-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ffj0r1bpj5uFloyHgjTDLrVpuh4fRDQ7K9cmCjG5BEN4l/J7enQzMx2SopPQNAdg aKGtwuW9B+HKN3yI/NFphA== 0000031617-94-000020.txt : 19941110 0000031617-94-000020.hdr.sgml : 19941110 ACCESSION NUMBER: 0000031617-94-000020 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940326 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19941109 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDO CORP CENTRAL INDEX KEY: 0000031617 STANDARD INDUSTRIAL CLASSIFICATION: 3812 IRS NUMBER: 110707740 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03985 FILM NUMBER: 94558205 BUSINESS ADDRESS: STREET 1: 14 04 111TH ST CITY: COLLEGE POINT STATE: NY ZIP: 113561434 BUSINESS PHONE: 7183214000 MAIL ADDRESS: STREET 1: 14 04 111TH ST CITY: COLLEGE POINT STATE: NY ZIP: 11356-1434 8-K/A 1 AMENDMENT TO FORM 8-K OF 12/17/93 EDO CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Amendment to application or report filed pursuant to Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 EDO CORPORATION (Exact Name of Registrant as specified in Charter) Amendment No. 1 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K dated December 17, 1993 as set forth in the pages attached hereto: Item 7. Financial Statements and Exhibits Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. EDO Corporation (Registrant) By M. J. Hegarty Vice President Date: February 14, 1994 EXPLANATION As disclosed in its filing of its Current Report on Form 8-K dated December 17, 1993, Registrant acquired Automotive Natural Gas, Inc. by way of an Agreement (the "Agreement") dated December 2, 1993 between Automotive Natural Gas, Inc., a Wisconsin corporation ("ANGI") and EDO Automotive Natural Gas, Inc., a Delaware corporation ("EDO"), EDO acquired substantially all the assets and certain liabilities of ANGI. EDO is a wholly-owned subsidiary of EDO Energy Corporation, a Delaware corporation, which is a wholly- owned subsidiary of EDO Corporation, a New York corporation. This amendment to such Current Report on Form 8-K includes the audited financial statements of ANGI and pro forma financial information required by Item 7 of Form 8-K. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired The following financial statements of ANGI are filed as part of this report: Independent Auditors' Report dated August 26, 1993 Balance Sheets at June 30, 1993 and June 30, 1992 Statement of Income for the year ended June 30, 1993 Statements of Stockholders' Deficit at June 30, 1993 Statements of Cash Flows for the year end June 30, 1993 Notes to Financial Statements (b) Pro Forma Financial Information The following pro forma consolidated financial statements of the Registrant are filed as part of this report: Introduction Notes to Pro Forma Consolidated Financial Statements Pro Forma Consolidated Balance Sheet at September 25, 1993 (unaudited) Pro Forma Consolidated Statements of Earnings for the year ended December 31, 1992 (unaudited) and the nine months ended September 25, 1993 (unaudited). McGLADREY & PULLEN Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT To the Board of Directors Automotive Natural Gas, Inc. Milton, Wisconsin We have audited the accompanying balance sheets of Automotive Natural Gas, Inc. as of June 30, 1993 and 1992, and the related statements of income, stockholders' (deficit) and cash flows for the year ended June 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Automotive Natural Gas, Inc. as of June 30, 1993 and 1992, and the results of its operations and its cash flows for the year ended June 30, 1993 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 5 and 13 to the financial statements, the Company has suffered recurring losses from operations, its total liabilities exceeds its total assets and the bank has filed suit against the Company demanding payment of the notes payable to the bank. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 13. