<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q/A
(AMENDMENT NO. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-87404
PRIMECO INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1951774
(State of other jurisdiction (IRS Employer
of Incorporation) Identification Number)
16225 PARK TEN PLACE, SUITE 200 HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 713/578-5600
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
As of August 13, 1996, 5,000 shares of Common Stock of Primeco Inc.
and 5,000 shares of Series A Cumulative Convertible Preferred Stock are
outstanding.
<PAGE> 2
The undersigned registrant hereby amends the following items of its Current
Report on Form 10-Q dated August 17, 1996, as set forth in the pages attached
hereto:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Asset Purchase and Sale Agreement, dated as of May 13, 1996,
between Primeco Inc. and Alpine Equipment Rentals & Supply
Company, Inc.
2.2 Amendment and Supplement to Asset Purchase and Sale Agreement,
date as of July 29, 1996, between Primeco and Alpine
Equipment Rentals & Supply Company, Inc.
10.1 Employment Agreement, dated as of April 1, 1996, between
Primeco Inc. and Brian Fontana
10.2 Indemnity Agreement, dated as of April 1, 1996, between
Primeco Inc. and Brian Fontana
99.1 Press Release, dated August 6, 1996
Financial Statements of Business Acquired - Alpine Equipment Rentals
and Supply Company, Inc. Financial Statements
Independent Auditors Report
Balance Sheet as of June 30, 1996 and December 31, 1995 and 1994
Statements of Operations for the six month periods ended June 30,
1996 and 1995 and the years ended December 31, 1995 and 1994
Statements of Stockholder's Equity for the period from January 1,
1994 through June 30, 1996
Statements of Cash Flows for the six month periods ended June 30,
1996 and 1995 and the years ended December 31, 1995 and 1994
Notes to Financial Statements
Primeco Inc. Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Balance Sheet as of June 30, 1996
Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1996
Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1995
2
<PAGE> 3
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
(b) Reports on Form 8-K
On March 12, 1996, Primeco filed a Current Report on Form 8-K,
pursuant to Items 2 and 7 thereof, regarding its acquisition
of the capital stock of Vibroplant U.S., Inc. (also known as
American Hi- Lift). On May 13, 1996, Primeco filed the
audited financial statements and the pro forma fiancial
information in connection with the American Hi-Lift
acquisition required by Items 7(a) and (b) of Form 8-K under
the cover of a Form 8-K/A.
3
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
Alpine Equipment Rentals and Supply Company:
We have audited the balance sheet of the Alpine Equipment Rentals and Supply
Company as of December 31, 1995 and 1994, and the related statements of
operations, stockholders' equity, and cash flows for the years 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 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.
As discussed in Note 7, substantially all of the Company's assets were sold to
Primeco Inc. on July 29, 1996.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alpine Equipment Rentals and
Supply Company as of 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.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 30, 1996
4
<PAGE> 5
Alpine Equipment Rentals and Supply Company
Balance Sheet
<TABLE>
<CAPTION>
JUNE 30
1996 DECEMBER
-------------------------
(UNAUDITED) 1995 1994
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 360,375 $ 135,073 $ 449,066
Bank certificate of deposit -- -- 50,000
Accounts receivable, net 1,515,773 1,734,652 1,364,801
Inventories 21,741 21,741 21,741
Rental Equipment, net 7,575,526 7,865,531 6,709,012
Property, plant and equipment, net 1,434,243 1,574,428 999,974
Other assets 71,258 -- --
Total assets $10,978,916 $11,331,425 $ 9,594,594
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 169,866 $ 197,339 $ 231,347
Accrued expenses 410,876 381,763 312,095
Debt 2,958,469 3,383,084 2,307,583
Note payable to former stockholder 33,251 81,645 154,910
Commitments and contingencies (Note 6)
Common stock, no par value, 10,000 shares
authorized and 2,087 shares issued and
outstanding 83,613 83,613 83,613
Paid-in capital 66,632 66,632 66,632
Retained earnings 7,256,209 7,137,349 6,438,414
----------- ----------- -----------
