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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) April 14, 1997
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RENTAL SERVICE CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 000-21237 33-0569350
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
14505 North Hayden Road, Suite 322, Scottsdale, Arizona 85260
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(Address of Principal Executive Offices) (Zip Code)
(602) 905-3300
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(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
THE CURRENT REPORT ON FORM 8-K OF RENTAL SERVICE CORPORATION DATED APRIL 14,
1997 IS HEREBY AMENDED TO INCLUDE THE ADDITION OF THE FOLLOWING INFORMATION:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
The audited combined financial statements of Industrial Air Tool as of
and for the years ended March 31, 1997 and 1996 were filed as pages F-42
through F-51 of the Company's Registration Statement on Form S-1
(Registration No. 333-26753), and are incorporated herein by reference.
(b) Pro Forma Financial Information
The unaudited pro forma consolidated financial information of Rental
Service Corporation, including the acquisition of Industrial Air Tool,
is attached as Exhibit 99.1 to this Current Report on Form 8-K.
(c) Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------------------------------------------
23.1 Consent of Ernst & Young LLP.
99.1 Rental Service Corporation Unaudited Pro Forma
Consolidated Financial Information.
2
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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 hereunto duly authorized.
RENTAL SERVICE CORPORATION
Date: June 4, 1997 By: /s/ Robert M. Wilson
--------------------
Robert M. Wilson
Senior Vice President
Chief Financial Officer
3
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- ----------------------------------------------
23.1 Consent of Ernst & Young LLP.
99.1 Rental Service Corporation Unaudited Pro Forma
Consolidated Financial Information.
4
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Current Report on Form
8-K of Rental Service Corporation of our report dated May 6, 1997, with respect
to the combined financial statements of Industrial Air Tool as of March 31, 1996
and 1997 and for the years then ended, included in the Registration Statement
(Form S-1 No. 333-26753) and related Prospectus of Rental Service Corporation
for the registration of 5,520,000 shares of its common stock, filed with the
Securities and Exchange Commission on May 29, 1997.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
June 3, 1997
<PAGE>
EXHIBIT 99.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information of Rental
Service Corporation (the "Company") presents the unaudited pro forma
consolidated statements of operations for the year ended December 31, 1996 and
the three months ended March 31, 1997, and the unaudited pro forma consolidated
balance sheet at March 31, 1997. The pro forma consolidated statements of
operations for the year ended December 31, 1996 and the three months ended March
31, 1997 have been adjusted to give effect to the Company's acquisition of all
of the outstanding shares of Comtect, Inc. and subsidiaries d/b/a Industrial Air
Tool (the "IAT Acquisition"), as if the IAT Acquisition had occurred at the
beginning of the respective periods. The pro forma consolidated balance sheet
gives effect to the IAT Acquisition as if the IAT Acquisition had occurred on
March 31, 1997. The IAT Acquisition was completed on April 25, 1997 and IAT's
balance sheet was consolidated with the Company's under the purchase method of
accounting as of that date. Pursuant to the acquisition agreement, the Company
assumed effective control of IAT's operations on March 1, 1997 and has included
IAT's revenues, costs and expenses from such date in its consolidated statements
of operations, net of imputed purchase price adjustments.
The pro forma acquisition adjustments represent the Company's determination of
all adjustments necessary to present fairly the Company's pro forma results of
operations and financial position and are based upon available information and
certain assumptions considered reasonable under the circumstances. Purchase
accounting values have been assigned on a preliminary basis, and are subject to
adjustment when final information as to the fair values of the net assets
acquired is available. The pro forma consolidated financial information
presented herein does not purport to present what the Company's financial
position or results of operations would actually have been had such events
leading to the pro forma acquisition adjustments in fact occurred on the date or
at the beginning of the periods indicated or to project the Company's financial
position or results of operations for any future date or period.
