1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JANUARY 1, 1999
BARNETT INC.
------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-21728 59-1380437
-------- ----------
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3333 LENOX AVENUE, JACKSONVILLE, FLORIDA 32254
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (904) 384-6530
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
================================================================================
2
ITEM 2. ACQUISITION OF ASSETS
On January 8, 1999, Barnett Inc.(the "Company") acquired the U.S. Lock
division of WOC, Inc., an indirect wholly owned subsidiary of Waxman Industries,
Inc. for a cash purchase price of approximately $33 million and the assumption
of liabilities estimated at approximately $2 million (the "U.S. Lock
Acquisition"). The effective date of the U.S. Lock Acquisition was January 1,
1999. Waxman Industries, Inc. continues to own 44.3% of the Company. The $33
million cash portion of the purchase price was financed by a term loan provided
by First Union National Bank.
The factors considered by the Company in determining the price to be
paid for the U.S. Lock Acquisition included its historical and expected growth
rates, its historical and expected earnings before interest and taxes as well as
the anticipated impact on the Company's financial results.
U.S. Lock is a leading distributor of security hardware to locksmiths
and other security hardware installers.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
A) Financial Statements of Business Acquired
Audited financial statements of U.S. Lock for the fiscal year ended June 30,
1998 and Report of Independent Public Accountants. Unaudited financial
statements for the six months ended December 31, 1998 and 1997.
Report of Independent Public Accountants.
Statements of Net Assets as of June 30, 1998 (audited) and December 31,
1998 (unaudited).
Statements of Operations for the Year Ended June 30, 1998 (audited)
and for the Six Months Ended December 31, 1998 and 1997 (unaudited).
Statements of Divisional Investment for the Year Ended June 30, 1998
(audited) and for the Six Months Ended December 31, 1998 (unaudited).
Statements of Cash Flows for the Year Ended June 30, 1998 (audited)
and for the Six Months Ended December 31, 1998 and 1997 (unaudited).
Notes to Financial Statements.
B) Pro Forma Financial Information
Unaudited Pro Forma Financial Data as of and for the Year Ended June 30,
1998 and the Six Months Ended December 31, 1998.
Balance Sheet as of December 31, 1998.
Statements of Income for the Year Ended June 30, 1998 and the Six Months
Ended December 31, 1998.
1
3
C) Exhibits:
1. Press release issued by Barnett Inc. on January 7, 1999
2. Asset purchase agreement dated December 18, 1998 among Barnett Inc., Waxman
Industries, Inc., and WOC Inc. (Incorporated by reference to Exhibit 3 of the
Form 8-K dated January 15, 1999 filed by Waxman Industries, Inc.)
2
4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BARNETT INC.
By /s/ ANDREA M. LUIGA
----------------------
Andrea M. Luiga
Dated: March 15, 1999 Vice President and Chief Financial Officer
3
5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of WOC Inc.:
We have audited the accompanying statement of net assets of U.S. Lock
Corporation (the "Company"), a division of WOC Inc. and indirect division of
Waxman Industries, Inc., as of June 30, 1998, and the related statements of
operations, divisional investment and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 U.S. Lock
Corporation as of June 30, 1998, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
December 23, 1998.
4
6
U.S. LOCK CORPORATION
(A DIVISION OF WOC INC. AND INDIRECT DIVISION OF WAXMAN INDUSTRIES, INC.)
