UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 31, 1996
Fansteel Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-8676 36-1058780
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
Number One Tantalum Place
North Chicago, Illinois 60064
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 689-4900
None
(Former name or address, if changed since last report)
On August 14, 1996, Fansteel Inc. (the "Registrant") filed a current report on
Form 8-K (the "Current Report") pertaining to the acquisition by its wholly-
owned subsidiary AST Acquisition Corp. on July 31, 1996 of all of the assets and
certain liabilities of American Sintered Technologies, Inc. (AST). At the time
of the filing of the Current Report, it was impractical for the Registrant to
provide financial statements and pro forma financial information for AST.
Pursuant to the instructions for Item 7 of Form 8-K, the Registrant hereby
amends Item 7 of the Current Report to include the previously omitted
information, as follows:
Item 7. Financial statements, pro forma financial information and exhibits.
a) Financial statements
1) Financial statements of American Sintered
Technologies, Inc. at December 31, 1995 and for
the year ended December 31, 1995.
2) Unaudited financial statements at June 30, 1996
and for the six month periods ended June 30, 1996
and 1995.
b) Pro forma financial information
1) Unaudited pro forma financial information for the
Registrant at June 30, 1996 and for the periods
ended June 30, 1996 and December 31, 1995.
c) Exhibits
2.1) Asset Purchase Agreement, dated July 26, 1996,
among AST Acquisition Corp., American Sintered
Technologies, Inc., and the shareholders of
American Sintered Technologies, Inc.*
99.1) Press release dated July 31, 1996.*
*Previously filed on August 14, 1996
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.
Fansteel Inc.
(Registrant)
Date: October 11, 1996 \s\ R. Michael McEntee
R. Michael McEntee
Vice President and Chief Financial Officer
Financial Statements
American Sintered Technologies, Inc.
Year ended December 31, 1995
with Report of Independent Auditors
Report of Independent Auditors
The Board of Directors and Stockholders
American Sintered Technologies, Inc.
We have audited the accompanying balance sheet of American Sintered
Technologies, Inc. as of December 31, 1995, and the related statements of income
and retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Sintered Technologies,
Inc. at December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
\s\ Ernst & Young
September 18, 1996
American Sintered Technologies, Inc.
Balance Sheet
As of December 31, 1995
ASSETS
Current assets:
Cash and cash equivalents $ 226,557
Accounts receivable 677,447
Inventories
Raw materials 94,235
Work-in-process 102,560
Finished goods 127,139
323,934
Other assets - current 20,968
Total current assets 1,248,906
Property, plant and equipment
Land 114,471
Buildings 863,745
Machinery and equipment 2,971,284
3,949,500
Less accumulated depreciation (2,031,103)
1,918,397
Total Assets $ 3,167,303
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 535,810
Accrued payrolls 42,433
Accrued vacation 26,000
Accrued payroll taxes 6,395
Accrued interest payable 4,734
Accrued commissions 45,072
Unearned revenue 50,000
Current portion of long-term debt 342,580
Total current liabilities 1,053,024
Long-term debt 1,430,619
Stockholders' equity:
Capital stock, no par value; 100,000
shares authorized; 2,000 shares
issued and outstanding 200,400
Retained earnings 483,260
Total stockholders' equity 683,660
Total liabilities and stockholders'
equity $ 3,167,303
See notes to the financial statements
American Sintered Technologies, Inc.
Statement of Income and Retained Earnings
Year Ended December 31, 1995
Net sales $ 8,314,996
Costs and expenses:
Cost of goods sold 6,769,090
Selling, general and administrative 687,741
7,456,831
Operating income 858,165
Other income (expense):
Interest income 6,852
Interest expense (114,847)
Miscellaneous income 16,851
(91,144)
Net income 767,021
Retained earnings at beginning of year 819,839
Distributions to shareholders (1,103,600)
Retained earnings at end of year $ 483,260
See notes to the financial statements
American Sintered Technologies, Inc.
