Washington, D.C. 20549
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): AUGUST 27, 1997
Fine Host Corporation
(Exact name of Registrant as specified in its charter)
Delaware 06-1156070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Greenwich Office Park Greenwich, CT 06831
(Address of principal executive offices) (Zip code)
(203) 629-4320
(Registrant's telephone number including area code)
Not applicable
(Former name and former address, if changed since last report)
Item 7. Financial Statements and Exhibits
a) Financial Statements of the Business Acquired
BEST INC.
Independent Auditors' Report
Balance Sheets as of June 30, 1997 and 1996
Statements of Earnings for the fiscal years ended June 30, 1997 and 1996
Statements of Stockholders'Equity for the fiscal years ended
June 30,1997 and 1996
Statements of Cash Flows for the fiscal years ended June 30, 1997 and 1996
Notes to Financial Statements
b) Pro Forma Financial Information (Unaudited)
FINE HOST CORPORATION
Pro Forma Consolidated Income Statement for the fiscal year ended
December 25, 1996
Notes to Pro Forma Consolidated Income Statement
Pro Forma Consolidated Balance Sheet as of June 25, 1997
Pro Forma Consolidated Income Statement for the six months ended June 25, 1997
Notes to Pro Forma Consolidated Financial Statements
a) Financial Statements of the Business Acquired
Independent Auditors' Report
The Stockholders Best, Inc.:
We have audited the accompanying balance sheets of Best, Inc. as of June 30,
1997 and 1996, and the related statements of earnings, stockholders' equity, and
cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Best, Inc. as of June 30, 1997
and 1996, and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/S/ KPMG PEAT MARWICK LLP
October 8, 1997
BEST, INC.
Balance Sheets
June 30, 1997 and 1996
Assets 1997 1996
- --------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 1,090,301 164,755
Trade accounts receivable, less allowance for
doubtful accounts of $253,000 in 1997 and
$138,000 in 1996 5,042,962 4,001,901
Current installments of notes rec.-nonrelated parties 72,200 42,002
Current installments of notes rec.-related parties 12,389 17,045
Inventories 494,305 376,147
Prepaid expenses and other current assets 185,206 182,509
- --------------------------------------------------------------------------------
Total current assets 6,897,363 4,784,359
Notes rec.-nonrelated parties, less current installments 616,463 389,047
Notes rec.-related parties, less current installments 233,789 687,514
Property, equipment, and leasehold improvements, less
accumulated depreciation and amortization 2,583,318 2,543,137
Investment 1,369,521 1,450,000
Other assets 922,831 724,201
- --------------------------------------------------------------------------------
$12,623,285 10,578,258
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
Current installments of long-term debt 562,801 410,080
Accounts payable 2,612,985 1,625,454
Accrued expenses 3,032,621 2,239,274
Accrued stockholders' dividends 0 104,281
Notes payable-related parties 130,417 0
- --------------------------------------------------------------------------------
Total current liabilities 6,338,824 4,379,089
Long-term debt, less current installments 2,404,699 2,984,817
Phantom stock 250,359 330,301
Stockholders' equity:
Common stock of $.10 par value per share. Authorized
250,000 shares; issued and outstanding 11,050 shares
in 1997 and 1996 1,106 1,106
Additional paid-in capital 404,039 401,939
Retained earnings 3,224,258 2,519,225
- --------------------------------------------------------------------------------
3,629,403 2,922,270
Less unearned stock compensation 0 (38,219)
- --------------------------------------------------------------------------------
Total stockholders' equity 3,629,403 2,884,051
Commitments (notes 8, 10, and 17)
- --------------------------------------------------------------------------------
$12,623,285 10,578,258
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
BEST, INC.
Statements of Earnings
Years ended June 30, 1997 and 1996
1997 1996
- -----------------------------------------------------------------------------
Revenues $ 43,173,817 33,836,098
Cost of revenues:
Food and paper products 14,756,114 10,736,376
Labor and fringe benefits 17,894,904 15,223,430
- ------------------------------------------------------------------------------
Total cost of revenues 32,651,018 25,959,806
- ------------------------------------------------------------------------------
Gross profit 10,522,799 7,876,292
General and administrative expenses 9,709,425 7,641,614
- ------------------------------------------------------------------------------
Earnings from operations 813,374 234,678
- ------------------------------------------------------------------------------
Other income (expense):
Interest expense (182,685) (228,375)
Interest income 142,202 84,019
Net rental income 79,447 29,000
Gain on sale of Best Vending 0 47,504
Gain (loss) on sale of equipment (3,945) 5,002
- ------------------------------------------------------------------------------
Other income (expense), net 35,019 (62,850)
- ------------------------------------------------------------------------------
Net earnings $ 848,393 171,828
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
BEST, INC.
