CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE | |
| SECURITIES EXCHANGE ACT OF 1934 | ||
| FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2005 |
||
| OR |
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE | |
| SECURITIES EXCHANGE ACT OF 1934 | ||
COMMISSION FILE NUMBER 0-11579
TBC CORPORATION
| DELAWARE | 20-1888610 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| 7111 Fairway Drive, Suite 201 | ||
| Palm Beach Gardens, Florida | 33418 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (561) 227-0955
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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): Yes þ No o
22,444,519 Shares of Common Stock were outstanding as of March 31, 2005.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TBC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 1,433 | $ | 2,832 | ||||
Accounts and notes receivable, less allowance
for doubtful accounts of $8,823 on March 31,
2005 and $9,307 on December 31, 2004: |
||||||||
Related parties |
37,260 | 32,149 | ||||||
Other |
127,818 | 117,812 | ||||||
Total accounts and notes receivable |
165,078 | 149,961 | ||||||
Inventories |
298,087 | 291,745 | ||||||
Deferred income taxes |
24,929 | 24,790 | ||||||
Other current assets |
17,014 | 19,270 | ||||||
Total current assets |
506,541 | 488,598 | ||||||
PROPERTY, PLANT AND EQUIPMENT, AT COST: |
||||||||
Land and improvements |
8,003 | 10,400 | ||||||
Buildings and leasehold improvements |
108,982 | 109,959 | ||||||
Furniture and equipment |
107,483 | 105,232 | ||||||
| 224,468 | 225,591 | |||||||
Less accumulated depreciation |
79,376 | 73,418 | ||||||
Total property, plant and equipment |
145,092 | 152,173 | ||||||
TRADEMARKS, NET |
15,824 | 15,824 | ||||||
GOODWILL, NET |
180,442 | 180,353 | ||||||
OTHER ASSETS |
40,523 | 39,331 | ||||||
TOTAL ASSETS |
$ | 888,422 | $ | 876,279 | ||||
See accompanying notes to consolidated financial statements.
-2-
TBC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Outstanding checks, net |
$ | 13,440 | $ | 30,368 | ||||
Accounts payable, trade |
162,452 | 128,656 | ||||||
Notes payable to banks |
55,408 | 41,013 | ||||||
Current portion of long-term debt and capital
lease obligations |
41,243 | 41,216 | ||||||
Federal and state income taxes payable |
1,773 | 17,790 | ||||||
Accrued warranty reserves |
19,516 | 19,667 | ||||||
Other current liabilities |
73,245 | 71,278 | ||||||
Total current liabilities |
367,077 | 349,988 | ||||||
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, LESS CURRENT PORTION |
155,653 | 167,349 | ||||||
NONCURRENT LIABILITIES |
43,016 | 43,320 | ||||||
DEFERRED INCOME TAXES |
10,193 | 10,613 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
STOCKHOLDERS’ EQUITY: |
||||||||
Common stock, $.10 par value, shares issued and
outstanding - 22,444 on March 31, 2005 and
22,312 on December 31, 2004 |
2,244 | 2,231 | ||||||
Additional paid-in capital |
30,260 | 28,882 | ||||||
Deferred compensation |
(1,205 | ) | (789 | ) | ||||
Accumulated other comprehensive loss |
(1,278 | ) | (1,570 | ) | ||||
Retained earnings |
282,462 | 276,255 | ||||||
Total stockholders’ equity |
312,483 | 305,009 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 888,422 | $ | 876,279 | ||||
See accompanying notes to consolidated financial statements.
