CONFORMED
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-11579
TBC CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 31-0600670
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hickory Hill Road
Memphis, Tennessee 38141
----------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 363-8030
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. Yes X No
21,201,493 Shares of Common Stock were outstanding as of March 31, 2000.
INDEX TO EXHIBITS at page 10 of this Report
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
March 31, December 31,
2000 1999
-------- --------
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents ...................... $ 948 $ 1,273
Accounts and notes receivable, less
allowance for doubtful accounts of
$7,665 on March 31, 2000 and
$7,751 on December 31, 1999:
Related parties ............................. 11,275 9,546
Other ....................................... 90,393 75,756
-------- --------
Total accounts and notes receivable ......... 101,668 85,302
Inventories .................................... 150,781 138,054
Refundable federal and state income taxes ...... 733 3,306
Deferred income taxes .......................... 6,037 6,079
Other current assets ........................... 11,882 15,553
-------- --------
Total current assets ........................ 272,049 249,567
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and improvements .......................... 7,707 8,129
Buildings and leasehold improvements ........... 25,831 27,330
Furniture and equipment ........................ 35,934 35,124
-------- --------
69,472 70,583
Less accumulated depreciation .................. 26,787 25,269
-------- --------
Total property, plant and equipment ......... 42,685 45,314
-------- --------
TRADEMARKS, NET ...................................... 16,325 16,437
-------- --------
GOODWILL, NET ........................................ 17,891 18,018
-------- --------
OTHER ASSETS ......................................... 19,838 19,037
-------- --------
TOTAL ASSETS ......................................... $368,788 $348,373
======== ========
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
-------- --------
CURRENT LIABILITIES: (Unaudited)
Outstanding checks, net ...................... $ 23,286 $ 5,170
Notes payable to banks ....................... 69,027 63,762
Current portion of long-term debt ............ 6,500 6,514
Accounts payable, trade ...................... 37,870 40,417
Other current liabilities .................... 15,326 20,035
-------- --------
Total current liabilities ............ 152,009 135,898
-------- --------
LONG-TERM DEBT, LESS CURRENT PORTION ............... 47,000 47,000
-------- --------
NONCURRENT LIABILITIES ............................. 1,577 1,420
-------- --------
DEFERRED INCOME TAXES .............................. 7,763 7,673
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value,
shares issued and outstanding -
21,201 on March 31, 2000 and
21,182 on December 31, 1999 ................ 2,120 2,118
Additional paid-in capital ................... 9,749 9,639
Retained earnings ............................ 148,570 144,625
-------- --------
Total stockholders' equity ........... 160,439 156,382
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $368,788 $348,373
======== ========
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months
Ended March 31,
------------------------
2000 1999
--------- --------
NET SALES * ...................................... $ 177,389 $ 162,202
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COSTS AND EXPENSES:
Cost of sales ................................ 145,503 134,379
Distribution ................................. 11,214 9,624
Selling and administrative ................... 12,143 10,332
Provision for doubtful accounts and notes .... 268 358
Interest expense ............................. 2,108 1,842
Other (income) expense - net ................. (376) (596)
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Total costs and expenses ................. 170,860 155,939
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INCOME BEFORE INCOME TAXES ....................... 6,529 6,263
PROVISION FOR INCOME TAXES ....................... 2,584 2,457
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NET INCOME ....................................... $ 3,945 $ 3,806
========= =========
EARNINGS PER SHARE -
Basic and diluted ............................ $ .19 $ .18
========= =========
* Including sales to related parties of $19,764 and $16,475 in the three
months ended March 31, 2000 and 1999, respectively.
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
------------ ------ ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Three Months Ended
March 31, 1999
- -------------------
BALANCE, JANUARY 1, 1999 .. 21,172 $ 2,117 $ 9,540 $126,774 $138,431
Net income for period .. 3,806 3,806
-------- -------- -------- -------- --------
BALANCE, MARCH 31, 1999 ... 21,172 $ 2,117 $ 9,540 $130,580 $142,237
======== ======== ======== ======== ========
Three Months Ended
March 31, 2000
- -------------------
BALANCE, JANUARY 1, 2000 .. 21,182 $ 2,118 $ 9,639 $144,625 $156,382
Net income for period ... 3,945 3,945
Issuance of common stock
under stock option and
incentive plan, net .. 19 2 110 -- 112
-------- -------- -------- -------- --------
BALANCE, MARCH 31, 2000 ... 21,201 $ 2,120 $ 9,749 $148,570 $160,439
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------
2000 1999
--------- --------
<S> <C> <C>
Operating Activities:
Net income .............................................. $ 3,945 $ 3,806
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ...................................... 1,812 1,610
Amortization ...................................... 299 234
Provision for doubtful accounts and notes ......... 268 358
(Gain) on sale of fixed assets .................... (68) --
Deferred income taxes ............................. 132 (63)
Equity in (earnings) loss from joint ventures ..... 324 (49)
Changes in operating assets
and liabilities:
Receivables ................................... (14,885) 205
Inventories ................................... (12,727) 13,314
Other current assets .......................... 3,783 (2,502)
Other assets .................................. (752) (710)
Accounts payable, trade ....................... (2,547) 1,797
Federal and state income taxes
refundable or payable ...................... 2,573 1,481
