-----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, Hj0yHYb/T/BFsQzCNO6BMd+SYg1jWqMJOGTwCI/PKG0sypmWZNacPji3dthslXeR +EHa0i7vlrZa+OKrwXzMJw== 0000950114-96-000263.txt : 19961024 0000950114-96-000263.hdr.sgml : 19961024 ACCESSION NUMBER: 0000950114-96-000263 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960809 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961023 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARDNER DENVER MACHINERY INC CENTRAL INDEX KEY: 0000916459 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 760419383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23654 FILM NUMBER: 96646630 BUSINESS ADDRESS: STREET 1: 1800 GARDNER EXPRESSWAY STREET 2: P O BOX 528 CITY: QUINCY STATE: IL ZIP: 62301 BUSINESS PHONE: 2172225400 MAIL ADDRESS: STREET 1: 1800 GARDNER EXPRESSWAY STREET 2: P O BOX 528 CITY: QUINCY STATE: IL ZIP: 62301 8-K/A 1 GARDNER DENVER MACHINERY INC. FORM 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: August 9, 1996 (Date of earliest event reported) GARDNER DENVER MACHINERY INC. (Exact Name of Registrant as Specified in its Charter) Delaware 0-23612 76-0419383 (State or Other Jurisdiction of (Commission File (I.R.S. Employer Incorporation or Organization) Number) Identification No.) 1800 Gardner Expressway Quincy, Illinois 62301 (Address of Principal Executive Offices and Zip Code) (217) 222-5400 (Registrant's Telephone Number, Including Area Code) 2 Item 2. Acquisition or Disposition of Assets - --------------------------------------------- On August 9, 1996, pursuant to a Stock Purchase Agreement dated July 11, 1996 among Gardner Denver Machinery Inc. ("Gardner Denver"), NORAMPTCO, Inc. a Delaware corporation ("NORAMPTCO"), Jacques Lepage, Suzanne Lepage, Anne Lepage and Arthur Lepage, Gardner Denver acquired (i) from Jacques Lepage, all of the issued and outstanding shares of capital stock of NORAMPTCO, all of the issued and outstanding shares of capital stock of Lamcor, Ltd., a United Kingdom corporation, and all of the issued and outstanding shares of capital stock of Lamson Corporation, a New York corporation and a subsidiary of NORAMPTCO, not owned by NORAMPTCO; and (ii) from Jacques Lepage, Suzanne Lepage, Anne Lepage and Arthur Lepage, all of the issued and outstanding capital stock of Lamson Europe S.A., a French corporation, not owned by NORAMPTCO, Lamson Corporation or U.S. Turbine Corporation, a Delaware corporation and a wholly-owned subsidiary of NORAMPTCO. The aggregate purchase price was approximately $30.5 million in cash, subject to adjustment based upon a closing balance sheet, and was negotiated between Gardner Denver and Jacques Lepage as the fair market value for the capital stock acquired. Funding for this acquisition was provided under Gardner Denver's existing $65 million credit facility, entered into on November 30, 1995, as to which The First National Bank of Chicago acts as agent for itself and the other lenders participating in the credit facility. The assets indirectly acquired by the acquisition of capital stock are those assets previously used by NORAMPTCO and its subsidiaries in the manufacture and distribution of cast iron centrifugal blower and exhauster component systems and fabricated steel multi-stage centrifugal blowers and exhausters. Gardner Denver currently intends to continue to use such assets for the purposes used by NORAMPTCO and its subsidiaries prior to the subject transaction. Item 7. Financial Statements and Exhibits - ------------------------------------------ The following financial statements, pro forma financial information and exhibits are filed as part of this report. (a) Financial statements of NORAMPTCO for the fiscal year ended January 31, 1996, in accordance with Rule 3.05 of Regulation S-X:
Item Page ---- ---- Audited financial statements of NORAMPTCO Report of Ernst & Young LLP, Independent Auditors 7 Consolidated Balance Sheet - As of January 31, 1996 8 Consolidated Statement of Income - Year Ended January 31, 1996 10 Consolidated Statement of Stockholders' Equity - Year Ended 11 January 31, 1996 2 3 Page ---- Consolidated Statement of Cash Flows - Year Ended January 31, 1996 12 Notes to Consolidated Financial Statements 13 Unaudited interim financial statements of NORAMPTCO Consolidated Balance Sheet - As of July 31, 1996 24 Consolidated Statement of Operations - Six Months Ended July 31, 1996 25 Consolidated Statement of Cash Flows - Six Months Ended July 31, 1996 26 Notes to Consolidated Financial Statements 27 (b) Pro forma financial information prepared pursuant to Article 11 of Regulation S-X: --- ----- Item Page ---- ---- Gardner Denver Machinery Inc. and NORAMPTCO Inc. Pro Forma 29 Consolidated Financial Statements (Unaudited) Pro Forma Consolidated Balance Sheet - As of June 30, 1996 30 Pro Forma Consolidated Statement of Operations - 32 Six Months Ended June 30, 1996 Pro Forma Consolidated Statement of Operations - 34 Year Ended December 31, 1995
(c) Exhibits 2.0 Stock Purchase Agreement dated July 11, 1996, among Gardner Denver, NORAMPTCO, Jacques Lepage, Suzanne Lepage, Anne Lepage and Arthur Lepage. All schedules and exhibits described in the Stock Purchase Agreement have been omitted and Gardner Denver will furnish supplementally to the Commission, upon request, a copy of any omitted schedule or exhibit. (Filed with initial Current Report on Form 8-K on August 23, 1996.) 3 4 SIGNATURE 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 thereunto duly authorized. GARDNER DENVER MACHINERY INC. Date: October 23, 1996 By: /s/Philip R. Roth ----------------------------- Philip R. Roth Vice President, Finance and Chief Financial Officer 4 5 GARDNER DENVER MACHINERY INC. EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION 2.0 Stock Purchase Agreement dated July 11, 1996, among Gardner Denver, NORAMPTCO, Jacques Lepage, Suzanne Lepage, Anne Lepage and Arthur Lepage. (Filed with initial Current Report on Form 8-K on August 23, 1996.)