STATEMENTS OF NET ASSETS
JUNE 30, 1998 AND UNAUDITED DECEMBER 31, 1998
($ IN THOUSANDS)
ASSETS
June 30, December 31,
1998 1998
---------- ------------
(audited) (unaudited)
CURRENT ASSETS:
Cash $ 726 $ 1,132
Trade receivables, net 2,478 2,868
Other receivables 82 21
Inventories 5,655 6,190
Prepaid expenses 57 (58)
-------- --------
Total current assets 8,998 10,153
PROPERTY AND EQUIPMENT:
Building improvements 760 817
Equipment 1,434 1,851
-------- --------
2,194 2,668
Less accumulated depreciation
and amortization (1,401) (1,511)
-------- --------
Property and equipment, net 793 1,157
OTHER ASSETS 25 34
-------- --------
TOTAL ASSETS $ 9,816 $ 11,344
======== ========
LIABILITIES AND DIVISIONAL INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 1,590 $ 1,726
Accrued liabilities 62 69
Accrued salaries and wages 107 54
Accrued bonuses 174 111
-------- --------
Total current liabilities 1,933 1,960
COMMITMENTS AND CONTINGENCIES
DIVISIONAL INVESTMENT 7,883 9,384
-------- --------
TOTAL LIABILITIES AND DIVISIONAL INVESTMENT $ 9,816 $ 11,344
======== ========
5
7
The accompanying Notes to Financial Statements
are an integral part of these statements.
U.S. LOCK CORPORATION
---------------------
(A DIVISION OF WOC INC. AND INDIRECT DIVISION OF WAXMAN INDUSTRIES, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998 AND UNAUDITED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 ($ IN THOUSANDS)
Six Months Six Months
Year Ended Ended Ended
June 30, December 31, December 31,
1998 1998 1997
-------- -------- --------
(audited) (unaudited) (unaudited)
Net Sales $ 22,762 $ 13,361 $ 10,833
Cost of sales 15,177 8,977 7,297
-------- -------- --------
Gross profit 7,585 4,384 3,536
Selling, general and
administrative expenses 4,780 2,717 2,329
Corporate charge 911 535 419
-------- -------- --------
Income before income taxes 1,894 1,132 788
Provision for income taxes 757 453 315
-------- -------- --------
Net Income $ 1,137 $ 679 $ 473
======== ======== ========
6
8
The accompanying Notes to Financial Statements
are an integral part of these statements.
U.S. LOCK CORPORATION
---------------------
(A DIVISION OF WOC INC. AND INDIRECT DIVISION OF WAXMAN INDUSTRIES, INC.)
STATEMENTS OF DIVISIONAL INVESTMENT
FOR THE YEAR ENDED JUNE 30, 1998 AND UNAUDITED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 ($ IN THOUSANDS)
Balance, June 30, 1997 $ 6,302
Net income 1,137
Advances from parent, net 444
-------
Balance, June 30, 1998 (audited) 7,883
Net income 679
Advances from parent, net 822
-------
Balance, December 31, 1998 (unaudited) $ 9,384
=======
7
9
The accompanying Notes to Financial Statements
are an integral part of these statements.
U.S. LOCK CORPORATION
---------------------
(A DIVISION OF WOC INC. AND INDIRECT DIVISION OF WAXMAN INDUSTRIES, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998 AND UNAUDITED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 ($ IN THOUSANDS)
SIX MONTHS SIX MONTHS
ENDED ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31,
JUNE 30,1998 1998 1997
---------------- ---------------- ----------------
(audited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net Income $ 1,137 $ 679 $ 473
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 193 110 93
Provision for bad debts 116 68 54
Changes in assets and liabilities:
Trade receivables (659) (458) (195)
Other receivables (23) 61 22
Inventories (1,248) (535) (885)
Prepaid expenses 35 115 122
Other assets 29 (9) 16
Accounts payable 571 136 370
Accrued liabilities 143 (109) 2
------- ------- -------
Net Cash Provided by Operating Activities 294 58 72
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Capital expenditures (463) (474) (92)
------- ------- -------
Net Cash Used in Investing Activities (463) (474) (92)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Advances from parent, net 444 822 164
------- ------- -------
Net Cash Provided by Financing Activities 444 822 164
------- ------- -------
8
10
NET INCREASE IN CASH 275 406 144
------ ------ ------
BALANCE, BEGINNING OF PERIOD 451 726 451
------ ------ ------
BALANCE, END OF PERIOD $ 726 $1,132 $ 595
====== ====== ======
The accompanying Notes to Financial Statements
are an integral part of these statements.
