SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
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 31, 1994
LADD FURNITURE, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-11577 56-1311320
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (910) 889-0333
N/A
(Former name or former address, if changed since last report.)
Item 7 of Form 8-K is hereby amended as follows:
ITEM 7. Financial Statements and Exhibits.
a) Consolidated Financial Statements of Pilliod Holding
Company
See the Index to Consolidated Financial
Statements following the signature page
hereto.
b) Revised Pro Forma Financial Information of LADD
Furniture, Inc.
Revised Unaudited Pro Forma Combined
Condensed Financial Information
Revised Unaudited Pro Forma Combined
Condensed Statement of Earnings for the
year ended January 1, 1994
Revised Unaudited Pro Forma Combined
Condensed Balance Sheet as of January 1,
1994
c) Exhibits
23.2 Consent of Ernst & Young
2
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 hereunto duly authorized.
LADD FURNITURE, INC.
Date: April 24, 1995 By: /s/William S. Creekmuir
William S. Creekmuir
Title: Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
3
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Auditors .............................................F-2
Consolidated Balance Sheets at January 31, 1994,
May 1, 1993 and May 2, 1992 ..............................................F-3
For the nine month period ended January 31, 1994 and the years
ended May 1, 1993 and May 2, 1992:
Consolidated Statements of Operations ...................................F-4
Consolidated Statements of Shareholders' Equity..........................F-5
Consolidated Statements of Cash Flows ...................................F-6
Notes to Consolidated Financial Statements .................................F-7
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Pilliod Holding Company
We have audited the accompanying consolidated balance sheets of Pilliod
Holding Company as of January 31, 1994, May 1, 1993 and May 2, 1992, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the nine month period ended January 31, 1994 and the years ended May
1, 1993 and May 2, 1992. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, subsequent
to the original issuance of the financial statements referred to above, it was
discovered that work in process inventory accounts were misstated. The
accompanying restated financial statements give effect to the adjustment of such
misstatements.
In our opinion, the restated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pilliod
Holding Company at January 31, 1994, May 1, 1993 and May 2, 1992 and the
consolidated results of its operations and its cash flows for the nine month
period ended January 31, 1994 and the years ended May 1, 1993 and May 2, 1992 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in the
nine month period ended January 31, 1994 the Company changed its method of
accounting for income taxes. As permitted by Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," prior year financial
statements were restated.
(Signature of Ernst & Young LLP appears here)
ERNST & YOUNG LLP
Toledo, Ohio
March 14, 1994, except for the third paragraph
of this report and Note 2 to the consolidated financial
statements as to which the date is April 14, 1995
F-2
PILLIOD HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS (RESTATED)
(Dollars in thousands except per share)
January 31, May 1, May 2,
1994 1993 1992
ASSETS
Current assets:
Cash $ 410 $ 19 $ 9
Accounts receivable, less allowance of $64
($49 in 1993 and $360 in 1992) for doubtful
accounts (Note 4) 12,455 11,571 10,988
Inventories (Notes 2 and 5):
Finished products 5,803 5,214 4,813
Work in process 1,525 1,159 944
Raw materials 3,911 4,500 2,604
11,239 10,873 8,361
Prepaid expenses 664 540 461
Deferred income taxes (Note 9) 1,643 708 -
Total current assets 26,411 23,711 19,819
Other assets:
Goodwill, net of accumulated amortization of
$1,829 ($1,668 in 1993 and $1,454 in 1992)
(Note 9) 6,449 6,610 6,824
Property and equipment held for sale - - 1,425
Other 22 16 190
Total other assets 6,471 6,626 8,439
Property, plant and equipment, at cost less
accumulated depreciation and amortization
(Notes 6 and 9) 9,050 8,418 8,078
$41,932 $38,755 $36,336
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,442 $ 8,084 $ 6,881
Accrued liabilities:
Compensation 851 1,952 1,772
Commissions and royalties 475 475 414
Taxes other than income 465 417 309
Insurance and other 243 148 155
Interest - - 1,851
2,034 2,992 4,501
Long-term debt due within one year or which
may become due on demand(Note 7) 4,568 4,661 24,677
Total current liabilities 14,044 15,737 36,059
Long-term debt, less amounts classified as due
currently (Note 7) 25,992 20,382 2,397
Deferred income taxes 505 708 -
Shareholders' equity (Notes 3, 8 and 9):
Class A common stock, $.01 par value;
9,000,000 shares authorized, 6,842,500
shares outstanding 68 68 68
Class B common stock, $.01 par value;
9,000,000 shares authorized, none
outstanding
Capital in excess of par value 6,622 6,622 6,622
Deficit (5,299) (4,762) (8,810)
Total shareholders' equity 1,391 1,928 (2,120)
$41,932 $38,755 $36,336
SEE ACCOMPANYING NOTES.
