SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
[X] 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 30, 1998
LINC CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 000-23309
Delaware 06-0850149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 East Wacker Drive, Suite 1000,
Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 946-1000
(Registrant's telephone number, including area code)
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits, or other portions of its Current Report on Form 8-K,
originally filed with the Securities and Exchange Commission on July 14, 1998 as
set forth in the pages attached hereto.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The following Consolidated Financial Statements of Spectra Precision
Credit Corp. and Subsidiary are included herein:
Consolidated Balance Sheet as of December 31, 1997
Consolidated Statement of Income for the year ended December 31, 1997
Consolidated Statement of Shareholder's Equity for the year ended
December 31, 1997
Consolidated Statement of Cash Flows for the year ended December 31,
1997
Notes to the December 31, 1997 Consolidated Financial Statements
Consolidated Balance Sheet (unaudited) as of June 30, 1998
Consolidated Statement of Income and Comprehensive Income (unaudited)
for the six months ended June 30, 1998
Consolidated Statement of Cash Flows (unaudited) for the six months
ended June 30, 1998
Note to the June 30, 1998 Consolidated Financial Statements
(b) Pro Forma Financial Information.
The following unaudited Pro Forma Financial Statements are included
herein:
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
for year ended December 31, 1997 and the six months ended June 30,
1998
Notes to Pro Forma Condensed Consolidated Financial Statements
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder
Spectra Precision Credit Corp.
Dayton, Ohio
We have audited the accompanying consolidated balance sheet of Spectra
Precision Credit Corp. (f. k. a. Spectra-Physics Credit Corp.) and
Subsidiary (the Company) as of December 31, 1997, and the related
consolidated statement of income, changes in shareholder's equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Spectra Precision Credit Corp. and Subsidiary as
of December 31, 1997, and the consolidated results of their
operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Dayton, Ohio
March 13, 1998, except for certain
information in Note 1c, as to which
the date is June 24, 1998
<PAGE>
SPECTRA PRECISION CREDIT CORP.
BALANCE SHEET
as of December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 1,199,370
Other receivables less $12,333 allowance for doubtful accounts 264,886
Prepaid and other assets (Note 6) 171,685
Deferred tax asset (Note 8) 173,567
Escrow compensating balance (Note 5) 2,894,448
Net investment in finance receivables less $411,000 allowance for
doubtful accounts (Notes 2, 3, and 5) 31,390,753
Equipment off lease, less accumulated depreciation of $21,659 43,054
Capital assets, less accumulated depreciation of $22,354 47,979
------------
Total assets $ 36,185,742
============
LIABILITIES AND SHAREHOLDER'S EQUITY
Payable to Spectra Precision, Inc. (Note 9) $ 37,956
Payable to others 125,030
Deferred revenue 23,761
Accrued sales, property and other taxes 115,230
Other current liabilities 44,617
Nonrecourse debt payable (Note 7) 29,169,625
Refundable security deposits 2,526,741
------------
Total liabilities 32,042,960
------------
Shareholder's equity:
Common stock, $.01 par value; 1,000 shares authorized, 100 shares
issued and outstanding 1
Paid-in capital 2,449,077
Retained earnings 1,808,766
Foreign currency translation adjustment (115,062)
------------
Total shareholder's equity 4,142,782
------------
Total liabilities and shareholder's equity $ 36,185,742
============
The accompanying notes are an integral part of the
financial statements.
</TABLE>
<PAGE>
SPECTRA PRECISION CREDIT CORP.
