<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1 to Current Report
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934.
Date of Report: April 25, 1996
CEDAR GROUP, INC.
Delaware 1-10372 23-2577796
State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization Identification)
500 Rue Notre Dame
Lachine, Quebec H9S 2B2
Registrant's Telephone Number: (514) 634-3550
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The undersigned Registrant hereby amends the following portion of its
Current report on Form 8-K dated April 25, 1996 and filed on May 10, 1996 as
set forth below:
1. Item 7 is hereby amended and restated as follows:
Item 7 Financial Statements and Exhibits
(a) Financial statements of business acquired Filed as part
of this Amendment for Groupe MIL Inc. are the financial
statements for the three years ending December 31, 1995, and
unaudited financial statements for the three month period
ended March 31, 1996 and 1995.
(b) Unaudited consolidated pro forma statements of operations for
the year ended September 30, 1995 and the six month period
ended March 31, 1996.
(c) Exhibits (referenced to Item 501 of Registration S-K)
None
2
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
CEDAR GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
INTRODUCTION
The unaudited pro forma consolidated statements of operations for the year
ended September 30, 1995 and six months ended March 31, 1996 are based on the
historical statements of operations of the Company for the year ended September
30, 1995 and the six months ended March 31, 1996, consolidated with the
financial information of the acquired businesses and adjusted for the accounting
for such acquisitions and other transactions as follows;
HISTORICAL FINANCIAL INFORMATION
The historical financial information includes financial information for;
(i) the Company, which has been derived from the audited financial
statements of the Company for the year ended September 30, 1995 and unaudited
interim financial statements for the six months ended March 31, 1996; (ii) the
Groupe MIL Inc. (MIL), which has been derived from the audited financial for the
year ended December 31, 1995, unaudited financial statements for the three
months ended March 31, 1996 and other financial information prepared in
accordance with Canadian GAAP and reconciled to US GAAP, appearing elsewhere in
the registration statement, except as to the other financial information (iii)
McConnell Dowell Corporation Limited (MDC), which has been derived from audited
financial statements for the year ended June 30, 1995, unaudited financial
statements for the nine months ended March 31, 1996 and other financial
information prepared in accordance with Australian GAAP and reconciled to
US GAAP (iv) Steen Contractors Limited (Steen), audited financial statements for
the nine months ended September 30, 1995 and unaudited six months ended March
31, 1996, prepared in accordance with Canadian GAAP and reconciled to US GAAP.
The financial information of the acquired businesses have been translated into
US dollars using the average foreign exchange rates for the year ended September
30, 1995 and the six months ended March 31, 1996.
ADJUSTMENTS
The historical financial information has been adjusted in arriving at the
unaudited pro forma consolidated statement of operations to reflect the
following transactions:
1. The acquisitions, by the Company, of a controlling interest in
McConnell Dowell Corporation Limited, Steen Contractors Limited and the
Groupe MIL Inc., each effective prior to March 31, 1996.
2. The repurchase by Steen, effective March 31, 1996, of the 25% of the
common shares not owned by the Company, thereby increasing the Company's
ownership interest to 100%.
The unaudited pro forma consolidated statements of operations and notes
thereto should be read in conjunction with the historical audited annual and
unaudited interim financial statements, including the notes thereto of the
Company and MIL appearing elsewhere in this form 8K/A.
The unaudited statements of operations are not necessarily indicative of
the results of operations that would have resulted if the various acquisitions
and other transactions had actually taken place at an earlier date.
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CEDAR GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
IN THOUSANDS OF US DOLLARS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY MIL
AUDITED AUDITED PRO FORMA ADJUSTMENTS PRO FORMA
---------- -------- -------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.............................. $ 155,750 $ 33,606 $ -- $215,709b(i) $ -- $ -- $ 405,065
Cost of sales...................... 139,407 30,264 (1,771)a(i) 192,371b(i) 360,271
Selling, general and administrative
expenses.......................... 15,433 16,379 (2,720)a(ii) 13,928b(i) 375b(ii) -- 16,379
---------- -------- -------- -------- -------- --------- ----------
154,840 46,643 (4,491) 206,299 375 -- 403,666
---------- -------- -------- -------- -------- --------- ----------
Profit from operations............. 910 (13,037) (4,491) 9,410 (375) -- 1,399
Interest income (expense), net..... (406) (2,105) 2,724a(iii) 22b(i) (6,000)b(iii, (79)c (5,844)
iv)
Income from operations of joint
venture........................... 2,165 -- -- -- -- 2,165
Other income....................... 1,236 -- -- 2,642b(i) -- -- 3,878
---------- -------- -------- -------- -------- --------- ----------
Income (loss) before taxes and
minority interest................. 3,905 (15,142) 7,215 12,074 (6,375) (79) 1,598
Income taxes
current........................... (300) (581) -- 2,057b(i) (2,453)b(v) -- (1,277)
deferred.......................... 1,993 -- -- -- -- -- 1,993
---------- -------- -------- -------- -------- --------- ----------
Income before minority interest.... 1,693 (581) -- 2,057 (2,453) -- 716
---------- -------- -------- -------- -------- --------- ----------
2,212 (14,561) 7,215 10,017 (3,922) (79) 882
Minority interest dividends on
preferred shares.................. (70) -- (1,449)d -- -- -- (1,519)
Minority interest common stock..... (122) -- -- (338)b(i) (2,208)b(vi) 224c (2,444)
---------- -------- -------- -------- -------- --------- ----------
Net income (loss).................. $ 2,020 $(14,561) $ 5,766 $ 9,679 $ (6,130) $ 145 $ (3,081)
