<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 3, 1998
TOKHEIM CORPORATION
-------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Indiana 1-6018 35-0712500
------- ------ ----------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification Number)
10501 Corporate Drive, Fort Wayne, IN 46845
- ----------------------------------------------------- -----
(Address of principal executive office) (Zip Code)
(219)-470-4600
-----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Pursuant to the Master Agreement for Purchase and Sale of Shares, Assets and
Liabilities (the "Purchase Agreement"), dated as of June 19, 1998, between
Tokheim Corporation ("Tokheim") and Schlumberger, Limited ("Schlumberger")
Tokheim will acquire (the "Acquisition") the fuel dispenser, systems and service
business (the "RPS Division") of Schlumberger, net of cash and debt, for a price
equal to $335.0 million, subject to certain adjustments, including an adjustment
for the difference in Net Equity (as defined in the Purchase Agreement) between
the December 31, 1997 balance sheet (as adjusted) and the balance sheet dated as
of the closing date of the Acquisition (as adjusted, the "Closing Balance
Sheet"). Pursuant to a letter agreement, Schlumberger will take $4.5 million of
accruals related to restructuring arrangements or other aspects of the
transactions contemplated by the Purchase Agreement on the Closing Balance
Sheet, effectively decreasing the purchase price to be paid at closing by
Tokheim by $4.5 million.
The purchase price for the Acquisition is payable in cash, but, Tokheim may,
at its option, pay up to $5.0 million of the purchase price with a warrant to
acquire Tokheim common stock. An additional $10.0 million of the purchase price
may, at Tokheim's option, be paid with Junior Subordinated Seller PIK Notes,
which will bear interest at a rate of 12% and will be subordinate to all current
and future bank borrowings, and to certain public and privately-placed debt.
Pursuant to a letter agreement, Schlumberger has agreed to retain its
manufacturing facility in Abbeville, France and all liabilities associated with
it, including any costs related to closing the facility. A letter agreement also
provides that, on the closing date for the Acquisition, Schlumberger and Tokheim
will enter into a technical services agreement, pursuant to which Schlumberger
will pay Tokheim a minimum fee of $850,000 a year (regardless of use) for a
period of five years.
The Purchase Agreement contains other provisions customary for transactions
of this type, including representations and warranties with respect to the
conditions and operations of the RPS Division, covenants with respect to the
conduct of the RPS Division's operations prior to the consummation of the
Acquisition and various closing conditions, including the receipt or waiver of
all other necessary consents and approvals and the continued accuracy of
representations and warranties contained in the Purchase Agreement.
The closing of the Acquisition is anticipated to occur on August 31, 1998.
Unless otherwise indicated herein, the "Company" refers to Tokheim and its
subsidiaries following the Acquisition, including the RPS Division.
Simultaneously with the consummation of the Acquisition, Tokheim will enter
into a new credit agreement with certain banks that will replace its existing
credit agreement. Tokheim also plans to offer (the "Offering") Senior
Subordinated Notes pursuant to Rule 144A under the Securities Act of 1933, as
amended. Tokheim intends to use the proceeds of the Offering, together with
borrowings under the new credit agreement, to finance the Acquisition, to
refinance substantially all of its existing indebtedness and to pay related fees
and expenses. As part of its refinancing effort, Tokehim has commenced a tender
offer and consent solicitation to repurchase its 11 1/2% Senior Subordinated
Notes, of which $55.0 million in aggregate principal amount are outstanding. The
foregoing transactions are, together, the "Transactions."
The new credit agreement provides for aggregate maximum borrowings by the
Company of up to $233.2 million principal amount at variable interest rates. On
a pro forma basis at May 31, 1998, the Company expects to borrow approximately
$183.5 million under the new credit agreement for the purposes set forth above
and to pay approximately $18.0 million of fees associated with the Acquisition
and the financing of the Acquisition.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS FORM 8-K, INCLUDING, WITHOUT LIMITATION,
STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND WORDS
OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT
MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR
INDUSTRY RESULTS, TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: INCREASES IN INTEREST RATES OR THE
COMPANY'S COST OF BORROWING OR A DEFAULT UNDER ANY MATERIAL DEBT AGREEMENT;
INABILITY OF THE COMPANY TO SUCCESSFULLY MAKE AND INTEGRATE ACQUISITIONS;
INABILITY TO ACHIEVE ANTICIPATED COST SAVINGS OR REVENUE GROWTH; DEPENDENCE ON
THE RETAIL PETROLEUM INDUSTRY; INABILITY TO FORECAST OR ACHIEVE FUTURE SALES
LEVELS OR OTHER OPERATING RESULTS; FLUCTUATIONS IN EXCHANGE RATES AMONG VARIOUS
FOREIGN CURRENCIES, PRINCIPALLY AMONG DOLLARS, FRENCH FRANC ("FFR") AND THE
BRITISH POUND; COSTS IN ADJUSTING TO A NEW COMMON EUROPEAN CURRENCY;
COMPETITION; INABILITY TO PROTECT PROPRIETARY TECHNOLOGY OR TO INTEGRATE NEW
TECHNOLOGIES QUICKLY INTO NEW PRODUCTS; CHANGES IN BUSINESS STRATEGY OR
DEVELOPMENT PLANS; BUSINESS DISRUPTIONS; CHANGES IN GENERAL ECONOMIC CONDITIONS
OR WITH ECONOMIC CONDITIONS OF PARTICULAR MARKETS IN WHICH THE COMPANY COMPETES;
UNAVAILABILITY OF FUNDS FOR CAPITAL EXPENDITURES OR RESEARCH AND DEVELOPMENT;
CHANGES IN CUSTOMER SPENDING LEVELS AND DEMAND FOR NEW PRODUCTS; CHANGES IN
GOVERNMENTAL, ENVIRONMENTAL OR OTHER REGULATIONS, ESPECIALLY AS THEY MAY AFFECT
THE CAPITAL EXPENDITURES OF THE COMPANY'S CUSTOMERS; FAILURE OF THE COMPANY TO
COMPLY WITH GOVERNMENTAL REGULATIONS; LOSS OF KEY MEMBERS OF MANAGEMENT; ADVERSE
PUBLICITY; CONTINGENT LIABILITIES AND OTHER CLAIMS ASSERTED AGAINST THE COMPANY;
LOSS OF SIGNIFICANT CUSTOMERS OR SUPPLIERS; "YEAR 2000" PROBLEMS WITH COMPUTER
SYSTEMS OR SOFTWARE OF THE COMPANY OR ITS CUSTOMERS, SUPPLIERS OR RESELLERS; AND
OTHER FACTORS. GIVEN THESE UNCERTAINTIES, INDIVIDUALS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY
OBLIGATION TO UPDATE ANY SUCH FACTORS OR TO ANNOUNCE PUBLICLY THE RESULT OF ANY
REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT
FUTURE EVENTS OR DEVELOPMENTS.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Business Acquired.
- RPS Division audited combined statements of income for the
years ended December 31, 1997, 1996 and 1995.
- RPS Division audited combined statements of cash flows for the
years ended December 31, 1997, 1996 and 1995.
- RPS Division audited combined balance sheets as of December
31, 1997 and 1996.
- RPS Division audited combined statements of equity for the
years ended December 31, 1997, 1996 and 1995.
- RPS Division notes to the audited combined financial
statements for the years ended December 31, 1997, 1996 and
1995.
(b) Pro Forma Financial Information
- Unaudited pro forma Company combined consolidated condensed
statement of earnings for the year ended November 30, 1997.
- Unaudited pro forma Company combined consolidated condensed
balance sheet as of November 30, 1997.
- Notes to unaudited pro forma Company consolidated condensed
financial statements.
- Unaudited pro forma Tokheim Corporation consolidated condensed
statement of earnings for the year ended November 30, 1997.
- Unaudited pro forma Tokheim Corporation consolidated condensed
balance sheet as of November 30, 1997.
- Notes to unaudited pro forma Tokheim Corporation consolidated
condensed financial statements.
2
<PAGE>
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 thereto duly authorized.
TOKHEIM CORPORATION
Date: August 3, 1998 By: /s/ Douglas K. Pinner
--------------------------
Douglas K. Pinner
Chairman of the Board,
President and Chief Executive Officer
and Director
Date: August 3, 1998 By: /s/ John A. Negovetich
--------------------------
John A. Negovetich
Executive Vice President,
Finance and Administration
<PAGE>
EXHIBITS
(a) Financial Statements of the Business Acquired.
- RPS Division audited combined statements of income for the
years ended December 31, 1997, 1996 and 1995.
- RPS Division audited combined statements of cash flows for the
years ended December 31, 1997, 1996 and 1995.
- RPS Division audited combined balance sheets as of December
31, 1997 and 1996.
- RPS Division audited combined statements of equity for the
years ended December 31, 1997, 1996 and 1995.
- RPS Division notes to the audited combined financial
statements for the years ended December 31, 1997, 1996 and
1995.
(b) Pro Forma Financial Information
- Unaudited pro forma Company combined consolidated condensed
statement of earnings for the year ended November 30, 1997.
- Unaudited pro forma Company combined consolidated condensed
balance sheet as of November 30, 1997.
- Notes to unaudited pro forma Company consolidated condensed
financial statements.
- Unaudited pro forma Tokheim Corporation consolidated condensed
statement of earnings for the year ended November 30, 1997.