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. McGladrey & Pullen Janesville, Wisconsin August 26, 1993, except Note 13 and for the last paragraph of Note 5 which are October 28, 1993. - 1 - CONTENTS INDEPENDENT AUDlTOR'S REPORT ON THE FINANCIAL STATEMENTS FINANCIAL STATEMENTS Balance sheets 2 Statement of income 3 Statement of stockholders' (deficit) 4 Statement of cash flows 5 Notes to financial statements 6-10 INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY INFORMATION 11 SUPPLEMENTARY INFORMATION Income statement information: Cost of goods sold 12 Selling, general and administrative expenses 13 AUTOMOTIVE NATURAL GAS, INC. BALANCE SHEETS June 30, 1993 1992 ASSETS (Note 5) CURRENT ASSETS Cash $ 6,897 $ 48,344 Receivables: Trade, less allowance for doubtful accounts 1993 $50,000; 1992 $25,000 (Note 2) 1,731,947 2,191,532 Income tax refund claim 37,466 221,000 Employees 12,107 3,993 Inventories (Note 3) 2,072,695 2,713,525 Prepaid expenses 31,616 9,509 Other 10,710 48,264 Total current assets $ 3,903,438 $ 5,236,167 RECEIVABLE, officer-stockholder (Note 14) $ - - $ 204,775 PROPERTY AND EQUIPMENT (Note 6) Property under capital lease $ 558,531 $ 558,531 Leasehold improvements 118,206 54,294 Equipment and fixtures, including equipment acquired under capital leases 1993 $153,803; 1992 $94,486 413,505 347,017 Computer equipment, including equipment acquired under capital leases 1993 $78,959; 1992 $76,421 353,861 271,809 Vehicles 95,668 95,668 $ 1,539,771 $ 1,327,319 Less accumulated depreciation, including amortization on property and equipment acquired under capital leases 1993 $204,176; 1992 $46,315 522,289 409,897 $ 1,017,482 $ 917,422 INTANGIBLE ASSET, licensing agreement, less accumulated amortization 1993 $31,250; 1992 $6,250 (Note 4) $ 218,750 $ $ 243,750 $ 5,139,670 $ 6,602,114 See Notes to Financial Statements. June 30, 1993 1992 LIABILITIES AND STOCKHOLDERS' (DEFICIT) CURRENT LIABILITIES Notes payable (Note 5) $ 1,174,262 $ 696,318 Current maturities of long-term debt (Note 5) 1,485 5,443 Current obligation under capital leases (Note 6) 97,276 64,642 Current obligation under license agreement (Note 4) 50,000 175,000 Trade payables 3,543,033 2,590,062 Payable, officer-stockholder 12,947 - - Excess of outstanding checks over bank balance 24,629 - - Accrued expenses 217,733 215,847 Advance billings on sales orders (Note 2) 1,237,668 2,948,245 Total current liabilities $ 6,359,033 $ 6,695,557 LONG-TERM DEBT, less current maturities Note payable (Note 5) $ - - $ 1,479 Obligation under capital leases (Note 6) 530,560 576,551 $ 530,560 $ 578,030 COMMITMENTS AND CONTINGENCY (Notes 4, 7 and 8) STOCKHOLDERS' (DEFICIT) Common stock, no par value; authorized 2,800 shares, issued and outstanding 1993 2,210 shares; 1992 2,420 shares $ 25,998 $ 27,337 Accumulated deficit (1,573,151) (698,810) Receivable, officer-stockholder (Note 14) (202,770) - - $(1,749,923) $ (671,473) $ 5,139,670 $ 6,602,114 - 2 - AUTOMOTIVE NATURAL GAS, INC. STATEMENT OF INCOME Year Ended June 30,1993 Net sales (Note 11) $18,588,819 Cost of goods sold 16,152,035 Gross profit $ 2,436,784 Selling, general and administrative expenses: Selling $ 1,329,022 General and administrative 1,853,405 $ 3,182,427 Operating (loss) $ (745,643) Non-operating income (expense): Interest income $ 13,670 Rental income (Note 6) 25,200 Interest expense (141,305) $ (102,435) (Loss) before cumulative effect of change in accounting principle $ (848,078) Cumulative effect on prior years of changing to a different depreciation method (Note 12) 72,398 Net (loss) $ (775,680) See Notes to Financial Statements. - 3 - AUTOMOTIVE NATURAL GAS, INC. STATEMENT OF STOCKHOLDER'S (DEFICIT) Receivable Common Accumulated Officer- Year Ended June 30,1993 Stock Deficit stockholder Balance, beginning $ 27,337 $ (698,810) $ - - Net (loss) - - (775,680) - - Purchase and retirement of 210 shares of common stock (1,339) (98,661) - - Reclassification of receivable, officer-stockholder to a contra- equity account (Note 14) - - - - (202,770) Balance, ending $ 25,998 $(1,573,151) $ (202,770) See Notes to Financial Statements. - 4 - AUTOMOTIVE NATURAL GAS, INC. STATEMENT OF CASH FLOWS Year Ended June 30,1993 CASH FLOWS FROM OPERATING ACTIVlTIES Net (loss) $ (775,680) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Depreciation