<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest event reported) March 6, 1996 (February 29,
1996)
WESTERN POWER & EQUIPMENT CORP.
Delaware 0-26230 91-1688446
- --------------- ----------- ------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
4601 N.E. 77th Ave., Suite 200, Vancouver, WA 98662
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(Address of principal executive offices)
(360)253-2346
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Registrant's telephone number, including area code
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS Page Number
(a) FINANCIAL STATEMENTS
Report of Independent Accountants 1
Construction Equipment Business of the Case Corporation
Sacramento Complex Combined Balance Sheet
December 31, 1995 2
Construction Equipment Business of the Case Corporation
Sacramento Complex Combined Statement of Operations and
Retained Earnings (Accumulated Deficit)
Year Ended December 31, 1995 3
Construction Equipment Business of the Case Corporation
Sacramento Complex Combined Statement of Cash Flows
Year Ended December 31, 1995 4
Construction Equipment Business of the Case Corporation
Sacramento Complex
Notes to Financial Statements 5 - 7
Pro Forma Combined Financial Information 8 - 13
<PAGE>
Report of Independent Accountants
To the Management and Stockholders of
Western Power & Equipment
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and retained earnings (accumulated deficit) and of cash
flows present fairly, in all material respects, the financial position of the
Construction Equipment Business of the Case Corporation Sacramento Complex (as
described in Note 1) at December 31, 1995, and the results of its operations and
its cash flows for the year then ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the management of Case Corporation and the four Case
Corporation stores in the Sacramento complex; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Portland, Oregon
March 22, 1996
-1-
<PAGE>
Western Power & Equipment
Construction Equipment Business of the Case Corporation Sacramento Complex
(Note 1)
Combined Balance Sheet
December 31, 1995
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ASSETS
Current assets:
Cash $ 1,700
Trade accounts receivable, net of allowance for
doubtful accounts of $1,876 561,830
Miscellaneous receivables 31,741
Inventories (Note 3) 5,027,023
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Total current assets 5,622,294
Property, plant and equipment, net (Note 4) 128,615
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$5,750,909
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LIABILITIES AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
Current liabilities:
Accounts payable $60,389
Payable to related party (Note 2) 7,227,748
Accrued expenses 600,974
----------
Total current liabilities 7,889,111
Retained earnings (accumulated deficit) (2,138,202)
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$5,750,909
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----------
The accompanying notes are an integral part of this statement.
<PAGE>
Western Power & Equipment
Construction Equipment Business of the Case Corporation Sacramento Complex
(Note 1)
Combined Statement of Operations and Retained Earnings (Accumulated Deficit)
For the Year Ended December 31, 1995
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<TABLE>
<S> <C>
Net sales $14,819,605
Cost of sales 11,514,520
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Gross profit 3,305,085
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Operating expenses:
Employee compensation 2,112,176
Facilities 670,079
Office supplies 66,484
Insurance 18,331
Property and sales taxes 114,406
Travel and entertainment 188,577
Advertising 102,163
Other 205,989
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Total operating expenses 3,478,205
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Other (income) expenses:
Interest expense 139,476
Interest income (43,830)
Other (142,126)
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Total other income (46,480)
-----------
Loss before income taxes (126,640)
Income taxes -
-----------
Net loss (126,640)
Accumulated deficit at beginning of year (336,278)
Net equity distributions to parent company (Note 2) (1,675,284)
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Accumulated deficit at end of period $(2,138,202)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Western Power & Equipment
Construction Equipment Business of the Case Corporation Sacramento Complex
(Note 1)
Combined Statement of Cash Flows
For the Year Ended December 31, 1995
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Cash flows from operating activities:
Net loss $ (126,640)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation 33,379
Changes in:
Accounts receivable 1,519,868
Miscellaneous receivables 13,250
Inventories (1,802,752)
Payable to related party 219,014
Accounts payable (14,395)
Accrued expenses 147,052
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Net cash used in operating activities (11,224)
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Cash flows from investing activities:
Disposal of property and equipment 11,224
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Net cash provided by investing activities 11,224
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Net change in cash -
Cash at beginning of period 1,700
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Cash at end of period $ 1,700
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Interest paid during the year ended December 31, 1995 aggregated
$139,476. Net equity distributions to the parent company during the
year ended December 31, 1995, aggregating $1,675,284, represent noncash
transactions recorded as decreases in payable to related party and,
accordingly, are not reflected on the combined statement of cash flows
(see Note 2).
The accompanying notes are an integral part of this statement.
