SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 14, 1995
Date of Report (Date of earliest event reported)
DISCUS ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-13826 41-1456350
(State or other jurisdiction (Commission File No.) (IRS Employer ID No.)
of incorporation)
2430 Metropolitan Centre, 333 South Seventh Street
Minneapolis, Minnesota 55402
(Address of principal executive offices)
(612) 305-0339
(Registrant's telephone number, including area code)
The undersigned registrant hereby amends the following items, financial
statements, pro forma financial information and exhibits, if any, or other
portions of its Form 8-K Report dated December 14, 1995, filed December 29,
1995, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Financial statements required to be filed pursuant to
Item 7 of Form 8-K filed December 29, 1995, for
Peerless Chain Company (a wholly owned subsidiary of
Bridgewater Resources Corp.).
(b) Pro Forma Financial Information.
Pro forma financial information required to be filed
pursuant to Item 7 of Form 8-K filed December 29,
1995, for Discus Acquisition Corporation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired:
PEERLESS CHAIN COMPANY (A WHOLLY OWNED SUBSIDIARY OF
BRIDGEWATER RESOURCES CORP.)
Page
Report of Independent Accountants F-1 to F-2
Balance Sheets as of December 31, 1994 and 1993 F-3
Statement of Operations and Retained Earnings for the year
ended December 31, 1994 and for the nine-month period ended
December 31, 1993 F-4
Statement of Cash Flows for the year ended December 31, 1994
and for the nine-month period ended December 31, 1993 F-5
Notes to Financial Statements F-6 to F-14
(b) Pro Forma Financial Information:
DISCUS ACQUISITION CORPORATION UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
Narrative Overview F-15
Discus Acquisition Corporation Unaudited Pro Forma Combined
Statement of Operations for the period from December 27, 1993
to December 25, 1994 F-16
Discus Acquisition Corporation Unaudited Pro Forma Combined
Statement of Operations for the period from December 26, 1994
to September 30, 1995 F-17
Discus Acquisition Corporation Unaudited Pro Forma Combined
Balance Sheet as of September 30, 1995 F-18
Notes to Unaudited Pro Forma Combined Financial Statements F-19 to F-20
(c) Exhibits
Consent of Coopers & Lybrand L.L.P. Exhibit 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of
Peerless Chain Company:
We have audited the accompanying balance sheets of Peerless Chain
Company (a wholly owned subsidiary of Bridgewater Resources Corp.) as of
December 31, 1994 and 1993, and the related statements of operations and
retained earnings and cash flows for the year ended December 31, 1994 and for
the nine-month period ended December 31, 1993. 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 Peerless Chain
Company as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for the year ended December 31, 1994 and for the nine-month
period ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note 4 to the financial statements, effective April 1,
1993, the Company adopted Statement of Financial Accounting Standard No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
/s/ Coopers & Lybrand L.L.P.
Minneapolis, Minnesota
February 23, 1995
PEERLESS CHAIN COMPANY
BALANCE SHEETS
as of December 31, 1994 and 1993
(000's Omitted, Except Per Share Data)
ASSETS 1994 1993
------- -------
Current assets:
Cash $ 14 $ 17
Accounts receivable, net 8,040 6,164
Inventories 9,605 8,536
Deferred income taxes 855 380
Prepaid expenses 438 378
------- -------
Total current assets 18,952 15,475
------- -------
Property and equipment, net 9,451 8,964
------- -------
Total assets $28,403 $24,439
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable, trade 2,163 1,508
Accrued liabilities 3,223 2,147
------- -------
Total current liabilities 5,386 3,655
------- -------
Pension benefits, less current portion 972 1,084
Postretirement medical benefits 1,184 532
Deferred income taxes 294 208
Payable to parent 11,244 11,108
Stockholder's equity:
Common stock, $.01 par value per
share; authorized, 1,000 shares;
issued and outstanding, 10 shares -- --
Additional paid-in capital 4,039 4,039
Retained earnings 5,284 3,813
------- -------
Total stockholder's equity 9,323 7,852
------- -------
Total liabilities and stock-
holder's equity $28,403 $24,439
======= =======
The accompanying notes are an integral
part of the financial statements.
