SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
Date of Report
(Date of earliest
event reported): April 24, 1995
Giddings & Lewis, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 0-17873 39-1643189
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
142 Doty Street, Fond du Lac, Wisconsin 54935
(Address of principal executive offices, including zip code)
(414) 921-9400
(Registrant's telephone number)
Item 2. Acquisition or Disposition of Assets.
On April 24, 1995, Giddings & Lewis, Inc. ("Giddings & Lewis")
acquired through a wholly owned subsidiary ("Purchaser") all of the issued
and outstanding shares of capital stock ("Fadal Stock") of Fadal
Engineering Company, Inc., a California corporation ("Fadal"), and the
land and building in Chatsworth, California used by Fadal in the operation
of its business (the "Property"), which was leased by Fadal from a related
partnership. Giddings & Lewis' acquisition of the Fadal Stock and the
Property as well as the consummation of the transactions related thereto
are sometimes collectively referred to herein as the "Acquisition." The
total cash consideration paid by Giddings & Lewis at the closing of the
Acquisition was $180,193,000, which amount includes $1,550,000 of direct
acquisition costs.
The Acquisition was consummated in accordance with the terms of (i)
a Stock Purchase Agreement, dated as of April 24, 1995 (the "Stock
Purchase Agreement"), by and among Giddings & Lewis, Purchaser, Fadal,
David E. de Caussin and Myrtle Rosalie de Caussin, trustees of the David
and Myrtle de Caussin Family Trust - 1988 (the "DM Trust"), and Larry F.
de Caussin and Elsie Margaret de Caussin, trustees of the Larry and Elsie
de Caussin Family Trust - 1988 (the "LE Trust") (the LE Trust and the DM
Trust are collectively referred to herein as the "Shareholders"); and (ii)
an Agreement of Purchase and Sale, dated as of April 24, 1995 (the
"Property Agreement"), by and between Giddings & Lewis, Purchaser and
20701 Plummer Street, Ltd., a California limited partnership ("PS Ltd.").
20701 Plummer Street, Inc., a California corporation owned by the
Shareholders, is the sole general partner of PS Ltd.
In connection with the Acquisition, Giddings & Lewis through
Purchaser (a) acquired the Fadal Stock from the Shareholders for (i)
$152,893,000 in cash at the closing of the Acquisition, subject to a
potential post-closing adjustment based on the Fadal stockholders' equity
as of April 24, 1995 and (ii) the incremental tax liability to the
Shareholders and Fadal resulting from the Purchaser's and Shareholders'
election under Section 338(h)(10) of the Internal Revenue Code to step up
the basis in Fadal's assets, $2,000,000 of which was paid to the
Shareholders at the closing of the Acquisition as an estimate of such
liability; (b) entered into confidential information agreements with ten
employees of Fadal pursuant to which Purchaser paid each of the ten
employees $1,500,000 in cash; and (c) acquired the Property as well as PS
Ltd.'s interest in the lease of the Property to Fadal for a purchase price
of $8,750,000. The purchase price paid by Giddings & Lewis in the
Acquisition was determined on the basis of arm's length negotiations
between the parties.
Following the Acquisition, Fadal was merged with and into
Purchaser, a Wisconsin corporation, which changed its name to Fadal
Engineering Company, Inc. Such merger and name change were consummated
immediately following the Acquisition on April 24, 1995.
Purchaser also entered into eight year, worldwide noncompetition
agreements with David E. de Caussin and Larry F. De Caussin, the
beneficial owners of the Fadal Stock prior to the Acquisition. In
addition, ten employees of Fadal, including David and Larry de Caussin,
entered into employment agreements. The employment agreements have two-
year terms, except for David and Larry de Caussin's agreements which have
terms expiring December 31, 1995, that are automatically renewed month to
month thereafter unless prior notice of termination is given. The
employment agreements also contain confidentiality covenants.
