Reddi Brake Slows the Red Ink, Acquires Express Undercar

Ventura’s Reddi Brake Supply Corp. has completed the acquisition of Express Undercar Parts Warehouse of California in exchange for common stock and cash valued at $969,000.

Reddi Brake distributes brake systems, chassis components and other auto undercarriage parts to professional installers through 92 outlets in 27 states. Express Undercar Parts has a similar operation with three warehouses in Orange County and another in Los Angeles County.

The transaction last week follows Reddi Brake’s purchase, earlier this year, of two Express Undercar operations in Las Vegas and one in Reno. That deal, also a common stock transaction, was valued at about $1.2 million.

“These are markets that we need to be in for expansion,” said Dick McGorrian, president and chief executive of Reddi Brake.

McGorrian said further expansion will include opening an additional 26 to 37 Reddi Brake outlets throughout the country in the 1996-1997 fiscal year. Other major acquisitions, he said, are also being considered.

Reddi Brake’s anticipated growth is a far cry from the operation’s outlook at the start of 1996. The company posted losses of about $1 million in January. Since then the losses have decreased each month and the company expects to post a profit for June, perhaps enough to offset the combined $453,000 in losses for April and May, McGorrian said.

“It’s no secret, as of January of this year the company was burning cash at about $1 million a month. Operation philosophies weren’t really well-founded and obviously some major changes had to be made,” said McGorrian, who joined Reddi Brake last November as vice president of marketing and took over as president and chief executive in February.

“Since January,” he said, “we’ve not only stopped the stream of red ink and negative cash flow, but we’ve turned it around.”

Beginning in February, McGorrian reworked the company’s middle management structure, shut down one of three regional offices and cut overhead by about $4 million annually, he said.

In addition, Reddi Brake just completed a $9.5-million equity financing and is updating and streamlining the companywide computer system. McGorrian said Reddi Brake also changed its marketing plan and business strategy, focusing more on the unique needs of different regions of the country.

“When they rolled this company out from the West Coast to the East Coast they developed similar products for all regions,” he said. “But each market is totally different. An L.A. customer might not mind spending $25 or $30 for a pair of brake pads, but in Louisville, Ky., those pads better be $7.”

As a result of these changes, McGorrian said, Reddi Brake increased its sales from $4.6 million in May to $6.3 million in June.

Reddi Brake on Monday reported same-store sales of $16.8 million for the fourth quarter ended June 30, up 200% from $13.7 million for the same period in 1995. The sales represent 84 stores in the chain.

McGorrian said there is no mystery to the recent upturn. “It’s not rocket science,” McGorrian said. “It’s basically operating your business.”