|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: DAUCH RICHARD E, 4, 2000-09-11 |
Next: BIG CITY RADIO INC, 4, 2000-09-11 |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
______________________________________________________________________________
FORM 8-K / A
AMENDED CURRENT REPORT
______________________________________________________________________________
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
June 30, 2000
DATE OF REPORT (Date of earliest event reported)
BRASS EAGLE INC.
(Exact name of registrant as specified in its charter)
|
DELAWARE |
0-23385 |
71-0578572 |
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
1201 SE 30TH Street, Bentonville, Arkansas 72712
(Address of principal executive offices) (zip code)
(501) 464-8700
(Registrant's telephone number, including area code)
BRASS EAGLE INC.
This amended report was filed to include the audited financial statements of the acquisition of substantially all of the assets of JT USA, L.P. of Chula Vista, California.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 30, 2000 Brass Eagle Inc. (the Registrant) completed the acquisition of substantially all of the assets of JT USA, L.P. (the Seller) of Chula Vista, California. Brass Eagle Inc. issued a press release on July 3, 2000 regarding this transaction, a copy of which is included as an exhibit hereto.
The assets involved included all patent and trademark rights, molds, tools and dies used to produce product, all existing product lines, a lease of real property in Chula Vista, California, all existing contracts, licenses and permits, all inventory, accounts receivable and goodwill. The assets will be owned by Brass Eagle's newly formed subsidiary, JT USA Inc.
The consideration paid was $32 million cash, and this amount was arrived at by arms-length negotiation. The acquisition was funded by $28 million from Brass Eagle's new $40 million line of credit with Bank of America, N. A., and $4 million generated by internal company operations. The Seller utilized these assets to generate sales of paintball masks, clothing and protective equipment for the sport of paintball and protective goggles and clothing for use in motocross. Brass Eagle plans to continue this aspect of JT's operations, as well as expanding JT into other extreme sports while generating synergies for Brass Eagle's existing operations.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
JT USA, L. P. FINANCIAL STATEMENTS AND BRASS EAGLE INC. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
|
|
|
|
REPORT OF INDEPENDENT AUDITORS |
|
|
|
|
|
JT USA, L.P. FINANCIAL STATEMENTS |
|
|
|
BALANCE SHEETS |
|
|
STATEMENTS OF OPERATIONS |
|
|
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL |
|
|
STATEMENTS OF CASH FLOWS |
|
|
NOTES TO FINANCIAL STATEMENTS |
|
|
|
|
BRASS EAGLE INC. UNAUDITED PRO FORMA CONDENSED |
|
|
|
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL |
|
|
STATEMENTS DESCRIPTION |
|
|
|
|
|
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE |
|
|
SHEETS |
|
|
|
|
|
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED |
|
|
STATEMENTS OF OPERATIONS |
|
|
|
|
|
PRO FORMA ADJUSTEMENT DESCRIPTIONS |
|
|
|
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Brass Eagle Inc.
Bentonville, Arkansas
and
The Partners
JT USA, L.P.
(formerly J.T. Racing, L.P. )
Chula Vista, California
We have audited the accompanying balance sheets of JT USA, L.P. (formerly J.T. Racing, L.P.) as of June 30, 2000 and December 31, 1999 and 1998 and the related statements of operations, changes in partners' capital, and cash flows for the six-month period ended June 30, 2000 and the years ended December 31, 1999 and 1998. 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 JT USA, L. P. (formerly J.T. Racing, L.P.) as of June 30, 2000 and December 31, 1999 and 1998 and the results of its operations and its cash flows for the six-month period ended June 30, 2000 and the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles.
Crowe, Chizek and Company, LLP
Oak Brook, Illinois
July 28, 2000
BRASS EAGLE INC.
JT USA, L.P.
(formerly J. T. RACING, L.P.)