- Unaudited pro forma Tokheim Corporation consolidated condensed
balance sheet as of November 30, 1997.
- Notes to unaudited pro forma Tokheim Corporation consolidated
condensed financial statements.
3
<PAGE>
Following are the combined financial statements of the RPS Division.
Subsequent to the date on which the Purchase Agreement was signed and the
combined financial statements were prepared, Tokheim and Schlumberger agreed
that Schlumberger would retain its manufacturing facility in Abbeville, France.
This change is not reflected in these combined financial statements, but is
reflected in the pro forma financial statements included elsewhere in this Form
8-K. See "Unaudited Pro Forma Company Combined Consolidated Condensed Financial
Statements."
4
<PAGE>
EXHIBIT(a)
RETAIL PETROLEUM SYSTEMS
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net revenue...................................... $344,248 $333,915 $303,668
-------- -------- --------
Expenses
Cost of goods sold and services................ 286,580 273,492 249,101
Research & engineering......................... 16,616 15,949 14,122
Marketing...................................... 25,520 24,111 21,364
General and administrative..................... 13,904 15,720 16,469
Goodwill amortization.......................... 3,902 3,255 2,594
Administrative fees allocated from parent...... 9,374 8,607 7,464
Restructuring charge........................... -- 9,978 --
-------- -------- --------
355,896 351,112 311,114
-------- -------- --------
Loss from operations............................. (11,648) (17,197) (7,446)
-------- -------- --------
Interest expense................................. (1,418) (1,652) (1,257)
Other expense.................................... (403) (1,557) (1,305)
-------- -------- --------
Loss before taxes and minority interest.......... (13,469) (20,406) (10,008)
Income tax benefit............................... 6,779 4,058 2,287
Minority interest................................ (30) (18) --
-------- -------- --------
Net loss......................................... $ (6,720) $(16,366) $ (7,721)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
EXHIBIT (a)
RETAIL PETROLEUM SYSTEMS
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(6,720) $(16,366) $(7,721)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization.................. 11,777 10,780 10,084
Other.......................................... 8,276 (1,920) (2,966)
Changes in operating assets and liabilities, net
of effect of acquired businesses:
Accounts receivable............................ (5,872) (22,210) (13,780)
Inventories.................................... 3,128 (9,064) (1,796)
Accounts payable and accrued liabilities....... (11,615) 38,668 10,012
Prepaid and refundable income taxes............ (3,558) 301 585
Other assets and liabilities, net.............. 17,741 10,243 (1,001)
------- -------- -------
Net cash provided by (used in) operating
activities.................................. 13,157 10,432 (6,583)
------- -------- -------
Cash flows from investing activities:
Capital expenditures............................. (9,486) (14,736) (11,389)
Acquisition of businesses........................ (1,933) (20,224) (314)
Other, net....................................... 1,151 (1,440) (294)
------- -------- -------
Net cash used in investing activities........ (10,268) (36,400) (11,997)
------- -------- -------
Cash flows from financing activities:
Advances from related parties.................... 2,083 25,402 18,442
Long-term debt................................... (740) 466 (248)
Capital contributions............................ 3,628 5,013 4,936
Dividends paid................................... (5,984) (5,702) (1,500)
------- -------- -------
Net cash provided by (used in) financing
activities.................................. (1,013) 25,179 21,630
------- -------- -------
Net change in cash and cash equivalents...... 1,876 (789) 3,050
Cash and cash equivalents, beginning of year. 5,445 6,234 3,184
------- -------- -------
Cash and cash equivalents, end of year....... $ 7,321 $ 5,445 $ 6,234
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
EXHIBIT (a)
RETAIL PETROLEUM SYSTEMS
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,321 $ 5,445
Short-term investments.................................... 1,001 3,431
Accounts receivable, net of allowance for doubtful
accounts of $3,313 and $3,397............................ 98,920 102,716
Receivables from related parties.......................... 3,620 2,076
Inventories............................................... 58,859 67,875
Deferred tax.............................................. 2,238 1,683
Prepaid and refundable income taxes....................... 4,631 1,420
Other current assets...................................... 4,002 2,964
-------- --------
Total current assets.................................... 180,592 187,610
-------- --------
Long-term investments and receivables....................... 988 2,383
Fixed assets, net of accumulated depreciation of $42,782 and
$45,651.................................................... 32,183 32,599
Goodwill.................................................... 51,757 57,391
Deferred tax................................................ 3,576 2,891
Other assets................................................ 338 19,796
-------- --------
Total assets............................................ $269,434 $302,670
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Bank overdrafts and short-term loans...................... $ 12,614 $ 11,433
Accounts payable and accrued liabilities.................. 87,608 110,516
Payables to related parties............................... 6,781 5,667
Dividends payable......................................... 137 --
Current portion of long-term debt......................... 46 203
-------- --------
Total current liabilities............................... 107,186 127,819
-------- --------
Long-term debt.............................................. -- 583
-------- --------
Other liabilities
Postretirement benefits................................... 4,188 3,827
Other long-term liabilities............................... 3,657 6,257
-------- --------
Total liabilities....................................... 115,031 138,486
-------- --------
Commitments and contingencies (Note 15)..................... -- --
Minority interest in subsidiaries........................... 133 118
Equity and retained earnings (deficit)
Equity.................................................... 160,578 157,670
Retained earnings (deficit)............................... (6,308) 6,396
-------- --------
154,270 164,066
-------- --------
Total liabilities and equity............................ $269,434 $302,670
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
EXHIBIT (a)
RETAIL PETROLEUM SYSTEMS
COMBINED STATEMENTS OF EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
EQUITY (DEFICIT) EQUITY
-------- --------- --------
<S> <C> <C> <C>
Balance, January 1, 1995......................... $107,245 $ 37,685 $144,930
Net loss....................................... (7,721) (7,721)
Dividends paid................................. (1,500) (1,500)
Capital contribution........................... 4,936 4,936
Related party advances......................... 18,442 18,442
Other.......................................... (315) (315)
Currency translation adjustment................ 2,198 2,198
-------- -------- --------
132,506 28,464 160,970
-------- -------- --------
Balance, December 31, 1995....................... 132,506 28,464 160,970
Net loss....................................... (16,366) (16,366)
Dividends paid................................. (5,702) (5,702)
Capital contribution........................... 5,013 5,013
Related party advances......................... 25,402 25,402
Other.......................................... (3,462) (3,462)
Currency translation adjustment................ (1,789) (1,789)
-------- -------- --------
157,670 6,396 164,066
-------- -------- --------
Balance, December 31, 1996....................... 157,670 6,396 164,066
Net loss....................................... (6,720) (6,720)
Dividends paid................................. (5,984) (26,922)
Capital contribution........................... 3,628 3,628
Related party advances......................... 2,083 23,021
Other.......................................... (1,237) (1,237)
Currency translation adjustment................ (1,566) (1,566)
-------- -------- --------
Balance, December 31, 1997....................... $160,578 $ (6,308) $154,270
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
EXHIBIT (a)
RETAIL PETROLEUM SYSTEMS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
1. ORGANIZATION
Retail Petroleum Systems ("RPS" or the "Company") provides the worldwide
retail petroleum industry with integrated solutions for secured fuel dispenser
transactions. These solutions are based on a range of products and services,
including gasoline dispensers, payment terminals, service station management
systems, maintenance and installation of equipment, turn-key construction, and
renovation of service stations. RPS has 2,350 employees and its operations are
principally focused in Europe and the United States. RPS's operations involve
a single industry segment for financial reporting purposes.
RPS is a wholly owned business of Schlumberger Limited (SL). The
accompanying financial statements have been prepared as if the Company had
operated as an independent stand-alone entity for the periods presented. These
results of operations, however, may not be indicative of the future results of
operations for RPS operating as a stand-alone entity.
On June 19, 1998, SL signed a contract with Tokheim Corporation for the sale
of the RPS operations. The accompanying financial statements do not include
any adjustments which may result from this change in ownership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Combined Financial Statements of RPS have been prepared in accordance
with accounting principles generally accepted in the United States.
Principles of Consolidation
The Combined Financial Statements include the accounts of all entities
controlled by RPS. All significant intercompany accounts and transactions are
eliminated. The equity method of accounting is used for investments in
affiliates in which RPS owns between 20% and 50%.
Revenue Recognition
Generally, revenue is recognized upon delivery of equipment to the customer,
or in the case of installation, when installation is complete. Maintenance
contracts revenue is recognized on a pro-rata basis over the life of the
contract. On-call revenue is recognized in the month in which the service is
provided. Turn-key station revenue is recognized using the "percentage of
completion" method.
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,
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. While actual results could differ from these estimates,
management believes that the estimates are reasonable.
Translation of Non-U.S. Currencies
All assets and liabilities recorded in functional currencies other than US
dollars are translated at current exchange rates. The resulting adjustments
are charged or credited directly to the equity section of the balance sheet.
Revenue and expenses are translated at the weighted-average exchange rates for
the period. All realized
9
<PAGE>
and unrealized transaction gains and losses are included in income in the
period in which they occur. Transaction losses included in results of
operations were $3 million, $2 million, and $.1 million in 1997, 1996 and
1995, respectively.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less at date of purchase.
Investments
Short-term investments held to maturity are stated at cost plus accrued
interest, which approximates market, and are comprised primarily of money
market funds.
For purposes of the Combined Statement of Cash Flows, the Company does not
consider short-term investments to be cash equivalents as they generally have
original maturities in excess of three months.
