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, 2000
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, 2000 Class A Common Stock, par value $.02 per share
Shares Outstanding: 2,333,133
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 Condensed Balance Sheets
June 30, 2000 (unaudited) and December 31, 1999 1
Consolidated Statements of Income
Three Months Ended June 30, 2000 and June 30,
1999 and Six Months Ended June 30, 2000 and
June 30, 1999 2
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and June 30, 1999 3
Notes to Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5
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 7
Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
LUCOR, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
Unaudited Audited
ASSETS 30-June-00 31-December-99
--------------- ------------------
Current assets:
Cash $ 4,402,071 $ 7,097,115
Accounts receivable 1,391,793 1,468,669
Inventory 4,724,066 4,885,220
Prepaid charges 616,975 683,677
Income tax receivable 61,391 --
----------- -----------
Total current assets 11,196,296 14,134,681
----------- -----------
Property, plant & equipment, net
of accumulated depreciation 38,847,975 33,419,225
----------- -----------
Other assets:
Goodwill, net of accumulated
amortization 21,569,048 21,956,315
Franchise and operating rights,
net of accumulated amortization 8,238,682 8,385,966
Leasehold rights, licenses,
application, and area development,
net of accumulated amortization 4,225,465 4,285,748
Other assets 126,093 160,093
----------- -----------
Total other assets 34,159,288 34,788,122
----------- -----------
Total assets $84,203,559 $82,342,028
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,238,876 $ 3,136,090
Current portion of deferred
revenue 200,000 200,000
Accounts payable 5,050,691 5,428,011
Income tax payable 5,201 43,002
Accrued expenses 5,665,647 5,927,936
Preferred dividend payable 35,000 35,000
----------- -----------
Total current liabilities 14,195,415 14,770,039
----------- -----------
Long-term debt, net of
current portion 62,746,244 60,178,661
Deferred gain 88,015 90,348
Deferred revenue and other long-
term liabilities 1,899,579 2,067,902
Deferred taxes 150,000 150,000
----------- -----------
Total long-term liabilities 64,883,838 62,486,911
----------- -----------
Stockholders' equity 5,124,306 5,085,078
----------- ----------
Total liabilities, equity $84,203,559 $82,342,028
=========== ===========
(1)
<PAGE>
LUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
(Unaudited)
<S> <C> <C> <C> <C>
THREE MOS THREE MOS SIX MOS SIX MOS
ENDED ENDED ENDED ENDED
30-JUN-00 30-JUN-99 30-JUN-00 30-JUN-99
----------- ----------- ----------- -----------
Net sales $27,331,143 $21,585,426 $53,040,653 $36,380,126
Cost of sales 6,087,247 4,739,995 11,942,267 8,002,575
----------- ----------- ----------- -----------
Gross profit 21,243,896 16,845,431 41,098,386 28,377,551
----------- ----------- ----------- -----------
Costs and expenses:
Direct 9,943,470 8,161,223 19,765,390 13,554,005
Operating 5,129,050 4,070,605 10,015,876 7,087,479
Depreciation 948,457 612,724 1,880,983 1,211,454
Selling, general, and
administrative 3,725,725 2,803,466 6,778,834 4,856,709
----------- ----------- ----------- -----------
19,746,702 15,648,018 38,441,083 26,709,647
----------- ----------- ----------- -----------
Income from operations 1,497,194 1,197,413 2,657,303 1,667,904
----------- ----------- ----------- -----------
Other income 200,686 108,755 362,276 165,347
Interest expense (1,449,074) (897,084) (2,858,904) (1,632,108)
----------- ----------- ----------- -----------
Income before provision
for income taxes 248,806 409,084 160,675 201,143
Income tax expense 21,324 -- 54,824 --
----------- ----------- ----------- -----------
Net income 227,482 409,084 105,851 201,143
Preferred dividend (35,000) (35,000) (70,000) (70,000)
----------- ----------- ----------- -----------
Net income available
to common shareholders $ 192,482 $374,084 $ 35,851 $131,143
=========== =========== =========== ===========
Weighted average number
of shares outstanding-
Basic and Diluted 2,835,288 2,828,621 2,834,986 2,823,455
=========== =========== =========== ===========
Basic and diluted income
available to common
shareholders per
common share
outstanding $ 0.07 $ 0.13 $0.01 $0.05
=========== =========== =========== ===========
</TABLE>
(2)
<PAGE>
LUCOR, INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
30-Jun-00 30-Jun-99
------------- -------------
Cash flow from operations:
Net income $ 105,851 $ 201,143
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization
of property and equipment 1,202,255 798,465
Amortization of intangible
assets and pre-operating costs 668,376 412,989
Stock issued as directors' fees 3,375 --
Changes in assets and liabilities-
excluding effects of acquititions:
Decrease(increase)in accounts
receivable 76,088 (2,761,846)
Decrease(increase) in inventories 161,154 (341,388)
Decrease (increase) in prepaid
expenses 66,702 (552,122)
Increase in income tax receivable (61,391) (71,270)
