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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, 2004
[ ] 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 CORPORATION
------------------------------------------------------
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of Common Shares of the Company, $0.01 per share par value,
outstanding as of July 31, 2004 was 1,000.
STANADYNE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2004 (unaudited) and December 31, 2003.......................................... 3
Condensed Consolidated Statements of Income for the three
months ended June 30, 2004 and 2003 (unaudited).......................................... 4
Condensed Consolidated Statements of Income for the six
months ended June 30, 2004 and 2003 (unaudited).......................................... 5
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2004 and 2003 (unaudited).......................................... 6
Notes to Condensed Consolidated Financial Statements (unaudited)......................... 7-21
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................ 22-29
Item 3 Quantitative and Qualitative Disclosures About Market Risk............................... 30
Item 4 Controls and Procedures.................................................................. 31
Part II Other Information
Item 5 Other Information........................................................................ 32-33
Item 6 Exhibits and Reports on Form 8-K......................................................... 33
Signature ......................................................................................... 34
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STANADYNE CORPORATION AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
June 30, DECEMBER 31,
2004 2003
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 18,948 $ 17,977
Accounts receivable, net of allowance for uncollectible
accounts of $679 at June 30, 2004 and $588 at December 31, 2003 52,483 38,903
Inventories, net 36,139 30,094
Prepaid expenses and other current assets 1,870 2,552
Deferred income taxes 4,723 4,471
-------- --------
Total current assets 114,163 93,997
Property, plant and equipment, net 100,971 106,250
Goodwill 71,082 70,819
Intangible and other assets, net 7,372 8,390
Due from Stanadyne Automotive Holding Corp. 4,231 4,269
-------- --------
Total assets $297,819 $283,725
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,450 $ 22,719
Accrued liabilities 28,623 31,249
Current maturities of long-term debt 6,645 6,523
Current installments of capital lease obligations 290 280
-------- --------
Total current liabilities 62,008 60,771
Long-term debt, excluding current maturities 86,651 88,631
Deferred income taxes 3,202 --
Capital lease obligations, excluding current installments 567 653
Other noncurrent liabilities 51,564 51,332
-------- --------
Total liabilities 203,992 201,387
-------- --------
Minority interest in consolidated subsidiary 204 238
Commitments and contingencies -- --
Stockholders' equity:
Common stock -- --
Additional paid-in capital 59,858 59,858
Other accumulated comprehensive income 1,859 1,479
Retained earnings 31,906 20,763
-------- --------
Total stockholders' equity 93,623 82,100
-------- --------
Total liabilities and stockholders' equity $297,819 $283,725
======== ========
See notes to condensed consolidated financial statements.
- 3 -
STANADYNE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
Three Months Three Months
Ended Ended
June 30, June 30,
2004 2003
---- ----
Net sales $ 92,067 $ 73,467
Cost of goods sold 71,010 57,889
-------- --------
Gross profit 21,057 15,578
Selling, general and administrative expenses 8,754 6,515
Amortization of intangibles 341 625
Management fees 275 275
-------- --------
Operating income 11,687 8,163
Interest, net (1,947) (2,056)
-------- --------
Income before income taxes and minority interest 9,740 6,107
Income taxes 2,741 2,499
-------- --------
Income before minority interest 6,999 3,608
Minority interest in (income) loss of consolidated subsidiary (7) 86
-------- --------
Net income $ 6,992 $ 3,694
======== ========
See notes to condensed consolidated financial statements.
- 4 -
STANADYNE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
Six Months Six Months
Ended Ended
June 30, June 30,
2004 2003
---- ----
Net sales $ 174,024 $ 144,334
Cost of goods sold 136,226 114,946
--------- ---------
Gross profit 37,798 29,388
Selling, general and administrative expenses 16,280 14,305
Amortization of intangibles 685 1,241
Management fees 550 550
--------- ---------
Operating income 20,283 13,292
Other income (expenses):
Gain from extinguishment of debt - 813
Interest, net (3,913) (4,180)
--------- ---------
Income before income taxes and minority interest 16,370 9,925
Income taxes 5,261 3,800
--------- ---------
Income before minority interest 11,109 6,125
Minority interest in loss of consolidated subsidiary 34 159
--------- ---------
Net income $ 11,143 $ 6,284
========= =========
See notes to condensed consolidated financial statements.
- 5 -
STANADYNE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Six Months
Ended Ended
June 30, June 30,
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 11,143 $ 6,284
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,276 10,458
Deferred income taxes (benefit) 3,096 (106)
Loss applicable to minority interest (34) (159)
Loss on disposal of property, plant and equipment 187 28
Changes in operating assets and liabilities (17,690) (2,789)
-------- --------
Net cash provided by operating activities 6,978 13,716
-------- --------
Cash flows from investing activities:
Capital expenditures (4,226) (5,362)
Proceeds from disposal of property, plant and equipment 5 2
-------- --------
Net cash used in investing activities (4,221) (5,360)
-------- --------
Cash flows from financing activities:
Proceeds on foreign term loan - 1,396
Net proceeds on foreign overdraft facilities 107 822
Principal payments on long-term debt (2,009) (8,889)
Payments of capital lease obligations (92) (63)
Proceeds from investment by minority interest - 205
-------- --------
Net cash used in financing activities (1,994) (6,529)
-------- --------
Cash and cash equivalents:
Net increase in cash and cash equivalents 763 1,827
Effect of exchange rate changes on cash 208 (558)
Cash and cash equivalents at beginning of period 17,977 4,683
-------- --------
Cash and cash equivalents at end of period $ 18,948 $ 5,952
======== ========
See notes to condensed consolidated financial statements.
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STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
(1) SIGNIFICANT ACCOUNTING POLICIES
Description of Business. Stanadyne Corporation (the "Company"), formerly known
as Stanadyne Automotive Corp., 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. ("PEPC"), Stanadyne, SpA ("SpA") and Precision
Engine Products LTDA ("PEPL"). A joint venture, Stanadyne Amalgamations Private
Limited ("SAPL"), is fully consolidated based on the Company's 51% controlling
share, while the remaining 49% is recorded as a minority interest. Intercompany
balances have been eliminated in consolidation.
Basis of Presentation. The balance sheet as of December 31, 2003 is condensed
financial information derived from the audited balance sheet. The interim
financial statements are unaudited. These financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America 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 2003 financial statements to conform to the 2004 presentation. The
Company's quarterly results are subject to fluctuation; consequently the results
of operations and cash flows for any quarter are not necessarily indicative of
the results and cash flows for any future period.
Stock Options. The Company follows the intrinsic method of accounting for its
stock-based compensation under the guidelines set forth in Accounting Principles
Board ("APB") Opinion No. 25 "Accounting for Stock Issued to Employees."
Intrinsic value is the excess of the market value of the common stock over the
exercise price at the date of grant. Because stock options are granted with
fixed terms and with an exercise price equal to the market price of the common
stock at the date of grant, there is no measured compensation cost of stock
options.
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STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
Had compensation costs for options been determined based on the fair value of
options outstanding for the three-month periods ended June 30, 2004 and 2003 and
for the six-month periods ended June 30, 2004 and 2003, pro forma net income
would be as follows:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
------- ------- ------- -------
Net income as reported $ 6,992 $ 3,694 $11,143 $ 6,284
Stock based compensation using
Black-Scholes option valuation model, net
of related tax effects 42 42 86 83
------- ------- ------- -------
Pro forma net income $ 6,950 $ 3,652 $11,057 $ 6,201
======= ======= ======= =======
The Company has adopted the disclosure provisions of SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure," an amendment of FASB
Statement No. 123. The Statement requires prominent disclosures in both annual
and interim financial statements regarding the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results.
