<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
-----------------
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 1995.
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------- ------
Commission file number 1-6575
BRAD RAGAN, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0756067
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4404-G Stuart Andrew Blvd.
Charlotte, North Carolina 28217-9990
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
704-521-2100
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,190,619 shares of Common
Stock ($1 par value) at August 10, 1995.
<PAGE> 2
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL POSITION
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
June 30,1995 December 31, 1994
------------ -----------------
<S> <C> <C>
Assets
----------------------------------------------------------------------------------------------------------------
Current Assets:
Cash $ 161 $ 240
Accounts receivable, less unearned interest income
of $4,490 and $4,457 and allowance for
doubtful accounts of $1,545 and $1,637 73,131 71,061
Inventories:
Merchandise 42,343 31,889
Materials and manufacturing supplies 2,589 2,197
----------------------------------------------------------------------------------------------------------------
44,932 34,086
Prepaid expenses 500 276
Other current assets 2,164 2,208
----------------------------------------------------------------------------------------------------------------
Total Current Assets 120,888 107,871
Other assets 3,604 3,211
Property, plant and equipment, net 7,214 7162
Cost in excess of net assets of businesses acquired, less
accumulated amortization of $869 and $851 561 579
----------------------------------------------------------------------------------------------------------------
$ 132,267 $ 118,823
----------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
----------------------------------------------------------------------------------------------------------------
Current Liabilities:
Short-term debt - Majority Shareholder $ 29,578 $ 25,576
Accounts payable and accrued expenses:
Trade 13,909 10,862
Majority Shareholder 18,132 12,704
Salaries, wages and commissions 5,820 7,231
Taxes, other than income 1,333 1,128
Federal and state taxes on income 897 369
Current portion of deferred revenue 2,335 2,315
Current portion of long-term debt - 4
Current portion of note payable - Majority Shareholder 5,500 5,500
Current portion of other long-term liabilities 166 172
----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 77,670 65,861
Other long-term liabilities, less current portion 2,734 2,633
Long-term deferred revenue 2,174 2,038
Shareholders' Equity:
Common stock, par value $1 per share:
Authorized 10,000,000 shares; issued 2,190,619 shares 2,191 2,191
Additional paid-in capital 9,171 9,171
Retained earnings 38,327 36,929
----------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 49,689 48,291
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
$ 132,267 $ 118,823
----------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -------------------------------
1995 1994 1995 1994
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 62,622 $ 61,812 $ 115,259 $ 111,363
Miscellaneous income - net 4,250 4 ,450 7,536 7,316
--------------------------------------------------------------------------------------------------------------------
66,872 66,262 122,795 118,679
Cost and expenses:
Cost of products sold. 43,485 42,994 79,954 76,761
Selling, administrative and general expenses 20,257 20,169 39,233 38,360
Interest expense 627 421 1,234 803
--------------------------------------------------------------------------------------------------------------------
64,369 63,584 120,421 115,924
--------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,503 2,678 2,374 2,755
Provision (benefit) for income taxes 1,031 323 976 353
--------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1,472 $ 2,355 $ 1,398 $ 2,402
--------------------------------------------------------------------------------------------------------------------
Income (loss) per commonshare $ 0.67 $ 1.00 $ 0.64 $ 1.04
--------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding 2,190,619 2,402,495 2,190,619 2,402,495
--------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands.
