<PAGE> 1
FORM 8-K/A1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 30, 1994
QUAKER STATE CORPORATION
(exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-2677 25-0742820
- ------------------------ -----------------------------------
(Commission File Number) (IRS Employer Identification Number)
255 Elm Street, Oil City, PA 16301
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: 814/676-7676
<PAGE> 2
On October 14, 1994, Quaker State Corporation ("Quaker State") filed a
current report on Form 8-K and reported under Item 2 that on September 30,
1994, Quaker State completed the acquisition of all of the capital stock of
Westland Oil Company, Inc., the acquisition by cash merger of the Specialty
Oil Companies and the purchase of certain related equipment. Because it was
impracticable to provide the required financial statements for the acquired
businesses and pro forma financial information related to the transaction at the
time of filing, such financial statements and pro forma financial information
were not included with that report on Form 8-K. Quaker State hereby amends
Item 7, Financial Statements, Pro Forma Financial Information, and Exhibits,
of its report on Form 8-K filed on October 14, 1994, as set forth below.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired:
1. Report of Independent Accountants.
2. Combined Balance Sheets as of December 25, 1993 and
December 26,1992.
3. Combined Statements of Income for the Fiscal Years ending
December 25, 1993 and December 26, 1992 and December 28, 1991.
4. Combined Statements of Stockholders' Equity for the Fiscal
Years ending December 25, 1993 and December 26, 1992 and
December 28, 1991.
5. Combined Statements of Cash Flows for the Fiscal years ending
December 25, 1993 and December 26, 1992 and December 28, 1991.
6. Notes to Combined Financial Statements.
7. Note to Make Combined Financial Statements Conform to
Regulation S-X.
(b) Pro Forma Financial Information:
1. Pro Forma Consolidated Statements of Operations of Quaker State
Corporation and Subsidiaries for the year ended December 31, 1993
and for the nine months ended September 30, 1994.
No Pro Forma Balance Sheet for Quaker State Corporation and
Subsidiaries is included in this Amendment to Form 8-K because the
transaction was reflected in the balance sheet included with
Quaker State's quarterly report on Form 10-Q for the quarter ending
September 30, 1994.
(c) Exhibits:
2(a). Stock Exchange Agreement by and among Quaker State Corporation
and Stockholders of Westland Oil Company, Inc., dated as of August 3,
1994, with list of omitted exhibits and schedules, filed as Exhibit
2(a) to Form 8-K filed October 14, 1994 and incorporated herein by
reference.
2(b). Agreement and Plan of Merger by and among Quaker State
Corporation and the Specialty Oil Companies dated as of August 3,
1994, with list of omitted exhibits and schedules, filed as Exhibit
2(b) to Form 8-K filed October 14, 1994 and incorporated herein by
reference.
2(c). Agreement to Buy and Sell Between Quaker State Corporation and
Moon Realty, dated as of September 30, 1994, with list of omitted
exhibits, filed as Exhibit 2(c) to Form 8-K filed October 14, 1994
and incorporated herein by reference.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUAKER STATE CORPORATION
(Registrant)
Date: November 23, 1994 By: /s/ Herbert M. Baum
----------------------------------
Herbert M. Baum, Chairman,
President and Chief Executive
Officer
<PAGE> 4
QUAKER STATE CORPORATION
EXHIBIT LIST
The following exhibits are required to be filed with this Amendment,
Form 8-K/A1.
EXHIBIT NO. AND DOCUMENT
2(a). Stock Exchange Agreement by and among Quaker State Corporation and
Stockholders of Westland Oil Company, Inc. dated as of August 3,
1994, with list of omitted exhibits and schedules, filed as Exhibit
2(a) to Form 8-K filed October 14, 1994 and incorporated herein by
reference.
2(b). Agreement and Plan of Merger by and among Quaker State Corporation
and the Specialty Oil Companies dated as of August 3, 1994, with list
of omitted exhibits and schedules, filed as Exhibit 2(b) to Form 8-K
filed October 14, 1994 and incorporated herein by reference.
2(c). Agreement to Buy and Sell Between Quaker State Corporation and Moon
Realty, dated as of September 30, 1994, with list of omitted
exhibits, filed as Exhibit 2(c) to Form 8-K filed October 14, 1994
and incorporated herein by reference.
<PAGE> 5
AUDITED FINANCIAL STATEMENTS
<PAGE> 6
AUDITED FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DECEMBER 25, 1993 AND DECEMBER 26, 1992
<PAGE> 7
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
SHREVEPORT, LOUISIANA
DECEMBER 25, 1993 AND DECEMBER 26, 1992
TABLE OF CONTENTS
AUDITED FINANCIAL STATEMENTS
Page
Independent Auditor's Report 1
Combined Balance Sheets 2
Combined Statements of Income 3
Combined Statements of Stockholders' Equity 4
Combined Statements of Cash Flows 5
Notes to Combined Financial Statements 6-15
OTHER FINANCIAL INFORMATION
Accountants' Report 16
Details of Combined Balance Sheet 17-18
Details of Combined Statement of Income 19
Details of Combined Statement of Stockholders' Equity 20
<PAGE> 8
HEARD, McELROY & VESTAL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS
720 TRAVIS STREET 2285 BENTON ROAD
POST OFFICE BOX 1607 SUITE B-100
SHREVEPORT, LA 71165 BOSSIER CITY, LA 71111
TELEPHONE (318) 221-0151 TELEPHONE (318) 747-7510
FACSIMILE (318) 425-4070
<TABLE>
<S> <C>
GILBERT R. SHANLEY, JR., C.P.A., A.P.C. O. PATRICK AVINGER, JR., C.P.A. (RET.)
C. CODY WHITE, JR., C.P.A., A.P.C. WILLIAM E. ALLEN, C.P.A. (RET.)
J. PETER GAFFNEY, C.P.A., A.P.C.
SPENCER BERNARD, Jr., C.P.A. S. BERTON HEARD, C.P.A. (1986)
WILLIAM L. HIGHTOWER, C.P.A. EDWARD N. ATKINSON, C.P.A. (1981)
H. Q. GAHAGAN, JR., C.P.A., A.P.C. CHARLES E. VESTAL, C.P.A. (1990)
GERALD W. HEDGCOCK, JR., C.P.A., A.P.C.
TIM B. NIELSEN, C.P.A.
JOHN W. DEAN, C.P.A., A.P.C.
JAMES D. DEAN, C.P.A., A.P.C.
MICHAEL P. AMEEN, C.P.A.
MARK D. ELDREDGE, C.P.A.
</TABLE>
March 3, 1994
The Board of Directors
Specialty Oil Company, Inc., I
Specialty Oil Company, Inc., II
Specialty Oil Company, Inc., III
Specialty Oil Company, Inc., IV
Westland Oil Company, Inc.
Shreveport, Louisiana
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying combined balance sheets of Specialty Oil
Company, Inc., I, Specialty Oil Company, Inc., II, Specialty Oil Company Inc.,
III, Specialty Oil Company, Inc., IV and Westland Oil Company, Inc. at
December 25, 1993 and December 26, 1992, and the related combined statements
of income, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Companies'
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 combined financial position of Specialty Oil
Company, Inc., I, Specialty Oil Company, Inc., II, Specialty Oil Company,
Inc., III, Specialty Oil Company, Inc., IV and Westland Oil Company, Inc. at
December 25, 1993 and December 26, 1992, and the combined results of their
operations and their combined cash flows for the years then ended in
conformity with generally accepted accounting principles.
Note 14 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has not been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, accordingly, we express no opinion on it.
/s/ Heard, McElroy & Vestal
1
<PAGE> 9
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED BALANCE SHEETS AT
DECEMBER 25, 1993 AND DECEMBER 26, 1992
<TABLE>
<CAPTION>
A S S E T S 1993 1992
<S> <C> <C>
CURRENT ASSETS:
Cash 4,048,834 3,773,605
Cash-restricted-Note 10 733,491 1,259,100
Receivables:
Trade-Notes 5 and 6 24,930,311 22,140,993
Related-Note 17 151,123 75,016
Notes-Note 3 224,395 314,117
Other 968,983 1,045,768
LESS-allowance for doubtful accounts 291,442 233,764
---------- ----------
Net receivables 25,983,370 23,342,130
Investments 5,026 5,026
Inventory-Notes 4 and 6 17,903,851 15,604,952
Prepaid expenses 529,511 1,468,370
---------- ----------
Total current assets 49,204,083 45,453,183
FIXED ASSETS:-Note 6
Land 417,995 385,413
Buildings 1,367,098 1,367,098
Leasehold improvements 2,563,411 2,217,382
Machinery and equipment 19,489,380 17,062,446
Trucks and trailers 6,497,819 5,074,818
Automobiles 419,162 395,507
Furniture and fixtures 1,546,756 1,370,427
Construction in progress-Note 11 1,358,511 172,243
---------- ----------
33,660,132 28,045,334
LESS-accumulated depreciation 15,317,699 12,402,397
---------- ----------
Net fixed assets 18,342,433 15,642,937
GOODWILL-NET OF AMORTIZATION 277,975 286,399
OTHER ASSETS:
Other investments-Notes 13 and 16 1,793,870 1,341,030
Other assets, at cost-Note 3 483,503 320,309
---------- ----------
Total other assets 2,277,373 1,661,339
---------- ----------
Total assets 70,101,864 63,043,858
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 10
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks-Note 5 - 11,310,419
Notes payable related parties-Note 5 500,000 600,000
Current portion of long-term debt-Note 6 778,164 1,768,641
Accounts payable:
Trade 19,004,702 23,453,680
Accrued expenses 1,457,556 1,355,553
Taxes payable, other than income taxes 620,654 506,917
---------- ----------
Total current liabilities 22,361,076 38,995,210
LONG-TERM DEBT, LESS CURRENT PORTION-Note 6 25,227,115 6,395,873
---------- ----------
Total liabilities 47,588,191 45,391,083
STOCKHOLDERS' EQUITY:
Common stock:
Specialty Oil Company, Inc., I-$100 par value.
Authorized 1,000 shares; issued and outstanding
1,101 shares 110,100 110,100
Specialty Oil Company, Inc., II-$1 par value.
Authorized 100,000 shares; issued and outstanding
290 shares 200 200
Specialty Oil Company, Inc., III-$1 par value.
Authorized 1,000 shares; issued and outstanding
1,000 shares - -
Specialty Oil Company, Inc., IV-$1 par value.
Authorized 1,000 shares; issued and outstanding-none - -
Westland Oil Company, Inc.-no par value.
Authorized 250,000 shares; issued and outstanding
147,000 shares 2 2
Preferred stock:
Westland Oil Company, Inc.-no par value.
