CHARLOTTE, N.C. (April 26, 2002)—Heafner Tire Group Inc., the largest independent distributor of tires and tire-related products in the U.S., is changing its name to American Tire Distributors to reflect the national reach of its business and its transformation into a “single-minded organization.”
The name change coincides with, but is not related to, two separate moves the company made recently to reduce debt and free up capital.
The new name is actually the moniker of a wholesale distribution company that Heaf-ner acquired during 2000 from Merchants Inc., a Manassas, Va.-based dealership.
“Our new name, American Tire Distributors, reflects the national reach of our business and clearly communicates our focus on distribution,” Heafner President and CEO Dick Johnson said. “We're no longer a group but a unified, innovative company focused on serving tire dealers across America.”
The renaming is part of Heafner's transition from a collection of companies joined through various acquisitions—the former American Tire Distributors being one of them—into a “single-minded organization,” a company press release said.
The name change, effective July 4, follows two years of reorganization during which Heafner abandoned most of its retail operations—which included selling the California-based Winston Tire Co. chain—while strengthening itself financially.
Heafner Tire Group was spawned through purchases the company made between 1997 and 2000 when it was still known as J.H. Heafner Co. Inc. Those buyouts included California Tire Co., Competition Parts Warehouse (CPW), ITCO Tire Co. and T.O. Haas Tire Co. In late summer of 1999, the company changed its name to Heafner Tire Group, saying that better reflected its status as a national distributor.
That same year Charlotte-based Heafner sold the majority of its equity interests to Charlesbank Capital Partners L.L.C., a private equity firm which then took over ownership of the company.
The recent financial moves are two separate transactions, the spokesman said, referring to deals to buy back bonds and to execute a lease-back agreement for three warehouses.
In the initial step, announced April 12, Heafner completed a buy-back of up to $126 million in bonds originally tendered in February. The $121.4 million was retired in a move that increases shareholder equity and, according to Mr. Johnson, gives the company greater financial flexibility.
“It was an effort to reduce our debt load and improve the equity of the company,” he said, “just to have a stronger balance sheet and improve the liquidity of the company.”
Mr. Johnson did not say if any underlying economic conditions created the need for capital improvements. Instead, he said the efforts were part of an ongoing series that began with Heafner exiting the retail tire business and included getting out of the auto parts business in California.
“There were several goals and objectives we wanted to accomplish,” he said. “We needed to get all of our back rooms consolidated. All of the objectives we had at the beginning of the year, we accomplished.”
Bill Berry, Heafner's CFO, said the buy-back was solely balance sheet-related and that the company doesn't anticipate making any similar moves in the foreseeable future.
Heafner purchased $121.4 million of its 10-percent senior notes, due 2008, through what it called a modified Dutch auction procedure for a $535 per $1,000 principal amount, plus accrued but unpaid interest. The tender offer, amended March 11, reduces Heafner's long-term debt by 32 percent, according to the company, and will reduce its annual interest expense by nearly $8 million.
The debt retirement increases shareholder equity—including redeemable preferred stock—by approximately $59 million to $18 million, marking the first time Heafner's shareholder equity has been positive since 2000.
“I'm pleased that we have been able to accomplish one of my top goals: to boost shareholder equity back into positive territory,'” Mr. Johnson said. “This debt reduction strengthens the company and gives us greater financial flexibility to better serve our customers.”
The lease-back deal called for the investment banking firm of W.P. Carey & Co. to acquire and then lease back to Heafner warehouse facilities the company has in Lincolnton and Charlotte, N.C., and Greenville, S.C.
W.P. Carey purchased the facilities for $15 million on behalf of Corporate Property Associates 14 Inc., a member of the $3 billion W. P. Carey Group of publicly held non-traded real estate investment trusts.
According to the terms of the agreement with Carey, the three warehouses—encompassing more than 465,600 square feet of space—have been leased to Heafner under a 20-year net lease.
Mr. Berry said the advantage of the lease-back deals was that Heafner now assumes control of the properties for at least two decades.
Mr. Johnson said Heafner will be looking to expand its distribution capacity, especially in certain areas of the country.
“Certainly, we want to look at the marketplaces we're in,” he said. “We've got several areas of the country that we're not represented in as well as we'd like. We've only got two distribution centers in the central region. There's certainly a lot of room for us to grow in the central part of the country.”
Heafner employs more than 2,000 nationwide. It operates 62 distribution centers servicing all or parts of 35 states. Among the brands offered by the company are Michelin, Uniroyal, BFGoodrich, Dunlop, Bridgestone, Firestone and several private and associate brands. It also carries 19 lines of custom wheels, as well as equipment and tire-related supplies.