-----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, O3DIxhoMOklPhU6+DC1S7rgurJa7F+i9T+SaJr9KHfgXuLWE833JoAIrLJSWYxKf Ppp9PZD7Dd4YLoP1XRGCJQ== 0000950124-98-003375.txt : 19980612 0000950124-98-003375.hdr.sgml : 19980612 ACCESSION NUMBER: 0000950124-98-003375 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980330 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980611 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORTON INDUSTRIAL GROUP INC CENTRAL INDEX KEY: 0000064247 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 380811650 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-13198 FILM NUMBER: 98646631 BUSINESS ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 BUSINESS PHONE: 3092667176 MAIL ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 FORMER COMPANY: FORMER CONFORMED NAME: MLX CORP /GA DATE OF NAME CHANGE: 19960823 FORMER COMPANY: FORMER CONFORMED NAME: MCLOUTH STEEL CORP DATE OF NAME CHANGE: 19850212 8-K/A 1 FORM 8-K/A 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) March 30, 1998 MORTON INDUSTRIAL GROUP, INC. (Exact name of registrant as specified in its charter) Georgia 0-13198 38-0811650 - -------------------------------------------------------------------------------- State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization File Number) Identification No.) 1021 West Birchwood, Morton, Illinois 61550 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code 309-266-7176 ------------ - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. CARROLL GEORGE, INC., ACQUISITION As previously reported on Form 8-K filed April 14, 1998, on March 30, 1998, the Company acquired all of the issued and outstanding capital stock of Carroll George, Inc. ("Carroll George"), an Iowa corporation, from its 30 shareholders. The Company paid a total purchase price of $8,104,000, including payment of all of Carroll George's revolving credit and term loan debt. The Company used a draw on its line of credit with Harris Trust and Savings Bank to fund the purchase price and debt payoff. The purchase price that the Company paid to the Carroll George shareholders was the result of arm's length bargaining between the Company and representatives of the shareholders. Carroll George manufactures components from polyurethane foam plastic and similar materials for sale to the agricultural equipment, trucking, and off road vehicle manufacturers. Carroll George's largest selling products are fully featured headliners and other interior assemblies for vehicle cabs. These headliners and interior assemblies contain dome lights, HVAC ducts and hookups, sound system wiring, and other components. Carroll George's largest customers are Caterpillar, Deere & Company, and J. I. Case. Carroll George is located in Northwood, Iowa, where it employs approximately 350 persons. Among the assets that the Company acquired as a result of its purchase of the stock of Carroll George are ten acres of land containing a 118,000 square foot manufacturing, warehouse, and office facility; plastic line bending equipment; hot melt laminating machinery; robotic routers; multiple cavity and rotary thremoforming machinery, robotic water jet cutting equipment; vinyl and plastic perforating equipment; digital sheeting equipment; die cutting and flame laminating machinery; and computer assisted design equipment. The Company currently intends to maintain Carroll George as a subsidiary and to operate its assets in substantially the same manner in which Carroll George employed them before the acquisition. In connection with the acquisition, the Company entered into an employment agreement with Gary L. George with a one year term that is renewable from year to year. Mr. George also entered into a noncompetition agreement with the Company that continues for five years after the termination of his employment by Carroll George. Prior to the closing of the acquisition, there was no material relationship between Mr. George or any of the other selling shareholders and the Company or any of its officers, directors, or affiliates or any associate of any director or officer of the Company. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. The following documents are filed as Exhibits to this Form 8-K/A:
