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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 MARCH 31, 2000
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: 1-14181
TRANSPORTATION COMPONENTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0562800
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
THREE RIVERWAY
SUITE 200
HOUSTON, TEXAS 77056
(Address of Principal Executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 332-2500
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, as of
May 12, 2000, was 17,740,289.
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
INDEX
PART I. - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets of Transportation Components, Inc. at
March 31, 2000 (Unaudited) and December 31, 1999...................... 3
Unaudited Consolidated Statements of Operations of
Transportation Components, Inc. for the three months ended
March 31, 2000 and March 31, 1999..................................... 4
Unaudited Consolidated Statements of Cash Flows of
Transportation Components, Inc. for the three months ended
March 31, 2000 and March 31, 1999..................................... 5
Notes to Unaudited Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 10
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 14
Item 6. Exhibits and Reports on Form 8-K............................... 14
Signature............................................................... 15
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
--------- -----------
<S> <C> <C>
Current assets: (UNAUDITED) (NOTE 1)
Cash and cash equivalents .............................. $ 3,667 $ 2,859
Accounts receivable, net of allowance for bad debts
of $1,644 and $1,586 ................................. 42,861 40,029
Receivables from related parties ....................... 395 508
Notes receivable, current .............................. 652 732
Inventories ............................................ 67,965 67,203
Prepaid expenses and other ............................. 2,694 2,941
Deferred tax asset ..................................... 5,221 5,447
--------- ---------
Total current assets .............................. 123,455 119,719
Property and equipment, net ................................ 14,203 14,532
Notes receivable, net ...................................... 703 752
Notes receivable from related parties ...................... 859 858
Goodwill, net .............................................. 86,794 87,358
Other assets ............................................... 1,328 1,351
--------- ---------
Total assets ...................................... $ 227,342 $ 224,570
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .................. $ 42,639 $ 42,459
Subordinated debt and other payables to related parties 1,762 1,762
Current portion of long-term debt ...................... 714 743
Other current liablities ............................... 930 1,004
--------- ---------
Total current liablities .......................... 46,045 45,968
Long-term debt, less current portion ....................... 63,888 61,173
Deferred tax liability ..................................... 2,859 2,962
Subordinated debt and other payables to related parties .... 12,483 12,488
--------- ---------
Total liablities .................................. 125,275 122,591
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par, 5,000,000 shares authorized,
none issued .......................................... -- --
Common stock, $0.01 par, 102,000,000 shares authorized,
17,782,054 shares issued ............................. 178 178
Additional paid-in capital ............................. 102,522 102,522
Treasury stock, at cost- 63,546 and 121,411 shares,
respectively ......................................... (145) (304)
Cumulative translation adjustments ..................... 126 134
Retained deficit ....................................... (614) (551)
Total stockholders' equity ........................ 102,067 101,979
--------- ---------
Total liabilities and stockholders' equity ........ $ 227,342 $ 224,570
========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2000 1999
------------ ------------
Revenues ................................... $ 77,850 $ 78,242
Cost of sales .............................. 54,731 53,763
------------ ------------
Gross profit ........................... 23,119 24,479
Selling, general and administrative expenses 20,655 19,288
Amortization of goodwill ................... 565 543
------------ ------------
Income from operations ..................... 1,899 4,648
Other income (expense):
Interest expense ....................... (1,850) (1,248)
Other income, net ...................... 222 228
------------ ------------
Income before income taxes ................. 271 3,628
Provision for income taxes ................. 334 1,668
------------ ------------
Net (loss) income .......................... $ (63) $ 1,960
============ ============
(Loss) income per share - Basic ............ $ 0.00 $ 0.11
============ ============
(Loss) income per share - Diluted .......... $ 0.00 $ 0.11
============ ============
Number of shares used in the
per share calculations:
Basic .................................. 17,676,897 17,727,815
============ ============
Diluted ................................ 17,676,897 19,328,648
============ ============
The accompanying notes are an integral part of
these consolidated financial statements.
