<PAGE>
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 0-19390
--------
TREADCO, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 7534 and 5531 71-0706271
- ------------------------- ------------------------- ----------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code No.)
organization)
1101 South 21st Street
Fort Smith, Arkansas
72901
(501) 788-6400
- -----------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
the registrant's principal executive offices)
Not Applicable
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have 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.
Class Outstanding at April 15, 1997
--------------------------------- --------------------------------
Common Stock, $.01 par value 5,072,255 shares
<PAGE>
TREADCO, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets --
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Operations --
For the Three Months Ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows --
For the Three Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements --
March 31, 1997 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
TREADCO, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1997 1996
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 150,452 $ 15,804
Accounts receivable:
Trade receivables, less allowances
for doubtful accounts (1997 --
$1,358,839; 1996 -- $1,161,266 ) 18,760,006 18,310,397
Other 2,712,465 6,011,067
Due from affiliates 149,084 154,120
Inventories - Note D 29,550,771 30,043,877
Prepaid expenses 127,724 155,483
Federal and state income taxes 2,796,518 1,625,935
Deferred income taxes 1,512,326 1,512,326
------------ ------------
TOTAL CURRENT ASSETS 55,759,346 57,829,009
PROPERTY, PLANT AND EQUIPMENT
Land 4,065,127 4,065,127
Structures 13,002,558 12,980,600
Retreading and other equipment 29,533,060 29,711,944
------------ ------------
46,600,745 46,757,671
Less allowances for depreciation (14,787,071) (13,571,967)
------------ ------------
31,813,674 33,185,704
OTHER ASSETS
Goodwill, less amortization
(1997 -- $3,562,312; 1996 -- $3,446,815) 13,040,645 13,156,142
Noncompete agreements, less amortization
(1997 -- $936,144; 1996 -- $870,832) 370,105 435,417
Deferred income taxes 148,191 200,052
Other 612,689 609,469
------------ ------------
14,171,630 14,401,080
------------ ------------
$ 101,744,650 $ 105,415,793
============ ============
<PAGE>
<CAPTION>
TREADCO, INC.
CONSOLIDATED BALANCE SHEETS
March 31 December 31
1997 1996
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 14,086,962 $ 14,546,576
Due to affiliate 639,731 959,174
Accrued salaries, wages and
other expenses 6,490,084 6,635,173
Current portion of long-term debt 1,722,125 1,645,085
------------ ------------
TOTAL CURRENT LIABILITIES 22,938,902 23,786,008
LONG-TERM DEBT, less current portion 18,873,715 19,610,482
OTHER LIABILITIES 76,092 71,689
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per
share -- authorized 2,000,000 shares;
none issued - -
Common stock, par value $.01 per share --
authorized 18,000,000 shares; issued
and outstanding 5,072,255 shares 50,723 50,723
Additional paid-in capital 45,623,346 45,623,346
Retained earnings 14,181,872 16,273,545
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 59,855,941 61,947,614
COMMITMENTS AND CONTINGENCIES -- Note E
------------ ------------
$ 101,744,650 $ 105,415,793
============ ============
<FN>
<F1>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
<F2>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
TREADCO, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31
1997 1996
(Unaudited)
<S> <C> <C>
SALES
Non-affiliates $ 32,094,010 $ 31,632,333
Affiliates 1,117,464 501,305
----------- -----------
33,211,474 32,133,638
COSTS AND EXPENSES
Materials and cost of new tires 23,260,210 23,565,762
Salaries and wages 6,209,620 5,267,861
Depreciation and amortization 1,353,811 860,336
Administrative and general 4,922,887 3,980,643
Amortization of goodwill 115,497 115,497
----------- -----------
35,862,025 33,790,099
----------- -----------
OPERATING LOSS (2,650,551) (1,656,461)
OTHER INCOME
Interest income 2,357 15,129
Gain on asset sales 3,548 4,483
Other 34,363 24,806
----------- -----------
40,268 44,418
OTHER EXPENSES
Interest 309,630 160,469
Amortization of noncompete agreements 65,312 65,312
----------- -----------
374,942 225,781
----------- -----------