To provide financing for the Acquisition, Giddings & Lewis (a)
entered into an unsecured $100 million revolving credit facility, dated as
of April 24, 1995 (the "1995 Credit Agreement"), with Citibank, N.A., and
(b) amended its unsecured $175 million revolving credit facility, dated as
of December 21, 1992, as amended (the "1992 Credit Agreement"), with
Citibank, N.A. and certain other financial institutions. The 1995 Credit
Agreement matures in April 1996, subject to extension. In connection with
the closing of the Acquisition, Giddings & Lewis borrowed $62,193,000 under
the 1995 Credit Agreement and $118,000,000 under the 1992 Credit Agreement
to finance the Acquisition and to pay costs associated with the Acquisition.
The Stock Purchase Agreement, the Property Agreement, the 1995
Credit Agreement and the 1992 Credit Agreement are filed as exhibits to
this Current Report on Form 8-K and are incorporated herein by reference.
The brief summaries of the material provisions of such agreements set
forth above are qualified in their entirety by reference to each
respective agreement filed as an exhibit hereto.
Fadal is principally involved in the design, manufacture and sale
of computer numerically controlled vertical machining centers. Giddings &
Lewis has no present plans to make significant changes to Fadal's
business.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired - Fadal Engineering
Company, Inc.
Report of Independent Auditors
Audited Financial Statements
Balance Sheets of December 31, 1994 and 1993
Statements of Income for the years ended December 31,
1994 and 1993
Statements of Stockholders' Equity for the years ended
December 31, 1994 and 1993
Statements of Cash Flows for the years ended December 31,
1994 and 1993
Notes to Financial Statements
Report of Independent Auditors
The Stockholders
Fadal Engineering Co., Inc.
We have audited the accompanying balance sheets of Fadal Engineering Co.,
Inc. as of December 31, 1994 and 1993, and the related statements of
income, stockholders' equity and cash flows for the years 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Fadal Engineering Co.
Inc. at December 31, 1994 and 1993, and the results of its operations and
its cash flows for the years then ended in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
March 3, 1995, except
for Note 11, as to
which the date is
April 24, 1995
Fadal Engineering Co., Inc.
Balance Sheets
December 31
1994 1993
Assets
Current assets:
Cash $ 8,012,038 $ 2,087,548
Accounts receivable, less allowance
for doubtful accounts of $390,761
and $292,418 in 1994 and 1993,
respectively 33,296,877 21,275,341
Note receivable from stockholders'
partnership, current portion
(Note 4) 1,785,710 1,785,710
Other receivables 164,785 138,437
Inventories (Note 1) 21,186,925 18,376,017
Prepaid expenses 595,190 535,387
---------- ----------
Total current assets 65,041,525 44,198,440
Equipment and leasehold improvements,
net (Notes 1 and 2) 5,568,520 4,628,948
Note receivable from stockholders'
partnership, non-current portion
(Note 4) 4,285,728 6,071,438
Note receivable from stockholders (Note
4) - 275,817
Accounts receivable, non-current
portion - 28,255
Other assets 142,290 137,195
----------- ----------
Total assets $75,038,063 $55,340,093
=========== ===========
December 31
1994 1993
Liabilities and stockholders' equity
Current liabilities:
Note payable to bank (Note 3) $12,000,000 $8,772,000
Bank term loan, current portion
(Note 3) 1,785,710 1,785,710
Accounts payable 9,021,575 4,339,382
Accrued expenses 945,013 869,967
Income tax payable 104,000 -
Notes payable to stockholders (Note
4) 8,613,031 6,781,256
Note payable to estate of former
stockholder (Note 4) 2,144,197 2,265,217
Note payable to former
stockholder's estate, current
portion (Note 5) 900,000 900,000
---------- ----------
Total current liabilities 35,513,526 25,713,532
Deferred income - 232,159
Bank term loan, long-term portion
(Note 3) 4,285,728 6,071,438
Note payable to former stockholder's
estate, long-term portion (Note 5) 6,300,000 7,200,000
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, no par value:
authorized shares - 135,000 issued
and outstanding shares - 18,480 20,533 20,533
Additional paid-in capital 1,200 1,200
Retained earnings 28,917,076 16,101,231
----------- -----------
Total stockholders' equity 28,938,809 16,122,964
----------- -----------
Total liabilities and stockholders'
equity $75,038,063 $55,340,093
=========== ===========
See accompanying notes.
Fadal Engineering Co., Inc.
