-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fd29OHY0tM8ypW7mRtu0cL5rcsPa1NKnoEHrJVWJGzviDUpcPZW/lnPTjI45WXkU pOm0sblX6d2xJL5LaVGk+g== 0000912057-99-002625.txt : 19991029 0000912057-99-002625.hdr.sgml : 19991029 ACCESSION NUMBER: 0000912057-99-002625 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFTERMARKET TECHNOLOGY CORP CENTRAL INDEX KEY: 0000933405 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 954486486 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21803 FILM NUMBER: 99736434 BUSINESS ADDRESS: STREET 1: ONE OAK HILL CENTER STREET 2: SUITE 400 CITY: WESTMONT STATE: IL ZIP: 60559 BUSINESS PHONE: 6304556000 MAIL ADDRESS: STREET 1: ONE OAK HILL CENTER STREET 2: SUITE 400 CITY: WESTMONT STATE: IL ZIP: 60559 10-Q 1 FORM 10Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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, 1999 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 (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 22, 1999, there were 20,417,372 shares of common stock of the Registrant outstanding. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AFTERMARKET TECHNOLOGY CORP. FORM 10-Q
Table of Contents ----------------- Page Number ----------- PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at September 30, 1999 (unaudited) and December 31, 1998 ....................................................... 3 Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 1999 and 1998 .................................... 4 Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 1999 and 1998 ............................... 5 Notes to Consolidated Financial Statements .................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ......................................... 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................................................. 21 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K ............................................ 22 SIGNATURES .................................................................................. 23 EXHIBIT INDEX ............................................................................... 24 Note: Items 1 - 5 of Part II are omitted because they are not applicable.
-2- AFTERMARKET TECHNOLOGY CORP. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
September 30, December 31, 1999 1998 --------------- -------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 2,099 $ 580 Accounts receivable, net 78,314 71,357 Inventories, net 116,156 98,696 Prepaid and other assets 4,762 3,959 Refundable income taxes - 10,954 Deferred income taxes 10,519 8,240 --------------- -------------- Total current assets 211,850 193,786 Property, plant and equipment, net 75,900 63,903 Debt issuance costs, net 4,983 5,044 Cost in excess of net assets acquired, net 261,928 267,947 Other assets 455 1,225 --------------- -------------- Total assets $ 555,116 $ 531,905 --------------- -------------- --------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 39,442 $ 35,945 Accrued expenses 45,374 42,643 Amounts due to acquired companies 8,313 10,204 Bank line of credit 1,228 2,060 Income taxes payable 553 - Current portion of credit facility 18,426 15,000 --------------- -------------- Total current liabilities 113,336 105,852 12% Series B and D Senior Subordinated Notes 111,259 111,394 Amount drawn on credit facility, less current portion 129,618 123,350 Amounts due to acquired companies, less current portion 7,606 8,483 Deferred compensation 3,534 3,323 Deferred income taxes 13,626 11,492 Stockholders' equity: Preferred stock, $.01 par value; shares authorized - 2,000,000; none issued - - Common stock, $.01 par value; shares authorized - 30,000,000; Issued - 20,585,372 and 20,411,768 (including shares held in treasury) 206 204 Additional paid-in capital 135,757 135,104 Retained earnings 42,740 35,676 Accumulated other comprehensive loss (572) (979) Common stock held in treasury, at cost (172,000 shares) (1,994) (1,994) --------------- -------------- Total stockholders' equity 176,137 168,011 --------------- -------------- Total liabilities and stockholders' equity $ 555,116 $ 531,905 --------------- -------------- --------------- --------------
-3- SEE ACCOMPANYING NOTES. AFTERMARKET TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the three months ended September 30, For the nine months ended September 30, 1999 1998 1999 1998 ------------------- ------------------- -------------------- -------------------- (Unaudited) (Unaudited) Net sales $ 142,156 $ 125,003 $ 418,557 $ 362,472 Cost of sales 95,199 86,931 286,560 245,492 ------------------- ------------------- -------------------- -------------------- Gross profit 46,957 38,072 131,997 116,980 Selling, general and administrative expense 30,716 26,066 91,265 70,329 Amortization of intangible assets 1,787 1,889 5,370 5,128 Special charges - - 4,000 3,580 ------------------- ------------------- -------------------- -------------------- Income from operations 14,454 10,117 31,362 37,943 Other income (expense), net (196) 550 163 1,500 Interest expense 6,951 6,361 19,750 17,997 ------------------- ------------------- -------------------- -------------------- Income before income taxes and extraordinary items 7,307 4,306 11,775 21,446 Income tax expense 2,879 1,753 4,711 8,592 ------------------- ------------------- -------------------- -------------------- Income before extraordinary items 4,428 2,553 7,064 12,854 Extraordinary items - net of income taxes - 170 - 533 ------------------- ------------------- -------------------- -------------------- Net income $ 4,428 $ 2,383 $ 7,064 $ 12,321 ------------------- ------------------- -------------------- -------------------- ------------------- ------------------- -------------------- -------------------- Per common share - basic: Income before extraordinary items $ 0.22 $ 0.13 $ 0.35 $ 0.65 Extraordinary items - (0.01) - (0.03) ------------------- ------------------- -------------------- -------------------- Net income $ 0.22 $ 0.12 $ 0.35 $ 0.62 ------------------- ------------------- -------------------- -------------------- ------------------- ------------------- -------------------- -------------------- Weighted average number of common shares outstanding 20,367 19,991 20,294 19,929 ------------------- ------------------- -------------------- -------------------- ------------------- ------------------- -------------------- -------------------- Per common share - diluted: Income before extraordinary items $ 0.21 $ 0.12 $ 0.33 $ 0.61 Extraordinary items - (0.01) - (0.03) ------------------- ------------------- -------------------- -------------------- Net income $ 0.21 $ 0.11 $ 0.33 $ 0.58 ------------------- ------------------- -------------------- -------------------- ------------------- ------------------- -------------------- -------------------- Weighted average number of common and common equivalent shares outstanding 21,225 21,091 21,142 21,203 ------------------- ------------------- -------------------- -------------------- ------------------- ------------------- -------------------- --------------------
-4- SEE ACCOMPANYING NOTES. AFTERMARKET TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
For the nine months ended September 30, 1999 1998 ------------------ ------------------- (Unaudited) OPERATING ACTIVITIES: Net income $ 7,064 $ 12,321 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Extraordinary item - 888 Depreciation and amortization 14,220 11,383 Amortization of debt issuance costs 718 832 Provision for losses on accounts receivable 711 634 Loss on sale of equipment 60 20 Deferred income taxes (546) 729 Changes in operating assets and liabilities, net of businesses acquired/sold: Accounts receivable (8,437) (3,768) Inventories (19,674) (9,318) Prepaid and other assets 10,830 (5,250) Accounts payable and accrued expenses 6,930 5,374 ------------------ ------------------- Net cash provided by operating activities 11,876 13,845 INVESTING ACTIVITIES: Purchases of property, plant and equipment (20,324) (15,394) Acquisition of companies, net of cash received - (114,512) Proceeds from sale of business 3,808 - Proceeds from sale of equipment 224 593 ------------------ ------------------- Net cash used in investing activities (16,292) (129,313) FINANCING ACTIVITIES: Borrowings on credit facility, net 9,694 128,300 Payments on bank line of credit, net (849) (2,387) Payment of debt issuance costs (727) (2,425) Redemption of senior subordinated notes - (5,614) Proceeds from exercise of stock options 565 780 Purchase of common stock for treasury - (1,994) Payments on amounts due to acquired companies (2,748) (468) ------------------ ------------------- Net cash provided by financing activities 5,935 116,192 ------------------ ------------------- Increase in cash and cash equivalents 1,519 724 Cash and cash equivalents at beginning of period 580 78 ------------------ ------------------- Cash and cash equivalents at end of period $ 2,099 $ 802 ------------------ ------------------- ------------------ ------------------- Cash paid during the period for: Interest $ 21,690 $ 18,776 Income taxes, net (6,418) 3,771
