<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 1999
REGISTRATION NO. 333-67975
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ALBECCA INC.
(Exact name of Registrant as specified in its charter)
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GEORGIA 5199 39-1389732
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or Organization) Classification Code Number) Number)
</TABLE>
3900 STEVE REYNOLDS BOULEVARD, NORCROSS, GEORGIA 30093
(770) 279-5210
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
CRAIG A. PONZIO
CHIEF EXECUTIVE OFFICER
ALBECCA INC.
3900 STEVE REYNOLDS BOULEVARD
NORCROSS, GEORGIA 30093
(770) 279-5210
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
Of Agent For Service)
---------------------
COPY TO:
PHILIP H. MOISE, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
FIRST UNION PLAZA, SUITE 1400
999 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
(404) 817-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
10 3/4% Senior Subordinated Notes Due
2008................................. $200,000,000 100% $200,000,000 $55,600(1)
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(1) Previously paid.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
TABLE OF CO-REGISTRANTS
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PRIMARY STANDARD
INDUSTRIAL I.R.S. EMPLOYEE
STATE OF CLASSIFICATION IDENTIFICATION
NAME OF ADDITIONAL REGISTRANT INCORPORATION CODE CODE
- ----------------------------- ------------- ---------------- ---------------
<S> <C> <C> <C>
Larson-Juhl US LLC.............................. Georgia 5199 58-2398627
Larson-Juhl International LLC................... Georgia 5199 58-2140960
Art Materials, Frames and Mouldings Company,
Inc. ......................................... Alabama 5199 63-0711562
Robert F. de Castro, Inc........................ Louisiana 5199 72-0644195
Glass Corporation of America, Inc. ............. Louisiana 5199 72-1313202
Art West, Inc. ................................. Arizona 5199 86-0499093
Eastern Moulding, Inc. ......................... Maryland 5199 52-1263383
Eastern Mouldings, Inc. ....................... New Jersey 5199 52-1554295
Larson-Juhl Australia L.L.C. ................... Georgia 5199 58-2157387
Larson-Juhl France L.L.C. ...................... Georgia 5199 58-2140956
Larson-Juhl South Africa L.L.C. ................ Georgia 5199 58-2140958
Larson-Juhl Seoul L.L.C. ....................... Georgia 5199 58-2140652
Larson-Juhl Korea L.L.C......................... Georgia 5199 58-2140650
Larson-Juhl Netherlands L.L.C. ................. Georgia 5199 58-2140958
</TABLE>
(ii)
<PAGE> 3
ALBECCA INC.
REGISTRATION STATEMENT ON FORM S-4
(CROSS REFERENCE SHEET FURNISHED PURSUANT TO
ITEM 501(B) OF REGULATION S-K)
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ITEM LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover of Prospectus; Cover
Page of the Registration Statement; Cross
Reference Sheet
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Available Information; Incorporation of
Certain Documents by Reference; Outside
Back Cover of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary; Risk Factors; Business; Selected
Financial Data
4. Terms of the Transaction................... Summary; Risk Factors; The Exchange Offer;
Description of the Notes; Plan of
Distribution; Certain United States Federal
Income Tax Considerations
5. Financial Information...................... Summary; Capitalization; Selected
Consolidated Financial Data
6. Material Contracts with the Company Being
Acquired................................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ Not Applicable
8. Interests of Named Experts and Counsel..... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
10. Information With Respect to S-3
Registrants................................ Not Applicable
11. Incorporation of Certain Information by
Reference.................................. Not Applicable
12. Information With Respect to S-2 or S-3
Registrants................................ Not Applicable
13. Incorporation of Certain Information by
Reference.................................. Not Applicable
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants.......... Outside Front Cover of Prospectus; Summary;
Risk Factors; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Consolidated
Financial Statements
15. Information With Respect to S-3
Companies.................................. Not Applicable
16. Information With Respect to S-2 or S-3
Companies.................................. Not Applicable
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies.................. Not Applicable
</TABLE>
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ITEM LOCATION IN PROSPECTUS
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18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or
in an Exchange Offer....................... Summary; Management; Certain Relationships
and Related Transactions
</TABLE>
<PAGE> 5
(ALBECCA LOGO)
PROSPECTUS
Exchange Offer for
$200,000,000
10 3/4% Senior Subordinated Notes Due 2008
TERMS OF EXCHANGE OFFER
- - Expires 5:00 p.m., New York City time,________, 1999, unless extended.
- - Unconditional other than that the exchange offer not violate applicable law or
any applicable interpretation of the Staff of the Securities and Exchange
Commission.
- - All outstanding notes that are validly tendered and not validly withdrawn will
be exchanged.
- - Tenders of outstanding notes may be withdrawn any time before the expiration
of the exchange offer.
- - The exchange of notes will not be a taxable exchange for U.S. federal income
tax purposes.
- - We will not receive any proceeds from the exchange offer.
- - The terms of the notes to be issued are substantially identical to the
outstanding notes, except for certain transfer restrictions and registration
rights relating to the outstanding notes.
Investing in the notes involves certain risks. See "Risk Factors" beginning on
page 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR
HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FEBRUARY , 1999
<PAGE> 6
TABLE OF CONTENTS
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SUMMARY..................................................... 1
RISK FACTORS................................................ 6
WHERE YOU CAN FIND MORE INFORMATION......................... 9
USE OF PROCEEDS............................................. 10
CAPITALIZATION.............................................. 11
SELECTED CONSOLIDATED FINANCIAL DATA........................ 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 13
BUSINESS.................................................... 22
MANAGEMENT.................................................. 33
PRINCIPAL SHAREHOLDERS...................................... 37
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 37
DESCRIPTION OF CERTAIN INDEBTEDNESS......................... 38
THE EXCHANGE OFFER.......................................... 39
DESCRIPTION OF NOTES........................................ 47
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 85
PLAN OF DISTRIBUTION........................................ 87
LEGAL MATTERS............................................... 88
EXPERTS..................................................... 88
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
</TABLE>
i
<PAGE> 7
SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this prospectus in its entirety.
THE EXCHANGE OFFER
Registration Rights........ You have the right to exchange your notes for
registered notes with substantially identical
terms. The exchange offer is intended to satisfy
these rights. After the exchange offer is
complete, you will no longer be entitled to any
exchange or registration rights with respect to
your notes.
The Exchange Offer......... We are offering to exchange $1,000 principal amount
of 10 3/4% senior subordinated notes due 2008 of
Albecca Inc. which have been registered under the
Securities Act of 1933 for each $1,000 principal
amount of its outstanding 10 3/4% senior
subordinated notes due 2008 which were issued in
August 1998 in a private offering. In order to be
exchanged, an outstanding note must be properly
tendered and accepted. All outstanding notes that
are validly tendered and not validly withdrawn
will be exchanged.
As of this date there are $200 million principal
amount of notes outstanding.
We will issue registered notes on or promptly after
the expiration of the exchange offer.
Expiration Date............ The exchange offer will expire at 5:00 p.m., New
York City time, , 1999, unless we
decide to extend the expiration date. Any
extension can be no more than 30 days from the
effective date of this prospectus.
Resale of Notes............ Based on current SEC interpretations, we believe
that the notes issued in the exchange offer may
be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions
of the Securities Act of 1933 provided that:
- the notes issued to you in the exchange offer are
being acquired in the ordinary course of your
business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the notes issued to you in
the exchange offer; and
- you are not an affiliate of ours.
If our belief is inaccurate and you transfer any
note issued to you in the exchange offer without
delivering a prospectus meeting the requirements
of the Securities Act of 1933 or without an
exemption from registration of your notes from
these requirements, you may incur liability under
the Securities Act of 1933. We do not assume or
indemnify you against this liability.
1
<PAGE> 8
\
Any broker-dealers who acquired the outstanding
notes in the offering may not rely on the SEC's
interpretations. Therefore, each broker-dealer
that is issued notes in the exchange offer for
its own account in exchange for notes which were
acquired by a broker-dealer as a result of
market-making or other trading activities, must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act of
1933, as amended, in connection with any resale
of the notes issued in the exchange offer. A
broker-dealer may use this prospectus for an
offer to resell, resale or other retransfer of
the notes issued to it in the exchange offer.
Consequences of Not
Exchanging Notes......... If you do not exchange your notes for notes issued
in the exchange offer, you will no longer be
entitled to registration rights and will not be
able to offer or sell your notes, unless they are
later registered under the Securities Act, or are
exempt from registration, or are sold in a
transaction not governed by the Securities Act
and applicable state securities laws. Except for
this registration, and except in limited
circumstances, we have no obligation to register
your notes.
Yield and Interest on the
Notes.................... The notes issued in the exchange offer bear
interest at the rate of 10 3/4% per annum,
payable semi-annually on February 15 and August
15 of each year, beginning February 15, 1999.
Conditions to the Exchange
Offer.................... The exchange offer is not conditioned upon any
minimum principal amount of notes being tendered
for exchange. However, the exchange offer has
certain customary conditions, which we may waive,
under certain circumstances. See "The Exchange
Offer -- Conditions." Except for the requirements
of applicable federal and state securities laws,
we do not have to comply with any federal or
state regulatory requirements in connection with
the exchange offer.
Procedures for Tendering
Notes.................... Subject to certain conditions, if you want to
accept the exchange offer you must complete, sign
and date the letter of transmittal included with
this prospectus, or a facsimile of it, in
accordance with the instructions contained in
this prospectus and in the letter of transmittal,
and mail or otherwise deliver the letter of
transmittal or facsimile, together with your
notes to be exchanged and any other required
documentation, to the exchange agent at the
address given in this prospectus. You may instead
tender of your notes through the procedures for
book-entry transfer explained in this prospectus.
See "The Exchange Offer -- Procedures for
Tendering" and "-- Book-Entry Transfer."
Guaranteed Delivery
Procedures............... If you wish to tender your notes and they are not
immediately available or you cannot deliver them
and a properly completed letter of transmittal,
or any other documents required by the letter of
transmittal, to the exchange agent before
, 1999, you may tender your notes
according to the guaranteed delivery procedures
2
<PAGE> 9
explained under "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights.......... You may withdraw the tender of your notes at any
time before 5:00 p.m., New York City time, on
, 1999. To withdraw a tender of your
notes, a written or facsimile transmission notice
of withdrawal must be received by the exchange
agent at its address given under "The Exchange
Offer -- Exchange Agent" before 5:00 p.m., New
York City time, on , 1999.
Acceptance of Notes and
Delivery of Notes........ Subject to certain conditions, any and all notes
that are properly tendered in the exchange offer
before 5:00 p.m., New York City time, on
, 1999 will be accepted for exchange.
The new notes issued in the exchange offer will
be delivered promptly following , 1999.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Certain Tax
Considerations........... The exchange of notes will not be considered a
sale or exchange or otherwise a taxable event for
federal income tax purposes. See "Certain United
States Federal Income Tax Considerations."
Exchange Agent............. State Street Bank and Trust Company is serving as
exchange agent in connection with the exchange
offer.
Fees and Expenses.......... We will pay all expenses incident to the exchange
offer.
Use of Proceeds............ We will not receive any cash proceeds from the
issuance of the notes in the exchange offer. See
"Use of Proceeds."
SUMMARY OF TERMS OF NOTES
The form and terms of the new notes to be issued in the exchange offer are
the same as the form and terms of old notes except that the new notes will be
registered under the Securities Act of 1933 and, therefore, will not bear
legends restricting their transfer and will not be entitled to further
registration under the Securities Act of 1933. The new notes will evidence the
same debt as the old notes and both the old notes and the new notes to be issued
are governed by the same indenture.
Maturity Date.............. August 15, 2008.
Interest Rate.............. 10 3/4% per annum, payable semi-annually on
February 15 and August 15 of each year, beginning
February 15, 1999.
Optional Redemption........ On or after August 15, 2003, the notes will be
redeemable at our option, in whole or in part, at
any time in cash at the redemption prices listed
under the caption "Description of the Notes" --
"Optional Redemption."
Subsidiary Guarantees...... The notes are unconditionally guaranteed, jointly
and severally, by all of the subsidiary
guarantors, which consist of almost all of our
subsidiaries other than foreign subsidiaries. If
we cannot make payments on the notes when they
are due, the subsidiary guarantors must make them
instead.
Ranking.................... The notes and subsidiary guarantees are senior
subordinated debts.
These rank behind all of our and our guarantor
subsidiaries' current and future debt, except
trade payables and; except indebtedness that
expressly provides that it is not senior to these
notes and the
3
<PAGE> 10
subsidiary guarantees. As of November 29, 1998,
we and our subsidiaries had $65.0 million in
outstanding debt that will be senior to the
notes.
Change of Control.......... If we sell certain assets or experience specific
kinds of changes in control, we must offer to
repurchase the notes at prices listed in the
section "Description of the Notes -- Change of
Control."
Restrictive Covenants...... We are issuing the notes under an indenture. The
indenture, among other things, restricts our
ability to:
- pay dividends;
- redeem stock;
- borrow money or issue preferred equity interests;
- sell certain assets or merge with or into other
companies;
- use assets as security in other transactions; and
- enter into certain transactions with affiliates.
OUR COMPANY
Albecca Inc., which primarily does business under the Larson-Juhl name, is
a worldwide leader in the custom framing industry. We design, manufacture and
distribute a complete line of high quality, branded custom framing products,
including wood and metal moulding, matboard, foam board, glass, equipment and
other framing supplies. A more detailed description of our business appears
later in this prospectus under the heading "Business."
Our headquarters are located at 3900 Steve Reynolds Boulevard, Norcross,
Georgia 30093. Our telephone number is (770) 279-5210.
When we use the name "Albecca" in this prospectus we are usually referring
to Albecca and its subsidiaries as a whole. Where we use "Albecca" only to mean
Albecca Inc., and not its subsidiaries, we have explained that in the
appropriate section.
EXPLANATION OF ADJUSTED EBITDA
Adjusted EBITDA is defined as operating income plus depreciation,
amortization excluding amortization of bond issuance costs, restructuring
charges and certain infrequent costs (see "Management's Discussion and Analysis
of Financial Condition and Results of Operations"). We are presenting Adjusted
EBITDA because we believe it is a useful indicator of a company's ability to
meet debt service and capital expenditure requirements. It is not, however,
intended to be an alternative measure of operating results or cash flows from
our operations, as determined in accordance with GAAP. We believe that the
measure of Adjusted EBITDA should exclude restructuring charges and certain
infrequent charges and not just those costs that are non-cash items. We believe
by excluding all restructuring charges and infrequent costs associated with the
components of our existing restructuring plan, cancelled initial public equity
offering and other items as discussed in Management's Discussion and Analysis,
we are providing a more meaningful presentation of our ability to service debt
and meet capital requirements in the future. We believe these items are isolated
occurrences and do not currently anticipate that restructuring charges will
occur in future periods and thus should not be reflected and included in the
measure of "Adjusted EBITDA".
Adjusted EBITDA is not necessarily comparable to similarly titled measures
for other companies and does not necessarily represent amounts of funds
available for management's discretionary use.
4
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of our
company. Our financial statements are prepared in accordance with GAAP. Albecca
is an S corporation and is not required to pay United States federal and certain
state income taxes.
Albecca ends its fiscal year on the last Sunday in August. The information
as of and for the fiscal years ended August 28, 1994, August 27, 1995, August
25, 1996, August 31, 1997 and August 30, 1998 is derived from our audited
consolidated financial statements. Fiscal year 1997 was a 53-week year. The
summary consolidated financial data for the three months ended November 30, 1997
and November 29, 1998 has been derived from Albecca's unaudited consolidated
financial statements which in the opinion of management, contain all adjustments
(consisting of only normal and recurring adjustments) necessary to present
fairly Albecca's financial position and results of operations at such dates and
for such periods. Historical results are not necessarily indicative of the
results to be expected in the future and results for interim periods are not
necessarily indicative of results for the entire year.
For purposes of the table below, Adjusted EBITDA, as defined on the
previous page, presented for the year ended August 30, 1998 excludes
restructuring charges of $2,262,000 and infrequent costs of $5,241,000. Of these
charges, $1,108,000 are non-cash items. Infrequent costs of $5,241,000 include
approximately $1,360,000 of integration costs associated with the integration of
existing and acquired international entities, approximately $508,000 related to
additional reserves for uncollectible accounts receivable as a result of the
closure of Albecca's United Kingdom plastic moulding manufacturing operations
and Greece operations, approximately $1,273,000 related to costs associated with
Albecca's cancelled initial public equity offering and approximately $2,100,000
associated with the integration of four acquired distributors of custom framing
products in the U.S. as well as costs associated with the upgrading of Albecca's
information systems, including Year 2000 compliance. Adjusted EBITDA for the
three months ended November 29, 1998 excludes charges of $117,000 associated
with costs related to the integration of Albecca's U.S. duplicate facilities.
There were no restructuring charges or infrequent costs excluded in the
computation of Adjusted EBITDA in any other period presented. Adjusted EBITDA
margin represents Adjusted EBITDA as a percentage of net sales.
It is important that you read the summary consolidated financial data
presented below along with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of our company and the related notes included elsewhere in this prospectus.
<TABLE>
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FISCAL YEAR THREE MONTHS ENDED
---------------------------------------------------- ----------------------------
NOVEMBER 30, NOVEMBER 29,
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- -------- ------------ ------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
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STATEMENT OF OPERATIONS DATA:
Net sales................................. $157,346 $225,359 $300,788 $354,058 $381,137 $102,985 $103,575
Gross profit.............................. 66,542 97,018 126,824 153,308 165,056 44,119 44,640
Restructuring charges..................... -- -- -- -- 2,262 -- 117
Operating income.......................... 15,534 22,471 30,229 35,601 31,961 10,773 8,299
Costs of cancelled initial public equity
offering................................ -- -- -- -- 1,273 -- --
Net income................................ 13,335 16,044 19,404 22,490 14,363 7,368 473
OTHER DATA:
Net cash provided by operating
activities.............................. $ 12,732 $ 19,043 $ 30,640 $ 22,150 $ 15,834 $ 4,836 $ 1,945
Net cash used in investing activities..... (8,826) (31,084) (38,099) (22,514) (34,015) (19,169) (4,529)
Net cash (used in) provided by financing
activities.............................. (3,530) 14,068 8,282 1,504 67,658 18,564 (2,793)
Adjusted EBITDA........................... 17,807 28,174 35,531 42,486 46,404 13,269 10,309
Adjusted EBITDA margin.................... 11.3% 12.5% 11.8% 12.0% 12.2% 12.9% 10.0%
Depreciation and amortization............. $ 2,273 $ 5,703 $ 5,302 $ 6,885 $ 8,213 $ 1,818 $ 2,174
Capital expenditures...................... 2,873 5,291 5,461 7,746 8,378 965 616
CREDIT DATA:
Total interest expense less amortization of bond costs............................... $ 11,893 $ 2,343 $ 6,844
Ratio of Adjusted EBITDA to cash interest expense.................................... 3.9x 5.7x 1.5x
Ratio of total debt less cash and cash equivalents to Adjusted EBITDA................ 4.5 3.0 5.0
Ratio of earnings to fixed charges........ 15.0 5.6 4.4 3.7 2.6 4.6 1.2
Pro forma ratio of earnings to fixed charges(1)...................................... 1.2
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
AUGUST 30, 1998 NOV. 29, 1998
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(UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................................................... $ 54,884 $ 48,488
Working capital............................................................................. 97,150 99,270
Total assets................................................................................ 305,922 317,779
Total debt.................................................................................. 262,769 264,973
Shareholders' deficit....................................................................... (25,644) (25,742)
</TABLE>
- ---------------
(1) Fixed charges for purposes of this calculation are adjusted to give effect
for the proceeds and related uses of the notes as if the notes had been
issued of the beginning of the period presented.
5
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RISK FACTORS
All forward-looking statements attributable to Albecca or persons acting on
our behalf are expressly qualified in their entirety by the following cautionary
statements.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF ALBECCA AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER
THESE NOTES.
We have now and, after the exchange offer, will continue to have a
significant amount of indebtedness. The following chart shows certain important
credit statistics and is presented assuming we had completed this offering as of
the dates or at the beginning of the periods specified below and applied the
proceeds as intended:
<TABLE>
<CAPTION>
AUGUST 30, 1998 NOVEMBER 29, 1998
--------------- -----------------
<S> <C> <C>
Total indebtedness..................................... $262,769 $264,973
Shareholders' deficit.................................. $(25,644) $(25,742)
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED THREE MONTHS ENDED
AUGUST 30, 1998 NOVEMBER 29, 1998
--------------- ------------------
<S> <C> <C>
Ratio of earnings to fixed charges.................... 2.6x 1.2x
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example:
- it could require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby making it more
difficult for us to satisfy our obligations with respect to these notes
and reducing the availability of our cash flow to fund working capital,
capital expenditures, research and development efforts and other general
corporate purposes;
- because a certain portion of our borrowings bear interest at variable
rates, we could be exposed to higher interest expense if there is an
increase in interest rates;
- it could limit our ability to borrow additional funds and a failure to
comply with the financial and restrictive covenants in our indebtedness
could result in an event of default which, if not cured or waived, could
have a material adverse effect on us; and
- certain foreign revolving credit facilities and term loans generally
restrict the subsidiary nonguarantors' ability to pay dividends or repay
intercompany loans to Albecca or other subsidiary guarantors.
- it could place us at a competitive disadvantage compared to our
competitors that have less debt because it will limit our flexibility in
planning for, or reacting to, changes in our business and the industry in
which we operate.
See "Description of Notes."
LIQUIDITY AND NEED FOR ADDITIONAL CASH -- TO SERVICE OUR INDEBTEDNESS, WE AND
OUR SUBSIDIARIES MAY NEED TO INCUR MORE DEBT. THIS COULD FURTHER EXACERBATE THE
RISKS DESCRIBED ABOVE.
Our ability to make payments on, or to refinance, our indebtedness
including these notes, or to fund planned capital or other expenditures, will
depend on our ability to generate cash in the future either through operations
or borrowings. However, either because of economic, financial, business and
other factors beyond our control, or our inability to achieve anticipated cost
savings and operating improvements, we cannot assure you that our cash flow from
operations, available cash and available borrowings will be adequate to pay our
indebtedness, including these notes, or to fund our other liquidity needs. We
may need to refinance all or a portion of our indebtedness, including these
notes, on or before maturity, and for the same reasons cannot assure you that we
will be able to refinance any of our indebtedness, including these notes, on
commercially reasonable terms or at all.
6
<PAGE> 13
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO OUR
EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE
GUARANTEES OF THESE NOTES ARE JUNIOR TO ALL OUR GUARANTORS' EXISTING
INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE BORROWINGS.
These notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing indebtedness, and future indebtedness incurred
without violating any of the indenture covenants other than trade payables and
inter-company debt, except future indebtedness that expressly provides that it
ranks equal with, or subordinated in right of payment to, the notes and the
guarantees. As a result, upon any distribution to our creditors or the creditors
of the guarantors in a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors or our or their property, the
holders of our senior debt and the guarantors' senior debt will be entitled to
be paid in full in cash before any payment may be made with respect to these
notes or the subsidiary guarantees.
Assuming we had completed this offering on November 29, 1998, these notes
and the subsidiary guarantees would have been subordinated to $65.0 million of
senior debt.
In addition, under certain circumstances, no payments may be made with
respect to the notes if a default exists with respect to senior debt. If we
incur any equally ranked debt, the holders of such debt would be entitled to
share ratably with holders of the notes in any proceeds distributed in
connection with a bankruptcy, liquidation, reorganization or similar proceeding.
This may have the effect of reducing the amount of proceeds paid to holders of
the notes. In addition, no cash payments may be made with respect to the notes
during the continuance of a payment default with respect to certain senior debt
and, under certain circumstances, no payments may be made with respect to the
notes for a period of up to 179 days if a nonpayment default exists with respect
to certain senior debt.
Albecca conducts most of its foreign operations through foreign
subsidiaries who will not guarantee the notes. Consequently, upon a foreign
subsidiary's liquidation or reorganization these notes and the subsidiary
guarantees will rank behind the rights of the creditors of the foreign
subsidiaries, including trade creditors. As of November 29, 1998, the foreign
subsidiaries had approximately $59.7 million of indebtedness.
ABILITY TO CONTINUE AND MANAGE GROWTH -- OUR FAILURE OR INABILITY TO IMPLEMENT
OUR GROWTH STRATEGY SUCCESSFULLY COULD NEGATIVELY AFFECT OUR PROFITABILITY.
Our ability to continue to grow will depend on a number of factors,
including the ability to make successful acquisitions, the demand for our
existing and new custom framing products, our ability to maintain sufficient
profit margins and the impact of existing and emerging competition. Concerning
acquisitions, we may not be able in the future to identify acquisition
candidates that meet our criteria, enter into acquisition agreements on
favorable terms, or successfully integrate an acquired business. We compete for
acquisitions with both strategic and financial buyers, and continued
consolidation in the industry may result in fewer acquisition opportunities. In
addition, in the past we have incurred restructuring charges related to some
previously-acquired companies. We have continued to review operations at our
subsidiaries, with recent emphasis on companies in the Pacific Rim, to determine
whether additional restructuring is appropriate. To accommodate our growth we
must also recruit, retain and develop qualified personnel, manage costs and,
when needed, adapt our infrastructure and modify our information systems.
Activities related to the implementation of our growth strategies may at times
divert management's attention from our business operations, and the costs
associated with such activities may adversely affect our profitability.
ACCOUNTING FOR GOODWILL -- IF WE DETERMINE THAT THE VALUE OF GOODWILL HAS BEEN
IMPAIRED, WE WILL BE REQUIRED TO RECORD A CHARGE TO EARNINGS.
Our consolidated balance sheet as of August 30, 1998 includes an amount
designated as goodwill that represents 14% of total assets. Goodwill is recorded
when the purchase price paid for a business is greater than the fair value of
the acquired business' net assets, including both tangible assets and identified
intangible assets. Goodwill and identified intangible assets are amortized over
the periods estimated to be
7
<PAGE> 14
benefited, but not more than 40 years. For the acquired companies, we have
determined that goodwill and other identifiable intangible assets should be
amortized over 10 to 40 years.
GAAP requires that we identify the tangible and intangible assets acquired
and allocated purchase price to those assets based on their fair values.
Reported earnings therefore are affected by our identification and valuation of
tangible and intangible assets as well as our estimate of the useful lives of
tangible assets and the periods that are expected to be benefited by the
identified intangible assets and goodwill. When the fair values of longer lived
assets are greater than the fair values of shorter lived assets, annual
amortization and depreciation charges are less than when the fair values of
shorter lived assets are greater than the fair values of longer lived assets.
Further, earnings are affected when new information or changes in circumstances
indicate that an asset has been impaired or that its estimated useful life is
less than originally expected. For example, if we subsequently determine that
the value of goodwill has been impaired, we will be required to record a charge
to earnings. Based on our assessment, there is no persuasive evidence that
goodwill should be amortized over a period of less than 40 years.
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO PURCHASE
YOUR NOTES UPON A CHANGE OF CONTROL AS REQUIRED BY THE INDENTURE.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding notes. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of notes and cannot raise additional
funds, or that restrictions in our credit facilities will not allow such
repurchases. See "Description of the Notes -- Certain Covenants -- Change in
Control."
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a debt or guarantee could be voided, or claims in
respect of a debt or guarantee could be subordinated to all other debts of that
debtor guarantor if, among other things, the debtor guarantor, at the time it
incurred the indebtedness evidenced by its debt or guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee;
- was insolvent or rendered insolvent by reason of such incurrence;
- was engaged in a business or transaction for which the debtor's or
guarantor's remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that debtor or guarantor pursuant to its debt
or guarantee could be voided and required to be returned to the debtor or
guarantor, or to a fund for the benefit of the creditors of the debtor or
guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a debtor or guarantor
would be considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets; or
- if the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
8
<PAGE> 15
On the basis of historical financial information, recent operating history
and other factors, we believe that Albecca and each guarantor, after giving
effect to issuance and guarantee of these notes, will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and will
not have incurred debts beyond its ability to pay such debts as they mature.
There can be no assurance, however, as to what standard a court would apply in
making such determinations or that a court would agree with our conclusions in
this regard.
NO PRIOR MARKET FOR NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET
WILL DEVELOP FOR THESE NOTES.
The old notes have been designated as eligible for trading in the NASD's
PORTAL market (Private Offerings, Resales and Trading through Automated
Linkages). Prior to this exchange offer, there has been no public market for the
new notes. If such a market were to develop, the new notes could trade at prices
that may be higher or lower than their principal amount. We do not intend to
apply for listing of the new notes on any securities exchange. The underwriters
who initially purchased the old notes have previously made a market in the old
notes, and currently intend to make a market in the new notes, as permitted by
applicable laws and regulations, after consummation of the exchange offer. They
are not obligated, however, to make a market in the notes and any such
market-making activity may be discontinued at any time without notice at their
sole discretion. In addition, the liquidity of the trading market in these
notes, and the market price quoted for these notes, may be adversely affected by
changes in the overall market for high yield securities and by changes in our
financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for these notes.
EXCHANGE OFFER PROCEDURES -- LATE DELIVERIES OF NOTES AND OTHER REQUIRED
DOCUMENTS COULD PREVENT A HOLDER FROM EXCHANGING ITS NOTES.
THE METHOD OF DELIVERY OF NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS OF NOTES. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR NOTES SHOULD BE
SENT TO ALBECCA.
WHERE YOU CAN FIND MORE INFORMATION
Albecca has filed with the SEC a registration statement on Form S-4 under
the Securities Act of 1933, as amended, covering the notes to be issued in the
exchange offer. This prospectus does not contain all of the information included
in the registration statement. Any statement made in this prospectus concerning
the contents of any contract, agreement or other document is not necessarily
complete. If we have filed any such contract, agreement or other document as an
exhibit to the registration statement, you should read the exhibit for a more
complete understanding of the document or matter involved. Each statement
regarding a contract, agreement or other document is qualified in its entirety
by reference to the actual document.
Following the exchange offer, we will be required to file periodic reports
and other information with the SEC under the Securities Exchange Act of 1934, as
amended. Our obligation to file periodic reports with the SEC will be suspended
if the notes issued in the exchange offer are held of record by fewer than 300
holders as of the beginning of any year. However, the indenture governing the
notes requires us to file with the SEC financial and other information for
public availability. In addition, the indenture governing the notes requires us
to deliver to you, or to State Street Bank and Trust for forwarding to you,
copies of all reports that we file with the SEC without any cost to you. We will
also furnish such other reports as we may determine or as the law requires.
You may read and copy the registration statement, including the attached
exhibits, and any reports, statements or other information that we file at the
SEC's public reference room in Washington, D.C. You can request copies of these
documents, upon payment of a duplicating fee, by writing the SEC. Please call
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<PAGE> 16
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings will also be available to the public on the SEC
Internet site (http://www.sec.gov).
You should rely only on the information provided in this prospectus. No
person has been authorized to provide you with different information.
We are not making an offer to exchange notes in any jurisdiction where the
offer is not permitted.
The information in this prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this prospectus
is accurate as of any other date.
This prospectus includes forward looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act including,
in particular, the statements about Albecca's plans, strategies, and prospects
under the headings "Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business." Although we believe that
our plans, intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, we can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the forward-looking statements we
make in this prospectus are set forth in "Risk Factors" above, and elsewhere in
this prospectus. All forward-looking statements attributable to Albecca or
persons acting on our behalf are expressly qualified in their entirety by these
cautionary statements.
USE OF PROCEEDS
The exchange offer is being effected to satisfy Albecca's obligations under
the notes, the indenture and the registration rights agreement. There will be no
cash proceeds payable to Albecca from the issuance of the notes in the exchange
offer. In consideration of issuing the notes in the exchange offer, Albecca will
receive an equal principal amount of notes. Notes that are properly tendered in
the exchange offer and not validly withdrawn will be accepted, cancelled and
retired and cannot be reissued.
The proceeds from the sale of the notes were used to:
(1) repay and retire Albecca's principal credit facility, which had an
outstanding balance of $82.3 million at the closing of the sale of the
notes; and
(2) fund the distribution of previously undistributed S corporation
earnings to Albecca's shareholders, in an aggregate amount of $60.0
million.
The remainder of the net proceeds of approximately $50.9 million is being
used for general corporate purposes, which may include future acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain Relationships and
Related Transactions."
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<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of Albecca at November
29, 1998. This table should be read in conjunction with Albecca's consolidated
financial statements and the related notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the other
financial information appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF
NOVEMBER 29,
1998
--------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 48,488
========
Debt (including current maturities):
Notes..................................................... 200,000
Other existing indebtedness............................... 64,973
--------
Total debt........................................ 264,973
Shareholders' deficit....................................... (25,742)
--------
Total capitalization.............................. $239,231
========
</TABLE>
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<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified by
reference to, and should be read in conjunction with, the consolidated financial
statements and the related notes thereto and other financial information
included elsewhere in this prospectus, as well as "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Albecca ends its
fiscal year on the last Sunday in August. The information as of and for the
fiscal years ended August 28, 1994, August 27, 1995, August 25, 1996, August 31,
1997 and August 30, 1998 is derived from our audited consolidated financial
statements. Fiscal year 1997 was a 53-week year. The summary consolidated
financial data for the three months ended November 30, 1997 and November 29,
1998 has been derived from Albecca's unaudited consolidated financial statements
which in the opinion of management, contain all adjustments, consisting of only
normal and recurring adjustments, necessary to present fairly Albecca's
financial position and results of operations at such dates and for such periods.
Historical results are not necessarily indicative of the results to be expected
in the future and results for interim periods are not necessarily indicative of
results for the entire year. Albecca is an S corporation and is not required to
pay United States federal and certain state income taxes.
For purposes of the table below, Adjusted EBITDA, as defined on page 4 of
this prospectus, presented for the year ended August 30, 1998 excludes
restructuring charges of $2,262,000 and infrequent costs of $5,241,000. Of these
charges, $1,108,000 are non-cash items. Infrequent costs of $5,241,000 include
approximately $1,360,000 of incremental costs associated with the integration of
existing and acquired international entities, approximately $508,000 related to
additional reserves for uncollectible accounts receivable as a result of the
closure of Albecca's United Kingdom plastic moulding manufacturing operations
and Greece operations, approximately $1,273,000 related to costs associated with
Albecca's cancelled initial public equity offering and approximately $2,100,000
associated with the integration of four acquired distributors of custom framing
products in the U.S. as well as costs associated with the upgrading of Albecca's
information systems, including Year 2000 compliance. Adjusted EBITDA for the
three months ended November 29, 1998 excludes charges of $117,000 associated
with costs related to the integration of Albecca's U.S. duplicate facilities.
There were no restructuring charges or infrequent costs excluded in the
computation of Adjusted EBITDA in any other period presented. Adjusted EBITDA
margin represents Adjusted EBITDA as a percentage of net sales.
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
---------------------------------------------------- --------------------------
NOV. 30, NOV. 29,
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................................... $157,346 $225,359 $300,788 $354,058 $381,137 $102,985 $103,575
Cost of sales................................. 90,804 128,341 173,964 200,750 216,081 58,866 58,935
-------- -------- -------- -------- -------- -------- --------
Gross profit................................ 66,542 97,018 126,824 153,308 165,056 44,119 44,640
Operating expenses............................ 51,008 74,547 96,595 117,707 130,833 33,346 36,224
Restructuring charges......................... -- -- -- -- 2,262 -- 117
-------- -------- -------- -------- -------- -------- --------
Operating income............................ 15,534 22,471 30,229 35,601 31,961 10,773 8,299
Costs of cancelled initial public equity
offering.................................... -- -- -- -- 1,273 -- --
Interest income............................... -- -- -- -- (116) (555)
Interest expense.............................. 1,034 4,008 6,846 9,722 11,949 2,343 7,125
Provision for income taxes.................... 1,165 2,322 3,679 3,243 4,021 896 1,059
Minority interest............................. -- 97 300 146 471 166 197
-------- -------- -------- -------- -------- -------- --------
Net income.................................... $ 13,335 $ 16,044 $ 19,404 $ 22,490 $ 14,363 $ 7,368 $ 473
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Net cash provided by operating activities..... $ 12,732 $ 19,043 $ 30,640 $ 22,150 $ 15,834 $ 4,836 $ 1,945
Net cash used in investing activities......... (8,826) (31,084) (38,099) (22,514) (34,015) (19,169) (4,529)
Net cash (used in) provided by financing
activities.................................. (3,530) 14,068 8,282 1,504 67,658 18,564 (2,793)
Adjusted EBITDA............................... 17,807 28,174 35,531 42,486 46,404 13,269 10,309
Adjusted EBITDA margin........................ 11.3% 12.5% 11.8% 12.0% 12.2% 12.9% 10.0%
Depreciation and amortization................. $ 2,273 $ 5,703 $ 5,302 $ 6,885 $ 8,213 $ 1,818 $ 2,174
Capital expenditures.......................... 2,873 5,291 5,461 7,746 8,378 965 616
CREDIT DATA:
Total interest expense less amortization of bond costs................................... $ 11,893 $ 2,343 $ 6,844
Ratio of Adjusted EBITDA to cash interest expense........................................ 3.9x 5.7x 1.5x
Ratio of total debt less cash and cash equivalents to Adjusted EBITDA.................... 4.5 3.0 5.0
Ratio of earnings to fixed charges............ 15.0 5.6 4.4 3.7 2.6 4.6 1.2
Pro forma ratio of earnings to fixed charges(1).......................................... 1.2
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 1,362 $ 3,376 $ 4,363 $ 5,301 $ 54,884 $ 8,334 $ 48,488
Working capital............................... 24,615 32,936 39,456 43,302 97,150 56,992 99,270
Total assets.................................. 58,458 122,781 190,168 208,689 305,922 253,405 317,779
Total debt.................................... 14,067 53,969 93,062 108,726 262,769 137,209 264,973
Shareholders' equity (deficit)................ 26,583 29,106 35,343 37,313 (25,644) 39,858 (25,742)
</TABLE>
- ---------------
(1) Fixed charges for purposes of this calculation are adjusted to give effect
to the proceeds and related uses of the notes as if the notes had been
issued at the beginning of the period presented.
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<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the "Selected Consolidated Financial Data" and Albecca's consolidated financial
statements and the related notes thereto which are included elsewhere in this
prospectus. In this "Management's Discussion and Analysis of Financial Condition
and Results of Operations," all references to Albecca's international operations
("International") include all of Albecca's operations outside of the U.S.
Albecca uses a 52-53 week fiscal year ending on the last Sunday in August.
Accordingly, fiscal years 1996, 1997 and 1998 ended on August 25, 1996, August
31, 1997, and August 30, 1998, respectively. Moreover, fiscal 1997 was a 53-week
year.
OVERVIEW
Albecca's net sales consist primarily of sales of branded custom framing
products to independent retail custom framers and franchise operations. With
operations in 20 countries, Albecca's net sales are geographically diversified.
U.S. customers accounted for 54.0%, 46.7% and 48.7% of net sales in 1996, 1997
and 1998, respectively, with International customers accounting for the balance.
