SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT TO FORM 8-K DATED JULY 8, 1996
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 21, 1996
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EDISON CONTROL CORPORATION
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(Exact name of registrant as specified in charter)
NEW JERSEY 0-14812 22-2716367
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(State or other jurisdiction Commission (IRS Employer
of Inspection) File Number Identification No.)
140 Ethel Road West, Piscataway N.J. 08854
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 819-8800
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Not Applicable
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(Former name or former address, if changed since last report.)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On June 21, 1996, Registrant through a newly organized, wholly-owned
subsidiary, purchased from unaffiliated persons, namely, Messrs. Allen W. Duhr,
Joseph F. Bennett, Alan J. Kastelic, Robert E. Klemm and Jay R. Hanamann,
(herein the "Shareholders") all of the issued and outstanding stock (the
"Conforms Stock") of Construction Forms, Inc., a Wisconsin corporation
("ConForms") and its affiliate C F Gilco, Inc. ("Gilco") and all of the issued
and outstanding units of another affiliate, JABCO, LLC, a Wisconsin limited
liability company ("JABCO") for an aggregate cash consideration of $20,599,487,
of which $567,087 were Registrant's acquisition costs and of which $1,500,000 is
held in escrow pending certain environmental remediation on property held by
ConForms. In connection with the acquisition of ConForms, Registrant also
acquired all of the outstanding stock of CF Ultra Tech, Inc., a wholly-owned
Wisconsin subsidiary of ConForms ("Ultra Tech").
ConForms is a leading manufacturer and distributor of systems of pipes,
couplings and hoses and other equipment used for the pumping of concrete. It
manufactures a wide variety of finished products with which it creates
appropriate configurations of systems for various concrete pumps. UltraTech
processes steel pipe into abrasion resistant hardened pipe for use in such
industries as mining, pulp and paper, power and waste treatment. Gilco produces
a line of concrete and plaster/mortar mixers.
The transaction was negotiated at arm's length and was based upon
Management's analysis of ConForms' assets and properties, historical
profitability and growth, industry position, business prospects and market
valuations of companies considered to be in related industries and businesses.
Funds utilized in the acquisition included approximately $4,800,000 of
Registrant's operating capital, approximately $9,740,000 available under a
Master Credit Agreement between LaSalle National Bank of Milwaukee, Wisconsin
("LaSalle"), ConForms, Gilco and UltraTech (collectively the "Borrowers") and
$6,800,000 under a Loan Agreement between Bank Audi USA of New York, New York
("Bank Audi") and the Borrowers. JABCO provided a guarantee in connection with
the LaSalle and Bank Audi loans.
The LaSalle facility includes an $8,000,000 working capital line, of which
$5,440,000 was drawn upon at closing, a $4,300,000 term/overadvance funding line
and a $3,000,000 letter of credit to support an Industrial Revenue Bond issued
on the JABCO property. All such facilities are cross-collateralized by the
corporate assets of ConForms, Ultra Tech and Gilco, including accounts
receivable, inventory and property and equipment as well as certain marketable
securities of Registrant. The Credit Agreement contains covenants customary in
such arrangements, including maintenance of certain financial ratios and minimum
tangible net worth and limitations on capital expenditures. For details,
reference is made to the Master Credit Agreement, filed as Exhibit 10(vi) to
this Report.
The Bank Audi long-term facility is subordinated to LaSalle. For details,
reference is made to the Loan Agreement filed as Exhibit 10 (vii) to this
Report. In connection therewith, William Finneran, Chairman of the Board and a
principal shareholder of the Registrant, provided collateral to the Bank to
support a guaranty of repayment by Borrowers of the principal and interest on
the loan. The guaranty is limited to the collateral value. The foregoing
arrangement was made by Mr. Finneran to reduce Registrant's cost of borrowed
funds from that which would have been otherwise obtainable from unaffiliated
"mezzanine" lenders. In consideration of his providing such collateral,
Registrant issued to Mr. Finneran a ten (10) year Warrant to purchase 500,000
shares of Registrant's Common Stock exercisable at a price of $1.60 per share.
At the time the transaction was negotiated, Registrant's Common Stock was quoted
at approximately $4 per share and, on
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the date the ConForms acquisition was consummated, the closing sale price for
Registrant's Common Stock in the over-the-counter market was $7 1/2 per share.
In approving the transaction, the Board of Directors of the Company received the
opinion of Commonwealth Associates, a New York based investment banking firm,
that the warrants issued to Mr. Finneran in return for the guarantee was fair,
from a financial point of view, to common stockholders of the Company.
