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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended September 30, 1995.
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 1-6575
BRAD RAGAN, INC.
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(Exact name of registrant as specified in its charter)
North Carolina 56-0756067
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4404-G Stuart Andrew Blvd.
Charlotte, North Carolina 28217-9990
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(Address of principal executive offices) (Zip Code)
704-521-2100
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(Registrant's telephone number, including area code)
Not Applicable
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(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 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 November 10, 1995.
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Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL POSITION
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
September 30, 1995 December 30, 1994
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<S> <C> <C>
Assets
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Current Assets:
Cash $ 115 $ 240
Accounts receivable, less unearned interest income
of $4,511 and $4,457 and allowance for
doubtful accounts of $1,720 and $1,637 73,053 71,061
Inventories
Merchandise 39,398 31,889
Material and manufacturing supplies 2,413 2,197
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41,811 34,086
Prepaid expenses 361 276
Other current assets 2,510 2,208
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Total Currents Assets 117,850 107,871
Other assets 3,932 3,211
Property, plant and equipment, net 7,190 7,162
Cost in excess of net assets of businesses acquired, less
accumulated amortization of $878 and $851 552 579
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$ 129,524 $ 118,823
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Liabilities and Shareholders' Equity
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Current Liabilities:
Short-term debt - Majority Shareholder $ 28,124 $ 25,576
Accounts payable and accrued expenses:
Trade 14,529 10,862
Majority Shareholder 14,893 12,704
Salaries, wages and commissions 6,897 7,231
Taxes, other than income 1,123 1,128
Federal and state taxes on income 410 369
Current portion of deferred revenue 2,415 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 162 172
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Total Current Liabilities 74,053 65,861
Other long-term liabilities, less current portion 2,901 2,633
Long-term deferred revenue 2,080 2,038
Shareholders' Equity:
Common stock, par value $1 per share:
Authorized 10,000,000 shares; issued 2,190,619 shares 2,191 2,191
Additional paid-in capital 9,171 9,171
Retained earnings 39,128 36,929
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Total Shareholders' Equity 50,490 48,291
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$ 129,524 $ 118,823
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</TABLE>
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<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
Three Months Ended Nine Months Ended
September 30, September 30,
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1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net sales $ 63,672 $ 63,269 $ 178,931 $ 174,632
Miscellaneous income - net 3,331 3,776 10,867 11,092
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67,003 67,045 189,798 185,724
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Cost and expenses:
Cost of products sold 44,432 44,422 124,386 121,183
Selling, administrative and general expenses 20,441 20,210 59,674 58,570
Interest expense 653 499 1,887 1,302
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65,526 65,131 185,947 181,055
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Income before income taxes 1,477 1,914 3,851 4,669
Provision for income taxes 676 406 1,652 759
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Net income $ 801 $ 1,508 $ 2,199 $ 3,910
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Net income per common share $ 0.37 $ 0.65 $ 1.00 $ 1.69
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Weighted average number of common shares
outstanding 2,190,619 2,402,495 2,190,619 2,402,495
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</TABLE>
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<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOW
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands.
Nine Months Ended
September 30,
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1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME: $ 2,199 $ 3,910
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH FROM OPERATING ACTIVITIES:
Depreciation and amortization 1,228 916
(Gain) loss on sale of property, plant and equipment (25) (31)
(Provision) benefit for deferred taxes (264) (1,239)
Changes in operating assets and liabilities:
Accounts receivable (1,993) (2,632)
Inventory (7,724) (8,887)
Prepaid Expenses (85) (226)
Accounts payable 5,857 9,752
Salaries, wages and commissions (333) (627)
Taxes, other than income tax (5) 42
Federal and state taxes on income 40 665
Deferred revenue 143 113
Other (513) (425)
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Total Adjustments (3,674) (2,579)
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,475) 1,331
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,252) (1,960)
Proceeds from disposals of property, plant and equipment 58 122
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,194) (1,838)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term dept paid (3) (11)
Short-term debt - Majority Shareholder 2,547 504
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,544 493
NET INCREASE (DECREASE) IN CASH (125) (14)
BEGINNING CASH 240 147
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ENDING CASH $ 115 $ 133
==========================================================================================================================
</TABLE>
4
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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. The Company had no dilutive common equivalent shares for
the third quarter and nine-month periods ended September 30, 1995.
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 differences between financial reporting and tax
reporting bases of the Company's assets, liabilities and expense items. For
the third quarter and the nine-month period ended September 30, 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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRD QUARTER 1995 COMPARED TO THIRD QUARTER 1994
Net sales for the quarter ended September 30, 1995, were up $403,000
to $63.7 million from $63.3 million for the same period of 1994. On a same
location basis, commercial and retail sales were up .4% and .2%, respectively.
Miscellaneous income decreased $445,000 in the third quarter of 1995
compared to the same period of 1994 primarily due to lower finance charge
income resulting from decreased consumer credit sales. It is anticipated that
miscellaneous income will be lower in future periods due in substantial part to
a reduction in anticipated net revenues derived from charges in respect of
certain retail credit sales transactions.
The third quarter 1995 gross margin rate increased slightly to 30.2%
compared to 29.8% for the 1994 third quarter.
Selling, administrative and general expenses increased slightly to
$20.4 million for the quarter of 1995 from $20.2 million for the 1994 third
quarter.
Higher short-term borrowing rates resulted in increased interest
expense for the third quarter of 1995 compared to the same period of 1994. The
average short-term borrowing rates for the third quarters of 1995 and 1994 were
7.4% and 6.2%, respectively.
