1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
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FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 1, 1996
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NORWOOD PROMOTIONAL PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
STATE OF TEXAS 0-21800 74-2553074
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(State or other jurisdiction (Commission (IRS. Employer
of incorporation) file no.) identification no.
70 N. E. LOOP 410 #295 SAN ANTONIO, TEXAS 78216
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(Address of principal executive offices)
Registrant's telephone number, including area code (210) 341-9440
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As reported in the Registrant's Current Report on Form 8-K dated April 15,
1995, the Registrant completed on April 1, 1995, its acquisition of the assets
of Alpha Products Business. ("Seller"). The consideration paid for Seller's
acquired assets was $6.7 million cash, which was drawn under the Company's
existing debt facilities, plus the assumption of certain operating liabilities.
As indicated in the previously filed Form 8-K, the audited financial statement
and pro forma financial information requirements of Item 7 were to be filed by
amendment. With this Amendment No. 1 on Form 8-K/A, Item 7 of the Registrant's
Current Report on Form 8-K dated April 15, 1995 is hereby restated and amended
to correctly state the information required under Items 7(a) and 7(b).
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
The Registrant's acquisition of the assets of Alpha Products Business
included the following business units -
1. Assets of Alpha Products Business
(i) The following items are incorporated herein by reference as
Exhibit 1 hereto:
1. The audited financial statements as of March 31, 1996 and
April 30, 1995 together with Report of Independent Public
Accountants.
3
(b) Pro Forma Financial Information Page
Set forth on the following pages are the Pro Forma
Condensed Consolidated Statements of Income of the
Registrant, required to be set forth in the Registrant's
Current Report on Form 8-K dated April 15 1995, which
Report describes the acquisition of Alpha Products, Inc.
by the Registrant and is amended by this Form 8-K/A.
The Pro Forma Condensed Consolidated Balance Sheet of the
Registrant as of September 2, 1995 presents the financial
position of the registrant as if the registrant had
acquired Alpha Products Business as of March 2, 1996.
Such balance sheet combines, with appropriate
adjustments, the Registrant's unaudited Condensed Balance
Sheet as of September 2, 1995 and Alpha Product
Business's Condensed Balance sheet as of March 31, 1996.
The acquisition will be accounted for as a purchase and
the results of operations of Alpha Products Business will
be included in the Registrant's Consolidated Statement of
Income beginning April 1, 1996. 5
The Pro Forma Condensed Consolidated Statement of Income
for the six month period ended March 2, 1996 presents the
results of operations for that period as if the
Registrant had acquired TEE-OFF Enterprises, Inc., Ocean
Specialty Products, Inc. and Alpha Products Business as
of September 3, 1995, the beginning of fiscal 1996. Such
Pro Forma Condensed Consolidated Statement of Income
combines, with appropriate adjustments, the Registrant's
unaudited results of operations for the six month period
ended March 2, 1996 with Alpha Products Business's
unaudited results of operations for the six months ended
February 29, 1995. 7
The Pro Forma Consolidated Statement of Income for the
fiscal year ended September 2, 1995 presents the results
of operations of the Registrant for such year as if the
Registrant had acquired The Bob Allen Companies, Inc.,
Designer Plastics, Inc., BTS Group, Inc., Ocean Specialty
Manufacturing Corporation, TEE-OFF Enterprises, Inc. and
Alpha Products Business as of September 4, 1994, the
beginning of fiscal 1995. Such Pro Forma Condensed
Consolidated Statement of Income combines, with
appropriate adjustments, the Registrant's results of
operations for its fiscal year ended September 2, 1995,
and Alpha Products Business's unaudited results of
operations for the twelve months ended August 31, 1995. 9
The Pro Forma financial statements have been prepared on the
basis of preliminary assumptions and estimates which are subject
to change. The pro forma financial statements may not be
indicative of the results that actually would have been achieved
if the acquisition of Alpha Products Business had been effected
on the dates indicated or which may be achieved in the future.
The pro forma financial statements should be read in conjunction
with the Consolidated Financial Statements of the Registrant,
and the separate audited financial statements for Alpha Products
Business.
(c) Exhibits
1. The audited financial statements as of March 31, 1996 and
April 30, 1995 together with Report of Independent Auditors'
Report.
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PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 2, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
PRO FORMA PRO FORMA
NORWOOD OCEAN ADJUSTMENTS NORWOOD TEE-OFF ADJUSTMENTS
(A) (B) INC. (DECR). PRO FORMA (C) INC. (DECR).
