SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A1
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
DREW INDUSTRIES INCORPORATED
(Exact name of registrant in charter)
AMENDMENT NO. 1
Delaware 0-13646 13-3250533
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
February 28, 1996 as set forth in the attached hereto:
o Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
a) Financial statements of business acquired
b) Pro forma financial information
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Drew Industries Incorporated
(Registrant)
/s/ Fredric M. Zinn
By Fredric M. Zinn
Chief Financial Officer
Date April 29, 1996
This report consists of 16 pages
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a) Financial Statements of business acquired
Shoals Supply, Inc.
A) Independent Auditors' Report;
B) Balance Sheets as of December 31, 1994 and 1995;
C) Statements of Income for the years ended December 31, 1994 and
1995;
D) Statements of Stockholder's Equity (Deficit) for the years
ended December 31, 1994 and 1995;
E) Statements of Cash Flows for the years ended December 31, 1994
and 1995; and
F) Notes to Financial Statements
SHOALS SUPPLY, INC.
(an S Corporation)
Financial Statements
December 31, 1994 and 1995
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Shoals Supply, Inc.:
We have audited the accompanying balance sheets of Shoals Supply, Inc. (an S
Corporation) as of December 31, 1994 and 1995, and the related statements of
income, stockholder's equity (deficit), 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 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 opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shoals Supply, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
March 1, 1996
SHOALS SUPPLY, INC.
(an S Corporation)
Balance Sheets
December 31, 1994 and 1995
Assets 1994 1995
------ ---- ----
Current assets:
Cash $ 803,461 175,911
Trade accounts receivable, net of allowance for
doubtful accounts of $10,000
in 1994 and 1995 (notes 5 and 6) 1,342,999 1,918,686
Inventories (notes 3 and 6) 6,770,940 7,835,699
Due from related parties (note 7) 350,000 --
Other current assets 130,277 98,615
----------- ----------
Total current assets 9,397,677 10,028,911
Machinery and equipment, net (notes 4 and 6) 876,829 1,213,851
Other assets 14,751 14,951
----------- ----------
Total assets $10,289,257 11,257,713
=========== ==========
Liabilities and Stockholder's Equity (Deficit)
----------------------------------------------
Current liabilities:
Notes payable to banks (note 6) $ 944,384 8,002,367
Accounts payable 2,082,656 3,066,285
Accrued liabilities 90,615 149,106
State income taxes payable 75,243 133,366
Due to related parties (note 7) 1,767,017 --
----------- ----------
Total current liabilities 4,959,915 11,351,124
Stockholder's equity (deficit):
Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding 1,000 1,000
Retained earnings (accumulated deficit) (notes 6 and 7) 5,328,342 (94,411)
----------- ----------
Total stockholder's equity (deficit) 5,329,342 (93,411)
Contingencies (note 8)
----------- ----------
Total liabilities and stockholder's equity (deficit) $10,289,257 11,257,713
=========== ==========
See accompanying notes to financial statements.
SHOALS SUPPLY, INC.
(an S Corporation)
Statements of Income
Years ended December 31, 1994 and 1995
1994 1995
---- ----
Net sales (notes 5 and 7) $47,448,344 55,742,537
Cost of sales (note 7) 41,997,819 49,253,007
----------- ----------
Gross profit 5,450,525 6,489,530
Selling, general and administrative expenses (note 7) 1,889,956 2,326,639
----------- ----------
Income from operations 3,560,569 4,162,891
Interest expense (note 6) 51,586 132,490
----------- ----------
Income before state income taxes 3,508,983 4,030,401
State income taxes 48,984 58,123
----------- ----------
Net income $ 3,459,999 3,972,278
=========== ==========
See accompanying notes to financial statements.
SHOALS SUPPLY, INC.
(an S Corporation)
Statements of Stockholder's Equity (Deficit)
Years ended December 31, 1994 and 1995
Common Stock Retained
----------------- Earnings
Number (Accumulated
of Shares Amount Deficit) Total
--------- ------ ------------ -----
Balance at December 31, 1993 1,000 $1,000 1,929,481 1,930,481
Net income -- 3,459,999 3,459,999
Distributions -- -- (61,138) (61,138)
----- ------ ---------- ----------
Balance at December 31, 1994 1,000 1,000 5,328,342 5,329,342
Net income -- 3,972,278 3,972,278
Distributions (notes 6 and 7) -- -- (9,395,031) (9,395,031)
----- ------ ---------- ----------
Balance at December 31, 1995 1,000 $1,000 (94,411) (93,411)
===== ====== ========== ==========
See accompanying notes to financial statements.