Authorized 100,000 shares; none issued - -
Additional paid-in capital 3,162,190 3,162,190
Retained earnings 19,241,181 14,380,283
---------- ----------
Total stockholders' equity 22,513,673 17,652,775
---------- ----------
Total liabilities and stockholders' equity 70,101,864 63,043,858
========== ==========
</TABLE>
2
<PAGE> 11
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDING
DECEMBER 25, 1993 AND DECEMBER 26, 1992
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
NET SALES 303,327,613 245,907,806
COST OF SALES 245,727,115 200,503,820
----------- -----------
GROSS PROFIT 57,600,498 45,403,986
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 49,261,604 38,979,047
----------- -----------
OPERATING INCOME 8,338,894 6,424,939
OTHER INCOME (DEDUCTIONS):
Interest expense (1,936,257) (1,652,701)
Miscellaneous-Note 12 1,267,180 1,106,391
----------- -----------
(669,077) (546,310)
----------- -----------
NET INCOME 7,669,817 5,878,629
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 12
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS
ENDING DECEMBER 25, 1993 AND DECEMBER 26, 1992
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------------------
Specialty Specialty Specialty Specialty
Oil Company, Oil Company, Oil Company, Oil Company,
Inc., I Inc., II Inc., III Inc., IV
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE-DECEMBER 28, 1991 110,100 200 - -
Issuance of 1,000 shares
common stock-Specialty
Oil Company, Inc., III - - - -
Distribution to stockholders
Net income-1992 - - - -
------- ---- ---- ----
BALANCE-DECEMBER 26, 1992 110,100 200 - -
Distribution to stockholders - - - -
Net income-1993 - - - -
------- ---- ---- ----
BALANCE-DECEMBER 25, 1993 110,100 200 - -
======= ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 13
<TABLE>
<CAPTION>
Common Stock
------------- Additional Total
Westland Oil Paid-In Retained Stockholders'
Company, Inc. Capital Earnings Equity
------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
2 3,162,190 10,073,873 13,346,365
- - - -
- - (1,572,219) (1,572,219)
- - 5,878,629 5,878,629
---- --------- ---------- ----------
2 3,162,190 14,380,283 17,652,775
- - (2,808,919) (2,808,919)
- - 7,669,817 7,669,817
---- --------- ---------- ----------
2 3,162,190 19,241,181 22,513,673
==== ========= ========== ==========
</TABLE>
4
<PAGE> 14
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDING
DECEMBER 25, 1993 AND DECEMBER 26, 1992
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 7,669,817 5,878,629
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,839,319 2,457,457
Amortization 131,515 53,423
Loss (gain) on sale of fixed assets (32,181) 11,929
Equity in earnings of investments (2,521) (40,387)
Net change in allowance for bad debts 57,678 85,692
(Increase) in accounts receivable-trade and other (2,712,533) (10,200,472)
(Increase) in inventory (2,298,899) (6,548,492)
(Increase) decrease in prepaid expenses 938,859 (1,120,766)
(Increase) decrease in other assets 99,171 (15,825)
Increase (decrease) in accounts payable (3,923,369) 12,951,013
Increase in accrued expenses 102,003 717,496
Increase in taxes payable, other than income taxes 113,737 389,577
----------- -----------
Total adjustments (4,687,221) (1,259,355)
----------- -----------
Net cash provided by operating activities 2,982,596 4,619,274
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (5,707,700) (9,538,792)
Proceeds from sale of fixed assets 77,975 28,703
Purchase of 50% interest in partnership (450,319) (7,500)
Funds loaned to stockholder and related parties (413,488) (75,016)
Payment received on notes receivable 164,738 298,219
Purchase of non-compete agreement - (300,000)
----------- -----------
Net cash (used) by investing activities (6,328,794) (9,594,386)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 40,718,127 7,422,703
Payment on notes payable-related parties (100,000) (100,000)
Payments on long-term debt (22,877,362) (1,210,489)
Net increase (decrease) in short-term borrowings (11,310,419) 2,610,419
Cash distributions to stockholders (2,808,919) (1,572,219)
----------- -----------
Net cash provided (used) by financing activities 3,621,427 7,150,414
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 275,229 2,175,302
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,773,605 1,598,303
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR 4,048,834 3,773,605
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 15
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 25, 1993 AND DECEMBER 26, 1992
1. NATURE OF OPERATIONS.
The companies are engaged in the packaging and distribution of motor oil
and related products, primarily private label lubricants. The companies
have locations in Louisiana, Arkansas, Mississippi, Alabama, Texas and New
Mexico. The companies also have an environmental division, Specialty
Environmental Services (SES). SES collects, transport, test and recycles
used products: lubricants, antifreeze, brake fluid, and used motor oil
filters. None of the products are considered hazardous materials.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Specialty Oil
Company, Inc., I, Specialty Oil Company, Inc., II, Specialty Oil Company,
Inc., III (refer to Note 15), Specialty Oil Company, Inc., IV (refer to
Note 17) and Westland Oil Company, Inc. (previously Westland Capital
Corporation). The financial statements of the companies are combined due
to the controlling ownership of the companies by two individuals and the
related operations of the companies. All significant intercompany
transactions have been eliminated.
FISCAL YEAR
The companies' fiscal year is a 52 week year ending on the Saturday of the
52nd week.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The companies follow the method of providing allowances for doubtful
receivables based upon historical collection experience.
INVENTORY
Inventory is stated at the lower of cost or market on the last-in, first-out
(LIFO) method.
GOODWILL
Goodwill is being amortized over a forty year period. The goodwill is the
excess cost paid over book value of assets acquired from Westland Oil
Company, Inc. by Westland Oil Company, Inc. (previously Westland Capital
Corporation).
NON-COMPETE AGREEMENT
The non-compete agreement is being amortized over five years. This
agreement was obtained in the purchase of Specialty Oil Company, Inc., III.
The unamortized balance at December 25, 1993 was $195,000.
6
<PAGE> 16
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
RECEIVABLES
The companies sell products in the states described in Note 1 to a diverse
base of customers.
FIXED ASSETS AND DEPRECIATION
Fixed assets are carried at cost. Expenditures for replacements are
capitalized and the replaced items are retired. Maintenance and repairs
are charged to operations as incurred. Gains and losses from the sale of
fixed assets are included in income. Depreciation is calculated on the
straight-line basis utilizing the following estimated useful lives:
<TABLE>
<S> <C>
Buildings 32 years
Leasehold improvements 5 to 15 years
Machinery and equipment 5 to 10 years
Trucks and trailers 4 to 6 years
Automobiles 3 years
Furniture and fixtures 5 to 10 years
</TABLE>
FEDERAL INCOME TAXES
The companies elected taxation under the IRC Subchapter S effective for the
tax year 1987; thus, the companies pay no federal or state income taxes.
The income is taxed at the individual shareholder level for federal and
state income tax purposes.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the companies consider all debt
instruments purchased with a maturity of three months or less to be cash
equivalents, except restricted cash.
3. NOTES RECEIVABLE.
Notes receivable at December 25, 1993 and December 26, 1992 consists of the
following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
*L. D. Myatt, interest at 8%-due on demand, unsecured 224,395 314,117
Insurance trusts-stockholders, secured by insurance
proceeds 262,365 -
------- -------
486,760 314,117
Portion classified as current 224,395 314,117
------- -------
Long-term portion (included in other assets) 262,365 -
======= =======
<FN>
*Stockholder of company.
</TABLE>
4. INVENTORY.
If the first-in, first-out (FIFO) method of accounting had been used by the
companies, inventories would have been $216,751 and $315,059 higher than
reported at December 25, 1993 and December 26, 1992. Inventories consist
of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Finished goods 13,076,973 11,757,493
Bulk oil 2,914,748 2,578,117
Containers and labels 2,128,881 1,584,401
LIFO reserve (216,751) (315,059)
---------- ----------
Total 17,903,851 15,604,952
========== ==========
</TABLE>
7
<PAGE> 17
5. NOTES PAYABLE TO BANKS.
Notes payable to banks at December 26, 1992 consist of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
To: Premier Bank, Shreveport, Louisiana, due 6-30-93 - 4,208,528
Commercial National Bank, Shreveport, Louisiana, due
6-30-93 - 5,260,657
Deposit Guaranty National Bank, due 6-30-93 - 1,841,234
--- ----------
- 11,310,419
=== ==========
</TABLE>
The company (SOC-II) has a note payable to Crystal-Clean South (a related
party) for $500,000 and $600,000 at December 25, 1993 and December 26,
1992, respectively. The note is unsecured, due upon demand and bears
interest at prime. Refer to Note 13 for further details.
6. LONG-TERM DEBT.
Long-term debt consists of the following at December 25, 1993 and December
26, 1992:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
To: Castrol, Inc., various notes payable in monthly installments
over five and ten year periods, collateralized by equipment 4,972 4,972
Quaker State, note due in quarterly installments of $1,333.34
including interest at 8 1/4%, collateralized by equipment - 1,600
Hibernia National Bank, note payable in monthly installments
of $26,977.08 including interest at 10.5%, collateralized
by equipment 441,141 702,486
Other-related party-insurance notes 100,510 -
Commercial National Bank, various notes, payable in monthly
installments of $12,041.65 plus interest at CNB prime,
collateralized by various transportation equipment - 104,581
Quaker State, various notes, payable in monthly installments,
five to eight years, collateralized by equipment 32,433 30,595
Commercial National Bank, various notes, payable in monthly
installments of $5,083.83 plus interest ranging from 1/2%
over CNB prime to CNB prime, collateralized by various
transportation equipment 24,458 85,465
Commercial National Bank, note payable in 84 monthly
installments of $5,095.23 plus interest at CNB prime,
collateralized by blow molding equipment 275,143 336,286
</TABLE>
8
<PAGE> 18
<TABLE>
<CAPTION>
6. LONG-TERM DEBT. (Continued) 1993 1992
---- ----
<S> <C> <C>
Concord Commercial Corporation, notes payable in
monthly installments of $35,854.32 including
interest at 8.25%, collateralized by equipment 2,018,877 2,270,235
Commercial National Bank, various notes, payable
in monthly installments of $3,773.34 plus
interest at New York prime, plus 1%, collater-
alized by various transportation equipment 107,745 128,294
Diamond Shamrock, note payable in quarterly install-
ments of $250,000 plus interest at 1% over Chemical
Bank prime, collateralized by fixed assets of
Specialty Oil Company, Inc., III - 4,500,000
*Premier Bank, Commercial National Bank, Shreveport,
Louisiana and Rabobank, New York, New York-line
of credit note shared equally; matures June 30, 1996,
interest varies based upon prime rate of London,
England interbank market 23,000,000 -
---------- ---------
26,005,279 8,164,514
LESS-current portion of long-term debt 778,164 1,768,641
---------- ---------
Long-term debt 25,227,115 6,395,873
========== =========
</TABLE>
Long-term debt maturing in the next five years is as follows:
<TABLE>
<S> <C>
1994 778,164
1995 590,499
1996 23,389,946
1997 416,547
1998 413,976
</TABLE>
The book value of fixed assets pledged as collateral on the above notes is
$3,139,893 and $9,218,679 at December 25, 1993 and December 26, 1992,
respectively. Interest expense paid in 1993 was $1,936,257 and in 1992 was
$1,587,173.
*The companies entered into an agreement with these three banks. The banks
have agreed to provide funds based upon accounts receivable and inventory
limited to an amount not to exceed $30,000,000. The loans are secured by
the companies' inventory, receivables and certain fixed assets. In regard
to this agreement, the companies and major stockholders entered into
certain loan covenants in regard to financial ratios, borrowings,
distributions and salaries and other such restrictions and covenants as
contained in the agreement of June 25, 1993. As of December 25, 1993, the
companies were in compliance with the various loan restrictions and
covenants.
The total line of credit for the above three banks is $30,000,000. The
unused portion of the line at December 25, 1993 is $7,000,000.
7. LEASES.
The companies have in effect long-term leases on real estate. Rentals for
1993 and 1992 were $2,315,452 and $2,410,347, respectively and are included
in the statement of income. The companies do not have the right to sublet
the leased premises and there are not any bonus rentals provided for in the
leases.
9
<PAGE> 19
7. LEASES. (Continued)
Rental commitments on long-term leases with related and outside parties are
detailed below:
<TABLE>
<CAPTION>
Related Party Outside
Leases Leases Total
------------- ------- -----
<S> <C> <C> <C>
1994 1,686,880 458,466 2,145,346
1995 1,581,380 447,406 2,028,786
1996 1,481,480 240,580 1,722,060
1997 1,252,478 195,980 1,448,458
1998 1,244,004 185,557 1,428,561
1999-2000 (end of lease) 1,386,504 630,106 2,016,610
--------- --------- ----------
Total 8,632,726 2,157,095 10,789,821
========= ========= ==========
</TABLE>
The above leases on land and buildings are leased to various companies
noted herein for various locations. The real estate is being leased from
two partnerships (refer to Note 14). The partners of the partnership are
also the major stockholders of the combined companies.
