-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aam5JGjUUUcPLl4n5EAuYpCbdMXeG9aZxbZbNJiEgrB5Id4kkDUlCWaHmktVCgzv +viz/QeM75BmunRu7qwnwQ== 0000942708-96-000038.txt : 19960731 0000942708-96-000038.hdr.sgml : 19960731 ACCESSION NUMBER: 0000942708-96-000038 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960730 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KINARK CORP CENTRAL INDEX KEY: 0000055805 STANDARD INDUSTRIAL CLASSIFICATION: COATING, ENGRAVING & ALLIED SERVICES [3470] IRS NUMBER: 710268502 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03920 FILM NUMBER: 96601153 BUSINESS ADDRESS: STREET 1: 7060 S YALE CITY: TULSA STATE: OK ZIP: 74136 BUSINESS PHONE: 9184940964 MAIL ADDRESS: STREET 1: 7060 SOUTH YALE STREET 2: STE 603 CITY: TULSA STATE: OK ZIP: 741365723 FORMER COMPANY: FORMER CONFORMED NAME: KIN ARK OIL CO DATE OF NAME CHANGE: 19690601 FORMER COMPANY: FORMER CONFORMED NAME: KIN ARK OIL & GAS CO DATE OF NAME CHANGE: 19680906 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED MARCH 31, 1996 COMMISSION FILE NO. 1-3920 KINARK CORPORATION (Exact name of the registrant as specified in its charter) DELAWARE 71-0268502 (State of Incorporation) (I.R.S. Employer Identification No.) 7060 SOUTH YALE TULSA, OKLAHOMA 74136 (Address of principal executive offices) Registrant's telephone number: (918) 494-0964 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 1996. Common Stock $.10 Par Value . . . . . 6,066,536 KINARK CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q/A Part I of the Company's Form 10-Q for the quarter ended March 31, 1996, is hereby amended and restated in its entirety as follows: PAGE "PART I. FINANCIAL INFORMATION Item 1. Financial Statements Independent Accountants' Review Report 2 Condensed Consolidated Balance Sheets as of March 31, 1996 (unaudited), and December 31, 1995 3 Condensed Consolidated Statements of Operations for the three months ended March 31, 1996 and 1995 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited) 5 Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 1996 and 1995 (unaudited) 6-10 SIGNATURES 16 INDEPENDENT ACCOUNTANTS' REVIEW REPORT To the Board of Directors and Shareholders of Kinark Corporation: We have reviewed the accompanying condensed consolidated balance sheet of Kinark Corporation (the "Company") and subsidiaries as of March 31, 1996, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended March 31, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Kinark Corporation and subsidiaries as of December 31, 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 27, 1996 (except as to the second paragraph of the Long-Term Debt Footnote, for which the date is April 1, 1996) which includes explanatory paragraphs discussing the Company's change in accounting for income taxes and the acquisition of Rogers Galvanizing Company, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. The Company adopted Statement of Financial Accounting Standards Nos. 121 and 123 effective January 1, 1996. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Tulsa, Oklahoma May 10, 1996 KINARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited MAR 31 DEC 31 (Dollars in Thousands) 1996 1995 ASSETS CURRENT ASSETS Cash $ 380 $ 30 Accounts receivable, less allowances 6,964 3,508 Net assets of discontinued operations 43 434 Inventories 4,081 2,615 Prepaid expenses 425 566 TOTAL CURRENT ASSETS 11,893 7,153 DEFERRED INCOME TAXES 2,309 2,070 OTHER ASSETS 383 145 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET 3,075 0 PROPERTY, PLANT AND EQUIPMENT, AT COST 36,734 30,455 Less: Allowance for depreciation 23,066 21,448 TOTAL PROPERTY, PLANT & EQUIPMENT, NET 13,668 9,007 TOTAL ASSETS $31,328 $18,375 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable $ 2,780 $ 1,593 Other accrued liabilities 3,589 2,057 Current portion of long-term obligations 2,667 628 TOTAL CURRENT LIABILITIES 9,036 4,278 LONG-TERM OBLIGATIONS 7,057 5,932 MINORITY INTEREST 1,322 0 SHAREHOLDERS' EQUITY Common stock 748 520 Additional paid-in capital 15,862 10,531 Retained earnings 3,214 3,090 Less: Treasury stock at cost (5,811) (5,976) Stock subscription receivable (100) 0 TOTAL SHAREHOLDERS' EQUITY 13,913 8,165 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $31,328 $18,375 See notes to condensed consolidated financial statements. KINARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited Three Months Ended March 31 (Dollars in Thousands Except per Share Amounts) 1996 1995 SALES $ 10,417 $ 6,074 COSTS AND EXPENSES Cost of sales 8,154 4,959 Selling, general & administrative 1,193 1,008 Depreciation and amortization 538 388 TOTAL COSTS AND EXPENSES 9,885 6,355 OPERATING EARNINGS (LOSS) 532 (281) OTHER EXPENSE Interest expense 205 144 EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 327 (425) Income Tax Expense (Benefit) 120 (155) Earnings (Loss) from Continuing Operations, before Minority Interest 207 (270) Minority Interest in Subsidiary 83 --- EARNINGS (LOSS) FROM CONTINUING OPERATIONS 124 (270) Loss from Discontinued Operation, net of Income Taxes --- (212) NET EARNINGS (LOSS) $ 124 $ (482) NET EARNINGS (LOSS) PER COMMON SHARE: Continuing Operations $ .02 $ (.07) Discontinued Operation --- (.06) $ .02 $ (.13) Average shares outstanding 5,318,000 3,751,000 See notes to condensed consolidated financial statements. KINARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited Three Months Ended March 31 (Dollars in Thousands) 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net Earnings (Loss) $ 124 $ (482) Adjustments to reconcile net earnings (loss) to net cash provided by (used for) operating activities: Loss from discontinued operations --- 212 Depreciation and amortization 538 388 Deferred income taxes (37) (287) Minority income 83 --- Change in assets and liabilities: Accounts receivable (970) (305) Inventories and other 292 169 Accounts payable and other accrued liabilities 385 58 Net Cash Provided by (Used for) Continuing Operations 415 (247) Net Cash (Used for) Discontinued Operations (416) (204) NET CASH (USED FOR) OPERATING ACTIVITIES (1) (451) CASH FLOWS FROM INVESTING ACTIVITIES Investment in Rogers Galvanizing Company (5,768) --- Proceeds from Sale of Kinpak, Inc. 807 --- Capital expenditures (365) (205) NET CASH USED FOR INVESTING ACTIVITIES (5,326) (205) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Sale of Common Stock 5,624 --- Proceeds from long-term obligations 5,264 3,452 Payments on long-term obligations (5,211) (2,820) NET CASH PROVIDED BY FINANCING ACTIVITIES 5,677 632 INCREASE (DECREASE) IN CASH 350 (24) CASH AT BEGINNING OF PERIOD 30 32 CASH AT END OF PERIOD $ 380 $ 8 See notes to condensed consolidated financial statements. KINARK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 UNAUDITED NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements included in this report have been prepared by Kinark Corporation (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited by an independent accountant. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, including Rogers Galvanizing Company ("Rogers") for 1996 (Note 4). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures are adequate to make the information presented not misleading. However, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 1995. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year. NOTE 2. EARNINGS PER COMMON SHARE Net earnings (loss) per common share for the periods presented has been computed based upon the weighted average number of shares outstanding of 5,318,000 and 3,751,000 for the three months ended March 31, 1996 and 1995, respectively, including the effect of stock options, when applicable, using the treasury stock method. NOTE 3. INVENTORIES Inventories consist primarily of zinc, the principal raw material used in galvanizing. NOTE 4. ACQUISITION OF ROGERS GALVANIZING COMPANY On February 5, 1996, the Company acquired 51.2% of the outstanding common stock of Rogers from The C.L. Simpson Inter Vivos Revocable Trust and The Alta Rogers Simpson Inter Vivos Revocable Trust (the "Trusts"). During February and March 1996, the Company acquired an additional 16.0% and 1.7%, respectively, of the minority common stock of Rogers at the same price per share paid for the common stock of the Trusts, bringing its ownership to 68.9% at March 31, 1996. The total purchase price for these acquisitions of the common stock of Rogers was approximately $5.7 million in cash. The Company acquired the Rogers stock using the proceeds from