<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, 1996.
[ ] 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.
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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 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 9, 1996.
<PAGE> 2
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.
June 30,1996 December 31, 1995
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<S> <C> <C>
Assets
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Current Assets:
Cash $ 192 $ 478
Accounts receivable, less unearned interest income
of $4,433 and $4,319 and allowance for
doubtful accounts of $1,885 and $1,907 72,375 68,235
Inventories:
Merchandise 42,764 35,021
Materials and manufacturing supplies 2,489 2,363
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45,253 37,384
Prepaid expenses 2,053 730
Other current assets 2,525 2,581
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Total Current Assets 122,398 109,408
Other assets 2,960 3,029
Property, plant and equipment, net 8,972 9,033
Cost in excess of net assets of businesses acquired, less
accumulated amortization of $906 and $887 524 543
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$ 134,854 $ 122,013
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Liabilities and Shareholders' Equity
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Current Liabilities:
Short-term debt - Majority Shareholder $ 29,080 $ 25,323
Accounts payable and accrued expenses:
Trade 15,398 14,087
Majority Shareholder 17,975 11,623
Salaries, wages and commissions 5,923 7,327
Taxes, other than income 1,227 1,046
Current portion of deferred revenue 2,551 2,499
Note payable - Majority Shareholder 5,500 5,500
Other accrued liabilities 4,832 --
Current portion of other long-term liabilities 62 61
- -----------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 82,548 67,466
Other long-term liabilities, less current portion 3,118 3,019
Long-term deferred revenue 1,934 1,881
Shareholders' Equity:
Common stock, par value $1 per share:
Authorized 10,000,000 shares; issued 2,190,619 shares 2,191 2,191
Additional paid-in capital 9,171 9,171
Retained earnings 35,892 38,285
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Total Shareholders' Equity 47,254 49,647
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$ 134,854 $ 122,013
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</TABLE>
The Notes to Financial Statements are an integral part of these
statements.
2
<PAGE> 3
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
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BRAD RAGAN, INC.
(Unaudited) Amounts in thousands, except share and per share data.
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net Sales $ 63,258 $ 62,622 $ 113,856 $ 115,259
Miscellaneous income - net 4,594 4,250 7,220 7,536
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67,852 66,872 121,076 122,795
Cost and expenses:
Cost of products sold 43,881 43,485 78,881 79,954
Selling administrative and general expenses 20,998 20,257 40,113 39,233
Unusual Charge 4,832 -- 4,832 --
Interest expense 590 627 1,147 1,234
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70,301 64,369 124,973 120,421
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Income (loss) before income taxes (2,449) 2,503 (3,897) 2,374
Provision (benefit) for income taxes (884) 1,031 (1,504) 976
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Net Income (loss) $ (1,565) $ 1,472 $ (2,393) $ 1,398
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Net Income (loss) per common share $ (0.71) $ 0.67 $ (1.09) $ 0.64
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Weighted average number of common shares
outstanding 2,190,619 2,190,619 2,190,619 2,190,619
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</TABLE>
The Notes to Financial Statements are an integral part of these statements.
3
<PAGE> 4
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands.
Six Months Ended
June 30,
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1996 1995
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ (2,393) $ 1,398
Adjustments To Reconcile Net Income (Loss)
To Net Cash Used In Operating Activities:
Depreciation and amortization 1,019 811
(Gain) loss on sale of property, plant and equipment (16) (13)
Deferred tax asset 46 15
Changes in operating assets and liabilities:
Accounts receivable, net (4,140) (2,071)
Inventories (7,869) (10,846)
Prepaid expenses (1,323) (224)
Accounts payable and accrued expenses 7,663 8,475
Salaries, wages and commissions (1,404) (1,410)
Taxes, other than income tax 181 205
Federal and state taxes on income -- 527
Deferred revenue 105 156
Other accrued liabilities 4,832 --
Other 176 (278)
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Total Adjustments (730) (4,653)
Net Cash Provided By (Used In) Operating Activities (3,123) (3,255)
Cash Flows From Investing Activities:
Capital expenditures (953) (865)
Proceeds from disposals of property, plant and equipment 33 42
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Net Cash Provided By (Used In) Investing Activities (920) (823)
Cash Flows From Financing Activities:
Long-term debt paid -- (3)
Short-term debt - Majority Shareholder 3,757 4,002
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Net Cash Provided By (Used In) Financing Activities $ 3,757 $ 3,999
Net Increase (Decrease) In Cash (286) (79)
Beginning Cash 478 240
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Ending Cash $ 192 $ 161
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</TABLE>
The Notes to Financial Statements are an integral part of these statements
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, 1995.
