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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________________ to ___________________
Commission File Number 0-21803
AFTERMARKET TECHNOLOGY CORP.
----------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-4486486
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One Oak Hill Center - Suite 400, Westmont, IL 60559
- --------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (630) 455-6000
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 ( )
As of October 31, 1998, there were 20,202,270 shares of common stock of the
Registrant outstanding.
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AFTERMARKET TECHNOLOGY CORP.
FORM 10-Q
<TABLE>
TABLE OF CONTENTS
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Page Number
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<S> <C>
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 1998 (unaudited)
and December 31, 1997 ............................................... 3
Consolidated Statements of Income (unaudited) for the Three
and Nine Months Ended September 30, 1998 and 1997.................... 4
Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended September 30, 1998 and 1997........................ 5
Notes to Consolidated Financial Statements .......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. 10
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K..................................... 20
SIGNATURES....................................................................... 21
EXHIBIT INDEX.................................................................... 22
EXHIBIT 11. - Statement Re Computation of Net Income Per Share................... 23
Note: Items 1 - 5 of Part II are omitted because they are not applicable.
</TABLE>
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<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 802 $ 78
Accounts receivable, net 77,628 53,761
Inventories 106,298 76,166
Prepaid and other assets 9,220 4,706
Refundable income taxes - 1,011
Deferred income taxes 4,599 3,478
-------- --------
Total current assets 198,547 139,200
Property, plant and equipment:
Land 1,675 -
Buildings 9,923 -
Machinery and equipment 47,037 19,335
Autos and trucks 3,914 2,712
Furniture and fixtures 4,540 3,139
Leasehold improvements 11,429 6,058
-------- --------
78,518 31,244
Less accumulated depreciation and amortization (19,830) (6,830)
-------- --------
58,688 24,414
Debt issuance costs, net 5,054 4,260
Cost in excess of net assets acquired, net 257,619 200,393
Other assets 3,643 410
-------- --------
Total assets $523,551 $368,677
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 31,962 $ 16,055
Accrued payroll and related costs 9,793 5,820
Accrued interest payable 3,324 6,253
Other accrued expenses 10,339 4,904
Bank lines of credit 1,954 4,596
Income taxes payable 300 -
Acquisition notes payable 1,536 1,435
Due to former owners 1,147 1,614
-------- --------
Total current liabilities 60,355 40,677
12% Series B and D Senior Subordinated Notes 115,657 121,288
Acquisition notes payable 8,632 9,097
Amount drawn on revolving credit facility 139,400 11,100
Deferred compensation 3,253 3,042
Deferred income taxes 9,638 8,044
Stockholders' equity:
Preferred stock, $.01 par value; shares authorized - 2,000,000; none issued - -
Common stock, $.01 par value; shares authorized - 30,000,000;
Shares issued - 20,043,986 and 19,577,274 200 195
Additional paid-in capital 134,029 131,604
Accumulated other comprehensive gain (loss) (1,434) 136
Retained earnings 55,815 43,494
-------- --------
188,610 175,429
Less: Treasury stock at cost (172,000 shares and none) (1,994) -
-------- --------
Total stockholders' equity 186,616 175,429
-------- --------
Total liabilities and stockholders' equity $523,551 $368,677
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES.
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<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1998 1997 1998 1997
------------ ----------- ---------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 125,003 $ 88,392 $ 362,472 $ 256,490
Cost of sales 86,931 54,519 245,492 157,679
--------- -------- --------- ---------
Gross profit 38,072 33,873 116,980 98,811
Selling, general and
administrative expense 26,066 18,741 70,329 54,477
Amortization of intangible assets 1,889 1,184 5,128 3,175
Special charges - - 3,580 -
--------- -------- --------- ---------
Income from operations 10,117 13,948 37,943 41,159
Interest and other income 550 449 1,500 1,457
Interest expense 6,361 4,945 17,997 13,968
--------- -------- --------- ---------
Income before income taxes
and extraordinary item 4,306 9,452 21,446 28,648
Provision for income taxes 1,753 3,800 8,592 11,517
--------- -------- --------- ---------
Income before extraordinary item 2,553 5,652 12,854 17,131
Extraordinary item - net of income tax
benefit 170 - 533 3,749
--------- -------- --------- ---------
Net income $ 2,383 $ 5,652 $ 12,321 $ 13,382
--------- -------- --------- ---------
--------- -------- --------- ---------
Basic earnings per common share:
Income before extraordinary item $ 0.13 $ 0.33 $ 0.65 $ 1.01
Extraordinary item (0.01) - (0.03) (0.22)
--------- -------- --------- ---------
Net income $ 0.12 $ 0.33 $ 0.62 $ 0.79
--------- -------- --------- ---------
--------- -------- --------- ---------
Weighted average number of common shares
outstanding 19,991 17,127 19,929 17,036
--------- -------- --------- ---------
--------- -------- --------- ---------
Diluted earnings per common share:
Income before extraordinary item $ 0.12 $ 0.30 $ 0.61 $ 0.90
Extraordinary item (0.01) - (0.03) (0.20)
--------- -------- --------- ---------
Net income $ 0.11 $ 0.30 $ 0.58 $ 0.70
--------- -------- --------- ---------
--------- -------- --------- ---------
Weighted average number of common and
common equivalent shares outstanding 21,091 19,017 21,203 18,927
--------- -------- --------- ---------
--------- -------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 12,321 $ 13,382
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary item 888 6,269
Depreciation and amortization 11,383 5,546
Amortization of debt issuance costs 832 671
Provision for losses on accounts receivable 634 688
Loss on sale of equipment 20 6
Deferred income taxes 729 1,299
Changes in operating assets and liabilities
(net of acquired businesses):
Accounts receivable (3,768) (9,387)
Inventories (9,318) (3,059)
Prepaid and other assets (5,250) (798)
Accounts payable and accrued expenses 5,374 (11,000)
---------- ----------
Net cash provided by operating activities 13,845 3,617
---------- ----------
INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (15,394) (6,690)
Acquisition of companies, net of cash received (114,512) (54,615)
Proceeds from sale of equipment 593 40
---------- ----------
Net cash used in investing activities (129,313) (61,265)
---------- ----------
FINANCING ACTIVITIES:
Borrowings on revolving credit facility, net 128,300 60,000
Payments on bank lines of credit, net (2,387) (94)
Payment of debt issuance costs (2,425) (778)
Retirement of senior subordinated notes (5,614) (44,800)
Proceeds from exercise of stock options 780 285
Payments on amounts due to former owners (468) -
Treasury stock (1,994) -
---------- ----------
Net cash provided by financing activities 116,192 14,613
---------- ----------
Increase (decrease) in cash and cash equivalents 724 (43,035)
Cash and cash equivalents at beginning of period 78 46,498
---------- ----------
Cash and cash equivalents at end of period $ 802 $ 3,463
---------- ----------
---------- ----------
Cash paid during the period for:
Interest $ 18,776 $ 18,546
Income taxes $ 3,771 $ 7,288
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE>
AFTERMARKET TECHNOLOGY CORP.
