SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 10, 2004
ALLIS-CHALMERS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-2199
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER)
OF INCORPORATION)
39-0126090
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
5075 WESTHEIMER, SUITE 890
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 713-369-0550
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
[ ] Written Communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the exchange ct (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 9.01 - Financial Statements and Exhibits
(a) Financial Statements of business acquired.
(1) Financial Statements of Downhole Injection Services, LLC.:
Independent Auditors' Report F-1
Balance Sheets as of November 30, 2004 and the Year Ended
December 31, 2003 F-3
Statements of Income for the Eleven Months Ended November
30, 2004 and the Year Ended December 31, 2003 F-4
Statement of Stockholder's Equity for the Eleven Months Ended
November 30, 2004 and the Year Ended December 31, 2003 F-5
Statements of Cash Flows for the Eleven Months Ended November 30,
2004 and the Year Ended December 31, 2003 F-6
Notes to Financial Statements F-7
(b) Pro Forma Financial Information.
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the Nine Months Ended September 30, 2004 P-1
Unaudited Pro Forma Consolidated Condensed Statement of
Financial Position as of September 30, 2004 P-2
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the Year Ended December 31, 2003 P-3
Unaudited Pro Forma Consolidated Condensed Statement of
Financial Position as of December 31, 2003 P-4
Notes to Unaudited Pro Forma Consolidated Condensed
Financial Statements P-5
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.
ALLIS-CHALMERS CORPORATION
By: /s/ Victor M. Perez
-----------------------
Victor M. Perez
Chief Financial Officer
Date: February 25, 2005
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
TABLE OF CONTENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
BALANCE SHEETS F-2
STATEMENTS OF OPERATIONS AND MEMBERS' EQUITY F-3
STATEMENTS OF CASH FLOWS F-4
NOTES TO FINANCIAL STATEMENTS F-5
[JOHNSON, MILLER & CO. LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Members
Downhole Injection Services, LLC
(A Texas Limited Liability Company)
We have audited the accompanying balance sheets of Downhole Injection Services,
LLC (a Texas Limited Liability Company) as of November 30, 2004 and December 31,
2003 and the related statements of operations and members' equity, and cash
flows for the eleven months and year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Downhole Injection Services,
LLC at November 30, 2004 and December 31, 2003, and the results of its
operations and its cash flows for the eleven months and the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ JOHNSON, MILLER & CO.
-------------------------
Johnson, Miller & Co.
Midland, Texas
February 4, 2005
F-1
FINANCIAL STATEMENTS
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
BALANCE SHEETS
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
ASSETS
2004 2003
----------- -----------
CURRENT ASSETS
Cash and cash equivalents (note A12) $ 71,881 20,064
Accounts receivable, net of allowance of $10,000 and $10,000
Customers 1,242,346 466,435
Employees -- 2,447
Inventories (note A8) 295,040 189,287
Prepaid expenses 155,626 60,263
----------- -----------
Total current assets 1,764,893 738,496
PROPERTY AND EQUIPMENT, NET (notes A8, A9 and C) 719,322 682,564
OTHER ASSETS (notes A9, A10 and D) 4,617 55,400
----------- -----------
Total assets $2,488,832 1,476,460
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Current portion of notes payable (note E) $ 757,406 159,846
Current portion of capitalized lease obligations (note F) 45,735 67,367
Accounts payable 1,002,375 572,238
Accrued expenses 105,333 78,583
Sales tax payable 21,937 9,340
Interest payable 19,827 4,314
----------- -----------
Total current liabilities 1,952,613 891,688
DEFERRED REVENUE 197,400 197,400
NOTES PAYABLE, net of current portion (note E) 17,070 103,744
CAPITALIZED LEASE OBLIGATIONS, net of current portion (note F) 66,702 --
COMMITMENTS AND CONTINGENCIES (notes G and H)
MEMBERS' EQUITY 255,047 283,628
----------- -----------
Total liabilities and members' equity $2,488,832 1,476,460
=========== ===========
The accompanying summary of accounting policies and footnotes are an integral
part of these financial statements.