============ ========= ========= ========= ========= =========== ============
Net income per common share and
common share equivalent
primary........................... $ 0.14 $ (0.08)d(i)
---------- -------- -------- -------- -------- --------- ----------
fully diluted..................... $ 0.11 $ (0.07)d(i)
---------- -------- -------- -------- -------- --------- ----------
Weighted average number of common
share and common share equivalent
primary........................... 14,929,000 5,680,418 d 20,609,414
fully diluted..................... 17,688,000 5,680,418 d(ii) 21,260,785
(2,107,633)d(ii)
</TABLE>
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CEDAR GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996
IN THOUSANDS OF US DOLLARS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY MIL
AUDITED UNAUDITED PRO FORMA ADJUSTMENTS PRO FORMA
---------- -------- ---------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales............................ $ 104,958 $ 17,396 $ -- $147,535b(i) $ -- $ -- $ 269,889
Cost of sales.................... 89,525 14,127 (407)a(i) 135,588b(i) 238,833
Selling, general and
administrative expenses......... 9,350 8,999 (1,360)a(ii) 8,756b(i) 188b(ii) 25,933
---------- -------- -------- -------- -------- --------- ----------
98,875 23,126 (1,767) 144,344 188 -- 264,766
---------- -------- -------- -------- -------- --------- ----------
Profit from operations........... 6,083 (5,730) 1,767 3,191 (188) -- 5,123
Interest income (expense), net... 43 (1,325) 1,348a(iii) (158)b(i) (3,000)b(iii,iv) (39)c (3,131)
Income from operations of joint
venture......................... 732 -- -- -- -- -- 732
Other income..................... 234 376 -- 339b(i) -- -- 949
---------- -------- -------- -------- -------- --------- ----------
Income before taxes and minority
interest........................ 7,092 (6,679) 3,115 3,372 (3,188) (39) 3,673
Income taxes
current......................... 2,374 (821) -- 1,106b(i) (1,226)b(v) -- 1,433
deferred........................ 343 -- -- -- -- 343
---------- -------- -------- -------- -------- --------- ----------
Income before minority
interest........................ 2,717 (821) -- 1,106 (1,226) -- 1,776
---------- -------- -------- -------- -------- --------- ----------
4,375 (5,858) 3,115 2,266 (1,962) (39) 1,897
Minority interest -- dividends on
preferred shares................ (205) -- (520)d -- -- (725)
Minority interest -- common
stock........................... (11) -- -- -- (517)b(vi) -- (528)
---------- -------- -------- -------- -------- --------- ----------
Net income....................... $ 4,159 $ (5,858) $ 2,595 $ 2,266 $ (2,479) $ (39) $ 644
========== ======== ======== ======== ======== ========= ==========
Net income per common share and
common share equivalent
primary......................... $ 0.25 -- -- -- -- -- $ 0.05d(i)
---------- -------- -------- -------- -------- --------- ----------
fully diluted................... $ 0.24 -- -- -- -- -- $ 0.05d(i)
---------- -------- -------- -------- -------- --------- ----------
Weighted average number of common
share and common share
equivalent
primary......................... 16,320,488 5,680,418d 22,000,906
fully diluted................... 17,334,599 5,680,418d(ii) 23,015,017
</TABLE>
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PRO FORMA FINANCIAL STATEMENT TABLE
CEDAR GROUP, INC.
NOTES TO THE UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
SEPTEMBER 30, 1995 AND MARCH 31, 1996
The unaudited pro forma consolidated statement of operations gives effect
to the following transactions. The adjustments in arriving at the unaudited
consolidated statements of operations for the year ended September 30, 1995 and
for the six months ended March 31, 1996, reflect such adjustments as if they had
occurred on October 1, 1994 and October 1, 1995, respectively, unless otherwise
indicated and include:
a) Acquisition of The Groupe MIL Inc.
On April 25, 1996, but effective March 31, 1996, the Company, through a
wholly owned subsidiary, acquired 100% of the Groupe MIL Inc. for cash of $1.00.
The previous owners of MIL have assumed the current and contingent encumbrances
and liabilities as of the date of closing, including accumulated working capital
deficiencies. In addition the previous owner will invest a further US $18.3
million (Cnd $25 million) by way of contributed surplus.
The acquisition has been accounted for under the purchase method. The
excess of the net assets acquired over the consideration paid amounted to US
$37.8 million (Cnd $51.4 million) of which US $24.2 million (Cnd $32.9 million)
has been allocated as reduction of MIL's fixed assets and the balance of US
$13.6 million (Cnd $18.5 million) as a deferred credit (negative goodwill),
which will be amortized over a period of five years.
The result of the acquisition on the pro forma consolidated statement of
operation for the year ended September 30, 1995 and the six months ended March
31, 1996 is summarized as follows:
i) reduction of fixed assets depreciation to nil
ii) amortization of the negative goodwill over five years
iii) reduction of interest charges to nil
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There are no material differences in the computation of net income under
Canadian and US GAAP.
b) Acquisition of McConnel Dowell Corporation Limited
On March 29, 1996, a wholly owned subsidiary of the Company, through the
facilities of the Australian Stock Exchange, acquired ordinary shares of MDC
representing 30.4% of the issued and outstanding shares. In addition, through a
tender offer expired April 9, 1996, an additional 26.9% of the issued and
outstanding shares were acquired. As a result of the above transactions,
together with the shares held prior to the transactions representing 19.9% of
the issued and outstanding shares, the Company, as of April 11, 1996 owned 77.2%
of the issued and outstanding ordinary shares of MDC. The total cost of
acquisition of MDC totaled US $41.1 million, resulting in goodwill of US $15.0
million, which will be amortized straight line over a period of 40 years. The
acquisitions were financed by bank credit facilities amounting to US $30.0
million and by part of the proceeds of the issue of preferred shares by a
subsidiary, convertible into common stock of the Company, in the amount of $13.8
million.
