Securities and Exchange Commission
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 26, 2000
Arguss Communications, Inc.
(Formerly Arguss Holdings, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 0-19589 02-0413153
---------------------------- --------------------- -------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
One Church Street, Suite 302
Rockville, Maryland 20850
---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 315-0027
Item 2. Acquisition or Disposition of Assets:
On May 26, 2000, Arguss Communications, Inc. ("Arguss") acquired U.S.
Communications, Inc. ("USC"), by merger of USC into its wholly owned subsidiary,
Arguss Communications Group, Inc. ("ACG").
USC provides engineering, construction and maintenance services to major
telecommunications and utility customers. The purchase price of approximately
$20,386,000 was satisfied by the issuance of approximately 631,000 shares of
Arguss common stock and $9,975,000 in cash.
The USC acquisition has been accounted for as a purchase. The excess of the
total cost over the fair value of the net assets acquired is being amortized by
the straight-line method over twenty years.
Item 7. Financial Statements and Exhibits:
(a) Financial Statements of Businesses Acquired:
Audited balance sheet of USC as of December 31, 1999 and related
statements of income and retained earnings and cash flow for the year
ended December 31, 1999.
Unaudited separate company financial information of USC as of March 31,
2000: balance sheet and related statements of income and cash flow for
the three months then ended.
(b) Pro Forma Financial Information:
Unaudited pro forma balance sheet of Arguss as of March 31, 2000 and
unaudited pro forma statements of operations for the fiscal year ended
December 31, 1999 and for the three months ended March 31, 2000.
<PAGE>
(c) Exhibits:
10.01 Agreement and plan of merger dated May 26, 2000 by and between U.S.
Communications, Inc., Arguss Communications, Inc. and Arguss
Communications Group. Inc.
23.01 Consent of REDW LLP, Certified Public Accountants.
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.
Arguss Communications, Inc.
June 9, 2000
Registrant
By: /s/ Rainer H. Bosselmann
----------------------------
Rainer H. Bosselmann
Chairman of the Board
and Chief Executive Officer
<PAGE>
U.S. COMMUNICATIONS, INC.
Financial Statements
and
Independent Auditors' Report
December 31, 1999
<PAGE>
U.S. COMMUNICATIONS, INC.
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
Balance Sheet
Statement of Income and Retained Earnings
Statement of Cash Flows
Notes to Financial Statements
<PAGE>
(Letterhead of Rogoff Erickson Diamond & Walker, LLP)
Independent Auditors' Report
Board of Directors
U.S. Communications, Inc.
Albuquerque, New Mexico
We have audited the accompanying balance sheet of U.S.
Communications, Inc. as of December 31, 1999, and the related
statements of income and retained earnings 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 financial statements referred to above
present fairly, in all material respects, the financial
position of U.S. Communications, Inc. as of December 31,
1999, and the results of its operations and cash flows for
the year then ended in conformity with generally accepted
accounting principles.
/s/ Rogoff Erickson Diamond & Walker, LLP
-----------------------------------------
Rogoff Erickson Diamond & Walker, LLP
Albuquerque, New Mexico
February 29, 2000
<PAGE>
U.S. COMMUNICATIONS, INC.
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets
Cash $ 3,562
Accounts receivable (Notes 2 and 3) 4,398,318
Inventory 398,727
Prepaid expenses 10,407
Receivable from stockholder (Note 6) 301,165
-----------
Total current assets 5,112,179
-----------
Property, plant and equipment, at cost (Notes 3 and 4)
Computer equipment 52,202
Small tools and equipment 468,254
Trucks 429,326
Machinery and equipment 4,331,702
Furniture and fixtures 63,286
Building and leasehold improvements 104,090
-----------
5,448,860
Less accumulated depreciation and amortization (2,314,868)
-----------
3,133,992
-----------
Total assets $ 8,246,171
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
U.S. COMMUNICATIONS, INC.
