-----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, Tunv6AqUZCgwhJwBr8pOEN1LN0RIP92tHdacl1dazHdFx1zAk7z46yjsaCiVVqit urlN7WNTQlcJuqiyUZH+iQ== 0001047469-99-025429.txt : 19990629 0001047469-99-025429.hdr.sgml : 19990629 ACCESSION NUMBER: 0001047469-99-025429 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990415 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990628 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: 99652944 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 8-K/A 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) April 15, 1999 MORTON INDUSTRIAL GROUP, INC. (Exact name of registrant as specified in its charter) GEORGIA 0-13198 38-0811650 (State of 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) (309-266-7176) (Registrant's telephone number, including area code) (Former name or former address, if changed since last report.) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS WORTHINGTON CUSTOM PLASTICS, INC. ACQUISTION As previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 1999, the Company acquired three manufacturing facilities from Worthington Custom Plastics, Inc. on April 15, 1999. This Current Report on Form 8-K/A amends the earlier filing by adding the financial statements identified in Item 7. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS The following financial statements are filed as Exhibits to this Form 8-K/A: Exhibit 99.1 Audited combined balance sheets of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. as of March 31, 1999, May 31, 1998 and May 31, 1997 and the related combined statements of operations and net assets and cash flows for the ten months ended March 31, 1999 and the years ended May 31, 1998 and May 31, 1997. Exhibit 99.2 Unaudited Pro Forma Condensed Consolidated Financial Statements Exhibit 99.3 Consent of Ernst & Young LLP. 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. Date: June 28, 1999 By: /s/ __________________________ Daryl R. Lindemann Vice President of Business Development and Secretary INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 99.1 Audited combined balance sheets of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. as of March 31, 1999, May 31, 1998 and May 31, 1997 and the related combined statements of operations and net assets and cash flows for the ten months ended March 31, 1999 and the years ended May 31, 1998 and May 31, 1997. 99.2 Unaudited Pro Forma Condensed Consolidated Financial Statements. 99.3 Consent of Ernst & Young LLP. EX-99.1 2 EXHIBIT 99.1 Audited Financial Statements Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. TEN MONTHS ENDED MARCH 31, 1999 AND YEARS ENDED MAY 31, 1998 AND 1997 WITH REPORT OF INDEPENDENT AUDITORS Audited Financial Statements Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Ten months ended March 31, 1999 and years ended May 31, 1998 and 1997 Table of Contents Report of Independent Auditors.............................................1 Audited Financial Statements Combined Balance Sheets....................................................2 Combined Statements of Operations and Net Assets...........................3 Combined Statements of Cash Flow...........................................4 Notes to Financial Statements..............................................5
Report of Independent Auditors Board of Directors Worthington Industries, Inc. We have audited the accompanying combined balance sheets of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc., a subsidiary of Worthington Industries, Inc., as of March 31, 1999, May 31, 1998 and May 31, 1997, and the related combined statements of operations and net assets and cash flows for the ten months ended March 31, 1999 and the years ended May 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc., a subsidiary of Worthington Industries, Inc. at March 31, 1999, May 31, 1998 and May 31, 1997, and the combined results of their operations and their cash flows for the ten months ended March 31, 1999 and the years ended May 31, 1998 and 1997 in conformity with generally accepted accounting principles. ERNST & YOUNG LLP April 30, 1999 1
Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Combined Balance Sheets (Dollars in thousands) MARCH 31, MAY 31, MAY 31, 1999 1998 1997 -------------------------------------------- ASSETS Current assets: Accounts receivable, less allowances of $105, $215 and $315 at March 31, 1999, May 31, 1998 and $ 17,896 $ 17,820 $ 18,481 May 31, 1997, respectively Inventories - (NOTE A) 12,439 12,174 13,675 Prepaid expenses and other current assets 274 196 46 --------------------------------------------- Total current assets 30,609 30,190 32,202 Cash held by trustee 962 1,040 1,182 Intangible assets 29,027 29,902 30,964 Net property, plant, and equipment - (NOTE B) 37,428 40,611 42,868 --------------------------------------------- Total assets $ 98,026 $101,743 $ 107,216 ============================================= LIABILITIES Current liabilities: Cash overdraft $ 168 $ 342 $ 272 Accounts payable - (NOTE F) 10,117 7,809 7,431 Accrued liabilities 2,564 2,818 2,417 Current portion of industrial revenue bonds - (NOTE C) 340 280 100 --------------------------------------------- Total current liabilities 13,189 11,249 10,220 Industrial revenue bonds, net of current portion - (NOTE C) 11,280 11,620 11,900 Net obligations to affiliates - (NOTE F) 73,790 78,890 83,926 NET ASSETS (DEFICIENCY) (233) (16) 1,170 --------------------------------------------- Total liabilities and net assets $ 98,026 $101,743 $ 107,216 =============================================
SEE ACCOMPANYING NOTES. 2
Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Combined Statements of Operations and Net Assets (Dollars in thousands) TEN MONTHS YEAR YEAR ENDED ENDED ENDED MARCH 31, MAY 31, MAY 31, 1999 1998 1997 --------------------------------------------- Net sales $ 87,246 $ 105,163 $ 86,909 Cost of goods sold 80,788 95,815 76,511 ----------------------------------------- Gross margin 6,458 9,348 10,398 Selling, general, and administrative expense 7,493 8,588 6,185 ----------------------------------------- Operating income (loss) (1,035) 760 4,213 Other income (expense): Allocated Parent expenses (595) (649) (709) Interest expense, net (534) (663) (763) Miscellaneous income - 1 30 ----------------------------------------- Income (loss) before income taxes (2,164) (551) 2,771 Income taxes (benefit) - (NOTE E) (801) (204) 1,039 ----------------------------------------- Net income (loss) (1,363) (347) 1,732 Beginning net assets (deficiency) (16) 1,170 (793) ----------------------------------------- Net assets (deficiency) before distributions from (to) Parent (1,379) 823 939 Distributions from (to) Parent 1,146 (839) 231 ----------------------------------------- Ending net assets (deficiency) $ (233) $ (16) $ 1,170 =========================================
SEE ACCOMPANYING NOTES. 3
Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Combined Statements of Cash Flows (Dollars in thousands) TEN MONTHS YEAR YEAR ENDED ENDED ENDED MARCH 31, MAY 31, MAY 31, 1999 1998 1997 ------------------------------------------ OPERATING ACTIVITIES Net earnings (losses) $ (1,363) $ (347) $ 1,732 Adjustments to reconcile net earnings (losses) to net cash provided by operating activities: Depreciation 3,390 3,783 2,687 Amortization 875 1,062 432 Loss on disposal of property, plant and equipment 40 - - Decrease in provision for bad debts (110) (100) - Changes in assets and liabilities: Accounts receivable 34 761 1,585 Inventories (265) 1,501 (1,214) Prepaid expenses and other current assets (78) (150) 1,470 Accounts payable and accrued expenses 2,054 779 (5,031) ----------------------------------------- Net cash provided by operating activities 4,577 7,289 1,661 INVESTING ACTIVITIES Investment in property, plant and equipment (493) (1,526) (1,441) Proceeds from disposal of property, plant and equipment 246 - - ----------------------------------------- Net cash used by investing activities (247) (1,526) (1,441) FINANCING ACTIVITIES Principal payments on Industrial Revenue Bonds (280) (100) - Net decrease in cash held by trustee 78 142 525 Decrease in net obligations to affiliates (5,100) (5,036) (2,618) Distributions from (to) Parent 1,146 (839) 231 ----------------------------------------- Net cash used by financing activities (4,156) (5,833) (1,862) ----------------------------------------- Increase (decrease) in cash and cash equivalents 174 (70) (1,642) Cash and cash equivalents (overdraft) at beginning of period (342) (272) 1,370 ----------------------------------------- Cash overdraft at end of period $ (168) $ (342) $ (272) =========================================
