1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8--K
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported) August 31, 1995
TRISTAR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-13099 13-3129318
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
12500 San Pedro Avenue, Suite 500, San Antonio, Texas 78216
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (210) 402-2200
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On August 31, 1995, Eurostar Perfumes, Inc., a Texas corporation
("Eurostar"), was merged (the "Merger") with and into TRISTAR CORPORATION, a
Delaware corporation ("Tristar"), with Tristar as the surviving corporation.
The Merger was consummated pursuant to an Agreement and Plan of Merger (the
"Agreement") dated as of July 1, 1995, by and among Tristar, Eurostar and
Transvit Manufacturing Corporation, a British Virgin Islands corporation
("Transvit") owned by the Core Sheth Families. As provided in the Agreement,
all the issued and outstanding shares of Eurostar Common Stock, $.001 par value
("Eurostar Common Stock"), were converted into the right to receive an
aggregate of 9,977,810 shares of Tristar Common Stock, $.01 par value ("Tristar
Common Stock"). The number of shares of Tristar Common Stock received by the
Core Sheth Families in exchange for the Eurostar Common Stock was based on a
valuation of Eurostar and Tristar at approximately 60% and 40%, respectively,
of the value of the combined entities. In addition, the exercise price of
certain warrants held by an affiliate of the Core Sheth Families may be reduced
in connection with the Merger.
The Core Sheth Families is a group which, prior to the Merger, owned
60.5% of the outstanding shares of Tristar Common Stock (71% assuming the
exercise of all outstanding warrants) and all of the outstanding shares of
Eurostar Common Stock. The Core Sheth Families consist of Shashikant S. Sheth,
a director of Tristar, Jamnadas Sheth, Kirit Sheth and Mahendra Sheth. Viren
S. Sheth, a director of Tristar and its President and Chief Executive Officer,
is Shashikant S. Sheth's brother. Although Viren S. Sheth is not a member of
the Core Sheth Families, he is related by blood to certain members of the Core
Sheth Families. Viren S. Sheth also served as President, Chief Executive
Officer and a director of Eurostar. Following the Merger approximately 16.6
million shares of Tristar Common Stock are outstanding, of which approximately
14 million shares, representing approximately 84% of the total, are held by the
Core Sheth Families. The Core Sheth Families also hold warrants to acquire an
additional 2,400,000 shares of Tristar Common Stock, which, if exercised, would
increase their beneficial ownership to approximately 86% of the outstanding
shares of Tristar Common Stock.
Tristar engages in numerous transactions with entities owned by the
Core Sheth Families. Prior to the Merger, Tristar was purchasing virtually all
of its fragrance products from Eurostar. From 1989 until September 1992,
Tristar purchased virtually all of its fragrance products from another single
supplier, S&J Perfume Company, Ltd. ("S&J Perfume"), which, since January 1991,
has also been controlled by the Core Sheth Families. During fiscal 1994 and
for the six months ended February 28, 1995, fragrance products supplied by
Eurostar represented approximately 79% and 78%, respectively, of Tristar's net
sales, and cosmetics supplied by Emicos International, Ltd. ("Emicos"), another
affiliate of the Core Sheth Families, accounted for approximately 12% and 12%,
respectively, of Tristar's net sales. For fiscal 1994 and for the six months
ended February 28, 1995, purchases from Eurostar amounted to $27,282,000 and
$13,200,000, respectively, and purchases from Emicos amounted to $4,254,000 and
$1,238,000, respectively. At August 31, 1994 and at February 28, 1995, Tristar
owed outstanding payables to Eurostar in the amounts of $1,162,000 and
$1,167,000, respectively, and owed outstanding payables to Emicos in the
amounts of $726,000 and
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$792,000, respectively. During fiscal 1994 and for the six months ended March
31, 1995, approximately 85% and 66%, respectively, of Eurostar's sales were to
Tristar.
In October 1992, Tristar entered into a three-year distribution
agreement with Eurostar and S&J Perfume, also an entity owned and controlled by
the Core Sheth Families, for the purchase of fragrance products. Under the
terms of the agreement, during fiscal 1994, Eurostar supplied virtually all of
Tristar's requirements for fragrance products for exclusive distribution by
Tristar in the United States, Mexico, Canada and Puerto Rico. This agreement
was amended in August 1993 to assure Tristar of a supply of fragrance products
from Eurostar through August 1999. No purchases have been made by Tristar from
S&J Perfume or its successor company, Starion International Limited, a United
Kingdom corporation, since fiscal 1993. This distribution agreement was
terminated in connection with the Merger.
During fiscal 1994, Tristar sold cosmetic pencils to Emicos in the
amount of $343,000. At August 31, 1994, Tristar had a receivable outstanding
from Emicos of $126,000.
Eurostar purchases various products from Tristar for resale to
Eurostar's customers in Central and South America. These purchases were
$114,000 in fiscal 1994. At August 31, 1994, Tristar had a receivable
outstanding from Eurostar of $248,000.
In October 1993, Tristar became a party to a one-year design and
consulting agreement with Eurostar pursuant to which Eurostar and other
entities of the Core Sheth Families provide marketing concepts and design
services to Tristar for the production of marketing and advertising material.
The agreement, renewable each calendar year, provides for a fixed annual fee to
be renegotiated at the end of each calendar year. The agreement was renewed
for calendar 1995, but was terminated as a result of the Merger. The fee for
calendar 1995 was $150,000.
Tristar was a party to a Computer Services and Support Agreement with
Eurostar pursuant to which Tristar paid Eurostar approximately $132,000 per
year for access to hardware and software which was used to maintain Tristar's
inventory and accounting systems. This agreement was terminated as a result of
the Merger.
In May 1995, Tristar sold its cosmetic pencil manufacturing business,
including all related equipment and inventory, to Eurostar in consideration for
the cost of inventories payable upon utilization of such inventories and a
seven-year note for approximately $600,000. In connection with the sale,
Eurostar agreed to supply all of Tristar's requirements for cosmetic pencils at
contractual prices such that, under fiscal 1994 volume levels and selling
prices, Tristar would achieve in future periods the same contribution from
cosmetic pencil sales as was achieved in fiscal 1994. Tristar intends to sell
or lease its manufacturing plant facilities in South Carolina.
