<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, 1998
-------------------------
[ ] 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)
<TABLE>
<S> <C> <C>
Delaware 7534 and 5531 71-0706271
- ---------------------------------- -------------------------------------------- ------------------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
1101 South 21st Street
Fort Smith, Arkansas 72901
(501) 788-6400
--------------------------------------------
(Address, including zip code, and
telephone number, including area code, of
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> 2
TREADCO, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements
Balance Sheets --
March 31, 1998 and December 31, 1997................................................. 3
Statements of Operations --
For the Three Months Ended March 31, 1998 and 1997................................... 5
Statements of Cash Flows --
For the Three Months Ended March 31, 1998 and 1997................................... 6
Notes to Financial Statements -- March 31, 1998 ..................................... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................................. 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ................................................................... 13
ITEM 2. Changes in Securities ............................................................... 13
ITEM 3. Defaults Upon Senior Securities ..................................................... 13
ITEM 4. Submission of Matters to a Vote of Security Holders ................................. 13
ITEM 5. Other Information ................................................................... 13
ITEM 6. Exhibits and Reports on Form 8-K .................................................... 14
SIGNATURES ..................................................................................... 15
EXHIBIT INDEX .................................................................................... 16
</TABLE>
2
<PAGE> 3
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TREADCO, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
------------ ---------------
(UNAUDITED) (NOTE)
ASSETS
CURRENT ASSETS
Accounts receivable:
<S> <C> <C>
Trade receivables, less allowance for
doubtful accounts (1998 -- $1,682,604;
1997 -- $1,719,389 ) ............................................... $ 19,127,023 $ 19,802,749
Other (primarily national accounts
and volume rebates) ................................................. 4,216,585 5,734,366
Due from affiliates ..................................................... 181,089 90,305
Inventories ............................................................. 28,195,505 27,326,046
Prepaid expenses ........................................................ 547 3,175
Federal and state income taxes refundable ............................... 1,501,143 1,221,681
Deferred income taxes ................................................... 1,466,469 1,466,469
------------- -------------
TOTAL CURRENT ASSETS ................................................ 54,688,361 55,644,791
PROPERTY, PLANT AND EQUIPMENT
Land..................................................................... 4,000,877 4,000,877
Structures .............................................................. 13,282,019 13,273,823
Retreading and other equipment .......................................... 30,901,163 32,048,910
------------- -------------
48,184,059 49,323,610
Less allowances for depreciation ........................................ (19,166,141) (17,994,542)
------------- -------------
29,017,918 31,329,068
OTHER ASSETS
Goodwill, less amortization
(1998 -- $4,024,303; 1997 -- $3,908,806) ............................... 12,578,656 12,694,153
Noncompete agreements, less amortization
(1998 -- $1,197,395; 1997 -- $1,132,082) ............................... 108,854 174,167
Construction in progress ................................................ 641,671 --
Other ................................................................... 811,693 616,003
------------- -------------
14,140,874 13,484,323
------------- -------------
$ 97,847,153 $ 100,458,182
============= =============
</TABLE>
3
<PAGE> 4
TREADCO, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
------------ ------------
(UNAUDITED) (NOTE)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Bank overdraft ............................. $ 901,211 $ 125,148
Trade accounts payable ..................... 17,915,795 17,144,202
Due to affiliate ........................... 703,221 731,711
Accrued salaries, wages and other expenses . 7,645,924 8,066,536
Current portion of long-term debt .......... 2,278,889 2,304,691
------------ ------------
TOTAL CURRENT LIABILITIES .............. 29,445,040 28,372,288
LONG-TERM DEBT, less current portion ............ 9,870,000 12,883,763
OTHER LIABILITIES ............................... 95,206 89,860
DEFERRED INCOME TAXES ........................... 229,806 277,703
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 .......................... 12,533,032 13,160,499
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ............. 58,207,101 58,834,568
COMMITMENTS AND CONTINGENCIES
$ 97,847,153 $100,458,182
============ ============
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from 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.
