Document/Exhibit Description Pages Size
1: 8-K Current Report 28 120K
2: EX-2.1 Share Acquisition Agreement 65 193K
3: EX-4.1 Purchase Agreement 30 118K
4: EX-4.2 Indenture 78 350K
5: EX-4.3 Form of Global Note 13 57K
6: EX-4.4 Registration Rights Agreement 28 102K
7: EX-23 Consent of Independent Acountants 1 7K
8: EX-99.1 Press Release Dated August 3, 1998 2 14K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 1998
PACIFIC AEROSPACE & ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Washington 0-26088 91-1744587
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
430 Olds Station Road, Wenatchee, WA 98801
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number,
including area code: (509) 667-9600
Item 2. Acquisition of Aeromet International plc
------------------------------------------------
On July 30, 1998 (the "Closing Date"), Pacific Aerospace and Electronics
(U.K.) Limited ("Purchaser"), a company organized under the laws of the United
Kingdom and an indirect wholly-owned subsidiary of Pacific Aerospace &
Electronics, Inc. ("PA&E"), purchased all of the issued and outstanding capital
stock (the "Stock Purchase") of Aeromet International plc ("Aeromet"), a British
limited company and wholly-owned subsidiary of Charles Baynes plc. The Stock
Purchase was made pursuant to a Share Acquisition Agreement dated July 1, 1998,
between Charles Baynes plc, a Charles Baynes affiliate Westpark Limited (the
"Seller"), Purchaser and PA&E.
In consideration for the Purchaser's acquisition of all of the issued and
outstanding capital stock of Aeromet (the "Shares"), PA&E delivered to Seller
(pound)42 million (or approximately $69 million) in cash. The purchase price for
the Shares was determined in arms-length negotiations between Charles Baynes plc
and PA&E.
The net proceeds of an offering (the "Offering") by PA&E of 11 1/4% Senior
Subordinated Notes due 2005 (the "Notes") were used to fund the Stock Purchase.
Subject to the terms and conditions of a Purchase Agreement (the "Purchase
Agreement"), dated July 23, 1998, between PA&E, PA&E's United States
subsidiaries (the "Subsidiaries") and Friedman, Billings, Ramsey & Co., Inc. and
BancBoston Securities Inc. (collectively the "Initial Purchasers"), the Initial
Purchasers agreed to purchase, and PA&E agreed to sell, Notes in the aggregate
principal amount of $75 million. The Notes were issued pursuant to an Indenture,
dated July 30, 1998 (the "Indenture") between PA&E, the Subsidiaries and IBJ
Schroder Bank & Trust Company, as trustee. The Notes (i) are senior
subordinated, unsecured, general obligations of PA&E, (ii) will mature on August
1, 2005, unless previously redeemed pursuant to the Indenture, and (iii) are
jointly and severally guaranteed on a senior subordinated basis by each of the
Subsidiaries.
In connection with the Purchase Agreement, PA&E and the Subsidiaries
entered into a registration rights agreement with the Initial Purchasers,
pursuant to which PA&E agreed to file with the Securities and Exchange
Commission either (i) an exchange offer registration statement relating to the
exchange of the Notes for fully registered notes with identical terms as the
Notes (the "Exchange Notes") or (ii) a shelf registration statement pursuant to
Rule 415 under the Securities Act of 1933, as amended, for resale of the Notes
and of the Exchange Notes that cannot be resold without delivery of a
prospectus. PA&E further agreed to use its reasonable best efforts to cause one
or both of such registration statements to be declared effective as the case may
be.
Prior to the Stock Purchase, no material relationship existed between
Charles Baynes plc or the Seller, and the Purchaser or PA&E, or any of their
respective affiliates, directors, officers, or associates.
Aeromet operates from five sites in England and is engaged in the
production of magnesium and aluminum precision sand and investment castings and
titanium and aluminum formed sheet products, for the aerospace, defense and
motorsport industries. Its primary assets
consist of manufacturing equipment, inventories of raw materials, work in
progress and finished products, and accounts receivable from the sale of its
products. PA&E intends that Aeromet will continue to engage in such business and
that Aeromet's assets will continue to be used for such business purposes as
they are currently used.
Item 7. Financial Statements and Exhibits
-----------------------------------------
(a) Financial Statements of Business Acquired
Filed with this report as pages F-1 to F-17 are the audited financial
statements of Aeromet for the two years ended December 31, 1996 and 1997.
(b) Pro Forma Financial Information
Filed with this report as pages P-1 to P-6 is the Unaudited Pro Forma
Financial Data for PA&E and Aeromet for the year ended May 31, 1998.
(c) Exhibits.
The following are filed as exhibits to this Current Report:
2.1 Share Acquisition Agreement dated July 1, 1998, by and between Charles
Baynes plc, Westpark Limited, Pacific Aerospace and Electronics (U.K.)
Limited, and Pacific Aerospace & Electronics, Inc.
4.1 Purchase Agreement dated as of July 23, 1998, between Pacific Aerospace &
Electronics, Inc., Balo Precision Parts, Inc., Cashmere Manufacturing Co.,
Inc., Ceramic Devices, Inc., Electronic Specialty Corporation, Morel
Industries, Inc., Northwest Technical Industries, Inc., Pacific Coast
Technologies, Inc., Seismic Safety Products, Inc., PA&E International, Inc.
and Friedman, Billings, Ramsey & Co., Inc. and BancBoston Securities Inc.
4.2 Indenture dated as of July 30, 1998, between Pacific Aerospace &
Electronics, Inc., Balo Precision Parts, Inc., Cashmere Manufacturing Co.,
Inc., Ceramic Devices, Inc., Electronic Specialty Corporation, Morel
Industries, Inc., Northwest Technical Industries, Inc., Pacific Coast
Technologies, Inc., Seismic Safety Products, Inc., PA&E International, Inc.
and IBJ Schroder Bank & Trust Company.