U.S. LOCK CORPORATION
---------------------
(A DIVISION OF WOC INC. AND INDIRECT DIVISION OF WAXMAN INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1998 (AUDITED)
and six months ended December 31, 1998 (unaudited)
NOTE 1 - DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A. DESCRIPTION OF THE COMPANY
U.S. Lock Corporation ("U.S. Lock" or the "Company") is a division of WOC Inc.
("WOC" or the "Parent"). WOC is a wholly-owned subsidiary of Waxman USA Inc.
("Waxman USA"), which is a wholly-owned subsidiary of Waxman Industries, Inc.
("Waxman Industries").
The Company is a distributor of a full line of security hardware, including
locksets, door closers, locksmith tools and other products to the locksmith
market in the United States. Many of the Company's products are sold under the
U.S. Lock (R) and Rx "Dealer Only"(TM) trademarks. U.S. Lock markets and
distributes its products through a telemarketing sales team, supplemented with
an annual catalog and monthly promotional flyers, which are mailed to existing
and potential customers.
B. TRADE RECEIVABLES
Trade receivables are presented net of allowances for doubtful accounts of
$436,000 and $442,000 at June 30, 1998 and December 31, 1998, respectively. Bad
debt expense totaled $116,000 for the year ended June 30, 1998 and $68,000 for
the six months ended December 31, 1998.
C. INVENTORIES
At June 30, 1998 and December 31, 1998, inventories, consisting primarily of
finished goods, are carried at the lower of first-in, first-out (FIFO) cost or
market.
9
11
D. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. For financial reporting purposes,
building improvements are amortized on a straight-line basis over the estimated
useful lives of the related assets or the remaining lease term of the related
building, whichever is shorter. Equipment is depreciated on a straight-line
basis over the estimated useful lives of the related assets. Depreciable lives
are 5 to 10 years for building improvements and 5 to 7 years for equipment. For
income tax purposes, accelerated methods of depreciation are used. Depreciation
and amortization expense totaled $193,000 for the year ended June 30, 1998 and
$110,000 for the six months ended December 31, 1998.
E. FINANCIAL STATEMENT ESTIMATES
The preparation of 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, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
F. EARNINGS PER SHARE
Earnings per share data is not presented and is not meaningful, as the Company
is a division of WOC, an indirect wholly-owned subsidiary of Waxman Industries.
G. NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income"
("SFAS 130") to be effective for financial statements issued for fiscal years
beginning after December 15, 1997. SFAS 130 requires companies to display the
components of comprehensive income with the same prominence as the other
financial statements for all periods presented. The Company does not have any
comprehensive income items.
NOTE 2 - INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of SFAS
No. 109, "Accounting for Income Taxes." SFAS No. 109 utilizes an asset and
liability approach and deferred taxes are determined based on the estimated
future tax effects of differences between the financial statement and tax bases
of assets and liabilities given the provisions of the enacted tax laws. The tax
provision for the twelve months ended June 30, 1998 and six months ended
December 31, 1998 represents the provision for federal and various state taxes,
calculated on a stand-alone basis.
The Company participates in the consolidated tax group of which Waxman
Industries is the common parent. Commencing July 1, 1994, the Company began
participating in a new tax sharing agreement with Waxman Industries. Under this
agreement, the Company's federal tax liability is equal to the lesser of (i) its
federal tax liability calculated on a stand-alone basis or (ii) its portion of
Waxman Industries' federal tax liability. Waxman Industries had approximately
$52.7 million of available domestic net operating loss carryforwards for income
tax purposes at June 30, 1998, which expire between 2008 and 2013. The Parent
files separate income tax returns in certain states based on the results of its
operations, which include the operations of U.S. Lock, within those states.
The components of the provision for income taxes, calculated on a stand-alone
basis, are as follows:
10
12
Six Months
Year Ended Ended
June 30, 1998 December 31, 1998
---------------- -----------------
U.S. Federal $663,000 $396,000
State and other 94,000 57,000
-------- --------
Total current $757,000 $453,000
======== ========
Deferred taxes and amounts payable to Waxman Industries are included in the
divisional investment in the accompanying statements of net assets.
