1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8 - K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 22, 1995
--------------
DeVlieg-Bullard, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-18198 62-1270573
- -------------- ------------- ------------------
(State or other (Commission (I.R.S. Employer
jurisdiciton of File Number) Identification No.)
incorportation)
One Gorham Island, Westport, CT 06880
- ----------------------------------- -----------
(Address of principal exective offices) (Zip Code)
Registrant's telephone number, including area (203) 221-8201
--------------
2
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
February 3, 1995 as set forth in the pages attached hereto:
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on behalf by the
undersigned, thereunto duly authorized.
DEVLIEG-BULLARD, INC.
Date: March 22, 1995 By: /s/ Lawrence M. Murray
-------------- -----------------------
Vice President and
Chief Financial Officer
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired:
Report of Independent Accountants
Balance Sheets of Mideastern, Inc. as of December 31, 1994 and 1993
Statements of Operations and Retained Earnings of Mideastern,
Inc. for the years ended December 31, 1994 and 1993
Statements of Cash Flows of Mideastern, Inc. for the years ended
December 31, 1994 and 1993
Notes to Financial Statements
Report of Independent Accountants
Balance Sheet of Mideastern, Inc. as of December 31, 1992
Statement of Operations and Retained Earnings of Mideastern,
Inc. for the year ended December 31, 1992
Statement of Cash Flows of Mideastern, Inc. for the year ended
December 31, 1992
Notes to Financial Statements
(b) Pro Forma Financial Information
The following unaudited pro forma combined financial statements have been
prepared to give effect to the acquisitions by DeVlieg-Bullard, Inc. (the
"Company") of Mideastern, Inc. ("Mideastern"), as well as Cushman Industries
("Cushman") and H.B. Industries, Inc. ("HBI") under the assumptions and
adjustments as set forth in the accompanying notes thereto. The unaudited pro
forma combined balance sheet presents the combined financial position of the
Company, Mideastern and HBI as of October 31, 1994 assuming the acquisitions
had occurred on October 31, 1994. Such pro forma information is based on
historical balance sheet data of the Company, Mideastern and HBI as of that
date. The accounts of Cushman (acquired September 9, 1994) are included in the
Company's balance sheet as of October 31, 1994. The unaudited pro forma
combined statements of operations for the year ended July 31, 1994 and the
three months ended October 31, 1994 have been prepared based on the individual
statements of the Company, Mideastern, Cushman and HBI as if the acquisitions
had taken place on August 1, 1993. The unaudited pro forma combined statements
of operations may not be indicative of the results that actually would have
occurred if the acquisitions had been in effect during the periods presented or
which may be obtained in the future.
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3
DeVlieg-Bullard, Inc.
Unaudited Pro Forma Combined Balance Sheet
(in thousands)
October 31, 1994
-----------------------------------------------------------------------
DeVlieg- H.B.
Bullard, Industries Mideastern, Pro forma Pro forma
Inc. Inc. Inc. Adjustments Combined
-------- ---------- ----------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 416 $ - $ - $ $ 416
Accounts receivable, net 10,167 297 657 11,121
Inventories, net 19,121 737 1,280 21,138
Other current assets 3,994 60 73 4,127
-------- ------ ------ ------- --------
Total current assets 33,698 1,094 2,010 - 36,802
Property, plant and equipment, net 6,249 - 487 380 (a) 7,116
Other assets 15,629 - 14 4,740 (b) 20,383
-------- ------ ------ ------- --------
Total assets $ 55,576 $1,094 $2,511 $ 5,120 $ 64,301
======== ====== ====== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit agreement $ 2,044 $ - $ 317 $ 6,654 (c) $ 9,015
Current portion of long-term debt 1,837 - 30 170 (d) 2,037
Accounts payable 5,785 37 274 6,096
Accrued expenses and other current liabilities 6,942 131 654 58 (e) 7,785
-------- ------ ------ ------- --------
Total current liabilities 16,608 168 1,275 6,882 24,933
Long-term debt 14,427 - 207 193 (d) 14,827
Postretirement benefit obligation 4,840 - - 4,840
Other noncurrent liabilities 1,954 - - 1,954
-------- ------ ------ ------- --------
Total liabilities 37,829 168 1,482 7,075 46,554
-------- ------ ------ ------- --------
Stockholders' equity:
Common stock 123 1 12 (13)(f) 123
Additional paid-in capital 32,299 10 - (10)(f) 32,299
Excess purchase price over net assets
from the Services Group acquisition (18,131) - - (18,131)
Retained earnings 3,605 915 1,017 (1,932)(f) 3,605
Cumulative translation adjustment (149) - - (149)
-------- ------ ------ ------- --------
Total stockholders' equity 17,747 926 1,029 (1,955) 17,747
-------- ------ ------ ------- --------
Total liabilities and stockholders' equity $ 55,576 $1,094 $2,511 $ 5,120 $ 64,301
======== ====== ====== ======= ========
3
4
The pro forma adjustments to the Unaudited Pro Forma Combined Balance Sheet are
as follows (amounts in thousands):
a) Property, plant and equipment of Mideastern has been adjusted to fair
market value as determined by appraisal and management estimates.
b) The excess purchase price over fair value of net assets acquired is
recorded as goodwill.
c) The acquisitions were financed with advances from the Company's
revolving credit agreement, approximately $3,000 for HBI and $4,000
for Mideastern. The Mideastern line of credit was repaid by the
Company in connection with the closing of the Mideastern acquisition.
d) To reflect the earnout note in the principal amount of $600 issued by
the Company in connection with the Mideastern acquisition, recorded
net of Mideastern bank debt repaid by the Company.
e) Additional costs and professional fees were recorded in connection
with the acquisitions.
f) The retained earnings, common stock and additional paid-in capital of
the acquirees were eliminated to reflect the change in ownership.
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5
DeVlieg-Bullard, Inc.