BALANCE SHEETS
|
|
December 31, |
June 30, |
|
|
|
1998 |
1999 |
2000 |
|
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash |
$ 803,254 |
$ 50,550 |
$ 31,515 |
|
Accounts receivable, net of allowance for bad |
|
|
|
|
debts of $34,930, $45,951, and $40,786 in |
|
|
|
|
1998, 1999, and June 30, 2000, respectively |
682,988 |
1,142,770 |
1,659,208 |
|
Due from related parties (Note 8) |
371,141 |
466,545 |
175,796 |
|
Inventory (Note 3) |
1,674,646 |
1,885,443 |
2,361,491 |
|
Prepaid expenses |
193,248 |
167,823 |
240,264 |
|
Total current assets |
3,725,277 |
3,713,131 |
4,468,274 |
|
|
|
|
|
|
Property and equipment, net (Note 4) |
329,004 |
712,175 |
867,716 |
|
|
|
|
|
|
Note receivable - partners |
141,620 |
120,779 |
109,636 |
|
Other assets |
0 |
10,000 |
10,000 |
|
Total assets |
$ 4,195,901 |
$ 4,556,085 |
$5,455,626 |
|
|
========== |
========= |
======== |
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Current portion of long-term debt (Note 7) |
$ 6,094 |
$ 15,042 |
$ 18,556 |
|
Borrowings under line of credit (Note 5) |
422,114 |
1,204,421 |
0 |
|
Accounts payable |
553,082 |
489,196 |
1,276,903 |
|
Due to partners (Note 8) |
1,223,044 |
860,160 |
1,269,685 |
|
Payroll liabilities |
685,089 |
319 |
10,464 |
|
Accrued distributors' rebates |
123,428 |
83,820 |
50,007 |
|
Accrued expenses and other liabilities |
213,603 |
589,661 |
492,524 |
|
Total current liabilities |
3,226,454 |
3,242,619 |
3,118,139 |
|
|
|
|
|
|
Long-term debt (Note 7) |
28,166 |
46,653 |
53,262 |
|
|
|
|
|
|
Partners' capital |
|
|
|
|
Limited partners |
940,340 |
1,265,645 |
2,282,264 |
|
General partner |
941 |
1,168 |
1,961 |
|
Total partners' capital |
941,281 |
1,266,813 |
2,284,225 |
|
|
|
|
|
|
Total liabilities and partners' capital |
$ 4,195,901 |
$ 4,556,085 |
$5,455,626 |
|
|
========== |
========= |
======== |
See accompanying notes to financial statements.
BRASS EAGLE INC.
JT USA, L.P.
(formerly J. T. RACING, L.P.)
STATEMENTS OF OPERATIONS
|
|
Years ended |
Six months ended |
||
|
|
December 31, |
June 30, |
||
|
|
1998 |
1999 |
1999 |
2000 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Net sales |
$11,360,379 |
$12,890,526 |
$6,233,634 |
$7,951,985 |
|
|
|
|
|
|
|
Cost of sales |
5,243,859 |
5,203,921 |
2,900,016 |
3,248,684 |
|
|
|
|
|
|
|
Gross profit |
6,116,520 |
7,686,605 |
3,333,618 |
4,703,301 |
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Selling and marketing |
1,910,423 |
1,787,272 |
892,202 |
1,199,624 |
|
General and administrative |
4,216,217 |
5,395,021 |
1,795,997 |
2,269,743 |
|
|
6,126,640 |
7,182,293 |
2,688,199 |
3,469,367 |
|
|
|
|
|
|
|
Operating income |
(10,120) |
504,312 |
645,419 |
1,233,934 |
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
Factoring expense |
(77,766) |
(187,364) |
(23,803) |
(79,396) |
|
Interest expense |
(43,570) |
(11,995) |
(8,109) |
(28,473) |
|
Interest income |
15,380 |
20,579 |
11,195 |
6,347 |
|
|
(105,956) |
(178,780) |
(20,717) |
(101,522) |
|
|
|
|
|
|
|
Net income (loss) |
$ (116,076) |
$ 325,532 |
$ 624,702 |
$1,132,412 |
|
|
========= |
======== |
======== |
======== |
See accompanying notes to financial statements.
BRASS EAGLE INC.
JT USA, L.P.
(formerly J. T. RACING, L.P.)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
|
|
Limited |
General |
|
|
|
Partners |
Partner |
Total |
|
|
|
|
|
|
Balances at January 1, 1998 |
$ 1,056,335 |
$ 1,022 |
$1,057,357 |
|
|
|
|
|
|
Net loss, year ended December 31, 1998 |
(115,995) |
(81) |
(116,076) |
|
|
|
|
|
|
Balances at December 31, 1998, as restated |
940,340 |
941 |
941,281 |
|
|
|
|
|
|
Net income, year ended December 31, 1999 |
325,305 |
227 |
325,532 |
|
|
|
|
|
|
Balances at December 31, 1999 |
1,265,645 |
1,168 |
1,266,813 |
|
|
|
|
|
|
Distribution |
(115,000) |
0 |
(115,000) |
|
|
|
|
|
|
Net income, six months ended June 30, 2000 |
1,131,619 |
793 |
1,132,412 |
|
|
|
|
|
|
Balance at June 30, 2000 |
$ 2,282,264 |
$ 1,961 |
$2,284,225 |
|
|
========== |
======== |
======== |
See accompanying notes to financial statements.
BRASS EAGLE INC.
JT USA, L.P.
(formerly J. T. RACING, L.P.)
