-----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, Gwr68XkX+nVXgRRhyF1j+nNLPj9XG6Rdyv3AFsfHVjv5gnGZNZsxKfmW5jhKB/Y3 S6Etplwmk1IX4982JgTooA== 0000898430-98-001936.txt : 19980515 0000898430-98-001936.hdr.sgml : 19980515 ACCESSION NUMBER: 0000898430-98-001936 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980401 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTHEWS STUDIO EQUIPMENT GROUP CENTRAL INDEX KEY: 0000855575 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 951447751 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-18102 FILM NUMBER: 98620384 BUSINESS ADDRESS: STREET 1: 3111 N KENWOOD ST CITY: BURBANK STATE: CA ZIP: 91504 BUSINESS PHONE: 8436715X32 MAIL ADDRESS: STREET 1: 2405 EMPIRE AVENUE CITY: BURBANK STATE: CA ZIP: 91504 8-K/A 1 FORM 8-K/A AMENDMENT #1 UNITED STATES 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 1, 1998 MATTHEWS STUDIO EQUIPMENT GROUP ---------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA -------------------------------------------- (State or other jurisdiction of incorporation) 0-18102 95-1447751 ---------------------- ------------------ (Commission file number) (I.R.S. Employer Identification No.) 3111 NORTH KENWOOD STREET, BURBANK, CA 91505 ------------------------------------------------------- (Address of principal executive offices) (Zip Code) (818) 525-5200 ------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Item 2. Acquisition or Disposition of Assets On April 1, 1998, Matthews Studio Equipment Group ("Matthews" or "the Company") acquired Four Star Holding, Inc. ("Four Star") a holding company which owns 100% of Four Star Lighting, Inc. Pursuant to a stock purchase agreement, in exchange for all of the capital stock of Four Star, the Company paid $18,421,000 in cash to the shareholders of Four Star and $9,104,000 in cash to reduce Four Star's long-term debt. The amount of consideration paid to the Four Star shareholders was reached through arms-length negotiations and was funded through the Company's credit facility discussed in Item 5 below. The amount paid to Four Star creditors was funded through the same credit facility. Prior to the acquisition, the ownership in Four Star was held by Four Star Associates, L.P., Stonebridge Partners Equity Fund, L.P., Bill L. Aishman, Anthony P. Cancellieri and Darren DeVerna. Four Star has operations in New York, New York and Los Angeles, California. Four Star provides rentals of lighting and other equipment for use in theatrical productions. Four Star will continue its business and operations as a wholly-owned subsidiary of the Company. Four Star's revenues for its fiscal year ended December 31, 1997 were approximately $11.7 million and the total liabilities as of that date were $13.9 million. Of the $27,525,000 cash paid on April 1, 1998, $9,104,000 was used to pay off certain liabilities of Four Star. A copy of the press release of the Company in respect of the acquisition of Four Star is attached hereto as Exhibit 3. Item 5. Other Events On April 1, 1998, Matthews and its principal subsidiaries amended its senior secured revolving credit facility (the "Amended Chase Facility") with The Chase Manhattan Bank as agent for a syndicate of lenders ("Bank"). The Amended Chase Facility provides for revolving credit loans of up to $64,000,000 and a term loan of $16,000,000, with an aggregate principal amount not in excess of $80.0 million at any time outstanding. The term loan requires principal payments beginning December 31, 1998. The proceeds of the Amended Chase Facility may be used, 1) to finance the Four Star acquisition, including fees and expenses incurred in connection with the Four Star acquisition, within the limits specified in the stock purchase agreement, 2) for general working capital purposes, 3) for the financing of future acquisitions of businesses with $10.0 million designated for such activities, 4) to finance the repayment of certain capitalized lease obligations, 5) to finance capital expenditures, within the limits specified in the agreement, and 6) to repay certain subordinated debt. Interest on outstanding borrowings under the Amended Chase Facility at the Company's choice is at LIBOR plus a maximum of 2.75% or the greater of (i) Chase Manhattan Bank's Prime Rate plus a maximum of 0.75%, (ii) the Base CD Rate (as determined by the Bank) plus a maximum of 1.75% or (iii) the Federal Funds Effective Rate plus a maximum of 