UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 20, 1998
DIAMOND HOME SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20829 36-3886872
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
222 Church Street
Woodstock, IL 60098
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (815) 334-1414
None
(Former name or address, if changed since last report)
On April 30, 1998, Diamond Home Services, Inc. (the "Registrant") filed a
current report on Form 8-K (the "Current Report") pertaining to the acquisition
by its wholly-owned subsidiary Diamond Acquisition Corp. on April 20, 1998 of
all the issued and outstanding voting stock of Reeves Southeastern Corporation
("Reeves"). At the time of the filing of the Current Report, it was impractical
for the Registrant to provide financial statements for Reeves and pro forma
financial information for the Registrant. Pursuant to the instructions for Item
7 of Form 8-K, the Registrant hereby amends Item 7 of the Current Report to
include previously omitted financial information, as follows:
Item 7. Financial statements, pro forma financial information and exhibits.
a) Financial statements
1) Financial statements of Reeves Southeastern Corporation at October 31, 1997
and 1996 and for the three fiscal years ended October 31, 1997.
2) Unaudited financial statements of Reeves Southeastern Corporation at
January 31, 1998 and for the three month fiscal periods ended January 31,
1998 and 1997.
b) Pro forma financial information
1) Unaudited pro forma financial information for the Registrant at December
31, 1997 and for the year ended December 31, 1997.
c) Exhibits
2.1) Stock Purchase Agreement, dated March 5, 1998, among Diamond Home
Services, Inc., Diamond Acquisition Corp., Reeves Southeastern
Corporation, and the shareholders of Reeves Southeastern
Corporation.(1)
10.1) Credit Agreement, dated April 20, 1998, between Registrant and Harris
Trust and Savings Bank, as agent.(1)
23.1) Consent of Coopers & Lybrand L.L.P.
99.1) Press release dated April 20, 1998.(2)
99.2) (i) Financial statements of Reeves Southeastern Corporation at
October 31, 1997 and 1996 and for the three fiscal years ended
October 31, 1997.
(ii) Unaudited financial statements of Reeves Southeastern
Corporation at January 31, 1998 and for the three month fiscal
periods ended January 31, 1998 and 1997.
99.3) Unaudited pro forma financial information for the Registrant at
December 31, 1997 and for the year ended December 31, 1997.
(1) Previously filed on Form 8-K on April 30, 1998
(2) Previously filed on Form 8-K on April 24, 1998
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Diamond Home Services, Inc.
(Registrant)
Date: May 13, 1998 \s\ Richard G. Reece
Vice President and Chief Financial Officer
(For the Registrant and as
Principal Accounting Officer)
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment to Form 8-K of Diamond Home
Services, Inc. of our report dated December 24, 1997, except for the
information included in Note 13 for which the date is March 5, 1998 on our
audits of the consolidated financial statements of Reeves Southeastern
Corporation and subsidiary as of October 31, 1997 and November 1, 1996
and for the years ended October 31, 1997 (52 weeks), November 1, 1996 (52
weeks), and November 3, 1995 (53 weeks).
/s/ Coopers & Lyband L.L.P.
Tampa, Florida
May 11, 1998
EXHIBIT 99.2
Reeves Southeastern Corporation for the three fiscal years ended
October 31, 1997, with Report of Independent Accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
Reeves Southeastern Corporation
We have audited the accompanying consolidated balance sheets of Reeves
Southeastern Corporation and subsidiary (the Company) as of October 31, 1997,
and November 1, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years ended October 31, 1997
(52 weeks), November 1, 1996 (52 weeks), and November 3, 1995 (53 weeks).
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Reeves
Southeastern Corporation and subsidiary as of October 31, 1997, and November 1,
1996, and the results of their operations and their cash flows for the years
ended October 31, 1997 (52 weeks), November 1, 1996 (52 weeks), and November 3,
1995 (53 weeks), in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Tampa, Florida
December 24, 1997, except for the information in
Note 13 for which the date is March 5, 1998
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
October 31,1997 and November 1, 1996
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Current Assets:
Cash $ 1,040,748 $ 481,965
Trade receivables, less allowance for doubtful accounts of
$297,600 and $287,600 13,830,626 13,157,355
Inventories 13,313,792 14,398,824
Prepaid expenses and other current assets 579,705 2,823,252
Total current assets 28,764,871 30,861,396
Investments 514,433 535,484
Property, plant and equipment, net of accumulated depreciation
and amortization 5,678,401 6,239,617
Other assets 3,345,475 2,507,384
Total assets $ 38,303,180 $ 40,143,881
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital leases $ 1,803,825 $ 1,878,028
Revolving credit note 6,739,000 8,692,000
Accounts payable, trade 5,226,233 3,918,971
Accrued expenses and other liabilities 4,055,756 4,702,238
Deferred revenue 712,089 659,641
Total current liabilities 18,536,903 19,850,878
Long-term debt and capital leases 1,356,328 3,285,129
Deferred income taxes 538,516 202,160
Total liabilities 20,431,747 23,338,167
Commitments and contingencies (Notes 9 and 10)
