<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- -----------
------------------
Commission File Number 1-12541
Atchison Casting Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kansas 48-1156578
- ---------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 South Fourth Street, Atchison, Kansas 66002
- ----------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (913) 367-2121
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X .
---
No .
---
There were 5,534,442 shares of common stock, $.01 par value per share,
outstanding on January 29, 1997.
<PAGE>
PART I
ITEM 1. Financial Statements.
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, June 30,
1996 1996
------------ --------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,628 $ 7,731
Customer accounts receivable, net of allowance for 37,066 32,224
doubtful accounts of $374 and $295, respectively
Inventories 28,566 24,357
Deferred income taxes 1,760 1,985
Other current assets 2,276 1,968
------ ------
Total current assets 72,296 68,265
PROPERTY, PLANT AND EQUIPMENT, Net 86,620 72,160
INTANGIBLE ASSETS, Net 22,348 18,441
DEFERRED CHARGES, Net 378 440
OTHER ASSETS 3,294 2,878
-------- --------
TOTAL $184,936 $162,184
-------- --------
-------- --------
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Cont'd)
(In Thousands)
December 31, June 30,
1996 1996
------------ --------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 11,213 $ 8,483
Accrued expenses 22,829 22,583
Current maturities of long-term obligations 946 780
-------- --------
Total current liabilities 34,988 31,846
LONG-TERM OBLIGATIONS 48,731 34,655
DEFERRED INCOME TAXES 13,911 12,686
OTHER LONG-TERM OBLIGATIONS 1,874 1,207
EXCESS OF ACQUIRED NET ASSETS OVER COST, Net 805 922
POST RETIREMENT OBLIGATION OTHER THAN PENSION 5,641 5,414
MINORITY INTEREST IN SUBSIDIARIES 1,033 800
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000
authorized shares; no shares issued and outstanding -- --
Common stock, $.01 par value, 19,300,000 56 56
authorized shares; 5,570,444 and 5,564,914
shares issued and outstanding including
treasury shares, respectively
Class A common stock (non-voting), $.01 par value
700,000 authorized shares; no shares issued and
outstanding -- --
Additional paid-in capital 42,235 42,159
Retained earnings 36,024 32,712
Minimum pension liability adjustment (293) (293)
Accumulated foreign currency translation adjustme (69) 20
-------- --------
77,953 74,654
Less shares held in treasury:
Common stock, 36,002 shares, at cost -- --
-------- --------
Total stockholders' equity 77,953 74,654
-------- --------
TOTAL $184,936 $162,184
-------- --------
-------- --------
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $61,622 $40,683 $110,620 $77,670
COST OF GOODS SOLD 51,511 35,837 93,868 67,069
--------- --------- --------- ---------
GROSS PROFIT 10,111 4,846 16,752 10,601
OPERATING EXPENSES:
Selling, general and administrate 4,966 3,712 9,230 7,063
Amortization of intangibles 182 383 321 744
Other income (Note 4) -- (513) -- (10,281)
--------- --------- --------- ---------
Total operating expenses 5,148 3,582 9,551 (2,474)
--------- --------- --------- ---------
OPERATING INCOME 4,963 1,264 7,201 13,075
INTEREST EXPENSE 877 634 1,463 1,272
MINORITY INTEREST IN NET INCOME
OF SUBSIDIARIES 43 38 34 73
--------- --------- --------- ---------
INCOME BEFORE TAXES 4,043 592 5,704 11,730
INCOME TAXES 1,672 260 2,392 4,553
--------- --------- --------- ---------
NET INCOME $2,371 $332 $3,312 $7,177
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON AND
EQUIVALENT SHARE $0.43 $0.06 $0.60 $1.30
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON AND EQUIVALENT
SHARES OUTSTANDING: 5,558,267 5,519,579 5,550,589 5,515,374
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
Six Months Ended
December 31,
---------------------
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $3,312 $7,177
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 4,011 3,393
Minority interest in net income of subsidiari 34 71
(Gain) loss on disposal of capital assets 2 (7)
Accretion of long-term obligations discount -- 86
Deferred income taxes 578 706
Changes in assets and liabilities:
Receivables 717 (2,168)
Insurance receivable -- 5,357
Inventories 1,777 (2,562)
Other current assets (42) (612)
Accounts payable 318 1,370
Accrued expenses (1,147) (2,062)
Post retirement obligation other
than pension 227 34
Other 57 19
------ ------
Cash provided by operating activitie 9,844 10,802
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,494) (6,136)
Payment for purchase of net assets of subsidiarie (22,298) (5,320)
Proceeds from sale of capital assets 3 7
Payment for purchase of minority interests (308) --
Assets held for resale (3) (76)
------ ------
Cash used in investing activities (29,100) (11,525)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 76 343
Proceeds from sale of minority interest in subsid 199 --
Payments on long-term obligations (551) --
Proceeds from issuance of long-term obligations 1,293 --
Net borrowings under revolving loan note 13,164 810
------ ------
Cash provided by financing activitie 14,181 1,153
EFFECT OF EXCHANGE RATE ON CASH (28) (1)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($5,103) $429
CASH AND CASH EQUIVALENTS, Beginning of period 7,731 759
------ ------
CASH AND CASH EQUIVALENTS, End of period $2,628 $1,188
------ ------
------ ------
CASH PAID DURING THE PERIOD FOR:
Interest $1,475 $1,258
------ ------
------ ------
Income taxes $2,424 $5,328
------ ------
------ ------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Unexpended bond funds ($164)
------
------
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies and Basis of Presentation
The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company for
the year ended June 30, 1996, as included in the Company's 1996 Annual
Report to Stockholders.
The accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of financial
position, results of operations and cash flows. Results of operations
for interim periods are not necessarily indicative of results to be
expected for a full year.
Certain December 31, 1995 amounts have been reclassified to conform with
December 31, 1996 classifications.
2. Inventories
As of
-----------------------
December 31, June 30,
1996 1996
------------ ---------
(Thousands)
Raw materials $ 5,031 $ 3,589
Work-in-process 17,482 16,677
Finished goods 2,677 1,455
Deferred supplies 3,376 2,636
-------- --------
$28,566 $24,357
-------- --------
-------- --------
3. Income Taxes
The provision for income taxes consisted of:
Six Months Ended
December 31,
1996 1995
------ -------
(Thousands)
Current:
Domestic $1,583 $3,875
Foreign 231 (28)
------ -------
$1,814 $3,847
Deferred:
Domestic $ 578 $ 706
Foreign -- --
------ -----
$ 578 $ 706
------ ------
Total $2,392 $4,553
------ -----
------ -----
<PAGE>
4. Other Income
The Company's fiscal 1996 first half results included $10.6 million
($11.8 million before deduction of fees paid to consultants who assisted
in the development of the claim and amounts recovered for the repair and
replacement of property) of partial insurance payments recorded by the
Company covering the period of July 1, 1994 through December 31, 1995.
These payments, by the Company's insurance carrier, resulted from the
business interruption portion of the Company's insurance claim filed as a
result of the July 1993 Missouri River flood.
5. Acquisitions
On October 1, 1996, the Company purchased all of the outstanding
capital stock of Los Angeles Die Casting Inc. ("LA Die Casting"), a
California corporation, for $8.8 million in cash. LA Die Casting, located
in Los Angeles, California, produces precision aluminum and zinc die
castings for the computer, communications and recreation industries. The
Company financed this transaction with funds available under its revolving
credit facility.
On October 26, 1996, the Company purchased all of the outstanding
capital stock of Canada Alloy Castings, Ltd. ("Canada Alloy") for $4.4
million (U.S.) in cash. Canada Alloy, located in Kitchener, Ontario,
produces stainless, carbon and alloy steel castings for a variety of
markets, including power generation equipment, pulp and paper machinery,
pumps and valves. The Company financed this transaction with funds
available under its revolving credit facility.
On October 31, 1996, the Company purchased all of the outstanding
capital stock of Pennsylvania Steel Foundry & Machine Company
("Pennsylvania Steel"), a Pennsylvania corporation, for $9.0 million in
cash, subject to adjustment. Pennsylvania Steel, located in Hamburg,
Pennsylvania, produces carbon and stainless steel castings for the power
generation, valve, pump and other industrial equipment markets. The
Company financed this transaction with funds available under its revolving
credit facility.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Net sales for the second quarter of fiscal 1997 were $61.6 million,
representing an increase of $20.9 million, or 51.5%, over net sales of $40.7
million in the second quarter of fiscal 1996. The operations acquired by the
Company since the beginning of fiscal 1996 generated net sales of $494,000
and $16.6 million in the second quarter of fiscal 1996 and fiscal 1997,
respectively, as follows:
FY96 2nd Qtr FY97 2nd Qtr
Operation Date Acquired Net Sales Net Sales
--------- ------------- ------------ ------------
La Grange Foundry Inc. December 14, 1995 $0.5 million $5.7 million
The G&C Foundry Company March 11, 1996 - $3.0 million
Los Angeles Die Casting Inc. October 1, 1996 - $2.4 million
Canada Alloy Castings, Ltd. October 26, 1996 - $2.0 million
Pennsylvania Steel Foundry October 31, 1996 - $3.5 million
& Machine Company
Excluding net sales generated by the operations acquired in fiscal 1996 and
fiscal 1997, net sales for the second quarter of fiscal 1997 were $45.0
million, representing an increase of $4.8 million, or 11.9%, over net sales
of $40.2 million in the second quarter of fiscal 1996. This 11.9% increase
in net sales was due primarily to increases in net sales to the mining and
construction, energy and utility markets, partially offset by a decrease in
net sales to the locomotive market.
