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): February 5, 1996
KINARK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-3920 71-0268502
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
7060 South Yale Avenue, Tulsa, OK 74136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 494-0964
N/A
(Former name or former address, if changed since last report.)
(Page 1 of 27 pages. Exhibit index appears on page ____.)
<PAGE>
Item 7 is hereby amended to read as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Report of Independent Auditors
Consolidated Balance Sheets as of September 30, 1995 and 1994
Consolidated Statements of Income and Retained Earnings for years
ended September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements for the years ended
September 30, 1995, 1994 and 1993
Condensed Consolidated Balance Sheet (Unaudited) as of December 31,
1995
Condensed Consolidated Statement of Income and Retained Earnings
(Unaudited) for the three months ended December 31, 1995
Condensed Consolidated Statement of Cash Flows (Unaudited) for the
three months ended December 31, 1995
Notes to Condensed Consolidated Financial Statements (Unaudited) for
the three months ended December 31, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Rogers Galvanizing Company:
We have audited the accompanying consolidated balance sheets of Rogers
Galvanizing Company and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash flows
for each of the three years in the period ended September 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rogers Galvanizing
Company and subsidiaries as of September 30, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1995 in conformity with generally accepted accounting
principles.
/s/ Hogan & Slovacek, PC
HOGAN & SLOVACEK, PC
November 20, 1995<PAGE>
ROGERS GALVANIZING COMPANY
Consolidated Balance Sheets
September 30, 1995 and 1994
ASSETS
1995 1994
CURRENT ASSETS:
Cash $ 312,326 $ 327,202
Cash-workers' compensation reserve 84,667 23,904
Certificate of deposit 50,000 50,000
Accounts receivable, less reserve for
doubtful accounts of $58,181 in
1995 and $45,138 in 1994 2,414,986 2,156,576
Inventories 978,931 639,495
Income taxes receivable - 37,000
Deferred income taxes 202,000 178,500
Prepaid expenses 88,456 58,111
Total current assets 4,131,366 3,470,788
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 175,172 75,172
Buildings 951,234 795,858
Shop equipment 5,584,697 4,883,002
Office equipment 238,876 216,631
Plant yard 198,868 177,898
Automobiles and trucks 123,009 108,481
Construction in progress 163,554 32,618
7,435,410 6,389,660
Less-accumulated depreciation 3,227,538 3,008,592
Total property, plant and equipment 4,207,872 3,381,068
OTHER ASSETS 132,341 -
$8,471,579 $6,851,856
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 934,488 $ 877,464
Accounts payable 780,379 858,816
Accrued workers' compensation liability 334,504 310,680
Accrued employee health liability 110,718 79,953
Accrued retirement 27,347 25,252
Accrued payroll and payroll taxes 316,125 182,770
Other accrued liabilities 25,876 16,515
Income taxes payable 113,757 -
Total current liabilities 2,643,194 2,351,450
DEFERRED INCOME TAXES 115,800 61,500
ACCRUED RETIREMENT 68,625 95,973
LONG-TERM DEBT 1,192,462 654,800
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Common shares, $100 par value, 1,967 shares
authorized, 1,172 shares outstanding 117,200 117,200
Capital surplus 103,451 103,451
Retained earnings, per accompanying
statements 4,230,847 3,467,482
Total shareholders' equity 4,451,498 3,688,133
$8,471,579 $6,851,856
The accompanying notes are an integral part of these financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
Consolidated Statements of Income and Retained Earnings
For the Years Ended September 30, 1995, 1994 and 1993
1995 1994 1993
Sales $17,614,234 $12,624,796 $11,544,123
Costs and expenses:
Costs of sales 12,764,067 9,447,974 7,806,927
Selling, general &
administrative 2,443,072 2,127,505 1,713,037
Depreciation 807,278 671,681 550,108
Operating earnings 1,599,817 377,636 1,474,051
Other (income) expense:
Interest expense, net 133,497 19,290 22,466
Other (107,869) (69,427) (66,389)
Earnings before income taxes 1,574,189 427,773 1,517,974
Income tax expense 585,800 104,000 511,000
Net earnings 988,389 323,773 1,006,974
Retained earnings, beginning of year 3,467,482 3,603,133 2,821,183
Dividends paid ($192 per share in
1995, $392 per share in 1994
and $192 per share in 1993) (225,024) (459,424) (225,024)