STATEMENT OF INCOME AND RETAINED EARNINGS
for the year ended December 31, 1997
Lease earnings $ 3,272,815
Residual lease earnings 182,338
Other revenues 1,047,443
---------
Total revenues 4,502,596
---------
Cost of funds 1,617,036
Depreciation 44,014
Payroll expense 710,755
Bad debt expense 326,254
General, operating, and administrative 455,083
---------
Total operating expense 3,153,142
---------
Income before income taxes 1,349,454
Provision for income taxes (Note 8) 553,957
---------
Net income $ 795,497
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
SPECTRA PRECISION CREDIT CORP.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
for the year ended December 31, 1997
<TABLE>
<CAPTION>
Common Stock Foreign Currency Total
Number Paid-in Retained Translation Shareholder's
of Shares Amount Capital Earnings Adjustment Equity
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 100 $ 1 $ 2,449,077 $ 1,013,269 $ (13,562) $ 3,448,785
Net income 795,497 795,497
Foreign currency translation adjustment (101,500) (101,500)
--- ------ ----------- ----------- ------------ ------------
Balance December 31, 1997 100 $ 1 $ 2,449,077 $ 1,808,766 $ (115,062) $ 4,142,782
=== ====== =========== =========== =========== ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
SPECTRA PRECISION CREDIT CORP.
STATEMENT OF CASH FLOWS
for the year ended December 31, 1997
Reconciliation of net income to operating activities:
Net income $ 795,497
---------
Adjustments to net income
Items not affecting cash:
Depreciation/amortization 44,014
Changes in assets and liabilities:
Decrease in other receivables 299,481
Decrease in prepaid expenses and other assets 581
Decrease in deferred tax asset 63,323
Increase in security deposits 386,794
(Decrease) in taxes payable (134,184)
(Decrease) in accounts payable (49,395)
(Decrease) in deferred revenue (8,162)
(Decrease) in accrued liabilities (22,879)
--------
Total adjustments 579,573
-------
Net cash provided by operating activities 1,375,070
---------
Cash flows from investing activities:
Finance receivables originates (25,299,335)
Collection on finance receivables 15,605,693
Capital expenditures (111,066)
-----------
Net cash used in investing activities (9,804,708)
----------
Cash flows from financing activities:
Debt issuance 9,093,722
---------
Net cash provided by financing activities 9,093,722
---------
Foreign currency translation adjustment - cash (17,709)
----------
Increase (decrease) in cash and cash equivalents 646,375
Cash and cash equivalents at beginning of year 3,447,443
---------
Cash and cash equivalents at end of year $ 4,093,818
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS
for the year ended December 31, 1997
1. Summary of Significant Accounting Policies:
The following is a summary of the significant accounting policies
followed in the preparation of the financial statements:
a. Operations:
Spectra Precision Credit Corp., formerly known as Spectra-Physics
Credit Corp., (the "Company") is a wholly owned finance subsidiary of
Spectra-Physics USA, Inc. Prior to becoming a separate subsidiary on
January 1, 1996, the Company had been a division of Spectra
Precision, Inc. (formerly known as Spectra-Physics Laserplane, Inc.)
since 1988. The Company provides financing of agricultural,
construction, professional surveying and other industrial machinery
and equipment. The equipment is manufactured by Spectra Precision,
Inc., Spectra Precision Surveying, Inc. (formerly known as Geotronics
of North America, Inc.), Spectra Precision of Canada, Ltd. (formerly
known as Geodimeter of Canada Ltd.) and other non-related party
companies and sold through various dealer locations throughout the
United States and Canada. The Company also provides customer and
dealer financing for various business purposes.
The organization of this entity was the result of a transfer of
assets and liabilities from Spectra Precision, Inc. to Spectra-
Physics USA, Inc., via a dividend. Spectra-Physics USA, Inc. then
transferred the assets and liabilities to Spectra Precision Credit
Corp. in exchange for 100 percent of the common stock of the Company.
b. Consolidation:
The 1997 financial statements are consolidated statements which
include the Company's wholly owned subsidiary Spectra Precision
Funding Corporation (SPFC). Established December 30, 1997, SPFC's
sole business purpose is to purchase lease receivables from Spectra
Precision Credit Corp. and sell them to major financial institutions
through the agreement disclosed in Note 5. The organization of this
entity was the result of a transfer of the assets and liabilities
related to the existing lease receivables of the Company to Spectra
Precision Funding Corp. in exchange for 100 percent of the common
stock of SPFC. All intercompany transactions have been eliminated in
these financial statements.
