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Previous: MCDONALDS CORP, 424B2, 1998-06-22 |
Next: SKLAR CORP, 10KSB40/A, 1998-06-22 |
<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 8, 1998
MORTON INDUSTRIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Georgia 0-13198 38-0811650
------------------------------------------------------------
State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization File Number) Identification No.)
1021 West Birchwood, Morton, Illinois 61550
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code 309-266-7176
-------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
B & W FABRICATORS, INC., ACQUISITION
As previously reported on a Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 14, 1998, the Company acquired all
of the issued and outstanding capital stock of B&W Metal Fabricators, Inc., of
Welcome, North Carolina, on April 8, 1998. This Current Report on Form 8-K/A
amends the earlier filing by adding the financial statements identified in Item
7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements are filed as Exhibits to this Form
8-K/A:
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
- ---------------------------------------------------------------------------
<S> <C>
99.1 Unaudited Financial Statements of B&W Metal
Fabricators, Inc., for the three months ended March 31,
1998
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
99.2 Audited Financial Statements of B&W Metal Fabricators,
Inc., for the years ended December 31, 1997, and 1996
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
99.3 Pro Forma Condensed Combined Balance Sheet and
Statement of Earnings
- ---------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
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.
MORTON INDUSTRIAL GROUP, INC.
(Registrant)
Date: June 22, 1998 By: /s/ Daryl R. Lindemann
----------------------------------------
Daryl R. Lindemann
Vice President-Finance, Secretary,
And Treasurer
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
99.1 Unaudited Financial Statements of B&W Metal
Fabricators, Inc., for the three months ended March 31,
1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
99.2 Audited Financial Statements of B&W Metal Fabricators,
Inc., for the years ended December 31, 1997, and 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
99.3 Pro Forma Condensed Combined Balance Sheet and
Statement of Earnings
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 1
EXHIBIT 99.1
ACCOUNTANT'S REPORT
Board of Directors
B & W Metal Fabricators, Inc.
Welcome, North Carolina
We have compiled the accompanying unaudited balance of B & W Metal Fabricators,
Inc. as of March 31, 1998, and the related of earnings and cash flows for the
period then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
Clifton Guaderson L.L.C.
Peoria, Illinois
June 18, 1998
<PAGE> 2
B & W METAL FABRICATORS, INC.
BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 525
Temporary investments 24
Accounts receivable 1,056
Inventories 815
----------
Total current assets 2,420
PROPERTY AND EQUIPMENT
Land and improvements 88
Buildings and improvements 1,482
Machinery and equipment 2,841
Automobiles and trucks 181
Office furniture and fixtures 45
Computer equipment 67
----------
Total, at cost 4,704
Less accumulated depreciation 2,585
Total property and equipment 2,119
CASH VALUE OF LIFE INSURANCE 66
TOTAL ASSETS $ 4,605
==========
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 262
Current installments of long-term debt 376
Accrued profit sharing 37
Other accrued expenses 26
Accrued property taxes 16
Income taxes payable 37
Deferred income taxes 314
----------
Total current liabilities 1,068
LONG-TERM DEBT, excluding current
installments 1,228
----------
Total liabilities 2,296
----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 100,000 shares
authorized and issued, 58,501 shares
outstanding 59
Additional paid-in capital 10
Retained earnings 2,240
----------
Total stockholders' equity 2,309
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,605
==========
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to interim financial statements.
3
<PAGE> 4
B & W METAL FABRICATORS, INC.
STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
NET SALES $ 2,471
COST OF SALES 1,692
---------
Gross profit 779
OPERATING EXPENSES 414
---------
Income from operations 365
OTHER INCOME (EXPENSE)
Interest expense 34
---------
Income before income taxes 331
INCOME TAXES 132
---------
NET EARNINGS $ 199
=========
EARNINGS PER SHARE $ 3.40
=========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 58,501
=========
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to interim financial statements.