SHOALS SUPPLY, INC.
(an S Corporation)
Statements of Cash Flows
Years ended December 31, 1994 and 1995
1994 1995
---- ----
Cash flows from operating activities:
Net income $ 3,459,999 3,972,278
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 321,190 423,995
Changes in operating assets and liabilities:
Trade accounts receivable, net (485,761) (575,687)
Inventories (3,128,804) (1,064,759)
Due from/ to related parties, net 1,025,608 (2,730,113)
Other current assets (70,360) 31,662
Other assets -- (200)
Accounts payable 146,471 983,629
Accrued liabilities 40,274 58,491
State income taxes payable 48,984 58,123
----------- ----------
Net cash provided by operating activities 1,357,601 1,157,419
----------- ----------
Cash flows used in investing activities - purchases
of machinery and equipment (612,785) (761,017)
----------- ----------
Cash flows from financing activities:
Proceeds from notes payable 855,199 8,037,650
Payments on notes payable (1,418,493) (979,667)
Distributions (61,138) (8,081,935)
----------- ----------
Net cash used in financing activities (624,432) (1,023,952)
----------- ----------
Net increase (decrease) in cash 120,384 (627,550)
Cash at beginning of year 683,077 803,461
----------- ----------
Cash at end of year $ 803,461 175,911
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 49,171 142,165
=========== ==========
Non-cash distribution $ -- 1,313,096
=========== ==========
See accompanying notes to financial statements.
SHOALS SUPPLY, INC.
(an S Corporation)
Notes to Financial Statements
Years ended December 31, 1994 and 1995
(1) Summary of Significant Accounting Policies
(a) Nature of Business
Shoals Supply, Inc. (the Company) is engaged in manufacturing,
refurbishing and distributing new and used axles, tires, chassis
components and related products and services for the manufactured
housing industry. The Company is wholly owned by Mr. Lecil V.
Thomas (note 2).
(b) Inventories
Inventories are carried at the lower of cost or market value.
Cost is determined using the first-in, first-out (FIFO) method.
(c) Machinery and Equipment
Machinery and equipment is stated at cost. Depreciation is
calculated using accelerated methods over the estimated useful
lives of the assets ranging from three to seven years.
(d) Income Taxes
The Company has elected to be treated as an S corporation in
accordance with Federal income tax law. As such, generally no
federal income taxes are levied on the corporation, but rather on
the individual stockholder. Consequently, no provision or
liability for federal income taxes has been reflected in the
accompanying financial statements.
The Company provides for certain state taxes based on income in
the states of Texas and Tennessee which do not allow S
corporation status.
(e) Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management of
the Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reported periods. Because of the use of
estimates inherent in the financial reporting process, actual
results could differ from these estimates.
(Continued)
SHOALS SUPPLY, INC.
(an S Corporation)
Notes to Financial Statements
(2) Subsequent Sale of the Company
On February 15, 1996, the Company sold its assets and business to Drew
Industries Incorporated (Drew), a publicly traded company who, through
its wholly-owned subsidiary Kinro, Inc., is a manufacturer and marketer
of aluminum and vinyl windows for manufactured homes and aluminum
windows and doors for recreational vehicles.
The consideration for the sale was 544,959 shares of common stock of
Drew having a value of approximately $7,500,000 at February 15, 1996,
cash at closing of $1,225,000 and a note with a present value of
approximately $716,000 payable over five years. Drew assumed $7,500,000
of the Company's notes payable to banks (note 6) and certain operating
liabilities. In addition, as a result of the sale of the Company, Drew
assumed a liability to pay bonuses to key Company employees totaling
$2,000,000, payable over a three-year period commencing in November,
1996. No related party balances were acquired or assumed by Drew.
On February 15, 1996, the Company entered into an agreement to lease all
of the property and plant facilities from Mr. Lecil V. Thomas for a
five-year period through February 15, 2001. Under the terms of the
lease, Drew will pay lease rentals of $252,000 per year, payable in
equal monthly payments. Upon expiration of the initial term, Drew may
renew the lease for an additional five-year period at mutually
acceptable rentals.
(3) Inventories
Inventories consist of the following at December 31, 1994 and 1995:
1994 1995
---- ----
Raw materials $4,069,412 3,298,591
Work in process 10,827 11,083
Finished goods 2,690,701 4,526,025
---------- ----------
$6,770,940 7,835,699
========== ==========
(4) Machinery and Equipment
Machinery and equipment consist of the following at December 31, 1994
and 1995:
1994 1995
---- ----
Office equipment $ 34,112 44,158
Machinery and equipment 1,391,925 1,520,809
Transportation equipment 787,996 1,340,423
---------- ---------
2,214,033 2,905,390
Less accumulated depreciation 1,337,204 1,691,539
---------- ---------
$ 876,829 1,213,851
========== =========
(Continued)
SHOALS SUPPLY, INC.
