EXHIBIT 99.1
------------
NEWS RELEASE
TBC CORPORATION
Release: June 5, 2000
Contact: Ronald E. McCollough
Executive Vice President
4770 HICKORY HILL ROAD 38141 * BOX 18342 MEMPHIS, TENNESSEE 38181-0342 * PHONE
901/363-8030 * FAX 901/541-3639
TBC AGREES TO ACQUIRE NATION'S FIFTH LARGEST
INDEPENDENT TIRE RETAILER
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PURCHASE OF TIRE KINGDOM WILL EXPAND MARKETING CHANNELS
TO INCLUDE COMPANY-OWNED RETAIL CENTERS
MEMPHIS, Tenn. (June 5, 2000) - TBC Corporation (Nasdaq/NM: TBCC) today
announced that it has signed a definitive agreement to acquire Tire Kingdom,
Inc., a privately-owned independent tire retailer which operates 148 retail
centers in the Southeast, for $45 million in an all-cash transaction. The
transaction, which will close later today, is being financed primarily through
bank borrowings. In a related development, TBC's credit facility has been
increased from $100 million to $133 million through a syndicate of banks headed
by The Chase Manhattan Bank, N.A. Tire Kingdom, based in Riveria Beach, Florida,
generated annual sales in 1999 of $224.0 million. TBC reported net sales for
1999 of $743.1 million.
Larry Day, President and Chief Executive Officer of TBC, remarked, "The
purchase of Tire Kingdom offers TBC an exceptional opportunity to expand the
marketing channels for our proprietary tire brands. The replacement tire market
has been consolidating at an accelerating pace in recent years, and we believe
it is imperative to use our strong capital base to integrate forward through
attractive strategic acquisitions. Big O Tires, which we acquired in 1996, has
contributed very favorably to our growth; and the Carroll Tire distribution
operations that we purchased in 1998 provided significant impetus to our
increased earnings in 1999. Tire Kingdom is a profitable business that ranks as
the nation's fifth largest independent tire retailer and commands a prominent
share in most of the markets in which it competes.
"We expect this acquisition, which will be accounted for as a purchase
transaction, to be accretive to TBC's earnings per share for 2001. The majority
of the anticipated synergies from combining Tire Kingdom with TBC relate to
procurement savings and cost reductions that we believe are readily
identifiable. An important focus for us over the balance of 2000 will be
realizing these synergies as quickly as possible. We also expect to benefit from
the planned growth of Tire Kingdom which has considerable opportunities to open
additional locations in markets it currently serves as well as to expand its
geographic coverage. We plan to move expeditiously to realize this expansion
potential."
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<PAGE>
TBC To Acquire Tire Kingdom
Page 2
June 5, 2000
Founded in 1972, Tire Kingdom operates 148 retail tire centers and a
specialty wholesale tire distribution business. The company markets a broad
selection of high-quality tires under both nationally advertised and private
brands. Tire Kingdom's retail centers provide full-service tire replacement
including tire balancing, wheel alignment, extended service programs and
warranties. The centers also offer under-car maintenance service including brake
repairs, suspension system replacement, drive line repair and oil change
service. Sales of replacement tires currently account for approximately three
fourths of the volume generated from its retail centers. Of the company's retail
centers, 144 are located in Florida, and the other 4 centers are in North
Carolina.
TBC Corporation is one of the nation's largest marketers and distributors of
tires for the automotive replacement market.
This release may contain certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks, uncertainties and other
factors which could cause actual results to differ materially, including but not
limited to, the degree of competition in the replacement tire industry, changes
in consumer spending on automobiles and replacement automotive products and the
Company's ability to continue to obtain products in sufficient quantity and at
competitive prices. Additional information on factors that could potentially
affect the Company or its financial results may be found in the Company's
filings with the Securities and Exchange Commission.