Exhibit No. Document - ----------- -------- - -------------------------------------------------------------------------------- Stock Purchase Agreement among the Company and Gary L. George and Gloria J. George dated March 2, 1998 - incorporated by reference 10.1 to Exhibit 10.1 to the Company's Form 8-K filed April 14, 1998 - -------------------------------------------------------------------------------- 99.1 Audited Financial Statements of Carroll George, Inc., for the years - --------------------------------------------------------------------------------
2 3 - -------------------------------------------------------------------------------- ended September 30, 1997, and 1996 - -------------------------------------------------------------------------------- 99.2 Pro Forma Condensed Combined Statement of Earnings - -------------------------------------------------------------------------------- 3 4 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. MORTON INDUSTRIAL GROUP, INC. (Registrant) Date: June 11, 1998 By: /s/ William D. Morton ------------------------------------- William D. Morton Chairman, President, and Chief Executive Officer 4 5 EXHIBIT INDEX - -------------------------------------------------------------------------------- EXHIBIT NO. DESCRIPTION - -------------------------------------------------------------------------------- Stock Purchase Agreement among the Company and Gary L. George and Gloria J. George dated March 2, 1998 - incorporated by reference 10.1 to Exhibit 10.1 to the Company's Form 8-K filed April 14, 1998 - -------------------------------------------------------------------------------- Audited Financial Statements of Carroll George for the years ended 99.1 September 30, 1997, and 1996 - -------------------------------------------------------------------------------- 99.2 Pro Forma Condensed Combined Statement of Earnings - --------------------------------------------------------------------------------
5 EX-99.1 2 EX-99.1 1 EXHIBIT 99.1 CARROLL GEORGE, INC. FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND 1996 2 CARROLL GEORGE, INC. TABLE OF CONTENTS SEPTEMBER 30, 1997 Page ---- Independent Auditors' Report 1 Financial Statements Balance Sheet 2-3 Statement of Income and Retained Earnings 4 Statement of Cash Flows 5-6 Notes to Financial Statements 7-13 3 INDEPENDENT AUDITORS' REPORT To the Board of Directors Carroll George, Inc. Northwood, Iowa 50459 We have audited the accompanying balance sheets of Carroll George, Inc. as of September 30, 1997 and 1996, and the related statements of income and retained earnings and cash flows for the years then ended. 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 Carroll George, Inc. as of September 30, 1997 and 1996, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Bertram Cooper & Co, L.L.P. - ----------------------------------------- Certified Public Accountants Albert Lea, MN 56007 November 11, 1997 1 4 CARROLL GEORGE, INC. BALANCE SHEET SEPTEMBER 30, 1997 AND 1996 ASSETS
1997 1996 ---------- ---------- CURRENT ASSETS Cash $ 50,616 $ 240,993 Accounts receivable - trade 2,736,132 2,144,414 Other miscellaneous receivables 640 446 Inventories - at lower of cost (FIFO) or market 2,724,092 2,004,203 Prepaid expense 3,278 19,427 Deferred income taxes 69,326 58,246 ---------- ---------- Total current assets 5,584,084 4,467,729 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT Land 26,422 26,422 Building 1,790,098 1,664,039 Plant equipment 3,503,373 2,930,085 Computer equipment and software 394,198 303,864 Office furniture and equipment 108,660 90,956 Trucks and trailers 30,904 42,597 ---------- ---------- Total property, plant and equipment 5,853,655 5,057,963 Less accumulated depreciation 2,106,898 1,760,348 ---------- ---------- Net property, plant and equipment 3,746,757 3,297,615 ---------- ---------- OTHER ASSETS Cash surrender and annuity value of officers life insurance 80,888 75,558 Patronage equities 1,339 1,339 Investment -- 450 ---------- ---------- Total other assets 82,227 77,347 ---------- ---------- Total assets $9,413,068 $7,842,691 ========== ==========
