<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934.
For the quarterly period ended: December 31, 1999
or
[_] 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 0-28568
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
California 95-2920557
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
700 East Bonita Avenue, Pomona, CA 91767
(Address of principal executive offices) (Zip Code)
(909) 624-8041
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the registrant's Common Stock, no par value,
at December 31, 1999 was 15,365,000 shares.
This Form 10-Q contains 14 pages.
1
<PAGE>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
INDEX
-----
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
December 31, 1999 (unaudited) and March 26, 1999
Condensed Consolidated Statements of Income (unaudited) 4
Thirteen weeks and forty weeks ended December 31, 1999
Thirteen weeks and thirty-nine weeks ended December 25, 1998
Condensed Consolidated Statements of Cash Flows (unaudited) 5
Forty weeks ended December 31, 1999 and
thirty-nine weeks ended December 25, 1998
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risks 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
Keystone Automotive Industries, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December March 26, 1999
31,1999 (Note)
(Unaudited)
----------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,724 $ 17,784
Accounts receivable, net of allowance of $1,376 at December 1999
and $962 at March 1999 26,681 30,256
Inventories, primarily finished goods 87,214 72,284
Other current assets 11,752 11,557
-------- --------
Total current assets 130,371 131,881
Plant, property and equipment, net 22,937 19,367
Goodwill, net of accumulated amortization of $2,815 at December 1999
and $1,583 at March 1999 37,142 36,262
Other intangibles, net of accumulated amortization of $3,005 at
December 1999 and $2,167 at March 1999 2,426 1,874
Other assets 4,973 4,710
-------- --------
Total Assets $197,849 $194,094
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Credit Facility $ 22,138 $ --
Bankers acceptances -- 2,961
Accounts payable 13,273 14,859
Accrued liabilities 5,815 8,531
Current portion of long-term debt 135 200
-------- --------
Total current liabilities 41,361 26,551
Long-term debt, less current portion 152 100
Other long-term liabilities 2,540 2,679
Deferred taxes 1,559 1,559
Shareholders' Equity:
Preferred stock, no par value:
Authorized shares--3,000,000
None issued and outstanding -- --
Common stock, no par value:
Authorized shares--50,000,000
Issued and outstanding shares: 15,365,000 at December 1999 and
16,858,000 at March 1999 84,445 105,436
Additional paid-in capital 1,223 1,223
Retained earnings 67,096 57,073
Accumulated other comprehensive loss (527) (527)
-------- --------
Total shareholders' equity 152,237 163,205
-------- --------
Total liabilities and shareholders' equity $197,849 $194,094
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
NOTE: The balance sheet at March 26, 1999 has been derived from the audited
consolidated 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.
3
<PAGE>
Keystone Automotive Industries, Inc.
Condensed Consolidated Statements of Income
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Forty Thirty-nine
Ended Weeks Ended Weeks Ended Weeks Ended
December 31, December 25, December 31, December 25,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 86,197 $ 84,017 $ 280,079 $ 235,327
Cost of sales 48,970 47,059 158,663 132,997
----------- ----------- ----------- -----------
Gross profit 37,227 36,958 121,416 102,330
Operating expenses:
Selling and distribution 27,226 22,935 82,648 64,747
General and administrative 7,971 6,590 23,194 17,717
Service Center consolidation costs -- 103 -- 505
----------- ----------- ----------- -----------
Operating income 2,030 7,330 15,574 19,361
Other income 564 973 1,883 2,155
Interest expense, net (328) (3) (469) (26)
----------- ----------- ----------- -----------
Income before income taxes 2,266 8,300 16,988 21,490
Income taxes 929 3,348 6,965 8,596
----------- ----------- ----------- -----------
Net income $ 1,337 $ 4,952 $ 10,023 $ 12,894
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.09 $ 0.28 $ 0.62 $ 0.78
=========== =========== =========== ===========
Diluted $ 0.09 $ 0.28 $ 0.62 $ 0.77
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic 15,425,000 17,603,000 16,104,000 16,605,000
=========== =========== =========== ===========
Diluted 15,425,000 17,779,000 16,133,000 16,837,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
Keystone Automotive Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Forty Thirty-nine
Weeks Ended Weeks Ended
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
Operating activities
Net income $ 10,023 $ 12,894
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 5,430 3,282
Deferred taxes -- 719
Provision for losses on uncollectible accounts 392 266
Provision for losses on inventory 194 --
Gain on sale of assets 7 (16)
Changes in operating assets and liabilities:
Accounts receivable 4,596 (1,039)
Inventories (12,764) 507
Other assets (448) (8,433)
Accounts payable and accrued liabilities (4,441) (7,597)
-------- --------
Net cash provided by operating activities 2,989 583
Investing activities
Proceeds from sale of assets 175 50,261
Purchases of property, plant and equipment (5,568) (3,603)
Cash paid for acquisitions (8,829) (3,114)
-------- --------
Net cash (used in) provided by investing activities (14,222) 43,544
Financing activities
Borrowings on credit facility 22,138 (19,477)
Bankers acceptances and other short-term debt, net (2,961) 666
Principal payments on long-term debt (13) (262)
Repurchases of common stock (21,092) (1,594)
Net proceeds on option exercise 101 1,694
-------- --------
Net cash used in financing activities (1,827) (18,973)
-------- --------
Net (decrease) increase in cash and cash equivalents (13,060) 25,154
Cash and cash equivalents at beginning of period 17,784 10,859
Cash from Republic stock acquisition -- 5,365
-------- --------
Cash and cash equivalents at end of period $ 4,724 $ 41,378
======== ========
Supplemental disclosures
Interest paid during the period $ 236 $ 213
======== ========
Income taxes paid during the period $ 6,838 $ 8,719
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
Keystone Automotive Industries, Inc.
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
December 31, 1999
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions of 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
only of normal recurring accruals, considered necessary for fair presentation,
with respect to the interim financial statements have been included. The
results of operations for the 40-week period ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the full year
ending March 31, 2000. For further information, refer to the financial
statements and footnotes thereto for the year ended March 26, 1999, included in
the Company's Form 10-K filed with the Securities and Exchange Commission on
June 24, 1999.