PEERLESS CHAIN COMPANY
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
for the year ended December 31, 1994
and for the nine-month period ended December 31, 1993
(000's Omitted)
Nine-Month
Year Ended Period Ended
December 31, December 31,
1994 1993
-------- --------
Net sales $ 42,843 $ 28,652
Cost of sales 32,939 22,428
-------- --------
Gross profit 9,904 6,224
Selling, general and administrative
expenses 7,169 4,845
-------- --------
Operating income 2,735 1,379
Interest expense, parent (558) (466)
-------- --------
Income before income taxes 2,177 913
Provision for income taxes (706) (334)
-------- --------
Net income 1,471 579
Retained earnings:
December 31, 1993 3,813 3,234
-------- --------
December 31, 1994 $ 5,284 $ 3,813
======== ========
The accompanying notes are an integral
part of the financial statements.
PEERLESS CHAIN COMPANY
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
for the year ended December 31, 1994
and for the nine-month period ended December 31, 1993
(000's Omitted)
Nine-Month
Year Ended Period Ended
December 31, December 31,
1994 1993
------- -------
Cash flows from operating activities:
Net income $ 1,471 $ 579
------- -------
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 1,725 1,045
Inventory valuation provision 68 250
Deferred income taxes (389) (172)
Loss on disposal of property and equipment 18
Changes in operating assets and liabilities:
Accounts receivable (1,876) (1,266)
Inventories (1,137) 734
Prepaid expenses (60) (30)
Accounts payable 655 (769)
Accrued liabilities 1,076 (512)
Pension and postretirement medical
benefits 540 494
------- -------
Total adjustments 620 (226)
------- -------
Net cash provided by operations 2,091 353
------- -------
Cash flows from investing activities:
Additions to property and equipment (2,246) (1,549)
Proceeds from the sale of property and
equipment 16
Net cash used in investing activities (2,230) (1,549)
------- -------
Cash flows from financing activities:
Payable to parent 136 1,202
------- -------
Net (decrease) increase in cash (3) 6
Cash, beginning of year 17 11
------- -------
Cash, end of year $ 14 $ 17
======= =======
Supplemental cash flow information:
Cash paid for:
Interest through payable to parent $ 558 $ 466
Income taxes through payable to parent 797 334
The accompanying notes are an integral
part of the financial statements.
PEERLESS CHAIN COMPANY
NOTES TO FINANCIAL STATEMENTS
(000's Omitted)
1. Significant Accounting Policies:
ORGANIZATION:
Peerless Chain Company (the Company) is a wholly owned subsidiary of
Bridgewater Resources Corp. (the Parent). The Company's principal
operations include the manufacture and sale of chain and wire form
products.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
INVENTORIES:
Inventories consist principally of chain and wire form products and are
stated at the lower of cost or market with cost determined on the
first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation charged
to operations is computed using the straight-line method over the
estimated useful lives of the assets.
Maintenance, repairs and minor renewals are charged to expense while
major renewals and betterment are capitalized. Upon sale or retirement,
the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in current
operations.
INCOME TAXES:
The Company is a member of a controlled group of corporations that file
a consolidated federal income tax return with its Parent. Under the
terms of the tax-sharing agreement, the Company provides for income
taxes as if the Company is a separate taxpayer. Amounts currently
payable are included in the amount payable to Parent.
Deferred income tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
USE OF ESTIMATES:
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles 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.
2. Selected Balance Sheet Information:
December 31
------------------
1994 1993
------- -------
Accounts receivable, net:
Accounts receivable $ 8,206 $ 6,292
Allowance for doubtful accounts (166) (128)
------- -------
Total $ 8,040 $ 6,164
======= =======
Inventories:
Raw materials 1,508 1,217
Work in progress 3,135 2,602
Finished goods 4,381 4,126
Supplies 581 591
------- -------
Total $ 9,605 $ 8,536
======= =======
Property and equipment, net:
Leasehold improvements 1,270 1,245
Equipment 13,217 11,948
Construction in progress 1,609 727
------- -------
16,096 13,920
Accumulated depreciation and
amortization (6,645) (4,956)
------- -------
Total $ 9,451 $ 8,964
======= =======
2. Selected Balance Sheet Information, continued:
December 31
------------------
1994 1993
------- -------
Accrued liabilities:
Accrued payroll $ 793 $ 576
Employee benefits 1,284 745
Workers' compensation reserve 702 553
Other 444 273
------- -------
Total $ 3,223 $ 2,147
======= =======
3. Retirement Plans:
The Company maintains a defined contribution profit sharing plan
covering substantially all of its employees and a 401(k) savings plan
covering nonunion employees. Employer contributions to the profit
sharing plan are made at the discretion of the Board of Directors;
Company contributions to the 401(k) savings plan are based upon
matching of participant contributions to specified levels. The
aggregate cost of the defined contribution plans was $444 for the year
ended December 31, 1994 and $289 for the nine-month period ended
December 31, 1993.