F-2
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
STATEMENTS OF OPERATIONS AND MEMBERS' EQUITY
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 2004
AND THE YEAR ENDED DECEMBER 31, 2003
2004 2003
------------ ------------
Sales $ 4,792,719 3,835,414
Cost of sales 3,875,646 3,050,921
------------ ------------
Gross profit 917,073 784,493
General and administrative expenses 871,927 792,603
------------ ------------
Income (loss) from operations 45,146 (8,110)
Other income (expense)
Interest income 22 403
Interest expense (73,749) (41,673)
Impairment loss on patent (note D) -- (983,278)
------------ ------------
(73,727) (1,024,548)
NET LOSS (28,581) (1,032,658)
Members' equity - beginning of period 283,628 1,316,286
------------ ------------
Members' equity - end of period $ 255,047 283,628
============ ============
The accompanying summary of accounting policies and footnotes are an integral
part of these financial statements.
F-3
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 2004
AND THE YEAR ENDED DECEMBER 31, 2003
2004 2003
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net loss $ (28,581) (1,032,658)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 326,034 283,765
Impairment loss on patent -- 983,278
Change in account balances
(Increase) decrease in accounts receivable - trade (775,911) 69,523
Decrease in accounts receivable - employees 2,447 2,722
Increase in inventories (105,753) (51,145)
(Increase) decrease in prepaid expenses (95,363) 46,792
Increase (decrease) in accounts payable 430,137 (73,388)
Increase (decrease) in accrued expenses 26,750 (39,028)
Increase (decrease) in sales tax payable 12,597 (5,268)
Increase in deferred revenue -- 135,000
Increase in interest payable 15,513 4,314
------------ ------------
Net cash (used in) provided by operating activities (192,130) 323,907
------------ ------------
Cash flows provided by (used in) investing activities
Purchase of property, plant and equipment (174,305) (137,267)
------------ ------------
Net cash used in investing activities (174,305) (137,267)
------------ ------------
Cash flows provided by (used in) financing activities
Issuance of notes payable 1,090,335 --
Repayments on notes payable (579,449) (171,830)
Repayments of capital lease obligations (92,634) (119,594)
------------ ------------
Net cash provided by (used in) financing activities 418,252 (291,424)
------------ ------------
Net increase (decrease) in cash and cash equivalents 51,817 (104,784)
Cash and cash equivalents
Beginning of period 20,064 124,848
------------ ------------
End of period $ 71,881 20,064
============ ============
Supplemental disclosure of cash flow information
Interest paid $ 58,236 37,359
============ ============
Non-cash investing and financing activities:
Acquisition of property and equipment through
capital lease financing $ 137,704 --
Acquisition of Ener-Coil, L.L.C. (see note B) -- --
The accompanying summary of accounting policies and footnotes are an integral
part of these financial statements.
F-4
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. FORMATION OF COMPANY
Downhole Injection Services, LLC (the "Company") is a Texas limited liability
company, which was formed February 1, 2004 by a business combination, which has
been accounted for as a purchase. The Company is owned 60% by the former members
of Ener-Coil, L.L.C. (a Texas limited liability company) and 40% by a
multinational integrated oil company and two individuals. All of the assets and
liabilities of Ener-Coil, L.L.C. and Downhole Injection Systems, LLC (an
Oklahoma limited liability company) were contributed to the Company in exchange
for the interest outlined above.
2. NATURE OF OPERATIONS
The Company is primarily engaged in the installation of coiled tubing for the
injection of chemical applications in existing oil and gas wells. These
operations are identical to those provided by the Company's predecessor. The
Company also will move existing customer tubing and repair, service, and store
customer tubing for future use. The Company's principal office is located in
Midland, Texas and services are offered from three branch offices located in
Texas.
3. PRODUCT, GEOGRAPHIC LOCATION AND CUSTOMER CONCENTRATIONS
Product and geographic statistics, as a percentage of revenues, are as follows:
2004
--------
Type of Services Rendered:
Installation of Tubing 60%
Removal and Repair of Customer
Owned Tubing 37%
Rental and Other 3%
Geographic Location of Services Rendered:
Texas 47%
Oklahoma 7%
Louisiana 16%
United Arab Emirates 3%
Other Locations 27%
4. SUPPLIER CONCENTRATION
The Company purchases substantially all of its tubing from two vendors. However,
the tubing is generally available from a variety of sources.
5. REVENUE RECOGNITION AND DEFERRED REVENUE
The Company recognizes revenue on jobs upon the completion of services
performed. Amounts which are invoiced prior to the completion of services are
treated as deferred revenue until the completion of services.
6. ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE
The Company maintains an allowance for losses on trade receivable at an amount
evaluated by management as sufficient to provide for future losses.
F-5
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
7. INVENTORY
Inventory is valued at the lower of cost or market using the average cost
method.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost for purchased assets.
Depreciation and amortization expense are computed using straight-line
depreciation methods over their estimated useful lives.
