<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM l0-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE SECURITIES EXCHANGE
ACT OF l934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-10946
BOBBIE BROOKS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 34-0662362
(State of incorporation) (I.R.S. Employer Identification No.)
3830 Kelley Avenue, Cleveland, Ohio 44114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 881-5300
Securities registered pursuant to Section l2(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section l2(g) of the Act:
Common Stock, Par Value $.00l Per Share
(Title of class)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
At March 1, 1996, the aggregate market value of the common shares held by
non-affiliates of the registrant (based upon the average bid and asked prices
of the Common Stock), was approximately $493,625.
As of March 1, l996, 4,932,400 shares of Common Stock were outstanding.
Documents Incorporated by Reference Form l0-K Reference
None
The exhibit index begins on page of this Form l0-K.
<PAGE>
PART I
ITEM l. BUSINESS
(a) General Development of Business.
Bobbie Brooks, Incorporated ("Brooks"), a Delaware corporation
originally organized in Ohio in 1946, owns Buckeye Business Products,
Inc. ("Buckeye"), which operates as a division and manufactures and
markets computer and data processing supplies, approximately 85% of
Allied Construction Products, Inc. ("Allied"), a Delaware corporation
organized in 1993, which manufactures and distributes products for the
construction and related industries, and approximately 62% of Aspen
Imaging International, Inc. ("Aspen"), a Delaware corporation originally
organized in Colorado in 1977, which manufactures and markets computer
and data processing supplies. Brooks also licenses the use by others of
certain apparel-related and printing-related trademarks and tradenames.
Brooks and its wholly-owned and majority-owned subsidiaries are
collectively referred to as the "Company". As of December 31, 1995, the
Company employed approximately 220 persons.
Brooks acquired Allied on March 1, 1993 and acquired Buckeye on
January 1, 1994. Buckeye acquired approximately 41% of Aspen on July 1,
1993 and increased its ownership to approximately 62% during 1995.
The Company's commercial printing subsidiary ceased its printing
operations near the end of the 1994 first quarter and liquidated its
assets. The decision to discontinue this segment was made in the third
quarter of 1993. The Company's retail subsidiary closed or sold its
stores near the end of 1994. The Company's apparel manufacturing
operations (other than trademark licensing), which operations did not
represent any material amount of the Company's business, completed their
final season during 1994.
On October 24, 1995, Pubco Corporation ("Pubco"), which owns
approximately 90% of Brooks' Common Stock, announced that it had made
separate proposals to Brooks and to Aspen, which if accepted, would
result in Pubco owning 100% of Brooks and the assets of Aspen and the
stockholders of each such company receiving Pubco Common Stock.
The proposal made to Brooks would provide for the merger of Brooks
into Pubco and the conversion of each six shares of Brooks Common Stock
into one share of Pubco Common Stock. The proposal made to Aspen would
provide for the acquisition of the assets of Aspen by a wholly owned
subsidiary of Pubco for Pubco Common Stock and the distribution to former
Aspen stockholders of one share of Pubco Common Stock for each seven
shares of Aspen Common Stock.
The proposals are subject to the approval of Pubco's stockholders and
the approval of the Board of Directors and stockholders of each of Brooks
and Aspen, after each of those companies has received a fairness opinion
from its independent financial advisor.
2
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(b) Financial Information About Industry Segments.
For purposes of industry segment reporting, the Company deems that
its operations are conducted in two segments: computer printer supplies
and construction products. See Note K of Notes to Consolidated Financial
Statements for further information on industry segment reporting.
(c) Narrative Description of Business.
Computer Printer Supplies Segment
Buckeye, which operates as a division of Brooks, manufactures and
markets computer ribbons, cartridge ribbons, computer paper, laser
toners, remanufactured toner cartridges and thermal transfer ribbons.
Buckeye also re-markets ink-jet supplies, magnetic media and copy paper.
Ribbons constitute approximately 65% of Buckeye's business with paper and
toner products representing 25% and 10%, respectively. Aspen
manufactures toner and purchases from suppliers, including Buckeye,
ribbon products and other supplies for printing devices. Some of Aspen's
contractors produce component parts on molds owned by Aspen. Ribbon
products constitute approximately 50% of Aspen's business with toner
products constituting approximately 35%. The remaining 15% of Aspen's
business is derived from the purchase and resale of other office supplies
used primarily with printing devices and from the sale of its
AspenGuideR, the definitive computer printer industry compatibility guide
which provides cross-reference information concerning ribbons, fax, laser
and other related supplies. At December 31, 1995, Buckeye employed
approximately 100 persons and Aspen employed approximately 20 persons.