The Company also maintains two noncontributory defined benefit pension
plans; one for union and one for nonunion employees. The plans provide
for monthly benefits based upon a percentage of the participants'
average monthly compensation multiplied by years of service. As a
result of a new union agreement entered into in 1994, effective January
1, 1995, the monthly benefits provided to union employees will be based
on years of service multiplied by a factor. This change in benefits
formula resulted in a decrease in the projected benefit obligation and
a corresponding decrease in unrecognized prior service cost of
approximately $1.3 million at December 31, 1994. There was no impact on
the net periodic pension expense for the year ended December 31, 1994.
The Company's general funding policy is to contribute amounts
sufficient to satisfy regulatory funding standards. Assets of the two
plans are invested principally in equity and bond funds.
The funded status of the defined benefit pension plans is summarized
below:
December 31
------------------
1994 1993
------- -------
Vested benefit obligation $ 2,792 $ 2,612
Nonvested benefits 293 270
------- -------
Accumulated benefit obligation 3,085 2,882
Effect of projected salary increases 876 2,314
------- -------
Projected benefit obligation 3,961 5,196
Less plan assets at fair value (3,935) (3,796)
------- -------
Projected benefits in excess of
plan assets 26 1,400
Unrecognized net loss (gain) from experience
different than actuarial assumptions 104 (140)
Unrecognized prior service cost 1,065 (107)
------- -------
Accrued pension cost $ 1,195 $ 1,153
======= =======
The components of net periodic pension expense are set forth below:
Nine-Month
Year Ended Period Ended
December 31, December 31,
1994 1993
------------- --------------
Service cost benefit earned
during the year $ 414 $ 207
Interest cost on projected
benefit obligation 296 265
Actual return on plan assets (303) (203)
Amortization of unrecognized
prior service cost (114) 11
Amortization of unrecognized
net loss 10
----- -----
$ 303 $ 280
===== =====
Significant actuarial assumptions for both plans are as follows:
December 31
---------------------
1994 1993
------ ------
Discount rate for service and
interest cost 7.50% 7.50%
Projected salary increases,
weighted average 6.00 6.00
Expected return on assets 8.00 8.00
Discount rate for year-end
benefit obligations 8.50 7.50
4. Postretirement Medical Benefits:
The Company provides certain post retirement health care and life
insurance benefits for retired employees. Substantially all union
employees may become eligible for these benefits if they remain
employed until normal retirement. All other employees are eligible to
receive benefits under the plan if they had reached age 60 by April 1,
1993.
Effective April 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The
Company elected to recognize the accumulated postretirement benefit
obligation of $5,938 at April 1, 1993, over 20 years.
The following table reconciles the accumulated postretirement benefit
obligation to the accrued postretirement liability:
December 31
-------------------
1994 1993
-------- -------
Accumulated postretirement benefit obligation:
Retirees $2,464 $2,094
Fully eligible active plan
participants 780 986
Other active plan participants 2,209 3,167
------ ------
Accumulated postretirement
benefit obligation 5,453 6,247
Unrecognized transition obli-
gation 5,172 5,715
Unrecognized net gain (903)
Accrued postretirement benefit
liability $1,184 $ 532
====== ======
The components of net periodic postretirement benefit expense are set
forth below:
Nine-Month
Year Ended Period Ended
December 31, December 31,
1994 1993
------------ ------------
Service cost benefit earned
during the year $128 $116
Interest cost on accumulated
benefit obligation 431 330
Amortization of transition
obligation 283 223
---- ----
$842 $669
==== ====
The accumulated postretirement benefit obligation was determined using
a discount rate of 8.5% and 7.5%, health care cost trend rate of 8.6%
and 12.0% (for pre-age 65 retirees) and 7.6% and 10.5% (for post-age 65
retirees) at December 31, 1994 and 1993, respectively. The health care
cost trend rates were assumed to decrease gradually to 5.5% to 2021 and
remain level thereafter. An increase in the health care cost trend rate
of one percentage point in each year would increase the accumulated
postretirement benefit obligation by approximately $835 and $1,056 at
December 31, 1994 and 1993, respectively, and increase expense by $95
for the year ended December 31, 1994 and $81 for the nine-month period
ended December 31, 1993, respectively.
