SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 1, 1995*
(Date of earliest event reported)
THE MANITOWOC COMPANY, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 1-11978 39-0448110
----------------- -------------- -----------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
500 South 16th Street, Manitowoc, WI 54220
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414-684-4410)
N/A
- ---------------------------------------------------------------------
(Former name or former address, if changed since last report)
*This Amendment is filed pursuant to the provisions of paragraphs
(a)(4) and (b)(2) of Item 7 of Form 8-K.
THE MANITOWOC COMPANY, INC.
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Amendment No. 1
To
Current Report on Form 8-K
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Current Report
dated as of December 1, 1995 on Form 8-K (the ``12/1/95 8-K'') as set
forth in the following pages.
Pursuant to the provisions of paragraphs (a)(4) and (b)(2) of Item 7
of Form 8-K, Item 7 of the 12/1/95 8-K is hereby amended to file the
financial statements and pro forma financial information required to
be filed in connection with the acquisition reported in Item 2 of the
12/1/95 8-K, and the Exhibit Index incorporated by reference in Item
7(c) of the 12/1/95 8-K is hereby amended to reflect the filing
herewith of an appropriate accountants' consent with respect to the
financial statements described in Item 7(a) hereof.
Item 7. Financial Statements and Exhibits
- ---------------------------------------------
a) Financial Statements of Business Acquired:
The following audited consolidated financial statements of The
Shannon Group, Inc. and Subsidiary are filed herewith:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
The following unaudited interim consolidated financial statements
of The Shannon Group, Inc. and Subsidiary are filed herewith:
Consolidated Condensed Statements of Operations for the Three and
Nine Months Ended September 30, 1995 and 1994
Consolidated Condensed Balance Sheet at September 30, 1995
Consolidated Condensed Statements of Cash Flows for the Nine
Months Ended September 30, 1995 and 1994
Notes to Unaudited Interim Financial Data.
b) Pro Forma Financial Information:
The following unaudited pro forma consolidated condensed
financial statements of The Manitowoc Company, Inc., reflecting the
acquisition of The Shannon Group, Inc. and Subsidiary are filed
herewith:
Introduction
Pro Forma Consolidated Condensed Statement of Operations
for the Year Ended December 31, 1994
Pro Forma Consolidated Condensed Balance Sheet
as of September 30, 1995
Pro Forma Consolidated Condensed Statement of
Operations for the Nine Months Ended
September 30, 1995
Notes to Consolidated Pro Forma Consolidated Condensed Financial
Statements
c) Exhibits.
See the Exhibit Index following the Signature page of this
Report, which is incorporated herein by reference.
Report of Independent Accountants
To the Shareholders and Board of Directors of
The Shannon Group, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of The
Shannon Group, Inc. and Subsidiary as of December 31, 1994 and 1993,
and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of The Shannon Group, Inc. and Subsidiary as of
December 31, 1994 and 1993, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 8, the Company changed its method of accounting
for income taxes in 1993.
Minneapolis, Minnesota
March 22, 1995
The Shannon Group, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 1994 and 1993
(in thousands, except share and per share data)
ASSETS
1994 1993
Current assets:
Accounts receivable, net $16,543 $10,913
Inventories 9,194 5,807
Current portion of reimbursable tooling costs 2,553 1,274
Prepaid expenses and other current assets 702 218
Deferred income taxes 871 613
------- -------
Total current assets 29,863 18,825
Property, plant and equipment, net 27,374 24,197
Goodwill, net 23,144 13,969
Other assets 5,690 8,508
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Total assets $86,071 $65,499
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 8,689 4,438
Accounts payable 7,492 5,606
Cash overdraft payable 4,424 1,947
Accrued salaries and related benefits 3,263 2,330
Other accrued expenses 2,413 1,661
Current portion of deferred revenue 545 356
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Total current liabilities 26,826 16,338
Long-term debt, less current portion 42,429 35,531
Deferred revenue, less current portion 374 601
Deferred income taxes 3,256 841
Other liabilities 715 1,176
------ ------
Total liabilities 73,600 54,487
------ ------
Commitments and contingencies
9% cumulative senior mandatorily redeemable preferred stock,
$.01 par value, 1,000 shares authorized, 50 shares issued
and outstanding, liquidation value of $5 million 4,779 4,779
------ ------
Stockholders' equity:
Common stock, $.01 par value, 10,000 shares
authorized, 1,000 shares issued and outstanding
Additional paid-in capital, common stock 8,000 8,000
Common stock warrant repurchase obligation 10,152 7,524
Accumulated deficit (10,460) (9,291)
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Total shareholders' equity 7,692 6,233
------ ------
Total liabilities and shareholders' equity $86,071 $65,499
====== ======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
The Shannon Group, Inc. and Subsidiary
Consolidated Statements of Operations
for the years ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
Net sales $107,653 $83,397 $78,450
Cost of sales 78,831 60,568 58,188
------- ------ -------
Gross profit 28,822 22,829 20,262
Operating expenses:
Sales and marketing 8,418 6,205 4,812
General and administrative 7,697 6,817 6,278
Amortization of intangible assets 2,830 2,969 3,024
Other operating expenses,
primarily management fees 399 449 368
Restructuring credit (350)
------ ------ ------
Income from operations 9,478 6,389 6,130
Interest expense 4,942 4,238 4,640
Other 103
------ ------ ------
Income before income taxes,extraordinary
item and cumulative effect of change
in accounting for income taxes 4,536 2,048 1,490
Income taxes:
Current 341 92 63
Deferred 2,286 715 710
------ ------ ------
Income before extraordinary item and
cumulative effect of change in accounting
for income taxes 1,909 1,241 717
Extraordinary item, reduction of income taxes
arising from utilization of net operating loss
carryforwards 710
