-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KRJ8ZLdQAuA+6TkLKOSldiQJ1Z5xZGJAzj+wEr3nYE5bNtZ417NDiawCGPZbLZYI aiEfb3RB6E6TcNXn0/hy+g== 0000950152-98-006945.txt : 19980819 0000950152-98-006945.hdr.sgml : 19980819 ACCESSION NUMBER: 0000950152-98-006945 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980818 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONRO MUFFLER BRAKE INC CENTRAL INDEX KEY: 0000876427 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 160838627 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19357 FILM NUMBER: 98693859 BUSINESS ADDRESS: STREET 1: 200 HOLLEDER PKWY CITY: ROCHESTER STATE: NY ZIP: 14615-3808 BUSINESS PHONE: 7166476100 10-Q 1 MONRO MUFFLER BRAKE 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from_______________to_____________ Commission File No. 0-19357 MONRO MUFFLER BRAKE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 16-0838627 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification #) 200 Holleder Parkway, Rochester, New York 14615 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zipcode) Registrant's telephone number, including area code 716-647-6400 ------------------------------ 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 requirements for the past 90 days. Yes X No ----- ----- As of August 3, 1998, 8,311,512 shares of the Registrant's Common Stock, par value $ .01 per share, were outstanding after giving retroactive effect to the five percent stock dividend paid June 18, 1998, to stockholders of record as of June 8, 1998. 2 MONRO MUFFLER BRAKE, INC. INDEX
Part I. Financial Information PAGE NO. Consolidated Balance Sheet at June 30, 1998 and March 31, 1998 3 Consolidated Statement of Income for the quarter ended June 30, 1998 and 1997 4 Consolidated Statement of Changes in Common Stockholders' Equity for the quarter ended June 30, 1998 5 Consolidated Statement of Cash Flows for the quarter ended June 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Exhibit Index 14
- 2 - 3 MONRO MUFFLER BRAKE, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, MARCH 31, 1998 1998 ---- ---- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and equivalents, including interest-bearing accounts of $75 at June 30, 1998 and $5,315 at March 31, 1998 $ 75 $ 5,315 Trade receivables 897 841 Inventories, at LIFO cost 29,078 27,492 Deferred income tax asset 1,725 1,725 Other current assets 2,986 4,115 ------------ ------------ Total current assets 34,761 39,488 ------------ ------------ Property, plant and equipment 170,041 165,839 Less - Accumulated depreciation and amortization (51,508) (49,429) ------------ ------------ Net property, plant and equipment 118,533 116,410 Other noncurrent assets 3,949 3,190 ------------ ------------ Total assets $ 157,243 $ 159,088 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,582 $ 3,582 Trade payables 8,646 11,633 Federal and state income taxes payable 2,175 2 Accrued expenses and other current liabilities Accrued interest 178 233 Accrued payroll, payroll taxes and other payroll benefits 3,850 3,764 Accrued insurance 2,153 2,441 Other current liabilities 3,942 4,316 ------------ ------------ Total current liabilities 24,526 25,971 Long-term debt 49,440 54,102 Other long-term liabilities 547 576 Deferred income tax liability 1,881 1,881 ------------ ------------ Total liabilities 76,394 82,530 ------------ ------------ Commitments Shareholders' equity: Class C Convertible Preferred Stock, $1.50 par value, $.216 and $.227 conversion value at June 30, 1998 and March 31, 1998, respectively; 150,000 shares authorized; 91,727 shares issued and outstanding 138 138 Common Stock, $.01 par value, 15,000,000 shares authorized; 8,311,512 shares and 7,876,901 shares issued and outstanding at June 30, 1998 and March 31, 1998, respectively 83 79 Additional paid-in capital 36,344 29,284 Retained earnings 44,284 47,057 ------------ ------------ Total shareholders' equity 80,849 76,558 ------------ ------------ Total liabilities and shareholders' equity $ 157,243 $ 159,088 ============ ============
These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 29, 1998. - 3 - 4 MONRO MUFFLER BRAKE, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
QUARTER ENDED JUNE 30, 1998 1997 ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales $ 44,113 $ 40,773 Cost of sales, including distribution and occupancy costs (a) 24,320 22,631 ---------------- -------------- Gross profit 19,793 18,142 Operating, selling, general and administrative expenses 12,389 11,492 ---------------- -------------- Operating income 7,404 6,650 Interest expense, net of interest income for the quarter of $14 in 1998 and $22 in 1997 (a) 905 868 Other expense, net 109 85 ---------------- -------------- Income before provision for income taxes 6,390 5,697 Provision for income taxes 2,533 2,280 ---------------- -------------- Net income $ 3,857 $ 3,417 ================ ============== Basic earnings per share $ .46 $ .41 ================ ============== Diluted earnings per share $ .43 $ .38 ================ ============== Weighted average number of shares of common stock and common stock equivalents used in computing earnings per share: Basic 8,306 8,242 ================ ============== Diluted 9,039 9,036 ================ ==============
(a) Amounts paid under operating and capital leases with affiliated parties totalled $496 and $483 for the quarters ended June 30, 1998 and 1997, respectively. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 29, 1998. - 4 - 5 MONRO MUFFLER BRAKE, INC. CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (UNAUDITED)