Financial Instruments
The fair value of cash, accounts receivable, trade accounts payable, short-
term borrowings, and accrued expenses are not materially different than their
carrying amounts as reported at December 31, 1997 and 1996.
Inventories
Inventories are stated at lower of average cost or market. Spares inventory
includes new and repaired parts primarily for maintenance of dispensers.
Spares are principally valued at average cost.
Fixed Assets and Depreciation
Fixed assets are stated at cost less accumulated depreciation, which is
provided for by charges to income over the estimated useful lives of the
assets by the straight-line method. Expenditures for renewals, replacements,
and betterments are generally capitalized. Maintenance and repairs are charged
to operating expense as incurred. Upon sale or other disposition, the
applicable amounts of asset cost and accumulated depreciation are removed from
the accounts and the net amount, less proceeds from disposal, is charged or
credited to income.
Estimated useful lives of buildings and improvements range from ten to 30
years and machinery and equipment from three to ten years.
Goodwill
Goodwill represents cost in excess of net assets of purchased companies and
is amortized on a straight-line basis over periods ranging from five to 40
years. Accumulated amortization was $23 million and $19 million at December
31, 1997 and 1996, respectively. The Company evaluates the recoverability of
goodwill at each balance sheet date.
Research and Engineering
All research and engineering expenditures are expensed as incurred,
including costs relating to patents or rights that may result from such
expenditures.
Taxes on Income
Taxes on income are computed in accordance with the tax rules and
regulations of the many taxing authorities where the income is earned. The
income tax rates imposed by these taxing authorities vary
10
<PAGE>
substantially. In most countries, RPS is a division of the SL legal entity
that is the ultimate tax payer in that jurisdiction. Taxable income may differ
from pre-tax income for financial accounting purposes. To the extent that
differences are due to revenue or expense items reported in one period for tax
purposes and in another period for financial accounting purposes, an
appropriate provision for deferred income taxes is made.
Tax credits and other allowances are credited to current income tax expense
on the flow-through method of accounting.
3. INVENTORIES
Inventories at December 31, 1997 and 1996 consist of the following:
<TABLE>
<S> <C> <C>
1997 1996
------- -------
Raw materials............................................. $18,071 $19,689
Work in progress.......................................... 6,038 9,793
Finished goods............................................ 9,321 13,246
Spares.................................................... 25,429 25,147
------- -------
$58,859 $67,875
======= =======
</TABLE>
4. FIXED ASSETS
Fixed assets at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land.................................................... $ 364 $ 392
Buildings and improvements.............................. 21,691 21,830
Machinery and equipment................................. 52,910 56,028
------- -------
74,965 78,250
Less: Accumulated depreciation.......................... (42,782) (45,651)
------- -------
Fixed assets............................................ $32,183 $32,599
======= =======
</TABLE>
Depreciation expense aggregated $7.9 million in 1997 and $7.5 million in
both 1996 and 1995.
5. ACQUISITIONS AND GOODWILL
In July 1996, RPS acquired for $7.0 million, GUEANT Pere & Fils and its
subsidiary ETPM, a gasoline dispenser service company providing maintenance of
service stations and project management of turn-key stations. In August 1996,
RPS acquired for $13.0 million, GERMANN and its Polish subsidiary, a turn-key
gasoline station provider located in Germany. Costs in excess of net assets
acquired were respectively $5.0 million and $12.0 million, respectively, which
are being amortized on a straight-line basis over ten and 20 years,
respectively.
In addition, between December 1995 and August 1996, RPS acquired three small
service companies in Italy, Borghetti, CME, and Nuova Rimic, for an aggregate
amount of $1.8 million. Costs in excess of net assets acquired were $1.0
million and are being amortized on straight-line basis over 10 years.
All acquisitions were accounted for as purchases.
6. DEBT
At December 31, 1996, the Company had $.5 million of long-term debt in
French francs at variable rates up to 7% and $46,000 in German marks at a rate
of 5.75%. All long-term debt was repaid in 1997, except for the $46,000 in
German marks which is due on June 30, 1998. The carrying value of long-term
debt at December 31, 1997 approximates the aggregate fair value.
11
<PAGE>
At December 31, 1997, the Company had available lines of credit of
approximately $13.4 million. The Company, at December 31, 1997, borrowed $12.6
million under these lines of credit at fixed and variable rates up to 8%.
7. TAXES ON INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. loss before taxes........................... $ 1,932 $ 4,698 $ 1,808
Foreign loss before taxes........................ 11,537 15,708 8,200
------- ------- -------
Total loss before taxes.......................... $13,469 $20,406 $10,008
======= ======= =======
</TABLE>
The following table shows the components of current and deferred income tax
benefits by taxing jurisdiction, both domestic and foreign:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current
Federal..................................... $ 134 $ (992) $ 681
State and local............................. 10 (104) 65
Foreign..................................... (5,745) (2,682) (1,561)
------- ------- -------
(5,601) (3,778) (815)
------- ------- -------
Deferred
Federal..................................... (645) (285) (968)
State and local............................. (111) (49) (166)
Foreign..................................... (422) 54 (338)
------- ------- -------
(1,178) (280) (1,472)
Total income tax benefits................. $(6,779) $(4,058) $(2,287)
======= ======= =======
</TABLE>
At December 31, 1997 and 1996, gross deferred tax assets were $6,695 and
$5,202, respectively; gross deferred tax liabilities were $881 and $612,
respectively. The principal components of net deferred tax assets (liabilities)
were:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Employee and retiree benefits............................. $3,059 $2,736
Accounts receivable....................................... 517 516
Warranty.................................................. 1,721 1,167
Property, plant and equipment............................. 670 191
Others, net............................................... (153) (36)
------ ------
$5,814 $4,574
====== ======
</TABLE>
A reconciliation between the U.S. federal income tax rate and the effective
tax rate is:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996 1995
---- ----- -----
<S> <C> <C> <C>
Statutory tax rate...... 35.0% 35.0% 35.0%
Difference in effective
tax rate on foreign
earnings............... 12.7 (16.9) (15.6)
State and local taxes... 2.6 1.8 3.5
---- ----- -----
Effective tax rate...... 50.3% 19.9% 22.9%
==== ===== =====
</TABLE>
12
<PAGE>
8. PENSION AND OTHER BENEFIT PLANS
SL sponsors several defined benefit pension plans that cover substantially
all U.S. employees. The benefits are based on years of service and
compensation on a career-average pay basis. These plans are substantially
fully funded with a trustee in respect to past and current service. Charges to
expense are based upon costs computed by independent actuaries. The funding
policy is to contribute annually amounts that are allowable for federal income
tax purposes. These contributions are intended to provide for benefits earned
to date and those expected to be earned in the future.
In the U.S., the RPS employees are included in the SL Plan, and accordingly,
$0.4 million was allocated to RPS for its share of pension expense for each of
the years ended December 31, 1997, 1996 and 1995. At December 31, 1997 and
December 31, 1996, accrued pension costs relating to the Company's
participation in this plan were $1.3 million.
Outside of the U.S., subsidiaries of SL sponsor several defined benefit and
defined contribution plans that cover substantially all employees who are not
covered by statutory plans. For defined benefit plans, charges to expense are
based upon costs computed by independent actuaries. These plans are
substantially fully funded with trustees in respect to past and current
service. For all non-US defined benefit plans, pension expense was $1.0
million, $1.8 million, and $1.1 million in 1997, 1996 and 1995, respectively.
For non-U.S. defined contribution plans, funding and costs are generally
based upon a predetermined percentage of employee compensation, Charges to
expense in 1997, 1996 and 1995, were $2.5 million, $2.4 million and $2.5
million, respectively.
In accordance with France labor agreements, RPS is required to pay certain
retirement benefits to employees who retire while working for the Company. The
benefit consists of a lump sum payment depending upon seniority, age and
salary level at retirement date. At both December 31, 1997 and 1996, accrued
French retirement costs were $1.3 million.
Health Care Benefits
The Company provides health care benefits for certain active employees. The
cost of providing these benefits is recognized as expense when incurred and
aggregated $1 million, $1.1 million and $.9 million in 1997, 1996 and 1995,
respectively. Outside the US, such benefits are mostly provided through
government-sponsored programs.
Postretirement Benefits other than Pensions
The Company provides certain health care benefits to former employees who
have retired under the US pension plans.
The principal actuarial assumptions used to measure costs were a discount
rate of 8% in 1997 and 7.5% in 1996 and 1995. The overall medical cost trend
rate assumption beginning December 31, 1997, was 8% graded to 5% over the next
six years and 5% thereafter. Previously, the overall assumption had been 9%
graded to 6% over the next six years and thereafter.
Net periodic Postretirement benefit cost in the U.S. for 1997, 1996 and
1995, included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period.......... $116 $181 $168
Interest cost on accumulated postretirement benefit
obligation.............................................. 56 80 64
Amortization of unrecognized net gain and other.......... (13) -- --
---- ---- ----
$159 $261 $232
==== ==== ====
</TABLE>
13
<PAGE>
The funded status at December 31, 1997 and 1996, was as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ 144 $ 105
Actives.................................................. 824 607
------ ------
968 712
Unrecognized net gain...................................... 380 476
Unrecognized prior service cost............................ 14 15
------ ------
Postretirement benefit liability....................... $1,362 $1,203
====== ======
</TABLE>
The assumed discount rate used to determine the accumulated Postretirement
benefit obligation was 7.5% for 1997 and 8% for 1996.