4.3 Form of Global Note from PA&E
4.4 Registration Rights Agreement dated as of July 30, 1998, between Pacific
Aerospace & Electronics, Inc., Balo Precision Parts, Inc., Cashmere
Manufacturing Co., Inc., Ceramic Devices, Inc., Electronic Specialty
Corporation, Morel Industries, Inc., Northwest Technical Industries, Inc.,
Pacific Coast Technologies, Inc., Seismic Safety Products, Inc., PA&E
International, Inc. and Friedman, Billings, Ramsey & Co., Inc. and
BancBoston Securities Inc.
23 Consent of Independent Accountants
99.1 Press Release dated August 3, 1998
SIGNATURES
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 hereunto duly authorized.
PACIFIC AEROSPACE & ELECTRONICS, INC.
By: /s/ DONALD A. WRIGHT
-------------------------------------
Donald A. Wright
President and Chief Executive Officer
Dated: August 13, 1998
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2.1 Share Acquisition Agreement dated July 1, 1998, by and between
Charles Baynes plc, Westpark Limited, Pacific Aerospace and
Electronics (U.K.) Limited, and Pacific Aerospace & Electronics,
Inc.
4.1 Purchase Agreement dated as of July 23, 1998, between Pacific
Aerospace & Electronics, Inc., Balo Precision Parts, Inc.,
Cashmere Manufacturing Co., Inc., Ceramic Devices, Inc.,
Electronic Specialty Corporation, Morel Industries, Inc.,
Northwest Technical Industries, Inc., Pacific Coast Technologies,
Inc., Seismic Safety Products, Inc., PA&E International, Inc. and
Friedman, Billings, Ramsey & Co., Inc. and BancBoston Securities
Inc.
4.2 Indenture dated as of July 30, 1998, between Pacific Aerospace &
Electronics, Inc., Balo Precision Parts, Inc., Cashmere
Manufacturing Co., Inc., Ceramic Devices, Inc., Electronic
Specialty Corporation, Morel Industries, Inc., Northwest Technical
Industries, Inc., Pacific Coast Technologies, Inc., Seismic Safety
Products, Inc., PA&E International, Inc. and IBJ Schroder Bank &
Trust Company.
4.3 Form of Global Note from PA&E
4.4 Registration Rights Agreement dated as of July 30, 1998, between
Pacific Aerospace & Electronics, Inc., Balo Precision Parts, Inc.,
Cashmere Manufacturing Co., Inc., Ceramic Devices, Inc.,
Electronic Specialty Corporation, Morel Industries, Inc.,
Northwest Technical Industries, Inc., Pacific Coast Technologies,
Inc., Seismic Safety Products, Inc., PA&E International, Inc. and
Friedman, Billings, Ramsey & Co., Inc. and BancBoston Securities
Inc.
23 Consent of Independent Accountants
99.1 Press Release dated August 3, 1998
AEROMET INTERNATIONAL PLC
Financial Statements
For the years ended December 31, 1996 and 1997
Table of Contents
Page
Independent Auditors' Report................................................ F-2
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Shareholder's Equity and Comprehensive Income/Loss............ F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
F-1
Independent Auditors' Report
The Board of Directors and Shareholder
Aeromet International PLC:
We have audited the accompanying balance sheets of Aeromet International PLC, a
wholly-owned subsidiary of Charles Baynes plc, as of December 31, 1997 and 1996,
and the related statements of operations, shareholder's equity and comprehensive
income/loss, 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examination, on a test basis, of evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aeromet International PLC as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG AUDIT PLC
KPMG Audit Plc
Birmingham, England
March 19, 1998
F-2
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AEROMET INTERNATIONAL PLC
Balance Sheets
December 31, 1996 and 1997
(In thousands, except for share data)
December 31
--------------------------
Assets 1996 1997
---------- ----------
Current assets:
Cash and cash equivalents.............................................. $ - 388
Accounts receivable, net of allowance for doubtful accounts of
$205 in 1996 and $148 in 1997.......................................... 12,561 12,062
Due from Affiliates.................................................... - 163
Inventories............................................................ 7,607 8,805
Deferred income taxes.................................................. 122 138
Prepaid expenses and other ............................................ 515 377
---------- ----------
Total current assets.......................................... 20,805 21,933
---------- ----------
Property, plant and equipment, net............................................. 9,977 9,485
---------- ----------
Other assets:
Costs in excess of net book value of acquired subsidiaries, net of
accumulated amortization of $17,142 in 1996 and $18,600 in 1997........ 27,056 23,893
Other.................................................................. 331 197
---------- ----------
Total other assets............................................ 27,387 24,090
---------- ----------
$ 58,169 55,508
========== ==========
Liabilities and Shareholder's Equity
Current liabilities:
Short-term borrowings.................................................. 7,908 4,661
Accounts payable....................................................... 5,979 7,935
Accrued liabilities.................................................... 1,563 1,715
Taxes payable.......................................................... 406 813
Due to Affiliates...................................................... 1,882 178
Current portion of capital lease obligations........................... 103 115
---------- ----------
Total current liabilities..................................... 17,841 15,417
Long-term liabilities:
Due to Affiliates ..................................................... 9,825 13,279
Capital lease obligations, net of current portion ..................... 1,058 944
Deferred income taxes ................................................. 736 798
---------- ----------
Total liabilities ............................................ 29,460 30,438
---------- ----------
Shareholder's equity:
Common stock, $0.155 par value. 5,000,000 shares authorized,
1,000,000 issued and outstanding at December 31, 1996 and 1997......... 155 155
Additional capital .................................................... 43,180 43,246
Accumulated other comprehensive income ................................ 2,677 1,558
Accumulated deficit ................................................... (17,303) (19,889)
---------- ----------
Total shareholder's equity.................................... 28,709 25,070
---------- ----------
Commitments and contingencies - -
$ 58,169 55,508
========== ==========
See accompanying notes to financial statements.