and amortization 184,790 Amortization on intangible 25,000 Cumulative effect on prior years of changing to a different depreciation method (72,398) Change in assets and liabilities: Decrease in receivables 451,471 Decrease in income tax refund claim 183,534 Decrease in inventories 640,830 (Increase) in prepaid expenses (22,107) Decrease in other assets 37,554 Increase in accounts payable and accrued expenses 967,804 (Decrease) in advance billings on sales orders (1,710,577) Net cash (used in) operating activities $ (89,779) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment $ (150,597) Principal payments received on note receivable officer-stockholder 2,005 Net cash (used in) investing activities $ (148,592) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on revolving credit agreements $ 477,944 Payments on obligation under license agreement (125,000) Principal payments on long-term borrowings, including capital lease obligations (80,649) Increase in outstanding checks over bank balance 24,629 Purchase of 210 shares of common stock for retirement (100,000) Net cash provided by financing activities $ 196,924 Net (decrease) in cash $ (41,447) Cash: Beginning 48,344 Ending $ 6,897 Year Ended June 30,1993 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 141,305 Income tax refund $ 183,534 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Capital lease obligations incurred for the use of equipment $ 61,855 See Notes to Financial Statements. - 5 - AUTOMOTIVE NATURAL GAS, INC. NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Business and Significant Accounting Policies Nature of business: Automotive Natural Gas, Inc. ("The Company") manufactures and installs pumping stations for the refueling of vehicles directly from natural gas pipelines and storage facilities. The Company also manufactures and installs conversion kits in vehicles to allow the use of natural gas as an alternative fuel source. The Company's customers consist primarily of private companies and public utilities located throughout the United States. Receivables on pumping stations are due as work is completed on the station with the final 10% due upon delivery. Receivables on conversion kits are due within 10 days of installation. A summary of the Company's significant accounting policies follows: Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market. Work in process and finished goods include materials, labor and overhead. Property and equipment: Property and equipment is carried at cost less accumulated depreciation and amortization. It is the Company's policy to include amortization on assets acquired under capital leases with depreciation on owned assets. Depreciation and amortization is computed using the straight-line method. Leasehold improvements are depreciated over the shorter of the term of the lease or their estimated useful lives. Intangible: The licensing agreement is being amortized by the straight-line method over a 10 year period. Estimated warranty claims: The Company sells its products with a warranty that provides for repairs or replacements of any defective parts Note 1. Nature of Business and Significant Accounting Policies (continued) for a one year period after the sale. At the time of the sale, the Company accrues an estimate of the cost of providing the warranty based on prior experience. The estimated warranty liability totaled $18,000 at June 30, 1993 and 1992, and is included in accrued expenses. Note 2. Advance Billings on Sales Orders The Company's policy is to bill customers varying percentages of the total contract price to manufacture pumping stations at various stages of completion of the contract. The accounts receivable balance includes $383,778 and $633,420 of these billings as of June 30, 1993 and 1992, respectively. Note 3. Composition of Inventories The composition of inventories is as follows as of June 30,1993 and 1992: 1993 1992 Finished goods $ 448,562 $ 1,165,812 Work-in-process 395,241 591,570 Production materials and purchases held for resale 1,228,892 956,143 $ 2,072,695 $ 2,713,525 - 6 - AUTOMOTIVE NATURAL GAS, INC. NOTES TO