<PAGE> 1
FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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 333-45823
STANADYNE AUTOMOTIVE CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2940378
(State or other jurisdiction of (I.R.S. Employer I.D.)
incorporation or organization)
92 Deerfield Road, Windsor, Connecticut 06095-4209
(Address of principal executive offices) (zip code)
(860) 525-0821
(Registrant's telephone number, including area code)
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 number of Common Shares of the Company, $0.01 per share par value,
outstanding as of July 31, 2000 was 1,000.
<PAGE> 2
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999.. 3
Condensed Consolidated Statements of Operations for the three months ended June 30, 2000 and
1999 (unaudited)............................................................................. 4
Condensed Consolidated Statements of Operations for the six months ended June 30, 2000 and
1999 (unaudited)............................................................................. 5
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2000 and 1999 (unaudited).............................................. 6
Notes to Condensed Consolidated Financial Statements (unaudited)............................. 7-17
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................... 18-22
Item 3 Quantitative and Qualitative Disclosures About Market Risk.................................. 23
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K............................................................ 24
Signature............................................................................................... 25
</TABLE>
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<PAGE> 3
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,899 $ 4,057
Accounts receivable, net of allowance for uncollectible
accounts of $704 at June 30, 2000 and $610 at December 31, 1999 42,808 40,296
Inventories 36,600 36,582
Prepaid expenses and other current assets 1,215 1,451
Deferred income taxes 7,609 8,360
--------- ---------
Total current assets 93,131 90,746
Property, plant and equipment, net 114,093 119,611
Intangible and other assets, net 86,769 91,687
Due from Stanadyne Automotive Holding Corp. 4,061 4,061
--------- ---------
Total assets $ 298,054 $ 306,105
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,588 $ 22,354
Accrued liabilities 30,676 27,788
Current maturities of long-term debt 5,906 5,198
Current installments of capital lease obligations 621 819
--------- ---------
Total current liabilities 59,791 56,159
Long-term debt, excluding current maturities 118,644 135,671
Deferred income taxes 4,993 5,747
Capital lease obligations, excluding current installments 234 592
Other noncurrent liabilities 46,173 46,255
--------- ---------
Total liabilities 229,835 244,424
--------- ---------
Commitments and contingencies -- --
Stockholders' equity:
Common stock -- --
Additional paid-in capital 59,858 59,858
Other accumulated comprehensive loss (4,034) (2,384)
Retained earnings 12,395 4,207
--------- ---------
Total stockholders' equity 68,219 61,681
--------- ---------
Total liabilities and stockholders' equity $ 298,054 $ 306,105
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
- 3 -
<PAGE> 4
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 Months 3 Months
Ended Ended
June 30, June 30,
2000 1999
------- -------
<S> <C> <C>
Net sales $82,918 $72,364
Cost of goods sold 62,277 58,078
------- -------
Gross profit 20,641 14,286
Selling, general and administrative expenses 9,291 7,342
Amortization of intangibles 1,435 1,479
Management fees 275 275
------- -------
Operating income 9,640 5,190
Interest, net 2,909 3,522
------- -------
Income before income taxes 6,731 1,668
Income tax expense 2,949 1,193
------- -------
Net income $ 3,782 $ 475
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
- 4 -
<PAGE> 5
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
6 Months 6 Months
Ended Ended
June 30, June 30,
2000 1999
--------- ---------
<S> <C> <C>
Net sales $ 163,646 $ 138,511
Cost of goods sold 124,403 113,536
--------- ---------
Gross profit 39,243 24,975
Selling, general and administrative expenses 17,278 14,543
Amortization of intangibles 2,886 2,947
Management fees 550 550
--------- ---------
Operating income 18,529 6,935
Interest, net 6,055 7,115
--------- ---------
Income (loss) before income taxes and
extraordinary item 12,474 (180)
Income tax expense 5,237 318
--------- ---------
Income (loss) before extraordinary item 7,237 (498)
Extraordinary gain related to early retirement of
debt, net of tax expense of $634 951 --
--------- ---------
Net income (loss) $ 8,188 $ (498)
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
- 5 -
<PAGE> 6
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
6 Months 6 Months
Ended Ended
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,188 $ (498)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 10,720 10,299
Extraordinary gain, net of applicable income taxes (951) --
Deferred income taxes 30 (1,562)
Loss on disposal of property, plant and equipment 140 31
Changes in operating assets and liabilities 233 3,216
-------- --------
Net cash provided by operating activities 18,360 11,486
-------- --------
Cash flows from investing activities:
Capital expenditures (3,478) (6,076)
Proceeds from disposal of property, plant and equipment 15 56
-------- --------
Net cash used in investing activities (3,463) (6,020)
-------- --------
Cash flows from financing activities:
Net (payments) borrowings on revolving credit facility (695) 249
Principal payments on long-term debt (12,920) (3,645)
Payments of capital lease obligations (479) (697)
-------- --------
Net cash used in financing activities (14,094) (4,093)
-------- --------
Cash and cash equivalents:
Net increase in cash and cash equivalents 803 1,373
Effect of exchange rate changes on cash 39 9
Cash and cash equivalents at beginning of period 4,057 5,132
-------- --------
Cash and cash equivalents at end of period $ 4,899 $ 6,514
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
- 6 -
<PAGE> 7
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
(1) SIGNIFICANT ACCOUNTING POLICIES
Description of Business. Stanadyne Automotive Corp. (the "Company") is a
wholly-owned subsidiary of Stanadyne Automotive Holding Corp. ("Holdings"). A
majority of the outstanding equity of Holdings is owned by American Industrial
Partners Capital Fund II, L.P. ("AIP").
Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and all of the Company's wholly-owned subsidiaries:
Precision Engine Products Corp., Stanadyne Automotive SpA ("SpA"), Precision
Engine Products LTDA ("PEPL") and Stanadyne Automotive Foreign Sales Corp.
("FSC"). Intercompany balances have been eliminated in consolidation.
Basis of Presentation. The balance sheet as of December 31, 1999 is condensed
financial information derived from the audited balance sheet. The interim
financial statements are unaudited. The results of the operations and cash flows
for the interim periods presented are not necessarily indicative of the results
for the full year. These statements have been prepared in accordance with
generally accepted accounting principles and, in the opinion of management,
reflect all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation for the periods presented. Certain amounts have been
reclassified in the 1999 financial statements to conform to the 2000
presentation.
(2) INVENTORIES
Components of inventory are as follows:
<TABLE>
<CAPTION>
As of As of
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials $ 2,198 $ 1,968
Work-in-process 25,402 24,891
Finished goods 9,000 9,723
------- -------
$36,600 $36,582
======= =======
</TABLE>
(3) INCOME TAXES
The Company's effective income tax rate before extraordinary gain was 42.0% for
the first six months of 2000. In 2000 the Company recorded $5.2 million of tax
expense on a pre-tax income of $12.5 million. In 1999 the Company recorded $0.3
million of tax expense on a pre-tax loss of $0.2 million because of the effect
of foreign income taxes on net losses in Italy. For both periods, the Company
received benefits from FSC. The Company applies the annual tax rate to the
quarterly earnings to provide consistent quarterly tax rates based on the
estimated effective tax rate for the year. To the extent there are differences
between components of planned and
- 7 -
<PAGE> 8
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
actual net income, the effective tax rate for the year could change and, in
turn, have an impact on future quarterly tax rates.
(4) LONG-TERM DEBT
The Company had $76.0 million and $90.0 million of Senior Subordinated Notes
("Notes") at an interest rate of 10.25% outstanding at June 30, 2000 and
December 31, 1999, respectively. The Notes are due on December 15, 2007. In the
first quarter of 2000, the Company retired $14.1 million in Notes at a
discounted price of $11.5 million. As a result of the early retirement of the
Notes, the Company realized a $1.0 million gain, net of income taxes and related
unamortized debt issuance costs. The transactions were recorded as an
extraordinary gain related to the early retirement of debt.
(5) CONTINGENCIES
The Company is involved in various legal and regulatory proceedings generally
incidental to its business. While the results of any litigation or regulatory
issue contain an element of uncertainty, management believes that the outcome of
any known, pending or threatened legal proceeding, or all of them combined, will
not have a material adverse effect on the Company's financial position or
results of operations.
The Company is subject to potential environmental liabilities as a result of
various claims and legal actions, which are pending or may be asserted against
the Company. Reserves for such liabilities have been established and no
insurance recoveries have been anticipated in the determination of the reserves.
In management's opinion, the aforementioned claims will be resolved without
material adverse effect on the results of operations, financial position or cash
flows of the Company. Also, in conjunction with the acquisition of the Company
from Metromedia on December 11, 1997, Metromedia agreed to partially indemnify
the Company and AIP for certain environmental matters. The effect of this
indemnification is to limit environmental exposure of known sites.
- 8 -
<PAGE> 9
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
(6) COMPREHENSIVE INCOME
The Company's comprehensive income (loss) for the three months ended June 30,
2000 and 1999 and the six months ended June 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $ 3,782 $ 475 $ 8,188 $ (498)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (632) (1,315) (1,650) (2,556)
------- ------- ------- -------
Comprehensive income (loss) $ 3,150 $ (840) $ 6,538 $(3,054)
======= ======= ======= =======
</TABLE>
(7) SEGMENTS
The Company has two reportable segments, the Diesel Systems Group (the "Diesel
Group") and the Precision Engine Products Corp. and its subsidiary ("Precision
Engine"). The Diesel Group manufactures diesel fuel injection equipment
including fuel pumps, injectors and filtration systems. This segment accounted
for approximately 84% and 80% of the Company's revenues for both the three
months ended June 30, 2000 and 1999 and for the six months ended June 30, 2000
and 1999, respectively. Precision Engine manufactures roller-rocker arms,
hydraulic valve lifters and lash adjusters for gasoline engines. Revenues for
Precision Engine accounted for approximately 16% and 20% of total revenues for
the three months ended June 30, 2000 and 1999 and for the six months ended June
30, 2000 and 1999, respectively. The Company considers the Diesel Group and
Precision Engine to be two distinct segments because the operating results of
each are compiled, reviewed and managed separately. In addition, the products
and services of each segment have an end use (diesel versus gasoline engines)
which entails different engineering and marketing efforts. There were no
inter-segment sales between the Diesel Group and Precision Engine for any of the
periods presented.