Unaudited Pro Forma Combined Pro Forma Combined Statement of Operations
(in thousands, except per share data)
Year ended July 31, 1994
-------------------------------------------------------------------------------------
DeVlieg- H.B. Pro forma
Bullard, Cushman Industries, Mideastern, Adjust- Pro forma
Inc. Industries(a) Inc.(a) Inc.(a) ments Combined
--------- ---------- --------- ---------- -------- ---------
(audited)
Net sales $63,619 $3,881 $1,647 $3,838 $72,985
Cost of sales 45,540 2,409 696 2,648 51,293
------- ------ ------ ------ ----- -------
Gross profit 18,079 1,472 951 1,190 - 21,692
Operating expenses 15,289 1,184 1,050 718 (850) (b) 17,082
115 (c)
455 (d)
73 (e)
(606) (f)
(346) (g)
Operating profit 2,790 288 (99) 472 1,159 4,610
Other (income) expense, net (42) (31) (1) (30) (104)
------- ------ ------ ------ ----- -------
Income before interest and
income taxes 2,832 319 (98) 502 1,159 4,714
Interest expense 1,345 192 7 39 1,085 (h) 2,668
------- ------ ------ ------ ----- -------
Income before income taxes 1,487 127 (105) 463 74 2,046
Provision for income taxes (92) - - - - (i) (92)
------- ------ ------ ------ ----- -------
Net income $ 1,579 $ 127 $ (105) $ 463 74 $ 2,138
======= ====== ====== ====== ===== =======
Income per common share $ 0.13 $ 0.17
======= =======
Average common shares and
equivalents outstanding 12,436 12,436
======= =======
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6
DeVlieg-Bullard, Inc.
Unaudited Pro Forma Combined Statement of Operations
(in thousands, except per share data)
Three Months Ended October 31, 1994
--------------------------------------------------------------------------------------------
DeVlieg- H.B. Pro forma
Bullard, Cushman Industries, Mideastern, Adjust- Pro forma
Inc. Industries Inc. Inc. ments Combined
-------- ---------- ----------- ----------- --------- ---------
Net sales $18,530 $425 $488 $1,139 $20,582
Cost of sales 13,510 264 107 792 14,673
------- ---- ---- ------ ---- -------
Gross profit 5,020 161 381 347 - 5,909
Operating expenses 3,932 130 312 91 (268)(b) 4,247
29 (c)
91 (d)
18 (e)
(55)(f)
(33)(g)
Operating profit 1,088 31 69 256 218 1,662
Other (income) expense, net 64 (4) (9) 51
------- ---- ---- ------ ---- -------
Income before interest and
income taxes 1,024 35 69 265 218 1,611
Interest expense 527 21 10 158 (h) 716
------- ---- ---- ------ ---- -------
Income before income taxes 497 14 69 255 60 895
Provision for income taxes 162 - - - - (i) 162
------- ---- ---- ------ ---- -------
Net income $ 335 $ 14 $ 69 $ 255 $ 60 $ 733
======= ==== ==== ====== ==== =======
Income per common share $ 0.03 $ 0.06
======= =======
Average common shares and
equivalents outstanding 13,250 13,250
======= =======
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The pro forma adjustments to the Unaudited Pro Forma Combined Statements of
Operations for the year ended July 31, 1994 and the three months ended October
31, 1994 are as follows (amounts in thousands):
a) In addition to the audited results of the Company, the Unaudited Pro
Forma Combined Statement of Operations for the year ended July 31,
1994 includes the historical results of Cushman for the twelve months
ended June 30, 1994, of HBI for the twelve months ended September 30,
1994, and of Mideastern for the twelve months ended October 31, 1994.
b) In connection with the acquisition of HBI, the Company operates from
the HBI facility in Madison Heights, Michigan for an interim period
and incurs occupancy costs (rent and utilities) on a month-to-month
basis until the inventory is consolidated and relocated to the
Company's Rockford, Illinois facility. In addition, the Company has
retained the services of two individuals for the transition period at
$45 annually per employee. These costs replace operating expenses
which had historically been incurred by HBI, primarily officer's
compensation. The adjustment represents net savings to the Company of
$850 and $268 for the year ended July 31, 1994 and the three months
ended October 31, 1994, respectively.
c) In conjunction with the acquisition of Mideastern, the Company entered
into employment agreements for three year terms with certain
employees. The adjustment represents the aggregate incremental salary
and related fringe costs related to these agreements.
d) The Company will incur incremental amortization expense on the
intangible assets attributable to the acquisitions. Straight-line
amortization is assumed, as follows:
Acquisition Intangibles Period Amortization
----------- ----------- ------ ------------
Cushman $4,161 30 years $139
HBI 2,140 15 years 143
Mideastern 2,600 15 years 173
---
Pro forma adjustment $455
====
e) Additional depreciation expense will be incurred on the acquired real
property and fixed assets. The pro forma adjustment represents
incremental depreciation expense, calculated on a straight line basis
over the expected useful lives of the property, plant and equipment.
f) In connection with the acquisition of Cushman, the Company accrued
$1,900 as part of the purchase price for costs associated with
relocating this operation from Hartford, Connecticut to an existing
facility in Frankenmuth, Michigan. Consequently, certain duplicative
costs will be avoided, primarily related to facilities.
g) Distributions to Mideastern shareholders will be avoided by the
Company.
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8
h) The adjustment represents incremental interest expense that would have
been incurred had the acquisitions occurred as of August 1, 1993. The
adjustment assumes $11,000 short-term borrowings to finance the
acquisitions at an effective interest rate of 11.15%.
i) No income taxes have been provided because taxes related to these
acquisitions would be offset through the realization of additional
Company deferred tax assets previously offset by a valuation
allowance.
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[MILLER & CO. LETTERHEAD]
Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Mideastern, Inc.
Abbottstown, Pennsylvania
We have audited the accompanying balance sheets of Mideastern, Inc. as
of December 31, 1994 and 1993, and the related statements of earnings and
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
Except as discussed in the following paragraph, we conducted our audits
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
our audits provide a reasonable basis for our opinion.
