UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 9, 1997
NATIONAL FIBERSTOK CORPORATION
DELAWARE 23-2574778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5775 Peachtree Dunwoody Road 30342
Suite C-150 (Zip code)
Atlanta, GA
(Address of principal
executive offices)
Registrant's telephone number, including area code (404) 256-1123
The undersigned Company hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
May 9, 1997 as set forth in the pages attached hereto.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS AS ACQUIRED.
AMERICOMM DIRECT MARKETING, INC.
Independent Auditors' Report . . . . . . . . . . . . F - 2
Balance Sheets at December 31, 1995 and 1996 . . . . F - 3
Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 . . . . . . . . . F - 4
Statements of Stockholders' Equity
for the years ended December 31, 1994,
1995 and 1996 . . . . . . . . . . . . . . . . . . F - 5
Statements of Cash Flows for the years
ended December 31, 1994, 1995 and 1996 . . . . . . F - 6
Notes to Financial Statements . . . . . . . . . . . . F - 7 to F - 11
(B) PRO FORMA FINANCIAL INFORMATION
<PAGE>
INDEX TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Stockholders of AmeriComm Direct Marketing, Inc.
Louisville, Kentucky
We have audited the accompanying balance sheets of AmeriComm Direct Marketing,
Inc. as of December 31, 1995 and 1996, and the related statements of income,
stockholders' equity and of cash flows for each of the three years in the
period ended December 31, 1996. 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, such financial statements present fairly, in all material
respects, the financial position of AmeriComm Direct Marketing, Inc. as of
December 31, 1995 and 1996 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Date: February 21, 1997, except for Note 11 for which the date is April
24, 1997.
Louisville, KY
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 770 $ 3,836
Debt security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,073
Receivables:
Trade (net of allowance for doubtful accounts of $212 and
$169 in 1995 and 1996, respectively) . . . . . . . . . . . . . . . . . . . . 3,520 4,266
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 132
Postage permits, meters and deposits . . . . . . . . . . . . . . . . . . . . . . 642 383
Supply inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 340
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 125
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 6,905 9,082
PROPERTY AND EQUIPMENT - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,920 2,066
INVESTMENT IN EQUITY SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 707 1,072
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 364
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,084 $12,584
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,340 $1,900
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 1,135
Customer postage advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 499
Current maturities of:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . 45 26
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 133
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 3,028 3,693
LONG-TERM DEBT:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . 29 -
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 138
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 138
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,325 3,831
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par; 3 shares authorized . . . . . . . . . . . . . . . . . . . 5 5
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,754 8,748
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . 6,759 8,753
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,084 $12,584
<PAGE>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1995 1996
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,441 $21,013 $26,485
COST OF SALES . . . . . . . . . . . . . . . . . . . . . . . . . . 13,103 14,937 18,140
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . 4,338 6,076 8,345
SELLING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 1,620 2,129 2,439
GENERAL AND ADMINISTRATIVE EXPENSES . . . . . . . . . . . . . . . 1,995 2,319 3,376
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . 723 1,628 2,530
OTHER INCOME (EXPENSES):
Consulting and other fees . . . . . . . . . . . . . . . . . 809 1,325 21
Interest expense . . . . . . . . . . . . . . . . . . . . . . (62) (50) (45)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 (18) 140
Net other income . . . . . . . . . . . . . . . . . . . . 813 1,257 116
INCOME BEFORE PROVISION FOR INCOME TAXES . . . . . . . . . . . . 1,536 2,885 2,646
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . 445 1,100 390
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,091 $1,785 $2,256
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Retained Earnings Total
Number of Shares Amount
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 . . . . . . . . . . 1 $ 5 $3,878 $3,883
Net income . . . . . . . . . . . . . . . . 0 0 1,091 1,091
BALANCE, DECEMBER 31, 1994 . . . . . . . . . 1 5 4,969 4,974