Net sales for the first six months of fiscal 1997 were $110.6 million,
representing an increase of $32.9 million, or 42.4%, over net sales of $77.7
million in the first six months of fiscal 1996. The operations acquired by
the Company since the beginning of fiscal 1996 generated net sales of
$494,000 and $24.6 million in the first six months of fiscal 1996 and fiscal
1997, respectively, as follows:
FY96 First Six FY97 First Six
Months Months
Operation Date Acquired Net Sales Net Sales
--------- ------------- ------------ -------------
La Grange Foundry Inc. December 14, 1995 $0.5 million $10.6 million
The G&C Foundry Company March 11, 1996 - $ 6.1 million
Los Angeles Die Casting Inc. October 1, 1996 - $ 2.4 million
Canada Alloy Castings, Ltd. October 26, 1996 - $ 2.0 million
Pennsylvania Steel Foundry October 31, 1996 - $ 3.5 million
& Machine Company
Excluding net sales generated by the operations acquired in fiscal 1996 and
fiscal 1997, net sales for the first six months of fiscal 1997 were $86.0
million, representing an increase of $8.8 million, or 11.4%, over net sales
of $77.2 million in the first six months of fiscal 1996. This 11.4% increase
in net sales was due primarily to increases in net sales to the mining and
construction, energy and utility markets, partially offset by a decrease in
net sales to the locomotive market.
<PAGE>
Gross profit for the second quarter of fiscal 1997 increased by $5.3 million,
or 108.6%, to $10.1 million, or 16.4% of net sales, compared to $4.8 million,
or 11.9% of net sales, for the second quarter of fiscal 1996. Gross profit
for the first six months of fiscal 1997 increased by $6.2 million, or 58.0%,
to $16.8 million, or 15.1% of net sales, compared to $10.6 million, or 13.6%
of net sales, for the first six months of fiscal 1996. The increase in gross
profit for both periods is primarily attributable to increased sales volume
levels. The increase in gross profit as a percentage of net sales for both
periods is primarily attributable to the inclusion in the prior year periods
of (i) the completion, at Canadian Steel Foundries, Ltd. ("Canadian Steel"),
of several negative margin orders which were accepted prior to the
acquisition of Canadian Steel by the company, (ii) costs associated with the
start-up of the Company's Amite facility in Louisiana and non-recurring costs
associated with the transfer to that facility of production from a foundry
purchased in May 1995 and (iii) above average training expenses associated
with the start-up of new products. Partially offsetting these factors were
lost production and expenses associated with the conversion from cupola to
electric melting at The G&C Foundry Company ("G&C") and costs associated with
the addition of iron casting capability at Empire Steel Castings, Inc.
("Empire"). The increase in gross profit as a percentage of net sales for
the first six months of fiscal 1997 is also attributable to higher
maintenance costs in the first six months of fiscal 1996 associated with
deferred maintenance expense on two newly acquired foundries and increased
maintenance costs related to regularly scheduled July shut-downs at the
Company's other facilities.
Selling, general and administrative expenses for the second quarter of fiscal
1997 were $5.0 million, or 8.1% of net sales, as compared to $3.7 million, or
9.1% of net sales, in the second quarter of fiscal 1996. For the first six
months of fiscal 1997, selling, general and administrative expenses were $9.2
million, or 8.3% of net sales, compared to $7.1 million or 9.1% of net sales,
for the first six months of fiscal 1996. The increase in selling, general
and administrative expense in both periods was primarily attributable to
expenses associated with the operations acquired by the Company in fiscal
1996 and fiscal 1997. The decrease in selling, general and administrative
expense as a percentage of net sales in both periods was primarily due to the
increase in net sales.
Amortization of certain intangibles for the second quarter of fiscal 1997 was
$182,000, or 0.3% of net sales, as compared to $383,000, or 0.9% of net
sales, in the second quarter of fiscal 1996. Amortization of certain
intangibles for the first six months of fiscal 1997 was $321,000 or 0.3% of
net sales, as compared to $744,000, or 1.0% of net sales, for the first six
months of fiscal 1996. The intangible assets consist of goodwill recorded in
connection with the acquisitions of Prospect Foundry, Inc., Kramer
International, Inc., Empire, G&C and Los Angeles Die Casting Inc. ("LA Die
Casting"). During fiscal 1996, the intangible assets included the
capitalized value of a non-compete agreement with Rockwell International,
which became fully amortized in June 1996. Partially offsetting the expense
relating to the amortization of these assets is the amortization of the
excess of acquired net assets over cost (negative goodwill) recorded by the
Company in connection with the acquisition of Canadian Steel.
