-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ulmq2jTYVbKHjSVuq2uRe42oWyrGf7/Tl2fLWyl3+dF1VhRPzcyJF8/wj4eCMHxY IZ+CpRoBCwkq2602wduceA== 0000912057-96-017809.txt : 19960816 0000912057-96-017809.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017809 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFTERMARKET TECHNOLOGY CORP CENTRAL INDEX KEY: 0000933405 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 954486486 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-86838 FILM NUMBER: 96613412 BUSINESS ADDRESS: STREET 1: 33309 1ST WAY SOUTH STREET 2: STE A 206 CITY: FEDERAL WAY STATE: WA ZIP: 98003 BUSINESS PHONE: 2068380346 MAIL ADDRESS: STREET 1: 33309 FIRST WAY S STREET 2: SUITE A 206 CITY: FEDERAL WAY STATE: WA ZIP: 98003 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1996 Commission File Number 33-86838-01 AFTERMARKET TECHNOLOGY CORP. (Exact Name of Registrant as Specified in its Charter) DELAWARE 95-4486486 (State of other jurisdiction of (IRS Employer Identification No.) incorporation or organization) Registrant's telephone number, including area code: (206) 838-0346 NO CHANGE Former name, former address and former fiscal year, if changed since last report 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 shares outstanding of each of the issuer's classes of common stock, as of June 30, 1996. Common Stock 1,000 Shares - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AFTERMARKET TECHNOLOGY CORP. FORM 10-Q TABLE OF CONTENTS Page Number ----------- PART I Financial Information Item 1 Financial Statements: Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 .................... 3 Consolidated Statements of Income (unaudited) for the Three and Six Months Ended June 30, 1996 and 1995 ........................................ 4 Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 1996 and 1995 .......... 5 Notes to Consolidated Financial Statements ........... 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations .................. 8 PART II Other Information Item 6. Exhibits and Reports on Form 8-K ..................... 13 Signatures ........................................... 14 Note: Items 1 - 5 of Part II are omitted because they are not applicable. -2- AFTERMARKET TECHNOLOGY CORP. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1996 1995 ------------ ------------ (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 9,905,284 $ 8,749,805 Accounts receivable, net 36,084,458 32,965,874 Inventories 50,577,197 43,064,712 Prepaid and other assets 2,475,438 2,032,671 Deferred tax assets 2,618,490 2,267,000 ------------- ------------- Total current assets 101,660,867 89,080,062 Equipment and leasehold improvements: Machinery and equipment 9,453,753 7,187,840 Autos and trucks 1,703,540 1,503,760 Furniture and fixtures 1,128,105 858,070 Leasehold improvements 3,694,378 2,860,711 ------------- ------------- 15,979,776 12,410,381 Less accumulated depreciation and amortization (2,428,761) (1,625,917) ------------- ------------- 13,551,015 10,784,464 Debt issuance costs, net 6,747,468 7,162,690 Cost in excess of net assets acquired, net 141,154,081 140,652,620 Other assets 392,286 245,897 ------------- ------------- Total assets $ 263,505,717 $ 247,925,733 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Accounts payable $ 18,431,989 $ 12,851,575 Accrued payroll and related costs 3,038,677 2,094,237 Accrued interest payable 8,164,383 8,097,647 Other accrued expenses 3,220,759 3,170,162 Bank lines of credit 2,188,851 811,067 Income taxes payable 453,968 1,912,116 Due to related parties 100,000 100,000 Due to former stockholders 36,734 36,734 ------------- ------------- Total current liabilities 35,635,361 29,073,538 Series B and D Senior Subordinated Notes 162,113,559 162,245,762 Deferred tax liabilities 4,336,207 3,478,000 Stockholder's equity: Common stock, $.01 par value; 5,000,000 shares authorized; 1,000 shares issued and outstanding 10 10 Additional paid-in capital 39,999,990 39,999,990 Retained earnings 21,393,380 13,103,433 Cumulative translation adjustment 27,210 25,000 ------------- ------------- 61,420,590 53,128,433 ------------- ------------- Total liabilities and stockholder's equity $ 263,505,717 $ 247,925,733 ------------- ------------- ------------- -------------