Net income . . . . . . . . . . . . . . . . 0 0 1,785 1,785
BALANCE, DECEMBER 31, 1995 . . . . . . . . . 1 5 6,754 6,759
Distributions to stockholder . . . . . . . 0 0 (262) (262)
Net income . . . . . . . . . . . . . . . . 0 0 2,256 2,256
BALANCE, DECEMBER 31, 1996 . . . . . . . . . 1 $ 5 $8,748 $8,753
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1995 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,091 $1,785 $2,256
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . (194) (61) 390
(Gain) loss on sales of property and equipment . . . . . . . . . 10 (4) 5
Depreciation and amortization . . . . . . . . . . . . . . . . . 729 605 754
Changes in assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . (221) (459) (772)
Postage permits, meters and deposits . . . . . . . . . . . . . . (109) (167) 259
Supply inventory . . . . . . . . . . . . . . . . . . . . . . . . 2 (172) 105
Other current assets . . . . . . . . . . . . . . . . . . . . . . 17 32 (18)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 119 (359) 3
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (82) 879 560
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . (244) (181) 328
Customer postage advances . . . . . . . . . . . . . . . . . . . (22) 156 (203)
Net cash provided by operating activities . . . . . . . . . . 1,096 2,054 3,667
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of debt security . . . . . . . . . . . . . . . . . . . . . 1,073
Proceeds from the sales of property and equipment . . . . . . . . . 88 8 1
Purchases of equipment . . . . . . . . . . . . . . . . . . . . . . . (552) (797) (869)
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . (332) (1,423) (365)
Net cash used in investing activities . . . . . . . . . . . . (796) (2,212) (160)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . (256) (100) (131)
Obligations under capital leases . . . . . . . . . . . . . . . . (91) (94) (48)
Proceeds from issuance of notes payable . . . . . . . . . . . . . . 400 135 0
Distributions to stockholder . . . . . . . . . . . . . . . . . . . . (262)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 53 (59) (441)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . 353 (217) 3,066
CASH AND CASH EQUIVALENTS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . 634 987 770
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 987 $ 770 $ 3,836
SUPPLEMENTAL INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . $ 100 $ 50 $ 45
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . $ 663 $ 1,277 $ 0
Acquisition of property and equipment financed
by capital lease obligations . . . . . . . . . . . . . . . . . . $ 121 $ 0 $ 0
<PAGE>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - AmeriComm Direct Marketing, Inc. (Company) provides direct
mail services, including database management and printing, to a widely
dispersed customer base concentrated primarily in the retail and
advertising industries and the not-for-profit sector. Credit sales are
generally made on an uncollateralized basis.
The Company conducts its operations primarily in Virginia, New Jersey,
Kentucky and Colorado. The Company began its New Jersey operations in
1995. In connection therewith, the Company acquired certain assets for a
purchase price of approximately $430.
Prior to January 1, 1996, the Company's operations were conducted through
four wholly-owned subsidiary corporations. Effective January 1, 1996, the
Company elected to be treated as a Subchapter S Corporation for income tax
purposes. Concurrent with this election, the Company merged its wholly--
owned subsidiaries into the parent company and dissolved the related
corporations. The 1994 and 1995 financial statements include the accounts
of AmeriComm Direct Marketing, Inc. and its wholly-owned subsidiaries, with
all significant intercompany transactions eliminated.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash in
banks and securities having original maturities when acquired of ninety
days or less.
<PAGE>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
1994 1995 1996
Beginning balance . $59 $176 $212
Provisions . . . . . 145 128 215
Recoveries . . . . . (1) (2) (11)
Write-offs . . . . . (27) (90) (247)
Ending balance . . . $176 $212 $169
INVESTMENTS - All equity securities are classified as available for sale
and are reported at fair value which approximates cost. The debt security
is classified as held-to-maturity and is reported at amortized cost.
SUPPLY INVENTORY - Supply inventory is stated at the lower of cost (first-
in, first-out method) or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated
useful lives of the respective assets, which range from three to seven
years. Leasehold improvements and equipment under capital leases are
amortized over the life of the leases or the estimated useful life of the
improvements or lease, whichever is shorter. Repairs and maintenance are
charged to operations when incurred and are approximately $510, $570, and
$600 in 1994, 1995, and 1996, respectively.
RESIDENT ADDRESS LISTS - Resident address lists, which are included in
other assets, are stated at cost and are amortized using the straight-line
method over ten years.