4
<PAGE> 5
B & W METAL FABRICATORS, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 199
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 93
Effects of changes in operating assets and liabilities:
Receivables (360)
Inventories (3)
Income tax refund receivable 95
Accounts payable 75
Accrued expenses and other liabilities 2
Income taxes payable 37
-------------
Net cash provided by operating activities 138
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (94)
-------------
NET INCREASE IN CASH 40
CASH, BEGINNING OF PERIOD 485
-------------
CASH, END OF PERIOD $ 525
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 34
=============
Income taxes $ -
=============
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to interim financial statements.
5
<PAGE> 6
B & W METAL FABRICATORS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of (a) the balance sheet
at March 31, 1998, (b) the statement of earnings for the three-month period
ended March 31, 1998, and (c) the statement of cash flows for the three-month
period ended March 31, 1998 have been made.
NOTE 2
The results for the three-month period ended March 31, 1998 are not necessarily
indicative of the results for the entire year 1998.
6
<PAGE> 1
EXHIBIT 99.2
B & W METAL
FABRICATORS, INC.
WELCOME,
NORTH CAROLINA
FINANCIAL
STATEMENTS
DECEMBER 31, 1997
AND 1996
<PAGE> 2
B & W METAL FABRICATORS, INC.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT.....................................1
FINANCIAL STATEMENTS
Balance Sheets..........................................2
Statements of Earnings..................................4
Statements of Stockholders' Equity......................5
Statements of Cash Flows................................6
Notes to Financial Statements...........................7
<PAGE> 3
INDEPENDENT AUDITOR'S REPORT
Board of Directors
B & W Metal Fabricators, Inc.
Welcome, North Carolina
We have audited the accompanying balance sheets of B & W Metal Fabricators, Inc.
as of December 31, 1997 and 1996, and the related statements of earnings,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of B & W Metal Fabricators, Inc.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Clifton Guaderson L.L.C.
Peoria, Illinois
June 4, 1998
<PAGE> 4
B & W METAL FABRICATORS, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 485,438 $ 219,190
Temporary investments 24,250 23,062
Accounts receivable 696,276 804,882
Income tax refunds receivable 95,129 70,135
Inventories 811,897 832,154
Prepaid expenses and other current assets - 410
------------- ---------------
Total current assets 2,112,990 1,949,833
------------- ---------------
PROPERTY AND EQUIPMENT
Land and improvements 87,680 87,680
Buildings and improvements 1,482,384 1,482,384
Machinery and equipment 2,841,247 2,327,726
Automobiles and trucks 180,936 163,828
Office furniture and fixtures 44,706 44,155
Computer equipment 63,073 64,158
------------- ---------------
Total, at cost 4,700,026 4,169,931
Less accumulated depreciation 2,491,569 2,191,813
------------- ---------------
Net property and equipment 2,208,457 1,978,118
------------- ---------------
CASH VALUE OF LIFE INSURANCE 66,034 60,076
OTHER ASSETS - 12,577
------------- ---------------
TOTAL ASSETS $ 4,387,481 $ 4,000,604
============= ===============
</TABLE>
2
<PAGE> 5
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 187,158 $ 141,615
Note payable to bank - 80,000
Notes payable to stockholders 2,015 2,015
Current installments of long-term debt 365,451 187,567
Accrued salaries and bonuses 21,640 13,267
Accrued profit sharing 39,500 40,000
Accrued payroll taxes withheld 2,630 8,541
Accrued property taxes 16,000 16,000
Deferred income taxes 313,851 309,798
-------------- ---------------
Total current liabilities 948,245 798,803
LONG-TERM DEBT, excluding current installments 1,330,411 1,297,842
-------------- ---------------
Total liabilities 2,278,656 2,096,645
-------------- ---------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 100,000 shares
authorized; 58,501 shares issued and
outstanding 58,501 58,501
Additional paid-in capital 10,000 10,000
Retained earnings 2,040,324 1,835,458
-------------- ---------------
Total stockholders' equity 2,108,825 1,903,959
-------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,387,481 $ 4,000,604
============== ===============
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to financial statements.
