UNITED STATES
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 first quarter ended June 30, 1998
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: 001-13657
STANDARD AUTOMOTIVE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-2018607
- ------------------------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
321 Valley Rd., Hillsborough Township, NJ 08876-4056
- ------------------------------------------ ------------------------------------
(Address of principal executive offices) (Zip Code)
(908) 369-5544
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
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 August 12, 1998 the registrant had a total of 3,375,126 shares of
Common Stock outstanding and 1,150,000 shares of Preferred Stock outstanding.
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Index to Quarterly Report on Form 10-Q
June 30, 1998
Page
----
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1998 and
June 30, 1998 3
Consolidated Statement of Income for the three months
ended June 30, 1998 4
Consolidated Statement of Cash Flows for the three
months ended June 30, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II Other Information
Item 5. Subsequent Events 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures
2
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
STANDARD AUTOMOTIVE CORPORATION
Balance Sheets
<TABLE>
<CAPTION>
(in thousands, except share data) March 31, June 30,
-------- --------
1998 1998
-------- --------
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,357 $ 2,009
Accounts receivable, net of allowance for doubtful accounts
of $30 and $30, respectively 4,838 3,068
Inventory 5,399 8,922
Prepaid expenses 515 441
Deferred tax asset 289 357
-------- --------
Total current assets 14,398 14,797
Property and equipment, net of accumulated depreciation and
amortization of $35 and $89 1,225 1,933
Intangible assets, net of accumulated amortization of $130 and $320 15,127 15,380
Capitalized acquisition and financing costs 810 901
-------- --------
Total assets $ 31,560 $ 33,011
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 1,146 $ 2,699
Accrued expenses 978 758
Income taxes payable 727 272
-------- --------
Total current liabilities 2,851 3,729
Note payable 4,000 4,453
Commitments and contingencies
Stockholders' equity:
Preferred stock, $ .001 par value 3,000,000 shares authorized,
1,150,000 issued and outstanding 1 1
Common stock, $ .001 par value 10,000,000 shares authorized,
3,095,000 issued and outstanding 3 3
Common stock subscription receivable (2) (2)
Additional paid-in capital 24,548 24,621
Retained earnings 159 206
-------- --------
Total stockholders' equity 24,709 24,829
-------- --------
Total liabilities and stockholders' equity $ 31,560 $ 33,011
======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
(and Predecessor Company)
Statements of Income
For the Three Months Ended June 30,
(in thousands, except earnings per share data)
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Revenues $ 4,875 $ 7,880
Operating costs and expenses:
Cost of revenues 3,787 6,153
Selling, general and administrative expenses 317 728
Amortization of intangible assets -- 190
------- -------
Total operating costs and expenses 4,104 7,071
------- -------
Operating income 771 809
Interest expense -- (86)
Other income/(expense) 19 (56)
------- -------
Income before income taxes 790 667
Provision for income taxes 324 327
------- -------
Net income 466 340
Preferred dividend -- (293)
------- -------
Net income available to common stockholders $ 466 $ 47
======= =======
Basic and diluted net income per share $ 0.30 $ 0.02
======= =======
Basic and diluted weighted average number of shares outstanding 1,568 3,095
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
(and Predecessor Company)
Statements of Cash Flows
For the Three Months Ended June 30,
(in thousands)
1997 1998
------- -------
Cash flows from operating activities:
Net income $ 466 $ 340
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 33 244
Non-cash compensation -- 98
Deferred taxes (82) (68)
Change in assets and liabilites:
Accounts receivable 1,616 1,770
Inventory (1,811) (3,523)
Prepaid expenses 60 74
Accounts payable and accrued expenses (641) 1,333
Income taxes payable 206 (455)
------- -------
Net cash (used in) operating activities (153) (187)
------- -------
Cash flows from investing activities:
Capitalized acquisition costs -- (106)
Repayment of note receivable - related parties 80 --
Acquisition of property and equipment (42) (761)
------- -------
Net cash provided by (used in) investing activities 38 (867)
------- -------
Cash flows from financing activities:
Preferred dividend payment -- (293)
------- -------
Net cash (used in) financing activities -- (293)
------- -------
Net decrease in cash and cash equivalents (115) (1,347)
Cash and cash equivalents, beginning of period 1,558 3,357
------- -------
Cash and cash equivalents, end of period $ 1,443 $ 2,010
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ -- $ 118
Income taxes -- 850
See accompanying notes to financial statements.
