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): May 29, 1997
Hein-Werner Corporation
(Exact name of registrant as specified in its charter)
Wisconsin 1-2725 39-0340430
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
2120 Pewaukee Road
Waukesha, WI 53188
(Address of principal executive office, including zip code)
(414) 542-6611
(Registrant's telephone number)
Item 2. Acquisition or Disposition of Assets.
On May 29, 1997, Hein-Werner Corporation (the "Company") sold
substantially all of the business, assets and certain liabilities of its
Great Bend Industries Division (the "Division") to Kaydon Corporation, a
Delaware corporation ("Kaydon"), and Kaydon Acquisition VIII, Inc., a
Delaware corporation and a wholly-owned subsidiary of Kaydon ("Buyer"),
pursuant to an Asset Purchase Agreement, dated as of April 9, 1997 (the
"Asset Agreement" ). The Company's sale of the business, assets and
certain liabilities of the Division, as well as the consummation of the
transactions related thereto, is referred to as the "Disposition."
Pursuant to the Asset Agreement: (i) the Company sold the Division to
Buyer for (a) $22,755,532 in cash at the closing of the Disposition (with
$2 million thereof being paid into an escrow), subject to a potential
adjustment based on the net asset value of the Division as finally
determined, and (b) the assumption by Buyer of certain contractual and
other liabilities of the Division; (ii) the Company agreed to a ten-year
covenant not to compete in the hydraulic cylinder business (subject to
certain exceptions including, without limitation, allowing the Company to
continue to manufacture hydraulic cylinders for its collision repair
business); and (iii) the Company agreed to indemnify Buyer and Kaydon (a)
against any breach by the Company of the Company's representations and
warranties contained therein, (b) for accounts receivable not collected
within 120 days following the closing and (c) for liabilities not
specifically assumed by Buyer under the Asset Agreement. The Company's
obligations to indemnify Buyer and Kaydon under the Asset Agreement for
breaches of representations and warranties are subject to a two-year time
limitation and an aggregate minimum threshold of $50,000. The purchase
price paid by Buyer for the business, assets and certain liabilities of
the Division was determined on the basis of arm's length negotiations
between the parties. The Company has paid or accrued approximately $1.3
million of direct Disposition costs.
In connection with the Disposition, the Company, Buyer and Firstar
Trust Company, as escrow agent, entered into an Escrow Agreement, dated as
of May 29, 1997 (the "Escrow Agreement"), pursuant to which the Buyer will
initially have $2 million of the purchase price available to cover (a) any
Company obligation to refund a portion of the purchase price based on the
final determination of the Division's net asset value, (b) any
indemnification obligations of the Company under the Asset Agreement, and
(c) a specified sum for a certain Division disputed receivable and
reworking fund. The amount of the purchase price held in escrow
automatically reduces at various times and in various amounts over an
approximately two-year period following the closing and all remaining
amounts thereunder will be disbursed to the Company on April 30, 1999.
The Division designs, manufactures, and supplies high performance
single-acting, double-acting, and telescopic hydraulic cylinders and
related hydraulic components to original equipment manufacturers in the
construction, transportation, solid waste, utility, and energy industries.
Located in Great Bend, Kansas, the Division employs approximately 230
people and reported net sales of approximately $20 million in 1996.
The Asset Agreement and the Escrow Agreement are filed as exhibits to
this Current Report on Form 8-K and are incorporated herein by reference.
The brief summaries of certain of the material provisions of the Asset
Agreement and the Escrow Agreement, set forth above, are qualified in
their entirety by reference to each respective agreement filed as an
exhibit hereto.
Item 7. Financial Statements and Exhibits.
(a) Financial Statement of Business Acquired - Not applicable
(b) Pro Forma Financial Information
HEIN-WERNER CORPORATION
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial information relates to
the disposition (such disposition as well as the consummation of certain
related transactions is referred to herein as the "Disposition") by Hein-
Werner Corporation (the "Company") of substantially all of the business,
assets, and certain liabilities of its Great Bend Industries Division (the
"Division"). The Disposition was deemed to be effective as of the close
of business on May 29, 1997. The pro forma amounts have been prepared
based upon certain accounting and other pro forma adjustments as described
in the accompanying notes to the historical financial statements of the
Company including the Division.