3
<PAGE> 6
B & W METAL FABRICATORS, INC.
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
NET SALES $ 7,698,793 $ 7,662,327
COST OF SALES 5,725,348 5,449,849
-------------- --------------
Gross profit 1,973,445 2,212,478
OPERATING EXPENSES 1,505,843 1,513,453
-------------- --------------
Income from operations 467,602 699,025
-------------- --------------
OTHER INCOME (EXPENSE)
Interest income 1,188 1,123
Interest expense (122,135) (134,320)
Gain (loss) on disposal of property and equipment 666 (140,535)
Miscellaneous (1,198) 1,222
-------------- --------------
Total other income (expense) (121,479) (272,510)
-------------- --------------
Earnings before income taxes 346,123 426,515
INCOME TAXES 141,257 182,818
-------------- --------------
NET EARNINGS $ 204,866 $ 243,697
============== ==============
EARNINGS PER SHARE - BASIC AND DILUTED $ 3.50 $ 4.17
============== =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 58,501 58,501
============== ==============
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to financial statements.
4
<PAGE> 7
B & W METAL FABRICATORS, INC
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1995, as previously reported 58,501 $ 58,501 $ 10,000 $ 1,118,641 $ 1,187,142
Prior period adjustment - - - 473,120 473,120
-------- ----------- ---------- -------------- -------------
BALANCE, DECEMBER 31,
1995, as restated 58,501 58,501 10,000 1,591,761 1,660,262
Net earnings - - - 243,697 243,697
-------- ----------- ---------- -------------- -------------
BALANCE, DECEMBER 31,
1996 58,501 58,501 10,000 1,835,458 1,903,959
Net earnings - - - 204,866 204,866
-------- ----------- ---------- -------------- -------------
BALANCE, DECEMBER 31,
1997 58,501 $ 58,501 $ 10,000 $ 2,040,324 $ 2,108,825
======== =========== ========== ============== =============
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to financial statements.
5
<PAGE> 8
B & W METAL FABRICATORS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 204,866 $ 243,697
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 373,403 261,272
(Gain) loss on disposal of property and equipment (666) 140,535
Deferred income taxes 4,053 5,372
Effects of changes in operating assets and liabilities:
Receivables 108,606 (167,883)
Inventories 20,257 30,009
Income tax refund receivable and other assets (12,417) (8,014)
Prepaid expenses and other current assets 410 16,831
Accounts payable 45,543 (78,631)
Accrued expenses and other liabilities 1,962 1,061
Income taxes payable - (128,926)
------------ -------------
Net cash provided by operating activities 746,017 315,323
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in cash value of life insurance (5,958) (5,835)
Proceeds from sale of equipment 3,500 1,000
Capital expenditures (606,576) (638,086)
Purchase of temporary investments (1,188) (1,123)
------------ -------------
Net cash used in investing activities (610,222) (644,044)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line-of-credit agreement - 105,000
Principal payments on line-of-credit agreement (80,000) (25,000)
Proceeds from long-term debt 495,525 471,150
Principal payments on long-term debt (285,072) (250,784)
------------ -------------
Net cash provided by financing activities 130,453 300,366
------------ -------------
NET INCREASE (DECREASE) IN CASH 266,248 (28,355)
CASH, BEGINNING OF YEAR 219,190 247,545
------------ -------------
CASH, END OF YEAR $ 485,438 $ 219,190
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 122,135 $ 134,320
============ =============
Income taxes $ 162,198 $ 315,539
============ =============
</TABLE>
These financial statements should be read only in connection with
the accompanying notes to financial statements.
6
<PAGE> 9
B & W METAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
B & W Metal Fabricators, Inc. was incorporated on January 14, 1978 in the state
of North Carolina. The Company's principal business activity is to fabricate and
bend sheet metal for equipment used in the construction and farming industry.
The Company grants credit on sales of its products, which are sold directly to
various enterprises located in the United States. The Company's fiscal year ends
on December 31. Significant accounting policies followed by the Company are
presented below.