The result of the acquisition on the pro forma consolidated statement of
operation for the year ended September 30, 1995 and the six months ended March
31, 1996 is summarized as follows:
(i) Unaudited statements of operations for the twelve months ended
September 30, 1995 and six months ended March 31, 1996;
(ii) Amortization of the purchase goodwill over 40 years;
(iii) Financing fees of $3.0 million expensed for the bank credit facility
for the year ended September 30, 1995 and $1.5 million for the six
months ended March 31, 1996;
(iv) The interest on the bank credit facility for one year would amount to
$3.0 million and $1.5 million for the six months;
(v) Income taxes would, as a result of the additional interest and
financing costs, be reduced at the Companies statutory rate of 38%;
(vi) Minority interest in the results of MDC to reflect the 22.8% interest
not held by the Company.
The statements of operations of MDC for the twelve months ended September
30, 1995 and six months ended March 31, 1996 excludes abnormal items relating to
non recurring gains and losses on real estate settlements. There are no material
differences in the computation of net income under Australian and US GAAP.
c) Acquisition of Steen Contractors Limited
On July 31, 1995, but effective April 1, 1995, the Company acquired 75% of
the issued and outstanding common shares of Steen for cash of US $4.6 million
(Cnd $6.3 million).
The acquisition was accounted for by the purchase method, which did not
give rise to any goodwill and the results of Steen have been included in the
consolidated statements of operations from April 1, 1995. On March 31, 1995,
Steen repurchased the remaining 25% of the issued and outstanding common shares
not held by the Company and this transaction was accounted for using the
purchase method.
The repurchase by Steen results in a reduction of the minority interest and
a reduction of interest income on the pro forma consolidated statement of
operation for the year ended September 30, 1995 and for the six months ended
March 31, 1996.
d) Convertible Preferred shares
On or about October 31, 1995, a wholly owned subsidiary of the Company
issued $8.5 million of 6% cumulative preferred shares (TCI preferred shares) and
on or about March 29, 1996, an additional amount of TCI preferred shares were
issued for gross proceeds $15.7 million.
The TCI preferred shares are convertible into common shares of the Company
at a discount from the trading price of the common stock on the five days prior
to the conversion. For purposes of the pro forma
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consolidated statement of operations, a conversion price of $4.25 per share was
used, resulting in the issuance of 5,680,418 common shares of the Company.
The Company is engaged in discussions with the holders of the TCI preferred
shares regarding the conversion terms. A preliminary agreement has been reached
with certain holders of TCI preferred shares to provide a minimum conversion
price of $4.25 per share. However unless a definitive agreement to this effect
can be reached, the number of common shares of the Company to be issued upon
conversion will fluctuate with the trading price of the common shares.
Earnings per share
i) The accrued TCI preferred share dividend is added back to income in
computing earnings per share as they have been considered as common
share equivalents.
ii) A portion of the proceeds of the TCI preferred share issuance were
used to repurchase 2,107,633 class A convertible shares of the Dominion
Bridge, Inc. The repurchase of the class A convertible preferred shares
eliminated the potential dilutive effect for the year ended September
30, 1995. The impact of the repurchase was given effect in the March 31,
1996 results of the Company, therefore, no further pro forma adjustments
were necessary for the six months period ended March 31, 1996.
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THE MIL GROUP
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Auditors' Report................................. 2
Financial Statements
Consolidated Earnings and Deficit.............. 3
Consolidated Changes in Cash Resources......... 4
Consolidated Balance Sheet..................... 5
Notes to Consolidated Financial Statements..... 6 to 14
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AUDITORS' REPORT
To the Directors of
The MIL Group Inc.
We have audited the consolidated balance sheets of The MIL Group Inc. as at
December 31, 1995, 1994 and 1993 and the consolidated statements of earnings
and deficit and changes in cash resources 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 an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
1995, 1994 and 1993 and the results of its operations and the changes in its
financial position for the years then ended in accordance with generally
accepted accounting principles.
Raymond, Chabot, Martin, Pare
General Partnership
Chartered Accountants
Levis
January 26, 1996
(except as to notes 14 and 15,
which are as of April 24, 1996
and May 28, 1996 respectively)
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THE GROUPE MIL INC.