------- ------ ----------- --------- ------ -----------
ASSETS
Current Assets:
Cash and cash equivalents $2,174 ($95) $94 (j) $2,173 $865 ($415)(j)
Accounts receivable 17,001 1,074 (143)(j) 17,932 567
Other receivables 492 0 492 0
Inventories 23,913 733 79 (j) 24,725 1,125
Prepaid expenses and other assets 1,916 73 (21)(j) 1,968 47
------- ------ ----------- --------- ------ -----------
Total current assets 45,496 1,785 9 47,290 2,604 (415)
Property, plant and equipment, net 12,090 942 (290)(e) 12,742 338 272 (e)
Deferred taxes 249 (39) 39 (j) 249 0 0
Goodwill 30,443 0 1,459 (f) 31,902 0 5,446 (f)
Other assets 6,581 99 909 (f) 7,589 0 1,000 (f)
------- ------ ----------- --------- ------ -----------
Total assets $94,859 $2,787 $2,126 $99,772 $2,942 $6,303
======= ====== =========== ========= ====== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $5,803 $1,131 $91 (g) $7,025 $1,535 ($5)(g)
Accrued liabilities 4,246 147 49 (g) 4,442 628 (562)(g)
Income taxes payable 866 (58) 58 (k) 866 0
Current maturities of long-term debt 3,232 0 3,232 0
Current portion of lease obligation 266 0 266 0
------- ------ ----------- --------- ------ -----------
Total current liabilities 14,413 1,220 198 15,831 2,163 (567)
Long term debt 59,210 1,562 1,933 (h) 62,705 0 7,649 (h)
Capital lease obligation 202 0 202
Shareholders' equity:
Common stock 19,617 2 (2)(i) 19,617 1 (1)(i)
Additional paid-in-capital 369 0 369 5 (5)(i)
Treasury stock (8) 0 (8)
Retained Earnings 1,310 3 (3)(i) 1,310 773 (773)(i)
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21,288 5 (5) 21,288 779 (779)
Less receivables for prch. of common stock 254 254
------- ------ ----------- --------- ------ -----------
Total shareholders' equity 21,034 5 (5) 21,034 779 (779)
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Total liabilities and shareholders' equity $94,859 $2,787 $2,126 $99,772 $2,942 $6,303
======= ====== =========== ========= ====== ===========
PRO FORMA
NORWOOD ALPHA ADJUSTMENTS NORWOOD
PRO FORMA (D) INC. (DECR). PRO FORMA
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ASSETS
Current Assets:
Cash and cash equivalents $2,623 $0 $0 $2,623
Accounts receivable 18,499 2,017 20,516
Other receivables 492 0 492
Inventories 25,850 3,017 28,867
Prepaid expenses and other assets 2,015 176 2,191
--------- ------- ------------ ---------
Total current assets 49,479 5,210 0 54,689
Property, plant and equipment, net 13,352 5,734 (951)(e) 18,135
Deferred taxes 249 0 0 249
Goodwill 37,348 0 0 37,348
Other assets 8,589 0 0 8,589
--------- ------- ------------ ---------
Total assets $109,017 $10,944 ($951) $119,010
========= ======= =========== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $8,555 $1,435 $0 $9,990
Accrued liabilities 4,508 263 150 (g) 4,921
Income taxes payable 866 0 866
Current maturities of long-term debt 3,232 349 3,581
Current portion of lease obligation 266 264 530
--------- ------- ------------ ---------
Total current liabilities 17,427 2,311 150 19,888
Long term debt 70,354 356 6,675 (h) 77,385
Capital lease obligation 202 501 703
Shareholders' equity:
Common stock 19,617 7,776 (7,776)(i) 19,617
Additional paid-in-capital 369 0 369
Treasury stock (8) 0 (8)
Retained Earnings 1,310 0 1,310
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21,288 7,776 (7,776) 21,288
Less receivables for prch. of common stock 254 254
--------- ------- ------------ ---------
Total shareholders' equity 21,034 7,776 (7,776) 21,034
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Total liabilities and shareholders' equity $109,017 $10,944 ($951) $119,010
========= ======= =========== =========
See notes on following page
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NORWOOD PROMOTIONAL PRODUCTS, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 2, 1995
(a) Represents the Registrant's consolidated financial position as reported in
Form 10-K as of September 2, 1995
(b) Represents Ocean Manufacturing Corporation's balance sheet as of November
20, 1995.
(c) Represents TEE-OFF Enterprises Inc.'s balance sheet as of January 23, 1996.