Notes to Consolidated Financial Statements
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Aftermarket Technology Corp. (the "Company") as of September 30, 1998 and for
the three and nine months ended September 30, 1998 and 1997 have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997.
Certain prior-year amounts have been reclassified to conform to the 1998
presentation.
NOTE 2: INVENTORIES
Inventories are stated at the lower of cost (first in, first out method)
or market:
<TABLE>
<CAPTION>
(In thousands) SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Raw materials, including core inventories... $ 38,274 $ 24,788
Work-in-process............................. 2,271 3,125
Finished goods.............................. 65,753 48,253
------------------ -----------------
$106,298 $ 76,166
------------------ -----------------
------------------ -----------------
</TABLE>
Finished goods include purchased parts which are available for sale.
NOTE 3: REVOLVING CREDIT FACILITY
In March 1998, the credit agreement for the Company's $100.0 million
credit facility with The Chase Manhattan Bank, as agent (the "Bank"), was
amended and restated to provide for a new credit facility comprised of a
$100.0 million revolving portion and a $120.0 million term loan portion (the
"New Credit Facility") to finance the Company's working capital requirements,
future acquisitions and the acquisition of Autocraft (See Note 4). Amounts
advanced under the New Credit Facility are secured by substantially all the
assets of the Company. Amounts advanced under the revolving portion of the
New Credit Facility will become due on December 31, 2003. Per the terms of
the New Credit Facility, the Company has made a scheduled quarterly
installment payment of $5.0 million as of September 30, 1998 to bring the
term loan portion to $115.0 million. Subsequent quarterly installments are
scheduled to continue through December 31, 2003 as outlined in the credit
agreement. The Company may prepay outstanding advances under the revolving
portion or the term loan portion of the New Credit Facility in whole or in
part without incurring any premium or penalty.
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<PAGE>
NOTE 4: ACQUISITIONS
In January 1997, the Company acquired all of the outstanding capital
stock of Replacement & Exchange Parts Co., Inc. ("REPCO"), a Texas based
distributor of transmission repair parts, for a purchase price of
approximately $12.3 million, including transaction fees and related expenses.
Goodwill recorded approximated $6.8 million.
In July 1997, the Company acquired substantially all of the assets of
ATS Remanufacturing ("ATS"), a remanufacturer of automatic transmissions and
related components located in Gastonia, North Carolina. In August 1997, the
Company acquired all of the outstanding capital stock of Trans Mart, Inc.
("Trans Mart"), a distributor of automatic and standard transmission parts
and related drive train components based in Florence, Alabama. To complete
these acquisitions, the Company made cash payments totaling $12.9 million and
$27.9 million for ATS and Trans Mart, respectively, including transaction
fees and related expenses. In addition, the ATS acquisition calls for
subsequent payments due on each of the first eight anniversaries of the
closing date. As of September 30, 1998 the Company paid $1.0 million of
additional payments related to the ATS acquisition. Substantially all of
these additional payments, which will aggregate up to approximately $18.0
million (present value $13.4 million as of September 30, 1998), are
contingent upon the attainment of certain sales levels by ATS, which the
Company believes are more likely than not to be attained. Goodwill recorded
for ATS and Trans Mart approximated $26.1 million and $20.9 million,
respectively.
In November 1997, the Company acquired all of the outstanding capital
stock of Metran Automatic Transmission Parts Corp. ("Metran"), a New York
based distributor of automatic and manual transmission parts and related
drive train components, for a purchase price of approximately $8.1 million,
including transaction fees and related expenses. Goodwill recorded
approximated $5.4 million.
On March 6, 1998, the Company acquired substantially all the assets of
the OEM Division of Autocraft Industries, Inc. ("Autocraft"), a
remanufacturer and distributor of drivetrain and electronic parts used in the
warranty and aftermarket repair of passenger cars and light trucks. The
purchase price consists of approximately $115.7 million, including
transaction fees and related expenses, paid at closing and up to an
additional $12.5 million to be paid in 1999 based on the performance of the
OEM Division's European operations during 1998. Goodwill recorded
approximated $62.0 million, which would increase by up to an additional $12.5
million dependent on the potential 1999 payment described above.
These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the allocation of the cost of the acquired assets
and liabilities has been made on the basis of the estimated fair value.
Goodwill for all acquisitions is amortized over a period not to exceed 40
years on a straight-line basis. The consolidated financial statements
include the operating results of each business from the date of acquisition.
