<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 31, 1997
TOKHEIM CORPORATION
-------------------------------------
(Exact Name of Registrant as Specified in Charter)
Indiana 1-6018 35-0712500
------- ------ ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10501 Corporate Drive, Fort Wayne, IN 46845
- --------------------------------------- --------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (219)-470-4600
--------------
N/A
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On December 31, 1997, Tokheim Corporation (the "Company") completed the
acquisition of Management Solutions, Inc., a Colorado corporation ("MSI"). MSI
develops and distributes retail automation systems (including point-of-sale
systems), primarily for the convenience store, petroleum dispensing and fast
food service industries. The transaction was reported on a Form 8-K filed on
January 15, 1998. The required financial statements and pro forma financial
information were not available at that time. The following financial statements
and pro forma financial information are filed as part of this Form 8-K.
(a) Financial Statements of MSI.
- Balance Sheets as of November 30, 1997 and
December 31, 1996.
- Statements of Operations for the eleven months
ended November 30, 1997 and the year ended
December 31, 1996.
- Statements of Cash Flows for the eleven
months ended November 30, 1997 and the
year ended December 31, 1996.
- Statements of Stockholders' Equity for the
eleven months ended November 30, 1997 and the
year ended December 31, 1996.
- Notes to the financial statements.
(b) Unaudited Pro Forma Financial Statements.
- Unaudited Pro Forma Consolidated Condensed
Statement of Operations for the year
ended November 30, 1997.
- Unaudited Pro Forma Consolidated Condensed
Balance Sheet as of November 30, 1997.
- Notes to Unaudited Pro Forma Condensed
Consolidated 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
---------------------------------------------------
Registrant
Date: February 12, 1998 By: /s/ Douglas K. Pinner
-----------------------------------------------
Douglas K. Pinner
Chairman, President and Chief Executive Officer
Date: February 12, 1998 By: /s/ John A. Negovetich
-----------------------------------------------
John A. Negovetich
Executive Vice President, Finance
and Administration
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors of
Management Solutions, Inc. and
Tokheim Corporation:
We have audited the accompanying balance sheets of Management Solutions,
Inc. as of November 30, 1997 and December 31, 1996, and the related statements
of operations, stockholders' equity and cash flows for the eleven months ended
November 30, 1997 and the year ended December 31, 1996. 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 audits 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 financial position of Management Solutions, Inc.
as of November 30, 1997 and December 31, 1996, and the results of its
operations and its cash flows for the eleven months ended November 30, 1997
and the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
Denver, Colorado
December 31, 1997
<PAGE>
MANAGEMENT SOLUTIONS, INC.
BALANCE SHEETS
AS OF NOVEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $1,020,285 $ 32,237
Trade accounts receivable, net of allowance of $110,403
and $64,603 at November 30, 1997 and December 31,
1996, respectively.................................... 1,061,527 1,098,540
Notes receivable from related party.................... 850,000 313,000
Inventory, net of reserve of $8,386 at November 30,
1997.................................................. 160,859 154,781
Interest receivable.................................... 90,591 68,892
Other.................................................. 6,776 37,281
---------- ----------
Total current assets................................. 3,190,038 1,704,731
Property and equipment, net of accumulated depreciation
of $247,875 and $194,576 at November 30, 1997 and
December 31, 1996, respectively......................... 255,027 107,320
Capitalized software, net of accumulated amortization of
$10,000 at November 30, 1997............................ 42,000 --
Other long-term assets................................... 6,950 6,000
---------- ----------
Total assets......................................... $3,494,015 $1,818,051
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable....................................... $ 170,349 $ 108,584
Bonuses payable........................................ 958,411 --
Deferred revenue....................................... 171,749 191,870
Customer deposits...................................... 26,428 36,421
Other.................................................. 45,876 8,445
---------- ----------
Total current liabilities............................ 1,372,813 345,320
========== ==========
Commitments (Note 4)
Stockholders' equity:
Common stock, no par value, 1,000,000 shares
authorized; 500,000 shares issued and outstanding..... 300,200 300,200
Retained earnings...................................... 1,821,002 1,172,531
---------- ----------
Total stockholders' equity........................... 2,121,202 1,472,731
---------- ----------
Total liabilities and stockholders' equity........... $3,494,015 $1,818,051
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-1
<PAGE>
MANAGEMENT SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Revenues:
Licenses............................................... $3,580,394 $ 963,911
Hardware............................................... 2,063,433 2,346,438
Services............................................... 2,159,514 1,280,573
---------- ----------
Total revenues....................................... 7,803,341 4,590,922
Costs and expenses:......................................
