1
EXHIBIT 99.2
CHRISTIANA COMPANIES, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
Report of Independent Public Accountants.................... 2
Consolidated Statements of Earnings for the years ended June
30, 1997, 1996, and 1995.................................. 3
Consolidated Balance Sheets as of June 30, 1997 and June 30,
1996...................................................... 4
Consolidated Statements of Shareholders' Equity for the
years ended June 30, 1997, 1996
and 1995.................................................. 5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995.............................. 6
Notes to Consolidated Financial Statements.................. 7
Quarterly Financial Information............................. 19
Consolidated Statements of Operations for the six months
ended December 31, 1997 and 1996 and the three months
ended December 31, 1997 and 1996.......................... 20
Consolidated Balance Sheets as of December 31, 1997 and June
30, 1997.................................................. 21
Consolidated Statements of Shareholders' Equity for the six
months ended December 31, 1997 and the year ended June 30,
1997...................................................... 22
Consolidated Statements of Cash Flow for the six months
ended December 31, 1997 and 1996.......................... 23
Notes to Consolidated Financial Statements.................. 24
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Christiana Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Christiana
Companies, Inc. (a Wisconsin corporation) as of June 30, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the years in the three year period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Christiana Companies, Inc. as of June 30, 1997 and 1996, and the results of its
consolidated operations and its cash flows for each of the three years in the
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 1, 1997
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CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
Revenues:
Product Sales....................................... $ -- $ -- $55,239,000
Warehousing and Logistic Services................... 84,208,000 77,170,000 71,642,000
----------- ----------- -----------
84,208,000 77,170,000 126,881,000
----------- ----------- -----------
Costs and Expenses:
Cost of Product Sales............................... -- -- 47,134,000
Warehousing and Logistic Expenses................... 70,973,000 65,418,000 57,684,000
Selling, General & Administrative Expenses.......... 8,656,000 7,531,000 11,739,000
----------- ----------- -----------
79,629,000 72,949,000 116,557,000
----------- ----------- -----------
Earnings From Operations.............................. 4,579,000 4,221,000 10,324,000
----------- ----------- -----------
Other Income (Expense):
Interest Income..................................... 516,000 531,000 942,000
Interest Expense.................................... (3,166,000) (3,096,000) (4,842,000)
Gain (Loss) on Disposal of Assets................... (765,000) 2,818,000 3,083,000
Equity in Earnings of EVI, Inc...................... 10,479,000 1,745,000 --
Other (Expense), Net................................ (674,000) (208,000) (367,000)
----------- ----------- -----------
6,390,000 1,790,000 (1,184,000)
----------- ----------- -----------
Earnings Before Income Taxes and Minority Interest.... 10,969,000 6,011,000 9,140,000
Income Tax Provision.................................. 4,306,000 2,408,000 3,394,000
----------- ----------- -----------
Net Earnings Before Minority Interest................. 6,663,000 3,603,000 5,746,000
Minority Interest..................................... -- -- (684,000)
----------- ----------- -----------
Net Earnings.......................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
=========== =========== ===========
Earnings Per Share.................................... $ 1.30 $ 0.69 $ 0.96
=========== =========== ===========
Weighted Average Number of Shares Outstanding......... 5,136,630 5,186,679 5,275,947
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
AS OF JUNE 30,
---------------------------
1997 1996
------------ ------------
Current Assets:
Cash and Cash Equivalents................................. $ 2,888,000 $ 3,728,000
Short-Term Investments.................................... 4,611,000 750,000
Accounts Receivable, Net.................................. 7,649,000 8,294,000
Inventories, Prepaids and Other Assets.................... 1,729,000 1,732,000
------------ ------------
Total Current Assets.............................. 16,877,000 14,504,000
------------ ------------
Long-Term Assets:
Investment in EVI, Inc.................................... 41,257,000 23,631,000
Mortgage Notes Receivable................................. 1,749,000 3,314,000
Rental Properties, Net.................................... -- 867,000
Fixed Assets, Net......................................... 75,604,000 81,283,000
Goodwill.................................................. 5,592,000 5,749,000
Other Assets.............................................. 1,277,000 1,670,000
------------ ------------
Total Long-Term Assets............................ 125,479,000 116,514,000
------------ ------------
TOTAL ASSETS...................................... $142,356,000 $131,018,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable.......................................... $ 3,526,000 $ 5,294,000
Accrued Liabilities....................................... 5,562,000 4,072,000
Short-Term Debt........................................... -- 1,354,000
Current Portion of Long-Term Debt......................... 3,531,000 1,295,000
------------ ------------
Total Current Liabilities......................... 12,619,000 12,015,000
------------ ------------
Long-Term Liabilities:
Long-Term Debt............................................ 36,149,000 44,013,000
Deferred Income Taxes..................................... 20,289,000 12,674,000
Other Liabilities......................................... 1,214,000 1,239,000
------------ ------------
Total Long-Term Liabilities....................... 57,652,000 57,926,000
------------ ------------
Total Liabilities................................. 70,271,000 69,941,000
------------ ------------
Shareholders' Equity:
Preferred Stock........................................... -- --
Common Stock.............................................. 5,196,000 5,196,000
Additional Paid-In capital................................ 12,022,000 12,022,000
Treasury Stock, at Cost................................... (1,236,000) (1,236,000)
Retained Earnings......................................... 56,103,000 45,095,000
------------ ------------
Total Shareholders' Equity........................ 72,085,000 61,077,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $142,356,000 $131,018,000
============ ============
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(1)(2)
COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- --------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1994.................. 5,440,899 $5,441,000 -- $ -- $18,217,000 $36,430,000 $60,088,000
Repurchase of Stock... (245,269) (245,000) -- -- (6,195,000) -- (6,440,000)
Net Earnings.......... -- -- -- -- -- 5,062,000 5,062,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1995.................. 5,195,630 $5,196,000 -- -- $12,022,000 $41,492,000 $58,710,000
Purchase of Treasury
Stock............... -- -- (59,000) (1,236,000) -- -- (1,236,000)
Net Earnings.......... -- -- -- -- -- 3,603,000 3,603,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1996.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000 $61,077,000
EVI Stock Issuance.... -- -- -- -- -- 4,345,000 4,345,000
Net Earnings.......... -- -- -- -- -- 6,663,000 6,663,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1997.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000 $72,085,000
========= ========== ======= =========== =========== =========== ===========
- ---------------
(1) Preferred stock: $10 par value, 1,000,000 shares authorized, none issued.