Other current liabilities ..................... (4,718) (2,269)
Noncurrent liabilities ........................ 28 19
-------- --------
Net cash provided by (used in) operating activities (22,533) 17,231
-------- --------
Investing Activities:
Purchase of property, plant and equipment ............... (1,219) (2,992)
Other ................................................... 60 58
-------- --------
Net cash used in investing activities ............. (1,159) (2,934)
-------- --------
Financing Activities:
Net bank borrowings (repayments) under
short-term borrowing arrangements ................... 5,265 (13,896)
Increase (decrease) in outstanding checks, net .......... 18,116 (603)
Payments on long-term debt .............................. (14) (479)
-------- --------
Net cash provided by (used in) financing activities 23,367 (14,978)
-------- --------
Change in cash and cash equivalents ........................ (325) (681)
Cash and cash equivalents:
Balance - Beginning of year ............................. 1,273 1,699
-------- --------
Balance - End of period ................................. $ 948 $ 1,018
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) for - Interest .................... $ 2,084 $ 1,674
- Income Taxes ................ (121) 1,039
Supplemental Disclosure of Non-Cash Financing Activity:
Issuance of restricted stock under stock incentive plan . 112 --
</TABLE>
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation
The December 31, 1999 balance sheet was derived from audited
financial statements. The consolidated balance sheet as of March 31,
2000, and the consolidated statements of income, stockholders' equity
and cash flows for the three months ended March 31, 2000 and 1999, have
been prepared by the Company, without audit. It is Management's opinion
that these statements include all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows as of March 31, 2000 and
for all periods presented. The results for the periods presented are
not necessarily indicative of the results that may be expected for the
full year.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the
Company's 1999 Annual Report.
Certain reclassifications have been made in the statements of
income and statements of cash flows for the periods ended March 31,
1999, to conform to the current presentation, with no effect on
previously reported net income.
2. Earnings Per Share
Basic earnings per share have been computed by dividing net
income by the weighted average number of shares of common stock
outstanding. Diluted earnings per share have been computed by dividing
net income by the weighted average number of common shares and
equivalents outstanding. Common share equivalents, if any, represent
shares issuable upon assumed exercise of stock options. The weighted
average number of common shares and equivalents outstanding were as
follows (in thousands):
Three Months
Ended March 31,
----------------------
2000 1999
------- ------
Weighted average common
shares outstanding 21,201 21,172
Common share equivalents -- 9
------ ------
Weighted average common shares
and equivalents outstanding 21,201 21,181
====== ======
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ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
The Company's financial position and liquidity remain strong. Working
capital totaled $120.0 million at March 31, 2000 compared to $113.7 million at
December 31, 1999. Current accounts and notes receivable increased by $16.4
million during the first three months of 2000 due principally to seasonal sales
fluctuations. Inventories increased by $12.7 million, due to seasonal
fluctuations as well as the addition of several new lines of tires. The net
total owed to banks and vendors, consisting of the combined balances of cash and
cash equivalents, outstanding checks, notes payable to banks and accounts
payable, increased by $21.2 million from December 31, 1999 to March 31, 2000.
This increase, together with cash generated from operations, enabled the Company
to fund the above-noted increases in current receivables and inventories, as
well as capital expenditures of $1.2 million during the first three months of
2000.
Results of Operations
Net sales increased 9.4% during the first quarter of 2000 compared
to the year-earlier level. Sales of tires accounted for approximately 93% of
total sales during the current quarter versus 94% in the first three months of
1999. Unit tire shipments increased 8.9% in the first quarter, including gains
in shipments to both franchised dealers and other customers. The average tire
sales price declined by approximately 0.5% compared to the year-earlier results.
Industrywide pricing pressures, prevalent throughout most of the last several
years, continued in the current quarter.
Cost of sales as a percentage of net sales decreased from 82.8% in the
first quarter of 1999 to 82.0% in the current quarter, due largely to the effect
of lower net product costs from suppliers. The lower net product costs in the
current quarter were related in part to increased interest income and discounts
on early payments to suppliers.
Distribution expenses as a percentage of net sales increased from 5.9%
in the first quarter of 1999 to 6.3% in the current period. The increase was
largely due to greater fixed costs associated with new distribution facilities,
which were opened in the last half of 1999 to better service both franchised
dealers and other customers.
Selling and administrative expenses were $1.8 million greater in the
current quarter than in the first three months of 1999. The increase was due
largely to increased compensation expenses, related in part to higher staffing
levels in the current quarter.
Interest expense increased $266,000 in the first quarter of 2000
compared to the year-earlier level. Interest related to short-term borrowings
increased $434,000 and interest on long-term borrowings declined $168,000
compared to the first three months of 1999. The greater interest associated with
short-term borrowings was due to the combined effects of higher borrowing levels
and higher interest rates. The reduction in interest on long-term borrowings was
due to lower long-term debt in the current quarter than in the year-earlier
period.
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Net other income was $220,000 less in the first three months of 2000
than in the year-earlier period, due primarily to reductions in the equity in
results from the Company's joint ventures.