-3-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| RESTATED | ||||||||
| (See Note 2) | ||||||||
| 2005 | 2004 | |||||||
NET SALES* |
$ | 466,372 | $ | 433,841 | ||||
COST OF SALES |
292,268 | 271,975 | ||||||
GROSS PROFIT |
174,104 | 161,866 | ||||||
EXPENSES: |
||||||||
Distribution expenses |
18,890 | 17,966 | ||||||
Selling, administrative and
retail store expenses |
141,983 | 131,949 | ||||||
Interest expense — net |
4,951 | 4,102 | ||||||
Other income |
(1,433 | ) | (718 | ) | ||||
Total Expenses |
164,391 | 153,299 | ||||||
INCOME BEFORE INCOME TAXES |
9,713 | 8,567 | ||||||
PROVISION FOR INCOME TAXES |
3,506 | 3,068 | ||||||
NET INCOME |
$ | 6,207 | $ | 5,499 | ||||
EARNINGS PER SHARE - |
||||||||
Basic |
$ | 0.28 | $ | 0.25 | ||||
Diluted |
$ | 0.27 | $ | 0.24 | ||||
Weighted Average Common Shares
Outstanding - |
||||||||
Basic |
22,355 | 22,021 | ||||||
Diluted |
23,386 | 23,256 | ||||||
| * Including sales to related parties of $27,723 and $25,261 for the three months ended March 31, 2005 and 2004, respectively. |
See accompanying notes to consolidated financial statements.
-4-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||
| Compre- | Total | |||||||||||||||||||||||||||||||
| Common Stock | Additional | hensive | Compre- | |||||||||||||||||||||||||||||
| Number of | Paid-In | Income | Deferred | Retained | hensive | |||||||||||||||||||||||||||
| Shares | Amount | Capital | (Loss) | Compensation | Earnings | Total | Income | |||||||||||||||||||||||||
BALANCE, JANUARY 1, 2004 |
21,905 | $ | 2,190 | $ | 23,898 | $ | (1,637 | ) | $ | — | $ | 238,657 | $ | 263,108 | ||||||||||||||||||
Net income for period |
— | — | — | — | — | 5,499 | 5,499 | |||||||||||||||||||||||||
Issuance of common stock under
stock option and incentive plans |
225 | 23 | 1,954 | — | — | — | 1,977 | |||||||||||||||||||||||||
Tax benefit from exercise of stock options |
— | — | 957 | — | — | — | 957 | |||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||
Net income |
— | $ | 5,499 | |||||||||||||||||||||||||||||
Interest rate swap agreement, net of tax |
— | — | — | 51 | — | — | 51 | 51 | ||||||||||||||||||||||||
Foreign currency translation adjustment |
— | — | — | 270 | — | — | 270 | 270 | ||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | — | — | — | 321 | ||||||||||||||||||||||||
Total comprehensive income |
— | — | — | — | — | — | — | $ | 5,820 | |||||||||||||||||||||||
BALANCE, MARCH 31, 2004 |
22,130 | $ | 2,213 | $ | 26,809 | $ | (1,316 | ) | $ | — | $ | 244,156 | $ | 271,862 | ||||||||||||||||||
BALANCE, JANUARY 1, 2005 |
22,312 | $ | 2,231 | $ | 28,882 | $ | (1,570 | ) | $ | (789 | ) | $ | 276,255 | $ | 305,009 | |||||||||||||||||
Net income for period |
— | — | — | — | — | 6,207 | 6,207 | |||||||||||||||||||||||||
Issuance of common stock under
stock option and incentive plans, net of amortization of deferred
compensation |
132 | 13 | 1,295 | — | (416 | ) | — | 892 | ||||||||||||||||||||||||
Tax benefit from exercise of stock options |
— | — | 83 | — | — | — | 83 | |||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||
Net income |
— | $ | 6,207 | |||||||||||||||||||||||||||||
Interest rate swap agreement, net of tax |
— | — | — | 88 | — | — | 88 | 88 | ||||||||||||||||||||||||
Foreign currency translation adjustment |
— | — | — | 204 | — | — | 204 | 204 | ||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | — | — | — | 292 | ||||||||||||||||||||||||
Total comprehensive income |
— | — | — | — | — | — | — | $ | 6,499 | |||||||||||||||||||||||
BALANCE, MARCH 31, 2005 |
22,444 | $ | 2,244 | $ | 30,260 | $ | (1,278 | ) | $ | (1,205 | ) | $ | 282,462 | $ | 312,483 | |||||||||||||||||
See accompanying notes to consolidated financial statements.
