<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: August 9, 1996
(Date of earliest event reported)
GARDNER DENVER MACHINERY INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-23612 76-0419383
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification No.)
1800 Gardner Expressway
Quincy, Illinois 62301
(Address of Principal Executive Offices and Zip Code)
(217) 222-5400
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
- ---------------------------------------------
On August 9, 1996, pursuant to a Stock Purchase Agreement dated July 11, 1996
among Gardner Denver Machinery Inc. ("Gardner Denver"), NORAMPTCO, Inc. a
Delaware corporation ("NORAMPTCO"), Jacques Lepage, Suzanne Lepage, Anne
Lepage and Arthur Lepage, Gardner Denver acquired (i) from Jacques Lepage,
all of the issued and outstanding shares of capital stock of NORAMPTCO, all
of the issued and outstanding shares of capital stock of Lamcor, Ltd., a
United Kingdom corporation, and all of the issued and outstanding shares of
capital stock of Lamson Corporation, a New York corporation and a subsidiary
of NORAMPTCO, not owned by NORAMPTCO; and (ii) from Jacques Lepage, Suzanne
Lepage, Anne Lepage and Arthur Lepage, all of the issued and outstanding
capital stock of Lamson Europe S.A., a French corporation, not owned by
NORAMPTCO, Lamson Corporation or U.S. Turbine Corporation, a Delaware
corporation and a wholly-owned subsidiary of NORAMPTCO. The aggregate
purchase price was approximately $30.5 million in cash, subject to adjustment
based upon a closing balance sheet, and was negotiated between Gardner Denver
and Jacques Lepage as the fair market value for the capital stock acquired.
Funding for this acquisition was provided under Gardner Denver's existing $65
million credit facility, entered into on November 30, 1995, as to which The
First National Bank of Chicago acts as agent for itself and the other lenders
participating in the credit facility.
The assets indirectly acquired by the acquisition of capital stock are those
assets previously used by NORAMPTCO and its subsidiaries in the manufacture
and distribution of cast iron centrifugal blower and exhauster component
systems and fabricated steel multi-stage centrifugal blowers and exhausters.
Gardner Denver currently intends to continue to use such assets for the
purposes used by NORAMPTCO and its subsidiaries prior to the subject
transaction.
Item 7. Financial Statements and Exhibits
- ------------------------------------------
The following financial statements, pro forma financial information and
exhibits are filed as part of this report.
(a) Financial statements of NORAMPTCO for the fiscal year ended January 31,
1996, in accordance with Rule 3.05 of Regulation S-X:
<TABLE>
<CAPTION>
Item Page
---- ----
<S> <C>
Audited financial statements of NORAMPTCO
Report of Ernst & Young LLP, Independent Auditors 7
Consolidated Balance Sheet - As of January 31, 1996 8
Consolidated Statement of Income - Year Ended January 31, 1996 10
Consolidated Statement of Stockholders' Equity - Year Ended 11
January 31, 1996
2
<PAGE> 3
<CAPTION>
Page
----
<S> <C>
Consolidated Statement of Cash Flows - Year Ended January 31, 1996 12
Notes to Consolidated Financial Statements 13
Unaudited interim financial statements of NORAMPTCO
Consolidated Balance Sheet - As of July 31, 1996 24
Consolidated Statement of Operations - Six Months Ended July 31, 1996 25
Consolidated Statement of Cash Flows - Six Months Ended July 31, 1996 26
Notes to Consolidated Financial Statements 27
(b) Pro forma financial information prepared pursuant to Article 11 of Regulation S-X:
--- -----
<CAPTION>
Item Page
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<S> <C>
Gardner Denver Machinery Inc. and NORAMPTCO Inc. Pro Forma 29
Consolidated Financial Statements (Unaudited)
Pro Forma Consolidated Balance Sheet - As of June 30, 1996 30
Pro Forma Consolidated Statement of Operations - 32
Six Months Ended June 30, 1996
Pro Forma Consolidated Statement of Operations - 34
Year Ended December 31, 1995
</TABLE>
(c) Exhibits
2.0 Stock Purchase Agreement dated July 11, 1996, among Gardner Denver,
NORAMPTCO, Jacques Lepage, Suzanne Lepage, Anne Lepage and Arthur
Lepage. All schedules and exhibits described in the Stock Purchase
Agreement have been omitted and Gardner Denver will furnish
supplementally to the Commission, upon request, a copy of any
omitted schedule or exhibit. (Filed with initial Current Report on
Form 8-K on August 23, 1996.)
3
<PAGE> 4
SIGNATURE
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.
GARDNER DENVER MACHINERY INC.
Date: October 23, 1996 By: /s/Philip R. Roth
-----------------------------
Philip R. Roth
Vice President, Finance and
Chief Financial Officer
4
<PAGE> 5
GARDNER DENVER MACHINERY INC.
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
2.0 Stock Purchase Agreement dated July 11, 1996, among
Gardner Denver, NORAMPTCO, Jacques Lepage, Suzanne Lepage, Anne
Lepage and Arthur Lepage. (Filed with initial Current Report on
Form 8-K on August 23, 1996.)