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TRANSPORTATION COMPONENTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income .......................................... $ (63) $ 1,960
Adjustments to reconcile net (loss) income to net cash
(used by) provided by operating activities:
Depreciation and amortization .......................... 1,344 1,227
Provision for bad debts ................................ 135 136
Loss on sale of assets ................................. 3 12
Deferred tax provision ................................. 120 471
Compensation expense related to issuance of common stock
to associate benefit plans ........................... 161 --
Changes in operating assets and liabilities:
Accounts receivable and notes receivable ............... (2,719) (2,522)
Inventories ............................................ (766) (1,804)
Other assets ........................................... 273 139
Accounts payable and accrued expenses .................. 105 1,737
------- -------
Net cash (used by) provided by operating activities (1,407) 1,356
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................... (481) (727)
Sales of property and equipment ........................ 17 --
Other .................................................. -- 110
------- -------
Net cash used in investing activities .............. (464) (617)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) of long term debt .......... 2,680 (2,141)
------- -------
Net cash provided by (used in) financing activities 2,680 (2,141)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................... (1) 5
------- -------
Net increase (decrease) in cash and cash equivalents ....... 808 (1,397)
Cash and cash equivalents, beginning of period ............. 2,859 4,090
------- -------
Cash and cash equivalents, end of period ................... $ 3,667 $ 2,693
======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Transportation Components, Inc., a Delaware corporation also known as
TransCom USA ("TransCom", and collectively with its subsidiaries, the
"Company"), was founded in October 1997 to become a leading national distributor
of replacement parts and supplies for commercial trucks, trailers and other
heavy duty vehicles and equipment. Prior to its initial public offering (the
"IPO"), TransCom had not conducted any operations. Concurrent with the
consummation of its IPO on June 24, 1998, TransCom acquired nine companies in
separate merger transactions. During the third and fourth quarters of 1998,
TransCom acquired an additional nine companies. During 1999, the Company
acquired two small heavy duty parts distributors, which have been integrated
into the Company as two branches.
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 to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presenation have been included. All significant intercompany transactions and
balances have been eliminated. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1999.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (i) the reported amounts of assets and liabilities, (ii)
the disclosure of contingent assets and liabilities known to exist as of the
date of the financial statements are published and (iii) the reported amount of
revenues and expenses recognized during the periods presented. The Company
regularly reviews all significant estimates affecting its consolidated financial
statements. Adjustments made with respect to the use of estimates often relate
to improved information not previously available. Uncertainties with respect to
such estimates and assumptions are inherent in the preparation of financial
statements.
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TRANSPORTATION COMPONENTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated (in thousands, except for share and
per share data):
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2000 1999
------------ ------------
NET (LOSS) INCOME
Net (loss) income .................. $ (63) $ 1,960
Add interest on 5% convertible notes
(assumed converted), net
of federal income tax effect .... -- 116
------------ ------------
Adjusted net (loss) income ......... $ (63) $ 2,076
============ ============
BASIC
Basic weighted average shares ...... 17,676,897 17,727,815
============ ============
DILUTED
Basic weighted average shares ...... 17,676,897 17,727,815
Effect on Dilutive securities
Options ........................ -- 1,195
Warrants ....................... -- --
Convertible subordinated notes . -- 1,599,638
------------ ------------
Diluted weighted average shares .... 17,676,897 19,328,648
============ ============
NET INCOME (LOSS) PER SHARE
Basic .............................. $ 0.00 $ 0.11
============ ============
Diluted ............................ $ 0.00 $ 0.11
============ ============
The computation of diluted weighted average shares for the three months
ended March 31, 2000 did not include shares potentially issuable for options,
warrants and convertible subordinated notes because their inclusion would have
been antidilutive.
3. LONG TERM OBLIGATIONS
Long-term debt obligations consist of the following (in thousands):
March 31, December 31,
2000 1999
-------- -----------
Revolving credit facility .............. $ 63,000 $ 60,100
Notes payable to a financial institution 1,153 1,355
Other .................................. 449 461
-------- --------
Total long-term debt ................... 64,602 61,916
Less: current portion ................. (714) (743)
-------- --------
$ 63,888 $ 61,173
======== ========
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TRANSPORTATION COMPONENTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 130, "Reporting Comprehensive Income", which requires companies to
display comprehensive income and its components in the financial statements.
Comprehensive income, which encompasses net income (loss) and currency
translation adjustments, is as follows:
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------ ------
Net (loss) income attributable to common
Stockholders ......................... $ (63) $1,960
Currency translation adjustments ....... (8) 62
------ ------
Comprehensive (loss) income ............ $ (71) $2,022
====== ======
5. SEGMENT INFORMATION
TransCom classifies its business into two reportable segments based on
geographic areas: "Domestic" (revenues generated from customers for use within
the United States) and "International" (revenues generated from customers for
use outside the United States - Canada, Mexico, South America, Central America,
Australia, New Zealand, Europe and Asia). All international operations have been
aggregated into one reportable segment because their operations are similar in
the nature of the product and production process, type of customer, and
distribution method. Operating income by segment is calculated using direct cost
of goods and services, direct selling, general and administration expenses, and
allocating general office expenses based on segment revenues.