We did not observe the taking of physical inventories as of December 31,
1992 (stated at $344,227), since that date was prior to the time we were
initially engaged as auditors for the Company. We were unable to satisfy
ourselves about inventory quantities by means of other auditing procedures.
The Company's accounting records did not permit us to extend our auditing
procedures sufficiently to satisfy ourselves about inventory valuation as of
December 31, 1992.
In our opinion, except for the effects of such adjustments, if any, on
the December 31, 1993 financial statements, as might have been determined to be
necessary had we been able to observe the physical inventories taken at
December 31, 1992, and had accounting records been adequate for us to satisfy
ourselves about inventory valuation as of December 31, 1992, the financial
statements referred to above present fairly, in all material respects, the
financial position of Mideastern, Inc. as of December 31, 1994 and 1993, and
the results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Miller & Co.
Hanover, Pennsylvania ------------
Miller & Co.
February 23, 1995
10
MIDEASTERN, INC.
BALANCE SHEETS
ASSETS
DECEMBER 31,
------------------------------
1994 1993
--------- ---------
$ $
CURRENT ASSETS
Cash 90,500 96,074
Accounts receivable 307,196 319,007
Receivable from pension plan 0 193
Inventories 1,143,143 758,958
Prepaid expenses 20,826 0
--------- ---------
TOTAL CURRENT ASSETS 1,561,665 1,174,232
--------- ---------
PROPERTY AND EQUIPMENT
Buildings and improvements 380,305 363,399
Machinery and equipment 337,634 296,551
Company vehicles 51,223 20,488
Office furniture and equipment 31,753 24,971
Computer software and equipment 49,913 37,829
--------- ---------
850,828 743,238
Less: Accumulated depreciation
and amortization 346,123 273,627
--------- ---------
TOTAL PROPERTY AND EQUIPMENT (NET) 504,705 469,611
--------- ---------
OTHER ASSET
Cash surrender value of life insurance 25,409 11,423
--------- ---------
TOTAL ASSETS 2,091,779 1,655,266
========= =========
The accompanying notes are an integral part of this statement.
11
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
-----------------------------
1994 1993
--------- ---------
$ $
CURRENT LIABILITIES
Line of credit 0 250,000
Current maturities of notes payable 21,000 26,648
Current portion of obligations under capital lease 0 3,680
Accounts payable 262,181 227,491
Accrued payroll 15,346 13,300
Payroll taxes withheld and accrued 4,451 17,814
Accrued interest 0 1,278
Accrued pension and 401(k) expense 25,784 100,568
Accrued vacation 17,346 18,700
Accrued corporate taxes 2,822 3,184
Deferred revenue 420,162 121,603
Accrued warranty reserve 13,000 0
Accrued expenses 25,000 0
--------- ---------
TOTAL CURRENT LIABILITIES 807,092 784,266
LONG-TERM DEBT
Notes payable 212,673 226,147
--------- ---------
TOTAL LIABILITIES 1,019,765 1,010,413
COMMITMENT
STOCKHOLDERS' EQUITY
Common stock ($100 par value; 5,000 shares authorized;
240 shares issued; and 200 shares outstanding) 24,000 24,000
Retained earnings 1,060,014 632,853
--------- ---------
1,084,014 656,853
Less: Treasury stock, at cost (40 shares) 12,000 12,000
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,072,014 644,853
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,091,779 1,655,266
========= =========
2 Miller & Co.
Certified Public Accountants
12
MIDEASTERN, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1994 1993
---------------------- ---------------------
$ % % $
SALES 4,042,295 100.00 100.00 3,309,837
COST OF SALES 2,849,896 70.50 64.17 2,124,010
--------- ------ ------ ---------
GROSS PROFIT 1,192,399 29.50 35.83 1,185,827
OPERATING AND FACTORY OVERHEAD
EXPENSES 30,422 0.75 3.01 99,527
GENERAL AND ADMINISTRATIVE EXPENSES 285,444 7.06 7.28 240,862
SELLING EXPENSES 60,857 1.51 1.94 64,265
--------- ------ ------ ---------
EARNINGS FROM OPERATIONS 815,676 20.18 23.60 781,173
INTEREST EXPENSE 36,329 0.90 0.78 25,900
OTHER INCOME (NET) 2,826 0.07 0.03 935
--------- ------ ------ ---------
EARNINGS BEFORE
DISCRETIONARY PENSION
CONTRIBUTION AND BONUSES 782,173 19.35 22.85 756,208
DISCRETIONARY PENSION CONTRIBUTION 0 0.00 1.92 63,508
BONUSES 0 0.00 7.25 240,000
--------- ------ ------ ---------
NET EARNINGS 782,173 19.35 13.68 452,700
====== ======
RETAINED EARNINGS - BEGINNING 632,853 234,108
DIVIDENDS 355,012 53,955
--------- ---------
RETAINED EARNINGS - ENDING 1,060,014 632,853
========= =========
The accompanying notes are an integral part of this statement.
3 Miller & Co.
Certified Public Accountants
13
MIDEASTERN, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993
----------- -----------
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 4,342,422 3,274,978
Cash paid to suppliers and
employees (3,575,950) (3,131,568)
Interest received 965 1,287
Interest paid (37,607) (26,076)
Income taxes paid 0 (99,180)
Other operating receipts 0 2,075
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 729,830 21,516
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (107,590) (107,098)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in line of credit (250,000) 250,000
Proceeds from notes payable 317,500 39,800
Principal repayments of notes
payable (336,622) (62,323)
Principal repayments of obligations
under capital lease (3,680) (4,915)
Dividends paid (355,012) (53,955)
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (627,814) 168,607
----------- -----------
NET INCREASE (DECREASE) IN CASH (5,574) 83,025
CASH - BEGINNING 96,074 13,049
----------- -----------
CASH - ENDING 90,500 96,074
=========== ===========
- Continued -
The accompanying notes are an integral part of this statement.