Statements of Stockholders' Equity
Years ended June 30, 1997 and 1996
Common stock
------------------------------------
Shares Additional Unearned Total
----------------------- paid-in Retained stock stockholders'
Class A Class B Amount capital earnings compensation equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 ............ 7,300 3,675 $1,098 383,781 2,639,297 (106,439) 2,917,737
Stock repurchase ............... 0 (100) (10) (25,574) 0 0 (25,584)
Stock issued at below fair value 0 175 18 43,732 0 0 43,750
Stock compensation ............. 0 0 0 0 0 68,220 68,220
Net earnings ................... 0 0 0 0 171,828 0 171,828
Dividends ...................... 0 0 0 0 (291,900) 0 (291,900)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 ............ 7,300 3,750 1,106 401,939 2,519,225 (38,219) 2,884,051
Stock repurchase ............... 0 (175) (18) (43,557) 0 0 (43,575)
Stock issued ................... 0 175 18 45,657 0 0 45,675
Stock compensation ............. 0 0 0 0 0 38,219 38,219
Net earnings ................... 0 0 0 0 848,393 0 848,393
Dividends ...................... 0 0 0 0 (143,360) 0 (143,360)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 ............ 7,300 3,750 $1,106 404,039 3,224,258 0 3,629,403
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
BEST, INC.
Statements of Cash Flows
Years ended June 30, 1997 and 1996
1997 1996
- --------------------------------------------------------------------------------
Operating activities:
Net earnings $ 848,393 171,828
Adj. to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 720,913 669,194
Amortization of debt discount 0 9,608
Loss (gain) on sale of equipment 3,945 (5,002)
Gain on sale of Best Vending 0 (47,504)
Stock compensation 38,219 111,970
Inc. in cash surrender value of officers' life
insurance policies (157,905) (90,481)
Deferred compensation (79,942) 330,301
Changes in operating assets and liabilities:
Trade accounts receivable (1,041,061) (732,066)
Notes receivable-nonrelated parties (257,614) 45,038
Inventories (118,158) 117,545
Prepaid expenses and other current assets (2,697) 43,486
Accounts payable 987,531 (170,949)
Accrued expenses 793,347 289,456
- --------------------------------------------------------------------------------
Net cash provided by operating activities 1,734,971 742,424
- --------------------------------------------------------------------------------
Investing activities:
Payment for purchase of property, equipment, and
leasehold improvements (836,421) (1,109,185)
Proceeds from sale of property, equipment,
and leasehold improvements 71,382 285,241
Distributions from investments 80,479 0
(Inc.) decrease in notes receivable-related parties 458,381 (397,675)
(Inc.) decrease in other assets (40,725) 162,473
- --------------------------------------------------------------------------------
Net cash used in investing activities (266,904) (1,059,146)
- --------------------------------------------------------------------------------
Financing activities:
Repayments of long-term debt (427,397) (1,558,688)
Proceeds from long-term debt 0 2,000,000
Proceeds from notes payable-related parties 130,417 0
Dividends paid (247,641) (291,900)
Proceeds from issuance of common stock 45,675 0
Repurchase of common stock (43,575) (2,086)
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (542,521) 147,326
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 925,546 (169,396)
Cash and cash equivalents, beginning of year 164,755 334,151
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of year $1,090,301 164,755
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
BEST, INC.
Notes to Financial Statements
June 30, 1997 and 1996
(1) Summary of Significant Accounting Policies
Nature of Business
Best, Inc. (the Company) manages food and dietary service operations
for a number of companies, institutions, and organizations in six
Midwest states under contracts that provide for revenues
consisting of food and beverage sales and management fees.
The Company purchases a significant portion of its food and paper
products through a single distributor. The Company believes the
relationship with the vendor is good.
Accounting 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 and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Inventories
Inventories, consisting primarily of food and paper products, are
valued at the lower of cost (first-in, first-out basis) or market.