LONG-LIVED ASSETS - In 1996, the Company adopted Statement of Financial
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of", which establishes accounting
standards for the impairment of property and equipment and resident address
lists, whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. There was no effect of
the standard on the Company's financial statements.
USE OF ESTIMATES - Financial statements prepared in conformity with
generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
these estimates.
RECLASSIFICATIONS - Certain reclassifications were made to the 1994 and
1995 financial statements to conform with the 1996 presentation, primarily
to record brokered sales revenues and operating expenses at gross amounts.
<PAGE>
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1995 1996
Buildings and leasehold improvements . . $ 351 $ 480
Equipment . . . . . . . . . . . . . . . 4,888 5,349
Equipment under capital lease . . . . . 208 208
Total . . . . . . . . . . . . . . . . . 5,447 6,037
Less-accumulated depreciation and
amortization . . . . . . . . . . . . . 3,527 3,971
Net . . . . . . . . . . . . . . . . . . $1,920 $2,066
3. INVESTMENTS
Investments consist of the following:
1995 1996
Debt security: U.S. Treasury Bill,
due 1/12/96, 7.10% . . . . . . . . . . $1,073 $0
Equity securities:
Investment in Gibraltar Bank
common stock . . . . . . . . . . . . $ 384 $ 384
Investment with McCown De Leeuw
& Co., III, L.P. . . . . . . . . . . 323 688
Total equity securities . . . . . . . . $ 707 $ 1,072
As of December 31, 1996, the Company has a five year commitment to invest
up to $1,000 with McCown De Leeuw & Co., III, L.P. (Partnership). At
December 31, 1996, the Company had invested $688 in the Partnership. The
balance is due within 60 days of request from the Partnership. The
Partnership's objective is to invest in equity securities of companies with
the potential for increased shareholder value.
4. OTHER ASSETS
Other assets consist of the following:
1995 1996
Resident address lists, net of
accumulated amortization of $25 and
$62, in 1995 and 1996, respectively . $ 350 $ 313
Net deferred non-current tax assets . . 148 0
Rental property . . . . . . . . . . . . 50 50
Other . . . . . . . . . . . . . . . . . 4 1
Total . . . . . . . . . . . . . . . . . $ 552 $ 364
<PAGE>
5. DEBT
At December 31,1996, the Company had no borrowings outstanding under a
$1,000 line of credit that expires on May 3, 1997 and bears interest at
a rate of prime (8.25% at December 31, 1996). Amounts, if any,
outstanding under the line of credit are secured by accounts receivable.
Long-term debt consists of the following:
1995 1996
Note payable to bank, interest at prime
(8.25% at December 31, 1996)
plus 1/2% . . . . . . . . . . . . . . $ 268 $ 168
Note payable to bank, interest at 8.4% . 134 103
Total . . . . . . . . . . . . . . . . . 402 271
Less current maturities . . . . . . . . 134 133
Long-term maturities . . . . . . . . . . $ 268 $ 138
The notes payable to bank are secured by certain property and equipment.
The Company is required to comply with covenants under the note agreements
including a restriction on the sale of the Company's assets other than in
the normal course of business. The Company was in compliance with its
covenants at December 31, 1996.
At December 31, 1996, maturities of long-term debt were as follows:
1996
1997 . . . . . . . . . . . . . . . . . . $ 133
1998 . . . . . . . . . . . . . . . . . . 103
1999 . . . . . . . . . . . . . . . . . . 35
Total . . . . . . . . . . . . . . . . . $ 271
The carrying amount of debt approximates its fair value.
<PAGE>
6. LEASES
The Company leases operating facilities, office space and equipment under
long-term noncancelable operating leases with various renewal terms and a
capital lease. Rent expense under operating leases was approximately
$480, $580, and $920 in 1994, 1995, and 1996, respectively.