4 Miller & Co.
Certified Public Accountants
14
MIDEASTERN, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31,
-------------------------
1994 1993
--------- ----------
$ $
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net earnings 782,173 452,700
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 72,496 63,771
Bad debts 2,297 22,967
Provision for doubtful accounts 26,000 0
Change in cash surrender value of
life insurance (13,986) (6,339)
Provision for inventory obsolescence 23,793 0
Change in LIFO reserve 5,334 5,122
(Increase) decrease in assets:
Accounts receivable (16,486) (111,491)
Receivable from pension plan 193 7,264
Inventories (413,312) (419,853)
Prepaid expenses (20,826) 4,018
Increase (decrease) in liabilities:
Accounts payable 34,690 (87,400)
Accrued payroll 2,046 5,051
Payroll taxes withheld and accrued (13,363) 11,542
Accrued interest (1,278) (176)
Accrued pension and 401(k) expense (74,784) 83,287
Accrued vacation (1,354) 18,700
Aaccrued corporate taxes (362) (99,082)
Deferred revenue 298,559 69,360
Accrued warranty reserve 13,000 0
Accrued expenses 25,000 0
Proceeds from surrender of life insurance 0 2,075
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 729,830 21,516
========= =========
The accompanying notes are an integral part of this statement.
5 Miller & Co.
Certified Public Accountants
15
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently
applied in the preparation of the accompanying financial statements
follows:
(A) INVENTORIES
Inventories are determined by physical count and are stated at
the lower of cost or market. Cost is determined using the
specific identification method for machine inventory and,
effective January 1, 1993, the last-in, first-out (LIFO)
method for parts inventory. The effects of the change in
accounting principle were not significant.
(B) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated or
amortized using the straight-line and accelerated methods over
the estimated average useful lives of the assets as follows:
buildings and improvements, fifteen to thirty-one and one half
years; machinery and equipment, five to seven years; company
vehicles, five years; office furniture and equipment, five to
seven years; and computer software and equipment, five years.
NOTE 2 - INCOME TAXES
Effective January 1, 1992, the Company has elected to be treated as
a "S" Corporation for federal and state purposes, whereby the earnings of
the Company are passed through to the stockholders who are personally
responsible for any related income taxes. Accordingly, no provision is
made for federal and state income taxes in the accompanying statements of
earnings.
The accompanying notes are an integral part of this statement.
6 Miller & Co.
Certified Public Accountants
16
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of December 31:
1994 1993
-------- -------
$ $
Accounts receivable - trade 329,616 317,352
Less: Allowance for doubtful accounts
and returned goods (26,000) 0
-------- -------
303,616 317,352
Employee advances 3,580 1,655
-------- -------
307,196 319,007
======== =======
In 1994, the Company adopted the allowance method of accounting for bad
debts, returns and allowances. The effects of the change in accounting
principle were not significant.
7 Miller & Co.
Certified Public Accountants
17
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
Inventories consist of the following as of December 31:
1994 1993
--------- -------
$ $
Used and rebuilt machines 0 8,100
Parts and raw materials 604,543 447,815
Work-in-process 562,393 303,043
Reserve for obsolescence (23,793) 0
--------- -------
1,143,143 758,958
========= =======
As described in Note 1 (A), the Company values its parts and raw
materials inventory using the LIFO method. The current replacement cost, as
determined using the FIFO method, of the parts and raw materials inventory is
$614,999 and $452,937 as of December 31, 1994 and 1993, respectively. If the
entire LIFO inventory were liquidated at December 31, 1994 and 1993, it would
increase net earnings $10,456 and $5,122, respectively.
NOTE 5 - CASH SURRENDER VALUE OF LIFE INSURANCE
The Company is the owner and beneficiary of life insurance policies
on its four stockholders. Three policies have death benefits of $300,000
while one policy has a death benefit of $250,000. The total cash surrender
value of these policies is $25,409 and $11,423 as of December 31, 1994 and
1993, respectively.
NOTE 6 - LINE OF CREDIT
The Company has a line of credit with Farmers Bank and Trust Company
with a maximum credit limit of $350,000. The demand note payable is
collateralized by all assets of the Company, personally guaranteed by three
of the stockholders and their wives, and by a property owed by Gerard R.
and Doris Paradis. Interest is payable monthly at the prime rate plus
1/2%, which was 9% as of December 31, 1994.
8 Miller & Co.
Certified Public Accountants
18
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NOTES PAYABLE
Notes payable consist of the following as of December 31:
1994 1993
------- -------
$ $
Note payable to Farmers Bank & Trust to refinance notes payable
to Adams County National Bank; collateralized by the
land and building and personal guarantees of the stockholders;
interest fixed at 7% until March 2, 1997; biweekly payments of
principal and interest of $1,451; repaid in January, 1995 233,673 0
Note payable to Adams County National Bank for the purchase of land
and building; collateralized by the land and building; variable
rate of interest; balance refinanced on March 2, 1994 0 173,107
Note payable to adams county national bank for the purchase of
machinery and equipment; collateralized by machinery and
equipment; variable rate of interest; balance refinanced on
March 2, 1994 0 70,740
Note payable to Sunnen Products; collateralized by
equipment; interest at 9%; repaid in 1994 0 8,948
------- -------
233,673 252,795
Less: Current maturities 21,000 26,648
------- -------
212,673 226,147
======= =======
The current maturity of note payable disclosed in the accompanying 1994
balance sheet assumes that the agreed-upon repayment term would continue for
1995. However, in January, 1995, the note was repaid.
9 Miller & Co.
Certified Public Accountants
19
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - PENSION PLANS
The company has two profit sharing plans. Both plans cover employees
who meet certain age and eligibility requirements. The Company
sponsors a Money Purchase Plan with annual contributions equal to 5% of
each participant's annual wages. The Company also sponsors a 401(k) plan
in which the employer matches 25% of each participant's contribution up to
6% of the participant's annual wages. The Company may make discretionary
contributions to the 401(k) plan as determined by management.
