UNITED STATES
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 (Date of earliest event reported) September 16, 1998
Commission File Number 1 - 5332
P & F INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-1657413
(State of incorporation) (I.R.S. Employer Identification Number)
300 Smith Street, Farmingdale, New York 11735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 694-1800
---------------
This amended report on Form 8-K/A is being filed to amend the report on
Form 8-K dated September 16, 1998, filed with the Commission on September 30,
1998. This amendment is being filed to provide financial statements, pro forma
financial information and exhibits pursuant to Item 7 of Form 8-K.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously disclosed in a Current Report on Form 8-K filed on September
30, 1998, on September 16, 1998, pursuant to an Asset Purchase Agreement dated
as of such date, (the "Asset Purchase Agreement"), Green Manufacturing, Inc., a
Delaware corporation and a wholly-owned subsidiary of P & F Industries, Inc.
(the "Registrant" or the "Company"), acquired certain assets (the "Purchased
Property") of Green Manufacturing, Inc., an Ohio corporation (the "Seller"), and
assumed certain of the Seller's liabilities. The purchase price for the
acquisition of the Purchased Property was $10,500,000 in cash, which amount was
the result of arms'-length negotiations between the Registrant and the Seller,
and which was financed primarily pursuant to a Credit Agreement, dated July 23,
1998, as amended, between European American Bank, the Registrant and
subsidiaries of the Registrant.
The Purchased Property was used by the Seller in the business of
manufacturing custom-engineered hydraulic cylinders, prefabricated stairways and
platforms and tractor-mounted post hole diggers. The Registrant intends to
continue such use of the Purchased Property.
2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired:
The audited balance sheets of Green Manufacturing, Inc., an Ohio
corporation, as of December 31, 1997 and 1996 and the related
statements of income and retained earnings and cash flows for the
years then ended, respectively, are included herein.
The unaudited balance sheets of Green Manufacturing, Inc., an
Ohio corporation, as of September 15, 1998 and September 28, 1997, and
the related statements of income and retained earnings and cash flows
for the periods then ended are included herein.
(b) Pro forma financial information:
The unaudited pro forma combined statements of operations of the
Company for the nine months ended September 30, 1998 and for the year
ended December 31, 1997 are included herein.
An unaudited pro forma condensed consolidated balance sheet has
not been presented, since the acquisition was reflected in the
Company's consolidated balance sheet as of September 30, 1998, as
reported in the Registrant's Quarterly Report on Form 10-Q filed on
November 16, 1998.
(c) Exhibits:
2.1 Asset Purchase Agreement, dated as of September 16, 1998, by and
between P & F Industries, Inc. and Green Manufacturing, Inc., an Ohio
corporation (incorporated by reference from the Registrant's Current
Report on Form 8-K filed on September 30, 1998)
23.1 Consent of Bock, Korsnack & Hinds, Inc.
3
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
BOCK, KORSNACK & HINDS, INC.
----------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Green Manufacturing, Inc.
Bowling Green, Ohio
We have audited the accompanying Balance Sheets of Green Manufacturing, Inc. (an
Ohio Corporation), as of December 31, 1997 and 1996, and the related Statements
of Earnings and Retained Earnings, 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Green Manufacturing, Inc., as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Bock, Korsnack & Hinds, Inc.
--------------------------------
Maumee, Ohio
January 28, 1998
4
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
BALANCE SHEETS
--------------
(See Independent Auditors' Report)
ASSETS
------
December 31,
1997 1996
---- ----
Current assets
Cash
Unrestricted $ 2,207 $ 1,817
Restricted 11,807 23,463
----------- -----------
14,014 25,280
----------- -----------
Accounts receivable
Customers (net of allowance for bad
debts of $ 8,217 and $ 12,119, for
1997 and 1996, respectively) 2,472,833 2,243,019
Employees 5,426 2,392
----------- -----------
2,478,259 2,245,411
----------- -----------
Inventories
Raw materials 718,546 846,802
Work in process 236,465 245,609
Finished goods 136,453 155,930
----------- -----------
1,091,464 1,248,341
----------- -----------
Prepaid expenses 12,392 17,085
Note receivable -0- 5,247
----------- -----------
Total current assets 3,596,129 3,541,364
----------- -----------
Other assets
Cash surrender value of life insurance 28,800 181,944
Deposits 1,000 1,000
Intangible assets 26,841 31,406
Prepaid leases -- 480
----------- -----------
Total other assets 56,641 214,830
----------- -----------
Net property and equipment - at cost 1,975,380 1,932,068
----------- -----------
Total assets $ 5,628,150 $ 5,688,262
=========== ===========
See accompanying Notes to Financial Statements.
