UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Second Quarter Ended September 30, 1999
Or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From __________________ to ____________________
Commission File Number: 001-13657
---------
STANDARD AUTOMOTIVE CORPORATION
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-2018607
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
321 Valley 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:
<TABLE>
<CAPTION>
Title of each Class Name of each Exchange on which Registered
------------------- -----------------------------------------
<S> <C>
Common Stock American Stock Exchange
8 1/2% Senior Convertible Redeemable Preferred Stock American Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of November 5, 1999 was $18,437,000 based upon a last sale
price of $8.88.
As of November 5, 1999, the Registrant had a total of 3,697,524 shares of
Common Stock outstanding and 1,132,600 shares of Preferred Stock outstanding.
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Index to Quarterly Report on Form 10-Q
September 30, 1999
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and
September 30, 1999 3
Consolidated Statements of Income for the three and six months
ended September 30, 1998 and 1999 4
Consolidated Statements of Stockholders' Equity for the period
ended September 30, 1999 5
Consolidated Statements of Cash Flows for the six months ended
September 30, 1998 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 13
Part II. Other Information
Item 1 Legal Proceedings 13
Item 5. Subsequent Events 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
STANDARD AUTOMOTIVE CORPORATION
Consolidated Balance Sheets
(in thousands, except share data )
<TABLE>
<CAPTION>
March 31, September 30,
1999 1999
-------- --------
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,686 $ 5,464
Marketable Securities 102 102
Accounts receivable, net of allowance for doubtful accounts
of $112 and $124, respectively 7,032 15,754
Other receivables 551 5
Inventory, net 13,466 19,115
Prepaid expenses 980 545
Deferred taxes 768 768
-------- --------
Total current assets 26,585 41,753
Property and equipment, net of accumulated depreciation and
amortization of $917 and $2,350 respectively 19,975 25,760
Intangible assets, net of accumulated amortization of
$1,173 and $1,771, respectively 29,000 31,470
Excess of purchase price over net assets acquired -- 23,079
Deferred acquisition and financing costs 1,477 2,472
Other assets 415 532
-------- --------
Total assets $ 77,452 $125,066
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 9,941 $ 16,863
Accrued expenses 1,760 3,100
Current portion of long term debt 3,438 4,000
Income taxes payable 171 211
Other current liabilities 1,845 5,810
-------- --------
Total current liabilities 17,155 29,984
Long term debt 29,381 59,218
-------- --------
Total liabilities 46,536 89,202
Commitments and contingencies
Stockholders' equity:
Convertible Redeemable Preferred stock, $ .001 par value
3,000,000 shares authorized, 1,132,600 issued and outstanding 1 1
Common stock, $ .001 par value 10,000,000 shares authorized,
3,500,124 and 3,697,524 issued and outstanding, respectively 4 4
Additional paid-in capital 28,443 31,108
Retained earnings 2,468 4,751
-------- --------
Total stockholders' equity 30,916 35,864
-------- --------
Total liabilities and stockholders' equity $ 77,452 $125,066
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Consolidated Statements of Income
For the Three and Six Months Ended September 30,
(in thousands, except net income per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------- -------------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues, net $17,245 $44,820 $25,125 $79,864
Operating costs and expenses:
Cost of revenues 14,003 36,947 20,156 65,223
Selling, general and administrative expenses 1,195 3,716 1,923 6,789
Amortization of intangible assests 255 384 445 710
------- ------- ------- -------
Total operating costs and expenses 15,453 41,047 22,524 72,722
------- ------- ------- -------
Operating income 1,792 3,773 2,601 7,142
Interest expense 363 1,399 449 2,082
Other expense, net 162 45 218 86
------- ------- ------- -------
Income before income taxes 1,267 2,329 1,934 4,974
Provision for income taxes 586 1,003 913 2,109
------- ------- ------- -------
Net income 681 1,326 1,021 2,865
Preferred dividend 294 289 587 582
------- ------- ------- -------