Contributions to the Money Purchase Plan and the 401(k) plan for the years
ended December 31, 1994 and 1993 were $32,324 and $105,194, respectively.
NOTE 9 - CONCENTRATION OF CREDIT RISK
The Company has deposits in excess of the $100,000 maximum coverage
provided by the Federal Deposit Insurance Corporation. As of December
31, 1994 and 1993, uninsured balances amounted to $36,037 and $72,673,
respectively.
NOTE 10 - SUBSEQUENT EVENT
On January 23, 1995, substantially all of the assets of the Company
were purchased by Devlieg-Bullard, Inc. The Company will operate as a
division of Devlieg-Bullard, Inc.
NOTE 11 - COMMITMENT
The stockholders may not sell, pledge or encumber any outstanding
shares of stock without first offering the shares to the Company and/or
other stockholders. If the Company does not tender the purchase price
within thirty days, the stockholder may transfer his shares to a third
party purchaser. In the event that a third party purchaser is unable to
tender the purchase price, the Company is liable to redeem the
stockholders' stock at fair market value. The fair market value as
determined by the stockholders as of December 31, 1994 and 1993 was
$5,000 per share.
10 Miller & Co.
Certified Public Accountants
20
[MILLER & CO. LETTERHEAD]
Certified Public Accountants
ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The following supplementary information
accompanying the financial statements is presented for the purposes of
additional analysis and is not a required part of the basic financial
statements. The supplementary information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and, in our
opinion, is fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.
Miller & Co.
Hanover, Pennsylvania ------------
Miller & Co.
February 23, 1995
11 Miller & Co.
Certified Public Accountants
21
MIDEASTERN, INC.
SALES
(See Accountants' Report on Supplementary Information)
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993
----------------------- --------------------
$ % % $
Parts 1,595,467 39.47 48.56 1,607,429
Rebuilt machines 1,566,121 38.74 40.52 1,341,103
Service calls 470,680 11.64 7.89 261,248
Customer parts repair 401,392 9.93 3.90 129,208
Freight and handling 43,121 1.07 1.25 41,245
Parts - job cost 42,244 1.05 0.00 0
Miscellaneous 4,850 0.12 0.03 886
--------- ------ ------ ---------
4,123,875 102.02 102.15 3,381,119
Less: Discounts and returns 81,580 2.02 2.15 71,282
--------- ------ ------ ---------
4,042,295 100.00 100.00 3,309,837
========= ====== ====== =========
12 Miller & Co.
Certified Public Accountants
22
MIDEASTERN, INC.
COST OF SALES
(See Accountants' Report on Supplementary Information)
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1994 1993
--------------------- -------------------
$ % % $
Inventories - beginning 758,958 18.78 10.40 344,227
Manufacturing costs:
Parts and machines purchased 1,358,617 33.62 35.92 1,188,665
Job costs-materials 687,750 17.02 11.88 392,940
Job costs-labor burden and
overhead 372,750 9.22 7.21 238,618
Job costs-labor 261,331 6.46 4.64 153,733
Supplies 123,708 3.06 2.76 91,429
Shop wages 110,529 2.73 4.56 151,046
Freight 78,212 1.93 2.03 67,342
Job costs-outside service 48,203 1.19 1.20 39,687
Job costs-travel costs 45,826 1.13 1.15 38,138
Job costs-subcontract 39,502 0.98 1.87 62,056
Warranty call wages 23,210 0.57 0.35 11,477
Shop maintenance wages 20,026 0.50 0.11 3,509
Subcontracting costs 18,451 0.46 0.75 24,918
Shipping and receiving wages 16,177 0.40 0.43 14,252
Job costs-freight 15,712 0.39 0.31 10,315
Hazardous waste removal 14,718 0.36 0.00 0
Outside service calls 5,857 0.14 1.09 36,130
Service call wages 1,484 0.04 0.43 14,268
Other costs 950 0.02 0.06 1,863
Machining costs 0 0.00 0.04 1,286
Inventory adjustments (8,932) (0.22) (0.09) (2,931)
--------- ----- ----- ---------
3,993,039 98.78 87.10 2,882,968
Less: Inventories - ending 1,143,143 28.28 22.93 758,958
--------- ----- ----- ---------
2,849,896 70.50 64.17 2,124,010
========= ===== ===== =========
13 Miller & Co.
Certified Public Accountants
23
MIDEASTERN, INC.
OPERATING AND FACTORY OVERHEAD EXPENSES
(See Accountants' Report on Supplementary Information)
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993
------------------------ ---------------------
$ % % $
Insurance 184,356 4.56 3.87 128,029
Depreciation and amortization 72,496 1.79 1.93 63,771
Payroll taxes 66,332 1.64 1.73 57,135
Mandatory pension and 401k expense 32,324 0.80 1.26 41,686
Employee benefits 30,676 0.76 0.44 14,476
Repairs and maintenance 28,485 0.70 0.66 21,889
Supplies 21,208 0.52 0.48 15,755
Telephone 20,678 0.51 0.64 21,330
Vacation and holiday wages 19,735 0.49 0.56 18,700
Utilities 18,905 0.47 0.51 16,926
Travel 16,681 0.41 0.41 13,620
Employee training 11,033 0.27 0.19 6,195
Other taxes 5,918 0.15 0.14 4,755
Officers' life insurance 4,823 0.12 0.36 11,804
Real estate taxes 3,129 0.08 0.10 3,331
Miscellaneous 2,913 0.07 0.07 2,439
Laundry expense 2,307 0.06 0.10 3,317
Shop wages 0 0.00 0.01 305
Less: Burden charged to contracts (511,577) (12.65) (10.45) (345,936)
--------- ------- ------- ---------
30,422 0.75 3.01 99,527
========= ======= ======= =========
14 Miller & Co.
Certified Public Accountants
24
MIDEASTERN, INC.
