UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 14, 1996
SMC CORPORATION
State of Oregon 0-25390 93-0939076
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation or File No.) Identification No.)
organization)
30725 Diamond Hill Road, Harrisburg, Oregon 97446
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 995-8214
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
(a) Financial Statements of Business Acquired
Pages 4 through 16 of this Form 8-K/A contain the audited financial
statements of Honorbuilt Industries, Inc. for the two years ended December
31, 1995 and unaudited interim financial statements for the three months
ended March 31, 1995 and 1996.
(b) Pro Forma Financial Information
Pages 17 through 21 of this Form 8-K/A contain Pro Forma Combined
Statements of Operations for the Registrant and Honorbuilt Industries Inc.
for the six months ended June 30, 1996 and for the 12 months ended December
31, 1995.
(c) Exhibits
None.
2
<PAGE>
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.
Dated: August 29, 1996
SMC CORPORATION
By: /s/ PAUL M. BROWN, JR.
----------------------------------------
Paul M. Brown, Jr.
Vice President - Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
3
<PAGE>
HONORBUILT INDUSTRIES, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
SMC Corporation
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' deficit and of cash flows
present fairly, in all material respects, the financial position of
Honorbuilt Industries, Inc. at December 31, 1995 and 1994, and the results
of its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles. 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 audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has suffered recurring losses from
operations and has a shareholders' deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 8. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
PRICE WATERHOUSE LLP
Portland, Oregon
August 22, 1996
5
<PAGE>
<TABLE>
<CAPTION>
HONORBUILT INDUSTRIES, INC.
BALANCE SHEET
(IN THOUSANDS)
- --------------------------------------------------------------------------------
DECEMBER 31,MARCH 31,
1994 1995 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1 $ 2 $ 3
Accounts receivable, net (Note 1) 313 311 1,023
Accounts receivable, related party (Note 6) 187 172 219
Inventories (Notes 1, 2 and 5) 2,729 2,441 1,512
Prepaid expenses and other current assets 17 11 6
------- ------- -------
Total current assets 3,247 2,937 2,763
Property, plant and equipment,
net (Notes 1, 3, 4, and 5) 351 348 334
Other assets, net (Note 1) 30 23 22
------- ------- -------
Total assets $ 3,628 $ 3,308 $ 3,119
======= ======= =======
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Notes payable (Note 4) $ - $ 817 $ 791
Current portion of long-term debt (Note 5) 734 657 641
Accounts payable 880 737 706
Accounts payable, related party (Note 6) 2,518 1,058 1,597
Product warranty liabilities 196 282 282
Accrued liabilities 258 399 332
------- ------- -------
Total current liabilities 4,586 3,950 4,349
Notes payable to shareholders (Notes 5 and 6) 200 200 200
------- ------- -------
Total liabilities 4,786 4,150 4,549
------- ------- -------
Commitments and contingencies (Note 7)
Shareholders' deficit:
Common stock, 10,000 shares authorized, 3,404
shares issued and outstanding (Note 6) 2,641 2,641 2,641
Additional paid-in capital (Note 6) - 2,300 2,300
Accumulated deficit (3,799) (5,783) (6,371)
------- ------- -------
Total shareholders' deficit (1,158) (842) (1,430)
------- ------- -------
Total liabilities and shareholders' deficit $ 3,628 $ 3,308 $ 3,119
======= ======= =======
The accompanying notes are an integral part of this financial statement.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
HONORBUILT INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1994 1995 1995 1996
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales $13,240 $ 15,816 $ 5,819 $ 3,714
Cost of sales 13,575 16,949 5,775 4,089
------- -------- ------- --------
Gross profit (loss) (335) (1,133) 44 (375)
Selling, general and administrative
expenses 936 986 280 167
------- -------- ------- --------
Loss from operations (1,271) (2,119) (236) (542)
Interest expense 96 123 35 40
Other (income) expense (23) (258) (6) 6
------- -------- ------- --------
Net loss $(1,344) $ (1,984) $ (265) $ (588)
======= ======== ======= ========
Net loss per share $ (1.14) $ (.58) $ (.08) $ (.17)
======= ======== ======= ========
Weighted average shares outstanding 1,184 3,404 3,404 3,404