c. New Accounting Standard:
The Company adopted Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" (SFAS 125) on January 1, 1997. SFAS
125 applies a control oriented approach to financial asset transfer
transactions whereby the Company (1) derecognizes financial assets
when control has been surrendered, (2) recognizes any related
servicing assets or liabilities, and (3) derecognizes liabilities
once they are extinguished. Under SFAS 125, the Company surrenders
control over
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
for the year ended December 31, 1997
its financial assets and recognizes a sale only if (1) the
transferred assets are isolated from the Company, even in bankruptcy,
(2) the transferee obtains the rights in the transferred assets, or
is a qualifying special purpose entity and (3) the Company does not
maintain effective control of the assets through an agreement which
obligates it to repurchase the transferred assets prior to maturity.
If any of the previous conditions are not met, the Company must
account for the transfer as a secured borrowing. The Company does not
meet all of the above conditions and accordingly accounts for all
lease receivable assignments (as described in Note 5), as secured
borrowings in these financial statements.
In years prior to 1997, the Company had recorded the above noted
financial asset transfers as sales. However, as a result of the
issuance of SFAS 125 and the amendment of the lease receivable
sale/purchasing agreement (see Note 5), the Company is recording the
transfers of lease receivables as secured borrowings (as noted
above). These financial statements present all lease receivables
transferred to the financial institutions as assets of the Company.
These lease receivables include transfers originated in 1997 and
remaining lease receivables that were treated as sales in years prior
to 1997 under previous agreements. Accounting for revenue deferred in
prior years under sales of lease receivables remains unchanged in
these financial statements.
d. Recognition of Income:
Lease earnings and residual income on finance leases are recognized
over the term of the contract at a constant rate of return on the
outstanding net investment. Fee income (other revenues), such as
lease documentation fees, surcharge fees, delinquency fees and laser
protection fees, is recognized only when received.
e. Cash and Cash Equivalents:
Cash and cash equivalents include cash on deposit with a bank and
highly liquid short-term investments with maturities of three months
or less from the date of purchase.
f. Allowance for Doubtful Accounts:
The Company maintains an allowance for uncollectible lease and other
receivables based on estimated collectibility and collection
experience. Uncollectible lease receivable balances are written off
against the allowance when the receivable ages 120 days or the
underlying collateral is repossessed.
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
for the year ended December 31, 1997
g. Equipment Off Lease:
The Company records its equipment off lease at the lower of cost or
estimated fair market value at the time of recovery. Depreciation is
provided over a six-month period using the straight line method.
h. Capital Assets:
Capital assets are recorded at cost and depreciation is provided over
the useful lives of the assets using the straight line method.
i. Income Taxes:
The Company has a tax allocation agreement with Spectra-Physics
Holdings USA, Inc. in which the Company pays its allocated share of
any consolidated U.S. income tax liability or receives credit
applicable to any period for which the Company is included as a
member of the consolidated group.
j. Foreign Currency Translation:
Foreign currency transactions that are of a long-term investment
nature are converted into the Company's functional currency at the
current and average exchange rates. The effects of the transitional
adjustments associated with these transactions are reported as a
separate component of shareholder's equity entitled "Foreign currency
translation adjustment."
k. Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
for the year ended December 31, 1997
2. Receivables and Allowance for Doubtful Accounts:
The maturities of outstanding lease receivables at December 31, 1997
were:
1998 $ 16,313,255
1999 9,438,575
2000 5,892,733
2001 3,064,130
2002 1,287,944
Thereafter 1,797
------------
35,998,434
Residual Value 2,031,525
------------
Total $ 38,029,959
============
Finance lease receivables are transferred without recourse, except for
the Company's escrow requirement of 10 percent of the purchaser's net
investment, to major financial institutions on a monthly basis.
Receivables may be refinanced or repaid by customers without penalty
prior to maturity. Therefore, the previous presentation should not be
regarded as a forecast of future cash inflows.
