<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report - April 26, 1998
---------------------------------
(Date of earliest event reported)
OWOSSO CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-25066 23-2756709
- ------------------------------- ---------------------- ------------------
(State or other jurisdiction of Commission file number (IRS Employer
incorporation or organization) Identification No.)
The Triad Building, 2200 Renaissance Boulevard
Suite 150, King of Prussia, PA 19406
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 275-4500
- --------------------------------------------------------------------------------
<PAGE>
The Registrant hereby files the required financial statements of the business
acquired and pro forma financial information pursuant to Items 7(a) and (b) of
its Current Report on Form 8-K, dated April 26, 1998 (the "Current Report") as
set forth herein:
Item 7. Financial Statements and Exhibits.
Page
----
(a) Financial Statements of Business Acquired:
Astro Air, Inc.:
Financial Statements for the Three Months Ended
March 31, 1998 and 1997 (unaudited) 3
Financial Statements for the Years Ended
December 31, 1997 and 1996 8
(b) Pro Forma Financial Information 21
(c) Exhibits
23.1 Consent of Hugh L. Goodpasture
2
<PAGE>
ASTRO AIR, INC.
Financial Statements for the
Three Months Ended
March 31, 1998 and 1997
(unaudited)
3
<PAGE>
ASTRO AIR, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------
1998 1997
Net sales $ 6,692,000 $ 4,622,000
Cost of products sold 5,698,000 3,842,000
----------- -----------
Gross profit 994,000 780,000
Selling, general and administrative expenses 367,000 287,000
----------- -----------
Income from operations 627,000 493,000
Interest expense 65,000 69,000
Other income 2,000 2,000
----------- -----------
Income before income taxes 564,000 426,000
Income tax expense 200,000 151,000
----------- -----------
Net income $ 364,000 $ 275,000
=========== ===========
See notes to condensed financial statements.
4
<PAGE>
ASTRO AIR, INC.
CONDENSED BALANCE SHEETS
- --------------------------------------------------------------------------------
March 31, December 31,
1998 1997
ASSETS (Unaudited) (See Note)
CURRENT ASSETS:
Cash and cash equivalents $ 144,000 $ 344,000
Receivables, net 3,296,000 2,675,000
Inventories, net 2,495,000 2,356,000
Prepaid expenses and other 2,001,000 1,855,000
----------- -----------
Total current assets 7,936,000 7,230,000
PROPERTY, PLANT AND EQUIPMENT, NET 3,324,000 3,021,000
GOODWILL, NET 52,000 53,000
OTHER ASSETS 175,000 252,000
----------- -----------
TOTAL ASSETS $11,487,000 $10,556,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 1,989,000 $ 1,335,000
Accrued expenses 866,000 853,000
Notes payable 1,289,000 1,293,000
Current portion of long-term debt 380,000 380,000
----------- -----------
Total current liabilities 4,524,000 3,861,000
LONG-TERM DEBT, LESS CURRENT PORTION 1,015,000 1,111,000
DEFERRED TAXES 238,000 238,000
STOCKHOLDERS' EQUITY 5,710,000 5,346,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,487,000 $10,556,000
=========== ===========
Note: the balance sheet at December 31, 1997 has been condensed from the audited
financial statements at that date.
See notes to condensed financial statements.
5
<PAGE>
ASTRO AIR, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 364,000 $ 275,000
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amotization 88,000 86,000
Changes in operating assets and liabilities (237,000) (708,000)
--------- ---------
Net cash (used in) provided by operating activities 215,000 (347,000)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (389,000) (418,000)
Other 74,000 75,000
--------- ---------
Net cash used in investing activities (315,000) (343,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on notes payable and long-term debt (100,000) 368,000
--------- ---------
Net cash provided by (used in) financing activities (100,000) 368,000
--------- ---------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (200,000) (322,000)
CASH AND CASH EQUIVALENTS, BEGINNING 344,000 372,000
--------- ---------
CASH AND CASH EQUIVALENTS, ENDING $ 144,000 $ 50,000
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 65,000 $ 70,000
======== ========
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
ASTRO AIR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of March 31, 1998 and the condensed
statements of operations and cash flows for the three months ended
March 31, 1998 and 1997 have been prepared by the Company, without
audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) considered necessary for a fair
presentation have been made. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in
conjunction with the financial statements for the year ended December
31, 1997. The condensed results of operations for the interim periods
are not necessarily indicative of the operating results for the full
year.