(2) Common stock: $1 par value, 12,000,000 shares authorized.
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings....................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By Operating Activities:
Depreciation and Amortization................... 7,155,000 7,159,000 8,207,000
(Gain) Loss on Disposal of Assets............... 765,000 (3,024,000) (3,213,000)
Deferred Income Tax (Benefit) Provision......... 4,813,000 (1,084,000) 1,462,000
Minority Interest............................... -- -- 684,000
Equity in Earnings of EVI, Inc.................. (10,479,000) (1,745,000) --
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable...... 645,000 (34,000) (2,240,000)
(Increase) Decrease in Inventories.............. (166,000) (191,000) 2,566,000
(Increase) Decrease in Prepaids and Other
Assets........................................ (303,000) 788,000 (485,000)
Increase in Accounts Payable and Accrued
Liabilities................................... 90,000 3,091,000 396,000
------------ ------------ ------------
Net Cash Provided By Operating Activities............ 9,183,000 8,563,000 12,439,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term Investments,
net Investments, Net............................ (3,861,000) 2,072,000 11,742,000
Capital Expenditures............................... (3,488,000) (19,715,000) (10,931,000)
Business Acquisitions, Net of Cash Acquired........ -- -- (13,291,000)
(Increase) Decrease in Mortgage Notes Receivable... 1,565,000 (109,000) 356,000
Decrease in Cash due to Merger of Prideco.......... -- -- (533,000)
Proceeds from Sales of Assets...................... 2,743,000 8,894,000 6,954,000
------------ ------------ ------------
Net Cash Used In Investing Activities................ (3,041,000) (8,858,000) (5,703,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (Payments) on Line of Credit, Net....... (1,354,000) (489,000) 501,000
Stock Repurchase................................... -- (1,236,000) (3,805,000)
Proceeds from Notes Payable........................ -- 9,011,000 4,125,000
Payments of Notes and Mortgages Payable............ (5,628,000) (3,638,000) (11,111,000)
------------ ------------ ------------
Net Cash Provided By (Used In) Financing
Activities......................................... (6,982,000) 3,648,000 (10,290,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ (840,000) 3,353,000 (3,554,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1.......... 3,728,000 375,000 3,929,000
------------ ------------ ------------
ENDING CASH AND CASH EQUIVALENTS, JUNE 30............ $ 2,888,000 $ 3,728,000 $ 375,000
============ ============ ============
Supplemental Disclosures of Cash Flow Information:
Interest Paid...................................... $ 3,190,000 $ 3,228,000 $ 4,612,000
Income Taxes Paid.................................. $ 1,396,000 $ 2,579,000 $ 2,950,000
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THREE YEARS ENDED JUNE 30, 1997)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: At June 30, 1997, Christiana is engaged in
providing public refrigerated and dry (non-refrigerated) warehousing and
logistic services; and owning 3,897,462 shares of EVI, Inc. common stock which
represents an 8.5% ownership interest at that date.
Principles of Consolidation: The consolidated financial statements include
the accounts of Christiana Companies, Inc., ("Christiana") and its
majority-owned subsidiaries (together with Christiana referred to as the
"Company"). All material intercompany transactions have been eliminated.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Short-Term Investments: As of June 30, 1997 and 1996, short-term
investments are classified as "available for sale" and include U.S. Treasury
securities and commercial paper maturing in less than one year. These
investments are carried at market, which approximates cost.
Accounts Receivable: Accounts receivable are presented net of a reserve for
bad debts of $233,000 and $253,000 at June 30, 1997 and 1996, respectively. The
provision for bad debts was $123,000 and $227,000 for the years ended June 30,
1997 and 1996, respectively. Deductions from the reserve were $143,000 and
$94,000 for the years ended June 30, 1997 and 1996, respectively.
Investment in EVI, Inc.: At June 30, 1997, the Company owned 3,897,462
shares of EVI, Inc. (NYSE:EVI) which represented 8.5% of the then outstanding
common stock. Based on the facts and circumstances associated with the
Investment in EVI, Inc., including the Company's Board of Directors
representation, and in accordance with the Accounting Principles Board Opinion
No. 18 the Company accounts for this investment under the equity method of
accounting. At June 30, 1997, these shares had a market value of $163,693,000.
Mortgage Notes Receivable: At June 30, 1997, mortgage notes receivable,
derived from condominium sales, totaled $1,749,000 and accrue interest at rates
ranging from 6.875% to 9.000%. The carrying value of the Company's mortgage
notes receivable approximates fair value.
The principal balance of mortgage notes receivable matures as follows:
YEAR ENDED JUNE 30,
- --------------------------------------------------------------------
1998................. $ 17,000 2001............. $ 16,000
1999................. 407,000 2002............. 63,000
2000................. 22,000 Thereafter....... 1,224,000
During the years ended June 30, 1997 and 1996, mortgage notes receivable of
$1,882,000 and $286,000, respectively, were sold or prepaid.
