<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
July 18, 1996
- -------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
SINTER METALS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13366 25-1677695
--------------- ----------- -------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
Incorporation)
50 Public Square, Cleveland, Ohio 44113
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 771-6700
---------------
Page 1 of Pages
-- --
<PAGE> 2
The undersigned Registrant hereby amends the following items,
financial statements, exhibits or other portions of its Current Report on Form
8-K dated August 2, 1996 as set forth in the pages attached hereto.
"Item 7. Financial Statements, Pro Forma Financial Information and Exhibits" is
hereby amended and restated to include pro forma financial information required
in connection with the acquisition of SinterForm Incorporated by the Registrant
to include an Exhibit."
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of SinterForm Incorporated
Report of Independent Public Accountants
Balance Sheet as of June 30, 1996
Statement of Income for the year ended June 30, 1996
Statement of Cash Flow for the year ended June 30, 1996
Statement of Stockholders' Equity for the year ended June 30, 1996
Notes to Financial Statements
(b) Pro forma financial information
Introduction to Pro Forma Condensed Combined Financial Statements
(unaudited)
Pro Forma Condensed Combined Balance Sheet (unaudited) as
of June 30, 1996
Pro Forma Condensed Combined Income Statement (unaudited) for the
year ended December 31, 1995
Pro Forma Condensed Combined Income Statement (unaudited) for the six
months ended June 30, 1996
Notes to Pro Forma Condensed Combined Financial Statements (unaudited)
2
<PAGE> 3
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
SinterForm Incorporated:
We have audited the accompanying balance sheet of SinterForm Incorporated (a
Michigan corporation) as of June 30, 1996, and the related 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 financial statements referred to above present fairly, in
all material respects, the financial position of SinterForm Incorporated as of
June 30, 1996 and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cleveland, Ohio,
August 16, 1996.
3
<PAGE> 4
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 443,105
Accounts receivable-
Trade 1,459,418
Employee 10,000
Income tax 81,000
Inventories:
Raw materials 479,317
Work in progress 621,484
Finished goods 262,176
Prepaid expenses 17,336
Customer tooling 29,745
----------
Total current assets 3,403,581
----------
PROPERTY, PLANT AND EQUIPMENT:
Land 38,925
Building 235,225
Production machinery and equipment 1,757,857
Office furniture and equipment 49,123
Vendor tooling 18,375
Automobiles and trucks 1,187
Construction-in-process 138,794
----------
2,239,486
Less- Accumulated depreciation 313,620
----------
Net property, plant and equipment 1,925,866
----------
OTHER ASSETS:
Deposits 500
Deferred income tax 54,000
Loan commitment fee net of amortization costs of $3,750
3,750
Organization costs net of amortization costs of $50,063
43,805
----------
Total other assets 102,055
----------
Total assets $5,431,502
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
4
<PAGE> 5
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
CURRENT LIABILITIES:
Trade accounts payable $1,461,864
Accrued liabilities-
Payroll 197,004
Bonuses 160,000
Michigan single business tax 16,000
Other taxes 45,552
Other expenses 32,009
Deferred income taxes 142,000
Current portion of long-term debt 470,864
----------
Total current liabilities 2,525,293
----------
LONG-TERM DEBT 660,424
----------
Total liabilities 3,185,717
----------
STOCKHOLDERS' EQUITY:
Common Stock
Class A, 30,000 shares authorized; 850 shares
outstanding 8,500
Class B, 30,000 shares authorized; 0 shares outstanding
--
Additional paid-in-capital --
Retained earnings 2,237,285
----------
Total stockholders' equity 2,245,785
----------
Total liabilities and stockholders' equity $5,431,502
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
5
<PAGE> 6
SINTERFORM INCORPORATED
-----------------------
STATEMENT OF INCOME
-------------------
FOR THE YEAR ENDED JUNE 30, 1996
--------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET SALES $ 14,201,189
COST OF SALES 11,926,039
------------
GROSS PROFIT 2,275,150
SELLING EXPENSES 517,418
GENERAL AND ADMINISTRATIVE EXPENSES 742,723
OTHER (INCOME) EXPENSE:
Interest expense 118,601
Gain from sale of assets (6,455)
Interest income (14,391)
Other income (242,427)
------------
INCOME BEFORE INCOME TAXES 1,159,681
INCOME TAX PROVISION 384,631
------------
NET INCOME $ 775,050
============
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
6
<PAGE> 7
SINTERFORM INCORPORATED
-----------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED JUNE 30, 1996
--------------------------------
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 775,050
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization 192,422
Gain on sale of equipment (5,074)
Deferred income taxes 54,000
Change in operating assets and liabilities-
Accounts receivable (490,071)
Inventories (24,346)
Prepaid expenses (22,032)
Other assets 11,863
Accounts payable 377,962
Accrued expenses (154,019)
---------
Net cash provided by operating activities 715,755
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 11,900