Albecca has grown internally as well as through the acquisition of 38 other
manufacturers and distributors of custom framing products since 1988. Of these
acquisitions, Albecca completed ten in 1996, six in 1997, six in 1998 and one in
the first three months of 1999.
Albecca's cost of sales for manufactured goods consists primarily of the
cost of raw materials, which is primarily lumber, direct labor and the overhead
associated with the manufacturing processes. Albecca's cost of sales for
products purchased for resale primarily consists of the cost of the product and
the related freight costs. The cost of Albecca's sampling program, through which
it provides moulding samples to retail custom framers, is also included in cost
of sales. Costs associated with its sampling program are comprised of the direct
materials, labor, overhead and freight associated with the production of samples
or the actual cost for the purchase of these samples. The costs of these samples
are expensed upon shipment of the samples to the customer. Albecca's operating
expenses include the expenses associated with Albecca's customer service,
marketing, selling, distribution processes and general and administrative
support.
Albecca Inc. has been an S corporation under the Code since 1987 and
Larson-Juhl International LLC has been a limited liability company since
inception. Therefore, neither has been subject to federal and certain state
income taxes. The provision for income taxes that Albecca historically has
recorded has been primarily for certain state and foreign income taxes. In
connection with the offering of the notes, Albecca distributed $60.0 million of
previously undistributed S corporation earnings to its shareholders. See "Use of
Proceeds" and "Certain Relationships and Related Transactions." Albecca intends
to continue to make distributions to its shareholders to pay their income tax
obligations as a result of Albecca's status as an S corporation.
Through June 25, 1998, Albecca Inc. and Larson-Juhl International LLC were
owned and controlled by the same shareholders. Effective June 26, 1998, the
members of Larson-Juhl International LLC contributed their respective equity
interests to Albecca Inc. whereby Larson-Juhl International LLC became a wholly
owned subsidiary of Albecca. The merger of these entities that are under common
control has been treated in a manner similar to a pooling-of-interests, and as
such, the financial statements have been restated to include the financial
statements of Larson-Juhl International LLC for all periods presented.
During April 1998, Albecca acquired all of the outstanding stock of a U.S.
distributor of custom framing products for approximately $9.9 million in cash.
Goodwill and other intangible assets of approximately $8.4 million were recorded
in connection with the acquisition.
Additionally, during October 1997, Albecca acquired all of the outstanding
stock of a distributor of custom framing products for approximately $8.0 million
in cash. Goodwill and other intangible assets of approximately $5.5 million were
recorded in connection with the acquisition. Albecca also acquired, during
13
<PAGE> 20
October 1997, the outstanding stock of four U.S. and international manufacturers
and distributors of custom framing products for aggregate consideration of
approximately $11.1 million in cash, resulting in goodwill and other intangible
assets of approximately $7.4 million.
During November 1996, Albecca acquired all of the outstanding stock of an
international distributor of custom framing products for approximately $9.6
million in cash. Goodwill and intangible assets of approximately $5.2 million
were recorded in connection with this acquisition. Albecca also acquired, during
fiscal year 1997, the outstanding stock of five international manufacturers and
distributors of custom framing products for aggregate consideration of
approximately $8.8 million in cash, resulting in goodwill and other intangible
assets of approximately $4.6 million.
During September 1995, Albecca acquired all of the outstanding stock of a
French manufacturer and distributor of custom framing products for approximately
$6.6 million in cash. No goodwill resulted from this acquisition. During May
1996, Albecca acquired all of the outstanding stock of a United Kingdom
manufacturer and distributor of custom framing products for approximately $13.3
million in cash. Goodwill and other intangible assets of approximately $4.7
million were recorded in connection with this acquisition. Albecca also
acquired, during fiscal year 1996, the outstanding stock or substantially all of
the operating assets and liabilities of eight international manufacturers and
distributors of custom framing products for aggregate consideration of
approximately $17.7 million in cash, resulting in goodwill and other intangible
assets of approximately $7.4 million.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of
operations data as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 29,
1996 1997 1998 1997 1998
----- ----- ----- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 57.8 56.7 56.7 57.2 56.9
----- ----- ----- ----- -----
Gross profit........................... 42.2 43.3 43.3 42.8 43.1
Operating expenses....................... 32.1 33.2 34.3 32.4 35.0
Restructuring charges.................... -- -- 0.6 -- 0.1
----- ----- ----- ----- -----
Operating income....................... 10.1 10.1 8.4 10.4 8.0
Cost of cancelled initial public
offering............................... -- -- 0.3 -- --
Interest income.......................... -- -- -- -- (0.5)
Interest expense......................... 2.2 2.8 3.1 2.2 6.8
----- ----- ----- ----- -----
Income before provision for income
taxes and minority interest......... 7.9 7.3 5.0 8.2 1.7
Provision for income taxes............... 1.2 0.9 1.1 0.9 1.0
Minority interest........................ 0.1 -- 0.1 0.1 0.2
----- ----- ----- ----- -----
Net income..................... 6.6% 6.4% 3.8% 7.2% 0.5%
===== ===== ===== ===== =====
Adjusted EBITDA................ 11.8% 12.0% 12.2% 12.9% 10.2%
===== ===== ===== ===== =====
</TABLE>
The preparation of unaudited interim financial results requires Albecca's
management to make estimates and assumptions that affect the amounts reported in
the interim financial results. Historical results are not necessarily indicative
of the results to be expected in the future and results for the interim periods
are not necessarily indicative of results for the entire year.
First Three Months of 1999 Compared to First Three Months of 1998
Net Sales. Net sales were $103.6 million in the first three months of 1999
compared to $103.0 million in the comparable period in 1998. U.S. net sales
increased 5.7% in the first three months of 1999 from the comparable period in
1998 and International net sales decreased 3.8% in the same period. The increase
in U.S. net sales primarily resulted from the impact of the four acquisitions
completed in 1998
14
<PAGE> 21
and an estimated $4.5 million increase in sales to independent custom framing
retailers, offset by an estimated $1.6 million decrease in sales to framing
departments of craft chains. The decrease in International net sales resulted
primarily from the closure of the United Kingdom plastic moulding manufacturing
operations.
Cost of Sales. Cost of sales was $58.9 million in both the first three
months of 1999 and in the comparable period in 1998. In the U.S., gross profit
margin increased to 45.4% in the first three months of 1999 from 45.2% in the
comparable period in 1998. This increase was primarily the result of an
improvement in the product mix sold. International gross profit margin increased
to 40.9% in the first three months of 1999 from 40.8% in the comparable period
in 1998.
Operating Expenses. Operating expenses were $36.2 million in the first
three months of 1999 compared to $33.3 million in the comparable period in 1998.
In the U.S., operating expenses as a percentage of net sales increased to 35.0%
in the first three months of 1999 from 32.1% in the comparable period in 1998.
This increase is primarily attributable to the delay in fully integrating the
four U.S. acquisitions completed during 1998. International operating expenses
as a percentage of net sales increased to 34.9% in the first three months of
1999 from 32.7% in the comparable period in 1998, mainly due to the decrease in
net sales associated with the closure of the United Kingdom manufacturing
facility, the integration of an acquisition and increased operating costs
primarily in two international locations.
Restructuring Charges. During the quarter ended November 29, 1998, Albecca
recorded additional restructuring charges of $0.1 million related to its fiscal
1998 restructuring plan associated with travel costs of approximately $70,000
directly related to the integration of the closed U.S. duplicate facilities into
other existing facilities as well as labor and other related costs of
approximately $47,000 incurred during the process of relocating property and
equipment to other existing facilities. During this quarter, the Company paid
amounts aggregating approximately $242,000 related to the restructurings,
including approximately $108,000 related to travel costs and labor costs
incurred in association with the integration of the duplicate facilities,
approximately $100,000 associated with severance and other termination benefits
paid to team members and approximately $34,000 associated with lease termination
fees. No restructuring charges were recorded during the first quarter of fiscal
1998. Albecca expects to incur an additional $0.2 million in restructuring costs
related to these closures during the second quarter of 1999. The additional
costs of $200,000 relate to incremental costs directly related to the
integration of the closed duplicate facilities into other existing facilities.
With respect to the closure of Albecca's plastic moulding manufacturing
operations in the United Kingdom, as of November 29, 1998, all 59 team members
had been terminated. The owned facility had not yet been sold and was still
being actively marketed. The leased facility had not yet been subleased.
With respect to the closure of Albecca's sole distribution operations in
Greece, as of November 29, 1998, 13 of the 14 team members remained at the
facility to complete the Greece-related components of Albecca's fiscal 1998
restructuring plan. In December 1998, 8 team members were terminated.
With respect to Albecca's closure of its duplicate facilities in the U.S.,
as of November 29, 1998, the remaining duplicate facility had been closed and 2
out of 17 original team members remained employed to complete integration
functions which will be completed during the second quarter of fiscal year 1999.
Interest Expense. Interest expense was $7.1 million in the first three
months of 1999 compared to $2.3 million in the comparable period in 1998. The
increase in interest expense is primarily due to an increase in debt and the
amortization of deferred financing costs associated with the August 1998 senior
subordinated debt placement.
Interest Income. Interest income was $0.6 million in the first three
months of 1999. This interest income resulted from the investment of cash
remaining from the August 1998 senior subordinated debt placement.
Adjusted EBITDA. Adjusted EBITDA is defined as operating income plus
depreciation, amortization excluding amortization of bond issue costs,
restructuring charges and certain infrequent costs. For the
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reasons set forth above, Adjusted EBITDA was $10.3 million, in the first three
months of 1999 compared to $13.3 million in the comparable period in 1998.
Adjusted EBITDA for the first three months of 1999 excludes restructuring
charges of $0.1 million.
1998 Compared to 1997
Net Sales. Net sales were $381.1 million in 1998 compared to $354.1
million in 1997. This increase is primarily a result of internal growth, the
acquisition of six manufacturers and distributors of custom framing products in
1998, the impact of the six acquisitions completed during 1997 and the expansion
of Albecca's lines of premium branded products, partially offset by changes in
currency. Currency fluctuations in 1998 reduced net sales by $8.7 million,
primarily due to a strengthening of the U.S. dollar against the German Mark,
Dutch Guilder, Australian dollar and Canadian dollar. U.S. net sales increased
12.2% in 1998 from 1997 and, on a constant currency basis, International net
sales increased 8.7% in the same period. The increase in U.S. net sales
primarily resulted from the acquisition of four distributors of custom framing
products and an estimated $10.0 million increase in sales to independent custom
framing retailers, offset by an estimated $8.5 million decrease in sales to
framing departments of craft chains. The increase in International net sales
resulted primarily from the acquisition of two manufacturers and distributors of
custom framing products in 1998 and the impact of the six International
acquisitions completed during 1997.
Cost of Sales. Cost of sales was $216.1 million in 1998 compared to $200.8
million in 1997, primarily as a result of increased net sales. In the U.S.,
gross profit margin decreased to 46.0% in 1998 from 46.7% in 1997. This decrease
was primarily the result of lower gross profit margins on products sold by
acquired businesses. This decrease was partially offset by an improvement in the
product mix sold and a 7.5% increase in the cost the U.S. sampling program
resulting from an increased pace of premium moulding line introductions and the
expansion of the independent retailer customer base. International gross profit
margin increased to 40.8% in 1998 from 40.3% in 1997, primarily due to Albecca's
success in leveraging its buying power with existing suppliers, sourcing of
products from additional vendors and the consolidation of certain international
activities, including distribution centers and manufacturing facilities.
Operating Expenses. Operating expenses were $130.8 million in 1998
compared to $117.7 million in 1997. The increase in operating expenses is
primarily attributable to the acquisition of six manufacturers and distributors
of custom framing products during 1998, representing an estimated $12.0 million,
and operating expenses for the six acquisitions completed during 1997. In the
U.S., operating expenses as a percentage of net sales increased to 32.1% in 1998
from 31.9% in 1997. This increase was primarily due to an estimated $1.0 million
increase in spending for marketing programs, including the consumer advertising
program, as well as $2.1 million of infrequent costs associated with the
integration of four acquired distributors of custom framing products and with
upgrading Albecca's information systems, including Year 2000 compliance, offset
by improved efficiencies throughout Albecca's U.S. distribution network.
International operating expenses as a percentage of net sales increased to 36.4%
in 1998 from 34.4% in 1997, primarily due to the acquisition of two
manufacturers and distributors of custom framing products which had higher
operating expenses as a percentage of net sales, as well as $1.4 million in
infrequent costs primarily related to the integration of existing and acquired
facilities.
Restructuring Charges. In June 1998, Albecca initiated a plan to close its
plastic moulding manufacturing operations located in the United Kingdom and
recorded a charge to operations of approximately $1.8 million. The plan to close
the operations was adopted as it was not able to achieve acceptable operating
results; therefore, Albecca made a decision to focus its energies and resources,
both financial and managerial, on the more profitable custom picture framing
market. This charge included $45,000 for the write-down of one of its
facilities, which is owned, to estimated realizable value from the future sale
of the building, $230,000 related to severance and other termination benefits
for 59 team members terminated in connection with this plan, $465,000 of lease
termination and exit costs, and $730,000 for the write-off of non-current
assets. The $465,000 of lease termination and exit costs represents Albecca's
estimated future obligations under the existing lease commitments of its closed
leased facility net of estimated recoverable costs through subleasing. The
write-off of non-current assets is related
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primarily to machinery and equipment used in the manufacturing of plastic
moulding which was dismantled and will not be sold nor used by Albecca due to
direct competitive pressures of plastic moulding on traditional moulding lines
in the United Kingdom. This charge also included additional reserves for
uncollectable accounts receivable of $330,000 which have been included in
operating expenses in the accompanying consolidated statement of operations for
the year ended August 30, 1998. In the opinion of management, these additional
reserves for uncollectible accounts receivable are a direct result of its
decision to close down these operations and its communication of the closure,
since, with the closure, the Company forfeited the collection leverage inherent
in the customers need for future products from the Company. The determination of
the uncollectible accounts receivable was based on a customer by customer review
by management after communicating its closure decision to each of these
customers. As of August 30, 1998, 2 of the original 59 team members remained to
finalize shut-down issues, which included the sale of its owned facility, the
subletting of its leased facility, the collection of receivables and the
maintenance of both its leased and owned facilities.
During the fourth quarter of 1998, Albecca initiated a plan to close its
sole distribution facility in Greece and recorded a charge to operations of
approximately $694,000. Management elected to close the operations in Greece
following a series of underperforming quarters versus the other European
operations at which time management determined that Albecca's resources, both
financial and managerial, would be more effectively invested in operations with
a greater potential return. This charge included severance costs for 14 team
members aggregating $79,000, write-off of goodwill of $333,000, additional
reserves for uncollectable accounts receivable of $178,000 and other exit costs
of approximately $104,000, including post-closing maintenance costs, lease
disposal costs, and legal fees directly related to the closure of the Greek
operations. The charge related to the additional reserves for uncollectable
accounts receivable has been included in operating expenses in the accompanying
consolidated statement of operations for the year ended August 30, 1998. In the
opinion of management, these additional reserves for uncollectible accounts
receivable are a direct result of its decision to close down these operations
(and its communication of the closure) since, with the closure, the Company
forfeited the collection leverage inherent in the customers need for future
products from the Company. In consultation with its attorneys, Albecca
determined in many cases that the cost of collection would significantly exceed
any expected return. This situation was one of the material factors in Albecca's
determination to close the business and was supported by a specific analysis of
each customer prior to and following the disclosure of the closing. As of August
30, 1998, the 14 team members remained at the facility to sell remaining assets,
collect existing receivables and clean up the facility in preparation of its
closure. Management anticipates that the plan of closure will be completed prior
to June 1999.
Additionally, during the fourth quarter of 1998, Albecca initiated a plan
to close two duplicate facilities in the U.S., and recorded a charge to
operations of approximately $276,000 related to these closures, primarily
consisting of $234,000 for severance and other termination benefits of 17 team
members. These were existing facilities operated by Albecca, but as a result of
recent acquisitions in their geographic areas were deemed to be duplicative and
thus the decision for closure was made by management. As of August 30, 1998, 15
of the 17 original team members had not yet been terminated; although management
anticipates that the remaining team members will be terminated prior to the end
of fiscal year 1999. In addition as of August 30, 1998, one of the two duplicate
facilities had been integrated with an existing facility.
Excluding non-cash charges consisting of a $333,000 write-down of goodwill
and a $775,000 write-down of the owned building and fixed assets, which were
recorded directly against the related assets, $258,000 was paid during the
fourth quarter of 1998, composed of $216,000 in severance and other termination
benefits and $42,000 in travel, post-closing maintenance, and relocation costs
of property and equipment directly associated with the restructuring plan.
Albecca expects all components of its fiscal 1998 restructuring plan to be
completed by the end of fiscal year 1999.
Albecca believes that the fiscal 1998 restructuring plan will not have a
material impact on the future operations, financial condition or liquidity of
the Company.
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Costs of Cancelled Initial Public Equity Offering. In July 1998, Albecca
cancelled a planned initial public equity offering of its common stock. As a
result of the decision not to complete the offering, Albecca wrote off the
associated expenses incurred of approximately $1.3 million which included costs
related to SEC filing fees, accounting and legal fees, and printing costs
directly attributable to the cancelled initial public equity offering.
Interest Expense. Interest expense was $11.9 million in 1998 compared to
$9.7 million in 1997. The increase in interest expense is primarily due to $28.1
million of additional indebtedness incurred in connection with the acquisition
of six manufacturers and distributors of custom framing products during 1998.
Adjusted EBITDA. For the reasons set forth above, Adjusted EBITDA was
$46.4 million in 1998 compared to $42.5 million in 1997. Adjusted EBITDA for the
year ended August 30, 1998 excludes restructuring charges of $2.3 million and
infrequent costs of $5.2 million.
1997 Compared to 1996
Net Sales. Net sales were $354.1 million in 1997 compared to $300.8
million in 1996. This increase is primarily a result of internal growth, the
acquisition of six manufacturers and distributors of custom framing products in
1997, the impact of the ten acquisitions completed during 1996 and the expansion
of Albecca's lines of premium branded products, partially offset by changes in
currency. Currency fluctuations in 1997 reduced net sales by $9.3 million,
primarily due to a strengthening of the U.S. dollar against the French Franc and
Dutch Guilder. U.S. net sales increased 1.9% in 1997 from 1996 and, on a
constant currency basis, International net sales increased 46.1% in the same
period. The increase in U.S. net sales is primarily due to an estimated $6.3
million increase in sales to independent custom framing retailers, partially
offset by an estimated $5.7 million decrease in sales to framing departments of
craft chains. The increase in International net sales resulted primarily from
the acquisition of six manufacturers and distributors of custom framing products
in 1997 and the impact of the ten International acquisitions completed during
1996.
Cost of Sales. Cost of sales was $200.8 million in 1997 compared to $174.0
million in 1996, primarily as a result of increased net sales. In the U.S.,
gross profit margin increased to 46.7% in 1997 from 44.0% in 1996. This increase
was primarily the result of an improvement in the product mix, partially offset
by a 16.0% increase in the cost of the U.S. sampling program resulting from an
increased pace of premium moulding line introductions and the expansion of the
independent retailer customer base. International's gross profit margin
increased to 40.3% in 1997 from 40.0% in 1996. The six acquisitions completed in
1997 did not have a significant impact on gross margin.
Operating Expenses. Operating expenses were $117.7 million in 1997
compared to $96.6 million in 1996. The increase in operating expenses is
primarily attributable to the acquisition of six manufacturers and distributors
of custom framing products during 1997, representing an estimated $11.1 million,
the impact of operating expenses from the ten acquisitions completed during 1996
and a $1.5 million investment in the U.S. consumer advertising program which
commenced in September 1996. In the U.S., operating expenses as a percentage of
net sales increased to 31.9% in 1997 compared to 31.0% in 1996. This increase
was primarily due to the $1.5 million investment in the U.S. consumer
advertising program, partially offset by improved efficiencies throughout
Albecca's U.S. distribution network. International operating expenses as a
percentage of net sales increased to 34.4% in 1997 from 33.4% in 1996, primarily
due to acquisition of six manufacturers and distributors of custom framing
products which had higher operating expenses as a percentage of net sales.
Interest Expense. Interest expense was $9.7 million in 1997 compared to
$6.8 million in 1996. The increase in interest expense is primarily due to $18.4
million of additional indebtedness incurred in connection with the acquisition
of six manufacturers and distributors of custom framing products during 1997.
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Adjusted EBITDA. For the reasons set forth above, Adjusted EBITDA was
$42.5 million in 1997 compared to $35.5 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $30.6 million, $22.2 million,
$15.8 million and $1.9 million in 1996, 1997, 1998 and for the first three
months of 1999, respectively. Albecca's primary cash requirements have been to
fund working capital, capital expenditures and acquisitions. Albecca has
generally used internally generated funds and amounts available under its bank
credit facilities as its primary sources of liquidity. Net cash used in
investing activities is primarily used for the acquisition of manufacturers and
distributors of custom framing products. Albecca invested $34.1 million for
acquisitions in 1996, $18.4 million for acquisitions in 1997, $28.1 million for
acquisitions in 1998 and $3.6 million for acquisitions in 1999.
Capital expenditures, excluding acquisition costs, were $5.5 million, $7.7
million, $8.4 million and $0.6 million in 1996, 1997, 1998 and for the first
three months of 1999, respectively. Albecca's historical capital expenditures
have been primarily used to expand its distribution network, enhance management
information systems and improve manufacturing efficiencies.
At November 29, 1998, Albecca had outstanding indebtedness of approximately
$265.0 million, consisting of $200.0 million in principal amount of the notes
and $65.0 million of other indebtedness. See "Risk Factors -- Substantial
Leverage and Shareholders' Deficit." Albecca's primary sources of liquidity will
be cash flow from operations and its available cash and cash equivalents of
$48.5 million. Albecca's liquidity needs following the Offering will relate
primarily to payment of principal and interest on outstanding indebtedness,
primarily constituting principal and interest on the notes, the funding of
capital expenditures, working capital, acquisitions and the funding of
distributions to Albecca's shareholders to pay income taxes as a result of its
status as an S corporation.
Albecca's ability to make scheduled payments of the principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness, including the notes, or to fund planned capital or other
expenditures will depend on its future financial or operating performance, which
will be affected by prevailing economic conditions and financial, business and
other factors, many of which are beyond its control. Based upon the current
level of operations, management believes that cash flow from operations and
available cash and cash equivalents will be adequate to meet Albecca's
anticipated future requirements for working capital, capital expenditures,
scheduled payments of principal and interest on its indebtedness, including the
notes, and acquisitions at least until the end of fiscal 1999. There can be no
assurance that Albecca's business will generate sufficient cash flow from
operations or that future borrowings will be available in an amount sufficient
to enable Albecca to service its indebtedness, including the notes, or to make
anticipated capital and other expenditures.
Albecca's Foreign Subsidiaries have outstanding indebtedness under various
foreign credit facilities, term notes and purchase money financing obligations,
which had an aggregate outstanding balance of $59.7 million as of November 29,
1998. Indebtedness of the Foreign Subsidiaries is effectively senior to the
notes and the Subsidiary Guarantees.
The largest of Albecca's foreign credit facilities is the $7.5 million
credit facility entered into by Larson-Juhl Canada Ltd. ("L-J Canada") to fund
its Canadian operations (the "Canadian Facility"). Borrowings under the Canadian
Facility bear interest at rates ranging from LIBOR plus 0.75% to the Canadian
prime rate and become due in August 2000. The Canadian Facility is secured by
all of the assets of L-J Canada. The Canadian Facility is subject to certain
customary financial and other covenants, including without limitation:
(1) financial reporting;
(2) funded indebtedness to total capitalization ratios;
(3) leverage ratio;
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(4) tangible net worth; and
(5) limitations on indebtedness, contingent obligations, liens, loans,
repayments of intercompany indebtedness, dividends, advances, investments,
acquisitions, mergers and sale of assets.
As of August 30, 1998 and November 29, 1998, approximately $0.3 million and $2.3
million was outstanding under the Canadian Facility, respectively.
Albecca's other foreign revolving credit facilities and term notes include
a series of credit facilities used to finance working capital needs and
acquisitions in the respective countries in which Albecca operates. These
facilities range in size from less than $100,000 to $3.6 million. The
indebtedness under these facilities generally bears interest at rates ranging
from 2.0% to 19.0% per annum (as of August 30, 1998) and matures on various
dates ranging through September 2017. Certain of these facilities are secured by
assets of the respective borrowers, including accounts receivable, inventory,
property or capital stock, and are generally subject to certain customary
financial and other covenants, including limitations on repayment of
intercompany indebtedness and payment of dividends.
Total foreign revolving facilities provide Albecca with additional
borrowings of up to $17.4 million as of August 30, 1998.
As of the date of this prospectus, Albecca does not have a bank credit
facility in place to fund its U.S. operations, although Albecca plans to enter
into a senior bank credit facility to finance future working capital needs,
capital expenditures and complementary acquisitions. At present, Albecca has not
entered into any agreements, commitments or understandings with respect to such
a credit facility. The Indenture will permit Albecca and the Subsidiary
Guarantors to incur additional indebtedness, including Senior Debt, subject to
certain limitations.
Albecca from time to time reviews and will continue to review acquisition
opportunities as well as changes in the capital markets. If Albecca were to
consummate a significant acquisition or elect to take advantage of favorable
opportunities in the capital markets, Albecca may supplement availability or
revise the terms under its credit facilities or undertake public or private
offerings of equity or debt securities. At present, Albecca has not entered into
any agreements, commitments or understandings with respect to such a credit
facility. Moreover, there can be no assurances that Albecca will be able to
obtain such financing in the amounts or at the times such financing may be
required, or that, if obtained, any such financing would be on acceptable terms.
See "Risk Factors -- Liquidity and Need for Additional Financing."
EXCHANGE RATES
Albecca is affected by the movement of currencies in the 19 foreign
countries in which it operates. Albecca's results of operations and financial
condition may be adversely affected by fluctuations in foreign currencies and by
translations of the financial statements of Albecca's International operations
from local currencies into U.S. dollars. Albecca addresses this exposure by
financing most funding needs in the applicable foreign currencies. In addition,
the exposure is further mitigated by each of the International operations
transacting business primarily in its local currency.
YEAR 2000 COMPLIANCE
Albecca has initiated a program to assess the impact of Year 2000
compliance on its information technology systems and its non-information
technology systems and has formulated a plan to address business disruption
associated with potential date processing problems.
Through its assessments, Albecca has identified potential Year 2000 issues
in its IT systems, both hardware and software and in its non-IT systems. Albecca
is in the process of addressing these deficiencies through upgrades,
replacements, specific enhancements and other corrective measures. Albecca
expects to complete remediation of its material IT systems no later than August
1999. In connection with its non-IT systems, which are building security,
heating, ventilation and air conditioning, and other equipment with date
sensitive operating controls, Albecca is in the process of identifying those
items which may require
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replacement or upgrading. Albecca expects to complete testing and correcting the
date sensitive non-IT systems by September 1999.
Albecca has initiated inquires of third parties, such as customers, vendors
and lessors with whom Albecca has significant business relationships, to assess
their state of addressing Year 2000 issues that will materially and adversely
impact Albecca. Albecca has just begun requesting that significant business
relationships respond in writing to Albecca's Year 2000 compliance inquiries
that they will be Year 2000 compliant by the end of 1999. Albecca plans to
continue to assess its significant third party business relationships' efforts
in addressing Year 2000 issues through other techniques as it deems appropriate.
Despite Albecca's efforts, there can be no guarantee that the systems of other
companies which Albecca relies upon to conduct its business will be Year 2000
compliant. Currently Albecca is not using any independent verification or
valuation processes, and Albecca currently believes that will not become
necessary.
Albecca estimates that it will incur expenses of $800,000 to $1.1 million
in conjunction with the Year 2000 compliance project. As of November 29, 1998,
Albecca has spent approximately $700,000 in connection with this project. The
majority of these expenditures have been and will be expensed as incurred.
The estimated dates of completion and costs of the Year 2000 initiatives
are based on management's best estimate. However, there can be no guarantees
that these estimates will be achieved, and actual results could differ
materially from those plans.
Albecca believes that its most reasonably likely worst case Year 2000
scenario would be a failure by a significant third party in supplying Albecca
products and services it needs to conduct its day-to-day operations. This risk
is not limited to its vendors but also includes, without limitation, utilities
or other general service providers or government entities. Albecca is focusing
its remedial efforts on those factors which it can reasonably be expected to
have influence upon. The extent of lost revenue as a result of such scenarios
cannot be estimated at this time.
Albecca has not yet completed its planning and preparation to handle the
most likely worst case scenarios described above. Albecca intends to develop
contingency plans for these scenarios by May 31, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of the impact of recent accounting pronouncements, see
Albecca's consolidated financial statements and the related notes thereto which
are included elsewhere in this prospectus.
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BUSINESS
OVERVIEW OF ALBECCA'S BUSINESS
Albecca, which primarily does business under the Larson-Juhl name, is a
worldwide leader in the custom framing industry. Albecca designs, manufactures
and distributes a complete line of high quality, branded custom framing
products, including wood and metal moulding, matboard, foam board, glass,
equipment and other framing supplies. Albecca's principal brands include the
"Larson-Juhl Classic Collection" and the "Craig Ponzio Signature Collection."
For over 100 years, Albecca has been designing, manufacturing and distributing
custom framing products that enhance the aesthetic qualities of prints,
paintings, drawings and other art and memorabilia. By combining traditional
craftsmanship with modern manufacturing technology, Albecca creates frames
characterized by distinctive design and superior quality. Albecca has attained
its worldwide leadership position by offering a complete selection of quality
branded products and outstanding service to its retail custom framing customers
and, more recently, by increasing awareness of its products through consumer
advertising.
Albecca believes it is a market leader in the United States and Canada and
estimates that it holds a leading market position in the other countries in
which it operates. Albecca believes it has achieved its leading market position
by combining innovative design of premium, branded products, a complete line of
quality products, global leadership in sales and customer service and
cost-efficient manufacturing and distribution. These competitive strengths have
made the Larson-Juhl brand one of the most globally recognized names in the
custom framing industry. Albecca believes that consumers are placing an
increased emphasis on the home, its decor and the expression of individual
style, which will contribute to the growth of the custom framing market. To
capitalize on this trend, Albecca's business strategy is focused on continuing
to introduce premium, branded product collections, increasing product and brand
awareness through consumer advertising, increasing sales penetration to retail
custom framers, improving profitability of operations and pursuing complementary
acquisitions.
Albecca conducts its operations through 77 locations in 20 countries. In
North America, Albecca operates four moulding and frame manufacturing plants and
29 light manufacturing/distribution centers. Internationally, Albecca operates
16 moulding and frame manufacturing plants and 36 light
manufacturing/distribution centers. In North America, Albecca's primary
customers are retail custom framers. In Europe, Albecca primarily serves retail
custom framers and home decorating centers.
Craig Ponzio, Albecca's Chairman, President, Chief Executive Officer and
principal shareholder joined Larson Picture Frame, Inc. in 1973 and purchased
that company in 1981. In 1988, Larson Picture Frame, Inc. acquired Juhl-Pacific
Corporation creating Larson-Juhl. Following the 1981 acquisition, the management
team initiated a program to expand Albecca's product lines, develop an
organizational infrastructure, and acquire and consolidate manufacturers and
distributors of custom framing products.
THE CUSTOM FRAMING INDUSTRY
While art work has been framed by hand for centuries, the custom framing
industry began in the 1890s with the development of special clamps, mat cutters
and other framing equipment. The real growth of the industry began in the 1970s
with the advent of technological advances in equipment and distribution
processes, which decreased the custom framer's barrier to entry and allowed an
increasing number of entrepreneurs to start custom framing businesses. These
trends paralleled the continuing growth of an economically strong middle class
seeking to decorate their homes with art work, photographs and other personal
items. Today the industry in North America includes approximately 20,000 retail
custom frame store fronts and over 300 manufacturers and distributors of custom
framing products. Independent custom framers currently account for approximately
89% of custom framing sales in North America. The remaining 11% of sales are
principally generated by custom framing departments of craft chains and
franchise operations. Outside North America, Albecca estimates there are over
20,000 retail custom frame store fronts and over 500 manufacturers and
distributors of custom framing products. Albecca estimates that sales to retail
custom framers in 1998 were approximately $1.2 billion in North America.
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Albecca believes the industry will grow as consumers place greater emphasis
on the home and its decor. Albecca believes this trend is contributing to the
growth of the custom framing industry and, when combined with Albecca's consumer
advertising program, will allow Albecca to help generate increased consumer
awareness and sales of custom framing products.
Historically, due to inventory and cost limitations, retail custom framers
were unable to offer a wide selection of products and instead marketed
themselves as craftsmen. Today, with advances in technology and distribution
processes, the retail custom framer is able to rely on manufacturers and
distributors to provide a wide assortment of framing products and supplies on a
just-in-time basis. Because custom framers are now able to offer a full line of
branded products without inventory limitations, the retail custom framing
industry is less dependent on technical ability than on design and marketing
skills. Albecca believes this shift will continue to benefit manufacturers and
distributors, such as Albecca, that are able to provide fast delivery of a
complete line of custom framing products as well as assist retail custom framers
with merchandising, design and selling strategies.
OUR PRODUCTS
Albecca designs, manufactures and distributes a complete line of quality
branded custom framing products, including wood and metal moulding, matboard,
foam board, glass, equipment and other framing supplies. This product offering
allows Albecca to be a complete source supplier to retail custom framers.
Albecca offers over 8,000 branded products in North America and over 17,000
additional branded products in the rest of the world. Of Albecca's worldwide
products, over 12,000 are branded custom frame wood moulding products. Albecca
believes it offers the widest variety of products for the retail custom framer
in the industry.
The following illustration depicts a completed custom frame, utilizing a
variety of framing products sold by Albecca:
[GRAPHIC]
WOOD MOULDING
Albecca is one of the world's largest manufacturers and suppliers of wood
moulding to the custom framing industry, based upon sales. Albecca provides
branded custom moulding in a variety of shapes, sizes, finishes and forms to
meet each customer's specific needs. Albecca's finishes include water gilded
gold leaf, naturally stained North American hardwoods, genuine European burlwood
and hand applied beeswax, as well as a variety of finishes inspired by antique
frames and furniture. The styles of these wood mouldings range from contemporary
geometric shapes to heavily embossed Baroque patterns. With a variety of widths
and styles available, multiple mouldings can be used within a single frame to
create thousands of framing combinations. Custom framers purchase moulding from
Albecca in a variety of formats including:
(1) long lengths of moulding which the framers cut to size;
(2) moulding cut to specific lengths (chop service); and
(3) moulding assembled as a completed frame (join service).
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Albecca's design team has created each of its over 1,100 branded wood
mouldings in North America. Most of Albecca's wood moulding products are
produced either in Albecca's plants in the U.S., Canada, Europe and South
Africa, or by third-party manufacturers in Europe and Asia that have devoted a
significant amount of their capacity to producing Albecca's high quality,
proprietary moulding products. See "-- Selective Manufacturing and Sourcing."
Albecca markets its wood moulding under the "Larson-Juhl Classic
Collection" and the "Craig Ponzio Signature Collection" brand names. Each
collection consists of a series of lines designed to evoke a particular era,
location, style or culture. The "Craig Ponzio Signature Collection" contains
Albecca's finest lines of wood moulding, allowing Albecca to market
differentiated products to multiple segments of the custom framing industry. See
"-- Emphasis on Design."
METAL MOULDING
Albecca distributes approximately 1,000 different branded metal mouldings
worldwide. Sales of these mouldings predominantly require chop service, as
retail custom framers generally do not have the equipment necessary to cut metal
moulding. Albecca markets one proprietary line of metal moulding, Clark, which
is one of the market leaders in metal moulding.
MATBOARD AND FOAM BOARD
Albecca sells matboard, which is cut to surround the art work and used
inside the frame, and foam board, which is used as a firm backing for certain
art work and other items to be framed. Albecca sells all major brands of
matboard and foam board to meet the preferences of retail custom framers. As
consumers have become increasingly concerned about preserving framed items
against discoloration and damage, certain premium conservation types of matboard
and foam board have been developed. In 1997, Albecca launched its own
proprietary line of premium conservation matboard, under the Artique brand name,
in an effort to promote this trend of preservation framing.
GLASS, EQUIPMENT AND OTHER FRAMING SUPPLIES
Albecca supplies a variety of glass types, generally priced based on
differing levels of ultraviolet filtering properties and reflectivity. Albecca
also sells a full complement of custom framing equipment and supplies as a
convenience to its customers. This selection includes joining machines, matboard
cutters and framing hardware. Albecca's net sales of custom framing equipment
have not been material. All of the glass, equipment and other framing supplies
sold by Albecca are produced by third-party manufacturers.
OUR SALES AND MARKETING STRATEGY
Albecca markets its products to custom frame shops principally through
Albecca-employed sales representatives, advertisements in trade magazines and
attendance at industry trade shows. Albecca also markets to consumers by
advertising in widely-distributed magazines that Albecca considers influential
among consumers and decorators, as well as through the use of direct mail
materials and in-store promotional displays. Through educational seminars and
consultations with Albecca's sales team, Albecca also provides technical,
marketing and other business advice both to established retail custom framers
and to prospective customers establishing new custom framing businesses.
Albecca's sales representatives update customers on Albecca's product
lines, advise customers on framing design and provide information on more
effective merchandising, design and selling techniques. Sales representatives
assist retail custom framers in redesigning their frame sample display walls.
Albecca's direct sales force also works with retail custom framers to help them
create and sell more sophisticated custom frames, and thereby increase the
average price per frame. The sales representatives also listen carefully to the
retail custom framers in order to understand and respond to issues concerning
Albecca's products, trends in consumer demand and competitive activities in the
marketplace. Sales representatives are employed by Albecca and compensated
principally by salary, with commission and bonus components available based on
sales and other performance criteria.
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<PAGE> 31
Albecca establishes a local presence by consolidating both the sales and
operations functions in each distribution center under the supervision of a
general manager. This decentralization of management has allowed most sales and
distribution issues to be decided at the local level, thereby improving the
level and speed of service provided to customers. Albecca believes the skill and
experience of its general managers has contributed to Albecca's ability to build
personal relationships with its retail custom framers.
Albecca markets to the retail custom framer directly through catalogs and
sales literature and through publicity and advertising in trade publications
such as Art Business News, Art World News, Art Expressions, Decor, der
Kunsthandel, Picture Framing Magazine and The Picture Business. These
advertisements generally focus on Albecca's image and the introduction of new
premium branded products.
Albecca has embarked on an aggressive plan to increase consumer awareness
and appreciation of the value of custom framing in general, and specifically,
Albecca's premium branded products. Albecca believes consumers are more likely
to perceive value in premium branded products. In 1996, Albecca began to
extensively advertise its branded products in well-known publications that
Albecca considers influential among consumers and decorators in the home
furnishing industry, such as Architectural Digest, Elle Decor, House and Garden,
House Beautiful, Metropolitan Home and Traditional Home. Albecca believes it is
the only manufacturer and distributor of custom framing products marketing its
products through a national consumer advertising program. These advertisements
portray the warmth and individuality custom frames can add to a home. Through
these advertisements, Albecca targets sophisticated consumers with the economic
power to purchase its high quality, premium branded products. In addition,
Albecca provides its customers with direct mail literature as well as
advertisements suitable for inclusion in local publications.