BALANCE SHEET -- CONTINUED
DECEMBER 31, 1999
LIABILITIES AND EQUITY
Current liabilities
Checks drawn against future deposits $ 146,508
Lines of credit (Note 3) 1,099,910
Current maturities of long-term debt (Note 4) 717,450
Accounts payable 1,149,710
Income taxes payable 807,905
Accrued expenses 316,160
----------
Total current liabilities 4,237,643
Long-term debt, less current maturities (Note 4) 1,332,520
Deferred tax liability (Note 5) 222,956
----------
Total liabilities 5,793,119
----------
Commitments and contingencies (Notes 7 and 8)
Equity
Common stock, $1 par value; 50,000 shares
authorized; 1,000 shares issued and outstanding 1,000
Retained earnings 2,452,052
----------
Total equity 2,453,052
----------
Total liabilities and equity $8,246,171
==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
U.S. COMMUNICATIONS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1999
Sales $ 14,721,798
Cost of sales 10,160,536
------------
Gross profit 4,561,262
Selling, general and administrative expenses 1,385,745
------------
Income from operations 3,175,517
------------
Other income (expense)
Interest expense (322,133)
Interest income 35,269
Loss on sale of fixed assets (8,242)
------------
(295,106)
------------
Income before income taxes 2,880,411
Income taxes (Note 5) 1,116,290
------------
Net income 1,764,121
Retained earnings, beginning of year 687,931
------------
RETAINED EARNINGS, end of year $ 2,452,052
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
U.S. COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 11,852,955
Cash paid to suppliers and employees (10,791,479)
Interest received 17,341
Interest paid (352,197)
Income taxes paid (189,836)
------------
Net cash provided by operating activities 536,784
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets 127,966
Purchases of fixed assets (188,136)
Net increase in receivable from stockholder (73,866)
------------
Net cash used in investing activities (134,036)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in checks drawn against future deposits (130,068)
Net advances on lines of credit 605,058
Payments on long-term debt (874,780)
------------
Net cash used in financing activities (399,790)
------------
Net increase in cash 2,958
Cash, beginning of year 604
------------
CASH, end of year $ 3,562
============
NON CASH INVESTING AND FINANCING ACTIVITIES
Fixed assets acquired by incurring long-term liabilities $ 1,731,621
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
U.S. COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS -- CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 1,764,121
-----------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 828,212
Loss on disposal of fixed assets 8,242
Provision for deferred income taxes 100,610
Change in assets and liabilities
Accounts receivable (2,886,771)
Inventories (398,727)
Prepaid expenses 23,316
Accounts payable 328,607
Accrued expenses (56,670)
Income taxes payable 825,844
-----------
Total adjustments (1,227,337)
-----------
Net cash provided by operating activities $ 536,784
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
U.S. COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the company's significant accounting policies applied in the
preparation of the accompanying financial statements follows:
Operations
----------
U.S. Communications, Inc. (the "company") provides engineering,
construction, and maintenance services to telecommunications and utility
companies in New Mexico, Texas, Colorado and Utah. Its customers include
public and private utility companies, cable television multiple system
operators, and telephone companies. The company does business as Avid
Communications in Texas. Through June 30, 1999, the company used a June
30th fiscal year for financial reporting and income tax purposes.
During the year ended December 31, 1999, four customers represented 95% of
the company's sales: Next Link 58%, US West Communications 16%,
Southwestern Bell 12%, and ICG 9%.
Revenue and Cost Recognition
----------------------------
Construction revenues and costs are recognized on an accrual basis. Work
performed under the various contracts is normally billed upon completion,
with the duration of "open end" contracts generally being less than 30
days. Any significant contract entered into by the company providing for
either a fixed contract amount or cost-plus-fee covering more than a few
days is accounted for using the percentage-of-completion method of
accounting. Management estimates percentage-of-completion primarily based
upon progress toward completion using milestones. Changes to estimates, if
any, are recognized in the period determined.
Construction costs include all direct material, labor and subcontractor
costs and those indirect costs related to contract performance, such as
supervisory salaries, payroll taxes, depreciation and amortization,
equipment rental and repair, small tools, fuel, sales tax, utilities,
travel and insurance. Depreciation and amortization expense included in
cost of sales totals $791,879.