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The Core Sheth Families have also loaned Tristar funds in connection
with the settlement of certain stockholder litigation. On December 17, 1993,
Tristar announced court approval of a settlement agreement, on behalf of
Tristar and certain other parties, of the previously disclosed stockholder
class action litigation for a cash payment of $9.5 million. To finance the
settlement agreement, the Core Sheth Families loaned Tristar $9 million and
purchased and extended common stock warrants for a price of $500,000. The last
portion of the settlement amount was paid by Tristar on December 16, 1994.
The loans from the Core Sheth Families mature in ten years, with
interest payable annually and principal payable 20% at the end of year eight,
20% at the end of year nine and the remaining 60% at the end of year ten, with
the exception of $1 million which was paid in December 1994 with a court
approved distribution of the proceeds of an executive liability and
indemnification policy owned by Tristar. These loans bear interest at the
long-term federal rate and are subordinated to indebtedness of Tristar owed to
its senior lenders.
The common stock warrants were purchased by the Core Sheth Families on
December 14, 1994, pursuant to an agreement entered into in connection with the
settlement agreement. The warrants grant the Core Sheth Families the right to
purchase up to 2,000,000 shares of Tristar's Common Stock within ten years of
the date of issuance. The initial per-share price of the common stock under
the warrants is $5.34 and it increases by 10% per year beginning December 15,
2001. As discussed below, the exercise price of such warrants may be reduced
in connection with the Merger.
In connection with the Merger, Tristar has agreed with the Core Sheth
Families that the exercise price of the outstanding 10-year warrants held by
the Core Sheth Families to purchase an aggregate of 2,000,000 shares of Tristar
Common Stock will be repriced at an amount, if lower than the current exercise
price, equal to the lowest average Closing Sales Price of the Tristar Common
Stock for any twenty (20) consecutive trading days during the period beginning
September 1, 1995 and ending on August 31, 1996. The current exercise price of
such warrants is $5.34 per share and such price is scheduled to increase 10%
per year beginning December 15, 2001.
The operations acquired from Eurostar included a plant, equipment and
other physical property used to manufacture designer alternative fragrances,
cosmetics and bath and body products. Tristar intends to continue to use such
plant, equipment and other physical property in the same manner as used prior
to the Merger.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
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Independent Auditors' Report
The Board of Directors and Stockholder
Eurostar Perfumes, Inc.:
We have audited the accompanying consolidated balance sheets of Eurostar
Perfumes, Inc. and subsidiaries as of September 30, 1994 and 1993, and the
related consolidated statements of income and retained earnings and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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.
As discussed in note 3 to the consolidated financial statements, approximately
85% and 99% of the Company's 1994 and 1993 sales, respectively, are to Tristar
Corporation, a related party.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eurostar Perfumes,
Inc. and subsidiaries as of September 30, 1994 and 1993, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in note 1(c) to the consolidated financial statements, the Company
changed its method of accounting for inventories in 1994.
KPMG Peat Marwick LLP
San Antonio, Texas
November 18, 1994
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Independent Accountants' Review Report
The Board of Directors and Stockholder
Eurostar Perfumes, Inc.:
We have reviewed the accompanying consolidated balance sheet of Eurostar
Perfumes, Inc. and subsidiaries as of March 31, 1995, and the related
consolidated statements of income and retained earnings and cash flows for the
six-month periods ended March 31, 1995 and 1994, and for the period from March
5, 1992 (inception) through September 30, 1992. These consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
July 14, 1995
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, September 30, September 30,
1995 1994 1993
----------- ------------- -------------
(unaudited)
Current assets:
Cash $ 740,058 $ 1,430,924 $ 420,523
U.S. treasury note, resticted (note 2) - - 100,156
Trade accounts receivable:
Affiliate (note 3) 1,893,490 1,881,614 5,856,190
Non-affiliate 1,675,858 868,560 31,450
Inventories (notes 3 and 4) 4,987,599 6,644,423 5,275,121
Deferred income taxes (note 7) 294,000 203,092 88,322
Other current assets 152,805 167,186 113,858
----------- ----------- -----------
Total current assets 9,743,810 11,195,799 11,885,620
Deferred income taxes (note 7) - - 75,255
Net property, plant and equipment (note 5) 8,001,663 8,440,174 7,952,906
----------- ----------- -----------
$17,745,473 $19,635,973 $19,913,781
=========== =========== ===========
Current liabilities:
Current installments of note payable
to parent company (note 6) $ 1,500,000 $ 2,050,000 $ 2,500,000
Trade accounts payable:
Non-affiliate accounts 1,044,227 2,288,209 2,970,136
Affiliate accounts (note 3) 147,408 1,137,156 1,771,144
Customer advances 192,765 83,169 122,589
Income taxes payable 602,737 2,027,666 2,247,244
Accrued expenses (note 6) 888,442 853,069 259,271
----------- ----------- -----------
Total current liabilities 4,375,579 8,439,269 9,870,384
Note payable to parent company, excluding
current installments (note 6) 5,015,701 4,165,701 6,468,684
Deferred income taxes (note 7) 409,000 159,092 -
Other liabilities 223,057 269,118 134,545
----------- ----------- -----------
Total liabilities 10,023,337 13,033,180 16,473,613
----------- ----------- -----------
Stockholder's equity:
Common stock, $.001 par value.
Authorized, issued and outstanding
1,000,000 shares 1,000 1,000 1,000
Additional paid-in capital 99,000 99,000 99,000
Retained earnings 7,622,136 6,502,793 3,340,168
----------- ----------- -----------
Total stockholder's equity 7,722,136 6,602,793 3,440,168
Commitments and contingencies (notes 3 and 8)
----------- ----------- -----------
$17,745,473 $19,635,973 $19,913,781
=========== =========== ===========
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See accompanying notes to consolidated financial statements.