Stockholders' equity 7,406,454 7,287,594 6,588,659
----------- ----------- -----------
Total liabilities and stockholder's equity $10,978,916 $11,331,425 $ 9,594,594
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
Alpine Equipment Rentals and Supply Company
Statement of Operations
<TABLE>
<CAPTION> SIX MONTHS SIX MONTHS
ENDED ENDED FOR THE YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 DECEMBER 31,
-------------------------
(UNAUDITED) (UNAUDITED) 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental Revenue $ 4,553,074 $ 4,627,707 $10,126,532 $ 8,794,296
Rental equipment sales 185,153 299,892 412,341 432,054
Other Income 91,171 94,576 201,718 157,615
----------- ----------- ----------- -----------
4,829,398 5,022,175 10,740,591 9,383,965
Cost of sales:
Depreciation - rental equipment 298,784 283,604 614,716 587,056
Cost of rental equipment sales, net
of accumulated depreciation 173,752 265,583 372,446 401,666
Direct operating expenses 967,552 1,095,171 2,519,639 2,173,319
----------- ----------- ----------- -----------
1,440,088 1,644,358 3,506,801 3,162,041
Gross Profit 3,389,310 3,377,817 7,233,790 6,221,924
----------- ----------- ----------- -----------
Selling, general, administrative and other 2,779,134 2,608,558 5,679,431 5,047,294
Depreciation - property,plant and
equipment 135,722 137,220 298,572 213,033
Interest expense 153,499 108,031 270,019 174,305
----------- ----------- ----------- -----------
3,068,355 2,853,809 6,248,022 5,434,632
Income before income taxes 320,955 524,008 985,768 787,292
Income tax expense 2,100 31,500 36,838 29,842
----------- ----------- ----------- -----------
Net Income $ 318,855 $ 492,508 $ 948,930 $ 757,450
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
Alpine Equipment Rentals and Supply Company
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Total
Common Common Paid-In Retained Stockholders'
Shares Stock Capital Earnings Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 2,087 $ 83,613 $ 66,632 $ 5,720,964 $ 5,871,209
Net Income 757,450 757,450
Stockholder distributions (40,000) (40,000)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 2,087 83,613 66,632 6,438,414 6,588,659
Net Income 948,930 948,930
Stockholder distributions (249,995) (249,995)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 2,087 83,613 66,632 7,137,349 7,287,594
Net Income (six months, unaudited) 318,855 318,855
Stockholder distributions (unaudited) (199,995) (199,995)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 (unaudited) 2,087 $ 83,613 $ 66,632 $ 7,256,209 $ 7,406,454
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
Alpine Equipment Rentals and Supply Company
Statement of Cash Flows
<TABLE>
<CAPTION> SIX MONTHS SIX MONTHS
ENDED ENDED FOR THE YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 DECEMBER 31,
--------------------------
(UNAUDITED) (UNAUDITED) 1995 1994
<S> <C> <C> <C> <C>
Operating activities:
Net income $ 318,855 $ 492,508 $ 948,930 $ 757,450
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 434,506 420,824 913,288 800,089
Net gain on disposal of rental equipment; and
property, plant and equipment (11,401) (34,309) (57,195) (31,738)
Provision for doubtful accounts -- -- 22,697
Effect on changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 218,879 29,970 (369,851) (266,979)
Increase in other assets (71,258) (75,157) -- --
Increase in accounts payable and accrued
expenses and other liabilities 1,640 225,947 35,660 160,420
----------- ----------- ----------- -----------
Net cash provided by operating activities 891,221 1,059,783 1,470,832 1,441,939
Investing activities:
Additions to rental equipment (175,058) (135,401) (141,509) (264,603)
Additions to property, plant and equipment (3,010) (353,964) (778,499) (34,047)
Proceeds from sales of rental equipment 185,153 299,892 412,341 432,054
Proceeds from disposals of property, plant and
equipment 3,600 17,300 1,350
Maturity of bank certificate of deposit 50,000 50,000 --
----------- ----------- ----------- -----------
Net cash (used in) provided by 7,085 (135,873) (440,367) 134,754
investing activities
Financing activities:
Proceeds from debt 330,000 567,000 75,000
Payments of debt (803,009) (602,886) (1,661,463) (1,316,018)
Shareholder distributions (199,995) (249,995) (249,995) (40,000)
----------- ----------- ----------- -----------
Net cash used in financing activities (673,004) (852,881) (1,344,458) (1,281,018)
Net increase (decrease) in cash and cash equivalents 225,302 71,029 (313,993) 295,675
