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Previous: CLEAR CHANNEL COMMUNICATIONS INC, 425, 2000-03-06 |
Next: OLD KENT FINANCIAL CORP /MI/, 4, 2000-03-06 |
UNITED STATES
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) December 20, 1999
INTERMET CORPORATION
(Exact name of registrant as specified in its charter)
Georgia
(State or other jurisdiction of incorporation)
| 0-13787 | 58-1563873 | |
| (Commission File No.) | (IRS Employer Identification No.) | |
| 5445 Corporate Drive, Suite 200, Troy, Michigan | 48098-2683 | |
| (Address of principal executive offices) | (Zip code) |
(248) 952-2500
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
This report amends the current report on Form 8-K of Intermet Corporation filed on December 30, 1999, relating to Intermet’s acquisitions of Ganton Technologies, Inc. and Diversified Diemakers, Inc. This amendment should be read in conjunction with such filing.
The amendment provides certain historical financial data for Ganton and Diversified Diemakers and pro forma financial information for Intermet giving effect to the acquisitions of Ganton and Diversified Diemakers.
Item 7. Financial Statements and Exhibits
Table of Contents
| (a) | Financial Statements of Businesses Acquired | |
| (1) | The audited financial statements of Ganton Technologies, Inc. for the years ended December 31, 1998 and 1997, including: |
| • | Report of Independent Accountants | ||
| • | Statements of Operations for the years ended December 31, 1998 and 1997 | ||
| • | Balance Sheets at December 31, 1998 and 1997 | ||
| • | Statements of Shareholders’ Equity for the years ended December 31, 1998 and 1997 | ||
| • | Statements of Cash Flows for the years ended December 31, 1998 and 1997 | ||
| • | Notes to Financial Statements |
| (2) | The unaudited interim condensed financial statements of Ganton Technologies, Inc. for the nine months ended September 30, 1999 and 1998, including: |
| • | Interim Condensed Statements of Operations for the nine months ended September 30, 1999 and 1998 | ||
| • | Interim Condensed Balance Sheets at September 30, 1999 and December 31, 1998 | ||
| • | Interim Condensed Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 | ||
| • | Notes to Interim Condensed Financial Statements |
| (3) | The audited consolidated financial statements of Diemakers, Inc. (the predecessor company of Diversified Diemakers, Inc.) for the years ended December 31, 1998 and 1997, including: |
| • | Report of Independent Accountants | ||
| • | Consolidated Balance Sheet at December 31, 1998 and 1997 | ||
| • | Consolidated Statement of Operations for the years ended December 31, 1998 and 1997 | ||
| • | Consolidated Statement of Stockholder’s Equity for the years ended December 31, 1998 and 1997 | ||
| • | Consolidated Statement of Cash Flows for the years ended December 31, 1998 and 1997 | ||
| • | Notes to Consolidated Financial Statements |
| (4) | The unaudited interim condensed consolidated financial statements of Diversified Diemakers, Inc. and its subsidiaries for the period from March 30, 1999 to September 30, 1999 and of Diemakers, Inc. and its subsidiaries (the predecessor company of Diversified Diemakers, Inc.) for the period from January 1, 1999 to March 29, 1999 and the nine months ended September 30, 1998, including: |
| • | Interim Condensed Consolidated Statements of Operations for the periods from March 30, 1999 to September 30, 1999 and January 1, 1999 to March 29, 1999 and the nine months ended September 30, 1998 | ||
| • | Interim Condensed Consolidated Balance Sheets at September 30, 1999 and December 31, 1998 | ||
| • | Interim Condensed Consolidated Statements of Cash Flows for the periods from March 30, 1999 to September 30, 1999 and January 1, 1999 to March 29, 1999 and the nine months ended September 30, 1998 | ||
| • | Notes to Interim Condensed Consolidated Financial Statements |
| (b) | Pro Forma Financial Information |
| • | Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 1999 | ||
| • | Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 1998 | ||
| • | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1999 | ||
| • | Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements |
| (c) | Exhibits |
| • | Exhibit 23.1 Consent of Independent Accountants | ||
| • | Exhibit 23.2 Consent of Independent Accountants |
2
(a)(1) Audited financial statements of Ganton
Technologies, Inc. for the years ended December 31, 1998 and
1997
Report of Independent Accountants
To the Board of Directors of Ganton Technologies, Inc.
In our opinion, the accompanying balance sheet and the related statements of operations, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Ganton Technologies, Inc. (the “Company”) at December 31, 1998 and 1997, and the results of its operations and its cash flows for the years ended December 31, 1998 and 1997, in conformity with generally accepted accounting principles. 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 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 discussed in Note 11, the Company changed its method of accounting for replacement dies effective January 1, 1997.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
March 19, 1999, except as to Note 5,
which is as of March 26, 1999
Chicago, Illinois
3
Ganton Technologies, Inc.
Statements of
Operations
For the Years Ended December 31, 1998 and 1997
(Dollars in Thousands)
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Net sales | $ | 113,919 | $ | 108,628 | ||||
| Cost of sales | 96,775 | 98,737 | ||||||
| Gross profit | 17,144 | 9,891 | ||||||
| Selling, general and administrative expense | 9,860 | 8,906 | ||||||
| Operating income | 7,284 | 985 | ||||||
| Interest expense | 2,681 | 2,980 | ||||||
| Other expense | 61 | 352 | ||||||
| Income (loss) before income taxes and cumulative
effect of accounting change |
4,542 | (2,347 | ) | |||||
| (Provision) benefit for income taxes | (2,057 | ) | 544 | |||||
| Income (loss) before cumulative effect of
accounting change |
2,485 | (1,803 | ) | |||||
| Cumulative effect of accounting change, net of tax | — | (2,677 | ) | |||||
| Net income (loss) | $ | 2,485 | ($4,480 | ) | ||||
The accompanying notes are an integral part of these financial statements.
4
Ganton Technologies, Inc.
Balance Sheets
December 31, 1998 and 1997
(Dollars in Thousands, Except Share Data)
| December 31, | ||||||||||
| 1998 | 1997 | |||||||||
| ASSETS | ||||||||||
| Current Assets: | ||||||||||
| Cash | $ | 81 | $ | 1,219 | ||||||
| Accounts receivable, less allowances of $382 and $325 | 16,379 | 14,917 | ||||||||
| Inventories | 8,941 | 7,891 | ||||||||
| Income tax receivable | 323 | 154 | ||||||||
| Deferred tax asset | 1,604 | 1,814 | ||||||||
| Prepaid expenses | 266 | 251 | ||||||||
| Total current assets | 27,594 | 26,246 | ||||||||
| Property, plant and equipment, net | 36,694 | 32,223 | ||||||||
| Reorganization value in excess of identifiable assets | 5,032 | 5,481 | ||||||||
| Restricted cash | 3,234 | 3,122 | ||||||||
| Other assets | 2,951 | 3,608 | ||||||||
| Total Assets | $ | 75,505 | $ | 70,680 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities: | ||||||||||
| Current portion of long-term debt | $ | 4,097 | $ | 3,540 | ||||||
| Accounts payable | 9,757 | 6,800 | ||||||||
| Customer deposits | 236 | 631 | ||||||||
| Die replacement reserve | 726 | 1,403 | ||||||||
| Other accrued liabilities | 9,044 | 6,432 | ||||||||
| Total current liabilities | 23,860 | 18,806 | ||||||||
| Long-term debt | 25,961 | 27,625 | ||||||||
| Environmental remediation reserve | 3,234 | 3,122 | ||||||||
| Other long-term liabilities | 422 | 1,502 | ||||||||
| Total liabilities | 53,477 | 51,055 | ||||||||
| Shareholders’ Equity: | ||||||||||
| Common stock, $.01 par value, 6,000,000 shares
authorized, 1,000,000 shares outstanding at December 31, 1998 and 1997 |
10 | 10 | ||||||||
| Additional paid in capital | 20,990 | 20,990 | ||||||||
| Retained earnings (deficit) | 1,179 | (1,306 | ) | |||||||
| Minimum pension liability | (151 | ) | (69 | ) | ||||||
| Total shareholders’ equity | 22,028 | 19,625 | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | 75,505 | $ | 70,680 | ||||||
The accompanying notes are an integral part of these financial statements.
5
Ganton Technologies, Inc.
Statements of
Shareholders’ Equity
For the Years Ended December 31,
1998 and 1997
(Dollars in Thousands)
| Accumulated | |||||||||||||||||||||
| Additional | Retained | Other | |||||||||||||||||||
| Paid in | Earnings | Comprehensive | |||||||||||||||||||
| Common Stock | Capital | (Deficit) | (Loss) | Total | |||||||||||||||||
| Balance at December 31, 1996 | $ | 10 | $ | 20,990 | $ | 3,174 | $ | $ | 24,174 | ||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||
| Net (loss) | (4,480 | ) | (4,480 | ) | |||||||||||||||||
| Additional minimum
pension liability |
(69 | ) | (69 | ) | |||||||||||||||||
| Total comprehensive (loss) | (4,549 | ) | |||||||||||||||||||
| Balance at December 31, 1997 | 10 | 20,990 | (1,306 | ) | (69 | ) | 19,625 | ||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||
| Net income | 2,485 | 2,485 | |||||||||||||||||||
| Additional minimum
pension liability |
(82 | ) | (82 | ) | |||||||||||||||||
| Total comprehensive income | 2,403 | ||||||||||||||||||||
| Balance at December 31, 1998 | $ | 10 | $ | 20,990 | $ | 1,179 | ($151 | ) | $ | 22,028 | |||||||||||
The accompanying notes are an integral part of these financial statements.
6
Ganton Technologies, Inc.
Statements of Cash
Flows
For the Years Ended December 31, 1998 and
December 31, 1997
(Dollars in Thousands)
| For the Years Ended | ||||||||||
| December 31, | ||||||||||
| 1998 | 1997 | |||||||||
| Cash Flows from Operating Activities: | ||||||||||
| Net income (loss) | $ | 2,485 | ($4,480 | ) | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||
| Cumulative effect of accounting change, net of tax | — | 2,677 | ||||||||
| Depreciation | 6,404 | 5,488 | ||||||||
| Amortization | 449 | 449 | ||||||||
| Gain on asset disposal | (4 | ) | (31 | ) | ||||||
| Deferred income taxes | 966 | (875 | ) | |||||||
| 10,300 | 3,228 | |||||||||
| Changes in: | ||||||||||
| Accounts receivable | (1,462 | ) | (1,836 | ) | ||||||
| Inventories | (1,050 | ) | 1,815 | |||||||
| Income tax receivable | (169 | ) | (1,048 | ) | ||||||
| Prepaid expenses | (15 | ) | 451 | |||||||
| Other assets | 121 | 93 | ||||||||
| Accounts payable | 2,957 | 1,180 | ||||||||
| Customer deposits | (395 | ) | (256 | ) | ||||||
| Other accrued expenses | 552 | 1,315 | ||||||||
| Net Cash Provided by Operating Activities | 10,839 | 4,942 | ||||||||
| Cash Flows from Investing Activities: | ||||||||||
| Capital expenditures | (10,882 | ) | (8,878 | ) | ||||||
| Proceeds from sale of fixed assets | 12 | 129 | ||||||||
| Net Cash Used by Investing Activities | (10,870 | ) | (8,749 | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||||
| Payment of notes payable | — | (1,791 | ) | |||||||
| Proceeds from borrowings | 2,488 | 5,157 | ||||||||
| Payments on borrowings | (3,595 | ) | (2,590 | ) | ||||||
| Net Cash (Used) Provided by Financing Activities | (1,107 | ) | 776 | |||||||
| DECREASE IN CASH | (1,138 | ) | (3,031 | ) | ||||||
| CASH BEGINNING OF YEAR | 1,219 | 4,250 | ||||||||
| CASH END OF YEAR | $ | 81 | $ | 1,219 | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||
| Cash paid during the period for: | ||||||||||
| Interest | $ | 2,705 | $ | 2,922 | ||||||
| Income taxes | $ | 1,260 | $ | 1,380 | ||||||
The accompanying notes are an integral part of these financial statements.