Purchase of equipment (562,012)
---------
Net cash used for investing activities (550,112)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of common stock (185,650)
Principal payment on long-term debt (150,328)
---------
Net cash used for financing activities (335,978)
---------
NET DECREASE IN CASH (170,335)
---------
CASH, AT BEGINNING OF YEAR 613,440
---------
CASH, AT END OF YEAR $ 443,105
=========
CASH PAYMENTS FOR INTEREST $ 118,601
=========
CASH PAYMENTS FOR TAXES $ 415,000
=========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
7
<PAGE> 8
SINTERFORM INCORPORATED
-----------------------
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
FOR THE YEAR ENDED JUNE 30, 1996
--------------------------------
<TABLE>
<CAPTION>
Common Common Additional
Stock- Stock- Paid-In Retained
Class A Class B Capital Earnings
------- ------- ------- --------
<S> <C> <C> <C> <C>
ENDING BALANCE AT JULY 1, 1995 $ 9,000 $-- $-- $ 1,647,385
Redemption of shares (500) -- -- (185,150)
Net income -- -- -- 775,050
------- ---- ---- -----------
ENDING BALANCE AT JUNE 30, 1996 $ 8,500 $-- $-- $ 2,237,285
======= ==== ==== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
8
<PAGE> 9
SINTERFORM INCORPORATED
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Organization of the Company
- ---------------------------
SinterForm Incorporated (the Company) was incorporated as a Michigan Corporation
on October 22, 1993. The Company purchased the assets and assumed the
liabilities of Sinteris PM Corporation and began operations on November 1, 1993.
As consideration for the purchase, the Company issued to Nethertech Holdings
Corporation, the parent company of Sinteris PM Corporation, 100 shares of class
B common stock.
The Company's principal business consists of the design, engineering and
production of precision pressed metal components for use primarily in the
automotive, home appliance, lawn and garden and power tool industries. The
Company manufactures components such as gears, bearings and sprockets, for use
in engines, transmission and other drive mechanisms.
Cash and Cash Equivalents
- -------------------------
The Company considers all short-term instruments with an original maturity of
three months or less, which are valued at the lower of cost or market at the
balance sheet date, to be cash equivalents.
Inventories
- -----------
Inventories are carried at the lower of cost (first-in, first-out method) or
market.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the applicable assets using the straight-line
method for financial reporting and using accelerated methods for tax reporting
purposes.
Organization Expenses
- ---------------------
Legal and other professional expenses incurred in connection with the
organization of the Company have been capitalized and are being amortized on the
straight-line method over five years.
Income Taxes
- ------------
Income taxes are provided on earnings reported in the financial statements.
Deferred income taxes resulting from timing differences between earnings
reported for financial statement purposes and income measured in accordance with
tax laws are accounted for using the liability method.
9
<PAGE> 10
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
2. CONCENTRATIONS OF CREDIT RISK:
-----------------------------
At June 30, 1996, the Company had cash balances at a financial institution which
exceed the maximum Federal Deposit Insurance Corporation's insurable level of
$100,000.
The Company is subject to credit risk involving its accounts receivable because
a significant portion of the Company's sales are to five major customers. These
five customers, which are not in similar industries, comprise of 75% of total
sales. Trade receivables for these customers totaled $784,704 at June 30, 1996.
3. LONG-TERM DEBT:
--------------
Long-term debt at June 30, 1996 consists of the following:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Long-term note - bank - due in monthly installments
of $28,125 plus interest at prime rate (prime rate
at June 30, 1996 was 8.25%). Collaterized by
accounts receivable, inventory, machinery and
equipment and real estate $ 562,500
Long-term note - bank - due in monthly installments
of $6,667 plus interest at prime rate plus .25%
(prime rate at June 30, 1996 was 8.25%)
Collaterized by accounts receivable, inventory,
machinery and equipment and real estate 293,334
Long-term note - bank - due in monthly installments
of $4,248 plus interest at prime rate plus 1.5%
(prime rate at June 30, 1996 was 8.25%) collaterized
by accounts receivable, inventory, machinery and
equipment and real estate 275,454
----------
1,131,288
Less- Current maturities 470,864
----------
$ 660,424
==========
</TABLE>
10
<PAGE> 11
4. REPURCHASE OF COMMON STOCK:
--------------------------
The Company has agreements with the Class A common stockholders, which give the
Company the option to repurchase the shares in the event of death, disability or
retirement of the stockholders. The option price is equal to the book value of
the shares, plus one half of the amount that market value exceeds the book value
of the Company's land, buildings and equipment. If the Company does not exercise
its option to purchase the shares, the stockholder can require the Company to
purchase the stock at the above price. During 1996, the Company repurchased 50
Class A common shares for $185,650. The shares were retired.
