SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) January 15, 1997
TOP AIR MANUFACTURING, INC.
(Exact name of registrant as specified in its charter)
Iowa 0-10571 42-1155462
(State or other jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification No.)
317 Savannah Park Road
Cedar Falls, Iowa 50613
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (319)268-0473
Item 7. Financial Statements and Exhibits.
(a) Financial Statements - See Index to Financial Statements
(b) Pro Forma Financial Information - See Index to Financial Statements
(c) Exhibits - See Exhibit Index
2
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants..................................F-2
Balance Sheet as of October 31, 1996......................................F-3
Statement of Earnings for the Period November 27, 1995,
Date of Inception, through October 31, 1996...............................F-4
Statement of Shareholder's Equity for the Period
November 27, 1995, Date of Inception, through
October 31, 1996..........................................................F-5
Statement of Cash Flows...................................................F-6
Notes to Financial Statements.............................................F-7
Pro Forma Financial Information..........................................F-11
Pro Forma Condensed Balance Sheet (Unaudited) November 30, 1996..........F-12
Notes to Unaudited Pro Forma Balance Sheet...............................F-13
Pro Forma Condensed Statement of Income (Unaudited)
for Six Months Ended November 30, 1996...................................F-14
Pro Forma Condensed Statement of Income (Unaudited)
for the Year Ended May 31, 1996..........................................F-15
Notes to Unaudited Pro Forma Statements of Income........................F-16
F-1
Independent Auditor's Report
Board of Directors
Ficklin Machine Co., Inc.
209 West Grant St.
Onarga, Illinois 60955
We have examined the balance sheet of
FICKLIN MACHINE CO., INC.
as of October 31, 1996 and the related statements of earnings, shareholder's
equity, and cash flows for the period November 27, 1995, date of inception,
through October 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 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 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
audit provides a reasonable basis for our opinion.
We did not observe the physical inventory (stated at $1,452,184) taken
as of March 6, 1996, since that date was prior to our initial engagement as
auditors for the Company, and the Company's records do not permit adequate
retroactive tests of inventory quantities.
In our opinion, the balance sheet referred to in the first paragraph
presents fairly, in all material respects, the financial position of Ficklin
Machine Co., Inc. as of October 31, 1996, and 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 inventory as of March 6, 1996, the statements of
earnings, shareholder's equity, and cash flows referred to in the first
paragraph present fairy, in all material respects, the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/ Bacon, Smith, Koelling and Ohm
March 10, 1997
F-2
FICKLIN MACHINE CO., INC.
Balance Sheet
October 31, 1996
ASSETS
Cash $273,074
Accounts receivable net of allowance for
uncollectible amounts of $15,000 909,642
Inventory 970,706
Prepaid expenses and deposits 63,890
Deferred income taxes 12,621
---------
Total current assets 2,229,933
---------
Property and equipment 754,858
Less accumulated depreciation 59,212
---------
Net property and equipment 695,646
---------
Intangible assets, net 408,093
---------
Total assets $3,333,672
=========
LIABILITIES
Current maturities of long-term debt $134,457
Notes payable 253,477
Borrowings under line of credit 500,000
Accounts payable 353,090
Accrued expenses and other liabilities 191,017
---------
Total current liabilities 1,432,041
Long-term debt, net of current maturities 1,284,693
Deferred income taxes 14,133
Total liabilities 2,730,867
---------
SHAREHOLDER'S EQUITY
Common stock, stated value $1 per share, authorized
10,000 shares, issued and outstanding, 1,000 shares 1,000
Additional paid-in-capital 399,000
Retained earnings 202,805
---------
Total shareholder's equity 602,805
---------
Total liabilities and
shareholder's equity $3,333,672
=========
The accompanying notes are an integral part of the financial statements.
F-3
FICKLIN MACHINE CO., INC.
Statement of Earnings
For the period November 27, 1995, date of inception, through October 31, 1996
Sales $3,909,111
Cost of sales 2,868,476
---------
Gross profit 1,040,635
General and administrative expenses 567,166
---------
Earnings from operations 473,469
---------
Other income (expense):
Interest income 37
Interest expense (154,684)
Other income 8,832
---------
Total other income (expense) (145,815)
---------
Net earnings before income taxes 327,654
Provision for income taxes 124,849
---------
Net earnings $202,805
=========
Retained earnings, beginning of period 0
Retained earnings, end of period $202,805
The accompanying notes are an integral part of the financial statements.
