SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Initial Report (Date of earliest event reported) to which this form
8-K/A is an amendment: February 12, 1999.
Commission file numbers 333-42411 and 333-42411-01
GLENOIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3862561
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
GLENOIT ASSET CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0343206
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 West 40th Street
New York, New York 10018
Telephone: (212) 391-3915
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
<PAGE>
GLENOIT CORPORATION
Amendment No. 1 on Form 8-K/A
to
Current Report on Form 8-K
Introduction
This Amendment No. 1 on Form 8-K/A (this "Amendment") is being filed by
Glenoit Corporation and Glenoit Asset Corporation (together the "Company") to
amend Item 7 of the Company's Current Report on Form 8-K dated February 12, 1999
(the "Initial Report") relating to the acquisition on February 12, 1999 of
Ex-Cell Home Fashions, Inc. (the "Ex-Cell Acquisition"). Pursuant to the
instructions to Item 7 of Form 8-K, the Company is filing this Amendment (not
later than 60 days after the date that the Initial Report was required to be
filed) in order to include the financial statements and proforma financial
information required with respect to the Ex-Cell Acquisition. Pursuant to Rule
12b-15 of the SEC Rules, the complete text of Item 7, as amended, is set forth
herein.
Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
(a) Financial Statements of businesses acquired.
<S> <C>
Table of Contents.............................................................F-1
Independent Auditors' Report..................................................F-2
Combined Balance Sheets of Ex-Cell Home Fashions, Inc. and
its subsidiaries and its affiliate Ansam Realty Company, LLC
as of June 30, 1998........................................................F-3
Combined Statement of Shareholders' and Members' Equity
of Ex-Cell Home Fashions, Inc. and its subsidiaries and its
its affiliate Ansam Realty Company, LLC for the year ended
June 30, 1998..............................................................F-5
Combined Statement of Income of Ex-Cell Home Fashions, Inc.
and its subsidiaries and its affiliate Ansam Realty Company, LLC
for the year ended June 30, 1998...........................................F-6
Combined Statement of Cash Flow of Ex-Cell Home Fashions, Inc.
and its subsidiaries and its affiliate Ansam Realty Company, LLC
for the year ended June 30, 1998...........................................F-7
Notes to Combined Financial Statements of Ex-Cell Home Fashions,
Inc. and its subsidiaries and its affiliate Ansam Realty Company,
LLC .......................................................................F-9
Combined Balance Sheet of Ex-Cell Home Fashions, Inc. and its
subsidiaries and its affiliate Ansam Realty Company, LLC as of
December 31, 1998 (Unaudited)..............................................F-22
Combined Statement of Income of Ex-Cell Home Fashions, Inc. and
its subsidiaries and its affiliate Ansam Realty Company, LLC
for the six months ended December 31, 1998 (Unaudited).....................F-24
Combined Statement of Shareholders' and Members' Equity of
Ex-Cell Home Fashions, Inc. and its subsidiaries and its
affiliate Ansam Realty Company, LLC for the six months
ended December 31, 1998....................................................F-25
2
<PAGE>
Combined Statement of Cash Flows of Ex-Cell Home Fashions, Inc.
and its subsidiaries and its affiliate Ansam Realty Company, LLC
for the six months ended December 31, 1998 (Unaudited).....................F-26
Notes to Condensed Combined Financial Statements
(Unaudited)................................................................F-28
(b) The unaudited proforma financial information furnished herein reflects the effect of the
acquisitions of Ex-Cell Home Fashions, Inc. and American Pacific Enterprises, Inc. on the
consolidated financial statements of Glenoit Corporation.
Unaudited Proforma Consolidated Statement of Income for the year
ended January 2, 1999......................................................F-31
Unaudited Proforma Consolidated Balance Sheet as of
January 2, 1999............................................................F-34
</TABLE>
(c) The exhibits furnished in connection with this Report are as follows:
Exhibit Number Description
2.1 Stock Purchase Agreement, dated February 12, 1999,
among Glenoit Corporation, Ex-Cell Home Fashions,
Inc., Arnold Angerman, Samuel Samelson and two
trusts is hereby incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form
8-K dated February 12, 1999.
4.1 Third Amended and Restated Credit Agreement, dated
February 12, 1999, among Glenoit Corporation, the
banks, financial institutions and other
institutional lenders parties to the Credit
Agreement and Banque Nationale de Paris, as Agent
is hereby incorporated by reference to Exhibit 4.1
of the Company's Current Report on Form 8-K dated
February 12, 1999.
99.1 Company Press Release dated February 12, 1999 is
hereby incorporated by reference to Exhibit 99.1 of
the Company's Current Report on Form 8-K dated
February 12, 1999.
The Registrant hereby undertakes to furnish supplementally a copy of any
schedule or exhibit to the Stock Purchase Agreement omitted herefrom, as
permitted by Item 601(b)(2) of Regulation S-K, to the Commission upon request.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 26, 1999
GLENOIT CORPORATION
By /S/ LESTER D. SEARS
-------------------------------------
Lester D. Sears
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial
and Accounting Officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 26, 1999
GLENOIT ASSET CORPORATION
By /S/ LESTER D. SEARS
---------------------------------------
Lester D. Sears
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial
and Accounting Officer)
4
<PAGE>
REPORT ON
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE ANSAM REALTY COMPANY, LLC
JUNE 30, 1998
Hertz, Herson & Company, LLP
Certified Public Accountants
<PAGE>
TABLE OF CONTENTS
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
-------------------------------------------------------------
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
--------------------------------------------
JUNE 30, 1998
-------------
FINANCIAL STATEMENTS: Page
----
Independent Auditors' Report 1
Exhibit A - Combined Balance Sheet 2
Exhibit B - Combined Statement of Shareholders' and Members' Equity 3
Exhibit C - Combined Statement of Income 4
Exhibit D - Combined Statement of Cash Flows 5-6
Notes to Financial Statements 7-18
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Ex-Cell Home Fashions, Inc.
295 Fifth Avenue
New York, New York 10016
We have audited the accompanying combined balance sheet of Ex-Cell Home
Fashions, Inc. and its subsidiaries and its affiliate, Ansam Realty Company, LLC
("the Company"), as at June 30, 1998, and the related combined statements of
income, shareholders' and members' equity, and cash flows for the year ended
June 30, 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Ex-Cell
Home Fashions, Inc. and its subsidiaries and its affiliate, Ansam Realty
Company, LLC, as at June 30, 1998, and the combined results of their operations
and their cash flows for the year ended June 30, 1998, in conformity with
generally accepted accounting principles.