F-3
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AEROMET INTERNATIONAL PLC
Statements of Operations
For the years ended December 31, 1996 and 1997
(In thousands)
Year ended
December 31
------------------------
1996 1997
--------- ---------
Net sales............................................... $ 41,939 48,697
Cost of sales........................................... 34,340 40,591
--------- ---------
Gross profit................................... 7,599 8,106
Operating expenses...................................... 7,098 6,482
--------- ----------
Income from operations......................... 501 1,624
--------- ---------
Other income (expense):
Interest expense...................................... (731) (754)
---------- ----------
Income (loss) before income taxes.............. (230) 870
---------- ---------
Income tax expense...................................... (570) (900)
---------- ----------
Net loss..................................... $ (800) (30)
========== ===========
See accompanying notes to financial statements.
F-4
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AEROMET INTERNATIONAL PLC
Statements of Shareholder's Equity and Comprehensive
Income/Loss For the years ended December 31,
1996 and 1997
(In thousands, except for share data)
Compre- Accumulated
Common Stock hensive Other Total
--------------------- Additional Income Accumulated Comprehensive Shareholder's
Shares Amount Capital (Loss) Deficit Income (Loss) Equity
--------- --------- ---------- --------- ----------- ------------- -------------
Balance at December 31, 1995........ 1,000,000 $ 155 43,137 - (16,409) - 26,883
Capital contribution from parent ... - - 43 - - - 43
Translation adjustment ............. - - - 2,677 - 2,677 2,677
Dividends paid to parent ........... - - - - (94) - (94)
Net loss............................ - - - (800) (800) - (800)
---------
Comprehensive income ............... 1,877
--------- ---------- ========= ----------- ------------- -------------
Balance at December 31, 1996 ....... 1,000,000 155 43,180 (17,303) 2,677 28,709
Capital contribution from parent ... - - 66 - - - 66
Translation adjustment ............. - - - (1,119) - (1,119) (1,119)
Dividends declared to parent ....... - - - - (2,556) - (2,556)
Net loss ........................... - - - (30) (30) - (30)
---------
Comprehensive loss ................. (1,149)
--------- ---------- ========== ----------- ------------- -------------
Balance at December 31, 1997 ....... 1,000,000 $ 155 43,246 (19,889) 1,558 25,070
========= ========= ========== =========== ============= =============
See accompanying notes to financial statements.
F-5
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AEROMET INTERNATIONAL PLC
Statements of Cash Flows
For the years ended December 31, 1996 and 1997
(In thousands)
Year ended
December 31
------------------------------
1996 1997
----------- -----------
Cash flow from operating activities:
Net loss...................................................... $ (800) (30)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 3,411 3,790
Allowance for doubtful accounts ..................... 133 (49)
Loss on sale of property, plant and equipment........ - (7)
Deferred taxes ...................................... 201 69
Changes in operating assets and liabilities:
Accounts receivable ........................ (586) 64
Inventories ................................ 483 (1,486)
Prepaid expenses and other ................. (73) 67
Accounts payable and accrued liabilities.... (823) 2,178
Other ...................................... (3,010) 343
----------- -----------
Net cash provided by (used in) operating activities.. (1,064) 4,939
----------- -----------
Cash flow from investing activities:
Acquisition of property, plant and equipment ........... (1,484) (1,526)
Proceeds from sale of property, plant and equipment .... 8 28
----------- -----------
Net cash used in investing activities ......... (1,476) (1,498)
----------- -----------
Cash flow from financing activities:
Net borrowings (repayments) under line of credit ....... 2,683 (2,930)
Payments on capital leases ............................. (145) (124)
----------- -----------
Net cash provided by (used in) financing activities 2,538 (3,054)
----------- -----------
Net increase (decrease) in cash and cash equivalents (2) 387
Cash and cash equivalents at beginning of year................... 2 -
Effect of exchange rates on cash ................................ - 1
----------- -----------
Cash and cash equivalents at end of year......................... $ - 388
=========== ===========
Supplemental cash flow information:
Cash paid during the year for:
Interest ...................................... $ 436 744
Income taxes .................................. 308 192
Non-cash investing and financing activities:
Seller financed acquisition of property,
plant and equipment............................ 1,319 18
See accompanying notes to financial statements.
F-6
AEROMET INTERNATIONAL PLC
Notes to Financial Statements
(All amounts in thousands, except for share data)
1. Description of Business and Basis of Presentation
Description of Business
Aeromet International PLC ("the Company"), a wholly-owned subsidiary of
Charles Baynes plc ("the Parent"), operates five sites in the United Kingdom
engaged the manufacture of precision metal components and products. Most of the
Company's customers are located in the United Kingdom and Europe and operate in
the aerospace, defence, and motorsport industries.
Basis of Preparation
The Company maintains its accounting records in accordance with United
Kingdom tax and Companies Act regulations. Certain adjustments have been made to
these records to present the accompanying financial statements in accordance
with United States generally accepted accounting principles (US GAAP).
On August 16, 1996, the Company changed its name from Kent Aerospace PLC to
Aeromet International PLC.
In October of 1996, the assets and liabilities of TKR International Limited
("TKR") were transferred to the Company. Prior to October 1996, TKR was also a
wholly-owned subsidiary of the Parent. The merger is a combination of entities
under common control. Accordingly, all prior period financial statements
presented have been restated to include combined results of operations,
financial position and cash flows of TKR as though it had always been part of
the Company. The financial statements are unaffected by the subsidiaries of the
Company since the subsidiaries have no assets, liabilities or operations.