Other income in the second quarter of fiscal 1996 was $513,000 ($315,000, net
of related income tax expense of $198,000), consisting primarily of a
$741,000 ($780,000 before deduction of fees paid to consultants who assisted
in the development of the claim) partial payment by the Company's insurance
carrier and $195,000 of expenses incurred by the Company in preparing a
secondary offering of its common stock, which was subsequently withdrawn by
the Company. Other income in the first six months of fiscal 1996 was $10.3
million ($6.3 million, net of related income tax expense of $4.0 million),
consisting primarily of $10.6 million ($11.8 million before deduction of fees
paid to consultants who assisted in the development of the claim and amounts
recovered for the repair and replacement of property) of partial payments by
the Company's insurance carrier. The payments by the Company's insurance
carrier, in both periods of fiscal
<PAGE>
1996, resulted from the business interruption portion of the Company's
insurance claim filed as a result of the July 1993 Missouri River flood.
Interest expense for the second quarter of fiscal 1997 increased to $877,000,
or 1.4% of net sales, from $634,000, or 1.6% of net sales, in the second
quarter of fiscal 1996. For the first six months of fiscal 1997, interest
expense increased to $1.5 million, or 1.3% of net sales, from $1.3 million,
or 1.6% of net sales, in the first six months of fiscal 1996. The increase
in interest expense for both periods is primarily the result of an increase
in the average amount of indebtedness outstanding. The increase in the
average amount of outstanding indebtedness is primarily a result of the
Company's acquisitions.
Income tax expense of the second quarter and first six months of fiscal 1997
has been provided at the combined federal and state statutory rate of
approximately 41.0%. Income tax expense for the second quarter of fiscal
1996 was provided at the combined federal and state statutory rate of
approximately 41.0%. Income tax expense for the first six months of fiscal
1996 has been provided at the combined federal and state statutory rate of
approximately 39.0%.
As a result of the foregoing factors, net income for the second quarter of
fiscal 1997 was $2.4 million, compared to net income of $322,000 for the
second quarter of fiscal 1996. Net income for the first six months of fiscal
1997 was $3.3 million, compared to net income of $7.2 million for the first
six months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operating activities for the first six months of fiscal 1997
was $9.8 million, a decrease of $1.0 million from the first six months of
fiscal 1996. This decrease was primarily attributable to a decrease in net
income and decreased working capital requirements primarily relating to
reduced inventory balances.
Working capital was $37.3 million at December 31, 1996, as compared to $36.4
million at June 30, 1996. The increase primarily resulted from net
additional working capital of $7.3 million associated with the Company's
acquisitions, partially offset by the application of existing cash balances
to outstanding long-term indebtedness balances.
During the first six months of fiscal 1997 the Company made capital
expenditures of $6.5 million, as compared to $6.1 million for the first six
months of fiscal 1996. Included in the first six months of fiscal 1997 were
capital expenditures of $1.9 million at G&C, primarily relating to the
conversion from cupola to electric melting. The balance of capital
expenditures was used for routine projects at each of the Company's
facilities. Included in the first six months of fiscal 1996 were capital
expenditures of $544,000 to acquire a production facility previously leased
by the Company's subsidiary, Prospect Foundry, Inc., and capital expenditures
of $1.1 million to acquire an inactive production/storage facility adjacent
to the Company's Canadian Steel subsidiary.
Total indebtedness of the Company at December 31, 1996 was $49.7 million, as
compared to $35.4 million at June 30, 1996. This increase of $14.3 million
primarily reflects indebtedness incurred of $8.8 million, $4.4 million and
$9.0 million to finance the acquisition of LA Die Casting, Canada Alloy
Castings, Ltd. ("Canada Alloy") and Pennsylvania Steel Foundry & Machine
Company ("Pennsylvania Steel"), respectively.
On October 1, 1996, the Company purchased all of the outstanding capital
stock of LA Die Casting, a California corporation, for $8.8 million in cash.
LA Die Casting, located in Los Angeles, California, produces precision
aluminum and zinc die castings for the computer,
<PAGE>
communications and recreation industries. The Company financed this
transaction with funds available under its revolving credit facility.
On October 26, 1996, the Company purchased all of the outstanding capital
stock of Canada Alloy for $4.4 million (U.S.) in cash. Canada Alloy, located
in Kitchener, Ontario, produces stainless, carbon and alloy steel castings
for a variety of markets, including power generation equipment, pulp and
paper machinery, pumps and valves. The Company financed this transaction
with funds available under its revolving credit facility.