Information as to the operations of TransCom's reportable segments is as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 DOMESTIC INTERNATIONAL INTERSEGMENT TOTAL
- --------------------------------- --------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Revenues ........................ $ 67,902 $ 10,018 $ (70) $ 77,850
========= ========= ========= =========
Operating income ................ 1,156 794 (51) 1,899
========= ========= ========= =========
Identifiable assets ............. 195,562 31,780 227,342
========= ========= =========
Depreciation and amortization ... 1,192 152 1,344
========= ========= =========
Capital expenditures ............ 435 46 481
========= ========= =========
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
- ---------------------------------
<S> <C> <C> <C> <C>
Revenues ........................ $ 70,151 $ 8,155 $ (64) $ 78,242
========= ========= ========= =========
Operating income ................ 3,915 753 (20) 4,648
========= ========= ========= =========
Identifiable assets ............. 185,043 36,076 221,119
========= ========= =========
Depreciation and amortization ... 1,054 173 1,227
========= ========= =========
Capital expenditures ............ 642 85 727
========= ========= =========
</TABLE>
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Information as to TransCom's operations in different geographical areas is
as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED ALL OTHER
MARCH 31, 2000 UNITED STATES MEXICO CANADA INTERNATIONAL(1) TOTAL
- ------------------ ------------- -------- -------- --------------- --------
<S> <C> <C> <C> <C> <C>
Revenues ........ $ 67,902 $ 5,809 $ 2,692 $ 1,447 $ 77,850
Long-lived assets 87,539 10,980 5,388 -- 103,907
THREE MONTHS ENDED
MARCH 31, 1999
- ------------------
Revenues ........ $ 70,151 $ 4,544 $ 2,628 $ 919 $ 78,242
Long-lived assets 77,087 11,385 9,427 -- 97,899
- ----------------------
</TABLE>
(1)Includes South America, Central America, Australia, Europe and Asia.
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS REPORT ON FORM 10-Q CONTAINS SOME "FORWARD-LOOKING STATEMENTS" WHICH
GIVE THE COMPANY'S CURRENT EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. SUCH
STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMS SUCH AS
"BELIEVES," "EXPECTS," "MAY," "ESTIMATES," "WILL," "SHOULD," "PLANS" OR
"ANTICIPATES" OR OTHER SIMILAR WORDS IN ANY DISCUSSION OF FUTURE OPERATING OR
FINANCIAL PERFORMANCE. SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND INVOLVE SIGNIFICANT RISKS AND UNCERTAINTIES, AND ACTUAL
RESULTS MAY VARY MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF ANY NUMBER OF FACTORS, MOST OF WHICH ARE BEYOND THE CONTROL OF
MANAGEMENT. IN PARTICULAR, THE COMPANY HAS IDENTIFIED SPECIFIC RISKS AND
UNCERTAINTIES RELATED TO THE COMPANY'S BUSINESS UNDER "ITEM 1. BUSINESS - RISK
FACTORS" ON PAGE 9 OF THE COMPANY'S ANNUAL REPORT OR FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999. NO ASSURANCE CAN BE GIVEN THAT THESE ARE ALL OF THE
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS. THIS DISCUSSION IS PROVIDED AS PERMITTED BY THE
PRIVATE LITIGATION SECURITIES LITIGATION REFORM ACT OF 1995.
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes thereto in this
Report, and the Company's audited consolidated financial statements contained in
the Form 10-K for the year ended December 31, 1999. Any capitalized terms used
but not defined in this Item have the same meaning given to them in the Form
10-K.
OVERVIEW
During 1999 and the first quarter of 2000, we focused on integrating our
operations. During 1999, we installed common operating and financial systems and
a wide area network in the majority of our branch locations. We centralized
payroll and standardized employee benefits such as health insurance, flexible
benefit plans and the 401(k) program for all domestic associates. In addition,
we transferred the accounts payable function from several branches to the
general office in Houston. We centralized invoice payments for approximately 25
of our larger vendors. We transferred the purchasing function for several of our
Florida branches to the general office. During the first quarter of 2000, we
continued to focus on processes related to our recently installed systems. We
estimate that the accounts payable and purchasing functions for most of our
remaining domestic branches will be centralized during 2000.
During 1999 and the first quarter of 2000, we failed to realize
significant cost savings from centralizing our administrative functions due to
the costs to staff and train our general office. We are building the
infrastructure to centralize the branch administrative functions before
significant costs can be reduced at the branches. Additionally, we incurred
costs to train our associates on the recently installed common operating and
financial systems. During the fourth quarter of 1999, we recorded approximately
$0.9 million of charges for severance costs associated with our centralization
of administration and other headcount reductions. We expect that significant
administrative costs at our branch locations can be eliminated or reduced during
the second half of 2000. We expect these administrative cost reductions will
result in additional charges for severance costs.