The statements of operations for the years ended December 31, 1996 and 1997
include the actual net sales, cost of sales, selling and administration costs as
incurred by the Company. Certain other amounts such as rent and administrative
services included in total operating expenses are allocated to the Company by
the Parent. The amount of allocated expenses was $1,479 and $1,596 in 1996 and
1997. Management believes the allocations to be reasonable under the
circumstances; however, there can be no assurances that such allocations will be
indicative of future results of operations or what the financial position and
results of operations of the Company would have been had it been a separate,
stand-alone entity during the periods covered.
The Company's functional currency is Pounds Sterling. All assets and
liabilities are translated into US dollars at year-end exchange rates. Income
and expense items are translated at average exchange rates prevailing during the
fiscal period. The resulting translation adjustments are recorded as a separate
component of shareholder's equity.
F-7
2. Summary of Significant Accounting Principles
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and demand deposits with banks.
Inventories
Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Plant and equipment under capital leases are stated at the lower
of the fair market value of the assets or the present value of minimum lease
payments at the inception of the leases.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the owned assets ranging from 4 to 20 years. Property,
plant and equipment held under capital leases are amortized using the
straight-line method over the shorter of the estimated useful lives of the
assets or the lease terms, ranging from 4 to 10 years.
Expenditures for maintenance and repairs are charged to expense as
incurred.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 20 years. The Company assesses the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The amount
of goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
Financial Instruments
The Company enters into foreign currency contracts with the Parent in order
to reduce the impact of certain foreign currency fluctuations. Firmly committed
transactions are hedged with forward exchange contracts. Gains and losses
related to hedges of firmly committed transactions are deferred and are
recognized in income or as adjustments of carrying amounts when the hedged
transaction occurs.
Revenue Recognition
Revenue is recognized when products are shipped to customers.
F-8
Restrictions on Capital
The Company is subject to United Kingdom (UK) Companies Act regulations,
and as such may only distribute its accumulated net 'realised' profits as
defined by reference to UK generally accepted accounting principles (UK GAAP).
Net 'realised' profits under UK GAAP were $656 and $2,506 at December 31, 1996
and 1997, respectively.
Research and Development and Advertising
Research and development costs and advertising costs are expensed as
incurred and are included in operating expenses. Research and development costs
in 1996 and 1997 were $11 and $19, respectively. Advertising costs in 1996 and
1997 were $97 and $169, respectively.
Income Taxes
The Company follows the asset and liability method of accounting for income
taxes. Under the asset and liability method of accounting for income taxes,
deferred tax assets and liabilities are recognized based on the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Stock-Based Compensation
The Company follows the provisions of Statements of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. This
statement permits a company to choose either a fair-value method or the
Accounting Principles Board (APB) Opinion No.25, Accounting for Stock Issued to
Employees, intrinsic-value based method of accounting for stock-based
compensation arrangements. SFAS No. 123 requires pro forma disclosure of net
income and earnings per share computed as if the fair-value based method had
been applied in financial statements of companies that account for such
arrangements under APB Opinion No. 25. The Company records stock-based
compensation using the APB Opinion No. 25 intrinsic-value-based method.
Pensions
The Company participates in the defined contribution pension scheme of the
Parent. Contributions made to the scheme were $255 in 1996 and $323 in 1997.
Comprehensive income
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 is effective for the
periods beginning after December 15, 1997. This statement provides reporting
standards of comprehensive income and its components and requires that all
components of comprehensive income be reported in the financial statements in
the period in which they are recognized. The Company has adopted the provisions
of SFAS No. 130 in its financial statements.
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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.
F-9
New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating
segments. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years must be restated. The
Company has not yet determined the impact of implementing the provisions of SFAS
No.131 on the Company's existing disclosures.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position No.98-1, Accounting for the Cost of Computer
Software Developed For or Obtained For Internal Use (SOP 98-1). This Statement
establishes standards regarding capitalization of certain costs incurred in
connection with developing or obtaining software for internal use. Under current
practice, the Company generally expenses such costs as incurred. SOP 98-1 is
effective for accounting periods beginning after December 15, 1998 and is to be
applied prospectively. Early adoption of SOP 98-1 is permitted. The Company has
not yet determined the impact of adopting SOP 98-1 on its future results of
operations and financial position.
3. Concentration of Risk
The Company's individual customers comprising more than 10% of net sales
are presented below for the year ended December 31, 1997. There were no
individual customers comprising more than 10% of net sales for the year ended
December 31, 1996.
Year ended
Customer December 31, 1997
-------- -----------------
A............................... $ 5,981
B............................... 5,317
The Company's individual customers comprising more than 10% of accounts
receivable are presented below at December 31, 1997. There were no individual
customers comprising more than 10% of accounts receivable at December 31, 1996.
Year ended
Customer December 31, 1997
-------- -----------------
B............................... $ 1,589
Credit is extended to customers based on an evaluation of their financial
condition and collateral is generally not required.
The Company currently purchases titanium and other raw materials from a
limited number of suppliers. Suppliers of titanium are limited and a change of
supplier could cause a delay in manufacturing and increased costs, and a
possible loss of sales, which could have a material adverse effect on the
manufacturing and delivery of the Company's products. Purchases from the
principal suppliers of titanium are as follows:
Year ended Year ended
December 31, December 31,
Supplier 1996 1997
-------- ----------- -----------
A............................ $ 1,923 3,470
F-10
4. Inventories
Inventories consist of the following:
December 31
---------------------
1996 1997
------- -------
Raw materials............................ $ 2,100 1,938
Work in progress......................... 4,554 6,076
Finished goods........................... 953 791
------- -------
$ 7,607 8,805
======= ======
5. Property, Plant and Equipment
Property, plant and equipment, including assets under capital lease
arrangements consists of the following:
December 31
---------------------
1996 1997
------- -------
Leasehold improvements......................... $ 532 512
Machinery and equipment........................ 19,052 19,766
------- -------
19,584 20,278
Less accumulated depreciation and amortization (9,607) (10,793)
------- -------
$ 9,977 9,485
------- -------
The Company recognized depreciation of property, plant and equipment of
$881 and $1,680 during the years ended December 31, 1996 and 1997, respectively.