EMPHASIS ON DESIGN
Albecca's goal is to develop and produce the best-designed products in the
industry. Albecca believes that quality designs not only will increase consumer
interest in its own products, but will also help to lead the entire industry to
improve design quality and thereby attract more consumers to custom framing. Led
by Mr. Ponzio, Albecca's design team extensively researches and studies
furniture, architectural and historical design elements and art and decorating
trends from around the world. Albecca incorporates these elements into branded
product lines introduced under one of Albecca's moulding collections.
Mr. Ponzio is Albecca's chief designer and provides leadership in all
aspects of the design process. Mr. Ponzio's 25 years of design experience are
complemented by the other members of the corporate design team, who have an
average of 17 years of design experience in the custom framing industry. The
corporate design team works in collaboration with designers in each of Albecca's
manufacturing facilities to create mouldings that bring together the best in
design with the manufacturing strengths of a particular facility. By combining
their creative vision with Albecca's commitment to developing high-quality
products, the entire design team strives to understand what consumers desire and
which designs are most likely to be commercially viable.
Albecca designs all of its wood moulding collections and the Clark
collection of metal moulding. In addition, Albecca recently introduced Artique,
its first proprietary matboard design. The team creates products which are
manufactured both by Albecca as well as by third-party manufacturers.
Traditionally, the time involved from design and conception to production of a
new product line is approximately six months.
Listed below is a brief description from Albecca's marketing materials of
recent introductions of wood moulding lines under the "Craig Ponzio Signature
Collection:"
<TABLE>
<CAPTION>
NAME DESCRIPTION YEAR INTRODUCED
---- ----------- ---------------
<S> <C> <C>
Aubusson........................... Inspired by artfully woven French 1998
rugs, Aubusson reflects the
delicate detail, carefully crafted
color and design of antique French
tapestries.
</TABLE>
25
<PAGE> 32
<TABLE>
<CAPTION>
NAME DESCRIPTION YEAR INTRODUCED
---- ----------- ---------------
<S> <C> <C>
Castillano......................... The splendor of Spain is captured 1996
in this rich, bold, distinctive
moulding. The pleasing proportions
and beautifully embossed patterns
exude tradition and fine quality.
Cortona............................ Like a comfortable piece of antique 1998
furniture or an heirloom passed
down from generation to generation,
this collection of beautifully
patterned genuine burlwood evokes
the same feelings of antiquity.
Couleurs Provence.................. Harvested from the French 1998
countryside, this moulding captures
the authentic detailing of aged
wormwood, the classic colors of
Provence and the beauty of a
natural beeswax finish.
El Greco........................... This majestic, deeply embossed 1998
Spanish moulding is designed in the
style of the royal court during the
15th century. Our artisans
meticulously recapture the bold,
strong distinction of this regal
age.
Imperial........................... The grace and stately detail of 1996
17th century France lives again in
this collection of delicately
embossed profiles.
Kensington......................... The natural beauty and unique 1997
characteristics of authentic
mahogany and European burlwood
veneers give this collection a
sense of warmth and character that
stands the test of time.
Musee.............................. Our Master Guilders create this 1996
distinctive collection of beautiful
mouldings using the same
time-honored techniques of
hand-finished waterguilding that
began centuries ago.
Prado.............................. Seemingly lit from within, the 1997
dark, rich glow of this moulding
collection reflects the accumulated
age of the beautiful monasteries of
Old World Europe.
Stradivarius....................... The graceful shapes and rich 1997
finishes of the Stradivarius violin
served as the inspiration for this
exquisitely designed moulding
collection.
</TABLE>
26
<PAGE> 33
<TABLE>
<CAPTION>
NAME DESCRIPTION YEAR INTRODUCED
---- ----------- ---------------
<S> <C> <C>
Umbria............................. Borrowing its name from the 1998
tranquil Italian region, Umbria
embodies the strength, hand
craftsmanship and timeless
tradition of this region.
Vermeer............................ Named in honor of the Dutch master, 1998
Vermeer, these elegant, smooth
mouldings bring together classic
and modern influences to create a
collection that is the true work of
a master.
</TABLE>
SELECTIVE MANUFACTURING AND SOURCING
Although Albecca produces wood moulding in thirteen Albecca-owned
manufacturing plants, most of the wood moulding sold by Albecca is produced by
third-party manufacturers. Albecca does not have supply contracts with any of
these suppliers. However, as an industry leader in design, and as one of the
largest distributors of wood moulding to retail custom framers, Albecca has
developed close working relationships with many of these third-party
manufacturers who produce Albecca's proprietary products to its designs and
specifications. Many of these manufacturers have devoted a significant amount of
their capacity to the production of Albecca's high quality products. In addition
to moulding manufacturing plants, Albecca has seven pre-assembled frame
manufacturing plants in Europe and the U.S. Albecca distributes its products
from its light manufacturing/distribution centers. See "-- Comprehensive
Distribution System."
The following lists certain information regarding Albecca's manufacturing
facilities:
<TABLE>
<CAPTION>
NUMBER OF
COUNTRY PRODUCTS FACILITIES
------- -------- ----------
<S> <C> <C>
Austria.............................................. Mouldings 1
Canada............................................... Mouldings 2
Czech Republic....................................... Mouldings and Frames 2
Finland.............................................. Mouldings 1
France............................................... Mouldings and Frames 4
Germany.............................................. Frames 1
Italy................................................ Mouldings 1
Netherlands.......................................... Frames 1
Russia............................................... Frames 1
South Africa......................................... Mouldings 2
Sweden............................................... Mouldings 2
United States........................................ Mouldings and Frames 2
--
Total...................................... 20
</TABLE>
The wood moulding manufacturing process begins with raw board lumber, from
which the moulding is milled and then sanded to produce the finished profile.
Then a variety of staining, distressing and hand-applied finishing techniques
are used to produce the completed moulding. There are typically between eight
and 25 process steps involved in producing Albecca's high-quality wood moulding
products.
Wood, the principal raw material used in Albecca's manufacturing processes,
is purchased from a variety of suppliers in the U.S., Canada, Asia and Africa as
kiln-dried blanks or as raw lumber that is then dried by Albecca. The primary
types of wood used by Albecca are North American oak and ash, as well as
European pine. Albecca has long-standing relationships with many of its
suppliers and has experienced only limited difficulty in satisfying its raw
materials requirements. Although the loss of any supplier may have an adverse
effect on Albecca's short-term operating results, Albecca believes it could
replace suppliers without having a material adverse effect on Albecca. Over the
past three years, prices of Albecca's primary types of wood have remained
relatively stable.
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<PAGE> 34
Albecca does not manufacture any other products, but instead purchases them
from numerous other manufacturers and distributors. Albecca works with one
manufacturer to produce its proprietary line of Clark metal moulding. Albecca is
the only purchaser of metal picture frame moulding from this manufacturer.
Albecca also works with one manufacturer to produce its Artique brand of
matboard. Albecca generally does not have supply contracts with these suppliers,
but relationships with these suppliers to date have been satisfactory, on the
whole.
Albecca's manufacturing and sourcing staff oversees manufacturing and
production, negotiates purchases of raw materials and researches and identifies
new suppliers and third-party manufacturers. Albecca's products are manufactured
according to plans prepared each year which reflect prior years' experience,
current industry trends, economic conditions and Albecca's estimates of a
particular line's performance. Albecca separately negotiates with suppliers for
the purchase of required raw materials in accordance with Albecca's
specifications and limits its exposure to holding excess raw material inventory
by purchasing based on demand. Albecca believes that its policy of limiting its
commitments for purchases reduces its exposure to excess inventory and
obsolescence. Albecca is not responsible for procuring raw materials used by its
third-party manufacturers.
COMPREHENSIVE DISTRIBUTION SYSTEM
Albecca provides a complete line of framing materials and supplies, and
fills orders rapidly and dependably. By supplying a broad line of quality
products, Albecca offers retail custom framers numerous alternatives to meet the
individual tastes of consumers. Albecca has developed a user-friendly order and
fulfillment system in North America that includes features such as toll-free
telephone and fax ordering, customer service and technical representatives,
extended customer service hours, instant stocking information and next-day
shipping on most orders from Albecca's distribution centers. This system, and
advancements in framing technology, allow retail custom framers to offer
dependable service to their customers without requiring significant amounts of
capital to be tied up in inventory and equipment. This, in turn, allows
Albecca's customers to enhance their marketing by committing more of their shop
space to retail display and more of their time to designing and selling, and
less to back-room operations.
DISTRIBUTION IN NORTH AMERICA
A typical custom framing transaction in North America begins with an
Albecca retail custom framing customer helping a consumer determine the best way
to preserve, mount and display a work of art or personal item. Consumers select
the style and color of framing materials to suit their individual taste, aided
by displays of moulding samples and other framing materials. Then, the retail
custom framer determines the proper amount and dimensions of each kind of
material, such as moulding, matboard and glass, needed to complete the framing
and contacts Albecca's customer service center by telephone or fax to place the
order. After confirming the order and the customer's credit availability on
Albecca's integrated management information system, the order is automatically
printed or displayed at the distribution center closest to the customer. Upon
receiving the order, personnel in the distribution center pull the required
materials, cut the moulding to its required dimensions, if requested, join the
frame, if necessary, inspect and package the order. Depending on the location of
the customer, orders are either delivered by one of Albecca's delivery trucks or
by a package delivery company with the goal of shipping the order for delivery
the next business day. After receiving the order, the retail custom framer
completes the preparation of the materials and assembles the finished frame
using matboard cutters, glass cutters and moulding joiners.
Albecca distributes its products in North America through 29 distribution
centers. The number and location of these distribution centers make Albecca the
only manufacturer with a broad-based North American distribution network.
Albecca's Chicago and Los Angeles distribution centers also serve as
distribution hubs that receive and process container-size deliveries of
Albecca's products and ship smaller quantities of products, generally weekly, to
the other distribution centers based on customer demand.
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<PAGE> 35
In North America, Albecca operates distribution centers in the following
metropolitan areas:
Atlanta, Georgia
Boston, Massachusetts
Calgary, Alberta
Chicago, Illinois
Cincinnati, Ohio
Cleveland, Ohio
Dallas, Texas
Denver, Colorado
Detroit, Michigan
Edmonton, Alberta
Greensboro, North Carolina
Houston, Texas
Huntsville, Alabama
Lakeland, Florida
Los Angeles, California
Miami, Florida
Minneapolis, Minnesota
Montreal, Quebec
New Orleans, Louisiana
Newark, New Jersey
Philadelphia, Pennsylvania
Phoenix, Arizona
San Diego, California
San Francisco, California
Seattle, Washington
St. Louis, Missouri
Toronto, Ontario
Vancouver, British Columbia
Washington, D.C.
INTERNATIONAL DISTRIBUTION
Outside North America, Albecca has relied to date on the distribution
systems in place for the companies it has acquired, and is in the process of
integrating and rationalizing these systems. Albecca's goal for its
international operations is to develop a fast, user-friendly order-fulfillment
system that operates through a logistical network similar to the one existing in
North America. In order to realize this goal, Albecca has developed a central
distribution center in Germany to improve response to European framers as well
as to better control distribution costs. This center began operations in August
1998.
Albecca operates distribution centers from the following countries outside
of North America:
<TABLE>
<CAPTION>
NUMBER OF
COUNTRY FACILITIES
------- ----------
<S> <C>
Australia................................................... 6
Austria..................................................... 2
Belgium..................................................... 1
Czech Republic.............................................. 1
Finland..................................................... 1
France...................................................... 2
Germany..................................................... 1
Greece...................................................... 1
Italy....................................................... 1
Japan....................................................... 1
Korea....................................................... 1
Netherlands................................................. 4
New Zealand................................................. 3
Norway...................................................... 1
Russia...................................................... 1
South Africa................................................ 2
Sweden...................................................... 5
United Kingdom.............................................. 2
--
Total............................................. 36
</TABLE>
OUR CUSTOMERS
In North America, Albecca's target customers are the approximately 20,000
custom framing retail store fronts that serve middle to upper income consumers.
To date, Albecca has served approximately 90%
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<PAGE> 36
of these retail store fronts. Outside North America, Albecca targets the over
20,000 retail custom frame store fronts and home decorating centers.
OUR MANAGEMENT INFORMATION SYSTEM
Albecca believes that information and technology are essential to
maintaining its competitive position. Albecca's management information system is
designed to provide responsive and efficient order processing, inventory
control, financial reporting and management information for Albecca's sales,
marketing, procurement, distribution and financial analysis functions. Albecca's
management information system allows it to track inventory on a real time basis
throughout its North American distribution network. Albecca's North American
operations utilize J.D. Edwards' WorldSoftware release 7.3 software and IBM
Series 640-2239 hardware (AS400 series) which are supported at Albecca's
headquarters in Norcross, Georgia. In addition, Albecca has introduced an
electronic data interchange system to facilitate processing customer orders and
inventory replenishment. Albecca believes that substantially all of its
information systems are Year 2000 compliant and plans to replace or upgrade
non-compliant systems before September 1999. Albecca believes that additional
costs incurred in connection with these replacements and upgrades will not have
a material impact on Albecca's financial condition or results of operations.
HOW WE MANAGE CREDIT DECISIONS AND COLLECTIONS
Albecca manages its credit and collection functions regionally in the U.S.
Outside of the U.S., credit and collection functions are managed separately in
each country in which Albecca operates. Albecca extends credit based on an
evaluation of the customer's financial condition and history with Albecca.
Albecca monitors credit levels on an ongoing basis to minimize credit risk.
Albecca does not factor its accounts receivable or maintain credit insurance.
HOW WE MANAGE INVENTORY
Albecca believes that a key competitive advantage is its complete line of
quality branded products, which allows Albecca to be a complete source supplier
to retail custom framers. In the U.S., Albecca's sales information system is
integrated into its inventory procurement system in order to provide current
demand trends and to optimize inventory stocking levels. This demand information
is reviewed on an ongoing, location-by-location basis in order to more
effectively control Albecca's inventory investment.
QUALITY CONTROL
A key factor in Albecca maintaining the quality of its products has been to
ensure that through the careful design of such products, they can be
manufactured consistently over a long period of time. Albecca monitors the
quality of its raw materials before the manufacture of products and inspects
prototypes of each product before production runs are commenced. Albecca also
performs in-line quality control checks during and after production. Final
inspections occur when the products are processed for final shipment at each of
Albecca's distribution centers. Albecca believes that its careful inspection
policy is an important element in maintaining the quality and reputation of its
products. In addition, Albecca conducts quarterly reviews with each of its
manufacturers and suppliers to assess and improve performance levels. Albecca
offers its customers a 100% satisfaction guarantee on every product sold.
OUR COMPETITORS AND HOW WE COMPETE
Albecca competes with over 300 North American and over 500 international
manufacturers and distributors of custom framing products. Albecca is one of the
largest manufacturers and distributors of wood moulding in North America, where
it estimates its largest competitor is The Williamson Company. The principal
manufacturers of metal moulding are Nielsen & Bainbridge and Cardinal Aluminum
Company, which primarily supply their products to custom framers through
distributors. Albecca believes it is one of the largest metal moulding customers
of both companies. The principal manufacturers of matboard are Crescent
Cardboard Company and Nielsen & Bainbridge which primarily supply their
30
<PAGE> 37
products to custom framers through distributors. Albecca believes it is the
largest single matboard customer of both companies.
Albecca competes primarily on the basis of product design and quality,
on-time delivery, inventory availability, service and price. Albecca believes
its principal competitive strengths are leadership in design and premium,
branded products to the custom framing industry, although its designs are
commonly imitated in the industry; a wide variety of custom framing products; a
direct sales force regularly visiting retail custom framers to introduce new
products and assist with in-store merchandising; and strategically located
manufacturing/distribution centers for rapid, efficient response to customers.
Albecca experiences competition from smaller, regionally-focused distributors of
framing products who may have a long-term relationship with its customers, a
product line directed toward regional tastes, and local sales representation.
In the broader sense, Albecca competes in the larger home decorating
market, where consumers may forego custom framing and choose ready-made picture
frames or framed art works, and in the larger wholesale contract framing market,
where wholesale picture framers produce framed art works in volume for large
accounts such as hotels or office complexes. Albecca believes that other home
furnishing items such as furniture, floor and wall coverings and window
treatments compete with custom framing for consumer dollars, and Albecca's
challenge is to enable the custom framing industry to capture more of those
sales.
IMPORTANCE OF TRADEMARKS
Albecca uses a number of trademarks to distinguish its brands, principally,
Larson-Juhl, Clark and Artique. Albecca has registered or applied for
registration of these trademarks in the U.S. and Canada and in numerous
countries in Europe, Asia and elsewhere. Mr. Ponzio has granted Albecca a
perpetual right to use the name "Craig Ponzio" to identify and brand Albecca's
premium custom framing products. Albecca regards its trademarks and other
proprietary rights as valuable assets in the marketing of its products, and on a
worldwide basis, seeks to protect them against infringement. There can be no
assurance that the actions taken by Albecca to establish and protect its
trademarks and other proprietary rights will be adequate to prevent imitation of
its products by others or to prevent others from seeking to block sales of
Albecca's products as violative of the trademarks and other proprietary rights
of others. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent as do the laws of the United States.
Albecca also regards its moulding designs as critical to the success of its
marketing efforts, and seeks to protect those designs before their introduction
to the marketplace. However, after such introduction there are no practical
means to prevent others from copying or imitating such designs or specific
design elements.
ALBECCA TEAM MEMBERS -- OUR EMPLOYEES
At August 30, 1998, Albecca had approximately 3,100 full-time team members,
or employees, of which approximately 2,400 were in operations, 310 were in sales
and marketing and 350 were in corporate and general administrative positions. In
certain of the European countries in which Albecca operates, Albecca's
relationships with its team members are as mandated by such countries' laws or
covered by social legislation governing employment practices. Management
believes that Albecca's relationship with its team members is good.
ENVIRONMENTAL MATTERS
Albecca is subject to various federal, state, local and foreign
environmental laws and regulations relating to the handling and management of
certain chemicals used and generated in manufacturing its products. Albecca
believes that its operations currently comply in all material respects with
these laws and regulations. Based on the annual costs incurred by Albecca over
the past several years, management does not believe that compliance with these
laws and regulations will have a material adverse effect upon Albecca's
business, financial condition and results of operations. Albecca believes,
however, that it is
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<PAGE> 38
reasonably likely that the trend in environmental litigation and regulation will
continue to be toward stricter standards. Such changes in the law and
regulations may require Albecca to make additional capital expenditures which,
while not presently estimable with certainty, are not presently expected to have
a material adverse effect on Albecca's business, financial condition and results
of operations.
OUR OFFICES AND OTHER FACILITIES
Albecca's principal executive offices are located in a 65,000 square foot
office building located in Norcross, Georgia owned by L-J Properties Inc., a
company owned by Messrs. Ponzio, Trimarco, Scheppmann and McKenzie, each of whom
is an executive officer of Albecca. Mr. Ponzio is also a director of Albecca.
Albecca's lease for this facility terminates in January 2009 and the annual rent
currently is $708,000. See "Certain Relationships and Related Transactions."
Albecca owns two facilities in Ashland, Wisconsin containing approximately
58,000 and 54,000 square feet each. These facilities are used in the manufacture
of moulding, sample frames and ready-made frames. Albecca also owns facilities
in Denver, Colorado and Waldorf, Maryland which are used as light
manufacturing/distribution centers. Albecca leases 27 other facilities in North
America which are used to manufacture and/or distribute Albecca's products.
These facilities vary in size from approximately 12,600 to 103,500 square feet
and have lease termination dates ranging from January 1999 to May 2006. See
"-- Selective Manufacturing and Sourcing" and "-- Comprehensive Distribution
System."
Albecca owns 15 facilities and leases 30 facilities in 18 countries outside
of North America which are used to manufacture and/or distribute Albecca's
products. The leased facilities vary in size from approximately 1,350 to 105,000
square feet and have lease termination dates ranging from December 1998 to
December 2003. See "-- Selective Manufacturing and Sourcing" and
"-- Comprehensive Distribution System."
Albecca believes that its properties and facilities are adequate for its
current needs. Albecca does not anticipate any material difficulty in replacing
such facilities or securing new facilities.
CURRENT LEGAL PROCEEDINGS ARE NOT MATERIAL
Albecca is a party from time to time in actions incidental to its business.
Albecca believes that any currently pending proceedings are of a routine nature
and will not, individually or in the aggregate, have a material adverse effect
upon Albecca.
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<PAGE> 39
MANAGEMENT
The following table sets forth the names, ages and principal positions of
Albecca's executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Craig A. Ponzio............................ 48 Chairman of the Board, President, Chief
Executive Officer and Director
June R. Ponzio............................. 36 Vice Chairman of the Board and Director
Philip H. Moise............................ 49 Director
William P. Trimarco........................ 39 President, International
Randall D. Fretz........................... 46 President, North America
Stephen M. Scheppmann...................... 43 Senior Vice President and Chief Financial
Officer
Stephen E. McKenzie........................ 36 Senior Vice President, Marketing
Patrick R. Cronin.......................... 51 Vice President, Human Resources
R. Bradley Goodson......................... 39 Vice President, Business Development and
Secretary
</TABLE>
Craig A. Ponzio has served as Albecca's Chairman of the Board, President,
Chief Executive Officer and a Director since 1981. He has been actively involved
with Albecca since 1973 and acquired Albecca in 1981. Mr. Ponzio oversees
Albecca's operations, including the development and execution of its strategy,
and is active in the identification and consummation of acquisitions. Mr. Ponzio
is Albecca's chief designer and provides leadership in all aspects of the design
process.
June R. Ponzio has served as Albecca's Vice Chairman of the Board and a
Director since May 1998. She served as Corporate Secretary from October 1993
until May 1998. She participates in corporate strategic planning, with
particular experience in acquisitions, vendor relationships and team member
relations. Prior to joining Albecca in 1992, she held a management position with
Freshens Yogurt.
Philip H. Moise has served as a Director since August 1998. Mr. Moise has
been a partner at the law firm of Nelson Mullins Riley & Scarborough, L.L.P.,
Atlanta, Georgia, since 1994, where he has served as the CEO of the firm's
Corporate, Securities and Tax Group. Immediately before joining that firm he was
a partner at Long, Aldridge & Norman, a law firm also in Atlanta.
William P. Trimarco has served as Albecca's President, International since
January 1, 1999 with responsibility for the Company's International Operations.
Mr. Trimarco had served as Albecca's President, U.S. Operations from July 1997
to December 1998. Mr. Trimarco joined Albecca in 1982 as Distribution
Coordinator. He served as Vice President of Operations from 1987 to 1995, and
Senior Vice President, U.S. Operations from 1995 to 1997.
Randall D. Fretz has served as Albecca's President, North America since
January 1, 1999 with responsibility for the Company's North American operations.
Mr. Fretz joined Albecca in 1995 as President, Canada. Prior to joining Albecca,
he was the Division Director, Ray-Ban for Bausch & Lomb, Canada.
Stephen M. Scheppmann has served as Albecca's Senior Vice President and
Chief Financial Officer since December 1997, and prior thereto served as its
Vice President and Chief Financial Officer since joining Albecca in December
1988. From 1978 to 1988, he was employed by Arthur Andersen & Co.
Stephen E. McKenzie has served as Albecca's Senior Vice President,
Marketing since September 1998 and from September 1995 served as its Vice
President, Marketing. From 1991 until 1995, Mr. McKenzie held the positions of
Product Manager and Marketing Manager. Before joining Albecca in August 1991, he
was the buyer for framing and import products for a national retailer.
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<PAGE> 40
Patrick R. Cronin has served as Albecca's Vice President, Human Resources
since March 1991 with responsibility for the Company's U.S. human resource
activities. Prior to joining Albecca, Mr. Cronin was Vice President, Human
Resources for the Great Atlantic & Pacific Tea Co., Inc.
R. Bradley Goodson has served as Albecca's Vice President, Business
Development and Secretary since May 1998. Mr. Goodson joined Albecca in August
1994 and held the positions of Finance Manager and Business Development Manager.
His primary focus is Albecca's acquisition activity. From 1983 until August
1994, Mr. Goodson was employed by Arthur Andersen & Co.
Craig Ponzio and June Ponzio are married. There are no other family
relationships among Albecca's directors and executive officers.
We are dependent on the abilities and expertise of Mr. Ponzio and the other
key managers listed above, particularly Messrs. Trimarco, Scheppmann and
McKenzie. We believe we have developed significant managerial depth and
experience. However, our business, financial condition and results of operations
could be adversely affected if any of these key managers ceased to be active in
the business. We do not have employment agreements with any of our key managers.
BOARD OF DIRECTORS
The Bylaws provide that the size of the Board of Directors shall be
determined by the Board of Directors or by the shareholders of Albecca. The size
of the Board of Directors is currently fixed at three members, two of whom are
members of Albecca's management. Directors of Albecca are generally elected at
the annual meeting of shareholders. Directors of Albecca are elected or
appointed to serve until they resign or are removed, or until their successors
are elected and have qualified.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued for
services rendered to Albecca by Albecca's Chief Executive Officer and the four
most highly compensated other executive officers whose total salary and bonus
exceeded $100,000 (collectively, the "Named Executive Officers") during the year
ended August 30, 1998. Albecca did not grant any stock appreciation rights or
make any long-term incentive plan payouts during that period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS COMPENSATION($) OPTIONS COMPENSATION($)
- --------------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Craig A. Ponzio, Chairman of
the Board, President and
Chief Executive Officer... 1998 680,000 (1) 19,000 -- --
William P. Trimarco,
President, U.S.
Operations................ 1998 240,000 220,000 -- 34,062 --
Stephen M. Scheppmann,
Senior Vice President and
Chief Financial Officer... 1998 188,000 125,000 -- -- 100,000(2)
Stephen E. McKenzie, Senior
Vice President,
Marketing................. 1998 117,000 55,000 -- -- --
Patrick J. Cronin, Vice
President, Human
Resources................. 1998 131,000 42,000 -- -- --
</TABLE>
- ---------------
(1) The amount of bonus earned for the fiscal year ended August 30, 1998 has not
been allocated to the individual through the date hereof.
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<PAGE> 41
(2) Represents the difference between the purchase price of the common stock
purchased on December 1, 1997 and the fair market value of such common
stock. See Note 6 of notes to Albecca's consolidated financial statements.
OPTION GRANTS
The following table sets forth information concerning each grant of stock
options to Albecca's executive officers during the year ended August 30, 1998:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER PERCENT ANNUAL RATES OF
OF OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
William P. Trimarco............. 34,062 100% 8.80 4/30/03 265,444 414,584
</TABLE>
- ---------------
(1) Represents option to purchase shares of Albecca's Class A common stock.
Options were granted at the fair market value of the common stock on the
date of grant as determined by the Board of Directors, and vested
immediately.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. The actual
stock price may increase or decrease over the term. Unless the market price
of the common stock appreciates over the option term, no value will be
realized from the option grants made to the executive officers.
1998 STOCK OPTION PLAN
In 1998, the Board of Directors and Albecca's shareholders approved the
Larson-Juhl 1998 Stock Option Plan. The purpose of the Plan is to advance the
interests of Albecca and its shareholders by affording certain employees and
directors of Albecca, as well as key consultants and advisors to Albecca, an
opportunity to acquire or increase their proprietary interests in Albecca. The
objective of the issuance of stock options under the Plan is to promote the
growth and profitability of Albecca because the optionees will be provided with
an additional incentive to achieve Albecca's objectives through participation in
its success and growth and by encouraging their continued association with or
service to Albecca.
Options under the Plan will be granted by the Compensation Committee of the
Board of Directors and may include incentive stock options and/or non-incentive
stock options. The Compensation Committee will administer the Plan and generally
will have discretion to determine the terms of an option grant, including the
number of option shares, option price, term, vesting schedule, the
post-termination exercise period and whether the grant will be an ISO or
non-ISO. Notwithstanding this discretion:
(1) if an option is intended to be an ISO, the option price per share
of Class A Common Stock may not be less than 100% of the fair
market value of such share at the time of grant, and the fair
market value at the time of grant of shares first purchasable
under the option in any one year cannot exceed $100,000;
(2) if an option is intended to be an ISO and is granted to a
shareholder holding more than 10% of the combined voting power of
all classes of Albecca's stock or of its parent or subsidiary on
the date of the grant of the option, the option price per share of
Class A Common Stock may not be less than 110% of the fair market
value of such shares at the time of grant; and
(3) the term of any option may not exceed 10 years, or five years if
the option is intended to be an ISO and is granted to a
shareholder owning more than 10% of the total combined voting
power of all classes of stock on the date of the grant of the
option.
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<PAGE> 42
A maximum of 2,600,000 shares of Class A Common Stock may be granted under
the Plan, unless it is amended to increase that number. Shares of Class A Common
Stock which are attributable to options that have expired, terminated or been
cancelled are available in connection with future option grants.
The Plan will remain in effect until terminated by the Board of Directors.
No ISO may be granted after May 1, 2008. The Plan may be amended by the Board of
Directors without the consent of the shareholders of Albecca, except that for
any amendment to be effective as to ISOs, it must be approved by Albecca's
shareholders within one year after approval by the Board of Directors if the
amendment increases the total number of shares issuable pursuant to ISOs or
changes the class of employees eligible to receive ISOs that may participate in
the Plan.
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<PAGE> 43
PRINCIPAL SHAREHOLDERS
The authorized capital stock of Albecca consists of 250,000,000 shares of
Class A Common Stock, $0.01 par value per share, 100,000,000 shares of Class B
Common Stock, $0.01 par value per share, and 50,000,000 shares of Preferred
Stock, $0.01 par value per share. The following table sets forth certain
information regarding the beneficial ownership of Albecca's two classes of
Common Stock as of the date of this prospectus with respect to each person who
owns beneficially more than 5% of the Common Stock and all executive officers
and directors of Albecca as a group. Except as otherwise indicated, the persons
or entities listed below have sole voting and investment power with respect to
such shares. Each share of Class B Common Stock is convertible at the option of
the holder into one share of Class A Common Stock. The number of shares of Class
A Common Stock and percentages contained under this heading do not account for
these conversion rights. Holders of Class A Common Stock are entitled to one
vote per share. Holders of Class B Common Stock are entitled to 10 votes per
share.
<TABLE>
<CAPTION>
SHARES OWNED
---------------------------------------- TOTAL
VOTING POWER
CLASS A CLASS B AFTER THE
COMMON STOCK COMMON STOCK OFFERING
----------------- -------------------- ------------
NUMBER PERCENT NUMBER PERCENT PERCENT
------- ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
Craig A. Ponzio............................... 34,000 .9% 16,626,000 100% 99.8%
June R. Ponzio................................ 34,000 .9% 16,626,000 100% 99.8%
All executive officers and directors as a
Group (8 persons)........................... 374,000 100% 16,626,000 100% 100%
</TABLE>
The address for Craig A. Ponzio and June R. Ponzio is 3900 Steve Reynolds
Boulevard, Norcross, Georgia 30093. All shares of Common Stock attributable to
Mrs. Ponzio are owned of record by her husband, Mr. Ponzio. Mrs. Ponzio
disclaims beneficial ownership of such shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Albecca leases its corporate headquarters in Norcross, Georgia from L-J
Properties Inc., a company owned by Messrs. Ponzio, Trimarco, Scheppmann and
McKenzie. L-J Properties is owned 70% by Mr. Ponzio and 10% by each of Messrs.
Trimarco, Scheppmann and McKenzie. The lease commenced in August 1991 and
terminates in August 2001, subject to Albecca's option to extend the lease for
two 36-month periods. Albecca currently pays L-J Properties $708,000 per year in
rent, with certain annual increases determined by a formula set forth therein.
Albecca believes that the lease with L-J Properties is on terms at least as
favorable to Albecca as those obtainable from unaffiliated third parties in
Albecca's area of operations. In fiscal years 1996, 1997 and 1998 Albecca made
payments of $642,000, $661,000 and $680,000, respectively, to L-J Properties
under this lease.
On May 1, 1998, Albecca distributed $10.5 million of previously
undistributed S corporation earnings to its shareholders as of that date,
through the issuance of S corporation notes payable in full upon demand and
bearing interest at 11% per annum, with interest payable quarterly until the
notes are paid in full ("S Corp Notes"). On June 10, 1998, Albecca Inc. repaid,
using borrowings under its existing credit facility, $4.0 million of the S Corp
Notes plus accrued interest. On June 24, 1998, the holders of the S Corp Notes,
who constituted all of the existing shareholders and members of Albecca Inc. and
Larson-Juhl International LLC ("L-J International"), respectively, contributed
the then outstanding $6.5 million balance on such S Corp Notes to L-J
International in satisfaction of a $6.5 million capital call made by L-J
International on June 5, 1998. L-J International demanded repayment of the S
Corp Notes on June 24, 1998. Albecca Inc. repaid the S Corp Notes, plus accrued
interest, on June 24, 1998, using borrowings under the existing credit
facilities. On June 26, 1998, the members of L-J International contributed their
respective membership interests in L-J International to Albecca Inc., at which
time L-J International became a wholly-owned subsidiary of Albecca Inc. No
consideration was given to the members for their contribution since the
shareholders of Albecca Inc. also constituted all of the members of L-J
International.
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<PAGE> 44
Albecca used a portion of the net proceeds of the Offering to distribute an
additional $60.0 million of previously undistributed S corporation earnings to
its shareholders concurrently with the consummation of the Offering. The amount
of this distribution to Mr. Ponzio was $58.68 million, to Mr. Trimarco $720,000
and to Mr. Scheppmann $600,000. See "Use of Proceeds."
In May 1998 Albecca amended existing arrangements with Mr. Ponzio and Mr.
Cronin, two of Albecca's executive officers, relating to the payment of deferred
compensation amounts previously accrued in prior years. The aggregate amount of
such deferred payments was $2.8 million in 1998. Subject to certain exceptions,
payment of these amounts will be deferred and paid in annual installments of
$450,000 through 2003 and $550,000 in 2004. Of the accrued amount, Messrs.
Ponzio and Cronin are entitled to aggregate payments of $2,700,000 and $100,000,
respectively.
DESCRIPTION OF CERTAIN INDEBTEDNESS
Simultaneously with the consummation of the sale of the notes, Albecca
repaid all amounts outstanding under, and retired, its existing principal credit
facility, as described in "Use of Proceeds." As of November 29, 1998, Albecca
and the Subsidiary Guarantors have outstanding certain purchase money financing
obligations, which had an outstanding balance of $205.3 million. Such
obligations rank senior in right of payment to the notes and Subsidiary
Guarantees. In addition, the foreign subsidiaries have outstanding indebtedness
under various foreign credit facilities, term notes and purchase money financing
obligations, which had an aggregate outstanding balance of $61.8 million.
Indebtedness of the foreign subsidiaries is effectively senior to the notes and
the Subsidiary Guarantees.
The largest of Albecca's foreign credit facilities is the $7.5 million
credit facility entered into by L-J Canada to fund its Canadian operations.
Borrowings under the Canadian Facility bear interest at rates ranging from LIBOR
plus 0.75% to the Canadian prime rate and mature in August 2000. The Canadian
Facility is secured by all of the assets of L-J Canada. The Canadian Facility is
subject to certain customary financial and other covenants, including without
limitation:
(1) financial reporting;
(2) funded indebtedness to total capitalization ratios;
(3) leverage ratio;
(4) tangible net worth; and
(5) limitations on indebtedness, contingent obligations, liens, loans,
repayments of intercompany indebtedness, dividends, advances, investments,
acquisitions, mergers and sale of assets.
As of November 29, 1998, approximately $2.3 million was outstanding under
the Canadian Facility.
Albecca's other foreign revolving credit facilities and term notes include
a series of credit facilities used to finance working capital needs and
acquisitions in the respective countries in which Albecca operates. These
facilities range in size from less than $100,000 to $3.6 million. The
indebtedness under these facilities generally bears interest at rates ranging
from 2.0% to 19.0% per annum, as of August 30, 1998, and matures on various
dates ranging through September 2017. Certain of these facilities are secured by
assets of the respective borrowers, including accounts receivable, inventory,
property or capital stock, and are generally subject to certain customary
financial and other covenants, including repayment of intercompany indebtedness
and payment of dividends.
As of the date of this prospectus, Albecca does not have a bank credit
facility in place to fund its U.S. operations, although Albecca plans to enter
into a senior bank credit facility to finance future working capital needs,
capital expenditures and complementary acquisitions. At present, Albecca has not
entered into any agreements, commitments or understandings with respect to such
a credit facility. The indenture will permit Albecca and the Subsidiary
Guarantors to incur additional indebtedness, including Senior Debt, subject to
certain limitations. See "Risk Factors -- Liquidity and Need for Additional
Financing" and "Description of the Notes -- Certain Covenants."
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<PAGE> 45
THE EXCHANGE OFFER
The following description is a summary of certain provisions of the
registration rights agreement and does not restate that agreement in its
entirety. We urge you to read the registration rights agreement, which has been
filed as an exhibit to the registration statement which includes this
prospectus.
TERMS OF THE EXCHANGE OFFER
In connection with the issuance of the notes pursuant to a Purchase
Agreement dated as of August 11, 1998, by and among Albecca and the Initial
Purchasers, the Initial Purchasers and their respective assignees became
entitled to the benefits of the registration rights agreement.
Under the registration rights agreement, Albecca is required to file by
December 9, 1998, a registration statement for a registered exchange offer with
respect to an issue of notes. Under the registration rights agreement, Albecca
is required to:
(1) use its best efforts to cause such exchange offer registration
statement to become effective by February 8, 1999;
(2) use its best efforts to keep the exchange offer open for at least
20 business days, or longer if required by applicable law;
(3) use its best efforts to consummate the exchange offer by March 10,
1999;
(4) cause the exchange offer to comply with all applicable federal and
state securities laws. The exchange offer being made hereby, if commenced
and consummated within the time periods described in this paragraph, will
satisfy those requirements under the registration rights agreement.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, all notes validly tendered and not withdrawn
before 5:00 p.m., New York City time, on the expiration date will be accepted
for exchange. Notes of the same class will be issued in exchange for an equal
principal amount at maturity of outstanding notes accepted in the exchange
offer. Notes may be tendered only in integral multiples of $1,000 of principal
amount at maturity. This prospectus, together with the letter of transmittal, is
being sent to all registered holders as of , 1999. The exchange
offer is not conditioned upon any minimum principal amount at maturity of notes
being tendered in exchange. However, the obligation to accept notes for exchange
pursuant to the exchange offer is subject to certain conditions as set forth
herein under "-- Conditions."
Notes will be deemed to have been accepted as validly tendered when, as and
if the trustee has given oral or written notice thereof to the exchange agent.