</TABLE>
5
<PAGE> 6
Consolidated Financial Statements
NORAMPTCO, Inc.
Year ended January 31, 1996
with Report of Independent Auditors
6
<PAGE> 7
Report of Independent Auditors
Board of Directors
NORAMPTCO, Inc.
We have audited the accompanying consolidated balance sheet of NORAMPTCO,
Inc. as of January 31, 1996, and the related consolidated statements of
income, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of NORAMPTCO, Inc. at January 31, 1996, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 6 to the consolidated financial statements, in
1996 the Company changed its method of accounting for postretirement
benefits.
March 15, 1996 /s/Ernst & Young LLP
7
<PAGE> 8
<TABLE>
NORAMPTCO, Inc.
Consolidated Balance Sheet
January 31, 1996
<S> <C>
ASSETS
Current assets:
Cash $ 808,934
Accounts receivable:
Trade (less allowance for doubtful accounts of $255,000) 8,106,669
Affiliates 79,378
Inventories 3,368,659
Prepaid and other current assets 278,736
Notes receivable from majority shareholder 433,921
Refundable taxes 44,990
Deferred income taxes 245,755
-----------
Total current assets 13,367,042
Notes receivable from majority shareholder, less current portion 576,608
Property, plant, and equipment, net 5,609,161
Investments 331,395
Goodwill and trademarks 849,722
Intangible pension asset 781,055
Deferred income taxes 416,382
Other assets 384,440
-----------
Total assets $22,315,805
===========
See accompanying notes.
8
<PAGE> 9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,046,169
Accrued commissions 994,317
Accrued liabilities 1,075,622
Accrued pension 1,676,239
Accrued income taxes 121,826
Current portion of long-term debt 737,718
Customer deposits 13,647
-----------
Total current liabilities 7,665,538
Postretirement benefit obligations other than pensions 111,456
Accrued pension 1,550,814
Long-term debt, less current portion 2,604,057
Minority interest in subsidiaries 947,110
-----------
Total liabilities 12,878,975
Stockholders' equity:
Capital stock, $1 par value:
Authorized, issued and outstanding 1,000 shares 1,000
Additional paid-in capital 263,227
Retained earnings 9,580,348
Adjustment to record minimum pension liability (407,559)
Foreign currency translation adjustment (186)
-----------
Total stockholders' equity 9,436,830
-----------
Total liabilities and stockholders' equity $22,315,805
===========
See accompanying notes.
</TABLE>
9
<PAGE> 10
<TABLE>
NORAMPTCO, Inc.
Consolidated Statement of Income
Year ended January 31, 1996
<S> <C>
Net sales $41,339,253
Cost of sales 27,519,683
-----------
Gross profit 13,819,570
Selling expenses 8,332,161
Administrative expenses 2,580,197
-----------
Operating income 2,907,212
Other income (expense):
Interest income 58,136
Interest expense (440,596)
Other (98,556)
-----------
Income before income taxes and minority interest 2,426,196
Provision for taxes 995,883
-----------
Income before minority interest 1,430,313
Minority interest (183,000)
-----------
Net income $ 1,247,313
===========
Earnings per share $ 1,247
===========
See accompanying notes.
10
<PAGE> 11
</TABLE>
<TABLE>
NORAMPTCO, Inc.
Consolidated Statement of Stockholders' Equity
Year ended January 31, 1996
<CAPTION>
Adjustment Adjustment
to Record to Record
Additional Minimum Foreign Total
Capital Paid-In Retained Pension Currency Stockholders'
Stock Capital Earnings Liability Translation Equity
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1995 $1,000 $263,227 $8,333,035 $(887,353) $(19,968) $7,689,941
Net income - - 1,247,313 - - 1,247,313
Adjustment to record
minimum pension liability - - - 479,794 - 479,794
Adjustment to record foreign
currency translation - - - - 19,782 19,782
---------------------------------------------------------------------------------------
Balance at January 31, 1996 $1,000 $263,227 $9,580,348 $(407,559) $ (186) $9,436,830
=======================================================================================
See accompanying notes.
</TABLE>
11
<PAGE> 12
<TABLE>
NORAMPTCO, Inc.