5 6 Consolidated Financial Statements NORAMPTCO, Inc. Year ended January 31, 1996 with Report of Independent Auditors 6 7 Report of Independent Auditors Board of Directors NORAMPTCO, Inc. We have audited the accompanying consolidated balance sheet of NORAMPTCO, Inc. as of January 31, 1996, and the related consolidated statements of income, stockholders' 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NORAMPTCO, Inc. at January 31, 1996, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. As discussed in Notes 1 and 6 to the consolidated financial statements, in 1996 the Company changed its method of accounting for postretirement benefits. March 15, 1996 /s/Ernst & Young LLP 7 8 NORAMPTCO, Inc. Consolidated Balance Sheet January 31, 1996 ASSETS Current assets: Cash $ 808,934 Accounts receivable: Trade (less allowance for doubtful accounts of $255,000) 8,106,669 Affiliates 79,378 Inventories 3,368,659 Prepaid and other current assets 278,736 Notes receivable from majority shareholder 433,921 Refundable taxes 44,990 Deferred income taxes 245,755 ----------- Total current assets 13,367,042 Notes receivable from majority shareholder, less current portion 576,608 Property, plant, and equipment, net 5,609,161 Investments 331,395 Goodwill and trademarks 849,722 Intangible pension asset 781,055 Deferred income taxes 416,382 Other assets 384,440 ----------- Total assets $22,315,805 =========== See accompanying notes. 8 9 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,046,169 Accrued commissions 994,317 Accrued liabilities 1,075,622 Accrued pension 1,676,239 Accrued income taxes 121,826 Current portion of long-term debt 737,718 Customer deposits 13,647 ----------- Total current liabilities 7,665,538 Postretirement benefit obligations other than pensions 111,456 Accrued pension 1,550,814 Long-term debt, less current portion 2,604,057 Minority interest in subsidiaries 947,110 ----------- Total liabilities 12,878,975 Stockholders' equity: Capital stock, $1 par value: Authorized, issued and outstanding 1,000 shares 1,000 Additional paid-in capital 263,227 Retained earnings 9,580,348 Adjustment to record minimum pension liability (407,559) Foreign currency translation adjustment (186) ----------- Total stockholders' equity 9,436,830 ----------- Total liabilities and stockholders' equity $22,315,805 =========== See accompanying notes.
9 10 NORAMPTCO, Inc. Consolidated Statement of Income Year ended January 31, 1996 Net sales $41,339,253 Cost of sales 27,519,683 ----------- Gross profit 13,819,570 Selling expenses 8,332,161 Administrative expenses 2,580,197 ----------- Operating income 2,907,212 Other income (expense): Interest income 58,136 Interest expense (440,596) Other (98,556) ----------- Income before income taxes and minority interest 2,426,196 Provision for taxes 995,883 ----------- Income before minority interest 1,430,313 Minority interest (183,000) ----------- Net income $ 1,247,313 =========== Earnings per share $ 1,247 =========== See accompanying notes. 10 11
NORAMPTCO, Inc. Consolidated Statement of Stockholders' Equity Year ended January 31, 1996
Adjustment Adjustment to Record to Record Additional Minimum Foreign Total Capital Paid-In Retained Pension Currency Stockholders' Stock Capital Earnings Liability Translation Equity --------------------------------------------------------------------------------------- Balance at January 31, 1995 $1,000 $263,227 $8,333,035 $(887,353) $(19,968) $7,689,941 Net income - - 1,247,313 - - 1,247,313 Adjustment to record minimum pension liability - - - 479,794 - 479,794 Adjustment to record foreign currency translation - - - - 19,782 19,782 --------------------------------------------------------------------------------------- Balance at January 31, 1996 $1,000 $263,227 $9,580,348 $(407,559) $ (186) $9,436,830 ======================================================================================= See accompanying notes.