2. Fiscal Year
The Company uses a 52/53 week fiscal year. The Company's fiscal year ends
on the last Friday of March. The nine-month periods ended December 31, 1999 and
December 25, 1998, included 40-week and 39-week periods, respectively
3. Income Taxes
The income tax provision for interim periods is based on an estimated
effective annual income tax rate.
4. Financing Arrangements
The Company maintains a revolving line of credit with a commercial lender
that provides a $30,000,000 unsecured credit facility that expires, as amended,
in September 2000. Initial advances under the revolving line of credit are made
with interest at the lender's prime rate: however, at the Company's option, all
advances may be converted to LIBOR plus 0.75%-0.875%. The agreement also
contains an unused line of credit charge of 0.125%. At December 31, 1999, $22.1
million was outstanding under the line of credit. The loan agreement is subject
to certain restrictive covenants and requires that the Company maintain certain
financial ratios. The Company was in compliance with all covenants as of
December 31, 1999.
5. Acquisitions
On June 27, 1998, the Company completed its acquisition of Republic
Automotive Parts, Inc. ("Republic"). The Company issued approximately 2,907,000
shares of its common stock in exchange for the outstanding common stock of
Republic (total purchase price of approximately $63.1 million using an average
share price of $21.69). The fair value of the assets acquired approximated
$41.9 million, net of approximately $28.8 million of liabilities assumed. The
excess of the purchase price over assets acquired (goodwill) approximated $21.2
million and is being amortized over 30 years. The acquisition of Republic has
been accounted for under the purchase method of accounting.
In addition, during fiscal 1999, subsequent to the Republic acquisition,
Keystone acquired six other companies for approximately $17.8 million cash, $1.8
million in stock and a note payable of $150,000. These acquisitions were
accounted for as purchases, and accordingly the assets and liabilities of the
acquired entities have been recorded at their estimated fair values at the dates
of acquisition. The excess of purchase price over the estimated fair values of
the assets acquired was approximately $9.9 million and has been recorded as
goodwill and is being amortized over 15 to 20 years. The results of operations
of the Company include the results of the acquired companies from the date of
acquisition.
6
<PAGE>
During the 40-week period ended December 31, 1999, the Company completed
four acquisitions for approximately $8.8 million in cash. These acquisitions
were accounted for as purchases, and accordingly the assets and liabilities of
the acquired entities have been recorded at their estimated fair values at the
dates of acquisition. The excess of purchase price over the estimated fair
values of the assets acquired was approximately $2.1 million and has been
recorded as goodwill and is being amortized over 15 years. The unaudited pro
forma results for fiscal 2000, assuming these four acquisitions had been made at
the beginning of fiscal 2000, would not have been materially different from the
results presented above.
6. Shareholders Equity
In actions taken in September 1998, March 1999 and July 1999, the Board of
Directors authorized management of the Company to purchase up to an aggregate of
2,500,000 shares of its common stock at such times and at such prices as the
President and Chief Financial Officer deemed appropriate. In October 1999, the
Board of Directors authorized management of the Company to purchase up to an
additional $10 million of its Common Stock. Through December 31, 1999, the
Company had repurchased an aggregate of 2,514,138 shares of its common stock at
an average cost of $15.88 per share.
7. Subsequent Event
In July 1997, certain individuals initiated a class action lawsuit against
State Farm Mutual Automobile Insurance Company ("State Farm") in the Illinois
Circuit Court in Williamson County (Marion, Illinois), which asserts claims for
breach of contract, consumer fraud and equitable relief relating to State Farm's
practice of sometimes specifying the use of parts manufactured by sources other
than the original equipment manufacturer ("non-OEM crash parts") when adjusting
claims for the damage to insured vehicles. The Williamson County Court
certified a near-nationwide class. It was alleged that this practice breaches
State Farm's insurance agreements with its policyholders and is a violation of
Illinois Consumer Fraud and Deceptive Business Practices Act because non-OEM
crash parts are inherently inferior to OEM crash parts and, consequently,
vehicles are not restored to their "pre-loss condition" as specified in their
policy. While the Company was not a party to this lawsuit, a substantial
portion of the Company's business consists of the distribution of non-OEM crash
parts to collision repair shops for the use in repairing automobiles, the vast
majority of which are covered by insurance policies. In October 1999, the jury
awarded the class damages in the amount of approximately $460 million and the
judge assessed punitive damages against State Farm of over $700 million. State
Farm has appealed the verdict.
As a result of the verdict in the State Farm Mutual Automobile Insurance
Company class action, State Farm, Nationwide Insurance and Farmers Insurance
have temporarily suspended specifying the use of many aftermarket collision
replacement parts in connection with the repair of vehicles which they insure.
These suspensions have had a material adverse effect on the Company's revenues
and earnings. Because these suspensions occurred very recently, it is difficult
for the Company to quantify the extent of the future impact on the Company. If
other insurance companies follow suit and institute suspensions, the suspensions
would likely have a further material adverse effect on to the Company's
operations. There can be no assurance as to when, if ever, State Farm,
Nationwide Insurance or Farmers Insurance will resume specifying parts of the
type the Company distributes.
7
<PAGE>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, certain matters
addressed in this Item 2 constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those anticipated by the Company's
management. The Private Securities Litigation Reform Act of 1995 (the "Act")
provides certain "safe harbor" provisions for forward-looking statements. All
forward-looking statements made in this Quarterly Report on Form 10-Q are made
pursuant to the Act and are subject to the cautionary statements set forth
herein.
General
- -------
The year-to-date results of operations for the period ended December 31,
1999 reflect a 40-week period whereas the comparable period in the prior fiscal
year reflects a 39-week period. Consequently, comparisons of these results may
not be meaningful.
The results of operations for the 40-week period ended December 31, 1999
include the results with respect to nine acquisitions completed subsequent to
December 25, 1998, accounted for as "purchases," whereas the 39-week period
ended December 25, 1998 does not include any results of operations for those
acquired entities. Such acquisitions include the acquisition of the Midwest
Bumper group of companies effective January 4, 1999 and the acquisition of the
Nordan Products group of companies effective May 10, 1999. In addition, the
results of operations for the 39-week period ended December 25, 1998, include
the results for Republic only for the period subsequent to the acquisition
(June 27, 1998), whereas the results of operations for the 40-week period ended
December 31, 1999, include the results for Republic for the entire period.