5
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
General
The financial statements as of and for the three months ended June 30,
1998 are unaudited; however in the opinion of management all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the financial statements for the interim period have been made.
The notes to the financial statements have been prepared consistent with the
10-K filed for the fiscal year ended March 31, 1998 and should be read in
connection with those financials. The comparative financial statements for the
period ended June 30, 1997 pertain to the predecessor company Ajax
Manufacturing.
1. Organizational and Business Description
Standard Automotive Corporation (the "Company") was formed and
incorporated in January 1997. The Company's principal activity is the
manufacture of trailer chassis for domestic customers, through its wholly owned
subsidiary, Ajax Manufacturing Company ("Ajax").
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and Ajax. All inter-company accounts and transactions are eliminated in
consolidation.
Inventory
Inventory is stated at the lower of cost, determined on a first-in,
first-out basis, or market.
3. Long Term Debt and Credit Agreements
In connection with the acquisition of Ajax, the Company incurred an
obligation of approximately $4,000,000 to the Ajax shareholder. The note was
secured by the assets of the Company with interest at a rate of 10% per annum.
The outstanding principal and accrued interest of $4,453,000 was paid in July
1998 concurrently with the completion of the Company's credit facility.
4. Related Party Transactions
The Company leases its manufacturing facility from the Ajax
shareholder. The lease provides for annual rent of $600,000 per year plus
reimbursable expenses, payable monthly, for a five year period with four renewal
options totaling twenty years. During the initial term of the lease, the Company
also has an option to purchase the leased Ajax facility for $6.5 million.
At June 30, 1998, the Company had advanced $810,000 to an entity
controlled by a stockholder of the Company for costs incurred on potential
acquisitions.
6
<PAGE>
5. Commitments and Contingencies
Environmental Matters
In March 1998 the NJDEP issued a Notice of Violation ("NOV") to the
Company for emitting VOC's from the paint spray booths in excess of permissible
limits in 1996. The NOV directed the Company to achieve compliance by April 1998
and to submit a written report documenting the corrective measures taken to
achieve compliance. The Company remains in active negotiations with NJDEP
regarding the VOC's emitted from its paint spray booths. As requested by NJDEP,
the Company submitted in May 1998 a new air permit application that would allow
the Company to install a fourth spray booth and expand permitted emissions from
the facility. The application is pending and the Company continues to negotiate
with NJDEP to resolve all air emission issues.
In March 1998, as part of the ISRA Remediation Agreement with NJDEP,
NJDEP required the company to perform soil and sediment sampling at various
locations at the facility. The sampling results were within NJDEP compliance
limits with the exception of results for certain metals detected in soil around
roof downspouts at the facility. The Company has engaged a contractor to perform
additional sampling at these locations, the results of which are being forwarded
to NJDEP. If the additional sampling indicates additional areas of contamination
above NJDEP compliance levels, additional investigations may be necessary.
While it is not feasible to predict the outcome of all these matters,
management, based upon the available information, is of the opinion that the
ultimate disposition of these environmental matters will not have a material
adverse effect on the Company's financial position or results of operations.
Legal
The Company is either a plaintiff or a defendant in several pending
legal matters arising in the normal course of operations. In the opinion of
management, the final resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
6. Subsequent Events
In July 1998, pursuant to the terms of the Stock Purchase Agreement
dated February 24, 1998, as amended, the Company completed the acquisition of
all of the outstanding capital stock of Barclay Investments, Inc. ("Barclay").
In consideration for such capital stock, the Company issued to the shareholders
of Barclay an aggregate of 185,000 shares of the common stock of the Company.
Simultaneously with the Company's acquisition of Barclay, pursuant to
the terms of the Stock Purchase Agreement dated February 13, 1998, as amended,
Barclay acquired all of the outstanding capital stock of R&S Truck Body, Inc.
(the "R&S Acquisition"). The aggregate consideration paid to the holders of the
capital stock of R&S (the "Shareholders") was $13,012,266 in cash and 95,126
shares of the Company's common stock. Also, pending the outcome of certain
events which will impact the financial results of R&S as of the closing, the
Shareholders may receive additional cash consideration in the amount of
approximately $656,000. R&S is in the process of completing construction of
its new plant in Ivel, Kentucky, approximately three miles from the current
plant in Allen, Kentucky. The estimated total cost of the plant is $7,500,000.
