================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): APRIL 10, 1998
HEARTLAND TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-11956 36-1487580
- --------------------------------------- -------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
547 WEST JACKSON BOULEVARD,
CHICAGO, ILLINOIS 60661
- --------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
(312) 294-0497
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
EXPLANATORY NOTE
This Amendment No. 1 on Form 8-K/A to the Current Report on Form 8-K (April 10,
1998) of Heartland Technology, Inc. (the "Registrant" or the "Company") amends
and restates in its entirety Item 7 solely to file the financial statements and
pro forma financial information required by Item 7(a) and (b), respectively.
* * *
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Solder Station One, Inc. Page
Report of Independent Auditors F-1
Balance Sheet at December 31, 1997 F-2
Statement of Operations for the year
ended December 31, 1997 F-3
Statement of Stockholders' Equity for the year
ended December 31, 1997 F-4
Statement of Cash Flows for the year
ended December 31, 1997 F-5
Notes to Financial Statements F-7
Report of Independent Auditors F-14
Balance Sheets at December 31, 1996 and 1995 F-15
Statements of Operations for the years
ended December 31, 1996 and 1995 F-16
Statements of Stockholders' Equity for the years
ended December 31, 1996 and 1995 F-17
Statements of Cash Flows for the years
ended December 31, 1996 and 1995 F-18
Notes to Financial Statements F-20
(b) Pro Forma Financial Information.
Heartland Technology, Inc. Page
Introduction F-25
Unaudited Pro Forma Condensed Consolidated
Balance Sheet at March 31, 1998 F-26
Notes F-27
Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the quarter ended
March 31, 1998 F-28
Notes F-29
Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended
December 31, 1997 F-30
Notes F-31
2
<PAGE>
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Reorganization, dated
as of April 10, 1998, by and among Solder
Station-One, Inc., Odilon Cardenas, Enedina
Cardenas, Heartland Technology, and SS
Acquisition Corporation (incorporated by
reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K dated April 24,
1998 (the "Registrant's Form 8-K")). +
99.1 Promissory Note, dated April 10, 1998, of
Solder Station-One, Inc. and SS Acquisition
Corporation, in the principal amount of
$1,700,000, and payable to Odilon Cardenas
and Enedina Cardenas (incorporated by
reference to Exhibit 99.1 to the
Registrant's Form 8-K).
99.2 Promissory Note, dated April 10, 1998, of
Solder Station-One, Inc. and SS Acquisition
Corporation, in the principal amount of
$400,000, and payable to Odilon Cardenas and
Enedina Cardenas (incorporated by reference
to Exhibit 99.2 to the Registrant's Form
8-K).
99.3 Promissory Note, dated April 10, 1998, of
Solder Station-One, Inc. and SS Acquisition
Corporation, in the principal amount of
$175,000, and payable to Corporate Finance
Associates (incorporated by reference to
Exhibit 99.3 to the Registrant's Form 8-K).
99.4 Continuing Guaranty, dated as of April 10,
1998, by Heartland Technology, Inc. in favor
of Odilon Cardenas and Enedina Cardenas
(incorporated by reference to Exhibit 99.4
to the Registrant's Form 8-K).
99.5 Loan and Security Agreement, dated as of
April 10, 1998, by and between Solder
Station-One, Inc., SS Acquisition
Corporation, and LaSalle National Bank
(incorporated by reference to Exhibit 99.5
to the Registrant's Form 8-K).
99.6 Guaranty, dated as of April 10, 1998, from
Heartland Technology, Inc. to LaSalle
National Bank (incorporated by reference to
Exhibit 99.6 to the Registrant's Form 8-K).
+ Certain schedules and similar attachments have been
omitted. The Registrant agrees to furnish supplementally a
copy of any omitted schedule or attachment to the
Commission upon request.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
Heartland Technology, Inc.
(Registrant)
Date: June 24, 1998 By: /s/ Leon F. Fiorentino
-----------------------
Name: Leon F. Fiorentino
Title: Vice President
4
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Solder Station One, Inc.
We have audited the accompanying balance sheet of Solder Station One, Inc. (the
"Company") as of December 31, 1997, and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Solder Station One, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Newport Beach, California
February 12, 1998
F-1
<PAGE>
SOLDER STATION ONE, INC.
Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
1997
------------------
<S> <C>
ASSETS
Current:
Cash and cash equivalents $1,145,127
Trade accounts receivable, less allowance for returns
and doubtful accounts
of $53,901 1,236,989
Non-trade accounts receivable 3,860
Inventories 146,947
Prepaid expenses 40,677
------------------
Total current assets 2,573,600
Property and equipment 2,136,085
Deposits and other assets 27,228
------------------
Total assets $4,736,913
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $236,456
Accrued liabilities 260,336
Current portion of capitalized lease obligations 11,226
Current installments of long-term debt 110,833
------------------
Total current liabilities 618,851
Capitalized lease obligations, excluding current portion 13,900
Long-term debt, excluding current installments 285,889
------------------
Total liabilities 918,640
------------------
Stockholders' equity:
Common stock, no par value; 1,000,000 shares authorized,
127,786 issued and outstanding 63,893
Additional paid-in capital 158,873
Retained earnings 3,595,507
------------------
Total stockholders' equity 3,818,273
------------------
Total liabilities and stockholders' equity $4,736,913
==================
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
SOLDER STATION ONE, INC.
Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
1997
--------------------
<S> <C>
Net sales $ 8,082,507
Cost of sales 4,737,042
--------------------
Gross profit 3,345,465
Selling, general and administrative expenses 1,533,259
--------------------
Income from operations 1,812,206
Interest expense (27,399)
Other income 87,538
--------------------
Income before income taxes 1,872,345
Provision for income taxes 800
--------------------
Net income $ 1,871,545
====================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SOLDER STATION ONE, INC.
Statement of Stockholders' Equity
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained
--------------------------------
Shares Amount Capital Earnings Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE -
December 31,
1996 127,786 63,893 158,873 4,149,622 4,372,388
Net income - - - 1,871,545 1,871,545
Shareholders'
distributions - - - (2,425,660) (2,425,660)
-----------------------------------------------------------------------------------------------
BALANCE -
December 31,
1997 127,786 $ 63,893 $ 158,873 $ 3,595,507 $ 3,818,273
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SOLDER STATION ONE, INC.
Statement of Cash Flows
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
1997
------------------------
<S> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 1,871,545
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 431,126
Gain on disposal of property and equipment (1,332)
Services provided to supplier (27,657)
Decrease (increase) in:
Trade accounts receivable 29,053
Non-trade accounts receivable 25,381
Inventories (52,157)
Prepaid expenses (2,540)
Increase (decrease) in:
Accounts payable (92,866)
Accrued liabilities 113,267
------------------------
Net cash provided by operating activities 2,293,820
------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from marketable securities 1,533,162
Acquisition of equipment, furniture and fixtures (954,627)
Proceeds from disposal of equipment, furniture and fixtures 1,550
------------------------
Net cash provided by investing activities 580,085
------------------------
</TABLE>
(continued)
F-5
<PAGE>
SOLDER STATION ONE, INC.
Statement of Cash Flows (continued)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
1997
---------------------
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt $ (44,162)
Principal payment on capitalized financing leases (1,921)
Capitalized financing leases 27,047
Shareholders' distributions (2,425,660)
---------------------
Net cash used in financing activities (2,444,696)
---------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 429,209
CASH AND CASH EQUIVALENTS - beginning
of year 715,918
---------------------
CASH AND CASH EQUIVALENTS - end of year $ 1,145,127
=====================
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 508
Income taxes 800
Noncash transactions:
Reductions to note payable based on noncash consideration (27,657)
Interest on note payable based on noncash consideration (26,891)
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Description
Solder Station One, Inc. (the "Company") was incorporated in 1979. The Company
provides solder masking and solder leveling services to printed circuit board
manufacturers.
Cash and Cash Equivalents
The Company considers all liquid investments with maturities of three months or
less at date of purchase to be cash equivalents.
Inventories
Inventories consist of supplies used in the solder masking and solder leveling
services provided by the Company and are stated at the lower of cost (first-in,
first-out) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed on the straight-line basis over the estimated useful lives
of the individual assets, generally three to seven years.
F-7
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
The Company sells its services to customers in the high technology industry and
primarily located in Southern California. The Company performs ongoing credit
evaluations of its customers and does not require collateral for its
receivables. However, the Company maintains an allowance for potential credit
losses. As of December 31, 1997, the gross accounts receivable balance included
amounts from three customers which individually represented approximately 19%,
7% and 5% of the total accounts receivable balance. Sale to these customers
totaled approximately 7%, 13% and 12% of gross sales for the year ended December
31, 1997.
The Company relies on three key vendors to supply its primary raw material
needs. Although there are a limited number of manufacturers capable of supplying
these needs, the Company believes that other suppliers could provide for the
Company's needs on comparable terms.
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
The Company applies provisions of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of (SFAS 121). SFAS 121 requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from these estimates.
F-8
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company's shareholders have elected to be taxed for Federal income tax
purposes as a Subchapter S Corporation under the Internal Revenue Code. As a
result, the net income and any tax credits of the Company are included in the
personal income tax returns of the Company's shareholders. Accordingly, no
provision has been made of Federal income taxes in the accompanying financial
statements. For state tax purposes, the Company is subject to an S Corporation
tax of 1.5% of pretax earnings. The Company's S Corporation taxes have been
substantially offset by California Enterprise Zone Tax Credit and the
manufacturers credit.