5
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
BALANCE SHEETS
--------------
(See Independent Auditors' Report)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31,
1997 1996
---- ----
Current liabilities
Current portion of long-term debt $ 717,880 $ 227,395
----------- -----------
Accounts payable
Trade 680,636 759,868
Employees' withheld payroll taxes, 79,370 53,321
----------- -----------
760,006 813,189
----------- -----------
Accrued liabilities
Salaries, wages and commissions 501,305 250,670
State and local taxes 21,692 16,229
Deferred compensation 18,521 -0-
Payroll taxes and insurance 52,251 95,505
Interest 6,643 295
----------- -----------
600,412 362,699
----------- -----------
Total current liabilities 2,078,298 1,403,283
Long-term debt - net of current maturities 993,898 1,957,035
Deferred compensation liability 18,521 150,159
----------- -----------
Total liabilities 3,090,717 3,510,477
----------- -----------
Stockholders' equity
Common stock, par value $ 100 per share,
authorized 1,000 shares, issued 362 shares,
including 232 held in treasury 36,200 36,200
Paid-in surplus 136,870 136,870
Retained earnings 2,616,600 2,256,952
----------- -----------
2,789,670 2,430,022
Less: Treasury stock - at cost (252,237) (252,237)
----------- -----------
Total stockholders' equity 2,537,433 2,177,785
----------- -----------
Total liabilities and stockholders' equity $ 5,628,150 $ 5,688,262
=========== ===========
See accompanying Notes to Financial Statements.
6
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
--------------------------------------------
(See Independent Auditors' Report)
For the
years ended
December 31,
1997 1996
---- ----
Sales - less discounts and allowances $18,219,388 $15,311,561
----------- -----------
Cost of sales
Beginning inventories 1,248,341 911,353
Materials and freight 7,167,254 6,582,329
Direct labor 2,050,819 1,815,166
Subcontracting 207,009 63,325
Manufacturing expenses 5,618,660 4,839,569
----------- -----------
16,292,083 14,211,742
Less: Ending inventories 1,091,464 1,248,341
----------- -----------
Total cost of sales 15,200,619 12,963,401
----------- -----------
Gross profit from sales 3,018,769 2,348,160
Selling and administrative expenses 1,836,079 1,513,464
----------- -----------
Earnings from operations 1,182,690 834,696
----------- -----------
Other income (expense)
Interest income 3,048 6,570
Gain (loss) on disposition of equipment (3,158) 4,016
Interest expense (116,655) (125,701)
Miscellaneous 9,370 8,811
----------- -----------
Net other expense (107,395) (106,304)
----------- -----------
Net earnings 1,075,295 728,392
----------- -----------
RETAINED EARNINGS
-----------------
Balance - beginning of year 2,256,952 2,031,888
Less: Dividends paid (715,647) (503,328)
----------- -----------
1,541,305 1,528,560
----------- -----------
Balance - end of year $ 2,616,600 $ 2,256,952
=========== ===========
See accompanying Notes to Financial Statements.
