<PAGE>
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 report (Date of earliest event reported): November 30, 1998
PRODUCTION RESOURCE GROUP, L.L.C.
(Exact name of Registrant as Specified in its Charter)
Delaware 333-46235 14-1786937
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Formation) Identification No.)
539 Temple Hill Road, New Windsor, New York 12553
(Address of Principal Executive Offices) (Zip Code)
(914) 567-5700
(Registrant's Telephone Number, Including Area Code)
<PAGE>
Explanatory Note
The Current Report on Form 8-K of Production Resource Group, L.L.C. (the
"Company" or "PRG"), initially filed with the Securities and Exchange Commission
(the "Commission") on December 15, 1998 is hereby amended by this Form 8-K/A so
as to comply with Item 7 of Form 8-K and the provisions of Rule 3-05 of
Regulation S-X. The Form 8-K filed on December 15, 1998 reported, in Item 2
thereof, the acquisition on November 30, 1998 of Haas Multiples Environmental
Marketing & Design, Inc. ("Haas").
The historical financial statements for the nine month period ended September
30, 1998 and the most recent year preceding the acquisition of Haas have been
included in this Form 8-K/A. The pro forma effects of the acquisition of Haas on
the Company's financial position at September 30, 1998 and results of operations
for the nine month period ended September 30, 1998 and for the most recent
fiscal year are also presented in this Form 8-K/A.
Item 7. Financial Statements and Pro Forma Financial Information
(a) Financial Statements of Businesses Acquired
Haas was acquired by the Company on November 30, 1998. The audited financial
statements of Haas, as of September 30, 1998 and December 31, 1997, and for the
nine month period ended September 30, 1998, and for the year ended December 31,
1997, and the related Independent Auditor's Report are located at Addendum I.
(b) Pro Forma Financial Information
Pro forma combined balance sheet as of September 30, 1998 and pro forma combined
statements of operations for the nine month period ended September 30, 1998 and
pro forma combined statements of operations for the year ended December 31, 1997
are located at Addendum II.
(c) Exhibits
Exhibit No. Document Description
- ----------- --------------------
10.13 Merger Agreement among Production Resource Group, L.L.C., PRG
Acquisition II Corp., Raymond E. Andrews, Donald R. Bendickson,
James D. Bucher, William R. Dircks, Michael A. Maher and Thomas J.
Van Hercke as Stockholders, and Hass Multiples Environmental
Marketing & Design, Inc. (incorporated by reference from Form 8-K
filed on December 15, 1998).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRODUCTION RESOURCE GROUP, L.L.C.
February 16, 1999 By /s/ Robert A. Manners
------------------ ---------------------
Date Robert A. Manners
Sr. Vice President Business Affairs
and General Counsel
<PAGE>
Addendum I.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Haas Multiples Environmental
Marketing & Design, Inc.
Minneapolis, Minnesota
We have audited the accompanying balance sheets of Haas Multiples Environmental
Marketing & Design, Inc. (the "Company" or "Haas") (a corporation) as of
September 30, 1998 and December 31, 1997 and the related statements of
operations, retained earnings, and cash flows for the periods then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 Haas Multiples Environmental
Marketing & Design, Inc. as of September 30, 1998 and December 31, 1997, and the
results of its operations and its cash flows for the periods then ended, in
conformity with generally accepted accounting principles.
Davich, Wilson, Morrow & Associates, P.A.