Maintenance and repairs are charged to expense as incurred. Costs and related
allowances for depreciation of property and equipment sold or otherwise retired
are eliminated from the accounts and the resulting gain or loss on dispositions
are reflected in income.
9. LONG-LIVED ASSETS
The Company periodically evaluates the recoverability of the carrying value of
its long-lived assets and identifiable intangibles and whenever events or
changes in circumstances indicate that the carrying amount of the asset
9. LONG-LIVED ASSETS (CONTINUED)
may not be recoverable. Examples of events or changes in circumstances that
indicate that the recoverability of the carrying amount of an asset should be
assessed include but are not limited to the following: a significant decrease in
the market value of an asset, a significant change in the extent or matter in
which an asset is used or a significant physical change in an asset, a
significant adverse change in legal factors or in the business climate that
could affect the value of an asset or an adverse action or assessment by a
regulator, an accumulation of costs significantly in excess of the amount
originally expected to acquire or construct an asset, and/or a current period
operating or cash flow loss combined with a history of operating or cash flow
losses or a projection or forecast that demonstrates continuing losses
associated with an asset used for the purpose of producing revenue.
10. INTANGIBLE ASSETS
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS No. 142
requires that goodwill and other intangible assets with indefinite lives no
longer be amortized. These intangible assets are tested for impairment at least
annually. If there is an impairment, the amount is expensed and the intangible
assets are written down accordingly.
Before implementation of SFAS No. 142, intangible assets were amortized by the
straight-line method over the estimated useful lives, ranging from 15 to 40
years.
11. INCOME TAXES
The Company is treated as a partnership for federal tax purposes. As such, the
federal income tax liability is borne by the members of the Company. No
provision for federal income tax liability is provided in these statements. A
provision has been made for the state income and franchise tax where applicable.
Taxable income will differ from net income under accounting principles generally
accepted in the United States of America due to differences in amortization,
depreciation, and disallowance of certain expenses for income tax purposes over
lives which generally are longer than the estimated useful lives used by the
Company for book purposes.
F-6
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
12. CASH FLOW AND NON-CASH INVESTING AND FINANCING TRANSACTIONS
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
13. ADVERTISING EXPENSES
Advertising costs are expensed as incurred. Advertising costs totaled $5,167 and
$23,658 for the eleven months ended November 30, 2004 and year ended December
31, 2003, respectively.
14. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
NOTE B - MERGER OF RELATED ENTITIES
Effective February 1, 2004, the Company acquired the assets and liabilities of
Ener-Coil, L.L.C., pre-merger owner of 43.5% of the Company.
NOTE B - MERGER OF RELATED ENTITIES (CONTINUED)
This merger has been accounted for under the purchase method of accounting. The
Company agreed to give the previous owners of Ener-Coil, L.L.C. an additional
16.5% of the Company for all of the assets and liabilities of Ener-Coil, L.L.C.
except for its original investment in the Company. The purchase price has been
allocated based on the estimated fair values of the 16.5% additional interest
acquired by the previous Ener-Coil members as follows:
Accounts receivable $ 360,327
Other current assets 39,305
Property, plant and equipment 154,679
Notes payable (533,929)
Accounts payable and accrued expenses (20,382)
--------------
$ --
==============
For purposes of financial reporting, the Company has accounted for the
acquisition as if it took place on January 1, 2004.
F-7
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
November December
30, 2004 31, 2003
------------ ------------
Computer Equipment $ 115,649 115,137
Machinery and Equipment 1,318,938 1,082,616
Vehicles 203,813 128,638
Furniture and Fixtures 50,451 50,451
------------ ------------
1,688,851 1,376,842
Less accumulated depreciation (969,529) (694,278)
------------ ------------
$ 719,322 682,564
============ ============
Depreciation expense totaled $275,251 for the eleven months ended November 30,
2004 and $228,365 for the year ended December 31, 2003.
NOTE D - AMORTIZABLE INTANGIBLES
The Company assumed a non-compete agreement for approximately $276,999.
Amortization has been calculated using the straight line method based on a life
of 5 years, the length of the non-compete period.
Total amortization expense was $50,783 and $55,400 for the eleven months ended
November 30, 2004 and year ended December 31, 2003.
On November 25, 2003, the Company lost a patent infringement lawsuit. As a
result, the Company recorded a patent impairment charge of approximately
$983,000.