The Company recorded net income of $801,000 ($.37 per share) for the
third quarter of 1995 compared to $1,508,000 ($.65 per share) for the same
period of 1994. The earnings decrease is primarily attributed to increased
income tax expense as described in Note D of Notes to Financial Statements and
increased interest expense. Net income will be adversely affected in future
periods as the result of planned elimination of certain charges in connection
with retail installment credit sales.
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994
Net sales were up $4.3 million for the nine-month period ended
September 30, 1995, compared to the same period of 1994. Sales increases were
realized in both the commercial and retail segments. On a same location basis,
commercial and retail sales were up 2.3% and 1.2%, respectively.
Miscellaneous income decreased slightly from $11.1 million for the
nine-month period of 1994 to $10.9 million for the same period of 1995.
The gross margin rate for the nine-month period of 1995 was 30.5% down
slightly from 30.6% for the same period of 1994.
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Selling, administrative and general expenses were up $1.1 million for
the nine-month period of 1995 to $59.7 million compared to $58.6 million for
the same period of 1994 due to expenses directly associated with increased
sales.
Higher short-term borrowing rates resulted in increased interest
expense. The average short-term borrowing rates for the nine-month periods
ended September 30, 1995 and 1994 were 7.5% and 5.6%, respectively.
The Company recorded net income of $2,199,000 ($1.00 per share) for
the nine-month period of 1995 compared to $3,910,000 ($1.69 per share) for the
same period of 1994. The earnings decrease is primarily attributed to
increased income tax expense as described in Note D of Notes to Financial
Statements and increased interest expense.
FINANCIAL POSITION
Accounts receivable balances higher than year-end 1994 levels reflect
seasonal sales volume increases during the second and third quarters.
Inventory and related accounts payable balances increased from year-end 1994
levels to support increased sales volume.
Total debt increased $2.5 million from year-end 1994 levels in order
to fund working capital requirements. Short-term debt is originated through
the majority shareholder, The Goodyear Tire & Rubber Company, which provides an
open line of credit.
7
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COMPARATIVE SALES ANALYSIS
BY BUSINESS SEGMENT
(AMOUNTS IN THOUSANDS)
COMMERCIAL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
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1995 1994 % VARIANCE 1995 1994% VARIANCE
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<S> <C> <C> <C> <C> <C> <C>
New Tires $19,709 $20,793 -5.2% $51,592 $52,717 -2.1%
Retreading 10,897 10,455 4.2% 30,513 28,851 5.8%
Service 6,142 6,108 0.6% 17,392 17,085 1.8%
Rubber Products 3,169 2,204 43.8% 8,638 5,924 45.8%
------- ------- -------- --------
Total $39,917 $39,560 0.9% $108,135 $104,577 3.4%
======= ======= ======== ========
</TABLE>
RETAIL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
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1995 1994 % VARIANCE 1995 1994% VARIANCE
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<S> <C> <C> <C> <C> <C>
Hard Goods $10,462 $10,482 -0.2% $31,826 $31,856 -0.1%
New Tires 6,314 6,410 -1.5% 18,005 18,141 -0.7%
Retreading 126 140 -10.0% 371 391 -5.1%
Service 6,853 6,677 2.6 20,594 19,667 4.7%
------- ------- ------- -------
Total $23,755 $23,709 0.2% $70,796 $70,055 1.1%
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</TABLE>
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in the following two proceedings relating
to certain installment credit sales transactions.
(1) A civil action, Ricks, et al. vs Brad Ragan Inc. et al., was filed in
the Circuit Court for Jefferson County, Alabama, on behalf of a purported class
consisting of all past and current budget account debtors to the Company and
other defendants in Alabama alleging that the Company and the other defendants
violated the Alabama fraud and consumer protection laws by charging the
plaintiffs for non-filing insurance (in-lieu of making appropriate filings
under the Alabama Uniform Commercial Code) in connection with credit extended
in connection with certain retail installment credit sales transactions. The
plaintiffs are seeking statutory damages, including cancellation of their
account agreements, unspecified punitive damages and other remedies.
(2) A civil action, Jordan, et al vs Avco Financial, et al. was filed in
the United States District Court for the Middle District of Georgia, Columbus
Division, against the Company and several other defendants on behalf of a
purported class of plaintiffs consisting of all persons nationwide who were
charged for non-filing insurance by the defendants. The complaint alleges that
the defendants, in the course of collecting non-filing insurance fees in
respect of certain retail installment credit sales transactions, violated the
Federal Truth in Lending Act, the Federal Racketeer Influenced and Corrupt
Organizations Act and that the defendants' activities also constituted common
law fraud, breach of contract and conversion. The plaintiffs are seeking
statutory remedies, unspecified compensatory and punitive damages and
attorney's fees and costs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 - Financial Data Schedule dated September 30, 1995
(for SEC use only)
(b) Report on Form 8-K:
No reports on Form 8-K were filed during the quarter
for which this report is filed.
9
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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
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(Registrant)
DATE: November 10, 1995 By: /s/ R.J. Carr
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R.J. Carr, Vice President - Finance
and Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRAD RAGAN, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 115
<SECURITIES> 0
<RECEIVABLES> 73,053
<ALLOWANCES> 1,720
<INVENTORY> 41,811
<CURRENT-ASSETS> 117,850
<PP&E> 7,190
<DEPRECIATION> 22,548
<TOTAL-ASSETS> 129,524
<CURRENT-LIABILITIES> 74,053
<BONDS> 0
<COMMON> 2,191
0
0
<OTHER-SE> 48,299
<TOTAL-LIABILITY-AND-EQUITY> 129,524
<SALES> 178,931
<TOTAL-REVENUES> 189,798
<CGS> 124,386
<TOTAL-COSTS> 184,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,037
<INTEREST-EXPENSE> 1,887
<INCOME-PRETAX> 3,851
<INCOME-TAX> 1,652
<INCOME-CONTINUING> 2,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,199
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