Consolidated Statement of Cash Flows
Year ended January 31, 1996
<S> <C>
OPERATING ACTIVITIES
Net income $ 1,247,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 834,066
Amortization of goodwill and trademarks 32,136
Provision for deferred income taxes (99,224)
Minority interest 183,000
Foreign currency adjustment 19,782
Changes in operating assets and liabilities:
Accounts receivable 1,147,492
Due from affiliates (76,822)
Inventories 25,981
Refundable taxes (44,990)
Prepaid and other current assets 41,163
Accounts payable 396,462
Accrued commissions (42,613)
Accrued liabilities (240,516)
Customer deposits (941,900)
Accrued postretirement benefits other than pensions 111,456
Accrued pension, net of intangible asset and equity adjustment 116,496
Accrued taxes 21,352
-----------
Net cash provided by operating activities 2,730,634
INVESTING ACTIVITIES
Purchase of property, plant, and equipment (780,760)
Notes receivable funded (638,295)
Collections on notes receivable 425,304
Purchase of trademarks (80,000)
Increase in investments and other assets (77,549)
-----------
Net cash used in investing activities (1,151,300)
FINANCING ACTIVITIES
Payments under line of credit arrangement (1,352,000)
Proceeds from long-term debt 500,000
Payments on long-term debt (848,120)
-----------
Net cash used in financing activities (1,700,120)
-----------
Net decrease in cash (120,786)
Cash at beginning of year 929,720
-----------
Cash at end of year $ 808,934
===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 446,580
Cash paid for income taxes (including payments to parent) 1,090,767
See accompanying notes.
</TABLE>
12
<PAGE> 13
NORAMPTCO, Inc.
Notes to Consolidated Financial Statements
Year ended January 31, 1996
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION
NORAMPTCO, Inc. (the Company) engineers and manufactures air and gas handling
centrifugal blowers and exhausters for a wide range of worldwide industrial,
municipal, and commercial uses.
Significant accounting policies of the Company are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiary, U. S. Turbine Corporation, and its majority
owned subsidiaries, Lamson Corporation and Lamson Europe. All significant
intercompany profits, transactions, and account balances have been eliminated
in consolidation. The Company's majority-owned subsidiary, Lamson Europe,
has a year end of December 31.
INVENTORIES
Inventories are valued at the lower of cost or market. The majority of
consolidated inventory is determined on a last-in, first-out (LIFO) basis.
PROPERTY, PLANT, AND EQUIPMENT
The Company records property, plant, and equipment at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of
the assets, ranging from 3 to 25 years.
GOODWILL AND TRADEMARKS
Goodwill and trademarks are being amortized on a straight-line basis over
40-year and 15-year periods, respectively. Accumulated amortization was
$659,407 at January 31, 1996.
13
<PAGE> 14
Notes to Consolidated Financial Statements (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
Deferred taxes arise from temporary differences between financial and tax
reporting, relating principally to the difference in methods of accounting
for depreciation and accrued expenses.
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
POSTRETIREMENT BENEFITS
Certain employees may be eligible for postretirement health care and life
insurance benefits upon retirement from Lamson Corporation. As more fully
disclosed in Note 6, effective February 1, 1995, Lamson Corporation adopted
the provision of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
RESEARCH AND DEVELOPMENT COSTS
Product research and development costs are charged to expense as incurred.
Research and development expense for the year ended January 31, 1996 was
$975,000.
EARNING PER SHARE
Net earning per common share are determined by dividing the weighted average
number of common shares outstanding during the year (1,000 shares) into net
earnings.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of Lamson Corporation's long-term debt is a reasonable
estimate of its fair value due to the variable interest rate on the term
loans and the fact that the Lamson Corporation could go out into the market
and obtain a revenue bond with a rate similar to that being paid on the
Industrial Development Revenue Bonds. In addition, the carrying value of
U.S. Turbine Corporation's long-term debt is a reasonable estimate of its
fair value due to the variable interest rate on the facility loan.
14
<PAGE> 15
Notes to Consolidated Financial Statements (Continued)
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<S> <C>
Raw materials and finished parts $ 3,657,359
Work in process 1,061,300
-----------
Total inventories at FIFO cost 4,718,659
LIFO reserve (1,350,000)
-----------
$ 3,368,659
===========
</TABLE>
3. Property, Plant, and Equipment
Property, plant, and equipment consists of the following:
<TABLE>
<S> <C>
Land $ 322,770
Building 4,102,859
Machinery and equipment 5,646,298
Furniture, fixtures, and equipment 2,478,651
Construction in progress 22,500
-----------
12,573,078
Less accumulated depreciation 6,963,917
-----------
$ 5,609,161
===========
</TABLE>
4. DEBT
Notes Payable
- -------------
Lamson Corporation has the following line of credit arrangements with Key Bank
available:
A $3,000,000 line of credit for working capital purposes. Borrowings bear
interest at the bank's base rate and are collateralized by inventory and
accounts receivable of Lamson Corporation. As of January 31, 1996 there were
no borrowings outstanding under this line of credit.
A $1,500,000 line of credit for Standby Letters of Credit in the event that
the $3,000,000 is fully utilized. Bank fees equal 1% of the face amount of
the Standby Letters of Credit. Borrowings are collateralized by inventory and
accounts receivable of Lamson Corporation.
15
<PAGE> 16
Notes to Consolidated Financial Statements (Continued)
4. DEBT (CONTINUED)
A $1,000,000 line of credit for purchase of equipment or capital
improvements. Borrowings bear interest at the bank's base rate. Borrowings
are collateralized by any equipment purchased with proceeds from the line and
inventory of Lamson Corporation. During the year Lamson Corporation borrowed
$500,000 against this line of credit which is being repaid over five years as
required by the terms of this agreement. As of January 31, 1996 the
outstanding balance under this line of credit and identified as Key Bank -
Building Improvement Loan II was $425,000.