7
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
STATEMENTS OF CASH FLOWS
------------------------
(See Independent Auditors' Report)
For the
years ended
December 31,
1997 1996
---- ----
Increase (decrease) in cash and cash
equivalents
Cash flows from operating activities
Cash received from customers $18,019,499 $15,309,873
Cash paid to suppliers
and employees (16,304,903) (14,381,831)
Interest received 3,048 6,570
Interest paid (110,307) (127,588)
----------- -----------
Net cash provided by
operating activities 1,607,337 807,024
----------- -----------
Cash flows from investing activities
Purchase of property
and equipment (421,298) (344,377)
Proceeds from sale of property
and equipment 2,650 18,000
Restricted cash for purchase
of equipment withdrawn from
Bond Fund -0- 150,471
----------- -----------
Net cash used in investing
activities (418,648) (175,906)
------------ ------------
Cash flows from financing activities
Proceeds from long-term debt 15,717 776,935
Principal payments on
long-term debt (230,852) (247,584)
Net payments on line-of-credit (257,517) (657,335)
Dividends paid (715,647) (503,328)
----------- -----------
Net cash used in financing
activities (1,188,299) (631,312)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 390 (194)
Cash and cash equivalents at
beginning of year 1,817 2,011
----------- -----------
Cash and cash equivalents at end
of year $ 2,207 $ 1,817
=========== ===========
(Continued on next page)
See accompanying Notes to Financial Statements.
8
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
STATEMENTS OF CASH FLOWS
------------------------
(See Independent Auditors' Report)
(Continued)
For the
years ended
December 31,
1997 1996
---- ----
Reconciliation of net earnings to net cash
provided by operating activities
Net earnings $ 1,075,295 $ 728,392
----------- -----------
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation and amortization 376,744 360,387
(Gain) loss on disposition of
property and equipment 3,158 (4,016)
Bad debts (recoveries) (3,652) 26,126
Change in assets and liabilities
(Increase) decrease in assets
Bond retirement fund 11,656 (898)
Accounts receivable (223,949) (38,248)
Inventories 156,877 (336,988)
Prepaid expenses 5,173 (5,776)
Other assets 153,144 (12,820)
Increase (decrease) in
liabilities
Accounts payable (53,183) 164,700
Accrued liabilities 106,074 (73,835)
----------- -----------
Total adjustments 532,042 78,632
----------- -----------
Net cash provided by operating activities $ 1,607,337 $ 807,024
=========== ===========
See accompanying Notes to Financial Statements.
9
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
1. Summary of significant accounting policies
------------------------------------------
The summary of significant accounting policies of Green Manufacturing,
Inc., is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
a.) Nature of Business
Green Manufacturing, Inc., is a manufacturing concern. The
Company's predominant product is hydraulic cylinders. The Company also produces
safety stairs, access equipment and agricultural products. The principal markets
for its products are the Midwestern and Southern United States. In addition, the
Company sells products outside of the United States.
b.) Allowance for Bad Debts
The Company provides an allowance for bad debts based upon prior
experience and management's assessment of the collectibility of existing
specific accounts.
c.) Inventories
Inventories are stated at the lower of cost or market on a
first-in, first-out (FIFO) basis. Cost includes material, labor and application
of manufacturing expenses.
d.) Property and Equipment
Property and equipment are stated at cost. Depreciation of
property, plant and equipment and amortization of intangible assets, are
computed on the straight-line and declining-balance methods over the useful
lives of the assets which range from 3 to 25 years. Maintenance and repairs are
charged to operations when incurred. Betterments and renewals are capitalized.
When property and equipment are sold or otherwise disposed of, the asset account
and related accumulated depreciation account are reduced, and any gain or loss
is included in operations.
10
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
(Continued)
1. Summary of significant accounting policies - continued
------------------------------------------
e.) Income Taxes
The Company has elected the application of Section 1372
(Subchapter S corporation) of the Internal Revenue Code, which provides that, in
lieu of corporate income taxes, the stockholders are taxed on their
proportionate share of the Company's taxable income.
f.) Warranty Costs
The Company provides a warranty period for its products. Warranty
costs are recorded when they are incurred. Management believes it is not
possible to accurately estimate these costs for future periods.
g.) Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company
considers unrestricted cash in operating bank accounts and cash-on-hand as cash
and cash equivalents.
h.) Advertising
The Company expenses advertising costs in the period in which
they are incurred.
i.) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Restricted cash
---------------
A loan agreement with respect to $ 1,500,000 of Wood County Economic
Development Revenue Bonds issued November 16, 1994, provides that a Sinking Bond
Fund be established for retirement of the Bonds. This agreement provides that
PNC Bank N.A. act as trustee for this Fund and that the Company make monthly
payments of $ 11,667, plus interest to retire the Bonds. The balance in this
account was $ 11,807 and $ 22,463 at December 31, 1997 and 1996, respectively.