Direct hardware and software costs..................... 3,820,270 2,750,351
Selling, general and administrative and other.......... 3,161,254 1,132,420
---------- ----------
Operating income..................................... 821,817 708,151
Interest and other income, net........................... 63,567 30,164
---------- ----------
Net income........................................... $ 885,384 $ 738,315
========== ==========
Pro forma net income..................................... $ 555,136 $ 462,924
========== ==========
Pro forma net income per share........................... $ 1.11 $ .93
========== ==========
Weighted average common shares outstanding............... 500,000 500,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-2
<PAGE>
MANAGEMENT SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31,
1996
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 885,384 $ 738,315
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 63,299 50,676
Provision for bad debts and inventory............... 54,186 64,603
Change in operating assets and liabilities:
Trade accounts receivable......................... (8,787) (671,967)
Inventory......................................... (14,464) (135,334)
Interest receivable............................... (21,699) (29,009)
Other current assets.............................. 30,505 (19,165)
Other long-term assets............................ (950) --
Accounts payable.................................. 61,765 53,827
Bonuses payable................................... 958,411 --
Deferred revenue.................................. (20,121) 191,870
Customer deposits................................. (9,993) 18,408
Other current liabilities......................... 37,431 (29,734)
---------- ---------
Net cash provided by operating activities....... 2,014,967 232,490
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment.................... (201,006) (12,150)
Capitalized software.................................. (52,000) --
Notes receivable from related party................... (537,000) 250,798
---------- ---------
Net cash (used in) provided by investing
activities..................................... (790,006) 238,648
---------- ---------
Cash flows from financing activities:
Distributions......................................... (236,913) (495,889)
---------- ---------
Net cash used in financing activities........... (236,913) (495,889)
---------- ---------
Net increase (decrease) in cash and cash
equivalents.................................... 988,048 (24,751)
Cash and cash equivalents, beginning of year............ 32,237 56,988
---------- ---------
Cash and cash equivalents, end of year.................. $1,020,285 $ 32,237
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
MANAGEMENT SOLUTIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1997 AND THE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996............. 500,000 $300,200 $ 930,105 $1,230,305
Net income......................... -- -- 738,315 738,315
Distributions ($.99 per share)..... -- -- (495,889) (495,889)
------- -------- ---------- ----------
Balance, December 31, 1996........... 500,000 300,200 1,172,531 1,472,731
Net income......................... -- -- 885,384 885,384
Distributions ($.47 per share)..... -- -- (236,913) (236,913)
------- -------- ---------- ----------
Balance, November 30, 1997........... 500,000 $300,200 $1,821,002 $2,121,002
======= ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
MANAGEMENT SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
Management Solutions, Inc. (the "Company") was founded in 1985 and develops
point of sale software for companies involved in the convenience store
industry. The Company also offers hardware and software installation, software
support and consulting services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition:
The Company's revenue consists of sales of software products, hardware, and
fees for maintenance and services. Revenue from licenses and hardware is
recognized upon delivery and completion of significant vendor obligations.
Prepaid amounts for post-contract customer support are deferred at the time of
receipt and are recognized as revenue over the term of the contract on a
straight-line basis.
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents.
Inventory:
Inventory consists of computer hardware that is held for resale to
customers. Inventories are carried at cost on a first-in, first-out basis and
are periodically assessed for obsolescence.
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.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash maintained at
financial institutions in amounts which at times may exceed federally insured
limits. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk in this area.
