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 (date of earliest event reported) FEBRUARY 3, 1997
HI-RISE RECYCLING SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation)
0-21946 65-0222933
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(Commission File Number) (IRS Employer Identification No.)
16255 N.W. 54TH AVENUE
MIAMI, FLORIDA 33014
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 624-9222
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(Former name or former address, if changed since last report)
1
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The audited financial statements of Wilkinson Company, Inc. as of and
for the year ended September 30, 1996 are attached hereto as Attachment 7(a) and
are incorporated herein by reference.
2
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION
It is currently impracticable to provide the pro forma financial
information required pursuant to Item 310(d) of Regulation S-B. This Report will
be amended within 60 days of the date of the original filing of this Report to
include such pro forma financial information.
(C) EXHIBITS
(2) Asset Purchase Agreement, dated as of February 3, 1997,
by and among Hi-Rise Recycling Systems, Inc., WC
Acquisition Corp. and Wilkinson Company, Inc.*
(23) Consent of Hausser & Taylor.
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*Previously filed.
3
<PAGE>
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.
HI-RISE RECYCLING SYSTEMS, INC.
Dated: March 7, 1997 By:/s/ DONALD ENGEL
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Donald Engel
Co-Chairman of the Board and
Chief Executive Officer
4
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ATTACHMENT 7(a)
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
CONTENTS
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PAGE
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AUDITORS' REPORT ON FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Balance sheet 2
Statement of income 3
Statement of shareholder's equity 4
Statement of cash flows 5
Notes to financial statements 6-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Wilkinson Company, Inc.
Stow, Ohio
We have audited the accompanying balance sheet of Wilkinson Company,
Inc. (a wholly-owned subsidiary of EFCO, Inc.) as of September 30, 1996, and the
related statements of income, shareholder's 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 financial statements referred to above present
fairly, in all material respects, the financial position of Wilkinson Company,
Inc. as of September 30, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Cleveland, Ohio
December 20, 1996
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<TABLE>
<CAPTION>
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
BALANCE SHEET
SEPTEMBER 30, 1996
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 900,278
Accounts receivable:
Trade, less allowance of $20,000 $884,108
Parent company 72,884 956,992
--------
Inventories:
Raw materials 295,434
Work-in-process 40,182
Finished goods 152,183 487,799
--------
Prepaid pension and other expenses 63,881
Deferred income taxes 33,300
---------
Total current assets $2,442,250
PROPERTY, PLANT, AND EQUIPMENT
Land 161,470
Buildings and improvements 2,275,162
Machinery and equipment 1,095,657
Furniture and fixtures 114,449
Vehicles 21,042
---------
Less allowances for depreciation 3,667,780
2,721,887 945,893
---------
OTHER ASSETS
Deposits 1,000
Deferred income taxes 15,500 16,500
--------- ----------
$3,404,643
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 424,953
Accrued income taxes (payable to Parent Company) 211,700
---------
Total current liabilities $ 636,653
OTHER LIABILITIES 11,517
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Total liabilities 648,170
SHAREHOLDER'S EQUITY
Preferred stock (no par value; authorized 12,000 shares;
issued and outstanding -0- shares) -
Common stock (no par value; authorized 18,000 shares;
issued and outstanding 4,825 shares)
and additional paid-in capital 580,007
Retained earnings 2,176,466
---------
Total shareholder's equity 2,756,473
----------
$3,404,643
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1996
NET SALES
Trade $3,511,540
Parent company 517,116
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$4,028,656
COST AND EXPENSES
Cost of products sold 3,048,785
Selling and administrative expenses 498,383
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3,547,168
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INCOME FROM OPERATIONS 481,488
OTHER INCOME
Rental income 243,278
Interest and other income 33,113 276,391
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INCOME BEFORE PROVISION FOR TAXES ON INCOME 757,879
PROVISION FOR TAXES ON INCOME 283,200
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NET INCOME $ 474,679
=========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
STATEMENT OF SHAREHOLDER'S EQUITY
YEAR ENDED SEPTEMBER 30, 1996
COMMON STOCK AND
ADDITIONAL PAID-IN CAPITAL TOTAL
OUTSTANDING RETAINED SHAREHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE - OCTOBER 1, 1995 4,825 $580,007 $2,343,221 $2,923,228
Net income 474,679 474,679
Dividends paid to Parent Company (641,434) (641,434)
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BALANCE - SEPTEMBER 30, 1996 4,825 $580,007 $2,176,466 $2,756,473
===== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $474,679
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation $ 75,739
Reduction in allowance for losses on accounts
receivable (31,100)
Deferred income taxes 14,300