-5- SEE ACCOMPANYING NOTES. AFTERMARKET TECHNOLOGY CORP. Notes to Consolidated Financial Statements (In thousands, except per share data) NOTE 1: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Aftermarket Technology Corp. (the "Company") as of September 30, 1999 and for the three and nine months ended September 30, 1999 and 1998 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, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. 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, 1998. Certain prior-year amounts have been reclassified to conform to the 1999 presentation. NOTE 2: INVENTORIES, NET Inventories are stated at the lower of cost (first in, first out method) or market:
September 30, 1999 December 31, 1998 -------------------- ------------------- Raw materials, including core inventories......... $ 45,556 $41,117 Work-in-process................................... 2,914 3,051 Finished goods.................................... 67,686 54,528 -------------------- ------------------- $116,156 $98,696 -------------------- ------------------- -------------------- -------------------
Finished goods includes remanufactured and purchased parts which are available for sale. NOTE 3: CREDIT FACILITY The Company has an agreement with The Chase Manhattan Bank, as agent, providing for a credit facility comprised of a $100.0 million revolving line of credit and a $120.0 million term loan (the "Credit Facility") to finance the Company's working capital requirements, future acquisitions and the acquisition of Autocraft (see Note 4). Amounts advanced under the Credit Facility are secured by substantially all the assets of the Company. Amounts advanced under the revolving portion of the Credit Facility will become due on December 31, 2003. The balance outstanding on the term loan (which requires payments through December 31, 2003) was $97.0 million as of September 30, 1999. The Company may prepay outstanding advances under the revolving line of credit or the term loan portion of the Credit Facility in whole or in part without incurring any premium or penalty. At September 30, 1999, $51.0 million was outstanding under the revolving line of credit. During 1998, the Company entered into an interest rate swap agreement in order to convert $50.0 million of its Credit Facility to a fixed rate. The Credit Facility contains several covenants, including ones that require the Company to maintain certain levels of net worth, leverage and cash flow coverage, and others that limit the Company's ability to incur indebtedness, make capital expenditures, create liens, engage in mergers and consolidations, make restricted payments (including dividends), sell assets, make investments, issue stock and engage in transactions with affiliates of the Company and its subsidiaries. -6- Based on its operating results during 1998, the Company was in technical default of the leverage and cash flow covenants of the Credit Facility and the Company's interest rate swap agreement as of December 31, 1998. Due to the defaults, the Company was not able to borrow under the Credit Facility. In March 1999, the Company obtained from its lenders waivers of the various defaults and certain amendments to the Credit Facility and the interest rate swap agreement. In August 1999, the Company obtained consent and amendments to certain of the covenants to its Credit Facility to allow the Company to acquire substantially all the assets of All Transmission Parts, Inc. and All Automatic Transmission Parts, Inc. (See Note 11.) NOTE 4: ACQUISITIONS 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 drive train and electronic parts used in the warranty and aftermarket repair of passenger cars and light trucks. The purchase price was approximately $115.9 million, including transaction fees and related expenses. The Company has estimated an additional payment of approximately $5.9 million to be paid in 1999 based on the performance of the OEM Division's European operations during 1998. Goodwill recorded of approximately $74.3 million includes the additional payment to be made and certain other adjustments that were made during the first quarter of 1999. The Autocraft acquisition has 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 Autocraft from the date of acquisition. See Note 11 - Subsequent Events, regarding the Company's acquisition activity subsequent to September 30, 1999. NOTE 5: EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
For the three months ended For the nine months ended September 30, September 30, -------------------------- ------------------------- 1999 1998 1999 1998 ------------ ---------- ----------- ---------- Numerator: Net income............................... $ 4,428 $ 2,383 $ 7,064 $12,321 ------------ ---------- ----------- ---------- ------------ ---------- ----------- ---------- Denominator: Weighted-average common shares outstanding 20,367 19,991 20,294 19,929 Effect of stock options and warrants..... 858 1,100 848 1,274 ------------ ---------- ----------- ---------- Denominator for diluted earnings per common share............................. 21,225 21,091 21,142 21,203 ------------ ---------- ----------- ---------- ------------ ---------- ----------- ---------- Basic earnings per common share.......... $ 0.22 $ 0.12 $ 0.35 $ 0.62 Diluted earnings per common share........ 0.21 0.11 0.33 0.58
-7- NOTE 6. REPORTABLE SEGMENTS The Company has two reportable segments: Original Equipment Manufacturer ("OEM") segment and Independent Aftermarket segment. The Company's OEM segment consists of four operating units that primarily sell remanufactured transmissions and engines directly to OEMs. The Company's Independent Aftermarket segment consists of the Company's Distribution Group, which primarily sells transmission repair kits, soft parts, remanufactured torque converters and transmissions, and new and remanufactured hard parts used in drive train repairs to independent transmission rebuilders and to a lesser extent to general repair shops, wholesale distributors and retail automotive parts stores. Other operating units, which are not reportable segments, consist of an electronic parts remanufacturing and distribution business, warehouse and distribution services for AT&T Wireless and a material recovery processing business primarily for Ford. The Company evaluates performance and allocates resources based upon profit or loss before income taxes and extraordinary items ("EBT"). The reportable segments' accounting policies are the same as those of the Company. Intersegment sales and transfers are recorded at the Company's standard cost and intersegment profits are eliminated. The reportable segments are each managed and measured separately primarily due to the differing customers, production processes, products sold and distribution channels. The reportable segments are as follows:
Independent OEM Aftermarket Other Totals --- ----------- ----- ------ For the three months ended September 30, 1999: Revenues from external customers ................. $ 77,422 $ 49,493 $ 15,241 $ 142,156 Intersegment revenues ............................ 269 20 - 289 Special charges .................................. - - - - Segment profit (loss) ............................ 10,388 (5,274) 1,899 7,013 For the nine months ended September 30, 1999: Revenues from external customers ................. $ 228,071 $ 147,602 $ 42,884 $ 418,557 Intersegment revenues ............................ 625 880 - 1,505 Special charges .................................. - 1,866 80 1,946 Segment profit (loss) ............................ 26,124 (17,882) 4,939 13,181 Independent OEM Aftermarket Other Totals --- ----------- ----- ------ For the three months ended September 30, 1998: Revenues from external customers ................. $ 65,123 $ 46,027 $ 13,853 $ 125,003 Intersegment revenues ............................ 153 601 - 754 Special charges .................................. - - - - Segment profit (loss) ............................ 4,496 (1,805) 282 2,973 For the nine months ended September 30, 1998: Revenues from external customers ................. $ 186,495 $ 143,457 $ 32,520 $ 362,472 Intersegment revenues ............................ 538 688 - 1,226 Special charges .................................. 2,650 795 - 3,445 Segment profit (loss) ............................ 17,197 (2,886) 1,257 15,568
-8- A reconciliation of the reportable segments to consolidated net sales and income before income taxes and extraordinary item are as follows:
For the three months ended For the nine months ended September 30, September 30, -------------------------------- ------------------------------------ 1999 1998 1999 1998 --------------- --------------- ----------------- ----------------- Net sales: - ---------- External revenues from reportable segments ......... $ 126,915 $ 111,150 $ 375,673 $ 329,952 Intersegment revenues for reportable segments ...... 289 754 1,505 1,226 Other revenues ..................................... 15,241 13,853 42,884 32,520 Elimination of intersegment revenues ............... (289) (754) (1,505) (1,226) --------------- --------------- ----------------- ----------------- Consolidated net sales ..................... $ 142,156 $ 125,003 $ 418,557 $ 362,472 --------------- --------------- ----------------- ----------------- --------------- --------------- ----------------- ----------------- Profit: - ------ Total profit for reportable segments ............... $ 5,114 $ 2,691 $ 8,242 $ 14,311 Other profit ....................................... 1,899 282 4,939 1,257 Unallocated amounts: Special charges .................................. - - (2,054) (135) Corporate (expense) profit ....................... (1,131) (461) (4,127) 102 Depreciation and amortization .................... (204) (370) (600) (441) Interest expense, net ............................ 1,629 2,164 5,375 6,352 --------------- --------------- ----------------- ----------------- Income before income taxes and Extraordinary items ...................... $ 7,307 $ 4,306 $ 11,775 $ 21,446 --------------- --------------- ----------------- ----------------- --------------- --------------- ----------------- -----------------