1.25%. In each case, the interest margin charged on outstanding loans may be reduced if specified ratios are achieved by the Company. In addition, the Company pays from three-eights of one percent to one-half of one percent on the unused credit commitment. The Amended Chase Facility matures August 14, 2002. The Amended Chase Facility requires the Company to maintain certain levels of net worth and, on a quarterly basis, certain levels of EBITDA (earnings before interest, taxes, depreciation and amortization), and to meet several financial ratios including interest coverage, leverage and debt service coverage ratios. In addition, the Company must maintain limits on annual rent expenses. The Amended Chase Facility provides for annual capital expenditure limits of $12.75 million in fiscal 1998 and $11.5 million for each fiscal year thereafter. Amounts (up to $2.0 million) permitted to be expended in a given fiscal year may be carried over (if not spent) and expended in the succeeding fiscal year. In addition, the annual limits will be increased by 25% in years when specified financial ratios have been achieved. Borrowings under the Amended Chase Facility by the Company and its subsidiaries are cross collateralized pursuant to a security agreement in which the Company and its subsidiaries has granted the Bank a first priority lien in all of their respective assets. A copy of the press release of the Company in respect of the Amended Chase Facility is attached hereto as Exhibit 3. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired Four Star was acquired by Matthews on April 1, 1998. The audited financial statements of Four Star, and the related Independent Auditors' Report for the Four Star fiscal year ended December 31, 1997 are located at Addendum I. (b) Pro forma Financial Information (unaudited) The required pro forma combined financial data is located at Addendum II. (2) (c) Exhibits EXHIBIT INDEX
Exhibit Document Description - ------- -------------------- 1. Sale Agreement dated as of March 20, 1998, among Matthews Studio Equipment Group, Four Star Associates, L.P., Stonebridge Partners Equity Fund, L.P., Bill L. Aishman, Anthony P. Cancellieri, Darren DeVerna, Four Star Lighting, Inc. and Four Star Holdings, Inc., without the schedules and exhibits thereto, other than as listed below: i. Employment Agreement dated as of April 1, 1998, between Darren DeVerna and Four Star Lighting, Inc. (previously filed). 2. Amended and Restated Credit Agreement (without schedules or exhibits)(previously filed). 3. Press release of the Company in respect of the acquisition of Four Star Lighting, Inc. and the amended Chase credit facility, (previously filed). 23. Independent Auditors' consent
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 8-K/A, to be signed on its behalf by the undersigned hereunto duly authorized. MATTHEWS STUDIO EQUIPMENT GROUP (Registrant) Date: May 11, 1998 By: /s/ Carlos De Mattos ---------------------------------------------- Carlos De Mattos Chairman of the Board, Chief Executive Officer, President & Chief Financial Officer By: /s/ Gary S. Borman ---------------------------------------------- Gary S. Borman Vice President, Corporate Controller & Principal Accounting Officer ADDENDUM I. - ----------- - -------------------------------------------------------------------- FOUR STAR HOLDING, INC. Consolidated Financial Statements for the Year Ended December 31, 1997 and Independent Auditors' Report FOUR STAR HOLDING, INC. TABLE OF CONTENTS - --------------------------------------------------------------
PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997: Consolidated Balance Sheet 2 Consolidated Statement of Operations 3 Consolidated Statement of Stockholder's Equity 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6-10
INDEPENDENT AUDITORS' REPORT To the Shareholder of Four Star Holding, Inc. We have audited the accompanying consolidated balance sheet of Four Star Holding, Inc. as of December 31, 1997, and the related consolidated statements of operations, stockholder's equity and cash flows for the year 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 audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Four Star Holding, Inc. as of December 31, 1997, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP March 6, 1998 FOUR STAR HOLDING, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31, 1997 - --------------------------------------------------------------------------------