(an S Corporation)
Notes to Financial Statements
(5) Business and Credit Concentrations
The majority of the Company's customers are engaged in the manufactured
home industry and are located predominantly in the southeastern United
States.
The Company has five customers which comprise approximately 87% and 83%
of sales in the years ended December 31, 1994 and 1995, respectively.
Related trade accounts receivable from these customers was approximately
$1,150,000 and $1,740,000 at December 31, 1994 and 1995, respectively.
(6) Notes Payable
On December 1, 1995 the Company entered into a $5,000,050 revolving note
and a $2,500,050 installment note with a bank. The proceeds of the notes
were used, in part, to payoff the remaining balances of the Company's
existing note agreements with another bank. Both notes are secured by
certain machinery and equipment, inventories and receivables of the
Company and are guaranteed by the stockholder. The revolving note is due
on December 1, 1996 with interest due monthly at a fixed rate of 6.4%
per annum. The installment note requires monthly payments of principal
and interest (fixed at 6.4% per annum) of $48,911 with a final balloon
payment of $2,111,823 due on December 1, 1996.
In addition to the above, on December 29, 1995 the Company entered into
a $537,550 note with a bank. The note is secured by certain machinery
and equipment, inventories and receivables of the Company. Interest is
due monthly at a fixed rate of 7.5% per annum and the principal balance
is due February 29, 1996.
Based on the borrowing rates currently available to the Company for
notes payable with similar terms and maturities, the fair value of notes
payable as of December 31, 1995 approximates their carrying amounts.
Amounts approximating $7,500,000 from these notes were paid to the
Company's stockholder and held in an account at the funding bank (note
2).
(7) Related Party Transactions
The Company leases primarily all of the property and plant facilities
from the stockholder. The leases are informal month-to-month agreements
with the stockholder. Lease payments to the stockholder amounted to
approximately $218,000 and $227,000 for the years ended December 31,
1994 and 1995, respectively.
The Company has sales to entities which share common ownership with the
Company. Sales to these entities totaled approximately $1,340,000 and
$2,720,000 for the years ended December 31, 1994 and 1995, respectively.
(Continued)
SHOALS SUPPLY, INC.
(an S Corporation)
Notes to Financial Statements
(7) Related Party Transactions, Continued
The Company paid certain general and administrative expenses for an
entity which shares common ownership with the Company. These payments,
which are excluded from the accompanying statements of income, totaled
approximately $450,000 and $550,000 for the years ended December 31,
1994 and 1995, respectively.
Entities which share common ownership with the Company paid certain
expenses for the Company. These expenses, which are included in cost of
sales and general and administrative expenses, totaled approximately
$510,000 and $610,000 for the years ended December 31, 1994 and 1995,
respectively.
As of December 31, 1994, the Company had a net payable to the
stockholder of approximately $950,000, which was subsequently paid in
1995.
As of December 31, 1995, the Company had a net receivable from related
parties of approximately $1,313,000. It was the intention of the
Company's stockholder not to collect this net amount from the related
parties. As a result, the net receivable was treated as a distribution
to the stockholder at December 31, 1995
(8) Contingencies
The Company leases all of the real property from the stockholder who is
responsible for environmental remediation costs, if any. The Company
cannot estimate the remediation costs, if any, associated with these
sites. The Company does not expect that such costs, if any, would have a
materially adverse effect on the results of operations or the financial
position of the Company. In addition, the Company's stockholder has
indemnified Drew against remediation costs, if any, arising from this
environmental matter.
b) Pro forma financial information
The unaudited pro forma financial information gives effect to the
acquisition of the assets and business of Shoals Supply, Inc. by Drew
Industries Incorporated. The acquisition is being accounted for as a
purchase.
The unaudited pro forma financial information has been prepared on
the following basis:
o The unaudited pro forma combined statement of income assumes that
the acquisition was completed as of the beginning of the period
presented.
o The unaudited pro forma combined balance sheet assumes that the
acquisition was completed as of the balance sheet date.