The companies have leases with various nonrelated parties for buildings,
primarily in Texas for Specialty Oil Company, Inc., III. The lease
commitments for these are detailed above. Total rentals paid to outside
parties was $555,238 in 1993 and $444,332 in 1992.
8. PROFIT SHARING PLAN.
The companies have a profit sharing plan covering all employees meeting
certain age and service requirements. The companies' contributions are
discretionary with the Board of Directors determining the amount, if any.
The contribution for the years ending December 25, 1993 and December 26,
1992 was $250,000 and $120,000, respectively.
9. RELATED PARTY TRANSACTIONS.
Related party transactions are detailed in other notes to the financial
statements. Refer to Notes 3, 7, 12, 13 and 14 for details of transaction
with related parties.
10. SELF INSURANCE.
The companies' medical insurance is provided through a self insured
program. The companies deposit the required monthly premiums in a separate
bank account to fund the insurance. At December 25, 1993 and December 26,
1992, cash in the amount of $733,491 and $1,259,100 is restricted to the
self insured insurance program.
11. CONSTRUCTION IN PROGRESS.
The amount in construction in progress represents payments made as of
December 25, 1993 on equipment. The projects are to be completed by May,
1994. The estimated cost to complete is approximately $1,000,000.
12. MISCELLANEOUS INCOME.
Miscellaneous income consists of the following at December 25, 1993, and
December 26, 1992:
10
<PAGE> 20
12. MISCELLANEOUS INCOME. (Continued)
<TABLE>
<CAPTION>
1993
------------------------------------------------------------
Specialty Specialty Specialty Westland
Oil Oil Oil Oil
Combined Company-I Company-II* Company-III** Company
-------- --------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
Interest 37,665 - 37,618 47 -
Royalty 199 199 - - -
Other 663,084 58,506 363,866 173,032 67,680
Management fees-
related companies 225,276 - 225,276 - -
Contract packaging 9,614 - - - 9,614
Laboratory services 412,844 - - - 412,844
--------- ------ ------- ------- -------
Total*** 1,348,682 58,705 626,760 173,079 490,138
========= ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1992
------------------------------------------------------------
Specialty Specialty Specialty Westland
Oil Oil Oil Oil
Combined Company-I Company-II* Company-III Company
-------- --------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Interest 39,318 - 39,318 - -
Royalty 279 179 100 - -
Other 630,414 48,525 233,538 287,068 61,283
Management fees-
related companies 130,380 - 130,380 - -
Contract packaging 43,006 - - - 43,006
Laboratory services 262,994 - - - 262,994
--------- ------ ------- ------- -------
Total 1,106,391 48,704 403,336 287,068 367,283
========= ====== ======= ======= =======
<FN>
*Excludes management fees received from other corporations of $4,218,148 in
1993 and $3,948,313 in 1992 which are eliminated during combination.
**Excludes rent paid to WOC in 1993 for $300,000.
***Excludes equity in losses of SOC, IV of $81,502.
</TABLE>
13. INVESTMENTS.
The company (SOCII) has a fifty percent (50%) ownership interest in the
following companies at December 25, 1993 and December 26, 1992.
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Myatt-Brooks, Inc. (a corporation) 50%
ownership-(equity in earnings $451,784-
1993 and $387,345-1992) 508,581 444,142
Crystal-Clean South (a partnership) 50%
ownership-(equity in loss $74,184-
1993 and $93,403-1992) 925,816 906,598
--------- ---------
Total 1,434,397 1,350,740
========= =========
</TABLE>
The Myatt-Brooks interest was acquired in July, 1986 and the Crystal-Clean
South was acquired in June, 1991. Both are accounted for under the equity
method of accounting for investments. Income from Myatt-Brooks of $64,439
and $90,149 and income of $19,218 and a loss of ($32,552) from Crystal-Clean
South are included in other income for 1993 and 1992, respectively.
11
<PAGE> 21
13. INVESTMENTS. (Continued)
Condensed financial information for the above companies is presented below
for 1993 based upon UNAUDITED FINANCIAL information for Myatt-Brooks and
audited financial statements for Crystal-Clean South (CCS). Our
unqualified opinion on the complete financial statements of CCS was dated
March 9, 1994 and the below information is fairly stated in relation to
those statements.
<TABLE>
<CAPTION>
Audited
Unaudited Crystal-
BALANCE SHEET Myatt-Brooks Clean South
------------ -----------
<S> <C> <C>
Current assets (includes $1,000,000 notes
receivable from partners for Crystal-Clean South) 2,585,483 1,504,174
Fixed assets 494,643 481,111
Other assets 660 _
---------- ---------
Total assets 3,080,786 1,985,285
========== =========
LIABILITIES AND EQUITY
Current liabilities 2,009,115 134,771
Long-term debt 36,580 -
Stockholders' equity 1,035,091 -
Partners' equity - 1,850,514
---------- ---------
Total liabilities and equity 3,080,786 1,985,285
========== =========
STATEMENTS OF OPERATIONS
Sales 17,515,342 2,032,936
Cost of sales 15,151,235 1,300,830
---------- ---------
Gross profit 2,364,107 732,106
Selling, general and administrative expenses 2,234,406 919,242
Other income (expense) (823) 225,573
---------- ---------
Net income 128,878 38,437
========== =========
</TABLE>
14. ADDITIONAL INFORMATION. (UNAUDITED-NOT COVERED BY AUDITOR'S REPORT)
The companies lease land and buildings from two partnerships as further
detailed in Note 7. The partnership only leases land and buildings to the
companies. The two partners of the partnership are also the major
stockholders of the companies. Summarized below are the condensed balance
sheets and statements of operations of the partnerships as of December 31,
1993. This information was provided by management and is on the income tax
basis of accounting.
<TABLE>
<CAPTION>
Myatt
Investment
Moon Realty Company
BALANCE SHEET (A Partnership) (A Partnership)
--------------- ---------------
<S> <C> <C>
Current assets 54,096 13,442
Land, buildings and equipment-net 6,743,835 563,313
Other assets 549,448 5,907
--------- -------
Total assets 7,347,379 582,662
========= =======
</TABLE>
12
<PAGE> 22
14. ADDITIONAL INFORMATION. (UNAUDITED-NOT COVERED BY AUDITOR'S REPORT)
(Continued)
<TABLE>
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
Long-term debt 5,303,436 375
Partners' equity 2,043,943 582,287
--------- -------
Total liabilities and partners' equity 7,347,379 582,662
========= =======
STATEMENTS OF OPERATIONS
Rental income 1,905,467 156,550
Interest income - 47,662
Interest expense 644,907 16,326
Depreciation expense 591,658 38,394
Other 127,457 38,630
--------- -------
Net income 541,445 110,862
========= =======
</TABLE>
15. SPECIALTY OIL COMPANY, INC., III.
The companies entered into an agreement in 1991 to purchase Industrial
Lubricants Company (ILC) located in San Antonio, Texas with nine branches
located in various cities in Texas. The purchase was completed in March,
1992. The assets of ILC were transferred to Specialty Oil Company, Inc.,
III. The purchase price was $18,264,108 and was financed by notes from the
seller of approximately $8,700,000 and cash from Specialty Oil Company of
approximately $9,600,000. The Company purchased primarily inventory, fixed
assets and net receivables. Of the monies borrowed from the seller,
$4,500,000 is still outstanding at December 26, 1992. The Company operated
for nine months in 1992 and its operations are included in the income
statement. The Company operated the entire year in 1993. A condensed
summary of the Company's balance sheet and income statement at December 26,
1992 is presented below:
<TABLE>
<S> <C>
BALANCE SHEET
Current assets 13,937,751
Fixed assets 4,923,041
Other 1,105
----------
Total assets 18,861,897
==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities 15,453,907
Long-term debt 3,527,673
Stockholders' (deficit) (119,683)
----------
Total liabilities and stockholders' (deficit) 18,861,897
==========
STATEMENT OF INCOME
Sales 76,881,065
Cost of sales 68,373,287
----------
Gross profit 8,507,778
Operating expenses 8,104,536
Other expenses 522,925
----------
Net (loss) (119,683)
==========
</TABLE>
13
<PAGE> 23
16. SPECIALTY OIL COMPANY, INC., IV.
Specialty Oil Company, Inc., IV (SOC IV) is a holding company. The company
presently has an interest in two partnerships. It owns a 50% interest in
each. The partnerships are Specialty Oil-Partnership and Gilco Lubricants.
Specialty partnership operates a distribution center in Atlanta, Georgia.
Gilco operates a distribution center and packaging of motor oil similar to
the Specialty Oil Companies. Gilco is located in Fort Worth, Texas.
The investments in the partnerships at December 25, 1993 and December 26,
1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Specialty Oil-partnership (equity in
(loss) of ($210,283)-1993 and
($17,210)-1992) (202,783) (9,710)
Gilco-(equity in earnings of $111,937-1993) 562,256 -
-------- ------
Total 359,473 (9,710)
======== ======
</TABLE>
A condensed summary of the partnerships' balance sheet and income statement
at December 25, 1993 is presented below based upon audited financial
statements. Our unqualified opinion on the complete financial statements
of Specialty Oil (a partnership) and Gilco Lubricants was dated March 9,
1994 and the below information is fairly stated in relation to those
statements. Specialty Oil (a partnership) operated for twelve months.
Gilco Lubricants operated for seven months.
<TABLE>
<CAPTION>
Audited Audited
Specialty Gilco
BALANCE SHEET Oil Partnership Lubricants
--------------- ----------
<S> <C> <C>
Current assets 1,663,041 1,601,853
Fixed assets 231,792 32,464
--------- ---------
Total assets 1,894,833 1,634,317
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Current liabilities 764,727 509,804
Long-term debt 1,535,673 -
Partners' equity (deficit) (405,567) 1,124,513
-------- ---------
Total liabilities and partners' equity (deficit) 1,894,833 1,634,317
========= =========
STATEMENT OF INCOME
Sales 7,265,399 4,366,333
Cost of sales 6,299,539 3,615,909
--------- ---------
Gross profit 965,860 750,424
Operating expenses 1,416,021 527,044
Other income 64,014 495
--------- ---------
Net income (loss) (386,147) 223,875
========= =========
</TABLE>
14
<PAGE> 24
17. ACCOUNTS RECEIVABLE-RELATED PARTIES.
Accounts receivable-related parties are in regard to tax distributions made
during the year to the stockholders of SOC-III. The distributions were
based upon financial accounting income. After year end, it was determined,
due to the tax depreciation adjustment, that the stockholders did not have
sufficient tax basis to receive them. Thus, an accounts receivable was set
up at December 26, 1993 totaling $151,123 and at December 26, 1992,
totaling $75,016.
15
<PAGE> 25
OTHER FINANCIAL INFORMATION
<PAGE> 26
HEARD, McELROY & VESTAL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS
720 TRAVIS STREET 2285 BENTON ROAD
POST OFFICE BOX 1607 SUITE B-100
SHREVEPORT, LA 71165 BOSSIER CITY, LA 71111
TELEPHONE (318) 221-0151 TELEPHONE (318) 747-7510
FACSIMILE (318) 425-4070
<TABLE>
<S> <C>
GILBERT R. SHANLEY, JR., C.P.A., A.P.C. O. PATRICK AVINGER, JR., C.P.A. (RET.)
C. CODY WHITE, JR., C.P.A., A.P.C. WILLIAM E. ALLEN, C.P.A. (RET.)
J. PETER GAFFNEY, C.P.A., A.P.C.
SPENCER BERNARD, Jr., C.P.A. S. BERTON HEARD, C.P.A. (1986)
WILLIAM L. HIGHTOWER, C.P.A. EDWARD N. ATKINSON, C.P.A. (1981)
H. Q. GAHAGAN, JR., C.P.A., A.P.C. CHARLES E. VESTAL, C.P.A. (1990)
GERALD W. HEDGCOCK, JR., C.P.A., A.P.C.