Certified Public Accountants
January 7, 1999
Bloomington, Minnesota
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 11,166 $ 92,365
Accounts receivable, less allowance for
doubtful accounts of $61,308 and $34,308,
respectively 4,943,654 2,778,363
Inventories (Note 2) 2,394,708 2,165,302
Deferred income tax (Note 10) 65,000 65,000
---------- ----------
Total Current Assets 7,414,528 5,101,030
PROPERTY, PLANT AND EQUIPMENT, at cost:
Plant equipment 662,355 324,961
Office equipment 506,290 362,878
Vehicles 26,940 26,940
Leasehold improvements 447,693 160,720
---------- ----------
1,643,278 875,499
Less accumulated depreciation 406,815 233,901
---------- ----------
1,236,463 641,598
OTHER ASSETS:
Security deposit and other assets 28,392 16,254
---------- ----------
$8,679,383 $5,758,882
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to bank (Note 3) $ 700,000 $ 100,000
Notes payable - shareholders (Note 4) 527,500 -0-
Notes payable - related party (Note 4) 25,725 249,027
Current portion of notes payable (Note 5) 11,640 29,136
Current portion of capital lease obligation 69,454 15,820
Accounts payable 2,400,859 1,507,252
Salaries, wages and employee withholdings 347,489 442,178
Income taxes 294,227 330,000
Other accrued liabilities 276,461 400,639
Advance payments received on customer contracts 2,055,754 898,563
---------- ----------
Total Current Liabilities 6,709,109 3,972,615
LONG-TERM LIABILITIES, less current portion:
Notes payable (Note 5) 6,900 15,659
Notes payable - shareholders (Note 4) -0- 527,500
Capital lease obligation (Note 7) 199,869 79,775
---------- ----------
206,769 622,934
DEFERRED INCOME TAX (Note 10) 16,000 16,000
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized 1,000,000
shares; issued and outstanding 10,000 shares 7,990 7,990
Retained earnings 1,739,515 1,139,343
---------- ----------
Total Stockholders' Equity 1,747,505 1,147,333
---------- ----------
$8,679,383 $5,758,882
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Nine
Months For the Year
Ended Ended
September 30, December 31,
1998 1997
-------------- ------------
<S> <C> <C>
REVENUE:
Net sales $17,662,714 $19,719,623
COSTS OF SALES:
Direct labor 833,021 1,262,665
Overhead 954,320 1,457,285
Materials 9,731,579 9,841,310
Manufacturing expenses - indirect 1,323,019 1,246,657
Warehouse expenses 544,210 329,102
----------- ----------
13,386,149 14,137,019
GROSS PROFIT 4,276,565 5,582,604
EXPENSES:
Selling expenses 2,062,101 2,580,987
General and administrative 1,161,375 1,256,914
---------- ----------
NET INCOME FROM OPERATIONS 1,053,089 1,744,703
OTHER INCOME (EXPENSE):
Other income (expense) ( 462) 10,817
Interest expense ( 84,455) ( 115,322)
Loss on sale of fixed assets -0- ( 5,081)
---------- -----------
Total Other Income (Expense) ( 84,917) ( 109,586)
---------- ----------
NET INCOME BEFORE INCOME TAXES 968,172 1,635,117
INCOME TAXES:
Current benefit (expense) ( 368,000) ( 632,000)
Deferred benefit (expense) -0- 26,000
---------- ----------
( 368,000) 606,000
---------- ----------
NET INCOME $ 600,172 $1,029,117
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
For the Nine For the
Months Year
Ended Ended
September 30, December 3l,
1998 1997
------------- ------------
<S> <C> <C>
RETAINED EARNINGS AT
BEGINNING OF PERIOD $1,139,343 $ 110,226
Net income 600,172 1,029,117
---------- ----------
RETAINED EARNINGS AT END OF PERIOD $1,739,515 $1,139,343
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine For the
Months Year
Ended Ended
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 600,172 $1,029,117
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 180,436 115,888
(Gain) loss on sale of assets -0- 5,081
Deferred income taxes -0- ( 26,000)
(Increase) decrease in:
Accounts receivable ( 2,165,291) ( 1,449,423)
Inventory ( 229,406) ( 1,462,746)
Refundable income taxes -0- 125,401
Prepaid expenses -0- 5,128
Security deposits and other assets ( 12,138) ( 482)
Increase (decrease) in:
Accounts payable 893,607 586,783
Salaries, wages and employee withholdings ( 94,689) 401,435
Income taxes ( 35,773) 330,000
Other accrued liabilities ( 124,178) 222,050
Advance payments received on customer contracts 1,157,191 525,343
----------- ----------
Total adjustments ( 430,241) ( 621,542)
----------- ----------
Net Cash Provided By (Used In) Operating Activities 169,931 407,575
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment ( 775,301) ( 615,590)
Proceeds from sale of equipment -0- 100
----------- ----------
Net Cash Provided By (Used In) Investing Activities ( 775,301) ( 615,490)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term obligations ( 26,255) ( 82,093)
Payments of short-term obligations ( 223,302) ( 47,671)
Payments on capital lease obligations ( 42,027) ( 14,564)
Net change in bank line of credit 600,000 ( 200,000)
Proceeds from long-term debt -0- 19,840
Proceeds from short-term debt -0- 296,698
Proceeds from capital lease obligation 215,755 110,159
----------- ----------
Net Cash Provided by (Used In)
Financing Activities 524,171 82,369
INCREASE (DECREASE) IN CASH ( 81,199) ( 125,546)
CASH AT BEGINNING OF YEAR 92,365 217,911
----------- ----------
CASH AT END OF YEAR $ 11,166 $ 92,365
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid $ 77,536 $116,739
Income tax paid $403,773 $300,000
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1998 and Year Ended December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Activity
Haas Multiples Environmental Marketing & Design, Inc. (the "Company"
or "Haas") designs and fabricates custom trade show and retail
marketing environments, point-of-sale visual merchandising systems, and
related services. The Company recognizes revenue upon shipment. The
Company grants credit on an unsecured basis to customers in the U.S.
