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. |
For the quarterly period ended October 2, 2004
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to .
Commission File No. 333-112252
Keystone Automotive Operations, Inc.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 23-2950980 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
44 Tunkhannock Avenue
Exeter, Pennsylvania 18643
(800) 233-8321
(Address, zip code, and telephone number, including
area code, of registrant’s principal executive office.)
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 periods 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 Exchange Act Rule 12b-2) Yes ¨ No x
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Keystone Automotive Holdings, Inc. owns 100% of the registrant’s common stock.
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
QUARTERLY REPORT FOR THE PERIOD
ENDED OCTOBER 2, 2004
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| October 2, 2004 |
January 3, 2004 |
|||||||
| (000’s) | (000’s) | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,791 | $ | 7,552 | ||||
| Trade accounts receivable, net |
33,512 | 31,033 | ||||||
| Inventories |
76,106 | 69,407 | ||||||
| Deferred tax assets |
2,323 | 763 | ||||||
| Prepaid expenses and other current assets |
4,494 | 4,907 | ||||||
| Total current assets |
130,226 | 113,662 | ||||||
| Property, plant and equipment, net |
50,002 | 51,320 | ||||||
| Deferred financing costs, net |
19,083 | 20,431 | ||||||
| Goodwill |
180,473 | 178,780 | ||||||
| Capitalized software, net |
1,576 | 2,750 | ||||||
| Intangible assets |
198,974 | 207,175 | ||||||
| Other assets |
275 | 327 | ||||||
| Total assets |
$ | 580,609 | $ | 574,445 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current maturities of long-term debt |
$ | 9,500 | $ | 10,000 | ||||
| Trade accounts payable |
36,123 | 35,674 | ||||||
| Accrued Interest |
7,630 | 3,321 | ||||||
| Accrued compensation |
7,603 | 6,920 | ||||||
| Accrued expenses |
5,737 | 3,484 | ||||||
| Total current liabilities |
66,593 | 59,399 | ||||||
| Long-term debt |
275,000 | 280,000 | ||||||
| Long-term liabilities |
1,603 | 1,319 | ||||||
| Deferred tax liabilities |
63,556 | 62,033 | ||||||
| Total liabilities |
406,752 | 402,751 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ Equity |
||||||||
| Common Stock par value of $0.01 per share: |
||||||||
| Authorized/Issued 1,000 in 2003 and 2004 |
— | — | ||||||
| Contributed capital |
175,000 | 178,500 | ||||||
| Accumulated deficit |
(1,426 | ) | (7,039 | ) | ||||
| Accumulated other comprehensive income |
283 | 233 | ||||||
| Total shareholders’ equity |
173,857 | 171,694 | ||||||
| Total liabilities and shareholders’ equity |
$ | 580,609 | $ | 574,445 | ||||
See accompanying notes to financial statements
1
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ending |
Nine Months Ending |
|||||||||||||||
| Successor |
Predecessor |
Successor |
Predecessor |
|||||||||||||
| July 4, 2004 to October 2, 2004 |
June 29, 2003 to |
January 4, 2004 to October 2, 2004 |
December 29, 2002 to September 27, 2003 |
|||||||||||||
| (000’s) | (000’s) | (000’s) | (000’s) | |||||||||||||
| Net sales |
$ | 111,553 | $ | 104,728 | $ | 339,765 | $ | 304,740 | ||||||||
| Cost of sales |
(76,577 | ) | (70,562 | ) | (234,455 | ) | (205,213 | ) | ||||||||
| Gross profit |
34,976 | 34,166 | 105,310 | 99,527 | ||||||||||||
| Selling, general and administrative expenses |
(25,214 | ) | (20,971 | ) | (77,751 | ) | (60,478 | ) | ||||||||
| Reorganization and other charges |
— | (578 | ) | — | (1,065 | ) | ||||||||||
| Income from operations |
9,762 | 12,617 | 27,559 | 37,984 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
53 | 7 | 111 | 17 | ||||||||||||
| Interest expense |
(6,315 | ) | (1,273 | ) | (18,687 | ) | (4,934 | ) | ||||||||
| Other income (expense), net |
(19 | ) | (34 | ) | 254 | (33 | ) | |||||||||
| Income before income tax |
3,481 | 11,317 | 9,237 | 33,034 | ||||||||||||
| Income tax expense |
(1,281 | ) | (4,405 | ) | (3,624 | ) | (12,065 | ) | ||||||||
| Net income |
2,200 | 6,912 | 5,613 | 20,969 | ||||||||||||
| Other comprehensive income: |
||||||||||||||||
| Foreign currency translation, net of taxes |
148 | 82 | 50 | 366 | ||||||||||||
| Change in fair value of derivatives, net of taxes |
— | 19 | — | 993 | ||||||||||||
| Comprehensive income |
$ | 2,348 | $ | 7,013 | $ | 5,663 | $ | 22,328 | ||||||||
See accompanying notes to financial statements.