11
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
(Continued)
2. Restricted cash - continued
---------------
The proceeds of the Wood County Economic Development Revenue Bonds
were used as follows:
Purchase new equipment $ 1,030,968
Retire City of Bowling Green
Industrial Development Bonds 447,293
Closing costs of new Bonds issued 21,739
-----------
$ 1,500,000
===========
3. Intangible assets
-----------------
Intangible assets consisted of the following:
1997 1996
---- ----
Bond and loan issue costs $ 41,851 $ 41,851
Less: Accumulated amortization 15,010 10,445
----------- -----------
$ 26,841 $ 31,406
============ ===========
Amortization charged to earnings was $ 4,566 for both 1997 and 1996.
4. Property and equipment
----------------------
Property and equipment consisted of the following:
1997 1996
---- ----
Land $ 82,425 $ 82,425
Buildings 1,141,811 961,937
Machinery and equipment 2,692,778 2,638,336
Motor vehicles 53,503 43,856
Office furniture and equipment 441,610 351,250
----------- -----------
4,412,127 4,077,804
Less: Accumulated depreciat 2,436,747 2,145,736
----------- -----------
$ 1,975,380 $ 1,932,068
=========== ===========
Depreciation charged to earnings was $ 372,178 and $ 355,821 in 1997
and 1996, respectively.
12
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
(Continued)
5. Notes payable and long-term debt
--------------------------------
Long-term debt consisted of the following:
1997 1996
---- ----
$ 1,200,000 revolving credit
agreement with Mid-American National
Bank and Trust Company, collateralized
by accounts receivable, inventory,
property, equipment and general
intangible assets, interest at prime,
which was 8.5% at December 31, 1997.
The note is due March 1, 1998. $ 519,418 $ 776,935
National City Bank term
note payable in monthly installments
of $ 3,984, including interest at a
fixed rate of 7.25%, collateralized by
specific equipment, final payment due
April, 1998. 12,496 57,584
GMAC loan payable in
monthly installments of $ 354,
including interest at 3.9%,
collateralized by an auto. The note
is due January, 2001. 12,015 -0-
Lucas County Port Authority
term note payable in monthly
installments of $ 1,492, including
interest at 4%, collateralized by
specific equipment. A loan covenant
requires the Company to maintain
certain employment levels. Final
payment is due November, 1998. 14,647 31,593
13
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
(Continued)
5. Notes payable and long-term debt - continued
--------------------------------
1997 1996
---- ----
$ 1,500,000 Economic
Development Revenue Bonds issued by
Wood County, November 16, 1994, which
provide for annual retirement payments
over a 10-year period. The Bonds to be
retired at November 1, 1998, total
$ 140,000. Interest is paid monthly and
computed weekly based upon the current
market rate as quoted by the market
activity of the Municipal Bond Market.
PNC Bank, Ohio N.A. acts as trustee over
redemption of the Bonds. At December 31,
1997 and 1996, the weekly computed rate
was 4.1% and 3.9%, respectively. $ 1,095,000 $ 1,235,000
Mid-American National Bank
and Trust Company loan payable in
monthly installments of $ 2,605,
including interest, collateralized by
accounts receivable, inventory, property,
equipment and general intangible assets,
interest at prime, which was 8.50% at
December 31, 1997. 58,202 83,318
----------- -----------
1,711,778 2,184,430
Less: Current portion (717,880) (227,395)
----------- -----------
$ 993,898 $ 1,957,035
=========== ===========
Anticipated long-term debt maturities are as follows:
1998 $ 717,880
1999 179,396
2000 154,148
2001 155,354
2002 160,000
2003 and thereafter 345,000
14
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
(Continued)
5. Notes payable and long-term debt - continued
--------------------------------
The Company also has a $ 1,095,000 letter of credit with Mid-American
National Bank and Trust Company. The letter of credit can only be used for
redemption of the Wood County Economic Development Revenue Bonds if the Bond
redemptions are in arrears. The letter of credit is open over the life of the
Bonds. A fee of 1% of the outstanding principal balance of the Bonds is due
annually.
