<PAGE>
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 quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
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Commission File Number 0-21803
AFTERMARKET TECHNOLOGY CORP.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-4486486
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
900 Oakmont Lane - Suite 100, Westmont, IL 60559
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (630) 455-6000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
As of October 31, 1997, there were 19,575,274 shares of common stock of the
Registrant outstanding.
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AFTERMARKET TECHNOLOGY CORP.
FORM 10-Q
TABLE OF CONTENTS
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Page Number
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PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 1997
(unaudited) and December 31, 1996...............................3
Consolidated Statements of Income (unaudited) for the Three
and Nine Months Ended September 30, 1997 and 1996...............4
Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended September 30, 1997 and 1996...................5
Notes to Consolidated Financial Statements......................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................9
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K...............................15
SIGNATURES.................................................................16
EXHIBIT INDEX..............................................................17
EXHIBIT 11. - Statement Re Computation of Net Income Per Share.............18
Note: Items 1 - 5 of Part II are omitted because they are not applicable.
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AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,462,541 $ 46,498,249
Accounts receivable, net 52,030,326 38,779,538
Inventories 77,068,636 60,586,056
Prepaid and other assets 3,752,490 2,916,197
Deferred tax assets 2,382,238 2,272,000
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Total current assets 138,696,231 151,052,040
Equipment and leasehold improvements:
Machinery and equipment 18,121,379 12,907,232
Autos and trucks 2,318,429 2,012,450
Furniture and fixtures 2,738,430 1,552,660
Leasehold improvements 5,914,369 4,584,329
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29,092,607 21,056,671
Less accumulated depreciation and amortization (5,831,360) (3,574,276)
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23,261,247 17,482,395
Debt issuance costs, net 4,485,441 6,320,179
Cost in excess of net assets acquired, net 194,760,972 145,430,296
Other assets 526,451 461,714
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Total assets $361,730,342 $320,746,624
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 20,203,672 $ 25,225,797
Accrued payroll and related costs 6,543,631 4,429,339
Accrued interest payable 2,638,987 7,995,405
Other accrued expenses 5,102,988 3,371,562
Bank lines of credit 4,240,663 4,334,686
Income taxes payable 694,323 321,299
Contingent acquisition notes payable 1,398,148 --
Due to former stockholders 1,505,387 2,002,824
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Total current liabilities 42,327,799 47,680,912
12% Series B and D Senior Subordinated Notes 121,340,364 161,981,356
Contingent acquisition notes payable 8,901,043 --
Amount drawn on revolving credit facility 60,000,000 --
Deferred compensation 2,971,776 --
Deferred tax liabilities 6,661,363 5,252,000
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000
Issued and outstanding shares - none at
September 30, 1997 and December 31, 1996, respectively -- --
Common stock, $.01 par value:
Authorized shares - 30,000,000
Issued and outstanding shares - 17,225,274 and
16,980,794 at September 30, 1997 and
December 31, 1996, respectively 170,682 169,808
Additional paid-in capital 81,663,633 81,379,860
Retained earnings 37,621,494 24,239,467
Cumulative translation adjustment 72,188 43,221
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Total stockholders' equity 119,527,997 105,832,356
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Total liabilities and stockholders' equity $361,730,342 $320,746,624
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</TABLE>
SEE ACCOMPANYING NOTES.