The 95,126 shares are subject to a put agreement among the
Shareholders, Barclay and the Company (the "Put Agreement"). Under the Put
Agreement, the Shareholders may sell or "put" the 95,126 shares to Barclay or
the Company for an aggregate dollar amount of $1,000,000 during the period
commencing on November 30, 1999 and ending December 31, 1999. Concurrently with
the R&S Acquisition, the Company also entered into a consulting and
non-competition agreement with William Smith, a shareholder of R&S, and
employment agreements with several key employees of R&S.
R&S is engaged in the design, manufacture and sale of customized dump
trucks and trailers, specialized truck suspension systems and related products
and parts. R&S also acts as a distributor for truck equipment manufactured by
other companies, including cranes, tarpaulins, spreaders, plows and
7
<PAGE>
specialized service bodies. R&S will triple its manufacturing capacity upon
completion of its new 145,000 square foot plant in Ivel, Kentucky.
In connection with the acquisition of Barclay, the Company waived the
right to cause Barclay to acquire the capital stock of CPS Trailer Company, Inc.
("CPS"). This decision was made as a result of an accident involving a truck
body manufactured by CPS which occurred after the execution of the Purchase
Agreement between Barclay and CPS. Nevertheless, as a condition to the
acquisition of Barclay, the Company caused Barclay to enter into a 60-day
extension with CPS preserving Barclays' right to acquire CPS should it be
determined that the potential liability to CPS arising out of the aforementioned
incident is not significant or has been settled in a manner which limits the
potential liability of Barclay and the Company.
The source of the funds to finance the R&S Acquisition was a
$40,000,000 Revolving Credit and Term Loan Agreement (the "Credit Agreement")
which the Company and certain of its subsidiaries (acting as Guarantors) entered
into in July 1998 with PNC Bank, National Association ("PNC"), both individually
and as agent for other financial institutions.
The Credit Agreement provides for Term Loans in the amount of
$18,000,000 and a Revolving Loan in the principal amount of $14,000,000
(collectively, the "Loans"). In addition, the amounts available under the Terms
Loans and the Revolving Loan will be increased by $7,000,000 and $1,000,000,
respectively, if the Company completes the acquisition of CPS. Portions of the
Term Loans were used to fund the R&S Acquisition and to retire certain
indebtedness of R&S and the Company. Proceeds available under the Revolving Loan
may be used for general working capital. Interest on the amounts outstanding
under the Loans is payable monthly and accrues at a variable rate based upon
LIBOR or the Base Rate of PNC, plus a percentage which adjusts from time to time
based upon the ratio of the Company's indebtedness to EBITDA, as such terms are
defined in the Loan Agreement. The rate of interest for the Loans is currently
8.16%. The principal amount of the Term Loans is payable in full on July 21,
2004. Amounts outstanding under the Revolving Loan are payable in full in July
2001, subject to the Company's request, with the approval of PNC, to extend the
due date for a one-year period, for a maximum extension period of three years.
All amounts outstanding under the Credit Agreement are secured by a lien on
substantially all of the Company's assets.
In connection with the R&S Acquisition, the Company incurred
approximately $3,700,000 in investment banking and finder's fees, and legal and
accounting expenses. The Company also incurred approximately $1,700,000 in
similar fees and expenses, including bank fees, in connection with the
procurement of the financing arrangement with PNC.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read together with the
consolidated financial statements and notes thereto included elsewhere herein.
Management's Discussion and Analysis for the three months ended June 30, 1998
include the unaudited consolidated operating results of Standard and Ajax. Since
Standard did not have any operating results for the three months ended June 30,
1997 the analysis below only reflects the operating results of Ajax in 1997.
Overview
Ajax manufactures trailer chassis to customer order and revenues are
recognized when the finished product is inspected and accepted by the customer
or its agent. The market for chassis is cyclical and is affected by overall
economic conditions, in particular the needs of the transportation industry.
Remanufacturing existing chassis tends to be counter-cyclical to manufacturing
new chassis. To reduce the effect of industry cyclicality on its business, in
September 1996 Ajax began to manufacture roll-off refuse containers. Sales of
such containers comprised less than 1% of Ajax's sales for the three months
ended June 30, 1998 and the company has suspended the manufacture of such
containers due to the volume of demand for its primary products.
