<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 Number)
520 Lake Cook Road
Deerfield, Illinois 60015
(Address of principal executive offices, including Zip Code)
(847) 572-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
As of May 1, 2000, the number of outstanding shares of common stock, par value
$.01 per share, of FleetPride, Inc. was 94,229.
1
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The registrant, FleetPride, Inc., has presented the financial
statements of FleetPride Corporation instead of the registrant's financial
statements. FleetPride Corporation is the registrant's parent company and has no
separate operations. FleetPride Corporation's only asset is its investment in
the registrant and equity in the registrant's earnings recorded and FleetPride
Corporation has no liabilities, except that FleetPride Corporation is
contingently liable for its guarantee of the registrant's debt. Thus, the
registrant's separate financial statements are not presented.
2
<PAGE> 3
FLEETPRIDE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,424 $ 6,445
Trade accounts receivable, less allowance for doubtful
accounts of $1,807 and $1,727 in 2000 and 1999 69,321 64,344
Inventories, net 113,090 113,585
Prepaid expenses 6,457 6,671
Current portion of patronage dividend receivable 5,279 5,928
-------- --------
Total current assets 195,571 196,973
Property, plant and equipment, net 28,601 27,390
Deferred financing fees 13,276 13,802
Goodwill and other intangibles 222,684 222,689
Other assets 17,771 16,820
-------- --------
Total Assets $477,903 $477,674
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 439 $ 541
Accounts payable 36,638 37,861
Accrued liabilities 18,876 27,144
-------- --------
Total current liabilities 55,953 65,546
Line of credit 130,250 121,250
Long-term debt 100,000 100,000
-------- --------
Total liabilities 286,203 286,796
Stockholders' equity:
Preferred Stock, liquidation value $100, par value $.01
per share (Series A outstanding: 881,420 in 2000 and
1999, Series B outstanding: 779,940 in 2000 and 1999,
Series C outstanding: 1 in 2000 and 1999 and
Series D outstanding: 1 in 2000 and 1999) 170,259 170,259
Common stock, par value $.01 per share (outstanding:
393,664 in 2000 and 1999) 4 4
Additional paid-in capital 60,266 60,266
Employee notes (415) (415)
Retained earnings (deficit) (38,414) (39,236)
-------- --------
Total stockholders' equity 191,700 190,878
-------- --------
Total liabilities and stockholders' equity $477,903 $477,674
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
FLEETPRIDE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INCOME STATEMENT
(in thousands)
Three Months Ended
------------------
March 31,
---------
2000 1999
--------- ---------
Net sales $ 137,244 $ 65,968
Cost of sales 89,835 42,923
--------- ---------
Gross profit 47,409 23,045
Selling general and administrative expenses 39,870 17,481
--------- ---------
Operating income 7,539 5,564
Other (income) / expense
Interest expense 5,971 4,208
Interest (income) (71) (83)
Management fee 186 --
Other expense / (income) (60) 25
--------- ---------
Income before income taxes 1,513 1,414
Income tax expense 691 563
--------- ---------
Net income and comprehensive income $ 822 $ 851
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 and THREE MONTHS ENDED MARCH 31, 2000
(amounts in thousands)
<TABLE>
<CAPTION>
FleetPride Corporation FleetPride Corporation FleetPride Corporation
Common Stock Series A Preferred Stock Series B Preferred Stock
---------------------- ------------------------ ------------------------
Par Paid In Par Paid In Par Paid In
Value Capital Value Capital Value Capital
-------- ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $ 1 $14,325 $ 4 $43,571 $ - $ -
Issuance of FleetPride Corporation
stock for Associated Brake Supply,
Inc. and Subsidiaries Acquisition - 11 1 4,988
Issuance of FleetPride Corporation
stock for Tisco, Inc. and Tisco
of Redding, Inc. Acquisition - 2 - 748
Issuance of FleetPride Corporation stock 1 15,145 4 37,891
Issuance of FleetPride Corporation
stock for Active Gear, L.L.C. Acquisition - 281 - 719
Issuance of FleetPride Corporation
stock for Superior Truck & Auto
Supply, Inc. Acquisition - 84 - 216
Issuance of FleetPride Corporation
stock for QDSP Holdings, Inc. Acquisition 1 19,606 5 52,924
Issuance of FleetPride Corporation stock
in conjunction with QDSP Holdings, Inc.