As a result of the verdict in the State Farm class action in October 1999,
State Farm, Nationwide Insurance and Farmers Insurance have temporarily
suspended specifying the use of many aftermarket collision replacement parts in
connection with the repair of vehicles which they insure. See "Part II-Other
Information-Item 5b" below. These suspensions have had a material adverse effect
on the Company's revenues and earnings for the 13-week and 40-week periods ended
December 31, 1999.
8
<PAGE>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
Results of Operations
- ---------------------
The following table sets forth for the periods indicated, certain selected
income statement items as a percentage of net sales.
<TABLE>
<CAPTION>
Thirteen Thirteen Forty Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
December 31, December 25, December 31, December 25,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 56.8 56.0 56.6 56.5
----- ----- ----- -----
Gross profit 43.2 44.0 43.4 43.5
Selling and distribution expenses 31.6 27.3 29.5 27.5
General and administrative expenses 9.2 7.8 8.3 7.5
Service Center consolidation costs 0.0 0.1 0.0 0.2
Other income 0.7 1.1 0.7 0.9
Interest expense, net (0.4) 0.0 (0.2) 0.0
----- ----- ----- -----
Income before income taxes 2.7 9.9 6.1 9.2
Income taxes 1.1 4.0 2.5 3.7
----- ----- -----
Net income 1.6% 5.9% 3.6% 5.5%
===== ===== ===== =====
</TABLE>
Thirteen Weeks Ended December 31, 1999 Compared to Thirteen Weeks Ended December
- --------------------------------------------------------------------------------
25, 1998.
- ---------
Net sales were $86.2 million for the quarter ended December 31, 1999 (the
"1999 Quarter") compared to $84.0 million for the quarter ended December 25,
1998 (the "1998 Quarter"), an increase of $2.2 million or 2.6%. This increase
reflects a decrease of $0.3 million in sales of automotive body parts (including
fenders, hoods, headlights, radiators, grilles and other crash parts), an
increase of $1.1 million in sales of new and recycled bumpers and an increase of
$1.0 million in sales of paint and related materials, which changes represent
increases (decreases) of approximately (0.9%), 4.4% and 7.9%, respectively,
compared to the 1998 Quarter. The increases were attributable primarily to an
increase in the number of service centers in operation due primarily to
acquisitions and startup operations and an increase in unit volume. The
decrease in sales of automotive body parts is primarily the result of the
actions by State Farm, Nationwide Insurance and Farmers Insurance in suspending
the use of certain aftermarket collision replacement parts. As a result of the
State Farm verdict, the Company believes that it has encountered pricing
pressure and expects the pressure to continue over at least the next few
quarters. In addition, the Company sold approximately $5.6 million of
remanufactured alloy wheels in the 1999 Quarter compared to $4.4 in the prior
year period, an increase of 26.3%.
Gross profit increased in the 1999 Quarter to $37.2 million (43.2% of net
sales) from $37.0 million (44.0% of net sales) in the 1998 Quarter, an increase
of 0.7%, primarily as a result of the increase in net sales. The Company's
decrease in gross profits as a percentage of net sales in the 1999 Quarter
primarily reflects the pricing pressure described above, an increase in freight
costs with respect to products shipped from overseas and a decrease in sales of
automotive body parts which have a higher margin compared to other products like
paint which has a lower margin.
Selling and distribution expenses increased to $27.2 million (31.6% of net
sales) in the 1999 Quarter from $22.9 million (27.3% of net sales) in the 1998
Quarter, an increase of 18.7%. The increase in these expenses as a percentage
of net sales was generally the result of acquisitions and several new start up
operations and deleveraging effect caused by reduced revenues without a
corresponding reduction in expenses. Throughout the 1999 Quarter, the Company
reviewed and reduced expenses where appropriate, mainly related to headcount.
9
<PAGE>
General and administrative expenses increased to $8.0 million (9.2% of net
sales) in the 1999 Quarter from $6.6 million (7.8% of net sales) in the 1998
Quarter, an increase of 21.0%. The increase in these expenses as a percentage
of net sales was generally the result of acquisitions, including, but not
limited to, an increase in the amounts of amortization of goodwill and covenants
not to compete, and costs associated with several new start-up operations.
Forty Weeks Ended December 31, 1999 Compared to Thirty-nine Weeks Ended December
25, 1998.
Net sales were $280.1 million for the forty weeks ended December 31, 1999
(the "99 Nine Months") compared to $235.3 million for the thirty-nine weeks
ended December 25, 1998 (the "98 Nine Months") an increase of $44.8 million or
19.0%. This increase was made up of increases of $19.8 million in sales of
automotive body parts (including fenders, hood, headlights, radiators, grilles,
and other crash parts), $16.4 million in sales of new and recycled bumpers and
$5.5 million in sales of paint and related materials, which increases represent
increases of approximately 19.3%, 22.7% and 14.6%, respectively, over the
comparable period in the prior fiscal year. In addition, the Company sold
approximately $16.6 million of manufactured alloy wheels in the 99 Nine Months
compared to $12.1 million in the 98 Nine Months, an increase of 37.5%. Increased
net sales were attributable primarily to the increase in the number of service
centers in operations as a result of acquisitions and an increase in unit
volume, and price increases in certain parts of the country. As a result of the
State Farm verdict, the Company has encountered reduced sales of automotive body
parts and pricing pressure and expects the pricing pressure to continue over at
least the next few quarters.
Gross profit increased in the 99 Nine Months to $121.4 million (43.4% of
net sales) from $102.3 million (43.5% of net sales) in the 98 Nine Months, an
increase of 18.7%, primarily as a result of the increase in net sales. The
Company's gross profit margin decreased slightly during the 99 Nine Months. The
Company's gross profit margin has fluctuated, and is expected to continue to
fluctuate, depending on a number of factors, including changes in product mix
(such as occurred in the third quarter as a result of the State Farm verdict),
acquisitions, competition and currency exchange rates. See the comparison of
the third quarter periods above for a discussion of the recent erosion in the
gross profit margin.
Selling and distribution expenses increased to $82.6 million (29.5% of net
sales) in the 99 Nine Months from $64.7 million (27.5% of sales) in the 98 Nine
Months, an increase of 2.7%. The increase in these expenses as a percentage of
net sales was due in part to certain costs associated with consolidating and
assimilating acquisitions and several new start-up operations.
