company leases certain oil change center facilities from IMC. During 1998
and 1997, the Company paid $89,974 and $188,927, respectively, in rents.
13. SUBSEQUENT EVENTS
On December 16, 1999, Lucor, Inc. executed a Stock Purchase Agreement to pur-
chase all of the Company's outstanding stock.
<PAGE>
LUCOR, INC. AND QUICK 10 CORPORATION
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
LUCOR, INC. AND QUICK 10 CORPORATION
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information combines
the historical financial information of Lucor, Inc. and subsidiaries (the
"Company") and Quick 10 Corporation ("Quick 10").
On December 16, 1999, the Company entered into an agreement with Quick 10 to
purchase all of the issued and outstanding capital stock of Quick 10, refer-
red to herein as the "Quick 10 Acquisition." Quick 10 owns and operates 27
quick oil change and lubrication centers. The purchase price was approx-
imately $18,000,000. The Quick 10 Acquisition is being accounted for by the
Company as a purchase.
The unaudited Pro Forma Combined Consolidated Condensed Balance Sheet combines
the September 30, 1999 historical consolidated balance sheet of the Company and
the historical balance sheet of Quick 10. The balance sheets are combined on
a pro forma basis as if the Quick 10 Acquisition had been effective as of
September 30, 1999, after giving effect to various adjustments for purchase
accounting purposes as well as the financing of the transaction.
The unaudited Pro Forma Combined Consolidated Condensed Statements of Income
(Loss) combines the September 30, 1999 historical results of operations of the
Company and Quick 10 for the nine months ended September 30, 1999 and for the
fiscal year ended December 31, 1998, as if the final closing of the acquisition
had been effective on January 1, 1998, after giving the effect to various
accounting adjustments.
The unaudited pro forma combined financial information has been prepared using
the assumptions set forth in the Notes to the Pro Forma Financial Information
and should be read in conjunction with the Company's consolidated financial
statements and notes thereto, which have been previously filed with the Sec-
urities and Exchange Commission in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 and the Quarterly Report on Form
10-Q for the period ended September 30, 1999 and with the financial state-
ments of Quick 10 and notes thereto filed herewith.
The unaudited pro forma combined financial information is intended for infor-
mational purposes and is not necessarily indicative of the future financial
position or future results of operations of the Company after the aforemen-
tioned transactions in fact had occurred on such date or at the beginning of
the period indicated or to project the Company's financial position or results
of operations at any future date or for any future period.
<PAGE>
LUCOR, INC. AND QUICK 10 CORPORATION
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
<TABLE>
LUCOR, INC. AND QUICK 10 CORPORATION
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED CONDENSED BALANCE SHEET
As of September 30, 1999
Historial Pro Forma
--------------------------- ------------------------
Quick 10
Lucor Corporation Adjustments Combined
----- ----------- ----------- --------
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 5,631,868 3,409,042 (2,803,809) (a) 6,237,101
Accounts receivable 2,600,803 132,732 2,733,535
Notes receivable-current -- 8,533 8,533
Income tax receivable 60,556 -- 60,556
Inventories 4,315,568 431,037 4,746,605
Prepaid expenses and
other 372,353 5,207 69,962 (g) 447,522
------------- ------------- ------------- -------------
Total current assets 12,981,148 3,986,551 (2,733,847) 14,233,852
Property and equipment,
net of accumulated
depreciation 33,335,215 2,129,427 158,968 (b) 35,623,610
Notes receivable -- 18,136 18,136
Cash surrender value -- 260,063 260,063
Intangibles, net of
accumulated depreciation 16,156,502 182,830 15,763,298 (b) 32,102,630
------------- ------------- ------------- -------------
$ 62,472,865 6,577,007 13,188,419 82,238,291
============= ============= ============= =============
Liabilities and
Stockholders' Equity
Current liabilities:
Current portion of
long-term debt 2,498,643 10,135 373,999 (a) 2,882,777
Current portion of
capital lease 2,467 -- -- 2,467
Accounts payable 4,470,438 971,251 -- 5,441,689
Accrued expenses 5,775,710 1,208,479 -- 6,984,189
Preferred dividend payable 70,000 -- -- 70,000
------------- ------------- ------------- -------------
Total current
liabilities 12,817,258 2,189,865 373,999 15,381,122
Long-term debt, net of
current portion 43,253,364 49,731 15,530,098 (a) 58,833,193
Purchase agreement -- 1,172,357 -- 1,172,357
Deferred tax liability -- 24,029 63,587 (e) 87,616
Other liabilities -- 361,760 -- 361,760
Deferred gain 52,647 -- -- 52,647
------------- ------------- ------------- -------------
Total long-term
liabilities 43,306,011 1,607,877 15,593,685 60,507,573
------------- ------------- ------------- -------------
Stockholders' equity 6,349,596 2,779,265 (2,779,265) (f) 6,349,596
