CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
SEPTEMBER 30, 1995 0-11579
TBC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0600670
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hickory Hill Road
Memphis, Tennessee 38141
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (901) 363-8030
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by 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
23,783,834 Shares of Common Stock were outstanding as of September 30, 1995.
1 of 10<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 30, December 31,
1995 1994
(Unaudited)
CURRENT ASSETS
Accounts and notes receivable, less
allowance for doubtful accounts
of $8,366 on September 30, 1995
and $7,069 on December 31, 1994:
Related parties $ 19,754 $ 13,557
Other 95,138 88,221
Total accounts and notes receivable 114,892 101,778
Inventories 53,676 39,754
Refundable federal and state income taxes - 383
Deferred federal income taxes 2,372 1,928
Other current assets 2,638 2,482
Total current assets 173,578 146,325
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 2,572 1,560
Buildings 10,982 8,438
Equipment 20,999 16,943
Furniture and fixtures 2,351 2,101
Leasehold improvements 600 600
37,504 29,642
Less accumulated depreciation 18,296 15,020
Total property, plant and equipment 19,208 14,622
OTHER ASSETS 10,321 8,735
TOTAL ASSETS $203,107 $169,682
See accompanying notes to consolidated financial statements.
-2-<PAGE>
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1995 1994
(Unaudited)
CURRENT LIABILITIES
Outstanding checks, net $ 9,445 $ 4,257
Notes payable to banks 51,401 25,780
Current portion of long-term debt 115 -
Accounts payable, trade 34,141 20,763
Federal and state income taxes payable 102 -
Other current liabilities 4,726 4,246
Total current liabilities 99,930 55,046
LONG-TERM DEBT, LESS CURRENT PORTION 569 -
NONCURRENT LIABILITIES 853 653
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
23,784 on September 30, 1995 and
26,282 on December 31, 1994 2,378 2,628
Additional paid-in capital 9,543 10,391
Retained earnings 89,834 100,964
Total stockholders' equity 101,755 113,983
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $203,107 $169,682
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
NET SALES* $147,171 $157,513 $409,737 $424,218
COSTS AND EXPENSES:
Cost of sales 135,253 143,929 373,955 384,880
Distribution 2,018 2,005 5,986 6,064
Selling and administrative 3,502 2,940 10,152 11,568
Other (income) expense - net 157 (496) (2) (1,444)
Total costs and expenses 140,930 148,378 390,091 401,068
INCOME BEFORE INCOME TAXES 6,241 9,135 19,646 23,150
PROVISION FOR INCOME TAXES 2,371 3,471 7,465 8,797
NET INCOME $ 3,870 $ 5,664 $ 12,181 $ 14,353
Earnings per share $ .16 $ .21 $ .49 $ .51
Weighted average number of shares
and equivalents outstanding 24,177 27,422 24,963 28,101
* Including sales to related parties of $30,381 and $37,538 in the three
months ended September 30, 1995 and 1994, respectively, and $102,504 and
$108,943 in the nine months ended September 30, 1995 and 1994,
respectively.
See accompanying notes to consolidated financial statements.
-4-<PAGE>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
Nine Months Ended
September 30, 1994
BALANCE, JANUARY 1, 1994 28,377 $2,838 $11,056 $102,656 $116,550
Net income for period 14,353 14,353
Issuance of common stock
under stock option and
incentive plans, net 20 2 131 - 133
Repurchase and retirement
of common stock (2,037) (204) (806) (20,508) (21,518)
Tax benefit from exercise
of stock options - - 41 - 41
BALANCE, SEPTEMBER 30, 1994 26,360 $2,636 $10,422 $ 96,501 $109,559
Nine Months Ended
September 30, 1995
BALANCE, JANUARY 1, 1995 26,282 $2,628 $10,391 $100,964 $113,983
Net income for period 12,181 12,181
Issuance of common stock
under stock option and
incentive plans, net 19 2 132 - 134
Repurchase and retirement
of common stock (2,517) (252) (1,002) (23,311) (24,565)
Tax benefit from exercise
of stock options - - 22 - 22
BALANCE, SEPTEMBER 30, 1995 23,784 $2,378 $ 9,543 $ 89,834 $101,755
See accompanying notes to consolidated financial statements.