TIM B. NIELSEN, C.P.A.
JOHN W. DEAN, C.P.A., A.P.C.
JAMES D. DEAN, C.P.A., A.P.C.
MICHAEL P. AMEEN, C.P.A.
MARK D. ELDREDGE, C.P.A.
</TABLE>
March 3, 1994
The Board of Directors
Specialty Oil Company, Inc., I
Specialty Oil Company, Inc., II
Specialty Oil Company, Inc., III
Specialty Oil Company, Inc., IV
Westland Oil Company, Inc.
Our audits were made for the purpose of forming an opinion on the basic
combined financial statements taken as a whole. The details of combined
balance sheet, statement of income and stockholders' equity are presented for
purposes of additional analysis and are not a required part of the basic
combined financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic combined financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic combined financial statements taken as a whole.
/s/ Heard, McElroy & Vestal
16
<PAGE> 27
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED BALANCE SHEET
DECEMBER 25, 1993
<TABLE>
<CAPTION>
A S S E T S Combined Eliminations
-------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash 4,048,834 -
Cash-restricted 733,491 -
Receivables:
Trade 24,930,311 -
Related parties 151,123 (15,398,576)
Notes 224,395 -
Other 968,983 -
---------- -----------
26,274,812 (15,398,576)
LESS-allowance for doubtful accounts 291,442 -
---------- -----------
Net receivables 25,983,370 (15,398,576)
Investments 5,026 -
Inventory 17,903,851 -
Prepaid expenses 529,511 -
---------- -----------
Total current assets 49,204,083 (15,398,576)
FIXED ASSETS:
Land 417,995 -
Buildings 1,367,098 -
Leasehold improvements 2,563,411 -
Machinery and equipment 19,489,380 -
Trucks and trailers 6,497,819 -
Automobiles 419,162 -
Furniture and fixtures 1,546,756 -
Construction in progress 1,358,511 -
---------- -----------
33,660,132 -
LESS-accumulated depreciation 15,317,699 -
---------- -----------
Net fixed assets 18,342,433 -
GOODWILL, NET OF AMORTIZATION 277,975 -
OTHER ASSETS:
Other investments 1,793,870 -
Other assets, at cost 483,503 -
---------- -----------
Total assets 70,101,864 (15,398,576)
========== ===========
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
--------- --------- ---------- --------- -------
<S> <C> <C> <C> <C>
347,835 2,517,349 773,719 - 409,931
733,491 - - - -
2,296,931 15,687,765 6,908,647 - 36,968
3,121,568 5,941,700 151,123 - 6,335,308
- 224,395 - - -
36,486 337,716 202,901 - 391,880
--------- ---------- ---------- ------- ----------
5,454,985 22,191,576 7,262,671 - 6,764,156
20,442 152,171 118,829 - -
--------- ---------- ---------- ------- ----------
5,434,543 22,039,405 7,143,842 - 6,764,156
- 5,026 - - -
1,765,064 1,345,697 5,690,768 - 9,102,322
69,058 131,480 153,874 - 175,099
--------- ---------- ---------- ------- ----------
8,349,991 26,038,957 13,762,203 - 16,451,508
- - 321,695 - 96,300
- - 1,367,098 - -
52,421 400,673 461,158 - 1,649,159
1,419,685 2,530,261 2,961,827 - 12,577,607
1,790,246 3,152,430 1,246,705 - 308,438
- 368,262 3,373 - 47,527
78,072 925,818 161,523 - 381,343
- 17,559 118,111 - 1,222,841
--------- ---------- ---------- ------- ----------
3,340,424 7,395,003 6,641,490 - 16,283,215
2,234,180 4,395,290 1,265,985 - 7,422,244
--------- ---------- ---------- ------- ----------
1,106,244 2,999,713 5,375,505 - 8,860,971
- - - - 277,975
- 1,434,397 - 359,473 -
2,502 118,537 162,611 - 199,853
--------- ---------- ---------- ------- ----------
9,458,737 30,591,604 19,300,319 359,473 25,790,307
========= ========== ========== ======= ==========
</TABLE>
17
<PAGE> 29
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED BALANCE SHEET
DECEMBER 25, 1993
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY Combined Eliminations
-------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable related parties 500,000 -
Current portion of long-term debt 778,164 -
Accounts payable:
Trade 19,004,702 -
Related parties - 15,398,576
Accrued expenses 1,457,556 -
Taxes payable, other than income taxes 620,654 -
---------- ----------
Total current liabilities 22,361,076 15,398,576
Long-term debt, less current portion 25,227,115 -
---------- ----------
Total liabilities 47,588,191 15,398,576
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock:
Specialty Oil Company, Inc., I-$100 par value.
Authorized 1,000 shares; issued and outstanding
1,101 shares 110,100 -
Specialty Oil Company, Inc., II-$1 par value.
Authorized 100,000 shares; issued and outstanding
290 shares 200 -
Specialty Oil Company, Inc., III-$1 par value.
Authorized 1,000 shares; issued and outstanding
1,000 shares - -
Specialty Oil Company, Inc., IV-par value. Authorized
$1,000 shares; issued and outstanding-none - -
Westland Oil Company, Inc.-no par value. Authorized
250,000 shares; issued and outstanding 147,000 shares 2 -
Preferred stock:
Westland Oil Company, Inc.-no par value. Authorized
100,000 shares; none issued - -
Additional paid-in capital 3,162,190 -
Retained earnings (deficit) 19,241,181 -
---------- ----------
Total stockholders' equity 22,513,673 -
---------- ----------
Total liabilities and stockholders' equity 70,101,864 15,398,576
========== ==========
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
--------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C>
- 500,000 - - -
33,909 65,261 115,602 - 563,392
4,150,206 3,300,799 3,162,112 - 8,391,585
- - 14,940,391 458,185 -
131,601 268,148 480,662 - 577,145
60,796 206,078 300,817 - 52,963
--------- ---------- ---------- ------- ----------
4,376,512 4,340,286 18,999,584 458,185 9,585,085
5,355 23,038,668 11,323 - 2,171,769
--------- ---------- ---------- ------- ----------
4,381,867 27,378,954 19,010,907 458,185 11,756,854
110,100 - - - -
- 200 - - -
- - - - -
- - - - -
- - - - 2
- - - - -
1,567,192 194,800 - - 1,400,198
3,399,578 3,017,650 289,412 (98,712) 12,633,253
--------- ---------- ---------- ------- ----------
5,076,870 3,212,650 289,412 (98,712) 14,033,453
--------- ---------- ---------- ------- ----------
9,458,737 30,591,604 19,300,319 359,473 25,790,307
========= ========== ========== ======= ==========
</TABLE>
18
<PAGE> 31
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDING DECEMBER 25, 1993
<TABLE>
<CAPTION>
Combined Eliminations
-------- ------------
<S> <C> <C>
NET SALES 303,327,613 186,674,076
COST OF SALES 245,727,115 (186,674,076)
----------- ------------
GROSS PROFIT 57,600,498 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 49,261,604 (4,518,148)
----------- ------------
OPERATING INCOME (LOSS) 8,338,894 (4,518,148)
OTHER INCOME (DEDUCTIONS):
Interest expense (1,936,257) -
Miscellaneous 1,267,180 4,518,148
----------- ------------
(669,077) 4,518,148
----------- ------------
NET INCOME (LOSS) 7,669,817 -
=========== ============
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc. III Inc., IV Inc.
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
53,641,549 182,337,172 91,361,101 - 162,661,867
48,216,249 167,992,310 79,240,586 - 136,952,046
---------- ----------- ---------- ------- -----------
5,425,300 14,344,862 12,120,515 - 25,709,821
4,754,982 17,116,853 11,433,396 - 20,474,521
---------- ----------- ---------- ------- -----------
670,318 (2,771,991) 687,119 - 5,235,300
- (376,384) (751,103) - (808,770)
58,705 4,844,908 473,079 (81,502) 490,138
---------- ----------- ---------- ------- -----------
58,705 4,468,524 (278,024) (81,502) (318,632)
---------- ----------- ---------- ------- -----------
729,023 1,696,533 409,095 (81,502) 4,916,668
========== =========== ========== ======= ===========
</TABLE>
19
<PAGE> 33
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDING DECEMBER 25, 1993
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
--------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
COMMON STOCK:
BALANCE-December 26, 1992 110,100 200 - - 2
Issuance of 1,000 shares
common stock-Specialty
Oil Company, Inc., III - - - - -
--------- --------- ------- ------- ----------
BALANCE-December 25, 1993 110,100 200 - - 2
========= ========= ======= ======= ==========
ADDITIONAL PAID-IN CAPITAL:
BALANCE-December 26, 1992
and December 25, 1993 1,567,192 194,800 - - 1,400,198
========= ========= ======= ======= ==========
RETAINED EARNINGS:
BALANCE-December 26,
1992 3,094,868 1,941,397 (119,683) (17,210) 9,480,911
Net income (loss) 729,023 1,696,533 409,095 (81,502) 4,916,668
Distributions to
stockholders (424,313) (620,280) - - (1,764,326)
--------- --------- ------- ------- ----------
BALANCE-December 25,
1993 3,399,578 3,017,650 289,412 (98,712) 12,633,253
========= ========= ======= ======= ==========
</TABLE>
20
<PAGE> 34
AUDITED FINANCIAL STATEMENTS
<PAGE> 35
AUDITED FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DECEMBER 26, 1992 AND DECEMBER 28, 1991
<PAGE> 36
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
SHREVEPORT, LOUISIANA
DECEMBER 26, 1992 AND DECEMBER 28, 1991
TABLE OF CONTENTS
AUDITED FINANCIAL STATEMENTS
Page
Independent Auditor's Report 1
Combined Balance Sheets 2
Combined Statements of Income 3
Combined Statements of Stockholders' Equity 4
Combined Statements of Cash Flows 5
Notes to Combined Financial Statements 6-15
OTHER FINANCIAL INFORMATION
Accountants' Report 16
Details of Combined Balance Sheet 17-18
Details of Combined Statement of Income 19
Details of Combined Statement of Stockholders' Equity 20
<PAGE> 37
HEARD, McELROY & VESTAL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS
720 TRAVIS STREET 2285 BENTON ROAD
POST OFFICE BOX 1607 SUITE B-100
SHREVEPORT, LA 71165 BOSSIER CITY, LA 71111
TELEPHONE (318) 221-0151 TELEPHONE (318) 747-7510
FACSIMILE (318) 425-4070
<TABLE>
<S> <C>
GILBERT R. SHANLEY, JR., C.P.A., A.P.C. O. PATRICK AVINGER, JR., C.P.A. (RET.)
C. CODY WHITE, JR., C.P.A., A.P.C. WILLIAM E. ALLEN, C.P.A. (RET.)
J. PETER GAFFNEY, C.P.A., A.P.C.
SPENCER BERNARD, Jr., C.P.A. S. BERTON HEARD, C.P.A. (1986)
WILLIAM L. HIGHTOWER, C.P.A. EDWARD N. ATKINSON, C.P.A. (1981)
H. Q. GAHAGAN, JR., C.P.A., A.P.C. CHARLES E. VESTAL, C.P.A. (1990)
GERALD W. HEDGCOCK, JR., C.P.A., A.P.C.
TIM B. NIELSEN, C.P.A.
JOHN W. DEAN, C.P.A., A.P.C.
JAMES D. DEAN, C.P.A., A.P.C.
MICHAEL P. AMEEN, C.P.A.
MARK D. ELDREDGE, C.P.A.
</TABLE>
March 1, 1993
The Board of Directors
Specialty Oil Company, Inc., I
Specialty Oil Company, Inc., II
Specialty Oil Company, Inc., III
Specialty Oil Company, Inc., IV
Westland Oil Company, Inc.