Stockholders' equity:
Common stock, par value $1:
Authorized - 2,500,000 shares
Outstanding - 602,400 shares including 72,526 and 80,176
subject to redemption (Note 9) 602,400 602,400
Additional paid-in capital 2,680,767 2,680,767
Retained earnings 21,413,080 19,432,156
24,696,247 22,715,323
Less treasury stock of 293,833 and 275,181 shares, at cost (5,924,814) (4,609,609)
Less guaranteed ESOP obligation (Note 9) (900,000) (1,300,000)
Total stockholder's equity 17,871,433 16,805,714
Total liabilities and stockholders' equity $ 38,303,180 $ 40,143,881
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
for the years ended October 31, 1997, November 1, 1996 and November 3, 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net sales $ 122,312,159 $ 117,200,166 $ 112,220,845
Cost of sales, including depreciation of $547,000,
$460,000 and $399,300 94,423,218 90,386,989 86,583,605
Gross profit on sales 27,888,941 26,813,177 25,637,240
Selling, general and administrative expenses, including
depreciation and amortization of $482,000, $518,000
and $368,200 23,971,401 22,296,269 20,761,033
3,917,540 4,516,908 4,876,207
Other expense (income):
Interest expense 1,107,275 1,067,481 1,153,248
Miscellaneous income (508,659) (733,755) (474,449)
598,616 333,726 678,799
Income from continuing operations
before income taxes 3,318,924 4,183,182 4,197,408
Provision for income taxes 1,338,000 1,648,000 1,706,000
Income from continuing operations 1,980,924 2,535,182 2,491,408
Discontinued operations:
Income from operations of Southeastern Galvanizing Division
(less applicable income taxes of $65,000 and $360,000
in 1996 and 1995) 0 100,447 581,198
Gain on sale of Southeastern Galvanizing Division (less
applicable income taxes of $2,016,000 in 1996) 0 3,239,081 0
0 3,339,528 581,198
Net Income $ 1,980,924 $ 5,874,710 $ 3,072,606
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended October 31, 1997, November 1, 1996 and November 3, 1995
<CAPTION>
Common Stock Additional Treasury Stock Guaranteed ESOP Obligation
Shares Amount Paid-in Retained Shares Amount Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 28, 1994 60,240 $ 60,240 $ 3,001,640 $ 10,484,840 25,015 $(2,843,514) 0 $ 0 $ 10,703,206
Purchase of treasury stock 0 0 0 0 2,170 (898,937) 4,771 (2,000,000) (2,898,937)
Issuance of stock from treasury 0 0 147,172 0 (1,141) 136,277 (807) 300,000 583,449
Net income 0 0 0 3,072,606 0 0 0 0 3,072,606
Stock dividend, 9 for 1 (Note 542,160 542,160 (542,160) 0 234,342 0 35,674 0 0
Balance, November 3, 1995 602,400 602,400 2,606,652 13,557,446 260,386 (3,606,174) 39,638 (1,700,000) 11,460,324
Purchase of treasury stock 0 0 0 0 25,355 (1,512,427) 0 0 (1,512,427)
Issuance of stock from treasury 0 0 74,115 0 (10,560) 508,992 (10,655) 400,000 983,107
Net income 0 0 0 5,874,710 0 0 0 0 5,874,710
Balance, November 1, 1996 602,400 602,400 2,680,767 19,432,156 275,181 (4,609,609) 28,983 (1,300,000) 16,805,714
Purchase of treasury stock 0 0 0 0 18,652 (1,315,205) 0 0 (1,315,205)
Issuance of stock from treasury 0 0 0 0 0 0 9,585 400,000 400,000
Net income 0 0 0 1,980,924 0 0 0 0 1,980,924
Balance, October 31, 1997 602,400 $ 602,400 $ 2,680,767 $ 21,413,080 293,833 $(5,924,814) 19,398 $ (900,000) $ 17,871,433
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended October 31, 1997, November 1, 1996 and November 3, 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,980,924 $ 5,874,710 $ 3,072,606
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,096,034 1,139,667 1,109,394
Provision for doubtful accounts 213,232 287,636 260,000
Loss (gain) on sale of investments (41,848) 0 4,000
Deferred income taxes (59,000) 187,000 58,000
Loss (gain) on disposals of property, plant and equipment 35,848 (37,598) (142,000)
Gain on disposal of Southeastern Galvanizing Division 0 (5,255,081) 0
Increase in trade receivables, net (948,773) (1,228,199) (2,046,219)
Decrease (increase) in inventories 1,166,669 (2,649,726) (322,945)
Increase (decrease) in accounts payable, trade 1,278,508 (2,184,690) 835,627
Decrease in other assets and liabilities, net (67,331) (1,850,334) (488,286)
Net cash provided by (used in) operating activities 4,654,263 (5,716,615) 2,340,177
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 521,260 69,800 23,700
Proceeds from sale of Southeastern Galvanizing Division 0 6,700,000 0
Acquisition of certain assets, net of liabilities assumed (269,245) 0 0
Purchases of property, plant and equipment (954,200) (2,221,298) (2,188,507)
Purchases of investments 0 (4,270) (113,362)
Proceeds on sale of investments 54,956 0 1,000
Net cash (used in) provided by investing activities (647,229) 4,544,232 (2,277,169)
Cash flows from financing activities:
Advances under revolving credit agreement 29,204,000 34,986,000 25,802,500
Payments on revolving credit agreement (31,157,000) (30,758,000) (27,544,500)
Principal payments of term debt and capital leases (2,193,484) (4,541,287) (1,666,144)
Proceeds on issuance of term debt 0 1,993,750 3,248,495
Payments received on notes receivable 1,613,438 109,682 98,152
Reduction of ESOP obligation 400,000 400,000 300,000
Issuance of treasury stock 0 583,107 283,449
Purchase of treasury stock (1,315,205) (1,512,427) (898,937)
Net cash (used in) provided by financing activities (3,448,251) 1,260,825 (376,985)
Net increase (decrease) in cash 558,783 88,442 (313,977)
Cash at beginning year 481,965 393,523 707,500
Cash at end of year $ 1,040,748 $ 481,965 $ 393,523
See Notes 2 and 4.