6. Pension plan
------------
The Company established a 401(k) Plan, effective January 1, 1995,
which allows all employees who are 18 years or older, work full time and have
completed at least one year of service to participate. The Company will match
25% of employees' contributions up to 8% of employees' annual earnings. Company
contributions were $ 41,596 and $ 32,347 for 1997 and 1996, respectively.
The Company had a Defined Benefit Pension Plan covering substantially
all its employees. The Plan was terminated on December 27, 1994. During 1996,
all the assets of the Defined Benefit Pension Plan were rolled over into the
401(k) Plan.
7. Commitments and related party transactions
------------------------------------------
The Company has entered into leases with its majority stockholder for
numerous items of manufacturing equipment. As of December 31, 1997, the leases
provided for monthly payments of $ 6,749. The rental expense was $ 80,988 and
$53,016 for the years ended December 31, 1997 and 1996, respectively.
The Company has also entered into leases with unrelated parties for
equipment and automobiles. The leases provided for monthly payments of $ 453 as
of December 31, 1997. The rental expense was $ 5,762 and $ 28,096 for the years
ended December 31, 1997 and 1996, respectively.
Minimum future lease payments as of December 31, were as follows:
1998 $ 40,659
1999 14,600
15
GREEN MANUFACTURING, INC.
-------------------------
Bowling Green, Ohio
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1997 and 1996
(See Independent Auditors' Report)
(Continued)
8. Concentration of credit risk
----------------------------
The Company grants credit to its customers, substantially all of whom
are located in the Midwestern and Southern United States. The Company had
outstanding credit to its regular customers of $ 2,481,050 at December 31, 1997.
The Company has had, from time to time, deposits in financial
institutions in excess of federally insured limits.
9. Deferred compensation plan
--------------------------
The Company had a Deferred Compensation Plan for certain key executive
employees, which was terminated during 1997. Under the Plan, deferred
compensation was computed annually based upon the Company's profit. The program
is not qualified under Internal Revenue Code Section 401; therefore, no
deduction is allowed until amounts are paid. The deferred compensation liability
was $ 37,042 and $ 150,159 as of December 31, 1997 and 1996, respectively.
10. Major customer
--------------
The Company has one customer which accounted for approximately 24% of
total revenues for the year ended December 31, 1997.
11. Advertising expense
-------------------
The Company incurred advertising expense of $ 56,464 and $ 75,075 in
1997 and 1996, respectively.
16
GREEN MANUFACTURING, INC.
Bowling Green, Ohio
BALANCE SHEETS
(Unaudited)
ASSETS September 15, September 28,
Current assets 1998 1997
---- ----
Cash
Unrestricted $ 96,394 $ 1,750
Restricted 118,921 130,025
------------ ------------
215,315 131,775
------------ ------------
Accounts receivable
Customers (net of allowance for bad
debts of $ 177,517 and $12,119) 2,584,946 2,826,649
Employees 79,700 3,649
------------ ------------
2,664,646 2,830,298
------------ ------------
Inventories
Raw materials 1,056,116 776,047
Work in process 368,614 271,379
Finished goods 194,177 142,831
------------ ------------
1,618,907 1,190,257
------------ ------------
Prepaid expenses 51,416 35,649
------------ ------------
Total current assets 4,550,284 4,187,979
------------ ------------
Other assets
Cash surrender value of life insurance 28,800 26,145
Deposits 11,676 3,685
Intangible assets 23,579 27,218
------------ ------------
Total other assets 64,055 57,048
------------ ------------
Net property and equipment - at cost 1,784,224 1,924,216
------------ ------------
Total assets $ 6,398,563 $ 6,169,243
============ ============
See accompanying Note to Unaudited Financial Statements.
17
GREEN MANUFACTURING, INC.