LOSS BEFORE INCOME TAXES (2,985,225) (1,837,824)
FEDERAL AND STATE INCOME TAXES
(CREDIT) -- Note C
Current (1,148,303) (657,601)
Deferred 51,861 1,359
----------- -----------
(1,096,442) (656,242)
----------- -----------
NET LOSS $ (1,888,783) $ (1,181,582)
=========== ===========
NET LOSS PER SHARE $ (0.37) $ (0.23)
=========== ===========
AVERAGE SHARES OUTSTANDING 5,072,255 5,072,255
=========== ===========
CASH DIVIDENDS PAID PER COMMON SHARE $ .04 $ .04
=========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
TREADCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31
1997 1996
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,888,783) $ (1,181,582)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 1,353,811 860,336
Amortization of goodwill 115,497 115,497
Amortization of noncompete agreements 65,312 65,312
Provision for losses on accounts
receivable 715,144 401,669
Provision for deferred income taxes 51,861 (1,359)
Gain on asset sales (3,548) (4,483)
Changes in operating assets
and liabilities:
Receivables 2,133,849 2,451,281
Inventories and prepaid expenses 520,865 990,320
Federal and state income taxes (1,170,583) -
Other assets (3,220) (221,550)
Trade accounts payable, accrued
expenses and taxes payable (604,702) (923,350)
Due to/from affiliates (314,407) 133,906
Other liabilities 4,403 4,685
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 975,499 2,690,682
INVESTING ACTIVITIES
Purchases of property, plant
and equipment (404,987) (810,357)
Proceeds from asset sales 426,754 11,260
----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 21,767 (799,097)
<PAGE>
FINANCING ACTIVITIES
Borrowings under revolving
credit facility 11,075,000 -
Payments under revolving
credit facility (11,375,000) (3,000,000)
Payments of other long-term debt (359,728) -
Dividends paid (202,890) (202,890)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES (862,618) (3,202,890)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 134,648 (1,311,305)
Cash and cash equivalents at
beginning of period 15,804 1,619,901
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 150,452 $ 308,596
=========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
TREADCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE A -- ORGANIZATION
Treadco, Inc. (the "Company") was organized in June 1991 as the successor
to the truck tire retreading and new truck tire sales business previously
conducted and developed by a wholly owned subsidiary of Arkansas Best
Corporation ("ABC"). In September 1991 the Company completed an initial
public offering. At March 31, 1997, ABC owned approximately 46% of the
Company's outstanding shares.
NOTE B -- FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information,
refer to the Company's financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1996.
NOTE C -- FEDERAL AND STATE INCOME TAXES
The following amounts and percentages, which relate to pre-tax income,
reflect the items included in income tax expense:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
<S> <C> <C>
Income tax (credit) at regular rates $(1,014,977) $ (624,860)
Percent (34.0)% (34.0)%
State taxes less federal benefits (119,791) (68,463)
Percent (4.0)% (3.7)%
Amortization of goodwill 35,200 35,200
Percent 1.2 % 1.9 %
Other items 3,126 1,881
Percent 0.1 % 0.1 %
---------- ----------
Income tax benefit $(1,096,442) $ (656,242)
Percent (36.7)% (35.7)%
========== ==========
</TABLE>
<PAGE>
NOTE D -- INVENTORIES
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
<S> <C> <C>
New tires and finished retreaded tires $ 23,645,344 $ 23,802,112
Materials and supplies 5,905,427 6,241,765
----------- -----------
$ 29,550,771 $ 30,043,877
=========== ===========
</TABLE>
NOTE E -- LITIGATION
Other than as discussed below, the Company is not a party to any pending
legal proceedings which management believes to be material to the financial
condition of the Company.
On October 30, 1995, the Company filed a lawsuit in Arkansas State Court,
alleging that Bandag, Inc. ("Bandag"), the Company's former retread
franchisor, and certain of its officers and employees violated Arkansas
statutory and common law in attempting to solicit the Company's employees to
work for Bandag or its competing franchisees and attempting to divert
customers from Treadco. At the Company's request, the Court entered a
Temporary Restraining Order barring Bandag, Treadco's former officers J. J.