Net income available to common stockholders $ 387 $ 1,037 $ 434 $ 2,283
======= ======= ======= =======
Basic net income per share $ 0.12 $ 0.28 $ 0.14 $ 0.63
======= ======= ======= =======
Diluted net income per share $ 0.12 $ 0.26 $ 0.14 $ 0.58
======= ======= ======= =======
Basic weighted average number of shares outstanding 3,330 3,690 3,213 3,610
Diluted weighted average number of shares outstanding 3,330 5,043 3,213 4,956
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
Standard Automotive Corporation
Consolidated Statements of Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Preferred Common Additional Total
Shares Preferred Shares Common Paid In Retained Stockholders'
Outstanding Stock Outstanding Stock Capital Earnings Equity
----------- --------- ----------- ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - March 31, 1999 1,150 $ 1 3,500 $ 4 $ 28,443 $ 2,468 $ 30,916
Shares Issued for
Acquisition -- -- 180 -- 2,565 -- 2,565
Options Issued -- -- -- -- 100 -- 100
Preferred Stock
Dividend -- -- -- -- -- (582) (582)
Conversion of
Preferred Stock to
Common Stock (17) 17 --
Net Income -- -- -- -- -- 2,865 2,865
-------- --- -------- --- -------- -------- --------
Balance - September 30, 1999 1,133 $ 1 3,697 $ 4 $ 31,108 $ 4,751 $ 35,864
======== === ======== === ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Consolidated Statements of Cash Flows
For the Six Months Ended September 30,
(in thousands)
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,021 $ 2,865
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 713 2,227
Non-cash interest and compensation 175 120
Deferred taxes (68) --
Change in assets and liabilites: --
Accounts receivable 2,451 (6,263)
Inventory (2,189) (4,202)
Prepaid expenses and other (79) 872
Accounts payable and accrued expenses 2,898 10,352
Income taxes payable (662) 40
-------- --------
Net cash (used in) provided by operating activities 4,260 6,011
-------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (30,683) (25,530)
Deferred acquisition costs 366 --
Acquisition of property and equipment (2,657) (2,301)
-------- --------
Net cash used in investing activities (32,974) (27,831)
-------- --------
Cash flows from financing activities:
Proceeds from bank loan 33,168 26,800
Repayment bank loan (968) (1,625)
Deferred financing costs (1,631) (995)
Preferred dividend payment (587) (582)
Cash acquired from acquisitions 2,294 --
Repayment of Ajax shareholder note (4,000) --
Payment of registration cost (78) --
-------- --------
Net cash (used in) provided by financing activities 28,198 23,598
-------- --------
Net Increase (decrease) in cash and cash equivalents (516) 1,778
Cash and cash equivalents, beginning of period 3,357 3,686
-------- --------
Cash and cash equivalents, end of period $ 2,841 $ 5,464
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 543 $ 2,109
Income taxes 1,462 2,194
Noncash investing and financing activities:
Capital stock and debt issued for acquisition of
businesses and assets 4,144 7,865
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
General
The financial statements for the six months ended September 30, 1999 are
unaudited; however, in the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair presentation of the
financial statements for the interim period have been made. The notes to the
financial statements have been prepared consistent with the Form 10-K filed for
the fiscal year ended March 31, 1999 and should be read in conjunction with
those financials.
1. Organizational and Business Combination
Standard Automotive Corporation (the "Company") is a Delaware corporation
that commenced operations in January, 1998. Standard currently operates two
divisions: (i) the Truck/Trailer Body Division, which designs, manufactures and
distributes trailer chassis for use primarily in the transport of shipping
containers and a broad line of specialized dump truck bodies, dump trailers,
truck suspensions and other related assemblies, and (ii) the Critical Components
Division, which specializes in the fabrication of large precision assemblies for
the aerospace, nuclear, industrial and military markets. Standard's
Truck/Trailer Division operates through its wholly-owned subsidiaries Ajax
Manufacturing Company ("Ajax"), R/S Truck Body Co. ("R/S") and CPS Trailer Co.
("CPS"), and its Critical Components Division, which operates through its
wholly-owned subsidiary, Ranor, Inc. ("Ranor").
