<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR 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 333-75887
FLEETPRIDE, INC.
(Exact name of registrant as specified in its charter)
ALABAMA 63-0681070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 LAKE COOK ROAD 60015
DEERFIELD, ILLINOIS (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 572-8000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 1, 2000, there was no established trading market for the
Registrant's common stock.
As of February 29, 2000, the number of outstanding shares of common
stock, par value $.01 per share, of FleetPride, Inc. was 94,229.
<PAGE> 2
FLEETPRIDE, INC. - FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 1999
We hereby amend Items 4, 8, 10, 11, 12, 13 and 14 and Schedule II, the
financial statement schedule, of our annual report on Form 10-K for the fiscal
year ended December 31, 1999, as filed with the Securities and Exchange
Commission on March 30, 2000, to add the additional information contained
herein.
<TABLE>
<CAPTION>
INDEX
10-K/A Page
-----------
<S> <C>
Index i
Part I
Item 4 - Submission of Matters to a Vote of Security Holders 1
Part II
Item 8 - Financial Statements and Supplementary Data 2
Part III
Item 10 - Directors and Executive Officers of the Registrant 28
Item 11 - Executive Compensation 30
Item 12 - Security Ownership of Certain Beneficial Owners and
Management 33
Item 13 - Certain Relationships and Related Party Transactions 34
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K 38
Financial Statement Schedule
Signatures
</TABLE>
i
<PAGE> 3
PART I
ITEM 4. Submission of Matters to a Vote of Security Holders.
On November 3, 1999, FleetPride Corporation, our sole shareholder,
approved an amendment to our Amended and Restated Articles of Incorporation
changing our name from HDA Parts System, Inc. to FleetPride, Inc., by written
consent in lieu of a meeting. There were 94,229 and 382,372.711 shares of our
common stock and Series B Preferred Stock, respectively, outstanding on November
3, 1999, and our sole shareholder voted all of such shares in favor of the
amendment.
1
<PAGE> 4
PART II
ITEM 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of FleetPride Corporation and
Subsidiaries
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 38 present fairly, in all material
respects, the financial position of FleetPride Corporation and its subsidiaries
("FleetPride") at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 14(a)(2) on page 38 presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of
FleetPride's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 30, 2000
2
<PAGE> 5
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 8,328 $ 6,445
Trade accounts receivable, less allowance for doubtful
accounts of $1,149 and $1,727 in 1998 and 1999................................ 18,099 64,344
Inventories, net................................................................. 41,453 113,585
Prepaid expenses................................................................. 61 2,090
Deferred tax asset............................................................... 2,588 4,581
Current portion of patronage dividend receivable................................. 2,108 5,928
----------- ------------
Total current assets........................................................ 72,637 196,973
Property, plant and equipment, net.................................................. 13,613 27,390
Deferred financing fees............................................................. 5,424 13,802
Goodwill and other intangibles...................................................... 55,496 222,689
Deferred tax asset.................................................................. 12,516 11,245
Other assets........................................................................ 4,238 5,575
----------- ------------
Total assets................................................................ $ 163,924 $ 477,674
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................................. $ 14,105 $ 37,861
Accrued interest................................................................. 5,217 7,410
Accrued liabilities relating to the acquisitions................................. 2,279 4,793
Accrued liabilities.............................................................. 7,649 15,482
----------- ------------
Total current liabilities................................................... 29,250 65,546
Line of credit...................................................................... 18,200 121,250
Long-term debt...................................................................... 100,000 100,000
----------- ------------
Total liabilities........................................................... 147,450 286,796
Stockholders' equity:
Preferred Stock, liquidation value $100, par value $.01
per share (Series A outstanding: 881,420 in 1999 and
435,750 in 1998, Series B outstanding: 779,940 in 1999
and 0 in 1998, Series C outstanding: 1 in 1999 and 0 in
1998 and Series D outstanding: 1 in 1999 and 0 in 1998).......................... 43,575 170,259
Common stock, par value $.01 per share (outstanding:
393,664 in 1999 and 108,834 in 1998)............................................. 1 4
Additional paid-in capital.......................................................... 14,325 60,266
Employee notes receivable........................................................... - (415)
Retained earnings (deficit)......................................................... (41,427) (39,236)
----------- ------------
Total stockholders' equity.................................................. 16,474 190,878
----------- ------------
Total liabilities & stockholders' equity.................................... $ 163,924 $ 477,674
=========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
----------- ---------- -----------
<S> <C> <C> <C>
Net sales...................................................................... $ 57,837 $ 103,295 $ 358,363
Cost of sales.................................................................. 36,611 65,855 234,709
----------- ---------- -----------
Gross profit................................................................... 21,226 37,440 123,654
Selling general & administrative expenses...................................... 16,143 31,030 97,446
---------- ---------- -----------
Operating income......................................................... 5,083 6,410 26,208
Other (income) / expense
Interest expense............................................................ 841 6,519 19,406
Interest (income)........................................................... (65) (624) (531)
Other expense / (income).................................................... (58) (86) 58
----------- ---------- -----------
Income before income taxes and extraordinary charge............................ 4,365 601 7,275
Income tax expense (benefit)................................................... 93 (687) 3,574
----------- ---------- -----------
Income before extraordinary charge............................................. 4,272 1,288 3,701
Extraordinary charge, net of taxes............................................. - - 1,510
----------- ---------- -----------
Net income and comprehensive income............................................ $ 4,272 $ 1,288 $ 2,191
Supplemental pro forma income data:
Pro forma income taxes on income before extraordinary charge................ $ 1,737 $ 239 $ 3,574
Extraordinary charge, net of taxes.......................................... - - 1,510
----------- ---------- -----------
Pro forma net income........................................................ $ 2,628 $ 362 $ 2,191
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 7
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEETPRIDE, INC. FLEETPRIDE
FLEETPRIDE, INC. FLEETPRIDE, INC. SERIES B CORPORATION
COMMON STOCK BRIDGE SECURITIES PREFERRED STOCK COMMON STOCK
-------------------- ------------------- ------------------ --------------
PAR PAID IN PAR PAID IN PAR PAID IN PAR PAID IN
VALUE CAPITAL VALUE CAPITAL VALUE CAPITAL VALUE CAPITAL
-------- -------- ------- --------- ------ --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 .................. $ 2 $ 493 $ -- $ -- $ -- $ -- $-- $ --
Net Income and Comprehensive Income
Capital Contribution ........................ 25
Distribution to Owners
-------- -------- ------ ------ ------ ------ ----- --------
Balance at December 31, 1997 ................ 2 518 -- -- -- -- -- --
Distribution to Owners
Stock Repurchase of FleetPride, Inc. ........
Recapitalization ............................ (1) (462) 3 24,940
Recapitalization Fees and Other
Creation of deferred tax
asset for intangibles ....................... 14,217
Issuance of Bridge Securities ............... -- 6,000
Repayment of Bridge Securities .............. -- (6,000)
Issuance of FleetPride, Inc. for
Acquisition of Stone Heavy Duty ............. 7 -- 2,993
Issuance of FleetPride, Inc. ................ 30 1 10,300
Formation and Issuance of FleetPride
Corporation stock ........................... (1) (14,310) (4) (38,233) 1 14,310
Issuance of FleetPride Corporation
stock for Truck and Trailer
Trailer Acquisition ......................... -- 7
Issuance of FleetPride Corporation
stock for Truckparts Acquisition ............ -- 5
Issuance of FleetPride Corporation
stock ....................................... -- 3
-------- -------- ------ ------ ------ ------ ----- --------
Net Income and Comprehensive Income
Balance at December 31, 1998 ................ -- -- -- -- -- -- 1 14,325
Issuance of FleetPride Corporation
stock for Associated Truck Parts
Acquisition ................................. -- 11
Issuance of FleetPride Corporation
stock for Tisco Acquisition ................. -- 2
Issuance of FleetPride Corporation stock .... 1 15,145
Issuance of FleetPride Corporation
stock for Active Gear Acquisition ........... -- 281
Issuance of FleetPride Corporation
stock for Superior Truck & Auto
Supply Acquisition .......................... -- 84
Issuance of FleetPride Corporation
stock for QDSP Acquisition ............... 1 19,606
Issuance of FleetPride Corporation
stock in conjunction with QDSP
Acquisition .............................. 1 10,812
Net Income and Comprehensive Income ------ ------ ------ ------ ------ ------ ----- --------
Balance at December 31, 1999 ................ $ -- $ -- $ -- $ -- $ -- $ -- $ 4 $ 60,266
====== ====== ====== ====== ====== ====== ===== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 8
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEETPRIDE FLEETPRIDE
CORPORATION CORPORATION
SERIES A SERIES B
PREFERRED STOCK PREFERRED STOCK FLEETPRIDE, TOTAL
------------------ ---------------- INC. EMPLOYEE RETAINED SHARE-
PAR PAID IN PAR PAID IN TREASURY NOTES EARNINGS HOLDERS'
VALUE CAPITAL VALUE CAPITAL STOCK RECEIVABLE (DEFICIT) EQUITY
------- ------- ------ -------- ---------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 .................. $ -- $ -- $ -- $ -- $(810) $-- $ 9,908 $ 9,593
Net Income and Comprehensive Income ......... 4,272 4,272
Capital Contribution........................ 25
Distribution to Owners ...................... (1,872) (1,872)
------- ------- ------- --------- ----- ----- -------- --------
Balance at December 31, 1997 ............. -- -- -- -- (810) -- 12,308 12,018
Distribution to Owners ...................... (1,390) (1,390)
Stock Repurchase of FleetPride, Inc. ........ (25,821) (25,821)
Recapitalization ............................ 26,631 (51,111) --
Recapitalization Fees and Other ............. (2,522) (2,522)
Creation of deferred tax
asset for intangibles .................... 14,217
Issuance of Bridge Securities ............... 6,000
Repayment of Bridge Securities .............. (6,000)
Issuance of FleetPride, Inc. for
Acquisition of Stone Heavy Duty .......... 3,000
Issuance of FleetPride, Inc. ................ 10,331
Formation and Issuance of FleetPride
Corporation stock ........................ 4 38,233 --
Issuance of FleetPride Corporation
stock for Truck and Trailer
Trailer Acquisition ......................... -- 2,993 3,000
Issuance of FleetPride Corporation
stock for Truckparts Acquisition ......... -- 1,995 2,000
Issuance of FleetPride Corporation stock .... -- 350
353
Net Income and Comprehensive Income ......... 1,288 1,288
------- ------- ------- --------- ----- ----- -------- --------
Balance at December 31, 1998 ................ 4 43,571 -- -- -- -- (41,427) 16,474
Issuance of FleetPride Corporation
stock for Associated Truck Parts
Acquisition .............................. 1 4,988 5,000
Issuance of FleetPride Corporation
stock for Tisco Acquisition .............. -- 748 750
Issuance of FleetPride Corporation stock .... 4 37,891 (415) 52,626
Issuance of FleetPride Corporation
stock for Active Gear Acquisition ........ -- 719 1,000
Issuance of FleetPride Corporation
stock for Superior Truck & Auto
Supply Acquisition ....................... -- 216 300
Issuance of FleetPride Corporation
stock for QDSP Acquisition ............... 5 52,924 72,536
Issuance of FleetPride Corporation
stock in conjunction with
QDSP Acquisition ......................... 3 29,185 40,001
Net Income and Comprehensive Income ......... 2,191 2,191
------- ------- ------- --------- ----- ----- -------- --------
Balance at December 31, 1999 ................ $ 9 $88,133 $ 8 $ 82,109 $-- $(415) $(39,236) $190,878
======= ======= ======= ========= ===== ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 9
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
- - - - - - - - - - - - - - - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
Operating activities:
<S> <C> <C> <C>
Income before extraordinary charge .................................................... $ 4,272 $ 1,288 $ 3,701
Extraordinary charge, net of taxes .................................................... -- -- 1,510
--------- --------- ---------
Net income ............................................................................ 4,272 1,288 2,191
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation ....................................................................... 1,187 1,752 3,104
Amortization ....................................................................... 54 863 4,890
Deferred tax expense (benefit) ..................................................... -- (887) 1,704
(Gain) on sale of property and equipment ........................................... (58) (86) (58)
Changes in operating assets and liabilities:
Accounts receivable .............................................................. (910) 40 (5,745)
Patronage dividend receivable .................................................... (387) (868) (3,820)
Inventories ...................................................................... (2,285) (1,366)
(3,700)
Prepaid expenses ................................................................. (348) 564 8,618
Other assets ..................................................................... 28 (721) 1,998
Deferred tax asset ............................................................... -- 887 (2,426)
Accounts payable ................................................................. (499) (1,634) 3,048
Accrued liabilities .............................................................. 77 7,113 (12,233)
--------- --------- ---------
Net cash provided by operating activities ..................................... 1,131 6,945 (2,429)
Investing activities:
Acquisition of property and equipment ................................................. (1,627) (1,668) (4,069)
Proceeds from sale of property and equipment .......................................... 98 116 --
Acquisitions, net of cash acquired .................................................... -- (74,527) (122,582)
--------- --------- ---------
Net cash used by investing activities ......................................... (1,529) (76,079) (126,651)
Financing activities:
Short term borrowings ................................................................. 2,412 (4,716) --
Proceeds of revolving line of credit .................................................. 10,680 -- 142,000
Payments of revolving line of credit .................................................. (10,503) (677) (126,828)
Proceeds on term loan (net of fees) ................................................... -- 68,481 69,493
Payments on term loan ................................................................. -- (51,993) (46,365)
Principal payment of long-term debt ................................................... (455) (10,802) --
Proceeds from issuance of long-term debt (net of fees) ................................ 150 95,931 --
Payment of bond consent and fees ...................................................... -- -- (3,730)
Payments for stock repurchase ......................................................... -- (25,821) --
Payments of recapitalization fees ..................................................... -- (2,522) --
Proceeds from issuance of Preferred Stock ............................................. -- 10,651 66,668
Proceeds from issuance of Common Stock ................................................ -- 33 25,959
Distribution to owners ................................................................ (1,872) (1,294) --
Contribution to stockholders' equity .................................................. 25 -- --
--------- --------- ---------
Net cash provided by financing activities ..................................... 437 77,271 127,197
--------- --------- ---------
Increase (decrease) in cash and cash equivalents ......................................... 39 8,137 (1,883)
Cash and cash equivalents at beginning of year ........................................... 152 191 8,328
--------- --------- ---------
Cash and cash equivalents at end of year ................................................. $ 191 $ 8,328 $ 6,445
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest ................................................................ $ 841 $ 1,214 $ 9,470
Cash paid for income taxes ............................................................ 77 273 473
Details of Acquisitions
Fair value of assets and liabilities acquired ......................................... $ -- $ 83,226 $ 208,115
Less equity payments .................................................................. -- 8,000 79,586
--------- --------- ---------
Cash paid ............................................................................. -- 75,226
128,529
Less cash acquired .................................................................... -- 699 5,947
--------- --------- ---------
Net cash paid for acquisitions ................................................ $ -- $ 74,527 $ 122,582
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE> 10
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - -------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements for FleetPride Corporation, formerly City
Truck Holdings, Inc., and its subsidiaries ("FleetPride") are presented on the
basis of accounting principles that are generally accepted in the United States.