Activity related to the allowance for doubtful accounts for the year
ended December 31, 1997 is shown below:
Balance at the beginning of the year $ 414,778
Provision for doubtful accounts 334,809
Receivables written off, net of recoveries (326,254)
---------
Balance at the end of the $ 423,333
==========
3. Investment in Direct Financing Leases:
The components of the Company's net investment in direct financing
leases at December 31, 1997 were as follows:
Lease payments receivable $ 35,998,434
Unguaranteed residuals 2,031,525
Unapplied cash - lease receivables (108,626)
-----------
Gross investment in direct financing leases 37,921,333
Deferred lease income (5,593,043)
Deferred residual income (526,537)
-----------
Net investment in direct financing leases $ 31,801,753
=============
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
for the year ended December 31, 1997
4. Concentration of Credit Risk:
The Company's receivables are the direct result of its leasing
transactions with customers in construction, agricultural, professional
surveying and industrial-related industries. The Company generally
maintains a collateralized interest in the equipment financed and the
majority of its business activity is with customers located within the
United States.
5. Assignment of Receivables:
The Company has entered into a lease receivable sale/purchasing and
service agreement with its wholly owned subsidiary, Spectra Precision
Funding Corporation (SPFC). The lease receivables are transferred on a
monthly basis net of security deposits received by the Company and any
unearned income related to the receivables, in exchange for cash. SPFC
has entered into a lease receivable sale/purchasing agreement with major
financial institutions (lenders), expiring July 30, 1998. The Company
has been appointed servicer of the lease receivables. Both agreements
are without recourse except for the Company's escrow requirement of 10%
of the funded amount. The lender's net investment was limited to
$50,000,000 at any time ($2,000,000 for equipment located in the U.K.)
during 1997 and was $29,169,625 at December 31, 1997.
6. Financial Instruments:
In order to effectively manage the exposure related to that portion of
the Company's portfolio where rate, term and transaction size create
possible interest rate risk, the Company purchased an interest rate cap
effective December 23, 1996. This financial instrument, also known as an
interest rate derivative, was not purchased for trading purposes but to
enable the Company to effectively manage its exposure to changes in
interest rates. As with any financial instrument, derivatives have
inherent risk. Market risk is the risk of gains or losses that may
result from changes in interest rates. These gains and losses may be
offset by other on- or off- balance sheet transactions. The Company
marked to market its interest rate cap agreements as of December 31,
1997, recording any gains or losses as adjustments to other revenues or
other expenses.
The cap allows the Company to convert variable rate funding into
synthetic fixed rate financing. The agreement is entered into with a
major financial institution and its terms are as follows:
Financial Notational Strike Life
Instrument Amount Rate (Years)
30 day LIBOR cap $ 6,500,000 6.5% 4
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
for the year ended December 31, 1997
7. NONRECOURSE DEBT PAYABLE:
Nonrecourse debt, which relates to direct finance leases permanently
funded through the agreement disclosed in Note 5, bears interest at
LIBOR plus ninety-five basis points. Maturities of such obligations at
December 31, 1997 are as follows:
Direct
finance lease
-------------
Year ending December 31:
1998 $ 12,321,183
1999 7,512,897
2000 5,192,664
2001 2,753,758
2002 1,389,123
---- ----------
$ 29,169,625
============
8. Income Taxes:
The components of the provision for income taxes were as follows for the
years ended December 31, 1997:
Federal tax provision:
Current $ 393,710
Deferred 54,057
-------
Total federal provision 447,767
-------
State and local tax provision:
Current 96,924
Deferred 9,266
-------
Total state and local provision 106,190
-------
Total provision for income taxes $ 553,957
=========
Current tax provision is the amount of income taxes reported or expected
to be reported on the Company's tax return. Income taxes paid in 1997
totaled $574,216.
Variances between accounting rules and tax laws result in differences
between the tax bases of certain assets and liabilities and their
reported amounts in the financial statements. The temporary tax effects
of these differences are recorded as deferred tax assets and liabilities
and consisted of the following at December 31, 1997:
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
for the year ended December 31, 1997
Current deferred tax assets:
Allowance for doubtful accounts $ 168,510
Property tax reserve 5,057
-------
$ 173,567
=========
No valuation allowance for the Company's deferred tax assets was
required at December 31, 1997 because in the opinion of management,
these deferred tax assets will be realized through future profitability.
