UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
|
Date of Report |
|
|
|
(Date of earliest |
|
|
|
event reported): |
July 15, 2016 |
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DOUGLAS DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
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001-34728 |
|
134275891 |
(State or other |
|
(Commission File |
|
(IRS Employer |
7777 North 73rd Street, Milwaukee, Wisconsin 53223
(Address of principal executive offices, including zip code)
(414) 354-2310
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
This Amendment No. 1 on Form 8-K/A amends the Current Report on Form 8-K of Douglas Dynamics, Inc. (the Company) dated July 15, 2016, (the Initial 8-K) to file the historical financial statements and pro forma financial information referred to in Item 9.01(a) and (b), respectively, relating to the Companys acquisition of substantially all of the assets of Dejana Truck & Utility Equipment Company, Inc. (DTUENY), and certain entities directly or indirectly owned by Peter Paul Dejana Family Trust Dated 12/31/98, on July 15, 2016. The Company hereby amends Item 9.01 of the Initial 8-K to provide in its entirety as follows:
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
(1) The historical audited combined financial statements of DTUENY Subsidiaries and Affiliates, which comprise the combined balance sheets as of December 31, 2015, 2014 and 2013 and the related combined statements of operations and comprehensive income, shareholders and members equity, and cash flows for each of the two years ended December 31, 2015, and related notes to the combined financial statements, are filed as Exhibit 99.2 to this Current Report on Form 8-K/A, and are incorporated by reference herein.
(2) The historical unaudited financial statements of DTUENY Subsidiaries and Affiliates as of June 30, 2016 and for the six month periods ended June 30, 2016 and June 30, 2015 are filed as Exhibit 99.3 to this Current Report on Form 8-K/A, and are incorporated by reference herein.
(3) The consent of Margolin, Winer & Evens LLP, DTUENYs independent auditor, is attached as Exhibit 23.1 to this Current Report on Form 8-K/A.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined financial information of the Company for the year ended December 31, 2015 and as of and for the six months ended June 30, 2016 is filed as Exhibit 99.4 to this Current Report on Form 8-K/A.
(c) Not applicable.
(d) Exhibits. The following exhibits are being filed herewith:
(2.1) Asset Purchase Agreement, dated June 15, 2016, among Acquisition Delta LLC, Peter Paul Dejana Family Trust Dated 12/31/98, Dejana Truck & Utility Equipment Company, Inc. and Andrew Dejana (as Appointed Agent) [Incorporated by reference to Exhibit 2.1 to Douglas Dynamics, Inc.s Current Report on Form 8-K filed June 20, 2016].*
(10.1) ABL Amendment, dated as of July 15, 2016, to the Second Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2014, among Douglas Dynamics, L.L.C., Douglas Dynamics Finance Company, Fisher, LLC, Trynex International LLC, Henderson Enterprises Group, Inc., Henderson Products, Inc., and Acquisition Delta LLC as borrowers, Douglas Dynamics, Inc., as guarantor, the banks and financial institutions listed therein, as lenders, J.P. Morgan Securities LLC and Wells Fargo Bank, N.A., as joint bookrunners and joint lead arrangers, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and Wells Fargo Bank, N.A., as syndication agent.*
(10.2) Term Loan Joinder Agreement and Amendment, dated as of July 15, 2016, to the Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2014, among Douglas Dynamics, L.L.C., as borrower, Douglas Dynamics, Inc., Douglas Dynamics Finance Company, Fisher, LLC, Trynex International LLC, Henderson Enterprises Group, Inc., Henderson Products, Inc., and Acquisition Delta LLC as guarantors, the banks and financial institutions listed therein, as lenders, J.P. Morgan Securities LLC and Wells Fargo Bank, N.A., as joint bookrunners and joint lead arrangers, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and Wells Fargo Bank, N.A., as syndication agent.*
(23.1) Consent of Margolin, Winer & Evens LLP.
(99.1) Press release dated July 18, 2016.*
(99.2) Audited Combined Financial Statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates, which comprise the combined balance sheets as of December 31, 2015, 2014 and 2013 and the related combined statements of operations and comprehensive income, shareholders and members equity, and cash flows for each of the two years ended December 31, 2015 and related notes to the combined financial statements.
(99.3) Unaudited Combined Financial Statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates as of June 30, 2016 and for the six month periods ended June 30, 2016 and June 30, 2015.
(99.4) Unaudited pro forma condensed combined financial information of Douglas Dynamics, Inc. for the year ended December 31, 2015 and as of and for the six months ended June 30, 2016.
*Previously filed.
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 hereunto duly authorized.
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DOUGLAS DYNAMICS, INC. | |
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| |
Date: September 30, 2016 |
By: |
/s/ Robert McCormick |
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Robert McCormick |
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Executive Vice President, Chief Financial Officer |
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and Secretary |
DOUGLAS DYNAMICS, INC.
Exhibit Index to Amendment No. 1 to Current Report on Form 8-K
Dated July 15, 2016
Exhibit |
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Number |
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(2.1) |
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Asset Purchase Agreement, dated June 15, 2016, among Acquisition Delta LLC, Peter Paul Dejana Family Trust Dated 12/31/98, Dejana Truck & Utility Equipment Company, Inc. and Andrew Dejana (as Appointed Agent) [Incorporated by reference to Exhibit 2.1 to Douglas Dynamics, Inc.s Current Report on Form 8-K filed June 20, 2016]. |
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(10.1) |
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ABL Amendment, dated as of July 15, 2016, to the Second Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2014, among Douglas Dynamics, L.L.C., Douglas Dynamics Finance Company, Fisher, LLC, Trynex International LLC, Henderson Enterprises Group, Inc., Henderson Products, Inc., and Acquisition Delta LLC as borrowers, Douglas Dynamics, Inc., as guarantor, the banks and financial institutions listed therein, as lenders, J.P. Morgan Securities LLC and Wells Fargo Bank, N.A., as joint bookrunners and joint lead arrangers, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and Wells Fargo Bank, N.A., as syndication agent.* |
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(10.2) |
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Term Loan Joinder Agreement and Amendment, dated as of July 15, 2016, to the Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2014, among Douglas Dynamics, L.L.C., as borrower, Douglas Dynamics, Inc., Douglas Dynamics Finance Company, Fisher, LLC, Trynex International LLC, Henderson Enterprises Group, Inc., Henderson Products, Inc., and Acquisition Delta LLC as guarantors, the banks and financial institutions listed therein, as lenders, J.P. Morgan Securities LLC and Wells Fargo Bank, N.A., as joint bookrunners and joint lead arrangers, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and Wells Fargo Bank, N.A., as syndication agent.* |
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(23.1) |
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Consent of Margolin, Winer & Evens LLP. |
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(99.1) |
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Press release dated July 18, 2016.* |
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(99.2) |
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Audited Combined Financial Statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates, which comprise the combined balance sheets as of December 31, 2015, 2014 and 2013 and the related combined statements of operations and comprehensive income, shareholders and members equity, and cash flows for each of the two years ended December 31, 2015 and related notes to the combined financial statements. |
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(99.3) |
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Unaudited Combined Financial Statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates as of June 30, 2016 and for the six month periods ended June 30, 2016 and June 30, 2015. |
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(99.4) |
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Unaudited pro forma condensed combined financial information of Douglas Dynamics, Inc. for the year ended December 31, 2015 and as of and for the six months ended June 30, 2016. |
*Previously filed.
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration Statements:
· Registration Statement (Form S-8 No. 333-169342) pertaining to the Amended and Restated 2010 Stock Incentive Plan of Douglas Dynamics, Inc.;
· Registration Statement (Form S-8 No. 333-184781) pertaining to the Douglas Dynamics, L.L.C. 401(k) Plan
of our report dated September 27, 2016, relating to our audit of the combined financial statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates, which comprise the combined balance sheets as of December 31, 2015, 2014 and 2013, and the related combined statements of operations and comprehensive income, shareholders and members equity, and cash flows for each of the two years in the period ended December 31, 2015, and the related notes to the combined financial statements, included in this Amendment No. 1 on Form 8-K/A of Douglas Dynamics, Inc.
/s/ Margolin, Winer & Evens LLP |
|
|
Garden City, New York |
September 29, 2016 |
Exhibit 99.2
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 2015 and 2014
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
CONTENTS
Report of Independent Auditors |
1 and 2 |
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Financial Statements: |
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Combined Balance Sheets |
3 |
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Combined Statements of Operations and Comprehensive Income |
4 |
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Combined Statements of Shareholders and Members Equity |
5 |
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Combined Statements of Cash Flows |
6 |
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Notes to Combined Financial Statements |
7 - 26 |
REPORT OF INDEPENDENT AUDITORS
Dejana Truck & Utility Equipment Company
Subsidiaries and Affiliates
Kings Park, New York
We have audited the accompanying combined financial statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates (the Company), which comprise the combined balance sheets as of December 31, 2015, 2014 and 2013, and the related combined statements of operations and comprehensive income, shareholders and members equity, and cash flows for each of the two years in the period ended December 31, 2015, and the related notes to the combined financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates as of December 31, 2015, 2014 and 2013, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matters
As discussed in Note 14 to the combined financial statements, the 2014 combined financial statements and 2013 combined balance sheet have been restated to reflect prior period adjustments. Our opinion is not modified with respect to this matter.
We also draw attention to Note 15 to the combined financial statements which describes an asset sale by the Company in July 2016. Our opinion is not modified with respect to this matter.
|
/s/ Margolin, Winer & Evans LLP |
Garden City, New York
September 27, 2016
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED BALANCE SHEETS
December 31, |
|
2015 |
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2014 |
|
2013 |
| |||
|
|
|
|
(As Restated) |
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(As Restated) |
| |||
ASSETS |
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| |||
Current Assets: |
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|
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|
|
| |||
Cash and cash equivalents |
|
$ |
18,516,518 |
|
$ |
13,065,764 |
|
$ |
11,453,828 |
|
Marketable securities |
|
1,999,005 |
|
1,999,005 |
|
2,130,855 |
| |||
Accounts receivable, net of allowance for doubtful accounts of $477,090, $525,513 and $460,513 |
|
19,710,665 |
|
16,695,526 |
|
14,997,443 |
| |||
Inventories |
|
21,659,300 |
|
19,328,657 |
|
16,165,462 |
| |||
Truck chassis floor plan inventory |
|
4,321,981 |
|
6,471,500 |
|
6,248,058 |
| |||
Prepaid expenses and other current assets |
|
1,174,842 |
|
1,166,090 |
|
1,066,114 |
| |||
|
|
|
|
|
|
|
| |||
Total Current Assets |
|
67,382,311 |
|
58,726,542 |
|
52,061,760 |
| |||
|
|
|
|
|
|
|
| |||
Property, Plant and Equipment - at cost, net of accumulated depreciation of $10,226,381, $8,971,891 and $8,109,927 |
|
20,711,776 |
|
20,184,395 |
|
17,255,618 |
| |||
Other Assets |
|
373,477 |
|
300,191 |
|
299,977 |
| |||
Deferred Costs, net of amortization of $4,643, $3,214 and $1,786 |
|
5,357 |
|
6,786 |
|
8,214 |
| |||
|
|
|
|
|
|
|
| |||
Total Assets |
|
$ |
88,472,921 |
|
$ |
79,217,914 |
|
$ |
69,625,569 |
|
|
|
|
|
|
|
|
| |||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
| |||
Current Liabilities: |
|
|
|
|
|
|
| |||
Floor plan obligations |
|
$ |
4,321,981 |
|
$ |
6,471,500 |
|
$ |
6,248,058 |
|
Current maturities of loan payable |
|
120,000 |
|
120,000 |
|
120,000 |
| |||
Current maturities of equipment financing |
|
210,341 |
|
203,810 |
|
|
| |||
Current maturities of mortgage notes payable |
|
598,333 |
|
598,333 |
|
503,333 |
| |||
Accounts payable and accrued expenses |
|
9,839,367 |
|
11,275,047 |
|
8,049,784 |
| |||
Payroll and sales tax payable |
|
100,185 |
|
90,634 |
|
100,240 |
| |||
Current maturities of due to related parties |
|
630,000 |
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Total Current Liabilities |
|
15,820,207 |
|
18,759,324 |
|
15,021,415 |
| |||
|
|
|
|
|
|
|
| |||
Long-term Liabilities: |
|
|
|
|
|
|
| |||
Loan payable, less current maturities |
|
|
|
120,000 |
|
240,000 |
| |||
Equipment financing, less current maturities |
|
583,032 |
|
793,374 |
|
|
| |||
Mortgage notes payable, less current maturities |
|
5,038,750 |
|
5,637,083 |
|
5,768,334 |
| |||
Due to related parties, less current maturities |
|
920,000 |
|
1,550,000 |
|
1,550,000 |
| |||
|
|
|
|
|
|
|
| |||
Total Liabilities |
|
22,361,989 |
|
26,859,781 |
|
22,579,749 |
| |||
|
|
|
|
|
|
|
| |||
Shareholders and Members Equity: |
|
|
|
|
|
|
| |||
Common stock |
|
2,311 |
|
2,311 |
|
2,411 |
| |||
Paid-in capital |
|
11,712,074 |
|
11,712,074 |
|
11,241,511 |
| |||
Retained earnings and members capital |
|
54,448,342 |
|
40,695,543 |
|
35,727,362 |