Buckeye markets its products exclusively through an in-house
telemarketing organization primarily to end-users in the United States.
Buckeye also produces products for the original equipment manufacturer
("OEM") market. Aspen's products are sold primarily through dealers
located in the United States who resell the products to end-users,
sometimes utilizing their own labeling.
Buckeye has approximately 12,000 accounts, none of which represents
5% of its business. Aspen has approximately 2,000 accounts, none of
which represents 5% of its business.
Principal raw materials used by Buckeye are nylon impression fabric
which is primarily purchased from one weaving mill, but is readily
available from other sources, uncoated free sheet paper, which is
purchased primarily from two suppliers, but is also readily available
from numerous sources, and plastic cartridge components, which are
purchased from numerous suppliers. Toner manufacturing chemicals are
purchased by Aspen from numerous suppliers.
Neither Buckeye's nor Aspen's business is seasonal and neither relies
on patents or trademarks for any material part of its business.
3
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Backlog is not important to Buckeye's business which depends on sales
to end users who purchase product when needed or on scheduled
deliveries. Backlog is not important to Aspen which depends on sales to
dealers who purchase product when needed. Both Buckeye and Aspen
generally maintain a one to two month's supply of inventory.
There are no dominant suppliers of product in the computer printing
supplies market which has numerous manufacturers and resellers.
Construction Products Segment
Allied designs, manufactures, assembles and distributes products for
the construction, utility and mining industries. Primary product lines
are divided into (A) products which are mounted on excavators, industrial
tractors, loaders and other equipment, including (i) hydraulic hammers
used for breaking rock, concrete and similar materials, (ii) hydraulic
mounted compactors used for soil compaction and pile and sheeting driving
applications, (iii) grapples used for material handling and demolition,
(iv) asphalt cutters, and (v) hydraulic pedestal boom systems used for
breaking oversize material at rock crushing operations and for waste
handling operations, and (B) underground products, including (i)
pneumatic piercing tools used to make horizontal holes for placement or
repair of underground utility lines, and (ii) aluminum trench supports
used to support the walls of open construction trenches. During the last
three fiscal years, mounted products represented approximately 80-85% of
Allied's sales while underground products represented the balance.
Allied maintains a contractual relationship with Krupp
Maschinentechnik GmbH, a German manufacturer of hammers and the component
parts thereof, under which these component parts are purchased by Allied,
assembled by Allied and exclusively sold and distributed in the United
States and Canada under Allied's own tradenames. These purchases have
represented approximately 50% of Allied's total component and material
purchases during the past three fiscal years.
Other sources of components and materials for Allied's products
include various metal products manufacturers, hydraulic system component
suppliers, and steel and aluminum suppliers, principally located in the
United States. No other supplier represents more than 5% of Allied's
component and material purchases. Raw materials used in the manufacture
of Allied's products are available from a variety of sources.
Allied's business is seasonal with approximately 60% of its annual
sales generated during the first half of the calendar year.
Allied actively sells to over 200 customers, none of which represents
more than 5% of Allied's annual sales.
Firm order backlog totalled approximately $4,286,000 as of February
23, 1996 compared to approximately $4,103,000 at February 24, 1995.
Average backlog ranges from a high of $5,000,000 to a low of less than
$1,000,000. Backlog represents orders expected to be filled within the
current fiscal year.
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Allied markets its products principally through distributors. Allied
competes with approximately 15 other foreign and domestic manufacturers
in the mounted product market and approximately 10 other foreign and
domestic manufacturers in the underground product market. None of
Allied's competitors are believed to hold a dominant position although
some have greater financial resources than Allied.
At December 31, 1995, Allied employed approximately 75 persons.