Cumulative effect of change in accounting for
income taxes 919
------- ------- ------
Net income $1,909 $2,160 $1,427
======= ======= ======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
The Shannon Group, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1994, 1993 and 1992
(in thousands, except share and per share data)
Number of Additional Common
Common Paid-In Stock
Shares Capital Warrant
($.01 Par Common Repurchase Accumulated
Value) Stock Obligation Deficit Total
Balance at December 31, 1991 1,000 $8,000 $2,186 $(6,640) $3,546
Net income for the year 1,427 1,427
Dividends on senior preferred stock
($9,000 per share) (450) (450)
Adjustments for increase in value of
common stock purchase warrants 2,096 (2,096)
------- ------- ------- ------- ------
Balance at December 31, 1992 1,000 8,000 4,282 (7,759) 4,523
Net income for the year 2,160 2,160
Dividends on senior preferred stock
($9,000 per share) (450) (450)
Adjustment for increase in value of
common stock purchase warrants 3,242 (3,242)
------ ------ ------ ------ -------
Balance at December 31, 1993 1,000 8,000 7,524 (9,291) 6,233
Net income for the year 1,909 1,909
Dividends on senior preferred stock
($9,000 per share) (450) (450)
Adjustment for increase in value of
common stock purchase warrants 2,628 (2,628)
------ ------- -------- ------- ------
Balance at December 31, 1994 1,000 $8,000 $10,152 $(10,460) $7,692
====== ====== ======= ======= ======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
The Shannon Group, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash
for the years ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
Cash flows from operating activities:
Net income $1,909 $2,160 $1,427
Adjustments to reconcile net income to net cash provided by
operating activities:
Cumulative effect of change in accounting for
income taxes (919)
Depreciation and amortization 1,744 1,597 1,426
Amortization of intangible assets 2,830 2,969 3,024
Amortization of deferred start-up costs 380 208 66
Deferred income tax expense 2,286 715
Provision for doubtful accounts 30 107 43
Restructuring credit (350)
Other 6 103
Changes in operating assets and liabilities:
Accounts receivable (3,397) (1,219) 1,504
Inventories (840) 691 442
Prepaid expenses and other current assets (339) 246 90
Other assets (23) (2) (74)
Accounts payable 883 (1,179) (1,649)
Accrued expenses 752 1,074 (1,195)
Deferred revenue (38) (128) 19
Other liabilities 258 66 257
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Net cash provided by operating activities 6,441 6,489 5,030
----- ------ ------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (11,757)
Additions to property, plant and equipment (1,548) (611) (418)
Proceeds from sale of property, plant and equipment 51 144
Additions to reimbursable tooling costs (1,206) (601) (2,211)
Reimbursements collected for tooling costs 1,163 707 817
Additions to deferred start-up costs (143) (780)
------- ------ ------
Net cash used in investing activities (13,297) (504) (2,592)
------- ------ ------
Cash flows from financing activities:
Principal payments on revolving loan (110,336) (95,102) (87,936)
Borrowings on revolving loan 109,691 94,448 85,795
Proceeds from issuance of long-term debt 10,956
Principal payments on other long-term debt (5,423) (4,938) (520)
Payment of senior preferred stock dividends (450) (450) (450)
Increase in cash overdraft payable 2,975 57 673
Payments for debt issuance costs (557)
------- ------- -------
Net cash provided by (used in) financing activities 6,856 (5,985) (2,438)
------- ------- -------
Net change in cash - - -
------- ------- -------
Supplemental cash flow information:
Cash paid during the period for:
Interest $4,658 $3,990 $4,403
Income taxes 163 91 102
Significant noncash investing and financing activities:
Issuance of long-term debt and assumption of liabilities in
exchange for assets in business acquisitions 5,854
Increase in goodwill and long-term debt for settlement of
contingent note obligations from an acquisition 1,079
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
The Shannon Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. Business Description and Summary of Significant Accounting Policies:
Business Description:
The Shannon Group, Inc. and its subsidiary (the Company) designs,
manufactures and markets commercial and industrial refrigeration
systems and residential refrigeration units.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Kolpak
Manufacturing, Inc. (KMFG). All material intercompany accounts and
transactions have been eliminated in consolidation.
Concentration of Credit Risk:
The Company sells its commercial products primarily to food service
dealers throughout the United States and its residential products to a
reseller of refrigeration equipment. The Company performs ongoing
credit evaluations of its customers and generally does not require
collateral. See Note 6 for discussion of a significant customer.
Inventories:
Inventories are stated at the lower of cost or market. Cost is
primarily determined using standard costs which approximate costs
utilizing the first-in, first-out method.
Property, Plant and Equipment:
Property, plant and equipment is stated at cost. Depreciation and
amortization is computed using the straight-line method over the
estimated useful lives of the assets.
At the time assets are sold or retired, the cost of the asset and
related accumulated depreciation or amortization are removed from the
accounts with the resulting gain or loss included in operations.
Maintenance and repairs are charged to expense as incurred while major
renewals or betterments are capitalized.
Goodwill:
The excess of cost over estimated fair value of net assets acquired is
amortized over 40 years using the straight-line method.
Noncompete Agreements and Other Assets:
A portion of the purchase price of acquired businesses has been
allocated to noncompete agreements with former owners based on their
estimated fair values at the acquisition date. The amounts are being
amortized on a straight-line basis over the contract lives of five
years. Other assets include deferred costs related to debt
origination, employee contracts, deferred start-up costs, and other
costs specifically related to the acquisition. These costs are being
amortized on a straight-line basis over the lesser of the estimated
period of benefit or the contract term (varying periods of three to
seven years).
