<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 June 30, 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 August 1, 2000, the number of outstanding shares of common stock, par
value $.01 per share, of FleetPride, Inc. was 94,229.
<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 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)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,317 $ 6,445
Trade accounts receivable, less allowance for doubtful
accounts of $1,603 and $1,727 in 2000 and 1999 64,452 64,344
Inventories, net 112,862 113,585
Prepaid expenses 9,990 6,671
Current portion of patronage dividend receivable 5,458 5,928
--------- ---------
Total current assets 201,079 196,973
Property, plant and equipment, net 29,807 27,390
Deferred financing fees 12,620 13,802
Goodwill and other intangibles 221,292 222,689
Other assets 17,847 16,820
--------- ---------
Total assets $ 482,645 $ 477,674
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,980 $ 37,861
Accrued liabilities 21,784 27,685
--------- ---------
Total current liabilities 53,764 65,546
Line of credit 137,750 121,250
Long-term debt 100,000 100,000
--------- ---------
Total liabilities 291,514 286,796
Stockholders' equity:
Preferred stock, liquidation value $100, par value $.01 per
share (Series A outstanding: 880,920 and 881,420 in 2000 and
1999, respectively, 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) 170,209 170,259
Common stock, par value $.01 per share (outstanding:
392,599 and 393,664 in 2000 and 1999, respectively) 4 4
Additional paid-in capital 60,266 60,266
Employee notes (415) (415)
Retained earnings (deficit) (38,933) (39,236)
--------- ---------
Total stockholders' equity 191,131 190,878
--------- ---------
Total liabilities and stockholders' equity $ 482,645 $ 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, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JUNE 30, JUNE 30,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 131,811 $ 75,562 $ 269,055 $ 141,530
Cost of sales 86,774 48,968 176,609 91,891
--------- --------- --------- ---------
Gross Profit 45,037 26,594 92,446 49,639
Selling general and administrative expenses 39,376 19,596 79,246 37,077
--------- --------- --------- ---------
Operating income 5,661 6,998 13,200 12,562
Other (income)/expense
Internet expense 6,681 4,075 12,652 8,283
Interest (income) (66) (134) (137) (217)
Management fee 186 -- 372 --
Other expense/(income) (175) 4 (235) 29
--------- --------- --------- ---------
Income (loss) before income taxes (965) 3,053 548 4,467
Income tax expense (benefit) (446) 1,215 245 1,778
--------- --------- --------- ---------
Net income (loss) and comprehensive income (loss) $ (519) $ 1,838 $ 303 $ 2,689
========= ========= ========= =========
</TABLE>
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 SIX MONTHS ENDED JUNE 30, 2000
(amounts in thousands)
<TABLE>
<CAPTION>
FLEETPRIDE CORPORATION FLEETPRIDE CORPORATION
FLEETPRIDE CORPORATION FLEETPRIDE CORPORATION SERIES B PREFERRED SERIES C PREFERRED
COMMON STOCK SERIES A PREFERRED STOCK STOCK 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, 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. and
Subsidiaries Acquisition 1 19,606 5 52,924 -- --
Issuance of FleetPride Corporation
stock in conjunction with QDSP
Holdings, Inc. and Subsidiaries
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 -- --
Repurchase of FleetPride Corporation
stock -- -- -- (50)
Net income and comprehensive income
----- -------- ----- -------- ----- -------- ----- --------
Balance at June 30, 2000 $ 4 $ 60,266 $ 9 $ 88,083 $ 8 $ 82,109 $ -- $ --
===== ======== ===== ======== ===== ======== ===== ========
<CAPTION>
FLEETPRIDE CORPORATION
SERIES D PREFERRED
STOCK
---------------------- RETAINED TOTAL
PAR PAID IN EMPLOYEE EARNINGS STOCKHOLDERS'
VALUE CAPITAL NOTES (DEFICIT) EQUITY
----- -------- -------- ---------- -------------
<S> <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. and
Subsidiaries Acquisition -- -- 72,536
Issuance of FleetPride Corporation
stock in conjunction with QDSP
Holdings, Inc. and Subsidiaries
Acquisition 40,001
Net income and comprehensive income 2,191 2,191
----- -------- -------- ---------- -------------
Balance at December 31, 1999 -- -- (415) (39,236) 190,878
Repurchase of FleetPride Corporation
stock (50)
Net income and comprehensive income 303 303