The Company's effective tax rate was 39.6% in the current quarter
compared to 39.2% in the first three months of 1999, due principally to
fluctuations in the equity in results from joint ventures and the related taxes
on those results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not consider its exposure to market risk to be
material.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Index to Exhibits
(b) No reports on Form 8-K were filed during the three months
ended March 31, 2000.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TBC CORPORATION
April 25, 2000 By /s/ Ronald E. McCollough
- -------------- ------------------------
Ronald E. McCollough
Executive Vice President,
Chief Financial Officer
and Treasurer
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<PAGE>
INDEX TO EXHIBITS
Located at
Sequentially
Exhibit No. Description Numbered Page
- ---------- ----------- -------------
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING INDENTURES:
4.1 Amendment No. 3, dated January 21, 2000, to the Note
Purchase and Private Shelf Agreement, dated July 10, 1996,
between TBC Corporation and The Prudential Insurance
Company of America . . . . . . . . . . . . . . . . . . 11
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EXHIBIT 4.1
-----------
AMENDMENT NO. 3
TO NOTE PURCHASE AND PRIVATE SHELF AGREEMENT
This Amendment No. 3 (this "Amendment"), dated as of January 21, 2000,
to the Note Purchase and Private Shelf Agreement dated as of July 10, 1996 (the
"Original Agreement") is entered into between TBC Corporation (the "Company")
and The Prudential Insurance Company of America ("Prudential").
RECITALS
WHEREAS, Prudential and the Company are parties to the Original
Agreement;
WHEREAS, the Original Agreement has been amended by
Amendment No. 1 ("Amendment No. 1"), dated as of September 20, 1996,
and by Letter Amendment No. 2 to Note Purchase and Private Shelf
Agreement, dated October 28, 1998 (the Original Agreement, as so amended,
being referred to as the "Existing Agreement");
WHEREAS, the Company desires to enter into a Credit Agreement, (as in
effect on the date hereof (except as otherwise specified herein), the "New
Credit Agreement") to be dated on or about January 21, 2000, among the Company,
First Tennessee Bank National Association, as Administrative Agent, and the
lenders party thereto;
WHEREAS, the Company has requested that Prudential agree to amend
various provisions of the Existing Agreement to enable the Company to enter into
the New Credit Agreement and Prudential is willing to do so on the terms and
conditions (including, without limitation, the amendments to the Existing
Agreement) set forth in this Amendment (the Existing Agreement, as amended by
this Amendment, is referred to as the "Agreement"); and
WHEREAS, terms used and not defined herein have the respective
meanings ascribed thereto in the Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
1. Amendments to Existing Agreement. The Existing Agreement
is hereby amended as follows:
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<PAGE>
(a) Change in Control. A new paragraph 4H is added to
the Existing Agreement to read as follows:
4H. Change in Control Prepayment.
(i) Notice of Change in Control or Control Event. The Company
will, within three Business Days after any Responsible Officer has
knowledge of the occurrence of any Change in Control or Control
Event, give written notice of such Change in Control or Control Event
(including a description of the terms thereof in sufficient detail to
enable a holder of Notes to evaluate the merits thereof) to each
holder of Notes unless notice in respect of such Change in Control
(or the Change in Control contemplated by such Control Event) shall
have been given pursuant to paragraph 4H(ii). If a Change in Control
has occurred, such notice shall contain and constitute an offer to
prepay Notes as described in paragraph 4H(iii) and shall be
accompanied by the certificate described in paragraph 4H(vii).
(ii) Condition to Company Action. The Company will not
take any action that consummates or finalizes a Change in Control
unless
(A) at least 30 days prior to such action it shall
have given to each holder of Notes written notice (including a
description of the terms of such Change in Control in
sufficient detail to enable a holder of Notes to evaluate the
merits thereof) containing and constituting an offer to prepay
Notes as described in paragraph 4H(iii), accompanied by the
certificate described in paragraph 4H(vii), and
(B) contemporaneously with consummating or
finalizing the Change in Control, it prepays all Notes required
to be prepaid in accordance with this paragraph 4H.
(iii) Offer to Prepay Notes. The offer to prepay Notes
contemplated by paragraph 4H(i) and paragraph 4H(ii) shall be an
offer to prepay, in accordance with and subject to this paragraph 4H,
all, but not less than all, the Notes held by each holder (in this
case only, "holder" in respect of any Note registered in the name of
a nominee for a disclosed beneficial owner shall mean such beneficial
owner) on a date specified in such offer (the "Proposed Prepayment
Date"). If such Proposed Prepayment Date is in connection with an
offer contemplated by paragraph 4H(i), such date shall be not less
than 30 days and not more than 60 days after the date of such offer
(if the
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Proposed Prepayment Date shall not be specified in such offer, the Proposed
Prepayment Date shall be the 30th day after the date of such offer).
(iv) Acceptance. A holder of Notes may accept the offer to prepay
made pursuant to this paragraph 4H by causing a notice of such acceptance to be
delivered to the Company at least 5 days prior to the Proposed Prepayment Date.
A failure by a holder of Notes to respond to an offer to prepay made pursuant to
this paragraph 4H shall be deemed to constitute an acceptance of such offer by
such holder.
(v) Prepayment. Prepayment of the Notes to be prepaid pursuant to
this paragraph 4H shall be at 100% of the principal amount of such Notes, plus
the Yield-Maintenance Amount determined for the date of prepayment with respect
to such principal amount, together with interest on such Notes accrued to the
date of prepayment. On the Business Day preceding the date of prepayment, the
Company shall deliver to each holder of Notes being prepaid a statement showing
the Yield-Maintenance Amount due in connection with such prepayment and setting
forth the details of the computation of such amount. The prepayment shall be
made on the Proposed Prepayment Date except as provided in paragraph 4H(vi).
