As filed with the Securities and Exchange Commission on September 15, 1995.
Registration No. 33-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KINARK CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 71-0268502
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
7060 SOUTH YALE
TULSA, OKLAHOMA 74136
(918) 494-0964
(Address, Including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
PAUL R. CHASTAIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
7060 SOUTH YALE
TULSA, OKLAHOMA 74136
(918) 494-0964
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
COPY TO:
Paul A. Quiros, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
1201 Peachtree Street, Suite 2200
Atlanta, Georgia 30361
(404) 817-6000
(404) 817-6050 (Fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
If the only securities being registered in this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. []
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
Title of Each Class ofAmount to beProposed MaximumProposed MaximumAmount of
Securities to be RegisteredRegisteredPrice Per Share<F1>Aggregate Offering Price<F1>Registration Fee
Common Stock, $.10 par value5,619,615$2.00 $11,239,230 $3,875.60
<FN>
<F1> Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a).
</FN>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
KINARK CORPORATION
Cross Reference Sheet Between Items in Part I of
Form S-3 and the Prospectus
Item Number and Caption Prospectus Caption
1. Front of Registration Statement
and Outside Front Cover Page of
Prospectus Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside
Back Cover Pages
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges Summary; Risk Factors; Summary Pro
Forma and Selected Financial Data
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Risk Factors
6. Dilution *
7. Selling-Security Holders *
8. Plan of Distribution Outside Front Cover Page; Summary; The
Rights Offering
9. Description of Securities to
Be Registered Description of Capital Stock
10. Interests of Named Experts
and Counsel Legal Matters; Experts
11. Material Changes Summary; Business Strategy; The
Acquisition; Description of
Subordinated Financing
12. Incorporation of Certain
Information by Reference Inside Front Cover Page; Description of
Capital Stock
13. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities *
*Omitted because answer is negative or not applicable
SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1995
PROSPECTUS AND PROXY STATEMENT
KINARK
CORPORATION
5,619,615 COMMON SHARES
Kinark Corporation ("Kinark" or the "Company") is distributing to holders
of record as of the close of business on ________________, 1995 (the "Record
Date"), of its common stock, $.10 par value per share (the "Common Stock"),
three nontransferable rights (each, a "Right") for each two shares of Common
Stock held on the Record Date, with each such Right entitling the holder
thereof to subscribe for and purchase one share of Common Stock (the "Basic
Subscription Privilege") for a price of $2.00 per share (the "Subscription
Price"). The Rights will expire at 5:00 p.m. New York City time, on
____________, 1995, unless extended as described herein (the "Expiration
Date"). Each Right also carries with it the right to subscribe at the
Subscription Price for additional shares that are not otherwise purchased
through the exercise of Rights in an aggregate amount up to 50% of the shares
that the holder is entitled to purchase under the Basic Subscription Privilege
(the "Oversubscription Privilege"). The number of Rights distributed to each
holder of Common Stock will be rounded down to the nearest whole number. No
fractional rights will be distributed, no fractional shares of Common Stock
will be issued, and no cash in lieu thereof will be paid. The Rights are
evidenced by nontransferable Subscription Certificates (the "Subscription
Certificates") distributed to holders of record on the Record Date with this
Prospectus. Pursuant to agreements with the Company, certain directors of the
Company have agreed to purchase not less than $1,750,000 of the Common Stock
(or 15.6% of the shares offered hereby) at the Subscription Price (the
"Purchase Commitment"). See "The Rights Offering - Purchase Commitment." ONCE
A HOLDER HAS EXERCISED ANY RIGHTS, SUCH EXERCISE MAY NOT BE REVOKED. HOLDERS
EXERCISING RIGHTS SHOULD COMPLETE AND RETURN THEIR SUBSCRIPTION CERTIFICATE(S)
WITH PAYMENT OF THE SUBSCRIPTION PRICE PROMPTLY TO INSURE TIMELY RECEIPT AND
THE COLLECTION OF ANY FUNDS PRIOR TO THE EXPIRATION DATE.
The proceeds of this offering (the "Rights Offering"), together with other
sources of funds available to the Company, will be used by the Company to
acquire for $8,321,200 all of the capital stock (the "Acquisition") of Rogers
Galvanizing Company ("Rogers"), to pay related fees and expenses, and for
general corporate purposes. Additional financing for the Acquisition will be
provided, to the extent necessary, by the issuance of up to $4,000,000
principal amount of Senior Secured Subordinated Notes (the "Notes") to a family
investment company (the "Investor") controlled by Michael T. Crimmins, Chairman
of the Board of the Company, pursuant to a securities purchase agreement (the
"Subordinated Financing Agreement"). Completion of the Rights Offering is
contingent upon satisfaction or waiver of a number of conditions, including the
determination by the Board of Directors of the Company that sufficient
financing is available to permit the Company to consummate the Acquisition. In
the event the conditions to the Rights Offering have not been satisfied by
_______________, 1995, or the Rights Offering is otherwise terminated, all
subscription payments will be returned promptly, without interest or deduction.
See "The Acquisition," "Description of Subordinated Financing," and "Use of
Proceeds."
[The following paragraph appears sideways along the left-hand margin of this
page in red ink.]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE.
This document contains two parts: a Prospectus of the Company with
respect to the shares of Common Stock issuable upon the exercise of the Rights,
and a Proxy Statement with respect to the solicitation of proxies (the
"Proxies") by the Board of Directors of the Company for a special meeting of
stockholders to be held on ________________, 1995 (the "Special Meeting"), for
the purpose of voting on an amendment to the Restated Certificate of
Incorporation of the Company to increase the number authorized shares of the
Common Stock from 12,000,000 to 18,000,000, and to approve the issuance of
certain warrants and underlying shares of Common Stock to be issued to the
Investor pursuant to the Subordinated Financing Agreement. The Proxy Statement
begins on page P-1 hereof. A proxy with respect to the matters to be
considered at the Special Meeting is enclosed with the Proxy Statement. PLEASE
COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY BE
RECORDED.
The Company's Common Stock is listed on the AMEX under the symbol "KIN."
The last reported sales price of the Common Stock on ________________, 1995,
was $_______ per share. The Company anticipates that the shares of Common
Stock issued upon the exercise of the Rights will be approved for trading on
the AMEX.
PRIOR TO DECIDING TO EXERCISE RIGHTS AND PURCHASE SHARES OF THE COMMON
STOCK, POTENTIAL INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH IN
"RISK FACTORS" ON PAGE 12 IN ADDITION TO THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS. STOCKHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS IN FULL WILL
SUFFER SIGNIFICANT DILUTION IN THEIR PROPORTIONATE INTEREST IN THE EQUITY
OWNERSHIP AND VOTING POWER OF THE COMPANY. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Underwriting Discounts Proceeds to the
Price to Public and Commissions(1) Company(2)
Per Share $2.00 N/A $2.00
Total $11,239,230 N/A $11,239,230
(1) See "Plan of Distribution" for information with respect to certain
contingent fees payable by the Company to Morrow & Co., Inc., the
Information Agent for the Rights Offering and solicitation of the Proxies.
(2) Before deducting expenses of the offering payable by the Company,
estimated to be $385,000.
The date of this Prospectus and Proxy Statement is _______________, 1995.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; New York Regional Office, Public Reference Room, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. The Company's Common Stock is listed on the American Stock
Exchange, Inc., and reports, proxy statements and other information concerning
the Company may be inspected at the office of the American Stock Exchange Inc.,
86 Trinity Place, New York, New York 10006. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement and any amendments thereto, including
exhibits filed as a part thereof, are available for inspection and copying as
set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission under the Exchange Act are incorporated herein by reference: (a)
the Company's Annual Report on Form 10-K for the year ended December 31, 1994;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, and June 30, 1995; and (c) the Company's Current Report on Form 8-K
dated March 31, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statements contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so
modified or superseded. All information appearing in this Prospectus is
qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED, FROM MORROW & CO., INC., 909
THIRD AVENUE, 20TH FLOOR, NEW YORK, NEW YORK 10022-4799 (TELEPHONE (800) ___-
____).
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
and consolidated financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. Pursuant to the
Stock Purchase Agreement dated as of August 3, 1994, as amended (the "Rogers
Agreement"), by and among the Company and The C.L. Simpson Inter Vivos
Revocable Trust and The Alta Rogers Simpson Inter Vivos Revocable Trust
(collectively, the "Trusts"), the Company and the Trusts have agreed that the
Company will acquire 51.2% of the capital stock (the "Trust Stock") of Rogers
from the Trusts. In addition, the Company has agreed to offer to purchase the
remaining shares of Rogers from its minority stockholders at the same price per
share paid for the Trust Stock. The Company cannot determine how many minority
stockholders of Rogers will accept the Company's offer, but for purposes of pro
forma financial information appearing herein, all of the Rogers capital stock
is assumed to be purchased.
THE COMPANY
The Company is currently a diversified company conducting business in
three market segments: galvanizing, specialty chemicals, and chemical storage
and distribution. The Company operates its galvanizing business through Boyles
Galvanizing Company, a wholly-owned subsidiary ("Boyles"). Boyles engages
principally in hot dip galvanizing, a process in which iron and steel products
are immersed in molten zinc to create an alloyed metal surface which is highly
resistant to oxidation or corrosion (rusting). The Company is presently
expanding its galvanizing business through its proposed acquisition of Rogers
(the "Acquisition"). Through its wholly-owned subsidiary, Lake River
Corporation ("Lake River"), the Company engages in the bulk storage of
chemicals. Lake River, located in Chicago, has 235 tanks providing 43 million
gallons of liquid storage capacity and 520,000 square feet of warehouse
capacity. Lake River also operates bag and drum filling lines for integrated
storage, formulating, packaging and distribution of chemicals. Through its
wholly-owned specialty chemicals subsidiary, Kinpak, Inc. ("Kinpak"), the
Company engages in the production and packaging of antifreeze, windshield
washer fluid and household cleaning products. The Company has announced plans
to divest Kinpak, but there can be no assurance as to the timing of any such
divestiture or the net proceeds thereof. The Company is also evaluating the
future prospects of Lake River as a subsidiary of the Company.
The Company was incorporated under the laws of the State of Delaware in
1955. The mailing address of the Company's executive offices is P.O. Box 1499,
Tulsa, Oklahoma 74101-1499. Its telephone number is (918) 494-0964.
BUSINESS STRATEGY
A key part of the Company's business strategy is to grow its galvanizing
business. The Acquisition will significantly increase the Company's share of
the central midwestern United States independent galvanizing market, and
management believes that the combined company will have the largest share of
this market in the four-state region comprised of Missouri, Kansas, Oklahoma
and Arkansas. Based on the pro forma combined results of the Company for the
most recently completed fiscal year, management expects the Acquisition to
increase substantially the revenues and earnings of the Company's galvanizing
operations. Management believes that this increased market share should
provide for greater versatility of service, optimization of production,
strengthened price leadership and enhanced profitability. In addition, the
Acquisition should provide the Company with greater financial and managerial
resources which will enhance the Company's ability to make future acquisitions
of independent galvanizing operations. Also, Rogers has recently entered into
a letter of intent to purchase the operations of a small galvanizing company in
a complementary geographic market. See "Business Strategy."
THE ACQUISITION
Pursuant to the Rogers Agreement, the Company will acquire the Trust Stock
from the Trusts for $4,260,000 in cash. As part of the Rogers Agreement, the
Company has agreed to offer to purchase the remaining outstanding shares of
capital stock of Rogers from its minority stockholders for cash at a price per
share equivalent to that paid to the Trusts for the Trust Stock. If all shares
of Rogers are purchased at the proposed price per share the total acquisition
price will be $8,321,200. The acquisition of the Trust Stock will trigger
certain change in control provisions of an existing life insurance premium
payment arrangement between Rogers and its former Chairman requiring
acceleration of those payments. Giving effect to those payments and the
payment of related fees and expenses, the total acquisition cost is estimated
to be approximately $9,600,000. These payments will be financed by the
proceeds of the Rights Offering, and, to the extent necessary, the proceeds of
the Notes. If sufficient funds are not available to complete the Acquisition,
no shares will be sold in this offering and all subscription payments will be
returned promptly, without interest or deduction. The conditions to the
acquisition of the Trust Stock include the settlement or favorable
determination of litigation by certain beneficiaries of the Trusts which seeks
to prevent the Acquisition, the absence of a material adverse change in the
business of Rogers, and the delivery of certain standard closing documents.
There can be no assurance that these conditions will be satisfied or, if not
satisfied, waived by the appropriate party. See "Summary Pro Forma and
Selected Consolidated Financial Information" and "The Acquisition."
THE RIGHTS OFFERING
Rights Each stockholder of the Company
will receive three
nontransferable rights (the
"Rights") for each two shares of
the Common Stock held by such
holder as of the close of
business on ______________, 1995
(the "Record Date"). The number
of Rights distributed to each
holder will be rounded down to
the nearest whole number and no
fractional rights, fractional
shares of Common Stock or cash
will be distributed or paid in
lieu thereof. An aggregate
maximum of 5,619,615 Rights will
be distributed pursuant to the
Rights Offering. The Rights are
evidenced by nontransferable
Subscription Certificates (the
"Subscription Certificates").
Subscription Price $2.00 in cash per share of Common
Stock subscribed for pursuant to
the Basic Subscription Privilege
or the Oversubscription Privilege
(the "Subscription Price").
Basic Subscription Privilege Each Right entitles the holder
thereof to purchase one share of
Common Stock upon payment of the
Subscription Price (the "Basic
Subscription Privilege"). See
"The Rights Offering
Subscription Privileges."
Oversubscription Privilege Each holder of Rights who elects
to exercise the Basic
Subscription Privilege is also
entitled to subscribe for
additional shares of Common Stock
upon payment of the Subscription
Price in an aggregate amount up
to 50% of the shares that the
holder is entitled to purchase
under the Basic Subscription
Privilege (the "Oversubscription
Privilege"). If the number of
shares of Common Stock available
after satisfaction of all
subscriptions pursuant to the
exercise of the Basic
Subscription Privilege (the
"Excess Shares") is insufficient
to satisfy fully all elections to
exercise the Oversubscription
Privilege, the Excess Shares will
be allocated pro rata among
holders who exercise their
Oversubscription Privilege based
on the respective numbers of
shares of Common Stock subscribed
by such holders pursuant to
exercise of the Basic
Subscription Privilege. See "The
Rights Offering - Subscription
Privileges."
Purchase Commitment Pursuant to agreements with the
Company, certain directors of the
Company have agreed to exercise
their Rights and purchase not
less than 875,000 shares (or
15.6% of the shares in this
Offering) at the Subscription
Price, or an aggregate of
$1,750,000 (the "Purchase
Commitment"). The Purchase
Commitment could have the effect
of increasing the proportionate
ownership of the Company by such
directors. See "The Rights
Offering - Purchase Commitment."
Non-Transferability of
Rights The Rights are nontransferable.
Record Date ________________, 1995, at 5:00
p.m. New York City time.
Expiration Date ________________, 1995, at 5:00
p.m. New York City time, unless
extended (the "Expiration Date").
The Expiration Date will not be
extended beyond ____________,
1995, and if the conditions to
the Rights Offering have not been
satisfied by ____________, 1995,
or the Rights Offering is
otherwise terminated, all
subscription payments will be
returned promptly, without
interest or deduction. See "The
Rights Offering - Expiration
Date."
Procedure for Exercising
Rights Rights may be exercised by the
holder by properly completing and
signing the Subscription
Certificate evidencing those
Rights and forwarding such
Subscription Certificate (or
following the Guaranteed Delivery
Procedures described herein),
with payment of the Subscription
Price for each share of Common
Stock subscribed for pursuant to
the Basic Subscription Privilege
and the Oversubscription
Privilege, to Mellon Securities
Transfer Services (the
"Subscription Agent") on or prior
to the Expiration Date. If the
mail is used to forward
Subscription Certificates, it is
recommended that insured,
registered mail be used. No
interest will be paid on funds
delivered in payment of the
Subscription Price. ONCE A
HOLDER HAS EXERCISED ANY RIGHTS,
SUCH EXERCISE MAY NOT BE REVOKED.
See "The Rights Offering -
Exercise of Rights."
Procedure for Exercising
Rights by Foreign and
Certain Other Stockholders Subscription Certificates will
not be mailed to holders of
Common Stock whose addresses are
outside the United States or who
have an APO or FPO address, but
will be held by the Subscription
Agent for their account. To
exercise the Rights represented
thereby, such holders must
contact the Subscription Agent on
or prior to 5:00 p.m. New York
City time, on ________________,
1995. See "The Rights Offering -
Foreign and Certain Other
Stockholders."
Persons Holding Common Stock
and Wishing to Exercise
Rights Through Others Persons holding Common Stock and
receiving the Rights distributed
with respect thereto through a
broker, dealer, commercial bank,
trust company or other nominee
should contact the appropriate
institution or nominee and
request it to effect the
transactions for them. See "The
Rights Offering - Exercise of
Rights."
Issuance of Common Stock Certificates representing shares
of the Common Stock purchased
pursuant to the valid exercise of
the Rights will be delivered to
subscribers as soon as
practicable after the Expiration
Date and the conditions to the
Rights Offering have been
satisfied and, in the case of the
exercise of the Oversubscription
Privilege, after all prorations
have been effected. See "The
Rights Offering - Subscription
Privileges."
Subscription Agent Mellon Securities Transfer
Services.
Information Agent Morrow & Co., Inc. (Telephone
number: (800) ___-____).
Common Stock to be
Outstanding After the
Rights Offering The exact number of shares
outstanding after completion of
the Rights Offering depends upon
the number of shares sold herein.