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
Six months ended March 31, Years ended September 30, Period from
---------------------------- ----------------------------- March 5, 1992 through
3/31/95 3/31/94 1994 1993 September 30, 1992
----------- ----------- ----------- ----------- ---------------------
(unaudited) (unaudited) (unaudited)
Net sales (notes 3 and 9) $17,410,449 $16,371,092 $31,481,083 $28,144,851 $ 216,038
Cost of goods sold (note 3) 12,139,545 9,397,860 19,932,841 17,687,588 198,755
----------- ----------- ----------- ----------- ---------
Gross profit 5,270,904 6,973,232 11,548,242 10,457,263 17,283
Selling, general and administrative
expenses (note 3) 3,369,615 2,749,953 5,944,374 3,935,640 743,069
----------- ----------- ----------- ----------- ---------
Operating income (loss) 1,901,289 4,223,279 5,603,868 6,521,623 (725,786)
Other income (expense):
Interest expense (144,933) (161,199) (337,712) (341,630) (38,173)
Other income 33,257 1,846 41,046 7,801 -
----------- ----------- ----------- ----------- ---------
Income (loss) before income taxes 1,789,613 4,063,926 5,307,202 6,187,794 (763,959)
Income tax expense (benefit) (note 7) 670,270 1,631,227 2,144,577 2,349,011 (265,344)
----------- ----------- ----------- ----------- ---------
Net income (loss) 1,119,343 2,432,699 3,162,625 3,838,783 (498,615)
Retained earnings (deficit) at
beginning of period 6,502,793 3,340,168 3,340,168 (498,615) -
----------- ----------- ----------- ----------- ---------
Retained earnings (deficit) at
end of period $ 7,622,136 $ 5,772,867 $ 6,502,793 $ 3,340,168 (498,615)
=========== ============ =========== =========== =========
Net Income (loss) per common share $ 1.11 $ 2.43 $ 3.16 $ 3.83 (.49)
=========== ============ =========== =========== =========
Number of common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
=========== ============ =========== =========== =========
-8-
See accompanying notes to consolidated financial statements.
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Period from
March 5, 1992
Six months ended March 31, Years ended September 30, through
1995 1994 1994 1993 September 30, 1992
(unaudited) (unaudited) (unaudited)
----------- ----------- ---------- ---------- -----------------
Cash flows from operating activities:
Net income (loss) $ 1,119,343 $ 2,432,699 $ 3,162,625 $ 3,838,783 $ (498,615)
Adjustments to reconcilie net income (loss) to net
cash provided by (used in) operating activities:
Allowance for obsolescence and other adjustments 242,388 56,254 239,774 110,000 -
Deferred income tax expense 159,000 70,577 119,577 101,767 (265,344)
Depreciation 531,635 447,899 968,607 685,258 -
Changes in operating assets and liabilities:
Trade accounts receivable (819,174) 3,277,607 3,137,466 (5,671,110) (216,530)
Inventories 1,414,436 (241,698) (1,609,076) (3,870,813) (1,514,308)
Other current assets 14,381 (10,642) (53,328) (47,402) (66,456)
Trade accounts payable (2,233,730) (2,576,959) (1,315,915) 2,097,425 2,643,855
Customer advances 109,596 (122,589) (39,420) 122,589 -
Income taxes payable (1,424,929) (194,036) (219,578) 2,247,244 -
Accrued expenses 35,373 387,560 593,798 243,566 15,705
Other liabilities (46,061) 166,781 134,573 - -
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in) operating
activities (897,742) 3,693,453 5,119,103 (142,693) 98,307
----------- ----------- ----------- ----------- ------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (93,124) (953,937) (1,455,875) (3,211,640) (5,291,979)
Acquisition of U.S. Treasury note - - - (100,156)
Proceeds from sale of U.S. Treasury note - - 100,156 - -
----------- ----------- ----------- ----------- ------------
Net cash used in investing activities (93,124) (953,937) (1,355,719) (3,211,640) (5,392,135)
----------- ----------- ----------- ----------- ------------
Cash flows from financing activities:
Proceeds from note payable to bank - - - 2,000,000 4,500,000
Repayment of note payable to bank - - - (6,500,000) -
Proceeds from issuance of common stock - - - - 100,000
Proceeds from note payable to parent company 2,000,000 171,984 - 7,658,691 1,309,993
Payments of note payable to parent company (1,700,000) (2,500,000) (2,752,983) - -
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in) financing
activities 300,000 (2,328,016) (2,752,983) 3,158,691 5,909,993
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash (690,866) 411,500 1,010,401 (195,642) 616,165
Cash at beginning of year 1,430,924 420,523 420,523 616,165 -
----------- ----------- ----------- ----------- ------------
Cash at end of year $ 740,058 $ 832,023 $ 1,430,924 $ 420,523 $ 616,165
=========== =========== =========== =========== ============
Supplemental disclosure of cash flow information:
Income taxes paid $ 1,905,650 $ 1,465,000 $ 2,295,775 $ - $ -
=========== =========== =========== =========== ============
Interest paid $ 15,580 $ 37,870 $ 304,915 $ 237,493 $ -
=========== =========== =========== =========== ============
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See accompanying notes to consolidated financial statements.
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Data with respect to March 31, 1995 and for the six month periods ended March
31, 1995 and 1994, and for the period from March 5, 1992 (inception) to
September 30, 1992 is unaudited)
(1) Summary of Significant Accounting Policies
(a) Description of Business
Eurostar Perfumes, Inc. (the "Company"), is a wholly-owned
subsidiary of Transvit Manufacturing Corporation ("Transvit"), a
foreign company owned by the Core Sheth Families. The Company was
incorporated on March 5, 1992. The primary business of the Company
is to manufacture perfumes at its plant located in Pleasanton,
Texas. The Company purchases significant amounts of inventory
from various European companies, and the Company is not dependent
on a single supplier or only a few suppliers. As discussed in
note 3, the Company has significant transactions with related
parties.
(b) Principles of Consolidation
The consolidated financial statements include the financial
statements of Eurostar Perfumes, Inc. and its wholly-owned
subsidiaries, American Star Corporation, which in 1993 marketed
the Company's products to customers located primarily in South
America, and Southern Star Sales, Inc. (Southern Star), a foreign
sales corporation which markets the Company's products
internationally. American Star Corporation became dormant in
fiscal year 1994 as its sales activity was transferred to Southern
Star. All significant intercompany balances and transactions have
been eliminated in consolidation.
(c) Interim Financial Statements (Unaudited)
The consolidated financial statements as of March 31, 1995 and for
the six month periods ended March 31, 1995 and 1994 and for the
period from March 5, 1992 (inception) through September 30, 1992
are unaudited. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the
six month period ended March 31, 1995 are not necessarily
indicative of the results that may be expected for the year ending
September 30, 1995.
The unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information pursuant to the Securities and
Exchange Commission's Proxy Rules (Regulation 14A).
(d) Inventories
Inventories are valued at the lower of cost or market.
In 1994, the Company adopted the last in, first-out (LIFO) method
of costing inventory. Previously, the first-in, first-out (FIFO)
method of costing inventory was used. Management believes that
the LIFO method has the effect of minimizing the impact of price
level changes on inventory valuations and generally matches
current costs against current revenues in the consolidated
statement of income. The effect of the change was to reduce net
income by approximately $185,000, net of income taxes, from that
which would otherwise have been reported. There is no cumulative
effect on prior years since the ending inventory as previously
reported is the beginning inventory for LIFO purposes.
Accordingly, proforma results of operations for the prior year had
LIFO been followed is not determinable.
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(e) Other Current Assets
Other current assets consist principally of deposits for Texas
worker's compensation insurance.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the following
estimated useful lives:
Buildings and improvements 40 years
Computer equipment and software 5 years
Machinery and equipment 5 - 7 years
Office equipment, fixtures and vehicle 3 - 7 years
Maintenance and repairs are charged to operations
(g) Foreign Currency Transactions
The Company purchases significant amounts of inventory from
foreign suppliers. Such inventory is recorded using currency
exchange rates in effect on the date of purchase. Gains and
losses on the settlement of accounts payable for such purchases
are recorded based upon the currency exchange rates in effect on
the date of settlement. Gains and losses on accounts payable to
be settled subsequent to September 30, 1994 and 1993 have been
provided based upon the currency exchange rates in effect on
September 30, 1994 and 1993. The net gain (loss) on transactions
in foreign currencies for the years ended September 30, 1994 and
1993 was $(59,058) and $5,205.
(h) Revenue Recognition
Revenue is recognized at the time of shipment for all products.
(i) Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(j) Net (Loss) Income Per Share
Net (loss) income per share is computed based on the number of
common shares outstanding during each period.
-11- (Continued)
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) U.S. Treasury Note
U.S. treasury note represented a deposit held by the Bureau of Alcohol,
Tobacco and Firearms for the permit maintained by the Company to store
and dispense the alcohol used in production. The security consisted of a
$100,000 face value U.S. treasury note bearing interest at 4.25% per
annum. The deposit was returned and sold in 1994.
(3) Related Party Transactions
In May 1995, the Company purchased Tristar Corporation's ("Tristar")
cosmetic pencil manufacturing business, including all related equipment
and inventory, in consideration for a seven year $600,000 note payable
and cash equal to the cost of inventories payable upon utilization of
such inventories.
Tristar, a major customer of the Company, is located in the United States
and is principally engaged in the marketing and wholesale distribution of
alternatives to designer fragrances in North America. Tristar is a
publicly traded company in which the Core Sheth Families have a majority
ownership interest. Additionally, Tristar and the Company have the same
president and chief executive officer. Included in affiliate trade
accounts receivable at September 30, 1994 and 1993 and March 31, 1995, is
$1,437,466, $5,380,990 and $1,629,164, respectively, due from Tristar.
For the years ended September 30, 1994 and 1993 and the six months ended
March 31, 1995 and 1994, approximately 85%, 99%, 66%, and 94%,
respectively, of the Company's sales were to Tristar.
Approximately 2% of the Company's sales for the year ended September 30,
1994 and the six months ended March 31, 1995 were to foreign based
affiliates located principally in South America. Such sales were not
significant for the year ended September 30, 1993 and the six months
ended March 31, 1994.
For the years ended September 30, 1994 and 1993 and the six months ended
March 31, 1995 and 1994, the Company purchased approximately $5,788,000,
$6,605,000, $3,241,000, and $3,290,000, respectively, of inventory and
other items from affiliates.
In accordance with a design/consultant fee contract with Tristar whereby
the Company provides certain graphics and design consulting services, the
Company charged Tristar $150,000, $112,500, $75,000, and $75,000, for the
years ended September 30, 1994 and 1993 and the six months ended March
31, 1995 and 1994, respectively. The Company entered into a computer
services and support agreement with Tristar whereby the Company provides
access to hardware and software. The company charged Tristar $55,000 and
$55,000 for the year ended September 30, 1994 and the six months ended
March 31, 1995, respectively. These amounts have been offset against
selling, general and administrative expenses in the accompanying
consolidated statements of income and retained earnings.
Included in trade accounts receivable at September 30, 1993 is $475,200
of net advances due from Eurostar Corporation ("Corp."), a wholly-owned
subsidiary of Transvit, which employed certain executives of the Company
and provided management services to the Company. Management fees paid to
Corp. for the year ended September 30, 1993 totaled $978,896 and are
included in selling, general and administrative expenses in the
accompanying consolidated statements of income and retained earnings.
Management fees were equal to the costs incurred by Corp., which include
primarily payroll and related items. Effective October 1, 1993, the
employees of Corp. were transferred to the Company.
-12- (Continued)
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EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Related Party Transactions (continued)
On October 23, 1992, the Company and a certain affiliate entered into a
distribution agreement with Tristar under which the Company is obligated
to supply Tristar with fragrance products. The distribution agreement
extends two years beyond any notice of termination given by the Company.
In August 1993, the Company agreed that it will not provide any notice of
termination of its distribution agreement with Tristar for a period of
four years. The effect of this agreement is to assure the continuation
of the relationship between the Company and Tristar through at least
1999. As a major customer of the Company, Tristar's ability to meet its
obligations will significantly impact the level of operations of the
Company.