Each of these line of credit arrangements is guaranteed by the Company. The
bank's base rate was 8.5% at January 31, 1996.
Long-Term Debt
- --------------
Long-term debt consists of the following:
<TABLE>
<S> <C>
Industrial Development Revenue Bonds $1,688,406
Key Bank - Test Lab Loan 714,287
Key Bank - Facility Loan 450,000
Key Bank - Building Improvements Loan II 425,000
Lamson Europe - Note Payable 64,082
----------
3,341,775
Less current portion 737,718
----------
$2,604,057
==========
</TABLE>
Industrial Development Revenue Bonds
The property, plant, and equipment of Lamson Corporation are financed under a
long-term lease arrangement with the Onondaga County Industrial Development
Agency and are legally the properties of such Agency. An amount equivalent
to the principal amount of the Agency's revenue bonds outstanding related to
those properties is included as a liability. While the bonds are not a debt
of Lamson Corporation, the long-term lease obligates Lamson Corporation to
payments equal to interest and amortization of such bonds and provides for
the ultimate reversion of the properties to Lamson Corporation at the end of
the bond agreement. The lease obligation requires annual payments of
approximately $495,000 through November 1, 2000 including interest at 8% and
is collateralized by all real property, fixtures ,and equipment purchased
with the bond proceeds. In addition, Lamson Corporation maintains a letter
of credit arrangement in an amount equal to the outstanding principal of the
bonds for the protection of the bondholders.
16
<PAGE> 17
Notes to Consolidated Financial Statements (Continued)
4. DEBT (CONTINUED)
Key Bank - Test Lab Loan
Payable in monthly installments of $14,286, including interest at 1% above
the bank's base rate through April 1, 2000; collateralized by equipment,
accounts receivable, and inventory and is guaranteed by the Company.
Key Bank - Facility Loan
Payable in monthly installments of $4,167, plus interest at 0.25% above the
bank's base rate through February 2005; collateralized by equipment, accounts
receivable, and inventory and is guaranteed by the Company.
Key Bank - Building Improvements Loan II
Payable in monthly installments of $8,333 plus interest at 1% above the
bank's base rate through April 1, 2000; collateralized by accounts receivable,
inventory, and new furniture and equipment and is guaranteed by the Company.
Lamson Europe - Note Payable
Note payable is part of a line of credit with a bank
Covenants and Restrictions
The loan agreements contain restrictive covenants which require Lamson
Corporation and U.S. Turbine Corporation, among other things, to maintain
certain financial ratios and specified levels of working capital and tangible
net worth as defined. The agreements also place a limit on total borrowing,
capital expenditures and dividends. As of January 31, 1996 Lamson
Corporation and U.S. Turbine Corporation are in compliance with all
covenants.
The maturities of long-term debt for each of the next five years ended
January 31 are as follows:
<TABLE>
<S> <C>
1997 $ 737,718
1998 709,222
1999 721,429
2000 626,429
2001 346,977
Thereafter 200,000
----------
$3,341,775
==========
</TABLE>
17
<PAGE> 18
Notes to Consolidated Financial Statements (Continued)
5. OFF BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
Letters of credit are issued by Lamson Corporation during the ordinary course
of business through Key Bank as required by certain customer contracts. As
of January 31, 1996, Lamson Corporation had outstanding letters of credit
totaling $513,400 secured by the $1,500,000 line of credit for Standby
Letters of Credit.
As of January 31, 1996, Lamson Corporation had an additional $1,767,200
outstanding letter of credit from Key Bank. This letter of credit supports
the outstanding principal of the Industrial Development Revenue Bonds.
Concentrations of credit risk with respect to trade receivables are limited
due to the wide variety of customers and their dispersion across many
different geographic areas. The Company routinely assesses the financial
strength of its customers. Letters of credit are the principal security
obtained to support contracts when the financial strength of a customer is
not considered sufficient. As a result, the Company does not consider itself
to have any significant concentrations of credit risk as of January 31, 1996.
6. EMPLOYEE BENEFITS
Employee Pension Benefits
Lamson Corporation maintains pension plans for salaried and hourly employees.
The salaried plan is a non-contributory, defined benefit plan covering
substantially all salaried employees who have completed one year of service
and are 21 years of age, provided they were hired prior to age 60. Benefits
are based upon years of service and compensation. The plan is funded by
Lamson Corporation in accordance with ERISA minimum funding requirements.
The hourly plan is a non-contributory, defined benefit plan covering hourly
employees who are within the bargaining unit of the United Steel Workers of
America, Local Union 8976. Benefits are based upon a fixed rate per month,
determined according to length of service. The plan is funded by Lamson
Corporation in accordance with ERISA minimum funding requirements.
