<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 23, 1998
MINUTEMAN INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 604540104 36-2262931
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
111 South Rohlwing Road, Addison Illinois 60601
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(630) 627-6900
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
<PAGE> 2
The following Items 2 and 7 amend in their entirety Items 2 and 7(a) and (b) of
Form 8-K previously filed on December 7, 1998.
Item 2 Acquisition or Disposition of Assets
On November 23, 1998, Minuteman International, Inc., (the "Company"),
entered into an Asset Purchase Agreement with AAR PowerBoss, Inc., for the
acquisition of substantially all of the net assets and assumption of certain
liabilities of AAR PowerBoss, Inc., ("PowerBoss"), an Illinois corporation.
PowerBoss designs, manufactures, and repairs ride-on and walk-behind sweepers
and scrubbers for floor and carpet care utilizing industrial application. The
Assets acquired pursuant to the Closing, which was completed on November 24,
1998, consist of business operations, machinery, equipment, inventory, accounts
receivable, and intellectual property rights. The liabilities assumed by the
Company are certain liabilities incurred by PowerBoss in the ordinary course of
business as reflected on the Final Closing Balance Sheet to be prepared pursuant
to the Asset Purchase Agreement.
The cash purchase price under the terms of the Asset Purchase
Agreement, paid on November 24, 1998, was in the amount of $12,012,659.00. The
purchase price is subject to certain post closing adjustments as provided for in
the Asset Purchase Agreement. These adjustments should result in a revised
purchase price of $11,631,000.00.
The Company paid for this acquisition with borrowed funds pursuant to
the terms of a Loan Agreement entered into with LaSalle National Bank. The Loan
Agreement includes a Term Note and a Revolving Line of Credit with LaSalle
National Bank.
PowerBoss's primary operations were conducted out of its plant in
Aberdeen, North Carolina. The Company has entered into a three-year lease for
the utilization of the plant and property located in Aberdeen. Rent is the sum
of $17,000.00 per month plus payment of insurance, taxes and maintenance of
these facilities as provided in the Lease.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
See Exhibit 2.3 of Item 7(c)
(b) Pro forma financial information.
The following unaudited pro forma condensed consolidated statements of
operations are based on the historical statements of operations of the
Company, adjusted to give effect to the 1998 acquisition of AAR
PowerBoss, Inc. The pro forma condensed consolidated statements of
operations for the year ended December 31, 1997 and for the nine months
ended September 30, 1998 were derived from the unaudited historical
statements of operations for the year ended December 31, 1997 and for
the nine months ended September 30, 1998 adjusted to give effect to the
acquisitions and related
<PAGE> 3
transactions as if this transaction had occurred on January 1, 1997,
the first day of the year ended December 31, 1997.
The pro forma adjustments included in the pro forma condensed
consolidated statements of operations are based upon available
information and certain assumptions that management believes are
reasonable. With respect to the pro forma acquisition adjustments
described in the notes accompanying the pro forma condensed
consolidated statement of operations, the allocation of the purchase
price of AAR PowerBoss, Inc. is preliminary and subject to final
determination by the Company's management. The unaudited pro forma
condensed consolidated statements of operations do not purport to
represent what the Company's results of operations would actually have
been had the transactions in fact occurred as of the beginning of each
period presented. In addition, the unaudited pro forma condensed
consolidated statements of operations do not purport to project the
Company's results of operations for any future date or period.
The pro forma condensed consolidated statements of operations for the
year ended December 31, 1997 include the statement of operations of
Minuteman International Inc. for the year ended December 31, 1997 and
the statement of operations of AAR PowerBoss for the year ended
February 28, 1998. The pro forma condensed consolidated statements of
operations for the nine months ended September 30, 1998 include the
statement of operations of Minuteman International Inc. for that period
and the statement of operations of AAR PowerBoss for the nine months
ended November 23, 1998. These statements should be read in connection
with the Company's audited consolidated financial statements for the
year ended December 31, 1997, which are included in the Company's 10-K
filed on March 15, 1998, and the Company's unaudited interim condensed
consolidated financial statement included in the Company's Form 10-Q
for the quarter ended September 30, 1998. See the pro forma financial
statements located in Exhibit 2.4 of Item 7(c).
(c) Exhibits - not included in Form 8-K previously filed.
2.3 Unaudited balance sheet of AAR PowerBoss, Inc. as of August 31,
1998 and unaudited statement of operations and cash flows for the
three months then ended.