NOTE 7: SPECIAL CHARGES During 1998, the Company took actions related to certain initiatives designed to improve operating efficiencies and reduce costs and recorded special charges of $3,580 and $5,164 in the second and fourth quarters of 1998, respectively. In the first quarter of 1999, the Company recorded special charges of $1,900, which consisted of $1,559 of severance costs related to its management reorganization and $341 of exit costs related to the consolidation of certain of the Company's distribution centers. In the second quarter of 1999, the Company recorded special charges of $2,100, which included $1,280 of exit and other costs related to the consolidation of certain of the Company's distribution centers, as well as $820 of severance and other costs related to the Company's management reorganization. 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 accrued expenses:
Termination Benefits Exit / Other Costs Total ------------ ------------------- ---------- Provision 1998 .................. $ 2,690 $ 6,054 $ 8,744 Payments 1998 ................... (822) (2,528) (3,350) ------------ ------------------- ---------- Reserve at December 31, 1998 .... $ 1,868 $ 3,526 $ 5,394 Provision 1999 .................. 1,829 2,171 4,000 Payments 1999 ................... (1,430) (1,212) (2,642) ------------ ------------------- ---------- Reserve at September 30, 1999 ... $ 2,267 $ 4,485 $ 6,752 ------------ ------------------- ---------- ------------ ------------------- ----------
-9- NOTE 8: COMPREHENSIVE INCOME The following table sets forth the computation of comprehensive income for the three and nine months ended September 30, 1999 and 1998, respectively:
For the three months ended For the nine months ended September 30, September 30, --------------------------- ---------------------------- 1999 1998 1999 1998 ------------ ----------- ------------ ------------ Net income ................................... $ 4,428 $ 2,383 $ 7,064 $ 12,321 Other comprehensive income (loss): Translation adjustment, net of related taxes ........................................ 182 (1,682) 407 (1,570) ------------ ----------- ------------ ------------ Total comprehensive income ................... $ 4,610 $ 701 $ 7,471 $ 10,751 ------------ ----------- ------------ ------------ ------------ ----------- ------------ ------------
NOTE 9: EXTRAORDINARY ITEMS In September 1998, the Company purchased and retired $5,398 in principle 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 an extraordinary item of $170, net of income tax benefit of $113 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 Credit Facility, the Company recorded an extraordinary item of $363, net of income tax benefit of $242, related to the write-off of previously capitalized debt issuance costs. NOTE 10: SALE OF SUBSIDIARY In December 1998, the Company agreed to sell the assets of its Canadian heavy-duty truck remanufacturing operation ("Mascot") for $3.8 million in cash and the assumption of certain liabilities. As part of this transaction, the Company recorded a $1.2 million loss in the fourth quarter of 1998. In February 1999, the Company collected the $3.8 million of cash proceeds, of which $1.9 million was used to retire Mascot's bank line of credit and certain other liabilities and $1.9 million was paid against the term loan portion of the Credit Facility. NOTE 11: SUBSEQUENT EVENTS On October 1, 1999, the Company acquired substantially all the assets of All Transmission Parts, Inc. for a cash purchase price of $32.0 million. The purchase price was paid by borrowings under the revolving portion of the Credit Facility. In addition, the Company expects to complete the acquisition of substantially all the assets of All Automatic Transmission Parts, Inc., which is an affiliate of All Transmission Parts, Inc., on or before December 1, 1999 for a cash purchase price of $8.0 million. The purchase price for this acquisition and related transaction expenses for both acquisitions will be paid by borrowings under the revolving portion of the Credit Facility. These acquisitions will be accounted for under the purchase method of accounting. Accordingly, the allocation of the cost of the acquired assets and liabilities will be made on the basis of the fair value. -10- 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, 1998. 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, 1999 COMPARED TO THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998. Net income increased $2.0 million, or 83.3%, from $2.4 million for the three months ended September 30, 1998 to $4.4 million for the three months ended September 30, 1999. Income before extraordinary item increased $1.8 million, or 69.2%, from $2.6 million for the three months ended September 30, 1998 to $4.4 million for the three months ended September 30, 1999. This increase was primarily attributable to an increase in profitability of the Company's OEM segment partially offset by a decline in profitability of the Company's Independent Aftermarket segment during 1999 as compared to 1998. Net income per diluted share was $0.21 for the three months ended September 30, 1999 as compared to $0.11 per diluted share for the three months ended September 30, 1998. Excluding extraordinary items, net income per diluted share was $0.12 for the three months ended September 30, 1998. NET SALES Net sales increased $17.2 million, or 13.8%, from $125.0 million for the three months ended September 30, 1998 to $142.2 million for the three months ended September 30, 1999. On a proforma basis, excluding $1.4 million of 1998 sales from Mascot, the Company's Canadian heavy-duty truck remanufacting operation, which was sold in February 1999, sales increased $18.6 million, or 15.1%, from $123.6 million for the three months ended September 30, 1998. This increase was primarily attributable to increased sales from the Company's OEM segment. In addition, the Independent Aftermarket segment and the Logistics Services and Material Recovery business units reported increases in 1999 as compared to 1998. Sales to DaimlerChrysler accounted for 22.0% and 16.7% of the Company's revenues for the three months ended September 30, 1999 and 1998, respectively. Sales to Ford accounted for 19.3% and 21.0% of the Company's revenues for the three months ended September 30, 1999 and 1998, respectively. -11- GROSS PROFIT Gross profit increased $8.9 million, or 23.4%, from $38.1 million for the three months ended September 30, 1998 to $47.0 million for the three months ended September 30, 1999. This increase was principally due to the increased sales from the Company's OEM segment and its Logistics Services and Material Recovery business units, partially offset by a decline in gross profit experienced by the Company's Independent Aftermarket segment. Gross profit as a percentage of net sales increased from 30.5% for the three months ended September 30, 1998 to 33.0% for the three months ended September 30, 1999. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses ("SG&A") increased $4.6 million, or 17.6%, from $26.1 million for the three months ended September 30, 1998 to $30.7 million for the three months ended September 30, 1999. As a percentage of net sales, SG&A expenses increased from 20.9% to 21.6% between the two periods. The increase was primarily due to (i) $1.4 million of additional infrastructure costs related to the Independent Aftermarket segment's enterprise-wide information system, (ii) $1.2 million related to the OEM segment's remanufactured engine program, primarily due to the expansion of its branch sales channel, (iii) $0.9 million in the Logistics Services business unit primarily related to sales volume growth and systems enhancements and (iv) $0.8 million primarily associated with the Company's business improvement initiatives, including travel, recruitment and professional service costs. AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets decreased slightly from $1.9 million for the three months ended September 30, 1998 to $1.8 million for the three months ended September 30, 1999. SPECIAL CHARGES The Company did not incur any special charges during the three months ended September 30, 1999. However, the Company, as a normal part of its 2000 business planning process, is identifying and reviewing areas where cost efficiencies can be achieved through consolidation of redundant facilities, outsourcing functions or changing processes or systems. Implementation of any of these could require the Company to incur special charges, which would be offset over time by the projected cost savings. INCOME FROM OPERATIONS Income from operations increased $4.4 million, or 43.6%, from $10.1 million for the three months ended September 30, 1998 to $14.5 million for the three months ended September 30, 1999, principally as a result of the factors described above. As a percentage of net sales, income from operations increased from 8.1% to 10.2%, between the two periods. INTEREST EXPENSE Interest expense increased $0.6 million, or 9.4%, from $6.4 million for the three months ended September 30, 1998 to $7.0 million for the three months ended September 30, 1999. The increase primarily resulted from borrowings under the Credit Facility to finance operating activities and purchases of property, plant and equipment. -12- EXTRAORDINARY ITEM During the three months ended September 30, 1998, the Company recorded an extraordinary item of $0.2 million resulting from the repurchase of $5.4 million in principle amount of the Senior Notes in open market transactions. OEM SEGMENT The following table presents net sales and segment profit (EBT) expressed in millions of dollars and as a percentage of net sales:
For the three months ended September 30, ---------------------------------------- 1999 1998 ------------------- -------------------- Net sales............................. $77.4 100.0% $65.1 100.0% -------- ---------- ---------- --------- -------- ---------- ---------- --------- Segment profit........................ $10.4 13.4% $ 4.5 6.9% -------- ---------- ---------- --------- -------- ---------- ---------- ---------
NET SALES. Net sales increased $12.3 million, or 18.9%, from $65.1 million for the three months ended September 30, 1998 to $77.4 million for the three months ended September 30, 1999. The increase was primarily due to increased sales of remanufactured transmissions to DaimlerChrysler and Ford and increased sales from the OEM segment's engine branch sales channel, partially offset by a decrease in sales volume of engine and related parts in the segment's European operations. Sales to DaimlerChrysler accounted for 40.3% and 32.0% of segment revenues for the three months ended September 30, 1999 and 1998, respectively. Sales to Ford accounted for 32.7% and 37.3% of segment revenues for the three months ended September 30, 1999 and 1998, respectively. SEGMENT PROFIT. Segment profit increased $5.9 million, or 131.1%, from $4.5 million (6.9% of OEM net sales) for the three months ended September 30, 1998 to $10.4 million (13.4% of OEM net sales) for the three months ended September 30, 1999. The increase is primarily attributable to the increased sales of remanufactured transmissions. INDEPENDENT AFTERMARKET SEGMENT The following table presents net sales and segment profit (loss) (EBT) expressed in millions of dollars and as a percentage of net sales:
For the three months ended September 30, ---------------------------------------- 1999 1998 ------------------- -------------------- Net sales........................... $ 49.5 100.0% $ 46.0 100.0% -------- ---------- ---------- --------- -------- ---------- ---------- --------- Segment profit (loss) .............. $ (5.3) (10.7)% $ (1.8) (3.9)% -------- ---------- ---------- --------- -------- ---------- ---------- ---------
NET SALES. Net sales increased $3.5 million, or 7.6%, from $46.0 million for the three months ended September 30, 1998 to $49.5 million for the three months ended September 30, 1999. This increase was largely attributable to sales of hard parts that were introduced after the third quarter of 1998 and to an improvement from the lower sales volumes experienced during 1998, which were caused by customer service and fill rate shortfalls related to implementation issues associated with the segment's enterprise-wide information system. SEGMENT PROFIT (LOSS). Segment profit decreased $3.5 million, from a $1.8 million loss for the three months ended September 30, 1998 to a $5.3 million loss for the three months ended September 30, 1999. This decline was primarily attributable to (i) $1.4 million of additional -13- infrastructure costs related to the segment's enterprise-wide information system, (ii) an increase of $1.0 million in allocated interest expense, primarily associated with an increase in segment investment for systems implementation costs, increased inventory levels to support new product and customer service initiatives, and segment losses and (iii) $0.7 million of costs related to the launch of the Company's independent aftermarket remanufactured transmission program. OTHER OPERATING UNITS The following table presents net sales and segment profit (EBT) expressed in millions of dollars and as a percentage of net sales:
For the three months ended September 30, ---------------------------------------- 1999 1998 -------------------- ------------------- Net sales............................. $15.2 100.0% $13.9 100.0% -------- ----------- ---------- -------- -------- ----------- ---------- -------- Segment profit........................ $ 1.9 12.5% $ 0.3 2.2% -------- ----------- ---------- -------- -------- ----------- ---------- --------
NET SALES. Net sales increased $1.3 million, or 9.4%, from $13.9 million for the three months ended September 30, 1998 to $15.2 million for the three months ended September 30, 1999. On a proforma basis, excluding $1.4 million of 1998 sales from Mascot, sales increased $2.7 million, or 21.6% between the periods. The increase was primarily attributable to increased sales by the Logistics Services and Material Recovery business units. SEGMENT PROFIT. Segment profit increased $1.6 million, or 533.3%, from $0.3 million for the three months ended September 30, 1998 to $1.9 million for the three months ended September 30, 1999. The increase was primarily the result of increased sales volumes by the Logistics Services and Material Recovery business units in 1999 versus 1998. RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998. Net income decreased $5.2 million, or 42.3%, from $12.3 million for the nine months ended September 30, 1998 to $7.1 million for the nine months ended September 30, 1999. During the nine months ended September 30, 1999 and 1998, the Company recorded special charges of $4.0 million and $3.6 million, respectively, related to certain initiatives designed to improve operating efficiencies and reduce costs (see "Special Charges" below). After-tax net earnings before extraordinary item and special charges decreased $5.5 million, or 36.7%, from $15.0 million for the nine months ended September 30, 1998 to $9.5 million for the nine months ended September 30, 1999. This decrease was primarily attributable to a decline in profitability from the Company's Independent Aftermarket segment, partially offset by an increase in profitability from the Company's OEM segment, during 1999 as compared to 1998. Net income per diluted share was $0.33 for the nine months ended September 30, 1999 as compared to $0.58 per diluted share for the nine months ended September 30, 1998. Excluding the special charges and extraordinary item, net income per diluted share was $0.45 for the nine months ended September 30, 1999 as compared to $0.71 per diluted share for the nine months ended September 30, 1998. NET SALES Net sales increased $56.1 million, or 15.5%, from $362.5 million for the nine months ended September 30, 1998 to $418.6 million for the nine months ended September 30, 1999. This increase is partially attributable to a full nine months of net sales from Autocraft, acquired in March 1998. On a pro forma basis, as if the Autocraft acquisition and the sale of Mascot had taken place on January 1, 1998, net sales would have been $417.9 million and $384.3 million for the nine months ended September 30, 1999 and 1998, respectively. The increase, on a pro forma -14- basis, was primarily attributable to increased sales across all reportable and non-reportable segments of the Company. Sales to DaimlerChrysler accounted for 20.1% and 19.1% of the Company's revenues for the nine months ended September 30, 1999 and 1998, respectively. Sales to Ford accounted for 19.3% and 15.4% of the Company's revenues for the nine months ended September 30, 1999 and 1998, respectively. On a pro forma basis, as if the Autocraft acquisition and the sale of Mascot had occurred on January 1, 1998, sales to DaimlerChrysler would have accounted for 18.0% of the Company's revenues for the nine months ended September 30, 1998 and sales to Ford would have accounted for 19.0% of the Company's revenues for the same period. GROSS PROFIT Gross profit increased $15.0 million, or 12.8%, from $117.0 million for the nine months ended September 30, 1998 to $132.0 million for the nine months ended September 30, 1999. This increase was principally due to the increased sales in the Company's OEM segment and Logistics Services business unit, partially offset by a decline in gross profit experienced by the Company's Independent Aftermarket segment. Gross profit as a percentage of net sales decreased from 32.3% to 31.5% between the two periods. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses ("SG&A") increased $21.0 million, or 29.9%, from $70.3 million for the nine months ended September 30, 1998 to $91.3 million for the nine months ended September 30, 1999. As a percentage of net sales, SG&A expenses increased from 19.4% to 21.8% between the two periods. This increase was due primarily to (i) $6.0 million related to the OEM segment's remanufactured engine program, primarily due to the expansion of its branch sales channel, (ii) $5.1 million of additional infrastructure costs related to the Independent Aftermarket segment's enterprise-wide information system, (iii) $3.5 million primarily associated with the Company's business improvement initiatives, including travel, recruitment and professional service costs, (iv) $2.9 million of additional cost due to a full nine months of SG&A cost from Autocraft, acquired on March 6, 1998 and (v) $2.4 million in the Logistics Services business unit primarily related to sales volume growth and systems enhancements. AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets increased $0.3 million, or 5.9%, from $5.1 million for the nine months ended September 30, 1998 to $5.4 million for the nine months ended September 30, 1999. The increase is attributable to the March 1998 Autocraft acquisition. SPECIAL CHARGES During the nine months ended September 30, 1999, the Company incurred $4.0 million of special charges. These charges consisted of $2.4 million of severance and other costs related to the Company's reorganization of certain management functions and $1.6 million of exit and other costs principally related to the consolidation of certain of the Company's distribution centers. During the nine months ended September 30, 1998, the Company incurred $3.6 million of special charges, consisting of $2.5 million of costs relating principally to idle plant capacity costs and $1.1 million of restructuring charges consisting principally of employee severance costs and certain other exit costs. These were the initial special charges the Company incurred in its efforts designed to improve operating efficiencies and reduce costs. The Company, as a normal part of its 2000 business planning process, is identifying and reviewing areas where cost efficiencies can be achieved through consolidation of redundant -15- facilities, outsourcing functions or changing processes or systems. Implementation of any of these could require the Company to incur special charges, which would be offset over time by the projected cost savings. INCOME FROM OPERATIONS Income from operations decreased $6.5 million, or 17.2%, from $37.9 million for the nine months ended September 30, 1998 to $31.4 million for the nine months ended September 30, 1999, principally as a result of the factors described above. As a percentage of net sales, income from operations decreased from 10.5% to 7.5%, between the two periods. INTEREST EXPENSE Interest expense increased $1.8 million, or 10.0%, from $18.0 million for the nine months ended September 30, 1998 to $19.8 million for the nine months ended September 30, 1999. The increase primarily resulted from borrowing under the $120.0 million term loan portion of the Credit Facility in March 1998 to finance the Autocraft acquisition. EXTRAORDINARY ITEMS During the nine months ended September 30, 1998, an extraordinary item in the amount of $0.5 million ($0.9 million, net of related income tax benefit of $0.4 million) was recorded. This amount was comprised of (i) a pre-tax charge of $0.6 million for the write-off of deferred financing fees in connection with the restatement and amendment of the credit agreement for the Credit Facility and (ii) a pre-tax charge of $0.3 million resulting from the repurchase of $5.4 million in principle amount of the Company's Senior Notes in open market transactions. OEM SEGMENT The following table presents net sales, special charges and segment profit (EBT) expressed in millions of dollars and as a percentage of net sales:
For the nine months ended September 30, --------------------------------------- 1999 1998 ------------------- ------------------- Net sales............................. $228.1 100.0% $186.5 100.0% --------- --------- ---------- -------- --------- --------- ---------- -------- Special charges....................... $ - -% $ 2.6 1.4% --------- --------- ---------- -------- --------- --------- ---------- -------- Segment profit........................ $ 26.1 11.4% $ 17.2 9.2% --------- --------- ---------- -------- --------- --------- ---------- --------
NET SALES. Net sales increased $41.6 million, or 22.3%, from $186.5 million for the nine months ended September 30, 1998 to $228.1 million for the nine months ended September 30, 1999. The increase was primarily due to (i) the timing of the Autocraft acquisition which was acquired on March 6, 1998, (ii) increased sales of remanufactured transmissions to Ford and DaimlerChrysler and (iii) increased engine sales through the Company's branch sales channel, partially offset by a decrease in sales volume of engine and related parts in the segment's European operations. Sales to DaimlerChrysler accounted for 36.8% and 37.1% of segment revenues for the nine months ended September 30, 1999 and 1998, respectively. Sales to Ford accounted for 32.4% and 28.0% of segment revenues for the nine months ended September 30, 1999 and 1998, respectively. On a pro forma basis, as if the Autocraft acquisition had occurred on January 1, 1998, sales to DaimlerChrysler would have accounted for 33.6% of segment revenues for the nine months ended September 30, 1998 and sales to Ford would have accounted for 33.1% of segment revenues for the same period. -16- SPECIAL CHARGES. Special charges of $2.6 million during 1998 were primarily incurred in connection with the consolidation of certain OEM segment manufacturing plants. There were no such charges incurred during the nine months ended September 30, 1999. SEGMENT PROFIT. Segment profit increased $8.9 million, or 51.7%, from $17.2 million (9.2% of OEM net sales) for the nine months ended September 30, 1998 to $26.1 million (11.4% of OEM net sales) for the nine months ended September 30, 1999. Excluding 1998 special charges of $2.6 million, segment profit increased by $6.3 million, as sales volume related increases in gross profit were partially offset by increased SG&A expenses associated with the expansion of the Company's branch sales network for remanufactured engines. Independent Aftermarket Segment The following table presents net sales, special charges and segment profit (loss) (EBT) expressed in millions of dollars and as a percentage of net sales:
For the nine months ended September 30, --------------------------------------- 1999 1998 ------------------- ------------------- Net sales......................... $147.6 100.0% $143.5 100.0% --------- --------- ---------- -------- --------- --------- ---------- -------- Special charges.................. $ 1.9 1.3% $ 0.8 0.6% --------- --------- ---------- -------- --------- --------- ---------- -------- Segment profit (loss)............ $(17.9) (12.1)% $ (2.9) (2.0)% --------- --------- ---------- -------- --------- --------- ---------- --------
NET SALES. Net sales increased $4.1 million, or 2.9%, from $143.5 million for the nine months ended September 30, 1998 to $147.6 million for the nine months ended September 30, 1999. This increase was largely attributable to sales of hard parts that were introduced after the third quarter of 1998 and to an improvement from the lower sales volumes experienced during 1998, which were caused by customer service and fill rate shortfalls related to implementation issues associated with the segment's enterprise-wide information system. SPECIAL CHARGES. Special charges increased $1.1 million, from $0.8 million for the nine months ended September 30, 1998 to $1.9 million for the nine months ended September 30, 1999. Special charges incurred during 1998 consisted of $0.3 million of severance costs and $0.5 million of costs related to the centralization of the Independent Aftermarket segment's management team and its MIS function and certain other personnel matters. Special charges incurred during 1999 consisted of $1.6 million of exit and other costs related to the consolidation of the Independent Aftermarket's distribution centers, as well as $0.3 million of severance and other costs related to the reorganization of certain management functions. SEGMENT PROFIT (LOSS). Segment profit decreased $15.0 million, from a $2.9 million loss for the nine months ended September 30, 1998 to a $17.9 million loss for the nine months ended September 30, 1999. Excluding 1999 and 1998 special charges of $1.9 million and $0.8 million, respectively, segment profit decreased $13.9 million between the two periods. This decline was primarily attributable to (i) $5.1 million of additional infrastructure costs related to the segment's enterprise-wide information system, (ii) an overall decline in gross profit margin of $4.6 million due primarily to changes in sales mix, an increase in costs and selected temporary sales discounts to maintain customer satisfaction and service levels as the Company implemented enhancements to its enterprise-wide information system and an increase in costs associated with the relocation of one the Company's primary distribution centers to a larger and more suitable facility, (iii) $2.3 million of costs related to the launch of the Company's independent aftermarket remanufactured transmission program and (iv) an increase of $2.2 million in allocated interest expense, primarily associated with an increase in segment investment for capitalized systems implementation costs, increased inventory levels to support new product and customer service initiatives, and segment losses. -17- Other Operating Units The following table presents net sales, special charges and segment profit (EBT) expressed in millions of dollars and as a percentage of net sales:
For the nine months ended September 30, ---------------------------------------- 1999 1998 ------------------- -------------------- Net sales............................. $42.9 100.0% $ 32.5 100.0% --------- --------- ---------- --------- --------- --------- ---------- --------- Special charges....................... $ 0.1 0.2% $ - -% --------- --------- ---------- --------- --------- --------- ---------- --------- Segment profit........................ $ 4.9 11.4% $ 1.3 4.0% --------- --------- ---------- --------- --------- --------- ---------- ---------