FINANCIAL STATEMENTS Note 4. Licensing Agreement, Obligation Under Licensing Agreement and Subsequent Event In April, 1992 the Company entered into an agreement which granted the Company exclusive rights to use technology in the manufacturing of conversion kits used in motor vehicles allowing the use of compressed natural gas as an alternative fuel source. The cost of this licensing agreement was $250,000. The Company owed $50,000 and $175,000 under this agreement at June 30, 1993 and 1992, respectively. On July 1, 1993, the Company purchased this technology under an agreement requiring periodic payments of varying amounts totalling $250,000. The present value of these payments using a discount rate of 10% is $213,600. Note 5. Pledged Assets, Current Notes Payable and Long-term Debt Current notes payable: Note payable, Bank One, $500,000 line-of-credit, due on demand $ 500,000 Note payable, Bank One, $700,000 line-of-credit, due on demand 674,262 $ 1,174,262 Long-term debt: Note payable, Bank One, final payment due September 1993 $ 1,485 Interest on the current notes payable is at a stated percentage over the bank's reference rate adjusted daily. Reference rate was 6% at June 30, 1993. Collateral on these notes includes a general business security agreement covering substantially all assets of the Company, the guarantee of an officer-stockholder and a life insurance policy on an officer-stockholder assigned to the bank. Note 5. Pledged Assets, Current Notes Payable and Long-term Debt (continued) As of June 30, 1993, the Company was in violation of the bank loan agreements. The bank demanded full payment on the notes in October 1993. On October 28, 1993, the bank served legal notice on the Company that it has filed suit for a money judgment and replevin of personal property and equipment. If the Company does not provide a proper answer within 20 days, the court may grant judgment against the Company for the amounts outstanding under the notes payable to the bank. A judgment awarding money may be enforced by garnishment or seizure of property. Note 6. Obligation Under Capital Leases Property: This obligation includes the present value of the balance due in future years for lease rentals for the use of land and building facilities leased from a stockholder of the Company. The lease is payable in monthly installments of principal and interest of approximately $6,200 until expiration of the lease in June, 2002. Since the present value of the future minimum lease payments at the beginning of the lease approximated the fair value of the leased asset at that date, the lease is considered to be a capital lease and has been so recorded with recognition of a leasehold interest in land and building at a cost of $558,531 on which accumulated amortization totalled $139,845 and $63,230 at June 30, 1993 and 1992, respectively. The Company sublet a portion of these facilities to an affiliated company under a month-to-month agreement. Rental income under this agreement for the year ended June 30, 1993 was $25,200. This agreement expires on October 31, 1993. - 7 - AUTOMOTIVE NATURAL GAS, INC. NOTES TO FINANCIAL STATEMENTS Note 6. Obligation Under Capital Leases (continued) The future minimum lease payments under this capital lease are as follows. Year Ending June 30, Amount 1994 $ 80,600 1995 74,400 1996 74,400 1997 74,400 1998 74,400 Thereafter 297,600 Total minimum lease payments $ 675,800 Less amounts representing interest 206,037 $ 469,763 Less current maturities 38 971 $ 430,792 Equipment: The obligation under capital leases also includes the present value of the balance due for future lease rentals for the use of computer, telephone, and office equipment. Since the present value of the future minimum lease payments at the beginning of these leases approximated the fair value of the leased assets at that date, these leases are considered to be capital leases and have been so recorded. The equipment and related liabilities under the capital leases were recorded at the present value of the future lease payments due under the leases, as determined with various discount rates. The