The Company sells its products to various end users in different geographic
locations located within the United States. Approximately 52% and 74% of the
November 30, 1997 and the December 31, 1996 accounts receivable balances,
respectively, are comprised of three customers.
Property and Equipment:
Property and equipment are stated at cost. Depreciation of property and
equipment are computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Furniture and fixtures........... 7 years
Equipment and automobiles........ 5 years
Computer equipment............... 3 years
</TABLE>
A-5
<PAGE>
MANAGEMENT SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Maintenance and repairs are charged to expense as incurred. Upon retirement
or sale, the costs of assets disposed of and the related accumulated
depreciation are eliminated and the related gain or loss is reflected in
income.
Income Taxes:
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code, effective in 1985. Taxable income or loss for
federal tax reporting is reported by the stockholders. Accordingly, no
provision for federal income taxes has been provided for in the financial
statements.
Software Capitalization:
The cost of establishing the technological feasibility of new products or
product enhancements are expensed as incurred as research and development
costs ($405,000 in 1997 and 1996). The costs incurred subsequent to the
establishment of the technological feasibility of the product and prior to its
general release are capitalized. Capitalized costs are amortized on a product-
by-product basis using the greater of (a) the ratio that current revenues for
a product bear to the total current and anticipated future revenues or (b) the
straight-line method over the estimated useful life of three years.
Amortization expense related to capitalized software development costs is
included in direct hardware and software costs in the accompanying statement
of operations and was $10,000 in 1997. There were no software development
costs capitalized in 1996 and prior years.
Pro forma Net Income Per Share:
Pro forma net income per share is computed using the weighted average number
of common shares outstanding divided by pro forma net income. The Company did
not have any common stock equivalents outstanding in 1997 or 1996.
New Accounting Pronouncement:
Effective December 15, 1997, the Company will adopt Statement of Financial
Accounting Standards Statement No. 128, ("SFAS 128") Earnings per Share. SFAS
128 simplifies the standards for computing earnings per share found in
Accounting Principles Board Opinion No. 15, Earnings per Share, and makes them
comparable to international earnings per share standards. Had SFAS 128 been
effective during the eleven months ended November 30, 1997 and December 31,
1996, "Basic earnings per share" and "Dilutive earnings per share" under SFAS
128 would have been identical to pro forma net income per share as presented
on the statements of operations.
3. PROPERTY AND EQUIPMENT
Fixed assets consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Furniture and fixtures.......................... $ 90,071 $ 19,687
Equipment and automobiles....................... 130,079 86,121
Computer equipment.............................. 257,411 189,588
Other........................................... 25,341 6,500
--------- ---------
502,902 301,896
Accumulated depreciation........................ (247,875) (194,576)
--------- ---------
Property and equipment, net..................... $ 255,027 $ 107,320
========= =========
</TABLE>
Depreciation expense was approximately $53,000 for the eleven months ended
November 30, 1997 and $51,000 for the year ended December 31, 1996.
A-6
<PAGE>
MANAGEMENT SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. TRANSACTIONS WITH RELATED PARTIES:
Operating Lease:
As of November 30, 1997 and December 31, 1996, the Company leased its office
and development facilities on a month-to-month basis with an officer and
employee, who is the majority stockholder of the Company. Rental expense was
approximately $110,400 for the eleven months ended November 30, 1997 and
$87,900 for the year ended December 31, 1996. On December 1, 1997, the Company
entered into a ten-year operating lease for its research and development
facilities with the majority stockholder of the Company. Per the lease
agreement, the Company is responsible for all tax, insurance, utility and
maintenance costs associated with the facility. The yearly rent is subject to
a CPI escalation starting December 2002. At the end of the initial ten-year
term, the Company has two renewal options of five years each.
Future minimum lease payments are as follows:
<TABLE>
<S> <C>
1998......................... $ 320,544
1999......................... 320,544
2000......................... 320,544
2001......................... 320,544
Thereafter................... 1,896,564
-----------
$3,178,740
===========
</TABLE>
Notes Receivable:
As of November 30, 1997 and December 31, 1996, the Company had a note
receivable of $850,000 and $263,000, respectively, bearing interest of 7.0%,
from a minority stockholder of the Company. The note is due on demand and was
subsequently repaid in December 1997. Interest earned during 1997 and 1996 was
$28,000 and $26,600, respectively.