ASSETS CURRENT ASSETS: Cash $ 68,094 Accounts receivable, less allowance for doubtful accounts of $138,000 910,616 Inventories 214,920 Other current assets 16,710 Deferred taxes 67,222 ----------- Total current assets 1,277,562 PROPERTY, PLANT AND RENTAL EQUIPMENT - Net 11,834,952 OTHER NONCURRENT ASSETS - Net 3,418,070 ----------- TOTAL ASSETS $16,530,584 =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 1,810,701 Accrued liabilities 259,356 Note payable - bank 1,053,882 Current portion of long-term debt 2,892,193 ----------- Total current liabilities 6,016,132 DEFERRED TAXES 1,406,010 LONG-TERM DEBT 4,482,588 SUBORDINATED DEBT 2,000,000 ----------- Total liabilities 13,904,730 ----------- STOCKHOLDER'S EQUITY: Preferred stock 750,000 Common stock, $.01 par value; 750,000 shares authorized, 712,500 shares outstanding 7,125 Additional paid-in capital 705,375 Retained earnings 1,163,354 ----------- Total stockholder's equity 2,625,854 ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $16,530,584 ===========
See notes to consolidated financial statements. - -2- FOUR STAR HOLDING, INC. CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------- REVENUES $11,668,787 ------------ COSTS AND EXPENSES: Cost of sales 6,764,522 Selling, general and administrative 1,263,321 ------------ Operating income 3,640,944 ------------ OTHER EXPENSES: Interest 1,134,378 Other 694,641 ------------ INCOME BEFORE PROVISION FOR INCOME TAXES 1,811,925 PROVISION FOR INCOME TAXES 779,441 ------------ NET INCOME $ 1,032,484 ============
See notes to consolidated financial statements. FOUR STAR HOLDING, INC. CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY YEAR ENDED DECEMBER 31, 1997 - --------------------------------------------------------------------------------
TOTAL ADDITIONAL COMMON COMMON STOCK PAID-IN PREFERRED STOCK RETAINED STOCKHOLDER'S SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS EQUITY ENDING BALANCE, DECEMBER 31, 1996 712,500 $7,125 $705,375 150,000 $750,000 $ 200,245 $1,662,745 Net income 1,032,484 1,032,484 Dividends paid (69,375) (69,375) ------- ------ -------- ------- -------- ---------- ---------- BALANCE, DECEMBER 31, 1997 712,500 $7,125 $705,375 150,000 $750,000 $1,163,354 $2,625,854 ======= ====== ======== ======= ======== ========== ==========
See notes to consolidated financial statements. - -4- FOUR STAR HOLDING, INC. CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1997 - --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,032,484 ----------- Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 3,452,139 Provision for doubtful accounts receivable 121,802 Decrease in deferred income taxes (112,281) Decrease in other long-term assets 84,016 Gain on sale of equipment (52,742) Increase in operating assets and liabilities: Accounts receivable (366,927) Inventories (83,251) Current assets (4,351) Accounts payable 1,379,795 Accrued liabilities 211,095 ----------- Total adjustments 4,629,295 ----------- Net cash provided by operating activities 5,661,779 ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of equipment (4,525,354) Proceeds from sale of equipment 66,075 ----------- Net cash used in investing activities (4,459,279) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of notes payable - bank (2,716,193) Borrowings under notes payable - bank 1,560,000 Dividends paid (69,375) ----------- Net cash used in financing activities (1,225,568) ----------- NET DECREASE IN CASH (23,068) CASH AT DECEMBER 31, 1996 91,162 ----------- CASH AT DECEMBER 31, 1997 $ 68,094 =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during period: Interest $ 1,134,378 =========== Income taxes $ 921,577 ===========
See notes to consolidated financial statements. - -5- FOUR STAR HOLDING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1997 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND BUSINESS Four Star Holding, Inc. (the "Company") was incorporated on July 25, 1995 with the primary purpose of acquiring Four Star Lighting, Inc. On September 8, 1995 (the "Date of Acquisition"), the Company acquired 100% of Four Star Lighting, Inc. Four Star Lighting, Inc. provides rentals of lighting and other equipment for use in theater productions. 