<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDED REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 12, 1996
-----------------------------
AMERICAN PRECISION INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-5601 16-1284388
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer-
of incorporation) File Number) Identification No.)
2777 Walden Avenue, Buffalo, New York 14225
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 684-9700
----------------------------
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
TOTAL PAGES - 22
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Page in
Document
--------
<S> <C>
(a) Financial Statements of Businesses Acquired
-------------------------------------------
Audited financial statements of Ketema, Inc. - Heat Transfer 4-16
Division for the years ended February 29, 1996 and
February 28, 1995.
(b) Pro Forma Financial Information
-------------------------------
Pro Forma Balance Sheet (Unaudited) as of December 29, 1995. 18-20
Pro Forma Statement of Earnings (Unaudited) for the year 21
ended December 29, 1995.
(c) Exhibits
--------
(23) Consent of Independent Accountants dated June 12, 1996. 22
</TABLE>
<PAGE> 3
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.
American Precision Industries Inc.
----------------------------------
(Registrant)
Date: June 12, 1996 /s/ John M. Murray
----------------------------------
Vice President - Finance
<PAGE> 4
KETEMA, INC. - HEAT [LOGO]
TRANSFER DIVISION
Financial Statements
February 29, 1996 and February 28, 1995
<PAGE> 5
3600 Marine Midland Center Telephone 716 856 4650
Buffalo, NY 14203
Price Waterhouse LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Owner of
Ketema, Inc. - Heat Transfer Division
In our opinion, the accompanying balance sheets and the related statements of
operations and of cash flows present fairly, in all material respects, the
financial position of the Heat Transfer Division of Ketema, Inc. at February 29,
1996 and February 28, 1995, and the results of its operations and its cash flows
for the year ended February 29, 1996 and the periods ended February 28, 1995 and
December 13, 1994 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Division's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As explained in Note 12, certain assets and liabilities of the Division were
sold to an unrelated company effective April 1, 1996.
/s/ Price Waterhouse LLP
Buffalo, New York
May 20, 1996
<PAGE> 6
KETEMA, INC. - HEAT TRANSFER DIVISION
<TABLE>
<CAPTION>
BALANCE SHEETS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- ----------------------------------------------------------------------------------------------------
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 41,000 $ 2,000
Accounts receivable, net 3,275,000 2,854,000
Inventories 3,318,000 2,964,000
Prepaid expenses 17,000 14,000
------------ ------------
Total current assets 6,651,000 5,834,000
Property, plant and equipment, net 2,791,000 2,899,000
Deferred income taxes - 78,000
------------ ------------
Total assets $ 9,442,000 $ 8,811,000
============ ============
LIABILITIES AND INTRA-COMPANY ACCOUNT
Current liabilities:
Accounts payable $ 1,844,000 $ 1,457,000
Accrued compensation and
employee related expenses 486,000 318,000
Accrued warranty expense 55,000 67,000
Other accrued expenses 219,000 279,000
------------ ------------
Total current liabilities 2,604,000 2,121,000
Deferred income taxes 86,000 -
Intra-company account 6,752,000 6,690,000
------------ ------------
Total liabilities and Intra-company account $ 9,442,000 $ 8,811,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 7
KETEMA, INC. - HEAT TRANSFER DIVISION
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
MARCH 1, DECEMBER 14, MARCH 1,
1995 TO 1994 TO 1994 TO
FEBRUARY 29 FEBRUARY 28, DECEMBER 13,
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
Net sales $ 21,776,000 $ 4,278,000 $ 13,434,000
--------------- --------------- --------------
Cost and expenses:
Cost of sales 17,480,000 3,596,000 10,998,000
Selling expenses 3,414,000 834,000 2,574,000
--------------- --------------- --------------
20,894,000 4,430,000 13,572,000
--------------- --------------- --------------
Operating profit (loss) before interest
income and income taxes 882,000 (152,000) (138,000)
Interest expense, net (454,000) (123,000) (449,000)
--------------- --------------- --------------
Income (loss) before income taxes 428,000 (275,000) (587,000)
Income taxes expense (benefit) 164,000 (104,000) (222,000)
--------------- --------------- --------------
Net income (loss) $ 264,000 $ (171,000) $ (365,000)
=============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 8
KETEMA, INC. - HEAT TRANSFER DIVISION
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------------
MARCH 1, DECEMBER 14, MARCH 1,