Two scenarios are presented: (i)
9,486,025 shares assuming the
issuance of 100% of the shares
offered hereby (including 120,000
shares issuable upon the exercise
of the Warrants) (the "100%
Case"), and (ii) 8,826,217 shares
assuming the issuance of
2,809,807 (or 50%) of the shares
offered hereby (including
2,270,000 shares issuable upon
exercise of the Warrants) (the
"50% Case").
AMEX Symbol for the Common
Stock KIN
Use of Proceeds The net proceeds from the sale of
the Common Stock in the Rights
Offering, together with the
proceeds from the sale of the
Notes to the Investor, will be
used by the Company to finance
the Acquisition, pay related fees
and expenses and for general
corporate purposes. See "Use Of
Proceeds," "The Acquisition" and
"Description of Subordinated
Financing."
Conditions to the Rights
Offering The issuance of shares pursuant to
the Rights Offering is subject to a
number of conditions, including (i)
the approval by the stockholders at
the Special Meeting of the increase
in the authorized number of shares of
the Common Stock and the issuance of
the Warrants and Warrant Shares, (ii)
the absence of any suit or other action
seeking to enjoin the Rights Offering
or the Acquisition, (iii) the
determination by the Board of Directors
of the Company that sufficient funds
are available to the Company from the
proceeds of the Rights Offering, the
sale of the Notes and other sources to
enable it to complete the Acquisition,
and (iv) the determination by the Board
of Directors of the Company that all of
the conditions to the Acquisition have
been or are expected to be satisfied
or, if not satisfied, waived. In the
event that the foregoing conditions to
the Rights Offering have not been
satisfied by _________, 1995, or the
Rights Offering is otherwise
terminated, all subscription payments
will be returned promptly, without
interest or deduction. See "The Rights
Offering - Conditions to the Rights
Offering."
Amendments and Termination The Company may extend the Rights
Offering and otherwise amend the terms
of the Rights Offering or terminate the
Rights Offering at any time prior to
the Expiration Date or thereafter if
the conditions to the Rights Offering
have not been satisfied. See "The
Rights Offering - Amendment and
Termination."
Risk Factors A purchase of the Common Stock
involves a substantial degree of
risk. See "Risk Factors" for
certain factors that a potential
investor should carefully
consider.
SUMMARY PRO FORMA AND SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
The Company's pro forma combined financial data set forth below and on the
following page should be read in conjunction with the Unaudited Pro Forma
Combined Condensed Financial Statements included elsewhere herein. Such pro
forma data do not purport to present the financial position or results of
operations of the Company had the transactions assumed herein occurred on the
dates indicated, nor are they necessarily indicative of the results of
operations which may be expected in the future. The pro forma combined
financial data have been prepared showing the elimination of the Company's
wholly-owned specialty chemicals subsidiary, Kinpak, as a continuing operation,
and the acquisition of all of the capital stock of Rogers, and are presented
assuming the acquisition is funded either (i) entirely by the proceeds of the
sale of all of the shares offered hereby (the "100% Case") or (ii) by the sale
of 2,809,807 of the shares offered hereby (or 50% of the total shares offered)
and the sale of all of the Notes to the Investor (the "50% Case"). The summary
historical data presented below and on the following pages have been derived
from the Company's Consolidated Financial Statements and notes thereto
incorporated by reference herein and Rogers' Consolidated Financial Statements
and notes thereto included elsewhere herein, and should be read in conjunction
therewith.
Pro Forma
For the Six Months Ended June 30, 1995
Kinark 100% Case<F2> 50% Case<F3>
Kinark Kinpak Adjusted Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Elimination<F1> Historical Historical Adjustments Combined Adjustments Combined
Sales $17,029 $4,259 $12,770 $9,190 $21,960 $21,960
Costs and expenses 17,845 4,580 13,265 8,372 $(83) 21,554 $(83) 21,554
Other expenses 355 45 310 20 (85) 245 278 608
Income tax expense
(benefit) (427) (134) (293) 240 (97) (150) (36) (89)
Earnings (loss) (744) (232) (512) 558 265 311 (159) (113)
Earnings (loss) per
common share (0.20) N/M (0.14) N/M N/M 0.03 N/M (0.02)
Weighted average shares
outstanding<F4> 3,747 N/M 3,747 N/M 5,620 9,366 2,810 6,567
<FN>
<F1> During August 1995, management of the Company finalized a formal plan to
discontinue the operations of Kinpak, one of the Company's subsidiaries.
The estimated pre-tax loss on disposal of this subsidiary is $1,525,000
including $185,000 of estimated operating losses to be incurred during the
disposal period. This estimated loss is not included in the pro forma
financial data presented.
<F2> Pro forma data reflecting (i) the issuance of all 5,619,615 shares of the
Common Stock offered in this Rights Offering, (ii) the issuance of none of
the Notes, (iii) the issuance of Warrants covering 120,000 shares of
Common Stock to the Investor and its financial advisor, and (iv) the
acquisition of 100% of the capital stock of Rogers by the Company. See
"The Acquisition" and "Description of Subordinated Financing."
<F3> Pro forma data reflecting (i) the issuance of 2,809,807 of the shares of
the Common Stock offered in this offering, (ii) the issuance of $4,000,000
of the Notes to the Investor (and the related issuance of Warrants
covering 2,270,000 shares of the Common Stock to the Investor and its
financial advisor), and (iii) the acquisition of 100% of the capital stock
of Rogers by the Company. See "The Acquisition" and "Description of
Subordinated Financing."
<F4> Weighted average shares outstanding include the dilutive effect of stock
options and warrants, if applicable.
</FN>
For the Year Ended December 31, 1994
Kinark 100% Case<F2> 50% Case <F3>
Kinark Kinpak Adjusted Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Elimination<F1> Historical Historical Adjustments Combined Adjustments Combined
Sales $34,782 $8,559 $26,223 $12,624 $38,847 $38,847
Costs and expenses 33,497 9,410 24,087 12,246 $(209) 36,124 $(209) 36,124
Other expenses 694 96 598 (51) (153) 394 555 1,102
Income tax expense
(benefit) 181 (346) 527 104 (203) 834 (55) 576
Earnings (loss) 410 (601) 1,011 325 159 1,495 (291) 1,045
Earnings (loss) per
common share 0.11 N/M 0.27 N/M N/M 0.16 N/M 0.16
Weighted average shares
outstanding (4) 3,752 N/M 3,752 N/M 5,620 9,372 2,810 6,562
<FN>
<F1> During August 1995, management of the Company finalized a formal plan to
discontinue the operations of Kinpak, one of the Company's subsidiaries.
The estimated pre-tax loss on disposal of this subsidiary is $1,525,000
including $185,000 of estimated operating losses to be incurred during the
disposal period. This estimated loss is not included in the pro forma
financial data presented.
<F2> Pro forma data reflecting (i) the issuance of all 5,619,615 shares of the
Common Stock offered in this Rights Offering, (ii) the issuance of none of
the Notes, (iii) the issuance of Warrants covering 120,000 shares of
Common Stock to the Investor and its financial advisor, and (iv) the
acquisition of 100% of the capital stock of Rogers by the Company. See
"The Acquisition" and "Description of Subordinated Financing."
<F3> Pro forma data reflecting (i) the issuance of 2,809,807 of the shares of
the Common Stock offered in this offering, (ii) the issuance of $4,000,000
of the Notes to the Investor (and the related issuance of Warrants
covering 2,270,000 shares of the Common Stock to the Investor and its
financial advisor), and (iii) the acquisition of 100% of the capital stock
of Rogers by the Company. See "The Acquisition" and "Description of
Subordinated Financing."
<F4> Weighted average shares outstanding include the dilutive effect of stock
options and warrants, if applicable.
</FN>
/TABLE
At and For the Six Months Ended June 30, 1995
Kinark 100% Case<F2> 50% Case <F3>
Kinark Kinpak Adjusted Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Elimination<F1> Historical Historical Adjustments Combined Adjustments Combined
Working capital $3,417 $1,200 4,617 $1,408 $6,025 $(24) $6,049
Total assets 21,898 1,852 20,046 7,587 $4,865 32,498 5,009 642
Capital expenditures 514 -- 514 552 -- 1,066 -- 1,066
Depreciation 946 150 796 453 -- 1,249 -- 1,249
Long-term obligations 7,454 (969) 6,485 761 (1,703) 5,543 4,000 11,246
Stockholders' equity 9,300 -- 9,300 4,286 6,568 20,154 34 14,595
Per share 2.48 N/M 2.48 N/M N/M 2.15 N/M 2.22
Common shares
outstanding 3,747 N/M 3,747 N/M 5,620 9,372 2,810 6,562
<FN>
<F1> During August 1995, management of the Company finalized a formal plan to
discontinue the operations of Kinpak, one of the Company's subsidiaries.
The estimated pre-tax loss on disposal of this subsidiary is $1,525,000
including $185,000 of estimated operating losses to be incurred during the
disposal period. This estimated loss is not included in the pro forma
financial data presented.
<F2> Pro forma data reflecting (i) the issuance of all 5,619,615 shares of the
Common Stock offered in this Rights Offering, (ii) the issuance of none of
the Notes, (iii) the issuance of Warrants covering 120,000 shares of
Common Stock to the Investor and its financial advisor, and (iv) the
acquisition of 100% of the capital stock of Rogers by the Company. See
"The Acquisition" and "Description of Subordinated Financing."
<F3> Pro forma data reflecting (i) the issuance of 2,809,807 of the shares of
the Common Stock offered in this offering, (ii) the issuance of $4,000,000
of the Notes to the Investor (and the related issuance of Warrants
covering 2,270,000 shares of the Common Stock to the Investor and its
financial advisor), and (iii) the acquisition of 100% of the capital stock
of Rogers by the Company. See "The Acquisition" and "Description of
Subordinated Financing."
</FN>
/TABLE
Kinark Historical
For the Six Months
Ended June 30, For the Year Ended December 31,
1995 1994 1994 1993 1992 1991<F1> 1990
Sales $17,029 $17,820 $34,782 $30,900 $30,476 $34,109 $34,202
Costs and expenses 17,845 16,362 33,497 28,062 27,399 28,283 30,490
Other expense 355 282 694 1,619 1,361 477 309
Income tax expense
(benefit) (427) 429 181 439 21 66 1,273
Earnings (loss)<F2> (744) 747 410 780 1,695 4,067 2,130
Earnings (loss) per
common share<F2> (0.20) 0.20 0.11 0.21 0.45 1.10 0.60
Weighted average shares
outstanding<F3> 3,747 3,754 3,752 3,755 3,748 3,705 3,561
<FN>
<F1> The Company changed its method of valuing certain inventory from the
first-in first-out (FIFO) method to the last-in first-out (LIFO) method in
1991. This change increased 1991 net earnings by $300,000 or $.08 per
share.
<F2> Earnings from continuing operations before cumulative effect of change in
accounting method.
<F3> Weighted average shares outstanding include the dilutive effect of stock
options, if applicable.
</FN>
At and For the
Six Months Ended At and For the Year Ended December 31,
June 30, 1995 1994 1993 1992 1991 1990
Working capital $3,417 $2,761 $3,961 $4,028 $2,000 $2,402
Total assets 21,898 20,954 20,931 18,402 16,841 17,716
Capital expenditures 514 1,668 2,540 3,306 2,414 1,639
Depreciation 946 1,771 1,584 1,523 1,574 1,636
Long-term obligations 7,454 6,009 7,720 7,548 6,417 10,686
Stockholders' equity 9,300 10,044 9,634 7,052 5,119 1,372
Per share 2.48 2.68 2.57 1.88 1.41 0.38
Common shares
outstanding 3,747 3,746 3,746 3,746 3,623 3,579
Rogers Historical
For the Nine Months
Ended June 30, For the Year Ended September 30,
1995 1994 1994 1993 1992 1991 1990
Sales $13,285 $9,225 $12,625 $11,544 $10,907 $11,575 $10,549
Costs and expenses 12,050 8,768 12,247 10,070 10,096 10,094 9,695
Other (income) expense 16 (36) (50) (44) (8) (26) (48)
Income tax expense 452 110 104 511 312 495 335
Earnings 767 383 324 1,007 507 960 567
Dividends paid 169 403 459 225 225 284 225
At and For the
Nine Months Ended At and For the Year Ended September 30,
June 30, 1995 1994 1993 1992 1991 1990
Working capital $1,614 $1,119 $1,515 $1,160 $909 $799
Total assets 7,587 6,852 5,548 4,298 4,157 3,321
Capital expenditures 712 973 923 596 828 883
Depreciation 660 672 550 474 381 201
Long-term obligations 634 751 231 287 233 --
Stockholders' equity 4,286 3,688 3,824 3,042 2,760 2,316
RISK FACTORS
Prior to deciding to exercise the Rights and purchase the Common Stock,
potential investors should carefully consider the following factors, together
with other information contained in or incorporated by reference into this
Prospectus, in evaluating the Company and its businesses.
RECENT OPERATING LOSSES
During the last four fiscal quarters, the Company has experienced
operating losses due primarily to losses at Kinpak and diminished profitability
at Lake River, its chemical packaging and storage subsidiaries. As a result of
these losses, the Company has determined to divest Kinpak, or, if necessary,
shut down Kinpak if a suitable buyer is not found. While management expects
the Company's earnings to improve greatly if the divestiture of Kinpak is
completed and the Acquisition is consummated, there can be no assurance that
the Company will be profitable over any particular time frame. Continued
losses will impair the Company's liquidity and capital resources and reduce the
value of the Common Stock. See "Business Strategy."
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
The Company's recent losses have reduced its liquidity and capital
resources. Depending upon the number of shares of Common Stock issued in the
Rights Offering, substantially all of the net proceeds from the Rights Offering
and the issuance of the Notes could be utilized in the acquisition of Rogers.
In addition, the Company's outstanding borrowings under its bank term loan and
revolving credit facility mature on March 31, 1996, and there can be no
assurance that the maturity date can be extended or the borrowings refinanced.
Unless the Company is sufficiently profitable or the bank borrowings are
extended or refinanced, the Company will likely have to find additional sources
of working capital to fund its operations. There can be no assurance that
these sources, if needed, will be found.
CONDITIONS TO THE RIGHTS OFFERING
The issuance of shares pursuant to the exercise of the Rights is subject
to a number of conditions, including (i) the approval by the stockholders of
the increase in the authorized shares of Common Stock and the issuance of the
Warrants and Warrant Shares, (ii) the absence of any suit or other action
seeking to enjoin the Rights Offering or the Acquisition, (iii) no stockholder
other than the Investor owning beneficially after the Rights Offering more than
20% of the outstanding shares of the Common Stock of the Company, (iv) the
determination by the Board of Directors of the Company that sufficient funds
are available to the Company from the proceeds of the Rights Offering, the sale
of the Notes and other sources to enable it to complete the Acquisition, and
(v) the determination by the Board of Directors of the Company that all of the
conditions to the Acquisition have been or are expected to be satisfied or, if
not satisfied, waived. There can be no assurance that these conditions will be
satisfied or if not satisfied, waived by the appropriate party. See "The
Rights Offering - Conditions to the Rights Offering."
CONDITIONS TO THE ACQUISITION
The Company's right and obligation to consummate the Acquisition are
subject to numerous conditions, including the settlement of certain stockholder
litigation which seeks to prevent the Acquisition, the absence of certain
adverse changes in Rogers, and the delivery of certain standard closing
documents. There can be no assurance that these conditions will be satisfied
or, if not satisfied, waived by the appropriate party. In addition, the
Company's ability to complete the Acquisition is dependent upon its securing
the necessary financing, of which the Rights Offering is a part. Depending
upon the success of the Rights Offering, the Company may need to sell all or a
portion of the Notes to the Investor in order to finance the Acquisition.
There can be no assurance that sufficient funds from these sources will exist
to complete the Acquisition. If sufficient funds are not available, no shares
will be sold in this Offering and all subscription payments will be returned
promptly, without interest or deduction. See "The Acquisition" and
"Description of Subordinated Financing."
IMPACT OF RIGHTS OFFERING ON HOLDERS OF COMMON STOCK
The Rights entitle the holders of the Common Stock to purchase shares of
the Common Stock at a price below the prevailing market price of the Common
Stock immediately prior to the commencement of the Rights Offering. Holders of
the Common Stock who exercise their Rights will preserve, and through the
Oversubscription Privilege may increase, their proportionate interest in the
equity ownership and voting power of the Company. Holders who do not exercise
their Rights will experience a decrease in their proportionate interest in the
equity ownership and voting power of the Company. The consummation of the sale
of the shares offered hereby would increase the number of shares of Common
Stock outstanding (on a pro forma basis as of _____________, 1995) (i) under
the 100% Case by 5,739,615 shares (or 153%) to 9,486,025 shares, assuming all
of the shares offered hereby are issued and including 120,000 shares issuable
upon exercise of the Warrants and (ii) under the 50% Case by 5,079,807 shares
(or 136%) to 8,826,217 shares assuming 50% of the shares offered hereby are
issued and including 2,270,000 shares issuable upon the exercise of the
Warrants.
MARKET CONSIDERATIONS
There can be no assurance that the market price of the Common Stock will
not decline during the subscription period or that, following the issuance of
the Rights and the issuance of the underlying shares upon exercise of the
Rights, a subscribing Rights holder will be able to sell shares purchased in
the Rights Offering at a price equal to or greater than the Subscription Price.
The election of a Rights holder to exercise Rights in the Rights Offering is
irrevocable. Moreover, until certificates are delivered, subscribing Rights
holders may not be able to sell the Common Stock that they have purchased in
the Rights Offering. Certificates representing shares of the Common Stock
purchased pursuant to the Basic Subscription Privilege will be delivered as
soon as practicable after the Expiration Date and, in the case of shares
purchased pursuant to the Oversubscription Privilege, all prorations and
adjustments contemplated by the terms of the Rights Offering have been
effected. No interest will be paid to Rights holders on funds delivered to the
Subscription Agent pursuant to the exercise of Rights pending delivery of
Common Stock acquired upon exercise of the Rights.