F-4
FICKLIN MACHINE CO., INC.
Statement of Shareholder's Equity
For the period November 27, 1995, date of inception, through October 31, 1996
Additional
Paid-in Retained
Common Stock Capital Earnings
------------ ------- --------
Shareholder's Equity, March 6, 1996 $0
Contribution upon incorporation, Note 1 $1,000 $399,000
Net earnings $202,805
-----------------------------------------------
Shareholder's Equity, October 31, 1996 $1,000 $399,000 $202,805
====== ======== ========
F-5
FICKLIN MACHINE CO., INC.
Statements of Cash Flows
For the period November 27, 1995, date of inception, through October 31, 1996
Cash flows from operating activities:
Net earnings $202,805
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 59,212
Amortization 56,716
Deferred income taxes 1,512
Change in assets and liabilities:
(Increase) decrease in receivables (909,642)
(Increase) decrease in inventory 125,019
(Increase) decrease in prepaid expenses 7,325
(Decrease) increase in accounts payable
and accrued expenses 544,107
--------
Net cash provided (used) by operating activities 87,054
--------
Cash flows from investing activities:
Purchase of Roy Ficklin Machine Co. Inc. (446,491)
Purchase of equipment (54,858)
Acquired intangibles (103,580)
--------
Net cash provided (used) in investing activities (604,929)
--------
Cash flows from financing activities:
Net borrowing (repayment) under line of credit (70,201)
Proceeds from issuance of long-term debt 500,000
Proceeds from issuance of stock and additional
paid in capital 400,000
Repayment of long-term debt (38,850)
--------
Net cash provided (used) in financing activities 790,949
--------
Net increase (decrease) in cash 273,074
Cash, beginning of period 0
--------
Cash, end of period $273,074
========
The accompanying notes are an integral part of the financial statements.
F-6
FICKLIN MACHINE CO., INC.
Notes to Financial Statements
Note 1 - Nature of Operations
The Company engages in the manufacture of grain carts and wagons which
are sold principally to farmers in the Midwest through distributor/dealer
networks. The Company also assembles sprayers and sprayer attachments for
domestic and light agricultural applications.
The Company was formed on November 27, 1995 and on March 6, 1996
acquired, by purchase, the assets and operations of Roy Ficklin Machine Co.,
Inc. The results of operations and cash flows are for the period beginning with
the date of acquisition.
Note 2 - Significant Accounting Policies
The significant accounting policies followed by the Company in the
preparation of these financial statements are as follows:
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Cash and cash investments - Cash and cash investments consist of
cash, bank deposits and temporary cash investments with a
maturity date of three months or less. The Company's cash
deposits exceed amounts insured by the FDIC from time to time
throughout the year.
Concentration of Credit Risk - The Company generally obtains
security agreements covering sales of its products. In cases
where security agreements are not obtained, the Company maintains
reserves for potential credit losses, and such losses have been
within management's expectations.
Inventories - Inventories are stated at the lower of first-in,
first-out (FIFO) cost or market.
Property, equipment and depreciation - Property and equipment are
stated at cost. Depreciation is computed on a straight-line
method over the estimated useful lives of the depreciable
property (buildings, 30 years; machinery and equipment, 3-10
years).
Marketing Costs - Cash and sales discounts to distributors and
dealers are treated as a reduction of the selling price at the
time the sale is recognized for financial reporting purposes.
F-7
FICKLIN MACHINE CO., INC.
Notes to Financial Statements
Note 2 - Significant Accounting Policies (Continued)
Goodwill and Other Intangibles - Goodwill of $397,559 (net of
accumulated amortization) represents the excess of acquisition
costs over the fair value of net assets purchased and is
amortized on a straight-line basis over 15 years. Other
intangibles including loan fees and organizational costs are
recorded at cost and are amortized on straight-line basis over
lives of 5 years. The Company continually reviews goodwill and
other intangibles to assess recoverability from future
operations. Impairments would be recognized in operating results
if a permanent diminution in value occurred.