F-3
PILLIOD HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)
(Dollars in thousands except per share)
NINE MONTHS
ENDED YEAR ENDED
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
Net sales $ 63,394 $ 77,719 $ 67,823
Cost of sales 49,808 60,051 53,557
Gross profit 13,586 17,668 14,266
Selling, general and administrative 8,800 11,261 10,748
Nonrecurring costs (NOTE 3) 5,159 - -
Operating profit (loss) (373) 6,407 3,518
Other income (expense):
Interest expense (1,411) (2,555) (3,358)
Other 109 270 352
Income (loss) before income taxes (1,675) 4,122 512
Provision (credit) for income taxes
(NOTE 9):
Federal:
Current - 74 40
Deferred (962) - -
State - deferred (176) - -
(1,138) 74 40
Net income (loss) $ (537) $ 4,048 $ 472
Earnings (loss) per share $ (.08) $ .54 $ .06
SEE ACCOMPANYING NOTES.
F-4
PILLIOD HOLDING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (RESTATED)
(Dollars in thousands)
Class A Capital in
Common Excess of
Stock Par Value Deficit Total
Balance at April 27, 1991
(NOTE 9) $68 $6,622 $ (9,282) $ (2,592)
Net income 472 472
Balance at May 2, 1992 68 6,622 (8,810) (2,120)
Net income 4,048 4,048
Balance at May 1, 1993 68 6,622 (4,762) 1,928
Net loss (537) (537)
Balance at January 31,
1994 $68 $6,622 $ (5,299) $ 1,391
SEE ACCOMPANYING NOTES.
F-5
PILLIOD HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
(Dollars in thousands)
NINE MONTHS
ENDED YEAR ENDED
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
OPERATING ACTIVITIES
Net income (loss) $ (537) $ 4,048 $ 472
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 1,493 2,093 2,382
Deferred taxes (1,138) - -
Gain on sales of property and
equipment (8) (15) (8)
Write down of property held for sale - - 108
Changes in operating assets and
liabilities:
Accounts receivable (884) (583) (1,511)
Inventories (366) (2,512) 1,305
Prepaid expenses (124) (79) 310
Accounts payable (642) 1,203 (520)
Accrued liabilities (958) (1,509) 1,229
Net cash provided by (used in) operating
activities (3,164) 2,646 3,767
INVESTING ACTIVITIES
Purchases of property and equipment (1,966) (1,818) (494)
Proceeds from sales of property and
equipment 10 1,467 32
Other (6) 63 (63)
Net cash used in investing activities (1,962) (288) (525)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 7,731 3,937 854
Payments on long-term debt (2,214) (6,209) (4,076)
Increase in deferred financing costs - (25) (61)
Other - (51) -
Net cash provided by (used in) financing
activities 5,517 (2,348) (3,283)
Net increase (decrease) in cash 391 10 (41)
Cash at beginning of period 19 9 50
Cash at end of period $ 410 $ 19 $ 9
Supplemental cash flow information:
Cash paid for interest $ 1,358 $ 4,137 $ 2,857
Cash paid for income taxes $ 79 $ 98 $ 31
Non-cash investing and financing activities:
During fiscal 1993 the Company entered into capital lease obligations of
approximately $325 for new equipment.