Bowling Green, Ohio
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY September 15, September 28,
Current liabilities 1998 1997
---- ----
Current portion of long-term debt $ 1,427,482 $ 854,216
------------ ------------
Accounts payable
Trade 755,586 1,010,640
Employees' withheld payroll taxes, etc. 36,442 72,689
------------ ------------
792,028 1,083,329
------------ ------------
Accrued liabilities
Salaries, wages and commissions 333,359 245,447
State and local taxes 49,996 11,847
Payroll taxes and insurance 14,396 49,310
Warranty reserve and other 89,575 9,669
------------ ------------
487,326 316,273
------------ ------------
Total current liabilities 2,706,836 2,253,818
Long-term debt - net of current maturities 965,460 1,145,460
------------ ------------
Total liabilities 3,672,296 3,399,278
------------ ------------
Stockholders' equity
Common stock, par value $ 100 per share,
authorized 1,000 shares, issued 362 shares,
including 232 held in treasury 36,200 36,200
Paid-in surplus 136,870 136,870
Retained earnings 2,805,434 2,849,132
------------ ------------
2,978,504 3,022,202
Less: Treasury stock - at cost (252,237) (252,237)
------------ ------------
Total stockholders' equity 2,726,267 2,769,965
------------ ------------
Total liabilities and stockholders' equity $ 6,398,563 $ 6,169,243
============ ============
See accompanying Note to Unaudited Financial Statements.
18
GREEN MANUFACTURING, INC.
Bowling Green, Ohio
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
January 1, 1998 January 1, 1997
to to
September 15, September 28,
1998 1997
-------------- -------------
Sales - less discounts and allowances $ 13,916,471 $ 13,732,886
------------ ------------
Cost of sales
Beginning inventories 1,091,464 1,248,341
Materials and freight 5,962,928 5,544,816
Direct labor 1,528,909 1,553,190
Subcontracting 98,254 184,334
Manufacturing expenses 4,463,296 3,860,244
------------ ------------
13,144,851 12,390,925
Less: Ending inventories 1,618,907 1,190,257
------------ ------------
Total cost of sales 11,525,944 11,200,668
------------ ------------
Gross profit from sales 2,390,527 2,532,218
Selling and administrative expenses 1,412,025 1,362,811
------------ ------------
Earnings from operations 978,502 1,169,407
------------ ------------
Other income (expense)
Interest income 2,114 10,555
Miscellaneous expense (14,700) --
Interest expense (72,725) (138,193)
Bad debt expense (169,300) --
Miscellaneous income 183,892 --
------------ ------------
Net other expense (70,719) (127,638)
------------ ------------
Net earnings 907,783 1,041,769
------------ ------------
RETAINED EARNINGS
Balance - beginning of period 2,616,600 2,256,952
Less: Dividends paid (718,949) (449,589)
------------ ------------
1,897,651 1,807,363
------------ ------------
Balance - end of period $ 2,805,434 $ 2,849,132
============ ============
See accompanying Note to Unaudited Financial Statements.
19
GREEN MANUFACTURING, INC.
Bowling Green, Ohio
STATEMENTS OF CASH FLOWS
(Unaudited)
January 1, 1998 January 1, 1997
to to
September 15, September 28,
1998 1997
-------------- -------------
Cash flows from operating activities
Net income $ 907,783 $ 1,041,769
------------ ------------
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization 276,740 308,974
Provision for losses on accounts receivable 169,300 --
Decrease (increase) in:
Accounts receivable (281,413) (583,630)
Inventories (527,443) 58,084
Prepaid expenses and other (113,298) (14,574)
Other assets (11,217) 154,358
Increase (decrease) in:
Accounts payable 13,501 270,140
Accrued liabilities (113,086) (196,585)
------------ ------------
Total adjustments (586,916) (3,233)
------------ ------------
Net cash provided by
operating activities 320,867 1,038,536
------------ ------------
Cash flows from investing activities:
Capital expenditures (81,781) (297,698)
------------ ------------
Net cash used in investing
activities (81,781) (297,698)
------------ ------------
Cash flows from financing activities
Principal payments on
long-term debt (59,418) (75,922)
Net borrowings on line of credit 740,582 (108,832)
Dividends paid (718,949) (449,589)
------------ ------------
Net cash used in financing
activities (37,785) (634,343)
------------ ------------
Net increase in cash and
cash equivalents 201,301 106,495
Cash and cash equivalents at
beginning of year 14,014 25,280
------------ ------------
Cash and cash equivalents at end
of year $ 215,315 $ 131,775
============ ============
See accompanying Note to Unaudited Financial Statements.