(4) Inventories
Inventories consist of the following:
March 31, September 30,
------------- ----------------------
1995 1994 1993
------------- --------- ---------
(unaudited)
Raw Materials $ 4,584,444 5,813,830 4,939,036
Finished Goods 1,493,102 1,144,802 99,444
Work-in-process 283,215 316,565 346,641
------------- --------- ---------
6,360,761 7,275,197 5,385,121
Less: Allowance for obsolescence
and other adjustments 592,162 349,774 110,000
Allowance for LIFO valuation 781,000 281,000 -
------------- --------- ---------
$ 4,987,599 6,644,423 5,275,121
============= ========= =========
(5) Property, Plant and Equipment
Property, plant and equipment consists of the following:
March 31, September 30,
------------- ----------------------
1995 1994 1993
------------- --------- ---------
(unaudited)
Machinery and equipment $ 4,721,822 4,728,847 4,059,594
Building and improvements 3,783,373 3,783,373 3,755,198
Computer equipment and software 1,199,047 1,110,158 468,340
Office equipment, fixtures and vehicle 450,382 438,990 322,362
Land 32,670 32,670 32,670
------------- --------- ---------
10,187,294 10,094,038 8,638,164
Less: Accumulated depreciation 2,185,632 1,653,864 685,258
------------- --------- ---------
$ 8,001,662 8,440,174 7,952,906
============= ========= =========
(6) Notes Payable
On August 1, 1993, the Company entered into a line of credit promissory
note agreement (the "LOC") with its parent company, Transvit, whereby
funds of up to $9,000,000 were made available to the Company. Proceeds
from the LOC in 1993 were used to pay certain bank debt and the
outstanding balance of a $2,000,000 line of credit demand promissory note
with Transvit. Interest is payable annually and bears interest at 4.5%
per annum. The total amount outstanding on the LOC at September 30, 1994
and 1993 is $6,215,701 and $8,968,684, respectively.
-13- (Continued)
15
EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Notes Payable- (continued)
The current installments of the LOC as of September 30, 1994 and 1993,
$2,050,000 and $2,500,000, respectively, are based on management's best
estimate of amounts to be paid during the next fiscal year. As discussed
below, the Company recently entered into a secured credit facility which
under its terms resticts the repayment of the Transvit line of credit to
payments no more than the greater of (i) $3,500,000 in the first fiscal
year or $1,500,000 per fiscal year thereafter, or (ii) fifty percent
(50%) of the Company's cash flow for fiscal years after the first year.
Accrued interest payable to Transvit of $48,471 and $58,312 as of
September 30 1994 and 1993, respectively, is included in accrued expenses
in the accompanying consolidated balance sheets.
On June 27, 1995, the Company entered into a $5,200,000 credit facility
which consists of term loans totaling $3,700,000 and a revolving credit
commitment of $1,500,000 bearing interest at the prime rate plus 1.75%
(9% at June 27, 1995) per annum and additional fees. In early July
1995, a $3,500,000 term loan was drawn down. The term loan calls for
equal monthly installments and matures in 2002. Borrowings under the
revolving line of credit are limited to forty (40%) of eligible inventory
as define therein. The revolving line of credit expires in June 1997
with options to renew annually thereafter. The credit facility is secured
by substantially all of the Company's assets. The agreement contains a
material adverse change provision, as well as certain restrictions and
conditions among which are limitations on cash dividends, capital
expenditures and repayments to Transvit under the Company's other line of
credit.
(7) Income Taxes
Income tax expense consists of the following:
Current Deferred Total
------- -------- -----
Year Ended September 30,
1994
U.S. Federal $1,776,000 110,955 1,886,955
State 249,000 8,622 257,622
---------- ------- ---------
$2,025,000 119,577 2,144,577
========== ======= =========
Year Ended September 30,
1993
U.S. Federal $1,987,642 94,430 2,082,072
State 259,602 7,337 266,939
---------- ------- ---------
$2,247,244 101,767 2,349,011
========== ======= =========
Income tax expense for the years ended September 30, 1994 and 1993
differed from the amounts computed by applying the U.S. federal income
tax rate of 35 percent to income before income taxes as a result of the
following:
1994 1993
---- ----
Computed expected tax expense $1,857,521 2,165,728
Increase (decrease) in income taxes
resulting from:
State income taxes, net of federal income
tax benefit 161,850 171,337
Penalty 60,000 68,374
Foreign sales corporation commissions
not subject to income taxes (37,000) -
Other, net 102,306 (563428)
---------- ---------
Total income tax expense $2,144,577 2,349,011
========== =========
-14- (Continued)
16
EUROSTAR PERFUMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Income Taxes - (continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1993 and 1994 are presented below:
1994 1993
---- ----
Deferred tax assets:
Inventories, principally due to allowance
for obsolescence $143,759 40,304
Start-up and organizational costs 162,257 214,428
Compensated absences, principally due
to accrual for financial reporting
purposes 41,573 -
Related party interest, principally due to
accrual for financial reporting purposes 17,760 48,018
Other 683 -
------- -------
Total deferred tax assets 366,032 302,750
Deferred tax liabilities:
Plant and equipment, principally due to
differences in deprecation and
capitalized interest 322,032 139,173
------- -------
Net deferred tax asset $44,000 163,577
======= =======
Based upon the level of historical taxable income and projections for
future taxable income, including the reversal of existing taxable
temporary differences, over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company
will realize the benefits of these deductible differences.
(8) Operating Leases
The Company has several noncancelable operating leases, primarily for
equipment, office space, and office furniture that expire over the next
three years. Rental expense for operating leases for the year ended
September 30, 1994 and 1993 was $97,838 and $69,653, respectively.
Future minimum lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) as of September
30, 1994 are:
Year ending September 30:
1995 $ 75,020
1996 50,955
1997 8,973
----------
$ 134,948
==========
(9) Export Sales and Related Receivables
Export sales, primarily to South America, for the year ended September
30, 1994 and for the six months ended March 31, 1995 and 1994 were
approximately $4,756,000, $6,000,000, and $500,000, respectively.
Included in trade accounts receivable at September 30, 1994 and for the
six months ended March 31, 1995 and 1994 is approximately $1,125,000,
$2,000,000, and $330,000, respectively, due from foreign customers.
Export sales for the year ended September 30, 1993 were not significant.
-15-
17
Item 7. Financial Statements and Exhibits. (Continued)
(b) Pro Forma Financial Information.