1995 TO 1994 TO 1994 TO
FEBRUARY 29, FEBRUARY 28, DECEMBER 13,
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 264,000 $ (171,000) $ (365,000)
Adjustments to reconcile net income
to cash provided by (used) operating
activities:
Depreciation and amortization 449,000 103,000 336,000
(Gain) loss on sale of fixed assets - - (20,000)
Deferred income taxes 164,000 (104,000) (222,000)
Change in assets and liabilities
Accounts receivable (421,000) (805,000) 322,000
Inventories (354,000) (76,000) 102,000
Prepaid expenses (3,000) 32,000 (34,000)
Accounts payable 387,000 163,000 310,000
Accrued compensation and employee
related expenses 168,000 85,000 (152,000)
Accrued warranty expense (11,000) - -
Other accrued expenses (60,000) (52,000) 28,000
------------- -------------- -------------
Net cash provided (used) by operations 583,000 (825,000) 305,000
Cash flow for investing activities:
Payments for capital expenditures (342,000) (87,000) (205,000)
Proceeds from sales of fixed assets - - 35,000
------------- -------------- -------------
Net cash used for investing activities (342,000) (87,000) (170,000)
Cash flow from financing activities:
Advance from (to) parent, net (202,000) 912,000 (135,000)
------------- -------------- -------------
Net cash flow from financing activities (202,000) 912,000 (135,000)
Net increase in cash 39,000 - -
Cash balances:
Beginning of period 2,000 2,000 2,000
------------- -------------- -------------
End of period $ 41,000 $ 2,000 $ 2,000
============= ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 9
KETEMA, INC. - HEAT TRANSFER DIVISION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Background
----------
These financial statements represent the accounts of the Heat Transfer
Division of Ketema, Inc. (the Division). On December 12, 1994, the
shareholders of Ketema, Inc. (Ketema) approved and adopted an Agreement
of Plan of Merger dated June 21, 1994 (the Merger Agreement) with KTM
Holdings Corp. (KTM) and KTM Acquisition Corp (Acquisition Corp.), a
wholly-owned subsidiary of KTM. Pursuant to the Merger Agreement,
Acquisition Corp. was merged with and into Ketema effective December
13, 1994. At that time, Ketema became a wholly-owned subsidiary of KTM.
Prior to December 13, 1994, KTM was essentially an inactive
corporation.
As a result of the merger, which was accounted for as a purchase in
accordance with Accounting Principle Board Opinion No. 16, Business
Combinations, certain purchase accounting adjustments were made to
allocate the purchase price to the acquired assets and assumed
liabilities. Such adjustments have been allocated to the Division and
are reflected in the accompanying balance sheets as of February 29,
1996 and February 28, 1995.
The statement of operations and of cash flows of the Division for the
period ended December 13, 1994 represents the historical results of the
Division.
2. SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
--------------------
The Division generates revenue principally from the design, engineering
and manufacture of a broad range of heat transfer products. Sales of
these services and products are primarily to domestic companies.
Inventory
---------
Inventories are stated at the lower of cost or market, cost being
determined by the last-in, first-out ("LIFO") method, and market on the
basis of the lower of replacement cost or estimated net proceeds from
sales.
Property, plant and equipment
-----------------------------
Expenditures for additions to plant facilities, or which extend the
useful life of the properties, are capitalized. Maintenance and repairs
are charged to operations as incurred. Depreciation of plant and
equipment is determined principally on a straight-line basis over the
estimated useful lives of the assets ranging from four to twenty-five
years.
- 1 -
<PAGE> 10
Intra-Company account
---------------------
The Intra-Company account represents KTM's net investment in the
Division. All transactions between the Division and KTM (or Ketema) are
reflected through this account. At the end of a reporting period the
net income or loss of the Division is closed out to this account.
Income taxes
------------
The taxable income of the Division is included in the consolidated
income tax return filed by Ketema, Inc. The portion of the consolidated
income provision allocated to the Division is that which would result
if the Division had filed a separate income tax return.
The Division provides for deferred income taxes under the asset and
liability approach. This method requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amount and tax basis of
assets and liabilities. Deferred income taxes have been determined by
applying current tax rates to temporary differences between the amount
of assets and liabilities determined for income tax and financial
reporting purposes.