RIGHTS NOT TRANSFERABLE; NO MARKET FOR RIGHTS
The Rights are not transferable, and thus there will be no market or other
means for holders of the Rights to directly realize any value associated with
the Rights. Thus, holders of the Rights must exercise them and acquire
additional shares of the Common Stock in order to realize any such value. The
election of a Rights holder to exercise Rights in the Rights Offering is
irrevocable.
CONCENTRATION OF OWNERSHIP
Following the Rights Offering and the consummation of the Acquisition,
certain stockholders will own or have the right to acquire a substantial
portion of the Common Stock. Assuming the sale of all 5,619,615 shares offered
hereby, including 120,000 shares issuable upon exercise of the Warrants, and no
issuance of the Notes (the "100% Case"), the exercise by the Investor of its
Rights pursuant to the Purchase Commitment and the exercise by Steel Partners
II, Ltd. ("Steel Partners") of its full Basic Subscription Privilege and
Oversubscription Privilege with respect to its Rights, the Investor will own
approximately 12.8% of the Common Stock and Steel Partners will own
approximately 18.1% of the Common Stock. Assuming the sale of 2,809,807 of the
shares offered hereby and the issuance of $4.0 million of the Notes to the
Investor, including 2,270,000 shares issuable upon exercise of the Warrants
(the "50% Case"), and the exercise by the Investor of its Rights pursuant to
the Purchase Commitment and the exercise by Steel Partners of its full Basic
Subscription Privilege and Oversubscription Privilege with respect to its
Rights, the Investor will own approximately 38.1% of the Common Stock and Steel
Partners will own approximately 19.4% of the Common Stock. As a result, the
ability of stockholders other than the Investor or Steel Partners to influence
the election of the Company's directors or the management and operations of the
Company may be limited. Under the 50% Case excluding the 2,270,000 shares
issuable upon exercise of the Warrants, and assuming the exercise by the
Investor of its Rights pursuant to the Purchase Commitment and the exercise by
Steel Partners of its full Basic Subscription Privilege and Oversubscription
Privilege with respect to their Rights, the Investor will own approximately
17.0% of the Common Stock and Steel Partners will own approximately 26.2% of
the Common Stock. However, under this scenario, a condition to the Investor's
purchase of the Notes will not have been satisfied which requires that no
stockholder other than the Investor own beneficially after the Rights Offering
more than 20% of the outstanding Common Stock of the Company and, unless
waived, the Investor will have no obligation to exercise the Purchase
Commitment and purchase $1,500,000 of Common Stock or to purchase the Notes.
See "Conditions to the Rights Offering."
CERTAIN ANTI-TAKEOVER EFFECTS
Assuming the sale of all 5,619,615 shares offered hereby, including
120,000 shares issuable upon exercise of the Warrants and no issuance of the
Notes (the "100% Case"), the members of the Board of Directors and senior
management of the Company will beneficially own approximately 19.6% of the
Common Stock, and assuming the sale of 2,809,807 of the shares offered hereby,
the issuance of $4.0 million of the Notes to the Investor including 2,270,000
shares issuable upon exercise of the Warrants (the "50% Case"), the members of
the Board of Directors and senior management will beneficially own
approximately 45.3% of the Common Stock. This Common Stock ownership, together
with various provisions of the Company's Restated Certificate of Incorporation
may tend to deter nonnegotiated tender offers or other efforts to obtain
control of the Company and thereby deprive stockholders of opportunities to
sell shares at prices higher than those prevailing in the market. See
"Description of Capital Stock - Certain Certificate of Incorporation and Bylaw
Provisions."
DEBT RESTRICTIONS
The terms of the Company's existing bank term loan and revolving credit
facility and the Subordinated Financing Agreement restrict certain aspects of
the Company's operations. These restrictions include specified minimum values
for the net worth, working capital and debt service coverage for the Company,
and limitations on incurring additional debt or capital expenditures or
engaging in acquisitions and dispositions by the Company. There can be no
assurance that the Company will be able to comply with these restrictions
without disrupting its business. See "Description of Subordinated Financing."
COMPETITION
The independent after-fabrication hot dip galvanizing market is highly
competitive. In particular, during the first six months of 1995 Boyles has
been subject to increasing price pressure from its competitors in certain of
its geographic markets, and a new independent galvanizer recently commenced
operations in Rogers' geographic market. The current profitability of Boyles
and Rogers, and hence the Company, will depend in part on their ability to
maintain current prices. There can be no assurance that these prices can be
maintained. See "Business Strategy."
GOVERNMENT REGULATION
The Company's operations are subject to various government regulations,
including those related to occupational safety and health (OSHA), workers
compensation and environmental matters. Like their competitors in the
galvanizing and chemicals businesses, Kinark and its subsidiaries and Rogers
will have regulatory compliance costs associated with past, present and future
operations, but the Company cannot presently quantify the cost of complying
with these regulations. While neither the Company, its subsidiaries nor Rogers
is presently the subject of any material claim or investigation with respect to
these regulations, there can be no assurance that the cost of complying with
these regulations in the future will not have a material adverse affect on the
Company, its subsidiaries or Rogers.
BUSINESS STRATEGY
In May 1995, Michael T. Crimmins, the Chairman of the Board of the
Company, acquired 9.7% of the Company's Common Stock from Northbridge Holdings,
Inc. In connection with this acquisition, Mr. Crimmins assumed the duties of
Chairman of the Board of the Company. In this new role, Mr. Crimmins intends
to lead the Company toward a refocusing of its efforts on its galvanizing
business and away from its specialty chemicals and chemical storage businesses.
As a result, the Company has determined to divest Kinpak, or if a suitable
buyer is not found, shut down Kinpak. In connection with the Acquisition and
the Subordinated Financing, Mr. Crimmins will assume the office of Chief
Executive Officer of the Company, and the Company's current President and Chief
Executive Officer will become the President and Chief Operating Officer of the
Company.
In conjunction with the refocusing of its efforts on galvanizing, the
Company is proceeding toward the consummation of the Acquisition and the
integration of Rogers into its operations. The Rights Offering and the
Subordinated Financing are integral steps in the financing of the Acquisition.
To assist the Company in its efforts to acquire Rogers, a family investment
company controlled by Mr. Crimmins (the "Investor") has agreed to purchase up
to $4.0 million principal amount of the Notes and purchase not less than $1.5
million of Common Stock offered hereby to finance the acquisition of Rogers.
A key part of the Company's business strategy is to grow its
galvanizing business. The Acquisition will significantly increase the
Company's share of the central midwestern United States independent galvanizing
market, and management believes that the combined company will have the largest
share of this market in the four-state region comprised of Missouri, Kansas,
Oklahoma and Arkansas. Based on the pro forma combined results of the Company
for the most recently completed fiscal year, the Acquisition to increase
greatly the revenues and earnings of the Company's galvanizing operations.
Management believes that this increased market share should provide for greater
versatility of service, optimization of production, strengthened price
leadership and enhanced profitability. In addition, the Acquisition should
provide the Company with greater financial and managerial resources which will
enhance the Company's ability to make future acquisitions of independent
galvanizing operations. Also, Rogers has recently entered into a letter of
intent to purchase the operations of a small galvanizing company in a
complementary geographic market. The Acquisition has the potential to restore
the Company to profitability. Rogers' sales have increased steadily since 1990
due to a strong geographic niche in the central Midwestern United States market
and, based on its operating income for the six months ended June 30, 1995,
Rogers would have been a major contributor to Kinark's profitability during
this period.
THE ACQUISITION
GENERAL
On August 3, 1994, the Company entered into an agreement (the "Rogers
Agreement") with two trusts (the "Trusts") which together own 51.2% of the
capital stock (the "Trust Stock") of Rogers Galvanizing Company ("Rogers") to
acquire their stock in Rogers for $4.3 million in cash (the "Acquisition").
The acquisition of the Trust Stock is conditioned upon the settlement or
favorable determination of litigation by certain beneficiaries of the Trusts
which seeks to prevent the Acquisition, the absence of a material adverse
change in the business of Rogers, the delivery of certain standard closing
documents, and other standard conditions. There can be no assurance that these
conditions will be satisfied or, if not satisfied, waived by the appropriate
party. As part of the Rogers Agreement, the Company has agreed to offer to
purchase the remaining outstanding shares of capital stock of Rogers from its
minority stockholders for cash at a price per share equivalent to that paid to
the Trusts for the Trust Stock.
The Company expects that the litigation by certain beneficiaries of the
Trusts which seeks to prevent the Acquisition will be settled or determined
favorably to the Company during the fourth quarter of 1995, but there can be no
assurance that this will be the case. Upon such settlement or determination,
the Company will be obligated to consummate the Acquisition within forty-five
days. If the Company is not able to close the Acquisition at such time due to
a lack of financing or for other reasons, the Trusts have the right to
terminate the Rogers Agreement. If the Acquisition does not close for any
reason, the Rights Offering will be terminated and all subscription payments
will be returned promptly, without interest or deduction.
ROGERS' BUSINESS
Similar to Boyles, Rogers provides corrosion protection for metal
components by means of hot dip galvanizing. Rogers was incorporated in 1940
and competes with Boyles in the central midwestern United States market.
Although the two companies have often bid jobs for the same customers, the
primary markets of the two companies do not generally overlap due to the
diverse physical locations of the Boyles' and Rogers' plants. Rogers
galvanizes for more than 600 customers annually. Rogers' primary market is in
the Tulsa area, which generates approximately 65% of its annual tonnage.
Currently, 40% to 50% of Rogers' business is subject to a yearly contract or
blanket purchase order.
Rogers maintains and operates two adjacent galvanizing plants in Tulsa.
On a combined basis, Rogers operates three galvanizing kettles with 56,000
square feet under roof. Combined capacity is 60,000 tons of galvanized steel
per year and, in the year ended December 31, 1994, Rogers galvanized
approximately 46,000 tons of steel. Rogers employs approximately 182 full-time
employees.
Rogers conducts specialty galvanizing operations through two subsidiaries,
Spin-Galv, Inc. ("Spin-Galv") and Reinforcing Services, Inc. ("RSI"). Spin-
Galv provides specialized centrifuge galvanizing for smaller metal components
by placing them in a basket-like container and "spinning" them in a molten zinc
solution. Markets targeted by Spin-Galv include fabricators, original
equipment manufacturers, and manufacturers of industrial fasteners and
connectors. RSI provides galvanized components primarily through a business
agreement with The Reinforced Earth Company ("RECO"). RSI purchases steel,
fabricates it to RECO's specifications and then galvanizes it using a highly
specialized and automated process that requires roughly one-third of the
personnel needed for more traditional galvanizing methods. This on-site
fabrication and galvanizing eliminates the in-bound transportation expense
normally incurred by RECO in shipping to the galvanizer. RSI's agreement with
RECO expires August 31, 1997. RSI plans to target other specialty
manufacturers, such as rebar manufacturers, to explore opportunities for adding
new galvanizing business.
A competitor of Rogers recently built a new plant in the Tulsa area, and
as a result the price that Rogers can charge for galvanizing is expected to be
subject to enhanced competitive pressure.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the maximum number of
shares of Common Stock to be issued with respect to the Rights are estimated to
be approximately $10,854,230, after deducting the estimated offering expenses
payable by the Company. The Company will use the net proceeds of the Rights
Offering to finance the Acquisition, pay related fees and expenses and for
other general corporate purposes. The following table illustrates the
estimated sources and uses of funds, assuming that the Company acquired 100% of
the capital stock of Rogers on June 30, 1995, through either (i) the issuance
of all of the shares of Common Stock offered hereby, including 170,000 shares
issuable upon exercise of the Warrants and no issuance of the Notes (the "100%
Case") and (ii) the issuance of 2,809,807 of the shares of Common Stock offered
hereby, and the issuance of $4.0 million of the Notes to the Investor including
120,000 shares issuable upon exercise of the Warrants and no issuance of the
Notes (the "50% Case").
AMOUNT
(IN THOUSANDS)
100% CASE
SOURCES OF FUNDS:
Common Stock offered hereby $11,239
Notes sold to the Investor --
Total Sources of Funds $11,239
USES OF FUNDS:
Acquisition of Rogers $8,321
Fees and expenses<F1> 1,215
Other corporate purposes 1,703
Total Uses of Funds $11,239
50% CASE
SOURCES OF FUNDS:
Common Stock offered hereby $5,620
Notes sold to the Investor 4,000
Total Sources of Funds $9,620
USES OF FUNDS:
Acquisition of Rogers $8,321
Fees and expenses<F1> 1,275
Other corporate purposes 24
Total Uses of Funds $9,620
(1) Includes approximately $415,000 to fund a trust to pay certain life
insurance premiums for the benefit of the chairman of Rogers pursuant to a
contractual provision triggered by the Acquisition.
CAPITALIZATION
The following table sets forth, assuming the acquisition of all of the
capital stock of Rogers, (i) the actual capitalization of the Company at
June 30, 1995, (ii) the capitalization of the Company at June 30, 1995,
adjusted to reflect the elimination of Kinpak as a discontinued operation,
(iii) the pro forma capitalization of the Company at June 30, 1995, in the 100%
Case, after deducting the estimated offering expenses and the application of
the net proceeds, and (iii) the pro forma capitalization of the Company at
June 30, 1995, in the 50% Case, after deducting the estimated offering expenses
and the application of the net proceeds.
June 30, 1995
Adjusted Pro Forma Pro Forma
HistoricalHistorical<F1>100% Case50% Case
Long-term obligations $7,454 $6,485 $5,381 $11,119
Stockholders' equity
Common stock, $.10 par value,
Authorized: Actual - 12,000,000 shares;
Pro forma - 18,000,000 shares;
Issued: Historical and Adjusted Historical
- 5,200,562 shares
Pro forma 100% Case - 9,366,025 shares
Pro forma 50% Case - 6,974,151 shares<F2>520 520 1,082 801
Additional paid-in capital 10,531 10,531 14,876 9,607
Retained earnings 4,226 3,251 3,251 3,251
Less: Treasury stock at cost:
Actual - 1,454,152 shares:
Pro forma 100% Case and pro forma
50% Case - no shares (5,977) (5,977) -- --
Total stockholders' equity 9,300 8,325 19,209 13,659
Total long-term obligations and stockholders' equity$16,754$19,07131,41031,598
<FN>
<F1> During August 1995, management of the Company finalized a formal plan to discontinue the operations of Kinpak. The
estimated loss on disposal of this subsidiary is $975,000 (net of income tax effects of $550,000) including $185,000 of
estimated operating losses to be incurred during the disposal period. The Kinpak elimination presented in the accompanying
pro forma financial statements reflect that entity as a discontinued operation.
<F2> Does not include shares issuable pursuant to currently exercisable options and warrants to purchase Common Stock, which
aggregate 112,500 shares - historical and adjusted historical, 112,500 shares - Pro Forma 100% Case, and 2,385,000 shares -
Pro Forma 50% Case.
</FN>
/TABLE
COMMON STOCK DIVIDENDS AND PRICE RANGE
The Company has a longstanding policy of not paying cash dividends on the
Common Stock in order to reinvest earnings to support its business operations.
The Company presently intends to continue that policy. The terms of the
Company's bank borrowings and the Notes also restrict the payment of dividends
on the Common Stock. See "Description of Subordinated Financing." The
Company's Common Stock is listed on the American Stock Exchange (the "AMEX")
under the symbol "KIN" and appears in the market reports in The Wall Street
Journal as "KinarkCp." The following table sets forth, for the periods
indicated, the high and low sales prices of the Common Stock as reported by the
AMEX:
Quarterly Stock Prices
First Second Third Fourth
1995
High $4 $3 15/16 3 7/16(1) N/A
Low 3 2 7/8 2 7/8 (1) N/A
1994
High $4 11/16 $4 7/8 $4 1/2 $4 1/4
Low 3 3/4 4 3 1/2 3
1993
High $5 1/2 $5 1/2 $5 3/8 $4 1/4
Low 4 3/8 4 1/4 4 3 3/8
(1) Through September 14, 1995.
On September 14, 1995, the closing price of the Common Stock on the AMEX
was $3 1/16 per share. On that date, there were approximately 2,675 record
holders of the Common Stock.
THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing nontransferable Rights, at no cost, to the
record holders ("Holders") of outstanding shares of the Common Stock as of the
Record Date (5:00 p.m. New York City time, on ________________, 1995). The
Company will distribute three Rights for each two shares of the Common Stock
held on the Record Date. Each such Right entitles the holder thereof to
subscribe for shares of the Common Stock pursuant to a Basic Subscription
Privilege and an Oversubscription Privilege. See "Subscription Privileges."
No fractional rights will be distributed and no cash in lieu thereof will be
paid. The Rights are evidenced by nontransferable Subscription Certificates
(the "Subscription Certificates").
The Subscription Price of $2.00 per share of the Common Stock represents a
discount of ____% from the closing price of $_______ for the shares of the
Common Stock listed on the AMEX immediately prior to the commencement of the
Rights Offering. There can be no assurance that shares of the Common Stock
will trade at prices above the Subscription Price. See "Risk Factors - Market
Considerations."
EXPIRATION DATE
The Rights will expire at 5:00 p.m. New York City time, on ____________,
1995, unless extended by the Company (the "Expiration Date"), after which time
all unexercised Rights will be null and void. The Company will not be
obligated to honor any purported exercise of Rights received by the
Subscription Agent after 5:00 p.m. New York City time, on the Expiration Date,
regardless of when the documents relating to such exercise were transmitted,
except when timely transmitted pursuant to the Guaranteed Delivery Procedures
described below. The Expiration Date will not be extended beyond ____________,
1995, and if the conditions to the Rights Offering have not been satisfied by
such date, or the Rights Offering is otherwise terminated, all subscription
payments will be returned promptly, without interest or deduction. See
"Amendments and Termination."