(B) USE OF ESTIMATES IN PREPARING 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.
Actual results could differ from those estimates.
(C) TEMPORARY INVESTMENTS
Temporary investments consist of certificates of deposit with original
maturities from three months to one year. These investments are stated at cost
which approximates market.
(D) INVENTORIES
Inventories are stated at the lower of cost or market with cost determined on a
first-in, first-out (FIFO) basis.
(E) PROPERTY AND EQUIPMENT
Depreciation of property and equipment is calculated over the estimated useful
lives of the respective assets using accelerated methods.
(F) INCOME TAXES
Deferred income taxes are provided on temporary differences between financial
statement and income tax reporting. Temporary differences are differences
between the amounts of assets and liabilities reported for financial statement
purposes and their tax bases. Deferred tax assets are recognized for temporary
differences that will be deductible in future years' tax returns and for
operating loss and tax credit carryforwards. Deferred tax assets are reduced by
a valuation allowance if it is deemed more likely than not that some or all of
the deferred tax assets will not be realized. Deferred tax liabilities are
recognized for temporary differences that will be taxable in future years' tax
returns.
7
<PAGE> 10
B & W METAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(G) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers the recorded value of its financial assets and
liabilities, which consist primarily of cash, accounts receivable, accounts
payable, notes payable, and long-term debt, to approximate the fair value of
the respective assets and liabilities.
(H) EARNINGS PER SHARE
Earnings per share is computed under the provisions of Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which was adopted
retroactively by the Company at December 31, 1997. Amounts reported as earnings
per share for the years ended December 31, 1997 and 1996 reflect the earnings
available to stockholders for the year divided by the weighted average number of
common shares outstanding during the year. The Company has no dilutive
securities as defined under SFAS No. 128, therefore, a single earnings per share
amount is presented in the financial statements.
NOTE 2 - INVENTORIES
Inventories at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw materials $ 230,930 $ 235,994
Work in process 231,578 239,073
Finished goods 349,389 357,087
------------ -------------
TOTAL INVENTORIES $ 811,897 $ 832,154
============ =============
</TABLE>
NOTE 3 - DEBT
NOTE PAYABLE TO BANK
The note payable to bank is a $100,000 revolving line of credit, of which $0 and
$80,000 was used at December 31, 1997 and 1996, respectively. The line of credit
expires September 17, 1998 and bears interest at the local prime lending rate
plus 0.5 percent (10 percent at December 31, 1997). Accrued interest is payable
monthly. The line of credit is collateralized by all of the Company's accounts
receivable and inventories.
NOTES PAYABLE TO STOCKHOLDERS
The notes payable to stockholders is an unsecured demand note and was paid in
full in 1998.
8
<PAGE> 11
B & W METAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3 - DEBT (CONTINUED)
LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable to bank, due in monthly installments of $1,011, which includes
interest at 8.5 percent, through December 2, 2001, secured by automobiles $ 32,025 $ -
Note payable to finance company, due in monthly installments of $9,519, which
includes interest at 7.85 percent, through May 18, 2001, secured by specific equipment 341,366 425,194
Note payable to bank, due in monthly installments of $9,509, which includes
interest at 8.5 percent, through September 15, 2002, secured by specific equipment 444,689 -
Mortgage note payable to bank, due in monthly installments of $21,919, which
includes interest at 8.25 percent through November 15, 2001, secured by real
estate and substantially all assets of the Company and a personal guarantee by
the Company's stockholders 877,782 1,060,215
-------------- ---------------
Total 1,695,862 1,485,409
Less current portion 365,451 187,567
-------------- ---------------
LONG-TERM PORTION $ 1,330,411 $ 1,297,842
============== ===============
Future maturities of long-term debt are as follows:
1998 $ 365,451
1999 409,988
2000 444,963
2001 380,712
2002 94,748
---------------
TOTAL $ 1,695,862
===============
</TABLE>
9
<PAGE> 12
B & W METAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - EMPLOYEE BENEFIT PLAN
The Company has a profit sharing plan covering substantially all employees.
