<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 September 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 November 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 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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,660 $ 6,445
Trade accounts receivable, less allowance for doubtful
accounts of $1,608 and $1,727 in 2000 and 1999 61,227 64,344
Inventories, net 111,774 113,585
Prepaid expenses 9,602 6,671
Current portion of patronage dividend receivable and rebates receivable 5,016 5,928
--------- ---------
Total current assets 198,279 196,973
Property, plant and equipment, net 29,759 27,390
Deferred financing fees 12,397 13,802
Goodwill and other intangibles 219,600 222,689
Other assets 14,350 16,820
--------- ---------
Total assets $ 474,385 $ 477,674
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,172 $ 37,861
Accrued liabilities 14,300 27,685
--------- ---------
Total current liabilities 48,472 65,546
Line of credit 137,500 121,250
Long-term debt 100,000 100,000
--------- ---------
Total liabilities 285,972 286,796
Stockholders' equity:
FleetPride Corporation preferred stock, liquidation value $100, par value
$.01 per share (Series A oustanding: 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
FleetPride Corporation 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) (41,651) (39,236)
--------- ---------
Total stockholders' equity 188,413 190,878
--------- ---------
Total liabilities and stockholders' equity $ 474,385 $ 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 for share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ -----------------------
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
2000 1999 2000 1999
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 124,568 $ 86,188 $ 393,623 $ 227,718
Cost of sales 80,587 57,183 257,196 149,074
--------- --------- --------- ---------
Gross profit 43,981 29,005 136,427 78,644
Selling general and administrative expenses 40,576 22,559 119,822 59,636
--------- --------- --------- ---------
Operating income 3,405 6,446 16,605 19,008
Other (income) / expense
Interest expense 6,512 4,974 19,164 13,257
Interest (income) (109) (87) (246) (304)
Management fee 186 -- 558 --
Other expense / (income) (291) 64 (526) 103
--------- --------- --------- ---------
Income (loss) before income taxes and extraordinary charge (2,893) 1,495 (2,345) 5,952
Income tax expense (benefit) (175) 595 70 2,369
--------- --------- --------- ---------
Income (loss) before extraordinary charge (2,718) 900 (2,415) 3,583
Extraordinary charge, net of taxes -- 1,510 -- 1,510
--------- --------- --------- ---------
Net income (loss) and comprehensive income (loss) $ (2,718) $ (610) $ (2,415) $ 2,073
========= ========= ========= =========
</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 NINE MONTHS ENDED SEPTEMBER 30, 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. 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 loss and comprehensive loss
----- -------- ----- -------- ---- --------
Balance at September 30, 2000 $ 4 $ 60,266 $ 9 $ 88,083 $ 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. 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 loss and comprehensive loss (2,415) (2,415)
------ ----- ------ ------ ------ --------- ---------
Balance at September 30, 2000 $ -- $ -- $ -- $ -- $ (415) $ (41,651) $ 188,413
====== ===== ====== ====== ====== ========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE> 6
FLEETPRIDE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
------------ ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ (2,415) $ 2,073
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 10,855 5,043
(Gain) loss on sale of property and equipment (435) 47
Changes in operating assets and liabilities:
Accounts receivable 2,568 (6,543)
Inventories 3,049 (3,160)
Prepaid expenses (2,060) (1,395)
Patronage dividend receivable and rebates receivable 1,589 (4,164)
Other assets 2,503 4,181
Accounts payable (4,371) (1,756)
Accrued liabilities (13,353) 6,917
--------- ---------
Net cash (used in) provided by operating activities (2,070) 1,243
INVESTING ACTIVITIES:
Acquisition of property and equipment (6,188) (3,821)
Proceeds from sale of property and equipment 1,247 79
Acquisitions, net of cash acquired (4,221) (112,405)
--------- ---------
Net cash used by investing activities (9,162) (116,147)
FINANCING ACTIVITIES:
Proceeds from revolving line of credit 24,000 136,142
Payments on revolving line of credit (7,750) (171,325)
Proceeds from borrowing of long-term debt (129) 75,000
Payment of bond consent and fees (624) (3,730)
Payments for repurchase of FleetPride Corporation Preferred Stock (50)
Proceeds from issuance of FleetPride Corporation Preferred Stock -- 78,835
Proceeds from issuance of FleetPride Corporation Common Stock -- 13,781
--------- ---------
Net cash provided by financing activities 15,447 128,703
--------- ---------
Increase (decrease) in cash and cash equivalents 4,215 13,799
Cash and cash equivalents at beginning of year 6,445 8,328
--------- ---------
Cash and cash equivalents at end of year $ 10,660 $ 22,127
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 21,518 $ 7,905
Cash paid for income taxes 935 35
Details of acquisitions
Fair value of assets and liabilities acquired $ 4,234 $ 197,763
Less equity payments -- 79,586
--------- ---------
Cash paid 4,234 118,177
Less cash acquired 13 5,772
--------- ---------
Net cash paid for acquisitions $ 4,221 $ 112,405
========= =========
</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
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
are 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., Onyx Distribution, Inc., 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 obligations 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 stockholders' equity section of the balance
sheet.