The following summarizes key information used by the Company in evaluating the
performance of each segment for the three months ended June 30, 2000 and 1999
and as of and for the six months ended June 30, 2000 and 1999:
- 9 -
<PAGE> 10
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 2000
----------------------------------------
DIESEL PRECISION
GROUP ENGINE ELIMINATIONS TOTALS
----- ------ ------------ ------
<S> <C> <C> <C> <C>
Net sales $69,781 $13,137 $ -- $82,918
Gross profit 18,262 2,379 -- 20,641
Deprecation and amortization
expense 4,441 912 -- 5,353
Operating income 8,795 845 -- 9,640
Net income 3,379 403 -- 3,782
Total capital expenditures 1,203 221 -- 1,424
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1999
----------------------------------------
DIESEL PRECISION
GROUP ENGINE ELIMINATIONS TOTALS
----- ------ ------------ ------
<S> <C> <C> <C> <C>
Net sales $ 57,765 $ 14,599 $ -- $ 72,364
Gross profit 11,128 3,158 -- 14,286
Depreciation and amortization
expense 4,339 805 -- 5,144
Operating income 3,200 1,990 -- 5,190
Net (loss) income (242) 717 -- 475
Total capital expenditures 3,188 359 -- 3,547
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2000
------------------------------------------------
DIESEL PRECISION
GROUP ENGINE ELIMINATIONS TOTALS
----- ------ ------------ ------
<S> <C> <C> <C> <C>
Net sales $137,171 $ 26,475 $ -- $163,646
Gross profit 34,698 4,545 -- 39,243
Deprecation and amortization
expense 8,898 1,822 -- 10,720
Operating income 14,568 3,961 -- 18,529
Net income 5,976 2,212 -- 8,188
Total assets 266,927 51,368 (20,241) 298,054
Total capital expenditures 3,164 314 -- 3,478
</TABLE>
- 10 -
<PAGE> 11
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------------------
DIESEL PRECISION
GROUP ENGINE ELIMINATIONS TOTALS
--------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Net sales $ 110,720 $ 27,791 $ -- $ 138,511
Gross profit 19,350 5,625 -- 24,975
Deprecation and amortization
expense 8,689 1,610 -- 10,299
Operating income 3,148 3,787 -- 6,935
Net (loss) income (1,904) 1,406 -- (498)
Total assets 278,198 52,851 (16,220) 314,829
Total capital expenditures 4,964 1,112 -- 6,076
</TABLE>
(8) SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS
The Notes issued December 11, 1997 by the Company are guaranteed jointly, fully,
severally and unconditionally by Precision Engine Products Corp. (the
"Subsidiary Guarantor") on a subordinated basis and are not guaranteed by FSC,
SpA and PEPL (the "Non-Guarantor Subsidiaries").
Supplemental combining condensed financial statements for Stanadyne Automotive
Corp. ("Parent"), the Subsidiary Guarantor and the Non-Guarantor Subsidiaries
are presented below. Separate complete financial statements of the Subsidiary
Guarantor are not presented because management has determined that they are not
material to investors.
- 11 -
<PAGE> 12
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
June 30, 2000
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,438 $ 13 $ 181 $ 267 $ 4,899
Accounts receivable, net 30,419 8,027 4,362 -- 42,808
Inventories 25,114 7,726 4,107 (347) 36,600
Other current assets 6,563 1,215 1,046 -- 8,824
--------- --------- --------- --------- ---------
Total current assets 66,534 16,981 9,696 (80) 93,131
Property, plant and equipment, net 80,388 20,214 13,491 -- 114,093
Intangible and other assets, net 59,771 13,355 13,964 (321) (a) 86,769
Investment in subsidiaries 41,695 (654) -- (41,041) (b) --
Due from Stanadyne Automotive Holding Corp. 4,061 -- -- -- 4,061
--------- --------- --------- --------- ---------
Total assets $ 252,449 $ 49,896 $ 37,151 $ (41,442) $ 298,054
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 41,010 $ 7,263 $ 4,992 $ (1) $ 53,264
Current maturities of long-term
debt and capital lease obligations 4,393 -- 2,134 -- 6,527
--------- --------- --------- --------- ---------
Total current liabilities 45,403 7,263 7,126 (1) 59,791
Long-term debt and capital lease obligations 118,644 -- 234 -- 118,878
Other noncurrent liabilities 34,335 11,689 5,463 (321) (a) 51,166
Intercompany accounts (18,342) 10,688 7,509 145 --
Stockholders' equity 72,409 20,256 16,819 (41,265) (b) 68,219
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 252,449 $ 49,896 $ 37,151 $ (41,442) $ 298,054
========= ========= ========= ========= =========
</TABLE>
(a) Reclassification of Non-Guarantor deferred tax asset to consolidate net
deferred tax liability.