11 12 NORAMPTCO, Inc. Consolidated Statement of Cash Flows Year ended January 31, 1996 OPERATING ACTIVITIES Net income $ 1,247,313 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 834,066 Amortization of goodwill and trademarks 32,136 Provision for deferred income taxes (99,224) Minority interest 183,000 Foreign currency adjustment 19,782 Changes in operating assets and liabilities: Accounts receivable 1,147,492 Due from affiliates (76,822) Inventories 25,981 Refundable taxes (44,990) Prepaid and other current assets 41,163 Accounts payable 396,462 Accrued commissions (42,613) Accrued liabilities (240,516) Customer deposits (941,900) Accrued postretirement benefits other than pensions 111,456 Accrued pension, net of intangible asset and equity adjustment 116,496 Accrued taxes 21,352 ----------- Net cash provided by operating activities 2,730,634 INVESTING ACTIVITIES Purchase of property, plant, and equipment (780,760) Notes receivable funded (638,295) Collections on notes receivable 425,304 Purchase of trademarks (80,000) Increase in investments and other assets (77,549) ----------- Net cash used in investing activities (1,151,300) FINANCING ACTIVITIES Payments under line of credit arrangement (1,352,000) Proceeds from long-term debt 500,000 Payments on long-term debt (848,120) ----------- Net cash used in financing activities (1,700,120) ----------- Net decrease in cash (120,786) Cash at beginning of year 929,720 ----------- Cash at end of year $ 808,934 =========== Supplemental disclosure of cash flow information: Cash paid for interest $ 446,580 Cash paid for income taxes (including payments to parent) 1,090,767 See accompanying notes.
12 13 NORAMPTCO, Inc. Notes to Consolidated Financial Statements Year ended January 31, 1996 1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS DESCRIPTION NORAMPTCO, Inc. (the Company) engineers and manufactures air and gas handling centrifugal blowers and exhausters for a wide range of worldwide industrial, municipal, and commercial uses. Significant accounting policies of the Company are as follows: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, U. S. Turbine Corporation, and its majority owned subsidiaries, Lamson Corporation and Lamson Europe. All significant intercompany profits, transactions, and account balances have been eliminated in consolidation. The Company's majority-owned subsidiary, Lamson Europe, has a year end of December 31. INVENTORIES Inventories are valued at the lower of cost or market. The majority of consolidated inventory is determined on a last-in, first-out (LIFO) basis. PROPERTY, PLANT, AND EQUIPMENT The Company records property, plant, and equipment at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 25 years. GOODWILL AND TRADEMARKS Goodwill and trademarks are being amortized on a straight-line basis over 40-year and 15-year periods, respectively. Accumulated amortization was $659,407 at January 31, 1996. 13 14 Notes to Consolidated Financial Statements (Continued) 1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAXES Deferred taxes arise from temporary differences between financial and tax reporting, relating principally to the difference in methods of accounting for depreciation and accrued expenses. 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. POSTRETIREMENT BENEFITS Certain employees may be eligible for postretirement health care and life insurance benefits upon retirement from Lamson Corporation. As more fully disclosed in Note 6, effective February 1, 1995, Lamson Corporation adopted the provision of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." RESEARCH AND DEVELOPMENT COSTS Product research and development costs are charged to expense as incurred. Research and development expense for the year ended January 31, 1996 was $975,000. EARNING PER SHARE Net earning per common share are determined by dividing the weighted average number of common shares outstanding during the year (1,000 shares) into net earnings. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of Lamson Corporation's long-term debt is a reasonable estimate of its fair value due to the variable interest rate on the term loans and the fact that the Lamson Corporation could go out into the market and obtain a revenue bond with a rate similar to that being paid on the Industrial Development Revenue Bonds. In addition, the carrying value of U.S. Turbine Corporation's long-term debt is a reasonable estimate of its fair value due to the variable interest rate on the facility loan. 14 15 Notes to Consolidated Financial Statements (Continued) 2. INVENTORIES Inventories consist of the following: Raw materials and finished parts $ 3,657,359 Work in process 1,061,300 ----------- Total inventories at FIFO cost 4,718,659 LIFO reserve (1,350,000) ----------- $ 3,368,659 ===========
3. Property, Plant, and Equipment Property, plant, and equipment consists of the following: Land $ 322,770 Building 4,102,859 Machinery and equipment 5,646,298 Furniture, fixtures, and equipment 2,478,651 Construction in progress 22,500 ----------- 12,573,078 Less accumulated depreciation 6,963,917 ----------- $ 5,609,161 ===========