The following table reconciles the U.S. statutory tax rate to the Company's
effective tax rate:
Six Months
Year Ended Ended
June 30, 1998 December 31, 1998
---------------- -----------------
U.S. statutory rate 35.0% 35.0%
State taxes, net 4.9 5.0
Other, net 0.1 --
------ ------
Effective tax rate 40.0% 40.0%
====== ======
The Company made income tax payments to the Parent of $94,000 for state income
taxes in the year ended June 30, 1998. No income tax payments were made in the
six months ended December 31, 1998.
NOTE 3 - LEASE COMMITMENTS
The Company leases certain warehouse and office facilities and equipment under
operating lease agreements, which expire at various dates through 2003.
Future minimum rental payments are as follows:
1999 $134,000
2000 127,000
2001 108,000
2002 99,000
2003 51,000
Thereafter --
--------
11
13
$519,000
========
Total rent expense charged to operations was $200,000 for the year ended June
30, 1998 and $130,000 for the six months ended December 31, 1998.
NOTE 4 - PROFIT SHARING AND 401(K) PLAN
Eligible employees of the Parent and certain divisions of the Parent participate
in a trusteed, profit sharing and 401(k) retirement plan sponsored by Waxman
Industries. Contributions by the Company are discretionary and are determined by
the Board of Directors of Waxman Industries. There were no profit sharing
contributions for the year ended June 30, 1998 or the six months ended December
31, 1998; however, the Company contributed a 50% match, up to the first 4% of
salary deferrals by employees, which amounted to $32,000 for the year ended June
30, 1998 and $21,000 for the six months ended December 31, 1998. The Company
currently offers no other retirement, post-retirement or post-employment
benefits.
NOTE 5 - RELATED-PARTY TRANSACTIONS
Management fees charged to the Company by Waxman Industries are presented in the
accompanying statements of operations as the corporate charge. In accordance
with an intercorporate agreement, the management fees charged to the Company are
the lesser of (i) 4% of net sales or (ii) the actual cost of providing services
to the Company.
In April 1996, Waxman Industries entered into an intercorporate agreement (the
"New Intercorporate Agreement") with Barnett Inc. ("Barnett"), a company in
which Waxman USA has a 44.4% ownership interest at June 30, 1998. Pursuant to
the New Intercorporate Agreement, Barnett provides certain services to U.S.
Lock. These services include the utilization of Barnett's management information
systems, financial accounting, order processing and billing and collection
services. The Company pays Barnett the allocable cost of the salaries and
expenses of Barnett's employees while they are performing such services. The
Company also reimburses Barnett for all out-of-pocket disbursements to third
parties by Barnett required for the provision of such services. These charges
amounted to $412,000 and $203,000 for the year and six months ended June 30 and
December 31, 1998, respectively, and are reflected in selling, general and
administrative expenses in the accompanying statements of operations. All
amounts incurred by Barnett on behalf of the Company have been reimbursed by the
Company as of June 30, 1998 and December 31, 1998.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings and claims that arise in the
ordinary course of business. In the opinion of management, the amount of any
ultimate liability with respect to these actions will not materially affect the
Company's financial statements or results of operations.
NOTE 7 - SALE OF THE COMPANY
In December 1998, Waxman Industries and the Parent announced they entered into
an agreement to sell the business of the Company, including certain assets and
liabilities of the Company, to Barnett.
12
14
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the
"Unaudited Pro Forma Financial Data") of the Company have been derived by the
application of pro forma adjustments to the historical financial statements of
U.S. Lock and Barnett Inc. for the periods indicated. The adjustments are
described in the accompanying notes.
The Unaudited Pro Forma Financial Data give effect to the
transactions as if the transactions occurred as of December 31, 1998, for
purposes of the balance sheet data, and as of the beginning of the period for
the year ended June 30, 1998 and the six months ended December 31, 1998, for
purposes of the statement of income data. The Unaudited Pro Forma Financial Data
does not give effect to any transactions other than the transactions discussed
below and those discussed in the accompanying notes. The Unaudited Pro Forma
Financial Data are provided for informational purposes only and do not purport
to represent the results of operations or financial position of the Company had
the transactions in fact occurred on such dates, nor do they purport to be
indicative of the financial position or results of operations as of any future
date or for any future period.