Retained earnings, end of year $4,230,847 $3,467,482 $3,603,133
The accompanying notes are an integral part of these financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $988,389 $323,773 $1,006,974
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 807,278 671,681 550,108
Deferred income taxes 30,800 (29,000) (61,000)
Changes in operating assets and liabilities:
(Increase) in accounts
receivable (258,410) (424,173) (470,087)
(Increase) in inventories (339,436) (71,951) (62,672)
(Increase) decrease in
income taxes receivable 37,000 (17,000) 27,598
(Increase) in prepaid
expenses (30,345) (20,365) (19,638)
Increase (decrease) in
accounts payable (78,437) 321,371 95,965
Increase in workers'
compensation liability 23,824 57,827 118,702
Increase (decrease) in accrued
employee health liability 30,765 (17,325) 97,278
Increase (decrease) in accrued
payroll and payroll taxes 133,355 (142,875) 130,255
Increase (decrease) in other
accrued liabilities 9,361 (10,836) 8,265
Increase (decrease) in income
taxes payable 113,757 (129,745) 129,745
(Decrease) in accrued
retirement (25,253) (23,317) (88,170)
Total adjustments 454,259 164,292 456,349
Net Cash provided by operating
activities 1,442,648 488,065 1,463,323
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant
and equipment (1,144,082) (972,825) (922,582)
Purchase of other assets (132,341) - -
Net cash used in
investing activities (1,276,423) (972,825) (922,582)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (225,024) (459,424) (225,024)
Proceeds from debt 1,226,917 900,000 -
Payments on debt (1,122,231) (83,375) (24,554)
Net cash provided by (used
in) financing activities (120,338) 357,201 (249,578)
NET INCREASE (DECREASE) IN CASH 45,887 (127,559) 291,163
CASH, beginning of year 401,106 528,665 237,502
CASH, end of year $446,993 $401,106 $528,665
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $149,759 $34,255 $29,941
Income taxes paid $397,835 $214,742 $414,657
The Accompanying notes are an integral part of these financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
Notes to Consolidated Financial Statements
For the Years Ended September 30, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Rogers Galvanizing Company and its subsidiaries (the Company) is engaged in the
hot dip galvanizing of steel structures and components to customer
specifications. On September 27, 1995, the Company acquired the business and
operating assets of another galvanizing company.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Rogers Galvanizing Company and its wholly-owned subsidiaries, Reinforcing
Services, Inc., Spin-Galv, Inc. and Rogers Galvanizing Company - Kansas City,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.
Inventories
Inventories are composed, primarily, of raw zinc "pigs", molten zinc in
galvanizing kettles and other chemicals and materials used in the galvanizing
process. Molten zinc is stated at the lower of cost or market, with cost
determined by the last-in, first-out (LIFO) method. All other inventories are
stated at the lower of cost or market, with cost determined by the first-in,
first-out (FIFO) method.
The molten zinc valued on a LIFO basis in the September 30, 1995 and 1994
financial statements was $661,631 and $503,623, respectively. The
corresponding approximate replacement cost for this inventory was $1,258,970
and $952,300 at September 30, 1995 and 1994, respectively.
Property, Plant and Equipment
Depreciation is provided using accelerated and straight-line methods over the
estimated useful lives of the related property, ranging from three to 20 years.
During 1994, the Company capitalized $15,619 of interest incurred after
entering into a capitalized equipment lease obligation until the equipment was
placed in service.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Profit Sharing Plan
The Company has a qualified 401(k) profit sharing plan for eligible employees.
Eligible employees may defer a portion of their salary. At the discretion of
the Board of Directors, the Company may make annual contributions to the plan,
but is not required to do so. The Company made no contributions in 1994 or
1995.
Other Assets
Other assets represent goodwill, capitalized acquisition costs and a non-
compete agreement relating to the formation of a wholly-owned subsidiary and
the acquisition of the business and operating assets of another galvanizing
company. The capitalized acquisition costs and non-compete agreement are being
amortized over five years and the acquired goodwill is being amortized over
fifteen years.
