-----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, BIEaxWmxcBRYcNI6ZSkbPDBYxwk6JJKRO3x0P88W3AuD9ma0or6Ig8s5T6DQwyDZ rZVyLx9Sh/5NZuh7+vdLOg== 0000931763-97-000216.txt : 19970223 0000931763-97-000216.hdr.sgml : 19970223 ACCESSION NUMBER: 0000931763-97-000216 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961210 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970221 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENCOR INDUSTRIES INC CENTRAL INDEX KEY: 0000064472 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 590933147 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11703 FILM NUMBER: 97541210 BUSINESS ADDRESS: STREET 1: 5201 N ORANGE BLOSSOM TRAIL CITY: ORLANDO STATE: FL ZIP: 32810 BUSINESS PHONE: 4072906000 MAIL ADDRESS: STREET 1: 5201 N ORANGE BLOSSOM STREET 2: 5201 N ORANGE BLOSSOM CITY: ORANLANDO STATE: FL ZIP: 32810 FORMER COMPANY: FORMER CONFORMED NAME: MECHTRON INTERNATIONAL CORP DATE OF NAME CHANGE: 19880128 FORMER COMPANY: FORMER CONFORMED NAME: MECHTRON GENCO CORP DATE OF NAME CHANGE: 19720411 FORMER COMPANY: FORMER CONFORMED NAME: MECHTRON CORP DATE OF NAME CHANGE: 19690909 8-K/A 1 FORM 8-K/A - -------------------------------------------------------------------------------- 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: DECEMBER 10, 1996 (Date of earliest event reported) ________________________________ GENCOR INDUSTRIES, INC. (Exact name of registrant as specified in its charter) ________________________________ DELAWARE 0-3821 59-0933147 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation or organization) Identification No.) 5201 NORTH ORANGE BLOSSOM TRAIL, ORLANDO, FLORIDA 32810 (Address of principal executive offices, zip code) (407) 290-6000 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- 1 This Amendment No. 1 supplements the Report on Form 8-K filed with the Securities and Exchange Commission on December 26, 1996 by Gencor Industries, Inc. (the "Registrant") to file (a) the financial statements of the Process Equipment Division (the "PED Division") of Ingersoll-Rand Company ("Ingersoll") and (b) the pro forma financial information relating to the business combination of the Registrant and the PED Division.
Item 7. Financial Statements and Exhibits Page ---- (a) Financial Statements of the Process Equipment Division of Ingersoll-Rand Company (i) Report of Indepedent Certified Public Accountants 4 (ii) Combined Balance Sheets--September 30, 1996 and December 31, 1995 5 (iii) Combined Statements of Operations for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and December 31, 1994 6 (iv) Combined Statements of Stockholder's Equity for the nine months ended September 30, 1996 and years ended December 31, 1995 and 1994 7 (v) Combined Statements of Cash Flows for the nine months ended September 30, 1996 and years ended December 31, 1995 and 1994 8 (vi) Note to Combined Financial Statements for the nine months ended September 30, 1996 and years ended December 31, 1995 and 1994 9 (b) Pro Forma Combined Financial Statements of Gencor Industries, Inc. (i) Introduction 18 (ii) Pro Forma Condensed, Combined Statement of Income for the year ended September 30, 1996 (unaudited) 19 (iii) Notes to Pro Forma, Condensed Combined Statement of Income for the year ended September 30, 1996 (unaudited) 20
2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. GENCOR INDUSTRIES, INC. By: /s/ John E. Elliott -------------------------------------- John E. Elliott, Executive Vice President Dated: February 21, 1997 3 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors of Gencor Industries, Inc.: We have audited the accompanying combined balance sheets of Process Equipment Division of Ingersoll-Rand Company and subsidiaries (the "Division") as of September 30, 1996 and December 31, 1995, and the related combined statements of operations, stockholder's equity, and cash flows for the nine months ended September 30, 1996 and for each of the two years in the period ended December 31, 1995. These combined financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on the financial statements based on our audits. We did not audit the financial statements of CPM Europe SA, CPM/Europe Limited, California Pellet Mill Europe Limited, and CPM/Pacific (Private) Limited (combined companies), which statements reflect total assets constituting 21% of combined total assets at December 31, 1995 and total revenues constituting 16% and 17% of combined revenues for the years ended December 31, 1995 and 1994, respectively. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for CPM Europe SA, CPM/Europe Limited, California Pellet Mill Europe Limited, and CPM/Pacific (Private) Limited is based solely on the reports of such other auditors. 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, such combined financial statements present fairly, in all material respects, the financial position of Process Equipment Division of Ingersoll-Rand Company and subsidiaries at September 30, 1996 and December 31, 1995, and the results of their operations and their cash flows for the nine months ended September 30, 1996 and for each of the two years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, the Division adopted SFAS 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, in 1996. The accompanying combined financial statements have been prepared from the separate records maintained by the Division and may not necessarily be indicative of the conditions that would have existed or the results of operations obtained if the Division had been operated as an unaffiliated company. Portions of certain expenses represent allocations made from home office items applicable to the Division as a whole. /s/ Deloitte & Touche LLP December 10, 1996 Orlando, Florida 4 PROCESS EQUIPMENT DIVISION OF INGERSOLL-RAND COMPANY COMBINED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, ASSETS 1996 1995 CURRENT ASSETS: Cash (Note 11) $ 2,538,949 $ 1,518,584 Accounts receivable, less allowance for doubtful accounts of $1,391,000 and $1,181,000, respectively (Notes 1 and 11) 18,512,770 19,814,387 Inventories (Notes 1 and 2) 20,910,915 19,597,921 Prepaid expenses 893,799 457,383 Deferred tax assets (Notes 1 and 6) 1,748,280 1,618,782 ------------ ------------ Total current assets 44,604,713 43,007,057 ACCOUNTS RECEIVABLE FROM AFFILIATES (Notes 11 and 12) 4,275,753 43,877,681 PROPERTY AND EQUIPMENT - Net (Notes 1 and 3) 15,900,480 17,307,935 OTHER ASSETS 2,882,211 3,628,908 ------------ ------------ $ 67,663,157 $107,821,581 ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Temporary cash overdraft $ 2,560,178 $ 1,499,983 Notes payable (Note 5) 67,636 321,722 Accounts payable (Note 11) 5,807,233 4,774,903 Income taxes payable (Notes 1 and 6) 528,368 1,502,193 Accrued expenses (Note 4) 8,789,650 7,605,690 ------------ ------------ Total current liabilites 17,753,065 15,704,491 DEFERRED INCOME TAXES (Notes 1 and 6) 475,337 506,103 POST RETIREMENT BENEFITS (Note 10) 2,118,200 2,020,300 ACCOUNTS PAYABLE TO AFFILIATES (Notes 11 and 12) 7,759,790 52,328,529 ------------ ------------ Total liabilities 28,106,392 70,559,423 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 7) STOCKHOLDER'S EQUITY: Common stock (Note 1) 455,870 455,870 Capital in excess of par value 788,694 788,694 Retained earnings 32,269,255 29,570,109 Cumulative translation adjustment 6,042,946 6,447,485 ------------ ------------ Total stockholder's equity 39,556,765 37,262,158 ------------ ------------ $ 67,663,157 $107,821,581 ============ ============
See accompanying notes to combined financial statements. 5 PROCESS EQUIPMENT DIVISION OF INGERSOLL-RAND COMPANY COMBINED STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, ----------------------------------------- 1996 1995 1994 NET SALES (Notes 1 and 12) $77,374,421 $113,448,183 $96,164,570 COSTS AND EXPENSES: Cost of sales (Notes 1 and 2) 56,903,950 84,022,397 70,578,913 Selling and marketing expenses 9,963,738 14,735,700 13,378,172 General and administrative expenses (Notes 9, 10, and 12) 4,900,155 6,518,858 5,811,550 ----------- ------------ ----------- 71,767,843 105,276,955 89,768,635 ----------- ------------ ----------- OPERATING INCOME (Note 8) 5,606,578 8,171,228 6,395,935 ----------- ------------ ----------- OTHER INCOME (EXPENSE): Interest income 163,783 287,824 101,717 Interest expense (Note 5) (353,974) (233,155) (117,624) Other (Note 1) (146,442) (337,082) (937,152) ----------- ------------ ----------- (336,633) (282,413) (953,059) ----------- ------------ ----------- INCOME BEFORE INCOME TAXES 5,269,945 7,888,815 5,442,876 INCOME TAX EXPENSE (Notes 1 and 6): Current: Federal 1,615,490 2,410,334 2,713,913 Foreign 365,075 925,310 (81,096) State 178,700 1,060,873 259,438 ----------- ------------ ----------- 2,159,265 4,396,517 2,892,255 ----------- ------------ ----------- NET INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 3,110,680 3,492,298 2,550,621 CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, NET (Note 1) (411,534) - - ----------- ------------ ----------- NET INCOME $ 2,699,146 $ 3,492,298 $ 2,550,621 =========== ============ ===========