5. INCOME TAXES:
------------
Income tax expense consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Current $296,631
Deferred 88,000
--------
Total $384,631
========
</TABLE>
Deferred income tax assets and liabilities are the result of the following
elements:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Accrued expenses deductible
for tax purposes when paid $ 54,000
Accelerated depreciation (138,000)
Inventory valuation (4,000)
---------
Total $ (88,000)
=========
</TABLE>
The income tax provision differs from the amounts computed by applying the
federal statutory rate as follows:
<TABLE>
<CAPTION>
<S> <C>
Income tax at federal statutory
rate $ 394,292
Michigan Single Business Tax (34,000)
Nondeductible expenses 15,068
Other, net 9,271
---------
Income tax provision $ 384,631
=========
</TABLE>
11
<PAGE> 12
6. EMPLOYEE BENEFIT PLAN:
---------------------
Retirement benefits are provided for substantially all employees under a
contributory plan subject to Section 401(k) of the Internal Revenue Code. All
employees with at least six months of service and who have worked at least 500
hours are eligible to participate on the next 401(k) open date. The plan
requires minimum employee contributions of 2% of compensation (as defined) and
allows for additional voluntary contributions of up to 15% of compensation. The
Company is required to match 25% of employee contributions up to a maximum of
2.5% of salary. All Company contributions are fully vested. Total Company
contributions under the plan amounted to $35,789 in 1996.
7. SUBSEQUENT EVENT:
----------------
On July 18, 1996, the Company entered into a Stock Purchase Agreement
(Agreement) with Sinter Metals, Inc. (Sinter). Under the terms of the Agreement,
Sinter acquired all of the issued and outstanding shares of the Company's stock.
The purchase price was $7,000,000 plus 5,000 shares of Sinter's Class A common
stock.
In conjunction with the transaction, all outstanding debt was retired.
12
<PAGE> 13
SINTER METALS, INC.
INTRODUCTION TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On July 18, 1996, Sinter Metals, Inc. (the "Company") acquired
all of the issued and outstanding capital stock (the "stock") of SinterForm
Incorporated, a Michigan Corporation. The Company paid the Stockholders $7.0
million in cash and 5,000 shares of the Company's Class A common stock.
Additionally, the Company also paid the Stockholders an aggregate of $1.5
million in cash as the consideration under Noncompetition Agreements. The funds
used to acquire SinterForm were provided by internally generated funds and
borrowings under the Company's credit facility. The acquisition has been
recorded using the purchase method of accounting, and accordingly, the results
of operations of SinterForm have been included in the Company's consolidated
financial statements since the date of acquisition. The purchase price
allocation has been based on preliminary estimates which may be revised at a
later date; however, the effect of any revisions on the results of operations
would not be material.
The unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 1996, gives effect to material events that are directly attributable to
the acquisition as if it had occurred on June 30, 1996. The unaudited Pro Forma
Condensed Combined Statements of Income for the year ended December 31, 1995 and
the six months ended June 30, 1996, give effect to material events that are
directly attributable to the acquisition as if it had occurred on January 1,
1995.
Prior to its acquisition by the Company, SinterForm
Incorporated utilized a June 30 fiscal year end. For purposes of the Pro Forma
Condensed Combined Statements of Income for the year ended December 31, 1995 and
the six months ended June 30, 1996, the reporting periods of SinterForm
Incorporated have been conformed to those of the Company.
The unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the operating
results that would have occurred had the SinterForm acquisition been consummated
at the beginning of the periods presented, or of results which may occur in the
future. The unaudited pro forma financial information should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report or Form 10-K for the year ended December
31, 1995.