2
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Successor |
Predecessor |
|||||||
| January 4, 2004 to October 2, 2004 |
December 29, 2002 to September 27, 2003 |
|||||||
| (000’s) | (000’s) | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 5,613 | $ | 20,969 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
14,277 | 5,328 | ||||||
| Deferred financing charges |
2,125 | — | ||||||
| Deferred income taxes |
(37 | ) | 4,329 | |||||
| Non-cash charges related to inventory fair value adjustment |
3,516 | — | ||||||
| Other non-cash charges (gains) |
152 | (226 | ) | |||||
| Net change in operating assets and liabilities: |
||||||||
| (Increase) in trade accounts receivable |
(2,623 | ) | (2,957 | ) | ||||
| (Increase) in inventory |
(10,215 | ) | (8,373 | ) | ||||
| Increase in accounts payable and accrued liabilities |
7,978 | 14,476 | ||||||
| Decrease in other assets/liabilities |
433 | 3,512 | ||||||
| Net cash provided by operating activities |
21,219 | 37,058 | ||||||
| Cash flows used in investing activities: |
||||||||
| Purchase of property, plant and equipment |
(3,007 | ) | (4,586 | ) | ||||
| Capitalized software costs |
(553 | ) | (553 | ) | ||||
| Transaction cost & working capital settlement |
(1,693 | ) | — | |||||
| Proceeds from sale of property, plant and equipment |
— | 20 | ||||||
| Net cash used in investing activities |
(5,253 | ) | (5,119 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Borrowings under revolving line-of-credit |
— | 69,350 | ||||||
| Repayments under revolving line-of-credit |
— | (91,350 | ) | |||||
| Principal repayments on long-term debt |
(5,500 | ) | (8,020 | ) | ||||
| Payments for financing |
(777 | ) | — | |||||
| Repayment of capital contributions |
(3,500 | ) | — | |||||
| Net cash used in financing activities |
(9,777 | ) | (30,020 | ) | ||||
| Net effects of exchange rates on cash |
50 | 1,359 | ||||||
| Increase in cash and cash equivalents |
6,239 | 3,278 | ||||||
| Cash and cash equivalents, beginning of period |
7,552 | 1,715 | ||||||
| Cash and cash equivalents, end of period |
$ | 13,791 | $ | 4,993 | ||||
See accompanying notes to financial statements.
3
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The unaudited consolidated financial information herein has been prepared in accordance with generally accepted accounting principles and is in accordance with the Securities and Exchange Commission (“SEC”) regulations for interim financial reporting. In the opinion of management, the financial statements include all adjustments, consisting only of normal recurring adjustments, which are considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for the interim periods. This financial information should be read in conjunction with the audited financial statements and notes thereto for the year ended January 3, 2004 of the Company, which are included in the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on May 14, 2004.
| 1. | Background and Basis of Presentation |
Keystone Automotive Operations, Inc. and its wholly-owned subsidiaries (collectively “the Company”) are wholesale distributors and retailers of aftermarket automotive parts and accessories, operating in the eastern, central, and western regions of the United States and parts of Canada. The Company sells and distributes over 650 lines of specialty automotive products, such as light truck/SUV accessories, car accessories and trim items, specialty wheels, tires and suspension parts, and high performance products to a fragmented base of approximately 17,000 customers. The Company’s wholesale operations include an electronic service strategy allowing its customers access to its proprietary electronic catalog, as well as the ability to view product availability and place orders. The Company also operates 24 retail stores in Pennsylvania. The Company’s corporate headquarters are located in Exeter, Pennsylvania.
The accompanying financial statements are presented under two different basis of accounting, as described below. Certain prior year amounts have been reclassified in order to conform to current year presentation.
Prior to October 30, 2003, approximately 73.2% of the outstanding common stock was owned by Littlejohn & Co., LLC (“Littlejohn”), General Electric Capital Corporation (“GECC”) and Advent International Corporation and its affiliates (“Advent”). The accompanying statement of operations and comprehensive income for the three month period ended September 27, 2003, and the statement of operations and comprehensive income and of cash flows for the nine month period ended September 27, 2003 are prepared using the historically owned (“Predecessor”) basis of accounting.
On October 30, 2003 in a series of transactions, a newly formed holding company, Keystone Automotive Holdings, Inc. (“Holdings”), owned by Bain Capital Partners, LLC (“Bain Capital”), its affiliates, co-investors and management, acquired all of the Company’s outstanding capital stock for a purchase price of $441.3 million. The aggregate cash costs, together with funds necessary to refinance certain existing indebtedness of the Company and associated fees and expenses were financed by equity contributions of $179 million from Holdings, new senior credit facilities in the amount of $115 million, and the issuance and sale of $175 million of 9.75% senior subordinated notes due 2013. The purchase of the Company by Holdings is referred to hereinafter as “the Transaction”.
The acquisition of our Company by Holdings was accounted for under the purchase method of accounting. Under purchase accounting, the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values, with the remainder being allocated to goodwill. This is referred to as the (“Successor”) basis of accounting. The following table presents the final purchase price allocation that has been recorded on the consolidated balance sheet:
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