<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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: 333-41939
STELLEX INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-3971931
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1430 BROADWAY, 13TH FLOOR
NEW YORK, NEW YORK 10018
(212) 391-1392
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None.
Indicate by check mark whether the registrant (1) has filed all
reports required 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 / / No /x/
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /x/
As of December 1, 1998, the number of shares outstanding of the
registrant's Common Stock, no par value, was 1,000 shares. There is no trading
market for the Common Stock. Accordingly, the aggregate market value of the
Common Stock held by non-affiliates of the registrant is not determinable. See
Part II, Item 5 of this Report.
<PAGE>
<PAGE>
EXPLANATORY NOTE:
The annual report on Form 10-K filed by Stellex Industries, Inc. on March 31,
1998 is being amended for the sole purpose of filing the annual consolidated
financial statements of KII Holding Corp., a majority owned subsidiary, for the
period ended December 31, 1997.
2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
----------
To the Board of Directors and Shareholder of
KII Holding Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheets of KII Holding
Corp. and Subsidiaries (formerly Kleinert Industries, Inc. and Subsidiaries), a
majority-owned subsidiary of Stellex Industries, Inc., as of December 31, 1997
and 1996, and the related consolidated statements of income, shareholder's
equity, and cash flows for the six months ended December 31, 1997 (successor)
and June 30, 1997 (predecessor) and the years ended December 31, 1996 and 1995
(predecessor). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of KII Holding Corp.
and Subsidiaries (formerly Kleinert Industries, Inc. and Subsidiaries) as of
December 31, 1997 and 1996, and the consolidated results of their operations and
their cash flows for the six months ended December 31, 1997 (successor) and June
30, 1997 (predecessor) and the years ended December 31, 1996 and 1995
(predecessor) in conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers
Los Angeles, California
March 6, 1998
3
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<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1996
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 1,152,200 $ 406,000
Trade accounts receivable, less allowance for doubtful accounts 5,446,700 3,876,000
($91,600 and $112,300 in 1997 and 1996, respectively)
Inventories 12,817,100 11,547,700
Due from Parent - 55,600
Prepaid and other assets 262,300 225,700
Income taxes receivable 654,400 -
Deferred income taxes 531,800 486,000
----------- -----------
Total current assets 20,864,500 16,597,000
Property, plant and equipment, net 14,458,900 11,165,400
Goodwill, net of accumulated amortization of $262,700 in 1996 - 986,100
Deferred financing costs, net of accumulated amortization of $16,800 in 1997 983,200 -
Other assets 1,059,100 865,900
----------- -----------
Total assets $37,365,700 $29,614,400
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current liabilities:
Bank line of credit - $ 4,300,000
Accounts payable $ 1,638,400 1,525,000
Accrued liabilities 2,148,500 1,261,400
Customer deposits 116,700 177,900
Preferred dividend payable 42,300 -
Income taxes payable - 39,600
Notes payable, current 62,800 1,558,000
Obligations under capital leases, current 76,900 -
----------- -----------
Total current liabilities 4,085,600 8,861,900
Notes payable, less current portion 25,254,200 4,123,900
Obligations under capital leases, less current portion 370,600 -
Unfunded pension benefits 298,300 307,800
Deferred compensation liability 1,405,700 1,291,900
Deferred income taxes 1,693,400 851,300
----------- -----------
Total liabilities 33,107,800 15,436,800
----------- -----------
Equity Put Rights on common stock 1,078,100 -
Commitments and contingencies - -
Shareholder's equity:
Common stock, $1,000 par value; 1,000,000 shares authorized,
10,000 shares issued and outstanding (predecessor) - 10,000,000
Common stock, no par value; 20,000 shares authorized, 3,131,900 -
10,000 shares issued and outstanding (successor)
Series A Preferred Stock, $10,000 stated value; 400 shares 840,000 -
Authorized, 84 shares issued and outstanding (successor)
Series B Preferred Stock, $10,000 stated value; 75 shares - -
Authorized, none issued and outstanding (successor)
Undesignated Preferred Stock, $10,000 stated value; 25 shares -
Authorized, none issued and outstanding (successor) -
Additional paid-in capital (predecessor) - 1,952,700
(Accumulated deficit) retained earnings (792,100) 2,224,900
----------- -----------
Total shareholder's equity 3,179,800 14,177,600
----------- -----------
Total liabilities and shareholder's equity $37,365,700 $29,614,400
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
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<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR FOR THE YEAR
MONTHS ENDED FOR THE SIX ENDED ENDED
DECEMBER 31, MONTHS ENDED DECEMBER 31, DECEMBER 31,
1997 JUNE 30, 1997 1996 1995
---- ------------- ---- ----
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
Sales $17,576,800 $14,296,000 $24,306,900 $21,049,100
Cost of sales 13,644,100 10,139,600 17,366,800 15,083,500