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
TREADCO, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
------------ ------------
(UNAUDITED)
SALES
<S> <C> <C>
Non-affiliates ...................... $ 36,554,973 $ 32,094,010
Affiliates .......................... 949,975 1,117,464
------------ ------------
37,504,948 33,211,474
COSTS AND EXPENSES
Materials and cost of new tires ..... 24,676,323 23,260,210
Salaries and wages .................. 7,010,541 6,209,620
Depreciation and amortization ....... 1,487,801 1,353,811
Administrative and general .......... 4,906,777 4,922,887
------------ ------------
38,081,442 35,746,528
------------ ------------
OPERATING LOSS ........................... (576,494) (2,535,054)
OTHER INCOME
Interest income ..................... 11,121 2,357
Gain on asset sales ................. 22,725 3,548
Other ............................... 51,139 34,363
------------ ------------
84,985 40,268
OTHER EXPENSES
Interest ............................ 299,010 309,630
Amoritzation of goodwill ............ 115,497 115,497
Amortization of noncompete
agreements....................... 65,312 65,312
------------ ------------
479,819 490,439
LOSS BEFORE INCOME TAXES ................. (971,328) (2,985,225)
FEDERAL AND STATE INCOME TAXES (CREDIT)
Current ............................. (295,965) (1,148,303)
Deferred ............................ (47,897) 51,861
------------ ------------
(343,862) (1,096,442)
------------ ------------
NET LOSS ................................. $ (627,466) $ (1,888,783)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE .. $ (0.12) $ (0.37)
============ ============
CASH DIVIDENDS PAID PER COMMON SHARE ..... $ -- $ .04
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
TREADCO, INC.
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
------------ ------------
(UNAUDITED)
OPERATING ACTIVITIES
<S> <C> <C>
Net loss .......................................... $ (627,466) $ (1,888,783)
Adjustments to reconcile net loss to
net cash provided (used) by operating activities:
Depreciation and amortization .................. 1,487,801 1,353,811
Amortization of goodwill ....................... 115,497 115,497
Amortization of noncompete agreements .......... 65,312 65,312
Provision for losses on accounts receivable .... 385,844 715,144
Provision (credit) for deferred income taxes ... (47,897) 51,861
Gain on asset sales ............................ (22,725) (3,548)
Changes in operating assets and liabilities:
Receivables ................................. 2,210,919 2,133,849
Inventories and prepaid expenses ............ (1,159,327) 520,865
Federal and state income taxes refundable ... (279,462) (1,170,583)
Other assets ................................ 38,355 (3,220)
Trade accounts payable, accrued expenses .... 195,777 (604,702)
Due to/from affiliates ........................ (119,274) (314,407)
Other liabilities ............................. 5,346 4,403
NET CASH PROVIDED BY OPERATING ACTIVITIES ............ 2,248,700 975,499
------------ ------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ........ (821,181) (404,987)
Construction in progress .......................... (641,671) --
Proceeds from asset sales ......................... 22,725 426,754
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES ............................... (1,440,127) 21,767
FINANCING ACTIVITIES
Borrowings under revolving credit facility ........ 14,400,000 11,075,000
Payments under revolving credit facility .......... (15,400,000) (11,375,000)
Principal payments on other long-term debt
and capitalized lease obligations .............. (584,636) (359,728)
Dividends paid .................................... -- (202,890)
Net increase in cash overdrafts ................... 776,063 --
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES ................ (808,573) (862,618)
------------ ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS ............................... -- 134,648
Cash and cash equivalents at beginning of period .. -- 15,804
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ................................... $ -- $ 150,452
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
TREADCO, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
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,
1998, 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, 1998, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. 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, 1997.
On March 31, 1998, the Company and Bridgestone/Firestone, Inc. ("Bridgestone")
signed an agreement whereby Bridgestone would take over operations of the
Company's Oncor retreading facility located in Hazelwood, MO. The Company will
continue to market the Oncor retread tires produced at this plant. The book
value of the assets sold to Bridgestone in connection with the transaction was
approximately equal to the related debt obligation to Bridgestone of $1.8
million which was eliminated by the transaction. Accordingly, no gain or loss
was recognized by the Company on the transaction.