======= ======== ======= ========
The accompanying notes are an integral part of this financial tatement.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
HONORBUILT INDUSTRIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
(IN THOUSANDS)
- --------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL
------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 750 $ 410 $ - $ (2,455) $ (2,045)
Common stock issued upon
conversion of related party debt
(Note 6) 2,654 2,231 - - 2,231
Net loss - - - (1,344) (1,344)
----- --------- --------- --------- ---------
Balance, December 31, 1994 3,404 2,641 - (3,799) (1,158)
Conversion of related party debt (Note 6) - - 2,300 - 2,300
Net loss - - - (1,984) (1,984)
----- --------- --------- --------- ---------
Balance, December 31, 1995 3,404 2,641 2,300 (5,783) (842)
Net loss - - - (588) (588)
----- --------- --------- --------- ---------
Balance, March 31, 1996 (unaudited) 3,404 $ 2,641 $ 2,300 $ (6,371) $ (1,430)
===== ========= ========= ========= =========
The accompanying notes are an integral part of this financial statement.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
HONORBUILT INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1994 1995 1995 1996
------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,344) $ (1,984) $ (265) $ (588)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 80 65 17 15
Changes in certain assets and liabilities:
Accounts receivable 15 2 72 (712)
Accounts receivable, related party 13 15 (29) (47)
Inventories (395) 288 (680) 929
Prepaid expenses and other current assets 2 6 (106) 5
Accounts payable 434 (143) (62) (31)
Accounts payable, related party 1,333 840 950 539
Product warranty liabilities 16 86 14 -
Accrued liabilities and other obligations (16) 141 171 (67)
------- -------- ------- --------
Net cash provided by (used in) operating
activities 138 (684) 82 43
------- -------- ------- --------
Cash flows from investing activities:
Capital expenditures (50) (55) (57) -
------- -------- ------- --------
Net cash used in investing activities (50) (55) (57) -
------- -------- ------- --------
Cash flows from financing activities:
Net borrowings on notes payable - 817 - (26)
Repayments of long-term debt (89) (77) (21) (16)
------- -------- ------- --------
Net cash (used in) provided by financing
activities (89) 740 (21) (42)
------- -------- ------- --------
Net (decrease) increase in cash
and cash equivalents (1) 1 4 1
Cash and cash equivalents, beginning of period 2 1 1 2
------- -------- ------- --------
Cash and cash equivalents, end of period $ 1 $ 2 $ 5 $ 3
======= ======== ======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 59 $ 55 $ 84 $ 129
Income taxes - - - -
Non-cash exchange of debt for equity 2,231 2,300 - -
The accompanying notes are an integral part of this financial statement.
</TABLE>
9
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Honorbuilt Industries, Inc. (the "Company"), a Kansas corporation,
designs, manufactures, and markets Class C motor coaches sold
primarily to dealers throughout the United States.
ACCOUNTS RECEIVABLE
Accounts receivable are net of an allowance for doubtful accounts of
$123,434 and $148,115 at December 31, 1994 and 1995, respectively.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost
determined by the first-in, first-out method for raw materials,
work-in-process and finished goods and by the specific cost method for
chassis. Cost includes the purchase price of raw materials, direct
labor and an allocation of overhead costs. Raw materials inventory
consists of component parts. Chassis manufacturers provide terms
calling for payment generally upon completion of the motor coach.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Additions, renewals
and betterments are capitalized. Expenditures for maintenance, repairs
and minor renewals and betterments are charged to expense. Gains or
losses realized from sales or retirements are reflected in earnings
and are not significant for the years ended December 31, 1995 and
1994. Depreciation and amortization are provided using the
straight-line method over the estimated useful lives of 31.5 years for
buildings and improvements, and 5 to 7 years for machinery and
equipment.
OTHER ASSETS
Other assets consist primarily of product trade names, organization
costs and financing costs, which are being amortized using the
straight-line method over 3 to 5 years. Amortization expense for the
years ended December 31, 1994 and 1995 was $7,665 and $7,001,
respectively.