Future minimum lease payments under the capital lease and noncancelable
operating leases consist of the following at December 31, 1996:
CAPITAL OPERATING
LEASE LEASE
1997 . . . . . . . . . . . . . . . . . . $ 27 $ 976
1998 . . . . . . . . . . . . . . . . . . 0 979
1999 . . . . . . . . . . . . . . . . . . 0 509
2000 . . . . . . . . . . . . . . . . . . 0 214
Total minimum lease payments . . . . . . 27 $2,678
Less amounts representing interest
and executory costs . . . . . . . . . 1
Present value of net minimum lease payments 26
Less current maturities . . . . . . . . 26
Long-term maturities . . . . . . . . . . $ 0
The Company is also the lessor of a building and land under a noncancelable
operating lease for a period of five and one half years. At the end of the
lease term, the lessee is required to purchase, and the Company is required
to sell, the leased property for $450 in cash. The Company may not
encumber the property during the term of the lease in an amount in excess
of $450. The rental income from such lease was $60 for 1994, 1995 and
1996. Remaining annual rentals are $60 in 1997 and $20 in 1998.
7. INCOME TAXES
The provision (benefit) for income taxes includes the following
components:
1994 1995 1996
Current . . . . . . . . $ 639 $1,161 $0
Deferred . . . . . . . (194) (61) 390
Provision for income taxes $ 445 $1,100 $ 390
Due to the election of Subchapter S Corporation status in 1996, deferred
tax assets of $390 were eliminated from the Company's balance sheet,
resulting in an income tax expense of $390.
<PAGE>
The tax effects of the significant temporary differences, which comprise
the deferred tax assets and liabilities at December 31, 1995 were as
follows:
1995
Deferred current tax assets:
Accrued vacation . . . . . . . . . . . . . . . $ 86
Allowance for doubtful accounts . . . . . . . 99
Accrued health self-insurance . . . . . . . . 44
Phantom stock agreements . . . . . . . . . . .
13
Total deferred current tax assets . . . . . . .
$ 242
Deferred non-cuffent tax asset -
Rental property treated as an installment
sale for tax purposes . . . . . . . . . . . $ 198
Deferred long-term tax liability -
Depreciation . . . . . . . . . . . . . . . . .
(50)
Net defeffed non-cuffent tax asset,
included in other assets . . . . . . . . . . .
$ 148
The Company's income tax expense for the years ended December 31, 1994 and
1995, differed from amounts computed by applying the U.S. Federal income tax
rate of 34% to the Company's income before income taxes as a result of the
following:
1995 1996
Statutory income tax expense $ 522 $ 981
Increase in (reduction of) income
tax expense resulting from:
State and other tax expense 68 110
Other, net (145) 9
Reported income tax expense $ 445 $ 1,100
8. BENEFIT PLAN
On January 6, 1995, the Company established a defined contribution
savings plan under the provisions of Section 401(k) of the Internal
Revenue Code that provides benefits to substantially all employees. The
Company's contribution, which is based upon management discretion, was
approximately $95 and $150 in 1995 and 1996, respectively.
Prior to January 6, 1995, the Company sponsored a defined contribution
plan that covered substantially all employees. The Company's annual
contribution to the Plan, in an amount up to 25 % of the Company's income
before income taxes, was determined by its Board of Directors. Profit
sharing contribution expense recorded in 1994 was approximately $60.
9. PHANTOM STOCK AGREEMENTS
The Company has entered into Phantom Stock Agreements (Agreements) with
certain executives of the Company. The Agreements allow the executives
to earn additional amounts based on the performance of the Company.
Compensation under the Agreements is based on the difference between the
executives' interest in the value of the Company, as defined in the
Agreements, and the executives' basis in their interests. Amounts are
<PAGE>
deferred until termination of the executive or sale of the Company.
Compensation expense recorded under these Agreements was approximately
$20, $10, and $120 in 1994, 1995, and 1996, respectively.
10. SELF-INSURANCE HEALTH CARE PLAN
The Company maintains a self-insurance program for that portion of
employees' health care costs not covered by the Company's stop loss
insurance policy, which sets the maximum cash outlays for annual claims
for each employee or employee's dependents at $30 and for aggregate
annual claims up to $450 at December 31, 1996. Health care costs
recorded in 1994, 1995, and 1996 were approximately $295, $215, and $400,
respectively.
11. SALE OF COMPANY
On April 24, 1997, National Fiberstok Corporation acquired all of the
outstanding common stock of the Company for $24,000. Prior to the
closing of the sale of the Company's common stock, the Company's cash
balances, as determined under the Stock Purchase Agreement, investment in
equity securities and certain other assets of the Company were
distributed by the Company to the stockholders of the Company.