-16-
18
UNAUDITED PRO FORMA CONSOLIDATED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated combined financial statements
give effect to the merger of Tristar and Eurostar accounted for in a manner
similar to that in a pooling of interests as the companies are considered
entities under common control. The pro forma consolidated combined balance sheet
as of May 31, 1995 is presented as though the Merger had occurred on May 31,
1995 using Tristar's consolidated balance sheet as of May 31, 1995 and
Eurostar's consolidated balance sheet as of March 31, 1995. The pro forma
consolidated combined statements of income for the fiscal years ended August 31,
1994, 1993 and 1992 and for the nine month periods ended May 31, 1995 and 1994
are presented as though the acquisition had occurred as of March 5, 1992
(Eurostar's date of inception) using Tristar's consolidated statements of income
for the fiscal years ended August 31, 1994, 1993, and 1992 and the nine month
periods ended May 31, 1995 and 1994, and Eurostar's consolidated statements of
income for the fiscal years ended September 30, 1994 and 1993, the period from
March 5, 1992 (date of inception) through September 30, 1992 and the nine month
periods ended March 31, 1995 and 1994. The pro forma consolidated combined
financial statements have been prepared for illustrative purposes only and do
not purport to be indicative of the results that actually would have been
obtained if the Merger had been effected on the dates indicated or of the
results which may be obtained in the future.
-17-
19
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED BALANCE SHEET
Historical
-------------------------
Eurostar
Tristar Perfumes, Pro Forma
Corporation Inc. Combined
May 31, March 31, Pro Forma May 31,
ASSETS 1995 1995 Adjustments 1995
----------- ----------- ----------- -----------
Current assets:
Cash and cash equivalents $ 249,000 $ 740,000 $ 989,000
Accounts receivable 4,952,000 1,676,000 6,628,000
Accounts receivable - related parties, net - 1,893,000 $(1,629,000) (A) 264,000
Current portion note receivable - related party 50,000 - (50,000) (G)
Accounts receivable - insurance reimbursement 815,000 - 815,000
Inventories 8,549,000 4,987,000 (2,063,000) (C) 11,473,000
Prepaid expenses and other current assets 297,000 153,000 450,000
Refundable income taxes 52,000 - 52,000
Deferred income taxes - 294,000 701,000 (E) 995,000
----------- ----------- ----------- -----------
Total current assets 14,964,000 9,743,000 (3,041,000) 21,666,000
----------- ----------- ----------- -----------
Note receivable - related party 550,000 - (550,000) (G)
Assets held for sale 648,000 - 648,000
Property, plant and equipment 714,000 8,002,000 600,000 (G) 9,316,000
----------- ----------- ----------- -----------
Other assets:
Warrant valuation 1,532,000 (698,000) (D) 834,000
Other assets 56,000 56,000
Deferred income taxes - 2,714,000 (E) 2,714,000
----------- ----------- ----------- -----------
Total other assets 1,588,000 - 2,016,000 3,604,000
----------- ----------- ----------- -----------
Total assets $18,464,000 $17,745,000 $ (975,000) $35,234,000
=========== =========== =========== ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-18-
20
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED BALANCE SHEET, Continued
Historical
--------------------------
Eurostar
Tristar Perfumes, Pro Forma
Corporation Inc. Combined
May 31, March 31, Pro Forma May 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995 Adjustments 1995
----------- ----------- ----------- -----------
Current liabilities:
Short-term borrowings $ 3,964,000 $ - $ 3,964,000
Accounts payable--trade 474,000 1,044,000 1,518,000
Accounts payable--related parties, net 2,857,000 147,000 $(1,629,000) (A) 1,375,000
Accrued expenses 1,592,000 1,081,000 2,673,000
Income taxes payable - 603,000 603,000
Current portion of long-term obligations 35,000 1,500,000 1,535,000
----------- ----------- ----------- -----------
Total current liabilities 8,922,000 4,375,000 (1,629,000) 11,668,000
----------- ----------- ----------- -----------
Obligations under capital leases, less current portion 31,000 - 31,000
Subordinated long term debt, related parties 8,000,000 - 8,000,000
Net payable to parent company - 5,016,000 5,016,000
Deferred income taxes - 409,000 (409,000) (E) -
Other liabilities - 223,000 223,000
----------- ----------- ----------- -----------
Total liabilities 16,953,000 10,023,000 (2,038,000) 24,938,000
----------- ----------- ----------- -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock - - -
Common stock 67,000 1,000 99,000 (F) 167,000
Additional paid-in-capital 10,281,000 99,000 (99,000) (F) 10,281,000
Retained earnings (accumulated deficit) (8,837,000) 7,622,000 (698,000) (D)
(2,063,000) (C)
3,824,000 (E) (152,000)
----------- ----------- ----------- -----------
Total shareholders' equity 1,511,000 7,722,000 1,063,000 10,296,000
----------- ----------- ----------- -----------
Total liabilities and shareholders' equity $18,464,000 $17,745,000 $ (975,000) $35,234,000
=========== =========== =========== ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-19-
21
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED STATEMENT OF INCOME
Historical
--------------------------------
Tristar Eurostar Pro Forma
Corporation Perfumes, Inc. Combined
Nine Months Nine Months Nine Months
Ended Ended Ended
May 31, March 31, Pro Forma May 31,
1995 1995 Adjustments 1995
----------- ------------- ------------ -----------
Net sales $24,091,000 $25,708,000 $(17,636,000) (B) $32,163,000
(17,636,000) (B)
Cost of sales 19,821,000 17,670,000 (131,000) (C) 19,724,000
----------- ----------- ------------ -----------
Gross profit 4,270,000 8,038,000 131,000 12,439,000
Selling, general and administrative expenses 6,576,000 5,323,000 11,899,000
----------- ----------- ------------ -----------
(Loss) income from operations (2,306,000) 2,715,000 131,000 540,000
Other income (expense):
Interest expense (961,000) (249,000) (1,210,000)
Interest and other (expense) income (419,000) 36,000 123,000 (D) (260,000)
Insurance reimbursement 2,065,000 - 2,065,000
----------- ----------- ------------ -----------
(Loss) income before (benefit) provision for
income taxes (1,621,000) 2,502,000 254,000 1,135,000
(Benefit) provision for income taxes - 969,000 (442,000) (E) 527,000
----------- ----------- ------------ -----------
