<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 12, 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date Of Report (Date of earliest event reported): February 26, 1996
PRIMECO INC.
(Exact name of registrant as specified in its charter)
Texas
(State of other jurisdiction of Incorporation)
033-87404 74-1951774
(Commission File Number) (IRS Employer Identification Number)
16225 Park Ten Place, Suite 200 Houston, Texas 77084
(Address of principal executive offices)
(713) 578-5600
(Registrant's telephone number, including area code)
Page 1 of 26
Please see Exhibit Index on page 4
<PAGE> 2
The undersigned registrant hereby amends and restates in its entirety
the following items of its Current Report on Form 8-K dated March 12, 1996, as
set forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Financial Statements of Business Acquired -
Vibroplant U.S., Inc. Financial Statements
Independent Auditors Report 6
Balance Sheets as of February 25, 1996 and March 31, 1995 7
Statements of Operations for the period from April 1, 1995 through
February 25, 1996 and the years ended March 31, 1995 and 1994 8
Statements of Stockholder's Equity for the period from April 1, 1995
through February 25, 1996 and the years ended March 31, 1995
and 1994 9
Statements of Cash Flows for the period from April 1, 1995 through
February 25, 1996 and the years ended March 31, 1995 and 1994 10
Notes to Financial Statements 11
(b) Pro Forma Financial Information
Primeco Inc. Pro Forma Condensed Consolidated Financial Statements
(unaudited) 23
Pro Forma Condensed Consolidated Balance Sheets as of
December 31, 1995 24
Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995 25
Notes to Pro Forma Financial Statements 26
</TABLE>
(c) Exhibits
Exhibit 2.1 Stock Purchase Agreement by and among Vibroplant plc,
Vibroplant Investments, Ltd., and Primeco Inc.
dated as of January 9, 1996 (previously filed on
March 12, 1996 with the SEC in Prime's form 8-K)
-2-
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS, CONTINUED
Exhibit 2.2 Closing Supplement to Stock Purchase Agreement
dated as February 26, 1996 among Vibroplant plc,
Vibroplant Investments, Ltd., and Primeco
Inc. (previously filed on March 12, 1996 with the
SEC in Prime's form 8-K)
Exhibit 99.1 Press Release of Primeco Inc. dated February 27, 1996
(previously filed on March 12, 1996 with the SEC in
Prime's form 8-K)
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
PRIMECO INC.
By: /s/ BRIAN FONTANA
---------------------------------
Brian Fontana
Executive Vice President and
Chief Financial Officer
Date: May 13, 1996
-3-
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Business Acquired
The Vibroplant U.S., Inc. Financial Statements Independent
auditors Report
Balance Sheets as of February 25, 1996 and March 31, 1995
Statement of Operations for the period ended February 25, 1996 and
the years ended March 31, 1995 and 1994
Statement of Cash Flows for the period ended February 25, 1996 and
the years ended March 31, 1995 and 1994
Statement of Stockholder's Equity for the period from April 1, 1996
through February 25, 1996 and the years ended March 31, 1995 and 1994
Notes to Financial Statements
(b) Pro Forma Financial Information
Primeco Inc. Pro Forma Condensed Consolidated Financial Statements
(unaudited)
Pro Forma Condensed Consolidated Balance Sheets as of December 31, 1995
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1995
Notes to Pro Forma Financial Statements
(c) Exhibits
Exhibit 2.1 Stock Purchase Agreement by and among Vibroplant
plc, Vibroplant Investments, Ltd., and Primeco Inc.
dated as of January 9, 1996 (previously filed on
March 12, 1996 with the SEC in Prime's form 8-K)*
Exhibit 2.2 Closing Supplement to Stock Purchase Agreement
dated as February 26, 1996 among Vibroplant plc,
Vibroplant Investments, Ltd., and Primeco
Inc. (previously filed on March 12, 1996 with the
SEC in Prime's form 8-K)*
Exhibit 99.1 Press Release of Primeco Inc. dated February 27, 1996
(previously filed on March 12, 1996 with the SEC in
Prime's form 8-K)*
- ---------------
* Previously filed
-4-
<PAGE> 5
VIBROPLANT U.S., INC.