General and administrative expenses increased to $23.2 million (8.3% of
net sales) in the 99 Nine Months from $17.7 million (7.5% of net sales) in the
98 Nine Months, an increase of 31.0%. The increase in these expenses as a
percentage of net sales was primarily the result of acquisitions, costs
associated with several new start-up operations and Y2K compliance costs.
As a result of the above factors, net income decreased to $10.0 million
(3.6% of net sales) in the 99 Nine Months from $12.9 million (5.5% of net sales)
in the 98 Nine Months. The decrease in net income as a percentage of net sales
was primarily the result of increased operating expenses and a decrease in gross
profit as a percentage of sales.
Variability of Quarterly Results and Seasonality
The Company has experienced, and expects to continue to experience,
variations in its sales and profitability from quarter to quarter due, in part,
to the timing and integration of acquisitions and the seasonal nature of the
Company's business. The number of collision repairs is directly impacted by the
weather. Accordingly, the Company's sales generally are highest during the five-
month period from December to April. The impact of seasonality has been reduced
somewhat as the Company has become more geographically diversified. Other
factors which influence quarterly variations include the reduced number of
business days during the holiday seasons, the timing of the introduction of new
products, the level of consumer acceptance of new products, general economic
conditions that affect consumer spending, the timing of supplier price changes
and the timing of expenditures in anticipation of increased sales and customer
delivery requirements.
Liquidity and Capital Resources
The Company's primary need for funds has been to finance the growth of
inventory, acquisitions and the stock buyback program. At December 31, 1999,
working capital was $89.0 million compared to $105.3 million at March 26, 1999.
The decrease in working capital was primarily the result of a decrease in cash
and an increase in the outstanding indebtedness under the Company's credit
facility. The cash and borrowings were used to finance the repurchase of the
Company's Common Stock, to complete acquisitions and to finance the increase in
inventory, which increased to $87.2 million at December 31, 1999 from $72.3
million at March 26,
10
<PAGE>
1999. Historically, the Company has financed its working capital requirements
from its cash flow from operations, proceeds from public offerings of its Common
Stock and advances drawn under lines of credit. The decrease in shareholders'
equity from $163.2 million at March 26, 1999 to $152.2 million at December 31,
1999 was the result of the Company's repurchasing and retiring shares of its
Common Stock.
During fiscal 1999, the Company initiated a stock repurchase program, which
was increased by the Board of Directors during Fiscal 2000. From the beginning
of the stock repurchase program through December 31, 1999, the Company
repurchased an aggregate of 2,514,138 shares for $39.9 million, or an average of
$15.88 per share.
The Company has in place a revolving line of credit with its commercial
lender that provides for a $30 million unsecured credit facility that expires in
September 2000. Advances under the revolving line of credit bear interest at
LIBOR plus 0.75%. At December 31, 1999, $22.1 million had been drawn down
under the line of credit. The line of credit is subject to certain restrictive
covenants set forth in a loan agreement, which requires that the Company
maintain certain financial ratios. The Company was in compliance with all
covenants as of December 31, 1999 and as of the date of the filing of this
Quarterly Report.
During the 40 weeks ended December 31, 1999, the Company's cash and cash
equivalents decreased by $13.1 million. This decrease was the result of an
increase in cash provided by operating activities of $2.9 million from a variety
of sources, primarily net income, which was more than offset by decreases in (i)
cash used in investing activities of $14.2 million, primarily relating to the
consummation of acquisitions for cash and the purchase of property, plant and
equipment and (ii) cash used in financing activities of $1.8 million, primarily
as a result of the repurchase of shares of the Company's Common Stock and the
paydown of bankers acceptances, offset by borrowings under the credit facility.
While the Company believes that consolidation among independent
distributors of aftermarket collision parts continues to create opportunities
for the Company to acquire service centers in new and existing markets, it is
unlikely that the Company will acquire additional companies over the next 12
months, primarily as a result of the impact of the State Farm verdict. However,
if extraordinary opportunities arise, the Company will consider them.
The Company believes that its existing working capital, potential cash flow
from operations and funds available under its line of credit will enable it to
finance its operations for at least the next 12 months.
Inflation
- ---------
The Company does not believe that the relatively moderate rates of
inflation over the past three years have had a significant effect on its net
sales or profitability.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's results of operations are exposed to changes in interest
rates primarily with respect to borrowings under its credit facility, where
interest rates are tied to the prime rate or LIBOR. Under its current policies,
the Company does not use interest rate derivative instruments to manage exposure
to interest rate changes. Based on the current levels of debt, the exposure to
interest rate fluctuations is not considered to be material. The Company is
also exposed to currency fluctuations, primarily with respect to its product
purchases in Taiwan. While all transactions with Taiwan are conducted in U.S.
Dollars, changes in the relationship between the U.S. dollar and the New Taiwan
dollar might impact the price of products purchased in Taiwan. The Company
might not be able to pass on any price increases to customers. Under its
present policies, the Company does not attempt to hedge its currency exchange
rate exposure
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
-----------------
Item 2. Changes in Securities and Use of Proceeds. None
------------------------------------------
Item 3. Defaults Upon Senior Securities. None
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. None
---------------------------------------------------
11
<PAGE>
Item 5. Other Information.
-----------------
a. Management Information Systems. In January 1998, the Company
purchased a comprehensive software package for accounting, distribution and
inventory planning. During the initial phases of the implementation of the
package, the Company determined that the package would not meet the needs of the
Company. In October 1998, the Company entered into an agreement with a new
vendor for the purchase of a software package to be installed on an enterprise
basis. To date, the Company has expended an aggregate of approximately $4.5
million on hardware and software relating to the installation of the software
package and estimates that it will spend an additional $2.5 million over the
next 18 months to complete the installation and to make the system fully
operational. As the Company is still in the implementation phase and such an
implementation involves uncertainty, there can be no assurance that the actual
costs will not exceed the estimate. To date, the costs have been paid using
funds generated from operating cash flow or the sale of assets and it is
anticipated that future costs will be paid from existing working capital, from
cash flow from operations or borrowings under the credit facility.