Shreveport, Louisiana
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying combined balance sheets of Specialty Oil
Company, Inc., I, Specialty Oil Company, Inc., II, Specialty Oil Company Inc.,
III, Specialty Oil Company, Inc., IV and Westland Oil Company, Inc. at
December 26, 1992 and December 28, 1991, and the related combined statements
of income, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Companies'
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 combined financial position of Specialty Oil
Company, Inc., I, Specialty Oil Company, Inc., II, Specialty Oil Company,
Inc., III, Specialty Oil Company, Inc., IV and Westland Oil Company, Inc. at
December 26, 1992 and December 28, 1991, and the combined results of their
operations and their combined cash flows for the years then ended in
conformity with generally accepted accounting principles.
Note 15 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has not been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, accordingly, we express no opinion on it.
/s/ Heard, McElroy & Vestal
1
<PAGE> 38
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED BALANCE SHEETS AT
DECEMBER 26, 1992 AND DECEMBER 28, 1991
<TABLE>
<CAPTION>
A S S E T S 1992 1991
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash 3,773,605 1,598,303
Cash-restricted-Note 10 1,259,100 804,762
Receivables:
Trade-Notes 5 and 6 22,140,993 12,116,649
Related 75,016 -
Notes-Note 3 314,117 612,336
Other-Notes 9 and 13 1,045,768 869,640
LESS-allowance for doubtful accounts 233,764 148,072
---------- ----------
Net receivables 23,342,130 13,450,553
Investments 5,026 5,026
Inventory-Notes 4 and 5 15,604,952 9,056,460
Prepaid expenses 1,468,370 287,604
---------- -----------
Total current assets 45,453,183 25,202,708
FIXED ASSETS:-Note 6
Land 385,413 26,605
Buildings 1,367,098 -
Leasehold improvements 2,217,382 1,787,333
Machinery and equipment 17,062,446 11,403,250
Trucks and trailers 5,074,818 3,586,322
Automobiles 395,507 339,093
Furniture and fixtures 1,370,427 955,011
Construction in progress-Note 11 172,243 473,228
---------- ----------
28,045,334 18,570,842
LESS-accumulated depreciation 12,402,397 9,968,608
----------- ----------
Net fixed assets 15,642,937 8,602,234
GOODWILL-NET OF AMORTIZATION 286,399 294,822
OTHER ASSETS:
Other investments-Notes 14 and 17 1,341,030 1,293,142
Other assets, at cost 320,309 109,493
---------- ----------
Total other assets 1,661,339 1,402,635
---------- ----------
Total assets 63,043,858 35,502,399
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 39
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1992 1991
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks-Note 5 11,310,419 8,700,000
Notes payable related parties-Note 5 600,000 700,000
Current portion of long-term debt-Note 6 1,768,641 736,747
Accounts payable:
Trade 23,453,680 10,048,337
Accrued expenses 1,355,553 638,057
Taxes payable, other than income taxes 506,917 117,340
----------- ----------
Total current liabilities 38,995,210 20,940,481
LONG-TERM DEBT, LESS CURRENT PORTION-Note 6 6,395,873 1,215,553
----------- ----------
Total liabilities 45,391,083 22,156,034
STOCKHOLDERS' EQUITY:
Common stock:
Specialty Oil Company, Inc., I-$100 par value.
Authorized 1,000 shares; issued and outstanding
1,101 shares 110,100 110,100
Specialty Oil Company, Inc., II-$1 par value.
Authorized 100,000 shares; issued and outstanding
290 shares 200 200
Specialty Oil Company, Inc., III-$1 par value.
Authorized 1,000 shares; issued and outstanding
1,000 shares - -
Specialty Oil Company, Inc., IV-$1 par value.
Authorized 1,000 shares; issued and outstanding-none - -
Westland Oil Company, Inc.-no par value.
Authorized 250,000 shares; issued and outstanding
147,000 shares 2 2
Preferred stock:
Westland Oil Company, Inc.-no par value.
Authorized 100,000 shares; none issued - -
Additional paid-in capital 3,162,190 3,162,190
Retained earnings 14,380,283 10,073,873
---------- ----------
Total stockholders' equity 17,652,775 13,346,365
Total liabilities and stockholders' equity 63,043,858 35,502,399
========== ==========
</TABLE>
2
<PAGE> 40
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDING
DECEMBER 26, 1992 AND DECEMBER 28, 1991
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
NET SALES 245,907,806 151,297,107
COST OF SALES 200,503,820 123,220,352
----------- -----------
GROSS PROFIT 45,403,986 28,076,755
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 38,979,047 24,627,714
----------- -----------
OPERATING INCOME 6,424,939 3,449,041
OTHER INCOME (DEDUCTIONS):
Interest expense (1,652,701) (1,289,541)
Miscellaneous-Note 13 1,106,391 1,212,684
----------- -----------
(546,310) (76,857)
----------- -----------
NET INCOME 5,878,629 3,372,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 41
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS
ENDING DECEMBER 26, 1992 AND DECEMBER 28, 1991
<TABLE>
<CAPTION>
Common Stock
----------------------------------------------------------
Specialty Specialty Specialty Specialty
Oil Company, Oil Company, Oil Company, Oil Company,
Inc., I Inc., II Inc., III Inc., IV
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
BALANCE-DECEMBER 29, 1990 105,700 200 - -
Sale of 44 shares common
stock 4,400 - - -
Distribution to stockholders - - - -
Net income-1991 - - - -
------- ------- ------- -------
BALANCE-DECEMBER 28, 1991 110,100 200 - -
Issuance of 1,000 shares
common stock-Specialty Oil
Company, Inc. III - - - -
Distribution to stockholders - - - -
Net income-1992 - - - -
------- ------- ------- -------
BALANCE-DECEMBER 26, 1992 110,100 200 - -
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 42
<TABLE>
<CAPTION>
Common Stock
------------ Additional Total
Westland Oil Paid-In Retained Stockholders'
Company, Inc. Capital Earnings Equity
------------- ---------- -------- -------------
<S> <C> <C> <C> <C>
2 3,024,712 7,053,542 10,184,156
- 137,478 - 141,878
- - (351,853) (351,853)
- - 3,372,184 3,372,184
------- --------- ---------- ----------
2 3,162,190 10,073,873 13,346,365
- - - -
- - (1,572,219) (1,572,219)
- - 5,878,629 5,878,629
------- --------- ---------- ----------
2 3,162,190 14,380,283 17,652,775
======= ========= ========== ==========
</TABLE>
4
<PAGE> 43
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDING
DECEMBER 26, 1992 AND DECEMBER 28, 1991
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 5,878,629 3,372,184
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 2,457,457 1,753,576
Amortization 53,423 8,424
Loss (gain) on sale of fixed assets 11,929 (12,653)
Equity in earnings of investments (40,387) (10,863)
Net change in allowance for bad debts 85,692 60,686
(Increase) in accounts receivable-trade and other (10,200,472) (2,423,760)
Decrease in income taxes refundable - 25,682
(Increase) decrease in inventory (6,548,492) 1,910,822
(Increase) decrease in prepaid expenses (1,120,766) 45,221
(Increase) in other assets (15,825) (37,792)
Increase in accounts payable 12,951,013 2,942,601
Increase in accrued expenses 717,496 141,187
Increase (decrease) in taxes payable,
other than income taxes 389,577 (113,649)
---------- ----------
Total adjustments (1,259,355) 4,289,482
---------- ----------
Net cash provided by operating activities 4,619,274 7,661,666
CASH FLOWS FROM INVESTING ACTIVITIES:
Noncash investing activities-Note 12 - -
Purchase of fixed assets (9,538,792) (2,698,224)
Proceeds from sale of fixed assets 28,703 96,477
Purchase of 50% interest in partnership (7,500) (1,000,000)
Funds loaned to stockholder and related parties (75,016) (612,336)
Payment received on notes receivable 298,219 65,112
Purchase of non-compete agreement (300,000) -
Other - (2,844)
---------- ----------
Net cash (used) by investing activities (9,594,386) (4,151,815)
CASH FLOWS FROM FINANCING ACTIVITIES:
Noncash financing activities-Note 12 - -
Proceeds from long-term debt 7,422,703 612,133
Proceeds from notes payable-related parties - 700,000
Payment on notes payable-related parties (100,000) -
Payments on long-term debt (1,210,489) (1,038,634)
Net increase (decrease) in short-term borrowings 2,610,419 (3,250,000)
Cash distributions to stockholders (1,572,219) (171,598)
---------- ----------
Net cash provided (used) by financing activities 7,150,414 (3,148,099)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,175,302 361,752
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,598,303 1,236,551
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR 3,773,605 1,598,303
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 44
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 26, 1992 AND DECEMBER 28, 1991
1. NATURE OF OPERATIONS.
The companies are engaged in the packaging and distribution of motor oil
and related products, primarily private label lubricants. The companies
have locations in Louisiana, Arkansas, Mississippi, Alabama, Texas and New
Mexico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Specialty Oil
Company, Inc., I, Specialty Oil Company, Inc., II, Specialty Oil Company,
Inc., III (refer to Note 16), Specialty Oil Company, Inc., IV (refer to
Note 17) and Westland Oil Company, Inc. (previously Westland Capital
Corporation). The financial statements of the companies are combined due
to the controlling ownership of the companies by two individuals and the
related operations of the companies. All significant intercompany
transactions have been eliminated.
Westland Capital Corporation merged with its wholly owned subsidiary,
Westland Oil Company, effective for 1987. Westland Capital Corporation
then changed its name to Westland Oil Company, Inc. The merger was at
Westland's cost with the excess cost over book value being recognized as
goodwill.
FISCAL YEAR
The companies' fiscal year is a 52 week year ending on the Saturday of the
52nd week.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The companies follow the method of providing allowances for doubtful
receivables based upon historical collection experience.
INVENTORY
Inventory is stated at the lower of cost or market on the last-in, first-out
(LIFO) method.
GOODWILL
Goodwill is being amortized over a forty year period. The goodwill is the
excess cost paid over book value of assets acquired from Westland Oil
Company, Inc. by Westland Oil Company, Inc. (previously Westland Capital
Corporation).
NON-COMPETE AGREEMENT
The non-compete agreement is being amortized over five years. This
agreement was obtained in the purchase of Specialty Oil Company, Inc., III.
The unamortized balance at December 26, 1992 was $255,000.
6
<PAGE> 45
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
RECEIVABLES
The companies sell products in the states described in Note 1 to a diverse
base of customers.
FIXED ASSETS AND DEPRECIATION
Fixed assets are carried at cost. Expenditures for replacements are
capitalized and the replaced items are retired. Maintenance and repairs
are charged to operations as incurred. Gains and losses from the sale of
fixed assets are included in income. Depreciation is calculated on a
straight-line basis utilizing the following estimated useful lives:
<TABLE>
<S> <C>
Buildings 32 years
Leasehold improvements 5 to 15 years
Machinery and equipment 5 to 10 years
Trucks and trailers 4 to 6 years
Automobiles 3 years
Furniture and fixtures 5 to 10 years
</TABLE>
FEDERAL INCOME TAXES
The companies elected taxation under the IRC Subchapter S effective for the
tax year 1987; thus, the companies pay no federal or state income taxes.
The income is taxed at the individual shareholder level for federal and
state income tax purposes.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the companies consider all debt
instruments purchased with a maturity of three months or less to be cash
equivalents, except restricted cash.
3. NOTES RECEIVABLE.
Notes receivable at December 26, 1992 and December 28, 1991 consists of the
following:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
*L. D. Myatt, interest at 8%-due on demand, unsecured 314,117 310,626
Moon Realty, a related party, interest at 8% due on
demand, unsecured - 301,710
------- -------
314,117 612,336
Portion classified as current 314,117 612,336
------- -------
Long-term portion - -
======= =======
<FN>
*Stockholder of company.
