Attached files
Exhibit 99.3
T & W FORGE, INC.
UNAUDITED CONDENSED BALANCE SHEET
October 31, 2010
| ASSETS | 2010 | |||
| (Unaudited) | ||||
| Current assets: |
||||
| Cash |
$ | 1,535,072 | ||
| Accounts receivables, trade (net of allowance for doubtful accounts of approximately $19,000) |
1,258,510 | |||
| Notes receivable, related parties |
1,200,000 | |||
| Inventories |
2,094,854 | |||
| Prepaid expenses and other assets |
48,542 | |||
| Total current assets |
6,136,978 | |||
| Property and equipment, net |
797,046 | |||
| Deposits |
328,393 | |||
| $ | 7,262,417 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||
| Current liabilities: |
||||
| Current maturities of long-term debt |
$ | 300,000 | ||
| Note payable, related party |
— | |||
| Accounts payable |
639,721 | |||
| Accounts payable, related party |
(3,828 | ) | ||
| Accrued payroll and payroll taxes |
79,037 | |||
| Accrued expenses |
447,977 | |||
| Accrued expenses, related party |
3,541 | |||
| Current portion of accrued postretirement benefit obligation |
7,319 | |||
| Total current liabilities |
1,473,767 | |||
| Long-term debt, net of current maturities |
350,000 | |||
| Accrued postretirement benefit obligation, net of current portion |
67,138 | |||
| Total liabilities |
1,890,905 | |||
| Shareholders’ equity |
5,371,512 | |||
| $ | 7,262,417 | |||
The accompanying notes are an integral part of these financial statements.
T & W FORGE, INC.
UNAUDITED CONDENSED STATEMENT OF OPERATION
for the year ended October 31, 2010
| 2010 | ||||
| (Unaudited) | ||||
| Net sales |
$ | 16,349,030 | ||
| Cost of goods sold |
11,755,675 | |||
| Gross profit |
4,593,355 | |||
| Selling and administrative expenses |
929,107 | |||
| Income from operations |
3,664,248 | |||
| Interest expense |
(29,117 | ) | ||
| Interest income |
70,667 | |||
| Management fees |
(249,772 | ) | ||
| Gain on sale of assets |
5,000 | |||
| Miscellaneous income |
3,129 | |||
| Total other income (expense), net |
(200,093 | ) | ||
| Net income |
$ | 3,464,155 | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
T & W FORGE, INC.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
for the year ended October 31, 2010
| * Common Stock | Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
| Balances, October 31, 2009 |
100 | $ | 100,000 | $ | 146,444 | $ | 5,679,351 | $ | (46,321 | ) | $ | 5,879,474 | ||||||||||||
| Comprehensive income: |
||||||||||||||||||||||||
| Net income |
— | — | — | 3,464,155 | — | 3,464,155 | ||||||||||||||||||
| Actuarial postretirement gain |
— | — | — | — | 25,883 | 25,883 | ||||||||||||||||||
| Amortization of postretirement liability from earlier periods |
— | — | — | — | 2,000 | 2,000 | ||||||||||||||||||
| Total comprehensive income |
— | — | — | 3,464,155 | 27,883 | 3,492,038 | ||||||||||||||||||
| Distributions to shareholders |
— | — | — | (4,000,000 | ) | — | (4,000,000 | ) | ||||||||||||||||
| Balances, October 31, 2010 |
100 | $ | 100,000 | $ | 146,444 | $ | 5,143,506 | $ | (18,438 | ) | $ | 5,371,512 | ||||||||||||
| * | T&W Forge, Inc. common stock, $100 stated value, 850 shares authorized. |
The accompanying notes are an integral part of these unaudited condensed financial statements.
T & W FORGE, INC.