| |||
Accumulated other comprehensive income (loss) - Unrealized gain (loss) on marketable securities |
|
(995 |
) |
(995 |
) |
75,436 |
| |||
Due from shareholders/members |
|
(50,800 |
) |
(50,800 |
) |
(900 |
) | |||
|
|
|
|
|
|
|
| |||
Total Shareholders and Members Equity |
|
66,110,932 |
|
52,358,133 |
|
47,045,820 |
| |||
|
|
|
|
|
|
|
| |||
Total Liabilities and Shareholders and Members Equity |
|
$ |
88,472,921 |
|
$ |
79,217,914 |
|
$ |
69,625,569 |
|
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Years Ended December 31, |
|
2015 |
|
2014 |
| ||
|
|
|
|
(As Restated) |
| ||
|
|
|
|
|
| ||
Net Sales |
|
$ |
139,871,367 |
|
$ |
113,125,291 |
|
|
|
|
|
|
| ||
Cost of Sales |
|
102,071,020 |
|
84,251,687 |
| ||
|
|
|
|
|
| ||
Gross Profit |
|
37,800,347 |
|
28,873,604 |
| ||
|
|
|
|
|
| ||
Operating Expenses: |
|
|
|
|
| ||
Selling and shipping expenses |
|
5,185,319 |
|
4,904,713 |
| ||
General and administrative expenses |
|
12,878,409 |
|
11,460,265 |
| ||
|
|
|
|
|
| ||
Total Operating Expenses |
|
18,063,728 |
|
16,364,978 |
| ||
|
|
|
|
|
| ||
Income from Operations |
|
19,736,619 |
|
12,508,626 |
| ||
|
|
|
|
|
| ||
Other Income (Expense): |
|
|
|
|
| ||
Interest and dividend income |
|
27,434 |
|
13,122 |
| ||
Interest expense |
|
(447,711 |
) |
(432,286 |
) | ||
Rent and miscellaneous income |
|
162,017 |
|
206,446 |
| ||
|
|
|
|
|
| ||
Total Other Income (Expense) |
|
(258,260 |
) |
(212,718 |
) | ||
|
|
|
|
|
| ||
Income Before Provision for Income Taxes |
|
19,478,359 |
|
12,295,908 |
| ||
|
|
|
|
|
| ||
Provision for Income Taxes |
|
31,560 |
|
12,904 |
| ||
|
|
|
|
|
| ||
Net Income |
|
19,446,799 |
|
12,283,004 |
| ||
|
|
|
|
|
| ||
Other Comprehensive Loss |
|
|
|
|
| ||
Unrealized loss on marketable securities, net of reclassification adjustments of $81,142 in 2014 for realized gains included in net income |
|
|
|
(76,431 |
) | ||
|
|
|
|
|
| ||
Comprehensive Income |
|
$ |
19,446,799 |
|
$ |
12,206,573 |
|
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED STATEMENTS OF SHAREHOLDERS AND MEMBERS EQUITY
|
|
|
|
|
|
Retained |
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Earnings |
|
Due from |
|
Other |
|
|
|
|
|
Common |
|
Paid-In |
|
and Members |
|
Shareholders/ |
|
Comprehensive |
|
|
|
Years Ended December 31, 2015 and 2014 |
|
Stock |
|
Capital |
|
Capital |
|
Members |
|
Income (Loss) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2013, as previously reported |
|
$2,411 |
|
$11,241,511 |
|
$36,041,217 |
|
$(900 |
) |
$ |
|
$47,284,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior Period Adjustments |
|
|
|
|
|
(313,855 |
) |
|
|
75,436 |
|
(238,419 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2013, as restated |
|
2,411 |
|
11,241,511 |
|
35,727,362 |
|
(900 |
) |
75,436 |
|
47,045,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as restated |
|
|
|
|
|
12,283,004 |
|
|
|
|
|
12,283,004 |
|
Other comprehensive loss, as restated |
|
|
|
|
|
|
|
|
|
(76,431 |
) |
(76,431 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income, as restated |
|
|
|
|
|
|
|
|
|
|
|
12,206,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidating Distributions, as restated |
|
(100 |
) |
|
|
(470,563 |
) |
100 |
|
|
|
(470,563 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by Members, as restated |
|
|
|
|
|
75,246 |
|
(50,000 |
) |
|
|
25,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Contribution, as restated |
|
|
|
470,563 |
|
|
|
|
|
|
|
470,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Shareholders/Members |
|
|
|
|
|
(6,919,506 |
) |
|
|
|
|
(6,919,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2014, as restated |
|
$2,311 |
|
$11,712,074 |
|
$40,695,543 |
|
$(50,800 |
) |
$(995 |
) |
$52,358,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2014, as previously reported |
|
$2,411 |
|
$11,241,511 |
|
$41,235,218 |
|
$(50,900 |
) |
$ |
|
$52,428,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior Period Adjustments |
|
(100 |
) |
470,563 |
|
(539,675 |
) |
100 |
|
(995 |
) |
(70,107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2014, as restated |
|
2,311 |
|
11,712,074 |
|
40,695,543 |
|
(50,800 |
) |
(995 |
) |
52,358,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
|
|
19,446,799 |
|
|
|
|
|
19,446,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by Members |
|
|
|
|
|
23,000 |
|
|
|
|
|
23,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Shareholders/Members |
|
|
|
|
|
(5,717,000 |
) |
|
|
|
|
(5,717,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2015 |
|
$2,311 |
|
$11,712,074 |
|
$54,448,342 |
|
$(50,800 |
) |
$(995 |
) |
$66,110,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements. |
|
|
|
|
|
|
|
|
|
|
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
Years Ended December 31, |
|
2015 |
|
2014 |
|
| |||||||||
|
|
|
|
(As Restated) |
|
| |||||||||
Cash Flows from Operating Activities: |
|
|
|
|
|
| |||||||||
Net income |
|
$ |
19,446,799 |
|
$ |
12,283,004 |
|
| |||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| |||||||||
Depreciation and amortization |
|
1,374,402 |
|
1,117,201 |
|
| |||||||||
Loss on sale of property and equipment |
|
1,232 |
|
77,225 |
|
| |||||||||
Provision for doubtful accounts |
|
13,864 |
|
59,671 |
|
| |||||||||
Realized gain on sale of marketable securities |
|
|
|
(81,142 |
) |
| |||||||||
(Increase) decrease in cash surrender value - key-employee life insurance |
|
(5,786 |
) |
60,000 |
|
| |||||||||
Changes in operating assets: |
|
|
|
|
|
| |||||||||
Accounts receivable |
|
(3,029,003 |
) |
(1,757,754 |
) |
| |||||||||
Inventories |
|
(2,330,643 |
) |
(3,163,195 |
) |
| |||||||||
Truck chassis floor plan inventory |
|
2,149,519 |
|
(223,442 |
) |
| |||||||||
Prepaid expenses and other current assets |
|
(8,752 |
) |
(99,976 |
) |
| |||||||||
Changes in operating liabilities: |
|
|
|
|
|
| |||||||||
Accounts payable and accrued expenses |
|
(1,435,680 |
) |
3,225,263 |
|
| |||||||||
Payroll and sales tax payable |
|
9,551 |
|
(9,606 |
) |
| |||||||||
|
|
|
|
|
|
| |||||||||
Net Cash Provided by Operating Activities |
|
16,185,503 |
|
11,487,249 |
|
| |||||||||
|
|
|
|
|
|
| |||||||||
Cash Flows from Investing Activities: |
|
|
|
|
|
| |||||||||
Purchase of property and equipment |
|
(1,940,617 |
) |
(4,181,275 |
) |
| |||||||||
Proceeds from sale of property and equipment |
|
39,031 |
|
59,500 |
|
| |||||||||
Proceeds from sale of securities |
|
|
|
136,561 |
|
| |||||||||
Premiums paid on key-employee life insurance |
|
(60,000 |
) |
(60,000 |
) |
| |||||||||
Increase in other assets |
|
(7,500 |
) |
(214 |
) |
| |||||||||
|
|
|
|
|
|
| |||||||||
Net Cash Used in Investing Activities |
|
(1,969,086 |
) |
(4,045,428 |
) |
| |||||||||
|
|
|
|
|
| ||||||||||
Cash Flows from Financing Activities: |
|
|
|
|
| ||||||||||
Floor plan obligations, net |
|
$ |
(2,149,519 |
) |
$ |
223,442 |
| ||||||||
Proceeds from mortgage note payable |
|
|
|
475,000 |
| ||||||||||
Proceeds from equipment financing |
|
|
|
1,073,575 |
| ||||||||||
Principal payments of loan payable |
|
(120,000 |
) |
(120,000 |
) | ||||||||||
Principal payments of mortgage notes payable |
|
(598,333 |
) |
(511,251 |
) | ||||||||||
Principal payments of equipment financing |
|
(203,811 |
) |
(76,391 |
) | ||||||||||
Contributions by members |
|
23,000 |
|
25,246 |
| ||||||||||
Liquidating distribution |
|
|
|
(470,563 |
) | ||||||||||
Capital contribution |
|
|
|
470,563 |
| ||||||||||
Distributions to shareholders/members |
|
(5,717,000 |
) |
(6,919,506 |
) | ||||||||||
|
|
|
|
|
| ||||||||||
Net Cash Used in Financing Activities |
|
(8,765,663 |
) |
(5,829,885 |
) | ||||||||||
|
|
|
|
|
| ||||||||||
Net Increase in Cash and Cash Equivalents |
|
5,450,754 |
|
1,611,936 |
| ||||||||||
|
|
|
|
|
| ||||||||||
Cash and Cash Equivalents - beginning of year |
|
13,065,764 |
|
11,453,828 |
| ||||||||||
|
|
|
|
|
| ||||||||||
Cash and Cash Equivalents - end of year |
|
$ |
18,516,518 |
|
$ |
13,065,764 |
| ||||||||
|
|
|
|
|
| ||||||||||
Supplemental Disclosure of Cash Flow Information - |
|
|
|
|
| ||||||||||
Cash paid during the year for: |
|
|
|
|
| ||||||||||
Interest |
|
$ |
449,829 |
|
$ |
433,831 |
| ||||||||
Income taxes |
|
31,560 |
|
12,904 |
| ||||||||||
|
|
|
|
|
| ||||||||||
Supplemental Disclosure of Noncash Investing and Financing Activities - |
|
|
|
|
| ||||||||||
During 2014, a $50,000 membership interest was issued in exchange for a receivable from the member in the same amount. |
|
|
|
|
| ||||||||||
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. |
Nature of Business and Basis of Presentation |
|
The combined financial statements include the accounts of the following entities, all of which are under common ownership and control (collectively, the Company). All significant intercompany accounts and transactions have been eliminated. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Dejana Cargo and Van Interiors, Inc. and Dejana Cargo and Van Interiors of Jacksonville, Inc. (Dejana Transit) - Dejana Transits operations involve performing the ship through modifications on Ford Motor Companys Transit Connect vehicle. As a Ship Through Modifier, the Company supplies its proprietary commercial-floor conversion kits and installs accessory packages (upfitting) before placing the Transit Connect vehicles back into the Ford Transportation System for delivery to dealership customers throughout the United States and Canada (see Note 14). |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Dejana Eastbrook, LLC (Dejana Eastbrook) - Dejana Eastbrook owns a rental residential building in Baltimore, MD. |
2. |
Summary of Significant Accounting Policies |
|
Cash and cash equivalents - The Company considers cash and cash equivalents to include cash on hand, cash in various checking accounts at banks and investments in short term money market funds. The Company maintains cash and cash equivalents in various accounts, which at times may exceed federally insured limits. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Accounts receivable - Accounts receivable are reported in the balance sheet at their outstanding principal balance net of an estimated allowance for doubtful accounts. Sales terms usually provide for payment within 30 days from the completion of the upfitting process. An allowance for doubtful accounts is estimated based upon a review of outstanding receivables, historical collection information, and existing economic conditions. During the years ended December 31, 2015 and 2014, bad debt expense of $13,864 and $59,671, respectively, was recognized and is reflected in general and administrative expenses. Accounts receivable are charged against the allowance when substantially all collection efforts cease. The Companys sales arrangements generally do not provide for interest on past due amounts. Recoveries of accounts receivable previously charged off are recognized when received. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Comprehensive income - FASB ASC 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income includes net income and other comprehensive income. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income for the years ended December 31, 2015 and 2014 is presented in the combined statements of operations and comprehensive income. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Dejana Truck PA, a limited liability company, is not subject to income taxes as an entity since taxable income or loss is reportable by its members. Effective January 1, 2015, Dejana Truck PA became a single member LLC. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Shipping and handling - Shipping and handling costs incurred during the years ended December 31, 2015 and 2014 were $172,614 and $137,501, respectively, and are included as a component of selling and shipping expenses. |
3. |
Marketable Securities |
|
Marketable securities classified as available for sale at December 31, 2015, 2014 and 2013 consist of municipal bond funds and other equity securities as follows: |
|
|
December 31, |
|
December 31, |
|
December 31, |
| |||
Municipal Bond Funds: |
|
|
|
|
|
|
| |||
Cost |
|
$ |
2,000,000 |
|
$ |
2,000,000 |
|
$ |
2,000,000 |
|
Gross unrealized holding losses |
|
(995 |
) |
(995 |
) |
(2,980 |
) | |||
|
|
|
|
|
|
|
| |||
Fair value |
|
$ |
1,999,005 |
|
$ |
1,999,005 |
|
$ |
1,997,020 |
|
|
|
|
|
|
|
|
| |||
Other Equity Securities: |
|
|
|
|
|
|
| |||
Cost |
|
$ |
|
|
$ |
|
|
$ |
55,419 |
|
Gross unrealized holding gains |
|
|
|
|
|
78,416 |
| |||
|
|
|
|
|
|
|
| |||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
133,835 |
|
|
|
|
|
|
|
|
| |||
Total Marketable Securities: |
|
|
|
|
|
|
| |||
Cost |
|
$ |
2,000,000 |
|
$ |
2,000,000 |
|
$ |
2,055,419 |
|
Unrealized holding gains (losses) |
|
(995 |
) |
(995 |
) |
75,436 |
| |||
|
|
|
|
|
|
|
| |||
Fair value |
|
$ |
1,999,005 |
|
$ |
1,999,005 |
|
$ |
2,130,855 |
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
4. |
Property, Plant |
|
Property, plant and equipment are summarized as follows: |
|
|
|
|
Estimated |
|
|
|
|
|
|
|
| ||||||
|
|
|
|
Useful |
|
|
|
|
|
|
|
| ||||||
|
|
Depreciation |
|
Lives in |
|
December 31, |
|
December 31, |
|
December 31, |
|
| ||||||
|
|
Method |
|
Years |
|
2015 |
|
2014 |
|
2013 |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Land |
|
- |
|
- |
|
$ |
4,959,906 |
|
$ |
4,750,608 |
|
$ |
3,763,913 |
|
| |||
Construction in progress |
|
- |
|
- |
|
64,020 |
|
1,722,951 |
|
484,386 |
|
| ||||||
Buildings and improvements |
|
Straight line |
|
7 - 40 years |
|
16,887,657 |
|
14,375,123 |
|
14,138,137 |
|
| ||||||
Machinery and equipment |
|
Straight line |
|
3 - 7 years |
|
5,523,416 |
|
5,154,421 |
|
4,156,814 |
|
| ||||||
Furniture and fixtures |
|
Straight line |
|
5 - 7 years |
|
520,496 |
|
468,722 |
|
450,837 |
|
| ||||||
Autos and trucks |
|
Straight line |
|
5 - 7 years |
|
2,982,662 |
|
2,684,461 |
|
2,371,458 |
|
| ||||||
|
|
|
|
|
|
30,938,157 |
|
29,156,286 |
|
25,365,545 |
|
| ||||||
Less accumulated depreciation |
|
|
|
|
|
10,226,381 |
|
8,971,891 |
|
8,109,927 |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Property, plant and equipment, net |
|
|
|
|
|
$ |
20,711,776 |
|
$ |
20,184,395 |
|
$ |
17,255,618 |
|
| |||
|
|
|
| |||||||||||||||
5. |
Inventories |
|
Inventories consist of the following: | |||||||||||||||
|
|
December 31, |
|
December 31, |
|
December 31, |
| |||
|
|
2015 |
|
2014 |
|
2013 |
| |||
|
|
|
|
|
|
|
| |||
Upfitting equipment, components and parts |
|
$ |
18,472,710 |
|
$ |
16,844,997 |
|
$ |
14,009,505 |
|
|
|
|
|
|
|
|
| |||
Work in process |
|
3,186,590 |
|
2,483,660 |
|
2,155,957 |
| |||
|
|
|
|
|
|
|
| |||
|
|
$ |
21,659,300 |
|
$ |
19,328,657 |
|
$ |
16,165,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
6. |
Cash |
|
Life insurance policies have been purchased by the Company intended to fund the deferred compensation agreements for certain key employees. Total balance for cash surrender value for key employee life insurance is approximately $66,000 as of December 31, 2015 and is included in Other Assets. Total balance for cash surrender value for key employee life insurance was $-0- as of December 31, 2014 and 2013.