ADDITIONAL COMMON STOCK PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS (Amounts in thousands) Balance at March 31, 1998 7,877 $ 79 $ 29,284 $ 47,057 Net income 3,857 Exercise of stock options 39 436 5% stock dividend 396 4 6,624 (6,629) Rounding (1) ----------- ----------- ---------- -------------- Balance at June 30, 1998 8,312 $ 83 $ 36,344 $ 44,284 =========== =========== ========== ==============
These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 29, 1998. - 5 - 6 MONRO MUFFLER BRAKE, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
QUARTER ENDED JUNE 30, 1998 1997 ---- ---- (DOLLARS IN THOUSANDS) INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net income $ 3,857 $ 3,417 ---------------- --------------- Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 2,355 2,234 (Gain) loss on disposal of property, plant and equipment (19) 14 (Increase) decrease in trade receivables (56) 59 Increase in inventories (1,586) (1,523) Decrease in other current assets 1,129 436 (Increase) decrease in other noncurrent assets (829) 40 (Decrease) increase in trade payables (2,987) 2,861 Decrease in accrued expenses (632) (1,276) Increase in federal and state income taxes payable 2,173 2,068 Increase in other long term liabilities 1 7 ---------------- --------------- Total adjustments (451) 4,920 ---------------- --------------- Net cash provided by operating activities 3,406 8,337 ---------------- --------------- Cash flows from investing activities: Capital expenditures (4,429) (5,938) Proceeds from the disposal of property, plant and equipment 10 3 ---------------- --------------- Net cash used for investing activities (4,419) (5,935) ---------------- --------------- Cash flows from financing activities: Proceeds from the sale of common stock 435 52 Proceeds from borrowings 10,975 15,410 Principal payments on long-term debt and capital lease obligations (15,637) (16,280) --------------- --------------- Net cash used for financing activities (4,227) (818) ---------------- --------------- (Decrease) increase in cash (5,240) 1,584 Cash at beginning of year 5,315 6,438 ---------------- --------------- Cash at June 30 $ 75 $ 8,022 ================ ===============
These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 29, 1998. - 6 - 7 MONRO MUFFLER BRAKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Stock Dividend - ----------------------- On May 13, 1998, the Board of Directors declared a five percent stock dividend, payable June 18, 1998, to stockholders of record as of June 8, 1998. The consolidated financial statements, including all share information therein, have been restated to reflect this dividend. Additionally, in accordance with antidilution provisions of the Class C Convertible Preferred Stock, the conversion value of the preferred stock was restated from $.227 per share to $.216 per share. Shares reserved for issuance to officers and key employees under outstanding options and under the 1984, 1987 and 1989 Incentive Stock Option Plans have also been retroactively adjusted for the five percent stock dividend. Note 2 - Inventories - -------------------- The Company's inventories consist of automotive parts and tires. Substantially all merchandise inventories are valued under the last-in, first-out (LIFO) method. Under the first-in, first-out (FIFO) method, these inventories would have been $426,000 higher at June 30, 1998 and March 31, 1998. The FIFO value of inventory approximates the current replacement cost. Note 3 - Cash and Equivalents - ----------------------------- The Company's policy is to invest cash in excess of operating requirements in income producing investments. Cash equivalents of $75,000 at June 30, 1998 and $5,315,000 at March 31, 1998 include money market accounts which have maturities of three months or less. Note 4 - Supplemental Disclosure of Cash Flow Information - --------------------------------------------------------- The following transactions represent noncash investing and financing activities during the periods indicated: QUARTER ENDED JUNE 30, 1998 In connection with the declaration of a five percent stock dividend (see Note 1), the Company increased accrued expenses, common stock and additional paid-in capital by $1,000, $4,000 and $6,624,000, respectively, and decreased retained earnings by $6,629,000. QUARTER ENDED JUNE 30, 1997: In connection with the declaration of a five percent stock dividend, the Company increased accrued expenses, common stock and additional paid-in capital by $1,000, $4,000 and $7,014,000, respectively, and decreased retained earnings by $7,019,000. -7- 8 MONRO MUFFLER BRAKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CASH PAID DURING THE PERIOD: 1998 1997 ---- ---- Interest, net $1,053,000 $978,000 Income taxes 363,000 212,000 Note 5 - Other - -------------- These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 29, 1998. - 8 - 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The statements contained in this Form 10-Q which are not historical facts, including (without limitation) statements made in the Management's Discussion and Analysis of Financial Condition and Results of Operations, may contain statements of future expectations and other forward-looking statements that are subject to important factors that could cause actual results to differ materially from those in the forward-looking statements, including (without limitation) product demand, the effect of economic conditions, the impact of competitive services and pricing, product development, parts supply restraints or difficulties, industry regulation, the continued availability of capital resources and financing and other risks set forth or incorporated elsewhere herein and in the Company's Securities and Exchange Commission filings. The following table sets forth income statement data of Monro Muffler Brake, Inc. ("Monro" or the "Company") expressed as a percentage of sales for the fiscal periods indicated.