All professional standards that are effective as of December 31, 1999 have been
taken into consideration in preparing the financial statements. At December 31,
1998, the consolidated financial statements for City Truck Holdings, Inc.
include its wholly owned subsidiary HDA Parts System, Inc., whose operations
include Stone Heavy Duty, Truck and Trailer Parts, Inc., Connecticut Driveshaft,
Truckparts, Inc., and Tampa Brake and Supply Co. since their dates of
acquisition. At December 31, 1999, the consolidated financial statements for
FleetPride Corporation include its wholly owned subsidiary FleetPride, Inc.,
formerly HDA Parts System, Inc., whose operations include, in addition to the
subsidiaries and divisions listed above, Associated Brake Supply, Inc. and its
subsidiaries, Tisco, Inc., Tisco of Redding, Inc., Vantage Parts, Active Gear,
L.L.C., Superior Truck and Auto Supply, Inc., Certified Powertrain, California
Equipment Company, California Equipment Co. of Sacramento, QDSP Holdings, Inc.
and its subsidiaries, Wheels and Brakes, Inc. and Southwest Virginia Truck
Parts, Inc.
DESCRIPTION OF THE COMPANIES
As of May 29, 1998, City Truck and Trailer Parts of Tennessee, Inc., City Truck
and Trailer Parts of Alabama, Inc., City Truck and Trailer Parts of Alabama,
L.L.C., and City Friction, Inc. were merged into City Truck and Trailer Parts,
Inc., an Alabama corporation. All of these companies were under common control.
The stockholders of City Truck and Trailer Parts of Tennessee, Inc., City Truck
and Trailer Parts of Alabama, Inc. and City Friction, Inc. converted their
shares into 498 shares of common stock of City Truck and Trailer Parts, Inc.,
such that these three companies became wholly owned subsidiaries of City Truck
and Trailer Parts, Inc. The members of City Truck and Trailer Parts of Alabama,
L.L.C. contributed all of their equity interest to City Truck and Trailer Parts,
Inc. in exchange for 30 shares of common stock in City Truck and Trailer Parts,
Inc. and as a result became a wholly owned subsidiary. The transaction has been
accounted for in a manner similar to a pooling of interests under Accounting
Principles Board Opinion No. 16. Accordingly, all prior period consolidated and
combined financial statements presented have been restated to include the
combined results of operations, financial position and cash flows of these
companies as though they had always been a part of City Truck and Trailer Parts,
Inc. These companies previously followed consistent accounting policies and
there were no adjustments to the book value of their assets and liabilities.
City Transportation, Inc., at net book value $94, previously a wholly owned
subsidiary of City Truck and Trailer Parts, Inc., was retained by the prior
owners of City Truck and Trailer Parts, Inc. This has been accounted for as a
dividend distribution at net book value on the statement of stockholders' equity
as a distribution to owners.
The following transactions outline the chronology of the formation of
FleetPride.
On June 1, 1998, BABF City Corp. purchased 80% of the outstanding capital stock
of City Truck and Trailer Parts, Inc. At December 31, 1999 this interest had
decreased to 37.5% as a result of various capital transactions.
8
<PAGE> 11
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - -------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
On June 1, 1998, City Truck and Trailer Parts, Inc. issued $6.0 million of
redeemable, non-convertible, non-voting preferred stock (the "Bridge
Securities"). In July, 1998, the Bridge Securities were redeemed.
On June 19, 1998, City Truck and Trailer Parts, Inc. converted its 457 shares of
existing $1 par common stock into 57,227 shares of $0.01 par value common stock
and 249,427 shares of $0.01 par 6% preferred stock.
On July 8, 1998, City Truck and Trailer Parts, Inc. was renamed HDA Parts System
Inc.
On September 30, 1998, City Truck Holdings, Inc., a Delaware corporation, was
formed by the share for share exchange of stock in HDA Parts System, Inc. for
stock in City Truck Holdings, Inc. City Truck Holdings, Inc. is a holding
company which has no operations or debt, except for its guarantee of HDA Parts
System, Inc.'s debt.
On November 19, 1999, City Truck Holdings, Inc. changed its name to FleetPride
Corporation. On December 1, 1999, HDA Parts System, Inc. changed its name to
FleetPride, Inc.
All of the above name changes have been reflected elsewhere in the financial
statements.
NATURE OF OPERATIONS
FleetPride distributes a full line of nationally recognized brand name heavy
duty vehicle parts, as well as a private brand assortment operating 177 branch
locations in 31 states throughout the United States. The comprehensive selection
of parts includes braking, steering and suspension systems, transmissions,
drivelines, axles, wheels and rims, hydraulic systems and engine components.
Replacement parts for heavy duty vehicles are purchased from component
manufacturers, inventoried and delivered directly to customer locations from the
branches or sold "over-the-counter" to customers who visit the branches. The 177
branch locations consist primarily of warehouse and service space, with a small
retail selling space. In addition, FleetPride offers in-house re-manufactured
products such as brake shoes, transmissions, rear axles and driveline
components. Truck and trailer repair services also are offered at a number of
locations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of FleetPride and all
subsidiary companies. All material intercompany transactions have been
eliminated in consolidation.
9
<PAGE> 12
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - -------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
SEGMENT INFORMATION
Based on the criteria outlined in SFAS Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information", FleetPride has determined
that it operates in one business segment, that being the distribution of heavy
duty vehicle parts in the United States. Thus, all information required by SFAS
No. 131 is included in FleetPride's financial statements. No single customer
represented more than 10% of the FleetPride's total sales.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from the date of purchase.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
either the first-in, first-out (FIFO) or average-costs basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost less accumulated depreciation
and amortization. FleetPride provides for depreciation and amortization of
property and equipment using the straight-line method over the following
estimated useful lives:
CLASSIFICATION DEPRECIATION LIVES
- - - - - - - - - - - - - - - -------------- ------------------
Buildings and building improvements 40 years or the life of the lease
Furniture and fixtures 7 years
Vehicles 6 years
Machinery and equipment 3-8 years
When assets are retired or otherwise disposed of, the assets and related
allowances for depreciation and amortization are eliminated from the accounts
and any resulting gain or loss is reflected in income.
10
<PAGE> 13
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of the purchase cost over the fair value of net
assets acquired in a business and is presented net of accumulated amortization.
Amortization of goodwill is recorded on a straight line basis over 40 years.
Other intangibles are amortized over the useful lives of these assets which
range from 5 to 9 years. When facts and circumstances indicate impairment,
FleetPride reviews goodwill and other intangibles to assess recoverability from
estimated future results of operations and cash flows.
LONG-LIVED ASSETS
FleetPride evaluates its long-lived assets (including goodwill) on an ongoing
basis. Identifiable intangible assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
related asset may be impaired. Whether assets to be held and used are impaired
is measured by a comparison of the carrying amount of the asset to future
undiscounted cash flows expected to be generated by the asset. If the asset is
determined to be impaired, the loss recognized is measured by the amount by
which the carrying value of the asset exceeds its fair value.
REVENUE RECOGNITION
Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of a sale or within a specified period. Returned cores are either returned
to the vendor for credit or remanufactured.
PREOPENING EXPENSE
Expenses associated with the opening of new branch locations are expensed in the
period such costs are incurred.
INCOME TAXES
Prior to the recapitalization on May 29, 1998, with the exception of Truck
Parts, Inc., each of the companies included within these financial statements,
with the consent of its shareholders and members, had elected under the Internal
Revenue Code to be taxed as an S Corporation or a limited liability company. In
lieu of corporate income taxes, the stockholders of an S corporation and the
members of a limited liability company are taxed on their proportionate share of
FleetPride's taxable income. Therefore, no provision or liability for federal
income taxes had been included in the financial statements for 1997 and through
May 28, 1998. For comparison purposes, a supplemental pro forma income tax is
calculated for the periods prior to FleetPride being a C corporation.
Supplemental pro-forma net income included on the income statement is calculated
by applying an income tax rate of 39.8%, 39.8% and 44.6% in 1997, 1998 and 1999,
respectively, to the historical income before taxes.
11
<PAGE> 14
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
Concurrent with the recapitalization, FleetPride elected to be taxed as a C
corporation and is subject to income taxes on its profits in 1998. FleetPride
then set up a deferred tax asset of $15,104, increasing paid in capital by
$14,217, and recognized $887 net income. FleetPride applies an asset and
liability approach to accounting for income taxes. Deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse.