(b) As indicated in (a) above, the ConForms purchase entailed the
acquisition of certain property, plant and equipment used in the ConForms
business. Registrant intends to continue to continue the use of such assets as
previously utilized.
ITEM 7. FINANCIAL STATEMENTS, PRO FORM A FINANCIAL INFORMATION AND EXHIBITS
Financial Statements and Pro Forma Financial Information
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
INDEX TO COMBINED FINANCIAL STATEMENTS
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Page
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report 4
Combined Balance Sheets, January 31, 1996 and 1995 5-6
Combined Statements of Earnings, Years Ended January 31, 1996,
1995 and 1994 7
Combined Statements of Equity, Years Ended January 31, 1996,
1995 and 1994 8
Combined Statements of Cash Flows, Years Ended January 31, 1996,
1995 and 1994 9-10
Notes to Combined Financial Statements, Years Ended January 31, 1996
1995 and 1994 11-16
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Consolidating Balance Sheet, June 30, 1996 (Unaudited) 18-19
Pro Forma Condensed Combined Statement of Operations, Six Months
Ended June 30, 1996 (Five Months For Acquired Companies)
(Unaudited) 20
Pro Forma Condensed Combined Statement of Operations - Six Months
Ended December 31, 1995 or January 31, 1996 (Unaudited) 21
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited) 22
Signature page 23
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Construction Forms, Inc.:
We have audited the accompanying combined balance sheets of Construction Forms,
Inc. and subsidiaries and JABCO, LLC (the "Company") as of January 31, 1996 and
1995, and the related combined statements of earnings, equity and cash flows for
each of the three years in the period ended January 31, 1996. 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, such combined financial statements present fairly, in all
material respects, the financial position of the Company as of January 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended January 31, 1996 in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Milwaukee, Wisconsin
August 9, 1996
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
COMBINED BALANCE SHEETS
JANUARY 31, 1996 AND 1995
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ASSETS (Note 6) 1996 1995
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 393,085 $ 762,560
Accounts receivable, less allowance for
doubtful accounts of $250,000 and $325,000,
respectively 2,807,455 1,766,466
Receivable from affiliate (Note 4) 136,132 132,493
Inventories (Note 1 and 3) 4,330,870 4,150,938
Recoverable income taxes 13,452 58,522
Prepaid expenses and other assets 426,385 83,234
Prepaid income taxes (Note 5) 238,000 375,000
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Total current assets 8,345,379 7,329,213
INVESTMENT IN AND ADVANCES TO AFFILIATE (Note 4) 372,861 370,697
INTANGIBLES (net of amortization of $5,979 and $0,
respectively) (Note 1) 96,708 266
PROPERTY, PLANT AND EQUIPMENT (Note 1):
Cost:
Land 233,401 230,424
Buildings and improvements 4,060,217 1,883,469
Machinery and equipment 7,694,391 5,866,140
Construction in progress 750 230,883
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11,988,759 8,210,916
Less accumulated depreciation 5,505,156 5,047,185
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6,483,603 3,163,731
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TOTAL $15,298,551 $10,863,907
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See notes to combined financial statements.
