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
MARCH 31, 1996 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
23,782,352 Shares of Common Stock were outstanding as of March 31, 1996.
1 of 10<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
March 31, December 31,
1996 1995
(Unaudited)
CURRENT ASSETS
Accounts and notes receivable, less
allowance for doubtful accounts
of $8,423 on March 31, 1996
and $8,014 on December 31, 1995:
Related parties $ 19,733 $ 17,208
Other 77,204 78,330
Total accounts and notes receivable 96,937 95,538
Inventories 55,265 49,538
Refundable federal and state income taxes - 472
Deferred federal income taxes 2,455 2,389
Other current assets 2,780 2,252
Total current assets 157,437 150,189
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 2,572 2,572
Buildings 10,994 10,985
Equipment 21,055 20,324
Furniture and fixtures 2,397 2,381
Leasehold improvements 600 600
37,618 36,862
Less accumulated depreciation 18,906 17,714
Total property, plant and equipment 18,712 19,148
OTHER ASSETS 8,572 10,615
TOTAL ASSETS $184,721 $179,952<PAGE>
See accompanying notes to consolidated financial statements.
-2-<PAGE>
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1996 1995
(Unaudited)
CURRENT LIABILITIES
Outstanding checks, net $ 8,264 $ 8,120
Notes payable to banks 48,927 50,838
Current portion of long-term debt 62 81
Accounts payable, trade 12,071 10,117
Federal and state income taxes payable 1,512 -
Other current liabilities 4,131 4,433
Total current liabilities 74,967 73,589
LONG-TERM DEBT, LESS CURRENT PORTION 515 555
NONCURRENT LIABILITIES 1,027 985
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
23,782 on March 31, 1996 and
23,784 on December 31, 1995 2,378 2,378
Additional paid-in capital 9,543 9,543
Retained earnings 96,291 92,902
Total stockholders' equity 108,212 104,823
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $184,721 $179,952<PAGE>
See accompanying notes to consolidated financial statements.
-3-<PAGE>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months
Ended March 31,
1996 1995
NET SALES* $121,366 $130,343
COSTS AND EXPENSES
Cost of sales 110,065 118,432
Distribution 2,100 1,927
Selling and administrative 3,800 3,327
Other (income) expense - net (65) (239)
Total costs and expenses 115,900 123,447
INCOME BEFORE INCOME TAXES 5,466 6,896
PROVISION FOR INCOME TAXES 2,077 2,620
NET INCOME $ 3,389 $ 4,276
Earnings per share $ .14 $ .17
Weighted average number of shares
and equivalents outstanding 23,837 25,707
* Including sales to related parties of $32,826 and $35,846 in the three
months ended March 31, 1996 and 1995, 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
Three Months Ended
March 31, 1995
BALANCE, JANUARY 1, 1995 26,282 $2,628 $10,391 $100,964 $113,983
Net income for period 4,276 4,276
Issuance of common stock
under stock option and
incentive plans 3 - 22 - 22
Repurchase and retirement
of common stock (1,204) (120) (476) (10,995) (11,591)
Tax benefit from exercise
of stock options - - 3 - 3
BALANCE, MARCH 31, 1995 25,081 $2,508 $ 9,940 $ 94,245 $106,693
Three Months Ended
March 31, 1996
BALANCE, JANUARY 1, 1996 23,784 $2,378 $ 9,543 $ 92,902 $104,823
Net income for period 3,389 3,389
Forfeiture of restricted
stock (2) - - - -
BALANCE, MARCH 31, 1996 23,782 $2,378 $ 9,543 $ 96,291 $108,212
See accompanying notes to consolidated financial statements.