The Company operates as an independent distributor of heavy duty vehicle
parts and provider of related services. Results of operations include the
results of the companies and businesses acquired since their respective dates of
acquisition.
7
<PAGE> 8
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 nine 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-cost 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
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:
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- ------------
(in thousands)
Purchased parts $ 94,739 $ 99,783
Core inventory 17,035 13,802
-------- --------
$111,774 $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. This
acquisition 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 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
8
<PAGE> 9
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
Actual Proforma Actual Proforma Actual Proforma Actual Proforma
-------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $124,568 $124,568 $ 86,188 $ 139,654 $ 393,623 $ 393,957 $ 227,718 $ 426,653
Net income before extraordinary charge (2,718) (3,000) 900 675 (2,415) (2,388) 3,583 4,968
Extraordinary charge, net of taxes -- -- 1,510 -- -- -- 1,510 --
Net income (loss) and
comprehensive income (loss) $ (2,718) $ (3,000) $ (610) $ 675 $ (2,415) $ (2,388) $ 2,073 $ 4,968
</TABLE>
NOTE 4 - BORROWINGS
On June 27, 2000, the Company executed an amendment to its credit
agreement, dated as of September 30, 1999, which reduced the revolving credit
commitments under the credit agreement by $25 million and amended certain
financial covenants.
The Company received a waiver of compliance with certain financial
covenants under the Company's credit agreement from the bank group. The waiver
is effective through December 15, 2000.
Based on the Company's current level of performance, it is unlikely that
the Company will be in compliance with these financial covenants as of December
31, 2000. The Company intends to seek modifications to the credit agreement to
avoid this result. In addition, the Company is evaluating alternatives,
including the possibility of refinancing some or all of the debt under the
current credit agreement. There can be no assurance that the Company will be
able to effect any further modifications to the credit agreement or any other
arrangement that would avoid a default under the credit agreement or that any
such arrangement could be effected on commercially reasonable terms. If the
Company is in default under the credit agreement, the lenders could accelerate
the indebtedness under the credit agreement. This action could also result in an
event of default under the Senior Subordinated Notes. If the Company's
outstanding indebtedness under the credit agreement or the Senior Subordinated
Notes were to be accelerated, it is unlikely that the Company would be able to
obtain sufficient liquidity to meet its repayment obligations under this
indebtedness.
9
<PAGE> 10
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
included elsewhere in this report.
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: the Company's substantial debt and the
covenants contained therein, the Company's 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 heavy duty parts 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 that comprise the
stockholders' equity section of the balance sheet.
The historical financial data for the three and nine months ended
September 30, 1999 and 2000 reflect the financial results of the following
companies and businesses since the date the Company acquired them:
<TABLE>
<CAPTION>
Company/Business 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 20, 1999
Vantage Parts division of CNF Transportation Inc. and
Vantage Parts of Illinois, Inc..................................... May 28, 1999
Superior Truck & Auto Supply, Inc....................................... June 7, 1999
Certified Powertrain division of Certified Power, Inc................... August 6, 1999
California Equipment Company and California Equipment Co.
of Sacramento...................................................... August 25, 1999
QDSP Holdings, Inc. and its subsidiaries................................ September 30, 1999
Oklahoma Truck Supply Assoc., Inc....................................... February 24, 2000
</TABLE>
Accordingly, the Company's historical financial results are not comparable
to results for the three and nine months ended September 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,
and Oklahoma Truck Supply Assoc.,
10
<PAGE> 11
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. and California Equipment
Company and California Equipment Co. of Sacramento.