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LIABILITIES AND EQUITY 1996 1995
CURRENT LIABILITIES:
Note payable $ 500,000
Trade accounts payable 1,428,536 $ 1,333,701
Accrued compensation 1,279,421 1,129,189
Taxes, other than income taxes 18,241 15,148
Accrued expenses 392,859 426,530
Current maturities on long-term debt (Note 6) 222,180 222,180
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Total current liabilities 3,841,237 3,126,748
LONG-TERM DEBT (Note 6) 3,677,180 899,360
ACCRUED PENSION EXPENSE (Note 7) 468,305 409,307
DEFERRED INCOME TAXES (Note 5) 91,000 128,000
MINORITY INTEREST 33,344 8,795
EQUITY (Notes 6 and 8):
STOCKHOLDERS' EQUITY:
Common stock:
Class A nonvoting, $.01 par value - authorized
500,000 shares: issued 10,650 shares 107 107
Class B voting, $.01 par value - authorized
1,000,000 shares: issued 25,600 shares 256 256
Additional paid-in capital 129,197 129,197
Retained earnings 8,517,911 7,617,411
Foreign currency translation adjustments (14,692) 20,611
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8,632,779 7,767,582
Less-Treasury stock, at cost - 7,680 shares of
Class B common stock and 750 shares of
Class A common stock 1,525,885 1,525,885
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Total stockholders' equity 7,106,894 6,241,697
PARTNERS' EQUITY 80,591 50,000
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Total equity 7,187,485 6,291,697
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TOTAL $15,298,551 $10,863,907
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
COMBINED STATEMENTS OF EARNINGS
YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
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1996 1995 1994
NET SALES $19,789,192 $16,792,751 $15,032,470
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COSTS AND EXPENSES:
Cost of products sold 13,421,310 10,930,678 9,706,016
Selling, engineering and administrative expenses 4,728,149 4,222,708 4,137,901
Interest expense 146,257 118,591 130,715
Equity in earning, of affiliate (Note 4) (62,164) (54,767) (29,655)
----------- ----------- -----------
Total costs and expenses 18,233,552 15,217,210 13,944,977
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST 1,555,640 1,575,541 1,087,493
INCOME TAXES (Note 5):
Currently payable:
Federal 435,000 475,000 290,000
State 65,000 85,000 80,000
Deferred 100,000 45,000 (112,000)
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Total income taxes 600,000 605,000 258,000
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EARNINGS BEFORE MINORITY INTEREST 955,640 970,541 829,493
MINORITY INTEREST (24,549) (8,795)
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NET EARNINGS $ 931,091 $ 961,746 $ 829,493
=========== =========== ==========
See notes to combined financial statements.
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
COMBINED STATEMENTS OF EQUITY
YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
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Foreign
Additional Currency
Class A Class B Paid-in Retained Translation
Shares Amount Shares Amount Capital Earnings Adjustments
BALANCES, FEBRUARY 1, 1993 10,650 $ 107 25,600 $ 256 $ 129,197 $5,826,172
Stock purchased from former officer
Currency translation adjustment $(21,000)
Net earnings 829,493
------ ----- ------ ----- --------- ---------- --------
BALANCES, JANUARY 31, 1994 10,650 107 25,600 256 129,197 6,655,665 (21,000)
Currency translation adjustment 41,611
Initial investment in JABCO
Net earnings 961,746
------ ----- ------ ----- --------- ---------- --------
BALANCES, JANUARY 31, 1995 10,650 107 25,600 256 129,197 7,617,411 20,611
Currency translation adjustment (35,303)
Net earnings 900,500
------ ----- ------ ----- --------- ---------- --------
BALANCES, JANUARY 31, 1996 10,650 $ 107 25,600 $ 256 $ 129,197 $8,517,911 $(14,692)
====== ===== ====== ===== ========= ========== ========
Partner's Treasury
Equity Stock
BALANCES, FEBRUARY 1, 1993 $(1,389,984)
Stock purchased from former officer (135,901)
Currency translation adjustment
Net earnings
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BALANCES, JANUARY 31, 1994 (1,525,885)
Currency translation adjustment
Initial investment in JABCO $50,000
Net earnings
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BALANCES, JANUARY 31, 1995 50,000 (1,525,885)
Currency translation adjustment
Net earnings 30,591
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BALANCES, JANUARY 31, 1996 $80,951 $(1,525,885)
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See notes to combined financial statements.
