| December 1999 Memorandum |
Coolidge Distribution, Inc. |
| The information contained in
this Memorandum was compiled by TCG. Neither TCG nor CMI or any of their
respective directors, officers, employees or representatives make any
representation or warranty, express or implied, as to the accuracy or
completeness of the information contained in this Memorandum, and nothing
contained herein is, or shall be relied upon, as a promise or a
representation whether as to the past or the future.
Introduction TCG International Inc., ('TCG') has entered into a Letter of Intent with Coolidge Glass Co., Inc. ('Coolidge') whereby a newly incorporated subsidiary of TCG, Coolidge Distribution, Inc. ('CDI') will acquire Coolidge's automotive replacement glass, flat glass and stock metal parts distribution business. The purpose of this presentation is to provide you with the information you require to support CDI as a supplier of goods or services. The CDI/Coolidge transaction is anticipated to close in mid December 1999. TCG is a private family owned company headquartered in Burnaby, British Columbia. TCG employs approximately 2,100 people in the United States, Canada, the United Kingdom, the Netherlands and Australia. TCG is a significant participant in the automotive replacement glass ('ARG') business as a manufacturer, distributor, retailer and franchisor. Through its public subsidiary, Glentel Inc., TCG is an active participant in certain communication business segments in Canada. TCG has grown primarily through acquisitions, but is also experienced with start-up and expansion of business units. TCG invites you to visit its and the following affiliated web sites: www.tcgi.co Corporate Profile 1. Introduction TCG is a significant participant in the ARG business as a manufacturer, distributor, retailer and franchisor. A publicly traded subsidiary, Glentel Inc., is an important participant in certain communication business segments in Canada. The Company commenced operations in 1946 when an ARG retail store was established in New Westminster, British Columbia. TCG has grown primarily through acquisitions supported by corporate growth and occasional start-ups. The Company has been willing to divest business units when circumstances justify. It is fair to characterize the Company as an entrepreneurial and multi-national corporation. For the last sixteen years, the Company has extended its operations outside of Canada with relative success. Numerous transactions have occurred over this time period which, in combination with changes in industry structure (including pricing and costing structures, networks, etc.), have resulted in TCG having a medium sized, but sound position, in the United States ARG market. 2. Description of Business TCG, directly and through subsidiaries, operates one of the largest networks of retail ARG stores in the world, specializing in repair and replacement and other automotive products, with over 2,000 corporate, franchised and agent-operated locations in North America, Europe and 27 additional countries. TCG is also engaged, directly and through subsidiaries, in the wholesale distribution of ARG and related products throughout Canada, certain areas of the United States and the Netherlands. TCG also owns Novus of Minneapolis, Minnesota' the world's leading windshield repair equipment and resin manufacturer. Novus also franchises windshield repair businesses and licenses its name. TCG has entered into a co-branding agreement with Ziebart International Corporation of Troy, Michigan to offer Ziebart products and services at Speedy retail locations, both corporate and franchised. Ziebart is a high profile brand name offering professional vehicle detailing services, rust and appearance protection services, and a wide variety of car, truck and van accessories (including running boards, window tint, guards, lights, bedliners and floor mats). TCG is also in the airbag replacement service business through its 50% interest in Airbag Services International L.L.C. of Seattle, Washington ('Airbag'). Airbag has 38 franchised and 1 corporate locations in the United States. TCG recently opened 3 corporate Airbag locations in Vancouver, Toronto and Phoenix. TCG's 64% owned subsidiary, Glentel Inc. ('Glentel'), is engaged throughout Western Canada in the sale and servicing of two-way radio, cellular, PCS, paging and satellite communication equipment and related airtime usage. In Europe, TCG manufactures automotive glass through its 31% interest in Rioglass, S.A., ("Rio") in Logrono, Spain and distributes ARG through 100% subsidiary, Breda Automotive Glass, B.V. ("Breda") in Breda, the Netherlands. 3. Management Structure TCG is presently a management / holding company exerting significant control over its divisions and subsidiaries through its head office. The Skidmore family owns the Company and is represented through TCG's board and senior management. Arthur Skidmore, one of the Company's founders, remains involved from a board perspective. The Company's day to day affairs are managed by Allan Skidmore (automotive unit) and Thomas Skidmore (communication unit). Tom and Allan are Arthur Skidmore's sons. Allan and Tom, together with senior operating management, are responsible for managing day to day operations. 