The costs of the projects described above are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources and other
factors. However, there can be no guarantee that these time or cost estimates
will be achieved, and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, and the inherent difficulty in integrating new computer systems
into the Company's existing operations.
b. Legal Actions Against Insurance Companies Relating to the Use of
Aftermarket Collision Replacement Parts. In July 1997, certain individuals
initiated a class action lawsuit against State Farm Mutual Automobile Insurance
Company ("State Farm") in the Illinois Circuit Court in Williamson County
(Marion, Illinois), which asserts claims for breach of contract, consumer fraud
and equitable relief relating to State Farm's practice of sometimes specifying
the use of parts manufactured by sources other than the original equipment
manufacturer ("non-OEM crash parts") when adjusting claims for the damage to
insured vehicles. The Williamson County Court certified a near-nationwide class.
It was alleged that this practice breaches State Farm's insurance agreements
with its policyholders and is a violation of Illinois Consumer Fraud and
Deceptive Business Practices Act because non-OEM crash parts are inherently
inferior to OEM crash parts and, consequently, vehicles are not restored to
their "pre-loss condition" as specified in their policy. While the Company was
not a party to this lawsuit, a substantial portion of the Company's business
consists of the distribution of non-OEM crash parts to collision repair shops
for the use in repairing automobiles, the vast majority of which are covered by
insurance policies.
In October 1999, after a lengthy trial, the jury awarded the class
damages in the amount of approximately $460 million and the judge assessed
punitive damages against State Farm of over $700 million. State Farm has
appealed the verdict.
In the meantime, the Company understands that numerous class actions
have been brought against many of the other automobile insurance companies. The
Company is unaware of the exact status of these cases. In addition, the Company
understands that attorneys have sued several insurance companies alleging fraud
in setting up the Certified Automobile Parts Association ("CAPA"). CAPA is a
non-profit association of insurance companies, manufacturers, distributors,
collision repair shops and consumer groups which, using an independent testing
laboratory, compares the functional equivalence of OEM and non-OEM crash parts.
Shortly after the verdict in the Williamson County case, State Farm
suspended specifying most non-OEM crash parts used in connection with repairing
cars covered by their insurance. Effective November 8, 1999, Nationwide
Insurance and Farmers Insurance also temporarily suspended specifying many non-
OEM crash parts. The action of these insurance companies has had a material
adverse impact on the Company's sales and net income and if other insurance
companies follow suit and the State Farm decision is not overruled, the
magnitude of the negative impact on the Company would likely increase. See
"Management Discussion and Analysis of Financial Condition and Result of
Operations-General" above.
The Company believes that substantially all of the non-OEM crash parts
which it distributes are of similar quality to OEM crash parts and when
installed in a competent manner by collision repair shops, vehicles are restored
to their "pre-loss condition." In addition, the Company guarantees the parts it
distributes for as long as the owner at the time repairs are made continues to
own the vehicle.
In the event that the State Farm verdict is repeated in other cases,
and these cases are not overturned on appeal, with the result that non-OEM crash
parts can no longer be specified by insurance companies to repair insured
vehicles, the cost to consumers will be substantial. Once again, OEM's would
likely have monopoly pricing power with respect to many of the products required
to repair damaged vehicles.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
a. Exhibits - Exhibit 10.36 - Amendment No. 5 to Credit Agreement
between the Registrant and Mellon Bank, N.A.
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K - None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
By: /S/ John M. Palumbo
-------------------
John M. Palumbo
Chief Financial Officer
(Duly Authorized Officer and Principal Financial
and Accounting Officer)
Date: February 14, 2000
14
<PAGE>
EXHIBIT 10.36
FIFTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
---------
September 17, 1999, is entered into between MELLON BANK, N.A. (the "Bank"), with
----
a place of business at 400 South Hope Street, 5th Floor, Los Angeles, California
90071, and KEYSTONE AUTOMOTIVE INDUSTRIES, INC., a California corporation
("Borrower"), with its chief executive office located at 700 East Bonita Avenue,
- ----------
Pomona, California 91767.
RECITALS
--------
A. Borrower and the Bank have previously entered into that certain Credit
Agreement dated as of March 25, 1997, as amended by that certain First Amendment
to Credit Agreement dated as of August 25, 1997, that certain Second Amendment
to Credit Agreement dated as of March 17, 1998, that certain Third Amendment to
Credit Agreement dated as of June 29, 1998 and that certain Fourth Amendment to
Credit Agreement dated as of September 18, 1998 (collectively, the "Credit
------
Agreement"), pursuant to which the Bank has made certain loans and other
- ---------
financial accommodations available to Borrower. Terms used herein without
definition shall have the meanings ascribed to them in the Credit Agreement.
B. Borrower and the Bank wish to further amend the Credit Agreement under
the terms and conditions set forth in this Amendment. Borrower is entering into
this Amendment with the understanding and agreement that, except as specifically
provided herein, none of the Bank's rights or remedies as set forth in the
Credit Agreement is being waived or modified by the terms of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Amendments to Article I - Definitions.
-------------------------------------
(a) The first sentence of the definition of "Applicable Margin"
contained in Section 1.1 of the Credit Agreement is hereby amended in its
entirety as follows:
"'Applicable Margin': As of any date of determination, with
-----------------
respect to Prime Rate Option Revolving Loans or Libor Rate Option
Revolving Loans, as applicable, the percentage set forth opposite the
Consolidated Ratio of Total Indebtedness to EBITDA in effect as of
such date set forth in the table below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Consolidated Ratio of Total Applicable Margin Applicable Margin
Indebtedness to EBITDA Libor Rate Option Prime Rate Option
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Less than or equal to 1.00:1.00 .75% 0%
- -------------------------------------------------------------------------------------------
Greater than 1.00:1.00 and less than or .875% 0%
equal to 1.50:1.00
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
provided, however, that, notwithstanding the foregoing, for purposes
-------- -------
of determining the Applicable Margin, the Consolidated Ratio of Total
Indebtedness to EBITDA shall be deemed to be greater than 1.00 to 1.00
at all times when an Event of Default or Potential Event of Default
has occurred and is continuing based on the Borrower's failure to
deliver any financial statement or compliance certificate as and when
required pursuant to Sections 6.1(a)(i) and (iv) or 6.1(a)(ii) and
(iv), as applicable."
