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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 March 31, 1996
[ ] 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 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 .
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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 May 10, 1996.
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Part I - Financial Information
Item 1. Financial Statements
<TABLE>
STATEMENTS OF FINANCIAL POSITION
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
<CAPTION>
Assets March 31, 1996 December 31, 1995
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<S> <C> <C>
Current Assets:
Cash $ 276 $ 478
Accounts receivable, less unearned interest income
of $4,312 and $4,319 and allowance for
doubtful accounts of $1,670 and $1,907 65,612 68,235
Inventories:
Merchandise 40,650 35,021
Materials and manufacturing supplies 2,584 2,363
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43,234 37,384
Prepaid expenses 1,347 730
Other current assets 2,581 2,581
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Total Current Assets 113,050 109,408
Other assets 2,982 3,029
Property, plant and equipment, net 8,933 9,033
Cost in excess of net assets of businesses acquired, less
accumulated amortization of $897 and $887 533 543
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$ 125,498 $ 122,013
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Liabilities and Shareholders' Equity
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Current Liabilities:
Short-term debt - Majority Shareholder $ 29,396 $ 25,323
Accounts payable and accrued expenses:
Trade 12,303 14,087
Majority Shareholder 15,861 11,623
Salaries, wages and commissions 5,124 7,327
Taxes, other than income 1,176 1,046
Current portion of deferred revenue 2,551 2,499
Note payable - Majority Shareholder 5,500 5,500
Current portion of other long-term liabilities 61 61
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Total Current Liabilities 71,972 67,466
Other long-term liabilities, less current portion 3,063 3,019
Long-term deferred revenue 1,644 1,881
Shareholders' Equity:
Common stock, par value $1 per share:
Authorized 10,000,000 shares; issued 2,190,619 shares 2,191 2,191
Additional paid-in capital 9,171 9,171
Retained earnings 37,457 38,285
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Total Shareholders' Equity 48,819 49,647
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$ 125,498 $ 122,013
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</TABLE>
The notes to financial statements are an integral part of these statements.
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<TABLE>
STATEMENTS OF OPERATIONS
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
<CAPTION>
Three Months Ended
March 31,
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1996 1995
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<S> <C> <C>
Net sales $ 50,598 $ 52,637
Miscellaneous income - net 2,626 3,286
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53,224 55,923
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Costs and expenses:
Cost of products sold 35,000 36,469
Selling, administrative and general expenses 19,115 18,976
Interest expense 557 607
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54,672 56,052
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Income (loss) before income taxes (1,448) (129)
Provision (benefit) for income taxes (620) (55)
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Net income (loss) $ (828) $ (74)
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Income (loss) per common share $ (0.38) $ (0.03)
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Weighted average number of common shares outstanding 2,190,619 2,190,619
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</TABLE>
The notes to financial statements are an integral part of these statements.
3
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<TABLE>
STATEMENTS OF CASH FLOWS
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BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands.
<CAPTION>
Three Months Ended March 31,
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (828) $ (74)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH FROM OPERATING ACTIVITIES:
Depreciation and amortization 502 402
(Gain) loss on sale of property, plant and equipment 3 (13)
Changes in operating assets and liabilities:
Accounts receivable 2,623 1,837
Inventory (5,850) (8,327)
Prepaid expenses (617) (200)
Accounts payable 2,455 8,235
Salaries, wages and commissions (2,203) (2,505)
Taxes, other than income tax 130 228
Federal and state taxes on income - (370)
Deferred revenue (185) 6
Other 89 (149)
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Total Adjustments (3,053) (856)
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,881) (930)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (407) (353)
Proceeds from disposals of property, plant and equipment 13 36
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (394) (317)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt paid - (3)
Short-term debt - Majority Shareholder 4,073 1,155
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 4,073 $ 1,152
NET INCREASE (DECREASE) IN CASH (202) (95)
BEGINNING CASH 478 240
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ENDING CASH $ 276 $ 145
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</TABLE>
The notes to financial statements are an integral part of these statements.