FINANCIAL INSTRUMENTS
The Company estimates the fair value of its monetary assets and
liabilities based upon the existing interest rates related to such
assets and liabilities compared to the current market rates of
interest for instruments of a similar nature and degree of risk. The
fair value of long-term debt is estimated using discounted cash flow
analyses, based on the Company's incremental borrowing rates for
similar types of borrowing arrangements. The fair value of long-term
debt, exclusive of related party debt, is $569,000 and $517,000 at
December 31, 1994 and 1995, respectively. As discussed in Note 5, the
long-term debt to related parties does not have a fixed payment
stream. Therefore, fair value based upon discounted cash flow analysis
cannot be determined for the related party debt. The fair value of the
Company's line of credit at December 31, 1995 and 1994 approximates
the carrying value because the note bears interest at a competitive
rate. The Company records all other financial instruments, including
accounts receivable and accounts payable, at cost which approximates
market value.
10
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
The Company recognizes revenue from the sale of motor coaches when
title and risk of ownership are transferred to the dealer, which
generally is upon shipment or dealer pick-up.
Sales and the percentage of total sales made to dealers, representing
more than 10% of sales in any of the following periods, were as
follows:
YEAR ENDED DECEMBER 31,
1994 1995
------------------ -------------------
Bass Pro $2,229,241 16.8% $1,594,444 10.0%
California RV 1,686,745 12.7 -
Rusty Eck Ford 2,803,570 21.2 1,746,070 11.0
CERTAIN RISKS, UNCERTAINTIES AND CONCENTRATION OF CREDIT RISK
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 financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
The Company has a concentration of credit risk in the recreational
vehicle industry, specifically related to amounts outstanding at any
point in time in accounts receivable and/or under repurchase
agreements (see Note 7) with any specific dealership to which it has
sold motor homes. The Company requires no collateral from its dealers
upon sale of a motor home, and most dealer arrangements provide for
repurchase agreements which require the Company to repurchase
previously sold motor homes in the event of the dealer's default on
its financing arrangement.
PRODUCT WARRANTY
The Company provides a one-year warranty against defects in material
and workmanship to dealers and purchasers of motor coaches. Certain
components used in the manufacture of the Company's motor coaches
carry warranties of other manufacturers. Estimated warranty costs are
reserved at the time of sale of the warranted products.
INTERIM FINANCIAL DATA
The interim financial data for the three months ended March 31, 1995
and 1996 are unaudited; however, in the opinion of the Company, the
interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results
for the interim periods. Operating results and cash flows for the
three months ended March 31, 1995 and 1996 are not necessarily
indicative of the results to be achieved for the full year.
11
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter
S of the Internal Revenue Code. Under those provisions and analogous
provisions of certain state laws, the Company does not pay federal or
state corporate taxes on taxable income. Instead, the Company's
taxable income (loss) is attributed to the shareholders for their
respective shares of the Company's taxable income. Accordingly, no
accrual or provision for income tax was made in the Company's
financial statements for the years ended December 31, 1994 and 1995.
No provision for income tax on a pro forma basis as if the Company
were a C Corporation has been prepared due to net losses incurred
since the Company's inception.
LOSS PER SHARE
Net loss per share has been computed based on the weighted average
number of shares of common stock outstanding during the period.
2. INVENTORIES
Inventories by major classification consist of (in thousands):
DECEMBER 31,
1994 1995
---------- ----------
Raw materials $ 439 $ 594
Work-in-process 255 293
Finished goods, including chassis 2,035 1,554
---------- ----------
Total $ 2,729 $ 2,441
========== ==========
3. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment consist of
(in thousands):
DECEMBER 31,
1994 1995
---------- ----------
Land and improvements $ 10 $ 10
Buildings and improvements 322 341
Machinery and equipment 292 316
Furniture and fixtures 59 70
---------- ----------
683 737
Less accumulated depreciation (332) (389)
---------- ----------
Property, plant and equipment, net $ 351 $ 348
---------- ----------
12
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." The Company adopted the statement in fiscal 1996. The
adoption had no effect on the Company's financial position or results
of operations.
4. NOTES PAYABLE
The Company has a $1.0 million revolving line of credit with American
National Bank. The available borrowing under the line of credit is
limited to 85% of finished goods. At December 31, 1995, $816,929 was
outstanding on the Company's line of credit, with interest at the
bank's prime rate plus one percent (9.5%). Outstanding borrowings
under the line of credit are due on demand. The line of credit is
secured by accounts receivable and real estate of the Company.