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<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $88,391,340 $ 68,287,232 $256,489,896 $199,306,548
Cost of sales 54,518,688 42,289,029 157,678,910 122,457,605
----------- ------------ ------------ ------------
Gross profit 33,872,652 25,998,203 98,810,986 76,848,943
Selling, general and
administrative expense 18,740,746 13,525,604 54,477,198 38,651,311
Amortization of intangible assets 1,183,556 931,873 3,174,547 2,780,654
----------- ------------ ------------ ------------
Income from operations 13,948,350 11,540,726 41,159,241 35,416,978
Interest and other income 448,856 317,678 1,457,036 715,206
Interest expense 4,944,774 4,966,962 13,967,446 15,144,880
----------- ------------ ------------ ------------
Income before income taxes
and extraordinary item 9,452,432 6,891,442 28,648,831 20,987,304
Provision for income taxes 3,799,931 2,840,142 11,517,489 8,645,980
----------- ------------ ------------ ------------
Income before extraordinary item 5,652,501 4,051,300 17,131,342 12,341,324
Extraordinary item - net of income tax
benefit of $2,520,443 - Note 4 -- -- 3,749,315 --
----------- ------------ ------------ ------------
Net income 5,652,501 4,051,300 13,382,027 12,341,324
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Dividends accrued on preferred stock -- 605,677 -- 1,688,952
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Net income available to common
stockholders $ 5,652,501 $ 3,445,623 $13,382,027 $10,652,372
----------- ------------ ------------ ------------
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Per share of common stock:
Income before extraordinary item $ 0.29 $ 0.26 $ 0.89 $ 0.79
Extraordinary item, net of tax -- -- (0.20) --
----------- ------------ ------------ ------------
Net income per share $ 0.29 $ 0.26 $ 0.69 $ 0.79
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Shares used in calculation of
net income per share 19,410,801 15,721,742 19,327,613 15,644,433
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</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
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(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 13,382,027 $ 12,341,324
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary item 6,269,758 --
Depreciation and amortization 5,545,524 4,167,746
Amortization of debt issuance costs 671,258 625,132
Increase in allowance for
losses on accounts receivable 231,556 129,300
Loss on sale of equipment 5,698 28,634
Increase in contingent acquisition liabilities 202,580 --
Deferred income taxes 1,299,125 978,201
Changes in operating assets and liabilities:
Accounts receivable (8,931,263) (4,138,735)
Inventories (3,058,866) (9,179,984)
Prepaid and other assets (797,515) (849,761)
Accounts payable and accrued expenses (11,203,083) 3,287,866
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Net cash provided by operating activities 3,616,799 7,389,723
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INVESTING ACTIVITIES:
Purchases of equipment (6,690,257) (5,892,715)
Acquisition of companies, net of cash received (54,614,827) (4,106,970)
Proceeds from sale of fixed assets 40,053 48,232
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Net cash used in investing activities (61,265,031) (9,951,453)
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FINANCING ACTIVITIES:
Redemption of senior subordinated notes (40,000,000) --
Premium paid on redemption of senior notes (4,800,000) --
Borrowings (payments) on revolving credit facility, net 60,000,000 --
Borrowings (payments) on bank lines of credit, net (94,023) 2,113,408
Payment of debt issuance costs (778,100) --
Proceeds from exercise of stock options 284,647 --
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Net cash provided by financing activities 14,612,524 2,113,408
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Decrease in cash and cash equivalents (43,035,708) (448,322)
Cash and cash equivalents at beginning of period 46,498,249 8,755,691
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Cash and cash equivalents at end of period $ 3,462,541 $ 8,307,369
------------ ------------
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Cash paid during the period for:
Interest $ 18,546,312 $ 19,342,319
Income taxes $ 7,288,420 $ 8,438,414
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE>
AFTERMARKET TECHNOLOGY CORP
Notes to Consolidated Financial Statements
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Aftermarket
Technology Corp. (the "Company") as of September 30, 1997 and for the three
and nine months ended September 30, 1997 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
NOTE 2: INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
Raw materials.............. $32,393,992 $30,412,730
Work-in-process............ 2,124,620 1,166,275
Finished goods............. 42,550,024 29,007,051
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$77,068,636 $60,586,056
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Finished goods include purchased parts which are available for sale.
NOTE 3: ACQUISITIONS
The Company acquired Tranzparts, Inc. ("Tranzparts") for $4.0 million and
Diverco, Inc. ("Diverco") for $10.5 million on April 2, 1996 and October 1,
1996, respectively.
On January 31, 1997 the Company acquired Repco Industries, Inc. ("Repco") for
$11.8 million.