4
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NOTES TO FINANCIAL STATEMENTS
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
Earnings (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 is defending these actions, which are both
in preliminary discovery stages. It is not possible at this time to
determine the extent, if any, to which the Company may be liable or to
reasonably estimate the amount of any possible liability. In the event of an
adverse final determination in these cases, the Company's financial position
and results of operations for the period in which such determination occurs
could be materially affected.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter 1996 Compared To First Quarter 1995
Net sales for the quarter ended March 31, 1996, decreased $2.0 million
to $50,598,000 from $52,637,000 for the same period of 1995. Sales decreased
in all product lines except rubber products. On a same location basis
commercial sales increased 1.1% and retail sales decreased 8.1%.
Miscellaneous income decreased $660,000 for the first quarter of 1996
compared to the same period of 1995 due to lower finance charge income
resulting from decreased consumer credit sales and the discontinuance of
certain charges in connection with such sales.
The gross margin rate increased slightly to 30.8% for the first quarter
of 1996 compared to 30.7% for the first quarter of 1995.
Selling, administrative and general expenses increased $139,000 due to
expenses not directly associated with sales volume. As a percentage of
sales, expenses increased to 37.8% for the first quarter of 1996 compared to
36.1% for the same period of 1995.
Interest expense decreased $50,000 for the first quarter of 1996
compared to the same period of 1995 due to lower short-term borrowing rates.
The Company's average short-term borrowing rate for the first quarter of 1996
was 6.9% compared to 7.6% for the first quarter of 1995.
Historically, the first quarter does not represent a strong earnings
period for the Company. A net loss of $828,000 ($.38 per share) was recorded
for the first quarter of 1996 compared to a net loss of $74,000 ($.03 per
share) for the same period of 1995.
Financial Position
Net cash used in operating activities was $3.9 million for the first
quarter of 1996. Cash used by net loss before depreciation and amortization
was $326,000. Additional cash was used principally by increased inventory
balances to support the seasonal merchandise requirements for the second
quarter business levels. This was partially offset by related accounts
payable increases and seasonal accounts receivable decreases.
Net cash used in investing activities of $394,000 was principally for
capital equipment. Financing activities reflect a net increase in the
Company's short-term borrowing of $4.1 million. Short-term debt is
originated through the majority shareholder, The Goodyear Tire & Rubber
Company, which provides an open line of credit.
6
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COMPARATIVE SALES TABLE
(in 000's)
<TABLE>
COMMERCIAL SALES BY PRODUCT LINE
<CAPTION>
THREE MONTHS ENDED MARCH 31
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1996 1995 % VARIANCE
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<S> <C> <C> <C>
New Tires $ 14,743 $ 14,653 0.6%
Retreading 8,914 9,291 -4.1%
Service 5,267 5,383 -2.2%
Rubber Products 2,570 2,417 6.3%
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Total $ 31,494 $ 31,744 -0.8%
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RETAIL SALES BY PRODUCT LINE
<CAPTION>
THREE MONTHS ENDED MARCH 31
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1996 1995 % VARIANCE
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<S> <C> <C> <C>
Hard Goods $ 7,410 $ 8,900 -16.7%
New Tires 5,301 5,482 -3.3%
Retreading 101 119 -15.1%
Service 6,292 6,392 -1.6%
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Total $ 19,104 $ 20,893 -8.6%
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</TABLE>
7
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. 27 - Financial Data Schedule dated March 31, 1996
(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.
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(Registrant)
DATE: May 10, 1996 By: /s/ R. J. Carr
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R. J. Carr, Vice President - Finance
and Chief Financial Officer
<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 MARCH 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 276
<SECURITIES> 0
<RECEIVABLES> 65,612
<ALLOWANCES> 1,670
<INVENTORY> 43,234
<CURRENT-ASSETS> 113,050
<PP&E> 8,933
<DEPRECIATION> 21,384
<TOTAL-ASSETS> 125,498
<CURRENT-LIABILITIES> 71,972
<BONDS> 0
0
0
<COMMON> 2,191
<OTHER-SE> 46,628
<TOTAL-LIABILITY-AND-EQUITY> 125,498
<SALES> 50,598
<TOTAL-REVENUES> 53,224
<CGS> 35,000
<TOTAL-COSTS> 54,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 114
<INTEREST-EXPENSE> 557
<INCOME-PRETAX> (1,448)
<INCOME-TAX> (620)
<INCOME-CONTINUING> (828)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (828)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
</TABLE>