Benefits are based on the value of the account at retirement based upon plan
earnings and employer contributions. Plan assets consist primarily of listed
stocks and U.S. bonds. The Company's contributions are voluntary. Eligible
employees will receive a share of the Employer's contribution based on their
total compensation and a fixed compensation level. The fixed compensation level
is defined as the Social Security Wage Base in effect on the first day of the
Plan Year. The expense charged to operations was $39,500 and $40,000 for the
years ended December 31, 1997 and 1996, respectively.
NOTE 5 - INCOME TAXES
Income taxes consist of the following for the years ended December 31:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
1997:
<S> <C> <C> <C>
Federal $ 126,665 $ 3,273 $ 129,938
State 10,539 780 11,319
------------ ---------- -------------
$ 137,204 $ 4,053 $ 141,257
============ ========== =============
1996:
Federal $ 144,148 $ 4,308 $ 148,456
State 33,298 1,064 34,362
------------ ---------- -------------
$ 177,446 $ 5,372 $ 182,818
============ ========== =============
</TABLE>
A reconciliation of income taxes at the statutory federal tax rates to the
Company's actual income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Computed at federal statutory rates $ 117,682 $ 145,015
State income taxes, net of federal tax benefit 7,471 22,679
Nondeductible expenses 16,084 15,124
Other 20 -
------------ ------------
TOTAL INCOME TAXES $ 141,257 $ 182,818
============ =============
</TABLE>
The source of deferred tax liabilities and the tax effect of each at December
31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax liabilities:
Inventories, additional costs inventoried
for book purposes $ 313,851 $ 309,798
============ =============
</TABLE>
10
<PAGE> 13
B & W METAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - LEASES
The Company leases vehicles under noncancelable operating leases expiring in
various years through 1999. The leases contain renewal options for periods from
three to five years at their fair rental value at the time of renewal. Future
minimum lease payments under these leases are as follows:
<TABLE>
<S> <C>
1998 $ 23,367
1999 686
-----------
TOTAL $ 24,053
===========
</TABLE>
Minimum lease payments exclude rentals under renewal options which, as of
December 31, 1997, are not reasonably assured of being exercised.
Total rental expense for the years ended December 31, 1997 and 1996 was $26,937
and $23,677, respectively.
NOTE 7 - CONCENTRATIONS OF CREDIT
Sales to customers in excess of 10 percent of total net sales for the years
ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
CUSTOMER A CUSTOMER B
---------- ----------
<S> <C> <C>
Years ended:
December 31, 1997 54% 11%
December 31, 1996 30% 25%
</TABLE>
The accounts receivable from one customer which totaled $318,705 and
$366,305 exceeded 5 percent of the Company's stockholders' equity at December
31, 1997 and 1996, respectively.
NOTE 8 - PRIOR PERIOD ADJUSTMENT
Retained earnings at December 31, 1995 has been restated by $473,120 to correct
errors related to inventory made in 1995 and prior years. The error had no
effect on net earnings for 1996 or 1997. The inventory at December 31, 1995 was
understated by $788,533 and the tax effect of such adjustment was $315,413.
NOTE 9 - SUBSEQUENT EVENT
Effective April 8, 1998, all of the outstanding common stock of the Company was
acquired by Morton Industrial Group, Inc. in a business combination which will
be accounted for using the purchase method.
This information is an integral part of the accompanying financial statements.
11
<PAGE> 1
EXHIBIT 99.3
PRO FORMA CONDENSED COMBINED BALANCE SHEET
The following unaudited pro forma condensed combined balance sheet combines the
consolidated balance sheet of Morton Industrial Group, Inc. (Morton) at April 4,
1998 with the balance sheet of B & W Metal Fabricators, Inc. (B & W) at March
31, 1998 as though the merger had occurred on April 4, 1998. The Morton balance
sheet at April 4, 1998 reflects the acquisition of Carroll George, Inc. which
was consummated on March 30, 1998.