4. DEBT Notes Payable - ------------- Lamson Corporation has the following line of credit arrangements with Key Bank available: A $3,000,000 line of credit for working capital purposes. Borrowings bear interest at the bank's base rate and are collateralized by inventory and accounts receivable of Lamson Corporation. As of January 31, 1996 there were no borrowings outstanding under this line of credit. A $1,500,000 line of credit for Standby Letters of Credit in the event that the $3,000,000 is fully utilized. Bank fees equal 1% of the face amount of the Standby Letters of Credit. Borrowings are collateralized by inventory and accounts receivable of Lamson Corporation. 15 16 Notes to Consolidated Financial Statements (Continued) 4. DEBT (CONTINUED) A $1,000,000 line of credit for purchase of equipment or capital improvements. Borrowings bear interest at the bank's base rate. Borrowings are collateralized by any equipment purchased with proceeds from the line and inventory of Lamson Corporation. During the year Lamson Corporation borrowed $500,000 against this line of credit which is being repaid over five years as required by the terms of this agreement. As of January 31, 1996 the outstanding balance under this line of credit and identified as Key Bank - Building Improvement Loan II was $425,000. Each of these line of credit arrangements is guaranteed by the Company. The bank's base rate was 8.5% at January 31, 1996. Long-Term Debt - -------------- Long-term debt consists of the following: Industrial Development Revenue Bonds $1,688,406 Key Bank - Test Lab Loan 714,287 Key Bank - Facility Loan 450,000 Key Bank - Building Improvements Loan II 425,000 Lamson Europe - Note Payable 64,082 ---------- 3,341,775 Less current portion 737,718 ---------- $2,604,057 ==========
Industrial Development Revenue Bonds The property, plant, and equipment of Lamson Corporation are financed under a long-term lease arrangement with the Onondaga County Industrial Development Agency and are legally the properties of such Agency. An amount equivalent to the principal amount of the Agency's revenue bonds outstanding related to those properties is included as a liability. While the bonds are not a debt of Lamson Corporation, the long-term lease obligates Lamson Corporation to payments equal to interest and amortization of such bonds and provides for the ultimate reversion of the properties to Lamson Corporation at the end of the bond agreement. The lease obligation requires annual payments of approximately $495,000 through November 1, 2000 including interest at 8% and is collateralized by all real property, fixtures ,and equipment purchased with the bond proceeds. In addition, Lamson Corporation maintains a letter of credit arrangement in an amount equal to the outstanding principal of the bonds for the protection of the bondholders. 16 17 Notes to Consolidated Financial Statements (Continued) 4. DEBT (CONTINUED) Key Bank - Test Lab Loan Payable in monthly installments of $14,286, including interest at 1% above the bank's base rate through April 1, 2000; collateralized by equipment, accounts receivable, and inventory and is guaranteed by the Company. Key Bank - Facility Loan Payable in monthly installments of $4,167, plus interest at 0.25% above the bank's base rate through February 2005; collateralized by equipment, accounts receivable, and inventory and is guaranteed by the Company. Key Bank - Building Improvements Loan II Payable in monthly installments of $8,333 plus interest at 1% above the bank's base rate through April 1, 2000; collateralized by accounts receivable, inventory, and new furniture and equipment and is guaranteed by the Company. Lamson Europe - Note Payable Note payable is part of a line of credit with a bank Covenants and Restrictions The loan agreements contain restrictive covenants which require Lamson Corporation and U.S. Turbine Corporation, among other things, to maintain certain financial ratios and specified levels of working capital and tangible net worth as defined. The agreements also place a limit on total borrowing, capital expenditures and dividends. As of January 31, 1996 Lamson Corporation and U.S. Turbine Corporation are in compliance with all covenants. The maturities of long-term debt for each of the next five years ended January 31 are as follows: 1997 $ 737,718 1998 709,222 1999 721,429 2000 626,429 2001 346,977 Thereafter 200,000 ---------- $3,341,775 ==========
17 18 Notes to Consolidated Financial Statements (Continued) 5. OFF BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK Letters of credit are issued by Lamson Corporation during the ordinary course of business through Key Bank as required by certain customer contracts. As of January 31, 1996, Lamson Corporation had outstanding letters of credit totaling $513,400 secured by the $1,500,000 line of credit for Standby Letters of Credit. As of January 31, 1996, Lamson Corporation had an additional $1,767,200 outstanding letter of credit from Key Bank. This letter of credit supports the outstanding principal of the Industrial Development Revenue Bonds. Concentrations of credit risk with respect to trade receivables are limited due to the wide variety of customers and their dispersion across many different geographic areas. The Company routinely assesses the financial strength of its customers. Letters of credit are the principal security obtained to support contracts when the financial strength of a customer is not considered sufficient. As a result, the Company does not consider itself to have any significant concentrations of credit risk as of January 31, 1996. 