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
Net Income (loss) per common share is computed by dividing net income(loss) by
the weighted average number of common and dilutive common equivalent shares
outstanding during each period.
NOTE D - CONTINGENCIES
The Company is a defendant in two legal proceedings related to certain
installment credit sales transactions. These proceedings are both purported
class actions and include several defendants. These actions both allege that
the defendants, in charging certain fees in connection with financing
transactions in-lieu of making filings under the Uniform Commercial Code,
violated certain federal and state statutes and consumer protection laws. The
plaintiffs are seeking statutory damages, unspecified punitive damages and
other remedies. The Company has agreed in principle to a tentative settlement
in connection with these proceedings. A $4.8 million charge was recorded in
the second quarter of 1996 for the tentative settlement including associated
costs and expenses.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales for the quarter ended June 30, 1996, increased $636,000 to
$63,258,000 compared to $62,622,000 for the same period of 1995. Commercial
sales were up .7% primarily due to increased service sales. Retail sales
increased 1.5% primarily due to increased sales of hard goods. On a same
location basis, commercial and retail sales increased 2.4% and 2.0%,
respectively.
Miscellaneous income increased $344,000 for the second quarter of 1996
primarily due to higher finance charge income from increased consumer credit
sales.
The gross margin rate remained constant at 30.6% for the second quarters
of 1996 and 1995.
Selling, administrative and general expenses increased 3.7% for the second
quarter of 1996 due to expenses associated with increased sales volume and
higher expenses for compensation and benefits.
Interest expense decreased $37,000 for the second quarter of 1996 due to
lower short-term borrowing rates. The Company's average short-term borrowing
rate for the second quarter of 1996 was 6.9% compared to 7.6% for the same
period of 1995.
The Company recorded a net loss of $1,565,000 ($.71 per share) for the
first quarter of 1996 compared to net income of $1,472,000 ($.67 per share) for
the same period of 1995. The earnings decline is primarily attributable to a
$4.8 million unusual charge recorded in the second quarter of 1996 associated
with the tentative settlement of two class action lawsuits related to its
retail installment credit sales. For further discussion see Note D of Notes to
Financial Statements located elsewhere in this report.
FIRST HALF 1996 COMPARED TO FIRST HALF 1995
Net sales for the six-month period ended June 30, 1996, decreased
$1,403,000 to $113,856,000 compared to $115,259,000 for the same period of
1995. Commercial sales were constant with the 1995 level while retail sales
declined 3.0%. On a same location basis, commercial sales increased 1.8%, and
retail sales decreased 2.5%.
Miscellaneous income decreased $316,000 for the first half of 1996
primarily due to the discontinuance of certain charges in connection with
consumer credit sales.
The gross margin rate increased slightly to 30.7% for the first half of
1996 compared to 30.6% for the same period of 1995.
Selling, administrative and general expenses increased 2.2% primarily due
to increased costs associated with compensation and benefits.
Interest expense decreased $87,000 due to lower short-term borrowing
rates. The average short-term borrowing rate for the first half of 1996 was
6.9% compared to 7.6% for the same period of 1995.