Income Taxes:
For federal income tax purposes, KMFG is included in the
Company's consolidated income tax return.
Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year end
based on enacted tax laws and statutory tax rates applicable to the
periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
Deferred Revenue on Extended Warranty Contracts:
Amounts received from extended warranty contracts have been deferred
and are being recognized as revenue using the straight-line method
over the five-year life of the contracts. The expense related to
fulfilling these contracts is recognized in the period costs are
incurred.
2. Acquisitions:
In April 1994, the Company bought 100% of the issued and outstanding
common stock of Minnesota Store Equipment Company (MSE), and land and
buildings held by partnerships with common ownership with MSE, for
$17.1 million (excluding direct costs of the acquisition of
approximately $530,000 and including cash acquired of approximately
$3.7 million). MSE manufactures commercial walk-in cooler and freezer
units for convenience stores, grocery chains and restaurants across
North America. The acquisition resulted in excess cost over net assets
acquired (goodwill) of approximately $8.3 million.
In May 1994, the Company purchased certain assets, primarily machinery
and equipment and inventory, of Glenco Star Corporation (Glenco) for
$590,000 (excluding direct costs of the acquisition of approximately
$605,000, primarily related to transporting the inventory and
equipment to the Company's manufacturing facility and preparing for
production). Glenco was a manufacturer of commercial reach-in cooler
and freezer units for convenience stores across North America. In
conjunction with the acquisition, the Company also entered into an
agreement under which the sellers will receive, as additional
consideration for the assets purchased, 3-1/4% of the cash collected
for Glenco related sales through September 1998, up to a maximum
amount of $1,100,000. The minimum payments required by the agreement
of $560,000 have been discounted and recorded as additional purchase
consideration and long-term debt (see Note 4). Goodwill will be
increased in future years to the extent that payments exceed the
minimum amount recorded. The Glenco acquisition resulted in goodwill
of approximately $370,000.
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase prices have been allocated
to the assets acquired and liabilities assumed based on the estimated
fair values at the respective dates of acquisition. Also, the results
of MSE's and Glenco's operations have been included in the Company's
financial statements since their date of acquisition.
Pro forma data (unaudited) as though the MSE and Glenco acquisitions
had been effective at the beginning of 1993 is as follows
(in thousands):
1994 1993
(unaudited)
Net sales $113,587 $116,559
Income before extraordinary item
and cumulative effect 2,253 1,464
Net income 2,253 2,383
3. Selected Balance Sheet Information:
Selected balance sheet information at December 31, 1994 and 1993
consists of the following (in thousands):
Accounts Receivable:
1994 1993
Accounts receivable $16,740 $11,073
Allowance for doubtful accounts (197) (160)
------- ------
$16,543 $10,913
======= ======
Inventories:
1994 1993
Raw materials $6,521 $4,133
Work-in-process 1,510 745
Finished goods 1,163 929
------ -------
$9,194 $5,807
====== =======
Property, Plant and Equipment:
1994 1993 Estimated
Useful Life
Land $910 $715
Buildings and improvements 14,529 11,938 40 years
Machinery and equipment 15,009 13,640 15 years
Furniture and fixtures 2,208 1,804 10 years
Tooling and dyes 930 979 4 years
Transportation equipment 504 150 4 years
------ ------
34,090 29,226
Accumulated depreciation and amortization (6,716) (5,029)
------ ------
$27,374 $24,197
======= ======
Included in buildings and improvements, machinery and equipment,
and furniture and fixtures above are items acquired under capital
lease arrangements totaling $3.4 million and $2.6 million, net of
accumulated amortization of $355,000 and $247,000 at December 31, 1994
and 1993, respectively.
Goodwill (in thousands):
1994 1993
Goodwill $25,017 $15,324
Accumulated amortization (1,873) (1,355)
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$23,144 $13,969
======= =======
Other Assets (in thousands):
1994 1993
--------------------- -----------------------
Net Net Estimated
Original Book Original Book Period of
Cost Value Cost Value Benefit
Noncompete agreements $9,328 $1,938 $9,079 $3,537 5 years
Debt origination fees 1,649 906 1,092 611 3 - 7 years
Other acquisition-related costs 1,395 749 1,107 619 3 - 7 years
Deferred start-up costs 1,494 1,023 1,677 1,403 See below
Employment contract 190 40 190 84 5 years
------ ------ ------ ------
$14,056 $4,656 $13,145 6,254
====== ======
Accumulated amortization (9,400) (6,891)
------ ------
4,656 6,254
Noncurrent portion of reimbursable
tooling costs 929 2,165
Other 105 89
------ ------
$5,690 $8,508
====== ======
The Company has an agreement expiring in 1995 whereby a company
affiliated with a shareholder provides management services to the
Company. The agreement, as amended, provides for annual charges not
to exceed $325,000 (as adjusted for inflation each year) plus actual
out-of-pocket expenses not to exceed $75,000 per year. The Company
recognized $335,000, $273,000 and $266,000 of expense during the years
ended December 31, 1994, 1993 and 1992, respectively, under this
portion of the agreement. In addition, the Company is required to pay
the affiliate specified amounts for special services including
acquisition and financing support. During 1994, the Company paid
$440,000 for acquisition and financing-related services rendered by
the affiliate in connection with the MSE acquisition (see Note 2).
The affiliate allocated $105,000 of its fee to acquisition-related
services, which accordingly is included in the direct cost of the
acquisition; the remaining $335,000 of financing-related services are
included in the table above as debt origination fees.
