<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A(1)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
OCTOBER 4, 1995
LYNCH CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 1-106 38-1799862
(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
8 SOUND SHORE DRIVE, SUITE 290, GREENWICH, CONNECTICUT 06830
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: 203-629-3333
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
This amends Form 8-K previously filed by the
registrant on October 19, 1995, and filed by the
registrant with respect to an event occurring on
October 4, 1995. The following financial statements
and pro forma financial information are contained herein:
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
CENTRAL PRODUCTS COMPANY (A BUSINESS UNIT OF UNISOURCE
WORLDWIDE, INC., A WHOLLY-OWNED SUBSIDIARY OF ALCO STANDARD
CORPORATION)
1. Independent Auditors Report
2. Combined Balance Sheets as of September 30, 1995 and 1994
3. Combined Statements of Operations and Business Unit Equity
for the years ended September 30, 1995, 1994 and 1993.
4. Combined Statements of Cash Flows for the years ended
September 30, 1995, 1994 and 1993
5. Notes to the Combined Financial Statements
(b) PRO FORMA UNAUDITED FINANCIAL INFORMATION
1. Pro Forma Combined Condensed Balance Sheet as of
September 30, 1995
2. Notes to Pro Forma Combined Condensed Balance Sheet
-- Spinnaker Industries Inc.
3. Pro Forma Combined Condensed Statements of Income
for the Nine Months Ended September 30, 1995, and for
the Year Ended December 31, 1994
4. Notes to Pro Forma Combined Condensed Statements of Income
-- Spinnaker Industries Inc.
-- Lynch Corporation
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Spinnaker Industries, Inc.
/S/ ROBERT E. DOLAN
--------------------------
Robert E. Dolan,
Chief Financial Officer
Date: December 18, 1995
<PAGE>
CENTRAL PRODUCTS COMPANY,
A BUSINESS UNIT OF UNISOURCE
WORLDWIDE, INC. (A WHOLLY-OWNED
SUBSIDIARY OF ALCO STANDARD
CORPORATION)
COMBINED FINANCIAL STATEMENTS AS
OF SEPTEMBER 30, 1995 AND 1994 AND
FOR THE YEARS ENDED SEPTEMBER 30,
1995, 1994 AND 1993 AND INDEPENDENT
AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Spinnaker Industries, Inc.:
We have audited the accompanying combined balance sheets of the Central
Products Company, a Business Unit ("Business Unit") of Unisource Worldwide,
Inc. (a wholly-owned subsidiary of Alco Standard Corporation) as of September
30, 1995 and 1994 and the related combined statements of operations and
division equity and cash flows for each of the three years ended in the
period September 30, 1995. These financial statements are the responsibility
of the Business Unit's management. Our responsibility is to express an
opinion on these 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 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 audits provide a
reasonable basis for our opinion.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Business Unit and may not necessarily be
indicative of the conditions that would have existed or the results of
operations if the Business Unit had been operated as an independent company.
Portions of certain expenses represent allocations made by Unisource
Worldwide, Inc. of items applicable to the company as a whole.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of the Central Products
Company, a Business Unit of Unisource Worldwide, Inc. as of September 30,
1995 and 1994 and the results of its operations and its cash flows for each
of the three years in the period ended September 30, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
December 8, 1995
<PAGE>
CENTRAL PRODUCTS COMPANY,
A BUSINESS UNIT OF UNISOURCE WORLDWIDE, INC.
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash (overdraft) $ 450 $ (59)
Accounts receivable, net of allowance for doubtful accounts
of $1,160 in 1995 and $507 in 1994 11,265 14,014
Receivables from related parties (Note 5) 346 1,224
Inventories (Note 3) 13,876 9,863
Prepaid expenses and other assets 1,232 1,299
------- -------
Total current assets 27,169 26,341
PROPERTY, PLANT AND EQUIPMENT - net (Note 4) 21,659 24,702
OTHER ASSETS 213 733
------- -------
TOTAL ASSETS $49,041 $51,776
------- -------
------- -------
LIABILITIES AND BUSINESS UNIT EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,829 $ 5,000
Accrued compensation and benefits 1,075 1,500
Other current liabilities 1,239 1,071
Current portion of long-term debt 80
------- -------
Total current liabilities 8,143 7,651
LONG-TERM DEBT, less current portion 405
------- -------
TOTAL LIABILITIES 8,143 8,056
COMMITMENTS AND CONTINGENCIES (Note 7)
BUSINESS UNIT EQUITY (Notes 6 and 7) 40,898 43,720
------- -------
TOTAL LIABILITIES & BUSINESS UNIT EQUITY $49,041 $51,776
------- -------
------- -------
</TABLE>
See notes to combined financial statements.