Income Taxes
------------
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes are recognized for differences between the basis of
assets and liabilities for financial statement and income tax purposes. The
differences relate to the use of different methods and lives for financial
statement and income tax purposes when depreciating property, plant and
equipment. The deferred tax liability represents the future tax return
consequences of those differences, which will be taxable when the assets
are recovered or sold.
<PAGE>
U.S. COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1) Summary of Significant Accounting Policies -- continued
Advertising
-----------
The company expenses advertising costs as they are incurred.
Depreciation and Amortization
-----------------------------
The company provides for depreciation of fixed assets using the
straight-line method over the estimated useful life of the related asset.
Machinery and equipment, small tools and equipment, and trucks are
depreciated over lives ranging from 5 to 7 years; other assets are
generally depreciated over lives ranging from 5 to 10 years. For tax
reporting purposes, the company uses accelerated methods of depreciation
over lives approved by the Internal Revenue Service. The costs of minor
repairs and maintenance are charged to earnings when incurred; major
repairs and equipment overhauls that are expected to extend useful lives
are capitalized and depreciated.
Cash
----
The company maintains its cash in bank deposit accounts that, at times, may
exceed the federally insured limits. The company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk on cash.
Receivables
-----------
The company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
Inventories
-----------
Specific identification and average cost, which approximate lower of cost
or market, are used to determine cost. The specific identification method
is used for items ordered specifically for a job or group of jobs. The cost
of inventory is recorded as cost of sales at the time the specific
inventory item is issued to a job.
Equipment Leases
----------------
The company leases some of its equipment under cancelable operating leases
that provide for purchase options and the application of a portion of the
monthly payments to the equipment purchase option. Such leases have been
capitalized when the exercise of the option is reasonably assured because
the lease was structured, at inception, so that the purchase option price
is expected to be significantly less than the fair value of the equipment
at the date the option becomes exercisable.
<PAGE>
U.S. COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1) Summary of Significant Accounting Policies -- continued
Management Estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumption that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2) ACCOUNTS RECEIVABLE
As of December 31, 1999, accounts receivable consisted of the following:
Construction accounts receivable $3,688,921
Unbilled sales 622,840
Insurance claim receivable 63,276
Payroll advances and loans 23,281
----------
$4,398,318
==========
Of the total construction accounts receivable and unbilled sales at
December 31, 1999, the company's largest customers represented
approximately the following: Next Link 46%, US West Communications 41%, and
ICG 7%.
3) LINES OF CREDIT
At December 31, 1999, the company had three secured lines of credit from a
bank with outstanding balances totaling $1,099,910. The notes bear interest
at a rate equal to the prime rate quoted in The Wall Street Journal plus
1.25 percentage points (9.75% at December 31, 1999). The total available
lines of credit were $2,600,000 at December 31, 1999. Two secured lines of
credit totaling $2,100,000 mature November 16, 2000. These notes are
personally guaranteed by the company's president and are secured by
essentially all of the company's accounts receivable, fixed assets and an
assignment of life insurance on the company's president. The third line of
credit for $500,000 matures February 2001. This note is personally
guaranteed by the company's president and is secured by all chattel paper,
accounts receivable and general intangibles. Borrowings are limited to 75%
of accounts receivable for all lines of credit.
<PAGE>
U.S. COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
4) LONG-TERM DEBT
Long-term debt at December 31, 1999, consisted of the following:
Notes Payable and Capital Leases
--------------------------------
Forty-four notes payable and capitalized leases to
banks and financing companies, with monthly
payments totaling approximately $77,000,
including interest, notes secured by trucks and
equipment, interest at rates ranging from 8.5%
to approximately 13%, various maturities
through 2004 $2,049,970
Less current portion 717,450
----------
$1,332,520
==========
Maturities of long-term debt as of December 31, 1999, are as follows:
Year ending December 31,
2000 $ 433,145
2001 258,480
2002 272,975
2003 144,035
2004 81,648
----------
Total principal $1,190,283
==========
Maturities of capital leases as of December 31, 1999, are as follows:
Year ending December 31,
2000 $ 368,157
2001 345,161
2002 284,507
----------
Total principal and interest 997,825
Amount representing interest (138,138)
----------
Total principal $ 859,687
==========
Total cost of equipment under capital leases was approximately $1,588,000
as of December 31, 1999, with accumulated amortization of $322,000.