----- -------- -------- ---------- -------------
Balance at June 30, 2000 $ -- $ -- $ (415) $ (38,933) $ 191,131
===== ======== ======== ========== =============
</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 Six Months Ended
June 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income 303 2,683
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,078 3,169
(Gain) loss on sale of property and equipment (144) 30
Changes in operating assets and liabilities:
Accounts receivable (657) (5,155)
Patronage dividend receivable 1,147 (2,881)
Inventories 1,961 (3,682)
Prepaid expenses (2,062) (236)
Advances to shareholders and employees -- (115)
Other assets (1,380) 3,899
Accounts payable (6,563) 1,903
Accrued liabilities (5,939) 2,415
------------ ------------
Net cash (used in) provided by operating activities (6,256) 2,030
INVESTING ACTIVITIES:
Acquisition of property and equipment (4,551) (2,533)
Proceeds from sale of property and equipment 592 78
Acquisitions, net of cash acquired (4,179) (100,640)
------------ ------------
Net cash used by investing activities (8,138) (103,095)
FINANCING ACTIVITIES:
Proceeds from revolving line of credit 17,000 --
Payments from revolving line of credit (500) (36,200)
Principal payment of long-term debt (318) --
Proceeds from borrowing of long-term debt 259 84,092
Proceeds from issuance of long-term debt (net of fees) (125) --
Payments for repurchase of FleetPride Corporation Preferred Stock (50)
Proceeds from issuance of FleetPride Corporation Preferred Stock 49,669
Proceeds from issuance of FleetPride Corporation Common Stock -- 2,947
------------ ------------
Net cash provided by financing activities 16,266 100,508
------------ ------------
Increase (decrease) in cash and cash equivalents 1,872 (557)
Cash and cash equivalents at beginning of year 6,445 8,328
------------ ------------
Cash and cash equivalents at end of year $ 8,317 $ 7,771
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,151 $ 8,310
Cash paid for income taxes 494 82
Details of Acquisitions
Fair value of assets and liabilities acquired $ 4,192 $ 108,022
Less equity payments -- (7,050)
------------ ------------
Cash paid 4,192 100,972
Less cash acquired (13) (332)
------------ ------------
Net cash paid for acquisitions $ 4,179 $ 100,640
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
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.
Separate financial statements and other disclosures concerning FleetPride,
Inc.'s subsidiaries, all of which (other than FleetPride, Inc.'s foreign
subsidiaries) are guarantors of FleetPride, Inc.'s obligations under its 12%
Senior Subordinated Notes due 2005, which were issued in the amount of $100.0
million on July 31, 1998 (the "Senior Subordinated Notes"), are not included
herein because management has determined that this information is not material
to investors.
FleetPride, Inc.'s payment obligations under the Senior Subordinated Notes
have been guaranteed by its parent company, FleetPride Corporation, as well as
its subsidiaries, City Truck & Trailer Parts of Alabama, L.L.C., Truck &
Trailer Parts, Inc., Truckparts, Inc., Associated Brake Supply, Inc. and its
subsidiaries, Tisco, Inc., Active Gear, L.L.C., Superior Truck & Auto Supply,
Inc., QDSP Holdings, Inc. and its subsidiaries, Wheels and Brakes, Inc.,
FleetPride West, Inc. and Oklahoma Truck Supply Assoc., Inc. All of these
subsidiaries are direct or indirect wholly owned subsidiaries of FleetPride,
Inc. and they, along with FleetPride, Inc.'s parent company, FleetPride
Corporation, have fully and unconditionally guaranteed the Senior Subordinated
Notes on a joint and several basis. These subsidiary guarantors comprise all of
FleetPride, Inc.'s direct and indirect subsidiaries (other than its foreign
subsidiaries, which are not guarantors of FleetPride, Inc.'s obligation under
the Senior Subordinated Notes).
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 ownership of the guarantee of FleetPride, Inc., its
wholly owned subsidiary. FleetPride Corporation's historical financial
statements are identical to those of FleetPride, Inc., except with respect to
the accounts that comprise the stockholder's 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 it was acquired by FleetPride, Inc.
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 six months of 2000 and 1999.