Cash and cash equivalents at beginning of period 135,073 449,066 449,066 153,391
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 360,375 $ 520,095 $ 135,073 $ 449,066
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 270,019 $ 174,305
Cash paid during the year for income taxes $ 33,342 $ 33,356
Additions to rental equipment and property, plant
and equipment financed through promissory notes $ 2,096,699 $ 1,626,310
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
Alpine Equipment Rentals And Supply Company
Notes To Financial Statements
1. The Company:
Alpine Equipment Rental and Supply Company (the "Company") was formed
in 1974. The Company's operations primarily consist of renting
equipment and, to a lesser extent, selling used equipment to
commercial construction, industrial and residential users in the
Washington State area.
2. Summary of Significant Accounting Policies:
RENTAL AGREEMENTS
The Company rents equipment primarily to the construction, industrial
and homeowner markets. Rental agreements are structured as operating
leases, and rental revenue is recognized in the period in which it is
earned.
INVENTORIES
Inventory is valued at the lower of cost or market, with cost being
determined on the specific identification method.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental
equipment is computed using the straight-line method over the
estimated five-year useful life of the assets, after giving effect to
an estimated salvage value. Accumulated depreciation was
approximately $4,072,000 and $3,780,000 at December 31, 1995 and 1994,
respectively.
Expenditures for additions or improvements which extend asset lives
are capitalized in the period incurred. Normal repairs and
maintenance costs are expensed as incurred. When rental equipment is
disposed of, the related costs and accumulated depreciation are
removed from the respective accounts, and any gains or losses are
included in results of operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is
computed on the straight-line basis over the estimated useful lives of
the assets, giving effect to an estimated salvage value.
The estimated useful lives for leasehold improvements is 15 years and
the estimated useful lives for vehicles, shop tools, and furniture and
fixtures is 5 years.
9
<PAGE> 10
Notes to Financial Statements, Continued
2. Summary of Significant Accounting Policies, continued:
PROPERTY, PLANT AND EQUIPMENT, CONTINUED
Expenditures for additions or improvements which extend asset lives
are capitalized in the period incurred. Normal repairs and
maintenance costs are expensed as incurred. When property, plant and
equipment are disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gains
or losses are included in results of operations.
INCOME TAXES
As of July 1, 1988, the stockholders elected to report the Company's
taxable income as an "S" Corporation for federal income tax purposes,
pursuant to Section 1374(a) of the Internal Revenue Code. Previously,
the Company was organized as a "C" Corporation. As an "S"
Corporation, the income of the Company is taxable directly to the
stockholders. Accordingly, the Company is not subject to federal
income taxes with the exception of federal income taxes on gains
realized from the sale of depreciable personal property owned at June
30, 1988 and sold prior to July 1, 1998. Of the original potential
taxable gain of $1,059,000, the Company has recognized approximately
$777,000 through December 31, 1995. The remaining gain of
approximately $282,000 will be recognized in 1996 following the sale
of these assets (see Note 7).
CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and all highly liquid
investment instruments purchased with original maturities of three
months or less.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents and accounts receivable. The Company maintains cash
deposits with one bank, which from time-to-time, may exceed federally
insured limits. Management periodically assesses the financial
condition of the institution and believes that any possible credit
risk is minimal.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities comprising
the Company's customer base. However, the majority of the Company's
customers operate in the state of Washington and therefore the Company
is vulnerable to the general economic conditions of that state. The
Company generally does not require collateral on accounts receivable.