Financial Statements
February 25, 1996 and March 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
-5-
<PAGE> 6
Independent Auditors' Report
The Board of Directors and Stockholder
Vibroplant U.S., Inc.:
We have audited the accompanying balance sheets of Vibroplant U.S., Inc. as
of February 25, 1996, and March 31, 1995, and the related statements of
operations, stockholder's equity, and cash flows for the period from April
1, 1995 through February 25, 1996, and for each of the years in the two-year
period ended March 31, 1995. 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 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 audits provide 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 Vibroplant U.S., Inc. as of
February 25, 1996, and March 31, 1995, and the results of its operations and
its cash flows for the period from April 1, 1995, through February 25, 1996,
and for each of the years in the two-year period ended March 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in note 3 to the financial statements, the Company changed its
method of computing depreciation in 1995. As discussed in note 2(e) to the
financial statements, the Company changed its method of accounting for
income taxes in 1994 to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
KPMG Peat Marwick LLP
Fort Worth, Texas
April 8, 1996
-6-
<PAGE> 7
VIBROPLANT U.S., INC.
Balance Sheets
February 25, 1996 and March 31, 1995
<TABLE>
<CAPTION>
February 25, March 31,
Assets (note 7) 1996 1995
--------------- -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,693,078 3,003,586
Trade accounts receivable, less allowance
for doubtful accounts of approximately
$601,000 in 1996 and $610,000 in 1995 (note 2 (f)) 7,186,288 9,114,993
Income taxes receivable (note 8) 424,622 436,899
Inventories (notes 4 and 12) 3,717,727 3,146,086
Prepaid expenses 321,929 492,778
Deferred income taxes (note 8) 723,696 891,634
-------------- ------------
Total current assets 16,067,340 17,085,976
Property and equipment, net (notes 5 and 12) 57,484,172 53,803,575
Other assets, net 163,155 --
-------------- ------------
$ 73,714,667 70,889,551
============== ============
Liabilities and Stockholder's Equity
Current liabilities:
Current installments of long-term debt (note 7) $ 7,500,000 7,500,000
Current installments of obligations under capital
leases (note 6) 226,000 145,086
Accounts payable 697,971 1,060,433
Accrued expenses 2,910,724 2,899,085
Accrued dividends (note 1) 15,000,000 --
-------------- ------------
Total current liabilities 26,334,695 11,604,604
-------------- ------------
Long-term debt, excluding current installments
(note 7) 13,250,000 17,000,000
Obligations under capital leases, excluding current
installments (note 6) 325,069 163,543
Accrued environmental costs (note 11) 3,000,000 --
Deferred income taxes (note 8) 10,181,154 8,994,367
-------------- ------------
Total liabilities 53,090,918 37,762,514
-------------- ------------
Stockholder's equity (note 1):
Common stock, $.01 par value, 700,000 shares
authorized, 489,691 shares issued and outstanding 4,897 4,897
Additional paid-in capital 21,881,396 21,881,396
Retained earnings 394,096 12,897,384
Less treasury stock, 14,691 shares, at cost (note 9) (1,656,640) (1,656,640)
-------------- ------------
Total stockholder's equity 20,623,749 33,127,037
Commitments and contingencies (notes 6 and 11)
-------------- ------------
$ 73,714,667 70,889,551
============== ============
</TABLE>
See accompanying notes to financial statements.
-7-
<PAGE> 8
VIBROPLANT U.S., INC.
Statements of Operations
For the period from April 1, 1995 through February 25, 1996
and the years ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
February 25, March 31, March 31,
1996 1995 1994
------------ ---------- -----------
<S> <C> <C> <C>
Rental revenue (note 2 (f)) $ 37,203,561 38,584,141 40,442,447
-------------- ------------ ------------
Equipment sales 8,848,837 8,116,332 9,332,918
Less cost of sales (note 3) (6,083,250) (6,971,298) (6,046,228)
-------------- ------------ ------------
2,765,587 1,145,034 2,686,690
-------------- ------------ ------------
Parts and labor sales 3,559,906 3,592,854 3,017,420
Less cost of sales (1,901,780) (2,085,990) (1,786,999)
-------------- ------------ ------------
1,658,126 1,506,864 1,230,421
-------------- ------------ ------------
Operating profits 41,627,274 41,236,039 44,359,558
-------------- ------------ ------------
Selling, general and administrative expenses
(notes 6, 9 and 10) 12,760,387 15,207,889 15,703,727
Depreciation and amortization (note 3) 7,372,818 7,716,029 12,595,813
Operating salaries, wages and benefits 5,709,057 5,798,864 5,783,733
Other operating expenses (notes 5 and 6) 9,876,408 7,927,021 7,456,803
-------------- ------------ ------------
Total operating expenses 35,718,670 36,649,803 41,540,076
-------------- ------------ ------------
Operating income 5,908,604 4,586,236 2,819,482
-------------- ------------ ------------
Other expenses (income):
Interest expense (note 7) 1,517,196 1,828,363 2,212,715
Other, net (224,381) (166,059) 419,029
-------------- ------------ ------------
Total other expenses 1,292,815 1,662,304 2,631,744
-------------- ------------ ------------
Income before income taxes and
cumulative effect of changes in
accounting methods 4,615,789 2,923,932 187,738
Income taxes (note 8) 2,119,077 1,578,469 133,200
-------------- ------------ ------------
Income before cumulative effect
of changes in accounting methods 2,496,712 1,345,463 54,538
Cumulative effect at April 1, 1994 of change
in accounting for depreciation (note 3) -- 4,782,132 --
Cumulative effect at April 1, 1993 of change
in accounting for income taxes (note 2 (e)) -- -- (139,218)
-------------- ------------ ------------
Net income (loss) $ 2,496,712 6,127,595 (84,680)
============== ============ ============
</TABLE>
See accompanying notes to financial statements.