(vi) Deferral of Obligation to Purchase. The obligation of the
Company to prepay Notes pursuant to the offers accepted in accordance with
paragraph 4H(iv) is subject to the occurrence of the Change in Control in
respect of which such offers and acceptances shall have been made. In the event
that such Change in Control does not occur on or before the Proposed Prepayment
Date in respect thereof, the prepayment shall be deferred until and shall be
made on the date on which such Change in Control occurs. The Company shall keep
each holder of Notes reasonably and timely informed of
(A) any such deferral of the date of prepayment,
(B) the date on which such Change in Control and the prepayment
are expected to occur, and
(C) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned (in which case
the offers and acceptances made pursuant to this paragraph 4H in
respect of such Change in Control shall be deemed rescinded).
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Notwithstanding the foregoing, in the event that any Change in
Control does not occur within ninety (90) days of the Proposed
Prepayment Date in respect thereof, any holder of Notes may, upon
written notice to the Company, rescind its acceptance of an offer
made pursuant to this paragraph 4H in respect of such Change in
Control.
(vii) Officer's Certificate. Each offer to prepay the Notes
---------------------
pursuant to this paragraph 4H shall be accompanied by a certificate,
executed by a Responsible Officer of the Company and dated the date
of such offer, specifying:
(A) the Proposed Prepayment Date;
(B) that such offer is made pursuant to this
paragraph 4H;
(C) the principal amount of each Note offered to be
prepaid;
(D) the last date upon which the offer can be
accepted or rejected, and setting forth the consequences of
failing to provide an acceptance or rejection, as provided in
paragraph 4H(iv);
(E) the estimated Yield-Maintenance Amount, if any,
due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting
forth the details of such computation;
(F) the interest that would be due on each Note
offered to be prepaid, accrued to the Proposed Prepayment Date;
(G) that the conditions of this paragraph 4H have
been fulfilled; and
(H) in reasonable detail, the nature and date or
proposed date of the Change in Control.
(viii) The amount of each payment of the principal of the Notes
made pursuant to this paragraph 4H shall be applied against and
reduce each of the then remaining principal payments due pursuant to
paragraph 4A by a percentage equal to the aggregate principal amount
of the Notes so paid divided by the aggregate principal amount of the
Notes outstanding immediately prior to such payment.
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(b) Leverage Ratio. A new paragraph 6F is added to
the Existing Agreement to read as follows:
6F. Maximum Leverage Ratio. The Company will not per-
mit the Leverage Ratio to be greater than 3.5 to 1 as of the
end of any Fiscal Quarter. "Leverage Ratio" at any time means
the ratio of the daily average outstanding principal amount of
Consolidated Funded Indebtedness for each of the four most
recent Fiscal Quarters to the aggregate EBITDA for each of the
four most recent Fiscal Quarters. All defined terms in the
preceding sentence and all defined terms used in the
definitions of such defined terms have the respective meanings
ascribed thereto in the New Credit Agreement, all of which are
incorporated herein in their entirety.
(c) Investments. Paragraph 6B(3)(i) of the Existing
Agreement is hereby amended and restated in its entirety as follows:
(i) (A) loans or advances to any wholly-owned
Subsidiary or to the Company and (B) Permitted Subsidiary
Guarantees and Guarantees arising in connection with
Synthetic Leases;
(d) New Lending Facilities. Paragraph 6D of the
Existing Agreement is hereby amended and restated in its entirety as
follows:
6D. New Lending Facilities. The Company covenants
that, after the date hereof, it will not enter into any long
term or revolving credit facility (a "New Credit Facility") in
replacement of the New Credit Agreement, unless the form of
the agreement governing any such New Credit Facility and all
instruments evidencing any Indebtedness incurred thereunder,
are in form and substance satisfactory to the Required
Holders. In addition to the restriction contained in the
immediately preceding sentence, the Company further covenants
that the Company will cause (a) each Subsidiary, if any, which
guarantees the Debt of the Company under any New Credit
Facility to execute and deliver to Prudential a Subsidiary
Guarantee, together with such officers' certificates, good
standing certificates and opinions of counsel as the Required
Holders may reasonably request, and (b) the lenders thereunder
to execute and deliver to Prudential a fully executed
Sharing Agreement between Prudential and such lenders.
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(e) Revised Definitions. The defined terms "Current
Debt," "Current Liabilities," and "Funded Debt" in paragraph 10B are
hereby amended and restated in their entirety as follows:
"Current Debt" shall mean, with respect to any
Person, all Indebtedness of such Person for borrowed money
which by its terms or by the terms of any instrument or
agreement relating thereto matures on demand or within one
year from the date of the creation thereof, provided that
Indebtedness for money borrowed outstanding under a revolving
credit or similar agreement which obligates the lender or
lenders to extend credit over a period of more than one year
shall constitute Funded Debt and not Current Debt, even though
such Indebtedness by its terms matures on demand or within one
year from the date of the creation thereof.
"Current Liabilities" shall mean the aggregate amount
carried as current liabilities on the books of the Company and
its Subsidiaries, on a consolidated basis and after
eliminating all inter-company items, in accordance with
generally accepted accounting principles.