Statement of Cash Flows
Year Ended December 31, 1995
Cash flows from operating activities:
Net income $ 767,021
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 452,946
Changes in assets and liabilities:
Increase in accounts receivable (46,101)
Increase in inventories (31,378)
Increase in other assets - current (4,844)
Increase in accounts payable 261,404
Increase in accrued liabilities 10,913
Net cash provided by operating activities 1,409,961
Cash flows from investing activities:
Capital expenditures (394,464)
Net cash used in investing activities (394,464)
Cash flows from financing activities:
Proceeds from long-term debt 320,500
Payments of long-term debt (294,389)
Shareholder distributions (1,103,600)
Net cash used in financing activities (1,077,489)
Net decrease in cash and cash equivalents (61,992)
Cash and cash equivalents at beginning of year 288,549
Cash and cash equivalents at end of year $ 226,557
Cash payments for interest $ 115,002
See notes to the financial statements
American Sintered Technologies, Inc.
Notes to the Financial Statements
1. DESCRIPTION OF BUSINESS
American Sintered Technologies, Inc. was organized under the laws of the
Commonwealth of Pennsylvania on February 9, 1988. The primary business purpose
of the Company is the manufacturing of pressed metal products for sale to
primarily domestic wholesalers. The Company sells to the automotive, lawn and
garden, plumbing, hardware and electrical hardware industries, with the heaviest
concentration in the automotive and electrical hardware industries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid debt instruments with an
original maturity of three months or less.
INVENTORIES
Inventories are carried at cost, determined on a first-in, first-out basis, but
not in excess of market.
PLANT AND EQUIPMENT
Property and equipment additions are recorded at cost. Maintenance, repairs,
and renewals are expensed and additions and improvements are capitalized.
Depreciation is computed using the Modified Accelerated Cost Recovery System
(MACRS). Property and equipment are categorized into the following estimated
useful lives in order to compute depreciation expense:
Years
Buildings 5-31.5
Machinery and Equipment 3-7
Auto and Truck 5
Office Equipment 3-5
INCOME TAXES
The Company, with consent of its shareholders, has elected under the Internal
Revenue Code and the tax laws of the Commonwealth of Pennsylvania to be an S
corporation. In lieu of corporation income taxes, the shareholders of an S
corporation are taxed on their proportionate share of the Company's taxable
income. Therefore, no provision or liability for income taxes has been included
in these financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
American Sintered Technologies, Inc.
Notes to the Financial Statements
3. LONG-TERM DEBT
a) Long-term debt at December 31, 1995 consisted of the following:
Current
Balance Portion
Notes payable to Integra Bank, payable in
monthly installments of various amounts
including interest ranging from local prime
plus 1/2% to local prime plus 2%, final
payments due between March 1998 and May
2017, collateralized by certain items of
property, plant and equipment and certain
current assets. $ 904,823 $ 155,366
Note payable to the Commonwealth of
Pennsylvania, payable in monthly
installments of $3,479.14 including interest
at 2%, final payment due May 2001,
collateralized by certain items of
equipment. 214,155 37,812
Notes payable to North Central Pennsylvania
Regional Planning and Development
Commission, payable in monthly installments
of various amounts including interest
ranging from 5% to 5.5%, final payments due
between February 1997 and September 2000,
collateralized by certain items of
equipment. 226,619 66,986
Notes payable to Cameron County Revolving
Loan Fund, payable in monthly installments
of various amounts including interest
ranging from 4% to 4.5%, final payments due
between July 1997 and November 1999,
collateralized by certain items of
equipment. 203,579 68,117
Note payable to Cameron County Industrial
Planning Corporation, payable in monthly
installments of $1,554.09 including interest
at 2%, final payment due September 2009,
collateralized by certain items of property
and plant. $ 224,023 $ 14,299
Totals 1,773,199 $ 342,580
Less: Current Portion (342,580)
Long Term Debt $ 1,430,619
American Sintered Technologies, Inc.
Notes to the Financial Statements
Maturities of long term debt are as follows:
Year Ended
December 31, Amount
1996 $ 342,580
1997 345,443
1998 326,833
1999 295,793
2000 163,558
Thereafter 298,992
Total $ 1,773,199
Total interest incurred for the year ended December 31, 1995 was charged to
interest expense and none was capitalized.