SEE ACCOMPANYING NOTES.
F-6
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Effective prior to the start of business on January 31, 1994, all issued and
outstanding shares of the Company's common stock were acquired by LADD
Furniture, Inc. (LADD) (the "Acquisition") (see Note 3). The consolidated
financial statements include all transactions which occurred prior to the
closing of the Acquisition. All operations of the Company on January 31,
1994 were for the benefit of LADD.
The consolidated financial statements include the accounts of Pilliod
Holding Company (Company) and the accounts of its wholly-owned subsidiary, The
Pilliod Cabinet Company (Cabinet Company). Prior to the Acquisition, the
Company's fiscal year ended on the Saturday nearest April 30.
INVENTORIES
Inventories are valued at the lower of last-in, first-out (LIFO) cost or
market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment are provided
over the estimated useful lives of the assets using both straight-line and
declining balance methods.
Goodwill, which arose at the time of the March 19, 1985 acquisition of
Cabinet Company, is being amortized on a straight-line basis over 40 years.
PROFIT SHARING PLAN
Substantially all of the Company's employees are participants in a profit
sharing plan. Contributions to the plan are at the discretion of the Board of
Directors. Contributions of $110 were made in fiscal 1994; no contributions were
made in fiscal years 1993 or 1992.
F-7
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES
In the nine month period ended January 31, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," ("SFAS No. 109"). As permitted by the Statement, prior year
financial statements were restated effective with the March 19, 1985 acquisition
of Cabinet Company. Previous accounting rules required that assets acquired in a
business combination be recorded at their net-of-tax value and allowed the tax
effects to be discounted. SFAS No. 109 requires that such acquired assets be
recorded at their full assigned value with offsetting deferred taxes which may
not be discounted.
Under the liability method required by the Statement, deferred tax assets
and liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed based on the weighted average number
of common and dilutive common equivalent shares outstanding, 6,842,500 in 1994,
7,556,500 in 1993 and 7,519,536 in 1992.
2. RESTATEMENT
Subsequent to issuance of the financial statements for the nine month
period ended January 31, 1994 and the years ended May 1, 1993 and May 2, 1992,
it was discovered that work in process inventory accounts at one location were
overstated by $1,391 at January 31, 1994, $1,076 at May 1, 1993 and $169 at May
2, 1992. Accordingly, the accompanying financial statements give effect to the
restatement by reducing work in process inventory balances by such amounts.
F-8
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
2. RESTATEMENT (CONTINUED)
The effects of restatement on income (loss) before income taxes, provision
(credit) for income taxes, net income (loss) and earnings (loss) per share are
as follows:
NINE MONTHS
ENDED YEAR ENDED
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
Income (loss) before income taxes:
As previously stated $ (1,360) $ 5,029 $ 681
Adjustment for inventory misstatement (315) (907) (169)
As restated (1,675) 4,122 512
Provision (credit) for income taxes:
As previously stated (599) 97 40
Adjustment for tax effect of inventory
misstatement (539) (23) -
As restated (1,138) 74 40
Net income (loss):
As previously stated (761) 4,932 641
Adjustment for inventory misstatement,
net of income taxes 224 (884) (169)
As restated $ (537) $ 4,048 $ 472
Earnings (loss) per share:
As previously stated $ (.11) $ .65 $ .09
Adjustment for inventory misstatement,
net of income taxes .03 .11 .03
As restated $ (.08) $ .54 $ .06
Income (loss) before income taxes as previously stated for 1992 has been
reduced by $69 as a result of the retroactive adoption of FAS 109 (see NOTE 9).
Amounts for 1993 have been previously reported on a restated basis for the
adoption of FAS 109.
No deferred tax credits were recorded in 1993 or 1992 due to the history of
net operating losses (see NOTE 9).
