1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Brad Ragan, Inc.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
2
BRAD RAGAN, INC.
EXECUTIVE OFFICES: 4404-G STUART ANDREW BOULEVARD
CHARLOTTE, NORTH CAROLINA 28217
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 1995
The Annual Meeting of Shareholders of Brad Ragan, Inc., will be held
Thursday, May 25, 1995, at 11:30 A.M., in the "Yorkmont" Room of the Embassy
Suites Hotel, 4800 South Tryon Street, Charlotte, North Carolina, for the
following purposes:
1. To elect a board of six Directors of the Company.
2. To transact such other business as may be brought before the
meeting.
Shareholders of record at the close of business on March 31, 1995, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Ronald J. Carr
Secretary
Charlotte, North Carolina
April 14, 1995
If you do not intend to be present at the meeting, please sign, date and return
the accompanying proxy promptly, so that your shares of Common Stock may be
represented and voted at the meeting. A return envelope is enclosed for your
convenience.
3
BRAD RAGAN, INC.
EXECUTIVE OFFICES: 4404-G STUART ANDREW BOULEVARD
CHARLOTTE, NORTH CAROLINA 28217
PROXY STATEMENT
This Proxy Statement and the accompanying Proxy Card are first being
sent to shareholders on April 14, 1995, in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders of Brad Ragan, Inc. (the
"Company"), to be held on Thursday, May 25, 1995, and at any adjournment
thereof.
A copy of the Company's Annual Report to Shareholders (the "Annual
Report") for the year ended December 31, 1994, is enclosed with this Proxy
Statement. The Annual Report is not considered part of the proxy solicitation
materials.
GENERAL INFORMATION
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be
borne by the Company. In addition to solicitation by mail, arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy materials to their principals, and the Company will reimburse them
for their reasonable expenses in so doing.
The Board of Directors has fixed March 31, 1995, as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. On March 31, 1995, there were 2,190,619 outstanding shares of
Common Stock of the Company, each entitled to one vote. According to the laws
of North Carolina under which the Company is incorporated, shareholders do not
have cumulative voting rights in connection with the election of directors as
long as the Company has securities registered under the Securities Exchange
Act of 1934 at the record date for determining shareholders eligible to vote at
the meeting. Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. With regard to the election of directors, votes may be cast in favor
or withheld. Votes that are withheld will be excluded entirely from the vote
and will have no effect, although they will be counted for purposes of
establishing the presence of a quorum. Under the rules of the American Stock
Exchange, Inc., brokers who hold shares in street name for customers have
authority to vote on certain items when they have not received instructions
from beneficial owners. Brokers that do not receive instructions are entitled
to vote on the election of directors.
Where a choice is specified on any Proxy as to the vote on any matter
to come before the meeting, the Proxy will be voted in accordance with such
specification. If no specification is made but the Proxy is properly signed,
the shares represented thereby will be voted in favor of each proposal. Such
Proxies, whether submitted by shareholders of record or by brokers holding
shares in street name for their customers ("broker non-votes"), will be voted
in favor of nominees for directors. Broker non-votes will not be counted
either way in voting on other matters (where direction of beneficial owners is
required) and, therefore, will have the effect of negative votes.
4
Any shareholder submitting the accompanying Proxy has the right to
revoke it by notifying the Secretary of the Company in writing at any time
prior to the voting of the Proxy. A Proxy is suspended if the person giving
the Proxy attends the meeting and elects to vote in person.
Management is not aware that any matters, other than those specified
above, will be presented for action at the meeting, but, if any other matters
do properly come before the meeting, the persons named as agents in the Proxy
will vote such matters in accordance with their best judgment.