ITEM 7 - FINANCIAL Statements Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
NATIONAL FIBERSTOK CORPORATION
On June 28, 1996, National Fiberstok Corporation (NFC or the Company)
acquired the outstanding capital of Transkrit Corporation and subsidiaries
(Transkrit) and on February 21, 1997, NFC acquired the outstanding capital
stock of Label America, Inc. (LAI) (collectively, the Prior Acquisitions). On
April 24, 1997, NFC acquired the outstanding capital stock of AmeriComm Direct
Marketing, Inc. (ADMI) (the Transaction). The Unaudited Pro Forma Combined
Statement of Income includes the effect of the Prior Acquisitions and the
Transaction. The Unaudited Pro Forma Combined Balance Sheet includes the
Transaction and the Prior Acquisitions, excluding the Transkrit acquisition,
which occurred prior to December 31, 1996 (the date of the Combined Pro Forma
Combined Balance Sheet).
The following Unaudited Pro Forma Combined Statement of Income gives
effect to the Prior Acquisitions and Transaction as if they had occurred on
January 1, 1996. The unaudited pro forma financial data are based on the
historical financial statements of NFC, Transkrit, ADMI and LAI and the
assumptions and adjustments described in the accompanying notes. The
Unaudited Pro Forma Combined Statement of Income does not (a) purport to
represent what the Company's results of operations actually would have been if
the Transaction and the Prior Acquisitions had occurred as of the date
indicated or what such results will be for any future periods or (b) give
effect to certain non-recurring charges expected to result from the
Transaction and the Prior Acquisitions.
The following Unaudited Pro Forma Combined Balance Sheet as of December
31, 1996 was prepared as if the Prior Acquisitions and the Transaction had
occurred on such date, except for the Transkrit acquisition, as discussed
above. The Unaudited Pro Forma Combined Balance Sheet reflects the
preliminary allocation of the purchase price for the acquisitions to the
Company's tangible and intangible assets and liabilities. The final
allocation of such purchase prices, and the resulting wnortization expense in
the accompanying Unaudited Pro Forma Combined Statement of Income, will differ
from the preliminary estimates due to the final allocation being based on :
(a) actual closing date amounts of assets and liabilities, and (b)actual
values of property, plant and equipment and any identifiable intangible
assets.
The unaudited pro forma financial data are based upon assumptions that
the Company believes are reasonable and should be read in conjunction with the
financial statements of ADMI and the accompanying notes thereto included
elsewhere in this Form 8K and the Company's Form 10-K for the year ended
December 31, 1996.
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Historical LAI
Acquisition
NFC LAI ADMI Adjustments
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . $1,979 $70 $3,836 $(1,503) (c)
Accounts receivable, net . . . 17,384 1,298 4,266 (25) (a)
Inventories . . . . . . . . . 11,261 692 340 (50) (a)
Other . . . . . . . . . . . . 2,689 92 640 283 (a)
Total current assets . . . 33,313 2,152 9,082 (1,295)
Property and equipment, net . 47,367 1,088 2,066 200 (a)
Goodwill and other intangibles 43,484 0 0 6,444 (a)
Resident lists . . . . . . . . 0 0 313 0
Deferred financing . . . . . . 5,260 0 0 0
Noncompete agreements . . . . 487 0 0 700 (a)
Due from DEC . . . . . . . . . 876 0 0 0
Other . . . . . . . . . . . . 2,586 91 1,123 0
Total assets . . . . . . . $133,373 $3,331 $12,584 $6,049
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Revolving credit facility . . $0 $0 $0 $8,000 (b)
Current portion of long-
term debt . . . . . . . . . 446 232 159 (232) (a)
Bank overdraft . . . . . . . . 1,506 0 0 0
Accounts payable . . . . . . . 4,337 420 1,900 0