NOTE 5: SPECIAL CHARGES
The Company has commenced certain initiatives designed to improve
operating efficiencies and reduce costs. In the second quarter of 1998 the
Company recorded $3.6 million in special charges related to these
initiatives, consisting of $1.1 million of restructuring charges and $2.5
million of other charges. The $1.1 million restructuring charges includes
$0.8 million of severance costs for approximately 11 people and $0.3 million
of exit costs. The severance costs were incurred in connection with the
reorganization of the ATC Distribution Group's management structure,
centralization of the ATC Distribution Group's Management Information Systems
("MIS") operations and certain other personnel matters. The exit costs were
incurred to consolidate the Company's Joplin and Springfield Missouri engine
remanufacturing lines into the Springfield facility. The other charges
consisted of $2.0 million of idle plant capacity costs incurred at the Joplin
facility due to the consolidation of the remanufacturing lines and
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<PAGE>
$0.5 million of relocation costs related to the centralization of the ATC
Distribution Group's management team and to centralize the ATC Distribution
Group's MIS operations.
As part of its ongoing effort to maximize operating efficiencies and
lower costs, the Company is continuing to evaluate its business to identify
additional improvements that may result in additional special charges.
The following table summarizes the provisions and reserves for
restructuring and special charges as included in other accrued expenses:
<TABLE>
<CAPTION>
Termination
(In thousands) Benefits Exit / Other Costs Total
------------ ------------------ ----------
<S> <C> <C> <C>
Provision 1998 $ 822 $ 2,758 $ 3,580
Payments 1998 (657) (2,074) ( 2,731)
------ -------- --------
Reserve at September 30, 1998 $ 165 $ 684 $ 849
------ -------- --------
------ -------- --------
</TABLE>
NOTE 6: COMPREHENSIVE INCOME
As of January 1, 1998 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income (loss) and its components; however, the adoption of the Statement had
no impact on the Company's net income or stockholders' equity. SFAS No. 130
requires changes in the accumulated foreign currency translation adjustments,
which, prior to adoption of SFAS No. 130, were reported separately in
stockholders' equity, to be included in other comprehensive gain (loss).
Prior year financial statements have been reclassified as necessary to
conform to the requirements of SFAS No. 130.
During the first nine months of 1998 and 1997 total comprehensive income
amounted to $10,751,000 and $13,411,000, respectively.
The following table sets forth the computation of comprehensive income
for the nine months ended September 30, 1998 (In thousands):
<TABLE>
<CAPTION>
Accumulated
Compre- Additional Other
hensive Common Paid-in Comprehensive Retained Treasury
Income Stock Capital Gain/(Loss) Earnings Stock Total
-------- -------- ---------- ------------ --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997 $ - $ 195 $131,604 $ 136 $ 43,494 $ 175,429
Net Income 12,321 - - - 12,321 12,321
Other comprehensive losses:
Cumulative translation adj. (1,570) - - (1,570) - - (1,570)
------
Comprehensive income $10,751 - - - - - -
-------
-------
Issuance of common stock from
exercise of stock options 5 2,425 - - - 2,430
Acquisition of treasury shares (1,994) (1,994)
------- --------- -------- -------- ---------- ----------
Balances, September 30, 1998 $ 200 $134,029 $ (1,434) $ 55,815 $ (1,994) $ 186,616
------- -------- -------- -------- --------- ----------
------- -------- -------- -------- --------- ----------
</TABLE>
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NOTE 7: EXTRAORDINARY ITEM
In September 1998 the Company repurchased $5.4 million in principal
amount of the Company's 12% Senior Subordinated Notes due 2004 (the "Senior
Notes") in open market transactions. In connection with this repurchase, the
Company recorded a pre-tax extraordinary item charge of $0.3 million related
to the purchase price premium and the write-off of unamortized deferred
financing fees.
In March 1998 in connection with the restatement and amendment of the
credit agreement to provide for the New Credit Facility the Company recorded
a pre-tax extraordinary item charge of $0.6 million related to the write-off
of previously capitalized debt issuance costs.
The extraordinary item in 1997 of $3.8 million, net of income tax
benefit of $2.5 million, consists largely of a pre-tax charge of $5.7 million
related to the early redemption of $40.0 million in principal amount of the
Company's Senior Notes, consisting of the early redemption premium charge of
$4.3 million plus unamortized deferred financing fees of $1.4 million. The
extraordinary item also includes a pre-tax charge of $0.6 million related to
the restructuring of the Company's original revolving credit facility. Both
events occurred in February 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENT NOTICE
Readers are cautioned that certain statements contained in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations that are not related to historical results are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Statements that are predictive, that depend upon or refer to
future events or conditions, or that include words such as "expects,"
"anticipates," "intends," "plans," "believes," "estimates," "hopes," and
similar expressions constitute forward-looking statements. In addition, any
statements concerning future financial performance (including future
revenues, earnings or growth rates), ongoing business strategies or
prospects, and possible future Company actions are also forward-looking
statements.
Forward-looking statements are based on current expectations,
projections and assumptions regarding future events that may not prove to be
accurate. Actual results may differ materially from those projected or
implied in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, dependence on
significant customers, possible component parts shortages, the ability to
achieve and manage growth, future indebtedness and liquidity, environmental
matters, and competition. For a discussion of these and certain other
factors, please refer to Item 1. "Business--Certain Factors Affecting the
Company" contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. Please also refer to the Company's other filings
with the Securities and Exchange Commission.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998
COMPARED TO THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997
Income before extraordinary item decreased $3.1 million, or 54.8%, from
$5.7 million for the three months ended September 30, 1997 to $2.6 million
for the three months ended September 30, 1998. Net income decreased $3.3
million, or 57.8%, from $5.7 million for the three months ended September 30,
1997 to $2.4 million for the three months ended September 30, 1998.