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
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1996 1995 1994
OPERATING ACTIVITIES:
Net earnings $ 931,091 $ 961,746 $ 829,493
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment 631,127 478,933 435,952
Amortization 5,979
Provision for losses on accounts receivable (75,000) 27,000 87,000
Losses on sale of equipment 22,138 6,002 1,939
Equity in earnings of affiliate (62,164) (54,767) (29,655)
Minority interest in income of subsidiary 24,549 8,795
Changes in assets and liabilities:
Accounts receivable (980,003) 546,498 (720,469)
Receivable from affiliate (3,639) (25,856) (32,106)
Inventories (149,382) (298,102) (242,949)
Prepaid expenses and other assets (262,025) (2,785) (41,308)
Trade accounts payable (23,958) (301,489) 296,867
Accrued compensation 150,599 115,234 452,616
Increase in accrued interest 15,436
Taxes, other than income taxes 3,091 206 2,767
Accrued expenses 10,922 125,767 200,112
Income taxes 45,070 (278,104) 59,920
Deferred income taxes 100,000 45,000 (112,000)
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Net cash provided by operating activities 383,831 1,354,078 1,188,179
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INVESTING ACTIVITIES:
Additions to plant and equipment (812,248) (669,811) (478,452)
Acquisition of certain assets of Pipejoint & Company (150,491)
Payments received on advance to affiliate 60,000
Proceeds from sale of equipment 14,180 6,355 21,385
Partner capital contributions 50,000
Increase in prepaids and other (81,775)
Organization and financing costs (64,424) (266)
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Net cash used in investing activities (1,034,758) (613,722) (457,067)
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FINANCING ACTIVITIES:
Advances under revolving credit agreement 500,000
Payments on long-term debt (222,180) (157,180) (157,180)
Payments under revolving credit agreement (500,000)
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Net cash provided by (used in) financing activities 277,820 (157,180) (707,180)
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(Continued)
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
================================================================================
1996 1995 1994
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 3,632 $ 5,711 $(24,983)
---------- -------- --------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (369,475) 588,887 (1,051)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 762,560 173,673 174,724
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CASH AND CASH EQUIVALENTS,
END OF YEAR $ 393,085 $762,560 $173,673
========== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest (Net of capitalized
interest of $63,469, $6,329
and $0, respectively) $ 147,383 $123,938 $124,079
Income taxes, net of refunds 454,930 838,103 310,079
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
$3,000,000 of Industrial Revenue Bonds
were issued in February 1995, the
proceeds of which were held in trust
to fund additions to property, plant
and equipment $3,000,000
Included in JABCO LLC's accounts payable
were $124,328 of plant and equipment
additions $ 124,328
Obligation to former officer for purchase
of common stock $135,901
(Concluded)
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CONSTRUCTION FORMS, INC. AND SUBSIDIARIES AND JABCO, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
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1. NATURE OF BUSINESS AND ACCOUNTING POLICIES
Principles of Combination - The combined financial statements include the
accounts of Construction Forms, Inc., its 80%-owned subsidiary, CF Gilco,
Inc., its wholly-owned subsidiary CF Ultra Tech, Inc. and JABCO, LLC
(collectively the Company). All material intercompany accounts and
transactions have been eliminated. The Company has a January 31, fiscal year
end whereas JABCO, LLC has a December 31, fiscal year end.
Nature of Operations - The Company primarily engages in the design,
manufacture, and sale of concrete pumping accessories, concrete and
mortar/plaster mixers, and abrasion resistant steel piping. The Company's
principal market is in North America with limited sales activity in Europe.
Cash Equivalents - The Company considers all temporary investments with
maturities of three months or less when acquired to be cash equivalents.
Inventories - Inventories are stated at the lower of cost (principally
last-in, first-out method) or market. It is not practical to segregate the
components of raw material, work-in-process and finished goods at the
balance sheet date.
Depreciation - The cost of plant and equipment is depreciated over the
estimated useful lives of the various assets: buildings and improvements
15-40 years, machinery and equipment 3-8 years. Depreciation expense is
computed by the straight-line method for financial reporting purposes and by
accelerated methods for tax purposes.
Intangibles - Goodwill is amortized over a ten year period, organizational
costs are amoritzed over a five year period. Financing costs are being
amortized over a twenty year period.
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.
Fair Value of Financial Instruments - Management believes the carrying
amount of financial instruments is a reasonable estimate of the fair value
of these instruments.
Translation of Foreign Currencies - Assets and liabilities of foreign
operations are translated into United States dollars at current exchange
rates. Income and expense accounts are translated into United States dollars
at average rates of exchange prevailing during the year. Adjustments
resulting from the translation of financial statements of the foreign
operations are included as foreign currency translation adjustments in the
equity section of the accompanying consolidated balance sheets.
Research and Development - Amounts expended for research and development for
the years 1996, 1995 and 1994 totaled $220,000, $205,000 and $190,000
respectively, and are expensed as incurred.
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The interest carrying costs of construction of a new facility were
capitalized at the effective interest rate on the borrowing. The costs
approximated $63,469 and $6,329 as of 1996 and 1995, respectively.
2. CHANGE OF OWNERSHIP
On June 21, 1996 an unaffiliated party purchased all of the issued and
outstanding stock of the Company for an aggregate cash consideration of
approximately $20,600,000.
3. INVENTORIES
The excess of replacement cost over stated LIFO amounts of inventories
aggregated approximately $2,157,000 at January 31, 1996 and $2,121,000 at
January 31, 1995.
4. INVESTMENT IN AND ADVANCES TO AFFILIATE
The investment in affiliate (50% owned) is accounted for by the equity
method. The Company had sales of approximately $708,000,$674,000 and
$585,000 to the affiliate during 1996, 1995 and 1994, respectively.