Statements of Income
Years ended December 31
1994 1993
Net sales $137,827,754 $86,784,717
Costs and expenses:
Cost of sales (Note 4) 98,575,812 68,965,502
Selling, general and
administrative expenses 22,757,958 11,557,057
Depreciation and amortization 2,148,826 1,588,265
----------- ----------
Total operating expenses 123,482,596 82,110,824
----------- -----------
Operating income 14,345,158 4,673,893
Other (income) expense:
Interest income (Note 4) (495,725) (586,551)
Interest expense (Note 3, 4
and 5) 1,775,500 1,790,399
Earthquake repairs 541,173 -
Other miscellaneous (income)
expense (475,638) (347,860)
--------- ---------
Total other (income) expense 1,345,310 855,988
--------- ---------
Income before provision for state
income taxes 12,999,848 3,817,905
Provision for state income taxes
(Note 7) 184,003 91,418
---------- ----------
Net income $12,815,845 $3,726,487
=========== ===========
See accompanying notes.
Fadal Engineering Co., Inc.
Statements of Stockholders' Equity
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
Balance at December 31,
1992 18,480 $20,533 $1,200 $12,374,744 $12,396,477
Net income - - - 3,726,487 3,726,487
----------- ---------- --------- ---------- -----------
Balance at December 31,
1993 18,480 20,533 1,200 16,101,231 16,122,964
Net income - - - 12,815,845 12,815,845
----------- --------- -------- ---------- -----------
Balance at December 31,
1994 18,480 $20,533 $1,200 $28,917,076 $28,938,809
=========== ========= ======== ========== ==========
See accompanying notes.
Fadal Engineering Co., Inc.
Statements of Cash Flows
Years ended December 31
1994 1993
Increase (decrease) in cash
Operating activities
Cash received from customers $125,765,347 $82,716,197
Cash paid to suppliers and
employees (119,857,805) (81,004,989)
Interest received 496,692 588,585
Interest paid (1,841,778) (1,810,459)
Income taxes paid (76,703) (72,719)
Workers' compensation dividends
received 169,557 186,487
Net (loans to) repayments from
employees (27,005) 708
Rental income received 26,442 86,760
----------- ----------
Net cash provided by operating
activities 4,654,747 690,570
Investing activities
Capital expenditures (3,188,340) (3,877,936)
Proceeds from disposition of assets 419,328 183,869
----------- ----------
Net cash used in investing
activities (2,769,012) (3,694,067)
Financing activities
Proceeds from draws on lines of
credit 47,872,000 30,586,000
Repayments under lines of credit (44,644,000) (23,264,000)
Principal payments under bank term
loan (1,785,710) (1,785,710)
Net borrowings from stockholders 1,831,775 889,127
Net repayments on notes receivable
from stockholders' partnership 1,785,710 165,632
Principal payments on notes payable
to estate of former stockholder (121,020) (375,000)
Principal payments on note payable
to former stockholder's estate (900,000) (1,900,000)
Cash received on settlement of life
insurance policies - 700,000
----------- -----------
Net cash provided by financing
activities 4,038,755 5,016,049
----------- -----------
Net increase in cash 5,924,490 2,012,552
Cash at beginning of year 2,087,548 74,996
----------- -----------
Cash at end of year $8,012,038 $2,087,548
=========== ===========
Reconciliation of net income to net
cash provided by operating
activities:
Net income $12,815,845 $3,726,487
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 2,148,826 1,588,265
Gain on asset dispositions (275,728) (72,810)
Provision for doubtful accounts 150,000 -
Changes in assets and liabilities:
Increase in accounts
receivable (12,143,281) (4,061,249)
(Increase) decrease in other
receivables (26,348) 5,242
Increase in inventories (2,810,908) (2,556,315)
(Increase) decrease in prepaid
expenses and other assets (64,898) 16,333
Increase in accounts payable 4,682,193 1,878,771
Increase in income taxes
payable and accrued
expenses 179,046 165,846
---------- -----------
Total adjustments (8,161,098) (3,035,917)
----------- -----------
Net cash provided by operating
activities $4,654,747 $ 690,570
=========== ===========
See accompanying notes.