-8-
<PAGE> 9
VIBROPLANT U.S., INC.
Statements of Stockholder's Equity
For the period from April 1, 1995 through February 25, 1996
and the years ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock
--------------------- Additional
Number Paid-in Retained Treasury
of Shares Amount Capital Earnings Stock Total
--------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1993 489,691 $ 4,897 21,881,396 6,854,469 -- 28,740,762
Net loss -- -- -- (84,680) -- (84,680)
Acquisition of 14,691
shares of common
stock (note 9) -- -- -- -- (1,656,640) (1,656,640)
------- -------- ---------- ----------- ---------- -----------
Balance,
March 31, 1994 489,691 $ 4,897 21,881,396 6,769,789 (1,656,640) 26,999,442
Net income -- -- -- 6,127,595 -- 6,127,595
------- -------- ---------- ----------- ---------- -----------
Balance,
March 31, 1995 489,691 4,897 21,881,396 12,897,384 (1,656,640) 33,127,037
Net income -- -- -- 2,496,712 -- 2,496,712
Dividend -- -- -- (15,000,000) -- (15,000,000)
------- -------- ---------- ----------- ---------- -----------
Balance,
February 25, 1996 489,691 $ 4,897 21,881,396 394,096 (1,656,640) 20,623,749
======= ======== ========== =========== ========== ===========
</TABLE>
See accomapnying notes to financial statements.
-9-
<PAGE> 10
VIBROPLANT U.S., INC.
Statements of Cash Flows
For the period from April 1, 1995 through February 25, 1996
and the years ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
February 25, March 31, March 31,
1996 1995 1994
------------ ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,496,712 6,127,595 (84,680)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Cumulative effect of change in accounting
for depreciation -- (4,782,132) --
Depreciation and amortization 7,372,818 7,716,029 12,683,697
Provision for bad debts 462,715 1,055,639 300,934
Provision for loss on real property -- 340,000 --
Deferred income taxes, including $139,218
cumulative effect of change in accounting
for income taxes in 1994 1,354,725 1,630,216 11,856
Changes in operating assets and liabilities:
Trade accounts receivable 1,465,990 32,422 (573,708)
Income taxes receivable 12,277 (307,375) 192,763
Inventories 3,176,459 3,658,797 4,310,272
Prepaid expenses 170,849 107,995 (105,787)
Other assets (163,155) -- --
Accounts payable (362,462) 421,454 (387,489)
Accrued environmental costs 3,000,000 -- --
Accrued expenses 11,639 (232,904) (48,912)
-------------- -------------- ------------
Net cash provided by operating activities 18,998,567 15,767,736 16,298,946
-------------- -------------- ------------
Cash flows from investing activities:
Purchases of property and equipment (14,344,316) (10,941,427) (6,877,795)
Decrease in other assets -- 434,016 21,624
-------------- -------------- ------------
Net cash used in investing activities (14,344,316) (10,507,411) (6,856,171)
Cash flows from financing activities:
Proceeds from long-term debt -- 24,750,000 2,500,000
Payments on long-term debt (3,750,000) (22,275,344) (10,159,576)
Payments under capital lease obligations (214,759) -- --
Payments on advances from Parent -- (5,000,000) --
Decrease in bank overdraft -- (392,366) (454,641)
Purchases of treasury stock -- (671,371) (985,269)
-------------- -------------- ------------
Net cash used in financing activities (3,964,759) (3,589,081) (9,099,486)
Net increase in cash and cash equivalents 689,492 1,671,244 343,289
Cash and cash equivalents at beginning of period 3,003,586 1,332,342 989,053
-------------- -------------- ------------
Cash and cash equivalents at end of period $ 3,693,078 3,003,586 1,332,342
============== ============== ============
</TABLE>
See accompanying notes to financial statements.
-10-
<PAGE> 11
VIBROPLANT U.S., INC.
