UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
|X| CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of Report (Date of earliest event reported) June 16, 1999
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 Road, Hillsborough, NJ 08876-4056
--------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(908) 874-7778 3715
-------------- ----
(Registrant's telephone number) (Primary Standard Industrial Code)
Not applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered under Section 12(b) of the Exchange Act:
Title of each Class Name of each Exchange on which Registered
- ------------------- -----------------------------------------
Common Stock American Stock Exchange
8 1/2% Senior Convertible Redeemable American Stock Exchange
Preferred Stock
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Item 5. Acquisition and Disposition of Assets
In June 1999, Standard Automotive Corporation ("Company") through its
wholly owned subsidiary Critical Components Corporation ("CCC"), acquired
substantially all of the assets of Ranor, Inc. ("Ranor") a fabricator of large
precision assemblies for the aerospace, nuclear, industrial and military
markets. The consideration paid for Ranor was $28,800,000, subject to final
adjustment, of which $23,500,000 was paid in cash and $5,300,000 was paid in the
form of three year, 6% interest only convertible subordinated notes of the
Company. Management estimates that a material portion of the excess purchase
price over net assets acquired will be allocated to property and equipment. The
Company is in the process of obtaining independent appraisals to value the
assets and determine their useful lives. Such determination should be completed
by the end of September 1999. Funds to complete the Ranor acquisition were
obtained by increasing the amounts outstanding under the Company's Credit
Agreement as more fully described below. The acquisition has been accounted for
as a purchase and, accordingly, the Company's first quarter financial statements
ending June 30, 1999 reflected the activity of Ranor for the period from June
16, 1999 through June 30, 1999.
In order for the Company to consummate the acquisition of Ranor, in June
1999, the Company obtained an increase in its existing credit facility
arrangement from $40,000,000 to $68,125,000 through PNC Bank, NA and PNC Capital
Markets. The Company's Credit Agreement, as amended, provides for Term Loans in
the principal amount of $48,125,000 and a Revolving Loan in the principal amount
of $20,000,000. The principal of the Term Loans is payable in two tranches of
$23,125,000 and $25,000,000 in June 2004 and June 2005, respectively. Amounts
outstanding under the Revolving Loan are payable in full in July 2002, subject
to the Company's request, with the approval of the lenders, to extend the due
date for one year, with a maximum extension of two one year periods.
Item 7. Financial Statements and Exhibits
(a) The financial statements required to be filed with this Form 8-K for
the acquisition of Ranor, Inc. for the Years Ended December 31, 1996, 1997 and
1998 are being filed herewith.
(b) The pro forma financial information required to be filed with this
Form 8-K was filed as part of the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1999. A copy of the pro forma financial information is
being filed herewith.
2
<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.
STANDARD AUTOMOTIVE CORPORATION
(Registrant)
/s/ Roy Ceccato August 27 1999
- -------------------------------------------
Roy Ceccato
Treasurer
3
<PAGE>
2. Proforma Information (Unaudited)
The following summarized, unaudited proforma information for the three
months ended June 30, 1999 assumes that the acquisition of Ranor had occurred on
April 1, 1999 (in thousands except per share data):
SAC Ranor Adjustments Proforma
--- ----- ----------- --------
Revenues, net $35,044 $ 4,890 $ -- $39,934
Operating income 3,370 1,138 (544) 3,964
Net income $ 1,540 $ 1,008 $ (606) $ 1,942
======= ======= ======= =======
Preferred dividend 293 -- -- 293
Basic net income per share $ 0.35 $ 0.45
======= =======
Diluted net income per share $ 0.35 $ 0.44
======= =======
Basic weighted average number
of shares outstanding 3,530 -- 150 3,680
Diluted weighted average number
of shares outstanding 3,572 -- 150 3,722
The proforma operating results reflect estimated adjustments for
amortization expense on intangibles arising from the acquisition, interest
expense on the acquisition debt and the related tax effect.
Proforma results of operations information is not necessarily indicative
of the results of operations that would have occurred had the acquisitions been
consummated as of April 1, 1999 or of future results of the combined companies.