/s/ Hertz, Herson & Company, LLP
New York, New York
August 7, 1998, except for Note N, as to
which the date is February 12, 1999
F-2
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED BALANCE SHEET
AS AT JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS
Current Assets
<S> <C>
Cash $ 824,002
Accounts receivable, partially pledged - Note F 149,787
Insurance and other claims receivable - Note B 82,788
Inventories, partially pledged - Note C 21,650,642
Prepaid and recoverable income taxes, pledged - Note H 32,810
Prepaid expenses and other current assets 133,056
------------
Total Current Assets 22,873,085
Cash Surrender Value of Officers' Life Insurance,
Less Loans of $1,052,618 508,671
Property, Plant and Equipment, Pledged, at Cost,
Less Accumulated Depreciation of $18,945,011
- Notes D and I 8,982,324
Deferred Charges and Other Assets - Note E 301,119
------------
TOTAL ASSETS $ 32,665,199
==============
==============
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-3
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED BALANCE SHEET
AS AT JUNE 30, 1998
LIABILITIES AND SHAREHOLDERS' AND MEMBERS' EQUITY
-------------------------------------------------
<TABLE>
<CAPTION>
Current Liabilities
- -------------------
<S> <C>
Due to factor, collateralized - Note F $ 2,720,744
Current maturities of long-term debt, collateralized - Note I 1,211,423
Accounts payable - Note G 5,250,132
Accrued expenses and other current liabilities 1,970,884
Income taxes payable - Note H 767,918
----------
Total Current Liabilities 11,921,101
Long-term Debt, Collateralized - Note I 6,336,941
Deferred Compensation - Note J 633,360
Deferred Income Taxes - Note H 140,488
---------
Total Liabilities 19,031,890
Commitments and Contingencies - Notes K and N
Shareholders' and Members' Equity - Note L 13,633,309
------------
TOTAL LIABILITIES AND SHAREHOLDERS' AND MEMBERS' EQUITY $ 32,665,199
===============
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-4
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF SHAREHOLDERS' AND MEMBERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998
EXHIBIT B
<TABLE>
<CAPTION>
Ex-Cell Home Fashions, Inc.
--------------------------------------------------
Preferred Stock Voting Common Stock
------------------------- ---------------------------
Combined Eliminations Shares Amount Shares Amount
-------------- ------------ --------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance as at July 1, 1997 $ 14,429,127 $( 170,391 ) 5,449 $ 544,900 763 $ 1,742,516
Redemption and retirement of
586 shares of preferred stock and
237 shares of common stock ( 3,120,000 ) ( 586 ) ( 58,600 ) ( 237 ) ( 412,976 )
Exchange of preferred stock for - ( 3,792 ) ( 379,200 ) 57 379,200
common stock
Issuance of common stock 208,300 237 208,300
Common stock dividend - ( 4,100 )
Buyout of member's inteest ( 798,213 )
Net income for the year 3,019,309 13,977
Members' distributions during year ( 105,214 )
-------------- -------------- ------- ----------- ----- ---------------
Balance as at June 30, 1998 $ 13,633,309 $( 156,414 ) 1,071 $ 107,100 820 $ 1,912,940
================================ ============== ============== ======= =========== ===== ===============
<CAPTION>
Ansam Realty
Ex-Cell Home Fashions, Inc. Company, LLC
------------------------------------------- --------------
Non Voting Common Stock
------------------------ Retained Members'
Shares Amount Earnings Capital
------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
Balance as at July 1, 1997 - $ - $ 9,769,901 $ 2,542,201
Redemption and retirement of
586 shares of preferred stock and
237 shares of common stock ( 2,648,424 )
Exchange of preferred stock for
common stock
Issuance of common stock
Common stock dividend 4,100 4,100
Buyout of member's inteest ( 798,213 )
Net income for the year 2,610,210 395,122
Members' distributions during year ( 105,214 )
----- ------------- ----------------- --------------
Balance as at June 30, 1998 4,100 $ 4,100 $ 9,731,687 $ 2,033,896
================================ ===== ============= ================= ==============
</TABLE>
F-5
<PAGE>
.
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1998
EXHIBIT C
<TABLE>
<CAPTION>
% To Net
Amount Sales
------ -----
<S> <C> <C>
Sales - Note M $ 81,159,648 103.08
Less Freight-out 885,257 01.12
Returns and allowances 1,437,467 01.83
Discounts 100,811 00.13
------- -----
Net sales 78,736,113 100.00
Cost of goods sold 53,627,324 68.11
---------- -----
Gross Profit 25,108,789 31.89
Operating Expenses ---------- -----
Corporate marketing and design 12,673,498 16.09
General administrative, net 4,068,405 05.17
Data processing 1,204,930 01.53
Financial, including interest expense of $1,782,520 2,344,625 02.98
--------- -----
Total Operating Expenses 20,291,458 25.77
---------- -----
Income before taxes 4,817,331 06.12
Provision for taxes based on income - Note H 1,798,022 02.29
--------- -----
Net Income for the Year $ 3,019,309 03.83
========= =====
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith
F-6
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
EXHIBIT D
<TABLE>
<CAPTION>
Cash Flows from Operating Activities
- ------------------------------------
<S> <C>
Net income $ 3,019,309
---------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,558,227
Changes in operating assets and liabilities:
Accounts receivable 117,656
Insurance and other claims receivable 2,477,527
Due from affiliates, net 421,608
Inventories ( 4,841,163 )
Prepaid expenses and other current assets 172,929
Other assets ( 16,953 )
Due to factor ( 307,868 )
Accounts payable 647,286
Accrued expenses and other current liabilities ( 904,906 )
Income taxes prepaid and payable ( 28,474 )
Security deposits 43,823
------
Total Adjustments ( 660,308 )
- -------
Net cash provided by operating activities 2,359,001
---------
Cash Flows from Investing Activities
Acquisitions of property, plant and equipment ( 1,198,630 )
(Increase) in cash surrender value, net of loans payable ( 68,559 )
- ------
Net cash (used in) investing activities ( 1,267,189 )
- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-7
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
EXHIBIT D
<TABLE>
<CAPTION>
Cash Flows from Financing Activities
- ------------------------------------
<S> <C>
Long-term debt, net $ 2,620,345
Due to members ( 23,081 )
Purchase and retirement of preferred and common stock ( 3,120,000 )
Proceeds from issuance of common stock 208,300
Buyout of member's interest ( 135,729 )
Distributions paid to members ( 105,214 )
-------
Net cash (used in) financing activities ( 555,379 )
-------
Net increase in cash 536,433
Cash at beginning of year 287,569
-------
Cash at end of year $ 824,002
==================
Cash payments for income taxes $ 2,017,443
==================
Cash payments for interest $ 1,848,963
==================
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-8
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS AS AT JUNE 30, 1998
Nature of Operations
- --------------------
Ex-Cell Home Fashions, Inc. ("Ex-Cell") is a manufacturer and importer of
merchandise for the home furnishings market in the United States.