Notes to Financial Statements
February 25, 1996 and March 31, 1995 and 1994
(1) Stock Purchase Agreement
On February 26, 1996, pursuant to a stock purchase agreement
dated as of January 9, 1996, Primeco, Inc. (Prime) purchased all of
the outstanding stock of Vibroplant, U.S., Inc. (the Company) from
Vibroplant plc (the Parent). Prime also repaid the Company's
outstanding bank debt as of February 26, 1996, which was approximately
$36,700,000.
Prior to the stock purchase agreement the Company declared
dividends of $15,000,000 and paid an intercompany account balance of
$1,700,000 (including additional management fees of $1,500,000
recognized at closing) to the Parent from the proceeds of additional
borrowings from a bank.
In conjunction with the stock purchase agreement, on February 26,
1996, the Parent paid divestiture bonuses totaling $1,024,500 to
former employees of the Company. Severance payments were made to
former employees totaling $791,050.
(2) Summary of Significant Accounting Policies
(a) Description of Business
The Company is engaged in the rental, sales and servicing of
aerial lift equipment. The majority of the Company's customers are
engaged in the construction industry and are located throughout the
United States. No single customer accounted for more than five
percent of the Company's sales in 1996, 1995 or 1994.
(b) Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.
(c) Inventories
Inventories consist of equipment replacement parts and supplies
and equipment held for sale. Inventories are carried at the lower
of cost or market value. Cost is determined using the first-in,
first-out (FIFO) method for parts and supplies. Cost for equipment
held for sale is determined using the specific identification
method.
(d) Property and Equipment
Property and equipment are stated at cost. Property and
equipment under capital leases are stated at the lower of the
present value of net minimum lease payments or fair value at the
inception of the lease.
-11-
<PAGE> 12
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(2) Summary of Significant Accounting Policies, Continued
(d) Property and Equipment, Continued
Effective April 1, 1994, the Company retroactively changed to
the declining balance method for depreciating rental equipment
(note 3). Remaining assets are depreciated using the straight-line
method over the estimated useful lives of the assets (generally 5
to 30 years). Property and equipment under capital leases are
amortized on a straight-line basis over the shorter of the lease
term or estimated useful lives of the assets.
Upon sale or retirement, the related cost and accumulated
depreciation are eliminated from the accounts and gains and losses
are recognized in income. Repairs and maintenance which do not
extend the lives or improve the respective assets are charged to
expense as incurred.
(e) Income Taxes
Effective April 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (Statement 109), on a prospective basis and has
reported the cumulative effect of the change in the 1994 statement
of operations. Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(f) Revenue Recognition
Rental revenue is recognized on the accrual basis. Included
in trade accounts receivable are unbilled rental revenues of
approximately $1,255,000 and $1,296,000 at February 25, 1996 and
March 31, 1995, respectively.
(g) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents
approximate fair value because of the short maturity of such
instruments.
The carrying amounts of long-term debt approximate fair
value due to the variable interest rate on such obligation.
-12-
<PAGE> 13
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(2) Summary of Significant Accounting Policies, Continued
(h) Use of Estimates
Management of the Company has made a number of estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could
differ from those estimates.
(i) New Accounting Standard
In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of (Statement 121). Statement 121 requires that
long-lived assets and certain intangibles be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable.
Management cannot currently estimate whether the adoption of
Statement 121 in 1997 will have a material adverse effect on the
Company's financial position or results of operations.
(3) Change in Accounting for Depreciation
Effective April 1, 1994, the Company changed its method of
depreciating rental equipment from the straight line method to the
declining balance method. The new method of depreciation was adopted
to provide a better matching of revenues and expenses over the lives
of the rental equipment and was applied retroactively to equipment
acquisitions of prior years. The effect of the change in 1995 was to
increase the cost of equipment sold by $1,400,000 and to decrease
depreciation by $3,700,000. It was not practical to determine the
effect of this change in 1994. The cumulative adjustment as of April
1, 1994 to retroactively apply the new method of $4,782,000, after
reduction for income taxes of $2,820,000, is included in 1995 income.