Accrued expenses and other . . 8,184 120 1,634 671 (a)
Total current liabilities . 14,473 772 3,693 8,439
Noncurrent liabilities . . . . . 4,425 0 0 169 (d)
Long-term debt:
Senior notes . . . . . . . . . 100,000 0 0 0
Other . . . . . . . . . . . . 2,353 831 138 (831) (a)
Total long-term debt . . . 102,353 831
Stockholders' equity:
Common Stock . . . . . . . 3 138 5 (138) (a)
Additional paid-in capital . . 22,297 454 0 (454) (a)
Retained earnings
(accumulated deficit) . . . . (10,178) 1,136 8,748 (1,136) (a)
12,122 1,728 8,753 (1,728)
Total liabilities
and equity . . $133,373 $3,331 $12,584 $6,049
</TABLE>
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET (con't)
ADMI Company
Acquisition Pro
Adjustments Forma
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . $(4,330) (f) $52
Accounts receivable, net . . . 0 22,923
Inventories . . . . . . . . . 0 12,243
Other . . . . . . . . . . . . 240 (e) 3,944
Total current assets . . . (4,090) 39,162
Property and equipment, net . 852 (e) 51,573
Goodwill and other intangibles 15,714 (e) 65,642
Resident lists . . . . . . . . 6,987 (e) 7,300
Deferred financing . . . . . . 0 5,260
Noncompete agreements . . . . 1,000 (e) 2,187
Due from DEC . . . . . . . . . 0 876
Other . . . . . . . . . . . . (1,072) (e) 2,728
Total assets . . . . . . . $19,391 $174,728
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Revolving credit facility . . $2,400 (f) $10,400
Current portion of long-
term debt . . . . . . . . . (159) (e) 446
Bank overdraft . . . . . . . . 0 1,506
Accounts payable . . . . . . . 0 6,657
Accrued expenses and other . . 252 (g) 10,861
Total current liabilities . 2,493 29,870
Noncurrent liabilities . . . . . 2,515 (e) 7,109
Long-term debt:
Senior notes . . . . . . . . . 0 100,000
Other . . . . . . . . . . . . (138) (e) 2,353
Total long-term debt . . . (138) 102,353
Stockholders' equity:
Common Stock . . . . . . . (5) (e) 3
Additional paid-in capital . . 23,274 (f) 45,571
Retained earnings
(accumulated deficit) . . . . (8,748) (e) (10,178)
14,521 35,396
Total liabilities
and equity . . $19,391 $174,728
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The Pro Forma Combined Balance Sheet reflects the Transaction and the Label
America, Inc. Prior Acquisition as if they had occurred as of December 31,
1996 as follows. Actual amounts will differ from amounts estimated below:
(a) The Label America, Inc. acquisition will be accounted for as a
purchase in accordance with Accounting Principles Board Opinion No.
16, "Business Combinations." The purchase price is being allocated
first to the tangible and identifiable intangible assets and
liabilities of the Company based upon preliminary estimates of their
fair values, with the remainder allocated to goodwill. The total
purchase price is as follows:
<TABLE>
<S> <C> <C>
Purchase Price - acquisition of 428,571 shares . . $ 9,200
Acquisition expenses . . . . . . . . . . . . . . . 303
Book value of net assets acquired . . . . . . . . . (1,728)
Less -
Long-term debt paid to closing . . . . . . . . . (1,063)
. . . . . . . . . . . . . . . . . . . . . . . . (2,791)
Increase in basis . . . . . . . . . . . . . . . . . $ 6,712
Allocation of increase in basis:
Increase in fair value of property and equipment $ 200
Allocation to noncompete agreement . . . . . . . 700
Goodwill . . . . . . . . . . . . . . . . . . . . 6,444
Adjustment to record accounts receivable at fair value (25)
Adjustment to record inventory at fair value . . (50)
Adjustment to record investments at fair value . (150)
Accrual for acquisition related severance and other (671)
Changes in deferred taxes:
Increase in deferred tax assets-current . . . . 283
Increase in deferred tax liability-noncurrent . (19)
$ 6,712
(b) Reflects the borrowing on the Company's existing revolving credit facility to finance the acquisition of Label America, Inc.