DEFERRED FINANCING COSTS
In connection with establishing a revolving credit facility in September, 1999
and the private placement of debt in July 1998, FleetPride incurred various
financing costs which have been deferred on FleetPride's balance sheet and are
being amortized over the terms of the agreements.
STOCK BASED COMPENSATION
FleetPride has elected to follow the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation" only and continues to account for
stock based compensation under the basis of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees".
RECLASSIFICATIONS
Certain amounts for the year ended December 31, 1998, were reclassified to
conform to the current year presentation. There was no impact on net income or
stockholders equity.
NOTE 2 - INVENTORIES
Inventories consisted of the following at December 31:
1998 1999
------------ -----------
Parts inventory.............................. $ 35,959 $ 99,783
Cores........................................ 5,494 13,802
------------ -----------
$ 41,453 $ 113,585
============ ===========
12
<PAGE> 15
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31:
1998 1999
-------- --------
Land ................................... $ 20 $ 2,947
Buildings and building improvements .... 7,732 8,964
Furniture and fixtures ................. 920 4,016
Vehicles ............................... 3,862 7,942
Machinery and equipment ................ 7,907 13,453
Less: accumulated depreciation ......... (6,828) (9,932)
-------- --------
Net property and equipment ............. $ 13,613 $ 27,390
======== ========
NOTE 4 - GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles consisted of the following at December 31:
1998 1999
--------- ---------
Goodwill ............................... $ 54,061 $ 221,618
Other intangibles ...................... 2,117 5,784
Less: accumulated amortization ......... (682) (4,713)
--------- ---------
Net goodwill and other intangibles ..... $ 55,496 $ 222,689
========= =========
Goodwill represents the cost in excess of the fair value of the net assets of
companies acquired in purchase transactions. Other intangible assets have been
recognized for covenants not to compete, workforce and a specific beneficial
customer agreement arising from purchase transactions. FleetPride has charged
$44, $505 and $4,031 in 1997, 1998 and 1999, respectively, for amortization of
goodwill and other intangibles.
NOTE 5 - BORROWINGS
REVOLVING LINE OF CREDIT
At December 30, 1998, FleetPride increased its maximum availability to $85.0
million on a revolving line of credit from a bank with interest based on the
LIBOR rate plus applicable margin, at 2.3% or, at FleetPride's option, several
other common indices. The interest rate at December 31, 1998, was 7.8%.
FleetPride has pledged all of its assets as collateral. FleetPride's outstanding
balance at December 31, 1998, was $18.2 million. On September 30, 1999, in
conjunction with the transaction with QDSP Holdings, Inc. and its subsidiaries,
this credit facility, and the prior credit facility of QDSP Holdings, Inc. and
its subsidiaries, were replaced with a new credit agreement.
On September 30, 1999, FleetPride entered into a new $225.0 million Credit
Agreement (the "Agreement"). The Agreement provides for a $75.0 million term
loan and a $150.0 million revolving line of credit from a bank with
13
<PAGE> 16
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 5 - BORROWINGS, CONTINUED
interest based upon the LIBOR rate plus applicable margin, initially at 3.25%
and 2.75%, respectively, or, at FleetPride's option, several other common
indices. FleetPride has pledged all of its assets as collateral. FleetPride and
FleetPride, Inc.'s subsidiaries are guarantors under the Agreement. The term
loan and revolving line of credit expire on September 30, 2004. FleetPride's
outstanding balance at December 31, 1999 was $121.3 million. The weighted
average interest rate on revolving credit and term loan borrowings outstanding
as of December 31, 1999 was 9.2%.
In connection with refinancing the prior credit facilities, FleetPride incurred
a $1.5 million extraordinary loss for the write-off of deferred financing fees,
net of taxes of $1.0 million.
SENIOR SUBORDINATED NOTES
On July 31, 1998, FleetPride issued $100.0 million of 12% Senior subordinated
notes due 2005 (the "Senior Subordinated Notes"), and received approximately
$96.0 million of proceeds after discounts, commissions and fees. Interest on
these notes is paid semi-annually on February 1, and August 1 commencing
February 1, 1999. The Senior Subordinated Notes may be redeemed at the option of
FleetPride, in whole or in part, at any time on or after August 1, 2002 at the
redemption prices set forth in the Indenture, plus accrued and unpaid interest
and liquidated damages, if any, to the date of redemption. In addition, at any
time prior to August 1, 2001, FleetPride may redeem up to 35% of the aggregate
principal amount of notes originally issued at a redemption price equal to 112%
of the aggregate principal amount thereof, plus accrued and unpaid interest out
of the proceeds of public equity offerings.
In connection with the issuance of the Senior Subordinated Notes, FleetPride
entered into a registration rights agreement that required it to file a
registration statement by December 28, 1998 and to use its best efforts to cause
the registration to become effective by March 13, 1999. The registration became
effective November 12, 1999. FleetPride did not comply with the obligations to
file and have a registration statement declared effective as set forth above.
FleetPride has paid the holders of the notes liquidated damages through November
12, 1999 as set forth in the registration rights agreements which are not
material to the consolidated financial statements. In addition, under certain
circumstances, FleetPride will be required to offer to purchase the Senior
Subordinated Notes at a price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest to the date of purchase with the proceeds of
certain assets sales.
The debt agreements described above contain certain covenants that, among other
things, limit the ability of FleetPride to: (i) pay dividends or make certain
other restricted payments; (ii) incur additional debt; (iii) encumber or sell
assets; (iv) enter into certain guarantees of debt; (v) enter into transactions
with affiliates; and (vi) merge or consolidate with any other entity or transfer
or lease all or substantially all of their assets.
14
<PAGE> 17
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable, and accrued
expenses approximate fair value because of the short maturity of these items.
The carrying amounts of the debt issued pursuant to FleetPride's revolving line
of credit agreement approximates fair value because the interest rates change
with market interest rates.
The Senior Subordinated Notes are not actively traded, but the most recent trade
of the Senior Subordinated Notes prior to December 31, 1999 was at a price of
$92. Using this price of $92, the fair value of these notes at December 31, 1999
would be $92.0 million.
There are no quoted market prices for FleetPride's 6% Series A Preferred Stock.
Each share of the 6% Series A Preferred Stock has a liquidation value of $100
per share, plus accrued and unpaid dividends. The total liquidation value of the
Series A Preferred Stock would be $94.2 million at December 31, 1999.
There are no quoted market prices for FleetPride's 6% Series B Preferred Stock.
Each share of the 6% Series B Preferred Stock has a liquidation value of $100
per share, plus accrued and unpaid dividends. The total liquidation value of the
Series B Preferred Stock would be $83.4 million at December 31, 1999.
These fair value estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.
NOTE 7 - ACQUISITIONS
FleetPride has made the following acquisitions during 1998 and 1999. They have
all been accounted for as a purchase and the consolidated financial statements
include income since the date of acquisition.
On June 19, 1998, FleetPride acquired substantially all of the assets of Stone
Heavy Duty, Inc. for approximately $24.5 million in cash and $3.0 million in
common and preferred stock. FleetPride has allocated $12.1 million of the
purchase price to the identified assets and liabilities.
On September 30, 1998, FleetPride acquired all of the capital stock of Truck and
Trailer Parts, Inc. for approximately $18.7 million in cash and $3.0 million in
common and preferred stock. FleetPride has allocated $7.1 million of the
purchase price to the identified assets and liabilities.
15
<PAGE> 18
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 7 - ACQUISITIONS, CONTINUED
On October 30, 1998, FleetPride acquired substantially all of the assets of
Tampa Brake and Supply Co., Inc. for approximately $9.9 million in cash.
FleetPride has allocated $4.1 million of the purchase price to the identified
assets and liabilities.
On November 4, 1998, FleetPride acquired substantially all of the assets of
Connecticut Driveshaft for approximately $9.9 million in cash. FleetPride has
allocated $5.1 million of the purchase price to the identified assets and
liabilities.
On December 17, 1998, FleetPride acquired all of the capital stock of
Truckparts, Inc. for approximately $12.1 million in cash and $2.0 million in
common and preferred stock. FleetPride has allocated $3.3 million of the
purchase price to the identified assets and liabilities.
On January 11, 1999, FleetPride acquired all of the capital stock of Associated
Brake Supply, Inc. and its subsidiaries for approximately $54.2 million in cash
and $5.0 million in common and preferred stock. FleetPride has allocated $16.5
million of the purchase price to the identified assets and liabilities.
On January 12, 1999, FleetPride acquired all of the capital stock of Tisco, Inc.
and Tisco of Redding, Inc. for approximately $6.5 million in cash and $0.8
million in common and preferred stock. FleetPride has allocated $2.7 million of
the purchase price to the identified assets and liabilities.
On April 20, 1999, FleetPride acquired all of the membership interests of Active
Gear, L.L.C. for approximately $6.8 million in cash and $1.0 million in common
and preferred stock. FleetPride has allocated $3.7 million of the purchase price
to the identified assets and liabilities.
On May 28, 1999, FleetPride acquired certain assets of CNF Transportation Inc.
and Vantage Parts of Illinois, Inc. for approximately $29.2 million in cash.
FleetPride has allocated $15.1 million of the purchase price to the identified
assets and liabilities.
On June 7, 1999, FleetPride acquired all of the capital stock of Superior Truck
and Auto Supply, Inc. for approximately $1.7 million in cash and $0.3 million in
common and preferred stock. FleetPride has allocated $1.7 million of the
purchase price to the identified assets and liabilities.
On August 6, 1999, FleetPride acquired certain assets of Certified Powertrain,
Inc. for approximately $6.1 million in cash. FleetPride has allocated $2.6
million of the purchase price to the identified assets and liabilities.
On August 25, 1999, FleetPride acquired substantially all of the assets of
California Equipment Company and California Equipment Co. of Sacramento for
approximately $1.8 million in cash. FleetPride has allocated $1.1 million of the
purchase price to the identified assets and liabilities.
16
<PAGE> 19
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 7 - ACQUISITIONS, CONTINUED
On September 30, 1999, FleetPride acquired all of the capital stock of QDSP
Holdings, Inc. and its subsidiaries for approximately $72.5 million in common
and preferred stock. FleetPride has assumed $12.9 million of net liabilities in
this acquisition.
On October 8, 1999, FleetPride acquired all of the capital stock of Wheels and
Brakes, Inc. and Specrite Brake Company for approximately $11.7 million in cash.
FleetPride has allocated $5.6 million of the purchase price to the identified
assets and liabilities.
On November 19, 1999, FleetPride acquired all of the stock of Southwest Virginia
Truck Parts, Inc. for approximately $1.2 million in cash. FleetPride has
allocated $.8 million of the purchase price to the identified assets and
liabilities.
In connection with these acquisitions, FleetPride has recorded aggregate
goodwill of $221.6 million and certain liabilities totaling $5.8 million in
connection with vendor consolidations, the closure of duplicate facilities, and
other activities that will be phased out during 1999 and 2000. Of the
liabilities established related to acquisitions, in 1999 FleetPride charged $648
for employee costs, $152 for stores and support facilities and $146 for other
items.
The following unaudited pro forma financial information combines the results of
operations of Associated Brake Supply, Inc. and its subsidiaries, Tisco, Inc.,
Tisco of Redding, Inc., Vantage Parts, Active Gear, L.L.C., Superior Truck and
Auto Supply, Inc., Certified Powertrain, California Equipment Company,
California Equipment Co. of Sacramento, QDSP Holdings, Inc. and its
subsidiaries, Wheels and Brakes, Inc. and Southwest Virginia Truck Parts, Inc.
as if the acquisitions had taken place on January 1, 1998, after giving effect
to certain adjustments including: amortization of goodwill, interest expense and
a normal charge for income taxes assuming all of the companies had operated as
"C" corporations for 1998 and 1999.