a private placement of approximately 2.28 million shares of the Company's common stock in January 1996. The Company intends to offer to purchase the remaining shares of Rogers common stock from its remaining minority stockholders. Rogers' galvanizing plants are located in Tulsa, Oklahoma and Kansas City, Missouri. The acquisition has been accounted for using the purchase method of accounting, and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the dates of acquisition including an adjustment to eliminate the LIFO valuation reserve on Rogers' zinc inventory. The excess of the purchase price over the fair values of the net assets acquired was approximately $3 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 25 years. It is the Company's policy to account for costs in excess of fair value of assets purchased and other intangible assets at the lower of amortized cost or estimated fair value. On a periodic basis, management reviews the valuation and amortization of such assets. As part of its ongoing review, management estimates the fair value of the Company's intangible assets, taking into consideration any events and circumstances which might have diminished fair value. No valuation allowances have been recorded as a result of these analyses. Management has not completed its determination of the fair value of Rogers' assets and liabilities, but does not believe that the historical amounts of such items differ materially from fair value. The net purchase price was preliminarily allocated as follows: (Dollars in Thousands) Estimated fair value of assets, not including cash $9,374 Goodwill 3,095 Liabilities (6,701) Purchase Price, net of cash received $5,768 The operating results of Rogers have been included in the consolidated statement of operations using a convenience date of February 1, 1996 has been selected for financial reporting purposes. The Company is currently evaluating options to raise additional financing to acquire the remaining common stock of Rogers. The financing options being considered include a rights offering to the Company's stockholders. The Company has not filed a registration statement relating to a rights offering and no securities will be sold or offers accepted prior to the time a registration statement is filed and becomes effective. There can be no assurance that the Company will be able to raise such additional financing or to acquire the remaining shares of Rogers common stock. The following unaudited pro forma results of operations assume the acquisition of 68.9% of Rogers' common stock as of January 1, 1995. The weighted average common shares used to compute pro forma net earnings (loss) per share include the approximately 2.28 million shares issued in the private placement. Three Months Ended March 31 (Dollars in Thousands) 1996 1995 SALES $12,020 $10,586 Earnings from continuing operations before minority interest 109 91 Less: Minority interest 54 118 Earnings (loss) from continuing operations 55 (27) Loss from discontinued operation, net of income taxes --- (212) NET EARNINGS (LOSS) $ 55 $ (239) NET EARNINGS (LOSS) PER COMMON SHARE $ .01 $ (.04) The pro forma results include an adjustment to reflect the amortization of the excess of cost over fair value of net assets acquired in the Rogers acquisition using a straight-line method over 25 years. The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the Rogers acquisition been consummated as of January 1, 1995, nor are they necessarily indicative of future operating results. NOTE 5. LONG-TERM OBLIGATIONS MARCH 31, 1996 (Dollars in Thousands) Kinark Rogers Combined Revolving lines of credit $2,942 $1,521 $4,463 Term loans and notes 2,926 1,480 4,406 Capital leases and other 419 436 855 6,287 3,437 9,724 Less current portion 631 2,036 2,667 $5,656 $1,401 $7,057 The Company's long-term obligations, excluding the Rogers' debt, are substantially unchanged from those disclosed in the December 31, 1995 Annual Report on Form 10-K, as amended. An amendment to the Company's bank credit agreement effective April 1, 1996, extended such agreement through April 1997 and provides that if Rogers defaults under its bank credit agreement, such default will constitute a default by the Company under its bank credit