Trademark Licensing
Since 1986, Garan, Incorporated, a New York City based AMEX company,
has been using the "Bobbie Brooks", "New Expressions by Bobbie Brooks"
and "Present Co. by Bobbie Brooks" registered trademarks under a license
agreement with Brooks. Garan and its sublicensees sell sportswear under
these labels exclusively at Wal-Mart Stores. While the license agreement
allows sales throughout the United States, Canada, Puerto Rico and
Mexico, sales are actually occurring only where Wal-Mart operates retail
stores. Through December 31, 1995, the license agreement provided for a
quarterly licensing fee based upon sales of garments bearing these
trademarks. Effective for the three year period commencing January 1,
1996, Brooks will receive a set annual licensing fee of $475,000, payable
quarterly. Under separate licensing agreements with two unaffiliated
commercial printers, Brooks has been licensing the use of its
"Tabard/Copley" tradename in the cities of New York and Atlanta in
exchange for monthly licensing fees based upon sales of printing services
by such printers using this tradename. All licensing fees are recorded
within the Corporate segment in Industry Segment Information at Note K.
ITEM 2. PROPERTIES
The Company owns or leases the following properties:
Owned or Square
Location Leased Footage Use
St. Louis, MO Owned 100,000 Commercial printing/offices
leased through 2001
Cleveland, OH Leased 312,000 Buckeye's/Allied's operations
executive/administrative
facilities; portion subleased
to third party
Dixon, IL Owned 22,000 Retail; for sale
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ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 3l, l995.
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PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
The Company's Common Stock is traded over-the-counter and quoted on
NASDAQ SmallCap Market under the symbol BBKS. The following table
presents for 1994 and 1995 the high and low bid prices of the Company's
Common Stock as reported by NASDAQ. Quotations are interdealer prices
which do not include retail markups, markdowns or commissions and do not
necessarily represent actual transactions.
1994 High Low
First Quarter $ 1 5/8 $ 1 5/8
Second Quarter 1 5/8 1 3/8
Third Quarter 1 5/8 1 3/8
Fourth Quarter 1 1/2 1 1/8
1995
First Quarter $ 1 1/8 $ 1
Second Quarter 1 1/4 1
Third Quarter 1 5/16 1
Fourth Quarter 1 1/8 3/4
(b) Holders.
There were approximately 4,700 stockholders of record as of March 1,
1996.
(c) Dividends.
The Company has not paid dividends on its Common Stock in recent
years and does not anticipate paying dividends on its Common Stock in the
forseeable future. In addition, no dividends may be paid on the Common
Stock while there is any unpaid dividend on the Preferred Stock. Subject
to the foregoing, the payment of dividends on Common Stock will depend,
among other factors, on earnings, capital requirements and the operating
and financial condition of the Company. At December 31, 1995,
$13,552,000 of dividends had not been declared or paid on the cumulative
Preferred Stock.
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(All numbers shown in 000's except share data and ratios)
Selected Statement of Operations Data
<CAPTIONS>
Years ended December 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales (A),(B) $ 47,590 $ 46,016 $ 42,084 $ 25,030 $ 26,787
Net income (loss): (A)
Continuing operations 4,920 4,036 3,207 2,078 1,808
Discontinued operations 1,100 (17,894) (2,637) (11,119) (2,997)
Net income (loss) 6,020 (13,858) 570 (9,041) (1,189)
Net income (loss) applicable
to Common Stockholders (D) 1,433 (17,713) (3,190) (13,163) (6,339)
Income (loss) per share: (A)
Continuing operations (D) .07 .04 (.11) (.41) (2.40)
Discontinued operations .22 (3.63) (.54) (2.26) (2.15)
Net income (loss)
per Common Share (D) $ .29 $ (3.59) $ (.65) $ (2.67) $ (4.55)
Weighted average
number of shares 4,932,400 4,932,400 4,932,400 4,932,400 1,392,400
Selected Balance Sheet Data
Years ended December 31
1995 1994 1993 1992 1991
Working capital ratio 2.8 to 1 1.4 to 1 1.6 to 1 2.1 to 1 2.2 to 1
Total assets $ 45,007 $ 41,490 $ 67,959 $ 72,532 $ 97,160
Long-term debt 1,742 124 5,177 9,750 7,675
Stockholders' equity 24,749 18,578 33,136 36,177 55,971
Common Stockholders'
equity (C) - - - - 8,530
Per Common Share (C) $ - $ - $ - $ - $ 1.73
Shares outstanding
at year end 4,932,400 4,932,400 4,932,400 4,932,400 4,932,400
<FN>
(A) The information contained in the above table has been restated to give effect to the
Buckeye business combination and the discontinuance of the commercial printing segment in
1993 and the discontinuance of the apparel and retail segments in 1994. Refer to Notes B
and C of the Consolidated Financial Statements.