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
Reeves Southeastern Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
Reeves Southeastern Corporation (Reeves) and its wholly owned subsidiary,
Foreline Security Corporation (Foreline) (herein the Company) are located in
Tampa, Florida. Reeves is in the business of manufacturing and
distributing, through its distribution network, a full line of fencing and
fencing related products. Reeves' primary manufacturing facilities are
located in Tampa, Florida, and it has 31 sales branches, primarily located
in the eastern United States. Foreline is engaged in the business of
distributing, installing, and servicing security systems and banking
equipment throughout the Southeast.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Reeves and Foreline. All significant intercompany accounts
and transactions have been eliminated.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles. The following summarizes significant
accounting policies.
FISCAL YEAR - The fiscal year of the Company is the 52-week (or 53-week)
period that ends at the close of business on the Friday that is nearest the
last day of October. Fiscal years 1997 and 1996, consisted of 52 weeks and
fiscal year 1995 consisted of 53 weeks.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
of raw materials and the raw materials content of work in process and
finished goods and certain purchased finished goods for Reeves are
determined on the last-in, first-out method (LIFO). Cost for the remainder
of the inventory is determined on the first-in, first-out method (FIFO).
INVESTMENTS - Investments are carried at the lower of aggregate cost or
market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost. Depreciation and amortization are computed using the straight-line
method over the estimated useful lives of five to twenty years. Upon
disposition, the asset cost and related accumulated depreciation or
amortization are removed from the accounts and the resulting gain or loss is
included in income.
INCOME TAXES - Deferred income taxes reflect the future tax effects of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end (see Note 6).
COMPUTER SOFTWARE COSTS - Computer software costs, net of accumulated
amortization, approximated $166,000 and $493,000 as of October 31, 1997 and
November 1, 1996, respectively, and are included in property, plant, and
equipment in the consolidated balance sheets. Such costs are being
amortized over their estimated useful lives using the straight-line method.
Amortization expense for the years ended October 31, 1997, November 1, 1996
and November 3, 1995 was approximately $85,000, $99,000 and $0,
respectively.
STATEMENT OF CASH FLOWS - During fiscal years 1997, 1996 and 1995, the
Company made interest payments of approximately $1,170,000, $959,000 and
$1,372,000, respectively, and tax payments of approximately $1,216,000,
$4,105,000 and $2,398,000, respectively. In addition, the Company had the
following noncash transactions:
During the years ended October 31, 1997, November 1, 1996 and November 3,
1995, notes totaling $787,876, $626,996 and $499,976, respectively, were
issued to former ESOP participants in conjunction with the purchase of
treasury stock shares of 16,761, 15,767 and 17,889, respectively (see Note
9). The notes have been included in accrued expenses and other liabilities
at their respective year-ends.
During the years ended October 31, 1997, November 1, 1996 and November 3,
1995, treasury stock of 9,585 shares costing $400,000, treasury stock of
18,575 shares costing $872,428, and treasury stock of 8,070 (as restated)
shares costing $300,000, respectively, were allocated to the Company's
Employee Stock Ownership Plan (the ESOP, see Note 9) and the cost included
in net income. During the year ended November 1, 1996 and November 3,
1995, treasury stock of 2,640 and 11,410 shares (as restated),
respectively, costing $110,679 and $283,449, respectively, were issued as
executive compensation and the related cost included in net income.
In connection with the Company's sale of the Southeastern Galvanizing
Division in fiscal 1996, the Company received a promissory note of
$3,000,000 (see Note 11).
In connection with an acquisition of net assets in fiscal 1997, the Company
issued a promissory note of $169,000 (see Note 5).
During the year ended November 3, 1995, the Company financed the purchase
of certain computer hardware and software through a capital lease which
approximated $723,000.
During the year ended November 3, 1995, the Company sold equipment for
approximately $200,000 and received a note receivable for the full amount.
CONCENTRATIONS OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
trade receivables. These concentrations are limited due to the large number
of customers comprising the Company's customer base and their dispersion
across a large geographic area in the United States.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS - 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. Estimates
also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS - Certain amounts shown in the consolidated financial
statements for the year ended November 1, 1996 and November 3, 1995,
respectively, have been reclassified to conform with the presentation
adopted for the year ended October 31, 1997.
3. INVENTORIES:
A summary of inventories at October 31, 1997 and November 1, 1996 follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Raw Materials $ 631,032 $ 681,427
Work in progress 671,901 526,001
Finished good 13,222,471 14,370,054
14,525,404 15,577,482
Less reserve to state inventories principally at LIFO cost (1,211,612) (1,178,658)
$ 13,313,792 $ 14,398,824
</TABLE>
Inventory components valued at LIFO amounted to 40% of total FIFO inventory
at both October 31, 1997 and November 1, 1996.
The following supplementary information is presented so that a reader may
make comparisons with companies using the FIFO method of inventory
valuation. FIFO income net of related taxes has been calculated consistent
with LIFO under all conditions and assumptions other than inventory
valuation.