(d) Represents Alpha Product's Business balance sheet as of March 31, 1996.
(e) To adjust fixed assets to their estimated fair value or decrease for
negative goodwill.
(f) To record non-compete and excess of purchase price paid over estimated fair
value of assets acquired.
(g) To record accrual of acquisition related costs offset by liabilities
retained by seller.
(h) Funds used to acquire Ocean Specialty Manufacturing Corporation, TEE-OFF
Enterprises, Inc. and Alpha Products Business and to pay certain acquisition
related costs assumed to have been provided from borrowings under the
Registrant's credit facilities or through issuance of promissory notes to
former shareholders'.
(i) Represents the elimination of Ocean Specialty Manufacturing Corporation,
TEE-OFF Enterprises Inc.'s and Alpha Products Business's stockholders'
equity.
(j) Represents assets retained by selling shareholders'.
(k) Represents retained tax liabilities or retained payables of selling
shareholders'.
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PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
YEAR TO DATE SECOND QUARTER ENDED MARCH 2, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
PRO FORMA
TEE- ACQUISITION FOR THE
NORWOOD OCEAN(A) OFF(B) ALPHA (C) ADJUSTMENTS ACQUISITIONS
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Sales $63,454 $1,836 $2,573 $9,373 $77,236
Cost of sales 44,369 1,437 2,076 8,455 (571)(d) 55,766
-------- --------- -------- --------- --------- ----------
Gross profit 19,085 399 497 918 571 21,470
Operating expenses:
Selling 4,890 65 61 832 (124)(d) 5,724
Sales administration 2,689 38 30 429 3,186
General and administrative 5,600 291 228 494 (224)(d) 6,389
Amortization 1,562 0 212 (e) 1,774
-------- --------- -------- --------- --------- ----------
Total operating expenses 14,741 394 319 1,755 (136) 17,073
Income from operations 4,344 5 178 (837) 707 4,397
Interest expense 1,869 53 0 68 442 (f) 2,432
-------- --------- -------- --------- --------- ----------
Income before income taxes 2,475 (48) 178 (905) 265 1,965
Provision for income taxes 1,030 (20) 0 0 (211)(g) 799
-------- --------- -------- --------- --------- ----------
Net Income $1,445 ($28) $178 ($905) $476 1,166
======== ========= ======== ========= ========= ==========
Net income per common share:
Primary shares $0.33 $0.27
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Fully diluted shares $0.33 $0.27
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Weighted average common
shares and equivalents:
Primary shares 4,383 4,383
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Fully diluted shares 4,383 4,383
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See notes on following page
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NORWOOD PROMOTIONAL PRODUCTS, INC.
NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE SECOND QUARTER ENDED MARCH 2, 1996
(a) Key acquired the assets of Ocean Specialty Manufacturing Corporation on
November 20, 1995.
(b) ArtMold acquired the assets of TEE-OFF Enterprises, Inc. on January 23,
1996.
(c) Radio Cap Company, Inc. acquired the assets of Alpha Products, Inc. on
April 1, 1996.
(d) Reflects estimated cost savings in salaries and wages and a bonus, all of
which were directly attributable to the Ocean and TEE-OFF Acquisitions,
depreciation expense savings due to the establishment of fair values of net
fixed assets below historical costs, rent reductions and reduction of
corporate allocations from the former parent to Alpha Products, Inc., as
follows:
Cost of sales:
Depreciation $327
Rent reduction 115
Corporate allocation 129
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$571
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Selling expenses:
Corporate allocation $105
Salaries wages and other 19
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$124
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General and administrative:
Salaries and wages $ 96
Depreciation 66
Corporate allocation 32
Other 30
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$224
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(e) Reflects the amortization of the excess of purchase price paid over
estimated fair value of assets acquired and the amortization of various
non-compete agreements entered into in connection with the acquisitions.
The excess of purchase price paid over estimated fair value of assets
acquired is amortized over 15 years, the non-compete agreements in
connection with the Ocean and TEE-OFF acquisitions are amortized over the
ten year term of the respective agreements.
(f) Adjusts interest expense for the financing of the acquisition of Ocean,
TEE-OFF and Alpha at the Company's effective borrowing rate of 7.5% per
annum.
(g) Reflects income tax effect for the pro forma adjustments.