<TABLE>
<CAPTION>
1998 1999
---- ----
ACTUAL PROFORMA ACTUAL PROFORMA
------ -------- ------ --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales......................................... $ 103,295 $ 545,582 $ 358,363 $ 553,884
Net income and comprehensive
income (loss)................................... 1,288 7,271 2,191 7,196
</TABLE>
In addition, FleetPride's subsidiaries operated throughout the periods presented
as independent, privately owned entities, which influenced the historical level
of owners' compensation and other expenses. Accordingly, the historical results
of operations include (i) historical compensation expenses in excess of the
current compensation levels to the former owners of certain subsidiaries of
FleetPride; and (ii) certain other private company expenses.
17
<PAGE> 20
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 8 - COMMON STOCK
The following are the number of shares outstanding for each of FleetPride,
Inc.'s and FleetPride Corporation's classes of common stock as of the dates
indicated:
<TABLE>
<CAPTION>
FLEETPRIDE
FLEETPRIDE, INC. FLEETPRIDE, INC. CORPORATION
COMMON STOCK BRIDGE SECURITIES COMMON STOCK COMMON STOCK
(PAR VALUE $1) (PAR VALUE $.01) (PAR VALUE $.01)(PAR VALUE $.01)
-------------- ---------------- --------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997....................... 938 -- -- --
Balance at December 31, 1997..................... 938 -- -- --
-------------- --------------- --------------- ---------------
Stock repurchase................................. (481)
Recapitalization................................. (457) 57,227
Issuance of bridge security ..................... 30,000
Repayment of bridge security..................... (30,000)
Issuance of acquisition of Stone Heavy
Duty, Inc...................................... 6,867
Issuance to employees and others................. 30,135
Formation of FleetPride Corporation.............. (94,229) 94,229
Issuance for acquisition of Truck and
Trailer Parts, Inc............................. 6,867
Issuance for acquisition of Truckparts, Inc...... 4,578
Issuance to employees............................ 3,160
-------------- --------------- --------------- ---------------
Balance at December 31, 1998..................... -- -- -- 108,834
Issuance of acquisition of Associated
Brake Supply, Inc. and subsidiaries............ 11,446
Issuance of acquisition of Tisco,................ 1,717
Inc. and Tisco of Redding, Inc.
Issuance of acquisition of Active Gear, L.L.C. 1,651
Issuance of acquisition of Superior Truck
& Auto Supply, Inc............................. 495
Issuance of acquisition of QDSP Holdings,
Inc. and subsidiaries.......................... 115,338
Issuance to employees and others................. 153,792
-------------- --------------- --------------- ---------------
Balance at December 31, 1999..................... -- -- -- 393,273
============== =============== =============== ===============
</TABLE>
The common stock of FleetPride, Inc. had a par value of $1 per share, of which
2,000 were authorized, and 1,538 were issued at December 31, 1997.
The common stock of FleetPride has a par value of $.01 per share, of which
250,000 and 25,000,000 were authorized at December 31, 1998 and 1999,
respectively, and 108,834 and 393,273 were issued and outstanding at December
31, 1998 and 1999, respectively.
18
<PAGE> 21
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - -------------------------------------------------------------------------------
NOTE 9 - PREFERRED STOCK
The following are the number of shares issued for each of the FleetPride, Inc.'s
and FleetPride Corporation's classes of preferred stock as of the dates
indicated:
<TABLE>
<CAPTION>
FLEETPRIDE, FLEETPRIDE FLEETPRIDE FLEETPRIDE FLEETPRIDE
INC. CORPORATION CORPORATION CORPORATION CORPORATION
SERIES B SERIES A SERIES B SERIES C SERIES D
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK STOCK STOCK
(PAR VALUE (PAR VALUE) (PAR VALUE) (PAR VALUE) (PAR VALUE)
$.01) $.01) $.01) $.01) $.01)
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997...................... -- -- -- -- --
Balance at December 31, 1997.................... -- -- -- -- --
Recapitalization................................ 249,428
Issuance of acquisition of Stone Heavy
Duty, Inc.................................... 29,931
Issuance to employees and others................ 103,013
Formation of FleetPride Corporation............. (382,372) 382,372
Issuance for acquisition of Truck and
Trailer Parts, Inc........................... 29,931
Issuance for acquisition of Truckparts,
Inc.......................................... 19,954
Issuance to employees and others................ 3,493
-------- ------------ ------------ ----------- ---------
Balance at December 31, 1998.................... -- 435,750 -- -- --
Issuance of acquisition of Associated
Brake Supply, Inc. and subsidiaries........ 49,886
Issuance of acquisition of Tisco,
Inc. and Tisco of Redding, Inc............. 7,483
Issuance of acquisition of Active Gear,
L.L.C...................................... 7,194
Issuance of acquisition of Superior Truck
& Auto Supply, Inc......................... 2,158
Issuance of acquisition of QDSP Holdings,
Inc. and subsidiaries...................... -- 502,719 1 1
Issuance to employees and others............. 378,949 277,221
-------- ------------ ------------ ----------- ---------
Balance at December 31, 1999................. -- 881,420 779,940 1 1
======== ============ ============ =========== =========
</TABLE>
FleetPride's Series A Preferred Stock has a par value of $.01 per share, of
which 850,000 and 50,000,000 were authorized at December 31, 1998 and 1999,
respectively, and 435,750 and 881,420 were issued at December 31, 1998 and 1999,
respectively. Each share of Series A Preferred Stock is entitled to one vote per
share on all matters. These shares earn dividends at a rate of 6.0% per annum,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, commencing June 30, 1998. Dividends not paid will cumulate whether or not
earned or declared with additional dividends thereon, compounded quarterly at
the rate of 6% per annum. At December 31, 1998 and 1999, FleetPride had $1,320
and $6,041 cumulated dividends on these shares, respectively.
FleetPride has no right to redeem any shares of its Series A Preferred Stock and
the holders of FleetPride's Series A Preferred Stock do not have a right to
require FleetPride to redeem any of the shares. Upon liquidation, holders of
Series A Preferred Stock are entitled to $100 per share plus accrued and unpaid
dividends.
19
<PAGE> 22
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 9 - PREFERRED STOCK, CONTINUED
FleetPride's Series B Preferred Stock has a par value of $.01 per share, of
which 0 and 1,700,000 were authorized at December 31, 1998 and 1999,
respectively, and 0 and 779,940 were issued at December 31, 1998 and 1999,
respectively. Each share of Series B Preferred Stock is entitled to one vote per
share on all matters. These shares earn dividends at a rate of 6.0% per annum,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1999.
Dividends not paid will cumulate whether or not earned or declared with
additional dividends thereon, compounded quarterly at the rate of 6% per annum.
At December 31, 1998 and 1999, FleetPride had $0 and $1,242 cumulated dividends
on these shares, respectively.
FleetPride has no right to redeem any shares of its Series B Preferred Stock and
the holders of FleetPride's Series B Preferred Stock do not have a right to
require FleetPride to redeem any of the shares. Upon liquidation, holders of
Series B Preferred Stock are entitled to $100 per share plus accrued and unpaid
dividends.
FleetPride's Series C Special Voting Preferred Stock has a par value of $.01 per
share, of which 0 and 1 were authorized at December 31, 1998 and 1999,
respectively, and 0 and 1 were issued at December 31, 1998 and 1999,
respectively. Each share of Series C Special Voting Preferred Stock is entitled
to one vote per share on all matters and is entitled to elect three directors,
provided that a specified ownership percentage of FleetPride's common stock is
maintained by the holder. These shares are not entitled to receive dividends.
FleetPride has the right to redeem the share of its Series C Special Voting
Preferred Stock if the specified ownership percentage of FleetPride's common
stock is not maintained by the holder. The holders of FleetPride's Series C
Special Voting Preferred Stock do not have a right to require FleetPride to
redeem any of the shares. Upon liquidation, holders of Series C Special Voting
Preferred Stock are entitled to $100 per share.
FleetPride's Series D Special Voting Preferred Stock has a par value of $.01 per
share, of which 0 and 1 were authorized at December 31, 1998 and 1999,
respectively, and 0 and 1 were issued at December 31, 1998 and 1999,
respectively. Each share of Series D Special Voting Preferred Stock is entitled
to one vote per share on all matters and is entitled to elect three directors,
provided that a specified ownership percentage of FleetPride's common stock is
maintained by the holder. These shares are not entitled to receive dividends.
FleetPride has the right to redeem the share of its Series D Special Voting
Preferred Stock if the specified ownership percentage of FleetPride's common
stock is not maintained by the holder. The holders of FleetPride's Series D
Special Voting Preferred Stock do not have a right to require FleetPride to
redeem any of the shares. Upon liquidation, holders of Series D Special Voting
Preferred Stock are entitled to $100 per share.
20
<PAGE> 23
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 10 - FLEETPRIDE, INC. CONDENSED FINANCIAL INFORMATION
FleetPride, Inc. is a wholly owned subsidiary of FleetPride. During September
1998, the shares of common stock of FleetPride, Inc. were exchanged for shares
of common stock of FleetPride.
Subsidiaries were acquired by FleetPride, Inc. using, in part, shares of common
stock of FleetPride. These holdings so acquired were subsequently contributed to
FleetPride, Inc. and recorded as an increase to paid-in capital. As the only
assets and operations of FleetPride relate to its ownership of the shares of
common and preferred stock in FleetPride, Inc., the financial position and
results of operations of FleetPride are identical to FleetPride, Inc.
No guarantor subsidiaries existed in 1997. FleetPride, Inc.'s payment
obligations under the Senior Subordinated Notes are fully and unconditionally
guaranteed on a joint and several basis by Truck and Trailer Parts, Inc. and
Truckparts, Inc. (collectively Guarantor Subsidiaries) in 1998. In 1999,
Associated Brake Supply, Inc. and its subsidiaries, Tisco, Inc., Tisco of
Redding, Inc., Active Gear, L.L.C., Superior Truck and Auto Supply, Inc., QDSP
Holdings Inc. and its subsidiaries, Wheels and Brakes, Inc., Southwest Virginia
Truck Parts, Inc. and FleetPride West, Inc. were also guarantor subsidiaries.
