SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 18, 1998
------------------
STANDARD AUTOMOTIVE CORPORATION
-------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 001-13657 59-2018007
-------- --------- ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation File Number) Identification No.)
321 Valley Road, Hillsborough, New Jersey 08876-4056
- ----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, (908) 369-5544
--------------
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Form 8K/A
September 21, 1998
Item 7. Financial Information, Pro Forma Financial Information and Exhibits
(a) Pro Forma Financial Information
The and the Unaudited Pro Forma Combined Statements of Income of Standard
Automotive Corporation ("SAC") for the fiscal year ended March 31, 1998 which
are set forth below, give effect to the acquisition of CPS Trailer Co., Inc. on
September 17, 1998, based upon the assumptions set forth below, and in the notes
to such statements. The acquisition has been accounted for as a "purchase".
The unaudited pro forma financial information has been included pursuant
to the requirements set forth in applicable rules of the SEC and is provided for
comparative purposes only. The unaudited pro forma financial information
presented does not purport to be indicative of the financial position or
operating results which would have been achieved had the acquisitions taken
place at the date indicated and should not be construed as representative of the
Company's financial position or results of operations far any future date or
period.
The unaudited pro forma adjustments are based on available information and
certain assumptions that the Company believes are reasonable under the
circumstances; however the actual recording of the CPS acquisition (which
recording management does not expect to vary materially) will be based on
independent appraisals, evaluations and estimates of fair values.
(b) Other Information
The Unaudited Pro Forma Combined Balance Sheet of SAC at September 30,
1998 and Unaudited Pro Forma Combined Statements of Income for the six months
ended September 30, 1998 are not presented herein. Since the CPS acquisition was
completed on September 17, 1998 they have been consolidated with the Company's
financial statements as reported in the 10-Q filing for the six months ended
September 30, 1998.
The Company's previously filed 10-Q for the six months ended September 30,
1998 is hereby incorporated by reference.
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year
Ended Year Ended Year Ended Ended
3/31/98 12/31/97 12/31/97 3/31/98
---------------------- Adjust- ---------- Adjust- -----------
SAC R/S ments Combined CPS ments Pro forma
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(1)
Revenues $ 7,936 $ 20,147 $ -- $ 28,083 $ 12,272 $ -- $ 40,355
Cost of revenues 6,094 14,862 -- 20,956 9,189 -- 30,145
Selling, general and administrative exp. 407 3,663 (460)(3) 3,610 2,027 -- 5,637
Amortization of intangibles 130 -- 468 (2) 598 -- 243(6) 841
------------------------------- --------------------------- --------
Total operating costs and expenses 6,631 18,525 8 25,164 11,216 243 36,623
------------------------------- --------------------------- --------
Operating income 1,305 1,622 (8) 2,919 1,056 (243) 3,732
Bridge Note interest expense (375) -- -- (375) -- -- (375)
Interest expense (75) -- (1,500)(4) (1,575) (20) (470)(7) (2,065)
Other income (expense) (54) 247 -- 193 132 -- 325
------------------------------- --------------------------- --------
Income before provision for income taxes 801 1,869 (1,508) 1,162 1,168 (713) 1,617
Provision for income taxes 458 -- (43)(5) 415 420 (188)(8) 647
------------------------------- --------------------------- --------
Net income $ 343 $ 1,869 $(1,465) $ 747 $ 748 $ (525) $ 970
=============================== =========================== ========
Preferred dividend 184 -- -- 184 -- -- 184
Basic and diluted net income per share $ 0.09 $ 0.35
========= ========
Basic and diluted weighted average
number of shares outstanding 1,846 280 125 2,251
</TABLE>
- ----------
(1) Reflects the acquisitions of R/S in July 1998 and CPS in September 1998,
as if it they had occurred at the beginning of the fiscal year.
(2) Reflects the amortization of R/S's purchase price in excess of net assets
acquired recorded at approximately $18,700,000 and assumes useful lives
between 20-40 years. However the actual recording of the R/S acquisition
(which recording management does not expect to vary materially) will be
based on independent appraisals, evaluations and estimates of fair values.
(3) Included in R/S's general and administrative expenses are bonuses of
$460,000.
(4) Reflects R/S's incremental interest expense on approximately $19,900,000
of additional debt at 8.1%.
(5) Pro forma net income reflects a provision for income taxes since R/S had
been an S Corporation before being acquired. Such provision assumes an
effective tax rate of 40%.
(6) Reflects the amortization of CPS's purchase price in excess of net assets
acquired recorded at approximately $9,700,000 and assumes useful lives
between 20-40 years. However the actual recording of the CPS acquisition
(which recording management does not expect to vary materially) will be
based on independent appraisals, evaluations and estimates of fair values.
(7) Reflects CPS's incremental interest expense on approximately $5,800,000 of
additional debt at 8.1%.
(8) Reflects the tax effects of the above adjustments for the CPS acquisition.
<PAGE>
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 hereunto duly authorized.
STANDARD AUTOMOTIVE CORPORATION
(Registrant)
Date: December 1, 1998 By: /s/ Roy Ceccato
---------------------------
Roy Ceccato
Principal Accounting Officer
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
DECEMBER 31, 1997 AND 1996
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITOR'S REPORT 1
BALANCE SHEETS 2-3
STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS 4-5
STATEMENTS OF CASH FLOWS 6-7
NOTES TO THE FINANCIAL STATEMENTS 8-13
*******
*****
***
*
<PAGE>
[LETTERHEAD OF STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder
CPS Trailer Co.