CONSOLIDATED EARNINGS AND DEFICIT
YEAR ENDED DECEMBER 31, 1995
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
SALES...................................... $46 219 $143 622 $171 178
========= ========= =========
Earnings (loss) before the following items. (15 494) 5 281 6 559
--------- --------- ---------
Interest
Short-term debt.......................... 88 190 295
Long-term debt........................... 168 188 346
Subordinated advances from a shareholder. 3 491 3 511 3 511
Interest income............................ (196) (250) (880)
Forgiveness of interest.................... (354) (1 046)
Forgiveness of interest on subordinated
advances from a former shareholder....... (1 239)
Interest income on military contracts...... (656) (6 310) (2 600)
Share in the net loss of a company subject
to significant influence................. 955 540
Loss on disposal of fixed assets........... 153
Depreciation of fixed and other assets..... 2 435 2 794 3 562
Share of a partner in the winding-up
of the limited partnership............... (216)
--------- -------- --------
5 330 724 2 426
--------- -------- --------
Earnings (loss) before income taxes........ (20 824) 4 557 4 133
--------- --------- ---------
Income taxes (Note 3)
Current (recovery)....................... (799) 2 813 1 893
Deferred (recovery)...................... (114) 199
Recovery of current income taxes
arising from application of prior
years' losses.......................... (2 828) (1 821)
--------- --------- ---------
(799) (129) 271
--------- --------- ---------
NET EARNINGS (LOSS)........................ (20 025) 4 686 3 862
Deficit, beginning of year................. (106 284) (110 970) (114 832)
--------- --------- ---------
Deficit, end of year...................... $(126 309) $(106 284) $(110 970)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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THE GROUPE MIL INC.
CONSOLIDATED CHANGES IN CASH RESOURCES
YEAR ENDED DECEMBER 31, 1995
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATIONS
Net earnings (loss)........................ $(20 025) $ 4 686 $ 3 862
Non-cash items
Share of a partner in the winding-up of
the limited partnership................ (216)
Share in the net loss of a company
subject to significant influence....... 955 540
Loss on disposal of fixed assets......... 153
Depreciation of fixed and other assets... 2 435 2 794 3 562
Deferred income taxes.................... (114) 199
Deferred pension cost.................... 296 79 (25)
Deferred income.......................... (2 659) (5 910)
-------- -------- --------
(19 953) 2 490 8 075
Net changes in working capital and contract
holdbacks................................ 6 163 (17 039) 35 478
-------- -------- --------
Source (use) of cash....................... $(13 790) $(14 549) $ 43 553
-------- -------- --------
FINANCING
Installments on long-term debt and use
of cash.................................. $ (1 923) $ (2 355) $ (3 414)
-------- -------- --------
INVESTMENT
Investment in shares of the company subject
to significant influence................. (1 495)
Net assets resulting from M&M Manufacturing
Limited Partnership...................... 4 488
Fixed and other assets..................... (2 023) (521) (948)
-------- -------- --------
Source (use) of cash....................... (2 023) (521) 2 045
-------- -------- --------
INCREASE (DECREASE) IN CASH................ (17 736) (17 425) 42 184
Cash position, beginning of year........... 11 098 28 523 (13 661)
-------- -------- --------
Cash position, end of year................. $ (6 638) $ 11 098 $ 28 523
======== ======== ========
</TABLE>
Cash position is defined as cash and banker's acceptances net of bank
loans.
The accompanying notes are an integral part of the consolidated financial
statements.
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THE GROUPE MIL INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets
Cash and banker's acceptances............ $ 1 002 $ 11 098 $ 28 742
Accounts receivable (Note 4)............. 13 651 16 026 18 932
Inventory................................ 1 998 1 913 2 374
Net contracts in progress (Note 5)....... 2 594 14 800
Prepaid expenses......................... 1 213 1 166 1 498
--------- --------- ---------
20 458 45 003 51 546
Contract holdbacks and other (Note 6)...... 1 804 874 756
Investments................................ 955
Fixed assets (Note 7)...................... 33 467 33 879 36 151
Deferred pension cost...................... 1 256 1 552 1 631
--------- --------- ---------
$ 56 985 $ 81 308 $ 91 039
========= ========= =========
LIABILITIES
Current liabilities
Bank loans (Note 8)...................... 7 640 219
Accounts payable and accrued liabilities. 20 647 52 091 56 579
Net progress billings (Note 5)........... 1 445
Deferred income.......................... 8 541 11 200
Instalments on long-term debt............ 1 923 1 923 2 355
--------- --------- ---------
38 751 65 214 60 598
Deferred income............................ 17 110
Long-term debt (Note 9).................... 4 987 6 910 8 833
Subordinated advances from a
shareholder (Note 10).................... 32 588 42 588 42 588
--------- --------- ---------
76 326 114 712 129 129
--------- --------- ---------
SHAREHOLDERS' DEFICIENCY
Capital stock (Note 11).................... 72 880 72 880 72 880
Contributed surplus (Note 10).............. 34 088
Deficit.................................... (126 309) (106 284) (110 970)
--------- --------- ---------
(19 341) (33 404) (38 090)
--------- --------- ---------
$ 56 985 $ 81 308 $ 91 039
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
On behalf of the Board,
- ---------------------------------- -----------------------------------
Director Director
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THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars.)
1 -- GOVERNING STATUTES AND NATURE OF OPERATIONS
The Company, incorporated under the Canada Business Corporations Act, designs,
builds, and repairs mainly ships and various industrial products.
2 -- ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries.
INCOME RECOGNITION
The Company recognizes income using the percentage-of-completion method and
records provisions for all anticipated costs.
INVENTORY VALUATION AND CONTRACTS IN PROGRESS
Raw materials are valued at the lower of average cost and replacement cost.
Contracts in progress are valued at the lower of cost, increased by the
estimated profit and net realizable value. Cost includes direct labour, raw
materials and applied overhead.
