CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| [X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003 | ||
| OR | ||
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
COMMISSION FILE NUMBER 0-11579
TBC CORPORATION
| 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 | |
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| (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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): Yes [X] No [ ]
21,808,107 Shares of Common Stock were outstanding as of September 30, 2003.
INDEX TO EXHIBITS at page 18 of this report
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
| September 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
CURRENT ASSETS: |
||||||||||
Cash and cash equivalents |
$ | 4,552 | $ | 2,319 | ||||||
Accounts and notes receivable, less allowance for
doubtful accounts of $7,920 on September 30, 2003
and $8,701 on December 31, 2002: |
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Related parties |
15,640 | 16,507 | ||||||||
Other |
124,534 | 103,201 | ||||||||
Total accounts and notes receivable |
140,174 | 119,708 | ||||||||
Inventories |
233,038 | 170,867 | ||||||||
Deferred income taxes |
11,749 | 12,364 | ||||||||
Other current assets |
17,640 | 12,515 | ||||||||
Total current assets |
407,153 | 317,773 | ||||||||
PROPERTY, PLANT AND EQUIPMENT, AT COST: |
||||||||||
Land and improvements |
11,504 | 6,068 | ||||||||
Buildings and leasehold improvements |
41,643 | 28,795 | ||||||||
Furniture and equipment |
81,534 | 64,052 | ||||||||
| 134,681 | 98,915 | |||||||||
Less accumulated depreciation |
54,845 | 42,993 | ||||||||
Total property, plant and equipment |
79,836 | 55,922 | ||||||||
TRADEMARKS, NET |
15,824 | 15,824 | ||||||||
GOODWILL, NET |
106,025 | 58,381 | ||||||||
OTHER ASSETS |
29,796 | 25,971 | ||||||||
TOTAL ASSETS |
$ | 638,634 | $ | 473,871 | ||||||
See accompanying notes to consolidated financial statements.
-2-
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
| September 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
CURRENT LIABILITIES: |
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Outstanding checks, net |
$ | 9,956 | $ | 4,209 | ||||||
Notes payable to banks |
9,900 | 35,000 | ||||||||
Current portion of long-term debt
and capital lease obligations |
20,599 | 18,500 | ||||||||
Accounts payable, trade |
106,597 | 45,200 | ||||||||
Federal and state income taxes payable |
771 | 767 | ||||||||
Other current liabilities |
69,808 | 47,481 | ||||||||
Total current liabilities |
217,631 | 151,157 | ||||||||
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, LESS CURRENT PORTION |
143,438 | 79,700 | ||||||||
NONCURRENT LIABILITIES |
15,395 | 14,243 | ||||||||
DEFERRED INCOME TAXES |
9,128 | 5,651 | ||||||||
STOCKHOLDERS’ EQUITY: |
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Common stock, $.10 par value, shares issued and
outstanding - 21,808 on September 30, 2003
and 21,292 on December 31, 2002 |
2,181 | 2,129 | ||||||||
Additional paid-in capital |
22,505 | 16,687 | ||||||||
Other comprehensive income (loss) |
(1,089 | ) | (1,281 | ) | ||||||
Retained earnings |
229,445 | 205,585 | ||||||||
Total stockholders’ equity |
253,042 | 223,120 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 638,634 | $ | 473,871 | ||||||
See accompanying notes to consolidated financial statements.
-3-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
NET SALES * |
$ | 362,401 | $ | 295,455 | $ | 947,789 | $ | 831,877 | |||||||||||
COST OF SALES |
248,195 | 216,106 | 648,530 | 610,376 | |||||||||||||||
GROSS PROFIT |
114,206 | 79,349 | 299,259 | 221,501 | |||||||||||||||
EXPENSES: |
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Distribution expenses |
15,811 | 13,881 | 44,591 | 39,320 | |||||||||||||||
Selling, administrative and
retail store expenses |
79,883 | 51,960 | 212,547 | 146,735 | |||||||||||||||
Interest expense — net |
2,786 | 2,139 | 7,046 | 6,473 | |||||||||||||||
Other (income) expense — net |
(869 | ) | (912 | ) | (2,288 | ) | (1,953 | ) | |||||||||||
Total expenses |
97,611 | 67,068 | 261,896 | 190,575 | |||||||||||||||
INCOME BEFORE INCOME TAXES |
16,595 | 12,281 | 37,363 | 30,926 | |||||||||||||||
PROVISION FOR INCOME TAXES |
6,064 | 4,635 | 13,503 | 11,658 | |||||||||||||||
NET INCOME |
$ | 10,531 | $ | 7,646 | $ | 23,860 | $ | 19,268 | |||||||||||
EARNINGS PER SHARE - |
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Basic |
$ | .48 | $ | .36 | $ | 1.11 | $ | .91 | |||||||||||
Diluted |
$ | .46 | $ | .35 | $ | 1.06 | $ | .88 | |||||||||||
| * | Including sales to related parties of $24,168 and $25,367 in the three months ended September 30, 2003 and 2002, respectively and $62,858 and $77,449 in the nine months ended September 30, 2003 and 2002, respectively. |
See accompanying notes to consolidated financial statements.