(4) Inventories
Inventories consist of the following at February 25, 1996 and March
31, 1995:
1996 1995
---- ----
Replacement parts and supplies $2,733,309 2,761,984
Equipment held for sale 984,418 384,102
---------- ---------
$3,717,727 3,146,086
========== =========
-13-
<PAGE> 14
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(5) Property and Equipment
Property and equipment consist of the following at February 25,
1996 and March 31, 1995:
<TABLE>
<CAPTION>
Cost, net of
Accumulated Accumulated
1996: Cost Depreciation Depreciation
-------------- -------------- --------------
<S> <C> <C> <C>
Rental equipment $ 88,130,589 37,268,732 50,861,857
Transportation equipment 2,712,800 1,835,732 876,816
Furniture and equipment 2,769,952 2,184,891 585,061
Land 1,795,465 -- 1,795,465
Buildings 5,061,195 1,696,222 3,364,973
-------------- -------------- --------------
$ 100,470,001 42,985,222 57,848,172
============== ============== ==============
1995:
Rental equipment $ 86,810,271 39,682,393 47,127,878
Transportation equipment 2,799,966 2,205,431 594,535
Furniture and equipment 2,814,630 2,002,819 811,811
Land 1,893,119 -- 1,893,119
Buildings 4,936,110 1,559,878 3,376,232
-------------- -------------- --------------
$ 99,254,096 42,985,829 57,484,172
============== ============== ==============
</TABLE>
In 1995 the Company recorded a provision for loss on real property of
$340,000. This provision, which is included in other operating expenses in the
accompanying statements of operations, is the result of a decline in the fair
market value of the property.
-14-
<PAGE> 15
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(6) Leases
The Company is obligated under various capital leases for
transportation equipment that expire at various dates during the next four
years. At February 25, 1996 and March 31, 1995, the gross amount of equipment
and related accumulated amortization recorded under capital leases were as
follows:
1996 1995
---- ----
Transportation equipment $951,000 494,000
Less accumulated amortization 299,000 144,000
-------- -------
$652,000 350,000
======== =======
Amortization of assets held under capital leases is included with the
depreciation expense.
The Company also has several noncancelable operating leases,
primarily for rental and transportation equipment and land and buildings,
that expire over the next six years. Rental expense for operating leases
during 1996, 1995 and 1994 consisted of the following:
1996 1995 1994
---- ---- ----
Rental equipment $ 507,000 - -
Transportation equipment 471,000 384,000 323,000
Land and buildings 540,000 605,000 658,000
----------- ------- -------
$1,518,000 989,000 981,000
=========== ======= =======
Rental expense is included in selling, general and administrative
expenses for land and buildings and other operating expenses for rental and
transportation equipment in the accompanying statements of operations.
-15-
<PAGE> 16
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(6) Leases, Continued
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of February 25, 1996 are:
<TABLE>
<CAPTION>
Capital Operating
Year ending March 31: leases leases
--------- ----------
<S> <C> <C>
1997 $ 286,000 1,519,000
1998 165,000 1,216,000
1999 129,000 1,021,000
2000 48,000 476,000
2001 -- 166,000
2002 -- 160,000
--------- ---------
Total minimum lease payments 628,000 4,558,000
=========
Less amount representing interest (at rates
ranging from 8% to 11%) (76,931)
---------
Present value of net minimum capital
lease payments 551,069
Less current installments of obligations
under capital leases (226,000)
---------
Obligations under capital leases, excluding
current installments $ 325,069
=========
</TABLE>
-16-
<PAGE> 17
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(7) Long-term Debt
Long-term debt consists of the following at February 25, 1996 (note 1)
and March 31, 1995:
1996 1995
---- ----
Term loan with a bank, due in varying installments
through June 1999, with interest at LIBOR plus
1.125% (6.9% at February 25, 1996) secured by
substantially all of the Company's assets and
guaranteed by the Parent
$20,750,000 24,500,000
Less current installments 7,500,000 7,500,000
----------- -----------
Long-term debt, excluding current installments $13,250,000 17,000,000
=========== ===========
The loan agreement provides the Company with a term loan of
$24,500,000, a $5,000,000 revolving credit facility and letters of credit
totaling $2,220,000. There were no borrowings outstanding under the
revolving credit facility or the letters of credit at February 25, 1996 or
March 31, 1995. In connection with these loan agreements, the Parent has
executed guaranty agreements which also require the Parent to meet various
restrictive and affirmative covenants.