No provision has been made in the accompanying financial statements for built-in
gains taxes which, if any, might be due in the event of the sale of any of the
Company's assets.
Cost of Sales
Certain materials used in the Company's processing are regularly recovered. The
Company receives either cash for the recovered materials or discounts on
purchases of raw materials. Such savings are treated as a reduction of cost of
sales.
2. OWNERSHIP OF COMPANY
The Company's sole stockholders are Mr. and Mrs. Odilon Cardenas. They are the
only members of the Board of Directors and participate in the day-to-day
operation and management of the Company.
F-9
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements (Continued)
3. PROPERTY AND EQUIPMENT
A summary of property and equipment at cost, are as follows:
<TABLE>
<CAPTION>
1997
-----------------------
<S> <C>
Machinery and equipment $ 6,340,133
Office furniture and fixtures 112,622
Vehicles 47,445
Leasehold improvements 780,034
-----------------------
7,280,234
Less accumulated depreciation and amortization 5,144,149
-----------------------
Property and equipment, net $ 2,136,085
=======================
4. LONG-TERM DEBT
Long-term debt consists of the following:
1997
-----------------------
Note to equipment supplier payable in
monthly principal installments of
$9,336 plus interest, bearing interest
at 6.31%, due February 1, 2002 secured by
equipment of the Company $ 396,722
Less current installments 110,833
-----------------------
Long-term debt, excluding current installments $ 285,889
=======================
</TABLE>
Maturities of long-term debt at December 31, 1997 are as follows:
1999 $ 110,833
1998 110,833
2000 110,833
2001 64,223
--------------
$ 396,722
==============
F-10
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements (Continued)
4. LONG-TERM DEBT (continued)
The terms of the note payable to the equipment supplier provide for reductions
to the outstanding balance based on services provided to the supplier by the
Company and certain purchases made by the Company from the supplier. A dispute
has arisen with the supplier concerning the formula for allowing future
reductions to the total outstanding balance at December 31, 1997.
5. RELATED PARTY TRANSACTIONS
The Company's stockholders own two buildings which the Company leases for its
Santa Ana, California manufacturing facilities and administrative offices. Rent
paid on these buildings totaled to approximately $222,650 for 1997.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its manufacturing facilities and administrative offices under
noncancelable operating leases. The leases typically require the Company to pay
taxes, insurance and certain other operating expenses applicable to the leased
property. In the normal course of business, expiring leases will be renewed or
replaced with new leases. Total rental expense on operating leases was $286,826
for 1997.
Future minimum lease commitments under all noncancelable leases with initial or
remaining terms of one year or more consisted of the following at December 31,
1997:
1998 $ 222,456
1999 231,354
2000 240,608
2001 250,233
-----------------
Total minimum lease payments $ 944,651
=================
F-11
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements (Continued)
6. COMMITMENTS AND CONTINGENCIES (continued)
Capital Lease Obligations
The Company leases certain equipment under two- to four-year capital leases
expiring in October 2001. The net book value of the assets recorded under these
capital leases is $28,918 as of December 31, 1997, including accumulated
depreciation of $1,300 as of December 31, 1997, and is included in property and
equipment in the financial statements. Total future minimum lease payments under
these capital leases and the present value of the minimum lease payments as of
December 31, 1997 consist of the following:
For the years ending December 31:
1998 $ 11,226
1999 9,552
2000 4,530
2001 3,774
-----------------
29,082
Less amount representing interest 3,956
-----------------
Present value of minimum lease payments 25,126
Less current portion 11,226
-----------------
$ 13,900
=================
7. IMPACT OF YEAR 2000 (UNAUDITED)
Certain older computer programs were written using two digits rather than four
to define the applicable year. As a result, those computer programs have
time-sensitive software that recognize a date using "00" as the year 1900 rather
than the year 2000 (the "Year 2000 Issue"). This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in other normal
business activities.
F-12
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements (Continued)
7. IMPACT OF YEAR 2000 (UNAUDITED) (continued)
The Company has completed an initial assessment of the Year 2000 Issue and will
have to modify or replace portions of its software so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
The Company believes that these modifications to existing software and
conversions are estimated to be completed by December 31, 1998. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have an impact on the operations of the Company. This
timeline is based on the Company's best estimates, and actual results could
differ materially from those anticipated. In addition, there is no guarantee
that the systems of other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the Company.
8. SUBSEQUENT EVENTS
The owners of the Company have entered into a non-binding letter of intent to
sell their interest in the Company.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Solder Station One, Inc.:
We have audited the accompanying balance sheets of Solder Station One, Inc. As
of December 31, 1996 and 1995 and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the finanial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Solder Station One, Inc. As of
December 31, 1996 and 1995 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
November 11, 1997
F-14
<PAGE>
SOLDER STATION ONE, INC.
Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------------- --------------------
Assets
<S> <C> <C>
Current:
Cash and cash equivalents $ 715,918 533,141
Marketable securities 1,533,162 969,095
Trade accounts receivable, less allowance for returns and
doubtful accounts of $45,938 in 1996 and $47,188 in 1995 1,266,042 1,495,127
Non-trade accounts receivable 29,241 46,571
Inventories 94,790 159,231
Prepaid expenses 38,137 34,309
-------------- --------------
Total current assets 3,677,290 3,237,474
Property and equipment 1,612,802 1,719,719
Deposits and other assets 27,228 27,228
-------------- --------------
Total assets $ 5,317,320 4,984,421
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 329,322 589,158
Accrued liabilities 147,069 158,385
Current installments of long-term debt 110,833 130,680
-------------- --------------------
Total current liabilities 587,224 878,223
Long-term debt, excluding current installments 357,708 233,814
-------------- --------------------
Total liabilities 944,932 1,112,037
-------------- --------------------
Stockholders' equity:
Common stock, no par value; 1,000,000 shares authorized,
127,786 issued and outstanding 63,893 63,893
Additional paid-in capital 158,873 158,873
Retained earnings 4,149,622 3,649,618
-------------- --------------------
Total stockholders' equity 4,372,388 3,872,384
-------------- --------------------
Total liabilities and stockholders' equity $ 5,317,320 4,984,421
============== ====================
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE>
SOLDER STATION ONE, INC.
Statements of Operations
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Net sales $ 7,729,038 6,896,146
Cost of sales 4,822,015 4,524,997
-------------- --------------
Gross profit 2,907,023 2,371,149
Selling, general and administrative expenses 1,605,827 1,459,858
-------------- --------------
Income from operations 1,301,196 911,291
Interest expense 47,306 4,490
Other income (expense) 101,009 87,048
-------------- --------------
Income before income taxes 1,354,899 993,849
Provision for income taxes 800 800
-------------- --------------
Net income $ 1,354,099 993,049
============== ==============
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
SOLDER STATION ONE, INC.
Statements of Stockholders' Equity
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
COMMON STOCK CAPITAL EARNINGS EQUITY
------------------------ --------- ----------- --------------
SHARES AMOUNT
--------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 127,786 $ 63,893 158,873 3,075,553 3,298,319
Net earnings ___ ___ ___ 993,049 993,049
Shareholders' distributions ___ ___ ___ (418,984) (418,984)
--------- --------- --------- ----------- --------------
Balance at December 31, 1995 127,786 63,893 158,873 3,649,618 3,872,384
Net earnings ___ ___ ___ 1,354,099 1,354,099
Shareholders' distributions ___ ___ ___ (854,095) (854,095)
--------- --------- --------- ----------- --------------
Balance at December 31, 1996 127,786 $ 63,893 158,873 4,149,622 4,372,388
========= ========= ========= =========== ==============
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
SOLDER STATION ONE, INC.
Statements of Cash Flows
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,354,099 993,049
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 426,586 355,845
Gain on disposal of fixed assets (18,075) (1,099)
Loss in marketable securities 11,418 19,413
Services provided to supplier (61,685) --
Decrease (increase) in:
Trade accounts receivable 229,085 (359,010)
Non-trade accounts receivable 17,330 (24,895)
Inventories 64,441 (107,478)
Prepaid expenses (3,828) 7,037
Deposits and other assets -- 2,446
Increase (decrease) in:
Accounts payable (259,836) 290,179
Accrued liabilities (11,316) 45,465
------------------- --------------------
Net cash provided by operating activities 1,748,219 1,220,952
------------------- --------------------
Cash flows from investing activities:
Investments in marketable securities (575,485) (57,082)
Acquisition of equipment, furniture and fixtures (155,417) (961,552)
Proceeds from disposal of equipment, furniture and fixtures 39,402 1,501
------------------- --------------------
Net cash used in investing activities (691,500) (1,017,133)
------------------- --------------------
</TABLE>
(Continued)
F-18
<PAGE>
SOLDER STATION ONE, INC.
Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
Cash flows from financing activities:
Repayment of long-term debt $ (19,847) (23,810)
Shareholders' distributions (854,095) (418,984)
------------------- -------------------
Net cash used in financing activities (873,942) (442,794)
------------------- -------------------
Net increase (decrease) in cash and cash equivalents 182,777 (238,975)
Cash and cash equivalents at beginning of year 533,141 772,116
------------------- -------------------
Cash and cash equivalents at end of year $ 715,918 533,141
=================== ===================
Supplemental disclosures:
Cash paid during the year for:
Interest $ 1,718 2,001
Income taxes 800 800
Noncash transactions:
Equipment purchases financed by supplier 185,579 344,647
Reductions to note payable based on noncash consideration (61,685) --
=================== ===================
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements, Continued
SOLDER STATION ONE, INC.