(b) Elimination of investments in subsidiaries of the Parent.
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<PAGE> 13
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,760 $ 2 $ 184 $ 111 $ 4,057
Accounts receivable, net 28,068 8,213 4,112 (97) 40,296
Inventories 23,677 8,039 5,184 (318) 36,582
Other current assets 6,636 1,196 1,979 -- 9,811
--------- -------- ------- -------- --------
Total current assets 62,141 17,450 11,459 (304) 90,746
Property, plant and equipment, net 83,467 21,476 14,668 -- 119,611
Intangible and other assets, net 63,068 13,746 15,020 (147) (a) 91,687
Investment in subsidiaries 36,516 (311) -- (36,205) (b) --
Due from Stanadyne Automotive Holding Corp. 4,061 -- -- -- 4,061
--------- -------- ------- -------- --------
Total assets $ 249,253 $ 52,361 $41,147 $(36,656) $306,105
========= ======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 37,857 $ 6,511 $ 5,842 $ (68) $ 50,142
Current maturities of long-term
debt and capital lease obligations 3,007 -- 3,010 -- 6,017
--------- -------- ------- -------- --------
Total current liabilities 40,864 6,511 8,852 (68) 56,159
Long-term debt and capital lease obligations 135,671 -- 592 -- 136,263
Other noncurrent liabilities 34,096 12,224 5,829 (147)(a) 52,002
Intercompany accounts (25,498) 15,567 10,023 (92) --
Stockholders' equity 64,120 18,059 15,851 (36,349)(b) 61,681
--------- -------- ------- -------- --------
Total liabilities and stockholders' equity $ 249,253 $ 52,361 $41,147 $(36,656) $306,105
========= ======== ======= ======== ========
</TABLE>
(a) Reclassification of Non-Guarantor deferred tax asset to consolidate net
deferred tax liability.
(b) Elimination of investments in subsidiaries of the Parent.
- 13 -
<PAGE> 14
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $64,252 $ 13,137 $ 5,592 $(63)(a) $82,918
Cost of goods sold 46,851 10,742 4,746 (62)(a) 62,277
------- -------- ------- ---- -------
Gross profit 17,401 2,395 846 (1) 20,641
Selling, general, administrative and
other operating expenses 9,161 1,332 549 (41)(b) 11,001
Intercompany FSC commissions and reduction
of intercompany pushdown debt (c) 1,288 (9) (1,272) (7) --
------- -------- ------- ---- -------
Operating income 6,952 1,072 1,569 47 9,640
Interest, net 2,402 97 370 40(b) 2,909
------- -------- ------- ---- -------
Income before income taxes 4,550 975 1,199 7 6,731
Income tax expense 2,390 359 200 -- 2,949
------- -------- ------- ---- -------
Net income $ 2,160 $ 616 $ 999 $ 7 $ 3,782
======= ======== ======= ==== =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $ 51,719 $ 14,599 $ 6,150 $(104)(a) $72,364
Cost of goods sold 40,907 11,441 5,815 (85)(a) 58,078
-------- -------- ------- ----- -------
Gross profit 10,812 3,158 335 (19) 14,286
Selling, general, administrative and
other operating expenses 7,395 1,235 466 -- 9,096
Intercompany FSC commissions and reduction
of intercompany pushdown debt (c) 637 (94) (564) 21 --
-------- -------- ------- ----- -------
Operating income 2,780 2,017 433 (40) 5,190
Interest, net 2,813 315 412 (18) 3,522
-------- -------- ------- ----- -------
(Loss) income before income taxes (33) 1,702 21 (22) 1,668
Income tax (benefit) expense (189) 955 427 -- 1,193
-------- -------- ------- ----- -------
Net income (loss) $ 156 $ 747 $ (406) $ (22) $ 475
======== ======== ======= ===== =======
</TABLE>
(a) Elimination of intercompany sales and cost of sales from Stanadyne
Automotive, SpA to Parent.
(b) Elimination of intercompany lease activity between PEPC and PEPL.
(c) Reduction of intercompany pushdown debt previously established in purchase
accounting.