Part of the Company's strategy is to grow through expansion of product
lines and acquisitions such as the recently completed acquisition of R & S Truck
Body Co., Inc. The Company's proposed expansion is expected to place a strain
on the Company's management, operational, financial and other resources. The
Company's expansion plans will be dependent upon its ability to identify
appropriate targets for acquisition and raise the necessary financing for
acquisitions. Further, the success of the Company's efforts will be dependent
upon its ability to market new products, absorb new management and other
personnel, and reduce duplicative overhead. The Company has limited experience
in effectuating a plan of rapid expansion and in managing a geographically
dispersed operation. There can be no assurance that the Company can successfully
expand its operations or manage its growth.
Results of Operations
The following table sets forth, for the period indicated, certain
components of the Company's Statements of Income expressed in dollar amounts (in
thousands) and as a percentage of net revenues. Results of operations and cash
flows for the three months ended June 30, 1997 reflect Ajax while the three
months ended June 30, 1998 reflect the consolidated amounts of Standard and its
subsidiary Ajax (rounded):
Three Months Ended June 30,
--------------------------------
1997 1998
-------------- --------------
Revenues, net $4,875 100.0% $7,880 100.0%
Cost of revenues 3,787 77.7 6,153 78.1
Selling, general and administrative 317 6.5 728 9.2
Operating income 771 15.8 809 10.3
Income before provision for taxes 790 16.2 667 8.5
Provision for income taxes 324 6.6 327 4.1
Net income $ 466 9.6% $ 340 4.3%
====== ===== ====== =====
9
<PAGE>
Comparison of Three Month Periods Ended June 30, 1998 and 1997
The following discussion provides information regarding the Company's
results of operations for the three months ended June 30, 1997 ("1997") and June
30, 1998 ("1998").
Net Revenues in 1998 were $7,880,000, an increase of 62% from net
revenues of $4,875,000 for 1997. The increase in net revenues reflects a shift
of the Company's business to the manufacture of new chassis from the
remanufacture of used chassis, and a general improvement in the trailer
industry. During 1998, sales of new chassis represented 40% of net revenues as
compared to 27% in 1997. The increase in sales of new chassis resulted
principally from an increase in the volume of new chassis sold in 1998 as
compared to 1997. In contrast, sales of remanufactured chassis represented 47%
of net revenues in 1998 as compared to 51% in 1997. As the result of certain
customers requirements for new chassis, the Company's gross margins declined
moderately in 1998. Sales of refuse containers were not material during 1998 and
1997.
Cost of Revenues increased to $6,153,000 or 78% of net revenues in 1998
from $3,787,000 or 78% of net sales in 1997. Cost of revenues as a percentage of
net revenues increased moderately during 1998 as the mix of the Company's
business reflected an increase in the sales of new chassis.
Selling, General & Administrative Expense were $728,000 during 1998, an
increase of 130% from the $317,000 during 1997. SG&A expenses increased to 9% of
net revenues up from 7% of net revenues during the prior year period. The
increase in SG&A during the current quarter was due to expenses related to the
new executive office space, officers' salaries, Directors & Officers Insurance,
and public relations expense incurred since the public offering.
Interest Expense was $86,000 during 1998 as compared to $0 during 1997,
reflecting non-recurring interest on the note payable to the Ajax shareholder.
Liquidity and Capital Resources
In January 1998, the Company completed its Initial Public Offering. The
Company sold Preferred and Common at a price of $12.00 and $10.00 per share,
respectively, for an aggregate offering price of $28,750,000, including exercise
of the over-allotment in February 1998, and yielding net proceeds of
approximately $23,998,000.
Of the net proceeds, the Company used $19,618,000 to satisfy a portion
of the purchase price due the selling stockholder of Ajax and $347,000 to retire
the Company's other debt including accrued interest. The balance was utilized
for general working capital purposes and acquisition costs.
The Company used $187,000 of cash in operating activities during 1998
as compared to $153,000 used in operating activities during 1997. The cash used
in operating activities during 1998 reflects primarily an increase in inventory
of $3,523,000 which was partially offset by a decrease in accounts receivable of
$1,770,000, and an increase in accounts payable and accrued expenses of
$1,333,000. The Net cash used in investing activities was $867,000 during 1998
as compared to $38,000 generated by investing activities during the prior year.