2.4 Pro forma consolidated balance sheet as of September 30, 1998 and
pro forma consolidated statements of income for the year ended
December 31, 1997 and the nine months ending September 30, 1998.
2.5 Audited financial statements of AAR PowerBoss, Inc. for the years
ended May 31, 1998 and 1997.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 6, 1999
MINUTEMAN INTERNATIONAL, INC.
By: _______________________________
Jerome E. Rau
President and Chief Executive Officer
By: _______________________________
Thomas J. Nolan
Vice President, Treasurer, and Chief
Financial Officer
<PAGE> 1
Form 8-K/A AAR POWERBOSS, INC
EXHIBIT 2.3 UNAUDITED BALANCE SHEET
AUGUST 31,1998
(in 000's)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
CURRENT ASSETS
ACCOUNTS RECEIVABLES, NET 2,813
INVENTORIES,NET 5,402
DEPOSITS AND OTHER 69
ACCOUNTS RECEIVABLES, TRANSFERRED TO
FINANCIAL INSTITUTIONS 2,068
-------
TOTAL CURRENT ASSETS 10,352
-------
PROPERTY, PLANT AND EQUIPTMENT 7,093
ACCUMULATED DEPRECIATION (4,445)
-------
NET PROPERTY, PLANT AND EQUIPMENT 2,648
OTHER ASSETS 102
-------
TOTAL ASSETS 13,102
=======
LIABILITIES & OWNERS' DEFICIT
CURRENT LIABILITIES
ACCOUNTS PAYABLE 2,053
CASH OVERDRAFT 207
ACCRUED LIABILITIES 923
OBLIGATIONS FOR TRANSFERRED RECEIVABLES 2,068
-------
TOTAL CURRENT LIABILITIES 5,251
PAYABLE AAR CORP 9,606
OWNERS' DEFICIT
COMMON STOCK 1
CAPITAL SURPLUS 7,723
ACCUMULATED DEFICIT (9,479)
-------
TOTAL OWNERS' DEFICIT (1,755)
-------
TOTAL LIABILITIES &
OWNERS' DEFICIT 13,102
=======
</TABLE>
See Accompanying notes to Unaudited Financial Statements.
<PAGE> 2
FORM 8-K/A AAR POWERBOSS, INC.
EXHIBIT 2.3 UNAUDITED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31,1998
(000's)
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 5,390
Cost of sales $ 4,222
-------------
Gross Profit $ 1,168
Selling, General and Administrative $ 1,007
-------------
Income from operations $ 161
Other (expense)
Interest expense $ (223)
-------------
Other (expense) $ (223)
Loss before income taxes $ (62)
-------------
Income taxes benefit $ 22
-------------
Net loss $ (40)
-------------
</TABLE>
See Accompanying notes to Unaudited Financial Statements.
<PAGE> 3
FORM 8-K/A
EXHIBIT 2.3
AAR POWERBOSS, INC
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31,1998
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net loss $ (40)
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation 120
Changes in assets/liabilities
Accounts Receivable 242
Inventories (653)
Deposits and Other (19)
Accounts payable and accrued liabilities 1,137
------
NET CASH PROVIDED BY OPERATIONS $ 787
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property, Plant & Equipment $ (36)
------
NET CASH USED IN INVESTING ACTIVITIES $ (36)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to AAR CORP $ (735)
------
NET CASH USED IN FINANCING ACTIVITIES $ (735)
DECREASE IN CASH OVERDRAFT $ 16
CASH OVERDRAFT AT BEGINNING OF YEAR $ (223)
------
CASH OVERDRAFT AT END OF YEAR $ (207)
</TABLE>
See Accompanying notes to Unaudited Financial Statements.
<PAGE> 4
AAR POWERBOSS, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AT AUGUST 31, 1998
1) THE UNAUDITED BALANCE SHEET AS OF AUGUST 31, 1998 AND THE UNAUDITED
STATEMENTS OF OPERATIONS AND CASH FLOWS HAVE BEEN PREPARED ON A BASIS
CONSISTENT WITH PRIOR YEAR PERIODS. CERTAIN INFORMATION AND FOOTNOTE
DISCLOSURES NORMALLY INCLUDED IN THE FINANCIAL STATEMENTS HAVE BEEN
CONDENSED OR OMITTED, PURSUANT TO SEC RULES AND REGULATIONS. IT IS
SUGGESTED THAT THESE UNAUDITED FINANCIAL STATEMENTS BE READ IN CONJUNCTION
WITH THE AUDITED FINANCIAL STATEMENTS AND THE NOTES INCLUDED HEREIN FOR THE
YEARS ENDED MAY 31, 1998 AND 1997.
