1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment To Application Or Report
Filed pursuant to Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934.
COMMERCIAL INTERTECH CORP.
--------------------------
(Exact name of registrant as specified in its charter)
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report dated May 17, 1994
on Form 8-K as set forth in the pages attached hereto:
Item 5. Other Events
(a) Disclosure of Negative Goodwill amortization period and
explanation of the method used to determine the amount.
(b) Disclosure of tax loss carryforward acquired.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Because Sachsenhydraulik Chemnitz GmbH and its wholly owned
subsidiary Hydraulic Rochlitz GmbH, the companies acquired, operated
in a different environment, Commercial Intertech Corp. requested and
received a letter dated March 28, 1994 from the staff of the
Securities and Exchange Commission a waiver to file audited financial
statements for periods prior to the consummation of the acquisition.
Audited balance sheets as of April 30, 1994 are attached hereto as
Exhibit 7(a).
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet of Commercial
Intertech Corp. and Subsidiaries and Sachsenhydraulik Chemnitz GmbH
and Subsidiary as of April 30, 1994 are attached hereto as Exhibit
7(b).
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMERCIAL INTERTECH CORP.
--------------------------
(Registrant)
Date: July 15, 1994
------------------------
/s/ Philip Winkelstern
--------------------------
Philip N. Winkelstern
Senior Vice President
Chief Financial Officer
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Item. 5 - Other Events
a) Negative Goodwill (Operating loss indemnification)
Under the terms of the agreement between Commercial Intertech Corp.
("TEC") and the Treuhandanstalt ("THA"), to acquire Sachsenhydraulik Chemnitz
GmbH and its wholly owned subsidiary (Hydraulic Rochlitz GmbH), which are known
as ORSTA Hydraulik, Commercial will receive approximately U.S. $31.0 million
(51.5 million Deutsche marks) designed as an indemnification of estimated
operating losses over a period of two years. The amount of operating loss
indemnification available to TEC was adjusted for cash consumed by the ORSTA
operations between January 1, 1994, the measurement date, and April 30, 1994,
the acquisition date. The remaining indemnification will be amortized over a
two year period starting May 1, 1994. The two year indemnification period was
negotiated with the THA as part of the Purchase Agreement and was specified
accordingly in the Agreement. The operating loss indemnification will be
amortized based on estimated operating results of the ORSTA Hydraulik
operations as acquired on April 30, 1994. The quarterly amortization value
will remain unchanged as actual results are reported and will be translated
from Deutsche marks into U.S. dollars at the average exchange rate for the
period.
Negative Goodwill Amortization
(in thousands)
Fiscal Quarters Deutsche Marks U.S. Dollars
--------------- -------------- ------------
Third Quarter, 1994 3,297 $1,995
Fourth Quarter, 1994 7,015 4,245
First Quarter, 1995 6,855 4,148
Second Quarter, 1995 6,500 3,934
Third Quarter, 1995 5,410 3,274
Fourth Quarter, 1995 4,745 2,871
First Quarter, 1996 3,745 2,266
Second Quarter, 1996 1,504 910
------- -------
Total 39,071 $23,643
======= =======
b) Operating Loss Carryforward
Tax loss carryforwards were also acquired with the ORSTA Hydraulik
operations. The loss carryfowards at April 30, 1994 were 173.9 million
Deutsche marks (approximately U.S. $105.2 million). The losses can be carried
forward indefinitely.