NOTE E - NOTES PAYABLE
Notes payable are comprised of the following:
November
30, 2004
----------
Promissory note payable to Michael Weaver, 4 months of
$7,750, interest rate at 0%, unsecured $ 7,750
Revolving line of credit with Bank ofAmerica, with maximum
borrowings of $600,000, matures March 8, 2005,interest
rate variable, collateralized by substantially all of
the Company's assets 585,822
Promissory note payable to PAS, Inc. and W.T. Butler Enterprises,
58 months of $3,500 each, interest rate at 6%, unsecured 1,566
Promissory note payable Robert Patterson, former shareholder,
24 months of $2,436, interest rate at 0% collateralized by
certain specific assets of the Company 12,315
F-8
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
NOTE E - NOTES PAYABLE (CONTINUED)
Promissory note payable to Herb Sostek, 24 months of
$6,648, interest rate at 6%, unsecured 45,620
Promissory note payable to Local Bank of Oklahoma, 60 payments
of $2,219, interest rate at 6.75%, collaterialized by
certain specific assets of the Company 43,778
Prommisory note payable to Ford Motor Credit Corp, 36 payments
of $1,137, interest rate at 0% collateralized by
2003 Ford F350 14,783
Promissory note payable to Local Bank of Oklahoma, 60 Payments
of $2,147, interest rate at 6.75%, collateralized by
equipment $ 62,842
------------
774,476
Less - Current Portion (757,406)
------------
$ 17,070
============
December
31, 2003
-----------
Promissory note payable to PAS, Inc. and W.T. Butler Enterprises,
58 months of $3,500 each, interest rateat 6%, unsecured $ 76,208
Promissory note payable to Herb Sostek, 24 months of
$6,648, interest rate at 6%, unsecured 41,168
Promissory note payable to Local Bank of Oklahoma, 60 payments of
$2,219, interest rate at 6.75%, collateralized by certain
specific assets of the Company 62,931
Prommisory note payable to Ford Motor Credit Corp, 60 payments of
$798.94, interest rate at 9.25% collateralized by
1999 Ford F350 2,360
Promissory note payable to Local Bank of Oklahoma, 60 Payments
of $2,147, interest rate at 6.75%, collateralized by
certain specific assets of the Company 80,923
-----------
263,590
Less - Current Portion (159,846)
-----------
$ 103,744
===========
F-9
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
NOTE E - NOTES PAYABLE (CONTINUED)
For the succeeding five years, aggregate maturities applicable to long-term debt
outstanding at November 30, 2004 are as follows:
November 30,
2005 $ 757,406
2006 17,070
--------------
$ 774,476
==============
NOTE F - CAPITAL LEASES
The Company has acquired certain equipment through leasing arrangements, which
qualify as capital leases. The equipment acquired has been capitalized and is
subject to depreciation (see Note A). The present value of the lease obligations
have been recorded as liabilities and are summarized below at November 30, 2004:
Present Value
of Obligation
-------------
Capital lease payable to Outsource Lease, 60 monthly
payments of $3,710 commencing April 11, 2002, interest
rate at 10.67%, collateralized by tubing unit $ 21,259
Capital lease payable to Outsource Lease, 60 monthly payments
of $865 commencing April 29, 2002, interest rate at 10.67%,
collateralized by computer network 91,178
--------------
112,437
Less - Current Portion 45,735
--------------
$ 66,702
==============
Future minimum lease payments for these capital leases are as follows:
Year Total Payment
---- -------------
2005 $ 54,900
2006 54,900
2007 21,232
-------------
Total Future Minimum Lease Payments 131,032
Total Amount Representing Interest 18,595
-------------
Present Value of Lease Obligation $ 112,437
=============
The Company utilizes leased equipment in its daily operations which have been
capitalized. Capitalized costs of the equipment are $237,065 and $187,785 and
accumulated depreciation is $80,164 and $75,114 at November 30, 2004 and
December 31, 2003, respectively.
F-10
DOWNHOLE INJECTION SERVICES, LLC
(A TEXAS LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 2004 AND DECEMBER 31, 2003
NOTE G - OPERATING LEASES
The Company conducts certain parts of its operations from leased premises
pursuant to operating leases, which will expire during 2005.
Management expects that in the normal course of business, the lease will be
renewed or replaced by other leases.
Total rental expense was $174,869 for the eleven months ended November 30, 2004
and $143,774 for the year ended December 31, 2003.