2. ACQUISITION On September 8, 1995, the Company acquired Four Star Lighting, Inc. from its former shareholders whereby the ownership of common stock was transferred to Four Star Holding, Inc. ("1995 Acquisition"). The agreement provided for the payment to the former Four Star Lighting Inc. shareholders following the closing of the transaction. The acquisition has been accounted for by the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired plus various costs incurred associated with the acquisition has been recorded as goodwill. The covenant not to compete will be written off over five years and goodwill will be written off over 30 years. The purchase price was financed by the issuance of 712,500 shares of the Company's common stock, 150,000 shares of the Company's preferred stock, the issuance of subordinated debt and the issuance of a long term note. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include all of the accounts of the Company and its wholly-owned subsidiary. All material intercompany accounts and transactions have been eliminated in consolidation. INCOME RECOGNITION - The Company recognizes lease income under the operating method of accounting for equipment under rental contracts and is reimbursed for supplies relating to rental equipment. Under such method, income is recognized as lease payments are due. DEPRECIATION - Building and rental equipment are depreciated using the straight-line method over the estimated useful lives of 25 years for the building and five years for rental equipment. OTHER NONCURRENT ASSETS - Other noncurrent assets include organizational and deferred financing costs. Organizational costs are amortized over a 60-month period on a straight-line basis. Deferred financing costs are amortized over the period of the underlying debt on a straight-line basis. IMPAIRMENT OF LONG-LIVED ASSETS - The Company adopted Statement No. 121, Accounting for the Impairment of Long-Lived Assets, of the Financial Accounting Standards Board in 1995. This Statement requires that long- lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of an asset may not be recoverable. FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments include cash, accounts receivable, accounts payable accruals and line of credit, it was assumed that the carrying amount approximated fair value because of their short maturity. The fair value of the company's long-term debt is estimated using discounted cash flow analysis, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. At December 31, 1997, the Company's fair value for long-term debt approximated the current carrying value. 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. 4. PROPERTY, PLANT AND RENTAL EQUIPMENT Property, plant and rental equipment consist of the following at December 31, 1997: Land $ 30,000 Buildings and improvements 6,200 Rental equipment 18,402,042 ----------- 18,438,242 Less accumulated depreciation 6,603,290 ----------- $11,834,952 ===========
Depreciation expense relating to property, plant and rental equipment amounted to $3,244,660 for the year ended December 31, 1997. 5. OTHER NONCURRENT ASSETS Other noncurrent assets consist of the following at December 31, 1997: Organizational costs $ 3,250 Deferred financing costs 345,731 Covenant not to compete 105,000 Goodwill 3,382,578 Other noncurrent assets - miscellaneous 30,000 ---------- 3,866,559 Less accumulated amortization 448,489 ---------- $3,418,070 ==========
Amortization expense relating to other noncurrent assets amounted to $207,479 for the year ended December 31, 1997, and is included within other expenses on the statement of operations and stockholder's equity. During 1997, the Company recorded an adjustment to goodwill of approximately $84,000 due to the settlement of certain pre-acquisition tax liabilities. 6. LINE OF CREDIT The Company has a revolving line of credit with a bank, which allows the Company to borrow up to $3,500,000 Borrowings under the line of credit are at 2% above the bank's reference rate (the bank's reference rate was 8.5% at December 31, 1997.) At December 31, 1997 total borrowings on the line of credit were $1,053,882. The line of credit is collateralized by substantially all of the Company's assets. 7. LONG-TERM DEBT