6
<PAGE> 7
The Company recorded a net loss of $2,393,000 ($1.09 per share) for the
six-month period ended June 30, 1996, compared to net income of $1,398,000
($.64 per share) for the same period of 1995. The earnings decrease is
primarily attributed to the previously mentioned $4.8 million unusual charge
recorded in 1996.
FINANCIAL POSITION
Net cash used in operating activities was $3.1 million. Cash used by net
loss before depreciation and amortization was $2.4 million. Additional cash
was used to fund increased accounts receivable and inventory balances that
reflect the stronger second quarter selling season. This was offset by related
accounts payable increases and an increase in other accrued liabilities.
Net cash used in investing activities of $920,000 was principally for
capital equipment. Financing activities reflect a net increase in the
Company's short-term borrowing of $3.8 million. Short-term debt is originated
through the majority shareholder, The Goodyear Tire & Rubber Company, which
provides an open line of credit.
Comparative Sales Table
(Amounts In Thousands)
COMMERCIAL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
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1996 1995 %VARIANCE 1996 1995 %VARIANCE
----------- ---- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
New Tires $17,564 $17,230 1.9% $32,307 $31,883 1.3%
Retreading 10,313 10,325 -0.1% 19,227 19,616 -2.0%
Service 6,334 5,867 8.0% 11,601 11,250 3.1%
Rubber Products 2,504 3,052 -18.0% 5,074 5,469 -7.2%
------- ------- ------- -------
Total $36,715 $36,474 0.7% $68,209 $68,218 -0.0%
======= ======= ======= =======
RETAIL SALES BY PRODUCT LINE
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------------------
1996 1995 %VARIANCE 1996 1995 %VARIANCE
----------- ---- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Hard Goods $13,001 $12,464 4.3% $20,411 $ 21,364 -4.5%
New Tires 6,045 6,209 -2.6% 11,346 11,691 -3.0%
Retreading 121 126 -4.0% 222 245 -9.4%
Service 7,376 7,349 0.4% 13,668 13,741 -0.5%
------- ------- ------- --------
Total $26,543 $26,148 1.5% $45,647 $ 47,041 -3.0%
======= ======= ======= ========
</TABLE>
7
<PAGE> 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in two legal proceedings related to
certain installment credit sales transactions. For further discussion see Note
D of Notes to Financial Statements included elsewhere in this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1996 Annual Meeting of Shareholders on May 23,
1996. 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
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<S> <C> <C>
Eugene R. Culler, Jr. 2,138,910 300
Michael R. Thomann 2,138,910 300
Ronald J. Carr 2,138,910 300
Richard D. Pearson 2,138,910 300
Richard E. Sorensen 2,138,910 300
Charles A. Bethel, Jr. 2,138,710 500
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Exhibit No. 27 - Financial Data Schedule dated June
30, 1996.
(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.
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(Registrant)
DATE: August 9, 1996 By: /s/ R. J. Carr
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R. J. Carr, Vice President - Finance
and Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRAD RAGAN, INC. FOR THE QUARTER ENDED JUNE 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 192
<SECURITIES> 0
<RECEIVABLES> 72,375
<ALLOWANCES> 1,885
<INVENTORY> 45,253
<CURRENT-ASSETS> 122,398
<PP&E> 8,972
<DEPRECIATION> 21,539
<TOTAL-ASSETS> 134,854
<CURRENT-LIABILITIES> 82,548
<BONDS> 0
0
0
<COMMON> 2,191
<OTHER-SE> 45,063
<TOTAL-LIABILITY-AND-EQUITY> 134,854
<SALES> 113,856
<TOTAL-REVENUES> 121,076
<CGS> 78,881
<TOTAL-COSTS> 118,994
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 624
<INTEREST-EXPENSE> 1,147
<INCOME-PRETAX> (3,897)
<INCOME-TAX> (1,504)
<INCOME-CONTINUING> (2,393)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,393)
<EPS-PRIMARY> (1.09)
<EPS-DILUTED> (1.09)
</TABLE>