Fair value of financial instruments
-----------------------------------
SFAS No. 107, Disclosure about Fair Value of Financial Instruments,
requires that companies disclose the estimated "fair value" of their
financial instruments. "Fair value" is generally defined as the price a
willing buyer and a willing seller would exchange for a financial
instrument in the normal course of business.
Financial instruments primarily consist of trade receivables and
payables, which are expected to be realized or paid in the normal
course of business operations and their net carrying amounts
approximate fair value.
Advertising
-----------
The Division expenses the cost of advertising in the year in which the
advertising first takes place. Total advertising expenses for the
periods ending February 29, 1996, February 28, 1995 and December 13,
1994 was approximately $76,000, $43,000 and $142,000, respectively.
Use of estimates in the preparation of financial statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
- 2 -
<PAGE> 11
The major areas in which the Division utilizes estimates include
deferred tax assets and reserves for warranties and inventory
obsolescence. The amounts contained within these financial statements
represent management's best estimate of expected outcomes based on
available information. However, the Division realizes that certain
events could occur or fail to occur which would impact the estimates by
an immaterial amount in the future.
3. INVENTORIES
The significant components of inventory are as follows:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Raw materials $ 347,000 $ 355,000
Work in process 537,000 304,000
Finished goods and parts 3,034,000 2,674,000
------------- --------------
3,918,000 3,333,000
Less reserves:
LIFO (136,000) (9,000)
Obsolescence (464,000) (360,000)
------------- --------------
$ 3,318,000 $ 2,964,000
============= ==============
</TABLE>
4. PROPERTY AND EQUIPMENT, NET
The significant components of property and equipment are as follows:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Land $ 385,000 $ 385,000
Buildings and improvements 1,137,000 1,137,000
Equipment 1,321,000 1,197,000
Furniture and fixtures 320,000 202,000
CIP 82,000 81,000
------------- -------------
3,245,000 3,002,000
Less: accumulated depreciation (454,000) (103,000)
------------- -------------
$ 2,791,000 $ 2,899,000
============= =============
</TABLE>
- 3 -
<PAGE> 12
5. INCOME TAXES
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
MARCH 1, DECEMBER 14, MARCH 1,
1995 TO 1994 TO 1994 TO
FEBRUARY 29, FEBRUARY 28, DECEMBER 13,
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Federal expense (benefit)
Deferred $ 138,000 $ (88,000) $ (186,000)
State expense (benefit)
Deferred 26,000 (16,000) (36,000)
------------- -------------- -------------
Total expense (benefit) $ 164,000 $ (104,000) $ (222,000)
============= ============== =============
</TABLE>
Deferred tax liabilities (assets) at February 29, 1996 and February 28,
1995 are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------- -------------
<S> <C> <C>
Accelerated depreciation $ 501,000 $ 500,000
Other 3,000 2,000
------------- -------------
Gross deferred tax liabilities 504,000 502,000
------------- -------------
Various reserves (212,000) (172,000)
Accrued vacation - (62,000)
Net operating loss carryforwards (206,000) (346,000)
------------- -------------
Gross deferred tax assets (418,000) (580,000)
------------- -------------
Deferred tax assets valuation allowance - -
Deferred tax (asset) liabilities $ 86,000 $ (78,000)
============= =============
</TABLE>
- 4 -
<PAGE> 13
The provision for income tax expense (benefit) differs from the federal
statutory rate of 34% due to the following:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28, DECEMBER 13,
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Statutory rate (benefit) 34.0% (34.0%) (34.0%)
State income taxes (benefit)
less federal effect 4.0 (4.0) (4.0)
Other .2 .1 .1
------------- -------------- -------------
Effective tax (benefit) rate 38.2% (37.9%) (37.9%)
</TABLE>
Assuming the Heat Transfer Division filed separate income tax returns
they would have net operating loss carryforwards of approximately
$508,000 available to reduce future income taxes at February 29, 1996.
These will expire in the year 2010.