Gain on sale of equipment (1,000)
Changes in:
Accounts receivable (196,602)
Inventories 105,766
Prepaid pension and other expenses (12,265)
Accounts payable and accrued expenses 62,775
Accrued income taxes (payable to Parent Company) 211,700
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Total adjustments 229,313
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Net cash provided by operating activities 703,992
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (157,055)
Purchases of property, plant and equipment (9,253)
Proceeds from sale of equipment 1,000
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Net cash used in investing activities (165,308)
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INCREASE IN CASH AND CASH EQUIVALENTS 538,684
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 361,594
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CASH AND CASH EQUIVALENTS - END OF YEAR $900,278
=======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes (not including transfer to Company's
parent described below) $ 40,192
Supplemental disclosure of noncash investing and financing
activity:
The Company transferred $946,284 of marketable securities
(at cost, which approximated market) to the Company's parent
to pay $304,850 of accrued income taxes and to pay dividends
of $641,434.
The accompanying notes are an integral part of these financial statements.
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<PAGE>
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION - Wilkinson Company, Inc. (the "Company") is a
wholly-owned subsidiary of EFCO, Inc. (the "Parent Company").
The Company, which is a sheet metal fabricator of rubbish and
linen chutes, stainless steel corner guards and bumper rails
and miscellaneous sheet metal parts, provides credit to its
customers. These customers serve primarily the construction
industry and are located throughout the United States.
B. REVENUE RECOGNITION - The Company recognizes revenue on
contracts using the completed contract method of accounting
for both financial reporting purposes and income tax purposes.
This method is used because the typical contract is completed
in three months or less and financial position and results of
operations do not vary significantly from those which would
result from use of the percentage-of-completion method.
C. USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure 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.
D. CASH AND CASH EQUIVALENTS - The Company considers all highly
liquid investments with an original maturity of three months
or less to be cash equivalents, and maintains cash at various
financial institutions which may exceed federally insured
amounts.
E. MARKETABLE SECURITIES - At September 30, 1995, the Company had
marketable securities (stocks and corporate bonds) of
$789,230, at cost, which approximated market value. All
marketable securities were transferred to the Parent Company
during the year ended September 30, 1996, at cost, which
approximated market value.
F. INVENTORIES - Inventories are stated at the lower of cost
(determined by the first-in, first-out method) or market.
G. PROPERTY, PLANT AND EQUIPMENT - Property, plant, and equipment
are carried at cost. Depreciation is provided over their
estimated useful lives (building and improvements over 10-30
years, machinery and equipment over 5-12 years, other over
4-10 years) by use of the straight-line and declining balance
methods. Depreciation expense for the year ended September 30,
1996 was $75,739. The cost and accumulated depreciation of
assets sold or retired are removed from the respective
accounts and any gain or loss is reflected in earnings.
Maintenance, repairs and minor repairs are charged to expense
when incurred. Additions and major renewals are capitalized.
H. FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair values of cash,
accounts receivable, accounts payable and other short-term
obligations approximate their carrying values because of the
short maturity of these financial instruments.
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<PAGE>
WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
I. INCOME TAXES - The Company is included in the Parent Company's
consolidated tax returns. The Company is allocated a portion of
the Parent Company's tax expense based on the Company's
proportion of taxable income to the taxable income of the
consolidated group as a whole. At September 30, 1996, $211,700 of
accrued taxes is due to the Parent Company. The Company utilizes
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes," which requires an asset and
liability approach to financial accounting and reporting for
income taxes. The difference between the financial statement and
tax basis of assets and liabilities is determined annually.
Deferred income tax assets and liabilities are computed for those
temporary differences that have future tax consequences using the
current enacted tax laws and rates that apply to the periods in
which they are expected to affect taxable income. Valuation
allowances are established, if necessary, to reduce the deferred
tax asset to the amount that will, more likely than not, be
realized. Income tax expense is the current tax payable or
refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
NOTE 2. INCOME TAXES
The Company accounts for income taxes under SFAS 109. The deferred
taxes are the result of temporary differences arising from
differences in financial reporting and tax reporting methods
primarily for depreciation, franchise taxes, vacation accruals and
bad debts.