2. INCOME TAXES
The provision for income taxes consists of the following for the years ended
September 30,
1995 1994 1993
Current:
Federal $542,700 $133,000 $572,000
State 12,300 - -
555,000 133,000 572,000
Deferred:
Federal 30,800 (29,000) (61,000)
State - - -
$585,800 $104,000 $511,000
The income tax rate for financial reporting purposes varies from the federal
statutory rate as follows:
1995 1994 1993
Percent of pretax income:
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes, net of
federal benefit .8 - -
Non-deductible permanent differences .4 1.7 .4
Adjustment of prior year's estimated
liability - (9.7) -
Other items 2.0 (1.7) (.7)
Effective income tax rate for the year 37.2% 24.3% 33.7%
Significant components of the Company's deferred tax liabilities and assets at
September 30 are as follows:
1995 1994
Deferred tax liabilities:
Tax over book depreciation $142,400 $ 98,500
Deferred tax assets:
Accrued retirement 37,200 46,900
Self-insured insurance programs 168,800 151,100
Reserve for doubtful accounts 22,600 17,500
228,600 215,500
Net deferred tax assets $ 86,200 $117,000
Based on the Company's history of operating earnings and its expectations for
future operations, management believes that operating income will be sufficient
to allow the full realization of deferred tax assets.
3. ACCRUED RETIREMENT
At September 30, 1992, the Company was making monthly retirement payments to
two retired company executives. During the year ended September 30, 1993, one
of the retired executives died. The liability to the remaining executive was
adjusted to estimated remaining payments to be made as calculated by an
insurance company using standard mortality tables and recorded at net present
value using an 8 percent interest rate.
4. LINE OF CREDIT AND LONG-TERM DEBT
The Company's line of credit and long-term debt consisted of the following at
September 30:
1995 1994
Combined revolving bank line of credit,
up to $3,000,000 through July 31, 1996,
interest payable monthly at floating
prime plus .5%, (9.25% at September 30,
1995) secured by certain of the Company's
machinery and equipment, and its inventories
and accounts receivable, restricts payment
of cash dividends to not more than net income,
line is limited to $2,425,000 by a $575,000
workers' compensation self-insurance letter
of credit required by Oklahoma's Workers'
Compensation Court as discussed in Note 5 $511,608 $650,000
Note payable to bank in monthly installments
of $3,097 including interest at 7.2%, final
payment due October, 1996, secured by specific
equipment 30,411 69,029
Note payable to bank in monthly installments
of $4,684 including interest at floating prime
plus .5% (9.25% at September 30, 1995), final
payment due June, 1997, secured by equipment,
receivables, and inventory 95,749 142,828
Note payable to an unrelated Company, payable
in monthly installments of $3,331 including
interest at 3.5%, final payment due July, 1997,
unsecured 70,875 107,661
Unsecured note payable to a Company, payable
in monthly installments of $3,000, including
interest at 8%, through March, 1998 80,957 109,324
Revolving bank line of credit, up to $750,000
through September, 2000, payable in monthly
installments of principal and interest of
$15,660 at floating prime plus .5% (9.25% at
September 30, 1995) secured by certain of the
Company's machinery and equipment and its
inventories and accounts receivable, restricts
payment of cash dividends to not more than net
income. 448,489 -
Note payable to unrelated party in monthly
installments of $6,475 including interest at 10%
through September, 2000, at which time unpaid
principal is due. 490,000 -
4. LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
Note payable to Tulsa County Industrial Authority
in monthly installments of $237 including interest
at 6.8% due September, 2015, joint and severally
guaranteed by co-makers 30,764 -
Capitalized lease obligation for equipment 368,097 453,422
2,126,950 1,532,264
Less current maturities 934,488 877,464
$1,192,462 $654,800
The aggregate maturities of this debt are as follows:
1996 $ 934,488
1997 410,463
1998 288,777
1999 115,422
2000 350,501
Thereafter 27,299
$2,126,950
5. WORKERS' COMPENSATION INSURANCE
The Company utilizes a self-insured program for workers' compensation. This
program is limited to losses of $300,000 per claim, and aggregate losses of
$5,000,000 over a two-year period through the use of a stop-loss policy. As
required by Oklahoma's Workers' Compensation Court, the Company has a $575,000
letter of credit with a bank to ensure the Company's ability to pay workers'
compensation claims. This letter of credit is included in the $3,000,000
revolving bank line of credit described in Note 4. Claims are accrued based on
the Company's estimate of the aggregate liability for claims made and for
potential claims. The Company provided $658,340, $813,195, and $329,499 for
workers' compensation claims for the years ended September 30, 1995, 1994, and
1993, respectively. In addition, the Company incurred $83,574, $67,546, and
$68,573 for reinsurance and administrative expenses for the years ended
September 30, 1995, 1994, and 1993, respectively.