QUARTER ENDED JUNE 30, 1998 1997 Sales .................................. 100.0% 100.0% Cost of sales, including distribution and occupancy costs ................... 55.1 55.5 ------------ ------------ Gross profit ........................... 44.9 44.5 Operating, selling, general and administrative expenses ............... 28.1 28.2 ------------ ------------ Operating income ....................... 16.8 16.3 Interest expense - net ................. 2.1 2.1 Other expense .......................... .2 .2 ------------ ------------ Income before provision for income taxes 14.5 14.0 Provision for income taxes ............. 5.8 5.6 ------------ ------------ Net income ............................. 8.7% 8.4% ============ ============
- 9 - 10 FIRST QUARTER ENDED JUNE 30, 1998 COMPARED TO FIRST QUARTER ENDED JUNE 30, 1997. Sales were $44.1 million for the quarter ended June 30, 1998 compared with $40.8 million in the quarter ended June 30, 1997 The sales increase of $3.3 million, or 8.2%, was due to an increase in sales of approximately $3.6 million relating to stores opened since the beginning of fiscal 1997. Comparable store sales were even with last year. Gross profit for the quarter ended June 30, 1998 was $19.8 million or 44.9% of sales compared with $18.1 million or 44.5% of sales for the quarter ended June 30, 1997. The increase in gross profit as a percentage of sales was primarily attributable to a decrease in purchases at the store level of certain higher-cost parts ("Outside Purchases"). This was accomplished through a combination of increasing the average inventory in the stores and refining the mix of parts carried. This improvement was partially offset by an increase in distribution and occupancy costs as a percent of sales for the first quarter of fiscal 1999 as compared to the first quarter of fiscal 1998, primarily due to an increase in the number of stores against flat comparable store sales. Operating, selling, general and administrative expenses for the quarter ended June 30, 1998 increased by $.9 million to $12.4 million over the quarter ended June 30, 1997, and decreased to 28.1% of sales compared to 28.2% in the same quarter of the prior year. The increase in total dollars expended is primarily attributable to increased store supervision and increased store support expenses. Although expenses increased during the first quarter of fiscal 1999 as compared to the first quarter of fiscal 1998, these expenses decreased as a percent of sales primarily due to management's continued focus on discretionary spending and controlling costs, as well as insurance rate reductions including favorable workers compensation results in certain states. Operating income for the quarter ended June 30, 1998 of approximately $7.4 million increased 11.3% over operating income for the quarter ended June 30, 1997, and increased as a percentage of sales from 16.3% to 16.8% for the same periods. Net interest expense for the quarter ended June 30, 1998 increased by approximately $37,000 compared to the comparable period in the prior year, and remained level at 2.1% as a percentage of sales. The increase in dollars expended is due to an increase in the average debt outstanding during the quarter, as well as a decrease in the amount of construction period interest income recorded between the two quarters due to decreased construction activity. This was largely offset by a decrease in the weighted average interest rate. Net income for the quarter ended June 30, 1998 of $3.9 million increased 12.9% over net income for the quarter ended June 30, 1997. -10- 11 INTERIM PERIOD REPORTING The data included in this report are unaudited and are subject to year-end adjustments; however, in the opinion of management, all known adjustments (which consist only of normal recurring adjustments) have been made to present fairly the Company's operating results for the unaudited periods. The results for interim periods are not necessarily indicative of results to be expected for the fiscal year. CAPITAL RESOURCES AND LIQUIDITY CAPITAL RESOURCES The Company's primary capital requirement has been the funding of its new store expansion program and the upgrading of facilities and systems in existing stores. For the quarter ended June 30, 1998, the Company spent $4.4 million for equipment and new store construction. Funds were provided primarily by cash flow from operations. Management believes that the Company has sufficient resources available (including cash