(2) INVENTORIES
Components of inventories are as follows:
As of As of
June 30, 2004 December 31, 2003
------------- -----------------
Raw materials and purchased parts $13,786 $ 8,025
Work-in-process 15,828 14,506
Finished goods 6,525 7,563
------- -------
$36,139 $30,094
======= =======
(3) INCOME TAXES
The Company had an effective income tax rate of 32.1% for the first six months
of 2004, compared to 38.3% for the first six months of 2003. In the first six
months of 2004, the Company recorded $5.3 million of tax expense on a pre-tax
income of $16.4 million. In 2003, the Company recorded $3.8 million of tax
expense on a pre-tax income of $9.9 million. Taxes for 2003 include $0.7 million
for a valuation allowance associated with foreign net operating loss
carry-forwards in SpA that were anticipated to expire in 2003 without
utilization. The Company received U.S. income tax benefits for export sales in
both periods. The tax rate for 2004 includes an estimate of acquisition costs
related to the sale of the Company (see Note 10). The Company
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STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
applies the estimated 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
actual net income, the estimated annual 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 $66.0 million of Notes at an interest rate of 10.25% outstanding
at June 30, 2004 and December 31, 2003, respectively. The Notes are due on
December 15, 2007. On January 15, 2003 the Company retired $5.0 million in Notes
resulting in a $0.8 million gain after the write off of unamortized debt
issuance costs of $0.1 million. The transaction was recorded as other income in
the Company's consolidated financial statements. See Note 10 for information on
the tender offer for these Notes.
The Company had $23.2 million and $25.0 million in U.S.-based term loans (the
"Term Loan") outstanding at June 30, 2004 and December 31, 2003, respectively.
The relative interest rates on June 30, 2004 ranged from 4.55% to 6.25%. The
Company had no borrowings against the Revolving Credit Line at June 30, 2004 and
December 31, 2003 and had $29.7 million and $24.7 million available for
borrowings at June 30, 2004 and December 31, 2003, respectively. The Term Loan
and the Revolving Credit Line are governed by a Loan and Security Credit
Agreement dated October 24, 2003, (the "Senior Bank Facility"). The Company was
in compliance with the quarterly financial performance covenants as established
by the Senior Bank Facility as of the June 30, 2004 measurement date.
Indebtedness in overseas operations included $2.7 million and $2.6 million in
overdraft borrowings at SpA outstanding at June 30, 2004 and December 31, 2003,
respectively. The Company also had $1.4 million and $1.5 million in foreign
borrowings at SAPL outstanding at June 30, 2004 and December 31, 2003,
respectively.
(5) GOODWILL AND INTANGIBLE AND OTHER ASSETS
Goodwill for the Precision Products & Technologies Group ("Precision Products")
was $59.7 million and $59.4 million at June 30, 2004 and December 31, 2003,
respectively. The change in goodwill balances between periods is due to foreign
currency translation of Euro-denominated goodwill at SpA. Goodwill for Precision
Engine Products ("Precision Engine") was $11.4 million at June 30, 2004 and
December 31, 2003. Major components of intangible and other assets at June 30,
2004 and December 31, 2003 are listed below:
- 9 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
June 30, 2004 December 31, 2003
------------- -----------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Value Amortization Value Amortization
----- ------------ ----- ------------
Patents $ 9,809 $ 7,888 $ 9,809 $ 7,681
Debt issuance costs 4,916 2,469 4,886 2,105
Pension intangible asset 1,604 - 1,604 -
Customer contracts 1,310 1,228 1,310 1,134
Deferred income taxes - - 335 -
Other 1,793 475 1,820 454
------- ------- ------- -------
$19,432 $12,060 $19,764 $11,374
======= ======= ======= =======
Amortization expense of intangible assets was $341 and $625 for the three months
ended June 30, 2004 and 2003, respectively, and $685 and $1,241 for the six
months ended June 30, 2004 and 2003, respectively. Estimated annual amortization
expense of intangible assets is expected to be $1,359 in 2004, $1,182 in 2005,
$1,169 in 2006, $927 in 2007 and $293 in 2008.
(6) 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 consolidated 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 consolidated results of operations, financial
position or cash flows of the Company. Also, in conjunction with the acquisition
of the Company from Metromedia Company ("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 the
Company's financial exposure for known environmental issues.
- 10 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
The changes in the Company's warranty accrual is provided below:
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------- ------- ------- -------
Warranty liability, beginning of period $ 1,694 $ 1,688 $ 1,842 $ 1,875
Warranty expense based on products sold 203 210 415 420
Adjustments to warranty estimates 137 (150) 58 (300)
Warranty claims paid (163) (135) (444) (382)
------- ------- ------- -------
Warranty liability, end of period $ 1,871 $ 1,613 $ 1,871 $ 1,613
======= ======= ======= =======
The Company's warranty accrual is included as a component of accrued liabilities
on the consolidated balance sheets.
(7) COMPREHENSIVE INCOME
The Company's comprehensive income is as follows:
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
---- ---- ---- ----
Net income $ 6,992 $ 3,694 $11,143 $ 6,284
Other comprehensive (loss) income, net of tax:
Foreign currency translation
adjustments (641) 2,189 380 4,232
------- ------- ------- -------
Comprehensive income $ 6,351 $ 5,883 $11,523 $10,516
======= ======= ======= =======
(8) SEGMENTS
The Company has two reportable segments, Precision Products and Precision
Engine. Precision Products manufactures its own proprietary products including
pumps for gasoline and diesel engines, injectors and filtration systems for
diesel engines, and various non-proprietary products manufactured under contract
for other companies. The Company's proprietary products currently account for
the majority of Precision Products sales. This segment accounted for
approximately 83% and 74% of the Company's total revenues for the three months
ended June 30, 2004 and 2003, respectively and approximately 83% and 75% of the
Company's total revenues for the six months ended June 30, 2004 and 2003,
respectively.
Precision Engine manufactures roller-rocker arms, hydraulic valve lifters and
lash adjusters primarily for gasoline engines. Revenues for Precision Engine
accounted for approximately 17%
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STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
and 26% of the Company's total revenues for the three months ended June 30, 2004
and 2003, respectively and approximately 17% and 25% of the Company's total
revenues for the six months ended June 30, 2004 and 2003, respectively.
The Company's reportable segments are strategic business units that offer
similar products (engine parts) to customers in related industries
(agricultural, industrial and automotive engine manufacturers). The Company
considers Precision Products and Precision Engine to be two distinct segments
because the operating results of each are compiled, reviewed and managed
separately by the Company's chief operating officer.