Fixed Assets: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and accelerated methods
for financial reporting purposes. The cost of major renewals and
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CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
improvements are capitalized; repair and maintenance costs are expensed. A
summary of the cost of fixed assets and the estimated useful lives for financial
reporting purposes is as follows:
AT JUNE 30,
--------------------------- ESTIMATED
1997 1996 USEFUL LIVES
------------ ------------ ------------
Rental Properties.......................... $ -- $ 1,029,000 20-40 years
Less: Accumulated Depreciation........... -- (162,000)
------------ ------------
$ -- $ 867,000
============ ============
Fixed Assets:
Land..................................... $ 3,380,000 $ 3,416,000 --
Machinery and Equipment.................. 53,171,000 54,314,000 5-7 years
Buildings and Improvements............... 41,534,000 41,394,000 30-32 years
Construction-In-Progress................. 451,000 12,000 --
Less: Accumulated Depreciation........... (22,932,000) (17,853,000)
------------ ------------
$ 75,604,000 $ 81,283,000
============ ============
Goodwill: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1997 and $157,000 in 1996). The accumulated amortization at June
30, 1997 and 1996 was $566,000 and $409,000, respectively. The Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life may warrant revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company uses an
estimate of the undiscounted cash flows over the remaining life of the goodwill
measuring whether the goodwill is recoverable.
Other Assets: Other Assets primarily represent deferred charges and cash
surrender value of officer's life insurance.
Long-lived Assets: During fiscal 1997, the Company adopted Statement of
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." Adoption of this standard did
not have a material impact on the Company's financial position or results of
operations.
Income Taxes: Deferred income taxes are provided on the temporary
differences in the carrying values of assets and liabilities for financial
reporting and income tax purposes.
Earnings Per Share: Earnings per share is computed on the basis of the
weighted average number of common shares outstanding. The Company has stock
options which are considered common stock equivalents for purposes of computing
earnings per share. The impact of these common stock equivalents is not
material.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with original maturities of less than ninety days to be cash
equivalents.
Reclassifications: Certain reclassifications have been made in the 1996
statements to conform with 1997 presentation.
Derivatives: Derivative financial instruments have been used by the Company
to manage its interest rate exposure on certain debt instruments. Amounts to be
received or paid under interest rate swap agreements are recognized as interest
income or expense in the periods in which they accrue. If interest rate swap
agreements are terminated due to the underlying debt being extinguished, any
resulting gain or loss is recognized as interest income or expense at the time
of termination.
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CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. ACQUISITIONS
On June 30, 1995, Prideco, Inc. ("Prideco"), a majority-owned subsidiary of
the Company, merged with Grant Acquisition Company, a wholly-owned subsidiary of
EVI, Inc. In the merger, the Company's shares of Prideco were converted into
2,071,716 shares of Common Stock, $1.00 par value, of EVI. Prideco's results of
operations are included in the Company's Consolidated Statement of Earnings
through June 30, 1995, the date of the merger. Concurrent with the merger, the
Company acquired an additional 1,825,746 shares of EVI, Inc. common stock
directly from EVI and the minority shareholders of Prideco for an aggregate cash
price of $13,291,000.
On January 4, 1994, the Company acquired, by way of merger, The TLC Group,
Inc., a Zeeland, Michigan-based firm which provides fully integrated logistic
services including refrigerated and dry warehousing, transportation and
information services. The purchase price consisted of approximately $5,630,000
in cash, the issuance of 234,269 shares of Christiana common stock, an 8%
subordinated note in the amount of $1,764,000 and the assumption of its
liabilities. As part of this acquisition, the assets of The TLC Group were
revalued to their fair market value with the excess of purchase price over fair
value amounting to $5,991,000 being recorded as goodwill. This acquisition was
accounted for as a purchase and accordingly, the results of TLC's operations are
included in the consolidated financial statements of the Company since the date
of acquisition.
During fiscal 1995, the Company repurchased the 234,269 shares issued in
the TLC acquisition for $3,805,000 and a three year note in the amount of
$2,286,000.
The following summarizes the unaudited consolidated pro forma operating
results of the Company as if the merger of Prideco and the acquisition of EVI
shares had occurred at the beginning of fiscal year 1995.
YEAR ENDED JUNE 30,
1995
-------------------
Revenues.................................................... $71,642,000
Net Earnings................................................ 4,173,000
Earnings Per Share.......................................... $ 0.79
Pro forma results are not necessarily indicative of results that would have
occurred had the purchase been made at the beginning of the respective period,
or of results which may occur in the future.
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CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C. INDEBTEDNESS
The following is a summary of consolidated indebtedness:
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
Christiana Corporate
Notes Payable........................................... $ 2,286,000 $ 2,286,000
Line of Credit.......................................... -- --
Total Logistic Control, LLC
Revolving Credit Agreement.............................. 31,248,000 35,248,000
Line of Credit.......................................... -- 1,354,000
Notes Payable, Equipment Related........................ 4,382,000 6,010,000
Subordinated Note....................................... 1,764,000 1,764,000
----------- -----------
Subtotal........................................ 39,680,000 46,662,000
Less: Current Portion of Long-Term Debt................... (3,531,000) (1,295,000)
Short-Term Debt..................................... -- (1,354,000)
----------- -----------
Long-Term Debt............................................ $36,149,000 $44,013,000
=========== ===========
Christiana has a $15,000,000 unsecured line of credit, renewable annually.
Borrowings under this line bear interest at either the London Interbank Offered
Rate ("LIBOR") plus 125 basis points, or prime at the Company's option. No
compensating balances are required under the terms of this credit facility.