Note 3 - Inventories
Inventories are as follows:
Miscellaneous supplies and parts $ 29,095
Raw materials 362,781
Work in process 94,146
Finished goods and purchased resale items 484,684
-------
$970,706
=======
Note 4 - Property and Equipment
Property and equipment includes the following:
Land $ 22,054
Buildings 294,694
Machinery and equipment 315,766
Transportation equipment 107,728
Office equipment 14,616
-------
Total cost, property and equipment $754,858
=======
Note 5 - Notes Payable and Long-Term Debt
The Company has short-term obligations consisting
the following:
Revolving credit note payable to LaSalle Bank in
the amount of $2,000,000, and expiring May 1,
1997. Interest is payable monthly at the bank's
prime rate plus 0.25%. $500,000
=======
Note payable to Roy Ficklin Machine Co., Inc. due
October 31, 1996 interest at the prime rate of
LaSalle Bank as adjusted from time to time (paid
November 1, 1996) $253,477
=======
F-8
FICKLIN MACHINE CO., INC.
Notes to Financial Statements
Note 5 - Notes Payable and Long-Term Debt (Continued)
Long-term debt includes the following:
Term loan dated March 6, 1996 in the original
amount of $258,000, payable to LaSalle Bank in
the monthly installments of $4,300, plus interest
at the bank's prime rate plus 0.25%, as adjusted
from time to time. $227,900
Mortgage note dated March 6, 1996 in the original
amount of $225,000 payable to LaSalle Bank in
monthly installments of $1,250 plus interest at
the bank's prime rate plus 0.25%, as adjusted
from time to time, through March 1, 2001 with the
remaining balance then due. 216,250
Subordinated note payable to Roy Ficklin Machine
Co. dated March 6, 1996 in the original amount of
$475,000, due in annual installments of $67,857
together with interest at the prime rate of
LaSalle Bank as adjusted from time to time. 475,000
Note payable to shareholder dated March 6, 1996
due March 5, 2006 with interest payable
semiannually at the prime rate of LaSalle Bank as
adjusted from time to time. 500,000
---------
Total 1,419,150
Less current portion 134,457
---------
Long-term debt $1,284,693
=========
The prime rate for purposes of the above notes was 8.25% during the
year.
In addition to real estate which secures the mortgage note, all loans
from LaSalle Bank are secured by accounts receivable, inventories, equipment and
intangibles. Substantially identical security is offered for the subordinated
notes which grant preference to those of LaSalle Bank.
Maturities of long-term debt are as follows:
Year ending October 31,
1997 $134,457
1998 134,457
1999 134,457
2000 134,457
2001 245,607
F-9
FICKLIN MACHINE CO., INC.
Notes to Financial Statements
Note 6 - Income Taxes
The provision for income taxes for the eight months ended October 31,
1996 is as follows:
Federal State Total
------- ----- -----
Currently payable $100,134 $23,203 $123,337
Deferred 1,262 250 1,512
-------- ------- --------
$101,396 $23,453 $124,849
======== ======= ========
Deferred income taxes at October 31 consisted of:
Assets Liabilities
------ -----------
Accelerated depreciation $14,133
Accounts receivable $ 6,507
Accrued liabilities 6,114
-------
$12,621 $14,133
====== ======
Note 7 - Additional Cash Flow Disclosures
The Company made the following cash payments during the eight months
ended October 31, 1996:
Interest (no amounts capitalized) $ 91,613
=======
Income taxes $116,000
=======
In connection with its purchase of the assets of Roy Ficklin Machine
Co., Inc., the Company acquired the assets through issuance of short and
long-term notes. A reconciliation between the asset purchase price and payments
made by the Company as reflected in its Statement of Cash Flows is as follows:
Working capital items consisting primarily
of inventory and prepaid expenses $1,731,679
Property and equipment 700,000
Intangible assets 250,000
----------
Total requirements $2,681,679
Working capital items $ 453,501
Seller financing 728,477
Bank financing, short-term 570,210
Bank financing, long-term 483,000
----------
Total sources 2,235,188
---------
Cash payments for assets acquired $ 446,491
==========
Note 8 - Subsequent Events
On January 15, 1997, substantially all of the common stock of the
Company was acquired by Top Air Manufacturing, Inc.; the accounting treatment to
be accorded this combination has not been determined. In connection therewith,
all long-term debt of the Company was repaid from funds advanced by Top Air.