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Item 7. Financial Statements and Exhibits
a) Financial Statements of Business Acquired
Audited Consolidated Balance Sheet And Report of Independent Auditors
Sachsenhydraulik Chemnitz GmbH and Subsidiary
As Of
April 30, 1994
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SACHSENHYDRAULIK CHEMNITZ GmbH AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(000's Omitted) April 30, 1994
--------------
ASSETS
CURRENT ASSETS
Cash (including equivalents of $1,807,000). . . . . $ 11,140
Notes and accounts receivables. . . . . . . . . . . 7,519
Less: Allowance . . . . . . . . . . . . . . . . 2,384
--------
5,135
Inventories . . . . . . . . . . . . . . . . . . . . 4,044
Prepaid expenses and other current assets . . . . . 1,177
Current receivable from Treuhandanstalt . . . . . . 21,480
--------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . 42,976
NONCURRENT ASSETS
Restricted assets-capital investment programs by
Treuhandanstalt. . . . . . . . . . . . . . . . . 5,487
--------
TOTAL NONCURRENT ASSETS . . . . . . . . . . . 5,487
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment - cost. . . . . . . . 42,089
Less: Allowance for depreciation . . . . . . . . . 21,056
--------
NET PROPERTY, PLANT AND EQUIPMENT . . . . . . 21,033
--------
$ 69,496
========
CURRENT LIABILITIES
Bank loans. . . . . . . . . . . . . . . . . . . . . $ 1,455
Accounts payable . . . . . . . . . . . . . . . . . 4,097
Accrued payroll and related taxes . . . . . . . . . 2,524
Accrued expenses. . . . . . . . . . . . . . . . . . 8,905
Accrued income taxes. . . . . . . . . . . . . . . . 0
Current portion of long-term debt . . . . . . . . . 973
--------
TOTAL CURRENT LIABILITIES . . . . . . . . . . 17,954
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . 1,379
SHAREHOLDER EQUITY
Common stock
Authorized and issued: one share . . . . . . . . 5,447
Capital surplus . . . . . . . . . . . . . . . . . . 144,721
Retained earnings (deficit) . . . . . . . . . . . . (100,005)
--------
TOTAL SHAREHOLDER EQUITY . . . . . . . . . . 50,163
--------
$ 69,496
========
See notes to consolidated balance sheet.
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NOTES TO CONSOLIDATED BALANCE SHEET
SACHSENHYDRAULIK CHEMNITZ GmbH AND SUBSIDIARY
Note A - Accounting Policies
Basis of Presentation
- - ---------------------
The accounts of Sachsenhydraulik Chemnitz GmbH and its wholly owned
subsidiary, Hydraulik Rochlitz GmbH (collectively referred to as the "Company")
are included in the consolidated balance sheet. The Company is a manufacturer
of hydraulic cylinders, piston and gear pumps, and industrial valves and does
business as ORSTA Hydraulik. All intercompany accounts have been eliminated.
Subsequent Event
- - ----------------
Commercial Intertech Corp. acquired the common stock of the Company,
effective May 1, 1994, from the Treuhandanstalt ("THA") the regulatory agency
of the Federal Republic of Germany responsible for the privatization of former
East German state-owned enterprises.
Inventories
- - -----------
Inventories are stated at the lower of cost or market. Inventories are
valued using the weighted average cost method which approximates first-in,
first-out.
Inventories as of April 30, 1994 consisted of the following:
(in thousands)
--------------
Raw materials $1,655
Work in progress 1,817
Finished goods 572
------
$4,044
======
Property and Depreciation
- - -------------------------
Property, plant and equipment are recorded at cost. Buildings and
equipment are depreciated over their useful lives by use of the straight-line
method.
Sachsenhydraulik Chemnitz GmbH and its wholly owned subsidiary were East
German entities prior to July 1, 1990. On July 1, 1990, the fixed assets of
the Company were revalued based on market value appraisals. These fair value
adjustments represented the establishment of the cost basis for former East
German companies, as the financial records of former East German companies did
not previously reflect Western historical cost accounting principles.
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Note A - Accounting Policies (continued)
Revenue Recognition
- - -------------------
Revenue is recognized when the earning process is complete and the risks
and rewards of ownership have transferred to the customer, which is generally
considered to have occurred upon shipment of the finished product.
Bank and Cash Equivalents
- - -------------------------
The Company considers all highly liquid investments with a maturity of
three months or less, when purchased, to be cash equivalents. The carrying
amounts reported in the balance sheet for cash and cash equivalents approximate
fair value.
Translation of Foreign Currencies
- - ---------------------------------
The financial statements are translated in accordance with Financial
Accounting Standards Board Statement No. 52. Under this method, all asset and
liability accounts are translated into U.S. dollars at the current exchange
rate.
Note B - Long-Term Debt
Long-term debt obligations consist of capital lease agreements with
payment through the year 1998. The liability equates to the net present value
of the future payments and the anticipated residual value of the assets at the
end of the leases. The value of the capitalized assets included in fixed
assets is $1,717,000.