Increase (decrease) in accounts
payable and accrued expenses (772,672) 5,144,034
----------- -----------
Net cash provided by operating
activities 1,449,738 2,830,005
----------- -----------
Cash flow from investing activities:
Purchase of property and equipment (3,401,821) (2,666,665)
Net increase in construction
in progress (127,433) (1,870,132)
Acquisition of additional service centers -- (5,186,718)
Net assets of acquisition 71,387 --
Decrease in deferred gain (2,333) (1,373)
Net increase in franchise fees,
goodwill, etc. 40,530 (517,306)
----------- -----------
Net cash used in
investing activities (3,419,670) (10,242,194)
----------- -----------
Cash flows from financing activities:
Repayments of debt and obligations under
capital leases (935,475) (808,445)
Proceeds from borrowings 448,686 11,846,264
Dividend paid (70,000) (70,000)
Decrease in other long-term liabilities (168,323) --
Repurchase of common stock -- 69,750
------------ ------------
Cash provided by (used in) financing
activities (725,112) 11,037,569
------------ ------------
Increase (decrease) in cash (2,695,044) 3,625,380
Cash at beginning of period 7,097,115 3,269,859
------------ ------------
Cash at end of period $ 4,402,071 $ 6,895,239
============ ============
(3)
<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
Raleigh-Durham, North Carolina, Cincinnati, Ohio (including northern
Kentucky), Pittsburgh, Pennsylvania, Dayton, Ohio, Toledo, Ohio, Lansing,
Michigan, Nashville, Tennessee, Richmond/Tidewater, Virginia and Atlanta,
Georgia areas. These service centers provide rapid lubrication, oil changes
and related services for automobiles, light duty trucks and other vehicles.
As of June 30, 2000 the Company had 213 centers in operation; as of December
31, 1999, 219 centers were in operation; and as of June 30, 1999 190 centers
were in operation.
The financial information as of June 30, 2000 and June 30, 1999 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, 1999 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, 1999.
Due to disappointing revenue and profits, the Company made the decision
in 1998 to close twelve of its Sears service centers. As a result of this
decision, during the fourth quarter of 1998, the Company took a charge of
$1,383,475. The Company closed six of these service centers during the first
quarter of 1999, five additional service centers during the second quarter of
1999, and one service center during February 2000.
The Company made the decision in 1999 to close nine additional service
centers, four of which are located in Sears service centers. As a result of
this decision, during the fourth quarter of 1999, the Company took a charge of
$276,007. The Company closed four of these service centers during the fourth
quarter of 1999 and has closed two service centers during the first quarter of
2000. The remaining three service centers are scheduled to close by December
31, 2000.
During June 2000, the Company acquired Navigator Real Estate, LLC from
Navigator Management, Inc. Navigator Real Estate, LLC sole assets consists of
several properties leased by the Company. It has loans outstanding for these
properties which were acquired in late 1999 and early 2000. The purchase price
of $50,000 was paid for the membership interest of Navigator Real Estate and
represents the capital investment of the original members. Navigator
Management, Inc. is owned by two major shareholders of Lucor, Inc. For more
information on the ownership of Navigator Management, Inc. see Certain
Relationships and Related Transactions section of the Company's Annual Report
on Form 10-K for the year ended December 31, 1999.
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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SECOND QUARTER
AND SIX MONTHS ENDED JUNE 30, 1999
Consolidated net sales for the three months ended June 30, 2000 rose
26.6% when compared to the second quarter of 1999. Consolidated net sales for
the six months ended June 30, 2000 rose 45.8% when compared to the first six
months of 1999. This sales growth reflects the increase in the number of
stores operated by the Company, due to the 1999 acquisition of seventy-three
stores in the Nashville, Tennessee, Dayton, Ohio, Cincinnati, Ohio, Lansing,
Michigan and Atlanta Georgia areas and the acquisition of twenty-four stores
in the Raleigh-Durham area. During 1999, the Company also built an additional
five service centers. Same store sales, comparing the three-month and six-
month periods of 2000 to the same periods in 1999, increased 1.2% and 3.7%,
respectively.
Cost of sales as a percent of sales increased 0.3% from 22.0% to 22.3%
for the three-month period ended June 30, 1999 compared to June 30, 2000.
Cost of sales as a percent of sales increased 0.5% from 22.0% to 22.5% for the
six-month period ended June 30, 1999 compared to June 30, 2000. The increase
in the cost of sales for the three-month and six-month period was primarily
the result of three price increases in the cost of oil over the past five
months.