Oran, Missouri
We have audited the accompanying balance sheets of CPS Trailer Co. as of
December 31, 1997 and 1996 and the related statements of income and changes in
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used in significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of CPS Trailer Co. as of December
31, 1997 and 1996, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ Stanley, Dirnberger, Hopper and Associates, LLC
STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC
Certified Public Accountants
Dated in Cape Girardeau, Missouri
March 12, 1998
-1-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
CURRENT ASSETS: 1997 1996
---------- ----------
Cash in Banks and on Hand $ 76,063 $ 165,996
Accounts Receivable 785,847 186,143
Inventories 1,644,795 1,885,484
Refundable Deposits 4,000 4,000
Prepaid Expenses 8,354 12,030
Prepaid Corporate Income Tax 0 47,405
Interest Receivable - CPS Enterprises, Inc. 3,970 17,156
---------- ----------
Total Current Assets $2,523,029 $2,318,214
---------- ----------
PROPERTY AND EQUIPMENT:
Land $ 70,084 $ 0
Buildings and Improvements 686,339 0
Machinery and Equipment 1,177,405 521,211
Office Furniture and Equipment 113,764 78,029
Vehicles 147,104 188,105
---------- ----------
Total Property and Equipment, Cost $2,194,696 $ 787,345
Less: Accumulated Depreciation (412,289) (267,950)
---------- ----------
Total Property and Equipment, Net $1,782,407 $ 519,395
---------- ----------
OTHER ASSET:
Note Receivable - CPS Enterprises, Inc. $ 900,000 $ 550,000
---------- ----------
TOTAL ASSETS $5,205,436 $3,387,609
========== ==========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES: 1997 1996
---------- ----------
Accounts Payable $ 864,267 $ 587,066
Accrued Liabilities 198,990 55,334
Customer Deposits 3,500 6,593
Current Portion of Deferred Tax Liability 1,549 6,777
Current Maturities of Notes Payable 81,923 375,000
---------- ----------
Total Current Liabilities $1,150,229 $1,030,770
---------- ----------
LONG-TERM LIABILITIES:
Long-Term Portion of Deferred Tax Liability $ 66,435 $ 59,552
Long-Term Portion of Notes Payable 943,077 0
---------- ----------
Total Long-Term Liabilities $1,009,512 $ 59,552
---------- ----------
TOTAL LIABILITIES $2,159,741 $1,090,322
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock:
Authorized 30,000 shares, No Par
Issued and Outstanding 5 Shares $ 1,000 $ 1,000
Retained Earnings 3,044,695 2,296,287
---------- ----------
TOTAL STOCKHOLDER'S EQUITY $3,045,695 $2,297,287
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $5,205,436 $3,387,609
========== ==========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES: 1997 1996
----------- -----------
Trailer Sales $12,081,949 $10,035,442
Cotton Feeder Sales 0 125,000
Parts and Materials Sales 158,615 210,921
Labor 25,166 30,792
Freight 6,573 5,825
----------- -----------
Total Revenues $12,272,303 $10,407,980
COST OF GOODS SOLD (9,188,661) (7,931,406)
----------- -----------
GROSS PROFIT $ 3,083,642 $ 2,476,574
----------- -----------
OPERATING EXPENSES:
Selling, General and Administrative $ 1,513,065 $ 1,056,871
Depreciation Expense 153,450 116,621
Building and Equipment Leases 309,178 315,111
Warranty Repairs 51,539 31,120
----------- -----------
Total Operating Expenses $ 2,027,232 $ 1,519,723
----------- -----------
OPERATING INCOME $ 1,056,410 $ 956,851
----------- -----------
OTHER INCOME AND (EXPENSES):
Trailer Delivery Revenue $ 191,506 $ 191,786
Trailer Delivery Expenses (179,912) (207,477)
Service Charges and Discounts Earned 66,324 60,810
Miscellaneous Income 7,664 2,896
(Loss) on Disposal of Assets (2,389) (261)
Bad Debts Written Off 0 (698)
Interest Income 48,736 17,156
Interest Expense (19,761) (4,854)
----------- -----------
Total Other Income and (Expenses) $ 112,168 $ 59,358
----------- -----------
INCOME BEFORE INCOME TAXES $ 1,168,578 $ 1,016,209
----------- -----------
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
PROVISION FOR INCOME TAXES: 1997 1996
---------- ----------
Current $ 418,515 $ 356,074
Deferred 1,655 27,423
---------- ----------
Total Provision for Income Taxes $ 420,170 $ 383,497
---------- ----------
NET INCOME $ 748,408 $ 632,712
---------- ----------
RETAINED EARNINGS, BEGINNING OF YEAR,
AS PREVIOUSLY REPORTED $2,296,287 $1,667,169
PRIOR PERIOD ADJUSTMENT:
FEDERAL INCOME TAXES, PRIOR PERIOD 0 (3,594)
---------- ----------
RETAINED EARNINGS, BEGINNING OF YEAR, RESTATED $2,296,287 $1,663,575
---------- ----------
RETAINED EARNINGS, END OF YEAR $3,044,695 $2,296,287
========== ==========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
OPERATING ACTIVITIES: 1997 1996
----------- ---------
Net Income $ 748,408 $ 632,712
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation 153,450 116,621
Bad Debts Written Off 0 698
Book (Loss) on Disposal of Assets 2,389 261
Deferred Taxes 1,655 27,423
Federal Income Taxes, Prior Period 0 (3,594)
----------- ---------
$ 905,902 $ 774,121
Changes in:
Current Assets, (Increase) Decrease
Accounts Receivable (655,865) 255,037
Inventories 240,689 (639,820)
Refundable Deposits 0 (4,000)
Prepaid Expenses 3,676 (54,069)
Interest Receivable 13,186 (17,156)
Prepaid Income Taxes 47,405 0
Current Liabilities, Increase (Decrease)
Accounts Payable 277,201 305,813
Accrued Liabilities 143,656 (297,598)
Customer Deposits (3,093) (49,162)
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 972,757 $ 273,166
----------- ---------
INVESTING ACTIVITIES:
Acquisition of Property and Equipment:
Land $ (50,042) 0
Buildings and Improvements (635,203) 0
Machinery and Equipment (656,194) $ (51,002)
Office Furniture and Equipment (35,734) (2,545)
Vehicles 0 (144,347)
Proceeds from Sale of Assets 29,500 42,450
Advances on Accounts Receivable from
CPS Enterprises, Inc. 0 (20,810)
Advances on Note Receivable from
CPS Enterprises, Inc. (350,000) (550,000)
Payment to CPS Enterprises, Inc. for
Transfer of Land and Building
Construction Costs (15,017) 0
----------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES $(1,712,690) $(726,254)
----------- ---------
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
FINANCING ACTIVITIES: 1997 1996
--------- ---------
Proceeds of Line of Credit Loan,
Net of Repayments $ 125,000 $ 375,000
Proceeds from Notes Payable 525,000 0
Principal Payments on Notes Payable 0 (1,293)
Principal Payments on Capital Leases 0 (21,279)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 650,000 $ 352,428
--------- ---------
NET (DECREASE) IN CASH $ (89,933) $(100,660)
CASH, BEGINNING OF YEAR 165,996 266,656
--------- ---------
CASH, END OF YEAR $ 76,063 $ 165,996
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 18,657 $ 3,245
Cash Paid During the Year for Income Taxes 309,646 680,503
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's principal business activities include the manufacture
of commercial and agricultural trailers and equipment serving
growing segments of the construction, solid waste, and agricultural
industries, with sales distribution throughout the United States.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined utilizing the average cost method.