7
Ganton Technologies, Inc.
Notes to Financial
Statements
December 31, 1998 and December 31, 1997
| 1. | Reorganization and Description of Business |
Reorganization of business
Effective March 29, 1996, (the “Effective Date”) Ganton Technologies, Inc. (the “Company” or “Ganton”) emerged from bankruptcy pursuant to the terms set forth in the Second Amended Plan of Reorganization and Disclosure Statement (the “Plan of Reorganization”).
In conjunction with its emergence from bankruptcy on March 29, 1996, Ganton adopted fresh start accounting in accordance with SOP 90-7. Except for recording $6,287,000 of reorganization value in excess of identifiable assets, no significant adjustments were made to Ganton’s other assets and liabilities, as their fair values approximated recorded amounts at the Effective Date.
Description of business
Ganton’s primary business is the production and machining of highly engineered custom aluminum die castings. A substantial amount of Ganton’s sales are to enterprises in automotive related industries. Ford Motor Company, General Motors Corporation, Chrysler Corporation and New Venture Gear accounted for 36%, 17%, 11% and 11% of the Company’s net sales in 1998 and accounted for 28%, 24%, 12%, and 11% in 1997, respectively. At December 31, 1998, and December 31, 1997, the Company had accounts receivable totaling $11.7 million and $10.5 million, respectively, from these manufacturers.
| 2. | Summary of Significant Accounting Policies |
Use of estimates
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 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.
Fair value of financial instruments
The carrying amount of cash, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. At December 31, 1998 and 1997, the difference between the carrying value of long term debt instruments and their estimated fair value is not material.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for the raw material component of manufactured product inventory and by the first-in, first-out (FIFO) method for the direct labor and overhead components of manufactured product inventory. Inventories valued by the LIFO method represented approximately 37% and 30% of total inventories at December 31, 1998 and December 31, 1997, respectively.
Revenue recognition
Revenue is recognized when products are shipped. The Company has entered into various tooling contracts. Revenues from such tooling contracts are recognized using the completed-contract method. The contract is considered complete and the related revenue is recognized when all significant costs have been incurred and the tooling has been completed in accordance with the customer’s specifications.
8
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
Reorganization value in excess of identifiable assets
Reorganization value in excess of identifiable assets was recorded in conjunction with the reorganization of the Company and is amortized on a straight line basis over 14 years. The Company evaluates the carrying value of reorganization value in excess of identifiable assets whenever circumstances indicate an impairment of value may exist. For purposes of this evaluation, the Company uses expected future undiscounted cash flows.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Repairs and maintenance are expensed when incurred. Cost and accumulated depreciation of assets retired or sold are removed from the accounts and the resulting gain or loss is included in cost of sales in the Statements of Operations.
Income taxes
The Company follows the liability method in accounting for income taxes. The liability method provides that deferred tax assets and liabilities be recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Reporting for Business Segments
The Company's management evaluates the operating performance of its business units individually. Under the provisions of segment reporting, the Company has aggregated operating units that have similar characteristics, which has resulted in one segment. Virtually all sales are made to one geographic area (United States). Thus, the Company has only one reportable segment.
New accounting standards
In June 1997, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income”, which established standards for reporting and display of comprehensive income and its components. This standard requires that certain items recognized under accounting principles as components of comprehensive income be reported in an annual financial statement that is displayed with the same prominence as other financial statements. The Company has adopted this standard in 1998.
In February 1998, the FASB issued SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” This standard’s objective is to improve pension and other postretirement benefits disclosure. The Company has adopted this standard in 1998.
9
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
| 3. | Inventories |
Inventories consist of the following (dollars in thousands):
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Raw materials | $ | 1,355 | $ | 973 | ||||
| Work-in-process | 2,451 | 1,681 | ||||||
| Finished goods | 1,302 | 1,608 | ||||||
| 5,108 | 4,262 | |||||||
| LIFO reserve | — | (424 | ) | |||||
| Obsolescence reserve | (63 | ) | (63 | ) | ||||
| 5,045 | 3,775 | |||||||
| Customer tooling in process | 3,495 | 4,091 | ||||||
| Capitalized engineering | 384 | — | ||||||
| Packaging | 17 | 25 | ||||||
| $ | 8,941 | $ | 7,891 | |||||
At December 31, 1998 the difference between inventory value on a LIFO method and a FIFO method was insignificant.
| 4. | Property, Plant and Equipment |
Property, plant and equipment consist of the following (dollars in thousands):
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Land | $ | 630 | $ | 630 | ||||
| Buildings | 16,009 | 15,599 | ||||||
| Machinery and equipment | 53,975 | 53,181 | ||||||
| Office furniture and equipment | 2,432 | 2,390 | ||||||
| Construction in progress | 1,058 | 266 | ||||||
| 74,104 | 72,066 | |||||||
| Less accumulated depreciation and amortization | 37,410 | 39,843 | ||||||
| $ | 36,694 | $ | 32,223 | |||||
10
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
| 5. | Long-Term Debt |
Long-term debt consists of the following (dollars in thousands):
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Credit Facility: | ||||||||
| Term loan (prime plus 1.25%) | $ | 15,470 | $ | 17,970 | ||||
| Revolving credit loan (prime plus 1.0%) | 10,464 | 9,587 | ||||||
| Equipment loan (prime plus 1.25%) | 4,027 | 3,148 | ||||||
| Capitalized Lease and Installment Note Obligations (interest at average rates of 10.75% and 9.75%, respectively) | 97 | 460 | ||||||
| 30,058 | 31,165 | |||||||
| Less amount due in one year | 4,097 | 3,540 | ||||||
| $ | 25,961 | $ | 27,625 | |||||
The Company maintains a $45 million credit facility (the “Facility”) which expires December 18, 1999. Provisions of the Facility include a $20 million revolving credit loan, a $20 million term loan and a $5 million equipment loan. Amounts borrowed under the revolving credit loan are generally limited to 85% of qualified accounts receivable. Amounts borrowed under the equipment loans are due in sixty monthly payments beginning the month in which the equipment loan is made; however, the entire principal balance of all equipment loans are due on December 18, 1999. Substantially all of the assets of Ganton are pledged as collateral for the amounts borrowed under the Facility.
On September 25, 1997, Ganton and the lender amended and modified certain of the provisions of the Facility. This amendment cured the covenant violation on the interest coverage ratio which occurred at the end of the first quarter of 1997. Under this amendment, interest on the revolving credit loan was prime plus 1.0% or LIBOR plus 2.75% and on the term and equipment loans prime plus 1.25% or LIBOR plus 3.0% for Ganton’s second, third and fourth quarters in 1997. Commencing December 31, 1997, interest on the revolving credit loan and the term and equipment loans may be adjusted based upon Ganton’s rolling twelve month interest coverage ratio, however, it may not exceed the interest rates described above. Ganton is required to pay a commitment fee of .375% on the unused portion of the revolving credit loan.
On October 15, 1998, Ganton and the lender amended and modified certain of the provisions of the Facility. This amendment cured the covenant violation on the interest coverage ratio which occurred at the end of the fourth quarter of 1997. This amendment also increased Ganton’s availability for equipment loans from $5 million to $10 million to purchase certain specified equipment.
The Facility contains standard covenants including limits on total indebtedness, distributions to stockholders, capital expenditures and requires Ganton to maintain specified levels of net worth, cash flows, EBIT and interest coverage ratio, all of which are defined in the Facility agreement.
11
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
As a result of the change in accounting described in Note 11, Ganton was in violation of certain covenants at December 31, 1997 and 1998. On March 26, 1999, the lender agreed to amend and modify certain of the provisions of the Facility. This amendment will waive all previous covenant violations and amend the future covenants. In addition, the term of the Facility will be extended to January 15, 2000, which allowed for the reclassification to long-term for the majority of the borrowings under the Facility.
| 6. | Retirement Plans |
Ganton maintains non-contributory defined benefit pension plans covering substantially all Ganton employees, retirees and their beneficiaries. Benefits provided to plan participants are based on final pay and years of service for all salaried employees and certain hourly employees, and years of service and a fixed rate for union employees. Ganton’s funding policy is to contribute annually an amount equal to at least the minimum Employee Retirement Income Security Act of 1974 funding standards.
The assumptions used in determining the benefit obligations of these plans as of December 31, 1998 and December 31, 1997 were:
| 1998 | 1997 | |||||||
| Discount rate | 7.00 | % | 7.15 | % | ||||
| Rate of return on plan assets | 8.50 | % | 8.50 | % | ||||
| Rate of compensation increase | 4.00 | % | 4.00 | % | ||||
The following table sets forth the funded status of the plans reconciled to the amounts included in the balance sheet (dollars in thousands):
| December 31, | |||||||||
| 1998 | 1997 | ||||||||
| Actuarial present value of benefits for services rendered to date: | |||||||||
| Accumulated benefit obligation: | |||||||||
| Vested benefits | $ | 3,779 | $ | 2,963 | |||||
| Non-vested benefits | 309 | 398 | |||||||
| 4,088 | 3,361 | ||||||||
| Additional benefits based on projected increases in compensation | 763 | 538 | |||||||
| Projected benefit obligation | 4,851 | 3,899 | |||||||
| Less plan assets at fair value | 2,936 | 2,128 | |||||||
| Projected benefit obligation in excess of plan assets | 1,915 | 1,771 | |||||||
| Unrecognized net (loss) | (604 | ) | (491 | ) | |||||
| Unrecognized prior service cost | (214 | ) | (347 | ) | |||||
| Additional minimum liability | 366 | 416 | |||||||
| Accrued pension liability | $ | 1,463 | $ | 1,349 | |||||
12
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
The additional minimum liability represents the excess of the unfunded accumulated benefit obligation over previously accrued pension costs. The amount has been recorded as an accrued pension liability with an offsetting intangible asset of $214,000 and $347,000 at December 31, 1998 and December 31, 1997, respectively. Because the asset recognized may not exceed the amount of unrecognized prior service cost, a balance of $151,000 and $69,000 is reported as accumulated other comprehensive loss at December 31, 1998 and December 31, 1997, respectively.
Pension costs are comprised of the following components (dollars in thousands):
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Service cost – benefits earned during the period | $ | 597 | $ | 479 | ||||
| Interest cost on projected benefit obligation | 284 | 206 | ||||||
| Return on assets | (299 | ) | (302 | ) | ||||
| Net amortization and deferral | 274 | 296 | ||||||
| $ | 856 | $ | 679 | |||||
The Company made contributions of $693,000 and $81,000 and paid employee benefits of $185,000 and $37,000 for the years ended December 31, 1998 and December 31, 1997, respectively.
| 7. | Income Taxes |
The significant components of the income tax provision (benefit) consisted of the following (dollars in thousands):
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Current | $ | 1,091 | $ | 331 | ||||
| Deferred | 966 | (875 | ) | |||||
| Total | $ | 2,057 | ($544 | ) | ||||
The difference between the effective tax rate (benefit) and the statutory federal tax rate of 34% relates primarily to state income taxes, amortization of reorganization value in excess of identifiable assets, and nondeductible meals and entertainment.