2. Inventory
Inventory is comprised of the following:
March 31, 1999 September 30, 1999
-------------- ------------------
Raw materials $ 9,557,000 $13,967,000
Work in progress 979,000 3,057,000
Finished goods 2,930,000 2,091,000
----------- -----------
$13,466,000 $19,115,000
=========== ===========
3. Long Term Debt and Credit Agreements
In July 1998, the Company and certain of its subsidiaries (acting as
Guarantors) entered into with PNC Bank, National Association ("PNC"), both
individually and as agent for other financial institutions a $40,000,000 Term
Loan and Revolving Credit Agreement ("Credit Agreement"). The Credit Agreement
provided for a Term Loan in the amount of $25,000,000 and a Revolving Loan in
the principal amount of $15,000,000. In June 1999, the Company obtained an
increase in its existing credit facility arrangement from $40,000,000 to
$68,125,000 through PNC and PNC Capital Markets to consummate the acquisition of
Ranor. 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 "Loans"). 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.
Interest on the amounts outstanding under the Loans is payable monthly and
accrues at a variable rate based upon LIBOR or the Base Rate of PNC, plus a
percentage which adjusts from time to time based upon the ratio of the Company's
indebtedness to EBITDA, as such terms are defined in the Credit Agreement. As of
September 30, 1999 the rate of interest for the Loans is 8.38%. All amounts
outstanding under the Credit Agreement are secured by a lien on substantially
all of the Company's assets.
As of September 30, 1999 the total amount outstanding under the Credit
Agreement was $57,800,000.
As part of the acquisition of Ranor in June 1999 the seller's were issued
$5,300,000 of three year, 6% interest only, convertible subordinated notes.
7
<PAGE>
4. Segment Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which supersedes SFAS No. 14, Financial Reporting for Segments of
A Business Enterprise, establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments as components of a company
about which separate financial information is available that is evaluated
regularly by management in deciding how to allocate resources and in assessing
performance.
Below are the selected financial segment data for the six months ended September
30, 1999 and 1998. (in thousands)
Critical
Trailer/Truck Components
September 30, 1999 Division Division Consolidated
------------------ -------- -------- ------------
Revenue $ 73,311 $ 6,553 $ 79,864
Operating Income 6,239 903 7,142
Identifiable Assets 91,291 33,775 125,066
Capital Expenditures 1,469 832 2,301
September 30, 1998
------------------
Revenue $ 25,125 -- 25,125
Operating Income 2,601 -- 2,601
Identifiable Assets 69,860 -- 69,860
Capital Expenditures 2,657 -- 2,657
With the acquisition of Ranor, the Company has organized its operation into two
divisions.
5. Related Party Transactions
None for the three months ended September 30, 1999.
8
<PAGE>
6. Basic and Diluted Earnings per Share
The following table sets forth, for the periods indicated, the calculation of
basic and diluted net income per share:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
(in thousands) September 30, September 30,
-------------------------- ------------------------
1998 1999 1998 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NUMERATOR:
Income from continuing operations: $ 681 $1,326 $1,021 $2,865
Less: Preferred dividends 294 289 587 582
------ ------ ------ ------
Income available to common stockholders
Used in basic net income per share $ 387 $1,037 $ 434 $2,283
DENOMINATOR :
Weighted average number of
common shares outstanding 3,330 3,690 3,213 3,610
Impact of potential common shares:
Stock options, warrents, and
convertable preferred -- 1,353 -- 1,346
------ ------ ------ ------
Weighted average number of
common shares and potential common
stock used in dilutive net income per share 3,330 5,043 3,213 4,956
====== ====== ====== ======
Basic net income per share $ 0.12 $ 0.28 $ 0.14 $ 0.63
====== ====== ====== ======
Diluted net income per share $ 0.12 $ 0.26 $ 0.14 $ 0.58
====== ====== ====== ======
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis should be read together with the
consolidated financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and with the Company's Annual Report on Form 10-K.
Overview
Since the acquisition of Ranor in June 1999, the Company is organized into
two separate operating divisions, the Trailer/Truck Division and the Critical
Components Division. These two divisions operate separately, and have distinct
management and reporting requirements.
The Trailer/Truck Division manufactures trailer chassis, dump truck bodies
and specialty trailers through its wholly-owned subsidiaries:
o Ajax is engaged in the manufacture of trailer chassis and the
re-manufacture of existing chassis. Ajax was acquired in January 1998.