As of December 31, 1996, the Company had a note receivable of $50,000 from
an officer and employee, who is the majority stockholder of the Company. The
full amount was repaid in November 1997.
5. SIGNIFICANT CUSTOMERS:
Customers which had greater than 10% of total revenues are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Customer A..................................................... 18% 46%
Customer B..................................................... -- 11
Customer C..................................................... 58 --
Customer D..................................................... 11 --
Customer E..................................................... -- 19
</TABLE>
6. PRO FORMA NET INCOME:
The pro forma net income and pro forma net income per share reflects the tax
adjustment as if the Company had filed C corporation tax returns for all
periods presented. The effect is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net income before pro forma adjustments................ $885,384 $738,315
Pro forma provision for income taxes................... 330,248 275,391
-------- --------
Pro forma net income................................... $555,136 $462,924
======== ========
</TABLE>
7. SUBSEQUENT EVENTS:
On December 29, 1997, Tokheim Corporation ("Tokheim") paid $12 million to
acquire all of the Company's common stock. In December 1997, prior to the
acquisition by Tokheim, the Company distributed $850,000 ($1.70 per share) to
the Company's shareholders.
A-7
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements of the Company have
been adjusted to reflect the effects of the MSI acquisition. The Unaudited Pro
Forma Consolidated Condensed Statement of Earnings gives effect to the MSI
acquisition as if it had occurred on December 1, 1996. The Unaudited Pro Forma
Consolidated Condensed Balance Sheet gives effect to the MSI acquisition as if
it had occurred on November 30, 1997. The statements do not purport to
represent what the Company's results of operations or financial position
actually would have been if the MSI acquisition had occurred as of such dates
and are not necessarily indicative of future operating results or financial
position. The Unaudited Pro Forma Consolidated Condensed Statement of Earnings
for the year ended November 30, 1997 and Pro Forma Consolidated Condensed
Balance Sheet as of November 30, 1997 were derived from the Company's audited
Consolidated Financial Statements.
The MSI acquisition has been accounted for using the purchase method of
accounting. Therefore, MSI's equity has been eliminated in the pro forma
financial statements. The allocation of the purchase price in the pro forma
financial statements is preliminary.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(AMOUNTS IN THOUSANDS EXCEPT DOLLARS PER SHARE)
<TABLE>
<CAPTION>
MSI TOKHEIM PRO
ACQUISITION FORMA FOR
PRO FORMA MSI
TOKHEIM MSI ADJUSTMENTS ACQUISITION
-------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales........................... $385,469 $7,803 $ -- $393,272
Cost of sales, exclusive of items
listed below....................... 283,932 3,820 -- 287,752
Selling, general and administrative
expenses........................... 68,167 1,761 100 (a) 70,028
Depreciation and amortization....... 9,232 53 1,205 (b) 10,490
Merger and acquisition cost and
other unusual items................ 3,493 1,347 (1,347)(c) 3,493
-------- ------ ------ --------
Operating income.................... 20,645 822 42 21,509
Interest expense, net .............. 16,451 (28) 912 (d) 17,335
Other income, net................... (1,003) (36) -- (1,039)
-------- ------ ------ --------
Earnings (loss) before income taxes
and extraordinary loss............. 5,197 886 (870) 5,213
Income taxes........................ 1,217 -- 2 (e) 1,219
-------- ------ ------ --------
Earnings (loss) before extraordinary
loss............................... $ 3,980 $ 886 $ (872) $ 3,994
======== ====== ====== ========
Preferred stock dividends ($1.94 per
share)............................. $ (1,512) $ (1,512)
Earnings (loss) before extraordinary
loss applicable to common stock.... $ 2,468 $ 2,482
Earnings (loss) per common share:
Primary
Before extraordinary loss........ $ 0.31 $ 0.31
======== ========
Weighted average number of shares
outstanding..................... 8,083 8,083