-5-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| RESTATED | ||||||||
| (See Note 2) | ||||||||
| 2005 | 2004 | |||||||
Operating Activities: |
||||||||
Net income |
$ | 6,207 | $ | 5,499 | ||||
Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |
||||||||
Depreciation |
6,981 | 6,728 | ||||||
Amortization of intangible assets |
19 | 18 | ||||||
Amortization of deferred financing costs |
492 | 491 | ||||||
Amortization of other deferred compensation |
67 | 80 | ||||||
Provision for doubtful accounts and notes |
1,113 | 1,009 | ||||||
Gain on sale of fixed assets |
(305 | ) | (5 | ) | ||||
Deferred income taxes |
(558 | ) | 952 | |||||
Equity in net earnings from joint ventures |
(1,124 | ) | (223 | ) | ||||
Changes in operating assets and liabilities
net of effect of assets acquired: |
||||||||
Receivables |
(16,319 | ) | (31,379 | ) | ||||
Inventories |
(6,342 | ) | (17,877 | ) | ||||
Other current assets |
2,511 | (1,361 | ) | |||||
Other assets |
(581 | ) | (445 | ) | ||||
Accounts payable, trade |
34,086 | 43,442 | ||||||
Federal and state income taxes refundable or payable |
(15,933 | ) | (538 | ) | ||||
Other current liabilities |
1,817 | (7,847 | ) | |||||
Noncurrent liabilities |
(304 | ) | (180 | ) | ||||
Net cash provided by (used in) operating activities |
11,827 | (1,636 | ) | |||||
Investing Activities: |
||||||||
Purchase of property, plant and equipment |
(3,941 | ) | (6,846 | ) | ||||
Investments in joint ventures, net of distributions received |
— | (798 | ) | |||||
Proceeds from asset dispositions |
4,025 | 192 | ||||||
Net cash provided by (used in) investing activities |
84 | (7,452 | ) | |||||
Financing Activities: |
||||||||
Net bank borrowings under short-term borrowing arrangements |
14,395 | 15,300 | ||||||
(Decrease) increase in outstanding checks, net |
(16,928 | ) | 301 | |||||
Payments of long-term debt and capital lease obligations |
(11,669 | ) | (5,095 | ) | ||||
Issuance of common stock under stock incentive plans |
892 | 1,642 | ||||||
Net cash (used in) provided by financing activities |
(13,310 | ) | 12,148 | |||||
(Decrease) increase in cash and cash equivalents |
(1,399 | ) | 3,060 | |||||
Cash and cash equivalents: |
||||||||
Balance — Beginning of year |
2,832 | 2,645 | ||||||
Balance — End of period |
$ | 1,433 | $ | 5,705 | ||||
(Continued)
-6-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
| Restated (See Note 2) |
||||||||
Supplemental Disclosures of Cash Flow Information: |
||||||||
Cash paid for — Interest |
$ | 4,386 | $ | 3,542 | ||||
Cash paid for — Income taxes |
20,030 | 2,767 | ||||||
Supplemental Disclosures of Non-Cash Financing Activity: |
||||||||
Tax benefit from exercise of stock options |
$ | 83 | $ | 957 | ||||
Issuance of restricted stock under stock incentive plan, net |
416 | 335 | ||||||
See accompanying notes to consolidated financial statements.
-7-
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The December 31, 2004 condensed consolidated balance sheet was derived from audited financial statements. The condensed consolidated balance sheet, statement of income, stockholders’ equity and cash flow for the period ended March 31, 2005 have been prepared by the Company without audit. The restated consolidated statements of income, stockholders’ equity and cash flow, as discussed in Note 2 “Restatement” of this Form 10Q, for the period ended March 31, 2004, have been prepared by the Company, without audit. It is Management’s opinion that these statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows as of March 31, 2005 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.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. Actual results could differ from those estimates.
The Company’s 2004 Annual Report on Form 10-K/A includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements. The summary of significant accounting policies, as well as certain other footnote disclosures and information normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted for the purposes of this quarterly report. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s 2004 Form 10-K/A.
-8-
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Restatement
During the second quarter of 2004, but effective on January 1, 2004, the Company changed its inventory costing method from the last-in, first