6. Short-term Borrowings
At December 31, 1996 and 1997, there was $7,908 and $4,661 outstanding
under a committed bank overdraft facility, respectively, which is unsecured
under a Composite Accounting Agreement between the bank and the Parent. The
current credit agreement provides borrowings of up to (pound)3,000 (equivalent
to $4,936 at December 31, 1997) for general corporate purposes. Weighted-average
interest rates of 7.1% and 7.6% were charged on this overdraft facility in 1996
and 1997, respectively. The Company borrowings under this agreement are
guaranteed by its Parent. The Company also guarantees certain of its Parents
borrowings.
7. Transactions with Affiliates
Net short term balances due to affiliates were $1,882 and $15 at December
31, 1996 and 1997 respectively. The balance at December 31, 1996 related to a
short term loan from the Parent, interest was charged on this loan at weighted
average rates of 12% and 10% in 1996 and 1997 respectively. The balance at
December 31, 1997 related to sundry trading with affiliated companies. No
interest is charged on the trading balances.
F-11
Long term loans from related companies are as follows:
Long-term
loans
---------
Balance at December 31, 1995........................ $ 9,561
Allocation of central costs......................... 375
Parent company recharges............................ 422
Cash transfers...................................... (1,448)
Translation adjustment.............................. 915
---------
Balance at December 31, 1996........................ 9,825
Allocation of central costs......................... 459
Parent company recharges............................ 567
Dividends declared.................................. 2,458
Cash transfers...................................... 334
Translation adjustment.............................. (364)
---------
Balance at December 31, 1997........................ $ 13,279
=========
The average balance of long term loans from related companies was $10,127
and $10,714 in 1996 and 1997 respectively.
No interest is charged on the long term loan.
Other transactions with related companies for 1996 and 1997 are analysed as
follows:
Purchases from related parties:
[Download Table]
Year ended Year ended
December 31, 1996 December 31, 1997
------------------- -----------------
Buck and Hickman........................... $ 130 462
National Packaging......................... 28 56
These Companies are both subsidiary undertakings of the Parent.
8. Leasing Arrangements
Capital Leases
The Company leases certain property, plant and equipment under capital
lease agreements that expire through 2018. Aggregate minimum payments to be
made under these agreements at December 31, 1997 are as follows for each of
the following fiscal year-ends:
1998...................................... $ 186
1999...................................... 191
2000...................................... 185
2001...................................... 172
2002...................................... 155
Thereafter................................ 501
------
1,390
Less amounts representing interest at
rates ranging from 6.57% to 7.82%......... (331)
------
F-12
Present value of net minimum capital
lease payments............................ 1,059
Less current portion of capital
lease obligations......................... (115)
------
Capital lease obligations, net of
current portion........................... $ 944
======
Included in property, plant and equipment are costs of $1,319 and $1,330
and related accumulated amortization of $14 and $149 recorded under capital
leases at December 31, 1996 and 1997 respectively.
Operating Leases
The Company leases certain property, plant and equipment under operating
lease agreements that expire through 2005. Aggregate minimum rental payments to
be made under these agreements at December 31, 1997 are as follows for each of
the following fiscal year-ends:
Minimum
Rentals
---------
1998.................................. $ 2,097
1999.................................. 2,047
2000.................................. 2,032
2001.................................. 2,002
2002.................................. 1,700
Thereafter............................ 21,270
------
$ 31,148
Total rent expense for operating leases during the years ended December 31,
1996 and 1997 amounted to $1,548 and $1,614, respectively.
9. Compensation Plans
The Parent has three stock-based compensation plans, which are described
below. The Company applies the APB Opinion No.25 intrinsic-value based method of
accounting for stock-based compensation arrangements. Had compensation cost been
determined on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 123, the Company's net loss would have
been reduced to the pro forma amounts indicated below:
December 31
-----------
1997 1996
---- ----
As reported.......................... $ 30 800
Pro forma............................ 56 850
Fixed Price Share Option Plan
Under the Saving Related Share Option Scheme, the Parent is authorized to
issue shares of the Parent's common stock to all full-time employees with six
months' service. Under the terms of the scheme, employees can choose each year
to have up to (pound)3,000 (equivalent to $4,936 at December 31, 1997) of their
annual base earnings withheld to purchase the Parent's common stock. The
purchase price of the stock is 80% of the market price at the date of the grant.
Compensation cost is recognized for the fair value of the employee's purchase
rights, which was estimated using the Black-Scholes model with the following
assumptions for 1997 and 1996, respectively: dividend yield of 3.02% and 2.27%;
an expected life of 2.75 years for both years; expected volatility of 2.5%; and
risk-free interest rates of 6.33% and 7.78%.
F-13
Performance-Based Share Option Plans
Under its Executive Share Option Scheme, the Parent may grant to selected
executives stock option awards in the Parent's common stock to a maximum total
of outstanding options for any participant of four times annual earnings.
Options are granted, normally twice each year, at the market price of the common
stock at the date of grant. Since 1991, all options have been granted in three
equal parts which, in normal circumstances, are first exercisable three, four,
and five years respectively after the date of grant. Exercise of options issued
since 1996 is dependent on certain performance criteria based on the Parent's
share growth. No options were granted during 1997. The fair value of each option
grant was estimated on the date of the grant using the Black-Scholes model with
the following assumptions for 1996: dividend yield of 2.27%; an expected life of
three years; expected volatility of 25%; and risk-free interest rate of 7.78%.
The Parent may issue up to 10% of its issued share capital for all schemes
operated by it. This is in accordance with the London Stock Exchange
regulations.