Notes to Financial Statements
December 31, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY DESCRIPTION
Solder Station One, Inc. (the Company) was incorporated in 1979. The
Company provides solder masking and solder leveling services to printed
circuit board manufacturers.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with maturities of three
months or less at date of purchase to be cash equivalents.
MARKETABLE SECURITIES
Investments in securities which do not meet the definition of cash
equivalents are classified as marketable securities. Marketable
securities consist of U.S. and state government agency issues. Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115), was adopted by
the Company at the beginning of Fiscal 1995. SFAS 115 requires that
investments be classified as "held to maturity," "available for sale" or
"trading securities." The statement defines investments in securities as
"held to maturity" based upon a positive intent and ability to hold
those securities. Securities that are bought and held principally for
the purpose of selling them in the near term are classified as "trading
securities" and would be reported at fair value, with unrealized gains
and losses included in operations. Debt and equity securities not
classified as "held to maturity" or "trading securities" are classified
as "available for sale" and would be recorded at fair value, with
unrealized gains and losses excluded from operations and reported as a
separate component of equity. At December 31, 1996 and 1995, the Company
classified all of its investments in securities which did not meet the
definition of cash equivalents as trading securities.
INVENTORIES
Inventories consist of supplies used in the solder masking and solder
leveling services provided by the Company and are stated at the lower of
cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is computed on the straight-line basis over the estimated
useful lives of the individual assets, generally three to seven years.
CONCENTRATIONS OF CREDIT RISK
The Company sells its services to customers in the high technology
industry and primarily located in Southern California. The Company
performs ongoing credit evaluations of its customers and does not
require collateral for its receivables. However, the Company maintains
an allowance for
F-20
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements, Continued
potential credit losses. As of December 31, 1996, the gross accounts
receivable balance included amounts from three customers which
individually represented approximately 23%, 12% and 10% of the total
accounts receivable balance. Sales to these customers totaled
approximately 19%, 11% and 10% of gross sales for the year ended
December 31, 1996.
The Company relies on three key vendors to supply its primary raw
material needs. Although there are a limited number of manufacturers
capable of supplying these needs, the Company believes that other
suppliers could provide for the Company's needs on comparable terms.
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF
The Company applies provisions of Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from these estimates.
INCOME TAXES
The Company's shareholders have elected to be taxed for Federal income
tax purposes as a Subchapter S Corporation under the Internal Revenue
Code. As a result, the net income and any tax credits of the Company are
included in the personal income tax returns of the Company's
shareholders. Accordingly, no provision has been made for Federal income
taxes in the accompanying financial statements. For state tax purposes,
the Company is subject to an S Corporation tax of 1.5% of pretax
earnings. The Company's S Corporation taxes have been substantially
offset by California Enterprise Zone Tax Credit and the manufacturers
credit. No provision has been made in the accompanying financial
statements for built-in gains taxes which, if any, might be due in the
event of the sale of any of the Company's assets.
COST OF SALES
Certain materials used in the Company's processing are regularly
recovered. The Company receives either cash for the recovered materials
or discounts on purchases of raw materials. Such savings are treated as
a reduction of cost of sales.
F-21
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements, Continued
(2) OWNERSHIP OF COMPANY
The Company's sole stockholders are Mr. and Mrs. Odilon Cardenas. They
are the only members of the Board of Directors and participate in the
day-to-day operation and management of the Company.