Ansam Realty Company, LLC ("Ansam") was organized as a partnership and commenced
operations in October, 1969. On December 8, 1994, the partners elected, under
North Carolina statutes, to convert the partnership to a limited company.
Ansam owns and leases real property in Goldsboro, North Carolina, to Ex-Cell.
Note A - Summary of Significant Accounting Policies
- ---------------------------------------------------
Principles of Combination and Consolidation
-------------------------------------------
The combined financial statements include the accounts of Ex-Cell Home Fashions,
Inc. and its subsidiaries and its affiliate, Ansam Realty Company, LLC.
Ex-Cell's subsidiaries include the following entities: Ex-Cell of Bentonville,
Inc. ("Bentonville"), Ex-Cell Linde of California, Inc. ("California"), Ex-Cell
Linde of Carolina, Inc. ("Carolina"), Ex-Cell Home Fashions (H.K.), Limited
("H.K."), Ex-Cell Home Fashions (Far East) Ltd. ("Far East") and Ex-Cell Home
Fashions (China) Ltd. ("China"), all of which subsidiaries are wholly owned. H.
K., Far East and China are Hong Kong corporations. As at June 30, 1998,
California was liquidated, with no resulting recordable gain or loss on the
liquidation. Ex-Cell and its subsidiaries and its affiliate, Ansam, are referred
to as "the Company" herein. See Note L for a tabulation of the capital
structure.
Significant intercompany accounts and transactions are eliminated in combination
and consolidation.
Inventories
-----------
Inventories are stated at the lower of cost, generally by the first-in,
first-out method, or market.
Property, Plant and Equipment, Pledged
--------------------------------------
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is computed by straight-line and accelerated methods at rates based
upon the estimated useful lives of the respective assets.
Deferred Loan Costs
-------------------
Loan costs, aggregating $76,005, are being amortized over the term of the
related loan of 15 years.
F-9
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS AS AT JUNE 30, 1998
Note A - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------------------
Foreign Currencies
------------------
Assets and liabilities recorded in foreign currencies on the books of foreign
subsidiaries are translated at the exchange rate on the balance sheet date.
Translation adjustments resulting from this process are charged or credited to
equity. Revenues, costs and expenses are translated at average rates of exchange
prevailing during the year. Gains and losses on foreign currency transactions
are included in nonoperating expenses. Gains and losses from foreign currency
translation adjustments or transactions during the years ended June 30, 1998
have been nominal, and therefore have not been segregated in the combining
financial statements.
Concentrations of Risk
----------------------
Major Customers
- ---------------
Two national retailers comprise approximately 30% of the Company's total sales
for the year ended June 30, 1998.
Uninsured Cash Balances
- -----------------------
The Company maintains cash balances in several domestic and foreign banks.
However, only the domestic bank accounts at each institution are insured in the
aggregate up to $100,000 by the Federal Deposit Insurance Corporation.
Advertising
-----------
Advertising costs charged to operations for the year ended June 30, 1998
approximated $770,000 and are expensed as incurred.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note B - Insurance and Other Claims Receivable
- ----------------------------------------------
Insurance and other claims receivable represent amounts due to the Company
totaling $2,560,315 for assets misappropriated by an employee in prior years.
During the year ended June 30, 1998, the Company recovered $2,491,491, net of
related expenses of $13,964 from its insurance carriere and the perpetrator. The
Company expects to recover another $82,788.
F-10
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30 1998
Note C - Inventories, Partially Pledged
- ---------------------------------------
Inventories are as follows as at June 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
Raw materials and work in process $ 8,107,662
Finished goods 13,542,980
----------
Total $ 21,650,642
===================
</TABLE>
The Company has granted a security interest to Capital Factors, Inc. in all its
imported inventories, which approximated $9,113,000 as at June 30, 1998. See
Note F
Note D - Property, Plant and Equipment, Pledged
- -----------------------------------------------
Property, plant and equipment are summarized as follows
<TABLE>
<CAPTION>
Balance at June 30, 1998
------------------------
Accumulated Book
Cost Depreciation Value
---- ------------ -----
<S> <C> <C> <C>
Land $ 404,108 $ - $ 404,108
Building and improvements 6,771,408 2,698,784 4,072,624
Machinery and equipment 13,261,829 10,849,226 2,412,603
Furniture and fixtures 1,453,951 1,105,493 348,458
Transportation and delivery equipment 163,121 150,711 12,410
Leasehold improvements 2,739,349 1,762,827 976,522
Data processing equipment 3,133,569 2,377,970 755,599
--------- --------- -------
Total $ 27,927,335 $ 18,945,011 $ 8,982,324
================== =================== ===================
</TABLE>
Depreciation amounted to $1,554,611 for the year ended June 30, 1998. Property,
plant and equipment are pledged to secure certain long-term obligations. See
related Note I for a description of such obligations. In that regard, Ansam has
pledged all its assets, which consist substantially of land, building and
improvements as collateral for indebtedness owing to First UnionNational Bank.
Furniture and fixtures at June 30, 1998 include assets in Hong Kong with a cost
of $97,995 and a book value of $49,556 and assets in China with a cost of
$523,348 and a book value of $260,522.
F-11
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note E - Deferred Charges and Other Assets
- ------------------------------------------
Deferred charges and other assets as at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Loans receivable (1) $ 247,619
Deposits and other 45,487
Deferred loan costs, less accumulated
amortization of $67,992 8,013
---------------------------
Total $ 301,119
===========================
</TABLE>
(1) Loans receivable of $247,619 result from advances made by the
Company under the terms of "Split dollar" life insurance policies
on the life of Irving Angerman. The advances are to be repaid
from the proceeds of the policies at death and are collateralized
by the cash surrender value of such policies.