See accompanying notes. -3- AFTERMARKET TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Net sales $ 66,872,798 $ 45,094,197 $ 131,019,316 $ 85,731,868 Cost of sales (41,809,554) (27,027,798) (80,168,576) (51,997,748) ------------- ------------- ------------- ------------- Gross profit 25,063,244 18,066,399 50,850,740 33,734,120 Selling, general and administration expense (12,663,140) (9,115,350) (25,125,707) (17,149,056) Amortization of intangible assets (933,126) (774,618) (1,848,781) (1,494,760) ------------- ------------- ------------- ------------- Income from operations 11,466,978 8,176,431 23,876,252 15,090,304 Interest and other income 175,371 287,490 397,451 486,446 Interest expense (5,113,743) (4,192,038) (10,177,918) (7,958,602) ------------- ------------- ------------- ------------- Income before income taxes 6,528,606 4,271,883 14,095,785 7,618,148 Provision for income taxes (2,637,422) (1,347,632) (5,805,838) (2,740,632) ------------- ------------- ------------- ------------- Net income $ 3,891,184 $ 2,924,251 $ 8,289,947 $ 4,877,516 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
See accompanying notes. -4- AFTERMARKET TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1996 1995 ------------ ------------ OPERATING ACTIVITIES: Net Income $ 8,289,947 $ 4,877,516 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,738,773 2,050,847 Amortization of debt issuance costs 415,222 310,312 Increase in allowance for losses on accounts receivable 127,080 385,861 Loss on sale of equipment 27,206 - Increase in net deferred tax liabilities 484,717 1,095,541 Changes in operating assets and liabilities: Accounts receivable (2,315,982) (1,750,184) Inventories (6,451,298) (4,701,089) Prepaid and other assets (570,628) (1,318,421) Accounts payable and accrued expenses 4,650,798 2,268,989 ------------ ------------ Net cash provided by operating activities 7,395,835 3,219,372 INVESTING ACTIVITIES: Purchases of equipment (3,540,856) (1,950,783) Acquisition of companies, net of cash acquired (4,106,970) (30,903,737) Proceeds from sale of fixed assets 29,686 1,861 ------------ ------------ Net cash used in investing activities (7,618,140) (32,852,659) FINANCING ACTIVITIES: Issuance of senior subordinated notes - 42,400,000 Borrowings (payments) on revolving bank lines, net 1,377,784 (1,325,567) Payment of debt issuance costs - (1,788,481) Payments on amounts due former stockholders - (4,083,834) ------------ ------------ Net cash provided by financing activities 1,377,784 35,202,118 ------------ ------------ Increase in cash and cash equivalents 1,155,479 5,568,831 Cash and cash equivalents at beginning of period 8,749,805 9,421,577 ------------ ------------ Cash and cash equivalents at end of period $ 9,905,284 $ 14,990,408 ------------ ------------ ------------ ------------ Cash paid during the period for: Interest $ 9,675,975 $ 7,233,720 Income taxes $ 6,305,846 $ 1,823,627
See accompanying notes. -5- 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 June 30, 1996 and for the three and six months ended June 30, 1996 and 1995 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. 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 six month period ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. NOTE 2: INVENTORIES Inventories are stated at the lower of cost (first in, first out method) or market: June 30, 1996 December 31, 1995 ------------- ----------------- Raw materials........................$ 25,764,590 $ 19,015,530 Work-in-process...................... 1,086,027 1,394,479 Finished goods....................... 23,726,580 22,654,703 ---------- ---------- $ 50,577,197 $ 43,064,712 ------------ ------------ ------------ ------------ The increase in raw materials is primarily a result of inventory build-ups required to meet increased production levels of remanufactured transmissions and engines associated with additional product applications, new and expanded production facilities, and seasonal demand fluctuations. NOTE 3: ACQUISITIONS The Company acquired Component Remanufacturing Specialists, Inc. ("CRS"), Mascot Truck Parts Inc. ("Mascot") and King-O-Matic Industries Ltd. ("King-O-Matic") on June 1, June 9, and September 12 of 1995, respectively, for a total purchase price of approximately $42.8 million. The Company issued $40 million of principal amount of -6- 12% Senior Subordinated Notes due 2004 concurrent with the acquisition of CRS, the proceeds of which financed the acquisitions. In addition, on April 2, 1996, the Company acquired Tranzparts, Inc. ("Tranzparts") for approximately $4.1 million in cash. The acquisitions have been accounted for as purchases. Accordingly, the allocation of the cost of the acquired assets and liabilities has been made on the basis of the estimated fair value. The consolidated financial