Acquisition 1 10,812 3 29,185
Net income and comprehensive income
-------- ----------- --------- ----------- --------- ------------
Balance at December 31, 1999 4 60,266 9 88,133 8 82,109
Net income and comprehensive income
-------- ----------- --------- ----------- --------- ------------
Balance at March 31, 2000 $ 4 $60,266 $ 9 $88,133 $ 8 $82,109
======== =========== ========= =========== ========= ============
<CAPTION>
FleetPride Corporation FleetPride Corporation
Series C Preferred Stock Series D Preferred Stock
------------------------ ------------------------ Retained Total
Par Paid In Par Paid In Employee Earnings Stockholders'
Value Capital Value Capital Notes (Deficit) Equity
---------- ------------ ---------- ------------ -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $ - $ - $ - $ - $ - $(41,427) $ 16,474
Issuance of FleetPride Corporation
stock for Associated Brake Supply,
Inc. and Subsidiaries Acquisition 5,000
Issuance of FleetPride Corporation
stock for Tisco, Inc. and Tisco
of Redding, Inc. Acquisition 750
Issuance of FleetPride Corporation stock (415) 52,626
Issuance of FleetPride Corporation
stock for Active Gear, L.L.C. Acquisition 1,000
Issuance of FleetPride Corporation
stock for Superior Truck & Auto
Supply, Inc. Acquisition 300
Issuance of FleetPride Corporation
stock for QDSP Holdings, Inc. Acquisition - - - - 72,536
Issuance of FleetPride Corporation stock
in conjunction with QDSP Holdings, Inc.
Acquisition 40,001
Net income and comprehensive income 2,191 2,191
---------- ------------ ---------- ------------ -------- --------- -------------
Balance at December 31, 1999 - - - - (415) (39,236) 190,878
Net income and comprehensive income 822 822
---------- ------------ ---------- ------------ -------- --------- -------------
Balance at March 31, 2000 $ - $ - $ - $ - $(415) $(38,414) $191,700
========== ============ ========== ============ ======== ========= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
FLEETPRIDE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASHFLOW
(in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net income $ 822 $ 851
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,477 1,686
(Gain) on sale of property and equipment - 25
Changes in operating assets and liabilities:
Accounts receivable (4,699) (4,583)
Patronage dividend receivable 851 (1,932)
Inventories 1,467 (74)
Prepaid expenses 252 744
Other assets (918) 3,057
Accounts payable (1,430) (1,105)
Accrued liabilities (8,559) 2,206
------------ ------------
Net cash provided by operating activities (8,737) 875
Investing activities:
Acquisition of property and equipment (1,759) (873)
Proceeds from sale of property and equipment - 17
Acquisitions, net of cash acquired (3,497) (62,413)
------------ ------------
Net cash used by investing activities (5,256) (63,269)
Financing activities:
Proceeds of revolving line of credit 9,000 53,097
Payments of revolving line of credit - (4,000)
Principal payment of long-term debt (167) (76)
Proceeds from borrowing of long-term debt 259 -
Proceeds from issuance of long-term debt (net of fees) (120) -
Proceeds from issuance of Preferred Stock - 7,603
Proceeds from issuance of Common Stock - 2,946
------------ ------------
Net cash provided by financing activities 8,972 59,570
------------ ------------
Increase (decrease) in cash and cash equivalents (5,021) (2,824)
Cash and cash equivalents at beginning of year 6,445 8,328
------------ ------------
Cash and cash equivalents at end of year $1,424 $5,504
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $9,120 $7,129
Cash paid for income taxes 295 16
Details of Acquisitions
Fair value of assets and liabilities acquired $3,510 $68,342
Less equity payments - 5,750
------------ ------------
Cash paid 3,510 62,592
Less cash acquired 13 179
------------ ------------
Net cash paid for acquisitions $3,497 $62,413
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial information presented herein is unaudited,
other than the condensed consolidated balance sheet at December 31, 1999 and
consolidated statement of stockholders' equity at December 31, 1999, which are
derived from audited financial statements. The interim financial statements and
notes thereto do not include all disclosures required by generally accepted
accounting principles and should be read in conjunction with the financial
statements and notes thereto included in the latest consolidated financial
statements of FleetPride Corporation and its subsidiaries (collectively, the
"Company").