ELECTION OF DIRECTORS
The Bylaws provide that the number of Directors shall be not less than
five nor more than fifteen. The Board of Directors has determined that the
Board should be comprised of six members and has nominated the following six
individuals to serve as Directors until the next Annual Meeting and until their
successors shall have been elected and shall qualify. Unless authority is
withheld, it is intended that Proxies received in response to this solicitation
will be voted in favor of the following six nominees, all of whom are currently
Directors:
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER POSITIONS AND OFFICES WITH THE COMPANY SINCE
- - - --------------------------------------------------------------------------------
Samir F. Gibara, 55 (1) (3) (4) 1994
Chairman of the Board of the Company;
Executive Vice President of The
Goodyear Tire & Rubber Company ("Goodyear"),
Akron, Ohio
William P. Brophey, 57 (3) (5) 1988
Vice Chairman of the Board,
President and Chief Executive Officer
of the Company
Ronald J. Carr, 50 (3) (5) 1992
Vice President - Finance, Chief Financial
Officer, Secretary and Treasurer
of the Company
Charles A. Bethel, Jr., 74 (1) (2) (4) (5) 1983
Retired (former Vice President,
Original Equipment Tire Sales of
Goodyear), Advance, North Carolina
Richard D. Pearson, 60 (1) (2) (4) 1978
Owner and manager of companies
involved in selling and leasing
heavy duty trucks and other heavy
equipment, Franklin Lakes, New Jersey
2
5
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER POSITIONS AND OFFICES WITH THE COMPANY SINCE
- - - --------------------------------------------------------------------------------
Richard E. Sorensen, 52 (2) (3) (5) 1977
Dean of the College of Business,
Virginia Polytechnic Institute and
State University, Blacksburg, Virginia
- - - --------------------------------------------------------------------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Nominating Committee.
(4) Member of Compensation Committee.
(5) Member of Litigation Committee.
Mr. Samir F. Gibara has been employed by Goodyear for more than 30
years. He has been Executive Vice President responsible for North American
Tires since May of 1994. Prior to that, he was Vice President, Strategic
Planning and Business Development, and Acting Chief Financial Officer. He was
elected a Director of the Company and became Chairman of the Board of Directors
on May 3, 1994.
Mr. William P. Brophey was elected President and Chief Executive
Officer of the Company effective October 1, 1988, and Vice Chairman of the
Board on March 10, 1994. He has over 35 years of service with Goodyear and has
held numerous field and corporate positions in wholesale, retail, credit, sales
and marketing, including being named General Marketing Manager, Commercial Tire
Products, in 1984. Prior to that, he was Region Manager of Goodyear's Great
Lakes Region.
Mr. Ronald J. Carr was elected Vice President - Finance and Chief
Financial Officer, Secretary and Treasurer effective May 1, 1992. He has over
25 years of service with Goodyear and has held various financial positions in
Goodyear's General Products and Tire Divisions and at Motor Wheel Corporation,
a former Goodyear subsidiary. Most recently he was Manager, Financial
Information, for Goodyear's North American Tire Division.
Mr. Charles A. Bethel, Jr., was employed by Goodyear from 1946 until
his retirement on August 31, 1983. At that date he was Vice President,
Original Equipment Tire Sales, a position held since 1977.
Mr. Richard D. Pearson is the owner and manager of a number of
companies that are involved in the sale and leasing of heavy duty trucks and
other heavy equipment, a business in which he has been engaged for more than 25
years.
Dr. Richard E. Sorensen has been Dean of the College of Business,
Virginia Polytechnic Institute and State University, since 1982. Prior to
that, he was employed in a teaching capacity and as Dean of the College of
Business at Appalachian State University.
It is not contemplated that any of the nominees will be unable or
unwilling for good cause to serve; but, if that should occur, it is the
intention of the agents named in the Proxy to vote for such other person or
persons to the office of Director as the Nominating Committee of the Board of
Directors may recommend.
3
6
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of April 1, 1995, to the knowledge of management, the only persons
owning beneficially more than five percent (5%) of the Company's Common Stock,
its only class of voting security, and the shares of Common Stock owned by
Executive Officers and Directors are as follows:
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OF CLASS
- - - -----------------------------------------------------------------------------------------------
The Goodyear Tire & Rubber Company 1,633,695 (1) 74.58%
1144 East Market Street
Akron, OH
Dimensional Fund Advisors, Inc. 128,300 (2) 5.86%
1299 Ocean Avenue
11th Floor
Santa Monica, CA
Gabelli & Company, Inc. 313,800 (3) 14.32%
GAMCO Investors, Inc.
Gabelli Funds, Inc.
Gabelli Performance Partnership
GLI, Inc.
655 Third Avenue
New York, NY
All Executive Officers and Directors 100 Less than 1%
of the Company as a Group (8 persons)
Samir F. Gibara (0)
William P. Brophey (0)
Ronald J. Carr (0)
Charles A. Bethel (100)
Richard D. Pearson (0)
Richard E. Sorensen (0)
James E. Owens (0)
Ronald P. Rumble (0)
- - - -----------------------------------------------------------------------------------------------
(1) Based upon information provided by Goodyear.