If the assumed medical cost trend rate was increased by one percentage
point, health care cost in 1997 would have been $.2 million, and the
accumulated postretirement benefit obligation would have been $1.2 million at
December 31, 1997.
9. RESTRUCTURING CHARGE
In 1996, the Company announced a charge of $6.8 million after tax, which
included pre-tax charges of $9.6 million for severance and termination costs,
and other asset impairments/charges of $.4 million.
The severance and termination costs relate to less than 10% of the worldwide
workforce, primarily in Europe, and pertain to both manufacturing and
operating personnel in about five locations. At December 31, 1997, $8.1
million of the severance and termination costs had been spent. The remainder
should be spent within the next nine months.
10. LEASES AND LEASE COMMITMENTS
Minimum rental commitments under noncancellable operating leases, primarily
real estate and office facilities, in effect at December 31, 1997 are as
follows:
<TABLE>
<S> <C>
Year ended December 31,
1998............................ $4,629
1999............................ 3,833
2000............................ 2,282
2001............................ 1,318
2002 and beyond................. 593
</TABLE>
Operating lease rental expense aggregated $6.4 million, $5.1 million and
$4.8 million for 1997, 1996 and 1995, respectively. These leases concern
mostly office building rentals and service van rentals.
14
<PAGE>
11. GEOGRAPHIC INFORMATION
During the years ended December 31, 1997, 1996 and 1995, neither sales to
any government nor sales to any single customer exceeded 10% of operating
revenue.
<TABLE>
<CAPTION>
UNITED
STATES EUROPE OTHER TOTAL
------- -------- ------ --------
<S> <C> <C> <C> <C>
Geographic Area 1997
Operating revenue........................ $72,064 $267,216 $4,968 $344,248
Operating loss........................... (1,312) (9,187) (1,149) (11,648)
Identifiable assets at December 31....... 47,233 222,201 -- 269,434
Geographic Area 1996
Operating revenue........................ 56,291 275,718 1,906 333,915
Operating loss........................... (5,619) (10,010) (1,568) (17,197)
Identifiable assets at December 31....... 42,331 260,339 -- 302,670
Geographic Area 1995
Operating revenue........................ 63,134 239,386 1,148 303,668
Operating loss........................... (1,479) (5,416) (551) (7,446)
Identifiable assets at December 31....... 41,229 186,532 -- 227,831
</TABLE>
12. STOCK OPTION PLANS
As of December 31, 1997, SL administered stock option plans, which are
described below. SL applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost for the SL plans
been determined based on the fair value at the grant dates for awards under
these plans, consistent with the methodology of SFAS 123, RPS net loss would
have been the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Net loss
As reported................................. $(6,720) $(16,366) $(7,721)
Pro forma................................... (7,117) (16,619) (7,753)
</TABLE>
As required by SFAS No. 123, the above pro-forma data reflect the effect of
stock option grants during 1997, 1996, and 1995.
During 1997, 1996, 1995 and in prior years, key employees of RPS were
granted stock options under the SL stock option plans. The exercise price of
each option equals the market price of SL stock on the date of grant; and
option's maximum term is ten years, and options generally vest in 20%
increments over five years.
As required by SFAS No. 123, the fair value of each grant is estimated on
the date of grant using the multiple option Black-Scholes option-pricing model
with the following weighted-average assumptions used for 1997, 1996 and 1995:
dividend of $0.75; expected volatility of 21% for 1997 grants and 20% for 1996
and 1995 grants; risk-free interest rates of 5.8%-6.77% for the 1997 grants;
5.09%-6.01% for the 1996 grants, and 5.70%-7.66% for the 1995 grants; and
expected option lives of 5.09 years for RPS employees for 1997 grants and 5.39
years for the 1996 and 1995 grants.
15
<PAGE>
A summary of the status of the SL stock option plans for RPS as of December
31, 1997, 1996 and 1995, and changes during the years ending on those dates is
presented below.
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
1997 EXERCISE 1996 EXERCISE 1995 EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
------------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................. 179,600 $ 34.08 164,700 $ 30.04 148,000 $ 29.28
Granted................ 42,500 $ 81.03 62,000 $ 42.35 22,500 $ 32.07
Exercised.............. (32,750) $ 29.80 (47,100) $ 30.84 (5,800) $ 18.55
------- ------- -------
Outstanding at end of
year.................... 189,350 $ 45.36 179,600 $ 34.08 164,700 $ 30.04
======= ======= =======
Options exercisable at
year-end................ 60,550 56,600 79,400
Weighted-average fair
value of options granted
during the year......... $ 24.01 $ 11.25 $ 8.35
</TABLE>
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AS OF 12/31/97 LIFE PRICE AS OF 12/31/97 PRICE
- --------------- -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$32.46-45.36....... $189,350 7.47 $45.36 60,550 $32.46
</TABLE>
13. RELATED PARTY TRANSACTIONS
In certain countries, RPS participates in SL's centralized treasury and cash
processes. In these countries, cash is managed either through zero balance
accounts or an interest-bearing offsetting mechanism. Cash disbursements for
operations, acquisitions, and other investments are funded as needed from
Schlumberger Limited.
SL and its affiliates provide a number of administrative functions to RPS
which resulted in charges of $9.4 million, $8.6 million, and $7.5 million
being recorded in the results of operations for 1997, 1996 and 1995,
respectively. Management believes that the method used to allocate such costs
is reasonable under the circumstances and the expense is reasonable and
adequate compared to the services provided.
There are no formal tax sharing arrangements between RPS and any entity of
SL. In most countries, RPS is a division of the SL legal entity that is the
ultimate tax payer in that jurisdiction. Thus the income tax benefit recorded
reflects the tax effect of the net operating losses incurred by RPS that are
available to offset the income of the SL legal entity that is the ultimate
taxpayer.
14. TRANSACTIONS WITH AFFILIATES
In July 1997, SI SPA, a non-RPS Schlumberger company purchased the shares of
Schlumberger Industries SPA, another Schlumberger company, from Koppens
Holding Nederland BV, a RPS company. As this was a transaction within a party
under common control, this transaction was recorded at net book value. The
difference between net book value and sale proceeds was credited to equity in
1997. The sales proceeds were transferred through a dividend to Schlumberger
Limited in 1997.
In December 1997, RPS via Koppens Iberica, acquired the shares of GNC, a
Portuguese subsidiary of SL for $5.8 million. This company was acquired to
implement and develop RPS business in Portugal. The difference between
purchase price and net book value was debited to equity in 1997.
16
<PAGE>
15. CONTINGENCIES
The Company complies with government laws and regulations and responsible
management practices for the protection of the environment. The Combined
Balance Sheet includes accruals for the estimated future costs associated with
certain environmental remediation activities related to the past use or
disposal of hazardous materials. Due to a number of uncertainties, including
uncertainty of timing, the scope of remediation, future technology, regulatory
changes and other factors, it is possible that the ultimate remediation costs
may exceed the amounts estimated. However, in the opinion of management, such
additional costs are not expected to be material relative to consolidated
liquidity, financial position or future results of operations.
In addition, the Company is party to various other legal proceedings.
Although the ultimate disposition of these proceedings is not presently
determinable, in the opinion of the Company any liability that might ensue
would not be material in relation to the Combined Financial Statements.
16. SUPPLEMENTARY INFORMATION
Operating revenue and related cost of goods sold and services comprised the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Operating revenue
Sales........................................ $185,702 $186,764 $191,439
Services..................................... 158,546 147,151 112,229
-------- -------- --------
$344,248 $333,915 $303,668
-------- -------- --------
Direct operating costs
Goods sold................................... $148,257 $149,142 $156,374
Services..................................... 138,323 124,350 92,727
-------- -------- --------
$286,350 $273,492 $249,101
======== ======== ========
</TABLE>
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Interest............................................. $1,414 $1,897 $1,649
Income taxes......................................... $1,926 $ 248 $ 516
</TABLE>
Accounts payable and accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- --------
<S> <C> <C>
Payroll, vacation and employee benefits................. $12,056 $ 13,945
Trade................................................... 41,245 44,969
Taxes, other than on income............................. 8,988 10,398
Other................................................... 25,319 41,204
------- --------
$87,608 $110,516
======= ========
</TABLE>
17
<PAGE>
EXHIBIT (b)
UNAUDITED PRO FORMA COMPANY COMBINED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
The following unaudited pro forma consolidated condensed financial
statements (the "Pro Forma Financial Statements") of the Company are derived
from the audited financial statements of Tokheim and the RPS Division and have
been adjusted to illustrate the effects of the Transactions. The Unaudited Pro
Forma Consolidated Condensed Financial Statements and accompanying notes should
be read in conjunction with the consolidated financial statements of Tokheim
which were filed with Tokheim's Annual Report on Form 10-K for the year ended
1997, and the combined financial statements of the RPS Division, including the
notes thereto, appearing elsewhere in this Form 8-K. The pro forma statement of
earnings includes the RPS Division's combined statement of income for the year
ended December 31, 1997 and Tokheim's consolidated statement of earnings for the
year ended November 30, 1997. The pro forma balance sheet includes the RPS
Division's combined balance sheet as of December 31, 1997 and Tokheim's
consolidated balance sheet as of November 30, 1997. These pro forma statements
give effect to Tokheim's acquisition (the "MSI Acquisition") of Management
Solutions, Inc. ("MSI"), completed in December, 1997, the 1998 common stock
offering by Tokheim (the "Common Stock Offering") and the Transactions, and
related purchase accounting adjustments, as if these events had taken place on
December 1, 1996 for the statement of earnings and on November 30, 1997 for the
balance sheet. The Pro Forma Financial Statements are not necessarily indicative
of either future results of operations or the results that might have occurred
if the foregoing MSI acquisition, the Common Stock Offering and the Transactions
had been consummated on the indicated dates.