and Canada, including major customers (Note 11).
b. Labor Force
The Company's production force is covered by a collective bargaining
agreement. The existing agreement expired October 31, 1998. A new
collective bargaining agreement was established effective November 1,
1998, and expires on October 31, 2001.
c. Uninsured Cash Balances
The Company maintains its cash balance at a single bank. Cash accounts
at banks are insured by the FDIC for up to $100,000. The amount in
excess of the insured limit was $161,843 at September 30, 1998 and
$605,433 at December 31, 1997, based upon the bank statement balance.
d. Cash Equivalents
The company considers currency on hand and demand deposits with
financial institutions to be cash equivalents.
e. Allowance for Doubtful Accounts
The Company's policy is to maintain an allowance for bad debts which is
based on historical experiences and account review.
f. Depreciation and Amortization
Depreciation is provided using the straight-line method over estimated
useful lives of five to seven years for equipment, three to five years
for vehicles and three to ten years for leasehold improvements.
Depreciation expense for the periods ended September 30, 1998 and
December 31, 1997 was $180,436 and $115,887, respectively.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Nine Months Ended September 30, 1998 and Year Ended December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
g. Income Taxes
Certain items of revenue and expense are recognized in different
periods for financial reporting and income tax purposes. The provision
for income tax recognizes the tax effects of all transactions entering
into the determination of income for financial reporting purposes
regardless of the period in which they are reported for income tax
purposes.
h. Accounting Estimates
The preparation of the accompanying financial statements in conformity
with generally accepted accounting principles requires management to
make certain estimates and assumptions that directly affect the results
of reported assets, liabilities, revenue, and expenses. Estimates and
assumptions are reviewed on an ongoing basis.
i. Fair Value of Financial Instruments
The fair values of all reported assets and liabilities which represent
financial instruments (none of which are held for trading purposes)
approximate the carrying values of such amounts.
NOTE 2 - INVENTORIES
Work in process and raw materials inventories are stated at the lower of
cost or market, on a first-in, first-out (FIFO) basis. Inventory cost
includes labor, material and production overhead. Inventories consisted of
the following,
September 30, December 31,
1998 1997
------------- ------------
Raw materials $ 20,944 $ 32,133
Work in process 2,373,764 2,133,169
---------- ----------
$2,394,708 $2,165,302
========== ==========
NOTE 3 - NOTES PAYABLE TO BANK
The Company has a $1,000,000 revolving credit agreement with a commercial
bank as of September 30, 1998. Borrowings under the revolving credit
agreement are due on demand and bear interest at 1.25% above the prevailing
prime rate. Principal outstanding under the line of credit at September 30,
1998 and December 31, 1997 was $700,000 and $100,000, respectively. The
line of credit expires December 1, 1998. Substantially all of the
Company's assets are pledged as collateral on borrowings under the
revolving credit agreement.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Nine Months Ended September 30, 1998 and Year Ended December 31, 1997
NOTE 4 - NOTES PAYABLE TO RELATED PARTIES
The Company is indebted to its stockholders in the amount of $527,500 at
September 30, 1998 and December 31, 1997. The loans carry interest rates of
9% to 12%, are payable on demand and are subordinated to the bank debt. At
September 30, 1998 the stockholder notes were reclassified to current
liabilities since they were converted to demand notes.