<PAGE>
U.S. COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
5) INCOME TAXES
The provision for income taxes differs from the expense that would result
from applying statutory rates to income before income taxes. Income taxable
for income tax purposes and income before income taxes as reported in these
financial statements and the related tax provision are reconciled as
follows for the year ended December 31, 1999:
Income before income taxes $ 2,880,411
State taxes (145,813)
Excess of tax method depreciation over depreciation
recorded for financial statements (306,883)
Difference between tax and financial statement basis
of assets disposed of during the year 30,631
Expenses not deductible for income tax purposes 106,089
-----------
Taxable income $ 2,564,435
===========
Current income tax provision at statutory rates
(approximately 40%) $ 1,015,680
Provision for deferred taxes 100,610
-----------
Income taxes $ 1,116,290
===========
At December 31, 1999, the remaining depreciable basis of the company's
assets for financial statement purposes exceeded the remaining depreciable
tax basis by approximately $561,000. Rates used to calculate deferred tax
liability were 34% for the federal income tax portion and approximately 6%
for state income taxes.
6) RECEIVABLE FROM STOCKHOLDER
The company's sole stockholder and president owed the company $301,165 at
December 31, 1999. During the year ended December 31, 1999, he borrowed a
total of $246,616 from the company, including accrued interest of $17,928
and repaid $172,800. The balance owed to the company is in the form of a
demand note bearing interest at 8% per annum.
<PAGE>
U.S. COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
7) PROFIT-SHARING PLAN
The company has a qualified profit-sharing plan covering all eligible
company employees. Contributions to the plan are at the sole discretion of
the company's management. The company has made a $124,801 contribution for
the year ended December 31, 1999. Accrued expenses on the accompanying
financial statements includes $150,000 of profit-sharing contribution,
$25,199 of which was expensed during the period from July 1, 1998, through
December 31, 1998.
8) OPERATING LEASES
The company leases its office and yard space under cancelable monthly
operating leases. Total lease payments on these leases for the year ended
December 31, 1999, amounted to $113,616. The lease for the yard in Denver,
Colorado has a lease term through December 2000 with a future minimum lease
obligation of $21,600.
<PAGE>
Note: The accompanying unaudited condensed financial statements do not contain
all disclosures required by generally accepted accounting principles. In the
opinion U.S. Communications, Inc. ("USC"), the accompanying unaudited condensed
financial statements contain all adjustments considered by management necessary
to present fairly the financial position of USC as of March 31, 2000 and the
results of operations and cash flows for the period presented. USC prepares its
interim financial information using the same accounting principles as it does
for its annual statements.
U.S. Communications, Inc.
Unaudited Condensed Balance Sheet
As of March 31, 2000
Assets:
Cash $ 1,000
Accounts Receivable, Net 4,162,000
Other Assets Current 1,866,000
----------
Total Current Assets 6,029,000
Property and Equipment, Net 3,125,000
----------
Total Assets $9,154,000
==========
Liabilities:
Current Liabilities $4,164,000
Non-Current Liabilities 2,553,000
----------
Total Liabilities 6,717,000
----------
Stockholder's Equity
Common Stock 1,000
Retained Earnings 2,436,000
----------
Total Stockholder's Equity 2,437,000
----------
Total Liabilities and
Stockholder's Equity $9,154,000
==========
<PAGE>
U.S. Communications, Inc.
Unaudited Condensed Income Statement
for the Three Months Ended March 31, 2000
Net Sales $3,629,000
Cost of Sales, excluding
depreciation 2,984,000
----------
Gross Profit 645,000
Selling, General &
Administrative 340,000
Depreciation 240,000
----------
Income from Operations 65,000
Other Expense:
Net Interest Expense (80,000)
----------
Pre-tax Loss (15,000)
Income Tax Benefit (6,000)
----------
Net Loss (9,000)
==========
<PAGE>
U.S. Communications, Inc.