-5-<PAGE>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
1996 1995
OPERATING ACTIVITIES
Net income $ 3,389 $ 4,276
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,234 1,042
Amortization 28 4
Deferred federal income taxes (66) (157)
Equity in earnings from joint ventures (39) -
Changes in operating assets and liabilities:
Receivables 647 (11,270)
Inventories (5,727) (11,973)
Other current assets (528) 63
Other assets 8 -
Outstanding checks, net 144 6,231
Accounts payable, trade 1,954 17,565
Federal and state income taxes
refundable or payable 1,984 2,540
Other current liabilities (302) (8)
Noncurrent liabilities 42 75
Net cash provided by (used in)
operating activities 2,768 8,388
INVESTING ACTIVITIES
Purchase of property, plant and equipment (811) (2,156)
Investment in joint venture - (982)
Other, net 13 -
Net cash used in investing activities (798) (3,138)
FINANCING ACTIVITIES
Net bank borrowings (repayments) under
short-term borrowing arrangements (1,911) 6,319
Net decrease in long-term debt (59) -
Issuance of common stock under stock option and
incentive plans - 22
Repurchase and retirement of common stock - (11,591)
Net cash provided by (used in)
financing activities (1,970) (5,250)
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 $ 799 $ 440
- Income taxes 159 237
Supplemental Disclosure of Non-Cash Financing
Activity:
Tax benefit from exercise of stock options $ - $ 3
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 March 31, 1996, and the
consolidated statements of income, stockholders' equity and cash flows
for the three months ended March 31, 1996 and 1995, 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 March 31, 1996 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 1995
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):
March 31, December 31,
1996 1995
Notes receivable $5,915 $7,961
Intangible assets, net of amortization 1,037 1,058
Investment in joint venture 1,586 1,562
Other 34 34
$8,572 10,615
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 $308,000 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. Working
capital increased from $76.6 million at December 31, 1995 to $82.5 million at
March 31, 1996. Inventories increased by $5.7 million during the current
quarter, in anticipation of increased seasonal sales demand. Other assets
decreased $2.0 million, principally due to advance collections on a note
receivable subsequent to March 31, 1996, which resulted in such amounts
being reclassified in the balance sheet to a current asset. The composite
total owed to banks and vendors, in the form of outstanding checks, notes
payable to banks and accounts payable, was relatively unchanged from
December 31, 1995 to March 31, 1996. Cash generated from operations enabled
the Company to fund the above-noted increase in inventories, as well as
normally recurring capital expenditures during the first three months of
1996.
A letter of intent has been signed regarding the Company's proposed
acquisition of all of the outstanding shares of Big O Tires, Inc. a franchisor
of independent retail tire and automotive service stores. If this proposed
acquisition is completed, the Company anticipates that additional long-term
borrowings will be incurred to finance the transaction.
Results of Operations
Net sales decreased 6.9% during the first quarter compared to the year-
earlier level. Sales of tires accounted for approximately 86% of total sales
in the first quarter of 1996 versus 88% in the first three months of 1995.
Unit tire volume declined 8.4% compared to the level experienced in the prior
year first quarter, due largely to the continuation of highly competitive
pressures in the replacement tire market. The average tire sales price was
relatively unchanged from the year-earlier level, decreasing 0.5% Sales of
non-tire products increased 10.0% in the first quarter of 1996, due
principally to greater shipments of automotive service equipment and
batteries.
Cost of sales as a percentage of net sales decreased from 90.9% in the
first quarter of 1995 to 90.7% in the current quarter. During the first
quarater of 1996, the Company benefitted from increased interest on early
payments to suppliers, which lowered net product costs.
Distribution expenses increased 9.0% in the current quarter compared to
the year-earlier level, due primarily to the addition of facilities in the
northeastern United States during the third quarter of 1995.
Selling and administrative expenses increased $473,000 from the level in
the first quarter of 1995, due to the expenses associated with the facilities
added in the northeastern United States.
Net other income was lower in the first quarter of 1996 compared to the
year-earlier level, due largely to increased interest expenses associated
with higher average bank borrowings.
-8-<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
None
(b) During the quarter for which this report is filed, the Company
filed a Current Report on Form 8-K dated March 14, 1996 providing
under Item 5, "Other Events", information relative to the signing
of a letter of intent regarding the Company's proposed
acquisition of all of the outstanding shares of Big O Tires, Inc.
The transaction remains subject to the approval by the Board of
Directors of each company of a definitive merger agreement, which
has not yet been completed. A definitive merger agreement would
then be subject to the approval of the stockholders of Big O.
-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
April 18, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> (8,264)<F1>
<SECURITIES> 0
<RECEIVABLES> 105,360
<ALLOWANCES> 8,423
<INVENTORY> 55,265
<CURRENT-ASSETS> 157,437
<PP&E> 37,618
<DEPRECIATION> 18,906
<TOTAL-ASSETS> 184,721
<CURRENT-LIABILITIES> 74,967
<BONDS> 0
0
0
<COMMON> 2,378
<OTHER-SE> 105,834
<TOTAL-LIABILITY-AND-EQUITY> 184,721
<SALES> 121,366
<TOTAL-REVENUES> 121,366
<CGS> 110,065
<TOTAL-COSTS> 110,065
<OTHER-EXPENSES> 5,835
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> 5,466
<INCOME-TAX> 2,077
<INCOME-CONTINUING> 3,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,389
<EPS-PRIMARY> .14
<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>