A shareholder of the Company owns another corporation which has an
installment loan due from Haas. The September 30, 1998 and December 31,
1997 balances due on the loan are $25,725 and $249,027, respectively. The
installment loan calls for monthly payments of $25,912 including interest
at 8.75%. The note is scheduled to be paid off in October 1998.
Interest expense paid on the above notes for the periods ending September
30, 1998 and December 31, 1997 was $55,077 and $60,626, respectively. See
Note 8 for other related party transactions.
NOTE 5 - LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
9/30/98 12/31/97
------- --------
<S> <C> <C>
An installment note with a commercial bank. The Company is paying $604 per
month including interest at the rate of 9.5% with final payment due
February, 2000. The note is secured by a 1995 Ford F700 truck. $ 9,569 $14,133
An installment note with a commercial bank. The Company is paying $6,215
per month including interest at the bank's base rate plus 1.5% with final
payment due April, 1998. The note is secured by substantially all
of the Company's assets. -0- 18,316
The Company is paying $512 per month on an installment
note including interest at 9.981% with final payment due May, 2000.
The note is secured by equipment. 8,971 12,346
------- -------
Total 18,540 44,795
Less: current portion 11,640 29,136
------- -------
Net long-term obligation $ 6,900 $15,659
======= =======
</TABLE>
The aggregate minimum annual payments on long-term obligations maturing in
periods subsequent to September 30, 1998 are:
1999 $11,640
2000 6,900
Thereafter -0-
-------
$18,540
Interest expense paid on all debt (including related parties and leases)
for the periods ending September 30, 1998 and December 31, 1997 was $84,455
and $115,322, respectively.
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Nine Months Ended September 30, 1998 and Year Ended December 31, 1997
NOTE 6 - OPERATING LEASE COMMITMENTS
The Company leases its office, warehouse and fabrication space under a
noncancellable operating lease which expires January 31, 2002. The lease
provides for monthly payments of $25,434 plus the Company's pro rata share
of operating expenses.
The Company also has a lease for additional warehouse space. The lease is
noncancellable and expires March 31, 2002. The lease provides for monthly
payments of $11,825 plus the Company's pro rata share of operating
expenses.
The Company also leases certain equipment under a noncancellable lease.
Monthly payments are $823 and the lease expires in December 1999.
The following is a schedule by years of future minimum lease payments
required over the remaining noncancellable operating lease terms as of
September 30, 1998:
Period ending September 30, 1999 $ 456,989
2000 448,759
2001 448,889
2002 174,464
Thereafter -0-
----------
$1,529,101
==========
Rental expense for all operating leases for the periods ended September 30,
1998 and December 31, 1997 was $623,966 and $535,681, respectively.
NOTE 7 - CAPITAL LEASES
The Company leases certain equipment under agreements classified as capital
leases. The cost and accumulated amortization as of September 30, 1998 and
December 31, 1997 related to such capitalized lease equipment was as
follows:
1998 1997
---- ----
Cost $325,944 $110,189
Less accumulated amortization 45,969 12,505
-------- --------
Net $279,975 $ 97,684
======== ========
Minimum lease payments under capital leases and the net present value of
the future minimum lease payments at September 30, 1998 are as follows:
Period ending September 30, 1999 $ 93,196
2000 86,196
2001 72,255
2002 60,550
2003 14,374
Thereafter -0-
--------
Total minimum lease payments 326,571
Less amount representing interest 57,248
--------
Present value of minimum lease payments 269,323
Less current portion 69,454
--------
Long-term portion $199,869
========
<PAGE>
HAAS MULTIPLES ENVIRONMENTAL
MARKETING & DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Nine Months Ended September 30, 1998 and Year Ended December 31, 1997
NOTE 8 - RELATED PARTY TRANSACTIONS
a. Related Purchases
Goods and services purchased from related companies through partial
common ownership totaled $323,989 for the nine months ended September
30, 1998 and $457,126 for the year ended December 31, 1997. At
September 30, 1998 and December 31, 1997, accounts payable included
$35,759 and $57,195, respectively, to these related companies. See Note
4 for other related party transactions.
b. Ownership Change
On November 30, 1998, the Company became a wholly owned subsidiary of
Production Resource Group, L.L.C. This was accomplished by the sale of
each shareholder's stock to PRG Acquisition II Corp. PRG Acquisition II
Corp. was then merged with Haas as a subsidiary of Production Resource
Group, L.L.C.