Long term debt at December 31, 1997 consists of the following: Term-loan with bank with interest at 2 percent per annum above the bank's reference rate. Principal is payable in 15 equal quarterly installments, with interest payable monthly. The note is collateralized by substantially all the Company's assets. $4,749,781 Capital expenditure loan with interest at 2 percent per annum above the bank's reference rate. Principal is payable in 12 equal quarterly installments, with interest payable monthly. The note is collateralized by substantially all the Company's assets. 2,625,000 ----------- Total 7,374,781 Less current maturities 2,892,193 ----------- Long-term debt $4,482,588 =========== Scheduled maturities of long-term debt are as follows: YEAR ENDING DECEMBER 31, AMOUNT 1998 $2,892,193 1999 2,667,193 2000 1,815,395 ----------- $7,374,781 ===========
The loan agreement, for the long-term debt and the line of credit (Note 6), has restrictive covenants, the most significant of which require the Company to comply with certain net worth, working capital and annual capital expenditure requirements. As of December 31, 1997 the Company was in default of its Capital Expenditure covenant, on February 17, 1997 the Company obtained a waiver from the bank related to this Covenant. 8. SUBORDINATED DEBT Subordinated debt due at December 31, 1997 consists of a $2,000,000 note due in two installments with 50% due on September 8, 2004 and the remaining 50% due one year later in 2005. Interest is at a rate of 9.25 percent per annum. 9. PREFERRED STOCK The Company has 150,000 preferred shares issued and outstanding. The shares carry a par value of $.01 and were issued at $5.00. Cumulative dividends on these outstanding preferred shares are payable when and as declared by the Board of Directors at a rate of 9.25 percent per annum payable semi- annually. The Company shall redeem 50 percent of the preferred stock on September 8, 2004 and the remaining 50 percent one year later in 2005 for $5.00 per share. 10. INCOME TAXES The Company has provided for deferred income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," whereby deferred income taxes are determined based upon the enacted income tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. Deferred income taxes arise from temporary differences resulting from a difference between the tax basis of an asset and its reported amount in the financial statements. The (benefit) provision for income taxes at December 31, 1996 consists of the following: Current: Federal $ 678,088 State 213,634 --------- 891,722 --------- Deferred: Federal (87,718) State (24,563) --------- (112,281) --------- Total income tax (benefit) provision $ 779,441 =========
The differences between the provision (benefit) for income taxes and income taxes computed using the U.S. Federal statutory tax rate of 34 percent are as follows: Federal income taxes (benefit) at statutory rates $ 616,055 Increase (decrease) in taxes resulting from: State taxes net of Federal benefit 118,272 Goodwill amortization 46,367 Other (1,253) --------- $ 779,441 =========
Significant components of the Company's deferred tax accounts are as follows: Current deferred tax asset: Accrued expenses $ 12,384 Allowances for accounts receivable 54,838 ----------- Current deferred tax asset 67,222 ----------- Noncurrent deferred tax asset (liability): APP 16 fixed asset write-up (1,007,240) Tax over book depreciation (398,770) ----------- Noncurrent deferred tax liability, net $(1,406,010) ===========
11. COMMITMENTS AND CONTINGENCIES The Company leases office and warehouse space in Mount Vernon, New York. It is a five-year lease effective September 1, 1994 through August 31, 1999 with an option to renew for an additional three years. The lease was executed June 11, 1997 retroactive to September 1, 1994. The present value of the future minimum lease payments at December 31, 1997 is as follows: MINIMUM PAYMENTS 1998 $197,554 1999 134,311
Rental expense, inclusive of miscellaneous rental costs, was $191,799 for the year ended December 31, 1997. 12. RELATED PARTY TRANSACTIONS The Company retains an affiliated entity, to provide management and advisory services in connection with the organization, management and operations of the Company. The Company can pay the affiliated entity up to $100,000 per annum. Management fees amounted to $100,000 for the year ended December 31, 1997 and is included in other expenses on the consolidated statement of operations and stockholder's equity. 