FIXED ASSETS
Fixed assets are recorded at historical cost less government grants. They are
depreciated over their estimated useful lives according to the following
methods and annual rates:
<TABLE>
<CAPTION>
Rates and
Methods periods
------- ----------
<S> <C> <C>
Building and wharves............................. Diminishing 2% to 5%
balance
Machinery, equipment and automotive equipment.... Diminishing 3%,10% and
balance 30%
Straight-line 20%
Furniture, equipment and leasehold improvements.. Diminishing 20%
balance
Straight-line Lease term
Software and data processing equipment........... Straight-line 20%
Diminishing 30%
balance
</TABLE>
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THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars.)
2 -- ACCOUNTING POLICIES (continued)
FOREIGN CURRENCY TRANSLATION
Accounts in foreign currencies are translated under the temporal method. Under
this method, monetary assets and liabilities are translated at the exchange
rate in effect at the balance sheet date. Other assets and revenue and expense
items are translated at the exchange rate in effect at the date of each
transaction. Exchange gains and losses are reflected in earnings for the year.
INCOME TAXES
Tax benefits and deferred income taxes resulting from loss carry-forwards,
timing differences and other will be accounted for when realized and will be
charged to earnings in the year of realization.
PENSION PLANS
Pension costs related to current services are charged to earnings for the
period during which services are rendered; past service costs as well as
actuarial gains or losses which have not yet been charged to earnings are
amortized over the expected average remaining service life of the employees
covered by the plans. The difference between the pension costs and funding
payments is recorded on the balance sheet under "prepaid expenses" (deferred
pension cost) or "accrued liabilities," as appropriate.
DEFERRED INCOME
This item relates mainly to interest realized on advance payments received on
long-term contracts and to income on long-term contracts in progress. Deferred
income will be transferred to earnings upon completion of the work.
GOVERNMENT ASSISTANCE AND GRANTS
Government assistance and grants received for fixed assets or operating
expenses are recorded against those items.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures related to current operations are expensed or
capitalized, as appropriate. Provisions are made for anticipated remedial
action for which costs can be reasonably estimated.
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THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars.)
3 -- INCOME TAXES
The tax benefit resulting from operating losses is not recorded in the financial
statements. These losses, which are available to reduce income taxes in future
years, are detailed as follows:
<TABLE>
<CAPTION>
Canada Quebec Ontario
------- ------ -------
<S> <C> <C> <C>
Amount of the loss carry-forwards for
tax purposes expiring within the
following years:
1997.................................... $ 6 322 $ 6 610
1998.................................... 14 373 14 373
1999.................................... 7 928 4 954
2000.................................... 1 746 1 507
2001.................................... 5 757 $ 332 222
2002.................................... 19 987 1 988 33 422
-------- ------ -------
56 113 2 320 61 088
Amount of the timing differences to be
deferred over an indefinite period...... 44 374 221 3 139
------- ------ -------
$100 487 $2 541 $64 227
======== ====== =======
</TABLE>
Losses and timing differences for each company of the group are detailed as
follows:
<TABLE>
<CAPTION>
Canada Quebec Ontario
------- ------ -------
<S> <C> <C> <C>
The MIL Group Inc. ....................... $ 67 572 $64 227
MIL Davie Inc. ........................... 30 374
MIL Intermodal Inc. ...................... 2 541 $2 541
-------- ------ -------
$100 487 $2 541 $64 227
======== ====== =======
</TABLE>
4 -- ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Trade accounts............................. $ 7 811 $10 196 $14 980
Taxes receivable........................... 1 386
Contract holdbacks receivable.............. 2 435 2 631 773
Income taxes receivable.................... 997 234 71
Interest on banker's acceptances........... 5 22
Insurance claims........................... 773 2 870 2 527
Other...................................... 244 73 581
------- ------- -------
$13 651 $16 026 $18 932
======= ======= =======
</TABLE>
16
<PAGE> 17
THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars.)
5 -- NET CONTRACTS IN PROGRESS (NET PROGRESS BILLINGS)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Contracts in progress...................... $ 38 676 $1 114 421 $1 022 356
Progress billings.......................... (36 082) (738 347) (687 527)
--------- ---------- ----------
2 594 376 074 334 829
Government assistance...................... (361 274) (336 274)
--------- ---------- ----------
$ 2 594 $ 14 800 $ (1 445)
========= ========== ==========
</TABLE>
6 -- CONTRACT HOLDBACKS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Trade accounts............................. $ 4 239 $ 3 505 $ 1 529
Current portion............................ 2 435 2 631 773
--------- --------- ---------
$ 1 804 $ 874 $ 756
========= ========= =========
</TABLE>
7 -- FIXED ASSETS
<TABLE>
<CAPTION>
1995
--------------------------------------
Accumulated
Cost depreciation Net
---- ------------ ---
<S> <C> <C> <C>
Land....................................... $ 726 $ 726
Buildings and wharves...................... 35 967 $ 15 786 20 181
Machinery, equipment, automotive equipment,
furniture, leasehold improvements,
software and data processing equipment... 37 643 26 460 11 183
Preliminary work on an investment program.. 1 377 1 377
--------- --------- ---------
$ 75 713 $ 42 246 $ 33 467
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------
Accumulated
Cost depreciation Net
---- ------------ ---
<S> <C> <C> <C>
Land....................................... $ 726 $ 726
Buildings and wharves...................... 35 885 $ 15 979 20 906
Machinery, equipment, automotive equipment,
furniture, leasehold improvements,
software and data processing equipment... 37 125 24 878 12 247
--------- --------- ---------
$ 73 736 $ 39 857 $ 33 879
========= ========= =========
</TABLE>
17
<PAGE> 18
THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars.)