The exchange agent will act as agent for the tendering holders of notes for the
purposes of receiving the notes and delivering notes to such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the exchange offer
No-Action Letters, Albecca believes that the notes issued pursuant to the
exchange offer may be offered for resale, resold or otherwise transferred by
each holder thereof other than a broker-dealer who acquires such notes directly
from Albecca for resale pursuant to Rule 144A under the Securities Act or any
other available exemption under the Securities Act and other than any holder
that is an "affiliate," as defined in Rule 405 under the Securities Act, of
Albecca without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such notes are acquired in the
ordinary course of such holder's business and such holder is not engaged in, and
does not intend to engage in, a distribution of such notes and has no
arrangement with any person to participate in a distribution of such notes. By
tendering the notes in the exchange offer, each holder, other than a
Participating Broker-Dealer, will represent to Albecca that:
(1) it is not an affiliate, as defined in Rule 405 under the
Securities Act, of Albecca;
(2) it is not a broker-dealer tendering notes acquired for its own
account directly from Albecca;
(3) any notes to be received by it will be acquired in the ordinary
course of its business; and
39
<PAGE> 46
(4) it is not engaged in, and does not intend to engage in, a
distribution of such notes and has no arrangement or understanding to
participate in a distribution of the notes.
If a holder of notes is engaged in or intends to engage in a distribution
of the notes or has any arrangement or understanding with respect to the
distribution of the notes to be acquired pursuant to the exchange offer, such
holder may not rely on the applicable interpretations of the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each Participating Broker-Dealer that receives notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of notes received in exchange for notes
where such notes were acquired by such Participating Broker-Dealer as a result
of market-making activities or other trading activities. Albecca has agreed that
it will make this prospectus available to any Participating Broker-Dealer for a
period of time not to exceed one year after the date on which the exchange offer
is consummated for use in connection with any such resale. See "Plan of
Distribution."
In the event that:
(1) any changes in law or the applicable interpretations of the staff
of the Commission do not permit Albecca to effect the exchange offer; or
(2) if any holder of Transfer Restricted Securities, as defined
herein, notifies Albecca within 20 business days following the consummation
of the exchange offer that:
(a) such holder was prohibited by law or SEC policy from
participating in the exchange offer; or
(b) such holder may not resell the notes acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder; or
(c) such holder is a broker-dealer and holds notes acquired
directly from Albecca or one of its affiliates, then Albecca will
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act on or prior to 30 days after the date on which
Albecca determines that it is not required to file the exchange offer
Registration Statement pursuant to clause (1) above or 75 days after
the date on which Albecca receives the notice specified in clause (2)
above and will
(y) use its best efforts to cause such Shelf Registration
Statement to become effective within 75 days after the date on which
Albecca becomes obligated to file such Shelf Registration Statement.
If, after Albecca has filed an Exchange Offer Registration Statement, Albecca is
required to file and make effective a Shelf Registration Statement solely
because the exchange offer will not be permitted under applicable federal law,
then the filing of the exchange offer registration statement will be deemed to
satisfy the requirements of clause (x) above. Such an event will have no effect
on the requirements of clause (y) above. Albecca will use its best efforts to
keep the Shelf Registration Statement continuously effective, supplemented and
amended to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the holders thereof for a period of at least
two years following the date on which such Shelf Registration Statement first
becomes effective under the Securities Act. The term "Transfer Restricted
Securities" means each note, until the earliest to occur of (a) the date on
which such note is exchanged in the exchange offer and entitled to be resold to
the public by the holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such note has been disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such note
is
40
<PAGE> 47
disposed of by a broker-dealer pursuant to the "Plan of Distribution"
contemplated by the exchange offer registration statement or (d) the date on
which such note is distributed to the public pursuant to Rule 144 under the Act.
Any of the following will be considered a Registration Default:
(1) the Exchange Offer Registration Statement or the Shelf
Registration Statement is not filed with the Commission on or prior to the
date specified in the registration rights agreement;
(2) any such Registration Statement has not been declared effective by
the Commission on or prior to the date specified for such effectiveness in
the registration rights agreement;
(3) the exchange offer has not been consummated thirty days of the
effective date; or
(4) any Registration Statement required by the registration rights
agreement is filed and declared effective but will thereafter cease to be
effective or fail to be usable for its intended purpose without being
succeeded within two days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective within five days of filing such post-effective amendment to such
Registration Statement, then Albecca has agreed to pay Liquidated Damages
to each holder of New Transfer Restricted Securities. With respect to the
first 90-day period immediately following the occurrence of such
Registration Default the Liquidated Damages will equal $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such
holder for each week or portion thereof that the Registration Default
continues. The amount of the Liquidated Damages will increase by an
additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.30 per week per $1,000 principal amount of Transfer
Restricted Securities. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
All accrued Liquidated Damages will be paid to the holder of the global
notes representing the notes by wire transfer of immediately available funds or
by federal funds check and to holders of certificated securities by mailing
checks to their registered addresses on each February 15 and August 15. All
obligations of Albecca set forth in the preceding paragraph that are outstanding
with respect to any Transfer Restricted Security at the time such security
ceases to be a Transfer Restricted Security will survive until such time as all
such obligations with respect to such security will have been satisfied in full.
Upon consummation of the exchange offer, subject to certain exceptions,
holders of notes who do not exchange their notes in the exchange offer will no
longer be entitled to registration rights and will not be able to offer or sell
their notes, unless such notes are subsequently registered under the Securities
Act, which, subject to certain limited exceptions, Albecca will have no
obligation to do, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "Risk
Factors -- Risk Factors Relating to the Notes -- Consequences of Failure to
Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "expiration date" will mean , 1999, which is 20
business days following the commencement of the exchange offer, unless the
exchange offer is extended, if and as required by applicable law, in which case
the term "expiration date" will mean the latest date to which the exchange offer
is extended.
In order to extend the expiration date, Albecca will notify the exchange
agent of any extension by oral or written notice and will notify the holders of
the notes by means of a press release or other public announcement prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date.
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<PAGE> 48
Albecca reserves the right:
(1) to delay acceptance of any notes, to extend the exchange offer or
to terminate the exchange offer and not permit acceptance of notes not
previously accepted if any of the conditions set forth herein under
"-- Conditions" has occurred and has not been waived by Albecca, by giving
oral or written notice of such delay, extension or termination to the
exchange agent; or
(2) to amend the terms of the exchange offer in any manner deemed by
it to be advantageous to the holders of the notes. Any such delay in
acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice thereof to the exchange
agent. If the exchange offer is amended in a manner determined by Albecca
to constitute a material change, Albecca will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the
notes of such amendment.
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must complete, sign and date the
letter of transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the letter of transmittal, and mail or otherwise
deliver such letter of transmittal or such facsimile, together with any other
required documents, to the exchange agent prior to 5:00 p.m., New York City
time, on the expiration date. In addition, either:
(1) certificates for such notes must be received by the exchange agent
along with the letter of transmittal;
(2) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such notes, if such procedure is available, into the
exchange agent's account at DTC (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the expiration date; or
(3) the holder must comply with the guaranteed delivery procedures
described below. THE METHOD OF DELIVERY OF NOTES, LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS
OF NOTES. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR NOTES SHOULD BE SENT TO ALBECCA. Delivery of all
documents must be made to the exchange agent at its address set forth
below. Holders of notes may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender for
such holders.
The tender by a holder of notes will constitute an agreement between such
holder and Albecca in accordance with the terms and subject to the conditions
set forth herein and in the letter of transmittal.
Only a holder of notes may tender such notes in the exchange offer. The
term "holder" with respect to the exchange offer means any person in whose name
notes are registered on the books of Albecca or any other person who has
obtained a properly completed bond power from the registered holder.
Any beneficial owner whose notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact such registered holder promptly and instruct such registered
holder to tender on his behalf. If such beneficial owner wishes to tender on his
own behalf, such beneficial owner must, prior to completing and executing the
letter of transmittal and delivering his notes, either make appropriate
arrangements to register ownership of the notes in such owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
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<PAGE> 49
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the notes
tendered pursuant thereto are tendered:
(1) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
(2) for the account of an Eligible Institution.
If the letter of transmittal is signed by a person other than the
registered holder of any notes listed therein, such notes must be endorsed or
accompanied by bond powers and a proxy which authorizes such person to tender
the notes on behalf of the registered holder, in each case as the name of the
registered holder or holders appears on the notes.
If the letter of transmittal or any notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Albecca, evidence
satisfactory to Albecca of their authority to so act must be submitted with the
letter of transmittal.
All questions as to the validity, form, eligibility, including time of
receipt, and withdrawal of the tendered notes will be determined by Albecca in
its sole discretion, which determination will be final and binding. Albecca
reserves the absolute right to reject any and all notes not properly tendered or
any notes which, if accepted, would, in the opinion of counsel for Albecca, be
unlawful. Albecca also reserves the absolute right to waive any irregularities
or conditions of tender as to particular notes. Albecca's interpretation of the
terms and conditions of the exchange offer, including the instructions in the
letter of transmittal, will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of notes must be cured
within such time as Albecca will determine. Neither Albecca, the exchange agent
nor any other person will be under any duty to give notification of defects or
irregularities with respect to tenders of notes, nor will any of them incur any
liability for failure to give such notification. Tenders of notes will not be
deemed to have been made until such irregularities have been cured or waived.
Any notes received by the exchange agent that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the exchange agent to the tendering
holders of notes, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
In addition, Albecca reserves the right in its sole discretion, subject to
the provisions of the indenture, to:
(1) purchase or make offers for any notes that remain outstanding
subsequent to the expiration date; or
(2) to terminate the exchange offer in accordance with the terms of
the registration rights agreement; and
(3) to the extent permitted by applicable law, purchase notes in the
open market, in privately negotiated transactions or otherwise. The terms
of any such purchases or offers could differ from the terms of the exchange
offer.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
all notes properly tendered will be accepted, promptly after the expiration
date, and the notes will be issued promptly after acceptance of the notes. See
"-- Conditions" below. For purposes of the exchange offer, notes will be deemed
to have been accepted as validly tendered for exchange when, as and if Albecca
has given oral or written notice thereof to the exchange agent.
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<PAGE> 50
In all cases, issuance of notes that are accepted for exchange pursuant to
the exchange offer will be made only after timely receipt by the exchange agent
of certificates for such notes or a timely Book-Entry Confirmation of such notes
into the exchange agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed letter of transmittal and all other
required documents. If any tendered notes are not accepted for any reason set
forth in the terms and conditions of the exchange offer or if notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged notes will be returned without expense to the
tendering holder, or, in the case of notes tendered by book-entry transfer
procedures described below, such non-exchanged notes will be credited to an
account maintained with such Book-Entry Transfer Facility, as promptly as
practicable after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the notes at the Book-Entry Transfer Facility for purposes of the exchange
offer within two business days after the date of this prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of notes by causing the Book-Entry Transfer
Facility to transfer such notes into the exchange agent's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of notes may be
effected through book-entry transfer at the Book-Entry Transfer Facility, the
letter of transmittal or facsimile thereof with any required signature
guarantees and any other required documents must, in any case, be transmitted to
and received by the exchange agent at one of the addresses set forth below under
"-- Exchange Agent" on or prior to the expiration date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of notes desires to tender such notes, and the notes
are not immediately available, or time will not permit such holder's notes or
other required documents to reach the exchange agent before the expiration date,
or the procedures for book-entry transfer cannot be completed on a timely basis,
a tender may be effected if:
(1) the tender is made through an Eligible Institution;
(2) prior to the expiration date, the exchange agent receives from
such Eligible Institution a properly completed and duly executed letter of
transmittal and Notice of Guaranteed Delivery, substantially in the form
provided by Albecca, by mail or hand delivery, setting forth the name and
address of the holder of notes and the amount of notes tendered, stating
that the tender is being made thereby and guaranteeing that within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the letter of transmittal will be deposited
by the Eligible Institution with the exchange agent; and
(3) the certificates for all physically tendered notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, and all
other documents required by the Letter of Transmittal are received by the
exchange agent within three NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of notes may be withdrawn at any time prior to 5:00 p.m., New York
City time on the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time on the
expiration date at one of the addresses set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name of the person
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<PAGE> 51
having tendered the notes to be withdrawn, identify the notes to be withdrawn,
including the principal amount of such notes, and where certificates for notes
have been transmitted, specify the name in which such notes are registered, if
different from that of the withdrawing holder.
If certificates for notes have been delivered or otherwise identified to
the exchange agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution. If notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn notes and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility, including
time of receipt, of such notices will be determined by Albecca, whose
determination will be final and binding on all parties.
Any notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer. Any notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder, or, in the case of notes tendered by
book-entry transfer into the exchange agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described above, such
notes will be credited to an account maintained with such Book-Entry Transfer
Facility for the notes, as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering" and "-- Book-Entry Transfer" above at any time on or prior to the
expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, notes will not be
required to be accepted for exchange, nor will notes be issued in exchange for
any notes, and Albecca may terminate or amend the exchange offer as provided
herein before the acceptance of such notes, if because of any change in law, or
applicable interpretations thereof by the SEC, Albecca determines that it is not
permitted to effect the exchange offer. Albecca has no obligation to, and will
not knowingly, permit acceptance of tenders of notes from affiliates, within the
meaning of Rule 405 under the Securities Act, of Albecca or from any other
holder or holders who are not eligible to participate in the exchange offer
under applicable law or interpretations thereof by the SEC, or if the notes to
be received by such holder or holders of notes in the exchange offer, upon
receipt, will not be tradable by such holder without restriction under the
Securities Act and the Exchange Act and without material restrictions under the
"blue sky" or securities laws of substantially all of the states of the United
States.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as exchange agent
for the exchange offer. Questions and requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Mail or Courier:
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place, 4th Floor
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen
By Facsimile:
Corporate Trust Department
(617) 664-5290
Attention: Kellie Mullen
For information call:
(617) 664-5587
</TABLE>
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<PAGE> 52
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by Albecca. The principal solicitation for tenders pursuant to the
exchange offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, fax or in person by officers and regular employees
of Albecca.
Albecca will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. Albecca, however, will pay the
exchange agent reasonable and customary fees for its services and will reimburse
the exchange agent for its reasonable out-of-pocket expenses in connection
therewith. Albecca may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the prospectus and related documents to the beneficial
owners of the notes, and in handling and forwarding tenders for exchange.
The expenses to be incurred in connection with the exchange offer will be
paid by Albecca, including fees and expenses of the exchange agent and trustee
and accounting, legal, printing and related fees and expenses.
Albecca will pay all transfer taxes, if any, applicable to the exchange of
notes pursuant to the exchange offer. If, however, certificates representing
notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the notes tendered, or if tendered notes are
registered in the name of any person other than the person signing the letter of
transmittal, or if a transfer tax is imposed for any reason other than the
exchange of notes pursuant to the exchange offer, then the amount of any such
transfer taxes, whether imposed on the registered holder or any other persons,
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions" on page 70. In this description,
"Albecca" refers only to Albecca Inc. and not to any of its subsidiaries.
Albecca has issued the notes under an indenture among itself, the
Subsidiary Guarantors and State Street Bank and Trust Company, as trustee (the
"Trustee"). The terms of the notes include those stated in the indenture and
those made part of the indenture by reference to the Trust Indenture Act of 1939
(the "Trust Indenture Act").
The following description is a summary of the material provisions of the
indenture and the registration rights agreement entered into by Albecca when it
entered into the indenture. It does not restate those agreements in their
entirety. We urge you to read the indenture and the registration rights
agreement because they, and not this description, define your rights as holders
of these notes. We have filed copies of the indenture and the registration
rights agreement as exhibits to the registration statement filed in connection
with the exchange offer.
BRIEF DESCRIPTION OF THE NOTES AND THE SUBSIDIARY GUARANTEES
THE NOTES
These notes:
- are general unsecured obligations of Albecca;
- are guaranteed, jointly and severally, by the Subsidiary Guarantees;
- are subordinated in right of payment to all existing and future Senior
Debt of Albecca; and
- are senior in right of payment to any future subordinated Indebtedness
of Albecca.
THE SUBSIDIARY GUARANTEES
These notes are guaranteed by the following subsidiaries of Albecca, which
we refer to as Subsidiary Guarantors in this prospectus:
- Larson-Juhl US LLC;
- Larson-Juhl International LLC;
- Art Materials, Frames and Mouldings Company, Inc.;
- Robert F. de Castro, Inc.;
- Glass Corporation of America, Inc.;
- Art West, Inc.;
- Eastern Moulding, Inc.;
- Eastern Mouldings, Inc.;
- Larson-Juhl Australia L.L.C.;
- Larson-Juhl France L.L.C.;
- Larson-Juhl South Africa L.L.C.;
- Larson-Juhl Seoul L.L.C.;
- Larson-Juhl Korea L.L.C.; and
- Larson-Juhl Netherlands L.L.C.
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The Subsidiary Guarantees of these notes:
- are general obligations of each Subsidiary Guarantor;
- are subordinated in right of payment to all existing and future Senior
Debt of each Subsidiary Guarantor; and
- are senior in right of payment to any future subordinated Indebtedness
of each Subsidiary Guarantor.
As of November 29, 1998, Albecca and the Subsidiary Guarantors had total
Senior Debt of approximately $65.0 million. As discussed in detail below under
"Subordination," payments on the notes and under the Subsidiary Guarantees will
be subordinated to the payment of Senior Debt. The indenture permits us and the
Subsidiary Guarantors to incur additional Senior Debt.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants in the Indenture, and Unrestricted Subsidiaries will not guarantee
these notes. As of the date of the indenture, only two of our subsidiaries are
Unrestricted Subsidiaries. However, under certain circumstances, we are
permitted to designate certain of our subsidiaries as Unrestricted Subsidiaries.
None of our foreign subsidiaries guarantee these notes. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their assets to us. Albecca and the guarantor subsidiaries generated 51% of our
consolidated revenues in the twelve-month period ended August 30, 1998 and held
39% of our consolidated assets as of August 30, 1998. See footnote 15 to our
consolidated financial statements included at the back of this prospectus for
more detail about the division of our consolidated revenues and assets between
our guarantor and non-guarantor subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
We have issued notes with a maximum aggregate principal amount of $200.0
million, in denominations of $1,000 and integral multiples of $1,000. The notes
will mature on August 15, 2008.
Interest on these notes will accrue at the rate of 10 3/4% a year and is
payable semi-annually in arrears on February 15 and August 15, beginning on
February 15, 1999. Albecca will make each interest payment to the Holders of
record of these notes on the immediately preceding February 1 and August 1.
Interest on these notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to Albecca, we will make
all principal, premium and interest payments on those notes in accordance with
those instructions. All other payments on these notes will be made at the office
or agency of the Paying Agent and Registrar within New York City unless we elect
to make interest payments by check mailed to the holders at their address set
forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. We may change
the Paying Agent or Registrar without prior notice to the holders of the notes,
and we or any of our subsidiaries may act as Paying Agent or Registrar.
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TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and we may require a
holder to pay any taxes and fees required by law or permitted by the indenture.
Albecca is not required to transfer or exchange any note selected for
redemption. Also, Albecca is not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
SUBSIDIARY GUARANTEES
The Subsidiary Guarantors unconditionally, jointly and severally guarantee
Albecca's obligations under these notes. Each Subsidiary Guarantee is
subordinated to the prior payment in full of all Senior Debt of that Subsidiary
Guarantor. The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee is limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors -- Fraudulent Conveyance Matters."
A Subsidiary Guarantor may not sell or otherwise dispose of all or
substantially all of its assets, or consolidate with or merge with or into
another Person, whether or not such Subsidiary Guarantor is the surviving
Person, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation
or merger assumes all the obligations of that Subsidiary Guarantor
pursuant to a supplemental indenture satisfactory to the Trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the indenture.
The Subsidiary Guarantee of a Subsidiary Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of its assets, including by way of merger or
consolidation, if Albecca applies the Net Proceeds of that sale or other
disposition in accordance with the applicable provisions of the indenture;
(2) in connection with any sale of all of the capital stock of a
Subsidiary Guarantor, if Albecca applies the Net Proceeds of that sale in
accordance with the applicable provisions of the indenture; or
(3) if Albecca designates any Restricted Subsidiary that is a
Subsidiary Guarantor as an Unrestricted Subsidiary.
See "Certain Covenants -- Asset Sales."
SUBORDINATION
The payment of principal, interest and premium, if any, on these notes will
be subordinated to the prior payment in full of all Senior Debt of Albecca.
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The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt, including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt, before the Holders of notes will be entitled to receive any payment
with respect to the notes, in the event of any distribution to creditors of
Albecca:
(1) in a liquidation or dissolution of Albecca;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Albecca or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of Albecca's assets and liabilities.
However, holders of notes may receive and retain Permitted Junior Securities and
payments made from the trust described under "-- Legal Defeasance and Covenant
Defeasance".
Albecca also may not make any payment in respect of the notes, except in
Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance", if:
(1) a payment default on Designated Senior Debt occurs and is
continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on Designated Senior
Debt that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default from Albecca or
the holders of any Designated Senior Debt. (a "Payment Blockage Notice")
Payments on the notes may and will be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice; and
(2) all scheduled payments of principal, premium and interest on the
notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 180 days.
Albecca must promptly notify holders of Senior Debt if payment of the notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Albecca, holders of these
notes may recover less ratably than creditors of Albecca who are holders of
Senior Debt. See "Risk Factors -- Subordination."
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OPTIONAL REDEMPTION
After August 15, 2003, Albecca may redeem all or a part of these notes upon
not less than 30 nor more than 60 days' notice, at the following redemption
prices plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 15 of the
years following:
<TABLE>
<CAPTION>
PERCENTAGE OF
YEAR PRINCIPAL AMOUNT
---- ----------------
<S> <C>
2003........................................................ 105.375%
2004........................................................ 103.583%
2005........................................................ 101.792%
2006 and thereafter......................................... 100.00%
</TABLE>
In addition, notwithstanding the above, at any time on or before August 15,
2001, Albecca may redeem up to 35% of the principal amount of the notes at a
redemption price of 110.75% of the principal amount plus accrued interest and
liquidated damages with the proceeds of one or more Equity Offerings, provided:
(1) at least 65% in the aggregate principal amount of the notes
originally issued remains outstanding; and
(2) the redemption must occur within 90 days of the closing of the
Equity Offering.
NO MANDATORY REDEMPTION REQUIRED
Albecca is not required to make mandatory redemption or sinking fund
payments with respect to the notes.
CERTAIN COVENANTS
Repurchase Upon Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require Albecca to repurchase all or any $1,000 increment of that holder's notes
pursuant to the Change of Control Offer. In the Change of Control Offer, Albecca
will offer a Change of Control Payment in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest thereon
to the date of purchase. Within 30 days following any Change of Control, Albecca
will mail a notice to each holder describing the transaction or transactions
that constitute the Change of Control. In that notice Albecca will offer to
repurchase notes on the Change of Control Payment Date specified in such notice,
pursuant to the procedures required by the indenture and described in such
notice. Albecca will comply with the requirements of Rule 14e-1 under the
Exchange Act and applicable requirements of any other securities laws and
regulations thereunder.
On the Change of Control Payment Date, Albecca will, to the extent lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment for all notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the notes so
accepted and an Officers' Certificate stating the aggregate principal
amount of notes or portions thereof being purchased by Albecca.
The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes. The Trustee will promptly authenticate
and mail to each holder, or cause to be
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transferred by book entry, a new note equal in principal amount to any
unpurchased portion of the notes surrendered. Each such new note will be in a
principal amount of $1,000 or multiple thereof.
Within 90 days following a Change of Control, and before complying with any
of the provisions of the "Change of Control" covenant in the indenture, Albecca
will either repay all outstanding Senior Debt, or obtain all required consents
under agreements governing outstanding Senior Debt to permit the repurchase of
notes required by this covenant. Albecca will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The provisions described above that require Albecca to make a Change of
Control Offer will be applicable regardless of whether or not any other
provisions of the indenture are applicable. Except as described above with
respect to a Change of Control, the indenture does not contain provisions that
permit the holders of the notes to require Albecca to repurchase or redeem the
notes in the event of a takeover, recapitalization or similar transaction.
Albecca's outstanding Senior Debt currently prohibits it from purchasing
any notes, and also provides that certain change of control events with respect
to Albecca would constitute a default under the agreements governing the Senior
Debt. Any future Albecca credit agreements or other Albecca agreements relating
to Senior Debt may contain similar restrictions and provisions. If a Change of
Control occurs at a time when Albecca is prohibited from purchasing notes,
Albecca could seek the consent of its senior lenders to the purchase or could
attempt to refinance the Senior Debt. If Albecca does not obtain such a consent
or repay such borrowings, it will remain prohibited from purchasing notes. In
such case, Albecca's failure to purchase tendered notes would constitute an
Event of Default under the indenture. This in turn would constitute a default
under such Senior Debt. In such circumstances, the subordination provisions in
the indenture would likely restrict payments to the holders of notes.
Albecca will not be required to make a Change of Control Offer if:
(1) a third party makes the Change of Control Offer in compliance with
the indenture requirements applicable to a Change of Control Offer made by
Albecca; and
(2) the third party purchases all notes validly tendered and not
withdrawn.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Albecca and its subsidiaries taken as a whole. Although there
is a limited body of case law interpreting the phrase "substantially all," there
is no precise established definition of the phrase under applicable law.
Accordingly, holders of notes cannot be certain whether and when they can
require Albecca to repurchase such notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of Albecca and
its subsidiaries taken as a whole.
Asset Sales
Albecca will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) Albecca or the Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) such fair market value is determined by Albecca's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by Albecca or
such Restricted Subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:
(a) any liabilities, as shown on Albecca's or such Restricted
Subsidiary's most recent balance sheet, assumed by the transferee of any
such assets pursuant to a customary novation
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agreement that releases the obligor from further liability, other than
contingent liabilities and liabilities which by their terms are
subordinated to the notes or any Subsidiary Guarantee; and
(b) any securities, notes or other obligations received by Albecca
or any such Restricted Subsidiary from such transferee that are
converted into cash by Albecca or such Restricted Subsidiary within 180
days following the closing of such Asset Sale, to the extent of the cash
received.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
Albecca or the Restricted Subsidiary may apply such Net Proceeds at its option:
(1) to permanently repay or retire Senior Debt;
(2) to acquire all or substantially all of the assets of, or a
majority of the Capital Stock of, another Permitted Business, if such
person becomes a Restricted Subsidiary;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any such Net Proceeds, Albecca may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner not prohibited by the indenture.
Any Net Proceeds from Asset Sales not applied or invested as provided above
will constitute Excess Proceeds. When the aggregate amount of Excess Proceeds
exceeds $10.0 million, Albecca must make an offer to all holders of notes (an
"Asset Sale Offer") to purchase or redeem with the Excess Proceeds the maximum
principal amount of notes that may be purchased out of the Excess Proceeds.
Albecca must also make the Asset Sale Offer to holders of Indebtedness that is
pari passu with the notes, that is, Indebtedness ranking equal to the notes as
to right of payment, and those holders will have a right to participate on a pro
rata basis. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest, if any, to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, Albecca may use such Excess Proceeds for
any purpose not otherwise prohibited by the indenture. If the aggregate
principal amount of notes and such other pari passu Indebtedness tendered in an
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select
the notes and such other pari passu Indebtedness to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
Restricted Payments
Albecca will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly
(1) declare or pay any dividend or make any other payment or
distribution (a) on account of Albecca's or any of its Restricted
Subsidiaries' Equity Interests or (b) to the direct or indirect holders of
Albecca's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such, other than dividends or distributions payable in Albecca
Equity Interests other than Disqualified Stock, or dividends or
distributions payable to Albecca or a Restricted Subsidiary of Albecca,
(2) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of Albecca or any Restricted Subsidiary other than any
such Equity Interests owned by Albecca or any Restricted Subsidiary of
Albecca;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes except a payment of interest or principal at the
Stated Maturity thereof, or
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(4) make any Restricted Investment,
all such payments and other actions set forth in clauses (1) through (4) being
collectively referred to as Restricted Payments, unless, at the time of and
after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) after giving pro forma effect to the Restricted Payment as if such
Restricted Payment had been incurred at the beginning of the applicable
four-quarter period, Albecca would have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test described in the first paragraph under "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" below; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Albecca and its Restricted Subsidiaries
after the date of the indenture, excluding Restricted Payments permitted by
clauses (2) and (3) on the next page, is less than the sum, without
duplication, of:
(a) 50% of the Consolidated Net Income of Albecca for the period,
taken as one accounting period, from the beginning of the first fiscal
quarter commencing after the date of the indenture to the end of
Albecca's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment, or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit; plus
(b) 100% of the aggregate Qualified Proceeds received by Albecca
from contributions to its common equity capital or from the issue or
sale of Equity Interests of Albecca other than Disqualified Stock, or
from the issue or sale of Disqualified Stock or debt securities of
Albecca that have been converted into or exchanged for such Equity
Interests, other than Equity Interests or Disqualified Stock or debt
securities sold to a Subsidiary of Albecca; plus
(c) to the extent that any Restricted Investment that was made
after the date of the indenture is sold for Qualified Proceeds or
otherwise liquidated or repaid, the lesser of (1) the Qualified Proceeds
with respect to such Restricted Investment, less the cost of
disposition, if any, and (2) the initial amount of such Restricted
Investment; plus
(d) upon the redesignation of an Unrestricted Subsidiary to a
Restricted Subsidiary, the lesser of (1) the fair market value of the
Subsidiary or (2) the aggregate amount of all investments made in the
Subsidiary; plus
(e) $1.0 million.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of Albecca
or any Subsidiary Guarantor in exchange for, or out of the net cash
proceeds of the substantially concurrent sale of, Equity Interests of
Albecca other than Disqualified Stock, other than to a Restricted
Subsidiary of the Company, provided that the amount of any such net cash
proceeds that are used for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (3) (b) of
the preceding paragraph;
(3) the defeasance, redemption, repurchase, retirement or other
acquisition of subordinated Indebtedness in exchange for, or with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Albecca
to the holders of its common Equity Interests on a pro rata basis;
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(5) so long as no Default or Event of Default shall have occurred and
is continuing, the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Albecca or any Restricted
Subsidiary of Albecca held by any member of Albecca's or any of its
subsidiaries' management, employees or consultants pursuant to any
management, employee or consultant equity subscription agreement or plan or
stock option agreement or stock plan, provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed
(a) U.S. $1.0 million in any twelve-month period, and
(b) in the aggregate, the sum of $5.0 million plus the aggregate
cash proceeds received by Albecca from the reissuance of Equity
Interests by Albecca to members of management of Albecca and its
subsidiaries,
provided that such cash proceeds shall be excluded from clause (3)(b) of the
preceding paragraph; and
(6) the payment of Permitted Quarterly Tax Distributions to the
holders of Capital Stock of Albecca as described below.
As long as Albecca is an S corporation or a substantially similar
pass-through entity for federal income tax purposes, Albecca may make
distributions to its shareholders, during each Quarterly Payment Period, in an
aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, subsequent Permitted Quarterly Tax Distributions shall be increased by
such undistributed portion.
Within 30 days following Albecca's filing of Internal Revenue Service Form
1120S for the immediately preceding taxable year, or within 30 days of a
redetermination of the taxable income of Albecca as a result of a final
agreement with a tax authority, the Tax CPA shall file with the Trustee a
written statement indicating in reasonable detail the calculation of the True-up
Amount. In the case of a True-up Amount due to the shareholders, the Permitted
Quarterly Tax Distribution payable during the immediately following Quarterly
Payment Period shall be increased by such True-up Amount. In the case of a
True-up Amount due to Albecca, the Permitted Quarterly Tax Distribution payable
during the immediately following Quarterly Payment Period shall be reduced by
such True-up Amount and the excess, if any, of such True-up Amount over such
Permitted Quarterly Tax Distribution shall be applied to reduce the immediately
following Permitted Quarterly Tax Distributions until such True-up Amount is
entirely offset.
The amount of all Restricted Payments other than cash shall be the fair
market value on the date of the Restricted Payment of the assets or securities
proposed to be transferred or issued by Albecca or such Restricted Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value of
any assets or securities that are required to be valued by this covenant shall
be determined by the Board of Directors, whose resolution with respect thereto
shall be delivered to the Trustee. The Board of Directors' determination must be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the fair market value exceeds
$1.0 million. Not later than the date of making any Restricted Payment, Albecca
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this "Restricted Payments" covenant were computed,
together with a copy of any fairness opinion or appraisal required by the
indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
Albecca will not, and will not permit any of its Restricted Subsidiaries to
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness, including Acquired Debt, and neither Albecca nor any
Subsidiary Guarantor will issue any Disqualified Stock and will not permit any
of its Restricted Subsidiaries to issue any shares of preferred stock. However,
Albecca and any Restricted Subsidiary may incur Indebtedness, including Acquired
Debt, or issue Disqualified Stock, if the Fixed Charge Coverage Ratio would have
been
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at least 2.0 to 1.0 for Albecca's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued. Such Fixed Charge Coverage Ratio would be determined on a pro
forma basis, including a pro forma application of the net proceeds therefrom, as
if the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The covenant described in this section allows the incurrence of any of the
following items of Indebtedness (collectively, "Permitted Debt"):
(1) Indebtedness under Credit Facilities, or the guarantee of Company
Indebtedness by the Subsidiary Guarantors, to the extent the aggregate
principal amount of all Indebtedness of Albecca and the Subsidiary
Guarantors outstanding under this clause, after giving effect to such
incurrence, does not exceed an amount equal to $65.0 million less the
aggregate amount of all optional or mandatory principal repayments
thereunder constituting permanent reductions of such Indebtedness
contemplated under the caption "Asset Sales";
(2) Indebtedness represented by the notes and the Subsidiary
Guarantees;
(3) Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of Albecca or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $7.5 million at any time outstanding;
(4) other indebtedness of Albecca and its Restricted Subsidiaries
outstanding on the Issue Date;
(5) Permitted Refinancing Indebtedness incurred in exchange for, or
the net proceeds of which are used to refund, refinance or replace,
Indebtedness, other than intercompany Indebtedness, that was permitted by
the indenture to exist or be incurred;
(6) intercompany Indebtedness between or among Albecca and any of its
Wholly Owned Restricted Subsidiaries, or intercompany Indebtedness by a
Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary to
Albecca or a Wholly Owned Restricted Subsidiary, provided, however, that:
(a) if Albecca or any Subsidiary Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
notes in the case of Albecca, or the Subsidiary Guarantee of such
Subsidiary Guarantor in the case of a Subsidiary Guarantor; and
(b) (1) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
Albecca or a Wholly Owned Restricted Subsidiary thereof and (2) any sale
or other transfer of any such Indebtedness to a Person that is not
either Albecca or a Wholly Owned Restricted Subsidiary of Albecca, shall
be deemed, in each case, to constitute an incurrence of such
Indebtedness by Albecca or such Subsidiary, as the case may be, that was
not permitted by this clause (6);
(7) Hedging Obligations incurred for the purpose of fixing or hedging
(a) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this indenture;
(b) the value of foreign currencies purchased or received by
Albecca in the ordinary course of business; or
(c) the price of raw materials used by Albecca or its Restricted
Subsidiaries in a Permitted Business;
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(8) Indebtedness arising from agreements of Albecca or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or Capital Stock of a Restricted
Subsidiary, to the extent that the amount of any such Indebtedness does not
exceed 25% of the gross proceeds of such disposition;
(9) the guarantee by Albecca or any of the Restricted Subsidiaries of
Indebtedness of Albecca or a Restricted Subsidiary that was permitted to be
incurred by another provision of the covenant described in this section;
(10) Acquired Debt in an aggregate principal amount at any time
outstanding not to exceed $10.0 million;
(11) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business, or
intentionally drawn in the case of daylight overdrafts, provided, however,
that such Indebtedness is extinguished within five business days of
incurrence; and
(12) additional Indebtedness, which may be under Credit Facilities, in
an aggregate principal amount or accreted value, as applicable, at any time
outstanding, including all Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (12), not to
exceed $20.0 million,
For purposes of determining compliance with the covenant described in this
section, if an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described above, or is entitled to be
incurred pursuant to the first paragraph of this section under the 2.0 to 1.0
test, Albecca will be permitted to classify such item of Indebtedness on the
date of its incurrence in any manner that complies with the covenant, and such
item of Indebtedness will be treated as having been incurred either pursuant to
only one of such clauses or the first paragraph of this section.
Liens
Albecca will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens unless the notes are secured by such
Lien on an equal and ratable basis.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Albecca will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist any encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to Albecca or any of the Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to Albecca or any of the Restricted Subsidiaries;
(2) make loans or advances to Albecca or any of the Restricted
Subsidiaries;
(3) guarantee any Indebtedness of Albecca or any Restricted
Subsidiary; or
(4) transfer any of its properties or assets to Albecca or any of the
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supple-
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ments, refundings, replacement or refinancings taken as a whole are no more
restrictive, with respect to such dividend and other payment restrictions,
than those contained in such Existing Indebtedness;
(2) the indenture and the notes;
(3) applicable law or any applicable Rules, regulation or order;
(4) any agreement or instrument governing Indebtedness or Capital
Stock of a Person acquired by Albecca or any of its Restricted Subsidiaries
as in effect at the time of such acquisition except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition, which encumbrance or restriction is not applicable to any
Person or the properties or assets of any Person, other than the Person or
the property or assets of the Person so acquired, provided that in the case
of Indebtedness, such Indebtedness was permitted by the terms of the
indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (4) of the preceding paragraph;
(7) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced; or
(8) Contracts for the sale of assets containing customary restrictions
with respect to a subsidiary pursuant to an agreement that has entered into
for the sale or disposition of all or substantially all of the Capital
Stock or the assets of such subsidiary.
Merger, Consolidation or Sale of Assets
Albecca may not, directly or indirectly consolidate or merge with or into
another Person, whether or not Albecca is the surviving corporation, or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person,
unless:
(1) either Albecca is the surviving corporation, or the Person formed
by or surviving any such consolidation or merger, if other than Albecca, or
to which such sale, assignment, transfer, conveyance or other disposition
shall have been made, is a corporation organized or existing under the laws
of the United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger, if other than Albecca, or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made,
assumes all the obligations of Albecca under the notes and the indenture
pursuant to agreements reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) except in the case of a merger of Albecca with or into a Wholly
Owned Restricted Subsidiary of Albecca, Albecca or the Person formed by or
surviving any such consolidation or merger, if other than Albecca, will on
the date of such transaction after giving pro forma effect thereto as if
the same had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the 2.0 to 1.0 test described in the first paragraph of
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" above.
Transactions with Affiliates
Albecca will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or
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assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to Albecca or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by Albecca or such Restricted
Subsidiary with an unrelated Person; and
(2) Albecca delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of
Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement, stock option or other compensation
agreement or plan and other reasonable fees, compensation, benefits and
indemnities paid or entered into by Albecca or any of its Restricted
Subsidiaries in the ordinary course of business to or with the officers,
directors or employees of Albecca or its Restricted Subsidiaries, other
than an increase of more than 10% in the annual base compensation or a
bonus in excess of two times the base salary of Craig A. Ponzio;
(2) transactions between or among Albecca and/or its Restricted
Subsidiaries;
(3) Restricted Payments that are permitted by the provisions of the
indenture described above under "-- Restricted Payments;"
(4) transactions with suppliers or customers in the ordinary course of
business; and
(5) the current lease on Albecca's Atlanta headquarters, any payments
thereunder, and any changes to the lease to the extent that such changes
comply with item (1) in the preceding paragraph.