Property, Equipment, and Leasehold Improvements
Property, equipment, and leasehold improvements are stated at cost.
Depreciation and amortization are computed using straight-line
methods using estimated useful lives of 40 years for buildings, 3
to 8 years for cafeteria and vending equipment, 3 to 5 years for
furniture and office equipment, 3 years for vehicles, and the
lesser of the term of the lease or the useful life for leasehold
improvements.
Investment
The Company carries its investment in a less than 20%-owned company at
cost.
Income Taxes
The Company has elected treatment as an S corporation under provisions
of the Internal Revenue Code and, as such, does not pay any
federal or Minnesota state income taxes. However, the Company is
subject to taxation in certain other state jurisdictions. The
Company is required to file annual information returns as an S
corporation summarizing the taxable income resulting from the
Company's operations. The Company's income and tax credits are
included in the individual tax returns of the stockholders who are
responsible for the related income taxes.
(Continued)
BEST, INC.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents. Cash equivalents
consist of short-term investments in certificates of deposit and
money market funds.
Impairment of Long-lived Assets and Long-lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to Be
Disposed Of, on July 1, 1996. This statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. Adoption of this statement did not
have a material impact on the Company's financial position or
results of operations.
(2) Notes Receivable
1997 1996
- --------------------------------------------------------------------------------
Notes receivable--nonrelated parties:
9%contract for deed receivable, due in monthly
installments of $1,159, including interest through
May 1, 1999, with a final payment of $129,049 on
June 1, 1999; secured by building $ 133,225 134,903
9%note receivable from sale of Best Vending, due in
monthly installments of $4,625, including interest
through October 2002 237,288 269,831
Prime plus 2.25% note receivable from customer for
equipment, due in monthly installments of $921,
including interest through June 2003 55,116 0
Prime plus 1.75% note receivable from customer for
sale of equipment, due in monthly installments of
$3,315, including interest through August 31, 2006 238,150 0
Other 24,884 26,315
- --------------------------------------------------------------------------------
688,663 431,049
Less current installments 72,200 42,002
- --------------------------------------------------------------------------------
$ 616,463 389,047
------------------------------------------------------------------------------
(Continued)
BEST, INC.
1997 1996
- --------------------------------------------------------------------------------
Notes receivable--related parties:
Notes receivable from stockholders/employees,
due in annual variable installments, including
interest at rates ranging from 7% to 10%,
maturing at various dates from July 1997 to
December 2006 $ 61,178 269,559
Notereceivable from a nursing home management
company (see note 4), due in lump sum payment,
including interest at prime rate, maturing
December 1998 185,000 435,000
- --------------------------------------------------------------------------------
246,178 704,559
Less current installments 12,389 17,045
- --------------------------------------------------------------------------------
$ 233,789 687,514
-------------------------------------------------------------------------------
Annual principal payments expected to be received on notes receivable as of
June 30, 1997, are as follows:
Fiscal year ending June Amount
------------------------------------------------------------------------------
1998 $ 84,589
1999 401,510
2000 86,913
2001 90,815
2002 92,056
Thereafter 178,958
------------------------------------------------------------------------------
$ 934,841
------------------------------------------------------------------------------
(3) Property, Equipment, and Leasehold Improvements
Property, equipment, and leasehold improvements consist of the following:
1997 1996
-----------------------------------------------------------------------------
Buildings $ 1,054,503 1,054,200
Building and tenant improvements 510,697 117,973
Cafeteria equipment 1,801,833 1,785,456
Furniture and office equipment 1,815,557 1,602,325
Vehicles 18,757 18,757
------------------------------------------------------------------------------
5,201,347 4,578,711
Less accumulated depreciation and amortization 2,618,029 2,035,574
------------------------------------------------------------------------------
$ 2,583,318 2,543,137
------------------------------------------------------------------------------
(Continued)
BEST, INC.
(4) Investment/Concentration of Credit Risk
On March 9, 1994, the Company made an investment of $1,480,000 in a
nursing home management company that provides comprehensive
management services for 17 nursing homes and 4 congregate
housing/assisted living projects. The purchase price was
$1,450,000. The Company is providing services at 17 of the
contracted facilities during fiscal 1997.
During fiscal 1996, the Company entered into a note receivable
agreement with the nursing home management company for $435,000.
This note is due in full in December 1998. The amount outstanding
under this agreement is $185,000 at June 30, 1997.