<TABLE>
<CAPTION>
1997 1996 1995
FIFO LIFO FIFO LIFO FIFO LIFO
<S> <C> <C> <C> <C> <C> <C>
Income from continuing $ 3,351,878 $ 3,318,924 $ 4,383,377 $ 4,183,182 $ 4,282,100 $ 4,197,408
operations before income
taxes
Income from continuing $ 2,000,878 $ 1,980,924 $ 2,655,299 $ 2,535,182 $ 2,542,223 $ 2,491,408
operations
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
A summary of property, plant and equipment at October 31, 1997 and November
1, 1996 follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land and improvements $ 1,813,907 $ 1,800,292
Buildings and improvements 3,539,643 3,209,169
Machinery and equipment 5,627,711 5,182,619
Furniture and fixtures 191,893 157,704
Assets under capital lease 139,616 723,493
11,312,770 11,073,277
Less accumulated depreciation and amortization (5,634,369) (4,833,660)
$ 5,678,401 $ 6,239,617
</TABLE>
During fiscal year 1997, the Company purchased certain portions of its
computer system that it was accounting for as a capital lease. The Company
subsequently entered into an agreement with the vendor for the sale at fair
value and leaseback of the computer system including software. The lease is
for a period of three years and has a renewal option at the projected fair
market value. The lease is classified as an operating lease and the book
value of the computer system of approximately $517,000 has been removed from
the balance sheet. Rental expense related to this lease is approximately
$269,000 annually.
5. INDEBTEDNESS AND CAPITALIZED LEASES:
A summary of long-term debt, capital leases and current maturities at
October 31, 1997 and November 1, 1996 follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Term note (prime or LIBOR plus 2.25%), principal payable in quarterly $ 2,000,000 $ 3,333,333
installments of $333,333, due in April 1999, prime interest payable
monthly and LIBOR interest payable on the last day of the applicable
interest period
Guaranteed ESOP obligation term note (prime or LIBOR plus 2.25%), 900,000 1,300,000
principal payable in quarterly installments of $100,000, prime
interest payable in quarterly installments, and LIBOR interest payable
on the last day of the applicable interest period, collaterized by
19,398 shares of the Company's stock (Note 9)
Computer lease (10.05%), principal and interest payable in monthly 70,283 529,824
installments of $2,513 through June 2000
Term note (7.5%), issued in conjunction with acquisition, principal 169,000 0
payable in annual installments of $42,500 in 1998 and 1999, and
$42,000 in 2000 and 2001, interest payable on each principal payment
date
Forklift lease (6.4%), principal and interest payable in monthly 20,870 0
installments of $419 through August 2002
3,160,153 5,163,157
Less current portion 1,803,825 1,878,028
$ 1,356,328 $ 3,285,129
</TABLE>
Maturities on long-term debt and capital leases are as follows:
<TABLE>
<CAPTION>
Year ending:
<S> <C>
1998 $ 1,803,825
1999 1,139,957
2000 165,690
2001 46,609
2002 4,072
$ 3,160,153
</TABLE>
At October 31, 1997, November 1, 1996 and November 3, 1995, the Company's
bank credit agreements provide for borrowings of up to $12,500,000 under a
revolving credit note. The rate of interest on borrowings under the
revolving credit note is at the lower of the prime rate, or the London
Interbank Borrowing Rate (LIBOR) plus 2.25% (prime rate was 8.50% and LIBOR
was 5.6525% at October 31, 1997). This agreement expires in 1999.
The revolving credit note and term note are collateralized by certain real
property and all accounts receivable, inventories and equipment of the
Company. The amount available under the revolving credit note is limited
based on a specified level of inventories and accounts receivable. Based on
these limitations, the Company has available to it under lines and letters
of credit unused amounts of approximately $5,761,000, $3,040,300 and
$7,073,300 at October 31, 1997, November 1, 1996 and November 3, 1995,
respectively.
The terms of the Company's financing agreements contain, among other
provisions, requirements for maintaining certain working capital and other
financial ratios, and restrictions on incurring additional indebtedness. In
addition, the Company is restricted as to contributions to the Company's
Employee Stock Ownership Plan and Pension Plan.
Deferred loan fees and costs are being amortized over the term of the
related debt on a straight-line basis. Amortization expense for 1997, 1996
and 1995, approximated $29,000, $62,000 and $58,000, respectively.
6. INCOME TAXES:
A summary of the provision for income taxes for the years ended October 31,
1997, November 1, 1996 and November 3, 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Continuing operations:
Federal income taxes:
Current $ 1,014,500 $ 1,491,000 $ 1,345,000
Deferred 65,500 (118,000) 58,000
1,080,000 1,373,000 1,403,000
State income taxes 258,000 275,000 303,000
$ 1,338,000 $ 1,648,000 $ 1,706,000
Discontinued operations:
Federal income taxes:
Current $ 0 $ 54,000 $ 320,000
65,500 (118,000) 58,000
Deferred 0 0 0
0 54,000 320,000
State income taxes 0 11,000 40,000
$ 0 $ 65,000 $ 360,000
Sale of division assets:
Federal income taxes:
Current $ 124,500 $ 1,416,000 $ 0
Deferred (124,500) 305,000 0
0 1,721,000 0
State income taxes 0 295,000 0
$ 0 $2,016,000 $ 0
Total:
Federal income taxes:
Current $1,139,000 $2,961,000 $1,665,000
Deferred (59,000) 187,000 58,000
1,080,000 3,148,000 1,723,000
State income taxes 258,000 581,000 343,000
$1,338,000 $3,729,000 $2,066,000
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of income and expenses for financial reporting purposes and for income tax
purposes. The following is a reconciliation of income taxes at the federal
statutory rate with income taxes recorded by the Company for the years ended
October 31, 1997, November 1, 1996 and November 3, 1995:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Computed income taxes at $ 1,128,400 34.00% $ 3,265,300 34.00% $ 1,747,126 34.0%
statutory rates
State income taxes net of 4.93% 404,400 4.20% 232,878 4.5%
federal income tax benefit 163,700
Other 45,900 1.38% 59,300 0.60% 85,996 1.7%
$ 1,338,000 40.31% $ 3,729,000 38.80% $ 2,066,000 40.2%
</TABLE>
Deferred taxes are recorded based upon differences between the financial
reporting and tax bases of assets and liabilities. Temporary differences
which give rise to a significant portion of deferred tax assets and
liabilities at October 31,1997 and November 1, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets:
Accrued expenses and other liabilities $ 334,356 $ 481,624
Capitalized inventory costs 153,048 166,134
Provision for bad debts 222,688 248,789
Other 9,186 14,366
Deferred tax asset 719,278 910,913
Deferred tax liability:
Basis of inventories (848,491) (862,713)
Basis of investments (131,651) (135,526)
Basis of property, plant and equipment 41,421 18,886
Installment sale (397,699) (522,199)
Other (54,100) (139,707)
Deferred tax liability (1,390,520) (1,641,259)
$ (671,242) $ (730,346)
</TABLE>
The current portion of the deferred tax liability is included in accrued
expenses and other liabilities on the balance sheet at October 31, 1997 and
November 1, 1996.