- 14 -
<PAGE> 15
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $126,199 $ 26,511 $ 11,147 $(211)(a) $163,646
Cost of goods sold 93,129 21,966 9,479 (171)(a) 124,403
-------- -------- -------- ----- --------
Gross profit 33,070 4,545 1,668 (40) 39,243
Selling, general, administrative and
other operating expenses 17,214 2,490 1,095 (85)(b) 20,714
Intercompany FSC commissions and reduction
of intercompany pushdown debt (c) 6,201 (2,238) (4,005) 42 --
-------- -------- -------- ----- --------
Operating income 9,655 4,293 4,578 3 18,529
Interest, net 4,976 233 762 84 (b) 6,055
-------- -------- -------- ----- --------
Income before income
taxes and extraordinary item 4,679 4,060 3,816 (81) 12,474
Income tax expense 2,525 1,520 1,192 -- 5,237
-------- -------- -------- ----- --------
Income before
extraordinary item 2,154 2,540 2,624 (81) 7,237
Extraordinary gain 951 -- -- -- 951
-------- -------- -------- ----- --------
Net income $ 3,105 $ 2,540 $ 2,624 $ (81) $ 8,188
======== ======== ======== ===== ========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $ 98,455 $ 27,791 $ 12,607 $(342)(a) $ 138,511
Cost of goods sold 79,275 22,166 12,391 (296)(a) 113,536
-------- -------- -------- ----- ---------
Gross profit 19,180 5,625 216 (46) 24,975
Selling, general, administrative and
other operating expenses 14,820 2,301 919 -- 18,040
Intercompany FSC commissions and reduction
of intercompany pushdown debt (c) 1,715 (490) (1,147) (78) --
-------- -------- -------- ----- ---------
Operating income 2,645 3,814 444 32 6,935
Interest, net 5,557 679 897 (18) 7,115
-------- -------- -------- ----- ---------
(Loss) income before income taxes (2,912) 3,135 (453) 50 (180)
Income tax (benefit) expense (1,584) 1,699 203 -- 318
-------- -------- -------- ----- ---------
Net (loss) income $ (1,328) $ 1,436 $ (656) $ 50 $ (498)
======== ======== ======== ===== =========
</TABLE>
(a) Elimination of intercompany sales and cost of sales from Stanadyne
Automotive, SpA to Parent.
(b) Elimination of intercompany lease activity between PEPC and PEPL.
(c) Reduction of intercompany pushdown debt previously established in purchase
accounting.
- 15 -
<PAGE> 16
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,105 $ 2,540 $ 2,624 $ (81) $ 8,188
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 8,218 1,808 694 -- 10,720
Extraordinary gain (951) -- -- -- (951)
Other adjustments 228 (570) 512 -- 170
Changes in operating assets and
liabilities 6,127 (3,599) (2,503) 208 233
-------- ------- ------- ----- --------
Net cash provided by
operating activities 16,727 179 1,327 127 18,360
-------- ------- ------- ----- --------
Cash flows from investing activities:
Capital expenditures (2,968) (168) (342) -- (3,478)
Proceeds from disposal of property,
plant and equipment 14 -- 1 -- 15
-------- ------- ------- ----- --------
Net cash used in
investing activities (2,954) (168) (341) -- (3,463)
-------- ------- ------- ----- --------
Cash flows from financing activities:
Net change in debt (13,094) -- (1,000) -- (14,094)
-------- ------- ------- ----- --------
Net cash used in
financing activities (13,094) -- (1,000) -- (14,094)
-------- ------- ------- ----- --------
Net increase (decrease) in cash and
cash equivalents 679 11 (14) 127 803
Effect of exchange rate changes on cash (1) -- 11 29 39
Cash and cash equivalents at
beginning of period 3,760 2 184 111 4,057
-------- ------- ------- ----- --------
Cash and cash equivalents at
end of period $ 4,438 $ 13 $ 181 $ 267 $ 4,899
======== ======= ======= ===== ========
</TABLE>
- 16 -
<PAGE> 17
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONCLUDED)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------------------------------------------------------------
Stanadyne Stanadyne
Automotive Corp. Subsidiary Non-Guarantor Automotive Corp.
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,328) $ 1,436 $ (656) $ 50 $ (498)
Adjustments to reconcile net (loss)
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,827 1,610 862 -- 10,299
Other adjustments (1,237) (215) (79) -- (1,531)
Changes in operating assets and
liabilities 8,615 (1,735) (3,517) (147) 3,216
-------- ------- ------- ------- --------
Net cash provided by (used in)
operating activities 13,877 1,096 (3,390) (97) 11,486
-------- ------- ------- ------- --------
Cash flows from investing activities:
Capital expenditures (4,620) (1,063) (393) -- (6,076)
Proceeds from disposal of property,
plant and equipment 56 -- -- -- 56
Investment in subsidiary (3,963) (29) -- 3,992 (a) --
-------- ------- ------- ------- --------
Net cash (used in) provided by
investing activities (8,527) (1,092) (393) 3,992 (6,020)
-------- ------- ------- ------- --------
Cash flows from financing activities:
Net change in debt (3,981) -- (112) -- (4,093)
Net change in equity -- -- 3,992 (3,992) (a) --
-------- ------- ------- ------- --------
Net cash (used in) provided by
financing activities (3,981) -- 3,880 (3,992) (4,093)
-------- ------- ------- ------- --------
Net increase (decrease) in cash and
cash equivalents 1,369 4 97 (97) 1,373
Effect of exchange rate changes on cash 42 -- (2) (31) 9
Cash and cash equivalents at
beginning of period 4,859 5 5 263 5,132
-------- ------- ------- ------- --------
Cash and cash equivalents at
end of period $ 6,270 $ 9 $ 100 $ 135 $ 6,514
======== ======= ======= ======= ========
</TABLE>
(a) Elimination of investment in SpA and PEPL.