(B) The increase in sales in 1993 is primarily due to the Allied acquisition.
(C) Common Stockholders' Equity and Stockholders' Equity Per Common Share are computed net of
the face value of the Series A and B Preferred Stocks, its redemption premium and unpaid
cumulative dividends thereon. If the amounts applicable to preferred stockholders are in
excess of Common stockholders' equity, then no value is reflected above. As discussed in
Note E of Notes to Consolidated Financial Statements, the unpaid cumulative Preferred
Stock dividend was $13,552,000 at December 31, 1995.
(D) Net of Preferred Stock dividend requirements.
</TABLE>
8
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison of 1995 and 1994
The Company has completed its transformation from a company with
predominantly retail and apparel operations into a company which
manufactures and distributes business to business products. The closure
of the Company's retail department store chain in 1994 and discontinuance
of its apparel manufacturing operations in 1994 have been accounted for
as discontinued operations. Income from discontinued operations, net of
taxes, for 1995 is the result of actual results being more favorable than
anticipated when the accrual was established during 1994.
The Company's continuing operations primarily consist of Buckeye and
Allied. Each of these operations is located at the Company's
manufacturing facility in Cleveland, Ohio.
The increase in sales from 1994 to 1995 is primarily due to an increase
in sales at Allied resulting from the introduction of a grapple product
line in late 1994, as well as increased sales of pedestal boom systems
and trench shoring equipment.
The decrease in gross profit percentage in 1995 from 1994 is primarily
due to a lower gross profit percentage at Allied. Because Allied
purchases components from a German manufacturer, the lower value of the
Dollar versus the Deutsche Mark in 1995 compared with 1994 resulted in
increased cost of sales and lower gross profits at Allied.
Lower borrowing levels at Allied and Buckeye in 1995 compared to 1994
resulted in a decrease in interest expense in 1995. The 1995 results of
operations include interest income from the proceeds of the discontinued
operations. These factors caused the change in net interest from 1994 to
1995. The Company will continue to generate interest and other income on
its available funds until used to make an acquisition of other operating
businesses. While no particular acquisition is pending or has been
identified, the Company routinely reviews acquisition opportunities.
The dividend requirements for the two classes of preferred stock adjust
annually, in January and August, respectively, based on changes in the
prime rate. The increases at those dates in 1995 from 1994 caused the
increase in preferred stock dividend requirements.
Due to the increase in Brooks' ownership of Aspen to approximately 62% at
the end of 1995, the Company's Consolidated Statement of Operations will
include Aspen beginning in 1996. In 1995, 1994 and 1993, the Company
accounted for Aspen's results of operations using the equity method which
were not significant and were included in other income in the Company's
Consolidated Statements of Operations.
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Comparison of 1994 and 1993
All of the financial statement information has been restated to give
effect to the business combination with Buckeye and the discontinued
operations described below.
The Company has completed its transformation from a company with
predominantly retail and apparel operations into a company which
manufactures and distributes business to business products.
During 1994, the Company closed its remaining retail stores and
discontinued its apparel manufacturing operations (other than trademark
licensing), which apparel manufacturing operations did not represent any
material amount of the Company's business. These actions have been
accounted for as discontinued operations. The Company's continuing
operations primarily consist of Buckeye and Allied. Each of these
operations is located at the Company's manufacturing facility in
Cleveland, Ohio.
Buckeye contributed approximately $23,356,000 of sales and approximately
$3,966,000 of pretax income in 1994 and approximately $23,391,000 of
sales and approximately $3,729,000 of pretax income in 1993. Without
Buckeye's operations, the Company would have reported a net income from
continuing operations of approximately $69,000 in 1994. Had the
financial statements included herein not been retroactively restated to
include Buckeye, the Company would have reported net losses from
continuing operations of approximately $442,000 in 1993. Therefore,
Buckeye has made a positive contribution in each of the years reported.