The following summarizes key information used by the Company in evaluating the
performance of each segment for the three months ended June 30, 2004 and 2003
and as of and for the six months ended June 30, 2004 and 2003:
For the Three Months Ended June 30, 2004
----------------------------------------
Precision Precision
Products Engine Eliminations Totals
-------- ------ ------------ ------
Net sales $ 76,256 $ 15,890 $ (79) $ 92,067
Gross profit 20,058 999 - 21,057
Depreciation and amortization
expense 4,327 760 - 5,087
Operating income (loss) 11,954 (267) - 11,687
Net income (loss) 7,132 (140) - 6,992
Total capital expenditures 2,371 (138) - 2,233
For the Three Months Ended June 30, 2003
----------------------------------------
Precision Precision
Products Engine Eliminations Totals
-------- ------ ------------ ------
Net sales $54,531 $18,936 $ - $73,467
Gross profit 12,773 2,805 - 15,578
Depreciation and amortization
expense 4,426 810 - 5,236
Operating income 5,543 2,620 - 8,163
Net income 2,266 1,428 - 3,694
Total capital expenditures 2,460 254 - 2,714
- 12 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
As of and For the Six Months Ended June 30, 2004
------------------------------------------------
Precision Precision
Products Engine Eliminations Totals
-------- ------ ------------ ------
Net sales $143,890 $ 30,232 $ (98) $174,024
Gross profit 37,581 217 - 37,798
Depreciation and amortization
expense 8,609 1,667 - 10,276
Operating income (loss) 22,047 (1,764) - 20,283
Net income (loss) 12,940 (1,797) - 11,143
Total assets 266,361 48,570 (17,112) 297,819
Total capital expenditures 3,869 357 - 4,226
As of and For the Six Months Ended June 30, 2003
------------------------------------------------
Precision Precision
Products Engine Eliminations Totals
-------- ------ ------------ ------
Net sales $107,936 $ 36,398 $ - $144,334
Gross profit 24,830 4,558 - 29,388
Depreciation and amortization
expense 8,827 1,631 - 10,458
Operating income 10,155 3,137 - 13,292
Net income 4,750 1,534 - 6,284
Total assets 249,001 51,477 (18,940) 281,538
Total capital expenditures 4,884 478 - 5,362
(9) PENSIONS AND OTHER POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
PENSIONS
The Company has a noncontributory defined benefit pension plan for eligible
domestic employees and also has two nonqualified plans, which are designed to
supplement the benefits payable to designated employees. The components of the
net periodic benefit costs for the three months and six months ended June 30
were as follows:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
------- ------- ------- -------
Service cost $ 779 $ 626 $ 1,553 $ 1,433
Interest cost 1,220 1,000 2,428 2,293
Expected return on plan assets (1,041) (716) (2,083) (1,642)
Amortization of prior service costs 43 38 86 86
Recognized net actuarial loss 14 88 28 201
------- ------- ------- -------
Net periodic pension cost $ 1,015 $ 1,036 $ 2,012 $ 2,371
======= ======= ======= =======
It is the policy of the Company to fund the pension plan in an amount at least
equal to the minimum required contribution as determined by the plan's
actuaries, but not in excess of the maximum tax-deductible amount under Section
404 of the Internal Revenue Code. The Company may make discretionary
contributions of any amount within this range based on
- 13 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
financial circumstances and strategic considerations, which typically vary from
year to year. The Company was not required to make any contributions in the
first six months of 2004.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
The Company and its domestic subsidiaries currently make available certain
health care and life insurance benefits for eligible retired employees. The
components of the net periodic benefit costs for the three months and six months
ended June 30 were as follows:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
------- ------- ------- -------
Service cost $ 43 $ 140 $ 119 $ 217
Interest cost 130 276 332 750
Amortization of prior service costs (667) (888) (1,333) (888)
Recognized net actuarial (income) loss (15) 62 - 62
------- ------- ------- -------
Net periodic postretirement benefits
(income) cost $ (509) $ (410) $ (882) $ 141
======= ======= ======= =======
The Company has elected to defer recognition of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 ("the Act") as permitted under FASB
Staff Position FAS 106-1. The Company has already taken steps to limit its
postretirement health care benefits; any reductions in postretirement benefit
costs resulting from the Act are not expected to be material.
(10) SUBSEQUENT EVENT
On August 6, 2004, stockholders of the Company's parent (Holdings), led by AIP,
completed the sale of all of their stock to KSTA Acquisition, LLC, an affiliate
of Kohlberg & Company, L.L.C, for $218.4 million. In addition to AIP, the
selling stockholders included certain current and former members of management
of the Company. Immediately following this transaction, KSTA Acquisition, LLC
distributed all of the stock of Holdings to its parent, KSTA Holdings, Inc and
merged with and into the Company, which continues as the surviving corporation.
As a result, KSTA Holdings owns 100% of the stock of Holdings. The stock
purchase and the related transactions, including the issuance of new senior
subordinated notes, the entering into a new senior secured credit facility, the
repayment of certain existing indebtedness, including the tender for the
existing Notes by KSTA Acquisition, LLC, and the payment of related fees and
expenses are collectively defined as the "Transactions". The Company will report
the necessary purchase accounting related to the Transactions in the third
quarter Form 10-Q, as the exact amounts are not known at this time.
The amounts necessary to consummate the Transactions totaled approximately $330
million, including approximately $218.4 million to purchase all of the
outstanding stock of Holdings,
- 14 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
approximately $89.3 million to repay existing indebtedness and approximately
$17.5 million in related fees and expenses, and approximately $4.8 million in
net change in cash balances.
The Transactions were financed as follows:
- - a cash common equity investment of $105 million in Holdings by an investor
group led by Kohlberg Investors IV, LP and including certain members of
management of the Company;
- - KSTA Acquisition, LLC and the Company issued new senior subordinated notes
to various qualified institutional buyers for $160 million ("New Notes");
- - KSTA Acquisition, LLC and the Company borrowed $65 million under a new six
year term loan senior secured credit facility ("New Term Loans").
The New Notes bear interest of 10.0%, payable semi-annually and will mature on
August 15, 2014. The New Term Loans bear interest at prime plus 2.5% or Libor
plus 3.5% and principal is repaid in 0.25% quarterly installments with a final
payment of the unamortized balance due on August 6, 2010. The Company also
negotiated a new $35.0 revolving credit facility, which bears interest at prime
plus 1.25% or Libor plus 2.25% payable on August 6, 2009. This new revolving
credit facility requires that the Company maintain a minimum fixed charge
coverage ratio if available borrowings fall below $5.0 million. The New Term
Loans and revolving credit facility are secured by substantially all of the
Company's domestic accounts receivable, inventory and assets.
Immediately following the Transactions, the Company purchased $54.2 million of
the Notes per the terms of a tender offer dated July 19, 2004. The balance of
the outstanding Notes will be called by the Company according to the terms of
the original indenture.
In connection with the Transactions, the Company amended the terms of the
Management Stock Option Plan to provide for vesting of all unvested options and
purchased all of the outstanding stock options requiring a charge in the third
quarter of 2004 for approximately $14.0 million.
(11) SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS
The Notes issued December 11, 1997 by the Company are guaranteed jointly, fully,
severally and unconditionally by PEPC (the "Subsidiary Guarantor") on a
subordinated basis and are not guaranteed by SpA, PEPL and SAPL (the
"Non-Guarantor Subsidiaries").
Supplemental combining condensed financial statements for Stanadyne Corporation
("Parent"), the Subsidiary Guarantor and the Non-Guarantor Subsidiaries are
presented below. Separate complete financial statements of the Subsidiary
Guarantor are not required.
- 15 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Consolidating Condensed Balance Sheets
June 30, 2004
------------------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- --------- ------------- ------------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 18,212 $ 41 $ 363 $ 332 $ 18,948
Accounts receivable, net 38,133 9,990 4,360 - 52,483
Inventories, net 23,593 6,952 6,435 (841)(a) 36,139
Other current assets 4,851 261 1,481 - 6,593
--------- --------- --------- --------- ---------
Total current assets 84,789 17,244 12,639 (509) 114,163
Property, plant and equipment, net 67,078 15,640 18,253 - 100,971
Goodwill 43,465 11,360 16,257 - 71,082
Intangible and other assets, net 6,352 1,316 2,323 (2,619)(b) 7,372
Investment in subsidiaries 29,072 (3,474) - (25,598)(c) -
Due from Stanadyne Automotive Holding Corp. 4,231 - - - 4,231
--------- --------- --------- --------- ---------
Total assets $ 234,987 $ 42,086 $ 49,472 $ (28,726) 297,819
========= ========= ========= ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 40,443 $ 8,897 $ 5,712 $ 21 $ 55,073
Current maturities of long-term
debt and capital lease obligations 2,900 671 3,364 - 6,935
--------- --------- --------- --------- ---------
Total current liabilities 43,343 9,568 9,076 21 62,008
Long-term debt and capital lease obligations 81,950 3,693 1,575 - 87,218
Other noncurrent liabilities 38,694 9,842 8,682 (2,452)(b) 54,766
Minority interest in consolidated subsidiary - - - 204 204
Intercompany accounts (19,901) 4,696 15,299 (94) -
Stockholders' equity 90,901 14,287 14,840 (26,405)(c) 93,623
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 234,987 $ 42,086 $ 49,472 $ (28,726) $ 297,819
========= ========= ========= ========= =========
(a) Amount represents the elimination of inventory for out of period
transfers.