- 17 -
<PAGE> 18
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(1) OVERVIEW
The Company is a leading designer and manufacturer of highly-engineered,
precision manufactured engine components. The Company's two reporting segments
are the Diesel Group, which manufactures diesel fuel injection equipment
including fuel pumps, injectors and filtration systems, and Precision Engine,
which manufactures roller-rocker arms, hydraulic valve lifters and lash
adjusters for gasoline engines. Detailed segment information can be found in
Note 7 of Notes to Condensed Consolidated Financial Statements.
Net sales in the second quarter of 2000 were 14.6% higher than the same period a
year ago and 18.1% higher through the first six months. All of the increase was
produced by the Diesel Group, where strong customer demand for fuel pumps and
filter products continued through the second quarter. Gross profits, already
benefiting from the higher sales volumes, were further enhanced through
productivity improvement programs completed during the second quarter of 2000 in
the Washington, North Carolina and Tallahassee, Florida facilities. Activity for
the Brazilian subsidiary, PEPL, was limited due to Tritec Motors, LTDA
postponement of the first production shipments from the original July, 2000
timeframe to the fourth quarter of 2000.
(2) BASIS OF PRESENTATION
The following table displays unaudited performance details for the periods
shown. Net sales, cost of goods sold, gross profit, selling, general and
administrative expense ("SG&A"), amortization of intangibles, management fees,
operating income and net income (loss) of the Company are presented in thousands
of dollars and as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
$ % $ % $ % $ %
------ ----- ------ ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................... 82,918 100.0 72,364 100.0 163,646 100.0 138,511 100.0
Cost of goods sold .......... 62,277 75.1 58,078 80.3 124,403 76.0 113,536 82.0
Gross profit ................ 20,641 24.9 14,286 19.7 39,243 24.0 24,975 18.0
SG&A ........................ 9,291 11.2 7,342 10.1 17,278 10.6 14,543 10.5
Amortization of intangibles . 1,435 1.7 1,479 2.0 2,886 1.8 2,947 2.1
Management fees ............. 275 0.3 275 0.4 550 0.3 550 0.4
Operating income ............ 9,640 11.6 5,190 7.2 18,529 11.3 6,935 5.0
Net income (loss) ........... 3,782 4.6 475 0.7 8,188 5.0 (498) (0.4)
</TABLE>
- 18 -
<PAGE> 19
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
COMPARISON OF RESULTS OF OPERATIONS:
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Net Sales. Net sales for the second quarter of 2000 totaled $82.9 million and
were 14.6% greater than the $72.4 million reported for the comparable period in
1999. This increase came from higher sales in the Diesel Group, up $12.0 million
or 20.8%, while Precision Engine sales decreased by $1.5 million or 10.0%.
Higher sales in Diesel Group were lead by increased demand for fuel pumps and
filter products, resulting in $11.8 million of additional second quarter
revenues. Approximately $5.7 million of this increase was due to additional
demand from General Motors for DS pumps and parts. While total sales of General
Motors DS pumps and parts for the three months ended June 30, 2000 were $13.6
million, the customer is proceeding with preparations for the discontinuance of
the 6.5l engine program which will result in lower DS product sales, possibly as
soon as later this year. The sales decline in Precision Engine was due to
reduced demand from Chrysler for roller-rocker arms and from Ford for roller
tappets, in both cases due to reduced vehicle sales.
Gross Profit. Gross profit for the second quarter of 2000 increased to $20.6
million from $14.3 million for the same period in 1999 and increased as a
percentage of net sales to 24.9% from 19.7%. All of the increase came from the
Diesel Group, where gross profits as a percentage of net sales improved to 26.2%
from 19.3%. In addition to the higher earnings on increased sales volumes in
Diesel Group, gross profits in the second quarter of 2000 reflect the full
benefits of the profitability improvement programs completed in 1999 and partial
benefits from a program completed during the quarter in the Washington, North
Carolina facility. Gross profits for Precision Engine were lower in 2000 at
18.1% of net sales for the second quarter, down from 21.6% in the second quarter
of 1999. Lower earnings on reduced sales volumes were partially offset by a
profitability improvement program completed during the quarter in the
Tallahassee, Florida facility.