During 1990, KMFG entered into a five-year sales agreement with a
customer whereby the customer agreed to purchase KMFG's entire
production of residential refrigeration units (see Note 6). The
customer reimburses KMFG for certain approved tooling costs generally
on a per-unit basis as units are shipped. A portion of these costs
are classified as current assets based upon the anticipated timing of
collections.
In addition to the tooling costs, KMFG has incurred other start-up
costs such as product and manufacturing engineering, rearrangement of
the manufacturing facility and employee training. These costs have
been deferred and are being amortized to cost of sales in the
statements of operations using the units-of-production method.
In September 1994, the customer sales agreement was extended through
December 31, 1998. In addition, KMFG is required to spend up to $3.5
million for new tooling design for which the customer will reimburse
KMFG over a three-year period beginning the month in which KMFG begins
selling the new models. Management believes that such sales will begin
in mid-1995. Through December 31, 1994, KMFG had spent $1.2 million
for such tooling development.
4. Long-Term Debt:
Long-term debt at December 31, 1994 and 1993 consists of the following:
1994 1993
(in thousands)
Term notes payable to General Electric Capital Corporation(GECC); interest payable
monthly at the prime rate plus 1-1/2%; principal due in quarterly installments
through November 30, 1997 with acceleration of payments required if certain
cash flow levels are achieved. 16,739 $21,051
14% senior subordinated notes payable to GECC; net of $85,000 allocated to stock
purchase warrants issued in exchange for a below market interest rate, amount
is being amortized over the term of the notes as additionalinterest expense
(see Note 5); interest payable monthly; principal due November 30, 1997. 11,465 11,453
Revolving loan with GECC; interest payable monthly at the prime rate plus 1-1/2%;
principal due November 30, 1997. 8,642 5,509
Term notes payable to GECC; interest payable monthly at the index rate plus 2-1/2%;
principal due in quarterly installments through November 30, 1997 with acceleration
of payments required if certain cash flow levels are achieved. 7,200
9% uncollateralized subordinated notes payable to individuals; interest payable
semi-annually; principal due May 1, 1999. 2,950
12.3% uncollateralized subordinated notes payable to individuals; repaid in
January 1995. 1,775 1,324
Contingent subordinated promissory notes payable to individuals; repaid in
January 1995. 842
Capital lease obligations; due in monthly or annual installments including
principal and interest at rates varying from 5% to 18.3%; maturing at various
dates through 2012. 1,218 632
Minimum obligation associated with the Glenco acquisition (see Note 2), minimum
monthly payments of $7,500 including interest imputed at 8-3/4%, due through
September 1998. 287
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51,118 39,969
Less current portion (8,689) (4,438)
------- ------
$42,429 $35,531
======= ======
The prime and index rates were 8.5% at December 31, 1994 and 6%
at December 31, 1993.
As part of the initial acquisition of the Company by the current
shareholders in November 1990, the Company issued $1.4 million of
contingent subordinated promissory notes to the sellers. Prior to
December 1994, the contingent notes had not been recorded as
liabilities as they were required to be paid only if the Company met
certain target earnings levels. In December 1994, the contingent
noteholders agreed to accept $1.1 million as a final settlement on the
note obligations, which was accounted for as an increase to goodwill
and long-term debt. The Company paid $258,000 to the noteholders in
December 1994 and the remainder in January 1995.
The Company has an agreement with GECC covering the term notes
payable, the revolving loan and the senior subordinated notes payable
(the GECC agreement). Borrowings under the agreement are
collateralized by all assets and common stock of the Company. The
maximum amount of the revolving loan is $18 million. The amount
available for borrowing under terms of the GECC agreement at December
31, 1994 and 1993 was $17.6 million and $11.8 million, respectively.
The GECC agreement contains warranties and covenants that must be
complied with on a continuing basis. Default on any warranty or
covenant could accelerate the maturity of these borrowings. The
agreement requires the Company to meet certain financial covenants
which include, among others, minimum net worth, maximum capital
expenditures, minimum cash flows and maximum total liabilities.
Aggregate maturities of long-term debt as of December 31, 1994
are as follows (in thousands):
Year Ending December 31
1995 $8,689
1996 6,677
1997 31,759
1998 149
1999 3,038
Thereafter 806
-------
$51,118
=======
5. Shareholders' Equity:
9% Cumulative Senior Mandatorily Redeemable Preferred Stock:
The Company has 1,000 shares of preferred stock authorized, of which
50 shares have been designated as senior preferred shares. At
December 31, 1994 and 1993, 50 shares of the senior preferred stock
were issued and outstanding.
Senior preferred shareholders are entitled to one vote per share and
vote as one class with the common shareholders. The Company may
redeem all or part of the outstanding senior preferred stock at any
time for a redemption price of $100,000 per share plus unpaid
dividends; mandatory redemption is required on or before November 29,
1997. No dividends, redemption or payments in liquidation may be made
with respect to common stock or any other class of stock prior to the
complete redemption of the senior preferred stock. Required dividends
have been paid annually.
Stock Warrants:
Warrants to purchase 471 shares of common stock at $1.00 per share
were issued to GECC in connection with the senior subordinated notes
payable (see Note 4) and are exercisable through November 29, 2000.
The proceeds allocated to these warrants at issuance in 1990 were
recorded as common stock warrant repurchase obligation in the
accompanying consolidated balance sheets. Among other things, the
warrants provide for adjustments of the exercise price and the number
of shares issuable thereunder in the event that the Company issues
additional shares of common stock or declares a stock split.