(b) Reclassification of deferred tax asset to consolidated net deferred
tax liability.
(c) Elimination of investments in subsidiaries of the Parent and
Subsidiary Guarantor.
- 16 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Consolidating Condensed Balance Sheets
December 31, 2003
------------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
------------ --------- ------------- ------------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 17,514 $ 19 $ 388 $ 56 $ 17,977
Accounts receivable, net 27,846 6,695 4,362 - 38,903
Inventories, net 18,044 6,375 6,065 (390)(a) 30,094
Other current assets 5,255 315 1,453 - 7,023
--------- --------- --------- --------- ---------
Total current assets 68,659 13,404 12,268 (334) 93,997
Property, plant and equipment, net 70,620 16,808 18,822 - 106,250
Goodwill 43,465 11,360 15,994 - 70,819
Intangible and other assets, net 7,817 1,246 2,027 (2,700)(b) 8,390
Investment in subsidiaries 29,856 (3,264) - (26,592)(c) -
Due from Stanadyne Automotive Holding Corp. 4,269 - - - 4,269
--------- --------- --------- --------- ---------
Total assets $ 224,686 $ 39,554 $ 49,111 $ (29,626) $ 283,725
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 39,729 $ 8,024 $ 6,214 $ 1 $ 53,968
Current maturities of long-term
debt and capital lease obligations 2,900 671 3,232 - 6,803
--------- --------- --------- --------- ---------
Total current liabilities 42,629 8,695 9,446 1 60,771
Long-term debt and capital lease obligations 83,400 4,029 1,855 - 89,284
Other noncurrent liabilities 35,059 10,300 8,562 (2,589)(b) 51,332
Minority interest in consolidated subsidiary - - - 238 238
Intercompany accounts (16,048) 320 15,729 (1) -
Stockholders' equity 79,646 16,210 13,519 (27,275)(c) 82,100
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 224,686 $ 39,554 $ 49,111 $ (29,626) $ 283,725
========= ========= ========= ========= =========
(a) Amount represents the elimination of inventory for out of period
transfers.
(b) Reclassification of deferred tax asset to consolidated net deferred
tax liability.
(c) Elimination of investments in subsidiaries of the Parent and
Subsidiary Guarantor.
- 17 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Consolidating Condensed Statements of Operations
Three Months Ended June 30, 2004
-----------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- --------- ------------ ------------ --------------
Net sales $ 72,320 $ 15,057 $ 6,682 $ (1,992)(a) $ 92,067
Cost of goods sold 52,399 14,278 6,273 (1,940)(a) 71,010
-------- -------- -------- -------- --------
Gross profit 19,921 779 409 (52) 21,057
Selling, general, administrative and
other operating expenses 7,864 930 778 (202) 9,370
-------- -------- -------- -------- --------
Operating income (loss) 12,057 (151) (369) 150 11,687
Interest, net (1,620) (73) (242) (12) (1,947)
-------- -------- -------- -------- --------
Income (loss) before income taxes
(benefit) and minority interest 10,437 (224) (611) 138 9,740
Income taxes (benefit) 2,965 (200) (90) 66 2,741
-------- -------- -------- -------- --------
Income (loss) before
minority interest 7,472 (24) (521) 72 6,999
Minority interest in gain of consolidated subsidiary - - - (7) (7)
-------- -------- -------- -------- --------
Net income (loss) $ 7,472 $ (24) $ (521) $ 65 $ 6,992
======== ======== ======== ======== ========
Consolidating Condensed Statements of Operations
Three Months Ended June 30, 2003
-----------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- --------- ------------ ------------ --------------
Net sales $ 50,725 $ 18,078 $ 5,473 $ (809)(a) $ 73,467
Cost of goods sold 37,921 15,652 5,068 (752)(a) 57,889
-------- -------- -------- -------- --------
Gross profit 12,804 2,426 405 (57) 15,578
Selling, general, administrative and
other operating expenses 6,670 770 (428) 403 7,415
-------- -------- -------- -------- --------
Operating income 6,134 1,656 833 (460) 8,163
Interest, net (1,604) (145) (288) (19) (2,056)
-------- -------- -------- -------- --------
Income before income taxes
(benefit) and minority interest 4,530 1,511 545 (479) 6,107
Income taxes (benefit) 1,431 683 522 (137) 2,499
-------- -------- -------- -------- --------
Income before
minority interest 3,099 828 23 (342) 3,608
Minority interest in loss of consolidated subsidiary - - - 86 86
-------- -------- -------- -------- --------
Net income $ 3,099 $ 828 $ 23 $ (256) $ 3,694
======== ======== ======== ======== ========
(a) Elimination of intercompany sales and cost of goods sold.
- 18 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Consolidating Condensed Statements of Operations
Six Months Ended June 30, 2004
----------------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- ---------- ------------- ------------ --------------
Net sales $ 136,347 $ 28,793 $ 12,133 $ (3,249)(a) $ 174,024
Cost of goods sold 98,562 28,904 11,905 (3,145)(a) 136,226
--------- --------- --------- --------- ---------
Gross profit (loss) 37,785 (111) 228 (104) 37,798
Selling, general, administrative and
other operating expenses 14,833 1,646 1,206 (170) 17,515
--------- --------- --------- --------- ---------
Operating income (loss) 22,952 (1,757) (978) 66 20,283
Other expenses:
Interest, net (3,282) (121) (481) (29) (3,913)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
(benefit) and minority interest 19,670 (1,878) (1,459) 37 16,370
Income taxes (benefit) 5,499 (166) (128) 56 5,261
--------- --------- --------- --------- ---------
Income (loss) before
minority interest 14,171 (1,712) (1,331) (19) 11,109
Minority interest in loss of consolidated subsidiary - - - 34 34
--------- --------- --------- --------- ---------
Net income (loss) $ 14,171 $ (1,712) $ (1,331) $ 15 $ 11,143
========= ========= ========= ========= =========
Consolidating Condensed Statements of Operations
Six Months Ended June 30, 2003
----------------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- ---------- ------------- ------------ --------------
Net sales $ 100,260 $ 35,037 $ 10,548 $ (1,511)(a) $ 144,334
Cost of goods sold 75,518 30,911 9,982 (1,465)(a) 114,946
--------- --------- --------- --------- ---------
Gross profit 24,742 4,126 566 (46) 29,388
Selling, general, administrative and
other operating expenses 13,652 2,004 (13) 453 16,096
--------- --------- --------- --------- ---------
Operating income (loss) 11,090 2,122 579 (499) 13,292
Other income (expenses):
Gain from extinguishment of debt 813 - - - 813
Interest, net (3,237) (303) (597) (43) (4,180)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and minority interest 8,666 1,819 (18) (542) 9,925
Income taxes 1,929 865 1,156 (150) 3,800
--------- --------- --------- --------- ---------
Income (loss) before
minority interest 6,737 954 (1,174) (392) 6,125
Minority interest in loss of consolidated subsidiary - - - 159 159
--------- --------- --------- --------- ---------
Net income (loss) $ 6,737 $ 954 $ (1,174) $ (233) $ 6,284
========= ========= ========= ========= =========
(a) Elimination of intercompany sales and cost of goods sold.