Allied's sales increased from 1993 to 1994 primarily because of the
inclusion of Allied's operations for the entire 1994 year. The decrease
in Allied's income from 1993 to 1994 is primarily the result of a decline
in gross margins due to increased sales of lower margin products,
unfavorable currency fluctuations which adversely affected raw material
cost, and the liquidation of inventory from phased-out product lines.
The increase in sales from 1993 to 1994 is the result of the inclusion of
Allied in the entire 1994 period.
The change in cost of sales from 1993 to 1994 is predominantly due to the
same factors. Gross margins decreased from 1993 to 1994 primarily
because Allied's products are sold at lower gross margins than Buckeye's.
Selling, general and administrative expenses decreased from 1993 to 1994
because of cost reductions at Buckeye.
As a result of the discontinuance of the Company's retail and apparel
businesses in 1994 and the discontinuance of the Company's commercial
printing business in 1993, the Company reported a loss from discontinued
operations in each year. Losses from discontinued operations represent
the Company's best estimate of the costs incurred and to be incurred from
the discontinuance of such operations.
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Liquidity and Capital Resources
As a result of the increase in Brooks' ownership of Aspen at year-end
1995 from approximately 41% to approximately 62%, the Company's
consolidated balance sheet at December 31, 1995 includes the accounts of
Aspen, whereas the Company's consolidated balance sheet at December 31,
1994 accounted for its investment in Aspen using the equity method of
accounting.
At December 31, 1995, the Company had almost $20,000,000 of cash, cash
equivalents, marketable securities and other short-term investments,
including approximately $5,000,000 owned by Aspen, and approximately
$1,742,000 of long-term debt.
Accounts payable and accrued liabilities decreased from December 31, 1994
to December 31, 1995, notwithstanding the consolidation with Aspen at
December 31, 1995, primarily as the result of the payment of certain
obligations related to the closing of the retail department store chain.
Although there was stockholders' equity of $24,749,000 at December 31,
1995, the Preferred Stock is entitled to a liquidation preference equal
to its $37,605,000 face value and $13,552,000 of unpaid cumulative
Preferred Stock dividends. As a result, there is no stockholders' equity
available to the Common Stock.
The Company has not consistently generated pretax income and the
potential future tax benefits of the deferred tax assets, primarily net
operating loss carryforwards, may not be realized. Accordingly, a
valuation allowance has been provided equal to the net deferred tax
assets related to these potential future tax benefits, which totaled
approximately $14,000,000 at December 31, 1995. Should the Company
generate pretax income in future years, the tax benefits of the net
operating loss carryforwards and other items will be realized, which will
have a positive impact on the future cash flows, liquidity and capital
resources of the Company.
New Accounting Standards
In 1995, the Financial Accounting Standards Board issued a new accounting
standard effective for 1996 that will be applicable to the Company. SFAS
No. 121-"Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of", establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles
and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed
of. The Company has determined the effect upon its adoption to be
immaterial to results of operations.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited Consolidated Financial Statements
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
December 3l, l995
12
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Ernst & Young LLP
One Cascade Plaza
Akron, Ohio 44308
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Bobbie Brooks, Incorporated
We have audited the accompanying consolidated balance sheets of Bobbie
Brooks, Incorporated and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement
schedule listed in the index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Bobbie Brooks, Incorporated and subsidiaries at December 31,
1995 and 1994, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
Ernst & Young LLP
March 8, 1996
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CONSOLIDATED BALANCE SHEETS
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
($ in 000's except share amounts)
December 31
1995
1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,878 $ 12,502
Marketable securities and other
investments available for sale--Note D 11,836 -
Trade receivables (less allowances
of $279 in 1995 and $1,250 in 1994) 5,058 5,808