<PAGE>
Western Power & Equipment
Construction Equipment Business of the Case Corporation Sacramento Complex
Notes to Combined Financial Statements
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1. Significant Operations and Accounting Policies
On February 29, 1996, Western Power and Equipment (the Company)
acquired the construction equipment assets and operations of four
factory owned stores of the Case Corporation (Case) Sacramento,
California Complex (the stores). The acquisition was consummated
for $630,000 in cash, $2,390,000 in instalment notes payable to Case
and $3,965,000 in inventory floor planning dealer finance agreements
with Case and its affiliates. The purchase transaction is not
reflected in the accompanying combined financial statements.
The stores are engaged in the sale, rental and servicing of light,
medium, and heavy construction equipment parts and related products.
Case serves as the manufacturer and distributor for substantially
all of the stores' products (see Note 2). The equipment distributed
by the stores is sold to contractors, governmental agencies and
other customers primarily for use in the construction of residential
and commercial buildings, roads and other various projects in the
northern and central California vicinity.
Prior to the acquisition, the accounts of the stores were included
in the accounts of Case and were not presented as those of a
separate reporting entity. The accompanying combined financial
statements present the financial position, results of operations and
cash flows of the stores on a carved-out basis as if the
construction equipment business of the stores had been an
independent reporting entity for the year ended December 31, 1995.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method for parts and
the specific identification method for equipment inventories.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. The stores calculate and record depreciation using
the straight-line method over the estimated useful lives of the
assets, ranging from 3 to 10 years. Expenditures for replacements
and improvements are capitalized and expenditures for repairs,
maintenance and routine replacements are charged to operating
expense as incurred. When assets are sold or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from
the accounts and any resulting gain or loss is included in
operations.
Income taxes
The stores account for income taxes under Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes," using the asset and liability approach. The asset and
liability approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases
of assets and liabilities.
Revenue recognition
Machinery sales are recognized upon shipment to customers. Returns
have not been significant.
Financial instruments
The stores record all financial instruments at cost which
approximates market value.
<PAGE>
Western Power & Equipment
Construction Equipment Business of the Case Corporation Sacramento Complex
Notes to Combined Financial Statements
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1. Significant Operations and Accounting Policies (Continued)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Advertising expense
The stores expense all advertising costs as incurred.
2. Related Party Transactions
As described in Note 1 to the combined financial statements, the
stores were owned by Case for periods prior to February 29, 1996.
As factory owned stores, the stores entered into significant
transactions with Case. These transactions included the purchase of
substantially all of the stores' new equipment and parts
inventories. As was Case's customary practice for all of its owned
stores, the cost of such purchases approximated prices charged to
distributorships and stores not owned by Case; the accompanying
combined financial statements have been prepared based on this
practice and have not been adjusted to eliminate unrealized or
realized intercompany profits.
As part of the stores' operations, Case Credit Corporation, a
division of Case, provided financing to the stores' customers for
the sale of new and used equipment. The terms of the financing
provided by Case Credit Corporation were consistent with those
provided to distributorships and stores not owned by Case. The
contracts receivable financed by Case Credit Corporation have not
been included in the accompanying combined financial statements.
The stores remitted substantially all excess cash to Case. In
addition, Case made significant disbursements for the individual
stores. These transactions are recorded in the store's combined
financial records and resulted in significant intercompany payables,
as shown in the accompanying combined balance sheet.
Management believes that the construction equipment revenues
historically produced by the four Sacramento Complex stores will be
supported by two facilities - one in Sacramento and one in Stockton,
on a going-forward basis. The acquisition agreement did not include
the purchase of any of the California facilities, and, accordingly,
the Company has reported the two facilities as if they had been held
under operating leases since the related land and buildings were
placed in service. Rent expense related to these leases aggregated
$438,396 for the year ended December 31, 1995.
In addition, the Company has recorded net equity distributions to
the parent company aggregating $1,675,284 during the year ended
December 31, 1995. Such distributions are shown as reductions of
accumulated deficit with corresponding decreases in the payable to
the parent company in the accompanying combined financial
statements. The distributions represent noncash transactions and,
accordingly, are not reflected in the combined statement of cash
flows.
<PAGE>
Western Power & Equipment
Construction Equipment Business of the Case Corporation Sacramento Complex
Notes to Combined Financial Statements
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3. Inventories
Inventories at December 31, 1995 consist of the following:
Equipment $4,046,743
Parts 980,280
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$5,027,023
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4. Property, plant and equipment
Property, plant and equipment at December 31, 1995 consist of the
following:
Machinery and equipment $ 214,217
Office furniture and fixtures 384,890
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599,107
Less - accumulated depreciation (470,492)
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$ 128,615
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5. Income Taxes
The taxable loss of the stores is included in the consolidated tax
returns of the stores' parent company, Case. Pursuant to Case's
corporate tax policy, the stores have not been charged allocations
for income taxes. For financial reporting purposes, the provision
(benefit) for income taxes has been calculated as though the stores
filed separate federal and state income tax returns as independent
reporting entities. Based upon the taxable loss and accumulated
deficit, no provision for income taxes has been recorded in the
accompanying statement of operations. Differences between the
financial reporting carrying amounts and the tax basis of assets and
liabilities on a stand-alone basis are not significant.