The Company's loan agreements with the various lenders include, among other
items, personal guarantees by all shareholders on all indebtedness. Various
life insurance policies which insure the shareholders and are owned by the
Company are assigned as additional collateral on all of the loans outstanding
with the North Central Pennsylvania Regional Planning and Development Commission
and the Cameron County Revolving Loan Fund.
The fair value of the Company's debt is $1,791,500 which was estimated using a
discounted cash flow analysis, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
b) Assets subject to lien are as follows:
Cost
Land $ 114,471
Buildings 863,745
Machinery and equipment 2,971,284
3,949,500
Accumulated depreciation (2,031,103)
Net property, plant and equipment
subject to lien 1,918,397
Accounts receivable 677,447
Inventory 283,934
$ 2,879,778
5. SUBSEQUENT EVENTS
On July 31, 1996, the Company sold all of its assets and certain liabilities to
AST Acquisition Corp., a wholly-owned subsidiary of Fansteel Inc., for the cash
price of $6,924,615. In addition to the cash paid, Fansteel Inc. assumed
$954,094 of low-interest municipal loans. These loans are subject to approval
of transfer by the various agencies, which should be completed within 90 days of
the close. Any loan not transferred will be paid off by Fansteel Inc.
Financial Statements
American Sintered Technologies, Inc.
At June 30, 1996
and For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
American Sintered Technologies, Inc.
Balance Sheet
June 30, 1996
(Unaudited)
ASSETS
Current assets:
Cash $ 116,206
Accounts receivable 984,058
Inventories
Raw materials 131,230
Work-in-process 92,048
Finished goods 121,828
345,106
Other assets - current 53,696
Total current assets 1,499,066
Property, plant and equipment
Land 114,471
Buildings 869,514
Machinery and equipment 3,378,331
4,362,316
Less accumulated depreciation (2,215,933)
2,146,383
Total Assets $ 3,645,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 622,334
Accrued liabilities 241,854
Current portion of long-term debt 387,594
Total current liabilities 1,251,782
Long-term debt 1,607,454
Stockholders' equity:
Capital stock, no par value; 100,000 shares
authorized; 2,000 shares issued and
outstanding 200,400
Retained earnings 585,813
Total stockholders' equity 786,213
Total liabilities and stockholders' equity $ 3,645,449
See notes to the financial statements
American Sintered Technologies, Inc.
Statement of Income and Retained Earnings
(Unaudited)
Six Months Ended
June 30, June 30,
1996 1995
Net sales $ 4,043,071 $ 4,395,172
Costs and expenses:
Cost of goods sold 3,281,379 3,449,330
Selling and administrative 368,941 352,018
3,650,320 3,801,348
Operating income 392,751 593,824
Other income (expense):
Interest income 2,399 3,599
Interest expense (57,081) (56,403)
Miscellaneous expense (8,116) (12,985)
(62,798) (65,789)
Net income 329,953 528,035
Retained earnings at beginning of year 483,260 819,839
Distributions to shareholders (227,400) (647,399)
Retained earnings at June 30 $ 585,813 $ 700,475
See notes to the financial statements
American Sintered Technologies, Inc.
Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30, June 30,
1996 1995
Cash flows from operating activities:
Income before income taxes $ 329,954 $ 528,035
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation 184,829 197,101
Changes in assets and liabilities:
(Increase) in accounts receivable (306,611) (176,712)
(Increase) in inventories (21,173) (44,961)
(Increase) in other assets - current (32,728) (64,787)
Increase in accounts payable and
accruals 153,744 388,219
Net cash provided by operating activities 308,015 826,895
Cash flows from investing activities:
Capital expenditures (412,815) (328,831)
Net cash used in investing activities (412,815) (328,831)
Cash flows from financing activities:
Proceeds from long-term debt 400,000 160,000
Payments of long-term debt (178,151) (138,681)
Shareholder distributions (227,400) (647,399)
Net cash used in financing activities (5,551) (626,080)
Net decrease in cash (110,351) (128,016)
Cash at beginning of year 226,557 288,549
Cash at June 30 $ 116,206 $ 160,533
See notes to the financial statements
American Sintered Technologies, Inc.