Property and Equipment:
Property and equipment are stated at cost, and for financial
statement purposes depreciation is computed on the straight-line
method over the estimated useful lives of the assets. The estimated
useful lives are 5 to 7 years for machinery and equipment, 5 to 7
years for office furniture and equipment, and 5 years for vehicles.
Repairs and maintenance are charged to expense as incurred.
Expenditures which significantly extend the useful lives of property
and equipment are capitalized.
Bad Debt:
The Company utilizes the direct write-off method to account for
uncollectible accounts receivable.
Revenue Recognition:
Trailers which are built for commercial customers based on a
contract and/or specifications are recognized as revenue when the
trailer is completed. Trailers built to customer specifications have
no right of return or exchange privileges. The Company may hold the
trailer for a short period of time until pick up or delivery to the
customer. The title to the trailer is transferred upon payment by
the customer. On other sales, the Company recognizes revenue from
the sale of trailers when the title is transferred to the customer
and the trailer is delivered or picked up by the customer.
-8-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -
CONTINUED
Major Customers:
Sales of various trailers to eight customers during the year ended
December 31, 1997 were approximately $3,206,725, and to three
customers during the year ended December 31, 1996 were approximately
$1,931,589. Accounts receivable from the eight customers at December
31, 1997 was $265,221 and from the three customers at December 31,
1996 was $115,125.
Income Taxes:
The Company utilizes the liability method of accounting for deferred
income taxes. This method provides for deferred tax assets and
liabilities for the expected future tax consequences of temporary
timing differences between the financial and tax basis of assets and
liabilities using the tax rates in effect for the year in which the
temporary timing differences are expected to reverse.
Concentration of Credit Risk:
The Company maintains its cash in demand deposit accounts which
routinely exceed FDIC insurance limits. As of December 31, 1997, the
Company had $208,586 in excess of FDIC insurance limits.
Non-Cash Investing Activities:
During the year ended December 31, 1997, the Company reduced its
receivable from CPS Enterprises, Inc. (a related company) by $56,161
for reimbursement of land and building construction costs.
NOTE 2: ACCOUNTS RECEIVABLE:
Accounts receivable as of December 31, 1997 and 1996, consist of the
following:
1997 1996
-------- --------
Trade $778,733 $128,688
CPS Enterprises, Inc.
(Related Party) 0 56,161
Employees 3,226 1,294
Stockholder 3,888 0
-------- --------
Total Accounts Receivable $785,847 $186,143
======== ========
-9-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3: INVENTORIES:
Inventories consist of the following as of December 31, 1997 and
1996:
1997 1996
---------- ----------
Raw Materials $1,157,964 $ 993,400
Work in Process 56,405 184,916
Finished Goods 430,426 707,168
---------- ----------
Total Inventories $1,644,795 $1,885,484
========== ==========
NOTE 4: ACCRUED LIABILITIES:
Accrued liabilities consist of the following as of December 31, 1997
and 1996:
1997 1996
---------- ----------
Taxes: Payroll, Sales, Excise $ 49,713 $ 3,051
Income Taxes, Federal and State 61,464 0
Wages and Bonuses 48,085 28,927
Interest 2,713 1,609
Other 37,015 21,747
---------- ----------
Total Accrued Liabilities $ 198,990 $ 55,334
========== ==========
NOTE 5: MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable as of December 31, 1997 and 1996,
consist of the following:
1997 1996
---------- ----------
Notes Payable, Union Planters Bank:
(Personally Guaranteed by Stockholder)
Note dated December 30, 1997, for
$525,000 principal, payable in
monthly installments of $8,278
including principal and interest at
1/4% under prime, due December 30,
2004. The note is guaranteed by CPS
Enterprises, Inc. and is secured by
all equipment. $ 525,000 $ 0
-10-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5: MORTGAGES AND NOTES PAYABLE: (Continued)
1997 1996
---------- ----------
Line of credit note refinanced and
dated January 21, 1998, includes
additional principal borrowings of
$225,000 after December 31, 1997,
payable in monthly installments of
$7,081 including principal and
interest at 1/4% under prime, due
January 21, 2013. The note is
guaranteed by CPS Enterprises, Inc.
and secured by real estate. $ 500,000 $ 0
$500,000 Line of Credit, renewed
annually, note dated April 18, 1995
with modification agreement dated
June 21, 1996, interest payable
monthly at .7% over prime. The note
was renewed with interest payable
monthly at 9% and is due April 10,
1998. The note is secured by all
inventory, accounts, contract rights
and equipment. 0 200,000
$500,000 Line of Credit, renewed
annually, note dated April 18, 1995,
with modification agreement dated
June 21, 1996, interest payable
monthly at .7% over prime. The note
was renewed with interest payable
monthly at 9% and is due April 10,
1998. The note is secured by all
inventory, accounts, contract rights
and equipment. 0 175,000
---------- ----------
Total Notes Payable $1,025,000 $ 375,000
Less: Current Maturities (81,923) (375,000)
---------- ----------
Long-Term Notes Payable $ 943,077 $ 0
========== ==========
-11-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5: MORTGAGES AND NOTES PAYABLE: (Continued)
Five year debt maturities for the years ended December 31, are as
follows:
1998 $ 81,923
1999 89,956
2000 97,515
2001 106,253
2002 115,489
Thereafter 533,864
----------
$1,025,000
==========
NOTE 6: RELATED PARTY TRANSACTIONS:
The Company has a lease agreement for land, buildings, machinery and
equipment, office furniture and equipment, and vehicles with CPS
Enterprises, Inc. (sole stockholder, Charles P. Siebert). CPS
Enterprises, Inc. owns a portion of the physical plant (building)
where CPS Trailer Co. is located. The lease agreement is renewed
annually and is based on the square footage of the buildings
occupied. Rental expense under this operating lease was $300,000 for
the years ended December 31, 1997 and 1996.
The Company has a note receivable from CPS Enterprises, Inc. for
$900,000 and $550,000 at December 31, 1997 and 1996, respectively.
Interest is to be paid monthly at prime. During the years ended
December 31, 1997 and 1996, interest income of $46,411 and $17,156
was earned on the note receivable.
The Company leased monthly an airplane from CSCS Enterprises, Inc.
(owned 50% by Charles P. Siebert) during the year ended December 31,
1996. Lease expense incurred was $6,300 for the year ended December
31, 1996.