Information with respect to options granted under the stock option plans in
respect of the employees of the company is as follows:
[Enlarge/Download Table]
Fixed price Performance-based
---------------------------------- -------------------------------------
Weighted-average Weighted-average
--------------------- ----------------------
Fair value Number Fair value
Number Exercise of options of Exercise of options
of options price granted options price granted
---------- -------- ---------- ---------- -------- ----------
Outstanding at December 31, 1995....... 742,839 0.88 653,834 0.81
Granted............................. 344,353 1.56 0.59 72,500 2.15 0.47
Expired or cancelled................ (91,837) 0.98 (7,500) 1.96
Exercised........................... (28,087) 0.86 (203,832) 0.71
---------- -------- ---------- --------
Outstanding at December 31, 1996....... 967,268 1.11 515,002 1.04
---------- -------- ---------- --------
Granted............................. 300,271 1.50 0.54 - - -
Expired or cancelled................ (197,665) 1.21 (47,000) 1.65
Exercised........................... (240,498) 0.72 (170,000) 0.75
---------- -------- ---------- --------
Outstanding at December 31, 1997....... 829,376 $1.34 298,002 $0.93
---------- -------- ---------- --------
Exercisable at:
December 31, 1997................... - - 189,167 $0.85
Summarized information about fixed price stock options outstanding in
respect of the employees of the Company at December 31, 1997 is as follows:
F-14
[Enlarge/Download Table]
Options outstanding Options exercisable
-------------------------------------------- -------------------------
Weighted-
average Weighted- Weighted-
Range of remaining average average
exercise Number contractual exercise price Number exercise
prices ($) outstanding life ($) exercisable price ($)
---------- ----------- ----------- -------------- ----------- ---------
0.93 100,715 1.3 years 0.93 - -
1.08 211,914 2.3 years 1.08 - -
1.50-1.56 516,747 3.8 years 1.53 - -
0.93-1.56 829,376 3.4 years 1.34 - -
Summarized information about performance-based stock options outstanding in
respect of the employees of the Company at December 31, 1997 is as follows:
[Download Table]
Options outstanding Options exercisable
-------------------------------------------- -------------------------
Weighted-
average Weighted- Weighted-
Range of remaining average average
exercise Number contractual exercise price Number exercise
prices ($) outstanding life ($) exercisable price ($)
---------- ----------- ----------- -------------- ----------- ---------
0.46 37,500 0.50 years 0.46 37,500 0.46
0.55-0.98 125,302 5.00 years 0.80 94,500 0.81
1.11-1.35 90,200 7.25 years 1.20 57,167 1.17
1.98 15,000 8.50 years 1.96 - -
2.32 30,000 8.50 years 2.32 - -
----------- ----------
0.46-2.32 298,002 5.10 years 1.09 189,167 0.85
=========== ==========
Share Bonus Scheme
Under the terms of the Share Bonus Scheme, the Parent is authorised to
grant shares of the Parent's common stock to the executive directors of the
Company in lieu of any annual cash bonus. Participation in this plan is
obligatory for bonuses above a certain threshold. Under the scheme, Parent
common stock, having an initial market value of up to four times the amount
excluded from the cash bonus scheme, are notionally allocated to the executive.
Over a five year period the trustees of the scheme will, when called upon to do
so by the executive, transfer an increasing proportion of such shares to the
executive, at which time the remaining shares which have not "vested" will be
forfeited by the executive. No shares were granted under this Scheme in 1996 and
1997.
10. Income Taxes
The Company computes income tax expense based on the UK Statutory Rates.
Income tax expense for the year ended December 31, 1996 was computed at the UK
Statutory Rate of 33%. During the year ended December 31, 1997, the UK Statutory
Rate was reduced from 33% to 31%. For the year ended December 31, 1997, the
Company computed income tax expense at a rate of 33% for 3 months and 31 percent
for 9 months resulting in a blended rate of 31.5% for the year.
F-15
The provision for income taxes (benefit) is as follows:
Year ended December 31
----------------------
1996 1997
------ ------
Current................................. $ 369 831
Deferred................................ 201 69
------ ------
Provision for income taxes.............. $ 570 900
====== ======
Income tax expense for the years ended December 31, 1996 and 1997 differ
from the amounts computed by applying the UK statutory tax rate to pre-tax
income (loss) as a result of the following:
Year ended December 31
----------------------
1996 1997
------ ------
Tax provision (benefit) at Statutory Rate.... $ (76) 275
Amortization of goodwill..................... 651 653
Effect of change in UK Statutory Rate........ - (36)
Non-deductible items and other............... (5) 8
------ -----
$ 570 900
====== =====
Significant components of the Company's deferred tax assets and liabilities
are as follows:
[Download Table]
December 31
---------------------
1996 1997
------ ------
Deferred tax assets:
Allowance for doubtful accounts and other...... $ 122 138
Deferred tax liabilities:
Fixed assets................................... 623 698
Intangible assets.............................. 113 100
------ ------
$ 736 798
------ ------
614 660
====== ======
11. Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and accounts
payable, approximate fair value due to the short maturity of such instruments.
The carrying value and related fair value for the Company's remaining financial
instruments, foreign currency contracts, are as follows:
[Enlarge/Download Table]
December 31, 1996 December 31, 1997
---------------------------------------- -----------------------------------------
Carrying amount Estimated fair value Carrying amount Estimated fair value
--------------- -------------------- --------------- --------------------
Foreign exchange forward contracts $ - (207) - 121
The fair value of short term foreign exchange contracts is based on
exchange rates at December 31, 1996 and 1997. The fair value of long term
foreign contracts is based on various quoted spot forward exchange rates.
F-16
2. Contingencies
Legal
The Company is currently subject and party to various legal actions arising
in the normal course of business. Management believes the ultimate liability, if
any, arising from such claims or contingencies is not likely to have a material
adverse effect on the Company's results of operations or financial condition.