(2) Based upon information provided by Dimensional Fund Advisors, Inc.,
("Dimensional"), and as reflected in a Schedule 13-G dated January 31,
1995, and filed with the Securities and Exchange Commission showing
beneficial ownership as of December 31, 1994, Dimensional, a
registered investment advisor, is deemed to have beneficial ownership
as of December 31, 1994, of the shares reported, all of which shares
are held in portfolios of DFA Investment Dimensions Group, Inc., a
registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional serves as
investment manager. Dimensional disclaims beneficial ownership of all
such shares.
(3) As reflected in a Schedule 13-D, dated June 9, 1993 (Amendment #9),
filed with the Securities and Exchange Commission, and other
information supplied by the beneficial owner.
4
7
Based solely on a review of copies of reports filed with the SEC since
January 1, 1994, and of written representations by certain officers and
directors, all persons subject to the reporting requirements of Section 16(a)
filed the required reports on a timely basis, except as follows: Samir F.
Gibara - Form 3 reporting that he has no beneficial ownership of any shares of
the Company's common stock. All reports known to the Company required to be
filed as of the date of this Proxy Statement have been filed.
5
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides a three-year summary of compensation for
the Named Executive Officers of the Company:
Long Term Compensation
---------------------------------------------
Awards Payouts
--------------------- -------------------
Annual Compensation Long
----------------------------- Securities Term
Other Under- Incen- All
Annual Restricted lying tive Other
Compen- Stock Options/ Plan Compen-
Salary Bonus sation Awards SAR's Payouts sation
Name and Principal Position Year ($) ($) (1) ($) (2) ($) (#) (3) ($) ($) (4)
- - - ------------------------------------------------------------------------------------------------------------------------
William P. Brophey 1994 162,955 40,638 0 0 3,300 0 4,500
Vice Chairman, President, 1993 152,718 41,700 0 0 3,500 0 4,497
and Chief Executive Officer 1992 145,798 19,875 0 0 3,500 0 4,364
Ronald J. Carr (5) 1994 130,115 21,020 0 0 1,750 0 3,880
Vice President - Finance, 1993 121,500 21,600 0 0 2,300 0 3,985
Secretary, Treasurer and 1992 81,000 11,341 0 0 1,800 0 2,716
Chief Financial Officer
James E. Owens 1994 104,003 15,274 0 0 1,350 0 3,023
Vice President and 1993 98,266 15,750 0 0 1,650 0 3,173
General Manager - 1992 94,958 7,500 0 0 1,650 0 3,292
Retail Division
Ronald P. Rumble (6) 1994 129,970 15,274 0 0 1,500 0 3,748
Vice President and 1993 104,740 18,110 0 0 2,600 0 4,248
General Manager - 1992 0 0 0 0 0 0 0
Commercial Division
- - - ------------------------------------------------------------------------------------------------------------------------
(1) The Company's Board of Directors has approved an Executive Bonus Plan
in which the Named Executive Officers participated in 1994. The 1994
plan provides incentive cash bonuses based on the attainment of
operating profit and cash flow objectives established at the beginning
of the year for the Company and Goodyear. Prior to 1994, bonuses were
paid by Goodyear. In 1994, bonuses were paid by the Company, and the
Company was reimbursed by Goodyear. No cost was incurred by the
Company relating to the bonuses in years 1992, 1993 or 1994. Payments
related to the 1994 Bonus Plan were made in February, 1995.
(2) In accordance with the rules of the Securities and Exchange
Commission, other compensation in the form of perquisites and other
personal benefits is not required to be reported if the amount
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for the Named Executive Officers.
(3) Options were granted by Goodyear to purchase shares of Common Stock of
Goodyear.
(4) Amounts paid on behalf of the Named Executive Officers for matching
401(k) Savings Plan Contributions.
(5) Mr. Carr was elected to his position effective May 1, 1992, and the
amounts shown reflect compensation earned since that date.
(6) Mr. Rumble was elected to his position effective March 1, 1993, and
the amounts shown reflect compensation earned since that date.
6
9
On November 1, 1994 (the "Transfer Date"), the Named Executive
Officers (the "Officers") became full-time employees of the Company. Prior to
that date, Messrs. Brophey, Carr, Owens and Rumble were employees of Goodyear
on loan to the Company, and the Company reimbursed Goodyear for the cost of the
base salary and fringe benefits for those Officers. Effective November 1,
1994, salaries for the Officers are paid directly to the Officers as employees
of the Company. The amounts shown in the compensation categories of the
Summary Compensation Table for 1994 include compensation paid to the Officers
both before and after the Transfer Date.
