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8-K/A - 8-K/A - Dynacast International Inc.d835274d8ka.htm
EX-99.3 - EX-99.3 - Dynacast International Inc.d835274dex993.htm
EX-99.1 - EX-99.1 - Dynacast International Inc.d835274dex991.htm

Exhibit 99.2

Kinetics Climax, Inc.

Financial Statements

As of June 30, 2014 and December 31, 2013, and

For the Three and Six Months Ended June 30, 2014 and 2013


Kinetics Climax, Inc.

Balance Sheets (Unaudited)

June 30, 2014 and December 31, 2013

(Dollars in thousands, except par value)

 

 

     June 30,
2014
     December 31,
2013
 

ASSETS

     

Current assets:

     

Accounts receivable

   $ 5,230       $ 5,148   

Inventories

     4,538         4,360   

Prepaid expenses

     1,155         1,208   

Deferred income taxes

     368         367   
  

 

 

    

 

 

 

Total current assets

     11,291         11,083   

Property, plant and equipment, net

     1,818         2,009   

Intangible assets, net

     1,168         1,283   
  

 

 

    

 

 

 

Total assets

   $ 14,277       $ 14,375   
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Accounts payable

   $ 478       $ 1,037   

Accrued liabilities

     1,589         1,378   

Accrued income taxes

     4,547         2,735   
  

 

 

    

 

 

 

Total current liabilities

     6,614         5,150   

Deferred tax liabilities

     125         41   
  

 

 

    

 

 

 

Total liabilities

     6,739         5,191   

Stockholder’s equity:

     

Common stock, $0.0001 par value, 100 shares authorized, issued and outstanding

     —           —     

Capital in excess of par value

     7,538         9,184   

Retained earnings (accumulated deficit)

     —           —     
  

 

 

    

 

 

 

Total stockholder’s equity

     7,538         9,184   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 14,277       $ 14,375   
  

 

 

    

 

 

 

The accompanying notes are an integral part of these financial statements.

 

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Kinetics Climax, Inc.

Statements of Income (Unaudited)

For the Three and Six Months Ended June 30, 2014 and 2013

(Dollars in thousands)

 

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2014      2013      2014      2013  

Revenues

   $ 8,945       $ 9,544       $ 19,788       $ 15,517   

Cost of sales

     6,412         5,565         12,751         11,615   

Selling, general and administrative expenses

     675         616         1,404         1,065   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating costs and expenses

     7,087         6,181         14,155         12,680   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     1,858         3,363         5,633         2,837   

Provision for income taxes:

           

Federal

     558         1,010         1,692         852   

State

     67         122         203         103   
  

 

 

    

 

 

    

 

 

    

 

 

 
     625         1,132         1,895         955   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 1,233       $ 2,231       $ 3,738       $ 1,882   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of these financial statements.

 

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Kinetics Climax, Inc.

Statements of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2014 and 2013

(Dollars in thousands)

 

 

     Six Months Ended
June 30,
 
     2014     2013  

Cash flows from operating activities:

    

Net income

   $ 3,738      $ 1,882   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     343        663   

Deferred income taxes

     83        42   

Changes in current assets and liabilities:

    

Accounts receivable

     (82     (2,585

Inventories

     (178     227   

Prepaid expenses

     53        101   

Accounts payable

     (559     255   

Accrued liabilities

     211        157   

Accrued income taxes

     1,812        913   
  

 

 

   

 

 

 

Net cash provided by operating activities

     5,421        1,655   
  

 

 

   

 

 

 

Cash flows from Investing activities:

    

Capital expenditures

     (37     (220
  

 

 

   

 

 

 

Net cash used in investing activities

     (37     (220
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Distributions to shareholder

     (5,384     (1,435
  

 

 

   

 

 

 

Net cash used in financing activities

     (5,384     (1,435
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     —          —     

Cash and cash equivalents at beginning of period

     —          —     
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ —        $ —     
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements.

 

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Kinetics Climax, Inc.

Statements of Changes in Stockholder’s Equity (Unaudited)

For the Six Months Ended June 30, 2014 and 2013

(Dollars in thousands, except share amounts)

 

 

     Common Stock      Capital in
Excess of
Par Value
    Retained
Earnings
(Accumulated
Deficit)
    Total
Equity
 
   Number
of Shares
     At Par
Value
        

Balance at December 31, 2013

     100       $ —         $ 9,184      $ —        $ 9,184   

Distributions to shareholder

     —           —           (1,646     (3,738     (5,384

Net income

     —           —           —          3,738        3,738   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

     100       $ —         $ 7,538      $ —        $ 7,538   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

     100       $ —         $ 11,962      $ (470   $ 11,492   

Distributions to shareholder

     —           —           (23     (1,412     (1,435

Net income

     —           —           —          1,882        1,882   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

     100       $ —         $ 11,939      $ —        $ 11,939   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements.