2) THE RESULTS OF OPERATIONS AND CASH FLOWS FOR THE THREE MONTH PERIOD ENDED
AUGUST 31, 1998 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS EXPECTED FOR
THE FULL YEAR.
3) IT IS THE COMPANY'S POLICY TO TAKE AN ANNUAL PHYSICAL IN CONJUNCTION WITH
THE PREPARATION OF ITS ANNUAL FINANCIAL STATEMENTS. AT TIMES OTHER THAN
YEAR END IT IS NECESSARY TO ESTIMATE THE BREAKDOWN OF RAW MATERIALS, WORK
IN PROCESS AND FINISHED GOODS INVENTORIES. AT AUGUST 31, 1998 THESE WERE AS
FOLLOWS:
<TABLE>
<CAPTION>
(000's)
<S> <C>
RAW MATERIALS AND PARTS $ 3,731
WORK IN PROCESS $ 305
FINISHED GOODS $ 1,830
INVENTORY RESERVE $ (464)
-------
$ 5,402
-------
</TABLE>
<PAGE> 1
Form 8-K/A MINUTEMAN INTERNATIONAL, INC.
EXHIBIT 2.4 UNAUDITED PROFORMA BALANCE SHEET
SEPTEMBER 30, 1998
(in 000's)
<TABLE>
<CAPTION> PROFORMA
MINUTEMAN AAR POWERBOSS ADJUSTMENTS
9/30/98 8/31/98 (NOTE 2) PROFORMA
------- ------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS
CASH & CASH EQUIVALENTS 1,385 - - 1,385
SHORT TERM INVESTMENTS 548 548
ACCOUNTS RECEIVABLES, NET 13,328 2,813 (143) 15,998
DUE FROM AFFILIATES 408 408
INVENTORIES, NET 13,050 5,402 (233) 18,219
PREPAIDS 1 69 70
DEFERRED INCOME TAXES 500 500
RECEIVABLES TRANSFERRED TO FINANCIAL
INSTITUTION - 2,068 (2,068) -
------- ------ ------ -------
TOTAL CURRENT ASSETS 29,220 10,352 (2,444) 37,128
------- ------ ------ -------
PROPERTY, PLANT & EQUIPMENT 20,325 7,093 (3,005) 24,413
ACCUMULATED DEPRECIATION (11,389) (4,445) 1,102 (14,732)
------- ------ ------ -------
NET PROPERTY, PLANT AND EQUIPMENT 8,936 2,648 (1,903) 9,681
GOODWILL 194 - 5,950 6,144
OTHER ASSETS - 102 - 102
------- ------ ------ -------
TOTAL ASSETS 38,350 13,102 1,603 53,055
======= ====== ====== =======
</TABLE>
<PAGE> 2
Form 8-K/A MINUTEMAN INTERNATIONAL, INC.
EXHIBIT 2.4 UNAUDITED PROFORMA BALANCE SHEET
SEPTEMBER 30, 1998
(in 000's)
<TABLE>
<CAPTION> PROFORMA
MINUTEMAN AAR POWERBOSS ADJUSTMENTS
9/30/98 8/31/98 (NOTE 2) PROFORMA
------- ------- ----------- --------
<S> <C> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE 1,500 - - 1,500
ACCOUNTS PAYABLE 3,670 2,053 - 5,723
CASH OVERDRAFT - 207 (207) -
ACCRUED EXPENSES 2,165 923 (71) 3,017
INCOME TAXES 197 - 197
OBLIGATIONS FOR TRANSFERRED RECEIVABLES - 2,068 (2,068) -
------- ------ ------ --------
TOTAL CURRENT LIABILITIES 7,532 5,251 (2,346) 10,437
LONG TERM DEBT - - 11,800 11,800
DEFERRED INCOME TAXES 200 - 200
PAYABLE TO AAR CORP 9,606 (9,606) -
SHAREHOLDERS EQUITY (OWNERS' DEFICIT)
COMMON STOCK 6,396 1 (1) 6,396
CAPITAL SURPLUS 7,723 (7,723) -
RETAINED EARNINGS 24,469 (9,479) 9,479 24,469
CURRENCY TRANSLATION (247) - - (247)
------- ------ ------ --------
TOTAL SHAREHOLDERS' EQUITY (OWNERS' DEFICIT) 30,618 (1,755) 1,755 30,618
------- ------ ------ --------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY 38,350 13,102 1,603 53,055
======= ====== ====== ========
</TABLE>
SEE NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 3
<TABLE>
<CAPTION>
FORM 8-K/A MINUTEMAN INTERNATIONAL, INC.