13
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
The Company’s deferred tax assets and liabilities were as follows (dollars in thousands):
| December 31, | ||||||||
| 1998 | 1997 | |||||||
| Deferred tax assets – current | $ | 1,604 | $ | 1,814 | ||||
| Other assets | — | 536 | ||||||
| Other long-term liabilities | (220 | ) | — | |||||
| $ | 1,384 | $ | 2,350 | |||||
Deferred taxes relate primarily to accruals and reserves recorded for financial statement purposes (not currently deductible for tax) offset by excess tax depreciation over that recorded for book purposes.
| 8. | Leases |
The Company leases certain equipment and other items under noncancellable operating leases. Rental expense for all operating leases approximated $907,000 and $705,000 for the years ended December 31, 1998 and December 31, 1997, respectively. Future minimum payments under noncancellable operating leases were as follows (dollars in thousands):
| 1999 | $ | 825 | ||
| 2000 | 659 | |||
| 2001 | 437 | |||
| 2002 | 148 | |||
| 2003 | 48 |
| 9. | Capital Stock |
Pursuant to the Plan of Reorganization, Ganton issued 900,000 shares of common stock to Gantec, LLC (“Gantec”), an affiliate of Cerberus Partners, LP (“Cerberus”) in exchange for $20 million of secured claims as defined in the Plan of Reorganization. Ganton also issued 100,000 shares of common stock to the predecessor sole shareholder in exchange for cash of $1,000,000. Under a shareholders’ agreement, all common shares have restrictions on their sale, rights of first refusal and formulas for determining the purchase price in the event of sales between shareholders.
During 1997, the Company and Gantec, entered into an employment agreement with an executive of Ganton. Under the terms of the agreement, the executive has been granted an option to purchase 6% of the outstanding common stock of Ganton from Gantec at a price to be determined by the Board of Directors. The option expires on June 30, 2002. Provisions of the agreement also state that if the executive is not terminated for cause and the option has not been exercised within the specified time frame, the executive may put the option to Ganton at the earlier of May 17, 2002 or an exit transaction, as defined by the agreement. In the event that the option is put to Ganton, Ganton would be required to purchase the option from the executive for $500,000. As of December 31, 1998, $200,000 has been provided to accrue for this put option over the vesting period.
14
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
During 1998, the Company and Gantec, entered into employment agreements with two other executives of Ganton. Under the terms of the agreements, the two executives have been granted options to purchase 5% and 3%, respectively, of the outstanding common stock of Ganton from Gantec at a price to be determined by the Board of Directors. The options expire on December 31, 2002.
| 10. | Commitments and Contingencies |
In March 1997, Ganton reached a settlement with the prior owner of a facility acquired by Ganton in 1989, and two third party remediation subcontractors employed by the prior owner (the “Parties”). Pursuant to the terms of the settlement, Ganton has agreed to be solely responsible for the clean-up and remediation of hazardous material associated with such property. The terms of the settlement require the Parties to contribute $5.4 million to an environmental remediation trust to be used for the clean-up of the site in exchange for dismissal of all litigation between Ganton and the Parties and a complete release from any further remediation obligation of the Parties relating to the property. During 1997, the Parties paid $3.1 million in cash with the remaining $2.3 million settlement covered by a letter of credit from the prior owner. The Company is allowed to draw on the letter of credit when the cash received is exhausted. To the extent the full amount of the settlement is not used to remediate the property, Ganton is entitled to one-half of the unused portion. Given the above provisions of the settlement, Ganton recorded $3.1 million of restricted cash at December 31, 1997, which represented the unused portion of cash received in 1997, and an environmental remediation reserve for the same amount. As of December 31, 1998, Ganton has recorded $3.2 million of restricted cash to cover the aforementioned environmental reserve. Ganton’s current engineering estimate is that the cost of the remediation will not exceed the $5.4 million settlement; therefore, Ganton reversed into income during 1998, $1.4 million of previously provided reserves, which were no longer required based on the revised estimates.
The Company is involved in various other legal proceedings. While it is not possible at this time to predict the amount of Ganton’s potential liability, none of these matters is expected to materially affect Ganton’s financial condition, results of operations or liquidity.
Under the terms of the Plan of Reorganization, certain creditors will receive a pro rata share of a bonus distribution if Ganton’s net sales, exclusive of tooling sales, exceeds certain amounts during any calendar year ending on or prior to December 31, 1999, up to a maximum amount of 100% of each creditors claim. The net sales level and corresponding bonus distribution are as follows:
| Net Sales | ||
| (exclusive of tooling sales) | Bonus Distribution | |
| $160 million | $1 million | |
| $170 million | $2 million | |
| $180 million | $3 million | |
| $190 million | $4 million |
15
Ganton Technologies, Inc.
Notes to Financial Statements
December 31, 1998 and December 31, 1997
| 11. | Change in Accounting — Die Replacement |
During 1997, the Company changed its method of accounting for replacement dies. Previously, these costs were capitalized and amortized on a units-of-production basis. Effective January 1, 1997, the cost to replace these dies is accrued based on a units-of-production estimate and the cost of the replacement dies is charged against the die replacement reserve. This method of accounting provides a better matching of revenue and expenses given the trend of current customer programs which provide for an element of die replacement in the piece price charged to the customer. The cumulative effect of the accounting change was a charge of $2,677,000, net of tax of $1,708,000.
16
(a) (2) Unaudited interim condensed financial statements of Ganton
Technologies, Inc. for the nine months ended September 30, 1999 and 1998
Ganton Technologies, Inc.
Interim Condensed Statements of Operations
| Nine months ended | |||||||||
| September 30, 1999 | September 30, 1998 | ||||||||
| (Unaudited) | |||||||||
| (in thousands of dollars) | |||||||||
| Net sales | $ | 88,460 | $ | 79,169 | |||||
| Cost of sales | 75,909 | 66,538 | |||||||
| Gross profit | 12,551 | 12,631 | |||||||
| Selling, general and administrative expense | 6,669 | 7,734 | |||||||
| Operating profit | 5,882 | 4,897 | |||||||
| Other income (expense): | |||||||||
| Interest expense | (2,296 | ) | (2,029 | ) | |||||
| Other, net | 51 | 47 | |||||||
| (2,245 | ) | (1,982 | ) | ||||||
| Income before income taxes | 3,637 | 2,915 | |||||||
| Provision for income taxes | 1,573 | 1,069 | |||||||
| Net income | $ | 2,064 | $ | 1,846 | |||||
See accompanying notes.
17
Ganton Technologies, Inc.
Interim Condensed Balance Sheets
| September 30, | December 31, | ||||||||
| 1999 | 1998 | ||||||||
| (Unaudited) | |||||||||
| (in thousands of dollars) | |||||||||
| Assets Current assets: |
|||||||||
| Cash and cash equivalents | $ | 195 | $ | 81 | |||||
| Accounts receivable, less allowances of $225
in 1999 and $382 in 1998 |
21,814 | 16,379 | |||||||
| Inventories | 12,027 | 8,941 | |||||||
| Other current assets | 1,895 | 2,193 | |||||||
| Total current assets | 35,931 | 27,594 | |||||||
| Property, plant and equipment, at cost | 79,988 | 74,104 | |||||||
| Less: Accumulated depreciation and amortization | 42,444 | 37,410 | |||||||
| Net property, plant and equipment | 37,544 | 36,694 | |||||||
| Intangibles, net of amortization | 4,695 | 5,032 | |||||||
| Other noncurrent assets | 7,126 | 6,185 | |||||||
| $ | 85,296 | $ | 75,505 | ||||||
18
Ganton Technologies, Inc.
Interim Condensed Balance Sheets
| September 30, | December 31, | |||||||||||
| 1999 | 1998 | |||||||||||
| (Unaudited) | ||||||||||||
| (in thousands of dollars) | ||||||||||||
| Liabilities and
shareholders’ equity Current liabilities: |
||||||||||||
| Accounts payable | $ | 8,491 | $ | 9,757 | ||||||||
| Income taxes and other accrued liabilities | 11,997 | 10,006 | ||||||||||
| Long term debt due within one year | 4,600 | 4,097 | ||||||||||
| Total current liabilities | 25,088 | 23,860 | ||||||||||
| Noncurrent liabilities: | ||||||||||||
| Long term debt due after one year | 32,437 | 25,961 | ||||||||||
| Other noncurrent liabilities | 3,679 | 3,656 | ||||||||||
| Total noncurrent liabilities | 36,116 | 29,617 | ||||||||||
| Shareholders’ equity: | ||||||||||||
| Common stock | 10 | 10 | ||||||||||
| Capital in excess of par value | 20,990 | 20,990 | ||||||||||
| Retained earnings | 3,243 | 1,179 | ||||||||||
| Accumulated other comprehensive income | (151 | ) | (151 | ) | ||||||||
| Total shareholders’ equity | 24,092 | 22,028 | ||||||||||
| $ | 85,296 | $ | 75,505 | |||||||||
See accompanying notes.
19
Ganton Technologies, Inc.
Interim Condensed Statements of Cash Flows
| Nine months ended | |||||||||||
| September 30, | September 30, | ||||||||||
| 1999 | 1998 | ||||||||||
| (Unaudited) | |||||||||||
| (in thousands of dollars) | |||||||||||
| Operating activities: | |||||||||||
| Net income | $ | 2,064 | $ | 1,846 | |||||||
| Adjustments to reconcile net income to cash (used in)
provided by operating activities: |
|||||||||||
| Depreciation | 5,190 | 4,615 | |||||||||
| Amortization | 337 | 337 | |||||||||
| (Gain) loss on sale of assets | 2 | (4 | ) | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (5,435 | ) | (4,740 | ) | |||||||
| Inventories | (3,086 | ) | 1,456 | ||||||||
| Accounts payable and accrued liabilities | 725 | 2,739 | |||||||||
| Other assets and liabilities | (620 | ) | 216 | ||||||||
| Net cash (used in) provided by operating activities | (823 | ) | 6,465 | ||||||||
| Investing activities: | |||||||||||
| Additions to property, plant and equipment | (6,066 | ) | (4,552 | ) | |||||||
| Proceeds from sale of assets | 24 | 4 | |||||||||
| Net cash used in investing activities | (6,042 | ) | (4,548 | ) | |||||||
| Financing activities: | |||||||||||
| Net increase (decrease) in revolving credit facility | 6,979 | (2,555 | ) | ||||||||
| Net cash provided by (used in) financing activities | 6,979 | (2,555 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 114 | (638 | ) | ||||||||
| Cash and cash equivalents at beginning of period | 81 | 1,219 | |||||||||
| Cash and cash equivalents at end of period | $ | 195 | $ | 581 | |||||||
See accompanying notes.
20
Ganton Technologies, Inc.
Notes to Interim Condensed Financial Statements
September 30, 1999 (Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed financial statements of Ganton Technologies, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. The December 31, 1998 condensed balance sheet data was derived from audited financial statements. For further information, refer to the financial statements and footnotes included in Ganton’s annual report for the year ended December 31, 1998.
2. Inventories
Inventories, net of reserves, consist of the following (in thousands of dollars):
| September 30, | December 31, | ||||||||||
| 1999 | 1998 | ||||||||||
| Finished goods | $ | 812 | $ | 1,302 | |||||||
| Work in process | 2,254 | 2,451 | |||||||||
| Raw materials | 3,617 | 1,292 | |||||||||
| Supplies and patterns | 5,344 | 3,896 | |||||||||
| $ | 12,027 | $ | 8,941 | ||||||||
3. Property, Plant and Equipment
Property, plant and equipment, at cost, consist of the following (in thousands of dollars):
| September 30, | December 31, | ||||||||||
| 1999 | 1998 | ||||||||||
| Land | $ | 630 | $ | 630 | |||||||
| Buildings and improvements | 16,044 | 16,009 | |||||||||
| Machinery and equipment | 55,274 | 53,975 | |||||||||
| Furniture and fixtures | 2,536 | 2,432 | |||||||||
| Construction in progress | 5,504 | 1,058 | |||||||||
| $ | 79,988 | $ | 74,104 | ||||||||
21
Ganton Technologies, Inc.