F-9
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
3. ACQUISITION OF THE COMPANY
Effective January 31, 1994 all issued and outstanding shares of the
Company's common stock were acquired by LADD. In connection with the
Acquisition, the Company, concurrent with the closing, repaid substantially all
outstanding long-term debt out of funds provided by LADD. Prior to but as a
result of the Acquisition, the Company paid management bonuses of $1,013,
redeemed all outstanding stock options for $4,078 and incurred certain other
expenses aggregating $68, all of which are included in nonrecurring costs in the
accompanying 1994 statement of operations.
4. CONCENTRATION OF CREDIT RISK
Cabinet Company is principally engaged in the business of furniture
manufacturing. Substantially all accounts receivable are from department stores
and furniture retailers. Credit is extended to customers based on an evaluation
of credit reports, payment practices and, in most cases, financial condition.
Collateral or letters of credit are generally not required. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
5. INVENTORIES
Under the LIFO method, inventories have been reduced by approximately $695,
$523 and $688 at January 31, 1994, May 1, 1993 and May 2, 1992, respectively,
from amounts which would have been reported under the first-in, first-out (FIFO)
method.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
Land and improvements $ 764 $ 730 $ 723
Buildings 8,244 7,895 7,500
Machinery and equipment 19,502 18,031 16,763
Office and show space equipment 1,668 1,607 2,275
Automotive equipment 172 151 170
30,350 28,414 27,431
Less accumulated depreciation and
amortization 21,300 19,996 19,353
$ 9,050 $ 8,418 $ 8,078
F-10
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
7. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt consists of the following:
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
Revolving line of credit with banks,
interest at prime plus 2% (8%
aggregate rate at January 31, 1994) $17,245 $ 9,514 $ 9,484
Term loans from banks, monthly
principal installments of $205, interest
at prime plus 2% (8% aggregate rate at
January 31, 1994) payable monthly 5,265 6,903 8,906
Subordinated notes (see below) 4,437 4,675 5,000
Notes payable to banks, effectively
guaranteed by the Company's principal
shareholders, due July 1, 1995, interest
at prime plus 1.5% (7.5% aggregate
rate at January 31, 1994) payable
monthly 3,000 3,000 3,000
Various equipment lease obligations,
payable monthly to August 1995 (see
Note 7) 247 348 128
Note payable to former shareholder,
payable in monthly installments of
$20, including interest at prime (6% at
January 31, 1994) 216 363 556
Commitment fees payable to bank, non-
interest bearing, payable $10 monthly 150 240 -
30,560 25,043 27,074
Amounts due within one year or which
may become due on demand 4,568 4,661 24,677
$25,992 $20,382 $ 2,397
All notes payable and long-term debt are classified in accordance with their
terms at January 31, 1994 as if the Acquisition and related transactions
described in Note 3 had not occurred. As a condition of the Acquisition, the
Company, with funds provided by LADD, repaid substantially all notes payable
and long-term debt concurrent with the closing on January 31, 1994.
F-11
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
7. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
On April 28, 1993 the Company entered into an agreement with the holders of
its subordinated notes to amend the notes. The agreement required the payment of
all accrued and unpaid interest through February 18, 1993 and the forgiveness of
$2,175 of principal. The amended agreement required the payment of an additional
$1,000 if a Change of Control Event occurred prior to April 28, 1994.
Recognition of gains on the debt restructuring was deferred pending expiration
of the contingency. As a result of the Acquisition, the $1,000 contingent
payment became due and was paid by the Company, concurrent with the closing, out
of funds provided by LADD. The January 31, 1994 and May 1, 1993 carrying value
of the subordinated debt consists of the remaining principal balance, expected
interest over the life of the notes and net contingent amounts payable.
At May 2, 1992, the Company had violated certain covenant requirements in
bank borrowing agreements. The banks did not grant waivers of the covenant
violations and could have declared the Company in default, and the debt due;
therefore, all borrowings under the agreement were classified as current in the
May 2, 1992 balance sheet.