7
<PAGE> 8
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
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:
<TABLE>
<CAPTION>
Classification Depreciation Lives
-------------- ------------------
<S> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------------- -------------
<S> <C> <C>
Purchased parts $ 96,494 $ 99, 783
Core inventory 16,368 13,802
-------------- -------------
$ 112,862 $ 113,585
============== =============
</TABLE>
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 of Oklahoma Truck Supply Assoc., Inc. since the date of acquisition.
8
<PAGE> 9
\ 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 its subsidiaries, Active Gear, L.L.C., the Vantage Parts
division of CNF Transportation Inc. and Vantage Parts of Illinois, Inc.,
Superior Truck & Auto Supply, Inc., the Certified Powertrain division of
Certified Power, Inc., California Equipment Company and California Equipment Co.
of Sacramento, QDSP Holdings, Inc. and its subsidiaries, Wheels and Brakes, Inc.
and its subsidiary, Southwest Virginia Truck Parts, Inc. and Oklahoma Truck
Supply Assoc., Inc. as if the acquisitions of those entities and businesses 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 Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2000 1999 2000 1999
--------------------- -------------------- -------------------- --------------------
Actual Pro forma Actual Pro forma Actual Pro forma Actual Pro forma
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 131,811 $ 131,811 $ 75,562 $ 144,379 $ 269,055 $ 269,389 $ 141,530 $ 286,999
Net income (loss) and
comprehensive income (loss) $ (519) $ (519) $ 1,838 $ 2,072 $ 303 $ 325 $ 2,689 $ 4,293
</TABLE>
NOTE 4 - BORROWINGS
As of June 27, 2000, the Company executed an amendment to its Credit
Agreement, dated as of September 30, 1999, which reduced the revolving credit
commitments by $25 million and amended certain financial covenants.
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 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 and six months ended June 30,
1999 and 2000 reflect the financial results of the companies acquired since 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
Active Gear, L.L.C ........................................................ April 17, 1999
Vantage Parts division of CNF Transportation Inc. and
Vantage Parts of Illinois, Inc. ...................................... May 28, 1999
Superior Truck & Auto Supply, Inc. ........................................ June 9, 1999
Oklahoma Truck Supply Assoc., Inc. ........................................ February 24, 2000
</TABLE>
9
<PAGE> 10
Accordingly, the Company's historical financial results are not comparable
to results for the three and six months ended June 30, 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 its subsidiaries, Active Gear, L.L.C., Superior
Truck & Auto Supply, Inc., QDSP Holdings, Inc. and its subsidiaries,
Wheels and Brakes, Inc. and its subsidiary, and Oklahoma Truck Supply
Assoc., Inc. and the assets and business of the Vantage Parts division
of CNF Transportation Inc. and Vantage Parts of Illinois, Inc., the
Certified Powertrain division of Certified Power, Inc., California
Equipment Company and California Equipment Co. of Sacremento, and
Southwest Virginia Truck Parts, Inc.
(2) the effect of refinancing the Company's credit agreement which
provides a term loan of $75.0 million and a revolving line of credit up
to $125.0 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.
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 time of the acquisitions and other expense reductions resulting from the
closure of duplicate facilities and other activities.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
------------------ --------------- --------------- -----------------
$ % $ % $ % $ %
-------- ------ ------- ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 131.8 100.0% $ 144.4 100.0% $ 269.4 $ 100.0% $ 287.0 100.0%
Gross profit 45.0 34.1% 48.5 33.6% 92.6 34.4% 95.7 33.3%
SG&A expenses 39.3 29.8% 38.3 26.5% 79.4 29.5% 76.0 26.5%
Income from operations 5.7 4.3% 10.2 7.1% 13.2 4.9% 19.7 6.9%
Interest expense, net 6.6 5.0% 6.2 4.3% 12.5 4.6% 11.9 4.1%
Other expense (income) -- 0.0% 0.2 0.1% 0.1 0.0% 0.1 0.0%
Income tax expense (benefit (0.4) -0.3% 1.7 1.2% 0.3 0.1% 3.4 1.2%
Net income (loss) $ (0.5) -0.4% $ 2.1 1.5% $ 0.3 $ 0.1% $ 4.3 1.5%
</TABLE>
The pro forma financial data are based on 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 the
events described above been consummated as of January 1, 1999. This data is not
necessarily 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.