"Funded Debt" shall mean with respect to any Person,
all Indebtedness of such Person which by its terms or by the
terms of any instrument or agreement relating thereto matures,
or which is otherwise payable or unpaid, more than one year
from, or is directly or indirectly renewable or extendible at
the option of the debtor to a date more than one year
(including an option of the debtor under a revolving credit or
similar agreement obligating the lender or lenders to extend
credit over a period of more than one year) from, the date of
the creation thereof.
(f) New Definitions. The following defined terms are
added to paragraph 10B of the Existing Agreement in their proper
alphabetical order:
"Change in Control" means (a) the acquisition of
ownership, directly or indirectly, beneficially or of record,
by any Person or group (within the meaning of the Securities
Exchange Act of 1934 and the rules of the Securities and
Exchange Commission thereunder as in effect on the date hereof)
of shares representing more than 20% of the aggregate
ordinary voting
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power represented by the issued and outstanding capital stock
of the company; (b) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the
Company by Persons who were neither (i) nominated by the
board of directors of the Company nor (ii) appointed by
directors so nominated; or (c) the acquisition of direct or
indirect Control of the Company by any Person or group.
"Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative
thereto.
"Control Event" means:
(a) the execution by the Company or any of
its Subsidiaries of any agreement or letter of
intent with respect to any proposed transaction or
event or series of transactions or events which,
individually or in the aggregate, may reasonably be
expected to result in a Change in Control;
(b) the execution of any written agreement
which, when fully performed by the parties thereto,
would result in a Change in Control; or
(c) the commencement (as defined in Regulation
14D of the Securities Exchange Act of 1934) of a
tender offer by any Person or group (as such terms
are defined in the definition of "Change in Control")
to the holders of the Voting Stock of the Company,
which offer, if accepted by the requisite number of
holders, would result in a Change in Control.
"New Credit Agreement" means the Credit Agreement (as
in effect on January 21, 2000) to be dated on or about January
21, 2000, among the Company, First Tennessee Bank National
Association, as Administrative Agent, and the lenders party
thereto.
(g) Definition of "Total Priority Debt".The definition of
"Total Priority Debt" in paragraph 10B of the Existing Agreement is
hereby amended by replacing the last sentence of such definition with
the following:
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<PAGE>
"Notwithstanding the foregoing, "Total Priority Debt"
shall not include Contingent Obligations of the
Company arising in connection with Synthetic Leases
or Permitted Subsidiary Guarantees."
(h) Defined Term "Credit Agreement". Each reference to
the defined term "Credit Agreement" in the Existing Agreement is
hereby amended to read "New Credit Agreement".
(i) Paragraph 6B(2)(v). Paragraph 6B(2)(v) of the
Existing Agreement is hereby amended to read in its entirety as
follows:
"(v) Guarantees arising in connection with Synthetic
Leases and Permitted Subsidiary Guarantees."
(j) Incorporation by Reference. Article VI of the New Credit
Agreement, other than Section 6.10 thereof, is hereby incorporated by
reference into paragraph 6 of the Existing Agreement, together with the
definitions of all terms used therein and all other provisions
necessary to interpret such Article; provided, however, that, to the
extent that the parties to the New Credit Agreement amend, waive or
otherwise modify such Article (or such definitions or other
provisions), such amendments, waivers or other modifications shall
apply to such Article (or such definitions or other provisions) as
incorporated into the Existing Agreement, effective as of the date of
effectiveness under the New Credit Agreement, without any consent or
other action on the part of the holders of the Notes. For the avoidance
of doubt,
(i) the foregoing sentence shall apply to any new
covenant or other provision which is added to such Article VI,
and to any covenant or other provision similar to the
covenants and other provisions of such Article VI which is
added to any other Article or section of the New Credit
Agreement (and, for purposes of this paragraph (j), such
covenant or other provision shall be deemed to be part of such
Article VI);
(ii) the proviso to the foregoing sentence shall
apply regardless of whether or not a Default or an Event of
Default shall exist at the time any such amendment, waiver or
other modification shall become effective; and
-18-
<PAGE>
(iii) if the Required Holders shall declare the Notes
to be due and payable as a result of an Event of Default
arising from a breach of any covenant or other provision of
such Article VI as incorporated into the Existing Agreement
prior to the effectiveness of any amendment, waiver or other
modification of or to such covenant or other provision, such
declaration shall remain in effect regardless of any such
subsequent amendment, waiver or other modification.
If any one or more lenders under the New Credit Agreement receive any
fee, equity securities or other compensation or remuneration in
consideration of any amendment, waiver or other modification to such
Article VI, Prudential shall simultaneously receive such fee, equity
securities or other compensation or remuneration in an amount which is
proportional to the outstanding amount of the Notes relative to the
aggregate commitments of such lenders under the New Credit Agreement.
2. Waivers Relating to Current Ratio. Any Default or Event
of Default arising from the Company's failure to comply with paragraph 6A(1) of
the Existing Agreement at any time from July 1, 1999 to and including the date
this Amendment shall become effective is hereby waived. In addition, the
Company's obligation to comply with paragraph 6A(1) of the Existing Agreement
at any time on or after the date this Amendment shall become effective to and
including March 30, 2001 is hereby waived. For the avoidance of doubt, paragraph
6A(1) of the Existing Agreement shall become effective March 31, 2001.