Note C - Deferred Tax Asset
The tax net operating loss carryforward amounts to $105,200,000. The
resultant deferred tax assets amount to approximately $46,300,000. Net
operating losses may be carried forward indefinitely. However, due to the
uncertainty as to the realization of the asset, a 100 percent valuation
allowance has been provided.
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Note D - Other Current Liabilities
Accrued payroll and related taxes consist of the following:
Severance and termination (Social Plan) $ 982
Payroll tax and insurance 622
Other 920
------
$2,524
======
Accrued expenses consist of the following:
Relocation / rearrangement accruals $4,164
Accrued contract losses 1,659
Other 3,082
------
$8,905
======
Note E - Shareholder Equity
The Company may not pay dividends until the retained earnings deficit is
eliminated.
Note F - Receivable From Treuhandanstalt
The receivable from the Treuhandanstalt is primarily attributable to the
pledge of financial aid contained in the purchase agreement. The total amount
pledged was approximately $36.0 million (59.0 million Deutsche marks) less
amounts consumed by the operations during the four month period ended April 30,
1994. The net amount receivable at April 30 is $27.0 million. This balance
will be received in installments over the remainder of 1994 and 1995.
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Report of Independent Auditors
The Board of Directors and Shareholder
Sachsenhydraulik Chemnitz GmbH
Chemnitz
Federal Republic of Germany
We have audited the accompanying consolidated balance sheet of
Sachsenhydraulik Chemnitz GmbH and subsidiary, as of April 30, 1994. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly,
in all material respects, the consolidated financial position of
Sachsenhydraulik Chemnitz GmbH and subsidiary at April 30, 1994 in conformity
with United States generally accepted accounting principles.
/s/Ernst & Young
Leipzig, Germany
June 24, 1994
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Consent of Independent Auditors
We consent to the incorporation by reference of our report dated June
24, 1994, with respect to the consolidated balance sheet of Sachsenhydraulik
Chemnitz GmbH and subsidiary included in this Current Report on Form 8-K dated
July 15, 1994, in the prospectuses contained in the following registration
statements:
Registration
Number Description Filing Date
- - ------------ ----------------------------------- ---------------
2-66710 Savings and Stock Purchase Plan for
Employees of Commercial Shearing,
Inc.
---Form S-8 Registration Statement June 23, 1986
2-62512 Commercial Shearing, Inc. Stock
Option and Award Plan of 1985
---Form S-8 and S-3 Registration
Statement April 24, 1986
33-25795 Non-Qualified Stock Purchase Plan of
Commercial Intertech Corp.
---Form S-8 Registration Statement Nov. 29, 1988
33-29980 Commercial Intertech Corp. Stock Option
and Award Plan of 1989 including
Pre-Effective Amendment No.1 to
Form S-8 Registration Statement
filed July 24, 1989 July 10, 1989
33-43907 Commercial Intertech Corp. Retirement
Stock Ownership and Savings Plan
---Form S-8 Registration Statement Nov. 13, 1991
/s/Ernst & Young
Leipzig, Germany
July 13, 1994
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Exhibit 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet
Commercial Intertech Corp. And Subsidiaries
and
Sachsenhydraulik Chemnitz GmbH And Subsidiary
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Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
Commercial Intertech Corp. and Subsidiaries
The following pro forma condensed consolidated balance sheet gives
effect to the acquisition of Sachsenhydraulik Chemnitz GmbH and Subsidiary by
Commercial Intertech Corp., accounted for as a purchase, as of April 30, 1994.
The pro forma condensed consolidated balance sheet as of April 30,
1994, has been prepared by Commercial Intertech Corp. based upon the audited
consolidated balance sheet of Sachsenhydraulik Chemnitz GmbH and Subsidiary
included elsewhere herein. The pro forma condensed consolidated balance sheet
should be read in conjunction with the audited consolidated balance sheet and
notes of Sachsenhydraulik Chemnitz GmbH and Subsidiary and the unaudited
condensed consolidated balance sheet of Commercial Intertech Corp. and
Subsidiaries.