7 -- FIXED ASSETS (continued)
<TABLE>
<CAPTION>
1993
--------------------------------------
Accumulated
Cost depreciation Net
---- ------------ ---
<S> <C> <C> <C>
Land....................................... $ 803 $ 803
Buildings and wharves...................... 35 649 $ 14 162 21 487
Machinery, equipment, automotive equipment,
furniture, leasehold improvements,
software and data processing equipment... 37 780 23 919 13 861
--------- --------- ---------
$ 74 232 $ 38 081 $ 36 151
========= ========= =========
</TABLE>
8 -- GUARANTEES ON BANK LOANS AND LETTERS OF CREDIT AND GUARANTEE
The bank loans of $9,410,000 ($2,675,000 in 1994 and $3,799,000 in 1993) and
letters of credit and guarantee of $200,000 ($1,200,700 in 1994 and $120,000
in 1993) are secured by:
- - The inventory, accounts and banker's acceptances;
- - Fixed assets;
- - A hypothec on the universality of property;
- - The pledge of debentures with a total par value of $116,000,000.
18
<PAGE> 19
THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars.)
9 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
CURRENT
MATURITY PORTION 1995 1994 1993
-------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
The MIL Group Inc.
Bank loan, prime interest rate plus 1/8
of 1%, payable over three years, secured
by the pledge of debentures as
described in Note 8, maturing in 1997.... 1997 $ 905 $1 770 $2 675 $3 580
Due to federal government, without
interest, payable in annual instalments
of $1,000,000, maturing on July 1, 2000.. 2000 1 000 5 000 6 000 7 000
MIL Davie Inc.
Due for pension, without interest,
payable in annual instalments of
$18,000, maturing in 1998................ 1998 18 38 56 74
Loan from the Societe de developpement
industriel du Quebec, without interest,
payable in annual instalments of 2000
$51,000, maturing in 2002................ and 2002 102 102 102
Obligation relating to pension plan
improvements............................. 432
------ ------ ------ ------
6 910 8 833 11 188
Instalments due within one year............ $1 923 1 923 1 923 2 355
------ ------ ------
$4 987 $6 910 $8 833
====== ====== ====== ======
</TABLE>
The instalments on long-term debt for the next years are $1,923,000 in 1996,
$1,883,000 in 1997, $1,002,000 in 1998, $1,000,000 in 1999, $1,051,000 in 2000
and $51,000 in 2002.
19
<PAGE> 20
THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars)
10 - SUBORDINATED ADVANCES FROM A SHAREHOLDER
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Advances, subordinated to bank loans, bearing
interest at the rate of 12%, payable annually,
convertible into 56,470,000 common shares after
February 28, 1991 $22,588 $22,588 $22,588
Advances, subordinated to bank loans and to the
redemption of the second preferred shares, without
interest or repayment terms 10,000 10,000 10,000
Advances, subordinated to the redemption of the
third and fourth preferred shares, bearing interest
at the rate of 8%(a) 10,000 10,000
------- ------- -------
$32,588 $42,588 $42,588
======= ======= =======
</TABLE>
- ---------------
(a) During the year, the shareholder renounced payment of these advances for an
amount of $10,000,000 and for interest totalling $24,088,220. The reductions
of advances and interest were recorded under contributed surplus.
11 -- CAPITAL STOCK
AUTHORIZED
Unlimited number of preferred shares, without par value, redeemable at paid-up
capital amount
First preferred shares, 7% cumulative, voting privileges after two years of
dividend arrears
Second preferred shares, without dividend, non-voting, non-participating
Third and fourth preferred shares, 8% cumulative non-voting, non-participating
Unlimited number of common shares, voting, participating, without par value
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
ISSUED AND FULLY PAID
499,999 first preferred shares $ 3,000 $ 3,000 $ 3,000
10,000,000 second preferred shares 10,000 10,000 10,000
10,000,000 third preferred shares 10,000 10,000 10,000
10,000,000 fourth preferred shares 10,000 10,000 10,000
15,234,046 common shares 39,880 39,880 39,880
------- ------- -------
$72,880 $72,880 $72,880
======= ======= =======
</TABLE>
As at December 31, 1995, the undeclared cumulative dividend on first
preferred shares amounts to $1,890,000 which represents nine years of arrears.
Dividend arrears as at December 31, 1995 on third and fourth preferred
shares amount to $6,187,500 and $5,637,500 respectively, which represents eight
years of arrears.
20
<PAGE> 21
THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars)
12 - PENSION PLANS
The Company's pension plans provide for benefits based on the number of
years of service and on the average final salaries of the employees covered by
the plans. The last actuarial valuation was carried out on January 1, 1995.
The values determined to fulfill the pension plan commitments as at December 31,
1995 are as follows:
<TABLE>
<S> <C>
Actuarial value of assets $41,917
Actuarial value of liabilities 39,639
-------------
Actuarial surplus $ 2,278
=============
Amortization 7 to 19 years
</TABLE>
The pension cost recorded in the current year's earnings includes the
amortization of the initial actuarial surplus and amounts to $834,718
($1,104,458 in 1994.)
13 - COMMITMENTS
The Company has entered into long-term lease agreements maturing on
various dates up to 1999 for an amount of $1,003,000 for the rental of office
space. The minimum lease payments for the next four years are as follows:
<TABLE>
<S> <C>
1996 $ 310
1997 291
1998 247
1999 185
------
$1,033
======
</TABLE>
14 - SUBSEQUENT EVENT
Subsequent to year end, the Societe Generale de Financement du Quebec,
which holds the Company's common shares, accepted an offer to purchase its
shares. Under this agreement the parent company undertakes to:
- ---------------
(a) Assume most of the long-term debt.