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege. The Basic Subscription Privilege entitles
the holder of each Right to purchase one share of the Common Stock upon payment
of the Subscription Price. Certificates representing shares of the Common
Stock purchased pursuant to the Basic Subscription Privilege will be delivered
to subscribers as soon as practicable after the Expiration Date.
Oversubscription Privilege. Subject to proration as described below, the
Oversubscription Privilege entitles the holder of a Right to subscribe upon
payment of the Subscription Price for a limited number of shares of the Common
Stock in addition to those subscribed by such holder through exercise of the
Basic Subscription Privilege. Shares of the Common Stock will be available for
purchase pursuant to the Oversubscription Privilege by each Right holder in an
aggregate amount up to 50% of the shares that the holder is entitled to
purchase under the Basic Subscription Privilege and only to the extent that any
shares of the Common Stock are not subscribed for through exercise of the Basic
Subscription Privilege (the "Excess Shares"). No fractional shares of Common
Stock will be issued pursuant to the exercise of the Oversubscription
Privilege. If the number of Excess Shares is not sufficient to satisfy all
subscriptions pursuant to the exercise of the Oversubscription Privilege, the
Excess Shares will be allocated pro rata (subject to the elimination of
fractional shares) among those holders who have exercised the Oversubscription
Privilege, in proportion to the number of shares each such holder has purchased
pursuant to the exercise of the Basic Subscription Privilege. However, no such
holder may be allocated a greater number of Excess Shares than was subscribed
by such holder pursuant to the exercise of such holder's Oversubscription
Privilege. Only those holders that exercise the Basic Subscription Privilege
will be entitled to exercise the Oversubscription Privilege. Certificates
representing shares of the Common Stock purchased pursuant to exercise of the
Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations have been
effected.
Banks, brokers and other nominee holders of Rights that exercise the
Oversubscription Privilege on behalf of beneficial owners of Rights will be
required to certify to the Subscription Agent and the Company, in connection
with the exercise of the Oversubscription Privilege, the aggregate number of
shares that have been subscribed through the exercise of the Basic Subscription
Privilege on behalf of those beneficial owners in addition to the number of
shares that are being subscribed pursuant to exercise of the Oversubscription
Privilege by each such beneficial owner.
PURCHASE COMMITMENT
Pursuant to agreements with the Company, certain directors of the Company
have agreed to exercise their Rights and purchase an aggregate of 875,000
shares, or approximately 15.6% of the shares offered hereby, at an aggregate
purchase price of $1,750,000 (the "Purchase Commitment"). These obligations
are contingent upon the continued existence of a binding agreement between the
Company and the Investor with respect to the issuance of the Notes and the
Warrants. See "Description of Subordinated Financing."
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the Subscription Agent, at or
prior to the Expiration Date (5:00 p.m. New York City time, on ____________,
1995, unless extended), the properly completed and executed Subscription
Certificate evidencing those Rights with any required signature guarantees,
together with payment in full of the Subscription Price for each share of the
Common Stock subscribed for pursuant to the Basic Subscription Privilege and
the Oversubscription Privilege. Such payment must be made by (a) check or bank
draft drawn upon a U.S. bank or postal, telegraphic, or express money order
payable to Mellon Securities Transfer Services, as Subscription Agent, or
(b) wire transfer of same day funds to the account maintained by the
Subscription Agent for such purpose at Mellon Bank, N.A., ABA No.
_______________, Account No. _____________________ (marked: "Kinark
Corporation Subscription"). Payment of the Subscription Price will be deemed
to have been received by the Subscription Agent only upon (i) clearance of any
uncertified check, (ii) receipt by the Subscription Agent of any certified
check or bank draft drawn upon a U.S. bank or any postal, telegraphic or
express money order or (iii) receipt of good funds in the Subscription Agent's
account designated above. HOLDERS WISHING TO PAY BY UNCERTIFIED PERSONAL CHECK
SHOULD NOTE THAT SUCH A CHECK MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR AND
SHOULD TRANSMIT THE CHECK SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
ENSURE THAT IT IS RECEIVED AND CLEARS BY SUCH DATE OR CONSIDER PAYMENT BY MEANS
OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
Mellon Securities Transfer Services
85 Challenger Road
Ridgefield Park, New Jersey 07660-2108
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificates evidencing such Rights to reach
the Subscription Agent on or prior to the Expiration Date, such Rights may
nevertheless be exercised if all of the following conditions (the "Guaranteed
Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price
for each share of the Common Stock being subscribed for pursuant to the
Basic Subscription Privilege and the Oversubscription Privilege to be
received (in the manner set forth above) by the Subscription Agent on or
prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guarantee notice (a "Notice of Guaranteed Delivery"),
substantially in the form provided with the Instructions as to Use of
Kinark Corporation Subscription Certificates (the "Instructions")
distributed with the Subscription Certificates, from a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. (the "NASD"), or from a commercial
bank or trust company having an office or correspondent in the United
States (each, an "Eligible Institution"), stating the name of the
exercising Rights holder, the number of Rights represented by the
Subscription Certificates held by such exercising Rights holder, the
number of shares of the Common Stock being subscribed for pursuant to the
Basic Subscription Privilege and the number of the shares of Common Stock,
if any, being subscribed for pursuant to the Oversubscription Privilege,
and guaranteeing the delivery to the Subscription Agent of any
Subscription Certificate evidencing such Rights within three AMEX trading
days following the date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate evidencing the
Rights being exercised, with any required signatures guaranteed, is
received by the Subscription Agent within three AMEX trading days
following the date of the Notice of Guaranteed Delivery relating thereto.
The Notice of Guaranteed Delivery may be delivered to the Subscription
Agent in the same manner as Subscription Certificates at the addresses set
forth above, or may be transmitted to the Subscription Agent by telegram
or facsimile transmission (telecopier no. ________________). Additional
copies of the form of Notice of Guaranteed Delivery are available upon
request from the Information Agent, whose address and telephone number are
set forth below under "Information Agent."
Funds received in payment of the Subscription Price for shares subscribed
for pursuant to the Rights will be held in a segregated account pending
issuance of such shares. If a Rights holder exercising the Oversubscription
Privilege is allocated less than all of the shares of the Common Stock which
such holder wished to subscribe for pursuant to the Oversubscription Privilege,
the excess funds paid by such holder in respect of the Subscription Price for
shares of the Common Stock not so allocated shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date.
Unless a Subscription Certificate (i) provides that the shares of the
Common Stock to be issued pursuant to the exercise of Rights represented
thereby are to be delivered to the record holder of such Rights or (ii) is
submitted for the account of an Eligible Institution, signatures on such
Subscription Certificate must be guaranteed by a commercial bank, trust
company, securities broker or dealer, credit union, savings association or
other eligible guarantor institution which is a member of or a participant in a
signature guarantee program acceptable to the Subscription Agent.
Holders who hold shares of the Common Stock for the account of others,
such as brokers, trustees or depositaries for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Right should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
shares of the Common Stock or Rights held through such a holder should contact
the holder and request the holder to effect transactions in accordance with the
beneficial owner's instructions.
The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
SUBSCRIPTION CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE
ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT
PRIOR TO 5:00 P.M. NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU
ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Certificates or
incur any liability for failure to give such notification.
The Company will pay the fees and expenses of the Subscription Agent, and
has also agreed to indemnify the Subscription Agent from any liability which it
may incur in connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed Morrow & Co., Inc. as Information Agent for the
Rights Offering. Any questions or requests for assistance concerning the
method of exercising Rights or additional copies of this Prospectus, the
Instructions or the Notice of Guaranteed Delivery may be directed to the
Information Agent at the telephone number and address below.
Morrow & Co., Inc.
909 Third Avenue
20th Floor
New York, New York 10022-4799
or
CALL TOLL-FREE
(800) - ______________
The Company will pay the fees and expenses of the Information Agent and
has also agreed to indemnify the Information Agent from certain liabilities
which it may incur in connection with the Rights Offering.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
CONDITIONS TO THE RIGHTS OFFERING
The issuance of shares pursuant to the exercise of the Rights is subject
to a number of conditions, including (i) the approval by the stockholders at
the Special Meeting of the increase in the authorized number of shares of the
Common Stock and the issuance of the Warrants and Warrant Shares, (ii) the
absence of any suit or other action seeking to enjoin the Rights Offering or
the Acquisition, (iii) no stockholder other than the Investor owning
beneficially after the Rights Offering more than 20% of the Common Stock of the
Company, (iv) the determination by the Board of Directors of the Company that
sufficient funds are available to the Company from the proceeds of this
offering, the sale of the Notes and other sources to enable it to complete the
Acquisition, and (v) the determination by the Board of Directors of the Company
that all of the conditions to the Acquisition have or are expected to be
satisfied or, if not satisfied, waived, or the Rights Offering is otherwise
terminated. In the event that the foregoing conditions to the Rights Offering
have not been satisfied by _________, 1995, all subscription payments will be
returned promptly, without interest or deduction.
AMENDMENTS AND TERMINATION
The Company may extend the Rights Offering and otherwise amend the terms
of the Rights Offering or terminate the Rights Offering at any time prior to
the Expiration Date or thereafter if the conditions to the Rights Offering have
not been satisfied.
SHARES OF THE COMMON STOCK OUTSTANDING AFTER THE RIGHTS OFFERING
Assuming the issuance of all of the shares offered hereby, approximately
5,619,615 shares of the Common Stock will be issued in connection with the
Rights Offering. Based on the 3,746,410 shares of the Common Stock outstanding
as of ____________, 1995, the issuance of such shares pursuant to the Rights
Offering would result (on a pro forma basis as of such date) in a 150% increase
in the number of outstanding shares of the Common Stock. Assuming the issuance
of 2,809,807 of the shares offered hereby, the issuance of such shares would
result (on a pro forma basis as of _____________, 1995) in a 75% increase in
the number of outstanding shares of the Common Stock.
FOREIGN AND CERTAIN OTHER STOCKHOLDERS
Subscription Certificates will not be mailed to holders whose addresses
are outside the United States or who have an APO or FPO address, but will be
held by the Subscription Agent for their account. To exercise such Rights,
such holders must notify the Subscription Agent on or prior to 5:00 p.m. New
York City time, on ________________, 1995.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Nelson Mullins Riley & Scarborough, L.L.P., the material
United States federal income tax consequences to holders of shares of the
Common Stock upon the issuance (the "Issuance") of the Rights, and to holders
of the Rights upon the exercise, lapse or disposition of the Rights, will be as
set forth below. This opinion is based upon laws, regulations, rulings and
decisions currently in effect. This opinion does not discuss all aspects of
federal income taxation that may be relevant to a particular investor or to
certain types of investors subject to special treatment under the federal
income tax laws (for example, banks, dealers in securities, life insurance
companies, tax exempt organizations and foreign taxpayers), and does not
discuss any aspect of state, local or foreign tax laws. This opinion is
limited to holders who will hold the Rights and any shares of the Common Stock
received therefor upon exercise as capital assets.
Issuance of the Rights. Holders of shares of the Common Stock will not
recognize taxable income, for federal income tax purposes, in connection with
the receipt of the Rights.
Basis and Holding Period of the Rights. Except as provided in the
following sentence, the basis of the Rights received by a holder of Common
Stock as a distribution with respect of such holder's shares of the Common
Stock will be zero. If either (i) the fair market value of the Rights on the
date of Issuance is 15% or more of the fair market value (on the date of
Issuance) of the shares of the Common Stock with respect to which they are
received or (ii) the holder of Common Stock elects, in his or her federal
income tax return for the taxable year in which the Rights are received, to
allocate part of the basis of such shares of the Common Stock to the Rights,
then upon exercise or sale of the Rights, the holder's basis in such shares of
the Common Stock will be allocated between the shares of the Common Stock and
the Rights in proportion to the fair market values of each on the date of
Issuance. The holding period of the Rights received by a holder as a
distribution on such holder's shares of the Common Stock will include the
holder's holding period (as of the date of Issuance) for the shares of the
Common Stock with respect to which the Rights were issued.
Lapse of the Rights. Holders of shares of the Common Stock who allow the
Rights received by them at the Issuance to lapse will not recognize any gain or
loss, and no adjustment will be made to the basis of the shares of the Common
Stock, if any, owned by such holders of the Rights.
Exercise of the Rights; Basis and Holding Period of Shares of the Common
Stock. Holders of the Rights will not recognize any gain or loss upon the
exercise of such Rights. The basis of the shares of the Common Stock acquired
through exercise of the Rights will generally be equal to the sum of the
Subscription Price therefor and the holder's basis in such Rights (if any).
The holding period for the shares of the Common Stock acquired through exercise
of the Rights will begin on the date such Rights are exercised.
THE FOREGOING IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH
HOLDER OF SHARES OF THE COMMON STOCK IS URGED TO CONSULT WITH HIS OR HER OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS
OR HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF
STATE AND LOCAL INCOME AND OTHER TAXES.
OTHER MATTERS
The Rights Offering is not being made in any state or other jurisdiction
in which it is unlawful to do so, nor is the Company selling or accepting any
offers to purchase any shares of the Common Stock from Rights holders who are
residents of any such state or other jurisdiction. The Company may delay the
commencement of the Rights Offering in certain states or other jurisdictions in
order to comply with the securities law requirements of such states or other
jurisdictions. It is not anticipated that there will be any changes in the
terms of the Rights Offering. The Company, if it so determines in its sole
discretion, may decline to make modifications to the terms of the Rights
Offering requested by certain states or other jurisdictions, in which event
Rights holders resident in those states or jurisdictions will not be eligible
to participate in the Rights Offering.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Company consists of 12,000,000 shares
of Common Stock, $.10 par value per share. As of June 30, 1995, the Company
had issued 5,200,562 shares of Common Stock, 3,746,410 of which were
outstanding and 1,454,152 of which were treasury shares. Holders of Common
Stock are entitled to one vote per share on all matters on which the holders of
Common Stock are entitled to vote and do not have any cumulative voting rights.
The holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors. The Company has a
longstanding policy of not paying cash dividends on the Common Stock in order
to reinvest earnings to support its business operations. The terms of the
Company's secured credit facilities and the Subordinated Financing Agreement
also restricts the payment of dividends on the Common Stock. See "Common Stock
Dividends and Price Range."
Holders of Common Stock have no preemptive, conversion, redemption or
sinking fund rights. In the event of a liquidation, dissolution or winding-up
of the Company, holders of Common Stock are entitled to share equally and
ratably in the assets of the Company, if any, remaining after the payment of
all debts and liabilities of the Company. The outstanding shares of Common
Stock are, and the shares of Common Stock issuable upon exercise of the Rights
when issued will be, fully paid and nonassessable.
For a description of the Rights to be distributed by the Company, see "The
Rights Offering." For a description of the Warrants to be issued to the
Investor and his financial advisor, see "Description of Subordinated
Financing - Warrants."
CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The provisions of the Company's Restated Certificate of Incorporation (the
"Certificate"), the Company's Amended and Restated Bylaws (the "Bylaws") and
the Delaware Corporation Law summarized in the following paragraphs may be
deemed to have anti-takeover effects and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider to be in such
stockholder's best interest, including those attempts that might result in a
premium over the market price for the shares held by stockholders, and may make
removal of management more difficult.
Authorized but Unissued Stock. The authorized but unissued shares of
Common Stock will be available for future issuance without stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved Common Stock may enable the Board of Directors to
issue shares to persons friendly to current management, which could render more
difficult or discourage any attempt to obtain control of the Company by means
of a proxy contest, tender offer, merger or otherwise, and thereby protect the
continuity of the Company's management.
The Board of Directors may also create and issue, without stockholder
approval, rights or options entitling the holders thereof to purchase from the
Company shares of the Company's Common Stock.
Number of Directors. The Certificate provides that the number of
directors of the Company shall be as provided in the Bylaws, but may not be
less than three and shall be seven if the Bylaws do not provide a number. The
Bylaws set the number of directors of the Company at six. This number may be
increased or decreased at any time by amendment of the Bylaws, subject to the
provisions of the Certificate.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of stockholder proposals
and stockholder nominations for the election of directors at any annual meeting
of stockholders must be in writing and be received at the principal executive
offices of the Company not less than 90 days in advance of the annual meeting.
The requirement to deliver notice to the Corporation a set number of days in
advance of an annual meeting shall mean that such notice must be delivered such
number of days in advance of the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed more than 60 days
from such anniversary, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which notice
of such meeting is first given to stockholders. For the purposes of this
Section, notice of an annual meeting shall be deemed to first be given to
stockholders when disclosure of such date is first made in a press release
reported by the Dow Jones News Services, Associated Press or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 and 15(d) of
the Securities Exchange Act of 1934, as amended. The Chairman of an annual
meeting shall, if the facts warrant, determine and declare to the annual
meeting that business was not properly brought before the meeting and if he
should so determine, he shall so declare to the annual meeting and any such
business not properly brought before the annual meeting shall not be
transacted. At any special meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
Approval of Business Combinations. The Certificate provides that subject
to certain exceptions summarized below and in addition to any affirmative vote
required by law or by the Certificate, approval of any Business Combination (as
hereinafter defined) requires the affirmative vote of at least two-thirds of
the outstanding Voting Shares (as hereinafter defined). For these purposes,
"Business Combination" shall mean:
(A) Any merger or consolidation of the Company or any subsidiary
with or into (i) any Interested Stockholder (as hereinafter defined) or
(ii) any other corporation which is, or after such merger or
consolidation, would be an Interested Stockholder or an affiliate of an
Interested Stockholder;
(B) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any Interested Stockholder or any affiliate of any
Interested Stockholder of any assets of the Company or any subsidiary
having an aggregate Fair Market Value of $1,000,000 or more in one
transaction or a series of related transactions;
(C) The issuance or transfer by the Company or any subsidiary of any
securities of the Company or any subsidiary to any Interested Stockholder
or any affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $1,000,000 or more in one transaction or a
series of related transactions; or
(D) The adoption of any plan for the liquidation or dissolution of
the Company proposed by or on behalf of an Interested Stockholder or any
affiliate of any Interested Stockholder.