The Acquisition has been accounted for using the purchase method of
accounting. Therefore the RPS Division's equity has been eliminated in the pro
forma consolidated condensed statements. The allocation of the aggregate
purchase price included in the Unaudited Pro Forma Consolidated Condensed
Financial Statements is preliminary.
UNAUDITED COMPANY COMBINED PRO FORMA CONSOLIDATED CONDENSED STATEMENT
OF EARNINGS FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
TOKHEIM
TOKHEIM PRO PRO FORMA FOR
FORMA FOR COMMON STOCK
COMMON REFINANCING OFFERING,
STOCK AND MSI ACQUISITION,
(a) RPS RPS OFFERING ACQUISITION REFINANCING &
RPS DIVISION DIVISION AND MSI PRO FORMA RPS DIVISION
DIVISION ADJUSTMENTS ADJUSTED ACQUISITION ADJUSTMENTS ACQUISITION
-------- ----------- -------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $344,248 $ -- $344,248 $393,272 $ -- $737,520
Cost of sales, exclusive
of items listed below.. 303,196 (9,125) 294,071 287,752 (850)(b) 580,973
Selling, general and
administrative
expenses............... 48,798 (11,480) 37,318 70,028 -- 107,346
Depreciation and
amortization........... 3,902 3,973 7,875 10,490 6,044 (c) 24,409
Merger and acquisition
costs and other unusual
items.................. 2,338 2,338 3,493 -- 5,831
-------- ------- -------- -------- -------- --------
Operating income (loss). (11,648) 14,294 2,646 21,509 (5,194) 18,961
Interest expense, net... 1,418 -- 1,418 10,570 31,159 (d) 43,147
Other expense (income),
net.................... 433 -- 433 (1,039) -- (606)
-------- ------- -------- -------- -------- --------
Earnings (loss) before
income taxes and
extraordinary loss..... (13,499) 14,294 795 11,978 (36,353) (23,580)
Income taxes............ (6,779) 7,178 399 1,895 2,294
-------- ------- -------- -------- -------- --------
Earnings (loss) before
extraordinary loss..... $ (6,720) $ 7,116 $ 396 $ 10,083 $(36,353) $(25,875)
======== ======= ======== ======== ======== ========
Preferred stock
dividends ($1.94 per
share)................. $ (1,512) $ (1,512)
======== ========
Earnings (loss) before
extraordinary loss
applicable to common
stock.................. $ 8,571 $(27,387)
Earning (loss) per
common share:
Basic
Before extraordinary
loss................. $ 0.70 $ (2.24)
======== ========
Weighted average
shares outstanding... 12,253 12,253
======== ========
Diluted
Before extraordinary
loss................. $ 0.65 $ (2.24)
======== ========
Weighted average
shares outstanding.... 13,237 12,253
======== ======= ========
EBITDA (as defined, see
Note 1)................ $ (274) $12,730 $ 12,456 $ 36,925 $ 850 $ 50,231
======== ======= ======== ======== ======== ========
Adjusted EBITDA (as
defined, see Note 2)... 78,931
========
</TABLE>
18
<PAGE>
EXHIBIT (a)
UNAUDITED PRO FORMA COMPANY COMBINED CONSOLIDATED CONDENSED
BALANCE SHEET AS OF NOVEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TOKHEIM
PRO FORMA
FOR COMMON
TOKHEIM PRO REFINANCING STOCK OFFERING,
(e) FORMA FOR AND MSI ACQUISITION,
RPS RPS COMMON STOCK ACQUISITION REFINANCING &
RPS DIVISION DIVISION OFFERING AND PRO FORMA RPS DIVISION
DIVISION ADJUSTMENTS ADJUSTED MSI ACQUISITION ADJUSTMENTS ACQUISITION
-------- ----------- -------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash
equivalents........... $ 7,321 $ (7,321) $ -- $ 7,458 $ (2,000)(h) $ 5,458
Accounts receivables,
net................... 102,540 (3,620) 98,920 84,164 -- 183,084
Net inventory.......... 58,859 -- 58,859 64,508 -- 123,367
Other current assets... 11,872 -- 11,872 6,711 -- 18,583
-------- -------- -------- -------- --------- --------
Total current
assets............ 180,592 (10,941) 169,651 162,841 (2,000) 330,492
Property, plant &
equipment, net......... 32,183 -- 32,183 42,221 -- 74,404
Other tangible assets... 1,326 -- 1,326 9,191 -- 10,517
Goodwill................ 51,757 (51,757) -- 62,695 241,765 (f) 304,460
Other noncurrent assets
and deferred charges... 3,576 -- 3,576 19,561 6,632 (g) 29,769
-------- -------- -------- -------- --------- --------
Total assets....... $269,434 $(62,698) $206,736 $296,509 $ 246,397 $749,642
======== ======== ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Liabilities:
Current liabilities:
Current portion long-
term debt........... $ 46 $ -- $ 46 $ 2,391 $ -- $ 2,437
Notes payable, bank.. -- -- -- 98 -- 98
Cash overdraft....... 12,614 (12,614) -- 10,575 -- 10,575
Accounts payable and
accruals............ 94,526 (6,781) 87,745 105,818 27,575 (h) 221,138
-------- -------- -------- -------- --------- --------
Total current
liabilities....... 107,186 (19,395) 87,791 118,882 27,575 234,248
Long-term debt......... -- -- -- 4,397 4,397
New credit agreement... -- -- -- 8,158 151,339 (i) 159,497
Senior subordinated
notes................. -- -- -- 55,000 195,000 (i) 250,000
Guaranteed ESOP
obligation............ -- -- -- 9,429 -- (i) 9,429
Junior subordinated
seller PIK notes...... -- -- -- -- 10,000 (i) 10,000
Postretirement
benefits.............. 4,188 -- 4,188 14,378 -- 18,566
Minimum pension
liability............. -- -- -- 2,173 -- 2,173
Minority interest...... 133 -- 133 1,319 -- 1,452
Other long-term
liabilities........... 3,657 -- 3,657 5,511 -- 9,168
-------- -------- -------- -------- --------- --------
Total liabilities.. 115,164 (19,395) 95,769 219,247 383,914 698,930
Redeemable convertible
preferred stock........ -- -- -- 24,000 -- 24,000
Guaranteed ESOP
obligation............. -- -- -- (9,429) -- (9,429)
Preferred treasury stock
at cost................ -- -- -- (4,718) -- (4,718)
-------- -------- -------- -------- --------- --------
Total preferred
equity............ -- -- -- 9,853 9,853
Common stock............ 162,144 -- 162,144 88,882 (162,144)(j) 88,882
Minimum pension
liability.............. -- -- -- (2,173) -- (2,173)
Foreign currency
translation
adjustments............ (1,566) -- (1,566) (18,048) 1,566 (j) (18,048)
Retained earnings
(accumulated deficit).. (6,308) (43,303) (49,611) (1,112) 23,061 (k) (27,662)
Common treasury stock at
cost................... -- -- -- (140) -- (140)
-------- -------- -------- -------- --------- --------
Total common
equity............ 154,270 (43,303) 110,967 67,409 (137,517) 40,859
-------- -------- -------- -------- --------- --------
Total liabilities
and Shareholders'
equity........... $269,434 $(62,698) $206,736 $296,509 $ 246,397 $749,642
======== ======== ======== ======== ========= ========
</TABLE>
19
<PAGE>
Note 1 EBITDA (as used in this Form 8-K) represents earnings (loss) from
continuing operations before income taxes, extraordinary loss from debt
extinguishment, net interest expense, depreciation and amortization, merger
and acquisition costs and other unusual items and minority interest.
The following table calculates EBITDA (as defined) using data extracted from
the Unaudited Pro Forma Company Combined Consolidated Condensed Financial
Statements, included elsewhere herein:
<TABLE>
<CAPTION>
TOKHEIM
PRO FORMA FOR
TOKHEIM PRO COMMON
FORMA FOR REFINANCING STOCK OFFERING,
EQUITY AND MSI ACQUISITION,
RPS RPS OFFERING ACQUISITION REFINANCING &
RPS DIVISION DIVISION AND MSI PRO FORMA RPS DIVISION
DIVISION ADJUSTMENTS ADJUSTED ACQUISITION ADJUSTMENTS ACQUISITION
-------- ----------- -------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes and
extraordinary loss..... $(13,499) $14,294 $ 795 $11,978 $(36,353) $(23,580)
Interest expense, net... 1,418 -- 1,418 10,570 31,159 43,147
Depreciation and
amortization........... 11,777 (3,902) 7,875 10,490 6,044 24,409
Merger and acquisition
cost and other unusual
items.................. -- 2,338 2,338 3,493 -- 5,831
Minority interest....... 30 -- 30 394 -- 424
-------- ------- ------- ------- -------- --------
EBITDA.............. $ (274) $12,730 $12,456 $36,925 $ 850 $ 50,231
======== ======= ======= ======= ======== ========
</TABLE>
EBITDA is used as a financial indicator of the Company's ability to service
debt, although the precise definition of EBITDA is subject to variation
among companies. EBITDA should not be construed as an alternative to
operating income or cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of the Company's operating performance or as a
measure of liquidity. For additional information concerning Tokheim's
historical cash flows, see the consolidated statement of cash flows included
elsewhere herein.