6. EMPLOYEE HEALTH INSURANCE
The Company adopted a self-insured program for employee health benefits on June
1, 1993. Under this program, responsibility for employee health care costs are
assumed by the Company with incurred costs above a specified amount covered by
a stop-loss insurance policy. For the years ended September 30, 1995, 1994,
and 1993, respectively, the Company provided $571,523, $475,615, and $155,228
for employee health care costs and paid out $293,754, $334,669, and $1,404 in
employee health care claims and incurred $247,003, $158,241, and $56,725 in
administrative costs and stop-loss insurance premiums.
7. NON-CASH TRANSACTIONS
During 1994, the Company entered into a capital lease obligation for equipment
totalling $466,519. In addition, the Company purchased inventory of $113,673
by issuing a note payable to an unrelated company. In 1995, the Company
purchased the operating assets of another galvanizer for cash and the issuance
of a note payable to an unrelated party in the amount $490,000.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising from time
to time in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect
on the Company's financial position, liquidity or results of operations.
The Company has long-term operating lease agreements for the use of facilities
at its subsidiaries which were entered into during 1994. Future related lease
obligations are as follows for the years ended September 30, 1996 - $156,000,
1997 - $68,000, 1998 - $27,000, 1999 - $27,000, 2000 - $27,000 and $134,775
thereafter. Rent expense for these facilities during 1995 and 1994 were
$134,227 and $29,210, respectively.
9. OBLIGATIONS UNDER CAPITAL LEASE
The Company acquired certain equipment under provisions of a long-term lease.
For financial reporting purposes, minimum lease rentals for the assets have
been capitalized. The following is a schedule of leased equipment under the
capital lease:
Capitalized cost $466,519
Less accumulated depreciation 68,034
$398,485
The following is a schedule by years of future minimum lease payments,
including renewal options, together with the present value of the net minimum
lease payments as of September 30, 1995:
Year Ended September 30,
1996 $116,514
1997 116,514
1998 116,514
1999 75,838
Total minimum lease payments 425,380
Less amount representing interest 57,283
Present value of net minimum lease payments $368,097
Current portion $ 90,331
Long-term portion 277,766
$368,097
The present value of net minimum lease payments are combined with other long-
term debt in the accompanying financial statements and Note 4.
<PAGE>
ROGERS GALVANIZING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31,1995
ASSETS
CURRENT ASSETS:
Cash $ 263,438
Accounts receivable, net 2,750,834
Inventories 1,071,700
Prepaid expenses 110,126
Total current assets 4,196,098
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 175,172
Galvanizing plants and equipment 6,851,668
Other 576,945
Construction in progress 569,925
8,173,710
Less accumulated depreciation (3,445,599)
Total property, plant and equipment 4,728,111
Deferred income taxes 202,000
Intangible assets 173,194
$9,299,403
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $1,371,487
Accounts payable 1,147,339
Accrued liabilities 787,660
Total current liabilities 3,306,486
DEFERRED INCOME TAXES 115,800
ACCRUED RETIREMENT 61,991
LONG-TERM DEBT 1,298,101
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY:
Common shares, $100 par value, 1,967 shares authorized,
1,172 shares outstanding 117,200
Capital surplus 103,451
Retained earnings 4,296,374
Total shareholders' equity 4,517,025
$9,299,403
See notes to consolidated financial statements.<PAGE>
ROGERS GALVANIZING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
Sales $4,498,107
Costs and expenses:
Costs of sales 3,464,688
Selling, general and administrative 577,668
Depreciation 216,181
Operating earnings 239,570
Other (income) expense:
Interest expense, net 56,972
Other (13,825)
Earnings before income taxes 196,423
Income tax expense 74,640
Net earnings 121,783
Retained earnings, beginning of period 4,230,847
Less: Dividends paid 56,256
Retained earnings, end of period $4,296,374
See notes to consolidated financial statements.<PAGE>
ROGERS GALVANIZING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 121,783
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 218,360
Changes in operating assets and liabilities:
Increase in accounts receivable (335,848)