The Company is obligated to repurchase the warrants, or stock issued
thereunder, if demanded by GECC. The repurchase price is at a market
price to be determined based on the then-current value of the Company,
as defined by the agreement. The repurchase price would have been
approximately $10.2 million at December 31, 1994 and approximately
$7.5 million at December 31, 1993. Each year, the amount necessary to
record the repurchases obligation at its current repurchase price is
accreted to common stock warrant repurchase obligation by direct
charges to accumulated deficit. The amount accreted was $2.6 million,
$3.2 million and $2.1 million in 1994, 1993 and 1992, respectively.
6. Commitments and Contingencies:
Sales:
KMFG has entered into a sales agreement with a customer which expires
on December 31, 1998. Pursuant to the terms of the agreement, the
customer will purchase KMFG's entire production of residential
refrigeration units. As discussed in Note 3, the agreement also
requires the Company to incur certain costs (see Note 3). This
customer represents approximately 14%, 18% and 24% of sales in 1994,
1993 and 1992, respectively, and 10% and 14% of accounts receivable at
December 31, 1994 and 1993, respectively.
Leases:
The Company leases equipment, warehouse facilities and office space
under noncancellable operating leases which expire at various dates
through 1997. The monthly rentals under these agreements vary from
month to month because certain facility leases also require the
Company to pay a pro rata share of lessors' operating costs. The
Company has the option to renew certain leases for a specified period
of time, and/or the option to purchase the related asset at fair value
at the end of the lease term. Rent expense was $642,000, $565,000 and
$631,000 during the years ended December 31, 1994, 1993 and 1992,
respectively.
Aggregate future minimum rental payments as of December 31, 1994 under
noncancellable operating leases are as follows (in thousands):
Year Ending December 31
1995 $323
1996 154
1997 66
1998 9
-----
$552
=====
Litigation:
The Company is a defendant in several lawsuits incidental to its
operations. In the opinion of management, resolution of these matters
will not have a material impact on the financial position or results
of operations of the Company.
7. Employee Benefit Plans:
Employees of the Company covered under collective bargaining
agreements are participants in a defined contribution multi-employer
pension plan. Contributions are determined in accordance with
provisions of a negotiated labor contract. The Company charged
$90,000, $81,000 and $79,000 to expense during the years ended
December 31, 1994, 1993 and 1992, respectively, related to this plan.
Former employees of MSE who meet specified eligibility requirements
are participants in one of three contributory defined contribution
plans qualified under Section 401(k) of the Internal Revenue Code. In
accordance with the plan agreements, the Company is required on an
annual basis to contribute an amount equal to 25% of the employees'
contributions up to specified limits. Additionally, the Company may
elect to make discretionary contributions to the plans. The Company
charged $35,000 to expense during 1994 related to these plans.
The Company also maintains a contributory defined contribution profit
sharing and retirement plan covering substantially all eligible
employees, as defined, excluding those covered under collective
bargaining agreements or the MSE plans. Required Company
contributions are calculated as a percentage of employee contributions
in accordance with the plan agreement. Discretionary contributions to
the plan are determined annually by the Board of Directors. The
Company charged $100,000, $69,000 and $98,000 to expense during the
years ended December 31, 1994, 1993 and 1992, respectively, related to
this plan. There were no discretionary contributions to the plan in
1994, 1993 or 1992.
8. Income Taxes:
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109) effective January 1,
1993. The cumulative effect of this change in accounting for income
taxes increased net income by $919,000, which is reported separately
in the consolidated statement of operations for the year ended
December 31, 1993, and decreased goodwill by $1,645,000 as a result of
recording the tax benefit of acquired net operating loss
carryforwards. Excluding the amount recognized as the cumulative
effect of the change, the effect of applying SFAS 109 on income from
operations and net income for the year ended December 31, 1993 was a
decrease of approximately $170,000. The 1992 financial statements
have not been restated. Under SFAS 109, commencing in 1993, the
utilization of net operating loss carryforwards are not presented as
extraordinary items for income statement classification purposes.
The components of the net deferred tax liability recognized in the
accompanying balance sheets at December 31, 1994 and 1993 are as
follows (in thousands):
1994 1993
Deferred tax assets $4,074 $5,746
Deferred tax liabilities (6,459) (5,974)
------- -------
Net deferred tax liability $(2,385) $(228)
======= =======
The components of the net deferred tax liability at December 31,
1994 and 1993 are as follows (in thousands):
1994 1993
Net operating loss
carryforwards $2,810 $4,987
Inventory overhead 133 76
Asset valuation allowances 215 219
Accrued expenses 730 466
Depreciation (6,457) (5,974)
Other, net 184 (2)
------- ------
$(2,385) $(228)
======= ======
The reconciliation of the federal income tax rate with the effective
income tax rate for the years ended December 31, 1994, 1993 and 1992
is as follows:
1994 1993 1992
Statutory income tax rate 34.0% 34.0% 34.0%
Increase in deferred tax rate,
primarily due to state income taxes 17.3
State taxes, net of federal benefits 5.7 3.3 .6
Amortization of goodwill 3.4 5.6 10.0
Alternative minimum tax 3.4
Other (2.5) (3.5) 3.9
---- ---- ----
57.9% 39.4% 51.9%
==== ==== ====
At December 31, 1994, the Company has available unused net operating
loss carryforwards of approximately $8.3 million for income tax
reporting purposes of which approximately $7.9 million are subject to
certain annual limitations as a result of ownership changes. These
carryforwards will expire at various dates from 2001 to 2007.