9. Related Party Transactions:
a. Recourse:
Certain finance contracts do not qualify under the Company's normal
credit underwriting policies. In order to induce the Company to
extend facilities, Spectra Precision Surveying, Inc., Spectra
Precision of Canada, Ltd. and Spectra Precision, Inc. provide
recourse. Although there are master recourse agreements in place,
each individual credit is reviewed and specific agreements are
periodically written to determine the exact amount and term of
recourse. At December 31, 1997, approximately thirty-two percent of
the outstanding finance receivables were covered by such recourse.
b. Funding of Receivables:
The Company has entered into a lease receivable sale/purchase
agreement with Spectra Precision Credit Ltd., (formerly
Spectra-Physics Leasing Ltd., ("SPCL"). Through this agreement, the
Company purchases the lease receivables of SPCL on a monthly basis
and sells them to major financial institutions through the agreement
disclosed in Note 5. The cost of funds charged to SPCL is equal to
that paid by the Company plus any administrative costs incurred and
the forfeited interest resulting from the additional escrow funding
requirements.
c. Other Transactions:
The employees of the Company participate in various plans of Spectra
Precision, Inc. Such plans include medical, flexible spending and
401(k) plans. Certain business expenses, including employee fringe
benefits, are allocated to the Company by Spectra Precision, Inc.
These expenses totaled $928,988 for 1997. Commencing January 1,
1997, a facilities allocation fee of $3,000 per month was paid by
the Company to Spectra Precision, Inc.
<PAGE>
SPECTRA PRECISION CREDIT CORP.
BALANCE SHEET (unaudited)
as of June 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 782,667
Other receivables less $12,333 allowance for doubtful accounts 609,912
Prepaid and other assets 134,830
Escrow compensating balance 3,238,324
Net investment in finance receivables less $603,000 allowance for
doubtful accounts 34,715,302
Capital assets, less accumulated depreciation 75,422
----------
Total assets $ 39,556,457
============
LIABILITIES AND SHAREHOLDER'S EQUITY
Payable to others 211,020
Deferred revenue 35,069
Accrued sales, property and other taxes 73,622
Other current liabilities 113,467
Nonrecourse debt payable 32,383,246
Refundable security deposits 2,836,642
----------
Total liabilities 35,653,066
----------
Shareholder's equity:
Common stock, $.01 par value; 1,000 shares authorized, 100 shares
issued and outstanding 1
Paid-in capital 2,449,077
Retained earnings 1,586,073
Accumulated other comprehensive income (131,760)
----------
Total shareholder's equity 3,903,391
---------
Total liabilities and shareholder's equity $ 39,556,457
============
</TABLE>
<PAGE>
SPECTRA PRECISION CREDIT CORP
STATEMENT OF INCOME AND COMPREHENSIVE INCOME (unaudited)
for the six months ended June 30, 1998
Lease earnings $ 1,948,934
Residual lease earnings 111,535
Other revenues 434,758
---------
Total revenues 2,495,227
---------
Cost of funds 1,122,145
Depreciation 43,536
Payroll expense 355,578
Bad debt expense 423,692
General, operating, and administrative 449,055
---------
Total operating expense 2,394,006
---------
Income before income taxes 101,221
Provision for income taxes 63,032
-------
Net income 38,189
-------
Other comprehensive income, net of tax:
Foreign currency translation adjustments (16,698)
--------
Comprehensive income $ 21,491
=============
<PAGE>
SPECTRA PRECISION CREDIT CORP.