For the succeeding five year period, future minimum lease commitments under
non-cancelable operating leases with terms in excess of one year are:
2005 $ 166,235
2006 132,245
2007 60,161
2008 30,000
2009 10,000
------------
$ 398,641
============
As of November 30, 2004, the Company has leased four trucks from Ford Motor
Credit under a cancelable master lease agreement. The lease may be canceled by
the Company by return of the trucks to the lessor along with a premium for early
termination as determined by formula. The term of the lease is for 48 months
from the date of delivery to the Company. Insurance, taxes, and operating
expenses are paid by the Company.
For 2004, rentals paid under this agreement totaled $50,458. As of December 31,
2004, the Company's monthly lease commitment under this agreement is $5,027.
The future annual minimum lease commitment, assuming no early termination, is
$60,323.
NOTE H - SUBSEQUENT EVENT
Effective December 1, 2004, the members of the Company entered into a buy sell
agreement with a third party. The members agreed to sell all of their equity
interest for $1,100,000 cash, 508,466 shares of the third party company's stock
and assumption of all of the Company's present and future obligations.
F-11
ALLIS-CHALMERS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Allis-Chalmers ("Company") completed an acquisition to acquire all the equity
interest of Downhole Injection Services, LLC (the "Acquisition Transaction").
The transaction is more fully described below.
DOWNHOLE INJECTION SERVICES LLC TRANSACTION. We purchased Downhole Injection
Services LLC ("DIS") from an investor group in Midland, Texas (65%) and Chevron
USA, Inc. (35%) for approximately $1,100,000 in cash, 508,466 shares of
registrants Common Stock and payment or assumption of approximately $950,000 of
DIS debt.
DIS is headquartered in Midland, Texas and provides solutions to downhole
chemical treating problems through the installation of small diameter, stainless
steel coiled tubing into producing oil and gas wells.
The accompanying unaudited pro forma consolidated condensed financial statements
illustrate the effects at the Acquisition Transaction on the Company's results
of operations and financial position. The unaudited pro forma consolidated
condensed statements of operations for the twelve months ended December 31, 2003
and the nine months ended September 30, 2004 are based on historical statements
of operations and assume that the Acquisition Transaction had occurred as of the
beginning of the period presented. The unaudited pro forma consolidated
condensed statement of financial position as of December 31, 2003 and the nine
months ended September 30, 2004 is based on the historical statement of
financial position of the Company and assumes that the Acquisition Transaction
had occurred as of the period presented.
Certain information normally included in the financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The unaudited pro forma consolidated condensed financial
statements should be read in conjunction with our audited financial statements
in our Form 10-K Annual Report including notes thereto for the year ended
December 31, 2003 and our Form 10-Q Quarterly Report including notes thereto for
the nine months ended September 30, 2004.
ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 2004
(In thousands, except per share data)
ALLIS-
CHALMERS DIAMOND
CONSOLIDATED DIAMOND PURCHASE
HISTORICAL HISTORICAL ADJUSTMENTS
------------ ---------- -------------
ASSETS
Cash and cash equivalents $ 12,992 $ 139 $ (139) (a)
(2,530) (b)
Trade Receivables 10,419 676 (224) (a)
Inventories, net -- 1,650 --
Lease receivable, net 180 -- --
Prepaids and other current assets 1,496 16 (16) (a)
------------ ---------- -------------
Total Current Assets 25,087 2,481 (2,909)
Net Property, plant and equipment 30,309 481 --
Goodwill 10,331 -- 814 (c)
Other intangibles, net 3,089 550 1,100 (c)
(163) (i)
Debt issuance costs, net 635
Lease receivable 590
Other assets 79 -- --
------------ ---------- -------------
Total Assets $ 73,120 $ 3,512 $ (1,158)
============ ========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 4,858 $ 370 $ (370) (d)
Trade accounts payable 2,566 447 --
Accrued employee benefits 481 -- --
Accrued interest 283 --
Accrued expenses 1,331 112 (112) (e)
Accounts payable, related parties 406 -- --
------------ ---------- -------------
Total Current Liabilities 9,925 929 (482)
Accrued postretirement benefit obligations 510 -- --
Long-term debt 25,241 327 (327) (d)
Other long-term liabilites 129 --
Redeemable Warrant 1,500
Preferred Stock 0 -- --
------------ ---------- -------------
37,305 1,256 (809)
Minority Interest 2,274 -- 524 (j)
-- -- --
Shareholders' equity
Common stock 130 1 (1) (f)
Capital in excess of par value 38,380 1,418 (1,418) (f)
4,600 (g)
-- -- (2,530) (h)
Accumulated earnings (deficit) (4,969) 837 (837) (f)
(163) (i)
(524) (j)
Total Shareholders' Equity 33,541 2,256 (873)
------------ ---------- -------------
Total Liabilities and Shareholders' Equity $ 73,120 $ 3,512 $ (1,158)
============ ========== =============
See notes to unaudited pro forma consolidated financial statements.