Fadal Engineering Co., Inc.
Notes to Financial Statements
December 31, 1994
1. Summary of Significant Accounting Policies
Description of Business
Fadal Engineering Co., Inc. (the Company) designs, manufactures, and sells
computer numerically controlled metalworking machining centers for use in
industrial machine shops.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method)
or market and consist of the following at:
December 31
1994 1993
Raw materials $13,321,470 $11,352,245
Work-in-process 6,120,364 5,856,731
Finished goods 1,745,091 1,167,041
----------- -----------
$21,186,925 $18,376,017
=========== ===========
Depreciation and Amortization
Depreciation of machinery, office equipment, software, and automotive
equipment are provided on the double declining balance method over the
estimated useful lives of three to seven years. Leasehold improvements are
amortized on the straight-line method over the terms of the underlying
leases or, if shorter, the estimated useful lives of the improvements.
Research and Development Costs
Research and development costs of $95,484 and $320,214 for 1994 and 1993,
respectively, were expensed as they were incurred.
Credit Risk
The Company sells vertical machining centers to both foreign and domestic
retail and wholesale customers and distributors. Sales to foreign
customers and distributors accounted for 10.6% of net sales for 1994. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables are
generally due within 30 days, however, some customers are granted extended
terms. Credit losses have consistently been within management's
expectations.
Major Customer
The Company had net sales to one customer representing 14% of total
Company net sales during the year ended 1994 (13% in 1993). Accounts
receivable from this customer at December 31, 1994 were $6,296,349
($3,345,563 at 1993).
2. Equipment and Leasehold Improvements
Equipment and leasehold improvements consist of the following:
December 31
1994 1993
Machinery and equipment $8,294,513 $6,083,658
Automotive equipment 293,493 303,230
Office equipment 1,460,139 1,113,467
Software 329,040 310,263
Leasehold improvements 1,843,525 2,046,953
---------- -----------
12,220,710 9,857,571
Less accumulated depreciation (6,652,190) (5,228,623)
---------- -----------
$5,568,520 $4,628,948
========== ===========
3. Notes Payable to Bank
For working capital purposes, the Company has a revolving credit facility
with a bank under which the Company may borrow up to $10,000,000. As of
December 31, 1994, the facility provided for a temporary increase to a
maximum amount of borrowings of $20,000,000 through January 31, 1995 and
$15,000,000 thereafter through February 28, 1995. Advances under the
revolving credit facility can be made based on certain percentages of
eligible accounts receivable and inventory (as defined in the credit
agreement). The agreement expires in August 1995. Interest is charged at
the bank's prime rate of interest (8.5% at December 31, 1994). Interest
expense relating to this credit facility for the years ended December 31,
1994 and 1993 amounted to $238,698 and $50,837, respectively.
In August 1992, in connection with the purchase of commercial land and
building by a partnership owned by the stockholders (see Note 4), the
Company borrowed $10,000,000 under a term loan facility. The outstanding
balance on this loan was $6,071,438 and $7,857,148 at December 31, 1994
and 1993, respectively. This loan is payable in quarterly principal
installments of $357,142 through August 1999. Interest is charged at
either the bank's prime rate (8.5% at December 31, 1994) plus 1/2%, or
other offshore rate (LIBOR of 5% plus 2.5% on $5,000,000 of outstanding
balance at December 31, 1994) and is payable monthly. Under the terms of
the loan agreement the Company is obligated to make one additional
principal payment each year based on excess cash flow for the prior year
(as defined), up to a maximum of $357,142. Amounts due after December 31,
1994 are as follows (assuming the maximum additional principal payment):
1995 $1,785,710
1996 1,785,710
1997 1,785,710
1998 714,308
----------
$6,071,438
==========
Interest expense relating to the term loan was $467,331 and $549,850 for
1994 and 1993, respectively.
The credit facility and term loan are secured under a blanket security
agreement covering substantially all assets of the Company. These
agreements place various restrictions on the Company and provide specific
financial ratios that must be maintained.
The above term loan facility is personally guaranteed by the stockholders
up to $1,071,438 at December 31, 1994 ($2,857,148 at December 31, 1993).