(b) Inject the capital required to cover certain future expenses.
(c) Offset the working capital deficiency as at March 31, 1996.
(d) Release the Company from contingent liabilities relating primarily to
environmental matters and military contracts.
(e) Ensure that preferred shareholders relinquish their dividend arrears.
21
<PAGE> 22
THE GROUPE MIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Amounts in tables are in thousands of Canadian dollars)
15 - RECONCILIATION OF NET EARNINGS AND SHAREHOLDERS' EQUITY
REPORTED IN ACCORDANCE WITH CANADIAN AND U.S. GAAP
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net earnings (loss) - Canadian GAAP $(20,025) $ 4,686 $ 3,862
Adjustment
Pension Costs(1) (5) 91 (116)
-------- -------- --------
Net earnings (loss) - U.S. GAAP $(20,030) $ 4,777 $ 3,746
======== ======== ========
Shareholders' equity (deficiency - Canadian GAAP (19,341) (33,404) (38,090)
Adjustments
Pension costs(1) (1,739) (1,734) (1,825)
Redeemable preferred shares(2) (41,825) (40,225) (38,625)
-------- -------- --------
Shareholders' equity (deficiency) - U.S. GAAP $(62,905) $(75,363) $(78,540)
======== ======== ========
</TABLE>
- ---------------
(1) Pension costs
The pension costs determined in accordance with U.S. GAAP differ from the
results using Canadian GAAP with respect to the amortization of experience
gains or losses and the treatment of curtailment losses.
(2) Redeemable preferred shares
Pursuant to regulation S-X of the United States Securities and Exchange
Commission, the Second, Third and Fourth Preferred shares should not be
classified as part of shareholders' equity.
22
<PAGE> 23
THE GROUPE MIL INC.
CONSOLIDATED EARNINGS AND DEFICIT
THREE MONTHS PERIOD ENDED MARCH 31, 1996
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Sales $ 10,511 $ 14,257
========= =========
Earnings (loss) before the following items (689) (2,760)
--------- ---------
Interest
Short-term debt 168 4
Long-term debt 19 42
Subordinated advances from a shareholder 678 878
Interest income (13) (91)
Interest income on military contracts (543)
Depreciation and amortization 554 603
--------- ---------
1,406 893
--------- ---------
Loss before Income taxes (2,095) (3,653)
Income taxes
Current (343)
--------- ---------
NET LOSS (1,752) (3,653)
Deficit, beginning of year (126,309) (106,284)
--------- ---------
Deficit, end of year $(128,061) $(109,937)
========= =========
</TABLE>
23
<PAGE> 24
THE GROUPE MIL INC.
CONSOLIDATED CHANGES IN CASH RESOURCES
THREE MONTHS PERIOD ENDED MARCH 31, 1996
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
OPERATIONS
Net loss $(1,752) $(3,653)
Non-cash items
Less on disposal of fixed assets 265 -
Depreciation of fixed assets 554 603
Deferred pension cost (102) 96
Deferred income (2,291) -
------- -------
(3,326) (2,954)
Changes in non-cash working capital items 4,446 (2,671)
------- -------
Source (use) of cash 1,120 (5,625)
------- -------
FINANCING
Installments on long-term debt and
use of cash (905) (905)
------- -------
INVESTMENT
Fixed assets and use of cash (317) (53)
------- -------
Decrease in cash (102) (6,583)
Cash position, beginning of year (6,638) 11,098
------- -------
Cash position, end of year $(6,740) $ 4,515
======= =======
</TABLE>
Cash position is defined as cash and banker's acceptances net of bank loans.
24
<PAGE> 25
THE GROUPE MIL INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and banker's acceptances $ 1,575 $ 4,515
Accounts receivable (note 1) 18,235 13,760
Raw materials inventory 2,093 1,828
Net contracts in progress (note 2) 14,686
Prepaid expenses 1,584 1,598
-------- --------
23,487 36,387
Contract holdbacks and others (note 3) 1,504 1,050
Fixed assets (note 4) 32,965 33,327
Deferred pension cost 1,358 1,456
-------- --------
$ 59,314 $ 72,220
======== ========
LIABILITIES
Current liabilities
Bank loans $ 8,315 $ -
Accounts payable and accrued liabilities 21,226 26,019
Interest payable on subordinated advances
from a shareholder 21,542
Net progress billings (note 2) 5,316 -
Deferred income 11,200
Installments on long-term debt 1,923
-------- --------
34,857 60,684
Long-term debt (note 5) 6,005
Subordinated advances from a shareholder
(note 6) 32,588 42,588
-------- --------
67,445 109,277
-------- --------
SHAREHOLDERS' DEFICIENCY
Capital stock 72,880 72,880
Contributed surplus 47,050 -
Deficit (128,061) (109,937)
-------- --------
(8,131) (37,057)
-------- --------
$ 59,314 $ 72,220
======== ========
</TABLE>
25
<PAGE> 26
THE GROUPE MIL INC.