Revenue increased 41.4% during the three months ended September 30, 1998
as compared to the same period in 1997. Revenue growth was achieved from
both of the Company's primary customer groups: original equipment
manufacturers ("OEMs") and independent transmission rebuilders, general
repair shops, distributors and retail automotive parts stores (the
"Independent Aftermarket"). This increase resulted from OEM customer revenue
growth of 72.8% and Independent Aftermarket revenue growth of 14.4%. Both of
these increases were entirely the result of the strategic acquisitions the
Company completed in the second half of 1997 and in 1998, which were
partially offset by declines in revenues from businesses the Company acquired
prior to 1997.
On a per share basis, income before extraordinary item decreased from
$0.30 per diluted share for the three months ended September 30, 1997 to
$0.12 per diluted share for the three months ended September 30, 1998. The
number of shares used in the per diluted share calculations were 19.0 million
for the three months ended September 30, 1997 and 21.1 million for the three
months ended September 30, 1998. The increase in shares resulted primarily
from the Company's public offering of Common stock in October 1997.
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NET SALES
Net sales increased $36.6 million, or 41.4%, from $88.4 million for the
three months ended September 30, 1997 to $125.0 million for the three months
ended September 30, 1998. Incremental net sales of $48.9 million for the
three months ended September 30, 1998 were generated by the companies
acquired in the second half of 1997 and in 1998 (ATS, Trans Mart, Metran and
Autocraft).
Excluding the benefit of the ATS and Autocraft acquisitions, net sales
to OEM customers during the three months ended September 30, 1998 decreased
$12.1 million, or 29.6%, compared with the same period in the prior year.
This reduction over last year is due in part to lower demand from the
Company's OEM customers as a result of the OEMs having to replace fewer
transmissions during the mild winter of 1997-1998. The lower demand has led
to several of the Company's OEM customers having excess inventory. In order
to assist these customers in lowering their inventories to meet targeted
levels by the end of 1998, the Company began reducing its shipments to them
during the third quarter. Although most of these OEMs have made good progress
in reducing their inventory levels, lower than forecasted demand at Chrysler,
one of the Company's primary OEM customers, has made it necessary for the
Company to further reduce shipments to Chrysler significantly in order for
Chrysler to still achieve the targeted inventory level by year-end.
Net sales to Chrysler represented 16.7% of total net sales for the three
months ended September 30, 1998, as compared to 31.7% of total net sales for
the three months ended September 30, 1997. The reduction in net sales to
Chrysler as a percentage of total net sales is due to both the reduction in
shipments of remanufactured transmissions as well as an increase in the
Company's revenue base from the acquisitions in the second half of 1997 and
in 1998. As a result of the Autocraft acquisition in March 1998, Ford has
become a significant customer, accounting for 21.0% of total net sales for
the three months ended September 30, 1998.
Excluding the benefits of the Trans Mart and Metran acquisitions, net
sales to Independent Aftermarket customers during the third quarter of 1998
decreased $0.2 million, or 0.4%, compared to the same period in 1997. During
1998 the Company's Independent Aftermarket business (primarily the ATC
Distribution Group) has been affected by the mild weather as well as
short-term problems associated with the implementation of the Distribution
Group's enterprise-wide computer system. The Company expects to recognize
operational efficiencies and improved productivity after the system is fully
implemented and integrated into operations. The Company expects to have
substantially all of the Distribution Group locations operational on the new
computer system by the end of 1998.
GROSS PROFIT
Gross profit as a percentage of net sales decreased from 38.3% for the
three months ended September 30, 1997 to 30.5% for the three months ended
September 30, 1998. Of the 7.8% gross profit margin percentage reduction,
4.8% was attributable to those companies acquired during the second half of
1997 (ATS, Trans Mart and Metran) and the acquisition of Autocraft in March
of 1998, which combined have historically operated at a lower gross margin
percentage than the consolidated company. The balance of the reduction is
primarily due to a change in the mix of product sales during the three months
ended September 30, 1998 as compared to comparable period in 1997.
-11-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") increased $7.3
million, or 39.1%, from $18.7 million for the three months ended September
30, 1997 to $26.1 million for the three months ended September 30, 1998. The
higher SG&A resulted largely from the companies acquired in the second half
of 1997 and in 1998 (ATS, Trans Mart, Metran and Autocraft). As a percentage
of net sales, SG&A decreased from 21.2% to 20.9% between the two periods.
This decrease was principally due to companies acquired in the second half of
1997 and in 1998, which combined have historically operated at a lower SG&A
percentage of sales than the consolidated company.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased $0.7 million, or 59.5%, from
$1.2 million for the three months ended September 30, 1997 to $1.9 million
for the three months ended September 30, 1998. The increase resulted from the
additional intangible assets arising from the acquisitions of ATS, Trans
Mart, Metran and Autocraft.
INCOME FROM OPERATIONS
Income from operations decreased $3.8 million, or 27.5%, from $13.9
million for the three months ended September 30, 1997 to $10.1 million for
the three months ended September 30, 1998. As a percentage of net sales,
income from operations decreased from 15.8% for the three months ended
September 30, 1997 to 8.1% for the three months ended September 30,1998. The
lower income from operations as a percentage of sales recorded in the third
quarter of 1998 as compared to 1997 is principally due to the lower gross
margin percentages in 1998 as compared to 1997 and additional amortization of
intangible assets arising from the acquisitions during the second half of
1997 and in 1998.