Increase in inventories (92,769)
Increase in prepaid expenses (21,669)
Increase in accounts payable 366,960
(Decrease) in accrued liabilities (145,817)
Total adjustments (10,783)
Net cash provided by operating activities 111,000
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant and equipment (777,496)
Net cash used in investing activities (777,496)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (56,256)
Proceeds from debt 562,982
Payments on debt (23,785)
Net cash provided by financing activities 482,941
NET DECREASE IN CASH (183,555)
CASH, BEGINNING OF PERIOD 446,993
CASH, END OF PERIOD $ 263,438
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 59,668
Income taxes paid $ 62,437
See notes to consolidated financial statements.<PAGE>
ROGERS GALVANIZING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
Rogers Galvanizing Company (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim
reporting and include all normal and recurring adjustments which are, in
the opinion of management, necessary for a fair presentation. These
financial statements have not been audited by an independent accountant.
The consolidated financial statements include the accounts of the Company
and its subsidiaries, Reinforcing Services, Inc., Spin-Galv, Inc. and
Rogers Galvanizing Company - Kansas City, Inc., which was acquired on
September 27, 1995. All significant intercompany balances and
transactions have been eliminated in consolidation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that
the disclosures are adequate to make the information presented not
misleading. However, these consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto for the years ended September 30, 1995, 1994, and 1993, included
elsewhere in this Form 8-K/A. The financial data for the interim periods
presented may not necessarily reflect the results to be anticipated for
the complete year.
2. INVENTORIES
Inventories are composed primarily of raw zinc "pigs," molten zinc in
galvanizing kettles and other chemicals and materials used in the
galvanizing process. Molten zinc is stated at the lower of cost or
market, with cost determined by the last-in, first-out (LIFO) method. All
other inventories are stated at the lower of cost or market, with cost
determined by the first-in, first-out (FIFO) method.
3. ACQUISITION BY KINARK CORPORATION
On February 5, 1996, Kinark Corporation ("Kinark") acquired 51.2% of the
outstanding common stock of the Company for $4.3 million in cash from
Trusts that held such stock, and concurrently assumed control of the Board
of Directors. Additionally, on February 16, 1996, pursuant to five
separate option agreements, Kinark acquired an additional 16% of the
Company's outstanding common stock for $1.3 million in cash. The
acquisition will be accounted for using the purchase method of accounting.
Under the purchase agreement with the Trusts, Kinark has agreed to
purchase the Company's remaining outstanding shares of common stock from
its minority stockholders for cash at a price per share equivalent to that
paid in the transactions described above.
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION.
Pro Forma Consolidated Financial Data (Unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1995 (Unaudited)
Pro Forma Condensed Consolidated Income Statement for the year ended
December 31, 1995 (Unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements for
the year ended December 31, 1995 (Unaudited)
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following Pro Forma Consolidated Financial Data of Kinark Corporation (the
"Company") consists of a Pro Forma Condensed Consolidated Balance Sheet
(unaudited) as of December 31, 1995 (the "Pro Forma Balance Sheet"), and the
Pro Forma Condensed Consolidated Statement of Operations (unaudited) for the
year ended December 31, 1995 (the "1995 Pro Forma Statement of Operations").
The Pro Forma Balance Sheet reflects the combination of the balance sheets of
the Company as of December 31, 1995, and Rogers Galvanizing Company ("Rogers")
as of September 30, 1995, as adjusted for the issuance of 2,280,000 shares of
the Company's common stock under a Private Placement the proceeds of which were
used to acquire 67.2% of the outstanding common stock of Rogers in two
transactions on February 5 and February 16, 1996. The Pro Forma Balance Sheet
is presented as if the Rogers acquisition and the Private Placement had been
consummated on December 31, 1995.