STOCK OPTIONS, SAR GRANTS IN 1994
The Company does not provide its executive officers any type of
financial compensation based on the appreciated market value of the Company's
Common Stock. On January 4, 1994, the Named Executive Officers were granted
options by Goodyear to purchase shares of Common Stock of Goodyear at an
exercise price equal to the market price on the grant date. The Company does
not incur any cost related to the grant or the exercise of Goodyear stock
options. No SARs have been granted to any Named Executive Officer. All
options in the following tables relate to shares of Common Stock of Goodyear.
OPTION GRANTS IN 1994
% of Total Potential
Securities Options/SARs Realizable value at
Options/SARs Granted to Exercise or Assumed Annual Rates of
Granted (#) Employees in Base Price Expiration Stock Price Appreciation
Name (1) 1994 (2) ($/sh) Date for Option Term (3)
- - - --------------------------------------------------------------------------------------------------------------------
5% 10%
------- --------
William P. Brophey 3,300 35.9% $44.25 01/04/04 $91,839 $232,716
Ronald J. Carr 1,750 19.0% $44.25 01/04/04 $48,702 $123,410
James E. Owens 1,350 14.7% $44.25 01/04/04 $37,570 $95,202
Ronald P. Rumble 1,500 16.3% $44.25 01/04/04 $41,745 $105,780
- - - --------------------------------------------------------------------------------------------------------------------
(1) Options vest 50% in year one, and 50% in year two. The option
exercise price is 100% of the fair market value of Goodyear Common
Stock on the date of grant.
(2) Percent of total options granted by Goodyear to all employees of the
Company. In the aggregate, these options were less than 1% of the
total options granted by Goodyear in 1994.
(3) Amounts represent hypothetical gains that could be achieved if options
were exercised at end of the option term. The dollar amounts under
this column assume 5% and 10% compounded annual appreciation in the
Common Stock of Goodyear from the date the respective options were
granted. These calculations and assumed realizable values are
required to be disclosed under Securities and Exchange Commission
rules and, therefore, are not intended to forecast future appreciation
of Common Stock of Goodyear or amounts that may be ultimately realized
upon exercise.
7
10
OPTION EXERCISES IN 1994 AND YEAR-END VALUES
The following table sets forth certain information regarding the
exercise of Goodyear stock options during 1994 and the value of unexercised
options held as of December 31, 1994. The Company does not incur any cost
related to the grant or exercise of Goodyear stock options.
OPTION EXERCISES IN 1994 AND YEAR-END VALUES
Number of Securities Value of Unexercised
Shares Unexercised Options/SARs In-the-Money Options/SARs
Acquired at Dec. 31, 1994 (#) (2) at Dec. 31, 1994 ($) (2) (3)
on (#) Value ----------------------------- ----------------------------
Name Exercise ($) (1) Exercisable Unexercisable Exercisable Unexercisable
- - - ---------------------------------------------------------------------------------------------------------------
William P. Brophey 0 $0 23,850 5,050 $155,075 $0
Ronald J. Carr 0 $0 8,950 2,900 $ 79,775 $0
James E. Owens 0 $0 2,475 2,175 $ 11,138 $0
Ronald P. Rumble 0 $0 9,700 2,800 $135,625 $0
- - - ---------------------------------------------------------------------------------------------------------------
(1) Represents the difference between the exercise price and the price of
the Goodyear Common Stock on the date of exercise.
(2) Shares include options granted to the named officer while employed by
Goodyear but not associated with the Company.
(3) Represents the difference between the exercise price of the
outstanding options and the closing price of Goodyear Common Stock on
the New York Stock Exchange on December 30, 1994, which was $33.625
per share. Options that have an exercise price greater than the
year-end NYSE closing price are excluded from the value calculation.
LONG TERM INCENTIVE AWARDS
The Company does not provide its executive officers any other form of
compensation based upon any long-term incentive plan or any other type of
employment arrangement.
EMPLOYMENT AGREEMENTS
Neither the Company nor Goodyear provides the Company's executive
officers with any type of employment agreement or contract.
RETIREMENT BENEFITS
Prior to November 1, 1994, the Named Executive Officers were on loan
from Goodyear and participated in the Retirement Plan for Salaried Employees of
The Goodyear Tire & Rubber Company (the "Salaried Plan"). The Company was
billed by Goodyear for the cost incurred to maintain each Named Executive
Officer's participation in the Salaried Plan.