Deferred compensation agreements have been provided for certain key employees of the Company. Vesting is based on a cliff-vesting provision and occurs on the stated dates of retirement of the employees ranging from September 2023 to October 2036. The deferred compensation amount is due in a lump-sum and is based on the cash surrender value of the key-employee life insurance policy as of the date of retirement. No accruals for deferred compensation have been provided for as of December 31, 2015, 2014 and 2013, as management believes the liability to be immaterial. | |||||||||||
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
7. |
Warranty Costs |
|
Estimated future warranty costs are accrued and charged to cost of sales in the period the related revenue is recognized. Liability estimates are determined based on managements judgment considering such factors as historical experience, the likely current cost of corrective action and manufacturer participation in sharing the cost of corrective action. Management believes no warranty reserve is necessary as of December 31, 2015, 2014 and 2013. | ||||||||||||||
|
|
|
| ||||||||||||||
8. |
Related Party Transactions |
|
At December 31, 2015, 2014 and 2013, the Company had a 5%, interest only, unsecured note payable to an officer of the Company in the amount of $920,000. Interest expense related to the note payable for each of the years ended December 31, 2015 and 2014 amounted to $46,000. The note is due on demand but the parties have agreed the note will not be called before July 1, 2017.
At December 31, 2015, 2014 and 2013, the Company had a 5%, interest only, unsecured note payable to a family trust established by an officer of the Company in the amount of $630,000. Interest expense related to the note payable for each of the years ended December 31, 2015 and 2014 amounted to $31,500. The note is due on demand but the parties have agreed that the note would not be called before January 1, 2016. | ||||||||||||||
|
|
|
| ||||||||||||||
9. |
Shareholders Equity |
|
The details of common stock and paid-in capital are as follows:
| ||||||||||||||
|
|
|
| ||||||||||||||
|
|
2015 and 2014 |
|
2013 |
|
| |||||||||||
|
|
Common |
|
Paid-in |
|
Common |
|
Paid-in |
|
| |||||||
|
|
Stock |
|
Capital |
|
Stock |
|
Capital |
|
| |||||||
|
|
|
|
|
|
|
|
|
|
| |||||||
HHSC |
|
|
|
|
|
|
|
|
|
| |||||||
No par value, |
|
|
|
|
|
|
|
|
|
| |||||||
200 shares authorized, |
|
|
|
|
|
|
|
|
|
| |||||||
200 shares issued |
|
$ |
2,000 |
|
$ |
937,822 |
|
$ |
2,000 |
|
$ |
937,822 |
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||||||
Dejana Truck NE |
|
|
|
|
|
|
|
|
|
| |||||||
No par value, |
|
|
|
|
|
|
|
|
|
| |||||||
200 shares authorized, |
|
|
|
|
|
|
|
|
|
| |||||||
200 shares issued |
|
100 |
|
174,102 |
|
100 |
|
174,102 |
|
| |||||||
|
|
|
|
|
|
|
|
|
|
| |||||||
Dejana Cargo |
|
|
|
|
|
|
|
|
|
| |||||||
No par value, |
|
|
|
|
|
|
|
|
|
| |||||||
1,000 shares authorized, |
|
|
|
|
|
|
|
|
|
| |||||||
1,000 shares issued |
|
100 |
|
9,318,146 |
|
100 |
|
9,318,146 |
|
| |||||||
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
2015 and 2014 |
|
2013 |
| ||||||||
|
|
Common |
|
Paid-in |
|
Common |
|
Paid-in |
| ||||
|
|
Stock |
|
Capital |
|
Stock |
|
Capital |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Dejana Leasing |
|
|
|
|
|
|
|
|
| ||||
$.01 par value, |
|
|
|
|
|
|
|
|
| ||||
200 shares authorized, |
|
|
|
|
|
|
|
|
| ||||
100 shares issued |
|
$ |
1 |
|
$ |
6,201 |
|
$ |
1 |
|
$ |
6,201 |
|
|
|
|
|
|
|
|
|
|
| ||||
Dejana Truck GTR PA |
|
|
|
|
|
|
|
|
| ||||
No par value, |
|
|
|
|
|
|
|
|
| ||||
10 shares authorized, |
|
|
|
|
|
|
|
|
| ||||
10 shares issued |
|
100 |
|
|
|
100 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Dejana Transit |
|
|
|
|
|
|
|
|
| ||||
Dejana Cargo and |
|
|
|
|
|
|
|
|
| ||||
Van Interiors, Inc. |
|
|
|
|
|
|
|
|
| ||||
$1 par value, |
|
|
|
|
|
|
|
|
| ||||
10 shares authorized, |
|
|
|
|
|
|
|
|
| ||||
10 shares issued |
|
10 |
|
1,275,803 |
|
10 |
|
793,822 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Dejana Cargo and Van |
|
|
|
|
|
|
|
|
| ||||
Interiors of Jacksonville, Inc. |
|
|
|
|
|
|
|
|
| ||||
No par value, |
|
|
|
|
|
|
|
|
| ||||
600 shares authorized, |
|
|
|
|
|
|
|
|
| ||||
100 shares issued |
|
|
|
|
|
100 |
|
11,418 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
2,311 |
|
$ |
11,712,074 |
|
$ |
2,411 |
|
$ |
11,241,511 |
|
10. |
Floor Plan |
|
Floor plan obligations - The Company has a floor plan note for up to $10,000,000. Upon bank approval, the Company may increase its $10,000,000 borrowing by an additional $3,000,000 for a total of $13,000,000. The current terms of the line of credit are contained in the fifth amendment dated June 30, 2015. The line of credit was set to expire on June 30, 2016 but was extended to June 30, 2017 per the sixth amendment dated June 30, 2016. The floor plan agreement is similar to the bailment pool agreements as the Company receives truck chassis on upfitting service installations. The note bears interest at an adjusted LIBOR rate, which was 1.99%, 1.91%, and 2.42% as of December 31, 2015, 2014 and 2013, respectively. Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo and Dejana Transit are obligated under the loan which is guaranteed by HHSC, Dejana Aerial, Dejana Leasing and Dejana Truck PA, and is collateralized by a security interest in the assets of Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo, and Dejana Transit. The obligation under the floor plan agreement as of December 31, 2015, 2014 and 2013 is $4,321,981, $6,471,500 and $6,248,058, respectively. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
During 2015 and 2014, the Company incurred approximately $113,000 and $138,000 in interest on the floor plan arrangements, respectively.
Letters of credit - In June 2014, Dejana Realty NJ obtained an irrevocable letter of credit issued by JP Morgan Chase for $14,554 with an original expiration date of June 14, 2015, and automatically extended for periods of one year, in favor of the Township of Cinnaminson, NJ (the Township). The Township required the letter of credit to ensure that the office and plant facility in Cinnaminson, NJ owned by Dejana Realty NJ is maintained free of defects. In November 2015, Dejana Realty NJ obtained an additional irrevocable letter of credit issued by JP Morgan Chase for $187,626 with an expiration date of November 10, 2017, in favor of the Township. The Township required the letter of credit as part of site improvements to be performed by Dejana Realty NJ.
Mortgage notes - On February 28, 2012, Dejana Realty NJ obtained an $825,000 mortgage loan, which was used to finance the purchase of property (with a carrying amount of approximately $3,156,000 at December 31, 2015) in Cinnaminson, NJ. The loan is payable over fifteen years in equal monthly principal installments of $4,583. The interest rate is 3.04% and the loan is secured by Dejana Realty NJs property. The loan is guaranteed by Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo, Dejana Transit and HHSC (collectively referred to as the Guarantors).
On February 28, 2012, Dejana Realty MD obtained a $2,475,000 mortgage loan, which was used to finance the construction of an office and plant facility in Smithfield, RI. The loan is payable over fifteen years in equal monthly principal installments of $13,750. The interest rate is 3.04% and the loan is secured by the property owned by Dejana Realty MD (with a carrying amount of approximately $2,161,000 at December 31, 2015). The loan is guaranteed by the Guarantors.
On March 20, 2013, Dejana Realty Smithfield obtained a $2,000,000 mortgage loan secured by a building owned by Dejana Realty Smithfield (with a carrying amount of approximately $5,055,000 at December 31, 2015). The loan bears interest at a rate of 3.17% per annum and is payable over fifteen years in equal monthly principal installments of $11,111, commencing April 20, 2013. On October 11, 2013, Dejana Realty Smithfield obtained an additional $1,500,000 mortgage loan, secured by the same building. The loan which bears a fixed rate of 3.24% is payable over ten years in equal monthly principal installments of $12,500. The loans are guaranteed by the Guarantors. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
On October 31, 2014, Dejana Realty Kings Park obtained a $475,000 mortgage loan, which was used to finance the purchase of land next to the facility in Kings Park, NY. The loan is payable over five years in equal monthly principal installments of $7,917. The loan bears interest at LIBOR (0.42% at December 31, 2015) plus 1.50%. In conjunction with the mortgage loan, the Company effectively fixed the interest rate under a related swap agreement (see Note 2). The loan is secured by property owned by Dejana Realty Kings Park (with a carrying amount of approximately $987,000 at December 31, 2015) and is guaranteed by the Guarantors, Dejana Truck PA, Dejana Aerial, Dejana Leasing and a shareholder/member of the Company. The loan was paid off and the swap transaction was terminated in September 2016.
Interest incurred on the mortgage notes, included interest related to the swap agreement, for the years ended December 31, 2015 and 2014 was $187,764 and $192,395, respectively.
Equipment financing - The Company has financed various equipment purchases as follows:
Effective May 29, 2014, Dejana Cargo is obligated pursuant to the terms of a $644,375 financing agreement for the purchase of equipment. The loan is payable in monthly installments of $11,602 including interest at 3.08%, secured by the equipment, and due in June 2019.
Effective September 17, 2014, Dejana Truck NY is obligated pursuant to the terms of a $260,566 financing agreement for the purchase of equipment. The loan is payable in monthly installments of $4,723 including interest at 3.35%, secured by the equipment, and due in October 2019.
Effective October 29, 2014, Dejana Truck NY is obligated pursuant to the terms of a $110,219 financing agreement for the purchase of equipment. The loan is payable in monthly installments of $1,988 including interest at 3.16%, secured by the equipment, and due in November 2019.
Effective October 29, 2014, Dejana Truck GTR PA is obligated pursuant to the terms of a $58,412 financing agreement for the purchase of equipment. The loan is payable in monthly installments of $1,054 including interest at 3.17%, secured by the equipment, and due in November 2019.
Interest incurred on the equipment financing loans for the years ended December 31, 2015 and 2014 was $28,588 and $12,418, respectively.
The equipment financing loans were paid off in July 2016 with the operating cash flows of the Company. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Principal payment requirements - Principal payments on the mortgage notes, equipment financing and acquisition of business note (Note 13) are due as follows: | |||||||||||||||||
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
Acquisition |
|
|
| ||||||||||
|
|
|
Mortgage |
|
Equipment |
|
of Business |
|
|
| ||||||||||
|
|
|
Notes |
|
Financing |
|
Note |
|
Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Years ending December 31, |
|
|
|
|
|
|
|
|
| ||||||||||
|
2016 |
|
$ |
598,333 |
|
$ |
210,341 |
|
$ |
120,000 |
|
$ |
928,674 |
| ||||||
|
2017 |
|
598,333 |
|
217,080 |
|
|
|
815,413 |
| ||||||||||
|
2018 |
|
598,333 |
|
224,037 |
|
|
|
822,370 |
| ||||||||||
|
2019 |
|
590,416 |
|
141,915 |
|
|
|
732,331 |
| ||||||||||
|
2020 |
|
503,333 |
|
|
|
|
|
503,333 |
| ||||||||||
|
Thereafter |
|
2,748,335 |
|
|
|
|
|
2,748,335 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
$ |
5,637,083 |
|
$ |
793,373 |
|
$ |
120,000 |
|
$ |
6,550,456 |
| ||||||
|
|
|
| |||||||||||||||||
11. |
Commitments |
|
Operating leases, as lessee - The Company leases various facilities under long term operating leases.