-5-<PAGE>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months
Ended September 30,
1995 1994
OPERATING ACTIVITIES
Net income $ 12,181 $ 14,353
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,398 3,164
Amortization 12 80
Deferred federal income taxes (444) (366)
Changes in operating assets and liabilities:
Receivables (12,893) (33,171)
Inventories (13,922) 8,134
Other current assets (156) (270)
Other assets (47) (219)
Outstanding checks, net 5,188 4,924
Accounts payable, trade 13,378 19,840
Federal and state income taxes
refundable or payable 507 (47)
Other current liabilities 480 322
Noncurrent liabilities 200 531
Net cash provided by (used in)
operating activities 7,882 17,275
INVESTING ACTIVITIES
Purchase of property, plant and equipment (7,984) (2,997)
Investments in joint ventures (1,772) -
Other, net - 336
Net cash used in investing activities (9,756) (2,661)
FINANCING ACTIVITIES
Net bank borrowings (repayments) under
short-term borrowing arrangements 25,621 6,771
Net increase in long-term debt 684 -
Issuance of common stock under stock option and
incentive plans 134 133
Repurchase and retirement of common stock (24,565) (21,518)
Net cash provided by (used in)
financing activities 1,874 (14,614)
Increase (decrease) in Cash and Cash Equivalents - -
CASH AND CASH EQUIVALENTS
Balance - Beginning of period - -
Balance - End of period $ - $ -
Supplemental Disclosures of Cash Flow Information:
Cash paid for - Interest $ 2,197 $ 853
- Income taxes 7,402 9,210
Supplemental Disclosure of Non-Cash Financing Activity:
Tax benefit from exercise of stock options $ 22 $ 41
See accompanying notes to consolidated financial statements.
-6-<PAGE>
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation
The consolidated balance sheet as of September 30, 1995, the
consolidated statements of income for the three months and nine months
ended September 30, 1995 and 1994, and the consolidated statements of
stockholders' equity and cash flows for the nine months ended
September 30, 1995 and 1994, have been prepared by the Company, without
audit. It is Management's opinion that these statements include all
adjustments, consisting only of normal recurring adjustments, necessary
to present fairly the financial position, results of operations and cash
flows as of September 30, 1995 and for all periods presented. The results
for the periods presented are not necessarily indicative of the results
that may be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 1994
Annual Report.
2. Earnings Per Share
Earnings per share have been computed by dividing net income by the
weighted average number of common shares and equivalents outstanding.
Common share equivalents included in the computation represent shares
issuable upon assumed exercise of stock options, which would have a
dilutive effect in the respective periods. Fully diluted earnings per
share did not significantly differ from primary earnings per share in the
periods presented.
3. Other Assets
Other assets consist of the following (in thousands):
September 30, December 31,
1995 1994
Notes receivable $ 7,679 $7,900
Intangible assets, net of amortization 823 835
Investments in joint ventures 1,772 -
Other 47 -
$10,321 $8,735
The notes receivable totals include a note for $4,897,000 from a
former distributor. The maker of the note was discharged in a proceeding
under Chapter 11 of the Bankruptcy Code in 1991. The Company received
distributions totaling $290,000 from the bankruptcy proceeding. The
Company holds written guarantees of the distributor's account, absolute
and continuing in form, signed by the principal former owners and officers
of the distributor and their wives, upon which the Company filed suit in
1989. The defendants have pleaded various defenses based on, among other
things, an alleged oral cancellation of the guarantees. The defendants
have also filed a third party complaint against the Company's former chief
executive officer in which they claim the right to recover against him for
any liability they may have to the Company. The Company believes, on the
basis of applicable Tennessee law, that those defenses are invalid and that
there is no merit to the third party complaint. In October 1994, the Court
granted the Company's motion to exclude evidence of any oral cancellation
of the guarantees. The Court's order has been appealed and no date for
trial has been scheduled. The Company knows of no reason to believe that
the defendants will be unable to pay any judgment that may be entered
against them in the action.