NOTE 7: INCOME TAXES:
Components of the deferred income tax liability as of December 31,
1997 and 1996 are as follows:
1997 1996
------- -------
Deferred Tax Liability:
Accrued Interest Income $ 1,549 $ 6,777
Depreciation 66,435 59,552
-12-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7: INCOME TAXES: (Continued)
Components of the deferred income tax liability by tax jurisdiction
is as follows:
1997 1996
------- -------
Current Deferred:
Federal $ 1,350 $ 5,833
State 199 944
------- -------
Total $ 1,549 $ 6,777
======= =======
Long-Term Deferred:
Federal $57,918 $51,917
State 8,517 7,635
------- -------
Total $66,435 $59,552
======= =======
NOTE 8: LABOR LEASING AGREEMENT:
The Company has a labor leasing agreement with Labor Specialists,
Inc. The agreement covers the employees that manufacture the
trailers. The Company is responsible for hiring and terminating the
employees. According to the agreement, Labor Specialists, Inc. is
solely liable for all employment responsibilities relating to the
leased employees; including administering payroll, payment of wages;
securing in its own name a workers' compensation and employer's
liability insurance policy, and payment of all payroll taxes. The
contract is renewed annually.
NOTE 9: STOCK SALE AGREEMENT:
On January 30, 1998, Charles P. Siebert, sole stockholder, entered
into an agreement to sell his stock to Barclay Investments, Inc. on
May 31, 1998, or at such later date as the parties shall agree upon.
-13-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
DECEMBER 31, 1997 AND 1996
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITOR'S REPORT 1
BALANCE SHEETS 2-3
STATEMENTS OF INCOME AND CHANGES IN UNDISTRIBUTED EARNINGS 4
STATEMENTS OF CASH FLOWS 5
NOTES TO THE FINANCIAL STATEMENTS 6-8
*******
*****
***
*
<PAGE>
[LETTERHEAD OF STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder
CPS Enterprises, Inc.
Oran, Missouri
We have audited the accompanying balance sheets of CPS Enterprises, Inc. (a
Subchapter S Corporation) as of December 31, 1997 and 1996, and the related
statements of income and changes in undistributed earnings and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CPS Enterprises, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC
STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC
Certified Public Accountants
Dated in Cape Girardeau, Missouri
March 12, 1998
-1-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
CURRENT ASSETS: 1997 1996
----------- -----------
Cash in Banks and on Hand $ 43,363 $ 19,640
Accounts Receivable - Stockholder 10,085 0
----------- -----------
Total Current Assets $ 53,448 $ 19,640
----------- -----------
PROPERTY AND EQUIPMENT:
Land and Buildings $ 930,854 $ 950,896
Machinery and Equipment 489,867 489,867
Office Furniture and Equipment 33,264 33,264
Vehicles 38,535 38,535
Construction in Progress 0 51,136
----------- -----------
Total Property and Equipment, Cost $ 1,492,520 $ 1,563,698
Less: Accumulated Depreciation (589,285) (517,018)
----------- -----------
Total Property and Equipment, Net $ 903,235 $ 1,046,680
----------- -----------
TOTAL ASSETS $ 956,683 $ 1,066,320
=========== ===========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES: 1997 1996
-------- ----------
Accounts Payable - CPS Trailer Co. $ 0 $ 56,161
Accrued Interest Payable - CPS Trailer Co. 3,970 17,156
-------- ----------
Total Current Liabilities $ 3,970 $ 73,317
-------- ----------
LONG-TERM LIABILITIES:
Long-Term Portion of
Note Payable $900,000 $ 550,000
-------- ----------
TOTAL LIABILITIES $903,970 $ 623,317
-------- ----------
STOCKHOLDER' S EQUITY:
Common Stock:
Authorized 3,000 Shares, $10 Par Value;
Issued and Outstanding 1 Share $ 10 $ 10
Paid-In Capital 5,490 5,490
Undistributed Earnings 47,213 437,503
-------- ----------
TOTAL STOCKHOLDER' S EQUITY $ 52,713 $ 443,003
-------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $956,683 $1,066,320
======== ==========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
STATEMENTS OF INCOME AND CHANGES IN UNDISTRIBUTED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
--------- ---------
RENTAL INCOME $ 300,000 $ 300,000
--------- ---------
RENTAL EXPENSES:
Insurance $ 2,783 $ 0
Depreciation 72,267 77,844
Equipment Leases 0 2,015
Taxes and Licenses 578 569
Other Rental Expenses 17 67
Interest 46,411 53,832
Professional Fees 1,675 0
--------- ---------
Total Rental Expenses $ 123,731 $ 134,327
--------- ---------
NET RENTAL INCOME $ 176,269 $ 165,673
UNDISTRIBUTED EARNINGS, BEGINNING OF YEAR 437,503 420,362
Stockholder Distributions (566,559) (148,532)
--------- ---------
UNDISTRIBUTED EARNINGS, END OF YEAR $ 47,213 $ 437,503
========= =========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
OPERATING ACTIVITIES: 1997 1996
--------- ---------
Net Income $ 176,269 $ 165,673
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation 72,267 77,844
--------- ---------
$ 248,536 $ 243,517
Current Assets, (Increase) Decrease:
Accounts Receivable (10,085) 7,665
Current Liabilities, Increase (Decrease):
Accounts Payable 0 (10,587)
Accrued Interest Payable (13,186) 17,156
--------- ---------
Net Cash Provided by Operating Activities $ 225,265 $ 257,751
--------- ---------
INVESTING ACTIVITIES:
Acquisition of Property and Equipment:
Land Improvements/Acquisition $ 0 $ (20,801)
Machinery and Equipment 0 (2,854)
Buildings Improvements/Construction
In Progress 0 (65,391)
Vehicles 0 (3.848)
Proceeds from Transfer of Land and Building 0 0
Construction Costs to CPS Trailer Co., Inc. 15,017 0
--------- ---------
Net Cash Provided (Used) by Investing
Activities $ 15,017 $ (92,894)
--------- ---------
FINANCING ACTIVITIES:
Advances from CPS Trailer Co. $ 0 $ 20,810
Proceeds of Note Payable from CPS Trailer Co. 350,000 550,000
Principal Payments on Mortgages and
Notes Payable 0 (570,827)
Distributions to Stockholder (566,559) (148,532)
--------- ---------
Net Cash (Used) by Financing Activities $(216,559) $(148,549)
--------- ---------
NET INCREASE IN CASH $ 23,723 $ 16,308
CASH AT BEGINNING OF YEAR 19,640 3,332
--------- ---------
CASH AT END OF YEAR $ 43,363 $ 19,640
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 59,597 $ 36,676
========= =========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Nature of Business:
The Company's principal business activities include the rental of
land, buildings, equipment and vehicles (property, plant and
equipment) to a related company, OPS Trailer Co. The property, plant
and equipment are used in the manufacturing of commercial and
agricultural trailers and equipment.