On October 31, 1996, the Company purchased all of the outstanding capital
stock of Pennsylvania Steel, a Pennsylvania corporation, for $9.0 million in
cash, subject to adjustment. Pennsylvania Steel, located in Hamburg,
Pennsylvania, produces carbon and stainless steel castings for the power
generation, valve, pump and other industrial equipment markets. The Company
financed this transaction with funds available under its revolving credit
facility.
The Company anticipates that its operating cash flow and amounts available
under its bank revolving credit facility will be adequate to fund capital
expenditures and working capital requirements for the next two years.
<PAGE>
PART II
ITEM 1 - Legal Proceedings
NOT APPLICABLE
ITEM 2 - Changes in Securities
NOT APPLICABLE
ITEM 3 - Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on November 15, 1996.
Stockholders owning 5,273,409 shares voted in favor of Paul C. Craig
as a Class III director. There were 2,863 shares withheld.
Stockholders owning 5,273,457 shares voted in favor of Ray H. Witt as
a Class III director. There were 2,815 shares withheld. Accordingly,
Mr. Craig and Mr. Witt were elected as Class III directors for a term
of three years. Previously elected and continuing to serve their
terms are Hugh H. Aiken, David L. Belluck and John O. Whitney.
ITEM 5 - Other Information
NOT APPLICABLE
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10 Purchase and Sale Agreement dated as of December 30, 1996 by
and among Kramer International, Inc., James Stott and David
Jungen.
27 Financial Data Schedule
(B) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1996.
<PAGE>
* * * * * * * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Atchison Casting Corporation
-------------------------------
(Registrant)
DATE: January 29, 1997 /s/ HUGH H. AIKEN
--------------------------------
Hugh H. Aiken, Chairman of the
Board, President and Chief
Executive Officer
DATE: January 29, 1997 /s/ KEVIN T. MCDERMED
------------------------------------
Kevin T. McDermed, Vice President,
Chief Financial Officer, Treasurer
and Secretary
<PAGE>
WB-15 COMMERCIAL OFFER TO PURCHASE
GENERAL PROVISIONS
The Buyer, Kramer International, Inc., offers to purchase the Property known as
114 East Pittsburgh Avenue in the City of Milwaukee, County of Milwaukee,
Wisconsin
(Additional description, if any:) as per title insurance commitment
- - PURCHASE PRICE: Three Hundred Fifty Thousand and 00/100 Dollars
($ 350,000.00):
- - EARNEST MONEY of $ ---- in the form of ---- accompanies this Offer and
earnest money of $ ---- in the form of ---- will be paid within ----- days of
acceptance.
- - THE BALANCE OF PURCHASE PRICE will be paid in cash or equivalent at closing
unless otherwise provided below.
- - ADDITIONAL ITEMS INCLUDED IN PURCHASE PRICE: Seller shall include in the
purchase price and transfer, free and clear of encumbrances, all fixtures, as
defined herein and as may be on the Property on the date of this Offer, unless
excluded below and the following additional items: None. All personal property
included in purchase price will be transferred by Bill of Sale. - ITEMS NOT
INCLUDED IN THE PURCHASE PRICE: __________________________________________.
- - PROPERTY CONDITION REPRESENTATIONS: See Addendum A .
- - TIME IS OF THE ESSENCE as to: (1) earnest money payment(s); (2) binding
acceptance; (3) occupancy; (4) date of closing and all other dates and
deadlines in this Offer except ________________________________________________
______________________________________________________________________________.
ACCEPTANCE, DELIVERY AND RELATED PROVISIONS
- - BINDING ACCEPTANCE: This Offer is binding upon both parties only if a copy
of the accepted Offer is delivered to Buyer on or before December 31, 1996
- - DELIVERY OF DOCUMENTS AND WRITTEN NOTICES: Unless otherwise stated in this
Offer, delivery of documents and written notices to a party shall be effective
only when accomplished in any of the following ways:
(1) By depositing the document or written notice postage or fees prepaid in the
U.S. Mail or a commercial delivery system addressed to the party at:
Buyer: 114 East Pittsburgh Avenue, Milwaukee, Wisconsin 53204
Seller: 114 East Pittsburgh Avenue, Milwaukee, Wisconsin 53204
(2) By giving the document or written notice personally to the party;
(3) By electronically transmitting the document or written notice to the
following telephone number: Buyer: (414) 278-0479
Seller: (414)278-0479 . Any signed document transmitted by fax shall be
considered an original document and shall have the binding and legal effect of
an original document. The signature of any Party upon a faxed document shall be
considered an original signature.
OCCUPANCY AND RELATED PROVISIONS
- - OCCUPANCY of the Property shall be given to Buyer at time of closing unless
otherwise agreed in writing.
- - LEASED PROPERTY: See Addendum A .
- - RENTAL WEATHERIZATION: This transaction is exempt from State of Wisconsin
Rental Weatherization Standards (ILHR 67, Wisconsin Administrative Code). If
not exempt, (Buyer) (Seller) [STRIKE ONE] will be responsible for compliance,
including all costs.