NET SALES. Net sales increased $10.4 million, or 32.0%, from $32.5 million for the nine months ended September 30, 1998 to $42.9 million for the nine months ended September 30, 1999. On a pro forma basis, as if the Autocraft acquisition and the sale of Mascot had taken place on January 1, 1998, net sales would have been $42.2 million and $34.9 million for the nine months ended September 30, 1999 and 1998, respectively. This increase was primarily attributable to increased sales in the Logistics Services and Material Recovery business units, which were acquired in March 1998 as part of the Autocraft acquisition. Prior to the Autocraft acquisition, revenue in this segment was entirely attributable to Mascot, the Company's Canadian heavy-duty truck remanufacturing operation, which was sold in February 1999. SEGMENT PROFIT. Segment profit increased $3.6 million, or 276.9%, from $1.3 million for the nine months ended September 30, 1998 to $4.9 million for the nine months ended September 30, 1999. The increase was primarily the result of additional sales volume described above. LIQUIDITY AND CAPITAL RESOURCES The Company had total cash and cash equivalents on hand of $2.1 million at September 30, 1999. Net cash provided by operating activities was $11.9 million for the nine-month period. Net cash used in investing activities was $16.3 million for the period, which consisted of $20.1 million in net capital expenditures largely for remanufacturing equipment and systems implementation costs partially offset by $3.8 million of proceeds from the sale of Mascot. Net cash provided by financing activities of $5.9 million was primarily from net borrowings of $9.7 million made under the Credit Facility, partially offset by $0.8 million in payment of the Canadian bank line of credit, $2.7 million in payment of amounts due to acquired companies and $0.7 million in payment of deferred financing fees related to amendments made to the Credit Facility. Based on its operating results during 1998, the Company was in technical default of the leverage and cash flow covenants of the Credit Facility and the Company's interest rate swap agreement as of December 31, 1998. This resulted in a cross default under the line of credit for the Company's Canadian subsidiaries. Due to the defaults, the Company was prohibited from further borrowings under the Credit Facility and its Canadian line of credit. In March 1999, the Company obtained from its lenders waivers of the various defaults and certain amendments to the Credit Facility and the interest rate swap agreement that the Company believes will enable it to comply with the covenants in the future. Amounts outstanding under the Credit Facility bear interest at either the "Alternate Base Rate" or the "Eurodollar Rate" (as defined in the Credit Agreement) plus an applicable margin. At December 31, 1998 the Alternate Base Rate margin was zero and the Eurodollar margin was 1.0%. -18- As of September 30, 1999, the Alternate Base Rate margin was 1.25% and the Eurodollar margin was 2.25%. As of September 30, 1999, the Company had approximately $46.8 million available to borrow under the revolving portion of the Credit Facility. On October 1, 1999, the Company acquired substantially all the assets of All Transmission Parts, Inc. for $32.0 million in cash through borrowings under the revolving portion of the Credit Facility. In addition, the Company expects to complete the acquisition of substantially all the assets of All Automatic Transmission Parts, Inc. for $8.0 million in cash on or before December 1, 1999. This transaction will also be funded through borrowings under the revolving portion of the Credit Facility. As of October 1, 1999, the Company had approximately $14.8 million available to borrow under the revolving portion of the Credit Facility. In addition, the Company has received approval from its lending group to increase its revolving credit commitments by $10.0 million but has not yet obtained the additional commitments. 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 the Year 2000. The project team has developed and is 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 was to inventory all of its computer hardware and software and all of its devices having imbedded computer technology. The Year 2000 project team focused on four 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); and (iv) facilities (e.g., heating and air conditioning systems, elevators, telephones, and fire and security systems). This inventory has been completed. In the second step, the project team determined whether each inventoried system or device is Year 2000 compatible, either through testing by the project team or certification from the vendor of the system or device. In the third step, those that are not compatible were upgraded or replaced. BUSINESS SYSTEMS. The business systems used by the Company's Logistics Services, Material Recovery and electronics operations and the business systems used by its subsidiaries that remanufacture transmissions for the Company's OEM transmission customers (including DaimlerChrysler, Ford and General Motors), have each been certified by the respective vendor as being Year 2000 compatible. The enterprise system being implemented for the Independent -19- Aftermarket segment has also been certified by the vendor as being Year 2000 compatible. Certain operations within the Independent Aftermarket segment that are not yet integrated into the enterprise system, are expected to be upgraded or replaced before the end of the year in order to be Year 2000 compatible. The noncompatible business system previously used by the Company's European operation was replaced with a Year 2000 compatible system during the third quarter of 1999. Substantially all other noncompatible hardware and software has been or will be decommissioned at or before the end of the year. PRODUCTION, FINANCIAL MANAGEMENT AND FACILITIES. Each device and each piece of hardware and non-business system software (a "Non-System Item") that can be tested by the Company has been tested for Year 2000 compatibility. In the case of any Non-System Item that cannot be tested, the vendor has been asked for a certification regarding compatibility. Substantially all of the Non-System Items have been tested or certified and upgraded or replaced. VENDORS. The project team has contacted each of the Company's significant vendors and requested that they apprise the Company of the status of their Year 2000 compliance programs. The Company had originally targeted the end of the first quarter of 1999 as the date for receiving substantially all vendor responses. While many vendor responses have been received, the Company is still pursuing responses from some vendors. There can be no assurance as to when or if this process will be completed. COSTS The total cost associated with the Company becoming Year 2000 compatible is not expected to be material to its financial position. As of September 30, 1999, the Company had spent approximately $1.0 million in connection with the project, consisting primarily of costs to replace or upgrade noncompatible business systems, including the system formerly used in the Company's European operation. The Company expects its future costs in connection with its Year 2000 project to be nominal. Excluded from the above cost estimates are the costs associated with the Distribution Group's enterprise-wide computer system to the extent that such costs relate to implementation of the system as opposed to making it Year 2000 compatible. 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. 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 noncompatibility of one of its critical business systems and (ii) disruption of the business of certain of its significant customers and vendors due to their noncompliance. At this time, the Company believes that all of its critical business systems are Year 2000 compatible. 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. -20- The Company is in the process of developing a contingency plan to address any material Year 2000 noncompliance issues. The Company projects to have the plan completed by the end of November 1999. 