GENERAL AND ADMINISTRATIVE EXPENSES
(See Accountants' Report on Supplementary Information)
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1994 1993
---------------------- ------------------
$ % % $
Office wages 197,030 4.87 5.55 183,652
Legal and accounting 57,915 1.43 0.78 25,752
Bad debts and provision for
doubtful accounts 12,297 0.30 0.69 22,967
Appraisal and settlement fee 6,345 0.16 0.00 0
Meals and entertainment 4,523 0.11 0.09 2,908
Clothing allowance 2,642 0.07 0.06 1,974
Donations 1,941 0.05 0.04 1,316
Pension administration costs 1,830 0.05 0.05 1,498
Dues and subscriptions 921 0.02 0.02 795
------- ---- ---- -------
285,444 7.06 7.28 240,862
======= ==== ==== =======
15 Miller & Co.
Certified Public Accountants
25
MIDEASTERN, INC.
SELLING EXPENSES AND OTHER INCOME (EXPENSE)
(See Accountants' Report on Supplementary Information)
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1994 1993
--------------------- -------------------
$ % % $
SELLING EXPENSES
Sales commissions 26,044 0.65 0.53 17,839
Travel and lodging 20,729 0.52 0.89 29,406
Advertising 8,687 0.21 0.27 8,781
Meals and entertainment 5,397 0.13 0.25 8,239
------ ---- ---- ------
60,857 1.51 1.94 64,265
====== ==== ==== ======
OTHER INCOME (EXPENSE)
Miscellaneous income 1,661 0.05 0.00 8
Interest income 965 0.02 0.04 1,287
Service charges 200 0.00 (0.01) (360)
------ ---- ----- ------
2,826 0.07 0.03 935
====== ==== ==== ======
16 Miller & Co.
Certified Public Accountants
26
[MILLER & CO. LETTERHEAD]
Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Mideastern, Inc.
Abbottstown, Pennsylvania
We have audited the accompanying balance sheets of Mideastern, Inc. as
of December 31, 1992 and the related statements of earnings and retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
our audit provides a reasonable basis for our opinion.
We did not observe the taking of physical inventories as of December 31,
1992 and 1991 (stated at $344,227 and $191,416, respectively), since those
dates were prior to the time we were initially engaged as auditors for the
Company. We were unable to satisfy ourselves about inventory quantities by
means of other auditing procedures. The Company's accounting records did not
permit us to extend our auditing procedures sufficiently to satisfy ourselves
about inventory valuation as of those dates.
In our opinion, except for the effects of such adjustments, if any,
as might have been determined to be necessary had we been able to observe the
physical inventories taken at December 31, 1992 and 1991, and had accounting
records been adequate for us to satisfy ourselves about inventory valuation as
of those dates, the financial statements referred to above present fairly, in
all material respects, the financial position of Mideastern, Inc. as of
December 31, 1992, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Miller & Co.
Hanover, Pennsylvania ------------
Miller & Co.
February 23, 1995
27
MIDEASTERN, INC.
BALANCE SHEET
ASSETS
DECEMBER 31,
1992
------------
$
CURRENT ASSETS
Cash 13,049
Accounts receivable 230,483
Receivable from pension plan 7,457
Inventories 344,227
Prepaid expenses 4,018
------------
TOTAL CURRENT ASSETS 599,234
------------
PROPERTY AND EQUIPMENT
Buildings and improvements 350,733
Machinery and equipment 212,457
Company vehicles 20,488
Office furniture and equipment 18,975
Computer software and equipment 33,487
------------
636,140
Less: Accumulated depreciation and amortization 209,856
------------
TOTAL PROPERTY AND EQUIPMENT (NET) 426,284
------------
OTHER ASSET
Cash surrender value of life insurance 7,159
------------
TOTAL ASSETS 1,032,677
============
The accompanying notes are an integral part of this statement.
28
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
1992
------------
$
CURRENT LIABILITIES
Current maturities of notes payable 31,213
Current portion of obligations under capital lease 4,915
Accounts payable 314,891
Accrued payroll 8,249
Payroll taxes withheld and accrued 6,272
Accrued interest 1,454
Accrued pension 17,281
Accrued corporate taxes 102,266
Deferred revenue 52,243
------------
TOTAL CURRENT LIABILITIES 538,784
------------
LONG-TERM DEBT
Notes payable 244,105
Obligations under capital leases 3,680
------------
TOTAL LONG-TERM DEBT 247,785
------------
TOTAL LIABILITIES 786,569
------------
COMMITMENT
STOCKHOLDERS' EQUITY
Common stock ($100 par value; 5,000 shares authorized;
240 shares issued; and 200 shares outstanding) 24,000
Retained earnings 234,108
------------
258,108
Less: Treasury stock, at cost (40 shares) 12,000
------------
TOTAL STOCKHOLDERS' EQUITY 246,108
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,032,677
============
2 Miller & Co.
Certified Public Accountants
29
MIDEASTERN, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEAR ENDED
DECEMBER 31, 1992
------------------------------
$ %
SALES 2,173,056 100.00
COST OF SALES 1,441,846 66.35
------------- ----------
GROSS PROFIT 731,210 33.65
OPERATING AND FACTORY OVERHEAD EXPENSES 363,174 16.71
GENERAL AND ADMINISTRATIVE EXPENSES 203,525 9.37
SELLING EXPENSES 103,370 4.76
------------- ----------
EARNINGS FROM OPERATIONS 61,141 2.81
INTEREST EXPENSE 30,136 1.39
OTHER INCOME (NET) (250) (0.01)
------------- ----------
NET EARNINGS 30,755 1.41
==========
RETAINED EARNINGS - BEGINNING 203,353
-------------
RETAINED EARNINGS - ENDING 234,108
=============
The accompanying notes are an integral part of this statement.