Notes payable attributable to Christiana Corporate are amounts due as a
result of repurchased common stock. The notes payable are unsecured and bear
interest at the rate of 7%.
Total Logistic Control, LLC has a revolving credit agreement that provides
for borrowings at June 30, 1997 up to $40,000,000. Borrowings under this
agreement mature on March 31, 2001 and bear interest, payable monthly at either
LIBOR plus 125 basis points, or a floating rate at the bank's prime rate (6.7%
at June 30, 1997) and are unsecured. At June 30, 1996 Wiscold's borrowings under
the original revolving credit were priced at LIBOR plus 175 basis points or
prime (7.10% at June 30, 1996) and were secured by Wiscold's assets. The
revolving credit agreement requires, among other things, that defined levels of
net worth and debt service coverage be maintained and restricts certain
activities including limitation on new indebtedness and the disposition of
assets. No compensating balances are required under the terms of this credit
facility.
On September 15, 1992, Wiscold entered into an interest rate swap agreement
with three commercial banks which expires on December 15, 1997. As of June 30,
1997, $12,650,000 of outstanding Wiscold debt was subject to the swap agreement.
The agreement effectively fixes the interest rate payable by Wiscold on this
portion of the debt at 5.3% plus an interest rate spread determined by Wiscold's
leverage ratio. As of June 30, 1997, the effective rate of this outstanding debt
was 6.55%.
Under the swap agreement, the Company is exposed to credit risk only in the
event of nonperformance by the commercial banks, which is not anticipated.
Total Logistic Control, LLC has a bank line of credit which permits
borrowings up to $5,000,000. Borrowings bear interest at either LIBOR plus 200
basis points, or the bank's prime rate, at TLC's option (7.69% and 7.48% at June
30, 1997 and 1996, respectively), and are secured by certain accounts
receivable. Notes payable relate to specific equipment purchases, primarily
transportation and material handling equipment and a new distribution facility,
and are secured by specified assets. These notes bear interest on both fixed and
floating terms ranging from 6.375% to 9.37%. No compensating balances are
required under the terms of these credit arrangements. TLC's subordinated note
bears interest at 8% and was incurred in the
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CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption of a former shareholder's ownership coincident with the sale to
Christiana. This obligation is guaranteed by Christiana.
Future maturities of consolidated indebtedness are as follows:
YEAR ENDED
JUNE 30, TOTAL
- ---------- -----------
1998............................................ $ 3,531,000
1999............................................ 4,078,000
2000............................................ 5,193,000
2001............................................ 25,150,000
2002............................................ 1,728,000
Thereafter........................................ --
The weighted average interest rate paid on short term borrowings, all of
which was attributable to TLC, was 7.46% and 8.21% for fiscal 1997 and 1996,
respectively. The carrying value of the Company's debt approximates fair value.
D. INCOME TAXES
The Income Tax Provision consists of the following:
YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
---------- ----------- ----------
Current
Federal..................................... $ (442,000) $ 3,029,000 $1,866,000
State....................................... (65,000) 463,000 66,000
Deferred...................................... 4,813,000 (1,084,000) 1,462,000
---------- ----------- ----------
$4,306,000 $ 2,408,000 $3,394,000
========== =========== ==========
The components of Deferred Income Taxes are:
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
Deferred Tax Assets:
Alternative Minimum Tax................................. $ -- $ 1,255,000
Other................................................... 1,612,000 1,431,000
----------- -----------
Total Deferred Tax Asset........................ $ 1,612,000 $ 2,686,000
----------- -----------
Deferred Tax Liabilities:
Condemnation Proceeds................................... $ 4,513,000 $ 5,259,000
Tax Over Book Depreciation.............................. 7,816,000 7,311,000
Equity in Earnings of EVI, Inc.......................... 4,767,000 649,000
EVI, Inc. Stock Issuance................................ 2,787,000 --
Installment Sale........................................ 407,000 676,000
Other................................................... 860,000 1,083,000
----------- -----------
Total Deferred Tax Liability.................... 21,150,000 14,978,000
----------- -----------
Net Deferred Tax Liability................................ $19,538,000 $12,292,000
=========== ===========
11
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CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate follows:
YEAR ENDED JUNE 30,
--------------------
1997 1996 1995
---- ---- ----
Statutory Federal Income Tax Rate........................... 35% 34% 34%
Increase (Reduction) in Taxes Resulting From:
State Income Tax, Net.................................. 5 5 3
Municipal Bond Interest................................ -- -- (1)
Other, Net............................................. (1) 1 1
-- -- --
39% 40% 37%
== == ==
E. EMPLOYEE BENEFIT PLANS
The Company has 295,000 shares of its common stock reserved for issuance
under a stock option plan, which permits the granting of options as well as
appreciation rights and awards. During fiscal 1997, options for a total of
40,000 shares were granted at exercise prices of $21.50 and $22.25. During
fiscal 1996, options for a total of 100,000 shares were granted at an exercise
price of $24.25 per share. At June 30, 1997 and 1996, 36.0% and 23.5%,
respectively, of total options granted were exercisable. The remaining options
are exercisable over the next seven years.