STATEMENT OF CASH FLOWS (unaudited)
for the six months ended June 30, 1998
Reconciliation of net income to operating activities:
Net income $ 38,189
-----------
Adjustments to net income Items not affecting cash:
Depreciation/amortization 43,536
Changes in assets and liabilities:
Decrease in other receivables 344,999
(Increase) in prepaid expenses and other assets (36,855)
Decrease in deferred tax asset 173,567
Increase in security deposits 309,901
(Decrease) in taxes payable (41,608)
Increase in accounts payable 85,990
Increase in deferred revenue 11,308
Increase in accrued liabilities 68,850
-------
Total adjustments 959,688
-------
Net cash provided by operating activities 997,877
-------
Cash flows from investing activities:
Finance receivables originates (12,072,031)
Collection on finance receivables 11,187,368
Capital expenditures (70,979)
-----------
Net cash used in investing activities (955,642)
-----------
Foreign currency translation adjustment - cash (115,062)
-----------
Decrease in cash and cash equivalents 72,827
Cash and cash equivalents at beginning of period 4,093,818
----------
Cash and cash equivalents at end of period $ 4,020,991
============
<PAGE>
SPECTRA PRECISION CREDIT CORP.
NOTE TO FINANCIAL STATEMENTS
for the six months ended June 30, 1998
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles. The interim statements
do not include all of the information and disclosures required for annual
financial statements. In the opinion of the Company's management, all
adjustments (consisting solely of adjustments of a normal recurring nature)
necessary for a fair presentation of these interim results have been included.
Intercompany accounts and transactions have been eliminated. For further
information, refer to the consolidated audited financial statements and notes
thereto for the year ended December 31, 1997 included in Item 7(a) of this Form
8-K/A.
<PAGE>
(b) Pro Forma Financial Information
LINC Capital, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Financial Statements (Unaudited)
The following unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1997 and the six months ended June
30, 1998 present the unaudited pro forma results of operations of LINC Capital,
Inc. and Subsidiaries (the "Company") assuming the acquisition of Spectra
Precision Credit Corp., including its wholly-owned special purpose subsidiary,
Spectra Precision Funding Corporation, (collectively "Spectra") and Spectra
Precision Credit, Ltd. had been consummated as of January 1, 1997.
These unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the Company's consolidated financial
statements and notes thereto previously filed on Form 10-K for the year ended
December 31, 1997 and on Form 10-Q for the quarter ended June 30, 1998 and
Spectra's financial statements and notes thereto included in Item 7 (a) of this
Form 8-K/A. The unaudited pro forma information is not necessarily indicative of
either the results of operations that would have occurred had the acquistion
taken place as of January 1, 1997 or the future results of the combined
operations.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Pro Form Condensed Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1997
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
LINC Capital, Spectra Precision Spectra Precision
Inc. Credit Corp. Leasing, Ltd.
Historical Historical Historical Pro Forma Pro Forma
Statements Statements Statements Adjustments Total
<S> <C> <C> <C> <C> <C>
Net revenues:
Sales of equipment $ 23,131 -- -- -- 23,131
Cost of equipment sold 18,549 -- -- -- 18,549
------ ---- ---- ---- ------
Gross profit from sales of equipment 4,582 -- -- -- 4,582
Rental and operating lease revenue 7,492 -- -- -- 7,492
Direct finance lease income 5,981 3,456 161 -- 9,598
Gain on sale of lease financing receivables 880 -- -- -- 880
Gain on equity participation rights 430 -- -- -- 430
Other income 3,763 1,047 5 -- 4,815
----- ----- --- ---- ------
Total net revenues 23,128 4,503 166 -- 27,797
Expenses:
Selling, general and administrative 9,040 1,210 170 208 (a) 10,628
Interest 4,511 1,617 48 620 (b) 6,796
Depreciation of equipment under rental
agreements and operating leases 4,226 -- -- -- 4,226
Provision for credit losses 1,253 326 -- -- 1,579
------ ----- --- --- ------
Total expenses 19,030 3,153 218 828 23,229
Income (loss) from continuing operations
before income taxes and minority interest 4,098 1,350 (52) (828) 4,568
Income tax expense (benefit) 1,627 554 (11) (323)(c) 1,811
(27)(d)
(9)(e)
----- ----- ---- ----- -----
Income (loss) from continuing operations
before minority interest 2,471 796 (41) (469) 2,757
Minority interest (13) -- -- -- (13)
----- ---- ---- ----- ------
Net income (loss) from continuing operations $ 2,458 796 (41) (469) 2,744
======== ==== ==== ===== ======
Net income from continuing operations
per common share
Basic $ 0.73 0.81
Diluted $ 0.72 0.81
Weighted average shares
Basic 3,371,527 3,371,527
Diluted 3,397,338 3,397,338
</TABLE>
See accompanying notes to unaudited pro form condensed consolidated financial
statements.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Pro Form Condensed Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 1998
(Dollars in thousands, except per share data)
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LINC Capital, Spectra Precision Spectra Precision
Inc. Credit Corp. Leasing, Ltd.