FleetPride and FleetPride, Inc.'s subsidiaries also guarantee FleetPride, Inc.'s
obligations under the Credit Agreement. The following consolidating condensed
financial information is listed below:
Consolidating Balance Sheet at December 31, 1998:
<TABLE>
<CAPTION>
FLEETPRIDE GUARANTOR CONSOLIDATED
INC. SUBSIDIARIES ELIMINATIONS TOTAL
---------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents ....................... $ 7,791 $ 537 $ -- $ 8,328
Accounts receivable, net ...................... 13,344 4,755 -- 18,099
Inventories ................................... 33,377 8,076 -- 41,453
Other current assets .......................... 4,562 195 -- 4,757
-------- -------- -------- --------
Total current assets ....................... 59,074 13,563 -- 72,637
Property, plant & equipment, net ................. 12,705 908 -- 13,613
Investments ...................................... 34,497 -- (34,497) --
Other long term assets ........................... 21,773 405 -- 22,178
Goodwill and other intangibles ................... 30,844 -- 24,652 55,496
-------- -------- -------- --------
Total assets ............................... $158,893 $ 14,876 $ (9,845) $163,924
======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ................................. $ 12 $ 149 $ -- $ 161
Accounts payable .............................. 10,780 3,325 -- 14,105
Accrued liabilities ........................... 13,427 1,557 -- 14,984
-------- -------- -------- --------
Total current liabilities .................. 24,219 5,031 -- 29,250
Revolving credit facility ........................ 18,200 -- -- 18,200
12% senior subordinated notes .................... 100,000 -- -- 100,000
-------- -------- -------- --------
Total liabilities ........................ 142,419 5,031 -- 147,450
-------- -------- -------- --------
Total stockholders' equity ................. 16,474 9,845 (9,845) 16,474
-------- -------- -------- --------
Total liabilities and stockholders' equity .... $158,893 $ 14,876 $ (9,845) $163,924
======== ======== ======== ========
</TABLE>
21
<PAGE> 24
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 10 - FLEETPRIDE, INC. CONDENSED FINANCIAL INFORMATION, CONTINUED
Consolidating Balance Sheet at December 31, 1999:
<TABLE>
<CAPTION>
FLEETPRIDE GUARANTOR CONSOLIDATED
INC. SUBSIDIARIES ELIMINATIONS TOTAL
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents .......... $ 5,847 $ 598 $ -- $ 6,445
Accounts receivable, net ......... 25,406 38,938 -- 64,344
Inventories ...................... 42,487 71,098 -- 113,585
Other current assets ............. 8,242 4,357 -- 12,599
--------- --------- --------- ---------
Total current assets .......... 81,982 114,991 -- 196,973
Property, plant & equipment, net .... 13,741 13,649 -- 27,390
Investments ......................... 253,086 -- (253,086) --
Other long term assets .............. 26,737 3,885 -- 30,622
Goodwill and other intangibles ...... 52,880 -- 169,809 222,689
--------- --------- --------- ---------
Total assets ................ $ 428,426 $ 132,525 $ (83,277) $ 477,674
========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................. $ 17,867 $ 19,994 $ -- $ 37,861
Accrued liabilities .............. 13,816 13,869 -- 27,685
--------- --------- --------- ---------
Total current liabilities ..... 31,683 33,863 -- 65,546
Revolving credit facility ........... 121,250 -- -- 121,250
12% senior subordinated notes ....... 100,000 -- -- 100,000
--------- --------- --------- ---------
Total liabilities ........... 252,933 33,863 -- 286,796
--------- --------- --------- ---------
Total stockholders' equity .... 175,493 98,662 (83,277) 190,878
--------- --------- --------- ---------
Total liabilities and
stockholders' equity .......... $ 428,426 $ 132,525 $ (83,277) $ 477,674
========= ========= ========= =========
</TABLE>
Consolidating Income Statement at December 31, 1998:
<TABLE>
<CAPTION>
FLEETPRIDE, GUARANTOR CONSOLIDATED
INC. SUBSIDIARIES TOTAL
----------- --------- ------------
<S> <C> <C> <C>
Net sales ................................................ $ 95,089 $ 8,206 $ 103,295
Cost of sales ............................................ 59,690 6,165 65,855
--------- --------- ---------
Gross profit ............................................. 35,399 2,041 37,440
Selling, general & administrative expenses ............... 29,498 1,532 31,030
--------- --------- ---------
Operating income ......................................... 5,901 509 6,410
Interest expense ......................................... 6,519 -- 6,519
Interest (income) ........................................ (624) -- (624)
Other (income)/expense ................................... (87) 1 (86)
--------- --------- ---------
Income before income taxes and extraordinary charge ...... 93 508 601
Income tax expense (benefit) ............................. (687) -- (687)
--------- --------- ---------
Income before extraordinary charge ....................... 780 508 1,288
Extraordinary charge, net of taxes ....................... -- -- --
--------- --------- ---------
Income and comprehensive income .......................... $ 780 $ 508 $ 1,288
========= ========= =========
</TABLE>
22
<PAGE> 25
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 10 - FLEETPRIDE, INC. CONDENSED FINANCIAL INFORMATION, CONTINUED
Consolidating Income Statement at December 31, 1999:
<TABLE>
<CAPTION>
FLEETPRIDE, GUARANTOR CONSOLIDATED
INC. SUBSIDIARIES TOTAL
---------- ------------ -----------
<S> <C> <C> <C>
Net sales .............................................. $ 59,979 $298,384 $ 358,363
Cost of sales .......................................... 37,310 197,399 234,709
--------- --------- ---------
Gross profit ........................................... 22,669 100,985 123,654
Selling, general & administrative expenses ............. 21,817 75,629 97,446
--------- --------- ---------
Operating income ....................................... 852 25,356 26,208
Interest expense ....................................... 19,320 86 19,406
Interest (income) ...................................... (451) (80) (531)
Other (income)/expense ............................... 102 (44) 58
--------- --------- ---------
Income before income taxes and extraordinary charge .... (18,119) 25,394 7,275
Income tax expense (benefit) ........................... 3,316 258 3,574
--------- --------- ---------
Income before extraordinary charge ..................... (21,435) 25,136 3,701
Extraordinary charge, net of taxes ..................... 1,510 -- 1,510
--------- --------- ---------
Income and comprehensive income ........................ $ (22,945) $ 25,136 $ 2,191
========= ========= =========
</TABLE>
Consolidating Statement of Cash Flows at December 31, 1998:
<TABLE>
<CAPTION>
FLEETPRIDE, GUARANTOR CONSOLIDATED
INC. SUBSIDIARIES TOTAL
---------- ------------ ------------
<S> <C> <C> <C>
Net income and comprehensive income ........................ $ 779 $ 509 $ 1,288
Adjustments to reconcile net income to net
cash provided by operating activities ................... 5,700 (43) 5,657
-------- -------- --------
Cash provided by operating activities ...................... 6,479 466 6,945
Cash (used)/provided by investing activities ............... (76,150) 71 (76,079)
Cash provided by financing activities ...................... 77,271 -- 77,271
-------- -------- --------
Net increase in cash ....................................... 7,600 537 8,137
Cash and cash equivalents at the beginning of period ....... 191 -- 191
-------- -------- --------
Cash and cash equivalents at the end of period ............. $ 7,791 $ 537 $ 8,328
======== ======== ========
</TABLE>
Consolidating Statement of Cash Flows, For the Year Ended December 31, 1999:
<TABLE>
<CAPTION>
FLEETPRIDE, GUARANTOR CONSOLIDATED
INC. SUBSIDIARIES TOTAL
--------- ------------ ------------
<S> <C> <C> <C>
Net income and comprehensive income ..................... $ (22,945) $ 25,136 $ 2,191
Adjustments to reconcile net income to net cash
provided by operating activities ..................... (6,609) 1,989 (4,620)
--------- --------- ---------
Cash provided by operating activities ................... (29,554) 27,125 (2,429)
Cash (used)/provided by investing activities ............ (126,651) -- (126,651)
Cash provided by financing activities ................... 127,197 -- 127,197
--------- --------- ---------
Net increase in cash .................................... (29,008) 27,125 (1,883)
Cash and cash equivalents at the beginning of period .... 8,328 -- 8,328
--------- --------- ---------
Cash and cash equivalents at the end of period .......... $ (20,680) $ 27,125 $ 6,445
========= ========= =========
</TABLE>
23
<PAGE> 26
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 11 - EMPLOYEE BENEFIT PLANS
FleetPride sponsors a number of defined contribution 401(k) plans covering
substantially all of its full-time employees. Employees may contribute up to 15%
of their salary to the plan while FleetPride may make discretionary
contributions to it. Total expenses under these plans were $130, $248 and $787
for the years ended December 31, 1997, 1998 and 1999, respectively.
NOTE 12 - OPERATING LEASES
FleetPride leases office and warehouse space from related parties and third
parties. Rental expense to related parties was $750, $1,136 and $5,962 in 1997,
1998 and 1999, respectively. FleetPride also leases office, warehouse space and
transportation equipment from unrelated parties. Rental expense to third parties
was $381, $494 and $4,626 in 1997, 1998 and 1999, respectively. Minimum future
rental payments under these leases for each of the next five years and
thereafter, and in the aggregate are as follows:
2000.................. 9,230
2001.................. 8,349
2002.................. 7,897
2003.................. 6,834
2004.................. 4,868
Thereafter............ 14,259
---------------
$ 51,437
===============
NOTE 13 - RELATED PARTY TRANSACTIONS
In addition to the transactions described in the above footnotes, the following
related party transactions existed at December 31, 1999.
In May 1998, FleetPride entered into a Corporate Development and Administrative
Services Agreement with Brentwood Private Equity L.L.C. ("BPE"), an affiliate of
FleetPride's majority shareholder, Brentwood. Under the terms of the agreement,
BPE agreed to assist FleetPride with corporate development services for a
predetermined percentage of certain transactions. On September 30, 1999
FleetPride terminated this agreement. FleetPride incurred $2,208 and $1,684 in
1998 and 1999, respectively, under the terms of this agreement in connection
with acquisitions made by FleetPride.
On September 30, 1999, FleetPride entered into a Management Services Agreement
with Brentwood Private Equity Management LLC ("BPEM") and Aurora Management
Partners LLC ("AMP"), affiliates of FleetPride's majority shareholders. Under
the terms of the agreement, BPEM and AMP have agreed to assist FleetPride with
corporate development services for a fixed fee and a predetermined percentage of
certain transactions. In 1999, FleetPride incurred $2,272 under the terms of
this agreement.
24
<PAGE> 27
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 14 - INCOME TAXES
The income tax expense (benefit) for the years ended December 31, consists of
the following:
1997 1998 1999
------- ------- -------
Current tax expense
Federal ........................... $ -- $ -- $ 241
State and local ................... 93 200 630
Deferred tax expense (benefit)
Federal ........................... -- (751) 2,162
State and local ................... -- (136) (458)
------- ------- -------
$ 93 $ (687) $ 2,575
======= ======= =======
The provision for income tax differs from the statutory tax expense computed by
applying the Federal corporate rate of 34% for the years ended December 31 as
follows:
1997 1998 1999
------- ------- -------
Taxes computed at statutory rate ............. $ 93 204 1,620
State tax expense, net of Federal benefit .... -- 42 114
Income earned while an S corporation ......... -- (1,017) --
Goodwill amortization ........................ -- 5 491
Other non-deductible expenses ................ -- 79 350
------- ------- -------
Total income tax expense (benefit) ........... $ 93 $ (687) $ 2,575
======= ======= =======
The above tables include a tax benefit of $999 related to an extraordinary item
incurred in 1999.
The approximate tax effects of temporary differences between the tax basis of
assets and liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax asset and deferred tax liability are as
follows at December 31:
1998 1999
-------- --------
Inventories ......................... $ 619 $ 3,215
Property, plant and equipment ....... -- 169
Accrued liabilities ................. 167 1,243
Recapitalization .................... 13,664 12,716
Net operating loss carryforwards .... 854 2,231
Other ............................... -- 44
-------- --------
Total deferred tax asset ............ 15,304 19,618
Rebates receivable .................. -- (2,532)
Goodwill and other intangibles ...... (200) (1,260)
-------- --------
Total deferred tax liability ........ (200) (3,792)
-------- --------
Net deferred tax asset .............. $ 15,104 $ 15,826
======== ========
The acquisition of FleetPride's stock by BABF City Corp. resulted in a step-up
in the tax basis of FleetPride's net assets of $37,413 in 1998. This amount will
be amortized over 15 years for tax purposes, resulting in a deferred tax
25
<PAGE> 28
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 14 - INCOME TAXES, CONTINUED
asset of $14,217. Pursuant to SFAS 109, FleetPride's contributed capital has
been increased by the amount of this tax benefit.
Net operating loss carryforwards of $4,454 at December 31, 1999, will begin
expiring in 2018.
NOTE 15 - STOCK COMPENSATION PLANS
FleetPride has a stock option plan that provides for the granting of stock
options to officers and key employees. The objectives of this plan include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting the success of FleetPride by providing
employees the opportunity to acquire common stock. The 1999 Equity Incentive
Plan is the only plan with stock option awards available for grant; no prior
plans existed. FleetPride is authorized to grant options for up to 25,000 common
shares under the 1999 Equity Incentive Plan, of which 11,700 have been granted,
as of December 31, 1999. Options outstanding under FleetPride's option plan have
been granted at prices which are either equal to or above the market value of
the stock on the date of grant, vest over an eight year period and expire ten
years after the grant date.