See accompanying notes to combined financial statements. 6 PROCESS EQUIPMENT DIVISION OF INGERSOLL-RAND COMPANY COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
CAPITAL CUMULATIVE COMMON IN EXCESS RETAINED TRANSLATION STOCK OF PAR EARNINGS ADJUSTMENT TOTAL BALANCE, DECEMBER 31, 1993 $455,870 $ 788,694 $ 40,453,127 $ 3,353,664 $ 45,051,355 Net income - - 2,550,621 - 2,550,621 Distributions to Parent - - (3,085,440) - (3,085,440) Change in cumulative translation adjustment - - - 1,672,825 1,672,825 ------------- ------------- --------------- ------------- -------------- BALANCE, DECEMBER 31, 1994 455,870 788,694 39,918,308 5,026,489 46,189,361 Net income - - 3,492,298 - 3,492,298 Distributions to Parent - - (13,840,497) - (13,840,497) Change in cumulative translation adjustment - - - 1,420,996 1,420,996 ------------ ------------ -------------- ------------ ------------- BALANCE, DECEMBER 31, 1995 455,870 788,694 29,570,109 6,447,485 37,262,158 Net income - - 2,699,146 - 2,699,146 Change in cumulative translation adjustment - - - (404,539) (404,539) ------------ ------------ -------------- ------------ ------------- BALANCE, SEPTEMBER 30, 1996 $455,870 $ 788,694 $ 32,269,255 $ 6,042,946 $ 39,556,765 ============ ============ =============== ============ =============
See accompanying notes to combined financial statements. 7 PROCESS EQUIPMENT DIVISION OF INGERSOLL-RAND COMPANY COMBINED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, ------------------------------------ 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,699,146 $ 3,492,298 $ 2,550,621 Adjustments to reconcile net income to cash provided by (used for) operations: Cumulative effect of a change in accounting principle 411,534 Loss (gain) on foreign exchange (26,184) 146,352 399,307 Depreciation and amortization 1,921,078 2,415,437 2,108,271 Change in assets and liabilities: Decrease (increase) in trade receivables 1,311,271 (4,341,776) 378,464 Decrease (increase) in inventories (1,315,400) (1,564,674) 3,688,012 Decrease (increase) in prepaid expenses and other assets 311,510 (557,257) 662,548 Increase in deferred income taxes (160,300) (69,944) (1,266,597) Increase (decrease) in accounts payable 1,032,801 (1,258,066) 1,930,977 Increase (decrease) in temporary cash overdraft 1,061,765 (136,972) 593,866 Decrease in income taxes payable (974,334) (711,690) (1,374,551) Increase (decrease) in accrued expenses 1,285,314 1,775,529 (1,578,182) ------------ ------------ ------------ Total adjustments 4,859,055 (4,303,061) 5,542,115 ------------ ------------ ------------ Cash provided by (used for) operations 7,558,201 (810,763) 8,092,736 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES - Capital expenditures (1,334,665) (2,662,584) (2,272,268) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net (reduction) increase under line of credit and notes payable (254,773) (2,167,962) 2,457,847 Payments to affiliates (44,682,580) (30,181,600) (5,763,660) Payments from affiliates 39,707,452 47,893,954 266,752 Distributions to parent (13,840,497) (3,085,440) ------------ ------------ ------------ Cash provided by (used for) financing activities (5,229,901) 1,703,895 (6,124,501) EFFECT OF EXCHANGE RATE CHANGES ON CASH 26,730 270,518 252,363 NET INCREASE (DECREASE) IN CASH $ 1,020,365 (1,498,934) (51,670) CASH, BEGINNING OF PERIOD $ 1,518,584 3,017,518 3,069,188 ------------ ------------ ------------ CASH, END OF PERIOD $ 2,538,949 $ 1,518,584 $ 3,017,518 ============ ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 158,510 $ 158,062 $ 139,805 ============ ============ ============ Income taxes $ - $ 305,358 $ 796,390 ============ ============ ============