Total revenue under contracts with facilities managed by the nursing
home management company for the years ended June 30, 1997 and
1996, was $6,175,401 and $7,356,837, respectively. Total accounts
receivable related to contracts with facilities managed by the
nursing home management company as of June 30, 1997 and 1996, were
$1,107,954 and $1,346,434, respectively.
(5) Other Assets
Other assets consist of the following:
1997 1996
------------------------------------------------------------------------------
Cash surrender value of officers' life
insurance policies, net of policy loans $ 665,718 507,813
Federal tax deposit 191,429 130,271
Non-compete agreements 41,011 61,444
Miscellaneous 24,673 24,673
------------------------------------------------------------------------------
$ 922,831 724,201
------------------------------------------------------------------------------
(6) Accrued Expenses
Accrued expenses consist of the following:
1997 1996
- --------------------------------------------------------------------------------
Salaries and wages $ 1,100,126 570,921
All purpose paid leave 974,082 827,427
Payroll, withholdings, and sales taxes 407,506 266,745
Group health insurance 255,886 226,320
Workers' compensation 253,845 110,000
Other 41,176 237,861
- --------------------------------------------------------------------------------
$ 3,032,621 2,239,274
- --------------------------------------------------------------------------------
(Continued)
BEST, INC.
(7) Long-term Debt
Long-term debt consists of the following:
1997 1996
----------------------------------------------------------------------------
Termnote payable to bank in monthly installments of $16,667 with interest
at a rate of 1.5% over prime through April 1, 1998. The term loan is
secured by trade accounts receivable, inventories and property,
equipment, and leasehold improvements and guaranteed by two
stockholders of the Company. $ 131,862 331,784
Termnote payable to bank in monthly installments of $42,250 with interest
at a rate of 1.5% over prime through January 31, 2002. The term loan is
secured by trade accounts receivable, inventories, and property,
equipment, and leasehold improvements and guaranteed by three
stockholders of the Company (see below). 1,866,888 2,000,000
Mortgage payable to John Alden Life in monthly installments of $5,018, plus
interest at the rate of 8% through December 2014, callable
December 2004, secured by building 552,153 567,529
Unsecured note payable to former stockholder of the Company, in monthly
installments of $3,337 including interest at rate of 8% through
November 2004 221,580 243,085
Unsecured discounted note payable to former stockholder of the Company, in
monthly installments of $1,320 beginning June 1996, at
an interest rate of 8% through May 2004 117,648 124,129
Unsecured note payable to former stockholder of the
Company, in monthly installments of $3,129,
including interest at 8% through December 1997 15,339 50,439
Other 62,030 77,931
---------------------------------------------------------------------------
2,967,500 3,394,897
Less current installments 562,801 410,080
---------------------------------------------------------------------------
$ 2,404,699 2,984,817
---------------------------------------------------------------------------
(Continued)
BEST, INC.
Annual maturities of long-term debt at June 30, 1997 are as follows:
Fiscal year ending June Amount
- --------------------------------------------------------------------------------
1998 $ 562,801
1999 443,956
2000 472,687
2001 814,687
2002 83,964
Thereafter 589,405
- --------------------------------------------------------------------------------
$ 2,967,500
- --------------------------------------------------------------------------------
The Company has a bank line of credit that permits borrowings of up to
$1,000,000 with interest at 1.5% over the prime rate. The line of
credit is secured by trade accounts receivable, inventories,
property, equipment and leasehold improvements, and cash surrender
value of officers' life insurance policies and expires in January
1998. In addition, the line of credit contains various covenants
that restrict borrowings, acquisitions, and dispositions of assets
and require the Company to maintain certain financial ratios.
There were no borrowings outstanding under the line of credit at
June 30, 1997 or 1996.
(8) Operating Leases
The Company leases equipment and office space under various operating
lease agreements. The future minimum lease payments required under
those agreements at June 30, 1997, are as follows:
Fiscal year ending June Amount
-----------------------------------------------------------------------------
1998 $ 103,464
1999 75,217
2000 48,539
2001 2,712
-----------------------------------------------------------------------------
$ 229,932
-----------------------------------------------------------------------------
(9) Stock Issuance
In 1995, the board of directors authorized the issuance of 1,675
shares of stock to an officer at a price below fair value of the
stock. The compensation expense related to these shares amounted
to $38,219 and $68,220 during fiscal 1997 and 1996, respectively.