7. EMPLOYEE PENSION PLAN:
On January 10, 1995, the Board of Directors approved an amendment to the
Company's pension plan which resulted in the freezing of all future benefits
and the vesting of all participants 100 percent in their accrued benefits.
As a result, the Company recognized a gain of approximately $188,000. The
gain has been netted with employee compensation under selling, general and
administrative expenses in the 1995 consolidated statement of income.
The Company's consolidated statements of income included pension related
income of approximately $5,600, $5,500 and $116,000 for fiscal years 1997,
1996 and 1995, respectively, and was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost for current period $ 0 $ 0 $ 49,962
Interest on projected benefit obligation 117,970 132,817 185,476
Less actual return on plan assets (133,262) (191,167) (304,715)
Amortization of losses 0 0 12,484
Amortization of transition amount 0 0 (5,274)
Amortization of prior service cost 0 0 4,737
Deferral of asset gain 9,680 52,894 129,237
Recognition of gain 0 0 (187,545)
Net pension income $ (5,612) $(5,456) $ (115,638)
</TABLE>
The following table sets forth the Plan's funded status and amounts
recognized in the consolidated balance sheets at October 31, 1997, and
November 1, 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Actuarial present value of vested benefit obligation $ (1,000,882) $ (1,538,962)
Actuarial present value of accumulated benefit obligation
$ (1,000,882) $ (1,538,962)
Actuarial present value of projected benefit obligation for service $ (1,000,882) $ (1,538,962)
rendered to date
Plan assets at fair value 925,391 1,561,554
Projected (shortfall) excess of plan assets compared to benefit (75,491) 22,592
obligations
Unrecognized net loss from past experience different from that assumed 127,387 23,692
and effects of changes in assumptions
Pension asset $ 51,896 $ 46,284
</TABLE>
Assumptions used to develop the net periodic pension cost and the Plan's
funded status as of year-end were:
<TABLE>
<CAPTION>
1997 1996 1995
NET FUNDED NET FUNDED NET FUNDED
PERIODIC STATUS AS PERIODIC STATUS AS PERIODIC STATUS AS
PENSION OF YEAR- PENSION OF YEAR- PENSION OF YEAR-END
COST END COST END COST
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.75% 7.50% 7.75% 7.75% 7.50% 7.50%
Expected long-term rate of return on 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
assets
Rate of increase in compensation levels ------ ------ ------ ------ 5.00% 5.00%
</TABLE>
During October 1997, the Board of Directors approved an amendment to the
Company's pension plan that authorized the termination of the Plan and the
distribution of all the plan assets to the participants in the Plan. The
Company has filed a request for termination with the Internal Revenue
Service and notified the Pension Benefit Guarantee Corporation of its intent
to terminate the Plan.
8. DEFINED CONTRIBUTION PLANS:
Reeves Southeastern Corporation Profit Sharing and Savings Plan (the Plan)
permits employees to defer a portion of eligible compensation through
participant contributions to the Plan. Employer contributions to the Plan
are at the discretion of the Board of Directors. The Company has approved
contributions for fiscal 1997, 1996 and 1995 approximating $108,000,
$164,000 and $241,000, respectively, representing a match of 25% of
participant contributions up to 6% of eligible compensation for 1997, a
match of 40% of participant contributions up to 6% of eligible compensation
for 1996 and a match of 50% of participant contributions up to 6% of
eligible compensation for 1995.
9. EMPLOYEE STOCK OWNERSHIP PLAN:
The Company maintains an Employee Stock Ownership Plan (the ESOP) and
Employee Stock Ownership Trust (the Trust) as a noncontributory defined
contribution plan which covers eligible employees of the Company.
During 1995, the Trust obtained a $2 million loan to finance the purchase of
47,710 shares of the Company's common stock from the Chairman of the Board
of the Company. The shares were purchased at $41.92 per share based on an
independent valuation as of October 28, 1994. The Company has guaranteed
the Trust's borrowing and reported the outstanding balance of this loan as a
liability of the Company (see Note 5). Accordingly, the guarantee of the
ESOP obligation is reported as a reduction of stockholders' equity. On an
annual basis, the Company makes contributions to the Trust to make principal
and interest payments. As the principal amount of the borrowing is repaid
by the ESOP, the related liability and the guaranteed ESOP obligation are
reduced accordingly. The Company's cash contributions are determined based
on the Trust's total debt service. The Company contributed $400,000,
$400,000 and $300,000, plus interest, to the Trust during 1997, 1996 and
1995, respectively. Shares of common stock acquired by the ESOP are
allocated to each employee in amounts based on employees' annual
compensation. As of October 31, 1997, November 1, 1996 and November 3,
1995, the ESOP had 72,526, 80,176 and 78,036 of allocated shares,
respectively and 19,398, 28,983 and 39,638 of unallocated shares,
respectively.