Ajax operates in New Jersey and Sonora Mexico. The Mexican facility
commenced production in April 1999.
o R/S is engaged in the design, manufacture and sale of customized dump
trucks and trailers, specialized truck suspension systems and related
products and parts. R/S also acts as a distributor for truck equipment
manufactured by other companies, including cranes, tarpaulins, spreaders,
plows and specialized service bodies. R/S was acquired in July 1998.
o CPS is primarily engaged in the design, manufacture and sale of dump
trailers, specializing in trailers for hauling bulk commodities such as
gravel, grain and corn, and for the construction and waste hauling
industries. CPS was acquired in September 1998. CPS continues to expand
its product line.
The Critical Components Division operates through its wholly-owned
subsidiary:
o Ranor is primarily engaged in the metal fabrication and machining of
large precision components and assemblies for the aerospace, nuclear,
industrial and military industries. Ranor was acquired in June 1999.
Results of Operations
The following table sets forth, for the periods indicated, certain
components of the Company's Consolidated Statements of Income expressed in
dollar amounts and as a percentage of net revenues. The three and six months
ended September 30, 1998 reflect the consolidated amounts of Standard and Ajax,
with R/S and CPS from their respective date of acquisition. The three and six
months ended September 30, 1999 reflect the consolidated amounts of Standard,
Ajax, R/S, CPS for the entire period, and Ranor from the date of acquisition.
10
<PAGE>
<TABLE>
<CAPTION>
(in thousands) For the Three Months Ended September 30, For the Six Months Ended September 30,
------------------------------------------ ------------------------------------------
1998 1999 1998 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net $17,245 100.0% $44,820 100.0% $25,125 100.0% $79,864 100.0%
Cost of revenues 14,003 81.2 36,947 82.4 20,156 80.2 65,223 81.7
Selling, general and
administrative 1,195 6.9 3,716 8.3 1,923 7.6 6,789 8.5
Amortization of intangiable
assets 255 1.5 384 0.9 445 1.8 710 0.9
------- ------ ------- ------ ------- ------ ------- ------
Operating income 1,792 10.4 3,773 8.4 2,601 10.4 7,142 8.9
Other expense 525 3.0 1,444 3.2 667 2.7 2,168 2.7
------- ------ ------- ------ ------- ------ ------- ------
Income before provision
for taxes 1,267 7.3 2,329 5.2 1,934 7.7 4,974 6.2
Provision for income taxes 586 3.4 1,003 2.2 913 3.6 2,109 2.6
------- ------ ------- ------ ------- ------ ------- ------
Net income $ 681 $ 3.9% $ 1,326 $ 3.0% $ 1,021 $ 4.1% $ 2,865 $ 3.6%
======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
Comparison of Six Months Ended September 30, 1999 to September 30, 1998
The following discussion provides information regarding the Company's results of
operations for the six months ended September 30, 1999 and September 30, 1998.
Net Revenues for the six months ended September 30, 1999 were $79,864,000,
an increase of 218% from net revenues of $25,125,000 for the comparable period
in 1998. The increase in revenues reflect sales from the Company's recently
established 64,000 sq. foot chassis manufacturing facility located in Sonora,
Mexico, which commenced production in April 1999. A general improvement in the
trailer industry, and the acquisitions of R/S, CPS and Ranor also contributed to
the increase. The acquisitions contributed revenue representing 22%, 15% and 8%,
respectively, of net revenues, while the Mexican facility contributed 21%.
Cost of Revenues increased to $65,223,000 or 81.7% of net revenues for the
six months ended September 30, 1999 from $20,156,000 or 80.2% of net revenues
for the comparable period in 1998. The increase was principally due to the
acquisitions of R/S, CPS, Ranor and the start up of the chassis manufacturing
facility in Mexico. In addition, Ajax experienced a shift in its product mix to
predominately new chassis for the six months ended September 30, 1999 compared
to a mixture of new and remanufactured chassis for the six months ended
September 30, 1998. Ajax experienced production start up delays at its Mexico
plant, which also contributed to a higher cost of revenue.
Selling, General & Administrative Expenses were $6,789,000 for the six
months ended September 30, 1999 an increase of $4,866,000 from $1,923,000
incurred for the comparable period in 1998. SG&A expenses, as a percentage of
net revenue, increased to 8.5%, up from 7.6% during the six months ended
September 30, 1998. The increase in the dollar amount of SG&A for the six months
ended September 30, 1999 principally reflects $3,765,000 arising from the
acquisitions of R/S, CPS, Ranor and the start up of the Mexico plant. Additional
expenses related to an increase in selling efforts, upgrading information
technology systems and general corporate overhead also contributed to the
increase.