2. INVENTORIES
March 31, December 31,
1998 1997
--------- ------------
Raw materials and supplies $ 963,000 $ 910,000
Work in process 787,000 743,000
Finished goods 745,000 703,000
---------- ----------
Total $2,495,000 $2,356,000
========== ==========
3. SUBSEQUENT EVENT
Effective April 26, 1998, the Company sold substantially all of its
assets to Owosso Corporation of King of Prussia, Pennsylvania for
$8,000,000 in cash, plus debt of approximately $2,700,000. In
connection with the sale, Owosso Corporation entered into an agreement
with Dacus Properties, Inc. ("DPI"), the parent company of Astro Air,
under which DPI will receive 3.4% of the net revenues generated by
certain specified customers through April 26, 2003.
7
<PAGE>
ASTRO AIR, INC.
Financial Statements for the
Years Ended
December 31, 1997 and 1996
8
<PAGE>
HUGH L. GOODPASTURE , P.C.
Certified Public Accountant
P.O. Box 95 215 East Commerce
Jacksonville, Texas 75766
(903) 586-2275
INDEPENDENT AUDITOR'S REPORT
Astro Air, Inc.
P.O. Box 1988
Jacksonville, Texas 75766
Sirs:
I have audited the accompanying balance sheet of Astro Air, Inc., as of December
31, 1997, and 1996, and the related statements of income, retained earnings, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
al1 material respects, the financial position of Astro Air, Inc. , as of
December 31, 1997, and 1996, and the results of its operations and its cash flow
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Hugh L. Goodpasture
- -----------------------
Hugh L. Goodpasture
Certified Public Accountant
February 24, 1998
9
<PAGE>
ASTRO AIR, INC.
BALANCE SHEET
DECEMBER 31, 1997, and DECEMBER 31, 1996
ASSETS
December 31, 1997 December 31, 1996
------------------ -----------------
CURRENT ASSETS
Cash $ 343,479 $ 371,556
Petty Cash 200 200
Accounts Receivable - Trade 2,675,291 1,462,667
Accounts Receivable - Other 1,843,279 1,110,279
Inventories 2,355,522 2,127,195
Prepaid Insurance 12,266 7,600
----------- -----------
TOTAL CURRENT ASSETS 7,230,037 5,079,497
FIXED ASSETS
Land -0- 12,500
Buildings -0- 38,690
Leasehold Improvements -0- 249,937
Plant Machinery and Equipment 5,461,499 4,722,099
Office Equipment 275,053 261,648
Autos and Trucks 237,999 296,265
----------- -----------
5,974,551 5,581,139
Less: Accumulated Depreciation (2,953,387) (2,998,762)
----------- -----------
FIXED ASSETS 3,021,164 2,582,377
OTHER ASSETS
Notes Receivable - Other 147,832 155,349
Deferred Interest -0- -0-
Utility Deposit 126 126
Equipment in Progress 103,436 298,702
Goodwill, Net of Amortization of
$92,100 and $86,293, Respectively 53,086 58,893
----------- -----------
TOTAL OTHER ASSETS 304,480 513,070
----------- -----------
TOTAL ASSETS $10,555,681 $ 8,174,944
=========== ===========
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
ASTRO AIR INC.
