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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Date of report (Date of earliest event reported): February 23, 1999
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AFTERMARKET TECHNOLOGY CORP.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-21803 95-4486486
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(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
One Oak Hill Center, Suite 400, Westmont, IL 60559
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (630) 455-6000
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AFTERMARKET TECHNOLOGY CORP.
FORM 8-K
ITEM 5. OTHER EVENTS.
On February 23, 1999, Aftermarket Technology Corp. (the "Company")
issued a press release announcing, among other things, the following: (i) a
strategic restructuring of the Company's Distribution Group, (ii) year-end
charges totaling approximately $21 million, net of tax effect, (iii) an
expected loss of approximately $0.40 per share for 1998, (iv) 1998 earning of
approximately $0.50 per share excluding the nonrecurring portion of such
charges and certain charges taken in the first three quarters of 1998,
(v) the Company's technical violation of certain financial ratio covenants
under its bank credit facility, and (vi) expected net income for 1999 at least
comparable to 1998 results excluding the nonrecurring portion of the 1998
charges. A copy of the press release is attached to this Form 8-K as Exhibit 99.
On February 24, 1999, Barry C. Kohn, Chief Financial Officer of the
Company, had telephone discussions with securities analysts during which Mr.
Kohn disclosed that the Company expects to report a loss for the first
quarter of 1999 after giving effect to potential additional nonrecurring
restructuring charges during the quarter. Excluding these nonrecurring
charges, results for the first quarter of 1999 are expected to be breakeven
to slightly profitable.
FORWARD LOOKING STATEMENT NOTICE
The above paragraphs and the attached press release contain
forward-looking statements that involve risks and uncertainties because such
statements are based upon assumptions as to future events that may not prove
to be accurate. There can be no assurance that actual results will not differ
materially from those projected or implied by such statements. The factors
that could cause actual results to differ are discussed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and other
filings made by the Company with the Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
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99 Press Release issued by Aftermarket Technology Corp. on
February 23, 1999.
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.
Dated: February 24, 1999
By: /s/Joseph Salamunovich
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Joseph Salamunovich
Vice President
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EXHIBIT 99
Contacts: George Sard/David Reno/Heather Reeves Barry Kohn
Sard Verbinnen & Co. Aftermarket Technology Corp.
(212) 687-8080 (630) 455-6000
AFTERMARKET TECHNOLOGY ANNOUNCES STRATEGIC REORGANIZATION
AND YEAR-END CHARGES
MOVES TO REGIONAL DISTRIBUTION STRUCTURE, REALIGNS OPERATING MANAGEMENT
1998 RESULTS TO INCLUDE $21 MILLION OF FOURTH QUARTER CHARGES NET OF TAX EFFECT;
EXPECTS 1998 EPS OF $0.50 BEFORE CHARGES
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WESTMONT, IL, FEBRUARY 23, 1999 - Aftermarket Technology Corp.
(NASDAQ: ATAC), a leading remanufacturer and distributor of drive train
products for the automotive aftermarket, today announced a strategic
reorganization of its Distribution Group that is intended to improve customer
focus, strengthen operations, improve financial performance, and position the
Company for future growth.
The Distribution Group is moving from centralized management to a
regional structure and is realigning operating management. Under the new
structure, the Distribution Group will consist of four North American
regions, each headed by a regional vice president with significant experience
in the automotive aftermarket. The new regional heads are Steve Parrish
(Western Region), Corby Wilemon (Southern Region), Tom DeMille (Northern
Region) and Gordon King (Canadian Region). As part of the reorganization, Wes
Dearbaugh, President of the Distribution Group, is resigning and the Company
has initiated an external search for his replacement. In addition, several
middle managers in the Distribution Group have been replaced.
The reorganization reflects the assessment of the Company's new
management that the Distribution Group consolidation begun last year, while
providing certain benefits, has reduced the Group's focus on its customers.
The reorganization is intended to address that issue while retaining the
benefits of consolidation.
Aftermarket is also commencing a program to address certain existing
problems that have arisen during the implementation of the Distribution
Group's enterprise-wide computer system. The Company now expects that the
start of the final phase of the system roll-out will be delayed until mid
1999 while these problems are resolved.