MARCH 31, 1996
(Amounts in the tables are in thousands of Canadian dollars)
1 - ACCOUNT RECEIVABLE
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Trade accounts $13,114 $ 8,237
Taxes receivable 800 327
Contract holdbacks 953 1,884
Income taxes receivable 1,092 138
Interest on banker's acceptances 3 -
Insurance claims 1,727 3,102
Other 546 72
------- -------
$18,235 $13,760
======= =======
</TABLE>
2 - CONTRACTS IN PROGRESS, NET OF PROGRESS BILLINGS AND ADVANCES
(PROGRESS BILLINGS AND ADVANCES, NET OF CONTRACTS IN PROGRESS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Contracts in progress $10,298 $15,706
Progress billings and advances 15,614 1,020
------- -------
$(5,316) $14,686
======= =======
</TABLE>
3 - CONTRACT HOLDBACKS
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Trade accounts $ 2,457 $ 2,934
Current portion 953 1,884
------- -------
$ 1,504 $ 1,050
======= =======
</TABLE>
26
<PAGE> 27
THE GROUPE MIL INC.
MARCH 31, 1996
(Amounts in the tables are in thousands of Canadian dollars)
4 - FIXED ASSETS
<TABLE>
<CAPTION>
1996
-------------------------------------
ACCUMULATED
COST DEPRECIATION NET
------- ------------ -------
<S> <C> <C> <C>
Land $ 685 $ - $ 685
Buildings and wharves 35,967 15,979 19,988
Machinery, rolling stock, furniture, equipment, leasehold
Improvements, software and data processing equipment 36,656 25,851 10,805
Investment program 1,487 1,487
------- ------- -------
$74,795 $41,830 $32,965
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------
ACCUMULATED
COST DEPRECIATION NET
------- ------------ -------
<S> <C> <C> <C>
Land $ 726 $ - $ 726
Buildings and wharves 35,890 15,180 20,710
Machinery, rolling stock, furniture, equipment, leasehold
Improvements, software and data processing equipment 37,171 25,280 11,891
------- ------- -------
$73,787 $40,460 $33,327
======= ======= =======
</TABLE>
27
<PAGE> 28
THE GROUPE MIL INC.
MARCH 31, 1996
(Amounts in the tables are in thousands of Canadian dollars)
5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Current
Maturity Portion 1996 1995
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
The MIL Group Inc.
Bank loan, prime interest rate plus 1/8
of 1%, repayable over three years,
secured by the pledge of debentures 1997 $ - $ - $ 1,770
Due to federal government, without
interest, repayable in annual installments
of $1,000,000 2000 - - 6,000
MIL Davie Inc.
Due for pension, without interest
Repayable in annual installments of
$18,000 1998 - - 56
Loan from Societe de developpement
Industrial du Quebec, without interest,
repayable in annual installments of 2000
$51,000 and 2002 - - 102
-------- ------- -------
- - 7,928
Installments due within one year 1,923
-------- ------- -------
$ - $ - $ 6,005
======== ======= =======
</TABLE>
6 - SUBORDINATED ADVANCES FROM A SHAREHOLDER
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Advances, subordinated to bank loans, bearing interest at the rate of 12%
payable annually, convertible into 56,470,000 common shares after
February 28, 1991 $22,588 $22,588
Advances, subordinated to bank loan and to the redemption of the second
preferred shares, without interest of repayment terms 10,000 10,000
Advances, subordinated to the redemption of the third and fourth preferred
shares, bearing interest at the rate of 8% payable after payment of
dividends on these shares, without repayment terms - 10,000
------- -------
$32,588 $42,588
======= =======
</TABLE>
28
<PAGE> 29
THE GROUPE MIL INC.
NOTES TO QUARTERLY AND ANNUAL FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995 AND DECEMBER 31, 1995, 1994 AND 1993
(Amounts in the tables are in thousands of Canadian dollars)
7 - RECONCILIATION OF NET EARNINGS AND SHAREHOLDER'S REPORTED IN ACCORDANCE
WITH CANADIAN AND U.S. GAAP
<TABLE>
<CAPTION>
MARCH 31
------------------------
1998 1995 1995 1994 1993
--------- -------- -------- -------- --------
Quarterly
Unaudited
<S> <C> <C> <C> <C> <C>
Net earnings - Canadian GAAP $ (1,751) $ (3,653) $(20,025) $ 4,686 $ 3,862
Adjustments:
Pension costs(1) (17) (1) (5) 91 (116)
-------- -------- -------- -------- --------
Net earnings - U.S. GAAP (1,768) (3,654) (20,030) 4,777 3,746
-------- -------- -------- -------- --------
Shareholder's equity - Canadian GAAP (8,131) (37,057) (19,341) (33,404) (38,090)
Adjustments:
Pension costs(1) (1,756) (1,735) (1,739) (1,734) (1,825)
Redeemable preferred shares(2) (42,225) (40,625) (41,825) (40,225) (38,625)
-------- -------- -------- -------- --------
Shareholder's equity - U.S. GAAP $(52,112) $(79,417) $(62,905) $(75,363) $(78,540)
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Pension costs
The net pension costs determined in accordance with U.S. GAAP differs from
the results using Canadian GAAP with respect to the amortization of
experience gains or losses and the treatment of curtailment losses.
(2) Redeemable preferred shares
Pursuant to regulations S-X of the United States Securities and Exchange
Commission, the Second, Third and Fourth Preferred shares described in
Note 12 should not be classified as part of shareholder's equity.
29
<PAGE> 30
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
CEDAR GROUP, INC.
DATED: JULY 10, 1996 By: /s/ Nicolas Matossian
------------------------------------
Nicolas Matossian
Chief Operating Officer
CEDAR GROUP, INC.
By: /s/ Robert Chartier
------------------------------------
Robert Chartier
Principal Accounting Officer
30