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of the
results for interim periods. The current period's results of operations are not
necessarily indicative of results that ultimately may be achieved for the year.
Description of Companies and Operations
FleetPride Corporation, a Delaware corporation, was formed by the
share-for-share exchange of stock in FleetPride, Inc. for stock in FleetPride
Corporation. FleetPride Corporation is a holding company that has no operations
or debt, except for its guarantee of debt of FleetPride, Inc., its wholly owned
subsidiary. The historical financial statements for FleetPride Corporation are
identical to those of FleetPride, Inc. except with respect to the accounts which
comprise the stockholders' equity section of the balance sheet.
The Company operates as an independent distributor of heavy duty vehicle
parts and provider of related services. Operations include the operations of the
companies acquired in 1998 and 1999 and the operations of Oklahoma Truck Supply
Assoc., Inc. since the date of acquisition.
Segment Information
The Company has determined that it operates in one business segment, that
being the distribution of heavy duty vehicle parts in the United States. No
single customer represented more than 10% of the Company's total sales for the
first three months of 2000 and 1999.
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. The Company 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
7
<PAGE> 8
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
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.
NOTE 2 - INVENTORIES
Inventories consist of the following:
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
Purchased parts $ 100,769 $ 99,783
Core inventory 12,321 13,802
--------- --------
$ 113,090 $113,585
========= ========
NOTE 3 - ACQUISITIONS
On February 24, 2000 the Company acquired all of the capital stock of
Oklahoma Truck Supply Assoc., Inc. for approximately $3.8 million in cash. It
has been accounted for as a purchase, with the purchase price being allocated to
the fair value of the identified assets and liabilities of the Company with the
excess recorded as goodwill. The consolidated financial statements include
income since the date of acquisition.
The following unaudited pro forma financial information combines the
results of FleetPride, Inc. and Tisco, Inc., Tisco of Redding, Inc., Associated
Brake Supply, Inc. and subsidiaries, Truckparts, Inc., Active Gear, L.L.C.,
Vantage Parts, Superior Truck & Auto Supply, Inc., Certified Power, Inc.,
California Equipment Company, QDSP Holdings, Inc., Wheels and Brakes, Inc.,
Southwest Virginia Truck Parts, Inc. and Oklahoma Truck Supply Assoc., Inc. as
if the acquisitions had taken place on January 1, 1999 after giving effect to
certain adjustments including: amortization of goodwill, interest expense and a
normal charge for income taxes assuming all of the companies operated as "C"
corporations for 1999 and 2000.
<TABLE>
<CAPTION>
Three Months Ended March 31, Three Months Ended March 31,
2000 1999
---------------------------- ----------------------------
Actual Proforma Actual Proforma
------ -------- ------ --------
<S> <C> <C> <C> <C>
Sales $137,244 $137,578 $65,968 $142,985
Net income (loss) and
comprehensive income (loss) $ 822 $ 859 $ 851 $ 2,466
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the unaudited consolidated financial statements and related notes thereto.
This report contains "forward-looking statements" which are identifiable
by the use of forward-looking terms, such as "may", "intend", "will", "expect",
"anticipate", "estimate", "continue", or similar phrases. In particular, any
statement concerning future opportunities, future operating results or the
ability to generate future revenues, income or cash flow are forward-looking
statements. Although
8
<PAGE> 9
the Company believes that the expectations reflected in the forward-looking
statements are reasonable, its expectations may not prove to be correct. Such
statements are subject to inherent uncertainties and risks which could cause
actual results to vary materially from suggested results, including but not
limited to the following: substantial debt, ability to acquire and successfully
integrate heavy duty vehicle parts businesses at reasonable prices, management's
ability to meet the significant demands of growth, pricing pressure and the
competitive factors and economic factors in the trucking industry.
GENERAL / RESULTS OF OPERATIONS
FleetPride Corporation is the parent company of FleetPride, Inc. and has
no separate operations, assets except its investment in FleetPride, Inc. or
liabilities, except for its guarantee of FleetPride, Inc. debt. FleetPride
Corporation's historical financial statements are identical to those of
FleetPride, Inc. except with respect to the accounts which comprise the
stockholders' equity section of the balance sheet.