CLOSING AND RELATED PROVISIONS
- - CLOSING: This transaction is to be closed at the place designated by
Buyer's mortgagee or O'Neil, Cannon & Hollman, S.C. no later than January 2,
1997, unless another date or place is agreed to in writing.
- - CLOSING PRORATIONS: The following items shall be prorated at closing: None.
- - SPECIAL ASSESSMENTS: See Addendum
- - FORM OF TITLE EVIDENCE: Seller shall give evidence of title by an OWNER'S
policy of title insurance as further described under TITLE EVIDENCE.
- - CONVEYANCE OF TITLE: Upon payment of the purchase price, Seller shall
convey the Property by warranty deed (or other conveyance as provided herein)
free and clear of all liens and encumbrances, except: municipal and zoning
ordinances and agreements entered under them, recorded easements for the
distribution of utility and municipal services, recorded building and use
restrictions and covenants, general taxes levied in the year of closing and
None other (provided none of the foregoing prohibit present use of the
Property), which constitutes merchantable title for purposes of this
transaction. Seller further agrees to complete and execute the documents
necessary to record the conveyance.
<PAGE>
PROPERTY IMPROVEMENT, DEVELOPMENT OR CHANGE OF USE.
PROPERTY CONDITION PROVISIONS
- - PROPERTY DIMENSIONS AND SURVEYS: Buyer acknowledges that any Property,
building or room dimensions, or total acreage or building square footage
figures, provided to Buyer by Seller or Seller's agent(s), may be approximate
because of rounding or other reasons, unless verified by survey or other
means. Buyer also acknowledges that there are various formulas used to
calculate total square footage of buildings and that total square footage
figures will vary dependent upon the formula used.
- - INSPECTIONS: Seller agrees to allow Buyer's inspectors reasonable access
to the Property upon reasonable notice if the inspections are reasonably
necessary to satisfy the contingencies in this Offer. Buyer agrees to
promptly provide copies of all such inspection reports to Seller, and to
listing broker if Property is listed. Furthermore, Buyer agrees to promptly
restore the Property to its original condition after Buyer's inspections are
completed, unless otherwise agreed with Seller.
- - PROPERTY DAMAGE BETWEEN ACCEPTANCE AND CLOSING: Seller shall maintain the
Property until the earlier of closing or occupancy by Buyer in materially the
same condition as of the date of acceptance of this Offer. If, prior to the
earlier of closing or occupancy by Buyer, the Property is damaged in an
amount of not more than five per cent (5%) of the selling price, Seller shall
be obligated to restore the Property. If Seller is unable to restore the
Property, Seller shall promptly notify Buyer in writing and this Offer may be
cancelled at the option of the Buyer. If the damage shall exceed such sum,
Seller shall promptly notify Buyer in writing of the damage and this Offer
may be cancelled at option of Buyer. Should Buyer elect to carry out this
Offer despite such damage, Buyer shall be entitled to any insurance proceeds
relating to the damage to the Property, plus a credit towards the purchase
price equal to the amount of Seller's deductible on such policy.
- - PRE-CLOSING INSPECTION: At a reasonable time, preapproved by Seller or
Seller's agent, within 3 days before closing, Buyer shall have the right to
inspect the Property to determine that there has been no significant change
in the condition of the Property, except for changes approved by Buyer.
DEFAULT
Seller and Buyer each have the legal duty to use good faith and due diligence
in completing the terms and conditions of this Offer. A material failure to
perform any obligation under this Offer is a default which may subject the
defaulting party to liability for damages or other legal remedies.
If BUYER DEFAULTS. Seller may:
(1) sue for specific performance and request the earnest money as partial
payment of the purchase price; or
(2) terminate the Offer and have the option to: (a) request the earnest
money as liquidated damages; or (b) direct broker to return the earnest
money and have the option to sue for actual damages.
If SELLER DEFAULTS. Buyer may:
(1) sue for specific performance; or
(2) terminate the Offer and request the return of the earnest money, sue
for actual damages, or both.
In addition, the Parties may seek any other remedies available in law or
equity.
The Parties understand that the availability of any judicial remedy will
depend upon the circumstances of the situation and the discretion of the
courts. If either Party defaults, the Parties may renegotiate the Offer or
seek nonjudicial dispute resolution instead of the remedies outlined above.
By agreeing to binding arbitration, the Parties may lose the right to
litigate in a court of law those disputes covered by the arbitration
agreement.
NOTE: WISCONSIN LICENSE LAW PROHIBITS A BROKER FROM GIVING ADVICE OR
OPINIONS CONCERNING THE LEGAL RIGHTS OR OBLIGATIONS OF PARTIES TO A
TRANSACTION OR THE LEGAL EFFECT OF A SPECIFIC CONTRACT OR CONVEYANCE.