SEE ACCOMPANYING NOTES. 4 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements March 31, 1999 (Dollars in thousands) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS DESCRIPTION Worthington Non-Automotive Plastics Group (the "Group") is part of Worthington Custom Plastics, Inc. (the "Company"), a subsidiary of Worthington Industries, Inc. (the "Parent"). The Group consists of three manufacturing plants located in Lebanon, Kentucky; Harrisburg, North Carolina and St. Matthews, South Carolina. The combined financial statements do not include the accounts of the Company's automotive related custom plastics plants located in Salem, Ohio; Upper Sandusky, Ohio; Mason, Ohio; Mentor, Ohio and Cumming, Georgia nor its investments in London Industries, Inc. and Worthington Precision Metals, Inc. The Group produces a wide variety of functional and decorative, custom-made, molded plastic products. BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying combined financial statements are prepared on the basis of historical cost from the accounting records of the Group. The combined financial statements have been presented as if the Group had operated as an independent, stand-alone entity for the periods presented. Significant intergroup accounts and transactions are eliminated. The combined financial statements include allocations of certain Company and Parent liabilities and expenses relating to the Group businesses. Management believes these allocations are reasonable. The Company and Parent charge each plant for corporate, sales and administrative services. As the Harrisburg, North Carolina plant (PMI) handles most of these functions on site, no charges are allocated to this plant. The allocated Company and Parent expenses include executive, sales and administrative payroll, information systems, legal services, various payroll benefits, aviation services, and facilities management. Such expenses are allocated on a direct basis where appropriate or an indirect basis (primarily based on sales) in a manner designed to allocate all such expenses to the various divisions and subsidiaries of the Company and Parent. Interest expense in the combined financial statements is also based on allocations from the Parent. Such allocations relate to the Group's working capital and industrial revenue bonds. No intercompany interest was allocated to the Group for the Parent's investment in the Harrisburg, North Carolina plant (see Note H). 5 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements (continued) (Dollars in thousands) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BASIS OF FINANCIAL STATEMENT PRESENTATION (CONTINUED) As a result of the Company and Parent charges and allocations, these financial statements may not be indicative of the financial position and results of operations which would have occurred had the Group been an independent entity during the periods presented. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Group considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. INVENTORIES Raw materials and work in process inventories are valued at the lower of cost, which is principally determined on the first-in, first-out (FIFO) basis, or market. Finished goods inventories are valued as a percentage (primarily 85%) of their selling prices which is estimated to approximate their FIFO cost. Inventories consist of:
MARCH 31, MAY 31, MAY 31, 1999 1998 1997 --------------------------------------------- Raw materials $ 5,543 $ 6,180 $ 7,420 Work in process 3,086 1,796 2,699 Finished goods 3,810 4,198 3,556 --------------------------------------------- $ 12,439 $ 12,174 $13,675 =============================================
6 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements (continued) (Dollars in thousands) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets consist of goodwill which is being amortized on the straight-line method over 30 years. Amortization expense was $875 for the ten months ended March 31, 1999 and $1,062 and $432 for the years ended May 31, 1998 and 1997, respectively. PROPERTY, PLANT, AND EQUIPMENT AND DEPRECIATION Property, plant, and equipment are carried at cost and depreciated using the straight-line method over the following estimated useful lives of the assets:
(IN YEARS) ---------- Buildings 10 - 40 Improvements 5 - 20 Machinery and Equipment 2 - 20 Vehicles 3 - 5 Furniture and Fixtures 3 - 10
IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. REVENUE RECOGNITION The Group recognizes revenue at the time the related inventory is shipped. ENVIRONMENTAL COSTS Environmental costs are capitalized if the costs extend the life of the property, increase its capacity, and/or mitigate or prevent contamination from future operations. Costs related to environmental contamination treatment and clean-up are charged to expense. 7 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements (continued) (Dollars in thousands) NOTE B - PROPERTY, PLANT, AND EQUIPMENT Major classifications of property, plant and equipment consisted of the following at:
MARCH 31, MAY 31, MAY 31, 1999 1998 1997 ----------------------------------------------- Land $ 1,630 $ 1,630 $ 1,630 Buildings 9,660 9,660 9,620 Improvements 1,108 823 815 Machinery and equipment 37,998 37,077 35,828 Vehicles 203 243 67 Furniture and fixtures 788 1,886 1,622 ----------------------------------------------- 51,387 51,319 49,582 Accumulated depreciation (13,959) (10,708) (6,714) ----------------------------------------------- Net property, plant and equipment $ 37,428 $ 40,611 $42,868 ===============================================
NOTE C - INDUSTRIAL REVENUE BONDS The industrial development revenue bonds mature on December 31, 2019 and bear interest at 8.0%. The bonds were issued under a lease and purchase agreement for the Group's plant in Lebanon, Kentucky through the City of Lebanon, Kentucky and were acquired by the Parent. At March 31, 1999, May 31, 1998 and May 31, 1997, the carrying value of the bonds approximates their fair value. Covenants and restrictions associated with these bonds include the restriction on the use of proceeds for construction costs, maintaining insurance and providing financial information. At March 31, 1999, the Group is in compliance with all covenants. Principal payments due on the bonds for the next five years ending March 31 are as follows:
2000 $ 340 2001 430 2002 480 2003 590 2004 650 2005 and thereafter 9,130 --------- $11,620 =========
8 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements (continued) (Dollars in thousands) NOTE D - LEASE COMMITMENTS The Group leases certain buildings and equipment for use in its operations under non-cancelable operating leases. Most leases contain renewal options. The lease agreements provide for increases in rentals if the renewal options are exercised based on prearranged increases. The minimum rental payments for each of the next five years in the period ending March 31, 2004 are: $744, $748, $614, $207 and $207, respectively. Rent expense under operating leases during the ten months ended March 31, 1999 and the years ended May 31, 1998 and May 31, 1997 was $904, $1,081 and $441, respectively. NOTE E - INCOME TAXES Federal income taxes and related deferred tax assets and liabilities are calculated by the Parent in accordance with Statement of Financial Accounting Standards No. 109. All deferred tax assets and liabilities are recorded at the Parent level. The tax expense or benefit is allocated to the Group based on an annual income tax rate of 37.0% for the ten months ended March 31, 1999 and the year ended May 31, 1998 and 37.5% for the year ended May 31, 1997. NOTE F - RELATED PARTY TRANSACTIONS The Group's net obligations to affiliates consist of various receivables and accounts payable to the Parent and its affiliates. Accounts payable to the parent at March 31, 1999, May 31, 1998 and May 31, 1997 include $61,562 related to the acquisition of Plastics Manufacturing, Inc. and approximately $15,000 related to the acquisition of the Group's plant in St. Matthews, South Carolina. The Group purchases from and sells to affiliated companies certain raw materials and services at prevailing market prices. Purchases from affiliated companies totaled $543, $2,979 and $717 for the ten months ended March 31, 1999 and the years ended May 31, 1998 and 1997, respectively. Sales to affiliated companies totaled $379, $419 and $283 for the ten months ended March 31, 1999 and the years ended May 31, 1998 and 1997, respectively. 9 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements (continued) (Dollars in thousands) NOTE G - EMPLOYEE BENEFIT PLANS Certain employees of the Group participate in a current cash profit sharing plan and a deferred profit sharing plan. Contributions to and costs for these plans are determined as a percentage of the Group's pre-tax income before profit sharing by location. Profit sharing expenses and related accruals are recorded at each of the Group's plant locations. Total profit sharing expenses were $639, $391 and $470 for the ten months ended March 31, 1999 and the years ended May 31, 1998 and 1997, respectively. NOTE H - ACQUISITION On December 6, 1996, the Company acquired the net assets of Plastics Manufacturing, Inc. (PMI) located in Harrisburg, North Carolina for $61,562 in a business combination accounted for as a purchase. PMI is a manufacturer of plastic injection-molded and thermoformed parts. The combined statements of earnings and cash flows for the year ended May 31, 1997 include six months of PMI's operations. Goodwill in the amount of $31,396 resulting from the purchase is being amortized using the straight-line method over 30 years. NOTE I - CONCENTRATION OF CREDIT RISK AND SALES TO SIGNIFICANT CUSTOMERS The Group recorded sales transactions with significant customers as follows:
SALES ACCOUNTS RECEIVABLE ------------------------------------------------------------------------------------ TEN MONTHS YEAR YEAR ENDED ENDED ENDED MARCH 31, MAY 31, MAY 31, MARCH 31, MAY 31, MAY 31, 1999 1998 1997 1999 1998 1997 ------------------------------------------------------------------------------------ American Yard Products 9.1% 12.9% 17.4% $ - $2,532 $ 2,709 General Electric 13.5 12.4 16.7 2,528 3,229 1,851 B/E Aerospace 10.5 10.8 6.4 2,681 1,691 3,917 IBM 11.0 10.2 12.2 1,579 2,522 1,741 ------------------------------------------------------------------------------------ 44.1% 46.3% 52.7% $6,788 $9,974 $10,218 ==================================================================================
10 Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. Notes to Financial Statements (continued) (Dollars in thousands) NOTE J - CONTINGENCIES In the ordinary course of business, the Group is threatened with or named as a defendant in various litigation or environmental issues related to its operations. It is not possible to determine the ultimate disposition of these matters. In the opinion of management, the outcome of these actions would not significantly affect the Group's financial position. NOTE K - SUBSEQUENT EVENT Effective April 15, 1999, substantially all of the assets of the Group were acquired by Morton Custom Plastics, LLC. NOTE L - YEAR 2000 ISSUE (UNAUDITED) The Group has developed a plan to modify its information technology to be ready for the Year 2000 and has begun converting critical data processing systems. The project is expected to be complete before the end of 1999. The Group believes all significant Year 2000 issues will be resolved before the millennium change and does not believe any Year 2000 issues will significantly impact the financial condition of the Company. 11 EX-99.2 3 EXHIBIT 99.2 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1998 and for the quarter ended April 3, 1999 of Morton Industrial Group, Inc. (Morton) give effect to (i) the acquisition of the Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. ("Worthington") and (ii) the acquisitions in 1998 of B&W Metal Fabricators, Inc., certain assets of SMP Steel Corporation, Carroll George, Inc. and Mid-Central Plastics, Inc. (collectively, the "1998 Acquisitions"), as though each such transaction was effective at the beginning of respective periods. The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition of Worthington, as though such transaction was completed on April 3, 1999. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative either of the results that actually would have been achieved if the transactions reflected therein had been completed on the dates indicated or the results which may be obtained in the future. MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1998
1998 Pro Forma Morton Worthington Acquisitions(1) Adjustments ----------- ------------ -------------- ------------- Net Sales $ 151,196 $ 105,084 $ 24,561 $ 0 ----------- ------------ -------------- ------------- Gross Profit 21,456 9,694 3,890 3,401 (2) Selling and administrative expenses 14,499 9,614 2,401 (1,059) (3) ----------- ------------ -------------- ------------- Operating income 6,957 80 1,489 4,460 Interest and other expense 4,459 571 1,143 2,326 (5) ----------- ------------ -------------- ------------- Earnings (loss) before income taxes and extraordinary charge 2,498 (491) 346 2,134 (Provision) benefit for income taxes (415) 15 (81) (167) (4) ----------- ------------ -------------- ------------- Earnings (loss) before extraordinary charge 2,083 (476) 265 2,301 ----------- ------------ -------------- ------------- ----------- ------------ -------------- ------------- Earnings before extraordinary charge per common share: Basic $ 0.52 Diluted 0.45 Number of shares used to compute per share data: Basic 4,023,373 Diluted 4,582,614 Pro Forma Consolidated ---------------- Net Sales $ 280,841 ---------------- Gross Profit 38,441 Selling and administrative expenses 25,455 ---------------- Operating income 12,986 Interest and other expense 8,499 ---------------- Earnings (loss) before income taxes and extraordinary charge 4,487 (Provision) benefit for income taxes (314) ---------------- 4,173 ---------------- ---------------- Earnings before extraordinary charge per common share: Basic $ 0.64 (a) Diluted 0.56 (a) Number of shares used to compute per share data: Basic 4,023,373 Diulted 4,582,614