The historical financial data for the three months ended March 31, 1999
reflect the financial results of the companies acquired in 1998 for the full
period and the following from the date of acquisition:
<TABLE>
<CAPTION>
Company Date of Acquisition
------- -------------------
<S> <C>
Associated Brake Supply, Inc. and its subsidiaries ..................... January 11, 1999
Tisco, Inc. and Tisco of Redding, Inc................................... January 12, 1999
</TABLE>
The financial data for the three months ended March 31, 2000 includes
results of the companies acquired in 1998 and 1999 for the full period and the
following from the date of acquisition:
<TABLE>
<CAPTION>
Company Date of Acquisition
------- -------------------
<S> <C>
Oklahoma Truck Supply Assoc., Inc...................................... February 24, 2000
</TABLE>
Accordingly, the Company's historical financial results are not comparable
to results for the three months ended March 31, 2000.
COMPARISON OF PRO FORMA RESULTS OF OPERATIONS
The unaudited pro forma summarized financial information presented below
was derived by applying pro forma consolidated adjustments to the Company's
historical financial statements, after giving effect to:
(1) the acquisitions of Tisco, Inc., Tisco of Redding, Inc., Associated
Brake Supply, Inc. and subsidiaries, Active Gear, L.L.C., Superior
Truck & Auto Supply, Inc., QDSP Holdings, Inc., Wheels and Brakes,
Inc., Southwest Virginia Truck Parts, Inc. and Oklahoma Truck Supply
Assoc., Inc. and the assets and business of Vantage Parts, Certified
Power, Inc. and California Equipment Company;
(2) the effect of refinancing the credit agreement which provides a term
loan of $75.0 million and a revolving line of credit up to $150.0
million; and
(3) the January 1999 private equity offering which was fully funded in
April 1999 and the September 30, 1999 private equity offering funded in
connection with the QDSP Holdings, Inc. merger.
9
<PAGE> 10
These pro forma consolidated adjustments give effect to the above transactions
as if these transactions had occurred on January 1, 1999 for the unaudited pro
forma condensed income statement data. The pro forma adjustments reflect the
elimination of excess compensation based on employment contracts entered into at
the times of acquisitions and other expense reductions resulting from the
closure of duplicate facilities and other activities.
<TABLE>
<CAPTION>
Three Months Ended March 31, Three Months Ended March 31,
2000 1999
---------------------------- ----------------------------
$ % $ %
--- --- --- ---
<S> <C> <C> <C> <C>
Sales $137.6 100.0% $ 143.0 100.0%
Gross profit 47.5 34.5% 47.5 33.2%
SG&A expenses 40.0 29.1% 37.9 26.5%
Income from operations 7.6 5.5% 9.6 6.7%
Interest expense, net 5.9 4.3% 5.2 3.6%
Other expense (income) 0.1 0.1% (0.1) -0.1%
Income tax expense 0.7 0.5% 2.0 1.4%
Net Income $ 0.9 0.7% $ 2.5 1.7%
</TABLE>
The pro forma financial data are subject to numerous assumptions and
estimates which are subject to change and, in many cases, are beyond the
Company's control. The pro forma financial data may not be indicative of the
operating results or financial position the Company would have achieved had it
consummated the events described above. You should not construe this data as
representative of the Company's future operating results or financial position.
The pro forma information presented above and discussed below has not been
derived pursuant to APB 16.
PRO FORMA THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO PRO FORMA THREE MONTHS
ENDED MARCH 31, 1999
Sales. Pro forma sales were $137.6 in the quarter ended March 31, 2000, a
3.8% decrease compared with pro forma sales of $143.0 for the same period in
1999. Sales volume has decreased in the first quarter of 2000 at most locations.
Demand in the heavy duty parts aftermarket has slowed. Also, the Company's
business in the Western and Southeastern United States has been impacted by
computer system conversions and consolidation at several locations.
Gross profit. Pro forma gross profit was unchanged at $47.5 million in the
first quarter 2000 and 1999. As a percentage of sales, the Company's gross
profit increased to 34.5% in 2000 from 33.2% in 1999. The improved margin
reflects the impact of lower product costs.
SG&A expenses. Pro forma SG&A expenses increased to $40.0 million in 2000
from $37.9 million in 1999, an increase of 5.5%. As a percentage of sales, SG&A
expenses increased to 29.1% in 2000 from 26.5% in 1999. The increase in SG&A
expenses as a percentage of sales is primarily the result of overhead resulting
from establishing a corporate staff and costs of system conversions.