Unaudited Condensed Statement of Cash Flows
for the Three Months Ended March 31, 2000
Cash flows from operating activities:
Net Loss $ (9,000)
Depreciation 240,000
Changes in Assets & Liabilities
Accounts Receivable 236,000
Other Assets (1,125,000)
Accounts Payable and
Other Liabilities 989,000
-----------
Net Cash from Operations 331,000
-----------
Cash Flow from Investing Activities:
Capital Expenditures (231,000)
-----------
Net from Investing Activities (231,000)
-----------
Cash Flow for Financing Activities:
Repayments of Lines
of Credit, net (103,000)
-----------
Net from Financing Activities (103,000)
-----------
Net Decrease in Cash (3,000)
-----------
Cash at Beginning of period 4,000
-----------
Cash at Ending of period $ 1,000
===========
<PAGE>
Pro Forma Financial Information
The accompanying pro forma consolidated statements of operations present the
results of operations of Arguss and USC as if the acquisition of USC had
occurred as of January 1, 1999. The pro forma consolidated balance sheet
reflects the pro forma consolidated financial position of the companies as if
the acquisition had occurred March 31, 2000. The pro forma information reflects
the total consideration paid, including the issuance of approximately 631,000
shares of Arguss' common stock (See Item 2. for details.) The pro forma data is
not necessarily indicative of what the results would have been if the
acquisition had occurred on the dates indicated.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 2000
USC
Arguss as Acquisition Pro Forma Consolidated
Reported (A) As Reported Adjustments Pro Forma
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Cash $ 386,000 $ 1,000 ($ 61,000)(1) $ 326,000
Restricted Cash from
Customer Advances 175,000 -- -- 175,000
Accounts Receivable 45,681,000 4,162,000 -- 49,843,000
Costs and Earnings in
Excess of Billings 14,470,000 1,168,000 -- 15,638,000
for Materials
Inventories 5,165,000 355,000 -- 5,520,000
Other Assets, Current 2,343,000 343,000 -- 2,686,000
Deferred Income Taxes 1,829,000 -- -- 1,829,000
------------ ----------- ------------- ------------
Total Current Assets 70,049,000 6,029,000 (61,000) 76,017,000
Property, Equipment 37,614,000 3,125,000 -- 40,739,000
Goodwill, Net 106,565,000 -- 18,219,000(2) 124,784,000
------------ ----------- ------------- ------------
TOTAL ASSETS $214,228,000 $ 9,154,000 $ 18,158,000 $241,540,000
============ =========== ============= ============
Current Liabilities $ 85,177,000 $ 4,164,000 9,934,000(3) $ 99,275,000
Non-Current Liabilities 22,143,000 2,553,000 -- 24,696,000
------------ ----------- ------------- ------------
TOTAL LIABILITIES 107,320,000 6,717,000 9,934,000 123,971,000
------------ ----------- ------------- ------------
Stockholders' Equity 106,908,000 2,437,000 8,224,000(4) 117,569,000
------------ ----------- ------------- ------------
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $214,228,000 $ 9,154,000 $ 18,158,000 $241,540,000
============ =========== ============= ============
</TABLE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet:
(1) Reflects the cash element of the Company's other acquisition costs.
(2) Reflects the estimated goodwill of the acquisition.
(3) Reflects acquisition financing of approximately $10 million.
(4) Reflects the value of 631,000 in additional shares issued.