4
<PAGE>
RANOR, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
RANOR, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements:
Balance Sheets 2
Statements of Earnings and Retained Earnings 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 11
<PAGE>
Love, Bollus, Lynch & Rogers, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
10 Mechanic Street Worcester, Massachusetts 01608
Telephone 508-755-7107 Facsimile 508-755-3896
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ranor, Inc.
We have audited the accompanying balance sheets of Ranor, Inc. as of December
31, 1998 and 1997, and the related statements of earnings and retained earnings
and cash flows for each of the years in the three year period ended December 31,
1998. 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 Ranor, Inc. as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the years in the three year period ended December 31, 1998 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for contract revenue in 1998.
Worcester, Massachusetts
February 20, 1999
<PAGE>
RANOR, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
Assets
Current assets
Cash and cash equivalents $ 2,723,921 $ 2,711,504
Marketable securities 520,321 350,503
Accounts and notes receivable
Trade 2,635,973 2,550,466
Income taxes -- 17,467
Other -- 300,349
Inventories 137,353 77,288
Costs and estimated earnings in excess of
billings on uncompleted contracts 3,016,780 881,528
Other current assets 905 --
----------- -----------
Total current assets 9,035,253 6,889,105
----------- -----------
Property, plant, and equipment 11,728,300 10,186,195
Less: Accumulated depreciation and amortization 8,819,658 8,516,803
----------- -----------
2,908,642 1,669,392
----------- -----------
$11,943,895 $ 8,558,497
=========== ===========
<PAGE>
1998 1997
---- ----
Liabilities and Stockholders' Equity
Current liabilities
Current portion of capital lease obligation $ 7,568 $ --
Accounts payable, trade 482,152 531,844
Accrued and other liabilities 328,206 230,456
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,475,757 --
----------- -----------
Total current liabilities 2,293,683 762,300
Capital lease obligation, less current portion 30,375 --
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,128,391 1,562,509
Deferred income taxes 112,000 79,000
----------- -----------
3,564,449 2,403,809
----------- -----------
Stockholders' equity
Common stock
Class A, no par value, 200 shares authorized,
issued, and outstanding 15,000 15,000
Class B, no par value, 900 shares authorized,
800 shares issued and outstanding 60,000 60,000
Additional paid-in capital 99,801 99,801
Retained earnings 8,204,645 5,979,887
----------- -----------
8,379,446 6,154,688
----------- -----------
$11,943,895 $ 8,558,497
=========== ===========
See accompanying notes to financial statements.
2
<PAGE>
RANOR, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue $ 17,713,802 $ 15,980,145 $ 14,702,555
Cost of revenue 11,719,213 10,975,179 10,138,428
------------ ------------ ------------
Gross profit 5,994,589 5,004,966 4,564,127
Selling, general, and administrative expenses 2,040,157 2,165,008 2,570,146
------------ ------------ ------------
Operating profit 3,954,432 2,839,958 1,993,981
------------ ------------ ------------
Other income (expense)
Investment and interest income 228,642 169,987 115,458
Unrealized gain on marketable securities 13,537 21,436 7,067
Gain on sale of property and equipment 29,067 15,770 3,678
Gain on sale of assets held for sale -- 105,912 --
Interest expense (2,920) (1,303) (10,664)
------------ ------------ ------------
268,326 311,802 115,539
------------ ------------ ------------
Earnings before income taxes 4,222,758 3,151,760 2,109,520
Income taxes 198,000 138,000 88,972
------------ ------------ ------------
Net earnings 4,024,758 3,013,760 2,020,548
Retained earnings, beginning of year 5,979,887 4,690,127 4,749,579
Distributions to stockholders (1,800,000) (1,724,000) (2,080,000)
------------ ------------ ------------
Retained earnings, end of year $ 8,204,645 $ 5,979,887 $ 4,690,127
============ ============ ============
Earnings per share $ 4,024.76 $ 3,013.76 $ 2,020.55
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
RANOR, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,024,758 $ 3,013,760 $ 2,020,548
----------- ----------- -----------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 340,564 277,253 254,073
Deferred income taxes 33,000 56,000 3,000
Gain on sale of property and equipment (29,067) (15,770) (3,678)
Gain on sale of assets held for sale -- (105,912) --
Unrealized gain on marketable securities (13,537) (21,436) (7,067)
Interest accrued on notes receivable, officers -- -- (14,659)
(Increase) decrease in operating assets:
Accounts receivable 232,309 (227,968) (801,223)
Inventories (60,065) (44,434) 10,764
Other current assets (905) -- --
Uncompleted contracts (1,093,613) (600,811) 656,281
Increase (decrease) in operating liabilities:
Accounts payable, trade (49,692) 179,911 67,863