9. Restructuring Credit:
The Company recorded a charge to operations in 1991 of $3,465,000 to
accrue for the estimated costs of closing its Los Angeles, California
manufacturing facility, related operating losses and the write-off of
certain related intangible assets. Actual costs to close the facility
were less than originally anticipated and, accordingly, the Company
recorded a $350,000 credit to operations in 1992.
THE SHANNON GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------ ------ ------ ------
Net Sales: $36,408 $33,028 $102,220 $ 78,357
Cost And Expenses:
Cost of goods sold 26,713 23,679 75,634 57,257
Selling and
administrative expenses 5,331 4,603 14,887 11,794
Amortization 769 709 2,291 2,047
------- ------- ------- -------
Total 32,813 28,991 92,812 71,098
Earnings From Operations 3,595 4,037 9,408 7,259
Other Income (Expense):
Interest expense (1,324) (1,388) (4,369) (3,441)
------- ------- ------ ------
Total (1,324) (1,388) (4,369) (3,441)
Earnings before income taxes 2,271 2,649 5,039 3,818
Income taxes 1,035 937 2,084 1,320
------- ------- ------ ------
NET EARNINGS $ 1,236 $ 1,712 $ 2,955 $ 2,498
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
THE SHANNON GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEET
September 30, 1995
(Unaudited)
(In thousands)
ASSETS:
Current assets:
Accounts receivable $ 24,701
Inventories 10,242
Prepaid expenses and other 2,665
----------
Total current assets 37,608
Intangible assets 23,762
Other assets 4,057
Property, plant and equipment - net 27,177
----------
TOTAL $92,604
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,374
Accounts payable and accrued expenses 21,778
----------
Total current liabilities 28,152
Long-term debt, less current portion 44,273
Other 5,096
Commitments and contingencies --
Redeemable preferred stock 4,779
Stockholders' equity:
Common stock 8,000
Common stock warrant repurchase obligation 10,152
Accumulated deficit (7,848)
----------
Total stockholders' equity 10,304
----------
TOTAL $92,604
==========
<FN>
The accompanying notes are an integral part of these statements.
[CAPTION]
THE SHANNON GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1995 and 1994
(In thousands)
(Unaudited)
September 30,
1995 1994
---------- ----------
Cash Flows From Operations:
Net earnings $ 2,955 $ 2,498
Non-cash adjustments to income:
Depreciation and amortization 3,845 3,520
Other 80 (179)
Changes in operating assets & liabilities:
Accounts receivable (7,993) (7,941)
Inventory (1,050) (3,170)
Other current assets 1,296 (361)
Current liabilities 3,485 7,434
Non-current liabilities (982) (46)
Non-current assets 1,032 893
--------- ---------
Net cash provided by operations 2,668 2,648
Cash Flows From Investing:
Business acquisitions -
net of cash acquired -- (11,757)
Capital expenditures (2,951) (870)
--------- ---------
Net cash used for investing (2,951) (12,627)
Cash Flows From Financing:
Dividends paid (338) (338)
Proceeds from revolving line of credit-net 7,268 1,988
Proceeds from long-term borrowings -- 10,956
Principal payments on long-term debt (6,647) (2,627)
--------- ---------
Net cash provided by financing 283 9,979
Net increase in cash & cash equivalents 0 0
--------- ---------
Balance at beginning of year 0 0
--------- ---------
Balance at end of period $ 0 $ 0
<FN>
The accompanying notes are an integral part of these statements.
THE SHANNON GROUP, INC. AND SUBSIDIARY
Notes to Unaudited Interim Financial Data
1. The preceding interim consolidated financial statements have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. The data is unaudited but, in
the opinion of management, reflects all accruals and adjustments,
all of which are of a normal recurring nature, necessary for a fair
statement of the registrant's financial condition and results of
operations for the interim periods.
The results for interim periods are not necessarily indicative of
the results to be expected for the year due to seasonal factors.
2. Inventories included in the consolidated condensed balance sheet
are carried at lower of cost or market using the first-in, first-
out method and consist of the following at September 30, 1995 (in
thousands):
Raw materials $ 8,666
Work-in-process 489
Finished goods 1,087
----------
Total $10,242
==========
THE MANITOWOC COMPANY, INC.
Pro Forma Consolidated Condensed Financial Statements
(Unaudited)
On December 1, 1995, The Manitowoc Company, Inc. (``Manitowoc'')
acquired all of the outstanding common stock of The Shannon Group,
Inc. (``Shannon'') for $126.0 million plus direct costs of the
acquisition of $2,454,000 and the assumption of certain current
liabilities. The acquisition was financed through Manitowoc's credit
facilities.
Shannon is a manufacturer of commercial refrigerators, freezers and
related products, ranging from small under-counter units to 300,000
square foot refrigerated warehouses. Among its wide range of
products, Shannon is best known for its foamed-in-place walk-in
refrigeration units, wood rail walk-in units, refrigerated food-prep
tables, reach-in refrigerator/freezers and modular refrigeration
systems. Shannon is the primary or sole supplier of walk-in
refrigerator/freezers to many of the leading restaurant and grocery
chains in the United States. Presently, Shannon produces its
refrigeration products at nine facilities located in Tennessee, Iowa
and Wisconsin, and employs 1,200 persons.
Shannon's products are marketed under six brand names. It is
Manitowoc's intention to preserve these brand identities, as well as
to keep Shannon's businesses operating independently under the
direction of the present management. The acquisition is expected to
complement Manitowoc's existing food service product line.