<PAGE>
CENTRAL PRODUCTS COMPANY,
A BUSINESS UNIT OF UNISOURCE WORLDWIDE, INC.
COMBINED STATEMENTS OF OPERATIONS AND BUSINESS UNIT EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET SALES (Note 5) $120,219 $108,842 $105,631
COST OF GOODS SOLD (99,129) (90,239) (86,376)
-------- -------- --------
GROSS PROFIT 21,090 18,603 19,255
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (13,823) (11,608) (11,853)
ROYALTY AND MANAGEMENT FEES PAID
TO PARENT (NOTE 5) (1,677) (2,251) (2,464)
-------- -------- --------
OPERATING INCOME 5,590 4,744 4,938
OTHER INCOME (EXPENSE) - Net (20) (65) 26
-------- -------- --------
INCOME BEFORE INCOME TAXES 5,570 4,679 4,965
INCOME TAXES (2,204) (1,825) (1,902)
-------- -------- --------
NET INCOME 3,366 2,854 3,062
BUSINESS UNIT EQUITY, Beginning of year 43,720 44,941 47,106
NET CASH TRANSFERRED TO ALCO (5,231) (4,075) (5,227)
NET ASSETS RETAINED BY ALCO (957)
-------- -------- --------
BUSINESS UNIT EQUITY, End of year $ 40,898 $ 43,720 $ 44,941
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to combined financial statements.
<PAGE>
CENTRAL PRODUCTS COMPANY,
A BUSINESS UNIT OF UNISOURCE WORLDWIDE, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
(Dollars in Thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,366 $ 2,854 $ 3,062
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,980 3,248 3,318
Loss (gain) on sale of fixed assets 71 (24) 11
Changes in current assets and liabilities:
Accounts receivable 2,749 (1,676) 1,036
Inventories (4,173) 1,218 2,501
Prepaid expenses and other assets 21 29 (20)
Accounts payable 829 1,082 (2,867)
Accrued compensation and benefits 243 (7) (405)
Other current liabilities 168 348 (180)
------- -------- --------
Cash provided by operating activities 6,254 7,072 6,456
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,339) (2,104) (2,296)
Proceeds from sale of property, plant and equipment 27 35 8
Net (increase) decrease in receivable from
related parties 878 (897) 292
------- -------- --------
Cash used in investing activities (434) (2,966) (1,996)
FINANCING ACTIVITIES:
Net cash transferred to Alco (5,231) (4,075) (5,227)
Principal payments on note payable (80) (115)
------- -------- --------
Cash used in financing activities (5,311) (4,190) (5,227)
NET INCREASE (DECREASE) IN CASH 509 (84) (767)
CASH, Beginning of year (59) 25 792
------- -------- --------
CASH, End of year $ 450 $ (59) $ 25
------- -------- --------
------- -------- --------
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Assets (liabilities) retained by Alco:
Inventory $ 160
Prepaid expenses 36
Property, plant and equipment, net 1,304
Patent 530
Note payable (405)
Pension liability (668)
-------
$ 957
-------
-------
NOTE PAYABLE ISSUED FOR PATENT $ 600
------
------
</TABLE>
See notes to combined financial statements.