Changes in stock options outstanding are summarized as follows:
NUMBER OF EXERCISE PRICE
OPTIONS PER OPTION
--------- ----------------
Balance, June 30, 1994.................................... 151,250 26.000 - 34.375
Options Granted......................................... 5,000 28.8125
Options Canceled........................................ 5,000 27.125
------- ----------------
Balance, June 30, 1995.................................... 151,250 26.000 - 34.375
Options Granted......................................... 100,000 24.250
Options Canceled........................................ 7,500 27.125 - 34.375
------- ----------------
Balance, June 30, 1996.................................... 243,750 24.250 - 34.375
Options Granted......................................... 40,000 21.500 - 22.250
------- ----------------
Balance, June 30, 1997.................................... 283,750 21.500 - 34.375
======= ================
As of June 30, 1997, the total number of stock options outstanding and
those currently exercisable was 283,750 and 102,167, respectively. The
weighted-average exercise price of total stock options and those currently
exercisable was $27.145 and $28.950, respectively. Additionally, the
weighted-average contractual life of stock options outstanding as of June 30,
1997 was 2.7 years.
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123 and has been
determined as if the Company had accounted for its stock options under the fair
value method as provided there-in. The fair value of each option grant is
estimated on the date of the grant using an option pricing model with the
following weighted-average assumptions used for options issued in fiscal 1997
and 1996, respectively: risk-free interest rate of 6.5%; expected remaining
lives of 6 and 5 years; expected volatility of 25% and 20%; and no expected
dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net income and earnings per share as
reported and pro forma as if the fair value based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects on reported net income for
12
13
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future years, because as provided by SFAS No. 123, only the effects of awards
granted after July 1, 1996 are considered in the pro forma calculation.
JUNE 30, 1997 JUNE 30, 1996
------------------------- -------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ---------- ----------- ----------
Net Earnings............................ $6,663,000 $6,282,000 $3,603,000 $3,330,000
Earnings Per Share...................... $ 1.30 $ 1.22 $ .69 $ .65
The Company has 401(k) plans covering substantially all of its employees.
The costs under these plans have not been material. The Company does not provide
post employment medical or life insurance benefits.
F. COMMITMENTS
Total Logistic Control, LLC has operating leases for warehousing and office
facilities. Rental expense under these leases was $7,213,000, $5,479,000 and
$5,100,000 in fiscal 1997, 1996 and 1995, respectively. At June 30, 1997, future
minimum lease payments under these operating leases are as follows:
YEAR ENDED JUNE 30,
-------------------
1998............................................ $ 5,800,773
1999............................................ 4,513,455
2000............................................ 3,982,490
2001............................................ 2,993,435
2002............................................ 2,274,180
Thereafter...................................... 11,976,486
G. ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share". This statement
establishes standards for computing and presenting earnings per share (EPS).
This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, Earnings per Share. The Company is
required to adopt this statement for financial statements issued for the years
ending after June 30, 1998; earlier application is not permitted. Pro forma
disclosure of EPS computed in accordance with SFAS No. 128 is as follows:
FISCAL YEAR ENDED JUNE 30,
--------------------------
1997 1996 1995
------ ------ ------
Earnings Per Share As Reported.............................. $1.30 $0.69 $0.96
Pro Forma:
Basic Earnings Per Common Share........................... $1.30 $0.69 $0.96
Diluted Earnings Per Common Share......................... $1.29 $0.69 $0.96
13
14
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. MARKET SEGMENT INFORMATION
The Company was engaged in primarily two distinct lines of business,
namely, the manufacture of industrial products and the operation of warehousing,
logistic services and rental properties. On June 30, 1995, the Company's
manufacturing segment, Prideco, was merged with a unit of EVI, Inc.
YEAR ENDED JUNE 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
Revenues
Industrial Products.............................. $ -- $ -- $ 55,239,000
Warehousing and Logistic Services................ 84,208,000 77,170,000 71,642,000
------------ ------------ ------------
Total.................................... $ 84,208,000 $ 77,170,000 $126,881,000
============ ============ ============
Earnings from Operations
Industrial Products.............................. $ -- $ -- $ 4,226,000
Warehousing and Logistic Services................ 6,473,000 5,580,000 7,533,000
Corporate Expenses............................... (1,894,000) (1,359,000) (1,435,000)
------------ ------------ ------------
Total.................................... $ 4,579,000 $ 4,221,000 $ 10,324,000
============ ============ ============
Assets
Industrial Products.............................. $ -- $ -- $ --
Warehousing and Logistic Services................ 91,355,000 98,370,000 91,992,000
Corporate........................................ 51,001,000 32,648,000 29,750,000
------------ ------------ ------------
Total.................................... $142,356,000 $131,018,000 $121,742,000
============ ============ ============
Capital Expenditures
Industrial Products.............................. $ -- $ -- $ 682,000
Warehousing and Logistic Services................ 3,488,000 19,715,000 10,249,000
------------ ------------ ------------
Total.................................... $ 3,488,000 $ 19,715,000 $ 10,931,000
============ ============ ============
Depreciation and Amortization
Industrial Products.............................. $ -- $ -- $ 1,256,000
Warehousing and Logistic Services................ 7,148,000 7,144,000 6,885,000
Corporate........................................ 7,000 15,000 66,000
------------ ------------ ------------
Total.................................... $ 7,155,000 $ 7,159,000 $ 8,207,000
============ ============ ============
There were no intersegment sales. Corporate assets consist primarily of
cash equivalents, short-term investments, marketable securities and residential
real estate.
14
15
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. EVI, INC. SUMMARY FINANCIAL INFORMATION
The following represents summarized financial information for EVI, Inc. The
Company's investment is accounted for under the equity method. EVI's fiscal year
ends on December 31, 1996. For more information regarding EVI's financial
condition and operations, reference is made to the EVI's Form 10-K filed with
the Securities and Exchange Commission.