The unaudited pro forma consolidated condensed financial statements
are derived from and should be read in conjunction with the unaudited
historical financial statements of Manitowoc as of and for the
transition period ended December 31, 1994 (previously filed on Form
10-Q), the audited historical financial statements of Manitowoc for
the year ended July 2, 1994, and the audited historical financial
statements of Shannon for the year ended December 31, 1994 included
elsewhere in this Form 8-K/A. The December 31, 1994 Manitowoc
historical financial statements are unaudited due to a change in
fiscal year end from the Saturday nearest June 30 to December 31. The
change was approved by Manitowoc's Board of Directors in August, 1994.
The following unaudited pro forma consolidated condensed financial
statements have been compiled as if Manitowoc acquired all of the
outstanding common stock of Shannon on the date of the balance sheet
or as of the beginning of the period for purposes of the statements of
operations. The pro forma adjustments are based upon currently
available information and upon certain assumptions.
The unaudited pro forma consolidated condensed financial statements are
provided for informational purposes only and are not necessarily indicative
of the results of future operations or the future financial position of
Manitowoc or the actual results that would have been achieved had the
acquisition of Shannon been consummated prior to the periods presented.
THE MANITOWOC COMPANY, INC.
Pro Forma Consolidated Condensed Statement of Operations
Year ended December 31, 1994
(Unaudited)
(In thousands, except per-share data)
The Manitowoc The Shannon Pro Forma Pro Forma
Company, Inc. Group, Inc. Adjustments Results
---------- --------- --------- --------
Net Sales: $270,458 $107,653 $ -- $378,111
Costs and Expenses:
Cost of goods sold 203,689 78,831 -- 282,520
Engineering, selling and
administrative expenses 50,621 16,514 -- 67,135
Plant relocation expenses 14,000 -- -- 14,000
Amortization 161 2,830 (a) 190 3,181
-------- -------- -------- --------
Total 268,471 98,175 190 366,836
Earnings From Operations 1,987 9,478 (190) 11,275
Interest and dividend income 1,096 -- -- 1,096
Interest expense (357) (4,942) (b) (2,543) (7,842)
Other income 29 -- -- 29
-------- -------- -------- --------
Total 768 (4,942) (2,543) (6,717)
-------- -------- -------- --------
Earnings before taxes
on income 2,755 4,536 (2,733) 4,558
Provision for taxes on income 960 2,627 (c) (992) 2,595
-------- -------- -------- --------
NET EARNINGS $ 1,795 $ 1,909 $ (1,741) $ 1,963
======== ======== ======== ========
NET EARNINGS PER SHARE (k) $ 0.22 $ 0.24
======== ========
<FN>
See accompanying notes to unaudited pro forma consolidated condensed financial statements.
[CAPTION]
THE MANITOWOC COMPANY, INC.
Pro Forma Consolidated Condensed Balance Sheet
September 30, 1995
(Unaudited)
(In thousands)
The Manitowoc The Shannon Pro Forma Pro Forma
Company, Inc. Group, Inc. Adjustments Results
----------- ----------- ------------ -------
ASSETS:
Current assets:
Cash and cash equivalents $ 10,943 $ -- $ -- $ 10,943
Marketable securities 3,179 -- -- 3,179
Accounts receivable 42,212 24,701 -- 66,913
Inventories 38,778 10,242 -- 49,020
Prepaid expenses and other 1,417 1,826 -- 3,243
Future income tax benefits 10,913 839 -- 11,752
-------- -------- -------- --------
Total current assets 107,442 37,608 -- 145,050
Goodwill 2,789 23,270 (d) 59,724 85,783
Other non-current assets 10,478 4,549 (d) 4,687 19,714
Property, plant and
equipment - net 61,310 27,177 -- 88,487
-------- -------- -------- --------
TOTAL ASSETS $182,019 $ 92,604 $ 64,411 $339,034
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion -
Long-term debt $ -- $ 6,374 (e) $ 3,626 $ 10,000
Short-term borrowings 13,700 -- (e) (4,734) 8,966
Accounts payable and
accrued expenses 50,564 20,826 (f) 1,000 72,390
Income taxes payable 2,676 -- -- 2,676
Product warranties 5,388 952 -- 6,340
-------- -------- -------- --------
Total current liabilities 72,328 28,152 (108) 100,372
Non-current liabilities:
Product warranties 2,944 859 -- 3,803
Deferred income taxes -- 3,228 -- 3,228
Deferred employee expenses 18,725 -- -- 18,725
Long-term debt -- 44,273 (e) 79,602 123,875
Other non-current liabilities 8,096 1,009 -- 9,105
-------- -------- -------- --------
Total non-current liabilities 29,765 49,369 79,602 158,736
Redeemable preferred stock -- 4,779 (g) (4,779) --
Stockholders' equity:
Common stock 109 -- -- 109
Additional paid in capital 31,115 8,000 (g) (8,000) 31,115
Common stock warrant
repurchase obligation -- 10,152 (g) (10,152) --
Cumulative foreign currency
translation adjustment (308) -- -- (308)
Retained earnings (deficit) 130,512 (7,848) (g) 7,848 130,512
Treasury stock at cost (81,502) -- -- (81,502)
-------- -------- -------- --------
Total stockholders' equity 79,926 15,083 (15,083) 79,926
-------- -------- -------- --------
TOTAL $182,019 $ 92,604 $ 64,411 $339,034
======== ======== ======== ========
<FN>
See accompanying notes to unaudited pro forma consolidated condensed financial statements.
[CAPTION]
THE MANITOWOC COMPANY, INC.