13
<PAGE> 14
SINTER METALS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SINTER
METALS SINTERFORM
ASSETS HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
- ------ ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 2,663 $ 443 $ 3,106
Accounts receivable, 12,949 1,550 14,499
net
Inventories 10,723 1,363 12,086
Other current assets 651 48 699
-------- -------- --------
Total current assets 26,986 3,404 30,390
Property, plant and
equipment, net 30,261 1,926 2,051 (A) 34,238
Other assets, net 6,461 102 297 (B) 6,860
Goodwill, net 12,986 0 5,016 (C) 18,002
-------- -------- -------- --------
$ 76,694 $ 5,432 $ 7,364 $ 89,490
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term debt $ 264 471 (471)(D) 264
Accounts payable 7,645 1,462 100 (E) 9,207
Accrued expenses 6,747 434 7,181
Income taxes payable 1,222 158 1,380
-------- -------- -------- --------
Total current
liabilities 15,878 2,525 (371) 18,032
-------- -------- -------- --------
Long-term obligations:
Long-term debt 9,355 661 9,145 (D) 19,161
Deferred income taxes 4,324 0 750 (F) 5,074
Other long-term
obligations 834 0 834
-------- -------- -------- --------
Total liabilities 30,391 3,186 9,524 43,101
-------- -------- -------- --------
Stockholders' equity:
Common stock 7 9 (9)(G) 7
Additional paid-in
capital 27,838 0 86 (H) 27,924
Cumulative translation
adjustment 372 0 372
Retained earnings 18,086 2,237 (2,237)(I) 18,086
-------- -------- -------- --------
Total stockholders
equity 46,303 2,246 (2,160) 46,389
-------- -------- -------- --------
$ 76,694 $ 5,432 $ 7,364 $ 89,490
======== ======== ======== ========
</TABLE>
See notes to Pro Forma Condensed Combined Financial Statements.
14
<PAGE> 15
SINTER METALS, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31,1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SINTER
METALS SINTERFORM
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Net sales $ 94,310 $ 13,280 $107,590
Cost of sales 73,245 11,100 128 (J) 84,473
------- ------- ------- -------
Gross profit 21,065 2,180 (128) 23,117
Selling, general and
administrative expenses 7,698 904 8,602
Amortization of
intangible assets 332 0 166 (K) 498
------- ------ ------- -------
Income from operations 13,035 1,276 (294) 14,017
Interest expense 287 114 474 (L) 875
Other expense (income),
net 111 (236) (125)
------- ------ ------- -------
Income before income
taxes 12,637 1,398 (768) 13,267
Provision for income
taxes 4,750 487 (284) (M) 4,953
------- ------- ------- -------
Net income $ 7,887 $ 911 $ (484) $ 8,314
======= ======= ======= =======
Net income per common
share $ 1.05 $ 1.11
======= =======
Weighted average common
share 7,500 7,505
======= ========
<FN>
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
15
<PAGE> 16
SINTER METALS, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SINTER
METALS SINTERFORM
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Net sales $ 55,539 $ 7,653 $ 63,192
Cost of sales 42,727 6,412 64 (J) 49,203
-------- -------- -------- --------
Gross profit 12,812 1,241 (64) 13,989
Selling, general and
administrative expenses 4,875 836 5,711
Amortization of
intangible assets 195 0 83 (K) 278
-------- -------- -------- --------
Income from operations 7,742 405 (147) 8,000
Interest expense 188 47 230 (L) 465
Other (income), net (21) (190) (211)
-------- -------- -------- --------
Income before income
taxes 7,575 548 (377) 7,746
Provision for income
taxes 2,775 149 (139) (M) 2,785
-------- -------- -------- --------
Net Income $ 4,800 $ 399 $ (238) $ 4,961
======== ======== ======== ========
Net income per common
share $ .64 $ .66
======== ========
Weighted average common
shares outstanding 7,548 7,553
======== ========
<FN>
See notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
16
<PAGE> 17
SINTER METALS, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(A) An adjustment to reflect the increase in property, plant and equipment of
SinterForm from historical cost to the preliminary assessment of fair
market value.
(B) Represents the assets associated with the estimated transaction costs to be
incurred.
(C) The increase in goodwill is recorded to reflect the excess purchase price
paid for the stock of SinterForm in excess of the recorded book value.
(D) The incremental bank indebtedness represents the cash portion of the
purchase price and the refinancing of the SinterForm indebtedness.
(E) Represents an accrual for unpaid transaction costs.
(F) To record the deferred tax liability associated with the purchase
accounting adjustment to property, plant and equipment discussed in (A).
(G) Represents the adjustment necessary to eliminate the stock of SinterForm.
(H) The stock portion of the purchase was 5,000 shares issued at $17.25 per
share.
(I) Represents the adjustments necessary to eliminate the retained earnings of
SinterForm.
(J) Records the incremental depreciation associated with the increases in
property, plant and equipment identified in (A) above.
(K) Records the anticipated amortization of goodwill and intangible assets
arising from the acquisition.
(L) Records the interest expense associated with the incremental borrowings at
the average rate incurred.
(M) Represents the tax benefit associated with the incremental expenses
incurred above.
17
<PAGE> 18
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 hereunto duly authorized.
SINTER METALS, INC.
Date: September 27, 1996 /s/ Joseph W. Carreras
------------------
By: Joseph W. Carreras
Chairman of the Board
and Chief Executive Officer
/s/ Michael T. Kestner
--------------------
By: Michael T. Kestner
Chief Financial Officer
18