In addition, on September 30, 1999 FleetPride granted options to purchase 3,956
shares of FleetPride common stock to various individuals upon conversion of
options to purchase QDSP Holdings, Inc. stock, in accordance with the terms of
the Agreement and Plan of Merger relating to FleetPride's acquisition of QDSP
Holdings, Inc. These grants were not made under the 1999 Equity Incentive Plan.
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF SHARES AVERAGE
(IN THOUSANDS) EXERCISE PRICE
-------------- --------------
<S> <C> <C>
Outstanding at December 31, 1998.................................... -- --
Granted............................................................. 15,656 $ 170
Exercised........................................................... -- --
Canceled............................................................ -- --
--------- -------
Outstanding (held by 38 optionees) at December 31, 1999............. 15,656 $ 170
--------- -------
Options exercisable at December 31, 1999............................ 440 $ 170
--------- -------
</TABLE>
FleetPride continues to account for stock-based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," under which no compensation cost for
stock options is recognized for stock option awards granted at or above fair
market value. Had compensation expense for FleetPride's stock-based compensation
plan been determined based upon fair values at the grant dates for awards under
those plans in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation," FleetPride's net earnings would have been reduced to the pro
forma amounts indicated below. The pro forma effects of applying SFAS 123 are
not indicative of future amounts. Additional stock option awards are anticipated
in future years.
1999
-----------
Net earnings (in thousands)
As reported.................................... $ 2,191
Pro forma...................................... $ 2,090
-----------
26
<PAGE> 29
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 15 - STOCK COMPENSATION PLANS, CONTINUED
The weighted average fair value of options granted during 1999 estimated on the
date of grant using the Black-Scholes option-pricing model was $86. The fair
value of 1999 options granted is estimated on the date of grant using the
following assumptions: dividend yield of 0%, expected volatility of 31%,
risk-free interest rate range of 6.2% to 6.3% depending on grant date, and an
expected life of approximately 8 years.
On March 5, 1999, John J. Greisch, President and Chief Executive Officer, John
P. Miller, Vice President of Finance, Chief Financial Officer, Treasurer and
Secretary and Anthony W. Cavalle, Vice President of Operations purchased 2,000,
250 and 250 shares of FleetPride's common stock, respectively, subject to
vesting over four years. Mr. Greisch, Mr. Miller and Mr. Cavalle paid cash of
$3, $0 and $0, respectively, and signed promissory notes of $337, $42 and $42,
respectively, of which $415 remains outstanding at December 31, 1999. The
promissory notes mature on March 4, 2004 and bear interest at 5.3%.
27
<PAGE> 30
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth information regarding our executive officers
and directors as of December 31, 1999:
<TABLE>
<CAPTION>
Name Age Position
- - - - - - - - - - - - - - - ------------------------------------------ ------- ----------------------------------------------------------------
<S> <C> <C>
John J. Greisch 43 President, Chief Executive Officer and Director
John P. Miller 42 Vice President, Chief Financial Officer, Treasurer and Secretary
Anthony W. Cavalle 44 Vice President Operations
Frederick J. Warren 60 Chairman of the Board of Directors
Robert Anderson 79 Director
W. Larry Clayton 53 Director
Richard R. Crowell 45 Director
Christopher A. Laurence 32 Director
Gerald L. Parsky 57 Director
William S. Wade 52 Director
</TABLE>
JOHN J. GREISCH, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr.
Greisch has served as our President, Chief Executive Officer and as a director
since joining us in June 1998. From May 1986 to December 1997, Mr. Greisch
served in various positions at The Interlake Corporation, a global industrial
equipment manufacturer with approximately $800 million in 1997 sales that was
acquired by GKN plc in early 1999. Most recently, Mr. Greisch served as
President of the Material Handling Group, Interlake's largest operating unit
with approximately $475 million in 1997 sales, and before that he served as Vice
President of Finance, Chief Financial Officer. Mr. Greisch is a Certified Public
Accountant.
JOHN P. MILLER, VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY. Mr. Miller has served as our Vice President of Finance,
Chief Financial Officer and Secretary since joining us in June 1998 and our
Treasurer since November 1999. From 1997 to June 1998, Mr. Miller served as
Chief Financial Officer of Peapod, Inc., an internet-based grocery shopping
service. From 1985 to 1997, Mr. Miller served in various positions at Interlake.
Mr. Miller last served as Controller for Interlake, and before that he served as
Vice President Finance for Interlake's Material Handling Group. Mr. Miller is a
Certified Public Accountant.
ANTHONY W. CAVALLE, VICE PRESIDENT OPERATIONS. Mr. Cavalle has served
as Vice President Operations since joining us in October 1998. From 1997 to
October 1998, Mr. Cavalle served as Executive Vice President Operations of
Carstar, a franchiser and consolidator of collision service centers with
approximately $250 million in 1998 sales. From 1981 to 1997, Mr. Cavalle served
in various positions at Chief Auto Parts, an auto parts retailer and distributor
with approximately $500 million in 1997 sales. Mr. Cavalle's most recent
position at Chief Auto Parts was as Vice President Commercial and International
Business and before that he served as Vice President Marketing.
FREDERICK J. WARREN, CHAIRMAN OF THE BOARD OF DIRECTORS. Mr. Warren has
served as a director since June 1998. Mr. Warren has been with Brentwood
Associates since co-founding it in 1972 and is presently a general partner of
Brentwood Buyout Management Partners, L.P. and Brentwood Buyout Partners, L.P.,
a managing member of Brentwood Private Equity, L.L.C. and Brentwood Private
Equity Management, L.L.C. Mr. Warren is also a director of PulsePoint
Communications.
ROBERT ANDERSON, DIRECTOR. Mr. Anderson has served as a director since
October 1999. Mr. Anderson has been associated with Rockwell International
Corporation since 1968, where he has been Chairman Emeritus
28
<PAGE> 31
since 1990 and served previously as Chairman of the Executive Committee from
1988 to 1990 and as Chairman of the Board and Chief Executive Officer from 1979
to 1988. Mr. Anderson is a director of Gulfstream Aerospace Corporation, Motor
Cargo Industries, Inc. and Optical Data Systems Company.
W. LARRY CLAYTON, DIRECTOR. Mr. Clayton has served as a director since
our inception in June 1998. Mr. Clayton served as a Regional General Manager
from June 1998 to September 1999. Mr. Clayton is the founder of City Truck &
Trailer Parts, Inc., and served as President of City Truck from its inception in
1975.
RICHARD R. CROWELL, DIRECTOR. Mr. Crowell has served as a director
since October 1999. Mr. Crowell is President and a founding partner of Aurora
Capital Partners. Prior to forming Aurora Capital Partners in 1991, Mr. Crowell
was Managing Director of Rosecliff, Inc., the management company for Acadia
Partners L.P., since its inception in 1987.
CHRISTOPHER A. LAURENCE, DIRECTOR. Mr. Laurence has served as a
director since June 1998. Mr. Laurence joined Brentwood in 1991 and is presently
a managing member of Brentwood Private Equity, L.L.C. and Brentwood Private
Equity Management, L.L.C. Mr. Laurence is also a director of Aspen Marketing
Group, Inc., Silver Cinemas International, Inc. and World Point Logistics.
GERALD L. PARSKY, DIRECTOR. Mr. Parsky has served as a director since
October 1999. Mr. Parsky is the Chairman and a founding partner of Aurora
Capital Partners. Prior to forming Aurora Capital Partners in 1991, Mr. Parsky
was a senior partner and a member of the Executive and Management Committees of
the law firm of Gibson, Dunn & Crutcher LLP.
WILLIAM S. WADE, DIRECTOR. Mr. Wade has served as a director since
October 1999. Prior to joining the board, Mr. Wade served as the Chief Executive
Officer of QDSP Holdings, Inc. since its inception in 1998. From 1997 to 1998,
he served as Senior Vice President of Stant Corporation, and from 1994 to 1997,
he served as the Chief Executive Officer of Americas of F.A.G. Bearings.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Not applicable.
29
<PAGE> 32
ITEM 11. Executive Compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation we paid for services rendered during the year ended December 31,
1999 to our Chief Executive Officer and to each of our other most highly
compensated named executive officers that earned compensation in excess of
$100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
---------------------- -------------------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($)(2) STOCK AWARDS ($) OPTIONS (#)
--------------------------- ---- ---------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
John J. Greisch (3) 1999 $282,885 $147,500 -- 7,000
President and Chief Executive Officer 1998 157,747 82,106 -- --
John P. Miller (4) 1999 177,692 75,000 -- 750
Vice President of Finance, Chief 1998 81,441 69,255 $99,761 --
Financial Officer, Secretary and
Treasurer
Anthony W. Cavalle (5) 1999 175,000 49,051 -- --
Vice President Operations 1998 47,677 16,285 -- --
Gene L. Curtin (6) 1999 154,308 43,862 -- 1,500(7)
Vice President and Chief Information
Officer
</TABLE>
- - - - - - - - - - - - - - - --------------------
(1) The four named executive officers receive perquisites from us, but in 1999
such perquisites did not reach the threshold for reporting of the lesser of
$50,000 or ten percent of salary and bonus set forth in the applicable rule
of the Securities and Exchange Commission.
(2) The amounts disclosed in the Bonus column were all awarded under our
Executive Incentive Compensation Plan, except the amount disclosed for Mr.
Curtin includes a payment of $30,000 in 1999 pursuant to a signing bonus.
(3) Mr. Greisch became our President and Chief Executive Officer on June 1,
1998.
(4) Mr. Miller became our Vice President of Finance, Chief Financial Officer
and Secretary on June 29, 1998. Mr. Miller became Treasurer on November 3,
1999. The amount of Mr. Miller's 1998 restricted stock awards represent the
difference between the purchase price and the fair market value of the
shares of FleetPride Corporation preferred stock Mr. Miller acquired in
July 1998.
(5) Mr. Cavalle became our Vice President of Operations on October 6, 1998.
(6) Mr. Curtin became our Vice President and Chief Information Officer on
February 1, 1999. Mr. Curtin resigned on January 5, 2000.
(7) On February 1, 1999, FleetPride Corporation granted Mr. Curtin options to
purchase 750 shares of common stock with an exercise price of $170 per
share, expiring on January 31, 2009, and vesting over eight years from the
date of grant, subject to possible acceleration of vesting. These options
were canceled on January 5, 2000.
On November 3, 1999, Mr. Curtin entered into a Nonqualified Stock Option
Agreement with FleetPride Corporation under which Mr. Curtin was granted
options to purchase an additional 750 shares of common stock. These options
were canceled on January 5, 2000. See "---Option/SAR Grants in Last Fiscal
Year" below.
30
<PAGE> 33
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The table below provides information regarding stock options granted to
our named executive officers during the fiscal year ended December 31, 1999. We
did not grant any stock appreciation rights in 1999.