For any deferred tax asset or liability resulting from these
differences the independent stores would have recorded a full
valuation allowance which would offset any deferred tax asset or
liability.
6. Subsequent Event
On March 1, 1996, the Company entered into a five-year operating
lease for $3,000 per month for a new facility in Stockton.
<PAGE>
Western Power & Equipment
Pro Forma Combined Financial Information (Unaudited)
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January 31, 1996
The unaudited pro forma combined financial statements are provided as
required by Regulation S-X of the Securities and Exchange Commission.
Effective February 17, 1996, Western Power & Equipment (the Company)
acquired the construction equipment assets and operations of four
factory owned stores of the Case Corporation (Case) Sacramento,
California Complex (the stores). The acquisition was consummated for
$630,000 in cash, $2,290,000 in instalment notes payable to Case and
$3,965,000 in inventory floor planning dealer finance agreements with
Case and its affiliates.
The pro forma combined balance sheet as of January 31, 1996 presents the
financial position of the combined entities assuming that the
acquisition had been completed as of that date. The pro forma combined
balance sheet as of January 31, 1996 combines the accounts of the
Company as of January 31, 1996 with the accounts of the stores as of
December 31, 1995.
The pro forma combined statement of operations for the six months ended
January 31, 1996 presents the results of operations of the combined
entities assuming that the acquisition had been completed as of the
beginning of the period. The pro forma combined statement of operations
for the six months ended January 31, 1996 combines operating results of
the Company for the six months ended January 31, 1996 with the operating
results of the stores for the six months ended December 31, 1995.
These pro forma statements include all material adjustments necessary to
restate the historical results to accommodate these assumptions.
However, the pro forma combined balances are not necessarily indicative
of balances which would have resulted had the purchase actually occurred
on July 31, 1995. These pro forma statements should be read in
conjunction with the other financial statements and accompanying notes.
<PAGE>
Western Power & Equipment
Pro Forma Combined Balance Sheet (Unaudited)
January 31, 1996 (Dollars in thousands)
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<TABLE>
Western
Power & Sacramento
Equipment stores Pro forma Pro forma
Assets (historical) (historical) adjustments combined
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 2,948 $ 2 $ (630)(b) $ 2,320
Trade accounts receivable less allowance
for doubtful accounts 4,792 594 5,386
Inventories 50,202 5,027 55,229
Prepaid expenses 69 69
Prepaid income taxes 202 202
Deferred income taxes 417 417
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Total current assets 58,630 5,623 (630) 63,623
Property and equipment, net 5,853 129 1,012 (b) 6,994
Intangible and other assets 2,080 150 (c) 2,230
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Total assets $66,563 $5,752 $ 532 $72,847
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------- ----- ------- --------
Liabilities and Shareholders' Equity
Current liabilities:
Borrowings under floor financing lines $41,572 $ $ $41,572
Short-term borrowings 506 506
Payable to Case Corporate 7,228 (1,606)(a) 5,622
Accounts payable 1,311 60 1,371
Accrued payroll and vacation 408 373 781
Other accrued liabilities 658 229 887
Capital lease obligation 51 51
Payable to parent 263 263
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Total current liabilities 44,769 7,890 (1,606) 51,053
Deferred income taxes 299 299
Capital lease obligation 939 939
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Total liabilities 46,007 7,890 (1,606) 52,291
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Commitments and contingencies (Note 9)
Shareholders' equity:
Common stock 4 4
Additional paid-in capital 16,047 16,047
Retained earnings (deficit) 4,505 (2,138) 2,138 (b) 4,505
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Total stockholders' equity (deficit) $20,556 $(2,138) $2,138 $20,556
------- ----- ------- --------
Total liabilities and stockholders' equity (deficit) $66,563 $5,752 $ 532 $ 72,847
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------- ----- ------- --------
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements.