</TABLE>
4. INVENTORY.
If the first-in, first-out (FIFO) method of accounting had been used by the
companies, inventories would have been $315,059 and $314,639 higher than
reported at December 26, 1992 and December 28, 1991. Inventories consist of
the following:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Finished goods 11,757,493 6,102,683
Bulk oil 2,578,117 1,911,721
Containers and labels 1,584,401 1,356,695
LIFO reserve (315,059) (314,639)
---------- ---------
Total 15,604,952 9,056,460
========== =========
</TABLE>
7
<PAGE> 46
5. NOTES PAYABLE TO BANKS.
Notes payable to banks at December 26, 1992 and December 28, 1991 consist
of the following:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
To: First Commercial Bank, Little Rock, AK,
due 5-92 - 400,000
*Premier Bank, Shreveport, Louisiana, due 6-30-93
and 7-13-92, respectively 4,208,528 1,800,000
*Commercial National Bank, Shreveport, Louisiana,
due 6-30-93 and 4-30-92, respectively 5,260,657 5,000,000
*Deposit Guaranty National Bank, due 6-30-93 1,841,234 -
Hibernia National Bank, due 6-21-92 - 1,500,000
---------- ---------
11,310,419 8,700,000
========= =========
</TABLE>
Interest on the above notes varies based on prime.
The companies have lines of credit with the above banks totaling $21,500,000 of
which $11,310,419 had been utilized as of December 26, 1992 and $10,189,581 was
available for use at December 26, 1992.
*The companies entered into an agreement with these three banks. The banks
have agreed to provide funds based upon accounts receivable and inventory
limited to an amount not to exceed $21,500,000. The loans are secured by the
companies' inventory, receivables and certain fixed assets. In regard to this
agreement, the companies and major stockholders entered into certain loan
covenants in regard to financial ratios, borrowings, distributions and salaries
and other such restrictions and covenants as contained in the agreement of
August 24, 1992. As of December 26, 1992, the companies were in compliance
with the various loan restrictions and covenants.
The company (SOC-II) has a note payable to Crystal-Clean South (a related
party) for $600,000 and $700,000 at December 26, 1992 and December 28,
1991, respectively. The note is unsecured, due upon demand and bears
interest at prime. Refer to Note 14 for further details.
6. LONG-TERM DEBT.
Long-term debt consists of the following at December 26, 1992 and December
28, 1991:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
To: Commercial National Bank, payable in monthly installments
of $10,591.68 including interest at 12%, collateralized by
storage tanks and pumps - 74,992
Castrol, Inc., various notes payable in monthly installments
over five and ten year periods, collateralized by equipment 4,972 5,743
Quaker State, note due in quarterly installments of $1,333.34
including interest at 8 1/4%, collateralized by equipment 1,600 4,800
</TABLE>
8
<PAGE> 47
<TABLE>
<CAPTION>
6. LONG-TERM DEBT. (Continued) 1992 1991
---- ----
<S> <C> <C>
Hibernia National Bank, note payable in monthly installments
of $26,977.08 including interest at 10.5%, collateralized
by equipment 702,486 937,198
Commercial National Bank, various notes, payable in monthly
installments of $8,944.40 plus interest at CNB prime,
collateralized by transportation equipment - 82,320
Commercial National Bank, various notes, payable in monthly
installments of $12,041.65 plus interest at CNB prime,
collateralized by various transportation equipment 104,581 245,140
Quaker State, various notes, payable in monthly installments,
five to eight years, collateralized by equipment 30,595 29,708
Commercial National Bank, various notes, payable in monthly
installments of $5,083.83 plus interest ranging from 1/2%
over CNB prime to CNB prime, collateralized by various
transportation equipment 85,465 174,970
Commercial National Bank, note payable in 84 monthly
installments of $5,095.23 plus interest at CNB prime,
collateralized by blow molding equipment 336,286 397,429
Concord Commercial Corporation, notes payable in
monthly installments of $35,854.32 including
interest at 8.25%, collateralized by equipment 2,270,235 -
Commercial National Bank, various notes, payable
in monthly installments of $3,773.34 plus
interest at New York prime, plus 1%, collater-
alized by various transportation equipment 128,294 -
Diamond Shamrock, note payable in quarterly install-
ments of $250,000 plus interest at 1% over Chemical
Bank prime, collateralized by fixed assets of
Specialty Oil Company, Inc., III 4,500,000 -
--------- ---------
8,164,514 1,952,300
LESS-current portion of long-term debt 1,768,641 736,747
--------- ---------
Long-term debt 6,395,873 1,215,553
========= =========
</TABLE>
Long-term debt maturing in the next five years is as follows:
<TABLE>
<S> <C>
1993 1,768,641
1994 1,732,645
1995 1,547,032
1996 1,388,618
1997 915,219
</TABLE>
The book value of fixed assets pledged as collateral on the above notes is
$9,218,679 and $2,063,007 at December 26, 1992 and December 28, 1991,
respectively. Interest expense paid in 1992 was $1,587,173 and in 1991 was
$1,289,780.
9
<PAGE> 48
7. LEASES.
The companies have in effect long-term leases on real estate. Rentals for
1992 and 1991 were $2,410,347 and $1,657,080, respectively and are included
in the statement of income. The companies do not have the right to sublet
the leased premises and there are not any bonus rentals provided for in the
leases.
Rental commitments on long-term leases with related and outside parties are
detailed below:
<TABLE>
<CAPTION>
Related Party Outside
Leases Leases Total
------------- ------- -----
<S> <C> <C> <C>
1993 1,886,880 492,804 2,379,684
1994 1,686,880 353,082 2,039,962
1995 1,581,380 312,023 1,893,403
1996 1,481,480 135,195 1,616,675
1997 1,252,478 90,596 1,343,074
1998-2000 (end of lease) 2,630,508 94,539 2,725,047
---------- --------- ----------
Total 10,519,606 1,478,239 11,997,845
========== ========= ==========
</TABLE>
The above leases on land and buildings are leased to various companies
noted herein for various locations. The real estate is being leased from
two partnerships (refer to Note 15). The partners of the partnership are
also the major stockholders of the combined companies.
The companies have leases with various nonrelated parties for buildings,
primarily in Texas for Specialty Oil Company, Inc., III. The lease
commitments for these are detailed above. Total rentals paid to outside
parties was $444,332 in 1992 and $72,158 in 1991.
8. PROFIT SHARING PLAN.
The companies have a profit sharing plan covering all employees meeting
certain age and service requirements. The companies' contributions are
discretionary with the Board of Directors determining the amount, if any.
The contribution for the years ending December 26, 1992 and December 28,
1991 was $120,000 and $150,000, respectively.
9. RELATED PARTY TRANSACTIONS.
Related party transactions are detailed in other notes to the financial
statements. Refer to Notes 3, 7, 13, 14 and 15 for details of transaction
with related parties.
Included in accounts receivable-other are the following amounts from a
related party:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Myatt-Brooks - 200,000
</TABLE>
Myatt-Brooks paid a corporate management fee (overhead reimbursement) to
Specialty Oil Company, Inc., II in 1992 and 1991 of $100,380 and $80,834,
respectively. Crystal Clean South (a related party) paid a management fee
of $30,000 in 1992. These amounts are included in other income in the
income statement.
10. SELF INSURANCE.
The companies' medical insurance is provided through a self insured
program. The companies deposit the required monthly premiums in a separate
bank account to fund the insurance. At December 26, 1992 and December 28,
1991, cash in the amount of $1,259,100 and $804,762 is restricted to the
self insured insurance program.
10
<PAGE> 49
11. CONSTRUCTION IN PROGRESS.
The amount in construction in progress represents payments made as of
December 26, 1992 on equipment. The projects are to be completed by May,
1993. The estimated costs to complete are considered immaterial.
12. NONCASH INVESTING AND FINANCING ACTIVITIES.
The company (Specialty Oil-I) issued common stock to two shareholders and
reduced the note receivable of another stockholder with the net income from
the company in 1991.
<TABLE>
<CAPTION>
1991
----
<S> <C>
Noncash distribution to stockholders (180,255)
Common stock issued in lieu of cash distribution 141,878
Reduction in stockholder's note receivable 38,377
---------
-
=========
</TABLE>
13. MISCELLANEOUS INCOME.
Miscellaneous income consists of the following at December 26, 1992, and
December 28, 1991:
<TABLE>
<CAPTION>
1992
------------------------------------------------------------
Specialty Specialty Specialty Westland
Oil Oil Oil Oil
Combined Company-I Company-II* Company-III Company
-------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Interest 39,318 - 39,318 - -
Royalty 279 179 100 - -
Other 630,414 48,525 233,538 287,068 61,283
Myatt-Brooks
management fee 100,380 - 100,380 - -
Crystal Clean South-
management fee 30,000 - 30,000 - -
Contract packaging 43,006 - - - 43,006
Laboratory services 262,994 - - - 262,994
--------- ------ ------- ------- -------
Total 1,106,391 48,704 403,336 287,068 367,283
========= ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1991
-------------------------------------------------
Specialty Specialty Westland
Oil Oil Oil
Combined Company-I Company-II* Company
-------- --------- ----------- --------
<S> <C> <C> <C> <C>
Interest 63,059 2,843 60,116 100
Royalty 300 300 - -
Other 720,701 47,733 **588,095 84,873
Myatt-Brooks
management fee 80,834 - 80,834 -
Contract packaging 25,986 - - 25,986
Laboratory services 321,804 - - 321,804
--------- ------ ------- -------
Total 1,212,684 50,876 729,045 432,763
========= ====== ======= =======
<FN>
*Excludes management fees received from other corporations of $3,948,313 in
1992 and $2,334,612 in 1991 which are eliminated during combination.
**This amount includes $500,000 settlement from vendor in regard to pricing
dispute. The amount is also included in accounts receivable other at
year-end.
</TABLE>
11
<PAGE> 50
14. INVESTMENTS.
The company (SOCII) has a fifty percent (50%) ownership interest in the
following companies at December 26, 1992 and December 28, 1991.
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Myatt-Brooks, Inc. (a corporation) 50%
ownership-(equity in earnings $387,345-
1992 and $297,196-1991) 444,142 353,993
Crystal-Clean South (a partnership) 50%
ownership-(equity in loss $93,403-
1992 and $60,851-1991) 906,598 939,149
--------- ---------
Total 1,350,740 1,293,142
========= =========
</TABLE>
The Myatt-Brooks interest was acquired in July, 1986 and the Crystal-Clean
South was acquired in June, 1991. Both are accounted for under the equity
method of accounting for investments. Income from Myatt-Brooks of $90,149
and $71,714 and a loss of ($32,552) and ($60,851) from Crystal-Clean South
are included in other income for 1992 and 1991, respectively.
Condensed financial information for the above companies is presented below
for 1992 based upon UNAUDITED FINANCIAL information for Myatt-Brooks and
audited financial statements for Crystal-Clean South (CCS). Our unqualified
opinion on the complete financial statements of CCS was dated March 15, 1993
and the below information is fairly stated in relation to those statements.
<TABLE>
<CAPTION>
Audited
Unaudited Crystal-
BALANCE SHEET Myatt-Brooks Clean South
------------ -----------
<S> <C> <C>
Current assets (includes
$1,200,000 notes receivable from
partners for Crystal-Clean South) 2,112,680 1,561,835
Fixed assets 462,510 344,764
Other assets 660 _
---------- ---------
Total assets 2,575,850 1,906,599
========== =========
LIABILITIES AND EQUITY
Current liabilities 1,619,406 94,522
Long-term debt 67,805 -
Stockholders' equity 888,639 -
Partners' equity - 1,812,077
---------- ---------
Total liabilities and equity 2,575,850 1,906,599
========== =========
STATEMENTS OF OPERATIONS
Sales 13,386,928 1,191,707
Cost of sales 11,337,907 864,386
---------- ---------
Gross profit 2,049,021 327,321
Selling, general
and administrative expenses 1,867,168 488,677
Other income (expense) (1,198) 95,134
---------- ---------
Net income (loss) 186,655 (66,222)
========== =========
</TABLE>
12
<PAGE> 51
15. ADDITIONAL INFORMATION. (UNAUDITED-NOT COVERED BY AUDITOR'S REPORT)
The companies lease land and buildings from two partnerships as further
detailed in Note 7. The partnership only leases land and buildings to the
companies. The two partners of the partnership are also the major
stockholders of the companies. Summarized below are the condensed balance
sheets and statements of operations of the partnerships as of December 31,
1992. This information was provided by management and is on the income tax
basis of accounting.