STATEMENTS OF CASH FLOWS
|
|
Years ended |
Six months ended |
||
|
|
December 31, |
June 30, |
||
|
|
1998 |
1999 |
1999 |
2000 |
|
|
|
|
(Unaudited) |
|
|
Cash flows from operating activities |
|
|
|
|
|
Net income (loss) |
$(116,076) |
$325,532 |
$ 624,702 |
$1,132,412 |
|
Adjustments to reconcile net income (loss) |
|
|
|
|
|
to net cash from operating activities |
|
|
|
|
|
(Gain) loss on disposition of assets |
8,179 |
(3,000) |
(3,000) |
0 |
|
Depreciation and amortization |
123,094 |
211,015 |
75,395 |
134,360 |
|
Provision for bad debts |
6,577 |
11,020 |
(153) |
(5,165) |
|
Changes in assets and liabilities |
|
|
|
|
|
Accounts receivable |
(195,527) |
(470,803) |
154,520 |
(511,273) |
|
Inventory |
(236,515) |
(210,797) |
(715,370) |
(476,048) |
|
Prepaid expenses |
(181,486) |
(79,419) |
117,677 |
(85,939) |
|
Accounts payable |
479,475 |
(63,887) |
219,579 |
787,707 |
|
Accrued expenses |
495,960 |
(375,265) |
(178,925) |
(120,805) |
|
Net cash provided by (used in ) |
|
|
|
|
|
operating activities |
383,681 |
(655,604) |
294,425 |
855,249 |
|
Cash flows from investing activities |
|
|
|
|
|
Property additions |
(305,897) |
(462,395) |
(202,573) |
(278,238) |
|
Payments on notes receivable |
19,053 |
20,842 |
10,188 |
11,143 |
|
Advances to / from related parties |
(352,088) |
(439,983) |
807,000 |
292,584 |
|
Proceeds on sale of equipment |
0 |
3,000 |
3,000 |
0 |
|
Net cash provided by (used in) investing |
|
|
|
|
|
activities |
(638,932) |
(878,536) |
617,615 |
25,489 |
|
Cash flows from financing activities |
|
|
|
|
|
Principal payment on notes payable |
(8,444) |
(10,000) |
(3,924) |
(32,298) |
|
Borrowing on notes payable |
36,610 |
37,434 |
13,425 |
42,421 |
|
Distribution to limited partner |
0 |
0 |
0 |
(115,000) |
|
Borrowings (payments) due to / from partners |
888,465 |
(28,305) |
(851,706) |
409,525 |
|
Borrowings (payments) on line of credit |
125,407 |
782,307 |
(422,114) |
(1,204,421) |
|
Net cash provided by (used in) financing |
|
|
|
|
|
activities |
1,042,038 |
781,436 |
(1,264,319) |
(899,773) |
|
|
|
|
|
|
|
Increase (decrease) in cash |
786,787 |
(752,704) |
(352,279) |
(19,035) |
|
Cash and cash equivalents at beginning of |
|
|
|
|
|
period |
16,467 |
803,254 |
803,254 |
50,550 |
|
Cash and cash equivalents at end of period |
$ 803,254 |
$ 50,550 |
$ 450,975 |
$ 31,515 |
|
|
======== |
======= |
======== |
======== |
|
Supplementary disclosures of cash flow |
|
|
|
|
|
Information |
|
|
|
|
|
Cash paid during the period for |
|
|
|
|
|
Interest |
$ 43,570 |
$ 11,995 |
$ 8,109 |
$ 28,473 |
See accompanying notes to financial statements.
BRASS EAGLE INC.
JT USA, L.P.
(formerly J. T. RACING, L.P.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND OPERATION
JT USA, L.P. (formerly J.T. Racing, L.P.) (a limited partnership) ("the Partnership") was organized as a California limited partnership on December 10, 1996. On March 1, 1999, the Partnership changed its name from J.T. Racing, L.P. to JT USA, L.P. The Partnership was capitalized on January 1, 1997. On June 30, 2000, JT USA, L.P. sold certain assets of the business to Brass Eagle Inc. These financial statements present the financial position and results of operations of JT USA, L.P. prior to the sale.
The Partnership designs, manufactures, and markets protective sports equipment and apparel - primarily for the sport of paintball. Products are sold through domestic dealers, domestic and foreign distributors, and through direct mailings.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the Partnership are as follows:
Use of Estimates in the Preparation of 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include cash, time deposits, and highly liquid investments with original maturities of three months or less.
Inventories: Inventories are stated at the lower of cost or market determined using the average cost method.
Property and Equipment: Property and equipment are recorded at cost. Depreciation is computed using the straight-line and double declining balance methods of depreciation over the assets estimated useful lives of three to ten years. Leasehold improvements are depreciated over the shorter of their useful lives or the lease term. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized.