BALANCE SHEET
DECEMBER 31, 1997, and DECEMBER 31, 1996
(PAGE TWO)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 1997 December 31, 1996
----------------- -----------------
CURRENT LIABILITIES
Accounts Payable - Trade $ 1,335,457 $ 966,946
Note Payable-Factored Accounts Receivable 1,293,337 1,158,510
Accrued Payroll 245,515 139,433
Accrued Interest 9,367 6,975
Accrued Property Taxes 70,041 67,480
Accrued Vacation Time 30,534 -0-
FICA Tax Payable 16,981 10,667
Sales Tax Accrued 1,177 1,032
Unemployment Taxes Payable 7,509 4,218
Other Accrued Liabilities 1,366 982
Federal Income Tax Payable 469,235 182,479
Current Portion of Long-Term Debt 380,301 295,072
---------- -----------
TOTAL CURRENT LIABILITIES 3,860,820 2,833,794
LONG-TERM LIABILITIES
Long-Term Notes Payable 1,491,391 1,103,027
Less: Current Portion of Long-Term Debt (380,301) (295,072)
---------- -----------
Long-Term Debt 1,111,090 807,955
Deferred Tax Liability 237,673 206,328
---------- -----------
TOTAL LONG-TERM LIABILITIES 1,348,763 1,014,283
---------- -----------
TOTAL LIABILITIES 5,209,583 3,848,077
---------- -----------
STOCKHOLDERS' EQUITY
Common Stock:
Authorized, 1,000,000 shares of
$1.00 par value; issued and
outstanding, 42,000 shares 42,000 42,000
Retained Earnings 5,304,098 4,284,867
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,346,098 4,326,867
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $10,555,681 $8,174,944
=========== ==========
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
ASTRO AIR, INC.
STATEMENT OF RETAINED EARNINGS AND STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, and DECEMBER 31, 1996
1997 1996
---- ----
Retained Earnings, Beginning $4,284,867 $3,900,226
Add: Net Income 1,019,230 384,641
Rounding 1 -0-
---------- ----------
Retained Earnings, Ending $5,304,098 $4,284,867
Common Stock:
Authorized, 1,000,000 shares of $1.00 par
value; issued and outstanding, 42,000 shares 42,000 42,000
---------- ----------
TOTAL STOCKHOLDERS' EQUITY $5,346,098 $4,326,867
========== ==========
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
ASTRO AIR, INC.
INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 1997, and DECEMBER 31, 1996
1997 1996
---- ----
INCOME
Gross Sales $ 22,594,756 $ 17,461,888
Less: Cash Discounts (58,005) (73,759)
------------ ------------
Net Sales 22,536,751 17,388,129
Other Income 378,020 290,884
------------ ------------
TOTAL INCOME 22,914,771 17,679,013
COSTS OF GOODS SOLD
Material (See Note 1) 10,374,037 8,333,219
Freight and Delivery 186,223 142,685
Direct Labor 3,999,660 3,403,592
Contract Direct Labor 914,629 1,834
Vacation Expense 3,509 -0-
Manufacturing Overhead 4,327,l37 3,764,113
------------ ------------
TOTAL MANUFACTURING EXPENSE 19,805,195 15,645,443
DIRECT SALES EXPENSE 188,868 166,726
------------ ------------
COSTS OF GOODS SOLD 19,994,063 15,812,169
------------ ------------
GROSS PROFIT 2,920,708 1,866,844
EXPENSES
General and Administrative Expense 919,843 819,734
Interest and Other Expense 590,771 433,987
------------ ------------
TOTAL EXPENSES 1,510,614 1,253,721
------------ ------------
INCOME BEFORE INCOME TAX EXPENSE
AND EXTRAORDINARY ITEM 1,410,094 613,123
INCOME TAX EXPENSE 500,580 228,482
------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 909,514 384,641
EXTRAORDINARY GAIN: CASUALTY
INSURANCE PROCEEDS 109,716 -0-
------------ ------------
NET INCOME $ 1,019,230 $ 384,641
============ ============
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
ASTRO AIR, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, and DECEMBER 31, 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 909,514 $ 384,641
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 363,997 333,079
Amortization of Goodwill 5,807 5,808
Provision for Deferred Income Taxes 31,345 46,003
Changes in Operating Assets and Liabilities:
(Increase) Decrease in:
Receivables (1,938,107) 260,725
Inventories and Prepaid Expenses (232,993) (174,616)
Other Assets 48,572 (35,369)
Increase (Decrease) in:
Accounts Payable and Accrued Liabilities 520,214 (49,337)
Federal Income Tax Payable 286,756 (186,868)
------------ -----------
Net Cash Provided (Used) by Operating
Activities Exclusive of Extraordinary Item (4,895) 584,066
Extraordinary Gain - Casualty
Insurance Proceeds 109,716 -0-
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 104,821 584,066
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Fixed Assets (1,412,498) (365,209)
(Increase) Decrease in:
Equipment in Progress 195,266 (271,839)
Proceeds from Sale of Fixed Assets 609,714 -0-
------------ -----------