6. RELATED PARTY TRANSACTIONS
Transactions with KTM and Ketema
--------------------------------
KTM funds daily operations and collects daily cash receipts from the
Division. KTM (or Ketema) also incurs certain general and
administrative costs as well as interest expense on behalf of the
Division. These expenses have been allocated to the Division, primarily
on the ratio of the Division's capital employed as compared to total
capital for KTM. Management believes this allocation method is
reasonable. The amounts allocated are as follows:
<TABLE>
<CAPTION>
MARCH 1, DECEMBER 14, MARCH 1,
1995 TO 1994 TO 1994 TO
FEBRUARY 29, FEBRUARY 28, DECEMBER 13,
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
General and administrative
expenses $ 528,000 $ 115,000 $ 436,000
Interest expense, net $ 454,000 $ 123,000 $ 470,000
</TABLE>
In addition, all other significant expenses of the Division are
reflected in the accompanying statement of operations.
Transactions with Affiliated Divisions
--------------------------------------
From time to time, the Division will perform certain services and
manufacture certain products for affiliated divisions of Ketema. During
the periods ended February 29, 1996, February 28, 1995 and December 13,
1994, the total revenue generated from these sales approximated
$2,300,000, $63,000 and $105,000, respectively.
- 5 -
<PAGE> 14
7. EMPLOYEE BENEFITS
The following table sets forth the funded status of KTM's hourly and
salaried defined benefit plans (the Plans), of which the Division is a
part. Total employees included in the hourly plan is 374, of which 109
employees are employed by the Division. Total employees included in the
salaried plan are 583, of which 51 are employed by the Division.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1995 1994
---- ----
HOURLY SALARIED HOURLY SALARIED
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $ 1,441,000 $ 6,172,000 $ 1,104,000 $ 3,826,000
Nonvested benefits 84,000 516,000 24,000 557,000
------------- -------------- ------------- ---------------
Accumulated benefits $ 1,525,000 $ 6,688,000 $ 1,128,000 $ 4,383,000
============= ============== ============= ===============
Projected benefits $ 1,525,000 $ 8,706,000 $ 1,128,000 $ 6,694,000
Plan assets at fair value 1,246,000 6,537,000 1,128,000 5,792,000
------------- -------------- ------------- ---------------
Projected benefits in excess
of plan assets 279,000 2,169,000 - 902,000
Unrecognized net asset at
transition 207,000 5,000 220,000 6,000
Unrecognized prior service cost (168,000) (24,000) (59,000) (29,000)
Unrecognized net (loss) gain
and prior service costs (505,000) (103,000) (350,000) 436,000
------------- -------------- ------------- ---------------
Accrued (prepaid) pension cost $ (187,000) $ 2,047,000 $ (189,000) $ 1,315,000
============= ============== ============= ===============
</TABLE>
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present values of
the projected benefit obligations of the Plans were 7.25% and 4.50%,
respectively, for 1996 and 8.25% and 5.25%, respectively, for 1995. The
expected long-term rate of return on assets was 9.0% in fiscal 1996 and
1995. Plan assets are comprised primarily of fixed income bonds and
marketable securities.
- 6 -
<PAGE> 15
Net periodic pension cost associated with the Division's defined
benefit pension plans for the following periods consists of the
following:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28, DECEMBER 13,
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Service cost $ 64,000 $ 16,000 $ 59,000
Interest cost 50,000 9,000 37,000
Actual return on Plan assets (139,000) (18,000) (66,000)
Amortization of unrecognized net
asset at transition and other
deferred amounts 57,000 (1,000) (6,000)
------------- -------------- -------------
$ 32,000 $ 6,000 $ 24,000
============= ============== =============
</TABLE>
8. SIGNIFICANT CUSTOMERS
During fiscal 1996 and the period ended February 28, 1995, one
unaffiliated customer accounted for 13% and 15%, respectively, of the
Division's total revenues. Additionally, the Division had sales to an
affiliate during fiscal 1996 which accounted for 11% of the Division's
total revenues.
9. LEASES
The Division leases certain office equipment and automobiles through
operating leases. Certain of these leases provide for the payment of
taxes, insurance and maintenance costs. Net future minimum lease
commitments do not have a material impact on the Division's financial
statements. Total rental expense for the periods ended February 29,
1996, February 28, 1995 and December 13, 1994 approximated $100,000,
$11,000 and $63,000, respectively.
10. COMMITMENTS AND CONTINGENCIES
During fiscal 1996, the Division eliminated certain positions in an
effort to reduce the cost of operations. The total cost of severance
pay and benefits related to these positions approximated $165,000 and
has been included in the accompanying statement of operations for the
period then ended.
As of February 28, 1996, approximately $50,000 of these costs are
accrued in the balance sheet.