Income from operations. Pro forma income from operations decreased to $7.6
million in 2000 from $9.6 million in 1999, a decrease of 20.8%. As a percentage
of sales, income from operations decreased to 5.5% from 6.7%. The decrease in
income from operations as a percentage of sales is due to the increased expenses
discussed above.
Interest expense. Pro forma interest expense increased to $5.9 million in
2000 from $5.2 million in 1999. Interest expense in 1999 was driven by higher
outstanding borrowings resulting from 1999 acquisitions partially offset by
interest on funds received from equity issued in January, April and September
1999.
10
<PAGE> 11
Net Income. Pro forma net income decreased to $0.9 million in the three
months ended March 31, 2000 from $2.5 million in 1999 due primarily to the
increase in expenses and interest expense discussed above.
COMPARISON OF HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Sales. Sales increased to $137.2 million in the quarter ended March 31,
2000 from $66.0 million for the same period in 1999, an increase of 108.0%. The
sales growth is attributable to the acquisitions completed in 1999 and 2000.
Gross profit. Gross profit increased to $47.4 million in the first quarter
2000 from $23.0 million in 1999, an increase of 105.7%, as a result of the
acquisitions completed. As a percentage of sales, the Company's gross profit
decreased to 34.5% in 2000 from 34.9% in 1999. The lower margin reflects the
impact of revenue from acquired companies with lower margins.
SG&A expenses. SG&A expenses increased to $39.9 million in 2000 from $17.5
million in 1999, an increase of 128.1%. As a percentage of sales, SG&A expenses
increased to 29.1% in 2000 from 26.5% in 1999. The increase in SG&A as a percent
of sales was driven by increased amortization, corporate expenses and computer
system conversion costs.
Income from operations. Income from operations increased to $7.5 million
in 2000 from $5.6 million in 1999, an increase of 33.9%. As a percentage of
sales, income from operations decreased to 5.5% from 8.4%. The decrease in
income from operations as a percentage of sales is due primarily to the impact
of revenue from acquired companies with lower margins.
Interest expense, net. Interest expense increased to $5.9 million in 2000
from $4.1 million in 1999. The increase was largely the result of higher debt
incurred to complete acquisitions in 1999. Debt at March 31, 2000 primarily
consisted of $100.0 million senior subordinated notes, $75.0 term loan and $55.3
million of borrowings under the revolving credit facility. Comparably, long term
debt at March 31, 1999 consisted of $100.0 million senior subordinated notes and
$67.5 million of borrowings under the revolving credit facility.
Income tax expense. Income tax expense increased to $0.7 million in 2000
from $0.6 million in 1999, due to an increase in the effective tax rate to 45.7%
from 39.8% as a result of acquisitions made in 1999 and 2000.
Net Income and Comprehensive Income. Net income and comprehensive income
decreased to $0.8 million in the three months ended March 31, 2000 from $0.9
million in 1999 primarily due to the higher tax rate discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically used internal cash flow from operations to fund
its working capital requirements, capital expenditures and new branch locations.
Capital expenditure requirements have been relatively low historically and were
$1.8 million for the three months ended March 31, 2000. Also, the Company does
not anticipate that it will pay dividends for the foreseeable future.
In January 1999, the Company secured commitments of $52.5 million for a
private equity offering consisting of series A preferred stock and common stock
of the Company. Brentwood Associates Buyout Fund II, L.P. committed $15.0
million and other investors committed $37.5 million. In January 1999, the
11
<PAGE> 12
Company received $10.5 million of the equity to partially finance the
acquisitions of Associated Brake Supply, Inc. and its subsidiaries, Tisco, Inc.
and Tisco of Redding, Inc. and borrowed $49.3 million under the revolving credit
facility to finance the balance and an additional $4.0 million for working
capital. In April 1999, the Company received the remaining equity commitments of
$42.0 million which was used to finance the Vantage Parts, Active Gear L.L.C.
and Superior Truck & Auto Supply, Inc. acquisitions.
On September 30, 1999, in conjunction with the merger with QDSP Holdings,
Inc., the Company entered into a new $225 million credit agreement and received
$40.0 million from a private equity offering. Proceeds from the equity offering
and $121.5 million from the credit facility were used to refinance existing debt
of the Company and QDSP Holdings, Inc. and to fund the acquisition of Wheels and
Brakes, Inc. The merger with QDSP Holdings, Inc. was completed by issuing
FleetPride Corporation stock in exchange for the outstanding stock of QDSP
Holdings, Inc. and at the same time proceeds of $40.0 million in cash were
received from the issuance of stock to existing stockholders of the Company and
QDSP Holdings, Inc.