Six Months Ended
June 30,
---------------------------------------
1995 1994
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 1,398 $ 2,402
Adjustments To Reconcile Net Income (Loss)
To Net Cash Used In Operating Activities:
Depreciation and amortization 811 600
(Gain) loss on sale of property, plant and equipment (13) (20)
(Provision) benefit for deferred taxes 15 (749)
Changes in operating assets and liabilities:
Accounts receivable, net (2,071) (1,195)
Inventories (10,846) (8,626)
Prepaid expenses (224) (148)
Accounts payable and accrued expenses 8,475 7,658
Salaries, wages and commissions (1,410) (844)
Taxes, other than income tax 205 186
Federal and state taxes on income 527 894
Deferred revenue 156 87
Other (278) (404)
--------------------------------------------------------------------------------------------------------
Total Adjustments (4,653) (2,561)
Net Cash Provided By (Used In) Operating Activities (3,255) (159)
Cash Flows From Investing Activities:
Capital expenditures (865) (708)
Proceeds from disposals of property, plant and equipment 42 110
--------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities (823) (598)
Cash Flows From Financing Activities:
Long-term debt paid (3) (7)
Short-term debt - Majority Shareholder 4,002 1,305
--------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Financing Activities $ 3,999 $ 1,298
Net Increase (Decrease) In Cash (79) 541
Beginning Cash 240 147
--------------------------------------------------------------------------------------------------------
Ending Cash $ 161 $ 688
--------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
BRAD RAGAN, INC.
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In management's opinion, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
financial statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined
using the last-in, first-out (LIFO) method for substantially all inventories.
An actual valuation of inventory under the LIFO method is made only at the end
of each year based on the inventory levels and costs at that time. Accordingly,
interim LIFO calculations must necessarily be based on management's estimates
of expected year-end inventory levels and costs. Since these are subject to
many forces beyond management's control, interim results are subject to the
final year-end LIFO inventory valuation.
NOTE C - INCOME PER SHARE
Earnings per common share is computed by dividing net income by the weighted
average number of common and dilutive common equivalent shares outstanding
during each period.
NOTE D - ACCOUNTING FOR INCOME TAXES
In 1992, the Company adopted Statement of Accounting Standards No. 109,
"Accounting for Income Taxes," pursuant to which a deferred tax asset was
recorded to reflect temporary difference between financial and tax return
recognition of certain income and expense items. For the second quarter and
the first half of 1994, income tax expense was partially offset by the
reduction in the deferred tax asset valuation allowance. This reduction in the
valuation allowance was based on management's determination of the realization
of the deferred tax asset in accordance with SFAS 109.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter 1995 Compared To Second Quarter 1994
Net sales for the quarter ended June 30, 1995, increased $810,000 to $62.6
million compared to $61.8 million for the same period of 1994. Commercial
sales were up 1.9% primarily due to increased sales of rubber products. Retail
sales were up .5% primarily due to increased service sales. On a same location
basis, commercial and retail sales were up 1.2% and .6%, respectively.
Miscellaneous income decreased slightly to $4.3 million for the second
quarter of 1995 compared to $4.5 million for the second quarter of 1994
primarily due to lower finance charge income resulting from decreased consumer
credit sales.
The second quarter 1995 gross margin rate increased slightly to 30.6%
compared to 30.4% for the 1994 second quarter.
Selling, administrative and general expenses increased slightly to $20.3
million for the second quarter of 1995 compared to $20.2 million for the same
period of 1994. As a percentage of sales, these expenses decreased to 32.3%
for the 1995 second quarter compared to 32.6 for the 1994 second quarter.
Higher short-term borrowing rates resulted in increased interest expense
of $627,000 for the second quarter of 1995 compared to $421,000 for second
quarter of 1994. The average short-term borrowing rates for the second
quarters of 1995 and 1994 were 7.6% and 5.5%, respectively.
Net income of $1,472,000 ($.67 per share) was recorded for the second
quarter of 1995 compared to $2,355,000 ($1.00 per share) for the same period of
1994. The earnings decrease is attributed to increased income tax expense as
described in Note D of Notes to Financial Statements and increased interest
expense.
FIRST HALF 1995 COMPARED TO FIRST HALF 1994
Net sales increased $3.9 million to $115,259,000 for the six months ended
June 30, 1995, compared to $111,363,000 for the same period of 1994.
Commercial sales were up 4.9% primarily due to increased sales of rubber
products. Retail sales increased 1.5% primarily due to higher service sales.
On a same location basis, commercial and retail sales were up 4.4% and 1.7%,
respectively.
Miscellaneous income increased slightly to $7.5 million for the first half
of 1995 compared to $7.3 million for the same period of 1994.
The gross margin rate for the first half of 1995 decreased to 30.6% from
31.1% for the same period of 1994 due to higher product acquisition cost.