(c) Reflects the following:
Purchase Price . . . . . . . . . . . . . . . . . . $ (9,200)
Acquisition fees . . . . . . . . . . . . . . . . . (303)
Borrowing on revolving credit facility . . . . . . 8,000
$ (1,503)
(d) Reflects the following:
Increase in deferred tax liability . . . . . . . . $ 19
Reserve on investments . . . . . . . . . . . . . . 150
$ 169
(e) The AmeriComm Direct Marketing, Inc. acquisition will be accounted for as a purchase in accordance with Accounting Principles
Board Opinion No. 16, "Business Combinations." The purchase price is being allocated first to the tangible and identifiable
intangible assets and liabilities of the Company based upon preliminary estimates of their fair values, with the remainder
allocated to goodwill. The total purchase price is as follows:
Purchase Price - acquisition of 1,000 shares . . . $ 25,188
Acquisition expenses . . . . . . . . . . . . . . . 2,208
Book value of net assets acquired . . . . . . . . . (8,753)
Less -
<PAGE>
Shareholder distribution prior to closing . . . 1,850
Unaccrued phantom stock plan compensation paid
prior to closing . . . . . . . . . . . . . . . . 608
Assets transferred to seller . . . . . . . . . . 1,072
Other . . . . . . . . . . . . . . . . . . . . . 150
Long-term debt paid to closing . . . . . . . . . (297)
Accrued phantom stock plan compensation paid
prior to closing . . . . . . . . . . . . . . . . (151)
Accrued bonuses paid prior to closing . . . . . (105)
. . . . . . . . . . . . . . . . . . . . . . . . (5,626)
Increase in basis . . . . . . . . . . . . . . . . . $ 21,770
Allocation of increase in basis:
Increase in fair value of property and equipment $ 852
Allocation to noncompete agreements . . . . . . 1,000
Allocation to residents list . . . . . . . . . 6,987
Goodwill . . . . . . . . . . . . . . . . . . . . 15,714
Accrual for acquisition related severance and other (508)
Changes in deferred taxes:
Increase in deferred tax asset-current . . . . . 240
Increase in deferred tax liability-noncurrent . (2,515)
$ 21,770
(f) Reflects the following:
Capital contribution by parent . . . . . . . . . . $ 23,274
Borrowing on revolving credit facility . . . . . . 2,400
Payments -
Payment to seller . . . . . . . . . . . . . . . (24,635)
Shareholder distribution prior to closing . . . (1,850)
Phantom stock plan payments prior to closing (759)
Long-term debt paid prior to closing . . . . . . (297)
Bonuses paid prior to closing . . . . . . . . . (105)
Acquisition fees . . . . . . . . . . . . . . . . (2,208)
Other . . . . . . . . . . . . . . . . . . . . . (150)
. . . . . . . . . . . . . . . . . . . . . . . . (30,004)
. . . . . . . . . . . . . . . . . . . . . . . . $ (4,330)
(g) Reflects the following:
Payment of accrued phantom stock plan prior to closing $ (151)
Payment of accrued bonuses prior to closing . . . . (105)
Accrual for acquisition related severance and other 508
$ 252
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Historical
Transkrit
for the Historical
Historical Six LAI
NFC Month Transkrit for the
for the Period Transaction Year
Year Ended Ended and Ended
December 31, June 28, Acquisition December 31,
1996 1996 Adjustments 1996
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . $111,342 $ 48,004 $0 $16,202
Cost of sales . . . . . . . . 80,215 30,685 (469) (a) 12,813
Gross profit . . . . . . . . 31,127 17,319 469 3,389
Selling, general
and administrative
expenses . . . . . . . . . . 25,200 14,381 (427) (b) 2,648
Operating income . . . . . . 5,927 2,938 896 741
Interest expense
(income) . . . . . . . . . . 8,126 (441) 5,167 (c) 99
Other (income) expense . . . 0 (306) 0 0
Income (loss) before
income taxes and
extraordinary item . . . . . (2,199) 3,685 (4,271) 642
Income tax provision
(benefit) . . . . . . . . . (626) 1,062 (1,297) (d) 0
Net income (loss) before
extraordinary item . . . . . ($1,573) $2,623 ($2,974) $ 642
Other Data:
EBITDA (j) . . . . . . . . . $12,495 $5,807 $1,594 $ 1,177
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (con't)
</TABLE>
<TABLE>
<CAPTION>
Historical
ADMI
LAI for the ADMI
Transaction Year Transaction
and Ended and Company
Acquisition December 31, Acquisition Pro
Adjustments 1996 Adjustments Forma
<S> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . $0 $26,485 $ 0 $202,033
Cost of sales . . . . . . . 131 (e) 18,140 122 (h) 141,637