"Voting Shares" shall mean all issued and outstanding shares of equity
securities and all rights to acquire any equity securities which are generally
entitled to vote in the election of directors.
The two-thirds voting requirement shall not apply to a particular Business
Combination if (i) any noncash consideration to be paid to holders of Common
Stock in such Business Combination is in the same form and bears the same
percentage to the total consideration as previously paid by the Interested
Stockholder in connection with its acquisition of beneficial ownership of
shares of Common Stock of the Company and (ii) the aggregate amount of cash and
the Fair Market Value of noncash consideration, determined as of the date of
the consummation of the Business Combination, to be received per share by the
holders of Common Stock in such Business Combination is at least equal to the
highest of the following:
(A) The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder for any Voting Shares acquired by it (1) within the
two-year period immediately prior to the date of the first public
announcement of the proposed Business Combination or (2) in the
transaction in which it became an Interested Stockholder, whichever is
higher;
(B) The Fair Market Value per share of Common Stock on the date of
the first public announcement of the proposed Business Combination or on
the date on which the Interested Stockholder became an Interested
Stockholder, whichever is higher; and
(C) The per share book value of the Common Stock as reported at the
end of the fiscal quarter immediately preceding the date of the first
public announcement of the proposed Business Combination.
The two-thirds voting requirement shall also not apply to a particular Business
Combination if the Business Combination has been approved by two-thirds of the
directors of the Company.
"Fair Market Value" shall mean: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the whole Board of Directors in good
faith; and (ii) in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as determined in good
faith by a majority of the whole Board of Directors.
"Interested Stockholder" shall mean any Person (other than the Company or
any corporation of which a majority of each class of equity securities is
owned, directly or indirectly, by the Company) which, as of the record date for
the determination of stockholders entitled to notice of and to vote on a
Business Combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares; or
(B) is an affiliate of the Company and at any time within two years
prior thereto was the beneficial owner, directly or indirectly, of not
less than 10% of the then outstanding Voting Shares; or
(C) is an assignee of or successor in interest to any shares of
capital stock of the Company which were at any time within two years prior
thereto beneficially owned by any Interested Stockholder, and such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
A majority of the whole Board of Directors shall have the power and duty
to determine on the basis of information known to them whether a person is an
Interested Stockholder, the number of Voting Shares beneficially owned by any
person, whether a person is an affiliate of another, whether a person has the
power to vote or dispose of Voting Shares or to direct the voting or
disposition of Voting Shares, whether the assets subject to any Business
Combination or the consideration received for the issuance or transfer of
securities by the corporation or any subsidiary or any Business Combination has
an aggregate Fair Market Value of $1,000,000 or more, or whether a person has
the right to acquire beneficial ownership of Voting Shares. The affirmative
vote of the holders of at least two-thirds of the Voting Shares shall also be
required to amend, repeal or adopt any provisions inconsistent with the two-
thirds votes required for Business Combinations.
Section 203 of the Delaware Corporation Law. Subject to certain
exclusions summarized below, Section 203 of the Delaware Corporation Law
("Section 203") prohibits any "Interested Stockholder" from engaging in a
"Business Combination" with a Delaware corporation for three years following
the date such person became an Interested Stockholder. For purposes of this
subsection, "Interested Stockholder" generally includes: (a)(i) any person who
is the beneficial owner of 15% or more of the outstanding voting stock of the
corporation or (ii) any person who is an affiliate or associate of the
corporation and who was the beneficial owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years before the date
on which such person's status as an Interested Stockholder is determined; and
(b) the affiliates and associates of such person. For purposes of this
subsection and subject to certain exceptions, a "Business Combination" includes
(i) any merger or consolidation of the corporation or a majority-owned
subsidiary of the corporation, (ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets of the corporation or a
majority-owned subsidiary of the corporation having an aggregate market value
equal to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation, (iii) any transaction that
results in the issuance or transfer by the corporation or a majority-owned
subsidiary of the corporation of any stock of the corporation or the subsidiary
to the Interested Stockholder, except pursuant to a transaction that effects a
pro rata distribution to all stockholders of the corporation, (iv) any
transaction involving the corporation or a majority-owned subsidiary of the
corporation that has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation or the subsidiary that is owned by the
Interested Stockholder, and (v) any receipt by the Interested Stockholder of
the benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation or a majority-owned subsidiary of the corporation.
Section 203 does not apply to a Business Combination if (i) before a
person became an Interested Stockholder, the Board of Directors of the
corporation approved either the transaction in which the Interested Stockholder
became an Interested Stockholder or the Business Combination, (ii) upon
consummation of the transaction that resulted in the person becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (other than certain excluded shares), or (iii) following a
transaction in which the person became an Interested Stockholder, the Business
Combination is (a) approved by the Board of Directors of the corporation and
(b) authorized at a regular or special meeting of stockholders (and not by
written consent) by the affirmative vote of the holders of at least two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Mellon
Securities Transfer Services, Ridgefield Park, New Jersey.
DESCRIPTION OF SUBORDINATED FINANCING
GENERAL
The Company and the Investor have agreed pursuant to the terms of a
Securities Purchase Agreement (the "Subordinated Financing Agreement") to the
issuance by the Company and the purchase by the Investor of up to $4.0 million
principal amount of Senior Secured Subordinated Notes (the "Notes") at par in
increments of $500,000. The Notes are issuable by the Company and, subject to
the terms and conditions of the Subordinated Financing Agreement, must be
purchased by the Investor from time to time at the election of the Company over
a one year period beginning on the date of closing by the Company of the
Acquisition (the "Acquisition Closing Date"). The Notes will mature on the
eighth anniversary of the Acquisition Closing Date, bear interest payable semi-
annually in arrears at a rate of 13.5% per annum and be repaid in six equal
semi-annual principal payments beginning six months after the fifth anniversary
of the Acquisition Closing Date. The Notes may be prepaid in whole or in part
in increments of at least $100,000, provided that partial prepayments will be
applied first to accrued interest and then to the unpaid principal installments
in the inverse order of maturity. The Notes must be prepaid in full at par,
plus accrued interest, upon a change in control of the Company. For these
purposes, a change in the control will be deemed to have occurred if (i) there
is a change during any consecutive twenty-four month period in the identity of
the persons constituting a majority of the Board of Directors of the Company
other than a change approved by the Investor or caused by the Investor and its
designees on the Board of Directors or (ii) the Investor's designees are no
longer serving as directors of the Company for any reason, other than their
death, resignation or refusal to stand for reelection or (iii) Michael T.
Crimmins shall no longer be serving as Chief Executive Officer for any reason,
other than death, permanent disability, refusal to serve or cause as defined in
the Subordinated Financing Agreement or the rights or duties of the Chief
Executive Officer shall have been reduced without the consent of the Investor.
The Notes will be subordinated to the Company's existing bank debt (the
"Senior Debt"), and will be secured by the capital stock of Rogers. The assets
of Rogers, other than its net working capital, will not be available for pledge
to secure the Senior Debt. The Secured Financing Agreement contains certain
financial and nonfinancial covenants typical for a subordinated financing.
WARRANTS
Pursuant to the terms of the Subordinated Financing Agreement, the Company
will issue 100,000 warrants to purchase Common Stock (the "Warrants") to the
Investor in exchange for a binding and irrevocable commitment from the Investor
to purchase the Notes upon demand by the Company (the "Commitment"), and will
pay $100,000 fee on the Acquisition Closing Date. Additional Warrants will be
issued upon the purchase by the Investor of the Notes from time to time at a
rate of 268,750 Warrants for each $500,000 of Notes purchased. The Company
will also issue 20,000 Warrants to Gary R. Griffith, the Investor's financial
advisor, upon receipt of the Commitment. Each Warrant will entitle the holder
thereof to purchase one share of the Common Stock at any time and from time to
time after the date of issuance thereof until the eighth anniversary of the
Acquisition Closing Date. The exercise price of each Warrant will be the
average of the closing prices for the Common Stock reported by the AMEX during
the twenty trading days preceding the issuance of the Warrant. The Warrants
will be transferable.
The number of Warrant Shares and the exercise price are subject to
adjustment for stock splits, stock dividends and distributions, subdivisions,
combinations and reclassification on, or of, the Common Stock and in the event
of the issuance of Common Stock (or rights therefore or securities convertible
thereto) at an effective price which is less than the market price per share of
the Common Stock. In addition, the number of Warrant Shares is subject to
adjustment for mergers, consolidations and sales of assets.
The purchase price of each Warrant will be 1/100th of $.01 (or an
aggregate of $227.00 for all of the Warrants to be issued), which will be paid
in cash by the Investor or his financial advisor, as applicable. The Warrants
issued on the Acquisition Closing Data shall have an exercise price equal to
the average closing price of the Common Stock during the 20 trading days prior
to the Acquisition Closing Data. The exercise price of any other Warrants
issued will be the average closing price of the Common Stock during the 20
trading days prior to the date of issuance thereof. The Warrants are payable
in cash or by the application of accrued interest on, and unpaid principal of,
the Notes in an equivalent amount.
CONDITIONS TO THE PURCHASE OF THE NOTES
The obligation of the Investor to purchase the Notes is subject to a
number of conditions, including (i) that there has been no material adverse
change in the financial condition, business, operations or prospects of the
Company and its subsidiaries or Rogers, (ii) that the issuance of the Warrants
and the Warrant Shares is approved by the stockholders of the Company, (iii)
that the Warrant Shares are approved for listing on AMEX, (iv) no stockholder
other than Michael T. Crimmins or his affiliates owning beneficially after the
Rights Offering more than 20% of the outstanding Common Stock of the Company,
(v) that the Board of Directors of the Company determines that sufficient funds
are available to the Company from the proceeds of the Rights Offering, the sale
of the Notes and other sources to enable to complete the Acquisition, (vi) the
absence of any litigation or proceeding challenging the legality or validity of
the Rights Offering or the issuance or sale of the Notes or Warrants or seeking
any change in control of the Company and (vii) the appointment of Michael T.
Crimmins as the Chief Executive Officer of the Company.
REGISTRATION RIGHTS
The Company has agreed, upon demand, to provide one registration under the
Securities Act of 1933, as amended (the "Securities Act"), for the Notes, the
Warrants and the Warrant Shares and the other Common Stock of the Investor and
to include all or a portion of the Warrant Shares and the other Common Stock of
the Investor in any other registrations by the Company under the Securities
Act, subject to certain conditions and exceptions.
LEGAL MATTERS
The legality of the Common Stock offered hereby has been passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated by reference in this Prospectus from Kinark Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated by reference herein. The consolidated financial
statements of Rogers Galvanizing Company as of and for the years ended
September 30, 1994, and 1993, set forth in this Prospectus have been audited by
Hogan & Slovacek, PC, independent auditors, as indicated in their report set
forth herein and the financial statements of Rogers Galvanizing Company for the
year ended September 30, 1992, set forth in this Prospectus have been audited
by Arthur Andersen LLP, independent auditors, as indicated in their report set
forth herein. The financial statements and financial statement schedule
referred to above have been incorporated by reference or included in reliance
upon the reports of such firms given upon their authority as experts in
accounting and auditing.
INDEX TO FINANCIAL STATEMENTS
Page
KINARK CORPORATION
Pro Forma
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1995 F-3
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Six Months Ended June 30, 1995, and the
Year Ended December 31, 1994 F-4
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements F-6
ROGERS GALVANIZING COMPANY
Unaudited
Unaudited Consolidated Balance Sheets as of June 30, 1995 F-8
Unaudited Consolidated Statements of Income and Retained Earnings
for the Nine Months Ended June 30, 1995 and 1994 F-9
Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 1995 and 1994 F-10
Notes to Unaudited Consolidated Financial Statements F-11
Audited
Independent Auditors' Report F-12
Independent Auditors' Report F-13
Consolidated Balance Sheets as of September 30, 1994, and 1993 F-14
Consolidated Statements of Income and Retained Earnings for the
Years Ended September 30, 1994, 1993, and 1992 F-15
Consolidated Statements of Cash Flows for the Years Ended September
30, 1994, 1993, and 1992 F-16
Notes to Consolidated Financial Statements F-17
PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following Pro Forma Consolidated Financial Data of Kinark Corporation
and subsidiaries (the "Company") consist of a Pro Forma Condensed Consolidated
Balance Sheet (unaudited) as of June 30, 1995 (the "Pro Forma Balance Sheet"),
and the Pro Forma Condensed Consolidated Statements of Operations (unaudited)
for the six-months ended June 30, 1995 and the year ended December 31, 1994
(the "1995 Pro Forma Statement of Operations" and "1994 Pro Forma Statement of
Operations," respectively).
The Pro Forma Balance Sheet reflects the combination of the balance sheets
of the Company and Rogers Galvanizing Company ("Rogers") as of June 30, 1995,
(i) as adjusted for the issuance 5,619,615 shares of the Company's common stock
in the Rights Offering (the "100% Case") and (ii) as adjusted for the issuance
of 2,809,807 shares of the Company's common stock in the Rights Offering and
the issuance of the $4,000,000 Senior Secured Subordinated Notes (the "50%
Case"). The Pro Forma Balance Sheet is presented as if the Rogers acquisition
and the stock sale had been consummated on June 30, 1995.
The 1995 Pro Forma Statement of Operations reflects the combination of the
income statements for the Company and Rogers for the six months ended June 30,
1995, as if such transactions were consummated on January 1, 1995. The 1994
Pro Forma Statement of Operations reflects the combination of the income
statements of the Company for the year ended December 31, 1994, and of Rogers
for its fiscal year ended September 30, 1994, as if the transaction was
consummated on January 1, 1994.
The acquisition of Rogers will be accounted for using the purchase method.
The Company has not completed its assessment of the fair values of Rogers'
assets and liabilities which are reflected in the accompanying Pro Forma
Balance Sheet at historical cost. The Company expects to finalize its fair
value assessment in 1995 and does not expect that fair values will differ
materially from historical amounts. Accordingly, the final consolidated
amounts may differ from those set forth herein.
The Pro Forma Consolidated Financial Data should be read in conjunction
with the separate historical financial statements of the Company and Rogers,
the related notes and the Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company incorporated by reference in
this Prospectus. The Pro Forma Consolidated Financial Data are based upon
currently available information and upon certain assumptions that the Company
believes are reasonable under the circumstances. The Pro Forma Consolidated
Financial Data do not purport to represent what the Company's financial
position or results of operations would actually have been if the
aforementioned transactions in fact had occurred on such date or at the
beginning of the periods indicated or to project the Company's financial
position or results of operations at any future date or for any future period.