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<PAGE>
NOTE 3: ACQUISITIONS, CONTINUED
On July 31, 1997, the Company acquired substantially all of the assets of ATS
Remanufacturing ("ATS") and on August 15, 1997 the Company acquired all of the
outstanding capital stock of Trans Mart, Inc. ("Trans Mart"). Upon the
completion of these acquisitions, the Company made cash payments totaling $39.0
million (excluding related fees and expenses). In addition, the ATS acquisition
calls for subsequent payments due on each of the first eight anniversaries of
the closing date. Substantially all of these additional payments, which will
aggregate up to approximately $19.0 million (present value $13.3 million as of
September 30, 1997), are contingent upon the attainment of certain sales levels
by ATS. The initial cash payments for ATS and Trans Mart plus the present value
of the potential future payments relating to the ATS acquisition plus the fees
and expenses related to the two acquisitions exceed the fair value of the
acquired net assets of ATS and Trans Mart by an aggregate of $45.9 million.
These acquisitions have been accounted for as purchases. Accordingly, the
allocation of the cost of the acquired assets and liabilities has been made on
the basis of the estimated fair value. The cost in excess of net assets
acquired was capitalized and is being amortized on the straight line method over
forty years. The consolidated financial statements include the operating
results of each business from the date of acquisition. Pro forma information to
reflect the 1996 acquisitions of Tranzparts and Diverco and the 1997
acquisitions of Repco, ATS and Trans Mart have not been presented because the
effect of such acquisitions was not material to prior periods.
NOTE 4: EXTRAORDINARY ITEM
The extraordinary item consists largely of a pre-tax charge of $5.7 million
related to the early redemption of $40 million in principal amount of the
Company's 12% Senior Subordinated Notes due 2004 (including early redemption
premium payments totaling $4.8 million). The extraordinary item also includes a
pre-tax charge of $0.6 million related to the restructuring of the Company's
revolving credit facility. Both events occurred in February 1997.
NOTE 5: NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares of
common stock and common equivalent shares outstanding using the treasury
stock method. For the three and nine month periods ended September 30, 1996,
a pro forma calculation was used in the computation of the weighted average
number of shares outstanding. This calculation includes the estimated number
of shares of common stock issued in the Company's initial public offering
whose net proceeds were used to redeem the outstanding preferred stock
including accrued dividends, and the common and common equivalent shares
issued during the 12-month period prior to the filing of the Company's
initial public offering.
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<PAGE>
NOTE 5: NET INCOME PER SHARE, CONTINUED
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options and warrants will be excluded.
The impact is expected to result in an increase in primary net income per
share of $0.04 and $0.03 for the three months ended September 30, 1997 and
1996, respectively, and $0.10 for each the nine months ended September 30,
1997 and 1996. The impact of Statement 128 on the calculation of fully
diluted earnings per share for these periods is not expected to be material.
NOTE 6: PUBLIC OFFERING
On October 28, 1997, the Company completed the public offering of 3,650,000
shares of its common stock. Of the shares sold in the offering, 2,200,000
shares were sold by the Company and 1,450,000 shares were sold by certain
stockholders. The Company did not receive any proceeds from the sale of shares
by the selling stockholders. The $48.1 million of net proceeds to the Company
from the offering were used to repay a portion of the outstanding indebtedness
under the Company's revolving credit facility.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997
COMPARED TO THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1996.
Net income increased $1.6 million, or 40 percent, from $4.1 million for the
three months ended September 30, 1996 to $5.7 million for the three months
ended September 30, 1997. Net sales increased $20.1 million, or 29 percent,
from $68.3 million for the three months ended September 30, 1996 to
$88.4 million for the three months ended September 30, 1997, primarily due to
sales generated by the acquisitions of Diverco, Repco, ATS and Trans Mart
augmented by increased sales volumes to existing Original Equipment
Manufacturing ("OEM") customers. In general, costs and expenses also
increased; however, overall the Company was able to spread its overhead
expenses over a larger revenue base, which contributed to the comparatively
higher net income for the three month period.