5. Lease Commitments:
The Company leases its office and manufacturing facilities as well as
various equipment and warehouses under noncancellable operating lease
agreements.
The Company's office and manufacturing facilities lease, as last
amended on August 2, 1994, has a term through June 2011. Annual lease
payments are $1,269 and are to be adjusted for inflation every five
years with the next adjustment scheduled for 1996. The lease imposes
various restrictions which, among other things, requires the Company to
maintain certain financial covenants and prohibits the Company and the
Parent from making significant acquisitions or dispositions of property
or businesses without prior approval by the lessor.
Future minimum lease payments under the various lease agreements at
December 31, 1994 are:
1995 $ 1,640
1996 1,480
1997 1,358
1998 1,329
1999 1,300
Thereafter 14,599
The Company incurred rent expense of $1,736 for the year ended December
31, 1994 and $1,132 for the nine-month period ended December 31, 1993.
6. Litigation and Other Commitments:
Certain legal actions are pending against the Company. Litigation is
subject to many uncertainties and the outcome of individual matters is
not predictable with assurance; however, in the opinion of management,
the ultimate resolution of these actions will not have a material
adverse effect on the consolidated financial position of the Company.
The Company has a letter of credit facility of $650 at December 31,
1994, of which approximately $150 is unused.
7. Business and Credit Concentration:
The Company's most significant customer accounted for 21.0% of total
revenues for the year ended December 31, 1994 and 19.6% of total
revenues for the nine-month period ended December 31, 1993. This major
customer accounted for $1,654 and $778 of the Company's accounts
receivable balances at December 31, 1994 and 1993, respectively.
The Company reviews trade customers' credit history before extending
credit. The Company establishes an allowance for doubtful accounts
based on factors surrounding the credit risk of specific customers and
other information. Accounts receivable are not collateralized.
8. Income Taxes:
The components of the Company's provision for income taxes consisted of
the following:
Nine-Month
Year Ended Period Ended
December 31, December 31,
1994 1993
------------ ------------
Currently payable $1,095 $ 506
Deferred (389) (172)
------ ------
$ 706 $ 334
====== ======
The Company's income tax expense differed from the amounts computed
using the federal statutory rate due principally to the effect of state
income taxes net of federal benefit.
The components of the net deferred tax asset consisted of the
following:
December 31
-------------------
1994 1993
-------- -------
Deferred tax asset $ 1,632 $ 1,190
Deferred tax liability (1,071) (1,018)
------- -------
$ 561 $ 172
======= =======
The Company's net deferred tax asset principally results from temporary
differences arising from pension and postretirement benefit costs
accrued for financial reporting purposes net of the Company's use of
accelerated depreciation methods for income tax reporting purposes.
9. Payable to Parent:
The payable to parent represents operating advances made by the Parent
to fund operations net of cash provided by the Company to the Parent.
This account also is utilized to account for the reimbursement of
expenditures made by the Parent on the behalf of the Company. The
Company is also charged for currently payable income taxes and interest
by its Parent. Interest is allocated to the Company based principally
upon the payable to parent balance using an interest rate of 6%.
Item 7.(b) Pro Forma Financial Information
Discus Acquisition Corporation
Unaudited Pro Forma Combined Financial Statements
Narrative Overview
On December 14, 1995, Discus Acquisition Corporation (the "Company") acquired
the outstanding stock of Peerless Chain Company ("Peerless") from Bridgewater
Resources Corp. ("Bridgewater") pursuant to a Stock Purchase Agreement dated
November 22, 1995 and as amended on December 7 and December 13, 1995. The stock
of Peerless was purchased by the Company for $23.8 million, subject to certain
post-closing adjustments. The purchase price was paid with subordinated
financing from Bridgewater ($3.7 million, of which $1.2 million was repaid in
January 1996); senior financing from The CIT Group/Business Credit, Inc. ($14.7
million), and the remaining balance (approximately $5.4 million) by cash from
the Company. In connection with the acquisition, the Company sold approximately
$4.2 million of additional common stock to a group of investors, including
certain members of Peerless' management. Approximately $1.3 million of
transaction costs were incurred, of which $416,000 was funded by the senior
financing and the balance accrued at the closing date.