The U.S. Lock Acquisition was accounted for using the purchase
method of accounting. The total cost of the U.S. Lock Acquisition will be
allocated to the tangible and intangible assets acquired and liabilities assumed
based upon their respective fair values as of the time the U.S. Lock Acquisition
was consummated. The pro forma adjustments are based upon available information
and upon certain assumptions that management believes are reasonable. The final
allocation of the purchase price, however, and the resulting effect on income
from operations may differ significantly from the pro forma amounts included
herein.
13
15
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
($ IN THOUSANDS)
Historical Adjustments For
---------- ---------------
Barnett Inc. U.S. Lock. The Transactions Pro Forma
------------ ---------- ---------------- ---------
ASSETS
CURRENT ASSETS:
Cash $ 321 $ 1,132 $ (1,215)(a) $ 238
Accounts receivable, net 33,341 2,889 36,230
Inventories 51,092 6,190 (250)(b) 57,032
Prepaid expenses 2,906 (58) 2,848
-------- -------- -------- --------
Total current assets 87,660 10,153 (1,465) 96,348
PROPERTY AND EQUIPMENT:
Property and equipment, net 19,015 1,157 3,000(c) 23,172
OTHER ASSETS:
Cost of Business in Excess
of Net Assets Acquired 4,732 -- 22,745(d) 27,477
Deferred Tax Assets, net 716 716
Other Assets 1,124 34 83(e) 1,241
-------- -------- -------- --------
TOTAL ASSETS $113,247 $ 11,344 $ 24,363 $148,954
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
14
16
CURRENT LIABILITIES:
Accounts payable $ 19,924 $ 1,726 $ 21,650
Accrued liabilities 2,577 234 $ 747(f) 3,558
Accrued income taxes payable -- -- --
Short-term debt 7,001 -- 7,001
-------- -------- -------- --------
Total current liabilities 29,502 1,960 747 32,209
LONG TERM DEBT -- -- 33,000(g) 33,000
SHAREHOLDERS' EQUITY:
Divisional equity -- 9,384 (9,384)(h) --
Common stock 162 -- 162
Paid-in capital 47,820 -- 47,820
Retained earnings 35,763 -- 35,763
-------- -------- -------- --------
Total Shareholders' equity 83,745 9,384 (9,384) 83,745
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $113,247 $ 11,344 $ 24,363 $148,954
======== ======== ======== ========
See Notes to Unaudited Pro Forma Balance Sheet
15
17
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Reflects both the payment of deferred financing charges of $0.1
million and the elimination of the remaining cash balance of $1.1
million. All cash eliminated was retained by Waxman Industries.
(b) Reflects the adjustment of certain inventory to be
discontinued to fair value.
(c) Reflects the fair market value of U.S. Lock's corporate office
building located in Brentwood, New York that was purchased as part
of the U.S. Lock Acquisition but was not owned by U.S. Lock.
(d) For purposes of the pro forma information, the excess of the
purchase price over the historical net assets and assumed
liabilities of U.S. Lock has been considered to be goodwill and
other intangible assets, pending other purchase price allocation
of adjustments. The adjustment reflects the following as of
December 31, 1998:
Purchase price of U.S. Lock Acquisition $ 33,000
Transaction expenses related to the U.S. Lock Acquisition 600
Fair value adjustment of inventory 250
Fair value of building purchased (3,000)
Severance and other liabilities 147
Asset not acquired in purchase 1,132
Elimination of historical divisional equity (9,384)
--------
$ 22,745
========
(e) Reflects the financing costs associated with the purchase of U.S.
Lock.
(f) Reflects the (i) transaction expenses of $0.6 million incurred,
and (ii) recognition of severance and other liabilities of $0.15
million incurred with the acquisition of U.S. Lock.
(g) Reflects the term loan provided by First Union National Bank for
the $33.0 million cash purchase price.