Seiter, Ronald W. Toothaker, and Ronald W. Hawks and Bandag officers
Martin G. Carver and William Sweatman from soliciting or hiring Treadco's
employees to work for Bandag or any of its franchises, from diverting or
soliciting Treadco's customers to buy from Bandag franchises other than
Treadco, and from disclosing or using any of Treadco's confidential
information.
On November 8, 1995, Bandag and the other named defendants asked the State
Court to stop its proceedings pending a decision by the United States
District Court, Western District of Arkansas, on a Complaint to Compel
Arbitration filed by Bandag in the Federal District Court on November 8,
1995.
The Federal District Court has ruled that under the terms of the Company's
franchise agreements with Bandag, all of the issues involved in the Company's
lawsuit against Bandag are to be decided by arbitration. The Company and
Bandag are conducting discovery in preparation for the arbitration hearing. A
date for the arbitration hearing has been set for the latter part of 1997.
<PAGE>
NOTE F -- LONG-TERM DEBT
The Company has a revolving credit agreement with Societe Generale,
Southwest Agency, (the "Credit Agreement") providing for borrowings of up to
the lesser of $20 million or the applicable borrowing base. The Credit
Agreement expires in September 1998 unless renewed or extended. The Credit
Agreement was amended in March 1997 to revise certain financial covenants and
the Company's interest rate on LIBOR advances. Borrowings under the Credit
Agreement bear interest, at the Company's option, at 1 1/4% above the bank's
LIBOR rate, or at the higher of the bank's prime rate or the "federal funds
rate" plus 1/2%. At March 31, 1997 the interest rate on the Credit Agreement
was 6.2%. The Company pays a commitment fee of 3/8% on the unused amount
under the Credit Agreement. There was $10 million borrowed under the Credit
Agreement as of March 31, 1997.
NOTE G -- RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for computing primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of
Statement 128 on the calculation of primary earnings per share and fully
diluted earnings per share for these quarters is not expected to be material.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Significant Events
In August 1995, Bandag, Incorporated ("Bandag"), the Company's primary
tread rubber supplier and franchiser, informed the Company that it would not
renew the Company's eight franchise agreements which expired in the summer of
1996. The Company subsequently entered into an agreement with Oliver Rubber
Company ("Oliver") to be a supplier of equipment and related materials for
the eight franchised locations and any other Company facility which ceased
being a Bandag franchised location. Bandag subsequently advised the Company
that unless the Company used the Bandag retread process exclusively, Bandag
would not renew any of the Company's remaining franchise agreements when they
expired.
During 1996, the Company converted all of its production facilities that
were operated as Bandag retread franchises to Oliver licensed facilities. The
conversion was completed in phases throughout the first three quarters of
1996 with approximately one-third of its production facilities converted each
quarter.
The conversion resulted in up to two lost production days during each
change, some short-term operational inefficiencies and time lost as
production employees familiarized themselves with the new equipment.
Results of Operations
The Company is affected by seasonal fluctuations, which influence the
demand for retreads and new tires. The Company generally experiences reduced
demand for retreads and new tires in the first quarter due to more difficult
driving and tire maintenance conditions resulting from inclement weather. The
Company is also subject to cyclical national and regional economic
conditions.
The following table sets forth for the periods indicated a summary of sales
by category:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996 %
<S> <C> <C> <C>
SALES
Retread $ 13,684,827 $14,485,511 (5.5)%
New tires 16,443,687 15,026,435 9.4 %
Service 3,082,960 2,621,692 17.6 %
----------- ----------- -----
TOTAL $ 33,211,474 $32,133,638 3.4 %
=========== =========== =====
</TABLE>
<PAGE>
The following table sets forth for the periods indicated a summary of the
Company's operating costs and expenses as a percentage of sales.
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
<S> <C> <C>
COSTS AND EXPENSES
Materials and cost of new tires 70.1% 73.3%
Salaries and wages 18.7 16.4
Depreciation and amortization 4.1 2.7
Administrative and general 14.8 12.4
Amortization of goodwill 0.3 0.4
----- -----
108.0% 105.2%
===== =====
</TABLE>
Three Months Ended March 31, 1997 as Compared to Three Months
Ended March 31, 1996
Sales (including sales to affiliates) for the three months ended March 31,
1997 increased 3.4% to $33.2 million from $32.1 million for the three months
ended March 31, 1996. During the three months ended March 31, 1997, the
Company sold approximately 138,000 retreaded truck tires, an increase of 0.7%
from the three months ended March 31, 1996 and new tires sold increased 13.6%
to 92,000 tires. The average sales price for both retreads and new tires has
decreased as the Company faces new competition at many of its locations,
which has caused added pressure on selling prices. As anticipated, Bandag,
Inc. continues to target the Company's accounts which has caused difficulty
in retaining the national account business and in many cases the business
retained is at lower margins.