Accrued and other liabilities 97,750 71,306 (1,001)
----------- ----------- -----------
Total adjustments (543,256) (431,861) 164,353
----------- ----------- -----------
Net cash provided by (used in)
operating activities 3,481,502 2,581,899 2,184,901
----------- ----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (156,281) (137,902) (59,817)
Expenditures for property and equipment (1,565,578) (419,768) (282,742)
Proceeds from sale of property and equipment 58,000 20,000 9,000
Expenditures for equipment held for resale -- (7,800) (279,000)
Proceeds from sale of equipment held for resale -- 413,660 86,708
----------- ----------- -----------
Net cash provided by (used in)
investing activities (1,663,859) (131,810) (525,851)
----------- ----------- -----------
Cash flows from financing activities:
Net borrowings (payments) on note payable, bank -- (90,000) 90,000
Payment of capital lease obligations (5,226) -- --
Repayment of notes receivable, officers -- 307,844 --
Distributions to stockholders (1,800,000) (1,724,000) (2,080,000)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (1,805,226) (1,506,156) (1,990,000)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 12,417 943,933 (330,950)
Cash and cash equivalents, beginning of year 2,711,504 1,767,571 2,098,521
----------- ----------- -----------
Cash and cash equivalents, end of year $ 2,723,921 $ 2,711,504 $ 1,767,571
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Ranor, Inc. is a job shop specializing in the fabrication and
machining of high tolerance steel weldments. The Company serves many
domestic markets, including U.S. Government agencies such as National
Laboratories, the Department of Defense, the Department of Energy, and the
paper, pulp and medical technology industries. The Company builds custom,
unique products to customer specifications.
Accounting 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 revenue and
expenses during the reported period. Actual results could differ from
those estimates.
Cash and cash equivalents
For purposes of these financial statements, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
Credit risk
The Company maintains its cash and cash equivalents in bank
deposit accounts which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. The Company
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
Other financial instruments that expose the Company to
concentrations of credit risk are accounts receivable, trade. The Company
performs an evaluation of its customers' financial condition prior to
acceptance of contracts and generally does not require collateral.
Allowances are maintained for potential credit losses however, such losses
have not been material in the past.
Revenue from the Company's largest customer was approximately
$1,975,000 in 1998. Accounts receivable, trade from this customer as of
December 31, 1998 was $964,000. No other single customer accounted for a
material portion of revenue or accounts receivable, trade.
Marketable securities
Marketable securities are comprised of mutual funds and are
considered trading securities under the provisions of Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." Such investments are carried at fair
value. Unrealized holding gains and losses are included in earnings.
Inventories
Inventories, which consist of raw steel purchased for future
production, are valued at the lower of cost or fair value. Cost is
determined on the basis of the first-in, first-out (FIFO) method.
5
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant, and equipment
Property, plant, and equipment are carried at cost.
Depreciation and amortization are computed using straight-line and
accelerated methods.
Revenue recognition
Prior to 1998, the Company recorded revenue using the
completed contract method of accounting. The Company has experienced a
significant shift in the size, duration and complexity of contracts with
customers. During 1998, the Company switched its method of accounting for
uncompleted contracts to the percentage of completion method. In
accordance with generally accepted accounting principles, all periods
presented in these financial statements have been restated to reflect this
change.
Revenues from contracts are primarily recognized on the
percentage-of-completion method, measured using the cost-to-cost
methodology. Costs include direct engineering and manufacturing costs,
applicable overheads, and special tooling and test equipment. Revenues and
profits on uncompleted contracts are based on the Company's estimates to
complete and are reviewed periodically, with adjustments recorded in the
period in which the revisions are made. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Progress billings are made according to the terms of the
contract.
The asset "Costs and estimated earnings in excess of billings
on uncompleted contracts" represents revenue recognized in excess of
amounts billed. The liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of
revenue recognized.