8
11
The Salaried Plan is a qualified, defined benefit plan which provides
a basic non-contributory pension benefit and a voluntary contributory pension
benefit based on various factors including years of service, compensation and
plan maximums. The annual non-contributory benefit equals $318 for each year
of service prior to 1994. The annual non-contributory benefit for 1994 and
each year thereafter equals 1.1% of annual Social Security Covered Compensation
for such year.
The Salaried Plan permits an eligible employee to make monthly
optional contributions at an annual rate of 2% of his or her earnings in excess
of Social Security Covered Compensation. For service prior to 1994, the annual
contributory benefit equals the years of service during which contributions
were made multiplied by 1.4% of average annual earnings in excess of $22,716
during the five-year period ended December 31, 1993. The annual contributory
benefit for 1994 and each year thereafter equals 1.58% of annual earnings (up
to $150,000 in 1994) in excess of annual Social Security Covered Compensation.
The Salaried Plan provides pension benefits to participants who have
at least 30 years of service or have at least 10 years of service and have
attained the age of 55. Benefits payable to a participant who retires between
ages 55 and 62 are subject to a reduction of 4.8% for each full year of
retirement before age 62. The years of credited service at December 31, 1994,
under the Salaried Plan for each Named Executive Officer are: Mr. Brophey, 35
years; Mr. Carr, 27 years; Mr. Owens, 43 years; and Mr. Rumble, 26 years.
On November 1, 1994, the Named Executive Officers became participants
in The Goodyear Tire & Rubber Company Retirement Benefit Plan for Employees
with Service with Designated Subsidiaries (the "Subsidiary Plan"), a
non-qualified, defined benefit plan. Benefits payable to a participant or
beneficiary under the Subsidiary Plan shall be in such amount as is required,
when added to the benefits payable to the participant or beneficiary under the
Salaried Plan, to produce an aggregate benefit equal to the benefit that would
have been payable to the participant or beneficiary if the employment of the
participant with Company were treated as employment with an employer under the
Salaried Plan, and if the limitations on compensation pursuant to Section 401
(a) (17) of the Internal Revenue Code of 1986, as amended, were not in effect.
As of December 31, 1994, the estimated annual benefits payable on a
five-year certain and life annuity basis (and not under any of the various
survivor options or the lump sum option) under retirement at age 65 were as
follows: Mr. Brophey, $86,745; Mr. Carr, $75,285; Mr. Owens, $61,872; and Mr.
Rumble, $76,214. These estimates were based on 1994 earnings and estimated
annual Social Security Covered Compensation projections to each individual's
65th birthday.
DIRECTOR COMPENSATION
Through March 31, 1994, each of the Company's outside Directors
received an annual Director's fee of $18,000 paid quarterly plus reimbursement
of expenses incurred as a Director. Effective April 1, 1994, Director's fees
for outside Directors were modified to $2,500 per Board Meeting attended,
$1,000 per telephonic Board Meeting, $1,000 per committee meeting attended not
in conjunction with a Board Meeting and $500 per telephonic committee meeting,
all subject to an annual maximum amount of $20,000 plus reimbursement of
expenses incurred as a Director. Directors may at their option defer the
payment of Director's compensation. Directors who are also officers or
employees of the Company or employees of Goodyear receive no such fees.
9
12
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE POLICIES AND PRACTICES
The Compensation Committee (the "Committee") annually reviews the
compensation program for the Company's executive officers, all of whom are
Named Executive Officers in the compensation disclosures included in this proxy
statement, and recommends to the Board of Directors changes to the compensation
program in general and adjustments to individual compensation levels.
In its annual review, the Committee seeks to determine whether (1) the
Company is competitive and can attract and retain qualified and experienced
personnel and (2) the executive officers are appropriately motivated by the
compensation program to seek to attain performance goals approved by the
Committee, as well as sustained earnings growth for the benefit of all
shareholders of the Company.
The Chief Executive Officer provides the Committee information
regarding proposed annual salary and annual incentive based compensation
targets. The Committee also receives information regarding compensation paid
by Goodyear, including information regarding options to purchase shares of
Goodyear Common Stock for each executive officer. On November 1, 1994, the
Named Executive Officers became employees of the Company. Prior to November 1,
1994, the Company reimbursed Goodyear for the annual salaries paid to the
executive officers, and the Company has deducted those amounts for federal tax
purposes.
The Committee meets early each year to review the compensation package
and make a recommendation regarding compensation for the Chief Executive
Officer and the other Named Executive Officers for approval by the Board of
Directors. In 1994, the Chief Executive Officer was authorized by the
Committee to adjust the base salaries of the other executive officers without
action by the Committee.