18
<PAGE> 19
Notes to Consolidated Financial Statements (Continued)
6. EMPLOYEE BENEFITS (CONTINUED)
The components of net periodic pension expense for the year ended January 31
for the salaried and hourly plans combined are as follows:
<TABLE>
<S> <C>
Current Service Cost $154,906
Interest cost (on projected benefit obligation) 670,566
Actual (gain) loss on plan assets (689,290)
Net amortization and deferral 531,648
Amortization of acquisition liability (51,600)
--------
Net periodic pension expense $616,230
========
</TABLE>
The following table represents a reconciliation of the funded status of the
salaried and hourly plans combined as of January 31, 1996 (date of the most
recent actuarial information):
<TABLE>
<S> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of $7,743,032 $7,881,394
==========
Projected benefit obligation $8,377,619
Plan assets at fair value 4,965,858
----------
Plan projected benefit obligation in excess of assets 3,411,761
Unrecognized prior service cost (102,155)
Unrecognized loss (567,916)
Unrecognized liability at date of adoption (being recognized over 15 years) (703,250)
Adjustment required to recognize minimum liability 1,188,613
----------
Accrued pension liability $3,227,053
==========
</TABLE>
Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions" requires recognition in the balance sheet of a minimum pension
liability. This minimum liability is equal to the excess of the accumulated
benefit obligation over plan assets. An additional long-term liability of
$1,188,613 has been recognized as of January 31, 1996 to reflect the minimum
pension liability, with an offsetting intangible asset of $781,055.
The actuarial present value of the projected benefit obligation shown in the
above table is based on a discount rate of 8.75% at January 31, 1996. The
expected return on assets is 9.0% and the assumed rate of increase in the
future compensation level is 5%.
Plan assets consist primarily of investments in bond and mortgage funds,
domestic and international stock funds, and a general investment fund managed
by the Principal Financial Group.
19
<PAGE> 20
Notes to Consolidated Financial Statements (Continued)
6. EMPLOYEE BENEFITS (CONTINUED)
Lamson Corporation has two discretionary defined contribution 401(k)
retirement plans covering substantially all salaried and hourly employees of
Lamson Corporation and U.S. Turbine Corporation. Employees may elect to
contribute up to 15% of their annual compensation to the Plans, subject to
limits established by the Internal Revenue Code. The Company may make
discretionary contributions. Neither Lamson Corporation nor U.S. Turbine
Corporation made contributions to these plans in 1996.
Employee Health Care and Insurance Benefits
Lamson Corporation hourly employees who are within the bargaining unit of
the United Steel Workers of America, Local Union 8976, are eligible to
receive postretirement life insurance benefits and those employees who retire
between the ages of 62 and 65 with 20 years of continuous service are
eligible to receive postretirement health care benefits until they attain age
65.
Lamson Corporation salaried employees who retire prior to December 31, 1996
and have attained certain combinations of age and years of service are
eligible to receive postretirement health insurance benefits until they
attain age 65. Salaried employees retiring after December 31, 1996 are not
eligible to receive postretirement health care benefits.
Effective February 1, 1995, Lamson Corporation adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," which requires that the estimated cost of
postretirement benefits be accrued over the period earned. Prior to
adoption, Lamson Corporation recognized the cost of these benefits on the
pay-as-you-go basis. The accumulated postretirement benefit obligation at
adoption was $812,900 and will be recognized over 20 years.
These benefits are funded on a pay-as-you-go basis by Lamson Corporation and
require minimal contributions from participants.
The components of postretirement benefit expense are as follows:
<TABLE>
<S> <C>
Current service cost $ 20,966
Interest cost 64,337
Net amortization and deferral 40,648
--------
Net postretirement benefit expense $125,951
========
</TABLE>
20
<PAGE> 21
Notes to Consolidated Financial Statements (Continued)
6. EMPLOYEE BENEFITS (CONTINUED)
The following table reflects the plan's combined postretirement benefit
liability as of January 31, 1996:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees $ 450,105
Employees fully eligible 134,600
Other active employees 150,765
---------
735,470
Unrecognized net loss (64,992)
Unrecognized transition obligation (559,022)
---------
Accrued postretirement benefit obligation $ 111,456
=========
</TABLE>
A discount rate of 7.25% was used to calculate the accumulated postretirement
benefit obligation at January 31, 1996. The assumed health care cost trend
rate used in measuring the accumulated postretirement benefit obligation was
11.50% in 1996 declining by .75% per year to an ultimate rate of 5.50%. If
the health care cost trend rate assumptions were increased by 1% per year,
the APBO as of January 31, 1996 would be increased by approximately 5%. The
effect of this change on the sum of the service cost and interest cost
components of the postretirement benefit expense for the year ended January
31, 1996 would be an increase of 8%.
During the current year Lamson Corporation modified its retirement plan
resulting in a $213,000 reduction of the transition obligation.
7. INCOME TAXES
Income tax expense for January 31, 1996 has been determined in accordance
with the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", which provides for a liability approach to
taxes. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse.