Direct cost decreased for the second quarter as a percent of sales from
37.8% to 36.4% for 1999 and 2000, respectively. This decrease is due to higher
volume at the service centers thus reducing the direct labor required as a
percent of sales by spreading the fixed nature of some of these costs over the
higher volume. Direct cost for the first six months of 1999 and 2000 was the
same at 37.3% of sales.
Operating costs decreased as a percent of sales from 18.9% for the second
quarter of 1999 to 18.8% for the second quarter of 2000. Actual cost
increased by $1,058,445 for the three-months ended June 30, 2000 compared to
the same period in 1999. Operating costs also decreased as a percentage of
sales for the six-month period ended June 30, 2000. Operating costs decreased
from 19.5% for 1999 to 18.9% for 2000. Actual cost increased by $2,928,397 for
the six months ended June 30, 2000 compared to the same period in 1999. This
decrease in the three-month and six-month periods is the result of lower
rental and management fees as a percentage of sales for acquired operations
and increased revenue per store for other operations.
Depreciation and amortization charges increased $335,733 for the second
quarter of 2000 in comparison to the second quarter of 1999 and increased
$669,529 for the six-month period of 2000 in comparison with the six-month
period of 1999. Depreciation and amortization expense increased due to the
acquisition of service centers as noted above.
Selling, general and administrative (SG&A) expense increased 32.9% or
$922,259 comparing the three-month period ending June 30, 1999 to the same
period ended June 30, 2000. As a percentage of net sales, SG&A expense
increased from 13.0% to 13.6%. Marketing costs increased by approximately
$570,000 when comparing the second quarter of 1999 with the second quarter of
2000. During the second quarter of 1999, the Company received a grand opening
rebate for marketing costs associated with new store acquisitions thus
decreasing marketing expense for that period. Administrative staffing
increased from the previous year due to increased regional and corporate
requirements associated with supporting the additional service centers
acquired and built during 1999.
<PAGE>
Selling, general and administrative expense increased 39.6% or $1,922,125
comparing the six-month period ended June 30, 2000 to the six-month period
ended June 30, 1999. As a percentage of net sales, SG&A expense decreased from
13.3% to 12.8%. Marketing cost increased by approximately $680,000 when
comparing year-to-date totals for 2000 to 1999. Administrative staffing
increased from the previous year due to increased regional and corporate
requirements associated with supporting the additional service centers
acquired and built during 1999.
Other income increased $91,931 comparing the second quarter of 2000 with
the second quarter of 1999. Other income increased $196,929 comparing the
six-month period ended June 30,2000 to the six-month period ended June 30,
1999. Other income increased due to interest earned on larger amounts of cash
invested and higher commissions on vending sales due to the larger number of
stores.
Interest expense increased by $551,990 for the three-month period ended
June 30, 2000 compared to the three-month period ended June 30, 1999.
Interest expense increased by $1,226,796 for the six-month period ended June
30, 2000 compared with the six-month period ended June 30, 1999. The increase
reflects additional borrowing required by the Company associated with the
additional service centers acquired or built during 1999. A charge for
dividend payments due on the Company's preferred stock was made for each
period.
An income tax charge of $21,324 and $54,824 was made for the three-month
and six-month period ending June 30, 2000, respectively, reflecting state
income taxes estimated to be payable. The Company has a federal net operating
loss carry-forward and, therefore, has not made a federal income tax charge for
the year.
Liquidity and capital resources:
Since the end of 1999, working capital (current assets less current
liabilities) decreased by $2,363,761. A majority of the capital decrease has
resulted from the use of funds in capital improvements made to stores acquired
in 1999 and to build new service centers. Cash flow from operations amounted
to $1,449,738. The positive cash flow resulted from net income for the year
adding non-cash items of depreciation and amortization, plus a decrease in
accounts receivable and inventories and offset by a decrease in accounts
payable and accrued expenses.
During June 2000, the Company acquired Navigator Real Estate, LLC from
Navigator Management, Inc., increasing the total assets and liabilities
of the Company by approximately $3,324,000.
<PAGE>
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:
The annual meeting of Lucor, Inc. was held on May 19, 2000. At that meeting
all of the Company's directors were re-elected with the indicated number of
shares voted:
In Favor
Stephen P. Conway 2,352,410
Jerry B. Conway 2,352,410
D. Fredrico Fazio 2,352,410
Anthony J. Beisler 2,352,410
Richard L. Rubin 2,352,410
R. Lewis Stanford 2,352,410
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
<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 2000.
LUCOR, INC.
s/s Stephen P. Conway
----------------------------------
Stephen P. Conway
Chairman, Chief Executive Officer,
and Director
s/s Kendall A. Carr
----------------------------------
Kendall A. Carr
Chief Financial Officer