----------- ----------- ----------- -----------
Gross profit 3,932,700 4,156,400 6,940,100 5,965,600
----------- ----------- ----------- -----------
Operating expenses:
Selling and marketing 532,500 429,800 836,300 744,300
General and administrative 2,544,100 1,353,300 2,792,900 2,554,200
Amortization of non-compete covenants, goodwill,
deferred financing costs and organization costs 70,200 15,600 31,200 282,200
----------- ----------- ----------- -----------
Total operating costs 3,146,800 1,798,700 3,660,400 3,580,700
----------- ----------- ----------- -----------
Income from operations 785,900 2,357,700 3,279,700 2,384,900
----------- ----------- ----------- -----------
Other (income) expense:
Interest income (6,200) (4,500) (11,600) (5,500)
Interest expense 1,070,700 375,700 855,800 1,034,400
Other 24,000 102,900 58,100 44,100
----------- ----------- ----------- -----------
Total other expense, net 1,088,500 474,100 902,300 1,073,000
----------- ----------- ----------- -----------
(Loss) income before benefit (provision) for
income taxes and extraordinary loss (302,600) 1,883,600 2,377,400 1,311,900
Provision (benefit) for income taxes (1,100) 753,400 944,900 524,800
----------- ----------- ----------- -----------
(Loss) income before extraordinary loss (301,500) 1,130,200 1,432,500 787,100
Extraordinary loss on early extinguishment of
debt (net of income tax benefit of $298,900) (448,300) - - -
----------- ----------- ----------- -----------
Net (loss) income ($ 749,800) $ 1,130,200 $ 1,432,500 $ 787,100
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
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<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
----------
<TABLE>
<CAPTION>
Preferred "A" Preferred "B" Undesignated
Common Stock Stock Stock Preferred Stock Additional
---------------- ---------------- -------------- ---------------- Paid-In Retained
Predecessor: Shares Amount Shares Amount Shares Amount Shares Amount Capital Earnings Total
- ------------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 10,000 $10,000,000 - $ - - $ - - $ - $1,952,700 $ 5,300 $11,958,000
Net income - - - - - - - - - 787,100 787,100
------ ----------- ---- ----- -- ---- -- ---- ---------- -------- -----------
Balance,
December 31, 1995 10,000 10,000,000 - - - - - - 1,952,700 792,400 12,745,100
Net income - - - - - - - - - 1,432,500 1,432,500
------ ----------- ---- ----- -- ---- -- ---- ---------- --------- -----------
Balance,
December 31, 1996 10,000 10,000,000 - - - - - - 1,952,700 2,224,900 14,177,600
Net income for
the six
months ended
June 30, 1997 - - - - - - - - - 1,130,200 1,130,200
------ ----------- ---- ----- -- ---- -- ---- ---------- --------- -----------
Balance,
June 30, 1997 10,000 $10,000,000 - $ - - $ - - $ - $1,952,700 $3,355,100 $15,307,800
====== =========== ==== ===== == ==== == ==== ========== ========== ===========
Successor:
- ----------
Issuance of
common stock 10,000 $ 3,910,000 - $ - - $ - - $ - $ - $ - $ 3,910,000
Equity put
rights on
common stock (1,990) (778,100) - - - - - - - - (778,100)
Issuance of
cumulative,
non-voting
Preferred "A"
Stock - - 84 840,000 - - - - - - 840,000
Dividends on
Preferred "A"
Stock ($503.57
per share) - - - - - - - - - (42,300) (42,300)
Net loss for
the six
months ended
December 31, 1997 - - - - - - - - - (749,800) (749,800)
------ ----------- ---- ----- -- ---- -- ---- ---------- --------- -----------
Balance,
December 31, 1997 8,010 $ 3,131,900 84.00 $840,000 - $ - - $ - $ - ($792,100) $ 3,179,800
====== =========== ===== ======== == ==== == ==== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
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<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FOR THE FOR THE
MONTHS ENDED SIX MONTHS YEAR ENDED YEAR ENDED
DECEMBER 31, ENDED DECEMBER 31, DECEMBER 31,
1997 JUNE 30, 1997 1996 1995
---- ------------- ---- ----
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($749,800) $1,130,200 $1,432,500 $787,100
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 813,500 862,600 1,660,200 1,668,100
Amortization of intangibles 70,200 15,600 31,200 282,200
Gain on sale of property (900) (4,000) (2,200) (10,600)
Extraordinary loss on early extinguishment of debt 448,300 - - -
Deferred income taxes (593,900) 125,100 254,100 165,800
Compensation expense from put rights on common stock 300,000 - - -
Changes in assets and liabilities:
Trade accounts receivable (592,500) (978,200) (388,600) (299,000)
Inventories 896,400 (1,078,300) (1,074,100) (1,058,200)
Income taxes receivable 221,200 - - -
Prepaid and other assets (124,500) (105,300) (219,600) (8,400)
Due from Parent - (2,100) (55,600) (146,000)
Accounts payable (445,600) 559,000 357,700 127,500
Accrued liabilities 973,600 18,000 530,400 329,400
Customer deposits (58,100) (3,100) 134,400 8,200
Income taxes payable - (60,100) (3,400) 20,000
--------- ---------- ---------- ---------
Net cash provided by operating activities 1,157,900 479,400 2,657,000 1,866,100
--------- ---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (excluding capital (1,232,700) (868,500) (1,052,500) (656,700)
leasing)
Collections on notes receivable - - - 1,600
Proceeds from sale of property, plant and equipment - 33,500 4,500 12,000
Net cash paid to seller for the acquisition of Kleinert (14,799,300) - - -
---------- ---------- ---------- ---------
Net cash used in investing activities (16,032,000) (835,000) (1,048,000) (643,100)