The new credit agreement provides for up to $225 million in borrowings
through September 30, 2004. The agreement provides for a $75 million term loan
and $150 million revolving line of credit from a bank with interest based on the
LIBOR rate plus applicable margin, initially at 3.25% and 2.75%, respectively,
or, at the Company's option, several other common indices. The Company has
pledged all of the Company's assets as collateral. The revolving credit facility
had undrawn availability of $103.5 million at September 30, 1999. The new $225
million agreement replaced the Company's $85 million revolving credit facility.
The effective rate of interest on the Company's term loan and revolving credit
facility as of March 31, 2000 was approximately 9.2%.
The Company expects to fund working capital needs, capital expenditures
and future acquisitions through availability under the revolving credit
facility, future issuances of debt or equity securities and cash flow generated
from operations. However, the Company's ability to execute its growth strategy
and to make scheduled payments of interest or principal or to refinance its
indebtedness will depend upon future operating performance, which will be
affected by general economic, financial, competitive, legislative, regulatory,
business and other factors beyond the Company's control.
EFFECT OF INFLATION
Inflation has not had a significant effect on the Company's results of
operations in recent years. The Company's selling, general and administrative
expenses, such as salaries, employee benefits, and facilities costs are subject
to normal inflationary pressures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company is exposed to market risk primarily from interest rates. The
Company is actively involved in monitoring its exposure to market risks and it
continues to develop and utilize appropriate risk management techniques.
Accordingly, the Company may enter into certain derivative financial instruments
such as interest rate caps or swaps and foreign currency futures contracts or
obligations. The Company does not use derivative financial instruments for
trading or to speculate on changes in interest rates or foreign currency
exchange rates. The sensitivity analysis below, which hypothetically illustrates
potential market risk exposure, estimates the effects of hypothetical sudden and
sustained changes in the applicable market conditions on earnings for the three
months ended March 31, 2000. The sensitivity analysis presented does not
consider any additional actions the Company might take to mitigate exposure to
such a change. The market change, assumed to occur as of March 31, 2000,
includes a 100 basis point change in market interest rates. The hypothetical
change and assumptions may be different from what actually occurs in the future.
As of March 31, 1999, the Company had no derivative financial instruments
to manage interest rate risk. Accordingly, the Company is exposed to earnings
and fair value risk due to changes in interest rates with respect to
12
<PAGE> 13
its long-term obligations. As of March 31, 2000, approximately 56.6% of the
Company's long-term obligations were floating rate obligations. The detrimental
effect on earnings of the hypothetical 100 basis point increase in interest
rates described above would be approximately $0.3 million before income taxes
for the three months ended March 31, 2000. This effect is primarily due to the
floating rate borrowing under the Company's revolving credit facility.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibit Description
------- -----------
27.1 Financial Data Schedule
(B) Reports on Form 8-K
None
14
<PAGE> 15
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLEETPRIDE, INC.
Date: May 15, 2000 /s/ John P. Miller
----------------------------
John P. Miller
Vice President of Finance, Chief Financial
Officer, Treasurer and Secretary
15
<PAGE> 16
EXHIBIT INDEX
EX 27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001083317
<NAME> FLEETPRIDE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,424
<SECURITIES> 0
<RECEIVABLES> 71,128
<ALLOWANCES> 1,807
<INVENTORY> 113,090
<CURRENT-ASSETS> 195,571
<PP&E> 39,749
<DEPRECIATION> 11,148
<TOTAL-ASSETS> 477,903
<CURRENT-LIABILITIES> 55,953
<BONDS> 100,000
0
170,259
<COMMON> 4
<OTHER-SE> 21,437
<TOTAL-LIABILITY-AND-EQUITY> 477,903
<SALES> 137,244
<TOTAL-REVENUES> 137,244
<CGS> 89,835
<TOTAL-COSTS> 129,705
<OTHER-EXPENSES> (60)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,971
<INCOME-PRETAX> 1,513
<INCOME-TAX> 691
<INCOME-CONTINUING> 822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 822
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