NET CASH USED BY INVESTING ACTIVITIES (607,518) (637,048)
- CONTINUED ON NEXT PAGE -
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
ASTRO AIR, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, and DECEMBER 31, 1996
(PAGE TWO)
1997 1996
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Revolving Line of
Credit and Long-Term Debt $ 16,447,197 $ 12,812,968
Payments on Revolving Line of
Credit, Long-Term Debt, and
Capital Lease Obligations (15,972,577) (12,570,336)
------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 474,620 242,632
------------- -------------
INCREASE (DECREASE) IN CASH (28,077) 189,650
CASH AT BEGINNING OF YEAR 371,556 181,906
------------- -------------
CASH AT END OF YEAR $ 343,479 $ 371,556
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During 1997 for Interest $251,646
Cash Paid During 1997 for 1996 Income Taxes $182,479
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
ASTRO AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, and DECEMBER 31, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Major Customer and Market Information:
The Company manufactures components, primarily evaporator and condenser coils,
for the air-conditioning industry. Sales are nationwide under the name of ASTRO
AIR, INC. During the years ended December 31, 1997, and 1996, each of three (3)
and three (3) customers accounted for ten percent (10%) or more of sales,
respectively. For 1997, the largest customer accounted for thirty-eight percent
(38%), with the three (3) together accounting for eighty-seven percent (87%).
For 1996, the largest customer accounted for thirty percent (30%), with the
three (3) together accounting for eighty percent (80%).
Astro Air, Inc., is a wholly owned subsidiary of Dacus Properties, Inc.
Accounting Basis and Income Recognition:
The books of the company are kept on the accrual basis. Income is recognized at
the date of invoicing. No allowance for bad debts has been set up. The company
uses the direct write-off method of bad debts,
"Accounts Receivable - Other" reflects advances to key employees who are not
related parties and amounts due from companies outside the normal trade or
business, except for $1,844,838 due from the parent Company for 1997, and
$1,111,934 due from the parent Company for 1996.
Accounts Receivables are pledged with banks to secure notes in the amount of
$1,293,337 for 1997, and $1,158,510 for 1996. These amounts are reflected in the
account "Note Payable -- Factored Accounts Receivable."
Inventories
Raw materials and supplies are recorded at lower of cost or market.
Work-in-process inventory is recorded at material cost plus labor and overhead
based on related historical data. Some components are so highly automated that
labor cost per part is insignificant and is not applied. The effect on
work-in-process cost caused by this deviation is not deemed material to total
work-in-process costing.
Finished goods are costed at sales price less anticipated profit margin.
Inventories are accounted for on the first-in, first-out basis.
16
<PAGE>
ASTRO AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, and DECEMBER 31, 1996
(PAGE TWO)
Materials used in manufacturing were as follows:
1997 1996
---- ----
Beginning Inventory $ 2,127,195 $ 1,955,411
Purchases 10,602,364 8,505,003
------------ ------------
Total 12,729,559 10,460,414
Less: Ending Inventory (2,355,522) (2,127,195)
------------ ------------
Materials Put in Process $ 10,374,037 $ 8,333,219
============ ============
Ending Inventories were:
Raw Materials $ 865,310 $ 865,707
Work-in-Process 742,749 362,054
Finished Goods 703,114 851,261
Supplies 44,349 48,173
------------ ------------
Total $ 2,355,522 $ 2,127,195
============ ============
Intangible Assets:
Goodwill in the amount of $145,186 was recorded as a result of the merger of
Coils, Inc., into Astro Air, Inc., in September 1982. This is being amortized
over a period of twenty-five (25) years using the straight-line method. The
current unamortized balance is $53,086.
Property and Equipment:
Property and Equipment are stated at cost and are depreciated over the estimated
useful life on a straight-line basis. No interest was capitalized on
self-constructed equipment as the amount was not deemed material. Accelerated
depreciation methods are used for income tax purposes. The company has followed
a policy of capitalizing expenditures which materially increase asset lives, and
charging ordinary maintenance and repairs to operations as incurred. All assets
are pledged against debt. Depreciation expense for 1997 was $363,997.