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1995
Kinark 100% Case 50% Case
Kinark Kinpak Adjusted Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Elimination(b) Historical Historical Adjustments Combined Adjustments Combined
(In thousands)
ASSETS
Current Assets:
Cash $37 $38 $75 $461 $10,854(c) $536 $9,175(j) $560
(9,151)(f) (9,151)(m)
(1,703)(g)
Receivables, net 5,016 (1,462) 3,554 2,554 -- 6,108 -- 6,108
Net asset of
discontined opertions -- 2,384 2,384 -- -- 2,384 -- 2,384
Inventories 3,030 (579) 2,451 861 -- 3,312 -- 3,312
Prepaid assets 478 (64) 414 72 -- 486 -- 486
Total current assets 8,561 317 8,878 3,948 -- 12,826 24 12,850
Fixed assets, net 10,765 (1,612) 9,153 3,432 -- 12,585 -- 12,585
Other assets:
Deferred income taxes 1,803 1,803 207 -- 2,010 -- 2,010
Other assets 769 (557) 212 -- -- 212 120(j) 332
Excess of cost over
fair value of net
assets acquired -- -- -- -- 4,865(f) 4,865 4,865(m) 4,865
Total other assets 2,572 (557) 2,015 207 4,847 7,087 4,967 7,207
Total Assets 21,898 (1,852) 20,046 7,587 4,847 32,498 4,991 32,642
LIABILITIES AND
SHAREHOLDERS EQUITY
Current liabilities:
Long-term debt-current 801 (210) 591 829 1,420 1,420
Accrued retirement
liabilities -- -- -- 19 19 19
Accounts payable 1,536 (474) 1,062 780 1,842 1,842
Insurance reserves -- -- -- 452 452 452
Accrued expenses-other 2,667 (199) 2,468 325 2,793 2,793
Accrued income taxes 140 -- 140 135 275 275
Total current
liabilities 5,144 (883) 4,261 2,540 6,801 6,801
Deferred income taxes 127 127 127
Long-term debt 7,454 (969) 6,485 243 (1,703)(g) 5,025 6,728
Accrued retirement -- -- -- 84 -- 84 84
Lease obligations -- -- -- 307 -- 307 307
Subordinated notes -- -- -- -- -- -- 4,000(j) 4,000
Total long-term
liabilities 7,454 (969) 6,485 761 (1,703) 5,543 4,000 11,246
Total liabilities 12,598 (1,852) 10,746 3,301 (1,703) 12,344 4,000 18,047
Shareholder's Equity:
Common Stock 520 -- 520 117 417(c) 937 136(j) 656
(117)(d) (117)(n)
Additional paid-in
capital 10,531 -- 10,531 104 4,460(c) 14,991 (818)(j) 9,713
(104)(d) (104)(j)
Treasury stock (5,977) -- (5,977) -- 5,977(c) -- 5,977(j) --
Retained earnings 4,226 4,226 4,065 (4,065)(d) 4,226 (4,065)(n) 4,226
Total shareholders'
equity 9,300 9,300 4,286 6,550 20,154 991 14,595
Total liabilities and
shareholders equity 21,898 (1,852) 20,046 7,587 4,847 32,498 4,991 32,642
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
Kinark 100% Case 50% Case
Kinark Kinpak Adjusted Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Elimination(b) Historical Historical Adjustments Combined Adjustments Combined
(In thousands, except per share data)
SALES $17,029 $4,259 $12,770 $9,190 $21,960 $21,960
COSTS AND EXPENSES:
Costs of sales 12,716 2,319 10,397 6,774 17,171 17,171
Selling, general and
administrative 4,183 2,111 2,072 1,173 (180) 3,065 (180) 3,065
Depreciation and
amortization 946 150 796 425 97(e) 1,318 97(l) 1,318
Operating earnings
(loss) (816) (321) (495) 818 83 406 83 406
OTHER (INCOME) EXPENSE:
Interest expense (net) 355 45 310 80 (85)(g) 305 278(k) 668
Other (income) expense -- -- -- (60) -- (60) -- (60)
Other expenses, net 355 45 310 20 (85) 245 278 608
Earnings (loss) from
continuing operations
before income taxes (1,171) 366 (805) 798 168 161 (195) (202)
Income taxes (427) (134) (293) 240 (97)(h) (150) (36)(p) (89)
Earnings (loss) from
continuing operations (744) (232) (512) 558 265 311 (159) (113)
Earnings (loss) per
share (0.20) (0.14) 0.03 (0.02)
Weighted average shares
outstanding 3,747 3,747 5,620 9,366(i) 2,810 6,567(o)
See notes to Pro Forma Condensed Consolidated Financial Statements
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
Kinark 100% Case 50% Case
Kinark Kinpak Adjusted Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Elimination(b) Historical Historical Adjustments Combined Adjustments Combined
(In thousands, except per share data)
SALES $34,782 $8,559 $26,223 $12,624 $38,847 $38,847
COSTS AND EXPENSES:
Costs of sales 23,646 4,646 19,000 9,448 28,448 28,448
Selling, general and
administrative 8,080 4,462 3,618 2,127 (404) 5,341 (404) 5,341
Depreciation and
amortization 1,771 302 1,469 671 195(e) 2,335 195(l) 2,335
Operating earnings
(loss) 1,285 (851) 2,136 378 209 2,723 209 2,723
OTHER (INCOME) EXPENSE:
Interest expense (net) 599 96 503 19 (153)(g) 369 555(k) 1,007
Other (income) expense 95 -- 95 (70) -- 25 -- 25
Other expenses, net 694 96 598 (51) (153) 394 555 1,102
Earnings (loss) from
continuing operations
before income taxes 591 (947) 1,538 429 362 2,329 (346) 1,621
Income taxes 181 (346) 527 104 203(h) 834 (55)(j) 576
Earnings (loss) from
continuing operations 410 (601) 1,011 325 159 1,495 (291) 1,045
Earnings (loss) per
share 0.11 0.27 0.16 0.16
Weighted average shares
outstanding 3,752 3,752 5,620 9,372(i) 2,810 6,562(o)
See notes to Pro Forma Condensed Consolidated Financial Statements
KINARK CORPORATION
NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(a) The historical information for Rogers Galvanizing Company ("Rogers") in
the accompanying proforma condensed consolidated statement of operations
for the year ended December 31, 1994 is based on that company's September
30, 1994 fiscal year
(b) During August, 1995, management of Kinark Corporation (the "Company")
finalized a formal plan to discontinue the operations of its subsidiary,
Kinpak, Inc. The estimated pre-tax loss on disposal of this subsidiary is
$1,525 including $185 of estimated operating losses to be incurred during
the disposal period. This estimated loss is not reflected in the
accompanying proforma financial statements. The Kinpak, Inc. elimination
presented in the accompanying proforma financial statements reflects
entity's assets, liabilities and operations based on historical cost.
Pro Forma Adjustments - 100% Case:
(c) Reflects the issuance of 5,619,615 shares of the Company's common stock at
$2.00 per share through the Rights Offering resulting in net proceeds of
$10,854, an increase in common stock of $417 and additional paid in
capital of $4,460 (net of cost of treasury stock issued and stock issuance
costs of $385).
(d) To reflect the elimination of Rogers' shareholders' equity.
(e) Adjustments to reflect (i) the amortization of the excess of cost over
fair value of net assets acquired in the Roger acquisition using a
straight-line method over 25 years and (ii) the elimination of salary and
benefits relating to Roger's Chairman of the Board who will retire
effective upon the acquisition by the Company.
(f) Adjustment to reflect the purchase of Rogers common stock. For purposes
of these proforma statements, the historical amounts of Rogers' assets and
liabilities have not been adjusted to fair value. Based upon current
estimates, fair values are not expected to differ materially from such
historical cost amounts. Adjustments based upon final determination of
the fair values of assets acquired and liabilities assumed will be made as
of the closing date. The excess of costs over fair value of net assets
acquired is as follows:
Purchase cost:
Purchase price $8,321
Acquisition costs 830
Total cash expended 9,151
Liabilities assumed 3,301
Total purchase cost 12,452
Assets acquired 7,587
Excess of cost over fair value
of net assets acquired $4,865
(g) Adjustment reflects reduction of revolving line of credit using excess
proceeds of Rights Offering and the resultant decrease in interest
expense. Interest on the revolving line of credit is assumed to have an
effective rate of 9% for the year ended December 31, 1994 and 10% for the
six months ended June 30, 1995.
(h) To reflect the tax effects of pro-forma adjustments using a 36% effective
tax rate.
(i) Reflects the historical weighted average shares outstanding adjusted for
issuance of 5,619,615 shares under the Rights Offering.
Pro Forma Adjustments - 50% Case:
(j) Reflects the issuance of 2,809,807 shares of the Company's common stock at
$2.00 per share through the Rights Offering resulting in net proceeds of
$5,295, an increase in common stock of $136 and a decrease to additional
paid in capital of $818 (net of cost of treasury stock issued and stock
issuance costs of $325); and the issuance $4,000 Senior Secured
Subordinated Notes. Debt issuance costs of $120 are recorded in Other
Assets.
(k) To reflect additional interest expense and amortization of debt issuance
costs of $4,000 of Senior Secured Subordinated Notes. The Senior Secured
Subordinated Notes bear interest payable semi-annually in arrears at a
rate of 13.5% per annum.
(l) Adjustments to reflect (i) the amortization of the excess of cost over
fair value of net assets acquired in the Rogers acquisition using a
straight-line method over 25 years and (ii) the elimination of salary and
benefits relating to Roger's Chairman of the Board who will retire
effective upon the acquisition by the Company.
(m) Adjustment to reflect the purchase of Rogers common stock. For purposes
of these proforma statements, the historical cost amounts of Rogers'
assets and liabilities have not been adjusted to fair value. Based upon
current estimates, fair values are not expected to differ materially from
such historical amounts. Adjustments based upon final determination of
the fair values of assets acquired and liabilities assumed will be made as
of the closing date. The excess of costs over fair value of net assets
acquired is as follows:
Purchase cost:
Purchase price $8,321
Acquisition costs 830
Total cash expended 9,151
Liabilities assumed 3,301
Total purchase cost 12,452
Assets acquired 7,497
Excess of cost over fair
value of net
assets acquired $4,865
(n) To reflect the elimination of Rogers' shareholders' equity.
(o) Reflects the historical weighted average shares outstanding adjusted for
issuance of 2,809,807 shares under the Rights Offering. For purposes of
computing earnings (loss) per share, the effects of the exercise of
Warrants issued in connection with the Senior Secured Subordinated Notes
determined under the treasury stock method was antidilutive.
(p) To reflect the tax effects of pro-forma adjustments using a 36% effective
tax rate.
ROGERS GALVANIZING COMPANY
Consolidated Balance Sheet (Unaudited)
June 30, 1995
1995
CURRENT ASSETS:
Cash $ 461,042
Accounts receivable, less reserve for doubtful accounts of
$64,433 in 1995 and $51,138 in 1994 2,553,479
Inventories 861,225
Income taxes receivable --
Deferred income taxes 207,000
Prepaid expenses 72,114
Total current assets 4,154,860
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 175,172
Galvanizing plants and equipment 6,682,642
Other 244,507
7,102,321
Less-accumulated depreciation 3,670,180
Total property, plant and equipment 3,432,141
$7,587,001
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $828,969
Accounts payable 780,360
Accrued workers' compensation liability 361,114
Accrued employee health liability 90,667
Accrued retirement 18,974
Accrued payroll and payroll taxes 309,757
Other accrued liabilities 15,492
Income taxes payable 134,810
Total current liabilities 2,540,143
DEFERRED INCOME TAXES 127,000
ACCRUED RETIREMENT 83,502
LONG-TERM DEBT 549,779
COMMITMENTS AND CONTINGENCIES --
SHAREHOLDERS' EQUITY:
Common shares, $100 par value, 1,967 shares authorized,
1,172 shares outstanding 117,200
Capital surplus 103,451
Retained earnings 4,065,926
Total shareholders' equity 4,286,577
$7,587,001
The accompanying notes are an integral part of these financial statements.
ROGERS GALVANIZING COMPANY
Consolidated Statements of Income and Retained Earnings (Unaudited)
For the Nine Months Ended June 30, 1995 and 1994
1995 1994
Sales $13,284,968 $9,224,683
Costs and expenses:
Costs of sales 9,555,746 6,908,029
Selling, general & administrative 1,889,266 1,419,771
Depreciation 604,597 440,000
Operating earnings 1,235,359 456,883
Other (income) expense:
Interest expense, net 110,824 15,469
Other (94,730) (51,483)
Earnings before income taxes 1,219,265 492,897
Income tax expense 452,053 110,186
Net earnings 767,212 382,711
Retained earnings, beginning of period 3,467,482 3,603,133
Dividends paid ($144 per share in 1993 and
$344 in 1994 (168,768) (403,168)
Retained earnings, end of period $4,065,926 $3,582,676
The accompanying notes are an integral part of these financial statements.
ROGERS GALVANIZING COMPANY
Consolidated Statements of Cash Flows (Unaudited)
For The Nine Months Ended June 30, 1995 and 1994
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $767,212 $382,711
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 660,438 494,850
Deferred income taxes 37,000 (34,000)
Changes in operating assets and
liabilities:
(Increase) decrease in accounts receivable (396,903) 138,159
(Increase) in inventories (221,730) (25,181)
(Increase) decrease in income taxes receivable 37,000 (25,811)
(Increase) in prepaid expenses (14,003) (13,234)
Increase (decrease) in accounts payable (78,456) 36,599
Increase in workers' compensation liability 50,434 99,397
Increase in accrued employee health liability 10,714 2,519
Increase (decrease) in accrued payroll and
payroll taxes 126,987 (155,423)
(Decrease) in other accrued liabilities (1,023) (4,365)
Increase (decrease) in income taxes payable 134,810 (129,745)
(Decrease) in accrued retirement (18,749) (17,671)
Total adjustments 326,519 366,094
Net cash provided by operating
activities 1,093,731 748,805
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant and equipment (711,511) (536,609)
Net cash used in investing activities (711,511) (536,609)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (168,768) (403,168)
Proceeds from debt 690,421 950,000
Payments on debt (843,937) (539,513)
Net cash provided by (used in) financing
activities (322,284) 7,319
NET INCREASE IN CASH 59,936 219,515
CASH, beginning of period 401,106 528,665
CASH, end of period $461,042 $748,180
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $124,342 $ 25,346
Income taxes paid $225,000 $295,000
The accompanying notes are an integral part of these financial statements.
ROGERS GALVANIZING COMPANY
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Months Ended June 30, 1995 and 1994
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by Rogers
Galvanizing Company (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission for interim reporting and include all
normal and recurring adjustments which are, in the opinion of management,
necessary for a fair presentation. These financial statements have not been
audited by an independent accountant. The consolidated financial statements
include the accounts of the Company and its subsidiaries, Reinforcing Services,
Inc. and Spin-Galv, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations for
interim reporting. The Company believes that the disclosures are adequate to
make the information presented not misleading. However, these financial
statements should be read in conjunction with the financial statements and
notes thereto included elsewhere in this Registration Statement for the years
ended September 30, 1994, 1993 and 1992. The financial data for the interim
periods presented may not necessarily reflect the results to be anticipated for
the complete year.
2. INVENTORIES
Inventories are composed, primarily, of raw zinc "pigs", molten zinc in
galvanizing kettles and other chemicals and materials used in the galvanizing
process. Molten zinc is stated at the lower of cost or market, with cost
determined by the last-in, first-out (LIFO) method. All other inventories are
stated at the lower of cost or market, with cost determined by the first-in,
first-out (FIFO) method.
3. PLANNED ACQUISITION
The Company has recently entered into an agreement to purchase the assets of a
small galvanizing company for cash and debt of approximately $750,000 to
$925,000 depending on the amount of inventory on hand at the date of closing.
The Company expects this acquisition to be consummated before September 30,
1995.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Rogers Galvanizing Company:
We have audited the accompanying consolidated balance sheets of Rogers
Galvanizing Company and subsidiaries as of September 30, 1994 and 1993, and the
related consolidated statements of income and retained earnings and cash flows
for each of the two years ended September 30, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 audits 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 financial position of Rogers Galvanizing
Company and subsidiaries as of September 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the two years ended September
30, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 10 to the financial statements, management has determined
that the appropriate accounting treatment for a certain building lease entered
into in 1994 is an operating lease instead of a capital lease as it was
originally presented in the financial statements as of September 30, 1994 and
for the year then ended. Accordingly, the 1994 financial statements have been
restated to more appropriately reflect that particular lease.
/s/ Hogan & Slovacek
November 17, 1994,
except as to Note 10
which is August 16, 1995
Tulsa, Oklahoma
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Rogers Galvanizing Company:
We have audited the accompanying statements of income and cash flows of Rogers
Galvanizing Company (a Delaware corporation) for the year ended September 30,
1992. 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 statements of income and cash
flows are free of material misstatement. An audit includes examining on a test
basis, evidence supporting the amounts and disclosures in the statements of
income and cash flows. 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 statements of income and cash flows referred to above
present fairly, in all material respects, the results of operations and cash
flows of Rogers Galvanizing Company for the year ended September 30, 1992, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen, LLP
Tulsa, Oklahoma
October 26, 1992
ROGERS GALVANIZING COMPANY
Consolidated Balance Sheets
September 30, 1994 and 1993
1994 1993
CURRENT ASSETS:
Cash $401,106 $528,665
Accounts receivable, less reserve for
doubtful accounts of $45,138 in 1994
and $44,925 in 1993 2,156,576 1,732,403
Inventories 639,495 453,870
Income taxes receivable 37,000 20,000
Deferred income taxes 178,500 162,000
Prepaid expenses 58,111 37,746
Total current assets 3,470,788 2,934,684
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 175,172 175,172
Galvanizing plants and equipment 5,997,857 4,622,936
Other 216,631 152,209
6,389,660 4,950,317
Less-accumulated depreciation 3,008,592 2,336,912
Total property, plant and equipment 3,381,068 2,613,405
$6,851,856 $5,548,089
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $877,464 $26,109
Accounts payable 858,816 537,445
Accrued workers' compensation liability 310,680 252,853
Accrued employee health liability 79,953 97,278
Accrued retirement 25,252 23,317
Accrued payroll and payroll taxes 182,770 325,645
Other accrued liabilities 16,515 27,351
Income taxes payable -- 129,745
Total current liabilities 2,351,450 1,419,743
DEFERRED INCOME TAXES 61,500 74,000
ACCRUED RETIREMENT 95,973 121,225
LONG-TERM DEBT 654,800 109,337
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Common shares, $100 par value, 1,967 shares
authorized, 1,172 shares outstanding 117,200 117,200
Capital surplus 103,451 103,451
Retained earnings, per accompanying statements 3,467,482 3,603,133
Total shareholders' equity 3,688,133 3,823,784
$6,851,856 $5,548,089
The accompanying notes are an integral part of these financial statements.
ROGERS GALVANIZING COMPANY
Consolidated Statements of Income and Retained Earnings
For the Years Ended September 30, 1994, 1993 and 1992
1994 1993 1992
Sales $12,624,796 $11,544,123 $10,907,159
Costs and expenses:
Costs of sales 9,447,974 7,806,927 8,190,603
Selling, general &
administrative 2,127,505 1,713,037 1,431,979
Depreciation 671,681 550,108 473,754
Operating earnings 377,636 1,474,051 810,823
Other (income) expense:
Interest expense, net 19,290 22,466 36,396
Other (69,427) (66,389) (44,241)
Earnings before income taxes 427,773 1,517,974 818,668
Income tax expense 104,000 511,000 312,000
Net earnings 323,773 1,006,974 506,668
Retained earnings, beginning of
year 3,603,133 2,821,183 2,539,539
Dividends paid ($392 per share in
1994 and $192 in 1993 and 1992) (459,424) (225,024) (225,024)
Retained earnings, end of year $3,467,482 $3,603,133 $2,821,183
The accompanying notes are an integral part of these financial statements.