(Continued)
BEST, INC.
(10) Stock Redemption Agreement
The Company has a stock redemption agreement with all of its
stockholders that provides a right of first refusal to the Company
and its stockholders in the event of the disposition of stock by a
stockholder. The agreement also may require the Company and/or its
stockholders to purchase a stockholder's interest upon death,
disability, retirement, or termination. The purchase price varies
with the class of stock and the circumstances causing the
redemption. The Company maintains life insurance and disability
policies on its stockholders, the proceeds of which would be used
to fund all or a portion of the purchase of a stockholder's
interest by the Company upon the death or disability of the
stockholder. Under the terms of the agreement, in the event of
death of a stockholder, the purchase price is payable over a
five-year period. In the event of disability, retirement, or
termination, the purchase price is payable over a ten-year period.
(11) Employee Savings Retirement Plan
The Company has a savings retirement plan for all eligible employees
under Section 401(k) of the Internal Revenue Code. The plan allows
employees to defer up to 15% of their compensation, on a pretax
basis. The Company contributes an additional 50% of the employees'
contributions up to 4% of eligible employees' compensation. The
Company may also make discretionary contributions. Contributions
to the plan by the Company were $347,680 in fiscal 1997 and
$315,938 in fiscal 1996.
(12) Phantom Stock
The Company had phantom stock agreements with two key personnel. Under
these agreements, the participants earn benefits based on earnings
of "phantom" shares of the Company's stock. These participants
vest in these phantom shares over a three to four-year period
pursuant to terms of the individual agreements. Under the terms of
the agreements, the Company is required to pay out the amounts
vested upon death, disability, retirement, or termination over a
four-year period. One of the key personnel was terminated during
the year (see note 16).
These agreements allow the participants to convert a portion of the
phantom shares to common stock. Total compensation expense
(income) under these agreements was $(79,942) and $330,301 for the
years ended June 30, 1997 and 1996, respectively.
(13) Supplementary Cash Flow Information
The Company repurchased common stock from related parties for cash and
notes payable of $43,575 and $25,584 in fiscal 1997 and 1996,
respectively.
The Company received a note receivable of $287,500 in connection with
its sale of Best Vending during fiscal 1996.
The Company paid interest of $171,718 and $228,375 in fiscal 1997 and
1996, respectively.
(Continued)
BEST, INC.
(14) Sale of Vending Business
On October 27, 1995, the Company sold its vending business for
$530,203, in the form of $242,703 cash and a note receivable for
$287,500. The gain of $47,504 was recognized in fiscal 1996.
Vending business revenues were $453,535 in fiscal 1996.
(15) Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practical to estimate that value:
Accounts Receivable and Accounts Payable
The carrying amount approximates fair value because of the
short maturity of those instruments.
Long-term Debt and Notes Receivable
The carrying amount of notes payable and notes receivable
approximates fair value due to variable rates for the term
note payable and the relative stability of intermediate
fixed rates.
(16) Termination of the Chief Executive Officer
The chief executive officer (CEO) of the Company was terminated during
the year ended June 30, 1997. Based on the employment agreement,
the former CEO received a severance payment of $125,301, which was
expensed during the year ended June 30, 1997. The former CEO was
not vested in his phantom stock shares as of his termination. The
phantom stock expense accrual balance for his shares was
eliminated which resulted in a reduction to general and
administrative expenses of $158,697 for the year ended June 30,
1997.
(17) Commitments and Contingent Liabilities
The Company is involved in several legal actions at June 30, 1997, the
ultimate settlement of which is not expected to have a material
effect on the financial condition of the Company.
(18) Sale of the Company
On August 27, 1997, the Company was acquired by Fine Host Corporation.
b) Pro Forma Financial Information (Unaudited)
The following unaudited pro forma consolidated financial data
should be read in conjunction with the consolidated financial statements of
Fine Host Corporation (the "Company"), the notes thereto and other
financial information set forth in the Company's Form 10-K.
The pro forma consolidated statement of income for the fiscal year
ended December 25, 1996 gives effect to the following transactions and
events as if they occurred as of the beginning of the fiscal year: (i) the
acquisition of Best, Inc. ("Best"), acquired in August 1997; (ii) seven
other acquisitions that occurred during fiscal year 1996 and 1997, none of
which are individually or in the aggregate deemed significant; (iii) the
adjustment to reflect interest expense as if borrowings to purchase all of
these companies had taken place at the beginning of the fiscal year; and
(iv) the related tax effects of the foregoing.