The components of the provision for taxes on income for the year
ended September 30, 1996 are:
Current tax provision:
Federal $211,700
State and local 57,200
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268,900
Deferred tax provision relating to:
Income 14,300
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Total provision for income taxes $283,200
=======
At September 30, 1996, the Company's net deferred income tax asset
consists of the following:
Deferred tax assets:
Allowance for uncollectible accounts $ 6,800
Vacation accruals 14,700
Franchise taxes 11,800
Depreciation 15,500
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Total deferred tax assets 48,800
Deferred tax liabilities -
------
Net deferred tax asset $48,800
======
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WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. RETIREMENT PLAN
The Company has a noncontributory defined benefit pension plan which
covers substantially all employees who are employed within the
collective bargaining unit. This plan provides monthly benefits that
are based on an employee's years of service and the applicable
benefit rate, as defined. The Company funds the pension plan in
accordance with the funding provisions of the Employee Retirement
Income Security Act of 1974.
Total pension expense for the plan was $11,874 for the year ended
September 30, 1996. The components of pension expense for the plan
are as follows:
Service cost - benefits earned during the period $ 10,878
Interest cost on projected benefit obligation 31,555
Actual return on plan assets - (gain) (32,258)
Net amortization and deferral 1,699
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Net periodic pension cost $ 11,874
=======
The following table sets forth the unfunded status of the Company's
pension plan and the related amounts recognized in the Company's
balance sheet as of September 30, 1996 are:
Actuarial present value of benefit obligations:
Vested benefit obligation 464,177
Nonvested benefit obligation 971
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Accumulated benefit obligation 465,148
Effect of projected future compensation levels -
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Projected benefit obligation 465,148
Plan assets at fair value 454,503
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Deficiency of plan assets over projected
benefit obligation 10,645
Unrecognized net loss (47,770)
Unrecognized prior service costs (21,735)
Unrecognized net transition asset 4,304
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Pension asset recognized in balance sheet $ 54,556
=======
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5 percent.
The expected long-term rate of return on assets was 8.0 percent. Due
to the nature of the plan, the rate of change in future compensation
levels does not affect the projected benefit obligation.
The Company also has a defined contribution plan, which includes a
cash or deferred provision, covering all employees not within the
collective bargaining unit (primarily administrative personnel),
meeting certain requirements. The Company makes a matching
contribution in an amount equal to 50% of the first 6% of amounts
contributed by a participant. Additionally, at management's
discretion, an amount may be contributed out of current or
accumulated profits. For the year ended September 30, 1996, the
Company made matching contributions of $7,282 and discretionary
contributions of $6,000.
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WILKINSON COMPANY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF EFCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. RELATED PARTY TRANSACTIONS
The Company provides sheet metal fabrication services to the Parent
Company at prices approximating those available to unrelated
parties. During the year ended September 30, 1996, the Company
charged $517,116 for such services, and has a receivable of $72,884
as of September 30, 1996 related to these services.
NOTE 5. RENTAL INCOME
The Company is the lessor of manufacturing space under an operating
lease expiring in December 1997.
Minimum future rentals to be received are as follows:
Year ending September 30:
1997 $239,078
1998 59,769
Management estimates expenses related to rental income, which are
included in costs and expenses in the statement of income, to be
approximately $95,000.
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<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2 Asset Purchase Agreement, dated as of February 3, 1997, by and
among Hi-Rise Recycling Systems, Inc., WC Acquisition Corp. and
Wilkinson Company, Inc.*
23 Consent of Hausser & Taylor.
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*Previously filed.
We consent to the incorporation by reference in the Registration Statement
of Hi-Rise Recycling Systems, Inc. on Form S-3 (File No. 333-1206) of our report
dated December 20, 1996 on our audit of the financial statements of Wilkinson
Company, Inc. as of September 30, 1996 and for the year then ended.
/s/ HAUSSER & TAYLOR
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HAUSSER & TAYLOR
Cleveland, Ohio
March 3, 1997