For financial reporting purposes, income (loss) from continuing operations
before income taxes and minority interest included the following:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
United States $2,848,437
Foreign (422,241)
----------
$2,426,196
==========
</TABLE>
21
<PAGE> 22
Notes to Consolidated Financial Statements (Continued)
7. INCOME TAXES (CONTINUED)
The provision for income taxes charged to operations for the year ended
January 31 was as follows:
<TABLE>
<S> <C>
Current tax expense:
Federal $1,024,024
State 71,083
----------
Total current 1,095,107
Deferred tax expense (benefit):
Federal (91,295)
State (7,929)
----------
Total deferred (99,224)
----------
Total provision $ 995,883
==========
As of January 31 deferred taxes consist of the following:
Deferred tax liabilities:
Prepaid expenses $ (93,010)
Pension (193,946)
Depreciation (223,676)
----------
(510,632)
Deferred tax assets:
Postretirement benefit obligations other than pensions 43,233
Accrued pension 790,693
Vacation 132,764
Doubtful account reserve 98,351
Warranty 46,547
Inventories 59,630
Accrued liabilities 1,551
----------
1,172,769
----------
$ 662,137
==========
</TABLE>
8. SUBSEQUENT EVENT (UNAUDITED)
On July 9, 1996, the Company reacquired 100 shares of its common stock for
approximately $1,960,000.
22
<PAGE> 23
Notes to Consolidated Financial Statements (Continued)
8. SUBSEQUENT EVENT (UNAUDITED) (CONTINUED)
The Company was acquired by Gardner Denver Machinery Inc. on August 9, 1996.
As part of the due diligence process, certain potential environmental issues
related to the Company were identified. It is Gardner Denver's opinion that
the possible liability that could arise from these potential environmental
issues is between $100,000 and $1,000,000.
23
<PAGE> 24
<TABLE>
NORAMPTCO, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
AS OF JULY 31, 1996
-------------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,778
Receivables, net 8,484
Inventories, net 4,459
Deferred income taxes 335
Other 366
-------
Total current assets 15,422
-------
Plant and equipment, net 5,482
Intangibles, net 1,620
Deferred income taxes 319
Other assets 390
-------
Total assets $23,233
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 3,336
Accounts payable and accrued liabilities 7,151
-------
Total current liabilities 10,487
-------
Long-term debt, less current maturities 2,454
Postretirement benefits other than pensions 138
Minority interest in subsidiaries 1,035
Other long-term liabilities 1,551
-------
Total liabilities 15,665
-------
Stockholders' equity:
Common stock, $1 par value; 1,000
shares authorized; 900 shares
issued and outstanding at July 31, 1996 1
Capital in excess of par value 263
Retained earnings 7,722
Pension liability adjustment (407)
Cumulative translation adjustment (11)
-------
Total stockholders' equity 7,568
-------
Total liabilities and stockholders' equity $23,233
=======
The accompanying notes are an integral part of this statement.
</TABLE>
24
<PAGE> 25
<TABLE>
NORAMPTCO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
JULY 31, 1996
----------------
<S> <C>
Revenues $19,615
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 12,081
Depreciation and amortization 464
Selling and administrative expenses 6,152
Interest expense 154
-------
18,851
Income before income taxes 764
Provision for income taxes 577
-------
Net income before minority interest 187
Minority interest (95)
--------
Net income $ 92
=======
The accompanying notes are an integral part of this statement.
</TABLE>
25
<PAGE> 26
<TABLE>
NORAMPTCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
JULY 31, 1996
----------------
<S> <C>
Cash flows from operating activities:
Net income $ 92
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 464
Deferred income taxes (8)
Minority interest 95
Changes in assets and liabilities (846)
-------
Net cash used in operating activities (203)
-------
Cash flows from investing activities:
Capital expenditures (326)
Purchase and retirement of stock (1,960)
Collections on notes receivable 1,010
-------
Net cash used in investing activities (1,276)
-------
Cash flows from financing activities:
Proceeds from long-term borrowing 2,448
-------
Increase in cash 969
Cash, beginning of period 809
-------
Cash, end of period $ 1,778
=======
The accompanying notes are an integral part of this statement.
</TABLE>
26
<PAGE> 27
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
BASIS OF PRESENTATION. The accompanying financial statements include the
accounts of NORAMPTCO, Inc. (the Company), its wholly-owned subsidiary U.S.
Turbine Corporation, and its majority owned subsidiaries, Lamson Corporation
and Lamson Europe. All significant intercompany profits, transactions, and
account balances have been eliminated in consolidation. The Company's
majority owned subsidiary, Lamson Europe, has been consolidated using its
results for the six months ended June 30, 1996.
The interim financial information presented has been prepared from the books
and records without audit, and do not include all of the information and
footnotes required by generally accepted accounting principals for complete
statements. In the opinion of management, all adjustments, consisting only
of normal recurring adjustments necessary for a fair presentation of such
financial statements, have been included.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that affect the reported amounts of assets, 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.
NOTE 2: INCOME TAXES.
The provision for income taxes charged to operations and paid to various
taxing authorities for the six months ended July 31, 1996 was $577 and $332,
respectively.