Property and Equipment:
Property and equipment are stated at cost, and for financial
statement purposes depreciation is computed on the straight-line
method over the estimated useful lives of the assets. The estimated
useful lives are as follows:
YEARS
---------
Buildings and Building Improvements 7-40
Machinery and Equipment 5-7
Office Furniture and Equipment 5-7
Vehicles 5
Repairs and maintenance are charged to expense as incurred.
Expenditures which significantly extend the useful lives of existing
property and equipment are capitalized.
Income Taxes:
In October, 1986, Charles P. Siebert, the sole stockholder of the
Corporation, elected under Section 1362 of the Internal Revenue Code
to be taxed as an S Corporation. In lieu of corporate income taxes,
the stockholder of an S Corporation is taxed on the Company's
taxable income. Therefore, no provision or liability for income
taxes has been included in the financial statements.
Non-Cash Investing and Financing Activities:
During the year ended December 31, 1997, the Company's payable to
CPS Trailer Co., Inc. (a related company) was reduced by $56,161 for
transferring land and building construction costs.
-6-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: - CONTINUED
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
NOTE 2: NOTE PAYABLE:
The note payable as of December 31, 1997 and 1996 consist of the
following:
1997 1996
-------- --------
Note Payable, CPS Trailer Co.
(Related Party), due January 1, 1999,
interest is payable monthly at prime. 900,000 550,000
-------- --------
Total Long-Term Portion Note
Payable $900,000 $550,000
======== ========
NOTE 3: RELATED PARTY TRANSACTION:
The Company has a lease agreement with CPS Trailer Co. (sole
stockholder, Charles P. Siebert) whereby, the Company receives
monthly lease payments from CPS Trailer Co. for the use of the land,
buildings, machinery and equipment, office furniture and equipment,
and vehicles owned by the Company. The lease agreement is renewed
annually and is based on the square footage of the buildings owned.
Rental income received under the lease for the years ended December
31, 1997 and 1996 was $300,000 and $300, 000, respectively.
-7-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3: RELATED PARTY TRANSACTION: - CONTINUED
The Company incurred interest expense during the years ended
December 31, 1997 and 1996 on the note payable to CPS Trailer Co.
referred to in Note 2 of $46,411 and $17,156, respectively.
The Company is a guarantor of two loans to CPS Trailer Co. made by
Union Planters Bank. The loan balances at December 31, 1997 totaled
$1,025,000. One of the notes included additional borrowings of
$225,000 after December 31, 1997. The Company does not consider it
probable that the Company will be required to satisfy these
guarantees.
NOTE 4: STOCK SALE AGREEMENT:
On January 30, 1998, Charles P. Siebert, sole stockholder, entered
into an agreement to sell his stock to Barclay Investments, Inc. on
May 31, 1998, or at a later date as the parties shall agree upon.
-8-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITOR' S REPORT 1
BALANCE SHEETS 2-3
STATEMENTS OF INCOME AND CHANGES IN STOCKHOLDER' S EQUITY 4-5
STATEMENTS OF CASH FLOWS 6-7
NOTES TO THE FINANCIAL STATEMENTS 8-13
*******
*****
***
*
<PAGE>
[LETTERHEAD OF STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, L.L.C.]
INDEPENDENT AUDITOR' S REPORT
To the Board of Directors and Stockholder
CPS Trailer Co.
Oran, Missouri
We have audited the accompanying balance sheets of CPS Trailer Co. as of
December 31, 1996 and 1995 and the related statements of income and changes in
stockholder's equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used in significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of CPS Trailer Co. as of December
31, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ STANLEY, DIRNBERGER, HOPPER & ASSOCIATES, LLC
STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC
Certified Public Accountants
Dated in Cape Girardeau, Missouri
June 4, 1997
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
CURRENT ASSETS: 1996 1995
----------- -----------
Cash in Banks and on Hand $ 165,996 $ 266,656
Accounts Receivable 186,143 421,068
Inventories 1,885,484 1,245,664
Refundable Deposits 4,000 0
Prepaid Expenses 12,030 5,366
Prepaid Corporate Income Tax 47,405 0
Interest Receivable - CPS Enterprises, Inc. 17,156 0
----------- -----------
Total Current Assets $ 2,318,214 $ 1,938,754
----------- -----------
PROPERTY AND EQUIPMENT:
Machinery and Equipment $ 521,211 $ 499,987
Office Furniture and Equipment 78,029 75,485
Vehicles 188,105 72,758
----------- -----------
Total Property and Equipment, Cost $ 787,345 $ 648,230
Less: Accumulated Depreciation (267,950) (167,397)
----------- -----------
Total Property and Equipment, Net $ 519,395 $ 480,833
----------- -----------
OTHER ASSET:
Note Receivable - CPS Enterprises, Inc. $ 550,000 $ 0
----------- -----------
TOTAL ASSETS $ 3,387,609 $ 2,419,587
=========== ===========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDER' S EQUITY
CURRENT LIABILITIES: 1996 1995
---------- ----------
Accounts Payable $ 587,066 $ 281,253
Accrued Liabilities 55,334 352,932
Customer Deposits 6,593 55,755
Deferred Tax Liability 6,777 0
Current Maturities of Notes Payable 375,000 1,293
Current Maturities of Capital Leases 0 6,184
---------- ----------
Total Current Liabilities $1,030,770 $ 697,417
---------- ----------
LONG-TERM LIABILITIES:
Deferred Tax Liability $ 59,552 $ 38,906
Long-Term Portion of Capital Leases 0 15,095
---------- ----------
Total Long-Term Liabilities $ 59,552 $ 54,001
---------- ----------
TOTAL LIABILITIES $1,090,322 $ 751,418
---------- ----------
STOCKHOLDER' S EQUITY:
Common Stock:
Authorized 30,000 shares, No Par
Issued and Outstanding 5 Shares $ 1,000 $ 1,000
Retained Earnings 2,296,287 1,667,169
---------- ----------
TOTAL STOCKHOLDER' S EQUITY $2,297,287 $1,668,169
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $3,387,609 $2,419,587
========== ==========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF INCOME AND CHANGES IN STOCKHOLDER' S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUES: 1996 1995
------------ ------------
Trailer Sales $ 10,035,442 $ 8,664,176
Boll Buggy Sales 0 2,387,500
Cotton Feeder Sales 125,000 175,000
Parts and Materials Sales 210,921 177,245
Labor 30,792 76,519
Freight 5,825 4,276
------------ ------------
Total Revenues $ 10,407,980 $ 11,484,716
COST OF GOODS SOLD (7,931,406) (8,908,648)
------------ ------------
GROSS PROFIT $ 2,476,574 $ 2,576,068
------------ ------------
OPERATING EXPENSES:
Selling, General and Administrative $ 1,056,871 $ 796,443
Depreciation Expense 116,621 91,620
Building and Equipment Leases 315,111 329,932
Warranty Repairs 31,120 63,349
------------ ------------