8. COMMON STOCK
In addition to the 9,000,000 shares of authorized Class A common stock, the
Company is authorized to issue 9,000,000 shares of Class B common stock, of
which none have been issued. The two classes of common stock entitle the holders
to the same rights and privileges except that Class A common stock entitles the
holder to voting rights while Class B common stock has no voting rights.
Shareholders of Class A common stock are permitted to exchange any or all
shares for the same number of Class B shares and Class B holders are entitled to
convert any or all shares into the same number of Class A shares within certain
limitations.
Prior to but as a result of the Acquisition, the Company redeemed all
1,310,000 stock options then outstanding for aggregate consideration of $4,078.
F-12
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
8. COMMON STOCK (CONTINUED)
Information on stock options is as follows:
Class A Shares Exercise
Under Option Price
Outstanding at April 27, 1991 1,020,000 $.50 to $1.17
Granted in 1992 795,000 $ .25
Cancelled in 1992 (725,000) $.85 to $1.17
Outstanding at May 2, 1992 and May 1,
1993 1,090,000 $ .25 to $.85
Granted in 1994 220,000 $ 1.00
Redeemed in 1994 (1,310,000) $.25 to $1.00
Outstanding at January 31, 1994 -
9. INCOME TAXES
In the nine month period ended January 31, 1994, the Company adopted SFAS
No. 109. The Statement requires the use of the asset and liability approach for
accounting and reporting for income taxes. Financial statements for prior years
were restated effective with the March 19, 1985 acquisition of the Cabinet
Company. As a result of the changes in accounting for business combinations
required by SFAS No. 109, the restatement of the acquisition of Cabinet Company
resulted in additional goodwill ($1,840), additional costs allocated to
property, plant and equipment ($969) and increased deferred tax liabilities
($2,809). The net effect at April 27, 1991 of the additional depreciation of
property, plant and equipment, the additional amortization of goodwill and the
additional deferred tax credits was a reduction in deficit of $1,681 from
amounts reported prior to adoption. The effects of adoption on 1994, 1993 and
1992 pretax results of operations as a result of restatement for the 1985
acquisition were not material. The effects of adoption on the 1993 and 1992
provision (credit) for income taxes were not material.
At January 31, 1994, the Company has operating loss carryforwards for tax
purposes of approximately $5,970. Such carryforwards may be used to reduce
otherwise taxable income until they expire beginning in 2005. Alternative
minimum tax credits of $149 are available to offset future regular federal
income tax liabilities and do not expire.
F-13
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
9. INCOME TAXES (CONTINUED)
At May 1, 1993 and May 2, 1992, valuation allowances of $413 and $1,968,
respectively, were established to reduce net deferred tax assets to zero due to
the history of net operating losses. A portion of the valuation allowance was
reversed in 1993 principally as a result of profitable operations reducing net
operating loss carryforwards. The remaining valuation allowance was reversed in
the nine month period ended January 31, 1994 due to continued profitable
operations prior to nonrecurring costs.