SG&A. SG&A for the second quarter of 2000 increased to $9.3 million from $7.3
million for the comparable period in 1999, representing an increase of $2.0
million or 26.5%. The higher 2000 SG&A expense is partially traceable to $0.7
million associated with an unsuccessful union organizing effort by the UAW at
the Windsor, Connecticut facility. Additional SG&A expense in the second quarter
of 2000 was also driven by accrued bonuses based on higher earnings in Diesel
Group and $0.2 million of PEPL startup costs in Precision Engine.
Amortization of Intangibles. Amortization of intangible assets was $1.4 million
in both the second quarter of 2000 and 1999. Goodwill amortization in both
second quarters was $0.5 million.
Operating Income. Operating income for the second quarter of 2000 totaled $9.6
million versus $5.2 million in the second quarter of 1999, representing an
increase of $4.4 million or 85.7%. As
- 19 -
<PAGE> 20
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
a percentage of net sales, operating income increased to 11.6% from 7.2%. This
significant improvement was due to the higher gross profit reported in the
Diesel Group noted above, partially offset by higher SG&A expenses in both
segments.
Net Income. Net income in the second quarter of 2000 totaled $3.8 million versus
$0.5 million for the same period in 1999. Net income in 2000 versus 1999 was
driven by higher operating income and lower interest expense due to partial
retirement of the Notes, somewhat offset by higher income tax expense.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Net Sales. Net sales for the first six months of 2000 totaled $163.6 million and
were 18.1% greater than the $138.5 million reported for the same period in 1999.
Higher sales in Diesel Group, up $26.5 million or 23.9%, trace to increased
demand for fuel pumps and record-breaking sales of filter products. Sales of
fuel pump products increased $22.6 million, with $13.3 million derived from
General Motors DS pump and spare part shipments. While total sales of General
Motors DS pumps and parts for the six months ended June 30, 2000 were $27.5
million, the customer continues preparation for the discontinuance of the 6.5l
engine program which will result in lower DS product sales, possibly as soon as
later this year. Precision Engine sales for the first six months of 2000
decreased by $1.3 million or 4.7% versus the same period a year ago, due to
lower demand from both Chrysler and Ford, in both cases due to reduced vehicle
sales.
Gross Profit. Gross profit for the first six months of 2000 increased to $39.2
million from $25.0 million for the comparable period in 1999 and increased as a
percentage of net sales to 24.0% from 18.0%. Reflective of the strong customer
demand for fuel pumps and filter products, all of this increase came from the
Diesel Group, where gross profit as a percentage of net sales was 25.3% for the
first six months of 2000, up from 17.5% in the first six months of 1999. In
addition to the higher earnings on increased sales volumes in Diesel Group,
gross profit in the first six months of 2000 reflects the full benefits of the
profitability improvement programs completed during 1999 and partial benefit
from programs completed during the second quarter of 2000 in the Washington,
North Carolina and Tallahassee, Florida facilities. Gross profits for Precision
Engine were less in 2000, at 17.2% of net sales for the first six months, down
from 20.2% in the first six months of 1999 which included a $0.7 million savings
in a liability established in 1998.
SG&A. SG&A for the first six months of 2000 increased to $17.3 million from
$14.5 million for the comparable period in 1999, representing an increase of
$2.8 million or 18.8%. Most of this increase is traceable to accrued bonus
expenses based on higher earnings in Diesel Group, $0.4 million of PEPL startup
costs in Precision Engine and $0.7 million associated with an unsuccessful union
organizing effort by the UAW at the Windsor, Connecticut facility.
- 20 -
<PAGE> 21
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
Amortization of Intangibles. Amortization of intangible assets was $2.9 million
in the first six months of both 2000 and 1999. Goodwill amortization in both
first six month periods was $1.0 million.
Operating Income. Operating income for the first six months of 2000 totaled
$18.5 million as compared to $6.9 million in the first six months of 1999,
representing an increase of $11.6 million or 167.2%. As a percentage of net
sales, operating income increased to 11.3% from 5.0%. This significant
improvement was due to the higher gross profit reported in the Diesel Group
noted above, slightly offset by higher SG&A expenses in both segments.
Net Income. Net income in the first 6 months of 2000 totaled $8.2 million versus
a net loss of $0.5 million in the first six months of 1999. Net income in 2000
versus 1999 was driven by higher operating income and lower interest expense due
to partial retirement of the Notes, somewhat offset by higher income tax
expense. In addition, net income in the first six months of 2000 includes a $1.0
million extraordinary gain, net of taxes and unamortized debt issuance costs, on
the early retirement of $14.1 million of Notes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flows from operations
supplemented by a revolving credit facility of which $26.4 million was available
for borrowings as of June 30, 2000. The Company occasionally utilizes capital
leasing and, for its Italian subsidiary Stanadyne Automotive, SpA, maintains
overdraft facilities with local financial institutions.