<PAGE>
CENTRAL PRODUCTS COMPANY,
A BUSINESS UNIT OF UNISOURCE WORLDWIDE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
(Dollars in Thousands)
- ------------------------------------------------------------------------------
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Effective September 30, 1995, Central Products Acquisition Corp., ("CPAC"),
entered into a stock and asset purchase agreement with Unisource Worldwide,
Inc. ("Unisource"), and Alco Standard Corporation, Unisource's parent
("Alco"). CPAC is a newly formed, wholly-owned subsidiary of Spinnaker
Industries, Inc. ("Spinnaker"). Under the sales agreement, CPAC purchased
from Unisource all the outstanding capital stock of Central Products
Company ("CPC"), and all the assets and certain liabilities in Unisource's
Central Products Division ("Division") (together the "Business Unit").
The Business Unit manufactures and sells water-activated and pressure-
sensitive carton sealing tapes.
The accompanying combined financial statements reflect the financial
position, results of operations and cash flows of the Business Unit prior
to its acquisition by Spinnaker. The assets, liabilities and results of
operations specifically related to the Business Unit have been included in
the financial statements. Transactions between CPC and Division have been
eliminated in the combined financial statements. Certain corporate, general
and administrative expenses of Unisource have been allocated to the
Business Unit. Such expenses are not necessarily indicative of, and it
is not practicable for management to estimate the level of expenses which
might have been incurred had the Business Unit been operated as an
independent company.
2. ACCOUNTING POLICIES
INVENTORIES - Substantially all inventories are stated at the lower of
cost (last in, first out method) or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant an equipment is stated at
cost. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets which range from 2 to 40 years.
INCOME TAXES - For federal and state income tax purposes, taxable income
of the Business Unit was included in the consolidated tax returns of Alco.
Income taxes have been provided in the statement of operations on a
separate return basis. Because the tax attributes associated with the
Operations of the Business Unit were retained by Alco, the liability for
current and deferred taxes has been recognized as a component of business
unit equity in the balance sheet. The effective income tax rate differs
from the federal statutory rate as a result of state income taxes.
<PAGE>
3. INVENTORIES
Inventories at September 30, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials $ 4,512 $ 4,097
Work-in-progress 2,685 2,550
Finished goods 8,622 4,589
-------- --------
15,819 11,236
Less LIFO reserve (1,943) (1,373)
-------- --------
$ 13,876 $ 9,863
-------- --------
-------- --------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30, 1995 and 1994 consists
of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 182 $ 182
Buildings and improvements 6,818 6,853
Machinery and equipment 39,271 46,538
-------- --------
46,271 53,573
Less accumulated depreciation (24,612) (28,871)
-------- --------
$ 21,659 $ 24,702
-------- --------
-------- --------
</TABLE>
5. RELATED PARTY TRANSACTIONS
Management fees allocated by Alco to the Business Unit were $1,140, $1,764
and $1,764 for the years ended September 30, 1995, 1994 and 1993,
respectively. Royalty expense allocated to the Business Unit by Alco was
$537, $487 and $700 for the years ended September 30, 1995, 1994 and 1993,
respectively. No allocation of interest income (expense) on the receivable
from or payable to Alco has been recorded in the accompanying financial
statements.
Sales to other units of Alco were $10,878, $11,139 and $7,835 for the
years ended September 30, 1995, 1994 and 1993, respectively. Purchases
from other units of Alco were not significant in any of the three years.
<PAGE>
6. RETIREMENT
Employees of the Business Unit participated in one of three defined
benefit pension plans, depending on their location and employee status
(hourly or salary), sponsored by Alco. Pension expense under these plans
allocated to the Business Unit was $663, $593 and $402 for the years
ended September 30, 1995, 1994 and 1993, respectively. The Business Unit
also participated in two defined contribution plans which collectively
covered substantially all employees of the Business Unit. Contributions
to the plans were based on matching employee contributions. Plan expense
allocated to the Business Unit was $471, $353 and $331 for the years
ended September 30, 1995, 1994 and 1993, respectively.
The liabilities for these obligations have been retained by Alco as of
the acquisition date and accordingly, are not included in the balance
sheet as of September 30, 1995.
7. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments under long-term operating leases are as
follows at September 30, 1995:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
<S> <C>
1996 $967
1997 967
1998 784
1999 595
2000 595
Thereafter 4,710
------
$8,618
------
------
</TABLE>
Rental payments under operating leases were $1,703, $1,814 and $1,632 for
the years ended September 30, 1995, 1994 and 1993, respectively.