At December 31, 1995 and 1994, the Company had an allowance for
doubtful accounts of $22,697.
10
<PAGE> 11
Notes to Financial Statements, Continued
2. Summary of Significant Accounting Policies, continued:
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
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from these estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited interim
condensed financial statements contain all adjustments (consisting
only of normal recurring items) necessary to present fairly the
financial position of the Company as of June 30, 1996 and the results
of its operations and cash flows for the six months ended June 30,
1996 and 1995. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to the Securities and Exchange Commission's rules and regulations.
The results of operations for all interim periods presented are not
necessarily indicative of the results to be expected for the full
year.
3. Property, Plant and Equipment:
Property, plant and equipment consist of the following as of December
31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Property, plant and equipment at cost:
Vehicles $ 2,068,177 $ 1,614,046
Shop tools 214,266 188,937
Leasehold improvements 455,186 295,544
Furniture and fixtures 313,647 119,363
------------- -----------
3,015,276 2,217,890
Accumulated depreciation (1,476,848) (1,217,916)
------------- -----------
Net property, plant and equipment $ 1,574,428 $ 999,974
============= ===========
</TABLE>
11
<PAGE> 12
Notes to Financial Statements, Continued
4. Related Party Transactions:
The Company leases two of its facilities from partnerships owned by
certain Company shareholders. The leases call for lease payments
aggregating $13,903 per month and both expire in 1996. The rental
expense for these leases included in the statement of operations was
approximately $167,000 and $163,000 for the years ended December 31,
1995 and 1994, respectively.
The Company issued a note payable to a former stockholder for the
purchase of that stockholder's shares of Company stock. See Note 5
for additional information.
5. Debt and Note Payable to Former Stockholder:
Debt consists of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revolving credit agreement $ 267,000 $ -
Promissory notes issued for the purchase
of rental equipment and property, plant
and equipment 3,116,084 2,307,583
------------- -----------
$ 3,383,084 $ 2,307,583
============= ===========
</TABLE>
In January 1993, the Company borrowed approximately $200,000 from a
bank to fund distributions to stockholders. This loan accrued
interest at 10% and was repaid in April, 1994.
In March 1993, the Company entered into a one-year revolving credit
agreement with a bank which has been renewed annually. The agreement
originally provided for a $200,000 line of credit which was increased
to $400,000 on December 27, 1995. Interest on the outstanding debt is
based on prime plus 1% (9.5% at December 31, 1995 and 1994) and is
collateralized by equipment. The amount available for additional
borrowings under this revolving credit agreement at December 31, 1995
was approximately $133,000. Borrowings under this revolving credit
agreement are payable on demand.
In connection with the purchase of rental equipment and property,
plant and equipment, the Company has issued promissory notes to
several creditors with varying terms. All notes issued are
collateralized by the purchased equipment and bear interest at various
rates ranging from 7.5% to 10.75% at December 31, 1995. All notes are
payable in monthly installments and mature on various dates through
December 1999.
The note payable to stockholder is a promissory note issued to a
Company stockholder for the purchase of that stockholder's shares of
Company stock. Monthly installments are due on the note in the amount
of $7,500, including interest at 9%, through December 1, 1996.
12
<PAGE> 13
Notes to Financial Statements, Continued
5. Debt and Note Payable to Former Stockholder, continued:
Maturities of debt and the note payable are as follows at December 31,
1995:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1996 $ 1,748,702
1997 921,022
1998 564,991
1999 230,014
-----------
$ 3,464,729
============
</TABLE>
6. Commitments and Contingencies:
LEASES
The Company leases facilities under operating leases. Minimum future
obligations for operating leases in effect at December 31, 1995 are:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1996 $ 419,476
1997 207,223
1998 209,430
1999 193,104
2000 129,376
-----------
$ 1,158,609
===========
</TABLE>
Lease expense charged to operations in the accompanying statement of
operations was approximately $510,000 and $445,000 for the years ended
December 31, 1995 and 1994, respectively.