<TABLE>
<CAPTION>
Individual Grants (1)
----------------------------------------------------------- Potential Realizable
Value at Assumed
Number of Percent of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration -------------------------
Granted (#) Fiscal year (%) (per share)($) Date (2) 5% 10%
----------- --------------- -------------- ---------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Greisch........... 7,000 44.7 $170 11/03/09 $748,385 $1,896,554
John P. Miller............ 750 4.79 $170 11/03/09 80,184 203,202
Anthony W. Cavalle ....... 0 -- -- -- -- --
Gene L. Curtin............ 750(3) 4.79 $170 1/31/09 80,184 203,202
750(4) 4.79 $170 11/03/09 80,184 203,202
- - - - - - - - - - - - - - - ----------------
</TABLE>
(1) Except with respect to the option grant referenced in note (3) below,
all of the option grants reflected in this table were made pursuant to
nonqualified stock option agreements under FleetPride Corporation's
1999 Equity Incentive Plan. On the initial vesting date under the
option agreements, which is December 31, 1999 or December 31, 2000
depending on the terms of the particular option agreement, 10 percent
of the options granted to each optionee will become vested and
exercisable. An additional 10 percent of the options will become vested
and exercisable on each of the first four anniversaries of the initial
vesting date, an additional 16.66 percent of the options will become
vested and exercisable on the fifth anniversary of the initial vesting
date and an additional 16.67 percent of the options will become
exercisable on each of the sixth and seventh anniversaries of the
initial vesting date. The options will only vest and become exercisable
as long as the optionee remains an employee of ours.
In addition, the options that are scheduled to vest on the fifth,
sixth, and seventh anniversaries of the initial vesting date, which
equal 50 percent of the total amount of options granted to each
optionee, may be subject to accelerated vesting based on satisfaction
of performance standards set forth in the option agreements. Depending
on the extent to which the performance standards are met, up to 20
percent of the options subject to performance standards may become
vested and exercisable on the initial vesting date and up to 20 percent
of the options subject to performance standards may become vested and
exercisable on each of the first four anniversaries of the initial
vesting date. Options that do not vest in any year based on failure to
satisfy the performance standards may vest in the following year in
accordance with the terms of the option agreements.
All option shares will become immediately vested and exercisable upon
death or disability of the optionee or upon our merger, consolidation
or reorganization, sale of substantially all of ours and our
subsidiaries' assets or various other events.
(2) Unless terminated earlier upon termination of the optionee's employment
in accordance with the terms of the option agreement.
(3) See "---Summary Compensation Table" above. These options were canceled
on January 5, 2000.
(4) These options were canceled on January 5, 2000.
31
<PAGE> 34
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
None of our named executive officers held or holds stock appreciation
rights or exercised stock options during 1999. The following table sets forth
information regarding the number and value of unexercised stock options held by
each of the named executive officers as of December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year End (#) Fiscal Year End ($)
------------------------- -----------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- - - - - - - - - - - - - - - ------------------------------ --------------- ----------------- ------------------------- -----------------------
<S> <C> <C> <C> <C>
John J. Greisch.............. 0 0 0/7,000 0/0
John P. Miller............... 0 0 0/750 0/0
Anthony W. Cavalle .......... -- -- -- --
Gene L. Curtin............... 0 0 75/1,425(1) 0/0
</TABLE>
(1) Mr. Curtin's options were canceled on January 5, 2000.
COMPENSATION OF DIRECTORS
The members of our board of directors do not receive any compensation
for their services as directors. They do receive reimbursement for travel and
other expenses incurred in their capacity as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Messrs. Clayton, Anderson, Parsky and Warren served as
members of the compensation committee. Mr. Warren is Chairman of our board of
directors. Mr. Clayton served as a regional general manager during 1999.
Messrs. Warren and Parsky may have indirect interests in our management
services agreement based on their positions as managing members of the general
partner of Brentwood Associates Buyout Fund II, L.P., in the case of Mr.
Warren and the general partner of Aurora Capital Group, in the case of Mr.
Parsky, as described under the caption "Certain Relationships and
Related Party Transactions--Relationship with Brentwood and Aurora." None of
our executive officers has served on the board of directors or compensation
committee of any other entity any of whose officers served either on our board
of directors or compensation committee.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT CONTRACTS
Our indirect subsidiary, Quality Distribution Service Partners, Inc.,
entered into an employment agreement with William S. Wade as Chairman, Chief
Executive Officer and President. This agreement became effective on July 31,
1998 and was terminated as of December 31, 1999. We terminated Mr. Wade's
employment without cause and we are required to pay him $20,833 per month until
July 30, 2001. Mr. Wade also has a term life insurance policy procured and paid
for by us and he is entitled to participate in any group insurance,
hospitalization, medical, dental, health, accident, disability or similar plan
or program.
CHANGE-IN-CONTROL ARRANGEMENTS
See "Executive Compensation-Option/SAR Grants in Last Fiscal Year"
and "Certain Relationships and Related Party Transactions-Stock Purchase
Agreements."
32
<PAGE> 35
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
We are a wholly-owned subsidiary of our parent company, FleetPride
Corporation. FleetPride Corporation has five classes of voting securities,
common stock and preferred stock designated as voting Series A preferred stock,
voting Series B preferred stock, Series C special voting preferred stock and
Series D special voting preferred stock. The common stock, Series A preferred
stock and Series B preferred stock vote together as a single class. Each of the
Series C special voting preferred stock and Series D special voting preferred
stock vote as separate classes and entitle each of Aurora Capital Group and
Brentwood Associates, respectively, to elect three directors, provided that
Aurora and Brentwood maintain specified ownership percentages of FleetPride
Corporation's common stock. The following table sets forth, as of December 31,
1999, the ownership of FleetPride Corporation's common stock and the ownership
of its voting preferred stock by each stockholder who is known by us to own
beneficially more than five percent of the outstanding common stock or voting
preferred stock, respectively, by each director, by each executive officer
listed in the table below, and by all directors and officers as a group.
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Preferred Preferred Series D
Stock Stock Stock Preferred
--------- --------- --------- Stock
Series A Series B Series C ----------
Common Preferred Preferred Preferred Series D
Stock Stock Stock Stock Preferred
Amount Amount Amount Amount Stock
and and and and Amount and Percent
Nature of Nature of Nature of Nature of Nature of of all
Name and Beneficial Percent Beneficial Percent Beneficial Percent Beneficial Percent Beneficial Percent Voting
Address Ownership of Class Ownership of Class Ownership of Class Ownership of Class Ownership of Class Stock
-------- --------- -------- --------- -------- --------- -------- ---------- -------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aurora(1) 170,061 43.2% -- -- 741,237 95.0% 1 100% -- -- 44.3%
Brentwood(2) 143,771 36.5% 626,640 69.1% 17,506 2.2% -- -- 1 100.0% 37.5%
Frederick J. -- -- -- -- -- -- -- -- -- -- --
Warren(2)(3).
Christopher A. -- -- -- -- -- -- -- -- -- -- --
Laurence(2)(3)
Gerald L. -- -- -- -- -- -- -- -- -- -- --
Parsky(1)(4)
Richard R. -- -- -- -- -- -- -- -- -- -- --
Crowell(1)(4)
Robert 236 * -- -- 884 0.1% -- -- -- -- *
Anderson(1)
William S. 3,057 * -- -- 13,324 1.7% -- -- -- -- *
Wade(1)
John J. 8,602 2.2% 6,983 * -- -- -- -- -- -- *
Greisch(5)
John P. 1,979 * 998 * -- -- -- -- -- -- *
Miller(5)
Anthony W. 1,479 * 998 * -- -- -- -- -- -- *
Cavalle(5)
W. Larry 8,600 2.2% 37,486 4.3% -- -- -- -- -- -- 2.2%
Clayton(6)
Gene L. 174 * 758 * -- -- -- -- -- -- *
Curtin(7)
All directors 24,127 6.1% 47,223 5.4% 14,208 1.8% -- -- -- -- 4.2%
and officers
as a group
(eleven persons)
</TABLE>
- - - - - - - - - - - - - - - -----------------
* Less than one percent.
33
<PAGE> 36
(1) The address for Aurora and Messrs. Parsky, Crowell, Anderson and Wade is
c/o Aurora Capital Group, 10877 Wilshire Boulevard, Suite 2100, Los
Angeles, California 90024. Aurora Equity Partners II L.P. is the owner of
record of 147,868 shares of common stock and 644,504 shares of preferred
stock, Aurora Overseas Equity Partners II L.P. is the owner of record of
1,999 shares of common stock and 8,711 shares of preferred stock and
Quality Distribution Equity Partners L.P. is the owner of record of 20,195
shares of common stock and 88,022 shares of preferred stock, indicated as
owned by Aurora.
(2) The address for Brentwood and Messrs. Warren and Laurence, is c/o
Brentwood Associates, 11150 Santa Monica Boulevard, Suite 1200, Los
Angeles, California 90025. BABF City Corp., wholly owned by Brentwood
Associates Buyout Fund II, L.P., is the owner of record of 57,227 shares
of common stock and 249,428 shares of preferred stock and HDA Partners I,
L.P., of which Brentwood is the general partner, is the owner of record of
86,544 shares of common stock and 377,212 shares of preferred stock,
indicated as owned by Brentwood.
(3) Messrs. Warren and Laurence are managing members of the general partner of
Brentwood Associates Buyout Fund II, L.P., and in that capacity share
voting and dispositive power with respect to the shares owned by Brentwood
Associates Buyout Fund II, L.P. and may be deemed to be beneficial owners
of those shares but disclaim beneficial ownership of those shares.
(4) Messrs. Parsky and Crowell are managing members of the general partner of
Aurora Capital Group, and in that capacity share voting and dispositive
power with respect to the shares owned by Aurora Equity Partners II L.P.,
Aurora Overseas Equity Partners II L.P. and Quality Distribution Equity
Partners L.P. and may be deemed to be beneficial owners of those shares
but disclaim beneficial ownership of those shares.
(5) The address for Messrs. Greisch, Miller and Cavalle is c/o FleetPride,
Inc., 520 Lake Cook Road, Deerfield, Illinois 60015.
(6) The address for Mr. Clayton is 1010 Bridle Lane, Helena, Alabama 35080.
(7) The address for Mr. Curtin is 29 Bruce Circle North, Hawthorn Woods,
Illinois 60047.
ITEM 13. Certain Relationships and Related Party Transactions.
RELATIONSHIP WITH BRENTWOOD AND AURORA
Pursuant to a management services agreement, dated as of September 30,
1999, among FleetPride Corporation, Brentwood Private Equity Management, L.L.C.,
an affiliate of Brentwood, and Aurora Management Partners LLC, an affiliate of
Aurora, Brentwood Private Equity Management and Aurora Management Partners have
agreed to provide us with financial consulting services, including consultation
and advice in such fields as financial services, accounting, general business
management, acquisitions, dispositions, banking and other matters.
We may terminate the management services agreement for justifiable
cause with respect to Brentwood Private Equity Management by written notice to
it, authorized by a majority of the directors other than those appointed by
Brentwood Private Equity Management. We may terminate the management services
agreement for justifiable cause with respect to Aurora Management Partners by
written notice to it, authorized by a majority of the directors other than those
appointed by Aurora Management Partners. Justifiable cause means commission of
any of the following acts by Brentwood Private Equity Management or Aurora
Management Partners, as the case may be:
(a) misappropriation of our funds or property;
(b) gross neglect or willful misconduct in the fulfillment of its
obligations under the management services agreement; or
34
<PAGE> 37
(c) conviction of a felony involving moral turpitude that has
become final and not subject to appeal.
Unless earlier terminated for justifiable cause, the management
services agreement will automatically terminate:
(a) with respect to Brentwood Private Equity Management, on
the date that Brentwood no longer retains the voting and dispositive
power with respect to at least 45% of the total number of shares of
our common stock that it held immediately following the consummation
of the transactions contemplated by the merger agreement relating to
our acquisition of QDSP; and
(b) with respect to Aurora Management Partners on the date
that Aurora no longer retains the voting and dispositive power with
respect to at least 45% of the total number of shares of our common
stock that it held immediately following the consummation of the
transactions contemplated by the QDSP merger agreement.