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PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 2, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
PRO FORMA
BOB DESIGNER TEE- ACQUISITION FOR THE
NORWOOD ALLEN(A) LINE(B) OCEAN(C) BTS(D) OFF (E) ALPHA(F) ADJUSTMENTS ACQUISITIONS
-------- ------- --------- --------- -------- ---------- --------- ----------- ------------
Sales $103,860 $7,949 $5,379 $7,327 $7,346 $9,079 $19,610 $160,550
Cost of sales 70,963 4,875 3,481 5,737 4,796 7,174 17,106 (2,049)(g) 112,083
-------- ------ -------- -------- ------- --------- -------- -------- --------
Gross profit 32,897 3,074 1,898 1,590 2,550 1,905 2,504 2,049 48,467
Operating expenses:
Selling 7,459 918 377 272 863 151 2,560 (146)(g) 12,454
Sales administration 3,831 473 296 139 253 78 1,318 6,388
General and administrative 9,037 1,498 1,140 1,334 1,151 477 2,418 (2,583)(g) 14,472
Amortization 2,119 0 0 0 0 1,690 (h) 3,809
-------- ------ -------- -------- ------- --------- -------- -------- --------
Total operating expenses 22,446 2,889 1,813 1,745 2,267 706 6,296 (1,039) 37,123
Income from operations 10,451 185 85 (155) 283 1,199 (3,792) 3,088 11,344
Interest expense 3,619 132 85 194 211 6 729 1,612 (i) 6,588
-------- ------ -------- -------- ------- --------- -------- -------- --------
Income before income taxes 6,832 53 0 (349) 72 1,193 (4,521) 1,476 4,756
Provision for income taxes 2,800 0 3 16 24 0 0 (890)(j) 1,953
-------- ------ -------- -------- ------- --------- -------- -------- --------
Net Income $4,032 $53 ($3) ($365) $48 $1,193 ($4,521) $2,366 $2,803
======== ====== ======== ======== ======= ========= ======== ======== ========
Net income per common share:
Primary shares $1.11 $0.77
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Fully diluted shares $1.10 $0.76
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Weighted average common
shares and equivalents:
Primary shares 3,636 3,636
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Fully diluted shares 3,668 3,668
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See notes on following page
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NORWOOD PROMOTIONAL PRODUCTS, INC.
NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 2, 1995
(a) Air-Tex acquired the assets of The Bob Allen Companies, Inc. on March 1,
1995.
(b) Air-Tex acquired the assets of Designer Plastics, Inc. on June 9, 1995.
(c) Key acquired the assets of Ocean Specialty Manufacturing Corporation on
November 20, 1995.
(d) Barlow acquired the assets of BTS Group on July 28, 1995.
(e) ArtMold acquired the assets of TEE-OFF Enterprises, Inc. on January 23,
1996.
(f) Radio Cap Company, Inc. acquired the assets of Alpha Products, Inc. on
April 1, 1996.
(g) Reflects estimated cost savings in salaries and wages and a bonus, all of
which were directly attributable to the Bob Allen, Designer Line, BTS, Ocean
and TEE-OFF acquisitions, depreciation expense savings due to the
establishment of fair values of net fixed assets below historical costs,
cost savings from expenses directly related to a certain joint venture,
(which was not included in the BTS acquisition), rent reductions, closing
costs related to the purchase of Alpha Products by the former owner and
reduction of corporate allocations from the former parent to Alpha Products,
Inc., as follows:
Cost of sales:
Depreciation $ 1,495
Rent reduction 278
Corporate allocation 276
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$ 2,049
=======
Selling expenses:
Corporate allocation $ 129
Salaries wages and other 17
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$ 146
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General and administrative:
Salaries and wages $ 1,028
Bonus 1,014
Depreciation 183
Corporate allocation (380)
Closing costs 523
Other 215
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$ 2,583
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(h) Reflects the amortization of the excess of purchase price paid over
estimated fair value of assets acquired and the amortization of various
non-compete agreements entered into in connection with the acquisitions.
The excess of purchase price paid over estimated fair value of assets
acquired is amortized over 15 years, the non-compete agreements in
connection with the Ocean and TEE-OFF acquisitions are amortized over the
ten year term of the respective agreements.
(i) Adjusts interest expense for the financing of the acquisition of Ocean,
TEE-OFF and Alpha at the Company's effective borrowing rate of 7.5% per
annum.
(j) Reflects income tax effect for the pro forma adjustments.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 14, 1996 By: /s/ J. Max Waits
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J. Max Waits
Secretary
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Norwood Promotional Products, Inc.
Form 8-K
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description of Exhibit Page
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99.1 The audited financial statements as of March 31,
1996 and April 30, 1995 together with Report of
Independent Auditors' Report. 15