2 5 LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996 ---------- ---------- CURRENT LIABILITIES Note payable - bank $ 570,500 $ 420,500 Current portion of long-term debt 382,411 278,294 Accounts payable 1,709,876 1,510,927 Accrued wages and commissions 401,304 295,893 Accrued payroll taxes 107,000 77,924 Accrued interest 10,259 3,961 Other liabilities 14,653 12,801 Accrued income taxes 118,701 114,892 ---------- ---------- Total current liabilities 3,314,704 2,715,192 ---------- ---------- LONG-TERM DEBT - NET OF CURRENT PORTION 1,024,613 781,335 ---------- ---------- DEFERRED INCOME TAXES 369,241 311,395 ---------- ---------- STOCKHOLDERS' EQUITY Common stock - no par value - stated value $12.50 per share - 25,000 shares authorized - 9,062 shares issued of which 1,638 and 1,638 were held in treasury at September 30, 1997 and 1996, respectfully 113,275 113,275 Paid in surplus 36,420 36,420 Retained earnings 4,597,815 3,928,074 ---------- ---------- Total 4,747,510 4,077,769 Less treasury stock - at cost 43,000 43,000 ---------- ---------- Total stockholders' equity 4,704,510 4,034,769 ---------- ---------- Total liabilities and stockholders' equity $9,413,068 $7,842,691 ========== ==========
The accompanying notes are an integral part of this statement. 3 6 CARROLL GEORGE, INC. STATEMENT OF INCOME AND RETAINED EARNINGS YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996 ------------------------- ------------------------- Percent Percent Amount to Sales Amount to Sales ----------- ----------- ----------- ----------- NET SALES $22,838,649 100.0 % $17,892,853 100.0 % ----------- ----------- ----------- ----------- COST OF GOODS SOLD Inventories - beginning 2,004,203 8.8 1,920,768 10.7 Purchases 12,289,322 53.8 9,548,481 53.4 ----------- ----------- ----------- ----------- Total 14,293,525 62.6 11,469,249 64.1 Less inventory - ending 2,724,092 11.9 2,004,203 11.2 ----------- ----------- ----------- ----------- Cost of material 11,569,433 50.7 9,465,046 52.9 Direct labor 3,786,207 16.6 2,682,555 15.0 Indirect labor 1,200,624 5.3 859,355 4.8 Direct manufacturing expense 2,387,422 10.5 1,857,375 10.4 ----------- ----------- ----------- ----------- Total cost of goods sold 18,943,686 83.1 14,864,331 83.1 ----------- ----------- ----------- ----------- GROSS PROFIT 3,894,963 16.9 3,028,522 16.9 ----------- ----------- ----------- ----------- EXPENSES Material control 163,118 0.7 108,010 0.6 Trucking and shipping 55,770 0.2 72,919 0.4 Engineering 490,702 2.1 398,824 2.2 Executive 838,784 3.7 741,437 4.1 Selling 719,082 3.1 534,586 3.0 Administrative 383,820 1.7 254,529 1.4 Interest expense 198,439 0.9 162,060 0.9 ----------- ----------- ----------- ----------- Total expenses 2,849,715 12.4 2,272,365 12.6 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAX 1,045,248 4.5 756,157 4.3 INCOME TAX 375,507 1.6 280,984 1.6 ----------- ----------- ----------- ----------- NET INCOME 669,741 2.9 % 475,173 2.7 % =========== =========== RETAINED EARNINGS - Beginning of year 3,928,074 3,452,901 ----------- ----------- RETAINED EARNINGS - End of year $ 4,597,815 $ 3,928,074 =========== ===========
The accompanying notes are an integral part of this statement. 4 7 CARROLL GEORGE, INC. STATEMENT OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 22,244,697 $ 17,375,369 Cash paid to suppliers and employees (21,607,045) (16,223,715) Interest received 14,962 21,424 Interest paid (192,141) (158,098) Income tax refunds (payments) (324,932) (221,667) ------------ ------------ Net cash provided by operating activities 135,541 793,313 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (819,433) (870,417) Increase in value of officers life insurance (5,330) (5,074) Proceeds from sale of equipment 1,450 -- ------------ ------------ Net cash used in investing activities (823,313) (875,491) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net loans under line of credit agreement 150,000 20,500 Proceeds from issuance of long-term debt 700,000 169,101 Principal payment on long-term debt (352,605) (230,894) ------------ ------------ Net cash provided by (used in) financing activities 497,395 (41,293) ------------ ------------ NET DECREASE IN CASH (190,377) (123,471) CASH - Beginning of year 240,993 364,464 ------------ ------------ CASH - End of Year $ 50,616 $ 240,993 ============ ============