Total Operating Expenses $ 1,519,723 $ 1,281,344
------------ ------------
OPERATING INCOME $ 956,851 $ 1,294,724
------------ ------------
OTHER INCOME AND (EXPENSES):
Trailer Delivery Revenue $ 191,786 $ 152,444
Trailer Delivery Expenses (207,477) (136,553)
Service Charges and Discounts Earned 60,810 28,783
Miscellaneous Income 2,896 29,174
(Loss) on Disposal of Assets (261) (13,951)
Bad Debts Written Off (698) (10,937)
Interest Income 17,156 0
Interest Expense (4,854) (39,628)
------------ ------------
Total Other Income and (Expenses) $ 59,358 $ 9,332
------------ ------------
INCOME BEFORE INCOME TAXES $ 1,016,209 $ 1,304,056
------------ ------------
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF INCOME AND CHANGES IN STOCKHOLDER' S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
PROVISION FOR INCOME TAXES: 1996 1995
----------- -----------
Current $ 356,074 $ 478,238
Deferred 27,423 12,820
----------- -----------
Total Provision for Income Taxes $ 383,497 $ 491,058
----------- -----------
NET INCOME $ 632,712 $ 812,998
----------- -----------
RETAINED EARNINGS, BEGINNING OF YEAR,
AS PREVIOUSLY REPORTED $ 1,667,169 $ 854,171
PRIOR PERIOD ADJUSTMENT:
FEDERAL INCOME TAXES, PRIOR PERIOD (3,594) 0
----------- -----------
RETAINED EARNINGS, BEGINNING OF YEAR, RESTATED $ 1,663,575 $ 854,171
----------- -----------
RETAINED EARNINGS, END OF YEAR $ 2,296,287 $ 1,667,169
=========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
OPERATING ACTIVITIES: 1996 1995
--------- ---------
Net Income $ 632,712 $ 812,998
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation 116,621 91,620
Bad Debts Written Off 698 10,937
Book (Loss) on Disposal of Assets 261 13,951
Deferred Taxes 27,423 12,820
Federal Income Taxes, Prior Period (3,594) 0
--------- ---------
$ 774,121 $ 942,326
Changes in:
Current Assets, (Increase) Decrease
Accounts Receivable 255,037 (6,853)
Inventories (639,820) (164,026)
Refundable Deposits (4,000) 1,500
Prepaid Expenses (54,069) 25,618
Interest Receivable (17,156) 0
Current Liabilities, Increase (Decrease)
Accounts Payable 305,813 (206,771)
Accrued Liabilities (297,598) 310,847
Customer Deposits (49,162) 30,715
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 273,166 $ 933,356
--------- ---------
INVESTING ACTIVITIES:
Acquisition of Property and Equipment:
Machinery and Equipment $ (51,002) $(233,882)
Office Furniture and Equipment (2,545) (52,119)
Vehicles (144,347) (33,758)
Proceeds from Sale of Assets 42,450 22,032
Advances on Accounts Receivable from
CPS Enterprises, Inc. (20,810) 0
Advances on Note Receivable from
CPS Enterprises, Inc. (550,000) 0
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES $(726,254) $(297,727)
--------- ---------
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
FINANCING ACTIVITIES: 1996 1995
--------- ---------
Proceeds of Line of Credit Loan,
Net of Repayments $ 375,000 $(300,000)
Proceeds from Notes Payable 0 165,000
Principal Payments on Notes Payable (1,293) (254,379)
Principal Payments on Capital Leases (21,279) (5,695)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES $ 352,428 $(395,074)
--------- ---------
NET (DECREASE) INCREASE IN CASH $(100,660) $ 240,555
CASH, BEGINNING OF YEAR 266,656 26,101
--------- ---------
CASH, END OF YEAR $ 165,996 $ 266,656
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 3,245 $ 39,968
Cash Paid During the Year for Income Taxes 680,503 201,982
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's principal business activities include the manufacture
of commercial and agricultural trailers and equipment serving
growing segments of the construction, solid waste, and agricultural
industries, with sales distribution throughout the United States.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined utilizing the average cost method.
Property and Equipment:
Property and equipment are stated at cost, and for financial
statement purposes depreciation is computed on the straight-line
method over the estimated useful lives of the assets. The estimated
useful lives are 5 to 7 years for machinery and equipment, 5 to 7
years for office furniture and equipment, and 5 years for vehicles.
Repairs and maintenance are charged to expense as incurred.
Expenditures which significantly extend the useful lives of property
and equipment are capitalized.
Bad Debt:
The Company utilizes the direct write-off method to account for
uncollectible accounts receivable.
Revenue Recognition:
Trailers which are built for commercial customers based on a
contract and/or specifications are recognized as revenue when the
trailer is completed. Trailers built to customer specifications have
no right of return or exchange privileges. The Company may hold the
trailer for a short period of time until pick up or delivery to the
customer. The title to the trailer is transferred upon payment by
the customer. On other sales, the Company recognizes revenue from
the sale of trailers when the title is transferred to the customer
and the trailer is delivered or picked up by the customer.
-8-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- CONTINUED
Major Customers:
Sales of various trailers to three customers during the year ended
December 31, 1996 were approximately $1,931,589, and to four
customers during the year ended December 31, 1995 were approximately
$3,778,266.
Income Taxes:
The Company utilizes the liability method of accounting for deferred
income taxes. This method provides for deferred tax assets and
liabilities for the expected future tax consequences of temporary
timing differences between the financial and tax basis of assets and
liabilities using the tax rates in effect for the year in which the
temporary timing differences are expected to reverse.
Concentration of Credit Risk:
The Company maintains its cash in demand deposit accounts which
routinely exceed FDIC insurance limits. As of December 31, 1996, the
Company had $204,943 in excess of FDIC insurance limits.
NOTE 2: ACCOUNTS RECEIVABLE:
Accounts receivable as of December 31, 1996 and 1995, consist of the
following:
1996 1995
-------- --------
Trade $128,688 $381,477
CPS Enterprises, Inc.
(Related Party) 56,161 35,351
Employees 1,294 589
Stockholder 0 3,651
-------- --------
Total Accounts Receivable $186,143 $421,068
======== ========
-9-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 3: INVENTORIES:
Inventories consist of the following as of December 31, 1996 and
1995:
1996 1995
---------- ----------
Raw Materials $ 993,400 $ 913,504
Work in Process 184,916 147,445
Finished Goods 707,168 184,715
---------- ----------
Total Inventories $1,885,484 $1,245,664
========== ==========
Finished Goods inventory as of the end of the 1996 year increased
substantially from the prior year due to the Company's decision to
produce at a constant level during the off season immediately prior
to year end.