related liabilities are payable in monthly installments of principal and interest until the expiration of the leases. The future minimum lease payments under these capital leases are as follows: Note 6. Obligation Under Capital Leases (continued) Year Ending June 30, Amount 1994 $ 71,388 1995 64,420 1996 41,327 1997 5,212 Total minimum lease payments $ 182,347 Less amount representing interest 24,274 $ 158,073 Less current maturities 58,305 $ 99,768 Note 7. Contingency The Company had an open letter-of-credit with Bank One for $50,000. Note 8. Lease Commitments The Company has entered into agreements to lease automobiles, office equipment and temporary office space. The total minimum rental commitments under these operating leases are as follows: Year Ending June 30, Amount 1994 $ 18,268 1995 850 $ 19,118 The total rent expense for the year ended June 30,1993 was approximately $141,809. Note 9. Employee Fringe Benefits The Company has a profit sharing plan with a 401(k) provision covering all employees who meet the eligibility requirements set forth in the plan. The amount the Company contributes to the plan is at the discretion of the Company's Board of Directors. The total expense related to the plan for the year ended June 30, 1993 was $16,431. - 8 - AUTOMOTIVE NATURAL GAS, INC. NOTES TO FINANCIAL STATEMENTS Note 10. Income Taxes and Unused Net Operating Loss At June 30, 1993, the Company has net operating loss carryforwards of approximately $1,142,000 available under provisions of the Internal Revenue Code to be applied against future federal taxable income. These carryforwards expire during 2007 and 2008. These carryforwards have been used to eliminate the deferred income tax credits. The resulting reduction in deferred income tax credits will be reversed when the applicable net operating loss carryforwards are actually applied against taxable income on the Company's income tax returns or when the loss carryforwards expire. The Company also has a net operating loss carryforward of approximately $1,596,000 available under provisions of the Wisconsin Department of Revenue Code to be applied against future Wisconsin taxable income. These carryforwards expire during 2007 and 2008. In February 1992, the Financial Accounting Standards Board issued Statement No. 109, Accounting for Income Taxes, which significantly changes the recognition and measurement of deferred tax assets and liabilities. Statement No. 109 requires that deferred taxes be recorded on a liability method and adjusted when new tax rates are enacted. Deferred tax balances are presently recorded using the rates in effect when the transactions giving rise to the deferred tax occur, and deferred tax balances are not adjusted when tax rates change. The Company is required to adopt Statement No. 109 beginning with the year ended June 30, 1994, although earlier adoption is permitted. The Statement provides that the effect of its adoption may be recorded entirely in the year of adoption or retroactively by restating one or more prior years. Note 10. Income Taxes and Unused Net Operating Loss (continued) The Company has not yet completed its assessment of the effect Statement No. 109 may have on the accompanying financial statements, or whether to restate any of the prior years. However, based on its current assessment, the Company does not believe the adoption of Statement No. 109 will materially affect the accompanying financial statements. Note 11. Major Customers Net sales for the year ended June 30, 1993 include sales to the following major customers (each of which accounted for 10% or more of the total net sales of the Company). Customer A $ 3,975,447 Customer B $ 3,407,800 Note 12. Accounting Change In 1993, the Company changed its depreciation method for equipment, fixtures and vehicles from an accelerated method to the straight-line method. The effect of this change in accounting method was to increase net income by $72,398 in 1993. The change had no income tax effect due to net operating loss carryforwards. The Company believes the straight-line method of depreciation will more accurately reflect