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 state 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 were 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK DERIVATIVE FINANCIAL INSTRUMENTS The Company does not hold or issue derivative financial instruments for trading purposes. The Company uses derivative financial instruments to manage its exposure to fluctuations in interest rates. Neither the aggregate value of these derivative financial instruments nor the market risk posed by them is material to the Company. The Company uses interest rate swaps to convert variable rate debt to fixed rate debt to reduce volatility risk. For additional discussion regarding the Company's use of such instruments, see Item 1. "Notes to Consolidated Financial Statements-Note 3." INTEREST RATE EXPOSURE Based on the Company's overall interest rate exposure during the nine months ended September 30, 1999, and assuming similar interest rate volatility in the future, a near-term (12 months) change in interest rates would not materially affect the Company's consolidated financial position, results of operation or cash flows. A 10% change in the rate of interest would not have a material effect on the Company's financial position, results of operation or cash flows. FOREIGN EXCHANGE EXPOSURE The Company has two foreign operations that expose it to translation risk when the local currency financial statements are translated to U.S. dollars. Since changes in translation risk are reported as adjustments to stockholders' equity, a 10% change in the foreign exchange rate would not have a material effect on the Company's financial position, results of operation or cash flows. -21- AFTERMARKET TECHNOLOGY CORP. PART II. OTHER INFORMATION Items 1-5 are not applicable. Item 6. - Exhibits and Reports on Form 8-K. (a) Exhibits See Exhibit Index on Page 24. (b) Reports on Form 8-K During the quarter ended September 30, 1999 the Company filed the following reports on Form 8-K: (1) Report dated July 30, 1999 reporting under Item 5 earnings estimates for the third quarter of 1999 and the year ended December 31, 1999. In addition, reporting under Item 7 the Company's press release dated July 29, 1999. (2) Report dated September 15, 1999 reporting under Item 5 the Company's intention to acquire substantially all the assets of All Transmission Parts, Inc. and its affiliate, All Automatic Transmission Parts, Inc. including an estimate of the related addition to 2000 earnings. In addition, reporting under Item 7 the Company's press release dated September 15, 1999. -22- 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: October 28, 1999 /s/ Barry C. Kohn - ---------------------- ------------------------------------------- Barry C. Kohn, Chief Financial Officer - - Barry C. Kohn is signing in the dual capacities as i) the principal financial officer, and ii) a duly authorized officer of the company. -23- AFTERMARKET TECHNOLOGY CORP. EXHIBIT INDEX
Exhibit Number Description Electronic (E) - ------------- ---------------------------------------------------------------- ----------------- 10.57 Consent and Amendment dated as of August 25, 1999 to the Amended (E) and Restated Credit Agreement, dated as of March 6, 1998 among Aftermarket Technology Corp., the several banks and other financial institutions from time to time parties thereto and The Chase Manhattan Bank, as agent. 27 Financial Data Schedules (E)
-24- EX-10.57 2 EXHIBIT 10.57 EXHIBIT 10.57 CONSENT AND AMENDMENT CONSENT AND AMENDMENT, dated as of August 25, 1999 (this "AMENDMENT"), to the Amended and Restated Credit Agreement, dated as of March 6, 1998 (as amended, supplemented or otherwise modified from time to time, the "AGREEMENT"), among AFTERMARKET TECHNOLOGY CORP., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties thereto (the "LENDERS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent (in such capacity, the "AGENT"). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Agent are parties to the Agreement; WHEREAS, the Borrower intends to acquire substantially all of the assets of All Transmission Parts, Inc. and All Automatic Transmission Parts, Inc. for approximately $40,000,000 (the "ALL TRANS ACQUISITION"); WHEREAS, the Borrower has requested that the Lenders approve the amount of the Acquisition pursuant to subsection 8.10(j)(v) and agree to amend certain provisions of the Agreement, and the Lenders and the Agent are agreeable to such request upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, and for other valuable consideration the receipt of which is hereby acknowledged, the Company, the Lenders and the Agent hereby agree as follows: 1. DEFINITIONS. All terms defined in the Agreement shall have such defined meanings when used herein unless otherwise defined herein. 2. CONSENT TO ALL TRANS ACQUISITION. Pursuant to clause (v) of Section 8.10(j), the Required Lenders hereby consent to the All Trans Acquisition to the extent it would otherwise exceed the limitations thereof, so long as the other requirements in respect thereof are satisfied, it being understood that the aggregate consideration paid in connection with the All Trans Acquisition shall be applied against and reduce the availability of the $55,000,000 limit under subsection 8.10(j)(vi) (as such subsection is amended by this Amendment). 3. AMENDMENT OF SUBSECTION 1.1. Subsection 1.1 of the Agreement is hereby amended by adding the following new definitions in alphabetical order: "NEW LENDER": as defined in subsection 2.7(d). "NEW LENDER SUPPLEMENT": as defined in subsection 2.7(d). 2 4. AMENDMENT OF SECTION 2. The Agreement is hereby amended by adding the following new subsection 2.7 to the end of Section 2: "2.7 INCREASE IN REVOLVING CREDIT COMMITMENTS OR TERM LOANS (a) The Borrower may, with notice to the Agent but without the consent of the Required Lenders, (a) from time to time during the Revolving Credit Commitment Period, request that the Revolving Credit Commitments be increased, or (b) from time to time prior to the Termination Date, request to borrow additional Term Loans; PROVIDED that the sum of incremental Revolving Credit Commitments and additional Term Loans obtained pursuant to this subsection shall not exceed $10,000,000 and shall, in each case, aggregate at least $2,000,000 per requested increase; and PROVIDED FURTHER that any request made by the Borrower pursuant to this subsection 2.7(a) shall be accompanied by documentation complying with the provisions of subsection 6.2(e) and additional written evidence to the extent necessary to demonstrate that after giving effect to the additional Term Loans or the Revolving Loans available to the Borrower pursuant to the increased Revolving Credit Commitments, the Borrower would be in compliance with subsection 8.17 hereof. Upon receipt of such notice, the Administrative Agent will seek the agreement of one or more Lenders (including New Lenders) to increase or, in the case of New Lenders, make, its or their Revolving Credit Commitment or make additional Term Loans, as applicable, in an aggregate amount equal to the amount so requested by the Borrower. (b) If one or more of the Lenders (including New lenders) shall have agreed to increase its or their existing Revolving Credit Commitment or, in the case of New Lenders, agree to a Revolving Credit Commitment, or to make a Term Loan, in each case pursuant to a request made as described in the foregoing clause (a) (it being understood that no Lender shall have any obligation to increase its Revolving Credit Commitment or make such additional Term Loan), such increases in Revolving Credit Commitments shall become effective, and such Term Loans shall be made available to the Borrower, on a date mutually agreed upon among the Agent, the Borrower and the Lenders providing such increase and/or such new Revolving Credit Commitments or Term Loans and shall be implemented pursuant to documentation consistent herewith and otherwise in form and substance reasonably satisfactory to the Agent, providing, among other things, for adjustments to cause the Loans of each Lender to correspond to their respective percentage of the applicable facility after giving effect to such increase (including, without limitation, by providing for prepaying and reborrowing all then outstanding Loans). (c) Revolving Credit Loans, Revolving Credit Commitments and Term Loans made or agreed to pursuant to this subsection 2.7 shall have the same maturities, interest and fee rates and other terms as the other Revolving Credit Loans, Revolving Credit Commitments and/or Term Loans hereunder, as applicable, and shall for all purposes be deemed to be Revolving Credit Loans, Revolving Credit Commitments and/or Term Loans hereunder, as the case may be. 3 (d) Any bank, financial institution or other entity which, with the consent of the Borrower and the Agent (which consent shall not be unreasonably withheld), elects to become a "Lender" under this Agreement pursuant to this subsection 2.7 shall execute a New Lender Supplement (each, a "NEW LENDER SUPPLEMENT") substantially in the form of Exhibit H, whereupon such bank, financial institution or other entity (a "NEW LENDER") shall become a Revolving Credit Lender or Term Loan Lender, as the case may be, for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement." 5. AMENDMENT OF SUBSECTION 4.3. Subsection 4.3 is hereby amended by inserting the new clause (e) after existing clause (d): "(e) If additional Term Loans are borrowed pursuant to subsection 2.7(c), the remaining scheduled installments in effect on the date such additional Term Loans are borrowed shall be increased ratably (determined on the basis of the respective amounts of such remaining installments)." 6. AMENDMENT OF SUBSECTION 8.1(a). Subsection 8.1(a) of the Agreement is hereby amended by deleting the permitted maximum Leverage Ratios listed therein for the last day of the Borrower's fiscal quarters ending December 31, 1999 and March 31, 2000 and inserting in lieu thereof the following permitted maximum Leverage Ratios: "December 31, 1999 4.25 to 1.0 March 31, 2000 3.75 to 1.0".
7. AMENDMENT OF SUBSECTION 8.1(b). Subsection 8.1(b) of the Agreement is hereby amended by deleting the minimum permitted interest coverage ratio listed therein for the Borrower's four consecutive fiscal quarters ending March 31, 2000 and inserting in lieu thereof the following interest coverage ratio: "March 31, 2000 2.25 to 1.0".