NOTE 9 - PENSION PLANS
Substantially all employees, including union members, are eligible to
participate in the 401(K) plan established by the Company. Company
contributions to the plan for the periods ending September 30, 1998 and
December 31, 1997 were $32,994 and $28,747, respectively.
In addition, payments made to union multi-employer pension plans for
the periods ending September 30, 1998 and December 31, 1997 were
$71,309 and $57,777, respectively. Actuarial information relating to
the Company's participation in such plans is not available.
NOTE 10 - INCOME TAXES
Certain income and expense items are accounted for in different periods
for income tax purposes than for financial reporting purposes.
Provision for deferred taxes are made in recognition of these timing
differences. The major differences that result in a deferred tax asset
are the bad debt allowance and compensated absences. The primary cause
of the deferred tax liability is depreciation of assets.
NOTE 11 - MAJOR CUSTOMERS
During the period ended September 30, 1998, two customers accounted for
60 percent of revenue and 67 percent of the accounts receivable. During
the year ended December 31, 1997, two customers accounted for 55
percent of the revenue and 31 percent of accounts receivable.
<PAGE>
Addendum II.
Pro Forma Combined Financial Information
In 1997 and 1998, PRG completed the following acquisitions (collectively
referred to as "Other Acquisitions"):
In June 1997, PRG acquired substantially all the assets and assumed
certain liabilities of Design Dynamics, Inc. ("DDE").
In August 1997, PRG acquired substantially all the assets of five
companies operating under the name of Bash ("Bash").
In January 1998, PRG acquired substantially all the assets and assumed
certain liabilities of Pro-Mix, Inc. ("Pro-Mix")
In June 1998, PRG acquired Light and Sound Designs Holdings Limited
("Holdings"). In addition, PRG acquired substantially all the assets
and assumed certain liabilities of Production Arts Lighting Inc. and
affiliated companies (collectively "Production Arts").
In July 1998, PRG acquired substantially all the assets and assumed
certain liabilities of CBE Events and Exhibits, Inc. ("CBE").
In August 1998, PRG acquired Signal Perfection, Ltd. ("SPL").
In December 1997, PRG issued $100,000,000 of Senior Subordinated Notes (the
"Offering").
The proceeds from the Offering were used to repay existing bank indebtedness and
to purchase the net assets of Pro-Mix and for working capital requirements.
The following unaudited pro forma combined statements of operations for the nine
month period ended September 30, 1998 and for the year ended December 31, 1997
give effect to the Haas acquisition, Other acquisitions, the Offering and
financing under the Company's Credit Facility. In addition they are based on the
historical financial statements of the Company, Haas and the historical results
of operations of the Other Acquisitions. The financial statements for Holdings
are for the year ended March 31, 1998 and for the period January 1, 1998 to June
19, 1998. The historical results of operations of Holdings have been adjusted to
conform to generally accepted accounting principles of the United States and
have been translated into United States Dollars based upon appropriate exchange
rates. The historical results of operations of SPL are for the year ended
<PAGE>
February 28, 1998 and for the period January 1, 1998 to August 13, 1998. The
unaudited pro forma combined statements of operations gives effect to the
combinations under the purchase method of accounting.
The unaudited pro forma combined balance sheet as of September 30, 1998 reflects
the effect of the acquisition of Haas on the Company's balance sheet. The effect
of the Other Acquisitions, which closed prior to September 30, 1998, was
reflected in the Company's September 30, 1998 balance sheet, which was included
in the Form 10-Q filed for such period.
The unaudited pro forma combined statements of operations have been prepared by
the management of the Company, Haas, and the Other Acquisitions based upon
historical information included herein and other financial information. These
pro forma statements do not purport to be indicative of the combined results of
operations or financial position which would have been achieved had the
transactions described above taken place at the dates indicated and should not
be construed as representative of the Company's combined financial position or
combined results of operations for any future date or period. The pro forma
combined statements of operations should be read in conjunction with (i) the
Company's historical financial statements and notes contained in the Company's
annual report on Form S-4 and the Company's quarterly reports on Form 10-Q and
(ii) the historical financial statements of Haas and the Other Acquisitions
contained in Forms 8-K filed by the Company in connection with its various
acquisitions.