The Company has provided a put option to participants in the ESOP allowing
them to put distributions of the Company's common stock back to the Company
upon retirement or termination of employment at the higher of the fair value
of the stock, as determined by an annual independent appraisal, or $5.10 per
share (adjusted for the stock dividend, see Note 12). At October 31, 1997,
November 1, 1996 and November 3, 1995, 72,526, 80,176 and 78,036 shares,
respectively, are subject to mandatory redemption under this put
arrangement. The most recent valuation of the Company's common stock was for
the year ended November 1, 1996 and resulted in a valuation of $70.51 per
share, or approximately $5,113,800, for the total shares held by the ESOP
and subject to redemption at October 31, 1997.
10. COMMITMENTS AND CONTINGENCIES:
The Company leases a portion of its sales facilities and vehicles under
noncancelable operating leases expiring at various dates through September
2008. Total rental expense for 1997, 1996 and 1995 was approximately
$3,168,000, $2,992,000 and $2,707,000, respectively.
Minimum annual rentals for the five years subsequent to 1997 and in the
aggregate are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1998 $35,172 $ 2,343,000
1999 35,172 1,872,000
2000 25,124 1,180,000
2001 5,028 579,000
2002 4,190 400,000
Thereafter 0 1,152,000
Total minimum payments 104,686 $ 7,526,000
Amount representing interest 13,533
Present value of minimum payments $91,153
</TABLE>
The Company's Tampa facilities have been listed on the federal Environmental
Protection Agency's (the EPA) Superfund National Priorities List. As a
result of such inclusion on that list, the Company has engaged in
discussions with the EPA and state and local authorities to coordinate the
actions necessary to remove such facilities from that list.
Over the past several years, management and its consultants have studied the
site for the purpose of determining the nature and extent of the
contamination of soil and groundwater caused by disposal procedures prior to
mid-1982. The EPA issued records of decision for the selected methods of
treatment of the contaminated soil and groundwater at the site. During
fiscal 1997, the Company completed the first phase of remediation of the
site under a plan approved by the EPA. During October 1997, the EPA issued
a memorandum of acceptance confirming that the remediation had been
completed in accordance with the approved plan. Based on site studies,
existing regulations, and the Company's remediation activities to date,
management is of the opinion that future remediation costs will not have a
material adverse effect on the Company's consolidated financial position or
results of operations. The Company's consolidated statements of income
included remediation costs of approximately $736,000, $669,000 and $482,000
for fiscal years 1997, 1996 and 1995, respectively. At October 31, 1997 and
November 1, 1996, the Company had accrued approximately $350,000 and
$1,002,000, respectively, for future remediation costs.
11. SALE OF GALVANIZING OPERATION:
In March 1996, the Company sold its commercial galvanizing division. The
sale included substantially all of the assets of the division and an
assumption of certain liabilities by the buyer. The Company's consolidated
financial statements for 1996 have been adjusted to reflect the
discontinuance of this business.
The Company received $6,700,000 in cash and a promissory note for $3,000,000
at closing.
A summary of the net assets of the discontinued operations, which are
included in the Company's consolidated balance sheet at November 3, 1995, is
as follows:
November 3,
1995
Current assets $1,286,380
Current liabilities (65,633)
1,220,747
Property, plant and equipment, net of 1,937,847
accumulated depreciation and amortization
$3,158,594
The operating results and the sale of the commercial galvanizing
division have been reported as separate components of discontinued
operations in the consolidated statements of income. The
summarized operating results of the discontinued operations is as
follows:
<TABLE>
<CAPTION> YEAR ENDED
NOVEMBER 1, NOVEMBER 3,
1996 1995
<S> <C> <C>
Net sales $ 1,760,146 $ 6,554,612
Income from discontinued operations before income taxes $ 165,447 $ 941,198
Provision for income taxes 65,000 360,000
Net income from discontinued operations $ 100,447 $ 581,198
</TABLE>
12. STOCK DIVIDEND:
The Company declared a 9 for 1 stock dividend to shareholders of record
on November 3, 1995. A total of 542,160 shares of common stock were
issued in connection with this dividend and considered effective for
the year ended November 3, 1995. The stated par value of each share
remained $1. A total of $542,160 was reclassified from the Company's
additional paid-in capital to the Company's common stock. All applicable
share and per share data have been adjusted for the stock dividend.
13. SUBSEQUENT EVENT:
During March 1998, the shareholders of the Company entered into an
agreement to sell their stock in the Company to an independent third
party. Completion of the transaction is contingent upon receipt
of regulatory and other closing conditions and upon resolution of
certain environmental
(a) Financial Statements
(2) Unaudited financial statements of Reeves Southeastern
Corporation at January 30, 1998 and for the three month periods
ended January 30, 1998 and January 31, 1997.