(3) MARKETABLE SECURITIES
The carrying values and estimated market values of investment securities
held as trading securities are summarized as follows:
U.S. STATE AND LOCAL GOVERNMENT AGENCY ISSUE
--------------------------------------------
Gross
unrealized
Cost Fair value loss
------------- ---------------- --------------
As of December 31, 1995 $ 987,080 969,095 17,985
As of December 31, 1996 1,562,565 1,533,162 29,403
============= ================ ==============
Maturities of the trading securities are summarized as follows:
YEAR ENDED DECEMBER 31
--------------------------------------
1996 1995
-------------------- -----------------
Within 1 year $ 300,763 407,424
After 1 year through 5 years 649,236 352,239
After 5 years through 10 years 277,146 --
After 10 years 335,420 227,417
-------------------- -----------------
$ 1,562,565 987,080
==================== =================
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment at cost, are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
<S> <C> <C>
Machinery and equipment $ 5,425,794 5,950,793
Office furniture and fixtures 102,569 120,641
Vehicles 37,875 106,334
Leasehold improvements 767,867 778,887
-------------------- -------------------
Subtotal 6,334,105 6,956,655
Less accumulated depreciation
and amortization 4,721,303 5,236,936
-------------------- -------------------
Property and equipment, net $ 1,612,802 1,719,719
==================== ===================
</TABLE>
F-22
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements, Continued
(5) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
<S> <C> <C>
Note to equipment supplier payable in monthly principal
installments of $9,336 plus interest, bearing interest
at 6.31%, due February 1, 2002 secured by
equipment of the Company $ 468,541 344,647
Note payable to customer in monthly installments of
$1,984, paid in 1996, secured by equipment of the
Company -- 19,847
-------------------- -------------------
Total long-term debt 468,541 364,494
Less current installments 110,833 130,680
-------------------- -------------------
Long-term debt, excluding current
installments $ 357,708 233,814
==================== ===================
</TABLE>
Maturities of long-term debt at December 31, 1996 are as follows:
1997 $ 110,833
1998 110,833
1999 110,833
2000 110,833
2001 25,209
-------------------
$ 468,541
===================
The terms of the note payable to the equipment supplier provide for
reductions to the outstanding balance based on services provided to
the supplier by the Company and certain purchases made by the
Company from the supplier. A dispute has arisen with the supplier
concerning the formula for allowing future reductions to the total
outstanding balance at December 31, 1996.
(6) RELATED PARTY TRANSACTIONS
The Company's stockholders own two buildings which the Company
leases for its Santa Ana, California manufacturing facilities and
administrative offices. Rent paid on these buildings totaled to
approximately $212,328 and $202,069 for 1996 and 1995, respectively.
F-23
<PAGE>
SOLDER STATION ONE, INC.
Notes to Financial Statements, Continued
(7) COMMITMENTS AND CONTINGENCIES
The Company leases its manufacturing facilities and administrative
offices under noncancelable operating leases. The leases typically
require the Company to pay taxes, insurance and certain other
operating expenses applicable to the leased property. In the normal
course of business, expiring leases will be renewed or replaced with
new leases. Total rental expense on operating leases was $294,591
and $302,221 for 1996 and 1995, respectively.
Future minimum lease commitments under all noncancelable leases with
initial or remaining terms of one year or more consisted of the
following at December 31, 1996:
1997 $ 17,825
1998 18,538
1999 19,280
2000 20,051
2001 20,853
Thereafter 21,687
--------------------
Total minimum lease payments $ 118,234
====================
(8) SUBSEQUENT EVENTS
The owners of the Company have entered into a letter of intent to
sell their interest in the Company.
F-24
<PAGE>
CONDENSED PRO FORMA FINANCIAL INFORMATION FOR THE COMPANY AS OF
MARCH 31, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
QUARTER ENDED MARCH 31, 1998
The following unaudited Condensed Pro Forma Balance Sheet and Statements of
Operations (collectively, the "Pro Forma Financial Statements") are based on
historical financial statements of the Company and Solder Station One, Inc.
("Solder") after giving effect to the Company's purchase of all Solder
outstanding stock.
The Pro Forma Financial Statements were prepared as if the transaction has
occurred as of January 1, 1997 and as of January 1, 1998 for Statements of
Operations purposes and as of March 31, 1998 for Balance Sheet purposes. The Pro
Forma Financial Statements are not necessarily indicative of the future
financial position or future results of operations of the Company after the
purchase of Solder stock, or of the financial position or results of operations
of the Company had the purchase of Solder stock occurred on the dates indicted
above or been in effect for the period presented.
The Pro Forma Adjustments are based upon available information and upon certain
assumptions the Company believes are reasonable. The Pro Forma Financial
Statements and accompanying notes should be read in conjunction with, and are
qualified in their entirety by, the historical financial statements and other
financial information pertaining to the Company and Solder, and related notes
thereto, included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 and historical financial statements and other financial
information pertaining to Solder included in this Form 8-K/A and in previously
filed Form 8-K.
F-25
<PAGE>
Heartland Technology, Inc. and Solder Station One, Inc.