The Revenue Reconciliation Act of 1993 added Section 162 (m) to the
Internal Revenue Code (the "Code") which eliminated tax deductions for
compensation paid to an executive officer in excess of $1 million, unless
certain requirements are met. No executive officer receives compensation in
excess of the allowed deductions. The Committee will consider the
applicability of this section of the Code in the formalization of all executive
compensation plans.
COMPENSATION OF EXECUTIVE OFFICERS
Salaries for the executive officers are established using Goodyear's
compensation guidelines within a salary range that is fixed annually based on
market data derived from salary surveys of hundreds of companies made available
to compensation professionals by various associations and consultants.
Salaries are fixed within these ranges based on Mr. Brophey's performance
evaluation and are not linked to specific performance criteria.
The Named Executive Officers obtain the opportunity for bonus
compensation by participating in the Goodyear Performance Recognition Plan (the
"Performance Plan"). For the Named Executive Officers (other than the Chief
Executive Officer), the target payout (assuming 100% payout) under the
Performance Plan was established at an average amount of approximately 14.9%
of the midpoint of the salary range of such persons. Compensation paid
pursuant to the Performance Plan was based 50% on the earnings before interest
and taxes ("EBIT") and cash flow
10
13
of the Company and 50% on the EBIT and cash flow levels achieved by Goodyear.
Payouts under the Performance Plan could range from zero to 150% of the
participant's target amount depending on the extent to which applicable EBIT
and cash flow goals were achieved. In 1994, the EBIT goal for the Company was
exceeded, while the cash flow goal was partially achieved. Based on the
results of the Company and Goodyear in the aggregate, bonuses were paid at 140%
of target levels.
The target levels of participation and the Company EBIT and cash flow
goals for 1995 were reviewed and approved by the Committee. The Company was
reimbursed by Goodyear for the Performance Plan payouts to Named Executive
Officers in 1994.
The Committee received a report regarding stock options granted by
Goodyear for the purchase of Goodyear Common Stock to the Named Executive
Officers and other key employees of the Company pursuant to the 1989 Goodyear
Performance and Equity Incentive Plan (the "Option Plan"). The size of
individual option grants were determined primarily on the basis of the
responsibilities and relative position of each executive officer within
guideline ranges established by Goodyear based on surveys of the option
granting practices of other companies. The Company does not incur any cost in
connection with the options granted to the Named Executive Officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The salary of Mr. Brophey was established using Goodyear's
compensation guidelines within a salary range that is fixed annually based on
market data derived from salary surveys of hundreds of companies made available
to compensation professionals by various associations and consultants and was
approved by the Committee. In July of 1994, Mr. Brophey was granted a 6 1/4%
salary increase within those guidelines in recognition of the improved
operating results and financial condition of the Company.
Mr. Brophey's participation in the Performance Plan was established at
a level that is intended to result in a payout (assuming 100% payout under the
Performance Plan) equal to 21% of the midpoint of his salary range. Payouts
under the Performance Plan could range from zero to 150% of Mr. Brophey's
target amount depending on the extent to which applicable EBIT and cash flow
goals were achieved. The EBIT goal approved last year by the Committee was
exceeded, while the cash flow goal was partially achieved. Based on the
results of the Company and Goodyear in the aggregate, his payout was 140% of
the target level, resulting in his performance based compensation being equal
to 24% of his salary. This bonus was reimbursed to the Company by Goodyear.
On January 4, 1994, Mr. Brophey was granted an option to purchase
3,300 shares of Goodyear Common Stock at a per share exercise price equal to
the market price of Goodyear Common Stock on the date of grant. The size of
the grant was determined on the basis of guidelines established by Goodyear
based on surveys of the option granting practices of other companies. The
Committee does not participate in the granting of such stock options, and the
Company does not incur any cost relating to such options, however stock options
are considered to be a part of Mr. Brophey's compensation package.
February 16, 1995 The Compensation Committee:
Samir F. Gibara (Chairman)
Charles A. Bethel, Jr.
Richard D. Pearson
11
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Goodyear is the Company's majority shareholder and its principal
supplier of new tires. Samir F. Gibara, Chairman of the Board of the Company,
is an Executive Vice President of Goodyear and has been employed by Goodyear
for more than 30 years. Until November 1, 1994, William P. Brophey, Vice
Chairman of the Board, President and Chief Executive Officer of the Company,
had been employed by Goodyear for more than 35 years; Ronald J. Carr, Vice
President - Finance, Secretary and Treasurer had been employed by Goodyear for
more than 25 years; James E. Owens, Vice President and General Manager -
Retail Division, had been employed by Goodyear for more than 40 years; and
Ronald P. Rumble, Vice President and General Manager - Commercial Division, had
been employed by Goodyear for more than 25 years.