(b) Subsection (a) of the definition of "Indebtedness" contained in
Section 1.1 of the Credit Agreement is hereby amended in its entirety as
follows:
"(a) all indebtedness of such Person for borrowed money, including,
without limitation, all current and long term interest bearing
liabilities;"
(c) The definition of "Leverage Ratio" contained in Section 1.1 of
the Credit Agreement is hereby deleted in its entirety.
(d) The definition of "Maturity Date" contained in Section 1.1 of the
Credit Agreement is hereby amended in its entirety as follows:
"'Maturity Date': September 15, 2000."
-------------
(e) Clause (vi) of the definition of "Permitted Acquisitions"
contained in Section 1.1 of the Credit Agreement is hereby amended in its
entirety as follows:
"(vi) the total cash consideration paid for any Permitted
Acquisition (in a single transaction or in a series of related
transactions) shall not exceed $7,500,000;"
(f) The definition of "Revolving Commitment" contained in Section 1.1
of the Credit Agreement is hereby amended in its entirety as follows:
"'Revolving Commitment': The amount of $30,000,000, as such
--------------------
amount may be reduced pursuant to Section 2.1(c)."
(g) The following definition for "Consolidated Net Worth" is hereby
added to Section 1.1 of the Credit Agreement in the appropriate
alphabetical order:
"'Consolidated Net Worth': At any date of determination, the sum
----------------------
of the capital stock, additional paid-in capital, and retained
earnings (or minus accumulated deficit) of the Borrower and its
Subsidiaries on a consolidated basis, determined in conformity with
GAAP."
(h) The following definition for "Stock Repurchases" is hereby added
to Section 1.1 of the Credit Agreement in the appropriate alphabetical
order:
2
<PAGE>
"'Stock Repurchases': Any repurchase of any of the capital stock
-----------------
of Borrower or any of its Subsidiaries by Borrower or any of its
Subsidiaries."
2. Amendments to Article VI - Covenants.
------------------------------------
(a) Section 6.2(a) of the Credit Agreement, entitled "Consolidated
Fixed Charge Coverage Ratio", is hereby amended in its entirety as follows:
"(a) Consolidated Fixed Charge Coverage Ratio. As of the end of
----------------------------------------
each fiscal quarter, Borrower and its Subsidiaries on a consolidated
basis permit the Fixed Charge Coverage Ratio to be less than
1.50:1.00."
(b) Section 6.2(b) of the Credit Agreement, entitled "Consolidated
Current Ratio", is hereby deleted in its entirety and replaced with the
following covenant entitled "Consolidated Net Worth":
"(b) Consolidated Net Worth. At any time, permit the
----------------------
Consolidated Net Worth to be less than $140,000,000."
(c) Section 6.2(c) of the Credit Agreement, entitled "Consolidated
Total Liabilities to Tangible Net Worth Ratio", is hereby deleted in its
entirety and replaced with the following covenant entitled "Consolidated
Ratio of Total Indebtedness to EBITDA":
"(c) Consolidated Ratio of Total Indebtedness to EBITDA. At any
--------------------------------------------------
time, Borrower and its Subsidiaries on a consolidated basis permit the
ratio of (i) Total Indebtedness to (ii) EBITDA to be greater than
1.50:1.00."
(d) Section 6.2(e) of the Credit Agreement, entitled "Liens Etc.", is
hereby amended in its entirety as follows:
"(e) Liens Etc. Create or suffer to exist, or permit any of its
---------
Subsidiaries to create or suffer to exist, any Lien upon or with
respect to any of its properties, whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, in each case to secure any indebtedness of
any Person other than Liens in favor of Bank and, to the extent the
aggregate Indebtedness secured thereby does not exceed $5,000,000,
except the following: (i) Liens reflected on Schedule 6.2(e) to the
---------------
Credit Agreement delivered at the closing of the initial Loan; (ii)
purchase money Liens upon or in any property acquired or held by the
Borrower or any Subsidiary in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of such
property; and (iii) Liens for taxes not yet due."
(e) Section 6.2(h) of the Credit Agreement, entitled "Loans,
Investments, Secondary Liabilities", is hereby amended in its entirety as
follows:
3
<PAGE>
"(h) Loans, Investments, Secondary Liabilities. Make or permit
-----------------------------------------
to remain outstanding, or permit any Subsidiary to make or permit to
remain outstanding, any loan or advance to, or guarantee, induce or
otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stock or dividends of, or own,
purchase or acquire any stock, obligations or securities of or any
other interest in, or make any capital contribution to, any other
Person, or make or permit to remain outstanding loans and advances to
any of its officers, directors and shareholders or enter into or
permit to remain outstanding guarantees in connection with the
obligations of any of its officers, directors and shareholders, in an
aggregate amount outstanding at any time, collectively among the
Borrower and its Subsidiaries, in excess of $1,000,000, except that
the Borrower and its Subsidiaries may, without limitation as to the
dollar amount of any such transactions:
(i) own, purchase or acquire certificates of deposit issued by
the Bank, commercial paper rated Moody's P-1, municipal bonds rated
Moody's AA or better, direct obligations of the United States of
America or its agencies, and obligations guaranteed by the United
States of America;
(ii) continue to own the existing capital stock of the
Borrower's Subsidiaries;
(iii) endorse negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;
(iv) allow the Borrower's Subsidiaries to make or permit to
remain outstanding advances from the Borrower's Subsidiaries to the
Borrower; and
(v) allow the Borrower to make or permit to remain outstanding
advances from the Borrower to the Borrower's Subsidiaries, provided
--------
that such advances may not exceed an amount of $5,000,000 outstanding
at any one time."
(f) Section 6.2(i) of the Credit Agreement, entitled "Asset Sales", is
hereby amended in its entirety as follows:
"(i) Asset Sales. Convey, sell, lease, transfer or otherwise
-----------
dispose of, or permit any Subsidiary to convey, sell, lease, transfer
or otherwise dispose of, during any fiscal year of the Borrower, in
one transaction or a series of transactions, outside the ordinary
course of business, assets of the Borrower or of any of its
Subsidiaries, whether now owned or hereafter acquired, having an
aggregate value in excess of $1,000,000."