Notes to Financial Statements
(Unaudited)
The balance sheet at June 30, 1996, and the statements of income and retained
earnings and cash flows for the six months ended June 30, 1996 and 1995, are
unaudited, but include all adjustments (consisting only of normal and recurring
accruals) which the Company considers necessary for fair presentation.
The accompanying financial statements do not include all disclosures normally
provided in annual financial statements and, therefore, should be read in
conjunction with the December 31, 1995 financial statements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
On July 31, 1996, the Company sold all of its assets and certain liabilities
to AST Acquisition Corp., a wholly-owned subsidiary of Fansteel Inc., for the
cash price of $6,924,615. In addition to the cash paid, Fansteel Inc. assumed
$954,094 of low-interest municipal loans. These loans are subject to approval
of transfer by the various agencies, which should be completed within 90 days of
the close. Any loan not transferred will be paid off by Fansteel Inc.
Fansteel Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1995
(in thousands of dollars, except per share data)
Pro Forma
American Pro Consol.
Sintered Dr (Cr) Forma Statement
Fansteel Tech. Pro Forma Adj. of
Inc. Inc. Adjustment Ref. Operations
Net Sales $ 102,598 $ 8,315 $ $ 110,913
Cost and Expenses
Cost of products
sold 84,952 6,769 210 (1) 91,931
Selling, general
and administrative 13,211 688 152 (2) 14,051
98,163 7,457 362 105,982
Operating Income 4,435 858 (362) 4,931
Other Inc/(Exp)
Interest income on
investments 1,216 - (332) (3) 884
Interest other, net (2) (108) 83 (4) (27)
Other (135) 17 (118)
1,079 (91) (249) 739
Income Before Income
Taxes 5,514 767 (611) 5,670
Provision for Income
Taxes 2,181 - 61 (5) 2,242
Net Income $ 3,333 $ 767 $ (672) $ 3,428
Net Income Per Share $ .39 $ .09 $ (.08) $ .40
Average Common
Shares Outstanding 8,598,858 8,598,858 8,598,858 8,598,858
See explanatory notes for pro forma adjustments
Fansteel Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Six Months Ended June 30, 1996
(in thousands of dollars, except per share data)
Pro Forma
American Pro Consol.
Sintered Dr (Cr) Forma Statement
Fansteel Tech. Pro Forma Adj. of
Inc. Inc. Adjustment Ref. Operations
Net Sales $ 59,577 $ 4,043 $ $ 63,620
Cost and Expenses
Cost of products
sold 49,328 3,281 141 (1) 52,750
Selling, general
and administrative 7,119 369 52 (2) 7,540
56,447 3,650 193 60,290
Operating Income 3,130 393 (193) 3,330
Other Inc/(Exp)
Interest income on
investments 495 - (178) (3) 317
Interest other, net (2) (55) 38 (4) (19)
Other (47) (8) (55)
446 (63) (140) 243
Income Before Income
Taxes 3,576 330 (333) 3,573
Provision (Benefit)
for Income Taxes 1,417 - (1) (5) 1,416
Net Income $ 2,159 $ 330 $ (332) $ 2,157
Net Income Per Share $ .25 $ .04 $ (.04) $ .25
Average Common
Shares Outstanding 8,598,858 8,598,858 8,598,858 8,598,858
See explanatory notes for pro forma adjustments
Fansteel Inc.
Notes to Consolidated Pro Forma Statements of Operations
The accompanying consolidated pro forma statements of operations reflect the
acquisition of AST as if the acquisition had occurred on January 1, 1995. The
adjustments to reflect the acquisition are as follows:
1) Adjustment to Cost of Products Sold:
1995 1996
Amortization of goodwill $ 230 $ 115
Adjustment to depreciation
to reflect step-up in basis
and conform to Fansteel's
depreciation methods (172) (26)
Adjustments to reflect changes
in compensation to prior owners 152 52
$ 210 $ 141
2) Adjustments to reflect changes in compensation to prior owners.