Investment in and advances to affiliate includes $150,723 and $210,723 of
advances at January 31, 1996 and 1995, respectively.
5. INCOME TAXES
Deferred income taxes are provided on temporary differences relating to
reporting expenses in different periods for financial statement and income
tax purposes and differences in bases of assets and liabilities. Such
differences relate primarily to depreciation expense, inventory costs, bad
debts, warranty, insurance and pension expense.
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This reconciliation of income tax computed at the U.S. federal statutory rates
to income tax expense is:
1996 1995 1994
Tax at U.S. statutory rate $518,000 $536,000 $370,000
State taxes net of federal benefit 72,000 75,000 60,000
Adoption of SFAS 109 (150,000)
Other items 10,000 (6,000) (22.000)
-------- -------- --------
Income tax expense $600,000 $605,000 $258,000
======== ======== ========
Temporary differences which gave rise to the deferred tax assets and liabilities
included the following items:
Deferred tax assets: 1996 1995
Compensation and other employee benefits $291,000 $268,000
Inventory items 103,000 100,000
Book reserves and other items 152,000 198,000
-------- --------
546,000 566,000
Valuation allowance (13,000)
-------- --------
546,000 553,000
-------- --------
Deferred tax liabilities:
Book prepaids 106,000
Depreciaton 190,000 228,000
Other items 103,000 78,000
-------- --------
399,000 306,000
-------- --------
Net deferred tax asset $147,000 $247,000
======== ========
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6. LONG-TERM DEBT
Long-term debt, less current maturities consists of the following at
January 31:
1996 1995
Industrial revenue bonds $3,000,000
Bank term loan 845,000 $1,040,000
Obligation to former officer 54,360 81,540
---------- ----------
Total long-term debt 3,899,360 1,121,540
Less current portion 222,180 222,180
---------- ----------
$3,677,180 $ 899,360
========== ==========
The Company has a revolving credit agreement with a bank which provides for
borrowings up to $2,000,000 through August 22, 1996. Borrowings bear
interest at either the bank's prime rate or 2.25% in excess of the 30, 60 or
90 day LIBOR rate. The Company has the option to convert $1,250,000 of
borrowings to a term loan payable over five years. The Company has $500,000
of outstanding borrowings on January 31, 1996 at an interest rate of 8.50%.
The Industrial Revenue Bonds ("IRB") were issued to finance construction of
a new production facility in Port Washington, WI. A total of $3,000,000 was
issued for the facility and is due in annual installments of $125,000 from
February 1997 through February 2000, $150,000 from February 2001 through
February 2005, and $175,000 from February 2006 through February 2015. The
interest rate is a variable rate based on the weighted average of the
interest rates borne by the IRB. The interest rate at January 31, 1996
approximated 3.5%.
The Company also has a term note payable to a bank. The balance outstanding
at January 31, 1996 of $845,000 is payable in annual installments, with a
final installment due December, 1999. Interest is payable quarterly at
either the prime rate, 2.25% in excess of the 30, 60 or 90 day LIBOR rate,
or 2% in excess of the Bank's cost of funds rate. The interest rate at
January 31, 1996 was 7.56%.
The Company has an obligation to a former officer. The obligation of $54,360
at January 31, 1996 is payable in annual installments, with a final
installment due September, 1997. Interest is payable annually at 6%.
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Annual principal payments for the next five years on long-term debt are as
follows:
Year Ending JABCO Term
January 31, IRB Note Other Total
1997 $195,000 $27,180 $ 222,180
1998 $ 125,000 195,000 27,180 347,180
1999 125,000 227,500 352,500
2000 125,000 227,500 352,500
2001 125,000 125,000
Thereafter 2,500,000 2,500,000
---------- -------- ------- ----------
$3,000,000 $845,000 $54,360 $3,899,360
========== ======== ======= ==========
The terms of the above agreements, among other provisions, require the
Company to maintain a minimum current ratio and restricts the Company to a
maximum debt to worth ratio. Substantially all of the Company's assets are
collateralized under the revolving credit, IRB, and term note payable
agreements.
7. EMPLOYEE RETIREMENT PLANS
The Company has a noncontributory defined pension plan covering
substantially all full-time employees.