Interest Expense increased to $2,082,000 for the six months ended
September 30, 1999 from $449,000 for the six months ended September 30, 1998,
reflecting debt incurred to complete the acquisitions of R/S, CPS and Ranor and
the start up of the plant in Mexico.
11
<PAGE>
Comparison of Three Months Ended September 30, 1999 to September 30, 1998
The following discussion provides information regarding the Company's results of
operations for the three months ended September 30, 1999 and September 30, 1998.
Net Revenues for the three months ended September 30, 1999 were
$44,820,000, an increase of 160% from net revenues of $17,245,000 for the three
months ended September 30,1998. The increase in revenues reflects sales from the
Company's recently established chassis manufacturing plant in Sonora, Mexico, a
general improvement in the trailer industry, along with the acquisitions of R/S,
CPS and Ranor. These acquisitions contributed revenue representing 17%, 13% and
12%, respectively, of net revenues, while the facility in Mexico contributed
30%.
Cost of Revenues increased to $36,947,000 or 82.4% of net revenues during
the three months ended September 30, 1999 from $14,003,000 or 81.2% of net
revenues for the comparable period in 1998. The increase was due to the
acquisitions of R/S, CPS and Ranor, and the start up of the plant in Mexico. The
Company also experienced initial production start up delays at its plant in
Mexico that contributed to a higher cost of revenue.
Selling, General & Administrative Expenses were $3,716,000 during the
three months ended September 30, 1999 an increase of $2,521,000 from $1,195,000
incurred for the comparable period in 1998. SG&A expenses, as a percentage of
net revenue, increased to 8.3%, up from 6.9% during the three months ended
September 30, 1998. The increase in the dollar amount of SG&A during the three
months ended September 30, 1999 principally reflects $1,856,000 arising from the
acquisition of the R/S, CPS, Ranor and the start up of the plant in Mexico.
Additional expenses related to an increase in selling efforts, upgrading
information technology systems and general corporate overhead also contributed
to the increase.
Interest Expense increased to $1,399,000 during the three months ended
September 30, 1999 from $363,000 for the comparable period in 1998, reflecting
debt incurred to complete the acquisitions of R/S, CPS and Ranor and the start
up of the plant in Mexico.
Liquidity and Capital Resources
The Company generated $6,011,000 of cash in operating activities during
the six months ended September 1999 which was a 41% increase as compared to
$4,260,000 generated for the comparable period in 1998. The net cash generated
in operating activities during the six months ended September 1999 is primarily
due to the increase in net income for the period. The net cash used in investing
activities was $27,831,000 during the six months ended September 1999 as
compared to $32,974,000 for the comparable period in 1998. The cash used in
investing activities during the six months ended September 1999 was primarily
for the acquisition of Ranor. Additional cash was used for the acquisition of
other property plant and equipment.
Cash provided by financing activities was predominately from the increase
in the Company's credit facility, which was used for the acquisition of Ranor.
The Credit Agreement, as amended, provides for a Term Loan in the amount
of $48,125,000 and a Revolving Loan in the principal amount of $20,000,000
(collectively, the "Loans"). 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 June 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. All amounts due under the Credit Agreement are secured by a
lien on substantially all the Company's assets. As of September 30, 1999 the
rate of interest for the amounts outstanding under the Credit Agreement is
8.38%. The Company made scheduled quarterly principal payments of $1,000,000 in
September 1999 and $625,000 in June of 1999.
Capital expenditures were $2,301,000 for the six months ended September
1999 compared to $2,657,000 for the same period in 1998. Capital expenditures
incurred during the six months ended September 1999 were primarily for the
purchase of new machinery for expanding the production capacity at Ranor and for
equipment purchased for the recently established chassis manufacturing plant in
Mexico. The Company also expanded its new computer network systems and
refurbished the corporate administration facility in Hillsborough, New Jersey.
The Company anticipates that capital expenditures during the fiscal year ending
March 31, 2000 will not substantially exceed those of the preceding years.