The unaudited pro forma consolidated financial information should be read in
conjunction with the historical Consolidated Financial Statements of the Company
and the Notes thereto and management's discussion thereof contained in the
Company's Registration Statement on Form S-1 (Registration No. 333-26753)), as
filed with the Securities and Exchange Commission on May 29, 1997.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
IAT PRO FORMA
HISTORICAL ACQUISITION ACQUISITION PRO FORMA
COMPANY (1) ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals................................. $ 94,218 $ 7,319 $ -- $101,537
Sales of parts, supplies and equipment............ 34,136 41,694 -- 75,830
-------- ------- ------- --------
Total revenues..................................... 128,354 49,013 -- 177,367
Cost of revenues:
Cost of equipment rentals, excluding equipment
rental depreciation............................. 55,202 5,170 -- 60,372
Depreciation, equipment rentals................... 17,840 445 (206) (2) 18,079
Cost of sales of parts, supplies and equipment.... 24,070 33,307 -- 57,377
-------- ------- ------- --------
Total cost of revenues............................. 97,112 38,922 (206) 135,828
-------- ------- ------- --------
Gross profit....................................... 31,242 10,091 206 41,539
Selling, general and administrative expense........ 12,254 7,107 -- 19,361
Depreciation and amortization, excluding equipment
rental depreciation............................... 2,835 164 -- 2,999
Amortization of intangibles........................ 2,379 -- 571 (3) 2,950
-------- ------- ------- --------
Operating income................................... 13,774 2,820 (365) 16,229
Non-operating income............................... -- (373) 373 (4) --
Interest expense, net.............................. 7,063 67 2,639 (5) 9,769
-------- ------- ------- --------
Income before income taxes and extraordinary item.. 6,711 3,126 (3,377) 6,460
Provision for income taxes......................... 2,722 150 (249) (6) 2,623
-------- ------- ------- --------
Income before extraordinary item................... 3,989 2,976 (3,128) 3,837
Redeemable preferred stock accretion............... 1,643 -- -- 1,643
-------- ------- ------- --------
Income before extraordinary item available to
common shareholders............................... $ 2,346 $ 2,976 $(3,128) $ 2,194
======== ======= ======= ========
Income before extraordinary item per common and
common equivalent share............................ $ .33 $ .30
======== ========
Weighted average common and common equivalent
shares............................................ 7,218 7,407
(7) (8)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations
2
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(1) Represents the results of the IAT Acquisition prior to its acquisition by
the Company. The results of operations for the IAT Acquisition represent the
results for IAT's fiscal year ended March 31, 1997.
(2) Represents the elimination of the historical carrying value of rental
depreciation of the IAT Acquisition of $445,000 and the Company's estimate
of $239,000 for rental depreciation assuming the rental fleet acquired was
recorded to fair market value at the beginning of the period presented. As a
result, pro forma depreciation decreased by $206,000.
(3) Represents the Company's estimate of the amortization of goodwill for the
IAT Acquisition, as if the IAT Acquisition was consummated at the beginning
of the period presented.
(4) Represents the elimination of income earned on assets not acquired in the
IAT Acquisition.
(5) Represents the elimination of the IAT Acquisition's interest expense of
$67,000 and the effects on interest expense from borrowing to fund the IAT
Acquisition of $2,706,000, as if the transaction was consummated at the
beginning of the period presented. As a result, pro forma interest expense
increased by $2,639,000.
(6) Represents the adjustment to provide income taxes at the Company's effective
tax rate of 40.6%.
(7) The acquisition agreement for the IAT Acquisition provides for the potential
issuance of up to 108,108 shares of the Company's Common Stock over the
three year period following the acquisition if certain performance
objectives are met. The effect of the potential issuance of these shares is
not considered in the pro forma consolidated financial statements, as the
related performance objectives have not currently been achieved.
(8) Weighted average common and common equivalent shares includes 189,189 shares
of Common Stock issued for the IAT Acquisition.
3
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
IAT PRO FORMA
HISTORICAL ACQUISITION ACQUISITION PRO FORMA
COMPANY (1) ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals................................... $27,527 $1,029 $ -- $28,556
Sales of parts, supplies and equipment.............. 13,782 6,960 -- 20,742
------- ------ ----- -------
Total revenues....................................... 41,309 7,989 -- 49,298
Cost of revenues:
Cost of equipment rentals, excluding equipment
rental depreciation................................ 14,316 828 -- 15,144
Depreciation, equipment rentals..................... 6,306 81 (21) (2) 6,366
Cost of sales of parts, supplies and equipment...... 9,709 5,595 -- 15,304
------- ------ ----- -------
Total cost of revenues............................... 30,331 6,504 (21) 36,814
------- ------ ----- -------
Gross profit......................................... 10,978 1,485 21 12,484
Selling, general and administrative expense.......... 3,784 1,194 -- 4,978
Depreciation and amortization, excluding equipment
rental depreciation................................. 1,068 30 -- 1,098
Amortization of intangibles.......................... 624 -- 95 (3) 719
------- ------ ----- -------
Operating income..................................... 5,502 261 (74) 5,689
Non-operating income................................. -- (59) 59 (4) --
Interest expense, net................................ 1,597 13 400 (5) 2,010
------- ------ ----- -------
Income before income taxes and extraordinary item.... 3,905 307 (533) 3,679
Provision for income taxes........................... 1,722 37 (137) (6) 1,622
------- ------ ----- -------
Income before extraordinary item..................... $ 2,183 $ 270 $(396) $ 2,057
======= ====== ===== =======
Income before extraordinary item per common and
common equivalent share.............................. $ .19 $ .18
======= =======
Weighted average common and common equivalent
shares.............................................. 11,493 11,682
(7) (8)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations
4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(1) Represents the results of the IAT Acquisition prior to its acquisition by
the Company. Results of the IAT Acquisition subsequent to the acquisition
date are included in the Historical Company's results for the three months
ended March 31, 1997.