For the three months ended March 31, 1997, "same store" sales decreased
4.2% which was offset by a 7.6% increase from "new store" sales. "Same store"
sales include both production locations and sales locations that have been in
existence for the entire periods presented. "New store" sales resulted from
one new production facility and five new sales locations.
Operating costs and expenses were $35.9 million for the three months ended
March 31, 1997 compared to $33.8 million during the three months ended March
31, 1996. The increase in sales and operating costs and expenses resulted in
operating loss of $2.7 million compared to operating loss of $1.7 million
during the three months ended March 31, 1996. The Company had a net loss of
$1.9 million, or $.37 net loss per share, compared to net loss of $1.2
million or $.23 net loss per share during the three months of March 31, 1996.
Average shares outstanding were 5.1 million for each of the three months
ended March 31, 1997 and 1996.
Operating costs and expenses as a percent of sales were 108.0% for the
three months ended March 31, 1997 compared to 105.2% for the three months
ended March 31, 1996. Materials and cost of new tires as a percent of sales
decreased to 70.1% for the three months ended March 31, 1997 from 73.3%
during the three months ended March 31, 1996, resulting primarily from lower
tread rubber costs with Oliver. Salaries and wages as a percent of sales
increased to 18.7% for the three months ended March 31, 1997 from 16.4%
during the three months ended March 31, 1996. The increase resulted from a
<PAGE>
greater number of employees added for new locations, cost-of-living raises,
and the lower selling price per retread tire. Depreciation and amortization
expense as a percent of revenue increased to 4.1% for the three months ended
March 31, 1997 from 2.7% for the three months ended March 31, 1996 primarily
as a result of the acquisition during 1996 of new retread production
equipment in connection with the conversion to Oliver and the addition of 100
new replacement service and delivery trucks. All existing precure retread
equipment, some of which was fully depreciated, was replaced with new Oliver
equipment, resulting in a higher depreciable cost basis. Administrative and
general expenses as a percent of sales increased to 14.8% for the three
months ended March 31, 1997 from 12.4% for the three months ended March 31,
1996. The increase resulted from several factors, including expenses related
to employee insurance costs and bad debt expenses.
Interest expense for the three months ended March 31, 1997 was $310,000
compared to $160,000 for the three months ended March 31, 1996. The increase
resulted primarily from the increase in debt outstanding relating to
equipment purchases.
The difference between the effective tax rate for the three months ended
March 31, 1997 and the federal statutory rate resulted primarily from state
income taxes, amortization of goodwill and other nondeductible expenses (see
Note C to the unaudited consolidated financial statements).
Liquidity and Capital Resources
The ratio of current assets to current liabilities was 2.43:1 at March 31,
1997 and December 31, 1996. Net cash provided by operating activities was
$975,000 for the three months ended March 31, 1997, compared to net cash
provided of $2.7 million for the three months ended March 31, 1996. The
decrease is due primarily to the changes in income taxes refundable and
increase in the Company's net loss offset in part by increased depreciation
and amortization.
The Company is a party to a revolving credit facility with Societe Generale
(the "Credit Agreement") providing for borrowings of up to the lesser of $20
million or the applicable borrowing base. The Company's borrowing base under
the Credit Agreement is equal to 80% of its eligible accounts receivable and
50% of its inventory consisting of tire casings, new tires and finished
retreads. At March 31, 1997, the borrowing base was $27.4 million. The Credit
Agreement expires in September 1998, unless renewed or extended.
The Credit Agreement contains various covenants which limit, among other
things, dividends, disposition of receivables, indebtedness and investments,
as well as requiring the Company to meet certain financial tests. The Credit
Agreement was amended in March 1997 to revise certain financial covenants and
the Company's interest rate on LIBOR advances. The Company was in compliance
with the revised covenants at March 31, 1997.