Samir F. Gibara, Chairman of the Board of the Company and Chairman of
the Company's compensation committee, is an Executive Vice President of
Goodyear. Mr. Gibara is not an employee of the Company and does not receive
any compensation or director's fees from the Company, nor is he a member of
Goodyear's Board of Directors or its compensation committee.
Charles A. Bethel, Jr., a Director of the Company, was employed by
Goodyear from 1946 through August of 1983.
The Company is a member of Goodyear's dealer network. Goodyear sold
to the Company approximately $63,766,000 of products and services, and the
Company sold to Goodyear approximately $7,181,000 of products and services
during 1994. The Company paid Goodyear $1,516,000 for rent on equipment and 56
facilities used by the Company.
The Company has determined that Goodyear is a cost-effective source
for various administrative services and support activities. These services and
activities include but are not limited to internal auditing, payroll
processing, communication services, data processing services, training, certain
legal assistance and other miscellaneous administrative support functions.
During 1994, the Company paid approximately $903,600 to Goodyear for these and
other services.
The Company believes that prices paid by the Company to Goodyear and
the products and services received by the Company from Goodyear during 1994
were fair and reasonable and on terms and at prices no less favorable than
could have been obtained elsewhere.
The Company maintains an open unsecured line of credit with Goodyear
to fund working capital requirements. The borrowing rate on the line of credit
is based on the 30-day LIBOR plus 1.5% effective the first day of each calendar
month as reported on the Reuter Money Service Monitor System.
On December 31, 1994, the Company issued a one-year $5.5 million
promissory note to Goodyear that may be renewable on December 31, 1995,
depending on business conditions. The note represented an extension of a
previous inventory ledger balance financing arrangement dated November 30,
1989, with an outstanding balance due on December 31, 1994, of $5.5 million.
The note is interest-bearing at 120% of the prime rate as announced by
Citibank, N.A., New York, New York, on the first day of each quarter during the
term of the note. Interest due under the note will be fully waived provided
that the ratio of the Company's annual shipments of off-the-road tires from
12
15
Goodyear to the average daily outstanding balance of the note equals or exceeds
two and one half to one (2.5:1). Interest will be prorated if the ratio is
less than that. In 1992, 1993 and 1994, the ratio exceeded 2.5:1, and the
interest was fully waived.
The Company and Goodyear entered into an option agreement in November
of 1989, whereunder Goodyear was granted the right to purchase up to 650,000
shares of the Company's Common Stock from the Company at a per share exercise
price based on the higher of the market price or book value of the Common
Stock, but in no event more than $75 or less than $25 per share. The option
agreement expired unexercised on November 10, 1994.
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder returns of the
Company's Common Stock, The American Stock Exchange Composite Index and the Dow
Jones Auto Parts Index at each December 31 for the five-year period beginning
December 31, 1989, and ended December 31, 1994.
The graph shows the total shareholder return that would have been
achieved had $100 been invested in each of these investment alternatives on
December 31, 1989, with all dividends reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
BRAD RAGAN, INC., AMEX COMPOSITE INDEX AND DJ AUTO PARTS INDEX
(GRAPH)
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
BRAD RAGAN, INC. 100 106 108 113 140 157
AMEX COMPOSITE 100 82 105 106 126 115
DJ AUTO PARTS 100 79 118 152 189 161
13
16
CORPORATE GOVERNANCE
The Company's Board of Directors held five meetings during 1994. All
present Directors attended at least 75% of the total number of meetings of the
Board of Directors and committees on which they serve.
The Board of Directors has five standing committees: Executive
Committee, Audit Committee, Nominating Committee, Compensation Committee and
Litigation Committee.
The Executive Committee consists of Messrs. Gibara (Chairman), Bethel
and Pearson. The Executive Committee is empowered to act between meetings of
the Board of Directors with powers of the full Board, except with respect to
certain matters. The Executive Committee did not meet during 1994.
The Audit Committee consists of Dr. Sorensen (Chairman), and Messrs.
Bethel and Pearson. The Audit Committee reviews the scope of the Company's
annual audit, the functions performed by the Company's independent accountants,
the functions of and procedures followed by the Company's internal accounting
and auditing staff and other matters relating to accounting policies and
controls. The Audit Committee held three meetings during 1994.