Note F - Due to Factor, Collateralized
- --------------------------------------
Under an arrangement with Capital Factors, Inc. ("Capital"), cancelable upon 60
days notice, the Company, subject to the factor's credit approval, assigns and
sells to Capital substantially all its accounts receivable without recourse; in
instances where the credit approval of the factor has not been received prior to
shipment, the risk of collectibility is retained by the Company.
The balance due to Capital of $2,720,744 as at June 30, 1998 represents advances
made to the Company in excess of the Company's net equity in accounts receivable
assigned and sold to the factor after deducting factoring charges, payments
received from the factor and an allowance, where necessary, for customers'
claims and deductions.
At June 30, 1998, approximately $46,000 of accounts receivable had been sold to
Capital with recourse. Substantially all these receivables were collected in the
subsequent period.
Accounts receivable (nonfactored), imported inventories and income tax refunds
payable to the Company are pledged to secure any indebtedness due or which may
become owing to Capital.
Note G - Accounts Payable
- -------------------------
Accounts payable, amounting to $5,250,132 as at June 30, 1998, consist of
amounts due trade creditors on open account.
F-12
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note H - Income Taxes
- ---------------------
Ex-Cell and its subsidiaries file separate federal and state income tax returns.
Ex-Cell files its returns based on a December 31 year end. Its domestic
subsidiaries file their returns based on a June 30 year end. Ex-Cell's policy is
to provide for United States income taxes on the undistributed income of its
foreign subsidiaries as such earnings are realized; such income taxes become due
and payable as and when dividends are paid by the subsidiaries to it as the
parent company.
Ansam is a limited liability company treated as a partnership for income tax
reporting purposes and, as such, is not subject to income tax. Accordingly, no
provision for income taxes on Ansam's earnings is provided in the combining
financial statements, since taxable income attributed to it is reportable by its
members in their individual income tax returns.
Income taxes payable as at June 30, 1998, which include deferred taxes on
undistributed earnings of wholly owned foreign subsidiaries, represent amounts
attributable to Ex-Cell and its subsidiaries and are reflected net of
prepayments. Deferred income taxes, noncurrent, represent the cumulative effect
of temporary differences in reporting revenue and expenses for tax and financial
statement purposes.
The tax effects of temporary differences that give rise to noncurrent deferred
income tax (assets) and liabilities at June 30, 1998 are attributable to Ex-Cell
and its subsidiaries and are presented below:
<TABLE>
<CAPTION>
1998
-------------------
<S> <C>
Deferred compensation $ ( 247,739 )
Depreciation 388,227
-------------------
Total, Net $ 140,488
===================
</TABLE>
Based upon Ex-Cell and its subsidiaries' history of profitability, management
believes that the deferred income tax asset will be realized in future years.
The provision for income taxes for the years ended June 30, 1998 is attributable
to Ex-Cell and its subsidiaries and consist of the following:
<TABLE>
<CAPTION>
1998
-------------------
<S> <C>
Current $ 1,751,130
Deferred - noncurrent 46,892
-------------------
Total $ 1,798,022
===================
</TABLE>
F-13
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note I - Long-term Debt, Collateralized
- ---------------------------------------
Long-term debt as at June 30, 1998 consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Due Within Due After
Ex-Cell Total One Year One Year
- ------- ----- -------- --------
Term loan - First Union National
Bank of North Carolina ("Bank") (1) $ 5,559,000 $ 768,000 $ 4,791,000
Note payable -
AKAB of Sweden (2) 181,050 120,700 60,350
Other 64,664 64,664
------ ------- ------
5,804,714 888,700 4,916,014
--------- ------- ---------
Ansam
- -----
Industrial Revenue Bonds (3) 443,850 177,523 266,327
Notes payable - First Union National
Bank of North Carolina
(4) 688,000 92,000 596,000
(5) 611,800 53,200 558,600
------- ------ -------
1,743,650 322,723 1,420,927
--------- ------- ---------
Total $ 7,548,364 $ 1,211,423 $ 6,336,941
=============== ========= ==========
</TABLE>
(1) In September 1997, Ex-Cell received proceeds of a $6,135,000 term loan
from the Bank, a portion of which was used to satisfy an existing term
loan. The loan, which is payable in quarterly principal installments of
$192,000 from October 1, 1997 through July 1, 2005, bears interest at a
current rate of 1.5% above LIBOR (London Interbank Offered Rate), and is
collateralized by a deed of trust on real property owned by the Company,
and all machinery and equipment, furniture and fixtures and leasehold
improvements now owned or hereafter acquired by the Company. In
addition, the related loan agreement contains various financial
covenants, the most significant of which are:
Ex-Cell and its subsidiaries must maintain minimum consolidated
working capital of $6,000,000 and a minimum ratio of their
consolidated current assets to their consolidated current
liabilities of 1.40 to 1.
F-14
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note I - Long-term Debt, Collateralized (Continued)
- ---------------------------------------------------
Ex-Cell and its subsidiaries must maintain minimum consolidated
tangible net worth, as defined, of at least $7,670,186 as at June
30, 1997 and increasing by no less than 50% of pre-tax net income
thereafter.
Ex-Cell and its subsidiaries must not exceed a maximum ratio of
total consolidated liabilities to consolidated tangible net
worth, as defined, as indicated in the table below:
Year Ending
June 29, 1998 2.9 to 1
June 29, 1999 2.5 to 1
June 29, 2000 2.1 to 1
Thereafter 2.0 to 1
Capital expenditures of Ex-Cell and its subsidiaries may not
exceed $1,500,000 in any fiscal year during the term of the loan.
As at June 30, 1998, Ex-Cell and its subsidiaries were in compliance
with the requirements contained in the related agreement.
(2) The note payable to AKAB of Sweden was issued for the purchase of
equipment. The note, which bears interest at 7.17%, is payable in three
remaining semi-annual principal installments of $60,350. The note is
secured by the equipment which has a book value of $348,225 as at June
30, 1998.