The 1995 Pro Forma Statement of Operations reflects the combination of the
income statements of the Company for the year ended December 31, 1995, and of
Rogers for its fiscal year ended September 30, 1995, as if the transaction was
consummated on January 1, 1995.
The Company has not completed the purchase accounting for the acquisition,
including its assessment of the fair values of Rogers' assets and liabilities,
which, with the exception of a pro-rata adjustment to eliminate the LIFO
valuation reserve on Roger's zinc inventory, are reflected at Rogers'
historical cost in the accompanying Pro Forma Balance Sheet. The Company
expects to finalize its fair value assessment in 1996. Accordingly, the final
consolidated amounts may differ from those set forth herein.
The Pro Forma Consolidated Financial Data should be read in conjunction with
the separate historical financial statements of the Company, the related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's Annual Report on Form 10-K, as well as the
historical consolidated financial statements of Rogers appearing in this Form
8-K/A. The Pro Forma Consolidated Financial Data is based upon currently
available information and upon certain assumptions that the Company believes
are reasonable under the circumstances. The Pro Forma Consolidated Financial
Data does not purport to represent what the Company's financial position or
results of operations would actually have been if the aforementioned
transactions in fact had occurred on such date or at the beginning of the
periods indicated or to project the Company's financial position or results of
operations at any future date or for any future period.
<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 (Unaudited)
Historical
Kinark Rogers(a) Pro-Forma Pro-Forma
Adjustments Consolidated
(in thousands)
ASSETS
Current assets:
Cash $ 30 $ 447 $ 5,585 (b) $ 518
(5,544) (e)
Accounts receivable,
net 3,508 2,415 5,923
Net assets of
discontinued
operation 434 434
Inventories 2,615 979 401 (i) 3,995
Prepaid assets 566 88 (143) (e) 511
Deferred income taxes 202 202
Total current
assets 7,153 4,131 299 11,583
Fixed assets 30,455 7,435 37,890
Less accumulated
depreciation (21,448) (3,227) (24,675)
Fixed assets, net 9,007 4,208 13,215
Other assets:
Deferred income
taxes 2,070 2,070
Other assets 145 132 277
Excess of cost over
fair value of net
assets acquired 2,889 (e) 2,889
Total other
assets 2,215 132 2,889 5,236
Total $ 18,375 $ 8,471 $ 3,188 $30,034
See notes to pro forma condensed consolidated financial statements.(Continued)
<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 (Unaudited)
Historical
Kinark Rogers(a) Pro-Forma Pro-Forma
Adjustments Consolidated
(in thousands)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt
- current portion $ 628 $ 934 $ 1,562
Accrued retirement
liabilities 27 27
Accounts payable 1,593 780 2,373
Accrued expenses
- other 2,057 788 $ 377(e) 3,222
Accrued income taxes 114 114
Total current
liabilities 4,278 2,643 377 7,298
Long-term debt 5,670 1,192 6,862
Accrued retirement 68 325(f) 393
Lease obligations 262 262
Deferred income taxes 116 116
Total long-term
liabilities 5,932 1,376 325 7,633
Total liabilities 10,210 4,019 702 14,931
MINORITY INTEREST 1,353(e) 1,353
SHAREHOLDERS' EQUITY
Common Stock 520 117 228(b) 748
(117)(c)
Additional paid-in
capital 10,531 104 5,472(b) 15,888
(104)(c)
(115)(b)
Treasury Stock (5,976) (5,976)
Retained earnings 3,090 4,231 (4,231)(c) 3,090
Shareholders' equity 8,165 4,452 1,133 13,750
Total $18,375 $8,471 $ 3,188 $30,034
See notes to pro forma condensed consolidated financial statements.(Concluded)
<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995 (Unaudited)
Historical
Kinark Rogers(a) Pro-Forma Pro-Forma
Adjustments Consolidated
(in thousands, except share and per share data)
SALES $ 25,246 $17,614 $ 42,860
COSTS AND EXPENSES:
Cost of sales 20,524 13,509 34,033
Selling, general and
administrative 3,766 1,698 $(370)(d) 5,094
Depreciation and
amortization 1,471 807 115(d) 2,393
Operating earnings
(loss) (515) 1,600 255 1,340
OTHER (INCOME) EXPENSE:
Interest expense, net 634 134 768
Other (income) expense,
net - (108) (108)
Other expenses,
net 634 26 660
Earnings (loss) from continuing operations
before income taxes (1,149) 1,574 255 680
Income Taxes (446) 586 135(g) 275
Income (loss) from continuing operations
before minority
interest (703) 988 120 405
Minority interest - - 397(h) 397
Earnings (loss) from
continuing operations $ (703) $988 $(277) $ 8
Earnings (loss) per
share $ (0.19) $ -
Weighted average shares
outstanding 3,747,134 6,027,134
See notes to pro forma condensed consolidated financial statements.