The following table sets forth the plan's funded status and amounts
recognized in the Company's financial statements at January 31, 1996 and
1995:
1996 1995
Actuarial present values of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $1,972,323 and $1,736,648,
respectively $2,006,903 $1,771,736
========== ==========
Projected benefit obligation for service
rendered to date $2,733,433 $2,370,186
Plan assets at fair value, primarily pooled
common stock and bond funds, stocks and bonds 3,109,557 2,515,406
---------- ----------
Plan assets in excess of projected benefit
obligation 376,124 145,220
Unrecognized net gain from past experience
different from that assumed (537,166) (216,596)
Unrecognized prior service cost (235,203) (256,641)
Unamortized portion of unrecognized net
transition asset (72,060) (81,290)
---------- ----------
Accrued pension expense recognized in the
consolidated balance sheet at January 31 $ (468,305) $ (409,307)
========== ==========
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
are 7.5% and 6.0%, respectively for 1996 and 1995. The expected rate of
return on plan assets is 8.0% for both years. The Company's funding policy
is to contribute annually amounts within the limits which can be deducted
for Federal income tax purposes. No contributions were made to the Plan in
the years ended January 31, 1996 and 1995.
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Pension expense consisted of the following components:
1996 1995 1994
Service cost-benefits earned during the year $ 95,491 $ 92,515 $ 91,182
Interest cost on projected benefit obligation 183,309 159,623 141,369
Actual return on plan assets (gain) loss (651,977) 73,463 (192,432)
Net amortization and deferral 432,175 (280,670) 6,937
--------- --------- ---------
Net periodic pension expense $ 58,998 $ 44,931 $ 47,056
========= ========= =========
The Company also has a retirement savings and thrift plan (401(k) plan)
covering substantially all of its employees. Under the 401(k) plan, the
Company contributes amounts based on employee contributions. Amounts charged
to earnings for the plan for the years ended January 31, 1996, 1995 and 1994
were $77,892, $77,436, and $70,998 respectively.
8. EMPLOYEE INCENTIVE STOCK OPTION PLAN
The Company has a nonqualified stock option plan. Under the plan the Company
has reserved 14,750 shares of common stock for option grants. At January 31,
1996 and 1995, options for the purchase of 6,500 shares of Class A nonvoting
common stock were outstanding. At January 31, 1996, 2,500 of the options
were exercisable at a price of $54.50 a share, 2,000 are exercisable at $110
per share and 2,000 are exercisable at $160 per share. All of the options
outstanding are exercisable during the 15 year option period. No options
were exercised during the years ended January 31, 1996, 1995 and 1994. The
Company is required to repurchase shares of common stock issued under the
option plan at a defined fair market value upon the grantee's termination of
employment with the Company.
9. COMMITMENTS
The Company leases warehouse facilities and equipment expiring at various
dates through November 1999. Future minimum lease payments required under
these noncancelable operating lease agreements are approximately as follows:
Year Ending
January 31,
1997 $120,000
1998 108,000
1999 86,000
--------
$314,000
========
Total rent expense for the years ended January 31, 1996, 1995 and 1994 was
approximately $141,000, $172,000 and $247,000, respectively.
10. PURCHASE OF ASSETS
On October 3, 1995, the Company purchased certain assets and the related
business operations of Pipejoint & Company for $150,491 cash.
******
-16-
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheet of Edison Control
Corporation ("Company") as of June 30, 1996 gives effect to the acquisition of
Construction Forms, Inc. and Subsidiaries and JABCO,LLC ("JABCO") ("acquired
entities"), which was completed on June 21, 1996. The accompanying pro forma
condensed combined statements of operations for the six months ended June 30,
1996 and the year ended December 31, 1995 gives effect to the acquisition of the
acquired entities as if the acquisitions had occurred at the beginning of each
of the periods.
The historical balances represent the financial position and results of
operations of the Company for each of the indicated dates and periods as
reported in the Financial Statements of Edison Control Corporation.
The balances for the acquired entities represents the historical financial
position as of June 30, 1996 and the results of operations for the year ended
January 31, 1996 and the five months ended June 30, 1996. JABCO'S financial
statements were adjusted to conform with the Construction Forms, Inc. and
subsidiaries fiscal year and the five month period ended.
The pro forma condensed combined statements of operations are based upon certain
assumptions and estimates which are subject to change. These statements are not
necessarily indicative of the actual results of operations that might have
occurred, nor are they necessarily indicative of the expected results in the
future.