Management believes that, based upon the Company's current levels of
operations, borrowings available under the Credit Agreement and cash flow
from operations will be sufficient to finance current and future operations,
including the capital expenditure program, and meet all present and future
debt service requirements.
<PAGE>
Forward Looking Statements
The foregoing management discussion contains forward-looking statements
that are based on current expectations and are subject to a number of risks
and uncertainties. Actual results could differ materially from current
expectations due to a number of factors, including general economic
conditions; competitive initiatives and pricing pressures; availability and
cost of capital; shifts in market demand; weather conditions; government
regulations; the performance and needs of industries served by Treadco;
actual future costs of operating expenses such as the price of oil; self-
insurance claims and employee wages and benefits; and the timing and amount
of capital expenditures.
<PAGE>
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is named as a defendant in legal actions,
the majority of which arise out of the normal course of its business. Other
than as discussed below, the Company is not a party to any pending legal
proceeding which the Company's management believes to be material to the
financial condition of the Company. The Company generally maintains liability
insurance against risks arising out of the normal course of its business.
On October 30, 1995, the Company filed a lawsuit in Arkansas State Court,
alleging that Bandag and certain of its officers and employees violated
Arkansas statutory and common law in attempting to solicit the Company's
employees to work for Bandag or its competing franchisees and attempting to
divert customers from Treadco. At the Company's request, the Court entered a
Temporary Restraining Order barring Bandag, Treadco's former officers J. J.
Seiter, Ronald W. Toothaker, and Ronald W. Hawks and Bandag officers Martin
G. Carver and William Sweatman from soliciting or hiring Treadco's employees
to work for Bandag or any of its franchises, from diverting or soliciting
Treadco's customers to buy from Bandag franchises other than Treadco, and
from disclosing or using any of Treadco's confidential information.
On November 8, 1995, Bandag and the other named defendants asked the State
Court to stop its proceedings pending a decision by the United States
District Court, Western District of Arkansas, on a Complaint to Compel
Arbitration filed by Bandag in the Federal District Court on November 8,
1995.
The Federal District Court has ruled that under the terms of the Company's
franchise agreements with Bandag, all of the issues involved in the Company's
lawsuit against Bandag are to be decided by arbitration. The Company and
Bandag are conducting discovery in preparation for the arbitration hearing. A
date for the arbitration hearing has been set for the latter part of 1997.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 10.1 - Seventh Amendment dated as of March 27, 1997 to the
Credit Agreement dated as of August 16, 1991 between Treadco, Inc.
and Societe Generale, Southwest Agency.
(b) Reports on Form 8-K
None
<PAGE>
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 hereunto duly authorized.
TREADCO, INC.
(Registrant)
Date: May 13, 1997 s/David E. Loeffler
David E. Loeffler
Vice President-Treasurer, Chief
Financial Officer
and Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
TREADCO, INC.
The following exhibits are filed with this report.
Exhibit
No.
10.1 Seventh Amendment dated as of March 27, 1997 to the Credit Agreement
dated as of August 16, 1991 between Treadco, Inc. and Societe
Generale, Southwest Agency.
<PAGE>
TREADCO, INC.
SEVENTH AMENDMENT AGREEMENT
This Seventh Amendment Agreement dated as of March 27, 1997
("Agreement") is by and between Treadco, Inc., a Delaware corporation
("Borrower"), and Societe Generale, Southwest Agency ("Bank").
INTRODUCTION
A. Pursuant to the Credit Agreement dated as of August 16, 1991, as
amended by the First Amendment Agreement dated as of September 30, 1991, the
Second Amendment Agreement dated as of November 30, 1993, the Third Amendment
Agreement dated as of November 28, 1994, the Fourth Amendment Agreement dated
as of March 14, 1995, the Fifth Amendment Agreement dated as of August 31,
1995, and the Sixth Amendment Agreement dated as of June 28, 1996 (as
amended, the "Credit Agreement"), each by and between the Borrower and the
Bank, the Bank agreed to provide Advances to the Borrower in an aggregate
principal amount outstanding at any time of up to $20,000,000.