Income Taxes: No provision for federal and state income taxes is required, as any liability for such taxes would be that of the partners rather than the Partnership.
Factoring Receivables: Certain account receivable balances are sold to a factoring company at a discounted rate. The receivables are sold without recourse thus they are not included in the balance sheet of the Partnership.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition: The Partnership recognizes revenue upon shipment of product.
Interim Results: The accompanying balance sheet at June 30, 2000 and the statements of operations and cash flows for the six-month periods ended June 30, 1999 and 2000 are interim financial statements. In the opinion of management, these statements have been prepared on the same basis as the annual financial statements and include all of the adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the results of the interim periods. The results of operations for the six-month period ended June 30, 2000 are not necessarily indicative of the results expected for the full calendar year.
NOTE 3 - INVENTORY
Inventory consisted of the following:
|
|
December 31, |
June 30, |
|
|
|
1998 |
1999 |
2000 |
|
|
|
|
|
|
Raw materials |
$1,077,738 |
$1,088,781 |
$1,004,800 |
|
Finished goods |
596,908 |
796,662 |
1,356,691 |
|
|
$1,674,646 |
$1,885,443 |
$2,361,491 |
|
|
======== |
======== |
======== |
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
|
December 31, |
June 30, |
|
|
|
1998 |
1999 |
2000 |
|
|
|
|
|
|
Office equipment |
$ 261,410 |
$ 295,594 |
$ 309,532 |
|
Machinery and equipment |
310,818 |
335,965 |
359,636 |
|
Tools, dies, and molds |
301,902 |
408,808 |
345,322 |
|
Furniture and fixtures |
25,577 |
40,305 |
40,305 |
|
Leasehold improvements |
162,416 |
198,864 |
205,677 |
|
Transportation equipment |
419,125 |
518,540 |
555,357 |
|
|
1,481,248 |
1,798,076 |
1,815,829 |
|
Accumulated depreciation |
1,152,244 |
1,196,193 |
1,122,400 |
|
|
329,004 |
601,883 |
693,429 |
|
Construction in progress |
0 |
110,292 |
174,287 |
|
|
$ 329,004 |
$ 712,175 |
$ 867,716 |
|
|
======== |
======== |
======== |
NOTE 5 - LINE OF CREDIT
At June 30, 2000, the Partnership had a line of credit which matures on July 31, 2000. Under the provisions of the agreement, borrowings may not exceed the lesser of $1,600,000 or the borrowing base. The borrowing base is computed using 80% of eligible accounts receivable plus 20% of inventories not to exceed $300,000. The Partnership designates advances under the agreement to accrue interest at either the bank's prime rate plus .75% (10.25% at June 30, 2000) or LIBOR plus 2.75% (9.39% at June 30, 2000). The line of credit is collateralized by substantially all of the Partnership's assets and is personally guaranteed by two of the limited partners. Amounts available under the line are reduced by outstanding letters of credit. The agreement includes certain restrictive covenants including maintaining a minimum tangible partners' capital as defined of at least $1,450,000, maintaining a ratio of debt to tangible partners' capital of not more than 2.25 to 1.0, a quick ratio of more than .50 to 1.0, maintaining profitability on a quarterly basis, and limitations on distributions to partners. As of June 30, 2000, the Partnership was in compliance with these covenants.
NOTE 6 - OUTSTANDING TRADE LETTERS OF CREDIT
During 1998, the Partnership also established a new letter of credit agreement with Sanwa Bank California, which provides borrowings for foreign purchases. As of December 31, 1998 and 1999 and June 30, 2000, the Partnership had no outstanding trade letters of credit.