4. Related Party Transactions
In connection with the purchase of commercial land and building by a
partnership owned by the stockholders in August 1992, the Company, which
leases the facility (see Note 6), agreed to lend the partnership up to
$10,000,000. The balance outstanding at December 31, 1994 and 1993 was
$6,071,438 and $7,857,148, respectively. Repayment terms for the loan are
identical to the term loan facility (see Note 3). The note is secured by a
deed of trust on the commercial land and building. The partnership has
borrowed the maximum amount allowed by the agreement.
At December 31, 1993, the Company held a note receivable from stockholders
in the amount of $275,817 related to the sale of land and a building to
the stockholders in December 1984. This note was repaid in June 1994.
Additionally, at December 31, 1993, the unrecognized portion of the gain
on the sale of the land and building totaled $232,159, which was recorded
in income in 1994.
Interest income relating to these notes was $467,331 and $534,194 for the
years ended December 31, 1994 and 1993, respectively.
Notes payable to stockholders and note payable to estate of former
stockholder consist of unsecured loans totaling $8,613,031 and $2,144,197,
respectively, which are due on demand and bear interest at 6% per annum.
Interest expense on these loans was $341,099 and $374,948 for the years
ended December 31, 1994 and 1993, respectively.
5. Stock Redemption
The Company's stockholder agreement requires that upon the death of any
stockholder, the Company has the obligation to purchase from the estate of
the stockholder, at a predetermined price, all shares owned by the
stockholder and his spouse.
In connection with the death of a stockholder in November, 1992, the
Company has acquired all of the common stock previously owned by the
deceased stockholder for a total price of $10,000,000. The outstanding
balance on this note at December 31, 1994 was $7,200,000. This note is
payable in annual installments of $900,000 through November 15, 2002.
Interest at 9% per annum is payable not less frequently than annually with
each principal installment. Interest expense for the year ended December
31, 1994 was $718,791 ($814,764 for 1993).
6. Commitments and Contingencies
Operating Leases
The Company leases office and warehouse facilities from related parties
under an operating lease that has initial and noncancelable terms in
excess of one year. Rent expense for the year ended December 31, 1994
totaled $1,768,980, of which $1,463,816 was to related parties ($2,011,930
for the year ended December 31, 1993, of which $1,489,650 was to related
parties).
Future minimum operating lease payments to related parties are as follows:
Year ending:
1995 $1,440,000
1996 1,440,000
1997 960,000
----------
Total minimum lease payments $3,840,000
==========
Developmental Contract
The Company has entered into a contract for the development of a product
to be included as an integral part of a lathe being developed by the
Company. The contract provides that the Company will be given a license
to use and sell the product.
Under the terms of the contract the Company is obligated to pay a total of
$450,000. As of December 31, 1994, the unpaid portion of the contract
amounted to $210,000, which is payable upon approval of the product by the
Company, which is expected to occur during 1995.
Contingencies
Various claims and actions, considered normal to the Company's business
have been asserted or are pending against the Company. In the opinion of
management, all such claims and actions should not have a material adverse
effect upon the Company's financial position, results of operations or
cash flows.
7. Provision for State Taxes Based on Income
The Company's tax provision is calculated in accordance with Statement of
Financial Accounting Standard No. 109 "Accounting for Income Taxes."
The Company elected S Corporation status effective January 1, 1987. Under
this election, the Company is not liable for Federal taxes on income and
is liable for 1.5% of California taxable income. Accordingly, the earnings
of the Company will be reported on the stockholders' federal and state
income tax returns.
8. Retirement Plan
Effective October 1990 the Company implemented a contributory 401(k)
retirement savings plan (the 401(k) Plan) covering all of the Company's
employees eighteen years of age and older. The 401(k) Plan is a defined
contribution salary deferral plan to which participants may contribute not
less than 1% nor more than 15% of their compensation. The Company
contributes an amount equal to 50% of each participant's elective
contribution up to the first 6% of compensation. The Company's expense for
1994 and 1993 was $168,810 and $163,755, respectively.
9. Earthquake Repairs
The Company suffered damage and work stoppage as a result of the major
earthquake which occurred on January 17, 1994, including losses for roof
repair and damages to leasehold improvements. The Company maintains
standard insurance policies with standard deductible provisions that
require an initial level of loss prior to receiving insurance proceeds.