The pro forma consolidated statement of income for the six months
ended June 25, 1997 gives effect to the following transactions and events
as if they occurred as of the beginning of the fiscal year: (i) the
acquisition of Best, acquired in August 1997; (ii) three additional
acquisitions that occurred in fiscal year 1997, none of which are
individually or in the aggregate deemed significant; (iii) the adjustment
to reflect interest expense as if borrowings to purchase these companies
had taken place at the beginning of the year; and (iv) the related tax
effects of the foregoing. The pro forma consolidated balance sheet gives
effect to the acquisition of Best and one additional fiscal year 1997
acquisition as if it had occurred on June 25, 1997.
Management believes the assumptions used provide a reasonable basis
on which to present the pro forma consolidated financial data. The pro
forma financial data are provided for informational purposes only and
should not be construed to be indicative of the Company's results of
operations or financial position had the transactions and events described
above been consummated on the dates assumed and do not project the
Company's results of operations or financial position for any future date
or period.
FINE HOST CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 12/25/96
(Unaudited)
(in thousands, except per share data)
Additional Pro Forma
Best Acquisitions Adjustments Pro Forma
Fine Host (Note 1) (Note 2) (Note 3) (Note 4)
------- ------ ------ ------ -------
Net Sales $127,925 $43,174 $86,254 $0 $257,353
Cost of Sales 113,703 32,651 74,077 3,127 223,558
------- ------ ------ ------ -------
Gross Profit 14,222 10,523 12,177 (3,127) 33,795
General & administrative expenses 5,388 9,709 12,666 0 27,763
------- ------ ------ ------ -------
Income (loss)from Operations 8,834 814 (489) (3,127) 6,032
Interest Expense(Income),net 2,330 (34) 386 4,942 7,624
------- ------ ------ ------ -------
Income (loss) before Taxes 6,504 848 (875) (8,069) (1,592)
Income Taxes 2,700 356 (368) (3,389) (701)
------- ------ ------ ------ -------
Subtotal 3,804 492 (507) (4,680) (891)
Accretion (1,300) 0 0 0 (1,300)
------- ------ ------ ------ -------
Net income (loss) $2,504 $492 ($507) ($4,680) ($2,191)
======= ====== ====== ======== =======
Net income (loss) per share
assuming full dilution $0.50 ($0.44)
===== =======
Average number of shares
outstanding assuming full
dilution 5,005 5,005
===== =====
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED DECEMBER 25, 1996
1. Best, Inc.
Represents the historical results of Best for the entire 1997 fiscal year,
with tax expense charged as if Best had been a C Corporation rather than an S
Corporation.
2. Additional Acquisitions
Represents the historical results from the beginning of the year through
acquisition date for fiscal year 1996 acquisitions and for the entire year for
fiscal year 1997 acquisitions.
3. Pro Forma Consolidated Statement of Income Adjustments
(a) The amortization of excess of cost over fair value of net assets
acquired.
(b) The increase in interest expense related to the borrowings to finance
the acquisitions.
(c) The income tax impact of the foregoing adjustments.
4. Actions Subsequent to the Acquisitions
Subsequent to the acquisitions, the Company will terminate certain
unprofitable food service contracts and will eliminate certain redundant
operations through office closings and termination of excess personnel in
connection with the integration of these acquisitions.