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
JANUARY 30, 1998 OCTOBER 31, 1997
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Current Assets:
Cash $713 $1,041
Trade receivables 11,500 13,831
Inventories 16,057 13,314
Prepaid expenses and other current assets 823 579
Total current assets 29,093 28,765
Investments 514 514
Property, plant and equipment, net 6,250 5,678
Other assets 3,103 3,346
Total assets $38,960 $38,303
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital leases $1,804 $1,804
Revolving credit note 8,694 6,739
Accounts payable 4,495 5,226
Accrued expenses and other liabilities 3,321 4,056
Deferred revenue 1,052 712
Total current liabilities 19,366 18,537
Long-term debt and capital leases 1,249 1,356
Deferred Income taxes 538 539
Total liabilities 21,153 20,432
Stockholders' equity:
Common stock 602 602
Additional paid-in capital 2,681 2,681
Retained earnings 21,249 21,413
24,532 24,696
Less treasury stock at cost (5,925) (5,925)
Less guaranteed ESOP obligation (800) (900)
Total stockholders' equity 17,807 17,871
Total liabilities and stockholders' equity $38,960 $38,303
See accompanying notes.
</TABLE>
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION> THREE MONTHS THREE MONTHS
ENDED JANUARY 30, ENDED JANUARY 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Net sales $22,904 $23,906
Cost of sales 17,822 18,640
Gross profit 5,082 5,266
Selling, general and administrative expenses 5,246 5,391
Operating loss (164) (125)
Other expenses (income)
Interest expense 222 272
Miscellaneous income (113) (120)
109 152
Loss before income taxes (273) (277)
Income taxes (109) (112)
Net loss ($164) ($165)
See accompanying notes.
</TABLE>
<TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED JANUARY 30, ENDED JANUARY 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net loss ($164) ($165)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 231 244
Provision for doubtful accounts 62 86
Changes in operating assets and liabilities:
Trade receivables 2,269 1,311
Inventories (2,743) (997)
Accounts payable (731) 1,361
Other assets and liabilities, net (411) (163)
Net cash provided by (used in) operating activities (1,487) 1,677
Investing activities:
Capital Expenditures (828) (448)
Net cash used in investing activities (828) (448)
Financing activities:
Borrowings on revolving credit agreement 10,911 6,255
Payments on revolving credit agreement (8,956) (7,042)
Payments of term debt and capital leases (107) (466)
Other 39 2
Reduction of ESOP obligation 100 100
Net cash provided by (used in) financing activities 1,987 (1,151)
Net increase (decrease) in cash (328) 78
Cash at beginning of period 1,041 482
Cash at end of period $713 $560
Supplemental cash flow disclosure:
Interest paid $184 $251
Income taxes paid $364 $186
See accompanying notes.
</TABLE>
REEVES SOUTHEASTERN CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the fiscal three-month period
ended January 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending October 31, 1998. For further
information, refer to the consolidated financial statements included
elsewhere herein.
2. INVENTORIES
A summary of inventories at January 30, 1998 and October 31, 1997 follows:
<TABLE>
<CAPTION>
January 30, October 31,
1998 1997
<S> <C> <C>
Raw materials $ 1,062 $ 631
Work in progress 846 672
Finished goods 15,361 13,223
17,269 14,526
Less reserve to state inventories principally at LIFO (1,212) (1,212)
cost
$ 16,057 $ 13,314
</TABLE>
Inventory components valued at LIFO amounted to 40% of total FIFO inventory
at both January 30, 1998 and October 31, 1997.
3. SEASONALITY
Reeves Southeastern's fencing results of operations may fluctuate from year
to year or quarter to quarter due to a variety of factors. Reeves expects
lower levels of sales and profitability during the period from November
through February due to winter and rainy weather in certain of the
Company's markets.
EXHIBIT 99.3
Pro forma Financial Information
On April 20, 1998, Diamond Home Services, Inc. (the "Company" or "DHMS")
consummated the purchase of all the outstanding voting shares (the "Shares") in
the capital of Reeves Southeastern Corporation ("Reeves") for an aggregate
consideration of $41,700,000 consisting of: 1) $30,000,000 cash at closing; 2)
$3,700,000 non-interest bearing notes payable in installments through June 2000;
and, 3) $8,000,000 in 7% notes payable (to be paid into an escrow account for
future possible environmental expenses, as defined) in installments through June
2005 (the "Acquisition"). The Unaudited Pro Forma Condensed Balance Sheet and
Unaudited Pro Forma Condensed Statement of Operations presented below have been
prepared from the historical financial statements of the Company and Reeves.
The Unaudited Pro Forma Condensed Balance Sheet reflects the balance sheet of
the Company as of December 31, 1997 and of Reeves as of October 31, 1997. The
Unaudited Pro Forma Condensed Statement of Operations reflects the operations of
the Company for the year ended December 31, 1997 and the operations of Reeves
for the fiscal year ended October 31, 1997.
The unaudited pro forma condensed consolidated financial information gives
effect to accounting for the Acquisition as a purchase, in accordance with
Accounting Principles Board Opinion No. 16. The Unaudited Pro Forma Condensed
Statement of Operations below has been prepared as if the Acquisition had
occurred at the beginning of fiscal year 1997. The Unaudited Pro Forma
Condensed Balance Sheet as of December 31, 1997 has been prepared as if the
Acquisition had occurred on December 31, 1997.
The pro forma adjustments are based on currently available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. The unaudited pro forma condensed consolidated financial
information should be read in conjunction with the accompanying notes, as well
as the historical consolidated financial information for the Company and Reeves,
including the notes thereto.