(h) Reflects the elimination of historical divisional equity of U.S.
Lock.
16
18
UNAUDITED PRO FORMA STATEMENT OF INCOME
JUNE 30, 1998
($ IN THOUSANDS)
Historical Adjustments For
---------- ---------------
Barnett Inc. U.S. Lock. The Transactions Pro Forma
------------ ---------- ---------------- ---------
Net sales $ 199,578 $ 22,762 $ 222,340
Cost of sales 132,135 15,177 147,312
--------- --------- --------- ---------
Gross profit 67,443 7,585 75,028
Selling, general and
administrative expenses 44,061 4,780 569 (a) 49,410
Corporate charge -- 911 (911)(b) --
--------- --------- --------- ---------
Operating income 23,382 1,894 342 25,618
Interest expense 157 -- 2,079 (c) 2,236
--------- --------- --------- ---------
Income before income taxes 23,225 1,894 (1,737) 23,382
Provision for income taxes 8,948 757 (467)(d) 9,238
--------- --------- --------- ---------
Net income $ 14,277 $ 1,137 $ (1,270) $ 14,144
========= ========= ========= =========
Earnings per share:
Basic $ 0.88 $ 0.87
Diluted $ 0.87 $ 0.87
Weighted average shares used:
Basic 16,179 16,179
Diluted 16,341 16,341
17
19
See Notes to Unaudited Pro Forma Statement of Income
UNAUDITED PRO FORMA STATEMENT OF INCOME
DECEMBER 31, 1998
($ IN THOUSANDS)
Historical Adjustments For
---------- ---------------
Barnett Inc. U.S. Lock. The Transactions Pro Forma
------------ ---------- ---------------- ---------
Net sales $ 110,511 $ 13,361 $ 123,872
Cost of sales 74,057 8,977 83,034
--------- --------- --------- ---------
Gross profit 36,454 4,384 40,838
Selling, general and
administrative expenses 24,178 2,717 285 (a) 27,180
Corporate charge -- 535 (535)(b) --
--------- --------- --------- ---------
Operating income 12,276 1,132 250 13,658
Interest expense 66 -- 1,040 (c) 1,106
--------- --------- --------- ---------
Income before income taxes 12,210 1,132 (790) 12,552
Provision for income taxes 4,704 453 (202)(d) 4,955
--------- --------- --------- ---------
Net income $ 7,506 $ 679 $ (588) $ 7,597
========= ========= ========= =========
Earnings per share:
Basic $ 0.46 $ 0.47
Diluted $ 0.46 $ 0.47
Weighted average shares used:
Basic 16,212 16,212
Diluted 16,223 16,223
18
20
See Notes to Unaudited Pro Forma Statement of Income
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF INCOME
(a) The U.S. Lock Acquisition will be accounted for under the purchase method
of accounting. Under the purchase method of accounting, the total purchase
price will be allocated to the tangible and intangible assets acquired and
liabilities assumed by the Company based on their respective fair values as
of the acquisition date based upon valuations and other studies not yet
available. For purposes of the pro forma information, the excess of the
purchase price over the historical net assets of U.S. Lock has been
considered to be goodwill, pending the completion of other purchase price
allocation adjustments. Assuming the pro forma remaining excess purchase
costs to be allocated will be amortized over a straight-line period of
approximately 40 years, the resulting amortization is approximately $0.6
million for the year ended June 30, 1998 and $0.3 million for the six
months ended December 31, 1998.
(b) Eliminates the intercompany corporate charge as per the intercorporate
agreement with Waxman Industries.
(c) Reflects additional interest incurred by the Company in connection with the
term loan provided by First Union National Bank. Assuming an interest rate
of 6.3%, interest expense on the principal of $33.0 million is
approximately $2.1 million and $1.0 million for the year and six months
ended June 30, 1998 and December 31, 1998, respectively.
(d) Adjusts income tax benefits for assumed tax effect of pro forma
adjustments, excluding goodwill amortization, and using an estimated 40.0%
rate.
19