The pro forma condensed combined financial statements should be read in
conjunction with the Company's historical Financial Statements and related Notes
included in the Company's Report on Form 10-K for the year ended December 31,
1995 and Form 10-Q for the six months ended June 30, 1996.
-17-
EDISON CONTROL CORPORATION
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1996 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
Edison
Eliminations Eliminations Control Acquired
Consolidated DR CR Corp. Entities
CURRENT LIABILITIES:
Trade accounts payable $ 1,412,795 $ 50,000 $ 55,189 $ 1,407,606
Payables to affiliates 3,595,654 3,595,654
Accrued compensation 518,948 518,948
Taxes other than income taxes 63,688 63,688
Accrued expenses 485,924 26,825 67,894 444,855
Income taxes payable (169,276) 594,099 (763,375)
Deferred income taxes 1,448,450 840,450 608,000
Current maturities on long-term debt 862,844 75,000 937,844
----------- ----------- --- ----------- -----------
Total current liabilities 4,623,373 3,747,479 1,557,632 6,813,220
LONG-TERM DEBT 18,731,516 18,731,516
DUE TO PARENT 745,000 745,000
DEFERRED INCOME TAXES 456,000 456,000
ACCRUED PENSION EXPENSE (433,662) (433,662)
STOCKHOLDERS' EQUITY:
Common stock 22,509 201 22,509 201
Additional paid-in capital 8,958,435 5,661,999 8,958,435 5,661,999
Translation adjustments 7,557 7,557
Retained earnings 4,252,042 121,594 4,252,042 121,594
----------- ----------- ----------- -----------
Total stockholders' equity 13,240,543 5,783,794 13,232,986 5,791,351
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $36,617,700 $10,276,273 $ $14,790,618 $32,103,425
---------- ----------- --- ----------- -----------
-19-
EDISON CONTROL CORPORATION
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1996 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
Edison
Eliminations Eliminations Control Acquired
Consolidated DR CR Corp. Entities
ASSETS
CURRENT ASSETS:
Cash $ 1,344,931 $ 393,035 $ 951,896
Temporary cash investments 37,400 37,400
Investments 284,000 284,000
Trade accounts receivable 2,870,619 $ 95,724 261,390 2,704,953
Receivables from affiliates 201,008 3,596,870 3,797,878
Trading securities 5,590,680 5,590,680
Inventories 6,793,616 213,360 6,580,256
Prepaid expenses 633,218 437,732 195,486
Deferred compensation 738,537 738,537
Deferred financing cost 400,000 400,000
Note receivable-current 75,000 75,000
Prepaid income taxes 93,000 93,000
----------- ---- ----------- ----------- -----------
Total current assets 18,987,009 3,767,594 8,318,734 14,435,869
INVESTMENT IN AND ADVANCES TO
AFFILIATES-S.H.H. 367,861 367,861
-CON FORMS 5,615,060 5,615,060
-GILCO 100 100
-ULTRA TECH 100 100
-JABCO LLC 121,594 1,216 120,378
----------- ---- ----------- ----------- -----------
367,861 5,736,854 5,616,276 488,439
DEFERRED FINANCING COSTS 791,667 791,667
NOTE RECEIVABLE 771,825 771,825
GOODWILL 10,172,068 10,172,068
PREPAID INCOME TAXES 10,350 10,350
PROPERTY, PLANT AND EQUIPMENT:
Land 233,401 233,401
Buildings and improvements 3,033,006 3,033,006
Machinery and equipment 3,291,674 442,372 2,849,302
Assets in progress 58,970 58,970
----------- ---- ----------- ----------- -----------
6,617,051 442,372 6,174,679
Less accumulated depreciation 388,781 388,781
----------- ---- ----------- ----------- -----------
Net fixed assets 6,228,270 53,591 6,174,679
ORGANIZATIONAL/FINANCE COSTS 64,690 64,690
Less accumulated amortization 4,145 4,145
----------- ---- ----------- ----------- -----------
Net intangibles 60,545 60,545
----------- ---- ----------- ----------- -----------
TOTAL ASSETS $36,617,770 $ $10,276,273 $14,790,618 $32,103,425
=========== ==== =========== =========== ===========
-18-
EDISON CONTROL CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (FIVE MONTHS FOR ACQUIRED COMPANIES) (UNAUDITED)
- -------------------------------------------------------------------------------
Historical
---------------------------
Edison Pro
Acquired Control Forma Pro
Companies Corporation Adjustments Forma
NET SALES $8,954,107 $ 550,813 $9,504,920
COST OF PRODUCTS SOLD 6,274,652 411,180 6,685,832