Net (loss) income $(1,621,000) $ 1,533,000 $ 696,000 $ 608,000
=========== =========== ============ ===========
Net (loss) income per common share:
Primary $ (.24) $ 1.53 $ .04
=========== =========== ===========
Fully diluted $ (.24) $ 1.53 $ .04
=========== =========== ===========
Weighted average number of shares outstanding:
(1,000,000) (F)
9,977,810 (F)
Primary 6,646,067 1,000,000 235,418 (F) 16,859,295
=========== =========== ============ ===========
(1,000,000) (F)
9,977,810 (F)
Fully diluted 6,646,067 1,000,000 244,643 (F) 16,868,520
=========== =========== ============ ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-20-
22
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED STATEMENT OF INCOME
Historical
--------------------------------
Tristar Eurostar Pro Forma
Corporation Perfumes, Inc. Combined
Nine Months Nine Months Nine Months
Ended Ended Ended
May 31, March 31, Pro Forma May 31,
1994 1994 Adjustments 1994
----------- ------------- ------------ -----------
Net sales $35,861,000 $24,605,000 $(22,867,000) (B) $37,599,000
(22,867,000) (B)
Cost of sales 29,290,000 14,907,000 (155,000) (C) 21,175,000
----------- ----------- ------------ -----------
Gross profit 6,571,000 9,698,000 155,000 16,424,000
Selling, general and administrative expenses 8,298,000 3,840,000 12,138,000
----------- ----------- ------------ -----------
(Loss) income from operations (1,727,000) 5,858,000 155,000 4,286,000
Other income (expense):
Interest expense (859,000) (248,000) (1,107,000)
Interest and other income 12,000 4,000 16,000
----------- ----------- ------------ -----------
(Loss) income before (benefit) provision for
income taxes (2,574,000) 5,614,000 155,000 3,195,000
(Benefit) provision for income taxes - 2,268,000 (659,000) (E) 1,609,000
----------- ----------- ------------ -----------
Net (loss) income (2,574,000) $ 3,346,000 $ 814,000 $ 1,586,000
=========== =========== ============ ===========
Net (loss) income per common share:
Primary $ (.39) $ 3.34 $ .09
=========== =========== ===========
Fully diluted $ (.39) $ 3.34 $ .09
=========== =========== ===========
Weighted average number of shares outstanding:
(1,000,000) (F)
9,977,810 (F)
Primary 6,629,837 1,000,000 259,780 (F) 16,867,427
=========== =========== ============ ===========
(1,000,000) (F)
9,977,810 (F)
Fully diluted 6,629,837 1,000,000 259,780 (F) 16,867,427
=========== =========== ============ ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-21-
23
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED STATEMENT OF INCOME
Historical
-------------------------------
Tristar Eurostar Pro Forma
Corporation Perfumes, Inc. Combined
Year Year Year
Ended Ended Ended
August 31, September 30, Pro Forma August 31,
1994 1994 Adjustments 1994
----------- -------------- ---------------- -----------
Net sales $46,488,000 $31,481,000 $(27,282,000)(B) $50,687,000
(27,282,000)(B)
Cost of sales 38,457,000 19,933,000 (1,155,000)(C) 29,953,000
----------- ----------- ------------ -----------
Gross profit 8,031,000 11,548,000 1,155,000 20,734,000
Selling, general and administrative expenses 10,662,000 5,944,000 16,606,000
----------- ----------- ------------ -----------
(Loss) income from operations (2,631,000) 5,604,000 1,155,000 4,128,000
Other income (expense):
Interest expense (1,195,000) (338,000) (1,533,000)
Interest and other (expense) income (352,000) 41,000 164,000 (D) (147,000)
Litigation expenses (208,000) - (208,000)
----------- ----------- ------------ -----------
(Loss) income before (benefit) provision for
income taxes (4,386,000) 5,307,000 1,319,000 2,240,000
(Benefit) provision for income taxes (95,000) 2,145,000 (820,000)(E) 1,230,000
----------- ----------- ------------ -----------
Net (loss) income $(4,291,000) $ 3,162,000 $ 2,139,000 $ 1,010,000
=========== =========== ============ ===========
Net (loss) income per common share:
Primary $ (.65) $ 3.16 $ .06
=========== =========== ===========
Fully diluted $ (.65) $ 3.16 $ .06
=========== =========== ===========
Weighted average number of shares outstanding:
(1,000,000)(F)
9,977,810 (F)
Primary 6,631,948 1,000,000 241,886 (F) 16,851,664
=========== =========== ============ ===========
(1,000,000)(F)
9,977,810 (F)
Fully diluted 6,631,948 1,000,000 241,886 (F) 16,851,664
=========== =========== ============ ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-22-
24
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED STATEMENT OF INCOME
Historical
---------------------------------
Tristar Eurostar Pro Forma
Corporation Perfumes, Inc. Combined
Year Year Year
Ended Ended Ended
August 31, September 30, Pro Forma August 31,
1993 1993 Adjustments 1993
------------- -------------- ------------- --------------
Net sales $ 51,409,000 $ 28,145,000 $ (25,104,000)(B) $ 54,450,000
(25,104,000)(B)
Cost of sales 40,367,000 17,688,000 3,349,000 (C) 36,300,000
------------- ------------ ------------- -------------
Gross profit 11,042,000 10,457,000 (3,349,000) 18,150,000
Selling, general and administrative expenses 8,753,000 3,935,000 12,688,000
------------- ------------ ------------- -------------
(Loss) income from operations 2,289,000 6,522,000 (3,349,000) 5,462,000
Other income (expense):
Interest expense (248,000) (342,000) (590,000)
Interest and other (expense) income 25,000 8,000 33,000
Litigation expenses (2,758,000) - (2,758,000)
Shareholders litigation settlement (9,500,000) - (9,500,000)
------------- ------------ ------------- -------------
(Loss) income before (benefit) provision for
income taxes (10,192,000) 6,188,000 (3,349,000) (7,353,000)
(Benefit) provision for income taxes (2,033,000) 2,349,000 (2,562,000)(E) (2,246,000)
------------- ------------ ------------- -------------
Net (loss) income $ (8,159,000) $ 3,839,000 $ (787,000) $ (5,107,000)
============= ============ ============= =============
Net (loss) income per common share:
Primary $ (1.23) $ 3.83 $ (.31)
============= ============ =============
Fully diluted $ (1.23) $ 3.83 $ (.31)
============= ============ =============
Weighted average number of shares outstanding:
(1,000,000)(F)
Primary 6,623,238 1,000,000 9,977,810 (F) 16,601,048
============= ============ ============= =============
(1,000,000)(F)
Fully diluted 6,623,238 1,000,000 9,977,810 (F) 16,601,048
============= ============ ============= =============
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-23-
25
TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC.