<PAGE>
Western Power & Equipment
Pro Forma Combined Statement of Operations (Unaudited)
For the Six Months Ended January 31, 1996
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<TABLE>
Western
Power & Sacramento
Equipment stores Pro forma Pro forma
(historical) (historical) adjustments combined
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net sales $48,925 $8,542 $ $57,467
Cost of goods sold 43,493 6,676 50,169
------- ------ ----- -------
Gross profit 5,432 1,866 7,298
Selling, general and administrative expenses 3,522 1,758 38 (a) 5,318
------- ------ ----- -------
1,910 108 (38) 1,980
Other (income) expense:
Interest expense (income) 741 52 115 (b) 908
Other (income) expense (175) (80) (255)
------- ------ ----- -------
Income (loss) before income taxes 1,344 136 (153) 1,327
Provision for income taxes (503) (503)
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Net income (loss) $ 841 $ 136 (153) $ 824
------- ------ ----- -------
------- ------ ----- -------
Net income per common share $ .24 $ N/A $ N/A $ .23
------- ------ ----- -------
------- ------ ----- -------
Shares used in net income per share calculations $3,533 $N/A $ N/A $ 3,533
------- ------ ----- -------
------- ------ ----- -------
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements.
<PAGE>
Western Power & Equipment
Pro Forma Combined Financial Information (Unaudited)
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July 31, 1995
The unaudited pro forma combined financial statements are provided as
required by Regulation S-X of the Securities and Exchange Commission.
Effective February 17, 1996, Western Power & Equipment (the Company)
acquired the construction equipment assets and operations of four
factory owned stores of the Case Corporation (Case) Sacramento,
California Complex (the stores). The acquisition was consummated for
$630,000 in cash, $2,390,000 in instalment notes payable to Case and
$3,965,000 in inventory floor planning dealer finance agreements with
Case and its affiliates.
The pro forma combined statement of operations for the year ended July
31, 1995 presents the results of operations of the combined entities
assuming that the acquisition had been completed as of the beginning of
the period. The proforma combined statement of operations for the year
ended July 31, 1995, combines operating results of the Company for the
year ended July 31, 1995 with the operating results of the stores for
the year ended June 30, 1995.
These pro forma statements include all material adjustments necessary to
restate the historical results to accommodate these assumptions.
However, the pro forma combined balances are not necessarily indicative
of balances which would have resulted had the purchase actually occurred
on July 31, 1995. This statement should be read in conjunction with the
other financial statements and accompanying notes.
<PAGE>
Western Power & Equipment
Pro Forma Combined Statement of Operations (Unaudited)
For the Year Ended July 31, 1995
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<TABLE>
Western
Power & Sacramento
Equipment stores Pro forma Pro forma
(historical) (historical) adjustments combined
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net sales $86,172 $14,054 $ $100,226
Cost of goods sold 76,144 10,926 87,070
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Gross profit 10,028 3,128 13,156
Selling, general and administrative expenses 6,078 3,210 77 (a) 9,365
3,950 (82) (77) 3,791
Other (income) expense:
Interest expense (income) 1,091 107 229 (b) 1,427
Bridge loan deferred financing costs 290 290
Other (income) expense (33) (152) (185)
------- ------- ------- --------
Income (loss) before income taxes 2,602 (37) (306) 2,259
Provision for income taxes (989) 130 (c) (859)
------- ------- ------- --------
Net income (loss) $ 1,613 $ (37) $ (176) $ 1,400
------- ------- ------- --------
------- ------- ------- --------
Net income per common share $ .74 $ N/A $ N/A $ .58
------- ------- ------- --------
------- ------- ------- --------
Shares used in net income per share calculations $ 2,192 $ N/A $ N/A $ 2,192
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
<PAGE>
Western Power & Equipment
Notes to Pro Forma Combined Financial Statements (Unaudited)
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The pro forma combined balance sheet has been prepared to reflect the
purchase by Western Power & Equipment of substantially all of the
construction equipment assets of four factory owned stores of Case
Corporation in California. Western Power & Equipment paid $630,000 in
cash, $2,390,000 in instalment notes payable to Case and $3,965,000 in
inventory floor planning dealer finance agreements with Case and its
affiliates. Pro forma adjustments are made to reflect the purchase of
the stores as follows:
NOTE 1
(a) The debt issued to finance the purchase of the net assets of the
stores.
(b) The tangible net assets of the stores recorded at estimated fair
values at the acquisition date.
(c) This amount represents an intangible asset for the excess of the
purchase price over the fair market value of the tangible assets
acquired.
NOTE 2
The pro forma combined statements of operations are based on the
financial statements of the Company and the stores after giving effect
to the following pro forma adjustment:
(a) Goodwill amortization expense resulting from the recording of
goodwill as an intangible asset and increased depreciation
expense for step-up of fixed assets.
(b) Adjustment to record interest on the note payable to Case of
$2,390,000 resulting from the acquisition.
(c) Adjustment to record income tax benefit from acquisition and
consolidation.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
WESTERN POWER & EQUIPMENT CORP.
(Registrant)
Dated: May 10, 1996 By: /s/ Thomas D. Berkompas
Thomas D. Berkompas
Vice President, Chief Accounting and
Chief Financial Officer