Note 2 Adjusted EBITDA (as defined) is EBITDA (as defined) plus the following
anticipated cost savings that the Company believes it can achieve in the
first full fiscal year after the Acquisition.
<TABLE>
<CAPTION>
AFTER AFTER
ONE FULL THREE FULL
FISCAL YEAR FISCAL YEARS
----------- ------------
<S> <C> <C>
ESTIMATED ANNUAL COST SAVINGS:
Combined manufacturing capabilities......... $20,300 $26,000
Integrated European service organizations... 1,800 9,000
Elimination of general and administrative
redundancies.............................. 2,300 5,000
Reduced raw material cost................... 2,500 5,500
Reduced foreign currency exposure........... 1,800 1,800
------- -------
Total estimated annual savings........... $28,700 $47,300
======= =======
</TABLE>
Combined manufacturing capabilities--The Company intends to consolidate
substantially all of its dispenser manufacturing into three facilities.
Management expects to generate approximately $26,000 of annual savings,
$20,300 of which is expected to be achieved in the first full fiscal year
after the Acquisition. These savings include personnel reductions and
elimination of fixed costs associated with the closed facilities.
Integrated European service organizations--The Company plans to combine the
service functions of the RPS Division and Tokheim into a single
organization. Management expects to generate approximately $9,000 of annual
savings, $1,800 of which is expected in the first full fiscal year after
the Acquisition through a reduction in personnel and the disposition of an
estimated 100 excess vehicles.
Elimination of general and administrative redundancies--Management intends
to eliminate redundant administrative staff. Management estimates that
approximately $5,000 of annual cost savings are achievable from such
reductions, $2,300 of which is expected in the first full fiscal year after
the Acquisition.
Reduced raw material cost--Management believes that benefits from the
combined volume purchasing power of the consolidated company will result in
volume discounts as well as rationalization of products and use of common
parts are expected to reduce the annual cost of materials by approximately
1.5% or $5,500, $2,500 of which is expected in the first year after the
Acquisition.
Reduced foreign currency exposure--Schlumberger's RPS Division incurred a
$2,458 loss in 1997 from currency exchange losses connected with
intercompany purchases of inventory. Management believes that the
utilization of hedging techniques would reduce these future losses by
approximately $1,800 per annum.
In addition, management expects to realize savings from other areas: (i)
reduced manufacturing costs resulting from product standardization and
elimination of redundant products; (ii) productivity and efficiency
improvement resulting from increased capacity utilization levels; (iii)
reduced administrative expense items such as insurance and supplies; and
(iv) cost savings from bringing in-house, various manufacturing operations
that the RPS Division currently outsources, such as metal fabrication.
It is anticipated that approximately $0.5 million of capital expenditures
and approximately $3.8 million of noncash and $27.9 million of cash
expenditures, will be required to realize the $47.3 million of cost
savings. The savings described above are based on estimates and assumptions
made by the Company that are inherently uncertain, and are subject to
significant business, economic and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the control of management. There can be no assurance that such savings
will be achieved. See "Special Note Regarding Forward-Looking Statements."
(a) The adjustments to the RPS Division's financial statements reflect amounts
that have been reclassified to conform to Tokheim's presentation and to
remove certain costs associated with operations as a division of
Schlumberger. The details of these reclassifications and adjustments are
as follows:
<TABLE>
<S> <C>
Cost of sales:
Reclassification of manufacturing depreciation and amortization
to depreciation and amortization................................. $(7,087)
Reclassification of personnel reductions (restructuring) to
merger and acquisitions and other unusual items.................. (350)
Reflects an adjustment related to operations of Schlumberger's
Abbeville facility for fiscal 1997 which will not be purchased
by Tokheim....................................................... (700)
Reclassification of nonrecurring warranty cost associated with
design flaws in new product launches. These design flaws were
corrected and are not expected to impact ongoing operations...... (988)
-------
Total adjustments and reclassification from cost of sales..... (9,125)
=======
Selling, general, and administrative expenses:
Adjustment to management and technical fees charged by
Schlumberger to its subsidiaries net of expenses Tokheim expects
to incur......................................................... (9,692)
Reclassification of selling, general and administrative
depreciation and amortization to depreciation and amortization... (788)
Reclassification of personnel reductions (restructuring) to
merger and acquisition costs and other unusual items............. (800)
Reclassification of other miscellaneous items to merger and
acquisition costs and other unusual items........................ (200)
-------
Total adjustments and reclassifications from selling, general
and administrative expenses.................................. (11,480)
=======
Depreciation and amortization:
Reclassification of manufacturing depreciation and amortization... 7,087
Reclassification of selling, general and administrative
depreciation and amortization.................................... 788
Elimination of preexisting goodwill amortization that Tokheim is
not purchasing................................................... (3,902)
-------
Total adjustments and reclassifications to depreciation and
amortization................................................. 3,973
-------
Merger and acquisition costs and other unusual items:
Reclassification of personnel reductions (restructuring) from
cost of sales.................................................... 350
Reclassification of personnel reductions (restructuring) from
selling, general and administrative expenses..................... 800
Reclassification of nonrecurring warranty cost associated with
design flaws in new product launches. These designs were
corrected and are not expected to impact ongoing operations...... 988
Reclassification of other miscellaneous items from selling,
general and administrative costs................................. 200
-------
Total adjustments and reclassifications to merger and
acquisition costs and other unusual items.................... 2,338
-------
Effect of all adjustments on pretax income......................... 14,294
Tax effect on adjustments using the RPS Division's calculated tax
rate of 50.2%..................................................... 7,178
-------
Effect of all adjustments on net earnings..................... $ 7,116
=======
The contract is noncancellable and requires minimum annual payments
of $850 per annum to Tokheim over the next five years............. $ 850
=======
</TABLE>
(b) Reflects a pro forma adjustment for technology and licensing fees
contractually payable by Schlumberger to Tokheim. These fees relate to
certain services and licenses provided to Schlumberger by Tokheim.
(c) The pro forma adjustment represents the amortization of goodwill
associated with the Acquisition as follows:
<TABLE>
<CAPTION>
ANTICIPATED ANNUAL
GROSS AMORTIZATION AMORTIZATION
AMOUNT PERIOD AMOUNT
-------- ------------ ------------
<S> <C> <C> <C>
Purchased goodwill........................ $241,765 40 years $6,044
======== ======== ======
</TABLE>
20
<PAGE>
(d) The pro forma adjustments to interest expense, net, were calculated as
follows:
<TABLE>
<S> <C>
Tokheim's pro forma interest expense for the MSI Acquisition and
the Common Stock Offering....................................... $10,570
RPS Division's historical interest expense, net.................. 1,418
-------
Total....................................................... 11,988
Plus: Interest expense on borrowings under:
New Credit Agreement ($168,926 at interest rates ranging from
6.60% to 9.4%, spread between four different facilities)....... 14,321
Junior Subordinated Seller PIK Note (interest rate of 12.0%).... 1,200
New Senior Subordinated Notes due 2008 (assumed rate of 10.0%).. 25,000
-------
Total....................................................... 40,521
Less: Interest expense on:
Tokheim debt being refinanced:
Existing Credit Agreement..................................... (1,717)
11 1/2% Senior Subordinated Notes............................. (6,325)
RPS Division.................................................... (1,418)
-------
Total....................................................... (9,460)
-------
Subtotal.................................................... 43,049
Amortization of debt issuance costs:
Remove:
Existing Credit Agreement..................................... (1,380)
11 1/2% Senior Subordinated Notes............................. (307)
Add:
New Credit Agreement.......................................... 1,005
New Senior Subordinated Notes due 2008........................ 780
-------
Pro forma interest expense, net................................. $43,147
=======
</TABLE>
Interest expense, net, includes that portion of interest with respect to
the Guaranteed ESOP Obligation which is not paid through dividends on, or
redemptions of, the ESOP Preferred Stock.
(e) The following table summarizes the adjustments made to the RPS Division's
audited financial statements to conform them to the terms and conditions
as outlined in the Purchase Agreement.
<TABLE>
<S> <C>
Assets:
Cash not being purchased........................................ $ (7,321)
Reduction of accounts receivable for related party receivables
not being purchased............................................ (3,620)
Pre existing goodwill not being purchased....................... (51,757)
--------
Total adjustments to assets................................. $(62,698)
========
Liabilities:
Cash overdraft not being assumed................................ $(12,614)
Reduction of accounts payable and accruals for related party
payables not being assumed..................................... (6,781)
--------
Total adjustments to liabilities............................ (19,395)
Shareholders' Equity:
Net adjustment to retained earnings for the above adjustments
of assets and liabilities...................................... (43,303)
--------
Total adjustments to liabilities and shareholders' equity... $(62,698)
========
</TABLE>
(f) This amount represents the excess of cost over the fair value of the net
assets of the RPS Division acquired and the deferred costs associated with
the Acquisition.