Inventories--Note H 7,447 7,258
Prepaid expenses and other current assets 730 553
Due from parent 2,236 1,167
--------- ---------
TOTAL CURRENT ASSETS 35,185 27,288
PROPERTY AND EQUIPMENT--Notes G and H 6,985 8,728
INTANGIBLE ASSETS ARISING FROM ACQUISITIONS
(at cost less accumulated amortization of
$490 in 1995 and $324 in 1994)-- Note A 627 793
EQUITY INVESTMENT--Note B - 2,689
OTHER ASSETS 2,210 1,992
--------- ---------
TOTAL ASSETS $ 45,007 $ 41,490
========= =========
See notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
($ in 000's except share amounts)
December 31
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,733 $ 6,507
Accrued liabilities--Note H 7,642 8,724
Loans payable-related party--Note G 289 1,911
Current portion of long-term debt--Note G 58 1,680
--------- ---------
TOTAL CURRENT LIABILITIES 12,722 18,822
LONG-TERM DEBT--Note G 1,742 124
DEFERRED CREDITS AND NONCURRENT LIABILITIES 2,772 3,336
MINORITY INTEREST 3,022 630
STOCKHOLDERS' EQUITY--Notes A and E
Preferred Stock-Series A - $.001 par value;
authorized 2,000,000 shares, issued and
outstanding 907,250 shares in 1995 and 1994
(aggregate liquidation preference and unpaid
dividend is $29,212 in 1995 and $27,239 in
1994) 1 1
Preferred Stock-Series B - $.001 par value;
authorized 300,000 shares, issued and
outstanding 194,600 shares in 1995 (aggregate
liquidation preference and unpaid dividend
is $22,489 in 1995 and $20,706 in 1994) - -
Common Stock - $.00l par value;
authorized 50,000,000 shares, 4,932,400
issued and outstanding in 1995 and 1994 5 5
Capital in excess of par value 52,392 53,042
Unrealized gains on investments available
for sale 801 -
Retained (deficit) (28,450) (34,470)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 24,749 18,578
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,007 $ 41,490
========= =========
See notes to consolidated financial statements.
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<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
($ in 000's except share amounts)
<CAPTIONS>
Year Ended December 3l
1995 1994 1993
<S> <C> <C> <C>
Net sales $ 47,590 $ 46,016 $ 42,084
Cost of sales 34,844 32,402 28,662
---------- ---------- ----------
GROSS PROFIT 12,746 13,614 13,422
Cost and expenses:
Selling, general and administrative expenses 7,989 8,081 8,643
Depreciation and amortization 1,037 1,212 1,027
Interest, net (998) 379 588
---------- ---------- ----------
8,028 9,672 10,258
Other income, net 336 148 144
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 5,054 4,090 3,308
Provision for income taxes--Note I 104 18 7
---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS BEFORE MINORITY INTEREST 4,950 4,072 3,301
Minority interest (30) (36) (94)
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 4,920 4,036 3,207
Income (loss) from discontinued operations,
net of taxes--Note C 1,100 (17,894) (2,637)
---------- ---------- ----------
NET INCOME (LOSS) 6,020 (13,858) 570
Preferred Stock dividend requirements 4,587 3,855 3,760
---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 1,433 $ (17,713) $ (3,190)
========== ========== ==========
Earnings (loss) per share--Note A:
CONTINUING OPERATIONS (NET OF PREFERRED
STOCK DIVIDEND REQUIREMENTS) $ .07 $ .04 $ (.11)
DISCONTINUED OPERATIONS .22 (3.63) (.54)
---------- ---------- ----------
NET INCOME (LOSS) $ .29 $ (3.59) $ (.65)
========== ========== ==========
Weighted average number of common
shares outstanding--Notes A and E 4,932,400 4,932,400 4,932,400
========== ========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
16
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
($ in 000's except share amounts)
Three Years Ended December 3l, l995
<CAPTIONS>
Series A Pre- Series B
ferred Stock Preferred Stock Common Stock Additional Retained
Par Par Par Paid In Earnings
Shares Value Shares Value Shares Value Capital (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 907,250 $ 1 194,600 $ - 4,932,400 $ 5 $53,742 $(17,571)
Subchapter S distribution to
shareholder of Buckeye--Note B - - - - - - - (3,611)
Net income for 1993 - - - - - - - 570
------- --- ------- --- --------- --- ------- ---------
Balance at December 31, 1993 907,250 $ 1 194,600 $ - 4,932,400 $ 5 $53,742 $(20,612)
Preferred Stock dividends paid
(paid at $3.60 per share)--
Note E - - - - - - (700) -
Net (loss) for l994 - - - - - - - (13,858)
------- --- ------- --- --------- --- ------- ---------
Balance at December 31, 1994 907,250 $ 1 194,600 $ - 4,932,400 $ 5 $53,042 $(34,470)
Preferred Stock dividends paid
(paid at $3.34 per share)--
Note E - - - - - - (650) -
Net income for l995 - - - - - - - 6,020
------- --- ------- --- --------- --- ------- ---------
Balance at December 31, 1995 907,250 $ 1 194,600 $ - 4,932,400 $ 5 $52,392 $(28,450)