UNAUDITED CONDENSED STATEMENT OF CASHFLOWS
for the year ended October 31, 2010
| 2010 | ||||
| (Unaudited) | ||||
| Cash flows from operating activities: |
||||
| Net income |
$ | 3,464,155 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||
| Depreciation and amortization |
247,144 | |||
| Changes in operating assets and liabilities: |
||||
| Accounts receivable, trade |
212,528 | |||
| Inventories |
220,685 | |||
| Prepaid expenses and other assets |
113,913 | |||
| Deposits |
(205,625 | ) | ||
| Accounts payable |
141,950 | |||
| Accrued payroll and payroll taxes |
(132,981 | ) | ||
| Accrued expenses |
(81,570 | ) | ||
| Other |
(17,570 | ) | ||
| Net cash provided by operating activities |
3,962,629 | |||
| Cash flows from investing activities: |
||||
| Advances on notes receivable, related parties |
(1,200,000 | ) | ||
| Collection of notes receivable, related parties |
2,900,000 | |||
| Capital expenditures |
(171,603 | ) | ||
| Net cash provided by investing activities |
1,528,397 | |||
| Cash flows from financing activities: |
||||
| Repayment of long-term debt |
(300,000 | ) | ||
| Distributions to shareholders |
(4,000,000 | ) | ||
| Net cash used for financing activities |
(4,300,000 | ) | ||
| Increase in cash and cash equivalents |
1,191,026 | |||
| Cash and cash equivalents at the beginning of the period |
344,046 | |||
| Cash and cash equivalents at the end of the period |
$ | 1,535,072 | ||
| Supplemental disclosure of cash flow information: |
||||
| Actuarial postretirement gain and amortization of postretirement liability from earlier periods |
$ | 27,883 | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
T & W FORGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
for the year ended October 31, 2010
| 1. | Summary of Significant Accounting Policies |
New Accounting Pronouncements
In January 2010, the FASB issued ASU No. 2010-06 to improve disclosures about fair value measurements, which amends the Accounting Standard Codification (“ASC”) related to fair value measurements and disclosures. This amendment to the ASC will add new requirements for disclosures about transfers into and out of fair value hierarchy Levels 1, 2 and 3 and separate disclosures about purchases, sales, issuances and settlements relating to fair value hierarchy Level 3 measurements. The ASU also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. Further, the ASU amends guidance on employers’ disclosure requirements for plan assets for defined benefit pensions and other postretirement benefit plans. Under the new guidance it is required that disclosures be provided by classes of assets instead of by major categories of assets. This ASU is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide fair value hierarchy Level 3 activity of purchases, sales, issuances and settlements on a gross basis, which will be effective for fiscal years beginning on or after December 15, 2010, and for interim periods within those fiscal years.
In February 2010, the Financial Accounting Standards Board (“FASB”), issued an Accounting Standard Update (“ASU”) No. 2010-09, which addresses certain implementation issues related to an entity’s requirement to perform and disclose subsequent events procedures. The ASU (i) exempts entities that file their financial statements with the SEC from disclosing the date through which subsequent events procedures have been performed and (ii) clarifies the circumstances in which an entity’s financial statements would be considered restated and the entity would therefore be required to update its subsequent events evaluation. The guidance provided by the FASB became effective immediately upon issuance.
The FASB issued a technical amendment to employers’ disclosure requirement for plan assets for defined benefit pensions and other postretirement benefit plans, which is integrated into ASC 715-20-50, Compensation – Retirement Benefits – Defined Benefit Pension Plans – General Disclosure. The objective is to provide users of financial statements with an understanding of (i) how investment allocation decisions are made, (ii) major categories of plan assets held by the plans, (iii) how fair value of plan assets are measured, (iv) the effect of fair value measurements on changes in plan assets during a period and (v) significant concentrations of risk within plan assets.
| 2. | Inventories: |
Inventories consist of the following:
| 2010 | ||||
| Raw materials |
$ | 1,304,516 | ||
| Work-in-process |
661,803 | |||
| Finished goods |
453,860 | |||
| 2,420,179 | ||||
| Less LIFO reserve |
(325,325 | ) | ||
| $ | 2,094,854 | |||
T & W FORGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, Continued
for the year ended October 31, 2010
| 3. | Financing Arrangements: |
The Company is not aware of any non-compliance with its debt covenants as of October 31, 2010.
| 4. | Related Party Transactions: |
The Company leases its office and plant facilities from a related party under an operating lease which is renewed annually. Under the terms of this lease agreement, the Company makes monthly rent payments of $35,000 and is responsible for all taxes and assessments on the property, insurance, utilities and repairs and maintenance. Rent expense under this lease totaled $420,000 for 2010.
| 5. | Employee Benefit Plan: |
The Company maintains postretirement benefits for all hourly employees who retire between the ages of 63 and 65. The following table presents the components of net periodic pension benefit costs for the Company’s postretirement plan:
| 2010 | ||||
| Service cost |
$ | 5,618 | ||
| Interest cost |
5,453 | |||
| Amortization of net (gain) loss |
2,000 | |||
| $ | 13,071 | |||
| 6. | Collective Bargaining Agreement: |
All hourly production employees are covered by a collective bargaining agreement that expired in 2009. Management reached a new agreement during 2010.