Limitation on Layering Debt
Albecca will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of Albecca and senior in any respect in right of
payment to the notes. No Subsidiary Guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt of such Subsidiary Guarantor and
senior in any respect in right of payment to such Subsidiary Guarantor's
Subsidiary Guarantee.
Business Activities
Albecca will not, and will not permit any Restricted Subsidiary to, engage
in any business other than Permitted Businesses.
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Reports
Whether or not required by the SEC, so long as any notes are outstanding,
Albecca will furnish to the holders of notes, within the time periods specified
in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if Albecca were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by Albecca's
certified independent accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if Albecca were required to file such reports.
In addition, whether or not required by the SEC, Albecca will file a copy
of all of the information and reports referred to in clauses (1) and (2)above
with the SEC within the time periods specified in the SEC's rules and
regulations, unless the SEC will not accept such a filing, and make such
information available to securities analysts and prospective investors upon
request.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
notes, whether or not prohibited by the subordination provisions
of the indenture;
(2) default in payment when due of the principal of or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by Albecca or any of its Restricted Subsidiaries, for 30
days after notice by the Trustee or by the holders of at least 25%
in principal amount of the notes then outstanding, to comply with
the provisions described above under "-- Change of Control,"
"-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of
indebtedness and Issuance of Preferred Stock";
(4) failure by Albecca or any of its Restricted Subsidiaries, for 60
days after notice by the Trustee or the holders of at least 25% in
principal amount of the notes then outstanding, to comply with any
of the other agreements in the indenture or the notes;
(5) default under any mortgage, indenture or instrument related to any
indebtedness for money borrowed by Albecca or any of its
Restricted Subsidiaries, or the payment of which is guaranteed by
Albecca or any of its Restricted Subsidiaries, whether such
indebtedness or guarantee now exists or is created after the date
of the indenture, if that default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$7.5 million or more; and
(6) failure by Albecca or any of its Restricted Subsidiaries to pay
final judgments totalling more than $7.5 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and
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effect, or any Subsidiary Guarantor, or any Person acting on behalf
of any Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to Albecca
or any of its significant Subsidiaries.
All outstanding notes will become due and payable immediately in the case
of an Event of Default arising from certain events of bankruptcy or insolvency
with respect to Albecca, any Restricted Subsidiary that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary. If any other Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding notes may declare all the notes to be due and payable
immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default, except a Default or
Event of Default relating to the payment of principal or interest, if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding, by notice to the Trustee, may on behalf of the holders of all of
the notes waive any existing Default or Event of Default and its consequences
under the indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the notes.
Albecca is required to deliver to the Trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Albecca is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Albecca or
any Subsidiary Guarantor, as such, shall have any liability for any obligations
of Albecca or the Subsidiary Guarantors under the notes, the indenture, the
Subsidiary Guarantees, the registration rights agreement or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
holder of notes by accepting a note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the notes. The
waiver may not be effective to waive liabilities under the federal securities
laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Albecca may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Subsidiary Guarantors discharged with respect to their Subsidiary
Guarantees ("Legal Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due from the trust referred to below;
(2) Albecca's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and Albecca's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, Albecca may, at its option and at any time, elect to have the
obligations of Albecca and the Subsidiary Guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any failure to comply with those covenants shall not constitute a
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Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events described under "Events of Default," not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events, will no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Albecca must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
and liquidated damages on the outstanding notes on the stated maturity or
on the applicable redemption date, as the case may be, and Albecca must
specify whether the notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, Albecca shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that Albecca has received from, or there has been published by,
the Internal Revenue Service a ruling, or since the date of the indenture,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Albecca shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either on the date of such deposit, other than a Default or
Event of Default resulting from the borrowing of funds to be applied to
such deposit, or at any time in the period ending on the 91st day after the
date of deposit, insofar as Events of Default from bankruptcy or insolvency
events are concerned;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the indenture, to which Albecca or any
of its Restricted Subsidiaries is a party or by which Albecca or any of its
Restricted Subsidiaries is bound;
(6) Albecca must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) Albecca must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by Albecca with the intent of
preferring the holders of notes over the other creditors of Albecca with
the intent of defeating, hindering, delaying or defrauding creditors of
Albecca or others; and
(8) Albecca must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of each note holder affected, an amendment or waiver
may not:
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
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(2) reduce the principal of or change the fixed maturity of any note
or alter the provisions with respect to the redemption of the notes, other
than provisions relating to the covenants described above under "-- Certain
Covenants";
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration;
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of or premium, if any, or interest on the notes;
(7) waive a redemption payment with respect to any note, other than a
payment required by one of the covenants described above under "-- Certain
Covenants"; or
(8) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination or that adversely affects the rights of the
holders of the notes will require the consent of the holders of at least 75% in
aggregate principal amount of notes then outstanding. Notwithstanding the
preceding, without the consent of any holder of notes, Albecca and the Trustee
may amend or supplement the Indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Albecca's obligations to holders
of notes in the case of a merger or consolidation or sale of all or
substantially all of Albecca's assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of Albecca or any Subsidiary Guarantor,
the indenture limits its right to obtain payment of claims in certain cases, or
to realize on certain property received in respect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions but
if it acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the SEC for permission to continue, or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
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BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The notes were offered and sold to qualified institutional buyers in
reliance on Rule 144A. The notes will be issued in registered, global form in
minimum denominations of $1,000 principal amount at maturity and integral
multiples of $1,000 in excess thereof.
The Global Notes will be deposited upon issuance with the Trustee as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry for Certificated Notes."
In addition, transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar with respect
to the notes. The notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised Albecca that DTC is a limited-purpose trust company created
to hold securities for its participating organizations which are called "direct
participants" and to facilitate the clearance and settlement of transactions in
those securities between direct participants through electronic book-entry
changes in accounts of participants. The direct participants include securities
brokers and dealers, including the initial purchasers of the notes, banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and Cedel. Access to DTC's system is also available to other entities
called "indirect participants" that clear through, or maintain a direct or
indirect custodial relationship with, a direct participant.
DTC has advised Albecca that, pursuant to DTC's procedures:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
the direct participants designated by the initial purchasers of the notes
with portions of the principal amount of the Global Notes that have been
allocated to them by the initial purchasers; and
(2) DTC will maintain records of the ownership interests of such
direct participants in the Global Notes and the transfer of ownership
interests by and between direct participants. DTC will not maintain records
of the ownership interests of, or the transfer of ownership interests by
and between, indirect participants or other owners of beneficial interests
in the Global Notes. Direct participants and indirect participants must
maintain their own records of the ownership interests of, and the transfer
of ownership interests by and between, indirect participants and other
owners of beneficial interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein
directly through DTC if they are direct participants in DTC or indirectly
through organizations that are direct participants in DTC. Investors in the Reg
S Temporary Global Notes may hold their interests therein directly through
Euroclear or CEDEL or indirectly through organizations that are participants in
Euroclear or CEDEL. After the expiration of the 40-Day Restricted Period, but
not earlier, investors may also hold interests in the Reg S Permanent Global
Notes through organizations other than Euroclear and CEDEL that are direct
participants in the DTC system. Morgan Guaranty Trust Company of New York,
Brussels office is the operator and depository of Euroclear and Citibank, N.A.
is the operator and depository of CEDEL, each a "nominee" of Euroclear and
CEDEL, respectively. Therefore, they will each be recorded on DTC's records as
the holders of all ownership interests held by them on behalf of Euroclear and
CEDEL, respectively. Euroclear and CEDEL must maintain on their own records the
ownership interests, and
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transfers of ownership interests by and between, their own customers' securities
accounts. DTC will not maintain such records. All ownership interests in any
Global Notes, including those of customers' securities accounts held through
Euroclear or CEDEL, may be subject to the procedures and requirements of DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in a
Global Note to such persons. Because DTC can act only on behalf of direct
participants, which in turn act on behalf of indirect participants and others,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons or entities that are not direct participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the notes see "-- Reg S Temporary and Reg
S Permanent Global Notes" and "-- Transfers of Interests in Global Notes for
Certificated Notes," below.
Except as described in "-- Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Under the terms of the indenture, Albecca, the Subsidiary Guarantors and
the Trustee will treat the persons in whose names the notes are registered,
including notes represented by Global Notes as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, liquidated damages, if any, and
interest on Global Notes registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee as the registered holder under the
indenture. Consequently, neither Albecca, the Trustee nor any agent of Albecca
or the Trustee has or will have any responsibility or liability for any aspect
of DTC's records or any direct participant's or indirect participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Notes, or for maintaining, supervising or reviewing any of DTC's records
or any direct participant's or indirect participant's records relating to the
beneficial ownership interests in any Global Note or any other matter relating
to the actions and practices of DTC or any of its direct participants or
indirect participants.
DTC has advised Albecca that its current payment practice with respect to
securities such as the notes is to credit the accounts of the relevant direct
participants with each payment on the payment date in amounts proportionate to
such direct participant's respective ownership interests in the Global Notes as
shown on DTC's records. Payments by direct participants and indirect
participants to the beneficial owners of the notes will be governed by standing
instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee, Albecca or the Subsidiary Guarantors.
Neither Albecca, the Subsidiary Guarantors nor the Trustee will be liable for
any delay by DTC or its direct participants or indirect participants in
identifying the beneficial owners of the notes, and Albecca and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between indirect participants who hold an interest through a
direct participant, other than indirect participants who hold an interest in the
notes through Euroclear or CEDEL, will be effected in accordance with the
procedures of such direct participant but generally will settle in immediately
available funds. Transfers between and among indirect participants who hold
interests in the notes through Euroclear and CEDEL will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described herein, cross-market transfers between direct participants in
DTC, on the one hand, and indirect participants who hold interests in the notes
through Euroclear or CEDEL, on the other hand, will be effected by Euroclear's
or
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CEDEL's respective nominee through DTC in accordance with DTC's rules on behalf
of Euroclear or CEDEL. However, delivery of instructions relating to crossmarket
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL and within their established deadlines, Brussels time for Euroclear and
United Kingdom time for CEDEL. Indirect participants who hold interest in the
notes through Euroclear and CEDEL may not deliver instructions directly to
Euroclear's or CEDEL's nominee. Euroclear or CEDEL will, if the transaction
meets its settlement requirements, deliver instructions to its respective
nominee to deliver or receive interests on Euroclear's or CEDEL's behalf in the
relevant Global Note in DTC, and make or receive payment in accordance with
normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an indirect
participant who holds an interest in the notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a direct participant in DTC will be
credited, and any such crediting will be reported to Euroclear or CEDEL during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in a Reg
S Permanent Global Note to a DTC participant until the European business day for
Euroclear or CEDEL immediately following DTC's settlement date.
DTC has advised Albecca that it will take any action permitted to be taken
by a holder of notes only at the direction of one or more direct participants to
whose account interests in the Global Notes are credited and only in respect of
such portion of the aggregate principal amount of the notes to which such direct
participant or direct participants has or have given direction. However, if
there is an Event of Default under the notes, DTC reserves the right to exchange
Global Notes without the direction of one or more of its direct participants for
legended notes in certificated form, and to distribute such certificated forms
of notes to its direct participants. See "-- Transfers of Interests in Global
Notes for Certificated Notes," below.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Reg S Permanent Global Notes and in
the U.S. Global Notes among direct participants, including Euroclear and CEDEL,
they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of
Albecca, the Subsidiary Guarantors, the initial purchasers of the notes or the
Trustee shall have any responsibility for the performance by DTC, Euroclear or
CEDEL or their respective direct and indirect participants of their respective
obligations under the rules and procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that Albecca believes to
be reliable, but Albecca takes no responsibility for the accuracy thereof.
Reg S Temporary and Reg S Permanent Global Notes
An indirect participant who holds an interest in Reg S Temporary Global
Notes through Euroclear or CEDEL must provide Euroclear or CEDEL, as the case
may be, with a certificate in the form required by the Indenture certifying that
such indirect participant either (a) is not a U.S. Person, as defined below, or
(b) has purchased such interests in a transaction that is exempt from the
registration requirements under the Securities Act. Euroclear or CEDEL, as the
case may be, must provide to the Trustee or the Paying Agent if other than the
Trustee, a certificate in the form required by the indenture prior to any
exchange of such beneficial interests for beneficial interests in Reg S
Permanent Global Notes.
"U.S. Person" means:
(1) any individual resident in the United States;
(2) any partnership or corporation organized or incorporated under the
laws of the United States
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(3) any estate of which an executor or administrator is a U.S. Person,
other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets;
(4) any trust of which any trustee is a U.S. Person, other than a
trust of which at least one trustee is a non-U.S. Person who has sole or
shared investment discretion with respect to its assets, and no beneficiary
of the trust, and no settler, if the trust is revocable, is a U.S. Person;
(5) any agency or branch of a foreign entity located in the United
States;
(6) any non-discretionary or similar account, other than an estate or
trust, held by a dealer or other fiduciary for the benefit or account of a
U.S. Person;
(7) any discretionary or similar account, other than an estate or
trust, held by a dealer or other fiduciary organized, incorporated or
resident in the United States, other than such an account held for the
benefit or account of a non-U.S. Person; or
(8) any partnership or corporation organized or incorporated under the
laws of a foreign jurisdiction and formed by a U.S. person principally for
the purpose of investing in securities not registered under the Securities
Act, unless it is organized or incorporated and owned by "accredited
investors" within the meaning of Rule 501(a) under the Securities Act who
are not natural persons, estates or trusts;
provided, however that the term "U.S. Person" shall not include a branch or
agency of a U.S. Person that is located and operating outside the United States
for valid business purposes as a locally regulated branch or agency engaged in
the banking or insurance business, any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country, the international organizations set forth in Section
902(o)(7) of Regulation S under the Securities Act and any other similar
international organizations, and their agencies, affiliates and pension plans.
Transfers of Interests in One Global Note for Interests in Another Global Note
Prior to the expiration of the 40-Day Restricted Period, an indirect
participant who holds an interest in Reg S Temporary Global Notes through
Euroclear or CEDEL will not be permitted to transfer its interest to a U.S.
Person who takes delivery in the form of an interest in U.S. Global Notes. After
the expiration of the 40-Day Restricted Period, an indirect participant who
holds an interest in Reg S Global Notes will be permitted to transfer its
interest to a U.S. Person who takes delivery in the form of an interest in U.S.
Global Notes only upon receipt by the Trustee of a written certification from
the transferor to the effect that such transfer is being made in accordance with
the restrictions on transfer described in the indenture and set forth in the
legend printed on the Reg S Permanent Global Notes.
Prior to the expiration of the 40-Day Restricted Period, a Direct or
Indirect Participant who holds an interest in U.S. Global Notes will not be
permitted to transfer its interests to any person that takes delivery thereof in
the form of an interest in the Reg S Temporary Global Notes. After the
expiration of the 40-Day Restricted Period, a direct or indirect participant who
holds an interest in U.S. Global Notes may transfer its interests to a person
who takes delivery in the form of an interest in Reg S Permanent Global Notes
only upon receipt by the Trustee of a written certification from the transferor
to the effect that such transfer is being made in accordance with Rule 904 of
Regulation S.
Transfers involving an exchange of a beneficial interest in Reg S Global
Notes for a beneficial interest in U.S. Global Notes or vice versa will be
effected by DTC by means of an instruction originated by the Trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. Accordingly, in connection with
such transfer, appropriate adjustments will be made to reflect a decrease in the
principal amount of the one Global Note and a corresponding increase in the
principal amount of the other Global Note, as applicable. Any beneficial
interest in the one Global Note that is transferred to a person who takes
delivery in the form of the other Global Note will, upon transfer, cease to be
an interest in such first Global Note and become an interest in such other
Global Note and, accordingly, will thereafter be subject
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to all transfer restrictions and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
Transfers of Interests in Global Notes for Certificated Notes
An entire Global Note may be exchanged for definitive notes in registered,
certificated form without interest coupons ("Certificated Notes") if:
(1) DTC notifies Albecca that it is unwilling or unable to continue as
depositary for the Global Notes and Albecca thereupon fails to appoint a
successor depositary within 90 days, or DTC has ceased to be a clearing
agency registered under the Exchange Act;
(2) Albecca, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Certificated Notes; or
(3) there shall have occurred and be continuing a Default or an Event
of Default with respect to the notes.
In any such case, Albecca will notify the Trustee in writing that, upon
surrender by the direct and indirect participants of their interest in such
Global Note, Certificated Notes will be issued to each person that such direct
and indirect participants and the DTC identify as being the beneficial owner of
the related notes.
Beneficial interests in Global Notes held by any direct or indirect
participant may be exchanged for Certificated Notes upon request to DTC, or by
such direct participant, for itself or on behalf of an indirect participant, to
the Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such direct or indirect participants in accordance with DTC's
customary procedures.
Neither Albecca, the Subsidiary Guarantors nor the Trustee will be liable
for any delay by the holder of any Global Note or DTC in identifying the
beneficial owners of notes, and Albecca and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of the
Global Note or DTC for all purposes.
Transfers of Certificated Notes for Interests in Global Notes
Certificated Notes may only be transferred if the transferor first delivers
to the Trustee a written certificate and, in certain circumstances, an opinion
of counsel confirming that in connection with such transfer it has complied with
the restrictions on transfer described in the indenture.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the notes represented by
the Global Notes be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global Note.
With respect to Certificated Notes, Albecca will make all payments of principal,
premium, if any, interest and liquidated damages, if any, by wire transfer of
immediately available same day funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address. Albecca expects that secondary trading in the
Certificated Notes will also be settled in immediately available funds.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the registration rights agreement, Albecca will file with the
SEC a registration statement to cover resales of Transferred Restricted
Securities as defined below (the "Shelf Registration Statement"), if any holder
of Transferred Restricted Securities notifies Albecca within 50 days after the
date of this prospectus that:
(1) the holder is prohibited by law or SEC policy from participating in the
exchange offer, other than due solely to the status of such holder as an
affiliate of Albecca within the meaning of the Securities Act; or
(2) the holder may not resell the notes acquired by it in the exchange
offer to the public without delivering a prospectus and this prospectus is not
appropriate or available for such resales, or
(3) the holder is a broker-dealer and owns notes acquired directly from
Albecca or an affiliate of Albecca.
Albecca will use its best efforts to cause the Shelf Registration Statement
to be declared effective as promptly as possible by the SEC.
For purposes of the foregoing, "Transfer Restricted Securities" means each
note until:
(1) the date on which such note has been exchanged by a person other than a
broker-dealer for a note in the exchange offer;
(2) following the exchange by a broker-dealer in the exchange offer of a
note for a note, the date on which such note is sold to a purchaser who receives
a copy of this prospectus from such broker-dealer on or prior to the date of
such sale;
(3) the date on which such note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement; or
(4) the date on which such note is distributed to the public pursuant to
Rule 144 under the Securities Act.
The registration rights agreement provides that Albecca will use its best
efforts to file the Shelf Registration Statement with the SEC within 75 days
after such filing obligation arises and to cause the Shelf Registration
Statement to be declared effective by the SEC within 150 days after such
obligation arises. Albecca will be required to pay the note holders liquidated
damages if:
(1) Albecca fails to file the Shelf Registration Statement by the required
date,
(2) the Shelf Registration Statement is not declared effective by the SEC
by the required date, or
(3) Albecca fails to consummate the exchange offer within 30 days after it
begins, or
(4) the Shelf Registration Statement or the registration statement filed in
connection with the exchange offer is declared effective but thereafter ceases
to be effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the registration rights agreement
(each such event referred to in clauses (1) through (4) above, a "Registration
Default").
With respect to the 90-day period immediately following the occurrence of the
first Registration Default Albecca will pay liquidated damages to a holder equal
to $0.05 per week per $1,000 principal amount of notes held by such holder. The
amount of the liquidated damages will increase by an additional $0.05 per week
per $1,000 principal amount of notes for each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $0.30 per week per $1,000 principal amount of notes. All accrued
liquidated damages will be paid by Albecca to the Global Note Holder by wire
transfer of immediately available funds or by federal funds check and to holders
of Certificated Securities by wire transfer to the accounts specified by them or
by mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease.
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Holders of notes will be required to deliver to Albecca information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth above.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to Albecca at 3900 Steve
Reynolds Boulevard, Norcross, Georgia 30093, Attention: Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person or assumed in connection with the acquisition of any
asset used or useful in a Permitted Business acquired by such specified
Person, provided that such Indebtedness was not incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, or such acquisition, as the
case may be.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
"controlling," "controlled by" and "under common control with" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise, provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights other than sales of inventory in the ordinary course of business
consistent with past practices and operating leases entered into in the
ordinary course of business, provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company
and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under "-- Certain Covenants --
Change of Control" and/or the provisions described above under "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the
provisions of the covenant described under "-- Certain Covenants -- Asset
Sales"); and
(2) the sale by Albecca and the issue or sale by any of the Restricted
Subsidiaries of Albecca of Equity Interests of any of Albecca's
Subsidiaries;
in the case of either clause (1) or (2), whether in a single transaction or a
series of related transactions that have a fair market value, as determined in
good faith by the Board of Directors, in excess of $1.0 million or for net cash
proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following shall not be deemed to be
Asset Sales:
(1) a transfer of assets by Albecca to a Wholly Owned Restricted
Subsidiary of Albecca or by a Wholly Owned Restricted Subsidiary of Albecca
to Albecca or to a Wholly Owned Restricted Subsidiary of Albecca;
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(2) an issuance of Equity Interests by a Restricted Subsidiary of
Albecca to Albecca or to a Wholly Owned Restricted Subsidiary of Albecca;
(3) a Restricted Payment that is permitted by the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments;"
(4) the sale and leaseback of any assets within 90 days of the
acquisition of such assets, provided that the sale price of such assets is
not materially less than the acquisition price of such assets; and
(5) the periodic clearance of aged, obsolete or discontinued
inventory.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents however
designated, of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited; and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) securities issued or unconditionally and fully guaranteed or
insured by the full faith and credit of the United States government or any
agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition;
(2) obligations issued or fully guaranteed by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Group or
Moody's Investors Service, Inc.;
(3) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any lender party to the Credit Facilities or
with any domestic commercial bank having capital and surplus in excess of
$250.0 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (1) and (3) above,
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having one of the two of the highest ratings
obtainable from either Moody's or S&P and in each case maturing within one
year after the date of acquisition; and
(6) investments in funds investing exclusively in investments of the
types described in clauses (1) through (5) above.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition other
than by way of merger or consolidation, in one or a series of related
transactions, of all or substantially all of the assets of Albecca and its
Subsidiaries taken as a whole to any "person" as such term is used in
Section 13(d)(3) of the Exchange Act, other than the Principals and their
Related Parties;
(2) the adoption of a plan relating to the liquidation or dissolution
of Albecca;
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(3) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which is that (A)
any "person", as defined above, other than the Principals and their Related
Parties, becomes the "beneficial owner", as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, of 40% or more of the Voting
Stock of Albecca measured by voting power rather than number of shares, and
(B) the Principals and their Related Parties beneficially own, directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of
Albecca than such other "person";
(4) the first day on which a majority of the members of the Board of
Directors of Albecca are not Continuing Directors; or
(5) Albecca consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, Albecca, in any such
event pursuant to a transaction in which any of the outstanding Voting
Stock of Albecca is converted into or exchanged for cash, securities or
other property, other than any such transaction where:
(a) the Voting Stock of Albecca outstanding immediately prior to
such transaction is converted into or exchanged for Voting Stock, other
than Disqualified Stock, of the surviving or transferee Person; and
(b) either the "beneficial owners," as defined above, of the Voting
Stock of Albecca immediately prior to such transaction own, directly or
indirectly through one or more subsidiaries, not less than a majority of
the total Voting Stock of the surviving or transferee corporation
immediately after such transaction, or if, immediately prior to such
transaction Albecca is a direct or indirect subsidiary of any other
Person (such other Person, the "Holding Company"), then the "beneficial
owners" of the Voting Stock of such Holding Company immediately prior to
such transaction own, directly or indirectly through one or more
subsidiaries, not less than a majority of the Voting Stock of the
surviving or transferee corporation immediately after such transaction.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus
(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, to the extent such losses were
deducted in computing such Consolidated Net Income of such Person and its
Restricted Subsidiaries; plus
(2) (A) if such Person is an S corporation or substantially similar
pass-through entity for U.S. federal income tax purposes, the amount of all
Permitted Quarterly Tax Distributions for such period, whether or not such
Permitted Quarterly Tax Distributions have actually been distributed, as
adjusted for any True-up Amount determined for such period, plus any
provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, and (B)
if such Person is not an S corporation or substantially similar
pass-through entity for U.S. federal income tax purposes, any provision for
taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes
was included in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized, to the extent that the expense was deducted in computing such
Consolidated Net Income, including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net
payments, if any, pursuant to Hedging Obligations; plus
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(4) depreciation and amortization, including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period, and other non-cash charges of such Person
and its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash charges were deducted in computing such
Consolidated Net Income, excluding any such non-cash charge to the extent
that it represents an accrual of or reserve for cash charges in any future
period or amortization of a prepaid cash charge that was paid in a prior
period; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, in each case, on a consolidated basis and determined in accordance
with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other noncash charges
of, a Restricted Subsidiary of a Person shall be added to Consolidated Net
Income to compute Consolidated EBITDA only to the extent, and in the same
proportion, that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP and reduced
by the amount of Permitted Quarterly Tax Distributions for such period, whether
or not such Permitted Quarterly Tax Distributions have actually been
distributed, as adjusted for any True-up Amount determined for such period;
provided that:
(1) the Net Income, but not loss, of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the referent Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
that has not been obtained or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its shareholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall
be excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Albecca who:
(1) was a member of such Board of Directors on the date of the
indenture immediately after the original offering of the notes; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were either
members of such Board at the time of such nomination or election or are
successor Continuing Directors appointed by such Continuing Directors or
their successors.
"Credit Facilities" means, with respect to Albecca or the Subsidiary
Guarantors, one or more debt facilities or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Facilities outstanding on the
Issue Date shall be deemed to have been incurred on such date in reliance on the
exceptions provided by clause (1) of the definition of Permitted Liens.
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"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means:
(1) any Senior Debt outstanding under the Credit Facilities, and
(2) any other Senior Debt permitted under the indenture the principal
amount of which is $25.0 million or more and that has been designated by
Albecca as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof, or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the notes mature. However, a class of Capital Stock shall not be
Disqualified Stock hereunder solely as the result of any maturity or redemption
that is conditioned upon, and subject to, compliance with the covenant described
above under "-- Certain Covenants -- Restricted Payments," and Capital Stock
issued to any plan for the benefit of employees of Albecca or its subsidiaries
or by any such plan to such employees shall not constitute Disqualified Stock
solely because it may be required to be repurchased by Albecca in order to
satisfy applicable statutory or regulatory obligations.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Equity Offering" means an offering of common stock, other than
Disqualified Stock, of Albecca, pursuant to an effective registration statement
filed with the Commission in accordance with the Securities Act, other than an
offering pursuant to Form S-8 or any successor form.
"Estimation Period" means the period for which a shareholder who is an
individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year in connection with determining
his estimated federal income tax liability for such period.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, pursuant to Hedging
Obligations; provided, however, that in no event shall any amortization of
deferred financing costs incurred in connection with the Offering be
included in Fixed Charges; plus
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus
(4) the product of:
(a) without duplication (1) all dividends paid or accrued in
respect of Disqualified Stock which are not treated as interest for tax
purposes for such period and (2) all cash dividend payments on any
series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests other than Disqualified Stock of Albecca,
times
(b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
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"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that Albecca or any of its
Restricted Subsidiaries incurs, assumes, Guarantees, repays or redeems any
Indebtedness, other than revolving credit borrowings, or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period.
In addition, for purposes of making the computation referred to above:
(1) acquisitions that have been made by Albecca or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated EBITDA for such
reference period shall be calculated without giving effect to clause (3) of
the proviso set forth in the definition of Consolidated Net Income and
shall reflect any pro forma expense and cost reductions attributable to
such acquisitions, to the extent such expense and cost reduction would be
permitted by the SEC under Article 11 of Regulation S-X to be reflected in
pro forma financial statements included in a registration statement filed
with the SEC;
(2) the Consolidated EBITDA attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded and
Consolidated EBITDA shall reflect any pro forma expense or cost reductions
relating to such discontinuance or disposition, to the extent such expense
or cost reductions would be permitted by the SEC to be reflected in pro
forma financial statements included in a registration statement filed with
the SEC;
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Subsidiaries following the
Calculation Date; and
(4) to the extent included in Consolidated EBITDA, all items shall be
excluded which are either extraordinary (as determined in accordance with
GAAP) or nonrecurring, including any gain from the sale or disposition of
assets outside the ordinary course of business or from the issuance or sale
of any Equity Interests, other than Disqualified Stock.
"Foreign Subsidiary" means any Restricted Subsidiary organized or
incorporated in a jurisdiction outside of the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture provided, however,
that all reports and other financial information provided by Albecca to the
Holders, the Trustee and/or the SEC shall be prepared in accordance with GAAP,
as in effect on the date of such report or other financial information.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
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"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, the value of foreign currencies, or
the price of raw materials.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) Capital Lease Obligations; or
(5) the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness, =other than letters of
credit and Hedging Obligations, would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, "Indebtedness" also includes
all indebtedness of others secured by a Lien on any asset of such Person,
whether or not such indebtedness is assumed by such Person, and, to the extent
not otherwise included, the Guarantee by such Person of any indebtedness of any
other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest; and
(2) the principal amount thereof in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all:
(1) investments by such Person in other Persons, including Affiliates,
in the forms of direct or indirect loans, including guarantees of
Indebtedness or other obligations;
(2) advances or capital contributions, excluding commission, travel
and similar advances to officers and employees made in the ordinary course
of business;
(3) purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities; and
(4) all items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP.
If Albecca or any Restricted Subsidiary of Albecca sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of Albecca such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of Albecca, Albecca shall be deemed
to have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
under "-- Certain Covenants -- Restricted Payments" above.
"Issue Date" means August 11, 1998, the date on which notes were first
issued and authenticated under the indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected
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under applicable law including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any option or other agreement to
sell or give a security interest therein.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain, but not loss, together with any related provision for
taxes on such gain, but not loss, realized in connection with (a) any Asset
Sale or (b) the extinguishment of any Indebtedness of such Person or any of
its subsidiaries; and
(2) any extraordinary or nonrecurring gain, but not loss, together
with any related provision for taxes on such extraordinary or nonrecurring
gain, but not loss.
"Net Proceeds" means the aggregate cash proceeds received by Albecca or any
of its Restricted Subsidiaries in respect of any Asset Sale, including any cash
received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale, net of:
(1) the direct costs relating to such Asset Sale;
(2) any relocation expenses incurred as a result thereof;
(3) taxes paid or payable as a result thereof, in each case after
taking into account any available tax credits or deductions and any tax
sharing arrangements;
(4) amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such
Asset Sale, other than Indebtedness under the Credit Facilities; and
(5) any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Albecca nor any of its Restricted Subsidiaries
(a) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness, or (b) is
directly or indirectly liable as a Subsidiary Guarantor or otherwise; and
(2) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of Albecca or any of its
Restricted Subsidiaries, including the stock of such Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, any principal,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Pari Passu Indebtedness" means Indebtedness that ranks pari passu in right
of payment to the notes.
"Paying Agent" means the depository and paying agent designated as such by
Albecca in connection with a Change of Control Offer.
"Permitted Business" means the design, manufacture, distribution,
marketing, licensing and sale of framing-related products and supplies and other
interior accessories and furnishing products and related services.
"Permitted Investments" means:
(1) any Investment in Albecca or in a Subsidiary Guarantor or a Wholly
Owned Foreign Subsidiary that is engaged in a Permitted Business;
(2) any Investment in Cash and Cash Equivalents;
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(3) any Investment by Albecca or any Restricted Subsidiary in a
Person, if as a result of such Investment:
(a) such Person becomes a Subsidiary Guarantor or a Wholly Owned
Foreign Subsidiary that is engaged in a Permitted Business; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Albecca or a Subsidiary Guarantor or a Wholly Owned
Foreign Subsidiary that is engaged in a Permitted Business;
(4) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under "-- Certain
Covenants -- Asset Sales" or any transaction not constituting an Asset Sale
by reason of the $1.0 million threshold contained in the definition
thereof;
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests of Albecca, other than Disqualified Stock of Albecca;
(6) Hedging Obligations entered into in the ordinary course of
Albecca's or its Restricted Subsidiaries' businesses and otherwise in
compliance with the indenture;
(7) additional Investments not to exceed $5.0 million at any one time
outstanding; and
(8) Investments in securities of trade creditors or customers received
in settlement of obligations or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers.
"Permitted Junior Securities" means Equity Interests in Albecca or debt
securities that:
(1) are subordinated to all Senior Debt and any debt securities issued
in exchange for Senior Debt to substantially the same extent as, or to a
greater extent than, the notes are subordinated to Senior Debt pursuant to
Article 10 of the indenture;
(2) have a final maturity date and a weighted average life to maturity
which is the same as or greater than the notes; and
(3) are not secured by any collateral.
"Permitted Liens" means:
(1) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date, other than Liens
extinguished in connection with the application of the proceeds of the
original sale of the notes;
(2) Liens securing Senior Debt and Liens on assets of Restricted
Subsidiaries securing Guarantees of Senior Debt permitted to be incurred
under the indenture;
(3) Liens securing the notes and the Subsidiary Guarantees;
(4) Liens of Albecca or a Wholly Owned Restricted Subsidiary on assets
of any Restricted Subsidiary of Albecca;
(5) Liens securing Permitted Refinancing Indebtedness which is
incurred to refinance any Indebtedness which has been secured by a Lien
permitted under the indenture and which has been incurred in accordance
with the provisions of the indenture, provided that such Liens:
(A) are not materially less favorable to note holders and are not
materially more favorable to the lienholders with respect to such Liens
than the Liens in respect of the Indebtedness being refinanced; and
(B) do not extend to or cover any property or assets of Albecca or
any of its Restricted Subsidiaries not securing the Indebtedness so
refinanced;
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(6) Liens for taxes, assessments or governmental charges or claims
that are not delinquent or are being contested in good faith by appropriate
proceedings and as to which Albecca or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(7) statutory Liens of landlords, workmen and other similarly situated
persons incurred in the ordinary course of business for sums not yet
delinquent for a period of more than 60 days or being contested in good
faith, if any reserve or other appropriate provision required by GAAP shall
have been made in respect thereof;
(8) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security or similar obligations;
(9) Liens securing letters of credit issued in the ordinary course of
business consistent with past practice in connection therewith;
(10) Liens to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations,
exclusive of obligations for the payment of borrowed money;
(11) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(12) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of Albecca or
any of its Restricted Subsidiaries;
(13) any interest or title of a lessor under any lease, whether or not
characterized as capital or operating; provided that such Liens do not
extend to any property or assets which is not leased property subject to
such lease;
(14) Liens securing Capital Lease Obligations and purchase money
Indebtedness incurred in accordance with the covenant described under
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock;" provided, however, that (A) the Indebtedness shall not
exceed the cost of such property or assets being acquired or constructed
and shall not be secured by any property or assets of Albecca or any
Restricted Subsidiary of Albecca other than the property or assets being
acquired or constructed, and (B) the Lien securing such Indebtedness shall
be created within 90 days of such acquisition or construction;
(15) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(16) Liens securing reimbursement obligations with respect to letters
of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(17) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of
Albecca or any of its Restricted Subsidiaries, including rights of set-off;
(18) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is otherwise permitted under the indenture;
(19) Liens securing Acquired Debt incurred in accordance with the
covenant described under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock", provided that (A) such Liens
secured such Acquired Debt at the time of and prior to the incurrence of
such Acquired Debt by Albecca or a Restricted Subsidiary of Albecca and
were not granted in connection
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with, or in anticipation of, the incurrence of such Acquired Debt by
Albecca or a Restricted Subsidiary of Albecca, and (B) such Liens do not
extend to or cover any property or assets of Albecca or any of its
Restricted Subsidiaries other than the property or assets that secured the
Acquired Debt prior to the time such Indebtedness became Acquired Debt of
Albecca or a Restricted Subsidiary of Albecca and are not more favorable to
the lienholders than those securing the Acquired Debt prior to the
incurrence of such Acquired Debt by Albecca or a Restricted Subsidiary of
Albecca;
(20) leases or subleases granted to others not interfering in any
material respect with the business of Albecca or its Restricted
Subsidiaries; and
(21) liens securing Indebtedness of foreign subsidiaries incurred in
accordance with the provisions of the covenant described above in
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock," provided that such Liens relate solely to the assets of
the foreign subsidiaries that incurred such Indebtedness.
"Permitted Quarterly Tax Distributions" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of Albecca
for the related Estimation Period, provided however, that:
(1) prior to any distributions of Tax Amounts Albecca shall deliver an
Officers' Certificate certifying that the Tax Amounts to be distributed
were determined pursuant to the terms of the indenture and stating to the
effect that Albecca qualifies as an S corporation or substantially similar
pass-through entity for federal income tax purposes; and
(2) at the time of such distributions, the most recent audited
financial statements of Albecca reflect that Albecca was treated as an S
corporation or substantially similar pass-through entity for federal income
tax purposes for the period covered by such financial statements.
"Permitted Refinancing Indebtedness" means any Indebtedness of Albecca or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, prepay, retire, renew, replace, defease or refund
Indebtedness of Albecca or any of its Subsidiaries other than such Indebtedness
described in clauses (1), (6), (7), (8), (9), (11) and (12) of the covenant
described above under "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock", provided that:
(1) the principal amount, or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount of,
or accreted value, if applicable, plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, prepaid, retired, replaced,
defeased or refunded plus the amount of reasonable expenses incurred in
connection therewith including premiums paid, if any, to the holders
thereof, such principal amount to be calculated as to foreign subsidiaries
on an aggregate consolidated basis in the case of a consolidated
refinancing of Indebtedness of foreign subsidiaries;
(2) such Permitted Refinancing Indebtedness has a final maturity date
at or later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, prepaid,
retired, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, prepaid,
retired, replaced, defeased or refunded is subordinated in right of payment
to the notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in right of
payment to, the notes on terms at least as favorable to the holders of
notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness either is incurred by Albecca or is incurred by
the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or
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refunded, or, in the case of a consolidated refinancing of the Indebtedness
of the foreign subsidiaries, by all of the foreign subsidiaries which are
obligors.
In the case of Permitted Refinancing Indebtedness incurred by Albecca under
a revolving credit facility or facilities to refinance, refund or replace
Indebtedness of foreign subsidiaries, and any successive Permitted Refinancing
Indebtedness incurred with respect thereto:
(a) such Permitted Refinancing Indebtedness shall include all
successive readvances, reborrowings and other Indebtedness thereafter
incurred under such facility or facilities up to the original principal
amount of such Permitted Refinancing Indebtedness; and
(b) such Indebtedness being refinanced shall be deemed to have been
outstanding on the Issue Date so long as the aggregate amount thereof at
the time of the refinancing does not exceed the aggregate amount of
Indebtedness of foreign subsidiaries outstanding on the Issue Date.