Historical Historical Historical Pro Forma Pro Forma
Statements Statements Statements Adjustments Total
<S> <C> <C> <C> <C> <C>
Net revenues:
Sales of equipment $ 14,800 -- -- -- 14,800
Cost of equipment sold 12,097 -- -- -- 12,097
------ ---- ---- ---- ------
Gross profit from sales of equipment 2,703 -- -- -- 2,703
Rental and operating lease revenue 4,714 -- -- -- 4,714
Direct finance lease income 5,268 2,060 78 -- 7,406
Gain on sale of lease financing receivables 3,588 -- -- -- 3,588
Gain on equity participation rights 2,678 -- -- -- 2,678
Other income 2,706 435 3 -- 3,144
------ ----- --- ---- ------
Total net revenues 21,657 2,495 81 -- 24,233
Expenses:
Selling, general and administrative 7,855 848 107 104 (a) 8,914
Interest 4,036 1,122 51 300 (b) 5,509
Depreciation of equipment under rental
agreements and operating leases 2,902 -- -- -- 2,902
Provision for credit losses 2,327 424 -- -- 2,751
------ ----- --- --- ------
Total expenses 17,120 2,394 158 404 20,076
Income (loss) from continuing operations
before income taxes and minority interest 4,537 101 (77) (404) 4,157
Income tax expense (benefit) 1,775 63 -- (158)(c) 1,627
(23)(d)
(30)(e)
----- --- ---- ----- -----
Income (loss) from continuing operations
before minority interest 2,762 38 (77) (193) 2,530
Minority interest -- -- -- -- --
----- ---- ---- ----- -----
Net income (loss) from continuing operations $ 2,762 38 (77) (193) 2,530
========== ==== ==== ===== =====
Net income from continuing operations
per common share
Basic $ 0.54 0.49
Diluted $ 0.52 0.47
Weighted average shares
Basic 5,158,826 5,158,826
Diluted 5,360,215 5,361,474
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See accompanying notes to unaudited pro form condensed consolidated financial
statements.
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Linc Capital, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
Effective June 30, 1998, the Company acquired the assets and business of
Spectra, the finance subsidiary of Spectra Precision, Inc. Spectra Precision,
Inc. is an international manufacturer of laser-based leveling and alignment
instruments, machine control systems, surveying instruments and software. The
acquisition included all of the outstanding stock of Spectra Precision Credit
Ltd., an affiliate of Spectra conducting business in the United Kingdom. Spectra
provides leasing, financing, and rental services to direct sales offices and
dealer/distributors of Spectra Precision's products. The consideration paid was
$39,939,000, net of cash acquired, including the assumption of $3,458,000 of
liabilities, plus future contingent consideration of up to $3,500,000. The fair
value of assets purchased in the acquisition was $35,829,000. The acquisition
has been accounted for using the purchase method of accounting.
The pro forma adjustments reflect the following:
(a) Represents the amortization of goodwill on a straight - line basis over 20
years.
(b) Represents the incremental interest expense on the funds borrowed to
fund the acquisition of Spectra and Spectra Precision Credit, Ltd.
(c) Represents the tax effect of the pro forma adjustments using a statutory
rate of 39%.
(d) Represents federal and state income tax expense adjustment on Spectra's
historical income before provision for income taxes to a statutory rate of
39%.
(e) Represents income tax expense adjustment on Spectra Precision Leasing,
Ltd.'s income before provision for income taxes using the statutory rate of
39%.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LINC CAPITAL, INC.
Dated: September 14, 1998
By: /s/ Allen P. Palles
-------------------
Allen P. Palles
Executive Vice President
and Chief Financial Officer
(Principal Financial
and Accounting Officer)