In 1996, two of the Company's operating leases with monthly lease
payments of $8,000, and $7,800, respectively, were extended through
July 31, 2002.
7. Subsequent Events:
On July 29, 1996, the Company's shareholders agreed to sell
substantially all of the assets of the Company to Primeco Inc. for
approximately $11 million of cash and a $350,000 payment for a
covenant not to compete. This sale required the Company to recognize
its remaining tax liability of approximately $282,000 (as discussed in
Note 2) for assets owned prior to July 1, 1988.
13
<PAGE> 14
PRIMECO INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
SEC REQUIREMENTS
The Pro Forma 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"). The 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
acquisitions (this "Offering") occurred as of the assumed dates.
EXPLANATORY NOTES
The Pro Forma Consolidated Statement of Operations for the year ended December
31, 1995 and the six month period ended June 30, 1996 have been prepared
assuming that the acquisition of Vibroplant U.S., Inc., ("American Hi-Lift")
and the acquisition of Alpine Equipment Rentals & Supply Company, Inc.
("Alpine") had occurred on January 1, 1995. The Pro Forma Consolidated Balance
Sheet as of June 30, 1996 gives effect to the Alpine acquisition as if such
transaction had occurred on June 30, 1996. 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 Pro Forma Consolidated Financial Statements should be read in conjunction
with (i) the historical consolidated financial statements included in Prime's
Annual Report on Form 10-K for the year ended December 31, 1995, and (ii)
Prime's Form 10-Q for the six month period ended June 30, 1996, and (iii) the
financial statements of Alpine included herein and (iv) the financial
statements of American Hi-Lift included on Form 8K/A dated May 13, 1996.
14
<PAGE> 15
PRIMECO INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(in thousands)
<TABLE>
<CAPTION>
ALPINE ACQUISITION
PRIMECO INC. ACQUISITION ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 104 $ 360 $ (350) (2) $ 114
(11,000) (2)
11,000 (3)
Accounts receivables, net 46,305 1,516 47,821
Inventories 23,376 22 23,398
Rental equipment, net 246,412 7,576 175 (2) 254,163
Property, plant and equipment, net 28,929 1,434 (196) (2) 30,167
Cost in excess of fair value of net assets
acquired, net 130,301 479 (2) 130,780
Other assets 17,556 72 350 (2) 17,906
(72) (1)
------------ ------------ ------------ ------------
Total assets $ 492,983 $ 10,980 $ 386 $ 504,349
============ ============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 8,330 $ 170 $ (170) (1) $ 8,330
Accrued expenses 28,971 356 (356) (1) 28,971
Debt 334,000 2,958 11,000 (3) 345,000
(2,958) (1)
Deferred income taxes 30,446 30,446
Other liabilities 9,041 90 366 (2) 9,497
(90) (1) (90)
Redeemable convertible preferred stock $.01 par
value, $2,000 per share liquidation value, 5,000
shares authorized and outstanding 9,202 9,202
Common shareholder's equity:
Common stock, $.01 par value, 10,000 shares
authorized and 5,000 shares outstanding 1 7,406 (7,406) (4) 1
Additional Paid-In Capital 76,936 76,936
Accumulated deficit (3,944) (3,944)
------------ ------------ ------------ ------------
Common shareholder's equity 72,993 7,406 (7,406) 72,992
------------ ------------ ------------ ------------
Total liabilities and shareholder's equity $ 492,983 $ 10,980 $ 386 $ 504,349
============ ============ ============ ============
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
15
<PAGE> 16
PRIMECO INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(in thousands)
<TABLE>
<CAPTION>
AMERICAN ACQUISITION
PRIMECO HI-LIFT ALPINE ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental Revenue $ 87,678 $ 6,239 $ 4,553 $ $ 98,470
New equipment sales 21,303 630 21,933
Rental equipment sales 17,148 980 185 18,313
Parts and merchandise sales 18,730 433 19,163
Service revenue and other income 8,597 661 92 9,350