6. EMPLOYEE BENEFITS Employee Pension Benefits Lamson Corporation maintains pension plans for salaried and hourly employees. The salaried plan is a non-contributory, defined benefit plan covering substantially all salaried employees who have completed one year of service and are 21 years of age, provided they were hired prior to age 60. Benefits are based upon years of service and compensation. The plan is funded by Lamson Corporation in accordance with ERISA minimum funding requirements. The hourly plan is a non-contributory, defined benefit plan covering hourly employees who are within the bargaining unit of the United Steel Workers of America, Local Union 8976. Benefits are based upon a fixed rate per month, determined according to length of service. The plan is funded by Lamson Corporation in accordance with ERISA minimum funding requirements. 18 19 Notes to Consolidated Financial Statements (Continued) 6. EMPLOYEE BENEFITS (CONTINUED) The components of net periodic pension expense for the year ended January 31 for the salaried and hourly plans combined are as follows: Current Service Cost $154,906 Interest cost (on projected benefit obligation) 670,566 Actual (gain) loss on plan assets (689,290) Net amortization and deferral 531,648 Amortization of acquisition liability (51,600) -------- Net periodic pension expense $616,230 ========
The following table represents a reconciliation of the funded status of the salaried and hourly plans combined as of January 31, 1996 (date of the most recent actuarial information): Actuarial present value of benefit obligation: Accumulated benefit obligation, including vested benefits of $7,743,032 $7,881,394 ========== Projected benefit obligation $8,377,619 Plan assets at fair value 4,965,858 ---------- Plan projected benefit obligation in excess of assets 3,411,761 Unrecognized prior service cost (102,155) Unrecognized loss (567,916) Unrecognized liability at date of adoption (being recognized over 15 years) (703,250) Adjustment required to recognize minimum liability 1,188,613 ---------- Accrued pension liability $3,227,053 ==========
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" requires recognition in the balance sheet of a minimum pension liability. This minimum liability is equal to the excess of the accumulated benefit obligation over plan assets. An additional long-term liability of $1,188,613 has been recognized as of January 31, 1996 to reflect the minimum pension liability, with an offsetting intangible asset of $781,055. The actuarial present value of the projected benefit obligation shown in the above table is based on a discount rate of 8.75% at January 31, 1996. The expected return on assets is 9.0% and the assumed rate of increase in the future compensation level is 5%. Plan assets consist primarily of investments in bond and mortgage funds, domestic and international stock funds, and a general investment fund managed by the Principal Financial Group. 19 20 Notes to Consolidated Financial Statements (Continued) 6. EMPLOYEE BENEFITS (CONTINUED) Lamson Corporation has two discretionary defined contribution 401(k) retirement plans covering substantially all salaried and hourly employees of Lamson Corporation and U.S. Turbine Corporation. Employees may elect to contribute up to 15% of their annual compensation to the Plans, subject to limits established by the Internal Revenue Code. The Company may make discretionary contributions. Neither Lamson Corporation nor U.S. Turbine Corporation made contributions to these plans in 1996. Employee Health Care and Insurance Benefits Lamson Corporation hourly employees who are within the bargaining unit of the United Steel Workers of America, Local Union 8976, are eligible to receive postretirement life insurance benefits and those employees who retire between the ages of 62 and 65 with 20 years of continuous service are eligible to receive postretirement health care benefits until they attain age 65. Lamson Corporation salaried employees who retire prior to December 31, 1996 and have attained certain combinations of age and years of service are eligible to receive postretirement health insurance benefits until they attain age 65. Salaried employees retiring after December 31, 1996 are not eligible to receive postretirement health care benefits. Effective February 1, 1995, Lamson Corporation adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," which requires that the estimated cost of postretirement benefits be accrued over the period earned. Prior to adoption, Lamson Corporation recognized the cost of these benefits on the pay-as-you-go basis. The accumulated postretirement benefit obligation at adoption was $812,900 and will be recognized over 20 years. These benefits are funded on a pay-as-you-go basis by Lamson Corporation and require minimal contributions from participants. The components of postretirement benefit expense are as follows: Current service cost $ 20,966 Interest cost 64,337 Net amortization and deferral 40,648 -------- Net postretirement benefit expense $125,951 ========
20 21 Notes to Consolidated Financial Statements (Continued) 6. EMPLOYEE BENEFITS (CONTINUED) The following table reflects the plan's combined postretirement benefit liability as of January 31, 1996: Accumulated postretirement benefit obligation (APBO): Retirees $ 450,105 Employees fully eligible 134,600 Other active employees 150,765 --------- 735,470 Unrecognized net loss (64,992) Unrecognized transition obligation (559,022) --------- Accrued postretirement benefit obligation $ 111,456 =========