NOTE 4: ACCRUED LIABILITIES:
Accrued liabilities consist of the following as of December 31, 1996
and 1995:
1996 1995
-------- --------
Taxes: Payroll, Sales, Excise $ 3,051 $ 16,206
Income Taxes, Federal and State 0 277,024
Wages and Bonuses 28,927 58,904
Interest 1,609 0
Other 21,747 798
-------- --------
Total Accrued Liabilities $ 55,334 $352,932
======== ========
-10-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 5: MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable as of December 31, 1996 and 1995,
consist of the following:
1996 1995
--------- --------
Notes Payable, First Financial Bank:
(Personally Guaranteed by
Stockholder)
$500,000 Line of Credit, note dated
April 18, 1995 with modification
agreement dated June 21, 1996,
interest payable monthly at .9% over
prime and modified to .7% over
prime. The note was due April 10,
1997 and was refinanced. The note is
secured by all inventory, accounts,
contract rights and equipment. $ 200,000 $ 0
$500,000 Line of Credit, note dated
April 18, 1995, with modification
agreement dated June 21, 1996,
interest payable monthly at .9% over
prime and modified to .7% over
prime. The note was due April 10,
1997 and was refinanced. The note is
secured by all inventory, accounts,
contract rights and equipment. 175,000 300
Note dated January 7, 1993, monthly
payments of $972, including
principal and interest at 8.0%. The
note is due January 6, 1996 and is
secured by a truck. 0 993
--------- --------
Total Notes Payable $ 375,000 $ 1,293
Less: Current Maturities (375,000) (1,293)
--------- --------
Long-Term Notes Payable $ 0 $ 0
========= ========
-11-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6: LEASES:
The Company entered into an equipment finance lease in February,
1994 for two forklifts expiring in 1999. The forklifts have been
capitalized using an interest rate of 9.3%. The Company paid the
equipment finance lease in full in 1996.
The forklifts under capital lease at December 31, 1995 had the
following book value:
1995
--------
Cost Capitalized $ 31,750
Accumulated Amortization (8,693)
--------
Net Book Value $ 23,057
========
The Company has certain other related party operating leases as
referred to in Note 7.
NOTE 7: RELATED PARTY TRANSACTIONS:
The Company has a lease agreement for land, buildings, machinery and
equipment, office furniture and equipment, and vehicles with CPS
Enterprises, Inc. (sole stockholder, Charles P. Siebert). CPS
Enterprises, Inc. owns the physical plant (building) where CPS
Trailer Co. is located. The lease agreement is renewed annually and
is based on the square footage of the buildings occupied. Rental
expense under this operating lease was $300,000 and $292,800 for the
years ended December 31, 1996 and 1995, respectively.
The Company leased monthly an airplane from CSCS Enterprises, Inc.
(owned 50% by Charles P. Siebert) during the years ended December
31, 1996 and 1995. Lease expense incurred was $6,300 and $23,100 for
the years ended December 31, 1996 and 1995, respectively.
-12-
<PAGE>
CPS TRAILER CO.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8: INCOME TAXES:
Components of the deferred income tax asset and liability as of
December 31, 1996 and 1995 are as follows:
1996 1995
------- -------
Deferred Tax Liability:
Accrued Interest Income $ 6,777 $ 0
Depreciation 59,552 38,906
-13-
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITOR'S REPORT 1
BALANCE SHEETS 2-3
STATEMENTS OF INCOME AND CHANGES IN UNDISTRIBUTED EARNINGS 4
STATEMENTS OF CASH FLOWS 5
NOTES TO THE FINANCIAL STATEMENTS 6-9
*******
*****
***
*
<PAGE>
[LETTERHEAD OF STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, L.L.C.]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder
CPS Enterprises, Inc.
Oran, Missouri
We have audited the accompanying balance sheets of CPS Enterprises, Inc. (a
Subchapter S Corporation) as of December 31, 1996 and 1995, and the related
statements of income and changes in undistributed earnings and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CPS Enterprises, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Respectfully submitted,
/s/ STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC
STANLEY, DIRNBERGER, HOPPER AND ASSOCIATES, LLC
Certified Public Accountants
Dated in Cape Girardeau, Missouri
June 4, 1997
<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
CURRENT ASSETS: 1996 1995
----------- -----------
Cash in Banks and on Hand $ 19,640 $ 3,332
Accounts Receivable 0 7,665
----------- -----------
Total Current Assets $ 19,640 $ 10,997
----------- -----------
PROPERTY AND EQUIPMENT:
Land and Buildings $ 950,896 $ 915,840
Machinery and Equipment 489,867 487,013
Office Furniture and Equipment 33,264 33,264
Vehicles 38,535 47,586
Construction in Progress 51,136 0
----------- -----------
Total Property and Equipment, Cost $ 1,563,698 $ 1,483,703
Less: Accumulated Depreciation (517,018) (452,073)
----------- -----------
Total Property and Equipment, Net $ 1,046,680 $ 1,031,630
----------- -----------
TOTAL ASSETS $ 1,066,320 $ 1,042,627
=========== ===========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES: 1996 1995
---------- ----------
Accounts Payable - Trade $ 0 $ 10,587
Accounts Payable - CPS Trailer Co. 56,161 35,351
Accrued Interest Payable - CPS Trailer Co. 17,156 0
Current Maturities of Mortgages & Notes Payable 0 55,568
---------- ----------
Total Current Liabilities $ 73,317 $ 101,506
---------- ----------
LONG-TERM LIABILITIES:
Long-Term Portion of Mortgages &
Notes Payable $ 550,000 $ 515,259
---------- ----------
TOTAL LIABILITIES $ 623,317 $ 616,765
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock:
Authorized 3,000 Shares, $10 Par Value;
Issued and Outstanding 1 Share $ 10 $ 10
Paid-In Capital 5,490 5,490
Undistributed Earnings 437,503 420,362
---------- ----------
TOTAL STOCKHOLDER'S EQUITY $ 443,003 $ 425,862
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,066,320 $1,042,627
========== ==========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
STATEMENTS OF INCOME AND CHANGES IN UNDISTRIBUTED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
--------- ---------
RENTAL INCOME $ 300,000 $ 292,800
--------- ---------
RENTAL EXPENSES:
Insurance $ 0 $ 3,858
Depreciation 77,844 70,097
Equipment Leases 2,015 16,103
Taxes and Licenses 569 4,141
Other Rental Expenses 67 4
Interest 53,832 48,725
--------- ---------
Total Rental Expenses $ 134,327 $ 142,928
--------- ---------
NET RENTAL INCOME $ 165,673 $ 149,872
OTHER EXPENSE:
Loss on Disposal of Assets 0 (91)