5. LONG-TERM DEBT
<TABLE>
Long-term debt consists of (in thousands): DECEMBER 31,
1994 1995
---------- ----------
<S> <C> <C>
9.0% note payable to Bennington State Bank, due in
monthly instalments of $9, including interest, due in
October 2000 $ 444 $ 367
6% note payable to the City of Minneapolis, Kansas,
due in monthly instalments of $3, including interest,
due in November 2002 290 290
Notes payable to related parties, bearing interest at
prime rate and payable upon the attainment of
certain profitability thresholds 200 200
---------- ----------
934 857
Less current portion (734) (657)
---------- ----------
$ 200 $ 200
---------- ----------
</TABLE>
The note payable to Bennington State Bank is secured by all assets of
the Company and is guaranteed by the Company's former president and
certain other shareholders. The note contains certain covenants
including working capital requirements and dividend restrictions. As
of December 31, 1994 and 1995, the Company was in violation of certain
of these covenants and did not obtain a waiver from the bank for the
conditions of default. Consequently, at December 31, 1994 and 1995,
the $443,830 and $366,810 note payable to the bank has been reflected
in the financial statements as current. The bank has not formally
notified the Company that it will accelerate demand for payment
13
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. LONG-TERM DEBT (CONTINUED)
on this note. The Company is currently renegotiating the note, which
would decrease the monthly payment to $5,000. In addition, Bennington
State Bank is to receive the proceeds from any rental income
associated with the Company's land and buildings. However, there can
be no assurance that the bank will not declare default and demand
payment or that the Company will be able to receive proceeds from
rental income.
The note payable to the City of Minneapolis is subordinated to the
note payable to the Bennington State Bank and is secured by the
Company's building and improvements. The Company has not made the
scheduled principal payments and is therefore in default. The note has
been classified as current at December 31, 1994 and 1995. The note is
guaranteed by the Company's former president.
The notes payable to related parties are subordinated to the note
payable to the Bennington State Bank. Payments of principal and
interest must be approved by the Board of Directors and are based on
the operating results of the Company. The Company does not anticipate
making any significant principal payments on these notes during 1996.
Accordingly, the notes payable have been classified as long-term at
December 31, 1995.
6. RELATED PARTIES
The Company is related through common ownership with an automobile and
recreational vehicle dealership owned by the Company's major
shareholder and president. From time to time, this dealership has
floored certain coaches. The following summarizes the related party
transactions and balances with this dealership:
1994 1995
---------- ----------
Chassis purchases $6,213,029 $5,587,182
Recreational vehicle sales 1,159,565 1,746,070
Accounts payable at December 31 2,055,592 1,556,265
Accounts receivable at December 31 68,720 830
The Company also purchased chassis from a minority shareholder-owned
auto dealership for use in the manufacture of the Company's product.
Purchases from this shareholder were $531,601 and $161,029 in 1994 and
1995, respectively. The related accounts payable recorded at December
31, 1994 and 1995, were $591 and zero, respectively.
During 1994 and 1995, the Company sold motor coaches to two companies,
each of which is owned by one shareholder of the Company. The sales to
these two companies totaled $1,142,440 and $1,299,793 for the years
ended December 31, 1994 and 1995, respectively. At December 31, 1994
and 1995 the Company had a receivable from these companies of $118,210
and $170,775, respectively.
14
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
6. RELATED PARTIES (CONTINUED)
The Company has notes payable to shareholders in the amount of
$200,000 at December 31, 1994 and 1995 (see Note 5).
During 1994 and 1995, a shareholder of the Company forgave
approximately $2,231,000 and $2,300,000, respectively, of accounts
payable related to chassis purchases. In return for the debt forgiven
in 1994, the shareholder received 2,654,440 shares of the Company's
common stock. The debt forgiveness in 1995 has been classified as
additional paid-in capital.
7. COMMITMENTS AND CONTINGENCIES
As is customary in the recreational vehicle industry, the Company is
contingently liable under the terms of repurchase agreements with
finance companies, which provide secured inventory financing for
dealers of the Company's products. These agreements require the
Company to repurchase its products from the finance company in the
event of a dealer's default. The contingent liability under these
agreements approximates the sales price of the motor coaches, less
principal payments made by the dealer. The Company expects to resell
any products repurchased to reduce any liabilities incurred. During
1994 and 1995, the Company did not experience significant losses under
these repurchase agreements.
The risk of loss is spread over various dealers and finance companies.