---------- ------- --------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on line of credit - 300,000 735,000 765,000
Borrowings on notes payable 643,000 - - -
Repayment on notes payable (29,500) (28,400) (2,141,600) (2,196,900)
Proceeds from issuance of common and preferred stock 4,750,000 - - -
Repayment of debt in connection with Kleinert Acquisition (7,600,000) - - -
Proceeds from borrowings in connection with Kleinert
Acquisition 19,300,000 - - -
Acquisition-related costs (1,353,500) - - -
Repayment on capital lease obligations (5,700) - - -
---------- ---------- ---------- ---------
Net cash provided by (used in) financing activities 15,704,300 271,600 (1,406,600) (1,431,900)
---------- - ------- --------- ---------
Net increase (decrease) in cash and cash equivalents 830,200 (84,000) 202,400 (208,900)
CASH AND CASH EQUIVALENTS, beginning of period 322,000 406,000 203,600 412,500
---------- ---------- ---------- ---------
CASH AND CASH EQUIVALENTS, end of period $1,152,200 $ 322,000 $ 406,000 $ 203,600
========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS:
Predecessor
-----------
Kleinert Industries, Inc. (predecessor) ("Kleinert") was a wholly owned
subsidiary of Kleinert Industrie Holding A.G., a Swiss company (the
"Parent"), and was organized under the laws of the State of California
on July 1, 1988, commencing operations on September 1, 1988, and which
provided management services for its wholly owned subsidiaries -
Paragon Precision Products ("PPP"), Bandy Machining International
("BMI"), Scanning Electron Analysis Laboratories, Inc. ("SEAL"), and
General Inspection Laboratories, Inc. ("GIL").
PPP specializes in the manufacture of precision aerospace components.
BMI manufactures precision hinges, door panels and hinged assemblies
for both aerospace and industrial applications. SEAL specializes in
materials analysis and problem solving for government and industry. GIL
provides a complete array of non-destructive testing services for
inspecting critical parts and manufactured components.
Acquisition And Successor
-------------------------
On July 1, 1997, KII Holding Corp. (successor), a Delaware company
("KII Holding") incorporated on July 1, 1997, through a wholly owned
subsidiary (KII Acquisition Corp., a Delaware corporation), acquired
all of the issued and outstanding capital stock of Kleinert and
Subsidiaries (predecessor company and currently known as Stellex
Aerospace and Subsidiaries) from Kleinert Industrie Holding A.G. (the
"Seller"). The acquisition has been accounted for using the purchase
method of accounting, and, accordingly, the net purchase price of
approximately $26.5 million (including the assumption of $2.65 million
of mortgage indebtedness and the issuance to the Seller of a note for
$1.75 million) has been allocated to the assets purchased and the
liabilities assumed based upon the fair values at the date of
acquisition. There was no excess purchase price over the fair values on
the net assets acquired in connection with the acquisition. The
acquisition was financed in part from new borrowings totaling $19.3
million and the issuance of common and preferred stock totaling $4.75
million. KII Holding is owned by Stellex Industries, Inc., a Delaware
corporation, which owns approximately 80% of the issued and outstanding
common stock of KII Holding, with Stellex Aerospace's management
holding the remainder of its outstanding common stock. KII Holding is a
holding company whose operations are conducted through its operating
subsidiaries. References to the "Company" include both KII Holding and
its predecessor, Kleinert.
Pursuant to the Kleinert Stock Purchase Agreement, the Seller agreed to
indemnify KII Acquisition Corp. for all liabilities and other losses
arising from, among other things, any breach of the representations,
warranties or covenants of the Seller or Kleinert contained in the
Kleinert Stock Purchase Agreement. KII Acquisition Corp. has agreed to
indemnify the Seller for all liabilities (including, without
limitation, liabilities for taxes), and other losses arising from,
among other things, the operation or conduct of Stellex Aerospace's
business after the Closing Date and the breach of any representation,
warranty or covenant of KII Acquisition Corp. contained in the Kleinert
Stock Purchase Agreement. With certain limited exceptions (e.g.,
fraud), neither the Seller nor KII Acquisition Corp. is required to
indemnify any other person unless the aggregate of all amounts for
which indemnity would otherwise be payable exceeds $100,000 (the
"Basket Amount") and, in such event, the indemnifying party shall be
responsible for all Indemnified Losses, including those
8
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<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
comprising the Basket Amount. In addition, the indemnification
obligations of KII Acquisition Corp. and the Seller are generally
limited to a maximum of $1,750,000.
Pursuant to an agreement entered into in connection with the Kleinert
Acquisition (the "Stellex Aerospace Investor Agreement"), six senior
members of Stellex Aerospace's management team (the "Buyers," and
together with a member of management who received Stock Appreciation
Rights ("SARs") as described below, the "Management Members") purchased
19.9% of the issued and outstanding shares of KII Holding for $778,090.