The unaudited pro forma condensed consolidated statements of
operations reflect the historical results of operations of the Company
including the Division for the year ended December 31, 1996, and the three
months ended March 29, 1997, with pro forma adjustments as if the
Disposition had occurred as of the beginning of the respective periods.
The unaudited pro forma condensed consolidated balance sheet reflects the
historical financial position of the Company, including the Division, with
pro forma adjustments as if the disposition had occurred at March 29,
1997. The pro forma adjustments are described in the accompanying notes
and give effect to events that are (a) directly attributable to the
Disposition, (b) factually supportable, and (c) in the case of certain
income adjustments, expected to have a continuing impact.
The unaudited pro forma condensed consolidated financial statements
should be read in connection with the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
The unaudited pro forma financial information presented is for
information purposes only and does not purport to represent what the
Company's financial position or results of operations as of the dates
presented would have been had the Disposition in fact occurred on such
date or at the beginning of the periods indicated, or to project the
Company's financial position or results of operations for any future date
or period.
Pro Forma Condensed Consolidated Balance Sheet
March 29, 1997
(unaudited)
Pro Forma Adjust-
Disposed ments (See
(In thousands) Hein-Werner Division Note 1) Pro Forma
ASSETS
Current assets:
Cash $ - $ - $ 8,223 $ 8,223
Accounts receivable, net 17,369 3,173 (59) 14,137
Inventories 16,397 3,081 - 13,316
Prepaid expenses and other 638 32 - 606
---------- --------- ---------- ----------
Total current assets 34,404 6,286 8,164 36,282
Restricted cash - - 2,000 2,000
Property, plants, and equipment, net 5,555 2,275 - 3,280
Other assets 2,823 - (177) 2,646
---------- -------- ---------- ----------
Total assets $ 42,782 $ 8,561 $ 9,987 $ 44,208
========== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,618 $ - $ - $ 2,618
Current installments of long-term
debt 1,780 100 (1,508) 172
Accounts payable 3,763 839 839 3,763
Income taxes payable 30 - 4,993 5,023
Other current liabilities 5,140 454 154 4,840
---------- -------- --------- ----------
Total current liabilities 13,331 1,393 4,478 16,416
Long-term debt, excluding current
installments 10,549 727 (9,434) 388
Other long-term liabilities 1,545 - - 1,545
---------- -------- --------- ----------
Total liabilities 25,425 2,120 (4,956) 18,349
Stockholders' equity 17,357 6,441 14,943 25,859
---------- -------- --------- ----------
Total liabilities and stockholders'
equity $ 42,782 $ 8,561 $ 9,987 $ 44,208
========== ======== ========= ==========
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1996
(unaudited)
Pro Forma
Disposed Adjustments (See
(In thousands, except per share data) Hein-Werner Division Note 2) Pro Forma
Net sales $ 68,492 $ 20,049 $ - $ 48,443
Cost of sales 42,672 15,657 - 27,015
--------- -------- --------- ---------
Gross profit 25,820 4,392 - 21,428
Selling, engineering, and administrative
expenses 21,471 1,752 (153) 19,566
Bad debt expense 420 14 - 406
--------- -------- --------- ---------
Operating profit (loss) 3,929 2,626 153 1,456
Interest (income) expense-net 1,465 246 (1,172) 47
Other expense-net 164 515 515 164
--------- -------- --------- ---------
Income before income taxes 2,300 1865 810 1,245
Income tax expense 124 15 311 420
--------- --------- --------- ---------
Net income $ 2,176 $ 1,850 $ 499 $ 825
========= ========= ========= =========
Earnings per share-primary $ 0.78 $ 0.29
========= =========
Earnings per share-fully diluted $ 0.72 $ 0.29
========= =========
Weighted average common and common
equivalent shares outstanding-primary 2,804 2,874
========= =========
Weighted average common and common
equivalent shares outstanding-fully diluted 3,383 2,874
========= =========
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