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COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
April 30, 1994
(Thousands of dollars) Sachsenhydraulik
Commercial Chemnitz
ASSETS Intertech GmbH Adjustments Consolidated
- - ------ ---------- --------- ----------- ------------
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . $ 15,001 $ 11,140 $ 0 $ 26,141
Accounts receivable, less allowance. . . . . . 82,757 5,135 0 87,892
Inventories. . . . . . . . . . . . . . . . . . 54,122 4,044 0 58,166
Deferred income tax benefits . . . . . . . . . 13,008 0 0 13,008
Prepaid expenses . . . . . . . . . . . . . . . 3,698 1,177 0 4,875
Receivable from Treuhandanstalt. . . . . . . . 0 21,480 0 21,480
----------------------------------------------------
TOTAL CURRENT ASSETS 168,586 42,976 0 211,562
PROPERTY, PLANT AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . 12,805 5,855 (5,855) 12,805
Building and equipment . . . . . . . . . . . . 224,508 35,303 (35,303) 224,508
Construction in progress . . . . . . . . . . . 9,209 931 (931) 9,209
Less allowance for depreciation. . . . . . . . (128,268) (21,056) 21,056 (128,268)
----------------------------------------------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 118,254 21,033 (21,033) 118,254
NONCURRENT ASSETS:
Intangible assets. . . . . . . . . . . . . . . 28,261 0 0 28,261
Pension assets . . . . . . . . . . . . . . . . 28,185 0 0 28,185
Other assets . . . . . . . . . . . . . . . . . 3,323 0 0 3,323
Restricted asset-capital investment program
by Treuhandanstalt. . . . . . . . . . . . . 0 5,487 (5,487) 0
----------------------------------------------------
TOTAL NONCURRENT ASSETS 59,769 5,487 (5,487) 59,769
----------------------------------------------------
TOTAL ASSETS $ 346,609 $ 69,496 $(26,520) $ 389,585
----------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Bank loans . . . . . . . . . . . . . . . . . . $ 17,353 $ 1,455 $ 0 $ 18,808
Accounts and notes payable . . . . . . . . . . 67,149 15,526 0 82,675
Accrued income taxes . . . . . . . . . . . . . 10,165 0 0 10,165
Dividends payable. . . . . . . . . . . . . . . 2,300 0 0 2,300
Current portion of long-term debt. . . . . . . 1,554 973 0 2,527
----------------------------------------------------
TOTAL CURRENT LIABILITIES $ 98,521 $ 17,954 $ 0 $ 116,475
NONCURRENT LIABILITIES:
Long-term debt . . . . . . . . . . . . . . . . 76,978 1,379 0 78,357
Deferred income taxes. . . . . . . . . . . . . 16,739 0 0 16,739
Postretirement benefit . . . . . . . . . . . . 20,529 0 0 20,529
Deferred credit - Operating loss
indemnification . . . . . . . . . . . . . . 0 0 23,643 23,643
---------------------------------------------------
TOTAL NONCURRENT LIABILITIES 114,246 1,379 23,643 139,268
SHAREHOLDERS' EQUITY:
Preferred stock, no par value:
Series A. . . . . . . . . . . . . . . . . . 0 0 0 0
Series B. . . . . . . . . . . . . . . . . . 24,631 0 0 24,631
Common stock, $1 par value:. . . . . . . . . . 10,107 5,447 (5,447) 10,107
Capital surplus. . . . . . . . . . . . . . . . 39,973 144,721 (144,721) 39,973
Retained earnings. . . . . . . . . . . . . . . 79,697 (100,005) 100,005 79,697
Deferred compensation. . . . . . . . . . . . . (20,108) 0 0 (20,108)
Translation adjustment . . . . . . . . . . . . (458) 0 0 (458)
----------------------------------------------------
133,842 50,163 (50,163) 133,842
----------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 346,609 $ 69,496 $(26,520) $ 389,585
===================================================
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Notes To Pro Forma Condensed Consolidated Balance Sheet
(unaudited)
a) The following pro forma adjustments are made to eliminate Commercial
Intertech Corp's investment in Sachsenhydraulik Chemnitz GmbH, to apply the
write-down of fixed assets in accordance with APB Opinion No. 16, and to record
the operating loss indemnification as pledged in the purchase agreement.
Shareholders' Equity $ 50,163
Operating loss indemnification (23,643)
Fixed Assets (21,033)
Asset in excess of fair value of
company received - reduction of
value of pre-existing capital
investment program ( 5,487)