(g) The following subsection (p) entitled "Stock Repurchases" is
hereby added to Section 6.2 of the Credit Agreement:
4
<PAGE>
"(p) Stock Repurchases. Authorize or permit any Stock
-----------------
Repurchases in excess of $20,000,000 for the period September 1, 1999
through March 31, 2000, or in excess of $20,000,000 in any subsequent
fiscal year of Borrower."
3. Effectiveness of this Amendment. Each of the following is a condition
-------------------------------
precedent to the effectiveness of this Amendment and to the Bank's obligation to
extend any credit to Borrower as provided for by this Amendment:
(a) Amendment. The Bank shall have received, in form and substance
---------
satisfactory to the Bank, this Amendment fully executed in a sufficient
number of counterparts for distribution to the Bank and Borrower.
(b) Authorizations. The Bank shall have received evidence, in form
--------------
and substance satisfactory to the Bank, that the execution, delivery and
performance by Borrower and each Guarantor and any instrument or agreement
required under this Amendment have been duly authorized.
(c) Representations and Warranties. The Representations and
------------------------------
Warranties set forth in the Credit Agreement must be true and correct as of
the date of this Amendment as if made as of such date.
(d) No Event of Default. As of the date hereof, no Event of Default,
-------------------
or event which with notice or passage of time or both would constitute an
Event of Default, exists or has occurred and is continuing.
(e) Other Required Documentation. All other documents and legal
-----------------------------
matters in connection with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded and shall be in form and
substance satisfactory to the Bank.
4. Representations and Warranties. The Borrower represents and warrants
------------------------------
as follows:
(a) Authority. Borrower has the requisite corporate power and
---------
authority to execute and deliver this Amendment, and to perform its
obligations hereunder and under the Loan Documents (as amended or modified
hereby). The execution, delivery and performance by the Borrower of this
Amendment and each Loan Document (as amended or modified hereby) have been
duly approved by all necessary corporate action of Borrower and no other
corporate proceedings on the part of Borrower are necessary to consummate
such transactions.
(b) Enforceability. This Amendment has been duly executed and
--------------
delivered by Borrower. This Amendment and each Loan Document (as amended or
modified hereby) is the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, and is in full
force and effect.
5
<PAGE>
(c) No Default. As of the date hereof, no event has occurred and is
----------
continuing that constitutes, or would with notice or passage of time or
both would constitute, an Event of Default.
5. Choice of Law. The validity of this Amendment, its construction,
-------------
interpretation and enforcement, the rights of the parties hereunder, shall be
determined under, governed by, and construed in accordance with the internal
laws of the State of California governing contracts only to be performed in that
State.
6. Counterparts. This Amendment may be executed in any number of
------------
counterparts and by different parties and separate counterparts, each of which
when so executed and delivered, shall be deemed an original, and all of which,
when taken together, shall constitute one and the same instrument. Delivery of
an executed counterpart of a signature page to this Amendment by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Amendment.
7. Due Execution. The execution, delivery and performance of this
-------------
Amendment are within the power of Borrower, have been duly authorized by all
necessary corporate action, have received all necessary governmental approval,
if any, and do not contravene any law or any contractual restrictions binding on
Borrower.
8. Reference to and Effect on the Loan Documents.
---------------------------------------------
(a) Upon and after the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to "the Credit Agreement", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to
the Credit Agreement as modified and amended hereby.
(b) Except as specifically amended above, the Credit Agreement and all
other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed and shall constitute
the legal, valid, binding and enforceable obligations of Borrower to the
Bank.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any the Bank or the Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
(d) To the extent that any terms and conditions in any of the Loan
Documents shall contradict or be in conflict with any terms or conditions
of the Credit Agreement, after giving effect to this Amendment, such terms
and conditions are hereby deemed modified or amended accordingly to reflect
the terms and conditions of the Credit Agreement as modified or amended
hereby.
6
<PAGE>
9. Ratification. Borrower hereby restates, ratifies and reaffirms each
------------
and every term and condition set forth in the Credit Agreement, as amended
hereby, and the Loan Documents effective as of the date hereof.
10. Estoppel. To induce the Bank to enter into this Amendment and to
--------
continue to make advances to Borrower under the Credit Agreement, Borrower
hereby acknowledges and agrees that, after giving effect to this Amendment, as
of the date hereof, there exists no Event of Default and no right of offset,
defense, counterclaim or objection in favor of Borrower as against the Bank with
respect to the Obligations.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of the
date first above written.
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.,
a California corporation
By:
---------------------------
Name:
-------------------------
Title:
------------------------
MELLON BANK, N.A.,
a national association
By:
----------------------------
Name:
-------------------------
Title:
------------------------
7
<PAGE>
GUARANTORS' CONSENT
Each of the undersigned hereby acknowledges and consents to the terms,
conditions and provisions of the Fifth Amendment to Credit Agreement dated as of
September 17,1999 entered into by and among Keystone Automotive Industries, Inc.
("Borrower") and Mellon Bank, N.A. (the "Bank"), and to the transactions
contemplated by such amendment. In addition, each of the undersigned hereby
reaffirms its obligations under its respective Continuing Guaranty delivered to
Lender in connection with the Credit Agreement as of the date noted beside each
such Guarantor's signature block, and agrees that it is and shall remain
responsible for the obligations of Borrower under such Credit Agreement as
amended by the Fifth Amendment to Credit Agreement.