Cash Flows From Operating Activities. Fueled by higher earnings in the Diesel
Group, cash flows from operations for the six months ended June 30, 2000 totaled
$18.4 million as compared to $11.5 million for the same period of 1999. Cash
flows from operations, other than changes in assets and liabilities, in 2000
totaled $18.1 million and were $9.9 million greater than the $8.3 million
reported in 1999. Despite the higher level of business in 2000, changes in
operating assets and liabilities this year still provided $0.2 million in
positive cash flow versus $3.2 million for the first six months of 1999.
Cash Flows From Investing Activities. The Company's capital expenditures for the
first six months of 2000 were $3.5 million compared to $6.1 million for the same
period of 1999. Capital expenditures for 2000 included amounts primarily for
cost reduction programs in the Diesel Group and general maintenance projects.
Expenditures in 1999 included $0.3 million in Precision Engine for the
completion of the vertical integration of the Chrysler roller-rocker product
line and $0.6 million for equipment in PEPL, cost reduction programs in the
Diesel Group and general maintenance projects to existing facilities.
- 21 -
<PAGE> 22
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
Cash Flows From Financing Activities. Cash flows from financing activities for
the six months ended June 30, 2000 resulted in a net reduction in cash of $14.1
million. Principal payments of long-term debt totaled $12.9 million, including
an $11.5 million retirement of Notes with a face value of $14.1 million. As of
June 30, 2000 there were no borrowings under the revolving credit facility.
Overdraft borrowings of Stanadyne Automotive, SpA decreased $0.7 million.
Scheduled payments of capital lease obligations totaled $0.5 million in the
first six months of 2000.
(3) NEW ACCOUNTING STANDARD
In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Gains or losses resulting
from changes in the values of those derivatives would be recognized immediately
or deferred depending on the use of the derivative and if the derivative is a
qualifying hedge. The Company plans to adopt SFAS No. 133 by January 1, 2001, as
required. The Company is currently assessing the impact of this statement on the
Company's consolidated financial statements.
(4) CAUTIONARY STATEMENT
This quarterly report contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, without limitation,
statements with respect to the financial condition, results of operations and
business of the Company and management's discussion and analysis of financial
condition and results of operations. All of these forward-looking statements are
based on estimates and assumptions made by the management of the Company which,
although believed to be reasonable, are inherently uncertain. Therefore, undue
reliance should not be placed upon such estimates and statements. No assurance
can be given that any such estimates will be realized, and it is likely that
actual results will differ materially from those contemplated by such
forward-looking statements. Factors that may cause such differences include: (1)
increased competition; (2) increased costs; (3) loss or retirement of key
members of management; (4) increases in the Company's cost of borrowing or
inability or unavailability of additional debt or equity capital; (5) adverse
state or federal legislation or regulation or adverse determinations in pending
litigation; and (6) changes in general economic conditions and/or in the markets
in which the Company competes. Many of such factors are beyond the control of
the Company and its management.
- 22 -
<PAGE> 23
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks which include changes in interest rates
and changes in foreign currency exchange rates as measured against the U.S.
dollar.
Interest Rate Risk. The carrying value of the Company's revolving credit lines
and term loans approximate fair value. The term loans are primarily LIBOR-based
borrowings and are re-priced approximately every month based on prevailing
market rates. A 10% change in the interest rate on the term loans would have
increased or decreased the first six months of 2000 interest expense by $0.2
million. The 10-1/4% Notes bear interest at a fixed rate and, therefore, are not
sensitive to interest rate fluctuation. The fair value of the Company's $76.0
million in Notes based on quoted market prices on June 30, 2000 was
approximately $62.7 million.
Foreign Currency Risk. The Company has subsidiaries in Italy and Brazil and
branch offices in France and England, and therefore is exposed to changes in
foreign currency exchange rates. Changes in exchange rates may positively or
negatively affect the Company's sales, gross margins, and retained earnings.
However, historically, these locations have contributed less than 15% of the
Company's net sales and retained earnings, with most of these sales attributable
to the Italian subsidiary. The Company also sells its products from the United
States to foreign customers for payment in foreign currencies as well as
dollars. Historically, foreign currency exchange gains and losses have been
immaterial. The Company does not hedge against foreign currency risk.
- 23 -
<PAGE> 24
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.15 Severance Benefits Agreement by and between Stanadyne
Automotive Corp. and Leon Janik dated as of May 25, 2000
27 Financial Data Schedule
b. No report on Form 8-K was filed during the quarter ended June 30,
2000.
- 24 -
<PAGE> 25
STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
SIGNATURE
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 thereunto duly authorized.
Stanadyne Automotive Corp.
--------------------------
(Registrant)
Date: August 14, 2000 /s/ Michael H. Boyer
--------------- -----------------------------
Michael H. Boyer
Vice President and
Chief Financial Officer
- 25 -
<PAGE> 26
EXHIBIT INDEX:
10.15 Severance Benefits Agreement by and between Stanadyne
Automotive Corp. and Leon Janik dated as of May 25, 2000
27 Financial Data Schedule