10
<PAGE> 11
PRO FORMA THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO PRO FORMA THREE MONTHS
ENDED JUNE 30, 1999
Sales. Pro forma sales were $131.8 million in the quarter ended June 30,
2000, a 8.7% decrease compared with pro forma sales of $144.4 million for the
same period in 1999. Sales volume has decreased in the second 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
negatively impacted by expenses related to computer system conversions and
consolidation at several locations.
Gross profit. Pro forma gross profit was $45.0 million in the second
quarter 2000, a 7.2% decrease compared with pro forma gross profit of $48.5
million for the same period in 1999. As a percentage of sales, the Company's
gross profit increased to 34.1% in 2000 from 33.6% in 1999. The improved margin
reflects the impact of lower product costs.
SG&A expenses. Pro forma SG&A expenses increased to $39.3 million in 2000
from $38.3 million in 1999, an increase of 2.6%. As a percentage of sales,
SG&A expenses increased to 29.8% 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 computer system
conversions.
Income from operations. Pro forma income from operations decreased to $5.7
million in 2000 from $10.2 million in 1999, a decrease of 44.1%. As a
percentage of sales, income from operations decreased to 4.3% from 7.1%. The
decrease in income from operations as a percentage of sales is due to the
increased expenses discussed above.
Income expense. Pro forma interest expense increased to $6.6 million in
2000 from $6.2 million in 1999. Interest expense in 2000 was driven by higher
outstanding borrowings resulting from 1999 acquisitions partially offset by
interest on funds received from equity issued in September 1999.
Net Income (Loss). The Company recorded a pro forma net loss of $0.5
million in the three months ended June 30, 2000 compared to net income of $2.1
million in 1999 due primarily to lower demand and an increase in expenses and
interest expense discussed above.
PRO FORMA SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO PRO FORMA SIX MONTHS ENDED
JUNE 30, 1999
Sales. Pro forma sales were $269.1 million for the six months ended June
30, 2000, a 6.1% decrease compared with pro forma sales of $287.0 million for
the same period in 1999. Sales volume has decreased for the period ended June
30, 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 negatively impacted by expenses related to computer system
conversions and consolidation at several locations.
Gross profit. Pro forma gross profit was $92.6 million in the six months
ended June 30, 2000, a 3.2% decrease compared with pro forma gross profit of
$95.7 million for the same period in 1999. As a percentage of sales, the
Company's gross profit increased to 34.4% in 2000 from 33.3% in 1999. The
improved margin reflects the impact of lower product costs.
SG&A expenses. Pro forma SG&A expenses increased to $79.4 million in 2000
from $76.0 million in 1999, an increase of 4.5%. As a percentage of sales,
SG&A expenses increased to 29.5% 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 computer system
conversions.
11
<PAGE> 12
Income from operations. Pro forma income from operations decreased to
$13.2 million in 2000 from $19.7 million in 1999, a decrease of 33.0%. As a
percentage of sales, income from operations decreased to 4.9% from 6.9%. 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 $12.5 million
in 2000 from $11.9 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.
Net Income. Pro forma net income decreased to $0.3 million in the six
months ended June 30, 2000 from $4.3 million in 1999 due primarily to the
increase in expenses and interest expense discussed above.
COMPARISON OF HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Sales. Sales increased to $131.8 million in the quarter ended June 30,
2000 from $75.6 million for the same period in 1999, an increase of 74.4%. The
sales growth is primarily attributable to the inclusion of the results of
operations from companies and businesses acquired in 1999 and 2000.
Gross profit. Gross profit increased to $45.0 million in the first
quarter 2000 from $26.6 million in 1999, an increase of 69.4%, as a result of
the acquisitions completed. As a percentage of sales, the Company's gross profit
decreased to 34.2% in 2000 from 35.2% in 1999. The lower margin reflects the
impact of revenue from acquired companies and businesses with lower margins.
SG&A expenses. SG&A expenses increased to $39.4 million in 2000 from
$19.6 million in 1999, an increase of 100.9%. As a percentage of sales, SG&A
expenses increased to 29.9% in 2000 from 25.9% 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 decreased to $5.7
million in 2000 from $7.0 million in 1999, a decrease of 19.1%. As a percentage
of sales, income from operations decreased to 4.3% from 9.3%. The decrease in
income from operations as a percentage of sales is due primarily to the impact
of revenue from acquired companies and businesses with lower margins and higher
SG&A expenses.