NOTE C -- INVENTORIES
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
-------------- --------------
<S> <C> <C>
New tires and finished retreaded tires .................................... $ 23,190,188 $ 22,391,595
Materials and supplies .................................................... 5,005,317 4,934,451
-------------- --------------
$ 28,195,505 $ 27,326,046
============== ==============
</TABLE>
7
<PAGE> 8
TREADCO, INC.
NOTES TO FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
NOTE D - NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
----------- -----------
(UNAUDITED)
NUMERATOR:
Numerator for basic and diluted earnings
per share - loss available for
<S> <C> <C>
common stockholders ..................... $ (627,466) $(1,888,783)
----------- -----------
DENOMINATOR:
Denominator for basic earnings per share -
Weighted-average shares ................. 5,072,225 5,072,255
Effect of dilutive securities:
Employee stock options .................. -- --
----------- -----------
Dilutive potential common shares ........... -- --
Denominator for diluted earnings per share -
adjusted weighted-average shares
and assumed conversions ................. 5,072,255 5,072,255
----------- -----------
Basic and diluted loss per common share ....... $ (0.12) $ (0.37)
----------- -----------
</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 results of
operations, cash flows or 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
franchisees, from diverting or soliciting Treadco's customers to buy from Bandag
franchisees 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
8
<PAGE> 9
TREADCO, INC.
NOTES TO FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
preparation for the arbitration hearing. The arbitration hearing is expected to
be held during 1998.
The Company will as a part of the arbitration process submit a substantial claim
against Bandag. Due to the uncertainties inherent in the arbitration process,
the Company has not recorded any claim recovery in the accompanying financial
statements.
NOTE F -- LONG-TERM DEBT
The Company is a party to a revolving credit facility 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 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, 1998, the borrowing base was $27.3 million.
Credit Agreement advances bear interest at variable rates determined under the
Credit Agreement. At March 31, 1998, the weighted average interest rate on
advances under the Credit Agreement was 6.94%. The Company pays a commitment fee
on the unused portion of the Credit Agreement at variable rates determined under
the Credit Agreement. At March 31, 1998, the commitment fee was .375%.
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 Company was in
compliance with the covenants at March 31, 1998.
NOTE G - RECENT ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of CPA's ("AuSEC") issued Statement of Position ("SOP"), Accounting
for Costs of Computer Software Developed For or Obtained For Internal Use. Under
the SOP, qualifying computer costs incurred during the "application development
stage" are required to be capitalized and amortized to income over the
software's estimated useful life. The SOP will be effective for the Company on
January 1, 1999. The SOP will result in capitalization of costs related to
internal computer software development. All such costs are currently expensed.
The amount of costs capitalized within any period will be dependent on the
nature of software development activities and projects in that period.
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting for Comprehensive Income. The Statement requires the classification of
components of other comprehensive income by their nature in a financial
statement and display of the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital in the
financial statements. The Company adopted FASB Statement No. 130 on January 1,
1998, however this statement had no impact on the Company's financial statements
since there are no items that are considered comprehensive income.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIGNIFICANT EVENTS
On March 31, 1998, the Company and Bridgestone/Firestone, Inc. ("Bridgestone")
signed an agreement whereby Bridgestone would take over operations of the
Company's Oncor retreading facility located in Hazelwood, MO. The Company will
continue to market the Oncor retread tires produced at this plant.
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
1998 1997
----------------- ----------------
(UNAUDITED)
SALES
<S> <C> <C>
Retread ........................................................ $ 15,503,889 $ 13,684,827
New tires....................................................... 18,289,075 16,443,687
Service ........................................................ 3,711,984 3,082,960
----------------- ----------------
37,504,948 33,211,474
================= ================
</TABLE>
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
1998 1997
----------------- ----------------
(UNAUDITED)
COSTS AND EXPENSES
<S> <C> <C>
Materials and cost of new tires ................................ 65.8% 70.0%
Salaries and wages.............................................. 18.7 18.7
Depreciation and amortization................................... 4.0 4.1
Administrative and general...................................... 13.0 14.8
----------------- ----------------
101.5% 107.6%
================= ================
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Continued
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1998 as Compared to Three Months Ended March 31,
1997
Sales (including sales to affiliates) for the three months ended March 31, 1998
increased 12.9% to $37.5 million from $33.2 million for the three months ended
March 31, 1997. Retread sales for the 1998 first quarter increased primarily due
to the higher volume of units sold and a small increase in the sales price per
unit. New tire sales for the 1998 first quarter were higher due to increased
unit sales offset in part by a lower sales price per unit on new tires sold to
national accounts. Service revenues increased due to the Company's continued
emphasis on its service operations. During the three months ended March 31,
1998, the Company sold approximately 154,000 retread truck tires, an increase of
12.1% from the three months ended March 31, 1997 and new tires sold increased
12.0% to 103,000 tires.
