<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 March 31, 1997
[ ] 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 May 9, 1997.
<PAGE> 2
Part I - Financial Information
Item 1. Financial Statements
STATEMENTS OF FINANCIAL POSITION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
<TABLE>
<CAPTION>
Assets March 31, 1997 December 31, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash $ 541 $ 682
Accounts receivable, less unearned interest income
of $5,153 and $5,105 and allowance for
doubtful accounts of $1,850 and $2,050 69,015 69,771
Inventories:
Merchandise 38,970 36,911
Materials and manufacturing supplies 2,859 2,781
-------- --------
41,829 39,692
Prepaid expenses 1,725 1,622
Other current assets 3,249 3,249
-------- --------
Total Current Assets 116,359 115,016
Other assets 2,891 2,921
Property, plant and equipment, net 8,883 8,887
Cost in excess of net assets of businesses acquired, less
accumulated amortization of $933 and $924 497 506
-------- --------
$128,630 $127,330
-------- --------
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt - Majority Shareholder $ 35,980 $ 34,766
Accounts payable and accrued expenses:
Trade 12,099 12,728
Majority Shareholder 12,706 9,983
Salaries, wages and commissions 5,830 7,469
Taxes, other than income 1,439 1,097
Current portion of deferred revenue 2,416 2,466
Note payable - Majority Shareholder 5,500 5,500
Other accrued liabilities 1,191 1,364
Current portion of other long-term liabilities 83 83
-------- --------
Total Current Liabilities 77,244 75,456
Other long-term liabilities, less current portion 3,417 3,346
Long-term deferred revenue 1,768 1,790
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 34,839 35,376
-------- --------
Total Shareholders' Equity 46,201 46,738
-------- --------
$128,630 $127,330
-------- --------
</TABLE>
The notes to financial statements are an integral part of these statements.
2
<PAGE> 3
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands, except share and per share data.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 54,419 $ 50,598
Miscellaneous income - net 3,066 2,626
----------- -----------
57,485 53,224
----------- -----------
Costs and expenses:
Cost of products sold 37,497 35,000
Selling, administrative and general expenses 20,194 19,115
Interest expense 678 557
----------- -----------
58,369 54,672
----------- -----------
Income (loss) before income taxes (884) (1,448)
Provision (benefit) for income taxes (347) (620)
----------- -----------
Net income (loss) $ (537) $ (828)
----------- -----------
Income (loss) per common share (0.25) $ (0.38)
----------- -----------
Weighted average number of common shares outstanding 2,190,619 2,190,619
----------- -----------
</TABLE>
The notes to financial statements are an integral part of these statements.
3
<PAGE> 4
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
BRAD RAGAN, INC.
(Unaudited)
Amounts in thousands.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (537) $ (828)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH FROM OPERATING ACTIVITIES:
Depreciation and amortization 546 502
(Gain) loss on sale of property, plant and equipment (6) 3
Changes in operating assets and liabilities:
Accounts receivable 756 2,623
Inventory (2,137) (5,850)
Prepaid expenses (103) (617)
Accounts payable 2,094 2,455
Salaries, wages and commissions (1,639) (2,203)
Taxes, other than income tax 342 130
Deferred revenue (72) (185)
Other accrued liabilities (173) --
Other 101 89
------- -------
Total Adjustments (291) (3,053)
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (828) (3,881)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (533) (407)
Proceeds from disposals of property, plant and equipment 6 13
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (527) (394)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt - Majority Shareholder 1,214 4,073
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 1,214 $ 4,073
NET INCREASE (DECREASE) IN CASH (141) (202)
BEGINNING CASH 682 478
------- -------
ENDING CASH $ 541 $ 276
------- -------
</TABLE>
The notes to financial statements are an integral part of these statements.
4
<PAGE> 5
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, 1996.
NOTE B - ACCOUNTS RECEIVABLE
Amounts included in accounts receivable having balances due after one year were
approximately $18.5 million at March 31, 1997, and $18.3 million at December 31,
1996.