Pro Forma Consolidated Condensed Statement of Operations
Nine months ended September 30, 1995
(Unaudited)
(In thousands, except per-share data)
The Manitowoc The Shannon Pro Forma Pro Forma
Company, Inc. Group, Inc. Adjustments Results
----------- --------- ---------- ------
Net Sales: $231,476 $102,220 $ -- $333,696
Costs and Expenses:
Cost of goods sold 176,343 75,634 -- 251,977
Engineering, selling and
administrative expenses 37,578 14,887 -- 52,465
Amortization 55 2,291 (h) (26) 2,320
-------- -------- -------- --------
Total 213,976 92,812 (26) 306,762
Earnings From Operations 17,500 9,408 26 26,934
Interest and dividend income 4 -- -- 4
Interest expense (1,010) (4,369) (i) (2,735) (8,114)
Other income (expense) 647 -- -- 647
-------- -------- -------- --------
Total (359) (4,369) (2,735) (7,463)
Earnings before taxes on income 17,141 5,039 (2,709) 19,471
Provision for taxes on income 6,397 2,084 (j) (1,067) 7,414
-------- -------- -------- -------
NET EARNINGS $ 10,744 $ 2,955 $ (1,642) $ 12,057
======== ======== ======== ========
NET EARNINGS PER SHARE (k) $ 1.40 $ 1.57
======= =======
<FN>
See accompanying notes to unaudited pro forma consolidated condensed financial statements.
THE MANITOWOC COMPANY, INC.
Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
I. Basis of Presentation
The pro forma financial statements give effect to the proposed
acquisition.
The following unaudited pro forma consolidated condensed
financial statements have been compiled as if Manitowoc acquired
all of the outstanding common stock of Shannon on the date of the
balance sheet or as of the beginning of the period for purposes
of the statements of operations. The pro forma adjustments are
based upon currently available information and upon certain
assumptions.
The acquisition has been accounted for in the unaudited pro forma
consolidated condensed financial statements using the purchase
method. Pro forma adjustments are required to adjust the
historical financial statements of Shannon and Manitowoc to
reflect the addition of debt used to finance the acquisition,
additional interest expense associated with such debt, and to
reflect amortization of intangible assets resulting from
application of the purchase method of accounting.
II. Pro Forma Adjustments
a) To amortize the purchase accounting fair value adjustments
related to tangible and intangible assets acquired, as if the
acquisition occurred on January 1, 1994.
b) To increase interest expense by applying Manitowoc's 1994
borrowing rate of 5.715% to long-term debt acquired to finance
the Shannon acquisition. The rate represents average 1994
monthly LIBOR rate plus 1.25% which is the rate stated in the new
long-term debt agreement established to finance the acquisition.
c) To record the income tax benefit related to additional interest
expense.
d) Gives effect to the purchase accounting fair value adjustments
for tangible and intangible assets, as if the acquisition
occurred on September 30, 1995.
e) To record long-term debt incurred to finance the Shannon
acquisition, net of Shannon debt paid in full as required by the
purchase agreement.
f) To record a portion of purchase price withheld for certain
liabilities as agreed to in the purchase agreement.
g) To eliminate The Shannon Group, Inc.'s stockholders' equity.
h) To amortize the purchase accounting fair value adjustments
related to tangible and intangible assets acquired, as if the
acquisition occurred on January 1, 1995.
i) To increase interest expense by applying Manitowoc's 1995
borrowing rate of 7.219% to long-term debt acquired to finance
the Shannon acquisition. The rate represents average 1995
monthly LIBOR rate plus 1.25% which is the rate stated in the new
long-term debt agreement established to finance the acquisition.
j) To record income tax benefit related to additional interest
expense.
k) Earnings per share is calculated using Manitowoc's historical
weighted average shares outstanding of 8,101,000 shares for the
year ended December 31, 1994 and 7,674,000 shares for the nine
months ended September 30, 1995.
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 thereunto duly authorized.
DATE: February 09, 1996 THE MANITOWOC COMPANY, INC.
(Registrant)
By: /s/ Robert R. Friedl
--------------------------------
Robert R. Friedl,
Vice President and
Chief Financial Officer
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO
FORM 8-K CURRENT REPORT
Dated December 1, 1995
As amended by Amendment No. 1 thereto on
Form 8-K/A (``Amendment No. 1'')
Incorporated
Exhibit Herein By Filed
No. Description Reference To Herewith
- ---------- --------------- ---------------- -----------
2.1 * Stock Purchase Agreement, Exhibit 2 to the
dated as of October 24, Registrant's
1995, for the acquisition Current Report on
of The Shannon Group, Inc. Form 8-K dated as
by The Manitowoc Company, of October 25, 1995
Inc.
2.2 * First Amendment to Stock Purchase X (1)
Agreement, dated as of December 1,
1995, for the acquisition of The Shannon
Group, Inc. by The Manitowoc Company, Inc.
4.1 * Credit Agreement, dated as of December 1, X (1)
1995, among The Manitowoc Company,
Inc., as Borrower, certain subsidiaries from
to time parties thereto, as Guarantors, the
several Lenders, and NationsBank, N.A., as Agent.
4.2 * Security and Pledge Agreement, dated as of X (1)
December 1, 1995, among The Manitowoc
Company, Inc., certain of its subsidiaries and
NationsBank, N.A.
20.1 Press Release dated December 1, 1995 regarding X (1)
completing the acquisition of The Shannon Group,
Inc.
23 Consent of Coopers and Lybrand L.L.P. X (2)
* Pursuant to Item 601(b) (2) of Regulation S-K, the Registrant agrees to
furnish to the Securities and Exchange Commission upon request a copy of
any unfiled exhibits or schedules to such document.
(1) Filed with original 12/1/95 8-K.
(2) Filed with Amendment No. 1.