(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 September 30, Nine Months Ended September 30,
2000 1999 2000 1999
---------------------------------- -------------------------------------
(dollars in thousands)
$ % $ % $ % $ %
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $124.6 100.0% $139.7 100.0% $394.0 100.0% $426.7 100.0%
Gross profit 44.0 35.3% 47.0 33.6% 136.5 34.6% 142.9 33.5%
SG&A expenses 40.6 32.6% 39.5 28.3% 119.9 30.4% 115.7 27.1%
Income from operations 3.4 2.7% 7.5 5.4% 16.6 4.2% 27.2 6.4%
Interest expense, net 6.4 5.1% 6.2 4.4% 18.9 4.8% 18.1 4.2%
Other expense (income) (0.1) -0.1% 0.1 0.1% -- 0.0% 0.1 0.0%
Income tax expense (benefit) 0.1 0.1% 0.5 0.4% 0.1 0.0% 4.0 0.9%
Net income (loss) $ (3.0) -2.4% $ 0.7 0.5% $ (2.4) -0.6% $ 5.0 1.2%
</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.
PRO FORMA THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO PRO FORMA THREE
MONTHS ENDED SEPTEMBER 30, 1999
Sales. Pro forma sales were $124.6 million in the quarter ended September
30, 2000, a 10.8% decrease compared with pro forma sales of $139.7 million for
the same period in 1999. Sales volume decreased in the third quarter of 2000 at
most locations. The Company believes that demand in the heavy duty aftermarket
has slowed due to the impact of record shipments of new class VIII vehicles in
1998 and 1999 and higher fuel costs for our customers. Also, the Company's
business in the Western and Southeastern United States has been negatively
impacted by the effects of consolidation at several locations.
Gross profit. Pro forma gross profit was $44.0 million in the third
quarter of 2000, a 6.4% decrease compared with pro forma gross profit of $47.0
million for the same period in 1999. As a percentage of sales, the Company's
gross profit increased to 35.3% from 33.6%. The improved margin reflects the
impact of lower product costs.
SG&A expenses. Pro forma SG&A expenses increased to $40.6 million in the
third quarter of 2000 from $39.5 million for the same period in 1999, an
increase of 2.8%. As a percentage of sales, SG&A expenses increased to 32.6%
from 28.3%. The increase in SG&A expenses as a percentage of sales is primarily
the result of overhead resulting from establishing a corporate staff.
11
<PAGE> 12
Income from operations. Pro forma income from operations decreased to $3.4
million in the third quarter of 2000 from $7.5 million in the third quarter of
1999, a decrease of 54.7%. As a percentage of sales, income from operations
decreased to 2.7% from 5.4%. The decrease in income from operations as a
percentage of sales is due to the increased expenses discussed in "-SG&A
expenses" above.
Interest expense. Pro forma interest expense increased to $6.4 million in
the third quarter of 2000 from $6.2 million in the third quarter of 1999.
Interest expense in 2000 was driven by higher outstanding borrowings resulting
from 1999 acquisitions consummated during 1999 being 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 $3.0
million in the three months ended September 30, 2000 compared to net income of
$0.7 million in the same period of 1999 due primarily to lower demand and an
increase in expenses and interest expense discussed above.
PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO PRO FORMA NINE MONTHS
ENDED SEPTEMBER 30, 1999
Sales. Pro forma sales were $394.0 million for the nine months ended
September 30, 2000, a 7.7% decrease compared with pro forma sales of $426.7
million for the same period in 1999. Sales volume decreased for the period ended
September 30, 2000 at most locations compared to the prior period. The Company
believes that demand in the heavy duty aftermarket has slowed due to the impact
of record shipments of new class VIII vehicles in 1998 and 1999 and higher fuel
costs for our customers. Also, the Company's business in the Western and
Southeastern United States has been negatively impacted by the effects of
computer system conversions and consolidation at several locations.