SUMMARIZED BALANCE SHEETS
AT DECEMBER 31,
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
Current Assets.............................................. $558,681 $249,574
Noncurrent Assets........................................... 294,162 241,486
-------- --------
Total Assets...................................... $852,843 $491,060
======== ========
Current Liabilities......................................... $233,126 $ 97,116
Noncurrent Liabilities...................................... 165,633 165,878
Stockholders' Equity........................................ 454,084 228,066
-------- --------
$852,843 $491,060
======== ========
SUMMARIZED INCOME STATEMENTS
FOR YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Revenues................................................... $ 478,020 $ 351,587 $ 248,537
Expenses................................................... (431,733) (319,147) (229,068)
Other Expenses, Net........................................ (14,741) (16,049) (13,021)
--------- --------- ---------
Income Before Taxes........................................ 31,546 16,391 6,448
Taxes...................................................... (7,041) (5,080) (1,806)
--------- --------- ---------
Income from Continuing Operations.......................... 24,505 11,311 4,642
Discontinued Operations, Net of Taxes...................... 74,392 -- --
--------- --------- ---------
Income before Extraordinary Item........................... 98,897 11,311 4,642
Extraordinary Item......................................... (731) -- (3,784)
--------- --------- ---------
Net Income....................................... $ 98,166 $ 11,311 $ 858
========= ========= =========
During fiscal 1997, EVI issued additional stock in a public offering. The
Company's share of the gain was $4,345,000 and is reflected as an increase in
retained earnings in the consolidated statement of Shareholders' Equity.
Included in the Company's retained earnings if $11,812,000 related to its'
investment in EVI.
15
16
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. PARENT COMPANY ONLY STATEMENTS
Following are the Parent Company only Condensed Balance Sheet, Statement of
Operations and Statement of Cash Flows:
PARENT COMPANY ONLY STATEMENTS
CONDENSED BALANCE SHEET
AS OF JUNE 30, 1997 AND 1996
ASSETS
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
Current Assets:
Cash Equivalents and Short-Term Investments............... $ 7,276,000 $ 4,444,000
Accounts Receivable and Other Current Assets.............. 1,576,000 1,309,000
Long-Term Assets:
Investment in EVI, Inc.................................... 41,257,000 23,631,000
Investments in and Advances to Subsidiaries............... 33,551,000 34,071,000
Fixed Assets, Net......................................... 10,848,000 11,330,000
Other Assets.............................................. 1,039,000 1,035,000
----------- -----------
TOTAL ASSETS...................................... $95,547,000 $75,820,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities.................. $ 5,525,000 $ 1,884,000
Long-Term Liabilities:
Deferred Income Taxes..................................... 17,083,000 9,711,000
Other Liabilities......................................... 854,000 3,148,000
----------- -----------
Total Liabilities................................. 23,462,000 14,743,000
----------- -----------
Total Shareholders' Equity........................ 72,085,000 61,077,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $95,547,000 $75,820,000
=========== ===========
16
17
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY STATEMENTS
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
FISCAL YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
F
Revenues:
Warehousing and Logistic Services................... $14,628,000 $11,432,000 $10,943,000
----------- ----------- -----------
14,628,000 11,432,000 10,943,000
----------- ----------- -----------
Costs and Expenses:
Warehousing and Logistic Services................... 8,554,000 7,692,000 6,682,000
Selling, General and Administrative Expenses........ 1,815,000 1,504,000 1,582,000
----------- ----------- -----------
10,369,000 9,196,000 8,264,000
----------- ----------- -----------
Earnings from Operations......................... 4,259,000 2,236,000 2,679,000
Other Income (Expense):
Interest Income (Expense), Net...................... 174,000 (426,000) 2,000
Equity in Earnings of EVI, Inc...................... 10,479,000 1,745,000 --
Other (Expense), Net................................ (3,975,000) (3,129,000) (2,683,000)
----------- ----------- -----------
Total Other Income (Expense)................ 6,678,000 (1,810,000) (2,681,000)
----------- ----------- -----------
Earnings Before Income Taxes.......................... 10,937,000 426,000 (2,000)
Income Tax Provision (Benefit)........................ 4,287,000 167,000 (648,000)
----------- ----------- -----------
Net Earnings (Loss) Before Equity in Undistributed
Net Earnings of Subsidiaries..................... 6,650,000 259,000 646,000
Equity in Undistributed Net Earnings of
Subsidiaries........................................ 13,000 3,344,000 4,416,000
----------- ----------- -----------
Net Earnings................................ $ 6,663,000 $ 3,603,000 $ 5,062,000
=========== =========== ===========
17
18
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings...................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
Equity in Earnings of EVI, Inc................. (10,479,000) (1,745,000) --
Equity in Undistributed Net Income of
Subsidiaries................................. (13,000) (3,344,000) (4,416,000)
Depreciation and Amortization.................. 979,000 859,000 828,000
Deferred Income Tax Provision.................. 4,571,000 997,000 1,348,000
Net Changes in Assets and Liabilities.......... 1,076,000 (410,000) 1,868,000
------------ ----------- ------------
Net Cash Provided By (Used In) Operating
Activities........................................ 2,797,000 (40,000) 4,690,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term
Investments.................................... (3,861,000) 2,072,000 11,742,000
Capital Expenditures.............................. (512,000) (793,000) (143,000)
Investment In Subsidiaries........................ 546,000 3,691,000 (2,546,000)
Investment In EVI, Inc............................ -- -- (13,291,000)
------------ ----------- ------------
Net Cash Provided By (Used In) Investing
Activities........................................ (3,827,000) 4,970,000 (4,238,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock Repurchase/Purchase of Treasury Stock....... -- (1,236,000) (3,805,000)
------------ ----------- ------------
Net Cash Used In Financing Activities............... -- (1,236,000) (3,805,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (1,030,000) 3,694,000 (3,353,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1......... 3,695,000 1,000 3,354,000
------------ ----------- ------------
ENDING CASH AND CASH EQUIVALENTS, JUNE 30........... $ 2,665,000 $ 3,695,000 $ 1,000
============ =========== ============
18
19
CHRISTIANA COMPANIES, INC.