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<PAGE>
Facts In Brief
(TBC Acquisition of Tire Kingdom)
Acquisition Strategy:
|X| The acquisition of Tire Kingdom expands TBC's marketing channels to
include the direct retailing of tires and related undercar services
to the consumer. Although TBC owns the Big O Tire operation, all but
12 of the 457 Big O locations are operated as franchised retail
centers.
|X| Ownership of Tire Kingdom will provide TBC a successful,
well-established retail platform that can be used to strengthen the
link between the Company and consumers. TBC currently has a strong
presence among wholesalers and retailers, which it will continue to
solidify.
|X| The addition of Tire Kingdom's volume of private branded tires is
expected to increase TBC's procurement strength significantly. TBC
also believes that there will be other meaningful operating
synergies from a combination of the two organizations. Total annual
savings of more than $4 million from increased purchasing strength
and operating cost savings are expected once the two organizations
are fully assimilated.
Transaction Structure:
|X| TBC has agreed to acquire the stock of TKI Holdings, Inc., a
privately owned holding company that owns Tire Kingdom. The
transaction will be accounted for as a purchase.
|X| The purchase price is $45 million in an all-cash transaction.
Approximately $27 million in goodwill is expected to be recorded
related to the acquisition.
|X| The terms of the transaction are based on a valuation of
approximately 9.0 times 1999 EBITDA for Tire Kingdom. The
acquisition is expected to be accretive to the Company's operating
income immediately, including allocated interest expense but
excluding amortization of goodwill and other intangibles related to
the acquisition. The acquired operations are expected to be
accretive to the earnings per share of TBC Corporation for 2001.
|X| The transaction is being financed principally through bank
borrowings. In a related development, the Company 's credit facility
has been increased from $100 million to $133 million through a
syndicate of banks headed by The Chase Manhattan Bank, N.A.
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<PAGE>
TBC/Tire Kingdom Facts
Page 2
June 5, 2000
|X| TBC's pro forma earnings for 1999 were $0.95 per share, assuming the
completion of the acquisition of Tire Kingdom on January 1,
1999, realization of the expected synergies from the assimilation
of Tire Kingdom, amortization of related goodwill and allocation
of interest expense. The pro forma figure is unchanged from the
Company's historical earnings of $0.95 per share excluding an after-
tax charge of $0.13 per share, related to the write-off of a note
receivable that had been the subject of litigation since 1989, and
an after-tax net gain of $0.03 per share related to the sale of a
distribution facility and the costs of relocating to four new
distribution centers.
About Tire Kingdom:
|X| Tire Kingdom is the leading independent tire retailer in Florida and
the fifth largest in the United States. The company owns and
operates 148 stores in leased locations. All but four of the stores,
which are in Charlotte, NC, are located in Florida.
|X| Tire Kingdom retails and wholesales a broad selection of
high-quality brand name and private label tires at competitive
prices. Approximately 25% of the tires marketed by Tire Kingdom in
1999 were nationally advertised "flag" brands, and the remainder
were private label tires and other manufacturers' brands. The
company's retail locations provide undercar maintenance related to
tire replacement, including wheel balancing, wheel alignment,
extended service programs and warranties, brake servicing,
suspension system replacement, drive line repair and oil change
service.
|X| Tire Kingdom's revenues in 1999 totaled $224.0 million.
Approximately $192 million of this volume was generated through the
company's retail stores, and the balance was contributed by
specialty wholesale tire marketing activities.
|X| Tire Kingdom operates two primary distribution centers in Florida,
Riviera Beach and Orlando, that total 205,000 square feet in size.
The company is headquartered in Riviera Beach.
|X| Virtually all of the Tire Kingdom stores are located in prime retail
sites. Sales per store averaged $1.3 million in 1999. Current
capacity in terms of service bays is believed to be sufficient to
substantially increase sales per store over the next few years.
|X| Tire Kingdom believes that there is the current potential to open 40
to 60 additional stores within Florida and contiguous states. This
expansion should require only a minimal additional investment in
corporate infrastructure.
|X| Tire Kingdom has approximately 1,600 employees. The company was
started in 1972, and ownership since 1993 has been controlled by
financial investors.