The annual dividend requirement on the Company's Preferred Stock is
$1,155,252. The future earnings of the Company, if any, may not be adequate to
pay the dividends on the Preferred Stock, and, although the Company intends to
pay quarterly dividends out of available capital surplus, there can be no
assurance that the Company will maintain sufficient capital surplus or that
future earnings, if any, will be adequate to pay the dividends on the Preferred
Stock. In addition, at September 30, 1999, the Company had $63,218,000 in total
debt outstanding, primarily consisting of $57,800,000 in loans payable to PNC,
$5,300,000 of three year, 6%, convertible subordinated notes to the sellers of
Ranor and the balance to various other small creditors.
12
<PAGE>
The Company continues to seek opportunities for growth through
acquisitions, and, in connection therewith, may seek to raise additional cash in
the form of equity, bank debt or other debt financing, or may seek to issue
stock or other financial instruments as consideration to acquisition targets.
At September 30, 1999, the Company had working capital of $11,769,000,
which is sufficient to meet its current operating requirements, and, if
necessary, such needs could be met out of the remaining cash available from the
Revolving Loan facility.
Year 2000 Compliance
The Company continues to address the impact of the Year 2000 issue on its
business. The Year 2000 issue is the result of computer hardware and software
programs designed to use two digits rather than four digits to define the
applicable year. If not corrected, certain computer applications may fail or
create erroneous results at the year 2000.
The Company reviewed its computer systems which could be adversely
affected by the Year 2000 issue, and believes its existing hardware and software
is Year 2000 compliant.
Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Exchange Act which represent the
Company's expectations or belief concerning future events that involve risks and
uncertainties, including the demand for our products, the costs of supplies and
raw materials. All statements other than statements of historical facts included
in this Quarterly Report on Form 10-Q including, without limitation, the
statements under "Management Discussion and Analysis of Results of Operations
and Financial Condition" and elsewhere in the Quarterly Report on Form 10-Q, are
forward-looking statements. While the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For a description of the Company's market risks, see "Item 7A -
Management's Discussion and Analysis of Financial Condition and Results of
Operation - Quantitative and Qualitative Disclosures about Market Risk" in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999.
PART II. Other Information
Item 1. Legal Proceedings
The Company is subject to various legal proceedings and claims arising in
the ordinary course of business. The Company's management does not expect that
the results of these legal proceedings will have a material adverse effect on
the Company's financial condition, results of operations or cash flows.
Item 5. Subsequent Events
On October 1, 1999 the Company entered into an agreement with the former
owners of CPS, which, among other things, provided a $475,000 final payment as a
purchase price adjustment under the Amended and Restated Stock Purchase
Agreement and Plan of Merger dated January 30, 1998 and a $250,000 payment
covering an expanded 36-month non-compete and confidentiality agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as part of this Quarterly Report on Form
10-Q
Exhibit no. Description
----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K dated June 16, 1999 was filed with respect to the Company's
financial statements for the quarter ended June 31, 1999 giving effect to
the acquisition of Ranor through its wholly owned subsidiary Critical
Components Corp.
13
<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
By: /s/ Steven Merker Date: November 9, 1999
-------------------------------------
Steven Merker
Chairman and Chief Executive Officer
Pursuant to requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Date
- ---------- ----
/s/ Steven Merker November 9, 1999
- ----------------------------------------
Steven Merker
Chairman and Chief Executive Officer
/s/ Joseph Spinella November 9, 1999
- ----------------------------------------
Joseph Spinella
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Statement of Income found on pages 3 & 4 of the
Company's Form 10-Q for the quarter ending September 30, 1999 and is qualified
in its entirety by reference to such consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 5,464
<SECURITIES> 102
<RECEIVABLES> 15,883
<ALLOWANCES> 124
<INVENTORY> 19,115
<CURRENT-ASSETS> 41,753
<PP&E> 28,110
<DEPRECIATION> 2,350
<TOTAL-ASSETS> 125,066
<CURRENT-LIABILITIES> 29,984
<BONDS> 63,218
0
1
<COMMON> 4
<OTHER-SE> 35,859
<TOTAL-LIABILITY-AND-EQUITY> 125,066
<SALES> 44,820
<TOTAL-REVENUES> 44,820
<CGS> 36,947
<TOTAL-COSTS> 41,047
<OTHER-EXPENSES> 45
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,399
<INCOME-PRETAX> 2,329
<INCOME-TAX> 1,003
<INCOME-CONTINUING> 1,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,326
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.26
</TABLE>