20
GREEN MANUFACTURING, INC.
Bowling Green, Ohio
NOTE TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements of Green Manufacturing, Inc., an Ohio corporation,
for the periods ended September 15, 1998 and September 28, 1997 are presented as
unaudited but, in the opinion of management, they include all adjustments
necessary for a fair statement of the results of operations for those periods.
All such adjustments are of a normal recurring nature. These interim financial
statements should be read in conjunction with the financial statements and notes
thereto of Green included in Item 7(a) of this Form 8-K/A.
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
21
(b) UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined statements of operations
are set forth herein to give effect to the September 16, 1998 acquisition of
certain assets and the assumption of certain liabilities of Green Manufacturing,
Inc., an Ohio corporation ("Green") by Green Manufacturing, Inc., a Delaware
corporation and a wholly-owned subsidiary of P & F Industries, Inc. ("P & F") as
if it had been consummated at the beginning of the earliest period presented
(January 1, 1997).
The acquisition was accounted for under the purchase method of
accounting in accordance with generally accepted accounting principles. Under
this method, tangible and identifiable intangible assets acquired and
liabilities assumed are recorded at their estimated fair values. The excess of
the purchase price, plus estimated fees and expenses related to the acquisition,
over the fair value of net assets acquired is recorded as goodwill.
The unaudited pro forma combined statements of operations do not
reflect any potential cost savings which may be realized following the
acquisition. The pro forma adjustments and assumptions are based on estimates,
evaluations and other data currently available and, in the Company's opinion,
provide a reasonable basis for the fair presentation of the estimated effects
directly attributable to the acquisition and related transactions. The unaudited
pro forma combined statements of operations are provided for illustrative
purposes only and are not necessarily indicative of what the combined results of
operations or financial position would actually have been had the acquisition
occurred on January 1, 1997, nor do they represent a forecast of the combined
results of operations or financial position for any future period or date.
All information contained herein should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 1997,
its Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, the
financial statements and notes thereto of Green included in Item 7(a) of this
Form 8-K/A and the Notes to Unaudited Pro Forma Combined Statements of
Operations included herein.
22
P & F INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
P & F Green Pro Forma
----- ----- ---------
Historical Historical Adjustments Notes Pro Forma
---------- ---------- ----------- ----- ---------
Revenues:
Net sales $38,223,141 $13,916,471 $ 0 $52,139,612
Other 434,044 0 0 434,044
--------------------------------------------------------------------------
38,657,185 13,916,471 0 52,573,656
Costs and expenses:
Cost of sales 23,466,037 11,279,443 0 34,745,480
Selling, administrative and general 9,504,027 1,386,237 103,000 (a) 10,993,264
Interest - net 404,496 70,611 540,000 (b) 1,015,107
Depreciation 553,028 272,397 75,000 (c) 900,425
--------------------------------------------------------------------------
33,927,588 13,008,688 (718,000) 47,654,276
--------------------------------------------------------------------------
Income before taxes on income 4,729,597 907,783 (718,000) 4,919,380
Taxes on income 1,778,000 0 72,000 (d) 1,850,000
--------------------------------------------------------------------------
Net income $ 2,951,597 $ 907,783 ($790,000) $ 3,069,380
==========================================================================
Weighted average common shares outstanding
Basic 3,197,301 3,197,301
Diluted 3,688,497 3,688,497
Net income per common share
Basic $ .92 $ .96
Diluted $ .80 $ .83
23
P & F INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
P & F Green Pro Forma
----- ----- ---------
Historical Historical Adjustments Notes Pro Forma
---------- ---------- ----------- ----- ---------
Revenues:
Net sales $49,605,480 $18,219,388 $ 0 $67,824,868
Other 421,467 -- 0 421,467
--------------------------------------------------------------------------