8. AMENDMENT OF SUBSECTION 8.7. Subsection 8.7 of the Agreement is hereby amended by deleting the existing subsection 8.7 and inserting in lieu thereof the following new subsection: "8.7 LIMITATION ON LEASES. Permit Consolidated Lease Expense for any fiscal year of the Borrower to exceed an amount equal to $11,000,000 for the fiscal year ending December 31, 1998, $17,000,000 for the fiscal year ending December 31, 1999 and $21,000,000 for each fiscal year thereafter." 9. AMENDMENT OF SUBSECTION 8.10(j). Subsection 8.10(j) of the Agreement is hereby amended by deleting "$25,000,000" from clause (vi) and inserting in lieu thereof "$55,000,000" such that subsection 8.10(j), as amended, reads as follows: 4 "(j) acquisitions by the Borrower and its Subsidiaries, of assets or Capital Stock of one or more corporations or other Persons so long as (i) each such acquisition and all transactions related thereto shall be consummated in accordance with applicable Requirements of Law; (ii) each such acquisition, in the case of an acquisition of Capital Stock, shall result in such corporation or Person becoming a Subsidiary; (iii) after giving effect to any such acquisition, no Default or Event of Default shall have occurred and be continuing; (iv) the Borrower shall have delivered to the Agent a certificate demonstrating that the requirements of subsection 8.1 would be satisfied on a pro forma basis as at the end of the most recently ended fiscal quarter of the Borrower with respect to which financial statements have been delivered pursuant to subsection 7.1 if each such acquisition (including the Indebtedness incurred in connection therewith) had occurred on the first day of the four fiscal quarter period ended with such most recently ended fiscal quarter; (v) in the case of any acquisition by the Borrower and its Subsidiaries, for cash or other consideration exceeding $15,000,000 in the aggregate, such acquisition shall be subject to the prior written consent of the Required Lenders; and (vi) the aggregate consideration for all such acquisitions after the Closing Date shall not exceed $55,000,000." 10. ADDITION OF EXHIBIT H. The Agreement is hereby amended by inserting Exhibit H hereto after existing Exhibit G. 11. REPRESENTATIONS; NO DEFAULT. On and as of the date hereof, and after giving effect to this Amendment, the Company confirms, reaffirms and restates that the representations and warranties set forth in Section 5 of the Agreement and in the other Loan Documents are true and correct in all material respects, PROVIDED that the references to the Agreement therein shall be deemed to be references to this Amendment and to the Agreement as amended by this Amendment. 12. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on and as of the date that the Agent shall have received: (a) counterparts of this Amendment, duly executed and delivered by a duly authorized officer of each of the Borrower, the Agent, and the Required Lenders, along with the written consent of each Subsidiary Guarantor in the form attached hereto; (b) an executed certificate of an officer of the Borrower in form satisfactory to the Agent as to the accuracy of the Borrower's representations and warranties set forth in Section 5 of the Agreement and in the other Loan Documents, the absence of any Default or Event of Default after giving effect to this Amendment and as to such other customary matters as the Agent may reasonably request; and (c) an amendment fee for the account of each Lender executing this Amendment and delivering its executed signature page to the Agent prior to 12:00 Noon, New York City time, on August 25, 1999, in the amount equal to 0.10% of the sum of such Lender's Aggregate Outstanding Extensions of Credit and its unutilized Commitments as of such date. 5 13. LIMITED CONSENT AND AMENDMENT. Except as expressly amended herein, the Agreement shall continue to be, and shall remain, in full force and effect. This Amendment shall not be deemed to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of the Agreement or any other Loan Document or to prejudice any other right or rights which the Lenders may now have or may have in the future under or in connection with the Agreement or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 14. COSTS AND EXPENSES. The Company agrees to pay or reimburse the Agent for all its reasonable and customary out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of this Amendment, and the consummation of the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of its counsel. 15. COUNTERPARTS. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written. AFTERMARKET TECHNOLOGY CORP. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary THE CHASE MANHATTAN BANK, as Agent and as a Lender By: /s/ Julie S. Long ------------------------------- Name: Julie S. Long Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ William S. Richards, Jr. ------------------------------- Name: William S. Richards, Jr. Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ F.C.H. Ashby ------------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations 7 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Glenn A. Currin ------------------------------- Name: Glenn A. Currin Title: First Vice President FIRST UNION NATIONAL BANK By: /s/ Kent Davis ------------------------------- Name: Kent Davis Title: Vice President HARRIS TRUST & SAVINGS By: /s/ Melissa A. Whitson ------------------------------- Name: Melissa A. Whitson Title: Vice President LASALLE NATIONAL BANK By: /s/ James J. Hess ------------------------------- Name: James J. Hess Title: Vice President NATIONAL CITY BANK By: /s/ Matthew R. Klinger ------------------------------- Name: Matthew R. Klinger Title: Assistant Vice President 8 BANK OF NEW YORK By: /s/ R. Wes Towns ------------------------------- Name: R. Wes Towns Title: Senior Vice President CREDIT AGRICOLE INDOSUEZ By: /s/ Ernest V. Hodge ------------------------------- Name: Ernest V. Hodge Title: Vice President - Senior Relationship Manager By: /s/ Sarah U. Johnston ------------------------------- Name: Sarah U. Johnston Title: Vice President - Senior Relationship Manager 9 CONSENT Each of the undersigned Guarantors hereby consents and agrees to the provisions of the foregoing Amendment, and hereby affirms that upon the effectiveness of the foregoing Amendment, each Loan Document to which it is a party shall continue to be, and shall remain, in full force and effect. AFTERMARKET TECHNOLOGY CORP. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary AARON'S AUTOMOTIVE PRODUCTS, INC. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary ACI ELECTRONICS HOLDING CORP. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary ACI ELECTRONICS INVESTMENT CORP. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary ATC ELECTRONICS & LOGISTICS, L.P. By: ACI ELECTRONICS HOLDING CORP., its General Partner By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary 10 ATC DISTRIBUTION GROUP, INC. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary ATS REMANUFACTURING, INC. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary COMPONENT REMANUFACTURING SPECIALISTS, INC. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary AUTOCRAFT REMANUFACTURING CORP. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary AUTOCRAFT INDUSTRIES, INC. By: /s/ Joseph Salamunovich ------------------------------- Name: Joseph Salamunovich Title: Vice President and Secretary EXHIBIT H FORM OF NEW LENDER SUPPLEMENT SUPPLEMENT, dated _________________, to the Amended and Restated Credit Agreement, dated as of March 6, 1998 (as amended, supplemented or otherwise modified from time to time, the "AGREEMENT"), among AFTERMARKET TECHNOLOGY CORP., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties thereto (the "LENDERS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent (in such capacity, the "AGENT"). Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Agreement. W I T N E S S E T H : WHEREAS, subsection 2.7(d) of the Agreement provides that any bank, financial institution or other entity may become a party to the Agreement with the consent of the Borrower and the Agent (which consent shall not be unreasonably withheld) by executing and delivering to the Borrower and the Agent a supplement to the Agreement in substantially the form of this Supplement; and WHEREAS, the undersigned now desires to become a party to the Agreement as a [Revolving Credit Lender] [Term Loan Lender]; NOW, THEREFORE, the undersigned hereby agrees as follows: 1. The undersigned agrees to be bound by the provisions of the Agreement, and agrees that it shall, on the date this Supplement is accepted by the Borrower and the Agent, become a [Revolving Credit Lender] [Term Loan Lender] for all purposes of the Agreement to the same extent as if originally a party thereto, with a [Revolving Credit Commitment] [Term Loan] of $__________________. 2. The undersigned (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Agreement and all amendments thereto, together with copies of the most recent available audited and unaudited financial statements delivered pursuant thereto and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it will, independently and without reliance the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Agreement and will perform in accordance with its terms all the obligations which by the terms of the Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to subsection 4.13 (b) of the Agreement. 3. The undersigned's address for notices for the purposes of the Agreement is as follows: IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written. [INSERT NAME OF NEW LENDER] By ----------------------------------- Title: Accepted this day of ---- - --------------, --------. AFTERMARKET TECHNOLOGY CORP. By ---------------------------- Title: Accepted this day of ----- - ---------------, ------. THE CHASE MANHATTAN BANK, as Agent By ---------------------------- Title: EX-27 3 EXHIBIT 27
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 2,099 0 81,067 2,753 116,156 211,850 106,443 30,543 555,116 113,336 111,259 0 0 206 175,931 555,116 418,557 418,720 286,560 386,484 0 711 19,750 11,775 4,711 7,064 0 0 0 7,064 0.35 0.33
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