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE TOTAL
----------- ----------- ----------- ----------- -----------
FISCAL 1997
Revenues.................... $20,480,000 $20,342,000 $22,450,000 $20,936,000 $84,208,000
Earnings From Operations.... 1,489,000 1,525,000 1,093,000 472,000 4,579,000
Earnings Before Taxes....... 1,767,000 6,126,000* 1,671,000 1,405,000 10,969,000
Net Earnings................ 1,083,000 3,730,000 1,019,000 831,000 6,663,000
Basic Earnings Per Share.... $ 0.21 $ 0.73 $ 0.20 $ 0.16 $ 1.30
FISCAL 1996
Revenues.................... $19,937,000 $19,651,000 $19,416,000 $18,166,000 $77,170,000
Earnings From Operations.... 2,053,000 1,053,000 810,000 305,000 4,221,000
Earnings Before Taxes....... 2,694,000 1,249,000 1,510,000 558,000 6,011,000
Net Earnings................ 1,638,000 760,000 918,000 287,000 3,603,000
Basic Earnings Per Share.... $ 0.32 $ 0.14 $ 0.18 $ 0.05 $ 0.69
- ---------------
* Includes $5,715,000 of gain on the sale of Mallard Drilling, an EVI
subsidiary.
19
20
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Revenues:
Warehousing and logistic services... $46,714,000 $40,821,000 $23,667,000 $20,342,000
Costs and Expenses:
Warehousing and logistic services... 39,317,000 33,913,000 20,116,000 16,693,000
Selling, general and
administrative................... 4,342,000 3,895,000 2,113,000 2,124,000
----------- ----------- ----------- -----------
43,659,000 37,808,000 22,229,000 18,817,000
----------- ----------- ----------- -----------
Earnings from Operations.............. 3,055,000 3,013,000 1,438,000 1,525,000
Other Income (Expense):
Interest income..................... 248,000 257,000 116,000 124,000
Interest expense.................... (1,492,000) (1,667,000) (739,000) (799,000)
Gain (losses) on sales of real
estate........................... -- 279,000 -- (6,000)
Equity in earnings of EVI, Inc...... 3,447,000 7,636,000 1,509,000 6,746,000
Gain (loss) on disposal of assets... 7,000 (1,281,000) -- (1,281,000)
Other income (expenses), net........ (1,386,000) (346,000) (883,000) (183,000)
----------- ----------- ----------- -----------
824,000 4,878,000 3,000 4,601,000
----------- ----------- ----------- -----------
Earnings before income taxes.......... 3,879,000 7,891,000 1,441,000 6,126,000
Income tax provision.................. 1,536,000 3,079,000 583,000 2,396,000
----------- ----------- ----------- -----------
Net earnings.......................... $ 2,343,000 $ 4,812,000 $ 858,000 $ 3,730,000
=========== =========== =========== ===========
Basic earnings per common share
(Note 4)............................ $ 0.46 $ 0.94 $ 0.17 $ 0.73
=========== =========== =========== ===========
Diluted net earnings per common share
(Note 4)............................ $ 0.45 $ 0.94 $ 0.16 $ 0.73
=========== =========== =========== ===========
Average number of shares
outstanding......................... 5,136,699 5,136,630 5,136,788 5,136,630
See notes to consolidated financial statements.
20
21
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31, JUNE 30,
1997 1997
------------ ------------
(UNAUDITED) (AUDITED)
Cash and cash equivalents................................... $ 3,373,000 2,888,000
Short-term investments...................................... 3,482,000 4,611,000
Accounts receivable......................................... 9,258,000 7,649,000
Prepaids and other current assets........................... 1,459,000 1,729,000
------------ ------------
Total Current Assets.............................. 17,572,000 16,877,000
------------ ------------
Long-Term Assets:
Investment in EVI, Inc.................................... 44,703,000 41,257,000
Mortgage notes receivable................................. 1,273,000 1,749,000
Fixed assets, net......................................... 73,881,000 75,604,000
Other long-term assets.................................... 6,132,000 6,869,000
------------ ------------
Total Long-Term Assets............................ 125,989,000 125,479,000
------------ ------------
$143,561,000 $142,356,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable.......................................... $ 4,729,000 $ 3,526,000
Accrued liabilities....................................... 5,579,000 5,562,000
Short term debt........................................... -- --
Current portion of long-term debt......................... 1,245,000 3,531,000
------------ ------------
Total Current Liabilities......................... 11,553,000 12,619,000
------------ ------------
Long-Term Liabilities:
Long-term debt............................................ 33,617,000 36,149,000
Deferred federal and state income taxes................... 22,434,000 20,289,000
Other liabilities......................................... 1,192,000 1,214,000
------------ ------------
Total Long-Term Liabilities....................... 57,243,000 57,652,000
------------ ------------
Total Liabilities................................. 68,796,000 70,271,000
------------ ------------
Shareholders' Equity:
Preferred stock........................................... -- --
Common stock, par value $1 per share; authorized
12,000,000 shares; issued 5,208,330.................... 5,209,000 5,196,000
Additional paid-in capital................................ 12,346,000 12,022,000
Less: Treasury Stock........................................ (1,236,000) (1,236,000)
Retained earnings........................................... 58,446,000 56,103,000
------------ ------------
Total Shareholders' Equity........................ 74,765,000 72,085,000
------------ ------------
$143,561,000 $142,356,000
============ ============
See notes to consolidated financial statements.