UNAUDITED PRO FORMA CONSOLIDATED
COMBINED STATEMENT OF INCOME
Historical
----------------------------------
Tristar Eurostar Pro Forma
Corporation Perfumes, Inc. Combined
Year Period Year
Ended Ended Ended
August 31, September 30, Pro Forma August 31,
1992 1992 Adjustments 1992
------------ -------------- ----------- ------------
Net sales $ 47,519,000 $ 216,000 $47,735,000
Cost of sales 35,129,000 199,000 35,328,000
------------ ---------- ----------- -----------
Gross profit 12,390,000 17,000 12,407,000
Selling, general and administrative expenses 5,492,000 743,000 6,235,000
------------ ---------- ----------- -----------
Income (loss) from operations 6,898,000 (726,000) 6,172,000
Other income (expense):
Interest expense (236,000) (38,000) (274,000)
Interest and other income 36,000 36,000
Litigation expenses (1,650,000) - (1,650,000)
------------ ---------- ----------- -----------
Income (loss) before provision (benefit) for
income taxes 5,048,000 (764,000) 4,284,000
Provision (benefit) for income taxes 1,761,000 (265,000) 1,496,000
------------ ---------- ----------- -----------
Net income (loss) $ 3,287,000 $ (499,000) $ 2,788,000
============ ========== =========== ===========
Net income (loss) per common share:
Primary $ .46 $ (.49) $ .22
============ ========== ===========
Fully diluted $ .46 $ (.49) $ .22
============ ========== ===========
Weighted average number of shares outstanding:
(1,000,000)(F)
Primary 7,072,844 1,000,000 5,820,389 (F) 12,893,233
============ ========== =========== ===========
(1,000,000)(F)
Fully diluted 7,072,844 1,000,000 5,820,389 (F) 12,893,233
============ ========== =========== ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial
Statements.
-24-
26
TRISTAR CORPORATION
Notes to Unaudited Pro Forma Consolidated Combined Financial Statements
The following pro forma adjustments are reflected in the accompanying unaudited
pro forma consolidated combined balance sheet and statements of income.
(A) To eliminate intercompany balances between Tristar and Eurostar.
(B) To eliminate intercompany sales between Tristar and Eurostar.
(C) To eliminate the impact of intercompany profit in Tristar's
ending inventory on items purchased from Eurostar.
(D) To reflect the write-off of the unamortized portion of the value
assigned to the distribution agreement between Tristar and
Eurostar in connection with the valuation of warrants issued to
the Core Sheth Families and the extension of the expiration date
of warrants previously issued to the Core Sheth Families (see
Note 6 of Notes to Consolidated Financial Statements) and to
reflect the resultant reduction in amortization expense. At the
Merger date, the unamortized portion of this value will be
written off as a charge through the statement of operations. This
charge, which should approximate $657,000 if the merger is
consummated in August 1995 as currently planned, is not reflected
in the accompanying pro forma statements of operations.
(E) To eliminate Tristar's deferred tax asset valuation and to tax
effect the pro forma adjustments at 34%. Based upon the combined
Tristar and Eurostar's level of historical taxable income and
projections for future taxable income, including the reversal of
existing taxable temporary differences, over the periods which
the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of
these deductible differences.
(F) To reflect the issuance of 9,977,810 shares of Tristar Common
Stock in exchange for Eurostar's outstanding shares and to
reflect the impact of Tristar's common equivalent shares from
dilutive stock options and warrants.
The pro forma consolidated combined balance sheet does not
reflect the possible future accounting impact of the potential
reduction in the exercise price of the warrants held by the Core
Sheth Families to purchase an aggregate of 2,000,000 shares of
Tristar Common Stock as the effect of repricing is currently
unknown. A valuation of the repricing provisions will be
completed at the date of consummation of the merger utilizing the
Black Scholes Method. The value related to the repricing
provisions, if any, will be accounted for through a reduction in
Retained Earnings in a manner similar to that for a dividend,
with a corresponding increase in Additional Paid-In Capital to
reflect the corresponding increase in warrant value. See "The
Merger -- Description of the Merger -- Repricing of Certain
Warrants."
(G) To reclassify the note receivable from Eurostar related to the
May 1995 pencil plant sale to property, plant and equipment.
Substantial charges will be incurred by the combined company in connection with
the Merger. The investment banking, legal, accounting, printing, mailing and
similar expenses are expected to approximate $1,000,000. Such costs will be
reflected in the combined company's fiscal 1995 statement of operations yet are
not reflected in the pro forma consolidated combined financial statements except
for the approximately $92,000 which has been accrued for as of May 31, 1995.
-25-
27
Item 7. Financial Statements and Exhibits. (Continued)
(c) Exhibit Index.
Exhibit 3.1 Certificate of Incorporation, as amended
Exhibit 10.1 Agreement and Plan of Merger dated as of July
1, 1995, among TRISTAR CORPORATION, Eurostar
Perfumes, Inc. and Transvit Manufacturing
Corporation
Exhibit 10.2 Amendment to Common Stock Purchase Warrant
dated August 31, 1995, between TRISTAR
CORPORATION and Starion International, Ltd.
Exhibit 10.3 Agreement dated August 31, 1995, among
TRISTAR CORPORATION, Eurostar Perfumes, Inc.
and Starion International Ltd.
-26-
28
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 thereunto duly authorized.
TRISTAR CORPORATION
By /s/ Loren M. Eltiste
-----------------------------------
Loren M. Eltiste
Vice President, Chief Financial
Officer, Assistant Secretary and
Principal Accounting Officer
DATE: August 31, 1995
-27-
29
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
Exhibit 3.1 Certificate of Incorporation, as amended
Exhibit 10.1 Agreement and Plan of Merger dated as of July
1, 1995, among TRISTAR CORPORATION, Eurostar
Perfumes, Inc. and Transvit Manufacturing
Corporation
Exhibit 10.2 Amendment to Common Stock Purchase Warrant
dated August 31, 1995, between TRISTAR
CORPORATION and Starion International, Ltd.
Exhibit 10.3 Agreement dated August 31, 1995, among
TRISTAR CORPORATION, Eurostar Perfumes, Inc.
and Starion International Ltd.