<TABLE>
<CAPTION>
Myatt
Investment
Moon Realty Company
BALANCE SHEET (A Partnership) (A Partnership)
--------------- ---------------
<S> <C>
Current assets 97,993 155,500
Land, buildings and equipment-
net 7,518,684 595,920
Notes receivable-related party - 485,329
Other assets 101,580 4,335
--------- ---------
Total assets 7,718,257 1,241,084
========= =========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt 6,749,901 224,391
Partners' equity 968,356 1,016,693
--------- ---------
Total liabilities and partners'
equity 7,718,257 1,241,084
========= =========
STATEMENTS OF OPERATIONS
Rental income 1,679,877 146,500
Interest income - 66,679
Interest expense 729,247 26,096
Depreciation expense 702,874 39,389
Other 68,758 34,827
--------- ---------
Net income 178,998 112,867
========= =========
</TABLE>
16. SPECIALTY OIL COMPANY, INC., III.
The companies entered into an agreement in 1991 to purchase Industrial
Lubricants Company (ILC) located in San Antonio, Texas with nine branches
located in various cities in Texas. The purchase was completed in March,
1992. The assets of ILC were transferred to Specialty Oil Company, Inc.,
III. The purchase price was $18,264,108 and was financed by notes from the
seller of approximately $8,700,000 and cash from Specialty Oil Company of
approximately $9,600,000. The Company purchased primarily inventory, fixed
assets and net receivables. Of the monies borrowed from the seller,
$4,500,000 is still outstanding at December 26, 1992. The Company operated
for nine months in 1992 and its operations are included in the income
statement. A condensed summary of the Company's balance sheet and income
statement at December 26, 1992 is presented below:
<TABLE>
<CAPTION>
BALANCE SHEET
<S> <C>
Current assets 13,937,751
Fixed assets 4,923,041
Other 1,105
----------
Total assets 18,861,897
==========
</TABLE>
13
<PAGE> 52
16. SPECIALTY OIL COMPANY, INC., III. (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
<S> <C>
Current liabilities 15,453,907
Long-term debt 3,527,673
Stockholders' (deficit) (119,683)
----------
Total liabilities and
stockholders' (deficit) 18,861,897
==========
STATEMENT OF INCOME
Sales 76,881,065
Cost of sales 68,373,287
----------
Gross profit 8,507,778
Operating expenses 8,104,536
Other expenses 522,925
----------
Net (loss) (119,683)
==========
</TABLE>
17. SPECIALTY OIL COMPANY, INC., IV.
Specialty Oil Company, Inc., IV (SOC IV) entered into a partnership with
Quaker State Corporation. The two corporations are equal partners of the
partnership. The partnership was effective December 1, 1992. It operates a
distribution center in Atlanta, Georgia. The partnership operated one month
in 1992. The investment in the partnership of Specialty Oil Company, Inc.,
IV is detailed below:
<TABLE>
<CAPTION>
<S> <C>
Initial partnership investment 7,500
Equity in loss for December, 1992 (17,210)
-------
Investment at December 26, 1992 (9,710)
=======
</TABLE>
The assets of the partnership were purchased from Quaker State with a note
given in payment of those assets. The note is for five years and payment is
due out of the profits of the business. Specialty Oil Company, Inc., IV is
not required to pay on the note for five years and it is liable for only
one-half after that point. Specialty Oil Company, Inc., IV doesn't receive
any distributions unless payment on the note is first paid.
A condensed summary of the partnerships' balance sheet and income statement
at December 26, 1992 is presented below based upon audited financial
statements. Our unqualified opinion on the complete financial statements of
Specialty Oil (a partnership) was dated March 15, 1993 and the below
information is fairly stated in relation to those statements.
<TABLE>
<CAPTION>
Audited
Specialty
BALANCE SHEET Oil Partnership
---------------
<S> <C>
Current assets 1,718,186
Fixed assets 199,096
---------
Total assets 1,917,282
=========
</TABLE>
14
<PAGE> 53
17. SPECIALTY OIL COMPANY, INC., IV. (Continued)
<TABLE>
<CAPTION>
Audited
Specialty
LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Oil Partnership
---------------
<S> <C>
Current liabilities 707,756
Long-term debt 1,228,946
Partners' (deficit) (19,420)
---------
Total liabilities and partners' (deficit) 1,917,282
=========
STATEMENT OF INCOME
Sales 333,876
Cost of sales 278,618
---------
Gross profit 55,258
Operating expenses 93,456
Other income 3,778
---------
Net (loss) (34,420)
=========
</TABLE>
15
<PAGE> 54
OTHER FINANCIAL INFORMATION
<PAGE> 55
HEARD, McELROY & VESTAL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS
720 TRAVIS STREET 2285 BENTON ROAD
POST OFFICE BOX 1607 SUITE B-100
SHREVEPORT, LA 71165 BOSSIER CITY, LA 71111
TELEPHONE (318) 221-0151 TELEPHONE (318) 747-7510
FACSIMILE (318) 425-4070
<TABLE>
<S> <C>
GILBERT R. SHANLEY, JR., C.P.A., A.P.C. O. PATRICK AVINGER, JR., C.P.A. (RET.)
C. CODY WHITE, JR., C.P.A., A.P.C. WILLIAM E. ALLEN, C.P.A. (RET.)
J. PETER GAFFNEY, C.P.A., A.P.C.
SPENCER BERNARD, JR., C.P.A. S. BERTON HEARD, C.P.A. (1986)
WILLIAM L. HIGHTOWER, C.P.A. EDWARD N. ATKINSON, C.P.A. (1981)
H. Q. GAHAGAN, JR., C.P.A., A.P.C. CHARLES E. VESTAL, C.P.A. (1990)
GERALD W. HEDGCOCK, JR., C.P.A., A.P.C.
TIM B. NIELSEN, C.P.A.
JOHN W. DEAN, C.P.A., A.P.C.
JAMES D. DEAN, C.P.A., A.P.C.
MICHAEL P. AMEEN, C.P.A.
MARK D. ELDREDGE, C.P.A.
</TABLE>
March 1, 1993
The Board of Directors
Specialty Oil Company, Inc., I
Specialty Oil Company, Inc., II
Specialty Oil Company, Inc., III
Specialty Oil Company, Inc., IV
Westland Oil Company, Inc.
Our audits were made for the purpose of forming an opinion on the basic
combined financial statements taken as a whole. The details of combined
balance sheet, statement of income and stockholders' equity are presented for
purposes of additional analysis and are not a required part of the basic
combined financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic combined financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic combined financial statements taken as a whole.
/s/ Heard, McElroy & Vestal
16
<PAGE> 56
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED BALANCE SHEET
DECEMBER 26, 1992
<TABLE>
<CAPTION>
A S S E T S Combined Eliminations
-------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash 3,773,605 -
Cash-restricted 1,259,100 -
Receivables:
Trade 22,140,993 -
Related parties 75,016 (13,913,498)
Notes 314,117 -
Other 1,045,768 -
---------- -----------
23,575,894 (13,913,498)
LESS-allowance for doubtful
accounts 233,764 -
---------- -----------
Net receivables 23,342,130 (13,913,498)
Investments 5,026 -
Inventory 15,604,952 -
Prepaid expenses 1,468,370 -
---------- -----------
Total current assets 45,453,183 (13,913,498)
FIXED ASSETS:
Land 385,413 -
Buildings 1,367,098 -
Leasehold improvements 2,217,382 -
Machinery and equipment 17,062,446 -
Trucks and trailers 5,074,818 -
Automobiles 395,507 -
Furniture and fixtures 1,370,427 -
Construction in progress 172,243 -
---------- -----------
28,045,334 -
LESS-accumulated depreciation 12,402,397 -
---------- -----------
Net fixed assets 15,642,937 -
GOODWILL, NET OF AMORTIZATION 286,399 -
OTHER ASSETS:
Other investments 1,341,030 -
Other assets, at cost 320,309 -
---------- -----------
Total assets 63,043,858 (13,913,498)
========== ===========
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
228,224 2,457,856 797,113 - 290,412
1,259,100 - - - -
1,856,953 12,452,010 6,972,564 - 859,466
3,694,920 - 75,016 - 10,218,578
- 314,117 - - -
82,332 462,038 171,330 - 330,068
--------- ---------- ---------- ------ ----------
5,634,205 13,228,165 7,218,910 - 11,408,112
12,924 139,998 80,842 - -
--------- ---------- ---------- ------ ----------
5,621,281 13,088,167 7,138,068 - 11,408,112
- 5,026 - - -
1,330,525 1,137,875 5,610,313 - 7,526,239
158,449 456,211 392,257 - 461,453
--------- ---------- ---------- ------ ----------
8,597,579 17,145,135 13,937,751 - 19,686,216
- - 321,695 - 63,718
- - 1,367,098 - -
52,421 334,690 331,107 - 1,499,164
1,233,131 2,161,654 2,336,645 - 11,331,016
1,430,722 2,447,578 910,024 - 286,494
- 368,938 1,123 - 25,446
74,638 828,454 145,845 - 321,490
45,719 - 78,867 - 47,657
--------- ---------- ---------- ------ ----------
2,836,631 6,141,314 5,492,404 - 13,574,985
1,969,746 3,743,708 569,363 - 6,119,580
--------- ---------- ---------- ------ ----------
866,885 2,397,606 4,923,041 - 7,455,405
- - - - 286,399
- 1,350,740 - (9,710) -
2,502 116,784 1,105 - 199,918
--------- ---------- ---------- ------ ----------
9,466,966 21,010,265 18,861,897 (9,710) 27,627,938
========= ========== ========== ====== ==========
</TABLE>
17
<PAGE> 58
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED BALANCE SHEET
DECEMBER 26, 1992
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY Combined Eliminations
---------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks 11,310,419 -
Notes payable related parties 600,000 -
Current portion of long-term debt 1,768,641 -
Accounts payable:
Trade 23,453,680 -
Related parties - 13,913,498
Accrued expenses 1,355,553 -
Taxes payable, other than income taxes 506,917 -
---------- ----------
Total current liabilities 38,995,210 13,913,498
LONG-TERM DEBT, LESS CURRENT PORTION 6,395,873 -
---------- ----------
Total liabilities 45,391,083 13,913,498
STOCKHOLDERS' EQUITY:
Common stock:
Specialty Oil Company, Inc., I-$100 par value. Authorized
1,000 shares; issued and outstanding 1,101 shares 110,100 -
Specialty Oil Company, Inc., II-$1 par value. Authorized
100,000 shares; issued and outstanding 290 shares 200 -
Specialty Oil Company, Inc., III-$1 par value. Authorized
1,000 shares; issued and outstanding 1,000 shares - -
Specialty Oil Company, Inc., IV-par value. Authorized
$1,000 shares; issued and outstanding-none - -
Westland Oil Company, Inc.-no par value. Authorized 250,000
shares; issued and outstanding 147,000 shares 2 -
Preferred stock:
Westland Oil Company, Inc.-no par value. Authorized 100,000
shares; none issued - -
Additional paid-in capital 3,162,190 -
Retained earnings (deficit) 14,380,283 -
---------- ----------
Total stockholders' equity 17,652,775 -
---------- ----------
Total liabilities and stockholders' equity 63,043,858 13,913,498
========== ==========
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
- 11,310,419 - - -
- 600,000 - - -
61,475 112,720 1,015,092 - 579,354
4,369,288 3,124,041 3,039,409 - 12,920,942
- 3,218,402 10,687,596 7,500 -
165,938 273,497 435,920 - 480,198
62,108 138,656 275,890 - 30,263
--------- ---------- ---------- -------- ----------
4,658,809 18,777,735 15,453,907 7,500 14,010,757
35,997 96,133 3,527,673 - 2,736,070
--------- ---------- ---------- -------- ----------
4,694,806 18,873,868 18,981,580 7,500 16,746,827
110,100 - - - -
- 200 - - -
- - - - -
- - - - -
- - - - 2
- - - - -
1,567,192 194,800 - - 1,400,198
3,094,868 1,941,397 (119,683) (17,210) 9,480,911
--------- ---------- ---------- -------- ----------
4,772,160 2,136,397 (119,683) (17,210) 10,881,111
--------- ---------- ---------- -------- ----------
9,466,966 21,010,265 18,861,897 (9,710) 27,627,938
========= ========== ========== ======== ==========
</TABLE>
18
<PAGE> 60
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED STATEMENT OF INCOME
FOR THE YEAR, NINE MONTHS (SPECIALTY OIL COMPANY, INC., III)
AND ONE MONTH (SPECIALTY OIL COMPANY, INC., IV)
FOR THE YEAR ENDING DECEMBER 26, 1992
<TABLE>
<CAPTION>
Combined Eliminations
-------- ------------
<S> <C> <C>
NET SALES 245,907,806 150,454,340
COST OF SALES 200,503,820 (150,454,340)
----------- ------------
GROSS PROFIT 45,403,986 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 38,979,047 (3,948,313)
----------- ------------
OPERATING INCOME (LOSS) 6,424,939 (3,948,313)
OTHER INCOME (DEDUCTIONS):
Interest expense (1,652,701) -
Miscellaneous 1,106,391 3,948,313
----------- ------------
(546,310) 3,948,313
----------- ------------
NET INCOME (LOSS) 5,878,629 -
=========== ============
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C>
48,278,656 138,436,891 76,881,065 - 132,765,534
43,321,116 126,291,205 68,373,287 - 112,972,552
---------- ----------- ---------- ------- -----------
4,957,540 12,145,686 8,507,778 - 19,792,982
4,013,608 15,220,225 8,104,536 17,210 15,571,781
---------- ----------- ---------- ------- -----------
943,932 (3,074,539) 403,242 (17,210) 4,221,201
- (501,154) (809,993) - (341,554)
48,704 4,351,649 287,068 - 367,283
---------- ----------- ---------- ------- -----------
48,704 3,850,495 (522,925) - 25,729
---------- ----------- ---------- ------- -----------
992,636 775,956 (119,683) (17,210) 4,246,930
========== ===========- ========= ======= ===========
</TABLE>
19
<PAGE> 62
SPECIALTY OIL COMPANY, INC., I
SPECIALTY OIL COMPANY, INC., II
SPECIALTY OIL COMPANY, INC., III
SPECIALTY OIL COMPANY, INC., IV
WESTLAND OIL COMPANY, INC.