statements include the operating results of each business from the date of acquisition. The following pro forma information gives effect to the 1995 acquisitions and the acquisition of Tranzparts as if such acquisitions occurred on January 1, 1995. The pro forma information includes adjustments for interest expense that would have been incurred to finance the acquisitions, additional depreciation based on the fair market values of the property, plant and equipment acquired, and amortization of intangibles arising from the transactions. The pro forma information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on January 1, 1995. Three Months Ended June 30, Six Months Ended June 30, -------------------------- ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- (in thousands) (in thousands) Net sales......$ 66,873 $ 54,581 $ 133,058 $ 107,351 Net income.....$ 3,893 $ 2,618 $ 8,365 $ 5,100 -7- AFTERMARKET TECHNOLOGY CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTH PERIOD ENDED JUNE 30, 1995. Net Sales Total net sales increased $21.8 million or 48.3%, from $45.1 million for the three month period ended June 30, 1995 to $66.9 million for the three month period ended June 30, 1996. Of this increase, $10.0 million was due to internal growth and $11.8 million was due to the incremental net sales generated by the companies acquired in 1995 and 1996, including CRS, Mascot, King-O-Matic and Tranzparts, which were acquired on June 1, June 9, and September 12 of 1995, and April 2, 1996, respectively. The internal growth was generated primarily from increased sales volumes with existing Original Equipment Manufacturer ("OEM") customers, the incremental sales from five new distribution centers opened during the second half of 1995, increased sales through existing distribution centers and increased sales volumes with existing retail customers. Net sales to the Mopar Parts Division of Chrysler Corporation ("Chrysler") for the three month period ended June 30, 1996 represented 36.8% of the Company's total net sales for the period as compared with 36.1% for the three month period ended June 30, 1995. Gross Profit Gross profit as a percentage of net sales decreased from 40.1% for the three month period ended June 30, 1995 to 37.5% for the three month period ended June 30, 1996. The decrease in margin was related primarily to the start-up activities of the Company's new plant in Joplin, Missouri and the expansion of capacity at the Company's plant in Springfield, Missouri needed to support future sales growth to retail and OEM customers. To a lesser degree, gross profit was also adversely impacted by certain non-recurring unfavorable cost variances relating to the reorganization of the Company's largest independent aftermarket production facility in Rancho Cucamonga, California. Selling, General and Administrative Expenses As a result of an increase in revenues, selling, general and administrative expenses ("SG&A") decreased as a percentage of net sales from 20.2% for the three month period ended June 30, 1995 to 18.9% for the three month period ended June 30, 1996. However, SG&A increased in absolute dollars from $9.1 million for the three month period ended June 30, 1995 to $12.7 million for the three month period ended June 30, 1996, representing an increase of $3.6 million or 39.6%. The increase in SG&A was due largely -8- to the ongoing incremental SG&A expenses of CRS, Mascot, King-O-Matic and Tranzparts. Other significant factors contributing to the increase in SG&A include the ongoing incremental expenses associated with the five new distribution centers opened during the second half of 1995, and certain initial start-up expenses incurred in connection with the Company's new plant in Joplin, Missouri and its new rebuild kit packaging and distribution facility in Memphis, Tennessee. Amortization of Intangible Assets Amortization of intangible assets increased $0.2 million for the three month period ended June 30, 1996 as compared to the three month period ended June 30, 1995 reflecting the increase in intangible assets that occurred as a result of the acquisitions of CRS, Mascot, King-O-Matic and Tranzparts. Income from Operations Principally as a result of the factors described above, income from operations increased from $8.2 million for the three month period ended June 30, 1995 to $11.5 million for the three month period ended June 30, 1996. Interest Expense Interest expense increased $0.9 million from $4.2 million for the three month period ended June 30, 1995 to $5.1 million