The difference between the provision for income taxes and income taxes using
the U.S. federal income tax rate were as follows:
<TABLE>
<S> <C>
Income tax provision at 34% $260
State and local income taxes 58
Tax effect of non-deductible expenses
related to the sale of the business 258
Other 1
----
Total $577
====
</TABLE>
27
<PAGE> 28
NOTE 3: INVENTORIES.
<TABLE>
<S> <C>
Raw materials and finished parts $ 4,728
Work in process 1,121
-------
Total inventories at FIFO cost 5,849
Excess of current standard costs
over LIFO costs (1,390)
-------
Total net inventories $ 4,459
=======
</TABLE>
NOTE 4: SUBSEQUENT EVENTS.
The Company was acquired by Gardner Denver Machinery Inc. on August 9, 1996.
On October 16, 1996 all the debt of Lamson Corporation and U.S. Turbine
Corporation, excluding the industrial development revenue bonds, was paid in
full by Gardner Denver Machinery Inc.
28
<PAGE> 29
PRO FORMA FINANCIAL INFORMATION
Gardner Denver's fiscal year end is December 31. NORAMPTCO's fiscal year end
is January 31. The Unaudited Pro Forma Consolidated Balance Sheet as of June
30, 1996 was prepared assuming the acquisition had occurred on June 30, 1996
and include NORAMPTCO's balances as of July 31, 1996. The Unaudited Pro
Forma Consolidated Statements of Operations for the six months ended June 30,
1996 and for the year ended December 31, 1995 were prepared assuming the
acquisition had occurred as of the beginning of the periods presented and
include NORAMPTCO's results of operations for the six months ended July 31,
1996 and for the year ended January 31, 1996, respectively. The acquisition
will be accounted for using the purchase method of accounting. Under the
purchase method of accounting, assets acquired and liabilities assumed are
recorded at their respective fair market values. The pro forma adjustments
are based on preliminary estimates of the allocation of the purchase price
and are subject to revision. Actual purchase accounting adjustments may
differ from the pro forma adjustments presented herein.
The pro forma consolidated financial information does not reflect any
operations of TCM Investments, Inc. ("TCM") which was acquired by Gardner
Denver on August 14, 1996. For the year ended April 30, 1996, TCM reported
revenues of $10.6 million.
The unaudited pro forma consolidated financial statements are based upon and
should be read in conjunction with the historical consolidated financial
statements of Gardner Denver Machinery Inc., including the notes thereto,
included in the reports and documents filed by Gardner Denver with the
Securities and Exchange Commission and the historical consolidated financial
statements of NORAMPTCO including the notes thereto. The unaudited pro forma
consolidated financial statements presented herein are based on certain
assumptions, are for informational purposes only and do not necessarily
reflect future results of operations and financial position or what the
results of operations or financial position would have been had such
transactions occurred at the beginning of the periods presented.
29
<PAGE> 30
<TABLE>
GARDNER DENVER MACHINERY INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
As of June 30, 1996
Historical Pro forma
------------------------ ------------------------
Gardner Adjustments
Denver NORAMPTCO Increase/
(6/30/96) (7/31/96) (Decrease) Combined
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,511 $ 1,778 $ -- $ 9,289
Receivables, net 35,537 8,484 -- 44,021
Inventories, net 40,726 4,459 1,390 <F1> 46,575
Deferred income taxes 191 335 1,554 <F8> 2,080
Other 1,174 366 -- 1,540
-------- ------- ------- --------
Total current assets 85,139 15,422 2,944 103,505
-------- ------- ------- --------
Plant and equipment, net 30,436 5,482 (2,000)<F9> 33,918
Intangibles, net 41,973 1,620 (781)<F2> 69,387
26,575 <F6>
Deferred income taxes 17,838 319 2,173 <F8> 20,330
Investment in and advances to affiliate 722 -- -- 722
Other assets 757 390 -- 1,147
-------- ------- ------- --------
Total assets $176,865 $23,233 $28,911 $229,009
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,147 $ 3,336 $ -- $ 4,483
Accounts payable and accrued liabilities 29,335 7,151 4,283 <F2> 46,359
5,590 <F5>
-------- ------- ------- --------
Total current liabilities 30,482 10,487 9,873 50,842
-------- ------- ------- --------
Long-term debt, less current maturities 24,237 2,454 28,565 <F7> 55,256
Postretirement benefits other than pensions 57,913 138 627 <F3> 58,678
Minority interest in subsidiaries -- 1,035 (1,035)<F4> --
Other long-term liabilities 499 1,551 (1,551)<F2> 499
-------- ------- ------- --------
Total liabilities 113,131 15,665 36,479 165,275
-------- ------- ------- --------
Stockholders' equity:
Common stock, $.01 par value; 50,000,000
shares authorized; 4,877,804 shares
issued and outstanding at June 30, 1996 49 1 (1)<F4> 49
Capital in excess of par value 134,145 263 (263)<F4> 134,145
Retained deficit (70,437) 7,722 (7,722)<F4> (70,437)
Pension Liability Adjustment -- (407) 407 <F2> --
Cumulative translation adjustment (23) (11) 11 <F4> (23)
-------- ------- ------- --------
Total stockholders' equity 63,734 7,568 (7,568) 63,734
-------- ------- ------- --------
Total liabilities and stockholders' equity $176,865 $23,233 $28,911 $229,009
======== ======= ======= ========
The accompanying notes are an integral part of this statement.