Income Taxes:
For 1997, income tax expense was $500,580. A consolidated tax return is filed
with the Parent Company. After recording deferred taxes of $31,345 for 1997, an
income tax liability of $469,235 remained. Deferred taxes resulted primarily
from timing differences due to book and tax depreciation methods and Section
263A Inventory Costs.
17
<PAGE>
ASTRO AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, and DECEMBER 31, 1996
(PAGE THREE)
2. LONG-TERM DEBT
<TABLE>
<CAPTION>
Maturity Interest 1997 1996
Date Rate Balance Balance Collateral
-------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Austin Bank 10-20-00 10.0% $ 626,815 $809,302 All Equipment
Austin Bank 11-25-02 9.5% 591,928 -0- Equipment, Machinery
Austin Bank 12-19-97 11.5% -0- 11,125 Real Estate
Austin Bank 12-03-00 7.5% 15,279 20,371 1996 Mercury Marquis
Austin Bank 02-11-99 9.0% 6,158 11,438 1995 Chevrolet Blazer
Austin Bank 05-10-98 9.0% 3,811 12,957 1995 Chevrolet Suburban
Austin Bank 07-10-98 8.0% 3,596 9,761 1993 Volvo
Austin Bank 08-20-00 8.449% 16,293 -0- 1997 Ford F250
Amada Leasing 01-01-02 8.0% 140,834 172,450 Equipment
Amada Leasing 03-01-02 8.0% 63,835 -0- Amanda Press Brake
LCA 09-05-97 N/A -0- 19,116 Air Compressor
Ford Motor Credit 05-27-97 6.9% -0- 1,355 1993 Ford F150
GMAC 05-11-98 10.0% 2,317 9,266 1995 Oldsmobile 88 Royale
David Cooper 02-05-01 9.0% 20,525 25,886 Equipment
--------- ----------
$1,491,391 $1,103,027
========== ==========
</TABLE>
3. RELATED PARTIES
Loans and advances to an officer in the amount of $147,832 are carried as other
assets and not included in current assets. No imputed interest is included in
this amount.
4. STOCKHOLDERS' EQUITY
The Company has 42,000 shares of one-dollar ($1.00) par common stock outstanding
for an aggregate capital stock in the amount of $42,000.
18
<PAGE>
ASTRO AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, and DECEMBER 31, 1996
(PAGE FOUR)
5. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principals requires that certain estimates be made by management.
6. CASUALTY LOSS
In January of 1997, the corporation suffered a casualty loss from a fire at
Plant Two. The corporation was covered by both casualty insurance on the assets
and business disruption insurance. Loss recovery was predicated on the
replacement value. The proceeds from the insurance company were $466,399 for the
losses to the assets. Of this amount, $327,318 went to the parent company, Dacus
Properties, Inc., who owns the building and the balance went to Astro Air, Inc.,
to replace their assets. Due to the insurance paying on a replacement basis, an
extraordinary gain was shown on the income statement of the corporation
representing the excess of insurance receipts over the book value of assets
damaged or destroyed. Additionally, the corporation received $41,580 due to the
interruption of manufacturing during the repair period.
7. SUBSEQUENT EVENTS
Subsequent to the balance sheet date, management has entered into serious
negotiations relative to the acquistion of the corporation either through an
asset purchase or other financial arrangement.
8. PENSION PLAN
In June of 1997, the company initiated a 401(k) plan for the company's
employees. Full-time employees are eligible after one year of service. The plan
provides for the company to contribute 50% of the first 4% of regular pay for
the year. The cost to the corporation for 1997 was $43,871, of which $5,861 was
administrative expense and the balance contributions on behalf of employee
participants.
9. RECLASSIFICATION
Deferred interest of $48,572 recorded at the end of 1996 was reclassified for
comparability with the adjustment made to this account for 1997.
19
<PAGE>
ASTRO AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, and DECEMBER 31, 1996
(PAGE FIVE)
10. CONTRACT DIRECT LABOR
The corporation uses an employment agency to screen and hire production workers.
After the initial trial period, the employee may be hired or released back to
the employment contractor. As these workers are basically involved in direct
production activities, this cost is separately shown on the income statement as
a direct cost rather than being included in manufacturing overhead. However, it
should be noted in analysis that these agency costs contain fringe benefit and
payroll tax costs normally included in manufacturing overhead, as well as the
contractor's profit.