Note 9 - Fair Value of Financial Instruments
The Company's financial instruments include accounts receivable,
accounts payable, notes payable and long-term debt. The fair values of such
financial instruments have been determined based on quoted market prices and
market interest rates as of October 31, 1996.
F-10
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth below presents the
pro forma condensed balance sheet of Top Air and Ficklin Machine as of November
30, 1996, as if the transaction (and related issuance of Top Air Common Stock)
had been consummated at such date. In addition, the unaudited pro forma
condensed statements of income of Top Air and Ficklin Machine for the fiscal
year ended May 31, 1996 and the six-month period ended November 30, 1996, is
presented as if the transaction (and related issuance of Top Air Common Stock)
had been consummated as of the beginning of the respective periods. The pro
forma adjustments do not reflect any operating efficiencies or cost savings
which Top Air believes are achievable or the cost of achieving any such
operating efficiencies and cost savings.
The following unaudited pro forma financial information has been prepared
from, and should be read in conjunction with, the financial statements,
including the notes thereto, of Top Air set forth in the Form 10-KSB of Top Air
for its fiscal year ended May 31, 1996 and Form 10-QSB for the six month period
ended November 30, 1996, which financial statements are incorporated herein by
this reference, and of Ficklin Machine, set forth elsewhere herein.
The unaudited pro forma financial information presented below has been
prepared using the purchase method of accounting, whereby the total cost of the
acquisition of the business, assets and operations of Ficklin Machine will be
allocated to the tangible assets acquired and liabilities assumed based upon
their respective fair values at the effective date of the transaction.
The unaudited pro forma financial information is provided for informational
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred had the transaction been consummated
on the dates, or at the beginning of the period, for which the consummation of
such transaction is being given effect, nor is it necessarily indicative of
future operating results or financial position.
F-11
TOP AIR MANUFACTURING, INC.
PRO FORMA CONDENSED BALANCED SHEET (Unaudited)
November 30, 1996
Pro Forma Pro Forma
Top Air Ficklin Adjustments Combined
------- ------- ----------- ----------
ASSETS
Current Assets
Cash $7,459 $46,480 $ -- $53,939
Receivables 889,390 337,829 (15,000) (3) 1,212,219
Inventories 3,431,341 1,127,156 -- 4,558,497
Income Tax Benefits 190,736 43,008 -- 233,744
Equipment Held for Sale 249,350 -- -- 249,350
Other 332,024 18,681 -- 350,705
--------- --------- ---------- ---------
Total Current Assets 5,100,300 1,573,154 (15,000) 6,658,454
Investment in Subsidiary -- -- 1,581,250 (1)
(1,581,250) (3) 0
Long Term Receivables 153,989 -- -- 153,989
Property and Equipment, less
accumulated depreciation 1,881,831 691,226 -- 2,573,057
Intangibles and Other Assets 83,145 406,450 763,087 (3) 1,252,682
---------- ---------- -------- -----------
$7,219,265 $2,670,830 $748,087 $10,638,182
========== ========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liablities
Current Maturities of Debt $275,136 $334,457 $ -- $609,593
Accounts Payable and Accrued Expenses 1,633,324 469,467 129,600 (3) 2,232,391
--------- --------- -------- ----------
Total Current Liabilities 1,908,460 803,924 129,600 2,841,984
--------- --------- -------- ----------
Long-Term Debt 1,366,015 1,279,143 (375,000) (2) 2,270,158
--------- --------- --------- ---------
Stockholders' Equity
Common Stock 250,860 1,000 71,875 (1)
(1,000) (3) 322,735
Additional Paid-in Capital 1,388,730 399,000 1,509,375 (1)
375,000 (2)
(774,000) (3) 2,898,105
Retained Earnings 2,324,891 187,763 (187,763) (3) 2,324,891
---------- -------- --------- ---------
3,964,481 587,763 993,487 5,545,731
Less: Treasury Stock (19,691) -- -- (19,691)
---------- --------- -------- ---------
3,944,790 587,763 993,487 5,526,040
---------- --------- -------- ---------
$7,219,265 $2,670,830 $748,087 $10,638,182
========== ========== ======== ===========
See Notes to Unaudited Pro Forma Balance Sheet.