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<PAGE>
TBC/Tire Kingdom Facts
Page 3
June 5, 2000
About TBC:
|X| TBC is one of the nation's largest independent marketers and
distributors of private brand tires for the automotive replacement
market.
|X| The Company markets tires in its wholesale distribution operations
under three proprietary brands, Multi-Mile, Cordovan and Sigma. The
Company also controls the Big O brand which is marketed through its
Big O Tire subsidiary. These four brands collectively rank TBC as
the fifth largest factor in the passenger replacement tire market
with an approximate 7% share. TBC's brands position the Company with
nearly an 11% share of the light-truck tire sector, that encompasses
the increasingly popular SUV category.
|X| The Company's Big O network encompasses 457 stores in 20 states and
38 associate dealers in Canada.
|X| The Big O brand has ranked nationally as the top tire brand in
overall customer satisfaction in three of the past five years as
reported by J.D. Power and Associates.
|X| TBC operates distribution centers in Memphis, TN and Fayetteville,
NC for its core wholesale operations with a total of 1.6 million
square feet. The Company operates 18 centers through its Carroll's
network in the Southeast, and its Big O operations have 6
distribution centers.
|X| TBC sources its tires through a broad, global array of suppliers.
The majority of the Company's tires are manufactured by its
long-time suppliers, the Kelly Springfield division of Goodyear Tire
& Rubber Company and Cooper Tire & Rubber.
|X| TBC achieved record net sales of $743.1 million in 1999, up 15% over
1998. The Company also recorded a new annual high in earnings per
share.
|X| TBC has completed three previous acquisitions as follows:
o Northern States Tire, Inc. (Lebanon, NH) - September 1995
o Big O Tires, Inc. (Denver, CO) - July 1996
o Carroll's, Inc. (Atlanta, GA) - November 1998
|X| TBC currently has approximately 900 employees on a consolidated
basis.
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<PAGE>
TBC/Tire Kingdom Facts
Page 4
June 5, 2000
About the Replacement Tire Industry:
|X| An estimated 226 million tires were marketed in the U.S. replacement
tire industry in 1999. Demand for replacement tires has increased
each year for more than three decades, driven principally by a
steady rise in the total number of vehicles in service and the
consistency in average miles driven annually by U.S. motorists.
|X| Shipments of replacement automotive tires grew 15%, or 25.3 million
units, from 1995 to 1999.
|X| Over 80% of the worldwide capacity for manufacturing tires is
controlled by six, major international companies. A major
consolidation at the manufacturing level occurred during the 1990s.
|X| Independent tire dealers have consistently accounted for the
majority of tire sales in the replacement market. They in fact
increased their share of the replacement passenger tire segment
from 54% in 1990 to 60% in 1999. These independent dealers benefit
from convenient locations, established goodwill among consumers
and the characteristic of the purchase of a set of replacement
tires as a dealer-assisted transaction.
|X| TBC consistently ranks high in national surveys of the
qualities that independent tire dealers seek such as product
availability, line coverage, competitive prices and territory
protection.
This document may contain certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to certain risks, uncertainties and other factors which
could cause actual results to differ materially, including but not limited to,
the degree of competition in the replacement tire industry, changes in consumer
spending on automobiles and replacement automotive products and the Company's
ability to continue to obtain products in sufficient quantity and at competitive
prices. Additional information on factors that could potentially affect the
Company or its financial results may be found in the Company's filings with the
Securities and Exchange Commission.
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<PAGE>
TBC CORPORATION
AND
TIRE KINGDOM, INC.
PRO FORMA FINANCIAL STATEMENTS
1999
This document may contain certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to certain risks, uncertainties and other factors which
could cause actual results to differ materially, including but not limited to,
the degree of competition in the replacement tire industry, changes in consumer
spending on automobiles and replacement automotive products and the Company's
ability to continue to obtain products in sufficient quantity and at competitive
prices. Additional information on factors that could potentially affect the
Company or its financial results may be found in the Company's filings with the
Securities and Exchange Commission.