11. ACCRUED VACATION COST
The corporation has adopted a policy of taking vacation in the period available
or losing it. However, in transition, many employees had vacation accrued prior
to the policy change. Management has elected to accrue this liability and will
discharge it within the time allotted by the Internal Revenue Code for the
inclusion in current year expenses.
20
<PAGE>
OWOSSO CORPORATION
Pro Forma Financial Information
21
<PAGE>
OWOSSO CORPORATION
PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Effective April 26, 1998, Owosso Corporation (the "Company") completed
the sale of substantially all of the assets of its Great Bend Manufacturing
subsidiary ("Great Bend"), a manufacturer of agricultural equipment, to Allied
Products Corporation of Chicago, Illinois (the "Disposition"). The Company
received proceeds from the transaction of approximately $10,000,000, subject to
certain post-closing adjustments.
Also effective April 26, 1998, the Company acquired substantially all
of the assets and assumed certain liabilities of Astro Air, Inc., ("Astro Air")
a privately owned Texas corporation that manufactures heat transfer coils, for a
purchase price of $8,000,000 of cash, plus the repayment, shortly after closing,
of approximately $2,700,000 of debt (the "Acquisition"). In connection with the
Acquisition, the Company has entered into an agreement with Dacus Properties,
Inc. ("DPI"), the former owner of Astro Air, under which DPI will receive 3.4%
of the net revenues generated by certain specified customers through April 26,
2003. The Acquisition has been accounted for by the purchase method of
accounting. The purchase price was preliminarily allocated (and any contingent
purchase price payable will be allocated) to the net assets acquired based on
estimated fair values at the date of acquisition. This resulted in excess of
purchase price over assets acquired of approximately $950,000, which is being
amortized on a straight-line basis over 20 years.
The following pro forma condensed consolidated statements of operations
for the six months ended April 26, 1998 and for the year ended October 26, 1997
give effect to the Disposition and the Acquisition as if the transactions had
occurred at the beginning of fiscal 1997. A pro forma balance sheet has not been
included since the effects of the Disposition and the Acquisition are reflected
in the Company's Condensed Consolidated Balance Sheet included in Form 10-Q for
the quarter ended April 26, 1998 filed with the Securities and Exchange
Commission on June 10, 1998.
The historical financial data of the Company and of Great Bend included
in the pro forma financial statements is as of the periods presented. The
financial data of Astro Air included in the pro forma condensed consolidated
statement of operations for the year ended October 26, 1997 is for the year
ended December 31, 1997 (audited). The financial data of Astro Air included in
the pro forma condensed consolidated statement of operations for the six months
ended April 26, 1998 has been derived from the interim financial information for
the period November 1, 1997 through April 26, 1998. The pro forma financial data
presented herein is based on management's estimate of the effects of the
Disposition and the Acquisition, based upon currently available information and
certain assumptions the Company believes are reasonable. The Company does not
expect the receipt of additional information to have a material adverse effect
on the pro forma financial information presented herein. The pro forma condensed
consolidated statements of operations for the six months ended April 26, 1998
and the year ended October 26, 1997 are unaudited, but in the opinion of
management, include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation.
The pro forma condensed consolidated statements of operations for the
six months ended April 26, 1998 and the year ended October 26, 1997, are not
necessarily indicative of the results of operations that actually would have
been achieved had the transactions described been consummated as of the dates
indicated, or that may be achieved in the future.