5 8
1997 1996 --------- --------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Income $ 669,741 $ 475,173 --------- --------- Adjustments to reconcile net income to net cash provided by operating activities Depreciation 367,290 301,980 Loss on disposition of equipment 1,551 -- Increase in accounts receivable (591,718) (517,484) Increase in other miscellaneous receivables (194) (151) Increase in inventories (719,889) (83,435) Decrease in prepaid expenses 16,149 9,662 Increase in deferred income tax asset (11,080) (3,345) Increase in patronage equities -- (66) Decrease in investment 450 -- Increase in accounts payable 198,949 475,146 Increase in accrued wages and commissions 105,411 58,326 Increase in accrued payroll taxes 29,076 10,383 Increase in accrued interest 6,298 3,961 Increase in other liabilities 1,852 501 Increase in accrued income taxes 3,809 2,705 Increase in deferred income tax liability 57,846 59,957 --------- --------- Total adjustments (534,200) 318,140 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 135,541 $ 793,313 ========= =========
The accompanying notes are an integral part of this statement. 6 9 CARROLL GEORGE, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND 1996 A. Summary of Significant Accounting Policies Nature of Business The corporation manufactures upholstered parts and other finished products from polyurethane foam plastic and similar material. It sells these manufactured products to the farm machinery, industrial equipment and transportation industries throughout the United States, Canada, Mexico, Japan and Europe. The Company provides credit in the normal course of business to customers primarily located within the United States. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. Credit losses, when realized, have been within the range of the Company's expectations and, historically, have not been significant. It is management's opinion that no significant amounts of uncollectible accounts remain at September 30, 1997 and 1996. Concentrations of Credit Risk The Company grants credit to it's customers based on ongoing credit evaluation of its customers' financial condition and, generally, requires no collateral from its customers. The Company has temporary cash investments with a financial institution in excess of the federally insured limit. Sales to Major Customers Sales of 10% or more of total revenue were made to three customers for 1997 and two customers for 1996. They totaled approximately $18,140,000 for 1997 and $11,111,000 for 1996. 7 10 Property and Equipment Property and equipment are carried at cost. Depreciation of property and equipment is provided using straight-line and accelerated methods for financial reporting purposes at rates based on the following estimated useful lives: Years ----- Building 10-39 Plant equipment 10 Office furniture and equipment 5-10 Trucks and trailers 5-10 For income tax purposes, depreciation is computed using the straight-line and the accelerated cost recovery system and the modified accelerated cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Income Taxes The company provides deferred taxes for temporary differences between tax and financial reporting of depreciation, Internal Revenue Code Section 263A inventory costs and accrued vacation pay. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of September 30, 1997 and 1996. Reclassifications Certain amounts for the fiscal year ended September 30, 1996 have been reclassified to conform with the September 30, 1997 fiscal year presentation. 8 11 B. Inventories Inventories are composed of the following at September 30:
1997 1996 ---------- ---------- Raw material $2,012,973 $1,415,658 Work in process 546,643 354,119 Finished goods 164,476 234,426 ---------- ---------- $2,724,092 $2,004,203 ========== ==========
C. Officer's Life Insurance The Company is the beneficiary of several life insurance policies on the life of Gary L. George as follows:
Cash Surrender and Annuity Value Name of Face Amount ---------------------- Insurance Company of Policy 1997 1996 - ----------------------------- --------- -------- -------- Life Investors Insurance Company of America $ 71,800 $ 32,605 $ 30,117 Connecticut General 100,000 22,499 20,615 New York Life Insurance Company 50,000 25,784 24,826 -------- -------- -------- $221,800 $ 80,888 $ 75,558 ======== ======== ========
D. Accumulated Depreciation This amount is detailed as follows at September 30:
1997 1996 ---------- ---------- Building $ 529,818 $ 483,177 Plant equipment 1,289,858 1,017,325 Computer equipment and software 202,064 164,018 Office furniture and equipment 65,583 58,298 Trucks and trailers 19,575 37,530 ---------- ---------- $2,106,898 $1,760,348 ========== ==========
9 12 E. Note Payable - Bank The Company has a $1,000,000 revolving line of credit with Norwest Bank under a note dated January 13, 1997, due on demand. The interest rate is 1.5% over the base rate at Norwest Bank, adjusted monthly, and is currently 10.0%. Collateral consists of accounts receivable, inventory, equipment, general intangibles and a guaranty of the majority stockholder. Amounts outstanding under this line of credit were $570,500 and $420,500 at September 30, 1997 and 1996, respectively. G. Long-Term Debt
Long-term debt consists of the following: 1997 1996 ----------- ---------------- Note dated May 25, 1989, payable to Norwest Bank with a variable interest rate of 1.75% over Norwest National Association prime. The current interest rate is 10.25%. Payments are $4,100 monthly including interest until October 1, 1999. The note is collateralized by real estate. $ 7,599 $ 53,407 Note dated February 3, 1995, payable to Norwest Bank with a variable interest rate of 1.5% over Norwest National Association prime. The current interest rate is 10.0%. Payments are $10,900 monthly including interest until January 15, 2000. The note is collateralized by accounts receivable, inventory, equipment, general intangibles and a guaranty of the majority stockholder. 267,711 366,247 Note dated February 3, 1995, payable to Norwest Bank with a variable interest rate of 1.5% over Norwest National Association prime. The current interest rate is 10.0%. Payments are $12,000 monthly including interest until August 15, 2000. The note is collateralized by accounts receivable, inventory, equipment, general intangibles and a guaranty of the majority stockholder. 384,779 484,728 Note dated April 23, 1996, payable to Norwest Bank with a variable interest rate of 1.5% over Norwest National Association prime. The current interest rate is 10.0%. Payments are $3,170 monthly including interest until March 20, 2001. The note is collateralized by accounts receivable, inventory, equipment, general intangibles and a guaranty of the majority stockholder. 114,959 140,088
10 13 Note dated January 13, 1997, payable to Norwest Bank with a variable interest rate of 1.5% over Norwest National Association prime. The current interest rate is 9.75%. Payments are $14,700 monthly including interest until January 13, 2002. The note is collateralized by accounts receivable, inventory, equipment, general intangibles and a guaranty of the majority stockholder. 623,045 - Capitalized lease payable to IBM Credit Corporation with interest at 6.23% due in monthly installments of $583, including interest until February, 1999, collateralized by computer equipment and software 8,931 15,159 --------------- ------------ 1,407,024 1,059,629 Less current portion (382,411) (278,294) --------------- ------------ Long-term debt $ 1,024,613 $ 781,335 =============== ============
The credit agreement with the Norwest Bank places certain restrictions on the Company. Included is a prohibition on payment of dividends and maintaining a 1.0 to 1.0 ratio of net profit plus depreciation to current maturities of long term debt and a ratio of 1.2 total liabilities to net worth. Maturities of long-term debt are as follows:
Year ended September 30, ------------------------ 1998 $ 382,411 1999 408,713 2000 371,478 2001 184,409 2002 60,013 --------------- $ 1,407,024 ===============