13. LITIGATION The shareholders and certain of the directors of the Company have been named in a civil lawsuit filed in federal court in the Southern District of New York by a third-party alleging that it had an agreement to purchase the Company and as a result of actions taken by the shareholders and directors it was damaged. The Company's bylaws indemnify the shareholders and directors for any damages which might result from this action. In the opinion of management and the board of directors, the lawsuit is without merit and will not result in a material liability to the Company. 14. SUBSEQUENT EVENTS The shareholders of the Company are in negotiations for sale of their stock in the Company. No definitive purchase agreement has been entered into. ****** ADDENDUM II. - ------------ Pro forma combined financial data The following unaudited pro forma combined statements of operations for the year ended September 30, 1997 (December 31, 1997 for Four Star), and the three months ended December 31, 1997 give effect to the acquisition of Four Star by the Company. The pro forma information is based on the historical financial statements of the Company and Four Star giving effect to the combination under the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma financial statements. The following unaudited pro forma combined balance sheet also gives effect to the combination under the purchase method of accounting. The unaudited pro forma statements have been prepared by the management of the Company and Four Star based upon the historical information included herein and other financial information. These pro forma statements do not purport to be indicative of the results of operations or financial position which would have occurred had the acquisition been made at the beginning of the periods or as of the date indicated or of the financial position or results of operations which may be obtained in the future. The Company will account for the transaction under the purchase method of accounting. Accordingly, the cost to acquire Four Star will be allocated to the assets acquired and liabilities assumed according to their respective fair values. The final allocation of the purchase price is dependent upon completion of certain studies that are not yet complete. Accordingly, the purchase allocation adjustments are preliminary and have been made solely for the purpose of preparing such pro forma statements. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Pro Forma Condensed Consolidated Statements of Operations (in thousands, except per share data)
Historical ------------------------------------- Matthews Four Star -------------- --------------- For the Year Ended September 30, December 31, Pro forma Pro forma 1997 1997 Adjustments Combined (3) -------------- --------------- -------------- ------------- Revenues from rental operations $ 25,589 $ 11,669 $ $ 37,258 Net product sales 20,769 20,769 ----------- ----------- ---------- ----------- 46,358 11,669 58,027 Costs and expenses: Cost of rental operations 14,519 6,765 21,284 Cost of sales 14,081 14,081 Selling, general and administrative 12,629 1,959 504 (1) 15,092 Interest 2,675 1,134 1,384 (4) 5,193 ----------- ----------- ---------- ----------- 43,904 9,858 1,888 55,650 Income before income taxes 2,454 1,811 (1,888) 2,377 Provision for income taxes 748 779 (513) 1,014 ----------- ----------- ---------- ----------- Income before extraordinary item $ 1,706 $ 1,032 $ (1,375) $ 1,363 Extraordinary loss on early extinguishment of debt net of income tax benefit of $130 (194) (194) ----------- ----------- ---------- ----------- Net income $ 1,512 $ 1,032 $ (1,375) $ 1,169 =========== =========== ========== =========== Income per common share basic (Note 2): Income before extraordinary item $ 0.16 $ 0.13 Extraordinary loss on early extinguishment of debt (0.02) (0.02) ----------- ----------- Net Income per share $ 0.14 $ 0.11 =========== =========== Income per common share diluted (Note 2): Income before extraordinary item $ 0.15 $ 0.13 Extraordinary loss on early extinguishment of debt (0.02) (0.02) ----------- ----------- Net Income per share $ 0.13 $ 0.11 =========== ===========
See notes to pro forma condensed consolidated statements of operations MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Pro Forma Condensed Consolidated Statements of Operations For the Three Months Ended December 31, 1997 (in thousands, except per share data)