Pursuant to the management services agreement, each of Brentwood
Private Equity Management and Aurora Management Partners are entitled to receive
a fee of $375,000 per year, payable semi-annually in advance. In addition, we
will:
(a) pay to each of Brentwood Private Equity Management and
Aurora Management Partners a transaction fee for merger and acquisition
services equal to 0.75% of the aggregate transaction consideration, not
to exceed $100,000;
(b) promptly reimburse each of Brentwood Private Equity Management
and Aurora Management Partners for all reasonable out-of-pocket costs
and expenses incurred in connection with their investment in us and the
performance of their respective obligations under the management
services agreement.
In connection with our acquisitions of various businesses, we have paid
Brentwood Private Equity Management and Aurora Management Partners fees in 1999
amounting to $2.7 million and $1.0 million, respectively. We believe the terms
of the management services agreement are as fair to us as those that could have
been obtained from arms-length negotiations with unrelated parties.
In May 1999, Brentwood purchased $15.0 million of FleetPride
Corporation's equity securities. In connection with our merger with QDSP,
Brentwood and Aurora also made cash equity contributions of $3.1 million and
$36.9 million, respectively, to FleetPride Corporation.
Messrs. Warren, Laurence, Parsky and Crowell may have indirect
interests in these transactions based on their positions as managing members of
the general partners of Brentwood Associates Buyout Fund II, L.P., in the case
of Messrs. Warren and Laurence, and the general partners of Aurora Capital
Group, in the case of Messrs. Parsky and Crowell, as described above under the
caption "Security Ownership of Certain Beneficial Owners and Managers."
STOCKHOLDERS' AGREEMENT
On September 30, 1999, FleetPride Corporation and each of FleetPride
Corporation's stockholders at that time entered into a stockholders' agreement
which amends and restates the September 30, 1998 stockholders agreement and
restricts the transfer of shares of common stock and preferred stock held by the
stockholders. The stockholders' agreement also entitles the stockholders to
rights regarding the transfer of their shares and the election of directors.
The stockholders' agreement provides a "right of first refusal" to
FleetPride Corporation and each of the stockholders owning the same class of
securities being offered for sale. The stockholders' agreement also provides
stockholders with "tag-along rights." If any stockholder then owning 10% or
more of the outstanding shares of any class or series of FleetPride
Corporation's common stock proposes to transfer any shares, each of the other
stockholders may require the proposed purchaser to purchase a pro rata portion
of its shares, and the 10% selling stockholder would have to make a
corresponding reduction in the number of its shares to be purchased. In
addition, the stockholders' agreement provides Brentwood and Aurora with
"drag-along rights." If
35
<PAGE> 38
Brentwood and Aurora desire to sell all of their shares to an unaffiliated
third-party who has offered to acquire all of FleetPride Corporation's
outstanding shares, then Brentwood and Aurora may require each of the other
stockholders to sell all of their shares in the same transaction and upon the
same terms and conditions.
The right of first refusal, tag-along rights and drag-along rights
terminate on the earlier to occur of:
(a) the closing of an underwritten public offering of
FleetPride Corporation's common stock, following which FleetPride
Corporation's common stock is listed on a national securities exchange
or the Nasdaq Stock Market, provided that the proceeds of the offering
are not less than $50,000,000; or
(b) any transfer of FleetPride Corporation's equity securities
in connection with a merger, consolidation, sale of assets or sale or
exchange of FleetPride Corporation's stock representing more than 50%
of the voting power in terms of the election of FleetPride
Corporation's directors.
The stockholders' agreement provides the parties with rights to have
their shares registered for sale under the Securities Act of 1933.
The stockholders' agreement also provides that Larry Clayton, or in the
event of his death or incapacity to perform his duties as director, Delton
Clayton, shall be entitled to be a director as long as Larry Clayton and his
affiliates own at least 45% of the 11,445 shares of common stock owned by Larry
Clayton and his affiliates as of September 30, 1998. As long as the Clayton
director is entitled to be a member of the board and FleetPride Corporation's
series C preferred stock remains outstanding, Aurora shall be entitled to
nominate one director who is not an employee of Aurora or its affiliates.
STOCK PURCHASE AGREEMENTS
Several of our executive officers, senior managers and a director
acquired equity interests in FleetPride Corporation consisting of common stock
and Series A preferred stock pursuant to the stock purchase agreements
summarized below.
John J. Greisch, President and Chief Executive Officer. Mr. Greisch
purchased 2,000 shares of FleetPride Corporation's common stock for $170 per
share pursuant to his stock purchase agreement dated as of March 5, 1999. These
shares vest over four years so long as he is employed by us. Of the $340,000
purchase price for the shares, Mr. Greisch paid $3,400 in cash and signed a
promissory note for the remaining $336,600. The promissory note matures on March
4, 2004, bears interest at 5.3% per year and requires payments from time to
time. The note is collateralized by these shares. As of December 31, 1999, there
was approximately $336,600 outstanding under the note.
If Mr. Greisch's employment is terminated for any reason, a portion of
the unvested shares will become immediately vested. FleetPride Corporation may
purchase any or all of the remaining unvested shares for $170 per share. If Mr.
Greisch's employment is terminated prior to an initial public offering of common
stock, FleetPride Corporation may purchase any and all of the vested common
shares at fair market value.
If we are acquired by a third party through an asset purchase, merger
or sale of more than 50% of our outstanding equity, all of the common shares
will vest immediately before the acquisition.
John P. Miller, Vice President, Chief Financial Officer, Treasurer
and Secretary. Mr. Miller purchased 250 shares of FleetPride Corporation's
common stock for $170 per share pursuant to his stock purchase agreement dated
as of March 5, 1999. Of the $42,500 purchase price for the shares, Mr. Miller
paid $425 in cash and signed a promissory note for the remaining $42,075. The
promissory note matures on March 4, 2004, bears interest at 5.3% per annum and
requires payments from time to time. The note is collateralized by these shares.
These shares are otherwise subject to the same terms and conditions as Mr.
Greisch's pledged shares. As of December 31, 1999, there was approximately
$36,075 outstanding under the note.
36
<PAGE> 39
If we are acquired by a third party through an asset purchase, merger
or sale of more than 50% of our outstanding equity, Mr. Miller's common shares
are subject to the same conditions as Mr. Greisch's.
Anthony W. Cavalle, Vice President Operations. Mr. Cavalle purchased
250 shares of FleetPride Corporation's common stock for $170 per share pursuant
to his stock purchase agreement dated as of March 5, 1999. Of the $42,500
purchase price for the shares, Mr. Cavalle paid $425 in cash and signed a
promissory note for the remaining $42,075. The promissory note matures on March
4, 2004, bears interest at 5.3% per annum and requires payments from time to
time. The note is collateralized by these shares. These shares are otherwise
subject to the same terms and conditions as Mr. Greisch's pledged shares. As of
December 31, 1999, there was approximately $42,075 outstanding under the note.
If we are acquired by a third party through an asset purchase, merger
or sale of more than 50% of our outstanding equity, Mr. Cavalle's common shares
will be subject to substantially the same conditions as Messrs. Greisch and
Miller, except that FleetPride Corporation may purchase for $1.00 per share all
shares eligible for accelerated vesting which did not vest in the year before
the year the acquisition closed.
37
<PAGE> 40
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(A) Financial Statements:
(1) Consolidated Financial Statements of FleetPride Corporation which are
included at Item 8 of this report, and
incorporated herein by reference.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(a) Report of Independent Accountants................................................................... 2
(b) Consolidated Balance Sheets at December 31, 1998 and 1999........................................... 3
(c) Consolidated Statements of Income for the Years Ended............................................... 4
December 31, 1997, 1998 and 1999
(d) Consolidated Statements of Stockholders' Equity for the Years........................................ 5
Ended December 31, 1997, 1998 and 1999
(e) Consolidated Statements of Cash Flows for the Years Ended............................................ 7
December 31, 1997, 1998 and 1999
(f) Notes to Consolidated Financial Statements........................................................... 8
</TABLE>
(2) Financial Statement Schedule
(a) Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable, or not required, or because they are included in
the financial statements or the notes thereto in Item 8 of this
report.
(3) Exhibits filed with this report are listed on the "Exhibit Index".
(B) Reports on Form 8-K
None.
(C) Exhibits.
Exhibits filed with this report are listed on the "Exhibit Index".
38
<PAGE> 41
SCHEDULE II
FLEETPRIDE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
For the year ended
December 31, 1997........................... $ 13 $ 121 $ -- $ 121 $ 13
For the year ended.......................... $ 13 $ 134 $ 1,002(1) $ -- $ 1,149
December 31, 1998
For the year ended
December 31, 1999........................... $ 1,149 $ (208) $ 968(1) $ 182 $ 1,727
Inventory valuation allowance:
For the year ended
December 31, 1997........................... $ 350 $ 150 $ -- $ 150 $ 350
For the year ended
December 31, 1998........................... $ 350 $ 440 $ 2,682(1) $ 123 $ 3,349
For the year ended
December 31, 1999........................... $ 3,349 $ (294) $ 9,574(1) $ 2,787 $ 9,842
</TABLE>
(1) These additions relate to businesses acquired during the year.
39
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to the
Registrant's Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FLEETPRIDE, INC.
Date: May 1, 2000 By: /s/ John P. Miller
-------------- ------------------------------
John P. Miller, Vice President of
Finance, Chief Financial Officer,
Secretary and Treasurer
Pursuant to the requirements of Securities Exchange Act of 1934, this
Report to be signed by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: May 1, 2000 /s/ Frederick J. Warren
-------------- ---------------------------------------------
Frederick J. Warren, Chairman of the Board
Date: May 1, 2000 /s/ John J. Greisch
-------------- ---------------------------------------------
John J. Greisch, Director, President and
Chief Executive Officer (Principal Executive
Officer)
Date: May 1, 2000 /s/ Robert Anderson
-------------- ---------------------------------------------
Robert Anderson, Director
Date:
-------------- ---------------------------------------------
W. Larry Clayton, Director
Date: May 1, 2000 /s/ Richard R. Crowell
-------------- ---------------------------------------------
Richard R. Crowell, Director
Date: May 1, 2000 /s/ Christopher A. Laurence
-------------- ---------------------------------------------
Christopher A. Laurence, Director
Date: May 1, 2000 /s/ Gerald L. Parksy
-------------- ---------------------------------------------
Gerald L. Parsky, Director
Date: May 1, 2000 /s/ William S. Wade
-------------- ---------------------------------------------
William S. Wade, Director
Date: May 1, 2000 /s/ John P. Miller
-------------- ---------------------------------------------
John P. Miller, Vice President of Finance,
Chief Financial Officer, Secretary and Treasurer
(Principal Accounting Officer and Principal
Financial Officer)
</TABLE>
40
<PAGE> 43
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - - - - - - - - - - - - - - ------- -------------------
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in this Form 10-K/A of Fleetpride, Inc of
our report dated March 30, 2000 relating to the financial statements and
financial statement schedule of Fleetpride Corporation.
/s/ PricewaterhouseCoopers LLP
- - - - - - - - - - - - - - - ------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
April 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,445
<SECURITIES> 0
<RECEIVABLES> 64,344
<ALLOWANCES> 1,727
<INVENTORY> 113,585
<CURRENT-ASSETS> 196,973
<PP&E> 27,390
<DEPRECIATION> 9,932
<TOTAL-ASSETS> 477,674
<CURRENT-LIABILITIES> 65,546
<BONDS> 100,000
0
170,259
<COMMON> 4
<OTHER-SE> 20,615
<TOTAL-LIABILITY-AND-EQUITY> 477,674
<SALES> 358,363
<TOTAL-REVENUES> 358,363
<CGS> 234,709
<TOTAL-COSTS> 234,709
<OTHER-EXPENSES> 58
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,406
<INCOME-PRETAX> 7,275
<INCOME-TAX> 3,574
<INCOME-CONTINUING> 3,701
<DISCONTINUED> 0
<EXTRAORDINARY> 1,510
<CHANGES> 0
<NET-INCOME> 2,191
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