Selling, administrative and general expenses increased to $39.2 million
for the first half of 1995 from $38.4 million for the same period of 1994 due
to expenses directly associated with increased sales. As a percentage of
sales, these expenses decreased to 34.0% from 34.4%.
Higher short-term borrowing rates resulted in increased interest expense
for the first half of 1995 compared to the 1994 first half. The Company's
average short-term borrowing rate for the first half of 1995 was 7.6% compared
to 5.2% for the same period of 1994.
6
<PAGE> 7
Net income of $1,398,000 ($.64 per share) was recorded for the six months
ended June 30, 1995, compared to $2,402,000 ($1.04 per share) for the same
period of 1994. The income reduction can be attributed to increased income tax
expense as described in Note D of Notes to Financial Statements and increased
interest expense.
FINANCIAL POSITION
Increased accounts receivable balances from year-end 1994 reflect the
strong second quarter selling season. Inventory and related accounts payable
balances increased from the year-end 1994 levels to support sales growth for
the first half of 1995.
Total debt was increased $4.0 million from the year-end 1994 level in
order to fund working capital requirements primarily associated with increased
inventories. Short-term debt is originated through the majority shareholder,
The Goodyear Tire & Rubber Company, which provides an open line of credit.
7
<PAGE> 8
BY BUSINESS SEGMENT
(Amounts In Thousands)
COMMERCIAL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- -----------------------------------
1995 1994 %VARIANCE 1995 1994 %VARIANCE
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
New Tires $17,230 $18,044 -4.5% $31,883 $31,924 -0.1%
Retreading 10,325 9,957 3.7% 19,616 18,396 6.6%
Service 5,867 5,913 -0.8% 11,250 10,977 2.5%
Rubber Products 3,052 1,889 61.6% 5,469 3,720 47.0%
------- ------- ------- -------
Total $36,474 $35,803 1.9% $68,218 65,017 4.9%
======= ======= ======= =======
</TABLE>
RETAIL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- -----------------------------------
1995 1994 %VARIANCE 1995 1994 %VARIANCE
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Hard Goods $12,464 $12,808 -2.7% $21,364 $21,374 -
New Tires 6,209 6,252 -0.7% 11,691 11,731 -0.3%
Retreading 126 135 -6.7% 245 251 -2.4%
Service 7,349 1,889 7.9% 13,741 12,990 5.8%
------- ------- ------- -------
Total $26,148 $26,009 0.5% $47,041 $46,346 1.5%
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1995 Annual Meeting of Shareholders on May 25,
1995. The only item on the agenda was the election of directors for which
votes were cast or withheld as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Samir F. Gibara 2,045,206 0
William P. Brophey 2,045,206 0
Ronald J. Carr 2,045,206 0
Richard D. Pearson 2,045,206 0
Richard E. Sorensen 2,045,006 200
Charles A. Bethel, Jr. 2,045,206 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter for which
this report is filed.
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.
BRAD RAGAN, INC.
---------------------------------------
(Registrant)
DATE: August 14, 1995 By: /s/ R. J. Carr
--------------- ------------------------------------
R. J. Carr, Vice President -
Finance and Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRAD RAGAN, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 161
<SECURITIES> 0
<RECEIVABLES> 73,131
<ALLOWANCES> 1,545
<INVENTORY> 44,932
<CURRENT-ASSETS> 120,888
<PP&E> 7,214
<DEPRECIATION> 784
<TOTAL-ASSETS> 132,267
<CURRENT-LIABILITIES> 77,670
<BONDS> 0
<COMMON> 2,191
0
0
<OTHER-SE> 47,498
<TOTAL-LIABILITY-AND-EQUITY> 132,267
<SALES> 115,259
<TOTAL-REVENUES> 122,795
<CGS> 79,954
<TOTAL-COSTS> 119,187
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 499
<INTEREST-EXPENSE> 1,234
<INCOME-PRETAX> 2,347
<INCOME-TAX> 976
<INCOME-CONTINUING> 1,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,398
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