- 19 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Consolidating Condensed Statements of Cash Flows
Six Months Ended June 30, 2004
-------------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- ---------- ------------- ------------ --------------
Cash flows from operating activities:
Net income (loss) $ 14,171 $ (1,712) $ (1,331) $ 15 $ 11,143
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,669 1,656 951 - 10,276
Other adjustments 4,146 (198) (721) 56 3,283
Loss applicable to minority interest - - - (34) (34)
Changes in operating assets and
liabilities (17,932) 965 (708) (15) (17,690)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities 8,054 711 (1,809) 22 6,978
-------- -------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures (3,765) (353) (108) - (4,226)
Proceeds from disposal of property,
plant and equipment - - 5 - 5
Investment in subsidiaries (2,135) - - 2,135(a) -
-------- -------- -------- -------- --------
Net cash used in
investing activities (5,900) (353) (103) 2,135 (4,221)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Net change in debt (1,450) (336) (208) - (1,994)
Net change in equity - - 2,135 (2,135)(a) -
-------- -------- -------- -------- --------
Net cash (used in) provided by
financing activities (1,450) (336) 1,927 (2,135) (1,994)
-------- -------- -------- -------- --------
Net increase in cash and
cash equivalents 704 22 15 22 763
Effect of exchange rate changes on cash (6) - (40) 254 208
Cash and cash equivalents at
beginning of period 17,514 19 388 56 17,977
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period $ 18,212 $ 41 $ 363 $ 332 $ 18,948
======== ======== ======== ======== ========
(a) Elimination of additional investment in SpA by the Company.
- 20 -
STANADYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED OTHERWISE)
SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONCLUDED)
Consolidating Condensed Statements of Cash Flows
Six Months Ended June 30, 2003
------------------------------------------------------------------------
Stanadyne Stanadyne
Corporation Subsidiary Non-Guarantor Corporation
Parent Guarantor Subsidiaries Eliminations & Subsidiaries
----------- ---------- ------------- ------------ --------------
Cash flows from operating activities:
Net income (loss) $ 6,737 $ 954 $ (1,174) $ (233) $ 6,284
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 8,079 1,615 764 - 10,458
Other adjustments (1,045) 194 923 (150) (78)
Loss applicable to minority interest - - - (159) (159)
Changes in operating assets and
liabilities 2,642 (3,429) (3,129) 1,127 (2,789)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities 16,413 (666) (2,616) 585 13,716
-------- -------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures (3,938) (476) (1,260) 312 (5,362)
Proceeds from disposal of property,
plant and equipment 2 - - - 2
Investment in subsidiaries (214) - - 214 -
-------- -------- -------- -------- --------
Net cash used in
investing activities (4,150) (476) (1,260) 526 (5,360)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Net change in debt (8,889) - 2,155 - (6,734)
Net change in equity (2,549) 1,355 1,536 (137) 205
-------- -------- -------- -------- --------
Net cash (used in) provided by
financing activities (11,438) 1,355 3,691 (137) (6,529)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents 825 213 (185) 974 1,827
Effect of exchange rate changes on cash 7 - 54 (619) (558)
Cash and cash equivalents at
beginning of period 4,223 8 452 - 4,683
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period $ 5,055 $ 221 $ 321 $ 355 $ 5,952
======== ======== ======== ======== ========
- 21 -
STANADYNE CORPORATION AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULT 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 Precision Products and Precision Engine. Precision Products manufactures its
own proprietary products including pumps for gasoline and diesel engines,
injectors and filtration systems for diesel engines, and various non-proprietary
products manufactured under contract for other companies. Precision Engine
manufactures valve train components including roller-rocker arm assemblies,
hydraulic valve lifters and lash adjusters for gasoline and diesel engines.
Detailed segment information can be found in Note 8 of Notes to Condensed
Consolidated Financial Statements.
The Company's sales totaled $92.1 million and $174.0 million for the three and
six months ended June 30, 2004 respectively, representing increases of 25.3% and
20.6% when compared to the same periods of 2003. Continued strength in demand
for the Company's products from the off-highway markets drove most of this
increase. Sales to off-highway markets accounted for 63.3% of the total six
months year-to-date 2004 sales. Sales to the original equipment manufacturers
("OEMs") and the service markets increased by $15.2 million and $14.5 million,
respectively, for the first six months of 2004 compared to the first six months
of 2003.
Performance by segment for the second quarter of 2004 was mixed.
Precision Products sales and net income increased by $21.7 million and $4.9
million for the three months ended June 30, 2004, respectively, when compared to
the same period in 2003. This improvement resulted from continued strength in
the underlying demand for this segment's products across all markets and product
lines. After a slow introduction in the first quarter of the year, sales of the
new Integrated Fuel System ("IFS") totaled $1.0 million in the second quarter of
2004 as the production volumes continue to increase.
Precision Engine sales and net income decreased by $3.0 million and $1.6 million
for the three months ended June 30, 2004, respectively when compared to the same
period in 2003. Although demand from DaimlerChrysler ("DCX") for valve-train
actuator assembly ("VTAA's") remained strong in the second quarter of 2004,
continued weakness in the aftermarket demand for hardenable iron tappets
explained most of the lower sales result.
The gross profits in 2004 were not significantly impacted by the global market
supply shortages or cost surcharges for raw materials. The Company has taken
proactive steps to minimize supply shortages in 2004 but cannot foresee the
extent of the impact that may be felt on future earnings.
Net income for the first six months of 2004 grew to $11.1 million or 6.4% of net
sales - representing an increase of 77.3% from the net income of $6.3 million or
4.4% for the same period of 2003.
- 22 -
STANADYNE CORPORATION AND SUBSIDIARIES
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 of the Company are presented in thousands of
dollars and as a percentage of net sales. Historical results and percentage
relationships are not necessarily indicative of the results that may be expected
for any future period.
Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
$ % $ % $ % $ %
------ ----- ------ ----- ------- ----- ------- -----
Net sales 92,067 100.0 73,467 100.0 174,024 100.0 144,334 100.0
Cost of goods sold 71,010 77.1 57,889 78.8 136,226 78.3 114,946 79.6
Gross profit 21,057 22.9 15,578 21.2 37,798 21.7 29,388 20.4
SG&A 8,754 9.5 6,515 8.9 16,280 9.4 14,305 9.9
Amortization of intangibles 341 0.4 625 0.9 685 0.4 1,241 0.9
Management fees 275 0.3 275 0.4 550 0.3 550 0.4
Operating income 11,687 12.7 8,163 11.1 20,283 11.7 13,292 9.2
Net income 6,992 7.6 3,694 5.0 11,143 6.4 6,284 4.4
COMPARISON OF RESULTS OF OPERATIONS:
Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003
NET SALES. Net sales for the second quarter of 2004 totaled $92.1 million
compared to $73.5 million in the second quarter of 2003, representing an
increase of $18.6 million or 25.3%.
All of this increase was generated by the Precision Products segment where
second quarter 2004 increase in sales of $21.7 million were 39.8% higher than
the second quarter of 2003, while the Precision Engine segment reported a
reduction in sales of $3.1 million or 16.1% for the same period comparison.