As part of the closing of the sale, the six senior members were paid
$1,460,300 as part of a management participation plan agreement with
the prior owner who allowed them to purchase the 19.9%. In addition,
Stellex Industries purchased KII Holding's remaining common stock for
$3,131,910 and 84 shares of KII Holding's Series A Preferred Stock,
having a stated value of $10,000 per share (the "Series A Preferred
Stock"), for $840,000. Pursuant to the Stellex Aerospace Investor
Agreement, the Buyers also agreed to purchase shares of KII Holding's
Series B Preferred Stock with any other payments received by the Buyers
under their respective management participation plan agreements with
the Seller.
Pursuant to the Stellex Aerospace Investor Agreement, KII Holding
granted SARs to certain Management Members. KII Holding has the right
to redeem (the "Redemption Right") all, but not less than all, of any
common stock held by any Management Member and to cause a liquidation
and termination of any SAR held by him to KII Holding upon the
occurrence of certain events, including the death, disability or
termination of the Management Member, and for any reason after July 1,
2002. Moreover, the Stellex Aerospace Investor Agreement gives each
Management Member the right to cause KII Holding to purchase all, but
not less than all, of any common stock of KII Holding held by him
and/or to cause KII Holding to liquidate and terminate any SARs held by
him (hereinafter referred to as the "Put Right") upon the occurrence of
certain events, including such Management Member's death, disability,
termination Without Cause (as defined in the Stellex Aerospace Investor
Agreement) or scheduled retirement, and for any reason after July 1,
2002. The applicable purchase price to be received by a Management
Member upon the exercise of a Redemption Right or Put Right is based
upon a formula set forth in the Stellex Aerospace Investor Agreement.
To the extent KII Holding is prohibited under the terms of its existing
indebtedness from making payment to any Management Member for any
shares of its common stock or vested SARs purchased or liquidated
pursuant to the Stellex Aerospace Investor Agreement, then it is
required to issue a promissory note to such Management Member for the
amount owing. Such note shall be payable when and to the extent KII
Holding is permitted to make such payment and bear interest at a rate
of 10% per annum. Such note shall also be unsecured and subordinated to
all other indebtedness of KII Holding, including KII Holding's
Guarantee of the Notes.
The Stellex Aerospace Investor Agreement further provides that,
subsequent to the closing of the Kleinert Acquisition, each Management
Member, except for one who has a scheduled retirement, will enter into
a five-year employment agreement with KII Holding or one of its
subsidiaries.
9
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<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles Of Consolidation
---------------------------
The accompanying consolidated financial statements dated prior to the
acquisition of Kleinert and Subsidiaries on July 1, 1997, include the
accounts of Kleinert and its wholly owned subsidiaries (the
"Predecessor"). Financial statements dated subsequent to the
acquisition include the accounts of KII Holding (the "Successor") and
its wholly owned subsidiaries, KII Acquisition Corp., Stellex Aerospace
and Subsidiaries (PPP, BMI, SEAL and GIL). All significant intercompany
transactions have been eliminated in consolidation.
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 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.
Cash And Cash Equivalents
-------------------------
Cash and cash equivalents include all highly liquid investment
instruments purchased with a maturity of three months or less. The
carrying amount approximates fair value because of the short maturity
of these instruments.
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property, Plant And Equipment
-----------------------------
Property, plant and equipment are stated at the Company's allocated
acquisition cost for assets acquired through purchase acquisitions and
at cost for all new additions, and are being depreciated over the
estimated useful lives of the assets, using the straight-line method of
depreciation. Estimated useful lives for fixed assets are as follows:
<TABLE>
<S> <C>
Building and improvements 32 years
Leasehold improvements Based on the lesser of the useful life of the
assets or the remaining life of the lease
Machinery and equipment 8-10 years
Office furniture and fixtures 8-10 years
Office equipment and computers 4-5 years
Autos and trucks 4-5 years
</TABLE>
10
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expenditures for maintenance and repairs are charged to expense as
incurred. Major renewals or betterments, which substantially extend the
useful life of the assets, are capitalized. Upon sale or disposition of
assets, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in income.
Goodwill
--------
Goodwill relates to the excess of cost over the fair value of the net
assets of businesses acquired by the Predecessor and were being
amortized over a period of 40 years on a straight-line basis.
Deferred Financing Costs
------------------------
The costs related to the issuance of debt are capitalized and amortized
on a straight-line basis over the lives of the related debt.
Long-Lived Assets
-----------------
In fiscal year 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
adoption of SFAS No. 121 had no impact on the Company's financial
position or on its results of operations.
In accordance with SFAS No. 121, long-lived assets held and used by the
Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of
long-lived assets, the Company evaluates the carrying value of its
goodwill and property, plant and equipment on an ongoing basis and
recognizes an impairment when the estimated future undiscounted cash
flows from operations are less than the carrying value of the related
long-lived assets.
Fair Value Of Financial Instruments
-----------------------------------
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires certain disclosures regarding the fair value of financial
instruments. Cash and cash equivalents, accounts receivable, accounts
payable, accrued liabilities and amounts due to and from affiliates are
reflected in the consolidated financial statements at fair value
because of the short-term maturity of these instruments. The fair value
of long-term debt closely approximates its carrying value. The Company
uses quoted market prices, when available, or discounted cash flows to
calculate these fair values.