NOTE 7 - LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
December 31, |
June 30, |
|
|
|
1998 |
1999 |
2000 |
|
|
|
|
|
|
Installment notes, collateralized by equipment, bearing interest at fixed rates from 4.9% to 10.9%, maturing between July 2002 and October 2004. Monthly principal and interest payments range from approximately $375 to $795. |
|
|
|
|
|
|
|
|
|
Less current maturities |
6,094 |
15,042 |
18,556 |
|
|
$ 28,166 |
$ 46,653 |
$ 53,262 |
|
|
========= |
========= |
========= |
Annual maturities of long-term debt for periods ending June 30 are as follows:
|
2001 |
$ 18,556 |
|
2002 |
20,380 |
|
2003 |
17,730 |
|
2004 |
10,450 |
|
2005 |
4,702 |
|
|
$ 71,818 |
|
|
======= |
NOTE 8 - RELATED PARTY TRANSACTIONS
Due from related parties consisted of the following:
|
|
December 31, |
June 30, |
|
|
|
1998 |
1999 |
2000 |
|
|
|
|
|
|
Note receivable partners current portion |
$ 19,053 |
$ 20,961 |
$ 21,796 |
|
Due from factor |
352,088 |
291,584 |
0 |
|
Due from employees |
0 |
154,000 |
154,000 |
|
|
$ 371,141 |
$ 466,545 |
$ 175,796 |
|
|
========= |
========= |
========= |
Due to partners consisted of the following:
|
|
December 31, |
June 30, |
|
|
|
1998 |
1999 |
2000 |
|
|
|
|
|
|
Demand note payable to two partners |
$ 888,465 |
$ 860,160 |
$ 569,685 |
|
Royalties payable to limited partner |
301,573 |
0 |
0 |
|
Other advances |
33,006 |
0 |
0 |
|
Note payable to two partners due September 2000 |
|
|
|
|
|
$ 1,223,044 |
$ 860,160 |
$ 1,269,685 |
|
|
========= |
========== |
========= |
|
|
|
|
|
The Partnership has a note receivable due from two of the limited partners. The balance outstanding on the note was $160,673, $141,740, and $120,779 as of December 31, 1998 and 1999 and June 30, 2000, respectively. The note bears interest at 9%. Interest
income for the years ended December 31, 1998 and 1999 and the six months ended June 30, 1999 and 2000 was $15,321, $13,688, $7,057, and $6,184, respectively. The note is payable in equal monthly installments, including interest of $2,728 through May 2005.
As of December 31, 1998 and 1999 and June 30, 2000, the Partnership had non-interest-bearing advances outstanding of $888,465, $860,160, and $596,685, respectively, with two of the limited partners of the partnership. These advances are subordinated to the line of credit.
The Partnership paid royalties to a limited partner during 1998 for certain tools, dies, and molds that were used by the Partnership. This agreement was terminated as of January 1, 1999. The Partnership incurred $689,467 in royalty expense for the year ended December 31, 1998.
The Partnership factors certain account receivable balances to a factoring company owned by two of the limited partners. For the years ended December 31, 1998 and 1999 and the six-month periods ended June 30, 1999 and 2000, the Partnership incurred $77,766, $187,364, $0, and $79,396, respectively, for factoring fees.
The Partnership's primary operating facility is owned by two of the limited partners and is leased to the Partnership. The lease expires in January 2001. Rent expense was $240,000, $156,000, $120,000, and $84,000 for the years ended December 31, 1998 and 1999, and the six-month periods ended June 30, 1999 and 2000, respectively.
In 1999, the Partnership entered into an agreement for management services. Concurrent with the execution of the agreement, two limited partners became employees of the management company and began providing services as a contractor. The agreement provided for a $250,000 signing bonus and payments of $30,000 per month. The contract expires July 31, 2000. The contract also provides for quarterly discretionary bonus payments. Management fees included in general and administrative expenses were $2,015,000, $0, and $195,000 for the year ended December 31, 1999 and the six-month periods ended June 30, 1999 and 2000.
Prior to the establishment of the management agreement, the two limited partners were employees of the Partnership. Salaries and bonuses included in general and administrative expense for these two limited partners were approximately $1,504,000 for the year ended December 31, 1998.
The Partnership purchases and sells certain products to a company with a common ownership interest. The Partnership had purchases from this company of $221,020, $226,547, $125,861, and $141,039, and sales to this company of $40, $63,533, $20,496, and $11,510 for the years ended December 31, 1998 and 1999 and the six-month periods ended June 30, 1999 and 2000, respectively. The Partnership had a balance payable to this company of $0, $18,663, and $0 and a receivable from this company of $0, $3,444, and $0 as of December 31, 1998 and 1999 and June 30, 2000, respectively.
NOTE 9 - MAJOR CUSTOMERS
One customer accounted for 10% of net sales in 1999 and 0% of total accounts receivable at December 31, 1999. A second customer accounted for 10% of net sales in 1998 and 1999, and 26% and 4% of total accounts receivable at December 31, 1998 and 1999. No customers accounted for 10% or more of sales in the six months ended June 30, 2000.
NOTE 10 - CONTINGENCIES
JT USA, L.P. and J.T Racing, Inc., limited partners, are named in a number of lawsuits claiming product liability. JT USA, L.P. and J.T. Racing, Inc. are strongly contesting the claims and believe that their positions will be upheld. The Partnership has insurance for costs of defense and claims. Management does not anticipate that the outcome of the above litigation will have a material effect on the Partnership.
NOTE 11 - RETIREMENT INCOME PLAN
The Partnership has a defined benefit pension plan, which covers all full-time employees (those with at least 1,000 hours of service) who have attained age 21 and have 12 months of service. The plan began in 1998 for employees meeting the eligibility requirements as of January 1, 1998. The Partnership's funding policy is to contribute an amount equal to the minimum required employer contribution under the Employee Retirement Income Security Act of 1974 (ERISA). Plan assets are invested in various mutual funds.