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
Deferred tax assets:
Net operating loss carryforwards $2,270 $ 1,484 $ 3,184
Accrued liabilities 277 400 467
Other 173 135 169
Total deferred tax assets 2,720 2,019 3,820
Less valuation allowance - (413) (1,968)
Net deferred tax assets 2,720 1,606 1,852
Deferred tax liabilities:
Inventory 829 782 758
Property, plant and equipment 748 821 1,094
Other 5 3 -
Total deferred tax liabilities 1,582 1,606 1,852
Net deferred tax assets $1,138 $ - $ -
Deferred taxes are classified as follows:
Current assets $1,643 $ 708 $ -
Noncurrent liabilities (505) (708) -
Net deferred tax assets $1,138 $ - $ -
F-14
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share)
9. INCOME TAXES (CONTINUED)
A reconciliation of the provision (credit) for income taxes based on the
statutory U.S. Federal tax rate to the consolidated provision (credit) for
income taxes is as follows:
JANUARY 31, MAY 1, MAY 2,
1994 1993 1992
Expected tax (benefit) at 34% of pretax
income (loss) $ (570) $ 1,401 $ 174
Reversal of deferred tax valuation
allowance (413) (1,555) (251)
Debt restructuring basis differences (131) (22) -
State and local taxes - net of federal -
benefit (74) 128
Amortization of goodwill 62 55 73
Other (12) 67 44
$ (1,138) $ 74 $ 40
F-15
REVISED UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION
The following Revised Unaudited Pro Forma Combined Condensed
Statement of Earnings for the year ended January 1, 1994 and
the Unaudited Pro Forma Combined Condensed Balance Sheet as of
January 1, 1994 give effect to the Pilliod Holding Company and
subsidiary (Pilliod Furniture) acquisition and the other
adjustments and assumptions described in the notes to such
combined condensed statements, as if the transaction had
occurred at the beginning of the year ended January 1, 1994,
in the case of the Statement of Earnings, and at January 1,
1994, in the case of the Balance Sheet. The unaudited pro
forma combined condensed financial information has been
revised to incorporate changes to the audited historical
financial statements of Pilliod Furniture resulting from
discovery of misstatements to work-in-process inventory
accounts subsequent to issuance of the original financial
statements that were included in the registrant's Form 8-K/A-1
filed April 8, 1994.
The unaudited pro forma combined condensed financial
information relating to Pilliod Furniture is based on the
audited historical financial statements of the Company as of
and for the year ended January 1, 1994 and on the revised
audited historical financial statements of Pilliod Furniture
as of and for the nine months ended January 31, 1994, as well
as the fourth quarter of the revised audited historical
financial statements of Pilliod Furniture as of and for the
year ended May 1, 1993. The unaudited pro forma combined
condensed financial information gives effect to the
acquisition under the purchase method of accounting based on a
purchase price of $54,000,000 for the common stock, plus
transaction expenses of approximately $397,000, through the
use of borrowings of approximately $34,400,000 and proceeds
from the sale of selected trade accounts receivable for
$20,000,000. The total purchase cost of $54,397,000 was
allocated first to the tangible assets and liabilities of
Pilliod Furniture based upon their respective fair values and
the remainder was allocated to the excess of cost over the
assigned value of net assets acquired. Additionally, the
unaudited pro forma combined condensed financial information
excludes certain non-recurring expenses, principally relating
to management bonuses and redemption of outstanding stock options,
incurred by Pilliod Furniture during 1993.
The revised unaudited pro forma combined condensed financial
information is not necessarily indicative of future operations
or the actual results that would have occurred had the
transaction been consummated at the beginning of the year
presented. Moreover, valuations assigned to the assets
acquired and liabilities assumed are preliminary and subject
to change.
LADD FURNITURE, INC. AND SUBSIDIARIES
REVISED UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
For the year ended January 1, 1994
(Dollar amounts in thousands, except share data)
Historical Pro Forma
LADD Furniture, Inc. Pilliod Holding Co. Nonrecurring Purchase
and Subsidiaries and Subsidiary Costs Adjustments Combined
Net sales $521,200 86,645 607,845
Cost of sales 426,921 67,277 494,198
Gross profit 94,279 19,368 0 0 113,647
Selling, general, and
administrative expenses 81,953 11,741 1,020 (3) 94,464
(250)(2)
Nonrecurring costs 5,159 (5,159) 0 0
Operating income 12,326 2,468 5,159 (770) 19,183
Other deductions:
Interest expense 5,542 2,048 (2,027)(4) 7,455
1,892 (4)
Other, net 377 75 (215)(1) 1,077
840 (1)
5,919 2,123 0 (490) 8,532
Earnings before income taxes 6,407 345 5,159 (1,260) 10,651
Income tax expense (benefit) 2,561 (1,102) 1,960 (223)(5) 4,191
995 (6)
Net earnings $3,846 1,447 3,199 (2,032) 6,460
Net earnings per common share $0.17 0.28
Weighted average common
shares outstanding 23,053,654 23,053,654
See notes to revised unaudited pro forma combined condensed statement
of earnings.