The unaudited pro forma combined financial statements give effect to: (i) the
acquisition of all outstanding shares of common stock of Peerless; (ii) the
underlying financing of the acquisition of Peerless; and (iii) other
adjustments, primarily related to the application of purchase accounting for the
acquisition.
The accompanying unaudited pro forma combined statements of operations have been
prepared by combining the statements of operations of Discus Acquisition
Corporation with the statements of operations of Peerless Chain Company, giving
effect to the items described above as if the acquisition occurred in its
entirety at January 1, 1994.
The unaudited pro forma balance sheet as of September 30, 1995, has been
prepared by combining the balance sheets of Discus Acquisition Corporation and
Peerless Chain Company as of September 30, 1995. The unaudited pro forma balance
sheet has been prepared, giving effect to the items described above as if the
acquisition occurred in its entirety at September 30, 1995.
DISCUS ACQUISITION CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 27, 1993 TO DECEMBER 25, 1994
(000's Omitted, Except Share and Per Share Data)
--------------------------------------------------------------------
Discus Peerless
Acquisition Chain Pro Forma Pro Forma
Corporation Company Adjustments Combined
----------- ----------- ----------- -----------
Net sales $ 42,843 $ 42,843
$ 400 (14)
(144)(10)
Cost of sales 32,939 1,800 (1) 34,995
----------- ----------- -----------
Gross profit 9,904 (2,056) 7,848
Selling, general, and administrative 98 (14)
expenses $ 225 7,169 (35)(10) 7,457
----------- ----------- ----------- -----------
Operating income (loss) (225) 2,735 (2,119) 391
Interest expense (558) (642) (11) (1,200)
Interest income 74 (74) (12)
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes (151) 2,177 (2,835) (809)
----------- ----------- ----------- -----------
(30)(15) (30)
Provision for income taxes (706) 706 (15)
----------- ----------- -----------
Income (loss) from continuing operations (151) 1,471 (2,159) (839)
----------- ----------- ----------- -----------
Loss from discontinued operations associated
with restaurant operations disposed of in
June 1994 (390) (210)(15) (600)
Gain on disposal of all restaurant operations 2,260 302 (15) 2,562
----------- ----------- -----------
Net gain from discontinued operations 1,870 92 1,962
----------- ----------- ----------- -----------
Net income $ 1,719 $ 1,471 $ (2,067) $ 1,123
=========== =========== =========== ===========
Per share amounts:
Loss from continuing operations $ (.07) $ (.14)
Gain from discontinued operations .80 .32
----------- -----------
Net income $ .73 $ .18
=========== ===========
Weighted average number of shares
outstanding 2,350,401 3,822,307 (8) 6,172,708
=========== ===========
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
DISCUS ACQUISITION CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 26, 1994
TO SEPTEMBER 30, 1995
(000's Omitted, Except Share and Per Share Data)
--------------------------------------------------------------------
Discus Peerless
Acquisition Chain Pro Forma Pro Forma
Corporation Company Adjustments Combined
----------- ----------- ----------- -----------
Net sales $ 31,251 $ 31,251
Cost of sales $300 (14)
23,836 (31)(10) 24,105
----------- ----------- -----------
Gross profit 7,415 (269) 7,146
68 (14)
Selling, general, and administrative expenses $ 266 5,387 (3)(10) 5,718
----------- ----------- ----------- -----------
Operating income (loss) (266) 2,028 (334) 1,428
Interest expense (427) (473)(11) (900)
Interest income 94 (94)(12)
Gain on sale of equipment 247 247
----------- ----------- ----------- -----------
Income (loss) before income taxes (172) 1,848 (901) 775
Provision for income taxes (676) 646 (16) (30)
----------- ----------- ----------- -----------
Net income (loss) $ (172) $ 1,172 $ (255) $ 745
=========== =========== =========== ===========
Net income (loss) per share $ (.07) $ .12
=========== ===========
Weighted average number of shares
outstanding 2,360,977 3,822,307 (8) 6,183,284
=========== ===========
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
DISCUS ACQUISITION CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(000's Omitted, Except Share and Per Share Data)
-----------------------------------------------------------
Discus Peerless
Acquisition Chain Pro Forma Pro Forma
Corporation Company Adjustments Combined
----------- ----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,273 $ 3 $ (2,273)(12) $ 3
Accounts receivable, net 7,049 7,049
Inventories 10,942 1,800 (1) 12,742
Prepaid expenses 111 1,229 1,340