EXHIBIT 2.4 UNAUDITED PROFORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(000's)
AAR PROFORMA PROFORMA
MINUTEMAN INT'L POWERBOSS ADJUSTMENTS September 30, 1998
(9/30/98) (11/23/98) (REF #)
<S> <C> <C> <C> <C>
Net sales $ 43,548 $ 14,787 $ - $ 58,335
Cost of sales $ 29,504 $ 13,038 $ - $ 42,542
-------------------------------------------------------------
Gross Profit $ 14,044 $ 1,749 $ - $ 15,793
Selling, General and Administrative $ 9,869 $ 1,918 $ - $ 11,787
---------- -------- ------------- ----------------
Income <Loss> from operations $ 4,175 $ (169) $ - $ 4,006
Other income (Expense)
Interest income $ 19 $ 17 $ - $ 36
Interest expense $ (75) $ (665) $ 116 (4) $ (624)
Other-net(includes amortization) $ 418 $ 27 $ (224)(3) $ 221
-------------------------------------------------------------
Other income (Expense) $ 362 $ (621) $ (108) $ (367)
Income before income taxes $ 4,537 $ (790) $ (108) $ 3,639
-------------------------------------
(Provision) Benefit for income taxes $ (1,752) $ 280 $ 42 $ (1,430)
---------- -------- --------- ----------------
Net income (Loss) $ 2,785 $ (510) $ (66) $ 2,209
---------- -------- --------- ----------------
</TABLE>
SEE NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 4
<TABLE>
<CAPTION>
FORM 8-K/A MINUTEMAN INTERNATIONAL, INC.
EXHIBIT 2.4 UNAUDITED PROFORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(000's)
AAR PROFORMA PROFORMA
MINUTEMAN INT'L POWERBOSS ADJUSTMENTS December 31, 1997
(REF #)
<S> <C> <C> <C> <C>
Net sales $ 53,346 $ 22,759 $ - $ 76,105
Cost of sales $ 36,917 $ 20,175 $ - $ 57,092
-------------------------------------------------------------
Gross Profit $ 16,429 $ 2,584 $ - $ 19,013
Selling, General and Administrative $ 12,179 $ 2,072 $ - $ 14,251
---------- -------- --------- ---------------
Income from operations $ 4,250 $ 512 $ - $ 4,762
Other income (Expense)
Interest income $ 53 $ 4 $ - $ 57
Interest expense $ (57) $ (995) $ 263 (4) $ (789)
Other-net(includes amortization) $ 107 $ 15 $ (298)(3) $ (176)
-------------------------------------------------------------
Other income (Expense) $ 103 $ (976) $ (35) $ (908)
Income (Loss) before income taxes $ 4,353 $ (464) $ (35) $ 3,854
(Provision) Benefit for income taxes $ (1,506) $ 166 $ 12 $ (1,328)
---------- -------- --------- ---------------
Net income (Loss) $ 2,847 $ (298) $ (23) $ 2,526
---------- -------- --------- ---------------
</TABLE>
SEE NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 5
MINUTEMAN INTERNATIONAL, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(000's)
Exhibit 2.4
Adjustments to the Pro Forma Condensed Consolidated Balance Sheet:
1. The cash purchase price of $11,631, including costs directly related to the
transaction, was financed with borrowings from the Company's $13,500
revolving credit facility.
2. The purchase price of $11,631 is allocated as follows:
Accounts Receivable $ 1,934
Inventories 4,887
Prepaid Expenses and other assets 88
Property, Plant, Equipment 655
Accounts Payable <1,236>
Accrued Expenses and other
Current Liabilities < 647>
Excess Purchase Price over Net
Identifiable Assets (Goodwill) 5,950
-----
$11,631
Certain assets and liabilities of AAR PowerBoss were not purchased
(assumed) by Minuteman International, Inc. per the terms of this Purchase
Agreement.
No non-operating liabilities were assumed by Minuteman International, Inc.