-4-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
| Other | |||||||||||||||||||||||||
| Common Stock | Compre- | ||||||||||||||||||||||||
| Additional | hensive | ||||||||||||||||||||||||
| Number of | Paid-In | Income | Retained | ||||||||||||||||||||||
| Shares | Amount | Capital | (Loss) | Earnings | Total | ||||||||||||||||||||
Nine Months Ended
September 30, 2002 |
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BALANCE, JANUARY 1, 2002 |
21,003 | $ | 2,100 | $ | 11,783 | $ | (713 | ) | $ | 181,149 | $ | 194,319 | |||||||||||||
Net income for period |
19,268 | 19,268 | |||||||||||||||||||||||
Issuance of common stock under
stock option and incentive plans |
480 | 48 | 3,828 | — | — | 3,876 | |||||||||||||||||||
Repurchase and retirement
of common stock |
(230 | ) | (23 | ) | (138 | ) | — | (2,947 | ) | (3,108 | ) | ||||||||||||||
Tax benefit from exercise of
stock options |
— | — | 875 | — | — | 875 | |||||||||||||||||||
Change in other comprehensive
income associated with interest
rate swap agreements, net |
— | — | — | (261 | ) | — | (261 | ) | |||||||||||||||||
BALANCE, SEPTEMBER 30, 2002 |
21,253 | $ | 2,125 | $ | 16,348 | $ | (974 | ) | $ | 197,470 | $ | 214,969 | |||||||||||||
Nine Months Ended
September 30, 2003 |
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BALANCE, JANUARY 1, 2003 |
21,292 | $ | 2,129 | $ | 16,687 | $ | (1,281 | ) | $ | 205,585 | $ | 223,120 | |||||||||||||
Net income for period |
23,860 | 23,860 | |||||||||||||||||||||||
Issuance of common stock under
stock option and incentive plans |
516 | 52 | 4,554 | — | — | 4,606 | |||||||||||||||||||
Tax benefit from exercise of
stock options |
— | — | 1,264 | — | — | 1,264 | |||||||||||||||||||
Change in other comprehensive
income associated with interest
rate swap agreements, net |
— | — | — | 192 | — | 192 | |||||||||||||||||||
BALANCE, SEPTEMBER 30, 2003 |
21,808 | $ | 2,181 | $ | 22,505 | $ | (1,089 | ) | $ | 229,445 | $ | 253,042 | |||||||||||||
See accompanying notes to consolidated financial statements.
-5-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2003 | 2002 | ||||||||||
Operating Activities: |
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Net income |
$ | 23,860 | $ | 19,268 | |||||||
Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |
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Depreciation |
13,673 | 9,973 | |||||||||
Amortization of intangible assets |
30 | 13 | |||||||||
Amortization of other comprehensive (income) loss |
(309 | ) | 73 | ||||||||
Provision for doubtful accounts and notes |
2,729 | 1,699 | |||||||||
(Gain) loss on sale of fixed assets |
27 | (53 | ) | ||||||||
Deferred income taxes |
5,331 | 715 | |||||||||
Equity in net earnings from joint ventures |
(376 | ) | (345 | ) | |||||||
Changes in operating assets and liabilities,
net of effect of assets acquired: |
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Receivables |
(22,389 | ) | (27,223 | ) | |||||||
Inventories |
(48,359 | ) | (17,912 | ) | |||||||
Other current assets |
(4,147 | ) | (2,376 | ) | |||||||
Other assets |
(734 | ) | 1,923 | ||||||||
Accounts payable, trade |
45,010 | 16,264 | |||||||||
Federal and state income taxes refundable or payable |
1,278 | 4,305 | |||||||||
Other current liabilities |
850 | 4,442 | |||||||||
Noncurrent liabilities |
458 | 898 | |||||||||
Net cash provided by operating activities |
16,932 | 11,664 | |||||||||
Investing Activities: |
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Purchase of property, plant and equipment |
(14,585 | ) | (11,529 | ) | |||||||
Acquisition of Merchant’s, Inc., net of assets acquired |
(58,394 | ) | — | ||||||||
Purchase of net assets of retail tire stores |
— | (10,781 | ) | ||||||||
Proceeds from disposition of commercial division
of Merchant’s, Inc. |
5,600 | — | |||||||||
Distributions received from joint ventures, net of investments |
239 | 408 | |||||||||
Proceeds from asset dispositions |
6,174 | 526 | |||||||||
Net cash used in investing activities |
(60,966 | ) | (21,376 | ) | |||||||
Financing Activities: |
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Net bank borrowings (repayments) under short-term
borrowing arrangements |
(25,100 | ) | 24,600 | ||||||||
Increase in outstanding checks, net |
1,790 | 3,354 | |||||||||
Proceeds from long-term debt |
77,000 | — | |||||||||
Reduction of long-term debt and capital lease obligations |
(11,163 | ) | (18,033 | ) | |||||||
Issuance of common stock under stock option
and incentive plans |
3,740 | 3,708 | |||||||||
Repurchase and retirement of common stock |
— | (3,108 | ) | ||||||||
Net cash provided by financing activities |
46,267 | 10,521 | |||||||||
Increase in cash and cash equivalents |
2,233 | 809 | |||||||||
Cash and cash equivalents: |
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Balance — Beginning of year |
2,319 | 2,298 | |||||||||