Notes to Interim Condensed Financial Statements (continued)
September 30, 1999 (Unaudited)
4. Intangible Assets
Intangible assets of $4,695,000 and $5,032,000 (net of accumulated amortization of $1,592,000 and $1,255,000) at September 30, 1999 and December 31, 1998, respectively, consist of costs in excess of net assets acquired from fresh start accounting as a result of bankruptcy. Such costs are being amortized using the straight-line method over 14 years.
5. Reporting for Business Segments
Ganton’s management evaluates the operating performance of its business units individually. Under the provisions of segment reporting, Ganton has aggregated operating units that have similar characteristics, which has resulted in one segment. Virtually all sales are made to one geographic area (United States). Thus, Ganton has only one reportable segment.
6. Comprehensive Income
| Nine months ended | |||||||||
| September 30, | September 30, | ||||||||
| 1999 | 1998 | ||||||||
| (in thousands of dollars) | |||||||||
| Net income | $ | 2,064 | $ | 1,846 | |||||
| Other comprehensive income: | |||||||||
| Minimum pension liability adjustment | — | 82 | |||||||
| Total comprehensive income | $ | 2,064 | $ | 1,928 | |||||
22
Ganton Technologies, Inc.
Notes to Interim Condensed Financial Statements
September 30, 1999 (Unaudited)
7. Commitments and contingencies
In March 1997, Ganton reached a settlement with the prior owner of a facility acquired by Ganton in 1989, and two third party remediation subcontractors employed by the prior owner (the “Parties”). Pursuant to the terms of the settlement, Ganton has agreed to be solely responsible for the clean-up and remediation of hazardous material associated with such property. The terms of the settlement require the Parties to contribute $5.4 million to an environmental remediation trust to be used for the clean-up of the site in exchange for dismissal of all litigation between Ganton and the Parties and a complete release from any further remediation obligation of the Parties relating to the property. During 1997, the Parties paid $3.1 million in cash with the remaining $2.3 million settlement covered by a letter of credit from the prior owner. Ganton is allowed to draw on the letter of credit when the cash received is exhausted. To the extent the full amount of the settlement is not used to remediate the property, Ganton is entitled to one-half of the unused portion. Given the above provisions of the settlement, Ganton recorded $3.1 million of restricted cash at December 31, 1997, which represented the unused portion of cash received in 1997, and an environmental remediation reserve for the same amount. As of December 31, 1998, Ganton has recorded $3.2 million of restricted cash to cover the aforementioned environmental reserve.
Ganton is involved in various other legal proceedings. While it is not possible at this time to predict the amount of Ganton’s potential liability, none of these matters is expected to materially affect its financial condition, results of operations, or liquidity.
Effective March 2, 1996, Ganton emerged from bankruptcy pursuant to the terms set forth in the Second Amended Plan of Reorganization and Disclosure Statement. Under the terms of the plan of reorganization, certain creditors were to receive a pro rata share of a bonus distribution if Ganton’s net sales, exclusive of tooling sales, exceeded certain amounts during any calendar year ending on or prior to December 31, 1999, up to a maximum amount of 100% of each creditors claim. Based on the net sales of Ganton for the nine months ended September 30, 1999 and net sales in prior years, Ganton does not anticipate payment of bonus distribution to creditors under the plan of reorganization.
8. Earnings per Share
Ganton does not report earnings per share because the organization is a privately held concern.
23
(a) (3) Audited consolidated financial
statements of Diemakers, Inc. (the
predecessor company of Diversified Diemakers, Inc.) for the years
ended
December 31, 1998 and 1997
Report of Independent Accountants
To the Board of Directors and Stockholder of Diemakers, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholder’s equity and of cash flows present fairly, in all material respects, the financial position of Diemakers, Inc. and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. 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 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.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
January 15, 1999, except for footnote 12,
as to which the date is March 29, 1999
St. Louis, Missouri
24
Diemakers, Inc. and Subsidiaries
| 1998 | 1997 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 582 | $ | 1,140 | |||||||
| Accounts receivable, less allowances $162 and $74, respectively | 14,187 | 14,032 | |||||||||
| Inventories | 10,792 | 9,791 | |||||||||
| Costs in excess of billings on uncompleted contracts | 3,524 | 1,107 | |||||||||
| Prepaid expenses and other | 1,239 | 1,428 | |||||||||
| Income tax receivable | 3,777 | ||||||||||
| Deferred income taxes | 1,265 | 605 | |||||||||
| Total current assets | 31,589 | 31,880 | |||||||||
| Property, plant and equipment: | |||||||||||
| Land | 383 | 383 | |||||||||
| Buildings and improvements | 19,556 | 18,884 | |||||||||
| Machinery and equipment | 47,953 | 49,500 | |||||||||
| Vehicles, furniture and fixtures | 9,310 | 8,884 | |||||||||
| Assets not in service and under construction | 7,133 | 4,424 | |||||||||
| 84,335 | 82,075 | ||||||||||
| Less accumulated depreciation | (41,765 | ) | (37,562 | ) | |||||||
| 42,570 | 44,513 | ||||||||||
| Other assets: | |||||||||||
| Goodwill, net of $3,322 and $2,933, respectively, of | |||||||||||
| accumulated amortization | 12,186 | 12,575 | |||||||||
| Other | 217 | 53 | |||||||||
| Total assets | $ | 86,562 | $ | 89,021 | |||||||
25
Diemakers, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1998 and 1997
(Dollars in Thousands, except stated value per share)
| 1998 | 1997 | ||||||||||
| LIABILITIES AND STOCKHOLDER’S EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Bank line of credit | $ | 9,796 | $ | 9,107 | |||||||
| Current portion of long-term debt | 8,328 | 8,954 | |||||||||
| Accounts payable and other accruals | 8,450 | 9,973 | |||||||||
| Current portion of deferred revenue | 805 | 939 | |||||||||
| Dividends payable | 3,000 | 1,500 | |||||||||
| Accrued income taxes | 339 | ||||||||||
| Other | 1,024 | 1,381 | |||||||||
| Total current liabilities | 31,742 | 31,854 | |||||||||
| Long-term debt, net of current portion | 9,930 | 13,274 | |||||||||
| Deferred income taxes | 1,864 | 2,354 | |||||||||
| Deferred revenue, net of current portion | 1,105 | 1,681 | |||||||||
| Other | 2,038 | 1,174 | |||||||||
| Total liabilities | 46,679 | 50,337 | |||||||||
| Stockholder's equity: | |||||||||||
| Common stock, $3,190 stated value, 1,000 shares authorized, | |||||||||||
| issued and outstanding | 3,190 | 3,190 | |||||||||
| Additional paid-in capital | 25,961 | 25,961 | |||||||||
| Retained earnings | 10,732 | 10,561 | |||||||||
| Accumulated other comprehensive income | (1,028 | ) | |||||||||
| Total stockholder’s equity | 39,883 | 38,684 | |||||||||
| Total liabilities and stockholder’s equity | $ | 86,562 | $ | 89,021 | |||||||
The accompanying notes are an integral part of the consolidated financial statements.
26
Diemakers, Inc. and Subsidiaries
Consolidated Statement of Operations
for the years ended December 31, 1998 and 1997
(Dollars in Thousands)
| 1998 | 1997 | ||||||||
| Net sales | $ | 97,391 | $ | 91,609 | |||||
| Costs and expenses: | |||||||||
| Cost of sales | 78,868 | 74,912 | |||||||
| Selling, general and administrative | 11,334 | 11,018 | |||||||
| Goodwill amortization | 389 | 389 | |||||||
| Restructuring charge | 695 | 2,832 | |||||||
| Income from operations | 6,105 | 2,458 | |||||||
| Other expense: | |||||||||
| Interest expense | (1,712 | ) | (1,799 | ) | |||||
| Other expense, net | (79 | ) | (252 | ) | |||||
| Income before income taxes | 4,314 | 407 | |||||||
| Income tax (expense) benefit | (1,143 | ) | 1,285 | ||||||
| Net income | $ | 3,171 | $ | 1,692 | |||||
The accompanying notes are an integral part of the consolidated financial statements.
27
Diemakers, Inc. and Subsidiaries
Consolidated Statement of Stockholder’s Equity
for the years ended December 31, 1998 and 1997
(Dollars in Thousands)
| Accumulated | |||||||||||||||||||||
| Additional | Other | ||||||||||||||||||||
| Common | Paid in | Retained | Comprehensive | ||||||||||||||||||
| Stock | Capital | Earnings | Income | Total | |||||||||||||||||
| Balance, January 1, 1997 | $ | 3,190 | $ | 25,961 | $ | 10,369 | ($954 | ) | $ | 38,566 | |||||||||||
| Dividends declared | (1,500 | ) | (1,500 | ) | |||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||
| Net income | 1,692 | ||||||||||||||||||||
| Other comprehensive income - | |||||||||||||||||||||
| Foreign currency translation adjustment | (74 | ) | |||||||||||||||||||
| Comprehensive income | 1,618 | ||||||||||||||||||||
| Balance, December 31, 1997 | 3,190 | 25,961 | 10,561 | (1,028 | ) | 38,684 | |||||||||||||||
| Dividends declared | (3,000 | ) | (3,000 | ) | |||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||
| Net income | 3,171 | ||||||||||||||||||||
| Other comprehensive income - | |||||||||||||||||||||
| Foreign currency reclassification adjustment | 1,028 | ||||||||||||||||||||
| Comprehensive income | 4,199 | ||||||||||||||||||||
| Balance, December 31, 1998 | $ | 3,190 | $ | 25,961 | $ | 10,732 | $ | — | $ | 39,883 | |||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
28
Diemakers, Inc. and Subsidiaries
Consolidated Statement of Cash flows| 1998 | 1997 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 3,171 | $ | 1,692 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 7,258 | 8,024 | |||||||||
| Deferred income taxes | (1,150 | ) | (88 | ) | |||||||
| (Gain) loss on disposal of property, plant and equipment | (61 | ) | 115 | ||||||||
| Restructuring charge | 695 | 2,832 | |||||||||
| Changes in: | |||||||||||
| Accounts receivable, net | (113 | ) | (3,847 | ) | |||||||
| Inventories | (999 | ) | (678 | ) | |||||||
| Costs in excess of billings of uncompleted contracts | (2,417 | ) | 79 | ||||||||
| Accounts payable and other accruals | (1,512 | ) | (2,538 | ) | |||||||
| Deferred revenue | (710 | ) | (473 | ) | |||||||
| Other assets and liabilities, net | 1,639 | 1,473 | |||||||||
| Income taxes | 4,162 | (4,263 | ) | ||||||||
| Net cash provided by operating activities | 9,963 | 2,328 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Proceeds from sale of property, plant and equipment | 1,925 | 617 | |||||||||
| Purchase of property, plant and equipment | (7,830 | ) | (9,504 | ) | |||||||
| Deposits on fixed assets | (500 | ) | |||||||||
| Other | 52 | ||||||||||
| Net cash used in investing activities | (5,853 | ) | (9,387 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from bank line of credit, net | 681 | 5,848 | |||||||||
| Payments on long-term debt | (4,025 | ) | (4,276 | ) | |||||||
| Proceeds from issuance of long-term debt | 55 | 6,493 | |||||||||
| Dividends paid | (1,500 | ) | (1,125 | ) | |||||||
| Net cash (used in) provided by financing activities | (4,789 | ) | 6,940 | ||||||||
| Effect of exchange rate changes on cash | 121 | 52 | |||||||||
| Net decrease in cash and cash equivalents | (558 | ) | (67 | ) | |||||||
| Cash and cash equivalents, beginning of year | 1,140 | 1,207 | |||||||||
| Cash and cash equivalents, beginning of year | $ | 582 | $ | 1,140 | |||||||
The accompanying notes are an integral part of the consolidated financial statements.