The Business Unit is involved in various claims, including those related
to environmental matters and litigation arising in the normal course of
business. As provided in the purchase agreement, the liabilities, if
any, related to these obligations as of September 30, 1995 have been
retained by Alco.
* * * * * *
<PAGE>
SPINNAKER INDUSTRIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET AND STATEMENTS OF INCOME
The following unaudited pro forma combined condensed balance sheet and
statements of income have been prepared from the historical results of
operations of both Lynch Corporation ("Lynch"), Spinnaker Industries, Inc.
("Spinnaker"), its 83.2% owned subsidiary and Central Products Company ("CPC"),
a business unit of Unisource Worldwide, Inc. The pro forma balance is
presented as if the acquisition occurred as of September 30, 1995. The
allocations of purchase price to assets acquired and liabilities assumed,
including related amortization, are based on preliminary estimates and may be
adjusted when the final fair value allocations are determined. Included in
the operations of Lynch for the year ended December 31, 1994 are the pro
forma results of Brown-Bridge Industries, Inc., Spinnaker's 81% owned
subsidiary, acquired as of September 19, 1994, and USTC-Kansas Inc., Lynch's
wholly owned subsidiary, acquired on September 26, 1994 as if these
acquisitions occurred as of January 1, 1994. The pro forma statements of
operations reflect the combined revenues and expenses of Lynch and CPC as
if the acquisitions had been consummated at the beginning of the period
presented.
These statements should be read in conjunction with the historical financial
statements of CPC included elsewhere in this Form 8-K/A(1), the historical
financial statements of Lynch and Spinnaker, included in their most recently
filed Forms 10-K and 10-Q, including the notes thereto, the historical
financial statements of Brown-Bridge, the pro forma financial statements of
Lynch giving effect to the Brown-Bridge acquisition included in Lynch's
Form 8-K/A(1) of September 19, 1994, and the notes to these unaudited pro
forma combined condensed balance sheet and statements of income and the
historical financial statements of USTC-Kansas Inc. and the pro forma
financial statement of Lynch giving effect to the USTC-Kansas Inc. acquisition
included in Lynch's Form 8-K/A(2) of September 26, 1994. The pro forma
combined results are not necessarily indicative of the combined results of
future operations.
<PAGE>
LYNCH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Lynch
Corporation Spinnaker
& Subs CPC Adjustments Pro forma
------ --- ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $16,019 $450 $16,469
Marketable securities 11,327 11,327
Receivables, net 45,582 11,611 57,193
Inventories 22,110 13,876 1,943(1) 37,929
Deferred income taxes 2,872 2,872
Other current assets 7,616 1,232 536(2) 9,384
-------- ------- ------- --------
Total Current Assets 105,526 27,169 2,479 135,174
Property, Plant and Equipment - net 67,441 21,659 15,091(3) 104,191
Investment in & advances to affiliated companies 3,498 3,498
Acquisition intangibles 25,049 28,865(4) 53,914
Other assets 5,057 213 1,900(5) 7,170
-------- ------- ------- --------
Total assets $206,571 $49,041 $48,335 $303,947
-------- ------- ------- --------
-------- ------- ------- --------
CURRENT LIABILITIES:
Notes payable to banks $7,223 $7,223
Trade accounts payable 17,725 $5,829 23,554
Accrued liabilities 25,755 2,314 $700(6) 28,769
Current maturities of long-term debt 25,528 42,483(7) 68,011
-------- ------- ------- --------
Total current liabilities 76,231 8,143 43,183 127,557
Long-term debt 73,639 41,250(9) 114,889
Deferred income taxes 10,397 4,800(8) 15,197
Minority interests 12,130 12,130
Shareholders' Equity:
Common stock 5,139 40,898 (40,898)(10) 5,139
Additional paid-in capital 8,106 8,106
Retained earnings 22,205 22,205
Treasury stock (1,276) (1,276)
-------- ------- ------- --------
Total shareholders' equity 34,174 40,898 (40,898) 34,174
-------- ------- ------- --------
Total liabilities and shareholders' equity $206,571 $49,041 $48,335 $303,947
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
<PAGE>
SPINNAKER INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(1) Inventory valuation adjustment to reflect inventory at estimated fair
value versus historical cost which was based on the last-in, first-out
method.