<PAGE>
KINARK CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1995 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
(a)
The historical information for Rogers Galvanizing Company ("Rogers") in the
accompanying pro forma condensed consolidated financial statements for December
31, 1995 is based on that company's financial position as of September 30, 1995
and the results of their operations for the year then ended.
(b)
Issuance of 2,280,000 shares of Kinark Common Stock at $2.50 per share through
a Private Placement resulting in an increase of common stock of $228 and
additional paid-in capital of $5,357 (net of stock issuance costs of $115).
(c)
To reflect the elimination of Rogers' shareholders' equity in pro forma
consolidation.
(d)
Adjustments to reflect (i) the amortization of the excess of cost over fair
value of net assets acquired in the Rogers acquisition, using a straight-line
method over 25 years, and (ii) the elimination of salary and benefits relating
to Rogers' Chairman of the Board, who will retire effective upon the
acquisition by the Company.
(e)
Adjustment to reflect the purchase of 67.2% of Rogers common stock by Kinark.
For purposes of these pro forma statements, the historical amounts of Rogers'
assets and liabilities have not been adjusted to fair value with the exception
of those adjustments discussed in (f) and (i). Based upon current estimates,
fair values are not expected to differ materially from such historical amounts.
Adjustments based upon final determination of the fair values of assets
acquired and liabilities assumed will be made during 1996. The excess of cost
over fair value of net assets acquired is as follows:
Purchase cost:
Cash paid for Rogers common stock acquired
(includes $50 of earnest monies paid
prior to 1995) $ 5,594
Acquisition costs (including accrued costs of $377) 470
Total purchase cost 6,064
Liabilities assumed (including $325 from funding of retirement trust) 4,344
Minority interest 1,353
Total 11,761
Assets acquired (including an adjustment of $401 to eliminate
pro-rata share of LIFO valuation on Rogers' zinc inventory) 8,872
Excess of cost over fair value of net assets acquired $ 2,889
(f)
Adjustment to increase the liability related to the funding of certain life
insurance premiums for the benefit of the Rogers' Chairman of the Board
pursuant to a contractual requirement.
(g)
To reflect the tax effects of pro-forma adjustments.
(h)
Earnings from continuing operations attributable to minority interest.
(i)
Adjustment to eliminate pro-rata share of LIFO valuation reserve on Rogers'
zinc inventory.
<PAGE>
(C) EXHIBITS.
2.1. Stock Purchase Agreement entered into as of August 3, 1994, by
and among Kinark Corporation and The C.L. Simpson Inter Vivos
Revocable Trust and The Alta Rogers Simpson Inter Vivos
Revocable Trust, through their Interim Trustee, The Trust
Company of Oklahoma
2.2 Option Agreement dated October 10, 1995 between Kinark
Corporation and Deania L. Rogers and Paula Patterson, as trustee
of the Deania L. Rogers Marital Trust
2.3 Option Agreement dated October 10, 1995 between Kinark
Corporation and Ben C. Bishop
2.4 Option Agreement dated October 10, 1995 between Kinark
Corporation and J.W. Carpenter
2.5 Option Agreement dated October 10, 1995 between Kinark
Corporation and C.E. Story
2.6 Option Agreement dated October 10, 1995 between Kinark
Corporation and Thelma Lee Morris
99.1 Order Confirming Sale of Personal Property entered on December
21, 1994 by The District Court in and for Tulsa County, State of
Oklahoma
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
KINARK CORPORATION
By: /s/ Ronald J. Evans
Ronald J. Evans
President
Dated: April 19, 1996