In the normal course of business, the Company disposes of potentially
hazardous material which could result in claims related to environmental
cleanup. The Company has not been notified of any related claims. The Company is
subject to various other environmental and governmental regulations, however,
the extent of any non-compliance with those regulations, if any, is not
ascertainable.
13. Subsequent Event (unaudited)
In May 1998, the Parent signed a letter of intent with Pacific Aerospace &
Electronics, Inc., a public company headquartered in the United States, to sell
the Company for approximately (pound)45.0 million. The transaction is expected
to close in July 1998. However, there is no assurance that the transaction will
be completed.
F-17
INDEX TO UNAUDITED PRO FORMA DATA
Page
Unaudited Pro Forma Financial Data.......................................... P-2
Unaudited Pro Forma Balance Sheet Data...................................... P-3
Notes to Unaudited Pro Forma Balance Sheet Data............................. P-4
Unaudited Pro Forma Statement of Operations Data............................ P-5
Notes to Unaudited Pro Forma Statement of Operations Data................... P-6
P-1
UNAUDITED PRO FORMA FINANCIAL DATA
The following Unaudited Pro Forma Financial Data for the year ended May 31,
1998, gives effect to the Company's acquisition of Aeromet as if it had occurred
on June 1, 1997. The historical statement of operations data of the Company for
the year ended May 31, 1998, already reflects the results of operations of Balo
Precision Parts, Inc. ("Balo") and Electronic Specialty Corporation ("ESC")
since the time of their respective acquisitions by the Company in Fiscal 1998.
The historical balance sheet of the Company as of May 31, 1998, already reflects
the acquisitions of Balo and ESC, and the Unaudited Pro Forma Balance Sheet data
reflects the Aeromet Acquisition as if it had occurred on May 31, 1998.
This Unaudited Pro Forma Financial Data is based on the assumptions and
adjustments described in the accompanying notes which the Company believes are
reasonable. The Unaudited Pro Forma Statement of Operations Data does not
purport to represent what the Company's results of operations actually would
have been if the event described above had occurred as of the date indicated or
what such results will be for any future periods. The financial data is based
upon assumptions and adjustments that the Company believes are reasonable. This
Unaudited Pro Forma Financial Data and the accompanying notes should be read in
conjunction with the historical financial statements of the Company and Aeromet,
including the notes thereto.
Each of the acquisitions referred to in this Unaudited Pro Forma Financial
Data has been or will be accounted for using the purchase method of accounting.
Accordingly, the assets acquired and liabilities assumed have been or will be
recorded at their fair values as of the dates of their respective acquisitions.
These amounts have been recorded based upon preliminary estimates as of the
dates of the acquisitions. The Company does not believe that any changes to
these estimates that may occur will have a material impact on the Unaudited Pro
Forma Financial Data.
P-2
[Enlarge/Download Table]
Unaudited Pro Forma Balance Sheet Data
As of May 31, 1998
(in thousands)
Historical Pro forma,
------------------------ Pro forma as
Company(1) Aeromet(2) adjustments(3)(5) adjusted(4)
---------- ---------- ----------------- -----------
ASSETS
Current assets:
Cash and cash equivalents......................... $ 11,461 -- 9,638 (6) 21,099
Accounts receivable, net.......................... 9,375 13,885 -- 23,260
Due from Affiliates............................... -- 26 -- 26
Inventories....................................... 16,184 10,050 -- 26,234
Deferred income taxes............................. 386 137 -- 523
Prepaid expenses and other........................ 272 218 -- 490
---------- ---------- ----------------- -----------
Total current assets......................... 37,678 24,316 9,638 71,632
Property, plant and equipment, net..................... 26,335 9,073 9,000 (7) 44,408
Other assets:
Note receivable from related party................ 700 -- -- 700
Investment........................................ 4,579 -- -- 4,579
Costs in excess of net book value of acquired
subsidiaries, net.............................. 6,515 22,791 21,252 (8) 50,558
Patents, net...................................... 1,229 -- -- 1,229
Deferred income taxes............................. 222 -- -- 222
Other............................................. 1,322 12 3,405 (9) 4,739
---------- ---------- ----------------- -----------
Total other assets........................... 14,567 22,803 24,657 62,027
---------- ---------- ----------------- -----------
$ 78,580 56,192 43,295 178,067
========== ========== ================= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. 6,748 8,625 -- 15,373
Accrued liabilities............................... 2,587 2,380 -- 4,967
Taxes payable..................................... -- 1,616 -- 1,616
Current portion of long-term debt................. 1,027 -- -- 1,027
Current portion of capital lease obligations...... 206 119 -- 325
Line of credit and short-term borrowings.......... 1,511 5,108 5,108)(10) 1,511
---------- ---------- ----------------- -----------
Total current liabilities.................... 12,079 17,848 (5,108) 24,819
Long-term liabilities:
Long-term debt, net of current portion............ 9,059 -- 75,000 (11) 84,059
Capital lease obligations, net of current portion. 941 924 -- 1,865
Due to Affiliates................................. -- 10,849 (10,849)(10) --
Deferred income taxes............................. -- 763 3,060 (12) 3,823
Deferred rent and other........................... 359 -- -- 359
---------- ---------- ----------------- -----------
Total liabilities............................ 22,438 30,384 62,103 114,925
Shareholders' equity:
Convertible preferred stock....................... -- -- -- --
Common stock...................................... 15 155 (155)(15) 15
Additional paid-in capital........................ 57,830 43,286 (36,286)(14) 64,830
Cumulative unrealized loss on investment.......... (436) -- -- (436)
Cumulative translation adjustment................. -- 1,320 (1,320)(15) --
Accumulated deficit............................... (1,267) (18,953) 18,953 (15) (1,267)
---------- ---------- ----------------- -----------
Total shareholders' equity................... 56,142 25,808 (18,808) 63,142
---------- ---------- ----------------- -----------
$ 78,580 56,192 43,295 178,067
========== ========== ================= ===========
P-3
Notes to Unaudited Pro Forma Balance Sheet Data
(1) Represents the consolidated balance sheet of the Company as of May 31,
1998.