4. Summary Status - United States Coolidge Glass Distribution 1. Introduction Coolidge has been in business since 1963. From one warehouse in Milwaukee distributing ARG, Coolidge has grown to be a force in the Midwest as a leading wholesale distributor and/or fabricator of auto replacement glass, flat glass, insulated glass, metal parts and allied products. Coolidge added flat glass to its ARG distribution operations in the early 1970s and began fabricating insulating glass products in 1978. In 1994, Coolidge was designated an official distributor for Tubelite's architectural metal products. Coolidge leases a 100,000 square foot facility in Waukesha, Wisconsin where it fabricates insulated, spandrel, tempered glass and architectural metals. Corporate head office is based in this location. In 1997, Coolidge completed the expansion of its production facility in Waukesha increasing it by 30% to its present 100,000 square feet. Over $3 million was invested in new machinery and equipment including the largest tempering furnace of its kind in Wisconsin and a new edge fabricator, high-tech washer, polisher and hole drilling machine. Coolidge operates 15 distribution centres in Wisconsin, Illinois, Michigan, Minnesota, Michigan, and North Dakota. Two of the existing 15 distribution centres (Fargo, North Dakota and Minneapolis, Minnesota) were acquired in 1997 when Coolidge purchased, by merger, Total Glass Distributing, Inc. During the 3 years prior to 1997, Coolidge opened 6 new distribution centres. A distribution centre in Cincinnati, Ohio, which opened in 1997, was closed recently due to non-performance. The expansion of its production facility and distribution operations in recent years have stretched Coolidge's financial capabilities. Recent industry changes to the distribution business including the introduction of generic (lower cost) ARG and lower margins exhausted Coolidge's financial resources. As a result, after investigating its options and discussions with TCG, Coolidge decided to divest its operations. TCG has agreed to purchase Coolidge's business through two subsidiaries; CDI is purchasing the distribution operations and Coolidge Manufacturing, Inc. ('CMI') is purchasing the manufacturing business in Waukesha, Wisconsin. 2. Distribution Coolidge's 15 distribution centres are
located in Waukesha and Madison, Wisconsin; Elk Grove Village, Chicago
South and Harvey (Chicago) and Peoria, Illinois; Vinita Coolidge has operated as a supplier of OEM ARG and flat glass products to its customers. While this strategy was successful in the past, recent trends in the retail ARG market in the US have forced customers to seek lower cost ARG. This has resulted in lost sales and margin to Coolidge as they do not source less costly ARG parts from generic and foreign sources such as Mexico and China. In 1998, Coolidge entered into an agreement to supply ARG to Safelite Glass, the largest retail ARG supplier in the United States. While this agreement increased sales significantly, it also impacted Coolidge's ability to maintain its service levels to other customers. Some of these customers sought other suppliers for their ARG needs. The Safelite contract was also at a low gross margin. Coolidge terminated this unfavourable arrangement in early 1999. Coolidge has a wide customer base and is not reliant on any one customer for its sales, Coolidge's competitors include PPG, LOF, Iowa Glass Depot, Glass Depot and Dakotaland. Coolidge believes it is a major player in the mid-west region of the US and is one of the top three suppliers in its market. TCG believes that Coolidge is a junior competitor to PPG and LOF in markets where those national companies compete. Coolidge currently employs 223 employees in the distribution business. The warehouse employees, excluding management and office staff, are unionized except for Waukesha, Madison and Fargo. The Minneapolis centre was recently certified. CDI has negotiated new three-year agreements with all unionized staff, subject to closing of the purchase transaction. 3. CDI Strategic Focus TCG believes the major strengths of Coolidge's distribution business are the significant and loyal customer base and the strong name recognition. Other strengths include a good complement of experienced and loyal staff. Weaknesses of the business, other than the obvious impact of a difficult period in the US market and poor margin trends, include poor productivity, lack of focus, lack of product depth and poorly coordinated operational management. CDI's approach will be to address these problems in a reasonable time period without committing to major action steps until CDI has had the opportunity to better review operations after closing. Branch closures may be required but CDI's business plan does not assume this will occur. Nevertheless, CDI has identified certain areas where action will most probably be taken. One important mandate is for CDI to immediately enhance inventory depth. Much of Coolidge's inventory is composed of slower moving products while customers often have problems with having the more standard product orders filled. Our purchasing department is currently studying new inventory composition that will include the stocking of a wider range of ARG from a greater range of suppliers while still offering an acceptable quality of product, including OEM glass. TCG believes that sales can be enhanced, over time, by installing branch managers in all branches who have specific responsibilities not only for operations but also for customer support and sales generation, CDI intends, over time, to have customers deal with a customer service representative in the branch they use rather than the centralized system presently utilized. CDI also intends to introduce local training for customers in support of new techniques and difficult installations. This has been effective in building customer loyalty and respect for TCG in other areas. We will also work hard to comfort the independent customer bases that neither TCG nor CDI desires to compete with them as retailers. Within the distribution centres themselves, TCG will undertake a complete operational review using our most experienced operational staff. In addition to being onsite at and prior to closing for system and operational training we will commence a full review of delivery routing, warehouse configuration, personnel management and order processing. TCG believes that reasonable cost savings can be achieved over time. 4. Financial Information CDI will be financed through a common share investment by TCG, a bank financing offered by Wells Fargo Business Credit, Inc. and various assumed liabilities. |