</TABLE>
30
<PAGE> 31
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1996
(Unaudited)
1) Represents adjustment to record inventories at estimated fair market value
in accordance with the provisions of APB 16.
2) Represents adjustment to record excess of estimated pension liabilities
over fair market value of related assets, in accordance with FAS 87.
3) Represents adjustment to record the estimated value of post retirement
benefits (other than pension) in accordance with FAS 106.
4) Represents elimination of NORAMPTCO minority interest and equity.
5) Represents adjustment to record liabilities and commitments attributable to
integration of NORAMPTCO into Gardner Denver.
6) Represents adjustment to record the excess of the purchase price over the
fair value of the net assets acquired (goodwill).
7) Represents adjustment to record the debt used to acquire NORAMPTCO.
8) Represents adjustment to record additional deferred tax assets related to
pro forma adjustments.
9) Represents adjustment to reflect estimated fair value of plant and
equipment.
31
<PAGE> 32
<TABLE>
GARDNER DENVER MACHINERY INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Six Months Ended
Historical Pro forma
------------------------ ------------------------
Gardner Adjustments
Denver NORAMPTCO Increase/
(6/30/96) (7/31/96) (Decrease) Combined
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $97,483 $19,615 $ -- $117,098
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 67,532 12,081 (167)<F1> 79,446
Depreciation and amortization 3,798 464 330 <F2> 4,592
Selling and administrative expenses 12,375 6,152 (1,670)<F1> 16,857
Interest expense 1,094 154 969 <F3> 2,217
Loss on investment in and advances to affiliate 98 -- -- 98
------- ------- ------- --------
84,897 18,851 (538) 103,210
Income before income taxes 12,586 764 538 13,888
Provision for income taxes 5,034 577 53 <F4> 5,664
------- ------- ------- --------
Net income before minority interest 7,552 187 485 8,224
Minority interest -- (95) 95 <F5> --
------- ------- ------- --------
Net income $ 7,552 $ 92 $ 580 $ 8,224
======= ======= ======= ========
Earnings per share $ 1.50 $ 1.63
======= ========
The accompanying notes are an integral part of this statement.
</TABLE>
32
<PAGE> 33
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996
(Unaudited)
1) To reflect benefits of the integration of the business, additional expenses
of Gardner Denver, elimination of expenses related to the sale of the
business, and elimination of expenses related to the former principal
owner/CEO.
2) To adjust depreciation and amortization to reflect the estimated fair value
of plant and equipment, and goodwill created by acquisition.
3) To reflect interest expense on debt used to finance acquisition, net of
lower interest expense on pre-existing NORAMPTCO debt.
4) To reflect adjustments to tax provision related to pro forma adjustments.
Low effective tax rate of pro forma adjustments is primarily a result of
the elimination of non-deductible transaction costs and inclusion of
non-deductible goodwill amortization.
5) To reflect elimination of previously held minority interest.
33
<PAGE> 34
<TABLE>
GARDNER DENVER MACHINERY INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Year Ended
Historical Pro forma
------------------------ ------------------------
Gardner Adjustments
Denver NORAMPTCO Increase/
(12/31/95) (1/31/96) (Decrease) Combined
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $191,541 $41,397 $ -- $232,938
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 132,876 26,899 (334)<F1> 159,441
Depreciation and amortization 8,263 866 660 <F2> 9,789
Selling and administrative expenses 25,632 10,765 (1,536)<F1> 34,861
Interest expense 4,950 441 1,939 <F3> 7,330
-------- ------- ------- --------
171,721 38,971 729 211,421
Income before income taxes 19,820 2,426 (729) 21,517
Provision for income taxes 8,226 996 (4)<F4> 9,218
-------- ------- ------- --------
Net income before minority interest 11,594 1,430 (725) 12,299
Minority interest -- (183) 183 <F5> --
-------- ------- ------- --------
Net income $ 11,594 $ 1,247 $ (542) $ 12,299
======== ======= ======= ========
Earnings per share $ 2.37 $ 2.52
======== ========
The accompanying notes are an integral part of this statement.
</TABLE>
34
<PAGE> 35
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
(Unaudited)
1) To reflect benefits of the integration of the business, additional expenses
of Gardner Denver, and the elimination of expenses related to the former
principal owner/CEO.
2) To adjust depreciation and amortization to reflect the estimated fair value
of plant and equipment, and goodwill created by acquisition.
3) To reflect interest expense on debt used to finance acquisition, net of
lower interest expense on pre-existing NORAMPTCO debt.
4) To reflect adjustments to tax provision related to pro forma adjustments.
Low effective tax rate of pro forma adjustments is primarily a result of
the inclusion of non-deductible goodwill amortization.
5) To reflect elimination of previously held minority interest.
35