FINE HOST CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 25, 1997
(Unaudited)
(in thousands, except share data)
Additional Pro Forma
Best, Inc. Acquisition Adjustments Pro Forma
ASSETS Fine Host (Note 5) (Note 6) (Note 7) (Note 4)
--------- --------- ----------- ----------- ---------
Current assets:
Cash and cash equivalents $16,110 $0 $77 $16,187
Accounts receivable 20,247 7,053 160 27,460
Inventories 5,238 527 20 5,785
Prepaid expenses and
other current assets 4,886 251 148 5,285
------- ----- ---- ------
Total current assets 46,481 7,831 405 54,717
Contract rights, net 28,542 0 0 8,800 37,342
Fixtures and equipment, net 31,002 1,346 82 32,430
Excess of cost over fair value
of net assets acquired, net 43,962 0 0 22,504 66,466
Other assets 9,842 908 105 10,855
-------- ------- ---- ------- --------
Total assets $159,829 $10,085 $592 $31,304 $201,810
======== ======= ==== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses $23,567 $7,221 $1,227 $3,930 $35,945
Current portion of
subordinated debt 2,521 1,509 52 4,082
------- ------ ------ ------ -------
Total current liabilities 26,088 8,730 1,279 3,930 40,027
Deferred income taxes 13,514 0 0 0 13,514
Long-term debt 7,971 0 0 24,065 32,036
Subordinated debt 3,386 2,651 51 1,275 7,363
------- ------ ------ ------ ------
Total liabilities 50,959 11,381 1,330 29,270 92,940
Stockholders' equity:
Common Stock, $.01 par value,
25,000,000 shares authorized,
8,963,112 issued and outstanding
at June 25, 1997 90 1 0 (1) 90
Additional paid-in capital 101,715 404 0 (404) 101,715
Retained earnings 7,221 (1,701) (738) 2,439 7,221
Receivables from stockholders
for purchase of Common Stock (156) 0 0 0 (156)
------- ------- ------ ----- --------
Total stockholders'equity 108,870 (1,296) (738) 2,034 108,870
------- ------- ------ ----- --------
Total liabilities and
stockholders' equity $159,829 $10,085 $592 $31,304 $201,810
======== ======= ===== ======= ========
FINE HOST CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 6/25/97
(Unaudited)
(in thousands, except per share data)
Additional Pro Forma
Best Acquisitions Adjustments Pro Forma
Fine Host (Note 1) (Note 2) (Note 3) (Note 4)
-------- -------- ----------- ---------- ---------
Net Sales $102,844 $21,587 $7,360 $0 $131,791
Cost of Sales 92,386 16,326 6,538 712 115,962
-------- ------- ------ ------ --------
Gross Profit 10,458 5,261 822 (712) 15,829
General & administrative expenses 5,945 4,855 1,080 0 11,880
-------- ------- ------ ------ --------
Income (loss) from Operations 4,513 406 (258) (712) 3,949
Interest Expense (Income), net 828 (18) 30 1,354 2,194
-------- ------- ------ ------ --------
Income (loss) before Taxes 3,685 424 (288) (2,066) 1,755
Income Taxes 1,585 178 (121) (868) 774
-------- ------- ------ ------ --------
Net Income (loss) $2,100 $246 ($167) ($1,198) $981
======== ======= ====== ======== ========
Net income (loss) per share
assuming full dilution $0.24 $0.11
======= =======
Average number of shares
outstanding assuming
full dilution 8,634 8,634
======= =======
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 25, 1997
1. Best, Inc.
Represents the results of Best, Inc. for half of the entire
fiscal year, with tax expense charged as if Best had been a C Corporation rather
than an S Corporation.
2. Additional Acquisitions
Represents the historical results for the beginning of the year through
the acquisition date for 1997 fiscal year acquisitions.
3. Pro Forma Consolidated Statement of Income Adjustments
(a) The amortization of excess of cost over fair value of net assets
acquired.
(b) The increase in interest expense related to the borrowings to
finance the acquisitions.
(c) The income tax impact of the foregoing adjustments.
4. Actions Subsequent to the Acquisitions
Subsequent to the acquisitions, the Company will terminate certain unprofitable
food service contracts and will eliminate certain redundant operations through
office closings and termination of excess personnel in connection with the
integration of these acquisitions.
5. Best, Inc.
Represents the financial position of Best, Inc. at August 27, 1997.
6. Additional Acquisitions
Represents the financial position of the one additional acquisition that
occurred subsequent to June 25, 1997.
7. Pro Forma Consolidated Balance Sheet Adjustments
Purchase accounting adjustments relating to the acquisition of Best, Inc.
and one other acquisition. The aggregate purchase price of these acquisitions
was approximately $30.0 million. The purchase price was allocated to the assets
acquired and liabilities assumed based on their fair value at the time of
acquisition. The excess purchase price over the fair value of the assets
acquired was approximately $22.5 million.
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.
Fine Host Corporation
NOVEMBER 5, 1997 By:_/s/ Nelson A. Barber
-------------------------------------------
Date Nelson A. Barber
Senior Vice President and Treasurer
(Duly Authorized Officer and Principal Accounting Officer)