3 Miller & Co.
Certified Public Accountants
30
MIDEASTERN, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31, 1992
------------------
$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 2,118,558
Cash paid to suppliers and employees (1,998,031)
Interest received 812
Interest paid (28,682)
------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 92,657
------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (54,626)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in line of credit (60,000)
Proceeds from notes payable 75,950
Principal repayments of notes payable (40,163)
Principal repayments of obligations under capital lease (4,146)
------------
NET CASH USED IN FINANCING (28,359)
ACTIVITIES ------------
NET INCREASE IN CASH 9,672
CASH - BEGINNING 3,377
------------
CASH - ENDING 13,049
============
- Continued -
The accompanying notes are an integral part of this statement.
4 Miller & Co.
Certified Public Accountants
31
MIDEASTERN, INC.
STATEMENT OF CASH FLOWS - CONTINUED
YEAR ENDED
DECEMBER 31, 1992
-----------------
$
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net earnings 30,755
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
Bad debts 69,446
Change in cash surrender value of life insurance 1,746
(Increase) decrease in assets: (7,159)
Accounts receivable
Inventories (66,741)
Prepaid expenses (152,811)
Increase (decrease) in liabilities: (483)
Accounts payable 194,732
Accrued payroll 8,249
Payroll taxes withheld and accrued 4,718
Accrued interest 1,454
Accrued pension (4,142)
Accrued corporate taxes 650
Deferred revenue 12,243
--------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 92,657
==============
The accompanying notes are an integral part of this statement.
5 Miller & Co.
Certified Public Accountants
32
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in
the preparation of the accompanying financial statements follows:
(A) ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts
is required. If amounts become uncollectible, they will be
charged to operations when that determination is made.
(B) INVENTORIES
Inventories are determined by physical count and are stated
at the lower of cost or market. Cost is determined using the
specific identification method for machine inventory and the
first-in, first-out (FIFO) method for parts and raw material
inventory.
(C) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated
or amortized using the straight-line and accelerated methods
over the estimated average useful lives of the assets as
follows: buildings and improvements, fifteen to thirty-one
and one half years; machinery and equipment, five to seven
years; company vehicles, five years; office furniture and
equipment, five to seven years; and computer software and
equipment, five years.
6 Miller & Co.
Certified Public Accountants
33
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - INCOME TAXES
Effective January 1, 1992, the Company has elected to be
treated as a "S" Corporation for federal and state purposes, whereby
the earnings of the Company are passed through to the stockholders who
are personally responsible for any related income taxes. Accordingly,
no provision is made for federal and state income taxes in the
accompanying statement of earnings.
NOTE 3 - INVENTORIES
Inventories consist of the following as of:
DECEMBER 31,
1992
-------------
$
Used and rebuilt machines 17,700
Parts and raw materials 269,570
Work-in-process 56,957
-------------
344,227
=============
NOTE 4 - CASH SURRENDER VALUE OF LIFE INSURANCE
The Company is the owner and beneficiary of life insurance
policies on its four stockholders and a former stockholder. Each
policy has a death benefit of $250,000. The total cash surrender
value of these policies as of December 31, 1992 is $7,159.
7 Miller & Co.
Certified Public Accountants
34
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE
Notes payable consist of the following as of:
DECEMBER 31,
1992
-----------------
$
Note payable to Adams County National Bank for the purchase
of land and building; collateralized by the land
and building; variable rate of interest (8.25% as
of December 31); monthly payments of principal and
interest of $1,757 179,790
Note payable to Adams County National Bank for the purchase
of machinery and equipment; collateralized by
machinery and equipment; variable rate of interest
(8.25% as of December 31); monthly payments of
principal and interest of $1,292 80,056
Note payable to stockholder; uncollateralized; interest at
9.5%; maximum repayment term of two years 8,472
Note payable to stockholder; uncollateralized; interest at
9.5%; maximum repayment term of two years 7,000
------------
275,318
Less: Current maturities 31,213
------------
244,105
============
- Continued -
8 Miller & Co.
Certified Public Accountants
35
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE (CONTINUED)
Aggregate maturities of notes payable, assuming no change in
current terms, consist of the following for the remaining two years
ending December 31:
AGGREGATE
MATURITIES OF
NOTES PAYABLE
--------------------
$
1993 31,213
1994 26,648
In January, 1995, the remaining balances of all notes payable
were repaid.
NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASE
The Company leases computer software and equipment from First
Eastern Equipment Leasing Co. Leased property under capital lease
consists of the following as of:
DECEMBER 31,
1992
------------------
$
Computer software and equipment 14,165
Less: Accumulated amortization 5,317
------------
8,848
============
- Continued -
9 Miller & Co.
Certified Public Accountants
36
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASE (CONTINUED)
Future minimum lease payments consist of the following for the
remaining two years ending December 31:
FUTURE MINIMUM
LEASE PAYMENTS
--------------------
$
1993 5,875
1994 3,916
-----------
9,791
Less: Amount representing interest 1,196
-----------
PRESENT VALUE OF NET
MINIMUM LEASE
PAYMENTS 8,595
===========
Current portion 4,915
Noncurrent portion 3,680
-----------
PRESENT VALUE OF NET
MINIMUM LEASE
PAYMENTS 8,595
===========
NOTE 7 - PENSION PLANS
The Company has two profit sharing plans. Both plans cover
employees who meet certain age and eligibility requirements. The
Company sponsors a Money Purchase Plan with annual contributions equal
to 5% of each participant's annual wages. The Company also sponsors a
401(k) Plan in which the employer matches 25% of each participant's
contribution up to 6% of the participant's annual wages. The Company
may make discretionary contributions to the 401(k) Plan as determined
by management. Contributions to the Money Purchase Plan and the
401(k) Plan for the year ended December 31, 1992 were $16,784 and
$3,371, respectively.