Adjustments to the Pro Forma Condensed Consolidated Statement of Operations:
3. Adjustments to amortization of goodwill to reflect the allocation of
purchase price. Estimated amortization of goodwill is based on a
straight-line basis over twenty years.
4. Adjustments to interest expense reflect additional borrowings related to
the acquisition, using an effective annual interest rate of 6.2%
5. Significant Accounting Policies - Consolidation Principles
The consolidated financial statements include the accounts of Minuteman
International, Inc. and its subsidiaries. Significant intercompany
transactions and balances are eliminated in consolidation.
<PAGE> 1
EXHIBIT 2.5
AAR POWERBOSS, INC.
Financial Statements
May 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE> 2
AAR POWERBOSS, INC.
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 1
Balance Sheets, May 31, 1998 and 1997 2
Statements of Operations and Accumulated Deficit,
Years ended May 31, 1998 and 1997 3
Statements of Cash Flows,
Years ended May 31, 1998 and 1997 4
Notes to Financial Statements 5
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Audit Committee of the
Board of Directors
AAR PowerBoss, Inc.:
We have audited the accompanying balance sheets of AAR PowerBoss, Inc. (the
Company) as of May 31, 1998 and 1997 and the related statements of
operations and accumulated deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AAR PowerBoss, Inc. as
of May 31, 1998 and 1997 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
December 18, 1998
<PAGE> 4
AAR POWERBOSS, INC.
Balance Sheets
May 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
-------------- ------------
<S> <C> <C>
Current assets:
Accounts receivable, net of allowance for doubtful accounts of
$360,675 in 1998 and $333,574 in 1997 $ 3,054,760 5,238,059
Inventories 4,749,255 4,327,399
Deposits and other 82,928 123,407
Accounts receivable transferred to financial institution 2,160,598 -
-------------- ------------
Total current assets 10,047,541 9,688,865
-------------- ------------
Property and equipment, net:
Land 93,000 93,000
Building and improvements 2,911,611 2,911,611
Equipment, furniture, and fixtures 4,052,680 3,942,113
Accumulated depreciation (4,324,975) (3,890,428)
-------------- ------------
Total property and equipment, net 2,732,316 3,056,296
-------------- ------------
Other assets 69,379 19,379
-------------- ------------
$ 12,849,236 12,764,540
============== ============
LIABILITIES AND OWNER'S DEFICIT
Current liabilities:
Accounts payable $ 1,182,117 1,417,051
Cash overdraft 222,968 209,608
Accrued liabilities 657,488 721,209
Obligation for transferred receivables 2,160,598 -
-------------- ------------
Total current liabilities 4,223,171 2,347,868
Payable to AAR CORP. 10,341,308 11,692,318
-------------- ------------
Total liabilities 14,564,479 14,040,186
-------------- ------------
Owner's deficit:
Common stock, $1 par value. Authorized 100,000 shares, issued and
outstanding 1,000 shares 1,000 1,000
Capital surplus 7,723,179 7,723,179
Accumulated deficit (9,439,422) (8,999,825)
-------------- ------------
Total owner's deficit (1,715,243) (1,275,646)
-------------- ------------
$ 12,849,236 12,764,540
============== ============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
AAR POWERBOSS, INC.
Statements of Operations and Accumulated Deficit
Years ended May 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------- ------------
<S> <C> <C>
Net sales $ 22,496,872 22,337,653
Costs and operating expenses:
Cost of sales (19,936,985) (19,696,699)
Selling, general and administrative (2,293,881) (2,105,887)
---------------- ------------
Operating income 266,006 535,067
Capital charge from AAR CORP. (864,000) (997,000)
Other income - 16,739
Interest expense from transfer of accounts receivable (83,623) -
---------------- ------------
Loss before income taxes (681,617) (445,194)
Income tax benefit 242,020 157,900
---------------- ------------
Net loss (439,597) (287,294)
Accumulated deficit, beginning of year (8,999,825) (8,712,531)
---------------- ------------
Accumulated deficit, end of year $ (9,439,422) (8,999,825)
================ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
AAR POWERBOSS, INC.