<TABLE>
<CAPTION>
HISTORICAL
---------------- PRO FORMA
MORTON B & W ADJUSTMENTS COMBINED
------ ----- ------------ --------
ASSETS (In Thousands)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 1,069 $ 525 $ -- $ 1,594
Temporary investments -- 24 -- 24
Accounts, notes, and other
receivables, less allowance
for doubtful accounts of $100
in 1998 and 1997 12,977 1,056 (199)
(20) 13,814
Inventories 10,602 815 -- 11,417
Prepaid expenses 1,420 -- -- 1,420
Refundable income taxes 994 -- -- 994
Deferred income taxes 1,421 -- 73 (2) 1,494
-------- ------- ------- ---------
Total current assets 28,483 2,420 (146) 30,757
DEFERRED INCOME TAXES 2,263 -- 221 (2) 2,484
PROPERTY, PLANT, AND
EQUIPMENT, NET OF
ACCUMULATED
DEPRECIATION 24,456 2,119 4,901 (3) 31,476
OTHER 3,317 66 68 (9)
50 (8)
(66)(6) 3,635
-------- ------- ------ --------
TOTAL ASSETS $ 58,519 $ 4,605 $ 5,228 $ 68,352
======== ======= ======= =========
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
HISTORICAL
LIABILITIES AND ---------------------- PRO FORMA
STOCKHOLDERS' MORTON B & W ADJUSTMENTS COMBINED
EQUITY (DEFICIT) ------ ----- ------------ ---------
(In Thousands)
CURRENT LIABILITIES
<S> <C> <C> <C> <C>
Note payable to bank $ 18,000 $ - $ 4,050 (1) $ 22,050
Current installments of long-term
debt, obligations under capital
leases, and covenants payable 2,378 376 262 (1) 3,016
Accounts payable 14,697 262 (199) (5) 14,760
Accrued salaries and wages 1,242 63 - 1,305
Other accrued expenses 1,840 53 350 (4) 2,243
Deferred income taxes - 314 (314) (2) -
--------- ----------- --------- -------------
Total current liabilities 38,157 1,068 4,149 43,374
LONG-TERM DEBT, EXCLUDING
CURRENT INSTALLMENTS 12,587 1,228 3,388 (1) 17,203
OBLIGATIONS UNDER CAPITAL
LEASES, EXCLUDING
CURRENT INSTALLMENT 187 - - 187
OTHER 2,056 - - 2,056
--------- ---------- --------- -------------
Total liabilities 52,987 2,296 7,537 62,820
--------- ----------- --------- -------------
STOCKHOLDERS' EQUITY
(DEFICIT)
Class A common stock 38 59 (59) (7) 38
Class B common stock 2 - - 2
Additional paid-in capital 19,308 10 (10) (7) 19,308
Retained earnings (deficit) (13,816) 2,240 (2,240) (7) (13,816)
--------- ----------- --------- -------------
Total stockholders'
equity (deficit) 5,532 2,309 (2,309) 5,532
--------- ----------- --------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 58,519 $ 4,605 $ 5,228 $ 68,352
========= =========== ========= =============
</TABLE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
(1) Represents purchase price of $7,700 financed by a $4,050 draw on the
bank line of credit and $3,650 of subordinated notes, of which $262 is
current and $3,388 is long-term.
(2) Represents a deferred tax asset recognized as part of the purchase
price allocation and elimination of the deferred tax liability due to
utilization of Morton's net operating loss carryforwards to offset
future taxable income of B & W.
(3) Represents increase in appraised value for property, plant, and
equipment.
(4) Represents reserves set up at the acquisition date for potential bad
debts, environmental clean-up costs, factory rearrangement, and a new
information system.
(5) Elimination of intercompany receivables and payables.
(6) Elimination of cash value of life insurance which was transferred to
previous shareholders of B & W.