"Person" means any individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Principals" means Craig A. Ponzio and June R. Ponzio.
"Qualified Proceeds" means any of the following or any combination of the
following:
(1) cash;
(2) Cash Equivalents;
(3) long-term assets that are used or useful in a Permitted Business;
and
(4) the Capital Stock of any Person engaged primarily in a Permitted
Business if, in connection with the receipt by Albecca or any Restricted
Subsidiary of Albecca of such Capital Stock, (a) such Person becomes a
Wholly Owned Restricted Subsidiary and a Subsidiary Guarantor or (b) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, Albecca
or any Wholly Owned Restricted Subsidiary of Albecca that is a Subsidiary
Guarantor.
"Quarterly Payment Period" means the period commencing on the first day of
each month in which federal individual tax payments are due and ending on and
including the day of such month on which such payments are due, provided that
payments in respect of estimated state income taxes due in January may instead,
at the option of Albecca, be paid during the last five days of the immediately
preceding December.
"Related Party" with respect to any Principal means:
(1) any controlling shareholder or a majority, or more, owned
Subsidiary of such Principal or, in the case of an individual, any spouse
or immediate family member of such Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, shareholders, partners, owners or Persons beneficially
holding a majority, or more, controlling interest of which consist of such
Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of Albecca other than an
Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of Albecca or any Subsidiary Guarantor
outstanding under Credit Facilities and all Hedging Obligations with
respect thereto;
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(2) other Indebtedness of Albecca or any of its Subsidiary Guarantors
permitted to be incurred under the terms of the indenture, unless the
instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
notes; and
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include:
(a) any liability for federal, state, local or other taxes owed or
owing by Albecca;
(b) any Indebtedness of Albecca to any of its Subsidiaries or other
Affiliates;
(c) any trade payables; or
(d) that portion of any Indebtedness that is incurred in violation
of the indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50% of the total Voting Stock thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof; and
(2) any partnership:
(a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person; or
(b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person or any combination thereof.
"Subsidiary Guarantors" means, initially, each subsidiary of Albecca, other
than foreign subsidiaries and Unrestricted Subsidiaries, on the Issue Date and
thereafter each of the subsidiaries of Albecca that executes a Subsidiary
Guarantee in accordance with the provisions of the indenture, and their
respective successors and assigns.
"Tax Amounts" with respect to any taxable period shall not exceed an amount
equal to:
(A) the product of (1) the taxable income of Albecca for such period,
or as such amount may be subsequently adjusted based upon a redetermination
agreed upon with applicable tax authorities, as determined by the Tax CPA
and (2) the Tax Percentage; plus
(B) the amount of any interest and penalties assessed in connection
with such a redetermination; reduced by
(C) to the extent not previously taken into account, any income tax
benefit attributable to Albecca which could be realized, without regard to
actual realization, by its shareholders in the current or any prior taxable
year, or portion thereof, commencing on or after the date of the indenture,
including any tax losses or tax credits, computed at the applicable Tax
Percentage for the year that such benefit is taken into account for
purposes of this computation.
"Tax CPA" means a nationally recognized certified public accounting firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of U.S. federal and state and local income tax,
imposed on an individual taxpayer, as certified by the Tax CPA in a certificate
filed with the Trustee. The rate of state and local income tax to be taken into
account
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for purposes of determining the Tax Percentage for a particular taxable year
shall be deemed to be the highest state and local marginal tax rate applicable
to any shareholder.
"True-up Amount" means;
(1) in respect of a particular taxable year, an amount determined by
the Tax CPA equal to the difference between the aggregate
Permitted Quarterly Tax Distributions actually distributed in
respect of such taxable year; and
(2) the actual Tax Amounts for such year.
The amount equal to the excess, if any, of the amount described in
clause (1) over the amount described in clause (2) above shall be
referred to as the "True-up Amount due to Albecca" and the excess, if
any, of the amount described in clause (2) over the amount described in
clause (1) above shall be referred to as the "True-up Amount due to the
shareholders."
"True-up Determination Date" means the date on which the Tax CPA delivers a
statement to the Trustee indicating the True-up Amount.
"Unrestricted Subsidiary" means:
(1) HBA L.L.C. and HBA-MS Inc.; and
(2) any Subsidiary of Albecca, other than the Subsidiary Guarantors as
of the date of the indenture or any successor to any of them, that
is designated by the Board of Directors of Albecca as an
Unrestricted Subsidiary pursuant to a board resolution, but only
to the extent that such Subsidiary:
(A) has no Indebtedness other than Non-Recourse Debt;
(B) is not party to any agreement, contract, arrangement or
understanding with Albecca or any Restricted Subsidiary unless
the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Albecca or such
Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of Albecca;
(C) is a Person with respect to which neither Albecca nor any of
its Restricted Subsidiaries has any direct or indirect
obligation to subscribe for additional Equity Interests, or to
maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating
results; and
(D) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Albecca or any of its
Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the board resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing conditions and was permitted by the
covenant described above under "-- Certain Covenants -- Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
Albecca as of such date. The Board of Directors of Albecca may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness and
issuance of preferred stock by a Restricted Subsidiary of Albecca of any
outstanding Indebtedness or outstanding issue of preferred stock of such
Unrestricted Subsidiary and such designation shall only be permitted if:
(a) such Indebtedness and preferred stock is permitted under the
covenant described under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock" calculated on a
pro forma basis as if such designation had occurred at the
beginning of the four quarter reference period;
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(b) such Subsidiary becomes a Subsidiary Guarantor, and
(c) no Default or Event of Default would exist following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (A) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (B) the number of years calculated to the nearest
one-twelfth that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Foreign Subsidiary" of any Person means a Foreign Subsidiary
of such Person all of the outstanding Capital Stock or other ownership interests
of which, other than directors' qualifying shares or shares required to be owned
by foreign nationals by applicable law, shall at the time be owned by such
Person or by one or more Wholly Owned Foreign Subsidiaries of such Person or by
such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares or shares
required to be owned by foreign nationals by applicable law, shall at the time
be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries
of such Person or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax consequences of the ownership and disposition of the notes. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"),
regulations, rulings and decisions as in effect on the date of this prospectus,
all of which are subject to change, possibly with retroactive effect, and to
differing interpretations. This summary deals only with holders that will
acquire their notes at original issuance and will hold notes as capital assets,
and does not address tax considerations applicable to investors that may be
subject to special tax rules, such as banks, tax-exempt entities, insurance
companies or dealers in securities or currencies, persons that will hold notes
as a position in a "straddle" or conversion transaction, or as part of a
"synthetic security" or other integrated financial transaction, or persons that
have a "functional currency" other than the U.S. dollar.
As used herein, the term "United States holder" means a beneficial owner of
a note that is a United States person or that otherwise is subject to United
States federal income taxation on a net income basis in respect of the notes
because such person is engaged in a trade or business in the United States and
income and gain received in respect of the notes is effectively connected with
the conduct of such trade or business. The term "United States person" means a
holder of a note who is a citizen or resident alien individual of the United
States, or that is a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, an estate the income of which is subject to United States federal
income taxation regardless of its source, or a trust if:
(1) a U.S. court is able to exercise primary supervision over the
trust's administration; and
(2) one or more United States persons have the authority to control
all of the trust's substantial decisions.
The term "United States" means the United States of America, including the
States and the District of Columbia, its possessions, territories and other
areas subject to its jurisdiction.
Investors should consult their own tax advisors in determining the specific
tax consequences to them of holding and disposing of notes, including the
application to their particular situation of the United States federal income
tax considerations discussed below, as well as the application of state, local,
foreign and other tax laws.
The exchange offer is structured so that the exchange of notes pursuant to
the exchange offer will not be a taxable event for U.S. federal income tax
purposes. As a result, no material U.S. federal income tax consequences will
result to United States holders exchanging notes. A tendering holder's tax basis
in the notes received will be the same as such holder's tax basis in its notes
surrendered therefor. A tendering holder's holding period for the notes received
pursuant to the exchange offer will include its holding period for the notes
surrendered therefor.
UNITED STATES HOLDERS
Payments of Interest
Payments of interest on a note will be taxable to a United States holder as
ordinary interest income at the time that such payments are accrued or are
received in accordance with the United States holder's method of tax accounting.
Liquidated Damages
Any Liquidated Damages described herein under "Description of the
Notes -- Registration Rights; Liquidated Damages" will be taxable to a United
States holder as ordinary income in accordance with such United States holder's
method of tax accounting.
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Information Reporting and Backup Withholding
A noncorporate United States holder may be subject to information reporting
and to backup withholding at a rate of 31 percent with respect to payments of
principal and interest made on a note, or on proceeds of disposition of a note
before maturity, unless such United States holder provides proof of an
applicable exemption or a correct taxpayer identification number, and otherwise
complies with applicable requirements of the information reporting and backup
withholding rules.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against the United States person's United States federal
income tax liability provided the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
Under current United States federal income tax law:
(1) payments of interest and principal to a holder who is not a United
States holder (a "non-United States holder") will not be subject to
withholding of United States federal income tax, provided that (a) the
holder does not actually or constructively under the applicable attribution
rules of the Code own 10 percent or more of the total combined voting power
of all classes of stock of the Company entitled to vote, is not a bank
receiving interest on the notes in the ordinary course of its banking
business as described in Section 881(c)(3)(A) of the Code and is not a
controlled foreign corporation for federal income tax purposes related
directly or indirectly to the Company through stock ownership and (b) the
beneficial owner provides to the Company or a paying agent a statement
signed under penalties of perjury that includes its name and address and
certifies that it is a non-United States holder in compliance with
applicable requirements or, with respect to payments made after December
31, 1999, satisfies certain documentary evidence requirements for
establishing that it is a non-United States holder; and
(2) a non-United States holder will not be subject to United States
federal income tax on gain realized on the disposition of a note.
Notwithstanding the above, a non-United States holder that is subject to United
States federal income taxation on a net income basis with respect to its income
from a note generally will be subject to the same rules to which a United States
holder is subject with respect to the accrual of interest on a note and with
respect to gain or loss realized or recognized on the disposition of a note.
Such a non-United States holder that is a foreign corporation may also be
subject to a branch profits tax at the rate of 30 percent or such lower rate as
may be specified by an applicable income tax treaty on its effectively connected
earnings and profits for the taxable year, subject to various adjustments. For
this purpose, interest and gain received in respect of a note will be included
in the effectively connected earnings and profits of such non-United States
holder if such interest or gain is effectively connected with the conduct by
such holder of a trade or business in the United States. Moreover, a non-United
States holder who is an individual but who is not otherwise subject to United
States federal income taxation on a net basis with respect to a note will
nonetheless be subject to a 30 percent withholding tax on any gain other than
that attributable to accrued interest realized upon the sale, exchange or
retirement of a note if such individual is present in the United States for a
period or periods aggregating 183 days or more during the calendar year or
taxable year if one has been established in which such disposition occurs, and
either:
(1) such individual has a "tax home", as defined in Section 911(d)(3)
of the Code, in the United States unless such gain is attributable to an
office or other fixed place of business in a foreign country maintained by
such individual and has been subject to a foreign tax of at least 10
percent; or
(2) the gain is attributable to an office or other fixed place of
business in the United States. Special rules might also apply to a
non-United States holder that is a qualified resident of a country with
which the United States has an income tax treaty. A note held by an
individual holder who at the time of death was a non-resident alien will
not be subject to United States federal estate tax so long as at the time
of death such individual did not own actually or constructively, under the
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applicable attribution rules of the Code, 10 percent or more of the total
combined voting power of all classes of stock of Albecca entitled to vote
and was not subject to United States federal income taxation on a net
income basis with respect to its income from the note.
Information Reporting and Backup Withholding
United States information reporting requirements and backup withholding tax
will not apply to payments on, or proceeds from the disposition of, a note held
by a non-United States holder if the beneficial owner certifies its non-United
States status under penalties of perjury or, with respect to payments made after
December 31, 1999, satisfies certain documentary evidence requirements for
establishing that it is a non-United States holder, or otherwise establishes an
exemption; provided that neither Albecca nor its payment agent has actual
knowledge that the person is a United States person or that the conditions of
any other exemption are not in fact satisfied.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against the non-United States person's United States federal
income tax liability, provided that the required information is furnished to the
IRS.
On October 7, 1997, the U.S. Treasury Department issued final Treasury
regulations and subsequently released guidance regarding the effective date of
such Treasury regulations (the "Treasury Regulations") governing information
reporting and the certification procedures regarding withholding and backup
withholding on certain amounts paid to non-United States persons after December
31, 1999. Such regulations, among other things, may change the certification
procedures relating to the receipt by intermediaries of payments on behalf of a
beneficial owner of a note. Furthermore, with respect to payments made after
December 31, 1999, for purposes of applying the rules set forth in this and the
two preceding paragraphs to an entity that is treated as fiscally transparent
(e.g., a partnership or certain trusts) for United States federal income
taxation purposes, the beneficial owner means each of the ultimate beneficial
owners of the entity. Prospective investors should consult their tax advisors
regarding the effect, if any, of such new Treasury Regulations on an investment
in the notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such notes.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of notes received in exchange
for notes where such notes were acquired as a result of market-making activities
or other trading activities. Albecca has agreed that it will make this
prospectus available to any Participating Broker-Dealer for a period of time not
to exceed one year after the date on which the exchange offer is consummated for
use in connection with any such resale. In addition, until such date, all
broker-dealers effecting transactions in the notes may be required to deliver a
prospectus.
Albecca will not receive any proceeds from any sale of notes by
broker-dealers. Notes received by broker-dealers for their own account pursuant
to the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such notes. Any broker-dealer that resells notes that were
received by it for its own account pursuant to the exchange offer and any broker
or dealer that participates in a distribution of such notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by
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delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
Starting on the expiration date, Albecca will promptly send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any broker-dealer that requests such documents in the letter of transmittal.
Albecca has agreed to pay all expenses incident to the exchange offer, including
the expenses of one counsel for the holders of the notes, other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
notes, including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for Albecca by
Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia, and, as to matters
governed by New York law only, by Robinson Silverman Pearce Aronsohn & Berman
LLP, New York, New York. Philip H. Moise, a partner in the law firm of Nelson
Mullins Riley & Scarborough, L.L.P., serves as a director of Albecca.
EXPERTS
The consolidated financial statements included in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their report. In that report, that firm states that with respect to Larson-Juhl
Netherlands B.V. its opinion is based on the report of other independent public
accountants, BDO CampsObers. The financial statements referred to above have
been included herein in reliance upon the authority of those firms as experts in
giving said reports.
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ALBECCA INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Public Accountants -- Arthur
Andersen LLP........................................... F-2
Report of the Auditors -- BDO CampsObers.................. F-3
Consolidated Balance Sheets as of August 31, 1997, August
30, 1998 and November 29, 1998 (Unaudited)............. F-4
Consolidated Statements of Operations for each of the
three years in the period ended August 30, 1998 and for
the quarters ended November 29, 1998 and November 30,
1997 (Unaudited)....................................... F-5
Consolidated Statements of Shareholders' Equity (Deficit)
for each of the three years in the period ended August
30, 1998 and the quarter ended November 29, 1998
(Unaudited)............................................ F-6
Consolidated Statements of Cash Flows for each of the
three years in the period ended August 30, 1998 and for
the quarters ended November 29, 1998 and November 30,
1997 (Unaudited)....................................... F-7
Notes to Consolidated Financial Statements................ F-8
</TABLE>
F-1
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Albecca Inc.:
We have audited the accompanying consolidated balance sheets of ALBECCA
INC. (a Georgia corporation) and subsidiaries as of August 30, 1998 and August
31, 1997 and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for each of the three years in the period ended
August 30, 1998. These financial statements are the responsibility of Albecca's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Larson-Juhl Netherlands B.V. and subsidiaries, which statements reflect total
assets of 6% and 5% at August 30, 1998 and August 31, 1997, respectively, and
total revenues of 5%, 6%, and 7% for each of the three years in the period ended
August 30, 1998. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for that entity, is based solely on the report of other auditors.
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.
Our audits also included examining, on a test basis, evidence supporting the
translation of Larson-Juhl Netherlands B.V.'s financial statements from Dutch
guilders to U.S. dollars and from Part 9, Book 2 of the Dutch Civil Code to
generally accepted accounting principles. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Albecca Inc. and subsidiaries as of August 30, 1998
and August 31, 1997 and the results of their operations and their cash flows for
each of the three years in the period ended August 30, 1998 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 6, 1998
F-2
<PAGE> 97
LARSON-JUHL NETHERLANDS B.V.
REPORT OF THE AUDITORS
To the shareholders of Larson-Juhl Netherlands B.V.:
We have audited the financial statements of Larson-Juhl Netherlands B.V. at
Barneveld, the Netherlands for the three years ended August 30, 1998.
Albecca's management is responsible for the preparation of these financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
We conducted our audit in accordance with auditing standards generally
accepted in the Netherlands. The results of the audit would not have been
materially different had the audit been conducted in accordance with generally
accepted auditing standards in the United States. The standards in the
Netherlands 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
accessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements for the period September 1, 1997 up
to and including August 30, 1998 and including those for the fiscal year 1996
(for the period August 28, 1995 up to and including August 25, 1996) and the
fiscal year 1997 (for the period August 26, 1996 up to and including August 31,
1997) as previously audited by us, give a true and fair view of the state of
Albecca's affairs at August 30, 1998 and August 31, 1997 and of the results of
its operations and cash flows for the three years ended August 30, 1998 and have
been properly prepared in accordance with accounting principles generally
accepted in The Netherlands and comply with the financial reporting requirements
included in Part 9, Book 2 of the Dutch Civil Code.
/s/ BDO CampsObers
Arnhem, The Netherlands
BDO CampsObers
Registered accountants
Arnhem, October 6, 1998
F-3
<PAGE> 98
ALBECCA INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30, NOVEMBER 29,
1997 1998 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 5,301 $ 54,884 $ 48,488
Accounts receivable, less allowances for doubtful accounts
of $5,378, $5,859 and $6,742, at August 31, 1997,
August 30, 1998 and November 29, 1998.................. 49,270 50,785 62,748
Inventories............................................... 68,209 75,819 77,349
Other current assets...................................... 4,879 7,024 7,138
-------- -------- --------
Total current assets.............................. 127,659 188,512 195,723
PROPERTY, PLANT, AND EQUIPMENT, net......................... 52,675 61,758 63,172
OTHER LONG-TERM ASSETS...................................... 28,355 55,652 58,884
-------- -------- --------
$208,689 $305,922 $317,779
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 28,079 $ 35,205 $ 30,345
Accounts payable.......................................... 28,296 28,165 30,247
Accrued liabilities....................................... 27,982 27,992 35,861
-------- -------- --------
Total current liabilities......................... 84,357 91,362 96,453
-------- -------- --------
LONG-TERM DEBT, less current maturities (Note 4)............ 80,647 227,564 234,628
-------- -------- --------
OTHER LONG-TERM LIABILITIES................................. 6,372 12,640 12,440
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY (DEFICIT)(Notes 1 and 6):
Preferred stock, $0.01 par value; no shares authorized and
outstanding at August 31, 1997, 50,000,000 shares
authorized and no shares issued and outstanding at
August 30, 1998 and November 29, 1998.................. -- -- --
Common stock, $0.01 par value; 20,000,000 shares
authorized, 17,000,000 shares issued and outstanding at
August 31, 1997 and no shares issued and outstanding at
August 30, 1998 and November 29, 1998.................. 170 -- --
Class A common stock, $0.01 par value; no shares
authorized and outstanding at August 31, 1997,
250,000,000 shares authorized, 374,000 shares issued
and outstanding at August 30, 1998 and November 29,
1998................................................... -- 4 4
Class B common stock, $0.01 par value; no shares
authorized and outstanding at August 31, 1997,
100,000,000 shares authorized, 16,626,000 shares issued
and outstanding at August 30, 1998 and November 29,
1998................................................... -- 166 166
Additional paid-in capital................................ 582 7,326 7,326
Accumulated earnings (deficit)............................ 42,408 (24,029) (26,256)
Cumulative foreign currency translation adjustment........ (5,847) (9,111) (6,982)
-------- -------- --------
Total shareholders' equity (deficit).............. 37,313 (25,644) (25,742)
-------- -------- --------
$208,689 $305,922 $317,779
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE> 99
ALBECCA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------------------ ---------------------------
AUGUST 25, AUGUST 31, AUGUST 30, NOVEMBER 30, NOVEMBER 29,
1996 1997 1998 1997 1998
---------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................... $300,788 $354,058 $381,137 $102,985 $103,575
Cost of sales........................... 173,964 200,750 216,081 58,866 58,935
-------- -------- -------- -------- --------
Gross profit.......................... 126,824 153,308 165,056 44,119 44,640
Operating expenses...................... 96,595 117,707 130,833 33,346 36,224
Restructuring charges (Note 12)......... -- -- 2,262 -- 117
-------- -------- -------- -------- --------
Operating income...................... 30,229 35,601 31,961 10,773 8,299
Costs of cancelled initial public equity
offering (Note 12).................... -- -- 1,273 -- --
Interest income......................... -- -- (116) -- (555)
Interest expense........................ 6,846 9,722 11,949 2,343 7,125
-------- -------- -------- -------- --------
Income before provision for income
taxes and minority interest........ 23,383 25,879 18,855 8,430 1,729
Provision for income taxes.............. 3,679 3,243 4,021 896 1,059
Minority interest....................... 300 146 471 166 197
-------- -------- -------- -------- --------
Net income.............................. $ 19,404 $ 22,490 $ 14,363 $ 7,368 $ 473
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 100
ALBECCA INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL ACCUMULATED
-------------------- ---------------- ------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
----------- ------ ------- ------ ---------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, August 27, 1995.... 17,000,000 $ 170 -- $-- -- $ -- $ 566 $ 28,848
Net income................ -- -- -- -- -- -- -- 19,404
Distributions to
shareholders............ -- -- -- -- -- -- -- (12,250)
Currency translation
adjustment.............. -- -- -- -- -- -- -- --
----------- ----- ------- --- ---------- ---- ------ --------
BALANCE, August 25, 1996.... 17,000,000 170 -- -- -- -- 566 36,002
Capital contributions..... -- -- -- -- -- -- 16 --
Net income................ -- -- -- -- -- -- -- 22,490
Distributions to
shareholders............ -- -- -- -- -- -- -- (16,084)
Currency translation
adjustment.............. -- -- -- -- -- -- -- --
----------- ----- ------- --- ---------- ---- ------ --------
BALANCE, August 31, 1997.... 17,000,000 170 -- -- -- -- 582 42,408
Compensation related to
nonqualified stock
options................. -- -- -- -- -- -- 244 --
Conversion of common stock
for Class A and Class B
common stock............ (17,000,000) (170) 374,000 4 16,626,000 166 -- --
Capital contributions
(Note 11)............... -- -- -- -- -- -- 6,500 --
Net income................ -- -- -- -- -- -- -- 14,363
Distributions to
shareholders............ -- -- -- -- -- -- -- (80,800)
Currency translation
adjustment.............. -- -- -- -- -- -- -- --
----------- ----- ------- --- ---------- ---- ------ --------
BALANCE, August 30, 1998.... -- -- 374,000 4 16,626,000 166 7,326 (24,029)
Net income (unaudited).... -- -- -- -- -- -- -- 473
Distributions to
shareholders
(unaudited)............. -- -- -- -- -- -- -- (2,700)
Currency translation
adjustment
(unaudited)............. -- -- -- -- -- -- -- --
----------- ----- ------- --- ---------- ---- ------ --------
BALANCE, November 29, 1998
(unaudited)............... -- $ -- 374,000 $ 4 16,626,000 $166 $7,326 $(26,256)
=========== ===== ======= === ========== ==== ====== ========
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY
TRANSLATION
ADJUSTMENT TOTAL
----------- --------
<S> <C> <C>
BALANCE, August 27, 1995.... $ (478) $ 29,106
Net income................ -- 19,404
Distributions to
shareholders............ -- (12,250)
Currency translation
adjustment.............. (917) (917)
------- --------
BALANCE, August 25, 1996.... (1,395) 35,343
Capital contributions..... -- 16
Net income................ -- 22,490
Distributions to
shareholders............ -- (16,084)
Currency translation
adjustment.............. (4,452) (4,452)
------- --------
BALANCE, August 31, 1997.... (5,847) 37,313
Compensation related to
nonqualified stock
options................. -- 244
Conversion of common stock
for Class A and Class B
common stock............ -- --
Capital contributions
(Note 11)............... -- 6,500
Net income................ -- 14,363
Distributions to
shareholders............ -- (80,800)
Currency translation
adjustment.............. (3,264) (3,264)
------- --------
BALANCE, August 30, 1998.... (9,111) (25,644)
Net income (unaudited).... -- 473
Distributions to
shareholders
(unaudited)............. -- (2,700)
Currency translation
adjustment
(unaudited)............. 2,129 2,129
------- --------
BALANCE, November 29, 1998
(unaudited)............... $(6,982) $(25,742)
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 101
ALBECCA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------------------ ---------------------------
AUGUST 25, AUGUST 31, AUGUST 30, NOVEMBER 30, NOVEMBER 29,
1996 1997 1998 1997 1998
---------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 19,404 $ 22,490 $ 14,363 $ 7,368 $ 473
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest................................ 300 146 471 166 197
Depreciation and amortization.................... 5,302 6,885 8,213 1,818 2,174
Compensation related to nonqualified stock
options........................................ -- -- 244 -- --
Loss on disposal of property, plant and
equipment...................................... 199 393 32 65 142
Changes in operating assets and liabilities:
Accounts receivable............................ (568) 1,227 2,088 (7,051) (11,280)
Inventories.................................... 2,138 (1,218) 348 (1,569) 1,002
Other current assets........................... 1,155 (337) (870) (1,492) 164
Accounts payable............................... 6,403 (1,909) (2,436) 4,544 1,496
Accrued liabilities............................ (5,703) (2,846) (4,226) 670 8,093
Other.......................................... 2,010 (2,681) (2,393) 317 (516)
-------- -------- --------- -------- --------
Net cash provided by operating activities.... 30,640 22,150 15,834 4,836 1,945
-------- -------- --------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment......... (5,461) (7,746) (8,378) (965) (616)
Acquisitions of businesses......................... (34,062) (18,408) (28,065) (19,042) (3,594)
Proceeds from sales of property, plant and
equipment........................................ 658 3,455 509 21 61
Changes in other long-term assets.................. 766 185 1,919 817 (380)
-------- -------- --------- -------- --------
Net cash used in investing activities........ (38,099) (22,514) (34,015) (19,169) (4,529)
-------- -------- --------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of senior subordinated notes,
net of debt issue costs.......................... -- -- 193,241 -- --
Proceeds from revolving credit facilities.......... 76,849 68,249 109,861 40,118 12,295
Repayments of revolving credit facilities.......... (68,005) (52,951) (134,707) (19,251) (10,997)
Proceeds from long-term debt....................... 19,706 11,171 15,676 2,974 3,085
Repayments of long-term debt....................... (8,018) (8,897) (42,113) (2,177) (4,476)
Capital contribution............................... -- 16 -- -- --
Repayments of notes payable to shareholders........ -- -- (4,000) -- --
Distributions to shareholders...................... (12,250) (16,084) (70,300) (3,100) (2,700)
-------- -------- --------- -------- --------
Net cash provided by (used in) financing
activities................................. 8,282 1,504 67,658 18,564 (2,793)
-------- -------- --------- -------- --------
EFFECT OF EXCHANGE RATE ON CASH...................... 164 (202) 106 (1,198) (1,019)
-------- -------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH...................... 987 938 49,583 3,033 (6,396)
CASH and cash equivalents, beginning of period....... 3,376 4,363 5,301 5,301 54,884
-------- -------- --------- -------- --------
CASH and cash equivalents, end of period............. $ 4,363 $ 5,301 $ 54,884 $ 8,334 $ 48,488
======== ======== ========= ======== ========
SUPPLEMENTAL INFORMATION:
Interest paid...................................... $ 7,144 $ 9,282 $ 10,983 $ 3,315 $ 1,203
======== ======== ========= ======== ========
Income taxes paid.................................. $ 2,378 $ 3,858 $ 3,520 $ 462 $ 587
======== ======== ========= ======== ========
Details of acquisitions (Note 2):
Fair value of assets acquired.................... $(49,814) $(35,611) $ (46,995) $(31,624) $ (4,599)
Liabilities assumed.............................. 12,205 17,149 18,029 12,559 946
-------- -------- --------- -------- --------
Cash paid........................................ (37,609) (18,462) (28,966) (19,065) (3,653)
Less cash acquired............................... 3,547 54 901 23 59
-------- -------- --------- -------- --------
Net cash paid for acquisitions............... $(34,062) $(18,408) $ (28,065) $(19,042) $ (3,594)
======== ======== ========= ======== ========
NON-CASH FINANCING ACTIVITIES:
Issuance of notes payable for shareholder
distributions (Note 11).......................... $ -- $ -- $ 10,500 $ -- $ --
======== ======== ========= ======== ========
Capital contribution of shareholder notes payable
(Note 11)........................................ $ -- $ -- $ 6,500 $ -- $ --
======== ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 102
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Albecca Inc. (the "Company" or "Albecca," formerly Larson-Juhl Inc.)
primarily does business under the Larson-Juhl name. The Company designs,
manufactures and distributes a complete line of branded custom framing products.
The Company operates in 20 countries, primarily in North America and Europe.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Albecca Inc. and its subsidiaries. All significant intercompany transactions are
eliminated. Minority interest represents minority shareholders' interests in
certain majority-owned subsidiaries.
COMBINATION AND REORGANIZATION
Through June 25, 1998, Albecca Inc. and Larson-Juhl International LLC were
owned and controlled by the same shareholders. Effective June 26, 1998, the
members of Larson-Juhl International LLC contributed their respective equity
interests to Albecca Inc., whereby Larson-Juhl International LLC became a wholly
owned subsidiary of the Company. The combination has been treated in a manner
similar to a pooling-of-interests, and as such, the accompanying financial
statements have been restated to include the financial statements of Larson-Juhl
International LLC for all periods presented.
FISCAL PERIOD
The Company ends its fiscal year on the last Sunday in August. The
Company's fiscal years ended August 25, 1996 and August 30, 1998 were 52-week
years. The fiscal year ended August 31, 1997 was a 53-week year.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of three
months or less to be cash equivalents.
INVENTORIES
Inventories consist primarily of finished goods and are stated at the lower
of cost or market. Cost is determined by using the last-in, first-out method for
inventories within the United States (approximately 28.9% and 32.2% of total
inventories at August 31, 1997 and August 30, 1998, respectively) and the first-
in, first-out method for inventories within foreign countries. Additionally,
cost includes material, direct and indirect labor and capitalizable overhead. If
the first-in, first-out method of valuing inventories had been used exclusively,
inventories of the Company would have been $3,608,000 and $3,169,000 higher at
August 31, 1997 and August 30, 1998, respectively.
F-8
<PAGE> 103
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
Raw materials............................................... $11,991 $17,019
Work in process............................................. 3,028 2,774
Finished goods.............................................. 53,190 56,026
------- -------
$68,209 $75,819
======= =======
</TABLE>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is
provided over the estimated useful lives of the assets (buildings -- 15-35
years, machinery and equipment -- 7-15 years, and furniture and fixtures -- 3-7
years) using primarily the straight-line method.
Property, plant, and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
Land and buildings.......................................... $29,251 $39,743
Machinery and equipment..................................... 31,433 33,586
Furniture and fixtures...................................... 8,402 9,581
------- -------
69,086 82,910
Less accumulated depreciation............................... 16,411 21,152
------- -------
$52,675 $61,758
======= =======
</TABLE>
Depreciation expense included in the accompanying consolidated statements
of operations for the years ended August 25, 1996, August 31, 1997, and August
30, 1998 was approximately $4,744,000, $5,900,000, and $6,762,000, respectively.
OTHER LONG-TERM ASSETS
Goodwill is amortized over 40 years using the straight-line method.
Trademarks, trade names, customer lists, and other intangible assets are stated
at cost, less accumulated amortization, and are amortized over 10 to 15 years
using the straight-line method. Bond issuance costs are amortized over the life
of the senior subordinated notes (10 years) using the effective interest method.
During 1995, the Company adopted the Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." Under the provisions of this
statement, the Company has evaluated its long-lived assets for financial
impairment, and will continue to evaluate them as events or changes in
circumstances indicate that the carrying amount of such assets may not be fully
recoverable.
The Company evaluates the recoverability of long-lived assets by measuring
the carrying amount of the assets against the estimated undiscounted future cash
flows associated with them. At the time such evaluations indicate that the
future undiscounted cash flows of certain long-lived assets are not sufficient
to recover the carrying value of such assets, the assets are adjusted to their
fair values.
It is the Company's policy to amortize goodwill and other intangible assets
over future periods estimated to be benefited based on relevant factors, which
include market, economic and regulatory considerations.
F-9
<PAGE> 104
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company recorded an impairment charge of $333,000 related to goodwill
associated with its Greek operations during fiscal year 1998 as a direct result
of its decision to close its operations in Greece (Note 12).
Other long-term assets consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
Goodwill.................................................... $23,584 $44,056
Trademarks, trade names and customer lists.................. 5,880 6,065
Bond issuance costs......................................... -- 6,759
Other....................................................... 936 2,244
------- -------
30,400 59,124
Less accumulated amortization............................... 2,045 3,472
------- -------
$28,355 $55,652
======= =======
</TABLE>
INCOME TAXES
Albecca Inc. is an S corporation and two of its subsidiaries, Larson-Juhl
US LLC, and Larson-Juhl International LLC, are limited liability companies. Each
is treated as a pass-through entity under the Internal Revenue Code. They are
not subject to federal and certain state income taxes. As a result, the related
taxable income is included in the tax returns of the shareholders and members of
the respective companies. The Company makes distributions to shareholders to pay
their income tax obligations as a result of the Company's status as an S
corporation. The provision for income taxes included in the accompanying
consolidated financial statements primarily relates to certain state and foreign
income taxes.
FOREIGN CURRENCY TRANSLATION AND EXPOSURE
The asset and liability accounts of foreign subsidiaries have been
translated into U.S. dollars at the rate of exchange in effect at each balance
sheet date. Shareholders' equity is translated at historical rates. Resulting
translation adjustments arising from these translations are reflected as a
separate component in shareholders' equity. All the accounts of foreign
subsidiaries' statements of operations are translated at average exchange rates
during the year. Gains or losses on foreign currency transactions are included
in income as incurred and are not material to the Company's statements of
operations for the years presented. The denomination of foreign subsidiaries'
account balances in their local currency exposes the Company to certain foreign
exchange rate risks. The Company addresses the exposure by financing most
working capital needs in the applicable foreign currencies. Management does not
believe the remaining risks to be significant.
The Company's United Kingdom subsidiary periodically enters into forward
currency exchange contracts to manage its exposure against foreign currency
fluctuations on inventory purchase transactions denominated in foreign
currencies (primarily Italian Lira and U.S. dollars). Realized gains and losses
on foreign exchange contracts used as hedges of inventory purchase transactions
are included in the basis of the inventory and are recognized in income as a
component of cost of sales in the period in which the related inventory is sold.
At August 30, 1998 and August 31, 1997, the Company's United Kingdom subsidiary
had L 5,454,000 ($8,981,000) and L7,310,000 ($11,860,000), respectively, of
forward exchange contracts maturing in two years or less related to inventory
purchase transactions. At August 30, 1998, such contracts were for the purchase
of 8,900,000,000 Italian Lira and $3,860,000. At August 31, 1997 such contracts
were for the purchase of 12,880,000,000 Italian Lira and $4,090,000. At August
30, 1998 and August 31, 1997, deferred gains and losses on foreign exchange
contracts are not material to the
F-10
<PAGE> 105
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated financial statements and realized gains and losses resulting from
foreign exchange contracts were not material to the Company's results of
operations for the years ended August 25, 1996, August 31, 1997 and August 30,
1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's long-term debt is estimated based on
current rates offered for debt of similar terms and maturities. Under this
method, the Company's fair value of long-term debt was not significantly
different than the stated value at August 31, 1997 and August 30, 1998.
REVENUE RECOGNITION
The Company recognizes revenue at the time of shipment of products.
ADVERTISING
All costs associated with advertising and promoting products are expensed
in the period incurred. The amounts expensed for the years ended August 25,
1996, August 31, 1997 and August 30, 1998 were approximately $1,765,000,
$3,731,000 and $3,784,000.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131, which
supersedes SFAS Nos. 14, 18, 24, and 30, establishes new standards for segment
reporting, using the "management approach," in which reportable segments are
based on the same criteria on which management desegregates a business for
making operating decisions and assessing performance. The Company has adopted
SFAS No. 131 for its 1999 fiscal year which will not have a material impact on
its consolidated financial statements.
INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statements for the three months ended November 30, 1997 and
November 29, 1998 are unaudited; however, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the unaudited financial statements have been included. The
results for the three months ended November 29, 1998 are not necessarily
indicative of the results to be obtained for a full year.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current period presentation.
2. ACQUISITIONS
The following acquisitions were accounted for under the purchase method of
accounting, applying the provisions of Accounting Principles Board ("APB")
Opinion No. 16, and as a result, the Company has recorded the tangible and
identifiable intangible assets and liabilities of the acquired businesses at
their estimated fair values with the excess of the purchase price over these
amounts being recorded as goodwill which is amortized over 40 years. The
acquisitions were primarily financed with borrowings under the Company's
revolving credit facility and other debt instruments (Note 4). The accompanying
consolidated financial statements reflect the operations of the acquired
businesses for the periods after their respective date of acquisition.
F-11
<PAGE> 106
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During April 1998, the Company acquired all of the outstanding stock of
Eastern Mouldings, Inc., and Eastern Moulding, Inc., related U.S. distributors
of custom framing products for approximately $9,900,000 in cash. Goodwill and
other intangible assets of approximately $8,400,000 were recorded in connection
with the acquisition.
Additionally, during October 1997, the Company acquired all of the
outstanding stock of Robert F. de Castro, Inc., a distributor of custom framing
products for approximately $8,000,000 in cash. Goodwill and other intangible
assets of approximately $5,500,000 were recorded in connection with the
acquisition. The Company also acquired, during September and October 1997, the
outstanding stock of four U.S. and international manufacturers and distributors
of custom framing products for aggregate consideration of approximately
$11,100,000 in cash, resulting in goodwill and other intangible assets of
approximately $7,400,000.
During November 1996, the Company acquired all of the outstanding stock of
Mersch Design GmbH, an international distributor of custom framing products for
approximately $9,600,000 in cash. Goodwill and intangible assets of
approximately $5,200,000 were recorded in connection with this acquisition. The
Company also acquired, during fiscal year 1997, the outstanding stock of five
international manufacturers and distributors of custom framing products for
aggregate consideration of approximately $8,800,000 in cash, resulting in
goodwill and other intangible assets of approximately $4,600,000.