A discount rate of 7.25% was used to calculate the accumulated postretirement benefit obligation at January 31, 1996. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 11.50% in 1996 declining by .75% per year to an ultimate rate of 5.50%. If the health care cost trend rate assumptions were increased by 1% per year, the APBO as of January 31, 1996 would be increased by approximately 5%. The effect of this change on the sum of the service cost and interest cost components of the postretirement benefit expense for the year ended January 31, 1996 would be an increase of 8%. During the current year Lamson Corporation modified its retirement plan resulting in a $213,000 reduction of the transition obligation. 7. INCOME TAXES Income tax expense for January 31, 1996 has been determined in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which provides for a liability approach to taxes. Under this method, deferred tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. For financial reporting purposes, income (loss) from continuing operations before income taxes and minority interest included the following:
1996 ---------- United States $2,848,437 Foreign (422,241) ---------- $2,426,196 ==========
21 22 Notes to Consolidated Financial Statements (Continued) 7. INCOME TAXES (CONTINUED) The provision for income taxes charged to operations for the year ended January 31 was as follows: Current tax expense: Federal $1,024,024 State 71,083 ---------- Total current 1,095,107 Deferred tax expense (benefit): Federal (91,295) State (7,929) ---------- Total deferred (99,224) ---------- Total provision $ 995,883 ========== As of January 31 deferred taxes consist of the following: Deferred tax liabilities: Prepaid expenses $ (93,010) Pension (193,946) Depreciation (223,676) ---------- (510,632) Deferred tax assets: Postretirement benefit obligations other than pensions 43,233 Accrued pension 790,693 Vacation 132,764 Doubtful account reserve 98,351 Warranty 46,547 Inventories 59,630 Accrued liabilities 1,551 ---------- 1,172,769 ---------- $ 662,137 ==========
8. SUBSEQUENT EVENT (UNAUDITED) On July 9, 1996, the Company reacquired 100 shares of its common stock for approximately $1,960,000. 22 23 Notes to Consolidated Financial Statements (Continued) 8. SUBSEQUENT EVENT (UNAUDITED) (CONTINUED) The Company was acquired by Gardner Denver Machinery Inc. on August 9, 1996. As part of the due diligence process, certain potential environmental issues related to the Company were identified. It is Gardner Denver's opinion that the possible liability that could arise from these potential environmental issues is between $100,000 and $1,000,000. 23 24 NORAMPTCO, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands, except per share amounts) (Unaudited)
AS OF JULY 31, 1996 ------------------- ASSETS Current Assets: Cash and cash equivalents $ 1,778 Receivables, net 8,484 Inventories, net 4,459 Deferred income taxes 335 Other 366 ------- Total current assets 15,422 ------- Plant and equipment, net 5,482 Intangibles, net 1,620 Deferred income taxes 319 Other assets 390 ------- Total assets $23,233 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 3,336 Accounts payable and accrued liabilities 7,151 ------- Total current liabilities 10,487 ------- Long-term debt, less current maturities 2,454 Postretirement benefits other than pensions 138 Minority interest in subsidiaries 1,035 Other long-term liabilities 1,551 ------- Total liabilities 15,665 ------- Stockholders' equity: Common stock, $1 par value; 1,000 shares authorized; 900 shares issued and outstanding at July 31, 1996 1 Capital in excess of par value 263 Retained earnings 7,722 Pension liability adjustment (407) Cumulative translation adjustment (11) ------- Total stockholders' equity 7,568 ------- Total liabilities and stockholders' equity $23,233 ======= The accompanying notes are an integral part of this statement.
24 25 NORAMPTCO, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
SIX MONTHS ENDED JULY 31, 1996 ---------------- Revenues $19,615 Costs and expenses: Cost of sales (exclusive of depreciation and amortization) 12,081 Depreciation and amortization 464 Selling and administrative expenses 6,152 Interest expense 154 ------- 18,851 Income before income taxes 764 Provision for income taxes 577 ------- Net income before minority interest 187 Minority interest (95) -------- Net income $ 92 ======= The accompanying notes are an integral part of this statement.
25 26 NORAMPTCO, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) (Unaudited)
SIX MONTHS ENDED JULY 31, 1996 ---------------- Cash flows from operating activities: Net income $ 92 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 464 Deferred income taxes (8) Minority interest 95 Changes in assets and liabilities (846) ------- Net cash used in operating activities (203) ------- Cash flows from investing activities: Capital expenditures (326) Purchase and retirement of stock (1,960) Collections on notes receivable 1,010 ------- Net cash used in investing activities (1,276) ------- Cash flows from financing activities: Proceeds from long-term borrowing 2,448 ------- Increase in cash 969 Cash, beginning of period 809 ------- Cash, end of period $ 1,778 ======= The accompanying notes are an integral part of this statement.