The Company incurred $541,173 in damages which were below the deductible
amount. Substantially all costs related to the earthquake were paid in
1994 and are included as non-operating costs for financial statement
purposes.
10. Fair Values of Financial Instruments
The carrying amounts of the Company's note receivable from stockholders'
partnership, note payable to bank, bank term loan, notes payable to
stockholders and note payable to estate of former stockholder approximate
their fair values at December 31, 1994 and 1993. The fair value of the
note payable to former stockholder's estate was $6,797,000 at December 31,
1994 ($8,455,000 at December 31, 1993), as determined using discounted
cash flow analyses based on the Company's current incremental borrowing
rates for similar types of borrowing arrangements.
11. Subsequent Event
Effective April 24, 1995 the Company was sold to Giddings & Lewis, Inc.
(b) Pro Forma Financial Information.
GIDDINGS & LEWIS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial information relates to
the April 24, 1995 acquisition (such acquisition including certain related
transactions are collectively referred to herein as the "Acquisition") by
a wholly owned subsidiary of Giddings & Lewis, Inc. ("Giddings & Lewis")
of (a) all of the issued and outstanding shares of capital stock of Fadal
Engineering Company, Inc. ("Fadal") and (b) the land and building used by
Fadal and leased from a related partnership. The transaction will be
accounted for as a purchase business combination. The pro forma amounts
have been prepared based on certain purchase accounting and other pro
forma adjustments (as described in the accompanying notes) to the December
31, 1994 historical financial statements of both companies.
The unaudited pro forma condensed consolidated statement of income
for the year ended December 31, 1994 reflects the 1994 historical results
of operations of both companies with pro forma acquisition adjustments as
if the Acquisition had occurred on January 1, 1994. The unaudited pro
forma condensed consolidated balance sheet at December 31, 1994 reflects
the historical financial position of both companies at December 31, 1994,
with pro forma acquisition adjustments as if the Acquisition had occurred
on December 31, 1994. The pro forma adjustments are described in the
accompanying notes and give effect to events that are (a) directly
attributable to the Acquisition, (b) factually supportable, and (c) in the
case of certain income statement adjustments, expected to have a
continuing impact.
The unaudited pro forma condensed consolidated financial statements
should be read in connection with Giddings & Lewis' Annual Report on Form
10-K for the year ended December 31, 1994 along with December 31, 1994
financial statements of Fadal and related notes appearing elsewhere in
this Current Report on Form 8-K.
The unaudited pro forma financial information presented is for
information purposes only and does not purport to represent what Giddings
& Lewis' and Fadal's financial position or results of operations as of the
dates presented would have been had the Acquisition in fact occurred on
such date or at the beginning of the period indicated or to project
Giddings & Lewis' and Fadal's financial position or results of operations
for any future date or period.
PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
December 31, 1994
Giddings Pro Forma
ASSETS & Lewis Fadal Adjustments Pro Forma
(Note 2)
Current assets:
Cash and cash equivalents . $ 24,072 $ 8,012 $(8,012)(a) $ 24,072
Accounts receivable . . . . 343,881 33,297 - 377,178
Inventories . . . . . . . . 74,823 21,187 - 96,010
Note receivable . . . . . . - 1,827 (1,827)(a) -
Other current assets . . . . 20,378 719 235(a,b) 21,332
------- -------- -------- ---------
Total current assets . . . . . 463,154 65,042 (9,604) 518,592
Non-current assets
Net property, plant and
equipment . . . . . . . 107,164 5,568 6,900(b) 119,632
Note receivable . . . . . . - 4,286 (4,286)(a) -
Costs in excess of net
acquired tangible assets 84,997 - 120,783(b) 205,780
Other assets . . . . . . . . 31,911 142 1,211(a,b) 33,264
-------- --------- -------- --------