INTEREST EXPENSE
Interest expense increased $1.4 million, or 28.6%, from $4.9 million for
the three months ended September 30, 1997 to $6.4 million for the three
months ended September 30, 1998. The higher interest expense was largely due
to the borrowing of $120.0 million under the term loan portion of the New
Credit Facility in order to finance the Autocraft acquisition on March 6,
1998.
EXTRAORDINARY ITEM
During the three months ended September 30, 1998 the Company repurchased
$5.4 million in principal amount of its Senior Notes through open market
purchases. An extraordinary item in the amount of $0.2 million ($0.3
million, net of related income tax benefit of $0.1 million) was recorded
during the three months ended September 30, 1998 related to the purchase
price premium and the write-off of unamortized deferred financing fees.
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<PAGE>
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
COMPARED TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
After-tax net earnings before extraordinary item and special charges
decreased $2.1 million, or 12.4%, from $17.1 million for the nine months
ended September 30, 1997 to $15.0 million for the nine months ended September
30, 1998. During the nine month period ended September 30, 1998 the Company
recorded a special charge of $3.6 million relating to certain actions the
Company is taking in order to reduce costs and increase efficiencies (see
"Special Charges" below). Income before extraordinary item as reported
decreased $4.3 million, or 25.0%, from $17.1 million for the nine months
ended September 30, 1997 to $12.9 million for the nine months ended September
30, 1998.
Revenue increased 41.3% during the nine months ended September 30, 1998
as compared to the same period in 1997. Revenue growth was achieved from the
Company's two primary customer groups (OEMs and the Independent Aftermarket).
Revenues from OEM customers increased 56.9% and revenues from Independent
Aftermarket customers increased 26.8%. These increases were entirely due to
the strategic acquisitions the Company has completed since the beginning of
1997 which were partially offset by declines in revenues from businesses the
Company acquired prior to 1997.
On a per share basis, absent the extraordinary item and special charges,
net income per diluted share would have been $0.71 for the nine months ended
September 30, 1998. As reported, income per share before extraordinary item
decreased from $0.90 per diluted share for the nine months ended September
30, 1997 to $0.61 per diluted share for the nine months ended September 30,
1998. Special charges recorded during the nine months ended September 30,
1998 resulted in a reduction of $0.10 per diluted share. The number of shares
used in the per share calculations were 18.9 million for the nine months
ended September 30, 1997 and 21.2 million for the nine months ended September
30, 1998. The increase in shares resulted primarily from the Company's
public offering of Common stock in October 1997.
NET SALES
Net sales increased $106.0 million, or 41.3%, from $256.5 million for
the nine months ended September 30, 1997 to $362.5 million for the nine
months ended September 30, 1998. Incremental net sales of $131.3 million for
the nine months ended September 30, 1998 were generated by the companies
acquired in 1997 and 1998 (REPCO, ATS, Trans Mart, Metran and Autocraft).
Excluding the benefit of the ATS and Autocraft acquisitions, net sales
to OEM customers during the nine months ended September 30, 1998 decreased
$25.2 million, or 20.4%, compared with the same period in the prior year.
This reduction over last year is due in part to lower demand from the
Company's OEM customers as a result of the OEMs having to replace fewer
transmissions during the mild winter of 1997-1998. The lower demand has led
to several of the Company's OEM customers having excess inventory. In order
to assist these customers in lowering their inventories to meet targeted
levels by the end of 1998, the Company began reducing its shipments to them
during the third quarter. Although most of these OEMs have made good progress
in reducing their inventory levels, lower than forecasted demand at Chrysler,
one of the Company's primary OEM customers, has made it necessary for the
Company to further reduce shipments to Chrysler significantly in order for
Chrysler to still achieve the targeted inventory level by year-end. In
addition to the mild winter, management believes that demand from Chrysler
has also been affected by improvements in the quality of Chrysler's late
model original equipment transmissions and an increase in the percentage of
transmissions repaired by Chrysler dealers as opposed to replaced with
remanufactured units.
-13-
<PAGE>
Net sales to Chrysler represented 19.1% of total net sales for the nine
months ended September 30, 1998, as compared to 33.8% of total net sales for
the nine months ended September 30, 1997. The reduction in net sales to
Chrysler as a percentage of total net sales is due to both the reduction in
shipments of remanufactured transmissions as well as an increase in the
Company's revenue base from the acquisitions in 1997 and in 1998. As a
result of the Autocraft acquisition in March 1998, Ford has become a
significant customer, accounting for 15.4% of total net sales for the nine
months ended September 30, 1998.
Excluding the benefits of the REPCO, Trans Mart and Metran acquisitions,
net sales to Independent Aftermarket customers during the nine months ended
September 30, 1998 and 1997 were $132.6 million and $132.7 million,
respectively.
GROSS PROFIT
Gross profit as a percentage of net sales decreased from 38.5% for the
nine months ended September 30, 1997 to 32.3% for the nine months ended
September 30, 1998. Of the 6.2% gross profit margin percentage reduction,
4.4% was attributable to those companies acquired during 1997 and 1998
(REPCO, ATS, Trans Mart, Metran and Autocraft), which combined have
historically operated at a lower gross margin percentage than the
consolidated company. The balance of the reduction is primarily due to a
change in the mix of product sales during the nine months ended September 30,
1998 as compared to the comparable period in 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's SG&A expenses increased $15.9 million, or 29.1%, from
$54.5 million for the nine months ended September 30, 1997 to $70.3 million
for the nine months ended September 30, 1998. The higher SG&A resulted
largely from the companies acquired in 1997 and 1998 (REPCO, ATS, Trans Mart,
Metran and Autocraft). As a percentage of net sales, SG&A decreased from
21.2% to 19.4% between the two periods. This decrease was principally due to
companies acquired in 1997 and 1998, which combined have historically
operated at a lower SG&A percentage of sales than the consolidated company.