26 27 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. BASIS OF PRESENTATION. The accompanying financial statements include the accounts of NORAMPTCO, Inc. (the Company), its wholly-owned subsidiary U.S. Turbine Corporation, and its majority owned subsidiaries, Lamson Corporation and Lamson Europe. All significant intercompany profits, transactions, and account balances have been eliminated in consolidation. The Company's majority owned subsidiary, Lamson Europe, has been consolidated using its results for the six months ended June 30, 1996. The interim financial information presented has been prepared from the books and records without audit, and do not include all of the information and footnotes required by generally accepted accounting principals for complete statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of such financial statements, have been included. The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets, 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. NOTE 2: INCOME TAXES. The provision for income taxes charged to operations and paid to various taxing authorities for the six months ended July 31, 1996 was $577 and $332, respectively. The difference between the provision for income taxes and income taxes using the U.S. federal income tax rate were as follows: Income tax provision at 34% $260 State and local income taxes 58 Tax effect of non-deductible expenses related to the sale of the business 258 Other 1 ---- Total $577 ====
27 28 NOTE 3: INVENTORIES. Raw materials and finished parts $ 4,728 Work in process 1,121 ------- Total inventories at FIFO cost 5,849 Excess of current standard costs over LIFO costs (1,390) ------- Total net inventories $ 4,459 =======
NOTE 4: SUBSEQUENT EVENTS. The Company was acquired by Gardner Denver Machinery Inc. on August 9, 1996. On October 16, 1996 all the debt of Lamson Corporation and U.S. Turbine Corporation, excluding the industrial development revenue bonds, was paid in full by Gardner Denver Machinery Inc. 28 29 PRO FORMA FINANCIAL INFORMATION Gardner Denver's fiscal year end is December 31. NORAMPTCO's fiscal year end is January 31. The Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996 was prepared assuming the acquisition had occurred on June 30, 1996 and include NORAMPTCO's balances as of July 31, 1996. The Unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 1996 and for the year ended December 31, 1995 were prepared assuming the acquisition had occurred as of the beginning of the periods presented and include NORAMPTCO's results of operations for the six months ended July 31, 1996 and for the year ended January 31, 1996, respectively. The acquisition will be accounted for using the purchase method of accounting. Under the purchase method of accounting, assets acquired and liabilities assumed are recorded at their respective fair market values. The pro forma adjustments are based on preliminary estimates of the allocation of the purchase price and are subject to revision. Actual purchase accounting adjustments may differ from the pro forma adjustments presented herein. The pro forma consolidated financial information does not reflect any operations of TCM Investments, Inc. ("TCM") which was acquired by Gardner Denver on August 14, 1996. For the year ended April 30, 1996, TCM reported revenues of $10.6 million. The unaudited pro forma consolidated financial statements are based upon and should be read in conjunction with the historical consolidated financial statements of Gardner Denver Machinery Inc., including the notes thereto, included in the reports and documents filed by Gardner Denver with the Securities and Exchange Commission and the historical consolidated financial statements of NORAMPTCO including the notes thereto. The unaudited pro forma consolidated financial statements presented herein are based on certain assumptions, are for informational purposes only and do not necessarily reflect future results of operations and financial position or what the results of operations or financial position would have been had such transactions occurred at the beginning of the periods presented. 29 30 GARDNER DENVER MACHINERY INC. PRO FORMA CONSOLIDATED BALANCE SHEET (dollars in thousands, except per share amounts) (Unaudited)
As of June 30, 1996 Historical Pro forma ------------------------ ------------------------ Gardner Adjustments Denver NORAMPTCO Increase/ (6/30/96) (7/31/96) (Decrease) Combined --------- --------- ----------- -------- ASSETS Current Assets: Cash and cash equivalents $ 7,511 $ 1,778 $ -- $ 9,289 Receivables, net 35,537 8,484 -- 44,021 Inventories, net 40,726 4,459 1,390 46,575 Deferred income taxes 191 335 1,554 2,080 Other 1,174 366 -- 1,540 -------- ------- ------- -------- Total current assets 85,139 15,422 2,944 103,505 -------- ------- ------- -------- Plant and equipment, net 30,436 5,482 (2,000) 33,918 Intangibles, net 41,973 1,620 (781) 69,387 26,575 Deferred income taxes 17,838 319 2,173 20,330 Investment in and advances to affiliate 722 -- -- 722 Other assets 757 390 -- 1,147 -------- ------- ------- -------- Total assets $176,865 $23,233 $28,911 $229,009 ======== ======= ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 1,147 $ 3,336 $ -- $ 4,483 Accounts payable and accrued liabilities 29,335 7,151 4,283 46,359 5,590 -------- ------- ------- -------- Total current liabilities 30,482 10,487 9,873 50,842 -------- ------- ------- -------- Long-term debt, less current maturities 24,237 2,454 28,565 55,256 Postretirement benefits other than pensions 57,913 138 627 58,678 Minority interest in subsidiaries -- 1,035 (1,035) -- Other long-term liabilities 499 1,551 (1,551) 499 -------- ------- ------- -------- Total liabilities 113,131 15,665 36,479 165,275 -------- ------- ------- -------- Stockholders' equity: Common stock, $.01 par value; 50,000,000 shares authorized; 4,877,804 shares issued and outstanding at June 30, 1996 49 1 (1) 49 Capital in excess of par value 134,145 263 (263) 134,145 Retained deficit (70,437) 7,722 (7,722) (70,437) Pension Liability Adjustment -- (407) 407 -- Cumulative translation adjustment (23) (11) 11 (23) -------- ------- ------- -------- Total stockholders' equity 63,734 7,568 (7,568) 63,734 -------- ------- ------- -------- Total liabilities and stockholders' equity $176,865 $23,233 $28,911 $229,009 ======== ======= ======= ======== The accompanying notes are an integral part of this statement.