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Unaudited Pro Forma Combined Statement of Operations
Year ended December 31, 1997
($ In thousands)
<TABLE>
<CAPTION>
Other
Acquisition Haas
PRG Other Haas Pro Forma Pro Forma Pro Forma
Acquisitions Adjustments Adjustments Combined
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 75,180 $ 112,739 $ 19,720 $ $ 207,639
Direct production expenses:
Direct production costs 46,131 64,888 14,021 125,040
Depreciation expense 6,181 7,067 52 13,300
--------- --------- -------- --------- --------- ---------
52,312 71,955 14,073 138,340
--------- --------- -------- --------- --------- ---------
Gross profit 22,868 40,784 5,647 69,299
Selling, general and administrative
expenses 16,185 25,652 3,833 $ (887) 1 $(324) 6 44,459
Other depreciation and amortization 2,182 1,134 64 1,347 2 190 7 4,917
Non-recurring compensation expense 2,125 - - (2,125) 3 -
--------- --------- -------- --------- --------- ---------
Operating profit 2,376 13,998 1,750 1,665 134 19,923
Interest expense 3,956 788 115 10,996 4 15,855
Interest (income) (117) (82) (199)
--------- --------- -------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes, (1,463) 13,292 1,635 (9,331) 134 4,267
extraordinary item and minority interest
Provision for income taxes 392 2,202 606 3,200
--------- --------- -------- --------- --------- ---------
Income (loss) from continuing operations (1,855) 11,090 1,029 (9,331) 134 1,067
Discontinued operations:
Loss from operations of discontinued
Themed Attraction Permanent
Installation Business (5,302) - - (5,302)
--------- --------- -------- --------- --------- ---------
Income (loss) before minority interest
and extraordinary item (7,157) 11,090 1,029 (9,331) 134 (4,235)
Minority interest (126) 5 (126)
Extraordinary item (614) - (614)
--------- --------- -------- --------- --------- ---------
Net income (loss) $ (7,771) $ 11,090 $ 1,029 $ (9,457) $ 134 $ (4,975)
========= ========= ======== ========= ========= =========
Other Acquisitions ($ In thousands)
- ------------------
1. To record the difference between certain executive compensation of $12,
$495 and $380 from historical levels to amounts payable under employment
contracts entered into in connection with the acquisitions of the net assets of
Design Dynamics, Bash and Pro-Mix.
2. To record the estimated increase in goodwill amortization expense as follows:
Acquisition Amortization Period Amount
- ----------- ------------------- ------
DDE 15 years $ 84
Bash 15 years 484
Pro-Mix 25 years 44
Holdings 25 years 300
Production Arts 25 years 195
CBE 15 years 47
SPL 25 years 193
---
$ 1,347
=========
3. To eliminate non-recurring compensation expense paid to the two
shareholders of Bash and a shareholder of Design Dynamics upon their
execution of employment agreements with the Company.
4. Reflects adjustments to interest expense as follows:
Interest on Senior Subordinated Notes $11,500
Elimination of interest expense on credit facility indebtedness (3,551)
Elimination of interest expense related to acquisitions (360)
Amortization of deferred financing costs related to
Offering of Notes 370
Interest expense on borrowings to fund acquisitions 3,037
-------
$10,996
=======
5. To record minority interest related to the Holdings acquisition for the
period.
Haas Acquisition
- ----------------
6. To record the difference between certain executive compensation from
historical levels to amounts payable under employment contracts entered into
in connection with the acquisition of Haas.
7. To record the estimated goodwill amortization attributable to the
acquisition. Goodwill for Haas is being amortized over twenty-five years.