Precision Products sales reflected continued strength in the underlying demand
for this segment's products across all markets and product lines. Shipments to
OEM's in the second quarter of 2004 were 41.7% or $11.6 million higher and
shipments to the aftermarkets were 37.9% or $10.1 million higher than for the
second quarter of 2003. Sales of fuel filters totaled $19.6 million in the
second quarter of 2004 or 29.8% more than for the second quarter of 2003, with
significant growth in both OEM and aftermarket sales. Production of replacement
filter elements in the second quarter of 2004 for the aftermarket consumed all
available capacity, requiring the establishment of temporary manufacturing cells
until additional equipment is installed in the third quarter. Second quarter
shipments of diesel fuel pumps and injectors in 2004 and 2003 were $52.5 million
versus $36.6 million, respectively. This increase of $15.9 million or 43.5% was
primarily driven by higher demand from Deere & Company ("Deere"), General Engine
Products, the U.S. military and the aftermarket distribution network. Included
in this category were sales of the Company's new Integrated Fuel System (IFS)
totaling $1.0 million in the
- 23 -
STANADYNE CORPORATION AND SUBSIDIARIES
second quarter of 2004. Finally, sales of Precision Components and Assembly
("PCA") products totaled $4.2 million in the second quarter of 2004, reflecting
an increase of $1.3 million from the same period in 2003, all attributable to
higher sales to Caterpillar and Cummins.
Precision Engine segment sales were $3.1 million lower or 16.1% less in the
second quarter of 2004 compared to the same period in 2003. Sales to OEM
customers totaled $0.2 million less due primarily to the expected decline of
$0.9 million in tappets sold to Ford Motor Company related to the phase-out of
production of the Escort. OEM sales increased by $0.9 million in the second
quarter of 2004 compared to the second quarter of 2003 due to increased
shipments of VTAA's for the DCX 3.5 litre engine installed in the Pacifica and
new 300C sedan. Aftermarket demand for hardenable iron tappets was $2.9 million
lower in the second quarter of 2004, as customers for these tappets continued to
reduce inventory levels accumulated in 2003.
GROSS PROFIT. Gross profit for the Company in the second quarter of 2004 totaled
$21.1 million and 22.9% of net sales, versus $15.6 million and 21.2% of net
sales for the same period in 2003. Gross profit results by segment followed the
changes in sales reported above.
Precision Products recorded gross profit of $20.1 million or 26.3% of net sales
in the second quarter of 2004, considerably higher than the $12.8 million or
23.4% of net sales recorded for the same period in 2003. Most of this
improvement was due to additional operating leverage from higher sales volumes
in the second quarter of 2004 and particularly to the strength in higher margin
aftermarket sales of filter and pump products. The higher gross profits were
somewhat offset by the higher quarter to quarter comparison of manufacturing
costs due to cost premiums incurred in 2004, including inefficiencies related to
production of the new IFS product and higher levels of overtime and
inefficiencies associated with the introduction of new workers related to the
significant increase in demand for virtually all of the segments products.
Gross profit in the Precision Engine segment in the second quarter of 2004 was
$1.0 million or 6.3% of net sales as compared to the gross profit of $2.8
million or 14.8% of net sales reported for the same period of 2003. The
combination of lower sales volumes, particularly for product sold to the
aftermarket, and increased manufacturing and overhead costs in this segment,
resulted in the poor margin. Manufacturing inefficiencies, particularly in the
Tallahassee, Florida plant are being addressed by segment management. Machining
capability and reliability are being improved through formal preventative
maintenance programs and equipment refurbuishment, while the early stages of a
formal Six Sigma program suggest significant opportunities for cost reduction
later this year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A in the second
quarter of 2004 totaled $8.8 million and was higher than the $6.5 million
reported for the same period of 2003. This increase was primarily due to $1.1
million of higher costs for salaries and accrued profit sharing in the Precision
Products segment based on higher earnings in 2004. The SG&A costs in the
Precision Engine segment reflected an increase of $1.1 million from second
quarter 2003 to second quarter 2004 due primarily to a shift from foreign
exchange gains of $0.7 million recorded in 2003 to foreign exchange losses of
$0.3 million recorded in 2004.
- 24 -
STANADYNE CORPORATION AND SUBSIDIARIES
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets decreased
to $0.3 million in the second quarter of 2004 from $0.6 million in the second
quarter of 2003. This reduction reflected the conclusion of the amortization of
some the Company's patents.
OPERATING INCOME. Operating income for the second quarter of 2004 totaled $11.7
million or 12.7% of net sales versus $8.2 million or 11.1% for the same period a
year ago. All of this improvement occurred in the Precision Products segment,
where higher gross profits produced operating income of $12.0 million or 15.7%
of net sales versus the $5.5 million or 10.2% of net sales in the second quarter
of 2003. Lower gross profits and higher SG&A expenses recorded by the Precision
Engine segment in the second quarter of 2004 resulted in an operating loss of
$0.3 million or (1.7)% of net sales compared to an operating income of $2.6
million or 13.8% of net sales in the second quarter of 2003.
These results include $1.0 million in the second quarter of 2004 and $1.1
million in the second quarter of 2003 of pension expense which each included
$0.1 million of actuarial losses and amortization of prior service costs. These
results also include $0.5 million of income in the second quarter of 2004 and
$0.4 million of income in the second quarter of 2003 for amounts related to the
Company's post retirement healthcare and life insurance benefit plans, which
include $0.7 million of income and $0.8 million of income, respectively of
amortized actuarial gains in prior service costs.
NET INCOME. Net income for the second quarter of 2004 totaled $7.0 million
versus $3.7 million for the same period in 2003. This improvement reflected the
combined results of $3.5 million of higher operating income in 2004, $0.1
million in lower interest expense due to less debt, and a $0.2 million increase
in income taxes on higher earnings.
Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003
NET SALES. Net sales for the first six months of 2004 totaled $174.0 million
compared to $144.3 million in the first six months of 2003, representing an
increase of $29.7 million or 20.6%. A significant increase in Precision Products
sales of $36.0 million or 33.3% was partially offset by a decrease in Precision
Engine sales of $6.2 million or 16.9%.
Precision Products sales for the first six months of 2004 totaled $143.9 million
and reflected a 28.3% increase in shipments to OEM's and a 39.1% increase in
sales to the aftermarkets when compared to the same period of 2003. The growth
in sales to OEM's resulted primarily from increased demand for diesel fuel
injection equipment from Deere. Sales to Deere increased by $17.1 million in the
first six months of 2004 as compared to the same period of 2003 and included
$1.2 million for the new IFS product. Sales of diesel fuel pumps to General
Engine Products for the Hummer vehicle increased by $1.0 million in the first
six months of 2004 versus 2003. Year-over-year first six months Precision
Products sales to the aftermarket increased by $20.0 million. Sales of filter
replacement elements accounted for $6.6 million of this growth, with much of the
remainder of the increase due to $6.3 million higher demand for electronic
- 25 -
STANADYNE CORPORATION AND SUBSIDIARIES
pumps from General Motors Corporation and $3.3 million additional fuel pumps to
the U.S. military.
Precision Engine segment sales were $6.2 million lower in the first six months
of 2004 compared to the same period in 2003. Sales to OEM customers decreased by
$1.0 million due entirely to the expected decline of $1.8 million in tappets
sold to Ford Motor Company related to the phase-out of production of the Escort.
The balance of the decline in six months sales occurred in the aftermarket,
where demand for hardenable iron tappets was $4.8 million lower, as customers
for these tappets continued to reduce inventory levels accumulated in 2003.
GROSS PROFIT. Gross profit for the Company improved in the first six months of
2004 to $37.8 million and 21.7% of net sales, from $29.4 million and 20.4% of
net sales for the same period in 2003. Gross profit results by segment followed
the changes in sales reported above.
Precision Products recorded gross profit of $37.6 million or 26.1% of net sales
in the first six months of 2004, significantly higher than the $24.8 million or
23.0% of net sales recorded for the same period in 2003. Most of this
improvement was due to additional operating leverage from higher sales volumes
in the first six months of 2004 and particularly to the strength in higher
margin aftermarket sales of filter and pump products. The higher gross profits
were somewhat offset by the higher year to year comparison of manufacturing
costs due to cost premiums incurred in 2004 related to the production of the new
IFS product, as well as higher levels of overtime and inefficiencies associated
with the introduction of new workers required to support the significant
increase in demand for virtually all of the segments products.