Statements of Cash Flows
Years ended May 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (439,597) (287,294)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 462,230 304,423
Changes in assets and liabilities:
Accounts receivable 22,701 (523,149)
Inventories (421,857) 644,527
Prepaid expenses 40,079 (35,231)
Other assets (50,000) (1)
Accounts payable (234,934) (498,148)
Accrued liabilities (63,721) (132,241)
-------------- ----------
Net cash used in operating activities (685,099) (527,114)
-------------- ----------
Cash flows from investing activities -
property, plant, and equipment expenditures (138,251) (313,550)
-------------- ----------
Cash flows from financing activities:
Borrowings from (Payments to) AAR CORP. (1,350,608) 777,641
Proceeds from accounts receivable transfer 2,160,598 -
-------------- ----------
Net cash from financing activities 809,990 777,641
-------------- ----------
Decrease in cash and cash equivalents (13,360) (63,023)
Cash and cash equivalents, beginning of year (209,608) (146,585)
-------------- ----------
Cash and cash equivalents, end of year $ (222,968) (209,608)
============== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
AAR POWERBOSS, INC.
Notes to Financial Statements
May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
AAR PowerBoss, Inc. (PowerBoss or the Company) is a wholly owned
subsidiary of its ultimate parent, AAR CORP. PowerBoss designs,
manufactures, and sells riding and walk behind equipment that
sweeps and/or scrubs hard floors in manufacturing, distribution
and government facilities, hospitals, airports, and hotels. The
Company sells through a worldwide network of approximately 100
independent dealers.
REVENUE RECOGNITION
Sales and related cost of sales are recognized upon the shipment
of equipment and other products.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with
maturities of three months or less to be cash equivalents. At May
31, 1998 and 1997, no cash equivalents were held by the Company.
Cash overdraft consists of outstanding checks in excess of bank
balances.
ACCOUNTS RECEIVABLE
In 1998, PowerBoss entered into an agreement with a major
financial institution whereby PowerBoss would transfer to the
financial institution certain accounts receivable primarily due
from non-U.S. customers. In accordance with SFAS No. 125, the
Company has accounted for the transfer of the accounts receivable
as a secured borrowing. Under the terms of the agreement, the
financial institution assumes 90% of the credit risk for all
receivables it accepts for which it grants approval. For the
receivables the financial institution accepts for which it does
not grant credit approval, the financial institution assumes no
credit risk. As of May 31, 1998, PowerBoss transferred $2,160,598
of accounts receivable under the terms of the agreement. Interest
is charged on the outstanding accounts receivable balance at LIBOR
plus 75 basis points. Approximately $382,399 of the accounts
receivable transferred was guaranteed by AAR CORP.
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF MARKET OR CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of market or credit risk consist principally of
trade receivables. While the Company's trade receivables are
diverse by customer, the majority are concentrated with
industrial-type companies. The Company evaluates its customers'
financial condition prior to extending credit privileges and
performs ongoing credit evaluations by reviewing payment
experience, current financial condition and risk.
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of the fair value of certain
financial instruments. Accounts receivable, accounts payable,
obligation for transferred receivables, and accrued liabilities
are reflected in the financial statements at fair value because of
the short-term maturity of these instruments.
(Continued)
5
<PAGE> 8
AAR POWERBOSS, INC.
Notes to Financial Statements
May 31, 1998 and 1997
Fair value estimates are made at a specific point in time based on
relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could affect the estimates.
INVENTORIES
Inventories are priced at the lower of cost or market. Cost is
determined by the first-in, first-out method. The following is a
summary of inventories:
MAY 31,
----------------------------
1998 1997
------------- -------------
Raw materials and parts $ 3,661,715 2,902,942
Work-in-process 177,024 914,887
Finished goods 1,430,703 1,200,349
Inventory reserve (520,187) (690,779)
------------- -------------
$ 4,749,255 4,327,399
============= =============
PROPERTY, PLANT, AND EQUIPMENT
Depreciation is computed on the straight-line method over useful
lives of 10-40 years for buildings and improvements and 3-10 years
for equipment, furniture and fixtures. Repairs and maintenance
expenditures are expensed as incurred. Upon sale or disposal, cost
and accumulated depreciation are removed from the accounts and
related gains and losses are included in results of operations.
INCOME TAXES
Federal and state income tax obligations and benefits are assumed
and paid directly by AAR CORP. as part of the AAR CORP.
consolidated Federal and state income tax returns. There is no
tax-sharing agreement between PowerBoss and AAR CORP. or its
affiliates.
The income tax benefit reflected on the May 31, 1998 and 1997
Statements of Operations and Accumulated Deficit were calculated
based upon Federal and state statutory tax rates. The effective
tax rate for each year is approximately 35.5%.
(Continued)
6
<PAGE> 9
AAR POWERBOSS, INC.