Gross profit. Pro forma gross profit was $136.5 million for the nine
months ended September 30, 2000, a 4.5% decrease compared with pro forma gross
profit of $142.9 for the same period in 1999. As a percentage of sales, the
Company's gross profit increased to 34.6% from 33.5%. The improved margin
reflects the impact of lower product costs.
SG&A expenses. Pro forma SG&A expenses increased to $119.9 million for the
nine months ended September 30, 2000 from $115.7 million for the nine months
ended September 30, 1999, an increase of 3.6%. As a percentage of sales, SG&A
expenses increased to 30.4% from 27.1%. 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
$16.6 million for the nine months ended September 30, 2000 from $27.2 million
for the nine months ended September 30, 1999, a decrease of 39.0%. As a
percentage of sales, income from operations decreased to 4.2% from 6.4%. The
decrease in income from operations as a percentage of sales is due to the
increased expenses discussed in "-SG&A expenses" above.
Interest expense. Pro forma interest expense increased to $18.9 million
for the nine months ended September 30, 2000 from $18.1 million for the nine
months ended September 30, 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 January, April and September
1999.
Net income (loss). The Company recorded a pro forma net loss of $2.4
million for the nine months ended September 30, 2000 compared to net income of
$5.0 million for the nine months ended September 30, 1999 due primarily to lower
demand and an increase in expenses discussed in "-SG&A expenses" above.
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COMPARISON OF HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Sales. Sales increased to $124.6 million in the quarter ended September
30, 2000 from $86.2 million for the same period in 1999, an increase of 44.5%.
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 $44.0 million in the third quarter
of 2000 from $29.0 million for the same period in 1999, an increase of 51.7%, as
a result of the acquisitions completed. As a percentage of sales, the Company's
gross profit increased to 35.3% from 33.6%. The improved margin reflects the
impact of lower product costs.
SG&A expenses. SG&A expenses increased to $40.6 million for the three
months ended September 30, 2000 from $22.6 million for the three months ended
September 30, 1999, an increase of 79.6%. As a percentage of sales, SG&A
expenses increased to 32.6% from 26.2%. 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 $3.4 million
for the three months ended September 30, 2000 from $6.4 million for the three
months ended September 30, 1999, a decrease of 46.9%. As a percentage of sales,
income from operations decreased to 2.7% from 7.4%. The decrease in income from
operations as a percentage of sales is due primarily to the impact of higher
SG&A expenses.
Interest expense, net. Interest expense increased to $6.4 million for the
three months ended September 30, 2000 from $4.9 million for the three months
ended September 30, 1999. The increase was largely the result of higher debt
incurred to complete acquisitions in 1999 and 2000. Debt at September 30, 2000
primarily consisted of $100.0 million Senior Subordinated Notes, $75.0 term loan
and $62.5 million of borrowings under the revolving credit facility component of
the credit agreement. Comparably, long term debt at September 30, 1999 consisted
of $100.0 million Senior Subordinated Notes, $75.0 term loan and $46.5 million
of borrowings under the revolving credit facility.
Income tax expense (benefit). Income tax benefit was $0.2 million for the
three months ended September 30, 2000 compared to income tax expense of $0.5
million for the three months ended September 30, 1999, due to a loss incurred
for the three months ended September 30, 2000.
Extraordinary charge, net of taxes. In connection with the 1999
refinancing of the Company's and QDSP Holdings, Inc.'s prior credit facilities
(as described below under "-Liquidity and Capital Resources"), the Company
incurred an extraordinary loss of $1.5 million, net of taxes of $1.0 million,
for the write-off of deferred loan costs.
Net (loss) and comprehensive (loss). Net and comprehensive loss was $2.7
million for the three months ended September 30, 2000 compared to $0.6 million
for the three months ended September 30, 1999 primarily due to SG&A and interest
expense partially offset by income tax expense (benefit) and the extraordinary
charge as discussed above.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
Sales. Sales increased to $393.6 million for the nine months ended
September 30, 2000 from $227.7 million for the nine months ended September 30,
1999, an increase of 72.9%. The sales growth is attributable to the acquisitions
completed in 1999 and 2000.