Total non-current assets . . . 224,072 9,996 124,608 358,676
-------- --------- -------- --------
Total assets . . . . . . . . . $687,226 $ 75,038 $115,004 $877,268
======== ======== ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable . . . . . . $76,562 $ 9,021 $ - $ 85,583
Accrued expenses . . . . . . 78,912 1,049 (221)(a) 79,740
Notes payable - revolving
credit . . . . . . . . . . . . - - 180,193(c) 180,193
Notes payable - other . . . - 25,443 (25,443)(a) -
------- -------- -------- -------
Total current liabilities . . . 155,474 35,513 154,529 345,516
Non-current liabilities:
Notes payable . . . . . . . - 10,586 (10,586)(a) -
Other . . . . . . . . . . . 46,454 - - 46,454
--------- ------- -------- -------
Total non-current liabilities . 46,454 10,586 (10,586) 46,454
--------- -------- ------- --------
Total liabilities . . . . . . . 201,928 46,099 143,943 391,970
Total shareholders' equity . . 485,298 28,939 (28,939)(a,b) 485,298
--------- --------- --------- --------
Total liabilities and
shareholders' equity . . . . $687,226 $ 75,038 $115,004 $877,268
========= ========= ========= =========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Year Ended December 31, 1994
Giddings Pro Forma
& Lewis Fadal Adjustments Pro Forma
(Note 2)
Net sales . . . . . . . . . . . $619,471 $137,828 $ - $757,299
Cost of sales . . . . . . . . . 491,397 98,576 (1,610)(d,e) 588,363
Selling, general and
administrative expenses . . 58,977 22,758 (16,184)(f) 65,551
Depreciation and
amortization . . . . . . . . 15,399 2,149 5,297(g,h,i) 22,845
Other income . . . . . . . . . (22,128) - - (22,128)
--------- -------- -------- ----------
Operating income . . . . . . . 75,826 14,345 12,497 102,668
Net interest
income/(expense) . . . . . . 1,025 (1,280) (11,584)(j,k,l) (11,839)
Other income (expense) . . . . 755 (65) (170)(e) 520
-------- --------- ---------- --------
Income before provision
for income taxes . . . . . . 77,606 13,000 743 91,349
Provision for income taxes . . 29,726 184 5,519(m) 35,429
--------- --------- ---------- ---------
Net income . . . . . . . . . . $47,880 $12,816 ($4,776) $55,920
======== ======== ========== ==========
Net income per common
share . . . . . . . . . . . $1.40 $1.63(n)
======= ========
Average number of common
shares outstanding . . . . . 34,284 34,284
======== =========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
GIDDINGS & LEWIS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share data)
1. Basis of Presentation
The accompanying unaudited pro forma condensed consolidated
financial statements have been prepared using the historical financial
statements of Giddings & Lewis and Fadal, with pro forma adjustments as if
the Acquisition had occurred on January 1, 1994 for purposes of the income
statement and December 31, 1994 for purposes of the balance sheet.
2. Pro Form Adjustments
The pro forma adjustments are summarized as follows:
Balance Sheet:
(a) To eliminate related party and other assets and liabilities
not acquired/assumed in the Acquisition, as follows:
Cash . . . . . . . . . . . . $8,012
Note receivable:
Current . . . . . . . . . . 1,827
Non-current . . . . . . . . 4,286
Other current assets . . . . 15
Other assets . . . . . . . . 89
Accrued expenses . . . . . . (221)
Notes payable-current . . . . (25,443)
Notes payable-non-current . . (10,586)
--------
$(22,021)
========
(b) To adjust the acquired assets and assumed liabilities to their
estimated fair value:
Total cash consideration . . . . . . . . . . $180,193
=========
Purchase price allocation
Book value of acquired net assets of
Fadal at December 31, 1994 . . . . . . $50,960
Adjustments to acquired net assets:
Estimated fair value of land and
buildings acquired from related
partnership . . . . . . . . . . . . . 6,900
Organization costs . . . . . . . . . . 1,300
Loan origination fee . . . . . . . . . 250
Costs in excess of net acquired tangible
assets . . . . . . . . . . . . . . . 120,783
--------
$180,193
========
(c) To record the debt incurred by Giddings & Lewis to finance the
Acquisition (via draws on its new and amended U.S. revolving credit
facilities).
Income Statement:
(d) Reduction in lease costs due to the real estate and building
purchase - $1,440.