ROGERS GALVANIZING COMPANY
Consolidated Statements of Cash Flows
For The Years Ended September 30, 1994, 1993 and 1992
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $323,773 $1,006,974 $506,668
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 671,681 550,108 473,754
Deferred income taxes (29,000) (61,000) 98,000
Changes in operating
assets and liabilities:
(Increase) decrease in
accounts receivable (424,173) (470,087) 123,945
(Increase) in
inventories (71,951) (62,672) (70,918)
(Increase) decrease
in income taxes
receivable (17,000) 27,598 (47,598)
(Increase) decrease
in prepaid expenses (20,365) (19,638) 6,597
Increase (decrease)
in accounts payable 321,371 95,965 (88,612)
Increase in workers'
compensation liability 57,827 118,702 25,574
Increase (decrease)
in accrued employee
health liability (17,325) 97,278 --
Increase (decrease) in
accrued payroll and
payroll taxes (142,875) 130,255 80,218
Increase (decrease) in
other accrued
liabilities (10,836) 8,265 9,337
Increase (decrease)
in income taxes
payable (129,745) 129,745 (123,928)
(Decrease) in accrued
retirement (23,317) (88,170) (75,751)
Total adjustments 164,292 456,349 410,618
Net cash provided by
operating activities 488,065 1,463,323 917,286
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property,
plant and equipment (972,825) (922,582) (595,797)
Net cash used in
investing activities (972,825) (922,582) (595,797)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (459,424) (225,024) (225,024)
Proceeds from debt 900,000 -- 550,000
Payments on debt (83,375) (24,554) (750,610)
Net cash provided by
(used in) financing
activities 357,201 (249,578) (425,634)
NET INCREASE (DECREASE) IN CASH (127,559) 291,163 (104,145)
CASH, beginning of year 528,665 237,502 341,647
CASH, end of year $401,106 $528,665 $237,502
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Interest paid $34,255 $29,941 $44,531
Income taxes paid $214,742 $414,657 $372,431
The accompanying notes are an integral part of these financial statements.
ROGERS GALVANIZING COMPANY
Notes to Consolidated Financial Statements
September 30, 1994, 1993 and 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Rogers Galvanizing Company (the Parent Company) is engaged in the hot dip
galvanizing of steel structures and components to customer specifications.
During 1994, two new subsidiaries, Reinforcing Services, Inc. and Spin-Galv,
Inc. were formed. They perform services similar to those of the Parent
Company, but for more specialized areas.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Rogers Galvanizing Company and its wholly-owned subsidiaries, Reinforcing
Services, Inc. and Spin-Galv, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
Inventories
Inventories are composed, primarily, of raw zinc "pigs", molten zinc in
galvanizing kettles and other chemicals and materials used in the galvanizing
process. Molten zinc is stated at the lower of cost or market, with cost
determined by the last-in, first-out (LIFO) method. All other inventories are
stated at the lower of cost or market, with cost determined by the first-in,
first-out (FIFO) method.
The molten zinc valued on a LIFO basis in the September 30, 1994 and 1993
financial statements was $503,623 and $372,440, respectively. The
corresponding approximate replacement cost for this inventory was $952,300 and
$809,500 at September 30, 1994 and 1993, respectively.
Property, Plant and Equipment
Depreciation is provided using accelerated and straight-line methods over the
estimated useful lives of the related property, ranging from three to 20 years.
During 1994, the Company capitalized $15,619 of interest incurred after
entering into a capitalized equipment lease obligation until the equipment was
placed in service.
Reclassifications
Certain amounts in the 1992 and 1993 financial statements have been
reclassified to conform with the presentation in 1994.
2. INCOME TAXES
The provision for income taxes consists of the following for the years ended
September 30, 1994, 1993 and 1992:
1994 1993 1992
Current:
Federal $133,000 $572,000 $214,000
State -- -- --
133,000 572,000 214,000
Deferred:
Federal (29,000) (61,000) 98,000
State -- -- --
$104,000 $511,000 $312,000
The income tax rate for financial reporting purposes varies from the federal
statutory rate as follows:
1994 1993 1992
Percent of pretax income:
Federal statutory
income tax rate 34.0 % 34.0 % 34.0%
Non-deductible permanent
differences 1.7 .4 1.3
Adjustment of prior year's
estimated liability (9.7) -- --
Other items (1.7) (.7) 2.8
Effective income tax
rate for the year 24.3 % 33.7 % 38.1%
Significant components of the Company's deferred tax liabilities and assets at
September 30, 1994 and 1993 are as follows:
1994 1993
Deferred tax liabilities:
Tax over book depreciation $98,500 $121,000
Deferred tax assets:
Accrued retirement 46,900 56,000
Self insured insurance
programs 151,100 135,600
Reserve for doubtful accounts 17,500 17,400
215,500 209,000
Net deferred tax assets $117,000 $88,000
Based on the Company's history of operating earnings and its expectations for
future operation, management believes that operating income will be sufficient
to allow the full realization of deferred tax assets.
Effective October 1, 1992, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." There was no significant cumulative effect of the accounting
change.
3. ACCRUED RETIREMENT
At September 30, 1992, the Company was making monthly retirement payments to
two retired company executives. During the year ended September 30, 1993, one
of the retired executives died. The liability to the remaining executive was
adjusted to estimated remaining payments to be made as calculated by an
insurance company using standard mortality tables and recorded at net present
value using an 8 percent interest rate.
4. LINE OF CREDIT AND LONG-TERM DEBT
The Company's line of credit and long-term debt consisted of the following at
September 30:
1994 1993
Combined revolving bank line of credit, up
to $2,500,000 through April 14, 1995,
interest payable monthly at floating prime
plus .5%, (8.25% at September 30, 1994)
secured by certain of the Company's
machinery and equipment, and its inventories
and accounts receivable, restricts payment
of cash dividends to not more than net
income, line is limited to $2,200,000 by
a $300,000 workers' compensation self-
insurance letter of credit required by
Oklahoma's Workers' Compensation Court
as discussed in Note 5. $650,000 $--
Note payable to bank in monthly
installments of $3,097 including interest
at 7.2%, final payment due October, 1996,
secured by specific equipment 69,029 --
Note payable to bank in monthly
installments of $4,684 including interest
at floating prime plus .5% (8.25% at
September 30, 1994), final payment due
June, 1997, secured by equipment,
receivables, and inventory 142,828 --
Note payable to an unrelated Company,
payable in monthly installments of $3,331
including interest at 3.5%, final payment
due July, 1997, unsecured 107,661 --
Capitalized lease obligation for equipment 453,422 --
Unsecured note payable to a Company,
payable in monthly installments of $3,000,
including interest at 8%, through March,
1998 109,324 135,446
1,532,264 135,446
Less current maturities 877,464 26,109
$654,800 $109,337
The aggregate maturities of this debt
are as follows:
1995 $877,464
1996 245,353
1997 209,261
1998 123,209
1999 76,977
$1,532,264
5. WORKERS' COMPENSATION INSURANCE
The Company utilizes a self-insurance program for workers' compensation. This
program is limited to losses of $300,000 per claim, and aggregate losses of
$5,000,000 over a two-year period through the use of a stop-loss policy. As
required by Oklahoma's Workers' Compensation Court, the Company has a $300,000
letter of credit with a bank to ensure the Company's ability to pay workers'
compensation claims. This letter of credit is included in the $2,500,000
revolving bank line of credit described in Note 4. Claims are accrued based on
the Company's estimate of the aggregate liability for claims made and for
potential claims. The Company provided $813,195, $329,499 and $216,636 for
workers' compensation claims for the years ended September 30, 1994, 1993 and
1992, respectively. In addition, the Company incurred $67,546, $68,573 and
$66,920 for reinsurance and administrative expenses for the years ended
September 30, 1994, 1993 and 1992, respectively.
6. EMPLOYEE HEALTH INSURANCE
The Company adopted a self-insured program for employee health benefits on June
1, 1993. Under this program, responsibility for employee health care costs are
assumed by the Company with incurred costs above a specified amount covered by
a stop-loss insurance policy. For the years ended September 30, 1994 and 1993,
respectively, the Company provided $475,615 and $155,228 for employee health
care costs and paid out $334,699 and $1,404 in employee health care claims and
incurred $158,241 and $56,725 in administrative costs and stop-loss insurance
premiums.
7. NON-CASH TRANSACTIONS
During 1992, the company purchased certain real estate for $190,000 by paying
$30,000 in cash and signing a $160,000 note payable to the seller.
Accordingly, the $30,000 cash payment is included in the statements of cash
flows as additions to the property, plant and equipment.
During 1994, the Company entered into a capital lease obligation for equipment
totalling $466,519. In addition, the Company purchased inventory of $113,673
by issuing a note payable to an unrelated company.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising from time
to time in the ordinary course of business. In the opinion of Management, the
ultimate disposition of these matters will not have a material adverse effect
on the Company's financial position.
During 1994, the Company entered into long-term operating lease agreements for
the use of facilities at its two subsidiaries. Future related lease
obligations are as follows for the years ended September 30, 1995 - $127,986,
1996 - $127,986, 1997 - $109,986, 1998 - $103,986 and 1999 - $86,665. Rent
expense for these facilities during 1994 was $29,210.
9. OBLIGATIONS UNDER CAPITAL LEASE
The Company acquired certain equipment under provisions of a long-term lease.
For financial reporting purposes, minimum lease rentals for the assets have
been capitalized. The following is a schedule of leased equipment under the
capital lease:
Capitalized cost $466,519
Less accumulated depreciated 9,719
$455,800
The following is a schedule by years of future minimum lease payments,
including renewal options, together with the present value of the net minimum
lease payments as of September 30, 1994:
Year Ended September 30,
1995 $116,514
1996 116,514
1997 116,514
1998 116,514
1999 73,990
Total minimum lease payments 540,046
Less amount representing interest 86,624
Present value of net minimum lease payments $453,422
Current portion $83,408
Long-term portion 370,014
$453,422
The present value of net minimum lease payments are combined with other long-
term debt in the accompanying financial statements and Note 4.
10. CHANGE IN PREVIOUSLY-ISSUED FINANCIAL STATEMENTS
During the year ended September 30, 1994, the Company entered into lease
agreements relating to certain equipment and real estate. Both leases were
originally treated as capital leases for financial reporting purposes.
Management has subsequently determined the real estate lease did not meet the
requirements for capitalization. Accordingly the accompanying financial
statements have been restated as of September 30, 1994 and for the year then
ended. The effect of this restatement was to increase net income by $11,130;
reduce net property, plant and equipment by $722,953 and reduce recorded debt
by $734,083.
KINARK
CORPORATION
7060 SOUTH YALE
TULSA, OKLAHOMA 74136
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders (the
"Special Meeting") of Kinark Corporation (the "Company") will be held on
____________, ____________, 1995, at 1:00 p.m., local time at the Company's
offices at 7060 South Yale, Tulsa, Oklahoma 74136 for the purpose of
considering and voting upon:
1. Approval of an amendment to the Company's Restated Certificate
of Incorporation increasing the number of authorized shares of the
Company's common stock to 18,000,000.
2. Approval of the issuance of warrants (the "Warrants") covering
up to 2,270,000 shares of common stock of the Company (the "Warrant
Shares") to be issued to the Chairman of the Board of the Company, Michael
T. Crimmins (the "Investor") and his financial advisor, in connection with
the Investor's purchase of up to $4.0 million principal amount of senior
subordinated notes (the "Notes") to be issued by the Company, and the
issuance of the Warrant Shares upon the exercise of the Warrants.
3. Such other matters as may properly come before the Special
Meeting or any adjournment thereof.
Only stockholders of record at 5:00 p.m. New York City time on
____________, ____________, 1995, are entitled to notice of and to vote at the
meeting or any adjournment thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. To ensure a quorum for the meeting, please sign, date and
return the proxy promptly to the Company's subscription agent for the
accompanying rights offering, Mellon Securities Transfer Services, 85
Challenger Road, Ridgefield park, New Jersey 07660-2108, in the enclosed
business reply envelope. If you attend the meeting, you may revoke your proxy
and vote in person.
By Order of the Board of Directors
Paul R. Chastain
President and Chief Executive Officer
____________, 1995
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY BE
RECORDED.
KINARK
CORPORATION
7060 SOUTH YALE
TULSA, OKLAHOMA 74136
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ________________, 1995
This Proxy Statement is being furnished to the stockholders of Kinark
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at a Special Meeting of
Stockholders of the Company (the "Special Meeting") to be held on ____________,
____________, 1995, at the Company's offices located at 7060 South Yale, Tulsa,
Oklahoma 74136, at 1:00 p.m., local time, and at any adjournment thereof. It
is anticipated that this Proxy Statement and the accompanying proxy will be
mailed to stockholders on or about _________________, 1995.
VOTING
GENERAL
The securities that can be voted at the Special Meeting consist of the
common stock, $.10 par value per share, of the Company (the "Common Stock"),
with each share entitling its owner to one vote on each matter submitted to the
stockholders. The record of stockholders entitled to vote at the Special
Meeting was taken as of 5:00 p.m. New York City time on ____________,
____________, 1995. On that date the Company had outstanding and entitled to
vote 3,746,410 shares of Common Stock. Shares of Common Stock belonging to the
Company shall not be voted, directly or indirectly. The approval of the
amendment to the Company's Restated Certificate of Incorporation (the
"Certificate") requires the affirmative vote of a majority of the shares of
Common Stock outstanding, and the approval of the issuance of the Warrants and
Warrant Shares requires the affirmative vote of a majority of the shares of
Common Stock represented at the Special Meeting.
QUORUM
The presence, in person or by proxy, of a majority of the issued and
outstanding shares of Common Stock of the Company entitled to vote at the
Special Meeting is necessary to constitute a quorum at the Special Meeting.
Shares which are represented but which abstain or are withheld from voting will
be treated as present at the Special Meeting for purposes of determining a
quorum.
PROXIES
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Special Meeting in accordance with the
directions given. If no specific instructions are given with regard to the
matters to be voted upon, then the shares represented by a signed proxy will be
voted "FOR" adoption of the amendment to the Company's Certificate increasing
the number of authorized shares of Common Stock, and "FOR" the issuance of the
Warrants and Warrant Shares. If any other matters properly come before the
Special Meeting, the persons named as proxies will vote upon such matters
according to their judgment.
All proxies delivered pursuant to this solicitation are revocable at any
time at the option of the persons executing them by giving written notice to
Mellon Securities Transfer Services, the Company's solicitation agent for the
accompanying rights offering (the "Solicitation Agent"), at 85 Challenger Road,
Ridgefield Park, New Jersey 07660-2108, or by executing and delivering to the
Solicitation Agent a later dated proxy, or by voting in person at the Special
Meeting.
All expenses incurred in connection with the solicitation of proxies will
be borne by the Company. Such costs include charges by brokers, fiduciaries
and custodians for forwarding proxy materials to beneficial owners of Common
Stock held in their names. The Company has appointed Morrow & Co., Inc. (the
"Information Agent") as information agent for the solicitation of proxies for
the Special Meeting. Solicitation may be undertaken by mail, telephone and
personal contact by the Information Agent and, without additional compensation,
directors, officers and employees of the Company. The Company will pay the
Information Agent a fee of $________ plus expenses for its service as
information agent for the solicitation of proxies for the Special Meeting.
PRINCIPAL STOCKHOLDERS, DIRECTORS, AND CERTAIN OFFICERS
The following table sets forth certain information concerning the only
persons who are known to the Company to be beneficial owners of more than 5% of
the Company's Common Stock as of ____________, 1995, and the ownership of the
Common Stock as of that date by each director, certain executive officers, and
by all directors and officers as a group.
Shares
Beneficially Percent of
Beneficial Owner Owned Class (1)
Michael T. Crimmins 363,300(2) 9.7%
Paul R. Chastain 57,572(3) 1.5%
Richard C. Butler 37,000(4) 1.0%
Ronald J. Evans 5,000 0.1%
Harry D. Jones 17,600 0.5%
Mark E. Walker 410,530(5) 11.0%
Dimensional Fund Advisors, Inc. 195,100(6) 5.2%
Robert G. And Pauline B. Walker
Revocable Trust 379,724(7) 10.1%
Steel Partners II, L.P. 528,100(8) 14.1%
Quest Advisory Corp. 365,200(9) 9.7%
All Directors and Officers
as a Group (9 persons) 907,660(10) 23.9%
(1) Based on 3,746,410 shares of the Company's Common Stock outstanding as of
September 1, 1995, which does not include 54,625 shares subject to
currently exercisable options as of September 1, 1995, except with respect
to the holders of such currently exercisable options.
(2) Information based on Form 4 of Mr. Crimmins filed with the SEC. The
address for Mr. Crimmins is 7060 South Yale Avenue, Tulsa, Oklahoma 74136.
(3) Includes presently exercisable stock options as of September 1, 1995, to
acquire 46,500 shares. The stockholder's address is 7060 South Yale
Avenue, Tulsa, Oklahoma 74136.
(4) Information based on Form 4 of Mr. Butler filed with the SEC. Includes
3,000 shares held by Maumelle Gardens, Inc., of which company Mr. Butler
owns 60%. Mr. Butler disclaims beneficial ownership of these shares.
(5) Information based on Form 5 of Mr. Walker filed with the SEC. Includes
5,000 shares of Common Stock owned by a trust for Mr. Walker's son, of
which Mr. Walker is trustee, and 379,724 shares owned by the Robert G. and
Pauline B. Walker Revocable Trust (the "Trust"). Mr. Walker provides
investment advice to the Trust and receives certain compensation from the
Trust. Mr. Walker disclaims beneficial ownership of the Trust's shares
and shares of Common Stock owned by other members of the Walker family.
The stockholder's address is 2301 N. Central Expressway, Suite 140, Plano,
Texas 75075.
(6) Information based on Schedule 13G of Dimensional Fund Advisors, Inc.
("Dimensional") filed with the SEC. Dimensional, a registered investment
advisor, is deemed to have beneficial ownership of these shares of Common
Stock, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, for all of which Dimensional serves
as an investment manager. Dimensional disclaims beneficial ownership of
all such shares. The stockholder's address is 1299 Ocean Avenue, Santa
Monica, California 90401.