the economic depreciation of the equipment. Note 13. Management's Plans for Future Operations As shown in the accompanying financial statements, the Company has incurred losses from operations resulting in cash flow problems and its total liabilities exceed its total assets by approximately $1,750,000 as of June 30,1993. - 9 - AUTOMOTIVE NATURAL GAS, INC. NOTES TO FINANCIAL STATEMENTS Note 13. Management's Plans for Future Operations (continued) Much of its cash flow and working capital problems are also due to the significant growth in sales over the past few years. Management instituted a cost reduction program during August 1993. The backlog of sales as of June 30,1993 was approximately $1,970,000 and the Company has received additional orders for refueling stations from July 1, 1993 through October 28, 1993 of approximately $1,530,000. In 1993, the Company estimates it spent approximately $500,000 (unaudited) to reengineer its refueling stations which management believes will improve margins on this product. Management believes these factors will contribute towards achieving profitability. However, as discussed in Note 5, the Company is in violation of its bank loan agreements and has not been able to work out arrangements with its bank regarding a continuing lending relationship. The bank has sued the Company demanding payment of these loans. To date, management has not been able to find another lender to replace its current lender and to provide financing under a plan which will provide for the Company's needs. As a result of this situation, the Company is seeking alternatives and has entered into negotiations regarding selling the Company or its operations. Note 14. Receivable, Officer-stockholder The receivable from an officer who is the majority stockholder substantially arose in 1990 when a major addition was made to a building which the Company leases from this individual. The receivable arose because the total cost of the addition exceeded the amount borrowed to finance the addition. The original intent of this stockholder was to repay this advance over 15 years; however, Note 14. Receivable, Officer-stockholder (continued) during the year ended June 30,1993, his ability to repay was diminished due to the deteriorated financial condition of the Company which raises concerns about the Company's ability to make the monthly rent payments to the stockholder. Additionally, there are the potential ramifications of the stockholder's personal guarantee on the Company's notes payable to the bank, which is also the mortgage holder on this property. Also, this receivable is not evidenced by a signed note. Accordingly, this receivable has been presented on the accompanying balance sheet as a reduction of stockholders' equity. - 10 - McGLADREY & PULLEN Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY INFORMATION To the Board of Directors Automotive Natural Gas, Inc. Milton, Wisconsin Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. McGLADREY & PULLEN Janesville, Wisconsin August 26, 1993 - 11 - AUTOMOTIVE NATURAL GAS, INC. COST OF GOODS SOLD Year Ended June 30,1993 . Percent of Amount Net Sales Material $12,171,563 65.5 Subcontract costs $ 450,947 2.4 Direct labor $ 755,803 4.1 Manufacturing expenses: Indirect labor $ 671,227 3.6 Payroll taxes 221,495 1.2 Employee benefits 218,689 1.2 Depreciation 120,114 0.6 Rent 40,553 0.2 Telephone 7,476 - - Utilities 27,670 0.1 Property taxes 16,515 0.1 Maintenance 38,653 0.2 Warranty expense 26,416 0.1 Insurance 223,959 1.2 Operating supplies 120,567 0.6 Travel, meals and entertainment 123,353 0.7 Miscellaneous 3,456 -- Total manufacturing expenses $ 1,860,143 9.8 Total manufacturing costs $15,238,456 81.8 Decrease in work-in-process inventory 196,329 1.1 Total cost of goods manufactured $15,434,785 82.9 Decrease in finished goods inventory 717,250 3.9 Total cost of goods sold $16,152,035 86.8 - 12 - AUTOMOTIVE NATURAL GAS, INC. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Year Ended June 30,1993 Selling expenses: Wages and commissions $ 805,460 Payroll taxes 61,297 Employee benefits 21,430 Depreciation 36,958 Rent 17,322 Repairs and maintenance 5,915 Insurance 1,728 Property taxes 1,300 Utilities and telephone 8,841 Travel, meals and entertainment 121,266 Advertising 127,406 Provision for doubtful accounts 40,577 Freight 57,944 Postage 1,556 Supplies 12,208 Miscellaneous 7,814 Total selling expenses $ 1,329,022 General and administrative expenses: Officer salaries $ 216,616 Wages 493,979 Payroll taxes 51,322 Employee benefits 51,246 Depreciation and amortization 52,718 Rent 83,934 Repairs and maintenance 34,635 Insurance 66,580 Property taxes 15,849 Utilities 8,565 Telephone 101,049 Professional fees 367,820 Supplies 124,232 Research and development 11,912 Dues and subscriptions 28,058 Postage 26,532 Travel, meals and entertainment 101,961 Miscellaneous 16,397 Total general and administrative expenses $ 1,853,405 $ 3,182,427 - 13 - EDO Corporation Pro Forma Consolidated Financial Statements Introduction Pursuant to an Agreement (the "Agreement") dated December 2, 1993 between Automotive Natural Gas, Inc., a Wisconsin corporation ("ANGI") and EDO Automotive Natural Gas, Inc., a Delaware corporation ("EDO"), EDO acquired substantially all the assets and certain liabilities of ANGI. EDO is a wholly-owned subsidiary of EDO Energy Corporation, a Delaware corporation, which is a wholly-owned subsidiary of EDO Corporation, a New York corporation. The assets acquired include the inventory, machinery, intellectual property and other assets associated with the design and manufacture of compressed natural gas filling stations, dispensers and automotive conversion kits. The negotiated consideration, using available cash, was $68,000 plus the assumption of certain liabilities which liabilities are in excess of the value of the acquired assets by approximately $2.6 million. Additional costs incurred as a result of this transaction were approximately $422,000. In addition, certain additional payments, subject to possible conditions, and contingent payments based on future earnings may be made. It is expected that EDO will continue the use of the acquired assets. The following unaudited pro forma consolidated balance sheet as of September 25, 1993 and the unaudited pro forma consolidated statements of earnings for the year ended December 31, 1992 and the nine months ended September 25, 1993 give effect to the above acquisition by EDO Corporation. The pro forma consolidated financial statements assume that the acquisition for which pro forma effects are shown were completed as of September 25, 1993 for the pro forma consolidated balance sheet, and as of January 1, 1992 for the pro forma consolidated statements of earnings. The acquisition has been accounted for as a purchase. The pro forma results of operations are not necessarily indicative of the actual results of operations that would have occurred had the purchase been made at the beginning of the periods presented. The pro forma financial statements should be read in conjunction with the notes thereto included elsewhere herein and the Registrant's periodic reports filed pursuant to the Securities Exchange Act of 1934. EDO Corporation Notes to Pro Forma Consolidated Financial Statements (Unaudited) Pro forma adjustments to record the acquisition are summarized below: (a) To record the purchase of substantially all the assets and certain liabilities of ANGI. (b) To record the reduction of interest income as a result of the Registrant's use of cash to effect the acquisition. (c) To record amortization of goodwill. Goodwill will be amortized over 15 years using the straight line method. (d) To record the estimated income tax effect of the pro forma adjustments. EDO Corporation Pro Forma Consolidated Balance Sheet September 25, 1993 (In Thousands) EDO ANGI Pro Pro Historical Historical Forma Forma ASSETS (Unaudited) (Unaudited) Adjust. Total Cash $ 11,166 (72) (1,540)(a) 9,554 Accounts Receivable 37,064 1,185 (200)(a) 38,049 Inventory 18,695 1,732 (400)(a) 20,027 Prepayments and Other 3,225 164 3,389 Total Current Assets 70,150 3,009 (2,140) 71,019 Net Plant and Equipment 39,519 965 40,484 Goodwill 8,359 3,173(a) 11,532 Deferred