(a) Pro forma per share amounts give effect to preferred stock dividends requirements and related discount accretion. MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Quarter Ended April 3, 1999
Pro Forma Morton Worthington Adjustments ------------- ------------- ------------- Net Sales $ 39,359 $ 26,864 $ 0 ------------- ------------- ------------- Gross Profit 5,656 2,024 851 (2) Selling and administrative expenses 4,807 2,503 (265) (3) ------------- ------------- ------------- Operating income 849 (479) 1,116 Interest and other expense 1,575 155 569 (5) ------------- ------------- ------------- Earnings (loss) before income taxes and cumulative effect of accounting change (726) (634) 547 (Provision) benefit for income taxes 46 45 (38)(4) ------------- ------------- ------------- Earnings (loss) before cumulative effect of accounting change (680) (589) 509 ------------- ------------- ------------- ------------- ------------- ------------- Earnings before cumulative effect of accounting change per common share, basic and diluted $ (0.17) Number of shares used to compute per share data: Basic 4,067,573 Diluted 4,422,215 Pro Forma Consolidated ------------- Net Sales $ 66,223 ---------------- Gross Profit 8,531 Selling and administrative expenses 7,045 ------------- Operating income 1,486 Interest and other expense 2,299 ------------- Earnings (loss) before income taxes and cumulative effect of accounting change (813) (Provision) benefit for income taxes 53 ------------- Earnings (loss) before cumulative effect of accounting change (760) ------------- ------------- Earnings before cumulative effect of accounting change per $ (0.28) (a) common share, basic and diulted Number of shares used to compute per share data: Basic 4,067,573 Diluted 4,422,215
(a) Pro forma per share amounts give effect to preferred stock dividends requirements and related discount accretion. MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of April 3, 1999
Pro Forma Pro Forma Morton Worthington Adjustments Consolidated ------------- ------------- ------------- ------------- Assets Current assets: Cash $ 736 $ (168) $ 168 (8) $ 736 Accounts, notes and other receivables, net 16,100 17,896 0 33,996 Inventories 14,678 12,439 0 27,117 Prepaid expenses 1,094 274 0 1,368 Other 2,581 0 0 2,581 ------------- ------------- ------------- ------------- Total current assets 35,189 30,441 168 65,798 ------------- ------------- ------------- ------------- Deferred income taxes 4,646 0 0 4,646 Property, plant and equipment, net 45,482 37,428 (20,981) (7) 61,929 Intangible assets, net 12,908 29,027 (29,027) (8) 12,908 Other 1,610 962 913 (7) 3,485 ------------- ------------- ------------- ------------- $ 99,835 $ 97,858 $ (48,927) $ 148,766 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Liabilities and Stockholders' Equity Current Liabilities: Note payable to bank $ 14,400 $ 0 $ 0 $ 14,400 Current installment of long-term debt 5,473 340 (340) (9) 5,473 Accounts payable 16,490 10,117 0 26,607 Other accrued expenses 4,192 2,564 0 6,756 ------------- ------------- ------------- ------------- Total current liabilities 40,555 13,021 (340) 53,236 Long term debt, net of current portion 51,664 11,280 20,720 (9) 83,664 Other 2,502 73,790 (73,790) (8) 2,502 ------------- ------------- ------------- ------------- Total liabilities 94,721 98,091 (53,410) 139,402 ------------- ------------- ------------- ------------- Stockholders Equity Preferred stock 0 0 4,250(6)(7) 4,250 Class A common stock 39 0 0 39 Class B common stock 2 0 0 2 Additional paid-in capital 19,937 0 0 19,937 Retained earnings(deficit) (14,864) (233) 233 (8) (14,864) ------------- ------------- ------------- ------------- Total stockholders' equity 5,114 (233) 4,483 9,364 ------------- ------------- ------------- ------------- $ 99,835 $ 97,858 $ (48,927) $ 148,766 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF APRIL 3, 1999 (in thousands) (1) Reflects the results of operations of the companies acquired between January 1, 1998 and the date of acquisition by Morton. The companies were acquired on the following dates.