------------- ------------- ------------- -------------
$ 62,472,865 6,577,007 13,188,419 82,238,291
============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
LUCOR, INC. AND QUICK 10 CORPORATION
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
NINE MONTHS SEPTEMBER 30, 1999
Historial Pro Forma
----------------------------- -------------------------------
Quick 10
Lucor Corporation Adjustments Combined
------------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 59,942,632 10,691,132 70,633,764
Cost of sales 13,457,200 2,317,905 15,775,105
------------- ------------- -------------
46,485,432 8,373,227 54,858,659
Costs and expenses:
Direct 23,272,281 -- 23,272,281
Operating 11,494,460 5,669,169 17,163,629
Depreciation and
amortization 2,000,472 316,833 312,594(c) 2,629,899
Selling, general and
administrative 8,009,158 952,002 8,961,160
------------- ------------- ------------- -------------
44,776,371 6,938,004 312,594 52,026,969
------------- ------------- ------------- -------------
Income (loss) from
operations 1,709,061 1,435,223 (312,594) 2,831,690
------------- ------------- ------------- -------------
Other income 217,038 -- 217,038
Interest expense (2,644,206) (6,936) (1,237,472)(d) (3,888,614)
------------- ------------- ------------- -------------
Income (loss) before
provision for
income taxes (718,107) 1,428,287 (1,550,066) (839,886)
Income tax expense (benefit) 25,000 585,500 (585,500)(e) 25,000
------------- ------------- ------------- -------------
Net income (loss) (743,107) 842,787 (964,566) (864,886)
=============
Preferred dividend (105,000) (57,167) (162,167)
------------- ------------- -------------
Income (loss) available to
common shareholders $ (848,107) 785,620 (1,027,053)
============= ============= =============
Weighted average number of
share outstanding-basic
and diluted 2,826,899 2,826,899
============= =============
Basic and diluted loss per
common share outstanding $ (0.30) (0.36)
============= ==============
</TABLE>
<PAGE>
<TABLE>
LUCOR, INC. AND QUICK 10 CORPORATION
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
YEAR ENDING DECEMBER 31, 1998
Historial Pro Forma
--------------------------------- ----------------------------
Quick 10
Lucor Corporation Adjustments Combined
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net Sales $ 55,307,206 12,223,666 67,530,872
Cost of sales 12,715,861 2,669,877 15,385,738
------------- ------------- -------------
Gross profit 42,591,345 9,553,789 52,145,134
Costs and expenses:
Direct 20,449,478 20,449,478
Operating 10,981,273 6,318,699 17,299,972
Depreciation and
amortization 2,217,366 409,124 416,792 (c) 3,043,282
Selling, general and
administrative 7,388,269 1,265,862 8,654,131
Impairment loss-
Sears assets 1,383,475 1,383,475
------------- ------------- ------------- -------------
42,419,861 7,993,685 416,792 50,830,338
------------- ------------- ------------- -------------
Income (loss) from
operations 171,484 1,560,104 (416,792) 1,314,796
------------- ------------- ------------- -------------
Other income 205,956 402,061 608,017
Interest expense (2,664,938) (5,921) (1,619,899)(d) (4,290,758)
------------- ------------- ------------- -------------
Income (loss) before
provision for
income taxes (2,287,498) 1,956,244 (2,036,691) (2,367,945)
Income tax expense (benefit) (173,017) 787,000 (787,000)(e) (173,017)
------------- ------------- ------------- -------------
Net income (loss) (2,114,481) 1,169,244 (1,249,691) (2,194,928)
=============
Preferred dividend (140,000) (216,077) (356,077)
------------- ------------- -------------
Income (loss) available to
common shareholders $ (2,254,481) 953,167 (2,551,005)
============= ============= =============
Weighted average number of
shares outstanding -
basic and diluted 2,824,868 2,824,868
============= =============
Basic and diluted loss
per common share
outstanding $ (0.80) (0.90)
</TABLE>
<PAGE>
LUCOR, INC.
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) Reflects the borrowings obtained and cash paid in connection with the Quick
10 Acquisition.
(b) Amount represents the adjustments to state furniture, fixtures and equip-
ment acquired at fair market value pursuant to APB Opinion No. 16, "Business
Combinations". The purchase cost in excess of the fair market value of the
assets acquired is recognized as goodwill. The Company will amortize the good-
will over 40 years.
(c) Reflects the adjusted amortization expense for intangible assets and
depreciation expense for property and equipment. These assets have been
recorded at their estimated fair market value and amortized using the Company's
amortization methods over their estimated useful lives.
(d) Relects an increase in interest expense related to the debt incurred to
finance the Quick 10 Acquisition.
(e) Reflects the additional tax benefit and deferred tax liability calculated
using the Company's combined federal and state income tax rate.
(f) Reflects an adjustment for the elimination of equity in Quick 10.
(g) Reflects the prepayment of certain operating expenses in connection with
the Quick 10 Acquisition.
<PAGE>