CAR BODY CONCEPTS, INC., Date of Continuing Guaranty:
a Minnesota corporation March 17, 1997
By: /s/ John M. Palumbo
------------------------------
Name: John M. Palumbo
----------------------------
Title: CFO
---------------------------
INTEURO PARTS DISTRIBUTORS, INC., Date of Continuing Guaranty:
a Florida corporation March 17, 1997
By: /s/ John M. Palumbo
------------------------------
Name: John M. Palumbo
----------------------------
Title: CFO
---------------------------
NORTH STAR PLATING COMPANY, Date of Continuing Guaranty:
a Minnesota corporation March 28, 1997
By: /s/ John M. Palumbo
------------------------------
Name: John M. Palumbo
----------------------------
Title: CFO
---------------------------
REPUBLIC AUTOMOTIVE PARTS, INC., Date of Continuing Guaranty:
a Delaware corporation June 29, 1998
By: /s/ John M. Palumbo
------------------------------
Name: John M. Palumbo
----------------------------
Title: CFO
---------------------------
8
<PAGE>
FENDERS & MORE, INC., Date of Continuing Guaranty:
a Tennessee corporation June 29, 1998
By: /s/ John M. Palumbo
------------------------------
Name: John M. Palumbo
----------------------------
Title: CFO
---------------------------
9
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE (REVOLVING CREDIT)
------------------------------------------------------
$30,000,000 September 17, 1999
Los Angeles, California
FOR VALUE RECEIVED, KEYSTONE AUTOMOTIVE INDUSTRIES, INC., a California
corporation (the "Borrower"), promises to pay to the order of MELLON BANK, N.A.,
--------
a national banking association ("Bank"), on the Maturity Date (as defined in the
----
Credit Agreement referred to below) the lesser of (i) Thirty Million Dollars
($30,000,000) or (ii) the unpaid principal amount of all advances made by the
Bank to the Borrower as Revolving Loans under the Credit Agreement referred to
below.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from the date hereof until paid in full at the rates and at the times
which shall be determined in accordance with the provisions of the Credit
Agreement.
This Amended and Restated Promissory Note (Revolving Credit) (this "Note")
----
is the "Revolving Note" referred to in, and is entitled to the benefits of, that
certain Credit Agreement between Borrower and the Bank dated as of March 25,
1997, as amended by that certain First Amendment to Credit Agreement dated as of
August 25, 1997, that certain Second Amendment to Credit Agreement dated as of
March 17, 1998, that certain Third Amendment to Credit Agreement dated as of
June 29, 1998, that certain Fourth Amendment to Credit Agreement dated as of
September 18, 1998 and that certain Fifth Amendment to Credit Agreement dated as
of even date herewith (collectively, the "Credit Agreement"), to which reference
----------------
is hereby made for a more complete statement of the terms and conditions under
which the Revolving Loans evidenced hereby were made and are to be repaid. The
Credit Agreement, among other things, (i) provides for the making of advances
(the "Loans") by the Bank to the Borrower from time to time in an aggregate
-----
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the Indebtedness of the Borrower resulting from each such Loan being
evidenced by this Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified. (Any and all initially capitalized terms
set forth without definition in this Note shall have the respective meanings
assigned to such terms in the Credit Agreement.)
All payments of principal, interest and fees in respect of this Note shall
be made in lawful money of the United States of America in same day funds at
Bank's office located at Three Mellon Bank Center, 23rd Floor/Loan
Administration, Pittsburgh, Pennsylvania 15259 or at such other places as shall
be designated in writing for such purpose in accordance with the terms of the
Credit Agreement. Until notified of the transfer of this Note, the Borrower
shall be entitled to deem Bank or such person who has been so identified by the
transferor in writing to the Borrower as the holder of this Note, as the owner
and holder of this Note. Each of the Bank
<PAGE>
and any subsequent holder of this Note agrees that before disposing of this Note
or any part hereof, it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been paid
on the schedule attached hereto, if any; provided, however, that the failure to
-------- -------
make notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Borrower hereunder with respect to payments of
principal or interest on this Note.
This Note is subject to mandatory prepayment as provided in the Credit
Agreement. The Borrower may prepay this Note on a voluntary basis as permitted
under the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND BANK SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. THE BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT
THE SOLE OPTION OF BANK, IN ANY OTHER COURT IN WHICH BANK SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY.
THE BORROWER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
--------------------
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THE
PRECEDING PARAGRAPH. THE BORROWER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR THE LOANS
CONTEMPLATED HEREUNDER, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER REPRESENTS THAT
IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest and
fees thereon, (i) may become, or may be declared to be, due and payable in the
manner, upon the conditions and with the effect provided in the Credit
Agreement, and (ii) shall bear interest at a rate equal to 2% above the
applicable Interest Rate Option from and after the occurrence and during the
continuance of an Event of Default.
This Note is subject to restrictions on transfer or assignment as provided
in Section 8.7 of the Credit Agreement. The terms of this Note are subject to
amendment only in the manner provided in the Credit Agreement.
2
<PAGE>
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligation of the Borrower,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Note. The
Borrower hereby consents to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waives diligence, presentment,
protest, demand and notice of every kind and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
This Note amends, restates, replaces and supercedes that certain Promissory
Note (Revolving Credit) dated as of March 25, 1997 in the original principal
amount of Twenty-Five Million Dollars ($25,000,000) made by Borrower payable to
the order of Bank (the "Original Note"), which Original Note, upon Borrower's
-------------
execution and delivery of this Note, shall be null, void and of no further
force or effect.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer as of the date and the place first
above written.
KEYSTONE AUTOMOTIVE
INDUSTRIES, INC.
a California corporation
By: /s/ John M. Palumbo
---------------------------
Name: John M. Palumbo
-------------------------
Title: C.F.O.
------------------------
3
<PAGE>
TRANSACTIONS
ON
PROMISSORY NOTE (REVOLVING CREDIT)
<TABLE>
<CAPTION>
Type of Loan Amount of Amount of Outstanding
Date Made This Loan Made Principal Paid Principal Balance Notation
- ---- Date This Date This Date This Date Made By
------------ --------- -------------- ----------------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NINE MONTHS
ENDED 12/31/99 AND IS QUALIFIED IN IT ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> MAR-27-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,724
<SECURITIES> 0
<RECEIVABLES> 28,057
<ALLOWANCES> 1,376
<INVENTORY> 87,214
<CURRENT-ASSETS> 130,371
<PP&E> 44,306
<DEPRECIATION> 21,369
<TOTAL-ASSETS> 197,849
<CURRENT-LIABILITIES> 41,361
<BONDS> 0
0
0
<COMMON> 84,445
<OTHER-SE> 68,319
<TOTAL-LIABILITY-AND-EQUITY> 197,849
<SALES> 280,079
<TOTAL-REVENUES> 280,079
<CGS> 158,663
<TOTAL-COSTS> 105,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (469)
<INCOME-PRETAX> 16,988
<INCOME-TAX> 6,965
<INCOME-CONTINUING> 10,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,023
<EPS-BASIC> .62
<EPS-DILUTED> .62
</TABLE>