Information about the pension plans was as follows:
|
|
December 31, |
|
|
|
1998 |
1999 |
|
|
|
|
|
Change in benefit obligation |
|
|
|
Benefit obligation at beginning of period |
$ 0 |
$ 146,398 |
|
Service cost |
146,398 |
167,172 |
|
Interest cost |
0 |
10,248 |
|
Actuarial (gain) / loss |
0 |
(20,483) |
|
Benefits paid |
0 |
0 |
|
Other |
0 |
0 |
|
Benefit obligation at end of period |
146,398 |
303,335 |
|
|
|
|
|
Change in plan assets |
|
|
|
Actual return on plan asset |
$ 0 |
$ 332 |
|
Employer contribution |
0 |
114,821 |
|
Benefits paid |
0 |
0 |
|
Fair value of plan assets at end of period |
0 |
115,153 |
|
|
|
|
|
Funded status |
146,398 |
188,182 |
|
Unrecognized net actuarial gain |
1,585 |
18,263 |
|
|
|
|
|
Accrued benefit cost |
$ 147,983 |
$ 206,445 |
|
|
======== |
======= |
The components of pension expense and related actuarial assumptions and methods were as follows:
|
|
December 31, |
|
|
|
1998 |
1999 |
|
|
|
|
|
Service cost |
$ 147,983 |
$ 167,172 |
|
Interest cost |
0 |
10,248 |
|
Expected return on plan asset |
0 |
(4,065) |
|
Amortization of transition (asset) / obligation |
0 |
0 |
|
Amortization of (gain) / loss |
0 |
(72) |
|
Net periodic benefit cost |
$ 147,983 |
$ 173,283 |
|
|
======== |
======== |
|
|
|
|
|
Discount rate on benefit obligation |
7.00% |
7.00% |
|
Long-term expected rate of return on plan assets |
8.00 |
8.00 |
|
|
|
|
|
Rate of compensation increase |
4.00 |
4.00 |
|
Amortization method |
Straight-line |
Straight-line |
|
|
|
|
The provisions of Statement of Financial Accounting Standards (SFAS) No. 87, "Employers' Accounting for Pensions," require recognition in the balance sheet of an additional minimum liability and related intangible asset for pension plans with accumulated benefits in excess of plan assets. At December 31, 1998 and 1999, a liability of $147,983 and $206,445, respectively, is reflected in the balance sheet. Management estimated the net periodic benefit cost for the six-month periods ended June 30, 1999 and 2000 based on the prior period's cost. The net periodic pension cost recorded for the six-months ended June 30, 1999 and 2000 was $51,741 and $63,788, respectively.
NOTE 12 - SUBSEQUENT EVENT
On June 30, 2000, JT USA, L.P. sold certain assets of the business to Brass Eagle Inc.
BRASS EAGLE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS DESCRIPTION
On June 30, 2000, Brass Eagle completed the acquisition of JT USA, a manufacturer of protective accessories and apparel for the paintball industry. Management expects to gain synergies in marketing, product development, purchasing, sales and distribution in future periods as a result of the acquisition.
The following unaudited pro forma condensed consolidated financial statements (the "Pro Forma Financial Statements") are based on historical financial statements of Brass Eagle, Inc. and JT USA and have been prepared to illustrate the effects of the Acquisition.
The unaudited pro forma condensed statements of operation for the year ended December 31, 1999 and for the six months ended June 30, 2000 give effect to the Acquisition as if the transaction had been completed as of January 1, 1999. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2000 gives effect to the Acquisition as if the transaction had been completed as of that date.
The Acquisition will be accounted for using the purchase method of accounting. The total purchase price will be allocated to the tangible and intangible assets and liabilities acquired based upon their respective fair values. The allocation of the aggregate purchase price reflected in the Pro Forma Financial Statements is preliminary and is subject to adjustment upon the receipt of, among other things, certain appraisals of the acquired assets and liabilities.
The Pro Forma Statements do not purport to present the actual financial position or results of operations that would have occurred had the transactions and events reflected therein in fact occurred on the dates specified, nor do they purport to be indicative of the results of operations or financial condition that may be achieved in the future. The Pro Forma Financial Statements are based on certain assumptions and adjustments described in the notes hereto and should be read in conjunction therewith.