For the three months ended March 31, 1998, "same store" sales increased 12.7%
and "new store" sales accounted for 0.2% of the increase from the 1997 first
quarter. "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 new sales location.
Operating costs and expenses were $38.1 million for the three months ended March
31, 1998 compared to $35.7 million during the three months ended March 31, 1997.
For the three months ended March 31, 1998 the Company had an operating loss of
$576,000 compared to an operating loss of $2.5 million during the three months
ended March 31, 1997. The Company had a net loss of $627,000, or a $0.12 loss
per share, compared to a net loss of $1.9 million, or a $0.37 loss per share
during the three months of March 31, 1997.
Operating costs and expenses as a percent of sales were 101.5% for the three
months ended March 31, 1998 compared to 107.6% for the three months ended March
31, 1997. Materials and cost of new tires as a percent of sales decreased to
65.8% for the three months ended March 31, 1998 from 70.0% during the three
months ended March 31, 1997, resulting primarily from lower new tire costs and
improved production efficiency. Administrative and general costs as a percent of
sales decreased to 13.1% for the three months ended March 31, 1998 compared to
14.8% for the three months ended March 31, 1997. The decrease resulted from
several factors, including expenses related to employee insurance costs and bad
debt expense and also higher sales.
Interest expense for the three months ended March 31, 1998 was $299,000 compared
to $310,000 for the three months ended March 31, 1997. The decrease resulted
primarily from a reduction in debt outstanding.
The difference between the effective tax rate for the three months ended March
31, 1998 and the federal statutory rate resulted primarily from state income
taxes and amortization of nondeductible goodwill.
Average shares outstanding were 5.1 million for each of the three months ended
March 31, 1998 and 1997.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Continued
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The ratio of current assets to current liabilities was 1.86:1 at March 31, 1998
and 1.83:1 at December 31, 1997. Net cash provided by operating activities was
$1.4 million for the three months ended March 31, 1998, compared to net cash
provided of $1.0 million for the three months ended March 31, 1997.
The Company is a party to a revolving credit facility with Societe Generale,
Southwest Agency (the "Credit Agreement") providing for borrowings of up to the
lesser of $20 million or the applicable borrowing base. At March 31, 1998, the
amount borrowed under the Credit Agreement was $3 million.
Management believes that, based upon the Company's current levels of operations,
capital resources, 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 scheduled debt service
requirements.
YEAR 2000
Management of the Company has considered the impact of the Year 2000 on its
business operations. The impact on the Company's financial condition and cash
flows is expected to be immaterial for all years. The Company has not identified
any significant risks or uncertainties associated with the Year 2000 rollover.
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.
12
<PAGE> 13
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than as discussed below, the Company is not a party to any pending legal
proceedings which management believes to be material to the results of
operations, cash flows or 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
franchisees, from diverting or soliciting Treadco's customers to buy from Bandag
franchisees 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. The
arbitration hearing is expected to be held during 1998.
The Company will as a part of the arbitration process submit a substantial claim
against Bandag. Due to the uncertainties inherent in the arbitration process,
the Company has not recorded any claim recovery in the accompanying financial
statements.
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
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
Exhibit 27 -- Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
14
<PAGE> 15
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 12, 1998 /s/ David E. Loeffler
---------------------------------
David E. Loeffler
Vice President-Treasurer,
Chief Financial Officer
and Principal Accounting Officer
15
<PAGE> 16
EXHIBIT INDEX
The following exhibits are filed with this report.
EXHIBIT
NO.
27 Financial Data Schedule
<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, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000876948
<NAME> TREADCO, INC.
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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0
0
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</TABLE>