Pro Forma Condensed Consolidated Statement of Operations
Three Months Ended March 29, 1997
(unaudited)
Disposed Pro Forma Adjustments
(In thousands, except per share data) Hein-Werner Division (See Note 2) Pro Forma
Net sales $16,124 $ 4,305 $ - $ 11,819
Cost of sales 10,250 3,457 - 6,793
--------- -------- --------- ----------
Gross profit 5,874 848 - 5,026
Selling, engineering, and administrative
expenses 5,107 405 85 4,787
Bad debt expense 14 4 - 10
--------- --------- --------- ----------
Operating profit (loss) 753 439 (85) 229
Interest (income) expense-net 319 67 (263) (11)
Other expense-net 10 129 129 10
--------- --------- --------- ----------
Income before income taxes 424 243 49 230
Income tax expense 154 49 59 164
--------- --------- --------- ----------
Net income (loss) $ 270 $ 194 $ (10) $ 66
========= ========= ========= ==========
Earnings per share $ 0.10 $ 0.02
========= ==========
Weighted average common and common
equivalent shares outstanding 2,819 2,882
========= ==========
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
HEIN-WERNER CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1
The pro forma condensed consolidated balance sheet has been prepared
to reflect the sale by the Company of substantially all of the business,
assets, and certain liabilities of the Division. The pro forma
adjustments as of March 29, 1997, reflect the application of proceeds from
the sale of the Division to reduce outstanding short and long-term debt of
the Company and to establish remaining accrued liabilities. Pro forma
cash and restricted cash are comprised entirely of interest-bearing cash
equivalents.
NOTE 2
The pro forma condensed consolidated statements of operations for the
year ended December 31, 1996 and the three months ended March 29, 1997 are
based upon the financial statements of the Company for the year ended
December 31, 1996 and the three months ended March 29, 1997, respectively,
after giving effect to the following pro forma adjustments:
a) Reduction of interest expense from repayment of short and long-
term debt using proceeds from the sale of the Division, computed
using rates in effect during the respective periods. Also included
is assumed interest earned on the residual interest-bearing cash
equivalents.
b) Retention of certain central office selling, engineering, and
administrative expenses and other expenses previously allocated to
the Division, offset by a reduction of certain central office
expenses as a result of the sale of the Division.
c) Provision for income taxes needed so that income taxes on the
U.S. portion of consolidated pro forma income before income taxes
reflects U.S. statutory rates. For the three months ended March 29,
1997, losses in certain foreign countries for which no tax benefit
could be recorded due to an inability to carry those losses back
resulted in tax expense of $59 on foreign losses before income taxes
of $48. This results in consolidated pro forma income tax expense of
71% of consolidated income before income taxes, even though income
taxes have been provided at 38% on the U.S. portion thereof.
d) Pro forma weighted average common and common equivalent shares
reflect the issuance of 564,381 additional options in connection with
the repayment of the convertible subordinated notes.
(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 behalf of the
undersigned hereunto duly authorized.
HEIN-WERNER CORPORATION
June 13, 1997 By: /s/ Mary L. Kielich
Mary L. Kielich
Corporate Controller, Assistant
Secretary and Assistant Treasurer
HEIN-WERNER CORPORATION
EXHIBIT INDEX TO FORM 8-K
Report Dated May 29, 1997
Exhibit
(2.1) Asset Purchase Agreement, dated as of April 9, 1997, by and
among Hein-Werner Corporation, Kaydon Corporation and Kaydon Acquisition
VIII, Inc. [Incorporated by reference to Exhibit (2) to Hein-Werner
Corporation's Current Report on Form 8-K, dated April 9, 1997]
(2.2) Escrow Agreement, dated as of May 29, 1997, by and among Hein-
Werner Corporation, Kaydon Acquisition VIII, Inc. and Firstar Trust
Company, as escrow agent.