11
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
------------
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which prescribes an asset and liability
approach. The asset and liability method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between tax bases and financial
reporting bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.
The provision for income taxes includes federal and state income taxes
currently payable and those deferred because of temporary differences
between the financial statement and tax bases of assets and
liabilities. Such temporary differences primarily result from state
franchise taxes, allowance for doubtful accounts, and differences
between the book and tax bases of property and equipment. If necessary,
valuation allowances are established to reduce deferred tax assets to
the amount expected to be realized.
Equity Put Rights On Common Stock
---------------------------------
Management of Stellex Aerospace owns 19.9% of the outstanding stock of
KII Holding. The amount reported in the December 31, 1997 balance sheet
of KII Holding as equity put rights on common stock reflects the
redemption value of such shares based on certain redemption and put
rights associated with the stock. Changes in the value of the equity
put rights on common stock from the original amounts paid by the
minority shareholders are recorded as an adjustment to compensation
expense in the period.
Revenue Recognition
-------------------
Sales and cost of the products sold are recorded at the time of
shipment.
Impact Of Recently Issued Accounting Standards
----------------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." The standard
establishes guidelines for the reporting and display of comprehensive
income and its components in financial statements. Disclosure of
comprehensive income and its components will be required beginning with
the Company's fiscal year ending 1998. For the six months ended
December 31, 1997 and June 30, 1997, and the year ended December 31,
1996, the Company had no Comprehensive Income components as defined in
SFAS No. 130.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." The standard
requires that companies disclose "operating segments" based on the way
management disaggregates the Company for making internal operating
decisions. The new rules will be effective for the Company's 1998
fiscal year-end. Management believes that the adoption of this standard
will not have any material impact on the Company's reporting of its
segments.
12
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
About Pensions and Other Post-retirement Benefits," which standardizes
the disclosure requirement for pensions and other post-retirement
benefits. The implementation of SFAS No. 132 is not expected to have an
impact on the Company's financial statements. The standard will be
effective for the Company for the year ended December 31, 1998.
3. INVENTORIES:
Inventories as of December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Raw materials $1,212,500 $1,151,500
Work-in-process 6,250,300 4,634,900
Finished goods 5,354,300 5,761,300
----------- -----------
Total $12,817,100 $11,547,700
=========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, including computers and software held
under capital leases, as of December 31, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Land $1,000,000 $1,230,200
Building and improvements 2,100,000 3,451,900
Leasehold improvements 94,900 209,700
Machinery and equipment 10,894,500 20,556,200
Office furniture and fixtures 56,400 574,300
Office equipment and computers 322,900 1,344,000
Autos and trucks 46,500 130,500
Projects in progress 308,800 317,800
Office computers and software held under
capital leases 447,500 -
---------- ----------
15,271,500 27,814,600
Less, Accumulated depreciation, including
$15,700 of accumulated depreciation on
leased assets as of December 31, 1997 (812,600) (16,649,200)
---------- ----------
Total $14,458,900 $11,165,400
=========== ===========
</TABLE>
13
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ACCRUED LIABILITIES:
Accrued liabilities as of December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Bonuses payable $744,600 $510,400
Accrued workers' holiday and vacation
liability 489,300 430,800
Interest payable 430,500 2,900
Other 484,100 317,300
---------- ----------
$2,148,500 $1,261,400
========== ==========
</TABLE>
6. BANK LINE OF CREDIT:
The Company had a $6,550,000 revolving line of credit with a California
commercial bank. The bank had a first interest on substantially all
assets of the Company, except land and buildings. The line of credit
was scheduled for renewal on August 1, 1997. The line bore interest at
either .25% over the bank's prime rate or 1.5% over the London
Interbank Offered Rate ("LIBOR") or the Offshore Interbank Offered Rate
("IBOR"). At December 31, 1996, the effective interest rate was 7.165%.
The credit agreement contained restrictive covenants on additional
borrowings, capital expenditures, acquisitions and dividend payments
and required that the Company meet certain specified financial ratios.
As of December 31, 1996, the Company was in compliance with all of the
covenants and financial ratios under its credit agreement. Amount
outstanding under the facility at December 31, 1996 was $4,300,000. The
carrying amount approximates fair value because of the short maturity
of this instrument. The outstanding amount under the facility of
$4,600,000 was paid on July 1, 1997 in connection with the Kleinert
Acquisition. This credit facility was not renewed since all credit
facilities are now maintained by Stellex Industries.
Stellex Industries has a credit facility which provides for a $25
million revolving line of credit and a $25 million term line of credit.
Borrowings are collateralized by all of the assets of Stellex
Industries and are jointly and severally guaranteed by each of Stellex
Industries' subsidiaries, including KII Holding. The credit facility
requires Stellex Industries to maintain a minimum fixed charges
coverage ratio and interest coverage ratio, as defined, minimum net
worth of $5,500,000 and a maximum leverage ratio. The credit facility
also restricts Stellex Industries' ability to incur additional
indebtedness, pay dividends or other significant activities without
approval of the lender. Stellex Industries was in compliance with the
covenants at December 31, 1997. At December 31, 1997, Stellex
Industries had $7,500,000 outstanding under the revolving line of
credit in the form of base rate loans.