-------- -------- -------- --------
Total current assets 2,384 19,223 (473) 21,134
Equipment and leasehold improvements, net 9,282 2,985 (2) 12,267
Intangible assets, net 4,453 (3) 4,453
-------- -------- -------- --------
Total assets $ 2,384 $ 28,505 $ 6,965 $ 37,854
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,430 (9) $ 1,430
Acquisition notes payable 39 (4) 39
Accounts payable $ 113 $ 1,233 1,346
Accrued liabilities 2 3,199 852 (13) 4,053
Current portion of pension and postretirement
medical benefits 635 635
-------- -------- -------- --------
Total current liabilities 115 5,067 2,321 7,503
Long-term debt, less current portion 13,293 (9) 13,293
Subordinated acquisition note payable to seller 2,500 (5) 2,500
Pension and postretirement medical benefits,
less current portion 2,340 5,744 (6) 8,084
Payable to parent 10,690 (10,690)(7)
Shareholders' equity:
Common stock, no par value; 10,000,000
authorized shares; 2,376,140 issued and
outstanding shares (historical); 6,198,447
issued and outstanding shares (pro forma) 3,775 4,205 (8) 7,980
Additional paid-in capital 4,039 (4,039)
Accumulated deficit (1,506) 6,369 (6,369) (1,506)
-------- -------- -------- --------
Total shareholders' equity 2,269 10,408 (6,203) 6,474
-------- -------- -------- --------
Total liabilities and shareholders' equity $ 2,384 $ 28,505 $ 6,965 $ 37,854
======== ======== ======== ========
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(000's Omitted, Except Share and Per Share Data)
- -------------------------------------------------------------------------------
1. Represents adjustment to fair value based on the estimated gross profit
on the manufactured inventories purchased in a manufactured state at
the date of the business acquisition.
2. Represents adjustment to estimated fair market value based on
independent appraisal.
3. Represents identifiable and unidentifiable intangible assets based on
total purchase price and transaction costs incurred in connection with
the business acquisition.
4. Represents interim financing.
5. Represents seller financing incurred in Peerless acquisition which
bears interest at 8% and is due in December 1998.
6. Represents purchase accounting adjustment to full accrual basis of the
present value of estimated pension and postretirement medical benefits
at the date of the business acquisition.
7. Represents payment of intercompany debt between Peerless and seller
contemporaneous with business acquisition.
8. Represents the sale and issuance of 3,822,307 shares of common stock at
$1.10 a share in connection with funding the business acquisition,
which resulted in aggregate proceeds of $4,205.
9. Represents CIT financing ($14,723) incurred in Peerless acquisition
(term obligations of $6,700 and revolving line of credit of $8,023).
10. Represents downward adjustment of periodic amortization expense, based
on full accrual of benefit obligations at date of business acquisition
and change in discount rate, allocated to COS and SG&A based on
Peerless' historical experience.
11. Represents upward adjustment of interest expense due to outstanding
operating and acquisition indebtedness and associated interest costs in
excess of Peerless' utilization of intercompany parent financing.
12. Represents downward adjustment of interest income and decrease to the
Company's cash and cash equivalent balance as a result of the Company's
cash and cash equivalent amounts assumed to have been expended to fund
Peerless operations.
13. Represents accrued but unpaid transaction costs.
14. Represents additional depreciation and amortization expense related to
fair market value of equipment and intangibles acquired in business
acquisition, allocated to COS and SG&A based on Peerless' historical
experience.
15. Represents elimination of Peerless stand-alone tax provision and
establishment of a pro forma combined alternative minimum tax
provision. No pro forma "regular" federal taxes are provided due to the
pro forma loss from continuing operations. The net tax expense provided
on the Company's gain on disposal of restaurant operations represents
alternative minimum taxes that are not payable on a pro forma combined
basis and, therefore, have been eliminated.
16. Represents elimination of Peerless stand-alone tax provision and
establishment of a pro forma combined alternative minimum tax
provision. No pro forma "regular" federal taxes are provided due to
utilization of the Company's net operating loss carryforwards.
SIGNATURE
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 thereunto duly authorized.
DISCUS ACQUISITION CORPORATION
Date: February 23, 1996 By /s/ William H. Spell
William H. Spell
Chief Executive Officer