Included in SG&A expenses are non-cash charges totaling $0.6 million in
1998 and $1.5 million in 1997. These charges represent the pro rata portion
for each period of deferred compensation expense relating to the difference
between the exercise price and the intrinsic value for financial statement
presentation purposes of stock options granted by the Company in 1996. The
Company expects to recognize additional compensation expense aggregating $0.5
million over the balance of the respective vesting periods of the options,
which generally range from three to five years from the date of grant.
SPECIAL CHARGES
The Company has commenced two initiatives designed to improve operating
efficiencies and reduce costs:
- "LEAN" MANUFACTURING. The Company is beginning the process of
reorganizing its production lines using a cellular concept. Workers
are organized into teams and the members of each team are responsible
for feeding one another with product through the entire
remanufacturing process. This is expected to reduce the time and
floor space required to remanufacture product, which in turn will
reduce production costs. This will also enable the Company to
consolidate production facilities as the need for square footage is
reduced.
- DISTRIBUTION GROUP CONSOLIDATION. At the end of 1997, the Company
began to integrate the operations of the nine companies that make up
the ATC Distribution Group. The first steps in this process were
begun when the Distribution Group management function was centralized
and most of the Distribution Group companies were merged into a single
-14-
<PAGE>
entity. In addition, the Company developed a common product
identification and numbering system that is being implemented
throughout the Distribution Group in conjunction with a computer
network electronically linking its distribution centers, which system
is expected to be substantially completed by the end of 1998. During
the second quarter of 1998, the Distribution Group management
structure was reorganized to eliminate certain positions that were no
longer necessary as a result of the ongoing consolidation. In
addition, certain functions such as purchasing and MIS were
centralized. In the future, the Company expects to be able to
consolidate other Distribution Group functions and operations.
As a result of these initiatives, the Company recorded $3.6 million of
special charges during the second quarter of 1998, consisting of $1.1 million
of restructuring charges and $2.5 million of other charges. The
restructuring charges were: (i) $0.3 million of exit costs incurred when the
Company consolidated its Joplin and Springfield, Missouri engine
remanufacturing lines into the Springfield facility, which was made possible
by the production space savings achieved through use of cellular
remanufacturing; and (ii) $0.8 million of severance costs in connection with
the reorganization of the Distribution Group's management structure, the
centralization of its MIS function and certain other personnel matters. The
other charges consisted of (i) $2.0 million of idle plant capacity costs
incurred at the Joplin facility due to the consolidation of the engine
remanufacturing lines, and (ii) $0.5 million of relocation costs related to
the centralization of the Distribution Group's management team and to
centralize the Distribution Group's MIS function. Management expects to
realize annual pre-tax savings of approximately $3.0 million from the changes
to which these special charges relate.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased $2.0 million, or 61.5%, from
$3.2 million for the nine months ended September 30, 1997 to $5.1 million for
the nine months ended September 30,1998. The increase resulted from the
additional intangible assets arising from the acquisitions of REPCO, ATS,
Trans Mart, Metran and Autocraft.
INCOME FROM OPERATIONS
Principally as a result of the factors described above, income from
operations decreased $3.2 million, or 7.8%, from $41.2 million for the nine
months ended September 30, 1997 to $37.9 million for the nine months ended
September 30, 1998.
INTEREST EXPENSE
Interest expense increased $4.0 million, or 28.8%, from $14.0 million
for the nine months ended September 30, 1997 to $18.0 million for the nine
months ended September 30, 1998. The higher interest expense was largely due
to the borrowing of $120.0 million under the term loan portion of the New
Credit Facility in order to finance the Autocraft acquisition on March 6,
1998.
-15-
<PAGE>
EXTRAORDINARY ITEM
Extraordinary items totaling $0.5 million ($0.9 million, net of related
income tax benefit of $0.4 million) were recorded during the nine months
ended September 30, 1998. A pre-tax charge of $0.3 million is related to the
open market purchases of $5.4 million in principal amount of the Company's
Senior Notes in September 1998. A pre-tax charge of $0.6 million was related
to the write-off of previously capitalized debt issuance costs in connection
with the restatement and amendment of the credit agreement for the New Credit
Facility.
An extraordinary item in the amount of $3.8 million ($6.3 million, net
of related income tax benefit of $2.5 million) was recorded during the nine
months ended September 30, 1997. This amount was comprised of (i) a $5.7
million charge resulting from the early redemption of $40.0 million of the
Senior Notes in February 1997, which included the payment of a 12% early
redemption premium and the write-off of related debt issuance costs and (ii)
a charge of $0.6 million for the write-off of previously capitalized debt
issuance costs in connection with the termination of the Company's previous
revolving credit facility.
-16-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had total cash and cash equivalents on hand of $0.8 million
at September 30, 1998, representing an increase in net cash of $0.7 million
for the nine months then ended. Net cash provided by operating activities
was $13.8 million for the nine-month period. Net cash used in investing
activities was $129.3 million for the period, including $113.5 million (net
of $2.2 million of cash received) for the acquisition of Autocraft, a $1.0
million scheduled deferred payment related to the acquisition of ATS and
$15.4 million in capital expenditures largely for remanufacturing equipment,
systems implementation costs and leasehold improvements. Net cash provided
by financing activities of $116.2 million was primarily from net borrowings
of $128.3 million made under the New Credit Facility. Partially offsetting
the net borrowings were payments totaling $5.6 million in connection with the
repurchase of $5.4 million of Senior Notes, $2.4 million in payments on bank
lines of credit, $2.4 million in payment of debt issuance costs related to
the New Credit Facility and $2.0 million paid to repurchase shares of the
Company's common stock.
In October 1998 the Company repurchased an additional $4.2 million in
principal amount of Senior Notes for approximately $4.4 million.