-7-<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
The Company's financial position and liquidity remain strong. The
repurchase of 2.5 million shares of common stock for $24.6 million during the
first nine months of 1995 led to a decline in working capital, from $91.3
million at December 31, 1994 to $73.6 million at September 30, 1995. Current
accounts and notes receivable increased by $13.1 million and inventories
increased by $13.9 million, due largely to seasonal fluctuations. The net
increase in property, plant and equipment of $4.6 million was due in part to
the purchase of certain distribution facilities and equipment in the Northeast
during the third quarter. Other assets increased $1.6 million due primarily to
investments by the Company in a Mexican joint venture and a domestic
import/export joint venture. The composite total owed to banks and vendors,
in the form of outstanding checks, notes payable to banks, long-term debt and
accounts payable, increased by $44.9 million from December 31, 1994 to September
30, 1995. This increase, together with cash generated from operations, enabled
the Company to fund the above-noted increases in receivables, inventories and
fixed assets, as well as the stock repurchases during the first nine months of
1995.
Results of Operations
Net sales decreased 6.6% during the third quarter and 3.4% through the
first nine months compared to the year-earlier levels. Sales of tires accounted
for approximately 89% of total sales in the third quarter and first nine months
of 1995, compared to 90% in the third quarter of 1994 and 89% in the first nine
months of 1994. Unit tire volume decreased 11.2% in the current quarter and
6.9% in the first nine months of 1995, compared with the same periods in 1994.
The reduced unit tire volume reflected the recent industrywide sluggishness in
the replacement tire market, as well as increased competitive pressures. The
average tire sales price increased 4.6% in the current quarter and 3.5% in the
first nine months compared with the year-earlier levels, due primarily to
the effect of industry price increases during the past twelve months.
Cost of sales as a percentage of net sales increased from 91.4% in the
third quarter of 1994 to 91.9% in the current quarter. For the year-to-date
period, cost of sales increased from 90.7% of net sales in 1994 to 91.3% in
1995. The fluctuations were due principally to the combined effects of higher
net product costs from suppliers and increased shipments to customers directly
from manufacturers rather than through the Company's distribution facilities.
Distribution expenses were relatively unchanged in the current quarter
and first nine months of 1995 compared to the year-earlier levels.
Selling and administrative expenses increased $562,000 in the third quarter
compared to the prior year level, due primarily to expenses incurred in
connection with the facilities in the Northeast and the timing of certain
insurance expenses. Expenses in the first nine months of 1995 declined $1.4
million from the year-earlier level due to lower expenses for supplemental
retirement benefits, which were recorded for the first time in the second
quarter of 1994.
The fluctutions in net other income/expense in the third quarter and first
nine months were due principally to increased interest expenses associated with
higher interest rates and bank borrowing levels, compared to the year-earlier
levels.
-8-<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Index to Exhibits
(b) No reports on Form 8-K were filed during the three months ended
September 30, 1995.
-9-<PAGE>
SIGNATURE
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.
TBC CORPORATION
October 23, 1995 By /s/ Ronald E. McCollough
Ronald E. McCollough
Senior Vice President Operations
(principal accounting and
financial officer)
-10-<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> (9,445)<F1>
<SECURITIES> 0
<RECEIVABLES> 123,258
<ALLOWANCES> 8,366
<INVENTORY> 53,676
<CURRENT-ASSETS> 173,578
<PP&E> 37,504
<DEPRECIATION> 18,296
<TOTAL-ASSETS> 203,107
<CURRENT-LIABILITIES> 99,930
<BONDS> 0
<COMMON> 2,378
0
0
<OTHER-SE> 99,377
<TOTAL-LIABILITY-AND-EQUITY> 203,107
<SALES> 409,737
<TOTAL-REVENUES> 409,737
<CGS> 373,955
<TOTAL-COSTS> 373,955
<OTHER-EXPENSES> 16,136
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> 19,646
<INCOME-TAX> 7,465
<INCOME-CONTINUING> 12,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,181
<EPS-PRIMARY> .49
<EPS-DILUTED> 0<F2>
<FN>
<F1>THIS ITEM IS SHOWN UNDER THE CATEGORY "OUTSTANDING CHECKS, NET" ON THE
CONSOLIDATED BALANCE SHEETS.
<F2>THESE ITEMS ARE NOT SEPARATELY REPORTED ON TBC CORPORATION'S FORM 10-Q.
</FN>
</TABLE>