Michael T. DuBose, who was named Chairman, President and Chief
Executive Officer in December 1998, said, "Business discipline and a sharper
customer focus are essential to the future success of Aftermarket Technology.
We have the support of our principal stockholders to take the necessary steps
to drive long-term shareholder value. We have already made significant
management changes and improved financial and operating controls. The
continued strengthening of our OEM business and the realignment of our
Distribution Group will make
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Aftermarket much more efficient and responsive to customer needs as we
establish a cost structure that leverages the synergies among all of our
operations. With the addition of a new CFO in January and several other key
operating positions already filled, we are building a strong, experienced
team to take full advantage of our opportunities and leading market position."
The new management team has conducted a comprehensive review of the
Company's operations and has identified year-end charges of approximately $21
million, net of tax effect. As a result of the charges, the Company expects
to report a loss of approximately $0.40 per share for 1998. Excluding the
nonrecurring portion of the year-end charges (approximately $16 million, net
of tax effect) and certain charges taken in the first three quarters of the
year, 1998 earnings are expected to be approximately $0.50 per share. The
year-end charges include the following (all of which are stated net of tax
effect): an expense related to excess transmission cores ($4.0 million); a
write-off of excess and obsolete inventory primarily associated with the
Distribution Group ($2.9 million); a charge of $2.8 million related to the
early adoption of AICPA Statements of Position 98-5 (relating to start-up
costs of new production lines) and 98-1 (relating to internally developed
computer software costs); a restructuring charge of $1.7 million; a charge of
$1.6 million to reflect the enactment of a tax regulation that subjects a
portion of the Company's revenue over the last four years to state tax for
the first time; a loss of $0.7 million on the recent sale of the Company's
noncore Canadian heavy duty truck parts operations; and $6.8 million of other
charges, none of which individually is greater than $0.7 million. The Company
currently expects that during 1999 it will incur additional nonrecurring
restructuring costs totaling $2 million, net of tax effect.
As a result of management's comprehensive review, completion of the
Company's 1998 financial results has been delayed. The Company expects to
issue its final 1998 results in late March.
As a result of the charges, Aftermarket is in technical violation of
certain financial ratio covenants under its bank credit facility but
believes, based on discussions with the agent for its bank syndicate, that it
will be able to amend these covenants by March 31, 1999. Pending amendment of
the covenants, Aftermarket is not permitted to make additional borrowings
under the facility. The Company believes that its cash on hand will be
sufficient to meet its needs until the covenants are amended.
As previously announced, in December 1998, the Company's principal
stockholders (which are affiliates of Aurora Capital Partners) and certain of
the principals of Aurora commenced a program to purchase up to approximately
2.2 million shares of the Company's common stock in the open market in
accordance with SEC Rule 10b-18. To date, these Aurora affiliates and
principals have purchased approximately 480,000 shares of the Company's
common stock pursuant to this program. The Company has been advised by Aurora
Capital Partners that its affiliates and principals intend to complete the
purchase program, subject to market conditions, applicable legal requirements
and other factors.
"While 1999 will be a challenging transitional year for the Company,
we are taking decisive actions that should position Aftermarket well for the
future. We expect to gain
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momentum as the year progresses and 1999 results should be at least
comparable to 1998 results excluding the nonrecurring portion of the 1998
charges. Building on this momentum, we expect that we will show substantial
improvement in profitability in 2000 compared to 1999," said DuBose.
Aftermarket Technology is a leading remanufacturer and distributor
of drive train products used in the repair of vehicles in the automotive
aftermarket. Aftermarket Technology's principal products include
remanufactured transmissions, torque converters, engines, electronic control
modules, instrument display clusters and radios as well as remanufactured and
new parts for the repair of automotive drive train assemblies. In addition,
the Company provides value-added, third-party distribution and material
logistical services to such customers as AT&T Wireless and Ford Motor
Company. The Company's customers include original equipment manufacturers,
independent transmission rebuilders, general repair shops, distributors and
retail automotive parts stores. Established in 1994, the Company maintains
over 50 distribution centers throughout the United States and Canada, and
also has facilities in Mexico and England.
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The preceding paragraphs contain forward-looking statements that are subject
to risks and uncertainties that are described in the Company's filings with
the Securities and Exchange Commission. There can be no assurance that actual
results will not differ materially from those projected or implied by such
statements.