The minimum annual rentals are as follows: | |||||||||||||||||
|
|
|
| |||||||||||||||||
|
Years ending December 31, |
|
|
|
| |||||||||||||||
|
2016 |
|
$ |
137,000 |
|
| ||||||||||||||
|
2017 |
|
36,000 |
|
| |||||||||||||||
|
2018 |
|
36,000 |
|
| |||||||||||||||
|
2019 |
|
36,000 |
|
| |||||||||||||||
|
2020 |
|
36,000 |
|
| |||||||||||||||
|
Thereafter |
|
513,000 |
|
| |||||||||||||||
|
|
|
|
|
| |||||||||||||||
|
Total |
|
$ |
794,000 |
|
| ||||||||||||||
|
|
|
| |||||||||||||||||
|
|
|
Rent expense for the years ended December 31, 2015 and 2014 was approximately $250,000 and $302,000, respectively and is primarily included in cost of sales. See Note 15.
Operating leases, as lessor - The Company leases a plant and office facility in Smithfield, RI to an unrelated party. Minimum future rental income for the years ending December 31 is summarized as follows: | |||||||||||||||||
2016 |
|
$ |
99,015 |
|
2017 |
|
101,490 |
| |
2018 |
|
104,028 |
| |
2019 |
|
79,475 |
| |
|
|
$ |
384,008 |
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Rental income for the years ended December 31, 2015 and 2014 was $96,600 and $96,000, respectively.
Truck manufacturer bailment pool agreements - The Company receives, on consignment, truck chassis on which it performs upfitting service installations under bailment pool arrangements with major truck manufacturers. The Company never receives title to the truck chassis. The aggregate value of all bailment pool chassis on hand as of December 31, 2015, 2014 and 2013 is $21,469,494, $6,675,884 and $7,478,188, respectively. The Company is responsible to the manufacturer for interest on chassis held for upfitting. Interest rates vary depending on the number of days in the bailment pool. As of December 31, 2015, rates were based on prime (3.50% at December 31, 2015, and 3.25% at December 31, 2014 and 2013) plus a margin ranging from 0% to 8%.
During 2015 and 2014, the Company incurred approximately $40,000 and $11,000 in interest on the bailment pool arrangement, respectively. |
|
|
|
|
12. |
Defined |
|
The Company maintains a 401(k) plan, which covers substantially all of its employees. Under the provisions of the plan, eligible employees may defer a percentage of their compensation subject to the Internal Revenue Service limits. The Company has elected to contribute an amount equal to the employees contributions up to a maximum of 4% of the employees eligible compensation. Matching contributions to the plan during 2015 and 2014 approximated $289,000 and $246,000, respectively. |
|
|
|
|
13. |
Acquisition of
|
|
In connection with the acquisition of business in July 2013, the Company paid cash consideration of $440,000 and issued a note for $360,000 payable in equal annual installments of $120,000 beginning July 2014. |
|
|
|
|
14. |
Prior Period
|
|
Shareholders and members equity as of December 31, 2014 and 2013 have been adjusted to correct errors for the following:
· Inventory Costing - Inventories have been increased by $409,321 and $170,752 as of December 31, 2014 and 2013, respectively, as a result of certain inventory related costs not being reflected in their unit cost. Accordingly, Cost of Sales has been decreased by $238,569 for the year ended December 31, 2014. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
· Inventory Reserve - Inventories have been decreased by $141,923 and $123,823 as of December 31, 2014 and 2013, respectively, as a result of the Companys review of inventory on hand. Accordingly, Cost of Sales has been increased by $18,100 for the year ended December 31, 2014. |
|
|
|
|
|
· Accrual of Vacation Pay - Accounts payable and accrued expenses have been increased by $312,505 and $260,348 as of December 31, 2014 and 2013, respectively, as a result of the Companys review of its vacation policy. Accordingly, Cost of Sales, Selling and Shipping Expenses, and General and Administrative Expenses have been increased by $33,998, $2,025, and $16,134, respectively, for the year ended December 31, 2014. |
|
|
|
|
|
· Cash Surrender Value of Key Employee Life Insurance - Prepaid expenses and other current assets have been decreased by $25,000 as of December 31, 2014 and 2013, as a result of the Companys review of the total cash value of key employee life insurance policies. There was no effect on the combined statement of operations and comprehensive income for the year ended December 31, 2014. |
|
|
|
|
|
· Dejana Cargo and Van Interiors of Jacksonville, Inc. (Dejana Jax) - Dejana Jax, a separate affiliate combined with Dejana Transit ceased operations on December 31, 2014 and a liquidating distribution was made to the shareholder and subsequently recontributed to Dejana Cargo and Van Interiors, Inc. The liquidation of Dejana Jax did not result in a material loss or any significant impact to the ongoing operations of the Company. |
|
|
|
|
|
Due to the liquidation of Dejana Jax and the resulting liquidating distribution to the shareholder and subsequent contribution to Dejana Cargo and Van Interiors, Inc., retained earnings and members capital have been decreased by $470,563 with a corresponding increase in paid-in capital as of December 31, 2014. Additionally, common stock decreased by $100 with a corresponding decrease in Due from Shareholders as of December 31, 2014. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
· Accumulated Other Comprehensive Income - Accumulated Other Comprehensive Income (Loss) has been increased (decreased) by $(995) and $75,436 with a corresponding change in Retained Earnings and Members Capital as of December 31, 2014 and 2013, respectively, due to unrealized holding gains on marketable securities classified as available for sale previously reported in income. Accordingly, Miscellaneous Income has been increased by $76,431 with a corresponding change to Other Comprehensive Loss for the year ended December 31, 2014. |
|
|
|
|
|
The financial information included in the accompanying 2014 combined financial statements, 2013 combined balance sheet and notes thereto reflect the effects of the corrections and other adjustments described in the preceding discussion and tables. |
|
|
The principal effects of the restatement on each affected line item of the Companys December 31, 2014 combined financial statements and 2013 combined balance sheet are summarized as follows: |
|
|
December 31, |
|
December 31, |
| ||
|
|
2014 |
|
2013 |
| ||
|
|
Increase |
|
Increase |
| ||
|
|
(Decrease) |
|
(Decrease) |
| ||
|
|
|
|
|
| ||
Combined Balance Sheets: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Inventories |
|
$ |
267,398 |
|
$ |
46,929 |
|
Other current assets |
|
(25,000 |
) |
(25,000 |
) | ||
Accounts payable and accrued expenses |
|
312,505 |
|
260,348 |
| ||
Common stock |
|
(100 |
) |
|
| ||
Paid-in capital |
|
470,563 |
|
|
| ||
Retained earnings and members capital |
|
(539,675 |
) |
(313,855 |
) | ||
Accumulated other comprehensive income |
|
(995 |
) |
75,436 |
| ||
Due from shareholders |
|
(100 |
) |
|
| ||
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
| ||||||||
|
|
|
|
|
Year Ended |
|
| |||
|
|
|
|
|
December 31, |
|
| |||
|
|
|
|
|
2014 |
|
| |||
|
|
|
|
|
Increase |
|
| |||
|
|
|
|
|
(Decrease) |
|
| |||
|
|
|
|
|
|
|
| |||
|
Combined Statement of Operations and Comprehensive Income, and Statement of Shareholders and Members Equity |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
Cost of sales |
|
|
|
$ |
(186,471 |
) |
| ||
|
Selling and shipping expenses |
|
|
|
2,025 |
|
| |||
|
General and administrative expenses |
|
|
|
16,134 |
|
| |||
|
Miscellaneous income |
|
|
|
76,431 |
|
| |||
|
Net income |
|
|
|
244,743 |
|
| |||
|
Liquidating distributions |
|
|
|
470,563 |
|
| |||
|
Capital contribution |
|
|
|
470,563 |
|
| |||
|
Other comprehensive loss |
|
|
|
(76,431 |
) |
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
Cash |
|
| |||
|
|
|
|
|
Inflow |
|
| |||
|
|
|
|
|
(Outflow) |
|
| |||
|
|
|
|
|
|
|
| |||
|
Combined Statements of Cash Flows: |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
Cash flows from operating activities: |
|
|
|
|
|
| |||
|
Net income |
|
|
|
$ |
244,743 |
|
| ||
|
Unrealized gain on marketable securities |
|
|
|
(76,431 |
) |
| |||
|
Decrease in cash surrender value - key-employee life insurance |
|
|
|
60,000 |
|
| |||
|
Changes in operating assets: |
|
|
|
|
|
| |||
|
Inventories |
|
|
|
(220,469 |
) |
| |||
|
Accounts payable and accrued expenses |
|
|
|
52,157 |
|
| |||
|
Cash flows from investing activities - Premiums paid on key-employee life insurance |
|
|
|
(60,000 |
) |
| |||
|
Cash flows from financing activities: |
|
|
|
|
|
| |||
|
Liquidating distribution |
|
|
|
(470,563 |
) |
| |||
|
Capital contribution |
|
|
|
470,563 |
|
| |||
|
|
|
| |||||||
15. |
Subsequent Events |
|
In July 2016, pursuant to an Asset Purchase Agreement (the Agreement), the Company sold substantially all of the assets held by Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Truck PA, Dejana Cargo, Dejana Transit and Dejana Aerial (collectively, the Operating Entities) to an unrelated third party |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
(the Purchaser) for a cash purchase price of $180 million, subject to working capital and other adjustments. Of the $180 million cash purchase price, $18 million was deposited into an escrow account by the Purchaser to be disbursed upon satisfaction of certain terms outlined in the Agreement. As part of the Agreement, the Purchaser also assumed certain liabilities and contracts of the Operating Entities. In addition, the Agreement provides for potential earn out payments of up to $26 million, in the aggregate, contingent on the financial performance of the acquired business for each of the years ending December 31, 2016, 2017 and 2018. | |||||||||||
|
|
| |||||||||||
|
|
Under the Agreement, substantially all long-term operating leases, as lessee, were assigned and assumed by the Purchaser except for the long-term operating lease to Dejana Truck NY which was sub-leased to the Purchaser in July 2016 (see Note 11 and see below). The Company was not released by the lessors from its obligations under any of the leases assumed by the Purchaser. | |||||||||||
|
|
| |||||||||||
|
|
Prior to the sale transaction, the annual rentals relating to the intercompany leases for office and plant facilities that were leased to Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo and Dejana Transit, as described in Note 1, were eliminated in combination. The future minimum annual rentals associated with these leases approximated $7,005,000. In connection with the sale transaction, these lease agreements were terminated and the Company executed new lease agreements in July 2016 with the Purchaser. | |||||||||||
|
|
| |||||||||||
|
|
Future minimum rental income based on the new lease and sub-lease agreements is as follows: | |||||||||||
|
|
| |||||||||||
|
|
Years ending December 31, | |||||||||||
|
|
| |||||||||||
|
|
|
Lease |
|
Sub-lease |
|
|
|
| ||||
|
|
|
Agreements |
|
Agreement |
|
Total |
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
2016 |
|
$ |
792,750 |
|
$ |
18,000 |
|
$ |
810,750 |
|
| |
|
2017 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
|
| ||||
|
2018 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
|
| ||||
|
2019 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
|
| ||||
|
2020 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
|
| ||||
|
Thereafter |
|
8,720,250 |
|
513,000 |
|
9,233,250 |
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
$ |
15,855,000 |
|
$ |
675,000 |
|
$ |
16,530,000 |
|