21
22
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- ---------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ---------- -------- ----------- ----------- -----------
Balance, June 30, 1996.... 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000
EVI stock issuance........ -- -- -- -- -- 4,345,000
Net earnings.............. -- -- -- -- -- 6,663,000
--------- ---------- -------- ----------- ----------- -----------
Balance, June 30, 1997.... 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000
Common shares issued...... 12,700 13,000 -- -- 324,000 --
Net earnings
(Unaudited)............. -- -- -- -- -- 2,343,000
--------- ---------- -------- ----------- ----------- -----------
Balance, December 31,
1997.................... 5,208,330 $5,209,000 (59,000) $(1,236,000) $12,346,000 $58,446,000
========= ========== ======== =========== =========== ===========
See notes to consolidated financial statements.
22
23
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 2,343,000 $4,812,000
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 3,406,000 3,698,000
Loss (gain) on sale of assets.......................... (7,000) 1,001,000
Deferred income tax expenses........................... 2,145,000 3,134,000
Equity earnings of EVI, Inc............................ (3,447,000) (7,636,000)
Changes in assets and liabilities:
(Increase) in accounts receivable...................... (1,609,000) (329,000)
Decrease in other assets............................... 850,000 674,000
Increase (Decrease) in accounts payable and accrued
liabilities........................................... 1,197,000 (2,042,000)
----------- ----------
Net cash provided by operating activities................... 4,878,000 3,312,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. -- 1,482,000
Decrease in mortgage notes receivable..................... 476,000 1,472,000
(Increase) Decrease in short-term investments............. 1,129,000 (1,903,000)
Capital expenditures...................................... (1,518,000) (1,772,000)
----------- ----------
Net cash provided by (used in) investing activities......... 87,000 (721,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on long-term notes and credit
lines.................................................. -- 381,000
Payments of notes and loans payable....................... (4,817,000) (2,457,000)
Common stock issuance..................................... 337,000 --
----------- ----------
Net cash (used in) financing activities..................... (4,480,000) (2,076,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 485,000 515,000
BEGINNING CASH AND CASH EQUIVALENTS, July 1................. 2,888,000 3,728,000
----------- ----------
ENDING CASH AND CASH EQUIVALENTS, December 31............... $ 3,373,000 $4,243,000
=========== ==========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 1,450,000 $1,654,000
Income taxes paid......................................... $ 284,000 $ 381,000
See notes to consolidated financial statements.
23
24
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to fairly present the results
for the interim periods presented and should be read in conjunction with the
Company's 1997 Annual Report.
NOTE 2 -- EVI, INC. STOCK ISSUANCE
The Company accounts for its investment in EVI under the equity method of
accounting. In July 1996, the Company's share of the underlying net assets of
EVI increased $7,146,000 as a result of a public offering of EVI's common stock.
This was recorded as an increase of $4,345,000 in retained earnings, and a
$2,801,000 increase in deferred income taxes.
NOTE 3 -- MERGER AGREEMENT
The Company and EVI, Inc. executed a definitive merger agreement, dated
December 12, 1997, under which EVI will acquire all the outstanding common
shares of the Company. The terms of the merger provide that each Christiana
common share will be converted into approximately .74913 shares of EVI common
stock, cash in the approximate amount of $3.60, depending on the balance of
certain assets and liabilities at the time of closing and a contingent cash
payment of approximately $1.92 after five years, subject to the incurrence of
any indemnity claims by EVI during this period.
The merger transaction is subject to the approval of shareholders of both
EVI and the Company as well as customary regulatory approvals.
24
25
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- EARNINGS PER SHARE
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED DECEMBER 31, 1997 ENDED DECEMBER 31, 1996
------------------------------ ------------------------------
PER PER
SHARE SHARE
INCOME SHARES AMT. INCOME SHARES AMT.
---------- --------- ----- ---------- --------- -----
Net Income................................ $2,343,000 $4,812,000
Less: Preferred stock Dividends........... -- --
BASIC EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $2,343,000 5,136,699 $0.46 $4,812,000 5,136,630 $0.94
===== =====
Options issued to Employees............... 81,526 1,312
DILUTED EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $2,343,000 5,218,225 $0.45 $4,812,000 5,137,942 $0.94
========== ========= ===== ========== ========= =====
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED DECEMBER 31, 1997 ENDED DECEMBER 31, 1996
------------------------------ ------------------------------
PER PER
SHARE SHARE
INCOME SHARES AMT. INCOME SHARES AMT.
------ --------- ----- ---------- --------- -----
Net Income................................ $858,000 $3,730,000
Less: Preferred stock Dividends........... -- --
BASIC EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $858,000 5,136,788 $0.17 $3,730,000 5,136,630 $0.73
===== =====
Options issued to Employees............... 85,451 3,274
DILUTED EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $858,000 5,222,239 $0.16 $3,730,000 5,139,904 $0.73
======== ========= ===== ========== ========= =====
Basic earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the year.
In fiscal 1997, the Company adopted SFAS No. 128, "Earnings per Share",
effective December 15, 1997. As a result, the Company's reported earnings per
share for fiscal 1996 were restated. The effect of this accounting change on
previously reported earnings per share (EPS) data was as follows:
SIX MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
PER SHARE AMOUNTS 1996 1996
----------------- ------------ -------------
Primary EPS as reported.................................... $0.94 $0.73
Effect of SFAS No. 128..................................... -- --
Basic EPS as restated...................................... $0.94 $0.73
===== =====
Fully diluted EPS as reported.............................. $0.94 $0.73
Effect of SFAS No. 128..................................... -- --
Diluted EPS as restated.................................... $0.94 $0.73
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25