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<PAGE>
TBC CORPORATION AND TIRE KINGDOM, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed consolidated balance sheet
as of December 31, 1999, and the pro forma consolidated statement of income for
the year then ended give effect to TBC's acquisition of Tire Kingdom, Inc.,
accounted for as a purchase. This pro forma information is based on the
historical consolidated financial statements of TBC and its subsidiaries and
Tire Kingdom under the assumptions and adjustments set forth in the accompanying
notes. The 1999 historical income statement for TBC excludes an after-tax charge
of $2.8 million, or $0.13 per share, related to the write-off of a note
receivable that had been the subject of litigation since 1989, and an after-tax
net gain of $700,000, or $0.03 per share, related to the sale of a distribution
facility and the costs of relocating to four new distribution centers.
The unaudited pro forma consolidated financial statements have been
prepared by the management of TBC, assuming a purchase price of $45.0 million
and the payment of certain liabilities of Tire Kingdom. The pro forma
consolidated financial statements, which include results of operations as if the
acquisition had been consummated on January 1, 1999, do not reflect transaction
expenses expected to be incurred or any anticipated cost savings except as noted
in the accompanying notes. As a result, the pro forma consolidated financial
statements may not be indicative of the financial condition or results of
operations that actually would have existed or occurred had the acquisition been
in effect during the period presented or which may be attained in the future.
Actual performance will differ, and the differences may be material. The pro
forma consolidated financial statements should be read in conjunction with the
historical consolidated financial statements and notes thereto of TBC and Tire
Kingdom.
Earnings per share have been computed by dividing net income by the
weighted average number of common shares and equivalents outstanding. The
weighted average number of common shares outstanding were 21,177,000 for the
year ended December 31, 1999. Common share equivalents, representing shares
issuable upon assumed exercise of stock options, totaled 12,000. The weighted
average number of common shares and equivalents outstanding were 21,189,000.
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<PAGE>
TBC CORPORATION AND TIRE KINGDOM, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Pro Forma
Tire ---------------------------------------------
TBC Kingdom, Purchase
Corporation Inc. Price
(Historical) (Historical) Allocation Reclassifications Consolidated
------------ ------------ ---------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................... $ 1,273 $ 76 $ -- $ -- $ 1,349
Accounts and notes receivable,
net of allowance .......................... 85,302 12,733 -- -- 98,035
Inventories .................................. 138,054 30,433 -- -- 168,487
Refundable federal and state
income taxes .............................. 3,306 -- -- (152) 3,154
Deferred income taxes ........................ 6,079 3,370 -- -- 9,449
Other current assets ......................... 15,553 1,242 -- -- 16,795
-------- ------- ------------ ------- --------
Total current assets ..................... 249,567 47,854 -- (152) 297,269
-------- ------- ------------ ------- --------
PROPERTY, PLANT AND
EQUIPMENT - NET ............................. 45,314 10,956 -- -- 56,270
DEFERRED INCOME TAXES ........................... -- 2,408 -- (2,408) --
TRADEMARKS AND
GOODWILL, NET ................................. 34,455 14,351 13,296 (A) -- 62,102
OTHER ASSETS .................................... 19,037 1,588 400 (B) -- 21,025
-------- ------- ------------ ------- --------
TOTAL ASSETS .................................... $348,373 $77,157 $ 13,696 $(2,560) $436,666
======== ======= ============ ======= ========
See accompanying notes to pro forma consolidated financial statements.
</TABLE>
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<PAGE>
TBC CORPORATION AND TIRE KINGDOM, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Pro Forma
Tire ---------------------------------------------
TBC Kingdom, Purchase
Corporation Inc. Price
(Historical) (Historical) Allocation Reclassifications Consolidated
------------ ------------ ---------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Outstanding checks, net ...................... $ 5,170 $ -- $ -- $ -- $ 5,170
Notes payable to banks ....................... 63,762 710 33,035 (C) -- 97,507
Current portion of long-term debt
and capital lease obligations ............. 6,514 403 -- -- 6,917
Accounts payable, trade ...................... 40,417 29,012 12,000 (D) -- 81,429
Federal and state income
taxes payable ............................. -- 152 -- (152) --
Other current liabilities .................... 20,035 11,319 -- -- 31,354
------- ------- -------- ------- --------
Total current liabilities ................ 135,898 41,596 45,035 (152) 222,377
------- ------- -------- ------- --------
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS, LESS
CURRENT PORTION .............................. 47,000 3,332 (2,870) (E) -- 47,462
NONCURRENT LIABILITIES AND
DEFERRED REVENUE ............................. 1,420 3,760 -- -- 5,180
DEFERRED INCOME TAXES ........................... 7,673 -- -- (2,408) 5,265
STOCKHOLDERS' EQUITY:
Common stock ................................. 2,118 1 (1) -- 2,118
Additional paid-in capital ................... 9,639 27,524 (27,524) -- 9,639
Retained earnings ............................ 144,625 944 (944) -- 144,625
------- -------- ------- -------- -------
Total stockholders' equity ............. 156,382 28,469 (28,469) -- 156,382
------- -------- ------- -------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ......................... $348,373 $77,157 $ 13,696 $(2,560) $436,666
======= ======== ======= ======== =======
See accompanying notes to pro forma consolidated financial statements.