(7) Information based on Schedule 13D filed with the SEC. The stockholder's
address is 2301 N. Central Expressway, Suite 140, Plano, Texas 75075
(8) Information based on Schedule 13D of Steel Partners II, L.P. filed with
the SEC. Includes 25,000 shares held by Steel Partners Services, Ltd., an
affiliate of the stockholder, for the benefit of a foreign investment
company. The stockholder's address is 750 Lexington Avenue, 27th Floor,
New York, New York 10029.
(9) Information based on Schedule 13G of Quest Advisory Corp., Quest Advisory
Co, a general partnership, and Charles M. Royce filed with the SEC. The
stockholder's address is 1414 Avenue of the Americas, New York, New York
10019.
(10) All directors and officers as a group held in the aggregate presently
exercisable stock options to acquire 54,625 shares as of September 1,
1995. On the record date, directors and officers as a group owned 853,035
shares, or 22.8% of the 3,746,410 shares outstanding and entitled to vote,
not including presently exercisable stock options.
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved an amendment to the Certificate which
would increase the number of authorized shares of Common Stock of the Company
from 12,000,000 to 18,000,000. Assuming that the Company issues the maximum
number of shares of Common Stock in connection with the rights offering
described in the accompanying Prospectus, all of the Warrant Shares and all
shares subject to currently outstanding or issuable options under the Company's
stock option plan, the Company will have only 28,975 shares of Common Stock
authorized but not outstanding. The increase in the number of authorized
shares of Common Stock is necessary to permit the Board of Directors of the
Company to issue additional shares in the future to, among other things, raise
capital and make other acquisitions. The Company does not presently have any
plans to issue additional shares except as described herein and in the
accompanying Prospectus; however, the Board of Directors believes such an
increase is prudent to provide the Board of Directors with the flexibility to
issue shares in the future if needed without having to incur the delay
attendant with seeking the approval of the stockholders of the Company.
The Amendment must be approved by the stockholders of the Company by the
affirmative vote of a majority of the outstanding shares of the Common Stock.
Consequently, any shares not voted (whether by abstention, broker non-vote or
otherwise) have the effect of a vote against the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
AMENDMENT.
APPROVAL OF ISSUANCE OF THE WARRANTS AND WARRANT SHARES
The Board of Directors is soliciting the approval of the holders of the
Common Stock of the Company for the issuance of certain Warrants and Warrant
Shares (each as hereafter defined) to Michael T. Crimmins, the Chairman of the
Board of the Company (the "Investor"), and his financial advisor. The
Company's Common Stock is listed on the American Stock Exchange (the "AMEX").
Pursuant to the rules of the AMEX, the issuance of the Warrants and the Warrant
Shares requires the approval of the stockholders of the Company because the
Investor is an officer and director of the Company and the Warrant Shares may
constitute more than 20% of the shares of Common Stock then outstanding at the
time they are issued.
SUBORDINATED FINANCING
The Company and the Investor have agreed pursuant to the terms of a
Securities Purchase Agreement (the "Subordinated Financing Agreement") to the
issuance by the Company and the purchase by the Investor of up to $4.0 million
principal amount of Senior Subordinated Notes (the "Notes") at par in
increments of $500,000. The Notes are issuable by the Company and must be
purchased by the Investor from time to time at the election of the Company over
a one year period beginning on the date of closing (the "Acquisition Closing
Date") by the Company of its acquisition of Rogers Galvanizing Company
("Rogers"). See "The Acquisition" in the accompanying Prospectus. The Notes
will mature on the eighth anniversary of the Acquisition Closing Date, bear
interest payable semi-annually in arrears at a rate of 13.5% per annum and be
repaid in six equal semi-annual principal payments beginning six months after
the fifth anniversary of the Acquisition Closing Date. The Notes may be
prepaid in whole or in part in increments of at least $100,000, provided that
partial prepayments will be applied first to accrued interest and then to the
unpaid principal installments in the inverse order of maturity. The Notes must
be prepaid in full at par, plus accrued interest, upon a change in control of
the Company. For these purposes, a change in the control will be deemed to
have occurred if (i) there is a change during any consecutive twenty-four month
period in the identity of the persons constituting a majority of the Board of
Directors of the Company other than a change approved by Investor or caused by
the Investor and its designees on the Board of Directors or (ii) the Investor's
designees are no longer serving as directors of the Company for any reason,
other than their death, resignation or refusal to stand for reelection or (iii)
Michael T. Crimmins shall no longer be serving as Chief Executive Officer for
any reason, other than death, permanent disability, refusal to serve or cause
as defined in the Subordinated Financing Agreement or the rights or duties of
the Chief Executive Officer shall have been reduced without the consent of the
Investor.
The Notes will be subordinated to the Company's existing bank debt (the
"Senior Debt"), and will be secured by the capital stock of Rogers. The assets
of Rogers, other than its net working capital, will not be available for pledge
to secure the Senior Debt. See "Description of Subordinated Financing" in the
accompanying Prospectus for a more complete description of the terms of the
Subordinated Financing Agreement and the Notes.
WARRANTS
Pursuant to the terms of the Subordinated Financing Agreement, the Company
will issue 100,000 warrants to purchase Common Stock (the "Warrants") to the
Investor in exchange for a binding and irrevocable commitment from the Investor
to purchase the Notes upon demand by the Company (the "Commitment"), and will
pay $100,000 fee on the Acquisition Closing Date. Additional Warrants will be
issued upon the purchase by the Investor of the Notes from time to time at a
rate of 268,750 Warrants for each $500,000 of Notes purchased. The Company
will also issue 20,000 Warrants to Gary R. Griffith, the Investor's financial
advisor, upon receipt of the Commitment. Each Warrant will entitle the holder
thereof to purchase one share of the Common Stock at any time and from time to
time after the date of issuance thereof until the eighth anniversary of the
Acquisition Closing Date. The exercise price of each Warrant will be the
average of the closing prices for the Common Stock reported by the AMEX during
the twenty trading days preceding the issuance of the Warrant. The Warrants
will be transferable.
The number of Warrant Shares and the exercise price are subject to
adjustment for stock splits, stock dividends and distributions, subdivisions,
combinations and reclassification on, or of, the Common Stock and in the event
of the issuance of Common Stock (or rights therefore or securities convertible
thereto) at an effective price which is less than the market price per share of
the Common Stock. In addition, the number of Warrant Shares is subject to
adjustment for mergers, consolidations and sales of assets.
The purchase price of each Warrant will be 1/100th of $.01 (or an
aggregate of $227.00 for all of the Warrants to be issued), which will be paid
in cash by the Investor or his financial advisor, as applicable. The Warrants
issued on the Acquisition Closing Data shall have an exercise price equal to
the average closing price of the Common Stock during the 20 trading days prior
to the Acquisition Closing Data. The exercise price of any other Warrants
issued will be the average closing price of the Common Stock during the 20
trading days prior to the date of issuance thereof. The Warrants are payable
in cash or by the application of accrued interest on, and unpaid principal of,
the Notes in an equivalent amount.
The Company has agreed, upon demand, to provide one registration for the
Notes, the Warrants and the Warrant Shares and the other Common Stock of the
Investor under the Securities Act of 1993, as amended (the "Securities Act"),
and to include all or a portion of the Warrant Shares and the other Common
Stock of the Investor in any other registrations by the Company under the
Securities Act, subject to certain conditions and exceptions.
The issuance of the Warrant Shares must be approved by the stockholders of
the Company by the affirmative vote of a majority of the shares of the Common
Stock represented at the Special Meeting. Consequently, any shares represented
at the Special Meeting but not voted (whether by abstention or otherwise) have
the effect of a vote against the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ISSUANCE OF THE WARRANTS AND
WARRANT SHARES AS DESCRIBED ABOVE.
STOCKHOLDERS' PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 1996
Annual Meeting of Stockholders should be submitted to the Secretary of the
Company by certified mail, return receipt requested, and must be received by
the Company at its offices in Tulsa, Oklahoma on or before January 18, 1996, to
be eligible for inclusion in the Company's proxy statement and form of proxy
for that meeting.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors knows of no matters other than those stated above
which are to be brought before the meeting. Pursuant to provisions of the
Bylaws, at any special meeting of the stockholders only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors of the Company. However, if any other matter should
be presented for consideration and voting, it is the intention of the persons
named in the enclosed form of Proxy to vote the Proxy in accordance with their
judgment of what is in the best interest of the Company.
By order of the Board of Directors
Paul R. Chastain
President and Chief Executive Officer
Tulsa, Oklahoma
____________, 1995
KINARK
CORPORATION
7060 SOUTH YALE
TULSA, OKLAHOMA 74136
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF KINARK CORPORATION
(THE "COMPANY") FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
____________, 1995 (THE "SPECIAL MEETING").
The undersigned hereby appoints Paul R. Chastain and T. Bruce Lancaster
and each of them, with full power of substitution, as proxies to vote all of
the shares of Common Stock of the Company which the undersigned may be entitled
to vote at the Special Meeting, and at any adjournments thereof, on the
following matters in the following manner:
1. Approval of an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of the Company's
common stock to 18,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of the issuance of the Warrants covering up to 2,270,000 Warrant
Shares to the Investor and his financial advisor, in connection with the
Investor's purchase of up to $4.0 million principal amount the Notes to be
issued by the Company, and the issuance of the Warrant Shares upon the exercise
of the Warrants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In accordance with their judgment, upon such other matters as may properly
come before the Special Meeting or any adjournment thereof.
When this Proxy is properly executed and returned, and not revoked, the
shares it represents will be voted at the meeting in accordance with the
choices specified above. IF NO CHOICE IS SPECIFIED, IT WILL BE VOTED FOR THE
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND FOR THE ISSUANCE OF THE
WARRANTS AND WARRANT SHARES.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW.
Date: , 1995
(Signature of Stockholder)
(Signature of Stockholder)
NOTE: When signing as attorney,
trustee, administrator, executor or
guardian, please give your full title
as such. If a corporation, please sign
in full corporate name by President or
other authorized officer. In the case
of joint tenants, each joint owner must
sign.
No dealer, salesman or any other
person has been authorized to give
any information or to make any
representations other than those
contained in this Prospectus, and
any information or representation
not contained herein must not be
relied upon as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell or solicitation of an
offer to buy any securities other 5,619,615 SHARES
than the securities to which it
relates, or an offer to sell or a
solicitation of an offer to buy such
securities in any jurisdiction in
which such offer or solicitation may
not be legally made. Neither the KINARK
delivery of this Prospectus nor any CORPORATION
sale made hereunder shall under any
circumstances create any implication
that the information herein is
correct as of any date subsequent to
the date hereof.
COMMON STOCK
TABLE OF CONTENTS Page
Prospectus Summary 3
Summary Pro Forma and
Selected Consolidated
Financial Information 9
Risk Factors 12
Business Strategy 14
The Acquisition 15 PROSPECTUS
Use of Proceeds 16
Capitalization 17
Common Stock Dividends and
Price Range 18
The Rights Offering 18
Description of Capital Stock 23
Description of Subordinated
Financing 27
Legal Matters 28
Experts 28
Financial Statements F-1
Proxy Statement P-1
, 1995
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting commissions) of the sale of
the shares of Common Stock are as follows:
Registration Fee $3,876
AMEX Application Fee 17,500
Blue Sky Fees and Expenses 1,000
Printing and Engraving 45,000
Subscription Agent's Fees and Expenses 10,000
Information Agent's Fees and Expenses 10,000
Legal Fees and Expenses 175,000
Accounting Fees and Expenses 55,000
Financial Advisors Fees and Expenses(1) 115,000
Miscellaneous Disbursements 2,624
TOTAL $385,000
(1) Including financial advisor fees related to the Subordinated
Financing.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation (the "Certificate") of the Company
contains a provision which, subject to certain exceptions described below,
eliminates the liability of a director to the Company or its stockholders for
monetary damages for any breach of duty as a director. This provision does not
eliminate the liability of the director (i) for violations of his duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or involving intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (the
"Delaware Corporation Law") relating to unlawful dividends and distributions,
or (iv) for any transaction from which the director derived an improper
personal benefit.
The Certificate and the Bylaws (the "Bylaws") of the Company require
the Company to indemnify any person who was, is, or is threatened to be made a
named defendant or respondent in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
by reason of service by such person as a director, officer, employee or agent
of the Company or any other corporation for which he served as such at the
request of the Company. Such persons are entitled to be indemnified against
judgments, penalties, fines, settlements, and reasonable expenses actually
incurred by the director in connection with the proceeding, except that no
payments may be made with respect to liability which is not eliminated pursuant
to the provision of the Certificate described in the preceding paragraph. Such
persons are also entitled to have the Company advance any such expenses prior
to final disposition of the proceeding, upon delivery of a written undertaking
to repay the amounts advanced if it is ultimately determined that the standard
of conduct has not been met.
In addition to the Certificate and Bylaws of the Company, Section
145(c) of the Delaware Corporation Law requires the Company to indemnify any
director who has been successful on the merits or otherwise in defending any
proceeding described above. The Delaware Corporation Law also provides that a
court may order indemnification of a director if it determines that the
director is fairly and reasonably entitled to such indemnification.
The Company has the power, under the Certificate and Bylaws, to
obtain insurance on behalf of any director, officer, employee, or agent of the
Company against any liability asserted against or incurred by such person in
any such capacity, whether or not the Company has the power to indemnify such
person against such liability at that time under the Certificate or Bylaws.
ITEM 16. EXHIBITS
The following documents are filed as exhibits to this Registration
Statement:
3.1 The Company's Restated Certificate of Incorporation.
3.2 The Company's Bylaws (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q dated June 30,
1995).
4.1 Provisions in the Company's Restated Certificate of
Incorporation and Bylaws defining the rights of holders of the
Company's Common Stock.
4.2 Form of Letter to Stockholders.
4.3 Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and other Nominees.
4.4 Form of Instructions as to the Use of Kinark Corporation
Subscription Certificates.
4.5 Form of Subscription Certificate.
4.6 Form of Letter to Clients from Securities Dealers, Commercial
Banks, Trust Companies and other Nominees.
4.7 Form of DTC Participant Oversubscription Exercise Form.
4.8 Form of Notice of Guaranty Delivery.
4.9 Form of Nominee Holder Certification.
4.10 Form of Special Notice to Holders of Kinark Corporation Common
Stock whose Addresses are Outside the United States.
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P. as to the
legality of the securities being registered.
10.1 Securities Purchase Agreement by and between the Company and the
Investor.*
10.2 Form of Note by and between the Company and the Investor.*
10.3 Form Warrant by and between the Company and the Investor.*
10.4 Registration Rights Agreement by and between the Company and the
Investor.*
10.5 Subordination Agreement by and between the Company, the Investor
and Bank of Oklahoma.*
15.1 Letter Regarding Unaudited Interim Financial Information.
23.1 Consent of Deloitte & Touche LLP, independent auditors of the
Company.
23.2 Consent of Hogan & Slovacek, P.C., independent auditors of
Rogers Galvanizing Company.
23.3 Consent of Arthur Andersen LLP, independent auditors of Rogers
Galvanizing Company.
23.4 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (contained
in the opinion included at Exhibit 5.1).
24.1 Power of Attorney of certain officers and directors of the
Company (see page II-5).
*To be filed by amendment.
ITEM 17. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(d) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any
delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a post-
effective amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or Rule 3-19 of this
chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form F-3.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant as described in Item 14 or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
4. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tulsa, State of
Oklahoma, on September 15, 1995.
KINARK CORPORATION
By: /s/ Paul R. Chastain
Paul R. Chastain
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul R. Chastain and J. Bruce Lancaster, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, and each of them or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and
on the dates indicated.
Signature Title Date
/s/ Paul R. Chastain President and Chief Executive September 15, 1995
Paul R. Chastain Officer (principal executive
officer) and Director
/s/ J. Bruce Lancaster Vice President, Finance September 15, 1995
J. Bruce Lancaster (principalfinancial officer
and principal accounting
officer)
/s/ Richard C. Butler Director September 15, 1995
Richard C. Butler
/s/ Michael T. Crimmins Director September 15, 1995
Michael T. Crimmins
/s/ Ronald J. Evans Director September 15, 1995
Ronald J. Evans
/s/ Harry D. Jones Director September 15, 1995
Harry D. Jones
Director September 15, 1995
Mark E. Walker
EXHIBIT INDEX
PAGE
3.1 The Company's Restated Certificate of Incorporation.
4.1 Provisions in the Company's Restated Certificate of
Incorporation and Bylaws defining the rights of holders of
the Company's Common Stock.
4.2 Form of Letter to Stockholders.
4.3 Form of Letter to Securities Dealers, Commercial Banks,
Trust Companies and other Nominees.
4.4 Form of Instructions as to the Use of Kinark Corporation
Subscription Certificates.
4.5 Form of Subscription Certificate.
4.6 Form of Letter to Clients from Securities Dealers,
Commercial Banks, Trust Companies and other Nominees.
4.7 Form of DTC Participant Oversubscription Exercise Form.
4.8 Form of Notice of Guaranty Delivery.
4.9 Form of Nominee Holder Certification.
4.10 Form of Special Notice to Holders of Kinark Corporation
Common Stock whose Addresses are Outside the United States.
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P. as to
the legality of the securities being registered.
15.1 Letter Regarding Unaudited Interim Financial Information.
23.1 Consent of Deloitte & Touche LLP, independent auditors of
the Company.
23.2 Consent of Hogan & Slovacek, P.C., independent auditors of
Rogers Galvanizing Company.
23.3 Consent of Arthur Andersen LLP, independent auditors of
Rogers Galvanizing Company.