On a per share basis, net income increased from $0.26 per share for the three
months ended September 30, 1996 to $0.29 per share for the three months ended
September 30, 1997. The number of shares used in the per share calculations
were 15.7 million for the three months ended September 30, 1996 and 19.4
million for the three months ended September 30, 1997. The increase in
shares resulted primarily from the Company's initial public offering in
December 1996.
NET SALES
Net sales increased $20.1 million, or 29 percent, from $68.3 million for the
three months ended September 30, 1996 to $88.4 million for the three months
ended September 30, 1997. Of this increase, $14.7 million was due to the
incremental net sales generated by the acquisitions of Diverco, Repco, ATS and
Trans Mart and $5.4 million was due to internal growth. Approximately
$4.2 million of the internal growth was generated from increased sales volumes
with existing OEM customers. The remaining internal growth was generated by
increased sales to the Independent Aftermarket.
Net sales to the Mopar Parts Division of Chrysler Corporation ("Chrysler")
represented 31.7 percent of total net sales for the three months ended
September 30, 1997, as compared to 35.7 percent for the three months ended
September 30, 1996.
GROSS PROFIT
Gross profit as a percentage of net sales remained relatively constant at
38.3 percent for the three months ended September 30, 1997 and 38.1 percent
for the three months ended September 30, 1996.
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<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") increased $5.2 million, or
39 percent, from $13.5 million for the three months ended September 30, 1996 to
$18.7 million for the three months ended September 30, 1997. As a percentage of
net sales, SG&A expenses increased from 19.8 percent to 21.2 percent between the
two periods. The increase in SG&A expenses was primarily due to the ongoing
incremental expenses of the Diverco, Repco, ATS and Trans Mart acquisitions,
certain enhancements to the Company's infrastructure (including additional
management and improved information systems), and additional selling and other
variable overhead costs associated with the higher sales volume (including
increased production capacity). The increase in SG&A as a percentage of net
sales was primarily attributable to: (i) the deferred compensation expense
described below, (ii) certain enhancements to the Company's infrastructure
(including additional management and improved information systems), (iii) the
acquisitions of Tranzparts and Repco in April 1996 and January 1997,
respectively, which generally have higher SG&A expenses as a percentage of net
sales than does the Company as a whole, and (iv) the additional ongoing expenses
associated with being a publicly held company.
Included in SG&A expenses is a non-cash charge of $0.5 million in the three
months ended September 30, 1997 for deferred compensation expense relating to
the difference between the exercise price and the intrinsic value for financial
statement presentation purposes of employee stock options granted in October
1996, prior to the Company's initial public offering. There was no
corresponding charge recognized in the three months ended September 30, 1996.
The Company expects to recognize additional compensation expense aggregating
approximately $1.3 million over the balance of the respective vesting periods of
the options, which generally range from three to five years from the date of
grant, subject to potential adjustments resulting from exercise or early
termination of the options.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased $0.3 million, or 27 percent, from
$0.9 million for the three months ended September 30, 1996 to $1.2 million for
the three months ended September 30, 1997. The increase resulted from the
additional intangible assets arising from the acquisitions of Diverco, Repco,
ATS and Trans Mart.
INCOME FROM OPERATIONS
Principally as a result of the factors described above, income from operations
increased $2.4 million, or 21 percent, from $11.5 million for the three months
ended September 30, 1996 to $13.9 million for the three months ended September
30, 1997.
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<PAGE>
INTEREST EXPENSE
Interest expense decreased from $5.0 million for the three months ended
September 30, 1996 to $4.9 million for the three months ended September 30,
1997. The lower interest resulted from the net effect of the early redemption
of $40 million of the Company's 12% Senior Subordinated Notes due 2004 (the
"Senior Subordinated Notes") in February 1997, partially offset by borrowings
under the Company's revolving credit facility. The revolving credit facility
carries a significantly lower effective interest rate than did the Senior
Subordinated Notes.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
COMPARED TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996.