Total secured inventory financing obligations of the Company's
dealers, for which the Company was contingently liable, were
approximately $1 million at December 31, 1995.
From time to time, the Company is involved in various customer
complaints which arise in the ordinary course of business. The Company
does not believe that losses, if any, incurred under outstanding
repurchase agreements or customer complaint settlements will have a
significant impact on the Company's financial position, results of
operations, or cash flows.
As of December 31, 1995, the Company had two unused letters of credit
for $300,000. One letter of credit for $200,000 expired March 3, 1996.
8. GOING CONCERN
The Company has incurred significant operating losses in 1994 and
1995, which has resulted in an increase in shareholders' deficit. In
addition, the Company is not in compliance with certain of the
restrictive covenants of its borrowing arrangements. Such factors
raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements have been prepared on the
basis of a going concern. On June 14, 1996, as more fully described in
Note 9, the Company sold certain inventory and fixed assets to SMC
Corporation and ceased manufacturing motor coaches. The Company plans
to continue as a going concern as the lessor of certain land and real
estate. The Company's existence is dependent upon its ability to
generate sufficient cash flow to
15
<PAGE>
HONORBUILT INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
8. GOING CONCERN (CONTINUED)
meet its obligations on a timely basis, to successfully negotiate a
restructuring of its borrowing arrangements with its lenders, or to
obtain additional financing. Although it cannot be assured that the
Company will be able to continue as a going concern, management
believes the proceeds from the sale of certain assets, the realization
of the remaining assets, and the renegotiation of debt will enable the
Company to meet its obligations.
9. SUBSEQUENT EVENT
On June 14, 1996, certain inventory and fixed assets of the Company
and the trade name ElDorado were acquired by SMC Corporation for
$959,000 in cash and $100,000 in acquisition-related expenses. The
financial statements present the historical balances of the Company's
accounts and do not reflect the effect of the acquisition.
16
<PAGE>
SMC CORPORATION
PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
The unaudited pro forma combined financial statements are provided as
required by Regulation S-X of the Securities and Exchange Commission.
On June 14, 1996, SMC Corporation (the Company) acquired certain assets of
Honorbuilt Industries, Inc. (Honorbuilt). The acquisition was consummated
for $959,000 in cash and $100,000 in acquisition-related expenses.
The assets of Honorbuilt purchased by SMC have been included with the
Company's account in the balance sheet presented in the Company's June 30,
1996 Form 10-Q filing. Accordingly, no pro forma balance sheet has been
presented in this Form 8-K/A filing.
The pro forma combined statement of operations for the period January 1,
1996 through June 30, 1996 presents the results of operations of the
combined entities assuming that the acquisition had been completed as of
the beginning of the period. The pro forma financial statements include the
results of Honorbuilt's operations through the acquisition date of June 14,
1996, and Honorbuilt's results of operations from June 14, 1996 to June 30,
1996 have been consolidated in SMC's results.
This pro forma statement includes all material adjustments necessary to
restate the historical results to accommodate these assumptions. However,
the pro forma combined balances are not necessarily indicative of all
balances which would have resulted had the purchase actually occurred on
December 31, 1995. These pro forma statements should be read in conjunction
with the other financial statements and accompanying notes.
17
<PAGE>
<TABLE>
<CAPTION>
SMC CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
HONORBUILT
SMC INDUSTRIES, PRO FORMA PRO FORMA
CORPORATION INC. ADJUSTMENTS NOTES COMBINED
----------- ----------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sales $ 48,731 $ 6,928 $ - $ 55,659
Cost of sales 41,790 7,436 23 a,b 49,249
--------- --------- --------- ---------
Gross profit (loss) 6,941 (508) (23) 6,410
Selling, general and administrative
expenses 4,128 343 13 a,b,c,d 4,484
--------- --------- --------- ---------
Income (loss) from operations 2,813 (851) (36) 1,926
Interest expense 141 89 - 230
Other expense (income) (13) 8 24 f 19
--------- --------- --------- ---------
Income (loss) before provision
for taxes 2,685 (948) (60) 1,677
Provision (benefit) for income taxes 1,072 - (435) e 637
--------- --------- --------- ---------
Net income (loss) $ 1,613 $ (948) $ 375 $ 1,040
========= ========= ========= =========
Net income per share $ .24 N/A N/A $ .16
========= ========= ========= =========
Weighted average number of shares 6,661 N/A N/A 6,661
========= ========= ========= =========
The accompanying note is an integral part of this financial statement.