3. Consent Regarding Subordination Agreement and
Subsidiary Guarantees.
(a) Subsidiary Guarantees. Pursuant to Amendment No. 1, Big O
and TBC International, Inc. ("International") (among others) entered
into a Continuing Guaranty, dated September 20, 1996 (the "Old
Guaranty"). In connection with the execution hereof, Big O,
International and certain other Subsidiaries are entering into separate
Guaranties (the "New Guaranties"), dated on or about January 21, 1999,
pursuant to which they are guaranteeing the obligations of the Company
under the Notes, the Agreement and the New Credit Agreement. Prudential
acknowledges and agrees that the New Guarantees amend, restate and
replace the Old Guaranty with respect to Big O and International.
(b) Subordination Agreement. The last sentence of paragraph
6B(3) of the Existing Agreement prohibits Subsidiaries from
-19-
<PAGE>
making loans or advances to the Company except pursuant to a
subordination agreement in form and substance satisfactory to the
Required Holders. Section 2.1 of Amendment No. 1 sets forth
Prudential's consent to a form of subordination agreement attached as
Exhibit A to Amendment No. 1 with respect to certain receivables owed
by the Company to its Subsidiaries. Section 4 of the New Guaranties
contains, among other things, subordination arrangements with respect
to indebtedness of the Company owing to the Subsidiaries that are
parties to the New Guaranties. Prudential hereby acknowledges and
agrees that the subordination arrangements in such Section 4 amend,
restate and replace such subordination agreement and are in form and
substance satisfactory to it for purposes of such paragraph 6B(3).
4. Conditions to Effectiveness. This Amendment shall become
effective upon satisfaction of the following conditions:
(a) Opinion. Prudential shall have received an opinion
of Thompson Hine & Flory LLP, counsel for the Company, dated the
date hereof, regarding:
(i) the due incorporation and valid existence of
the Company and each of TBC International, Inc., Big O Tires,
Inc., and Carroll's, Inc. (collectively, the "Specified
Subsidiaries");
(ii) the corporate power and authority of the
Company to execute this Amendment and of each of the Specified
Subsidiaries to execute the Subsidiary Guarantee to be
executed by it;
(iii) the taking of all necessary corporate action by
the Company and each Specified Subsidiary to authorize the
execution and delivery of this Agreement, in the case of the
Company, and the Subsidiary Guarantee to be executed by it, in
the case of each Specified Subsidiary;
(iv) the absence of any conflicts between (A) this
Amendment, the Agreement and the Subsidiary Guarantees and (B)
the New Credit Agreement or any other agreement known to such
firm for money borrowed to which the Company or any Specified
Subsidiary is a party, or any guarantee known to such firm
issued to the lenders under the New Credit Agreement or any
such other agreement; and
-20-
<PAGE>
(v) the absence of any requirement to obtain any
approval of, or to make any filing with, any governmental
authority in connection with the execution, delivery and
performance of this Amendment and the Subsidiary Guarantees.
(b) Subsidiary Guarantees. Prudential shall have
received Subsidiary Guarantees executed by each of the Specified
Subsidiaries, Big O Retail Enterprises, Inc., Big O Development, Inc.,
and Big O Tire of Idaho, Inc.
(c) Sharing Agreement. All lending institutions party to
the New Credit Agreement shall have executed and delivered (in each
capacity in which it is a party to the New Credit Agreement) an amended
and restated sharing agreement in the form of Exhibit A hereto.
(d) New Credit Agreement. The New Credit Agreement,
in the form previously certified by the Company to Prudential, shall
have been executed and delivered by all parties thereto.
(e) Counsel Fees. The Company shall have paid the
fees and expenses of Bingham Dana LLP in connection with the
preparation, negotiation, execution and delivery of this Amendment.
5. Company Representations. The Company represents and warrants
to Prudential that each of its representations and warranties in the New Credit
Agreement is true and correct as of the date hereof. In addition, the Company
represents and warrants that no Default or Event of Default exists immediately
prior to the effectiveness hereof (except as indicated in Section 2 hereof) or
will exist immediately after giving effect hereto.
6. Governing Law. This Amendment shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the internal laws of the State of New York.
7. Effect of Amendment. On and after the effective date of this
Amendment, each reference in the Agreement to "this Agreement,"
"hereunder," "hereof," or words of like import, and each reference in the
Notes to "the Agreement," "thereunder," "thereof," or words of like import,
shall mean the Existing Agreement as amended by this Amendment. Except as
-21-
<PAGE>
expressly provided herein, the Existing Agreement shall remain in full
force and effect and is in all respects ratified and confirmed. This Amendment
shall not operate as a waiver of any Prudential's rights, powers or remedies,
nor constitute a waiver of any provision of the Agreement.
8. Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers as of the date and year first above
written.