DETAILS OF COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR AND THE NINE MONTHS (SPECIALTY OIL COMPANY, INC., III)
AND ONE MONTH (SPECIALTY OIL COMPANY, INC., IV)
FOR THE YEAR ENDING DECEMBER 26, 1992
<TABLE>
<CAPTION>
Specialty Specialty Specialty Specialty Westland
Oil Oil Oil Oil Oil
Company, Company, Company, Company, Company,
Inc., I Inc., II Inc., III Inc., IV Inc.
------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
COMMON STOCK:
BALANCE-December 28, 1991 110,100 200 - - 2
Issuance of 1,000 shares
common stock-Specialty
Oil Company, Inc., III - - - - -
--------- --------- ------- ------ ---------
BALANCE-December 26, 1992 110,100 200 - - 2
========= ========= ======== ======== =========
ADDITIONAL PAID-IN CAPITAL:
BALANCE-December 28, 1991
and December 26, 1992 1,567,192 194,800 - - 1,400,198
========= ========= ======== ======== =========
RETAINED EARNINGS:
BALANCE-December 28,
1991 2,296,302 1,325,329 - - 6,452,242
Net income (loss) 992,636 775,956 (119,683) (17,210) 4,246,930
Distributions to
stockholders (194,070) (159,888) - - (1,218,261)
--------- --------- -------- ------- ---------
BALANCE-December 26,
1992 3,094,868 1,941,397 (119,683) (17,210) 9,480,911
========= ========= ======== ======== =========
</TABLE>
20
<PAGE> 63
Item 7(a) 7. NOTE TO MAKE THE COMBINED FINANCIAL STATEMENTS CONFORM TO
REGULATION S-X
SIGNIFICANT CUSTOMERS/CONCENTRATIONS OF CREDIT RISK:
Sales and receivables from two customers are considered to be significant to
Westland and Specialty's combined results of operations and financial position.
The customers' concentrations as a percentage of the combined total sales and
receivables are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
% Net Sales 25.6% 22.5% 25.9%
% Trade Accounts Receivable 22.9% 20.6% 26.3%
</TABLE>
<PAGE> 64
Item 7(b) Pro Forma Financial Information
PRO FORMA FINANCIAL INFORMATION
On September 30, 1994 Quaker State Corporation (Quaker State) acquired all
the stock of Westland Company, Inc. (Westland) and the Specialty Oil Companies
(Specialty). The acquisition has been accounted for under the purchase method
and, accordingly, the operating results of Westland and Specialty will be
included in the consolidated financial statements from the date of acquisition.
The purchase accounting adjustments presented in the following pro forma
statements are preliminary estimates and subsequent revisions may be necessary.
The following pro forma financial statements should be read in conjunction with
the historical financial statements and other financial information of Westland
and Specialty appearing elsewhere in Quaker State's Form 8-K/A-1 and the
historical financial statements and other financial information of Quaker State
appearing in its 1993 Annual Report on Form 10-K and its quarterly report on
Form 10-Q for the quarter ended September 30, 1994. In addition, the
disposition of Quaker State's wholly owned subsidiary, Heritage Insurance
Group, Inc., sold on August 31, 1994 is reported in the September 15, 1994 8-K
filing by Quaker State Corporation.
PRO FORMA CONSOLIDATED BALANCE SHEET
No Pro Forma Consolidated Balance Sheet of Quaker State Corporation and
Subsidiaries for the nine-month period ending September 30, 1994 is included in
this current report on Form 8-K because the purchase of Westland and Specialty
is reflected in the Consolidated Balance Sheet in Quaker State Corporation's
quarterly report on Form 10-Q for the quarter ended September 30, 1994.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited Pro Forma Consolidated Statements of Operations of
Quaker State Corporation for the year ended December 31, 1993 and the nine
months ended September 30, 1994 present the separate historical results of
Quaker State and Westland/Specialty (prior to the acquisition date of September
30, 1994) and consolidated pro forma results as though such purchases had
occurred on January 1, 1993. The unaudited Pro Forma Consolidated Statements
of Operations do not purport to be indicative of the results which actually
would have occurred if the acquisition had been consummated on January 1, 1993
or which may occur in the future.
<PAGE> 65
Quaker State Corporation and Subsidiaries
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1993
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Adjusted
Quaker State Quaker State Westland
Corporation Adjustments* Corporation & Specialty Adjustments Pro Forma
------------ ------------ ------------ ----------- ----------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $628,336 $ $628,336 $303,328 $(22,078)(1) $909,586
Insurance revenues 130,830 (130,830) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
759,166 (130,830) 628,336 303,328 (22,078) 909,586
Other, net 8,292 8,292 1,267 9,559
- ---------------------------------------------------------------------------------------------------------------------------------
767,458 (130,830) 636,628 304,595 (22,078) 919,145
- ---------------------------------------------------------------------------------------------------------------------------------
COST AND EXPENSES
Cost of sales and operating costs 429,453 429,453 245,727 (22,078)(1) 653,525
423 (1)
Insurance contract and benefit costs 103,693 (103,693) -- --
Selling, general and administrative 184,115 (24,048) 160,067 46,292 206,359
Depreciation, depletion and amortization 28,758 28,758 2,970 1,800 (3) 33,528
Interest 5,287 5,287 1,936 7,223
- ---------------------------------------------------------------------------------------------------------------------------------
751,306 (127,741) 623,565 296,925 (19,855) 900,635
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 16,152 (3,089) 13,063 7,670 (2,223) 18,510
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 2,450 (286) 2,736 2,739 (4) 5,475
INCOME FROM CONTINUING OPERATIONS $ 13,702 $ (3,375) $ 10,327 $ 7,670 $ (4,962) $ 13,035
=================================================================================================================================
PER SHARE:
Income from continuing operations $.50 $.38 $.42
=================================================================================================================================
Weighted average capital and equivalent
shares outstanding 27,234 27,234 4,000 (5) 31,234
=================================================================================================================================
<FN>
*On August 31, 1994 the Company completed the sale of all the stock of it's
wholly owned subsidiary Heritage Insurance Group, Inc. as previously reported
on Form 8-K filed on September 15, 1994. This adjustments column gives effect
to the aforementioned sale in the December 31, 1993 pro forma statement of
operations.
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 66
Quaker State Corporation and Subsidiaries
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 1994
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Quaker State Westland
Corporation & Specialty Adjustments Pro Forma
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $528,097 $260,292 $(19,192)(1) $769,197
Other, net 4,682 1,288 5,970
- ----------------------------------------------------------------------------------------------------
523,779 261,580 (19,192) 775,167
- ----------------------------------------------------------------------------------------------------
COST AND EXPENSES
Cost of sales and operating costs 348,000 210,948 (19,192)(1) $540,626
870 (2)
Selling, general and administrative 141,207 36,946 178,153
Depreciation, depletion and amortization 23,238 3,326 1,350 (3) 27,916
Interest 3,580 1,593 5,173
- ----------------------------------------------------------------------------------------------------
516,025 252,815 (16,972) 751,868
- ----------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 16,754 8,765 (2,220) 23,299
- ----------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 5,465 -- 3,038 (4) 8,503
- ----------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS $ 11,289 $ 8,765 $ (5,258) $ 14,796
====================================================================================================
PER SHARE:
Income from continuing operations $.41 $.47
====================================================================================================
Weighted average shares outstanding 27,438 4,000 (5) 31,438
====================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 67
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Adjustments to the Pro Forma Consolidated Statements of Operations for
the nine month period ended September 30, 1994 and the year ended December 31,
1993 in connection with the acquisition of Westland and Specialty are presented
below:
<TABLE>
<CAPTION>
9/30/94 12/31/93
------- --------
<S> <C> <C> <C>
(1.) To eliminate sales of Quaker State
products to Westland and Specialty thereby
reducing sales and cost of sales of the
respective companies with no resulting
effect on income. 19,192 22,078
(2.) To eliminate profits on Quaker State
product inventory held by Westland and
Specialty. 870 423
(3.) To record amortization of excess of
purchase price over fair value of assets
acquired by Quaker State Corporation.
Amortization is calculated on a straight-line
basis over 40 years. Final purchase
accounting allocations may result in certain
intangible assets being amortized over a
shorter period. 1,350 1,800
(4.) To record an income tax provision for the
results of operations of Westland and Specialty
and the income tax effect of pro forma
adjustments. 3,038 2,739
(5.) To increase the number of shares issued for
acquisition of Westland. - -
</TABLE>
(6.) The purchase price of Westland and Specialty
consists of the following:
<TABLE>
<S> <C>
Cash 29,066
Quaker State Common Stock
(4,000,000 shares) 57,750
Direct expenses of purchase 2,340
-------
89,156
=======
</TABLE>