The cash used in investing activities during 1998 was for the acquisition of
property, plant and equipment and additional capitalized acquisition costs. Cash
flows used in financing activities during 1998 were for the Preferred Dividend
payment.
The terms on which the Company manufactures chassis provide for payment
within 30 days of acceptance and the Company's accounts receivable were
collected in an average of less than 30 days.
Capital expenditures were $761,000 in 1998 as compared to $42,000 for
the comparable period in the prior year. Capital expenditures incurred during
1998 were primarily for the initial investment of $290,000 in a new plant to
service the Western part of the United States, the purchase and installation of
a new computer network system and the refurbishing of the new corporate office
facility. The Company anticipates that capital expenditures during Fiscal 1999
will slightly exceed those of the proceeding years as the Company expands its
operations. Nevertheless, the Company could require substantial additional
capital if it were to expand its product lines by substantially modifying,
improving, or modernizing its
10
<PAGE>
facility, opening additional facilities or acquiring a new business within the
chassis industry or related industries.
The annual dividend requirement on the Convertible Preferred Stock is
$1,173,000. The future earnings of the Company, if any, may not be adequate to
pay the dividends on the Convertible Preferred Stock, and, although the Company
intends to pay quarterly dividends out of available capital surplus, there can
be no assurance that the Company will maintain sufficient capital surplus or
that future earnings, if any, will be adequate to pay the dividends on the
Convertible Preferred Stock. In addition, the Company had $4,453,000 in debt
outstanding, consisting of the note payable to Ajax shareholder, which bears
interest at an assumed rate of 10% and payable monthly. In July 1998, this Note
was paid-off in full concurrently with the closing of the Company's credit
facility with PNC Bank.
The Company intends to seek opportunities for growth through
acquisitions, and, in connection therewith, may seek to raise additional cash in
the form of equity, bank debt or other debt financing, or may seek to issue
stock as consideration for assets.
At June 30, 1998, the Company had working capital of $11,068,000, which
is sufficient to meet its current operating requirements, and, if necessary,
such needs could be met out of the remaining cash on hand from the IPO.
Year 2000
The Company is aware of the uncertainty surrounding the ability of
computer systems to function properly with the coming of the year 2000 and
related issues. The Company anticipates that it will replace substantial
portions of its existing computer software during 1999 as it integrates the
operations of its New Jersey facility with those of the businesses to be
acquired. Nevertheless, management intends during 1998 to assess the
functionality of all of the Company's computer systems, as well as those of the
businesses it acquires to determine which of the Company's systems are
susceptible to the year 2000 problem and what corrective measures need to be
taken. Subsequent to assessing its own computer inventory the Company will seek
to assess the functionality of the systems of its customers and suppliers in an
attempt to identify and ward off potential problems.
Part 2. Other Information
Item 5. Subsequent Events
In July 1998, pursuant to the terms of the Stock Purchase Agreement
dated February 24, 1998, as amended, the Company completed the acquisition of
all of the outstanding capital stock of Barclay Investments, Inc. ("Barclay").
In consideration for such capital stock, the Company issued to the shareholders
of Barclay an aggregate of 185,000 shares of the common stock of the Company.
Simultaneously with the Company's acquisition of Barclay, pursuant to
the terms of the Stock Purchase Agreement dated February 13, 1998, as amended,
Barclay acquired all of the outstanding capital stock of R&S Truck Body, Inc.
(the "R&S Acquisition"). The aggregate consideration paid to the holders of the
capital stock of R&S (the "Shareholders") was $13,012,266 in cash and 95,126
shares of the Company's common stock. Also, pending the outcome of certain
events which will impact the financial results of R&S as of the closing, the
Shareholders may receive additional cash consideration in the amount of
approximately $656,000. R&S is in the process of completing construction of its
new plant in Ivel, Kentucky, approximately three miles from the current plant in
Allen, Kentucky. The estimated total cost of the plant is $7,500,000.
The 95,126 shares are subject to a put agreement among the
Shareholders, Barclay and the Company (the "Put Agreement"). Under the Put
Agreement, the Shareholders may sell or "put" the 95,126 shares to Barclay or
the Company for an aggregate dollar amount of $1,000,000 during the period
commencing on November 30, 1999 and ending December 31, 1999. Concurrently with
the R&S
11
<PAGE>
Acquisition, the Company also entered into a consulting and non-competition
agreement with William Smith, a shareholder of R&S, and employment agreements
with several key employees of R&S.