Aggregate maturities of long-term debt at February 25, 1996 are as follows:
Year ending March 31 :
1997 $ 7,500,000
1998 3,750,000
1999 9,500,000
------------
$20,750,000
============
-17-
<PAGE> 18
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(8) Income Taxes
Total income taxes for the period from April 1, 1995 through February
25, 1996 and for the years ended March 31, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------ ----------
<S> <C> <C> <C>
Income from operations $ 2,119,077 1,578,469 133,200
Cumulative effect of change in
accounting for depreciation -- 2,820,621 --
-------------- ------------ ----------
$ 2,119,077 4,399,090 133,200
============== ============ ==========
</TABLE>
Income tax expense (benefit) attributable to income from operations
consists of the following for the period from April 1, 1995 through February
25, 1996 and for the years ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
Current Deferred Total
-------------- ------------ ------------
<S> <C> <C> <C>
1996:
Federal $ 340,352 1,212,122 1,552,474
State 424,000 142,603 566,603
-------------- ----------- ------------
$ 764,352 1,354,725 2,119,077
============== ========== ============
1995:
Federal $ (152,834) 1,458,614 1,305,780
State 101,087 171,602 272,689
-------------- ----------- ------------
$ (51,747) 1,630,216 1,578,469
============== ========== ============
1994:
Federal $ 252,729 (116,720) 136,009
State 7,833 (10,642) (2,809)
-------------- ----------- ------------
$ 260,562 (127,362) 133,200
============== ========== ============
</TABLE>
-18-
<PAGE> 19
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(8) Income Taxes, Continued
Income tax expense attributable to income from operations for the period
from April 1, 1995 through February 25, 1996 and for the years ended March 31,
1995 and 1994, respectively, differed from the amounts computed by applying
the marginal U.S. Federal income tax rate of 34 percent to pretax income as a
result of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------ -----------
<S> <C> <C> <C>
Computed "expected" income tax expense $ 1,569,000 994,000 63,830
Adjustments to deferred tax assets and liabilities
for changes in State income tax rates -- 255,000 --
Recognition of valuation allowance for deferred
tax assets -- 160,000 --
State income taxes, net of Federal income tax
benefit 374,000 117,000 (1,854)
Tax effect of amortization of unallocated purchase
price of subsidiaries -- -- 29,900
Other 176,077 52,469 41,324
-------------- ------------ ------------
$ 2,119,077 1,578,469 133,200
============== ============ ============
</TABLE>
-19-
<PAGE> 20
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(8) Income Taxes, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at February
25, 1996 and March 31, 1995, are presented below:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Deferred tax assets:
Trade accounts receivable, principally due
to the allowance for doubtful accounts $ 228,000 231,000
Accrued expenses, principally due to
insurance and environment reserves 1,615,000 715,000
Net operating loss carryforwards 160,000 220,000
Alternative minimum tax credit carryforwards 388,000 2,466,000
Other 20,783 612
------------ -----------
Gross deferred tax assets 2,411,783 3,632,612
Less valuation allowance (160,000) (160,000)
------------ -----------
Net deferred tax assets $ 2,251,783 3,472,612
============ ===========
Deferred tax liabilities:
Property and equipment, principally
due to differences in depreciation $(11,709,241) (11,520,000)
Other -- (55,345)
------------ -----------
Total deferred tax liabilities $(11,709,241) (11,575,345)
============ ===========
</TABLE>
The valuation allowance for deferred tax assets was $160,000 as of
February 25, 1996 and March 31, 1995, respectively.
At February 25, 1996, the Company had net operating loss carryforwards
for State income tax purposes of approximately $160,000 which may be available
to offset future State taxable income, if any, through 2005. In addition, the
Company has minimum tax credit carryforwards of approximately $388,000 which
are available to reduce future Federal regular income taxes, if any, over an
indefinite period.
(9) Related Party Transactions
During 1996, 1995 and 1994, management fees of $116,000, $84,000, and
$84,000 were charged to the Company by the Parent, respectively. Such amounts
are included in selling, general and administrative expenses in the
accompanying statements of operations.
-20-
<PAGE> 21
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(9) Related Party Transactions, continued
In 1994, the Company purchased the outstanding common stock not owned
by the Parent for approximately $1,657,000. The Company paid approximately
$985,000 in 1994 and paid the remaining balance of $671,371 in 1995.
(10) Employee Benefit Plans
The Company sponsors a defined contribution plan covering
substantially all employees. The plan provides that employees can voluntarily
contribute from 1% to 15% of their compensation. The Company's contributions
are discretionary and totaled approximately $222,000, $130,000 and $97,000 in
1996, 1995 and 1994, respectively.
The Company has entered into bonus compensation agreements with
various employees. Amounts recognized under these agreements were
approximately $250,000, $130,000 and $100,000 in 1996, 1995 and 1994,
respectively, which are included in selling, general and administrative
expenses in the accompanying statements of operations.
(11) Commitments and Contingencies
As a result of environmental assessments performed during 1995, the
Company identified environmental contamination of soil and ground water at
certain of the Company's rental facilities. Utilizing cost projections from
a remediation plan developed by the Company's environmental consultants, the
Company developed an estimate of future costs for the remediation. The total
estimated aggregate costs are expected to be $3,000,000, and are based on
technology currently available to treat the contaminated sites. This amount
has been recognized in other operating expenses in the accompanying 1996
statement of operations as it represents management's best estimate of the
remediation costs.