50,026,947 18,219,388 0 68,246,335
Costs and expenses:
Cost of sales 33,140,308 14,866,955 0 48,007,263
Selling, administrative and general 11,321,691 1,791,353 150,000 (a) 13,263,044
Interest - net 693,660 113,607 720,000 (b) 1,527,267
Depreciation 646,509 372,178 100,000 (c) 1,118,687
--------------------------------------------------------------------------
45,802,168 17,144,093 970,000 63,916,261
--------------------------------------------------------------------------
Income from continuing operations
before taxes on income 4,224,779 1,075,295 (970,000) 4,330,074
Taxes on income 1,711,000 -- 43,000 (d) 1,754,000
--------------------------------------------------------------------------
Income from continuing operations $ 2,513,779 $ 1,075,295 ($1,013,000) $ 2,576,074
==========================================================================
Weighted average common shares outstanding
Basic 2,986,920 2,986,920
Diluted 3,525,690 3,525,690
Income from continuing operations
Per common share
Basic $ .83 $ .86
Diluted $ .71 $ .73
24
Notes to Unaudited Pro Forma Combined Statements of Operations
1. The Acquisition
The unaudited pro forma combined statements of operations reflect the
acquisition of certain assets and the assumption of certain liabilities of
Green by P & F on September 16, 1998. The pro forma adjustments give effect
to the acquisition as if it had been consummated at the beginning of the
earliest period presented (January 1, 1997).
The purchase price for the acquisition was $10,500,000 in cash, $10,000,000
of which was provided by an acquisition loan from the Company's bank. In
addition, the Company also incurred approximately $409,000 in
acquisition-related costs. The excess of the purchase price plus these
acquisition-related costs over the fair value of net assets acquired has
been allocated to goodwill. The allocation of the total purchase price is
as follows:
Current and other assets $ 4,594,000
Property and equipment 4,350,000
Liabilities assumed (3,647,000)
Goodwill 5,612,000
-----------
$10,909,000
===========
Included in the liabilities assumed as part of the acquisition, were
$1,095,000 of outstanding long-term debt and $1,260,000 in short-term
borrowings.
2. Accounting Periods Presented
The historical information for P & F included in the unaudited pro forma
combined statement of operations for the nine months ended September 30,
1998 includes the operations of Green from September 16, 1998, the date of
acquisition, to September 30, 1998. The historical information for Green
included in the unaudited pro forma combined statement of operations for
the nine months ended September 30, 1998 includes the operations of Green
from January 1, 1998 to September 15, 1998.
3. Pro Forma Adjustments
The following adjustments were applied to the historical statements of
operations for P & F and Green for the nine months ended September 30, 1998
and the year ended December 31, 1998 to arrive at the unaudited pro forma
combined statement of operations for the respective periods as if the
acquisition had taken place on January 1, 1997:
(a) To reflect amortization of goodwill arising from the acquisition, over
a period of 40 years, and amortization of a covenant not to compete,
over a period of 5 years.
(b) To reflect additional interest expense on monies borrowed to finance
the acquisition.
(c) To reflect the change in depreciation related to the increase in fair
value of property and equipment
(d) To adjust the provision for income taxes to reflect the estimated
provision for taxes on a pro forma combined basis.
25
(c) EXHIBITS
Exhibit No. Description
2.1 Asset Purchase Agreement, dated as of September 16, 1998, by and
between P & F Industries, Inc. and Green Manufacturing, Inc., an
Ohio corporation (incorporated by reference from the Registrant's
Current Report on Form 8-K filed on September 30, 1998)
23.1 Consent of Bock, Korsnack & Hinds, Inc.
26
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.
P & F INDUSTRIES, INC.
(Registrant)
By:/s/ Joseph A. Molino, Jr.
-----------------------------
Joseph A. Molino, Jr.
Vice President
Date: December 18, 1998
27
INDEX TO EXHIBITS
Exhibit No. Description
2.1 Asset Purchase Agreement, dated as of September 16, 1998, by and
between P & F Industries, Inc. and Green Manufacturing, Inc., an
Ohio corporation (incorporated by reference from the Registrant's
Current Report on Form 8-K filed on September 30, 1998)
23.1 Consent of Bock, Korsnack & Hinds, Inc.