29
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 1. | Organization and Description of Business: | |
| Diemakers, Inc., (“Diemakers”) which is headquartered in Monroe City, Missouri, is a wholly-owned subsidiary of Kanematsu USA (“Parent”). Diemakers is principally engaged in manufacturing aluminum, magnesium and zinc products for the automotive, commercial and electronics industries and has an international customer base. | ||
| The accompanying consolidated financial statements include the accounts of Diemakers, Diemakers, Ltd. and Diemakers Redevelopment Corp. for the years ended December 31, 1998 and 1997 (collectively, the “Company”). Diemakers, Ltd., a wholly-owned subsidiary of Diemakers was located in Slough, United Kingdom, and was principally engaged in manufacturing magnesium products for the automotive, electronics and commercial industries until it terminated operations in April 1998 (see Note 11). Diemakers Redevelopment Corp., a wholly-owned subsidiary of Diemakers is located in Hannibal, Missouri, and is principally engaged in manufacturing magnesium products for the automotive, electronics, and commercial industries. All intercompany transactions and balances have been eliminated in consolidation. | ||
| 2. | Summary of Significant Accounting Policies: | |
| Inventories: Inventories of Diemakers and Diemakers Redevelopment Corp. are stated at the lower of cost or market, cost being determined using the last-in, first-out (LIFO) method. | ||
| Property, Plant and Equipment: Property, plant and equipment are recorded at cost and depreciated over the estimated useful lives of the assets, generally using the straight-line method of depreciation. The Company’s buildings and improvements are depreciated over 20 to 40 years and machinery and equipment, aircraft and vehicles over 3 to 10 years. | ||
| Expenditures for maintenance and repairs are charged to operations as incurred, while renewals and betterments which extend the useful lives of the assets are capitalized. | ||
| Upon retirement or disposal, the cost and related accumulated depreciation of the respective assets are removed from the accounts and any resulting gain or loss is included in the consolidated statement of operations. | ||
| Goodwill: The excess of cost over the fair value of the net assets acquired in business combinations is being amortized on a straight-line basis over forty-years. Amortization expense was approximately $389,000 for the years ended December 31, 1998 and 1997. | ||
| Impairment of Long-Lived Assets: The Company reviews long-lived assets and goodwill for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Impairment losses, if any, would be determined based on the present value of the cash flows using discount rates that reflect the inherent risk of the underlying business. No impairment was recorded during 1998 or 1997. |
30
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 2. | Summary of Significant Accounting Policies, continued: | |
| Revenue and Cost Recognition on Tooling Contracts: The Company has entered into various tooling contracts. Revenues from such tooling contracts are recognized using the completed-contract method. A contract is considered complete and the related revenue is recognized when all significant costs have been incurred and the tooling has been completed in accordance with the customer’s specifications. | ||
| Contract costs include all direct material and labor and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determinable. Costs incurred to date on uncompleted tooling contracts consist primarily of specialized equipment which will be installed and tested by the Company and subsequently sold to the customer. | ||
| The Company enters into certain arrangements with customers whereby the per unit sales price of the goods sold includes an amount related to future replacement costs for equipment used in the production process. The Company records these amounts as deferred revenue when received. The revenue is recognized in the period during which the costs are incurred. | ||
| Income Taxes: For U.S. federal income tax purposes, Diemakers is included in the consolidated income tax return of Kanematsu USA, Inc. The Company calculates its current and deferred income taxes as if it were filing a separate income tax return. For state income tax purposes, Diemakers files separate tax returns in each of the states in which it operates. Diemakers, Ltd. files separate tax returns in the United Kingdom. | ||
| The Company utilizes the asset and liability method for determining deferred income taxes. This method measures the tax effect of differences between the financial accounting and tax bases of the Company’s assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized. | ||
| Statement of Cash Flows and Noncash Transactions: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. | ||
| During the years ended December 31, 1998 and 1997, the Company made interest payments to its Parent totaling approximately $1,288,000 and $1,456,000, respectively, and to others totaling approximately $824,000 and $904,000, respectively. The Company capitalized approximately $426,000 and $382,000, respectively, of these interest payments in connection with construction projects. |
31
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 2. | Summary of Significant Accounting Policies, continued: | |
| Statement of Cash Flows and Noncash Transactions, continued: During the years ended December 31, 1998 and 1997, the Company paid $0 and $1,750,000, respectively, for federal income taxes to the Parent under a tax-sharing agreement and paid $212,000 and $207,000, respectively, for state income taxes. | ||
| During the years ended December 31, 1998 and 1997, the Company declared a dividend of $3,000,000 and $1,500,000, respectively, payable to its Parent. | ||
| Foreign Currency: The Company translates the financial statements of Diemakers, Ltd. in accordance with the provisions of Statement of Financial Accounting Standards No. 52, Foreign Currency Translation. The British Pound Sterling has been designated as the functional currency of Diemakers, Ltd. Assets and liabilities of Diemakers, Ltd. are translated into U.S. dollars at the exchange rate in effect at the balance sheet dates. Revenues and expenses of Diemakers, Ltd. are translated into U.S. dollars at an average of the exchange rates during the years ended December 31, 1998 and 1997. The following table reflects the accumulated balances of the foreign currency translation. |
| (000's) | ||||
| Balance, December 31, 1996 | ($954 | ) | ||
| Translation adjustment | (74 | ) | ||
| Balance, December 31, 1997 | (1,028 | ) | ||
| Reclassification adjustment | 1,028 | |||
| Balance, December 31, 1998 | $ | — | ||
| Use of Estimates: 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 periods. Actual results could differ from those estimates. |
| Reporting for Business Segments: The Company's management evaluates the operating performance of its business units individually. Under the provisions of segment reporting, the Company has aggregated operating units that have similar characteristics, which has resulted in one segment. Vitually all sales are made to one geographical area (United States). Thus, the Company has only one reportable segment. |
32
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 3. | Concentration of Credit Risk: | |
| Approximately 43% and 4% of the Company’s accounts receivable at December 31, 1998 and approximately 40% and 13% at December 31, 1997 are from Ford Motor Co. (and its affiliates) and General Motors Corp. (and its affiliates), respectively. Approximately 47% and 6% of the Company’s sales during the year ended December 31, 1998 and approximately 48% and 8% during the year ended December 31, 1997, were with Ford Motor Company (and its affiliates) and General Motors Corp. (and its affiliates), respectively. | ||
| 4. | Inventories: | |
| Inventories consist of the following at December 31, 1998 and 1997: |
| 1998 | 1997 | |||||||
| (000's) | (000's) | |||||||
| Raw materials | $ | 5,442 | $ | 4,575 | ||||
| Work in process | 3,474 | 3,202 | ||||||
| Finished goods | 3,541 | 3,420 | ||||||
| 12,457 | 11,197 | |||||||
| Reduction to LIFO basis | (1,292 | ) | (1,055 | ) | ||||
| Other reserves | (373 | ) | (351 | ) | ||||
| $ | 10,792 | $ | 9,791 | |||||
| 5. | Bank Line of Credit: | |
| At December 31, 1998 and 1997, Diemakers had outstanding $9,796,000 and $7,979,000, respectively, of a $12,000,000 maximum bank line of credit which bears interest at the prime rate per annum (7.75% and 8.50% as of December 31, 1998 and 1997, respectively) and matures on July 31, 1999. | ||
| Total availability under the bank line of credit is determined based on certain advance rates applied to eligible accounts receivable and inventory which also serve as collateral for the line of credit. The bank line of credit agreement also requires that the Company comply with various covenants including maintenance of specified levels of minimum net worth. | ||
| At December 31, 1997, Diemakers, Ltd. had a line of credit through the Bank of Tokyo with an outstanding balance of approximately $1,128,000. The entire amount outstanding was fully repaid during 1998 at which time the line of credit was cancelled. |
33
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 6. | Accounts Payable and Other Accruals: | |
| Accounts payable and other accruals consist of the following at December 31, 1998 and 1997: |
| 1998 | 1997 | |||||||
| (000's) | (000's) | |||||||
| Accounts payable | $ | 4,213 | $ | 2,838 | ||||
| Accrued profit sharing and deferred compensation | 1,509 | 1,240 | ||||||
| Reserve for Diemakers Ltd. lease abandonment and
restructuring charge, respectively |
677 | 2,814 | ||||||
| Other accruals | 2,051 | 3,081 | ||||||
| $ | 8,450 | $ | 9,973 | |||||
| 7. | Long-Term Debt: | |
| Long-term debt consists of several uncollateralized notes payable by Diemakers, Inc. to the Parent and the Bank of Tokyo. The outstanding balance of the notes to the Parent at December 31, 1998 and 1997 was approximately $13,274,000 and $17,299,000, respectively, which is payable in quarterly installments with due dates ranging from September 2000 through March 2007. Interest is payable monthly ranging from the prime rate less 1/2 percent per annum to the prime rate per annum of a New York bank (7.25% — 7.75% and 8.00% — 8.50% as of December 31, 1998 and 1997, respectively). The outstanding balance of the notes payable to the Bank of Tokyo was approximately $4,984,000 and $4,929,000 at December 31, 1998 and 1997, respectively. This amount is included in the current portion of long-term debt based on its maturity date. Interest on the notes is payable monthly and ranges from approximately 6.475% to 6.95% and 6.00% to 7.60% per annum as of December 31, 1998 and 1997, respectively. | ||
| Future required principal payments are as follows: |
| (000's) | ||||||||
| 1999 | $ | 8,328 | ||||||
| 2000 | 2,983 | |||||||
| 2001 | 2,311 | |||||||
| 2002 | 1,612 | |||||||
| 2003 | 1,202 | |||||||
| Thereafter | 1,822 | |||||||
| $ | 18,258 | |||||||
34
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 8. | Employee Benefit Plans: | |