Pro Forma Consolidated Financial Statements
<TABLE>
<CAPTION>
Balance Sheet as of March 31, 1998
(Unaudited)
(In Thousands)
Heartland Solder Pro
Technology Station One Forma Pro
Inc. A Inc. A Adjustments Forma
---------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $2,318 $1,324 ($2,824) B $ 818
Accounts receivable 3,601 1,179 4,780
Due from affiliate 531 531
Inventories 2,052 129 2,181
Prepaid expenses 77 73 150
--------- --------- ----------- ---------
Total current assets 8,579 2,705 (2,824) 8,460
Property and equipment, net 4,862 2,051 6,913
Other assets
Goodwill, net 8,774 4,217 E 12,991
Investment in partnerships 8,124 8,124
All other 760 27 (350) F 437
---------- --------- -------- ----------
Total other assets 17,658 27 3,867 21,552
-------- --------- -------- --------
Total Assets $31,099 $4,783 $1,043 $36,925
======= ====== ====== =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 1,909 $ 378 $ $ 2,287
Accrued expenses & other liabilities 1,216 95 1,311
Line of credit 1,023 1,023
Current portion of long term debt 1,601 122 1,719 C 3,442
Allowance for claims and liabilities 1,279 1,279
-------- ----------- ----------- ---------
Total current liabilities 7,028 595 1,719 9,342
Long term obligations
Capitalized lease obligations 11 11
Long term debt, less current portion 1,750 281 3,220 C 5,251
Notes payable 3,000 3,000
-------- ----------- ----------- ---------
Total long term obligations 4,750 292 3,220 8,262
Stockholders' equity 19,321 3,896 (3,896) D 19,321
-------- ------- ------- --------
Total Liabilities and Stockholders' Equity $31,099 $4,783 $1,043 $36,925
======= ====== ====== =======
</TABLE>
F-26
<PAGE>
Heartland Technology, Inc. and Solder Station One, Inc.
Pro Forma Consolidated Financial Statements
Notes to Balance Sheet as of March 31, 1998
(Unaudited)
(In Thousands)
A. Represents the historical financial position at March 31, 1998.
B. To record $1,500 cash paid for Solder stock and adjust for Solder cash
transferred to owner.
C. To record liability for bank debt and notes issued.
Due Due
Within After
One Year One Year Total
-------- -------- -----
Note payable $ 175 $ 175
Revolver 964 964
Three year term loan 400 $ 800 1,200
Five year acquisition loan 180 720 900
Notes payable 1,700 1,700
------ ------- -------
Totals $1,719 $3,220 $4,939
====== ====== ======
HTI issued a $400 note payable which will be paid if, and only if,
Solder attains certain operating income targets. The $400 note is not
included above. The $175 short term note is non-interest bearing.
D. To eliminate Solder equity in consolidation.
E. To record goodwill
Value of Solder assets $3,459
Less: liabilities assumed 887
-------
Net assets 2,572
Purchase price 6,789
-------
Goodwill $4,217
=======
F. To record the transfer of direct acquisition costs to goodwill and
recognition of financing charge.
F-27
<PAGE>
Heartland Technology, Inc. and Solder Station One, Inc.
Pro Forma Consolidated Financial Statements
Statement of Operations for the Quarter Ended March 31, 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Heartland Solder Pro
Technology Station One Forma Pro
Inc. A Inc. A Adjustments Forma
---------- ----------- ----------- -------
<S> <C> <C> <C>
Net sales $5,242 $1,645 $ $6,887
Cost of Sales 3,801 987 4,788
------- -------- ------ -------
Gross profit 1,441 658 0 2,099
Other income
Interest income 16 (16) B 0
Management fee from affiliate 106 106
Income from investment in partmerships (28) (28)
Other income 11 11
------------ --------- ------ ---------
Total other income 94 11 (16) 89
Other expenses
Selling, general and administrative expenses 1,633 591 26 D 2,250
Interest expense 142 0 111 C 253
Special compensation 188 188
--------- ----------- ------ --------
Total other expenses 1,963 591 137 2,691
Income before taxes (428) 78 (153) (503)
Provision for income taxes (190) 0 (33) E (223)
-------- --------- ----- ---------
Net loss ($ 238) $ 78 ($120) ($ 280)
======= ======= ===== ======
Net loss per share - basic and diluted ($ 0.14) ($0.17)
======= ======
Weighted average number of common shares 1,671 1,671
======= ======
</TABLE>
F-28
<PAGE>
Heartland Technology, Inc. and Solder Station One, Inc.
Pro Forma Consolidated Financial Statements
Notes to Statement of Operations for the Quarter Ended March 31, 1998
(Unaudited)
(In thousands, except per share amounts)
A. Represents historical results of operations for the quarter ended
March 31, 1998.
B. To reduce investment income in consideration of investments liquidated
to accomplish the purchase.
C. To record interest expense on the additional debt required to
accomplish the purchase.
Average Quarterly
Out- Interest Interest
standing Rate Expense
-------- --------- --------
Revolver $889 2.1% $ 19
Three year term loan 1,150 2.5% 29
Five year term loan 878 2.4% 21
Seller notes 2,100 2.0% 42
----
$ 111
====
Interest is accrued in 1998 on $400 note payable contingent amount.
D. To record 40 year amortization of $4,217 goodwill arising in the
purchase, $105 per year, $26 per quarter.
E. To reflect the consolidated income tax provision for the Company.
F-29
<PAGE>
Heartland Technology, Inc. and Solder Station One, Inc.