Income before extraordinary item increased $4.8 million, or 39 percent, from
$12.3 million for the nine months ended September 30, 1996 to $17.1 million for
the nine months ended September 30, 1997. Net sales increased $57.2 million, or
29 percent, from $199.3 million for the nine months ended September 30, 1996 to
$256.5 million for the nine months ended September 30, 1997, primarily due to
sales generated by the acquisitions of Tranzparts, Diverco, Repco, ATS and Trans
Mart, augmented by increased sales volumes to existing OEM customers. In
general, costs and expenses also increased; however, overall the Company was
able to spread its overhead expenses over a larger revenue base, which
contributed to the comparatively higher income before extraordinary item for the
nine month period.
On a per share basis, income before extraordinary item increased from $0.79 per
share for the nine months ended September 30, 1996 to $0.89 per share for the
nine months ended September 30, 1997. As a result of the extraordinary item,
however, net income per share decreased from $0.79 to $0.69 between the two
periods. The number of shares used in the per share calculations were 15.6
million for the nine months ended September 30, 1996 and 19.3 million for the
nine months ended September 30, 1997. The increase in shares resulted primarily
from the Company's initial public offering in December 1996.
NET SALES
Net sales increased $57.2 million, or 29 percent, from $199.3 million for the
nine months ended September 30, 1996 to $256.5 million for the nine months ended
September 30, 1997. Of this increase, $30.6 million was due to the incremental
net sales generated by the companies acquired in 1996 and 1997 (Tranzparts,
Diverco, Repco, ATS and Trans Mart) and $26.6 million was due to internal
growth. Approximately $20.4 million of the internal growth was generated from
increased sales volumes with existing OEM customers. The remaining internal
growth was generated by increased sales to the Independent Aftermarket.
Net sales to Chrysler represented 33.8 percent of total net sales for the nine
months ended September 30, 1997, as compared to 36.5 percent for the nine months
ended September 30, 1996.
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<PAGE>
GROSS PROFIT
Gross profit as a percentage of net sales remained relatively constant at 38.5
percent for the nine months ended September 30, 1997 as compared to 38.6 percent
for the nine months ended September 30, 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's SG&A expenses increased $15.8 million, or 41 percent, from $38.7
million for the nine months ended September 30, 1996 to $54.5 million for the
nine months ended September 30, 1997. As a percentage of net sales, SG&A
increased from 19.4 percent to 21.2 percent between the two periods. The
increase in SG&A expenses was primarily due to the ongoing incremental expenses
of the Tranzparts, Diverco, Repco, ATS and Trans Mart acquisitions, certain
enhancements to the Company's infrastructure (including additional management
and improved information systems), and additional selling and other variable
overhead costs associated with the higher sales volume (including increased
production capacity). The increase in SG&A as a percentage of net sales was
primarily attributable to: (i) the deferred compensation expense described
below, (ii) certain enhancements to the Company's infrastructure (including
additional management and improved information systems), (iii) the acquisitions
of Tranzparts and Repco in April 1996 and January 1997, respectively, which
generally have higher SG&A expenses as a percentage of net sales than does the
Company as a whole, and (iv) the additional ongoing expenses associated with
being a publicly held company.
Included in SG&A expenses are non-cash charges totaling $1.5 million for the
first nine months of 1997 of deferred compensation expense relating to the
difference between the exercise price and the intrinsic value for financial
statement presentation purposes of employee stock options granted in October
1996, prior to the Company's initial public offering. There were no
corresponding charges recognized in the first nine months of 1996. The Company
expects to recognize additional compensation expense aggregating approximately
$1.3 million over the balance of the respective vesting periods of the options,
which generally range from three to five years from the date of grant, subject
to potential adjustments resulting from exercise or early termination of the
options.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased $0.4 million, or 14 percent, from
$2.8 million for the nine months ended September 30, 1996 to $3.2 million for
the nine months ended September 30, 1997. The increase resulted from the
additional intangible assets arising from the acquisitions of Tranzparts,
Diverco, Repco, ATS and Trans Mart.