14
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT:
The balance of notes payable as of December 31, 1997 and 1996 consists
of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(SUCCESSOR) (PREDECESSOR)
--------- ----------
<S> <C> <C>
Note payable to Stellex Industries with interest at 9.5%, payable
quarterly. Interest expense incurred was $342,700 for the period
October 31, 1997 through December 31, 1997. The principal balance on
this note is due on demand. Although the note payable to Stellex
Industries is due on demand, Stellex Industries has advised the Company
that it has no present intentions of calling the note during 1998. $20,943,000 -
Note payable, first deed of trust on PPP land and building in Valencia,
California, as collateral, with a net book value of $2,967,700, with
interest at 7.875%; principal and interest payments of $22,264 are due
monthly with the unpaid balance of $2,362,700 due December 1, 2001. 2,624,000 $2,681,900
Uncollateralized note payable issued in connection with acquisition of
BMI payable to Credit Suisse, which provides for interest at the
borrower's preference of either the bank's base prime rate, payable
monthly or 1.5% over LIBOR, payable the earlier of the maturity of the
borrowings for LIBOR or quarterly; the Company exercised the later
option. The principal balance of $3,000,000 was paid on July 1, 1997,
pursuant to the terms of the acquisition. - 3,000,000
Note payable to the Parent of the Predecessor (Kleinert Industrie
Holding, A.G.) in connection with the Kleinert Acquisition that bears
interest at 8%, payable annually, the principal of which is due on July
1, 1999. Interest expense incurred was $70,600 for the six months ended
December 31, 1997. The note is guaranteed by Stellex Aerospace
and each of its subsidiaries. 1,750,000 -
Capital lease obligations due in aggregate monthly installments of
$9,800 until August 4, 2000 and $8,300 thereafter, through November 10,
2001, including interest ranging from 10% to 12% per annum. 447,500 -
---------- ----------
Total 25,764,500 5,681,900
Less, Current portion 139,700 1,558,000
---------- ----------
Long-term portion $25,624,800 $4,123,900
=========== ==========
</TABLE>
15
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On October 31, 1997, Stellex Industries paid on behalf of the Company
certain debt consisting of: $16,000,000 term note payable issued in
connection with the acquisition of Kleinert and which was payable to
Societe Generale and was to mature on June 30, 2004; a $2,500,000
promissory note also issued in connection with the acquisition and was
payable to Trinity Investment Corp., a related party, and was to mature
on June 30, 2005; and $1,230,000 of revolving credit borrowings under a
credit facility. As a result, the Company recorded a loss comprised of
unamortized debt issuance cost of $747,200 which has been reflected,
net of income tax benefit, in the Company's consolidated statements of
income as an extraordinary item.
In return for paying off debt, the Company issued a note payable to
Stellex Industries totaling $20,943,000 which included a $1,000,000
non-cash allocation of new deferred financing costs incurred by Stellex
Industries and capitalized by the Company. Such costs, which were
allocated to the Company, were incurred by Stellex Industries in
connection with the registration and exchange of $100,000,000 aggregate
principal amount of 9-1/2% Senior Subordinated Notes (the "Notes") due
November 1, 2007. The Notes are guaranteed by the Company and are
collateralized by the assets of the Company and other subsidiaries of
Stellex Industries. The Notes contain certain restrictive covenants
and, in the event that Stellex Industries was not in compliance with
the terms of the Notes, the Notes would become due and payable
immediately by Stellex Industries and its subsidiaries, including the
Company. As a result, the note payable to Stellex Industries would also
become due and payable immediately. Although the note payable to
Stellex Industries is due on demand, Stellex Industries has advised the
Company that it has no present intentions of calling the note during
1998.
The fair value of the Company's long-term notes payable is based on
either quoted market prices or current rates for similar issues for
debt of the same remaining maturities. At December 31, 1997 and 1996,
the fair value of the Company's long-term notes payable approximated
carrying value based on their effective interest rates compared to
current market rates.
Maturities of long-term debt and capital leases as of December 31, 1997
are as follows:
<TABLE>
<CAPTION>
Long-Term Debt Capital Leases
-------------- --------------
<S> <C> <C>
1998 $62,800 $121,100
1999 1,817,900 121,100
2000 73,400 119,900
2001 2,419,900 110,900
2002 - 100,200
Thereafter 20,943,000 _
---------- ---------
Total 25,317,000 573,200
Less, Amount representing interest - (125,700)
----------- --------
$25,317,000 $447,500
=========== ========
</TABLE>
16
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE FOR THE SIX FOR THE FOR THE
SIX MONTHS ENDED MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ------------- ----------------- -----------------
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
CURRENT:
Federal $448,500 $492,300 $514,800 $281,400
State 144,300 135,900 176,000 77,600
-------- -------- -------- --------
592,800 628,200 690,800 359,000
-------- -------- -------- --------
Deferred:
Federal (477,900) 85,100 202,700 121,300
State (116,000) 40,100 51,400 44,500
-------- -------- -------- --------
(593,900) 125,200 254,100 165,800
-------- -------- -------- --------
Total ($1,100) $753,400 $944,900 $524,800
======== ======== ======== ========
</TABLE>
The difference between the actual tax provision and the amount obtained
by applying the statutory federal income tax rate of 34% to the income
before income taxes is primarily attributable to the effect of state
income taxes (state tax rate of 9.3%), non-deductible expenses relating
to goodwill and officers' life insurance, and change in value of the put
rights on common stock.