During September 1995, the Company acquired all of the outstanding stock of
Andre Senelar SA, a French manufacturer and distributor of custom framing
products for approximately $6,600,000 in cash. No goodwill resulted from this
acquisition. During May 1996, the Company acquired all of the outstanding stock
of Arquati United Kingdom Limited, a United Kingdom manufacturer and distributor
of custom framing products for approximately $13,300,000 in cash. Goodwill and
other intangible assets of approximately $4,700,000 were recorded in connection
with this acquisition. The Company also acquired, during fiscal year 1996, the
outstanding stock or substantially all of the operating assets and liabilities
of eight international manufacturers and distributors of custom framing products
for aggregate consideration of approximately $17,700,000 in cash, resulting in
goodwill and other intangible assets of approximately $7,400,000.
The following unaudited pro forma summary results of operations are
presented assuming that the acquisitions completed during the years ended August
25, 1996, August 31, 1997 and August 30, 1998 had been consummated as of the
beginning of each period presented. The pro forma information is presented for
informational purposes only and is not necessarily indicative of the results of
operations which would have actually been obtained. Pro forma adjustments were
recorded to include increased depreciation and amortization of fixed assets and
intangible assets and additional interest expense on financing required for the
acquisitions (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
AUGUST 25, AUGUST 31, AUGUST 30,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Pro forma net sales.................................... $378,138 $409,316 $394,856
======== ======== ========
Pro forma net income................................... $ 17,416 $ 20,983 $ 13,268
======== ======== ========
</TABLE>
F-12
<PAGE> 107
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
Accrued operating expenses.................................. $ 9,495 $ 6,833
Accrued payroll and benefits................................ 12,606 12,224
Accrued income taxes........................................ 627 1,128
Accrued interest............................................ 532 1,498
Accrued taxes (other than income)........................... 1,257 1,410
Other....................................................... 3,465 4,899
------- -------
$27,982 $27,992
======= =======
</TABLE>
During May 1998, Albecca amended certain bonus arrangements with
shareholders and certain members of management whereby the payment of accrued
amounts aggregating $7,028,000 would be deferred and paid in varying increments
through fiscal year 2005. Accruals related to these compensation arrangements of
approximately $2,608,000 and $4,420,000 as of August 30, 1998 are included as a
component of accrued payroll and benefits and other long-term liabilities,
respectively.
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
10.75% senior subordinated notes, due August 2008, interest
paid semi-annually in arrears on February 15 and August 15
of each year commencing February 15, 1999................. $ -- $200,000
Revolving credit facility (the "Credit Facility"), as
amended, due September 1999, payable in U.S. dollars,
British Pounds, Deutsche Marks, and Australian dollars,
interest paid periodically at rates ranging from LIBOR
plus .75% to the prime rate less .50%..................... 49,507 --
Demand note payable in French Francs, interest paid
quarterly at a rate of 3.6% to 4.0%, secured by a standby
letter of credit.......................................... 3,446 3,562
Mortgage note due September 2017, payable in Deutsche Marks,
principal paid semi-annually in equal installments,
interest paid quarterly at a rate of 5.2%, secured by
certain property.......................................... -- 3,185
Demand note payable in British Pounds, interest paid
quarterly at a base rate plus 2.0% (9.0% as of August 30,
1998), secured by certain accounts receivable, inventory
and equipment............................................. 3,374 2,942
Demand note payable in Dutch Guilders, interest paid
quarterly at a base rate plus 1.25% (4.75% as of August
30, 1998) secured by certain accounts receivable,
inventory and property.................................... 3,521 3,018
Other long-term notes, interest payable at a weighted
average rate of 7.34%, maturing at various dates through
2010, no individual note exceeding $2,500................. 48,878 50,062
-------- --------
108,726 262,769
Less current maturities..................................... 28,079 35,205
-------- --------
Long-term portion................................. $ 80,647 $227,564
======== ========
</TABLE>
F-13
<PAGE> 108
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain of the above facilities are subject to certain financial covenants
related to adjusted tangible net worth and cash flow (as defined). Additionally,
the notes in foreign currencies above generally restrict the foreign subsidiary
holding the applicable notes from the payment of dividends or repayments of
intercompany loans to Albecca Inc. or other subsidiaries. Certain revolving
facilities provide Albecca with additional borrowings of up to $17,402,000 as of
August 30, 1998. Albecca had outstanding letters of credit totaling $3,867,000
as of August 30, 1998.
On August 11, 1998, Albecca issued $200,000,000 of 10.75% senior
subordinated notes (the "Notes"). The Notes are subject to certain redemption
and repurchase terms, as defined. In addition, the Notes contain certain
covenants that limit, among other things, the ability of Albecca and its
subsidiaries to (1) pay dividends, redeem capital stock, or make certain other
restricted payments or investments; (2) incur additional indebtedness or issue
preferred equity interests; (3) merge, consolidate, or sell all or substantially
all of its assets; (4) create lines on assets, and; (5) enter into certain
transactions with affiliates.
The Company's payment obligations under the Notes are jointly and severally
guaranteed by the subsidiary guarantors, as defined. (Note 15). The subsidiary
guarantees are unconditional in nature. The indenture to the Notes provides that
no subsidiary guarantor may consolidate with or merge with or into another
entity unless the surviving entity of such a consolidation or merger assumes all
the obligations of the subsidiary guarantor.
The Notes will not be redeemable at the Company's option prior to August
15, 2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, at the redemption prices listed
below plus accrued and unpaid interest and liquidated damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated as follows:
<TABLE>
<S> <C>
2003........................................................ 105.375%
2004........................................................ 103.583%
2005........................................................ 101.792%
2006 and thereafter......................................... 100.000%
</TABLE>
The Credit Facility which was repaid from net proceeds from the sale of the
Notes included borrowings denominated in foreign currencies in the aggregate
amount of $26,180,000 as of August 31, 1997. Other long-term notes included
borrowings denominated in foreign currencies in the aggregate amounts of
$35,402,000 and $46,979,000 as of August 31, 1997 and August 30, 1998.
Aggregate maturities of long-term debt as of August 30, 1998 are as
follows: 1999, $35,205,000; 2000, $6,820,000; 2001, $6,468,000; 2002,
$4,073,000; 2003, $2,637,000; thereafter, $207,566,000.
F-14
<PAGE> 109
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. GEOGRAPHIC INFORMATION
The following table presents information regarding Albecca's different
geographical regions based on the historical operations of Albecca (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
AUGUST 25, AUGUST 31, AUGUST 30,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
United States........................................ $162,429 $165,514 $185,696
Canada............................................... 19,186 19,973 23,498
United Kingdom....................................... 25,021 47,806 46,968
France............................................... 41,937 37,698 36,267
Other International.................................. 52,215 83,067 88,708
-------- -------- --------
$300,788 $354,058 $381,137
======== ======== ========
Operating income:
United States........................................ $ 21,022 $ 24,425 $ 25,428
Canada............................................... 2,632 2,386 3,929
United Kingdom....................................... 880 4,227 1,353
France............................................... 2,948 2,391 595
Other International.................................. 2,747 2,172 656
-------- -------- --------
$ 30,229 $ 35,601 $ 31,961
======== ======== ========
</TABLE>
Assets by geographical region consist of the following (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
United States............................................... $ 37,518 $123,458
Canada...................................................... 14,808 11,928
United Kingdom.............................................. 45,166 44,498
France...................................................... 37,686 36,765
Other International......................................... 73,511 89,273
-------- --------
$208,689 $305,922
======== ========
</TABLE>
6. SHAREHOLDERS' EQUITY (DEFICIT)
STOCK SPLIT
On April 27, 1998, Albecca effected a 1.7-for-1 stock split of its common
stock. The accompanying consolidated financial statements and notes hereof
reflect this stock split as if it had occurred at the beginning of each period.
CONVERSION OF COMMON STOCK
On May 21, 1998 in anticipation of a proposed equity offering which was
later cancelled (Note 12), Albecca Inc. amended its articles of incorporation to
reclassify its common stock from a single class into two separate classes, Class
A common stock and Class B common stock. The two classes are identical except as
to their voting rights, with the Class A common stock carrying one vote per
share, and the Class B common stock carry ten votes per share. The holders of
each class are entitled to class voting rights in very limited circumstances
under the Georgia Business Corporate Code. Otherwise, the classes vote together
on all matters presented to the shareholders. If the Class B common stock is
transferred to
F-15
<PAGE> 110
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
anyone outside of a limited group of holders related to the majority
shareholder, it will automatically convert into Class A common stock. Also, the
holders of the Class B common stock may convert it into Class A common stock at
the their option.
Upon approval of the amendment by the Company's three shareholders, the
common stock held by two of the Company's shareholders representing 2.2% of the
common stock was converted into Class A common stock, and the common stock held
by the majority shareholder representing 97.8% of the common stock was converted
into Class B common stock.
STOCK OPTIONS
In July 1990, the Company's sole shareholder granted an option to a key
employee to acquire 170,000 shares of common stock from the shareholder for
$0.76 per share. As a result of this grant, no compensation expense was
recognized as the exercise price, in the opinion of management, represented fair
value at the date of grant. This option was exercised in January 1995.
In November 1995, the Company's majority shareholder established a stock
performance program whereby a certain key employee could receive annually an
option to acquire 0.2% of the then outstanding shares of Albecca Inc.'s common
stock and 0.2% of member interest in Larson-Juhl International LLC from the
Company's majority shareholder for $300,000, contingent upon the Company
achieving its performance goals, including, sales, profits, asset management,
and future positioning, for each fiscal year through fiscal year 2000.
Compensation expense under this program is recognized over the performance
period based on the difference between the exercise price and the fair value, if
any, measured at the end of each period within the performance period. To the
extent that fair value exceeds the stated exercise price during the performance
period, changes in the fair value are reflected as an adjustment of accrued
compensation and compensation expense in the periods in which the changes occur
until the performance period is completed and such options are either granted or
forfeited. In November 1996, the key employee was awarded the option to acquire
34,000 shares of Albecca Inc.'s common stock and 0.2% of member interest in
Larson-Juhl International LLC from the Company's majority shareholder for
$300,000. No compensation expense was recognized for this award, as the exercise
price, in the opinion of management, exceeded its fair value at inception of the
program and through the date of grant. On April 17, 1998, this option was
exercised. No award was earned or granted to the key employee for fiscal year
1997. Albecca's majority shareholder extended the program through fiscal year
2001 under the same terms and conditions as the original stock performance
program. As of August 31, 1997 and August 30, 1998, no deferred compensation
expense was accrued as the exercise price and, in the opinion of management, did
not exceed the fair value at those dates.
In November 1996, the Company's majority shareholder granted another key
employee the right to acquire 42,500 shares of Albecca Inc.'s common stock and
0.25% of member interest in Larson-Juhl International LLC from the Company's
majority shareholder for $200,000, representing, in management's opinion, the
fair value at the date of grant. On April 19, 1997, this right was exercised. On
December 1, 1997, this key employee acquired 85,000 shares of Albecca Inc.'s
common stock and 0.5% of member interest in Larson-Juhl International LLC from
the Company's majority shareholder for $300,000. The Company recorded a
compensation charge of $100,000, representing the difference between the
exercise price and the fair value, based on management's estimate, at the date
of grant. On January 5, 1998, the Company's majority shareholder granted this
key employee the right to acquire 42,500 shares of Albecca Inc.'s common stock
and 0.25% of member interest in Larson-Juhl International LLC from the Company's
majority shareholder for $500,000, representing, in management's opinion, the
fair value at the date of grant. On April 17, 1998, this right was exercised.
On May 1, 1998, the Company adopted the Albecca Inc. 1998 Stock Option Plan
(the "Stock Option Plan") for which 2,600,000 shares of common stock were
authorized for issuance in connection with stock
F-16
<PAGE> 111
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
options granted under such plan. The Stock Option Plan provides for nonqualified
and incentive stock options. Additionally, as of May 1, 1998, the provisions of
the stock performance program discussed above were amended whereby any option
grant under such program would be granted by the Company under the Stock Option
Plan. On May 1, 1998, the Company granted to a certain key employee, under the
stock performance program, a nonqualified option to acquire 34,062 shares of
common stock at $8.80 per share, expiring May 1, 2003. As a result of this
grant, the Company recorded a compensation charge of $144,000 in the third
quarter of fiscal year 1998 representing the difference between the exercise
price and the fair value, based on management's estimate, at the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value-based method of accounting for an employee stock option plan or similar
equity instrument and allows an entity to continue to measure compensation cost
for those plans using the method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and, if presented, earnings per share, as if the fair value-based method of
accounting defined in the statement had been applied.
The Company has elected to account for its stock-based compensation plans
under APB Opinion No. 25, however, the Company has computed for pro forma
disclosure purposes the value of all options granted during the years ended
August 31, 1997 and August 30, 1998 using the minimum value method as prescribed
by SFAS No. 123 using the following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate..................................... 6%
Expected dividend yield..................................... --
Expected lives.............................................. Five years
Expected volatility......................................... --
</TABLE>
If the Company had accounted for these grants in accordance with SFAS No.
123, the Company's reported pro forma net income for the years ended August 31,
1997 and August 30, 1998 would have decreased to the following pro forma amount
(in thousands):
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 30,
1997 1998
---------- ----------
<S> <C> <C>
Net income:
As reported in the financial statements................... $22,490 $14,363
======= =======
Pro forma in accordance with SFAS No. 123................. $22,438 $14,158
======= =======
</TABLE>
7. RELATED PARTY TRANSACTIONS
The Company's principal executive offices are located in a 65,000
square-foot office building located in Norcross, Georgia owned by L-J Properties
Inc., a company owned by the existing shareholders of the Company. The Company's
lease for this facility terminates in August 2001. The total rent payments for
the years ended August 25, 1996, August 31, 1997, and August 30, 1998 were
approximately $642,000, $661,000, and $680,000, respectively.
On August 11, 1998, a partner in a law firm which is providing services to
Albecca in connection with general corporate matters as well as the pending
exchange offer related to its existing Notes became a director of the Company.
The amount of professional fees paid to this law firm during the year ended
August 30, 1998 were approximately $1,022,000. As of August 30, 1998,
approximately $265,000 was due to this law firm for previously provided
services.
F-17
<PAGE> 112
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain operating facilities and equipment under
operating leases. Future minimum annual rentals under noncancelable leases as of
August 30, 1998 are as follows: 1999 -- $8,145,000; 2000 -- $6,707,000;
2001 -- $5,086,000; 2002 -- $3,282,000; 2003 -- $1,631,000; and
thereafter -- $1,094,000.
The total rent payments for the years ended August 25, 1996, August 31,
1997, and August 30, 1998 were approximately $6,462,000, $7,368,000, and
$8,531,000, respectively.
LITIGATION
The Company is involved in certain litigation arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material adverse effect on the Company's financial
position or results of operations.
9. BENEFIT PLANS
The Company sponsors a defined contribution 401(k) retirement investment
plan (the "Plan") for all of its U.S. employees with more than one year of
service. The Company makes discretionary contributions to the Plan, including a
50% matching contribution. Under the terms of the Plan, a participant is 100%
vested in the Company's matching and discretionary contributions after six years
of service. Discretionary contributions made by the Company for the years ended
August 25, 1996, August 31, 1997, and August 30, 1998 were approximately
$409,000, $419,000, and $408,000, respectively.
10. QUARTERLY DATA (UNAUDITED)
The following table presents quarterly information regarding the Company's
historical operations for each quarter for each of the two years in the period
ended August 30, 1998 and the quarter ended November 29, 1998 (in thousands):
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
--------------------------------------------------------------------------------------
NOVEMBER 24, FEBRUARY 23, MAY 25, AUGUST 31, NOVEMBER 30, MARCH 1, MAY 31,
1996 1997 1997 1997 1997 1998 1998
------------ ------------ ------- ---------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $93,217 $92,799 $80,679 $87,363 $102,985 $96,829 $93,055
Cost of sales........ 54,275 54,126 44,213 48,136 58,866 54,602 52,349
------- ------- ------- ------- -------- ------- -------
Gross profit......... 38,942 38,673 36,466 39,227 44,119 42,227 40,706
Operating expenses... 28,395 29,909 28,601 30,802 33,346 34,646 32,019
Restructuring
charges............ -- -- -- -- -- -- --
------- ------- ------- ------- -------- ------- -------
Operating income..... 10,547 8,764 7,865 8,425 10,773 7,581 8,687
Costs of cancelled
initial public
equity offering.... -- -- -- -- -- -- --
Interest income...... -- -- -- -- -- -- --
Interest expense..... 2,262 2,466 2,323 2,671 2,343 2,370 2,759
------- ------- ------- ------- -------- ------- -------
Income (loss) before
provision for
income taxes and
minority
interest........... 8,285 6,298 5,542 5,754 8,430 5,211 5,928
Provision for income
taxes.............. 922 735 537 1,049 896 814 865
Minority interest.... 57 (23) 69 43 166 192 19
------- ------- ------- ------- -------- ------- -------
Net income
(loss)........... $ 7,306 $ 5,586 $ 4,936 $ 4,662 $ 7,368 $ 4,205 $ 5,044
======= ======= ======= ======= ======== ======= =======
<CAPTION>
FOR THE QUARTERS ENDED
-------------------------
AUGUST 30, NOVEMBER 29,
1998 1998
---------- ------------
<S> <C> <C>
Net sales............ $88,268 $103,575
Cost of sales........ 50,264 58,935
------- --------
Gross profit......... 38,004 44,640
Operating expenses... 30,822 36,224
Restructuring
charges............ 2,262 117
------- --------
Operating income..... 4,920 8,299
Costs of cancelled
initial public
equity offering.... 1,273 --
Interest income...... (116) (555)
Interest expense..... 4,477 7,125
------- --------
Income (loss) before
provision for
income taxes and
minority
interest........... (714) 1,729
Provision for income
taxes.............. 1,446 1,059
Minority interest.... 94 197
------- --------
Net income
(loss)........... $(2,254) $ 473
======= ========
</TABLE>
F-18
<PAGE> 113
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. OTHER
On May 1, 1998, Albecca Inc. made a partial distribution of previously
undistributed S corporation earnings to its shareholders in the form of demand
promissory notes payable to its shareholders in the aggregate amount of
$10,500,000, bearing interest at a rate of 11% per annum (the "S Corp Notes").
On June 10, 1998, Albecca Inc. repaid $4,000,000 of the S Corp Notes, plus
accrued interest. On June 24, 1998, the holders of the S Corp Notes contributed
the remaining balance of the S Corp Notes to Larson-Juhl International LLC, a
related company under common ownership (Note 12). Albecca Inc. repaid the
remaining balance of $6,500,000 to Larson-Juhl International LLC on June 24,
1998.
12. INFREQUENT ITEMS
RESTRUCTURING CHARGES
In June 1998, the Company initiated a plan to close its plastic moulding
manufacturing operations located in the United Kingdom and recorded a charge to
operations of approximately $1,800,000. The plan to close the operations in the
United Kingdom was adopted as it was not able to achieve acceptable operating
results; therefore, the Company made a decision to focus its energies and
resources (both financial and managerial) on the more profitable custom picture
framing market. This charge included $45,000 for the write-down of one of its
facilities which is owned to estimated realizable value from the future sale of
the building, $230,000 related to severance and other termination benefits for
59 team members terminated in connection with this plan, $465,000 of lease
termination and exit costs, and $730,000 for the write-off of non-current
assets. The $465,000 of lease termination and exit costs represents Albecca's
estimated future obligations under the existing lease commitments of the closed
leased facility net of estimated recoverable costs through subleasing. The
write-off of non-current assets is related primarily to machinery and equipment
used in the manufacturing of plastic moulding which was dismantled and will not
be sold nor used by the Company due to direct competitive pressures of plastic
moulding on traditional moulding lines. This charge also included additional
reserves for uncollectable accounts receivable of $330,000 which have been
included in operating expenses in the accompanying consolidated statement of
operations for the year ended August 30, 1998. In the opinion of management,
these additional reserves for uncollectible accounts receivable are a direct
result of its decision to close down these operations (and its communication of
the closure), since, with the closure, the Company forfeited the collection
leverage inherent in the customers need for future products from the Company.
The determination of the uncollectible accounts receivable was based on a
customer by customer review by management after communicating its closure
decision to each of these customers. As of August 30, 1998, 2 of the original 59
team members remained to finalize shut-down issues, which included the sale of
its owned facility, the subletting of its leased facility, the collection of
receivables and the maintenance of both its leased and owned facilities.
During the fourth quarter of 1998, the Company initiated a plan to close
its sole distribution facility in Greece and recorded a charge to operations of
approximately $694,000. Management elected to close the operations in Greece
following a series of under performing quarters versus the other European
operations at which time management determined that the Company's resources,
both financial and managerial, would be more effectively invested in operations
with a greater potential return. This charge included severance costs for 14
team members aggregating $79,000, write-off of goodwill of $333,000, additional
reserves for uncollectable accounts receivable of $178,000 and other exit costs
of approximately $104,000 including post-closing maintenance costs, lease
disposal costs, and legal fees directly related to the closure of the Greek
operations. The charge related to the additional reserves for uncollectable
accounts receivable has been included in operating expenses in the accompanying
consolidated statement of operations for the year ended August 30, 1998. In the
opinion of management, these additional reserves for uncollectible accounts
receivable are a direct result of its decision to close down these operations
(and its communication of the closure) since, with the closure, the Company
forfeited the collection leverage
F-19
<PAGE> 114
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
inherent in the customers need for future products from the Company. In
consultation with its attorneys, the Company determined in many cases that the
cost of collection would significantly exceed any expected return. This
situation was one of the material factors in the Company's determination to
close the business and was supported by a specific analysis of each customer
prior to and following the disclosure of the closing. As of August 30, 1998, the
14 team members remained at the facility to sell remaining assets, collect
existing receivables and clean up the facility in preparation of its closure.
Management anticipates that the plan of closure will be completed prior to June
1999.
Additionally, during the fourth quarter of 1998, the Company initiated a
plan to close two duplicate facilities in the U.S., and recorded a charge to
operations of approximately $276,000 related to these closures, primarily
consisting of $234,000 for the severance and other termination benefits of 17
team members. These facilities were operated by the Company, but, as a result of
recent acquisitions, were deemed to be duplicative and thus the decision for
closure was made by management. As of August 30, 1998, 15 of the 17 original
team members had not yet been terminated; although management anticipates that
the remaining team members will be terminated prior to the end of fiscal year
1999. In addition as of August 30, 1998, one of the two duplicate facilities had
been integrated with an existing facility.
November 29, 1998 Activity (unaudited). During the quarter ended November
29, 1998, the Company recorded additional restructuring charges of $117,000
related to the plan to close two duplicate facilities in the U.S. and paid
$242,000 primarily for severance and other termination benefits and lease
termination and other exit costs. The Company expects to incur an additional
$200,000 in restructuring costs related to these closures during the second
quarter of 1999, which will be expensed as incurred. The additional costs of
$200,000 relate to incremental costs directly related to the integration of the
closed duplicate facilities into other existing facilities.
With respect to the closure of the Company's plastic moulding manufacturing
operations in the United Kingdom as of November 29, 1998, all 59 team members
had been terminated. The owned facility had not yet been sold and was still
being actively marketed. The leased facility had not yet been subleased.
With respect to the closure of the Company's sole distribution operations
in Greece, as of November 29, 1998, 13 of the 14 team members remained at the
facility to complete the Greece-related components of the Company's fiscal 1998
restructuring plan. In December 1998, 8 team members were terminated.
With respect to the Company's closure of its duplicate facilities in the
U.S., as of November 29, 1998, the remaining duplicate facility had been closed
and 2 out of the 17 original team members remained employed to complete
integration functions which will be completed during the second quarter of
fiscal year 1999.
At August 30, 1998, approximately $896,000 of restructuring charges
remained in accrued liabilities representing severance and other termination
costs of approximately $327,000 to be paid through June 1999 and approximately
$569,000 of lease termination and exit costs.
November 29, 1998 (Unaudited). At November 29, 1998, approximately
$771,000 of restructuring charges remained in accrued liabilities representing
severance and other termination costs of approximately $227,000 to be paid
through June 1999 and approximately $544,000 of lease termination and other exit
costs.
F-20
<PAGE> 115
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the restructuring activity from plan adoption through August
30, 1998 and November 29, 1998 (unaudited) consists of the following:
<TABLE>
<CAPTION>
CLOSURE OF THE UNITED KINGDOM PLASTIC MOULDING MANUFACTURING OPERATIONS:
SEVERANCE AND LEASE
WRITE-DOWN OTHER TERMINATION
OF PROPERTY TERMINATION AND EXIT
AND EQUIPMENT BENEFITS COSTS TOTAL
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
1998 Provision......................... $775,000 $ 230,000 $465,000 $1,470,000
Non-cash..................... 775,000 0 0 775,000
-------- --------- -------- ----------
Cash......................... 0 230,000 465,000 695,000
Fiscal 1998 cash activity.............. 0 (216,000) 0 (216,000)
-------- --------- -------- ----------
Balance of accrual as of August 30,
1998................................. 0 14,000 465,000 479,000
First quarter 1999 cash activity
(unaudited).......................... 0 (14,000) (34,000) (48,000)
-------- --------- -------- ----------
Balance as of November 29, 1998
(unaudited).......................... $ 0 $ 0 $431,000 $ 431,000
======== ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLOSURE OF OPERATIONS IN GREECE:
SEVERANCE AND OTHER
WRITE-OFF OTHER TERMINATION EXIT
OF GOODWILL BENEFITS COSTS TOTAL
----------- ----------------- -------- --------
<S> <C> <C> <C> <C>
1998 Provision........................... $333,000 $79,000 $104,000 $516,000
Non-cash....................... 333,000 0 0 333,000
-------- ------- -------- --------
Cash........................... 0 79,000 104,000 183,000
Fiscal 1998 cash activity................ 0 0 0 0
-------- ------- -------- --------
Balance of accrual as of August 30,
1998................................... 0 79,000 104,000 183,000
First quarter 1999 cash activity
(unaudited)............................ 0 0 0 0
-------- ------- -------- --------
Balance as of November 29, 1998
(unaudited)............................ $ 0 $79,000 $104,000 $183,000
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
CLOSURE OF U.S. DUPLICATE FACILITIES:
SEVERANCE AND OTHER
OTHER TERMINATION EXIT
BENEFITS COSTS TOTAL
----------------- ------------ ---------
<S> <C> <C> <C>
1998 Provision.................................. $234,000 $ 42,000 $ 276,000
Non-cash.............................. 0 0 0
-------- --------- ---------
Cash.................................. 234,000 42,000 276,000
Fiscal 1998 cash activity....................... 0 (42,000) (42,000)
-------- --------- ---------
Balance of accrual as of August 30, 1998........ 234,000 0 234,000
First quarter 1999 provision (unaudited)........ 0 117,000 117,000
First quarter 1999 cash activity (unaudited).... (86,000) (108,000) (194,000)
-------- --------- ---------
Balance as of November 29, 1998 (unaudited)..... $148,000 $ 9,000 $ 157,000
======== ========= =========
</TABLE>
Revenue and net operating results from the activities that will not be
continued are not significant to the overall operations of the Company.
F-21
<PAGE> 116
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CANCELLED INITIAL PUBLIC EQUITY OFFERING
In July 1998, the Company cancelled a planned initial public equity
offering of its common stock. As a result of the decision not to complete the
offering, the Company wrote off the associated expenses incurred of
approximately $1,273,000, which are included as "costs of cancelled initial
public equity offering" in the accompanying consolidated statements of
operations. These costs related to SEC filing fees, accounting and legal fees,
and printing costs directly attributable to the cancelled initial public equity
offering.
13. SUBSEQUENT EVENTS
The Company made cash distributions of $2,700,000, and $1,600,000 on
September 11, 1998 and January 8, 1999, respectively, pursuant to the terms and
conditions of the Notes, to its shareholders to pay their estimated September
and January income tax obligations as a result of the Company's status as an S
corporation.
Subsequent to year-end, the Company filed a registration statement in
connection with a pending exchange offer in which its existing Notes due 2008
will be exchanged for new Notes with terms which are identical to the existing
Notes. The Company's payment of obligations under the Notes are jointly and
severally guaranteed by the subsidiary guarantors, as defined. The terms include
unconditional subsidiary guarantees to be provided by the subsidiary guarantors
of the Notes (Note 15). The indenture to the Notes provides that no subsidiary
guarantor may consolidate with or merge with or into another entity unless the
surviving entity of such a consolidation or merger assumes all the obligations
of the subsidiary guarantor.
14. COMPREHENSIVE INCOME (UNAUDITED)
As of August 30, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for the reporting and
presentation of comprehensive income and its components in a full set of general
purpose financial statements The adoption of SFAS No. 130 had no effect on the
Company's net income or shareholders' equity for the quarters ended November 30,
1997 and November 29, 1998. The reconciliation of net income to comprehensive
net income is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------
NOVEMBER 30, 1997 NOVEMBER 29, 1998
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Net income, as reported.............................. $ 7,368 $ 473
Comprehensive income: Foreign currency translation
adjustments..................................... (1,721) 2,129
------- ------
Total comprehensive income................. $ 5,647 $2,602
======= ======
</TABLE>
F-22
<PAGE> 117
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
These condensed consolidating financial statements reflect Albecca Inc. and
Subsidiary Guarantors, which consist of all of the Company's Wholly-Owned
Restricted Subsidiaries other than the foreign subsidiaries, as defined under
the Indenture dated August 11, 1998. These nonguarantor foreign subsidiaries are
herein referred to as "Subsidiary Nonguarantors." The subsidiary guarantee of
each Subsidiary Guarantor will be subordinated to the prior payment in full of
all senior debt of such Subsidiary Guarantor. Separate financial statements of
the Subsidiary Guarantors are not presented because the Subsidiary Guarantees
are joint and several and full and unconditional and the Company believes the
condensed consolidating financial statements presented are more meaningful in
understanding the financial position of the Subsidiary Guarantors and the
separate financial statements are deemed not material to investors.
On August 2, 1998, the operating assets of Albecca Inc. were contributed to
a wholly owned subsidiary of Albecca Inc. This subsidiary, Larson-Juhl US LLC,
became a Subsidiary Guarantor at the date of the issue of the Notes. Therefore,
the historical operations and cash flows of this entity are reflected as a
Subsidiary Guarantor for the one-month period ending August 29, 1998 and as the
Albecca Inc. for the period through August 2, 1998. The operating assets of this
entity are reflected as a component of Albecca Inc. as of August 30, 1997 and as
Subsidiary Guarantor as of August 29, 1998.