11. LEGAL PROCEEDINGS
During the period ended December 13, 1994, the Division settled a
wrongful termination lawsuit for $600,000 (including legal costs), of
which $170,000 was recovered from insurance proceeds. At February 28,
1994 the Division had accrued approximately $192,000 of costs
associated with this suit. Accordingly, the remaining $238,000 was
expensed in the period ended December 13, 1994. Also, the Division
negotiated a severance agreement with a former general manager of the
Division for $160,000. These costs have been reflected in the
accompanying statement of operations.
- 7 -
<PAGE> 16
Management of the Division is not aware of any other significant legal
proceedings against it at this time.
12. SUBSEQUENT EVENTS
Effective April 1, 1996, KTM agreed to sell certain of the assets and
liabilities of the Division to American Precision Industries, Inc. (an
unrelated company) for approximately $12,000,000.
- 8 -
<PAGE> 17
The following unaudited pro forma financial statements give effect to
the acquisition by API Ketema Inc., a newly created, wholly-owned subsidiary of
American Precision Industries Inc. ("API") of certain assets and assumption of
certain liabilities of the Heat Transfer Division ("HTD") of Ketema, Inc. in a
transaction accounted for as a purchase. The unaudited pro forma balance sheet
is based on the individual balance sheets of API as of December 29, 1995 and HTD
as of February 29, 1996 and has been prepared to reflect the acquisition of HTD
as of December 29, 1995. The unaudited pro forma statement of income is based on
the individual statements of income of API for the year ended December 29, 1995
and HTD for the year ended February 29, 1996 and combine the results of
operations of API and HTD (acquired on April 1, 1996) for the period ended
December 29, 1995 as if the acquisition had occurred at the beginning of that
period.
<PAGE> 18
AMERICAN PRECISION INDUSTRIES INC.
----------------------------------
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
--------------------------------------------
DECEMBER 29, 1995
-----------------
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------
ACQUISITION
ADJUSTMENT
API HTD (NOTE 1) COMBINED
------------------ ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 2,486,000 $ 41,000 $ $ 2,527,000
Accounts receivable, net 12,691,000 3,275,000 15,966,000
Marketable securities 3,493,000 -- 3,493,000
Inventories 10,589,000 3,318,000 13,907,000
Prepaid expenses 967,000 17,000 984,000
Deferred income tax benefit 1,389,000 1,389,000
------------------ ----------------- ------------------- ------------------
Total Current Assets 31,615,000 6,651,000 38,266,000
------------------ ----------------- ------------------- ------------------
Investments 6,277,000 6,277,000
Other Assets 7,630,000 7,630,000
Goodwill (Preliminary) -- 1,669,000 (a) 1,669,000
Property, Plant and Equipment
Land 211,000 385,000 (35,000) (b) 561,000
Buildings and improvements 6,183,000 1,137,000 1,238,000 (b) 8,558,000
Machinery, equipment and
furniture 22,265,000 1,641,000 1,674,000 (b) 25,580,000
Construction in process 1,450,000 82,000 -- 1,532,000
------------------ ----------------- ------------------- ------------------
30,109,000 3,245,000 2,877,000 36,231,000
Less accumulated depreciation (17,840,000) (454,000) 454,000 (c) (17,840,000)
------------------ ----------------- ------------------- ------------------
Net Property, Plant
and Equipment 12,269,000 2,791,000 3,331,000 18,391,000
------------------ ----------------- ------------------- ------------------
$ 57,791,000 $ 9,442,000 $ 5,000,000 $ 72,233,000
================== ================= =================== ==================
</TABLE>
<PAGE> 19
AMERICAN PRECISION INDUSTRIES INC.