(A) Reported on Form 10-Q filed May 4, 2000.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Statement of Operations
Year Ended December 31, 1999
USC
Arguss as Acquisition Pro forma Consolidated
Reported (A) As Reported Adjustments Pro Forma
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 197,408,000 $ 14,722,000 -- $ 212,130,000
Cost of Sales,
Excluding
Depreciation 149,099,000 9,333,000 -- 158,432,000
------------- ------------- ------------- -------------
Gross Profit,
Excluding
Depreciation 48,309,000 5,389,000 -- 53,698,000
Selling, General &
Administrative
Expenses 16,934,000 1,386,000 193,000(1) 18,513,000
Depreciation 8,407,000 828,000 -- 9,235,000
Goodwill
Amortization 4,568,000 -- 911,000(2) 5,479,000
Engineering &
Development
Expenses 1,253,000 -- -- 1,253,000
------------- ------------- ------------- -------------
Income from
Operations 17,147,000 3,175,000 (1,104,000) 19,218,000
Interest Expense, net (3,987,000) (295,000) (696,000)(3) (4,978,000)
------------- ------------- ------------- -------------
Income (loss)
Before Taxes 13,160,000 2,880,000 (1,800,000) 14,240,000
Income Taxes
(benefit) 6,710,000 1,116,000 (337,000)(4) 7,489,000
------------- ------------- ------------- -------------
Net
Income (loss) $ 6,450,000 $ 1,764,000 $ (1,463,000) $ 6,751,000
============= ============= ============= =============
Basic Earnings
per Share $.54 $.53
==== ====
Weighted Shares
Outstanding -Basic 12,048,000 12,679,000(5)
========== ==========
Earnings
per Share $.50 $.50
==== ====
Weighted Average
Shares Outstanding
Diluted 13,004,000 13,635,000(5)
========== ==========
</TABLE>
Notes to Unaudited Pro Forma Consolidated Statement of Operations:
(1) Reflects adjustment for estimated health and other benefit expenses, net of
reduced executive compensation of $182,000.
(2) Reflects one-year amortization of $18,219,000 of goodwill over 20 years.
(3) Reflects adjustment for interest expense for approximately $10 million in
acquisition financing for USC, net of $78,000 in reduced borrowing costs
under Arguss' credit facilities.
(4) Reflects adjustment for income tax benefit related to pro forma expenses.
(5) Includes 631,000 additional shares issued for the acquisition.
(A) Reported on Form 10-K filed on March 16, 2000.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Statement of Operations
For the Three Months Ended March 31, 2000
USC
Arguss as Acquisition Pro forma Consolidated
Reported (B) As Reported Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 55,044,000 $ 3,629,000 -- $ 58,673,000
Cost of Sales,
Excluding
Depreciation 42,948,000 2,984,000 -- 45,932,000
------------ ------------ ------------ ------------
Gross Profit,
Excluding
Depreciation 12,096,000 645,000 -- 12,741,000
Selling, General &
Administrative
Expenses 5,110,000 340,000 60,000(1) 5,510,000
Depreciation 2,366,000 240,000 -- 2,606,000
Goodwill
Amortization 1,427,000 -- 228,000(2) 1,655,000
Engineering &
Development
Expenses 236,000 -- -- 236,000
------------ ------------ ------------ ------------
Income from
Operations 2,957,000 65,000 (288,000) 2,734,000
Interest Expense,
Net (1,025,000) (80,000) (193,000)(3) (1,298,000)
------------ ------------ ------------ ------------
Income (loss)
Before Taxes 1,932,000 (15,000) (481,000) 1,436,000
Income Taxes
(benefit) 1,285,000 (6,000) (97,000)(4) 1,182,000
------------ ------------ ------------ ------------
Net
Income (loss) $ 647,000 ($ 9,000) ($ 384,000) $ 254,000
============ ============ ============ ============
Basic Earnings
Per Share $.05 $.02
==== ====
Weighted Average
Shares Outstanding
- Basic 13,123,000 13,754,000(5)
========== ==========
Dil. Earnings
Per Share $.05 $.02
==== ====
Weighted Average
Share Outstanding
- Diluted 13,549,000 14,180,000(5)
========== ==========
</TABLE>
Notes to Unaudited Pro Forma Consolidated Statement of Operations:
(1) Reflects adjustment for estimated health and other benefit expenses, net of
reduced executive compensation of $34,000.
(2) Reflects three-months' amortization of $18,219,000 of goodwill over 20
years.
(3) Reflects adjustment for interest expense for approximately $10 million in
acquisition financing for USC, net of $19,000 in reduced borrowing costs
under Arguss' credit facilities.
(4) Reflects adjustment for income tax benefit related to pro forma expenses.
(5) Includes 631,000 additional shares issued for the acquisition.
(B) Reported on Form 10-Q filed on May 4, 2000.