----------- ----------- ----------- ----------- -----------
153,456 8,943 4,830 167,229
Cost of sales:
Depreciation - rental equipment 18,097 1,175 299 (222) (1) 19,349
Cost of new equipment sales 17,867 516 18,383
Cost of rental equipment sales, net of
accumulated depreciation 14,215 524 174 467 (2) 15,380
Cost of parts and merchandise sales 13,622 250 13,872
Direct operating expenses 38,723 2,763 968 822 (3) 42,990
(286) (4)
----------- ----------- ----------- ----------- -----------
102,524 5,228 1,441 781 109,974
----------- ----------- ----------- ----------- -----------
Gross Profit 50,932 3,715 3,389 (781) 57,255
----------- ----------- ----------- ----------- -----------
Selling, general, administrative and other 23,159 2,457 2,779 (822) (3) 27,573
(696) (4)
Depreciation and amortization:
Noncompete agreements 0 59 (5) 59
Cost in excess of fair value of
assets acquired 1,618 76 (6) 1,694
P, P & E 1,557 158 136
Interest expense, net of interest income 17,474 280 153 764 (7) 18,671
----------- ----------- ----------- ----------- -----------
43,808 2,895 3,068 (619) 47,997
----------- ----------- ----------- ----------- -----------
Income(loss) before income taxes 7,124 820 321 (162) 8,103
Income tax expense (benefit) 3,365 374 2 31 (8) 3,772
----------- ----------- ----------- ----------- -----------
Net income (loss) 3,759 446 319 (193) 4,331
----------- ----------- ----------- ----------- -----------
Dividend requirement and accretion on
redeemable preferred stock 761 761
----------- ----------- ----------- ----------- -----------
Net Income (loss) applicable to
common shareholders $ 2,998 $ 446 $ 319 $ (193) $ 3,570
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
16
<PAGE> 17
PRIMECO INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(in thousands)
<TABLE>
<CAPTION>
AMERICAN ALPINE ACQUISITION
PRIMECO INC. HI-LIFT ACQUISITION ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- -----------
<S> <C>
Revenues:
Rental Revenue $ 138,983 $ 37,439 $ 10,127 $ $ 186,549
New equipment sales 34,601 3,778 38,379
Rental equipment sales 23,144 5,882 412 29,438
Parts and merchandise sales 32,223 2,599 34,822
Service revenue and other income 13,836 3,966 202 18,004
----------- ----------- ----------- ----------- -----------
242,787 53,664 10,741 0 307,192
----------- ----------- ----------- ----------- -----------
Cost of sales:
Depreciation - rental equipment 37,427 7,048 615 (1,703) (1) 45,090
Cost of new equipment sales 28,960 3,097
Cost of rental equipment sales, net of
accumulated depreciation 22,853 3,141 372 2,781 (2) 26,366
Cost of parts and merchandise sales 24,157 1,497
Direct operating expenses 60,553 16,577 2,520 1,862 (3) 79,650
(1,604) (4)
----------- ----------- ----------- ----------- -----------
173,950 31,360 3,507 1,336 151,106
----------- ----------- ----------- ----------- -----------
Gross Profit 68,837 22,304 7,234 (1,336) 156,086
----------- ----------- ----------- ----------- -----------
Selling, general, administrative and other 36,804 14,742 5,680 (1,862) (3) 57,226
(3,695) (4)
Depreciation and amortization:
Noncompete agreements 5,877 117 (5) 5,877
Cost in excess of fair value of
assets acquired 2,955 429 (6) 2,955
P, P & E 2,395 950 298
Interest expense, net of interest income 29,021 1,680 270 3,838 (7) 30,971
----------- ----------- ----------- ----------- -----------
77,052 17,372 6,248 (1,173) 97,029
----------- ----------- ----------- ----------- -----------
Income(loss) before income taxes (8,215) 4,932 986 (62) (2,460)
Income tax expense (benefit) (2,025) 2,241 37 (101) (8) 191
----------- ----------- ----------- ----------- -----------
Net income (loss) before extraordinary
item (6,190) 2,691 949 (101) (2,651)
Extraordinary item-loss on early
extinguishment of debt, net of tax
benefit of $794 (1,268) (1,268)
----------- ----------- ----------- ----------- -----------
Net (loss) income (7,458) 2,691 949 (101) (3,919)