See accompanying notes to combined financial statements. 8 PROCESS EQUIPMENT DIVISION OF INGERSOLL-RAND COMPANY NOTES TO COMBINED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994 - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES BUSINESS - The Process Equipment Division of Ingersoll-Rand Company ( "PED" or the "Division") is a wholly owned multinational division of Ingersoll- Rand Company ("I-R" or the "Parent") engaged in the business of the design, manufacture and marketing of pelleting, grinding and flaking, filtration, and sugar processing equipment. PRINCIPLES OF CONSOLIDATION - The combined financial statements include the accounts of the following companies and divisions: California Pellet Mill Company and Wholly Owned Subsidiaries: CPM Europe SA CPM/Europe Limited California Pellet Mill Europe Limited CPM/Pacific (Private) Limited CPM/Europe BV Silver Engineering Works, Inc. Silver-Weibull Division of Ingersoll-Rand Aktiebolag Filtration Division of Improved Machinery Processing Company The combined companies' common stock is as follows:
AUTHORIZED OUTSTANDING PAR VALUE California Pellet Mill Comapany 100,000 43,087 $10/share Silver Engineering Works, Inc. 50,000 25,000 $1/share
All material intercompany transactions and balances have been eliminated. REVENUES - Revenues and transfers between geographic regions are recorded as the products are shipped. Revenues are presented net of sales returns. FOREIGN CURRENCY TRANSLATION - Assets and liabilities of combined entities located outside of the United States are translated into their U.S. dollar equivalents based on rates of exchange prevailing at the balance sheet date. Revenue and expense accounts are translated at the weighted average exchange rate during the period. Gains and losses resulting from translation are accumulated in a separate component of stockholder's equity. Gains and losses resulting from foreign currency transactions are included in income and are not material for the nine months ended September 30, 1996 or for the years ended December 31, 1995 and 1994. 9 The Parent, on behalf of the Division, hedges certain foreign currency transactions and firm foreign currency commitments. The Parent enters into forward exchange contracts (forward contracts). Gains and losses associated with currency rate changes on forward contracts are recorded currently in income. Gains and losses on forward contracts hedging firm foreign currency commitments are deferred off-balance sheet and included as a component of the related transaction, when recorded; however, a loss is not deferred if deferral would lead to the recognition of a loss in future periods. INVENTORIES - Inventories are stated at cost, which is not in excess of market. Domestic manufactured inventories of standard products are valued on the last-in, first-out (LIFO) method and all other inventories are valued using the first-in, first-out (FIFO) method. PROPERTY AND DEPRECIATION - Property is stated at cost. The Division principally uses accelerated depreciation methods for both tax and financial reporting purposes for assets placed in service prior to December 31, 1994. The Division changed to the straight-line method for financial reporting purposes for assets acquired on or after January 1, 1995, while continuing to use accelerated depreciation for tax purposes. The straight- line method is the predominant method used throughout the industry in which the Division operates, and its adoption increases the comparability of the Division's results with those of its competitors. The effect of the change on the year ended December 31,1995 was not material. INCOME TAXES - The Division is included as part of I-R's consolidated federal income tax return. Income taxes are provided on the Division's combined financial statements on a separate return basis and are payable to I-R. Deferred taxes are provided on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates expected to apply when temporary differences are settled or realized. NEW ACCOUNTING STANDARDS - In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which becomes effective for fiscal years beginning after December 15, 1995. Under SFAS 121, long-lived assets are reviewed for impairment whenever events indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows from the asset is less than the carrying amount of the asset, an impairment loss is recognized. The effect of the adoption of SFAS 121 by the Division was a decrease in net income of approximately $412,000, net of tax, for the nine months ended September 30, 1996. 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 10 2. INVENTORIES Inventories at September 30, 1996 and December 31, 1995 consist of the following:
SEPTEMBER 30, DECEMBER 31, 1996 1995 Raw materials $ 5,853,056 $ 4,449,325 Work in process 3,823,520 3,527,424 Finished goods 17,826,650 17,872,747 ----------- ----------- 27,503,226 25,849,496 Less: LIFO reserve (2,110,925) (2,110,988) Reserve for obsolete and slow-moving inventory (4,481,386) (4,140,587) ----------- ----------- $20,910,915 $19,597,921 =========== ===========
At September 30, 1996 and December 31, 1995, cost is determined by the LIFO method for 42% and 41%, respectively, of total inventories and the FIFO method for all other inventories. 3. PROPERTY AND EQUIPMENT Property and equipment at September 30, 1996 and December 31, 1995 consist of the following:
SEPTEMBER 30, DECEMBER 31, 1996 1995 Land and improvements $ 1,146,142 $ 1,485,641 Building and improvements 8,211,414 8,668,308 Machinery and equipment 27,263,183 28,771,402 Furniture and fixtures 3,142,764 2,144,751 ------------ ------------ 39,763,503 41,070,102 Less: Accumulated depreciation (23,863,023) (23,762,167) ------------ ------------ $ 15,900,480 $ 17,307,935 ============ ============
Depreciation expense for the nine months ending September 30, 1996 and the years ended December 31, 1995 and 1994 was approximately $1,921,000, $2,415,000, and $2,108,000, respectively. 11 4. ACCRUED EXPENSES Accrued expenses consist of the following at September 30, 1996 and December 31, 1995:
SEPTEMBER 30, DECEMBER 31, 1996 1995 Deposits $2,858,798 $ 761,437 Sales tax payable 63,888 106,061 Accrued payroll 3,512,880 4,341,484 Real estate and other taxes 337,316 618,231 Warranty 478,419 424,832 Product liability 621,113 489,091 Legal 98,958 136,223 Royalties payable 43,071 66,540 Accrued interest 162,072 - Other 613,135 661,791 ----------- ----------- $8,789,650 $7,605,690 ----------- -----------
5. NOTES PAYABLE The Division has a borrowing facility at a rate of 5% with a bank up to $6,260,000, guaranteed by the Parent, which expired on November 30, 1996. At September 30, 1996 and December 31, 1995, $67,636 and $321,722, respectively, was outstanding. 6. INCOME TAXES The difference between the U.S. federal income tax rate and the Division's effective income tax rate is as follows:
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, DECEMBER 31, ------------------- 1996 1995 1994 Federal income tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal income tax benefit 2.2 8.7 2.9 Foreign dividends paid - 9.4 2.2 Foreign operations, net 5.3 - 17.4 Other, net (1.6) 2.6 (4.4) ----- ----- ----- 40.9% 55.7% 53.1% ----- ----- -----
12 Deferred tax liabilities (assets) were comprised of the following:
SEPTEMBER 30, DECEMBER 31, 1996 1995 Depreciation and amortization $1,002,638 $1,254,868 Deferred intercompany profit 148,200 159,600 Deferred tax on foreign corporations 100,700 114,133 ---------- ---------- Gross deferred tax liability 1,251,538 1,528,601 Allowance for doubtful accounts 235,435 221,733 Inventory cost adjustments 113,876 102,476 Inventory reserves 983,877 1,141,843 Accrued expenses 1,191,293 1,175,228 ---------- ---------- Gross deferred tax asset 2,524,481 2,641,280 ---------- ---------- $1,272,943 $1,112,679 ========== ==========
7. COMMITMENTS AND CONTINGENCIES OPERATING LEASES - The Division leases certain vehicles, equipment, and buildings under noncancelable operating leases. Total rent expense for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994 was $291,000, $257,000 and $229,000, respectively. Future minimum rental commitments under noncancelable leases in effect at September 30, 1996 are as follows: 1997 $ 430,228 1998 292,738 1999 262,349 2000 165,809 Thereafter - ---------- $1,151,124 ==========
GUARANTEES- In the normal course of business, the Division has issued several direct guarantees, including performance letters of credit, totaling approximately $5,365,000 at September 30, 1996 and $9,483,000 at December 31, 1995. Additionally, CPM Europe BV has guaranteed the liabilities of its subsidiary, Cia de Projectos y Molineria, Spain. CPM Europe BV is in the process of liquidating this subsidiary. No significant losses are expected. PRODUCT LIABILITY AND OTHER CLAIMS - The Division is involved in various other litigation matters arising in the ordinary course of business. Management has reviewed all claims and lawsuits and, upon advice of counsel, has made provisions for estimable losses and expenses of litigation relating to claims against the Division. CONCENTRATIONS OF CREDIT RISK - As of September 30, 1996, the Division had no significant concentration of credit risk in trade receivables due to the large number of customers which comprise its customer base and their dispersion across different countries. 13 8. GEOGRAPHIC INFORMATION The Division operates in one industry segment (food and animal feed production industry equipment) and is engaged in the design and manufacture of processing and pelleting equipment and their controls. The Division conducts separate operations in the United States, Europe, and Asia. Information about the Division's operations for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994 in these geographic areas is as follows:
UNITED SEPTEMBER 30, 1996 STATES EUROPE OTHER TOTAL ELIMINATIONS CONSOLIDATED Net sales to unaffiliated customers $47,953,189 $21,404,150 $4,969,595 $ 74,326,934 $ - $ 74,326,934 Transfer between geographic areas 6,465,737 5,898,866 6,241 12,370,844 (9,323,357) 3,047,487 ----------- ----------- ---------- ------------ ------------ ------------ Total net sales $54,418,926 $27,303,016 $4,975,836 $ 86,697,778 $ (9,323,357) $ 77,374,421 =========== =========== ========== ============ ============ ============ Operating income $ 6,296,070 $ (595,736) $ 381,500 $ 6,081,834 $ (475,256) $ 5,606,578 =========== =========== ========== ============ ============ ============ Identifiable assets $45,452,331 $23,615,124 $6,096,538 $ 75,163,993 $ (7,500,836) $ 67,663,157 =========== =========== ========== ============ ============ ============ DECEMBER 31, 1995 Net sales to unaffiliated customers $61,085,991 $34,556,077 $7,721,397 $103,363,465 $ - $103,363,465 Transfer between geographic areas 14,583,970 14,048,957 379,525 29,012,452 (18,927,734) 10,084,718 ----------- ----------- ---------- ------------ ------------ ------------ Total net sales $75,669,961 $48,605,034 $8,100,922 $132,375,917 $(18,927,734) $113,448,183 =========== =========== ========== ============ ============ ============ Operating income $ 6,013,971 $ 1,233,106 $1,399,407 $ 8,646,484 $ (475,256) $ 8,171,228 =========== =========== ========== ============ ============ ============ Identifiable assets $78,204,790 $60,710,433 $6,035,687 $144,950,910 $(37,129,329) $107,821,581 =========== =========== ========== ============ ============ ============ DECEMBER 31, 1994 Net sales to unaffiliated customers $54,106,268 $27,261,878 $6,628,021 $ 87,996,167 $ - $ 87,996,167 Transfer between geographic areas 5,526,857 16,945,882 136,218 22,608,957 (14,440,554) 8,168,403 ----------- ----------- ---------- ------------ ------------ ------------ Total net sales $59,633,125 $44,207,760 $6,764,239 $110,605,124 $(14,440,554) $ 96,164,570 =========== =========== ========== ============ ============ ============ Operating income $ 6,114,664 $ 1,034,711 $(318,234) $ 6,831,141 $ (435,206) $ 6,395,935 =========== =========== ========== ============ ============ ============
Identifiable assets are those assets of the Division that are identifiable with the operations in each geographic area. Export sales for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994, were approximately $8,290,000, $13,637,000, and $14,858,000, respectively. 9. PENSION PLANS The Division's domestic employees are covered by noncontributory pension plans sponsored by I-R. In addition, certain employees in other countries are covered by pension plans. I-R's domestic salaried plans principally provide benefits based on a career average earnings formula. I-R's hourly pension plans provide benefits under flat benefit formulas. Foreign plans provide benefits based on earnings and years of service. In addition, I-R maintains other supplemental benefit plans for officers and key employees. I-R's policy is to fund an amount which could be in excess of the pension cost expensed, subject to limitations imposed by current statutes or tax regulations. 14 Allocated pension cost for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994 were made in accordance with actuarially determined criteria and amounted to approximately $83,000, $110,000, and $78,000, respectively. Most of the Division's domestic employees are covered by savings and other defined contribution plans. Division contributions and costs are determined based on criteria specific to the individual plans and amounted to approximately $57,000, $123,000, and $116,000 for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994, respectively. 10. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS In addition to providing pension benefits, I-R sponsors a post-retirement plan (the "Plan") that covers most domestic employees of the Division. The Plan provides for healthcare benefits and, in some instances, life insurance benefits and is contributory with amounts adjusted annually. Life insurance plans are noncontributory. When full-time employees retire from the Division between age 55 and age 65 with 15 years of service, most are eligible to receive, at a cost to the retiree, certain healthcare benefits identical to those available to active employees. After attaining age 65, an eligible retiree's healthcare benefit coverage becomes coordinated with Medicare. I-R funds the benefit costs principally on a pay as you go basis. Information concerning the Division's liability under the Plan is as follows: SEPTEMBER 30, DECEMBER 31, 1996 1995 (IN THOUSANDS) Financial status of plans: Accumulated postretirement benefit obligation (APBO): Retirees $ 592 $ 608 Active employees 1,526 1,412 ------ ------ 2,118 2,020 Plan assets at fair value - - ------ ------ Unfunded accumulated benefit obligation in excess of plan assets 2,118 2,020 Unrecognized net gain - - Unrecognized prior service benefits - - ------ ------ Accrued postretirement benefit cost $2,118 $2,020 ====== ====== 15 The components of net periodic postretirement benefits cost for the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994 were as follows:
1996 1995 1994 (IN THOUSANDS) Service cost, benefits attributed to employee service $ 34 $ 24 $ 36 during the year Interest cost on accumulated postretirement benefit obligation 111 190 184 ----- ----- ----- Net periodic postretirement benefits cost $ 145 $ 214 $ 220 ===== ===== =====
The discount rate used in determining the APBO was 7.25% at September 30, 1996 and December 31, 1995, respectively. The assumed healthcare cost trend rates used in measuring the accumulated postretirement benefit obligation were 10.35% in 1996 and 1995, declining each year to an ultimate rate by 2003 of 4.65%. Increasing the healthcare cost trend rate by 1.0% as of September 30, 1996, would increase the APBO by 10%. The effect of this change on the sum of the service cost and interest cost components of net periodic postretirement benefits cost for 1996 would be an increase of 13%. 11. FINANCIAL INSTRUMENTS The Division, as a multinational operation, maintains significant operations in foreign countries. As a result of these global operating and financing activities, the Division is exposed to changes in foreign currency exchange rates, which affect the results of operations and financial conditions of the Division. The Division manages exposure to changes in foreign currency exchange rates through its normal operating and financing activities, as well as through I-R's treasury department by the use of financial instruments. Generally, the only financial instruments the Division utilized are forward exchange contracts. The purpose of the hedging activities is to mitigate the impact of changes in foreign exchange rates. The Division attempts to hedge transaction exposures through natural offsets. To the extent this is not practicable, major exposure areas which are considered for hedging include foreign currency denominated receivables and payables, intercompany loans, firm committed transactions, anticipated sales and purchases, and dividends relating to foreign subsidiaries. The carrying value of accounts receivable, accounts receivable from affiliates, accounts payable, accounts payable from affiliates, and notes payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. 16 12. TRANSACTIONS WITH AFFILIATES The Division enters into transactions with I-R and other affiliated I-R companies in the normal course of business. For the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994, sales to such affiliates are as follows. Purchases from affiliates were not significant. 1996 1995 1994 Sales to affiliates $3,047,487 $10,084,718 $8,168,403 ========== =========== ========== The Division is charged for certain administrative services, such as treasury, credit, and collection, as well as a monthly allocation of Parent corporate overhead. For the nine months ended September 30, 1996 and for the years ended December 31, 1995 and 1994, these expenses totaled approximately $1,068,000, $1,359,000, and $1,311,000, respectively, and are included in general and administrative expenses in the accompanying financial statements. Accounts receivable from affiliates are generally noninterest bearing and due currently. Accounts payable to affiliates include short-term notes payable to the Parent or Parent-owned subsidiaries. Such loans bear interest at rates between 2.7% to 4.65%. 