NOTE C - 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 D - 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.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FIRST QUARTER 1997 COMPARED TO FIRST QUARTER 1996
Net sales for the quarter ended March 31, 1997, increased $3.8 million
to $54,419,000 compared to $50,598,000 for the same period of 1996. Sales for
the Company's commercial segment increased 6.5% primarily due to increased
service sales. The retail segment sales increased 9.2% primarily due to
increased sales of lawn and garden and other hard goods. On a same location
basis, sales increased for the retail and commercial segments 8.4% and 5.4%,
respectively.
Miscellaneous income increased $440,000 for the first quarter of 1997
compared to the first quarter 1996 primarily due to increased revenues from
finance charges associated with increased consumer credit sales.
The gross margin rate increased slightly to 31.1% for the first
quarter of 1997 compared to 30.8% for the same period of 1996.
Selling, administrative and general expenses increased $1.1 million
due to higher expenses for compensation and benefits and expenses associated
with increased sales volume. As a percentage of sales, however, expenses
decreased to 37.1% for the first quarter of 1997 compared to 37.8% for the first
quarter of 1996.
Interest expense increased $121,000 for the first quarter of 1997
compared to the same period of 1996 due to higher average outstanding short-term
debt. The average short-term debt balance for the first quarter of 1997 was
$38.9 million compared to $31.5 million in 1996.
Historically, the first quarter does not represent a strong earnings
period for the Company. A net loss of $537,000 ($.25 per share) was recorded for
the first quarter of 1997 compared to a net loss of $828,000 ($.38 per share)
for the first quarter of 1996.
FINANCIAL POSITION
Net cash used in operating activities for the first quarter of 1997
was $831,000. Merchandise requirements for the upcoming strong selling season
resulted in cash used to increased inventory balances by $2.1 million. This was
offset by related increases in accounts payable balances of $2.1 million.
Financing activities reflect a net increase in the Company's
short-term borrowing of $1.2 million, which was used for capital expenditures of
$533,000 with the remainder funding working capital requirements. Short-term
debt is originated through the majority shareholder, The Goodyear Tire & Rubber
Company, which provides an open line of credit.
6
<PAGE> 7
COMPARATIVE SALES TABLE
(in 000's)
COMMERCIAL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-----------------------------------------------
1997 1996 % VARIANCE
------- ------- ----------
<S> <C> <C> <C>
New Tires $15,694 $14,743 6.5%
Retreading 9,210 8,914 3.3%
Service 6,091 5,267 15.6%
Rubber Products 2,556 2,570 -0.5%
------- -------
Total $33,551 $31,494 6.5%
======= =======
</TABLE>
RETAIL SALES BY PRODUCT LINE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
------------------------------------------------
1997 1996 % VARIANCE
------- ------- ----------
<S> <C> <C> <C>
Hard Goods $ 8,958 $ 7,410 20.9%
New Tires 5,194 5,301 -2.0%
Retreading 109 101 7.9%
Service 6,607 6,292 5.0%
------- -------
Total $20,868 $19,104 9.2%
======= =======
</TABLE>
7
<PAGE> 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. 27 - Financial Data Schedule dated March 31, 1997
(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: May 9, 1997 By: /s/ R. J. Carr
------------ ------------------------------------
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 MARCH 31, 1997,
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 541
<SECURITIES> 0
<RECEIVABLES> 69,015
<ALLOWANCES> 1,850
<INVENTORY> 41,829
<CURRENT-ASSETS> 116,359
<PP&E> 8,883
<DEPRECIATION> 22,489
<TOTAL-ASSETS> 128,630
<CURRENT-LIABILITIES> 77,244
<BONDS> 0
0
0
<COMMON> 2,191
<OTHER-SE> 44,010
<TOTAL-LIABILITY-AND-EQUITY> 128,630
<SALES> 54,419
<TOTAL-REVENUES> 57,485
<CGS> 37,497
<TOTAL-COSTS> 57,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 297
<INTEREST-EXPENSE> 678
<INCOME-PRETAX> (884)
<INCOME-TAX> (347)
<INCOME-CONTINUING> (537)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (537)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