</TABLE>
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<PAGE>
TBC CORPORATION AND TIRE KINGDOM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
TBC Tire
Corporation Kingdom, Pro Forma
(Adjusted Inc. -------------------------
Historical) (Historical) Adjustments Consolidated
------------- ------------ ----------- ------------
(F)
<S> <C> <C> <C> <C>
NET SALES ................................................ $ 743,050 $ 223,928 $ -- $ 966,978
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales ...................................... 613,425 125,707 (2,800) (I) 736,332
Distribution, selling and administrative (G) ....... 91,194 96,497 422 (J) 188,113
Interest expense ................................... 7,676 484 (H) 2,762 (K) 10,922
Other (income) expense - net ....................... (1,840) 642 (H) (516) (L) (1,714)
--------- --------- --------- ---------
Total costs and expenses ...................... 710,455 223,330 (132) 933,653
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ............................... 32,595 598 132 33,325
PROVISION FOR INCOME TAXES ............................... 12,536 294 428 13,258
--------- --------- --------- ---------
NET INCOME ............................................... $ 20,059 $ 304 $ (296) $ 20,067
========= ========= ========= =========
EARNINGS PER SHARE -
Basic and diluted $ .95 $ .95
========== ==========
See accompanying notes to pro forma consolidated financial statements.
</TABLE>
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<PAGE>
TBC CORPORATION AND TIRE KINGDOM, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Balance Sheet
-------------
(A) Estimated net increase in goodwill and/or other intangible assets.
Estimated intangibles acquired of $27,647,000 less $14,351,000
previously on the books of Tire Kingdom.
(B) Estimated finance charges incurred to facilitate the acquisition.
(C) Estimated additional borrowings required to finance the acquisition.
(D) Financing in the form of extended terms on trade payables with
suppliers.
(E) Repayment of notes payable to Tire Kingdom stockholders at the time of
closing.
Statement of Income
-------------------
(F) The 1999 historical income statement for TBC excludes an after-tax
charge of $2.8 million, or $0.13 per share, related to the write-off of
a note receivable that had been the subject of litigation since 1989,
and an after-tax net gain of $700,000, or $0.03 per share, related to
the sale of a distribution facility and the costs of relocating to four
new distribution centers.
(G) Distribution, selling and administrative expenses include the
provisions for doubtful accounts and notes.
(H) Interest expense and net other income/expense for Tire Kingdom reflect
the reclassification of interest income, which was previously netted
against interest expense.
(I) Pro forma adjustments to cost of sales include benefits from the
combined purchasing strength of TBC Corporation and Tire Kingdom.
(J) Pro forma adjustments to distribution, selling and administrative
expenses include additional amortization of intangibles of $947,000,
the elimination of a one-time adjustment by Tire Kingdom of $675,000,
and net savings of $1.2 million associated with the administration of
the combined companies.
(K) Pro forma adjustments to interest expense include interest on the
additional borrowings to finance the acquisition, additional fees on
TBC's short-term and long-term borrowing agreements, higher interest
rates on TBC's actual 1999 borrowings, and the elimination of interest
to Tire Kingdom stockholders related to the extinguishment of related
debt.
(L) Pro forma adjustments to other income/expense represent the elimination
of certain non-recurring items recorded by Tire Kingdom, including a
provision for restructuring.
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<PAGE>