<TABLE>
<S> <C>
Total purchase price of the RPS Division......................... $335,000
Estimated post closing purchase price adjustment................ (4,500)
Warrants issued to Schlumberger................................. (5,000)
--------
Adjusted purchase price....................................... 325,500
Book value of the RPS Division net assets, as adjusted, which
is estimated to approximate fair value......................... 110,967
--------
Excess of cost over fair value of net assets acquired............ 214,533
Deferred costs associated with the Acquisition:
Legal and financial advisory fees............................. 3,750
Direct acquisition costs (see note below)..................... 23,482
--------
Total goodwill.................................................. $241,765
========
</TABLE>
Note 3: Under the terms of a letter agreement, the Company has the option, and
intends, to finance $5,000 of the purchase price by issuing Schlumberger
a warrant to purchase, for a nominal price, shares of Tokheim common
stock. The number of shares for which the warrant may be exercised will
equal the number of shares whose value at the close of business on the
business day before the closing date for the Acquisition equals $5,000.
The warrant will expire five years after the closing date.
21
<PAGE>
(g) This amount represents the pro forma adjustment necessary to reflect the
Company's write-off of previous unamortized debt issuance cost and the
capitalization of the new debt issuance costs associated with the new
financing plan. The existing issuance costs will be written-off as a
charge to extraordinary loss from debt extinguishment in the period
incurred.
<TABLE>
<S> <C>
Write-off of deferred issuance costs associated with the Existing
Credit Agreement................................................. $ (4,693)
Write-off of deferred issuance costs associated with the 11 1/2%
Senior Subordinated Notes........................................ (2,925)
--------
Subtotal..................................................... (7,618)
Capitalization of estimated deferred issuance costs associated
with the New Credit Agreement.................................... 6,450
Capitalization of estimated deferred issuance costs associated
with the New Senior Subordinated Notes due 2008.................. 7,800
--------
Net adjustment to reflect the fees associated with the
financing of the Acquisition and refinancing of existing
debt........................................................ $ 6,632
========
The deferred debt issuance costs associated with the New Credit Agreement
and the New Senior Subordinated Notes will be amortized over the life of the
respective agreements on a straight line basis.
(h) Pro forma adjustment to accounts payable and accruals:
Accrued interest on $55,000 of 11 1/2% Senior Subordinated Notes
to be redeemed................................................... $ (2,107)
Accruable restructuring expenses.................................. 6,200
Accrued integration plan costs.................................... 23,482
--------
$ 27,575
========
Included in accrued liabilities are certain costs Tokheim believes will be
spent to close down redundant operations in connection with the
reorganization and rationalization of the RPS Division. The table below
summarizes the costs included in goodwill and accrued liabilities as they
relate to the integration plan for the RPS Division. The amounts do not
include costs associated with consolidation of previously existing Tokheim
subsidiaries, which will be expensed as incurred, nor do these costs benefit
production in future periods.
Personnel reductions.............................................. $ 18,602
Closure of redundant facilities................................... 4,880
--------
Total........................................................ $ 23,482
========
In addition to the above expenditures, the Company expects to spend
approximately $500 for capital projects with future benefits. The Company
estimates future accruable restructuring charges related to the integration
plan at approximately $6,200. In addition, nonaccruable operating charges
associated with the plan, which will be expensed as incurred, are estimated
at $2,000. These amounts have been aggregated and shown as a reduction of
cash of $2,000, an increase in accrued expenses of $6,200 and an aggregate
reduction of retained earnings of $8,200. (see also Note (k) below)
(i) This amount reflects the repayment of existing Tokheim and RPS Division
debt with the proceeds of the offering of the New Senior Subordinated Notes
due 2008 and borrowings under the New Credit Agreement.
Borrowings under the New Credit Agreement......................... $159,497
Borrowings under the New Credit Agreement (refinance preferred
ESOP obligation)................................................. 9,429
Issuance of % Senior Subordinated Notes due 2008................ 250,000
Junior Subordinated Seller PIK Notes.............................. 10,000
Repay:
Borrowings under the Existing Credit Agreement................... (8,158)
Borrowings under the Existing Credit Agreement (refinance
preferred ESOP obligation)...................................... (9,429)
11 1/2% Senior Subordinated Notes................................ (55,000)
--------
Net adjustment to reflect Acquisition financing and the
application of proceeds to repay existing debt.............. $356,339
========
</TABLE>
(j) Amounts represent the elimination of the RPS Division's existing net book
value.
22
<PAGE>
(k) Adjustments to retained earnings (accumulated deficit) are as follows:
<TABLE>
<S> <C>
Extraordinary loss on debt extinguishment:
Write-off of deferred issuance costs associated with the
Existing Credit Agreement....................................... $(4,693)
Write-off of deferred issuance costs associated with the 11 1/2%
Senior Subordinated Notes....................................... (2,925)
Premiums paid to redeem 11 1/2% Senior Subordinated Notes at the
estimated tender offer price of 119.512%........................ (10,732)
-------
Total extraordinary loss on debt extinguishment.............. (18,350)
Other:
Accruable restructuring expenses................................. (6,200)
Non accruable restructuring expenses............................. (2,000)
RPS division accumulated deficit eliminated in consolidation..... 49,611
-------
Total adjustment to retained earnings (accumulated deficit).. $23,061
=======
</TABLE>
Note 4: Dividends are payable on the Company's ESOP Preferred Stock, the
proceeds of which are used to service the Guaranteed ESOP Obligation.
23
<PAGE>
Exhibit (b)
UNAUDITED PRO FORMA TOKHEIM CORPORATION FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
The following unaudited pro forma Tokheim Corporation financial statements
have been adjusted to reflect the effects of the MSI Acquisition and the
issuance of approximately 4.17 million Shares of Tokheim Common Stock pursuant
to its 1998 Common Stock Offering. The Unaudited Pro Forma Tokheim Corporation
Consolidated Condensed Statement of Earnings gives effect to the MSI Acquisition
and the Common Stock Offering as if they had occurred on December 1, 1996. The
Unaudited Pro Forma Tokheim Corporation Consolidated Condensed Balance Sheet
gives effect to the MSI Acquisition and the Common Stock Offering as if they had
occurred on November 30, 1997. The statements do not purport to represent what
Tokheim's results of operations or financial position actually would have been
if the MSI Acquisition and the Common Stock Offering had occurred as of such
dates and are not necessarily indicative of future operating results or
financial position. The Unaudited Pro Forma Tokheim Corporation Consolidated
Condensed Statement of Earnings for the year ended November 30, 1997 and Pro
Forma Tokheim Corporation Consolidated Condensed Balance Sheet as of November
30, 1997 were derived from the Tokheim's audited Consolidated Financial
Statements.