| At December 31, 1998 and 1997, the Company sponsored the following employee benefit plans: | ||
| Diemakers, Inc. Employees’ Profit Sharing Plan and Trust enables participants to contribute a portion of their compensation on a pretax basis in accordance with Section 401(k) of the Internal Revenue Code. A participant’s annual pretax contributions are limited to the lesser of fifteen percent of compensation or the maximum allowed by tax regulations (approximately $10,000 and $9,500 in 1998 and 1997, respectively). Diemakers made a matching contribution of 50% of each participant’s contribution with a maximum matching contribution per participant of 2.5% of that participant’s salary. Diemakers’ matching contribution was approximately $548,000 and $522,000 for the years ended December 31, 1998 and 1997, respectively. Participants vest in employer contributions on the basis of twenty percent increments after each year of service, as measured from the date of employment, becoming fully vested after five years of service. | ||
| Diemakers has a profit-sharing and bonus plan for all employees. The amount to be paid to employees is determined based upon a formula which considers the profitability and overhead of Diemakers. For the years ended December 31, 1998 and 1997, approximately $1,369,000 and $1,375,000, respectively, was charged to operations related to this plan. | ||
| Diemakers also sponsors a contributory group health insurance plan for which it is self-insured. Diemakers has entered into a contract with an independent insurance company which administers the plan and provides insurance coverage for claims in excess of a specified amount ($150,000 and $175,000 per individual for the plan years ending December 31, 1998 and 1997, respectively). During the years ended December 31, 1998 and 1997, total premiums paid by employees of Diemakers were approximately $732,000 and $652,000, respectively, and claim payments made by Diemakers were approximately $3,221,000 and $2,406,000, respectively. As of December 31, 1998 and 1997 Diemakers had recorded a liability of approximately $889,000 and $774,000, respectively, for accrued health insurance claims. |
35
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 9. | Postretirement Benefits: | |
| Diemakers provides certain medical, dental and life insurance benefits for its retired employees and eligible dependents. Diemakers’ U.S. employees who meet plan requirements may become eligible for these benefits, which are subject to change, upon reaching normal retirement age while employed by Diemakers. Diemaker’s non-U.S. operations do not offer such benefits to retirees. Retirees do not share in the cost of these benefits; however, eligible dependents currently contribute 22% of the cost of coverage. | ||
| The accrued postretirement benefit cost as of December 31, 1998 and 1997 includes the following: |
| 1998 | 1997 | ||||||||
| Change in Benefit Obligation | |||||||||
| Benefit obligation at beginning of year | $ | 774,439 | $ | 703,664 | |||||
| Service cost | 33,384 | 42,452 | |||||||
| Interest cost | 47,224 | 51,891 | |||||||
| Plan participants’ contributions | 3,146 | 1,331 | |||||||
| Actuarial gain | (41,943 | ) | (6,298 | ) | |||||
| Benefits paid | (39,758 | ) | (18,601 | ) | |||||
| Benefit obligation at end of year | $ | 776,492 | $ | 774,439 | |||||
| Change in Plan Assets | |||||||||
| Fair value of plan assets at beginning of year | $ | — | $ | — | |||||
| Employer contributions | 36,612 | 17,270 | |||||||
| Plan participants’ contributions | 3,146 | 1,331 | |||||||
| Benefits paid | (39,758 | ) | (18,601 | ) | |||||
| Fair value of plan assets at end of year | $ | — | $ | — | |||||
| 1998 | 1997 | ||||||||
| Reconciliation of Funded Status | |||||||||
| Accumulated postretirement benefit obligation | ($776,492 | ) | ($774,439 | ) | |||||
| Market value of plan assets | — | — | |||||||
| Accumulated postretirement benefit obligation | ($776,492 | ) | ($774,439 | ) | |||||
| Unrecognized net (gain)/loss | (65,857 | ) | (28,402 | ) | |||||
| Accrued benefit cost | ($842,349 | ) | ($802,841 | ) | |||||
36
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 9. | Postretirement Benefits, continued: |
| 1998 | 1997 | |||||||
| Weighted-average assumptions | ||||||||
| Discount rate | 6.50 | % | 7.50 | % | ||||
| Initial weighted health care cost Pre 65 trend rate | 7.90 | % | 8.60 | % | ||||
| Initial weighted health care cost Post 65 trend rate | 7.90 | % | 8.60 | % | ||||
| Ultimate health care cost trend rate | 5.60 | % | 5.60 | % | ||||
| Years to ultimate trend | 5 | 6 | ||||||
| 1998 | 1997 | |||||||
| Component of net periodic benefit cost | ||||||||
| Service cost | $ | 33,384 | $ | 42,452 | ||||
| Interest cost | 47,224 | 51,891 | ||||||
| Recognized net (gain)/losses | (4,488 | ) | — | |||||
| Net periodic benefit cost | $ | 76,120 | $ | 94,343 | ||||
| Effect of a 1% change in medical trend
rates The following table illustrates the expected change in obligations and expenses due to a 1% increase and decrease in each of the assumed health care cost trend rates. |
| 1% Point | 1% Point | |||||||
| Increase | Decrease | |||||||
| Effect on service cost component | 1.8 | % | -1.8 | % | ||||
| Effect on interest cost component | 3.1 | % | -3.0 | % | ||||
| Effect on postretirement benefit obligation | 3.1 | % | -3.0 | % | ||||
37
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 10. | Income Taxes: | |
| The components of the provision (benefit) for income taxes are as follows: |
| 1998 | 1997 | ||||||||
| (000's) | (000's) | ||||||||
| U.S. federal: | |||||||||
| Current | $ | 1,986 | ($1,701 | ) | |||||
| Deferred | (1,099 | ) | (79 | ) | |||||
| 887 | (1,780 | ) | |||||||
| State: | |||||||||
| Current | 307 | (60 | ) | ||||||
| Deferred | (51 | ) | (9 | ) | |||||
| 256 | (69 | ) | |||||||
| U.K. income tax provision | — | 564 | |||||||
| Total income tax provision (benefit) | $ | 1,143 | ($1,285 | ) | |||||
38
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 10. | Income Taxes, continued: |
| The components of the current net deferred income tax asset and the noncurrent net deferred income tax liability as of December 31, 1998 and 1997 are as follows: |
| December 31, 1998 | December 31, 1997 | ||||||||||||||||
| Current | Noncurrent | Current | Noncurrent | ||||||||||||||
| (000's) | (000's) | (000's) | (000's) | ||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Accrued vacation | $ | 292 | $ | 209 | |||||||||||||
| Inventory capitalization | 297 | 244 | |||||||||||||||
| Accrued self-insurance | 338 | 294 | |||||||||||||||
| Deferred compensation | $ | 354 | $ | 240 | |||||||||||||
| Employment contracts | 40 | 101 | 33 | 150 | |||||||||||||
| Deferred tooling revenue | 420 | 652 | |||||||||||||||
| Postretirement benefits | 320 | 305 | |||||||||||||||
| Reserve for dissolution of Diemakers, Ltd. | 257 | ||||||||||||||||
| Diemakers, Ltd. net operating loss carryforward | 4,594 | ||||||||||||||||
| Workers’ compensation | 127 | 143 | |||||||||||||||
| Other | 292 | 205 | |||||||||||||||
| 1,643 | 1,195 | 1,128 | 5,941 | ||||||||||||||
| Deferred tax liability: | |||||||||||||||||
| Property, plant and equipment | (2,972 | ) | (3,035 | ) | |||||||||||||
| Inventory | (320 | ) | (465 | ) | |||||||||||||
| Other | (58 | ) | (87 | ) | (58 | ) | (666 | ) | |||||||||
| (378 | ) | (3,059 | ) | (523 | ) | (3,701 | ) | ||||||||||
| Valuation allowance | (4,594 | ) | |||||||||||||||
| Net deferred tax asset (liability) | $ | 1,265 | ($1,864 | ) | $ | 605 | ($2,354 | ) | |||||||||
39
Diemakers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
for the years ended December 31, 1998 and 1997
| 10. | Income Taxes, continued: |
| The provision for income taxes differs from the amount derived by applying the federal statutory income tax rate to income before income taxes as follows: |
| 1998 | 1997 | ||||||||
| (000's) | (000's) | ||||||||
| Computed “expected” income tax at 34% | $ | 1,467 | $ | 139 | |||||
| State income tax, net of federal income tax benefit | 169 | (45 | ) | ||||||
| Goodwill | 132 | 132 | |||||||
| Tax effect of write off of investment in Diemakers, Ltd. | (923 | ) | (4,079 | ) | |||||
| Increase in valuation allowance | 321 | 2,364 | |||||||
| Other | (23 | ) | 204 | ||||||
| $ | 1,143 | ($1,285 | ) | ||||||
| During 1998 and 1997, the valuation allowance increased $321,000 and $2,364,000, respectively, to approximately $4,915,000 and $4,594,000, respectively, related to the net deferred tax asset arising from the Diemakers, Ltd. net operating loss carryforward. At December 31, 1998, due to the planned liquidation of Diemakers, Ltd., the valuation allowance and corresponding deferred tax asset were written-off. |
| 11. | Dissolution of Diemakers, Ltd.: |
| In November 1997, the Company adopted a Plan of Termination (“Plan”) related to the operations of Diemakers, Ltd. Under such Plan, Diemakers, Ltd. ceased operations in April 1998 and liquidated its assets to satisfy obligations throughout the remainder of 1998. As part of this Plan, the Company recorded a liability of approximately $2,832,000 during 1997. The 1997 expense includes costs for such items as anticipated losses on the sale of fixed assets, employee termination costs and building lease costs. During 1998 the Company incurred additional restructuring exit costs of approximately $695,000 associated with its building lease, legal fees, termination of employees and other miscellaneous costs. At December 31, 1998 Diemakers has a remaining accrual in the amount of $677,000 for costs related principally to lease obligations for the facility utilized by Diemakers, Ltd. in Slough, England. |
| 12. | Sale of Company Assets: |
| Effective March 29, 1999, substantially all of the Company’s assets and certain of its liabilities were purchased by Gantech II, LLC, JJM, LLC and Cerebus Institutional Partners, L.P. |
40
(a) (4) The unaudited interim condensed
consolidated financial statements of Diversified Diemakers, Inc.
and
its subsidiaries
for the period from March 30, 1999 to September 30, 1999
and of Diemakers, Inc. and
its subsidiaries (the predecessor company
of Diversified Diemakers, Inc.) for the period from
January 1,
1999 to March 29, 1999 and the nine months ended September 30, 1998
| (Unaudited) | ||||||||||||
| (in thousands of dollars) | ||||||||||||
| Diversified | ||||||||||||
| Diemakers, Inc. | Diemakers, Inc. (predecessor) | |||||||||||
| Period from | Period from | |||||||||||
| March 30, 1999 | January 1, 1999 | |||||||||||
| to | to | Nine months ended | ||||||||||
| Sept. 30, 1999 | March 29, 1999 | Sept. 30, 1998 | ||||||||||
| Net sales | $ | 56,534 | $ | 24,156 | $ | 67,343 | ||||||
| Cost of sales | 45,786 | 19,894 | 54,451 | |||||||||
| Gross profit | 10,748 | 4,262 | 12,892 | |||||||||
| Selling, general and administrative expense | 5,630 | 3,772 | 7,867 | |||||||||
| Operating profit | 5,118 | 490 | 5,025 | |||||||||
| Interest expense | 2,133 | 293 | 1,219 | |||||||||
| Income before income taxes | 2,985 | 197 | 3,806 | |||||||||
| Provision for income taxes | 1,372 | 180 | 1,619 | |||||||||
| Net income | $ | 1,613 | $ | 17 | $ | 2,187 | ||||||
See accompanying notes.