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
The following unaudited pro forma balance sheet of the Company as of December 31, 2015 has been prepared by management after giving effect to the Companys sale of substantially all of the assets held by the Operating Entities and the assumption by the Purchaser of certain related liabilities, repayment of the equipment financing loans as described in Note 10, collections and repayments of the Companys intercompany receivables and payables and the distribution of the remaining operating cash flows of the Operating Entities had the transactions occurred on December 31, 2015. The pro forma financial information should be read in conjunction with historical financial information and is not necessarily indicative of the balance sheet at December 31, 2015 had the above mentioned transactions actually occurred at that date. | |||||
|
| |||||
|
UNAUDITED PROFORMA FINANCIAL INFORMATION | |||||
|
| |||||
|
Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates | |||||
|
| |||||
|
BALANCE SHEET | |||||
|
| |||||
|
December 31, |
|
2015 |
|
| |
|
|
|
|
|
| |
|
ASSETS |
|
|
|
| |
|
|
|
|
|
| |
|
Current Assets: |
|
|
|
| |
|
Cash and cash equivalents |
|
$ |
7,815,877 |
|
|
|
Marketable securities |
|
1,999,005 |
|
| |
|
Prepaid expenses and other current assets |
|
54,364 |
|
| |
|
|
|
|
|
| |
|
Total Current Assets |
|
9,869,246 |
|
| |
|
|
|
|
|
| |
|
Property, Plant and Equipment - net |
|
15,735,224 |
|
| |
|
|
|
|
|
| |
|
Sales Proceeds Held in Escrow |
|
18,000,000 |
|
| |
|
|
|
|
|
| |
|
Other Assets |
|
10,000 |
|
| |
|
|
|
|
|
| |
|
Deferred Costs - net of amortization |
|
5,357 |
|
| |
|
|
|
|
|
| |
|
Total Assets |
|
$ |
43,619,827 |
|
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
LIABILITIES AND EQUITY |
|
|
| |
|
|
|
| |
Current Liabilities: |
|
|
| |
Current maturities of mortgage notes payable |
|
$ |
598,333 |
|
Accounts payable and accrued expenses |
|
1,000 |
| |
|
|
|
| |
Total Current Liabilities |
|
599,333 |
| |
|
|
|
| |
Mortgage Notes Payable, less current maturities |
|
5,038,750 |
| |
|
|
|
| |
Due to Related Parties |
|
920,000 |
| |
|
|
|
| |
Total Liabilities |
|
6,558,083 |
| |
|
|
|
| |
Shareholders and Members Equity: |
|
|
| |
Common stock |
|
2,000 |
| |
Paid-in capital |
|
937,823 |
| |
* Retained earnings and members capital |
|
36,173,216 |
| |
Accumulated other comprehensive loss |
|
(995 |
) | |
Due from shareholders/members |
|
(50,300 |
) | |
|
|
|
| |
Total Shareholders and Members Equity |
|
37,061,744 |
| |
|
|
|
| |
Total Liabilities and Shareholders and Members Equity |
|
$ |
43,619,827 |
|
|
|
|
|
|
| |||
|
* |
Net of approximately $162,000,000 of sale proceeds distributed to the shareholders/members of the Company. | |
|
|
| |
|
|
On August 12, 2016, the Company acquired real property in Pennsylvania for a purchase price of approximately $2,300,000, through Dejana Realty of PA, LLC (newly formed in March 2016) to be leased to the Purchaser. |
Exhibit 99.3
DEJANA TRUCK & UTILITY
EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
(Unaudited)
Six Months Ended June 30, 2016 and 2015
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
CONTENTS
Financial Statements: |
|
|
|
Combined Balance Sheets |
1 |
|
|
Combined Statements of Operations and Comprehensive Income |
2 |
|
|
Combined Statements of Shareholders and Members Equity |
3 |
|
|
Combined Statements of Cash Flows |
4 |
|
|
Notes to Combined Financial Statements |
5 - 20 |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED BALANCE SHEETS
|
|
June 30, |
|
December 31, |
| ||
|
|
2016 |
|
2015 |
| ||
|
|
(Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current Assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
24,053,738 |
|
$ |
18,516,518 |
|
Marketable securities |
|
1,999,005 |
|
1,999,005 |
| ||
Accounts receivable, net of allowance for doubtful accounts of $477,020 and $477,090 |
|
16,443,499 |
|
19,710,665 |
| ||
Inventories |
|
19,372,287 |
|
21,659,300 |
| ||
Truck chassis floor plan inventory |
|
13,147,450 |
|
4,321,981 |
| ||
Prepaid expenses and other current assets |
|
772,878 |
|
1,174,842 |
| ||
Total Current Assets |
|
75,788,857 |
|
67,382,311 |
| ||
Property, Plant and Equipment - at cost, net of accumulated depreciation of $10,829,652 and $10,226,381 |
|
20,307,041 |
|
20,711,776 |
| ||
Other Assets |
|
669,444 |
|
373,477 |
| ||
Deferred Costs, net of amortization of $5,357 and $4,643 |
|
4,643 |
|
5,357 |
| ||
Total Assets |
|
$ |
96,769,985 |
|
$ |
88,472,921 |
|
LIABILITIES AND EQUITY |
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
| ||
Floor plan obligations |
|
$ |
13,147,450 |
|
$ |
4,321,981 |
|
Current maturities of loan payable |
|
|
|
120,000 |
| ||
Current maturities of equipment financing |
|
213,684 |
|
210,341 |
| ||
Current maturities of mortgage notes payable |
|
598,333 |
|
598,333 |
| ||
Accounts payable and accrued expenses |
|
9,828,590 |
|
9,839,367 |
| ||
Payroll and sales tax payable |
|
46,731 |
|
100,185 |
| ||
Current maturities of due to related parties |
|
630,000 |
|
630,000 |
| ||
Total Current Liabilities |
|
24,464,788 |
|
15,820,207 |
| ||
Long-term Liabilities: |
|
|
|
|
| ||
Equipment financing, less current maturities |
|
475,349 |
|
583,032 |
| ||
Mortgage notes payable, less current maturities |
|
4,739,583 |
|
5,038,750 |
| ||
Due to related parties, less current maturities |
|
920,000 |
|
920,000 |
| ||
Total Liabilities |
|
30,599,720 |
|
22,361,989 |
| ||
Shareholders and Members Equity: |
|
|
|
|
| ||
Common stock |
|
2,311 |
|
2,311 |
| ||
Paid-in capital |
|
11,712,074 |
|
11,712,074 |
| ||
Retained earnings and members capital |
|
54,507,675 |
|
54,448,342 |
| ||
Accumulated other comprehensive loss - Unrealized loss on marketable securities |
|
(995 |
) |
(995 |
) | ||
Due from shareholders/members |
|
(50,800 |
) |
(50,800 |
) | ||
Total Shareholders and Members Equity |
|
66,170,265 |
|
66,110,932 |
| ||
Total Liabilities and Shareholders and Members Equity |
|
$ |
96,769,985 |
|
$ |
88,472,921 |
|
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
Six Months Ended June 30, |
|
2016 |
|
2015 |
| ||
Net Sales |
|
$ |
75,160,620 |
|
$ |
63,227,960 |
|
|
|
|
|
|
| ||
Cost of Sales |
|
54,452,704 |
|
45,887,216 |
| ||
|
|
|
|
|
| ||
Gross Profit |
|
20,707,916 |
|
17,340,744 |
| ||
|
|
|
|
|
| ||
Operating Expenses: |
|
|
|
|
| ||
Selling and shipping expenses |
|
2,775,601 |
|
2,402,305 |
| ||
General and administrative expenses |
|
7,695,844 |
|
5,915,899 |
| ||
|
|
|
|
|
| ||
Total Operating Expenses |
|
10,471,445 |
|
8,318,204 |
| ||
|
|
|
|
|
| ||
Income from Operations |
|
10,236,471 |
|
9,022,540 |
| ||
|
|
|
|
|
| ||
Other Income (Expense): |
|
|
|
|
| ||
Interest and dividend income |
|
5,597 |
|
9,694 |
| ||
Interest expense |
|
(256,015 |
) |
(224,875 |
) | ||
Rent and miscellaneous income |
|
84,503 |
|
70,385 |
| ||
|
|
|
|
|
| ||
Total Other Income (Expense) |
|
(165,915 |
) |
(144,796 |
) | ||
|
|
|
|
|
| ||
Income Before Provision for Income Taxes |
|
10,070,556 |
|
8,877,744 |
| ||
|
|
|
|
|
| ||
Provision for Income Taxes |
|
17,110 |
|
14,513 |
| ||
|
|
|
|
|
| ||
Net Income |
|
10,053,446 |
|
8,863,231 |
| ||
|
|
|
|
|
| ||
Other Comprehensive Loss |
|
|
|
|
| ||
Unrealized loss on marketable securities |
|
|
|
(990 |
) | ||
|
|
|
|
|
| ||
Comprehensive Income |
|
$ |
10,053,446 |
|
$ |
8,862,241 |
|
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED STATEMENTS OF SHAREHOLDERS AND MEMBERS EQUITY
(Unaudited)
|
|
|
|
|
|
Retained |
|
|
|
Accumulated |
|
|
| ||||||
|
|
|
|
|
|
Earnings |
|
Due from |
|
Other |
|
|
| ||||||
|
|
Common |
|
Paid-In |
|
and Members |
|
Shareholders/ |
|
Comprehensive |
|
|
| ||||||
Six Months Ended June 30, 2016 and 2015 |
|
Stock |
|
Capital |
|
Capital |
|
Members |
|
Income (Loss) |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - January 1, 2015 |
|
$ |
2,311 |
|
$ |
11,712,074 |
|
$ |
40,695,543 |
|
$ |
(50,800 |
) |
$ |
(995 |
) |
$ |
52,358,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
8,863,231 |
|
|
|
|
|
8,863,231 |
| ||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
(990 |
) |
(990 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
8,862,241 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Distributions to Shareholders/Members |
|
|
|
|
|
(3,752,500 |
) |
|
|
|
|
(3,752,500 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - June 30, 2015 |
|
$ |
2,311 |
|
$ |
11,712,074 |
|
$ |
45,806,274 |
|
$ |
(50,800 |
) |
$ |
(1,985 |
) |
$ |
57,467,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - January 1, 2016 |
|
$ |
2,311 |
|
$ |
11,712,074 |
|
$ |
54,448,342 |
|
$ |
(50,800 |
) |
$ |
(995 |
) |
$ |
66,110,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Income |
|
|
|
|
|
10,053,446 |
|
|
|
|
|
10,053,446 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Distributions to Shareholders/Members |
|
|
|
|
|
(9,994,113 |
) |
|
|
|
|
(9,994,113 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - June 30, 2016 |
|
$ |
2,311 |
|
$ |
11,712,074 |
|
$ |
54,507,675 |
|
$ |
(50,800 |
) |
$ |
(995 |
) |
$ |
66,170,265 |
|
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, |
|
2016 |
|
2015 |
| ||
Cash Flows from Operating Activities: |
|
|
|
|
| ||
Net income |
|
$ |
10,053,446 |
|
$ |
8,863,231 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
736,656 |
|
634,590 |
| ||
(Gain) loss on sale of property and equipment |
|
(10,555 |
) |
6,113 |
| ||
Provision for doubtful accounts |
|
11,574 |
|
3,926 |
| ||
Changes in operating assets: |
|
|
|
|
| ||
Accounts receivable |
|
3,255,592 |
|
323,371 |
| ||
Inventories |
|
2,287,013 |
|
(1,244,092 |
) | ||
Truck chassis floor plan inventory |
|
(8,825,469 |
) |
2,788,938 |
| ||
Prepaid expenses and other current assets |
|
401,964 |
|
(102,524 |
) | ||
Changes in operating liabilities: |
|
|
|
|
| ||
Accounts payable and accrued expenses |
|
(10,777 |
) |
(2,735,096 |
) | ||
Payroll and sales tax payable |
|
(53,454 |
) |
(37,034 |
) | ||
|
|
|
|
|
| ||
Net Cash Provided by Operating Activities |
|
7,845,990 |
|
8,501,423 |
| ||
|
|
|
|
|
| ||
Cash Flows from Investing Activities: |
|
|
|
|
| ||
Purchase of property and equipment |
|
(611,354 |
) |
(511,236 |
) | ||
Proceeds from sale of property and equipment |
|
290,702 |
|
20,000 |
| ||
Premiums paid on key-employee life insurance |
|
(60,000 |
) |
(60,000 |
) | ||
Increase in other assets |
|
(235,967 |
) |
(11,200 |
) | ||
|
|
|
|
|
| ||
Net Cash Used in Investing Activities |
|
(616,619 |
) |
(562,436 |
) | ||
|
|
|
|
|
| ||
Cash Flows from Financing Activities: |
|
|
|
|
| ||
Floor plan obligations, net |
|
$ |
8,825,469 |
|
$ |
(2,788,938 |
) |
Principal payments of loan payable |
|
(120,000 |
) |
|
| ||
Principal payments of mortgage notes payable |
|
(299,167 |
) |
(299,166 |
) | ||
Principal payments of equipment financing |
|
(104,340 |
) |
(101,101 |
) | ||
Distributions to shareholders/members |
|
(9,994,113 |
) |
(3,752,500 |
) | ||
|
|
|
|
|
| ||
Net Cash Used in Financing Activities |
|
(1,692,151 |
) |
(6,941,705 |
) | ||
|
|
|
|
|
| ||
Net Increase in Cash and Cash Equivalents |
|
5,537,220 |
|
997,282 |
| ||
|
|
|
|
|
| ||
Cash and Cash Equivalents - beginning of period |
|
18,516,518 |
|
13,065,764 |
| ||
|
|
|
|
|
| ||
Cash and Cash Equivalents - end of period |
|
$ |
24,053,738 |
|
$ |
14,063,046 |
|
|
|
|
|
|
| ||
Supplemental Disclosure of Cash Flow Information - |
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
| ||
Interest |
|
$ |
247,729 |
|
$ |
232,732 |
|
Income taxes |
|
17,110 |
|
14,513 |
|
The accompanying notes are an integral part of these statements.