and equivalents, net cash flow from operations and bank financing) to expand its business as currently planned for the next several years. LIQUIDITY The Company has a line of credit from a commercial bank of $7.5 million. No amounts were outstanding under this short-term borrowing facility at June 30, 1998. Through February 7, 1996, the Company had a real estate line of credit of $25 million to be used for placement of mortgages. This line was terminated in fiscal 1996 at the Company's initiative and replaced by a new unsecured Revolving Credit facility with two banks. In June 1997, the Credit Agreement was modified to increase the amount available under the facility from $30 million to $50 million, and extend the term to March 2000. The facility bears interest at the prime rate or other LIBOR-based rate options tied to the Company's financial performance. Prior to the termination of the real estate line, the Company had utilized $13.2 million of the real estate line of credit for permanent mortgages. The Company has outstanding $1.8 million in principal amount of its 10.65% Senior Notes due 1999 (the "Senior Notes") with Massachusetts Mutual Life Insurance Company pursuant to a Senior Note Agreement. The fifth of six equal annual installments of principal in the amount of $1.8 million was paid on April 1, 1998. The Company has financed its office/warehouse facility via a 10 year mortgage with a current balance of $2.6 million, amortizable over 20 years, and an eight year term loan with a balance of $.5 million. Certain of the Company's long-term debt agreements require, among other things, the maintenance of specified current ratios, interest and rent coverage ratios and amounts of tangible net worth, and also contain restrictions on dividend payments and capital expenditures. - 11 - 12 MONRO MUFFLER BRAKE, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- a. Exhibits 11 - Statement of Computation of Per Share Earnings. b. Reports on Form 8-K The Company filed a report on Form 8-K on April 28, 1998 in connection with the execution of a definitive asset purchase agreement with Speedy Muffler King Inc., Bloor Automotive Inc. and Speedy Car-X Inc. for the purchase of certain assets in the United States for an aggregate purchase price of $52 million. The Company filed a report on Form 8-K on May 26, 1998 in connection with the declaration of a 5% stock dividend by the Company's Board of Directors on May 13, 1998. - 12 - 13 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. MONRO MUFFLER BRAKE, INC. DATE: August 18, 1998 By /s/ Jack M. Gallagher ------------------------------------------ Jack M. Gallagher President and Chief Executive Officer DATE: August 18, 1998 By /s/ Catherine D'Amico ------------------------------------------ Catherine D'Amico Senior Vice President-Finance, Treasurer and Chief Financial Officer - 13 - 14 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE NO. 11 Statement of computation of per share earnings. 15 - 14 - EX-11 2 EXHIBIT 11 1 Exhibit 11 MONRO MUFFLER BRAKE, INC. STATEMENT OF COMPUTATION OF PER SHARE EARNINGS (UNAUDITED) Earnings per share for each period was computed by dividing net income for such period by the weighted average number of shares of Common Stock and common stock equivalents outstanding during such period. All share data has been restated to reflect the 5% stock dividend paid June 18, 1998. (See Note 1).
QUARTER ENDED JUNE 30, 1998 1997 ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) DILUTED - ------- EARNINGS Net income available to common shares $ 3,857 $ 3,417 ============= ============ SHARES Weighted average number of common shares 8,306 8,242 Assuming conversion of Class C Convertible Preferred Stock 636 636 Dilutive effect of outstanding options 97 159 ------------- ------------ Total common and common equivalent shares 9,039 9,037 ============= ============ DILUTED EARNINGS PER SHARE $ .43 $ .38 ============= ============ BASIC - ----- EARNINGS Net income available to common shares $3,857 $3,417 ============= ============ SHARES Weighted average number of common shares 8,306 8,242 ============= ============ BASIC EARNINGS PER SHARE $ .46 $ .41 ============= ============
-15- EX-27 3 EXHIBIT 27
5 1,000 3-MOS MAR-31-1999 APR-01-1998 JUN-30-1998 75 0 897 0 29,078 34,761 170,041 51,508 157,243 24,526 0 0 138 83 80,628 157,243 44,113 44,113 24,320 24,320 12,389 0 905 6,390 2,533 3,857 0 0 0 3,857 .46 .43
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