41
Diversified Diemakers, Inc.
and Diemakers, Inc. (predecessor)
| Diversified | Diemakers, Inc. | ||||||||
| Diemakers, Inc. | (predecessor) | ||||||||
| September 30, | December 31, | ||||||||
| 1999 | 1998 | ||||||||
| (Unaudited) | |||||||||
| (in thousands of dollars) | |||||||||
| Assets
Current assets: |
|||||||||
| Cash and cash equivalents | $ | 1,093 | $ | 582 | |||||
| Accounts receivable, less allowances of $186 and $162 in 1999 and 1998 | 18,151 | 14,187 | |||||||
| Inventories | 23,234 | 14,316 | |||||||
| Other current assets | 1,829 | 2,504 | |||||||
| Total current assets | 44,307 | 31,589 | |||||||
| Property, plant and equipment, at cost | 75,248 | 84,335 | |||||||
| Less: | |||||||||
| Accumulated depreciation and amortization | (4,148 | ) | (41,765 | ) | |||||
| Net property, plant and equipment | 71,100 | 42,570 | |||||||
| Intangibles, net of amortization | 3,893 | 12,186 | |||||||
| Other noncurrent assets | 469 | 217 | |||||||
| $ | 119,769 | $ | 86,562 | ||||||
42
Diversified Diemakers, Inc.
and Diemakers, Inc. (predecessor)
| Diversified | Diemakers, Inc. | ||||||||
| Diemakers, Inc. | (predecessor) | ||||||||
| September 30, | December 31, | ||||||||
| 1999 | 1998 | ||||||||
| (Unaudited) | |||||||||
| (in thousands of dollars) | |||||||||
| Liabilities and shareholders’ equity
Current liabilities: |
|||||||||
| Bank line of credit | $ | 15,716 | $ | 9,796 | |||||
| Accounts payable | 8,415 | 4,213 | |||||||
| Income taxes and other accrued liabilities | 10,338 | 9,405 | |||||||
| Long term debt due within one year | 4,672 | 8,328 | |||||||
| Total current liabilities | 39,141 | 31,742 | |||||||
| Noncurrent liabilities: | |||||||||
| Long term debt due after one year | 32,421 | 9,930 | |||||||
| Other noncurrent liabilities | 1,594 | 5,007 | |||||||
| Total noncurrent liabilities | 34,015 | 14,937 | |||||||
| Shareholders’ equity: | |||||||||
| Common stock | 100 | 3,190 | |||||||
| Capital in excess of par value | 44,900 | 25,961 | |||||||
| Retained earnings | 1,613 | 10,732 | |||||||
| Total shareholders’ equity | 46,613 | 39,883 | |||||||
| $ | 119,769 | $ | 86,562 | ||||||
See accompanying notes.
43
Diversified Diemakers, Inc.
and Diemakers, Inc. (predecessor)
| (Unaudited) | ||||||||||||||||||
| (in thousands of dollars) | ||||||||||||||||||
| Diversified | |||||||||||||||||||
| Diemakers, Inc. | Diemakers, Inc. (predecessor) | ||||||||||||||||||
| Period from | Period from | ||||||||||||||||||
| March 30, 1999 to | January 1, 1999 to | Nine months ended | |||||||||||||||||
| Sept. 30, 1999 | March 29, 1999 | Sept. 30, 1998 | |||||||||||||||||
| Operating activities: | |||||||||||||||||||
| Net income | $ | 1,613 | $ | 17 | $ | 2,187 | |||||||||||||
| Adjustments to reconcile net income to cash (used in) provided by operating activities: | |||||||||||||||||||
| Depreciation | 4,158 | 1,763 | 5,200 | ||||||||||||||||
| Amortization | 630 | 97 | 289 | ||||||||||||||||
| Loss from disposition of assets | — | 95 | 769 | ||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||
| Accounts receivable | (2,899 | ) | (1,096 | ) | 450 | ||||||||||||||
| Inventories | (3,976 | ) | (4,039 | ) | (2,303 | ) | |||||||||||||
| Accounts payable and accrued liabilities | (2,737 | ) | 7,711 | (1,128 | ) | ||||||||||||||
| Other assets and liabilities | (889 | ) | 992 | 3,718 | |||||||||||||||
| Net cash (used in) provided
by operating activities |
(4,100 | ) | 5,540 | 9,182 | |||||||||||||||
| Investing activities: | |||||||||||||||||||
| Additions to property, plant and equipment | (3,511 | ) | (3,729 | ) | (5,885 | ) | |||||||||||||
| Proceeds from sales of assets | — | 10 | 1,925 | ||||||||||||||||
| Acquisition of Diemakers, Inc. | (91,500 | ) | — | — | |||||||||||||||
| Net cash used in investing activities |
(95,011 | ) | (3,719 | ) | (3,960 | ) | |||||||||||||
| Financing activities: | |||||||||||||||||||
| Proceeds from issuance of long term debt | 35,000 | — | — | ||||||||||||||||
| Proceeds from issuance of bank line of credit | 11,500 | — | — | ||||||||||||||||
| Proceeds from issuance of long term debt | 3,203 | — | — | ||||||||||||||||
| Payment on long term debt | (1,110 | ) | — | (3,064 | ) | ||||||||||||||
| Proceeds from (payment on) bank line of credit | 4,216 | (244 | ) | (3,232 | ) | ||||||||||||||
| Cash contribution by new owners | 236 | — | — | ||||||||||||||||
| Proceeds from the issuance of common stock | 45,000 | — | — | ||||||||||||||||
| Net cash provided by (used in) financing activities | 98,045 | (244 | ) | (6,296 | ) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (1,066 | ) | 1,577 | (1,074 | ) | ||||||||||||||
| Cash and cash equivalents at beginning of period | 2,159 | 582 | 1,074 | ||||||||||||||||
| Cash and cash equivalents at end of period | $ | 1,093 | $ | 2,159 | $ | — | |||||||||||||
See accompanying notes.
44
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Diversified Diemakers, Inc. and Diemakers, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the management of these companies, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim periods of 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. The December 31, 1998 condensed consolidated balance sheet data was derived from audited financial statements.
2. Acquisition
In the first quarter of 1999, Cerberus Institutional Partners, L.P. and the shareholders of Ganton Technologies, Inc. (Gantec II, LLC and JJM, LLC) set up Diversified Diemakers, Inc. to effect the purchase of assets of Diemakers, Inc. On March 29, 1999 Diversified Diemakers, Inc. purchased substantially all of the assets of Diemakers, Inc. for a price of $91.5 million, subject to post-closing adjustments.
This transaction was accounted for using purchase accounting and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition. The excess of the purchase price, including acquisition costs of $1.8 million, over the estimated fair values of net assets acquired was $4.5 million, which has been recorded as goodwill and is being amortized on a straight-line basis over 15 years. Diversified Diemakers accrued approximately $2.4 million for severance and office closing costs.
3. Inventories
Inventories, net of reserves, consist of the following (in thousands of dollars):
| Diversified | ||||||||
| Diemakers, Inc. | Diemakers, Inc. (predecessor) | |||||||
| September 30, | December 31, | |||||||
| 1999 | 1998 | |||||||
| Finished goods | $ | 3,632 | $ | 3,068 | ||||
| Work in process | 2,388 | 2,201 | ||||||
| Raw materials | 2,282 | 2,228 | ||||||
| Supplies and patterns | 14,932 | 6,819 | ||||||
| $ | 23,234 | $ | 14,316 | |||||
4. Property, Plant and Equipment
Property, plant and equipment, at cost, consist of the following (in thousands of dollars):
| Diversified | ||||||||
| Diemakers, Inc. | Diemakers, Inc. (predecessor) | |||||||
| September 30, | December 31, | |||||||
| 1999 | 1998 | |||||||
| Land | $ | 897 | $ | 383 | ||||
| Buildings and improvements | 16,210 | 15,083 | ||||||
| Machinery and equipment | 52,257 | 63,852 | ||||||
| Construction in progress | 5,884 | 5,017 | ||||||
| $ | 75,248 | $ | 84,335 | |||||
45
5. Intangible Assets
Diversified Diemakers intangible assets of $3,893,000, net of accumulated amortization of $630,000, at September 30, 1999 consist principally of costs in excess of net assets acquired. Such costs are being amortized using the straight-line method, principally over fifteen years. Diversified Diemakers periodically assesses the recoverability of the cost of its intangibles based on a review of projected undiscounted cash flows of the related operating entities.
Diemakers intangible assets of $12,186,000, net of accumulated amortization of $3,322,000, at December 31, 1998, respectively, consist principally of costs in excess of net assets acquired. Such costs are being amortized using the straight-line method, principally over forty years. Diemakers periodically assesses the recoverability of the cost of its intangibles based on a review of projected undiscounted cash flows of the related operating entities.
6. Reporting for Business Segments
Diversified Diemakers’ management evaluates the operating performance of its business units individually. Under the provisions of segment reporting, Diversified Diemakers has aggregated operating units that have similar characteristics, which has resulted in one segment. Virtually all sales are made to one geographic area (United States). Thus, Diversified Diemakers has only one reportable segment.
Diemakers’ management evaluates the operating performance of its business units individually. Under the provisions of segment reporting, Diemakers has aggregated operating units that have similar characteristics, which has resulted in one segment. Virtually all sales are made to one geographic area (United States). Thus, Diemakers has only one reportable segment.
7. Debt
At the end of March 1999, Diversified Diemakers signed a five-year $25 million secured revolving credit agreement with a bank group. On the same day Diversified Diemakers executed a $35 million five-year secured promissory note.
8. Comprehensive Income
Diversified Diemakers’ comprehensive income for the period from March 30, 1999 to September 30, 1999 is the same as the net income reported. Diemakers’ comprehensive income for the period from January 1, 1999 to March 30, 1999 and for the nine months ending September 30, 1998 is the same as the net income reported, respectively.
46
9. Environmental and Legal Matters
Diversified Diemakers is a party to a number of environmental matters and legal proceedings in the ordinary course of its business. Diversified Diemakers does not believe there are any pending or threatened legal proceedings to which it is a party, or to which any of its property is subject, that will have a material adverse effect on its consolidated financial position, results of operations or liquidity taken as a whole.
Diemakers is a party to a number of environmental matters and legal proceedings in the ordinary course of its business. Diemakers does not believe there are any pending or threatened legal proceedings to which it is a party, or to which any of its property is subject, that will have a material adverse effect on its consolidated financial position, results of operations or liquidity taken as a whole.
10. Earnings per Share
Diversified Diemakers and Diemakers do not report earnings per share because both organizations are privately held concerns.
47
(b) Pro Forma Financial Information
On December 20, 1999 Intermet acquired all of the issued and outstanding stock of Diversified Diemakers, Inc., for a purchase price of $160 million. Also on December 20, 1999 Intermet acquired all of the issued and outstanding stock of Ganton Technologies, Inc. for a purchase price of $110 million. In order to finance the acquisition, Intermet borrowed $200 million in the form of an eighteen-month term loan pursuant to a term loan agreement. The remaining $70 million plus related fees and expenses was obtained pursuant to an existing five year credit agreement.
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 1999 and the year ended December 31, 1998, have been prepared to illustrate the effect of the acquisitions of Ganton and Diversified Diemakers as if they had occurred on the first day of each period presented. The unaudited pro forma condensed consolidated statements of operations include only the results of ongoing operations and do not include any material nonrecurring charges or credits and related tax effects resulted directly from the transaction. The pro forma adjustments for the statements of operations give effect to events that are directly attributable to the transaction, are expected to have a continuing impact on the registrant and are factually supportable. The unaudited pro forma condensed consolidated balance sheet as of September 30, 1999 has been prepared to illustrate the effect of the acquisitions of Ganton and Diversified Diemakers as if they had occurred on that date. The pro forma adjustments to the balance sheet give effect to events that are directly attributable to the transaction and factually supportable regardless of whether they have a continuing impact or are nonrecurring.