(3) On December 1, 1985, Ansam received the proceeds of $3,350,000 from the
issuance of Industrial Revenue Bonds by Wayne County Industrial
Facilities and Pollution Control Financing Authority. The Bank is acting
as Trustee. The bonds bear interest at 81.87% of prime payable
quarterly. Quarterly principal payments amount to $44,381, with a final
payment of $44,416 due on December 1, 2000. The loan agreement has been
guaranteed by Ex-Cell. The loan is secured by the related property.
The Guarantee Agreement limits payments for dividends by Ex-Cell and the
acquisition by Ex-Cell of its common stock and imposes certain financial
covenants upon Ex-Cell. At June 30, 1998, Ex-Cell was in compliance with
the requirements contained in the loan agreement underlying the
guarantee.
F-15
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note I - Long-term Debt, Collateralized (`Continued)
- ----------------------------------------------------
(4) On September 3, 1997, Ansam borrowed $780,000 from the Bank under a
joint borrowing agreement entered into by Ex-Cell and Ansam with the
Bank. The balance borrowed by Ansam is payable in thirty-two quarterly
installments, commencing October 1, 1997, of $23,000 with the balance
due on October 1, 2005. Interest will be charged based on a fluctuating
rate to be determined each semi-annual period. Such rate is based on the
lower of LIBOR (London Interbank Offered Rate) or the bank's prime rate
and is calculated based on certain financial ratios of Ex-Cell and Ansam
at the end of each semi-annual period. This loan is secured by the
assets of the Company and is guaranteed by Ex-Cell. See Note D.
The loan agreement provides for Ex-Cell to maintain certain financial
covenants. At June 30, 1998, Ex-Cell was in compliance with these
covenants.
(5) On September 3, 1997, I & S of Goldsboro, LLC ("I & S") borrowed
$665,000 from the Bank, and on October 31, 1997 Ansam acquired the
members' interests of I & S. See Note L. The balance is payable in
thirty-two quarterly installments, commencing October 1, 1997, of
$13,300 with the balance due on October 1, 2005. Interest will be
charged at 1.4% above LIBOR. The loan is secured by the assets of I & S
and is guaranteed by Ex-Cell and Ansam.
Maturities of long-term debt are summarized as follows:
<TABLE>
<CAPTION>
Years Ending June 30, Amount
--------------------- ------
<S> <C>
2000 $ 1,151,073
2001 1,002,004
2002 913,200
2003 913,200
2004 913,200
Thereafter 1,444,264
--------------
Total $ 6,336,941
==============
</TABLE>
Note J - Retirement Plan and Deferred Compensation
- --------------------------------------------------
The Company sponsors a qualified defined contribution 401(k) profit sharing plan
covering certain employees. Subject to certain limitations, contributions to the
plan are made by the Company based upon fixed percentages of eligible employee
contributions. The plan provides generally for normal retirement at age 65. The
Company contributions to the plan amounted to $107,712.
F-16
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note J - Retirement Plan and Deferred Compensation (Continued)
- --------------------------------------------------------------
The Company also sponsors a nonqualified deferred compensation arrangement
covering certain employees. The Company contributions to the plan amounted to
$46,196.
Note K - Commitments and Contingencies
- --------------------------------------
Leases
------
The Company has entered into various operating leases for factory, warehouse and
office space as follows:
<TABLE>
<CAPTION>
Annual
Location Expiration Date Base Rent
-------- --------------- ---------
Domestic Office and Warehouse
-----------------------------
<S> <C> <C>
295 Fifth Avenue, New York, NY January 1, 2002 $372,000
105-109 W. Grantham Street, Goldsboro, NC Month-to-month 28,800
Foreign Factory and Office
--------------------------
Mainland China August 31, 2008 58,600
Hong Kong July 31, 2000 42,000
</TABLE>
Future minimum payments under the noncancellable operating leases consisted of
the following as at June 30, 1998:
<TABLE>
<CAPTION>
Years Ending June 30, Amount
--------------------- ------
<S> <C>
2000 $ 472,600
2001 434,100
2002 244,600
2003 58,600
2004 58,600
Thereafter 185,600
--------------
Minimum Lease Payments $ 1,454,100
==============
</TABLE>
Total rent expense charged to operations for the year was approximately
$572,000.
F-17
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note K - Commitments and Contingencies (Continued)
- --------------------------------------------------
Royalties
---------
In January 1998, the Company acquired the rights to manufacture and sell certain
products under the Fieldcrest Cannon name. Under terms of an agreement expiring
in 2002, the Company is obligated for minimum royalty payments between 3% and 8%
of sales of related products, as follows:
1998 $ 500,000
1999 750,000
2000 875,000
2001 1,000,000
2002 1,100,000
The agreement allows for renewal terms through December 31, 2007 and December
31, 2012 provided certain conditions have been met.
Royalty expense charged to operations approximated $515,000 for the year ended
June 30, 1998.
Other
-----
The Company, in the ordinary course of business, purchases merchandise from
foreign suppliers by means of letters of credit. At June 30, 1998, the amount of
unused balances of such letters of credit issued on the Company's behalf by
Capital Factors, Inc. was insignificant.
F-18
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note L - Shareholders' and Members' Equity
- ------------------------------------------
The following is a tabulation of the capital structure of the Company and its
subsidiaries and its affiliate included in combination and consolidation:
<TABLE>
<CAPTION>
Location of
----------- Authorized
Name Incorporation Class of Stock Number of Shares Par Value
------------- -------------- ---------------- ---------
Ex-Cell Home Fashions, Inc., parent entity New York 6% Noncumulative:
- ------- ----------------------------------
<S> <C> <C>
Preferred 2,000 $100
Common - voting 2,500 No Par
Common - nonvoting (1) 10,000 No Par
Subsidiaries of Ex-Cell Home Fashions, Inc.
- -------------------------------------------
Ex-Cell of Bentonville, Inc. Arkansas Common 2,000 No Par
Ex-Cell of Carolina, Inc. North Carolina Common 100,000 1
Ex-Cell Home Fashions (H.K.) Ltd. Limited Hong Kong Common 200,000 1 (HK)
Ex-Cell Home Fashions (Far East) Ltd. Limited Hong Kong Common 10,000 1 (HK)
Ex-Cell Home Fashions (China) Ltd. Hong Kong Common 1,870,000 1 (HK)
<CAPTION>
Issued and Outstanding
Class of Stock As at June 30, 1998
-------------- -------------------
Ex-Cell Home Fashions, Inc., parent entity 6% Noncumulative: Shares Amount
- ------- ---------------------------------- ------ ------
Preferred 1,071 $ 107,100
Common - voting 820 1,912,940
Common - nonvoting (1) 4,100 4,100
Subsidiaries of Ex-Cell Home Fashions, Inc.