Historical ------------------------- Pro forma Pro forma Matthews Four Star Adjustments Combined (3) -------- --------- ----------- -------- Revenues from rental operations $ 7,771 $2,938 $ $10,709 Net Product Sales 5,686 5,686 -------- ------- -------- -------- 13,457 2,938 16,395 Costs and expenses: Cost of rental operations 4,062 1,954 6,016 Cost of sales 3,860 3,860 Selling, general and administrative 4,379 584 126 (1) 5,089 Interest 1,151 272 346 (4) 1,769 -------- ------- -------- -------- 13,452 2,810 472 16,734 Income (loss) before income taxes 5 128 (472) (339) Provision (benefit) for income taxes 2 (63) (145) (206) -------- ------- -------- -------- Net income (loss) $ 3 $ 191 $ (327) $ (133) ======== ======= ======== ======== Net income (loss) per common share, basic and diluted (Note 2) $ 0.00 $ (0.01) ======== ========
See notes to pro forma condensed consolidated statements of operations MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 1. To record the estimated goodwill amortization attributable to the transaction. Goodwill is amortized over a period of twenty five years. 2. For the three months ended December 31, 1997 the number of shares used to calculate basic and diluted earnings per share were 10,987,000 and 12,580,000, respectively. For the twelve months ended September 30, 1997, the number of shares used to calculate basic and diluted earnings per share were 10,456,000, and 11,108,000, respectively. 3. The three month period ended December 31, 1997 for Four Star is included in both the pro forma condensed statements of operations for the twelve month period and the three month period ended December 31, 1997. 4. To record the effect of pro forma adjustments related to interest expense on borrowings incurred by the Company to fund the acquisition and to pay off all long-term debt of Four Star, in accordance with the purchase agreement. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Pro Forma Condensed Consolidated Balance Sheets December 31, 1997 ($ in thousands)
Historical ------------------------------ Pro forma Pro forma Matthews Four Star Adjustments Combined ---------- ---------- ----------- --------- ASSETS: Current Assets: Cash and cash equivalents $ 567 $ 68 $ $ 635 Accounts receivable 8,715 911 9,626 Current portion of net investment in leases 796 796 Inventories 9,242 215 9,457 Prepaid expenses and other current assets 2,313 84 2,397 -------- -------- ------- ------- Total current assets 21,633 1,278 22,911 Property, plant and equipment 61,041 11,835 72,876 Less accumulated depreciation (22,544) (22,544) -------- -------- ------- ------- Net property, plant and equipment 38,497 11,835 50,332 Investment in leases, less current portion 405 405 Other assets 7,118 3,418 13,778 (2) 24,314 -------- -------- ------- ------- Total assets $ 67,653 $ 16,531 $13,778 $97,962 ======== ======== ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 3,799 $ 1,811 $ $ 5,610 Accrued liabilities 2,393 259 2,652 Current portion of long-term debt and capital lease obligations 2,758 3,946 (3,946) (1) 2,758 -------- -------- ------- ------- Total current liabilities 8,950 6,016 (3,946) 11,020 Long-term debt and capital leases 43,658 6,483 20,350 (1) 70,491 Deferred income taxes 2,976 1,406 4,382 Shareholders' equity: Preferred stock 750 (750) - Common stock 7,064 713 (713) 7,064 Retained earnings 5,005 1,163 (1,163) 5,005 -------- -------- ------- ------- Total shareholders' equity 12,069 2,626 (2,626) 12,069 -------- -------- ------- ------- Total liabilities and shareholders' equity $ 67,653 $ 16,531 $13,778 $97,962 ======== ======== ======= =======
See notes to pro forma condensed consolidated balance sheets MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS 1. To record the effect of pro forma adjustments related to borrowings incurred by the Company to fund the acquisition and to pay off all long- term debt of Four Star, in accordance with the purchase agreement. 2. To record as unallocated assets, the net effect of pro forma adjustments for the excess purchase price over the fair value of net assets acquired. The fair value of the total assets acquired is estimated at $12,361,000. EX-23 2 CONSENT OF DELOITTE & TOUCHE Exhibit 23. INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement No. 333-3446 of Matthews Studio Equipment Group on Form S-8 of our reports dated March 6, 1998 (relating to Four Star Holding, Inc. and Four Star Lighting, Inc.), appearing in the Current Report on Form 8-K/A of Matthews Studio Equipment Group dated April 1, 1998. /s/ Deloitte & Touche LLP New York, New York April 20, 1998 -----END PRIVACY-ENHANCED MESSAGE-----