48
Intermet Corporation
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
| Diversified | |||||||||||||||||||||||||||
| Intermet | Diemakers | Ganton | |||||||||||||||||||||||||
| Historical | Historical* | Historical | |||||||||||||||||||||||||
| Nine months ended | |||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | Pro Forma | ||||||||||||||||||||||||
| 1999 | 1999 | 1999 | Adjustments | Pro Forma | |||||||||||||||||||||||
| (in thousands of dollars, except share data) | |||||||||||||||||||||||||||
| Net sales | $ | 716,275 | $ | 80,690 | $ | 88,460 | $ | 885,425 | |||||||||||||||||||
| Cost of sales | 625,003 | 65,680 | 75,909 | 766,592 | |||||||||||||||||||||||
| Gross profit | 91,272 | 15,010 | 12,551 | 118,833 | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||
| Selling, general and administrative | 28,664 | 9,402 | 6,669 | $ | 2,356 | A | 40,578 | ||||||||||||||||||||
| (629 | ) | B | |||||||||||||||||||||||||
| (5,884 | ) | F | |||||||||||||||||||||||||
| Operating profit | 62,608 | 5,608 | 5,882 | 4,157 | 78,255 | ||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||
| Interest income | 138 | — | 18 | 156 | |||||||||||||||||||||||
| Interest expense | (10,207 | ) | (2,426 | ) | (2,296 | ) | (14,175 | ) | C | (24,382 | ) | ||||||||||||||||
| 4,722 | D | ||||||||||||||||||||||||||
| Other, net | 424 | — | 33 | 337 | B | 794 | |||||||||||||||||||||
| (9,645 | ) | (2,426 | ) | (2,245 | ) | (9,116 | ) | (23,432 | ) | ||||||||||||||||||
| Income before income taxes | 52,963 | 3,182 | 3,637 | (4,959 | ) | 54,823 | |||||||||||||||||||||
| Provision for income taxes | 16,762 | 1,552 | 1,573 | (1,041 | ) | E | 18,846 | ||||||||||||||||||||
| Net income | $ | 36,201 | $ | 1,630 | $ | 2,064 | ($3,918 | ) | $ | 35,977 | |||||||||||||||||
| Income per common share — Basic | $ | 1.42 | $ | 1.41 | |||||||||||||||||||||||
| Income per common share — Diluted | $ | 1.41 | $ | 1.40 | |||||||||||||||||||||||
| Weighted average shares outstanding (thousands): | |||||||||||||||||||||||||||
| Basic | 25,529 | 25,529 | |||||||||||||||||||||||||
| Diluted | 25,634 | 25,634 | |||||||||||||||||||||||||
* Includes results of operations for
Diversified Diemakers, Inc. from March 30, 1999 to September 30, 1999
and Diemakers, Inc. from January 1, 1999
to March 29, 1999.
See accompanying notes.
49
Intermet Corporation
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
| Diversified | |||||||||||||||||||||||||
| Intermet | Diemakers | Ganton | |||||||||||||||||||||||
| Historical | Historical* | Historical | |||||||||||||||||||||||
| Year ended | |||||||||||||||||||||||||
| December 31, | December 31, | December 31, | Pro Forma | ||||||||||||||||||||||
| 1998 | 1998 | 1998 | Adjustments | Pro Forma | |||||||||||||||||||||
| (in thousands of dollars, except share data) | |||||||||||||||||||||||||
| Net sales | $ | 841,598 | $ | 97,391 | $ | 113,919 | $ | 1,052,908 | |||||||||||||||||
| Cost of sales | 730,857 | 78,868 | 96,775 | 906,500 | |||||||||||||||||||||
| Gross profit | 110,741 | 18,523 | 17,144 | 146,408 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||
| Selling, general and administrative | 35,092 | 12,418 | 9,860 | $ | 3,141 | A | 51,941 | ||||||||||||||||||
| (725 | ) | B | |||||||||||||||||||||||
| (7,845 | ) | F | |||||||||||||||||||||||
| Operating profit | 75,649 | 6,105 | 7,284 | 5,429 | 94,467 | ||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||
| Interest income | 230 | — | — | 230 | |||||||||||||||||||||
| Interest expense | (11,305 | ) | (1,712 | ) | (2,681 | ) | (18,900 | ) | C | (30,205 | ) | ||||||||||||||
| 4,393 | D | ||||||||||||||||||||||||
| Other, net | 614 | (79 | ) | (61 | ) | 449 | B | 923 | |||||||||||||||||
| (10,461 | ) | (1,791 | ) | (2,742 | ) | (14,058 | ) | 29,052 | |||||||||||||||||
| Income before income taxes | 65,188 | 4,314 | 4,542 | (8,629 | ) | 65,415 | |||||||||||||||||||
| Provision for income taxes | 24,199 | 1,143 | 2,057 | (2,195 | ) | E | 25,204 | ||||||||||||||||||
| Net income | $ | 40,989 | $ | 3,171 | $ | 2,485 | ($6,434 | ) | $ | 40,211 | |||||||||||||||
| Income per common share — Basic | $ | 1.60 | $ | 1.57 | |||||||||||||||||||||
| Income per common share – Diluted | $ | 1.58 | $ | 1.55 | |||||||||||||||||||||
| Weighted average shares outstanding (thousands): | |||||||||||||||||||||||||
| Basic | 25,610 | 25,610 | |||||||||||||||||||||||
| Diluted | 25,947 | 25,947 | |||||||||||||||||||||||
* Includes results of operations for Diemakers, Inc. from January 1, 1998 to December 31, 1998.
See accompanying notes.
50
Intermet Corporation
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
| Diversified | ||||||||||||||||||||||||||
| Intermet | Diemakers | Ganton | ||||||||||||||||||||||||
| Historical | Historical | Historical | ||||||||||||||||||||||||
| September 30, | September 30, | September 30, | Pro Forma | |||||||||||||||||||||||
| 1999 | 1999 | 1999 | Adjustments | Pro Forma | ||||||||||||||||||||||
| (in thousands of dollars) | ||||||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 4,443 | $ | 1,093 | $ | 195 | ($1,288 | ) | G | $ | 4,443 | |||||||||||||||
| Accounts receivable | 149,734 | 18,151 | 21,814 | 189,699 | ||||||||||||||||||||||
| Inventories | 68,168 | 23,234 | 12,027 | 103,429 | ||||||||||||||||||||||
| Other current assets | 13,310 | 1,829 | 1,895 | 8,435 | G | 25,469 | ||||||||||||||||||||
| Total current assets | 235,655 | 44,307 | 35,931 | 7,147 | 323,040 | |||||||||||||||||||||
| Property, plant and equipment, at cost | 525,512 | 75,248 | 79,988 | (46,592 | ) | G | 634,156 | |||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Foreign industrial development grants, net of amortization | 3,395 | — | — | 3,395 | ||||||||||||||||||||||
| Accumulated depreciation and amortization | 258,952 | 4,148 | 42,444 | (46,592 | ) | G | 258,952 | |||||||||||||||||||
| Net property, plant and equipment | 263,165 | 71,100 | 37,544 | 371,809 | ||||||||||||||||||||||
| Intangibles, net of amortization | 124,234 | 3,893 | 4,695 | (8,588 | ) | G | 243,169 | |||||||||||||||||||
| 118,935 | H | |||||||||||||||||||||||||
| Other noncurrent assets | 23,760 | 469 | 7,126 | 31,355 | ||||||||||||||||||||||
| $ | 646,814 | $ | 119,769 | $ | 85,296 | $ | 117,494 | $ | 969,373 | |||||||||||||||||
51
Intermet Corporation
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
| Diversified | |||||||||||||||||||||||||
| Intermet | Diemakers | Ganton | |||||||||||||||||||||||
| Historical | Historical | Historical | |||||||||||||||||||||||
| September 30, | September 30, | September 30, | Pro Forma | ||||||||||||||||||||||
| 1999 | 1999 | 1999 | Adjustments | Pro Forma | |||||||||||||||||||||
| (in thousands of dollars) | |||||||||||||||||||||||||
| Liabilities and shareholders’ equity | |||||||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||||||
| Notes payable | $ | 17,000 | $ | 17,000 | |||||||||||||||||||||
| Accounts payable | 68,334 | $ | 8,415 | $ | 8,491 | 85,240 | |||||||||||||||||||
| Income taxes and other accrued liabilities | 50,038 | 10,338 | 11,997 | $ | 5,495 | I | 80,418 | ||||||||||||||||||
| 2,550 | G | ||||||||||||||||||||||||
| Bank line of credit | 15,716 | (15,716 | ) | G | |||||||||||||||||||||
| Long term debt due within one year | 6,388 | 4,672 | 4,600 | (9,272 | ) | G | 6,388 | ||||||||||||||||||
| Total current liabilities | 141,760 | 39,141 | 25,088 | (16,943 | ) | 189,046 | |||||||||||||||||||
| Noncurrent liabilities: | |||||||||||||||||||||||||
| Long term debt due after one year | 205,343 | 32,421 | 32,437 | (64,858 | ) | G | 475,343 | ||||||||||||||||||
| 270,000 | J | ||||||||||||||||||||||||
| Other noncurrent liabilities | 54,234 | 1,594 | 3,679 | 59,507 | |||||||||||||||||||||
| Total noncurrent liabilities | 259,577 | 34,015 | 36,116 | 205,142 | 534,850 | ||||||||||||||||||||
| Minority interest | 2,337 | — | — | 2,337 | |||||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||||
| Common stock | 2,585 | 100 | 10 | (110 | ) | G | 2,585 | ||||||||||||||||||
| Capital in excess of par value | 63,493 | 44,900 | 20,990 | (65,890 | ) | G | 63,493 | ||||||||||||||||||
| Treasury stock | (6,669 | ) | — | (6,669 | ) | ||||||||||||||||||||
| Retained earnings | 184,270 | 1,613 | 3,243 | (4,856 | ) | G | 184,270 | ||||||||||||||||||
| Accumulated other comprehensive income | (448 | ) | — | (151 | ) | 151 | G | (448 | ) | ||||||||||||||||
| Unearned restricted stock | (91 | ) | — | (91 | ) | ||||||||||||||||||||
| Total shareholders’ equity | 243,140 | 46,613 | 24,092 | (70,705 | ) | 243,140 | |||||||||||||||||||
| $ | 646,814 | $ | 119,769 | $ | 85,296 | $ | 117,494 | $ | 969,373 | ||||||||||||||||
See accompanying notes.
52
Intermet Corporation
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 1999 and the year ended December 31, 1998 reflect the acquisitions of Ganton and Diversified Diemakers as if they had occurred on the first day of each period presented.
The unaudited pro forma condensed consolidated balance sheet at September 30, 1999 reflects the acquisitions of Ganton and Diversified Diemakers as if they had occurred on that date.
The unaudited pro forma financial information gives effect to the acquisitions transactions using the purchase method of accounting. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma financial information and are based upon preliminary available information and upon certain assumptions made by management of Intermet. Accordingly, the pro forma adjustments reflected in the unaudited pro forma financial information are preliminary and subject to revision. Such revision could be material.
The unaudited pro forma financial information is presented for illustrative purposes only. It is not necessarily indicative of the financial position or results of operations that would have occurred had the acquisitions been consummated on the dates indicated, nor are they necessarily indicative of Intermet’s future results of operations or financial position. The unaudited pro forma financial information should be read in conjunction with the audited consolidated financial statements of Intermet, as well as the audited financial statements of the acquired companies.
2. Pro Forma Adjustments
A. Amortization of the acquisition goodwill over 40 years
B. Reverse amortization of intangibles eliminated at acquisition
C. Interest expense for debt incurred at acquisition
D. Reverse interest expense for debt eliminated at acquisition
E. Income taxes on taxable pro forma adjustments
F. Adjustment to reflect expenses for duplicate sales, engineering,
administrative and operating functions that have been or will be
eliminated during 2000
G. Adjustments to apply purchase accounting and adjust assets to fair
value
H. Acquisition goodwill
I. Acquisition costs
J. Debt required for purchase
53
Pursuant to the requirements of the Securities Exchange Act of 1934, Intermet has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Intermet Corporation |
| By: /s/ Ronald C. Ryninger Jr. __________________________________ Ronald C. Ryninger Jr. Corporate Controller (Principal Accounting Officer) |
| Date: February 28, 2000 |
54
Exhibit Index
| Exhibit No. | Description | |
| Ex. 23.1 | Consent of Independent Accountants | |
| Ex. 23.2 | Consent of Independent Accountants |
|
|