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. |
Nature of Business and Basis of Presentation |
|
The combined financial statements include the accounts of the following entities, all of which are under common ownership and control (collectively, the Company). All significant intercompany accounts and transactions have been eliminated. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Dejana Cargo and Van Body Equipment Company, Inc. (Dejana Cargo) - Dejana Cargos operations involve the manufacturing and installation of box truck equipment onto truck chassis (upfitting), sold mainly throughout the East Coast markets. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Dejana Realty of Maryland, LLC (Dejana Realty MD) - Dejana Realty MD owns an office and plant facility located in Baltimore, MD, which is leased to Dejana Cargo. |
|
|
|
|
2. |
Summary of Significant Accounting Policies |
|
Cash and cash equivalents - The Company considers cash and cash equivalents to include cash on hand, cash in various checking accounts at banks and investments in short term money market funds. The Company maintains cash and cash equivalents in various accounts, which at times may exceed federally insured limits. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Marketable securities - The Company accounts for its marketable securities in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320, Investments - Debt and Equity Securities. In accordance with the provisions of FASB ASC 320, the Companys marketable securities are classified as available for sale and are reported at their fair value. Fair value of mutual funds is based on quoted prices in active markets (Level 1 of the fair value hierarchy established under FASB ASC 820, Fair Value Measurement). |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Sales tax - The Company collects sales tax from nonexempt customers, on certain sales transactions, and remits the entire amount to various states. The Companys accounting policy is to exclude the tax collected and remitted to these states from revenue and cost of sales. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Dejana Truck MD, Dejana Truck PA, Dejana Aerial, Holdings, Dejana Realty NE, Dejana Realty BA, Dejana Realty NY, Dejana Kenwood, Dejana Realty MD, Dejana Rosedale, Dejana Eastbrook, Dejana Realty HT, Dejana Realty NJ, Dejana Island Realty, Dejana Realty Smithfield, Dejana Realty Kings Park, and Dejana Realty PA are all single member LLCs. Pursuant to provisions of the Internal Revenue Code, each item of income, gain, loss, deduction or credit is reportable by the member. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Shipping and handling - Shipping and handling costs incurred during the six months ended June 30, 2016 and 2015 were $94,735 and $75,311, respectively, and are included as a component of selling and shipping expenses. Subsequent events - The Company has evaluated events and transactions for potential recognition or disclosure through September 27, 2016, the date the financial statements were available to be issued. | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
3. |
Marketable Securities |
|
Marketable securities classified as available for sale at June 30, 2016 and December 31, 2015, consist of municipal bond funds as follows: | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
June 30, |
|
December 31, |
|
| ||||||||||||||
|
|
|
|
|
|
2016 |
|
2015 |
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
Cost |
|
$ |
2,000,000 |
|
$ |
2,000,000 |
|
| ||||||||||||
|
|
|
|
Unrealized holding losses |
|
(995 |
) |
(995 |
) |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
Fair value |
|
$ |
1,999,005 |
|
$ |
1,999,005 |
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
| |||||||||||||||||||||
4. |
Property, Plant |
|
Property, plant and equipment are summarized as follows: | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
Estimated |
|
|
|
|
|
| ||||||||||||||
|
|
|
|
Useful |
|
|
|
|
|
| ||||||||||||||
|
|
Depreciation |
|
Lives in |
|
June 30, |
|
December 31, |
|
| ||||||||||||||
|
|
Method |
|
Years |
|
2016 |
|
2015 |
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Land |
|
- |
|
- |
|
$ |
4,934,906 |
|
$ |
4,959,906 |
|
| ||||||||||||
Construction in progress |
|
- |
|
- |
|
429,007 |
|
64,020 |
|
| ||||||||||||||
Buildings and improvements |
|
Straight line |
|
7-40 years |
|
16,569,586 |
|
16,887,657 |
|
| ||||||||||||||
Machinery and equipment |
|
Straight line |
|
3-7 years |
|
5,700,036 |
|
5,523,416 |
|
| ||||||||||||||
Furniture and fixtures |
|
Straight line |
|
5-7 years |
|
520,496 |
|
520,496 |
|
| ||||||||||||||
Autos and trucks |
|
Straight line |
|
5-7 years |
|
2,982,662 |
|
2,982,662 |
|
| ||||||||||||||
|
|
|
|
|
|
31,136,693 |
|
30,938,157 |
|
| ||||||||||||||
Less accumulated depreciation |
|
|
|
|
|
10,829,652 |
|
10,226,381 |
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Property, plant and equipment, net |
|
|
|
|
|
$ |
20,307,041 |
|
$ |
20,711,776 |
|
| ||||||||||||
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
5. |
Inventories |
|
Inventories consist of the following: | ||||||||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
June 30, |
|
December 31, |
|
| ||
|
|
|
|
|
2016 |
|
2015 |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Upfitting equipment, components and parts |
|
$ |
16,434,250 |
|
$ |
18,472,710 |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Work in process |
|
2,938,037 |
|
3,186,590 |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
$ |
19,372,287 |
|
$ |
21,659,300 |
|
|
|
|
|
| ||||||||
6. |
Cash Surrender Value - Key Employee Life Insurance and Deferred Compensation Agreements |
|
Life insurance policies have been purchased by the Company intended to fund the deferred compensation agreements for certain key employees. Total balance for cash surrender value for key employee life insurance is approximately $126,000 and $66,000 as of June 30, 2016 and December 31, 2015, respectively, and is included in Other Assets. | ||||||||
|
|
|
| ||||||||
7. |
Warranty Costs |
|
Estimated future warranty costs are accrued and charged to cost of sales in the period the related revenue is recognized. Liability estimates are determined based on managements judgment considering such factors as historical experience, the likely current cost of corrective action and manufacturer participation in sharing the cost of corrective action. Warranty reserve at June 30, 2016 and December 31, 2015 is $35,000 and $-0- , respectively. | ||||||||
|
|
|
| ||||||||
8. |
Related Party Transactions |
|
At June 30, 2016 and December 31, 2015, the Company had a 5%, interest only, unsecured note payable to an officer of the Company in the amount of $920,000. Interest expense related to the note payable for each of the six month periods ended June 30, 2016 and 2015 amounted to $23,000. The note is due on demand but the parties have agreed the note will not be called before July 1, 2017. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
At June 30, 2016 and December 31, 2015, the Company had a 5%, interest only, unsecured note payable to a family trust established by an officer of the Company in the amount of $630,000. Interest expense related to the note payable for each of the six months ended June 30, 2016 and 2015 amounted to $15,750. The note is due on demand but the parties have agreed that the note would not be called before January 1, 2016. |
|
|
|
|
9. |
Shareholders Equity |
|
The details of common stock and paid-in capital as of June 30, 2016 and December 31, 2015 are as follows: |
|
|
|
|
|
Common |
|
Paid-in |
|
| ||
|
|
|
|
|
Stock |
|
Capital |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
HHSC |
|
|
|
|
|
| ||
|
|
|
No par value, |
|
|
|
|
|
| ||
|
|
|
200 shares authorized, |
|
|
|
|
|
| ||
|
|
|
200 shares issued |
|
$ |
2,000 |
|
$ |
937,822 |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Dejana Truck NE |
|
|
|
|
|
| ||
|
|
|
No par value, |
|
|
|
|
|
| ||
|
|
|
200 shares authorized, |
|
|
|
|
|
| ||
|
|
|
200 shares issued |
|
100 |
|
174,102 |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Dejana Cargo |
|
|
|
|
|
| ||
|
|
|
No par value, |
|
|
|
|
|
| ||
|
|
|
1,000 shares authorized, |
|
|
|
|
|
| ||
|
|
|
1,000 shares issued |
|
100 |
|
9,318,146 |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Dejana Leasing |
|
|
|
|
|
| ||
|
|
|
$.01 par value, |
|
|
|
|
|
| ||
|
|
|
200 shares authorized, |
|
|
|
|
|
| ||
|
|
|
100 shares issued |
|
1 |
|
6,201 |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Dejana Truck GTR PA |
|
|
|
|
|
| ||
|
|
|
No par value, |
|
|
|
|
|
| ||
|
|
|
10 shares authorized, |
|
|
|
|
|
| ||
|
|
|
10 shares issued |
|
100 |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Dejana Transit |
|
|
|
|
|
| ||
|
|
|
$1 par value, |
|
|
|
|
|
| ||
|
|
|
10 shares authorized, |
|
|
|
|
|
| ||
|
|
|
10 shares issued |
|
10 |
|
1,275,803 |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
$ |
2,311 |
|
$ |
11,712,074 |
|
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
10. |
Floor Plan Obligations, Equipment Financing and Mortgage Notes |
|
Floor plan obligations - The Company has a floor plan note for up to $10,000,000. Upon bank approval, the Company may increase its $10,000,000 borrowing by an additional $3,000,000 for a total of $13,000,000. The current terms of the line of credit are contained in the sixth amendment dated June 30, 2016. The line of credit is set to expire on June 30, 2017. The floor plan agreement is similar to the bailment pool agreements as the Company receives truck chassis on upfitting service installations. The note bears interest at an adjusted LIBOR rate, which was 2.21% and 1.99% as of June 30, 2016 and December 31, 2015, respectively. Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo and Dejana Transit are obligated under the loan which is guaranteed by HHSC, Dejana Aerial, Dejana Leasing and Dejana Truck PA, and is collateralized by a security interest in the assets of Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo, and Dejana Transit. The obligation under the floor plan agreement as of June 30, 2016 and December 31, 2015 is $13,147,450 and $4,321,981, respectively. The bank acknowledged the excess over the limit as of June 30, 2016 and did not require amending the agreement due to the impending sale in July 2016 (see Note 13). |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
On February 28, 2012, Dejana Realty MD obtained a $2,475,000 mortgage loan, which was used to finance the construction of an office and plant facility in Smithfield, RI. The loan is payable over fifteen years in equal monthly principal installments of $13,750. The interest rate is 3.04% and the loan is secured by the property owned by Dejana Realty MD (with a carrying amount of approximately $2,129,000 at June 30, 2016). The loan is guaranteed by the Guarantors. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Effective October 29, 2014, Dejana Truck NY is obligated pursuant to the terms of a $110,219 financing agreement for the purchase of equipment. The loan is payable in monthly installments of $1,988 including interest at 3.16%, secured by the equipment, and due in November 2019. | ||||||||||||||
|
|
|
| ||||||||||||||
|
|
|
Effective October 29, 2014, Dejana Truck GTR PA is obligated pursuant to the terms of a $58,412 financing agreement for the purchase of equipment. The loan is payable in monthly installments of $1,054 including interest at 3.17%, secured by the equipment, and due in November 2019. | ||||||||||||||
|
|
|
| ||||||||||||||
|
|
|
Interest incurred on the equipment financing loans for the six months ended June 30, 2016 and 2015 was $11,858 and $15,098, respectively. | ||||||||||||||
|
|
|
| ||||||||||||||
|
|
|
The equipment financing loans were paid off in July 2016 with the operating cash flows of the Company. | ||||||||||||||
|
|
|
| ||||||||||||||
|
|
|
Principal payment requirements - Principal payments on the mortgage notes and equipment financing are due as follows: | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
Mortgage |
|
Equipment |
|
|
|
| ||||||
|
|
|
|
|
Notes |
|
Financing |
|
Total |
|
| ||||||
|
|
|
Twelve |
|
|
|
|
|
|
|
| ||||||
|
|
|
2017 |
|
$ |
598,333 |
|
$ |
213,684 |
|
$ |
812,017 |
|
| |||
|
|
|
2018 |
|
598,333 |
|
220,531 |
|
818,864 |
|
| ||||||
|
|
|
2019 |
|
598,333 |
|
227,598 |
|
825,931 |
|
| ||||||
|
|
|
2020 |
|
542,916 |
|
27,220 |
|
570,136 |
|
| ||||||
|
|
|
2021 |
|
503,333 |
|
|
|
503,333 |
|
| ||||||
|
|
|
Thereafter |
|
2,496,668 |
|
|
|
2,496,668 |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
$ |
5,337,916 |
|
$ |
689,033 |
|
$ |
6,026,949 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
| |||||||||||||||
11. Commitments and |
|
Operating leases, as lessee - The Company leases various facilities under long term operating leases. | |||||||||||||||
|
|
| |||||||||||||||
|
|
The minimum annual rentals are as follows: | |||||||||||||||
|
|
|
|
|
|
| |||||||||||
|
|
Twelve months ending June 30, |
|
|
|
| |||||||||||
|
|
2017 |
|
$ |
143,000 |
|
| ||||||||||
|
|
2018 |
|
36,000 |
|
| |||||||||||
|
|
2019 |
|
36,000 |
|
| |||||||||||
|
|
2020 |
|
36,000 |
|
| |||||||||||
|
|
2021 |
|
36,000 |
|
| |||||||||||
|
|
Thereafter |
|
495,000 |
|
| |||||||||||
|
|
|
|
|
|
| |||||||||||
|
|
Total |
|
$ |
782,000 |
|
| ||||||||||
|
|
|
|
|
|
|
| ||||||||||
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
Rent expense for the six months ended June 30, 2016 and 2015 was approximately $185,000 and $103,000, respectively, and is primarily included in cost of sales. See Note 13. | |||||
|
|
|
| |||||
|
|
|
Operating leases, as lessor - The Company leases a plant and office facility in Smithfield, RI to an unrelated party. Minimum future rental income for the twelve months ending June 30 is summarized as follows: | |||||
|
|
|
|
|
|
|
| |
|
|
|
2017 |
|
$ |
100,245 |
|
|
|
|
|
2018 |
|
102,751 |
|
| |
|
|
|
2019 |
|
105,320 |
|
| |
|
|
|
2020 |
|
26,492 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
$ |
334,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
Rental income for the six months ended June 30, 2016 and 2015 was $49,200 and $48,000, respectively. | |||||
|
|
|
| |||||
|
|
|