TBC CORPORATION
/s/ Ronald E. McCollough
------------------------
Name: Ronald E. McCollough
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
/s/ Billy B. Greer
------------------
Name: Billy B. Greer
Title: Vice President
-22-
<PAGE>
SHARING AGREEMENT
-----------------
This SHARING AGREEMENT, dated as of January 21, 2000 (this
"Agreement"), is entered into by and between First Tennessee Bank National
Association, as Administrative Agent, and the other lenders that are parties to
the Credit Agreement referred to below (herein sometimes called, collectively,
the "Banks" and individually a "Bank"), and THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ("Prudential" or the "Noteholder"; the Banks and the Noteholder being
herein sometimes collectively called the "Lenders" and individually called a
"Lender"),
W I T N E S S E T H:
WHEREAS, TBC CORPORATION, a Delaware corporation (the "Company"), and
the Banks have entered into a certain Credit Agreement, dated as of January 21,
2000 (as amended from time to time, being herein referred to as the "Credit
Agreement"), pursuant to which, among other things, the Banks agreed to make
certain loans to the Company;
WHEREAS, the Company and Prudential entered into a certain Note
Purchase and Private Shelf Agreement dated as of July 10, 1995, as amended by
Amendment No. 1 dated as of September 20, 1996, as further amended by Letter
Amendment No. 2 dated October 28, 1998, and as further amended by Amendment No.
3 dated as of January 21, 2000 (as amended from time to time, being herein
referred to as the "Note Agreement"), pursuant to which the Company issued and
Prudential purchased the Company's (a) 7.55% Series A Senior Notes due July 10,
2003 (the "Series A Notes"), (b) 7.87% Series B Senior Notes due July 10, 2005
(the "Series B Notes"), (c) 8.06% Series C Senior Notes due July 10, 2008 (the
"Series C Notes") and, from time to time on the terms and conditions set forth
in the Note Agreement, (d) the Shelf Notes (as defined in the Note Agreement;
the Series A Notes, the Series B Notes, the Series C Notes and the Shelf Notes
are collectively referred to herein as the "Senior Notes"; the Credit Agreement,
the Note Agreement and the Senior Notes are collectively referred to herein as
the "Company Loan Documents");
WHEREAS, under applicable law and the terms of the Credit Agreement,
the Banks are entitled to set-off, appropriate and apply any deposits (general
or special, time or demand, provisional or final) and any other indebtedness at
any time held or owing by a Bank to or for the credit or account of the Company,
against and on account of liabilities of the Company under the Credit Agreement,
pursuant to law and the terms of the Credit Agreement (collectively, the
"Set-Off Rights");
WHEREAS, the obligations of the Company under the Note Agreement and
the Senior Notes are intended to be pari passu with obligations of the Company
under the Credit Agreement; and
-23-
<PAGE>
WHEREAS, the Lenders have agreed to enter into this Agreement so as to
evidence the agreement among the Lenders with respect to certain payments that
may be received by the Lenders pursuant to Set-Off Rights;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Lenders hereby agree as follows:
1. If any Lender shall obtain any payment or other recovery pursuant to
Set-Off Rights in excess of its Proportionate Share (as defined below) of
payments then or thereafter obtained by all Lenders with respect to any Set-Off
Rights, such Lender shall purchase from the other Lenders such participation(s)
in the indebtedness of the Company held by such other Lenders pursuant to the
Company Loan Documents as shall be necessary to cause such purchasing Lender to
share such payment or other recovery ratably, based on Proportionate Shares,
with such selling Lenders; provided, however, that if all or any portion of such
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded, and each selling Lender shall repay to the
purchasing Lender the purchase price, to the ratable extent of such recovery in
proportion to the amount received by such selling Lender, together with an
amount equal to such selling Lender's ratable share (according to the proportion
of (x) the amount of such selling Lender's required repayment to the purchasing
Lender to (y) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in respect of
the total amount so recovered.
The term "Proportionate Share", as used herein, shall mean at any time
for each Lender a fraction (a) the numerator of which is the aggregate principal
amount of the indebtedness of the Company held by such Lender at such time
pursuant to the Company Loan Documents and (b) the denominator of which is the
aggregate principal amount of the indebtedness of the Company held by all
Lenders at such time pursuant to the Company Loan Documents.
2. The Company, by signing a copy of this Agreement, agrees that each
Lender so purchasing a participation from another Lender pursuant to Section 1
hereof may, to the fullest extent permitted by law, exercise all its rights of
payment (including rights of setoff) with respect to such participation as fully
as if such Lender were the direct creditor of the Company in the amount of such
participation.
3. If under any applicable bankruptcy, insolvency or other similar law,
any Lender possesses a secured claim, or receives a secured claim in lieu of
a setoff to which Section 1 or 2 hereof applies, such Lender shall exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the other Lenders in accordance with Section 1 hereof.
-24-
<PAGE>
4. This Agreement shall in all respects be a continuing, absolute,
unconditional and irrevocable agreement, and shall remain in full force and
effect until all obligations of the Company to the Lenders shall have been
satisfied in full and all obligations of all Lenders to the other Lenders
hereunder shall have been satisfied in full. Each Leader agrees that this
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment (in whole or in part) of any of the obligations of
the Company is rescinded or must otherwise be restored by any Lender, upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, as though
such payment had not been made.
5. This Agreement shall be binding upon, and inure to the benefit of
and be enforceable by, the Lenders, each of their respective successors,
transferees and assigns and each person or entity that purchases a participation
in the indebtedness of the Company held by a Lender. Without limiting the
generality of the foregoing sentence, any Lender may assign or otherwise
transfer (in whole or in part) to any other person or entity the obligations of
the Company to such Lender under any of the Company Loan Documents, and such
other person or entity shall thereupon become vested with all rights and
benefits, and become subject to all the obligations, in respect thereof granted
to or imposed upon such Lender under this Agreement.