R&S is engaged in the design, manufacture and sale of customized dump
trucks and trailers, specialized truck suspension systems and related products
and parts. R&S also acts as a distributor for truck equipment manufactured by
other companies, including cranes, tarpaulins, spreaders, plows and specialized
service bodies. R&S will triple its manufacturing capacity upon completion of
its new 145,000 square foot plant in Ivel, Kentucky.
In connection with the acquisition of Barclay, the Company waived the
right to cause Barclay to acquire the capital stock of CPS Trailer Company, Inc.
("CPS"). This decision was made as a result of an accident involving a truck
body manufactured by CPS which occurred after the execution of the Purchase
Agreement between Barclay and CPS. Nevertheless, as a condition to the
acquisition of Barclay, the Company caused Barclay to enter into a 60-day
extension with CPS preserving Barclays' right to acquire CPS should it be
determined that the potential liability to CPS arising out of the aforementioned
incident is not significant or has been settled in a manner which limits the
potential liability of Barclay and the Company.
The source of the funds to finance the R&S Acquisition was a
$40,000,000 Revolving Credit and Term Loan Agreement (the "Credit Agreement")
which the Company and certain of its subsidiaries (acting as Guarantors) entered
into in July 1998 with PNC Bank, National Association ("PNC"), both individually
and as agent for other financial institutions.
The Credit Agreement provides for Term Loans in the amount of
$18,000,000 and a Revolving Loan in the principal amount of $14,000,000
(collectively, the "Loans"). In addition, the amounts available under the Terms
Loans and the Revolving Loan will be increased by $7,000,000 and $1,000,000,
respectively, if the Company completes the acquisition of CPS. Portions of the
Term Loans were used to fund the R&S Acquisition and to retire certain
indebtedness of R&S and the Company. Proceeds available under the Revolving Loan
may be used for general working capital. Interest on the amounts outstanding
under the Loans is payable monthly and accrues at a variable rate based upon
LIBOR or the Base Rate of PNC, plus a percentage which adjusts from time to time
based upon the ratio of the Company's indebtedness to EBITDA, as such terms are
defined in the Loan Agreement. The rate of interest for the Loans is currently
8.16%. The principal amount of the Term Loans is payable in full on July 21,
2004. Amounts outstanding under the Revolving Loan are payable in full in July
2001, subject to the Company's request, with the approval of PNC, to extend the
due date for a one-year period, for a maximum extension period of three years.
All amounts outstanding under the Credit Agreement are secured by a lien on
substantially all of the Company's assets.
In connection with the R&S Acquisition, the Company incurred
approximately $3,700,000 in investment banking and finder's fees, and legal and
accounting expenses. The Company also incurred approximately $1,700,000 in
similar fees and expenses, including bank fees, in connection with the
procurement of the financing arrangement with PNC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.0 Financial Data Schedule
(b) Report on Form 8-K
Report dated August 5, 1998 with respect to the acquisition of R & S
Truck Body Co., Inc.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: STANDARD AUTOMOTIVE CORPORATION
-------------------------------
(Registrant)
August 12, 1998 /s/ Steven Merker
---------------------------------------
Steven Merker
Chairman and Chief Executive Officer
August 12, 1998 /s/ Roy Ceccato
---------------------------------------
Roy Ceccato
Director and Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Statement of Income found on pages 3 and 4 of the
Company's Form 10-Q for the three months ended June 30, 1998 and is qualified in
its entirety by reference to such consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 2,009
<SECURITIES> 0
<RECEIVABLES> 3,098
<ALLOWANCES> 30
<INVENTORY> 8,922
<CURRENT-ASSETS> 14,797
<PP&E> 2,022
<DEPRECIATION> 89
<TOTAL-ASSETS> 33,011
<CURRENT-LIABILITIES> 3,729
<BONDS> 4,453
0
1
<COMMON> 3
<OTHER-SE> 24,825
<TOTAL-LIABILITY-AND-EQUITY> 33,011
<SALES> 7,880
<TOTAL-REVENUES> 7,880
<CGS> 6,153
<TOTAL-COSTS> 6,153
<OTHER-EXPENSES> 918
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 667
<INCOME-TAX> 327
<INCOME-CONTINUING> 340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