AN ATTORNEY SHOULD BE CONSULTED IF LEGAL ADVICE IS REQUIRED. Buyer's or
Seller's legal right to earnest money cannot be determined by broker. In
the absence of a mutual agreement by the Parties, earnest money will be
distributed as set forth below.
ENTIRE CONTRACT
This Offer, including any amendments, contains the entire agreement of the
Parties regarding the transaction. All prior negotiations and discussions
have been merged into this Offer. This agreement binds and inures to the
benefit of the Parties to this Offer and their successors in interest.
EARNEST MONEY
- - HELD BY: Earnest money, if held by a broker, shall be held in the trust
account of the broker drafting the Offer prior to acceptance of Offer and in
the trust account of the listing broker (Buyer's agent if Property is not
listed) after acceptance until applied to purchase price or otherwise
disbursed as provided in the Offer. If negotiations do not result in an
accepted offer, the earnest money shall be promptly disbursed (after
clearance from payor's depository institution if earnest money is paid by
check) to the person who paid the earnest money.
- - DISBURSEMENT: At closing, earnest money shall be disbursed according to
the closing statement. If this Offer does not close, the earnest money shall
be disbursed according to a written disbursement agreement signed by all
Parties to this Offer. If said disbursement agreement has not been delivered
to broker within 60 days after the date set for closing, broker may disburse
the earnest money: (1) as directed by an attorney who has reviewed the
transaction and does not represent Buyer or Seller; (2) into a court hearing
a lawsuit involving the earnest money and all Parties to this Offer; (3) as
directed by court order; or (4) any other disbursement required or allowed by
law. Broker may retain legal services to direct disbursement per (1) or to
file an interpleader action per (2) and, in such event, broker may deduct
from the earnest money any costs and reasonable attorneys fees, not to exceed
$250, prior to disbursement. Should persons other than broker hold earnest
money, an escrow agreement should be drafted by the Parties or an attorney
for Buyer or Seller.
<PAGE>
- - LEGAL RIGHTS/ACTION: Broker's disbursement of earnest money does not
determine the legal rights of the Parties in relation to this Offer. At least
30 days prior to disbursement per (1) or (4), broker shall send Buyer and
Seller notice of the disbursement by certified mail. If Buyer or Seller
disagree with broker's proposed disbursement, a lawsuit may be filed to
obtain a court order regarding disbursement. Small Claims Court has
jurisdiction over all earnest money disputes arising out of the sale of
residential property with 1-4 dwelling units and certain other earnest money
disputes. The Buyer and Seller should consider consulting attorneys regarding
their legal rights under this Offer in case of a dispute. Both Parties
agree to hold the broker harmless from any liability for good faith
disbursement of earnest money in accordance with this Offer or applicable
Department of Regulation and Licensing regulations concerning earnest money.
See Wis. Administrative Code RL 18.
TITLE EVIDENCE
- - FORM OF TITLE EVIDENCE: Seller shall give evidence of title (as selected)
under CONVEYANCE OF TITLE to the Property in the form of an owner's policy of
title insurance in the amount of the purchase price on a current ALTA form
issued by an insurer licensed to write title insurance in Wisconsin.
- - PROVISION OF MERCHANTABLE TITLE: Seller shall pay all costs of providing
title evidence. For purposes of closing, title evidence shall be acceptable
if the abstract or a commitment for the required title insurance is delivered
to Buyer's attorney or to Buyer not less than 5 business days before closing,
showing title to the Property as of a date no more than 15 days before
delivery of such title evidence to be merchantable, subject only to liens
which will be paid out of the proceeds of closing and standard abstract
certificate limitations or standard title insurance requirements and
exceptions, as appropriate.
- - TITLE ACCEPTABLE FOR CLOSING: If title is not acceptable for closing,
Buyer shall notify Seller in writing of objections to title by the time set
for closing. In such event, Seller shall have a reasonable time, but not
exceeding 15 days, to remove the objections, and the time for closing shall
be extended as necessary for this purpose. In the event that Seller is unable
to remove said objections, Buyer shall have 5 days from receipt of notice
thereof, to deliver written notice waiving the objections, and the time for
closing shall be extended accordingly. If Buyer does not waive the
objections, this Offer shall be null and void. Providing title evidence
acceptable for closing does not extinguish Seller's obligations to give
merchantable title to Buyer.
DEFINITIONS
- - ACCEPTANCE: Acceptance occurs when all Buyers and Sellers have signed an
identical copy of the Offer, including signatures on separate but identical
copies of the Offer. See BINDING ACCEPTANCE regarding binding acceptance.