H. Capitalized Lease The Company has acquired computer equipment and software under a lease that is considered to be financed and thereby capitalized. The following is a summary of the capitalized lease information at September 30:
1997 1996 --------------- ---------------- Assets recorded as capitalized leases $ 19,101 $ 19,101 Less accumulated depreciation 4,435 1,705 ---------------- ------------------ Leased assets - net $ 14,666 $ 17,396 ================ ==================
11 14 The charge against income resulting from depreciation of assets recorded under capitalized leases is included with depreciation expense on the Company's operating statement. Future minimum lease payments, stated net of imputed interest costs, for the balance of the lease term are as follows:
Year ended September 30, -------------------------------------------- 1998 $ 6,996 1999 2,333 ------------------ 9,329 Less imputed interest (398) ------------------ Present value of lease obligations 8,931 Less current portion (6,627) ------------------ Long - term portion $ 2,304 ==================
I. Income Taxes The components for income tax expense consist of the following at September 30:
1997 1996 -------------- --------------- Taxes currently payable $ 328,741 $ 224,372 Deferred taxes 46,766 56,612 ------------------ ------------------ $ 375,507 $ 280,984 ================== ===================
The net deferred tax benefit in the accompanying balance sheet includes the following amounts of deferred tax assets and liabilities at September 30:
1997 1996 -------------- ---------------- Deferred tax liability $ 369,241 $ 311,395 Deferred tax assets 69,326 58,246 ------------------ ------------------- $ 299,915 $ 253,149 ================== ===================
The deferred tax liability results from the use of accelerated methods of depreciation of property and equipment. The deferred tax asset results from accrued vacation pay for financial reporting but not deductible for tax purposes until paid. J. Related Party Transactions A steel building is leased from a major shareholder and President of the corporation as explained in Note K. 12 15 K. Operating Leases The Company is obligated under the following lease agreements: Supplies, Inc. - $700 per month on a month-to-month basis for rent of a steel building used for a warehouse. Supplies, Inc. is owned by Gary George, a major shareholder and President of this corporation. Annual rentals paid were $8,400 and $8,400 for the years ended September 30, 1997 and 1996, respectively. Worth County Fair Board - $700 per month on a month-to-month basis for rent of fairground buildings used for warehouse space. Xerox Corporation - $126 per month for three years through May, 1998, for lease of a copier. The following is a schedule by years of minimum future rentals on noncancelable operating leases as of September 30, 1997: 1998 $ 1,008 ==================
L. A ten year comparison of operating results is outlined below:
Earnings Fiscal Year Percent Per Average Book Value Ended of Share Per Share Sept. 30 Net Sales Outstanding Outstanding -------------------------------------------- ------------- --------------- ---------------- 1997 2.9 % $ 90.21 $ 633.69 1996 2.7 64.00 543.47 1995 2.2 43.29 479.47 1994 0.7 11.73 413.80 1993 2.6 36.19 402.06 1992 4.6 61.14 365.87 1991 3.7 41.07 312.47 1990 6.3 77.08 271.40 1989 7.4 73.50 194.31 1988 7.6 50.75 120.81
13 EX-99.2 3 EX-99.2 1 PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS The following unaudited pro forma condensed combined statements of earnings combines the consolidated statement of earnings of Morton Industrial Group, Inc. (Morton) for the quarter ended April 4, 1998 and the year ended December 31, 1997 and the statement of earnings of Carroll George, Inc. (George) for the quarter ended April 4, 1998 and the year ended September 30, 1997, accounting for the purchase of Carroll George, Inc. as though the purchase had occurred at the beginning of the respective period. A pro forma balance sheet at April 4, 1998 is not required since Morton's balance sheet in the Form 10-Q for the quarter ended April 4, 1998 reflected the George acquisition.