</TABLE>
18
<PAGE>
SMC CORPORATION
PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
The unaudited pro forma combined financial statements are provided as
required by Regulation S-X of the Securities and Exchange Commission.
On June 14, 1996, SMC Corporation (the Company) acquired certain assets of
Honorbuilt Industries, Inc. (Honorbuilt). The acquisition was consummated
for $959,000 in cash and $100,000 in acquisition-related expenses.
The pro forma unaudited combined statement of operations for the year ended
December 31, 1995 presents the unaudited results of operations of the
combined entities assuming that the acquisition had been completed as of
the beginning of the period.
These unaudited pro forma statements include all material adjustments
necessary to restate the historical results to accommodate these
assumptions. However, the pro forma combined balances are not necessarily
indicative of all balances which would have resulted had the purchase
actually occurred on December 31, 1994. These pro forma statements should
be read in conjunction with the other financial statements and accompanying
notes.
19
<PAGE>
<TABLE>
<CAPTION>
SMC CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
HONORBUILT
SMC INDUSTRIES, PRO FORMA PRO FORMA
CORPORATION INC. ADJUSTMENTS NOTES COMBINED
----------- ----------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Sales $ 148,189 $ 15,816 $ - $ 164,005
Cost of sales 128,846 16,949 47 a,b 145,842
--------- --------- --------- ---------
Gross profit (loss) 19,343 (1,133) (47) 18,163
Selling, general and administrative
expenses 11,702 986 27 a,b,c,d 12,715
--------- --------- --------- ---------
Income (loss) from operations 7,641 (2,119) (74) 5,448
Interest expense 910 123 82 f 1,115
Other income (136) (258) - (394)
--------- --------- --------- ---------
Income (loss) before provision
for taxes 6,867 (1,984) (156) 4,727
Provision (benefit) for income taxes 1,926 - (130) e 1,796
--------- --------- --------- ---------
Net income (loss) $ 4,941 $ (1,984) $ (26) $ 2,931
========= ========= ========= =========
Net income per share $ .74 N/A N/A $ .44
========= ========= ========= =========
Weighted average number of shares 6,647 N/A N/A 6,647
========= ========= ========= =========
The accompanying note is an integral part of this financial statement.
</TABLE>
20
<PAGE>
SMC CORPORATION
NOTE TO PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1
The pro forma combined statements of operations have been prepared to
reflect the purchase by SMC Corporation of certain assets of Honorbuilt.
The Company paid $959,000 in cash and $100,000 in acquisition-related
expenses. The pro forma combined statements of operations are not
necessarily indicative of balances which would have resulted had the
acquisition actually occurred at the beginning of the period presented. Pro
forma adjustments are made to reflect the following:
a. Adjustment to reflect decreased depreciation of $10,000 and
$5,000 for the twelve months ended December 31, 1995 and the six
months ended June 30, 1996, respectively, resulting from the
nonownership of the building.
b. Adjustment to reflect (1) an increase in rent expense by $60,000
and $30,000 for the twelve months ended December 31, 1995 and the
six months ended June 30, 1996, respectively, related to the
operating lease of the land and building not acquired, and (2) an
increase by $9,000 and $4,000 for the twelve months ended
December 31, 1995 and the six months ended June 30, 1996,
respectively, related to depreciation expense associated with the
step-up valuation of the fixed assets.
c. In conjunction with the Honorbuilt acquisition, the Company
recorded $300,000 of goodwill which will be amortized over 15
years. This resulted in an adjustment to increase amortization
expense by $20,000 and $10,000 for the twelve months ended
December 31, 1995 and the six months ended June 30, 1996,
respectively.
d. Adjustment to decrease amortization expense by $5,000 and $3,000
for the twelve months ended December 31, 1995 and the six months
ended June 30, 1996, respectively, related to loan fees and
organizational costs recorded by Honorbuilt.
e. Adjustment to reflect the provision for income taxes of the
Company and Honorbuilt on a combined basis.
f. Adjustment of $82,000 to increase interest expense and $24,000 to
decrease interest income for the year ended December 31, 1995 and
the six months ended June 30, 1996, respectively.
21