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<PAGE>
INCOME FROM OPERATIONS
Principally as a result of the factors described above, income from operations
increased $5.7 million, or 16 percent, from $35.4 million for the nine months
ended September 30, 1996 to $41.1 million for the nine months ended September
30, 1997.
INTEREST EXPENSE
Interest expense decreased $1.2 million, or 8 percent, from $15.1 million for
the nine months ended September 30, 1996 to $13.9 million for the nine months
ended September 30, 1997. The lower interest resulted from the net effect of
the early redemption of $40 million of the Senior Subordinated Notes in February
1997, partially offset by borrowings under the Company's revolving credit
facility. The revolving credit facility carries a significantly lower effective
interest rate than did the Senior Subordinated Notes.
EXTRAORDINARY ITEM
An extraordinary item in the amount of $3.8 million ($6.3 million, net of
related income tax benefit of $2.5 million) was recorded in the nine months
ended September 30, 1997. This amount is comprised of: (I) a $5.7 million
charge resulting from the early redemption of $40 million of the Senior
Subordinated Notes in February 1997, which included the payment of a 12% early
redemption premium and the write-off of related debt issuance costs, and (II) a
$0.6 million charge for the write-off of previously capitalized debt issuance
costs in connection with the replacement of the Company's $30 million revolving
credit facility with a new $100 million facility in February 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had total cash and cash equivalents on hand of $3.5 million at
September 30, 1997, representing a decrease in net cash of $43.0 million from
December 31, 1996. Net cash provided by operating activities was $3.6 million
for the nine month period ended September 30, 1997. Net cash used in investing
activities was $61.3 million for the period, including $52.6 million for the
acquisitions of Repco, ATS and Trans Mart, and a scheduled payment of $2.0
million relating to the acquisition of Diverco. Capital expenditures of $6.7
million were primarily for purchases of remanufacturing equipment. Net cash
provided by financing activities was $14.6 million, including net borrowings of
$60.0 million under the revolving credit facility (primarily for the
acquisitions described above) offset in part by payments totaling $44.8 million
in connection with the redemption of $40 million of Senior Subordinated Notes.
On October 28, 1997, the Company completed the public offering of 3,650,000
shares of its common stock. Of the shares sold in the offering, 2,200,000
shares were sold by the Company and 1,450,000 shares were sold by certain
stockholders. The Company did not receive any proceeds from the sale of shares
by the selling stockholders. The $48.1 million of net proceeds to the Company
from the offering were used to repay a portion of the outstanding indebtedness
under the Company's revolving credit facility.
As of October 31, 1997, the Company had approximately $87.1 million available
under its $100 million revolving credit facility.
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<PAGE>
The Company believes that cash on hand, cash flow from operations and existing
borrowing capacity will be sufficient to fund its ongoing operations and its
budgeted capital expenditures. In pursuing acquisitions, the Company will
consider the effect any such acquisition costs may have on its liquidity. In
order to consummate such acquisitions, the Company may need to seek additional
capital through additional borrowings or equity financing.
The preceding paragraph contains forward-looking statements that involve risks
and uncertainties because such statements are based upon assumptions as to
future events that may not prove to be accurate. There can be no assurance that
actual results will not differ materially from those projected or implied by
such statements. The factors that could cause actual results to differ include,
but are not limited to, concentration of sales to Chrysler, the Company's
ability to achieve and manage growth, competition and other factors discussed
herein and in the Company's other filings with the Securities and Exchange
Commission.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," in June 1997. In addition to net income, comprehensive income includes
items recorded directly to stockholders' equity such as the income tax benefit
related to the exercise of certain stock options. This statement establishes
new standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. This
statement is effective for fiscal years beginning after December 15, 1997.