----------- ----------- ----------- ----------- -----------
Divident requirement and accretion on
preferred stock (1,528) (1,528)
----------- ----------- ----------- ----------- -----------
Net loss applicable to common shareholders $ (8,986) $ 2,691 $ 949 $ (101) $ (5,447)
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
17
<PAGE> 18
PRIMECO INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
On February 26, 1996, Primeco, Inc. (the "Company") 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. On July 29, 1996, the Company acquired Alpine, a
company which rented and sold a varied line of equipment to industrial
and commercial customers. The Company paid approximately $11.0
million for substantially all of the assets of Alpine and paid
$350,000 for noncompete agreements. The Acquisitions were 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 have been
included in the Company's financial statements commencing February
26, 1996. The results of Alpine's operations have been included in
the Company's financial statements commencing July 29, 1996.
2. PRO FORMA ADJUSTMENTS:
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
Pro forma adjustments related to the Alpine acquisition include the
following:
<TABLE>
<S> <C> <C>
(1) Elimination of the Alpine assets and liabilities not assumed.
(2) The purchase price for the Alpine acquisition consists of the following:
Cash paid for the assets of Alpine $ 11,000
Cash paid for noncompetes (other assets) 350
Cost incurred by the company directly related to the Alpine acquisition 366
-----------
$ 11,716
===========
Allocation of the Alpine purchase price to the acquired assets:
Cash $ 360
Accounts receivable, net 1,516
Inventories 22
Rental equipment, net 7,751
Property, plant and equipment, net 1,238
Noncompete agreements (other assets) 350
Costs in excess of fair value of net assets acquired 479
-----------
$ 11,716
===========
(3) Debt incurred to finance the Alpine acquisition
(4) Elimination of Alpine's stockholders equity
</TABLE>
18
<PAGE> 19
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Statement of Operations for the six months ended June 30,
1996, the amounts presented for American Hi- Lift represent the
audited eleven (11) month period ended February 25, 1996 less the
unaudited nine (9) month period ended December 31, 1995. For the
Statement of Operations for the year ended December 31, 1995, the
amounts presented for American Hi-Lift represents the audited eleven
(11) month period ended February 25, 1996 and the unaudited one (1)
month period ended April 30,1995.
The pro forma adjustments include the following:
<TABLE>
<S> <C> <C>
(1) Adjust depreciation expense for adjusted carrying values of assets
acquired from American Hi-Lift and the Company's depreciation method $ (311)
Adjust depreciation expense for adjusted carrying values of assets acquired
from Alpine 89
-----------
$ (222)
===========
(2) Adjust cost of sales for American Hi-Lift rental equipment sold to reflect
new carrying values and depreciation method. $ 456
Adjust cost of sales for Alpine rental equipment sold to reflect new carrying
values 11
-----------
$ 467
===========
(3) Reclassify certain Alpine selling, general, administrative and other expenses
("SG&A") to direct operating expenses to conform with the Company's
presentation.
(4) Reflects estimated cost savings from a reduction in the workforce of
American Hi-Lift and Alpine that were effected immediately after their
respective acquisitions and estimated reductions in overhead costs due
to the consolidation of certain general and administrative functions as
follows:
Direct operating expenses $ 286
===========
Selling, general, administrative and other:
Marketing, salaries (6 employees) $ 26
Corporate office salaries (29 employees) 406
Corporate office expenses 231
Management fee 33
-----------
$ 696
===========
(5) Amortization on Alpine convenants not to compete (three years).