The estimate of the remediation costs could change as a result of
changes to the remediation plan required by the various governmental
environmental agencies, changes in technology available to treat the sites,
or unforeseen circumstances existing at the site. It is not possible to
estimate the amount losses, if any, that may exceed the amounts accrued as a
result of these factors.
The Company is involved in litigation arising as a result of its
acquisition of American Hi-Lift Corporation (American) in 1988. On January
28, 1994, a jury verdict of approximately $429,000 was rendered against
American. The Company's management intends to vigorously appeal this
decision. Although the outcome of this litigation and its ultimate impact on
the Company have not been determined, management has recognized a provision
for possible losses as a result of this contingency. Management believes
that such provision is adequate to provide for its maximum estimated
liability resulting from this decision.
-21-
<PAGE> 22
VIBROPLANT U.S., INC.
Notes to Financial Statements, continued
(11) Commitments and Contingencies
The Company is fully insured, subject to varying deductibles, for
workers' compensation claims in substantially all states in which it
operates. In the remaining states, the Company provides for workers'
compensation claims through incurred loss retrospective policies. Management
believes that the Company has sufficiently provided for estimated claims,
including the effect of any retroactive premium adjustments, at February 25,
1996 and March 31, 1995.
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on the Company's financial position.
(12) Supplemental Disclosures of Cash Flow Information
Rental equipment of $3,748,100, $3,245,650, and $4,891,358 was
transferred to inventories in 1996, 1995 and 1994, respectively. Capital
lease obligations of $457,199 and $310,635 were incurred in 1996 and 1995,
respectively, when the Company entered into leases for equipment. Dividends
payable to the Parent of $15,000,000 were declared in 1996. In 1994, a
liability of $671,371 was recognized for purchases of treasury stock.
Cash paid for interest was $1,640,000, $2,034,000, and $2,217,152 in
1996, 1995 and 1994, respectively. Cash paid for income taxes was $752,000,
$428,400, and $67,799 in 1996, 1995 and l994, respectively.
-22-
<PAGE> 23
PRIMECO INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEC REQUIREMENTS
The Unaudited Pro Forma Condensed Consolidated Financial Statements
have been prepared in accordance with the requirements of Article 11 of
Regulation S-X promulgated by the Securities and Exchange Commission ("SEC").
These required statements are presented for informational purposes only and
are not indicative of the results of future operations, nor the results of
historical operations had the acquisition occurred as of the assumed dates.
EXPLANATORY NOTES
The Unaudited Pro Forma Condensed Consolidated Statements of Income
have been prepared assuming that the acquisition of Vibroplant U.S., Inc.
(American Hi-Lift) had occurred at the beginning of the period presented.
Pursuant to the SEC's regulations, permitted pro forma adjustments include
only the effects of events directly attributable to a transaction that are
factually supportable and, for income accounts, are expected to have a
continuing impact.
The Unaudited Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with the historical consolidated financial
statements included in Primeco's Annual Report on Form 10-K for the year
ended December 31, 1995.
-23-
<PAGE> 24
PRIMECO INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
American
Hi-Lift
Primeco Acquisition
as of as of Pro Forma
12-31-95 12-31-95 Adjustment Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
A S S E T S
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 174 $ 3,693 $ 3,867
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 36,467 7,611 $ (424)(1) 43,654
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 17,399 3,718 (370)(2) 20,747
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . 181,798 50,862 (5,000)(2) 227,660
Property, plant and equipment, net . . . . . . . . . . . . . . . 22,334 6,622 (1,037)(2) 27,919
Cost in excess of fair value of net assets acquired, net . . . . 115,084 -- 16,336 (4) 131,420
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 17,682 1,209 (724)(3) 18,167
----------- ----------- ----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 390,938 $ 73,715 $ 8,781 $ 473,434
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 14,968 $ 698 $ 15,666
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 27,737 20,911 $ (12,735)(5) 35,913
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,000 20,750 36,350 (6) 312,100
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 21,897 10,181 (3,610)(7) 28,468
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,552 551 -- 2,103
Redeemable convertible preferred stock . . . . . . . . . . . . . 9,150 -- -- 9,150