Gross profit in the Precision Engine segment in the first six months of 2004 was
$0.2 million or 0.7% of net sales as compared to $4.6 million or 12.5% of net
sales reported for the same period of 2003. The combination of lower sales
volumes, particularly for product sold to the aftermarket, and increased
manufacturing and overhead costs in this segment, resulted in the poor margin.
While only slightly more than break-even on a year-to-date basis for 2004, gross
profit in the second quarter of 2004 of $1.0 million showed significant
improvement from the 2004 first quarter negative gross margin of $0.3 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A totaled $16.3
million in the first six months of 2004 and was $2.0 million higher than the
$14.3 million reported for the same period of 2003. Increases in SG&A costs for
the first six months of 2004 included: $0.9 million of higher costs for salaries
and accrued profit sharing in the Precision Products segment based on higher
earnings; a shift from foreign exchange gains of $0.8 million recorded in 2003
to foreign exchange losses of $0.1 million recorded in 2004; and higher freight
on sales cost of $0.5 million.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets decreased
to $0.7 million in the first six moths 2004 from $1.2 million in the first six
months of 2003. This reduction reflected the conclusion of the amortization of
some the Company's patents.
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STANADYNE CORPORATION AND SUBSIDIARIES
OPERATING INCOME. Operating income for the first six months of 2004 totaled
$20.3 million or 11.7% of net sales versus $13.3 million or 9.2% for the same
period a year ago. All of this improvement occurred in the Precision Products
segment, where higher gross profits were only partially offset by increased SG&A
costs, resulting in operating income of $22.0 million or 15.3% of net sales
versus the $10.2 million or 9.4% of net sales in the first six months of 2003.
Lower gross profits recorded by the Precision Engine segment in the first six
months of 2004 resulted in an operating loss of $1.8 million or (5.8)% of net
sales compared to an operating income of $3.1 million or 8.6% of net sales in
the first six months of 2003.
These results include $2.0 million in 2004 and $2.4 million in 2003 of pension
expense which each included $0.1 million and $0.3 million, respectively, of
actuarial losses and amortization of prior service costs. These results also
include $0.9 million of income in 2004 and $0.1 million of expense in 2003 for
amounts related to the Company's post retirement healthcare and life insurance
benefit plans, which include $1.3 million of income and $0.8 million of income
respectively of amortized actuarial gains in prior service costs.
NET INCOME. Net income for the first six months of 2004 totaled $11.1 million
versus $6.3 million for the same period in 2003. This improvement reflected the
combined results of $7.0 million of higher operating income in 2004, $0.3
million in lower interest expense due to less debt, and a $1.5 million increase
in income taxes, partially offset by a $0.8 million gain in the first quarter of
2003 on the repurchase of a portion of the Company bonds.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash on hand and cash flows
from operations supplemented by a U.S.-based revolving credit facility under
which $29.7 million was available for borrowings as of June 30, 2004. The
Company occasionally utilizes capital leasing and, for its foreign operations in
Italy and India, maintains a combination of overdraft and term loan facilities
with local financial institutions on an as-needed basis. As of June 30, 2004,
there were borrowings of $23.2 million under the Term Loans, no borrowings under
the Revolving Credit Lines, $2.8 million in foreign overdraft facilities and
$1.3 million in foreign term loans. The Company met all financial covenants
required by the Senior Bank Facility for the June 30, 2004 measurement date. The
Company established new senior secured credit facilities, issued New Notes and
tendered for the purchase of old Notes, all as part of the transaction described
in Note 10 Subsequent Events of Notes to Condensed Consolidated Financial
Statements contained in Item 1 of this Report.
Cash Flows From Operating Activities. Cash flows from operating activities for
the six months ended June 30, 2004 totaled $7.0 million and were $6.7 million
lower than the $13.7 million generated in the same period of 2003. This
year-to-year decline was primarily accounted for by $17.7 million in additional
working capital requirements in the first six months of 2004 due to the higher
levels of business in the Precision Products segment. Total accounts receivable
and inventories increased by $13.6 and $6.0 million, respectively, and were only
partially offset by
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STANADYNE CORPORATION AND SUBSIDIARIES
higher accounts payable and accrued liabilities of $1.0 million. Despite the
higher amounts of working capital in 2004, the Company continues to aggressively
manage the accounts receivable and inventories relative to business levels.
Accounts receivable days outstanding improved to an average of 49.3 days for the
first six months of 2004 as compared to 53.5 days for the same period of 2003.
Inventory turnover, averaging 8.4 turns for the first six months of 2004,
reflected an improvement from the 7.7 turns recorded for the same period of
2003. Growth in purchased materials inventories occurred to ensure availability
to meet increasing customer demand. The Company continues to expand the use of
lean manufacturing techniques intended to minimize work in process inventories
and increase turnover. An accrued liability for workers compensation claims
incurred in prior years was settled during the second quarter with payment of
$3.1 million to the claims administrator, thus further reducing the cash flows
from operations in 2004.
Cash Flows From Investing Activities. The Company's capital expenditures for the
first six months of 2004 totaled $4.2 million, compared to $5.4 million for the
same period of 2003. Capital expenditures in 2004 included $1.6 million in
support of new products and programs, with the remainder applied to cost
reduction, quality enhancements, safety and ergonomics improvements, added
capacity and general maintenance projects.
Cash Flows From Financing Activities. Cash flows from financing activities for
the six months ended June 30, 2004 resulted in a net reduction in cash of $2.0
million, comprised of: scheduled principal payments against the U.S. Term Loans
for $1.8 million; and payments against the foreign term loan in India for $0.2
million. There were no borrowings under the Revolving Credit Facility, which
after reductions for outstanding letters of credit, represented available
liquidity of $29.7 million. Additional overdraft borrowings at SpA and SAPL for
the first six months of 2004 totaled $0.1 million. Payments against capital
lease obligations totaled $0.1 million.
Pension Plans. The Company maintains a qualified defined benefit pension plan
(the "Qualified Plan"), which covers substantially all domestic hourly and
salary employees, except for Tallahassee hourly employees, and an unfunded
nonqualified plan to provide benefits in excess of amounts permitted to be paid
under the provisions of the tax law to participants in the Qualified Plan.
The value of the Qualified Plan assets increased from $37.8 million at December
31, 2002 to $48.2 million at December 31, 2003. The combination of improved
investment performance offset by a declining discount rates during 2003 resulted
in an increase in the Qualified Plan unfunded benefit obligation. Cash
contributions to the Qualified Plan for the 2002 plan year of $2.5 million were
paid in the third quarter of 2003 to achieve a current liability funding level
of 80%. Based on recent legislation enacted to provide guidance on interest
rates used to value the obligations in the Qualified Plan, contributions for the
2003 plan year will require approximately $2.0 million by September, 2004 to
achieve a current liability funding level of 80%. The Company is considering the
effect of additional contributions on future funding requirements and continues
to examine the longer term projections for pension expense and cash
contributions.
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STANADYNE CORPORATION AND SUBSIDIARIES
(2) CRITICAL ACCOUNTING POLICIES
The Company prepares its consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America. As
such, the Company is required to make certain estimates, judgments and
assumptions that it believes are reasonable based upon the information
available. These estimates and assumptions affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the periods presented. The significant
accounting policies involving estimates which the Company believes are the most
critical to aid in fully understanding and evaluating the reported financial
results include: product warranty reserves, inventory reserves for excess or
obsolescence, income taxes, self-insured healthcare benefit costs, and pension
and postretirement benefit liabilities. All of the preceding are more fully
described in the notes to the consolidated financial statements contained in the
annual report on Form 10-K.