The Nominating Committee consists of Messrs. Gibara (Chairman),
Brophey, Carr and Sorensen. This committee's function is to study the
composition of the Board of Directors and the qualifications of its members and
to nominate for election to the Board persons whose background and expertise
will, in their judgment, complement the needs of the Company. This committee
will consider nominees recommended by shareholders. Such recommendations
should be submitted to the Secretary of the Company by December 31 in order to
be considered by the committee for the Annual Meeting to follow the fiscal
year-end. This committee met once during 1994.
The Compensation Committee consists of Messrs. Gibara (Chairman),
Bethel and Pearson. Its principal functions are to review the Company's
compensation and benefit programs for executive officers and to recommend
annual compensation levels for the executive officers for approval by the Board
of Directors. This committee met once during 1994.
The Litigation Committee consists of Messrs. Bethel (Chairman),
Brophey, Carr and Sorensen. This committee is responsible for monitoring any
matters of significant litigation that involve the Company. The committee did
not meet during 1994.
14
17
INDEPENDENT ACCOUNTANTS
Price Waterhouse has served the Company as independent accountants
since 1986. A representative from Price Waterhouse is expected to be present
at the Annual Meeting of Shareholders with the opportunity to make a statement
if he desires to do so and to answer any questions that concern the firm's work
for the Company. Price Waterhouse also serves as independent accountants for
Goodyear.
The Audit Committee and the Board of Directors have approved all of
the nonaudit services by Price Waterhouse and believe they have no effect on
audit independence. The Audit Committee has authorized management to engage
the Company's independent accountants in nonaudit services relating to
preparation of tax returns and working with IRS agents on tax audits, but other
matters require prior approval from the Audit Committee.
ANNUAL REPORT ON FORM 10-K
Shareholders may obtain a copy of the Company's Annual Report on Form
10-K for 1994 as filed with the Securities and Exchange Commission, including
all financial statements and schedules without charge by writing to:
Investor Relations
Brad Ragan, Inc.
4404-G Stuart Andrew Blvd.
Charlotte, NC 28217
Exhibits to the Annual Report on Form 10-K may be obtained for a
nominal charge for copying.
DEADLINE FOR SHAREHOLDERS' PROPOSALS
Any shareholder desiring to present a proposal for action at the
Company's 1996 Annual Meeting must deliver the proposal to the Company at its
principal executive offices no later than November 30, 1995.
By Order of the Board of Directors
Ronald J. Carr
Secretary
Charlotte, North Carolina
April 14, 1995
15
18
APPENDIX A
PROXY BRAD RAGAN, INC.
The undersigned shareholder of Brad Ragan, Inc., designates Samir F. Gibara and William P. Brophey, and either of them agents to
vote the shares of the undersigned at the Annual Meeting of Shareholders, Thursday, May 25, 1995, at 11:30 A.M., and at any
adjournment thereof, as follows:
(1) ELECTION OF DIRECTORS
/ / VOTE FOR all nominees (except as marked to the contrary) / / WITHHOLD AUTHORITY TO vote for all nominees listed below
Nominees: Samir F. Gibara, William P. Brophey, Ronald J. Carr, Charles A. Bethel, Jr., Richard D. Pearson, Richard E. Sorensen
(Instruction: To withhold authority to vote for an individual nominee, strike a line through the nominee's name.)
(2) To Transact such other business as may be brought before the meeting
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED AS SPECIFIED BY THE SHAREHOLDER.
IF NO SPECIFICATION IS MADE WITH RESPECT TO A MATTER WHERE A BALLOT IS PROVIDED, THIS PROXY WILL BE VOTED FOR SUCH MATTER.
Dated: , 1995
---------------------------- --------------------------------------------------------------------------------
(When signing as attorney, executor,
administrator trustee, guardian, et cetera, --------------------------------------------------------------------------------
give title as such. For joint accounts,
each joint owner should --------------------------------------------------------------------------------
sign.)
Please sign above as name(s) appear(s) on the other side.
16
19
BRAD RAGAN, INC.
PLEASE SIGN AND SEND IN YOUR PROXY
Your shares should be represented at the meeting by your proxy. The meeting
will be held Thursday, May 25, 1995, at 11:30 A.M. in the "Yorkmont" Room of
the Embassy Suites Hotel, 4800 South Tryon Street, Charlotte, North Carolina.
PLEASE SIGN THE PROXY PRINTED ON THE OTHER SIDE AND RETURN IT AT ONCE UNLESS
YOU EXPECT TO ATTEND THE MEETING IN PERSON.