Advertising and promotion
All costs associated with advertising and promoting the
Company are expensed in the year incurred. Advertising and promotion
expense was approximately $40,000, $2,000 and $12,000 in 1998, 1997, and
1996, respectively.
Income taxes
The Company has elected to be taxed for federal and state
purposes as an S Corporation, whereby income is passed through to the
stockholders and is taxed at the individual level. Accordingly, no federal
and only certain state income taxes are provided in the financial
statements.
Impairment of long-lived assets
The Company reviews the carrying values of certain long-lived
assets and certain identifiable intangibles whenever events or changes in
circumstances indicate the carrying value of an asset may not be
recoverable. Where indicated, the carrying value of such assets is reduced
through a charge to earnings. The adjusted carrying values represent
management's estimate of the amount expected to be recovered from these
assets in the future.
Earnings per share
Earnings per share are calculated on the weighted average of
outstanding shares each year.
6
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
New accounting standards
In June 1997, the Financial Accounting Standards Board
("FASB") issued SFAS 130, "Reporting Comprehensive Income," which
established standards for reporting and display of comprehensive income
and its components. This statement requires a separate statement to report
the components of comprehensive income for each period reported. The
provisions of this statement are effective for fiscal years beginning
after December 15, 1997. The adoption of this statement did not impact the
Company's financial statements.
In June, 1997 the FASB also issued SFAS 131, "Disclosures
About Segments of an Enterprise and Related Information." The standard
requires that companies disclose "operating segments" based on the way
management disaggregates the Company for making internal operating
decisions. The new rules will be effective for the 1998 fiscal year.
Abbreviated quarterly disclosure will be required beginning first quarter
of 1999, with both 1999 and 1998 information. The adoption of this
statement did not impact the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities." This statement is
effective for fiscal years beginning after June 15, 1999. The Company does
not currently utilize derivative instruments or engage in hedging
activities. Accordingly, the adoption of this statement will not impact
the Company's financial statements.
2 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts consist
of the following:
1998 1997
---- ----
Costs incurred on uncompleted contracts $3,478,744 $ 834,377
Estimated earnings 1,808,497 826,405
---------- ----------
5,287,241 1,660,782
Less: Billings to date 3,746,218 779,254
---------- ----------
$1,541,023 $ 881,528
========== ==========
These current contracts are included in the balance sheets as
follows:
1998 1997
---- ----
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 3,016,599 $ 881,528
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,475,576) --
----------- -----------
$ 1,541,023 $ 881,528
=========== ===========
7
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
2 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Continued)
In addition, the Company entered into several other production
contracts in 1994 and 1995. According to the terms of the contracts, the
Company acquired materials, commenced production and collected advance
billings. In January of 1997, the contracts were placed on hold pending
design approval by a U.S. regulatory agency. The customer subsequently
declared bankruptcy and was in default on the contracts. All remaining
costs and advance billings were accounted for on the completed contract
method and are presented as long-term uncompleted contracts pending
resolution of the matter. The amounts, classified as noncurrent, included
in the accompanying balance sheets related to unresolved contracts, are as
follows as of December 31:
1998 1997
---- ----
Costs incurred $ 230,034 $ 1,090,824
Less: Advance billings received 1,358,425 2,653,333
----------- -----------
Billings in excess of costs incurred $(1,128,391) $(1,562,509)
=========== ===========
During 1997, the customer's interest in the contracts was
assigned to a third party by the bankruptcy court. The Company contested
the assignment pending resolution of damage claims asserted under cost
escalation and stand-by clauses of the contracts. Certain of these claims
were agreed to in 1997 and a settlement of $300,000 was recorded as
additional revenue. The remaining claims were settled and approved by the
bankruptcy court in 1998. Additional revenue of $285,669 was recorded in
1998 related to this settlement.