In March 1998 the credit agreement for the Company's credit facility was
amended and restated to provide the New Credit Facility, which consists of a
$120.0 million term loan facility ($115.0 million as of September 30, 1998)
in addition to the existing $100.0 million revolving facility. The Company
borrowed $120.0 million under the term loan facility on March 6, 1998 to
purchase Autocraft and pay related transaction expenses, pay debt issuance
costs related to the New Credit Facility and contribute to its current
working capital requirements. The term loan is payable in quarterly
installments through December 31, 2003 ($5.0 million paid as of September 30,
1998) and bears interest at a rate of at either (i) the Alternate Base Rate
plus a specified margin or (ii) the Eurodollar Rate plus a specified margin.
The "Alternate Base Rate" is equal to the highest of (a) the Bank's prime
rate, (b) the secondary market rate for three-month certificates of deposit
plus 1.0% and (c) the federal funds rate plus 0.5%, in each case as in effect
from time to time. The "Eurodollar Rate" is the rate offered by the Bank for
eurodollar deposits for one, two, three, six or, if available by all lenders,
nine months (as selected by the Company) in the interbank eurodollar market
in the approximate amount of the Bank's share of the advance under the New
Credit Facility. The applicable margins for both Alternate Base Rate and
Eurodollar Rate loans are subject to a quarterly adjustment based on the
Company's leverage ratio as of the end of the four fiscal quarters then
completed. The Alternate Base Rate margin is currently zero and the
Eurodollar margin is currently at 1.0%. As of September 30, 1998 the Company
has paid down $5.0 million on the term loan facility.
The Company negotiated a fixed interest rate of 5.932% plus a specified
margin (currently 100 basis points) on $50.0 million of the term loan
facility with the balance bearing interest at the rate determined per the
description in the proceeding paragraph.
As of September 30, 1998, the Company had approximately $73.8 million
available under the revolving portion on the New Credit Facility.
The Company believes that cash on hand, cash flow from operations and
existing borrowing capacity will be sufficient to fund its ongoing operations
and its budgeted capital expenditures. In pursuing future acquisitions, the
Company will continue to consider the effect any such acquisition costs may
have on its liquidity. In order to consummate such acquisitions, the Company
may need to seek funds through additional borrowings or equity financing.
YEAR 2000 COMPLIANCE
The Company has assembled an internal project team that is addressing the
issue of computer programs and embedded computer chips being unable to
distinguish between the year 1900 and
-17-
<PAGE>
the Year 2000. The project team has developed and is in the process of
implementing a three-step plan intended to result in the Company's operations
continuing with no or minimal interruption through the Year 2000. The plan
has been designed to comply with guidelines established by the Automotive
Industry Action Group (an industry association supported by several of the
major OEMs).
For purposes of this discussion, "Year 2000 compatible" means that the
computer hardware, software or device in question will function in 2000
without modification or adjustment or will function in 2000 with a one-time
manual adjustment. However, there can be no assurance that any such Year
2000 compatible hardware, software or device will function properly when
interacting with any Year 2000 noncompatible hardware, software or device.
PROCESS OVERVIEW
The first step in the Company's plan is to inventory all of its computer
hardware and software and all of its devices having imbedded computer
technology. The Year 2000 project team is focusing on five areas:
(i) business systems; (ii) production (E.G., desk top computers and
remanufacturing machinery); (iii) financial management (E.G., banking
software, postage equipment and time clocks); (iv) facilities (E.G., heating
and air conditioning systems, elevators, telephones, and fire and security
systems); and (v) significant vendors and customers. The inventory is
approximately 30% complete and is expected to be finished by the end of 1998.
In the second step, the project team is determining whether each
inventoried system, device, customer or vendor is Year 2000 compatible. In
the third step, those that are not compatible will be upgraded or replaced.
- - BUSINESS SYSTEMS. The business system used by the Company's subsidiary
that remanufactures transmissions for Chrysler is Year 2000 compatible. The
systems used by the Distribution Group, the logistical services operation and
the subsidiaries that remanufacture transmissions for Ford and General Motors
are not currently Year 2000 compatible but are in the process of being
upgraded and are expected to be compatible by the end of the first quarter of
1999. The subsidiary that remanufactures transmissions for the Company's
foreign OEM customers is about to begin the implementation of a new business
system that is Year 2000 compatible and expects to have the implementation
completed by the end of the third quarter of 1999. The Company's electronics
operation and European operation are in the process of assessing whether
their business systems are Year 2000 compatible and what remediation may be
required to make them compatible.
- - PRODUCTION, FINANCIAL MANAGEMENT AND FACILITIES. Once they have been
inventoried, each device and each piece of hardware and non-business system
software (a "Non-System Item") that can be tested by the Company is being
tested for Year 2000 compatibility. In the case of any Non-System Item that
cannot be tested, the vendor is being asked for a certification regarding
compatibility. Each Non-System Item that is noncompatible will be either
upgraded or replaced. Approximately 80% of the Non-System Items that have
been inventoried to date have been tested or certified by the vendor. The
Company expects substantially all of its Non-System Items will have been
tested or certified and upgraded or replaced by the end of the second quarter
of 1999.
- - CUSTOMERS AND VENDORS. The project team has just begun the process of
contacting each of the Company's significant customers and vendors and
requesting that they apprise the Company of the status of their Year 2000
compliance programs. The Company has targeted the end of the first quarter
of 1999 as the date for receiving substantially all customer and vendor
responses, although no responses have been received to date and there can be
no assurance as to when this process will be completed.
-18-
<PAGE>
COSTS
The total cost associated with the Company becoming Year 2000 compatible
is not expected to be material to its financial position. To date, the
Company has spent approximately $100,000 in connection with the project,
consisting primarily of costs to upgrade noncompatible business systems.