 

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Kinetics Climax, Inc.

Notes to Financial Statements

 

 

1. General

Kinetics Climax, Inc. (the Company) engages in the production of customized metal components through the application of a specialized production technique called metal injection molding (MIM). Similar to plastic injection molding, MIM is a “net-shape” process that uses fine metal powder and the application of debinding and high temperature sintering technologies to produce solid metal parts. These parts are often used by original equipment manufacturers in the production of finished goods across various industries. The Company’s operations are performed at its MIM manufacturing facility in Wilsonville, Oregon, where its principal corporate offices are located.

The Company is a wholly owned subsidiary of Climax Engineered Materials, LLC, which is a wholly owned subsidiary of Freeport-McMoRan Inc. (FCX), a publicly traded United States (U.S.) corporation.

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. and should be read in conjunction with the Company’s financial statements and notes for the year ended December 31, 2013. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These financial statements reflect the Company’s balance sheet as of June 30, 2014, and December 31, 2013, and the related statements of income for the three- and six-month periods ended June 30, 2014 and 2013, and the statements of cash flows and changes in stockholder’s equity for the six-month periods ended June 30, 2014 and 2013. There are no amounts of other comprehensive income.

The Company has no cash accounts, and its cash activities are managed by FCX. Financing needs not met through operations are obtained from FCX.

Allocations

These financial statements include certain allocations of corporate charges from FCX, and are intended to reflect the Company’s financial position, results of operations and cash flows had it been a stand-alone entity during the periods presented. FCX allocations for the first six months of 2014 and 2013, include charges in connection with (i) information systems technology ($303 thousand for the first six months of 2014 and $315 thousand for the first six months of 2013), (ii) insurance ($701 thousand for the first six months of 2014 and $672 thousand for the first six months of 2013) and (iii) certain administrative services, primarily accounts payable, purchasing and employee benefits ($104 thousand for the first six months of 2014 and $51 thousand for the first six months of 2013). All allocations and estimates in the financial statements are based on assumptions that the Company believes are reasonable. However, these allocations and estimates may not be indicative of the costs that would have resulted if the Company had been operating on a stand-alone basis.

 

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Kinetics Climax, Inc.

Notes to Financial Statements

 

 

2. Inventories

The components of inventories follow (in thousands):

 

     June 30,
2014
     December 31,
2013
 

Raw materials

   $ 2,477       $ 1,885   

Work in process

     1,240         1,554   

Finished goods

     821         921   
  

 

 

    

 

 

 
   $ 4,538       $ 4,360   
  

 

 

    

 

 

 

Raw materials inventories may include small amounts of overhead costs necessary to combine or prepare certain raw materials for future projects.

 

3. Accounts Payable and Accrued Liabilities

The components of accounts payable and accrued liabilities follow (in thousands):

 

     June 30,
2014
     December 31,
2013
 

Accounts Payable

     

Trade payables

   $ 435       $ 969   

Utilities payable

     42         51   

Other

     1         17   
  

 

 

    

 

 

 
   $ 478       $ 1,037   
  

 

 

    

 

 

 

Accrued Liabilities

     

Deferred revenue

   $ 968       $ 1,012   

Salaries, wages and benefits

     299         351   

Other

     322         15   
  

 

 

    

 

 

 
   $ 1,589       $ 1,378   
  

 

 

    

 

 

 

 

4. Income Taxes

The Company is a member of a group that files consolidated U.S. federal and state income tax returns. Income taxes presented in these financial statements have been calculated as if the Company filed separate U.S. federal and state income tax returns.

The Company’s effective income tax rate was 34 percent for the first six months of 2014 and 2013.

 

5. Fair Value Measurement

Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

 

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Kinetics Climax, Inc.

Notes to Financial Statements

 

 

5. Fair Value Measurement (Continued)

 

The carrying values for the Company’s financial instruments (accounts receivable, accounts payable and accrued liabilities) approximate fair value because of their short-term nature and generally negligible credit losses.

 

6. Related Party Transactions

In addition to the allocations discussed in Note 1, distributions to the FCX parent company of $5.4 million were made for the first six months of 2014 and $1.4 million for the first six months of 2013.

 

7. Subsequent Events

On August 27, 2014, Climax Engineered Materials, LLC entered into a stock purchase agreement to sell the Company to Dynacast LLC. The transaction is expected to close in September 2014.

The Company evaluated events after June 30, 2014, and through September 26, 2014, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

 

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