Gross profit. Gross profit increased to $136.4 million for the nine months
ended September 30, 2000 from $78.6 million for the nine months ended September
30, 1999, an increase of 73.5%, as a result of the acquisitions completed. As a
percentage of sales, the Company's gross profit increased to 34.7% from 34.5%.
The improved margin reflects the impact of lower product costs.
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SG&A expenses. SG&A expenses increased to $119.8 million for the nine
months ended September 30, 2000 from $59.6 million for the nine months ended
September 30, 1999, an increase of 101.0%. As a percentage of sales, SG&A
expenses increased to 30.4% for the nine months ended September 30, 2000 from
26.2% for the nine months ended September 30, 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 $16.6 million
for the nine months ended September 30, 2000 from $19.0 million for the nine
months ended September 30, 1999, a decrease of 12.6%. As a percentage of sales,
income from operations decreased to 4.2% from 8.3%. 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.
Interest expense, net. Interest expense increased to $19.0 million for the
nine months ended September 30, 2000 from $13.0 million for the nine months
ended September 30, 1999. The increase was largely the result of higher debt
incurred to complete acquisitions in 1999.
Income tax expense. Income tax expense was $0.1 million for the nine
months ended September 30, 2000 compared to income tax expense of $2.3 million
for the nine months ended September 30, 1999, due to a loss incurred in the nine
months ended September 30, 2000.
Net income (loss) and comprehensive income (loss). Net and comprehensive
loss was $2.4 million in the nine months ended September 30, 2000 compared to
net income of $2.1 million in 1999 primarily due to SG&A and interest expense
partially offset by income tax expense (benefit) and the extraordinary charge as
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flows for the nine months ended September 30, 2000 as
compared to the same period in 1999 were $(2.1) million compared to $1.2
million. Cash flow from operating activities was negatively impacted in the
current period as a result of lower sales. Cash paid for capital expenditures
and acquisitions was $6.2 million and $4.2 million for the nine months ended
September 30, 2000, respectively. Capital expenditures include spending for new
branch openings and computer related expenditures. For the same period of 1999,
cash paid for capital expenditures and acquisitions was $3.8 million and
$112.4 million, respectively.
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 and 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.
On September 30, 1999, in conjunction with the merger with QDSP Holdings,
Inc., the Company entered into a new 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 credit agreement was amended on June 27, 2000 and currently provides
for up to $200 million in borrowings. The credit facility matures in 2004. The
credit agreement provides for a $75 million term loan and $125 million revolving
line
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of credit with interest based on the LIBOR rate plus applicable margin or, at
the Company's option, several other common indices. The Company has pledged all
of the Company's assets as collateral under the credit agreement. The effective
rate of interest on the Company's term loan and revolving credit facility as of
September 30, 2000 was approximately 9.9%.
The Company received a waiver of compliance with certain financial
covenants under the Company's credit agreement from the bank group. The waiver
is effective through December 15, 2000.
Based on the Company's current level of performance, it is unlikely that
the Company will be in compliance with these financial covenants as of December
31, 2000. The Company intends to seek modifications to the credit agreement to
avoid this result. In addition, the Company is evaluating alternatives,
including the possibility of refinancing some or all of the debt under the
current credit agreement. There can be no assurance that the Company will be
able to effect any further modifications to the credit agreement or any other
arrangement that would avoid a default under the credit agreement or that any
such arrangement could be effected on commercially reasonable terms. If the
Company is in default under the credit agreement, the lenders could accelerate
the indebtedness under the credit agreement. This action could also result in an
event of default under the Senior Subordinated Notes. If the Company's
outstanding indebtedness under the credit agreement or the Senior Subordinated
Notes were to be accelerated, it is unlikely that the Company would be able to
obtain sufficient liquidity to meet its repayment obligations under this
indebtedness.
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 nine
months ended September 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 September 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 September 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 floating rate obligations. As of September 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 $1.0 million before income
taxes for the nine months ended September 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
------- -----------
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: November 14, 2000 /s/ John P. Miller
---------------------------------
John P. Miller
Vice President of Finance,
Chief Financial Officer,
Treasurer and Secretary
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