(7) Elimination of stockholders' equity of B & W after payment of purchase
price to previous shareholders of B & W.
(8) Represents value assigned to the noncompete agreements with the
previous stockholders of B & W.
(9) Represents value assigned to goodwill from the acquisition.
<PAGE> 3
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
The following unaudited pro forma condensed combined statements of earnings
combines the consolidated statement of earnings of Morton Industrial Group, Inc.
(Morton) for the quarter ended April 4, 1998 and the year ended December 31,
1997 and the statement of earnings of Carroll George, Inc. (George) for the
quarter ended April 4, 1998 and the year ended September 30, 1997 and the
statement of earnings of B & W Metal Fabricators, Inc. (B & W) for the quarter
ended March 31, 1998 and the year ended December 31, 1997, accounting for the
purchases of George and B & W as though the purchases had occurred at the
beginning of the respective period.
<TABLE>
<CAPTION>
QUARTER ENDED APRIL 4, 1998
-------------------------- ----------------------------------------------
HISTORICAL PRO FORMA
-------------------------- ADJUSTMENTS COMBINED B & W
MORTON GEORGE ----------- --------- -----
-------- --------- (In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 30,672 $ 6,941 $ - $ 37,613 $ 2,471
Cost of sales 25,956 6,173 - 32,129 1,692
----------- ----------- --------- ----------- -----------
Gross profit 4,716 768 - 5,484 779
----------- ----------- --------- ----------- -----------
Operating expenses:
Selling expenses 767 370 - 1,137 120
Administrative expenses 2,395 428 - 2,823 294
------------ ------------
Total operating expenses 3,162 798 - 3,960 414
------------ ------------ --------- ----------- -----------
Operating income (loss) 1,554 (30) - 1,524 365
------------ ------------ --------- ----------- -----------
Other income (expense):
Interest expense (546) (75) (105) (2) (726) (34)
Miscellaneous 22 3 - 25 -
------------ ----------- --------- ----------- -----------
Total other income (expense) (524) (72) (105) (701) (34)
------------ ----------- --------- ----------- -----------
Earnings (loss) before
income taxes 1,030 (102) (105) 823 331
Income tax expense (benefit) 72 (40) - 32 132
------------ -----------
NET EARNINGS (LOSS) $ 958 $ (62) $ (105) $ 791 $ 199
============ =========== ========= =========== ===========
Earnings (loss) per share:
Basic $ 0.24 $ (8.35) $ 0.20 $ 3.40
============ ============ =========== ===========
Diluted $ 0.20 $ (8.35) $ 0.17 $ 3.40
============ ============ =========== ===========
Weighted average number of shares:
Basic 4,001,944 7,424 4,001,944 58,501
============ =========== =========== ===========
Diluted 4,687,917 7,424 4,687,917 58,501
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED APRIL 4, 1998
----------------------------------------
PRO FORMA
ADJUSTMENTS COMBINED
----------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
Net sales $ (325) (5) $ 39,759
Cost of sales (325) (5)
74 (4) 33,570
-------- -------------
Gross profit (74) 6,189
-------- -------------
Operating expenses:
Selling expenses - 1,257
Administrative expenses 7 (6) 3,124
-------- -------------
Total operating expenses 7 4,381
-------- -------------
Operating income (loss) (81) 1,808
-------- -------------
Other income (expense):
Interest expense (133) (2) (893)
Miscellaneous - 25
-------- -------------
Total other income (expense) (133) (868)
-------- -------------
Earnings (loss) before
income taxes (214) 940
Income tax expense (benefit) (132) (3) 32
-------- -------------
NET EARNINGS (LOSS) $ (82) $ 908
======== =============
Earnings (loss) per share:
Basic $ .23
=============
Diluted $ .19
=============
Weighted average number of shares:
Basic 4,001,944
=============
Diluted 4,687,917
=============
</TABLE>
<PAGE> 4
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------
HISTORICAL PRO FORMA
--------------------------- ADJUSTMENTS COMBINED B & W
MORTON (1) GEORGE ----------- ---------- -----