(6) Additional two-months of amortization of American Hi-Lift goodwill
(40 year life) $ 70
Amortization of Alpine goodwill (40 year life) 6
-----------
$ 76
===========
</TABLE>
19
<PAGE> 20
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS, CONTINUED
<TABLE>
<S> <C> <C>
(7) Adjust interest expense for debt incurred to finance the acquisitions at
the Company's current rate of 8%
American Hi-Lift $ 479
Alpine 285
-----------
$ 764
===========
(8) Adjust income tax expense to the Company's effective blended rate.
</TABLE>
The pro forma adjustments for the year ended December 31, 1995
include the following:
<TABLE>
<S> <C> <C>
(1) Adjust depreciation expense for adjusted carrying values of assets
acquired from American Hi-Lift and the Company's depreciation method $ (1,863)
Adjust depreciation expense for adjusted carrying values of assets acquired
from Alpine 160
-----------
$ (1,703)
===========
(2) Adjust cost of sales for American Hi-Lift rental equipment sold to reflect
new carrying values and depreciation method $ 2,741
Adjust cost of sales for Alpine rental equipment sold to reflect new
carrying values 40
-----------
$ 2,781
===========
(3) Reclassify certain Alpine SG&A expenses to direct operating expenses to
conform with the Company's presentation
(4) Reflects estimated cost savings from a reduction in the workforce of
American Hi-Lift and Alpine that were effected immediately after their
respective acquisitions and estimated reductions in overhead costs due to
the consolidation of certain general and administrative functions as follows:
Direct operating expenses (27 employees) $ 1,604
===========
Selling, general, administrative and other:
Marketing salaries (6 employees) $ 155
Corporate office salaries (29 employees) 1,955
Corporate office expenses 1,385
Management fee 200
-----------
$ 3,695
===========
(5) Amortization of Alpine covenants not to compete (three years)
(6) Amortization of American Hi-Lift goodwill (40 year life) $ 417
Amortization of Alpine goodwill (40 year life) 12
-----------
$ 429
===========
(7) Adjust interest expense for debt incurred to finance the acquisitions at the
Company's current rate of 8.5%
American Hi-Lift $ 3,172
Alpine 666
-----------
$ 3,838
===========
(8) Adjust income tax expense to the Company's effective blended rate.
</TABLE>
20
<PAGE> 21
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: October 11, 1996
21
<PAGE> 22
EXHIBIT INDEX
2.1 Asset Purchase and Sale Agreement, dated as of May 13, 1996, between
Primeco Inc. and Alpine Equipment Rentals & Supply Company, Inc.
2.2 Amendment and Supplement to Asset Purchase and Sale Agreement, date
as of July 29, 1996, between Primeco and Alpine Equipment Rentals &
Supply Company, Inc.
10.1 Employment Agreement, dated as of April 1, 1996, between Primeco Inc.
and Brian Fontana
10.2 Indemnity Agreement, dated as of April 1, 1996, between Primeco Inc.
and Brian Fontana
99.1 Press Release, dated August 6, 1996
Financial Statements of Business Acquired - Alpine Equipment Rentals and Supply
Company, Inc. Financial Statements
Independent Auditors Report
Balance Sheet as of June 30, 1996 and December 31, 1995 and 1994
Statements of Operations for the six month periods ended June 30, 1996 and 1995
and the years ended December 31, 1995 and 1994
Statements of Stockholder's Equity for the period from January 1, 1994 through
June 30, 1996
Statements of Cash Flows for the six month periods ended June 30, 1996 and 1995
and the years ended December 31, 1995 and 1994
Notes to Financial Statements
Primeco Inc. Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Balance Sheet as of June 30, 1996
Pro Forma Consolidated Statement of Operations for the six months ended June
30, 1996
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1995
22