3) Elimination of interest earned on investments sold to purchase AST.
4) Elimination of interest expense on debt of AST not assumed.
5) Adjustments at statutory rates to Provision (Benefit) for Income
Taxes:
1995 1996
Adjustment to reflect provision for
income taxes on AST income which
had been taxed directly to the
shareholders $ 301 $ 130
Adjustment for pro forma
adjustments (240) (131)
$ 61 $ (1)
Fansteel Inc.
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 1996
(in thousands of dollars)
American Pro Pro Forma
Sintered Forma Consol.
Fansteel Tech. Pro Forma Adj. Balance
Inc. Inc. Adjustments Ref. Sheet
Assets:
Current Assets
Cash and cash
equivalents $ 4,950 $ 116 $ (1,456) (1)(5) $ 3,610
Marketable
securities 3,210 - (2,981) (1) 229
Accounts receivable 18,378 984 19,362
Inventories:
Raw materials and
supplies 3,915 131 4,046
Work-in-process 12,481 92 12,573
Finished goods 5,735 82 5,817
22,131 305 - 22,436
Less: LIFO reserve 6,888 - 6,888
15,243 305 - 15,548
Other assets -
current:
Deferred income
taxes 1,150 - 1,150
Other 1,519 54 1,573
44,450 1,459 (4,437) 41,472
Net Assets of Disc.
Operations 2,181 - 2,181
Property, Plant and
Equipment
Land 1,338 114 (31) 1,421
Buildings 9,740 870 (270) 10,340
Machinery and
equipment 45,572 3,378 (178) 48,772
56,650 4,362 (479) 60,533
Accumulated
Depreciation 46,404 2,216 (2,216) 46,404
10,246 2,146 1,737 (2) 14,129
Other Assets
Marketable
securities 12,589 - (2,604) (1) 9,985
Prepaid pension
asset 7,704 - 7,704
Deferred income
taxes 20 - 20
Property held for
sale 1,129 - 1,129
Goodwill - - 3,455 (3) 3,455
Other 53 - 53
$ 78,372 $ 3,605 $ (1,849) $ 80,128
See explanatory notes for pro forma adjustments
Fansteel Inc.
Unaudited Pro Forma Consolidated Balance Sheet
(Cont'd.)
June 30, 1996
(in thousands of dollars)
American Pro Pro Forma
Sintered Forma Consol.
Fansteel Tech. Pro Forma Adj. Balance
Inc. Inc. Adjustments Ref. Sheet
Liabilities and
Equity:
Current Liabilities
Accounts payable $ 10,694 $ 622 $ 44 (4) $ 11,360
Accrued liabilities 8,756 192 (8) (5) 8,940
Accrued income
taxes 305 - 305
Current maturities
of long-term debt 77 388 (165) (5) 300
19,832 1,202 (129) 20,905
Long-term Debt 252 1,607 (877) (5) 982
Other Liabilities
Discontinued
operations 3,500 - 3,500
Deferred income
taxes 1,621 - 1,621
5,121 - - 5,121
Shareholders' Equity
Preferred stock - - -
Common stock 21,497 200 (200) (6) 21,497
Unrealized gain on
marketable
securities 2 - 2
Retained earnings 31,668 596 (643) (6) 31,621
53,167 796 (843) 53,120
$ 78,372 $ 3,605 $ (1,849) $ 80,128
See explanatory notes for pro forma adjustments
Fansteel Inc.
Notes to Consolidated Pro Forma Balance Sheet
The accompanying consolidated pro forma balance sheet reflects the acquisition
of AST as if the acquisition had occurred on June 30, 1996. The adjustments to
reflect the acquisition are as follows:
1) Reflects cash purchase price of AST.
2) Reflects write-up of fixed assets to agreed upon purchase price at
estimated fair value.
3) Record goodwill arising from acquisition of AST.
4) Reflects purchase price adjustment payable for working capital account
changes from December 31, 1995 to close per Purchase Agreement.
5) Reflects assets not acquired, and liabilities and debt of AST not
assumed by Registrant.
6) Reflects elimination of prior equity of AST.