P-1a
continued on next page
continued from above
PRO FORMA
DOWNHOLE ALLIS-
DOWNHOLE PURCHASE CHALMERS
HISTORICAL ADJUSTMENTS CONSOLIDATED
------------ ----------- ------------
ASSETS
Cash and cash equivalents 72 (1,053) (l) $ 8,610
Trade Receivables (871) (m)
Inventories, net 1,242 12,113
Lease receivable, net 295 1,945
Prepaids and other current assets 180
156 1,652
----------- ----------- ------------
Total Current Assets 1,765 (1,924) 24,500
Net Property, plant and equipment 718 1,692 (n) 36,201
Goodwill - 11,145
Other intangibles, net 970 (o) 5,546
Debt issuance costs, net 635
Lease receivable 590
Other assets 5 84
----------- ----------- ------------
Total Assets 2,489 738 $ 78,701
=========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt 803 (803) (p) $ 4,858
Trade accounts payable 1,002 4,015
Accrued employee benefits 481
Accrued interest 283
Accrued expenses 148 - 1,479
Accounts payable, related parties - - 406
----------- ----------- ------------
Total Current Liabilities 1,953 (803) (p) 11,522
Accrued postretirement benefit obligations 510
Long-term debt 84 (68) 25,257
Other long-term liabilites 197 326
Redeemable Warrant 1,500
Preferred Stock - - 0
------------ ----------- ------------
2,234 (871) 39,115
Minority Interest 2,798
--
Shareholders' equity 5 (q) 135
Common stock 255 1,942 (q)
Capital in excess of par value (255) (f) 42,392
Accumulated earnings (deficit) (83) (j) (5,739)
Total Shareholders' Equity 255 1,692 36,788
------------ ----------- ------------
Total Liabilities and Shareholders' Equity 2,489 821 $ 78,701
============ =========== ============
See notes to unaudited pro forma consolidated financial statements.
P-1a
ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(In thousands, except per share data)
ALLIS-
CHALMERS DIAMOND
CONSOLIDATED DIAMOND PURCHASE
HISTORICAL HISTORICAL ADJUSTMENTS
----------- ----------- -----------
Sales $ 32,989 $ 5,584 $ --
Cost of Sales 23,893 3,565 --
----------- ----------- -----------
Gross Profit 9,096 2,018 --
Marketing and
Administrative Expense 5,381 664 163 (i) (i)
----------- ----------- -----------
Income (Loss) from Operations 3,715 1,354 (163)
Other Income
Interest Income -- -- --
Interest Expense (1,634) (59) 59 (k)
Minority Interest (315) -- (524) (j)
Other 224 (26) --
----------- ----------- -----------
Income (Loss) Before Taxes 1,990 1,269 (628)
Taxes (359) -- --
----------- ----------- -----------
Net Income/ (Loss) 1,631 1,269 (628)
Preferred Dividend (124) -- --
----------- ----------- -----------
Net income/ (loss) attributed to
common shares $ 1,507 $ 1,269 $ (628)
=========== =========== ===========
Pro forma net income (loss)
per common share
Basic $ 0.21
==========
Diluted $ 0.15
==========
Weighted average shares
outstanding
Basic 7,285
==========
Diluted 9,980
==========
See notes to unaudited pro forma consolidated financial statements.
P-2a
continued below
continued from above
PRO FORMA
DOWNHOLE ALLIS-
DOWNHOLE PURCHASE CHALMERS
HISTORICAL ADJUSTMENTS CONSOLIDATED
------------ ----------- ------------
Sales 4,793 $ 43,366
Cost of Sales 3,876 -- 31,632
------------ ----------- ------------
Gross Profit 917 11,733
Marketing and
Administrative Expense 872 83 (i) 7,163
------------ ----------- ------------
Income (Loss) from Operations 45 (83) 4,570
Other Income
Interest Income -- --
Interest Expense (74) 74 (k) (1,634)
Minority Interest -- -- (772)
Other -- -- 198
------------ ----------- ------------
Income (Loss) Before Taxes (29) (9) 2,362
Taxes (359)
------------ ----------- ------------
Net Income/ (Loss) (29) (9) 2,003
Preferred Dividend (124)
------------ ----------- ------------
Net income/ (loss) attributed to
common shares (29) $ (9) $ 1,879
============ =========== ============
Pro forma net income (loss)
per common share
Basic $ 0.26
============
Diluted $ 0.19
============
Weighted average shares
outstanding
Basic 7,285
============
Diluted 9,980
============
See notes to unaudited pro forma consolidated financial statements.