for the three month period ended June 30, 1996. The increase in interest expense was due to the interest on the Series D Senior Subordinated Notes (the "Series D Notes") which were used to finance the acquisitions of CRS, Mascot and King-O-Matic, and the related amortization of debt issuance costs. The Series D Notes were issued on June 1, 1995 and therefore were only outstanding for one month during the three months ended June 30, 1995. RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO THE SIX MONTH PERIOD ENDED JUNE 30, 1995. Net Sales Total net sales increased $45.3 million or 52.9%, from $85.7 million for the six month period ended June 30, 1995 to $131.0 million for the six month period ended June 30, 1996. Of this increase, $21.2 million was due to internal growth and $24.1 million was due to the incremental net sales generated by the companies acquired in 1995 and 1996, including CRS, Mascot, King-O-Matic and Tranzparts which were acquired on June 1, June 9, September 12 of 1995, and April 2, 1996, respectively. The internal growth was generated primarily from increased sales volumes with existing OEM customers, the incremental sales from five new distribution centers opened during the second half of 1995, increased sales volumes through existing distribution centers and increased sales volumes with existing retail customers. -9- Net sales to Chrysler for the six month period ended June 30, 1996 represented 36.9% of the Company's total net sales for the period as compared with 38.4% for the six month period ended June 30, 1995. Gross Profit Gross profit as a percentage of net sales decreased from 39.3% for the six month period ended June 30, 1995 to 38.8% for the six month period ended June 30, 1996. The decrease in margin was related primarily to the start-up activities of the Company's new plant in Joplin, Missouri and the expansion of capacity at the Company's plant in Springfield, Missouri needed to support future sales growth to retail and OEM customers. To a lesser degree, gross profit was also adversely impacted by certain unfavorable cost variances relating to the relocation and reorganization of its largest independent aftermarket production facility from Azusa, California to Rancho Cucamonga, California. Selling, General and Administrative Expenses As a result of an increase in revenues, SG&A decreased as a percentage of net sales from 20.0% for the six month period ended June 30, 1995 to 19.2% for the six month period ended June 30, 1996. However, SG&A increased in absolute dollars from $17.1 million for the six month period ended June 30, 1995 to $25.1 million for the six month period ended June 30, 1996, representing an increase of $8.0 million or 46.8%. The increase in SG&A was due largely to the ongoing incremental SG&A expenses of CRS, Mascot, King-O-Matic and Tranzparts. Other significant factors contributing to the increase in SG&A include the ongoing incremental expenses associated with the five new distribution centers opened during the second half of 1995, and certain initial start-up expenses incurred in connection with the Company's new plant in Joplin, Missouri and its new rebuild kit packaging and distribution facility in Memphis, Tennessee. Amortization of Intangible Assets Amortization of intangible assets increased $0.3 million for the six month period ended June 30, 1996 as compared to the six month period ended June 30, 1995 reflecting the increase in intangible assets that occurred as a result of the acquisitions of CRS, Mascot, King-O-Matic and Tranzparts. Income from Operations Principally as a result of the factors described above, income from operations increased from $15.1 million for the six month period ended June 30, 1995 to $23.9 million for the six month period ended June 30, 1996. -10- Interest Expense Interest expense increased $2.2 million from $8.0 million for the six month period ended June 30, 1995 to $10.2 million for the six month period ended June 30, 1996. The increase in interest expense was due to the interest on the Series D Notes which were used to finance the acquisitions of CRS, Mascot and King-O-Matic, and the related amortization of debt issuance costs. The Series D Notes were issued on June 1, 1995 and therefore were only outstanding for one month during the six month period ended June 30, 1995. LIQUIDITY AND CAPITAL RESOURCES The Company had total cash and cash equivalents on hand of $9.9 million at June 30, 1996, representing an increase in net cash of $1.2 million for the six months then ended. Net cash