Charges and 7,592 659 8,251 Other Assets $ 125,620 4,633 1,033 131,286 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts Payable and Accrued Expenses 15,186 3,495 475(a) 19,156 Advances from Customers 4,070 856 4,926 Notes Payable 1,472 (1,472)(a) 0 Federal Income Taxes Total Current Liabilities 19,256 5,823 (997) 24,082 Deferred Income Taxes 2,182 2,182 Long Term Debt: 7% Convertible Subordinated Debentures 29,317 29,317 Other 598 598 Total Long Term Debt 29,317 598 0 29,915 ESOT Loan Obligation 15,285 15,285 Postretirement Obligation 13,741 13,741 Minority Interest 4,976 4,976 Shareholders' Equity: Preferred Shares, par value $1 per share, authorized 500,000 shares, issued 80,842 shares 81 81 Common shares, par value $1 per share, authorized 25,000,000 shares, 8,454 26 (26)(a) 8,454 issued 8,453,902 shares Additional paid-in capital 42,347 42,347 Retained Earnings 48,922 (1,814) 2,056(a) 49,164 Less: Treasury shares at cost, (42,694) (42,694) 3,004,060 at 9/25/93 Translation Adjustment (722) (722) ESOT Loan Obligation (15,285) (15,285) Deferral under Long-Term (240) (240) Incentive Plans Total Shareholders' Equity 40,863 (1,788) 2,030 41,105 Total Liabilities $ 125,620 4,633 1,033 131,286 and Shareholders' Equity EDO Corporation Pro Forma Consolidated Statements of Earnings For the Year Ended December 31,1992 (In Thousands except per share amounts) EDO ANGI Pro Pro Historical Historical Forma Forma (Audited) (Unaudited) Adjust. Total Net Sales $ 126,166 14,459 140,625 Costs and Expenses: Cost of Sales 92,045 12,050 104,095 Selling, general and administrative 18,477 2,874 212(c) 21,563 Research and Development 5,286 5,286 115,808 14,924 212 130,944 Operating Earnings 10,358 (465) (212) 9,681 Non-Operating Income (Expense) Interest Income 176 19 (54)(b) 141 Interest Expense (2,680) (119) (2,799) Litigation Settlement - 0 Other, net (443) 35 (408) (2,947) (65) (54) (3,066) Earnings (Loss) before Federal and foreign income taxes and minority interest 7,411 (530) (266) 6,615 Provision (benefit) for Federal and foreign income taxes 1,684 (1) (271)(d) 1,412 Net Earnings (Loss) before minority interest 5,727 (529) 5 5,203 Minority Interest (50) (50) Net Earnings (loss) 5,677 (529) 5 5,153 Dividends on preferred shares 1,455 1,455 Net Earnings (loss) available for common shares $ 4,222 (529) 5 3,698 Net Earnings (loss) per common share: $ 0.78 0.69 Average shares outstanding 5,389 5,389 EDO Corporation Pro Forma Consolidated Statements of Earnings For the Nine Months Ended September 25,1993 (In Thousands except per share amounts) EDO ANGI Pro Pro Historical Historical Forma Forma (Unaudited) (Unaudited) Adjust. Total Net Sales $ 77,020 10,770 87,790 Costs and Expenses: Cost of Sales 60,174 10,297 70,471 Selling, general and administrative 11,602 1,882 159(c) 13,643 Research and Development 4,610 4,610 76,386 12,179 159 88,724 Operating Earnings 634 (1,409) (159) (934) Non-Operating Income (Expense) Interest Income 215 8 (40)(b) 183 Interest Expense (1,859) (139) (1,998) Litigation Settlement (1,212) (1,212) Other, net (265) 94 (171) (3,121) (37) (40) (3,198) Earnings (Loss) before Federal and foreign income taxes and minority interest (2,487) (1,446) (199) (4,132) Provision (benefit) for Federal and foreign income taxes (1,235) (559)(d) (1,794) Net Earnings (Loss) before cumulative effect of accounting change and minority interest (1,252) (1,446) 360 (2,338) Cumulative effect of change in accounting for postretirement health benefits (net of taxes of $4,000) (9,400) (9,400) Net Earnings (loss) before minority interest (10,652) (1,446) 360 (11,738) Minority Interest 495 495 Net Earnings (loss) (10,157) (1,446) 360 (11,243) Dividends on preferred shares 1,064 1,064 Net Earnings (loss) available for common shares $ (11,221) (1,446) 360 (12,307) Earnings (loss) per common share: Net Earnings (loss) available for common shares before accounting change $ (0.34) (0.54) Cumulative effect of change in accounting for postretirement health benefits (1.74) (1.74) Net Earnings (loss) $ (2.08) (2.28) Average shares outstanding 5,395 5,395 -----END PRIVACY-ENHANCED MESSAGE-----