We believe the business level of the heavy duty truck parts industry
slowed during 1999 from the record levels experienced in 1997 and early 1998.
Our revenue level in 1999 declined slightly from 1998. Revenue for the first
quarter of 2000 was 0.5% below revenues for the same period of 1999. During
1998, our Oklahoma City branch recorded substantial revenues from two major
oilfield service companies, primarily under contracts to fabricate specialty
equipment. As a result of the overall slowdown in the oilfield services industry
during early 1999, the branch's sales declined from $12.7 million in the second
half of 1998 to $5.5 million in the second half of 1999. Revenues for the
Oklahoma City branch for the first quarter of 2000 exceeded the revenues for the
third and fourth quarters of 1999, but compared to the first
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TRANSPORTATION COMPONENTS, INC.
quarter of 1999 declined by 1.3 million. While this operation downsized its
workforce in response to the lower sales, it went from being very profitable in
1998 to a slightly above break-even operation during 1999. The operating income
of this branch for the first quarter of 2000 was higher than any quarter since
the first quarter of 1999. The revenues and operating income for this branch are
expected to continue to improve in 2000 in connection with the improved level of
business in the oilfield service industry.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31
-----------------------------------------
2000 % 1999 %
-------- ----- -------- -----
(IN THOUSANDS, EXCEPT PERCENTAGES)
Revenues .......................... $ 77,850 100.0 $ 78,242 100.0
Cost of sales ..................... 54,731 70.3 53,673 68.7
-------- ----- -------- -----
Gross profit .................. 23,119 29.7 24,479 31.3
Selling, general and administrative 20,655 26.5 19,288 24.7
Amortization of goodwill .......... 565 0.7 543 0.7
-------- ----- -------- -----
Income from operations ........ 1,899 2.5 4,648 5.9
Interest expense .................. (1,850) (2.4) (1,248) (1.6)
Other income ...................... 222 0.3 228 0.3
-------- ----- -------- -----
Income before income taxes .... $ 271 0.4 $ 3,628 4.6
======== ===== ======== =====
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1999
REVENUES. Revenues of $77.8 million for the three months ended March 31,
2000 declined $0.4 million, or 0.5%, compared to $78.2 million of revenues for
the three months ended March 31, 1999. Revenues at our Oklahoma City branch
exceeded the revenues achieved in the third and fourth quarters of 1999, but
compared to the first quarter of 1999 declined by $1.3 million as a result of
the slowdown during early 1999 in the oilfield services industry. Increased
revenues in Mexico were partially offset by revenue declines in our Eastern and
Central Regions.
GROSS PROFIT. Total gross profit dollars of $23.1 million for the three
months ended March 31, 2000 declined by $1.4 million, or 5.6%, from $24.5
million of gross profit for the three months ended March 31, 1999. As a
percentage of revenues, gross profit of 29.7% for the first quarter of 2000
declined 160 basis points from gross profit of 31.3% for the first quarter of
1999. This decline is partially the result of vendor price increases, which we
could not immediately pass through to our customers and changes in product mix.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $1.4 million, or 7.1%, to $20.7 million for the three months
ended March 31, 2000 from $19.3 million for the three months ended March 31,
1999. Selling, general and administrative expenses as a percentage of revenues
increased from 24.7% for the first quarter of 1999 to 26.5% for the first
quarter of 2000. The increases are the result of costs to build the
infrastructure, including staffing and training of our general office, to allow
us to centralize the branch administrative functions. We expect that significant
administrative costs at our branch locations can be eliminated or reduced during
the second half of 2000.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
2000 increased $0.6 million, or 48%, to $1.85 million compared to $1.25 million
of interest expense for the three months ended March 31, 1999. The increase in
interest expense is the result of an approximate $4.0 million increase in the
average amount of debt outstanding between the two quarters and an approximate
225 basis point increase in the average interest rate between the two quarters.
Additionally, we have paid fees for amendments to our
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TRANSPORTATION COMPONENTS, INC.
revolving credit facility, which have been recorded as interest expense. LIBOR
was approximately 100 basis points higher in the first quarter of 2000 compared
to the first quarter of 1999. The margin above LIBOR, which we paid increased by
125 basis points. The margin above LIBOR increased in connection with the
increase in our ratio of debt to earnings before interest, taxes, depreciation
and amortization. The increase in the average debt outstanding is primarily a
result of the increased working capital invested in accounts receivable and
inventory.