Gross profit . . . . . . (131) 8,345 (122) 60,396
Selling, general
and administrative
expenses . . . . . . 4 (f) 5,815 1,035 (i) 48,656
<PAGE>
Operating income . . . . . (135) 2,530 (1,157) 11,740
Interest expense
(income) . . . . . . 619 (g) 45 0 13,615
Other (income) expense . . 0 (161) 0 (467)
Income (loss) before
income taxes and
extraordinary item . . . . (754) 2,646 (1,157) (1,408)
Income tax provision
(benefit) . . . . . . (190) (d) 390 (258) (d) (919)
Net income (loss) before
extraordinary item . . . . $(564) $ 2,256 ($899) ($489)
Other Data:
EBITDA (j) . . . . . . $ 296 $ 3,356 $ 683 $25,408
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
The Pro Forma Combined Statement of Operations for the year ended
December 31, 1996 reflects the Transaction and the Prior Acquisitions as if
they had occurred on January 1, 1996 as follows:
<TABLE>
<S> <C>
(a) Reflects the following:
Conversion of Transkrit inventory valuation method from LIFO to FIFO $736
Increase in depreciation expense due to depreciation on increased property bases due to
purchase accounting adjustment (590)
Reduction in raw material costs due to contractual commitments from suppliers based on
higher purchases (315)
Reduced property and casualty insurance premiums due to greater values insured (100)
Reduced employee benefit insurance premiums (200)
$ (469)
(b) Reflects the following:
Reversal of terminated compensation plan expenses $ (121)
Reversal of management fees paid to previous affiliate (448)
Twenty-four person reduction in staffing due to rationalization (784)
Senior management retirements (274)
Lower telecommunication cost per minute due to volume increase (15)
Additional management fees to be incurred 50
Consolidation of redundant data networks (23)
Consolidation of logistics and transportation services (99)
Increase in depreciation expense due to depreciation on increased property bases due to
purchase accounting adjustment 32
Additional amortization related to patents 1,038
Additional amortization of goodwill 217
$ (427)
(c) Reflects the following:
Reversal of related party interest income $244
Additional debt cost amortization 379
Additional interest expense associated with Senior Notes 4,544
$5,167
(d) Reflects the net additional income tax benefit as a result of all transaction adjustments
(except for the goodwill amortization adjustment as the amortization of goodwill resulting from
the purchase of all outstanding capital stock will not be deductible for tax purposes).
(e) Increase in depreciation expense due to depreciation on increased property bases due to
purchase accounting adjustment
(f) Reflects the following:
Reduction in compensation expenses due to retirement of previous
owner/officer $(296 )
Additional amortization of goodwill 160
Additional amortization for noncompete agreement 140
$4
(g) Additional interest expense on borrowing to purchase outstanding capital stock of
Label America, Inc.
(h) Increase in depreciation expense due to depreciation on increased property bases due to
purchase accounting adjustment.
<PAGE>
(i) Reflects the following:
Reversal of terminated phantom stock plan expenses $(119 )
Reduction in compensation expenses due to retirement of previous owners/officers (564)
Additional amortization for noncompete agreement 200
Additional amortization related to residential list intangible assets 1,166
Additional amortization of goodwill 352
$1,035
(j) EBITDA is provided because it is a measure of an issue's ability to service its indebtedness commonly used by
certain investors. EBITDA, as defined herein, is a financial measure under the Senior Notes. The Senior Notes
contain a covenant which requires the Company to maintain certain minimum levels of EBITDA, as defined. EBITDA is
not a measurement of financial performance under generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to cash flow as a measure of liquidity.
EBITDA is defined as operating income plus depreciation, amortization and non-cash pension plan charges and the
elimination of the gain on disposal of equipment.
</TABLE>
<PAGE>
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 duly authorized.
NATIONAL FIBERSTOK CORPORATION
By: /s/ Robert B. Webster
Robert B. Webster
Executive Vice President and
Chief Financial Officer