Truck manufacturer bailment pool agreements - The Company receives, on consignment, truck chassis on which it performs upfitting service installations under bailment pool arrangements with major truck manufacturers. The Company never receives title to the truck chassis. The aggregate value of all bailment pool chassis on hand as of June 30, 2016 and December 31, 2015 is $32,242,043 and $21,469,494, respectively. The Company is responsible to the manufacturer for interest on chassis held for upfitting. Interest rates vary depending on the number of days in the bailment pool. As of June 30 2016, rates were based on prime (3.50% at June 30, 2016 and December 31, 2015) plus a margin ranging from 0% to 8%. | |||||
|
|
|
| |||||
|
|
|
During the six months ended June 30, 2016 and 2015, the Company incurred approximately $33,000 and $22,000 in interest on the bailment pool arrangement, respectively. | |||||
|
|
|
| |||||
12. |
Defined Contribution Retirement Plan |
|
The Company maintains a 401(k) plan, which covers substantially all of its employees. Under the provisions of the plan, eligible employees may defer a percentage of their compensation subject to the Internal Revenue Service limits. The Company has elected to contribute an amount equal to the employees contributions up to a maximum of 4% of the employees eligible compensation. Matching contributions to the plan during the six months ended June 30, 2016 and 2015 approximated $157,000 and $135,000, respectively. |
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
13. |
Subsequent Events |
|
In July 2016, pursuant to an Asset Purchase Agreement (the Agreement), the Company sold substantially all of the assets held by Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Truck PA, Dejana Cargo, Dejana Transit and Dejana Aerial (collectively, the Operating Entities) to an unrelated third party (the Purchaser) for a cash purchase price of $180 million, subject to working capital and other adjustments. Of the $180 million cash purchase price, $18 million was deposited into an escrow account by the Purchaser to be disbursed upon satisfaction of certain terms outlined in the Agreement. As part of the Agreement, the Purchaser also assumed certain liabilities and contracts of the Operating Entities. In addition, the Agreement provides for potential earn out payments of up to $26 million, in the aggregate, contingent on the financial performance of the acquired business for each of the years ending December 31, 2016, 2017 and 2018. | ||||||||||
|
|
|
| ||||||||||
|
|
|
Under the Agreement, substantially all long term operating leases, as lessee, were assigned and assumed by the Purchaser except for the long term operating lease to Dejana Truck NY which was sub-leased to the Purchaser in July 2016 (see Note 11 and see below). The Company was not released by the lessors from its obligations under any of the leases assumed by the Purchaser. | ||||||||||
|
|
|
| ||||||||||
|
|
|
Prior to the sale transaction, the annual rentals relating to the intercompany leases for office and plant facilities that were leased to Dejana Truck NY, Dejana Truck NE, Dejana Truck MD, Dejana Truck GTR PA, Dejana Cargo and Dejana Transit, as described in Note 1, were eliminated in combination. The future minimum annual rentals associated with these leases approximated $7,005,000. | ||||||||||
|
|
|
| ||||||||||
|
|
|
In connection with the sale transaction, these lease agreements were terminated and the Company executed new lease agreements in July 2016 with the Purchaser. | ||||||||||
|
|
|
| ||||||||||
|
|
|
Future minimum rental income based on the new lease and sub-lease agreements is as follows: | ||||||||||
|
|
|
| ||||||||||
|
|
|
Twelve months ending June 30, | ||||||||||
|
|
|
| ||||||||||
|
|
|
|
|
Lease |
|
Sub-lease |
|
Total |
| |||
|
|
|
2017 |
|
$ |
1,585,500 |
|
$ |
36,000 |
|
$ |
1,621,500 |
|
|
|
|
2018 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
| |||
|
|
|
2019 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
| |||
|
|
|
2020 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
| |||
|
|
|
2021 |
|
1,585,500 |
|
36,000 |
|
1,621,500 |
| |||
|
|
|
Thereafter |
|
7,927,500 |
|
495,000 |
|
8,422,500 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
$ |
15,855,000 |
|
$ |
675,000 |
|
$ |
16,530,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
The following unaudited pro forma balance sheet of the Company as of June 30, 2016 has been prepared by management after giving effect to the Companys sale of substantially all of the assets held by the Operating Entities and the assumption by the Purchaser of certain related liabilities, repayment of the equipment financing loans as described in Note 10, collections and repayments of the Companys intercompany receivables and payables and the distribution of the remaining operating cash flows of the Operating Entities, had the transactions occurred on June 30, 2016. The pro forma financial information should be read in conjunction with historical financial information and is not necessarily indicative of the balance sheet at June 30, 2016 had the above mentioned transactions actually occurred at that date. | ||||
|
|
|
| ||||
|
|
|
UNAUDITED PROFORMA FINANCIAL INFORMATION | ||||
|
|
|
| ||||
|
|
|
Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates | ||||
|
|
|
| ||||
|
|
|
BALANCE SHEET | ||||
|
|
|
| ||||
|
|
|
June 30, |
|
2016 |
| |
|
|
|
|
|
|
| |
|
|
|
ASSETS |
|
|
| |
|
|
|
|
|
|
| |
|
|
|
Current Assets: |
|
|
| |
|
|
|
Cash and cash equivalents |
|
$ |
7,846,142 |
|
|
|
|
Marketable securities |
|
1,999,005 |
| |
|
|
|
Prepaid expenses and other current assets |
|
35,927 |
| |
|
|
|
|
|
|
| |
|
|
|
Total Current Assets |
|
9,881,074 |
| |
|
|
|
|
|
|
| |
|
|
|
Property, Plant and Equipment - net |
|
15,600,817 |
| |
|
|
|
|
|
|
| |
|
|
|
Sales Proceeds Held in Escrow |
|
18,000,000 |
| |
|
|
|
|
|
|
| |
|
|
|
Other Assets |
|
235,000 |
| |
|
|
|
|
|
|
| |
|
|
|
Deferred Costs - net of amortization |
|
4,643 |
| |
|
|
|
|
|
|
| |
|
|
|
Total Assets |
|
$ |
43,721,534 |
|
|
|
|
|
|
|
|
|
DEJANA TRUCK & UTILITY EQUIPMENT COMPANY
SUBSIDIARIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
|
|
|
LIABILITIES AND EQUITY |
|
|
| |
|
|
|
|
|
|
| |
|
|
|
Current Liabilities: |
|
|
| |
|
|
|
Current maturities of mortgage notes payable |
|
$ |
598,333 |
|
|
|
|
Accounts payable and accrued expenses |
|
1,000 |
| |
|
|
|
|
|
|
| |
|
|
|
Total Current Liabilities |
|
599,333 |
| |
|
|
|
|
|
|
| |
|
|
|
Mortgage Notes Payable, less current maturities |
|
4,739,583 |
| |
|
|
|
|
|
|
| |
|
|
|
Due to Related Parties |
|
920,000 |
| |
|
|
|
|
|
|
| |
|
|
|
Total Liabilities |
|
6,258,916 |
| |
|
|
|
|
|
|
| |
|
|
|
Shareholders and Members Equity: |
|
|
| |
|
|
|
Common stock |
|
2,000 |
| |
|
|
|
Paid-in capital |
|
937,823 |
| |
|
|
|
* Retained earnings and members capital |
|
36,574,090 |
| |
|
|
|
Accumulated other comprehensive loss |
|
(995 |
) | |
|
|
|
Due from shareholders/members |
|
(50,300 |
) | |
|
|
|
|
|
|
| |
|
|
|
Total Shareholders and Members Equity |
|
37,462,618 |
| |
|
|
|
|
|
|
| |
|
|
|
Total Liabilities and Shareholders and Members Equity |
|
$ |
43,721,534 |
|
|
|
|
|
|
|
|
|
|
|
|
* Net of approximately $162,000,000 of sale proceeds distributed to the shareholders/members of the Company. |
|
|
|
|
|
|
|
On August 12, 2016, the Company acquired real property in Pennsylvania for a purchase price of approximately $2,300,000, through Dejana Realty PA to be leased to the Purchaser. |
Exhibit 99.4
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)
On July 15, 2016, Douglas Dynamics, Inc. (the Company) acquired substantially all of the assets of Dejana Truck & Utility Equipment Company, Inc. and certain related entities (Dejana) through the Companys wholly-owned subsidiary Acquisition Delta LLC. The Company paid cash consideration of $180,000, subject to an estimated working capital adjustment that reduced the purchase price by $3,989. The Asset Purchase Agreement governing the transaction also provides for potential earn out payments of up to $26,000 in the aggregate, contingent on the financial performance of the acquired business for each of the fiscal years ending December 31, 2016, 2017 and 2018.
On July 15, 2016, the Company also entered into an amendment (the Revolving Credit Agreement Amendment) to the Second Amended and Restated Credit and Guaranty Agreement dated as of December 31, 2014 (the Revolving Credit Agreement) and entered into a joinder agreement and amendment (the Term Loan Credit Agreement Amendment) to the Amended and Restated Credit and Guaranty Agreement dated as of December 31, 2014 (the Term Loan Credit Agreement) with the banks and financial institutions listed therein, as lenders, J.P. Morgan Securities LLC and Wells Fargo Bank, N.A., as joint bookrunners and joint lead arrangers, JPMorgan Chase Bank, N.A., as collateral agent and administrative agent, and Wells Fargo Bank, N.A., as syndication agent. The purchase price was funded through a combination of available cash resources, drawing $30,000 on the Companys Revolving Credit Agreement, as amended, and establishing an additional term loan commitment in the amount of $130,000, net of a $650 discount, on the Term Loan Credit Agreement, as amended.
Headquartered in Kings Park, New York, Dejana is an up fitter of Class 4-6 trucks and other commercial work vehicles in the Eastern U.S. Dejana is also a specialized manufacturer of storage solutions for trucks and vans and cable pulling equipment for trucks. Dejana maintains seven manufacturing and up fit facilities and currently employs approximately 500 people in five states.
Set forth below are the Companys unaudited pro forma combined condensed balance sheet as of June 30, 2016, reflecting the asset acquisition and the impact of the Companys Term Loan Credit Agreement Amendment which was used to fund the Dejana acquisition (collectively, the Transactions) as if the Transactions had taken place on June 30, 2016, and the Companys unaudited pro forma combined condensed statements of operations for the six months ended June 30, 2016 and the fiscal year ended December 31, 2015, reflecting the Transactions as if they had taken place on January 1, 2015.
The historical combined financial information of Dejana has been adjusted in the unaudited pro forma combined financial statements to give effect to pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results. As there were material transactions between the Company and Dejana during the periods presented in the unaudited pro forma combined condensed financial statements, such transactions have been eliminated.
The unaudited pro forma combined condensed financial information should be read in conjunction with the accompanying notes thereto. In addition, the unaudited pro forma combined condensed financial information was based on and should be read in conjunction with the:
· Separate historical combined financial statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates as of and for the six month period ended June 30, 2016 and the related notes and the combined audited financial statements which comprise the combined balance sheets as of December 31, 2015, 2014 and 2013, and the related combined statements of operations and comprehensive income, shareholders and members equity, and cash flows for each of the two years in the period ended December 31, 2015, and the related notes to the combined financial statements, included as an exhibit to this Current Report on Form 8-K/A; and
· Separate historical financial statements of the Company as of and for the six months ended June 30, 2016 and the related notes included in its Quarterly Report on Form 10-Q and separate historical financial statements of the Company for the year ended December 31, 2015 and the related notes included in its Annual Report on Form 10-K;
The Unaudited Pro Forma Combined Condensed Financial Information has been prepared using the acquisition method of accounting under U.S. generally accepted accounting principles. The Unaudited Pro Forma Combined Condensed Financial Information will differ from the final acquisition accounting for a number of reasons, including the fact that the Companys estimates of fair value are preliminary and subject to change when the formal valuation and other studies are finalized. The adjustments that may occur to the preliminary estimates could have a material impact on the accompanying Unaudited Pro Forma Combined Condensed Financial Information.
The Unaudited Pro Forma Combined Condensed Financial Information is presented for information purposes only. It has been prepared in accordance with the regulations of the Securities and Exchange Commission and is not necessarily indicative of what the Companys financial position or results of operations actually would have been had it completed the acquisition at the dates indicated, nor does it purport to project the future financial position or operating results of the combined company.
The finalization of the Companys purchase accounting assessment will result in changes in the valuation of assets and liabilities acquired which could be material. The Company will finalize the purchase price allocation as soon as practicable within the measurement period in accordance with Accounting Standards Codification (ASC) Topic 805-10, Business Combinations Overall (ASC 805-10), but in no event later than one year following the merger date. The purchase price allocation for Dejana and the pro forma adjustments are preliminary and based on information available to date, and are subject to revision as additional information becomes available. The actual adjustments described herein were made as of the closing date of the Transactions and are expected to change based upon the finalization of appraisals and other valuation studies the Company will obtain. Revisions to the preliminary purchase price could materially change the pro forma amounts of total assets, total liabilities, stockholders equity, depreciation and amortization and income tax expense.
The Unaudited Pro Forma Combined Condensed Financial Information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the merger; any costs to combine the operations of the Company and Dejana; or any costs necessary to achieve these cost savings, operating synergies and potential revenue enhancements.