13. SUBSEQUENT EVENT Effective September 30, 1996, I-R sold the Division to Gencor Industries, Inc. at a purchase price of approximately $60,869,000. The transaction closed subsequent to September 30, 1996. ****** 17 GENCOR INDUSTRIES, INC. PRO FORMA FINANCIAL DATA The pro forma condensed, combined statement of income (the proforma) for the year ended September 30, 1996 have been prepared to illustrate the estimated effects of the Purchase Agreement between Gencor Industries, Inc. (Gencor) and Ingersoll-Rand Company (I-R) to purchase the Process Equipment Division (PED) of I-R. The following proforma combined statement of income has been derived by the application of proforma adjustments to the combination of Gencor and PED's historical statements of income for the twelve months ended September 30, 1996. The proforma statement for the year ended September 30, 1996 gives effect to the acquisition as if the transaction was consummated as of October 1, 1995. Since the transaction was effective as of September 30, 1996, PED's balance sheet is included in the Gencor Form 10K filing as of September 30, 1996 and, accordingly, is not presented herein. The proforma condensed, combined statement of income is not necessarily indicative of actual results that may have occurred had the transaction been completed as of the date specified or of the results of operations of Gencor and its subsidiaries for any future period. The proforma financial data should be read in conjunction with the audited consolidated financial statements of Gencor and related notes thereto included in Form 10K. 18 GENCOR INDUSTRIES, INC. PROFORMA CONDENSED, COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1996 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) - --------------------------------------------------------------------------------
GENCOR PROCESS INDUSTRIES, EQUIPMENT PROFORMA PRO INC. DIVISION ADJUSTMENTS FORMA Net sales $ 60,208 $108,142 $(7,673) (a) $ 160,677 Cost of sales 44,534 79,929 (6,655) (a) 117,808 ---------- -------- ------- ---------- Gross profit 15,674 28,213 (1,018) 42,869 Product engineering and development 2,207 90 - 2,297 Selling, general, and marketing expenses 8,226 19,548 125 (b) 27,899 ---------- -------- ------- ---------- Income from operations 5,241 8,575 (1,143) 12,673 OTHER INCOME (EXPENSE): Interest expense (1,357) (452) (4,459) (c) (6,268) Other income 68 18 - 86 ---------- -------- ------- ---------- Income before tax 3,952 8,141 (5,602) 6,491 INCOME TAX 1,195 3,658 (2,387) (d) 2,466 ---------- -------- ------- ---------- NET INCOME $ 2,757 $ 4,483 $(3,215) $ 4,025 ========== ======== ======= ========== Net income per share Primary $1.55 $1.85 Fully Diluted $1.55 $1.82 Weighted average shares outstanding Primary 1,780,159 (e) 2,179,262 Fully Diluted 1,780,159 (e) 2,210,396
19 GENCOR INDUSTRIES, INC. NOTES TO PROFORMA CONDENSED, COMBINED STATEMENT OF INCOME YEAR ENDED SEPTEMBER 30, 1996 - -------------------------------------------------------------------------------- (a) Proforma adjustment to eliminate sales to I-R affiliates which are not expected to continue after the acquisition. (b) The adjustments to selling, general, and marketing expenses are as follows: Amortization of goodwill recorded as a result of the acquisition $ 364 Amortization of deferred debt acquisition costs 680 Removal of I-R corporate overhead charge (1,424) Allocation of Gencor overhead charge 505 ------- Total selling, general, and marketing adjustment $ 125 =======
(c) The proforma adjustments to interest expense are as follows: Interest expense on historical debt, repaid in acquisition $(1,589) Interest expense on revolving credit facility and term notes assumed at 8.25% 6,048 ------- Total interest expense adjustment $ 4,459 =======
(d) Proforma adjustment to income tax expense relating to net increase as adjusted for the combined entity. Income taxes are calculated at an estimated rate of 38%. (e) Profoma adjustment to reflect the issuance of 268,559 shares in conjunction with the acquisition as well as the assumed dilutive effect of stock options outstanding at September 30, 1996. 20 -----END PRIVACY-ENHANCED MESSAGE-----