Adoption of this standard will only require additional financial statement
disclosure detailing the Company's comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes new standards
for reporting information about operating segments in interim and annual
financial statements. This statement is also effective for fiscal years
beginning after December 15, 1997. The Company will evaluate the impact, if
any, this statement will have on disclosures in the consolidated financial
statements.
-14-
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
Part II. Other Information
Items 1 - 5 are not applicable.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter.
-15-
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AFTERMARKET TECHNOLOGY CORP.
Date: November 7, 1997 /s/ John C. Kent
------------------------------------------------
John C. Kent
Chief Financial Officer
- John C. Kent is signing in the dual capacities as i) the principal financial
officer, and ii) a duly authorized officer of the company.
-16-
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
EXHIBIT INDEX
EXHIBIT PAPER (P) OR
NUMBER DESCRIPTION ELECTRONIC (E)
11 Statement Re Computation (E)
of Net Income Per Share
27 Financial Data Schedule (E)
-17-
<PAGE>
EXHIBIT 11
AFTERMARKET TECHNOLOGY CORP.
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996 (a)
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Income before extraordinary item $ 5,652,501 $ 4,051,300 $ 17,131,342 $ 12,341,324
Extraordinary item - net of income tax
benefit of $2,520,443 - - 3,749,315 -
-------------- -------------- --------------- ---------------
Net income per statements of income $ 5,652,501 $ 4,051,300 $ 13,382,027 $ 12,341,324
-------------- -------------- --------------- ---------------
-------------- -------------- --------------- ---------------
Shares:
Weighted average common shares outstanding 17,126,925 12,000,000 17,035,928 12,000,000
Net effect of stock options granted during
the twelve months prior to the Company's
filing of its initial public offering,
calculated using the treasury stock method
at an offering price of $13.50 per share
(pro forma) - 523,772 - 523,772
Net effect of stock options and warrants
outstanding, excluding those discussed
above, calculated using the treasury stock
method at the average price for the period 2,283,876 1,226,252 2,291,685 1,194,482
Number of shares of common stock assumed
to be issued in the Company's initial public
offering whose net proceeds would be used
to redeem the outstanding preferred stock
including accrued dividends (pro forma) - 1,971,718 - 1,926,179
-------------- -------------- --------------- ---------------
Total 19,410,801 15,721,742 19,327,613 15,644,433
-------------- -------------- --------------- ---------------
-------------- -------------- --------------- ---------------
Per share of common stock:
Income before extraordinary item $ 0.29 $ 0.26 $ 0.89 $ 0.79
Extraordinary item, net of tax - - (0.20) -
-------------- -------------- --------------- ---------------
Net income per share $ 0.29 $ 0.26 $ 0.69 $ 0.79
-------------- -------------- --------------- ---------------
-------------- -------------- --------------- ---------------
</TABLE>
(a) The September 30, 1996 share data includes the pro forma effects of the
Company's initial public offering.
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,462,541
<SECURITIES> 0
<RECEIVABLES> 53,588,358
<ALLOWANCES> 1,558,032
<INVENTORY> 77,068,636
<CURRENT-ASSETS> 138,696,231
<PP&E> 29,092,607
<DEPRECIATION> 5,831,360
<TOTAL-ASSETS> 361,730,342
<CURRENT-LIABILITIES> 42,327,799
<BONDS> 121,340,364
0
0
<COMMON> 170,682
<OTHER-SE> 119,357,315
<TOTAL-LIABILITY-AND-EQUITY> 361,730,342
<SALES> 256,489,896
<TOTAL-REVENUES> 257,946,932
<CGS> 157,678,910
<TOTAL-COSTS> 214,461,494
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 869,161
<INTEREST-EXPENSE> 13,967,446
<INCOME-PRETAX> 28,648,831
<INCOME-TAX> 11,517,489
<INCOME-CONTINUING> 17,131,342
<DISCONTINUED> 0
<EXTRAORDINARY> 3,749,315
<CHANGES> 0
<NET-INCOME> 13,382,027
<EPS-PRIMARY> .69
<EPS-DILUTED> 0
</TABLE>