30 31 NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET As of June 30, 1996 (Unaudited) 1) Represents adjustment to record inventories at estimated fair market value in accordance with the provisions of APB 16. 2) Represents adjustment to record excess of estimated pension liabilities over fair market value of related assets, in accordance with FAS 87. 3) Represents adjustment to record the estimated value of post retirement benefits (other than pension) in accordance with FAS 106. 4) Represents elimination of NORAMPTCO minority interest and equity. 5) Represents adjustment to record liabilities and commitments attributable to integration of NORAMPTCO into Gardner Denver. 6) Represents adjustment to record the excess of the purchase price over the fair value of the net assets acquired (goodwill). 7) Represents adjustment to record the debt used to acquire NORAMPTCO. 8) Represents adjustment to record additional deferred tax assets related to pro forma adjustments. 9) Represents adjustment to reflect estimated fair value of plant and equipment. 31 32 GARDNER DENVER MACHINERY INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
Six Months Ended Historical Pro forma ------------------------ ------------------------ Gardner Adjustments Denver NORAMPTCO Increase/ (6/30/96) (7/31/96) (Decrease) Combined --------- --------- ----------- -------- Revenues $97,483 $19,615 $ -- $117,098 Costs and expenses: Cost of sales (exclusive of depreciation and amortization) 67,532 12,081 (167) 79,446 Depreciation and amortization 3,798 464 330 4,592 Selling and administrative expenses 12,375 6,152 (1,670) 16,857 Interest expense 1,094 154 969 2,217 Loss on investment in and advances to affiliate 98 -- -- 98 ------- ------- ------- -------- 84,897 18,851 (538) 103,210 Income before income taxes 12,586 764 538 13,888 Provision for income taxes 5,034 577 53 5,664 ------- ------- ------- -------- Net income before minority interest 7,552 187 485 8,224 Minority interest -- (95) 95 -- ------- ------- ------- -------- Net income $ 7,552 $ 92 $ 580 $ 8,224 ======= ======= ======= ======== Earnings per share $ 1.50 $ 1.63 ======= ======== The accompanying notes are an integral part of this statement.
32 33 NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Six Months Ended June 30, 1996 (Unaudited) 1) To reflect benefits of the integration of the business, additional expenses of Gardner Denver, elimination of expenses related to the sale of the business, and elimination of expenses related to the former principal owner/CEO. 2) To adjust depreciation and amortization to reflect the estimated fair value of plant and equipment, and goodwill created by acquisition. 3) To reflect interest expense on debt used to finance acquisition, net of lower interest expense on pre-existing NORAMPTCO debt. 4) To reflect adjustments to tax provision related to pro forma adjustments. Low effective tax rate of pro forma adjustments is primarily a result of the elimination of non-deductible transaction costs and inclusion of non-deductible goodwill amortization. 5) To reflect elimination of previously held minority interest. 33 34 GARDNER DENVER MACHINERY INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
Year Ended Historical Pro forma ------------------------ ------------------------ Gardner Adjustments Denver NORAMPTCO Increase/ (12/31/95) (1/31/96) (Decrease) Combined ---------- --------- ----------- -------- Revenues $191,541 $41,397 $ -- $232,938 Costs and expenses: Cost of sales (exclusive of depreciation and amortization) 132,876 26,899 (334) 159,441 Depreciation and amortization 8,263 866 660 9,789 Selling and administrative expenses 25,632 10,765 (1,536) 34,861 Interest expense 4,950 441 1,939 7,330 -------- ------- ------- -------- 171,721 38,971 729 211,421 Income before income taxes 19,820 2,426 (729) 21,517 Provision for income taxes 8,226 996 (4) 9,218 -------- ------- ------- -------- Net income before minority interest 11,594 1,430 (725) 12,299 Minority interest -- (183) 183 -- -------- ------- ------- -------- Net income $ 11,594 $ 1,247 $ (542) $ 12,299 ======== ======= ======= ======== Earnings per share $ 2.37 $ 2.52 ======== ======== The accompanying notes are an integral part of this statement.
34 35 NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 1995 (Unaudited) 1) To reflect benefits of the integration of the business, additional expenses of Gardner Denver, and the elimination of expenses related to the former principal owner/CEO. 2) To adjust depreciation and amortization to reflect the estimated fair value of plant and equipment, and goodwill created by acquisition. 3) To reflect interest expense on debt used to finance acquisition, net of lower interest expense on pre-existing NORAMPTCO debt. 4) To reflect adjustments to tax provision related to pro forma adjustments. Low effective tax rate of pro forma adjustments is primarily a result of the inclusion of non-deductible goodwill amortization. 5) To reflect elimination of previously held minority interest. 35 -----END PRIVACY-ENHANCED MESSAGE-----