(e) Reclassification between cost of sales and other expense -
$170.
(f) Reduction in compensation expense paid to key Fadal executives
in 1994 to conform with the terms of employment agreements entered into
with such individuals as part of the Acquisition - $16,184.
(g) Amortization of costs in excess of net acquired tangible
assets. Giddings & Lewis is in the process of valuing intangible assets
acquired. For purposes of this pro forma condensed consolidated statement
of income, Giddings & Lewis estimates the average life of these
intangibles will approximate 24 years - $4,950.
(h) Depreciation expense on the building purchase - $87.
(i) Amortization of organization costs during a period of 5 years
- $260.
(j) Eliminate interest expense on the debt retained by the sellers
- $1,280.
(k) Amortization of loan origination fees - $250.
(l) Additional interest expense on the acquisition debt of
$180,193. Interest rate used was 7.0% - $12,614.
(m) To reflect corporate and state income taxes at the estimated
combined effective statutory rate (41.5%) as if Fadal had been a C
corporation during 1994, and the tax effect of pro forma adjustments using
a 41.5% tax rate.
Per Share Computation:
(n) The computation of earnings per share is based upon the pro
forma net income divided by the historical weighted average number of
Giddings & Lewis common shares outstanding during 1994.
(c) Exhibits. The exhibits listed in the accompanying Exhibit
Index are filed as part of this Current Report on Form 8-K.
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.
GIDDINGS & LEWIS, INC.
Date: May 8, 1995 By: /s/ Richard C. Kleinfeldt
Richard C. Kleinfeldt
Vice President-Finance, Secretary
and Chief Financial Officer
GIDDINGS & LEWIS, INC.
EXHIBIT INDEX TO FORM 8-K
Report Dated April 24, 1995
Exhibit
(2.1) Stock Purchase Agreement by and among Giddings
& Lewis, Inc., Bike Corp., Fadal Engineering
Company, Inc., David E. de Caussin and Myrtle
Rosalie de Caussin, trustees of the David and
Myrtle de Caussin Family Trust - 1988, and
Larry F. de Caussin and Elsie Margaret de
Caussin, trustees of the Larry and Elsie de
Caussin Family Trust - 1988, dated as of April
24, 1995*
(2.2) Agreement of Purchase and Sale by and between
Giddings & Lewis, Inc., Bike Corp. and 20701
Plummer Street, Ltd., dated as of April 24,
1995*
(4.1) Credit Agreement among Giddings & Lewis, Inc.,
Giddings & Lewis GmbH, Giddings & Lewis AG, the
Institutions from time to time party thereto as
Lenders, the Institutions from time to time
party thereto as Issuing Banks, Citicorp North
America, Inc., as Agent, and Citicorp
Investment Bank Limited, as London Agent, dated
as of December 21, 1992. [Incorporated by
reference to Exhibit 4.2 to Giddings & Lewis,
Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1992]
(4.2) Amendment to Credit Agreement among Giddings &
Lewis, Inc., Giddings & Lewis GmbH, Giddings &
Lewis Ltd., the Institutions from time to time
party thereto as Lenders, the Institutions from
time to time party thereto as Issuing Banks,
Citicorp North America, Inc., as Retiring
Agent, and Citibank N.A., as Agent, Citicorp
Investment Bank Limited, as Retiring London
Agent, and Citibank International plc, as an
Agent, dated as of December 21, 1994.
[Incorporated by reference to Exhibit 4.3 to
Giddings & Lewis, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1994]
(4.3) Amendment No. 2 and Consent to Credit Agreement
among Giddings & Lewis, Inc., Giddings & Lewis
GmbH, Giddings & Lewis Ltd. and the
Institutions from time to time party thereto as
Agent and Lenders, dated as of April 24, 1995.
(4.4) Credit Agreement among Giddings & Lewis, Inc.,
the Institutions from time to time party hereto
as Lenders and Citibank, N.A., as Agent, dated
as of April 24, 1995.*
(23) Consent of Ernst & Young LLP
* The schedules/exhibits to this document are not being filed herewith.
The Registrant agrees to furnish supplementally a copy of any such
schedule/exhibit to the Securities and Exchange Commission upon request.