F-12
TOP AIR MANUFACTURING, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(1) To record the issuance of 1,150,000 shares of Top Air common stock, at the
closing price quoted on January 15, 1997, in exchange for all of the outstanding
common stock of Ficklin Machine Co.
(2) To record the conversion of a note payable to a shareholder, to additional
paid-in capital.
(3) To eliminate the investment in subsidiary.
F-13
TOP AIR MANUFACTURING, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (Unaudited)
SIX MONTHS ENDED NOVEMBER 30, 1996
Pro Forma Pro Forma
Top Air Ficklin Adjustments Combined
------- ------- ----------- ---------
Net Sales $3,207,748 $3,013,779 $ $6,221,527
Cost of Goods Sold 2,256,664 2,243,808 (14,514) (1) 4,485,958
--------- --------- ------- ---------
Gross Profit 951,084 769,971 14,514 1,735,569
Operating Expenses:
Selling 581,182 198,091 -- 779,273
Other 619,158 281,757 (25,275) (1)
35,998 (3) 911,638
--------- -------- ------- ---------
1,200,340 479,848 10,723 1,690,911
--------- -------- ------- ---------
Operating Income (Loss) (249,256) 290,123 3,791 44,658
Financial Income (Expense):
Interest Income 9,320 4,118 -- 13,438
Interest Expense (51,192) (109,772) 20,625 (2) (140,339)
---------- -------- ------- --------
(41,872) (105,654) 20,625 (126,901)
---------- -------- ------- --------
Income (Loss) Before Income Taxes (291,128) 184,469 24,416 (82,243)
Federal and State Income Taxes (Credits) (103,450) 64,561 -- (38,889)
---------- -------- ------- --------
Net Income (Loss) ($187,678) $119,908 $24,416 ($43,354)
========== ======== ======= ========
Income (Loss) Per Common Share ($0.01)
=========
Weighted Average Number of Shares Outstanding 5,163,765
=========
See Notes to Unaudited Pro Forma Statements of Income.
F-14
TOP AIR MANUFACTURING, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (Unaudited)
YEAR ENDED MAY 31, 1996
Pro Forma Pro Forma
Top Air Ficklin (1) Adjustments Combined
------- ------- ----------- --------
Net Sales $11,628,930 $1,052,264 $ -- $12,681,194
Cost of Goods Sold 7,724,645 696,106 (8,708) (2) 8,412,043
---------- --------- ------- ---------
Gross Profit 3,904,285 356,158 8,708 4,269,151
Operating Expenses:
Selling 1,403,264 56,850 -- 1,460,114
Other 1,302,446 129,926 (14,176) (2)
71,996 (4) 1,490,192
--------- -------- -------- ---------
2,705,710 186,776 57,820 2,950,306
-------- -------- -------- ---------
Operating Income 1,198,575 169,382 (49,112) 1,318,845
Financial Income (Expense):
Interest Income 49,653 4,751 -- 54,404
Interest Expense (197,834) (56,565) 10,313 (3) (244,086)
--------- -------- ------- -------
(148,181) (51,814) 10,313 (189,682)
--------- ------- ------- --------
Income Before Income Taxes 1,050,394 117,568 (38,799) 1,129,163
Federal and State Income Taxes 373,006 51,068 -- 424,074
-------- ------- -------- --------
Net Income $677,388 $66,500 ($38,799) $705,089
======== ======= ======== ========
Income Per Common Share $0.14
========
Weighted Average Number of Shares Outstanding 5,164,888
=========
See Notes to Unaudited Pro Forma Statements of Income.
F-15
TOP AIR MANUFACTURING, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF INCOME
(1) Information presented for Ficklin Machine for the period ended May 31, 1996
includes operations from March 6, 1996 (date of first operation) through May 31,
1996.
(2) To eliminate amortization of Ficklin Machine goodwill.
(3) To eliminate interest expense on note payable converted to additional
paid-in capital.
(4) To amortize goodwill acquired over a 15 year period using the straight-line
method.
F-16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 27, 1997
TOP AIR MANUFACTURING, INC.
By: /s/ Steven R. Lind
Steven R. Lind
President and Chief Executive Officer
S-1