UNAUDITED PRO FORMA TOKHEIM CORPORATION CONSOLIDATED
CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
TOKHEIM PRO
FORMA FOR
COMMON THE COMMON
MSI TOKHEIM PRO STOCK STOCK
ACQUISITION FORMA FOR OFFERING OFFERING
PRO FORMA MSI PRO FORMA AND MSI
TOKHEIM MSI ADJUSTMENTS ACQUISITION ADJUSTMENTS ACQUISITION
-------- ------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $385,469 $7,803 $ -- $393,272 $ -- $393,272
Cost of sales, exclusive
of items listed below.. 283,932 3,820 -- 287,752 -- 287,752
Selling, general and
administrative
expenses............... 68,167 1,761 100 (a) 70,028 -- 70,028
Depreciation and
amortization........... 9,232 53 1,205 (b) 10,490 -- 10,490
Merger and acquisition
cost and other unusual
items.................. 3,493 1,347 (1,347)(c) 3,493 -- 3,493
-------- ------ ------ -------- ------ --------
Operating income........ 20,645 822 42 21,509 -- 21,509
Interest expense, net... 16,451 (28) 912 (d) 17,335 (6,765)(f) 10,570
Other income, net....... (1,003) (36) -- (1,039) -- (1,039)
-------- ------ ------ -------- ------ --------
Earnings (loss) before
income taxes and
extraordinary loss..... 5,197 886 (870) 5,213 6,765 11,978
Income taxes............ 1,217 -- 2 (e) 1,219 676 (g) 1,895
-------- ------ ------ -------- ------ --------
Earnings (loss) before
extraordinary loss..... $ 3,980 $ 886 $ (872) $ 3,994 $6,089 $ 10,083
======== ====== ====== ======== ====== ========
Preferred stock
dividends ($1.94 per
share)................. $ (1,512) $ (1,512) $ (1,512)
======== ======== ========
Earnings (loss) before
extraordinary loss
applicable to common
stock.................. $ 2,468 $ 2,482 $ 8,571
======== ======== ========
Earnings (loss) per
common share:
Primary
Before extraordinary
loss................ $ 0.31 $ 0.31 $ 0.70
======== ======== ========
Weighted average
number of shares
outstanding......... 8,083 8,083 4,170 12,253
======== ======== ======= ========
Fully diluted
Before extraordinary
loss................ $ 0.27 $ 0.27 $ 0.65
======== ======== ========
Weighted average
number of shares
outstanding......... 9,067 9,067 4,170 13,327
======== ======== ======= ========
</TABLE>
24
<PAGE>
UNAUDITED PRO FORMA TOKHEIM CORPORATION CONSOLIDATED CONDENSED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TOKHEIM PRO
FORMA
MSI TOKHEIM PRO COMMON FOR STOCK
ACQUISITION FORMA FOR OFFERING OFFERING
PRO FORMA MSI PRO FORMA AND MSI
TOKHEIM MSI ADJUSTMENTS ACQUISITION ADJUSTMENTS ACQUISITION
-------- ------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash
equivalents........... $ 6,438 $1,020 $ -- (h) $ 7,458 $ -- $ 7,458
Accounts receivable,
net................... 83,011 2,002 (850)(i) 84,163 -- 84,163
Net inventory.......... 64,347 161 -- 64,508 -- 64,508
Other current assets... 6,705 7 -- 6,712 -- 6,712
-------- ------ ------- -------- -------- --------
Total current
assets............ 160,501 3,190 (850) 162,841 -- 162,841
Property, plant &
equipment, net......... 41,966 255 -- 42,221 -- 42,221
Other tangible assets... 9,184 7 -- 9,191 -- 9,191
Goodwill................ 62,695 -- -- 62,695 -- 62,695
Other noncurrent assets
and deferred charges... 16,273 42 4,821 (j) 21,136 (1,575)(m) 19,561
-------- ------ ------- -------- -------- --------
Total assets....... $290,619 $3,494 $ 3,971 $298,084 $ (1,575) $296,509
======== ====== ======= ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Liabilities:
Current liabilities:
Current portion of
long-term debt...... $ 2,391 $ -- $ -- $ 2,391 $ -- $ 2,391
Notes payable, bank.. 98 -- -- 98 -- 98
Cash overdraft....... 10,575 -- -- 10,575 -- 10,575
Accounts payable and
accruals............ 105,787 1,373 -- 107,160 (1,342)(n) 105,818
-------- ------ ------- -------- -------- --------
Total current
liabilities....... 118,851 1,373 -- 120,224 (1,342) 118,882
Long-term debt......... 4,397 -- -- 4,397 -- 4,397
Existing credit
agreement............. 24,090 -- 12,000 (k) 36,090 (27,932)(o) 8,158
Senior subordinated
notes................. 90,000 -- -- 90,000 (35,000)(n) 55,000
Guaranteed ESOP
obligation............ 9,429 -- -- 9,429 -- 9,429
Postretirement
benefits.............. 14,378 -- -- 14,378 -- 14,378
Minimum pension
liability............. 2,173 -- -- 2,173 -- 2,173
Minority interest...... 1,319 -- -- 1,319 -- 1,319
Other long-term
liabilities........... 5,511 -- -- 5,511 -- 5,511
-------- ------ ------- -------- -------- --------
Total liabilities.. 270,148 1,373 12,000 283,521 (64,274) 219,247
Redeemable convertible
preferred stock........ 24,000 -- -- 24,000 -- 24,000
Guaranteed ESOP
obligation............. (9,429) -- -- (9,429) -- (9,429)
Preferred treasury stock
at cost................ (4,718) -- -- (4,718) -- (4,718)
-------- ------ ------- -------- -------- --------
Total preferred
equity............ 9,853 -- -- 9,853 -- 9,853
Common stock............ 21,158 300 (300)(l) 21,158 67,724 (p) 88,882
Minimum pension
liability.............. (2,173) -- -- (2,173) -- (2,173)
Foreign currency
translation
adjustments............ (18,048) -- -- (18,048) -- (18,048)
Retained earnings
(accumulated deficit).. 9,821 1,821 (7,729)(l) 3,913 (5,025)(n) (1,112)
Common treasury stock at
cost................... (140) -- -- (140) -- (140)
-------- ------ ------- -------- -------- --------
Total common
equity............ 10,618 2,121 (8,029) 4,710 62,699 67,409
-------- ------ ------- -------- -------- --------
Total liabilities
and shareholders'
equity............ $290,619 $3,494 $ 3,971 $298,084 $ (1,575) $296,509
======== ====== ======= ======== ======== ========
</TABLE>
25
<PAGE>
<TABLE>
<C> <S> <C>
(a) Reflects additional compensation paid to the president of MSI
pursuant to an employment agreement entered into at the time
of the MSI Acquisition........................................ $ 100
(b) Reflects additional amortization expense related to $4,821 of
the purchase price that has been allocated to internally
developed software, which is being amortized over a four-year
period........................................................ $ 1,205
(c) Reflects the elimination of a nonrecurring charge of $980 that
relates to a bonus paid to the principal shareholder of MSI.
Also reflects the elimination of bonuses paid to employees of
MSI in anticipation of the sale to Tokheim, offset by expected
bonuses anticipated to be paid by Tokheim to senior management
of MSI........................................................ $(1,347)
(d) Additional interest expense related to the $12,000 of
additional borrowings under the Existing Credit Agreement to
fund the purchase of MSI at a 7.6% weighted average interest
rate.......................................................... $ 912
(e) MSI has been incorporated into Tokheim's consolidated federal
tax return. As such, Tokheim has available approximately
$24,669 of NOL carryforwards, which are offset by a
corresponding valuation allowance. Therefore, federal tax
provisions are only recorded for book purposes equal to the
expected Alternative Minimum Tax ("AMT") liability. The pro
forma provision for taxes is calculated as follows:
State and local tax provision for MSI's pre-tax earnings at
an 8.0% effective tax rate.................................. $ 71
Federal tax provision for MSI's pre-tax pro forma earnings
reduced by 90% for utilization of Tokheim's Net Operating
Loss ("NOL") carryforwards with the remaining amount taxed
at a 20% AMT rate........................................... 18
Reduction of state and local tax provision for pre-tax pro
forma earnings at an 8.0% effective tax rate................ (70)
Federal tax provision for MSI's pre-tax pro forma earnings
reduced by 90% for utilization of NOL carryforwards, with
the remaining amount taxed at a 20% AMT rate................ (17)
-------
$ 2
=======
Note: In addition to the above pro forma adjustments, the Company will incur
a one-time charge to operations for the writedown of in-process research and
development, of which technological feasibility has not yet been determined
and which has no alternative future use. This charge to earnings of
approximately $5,908 will be recorded in the first quarter of 1998.
(f) Pro forma adjustments to interest expense:
Decreased interest expense related to a portion of the
$12,000 of additional borrowings under the Existing Credit
Agreement to fund the purchase of MSI at a 7.6% interest
rate........................................................ $(1,382)
Decreased interest expense related to the $35,000 of 11 1/2%
Senior Subordinated Notes redeemed at 11.5%................. (4,025)
Decreased interest expense related to the $10,000 of 11 1/2%
Senior Subordinated Notes repurchased using proceeds from
the Existing Credit Agreement ($10,000 at 11.5% for 10.5
months, $10,000 at 7.6% for 1.5 months)..................... (1,101)
Decrease in amortization expense related to a pro rata share
of deferred issuance cost written off to extraordinary loss
on debt retirement.......................................... (257)
-------
(6,765)
=======
(g) Pro forma provision for taxes:
State and local tax provision at an 8.0% effective tax rate.. $ 541
Federal tax provision for pre-tax earnings reduced by 90% for
utilization of NOL carryforwards, with the remaining amount
taxed at a 20% AMT rate..................................... 135
-------
$ 676
=======
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
(h)Pro forma adjustment to cash:
Reflects the repayment of a loan from a minority shareholder.... $ 850
Reflects an adjustment to record a distribution of cash
dividends to MSI shareholders prior to the acquisition......... $ (850)
--------
$ --
========
(i)Reflects the repayment of a loan from a minority shareholder..... $ (850)
(j)Reflects the purchase price allocation to capitalized software
costs to be amortized over a four-year life.................... $ 4,821
(k)To record additional borrowings under the Existing Credit
Agreement to fund the MSI Acquisition.......................... $ 12,000
(l)Pro forma adjustment to shareholders' equity:
Elimination of MSI's common stock............................... $ (300)
========
To record the one-time write down of in-process research and
development.................................................... (5,908)
Reflects an adjustment to record a distribution of cash
dividends to MSI shareholders prior to the MSI Acquisition..... (850)
Elimination of MSI's retained earnings.......................... (971)
--------
Total adjustment to retained earnings......................... $ (7,729)
--------
Total adjustment to shareholders' equity...................... $ (8,029)
========
(m)Decrease in deferred issuance cost related to a 35% write down of
the unamortized balance........................................ $ (1,575)
(n)Redemption of 11 1/2% Senior Subordinated Notes
Redemption of 11 1/2% Senior Subordinated Notes with Common
Stock Offering proceeds........................................ $(35,000)
Elimination of four months of accrued interest on the $35,000 of
redeemed 11 1/2% Senior Subordinated Notes..................... (1,342)
Redemption premiums, charged to equity.......................... (3,450)
Pro rata write-off of deferred debt issuance costs, charged to
equity......................................................... (1,575)
--------
$(41,367)
========
(o)Pro forma adjustments to Existing Credit Agreement:
Repayment of funds borrowed to repurchase $10,000 of 11 1/2%
Senior Subordinated Notes...................................... $(10,000)
Repayment of funds borrowed to purchase MSI..................... (12,000)
Repayment of borrowed to provide Working Capital................ (5,932)
--------
$(27,932)
========
(p)Increase in Common Stock reflecting net proceeds of the Common
Stock Offering................................................. $ 67,724
Note: In addition to the pro forma adjustments, the Company will
incur a one-time extraordinary loss of $4,964 which reflects the
premiums paid to redeem the 11 1/2% Senior Subordinated Notes and
to write off a pro rata share of the original deferred issuance
cost.
</TABLE>
27