BRASS EAGLE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEETS
As of June 30, 2000
(In thousands except share data)
|
|
Brass Eagle Inc. |
JT USA , |
|
|
|
|
2000 |
2000 |
Adjustments |
Forma |
|
ASSETS |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
$ 3,008 |
$ 32 |
$ (32)(A) |
$ 3,008 |
|
Accounts receivable, less allowance for |
|
|
|
|
|
doubtful accounts of $410 |
16,582 |
1,659 |
0 |
18,241 |
|
Due from affiliate |
484 |
176 |
(176)(A) |
484 |
|
Inventories |
10,506 |
2,361 |
0 |
12,867 |
|
Prepaid expenses and other current assets |
715 |
240 |
(20)(A)(B) |
935 |
|
Deferred taxes |
1,363 |
0 |
0 |
1,363 |
|
Total current assets |
32,658 |
4,468 |
(228) |
36,898 |
|
Property and equipment, net |
10,938 |
868 |
92(B) |
11,898 |
|
JT USA acquisition deposit and cost |
4,724 |
0 |
(4,724)(A) |
0 |
|
Other assets |
0 |
120 |
240(B) |
360 |
|
Intangible assets, net |
6,401 |
0 |
28,931(C) |
35,332 |
|
|
$ 54,721 |
$ 5,456 |
$ 24,311 |
$ 84,488 |
|
|
======= |
======= |
======= |
======= |
|
Liabilities and stockholders' equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
$ 4,935 |
$ 1,277 |
$ (141)(A) |
$ 6,071 |
|
Accrued expenses |
4,738 |
553 |
(4)(A) |
5,287 |
|
Due to partners |
0 |
1,270 |
(1,214)(A) |
56 |
|
Current maturities of long-term debt |
0 |
19 |
5,589(D) |
5,608 |
|
Total current liabilities |
9,673 |
3,119 |
4,230 |
17,022 |
|
Minority interest |
29 |
0 |
0 |
29 |
|
Long-term debt, less current maturities |
0 |
53 |
22,365(D) |
22,418 |
|
Deferred income taxes |
625 |
0 |
0 |
625 |
|
Stockholders' equity and partners' capital |
|
|
|
|
|
Partners' capital |
0 |
2,284 |
(2,284) |
0 |
|
Common stock, $.01 par value, 10,000,000 |
|
|
|
|
|
shares authorized 7,255,947 issued and |
|
|
|
|
|
7,136,247 outstanding in 2000 |
73 |
0 |
0 |
73 |
|
Additional paid-in capital |
25,790 |
0 |
0 |
25,790 |
|
Retained earnings |
19,074 |
0 |
0 |
19,074 |
|
Treasury stock, 119,700 shares at cost |
(543) |
0 |
0 |
(543) |
|
|
44,394 |
2,284 |
(2,284) |
44,394 |
|
|
$ 54,721 |
$ 5,456 |
$ 24,311 |
$ 84,488 |
|
|
======== |
======= |
======= |
======= |
BRASS EAGLE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
Six months ended June 30, 2000
(In thousands except share data)
|
|
Brass Eagle, Inc. |
JT USA, |
|
|
|
|
2000 |
2000 |
Adjustments |
Forma |
|
|
|
|
|
|
|
Net sales |
$ 31,792 |
$ 7,952 |
$ 0 |
$ 39,744 |
|
|
|
|
|
|
|
Cost of sales |
20,976 |
3,249 |
0 |
24,225 |
|
|
|
|
|
|
|
Gross profit |
10,816 |
4,703 |
0 |
15,519 |
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Selling and marketing |
5,325 |
1,200 |
0 |
6,525 |
|
General and administrative |
1,759 |
2,269 |
(464)(E) |
3,564 |
|
Amortization |
265 |
0 |
725(F) |
990 |
|
|
7,349 |
3,469 |
261 |
11,079 |
|
|
|
|
|
|
|
Operating income |
3,467 |
1,234 |
(261) |
4,440 |
|
|
|
|
|
|
|
Minority interest |
21 |
0 |
0 |
21 |
|
Interest income |
279 |
6 |
(6)(E) |
279 |
|
Interest expense |
(7) |
(108) |
(840)(G) |
(955) |
|
|
293 |
(102) |
(846) |
(655) |
|
|
|
|
|
|
|
Income before income taxes |
3,760 |
1,132 |
(1,107) |
3,785 |
|
|
|
|
|
|
|
Provision for income taxes |
1,406 |
0 |
10 |
1,416 |
|
|
|
|
|
|
|
Net income |
$ 2,354 |
$ 1,132 |
$ (1,117) |
$ 2,369 |
|
|
======== |
======= |
======= |
====== |
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
|
Basic |
$ 0.33 |
|
|
$ 0.33 |
|
|
======== |
|
|
====== |
|
Diluted |
$ 0.31 |
|
|
$ 0.31 |
|
|
======== |
|
|
====== |
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
Basic |
7,135,907 |
|
|
7,135,907 |
|
Diluted |
7,525,240 |
|
|
7,525,240 |
|
|
|
|
|
|
BRASS EAGLE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the year ended December 31, 1999
(In thousands except share data)
|
|
Brass Eagle, Inc. Historical |
JT USA , L.P. |
|
|
|
|
1999 |
1999 |
Adjustments |
Forma |
|
|
|
|
|
|
|
Net sales |