LADD FURNITURE, INC. AND SUBSIDIARIES
REVISED UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of January 1, 1994
(In thousands)
Historical Pro Forma
LADD Furniture, Inc. Pilliod Holding Co. Purchase
and Subsidiaries and Subsidiary Adjustments Combined
Current assets:
Cash and temporary investments $ 1,350 410 1,760
Trade accounts receivable, net 72,975 12,455 (20,000)(3) 65,155
(275)(1)
Inventories 100,639 11,239 (1,157)(1) 110,721
Prepaid expenses and current assets 6,110 2,307 (1,257)(1) 7,160
Total current assets 181,074 26,411 (22,689) 184,796
Property, plant, and equipment, net 97,497 9,050 200 (1) 106,747
Intangible and other assets, net 57,166 6,471 26,478 (1) 90,115
Total assets $335,737 41,932 3,989 381,658
Current liabilities:
Current installments of long-term debt 5,815 4,568 (4,424)(3) 5,959
Short-term bank debt 20,000 (3) 20,000
Trade accounts payable 23,414 4,758 28,172
Accrued expenses and other current liabilities 28,841 4,718 1,470 (2) 35,029
Total current liabilities 58,070 14,044 17,046 89,160
Long-term debt, excluding current installments 105,257 25,992 (25,467)(3) 119,509
(422)(1)
14,149 (3)
Deferred items and other liabilities 22,307 505 74 (1) 22,886
Total liabilities 185,634 40,541 5,380 231,555
Shareholders' equity 150,103 1,391 (1,391)(4) 150,103
Total liabilities and shareholders' equity $335,737 41,932 3,989 381,658
See notes to revised unaudited pro forma combined condensed balance sheet.
NOTES TO REVISED UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF EARNINGS
(1) To record amortization expense for intangible assets, based upon a
forty year useful life, resulting from the allocation of the purchase
price to noncurrent assets at the date of the acquisition; and to
eliminate the historical amortization expense of Pilliod Holding Company
(Pilliod).
(2) To adjust expenses to reflect cost savings attributable to the combining
of certain operations and functions resulting from the acquisition of
Pilliod. Specifically, a reduction in audit fees, legal fees and consulting
fees resulting from a consolidation of professional services, as well as
reductions in credit and telephone services due to integration with
LADD's internal functions.
(3) To record costs of the trade receivables securitization program utilized
to partially finance the acquisition of Pilliod. The cost includes fees
associated with the securitization program and discount expense on the
$20,000,000 of receivables sold to finance the acquisition assuming an
average discount rate of 4.75%.
(4) To adjust interest expense to reflect the cost of short-term and long-term
borrowings used to partially finance the acquisition of Pilliod. The
adjustment incorporates elimination of Pilliod's interest expense at an
effective rate of 7.90% on debt repaid by LADD upon acquisition, and an
increase in interest expense resulting from financing the acquisition
utilizing long-term and short-term debt with an estimated average
effective interest rate of 5.50%.
(5) To record the income tax effect of pro forma adjustments.
(6) To adjust income tax expense for a reduction in historical net operating
losses utilized by Pilliod in 1993 in determining income tax expense as
the utilization of purchased net operating losses are to be accounted for
as a reduction in goodwill of LADD.
NOTES TO REVISED UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET
(1) To reflect the allocation of the purchase price for Pilliod Holding
Company (Pilliod) to the assets acquired based upon their estimated
fair values at the date of acquisition. The estimated fair value
adjustment has been determined based upon currently available information.
There is no assurance that such values will ultimately be assigned to the
assets acquired.
(2) To provide for costs associated with the acquisition of the business which
include employment related costs, planned consolidation of offices, and
other miscellaneous expenses that were incurred as a result of the
acquisition of the business.
(3) To record the sale of accounts receivable, and short-term and long-term
borrowing which include incurred to finance acquisition of Pilliod;
and to eliminate the Pilliod debt repaid at the time of the acquisition.
(4) To eliminate the equity of Pilliod.