(2) Purchase price adjustment due from seller.
(3) Valuation adjustment of property, plant and equipment based on
preliminary appraisals. Includes on a pro forma basis a warehouse facility
leased by CPC from seller that is under a separate contract to be acquired
by Spinnaker in January 1996 for $1,750,000.
(4) Excess of purchase price, including estimated acquisition costs of
$700,000, over the estimated fair value of net assets acquired.
(5) Deferred financing costs.
(6) Acquisition costs payable.
(7) Current maturities of debt incurred in connection with acquisition.
Includes $25,000,000 due under subordinated promissory note due to seller
with maturity of December 1999, but which may be put to the Company four
months after the acquisition. (Terms of the acquisition indebtedness are
more fully described in Form 8-K of October 4, 1995.)
(8) Deferred tax liability for differences between the book and tax basis
of acquired assets and assumed liabilities.
(9) Long-term debt incurred to finance acquisition includes $1,750,000 to
be incurred in connection with the acquisition of a warehouse facility
from the seller in January 1996.
(10) Elimination of equity of acquired company.
<PAGE>
LYNCH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED STATEMENT ON INCOME
FOR THE THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Lynch
Corporation Spinnaker Lynch
& Subs CPC Adjustments Adjustments Pro forma
------ --- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SALES AND REVENUES:
Multimedia $17,503 $17,503
Services 91,608 91,608
Manufacturing 119,097 $91,269 210,366
--------- ------- ------ ---- ---------
228,208 91,269 0 0 319,477
--------- ------- ------ ---- ---------
Costs and Expenses:
Multimedia $13,066 13,066
Services 82,598 82,598
Manufacturing 93,687 75,071 (2,034)(3,4,5) 166,724
Selling and administrative 25,782 11,731 (1,475)(3,5,6,7) 36,038
--------- ------- ------ ---- ---------
215,133 86,802 (3,509) 0 298,426
--------- ------- ------ ---- ---------
OPERATING PROFIT 13,075 4,467 3,509 0 21,051
Other income (expense):
Investment income 2,197 2,197
Interest expense (6,726) (6,612)(8,9) 500 (a) (12,838)
Share of operations of
Affiliated Companies (60) (60)
Gain on sales of subsidiary and
Affiliate stock 59 59
--------- ------- ------ ---- ---------
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS 8,545 4,467 (3,103) 500 10,409
Provision for income taxes (3,383) (1,768) 1,209 (10) (170)(b) (4,112)
Minority interests (1,588) (135)(c) (1,723)
--------- ------- ------ ---- ---------
NET INCOME 3,574 2,699 (1,894) 195 4,574
--------- ------- ------ ---- ---------
--------- ------- ------ ---- ---------
Weighted average shares and share equivalents 1,409,000 1,409,000
Earnings per share $2.54 $3.25
</TABLE>
<PAGE>
LYNCH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED STATEMENT ON INCOME
FOR THE THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Lynch
Corporation Spinnaker Lynch
& Subs CPC Adjustments Adjustments Pro forma
----------- --- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SALES AND REVENUES:
Multimedia $22,518 $22,518
Services 101,880 101,880
Manufacturing 131,148 $108,842 239,990
--------- -------- ------ ---- ---------
255,546 108,842 0 0 364,388
--------- -------- ------ ---- ---------
Costs and Expenses:
Multimedia $16,453 $16,453
Services 92,155 92,155
Manufacturing 108,097 90,239 (2,137)(3,4,5) 196,199
Selling and administrative 24,292 13,924 (2,584)(3,5,6,7) 35,632
--------- -------- ------ ---- ---------
240,997 104,163 (4,721) 0 340,439
--------- -------- ------ ---- ---------
OPERATING PROFIT 14,549 4,679 4,721 0 23,949
Other income (expense):
Investment income 2,332 2,332
Interest expense (8,799) (8,322)(8,9) 500 (a) (16,621)
Share of operations of
Affiliated Companies (301) (301)
Gain on sales of subsidiary and
Affiliate stock 190 190
--------- -------- ------ ---- ---------
INCOME BEFORE INCOME TAXES,