----------------------------------
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
--------------------------------------------
DECEMBER 29, 1995
-----------------
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
ACQUISITION
ADJUSTMENT
API HTD (NOTE 1) COMBINED
---------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders'
Equity
Current Liabilities
Short-term borrowings $ 2,602,000 $ -- $ $ 2,602,000
Accounts payable 5,136,000 1,844,000 6,980,000
Accrued compensation and
payroll taxes 3,566,000 486,000 4,052,000
Other accrued expenses 757,000 274,000 1,031,000
Dividends payable 463,000 463,000
Current portion of long-term
obligations 628,000 628,000
---------------- ---------------- ------------------ ------------------
Total Current Liabilities 13,152,000 2,604,000 15,756,000
---------------- ---------------- ------------------ ------------------
Long-Term Obligations,
less current portion 8,628,000 11,752,000 (d) 20,380,000
Deferred Income Taxes 1,251,000 86,000 1,337,000
Other Noncurrent Liabilities 413,000 413,000
Common stock, par value $.66-2/3 per share:
Authorized-10,000,000 shares
Issued - 7,502,000 5,001,000 5,001,000
Additional paid-in-capital 9,532,000 9,532,000
Intra-Company Account 6,752,000 (6,752,000) (e) --
Retained earnings 22,629,000 22,629,000
Net unrealized gain on
marketable securities 23,000 23,000
---------------- ---------------- ------------------ ------------------
37,185,000 6,752,000 (6,752,000) 37,185,000
Less cost of 374,262
treasury shares 2,838,000 -- -- 2,838,000
---------------- ---------------- ------------------ ------------------
Total Shareholders' Equity 34,347,000 6,752,000 (6,752,000) 34,347,000
---------------- ---------------- ------------------ ------------------
$ 57,791,000 $ 9,442,000 $ 5,000,000 $ 72,233,000
================ ================ ================== ==================
</TABLE>
<PAGE> 20
Note 1 The pro forma balance sheet has been prepared to reflect the
- ------ acquisition of HTD by API Ketema Inc. for an aggregate purchase price
of $11,752,000. Pro forma adjustments are made to reflect:
(a) The excess of acquisition cost over the fair value of net
assets acquired (goodwill).
(b) Step-up in bases of fixed assets based upon independent
appraisal.
(c) Elimination of accumulated depreciation.
(d) Increase in long-term debt to fund purchase cost.
(e) Elimination of intra-company account.
<PAGE> 21
AMERICAN PRECISION INDUSTRIES INC.
----------------------------------
PRO FORMA STATEMENT OF EARNINGS (UNAUDITED)
-------------------------------------------
YEAR ENDED DECEMBER 29, 1995
----------------------------
<TABLE>
<CAPTION>
ACQUISITION
ADJUSTMENT
API HTD (NOTE 1) COMBINED
---------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Net Sales $ 82,403,000 $ 21,776,000 $ $ 104,179,000
Investment Income 257,000 -- 257,000
---------------- ---------------- ------------------ ------------------
Revenues 82,660,000 21,776,000 104,436,000
---------------- ---------------- ------------------ ------------------
Costs and Expenses:
Cost of products sold 55,289,000 17,480,000 185,000 (a) 72,954,000
Selling and administrative 18,801,000 3,414,000 (528,000) (b) 21,701,000
14,000 (a)
Research and product
development 1,111,000 1,111,000
Goodwill amortization -- 56,000 (c) 56,000
Interest and debt expense 238,000 454,000 715,000 (d) 953,000
(454,000) (b)
---------------- ---------------- ------------------ ------------------
75,439,000 21,348,000 (12,000) 96,775,000
---------------- ---------------- ------------------ ------------------
Earnings before Income Taxes 7,221,000 428,000 12,000 7,661,000
Federal and State Income Taxes 2,490,000 164,000 5,000 (e) 2,659,000
---------------- ---------------- ------------------ ------------------
Net Earnings $ 4,731,000 $ 264,000 $ 7,000 $ 5,002,000
================ ================ ================== ==================
Net Earnings per Share $0.67 $0.71
================ ==================
Dividends Declared per Share $0.2575 $0.2575
================ ==================
Average Shares Outstanding 7,090,000 7,090,000
================ ==================
<FN>
Note 1 The pro forma income statement has been prepared to reflect the acquisition of HTD by API Ketema Inc. Pro forma
- ------ adjustments are made to:
(a) Adjust depreciation based on fair value of assets per appraisal over estimated lives.
(b) Eliminate certain corporate assessments.
(c) Amortize goodwill over estimated life.
(d) Reflect interest expense on line of credit used to fund purchase cost.
(e) Reflect income taxes on adjustments.
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 2-85320, 33-31315, 33-61734 and 33-61839) of
American Precision Industries Inc. of our report dated May 20, 1996 relating to
the financial statement of Ketema, Inc. - Heat Transfer Division, which appears
in the Amended Report on Form 8-K/A of American Precision Industries Inc. dated
June 12, 1996.
PRICE WATERHOUSE LLP
Buffalo, New York
June 12, 1996