PRO FORMA COMBINED STATEMENT OF INCOME
Year Ended December 31, 1995
(Unaudited)
(In thousands, except per share amounts)
Drew
Industries Shoals Pro Forma Pro Forma
Incorporated Supply, Inc Adjustments Combined
------------ ----------- ----------- ---------
Net sales $100,084 $55,743 $155,827
Cost of sales 72,602 49,253 121,855
-------- ------- --------
Gross profit 27,482 6,490 33,972
Selling, general and administrative
expenses 14,691 2,327 $ 601 (1,2,3) 17,619
-------- ------- ------- --------
Operating profit 12,791 4,163 (601) 16,353
Interest income (expense), net 134 (133) (757) (4) (756)
-------- ------- ------- --------
Income before income taxes 12,925 4,030 (1,358) 15,597
Provision for income taxes 5,103 58 1,011 (5) 6,172
-------- ------- ------- --------
Net income $ 7,822 $ 3,972 $(2,369) $ 9,425
======== ======= ======= ========
Net income per common share $ 1.58 $ 1.72
======== ========
Weighted average common shares
outstanding 4,947 5,492
======== ========
PRO FORMA COMBINED BALANCE SHEET
December 31, 1995
(Unaudited)
(In thousands, except share and per share amounts)
Drew
Industries Shoals Pro Forma Pro Forma
Incorporated Supply, Inc. Adjustments Combined
------------ ------------ ----------- ---------
ASSETS
Current assets
Cash and short term investments $ 4,028 $ 176 $(3,225) (6,7) $ 979
Accounts receivable, trade, net 4,165 1,919 6,084
Inventories 11,024 7,836 18,860
Prepaid expenses and other current assets 1,521 98 1,619
------- ------- ------- -------
Total current assets 20,738 10,029 $(3,225) 27,542
Fixed assets, net 5,594 1,214 6,808
Goodwill, net 319 12,047 (6) 12,366
Other assets 1,580 15 (500) (6) 1,095
------- ------- ------- -------
Total assets $28,231 $11,258 $ 8,322 $47,811
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable, including current maturities
of long-term indebtedness and
obligations under capital leases $ 128 $ 8,003 $(7,873) (6,7) 258
Accounts payable, trade 3,511 3,066 6,577
Accrued liabilities and other current
liabilities 8,279 282 675 (6,8) 9,236
------- ------- ------- -------
Total current liabilities 11,918 11,351 $(7,198) 16,071
Long-term indebtedness 6,588 (6,7) 6,588
Other long-term liabilities 311 1,339 (8) 1,650
------- ------- ------- -------
Total liabilities 12,229 11,351 729 24,309
------- ------- ------- -------
Stockholders' equity
Common stock, par value $.01 per share(a) 50 5 (6) 55
Common stock, par value $1.00 per share 1 (1) (6) 0
Paid in capital 9,103 7,495 (6) 16,598
Retained earnings (deficit) 7,197 (94) 94 (6) 7,197
------- ------- ------- -------
16,350 (93) 7,593 23,850
Treasury stock, at cost - 39,875 shares (348) (348)
------- ------- ------- -------
Total stockholders' equity 16,002 (93) 7,593 23,502
------- ------- ------- -------
Total liabilities and stockholders'
equity $28,231 $11,258 $ 8,322 $47,811
======= ======= ======= =======
a) Drew Industries Incorporated ("Drew") common stock; authorized 20,000,000
shares, issued 4,999,644 shares prior to the acquisition; 544,959 shares
issued in connection with the acquisition.
Pro Forma Adjustments:
1) To record amortization ($401,000), over thirty years, of goodwill.
2) To record the annual payment ($25,000) of the consulting contract between
Drew and the former owner of Shoals Supply, Inc. ("Shoals").
3) To record the excess of the fair compensation of the general manager of
Shoals over the compensation paid to the former owner of Shoals in that
capacity ($175,000).
4) Interest on debt incurred in connection with the acquisition, in excess of
the interest incurred by Shoals, as well as imputed interest on non-interest
bearing long-term obligations of Shoals.
5) To adjust the provision for income taxes to the pro forma calculation of the
provision for income taxes.
6) To (i) adjust the assets and liabilities of Shoals to their fair value at the
date of acquisition, (ii) record goodwill representing the excess of the cost
of the assets and business of Shoals over the fair value of the net tangible
assets acquired, (iii) eliminate the stockholder's equity (deficit) of Shoals
and, (iv) record the acquisition cost, including the issuance of 544,959
shares of Drew common stock with a value of $7.5 million, the payment of
$1,225,000, the issuance of a note to Shoals with a present value of
$715,000, and closing costs of $775,000.
7) To record the repayment, by Drew, of assumed bank debt of Shoals.
8) To record the present value of a liability for deferred employee bonuses
granted by Shoals prior to closing, and assumed by Drew. Of such liability,
$400,000 is current and $1,339,000 is long-term.