F-23
<PAGE> 118
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 29, 1998 (UNAUDITED)
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 44,034 $ 541 $ 3,572 $ 341 $ 48,488
Accounts receivable, net............... -- 21,881 40,867 -- 62,748
Intercompany accounts receivable....... 88,898 8,126 3,081 (100,105) --
Inventories............................ -- 28,953 48,396 -- 77,349
Other current assets................... 6 2,348 4,784 -- 7,138
-------- ------- -------- --------- --------
Total current assets............ 132,938 61,849 100,700 (99,764) 195,723
PROPERTY, PLANT AND EQUIPMENT, net....... -- 9,659 53,513 -- 63,172
OTHER LONG-TERM ASSETS................... 6,681 17,239 34,964 -- 58,884
INVESTMENT IN SUBSIDIARIES............... 43,453 -- 5 (43,458) --
INTERCOMPANY LOANS RECEIVABLE............ -- -- -- -- --
-------- ------- -------- --------- --------
Total assets.................... $183,072 $88,747 $189,182 $(143,222) $317,779
======== ======= ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt... $ -- $ 2,121 $ 28,224 $ -- $ 30,345
Accounts payable....................... -- 7,153 23,832 (738) 30,247
Intercompany accounts payable.......... 962 194 7,083 (8,239) --
Accrued liabilities.................... 8,438 15,997 11,426 -- 35,861
-------- ------- -------- --------- --------
Total current liabilities....... 9,400 25,465 70,565 (8,977) 96,453
-------- ------- -------- --------- --------
LONG-TERM DEBT, less current maturities.. 200,000 3,180 31,448 -- 234,628
-------- ------- -------- --------- --------
INTERCOMPANY LOANS PAYABLE............... -- 1,878 88,898 (90,776) --
-------- ------- -------- --------- --------
OTHER LONG-TERM LIABILITIES.............. -- 4,502 7,938 -- 12,440
-------- ------- -------- --------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.01 par value;
50,000,000 shares authorized and no
shares issued and outstanding at
November 29, 1998.................... -- -- -- -- --
Class A common stock, $0.01 par value;
250,000,000 shares authorized,
374,000 shares issued and outstanding
at November 29, 1998................. 4 -- -- -- 4
Class B common stock, $0.01 par value;
100,000,000 shares authorized,
16,626,000 shares issued and
outstanding at November 29, 1998..... 166 -- -- -- 166
Additional paid-in capital............. 8,912 37,520 4,347 (43,453) 7,326
Accumulated earnings (deficit)......... (35,410) 15,886 (6,732) -- (26,256)
Cumulative foreign currency translation
adjustment........................... -- 316 (7,282) (16) (6,982)
-------- ------- -------- --------- --------
Total shareholders' equity
(deficit)..................... (26,328) 53,722 (9,667) (43,469) (25,742)
-------- ------- -------- --------- --------
$183,072 $88,747 $189,182 $(143,222) $317,779
======== ======= ======== ========= ========
</TABLE>
F-24
<PAGE> 119
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 30, 1998
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ 49,188 $ 18 $ 5,678 $ -- $ 54,884
Accounts receivable, net................. 6 17,445 33,334 -- 50,785
Intercompany accounts receivable......... 373 7,024 539 (7,936) --
Inventories.............................. -- 28,322 47,497 -- 75,819
Other current assets..................... -- 2,254 4,770 -- 7,024
-------- ------- -------- --------- --------
Total current assets.............. 49,567 55,063 91,818 (7,936) 188,512
PROPERTY, PLANT AND EQUIPMENT, net......... -- 9,487 52,271 -- 61,758
OTHER LONG-TERM ASSETS..................... 6,703 17,315 31,634 -- 55,652
INVESTMENT IN SUBSIDIARIES................. 43,453 -- 3,580 (47,033) --
INTERCOMPANY LOANS RECEIVABLE.............. 84,941 -- 1,623 (86,564) --
-------- ------- -------- --------- --------
Total assets...................... $184,664 $81,865 $180,926 $(141,533) $305,922
======== ======= ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt..... $ -- $ 1,519 $ 33,686 $ -- $ 35,205
Accounts payable......................... -- 6,470 21,695 -- 28,165
Intercompany accounts payable............ -- 1,042 6,894 (7,936) --
Accrued liabilities...................... 2,784 15,477 9,731 -- 27,992
-------- ------- -------- --------- --------
Total current liabilities......... 2,784 24,508 72,006 (7,936) 91,362
-------- ------- -------- --------- --------
LONG-TERM DEBT, less current maturities.... 200,000 3,083 24,481 -- 227,564
-------- ------- -------- --------- --------
INTERCOMPANY LOANS PAYABLE................. -- 1,623 84,941 (86,564) --
-------- ------- -------- --------- --------
OTHER LONG-TERM LIABILITIES................ -- 4,443 8,197 -- 12,640
-------- ------- -------- --------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.01 par value;
50,000,000 shares authorized and no
shares issued and outstanding at August
30, 1998............................... -- -- -- -- --
Class A common stock, $0.01 par value;
250,000,000 shares authorized, 374,000
shares issued and outstanding at August
30, 1998............................... 4 -- -- -- 4
Class B common stock, $0.01 par value;
100,000,000 shares authorized,
16,626,000 shares issued and
outstanding at August 30, 1998......... 166 -- -- -- 166
Additional paid-in capital............... 8,912 37,520 7,927 (47,033) 7,326
Accumulated earnings (deficit)........... (27,202) 10,492 (7,319) -- (24,029)
Cumulative foreign currency translation
adjustment............................. -- 196 (9,307) -- (9,111)
-------- ------- -------- --------- --------
Total shareholders' equity
(deficit)....................... (18,120) 48,208 (8,699) (47,033) (25,644)
-------- ------- -------- --------- --------
$184,664 $81,865 $180,926 $(141,533) $305,922
======== ======= ======== ========= ========
</TABLE>
F-25
<PAGE> 120
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31, 1997
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ 399 $ 133 $ 4,769 $ -- $ 5,301
Accounts receivable, net................. 12,976 1,928 34,366 -- 49,270
Intercompany accounts receivable......... 429 -- 1,731 (2,160) --
Inventories.............................. 16,564 4,362 47,283 -- 68,209
Other current assets..................... 1,476 318 3,085 -- 4,879
------- ------- -------- -------- --------
Total current assets.............. 31,844 6,741 91,234 (2,160) 127,659
PROPERTY, PLANT AND EQUIPMENT, net......... 6,303 1,113 45,259 -- 52,675
OTHER LONG-TERM ASSETS..................... -- 418 27,937 -- 28,355
INVESTMENT IN SUBSIDIARIES................. 2,587 -- 700 (3,287) --
INTERCOMPANY LOANS RECEIVABLE.............. 37,063 -- 5,279 (42,342) --
------- ------- -------- -------- --------
Total assets...................... $77,797 $ 8,272 $170,409 $(47,789) $208,689
======= ======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt..... $ 149 $ 1,658 $ 26,272 $ -- $ 28,079
Accounts payable......................... 3,356 569 24,371 -- 28,296
Intercompany accounts payable............ 1,178 802 180 (2,160) --
Accrued liabilities...................... 16,622 534 10,826 -- 27,982
------- ------- -------- -------- --------
Total current liabilities......... 21,305 3,563 61,649 (2,160) 84,357
------- ------- -------- -------- --------
LONG-TERM DEBT, less current maturities.... 12,387 -- 68,260 -- 80,647
------- ------- -------- -------- --------
INTERCOMPANY LOANS PAYABLE................. -- 5,279 37,063 (42,342) --
------- ------- -------- -------- --------
OTHER LONG-TERM LIABILITIES................ -- 30 6,342 -- 6,372
------- ------- -------- -------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $0.01 par value; 20,000,000
shares authorized, 17,000,000 shares
issued and outstanding at August 31,
1997................................... 170 -- -- -- 170
Additional paid-in capital............... 1,742 700 1,427 (3,287) 582
Accumulated earnings (deficit)........... 42,190 (1,372) 1,590 -- 42,408
Cumulative foreign currency translation
adjustment............................. 3 72 (5,922) -- (5,847)
------- ------- -------- -------- --------
Total shareholders' equity
(deficit)....................... 44,105 (600) (2,905) (3,287) 37,313
------- ------- -------- -------- --------
$77,797 $ 8,272 $170,409 $(47,789) $208,689
======= ======= ======== ======== ========
</TABLE>
F-26
<PAGE> 121
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 29, 1998 (UNAUDITED)
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ -- $52,091 $53,276 $(1,792) $103,575
Cost of sales.............................. -- 28,881 31,846 (1,792) 58,935
------- ------- ------- ------- --------
Gross profit............................. -- 23,210 21,430 -- 44,640
Operating expenses......................... 37 18,373 17,814 36,224
Restructuring charges...................... -- 117 -- -- 117
------- ------- ------- ------- --------
Operating income......................... (37) 4,720 3,616 -- 8,299
Costs of cancelled initial public equity
offering................................. -- -- -- -- --
Interest income............................ (555) -- -- -- (555)
Interest expense........................... 6,026 178 921 -- 7,125
------- ------- ------- ------- --------
Income (loss) before provision for income
taxes and minority interest............ (5,508) 4,542 2,695 -- 1,729
Provision for income taxes................. -- 123 936 -- 1,059
Minority interest.......................... -- -- 197 -- 197
------- ------- ------- ------- --------
Net income (loss)................. $(5,508) $ 4,419 $ 1,562 $ -- $ 473
======= ======= ======= ======= ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................... $(2,195) $ 571 $ 3,569 $ -- $ 1,945
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. -- (554) (62) -- (616)
Acquisitions of businesses............... -- -- (3,594) -- (3,594)
Proceeds from sales of property, plant
and equipment.......................... -- 21 40 -- 61
Changes in other long-term assets........ (259) -- (121) -- (380)
------- ------- ------- ------- --------
Net cash used in investing activities.... (259) (533) (3,737) -- (4,529)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany loan balances.... -- 63 (63) -- --
Proceeds from revolving credit
facilities............................. -- -- 12,295 -- 12,295
Repayments of revolving credit
facilities............................. -- (57) (10,940) -- (10,997)
Proceeds from long-term debt............. -- 1,060 2,025 -- 3,085
Repayments of long-term debt............. -- (587) (3,889) -- (4,476)
Distributions to shareholders............ (2,700) -- -- -- (2,700)
------- ------- ------- ------- --------
Net cash provided by (used in) financing
activities............................. (2,700) 479 (572) -- (2,793)
------- ------- ------- ------- --------
EFFECT OF EXCHANGE RATE ON CASH............ -- 6 (1,025) -- (1,019)
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH............ (5,154) 523 (1,765) -- (6,396)
Cash and cash equivalents, beginning of
period................................... 49,188 18 5,678 -- 54,884
------- ------- ------- ------- --------
Cash and cash equivalents, end of period... $44,034 $ 541 $ 3,913 $ -- $ 48,488
======= ======= ======= ======= ========
</TABLE>
F-27
<PAGE> 122
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30, 1997 (UNAUDITED)
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 47,301 $ 2,217 $ 54,884 $ (1,417) $102,985
Cost of sales.............................. 25,926 1,315 33,042 (1,417) 58,866
-------- -------- -------- -------- --------
Gross profit............................. 21,375 902 21,842 -- 44,119
Operating expenses......................... 15,160 964 17,222 -- 33,346
-------- -------- -------- -------- --------
Operating income......................... 6,215 (62) 4,620 10,773
Interest expense........................... 47 165 2,131 -- 2,343
-------- -------- -------- -------- --------
Income (loss) before provision for income
taxes and minority interest............ 6,168 (227) 2,489 -- 8,430
Provision for income taxes................. 101 -- 795 -- 896
Minority interest.......................... -- -- 166 -- 166
-------- -------- -------- -------- --------
Net income (loss)................. $ 6,067 $ (227) $ 1,528 $ -- $ 7,368
======== ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................... $ (6,870) $ 168 $ 11,538 $ -- $ 4,836
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (130) (3) (832) -- (965)
Acquisitions of businesses............... (11,889) -- (7,153) -- (19,042)
Proceeds from sales of property, plant
and equipment.......................... -- -- 21 -- 21
Changes in other long-term assets........ 1,096 -- (279) -- 817
-------- -------- -------- -------- --------
Net cash used in investing activities.... (10,923) (3) (8,243) -- (19,169)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit
facilities............................. 35,323 138 4,657 -- 40,118
Repayments of revolving credit
facilities............................. (13,868) (535) (4,848) -- (19,251)
Proceeds from long-term debt............. 264 -- 2,710 -- 2,974
Repayments of long-term debt............. (1,225) -- (952) -- (2,177)
Repayments of notes payable to
shareholders........................... -- -- -- -- --
Distributions to shareholders............ (3,100) -- -- -- (3,100)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities............................. 17,394 (397) 1,567 -- 18,564
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE ON CASH............ -- 2 (1,200) -- (1,198)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH............ (399) (230) 3,662 -- 3,033
Cash and cash equivalents, beginning of
period................................... 399 133 4,769 -- 5,301
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period... $ 0 $ (97) $ 8,431 $ -- $ 8,334
======== ======== ======== ======== ========
</TABLE>
F-28
<PAGE> 123
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 30, 1998
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $170,885 $ 22,690 193,218 $ (1,792) $381,137
Cost of sales.............................. 92,880 12,323 116,534 (1,792) 216,081
-------- -------- -------- -------- --------
Gross profit............................. 78,005 10,367 76,684 -- 165,056
Operating expenses......................... 53,182 8,319 69,332 -- 130,833
Restructuring charges...................... -- 276 1,986 -- 2,262
-------- -------- -------- -------- --------
Operating income......................... 24,823 1,772 5,366 -- 31,961
Costs of cancelled initial public equity
offering................................. 1,273 -- -- -- 1,273
Interest income............................ (116) -- -- -- (116)
Interest expense........................... 623 655 10,671 -- 11,949
-------- -------- -------- -------- --------
Income (loss) before provision for income
taxes and minority interest............ 23,043 1,117 (5,305) -- 18,855
Provision for income taxes................. 864 24 3,133 -- 4,021
Minority interest.......................... -- -- 471 -- 471
Equity in earnings of subsidiaries......... 16,044 -- -- (16,044) --
-------- -------- -------- -------- --------
Net income (loss)................. $ 38,223 $ 1,093 $ (8,909) $(16,044) $ 14,363
======== ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................... $ 19,906 $ (564) $ (3,508) $ -- $ 15,834
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (955) (62) (7,361) -- (8,378)
Acquisitions of businesses............... (20,989) -- (7,076) -- (28,065)
Proceeds from sales of property, plant
and equipment.......................... 37 54 418 -- 509
Changes in other long-term assets........ -- -- 1,919 -- 1,919
-------- -------- -------- -------- --------
Net cash used in investing activities.... (21,907) (8) (12,100) -- (34,015)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of senior
subordinated notes, net of debt issue
costs.................................. 193,241 $ -- -- -- 193,241
Changes in intercompany loan balances.... (57,478) 433 57,045 -- --
Proceeds from revolving credit
facilities............................. 87,685 327 21,849 -- 109,861
Repayments of revolving credit
facilities............................. (92,585) (64) (42,058) -- (134,707)
Proceeds from long-term debt............. 2,641 777 12,258 -- 15,676
Repayments of long-term debt............. (8,509) (763) (32,841) -- (42,113)
Repayments of notes payable to
shareholders........................... (4,000) -- -- -- (4,000)
Distributions to shareholders............ (70,300) -- -- -- (70,300)
-------- -------- -------- -------- --------
Net cash provided by financing
activities............................. 50,695 710 16,253 -- 67,658
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE ON CASH............ 95 (253) 264 -- 106
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH............ 48,789 (115) 909 -- 49,583
Cash and cash equivalents, beginning of
period................................... 399 133 4,769 -- 5,301
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period... $ 49,188 $ 18 $ 5,678 $ -- $ 54,884
======== ======== ======== ======== ========
</TABLE>
F-29
<PAGE> 124
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31, 1997
----------------------------------------------------------------------
CONSOLIDATED
ALBECCA SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
----------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales........................................ $165,514 $ 9,121 $183,788 $(4,365) $354,058
Cost of sales.................................... 88,294 5,246 111,575 (4,365) 200,750
-------- -------- -------- ------- --------
Gross profit................................... 77,220 3,875 72,213 -- 153,308
Operating expenses............................... 51,667 4,296 61,744 -- 117,707
-------- -------- -------- ------- --------
Operating income............................... 25,553 (421) 10,469 -- 35,601
Interest expense................................. 700 651 8,371 -- 9,722
-------- -------- -------- ------- --------
Income (loss) before provision for income taxes
and minority interest........................ 24,853 (1,072) 2,098 -- 25,879
Provision for income taxes....................... 843 -- 2,400 -- 3,243
Minority interest................................ -- -- 146 -- 146
-------- -------- -------- ------- --------
Net income (loss)....................... $ 24,010 $ (1,072) $ (448) $ -- $ 22,490
======== ======== ======== ======= ========
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES..................................... $ 23,699 $ (1,940) $ 391 $ -- $ 22,150
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment..... (880) (222) (6,644) -- (7,746)
Acquisitions of businesses..................... -- -- (18,408) -- (18,408)
Proceeds from sales of property, plant and
equipment.................................... 1,649 -- 1,806 -- 3,455
Changes in other long-term assets.............. 2 97 86 -- 185
-------- -------- -------- ------- --------
Net cash provided by (used in) investing
activities................................... 771 (125) (23,160) -- (22,514)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany loan balances.......... (17,724) 1,137 16,587 -- --
Proceeds from revolving credit facilities...... 55,934 1,027 11,288 -- 68,249
Repayments of revolving credit facilities...... (52,401) -- (550) -- (52,951)
Proceeds from long-term debt................... 8,211 -- 2,960 -- 11,171
Repayments of long-term debt................... (2,404) -- (6,493) -- (8,897)
Capital contribution........................... 16 -- -- -- 16
Distributions to shareholders.................. (16,084) -- -- -- (16,084)
-------- -------- -------- ------- --------
Net cash (used in) provided by financing
activities................................... (24,452) 2,164 23,792 -- 1,504
-------- -------- -------- ------- --------
EFFECT OF EXCHANGE RATE ON CASH.................. -- (9) (193) -- (202)
-------- -------- -------- ------- --------
NET INCREASE IN CASH............................. 18 90 830 -- 938
Cash and cash equivalents, beginning of period... 381 43 3,939 -- 4,363
-------- -------- -------- ------- --------
Cash and cash equivalents, end of period......... $ 399 $ 133 $ 4,769 $ -- $ 5,301
======== ======== ======== ======= ========
</TABLE>
F-30
<PAGE> 125
ALBECCA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
ALBECCA INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 25, 1996
-----------------------------------------------------------------------
CONSOLIDATED
SUBSIDIARY SUBSIDIARY ELIMINATION CONSOLIDATED
ALBECCA INC. GUARANTORS NONGUARANTORS ENTRIES TOTAL
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $162,429 $ 8,931 $133,898 $ (4,470) $300,788
Cost of sales.............................. 90,999 5,071 82,364 (4,470) 173,964
-------- ------- -------- ---------- --------
Gross profit............................. 71,430 3,860 51,534 -- 126,824
Operating expenses......................... 48,897 3,616 44,082 -- 96,595
-------- ------- -------- ---------- --------
Operating income......................... 22,533 244 7,452 -- 30,229
Interest expense........................... 1,455 416 4,975 -- 6,846
-------- ------- -------- ---------- --------
Income (loss) before provision for income
taxes and minority interest............ 21,078 (172) 2,477 -- 23,383
Provision for income taxes................. 785 (17) 2,911 -- 3,679
Minority interest.......................... -- -- 300 -- 300
-------- ------- -------- ---------- --------
Net income (loss)................. $ 20,293 $ (155) $ (734) $ -- $ 19,404
======== ======= ======== ========== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................... $ 32,333 $(1,563) $ (130) $ -- $ 30,640
-------- ------- -------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. 23,495 (353) (28,603) -- (5,461)
Acquisitions of businesses............... (34,062) -- -- -- (34,062)
Proceeds from sales of property, plant
and equipment.......................... 99 85 474 -- 658
Changes in other long-term assets........ 13,459 (148) (12,545) -- 766
-------- ------- -------- ---------- --------
Net cash provided by (used in)
investing activities............ 2,991 (416) (40,674) -- (38,099)
-------- ------- -------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany loan balances.... -- 1,311 (1,311) -- --
Proceeds from revolving credit
facilities............................. 52,041 (15) 24,823 -- 76,849
Repayments of revolving credit
facilities............................. (68,005) -- -- -- (68,005)
Proceeds from long-term debt............. (5,116) 738 24,084 -- 19,706
Repayments of long-term debt............. (1,897) -- (6,121) -- (8,018)
Distributions to shareholders............ (12,250) -- -- -- (12,250)
-------- ------- -------- ---------- --------
Net cash provided by (used in) financing
activities............................. (35,227) 2,034 41,475 -- 8,282
-------- ------- -------- ---------- --------
EFFECT OF EXCHANGE RATE ON CASH............ -- (28) 192 -- 164
-------- ------- -------- ---------- --------
NET INCREASE IN CASH....................... 97 27 863 -- 987
Cash and cash equivalents, beginning of
period................................... 284 16 3,076 -- 3,376
-------- ------- -------- ---------- --------
Cash and cash equivalents, end of period... $ 381 $ 43 $ 3,939 $ -- $ 4,363
======== ======= ======== ========== ========
</TABLE>
F-31
<PAGE> 126
------------------------------------------------------
------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any shares in any jurisdiction where it is unlawful. The information in this
prospectus is current as of , 1998.
------------------------
TABLE OF CONTENTS*
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 6
Where You Can Find More Information... 9
Use of Proceeds....................... 10
Capitalization........................ 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 20
Management............................ 31
Certain Relationships and Related
Transactions........................ 35
Description of Certain Indebtedness... 36
The Exchange Offer.................... 37
Description of Notes.................. 45
Certain United States Federal Income
Tax Considerations.................. 82
Plan of Distribution.................. 84
Legal Matters......................... 85
Experts............................... 85
Index to Financial Statements......... F-1
</TABLE>
Until , 1998 (20 days after the date of this prospectus) all
dealers that buy, sell or trade these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$200,000,000
(ALBECCA LOGO)
10 3/4% SENIOR SUBORDINATED
NOTES DUE 2008
--------------------
PROSPECTUS
--------------------
, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE> 127
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Albecca's Articles of Incorporation eliminate, subject to certain limited
exceptions, the personal liability of a director to Albecca or its shareholders
for monetary damage for any breach of duty as a director. There is no
elimination of liability for (1) a breach of duty involving appropriation of a
business opportunity of Albecca; (2) an act or omission which involves
intentional misconduct or a knowing violation of law; (3) any transaction from
which the director derives an improper personal benefit; or (4) as to any
payments of a dividend or any other type of distribution that is illegal under
Section 14-2-832 of the Georgia Business Corporation Code (the "Code"). In
addition, if at any time the Code is amended to authorize further elimination or
limitation of the personal liability of a director, then the liability of each
director of Albecca shall be eliminated or limited to the fullest extent
permitted by such provisions, as so amended, without further action by the
shareholders, unless the provisions of the Code require such action. The
provision does not limit the right of Albecca or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
Albecca's bylaws contain certain provisions which provide indemnification
to directors of Albecca that is broader than the protection expressly mandated
in Sections 14-2-852 and 14-2-857 of the Code. To the extent that a director or
officer of Albecca has been successful, on the merits or otherwise, in the
defense of any action or proceeding brought by reason of the fact that such
person was a director or officer of Albecca, Sections 14-2-852 and 14-2-857 of
the Code would require Albecca to indemnify such persons against expenses
(including attorney's fees) actually and reasonably incurred in connection
therewith. The Code expressly allows Albecca to provide for greater
indemnification rights to its officers and directors, subject to shareholder
approval.
The indemnification provisions in Albecca's bylaws require Albecca to
indemnify and hold harmless any director who was or is a party or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (including
any action or suit by or in the right of Albecca) because he or she is or was a
director of Albecca, against expenses (including, but not limited to, attorney's
fees and disbursements, court costs and expert witness fees), and against
judgments, fines, penalties, and amounts paid in settlement incurred by him or
her in connection with the action, suit or proceeding. Indemnification would be
disallowed under any circumstances where indemnification may not be authorized
by action of the Board of Directors, the shareholders or otherwise. The Board of
Directors of Albecca also has the authority to extend to officers, employees and
agents the same indemnification rights held by directors, subject to all the
accompanying conditions and obligations. Indemnified persons would also be
entitled to have Albecca advance expenses prior to the final disposition of the
proceeding. If it is ultimately determined that they are not entitled to
indemnification, however, such amounts would be repaid. Insofar as
indemnification for liability arising under the Securities Act may be permitted
to officers and directors of Albecca pursuant to the foregoing provisions,
Albecca has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of Albecca as to which indemnification is being sought,
nor is Albecca aware of any pending or threatened litigation that may result in
claims for indemnification by any director, officer, employee or other agent.
II-1
<PAGE> 128
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<C> <C> <S>
3.1 -- Amended and Restated Articles of Incorporation of Albecca+
3.2 -- Amended and Restated Bylaws of Albecca+
4.1 -- Indenture dated August 11, 1998, among Albecca Inc. and
State Street Bank & Trust, as trustee, relating to the Notes
(the "Indenture")+
4.2 -- Form of 10 3/4% Senior Note due 2008 of Albecca Inc.
(included as Exhibit A of the Indenture filed as Exhibit
4.1)+
4.3 -- Subsidiary Guaranty+
4.4 -- Registration Rights Agreement, dated as of August 11, 1998,
among Albecca Inc. Donaldson Lufkin Jenrette Securities
Corporation and Morgan Stanley & Co. Incorporated+
5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
5.2 -- Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP
10.1 -- 1998 Stock Option Plan+
10.2 -- Lease Agreement, dated August 8, 1991, by and between L-J
Properties Inc. and Larson-Juhl Inc.+
10.3 -- Amendment No. 1 to Lease Agreement dated October 26, 1993,
by and between L-J Properties Inc. and Larson-Juhl Inc.+
10.4 -- Form of S Corp Note issued by Albecca in favor of its
existing shareholders+
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of Albecca+
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of BDO CampsObers
23.3 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed
as part of Exhibit 5.1)
23.4 -- Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(filed as part of Exhibit 5.2)
24.1 -- Power of Attorney (included in the signature pages to the
Registration Statement)+
25.1 -- Form T-1 with respect to the eligibility of State Street
Bank and Trust Company with respect to the Indenture+
27.1 -- Financial Data Schedule (for SEC use only)+
99.1 -- Form of Letter of Transmittal+
99.2 -- Form of Notice of Guaranteed Delivery+
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees+
99.4 -- Form of Letter to Client+
99.5 -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9+
</TABLE>
- ---------------
+ Previously filed
(b) Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS.
Albecca hereby undertakes that:
(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
II-2
<PAGE> 129
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(2) Every prospectus that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE> 130
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA,
STATE OF GEORGIA, ON FEBRUARY 2, 1999.
ALBECCA INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO Chairman of the Board, February 2, 1999
- ----------------------------------------------------- President, Chief Executive
Craig A. Ponzio Officer and Director
(Principal Executive Officer)
* Vice Chairman of the Board February 2, 1999
- ----------------------------------------------------- and Director
June R. Ponzio
* Director February 2, 1999
- -----------------------------------------------------
Philip H. Moise
* Senior Vice President, Chief February 2, 1999
- ----------------------------------------------------- Financial Officer (Principal
Stephen M. Scheppmann Financial and Accounting
Officer)
* President, International February 2, 1999
- -----------------------------------------------------
William P. Trimarco
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-4
<PAGE> 131
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL US LLC
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO Chairman of the Board, February 2, 1999
- ----------------------------------------------------- President, Chief Executive
Craig A. Ponzio Officer and Director
(Principal Executive Officer)
* Senior Vice President, Chief February 2, 1999
- ----------------------------------------------------- Financial Officer (Principal
Stephen M. Scheppmann Financial and Accounting
Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-5
<PAGE> 132
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL INTERNATIONAL LLC
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO Chairman of the Board, February 2, 1999
- ----------------------------------------------------- President, Chief Executive
Craig A. Ponzio Officer and Director
(Principal Executive Officer)
* Senior Vice President, Chief February 2, 1999
- ----------------------------------------------------- Financial Officer (Principal
Stephen M. Scheppmann Financial and Accounting
Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-6
<PAGE> 133
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
ART MATERIALS, FRAMES AND
MOULDINGS COMPANY, INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Treasurer (Principal Financial February 2, 1999
- ----------------------------------------------------- and Accounting Officer)
Stephen M. Scheppmann
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-7
<PAGE> 134
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
ROBERT F. DE CASTRO, INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Treasurer (Principal Financial February 2, 1999
- ----------------------------------------------------- and Accounting Officer)
Stephen M. Scheppmann
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-8
<PAGE> 135
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
GLASS CORPORATION OF AMERICA, INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Treasurer (Principal Financial February 2, 1999
- ----------------------------------------------------- and Accounting Officer)
Stephen M. Scheppmann
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-9
<PAGE> 136
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
ART WEST, INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Treasurer (Principal Financial February 2, 1999
- ----------------------------------------------------- and Accounting Officer)
Stephen M. Scheppmann
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-10
<PAGE> 137
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
EASTERN MOULDING, INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Treasurer (Principal Financial February 2, 1999
- ----------------------------------------------------- and Accounting Officer)
Stephen M. Scheppmann
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-11
<PAGE> 138
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
EASTERN MOULDINGS, INC.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Treasurer (Principal Financial February 2, 1999
- ----------------------------------------------------- and Accounting Officer)
Stephen M. Scheppmann
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-12
<PAGE> 139
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL AUSTRALIA L.L.C.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Vice President, Finance February 2, 1999
- ----------------------------------------------------- (Principal Financial and
Stephen M. Scheppmann Accounting Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-13
<PAGE> 140
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL FRANCE L.L.C.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Vice President, Finance February 2, 1999
- ----------------------------------------------------- (Principal Financial and
Stephen M. Scheppmann Accounting Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-14
<PAGE> 141
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL SOUTH AFRICA L.L.C.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Vice President, Finance February 2, 1999
- ----------------------------------------------------- (Principal Financial and
Stephen M. Scheppmann Accounting Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-15
<PAGE> 142
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL KOREA L.L.C.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Vice President, Finance February 2, 1999
- ----------------------------------------------------- (Principal Financial and
Stephen M. Scheppmann Accounting Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-16
<PAGE> 143
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL SEOUL L.L.C.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Vice President, Finance February 2, 1999
- ----------------------------------------------------- (Principal Financial and
Stephen M. Scheppmann Accounting Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-17
<PAGE> 144
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE CO-REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON FEBRUARY 2, 1999.
LARSON-JUHL NETHERLANDS L.L.C.
By: /s/ CRAIG A. PONZIO
------------------------------------
Name: Craig A. Ponzio
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG A. PONZIO President and Director February 2, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Craig A. Ponzio
* Vice President, Finance February 2, 1999
- ----------------------------------------------------- (Principal Financial and
Stephen M. Scheppmann Accounting Officer)
*By: /s/ CRAIG A. PONZIO
------------------------------------------------
Craig A. Ponzio, as
Attorney-in-fact
</TABLE>
II-18
<PAGE> 145
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To Albecca Inc.:
We have audited, in accordance with generally auditing standards, the
consolidated financial statements of ALBECCA INC. (a Georgia corporation)
included in this registration statement and have issued our report thereon dated
November 6, 1998. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. Item 16(b) of the Registration
Statement is the responsibility of Albecca's management and presented for
purposes of complying with the Securities and Exchange Commission rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Atlanta, Georgia
November 6, 1998
II-19
<PAGE> 146
SCHEDULE II
ALBECCA
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF YEAR EXPENSES DEDUCTIONS* OTHER** OF YEAR
---------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
For the fiscal year ended:
August 25, 1996: Allowance for
doubtful accounts................ $2,791,000 $2,643,000 $1,825,000 $282,000 $3,891,000
---------- ---------- ---------- -------- ----------
August 31, 1997: Allowance for
doubtful accounts................ $3,891,000 $4,526,000 $3,149,000 $110,000 $5,378,000
---------- ---------- ---------- -------- ----------
August 30, 1998: Allowance for
doubtful accounts................ $5,378,000 $3,756,000 $3,444,000 $169,000 $5,859,000
---------- ---------- ---------- -------- ----------
</TABLE>
- ---------------
* Principally charges for which reserves were provided, net of recoveries.
** Acquired through acquisition of businesses.
<PAGE> 147
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ---- -----------
<C> <S> <C>
3.1 -- Amended and Restated Articles of Incorporation of Albecca+
3.2 -- Amended and Restated Bylaws of Albecca+
4.1 -- Indenture dated August 11, 1998, among Albecca Inc. and
State Street Bank & Trust, as trustee, relating to the Notes
(the "Indenture")+
4.2 -- Form of 10 3/4% Senior Note due 2008 of Albecca Inc.
(included as Exhibit A of the Indenture filed as Exhibit
4.1)+
4.3 -- Subsidiary Guaranty+
4.4 -- Registration Rights Agreement, dated as of August 11, 1998,
among Albecca Inc. Donaldson Lufkin Jenrette Securities
Corporation and Morgan Stanley & Co. Incorporated+
5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
5.2 -- Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP
10.1 -- 1998 Stock Option Plan+
10.2 -- Lease Agreement, dated August 8, 1991, by and between L-J
Properties Inc. and Larson-Juhl Inc.+
10.3 -- Amendment No. 1 to Lease Agreement dated October 26, 1993,
by and between L-J Properties Inc. and Larson-Juhl Inc.+
10.4 -- Form of S Corp Note issued by Albecca in favor of its
existing shareholders+
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of Albecca+
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of BDO CampsObers
23.3 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed
as part of Exhibit 5.1)
23.4 -- Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(filed as part of Exhibit 5.2)
24.1 -- Power of Attorney (included in the signature pages to the
Registration Statement)+
25.1 -- Form T-1 with respect to the eligibility of State Street
Bank and Trust Company with respect to the Indenture+
27.1 -- Financial Data Schedule (for SEC use only)+
99.1 -- Form of Letter of Transmittal+
99.2 -- Form of Notice of Guaranteed Delivery+
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees+
99.4 -- Form of Letter to Client+
99.5 -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9+
</TABLE>
- ---------------
+ Previously filed
<PAGE> 1
EXHIBIT 5.1
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
999 Peachtree Street, N.E.
First Union Plaza, Suite 1400
Atlanta, Georgia 30309
Telephone: (404) 817-6000
February 2, 1999
Albecca Inc.
3900 Steve Reynolds Drive
Norcross, Georgia 30093
Ladies and Gentlemen:
We have acted as counsel to Albecca Inc., a Georgia corporation and
each of the entities listed on Exhibit A hereto (the "Subsidiary Guarantors")
(the "Company"), in connection with the filing of a Registration Statement on
Form S-4 (Reg. No. 333-67975) (the "Registration Statement") under the
Securities Act of 1933, as amended, relating to the proposed exchange (the
"Exchange Offer") of up to $200 million principal amount of 10 3/4%Senior
Subordinated Notes due 2008 (the "New Notes") for a like principal amount of the
Company's issued and outstanding 10 3/4% Senior Notes due 2008 (the "Old
Notes"), and the guarantee of the New Notes by the Subsidiary Guarantees. The
Old Notes were, and the New Notes will be, issued pursuant to the Indenture (the
"Indenture") dated as of August 11, 1998 among the Company, as issuer, and State
Street Bank and Trust Company, as trustee (the "Trustee"), which has been filed
as Exhibit 4.1 to the Registration Statement.
We have examined the Indenture, the form of certificate which will
evidence the New Notes, the Subsidiary Guarantee dated as of August 11, 1998, by
each of the Subsidiary Guarantors (the "Subsidiary Guarantee"), the Registration
Rights Agreement dated as of August 11, 1998 among the Company, the placement
agents named therein and the Trustee (the "Registration Rights Agreement") (the
Indenture, the Subsidiary Guarantee and the Registration Rights Agreement have
been filed as Exhibits to the Registration Statement), and certain corporate
records of the Company, and we have made such other investigations as we have
deemed appropriate in order to express the opinion set forth herein. We have
assumed that the execution and delivery of, and the performance of all
obligations under, the Indenture have been duly authorized by all requisite
action by the Trustee, and that the Indenture has been duly executed and
delivered by, and is a valid and binding agreement of, the Trustee, enforceable
against the Trustee in accordance with its terms.
This opinion is limited by and is in accordance with the January 1,
1992 edition of the Interpretive Standards applicable to Legal Opinions to Third
Parties in Corporate Transactions adopted by the Legal Opinion Committee of the
Corporate and Banking Law Section of the State Bar of Georgia (the "Interpretive
Standards").
As to matters of New York law addressed in opinions number 2 and 3
below, we have relied on the opinion of Robinson Silverman Pearce Aronsohn &
Berman LLP, New York, New York, which opinion has been filed as an exhibit to
the Registration Statement.
<PAGE> 2
Albecca Inc.
February 2, 1999
Page 2
Based upon the foregoing, and the other limitations and qualifications
set forth herein, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Georgia and the Subsidiary Guarantors
are duly organized and validly existing under the laws of the state set forth
across from their name on Exhibit A hereto.
2. The Indenture and the New Notes have been duly authorized by
the Company, and the New Notes, when executed, authenticated and delivered to
the holders of the Old Notes pursuant to the Exchange Offer in accordance with
the terms of the Indenture, will be valid and legally binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights
generally, (ii) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles of general
applicability, and (iii) to other limitations specified in the Interpretive
Standards.
3. The Subsidiary Guarantee has been duly authorized by each of
the Subsidiary Guarantors and is a valid and binding agreement of each of the
Subsidiary Guarantors enforceable against each of the Subsidiary Guarantors in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting creditors' rights generally, (ii) rights of acceleration, if
applicable, and the availability of equitable remedies may be limited by
equitable principals of general applicability, and (iii) to other limitations
specified in the Interpretive Standards.
This opinion is given as of the date hereof, and we assume no
obligation to advise you after the date hereof of facts or circumstances that
come to our attention or changes in law that occur which could affect the
opinions contained herein. This letter is being rendered solely for the benefit
of the Company in connection with the matters addressed herein. This opinion may
not be furnished to or relied upon by any person or entity for any purpose
without our prior written consent.
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
NELSON MULLINS RILEY &
SCARBOROUGH, L.L.P.
By: /s/ Philip H. Moise
----------------------
Philip H. Moise
<PAGE> 3
EXHIBIT A
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY GUARANTOR INCORPORATION
- ---------------------------- -------------
<S> <C>
Larson-Juhl US LLC.......................................... Georgia
Larson-Juhl International LLC............................... Georgia
Art Materials, Frames and Mouldings Company, Inc. .......... Alabama
Robert F. de Castro, Inc.................................... Louisiana
Glass Corporation of America, Inc. ......................... Louisiana
Art West, Inc. ............................................. Arizona
Eastern Moulding, Inc. ..................................... Maryland
Eastern Mouldings, Inc. ................................... New Jersey
Larson-Juhl Australia L.L.C. ............................... Georgia
Larson-Juhl France L.L.C. .................................. Georgia
Larson-Juhl South Africa L.L.C. ............................ Georgia
Larson-Juhl Seoul L.L.C. ................................... Georgia
Larson-Juhl Korea L.L.C..................................... Georgia
Larson-Juhl Netherlands L.L.C. ............................. Georgia
</TABLE>
<PAGE> 1
EXHIBIT 5.2
February 2, 1999
Nelson Mullins Riley & Scarborough LLP
First Union Plaza
999 Peachtree Street, Suite 1400
Atlanta, Georgia 30309
Albecca Inc.
3900 Steve Reynolds Drive
Norcross, Georgia 30093
Re: Albecca Inc.
Ladies and Gentlemen:
We have acted as special New York counsel to Albecca Inc., a Georgia
corporation (the "Company"), in connection with the filing of a registration
statement on Form S-4 (Registration No. 333-67975) (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), for the
purpose of registering the Company's offer to exchange (the "Exchange Offer")
$200,000,000 in aggregate principal amount of the Company's new 10 3/4% Senior
Subordinated Notes due 2008 (the "New Notes") for an equal principal amount of
the Company's outstanding 10 3/4% Senior Subordinated Notes due 2008 (the
"Existing Notes").
In rendering this opinion, we have examined the Indenture dated as of
August 11, 1998, among the Company, the Guarantors thereto and State Street Bank
and Trust Company, as Trustee (the "Indenture"), the Subsidiary Guarantee dated
as of August 11, 1998, by each of the Subsidiary Guarantors thereto (the
"Subsidiary Guarantee"), and the form of New Notes attached as an exhibit to the
Indenture and we have made such other investigations as we have deemed necessary
or appropriate as a basis for the opinions set forth herein. In our examination,
we have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of documents submitted to us as originals and the
conformity with authentic originaldocuments of all documents submitted to us as
copies or as forms of agreements or instruments. In rendering this opinion, we
have not examined any public records in New York or in any other state.
<PAGE> 2
In rendering the opinions expressed below, we have assumed, with your
consent, that (i) all of the documents and instruments (including the
Indenture, the New Notes and the Subsidiary Guarantee) referred to in this
opinion have been duly authorized by and have been duly executed and delivered
by all of the parties to such documents, (ii) other than with respect to the
Company and the Subsidiary Guarantors, all of such documents constitute legal,
valid, binding and enforceable obligations of all of the parties to such
documents and (iii) all signatures to such documents have been duly authorized
and all parties are duly organized and validly existing and have the power and
authority (corporate and other) to execute, deliver and perform such documents.
In furtherance and not in limitation of the foregoing, for purposes of
rendering the opinions expressed herein, we have also assumed, with your
consent, that (a) the execution and delivery of the Indenture, the New Notes
and the Subsidiary Guarantee and all documents and instruments executed in
connection therewith, by all parties thereto will be free of, and we are not
aware of the existence of, intentional or unintentional mistake, fraud, undue
influence, duress, or criminal activity and (b) the representations and
warranties of all parties in the Indenture, the New Notes and the Subsidiary
Guarantee and each other document and instrument executed in connection
therewith are true and correct in all respects.
Based upon the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that:
1. Assuming that the New Notes have been duly executed and
delivered by the Company, the New Notes, when executed and authenticated in
accordance with the provisions of the Indenture and when duly delivered in
exchange for the Existing Notes in accordance with the terms of the Exchange
Offer in the manner described in the Registration Statement, will constitute
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms.
2. The Subsidiary Guarantee is a valid and binding agreement of
each Subsidiary Guarantor, enforceable against each Subsidiary Guarantor in
accordance with its terms.
In addition to the limitations set forth above, the opinions set forth
herein are further limited by, subject to and based upon the following.
(a) We are admitted to practice in the State of New York only and do not
purport to be experts in the laws of jurisdictions other than the State of New
York, and we do not express any opinion as to the laws of any other
jurisdiction.
(b) The enforceability of the Indenture, the New Notes and the Subsidiary
Guarantee, including, if applicable, rights of acceleration, may be limited by
(i) bankruptcy,
<PAGE> 3
Nelson Mullins Riley & Scarborough LLP
Albecca Inc.
February 2, 1999
Page 3
insolvency, reorganization, moratorium or similar laws affecting or relating to
the rights and remedies of creditors rights generally including, without
limitation, laws relating to fraudulent transfers or conveyances, preferences
and equitable subordination, limitations on the accrual and payment of post
petition interest in any case filed under the United States Bankruptcy Code,
and Section 544 through 550 of the United States Bankruptcy Code and Sections
270 and 281 of the Debtor and Creditor Law of the State of New York, (ii)
general principles of equity (regardless of whether considered in a proceeding
in equity or at law) governing and limiting the availability of specific
performance, injunctive relief or other equitable remedies including, without
limitation, limitations on the effectiveness of purported waivers of equitable
rights, and (iii) an implied covenant of good faith and fair dealing.
(c) Certain rights, remedies and waivers contained in the
Indenture, the New Notes and the Subsidiary Guarantee may be limited or
rendered ineffective by applicable law or judicial decisions governing the same.
(d) We express no opinion as to:
(i) any federal or state securities or similar laws;
(ii) whether the interest, fees or other charges to be paid
or reimbursed as provided in the Indenture, the New Notes or the Subsidiary
Guarantee (and any other documents or instruments executed in connection
therewith or any prior documents and instruments related thereto), taken as a
whole or considering any part thereof, would be usurious. In rendering our
opinions expressed herein, however, we assume that the interest, fees and
other charges to be paid or reimbursed as provided in the Indenture, the New
Notes and the Subsidiary Guarantee (and any other documents or instruments
executed in connection therewith), taken as a whole and considering any part
thereof, would not be usurious;
(iii) any provision in the Indenture (A) purporting or
attempting to limit, restrict or waive the right to a trial by jury in any
legal proceeding brought by any of the parties to the Indenture, the New Notes
or the Subsidiary Guarantee, (B) purporting or attempting to waive the defenses
of forum non conveniens or improper venue, (C) purporting or attempting to
confer subject matter jurisdiction on a court not having independent grounds
therefor, (D) altering or attempting to alter by agreement the method of
service of process required by applicable law, (E) purporting or attempting to
grant a power of attorney to the Trustee or any other person to act on behalf
of the Company or any Subsidiary Guarantor, (F) purporting to
<PAGE> 4
Nelson Mullins Riley & Scarborough LLP
Albecca Inc.
February 2, 1999
Page 4
waive the benefits of any stay, extension or usery law or (G) purporting to
waive any immunity from jurisdiction of any court or from any legal process.
(e) Our opinions are based on current statues, regulations, case law
and administrative guidance, any or all of which may change in the future,
possibly with retroactive and detrimental effect. Opinions of counsel are not
binding on the courts and, accordingly, no assurance can be given that the
courts might not disagree with the opinions expressed herein.
This opinion is being furnished only to you and is solely for your
benefit and that of your successors and assigns, and is not to be otherwise
used, circulated, quoted, relied upon or otherwise referred to for any purpose
without our express prior written consent in each instance.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement to effect registration of the New Notes under the Act
and to the reference to us under the caption "Legal Matters" in the prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/ ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
<PAGE> 1
EXHIBIT 12.1
ALBECCA INC.
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Fiscal Year
---------------------------- Three Months Three Months
(in thousands) Pro Forma Ended Ended
1994 1995 1996 1997 1998 1998 November 30, 1997 November 29, 1998
------ ------ ------ ------ ------ -------- ----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings
Operating Income (A) 15,534 22,471 30,229 35,601 31,961 31,961 10,773 8,299
Interest Expense (B) 1,034 4,008 6,846 9,722 11,949 25,694* 2,343 7,125
====== ====== ====== ====== ====== ======= =============== =================
Ratio of Earnings to Fixed
Charges (A/B) 15.0 5.6 4.4 3.7 2.6 1.2 4.6 1.2
</TABLE>
* Pro forma interest expense calculated based on assumption of full year's
interest on notes and the interest saved on payoff of the retired credit
facility.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made part of this
Registration Statement.
/S/ Arthur Andersen LLP
Atlanta, Georgia
February 2, 1999
<PAGE> 1
EXHIBIT 23.2
February 2, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
amendment 2 to Registration Statement on Form S-4 of our report dated October
6, 1998 on the financial statements of Larson-Juhl Netherlands B.V. for the
year September 1, 1997 up to and including August 30, 1998 as well as our
reports on the financial statements of Larson-Juhl Netherlands B.V. for the
fiscal years 1996 (for the period August 28, 1995 up to and including August
25, 1996) and 1997 (for the period August 26, 1996 up to and including August
31, 1997).
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
Arnhem, The Netherlands
/s/ BDO CampsObers
- ------------------------
BDO CampsObers
Registeraccountants
M. Van Roekel RA