$ 68,230 |
$ 12,890 |
$ 0 |
$ 81,120 |
|
|
|
|
|
|
|
Cost of sales |
42,119 |
5,204 |
(193)(E) |
47,130 |
|
|
|
|
|
|
|
Gross profit |
26,111 |
7,686 |
193 |
33,990 |
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Selling and marketing |
10,096 |
1,787 |
0 |
11,883 |
|
General and administrative |
2,803 |
5,395 |
(2,354)(E) |
5,844 |
|
Amortization |
532 |
0 |
1,450(F) |
1,982 |
|
|
13,431 |
7,182 |
(904) |
19,709 |
|
|
|
|
|
|
|
Operating income |
12,680 |
504 |
1,097 |
14,281 |
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
Interest income |
190 |
20 |
(14)(E) |
196 |
|
Interest expense |
0 |
(199) |
(1,764)(G) |
(1,963) |
|
|
190 |
(179) |
(1,778) |
(1,767) |
|
|
|
|
|
|
|
Income before income taxes |
12,870 |
325 |
(681) |
12,514 |
|
|
|
|
|
|
|
Provision for income taxes |
4,685 |
0 |
(134)(H) |
4,551 |
|
|
|
|
|
|
|
Net income |
$ 8,185 |
$ 325 |
$ (547) |
$ 7,963 |
|
|
======== |
======= |
======= |
====== |
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
|
Basic |
$ 1.13 |
|
|
$ 1.10 |
|
|
======== |
|
|
====== |
|
Diluted |
$ 1.07 |
|
|
$ 1.04 |
|
|
======== |
|
|
====== |
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
Basic |
7,246,026 |
|
|
7,246,026 |
|
Diluted |
7,670,664 |
|
|
7,670,664 |
|
|
|
|
|
|
BRASS EAGLE INC.
PRO FORMA ADJUSTMENT DESCRIPTIONS
|
(A) |
Represents assets and liabilities retained by the previous owners. |
|
|
|
|
(B) |
Represents estimated step up in assets acquired net of assets retained by sellers. |
|
|
|
|
(C) |
Represents the estimated intangible assets recorded for the purchase. |
|
|
|
|
(D) |
Represents recording the debt associated with the acquisition. |
|
|
|
|
(E) |
Represents the elimination of discretionary bonus payments under related party management agreement and related expenses net of the additional cost under the agreement described below. The management agreement was due to expire July 31, 2000 and expired upon consummation of the agreement. The sellers have entered into an agreement to provide services in future periods for $16,000 per month for six months, $8,000 per month for the next six months, and $5,333 per month for the next twelve months. |
|
|
|
|
(F) |
Represents amortization of intangibles as a result of the acquisition. |
|
|
|
|
(G) |
Represents the estimated additional interest expense for the additional financing net of related party factor interest expense which will not continue. |
|
|
|
|
(H) |
Represents the estimated income tax expense for the adjusted operations of the acquired business. |
BRASS EAGLE INC.
|
(c) |
The following are filed as exhibits to this Amended Current Report on form 8-K: |
|
2 |
Asset Purchase Agreement dated March 29, 2000, by and between Brass Eagle Inc., JT USA, L. P. and certain other individuals and entities (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K filed with the SEC on July 13, 2000. |
|
99 (i) |
Press Release dated July 3, 2000, issued by Registrant (incorporated by reference to Exhibit 99(i) to the Registrant's Current Report on Form 8-K filed with the SEC on July 13, 2000. |
BRASS EAGLE INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
BRASS EAGLE INC. |
|
|
|
|
DATE: September 11, 2000 |
BY: /s/ J. R. Brian Hanna |
|
|
J. R. Brian Hanna |
|
|
Vice President - Finance and Chief Financial Officer and Treasurer |
BRASS EAGLE INC.
EXHIBIT INDEX
|
EXHIBIT NO. |
EXHIBIT |
|
|
|
|
2 |
Asset Purchase Agreement dated March 29, 2000, by and between Brass Eagle Inc., JT USA, L. P. and certain other individuals and entities (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K filed with the SEC on July 13, 2000. |
|
99 (i) |
Press Release dated July 3, 2000, issued by Registrant (incorporated by reference to Exhibit 99(i) to the Registrant's Current Report on Form 8-K filed with the SEC on July 13, 2000. |
|
|