-------- ------ (In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 94,402 $ 22,839 $ - $ 117,241 $ 7,699
Cost of sales 83,267 19,163 - 102,430 5,725
------------ ----------- ------- -------------- -----------
Gross profit 11,135 3,676 - 14,811 1,974
------------ ----------- ------- -------------- -----------
Operating expenses:
Selling expenses 2,231 1,210 - 3,441 281
Administrative expenses 13,746 1,223 - 14,969 1,225
------------ ----------- ------- -------------- -----------
Total operating expenses 15,977 2,433 - 18,410 1,506
------------ ----------- ------- -------------- -----------
Operating income (loss) (4,842) 1,243 - (3,599) 468
------------ ----------- ------- -------------- -----------
Other income (expense):
Interest expense (3,375) (198) (354) (2) (3,927) (122)
Miscellaneous 84 - - 84 -
------------ ----------- ------- -------------- -----------
Total other income (expense) (3,291) (198) (354) (3,843) (122)
------------ ----------- ------- -------------- -----------
Earnings (loss) before
income taxes (8,133) 1,045 (354) (7,442) 346
Income tax expense (benefit) (3,224) 375 (375) (3) (3,224) 141
------------ ----------- ------- -------------- -----------
NET EARNINGS (LOSS) $ (4,909) $ 670 $ 21 $ (4,218) $ 205
============ =========== ======= ============== ===========
Earnings (loss) per share:
Basic $ (2.52) $ 90.25 $ (2.17) $ 3.50
=========== =========== ============== ===========
Diluted $ (2.52) $ 90.25 $ (2.17) $ 3.50
=========== =========== ============== ===========
Weighted average number of shares:
Basic 1,944,444 7,424 1,944,444 58,501
============ =========== ============== ===========
Diluted 1,944,444 7,424 1,944,444 58,501
============ =========== ============== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
PRO FORMA
ADJUSTMENTS COMBINED
----------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
Net sales $ (16) (5) $ 124,924
Cost of sales (16) (5)
257 (4) 108,396
-------- ---------------
Gross profit (257) 16,528
-------- ---------------
Operating expenses:
Selling expenses 27 (6) 3,722
Administrative expenses - 16,221
-------- ---------------
Total operating expenses 27 19,943
-------- ---------------
Operating income (loss) (284) (3,415)
-------- ---------------
Other income (expense):
Interest expense (528) (2) (4,577)
Miscellaneous - 84
-------- ---------------
Total other income (expense) (528) (4,493)
-------- ---------------
Earnings (loss) before
income taxes (812) (7,908)
Income tax expense (benefit) (141) (3) (3,224)
-------- ---------------
NET EARNINGS (LOSS) $ (671) $ (4,684)
======== ===============
Earnings (loss) per share:
Basic $ (2.41)
===============
Diluted $ (2.41)
===============
Weighted average number of shares:
Basic 1,944,444
===============
Diluted 1,944,444
===============
</TABLE>
(1) Amounts for Morton for the twelve month period ended December 31, 1997
were determined by adding results for the six months ended June 30, 1997
and the results for the six months ended December 31, 1997 adjusting the
income tax provision to the estimated effective rate. Subsequent to June
30, 1997, Morton changed its fiscal year end from June 30 to December 31.
(2) Represents incremental interest expense relating to the additional debt
of Morton resulting from the completed acquisition of George and B & W,
net of the interest savings resulting from refinancing existing George
and B & W debt at a lower interest rate.
(3) Represents adjustment of the income tax provision to the estimated
amount. Morton has net operating loss carryforwards which could be
utilized to offset the taxable income of George and B & W. A deferred tax
asset would have been recorded as part of the purchase price allocation.
(4) Represents incremental depreciation expense resulting from adjustments to
asset bases and useful lives relating to the acquisition.
(5) Elimination of sales and purchases between Morton and B & W.
(6) Represents amortization of goodwill and the noncompete agreements.
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