P-2b
ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2003
(In thousands, except per share data)
ALLIS-
CHALMERS DIAMOND
CONSOLIDATED DIAMOND PURCHASE
HISTORICAL HISTORICAL ADJUSTMENTS
----------- -------------- -------------
ASSETS
Cash and cash equivalents $ 1,299 $ 139 $ (139) (a)
(2,530) (b)
Trade Receivables 8,823 676 (224) (a)
Inventories, net -- 1,650 --
Lease receivable, net 180 -- --
Prepaids and other current assets 887 16 (16) (a)
----------- -------------- -------------
Total Current Assets 11,189 2,481 (2,909)
Net Property, plant and equipment 31,128 481 --
Goodwill 7,661 -- 814 (c)
Other intangibles, net 2,290 550 1,100 (c)
(163) (i)
Debt issuance costs, net 567
Lease receivable 787
Other assets 40 -- --
----------- -------------- -------------
Total Assets $ 53,662 $ 3,512 $ (1,158)
=========== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 3,992 $ 370 $ (370) (d)
Trade accounts payable 3,133 447 --
Accrued employee benefits 591 -- --
Accrued interest 152 --
Accrued expenses 1,761 112 (112) (e)
Accounts payable, related parties 787 -- --
----------- -------------- -------------
Total Current Liabilities 10,416 929 (482)
Accrued postretirement benefit obligations 545 -- --
Long-term debt 28,241 327 (327) (d)
Other long-term liabilities 270 --
Redeemable Warrant 1,500
Preferred Stock 4,171 -- --
----------- -------------- -------------
45,143 1,256 (809)
Minority Interest 2,523 -- 524 (j)
Shareholders' equity 39 1 (1) (f)
Common stock 9,793 1,418 (1,418) (f)
Capital in excess of par value 4,600 (g)
- -- (2,530) (h)
Accumulated earnings (deficit) (8,625) 837 (837) (f)
(163) (i)
(524) (j)
----------- -------------- -------------
Total Shareholders' Equity 1,207 2,256 (873)
----------- -------------- -------------
Total Liabilities and Shareholders' Equity $ 48,873 $ 3,512 $ (1,158)
=========== ============== ==============
See notes to unaudited pro forma consolidated financial statements.
P-3a
continued below
continued from above
PRO FORMA
DOWNHOLE ALLIS-
DOWNHOLE PURCHASE CHALMERS
HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ----------- -------------
ASSETS
Cash and cash equivalents 20 (1,053) (l) $ (2,595)
(331) (s)
Trade Receivables 469 9,744
Inventories, net 189 1,839
Lease receivable, net 180
Prepaids and other current assets 60 947
---------- ---------- -------------
Total Current Assets 738 (1,384) 10,115
Net Property, plant and equipment 683 1,663 (n) 33,955
Goodwill 8,475
Other intangibles, net 973 (o) 4,720
Debt issuance costs, net 567
Lease receivable 787
Other assets 55 95
---------- ---------- -------------
Total Assets 1,476 1,222 $ 58,714
========== ========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt 227 (227) (p) $ 3,992
Trade accounts payable 572 4,152
Accrued employee benefits 591
Accrued interest 4 156
Accrued expenses 88 1,849
Accounts payable, related parties -- -- 787
---------- ---------- -------------
Total Current Liabilities 891 (227) 11,527
Accrued postretirement benefit obligations 545
Long-term debt 104 (104) (p) 28,241
Other long-term liabilities 197 467
Redeemable Warrant 1,500
Preferred Stock -- -- 4,171
---------- ---------- -------------
1,192 (331) 46,451
Minority Interest 4,502
Shareholders' equity
Common stock 5 (q) 44
Capital in excess of par value 284 (284) (f)
1,942 (q)
14,760
Accumulated earnings (deficit) (110) (i) (7,043)
---------- ---------- -------------
Total Shareholders' Equity 284 1,553 7,761
---------- ---------- -------------
Total Liabilities and Shareholders' Equity $ 1,476 $ 1,222 $ 58,714
========== ========== =============
See notes to unaudited pro forma consolidated financial statements.