- - FIXTURES: A "Fixture" is an item of property which is physically attached
to or so closely associated with land and improvements so as to be treated as
part of the real estate, including, without limitation, physically attached
items not easily removable without damage to the Property, items specifically
adapted to the Property, and items customarily treated as fixtures. A
"fixture" does not include trade fixtures owned by tenants of the Property.
- - INSPECTION: An "inspection" as defined as an observation of the Property
which does not include testing of the Property.
- - OTHER EXPENSES: In addition to "special assessments for work on site",
government entities may charge one-time or ongoing use fees for other public
improvements relating to curb, gutter, street, sidewalk, sanitary and storm
sewer (including all sewer mains and hook-up and interceptor charges), parks,
street lighting and street trees, and impact fees for other public
facilities, as defined in Wis. Stats. Section 66.55(1)(c) & (f).
- - TEST: A "test" is defined as the taking of samples of materials such as
soils, water or building materials from the Property and the laboratory or
other analysis of these materials Note: Any contingency authorizing such
tests should specify the areas of the Property to be tested, the purpose of
the test (e.g. to determine the presence or absence of environmental
contamination), any limitations on Buyer's testing and any other material
terms of the contingency (e.g. Buyer's obligation to return the Property to
its original condition).
PROPERTY DESCRIPTION: 114 East Pittsburgh Avenue, Milwaukee, Wisconsin
- - ADDENDA: The attached Addenda A is made part of this Offer.
ADDITIONAL PROVISIONS ________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________ IF ACCEPTED, THIS OFFER CAN CREATE A LEGALLY
ENFORCEABLE CONTRACT. BOTH PARTIES SHOULD CAREFULLY READ THIS DOCUMENT.
BROKERS MAY PROVIDE A GENERAL EXPLANATION OF THE PROVISIONS OF THE OFFER BUT
ARE PROHIBITED BY LAW FROM GIVING ADVICE OR OPINIONS CONCERNING YOUR LEGAL
RIGHTS UNDER THIS OFFER OR HOW TITLE SHOULD BE TAKEN AT CLOSING. AN ATTORNEY
SHOULD BE CONSULTED IF LEGAL ADVICE IS REQUIRED.
This Offer was drafted on December 24, 1996 (date) by N/A
Kramer International, Inc. (Licensee and Firm)
(x)By:/s/ Kevin T. McDermed 12/30/96
---------------------------------- --------------------- ------------
(Buyer's Signature) Print Name here: (Social Security No.) (Date)
(x)
---------------------------------- ------------------------------------
(Buyer's Signature) Print Name here: (Social Security No.) (Date)
EARNEST MONEY RECEIPT BROKER ACKNOWLEDGES RECEIPT OF EARNEST MONEY AS PER LIEN
10 OF THE ABOVE OFFER.
<PAGE>
______________________________ Broker (By)____________________________ SELLER
ACCEPTS THIS OFFER. THE WARRANTIES, REPRESENTATIONS AND COVENANTS MADE IN THIS
OFFER SURVIVE CLOSING AND THE CONVEYANCE OF THE PROPERTY. THE UNDERSIGNED
HEREBY AGREES TO CONVEY THE ABOVE-MENTIONED PROPERTY ON THE TERMS AND
CONDITIONS AS SET FORTH HEREIN AND ACKNOWLEDGES RECEIPT OF A COPY OF THIS OFFER.
(x) /s/ David Jungen 12/30/96
- ------------------------------- --------------------- ------------------
(Seller's Signature)^ (Social Security No.) (Date)
Print Name here:> David Jungen
(x) /s/ James Stott 12/30/96
- ------------------------------- --------------------- -------------------
(Seller's Signature)^ (Social Security No.) (Date)
Print Name here:> James Stott
<PAGE>
ADDENDUM A
to WB-15 Commercial Offer to Purchase
dated December 24, 1996 for the Property
located at 114 East Pittsburgh Avenue,
Milwaukee, Wisconsin 53204
1. Buyer has fully inspected the Property and accepts the Property in an
"As Is" condition, it being understood that Seller makes no warranties
or representations pertaining to conditions affecting the Property or
transaction.
2. Any lease between Buyer and Seller (oral or written) shall be deemed
canceled as of the closing of this transaction. Each party
acknowledges that the other party has fulfilled all the terms of said
lease, and releases the other party from any obligations under said
lease subsequent to the
closing.
3. Buyer acknowledges notice of contemplated special assessments from
the City of Milwaukee which Buyer assumes. Seller shall have no
liability with respect to any special assessment.
Kramer International, Inc.
By: /s/ Kevin T. McDermed /s/ David Jungen
--------------------- ----------------
Kevin McDermed David Jungen
Chief Financial Officer
/s/ James Stott
-----------------
James Stott
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<PAGE>
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2628
<SECURITIES> 0
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 184936
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