B. The Borrower has requested that the Bank amend the facility to
provide for a covenant modification as set forth herein.
THEREFORE, in consideration of the premises and the mutual agreements,
representations and warranties set forth herein, and for other good and
valuable consideration, the Borrower and the Bank hereby agree as follows:
Section 1. Definitions; References. Unless otherwise defined in this
Agreement, each capitalized term used in this Agreement has the meaning given
to such term in the Credit Agreement.
Section 2. Amendment. The Credit Agreement is hereby amended as
follows:
(a) Section 1.1 is amended by deleting the phrase" plus three quarters
of one percent (3/4%)" in the defined term "LIBO Rate" and by substituting
therefor the phrase "plus one and one quarter percent (1 1/4%)".
(b) Section 7.1(c) is amended by restating such Section in its entirety
as follows:
(c) The Borrower will not permit the ratio of its (i) income from
operation before interest and taxes to (ii) consolidated interest expenses to
be less than: (A) .75 to 1.0 for the three month period ending as of the last
Business Day of June, 1997, (B) 1.5 to 1.0 for the six month period ending as
of the last Business Day of September, 1997, (C) 1.5 to 1.0 for the nine
month period ending as of the last Business Day of December, 1997, and (D)
2.0 to 1.0 for the twelve month period ending as of the last Business Day of
each calendar quarter thereafter commencing with the quarter ending March,
1998.
Section 3. Representations and Warranties. The Borrower represents
and warrants to the Bank that:
<PAGE>
(a) the Liens created by the Security Agreement in favor of the Bank
are valid and subsisting;
(b) any representations and warranties set forth in the Credit
Agreement, as amended by this Agreement, and in the Security Agreement are
true and correct as of the date of this Agreement;
(c) the execution, delivery and performance of the Credit Agreement, as
amended by this Agreement, is within the power and authority of the Borrower
and has been duly authorized by appropriate proceedings and constitute a
valid legally binding agreement of the Borrower enforceable in accordance
with its terms; and
(d) as of the date of this Agreement, no Default has occurred and is
continuing.
Section 4. Effectiveness. This Agreement shall become effective as
of the date hereof when the Bank shall have received a counterpart of this
Agreement, together with a Secretary's Certificate of the Borrower certifying
the incumbency and true signature of the officer of the Borrower authorized
to sign this Agreement.
SECTION 5. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 6. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall constitute one and the same instrument.
Section 7. Entire Agreement. PURSUANT TO SECTION 26.02 OF THE TEXAS
BUSINESS AND COMMERCE CODE, A LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN
THE LOAN AGREEMENT EXCEEDS $50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE
LOAN AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY TO BE BOUND OR THAT
PARTY'S AUTHORIZED REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN
AGREEMENT, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED
BY AND MERGED INTO THE LOAN AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 27th day of March, 1997.
TREADCO, INC.
s/ Donald L. Neal
---------------------------------------
By: Donald L. Neal
Title: Sr Vice President - CFO
SOCIETE GENERAL, SOUTHWEST AGENCY
s/ Louis P. Laville, III
----------------------------------------
By: Louis P. Laville, III
Title: Vice President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TREADCO,
INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000876948
<NAME> TREADCO, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 150,452
<SECURITIES> 0
<RECEIVABLES> 18,760,006
<ALLOWANCES> 1,358,839
<INVENTORY> 29,550,771
<CURRENT-ASSETS> 55,759,346
<PP&E> 46,600,745
<DEPRECIATION> 14,787,071
<TOTAL-ASSETS> 101,744,650
<CURRENT-LIABILITIES> 22,938,902
<BONDS> 18,873,715
0
0
<COMMON> 50,723
<OTHER-SE> 59,805,218
<TOTAL-LIABILITY-AND-EQUITY> 101,744,650
<SALES> 33,211,474
<TOTAL-REVENUES> 33,211,474
<CGS> 23,260,210
<TOTAL-COSTS> 35,862,025
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 715,144
<INTEREST-EXPENSE> 309,630
<INCOME-PRETAX> (2,985,225)
<INCOME-TAX> (1,096,442)
<INCOME-CONTINUING> (1,888,783)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,888,783)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
<PAGE>
</TABLE>