provided by operating activities was $7.4 million for the six months ended June 30, 1996. Net cash used in investing activities was $7.6 million for the six months ended June 30, 1996, including $4.1 million for the acquisition of Tranzparts and $3.5 million in capital expenditures largely for transmission and engine remanufacturing equipment and other improvements related to the Company's new plant in Joplin, Missouri. Net cash provided by financing activities was $1.4 million, representing net borrowings on bank lines of credit. As of June 30, 1996, the Company had approximately $26.3 million available under its $30.0 million revolving credit facility. The Company has budgeted a total of $9.8 million for capital expenditures for all of 1996, including $5.2 million for the purchase of additional transmission and engine remanufacturing equipment to provide an increase in production capacity. 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 described in the preceding paragraph. In pursuing future acquisitions, the Company expects to have to consider the effect any such acquisition costs may have on its liquidity. In order to consummate such acquisitions, the Company may accordingly need to seek to raise additional capital through additional borrowings or equity financings. The information in this paragraph is forward-looking and involves risks and uncertainties that could significantly impact the Company's expected liquidity requirements in the short and long term. While it is impossible to itemize the many factors and specific events that could affect the Company's outlook for its liquidity requirements, such factors would include the possible reduction in deliveries to one or more significant customers for any reason and the possible effect of assimilating acquisitions into the Company's existing operations and the expansion of those operations. PLANNED OFFERING On June 24, 1996, the Company filed a Form S-1 Registration Statement with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as -11- amended, to register the sale by the Company of shares of its Common Stock (the "Offering"). Completion of the Offering is subject to a number of factors, including SEC approval of the Registration Statement and negotiation and execution of an Underwriting Agreement between the Company and the several underwriters who will participate in the Offering. Simultaneous with the consummation of the Offering, the Company will be merged with Aftermarket Technology Holdings Corporation ("Holdings"), the sole stockholder of the Company. Upon the effectiveness of such merger, the outstanding shares of Holdings Common Stock will be converted into shares of the Company's Common Stock, and the outstanding shares of Holdings Preferred Stock will be converted into the right to receive cash equal to its stated value plus accrued and unpaid dividends to the effective date of the reorganization (the "Preferred Stock Reorganization Consideration"). The total stated value of the Holdings Preferred Stock is $20.0 million and the accrued and unpaid dividends at June 30, 1996 totaled approximately $4.0 million. The net proceeds from the Offering will be used by the Company to redeem $40 million in aggregate principal amount of its Series B and D Senior Subordinated Notes (the "Senior Notes") at a redemption price of 112% plus accrued interest thereon, and to pay the aggregate Preferred Stock Reorganization Consideration. Any remaining net proceeds will be used by the Company for general corporate purposes. If the net proceeds from the Offering are not sufficient to fund the intended redemption of the Senior Notes and payment of the aggregate Preferred Stock Redemption Consideration, the Company expects that the balance of the Preferred Stock Redemption Consideration would be paid from cash on hand. No assurance can be given that the Company will successfully complete the Offering. -12- AFTERMARKET TECHNOLOGY CORP. Part II. Other Information Items 1 - 5 are not applicable. Item 6 Exhibits and Reports on Form 8-K No exhibits or reports were filed on Form 8-K during the quarter. -13- 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. /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. -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 9905284 0 38687930 2603472 50577197 101660867 15979776 2428761 263505717 35635361 162113559 0 0 10 61420580 263505717 131019316 131416767 80168576 107015984 0 127080 10177918 14095785 5805838 8289947 0 0 0 8289947 0 0
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