LIQUIDITY AND CAPITAL RESOURCES
As a distributor of heavy duty truck parts we require significant amounts
of working capital to fund inventories and accounts receivable. Additional cash
is required for capital items such as delivery vehicles, information technology
and warehouse equipment. We also require cash to pay our lease obligations and
to service our debt.
We used $1.4 million in net cash in operating activities during the three
months ended March 31, 2000. This cash was invested in increased accounts
receivable and inventory in connection with increased sales in the first quarter
of 2000 compared to the fourth quarter of 1999. Net cash used for investing
activities was $0.5 million for the three months ended March 31, 2000, primarily
relating to the purchase of information technology system. At March 31, 2000, we
had cash of $3.7 million, working capital of $77.4 million and total debt of
$78.8 million compared to $2.9 million, $73.8 million and $76.2 million at
December 31, 1999, respectively.
On June 24, 1998, we entered into a three-year revolving credit facility,
which provides for a line of credit up to $75 million. The credit facility
matures on June 24, 2001, bears interest at either LIBOR plus an applicable
margin based on the ratio of debt to cash flows (as defined), or the bank's
prime rate, at our option. Under the terms of the credit facility, we are
required to comply with various affirmative and negative covenants.
Effective September 30, 1999, we entered into an Amended and Restated
Credit Agreement, or Credit Facility. The primary changes were to modify two of
the financial covenants, increase the interest rates payable by 75 to 150 basis
points, and provide that the collateral for the loan will be a pledge of our
assets other than real estate and vehicles. The maximum borrowing capacity of
$75.0 million and the termination date of June 24, 2001 were not changed.
During March 2000, our internal cash flow projections indicated we would
violate certain financial ratios required by our Credit Facility at March 31,
2000. As a result, we requested and received an amendment, which cured the
projected covenant violations as of March 31, 2000.
As of March 31, 2000, we are in compliance with the financial covenants in
our Credit Facility. At March 31, 2000, $0.4 million was available for
borrowings under the most restrictive covenants under the Credit Facility.
Our Credit Facility matures on June 24, 2001. Because we prefer for
amounts borrowed under the Credit Facility to be classified in our balance sheet
as long-term, we intend to renew and extend or replace the Credit Facility as of
June 30, 2000. However, we cannot be sure that we will be able to renew and
extend or replace the Credit Facility. We expect interest costs will be higher
and the conditions more restrictive on any renewed or replacement facility.
Our internal cash flow projections indicate our cash flow from operations
will provide cash in excess of our normal working capital needs. Planned capital
expenditures for 2000 of approximately $3
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<PAGE>
TRANSPORTATION COMPONENTS, INC.
million are expected to be funded from cash flow from operations and
supplemented as necessary by borrowings from the Credit Facility, any
replacement or renewed credit facility or other sources of financing.
We will require additional capital to fund any future acquisitions. At
this time, we do not plan to grow through acquisitions in the near term unless
the market price of our common stock rises to levels that will make acquisitions
accretive to our earnings or we generate excess cash flow. We also may pursue
additional equity or debt financing to fund future acquisitions, although we may
not be able to obtain additional financing on attractive terms.
FOREIGN CURRENCY FLUCTUATIONS
A portion of the Company's consolidated revenues are billed and collected
in Mexican pesos and Canadian dollars. Additionally, substantially all of the
operating expenses related to foreign locations are incurred in a foreign
currency. Consequently, the Company's reported financial results are affected by
fluctuation of foreign currencies against the U.S. dollar. The Company
periodically performs foreign currency hedging to reduce its foreign currency
transaction exposures.
SEASONALITY
Weather extremes cause increased parts wear and breakdowns of trucks and
trailers; however, extreme weather, particularly during winter months, could
inhibit general business activity. These seasonal trends may cause fluctuations
in the Company's earnings. Additionally, quarterly results may be materially
affected by the timing of acquisitions, variations in the margins of products
sold and services performed during any particular quarter, the timing and
magnitude of acquisition assimilation projects and regional economic conditions.
Accordingly, the Company's operating results in any particular quarter may not
be indicative of the results that can be expected for any other quarter or for
the entire year.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any litigation that management considers to
be of a material nature.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
27.1 Financial Data Schedule
B. REPORTS ON FORM 8-K:
None
-14-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who has signed this report on behalf of
the Registrant and as the principal financial officer of the Registrant.
TRANSPORTATION COMPONENTS, INC.
Date: May 15, 2000 By: /s/ MAC McCONNELL
Mac McConnell, Senior Vice President
and Chief Financial Officer
-15-
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