22
<PAGE>
OWOSSO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED APRIL 26, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
OWOSSO Pro Forma
Historical Great Bend Astro Air Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales $ 75,922,000 $ 8,533,000 $ 13,384,000 $ 80,773,000
Cost of products sold 58,202,000 6,491,000 11,396,000 125,000 (a) 63,232,000
------------ ----------- ------------ ------------
Gross profit 17,720,000 2,042,000 1,988,000 17,541,000
Expenses:
Selling, general and administrative 10,505,000 1,373,000 734,000 227,000 (a) 10,093,000
Corporate 3,024,000 - - 3,024,000
------------ ----------- ------------ ------------
Income from operations 4,191,000 669,000 1,254,000 4,424,000
Interest expense 2,396,000 (6,000) 130,000 (80,000) (b) 2,452,000
Gain on sale of business 2,775,000 2,775,000 - -
Other income 71,000 24,000 4,000 51,000
------------ ----------- ------------ ------------
Income before income taxes 4,641,000 3,474,000 1,128,000 2,023,000
Income tax expense 2,698,000 2,152,000 400,000 (123,000) (c) 823,000
------------ ----------- ------------ ------------
Net income 1,943,000 1,322,000 728,000 1,200,000
Dividends and accretion on
preferred stock (532,000) - - (532,000)
------------ ----------- ------------ ------------
Net income available
for common shareholders $ 1,411,000 $ 1,322,000 $ 728,000 $ 668,000
============ =========== ============ ============
Basic and diluted earnings
per common share $ 0.24 $ 0.11
============ ============
Weighted average number of
common shares outstanding 5,811,000 5,811,000
============ ============
</TABLE>
______________________
Notes to pro forma adjusments:
(a) Represents the amortization of goodwill over 20 years and the covenant
not to compete over 5 years, and increased depreciation expense related
to the fair market value adjustment of property and equipment.
(b) Reflects a reduction in interest expense as a result of a net reduction
in the Company's revolving credit facility from proceeds from the sale of
Great Bend, net of the cost of the acquisition of Astro Air.
(c) Represents the tax effect of pro forma adjustments.
23
<PAGE>
OWOSSO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 26, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWOSSO Pro Forma
Historical Great Bend Astro Air Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales $ 143,061,000 $ 14,893,000 $ 22,915,000 $ 151,083,000
Cost of products sold 109,155,000 10,927,000 19,994,000 250,000 (a) 118,472,000
------------- ------------ ------------ -------------
Gross profit 33,906,000 3,966,000 2,921,000 32,611,000
Expenses:
Selling, general and administrative 20,495,000 2,500,000 1,259,000 452,000 (a) 19,706,000
Corporate 4,816,000 - - 4,816,000
------------ ----------- ----------- ------------
Income from operations 8,595,000 1,466,000 1,662,000 8,089,000
Interest expense 4,143,000 186,000 252,000 (160,000) (b) 4,049,000
Other income 199,000 23,000 - 176,000
----------- ----------- ------------ -----------
Income before income taxes 4,651,000 1,303,000 1,410,000 4,216,000
Income tax expense 2,100,000 548,000 501,000 (244,000) (c) 1,809,000
----------- ----------- ------------ -----------
Net income 2,551,000 755,000 909,000 2,407,000
Dividends and accretion on
preferred stock (1,047,000) - - (1,047,000)
----------- ----------- ------------ -----------
Net income available
for common shareholders $ 1,504,000 $ 755,000 $ 909,000 $ 1,360,000
=========== =========== ============ ===========
Basic and diluted earnings
per common share $ 0.26 $ 0.23
=========== ==========
Weighted average number of
common shares outstanding 5,809,000 5,809,000
=========== ==========
</TABLE>
- -----------------------------------
Notes to pro forma adjustments:
(a) Represents the amortization of goodwill over 20 years and the covenant
not to compete over 5 years, and increased depreciation expense related
to the fair market value adjustment of property and equipment.
(b) Reflects a reduction in interest expense as a result of a net reduction
in the Company's revolving credit facility from proceeds from the sale of
Great Bend, net of the cost of the acquisition of Astro Air.
(c) Represents the tax effect of pro forma adjustments.
24
<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 hereunto duly authorized.
OWOSSO CORPORATION
Date: June 18, 1998 By: /s/ John H. Wert, Jr.
---------------------
John H. Wert, Jr.
Senior Vice President - Finance,
Chief Financial Officer, and
Treasurer and Secretary
25
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
23.1 Consent of Hugh L. Goodpasture
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Owosso Corporation's
Registration Statements No. 33-98474 and 333-55835 on Form S-8 and Registration
Statement No. 33-99526 on Form S-3 of our report dated February 24, 1998 on the
financial statements of Astro Air, Inc. for the years ended December 31, 1997
and December 31, 1996 which are included in Amendment No. 1 to the Form 8-K.
HUGH L. GOODPASTURE
Jacksonville, Texas
June 18, 1998