P-3b
ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003
(In thousands, except per share data)
ALLIS-
CHALMERS DIAMOND
CONSOLIDATED DIAMOND PURCHASE
(RESTATED) HISTORICAL ADJUSTMENTS
----------- ----------- -----------
Sales $ 32,724 $ 5,470 $ --
Cost of Sales 24,029 3,926 --
----------- ----------- -----------
Gross Profit 8,695 1,544 --
Marketing and
Administrative Expense 6,169 731 195 (i)
----------- ---------- ----------
Income (Loss) from
Operations 2,526 813 (195)
Other Income
Interest Income 3 -- --
Interest Expense (2,467) (71) 71 (k)
Minority Interest (387) -- (276) (j)
Settlement on lawsuit 1,034
Gain on sale of interest in AirComp 2,433
Impairment loss on patent
Other 111 (5) --
----------- ---------- -----------
Income (Loss) Before Taxes 3,297 737 (400)
Taxes (370) -- --
----------- ---------- ----------
Net Income/ (Loss) 548 737 (400)
Preferred Dividend (656) -- --
----------- ----------- -----------
Net income/ (loss) attributed to common shares $ (108) $ 737 $ (400)
============ ========== ==========
Pro forma net income (loss)
per common share
Basic $ (0.03)
============
Diluted $ (0.03)
============
Weighted average shares
outstanding
Basic 3,927
============
Diluted 3,927
============
See notes to unaudited pro forma consolidated financial statements.
P-4a
continued below
continued from above
PRO FORMA
DOWNHOLE ALLIS-
DOWNHOLE PURCHASE CHALMERS
HISTORICAL ADJUSTMENTS CONSOLIDATED
------------ ------------ -------------
Sales 3,835 -- $ 42,029
Cost of Sales 3,051 -- 31,006
------------ ------------ -------------
Gross Profit 784 -- 11,023
Marketing and
Administrative Expense 792 110 (i) 7,997
------------ ------------ -------------
Income (Loss) from
Operations (8) (110) 3,026
Other Income
Interest Income 3
Interest Expense (42) 42 (k) (2,467)
Minority Interest - - (619)
Settlement on lawsuit - - 1,034
Gain on sale of interest in AirComp - - 2,433
Impairment loss on patent (983) 983 (r) -
Other - - 106
------------ ------------ -------------
Income (Loss) Before Taxes (1,033) 915 3,516
Taxes (370)
------------ ------------ -------------
Net Income/ (Loss) (1,033) 915 3,416
Preferred Dividend -- -- (656)
------------ ------------ -------------
Net income/ (loss) attributed to common shares $ (1,033) $ 915 $ 2,490
============ ============ =============
Pro forma net income (loss)
per common share
Basic $ 0.63
============
Diluted $ 0.43
============
Weighted average shares
outstanding
Basic 3,927
============
Diluted 5,762
============
See notes to unaudited pro forma consolidated financial statements.
P-4b
ALLIS-CHALMERS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following pro forma adjustments have been made to the historical financial
statements of the Company:
a.) Elimination of assets not purchased at closing.
b.) Reduction of cash for the Company's 55% share of the $4,600,000
paid to the sellers of Diamond Air at closing.
c.) Recognition of goodwill and other intangible assets resulting from
the acquisition of Diamond Air.
d.) Elimination of debt not assumed at closing.
e.) Elimination of accrued liabilities not assumed at closing.
f.) Elimination of Diamond Air's and DIS's equity for consolidation
purposes.
g.) Recognition of equity contribution of the Company and M-I L.L.C.
h.) Elimination of the Company's equity contribution for consolidation
purposes.
i.) Increase in amortization due to the increase in other intangible
assets values of acquired company.
j.) To record minority interest in Diamond Air's income.
k.) Reduction in interest expense due to reduction in debt not assumed.
l.) Reduction of cash of $1,053,000 paid to the sellers of DIS.
m.) Reduction of cash of $871,000 paid to the note holders of DIS to
extinguish the debt as of September 30, 2004.
n.) Recognition of fair value of assets in connection with the
acquisition of DIS.
o.) Recognition of goodwill and other intangible assets in connection
with the acquisition of DIS.
p.) Recognition of the payment to retire the debt.
q.) Recognition of the issuance of 508,466 shares of common stock at
#3.853 per share.
r.) Elimination of impairment on loss on patent.
s.) Reduction of cash of $371,000 paid to note holders of DIS to
extinguish the debt at December 31, 2003.
P-5