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Unaudited Pro Forma Combined Statements of Operations
($ In thousands)
</TABLE>
<TABLE>
<CAPTION>
PRG Other Haas Other Haas
Acquisitions Acquisitions
For the nine For the nine For the nine
months ended months ended months ended Pro Forma Pro Forma Company
September 30, September 30, September 30, Adjustments Adjustments Pro Forma
1998 1998 1998
------------- ------------- ------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 111,625 $ 43,802 $ 17,663 $ 173,090
Direct production expenses:
Direct production costs 69,017 27,158 13,206 109,381
Depreciation expense 7,701 2,549 115 10,365
------------- ------------- ------------- ----------- ----------- ---------
76,718 29,707 13,321 119,746
------------- ------------- ------------- ----------- ----------- ---------
Gross profit 34,907 14,095 4,342 53,344
Selling, general and administrative
expenses 23,773 8,768 3,224 $ (200) 10 35,565
Other depreciation and amortization 3,253 41 65 $518 8 142 11 4,019
------------- ------------- ------------- ----------- ----------- ---------
Operating profit 7,881 5,286 1,053 (518) 58 13,760
Interest expense 10,185 222 85 2,205 9 12,697
Interest (income) (506) (20) (526)
------------- ------------- ------------- ----------- ----------- ---------
Income (loss) before income taxes
and minority interest (1,798) 5,084 968 (2,723) 58 1,589
Provision for income taxes 739 343 368 1,450
------------- ------------- ------------- ----------- ----------- ---------
Income (loss) before minority
interest (2,537) 4,741 600 (2,723) 58 139
Minority interest (30) (30)
------------- ------------- ------------- ----------- ----------- ---------
Net income (loss) $ (2,567) $ 4,741 $ 600 $ (2,723) $ 58 $ 109
============= ============= ============ =========== =========== =========
</TABLE>
Other Acquisitions ($ In thousands)
- ------------------
8. To record the estimated increase in goodwill amortization attributable to
the Other Acquisitions.
9. To record the estimated effect of interest expense on borrowings incurred by
the Company to fund the Other Acquisitions.
Haas Acquisition
- ----------------
10. To record the difference between certain executive compensation from
historical levels to amounts payable under employment contracts entered into
in connection with the acquisition of Haas.
11. To record the estimated goodwill amortization attributable to the
acquisition of Haas. Goodwill is amortized over a period of twenty-five years
for Haas.
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Unaudited Pro Forma Combined Balance Sheet
September 30, 1998
($ In thousands)
<TABLE>
<CAPTION>
PRG Haas
September 30, September 30, Pro Forma Company
1998 1998 Adjustments Pro Forma
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 11,342 $ 11 $ (7,000) 13 $ 4,353
Accounts Receivable - net 34,631 4,944 39,575
Deferred production expenses 2,526 - 2,526
Inventories 9,495 2,395 11,890
Other current assets 5,734 65 5,799
----------- ------------ ---------- --------
63,728 7,415 (7,000) 64,143
Property and equipment - net 78,282 1,236 79,518
Goodwill - net 32,556 - 3,999 12 36,555
Other assets 9,539 28 9,567
----------- ------------ ---------- --------
Total assets $ 184,105 $ 8,679 $ (3,001) $ 189,783
============ ============ =========== =========
Liabilities and Members' Equity
Current liabilities
Current portion of long-term debt $ 830 $ 81 $ 911
Notes payable - 1,253 $ (1,253) 14 -
Accounts payable 14,871 2,401 17,272
Payoll and taxes payable 1,560 347 1,907
Deferred revenue 9,956 2,056 12,012
Income tax payable 963 294 1,257
Other current liabilities 6,916 292 7,208
----------- ------------ ---------- --------
Total current liabilities 35,096 6,724 (1,253) 40,567
Long-term debt
Senior Subordinated Notes 100,000 - 100,000
Credit Facilities 42,838 - 42,838
Other long-term debt 3,476 207 3,683
Minority interest 434 - 434
Members' equity 2,261 - 2,261
Common stock - 8 (8) 14
Additional paid-in-capital - -
Retained Earnings - 1,740 (1,740) 14 -
----------- ------------ ---------- ---------
$ 184,105 $ 8,679 $ (3,001) $ 189,783
=========== ============ ========== =========
</TABLE>
Haas Acquisition ($ In thousands)
- ----------------
12. To record the estimated goodwill attributable to the acquisition of
Haas of $3,999 based on their September 30, 1998 balance sheet.
13. To record the cash used to purchase Haas.
14. To adjust for certain liabilities not assumed and to adjust members' equity
for the elimination of the Haas stockholders' equity.