Excluded from this are the costs associated with the implementation of the
Distribution Group's enterprise-wide computer system, which is continuing
according to its original schedule. Over the next 12 months, the Company
expects to spend approximately $700,000 to upgrade its business systems and
approximately $600,000 to upgrade or replace Non-System Items.
The estimate of the cost to upgrade or replace Non-System Items is very
preliminary and the Company expects to develop a more definitive estimate
once the inventory has been completed and the testing/certification process
is further along. As a result, the actual amount that is ultimately expended
to upgrade or replace Non-System Items could be substantially higher or lower
than the above estimate.
RISKS
The failure to correct a material Year 2000 problem could result in an
interruption in or failure of certain normal business activities or
operations of the Company. Such failures could have a material adverse effect
on the Company. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of Year 2000 compliance by
the Company's significant customers and vendors, the Company is unable to
determine at this time whether the consequences of Year 2000 noncompliance
will have a material adverse effect on the Company, although its Year 2000
project is expected to significantly reduce that uncertainty.
The Company believes that the areas that present the greatest risk to
the Company are (i) disruption of the Company's business due to Year 2000 non
compatibility of one of its critical business systems and (ii) disruption of
the business of certain of its significant customers and venders due to their
noncompliance. At this time, the Company believes that all of its business
systems will be Year 2000 compatible before the end of 1999. Whether
disruption of a customer's or vendor's business due to noncompliance will
have a material adverse effect on the Company will depend on several factors
including the nature and duration of the disruption, the significance of the
customer or vendor and, in the case of vendors, the availability of alternate
sources for the vendor's products.
The Company is in the process of developing a contingency plan to
address any material Year 2000 noncompliance issues and expects to have the
plan completed by the end of 1998.
FORWARD-LOOKING STATEMENT NOTICE
Readers are cautioned that the preceding discussion contains numerous
forward-looking statements and should be read in conjunction with the
"Forward-Looking Statement Notice" appearing at the beginning of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Expectations about future Year 2000-related costs and the
progress of the Company's Year 2000 program are subject to various
uncertainties that could cause the actual results to differ materially from
the Company's expectations, including the success of the Company in
identifying hardware, software and devices that are not Year 2000 compatible,
the nature and amount of remediation required to make them compatible, the
availability, rate and amount of related labor and consulting costs and the
success of the Company's significant vendors and customers in addressing
their Year 2000 issues.
-19-
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
Part II. Other Information
Items 1 - 5 are not applicable.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Statement Re Computation of Net Income Per Share
(b) Reports on Form 8-K
(1) On August 10, 1998 the Company filed a Periodic Report on
Form 8-K dated August 7, 1998 reporting under Item 5 certain
information contained in a telephonic conference with
securities analysts on August 7, 1998.
-20-
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
Signatures
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.
AFTERMARKET TECHNOLOGY CORP.
Date: November 2, 1998 /s/ John C. Kent
- -------------------------- ----------------------------------
John C. Kent, Chief Financial Officer
- - John C. Kent is signing in the dual capacities as i) the principal
financial officer, and ii) a duly authorized officer of the company.
-21-
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Paper (P) or
Number Description Electronic (E)
- ------- ------------------------------------------------ --------------
<S> <C> <C>
11 Statement Re Computation of Net Income Per Share (P)
27 Financial Data Schedules (E)
</TABLE>
-22-
<PAGE>
EXHIBIT 11
AFTERMARKET TECHNOLOGY CORP.
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1998 1997 1998 1997
----------- ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income before extraordinary item $ 2,553 $ 5,652 $ 12,854 $ 17,131
Extraordinary item - net of income tax benefit 170 - 533 3,749
-------- ---------- --------- ---------
Net income per statements of income $ 2,383 $ 5,652 $ 12,321 $ 13,382
-------- ---------- --------- ---------
-------- ---------- --------- ---------
Shares:
Weighted average common shares outstanding 19,991 17,127 19,929 17,036
Net effect of stock options and warrants
outstanding, calculated using the treasury
stock method at the average price for the period 1,100 1,890 1,274 1,891
-------- ---------- --------- ---------
Total 21,091 19,017 21,203 18,927
-------- ---------- --------- ---------
-------- ---------- --------- ---------
Diluted earnings per common share:
Income before extraordinary item $ 0.12 $ 0.30 $ 0.61 $ 0.90
Extraordinary item, net of income tax benefit (0.01) - (0.03) (0.20)
-------- ---------- --------- ---------
Net income per share $ 0.11 $ 0.30 $ 0.58 $ 0.70
-------- ---------- --------- ---------
-------- ---------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 802
<SECURITIES> 0
<RECEIVABLES> 78,929
<ALLOWANCES> 1,301
<INVENTORY> 106,298
<CURRENT-ASSETS> 198,547
<PP&E> 78,518
<DEPRECIATION> 19,830
<TOTAL-ASSETS> 523,551
<CURRENT-LIABILITIES> 60,355
<BONDS> 115,657
0
0
<COMMON> 200
<OTHER-SE> 186,416
<TOTAL-LIABILITY-AND-EQUITY> 523,551
<SALES> 362,472
<TOTAL-REVENUES> 363,972
<CGS> 245,492
<TOTAL-COSTS> 323,895
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 634
<INTEREST-EXPENSE> 17,997
<INCOME-PRETAX> 21,446
<INCOME-TAX> 8,592
<INCOME-CONTINUING> 12,854
<DISCONTINUED> 0
<EXTRAORDINARY> 533
<CHANGES> 0
<NET-INCOME> 12,321
<EPS-PRIMARY> .62
<EPS-DILUTED> .58
</TABLE>