DATE ACQUIRED ------------- Carroll George, Inc........................................... March 30, 1998 B&W Metal Fabricators, Inc.................................... April 8, 1998 Mid-Central Plastics, Inc..................................... May 29, 1998 SMP Steel Corporation......................................... June 1, 1998
The results below also reflect purchase accounting adjustments to depreciation, amortization, interest and income tax expense.
B&W METAL SMP STEEL CARROLL MID-CENTRAL 1998 FABRICATORS, INC. CORPORATION GEORGE, INC. PLASTICS, INC. ACQUISITIONS ----------------- ----------- ------------ -------------- ------------ Net sales...................... $2,336 $1,330 $6,941 $13,954 $24,561 Gross profit................... 651 479 768 1,992 3,890 Selling and administrative expenses.... 462 72 809 1,058 2,401 ----------------- ----------- ------------ -------------- ------------ Operating income............... 189 407 (41) 934 1,489 Interest and other expense..... 170 4 177 792 1,143 ----------------- ----------- ------------ -------------- ------------ Earnings before income taxes and extraordinary charge..................... 19 403 (218) 142 346 (Provision)/benefit for income taxes............... (16) (28) 40 (77) (81) ----------------- ----------- ------------ -------------- ------------ Earnings before extraordinary charge....... 3 375 (178) 65 265 ----------------- ----------- ------------ -------------- ------------
(2) Reduction in depreciation expense and amortization arising from the Worthington purchase price allocation. (3) Reduction of the Worthington corporate expense allocation that is discontinued. (4) Because of the available net operating loss carryforward at Morton, no Federal income tax effect has been given in these pro forma statements; state income tax (expenses) or benefits have been provided at an average rate of 7%. (5) Increase in interest expense, and related amortization of debt issuance expense, attributable to the new secured revolving credit and term loan facility with an average interest rate of approximately 7.75% on a principal balance of $32,000. (6) In connection with the Worthington acquisition, 8% preferred shares valued at $4,250 were issued. The preferred shares have a face value of $10,000. The discount will be accreted over a five year period using the effective yield method. The preferred shares will provide a yield of approximately 28%. (7) Reflects the Worthington acquisition as follows: Purchase price paid as: Cash......................................................... $ 25,000 Preferred stock value........................................ 4,250 Estimated working capital adjustment......................... 4,000 Acquisition costs............................................ 1,125 Debt issuance expense........................................ 1,875 -------- Total consideration....................................... $ 36,250 -------- -------- Allocated to: Historical book value........................................ $ 55,356 Less reduction in carrying value of property, plant and equipment................................... (20,981) -------- Net allocation to property, plant and equipment............. 34,375 Increase in other assets--debt issuance expense............. 1,875 -------- Total consideration.................................... $ 36,250 -------- --------
The Worthington agreement also includes a contingent cash payment. The above data does not consider any contingent amounts. Any contingent cash payments will result in an adjustment to the carrying value of property, plant and equipment. (8) Adjustment to eliminate Worthington cash, intangible assets, intercompany balances and equity account existing at the time of the acquisition and not assumed. (9) Represents the elimination of Worthington's industrial revenue bond ($340 in current debt and $11,280 in long-term debt), and the entry into the secured revolving credit facility and term loan in the amount of $32,000. (10) The unaudited pro forma condensed consolidated statements of operations do not include any adjustments for cost savings which management expects to achieve in the areas of staff level adjustments, changes in sick pay policies, changes in contributory health care coverage policies and to other reductions in selling and administrative expenses. EX-99.3 4 EXHIBIT 99.3 CONSENT OF ERNST & YOUNG LLP We consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 333-68927 and 333-69575) of Morton Industrial Group, Inc. of our report dated April 30, 1999, with respect to the financial statements of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. included in the Form 8-K/A filed by Morton Industrial Group, Inc. dated April 15, 1999 (date of earliest event reported). -----END PRIVACY-ENHANCED MESSAGE-----