With these claims settled, the contract assignment and began
to negotiate completion of the projects. During this process, certain
contracts were cancelled and others were significantly modified. As the
contracts were resolved, the Company recorded revenue under the percentage
of completion method. The accompanying financial statements include the
following activities related to these contracts:
1998 1997 1996
---- ---- ----
Revenue $1,143,866 $ 57,020 $ 679,383
Cost of revenue 873,278 155,849 768,683
---------- ---------- ----------
Gross profit (loss) $ 270,588 $ (98,829) $ (89,300)
========== ========== ==========
3 - PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, together with estimated useful
lives, consists of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives 1998 1997
------------- ---- ----
<S> <C> <C> <C>
Building and improvements 15 - 35 years $ 590,442 $ 544,252
Leasehold improvements 15 - 35 years 357,491 297,539
Machinery and equipment 5 - 10 years 8,889,109 8,741,721
Motor vehicles 3 - 5 years 354,232 354,232
Furniture and fixtures 5 - 10 years 171,362 171,362
Computer equipment 3 - 5 years 77,089 77,089
Construction in progress 1,288,575 --
------------- -------------
$ 11,728,300 $ 10,186,195
============= =============
</TABLE>
8
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
3 - PROPERTY, PLANT, AND EQUIPMENT (Continued)
Depreciation and amortization for property, plant, and
equipment was $340,564, $261,836 and $241,573 in 1998, 1997 and 1996,
respectively.
During 1998, the Company began an expansion of its facility.
The cost of the new building and related equipment is currently estimated
to be $5,400,000. As of December 31, 1998, the Company had incurred
capital expenditures of $846,000 related to the new building and had made
deposits of $443,000 on new equipment.
4 - NOTE PAYABLE, BANK
The Company has a line of credit with a bank, secured by
substantially all Company assets. The agreement provides for borrowings up
to $1,500,000 based on a formula. There were no amounts outstanding on the
line of credit as of December 31, 1998 and 1997, respectively.
5 - CAPITAL AND OPERATING LEASES
The Company leases its operating facility from an entity
affiliated through common ownership. In addition, certain equipment is
leased under long-term lease agreements. The leases are classified as
either operating or capital leases for financial statement purposes. Lease
expense was approximately $257,600, $271,000 and $281,000 in 1998, 1997
and 1996, respectively.
Property, plant, and equipment assets acquired under capital
leases includes the following as of December 31, 1998:
Equipment $43,169
Less: Accumulated amortization 2,158
-------
$41,011
=======
The following is a schedule by years of future minimum lease
payments under operating leases together with the present value of minimum
lease payments for capital leases as of December 31, 1998.
Capital Operating
Year Ended December 31 Leases Leases
------------------ ------- ----------
1999 $10,861 $ 286,123
2000 10,861 283,850
2001 10,861 274,618
2002 10,861 252,000
2003 1,810 252,000
------- ----------
Total minimum lease payments 45,254 $1,348,591
Less: Amounts representing interest 7,311 ==========
-------
37,943
Less: Current portion of capital lease obligation 7,568
-------
Capital lease obligation, less current portion $30,375
=======
9
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
6 - PROFIT SHARING PLAN
The Company has a profit sharing and 401(k) savings plan
covering substantially all employees with more than one year of service.
Contributions to the plan are made at the discretion of the Company's
Board of Directors and were $138,426, $125,580 and $83,572 in 1998, 1997
and 1996, respectively.
7 - INCOME TAXES
Income taxes consist of the following:
1998 1997 1996
---- ---- ----
State
Current $165,000 $ 82,000 $ 85,972
Deferred 33,000 56,000 3,000
-------- -------- --------
$198,000 $138,000 $ 88,972
======== ======== ========
The temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities that give
rise to significant portions of deferred income taxes related primarily to
uncompleted contracts and depreciation and amortization.
8 - RELATED PARTY TRANSACTIONS
The Company had the following balances and transactions with
related parties:
1998 1997 1996
---- ---- ----
Notes receivable, officers $ -- $ -- $307,844
Interest income, officers -- -- 14,659
Rent expense, affiliate 252,000 252,000 252,000
9 - STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flows information is as
follows:
1998 1997 1996
---- ---- ----
Cash paid during the year for:
Interest $ 2,920 $ 1,303 $ 10,664
Income taxes 68,864 76,858 160,631
During 1998, the Company acquired equipment totaling $43,169
under capital lease obligations.
10
<PAGE>
RANOR, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
10 - SUBSEQUENT EVENT
Subsequent to December 31, 1998, the Company's stockholders
signed a letter of intent to sell substantially all of the Company's
business assets to a third party.
11 - RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 financial statements have
been reclassified to conform with the 998 presentation. Such
reclassifications had no effect on net earnings.
11