--------- ---------
NET INCOME $ 165,673 $ 149,781
UNDISTRIBUTED EARNINGS, BEGINNING OF YEAR 420,362 344,019
Stockholder Distributions (148,532) (73,438)
--------- ---------
UNDISTRIBUTED EARNINGS, END OF YEAR $ 437,503 $ 420,362
========= =========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
OPERATING ACTIVITIES: 1996 1995
--------- ---------
Net Income $ 165,673 $ 149,781
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation 77,844 70,097
Loss on Disposal of Assets 0 91
--------- ---------
$ 243,517 $ 219,969
Current Assets, (Increase) Decrease:
Accounts Receivable 7,665 0
Current Liabilities, Increase (Decrease):
Accounts Payable (10,587) 37,178
Accrued Interest Payable 17,156 0
--------- ---------
Net Cash Provided by Operating Activities $ 257,751 $ 257,147
--------- ---------
INVESTING ACTIVITIES:
Acquisition of Property and Equipment:
Land Improvements/Acquisition $ (20,801) $ (27,101)
Machinery and Equipment (2,854) (49,509)
Buildings Improvements/Construction
In Progress (65,391) (206,768)
Vehicle (3,848) 0
Proceeds from Sales of Assets 0 17,395
--------- ---------
Net Cash (Used) by Investing Activities $ (92,894) $(265,983)
--------- ---------
FINANCING ACTIVITIES:
Advances from CPS Trailer Co. $ 20,810 $ 0
Proceeds of Note Payable from CPS Trailer Co. 550,000 114,914
Principal Payments on Mortgages and
Notes Payable (570,827) (67,683)
Distributions to Stockholder (148,532) (73,438)
--------- ---------
Net Cash (Used) by Financing Activities $(148,549) $ (26,207)
--------- ---------
NET INCREASE (DECREASE) IN CASH $ 16,308 $ (35,043)
CASH AT BEGINNING OF YEAR 3,332 38,375
--------- ---------
CASH AT END OF YEAR $ 19,640 $ 3,332
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 36,676 $ 48,725
========= =========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Nature of Business:
The Company's principal business activities include the rental of
land, buildings, equipment and vehicles (property, plant and
equipment) to a related company, CPS Trailer Co. The property, plant
and equipment are used in the manufacturing of commercial and
agricultural trailers and equipment.
Property and Equipment:
Property and equipment are stated at cost, and for financial
statement purposes depreciation is computed on the straight-line
method over the estimated useful lives of the assets. The estimated
useful lives are as follows:
YEARS
---------
Buildings and Building Improvements 7-40
Machinery and Equipment 5-7
Office Furniture and Equipment 5-7
Vehicles 5
Repairs and maintenance are charged to expense as incurred.
Expenditures which significantly extend the useful lives of existing
property and equipment are capitalized.
Income Taxes:
In October, 1986, Charles P. Siebert, the sole stockholder of the
Corporation, elected under Section 1362 of the Internal Revenue Code
to be taxed as an S Corporation. In lieu of corporate income taxes,
the stockholder of an S Corporation is taxed on the Company's
taxable income. Therefore, no provision or liability for income
taxes has been included in the financial statements.
Non-Cash Investing and Financing Activities:
During the year ended December 31, 1995, the Company entered into a
note payable of $53,012 to purchase machinery and equipment. The
note was paid in full in 1996.
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: - CONTINUED
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
NOTE 2: ACCOUNTS RECEIVABLE:
Accounts receivable as of December 31, 1995 consist of the
following:
1995
-------
Related Party $ 5,000
Other 2,665
-------
Total Accounts Receivable $ 7,665
=======
NOTE 3: MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable as of December 31, 1996 and 1995 consist
of the following:
1996 1995
-------- --------
Notes Payable, First Financial Bank:
(Personally Guaranteed by the Stockholder)
Note dated April 18, 1995, payable
in monthly installments of $4,809,
including interest at .9% over prime,
collateralized by real estate, due
April 18, 2010. $ 0 $441,060
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 3: MORTGAGES AND NOTES PAYABLE: - CONTINUED
1996 1995
--------- ---------
Notes Payable, First Financial Bank:
- Continued
(Personally Guaranteed by the Stockholder)
Note dated April 18, 1995, payable
in monthly installments of $2,858,
including interest at .9% over prime,
collateralized by all assets, due
April 18, 1998. $ 0 $ 71,216
--------- ---------
Total Notes Payable,
First Financial Bank $ 0 $ 512,276
Note Payable, CPS Trailer Co.
(Related Party), due January 1, 1999,
interest is payable monthly at prime. 550,000 0
Note Payable, GMAC,
dated March 24, 1993, payable in
monthly installments of $396,
including interest at 8.5%, secured
by a vehicle, due March 24, 1997. 0 5,539
October 31, 1995, payable in quarterly
installments of $10,261, including
interest at 8.9%, secured by equipment
due November 10, 1998. 0 53,012
--------- ---------
Total Mortgages and Notes Payable $ 550,000 $ 570,827
Less: Current Portion 0 (55,568)
--------- ---------
Long-Term Portion $ 550,000 $ 515,259
========= =========
The $550,000 note payable to CPS Trailer Co. matures during the year
ending December 31, 1999. The Company paid in full all other
mortgages and notes payable in 1996.
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<PAGE>
CPS ENTERPRISES, INC.
ORAN, MISSOURI
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 4: RELATED PARTY TRANSACTION:
The Company has a lease agreement with CPS Trailer Co. (sole
stockholder, Charles P. Siebert) whereby, the Company receives
monthly lease payments from CPS Trailer Co. for the use of the land,
buildings, machinery and equipment, office furniture and equipment,
and vehicles owned by the Company. The lease agreement is renewed
annually and is based on the square footage of the buildings owned.
Rental income received under the lease for the years ended December
31, 1996 and 1995 was $300,000 and $292,800, respectively.
NOTE 5: OTHER COMMITMENTS:
The Company entered into a contract with Eftink Construction Co. on
March 3, 1997 to construct a 60,000 sq. ft. all steel modular
building with a base bid of $346,900. However, the Company
anticipates total costs approximating $1,000,000 upon completion for
the building, concrete, cranes, electrical and heating. The Company
does not anticipate any problem in obtaining conventional financing
when needed. The newly constructed building will be leased to CPS
Trailer Co. (sole stockholder, Charles P. Siebert).
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