(3) 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) loss of
material customers; (6) adverse state or federal legislation or regulation or
adverse determinations in pending litigation; (7) changes in the value of the
U.S. dollar relative to foreign currencies of countries where the Company
conducts its business; and (8) changes in general economic conditions and/or in
the automobile, light duty trucks, agricultural and construction vehicles and
equipment, industrial products and marine equipment markets in which the Company
competes. Many of such factors are beyond the control of the Company and its
management. The forward-looking statements contained in this report speak only
as of the date on which such statements were made. The Company undertakes no
duty or obligation to publicly update or revise any forward-looking statements
to reflect new, changing or unanticipated events or circumstances.
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STANADYNE CORPORATION 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 values 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 every one to three months. A 10% change in the
interest rate on the term loans would have had a negligible effect on the
interest expense recorded in the first six months of 2004. The Notes bear
interest at a fixed rate and, therefore, are not sensitive to interest rate
fluctuation. The fair value of the Company's $66.0 million in Notes based on
quoted market prices on June 30, 2004 was approximately $66.0 million.
Foreign Currency Risk. The Company has subsidiaries in Brazil and Italy, a joint
venture in India and a branch office in France, 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 and Brazilian subsidiaries. The Company also sells
its products from the United States to foreign customers for payment in foreign
currencies as well as U.S. dollars. Foreign currency exchange differences were a
net loss of $0.1 million for the six months ended June 30, 2004 and a net gain
of $0.8 million for the same period in 2003. A majority of the exchange
differences are related to the Company's operations in Brazil. The Company does
not hedge against foreign currency risk.
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STANADYNE CORPORATION AND SUBSIDIARIES
ITEM 4: CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this quarterly report, an evaluation of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures was conducted under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer. Based
on this evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures were adequate
and designed to ensure that information required to be disclosed by the Company
in this report is recorded, processed, summarized and reported in a timely
manner, including that such information is accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
(b) CHANGES IN INTERNAL CONTROLS
There was no change in internal control over financial reporting that materially
affected or is reasonably likely to materially affect the Company's internal
control over financial reporting, including any corrective actions with regard
to significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting, subsequent to the evaluation
described above.
Reference is made to the Certifications of the Chief Executive Officer and Chief
Financial Officer about these and other matters filed as exhibits to this
report.
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STANADYNE CORPORATION AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 5: OTHER INFORMATION
On August 6, 2004, stockholders of the Company's parent (Holdings), led by AIP,
completed the sale of all of their stock to KSTA Acquisition, LLC, an affiliate
of Kohlberg & Company, L.L.C, for $218.4 million. In addition to AIP, the
selling stockholders included certain current and former members of management
of the Company. Immediately following this transaction, KSTA Acquisition, LLC
distributed all of the stock of Holdings to its parent, KSTA Holdings, Inc and
merged with and into the Company, which continues as the surviving corporation.
As a result, KSTA Holdings owns 100% of the stock of Holdings. The stock
purchase and the related transactions, including the issuance of new senior
subordinated notes, the entering into of a new senior secured credit facility,
the repayment of certain existing indebtedness, including the tender for the
existing Notes by KSTA Acquisition, LLC, and the payment of related fees and
expenses are collectively defined as the "Transactions". The Company will report
the necessary purchase accounting related to the Transactions in the third
quarter Form 10-Q, as the exact amounts are not known at this time.
The amounts necessary to consummate the Transactions totaled approximately $330
million, including approximately $218.4 million to purchase all of the
outstanding stock of Holdings, approximately $89.3 million to repay existing
indebtedness and approximately $17.5 million in related fees and expenses, and
approximately $4.8 million in net change in cash balances.
The Transactions were financed as follows:
- - a cash common equity investment of $105 million in Holdings by an investor
group led by Kohlberg Investors IV, LP and including certain members of
management of the Company;
- - KSTA Acquisition, LLC and the Company issued new senior subordinated notes
to various qualified institutional buyers for $160 million ("New Notes");
- - KSTA Acquisition, LLC and the Company borrowed $65 million under a new six
year term loan senior secured credit facility ("New Term Loans").
The New Notes bear interest of 10.0%, payable semi-annually and will mature on
August 15, 2014. The New Term Loans bear interest at prime plus 2.5% or Libor
plus 3.5% and principal is repaid in 0.25% quarterly installments with a final
payment of the unamortized balance due on August 6, 2010. The Company also
negotiated a new $35.0 revolving credit facility, which bears interest at prime
plus 1.25% or Libor plus 2.25% payable on August 6, 2009. This new revolving
credit facility requires that the Company maintain a minimum fixed charge
coverage ratio if available borrowings fall below $5.0 million. The New Term
Loans and revolving credit facility are secured by substantially all of the
Company's domestic accounts receivable, inventory and assets.
Immediately following the Transactions, the Company purchased $54.2 million of
the Notes per the terms of a tender offer dated July 19, 2004. The balance of
the outstanding Notes will be called by the Company according to the terms of
the original indenture.
In connection with the Transactions, the Company amended the terms of the
Management Stock Option Plan to provide for vesting of all unvested options and
purchased all of the
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STANADYNE CORPORATION AND SUBSIDIARIES
outstanding stock options requiring a charge in the third quarter of 2004 for
approximately $14.0 million.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.17 Stock Purchase Agreement Among KSTA Acquisition, LLC and The Sellers
Listed on Attached A Thereto, Relating to all the Outstanding Stock
of Stanadyne Automotive Holding Corp., dated June 23, 2004
31.1 Certification of Chief Executive Officer Pursuant to Rule 15d-14(a)
of the Securities Exchange Act as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Rule 15d-14(a) of the
Securities Exchange Act as Adopted Pursuant to Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
32 Certification Pursuant to Rule 15d-14(b) of the Securities Exchange
Act and 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
b. Report on Form 8-K
On June 24, 2004, the Company filed a report on Form 8-K dated June 24,
2004 to report under Items 1 and 7 a press release announcing that a
definitive agreement has been reached to sell 100% of the stock of
Stanadyne's parent, Stanadyne Automotive Holding Corp., to an affiliate
of Kohlberg & Company, L.L.C.
On July 16, 2004, the Company furnished a report on Form 8-K dated July
16, 2004 to report under Item 12 its financial results for the quarter
ended June 30, 2004.
On July 22, 2004, the Company filed a report on Form 8-K dated July 21,
2004 to report under Items 5 and 7 a press release announcing an
offering of senior subordinated notes due 2014.
On July 22, 2004, the Company furnished a report on Form 8-K dated July
22, 2004 to report under Item 9 certain financial information about the
Company.
On August 9, 2004, the Company furnished a report on Form 8-K dated
August 6, 2004 to report under Items 7 and 9 a press release announcing
the conclusion of the sale on August 6, 2004 of 100% of the stock of
Stanadyne's parent, Stanadyne Automotive Holding Corp., to an affiliate
of Kohlberg & Company, L.L.C.
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STANADYNE CORPORATION 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 Corporation
---------------------
(Registrant)
Date: August 13, 2004 /s/ Stephen S. Langin
---------------------
Stephen S. Langin
Vice President and
Chief Financial Officer
- 34 -
EXHIBIT INDEX:
10.17 Stock Purchase Agreement Among KSTA Acquisition, LLC and The
Sellers Listed on Attached A Thereto, Relating to all the
Outstanding Stock of Stanadyne Automotive Holding Corp., dated
June 23, 2004
31.1 Certification of Chief Executive Officer Pursuant to Rule
15d-14(a) of the Securities Exchange Act as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Rule
15d-14(a) of the Securities Exchange Act as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification Pursuant to Rule 15d-14(b) of the Securities
Exchange Act and 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002