Common stockholder's equity. . . . . . . . . . . . . . . . . . . 60,634 20,624 (11,224)(8) 70,034
----------- ----------- ----------- -----------
Total liabilities and stockholder's equity . . . . . . . . $ 390,938 $ 73,715 $ 8,781 $ 473,434
=========== =========== =========== ===========
</TABLE>
See accompanying notes to Pro Forma Financial Statements
-24-
<PAGE> 25
PRIMECO INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Primeco American
For the Hi-Lift
Year Ended Acquisition Pro Forma
12/31/95 (see note 2) Adjustment Pro Forma
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Rental Revenue $ 138,983 $ 37,439 $ 176,422
New equipment sales 34,601 3,778 38,379
Rental equipment sales 23,144 5,882 29,026
Parts and merchandise sales 32,223 2,599 34,822
Service revenue and other income 13,836 3,966 17,802
----------- ----------- -----------
$ 242,787 $ 53,664 $ 296,451
Cost of sales:
Depreciation - rental equipment 37,427 7,048 $ (1,863)(3) 42,612
Cost of new equipment sales 28,960 3,097 32,057
Cost of rental equipment sales, net of
accumulated depreciation 22,853 3,141 2,741 (6) 28,735
Cost of parts and merchandise 24,157 1,497 25,654
Direct operating expenses 60,553 16,577 77,130
----------- ----------- ----------- -----------
$ 173,950 $ 31,360 $ 878 $ 206,188
----------- ----------- ----------- -----------
Gross Profit $ 68,837 $ 22,304 $ (878) $ 90,263
Selling, general, administrative and other 36,804 14,742 (5,004)(4,5) 46,542
Depreciation and amotization:
Noncompete agreements 5,877 5,877
Cost in excess of fair value of
assets acquired 2,955 417 (2) 3,372
P, P & E 2,395 950 3,345
Interest expense, net of interest income 29,021 1,680 3,172 (1) 33,873
----------- ----------- ----------- -----------
$ 77,052 $ 17,372 $ (1,415) $ 93,009
Income (loss) before income taxes (8,215) 4,932 537 (2,746)
Income tax expense (benefit) (2,025) 2,241 25 (7) 241
----------- ----------- ----------- -----------
Net income (loss) before
extraordinary item $ (6,190) $ 2,691 $ 512 $ (2,987)
Extraordinary item-loss on early
extinguishment of debt, net of tax
benefit of $794 (1,268) (1,268)
----------- ----------- ----------- -----------
Net Loss (7,458) 2,691 512 (4,255)
Dividend requirement and accretion
on preferred stock (1,528) (1,528)
----------- ----------- ----------- -----------
Net Loss applicable to common
stockholder $ (8,986) $ 2,691 $ 512 $ (5,783)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to Pro Forma Financial Statements
-25-
<PAGE> 26
PRIMECO INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
On February 26, 1996, Primeco acquired Vibroplant U.S., Inc. (also
known as American Hi-Lift Corporation), a company specialized in renting and
selling aerial lift equipment. The purchase price of Vibroplant U.S., Inc. was
cash of approximately $66.5 million. The Acquisition was accounted for under the
purchase method of accounting; accordingly, the total purchase price was
allocated to net assets based on estimated fair values. The results of
Vibroplant U.S.'s operations will be included in the financial statements
commencing February 26, 1996. In conjunction with this transaction, certain
existing stockholders of Holdings invested in additional common equity of
Holdings. Holdings then made a capital contribution of approximately $9.4
million to Primeco. Primeco used these funds, as well as borrowings under its
Senior Credit Facility, to fund the transaction.
NOTE 2 - PRO FORMA ADJUSTMENTS
Pro Forma Condensed Consolidated Balance Sheet
Pro forma adjustments include (1) reduction for accounts receivable
not purchased; (2) adjustment of assets acquired to fair market value; (3)
reclassification of deferred taxes to conform to Primeco's presentation; (4)
excess of the aggregate purchase price over the estimated fair value of the
tangible assets acquired; (5) accrued liabilities not assumed in the
acquisition ($15,300) net of costs relating to the acquisition ($2,565); (6)
debt issued to finance the acquisition ($57,100) in excess of debt assumed and
repaid ($20,750); (7) effect on deferred taxes resulting from the
allocation of the purchase price to items in (2) above ($2,886) plus the
reclassification of deferred taxes noted in (3) above ($724); (8) equity
contribution to fund the acquisition ($9,400) net of American H-Lift's equity
($20,624).
Pro forma Condensed Consolidated Statement of Operations
The Statement of Operations as presented for American Hi-Lift
represents the audited 11 month period ended 2-25-96 and the unaudited 1 month
period ended 4-30-95.
Pro forma adjustments include (1) record revised interest expense;
(2) record goodwill amortization; (3) record Primeco's method of depreciation;
(4) adjust G & A expense related to headcount and overhead reduction;
(5) eliminate American Hi-Lift's management fee; (6) adjust cost on rental
equipment sales to fair market value; and (7) adjust tax expense to Primeco's
effective blended rate.
-26-