MINORITY INTERESTS AND
EXTRAORDINARY ITEM 7,971 4,679 (3,601) 500 9,549
Provision for income taxes (3,124) (1,825) 1,334 (10) (170)(b) (3,785)
Minority interests (1,685) (99)(c) (1,784)
--------- -------- ------ ---- ---------
INCOME BEFORE EXTRAORDINARY
ITEM 3,162 2,854 (2,267) 231 3,980
Loss on early extinguishment of debt (net
of income tax benefit of $135) (264) (264)
--------- -------- ------ ---- ---------
NET INCOME $2,898 $2,854 ($2,267) $231 $3,716
--------- -------- ------ ---- ---------
--------- -------- ------ ---- ---------
Weighted average shares and share equivalents 1,337,000 1,337,000
Primary earnings per share:
Income before extraordinary item $2.37 $2.98
Extraordinary item (0.20) (0.20)
--------- -------
Net income $2.17 $2.78
--------- -------
--------- -------
Fully diluted earnings per share:
Income before extraordinary item $2.22 $2.72
Extraordinary item (0.16) (0.16)
--------- -------
Net income $2.06 $2.56
--------- -------
--------- -------
</TABLE>
<PAGE>
SPINNAKER INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(1) The historical financial statements of Spinnaker for the year ended
December 31, 1994 include on a pro forma basis the results of operations
of Spinnaker s 81% owned subsidiary, Brown-Bridge Industries, Inc., for
the period from January 1, 1994 through September 19, 1994 (date of
acquisition of Brown-Bridge) as if it were acquired as of January 1, 1994.
Included in Spinnaker s results of operations are $64,470,000 of net sales
and $909,000 of net income related to Brown-Bridge for such period on a
pro forma basis.
(2) Historical financial statements of CPC are for its fiscal year ended
September 30, 1994.
(3) Operating costs of Linden plant which was closed by seller in 1995 and
was not acquired. Sales previously supplied by the Linden plant will be
fulfilled from the acquired facilities.
(4) Adoption of the first-in, first-out method of inventory valuation from
the last-in, first-out (LIFO) method.
(5) Depreciation adjustment on acquired plant, property and equipment,
including depreciation of the leased facility to be purchased from seller.
(6) Amortization of goodwill over a period of 25 years.
(7) Reduction of management and royalty fees and warehouse rentals paid by
CPC to its parent.
(8) Guaranty fee payable to Spinnaker's parent (Lynch Corporation) in
connection with acquisition indebtedness. Lynch owns 83% of Spinnaker's
outstanding stock and has agreed to guarantee a $25 million note payable
to Alco for a four month period at .5% of the principal amount per month
($125,000 per month).
(9) Interest expense and amortization of deferred financing fees on debt
incurred in connection with the acquisition. Approximately $52 million
of the debt bears interest at a floating rate. A 1% change in the index
would increase (decrease) interest expense $520,000 on an annualized
basis.
(10) Tax effect on pro forma combined earnings at Spinnaker's effective rate.
<PAGE>
LYNCH CORPORATION AND SUBSIDIARIES
Pro forma Combined Condensed Statements of Income
(a) To reverse guarantee fee recorded by Spinnaker.
(b) To recorded tax effect on (a).
(c) To record minority interest effect of pro forma adjustments to
Spinnaker's Financial Statements.
(d) The historical financial statements of Lynch Corporation for the
year ended December 31, 1994, included on a pro forma basis of the
results of operations of Brown-Bridge Industries for the period from
January 1, 1994 through September 19, 1994 (date of acquisition of
Brown-Bridge) and USTC-Kansas, Inc. for the period from January 1, 1994
through September 26, 1994, as if they were acquired on January 1, 1994.
Included in Lynch's results of operations, are $64,470,000 of net sales
and $909,000 of net income related to Brown-Bridge on a pro forma basis
and $2,374,000 of net sales and a net loss of $322,000 related to
USTC-Kansas for such period on a pro forma basis.