---------- -------- ----------
GROSS PROFIT 2,679,455 139,633 2,819,088
$ 127,151 a
377,125 e
SELLING, ENGINEERING & ADMINISTRATIVE 2,109,336 412,736 (500,000)f 2,526,348
---------- -------- --------- ----------
OPERATING INCOME (LOSS) 570,119 (273,103) (4,276) 292,740
OTHER INCOME (EXPENSE):
Interest & dividends 8,131 37,229 45,360
Realized and unrealized gains (losses) on trading securities 109,156 (62,000)b 47,156
Interest expense (130,748) (8,333) (502,658)c (841,739)
(200,000)
---------- -------- --------- ----------
NET INCOME (LOSS) BEFORE INCOME TAXES 447,502 (135,051) (768,934) (456,483)
INCOME TAX EXPENSE (BENEFIT) 166,433 (55,000) (300,000)g (188,567)
---------- -------- --------- ----------
NET INCOME (LOSS) $ 281,069 $(80,051) $(468,934) $ (267,916)
========== ======== ========= ==========
NET (LOSS) PER COMMON SHARE $ (0.09)
-20-
EDISON CONTROL CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 OR JANUARY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
Edison Pro
Acquired Control Forma Pro
Companies Corporation Adjustments Forma
NET SALES $19,789,192 $ 791,502 $20,580,694
COST OF PRODUCTS SOLD 13,464,120 660,857 14,124,977
----------- ---------- -----------
GROSS PROFIT 6,325,072 130,645 6,455,717
$ 254,301 a
754,250 e
SELLING, ENGINEERING & ADMINISTRATIVE 4,719,029 729,267 (1,000,000)f 5,456,847
----------- ---------- ----------- -----------
OPERATING INCOME (LOSS) 1,606,043 (598,622) (8,551) 998,870
OTHER INCOME (EXPENSE):
Interest & dividends, net of fees 54,642 39,598 94,240
Realized and unrealized gains (losses) on trading securities 4,057,047 (1,935,000)b 2,122,047
Equity in earning of affiliate 62,164 62,164
Interest expense (155,799) (1,125,624)c (1,681,423)
(400,000)d
----------- ---------- ----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES 1,567,050 3,498,023 (3,469,175) 1,595,898
INCOME TAX EXPENSE (BENEFIT) 600,000 1,415,441 (1,352,978)g 662,463
----------- ---------- ----------- -----------
NET INCOME (LOSS) $ 967,050 $2,082,582 $(2,116,197) $ 933,435
=========== ========== =========== ===========
NET INCOME PER COMMON SHARE $ 0.33
-21-
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
UNAUDITED
SUMMARY OF TRANSACTION
On June 21, 1996, the Company purchased all the outstanding common stock of
Construction Forms, Inc. and its affiliate CF Gilco, Inc. and all of the issued
and outstanding units of JABCO, LLC for an aggregate cash consideration of
$20,599,487, which includes $567,087 of transaction costs. The transaction is
accounted for as a purchase, and accordingly, the purchase price was allocated
to the net assets acquired based upon the estimated fair values as follows:
Tangible net assets $10,427,419
Cost in excess of fair value of
net assets acquired 10,172,068
-----------
$20,599,487
===========
PRO FORMA INCOME STATEMENT ADJUSTMENTS
a) To reflect amortization of goodwill over a 40 year life.
b) To reflect the gain (loss) in cash and trading securities income (loss) due
to the investment in the acquired entities.
c) To reflect net change in interest expense:
Year Six Months
Ended Ended
Interest expense on liabilities not assumed $ (90,376) $ (84,342)
Interest expense on revolver and term note 727,000 354,000
Interest expense on subordinated debt 493,000 233,000
---------- ---------
$1,125,624 $ 502,658
========== =========
d) To reflect amortization of deferred financing costs related to stock
warrants granted.
e) To reflect amortization of deferred compensation related to stock options
granted.
f) To reflect decrease in acquired companies expenses related to previous
majority owners.
g) To adjust federal and state income taxes for the effect of the pro forma
adjustments.
-22-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereto
duly authorized.
EDISON CONTROL CORPORATION
----------------------------------------
(Registration)
Date: September 6, 1996 By
-------------------------------------
Mary McCormack, President and
Chief Executive Officer
By
-------------------------------------
Jay R. Hanamann
Chief Financial Officer and Treasurer
-23-