- -------------------------------------------
Ex-Cell of Bentonville, Inc. Common 100 5,000 *
Ex-Cell of Carolina, Inc. Common 5,000 5,000 *
Ex-Cell Home Fashions (H.K.) Ltd. Limited Common 193,000 25,000 *
Ex-Cell Home Fashions (Far East) Ltd. Limited Common 2 120,000 *
Ex-Cell Home Fashions (China) Ltd. Common 1,870,000 241,915 *
</TABLE>
Ansam Realty Company, LLC, affiliated entity (2)
- ------------------------------------------------
The members, as listed below, have agreed to share its profits and losses
in the following percentages:
<TABLE>
<CAPTION>
<S> <C>
Irving Angerman 70%
Samuel Samelson 30%
</TABLE>
(1) On February 26, 1998, the Board of Directors of Ex-Cell Home Fashions,
Inc. declared a 5 for 1 common stock dividend payable in nonvoting no par
value common stock, with a stated value of $1.
(2) On June 20, 1997, Alex Hershenbaum, a member owning a 15% interest,
withdrew from Ansam. In connection therewith, Ansam paid to Hershenbaum
$798,213 for his interest, and reflected a decrease in its members' equity
(chargeable against the remaining members) to the extent the amount paid to
this former member exceed his capital balance, amounting to $664,078.00
* Eliminated in consolidation of Ex-Cell and its subsidiaries.
F-19
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 1998
Note M - Sales
- --------------
Gross sales include sales of foreign produced merchandise shipped directly to
customers. Such sales amounted to approximately $2,174,000 for the year ended
June 30, 1998. Gross profit on these sales amounted to approximately $281,000
for the year ended June 30, 1998.
Note N - Subsequent Events
- --------------------------
On February 12, 1999, Ansam was merged into Ex-Cell and the stock of the
combined entity was sold to Glenoit Corporation.
Subsequent to June 30, 1998, Ansam purchased land located in Wayne County, North
Carolina, adjacent to certain of the property described in Note D, at a cost of
$50,000 and entered into a separate agreement to purchase another parcel of land
similarly located in that county at a cost of approximately $85,000.
F-20
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE ANSAM REALTY COMPANY, LLC
DECEMBER 31, 1998
F-21
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED BALANCE SHEET
AS AT DECEMBER 31, 1998
ASSETS
Current Assets
Cash $ 809,983
Accounts receivable, partially pledged 656,168
Due from factor, collaterized 2,550,686
Inventories, partially pledged - Note B 14,872,459
Prepaid and other current assets 720,907
-------------
Total Current Assets 19,610,203
Property, Plant and Equipment, Pledged, at Cost,
Less Accumulated Depreciation 8,903,164
Deferred Charges and Other Assets 764,102
--------------
TOTAL ASSETS $ 29,277,469
==============
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-22
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED BALANCE SHEET
AS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND SHAREHOLDERS' AND MEMBERS' EQUITY
Current Liabilities
Current maturities of long-term debt - collateralized $ 1,211,424
Accounts payable 4,823,218
Accrued expenses and other current liabilities 1,217,518
Income taxes payable 65,232
----------------
Total Current Liabilities 7,317,392
Long-term Debt, Collateralized 5,571,896
Other long-term liabilities 740,389
----------------
Total Liabilities 13,629,677
Commitments and Contingencies
Shareholders' and Members' Equity 15,647,792
----------------
TOTAL LIABILITIES AND SHAREHOLDERS' AND MEMBERS' EQUITY $ 29,277,469
================
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-23
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Sales $ 45,716,404 $ 44,601,635
Less Freight-out 473,877 436,594
Returns and allowances 1,113,707 552,867
Discounts 50,146 56,734
-------------- --------------
Net sales 44,078,674 43,555,440
Cost of goods sold 30,438,526 29,559,099
-------------- --------------
Gross Profit 13,640,148 13,996,341
Operating Expenses
Corporate marketing and design 7,366,871 6,228,052
General administrative, net 1,246,110 2,463,072
Data processing 582,308 635,950
Financial, including interest expense of $838,049 and $976,262 1,183,466 1,439,899
-------------- --------------
Total Operating Expenses 10,378,755 10,766,973
-------------- --------------
Income before taxes based on income 3,261,393 3,229,368
Provision for taxes based on income 1,183,660 1,329,104
-------------- --------------
Net Income $ 2,077,733 $ 1,900,264
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-24
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINING STATEMENT OF SHAREHOLDERS' AND MEMBERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
Combined
--------
Balance as at July 1, 1998 $ 13,633,309
Net income for the six months 2,077,733
Members' distributions during the six months ( 63,250)
----------------
Balance as at December 31, 1998 $ 15,647,792
================
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-25
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
Combined
--------
Cash Flows from Operating Activities
Net income $ 2,077,733
-------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 799,258
Changes in operating assets and liabilities:
Accounts receivable ( 423,593 )
Inventories 6,778,183
Prepaid expenses and other current assets ( 555,041 )
Other assets 45,689
Due from factor ( 5,271,430 )
Accounts payable ( 426,914 )
Accrued expenses and other liabilities ( 1,489,511 )
-------------
Total Adjustments ( 543,359 )
-------------
Net cash provided by operating activities 1,534,374
-------------
Cash Flows from Investing Activities
Acquisitions of property, plant and equipment ( 720,098 )
-------------
Net cash (used in) investing activities ( 720,098 )
===============
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-26
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
COMBINED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
Combined
--------
Cash Flows from Financing Activities
Long-term debt, net $ ( 765,045)
Distributions paid to members ( 63,250)
------------
Net cash (used in) financing activities ( 828,295)
------------
Net decrease in cash ( 14,019)
Cash at beginning of period 824,002
------------
Cash at end of period $ 809,983
==========
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-27
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO CONDENSED, COMBINED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 1998
Nature of Operations
- --------------------
Ex-Cell Home Fashions, Inc. ("Ex-Cell") is a manufacturer and importer of
merchandise for the home furnishings market in the United States.