At December 31, 1997, the Company's alternative minimum tax credits for
federal and state purposes are estimated to be $87,600 and $90,300,
respectively, which are available to reduce income taxes on an
indefinite carryforward basis.
17
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net deferred tax assets and liabilities as of December 31, 1997 and
1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(SUCCESSOR) (PREDECESSOR)
<S> <C> <C>
Current deferred income taxes:
Deferred tax assets:
Vacation accrual $211,900 186,500
Bonus accrual 321,900 221,000
Other 41,000 111,800
-------- --------
Total current deferred tax assets 574,800 519,300
Deferred tax liabilities:
Federal tax benefit of net deferred state taxes (43,000) (33,300)
-------- --------
Net current deferred tax assets $531,800 $486,000
======== ========
Non-current deferred income taxes:
Deferred tax assets:
Unfunded pension benefits $129,200 $133,600
Deferred compensation liability 608,700 567,600
Federal tax benefit of net deferred state taxes 138,600 54,700
AMT credit carryforward 177,900 398,900
----------- ----------
Total non-current deferred tax assets 1,054,400 1,154,800
Deferred tax liabilities:
Property, plant and equipment (2,747,800) (2,006,100)
----------- ----------
Net non-current deferred tax liabilities ($1,693,400) ($851,300)
=========== ==========
</TABLE>
Deferred tax assets are expected to be realized against future taxable
income and have not been reduced by valuation allowance.
9. EMPLOYEE BENEFIT PLANS:
Defined Contribution Plan
The Company sponsors a defined contribution pension plan which covers
substantially all employees. Company contributions are determined at
1.5% of the employees' gross compensation, plus an additional matching
of 50% of the employees' voluntary contribution. The maximum Company
contribution is limited to 3% of the employees' gross compensation.
Total Company contributions were $133,800, $133,400, $223,300 and
$200,500 for the six months ended December 31, 1997, the six months
ended June 30, 1997 and the years ended December 31, 1996 and 1995,
respectively.
The Company also sponsors a defined benefit plan which covers four
employees of a subsidiary of the Company. The balance of unfunded
pension benefits represents the net present value of
18
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
estimated future payments based on actuarially determined life
expectancies and an 7.75% discount rate. No assets have currently been
provided for the plan.
Deferred Compensation Agreements
The Company has individual deferred compensation agreements with eight
management employees. These agreements provide for monthly payments to
be made to the individuals commencing upon their retirement and
continuing for an agreed-upon term as set forth in the agreements,
generally fifteen years. The amount of the payments is specified by
each contract and is generally equal to forty percent of the employee's
average compensation for the last five years of his employment as
reduced by the amount of any company - provided benefits to which the
employee is entitled from any other Company pension benefit plan. The
agreements also contain other provisions entitling the employees to
pre-retirement death benefits, disability benefits and survivor
benefits.
The Company has in place individual life insurance policies on each of
the covered employees and intends to use the insurance benefits
(accumulated cash surrender value of the policies and the
post-retirement death benefits) to fund the benefit payments required
under the agreements. The insurance policies are designed such that the
insurance benefits under the policies are expected, over time, to be
sufficient to pay all of the required benefits and reimburse the
Company for its costs of providing the insurance.
At December 31, 1997 and 1996, the deferred compensation liability was
$1,405,700 and $1,291,900, respectively. The estimated liability was
calculated based on actuarially determined estimates of compensation,
mortality, retirement dates and other relevant factors pertaining to
the participants and a discount rate of 7.75% per annum. The related
expense for the six months ended December 31, 1997 and June 30, 1997,
and for the years ended December 31, 1996 and 1995 was $56,900,
$56,900, $209,500 and $71,800, respectively. The expense for 1996
included the non-recurring step-up of the liability for the
implementation of two additional agreements effective January 1, 1996.
10. LEASE COMMITMENTS:
The Company leases office facilities and equipment under operating
lease agreements which expire at various dates through 2004. The
facility leases have renewal options. Certain leases provide for annual
increases, at various dates, based upon percentage changes in the
Consumer Price Index.
19
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Minimum annual rentals on facility and equipment leases are as follows:
<TABLE>
<CAPTION>
Minimum Annual
Rentals
-------
<S> <C>
1998 $728,700
1999 591,200
2000 401,800
2001 12,600
2002 12,600
Thereafter 13,600
----------
Total $1,760,500
==========
</TABLE>
Rent expense for the six months ended December 31, 1997 and June 30,
1997, and for the years ended December 31, 1996 and 1995 was $352,600,
$349,700, $723,300 and $740,200, respectively, which includes $152,000,
$150,000, $290,000 and $309,500, respectively, for facility rent paid
to the former owner of BMI.
11. CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. The Company's customer base principally includes the
commercial aviation, aerospace and defense industries. The Company is
directly affected by national and international economic conditions in
the aerospace and defense industries. Management believes that such
factors are mitigated by the longevity of the Company's relationships
with its customers. For the six months ended December 31, 1997, the
Company derived approximately 53% of its sales from ten (10) customers
consisting of nineteen (19) separate operating divisions. In addition,
as of December 31, 1997, two customers accounted for approximately 28%
of the Company's trade accounts receivable balances.
It is the policy of the Company to deposit its cash in federally
insured financial institutions. From time to time, deposits exceed
Federal Deposit Insurance Corporation limits.
12. RELATED-PARTY TRANSACTIONS:
Mentmore Holdings Corporation, an affiliate, provides management
services to KII Holding and Subsidiaries pursuant to the Management
Advisory Services agreement dated July 1, 1997. Mentmore provides the
Company with general management, advisory, consulting, and other
services with respect to the Company's business, including strategic
planning, financial planning, accounting and financial reporting,
consulting and general business development. Total fees incurred by the
successor for services provided by Mentmore were $600,100 for the six
months ended December 31, 1997, including $450,100 for a non-recurring
charge for investment banking and financial advisory expenses.
20
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. EQUITY PUT RIGHTS ON COMMON STOCK:
Pursuant to an agreement entered into in connection with the Kleinert
Acquisition, certain members of Stellex Aerospace's management (the
"Buyer(s)") purchased 19.9% of the common and preferred shares of KII
Holding for $778,090.
KII Holding has the right to redeem (the "Redemption Right") all, but
not less than all, of any common stock held by the Buyers upon the
occurrence of certain events, including the death, disability or
termination of the Buyer, and for any reason after July 1, 2002. In
addition, each Buyer has the right to cause KII Holding to purchase
all, but not less than all, of any common stock held by him under
similar conditions (the "Put Right"). The applicable purchase price to
be received by a Buyer upon the exercise of a Redemption Right or Put
Right is based upon a formula set forth in the Stellex Investor
Agreement. In addition, KII Holding granted the Buyers the right to
receive the net appreciation associated with an additional 10% of
equity ownership in KII Holding. The value of these SARs is computed
under the same formula used for the Redemption and Put Rights on the
minority interests, and may be paid under similar conditions. The
equity put rights on common stock are reported in the financial
statements at the amount paid by management as adjusted for changes in
value based on the underlying formulas for the equity put rights on
common stock and SARs, with a corresponding charge to compensation
expense. This resulted in an expense of $300,000 for the six months
ended December 31, 1997.
14. SHAREHOLDER'S EQUITY:
The Company issued 84 shares of KII Holding's Series A Preferred Stock,
having a stated value of $10,000, for total gross proceeds of $840,000.
Each stockholder of preferred stock is entitled to one vote for each
share of preferred stock outstanding. When declared by the Board of
Directors, the preferred stockholders are entitled to receive
cumulative dividends at a rate of 10% per annum. At December 31, 1997,
dividends of $42,300 had been declared but not paid. The preferred
stock is redeemable, in cash, in whole or in part, at any time (or from
time to time) at the option of the Company, by resolution of the Board
of Directors at $10,000 per share plus any accrued and unpaid
dividends.
21
<PAGE>
<PAGE>
KII HOLDING CORP. AND SUBSIDIARIES
(FORMERLY KLEINERT INDUSTRIES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SUPPLEMENTAL CASH FLOWS INFORMATION:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX FOR THE FOR THE
MONTHS ENDED MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, JUNE 30, 1997 DECEMBER 31, DECEMBER 31,
1997 ------------- 1996 1995
---- ---- ----
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
Cash paid during the year for:
Interest $658,600 $377,800 $863,900 $1,032,800
Taxes 369,000 633,000 694,200 339,000
Non-cash financing and investing activities:
Note issued to Seller in
connection with the
Kleinert Acquisition $1,750,000 - - -
Capital lease obligations
Incurred 447,500 - - -
Dividends declared not
paid on Preferred "A" Stock 42,300 - - -
Issuance of note to Parent
in return for repayment of
certain external debt,
including a non-cash
allocation of deferred
financing cost totaling
$1,000,000 20,943,000 - - -
Details of Kleinert Acquisition:
Fair value of assets $35,541,200 - - -
Liabilities (1) (19,388,400) - - -
-----------
Cash paid, including
acquisition-related costs $16,152,800 - - -
==========
</TABLE>
(1) Includes note to Seller of $1,750,000 and assumption of
$2,653,500 mortgage note.
22
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, as of February 3, 1999.
STELLEX INDUSTRIES, INC..
By: /s/ William L. Remley
----------------------------
William L. Remley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard L. Kramer Chairman of the Board of Directors and February 3, 1999
-------------------------------- Director of Stellex Industries, Inc.
Richard L. Kramer
/s/ William L. Remley Vice Chairman, President, Chief Executive February 3, 1999
-------------------------------- Officer, Treasurer and Director of Stellex
William L. Remley Industries, Inc.
/s/ P. Roger Byer Chief Financial Officer of Stellex February 3, 1999
-------------------------------- Industries, Inc.
P. Roger Byer
</TABLE>
23