Pro Forma Consolidated Financial Statements
Statement of Operations for the Year Ended December 31, 1997
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Heartland Solder Pro
Technology Station One Forma Pro
Inc. A Inc. A Adjustments Forma
----------- ------------ ----------- -----
<S> <C> <C> <C>
Net sales $15,093 $8,082 $ $23,175
Cost of Sales 9,684 4,737 14,421
--------- ------- --------- -------
Gross profit 5,409 3,345 0 8,754
Other income
Interest income 272 88 (178) B 182
Management fee from affiliate 425 425
Income from investment in partnerships 587 587
Other income 28 28
---------- ------------ ---------- ----------
Total other income 1,312 88 (178) 1,222
Other expenses
Selling, general and administrative expenses 3,119 1,533 105 D 4,757
Interest expense 416 27 401 C 844
Special compensation 438 438
--------- ------------ ------------ ---------
Total other expenses 3,973 1,560 506 6,039
Income before taxes 2,748 1,873 (684) 3,937
Provision for income taxes 773 1 522 E 1,296
--------- ----------- ---------- --------
Net income $ 1,975 $1,872 ($1,206) $ 2,641
======= ====== ======= =======
Net income per share - basic and diluted $1.18 $1.58
===== =====
Weighted average number of common shares
outstanding 1,671 1,671
===== =====
</TABLE>
F-30
<PAGE>
Heartland Technology, Inc. and Solder Station One, Inc.
Pro Forma Consolidated Financial Statements
Notes to Statement of Operations for the Year Ended December 31, 1997
(Unaudited)
(In thousands, except per share amounts)
A. Represents historical results of operations for the year ended
December 31, 1997.
B. To reduce investment income in consideration of investments liquidated
to accomplish the purchase.
Investments liquidated by HTI $1,500
Approximate 1997 average investment return 6%
--------
Reduction of 1997 HTI interest income 90
Reduction of Solder 1997 interest income 88
--------
$ 178
--------
C. To record interest expense on the additional debt required to
accomplish the purchase.
Average Annual
Out- Interest Interest
standing Rate Expense
-------- -------- --------
Revolver $664 8.5% $ 56
Three year term loan 1,000 10.0% 100
Five year acquisition loan 810 9.5% 77
Seller notes 2,100 8.0% 168
-----
$401
-----
Interest is accrued in 1998 on $400 note payable contingent amount.
D. To record 40 year amortization of $4,217 goodwill arising in the
purchase, $105 per year.
E. To reflect the consolidated income tax provision for the Company.
F-31
NYFS08...:\65\63765\0003\306\8-KA410F.WPD
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- -------------- -----------------------------------------------------
2.1 Agreement and Plan of Reorganization, dated as of
April 10, 1998, by and among Solder Station-One,
Inc., Odilon Cardenas, Enedina Cardenas, Heartland
Technology, and SS Acquisition Corporation
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated April
24, 1998 (the "Registrant's Form 8-K")). +
99.1 Promissory Note, dated April 10, 1998, of Solder
Station-One, Inc. and SS Acquisition Corporation, in
the principal amount of $1,700,000, and payable to
Odilon Cardenas and Enedina Cardenas (incorporated by
reference to Exhibit 99.1 to the Registrant's Form
8-K).
99.2 Promissory Note, dated April 10, 1998, of Solder
Station-One, Inc. and SS Acquisition Corporation, in
the principal amount of $400,000, and payable to
Odilon Cardenas and Enedina Cardenas (incorporated by
reference to Exhibit 99.2 to the Registrant's Form
8-K)
99.3 Promissory Note, dated April 10, 1998, of Solder
Station-One, Inc. and SS Acquisition Corporation, in
the principal amount of $175,000, and payable to
Corporate Finance Associates (incorporated by
reference to Exhibit 99.3 to the Registrant's Form
8-K).
99.4 Continuing Guaranty, dated as of April 10, 1998, by
Heartland Technology, Inc. in favor of Odilon
Cardenas and Enedina Cardenas (incorporated by
reference to Exhibit 99.4 to the Registrant's Form
8-K).
99.5 Loan and Security Agreement, dated as of April 10,
1998, by and between Solder Station-One, Inc., SS
Acquisition Corporation, and LaSalle National Bank
(incorporated by reference to Exhibit 99.5 to the
Registrant's Form 8-K).
99.6 Guaranty, dated as of April 10, 1998, from Heartland
Technology, Inc. to LaSalle National Bank
(incorporated by reference to Exhibit 99.6 to the
Registrant's Form 8-K).
+ Certain schedules and similar attachments have been omitted.
The Registrant agrees to furnish supplementally a copy of any
omitted schedule or attachment to the Commission upon request.