Ansam Realty Company, LLC ("Ansam") was organized as a partnership and commenced
operations in October, 1969. On December 8, 1994, the partners elected, under
North Carolina statutes, to convert the partnership to a limited company.
Ansam owns and leases real property in Goldsboro, North Carolina, to Ex-Cell.
Note A - Summary of Significant Accounting Policies
- ---------------------------------------------------
Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial statements of
Ex-Cell have been prepared in accordance with generally accepted accounting
principles for interim financial information. 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 only normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended December 31, 1998 are not necessarily indicative of the
results that may be expected for the fiscal year ending June 30, 1999. The
unaudited financial statements should be read in conjunction with the audited
financial statements and footnotes thereto for the fiscal year ended June 30,
1998.
Principles of Combination and Consolidation
-------------------------------------------
The combining financial statements include the accounts of Ex-Cell Home
Fashions, Inc. and its subsidiaries and its affiliate, Ansam Realty Company,
LLC. Ex-Cell's subsidiaries include the following entities: Ex-Cell of
Bentonville, Inc. ("Bentonville"), Ex-Cell Linde of California, Inc.
("California"), Ex-Cell Linde of Carolina, Inc. ("Carolina"), Ex-Cell Home
Fashions (H.K.), Limited ("H.K."), Ex-Cell Home Fashions (Far East) Ltd. ("Far
East") and Ex-Cell Home Fashions (China) Ltd. ("China"), all of which
subsidiaries are wholly owned. H. K., Far East and China are Hong Kong
corporations. As at June 30, 1998, California was liquidated, with no resulting
recordable gain or loss on the liquidation. Ex-Cell and its subsidiaries and its
affiliate, Ansam, are referred to as "the Company" herein.
Significant intercompany accounts and transactions are eliminated in combination
and consolidation.
F-28
<PAGE>
EX-CELL HOME FASHIONS, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
AND ITS AFFILIATE, ANSAM REALTY COMPANY, LLC
NOTES TO CONDENSED, COMBINED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 1998
Note A - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note B - Inventories, Partially Pledged
- ---------------------------------------
Inventories are as follows
As at December 31, 1998
-----------------------
Raw materials and work in process $ 6,805,633
Finished goods 8,066,826
-----------------
Total $ 14,872,459
====================
The Company has granted a security interest to Capital Factors, Inc. in all its
imported inventories. Imported inventories amounted to approximately $6,334,000
as at December 31, 1998.
Note C - Subsequent Event
- -------------------------
On February 12, 1999, Ansam was merged into Ex-Cell and the stock of the
combined entity was sold to Glenoit Corporation.
F-29
<PAGE>
PROFORMA CONSOLIDATED FINANCIAL DATA
On October 2, 1998, Glenoit Corporation (the "Company") acquired all the Capital
Stock of American Pacific Enterprises, Inc. (the "APE Acquisition") for
approximately $39.1 million, including fees and expenses, subject to
post-closing adjustments. The Company filed on Form 8-K dated October 2, 1998
all related information.
The following Unaudited Pro Forma Statement of Income of the Company for the
year ended January 2, 1999 reflects the APE Acquisition and Ex-Cell Acquisition
as if they had occurred at the beginning of the fiscal year.
The following Unaudited Pro Forma Consolidated Balance Sheet of the Company as
of January 2, 1999 reflects the Ex-Cell Acquisition as if it occurred on that
date. The Company's Consolidated Balance Sheet as of January 2, 1999 reflects
the APE Acquisiton.
The Pro Forma Statements do not purport to represent what the Company's
financial position or results of operations would actually have been if the
relevant transactions had occurred at the beginning of each period presented or
to project the Company's consolidated results of operations or financial
position at any future date or for any future period.
F-30
<PAGE>
UNAUDITED PROFORMA STATEMENT OF INCOME
FOR THE YEAR ENDED JANUARY 2, 1999
<TABLE>
<CAPTION>
Nine Months ended
Twelve months October 2, 1998 APE Pro forma
end January 2, 1999 American Pacific Acquisition as adjusted
Glenoit Corporation Enterprises, Inc. adjustments for APE Acquisition
---------------------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C>
Net sales 172,042 53,327 225,369
Cost of sales 123,697 33,542 ( 3,367 ) f 153,872
------------------ ----------------- ----------- -------------------
Gross profit 48,345 19,785 3,367 71,497
------------------ ----------------- ----------- -------------------
Operating expenses:
Selling 15,025 2,392 17,417
Administrative 16,115 9,370 60 a 26,205
660 b
Research and development 1,736 1,736
------------------ ----------------- ----------- -------------------
Total operating expenses 32,876 11,762 720 45,358
------------------ ----------------- ----------- -------------------
Income from operations 15,469 8,023 2,647 26,139
Other income (expense):
Interest expense, net ( 13,942 ) ( 632 ) ( 2,606 ) c ( 17,180 )
Amortization of deferred
financing costs ( 691 ) ( 228 ) d ( 919 )
Other ( 147 ) ( 147 )
------------------ ----------------- ----------- -------------------
Total other ( 14,780 ) ( 632 ) ( 2,834 ) ( 18,246 )
------------------ ----------------- ----------- -------------------
Income before income taxes
and extraordinary loss 689 7,391 ( 187 ) 7,893
Income tax expense 307 137 2,565 e 3,009
------------------ ----------------- ----------- -------------------
Income before extraordinary loss 382 7,254 ( 2,752 ) 4,885
================== ================= =========== ===================
</TABLE>
F-31
<PAGE>
UNAUDITED PROFORMA STATEMENT OF INCOME
FOR THE YEAR ENDED JANUARY 2, 1999
<TABLE>
<CAPTION>
Pro forma Ex-Cell Pro forma
as adjusted for the 12 months Acquisition as adjusted
for APE Acquisition ended Dec. 31, 1998 adjustments for APE and Ex-Cell
------------------ ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Net sales 225,369 79,259 304,628
Cost of sales 153,872 53,819 1,000 g 208,691
------------------ ------------------ ------------ ----------------
Gross profit 71,497 25,440 ( 1,000 ) 95,937
------------------ ------------------ ------------ ----------------
Operating expenses:
Selling 17,417 13,812 31,229
Administrative 26,205 4,442 ( 2,061 ) h 25,973
908 l
Research and development 1,736 1,736
------------------ ------------------ ------------ ----------------
Total operating expenses 45,358 18,254 ( 1,153 ) 62,459
------------------ ------------------ ------------ ----------------
Income from operations 26,139 7,186 153 33,478
Other income (expense):
Interest expense ( 17,180 ) ( 1,644 ) 496 j ( 23,103 )
( 4,775 ) k
Amortization of deferred ( 919 ) ( 3 )_ ( 691 ) l ( 1,613 )
financing costs
Other ( 147 ) ( 147 )
------------------ ----------------- ------------ ----------------
Total other ( 18,246 ) ( 1,647 ) ( 4,970 ) ( 24,863 )
------------------ ----------------- ------------ ----------------
Income before income taxes
and extraordinary loss 7,893 5,539 ( 4,817 ) 7,927
Income tax expense 3,009 1,902 ( 1,889 ) m 3,021
------------------ ------------------ ------------ ----------------
Income before extraordinary loss 4,885 3,637 ( 2,928 ) 4,906
================== ================== ============ ================
</TABLE>
F-32
<PAGE>
(a) Adjustment to reflect additional depreciation expense related to the
write-up of APE's equipment to fair value.