10 Miller & Co.
Certified Public Accountants
37
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - ACCRUED CORPORATE TAXES
Accrued corporate taxes consist of the following as of:
DECEMBER 31,
1992
-------------------
$
Pennsylvania capital stock tax - 1992 725
Internal Revenue Service - 1990 audit 83,814
Internal Revenue Service - 1991 audit 4,554
Pennsylvania Department of Revenue -
1990 and 1991 13,173
----------
102,266
==========
The Company was audited by the Internal Revenue Service for
1990 and 1991. On June 24, 1993, the Company agreed to the proposed
changes.
NOTE 9 - CONCENTRATION OF CREDIT RISK
The Company has deposits in excess of the $100,000 maximum
coverage provided by the Federal Deposit Insurance Corporation. As of
December 31, 1992, uninsured balances amounted to $43,515.
11 Miller & Co.
Certified Public Accountants
38
MIDEASTERN, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - SUBSEQUENT EVENT
On January 23, 1995, substantially all of the assets of the
Company were purchased by DeVlieg-Bullard, Inc. The Company will
operate as a division of DeVlieg-Bullard, Inc.
NOTE 11 - COMMITMENT
The stockholders may not sell, pledge or encumber any
outstanding shares of stock without first offering the shares to the
Company and/or other stockholders. If the Company does not tender the
purchase price within thirty days, the stockholder may transfer his
shares to a third party purchaser. In the event that a third party
purchaser is unable to tender the purchase price, the Company is
liable to redeem the stockholders' stock at fair market value. The
fair market value as determined by the stockholders as of December 31,
1992 was $2,500 per share.
12 Miller & Co.
Certified Public Accountants
39
[MILLER & CO. LETTERHEAD]
Certified Public Accountants
ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The following supplementary information
accompanying the financial statements is presented for the purposes of
additional analysis and is not a required part of the basic financial
statements. The supplementary information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and, in our
opinion, is fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.
Miller & Co.
York, Pennsylvania ------------
Miller & Co.
February 23, 1995
13 Miller & Co.
Certified Public Accountants
40
MIDEASTERN, INC.
SALES
(See Accountants' Report on Supplementary Information)
YEAR ENDED
DECEMBER 31, 1992
-----------------------------
$ %
Parts 1,364,770 62.80
Rebuilt machines 497,284 22.88
Service calls 302,704 13.93
Freight and handling 30,820 1.42
Customer parts repair 5,400 0.25
Miscellaneous 2,797 0.13
----------- -----------
2,203,775 101.41
Less: Discounts and returns 30,719 1.41
----------- -----------
2,173,056 100.00
=========== ===========
14 Miller & Co.
Certified Public Accountants
41
MIDEASTERN, INC.
COST OF SALES
(See Accountants' Report on Supplementary Information)
YEAR ENDED
DECEMBER 31, 1992
------------------------------
$ %
Inventories - beginning 191,416 8.81
Manufacturing costs:
Parts and machine purchased 1,099,592 50.60
Shop wages 222,672 10.25
Outside service calls 70,399 3.24
Freight 53,992 2.48
Supplies 53,602 2.47
Subcontracting costs 37,172 1.71
Service call wages 25,891 1.19
Machining costs 17,557 0.81
Raw materials 15,895 0.73
Shipping and receiving wages 11,758 0.54
Shop maintenance wages 9,250 0.43
Job costs 5,706 0.26
Other costs 1,707 0.08
Inventory adjustments (30,536) (1.41)
------------- ------------
1,786,073 82.19
Less: Inventories - ending 344,227 15.84
------------- ------------
1,441,846 66.35
============= ============
15 Miller & Co.
Certified Public Accountants
42
MIDEASTERN, INC.
OPERATING AND FACTORY OVERHEAD EXPENSES
(See Accountants' Report on Supplementary Information)
YEAR ENDED
DECEMBER 31, 1992
------------------------
$ %
Insurance 101,330 4.66
Depreciation and amortization 69,446 3.20
Payroll taxes 44,496 2.05
Employee benefits 29,751 1.37
Research and development costs 24,816 1.14
Pension expense 20,155 0.93
Telephone 19,843 0.91
Repairs and maintenance 19,662 0.90
Utilities 12,982 0.60
Officers' life insurance 12,206 0.56
Supplies 10,991 0.51
Travel 10,262 0.47
Laundry expense 4,308 0.20
Shop wages 4,197 0.19
Miscellaneous 1,925 0.09
Real estate taxes 1,908 0.09
Other taxes 1,352 0.06
Employee training 302 0.01
Less: burden charged to contracts (26,758) (1.23)
----------- ----------
363,174 16.71
=========== ==========
16 Miller & Co.
Certified Public Accountants
43
MIDEASTERN, INC.
GENERAL AND ADMINISTRATIVE EXPENSES
(See Accountants' Report on Supplementary Information)
YEAR ENDED
DECEMBER 31, 1992
-----------------------------
$ %
Office wages 171,581 7.89
Legal and accounting 22,366 1.03
Meals and entertainment 2,757 0.13
Clothing allowance 1,920 0.09
Bad debts 1,746 0.08
Dues and subscriptions 1,090 0.05
Donations 1,055 0.05
Pension administration costs 1,010 0.05
------------ ---------
203,525 9.37
============ =========
17 Miller & Co.
Certified Public Accountants
44
MIDEASTERN, INC.
SELLING EXPENSES AND OTHER INCOME (EXPENSE)
(See Accountants' Report on Supplementary Information)
YEAR ENDED
DECEMBER 31, 1992
---------------------------
$ %
SELLING EXPENSES
Travel and lodging 47,497 2.19
Sales commissions 26,433 1.22
Advertising 17,006 0.78
Meals and entertainment 12,434 0.57
---------- ---------
103,370 4.76
========== =========
OTHER INCOME (EXPENSE)
Interest income 812 0.03
Fines and penalties (69) 0.00
Canceled orders (319) (0.01)
Service charges (674) (0.03)
---------- ---------
(250) (0.01)
========== =========
18 Miller & Co.
Certified Public Accountants