======== ========
Fully diluted
Before extraordinary loss........ $ 0.27 $ 0.27
======== ========
Weighted average number of shares
outstanding..................... 9,067 9,067
======== ========
</TABLE>
A-8
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MSI TOKHEIM PRO
ACQUISITION FORMA FOR
PRO FORMA MSI
TOKHEIM MSI ADJUSTMENTS ACQUISITION
-------- ------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents.......... $ 6,438 $1,020 $ -- (f) $ 7,458
Accounts receivable, net........... 83,011 2,002 (850)(g) 84,163
Net inventory...................... 64,347 161 -- 64,508
Other current assets............... 6,705 7 -- 6,712
-------- ------ ------- --------
Total current assets........... 160,501 3,190 (850) 162,841
Property, plant & equipment, net.... 41,966 255 -- 42,221
Other tangible assets............... 9,184 7 -- 9,191
Goodwill............................ 62,695 -- -- 62,695
Other noncurrent assets and deferred
charges............................ 16,273 42 4,821 (h) 21,136
-------- ------ ------- --------
Total assets................... $290,619 $3,494 $ 3,971 $298,084
======== ====== ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Liabilities:
Current liabilities:
Current portion of long-term
debt............................ $ 2,391 $ -- $ -- $ 2,391
Notes payable, bank.............. 98 -- -- 98
Cash overdraft................... 10,575 -- -- 10,575
Accounts payable................. 54,597 170 -- 54,767
Accruals & reserves.............. 51,190 1,203 -- 52,393
-------- ------ ------- --------
Total current liabilities...... 118,851 1,373 120,224
Long-term debt..................... 4,397 -- -- 4,397
Bank credit facility............... 24,090 -- 12,000 (i) 36,090
Senior subordinated notes.......... 90,000 -- -- 90,000
Guaranteed ESOP obligation......... 9,429 -- -- 9,429
Postretirement benefits............ 14,378 -- -- 14,378
Minimum pension liability.......... 2,173 -- -- 2,173
Minority interest.................. 1,319 -- -- 1,319
Other long-term liabilities........ 5,511 -- -- 5,511
-------- ------ ------- --------
Total liabilities.............. 270,148 1,373 12,000 283,521
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........................ 21,158 300 (300)(j) 21,158
Minimum pension liability........... (2,173) -- -- (2,173)
Foreign currency translation
adjustments........................ (18,048) -- -- (18,048)
Retained earnings (accumulated
deficit)........................... 9,821 1,821 (7,729)(j) 3,913
Common treasury stock at cost....... (140) -- -- (140)
-------- ------ ------- --------
Total common equity............ 10,618 2,121 (8,029) 4,710
-------- ------ ------- --------
Total liabilities and
shareholders' equity.......... $290,619 $3,494 $ 3,971 $298,084
======== ====== ======= ========
</TABLE>
A-9
<PAGE>
<TABLE>
<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 4 year period.......... $ 1,205
(c) Reflects the elimination of a non-recurring charge of $980 that
relates to the forgiveness of debt owed by the principal
shareholder. 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 Bank Credit Facility to fund the purchase of
MSI at a 7.6% weighted average interest rate..................... $ 912
(e) MSI will be 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 adjustment to cash:
Reflects the repayment of a loan from a minority shareholder..... $ 850
Reflects an adjustment to record a one-time distribution of cash
dividends
distributed to MSI shareholders................................. $ (850)
-------
$ --
=======
(g) Reflects the repayment of a loan from a minority shareholder..... $ (850)
(h) Reflects the purchase price allocation to capitalized software
costs to be amortized
over a four-year life............................................ $ 4,821
(i) To record additional borrowings under the Bank Credit Facility to
fund the MSI acquisition......................................... $12,000
(j) 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 one-time distribution of cash
dividends distributed to MSI shareholders....................... (850)
Elimination of MSI's retained earnings........................... (971)
-------
Total adjustment to retained earnings........................... $(7,729)
-------
Total adjustment to shareholders' equity........................ $(8,029)
=======
</TABLE>
A-10