(2) Represents the elimination of the historical carrying value of rental
depreciation of the IAT Acquisition of $81,000 and the Company's estimate of
$60,000 for rental depreciation assuming the rental fleet acquired was
recorded to fair market value at the beginning of the period presented. As a
result, pro forma depreciation decreased by $21,000.
(3) Represents the Company's estimate of the amortization of goodwill for the
IAT Acquisition, as if the IAT Acquisition was consummated at the beginning
of the period presented.
(4) Represents the elimination of income earned on assets not acquired in the
IAT Acquisition.
(5) Represents the elimination of the IAT Acquisition's interest expense of
$13,000 and the effects on interest expense from borrowing to fund the IAT
Acquisition of $413,000, as if the transaction was consummated at the
beginning of the period presented. As a result, pro forma interest expense
increased by $400,000.
(6) Represents the adjustment to provide income taxes at the Company's effective
tax rate of 44.1%.
(7) The acquisition agreement for the IAT Acquisition provides for the potential
issuance of up to 108,108 shares of the Company's Common Stock over the
three year period following the acquisition if certain performance
objectives are met. The effect of the potential issuance of these shares is
not considered in the pro forma consolidated financial statements, as the
related performance objectives have not currently been achieved.
(8) Weighted average common and common equivalent shares includes 189,189 shares
of Common Stock issued for the IAT Acquisition.
5
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------------------------
PRO FORMA
HISTORICAL IAT ACQUISITION PRO FORMA
COMPANY ACQUISITION(1) ADJUSTMENTS COMBINED
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ 1,578 $ 7,165 $ (7,165) (2) $ 1,578
Accounts receivable, net............... 22,844 6,993 -- 29,837
Other receivables and prepaid expense.. 2,850 217 -- 3,067
Income tax receivable.................. 1,524 -- -- 1,524
Parts and supplies inventories, net.... 10,515 6,664 -- 17,179
Deferred taxes......................... 8,645 -- -- 8,645
Rental equipment, net.................. 155,395 1,010 200 (3) 156,605
Operating property and equipment,
at cost, net.......................... 20,764 1,377 200 (3) 22,341
Intangible assets...................... 41,048 -- 22,837 (4) 63,885
Other assets........................... 2,380 716 (368) (2) 2,728
-------- ------- -------- --------
$267,543 $24,142 $ 15,704 $307,389
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable....................... $ 33,265 $ 2,513 $ -- $ 35,778
Payroll and other accrued expenses..... 21,389 1,233 -- 22,622
Accrued interest payable............... 742 -- -- 742
Income taxes payable................... 939 -- -- 939
Deferred taxes......................... 12,863 -- -- 12,863
Bank debt and long term obligations.... 101,569 705 31,895 (5) 134,169
Obligations under capital leases....... 55 -- -- 55
-------- ------- -------- --------
Total liabilities...................... 170,822 4,451 31,895 207,168
Redeemable common stock................ -- 10,775 (10,775) (2) --
Stockholders' equity:
Preferred stock....................... -- 891 (891) (6) --
Common stock (7)...................... 114 12 (10) (6) 116
Additional paid-in capital............ 93,917 -- 3,498 (6) 97,415
Retained earnings..................... 2,690 8,013 (8,013) (6) 2,690
-------- ------- -------- --------
Total stockholders' equity............. 96,721 8,916 (5,416) 100,221
-------- ------- -------- --------
$267,543 $24,142 $ 15,704 $307,389
======== ======= ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(1) The purchase method of accounting has been used in preparing the Unaudited
Pro Forma Consolidated Financial Statements of the Company with respect to
the IAT Acquisition. Purchase accounting values have been assigned to the
IAT Acquisition on a preliminary basis.
(2) Represents assets not acquired or liabilities not assumed in the IAT
Acquisition.
(3) Represents preliminary estimates of fair market value step-up for assets
acquired in the IAT Acquisition.
(4) Represents the estimated fair market value of goodwill represented by the
excess purchase price over the estimated fair market value of the net assets
acquired in the IAT Acquisition.
(5) Represents borrowings under the Company's Revolver to fund the IAT
Acquisition.
(6) Represents the elimination of the equity accounts of the IAT Acquisition and
the effect of the issuance of 189,189 shares of Common Stock for the IAT
Acquisition.
(7) The acquisition agreement for the IAT Acquisition provides for the potential
issuance of up to 108,108 shares of the Company's Common Stock over the
three year period following the acquisition if certain performance
objectives are met. The effect of the potential issuance of these shares is
not considered in the pro forma consolidated financial statements, as the
related performance objectives have not currently been achieved.
7