Interest expense, net. Interest expense increased to $6.7 million in
2000 from $4.0 million in 1999. The increase was largely the result of higher
debt incurred to complete acquisitions in 1999. Debt at June 30, 2000 primarily
consisted of $100.0 million senior subordinated notes, $75.0 term loan and $62.8
million of borrowings under the revolving credit facility. Comparably, long term
debt at June 30, 1999 consisted of $100.0 million senior subordinated notes and
$66.8 million of borrowings under the revolving credit facility.
Income tax expense (benefit). Income tax benefit was $0.4
million in 2000 compared to income tax expense of $1.2 million in 1999, due to
a loss incurred in the three months ended June 30, 2000.
Net Income (Loss) and Comprehensive Income (Loss). Net and
comprehensive loss was $0.5 million in the three months ended June 30, 2000
compared to net income of $1.8 million in 1999 primarily due to SG&A and
interest expense partially offset by income tax expense (benefit) as discussed
above.
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SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Sales. Sales increased to $269.1 million for the six months ended June
30, 2000 from $141.5 million for the same period in 1999, an increase of 90.1%.
The sales growth is attributable to the acquisitions completed in 1999 and 2000.
Gross profit. Gross profit increased to $92.4 million for the six
months ended June 30, 2000 from $49.6 million in 1999, an increase of 86.3%, as
a result of the acquisitions completed. As a percentage of sales, the Company's
gross profit decreased to 34.4% in 2000 from 35.1% in 1999. The lower margin
reflects the impact of revenue from acquired companies and businesses with
lower margins.
SG&A expenses. SG&A expenses increased to $79.2 million in 2000 from
$37.1 million in 1999, an increase of 113.7%. As a percentage of sales, SG&A
expenses increased to 29.5% in 2000 from 26.2% 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 $13.2
million in 2000 from $12.6 million in 1999, an increase of 5.1%. As a
percentage of sales, income from operations decreased to 4.9% from 8.9%. The
decrease in income from operations as a percentage of sales is due primarily to
the impact of revenue from acquired companies and businesses with lower margins.
Interest expense, net. Interest expense increased to $12.5 million in
2000 from $8.1 million in 1999. The increase was largely the result of higher
debt incurred to complete acquisitions in 1999. Debt at June 30, 2000 primarily
consisted of $100.0 million senior subordinated notes, $75.0 term loan and
$62.8 million of borrowings under the revolving credit facility. Comparably,
long term debt at June 30, 1999 consisted of $100.0 million senior subordinated
notes and $66.8 million of borrowings under the revolving credit facility.
Income tax expense. Income tax expense decreased to $0.2 million in
2000 from $1.8 million in 1999, due to lower income before taxes and an
increase in the effective tax rate to 44.6% 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 $0.3 million in the six months ended June 30, 2000 from
$2.7 million in 1999 primarily due to higher interest expense and a higher tax
rate as 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 $2.8 million for the three months ended June 30, 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 FleetPride Corporation. Brentwood Associates Buyout Fund II, L.P.
committed $15.0 million and other investors committed $37.5 million. In January
1999, the 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 were used to finance the Vantage Parts,
Active Gear L.L.C. and Superior Truck & Auto Supply, Inc. acquisitions.
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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 FleetPride Corporation stock to existing
stockholders of FleetPride Corporation and QDSP Holdings, Inc. The new $225
million agreement replaced the Company's $85 million revolving credit facility.
The credit agreement was amended on June 27, 2000 and provides for up to
$200 million in borrowings through September 30, 2004. The agreement provides
for a $75 million term loan and $125 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 $62.3
million at June 30, 2000. The effective rate of interest on the Company's term
loan and revolving credit facility as of June 30, 2000 was approximately 9.5%.
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
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 June 30, 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
June 30, 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 June 30, 2000, 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 its
long-term obligations. As of June 30, 2000, approximately 57.9% 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
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the three months ended June 30, 2000. This effect is primarily due to the
floating rate borrowing under the Company's revolving credit facility.
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibit Description
------- -----------
4.1 Thirteenth Supplemental Indenture
27.1 Financial Data Schedule
(B) Reports on Form 8-K
None
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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: August 14, 2000 /s/ John P. Miller
------------------------------------------
John P. Miller
Vice President of Finance, Chief Financial
Officer, Treasurer and Secretary
17