The unaudited pro forma condensed consolidated financial information is not
necessarily indicative of the financial position or the results which actually
would have been attained if the Acquisition had been consummated on the dates
indicated above, nor does it purport to indicate or suggest what the financial
position and/or results of the operations of the Company will be for any future
period.
<TABLE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
($ in thousands)
<CAPTION>
DHMS Reeves
Audited Audited Pro Forma
as of as of Pro Forma Unaudited
12/31/97 10/31/97 Adjustments Consolidated
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $9,966 $1,041 $(5,000) (1) $6,007
Accounts receivable 6,630 13,831 -- 20,461
Inventory -- 13,314 667 (2) 13,981
Refundable income taxes 986 -- -- 986
Prepaids and other current assets 1,959 580 100 (3) 2,639
Deferred income taxes 872 -- -- 872
Total current assets 20,413 28,765 (4,233) 44,946
Finance company accounts receivable 8,758 -- -- 8,758
Net property and equipment 5,546 5,678 5,100 (4) 16,324
Intangible assets, net 16,514 -- 22,053 (5) 35,867
Deferred income taxes 1,892 -- -- 1,892
Other 3,466 3,860 1,040 (6) 8,366
Total assets $56,589 $38,303 $23,960 $118,852
Liabilities and Common Stockholders'
Equity
Current liabilities:
Current portion of long-term debt $ - $1,804 $5,331 (7) $7,135
Due to bank 2,050 6,739 (6,739) (7) 2,050
Accounts payable and accrued 10,070 9,282 4,880 (8) 24,232
Deferred revenue -- 712 -- 712
Due to stockholders 554 -- -- 554
Total current liabilities 12,674 18,537 3,472 34,683
Long-term liabilities:
Long-term debt -- 1,356 37,808 (7) 39,164
Warranty and retention 9,161 -- -- 9,161
Deferred income taxes -- 539 551 (9) 1,090
Due to stockholders 544 -- -- 544
Total long-term liabilities 9,705 1,895 38,659 49,959
Common stockholders' equity 34,210 17,871 (17,871) (10) 34,210
Total liabilities and common
stockholders' $56,589 $38,303 $23,960 $118,852
equity
</TABLE>
(1) Reflects cash used in Acquisition.
(2) Reflects the elimination of LIFO reserves and the adjustments of inventory
to estimated fair value less cost of disposal.
(3) Reflects current portion of new deferred loan costs ($150,000) less write-
off of "old" deferred loan costs ($50,000).
(4) Reflects the write-up of land ($1,100,000), buildings ($2,500,000), and
manufacturing machinery and equipment ($1,500,000) to estimated fair market
value.
(5) Reflects the excess (goodwill) value of purchase price (including
acquisition expenses of $750,000) over net assets acquired.
(6) Reflects the write-up of investment in joint venture ($140,000) and net
write-up of non operating assets held for sale ($300,000) to estimated fair
value and the long-term portion of new deferred loan costs ($600,000).
(7) Reflects the financing of the Acquisition and refinancing of Reeves debt
with the new $45 million Credit Facility.
(8) Reflects certain liabilities and obligations assumed with the Acquisition
and estimated Acquisition expenses, as follows ($ in thousands):
<TABLE>
<CAPTION>
<S> <C>
Environmental $2,100
Pension Plan and Benefits 1,125
Taxes 155
Acquisition Expenses 750
Credit Facility Expenses 750
$4,880
</TABLE>
(1) Reflects net deferred income taxes related to the write-up of the net
assets acquired utilizing an estimated marginal income tax rate of 40%.
(2) Reflects the elimination of Reeves equity accounts (including ESOP
guarantee).
<TABLE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
($ in thousands)
<CAPTION>
DHMS Reeves
Audited Audited Pro Forma
as of as of Pro Forma Unaudited
12/31/97 10/31/97 Adjustments Consolidated
<S> <C> <C> <C> <C>
Net sales $161,109 $122,312 $ -- $283,421
Cost of sales 90,633 94,423 340 (1) 185,396
Gross profit 70,476 27,889 (340) 98,025
Operating expenses:
Selling, general and administrative 66,619 23,489 * (1,449) (2) 88,659
Amortization of intangibles 595 482 550 (3) 1,627
Total operating expenses 67,214 23,971 (899) 90,286
Operating income (loss) 3,262 3,918 559 7,739
Other expense (income):
Interest expense -- 1,107 2,919 (4) 4,026
Interest income, net (725) (508) 260 (5) (973)
(725) 599 3,179 3,053
Income before taxes 3,987 3,319 (2,620) 4,686
Income tax provision 1,683 1,338 (825) (6) 2,196
Net income $2,304 $1,981 $(1,795) $2,490
Net income per share:
Basic $.28
Diluted $.28
Weighted average number of shares
outstanding:
Basic 8,833
Diluted 8,833
(*) Includes $736,000 of environmental expenses.
</TABLE>
(1) Reflects additional depreciation expense related to write-up of fixed
assets.
(2) Reflects elimination of compensation for prior management and directors,
certain benefit plans, and non-recurring expenses such as an airplane
(disposed of in May 1998), which will not continue following Acquisition.
(3) Reflects the amortization of Acquisition goodwill over 40 years.
(4) Reflects additional interest expense related to Acquisition financing and
different interest rate spreads related to the new credit facility.
(5) Reflects the reduction on interest income earned on $5,000,000 of cash used
to fund part of the Acquisition.
(6) Reflects the tax effect of amortization of intangibles which is not
deductible for income tax purposes related to the Acquisition and the tax
effect of pro forma adjustments for depreciation, operating interest
expenses and interest income on an estimated marginal income tax rate of
40%.