(b) Adjustment to reflect the amortization of $22.0 million of goodwill over an
estimated useful life of 25 years.
(c) Adjustment to reflect interest expense related to the $55.7 million of
borrowings under the company's acquisition facility used in connection with
the APE Acquisition offset by savings from APE's debt that was paid off.
(d) Adjustment to reflect the amortization of approximately $1.0 million of
fees associated with the borrowings made under the Company's acquisition
facility.
(e) Adjustment to reflect income taxes related to the total of the historical
APE results and pro forma adjustments at an effective rate of 37.5% less
amounts previously reported in APE's historical results.
(f) Adjustment to reduce cost of sales by $3,367,000 of additional expense
incurred related to the write up of APE's inventory to fair value which was
sold during the Company's fourth quarter. The additional cost of $3,367,000
was a non-recurring one-time adjustment which negatively impacted the
Company's operating results within three months after the APE Acquisition.
(g) Adjustment to reflect additional depreciation expense related to the write
up of Ex-Cell's fixed assets to estimated fair value.
(h) Adjustment to reflect the elimination of certain payroll and personnel
costs associated with former shareholders of Ex-Cell that were terminated
in connection with the acquisition, net of anticipated costs of replacement
personnel.
(i) Amortization of estimated goodwill of $22.0 million over 25 years.
(j) Adjustment to eliminate interest expense of Ex-Cell related to long term
debt that was refinanced by Glenoit in connection with the Ex-Cell
Acquisition. Remaining interest expense relates to Ex-Cell's accounts
receivable factoring arrangement.
(k) Adjustment to reflect interest expense related to $52.4 million of
borrowings under the Company's Amended and Restated Credit Facility
utilized to acquire all outstanding shares of Ex-Cell and extinguish
Ex-Cell's outstanding long term debt.
(l) Adjustment to reflect the amortization of capitalized fees and expenses
associated with the amended and restated credit facility amortized over the
life of the facility.
(m) Adjustment to reflect income taxes related to the total of the historical
Ex-Cell results and pro forma adjustments at an effective rate of 37.5%
less amounts previously reported in Ex-Cell's historical results.
F-33
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JANUARY 2, 1999
<TABLE>
<CAPTION>
Ex-Cell Glenoit Pro Forma
Glenoit Combined Ex-Cell Acquisition for Ex-Cell
Consolidated Home Fashions, Inc. Adjustments Acquisition
---------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Cash 339,700 809,983 1,149,683
Receivables, net 30,031,108 3,206,854 33,237,962
Inventory 19,734,042 14,872,459 2,500,000 a 37,106,501
Other current assets 3,797,479 720,907 (987,500)b 3,530,886
---------------- --------------- --------------- ------------------
Total current assets 53,902,329 19,610,203 1,512,500 75,025,032
Property, plant and equipment, net 49,108,311 8,903,164 8,000,000 c 66,011,475
Goodwill, net 35,715,233 0 22,023,388 d 57,738,621
Other assets 5,973,190 764,102 4,193,000 e 10,930,292
================ =============== =============== ==================
Total assets 144,699,063 29,277,469 35,728,888 209,705,420
================ =============== =============== ==================
Accounts payable 2,888,602 4,823,218 7,711,820
Accrued liabilities 21,820,034 1,282,770 500,000 f 23,602,784
Current portion of long-term debt 0 1,211,424 (1,211,424)g 0
Due to parent 1,752,143 0 1,752,143
---------------- --------------- --------------- ------------------
Total current liabilities 26,460,779 7,317,392 (711,424) 33,066,747
Long-term debt 160,707,499 5,571,896 48,928,104 h 215,207,499
Other 3,886,254 740,389 3,160,000 i 7,786,643
Equity (46,355,469) 15,647,792 (15,647,792) (46,355,469)
================ =============== =============== ==================
Total liabilities and equity 144,699,063 29,277,469 35,728,888 209,705,420
================ =============== =============== ==================
</TABLE>
a - Adjustment reflects the estimated write up of inventory on-hand at Ex-Cell
to estimated fair value less cost to sell and less a normal selling margin.
b - Adjustment to recognize current deferred tax balances associated with the
application of purchase accounting to Ex-Cell accounts.
c - Adjustment to reflect the estimated write up of Ex-Cell's fixed assets to
fair value.
d - The purchase price to be allocated consists of: (1) $43.2 million paid to
the former shareholders of Ex-Cell, (2) $6.9 million of debt of Ex-Cell that was
extinguished, and (3) estimated fees and expenses of $1.1 million.
The Ex-Cell Acquisition was accounted for using the purchase method of
accounting and the total purchase cost was allocated first to assets and
liabilities based on their respective fair values, with the remainder allocated
to goodwill. The allocation of the purchase price above is based on historical
amounts and management's estimates which may differ from the final allocation.
e - Reflects the capitalization of $4.1 million in fees and expenses incurred in
connection with the financing of the Ex-Cell Acquisition.
f - Reflects fees and expenses accrued but not yet paid.
g - Reflects the extinguishment of the current portion of Ex-Cell long-term
debt.
h - Reflects proceeds of borrowings under the Company's amended and restated
credit facility less the repayment of existing Ex-Cell debt of $5.6 million.
i - Adjustment to reflect long term deferred tax liabilities recorded associated
with the application of purchase accounting.
F-34