Douglas Dynamics, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
As of June 30, 2016
|
|
|
|
Dejana Truck & Utility |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
Equipment Company |
|
|
|
Dejana Pro-Forma |
|
|
|
|
| ||||||
|
|
Douglas |
|
Subsidiaries & Affiliates |
|
Pro Forma Adjustments |
|
For assets of entities |
|
Pro Forma |
|
|
| ||||||
|
|
Dynamics, Inc. |
|
(unaudited) |
|
For Entities not Acquired |
|
acquired |
|
Adjustments |
|
Pro Forma |
| ||||||
(Dollars in thousands) |
|
(unaudited) |
|
(Note 1) |
|
(Note 1) |
|
(Note 1) |
|
(Note 2 & 3) |
|
Combined |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
|
$ |
48,666 |
|
$ |
24,054 |
|
$ |
(7,846 |
) |
$ |
16,208 |
|
$ |
(45,876 |
) |
$ |
18,998 |
|
Marketable Securities |
|
|
|
1,999 |
|
(1,999 |
) |
|
|
|
|
|
| ||||||
Accounts receivable, net |
|
66,617 |
|
16,443 |
|
|
|
16,443 |
|
|
|
83,060 |
| ||||||
Inventories |
|
60,296 |
|
19,373 |
|
|
|
19,373 |
|
125 |
|
79,794 |
| ||||||
Truck chassis floor plan inventory |
|
|
|
13,147 |
|
|
|
13,147 |
|
|
|
13,147 |
| ||||||
Deferred income taxes |
|
6,155 |
|
|
|
|
|
|
|
|
|
6,155 |
| ||||||
Prepaid and other current assets |
|
1,695 |
|
773 |
|
(36 |
) |
737 |
|
|
|
2,432 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total current assets |
|
183,429 |
|
75,789 |
|
(9,881 |
) |
65,908 |
|
(45,751 |
) |
203,586 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Property, plant, and equipment, net |
|
44,677 |
|
20,307 |
|
(15,601 |
) |
4,706 |
|
1,229 |
|
50,612 |
| ||||||
Goodwill |
|
160,932 |
|
|
|
|
|
|
|
71,042 |
|
231,974 |
| ||||||
Other intangible assets, net |
|
124,195 |
|
285 |
|
|
|
285 |
|
81,915 |
|
206,395 |
| ||||||
Other long-term assets |
|
3,521 |
|
440 |
|
(292 |
) |
148 |
|
|
|
3,669 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets |
|
$ |
516,754 |
|
$ |
96,821 |
|
$ |
(25,774 |
) |
$ |
71,047 |
|
$ |
108,435 |
|
$ |
696,236 |
|
Douglas Dynamics, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet (Continued)
As of June 30, 2016
|
|
|
|
Dejana Truck & Utility |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
Equipment Company |
|
|
|
Dejana Pro-Forma |
|
|
|
|
| ||||||
|
|
Douglas |
|
Subsidiaries & Affiliates |
|
Pro Forma Adjustments |
|
For assets of entities |
|
Pro Forma |
|
|
| ||||||
|
|
Dynamics, Inc. |
|
(unaudited) |
|
For Entities not Acquired |
|
acquired |
|
Adjustments |
|
Pro Forma |
| ||||||
|
|
(unaudited) |
|
(Note 1) |
|
(Note 1) |
|
(Note 1) |
|
(Note 2 & 3) |
|
Combined |
| ||||||
Liabilities and stockholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable, accrued expenses & other current liabilities |
|
33,245 |
|
10,506 |
|
(630 |
) |
9,876 |
|
|
|
43,121 |
| ||||||
Floor plan obligations |
|
|
|
13,147 |
|
|
|
13,147 |
|
|
|
13,147 |
| ||||||
Income taxes payable |
|
5,428 |
|
|
|
|
|
|
|
|
|
5,428 |
| ||||||
Short term borrowings |
|
|
|
|
|
|
|
|
|
20,000 |
|
20,000 |
| ||||||
Current portion of long-term debt |
|
1,629 |
|
812 |
|
(598 |
) |
214 |
|
3,046 |
|
4,889 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total current liabilities |
|
40,302 |
|
24,465 |
|
(1,228 |
) |
23,237 |
|
23,046 |
|
86,585 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Retiree health benefit obligation |
|
6,855 |
|
|
|
|
|
|
|
|
|
6,855 |
| ||||||
Pension obligation |
|
10,117 |
|
|
|
|
|
|
|
|
|
10,117 |
| ||||||
Deferred income taxes |
|
56,558 |
|
|
|
|
|
|
|
|
|
56,558 |
| ||||||
Long-term debt, less current portion |
|
181,919 |
|
5,215 |
|
(4,740 |
) |
475 |
|
123,293 |
|
305,687 |
| ||||||
Other long-term liabilities |
|
9,416 |
|
920 |
|
(920 |
) |
|
|
10,200 |
|
19,616 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Stock, par value $0.01, 200,000,000 shares authorized, 22,501,640 shares issued and outstanding at June 30, 2016 |
|
225 |
|
2 |
|
|
|
2 |
|
(2 |
) |
225 |
| ||||||
Additional paid-in capital |
|
143,361 |
|
11,712 |
|
49 |
|
11,761 |
|
(11,761 |
) |
143,361 |
| ||||||
Retained Earnings |
|
75,711 |
|
54,508 |
|
(19,566 |
) |
34,942 |
|
(35,711 |
) |
74,942 |
| ||||||
Accumulated other comprehensive loss, net of tax |
|
(7,710 |
) |
(1 |
) |
1 |
|
|
|
|
|
(7,710 |
) | ||||||
Total shareholders equity |
|
211,587 |
|
66,221 |
|
(19,516 |
) |
46,705 |
|
(48,104 |
) |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities and stockholders equity |
|
$ |
516,754 |
|
$ |
96,821 |
|
$ |
(25,774 |
) |
$ |
71,047 |
|
$ |
108,435 |
|
$ |
696,236 |
|
Douglas Dynamics, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Six Months Ended June 30, 2016
|
|
|
|
Dejana Truck & Utility |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
Equipment Company |
|
|
|
Dejana Pro-Forma |
|
|
|
|
| ||||||
|
|
Douglas |
|
Subsidiaries & Affiliates |
|
Pro Forma Adjustments |
|
Results of entities |
|
Pro Forma |
|
|
| ||||||
|
|
Dynamics, Inc. |
|
(unaudited) |
|
For Entities not Acquired |
|
acquired |
|
Adjustments |
|
Pro Forma |
| ||||||
(In thousands except per share amounts) |
|
(unaudited) |
|
(Note 1) |
|
(Note 1) |
|
(Note 1) |
|
(Note 4) |
|
Combined |
| ||||||
Net sales |
|
$ |
162,552 |
|
$ |
75,161 |
|
$ |
|
|
$ |
75,161 |
|
$ |
(2,844 |
) |
$ |
234,869 |
|
Cost of sales |
|
106,900 |
|
54,453 |
|
625 |
|
55,078 |
|
(2,817 |
) |
159,161 |
| ||||||
Gross profit |
|
55,652 |
|
20,708 |
|
(625 |
) |
20,083 |
|
(27 |
) |
75,708 |
| ||||||
Selling, general, and administrative expense |
|
22,225 |
|
10,471 |
|
(155 |
) |
10,316 |
|
(1,833 |
) |
30,708 |
| ||||||
Intangibles amortization |
|
3,452 |
|
|
|
|
|
|
|
2,327 |
|
5,779 |
| ||||||
Income from operations |
|
29,975 |
|
10,237 |
|
(470 |
) |
9,767 |
|
(521 |
) |
39,221 |
| ||||||
Interest (expense) income, net |
|
(5,735 |
) |
(250 |
) |
105 |
|
(145 |
) |
(3,268 |
) |
(9,148 |
) | ||||||
Litigation proceeds |
|
10,050 |
|
|
|
|
|
|
|
|
|
10,050 |
| ||||||
Other (expense) income, net |
|
(133 |
) |
85 |
|
(61 |
) |
24 |
|
|
|
(109 |
) | ||||||
Income before income taxes |
|
34,157 |
|
10,072 |
|
(426 |
) |
9,646 |
|
(3,789 |
) |
40,014 |
| ||||||
Income tax expense |
|
12,551 |
|
17 |
|
(3 |
) |
14 |
|
2,640 |
|
15,205 |
| ||||||
Net income |
|
$ |
21,606 |
|
$ |
10,055 |
|
$ |
(423 |
) |
$ |
9,632 |
|
$ |
(6,429 |
) |
$ |
24,809 |
|
Less: Net income attributable to participating securities |
|
289 |
|
|
|
|
|
|
|
|
|
332 |
| ||||||
Net income attributable to common shareholders |
|
$ |
21,317 |
|
|
|
|
|
|
|
|
|
$ |
24,477 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
|
22,459,488 |
|
|
|
|
|
|
|
|
|
22,459,488 |
| ||||||
Diluted |
|
22,459,488 |
|
|
|
|
|
|
|
|
|
22,459,488 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic earnings per common share attributable to common shareholders |
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
$ |
1.09 |
| ||||
Earnings per common share assuming dilution attributable to common shareholders |
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
$ |
1.08 |
| ||||
Cash dividends declared and paid per share |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
$ |
0.47 |
|
Douglas Dynamics, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Fiscal Year Ended December 31, 2015
|
|
|
|
Dejana Truck & Utility |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
Equipment Company |
|
|
|
Dejana Pro-Forma |
|
|
|
|
| ||||||
|
|
Douglas |
|
Subsidiaries & Affiliates |
|
Pro Forma Adjustments |
|
Results of entities |
|
Pro Forma |
|
|
| ||||||
|
|
Dynamics, Inc. |
|
(audited) |
|
For Entities not Acquired |
|
acquired |
|
Adjustments |
|
Pro Forma |
| ||||||
(In thousands except per share amounts) |
|
(audited) |
|
(Note 1) |
|
(Note 1) |
|
(Note 1) |
|
(Note 4) |
|
Combined |
| ||||||
Net sales |
|
$ |
400,408 |
|
$ |
139,871 |
|
$ |
|
|
$ |
139,871 |
|
$ |
(13,289 |
) |
$ |
526,990 |
|
Cost of sales |
|
267,545 |
|
102,071 |
|
1,168 |
|
103,239 |
|
(13,235 |
) |
357,549 |
| ||||||
Gross profit |
|
132,863 |
|
37,800 |
|
(1,168 |
) |
36,632 |
|
(54 |
) |
169,441 |
| ||||||
Selling, general, and administrative expense |
|
48,150 |
|
18,064 |
|
(280 |
) |
17,784 |
|
(2,129 |
) |
63,805 |
| ||||||
Intangibles amortization |
|
7,362 |
|
|
|
|
|
|
|
6,354 |
|
13,716 |
| ||||||
Income from operations |
|
77,351 |
|
19,736 |
|
(888 |
) |
18,848 |
|
(4,279 |
) |
91,920 |
| ||||||
Interest (expense) income, net |
|
(10,895 |
) |
(420 |
) |
225 |
|
(195 |
) |
(6,630 |
) |
(17,720 |
) | ||||||
Other (expense) income, net |
|
(193 |
) |
162 |
|
(110 |
) |
52 |
|
|
|
(141 |
) | ||||||
Income before income taxes |
|
66,263 |
|
19,478 |
|
(773 |
) |
18,705 |
|
(10,909 |
) |
74,059 |
| ||||||
Income tax expense |
|
22,087 |
|
32 |
|
(7 |
) |
25 |
|
6,030 |
|
28,142 |
| ||||||
Net income |
|
$ |
44,176 |
|
$ |
19,446 |
|
$ |
(766 |
) |
$ |
18,680 |
|
$ |
(16,939 |
) |
$ |
45,917 |
|
Less: Net income attributable to participating securities |
|
604 |
|
|
|
|
|
|
|
|
|
628 |
| ||||||
Net income attributable to common shareholders |
|
$ |
43,572 |
|
|
|
|
|
|
|
|
|
$ |
45,289 |
| ||||
|
|
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Earnings per share: |
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Weighted average number of common shares outstanding: |
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Basic |
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22,329,044 |
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22,329,044 |
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Diluted |
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22,341,775 |
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22,341,775 |
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Basic earnings per common share attributable to common shareholders |
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$ |
1.95 |
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$ |
2.03 |
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Earnings per common share assuming dilution attributable to common shareholders |
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$ |
1.94 |
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$ |
2.01 |
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Cash dividends declared and paid per share |
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$ |
0.89 |
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$ |
0.89 |
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Note 1 Presentation of Entities Acquired
Separate historical combined financial statements of Dejana Truck & Utility Equipment Company Subsidiaries and Affiliates were prepared including entities of which assets were not purchased by the Company in order to comply with Generally Accepted Accounting Principles (GAAP). For purposes of the Unaudited Pro Forma Combined Condensed Financial Information, the Company has removed the results and assets of the Dejana entities that the Company did not purchase.
Note 2 Preliminary Purchase Consideration Allocation
The final purchase consideration amount is pending, based on the final agreement of the adjustment to the cash consideration related to the level of net working capital transferred at closing. The preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is based on the estimated fair values at the date of acquisition. The fair values of the assets and liabilities included in the table below are preliminary and subject to change as the Company is currently in the process of obtaining third-party valuations.
The excess of the purchase consideration over the net tangible and identifiable intangible assets is reflected as goodwill. As the transaction was an asset purchase agreement for U.S. federal income tax purposes, only the newly created intangible assets and goodwill will be deductible over a fifteen year period for tax purposes.
The following table summarizes the preliminary estimates of fair value of the assets acquired and the liabilities assumed if the acquisition of Dejana had taken place on June 30, 2016.
(In thousands) |
|
June 30, 2016 |
| |
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| |
Accounts receivable |
|
$ |
16,443 |
|
Inventories |
|
19,498 |
| |
Truck chassis floor plan inventory |
|
13,147 |
| |
Prepaid expenses and other current assets |
|
737 |
| |
Property, plant and equipment |
|
5,935 |
| |
Goodwill |
|
71,042 |
| |
Intangible assets |
|
82,200 |
| |
Other assets - long term |
|
148 |
| |
Accounts payable and other current liabilities |
|
(9,876 |
) | |
Floor plan obligations |
|
(13,147 |
) | |
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| |
Total liabilities assumed |
|
$ |
186,127 |
|
The goodwill for the acquisition is a result of acquiring and retaining the existing workforces and expected synergies from integrating the operations into the Company. For book purposes, the acquired intangible assets include customer relationships of $63,400 being amortized over 15 years, patents of $1,500 being amortized over 14 years, non-compete agreements of $1,600 being amortized over 5 years, $1,700 backlog being amortized over three months and trademarks of $14,000 that possess indefinite lives.
Inventories reflect adjustments of $125 to establish the estimated fair market value. Property plant and equipment reflects an adjustment of $1,229 to establish the estimated fair market value. These adjustments have been reflected on the June 30, 2016 pro forma balance sheet.
For purposes of these Unaudited Pro Forma Combined Condensed Financial Statements, a blended statutory tax rate of 38.0% has been used. This rate is an estimate and does not take into account any possible future tax planning or events that may occur for the combined company.
Note 3 Adjustments to the Unaudited Pro Forma Combined Condensed Balance Sheet
Fair value adjustments were made to certain intangible assets, property, plant and equipment, and inventories. Inventories have been adjusted to their estimated fair market value and will be charged to cost of sales over a period of three months. Amortizable intangible assets are being amortized over estimated useful lives and property, plant and equipment are being depreciated over the estimated useful lives of the respective assets using the straight-line method for financial reporting. The current portion of long-term debt and long term debt, less current maturities, have both been updated to reflect the updated Term Loan Agreement. Retained earnings and cash have been adjusted for $769 in transaction related costs. Contingent consideration with a fair value of $10,200 has been included to represent the earn out consideration contingent on the financial performance of the acquired business for each of the fiscal years ending December 31, 2016, 2017 and 2018.
Note 4 Adjustments to the Unaudited Pro Forma Combined Condensed Statement of Operations
As there were material transactions between the Company and Dejana during the periods presented in the unaudited pro forma combined condensed financial statements, such transactions have been eliminated. Net sales and cost of sales of $2,844 and $13,289 have been eliminated for the six months ended June 30, 2016 and year ended December 31, 2015, respectively. Acquisition expenses of $769 were excluded in the combined condensed statement of operations for the six months ended June 30, 2016. There were no acquisition related expenses incurred in the consolidated statement of operations for the year ended December 31, 2015. The pro forma amounts include additional amortization of intangible assets, depreciation of assets at fair value, interest expense on increased debt levels and the related tax effects of these adjustments. Additionally, compensation amounts of $1,102 and $2,204 for the six months ended June 30, 2016 and year ended December 31, 2015 have been excluded in the combined condensed statement of operations due to new compensation agreements with management of Dejana that were entered into as part of the business combination.