(2) Represents the consolidated balance sheet of Aeromet as of May 31, 1998.
(3) Includes pro forma adjustments for the Aeromet Acquisition, related
financing, and proceeds from Series B Preferred ($7.0 million) held in
escrow pending closing of the Aeromet Acquisition.
(4) Represents the Company's pro forma, as adjusted balance sheet as if the
Aeromet Acquisition, the related financing, and the Series B convertible
preferred stock ("Series B Preferred") issuance had occurred on May 31,
1998.
(5) The following table sets forth the components of the aggregate purchase
price of Aeromet and the allocation of such purchase price (in thousands):
[Download Table]
Aeromet purchase price.................................................... $67,457
Acquisition costs......................................................... 1,500
-------
Total purchase price to be allocated................................. $68,957
=======
Historical book value of total assets acquired............................ $56,192
Elimination of historical costs in excess of net book value of acquired
subsidiaries(8)...................................................... (22,791)
Elimination of historical deferred income taxes(12)....................... 763
Adjustment of property, plant and equipment to fair value(7).............. 9,000
Liabilities assumed(13)................................................... (14,427)
Estimated deferred income taxes(12)....................................... (3,823)
Costs in excess of book value of Aeromet Acquisition(8)................... 44,043
-------
Total purchase price allocated....................................... $68,957
=======
(6) Proceeds from issuance of Series B Preferred ($7.0 million), the Notes net
of deferred financing costs ($71.0 million), less the cost of the
acquisition of Aeromet including acquisition costs ($69.0 million), and
plus previously incurred acquisition costs ($595,000).
(7) Adjustment of $9.0 million to record property, plant and equipment at fair
value for Aeromet.
(8) Incremental impact of recording costs in excess of net book value of
acquired subsidiaries for the Aeromet Acquisition ($44.0 million) and the
elimination of Aeromet's historical costs in excess of net book value of
acquired subsidiaries ($22.8 million).
(9) Represents estimated deferred financing costs incurred in connection with
the financing related to the acquisition of Aeromet ($4 million), less
previously incurred acquisition cost ($595,000).
(10) Elimination of debt of Aeromet not assumed by the Company, including $5.1
million short-term borrowing and $10.8 million of due to affiliates.
(11) Proceeds from the Note offering.
(12) Establishment of deferred income taxes upon Aeromet Acquisition ($3.8
million) and write-off of Aeromet's historical deferred income taxes
($763,000).
(13) Represents Aeromet's total liabilities ($30.4 million), less liabilities
not assumed ($5.1 million of short-term debt and $10.8 million of due to
affiliates).
(14) Elimination of Aeromet's historical additional paid-in capital ($43.3
million), plus proceeds from Series B Preferred ($7.0 million).
(15) Elimination of Aeromet's historical shareholders' equity accounts,
including Common Stock ($155,000), cumulative translation adjustment ($1.3
million), and accumulated deficit ($19.0 million).
P-4
[Enlarge/Download Table]
Unaudited Pro Forma Statement of Operations Data
For the Year Ended May 31, 1998
(in thousands)
Historical Pro forma,
------------------------ Pro forma as
Company(1) Aeromet(2) adjustments adjusted(3)
---------- ---------- ----------- -----------
Statement of Operations Data:
Net sales............................. $ 54,099 53,840 -- 107,939
Cost of sales......................... 39,487 43,645 900(4) 84,032
---------- ---------- ----------- -----------
Gross profit.......................... 14,612 10,195 (900) 23,907
Operating expenses.................... 9,872 6,240 (1,477)(5) 14,635
---------- ---------- ----------- -----------
Income from operations................ 4,740 3,955 577 9,272
Net interest expense.................. (755) (679) (8,830)(6) (9,964)
Other income (expense)................ (853) -- -- (853)
---------- ---------- ----------- -----------
Income (loss) before income taxes..... 3,132 3,276 (7,953) (1,545)
Income taxes (benefit)................ (482) 1,673 126(7) 1,317
---------- ---------- ----------- -----------
Net income (loss)..................... $ 3,614 1,603 (8,079) (2,862)
========== ========== =========== ===========
P-5
Notes to Unaudited Pro Forma Statement of Operations Data
(1) Represents the results of operations of the Company for the year ended May
31, 1998, and the results of operations of Balo and ESC from the effective
dates of their respective acquisitions.
(2) Represents the results of operations for Aeromet for the year ended May 31,
1998.
(3) Presents the statement of operations data of the Company as if the
acquisition of Aeromet and related financing transactions had occurred on
June 1, 1997.
(4) Represents depreciation on fair value adjustment to property, plant and
equipment upon the Aeromet Acquisition. The $9.0 million fair value
adjustment is being amortized over 10 years.
(5) Represents the incremental amortization of cost in excess of net book value
of acquired subsidiaries arising from the acquisition of Aeromet of $1.1
million, net of amortization previously recorded by Aeromet of $2.1
million, which has been eliminated. Cost in excess of net book value of
acquired subsidiaries is being amortized over 40 years for Aeromet. Also
represents the elimination of $474,000 of management fees paid to Aeromet's
previous parent.
(6) Represents incremental interest expected to be incurred from indebtedness
in connection with the acquisition of Aeromet ($75.0 million). Interest
expense was calculated at the annual rate of 11.25%, representing the rate
on the indebtedness expected to be incurred in the acquisition. Interest
expense on debt not assumed in the Aeromet Acquisition ($479,000) has been
eliminated. Deferred financing costs ($4.0 million) are amortized over 7
years.
(7) Tax provision to reflect the Company's estimated taxes on certain pro forma
adjustments.
P-6
Dates Referenced Herein and Documents Incorporated by Reference
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