Notes to Financial Statements
May 31, 1998 and 1997
The associated current and deferred income tax assets and
liabilities are reflected in the payables to AAR CORP. Deferred
taxes, which are recorded on AAR CORP.'s consolidated balance
sheet, consist of the following:
<TABLE>
<CAPTION>
MAY 31,
---------------------------
1998 1997
------------ -------------
<S> <C> <C>
Deferred tax assets:
Inventory $ 268,200 364,577
Warranty reserve 94,600 103,279
Accounts receivable and other 22,816 89,273
------------ -------------
Total current deferred tax assets 385,616 557,129
Long-term deferred tax liability - depreciation (195,125) (248,657)
------------ -------------
Total net deferred taxes $ 190,491 308,472
============ =============
</TABLE>
The Company has determined that a valuation allowance is not
required based upon the Company's expectations for future
earnings.
STATEMENTS OF CASH FLOWS
Supplemental information on cash flows follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
Interest paid $ 83,623 127
Income taxes paid 30,900 15,187
============ ===========
</TABLE>
USE OF ESTIMATES
Management of the Company has made estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(2) EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLANS
All eligible full-time employees of PowerBoss are covered by AAR
CORP.'s defined benefit retirement plan. The cost of these
benefits is allocated to PowerBoss from AAR CORP. and is included
in cost of sales and selling, general and administrative expenses
on the May 31, 1998 and 1997 Statements of Operations and
Accumulated Deficit. Defined benefit retirement plan expense
allocated to PowerBoss was $95,000 during fiscal 1998 and $94,000
during fiscal year 1997.
(Continued)
7
<PAGE> 10
AAR POWERBOSS, INC.
Notes to Financial Statements
May 31, 1998 and 1997
DEFINED CONTRIBUTION PLAN
The defined contribution plan is a profit-sharing plan which is
intended to qualify as a 401(k) plan under the Internal Revenue
Code. Under the plan, eligible employees may contribute up to
15.0% of their pretax compensation, subject to applicable
regulatory limits. The Company may make matching contributions up
to 6.0% of compensation. Participants vest immediately in Company
contributions. Expense charged to results of operations was
$26,230 during fiscal 1998 and $26,240 during 1997 representing
the cost of the matching contribution made by PowerBoss.
(3) RELATED PARTY TRANSACTIONS
AAR CORP. provides a variety of general and administrative services to
PowerBoss. These services include human resource and employee benefit
services, management information system services, insurance, tax,
treasury and cash management services, credit and collection services,
and other corporate services. The costs of these services are recorded
in selling, general and administrative expenses on PowerBoss' May 31,
1998 and 1997 Statement of Operations and Accumulated Deficit. Charges
allocated to PowerBoss for these services were $393,027 during fiscal
1998 and $428,725 during fiscal 1997. These charges may not be
indicative of costs required on a stand-alone basis. In addition,
certain related assets and liabilities are recorded on AAR CORP's.
balance sheet, including accruals for property taxes, medical claims,
and workman's compensation costs.
There are no fixed repayment terms related to the payable to AAR CORP.
Additionally, there is no interest charged to the Company other than
through the capital charge.
AAR CORP. will provide administrative, operational and financial support
to PowerBoss as long as it remains a wholly owned subsidiary of AAR.
CORP.
(4) COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under agreements
that expire at various dates through 2001. Rental expense under these
operating leases was $119,517 in fiscal 1998 and $143,541 in fiscal
1997.
Future minimum payments under leases with initial or remaining terms of
one year or more at May 31, 1998 are $95,113 for fiscal year 1999,
$56,089 for fiscal 2000, and $22,644 for fiscal 2001.
The Company has guaranteed approximately $104,000 at May 31, 1998 and
$120,000 at May 31, 1997 for an outside dealer financing arrangement.
(5) YEAR 2000
The Company's major business application (Data Three) is not Year 2000
compliant. The Company is in the process of evaluating its options
regarding its computer systems, which include converting the Company to
new business applications which are Year 2000 compliant. Costs related
to these options have not yet been determined, though these amounts may
be material to the financial position of PowerBoss.
(Continued)
8
<PAGE> 11
AAR POWERBOSS, INC.
Notes to Financial Statements
May 31, 1998 and 1997
(6) SUBSEQUENT EVENTS
On November 23, 1998, AAR CORP. sold substantially all of the assets and
liabilities (net assets) of the Company to Minuteman International.
9