agreement. Rogers' long-term obligations consist of primarily revolving lines of credit and term loans provided under a bank credit agreement, and notes payable to unrelated companies. Two revolving lines of credit, both of which expire July 31, 1996, provide for aggregate credit up to $3,000,000. Borrowings on the revolving lines of credit are limited to $2,100,000 by a $900,000 workers' compensation self-insurance letter of credit required by Oklahoma's Workers' Compensation Court. Amounts borrowed on the revolving lines of credit bear interest at 1/2% over prime. The revolving lines of credit can be paid down without penalty, or additional funds can be borrowed up to their respective limits. Rogers is currently negotiating renewal of the revolving lines of credit and anticipates that they will be renewed under comparable terms. Under the Rogers' bank credit agreement, the three term loans expire at various dates in October 1996, July 1997 and October 2000. One of these loans bears interest at 7.2% and the remaining loans bear interest at 1/2% over prime. In the aggregate, the amount outstanding on the term loans was $858,000 at March 31, 1996. Payments on the term loans are based on separate amortization schedules with equal monthly payments of principal and interest. Substantially all of the accounts receivables, inventories and fixed assets of Rogers and its subsidiaries are pledged as collateral under the bank credit agreement for the revolving lines of credit and term loans. The agreement places certain restrictions on payment of dividends and the amount of debt and lease obligations. Additionally, the bank credit agreement requires Rogers to maintain a specified minimum net worth. Rogers was in compliance with all such provisions of the bank credit agreement at March 31, 1996. Other long-term obligations of Rogers include notes payable to unrelated companies for the purchase of equipment, which equipment serves as collateral for such notes. In the aggregate, the amount outstanding on the notes was $622,000 at March 31, 1996. The notes bear interest at rates ranging from 3.5% to 9.5% and have maturities ranging from 1997 through 2015. NOTE 6. SHAREHOLDERS' EQUITY Changes in shareholders' equity during the three months ended March 31, 1996 consisted of: (Dollars in Thousands)
Shares Common Additional Stock Out- Stock ($.10Paid-In Retained Treasury Subscription standing Par Value)Capital Earnings Stock ReceivableTotal January 1, 1996 3,747,498 $520 $10,531 $3,090 $(5,976) $ $8,165 Net Earnings 124 124 Sale of Common Stock 2,319,038 228 5,331 (165) (100) 5,624 March 31, 1996 6,066,536 $748 $15,862 $5,811 $(5,976) $(100) $13,913
NOTE 7. STOCK OPTIONS On April 3, 1996, the Company granted a stock option to Ronald J. Evans, President of Kinark Corporation, to acquire 233,000 shares of its common stock at an exercise price of $2.50 per share, the fair market value of the common stock on the date of grant. The option was granted under the Company's 1988 Stock Option Plan. NOTE 8. NEW ACCOUNTING STANDARDS The Company has adopted the Financial Accounting Standards Board SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and SFAS No. 123, Accounting for Stock-Based Compensation, effective January 1, 1996. As allowed by SFAS No. 123, the Company will continue to follow the provisions of Accounting Principles Board Opinion No. 25 for such stock-based compensation plans. The adoption of SFAS No. 121 and No. 123 did not have a material impact on the Company's consolidated financial position or results of operations. NOTE 9. SUBSEQUENT PRIVATE PLACEMENT After the closing of the Private Placement, the Company offered and sold 40,000 shares of its Common Stock at an offering price of $2.50 per share, pursuant to a subsequent private placement which closed on March 29, 1996. This subsequent private placement resulted in gross proceeds of $100,000. SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the registrant caused this amendment to report to be signed on its behalf by the undersigned, thereunto duly authorized: KINARK CORPORATION Registrant /S/Paul R. Chastain Paul R. Chastain Vice President and Chief Financial Officer (Principal Financial Officer)" Date: July 30, 1996 -----END PRIVACY-ENHANCED MESSAGE-----