6. None of the provisions of this Agreement shall inure to the benefit
of the Company or, except as provided in Section 5 hereof, any other person
other than the Lenders; consequently, the Company and any and all other persons
shall not be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the provisions of this Agreement or the failure of any Lender to
comply with such provisions.
7. No amendment to or waiver of any provision of this Agreement, nor
consent to any departure by any Leader herefrom, shall in any event be effective
unless the same shall be in writing and signed by all the Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
8. All notices and other communications provided to any Lender under
this Agreement shall be in writing or by facsimile and addressed, delivered or
transmitted to such Lender at its address or facsimile number set forth below
its signature hereto or at such other address or facsimile number as may be
designated by such Lender in a notice to the other Lenders. Any notice, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted if
actually received, and the burden of proving receipt shall be on the
transmitting Lender.
-25-
<PAGE>
9. No failure or delay on the part of any Lender in exercising any
power or right under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
10. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES THE
ENTIRE UNDERSTANDING BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
12. This Agreement may be separately executed in counterparts and by
the different parties hereto in separate counterparts, each of which when so
executed shall be deemed to constitute one and the same Agreement.
13. The parties hereto that were parties to the Sharing Agreement (the
"Original Sharing Agreement"), dated as of September 20, 1996, relating to
certain obligations of the Company, acknowledge and agree that this Agreement
shall be deemed to amend, restate and replace the Original Sharing Agreement as
to them.
[Signatures appear on the next page.]
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written by their duly authorized officers.
FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, individually
and as Administrative Agent
By:
Name: Timothy J. Miller
Title: Vice President
Address:
165 Madison Avenue
Memphis, Tennessee 38103
Attention: Timothy J. Miller
Vice President
(901) 523-4108 phone
(901) 523-4267 fax
THE CHASE MANHATTAN BANK
By:
Name: Benedict A. Smith
Title: Vice President
Address:
One Chase Square, 9th Floor
Rochester, New York 14643
Attention: Benedict A. Smith
(716) 258-5669 phone
(716) 258-4258 fax
[Signatures continued on the next page.]
-27-
<PAGE>
FIRST UNION NATIONAL BANK
By:
Name: Kathleen L. Nelson
Title: Vice President
Address:
150 Fourth Avenue North, Suite 200
Nashville, Tennessee 37219
Attention: Kathleen L. Nelson
(615) 251-9212 phone
(615) 251-0894 fax
SUNTRUST BANK, NASHVILLE, N.A.
By:
Name: Renee D. Drake
Title: Vice President
Address:
6410 Poplar Avenue, Suite 320
Memphis, Tennessee 38119
Attention: Renee Drake
Vice President
(901) 762-9868 phone
(901) 766-7565 fax
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:
Name: Billy B. Greer
Title: Vice President
Address:
c/o Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, GA 30346
Attention: Managing Director
(770) 395-8424 phone
(770) 395-8421 fax
-28-
<PAGE>
CONSENT AND AGREEMENT
---------------------
Each of the undersigned hereby consents to the provisions of the
foregoing Agreement and the transactions contemplated thereby and specifically
agrees to the provisions of Sections 1 and 2 of the Agreement (including the
provisions regarding the right of setoff). Each of the undersigned agrees to
notify each Lender promptly of any payment to, or setoff or obtaining of a
secured claim by, the other Lenders contemplated by the foregoing Agreement.
Dated: January 21, 2000
TBC CORPORATION
By:
Ronald E. McCollough,
Executive Vice President, Chief
Financial Officer and Treasurer
BIG O TIRES, INC.
By:
Ronald E. McCollough,
Executive Vice President
TBC INTERNATIONAL, INC.
By:
Ronald E. McCollough,
Executive Vice President
CARROLL'S, INC.
By:
Ronald E. McCollough,
Executive Vice President
-29-
<PAGE>
BIG O RETAIL ENTERPRISES, INC.
By:
Ronald E. McCollough,
Executive Vice President
BIG O DEVELOPMENT, INC.
By:
Ronald E. McCollough,
Executive Vice President
BIG O TIRE OF IDAHO, INC.
By:
Ronald E. McCollough,
Executive Vice President
-30-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> (22338)<F1>
<SECURITIES> 0
<RECEIVABLES> 109333
<ALLOWANCES> 7665
<INVENTORY> 150781
<CURRENT-ASSETS> 272049
<PP&E> 69472
<DEPRECIATION> 26787
<TOTAL-ASSETS> 368788
<CURRENT-LIABILITIES> 152009
<BONDS> 47000
0
0
<COMMON> 2120
<OTHER-SE> 158319
<TOTAL-LIABILITY-AND-EQUITY> 368788
<SALES> 177389
<TOTAL-REVENUES> 177389
<CGS> 145503
<TOTAL-COSTS> 145503
<OTHER-EXPENSES> 22981
<LOSS-PROVISION> 268
<INTEREST-EXPENSE> 2108
<INCOME-PRETAX> 6529
<INCOME-TAX> 2584
<INCOME-CONTINUING> 3945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3945
<EPS-BASIC> .19
<EPS-DILUTED> .19
<FN>
<F1>THIS ITEM IS SHOWN NET OF "OUTSTANDING CHECKS, NET" ON THE CONSOLIDATED
BALANCE SHEETS.
</FN>
</TABLE>