QUARTER ENDED APRIL 4, 1998 ------------------------------------------------------------- HISTORICAL -------------------- PRO FORMA MORTON GEORGE ADJUSTMENTS COMBINED ------ ------ ----------- -------- (In Thousands, Except Per Share Amounts) Net sales $ 30,672 $ 6,941 $ - $ 37,613 Cost of sales 25,956 6,173 - 32,129 ----------- ----------- --------- ------------ Gross profit 4,716 768 - 5,484 ----------- ----------- --------- ------------ Operating expenses: Selling expenses 767 370 - 1,137 Administrative expenses 2,395 428 - 2,823 ----------- ----------- --------- ------------ Total operating expenses 3,162 798 - 3,960 ----------- ----------- --------- ------------ Operating income (loss) 1,554 (30) - 1,524 ----------- ----------- --------- ------------ Other income (expense): Interest expense (546) (75) (105)(2) (726) Miscellaneous 22 3 - 25 ----------- ----------- --------- ------------ Total other income (expense) (524) (72) (105) (701) ----------- ----------- --------- ------------ Earnings (loss) before income taxes 1,030 (102) (105) 823 Income taxes 72 (40) - 32 ----------- ----------- --------- ------------ NET EARNINGS (LOSS) $ 958 $ (62) $ (105) $ 791 =========== =========== ========= ============ Earnings (loss) per share: Basic $ 0.24 $ (8.35) $ 0.20 =========== =========== ============ Diluted $ 0.20 $ (8.35) $ 0.17 =========== ============ ============ Weighted average number of shares: Basic 4,001,944 7,424 4,001,944 =========== =========== ============ Diluted 4,687,917 7,424 4,687,917 =========== =========== ============
2 PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1997 ------------------------------------------------------------- HISTORICAL -------------------- PRO FORMA MORTON(1) GEORGE ADJUSTMENTS COMBINED --------- ------ ----------- -------- (In Thousands, Except Per Share Amounts) Net sales $ 94,402 $ 22,839 $ - $ 117,241 Cost of sales 83,267 19,163 - 102,430 ----------- ----------- --------- ------------ Gross profit 11,135 3,676 - 14,811 ----------- ----------- --------- ------------ Operating expenses: Selling expenses 2,231 1,210 - 3,441 Administrative expenses 13,746 1,223 - 14,969 ----------- ----------- --------- ------------ Total operating expenses 15,977 2,433 - 18,410 ----------- ----------- --------- ------------ Operating income (loss) (4,842) 1,243 - (3,599) ----------- ----------- --------- ------------ Other income (expense): Interest expense (3,375) (198) (354)(2) (3,927) Miscellaneous 84 - - 84 ----------- ----------- --------- ------------ Total other income (expense) (3,291) (198) (354) (3,843) ----------- ----------- --------- ------------ Earnings (loss) before income taxes (8,133) 1,045 (354) (7,442) Income taxes (3,224) 375 (375)(3) (3,224) ----------- ----------- --------- ------------ NET EARNINGS (LOSS) $ (4,909) $ 670 $ 21 $ (4,218) =========== =========== ========= ============ Earnings (loss) per share: Basic $ (2.52) $ 90.25 $ (2.17) =========== =========== ============ Diluted $ (2.52) $ 90.25 $ (2.17) =========== =========== ============ Weighted average number of shares: Basic 1,944,444 7,424 1,944,444 =========== =========== ============ Diluted 1,944,444 7,424 1,944,444 =========== =========== ============
(1) Amounts for Morton for the twelve month period ended December 31, 1997 were determined by adding results for the six months ended June 30, 1997 and the results for the six months ended December 31, 1997 adjusting the income tax provision to the estimated effective rate. Subsequent to June 30, 1997, Morton changed its fiscal year end from June 30 to December 31. (2) Represents incremental interest expense relating to the additional debt of Morton resulting from the completed acquisition of George, net of the interest savings resulting from refinancing existing George debt at a lower interest rate. (3) Represents adjustment of the income tax provision to the estimated amount. Morton has net operating loss carryforwards which could be utilized to offset the taxable income of George. A deferred tax asset would have been recorded as part of the purchase price allocation. -----END PRIVACY-ENHANCED MESSAGE-----