======== === ======= === ========= === ======= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
17
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
($ in 000's except share amounts)
<CAPTIONS>
Year Ended December 3l
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 4,920 $ 4,036 $ 3,207
Adjustments to reconcile net income to net
cash provided by operating activities:
Income (loss) from discontinued operations 1,100 (17,894) (2,637)
Write-down of assets of discontinued segments - 8,049 2,572
Depreciation and amortization 1,296 2,259 2,306
Net (gain) on sales of securities (75) - (25)
Net (gain) loss on disposal of fixed assets (279) 199 (9)
Minority interest (55) 36 94
Changes in operating assets and liabilities
net of acquisitions and divestitures:
Trade receivables 1,292 6,919 4,027
Inventories 491 19,938 9,469
Other assets (1,310) 733 796
Accounts payable (2,124) (4,385) (1,446)
Other current liabilities (2,629) (739) (5,253)
Deferred credits and noncurrent liabilities (564) 739 (38)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,063 19,890 13,063
INVESTING ACTIVITIES
Purchase of marketable securities (11,764) - -
Proceeds from sale of marketable securities 1,364 - 25
Purchases of fixed assets (327) (3,801) (1,204)
Proceeds from the sale of fixed assets 2,622 3,769 29
Purchase of Aspen stock (665) - (2,858)
Cash acquired in Aspen investment 4,359 - -
Acquisition of construction products business - - (3,000)
--------- --------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (4,411) (32) (7,008)
FINANCING ACTIVITIES
Net borrowings (repayments) on loans payable (1,622) (300) 2,211
Net borrowings (repayments) on other facilities - (1,577) 1,110
Proceeds from long-term debt 32,614 33,565 37,960
Principal payments on long-term debt (32,618) (39,444) (45,981)
Dividends paid (650) (700) -
Distribution to shareholder of Buckeye - - (3,611)
--------- --------- ---------
NET CASH (USED IN) FINANCING ACTIVITIES (2,276) (8,456) (8,311)
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,624) 11,402 (2,256)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,502 1,100 3,356
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 7,878 $ 12,502 $ 1,100
========== ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
December 3l, l995
($ in 000's except share amounts)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements of Bobbie
Brooks, Incorporated ("Company") include the accounts of the Company and its
wholly-owned and majority-owned subsidiaries. Investments of 20%-50% owned
affiliates are accounted for using the equity method. Intercompany balances
and transactions have been eliminated upon consolidation.
Brooks provides its parent, Pubco Corporation ("Pubco"), with certain
corporate services. The parent paid to the Company for these services $648 in
each of the years ended December 31, 1995, 1994 and 1993.
Cash and Cash Equivalents: Cash equivalents are composed of all highly liquid
investments generally with a maturity of three months or less at the time of
purchase.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out) or market.
Financial Instruments: The Company's financial instruments recorded on the
balance sheet include cash and cash equivalents and long-term debt. Because
of their short maturity, the carrying amount of cash and cash equivalents
approximates fair value. Because the majority of long-term debt is at market
rates of interest that adjust frequently, the carrying amount of long-term
debt approximates fair value.
Off balance sheet financial instruments include foreign currency exchange
agreements. In the normal course of business, the Company's construction
products subsidiary purchases components from a German supplier and from time
to time, enters into foreign currency exchange contracts with banks in order
to fix its trade payables denominated in the Deutsche Mark. The contract
amounts outstanding and the net deferred gains or losses were not significant
at December 31, 1995 and 1994.
Long-lived Assets: Property and equipment are recorded at cost with
depreciation and amortization principally computed by the straight-line method.
Intangible assets ("goodwill") represents the excess of the purchase price
over the fair value of the net assets of acquired businesses and is being
amortized by the straight-line method, in most cases up to 10 years. The
carrying amount of goodwill is reviewed if facts and circumstances suggest
that it may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the estimated undiscounted cash flows of
the entity acquired over the remaining amortization period, the carrying
amount of the goodwill is reduced by the estimated shortfall of cash flows.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset or related groups
of assets, may not be recoverable. Measurement of the amount of impairment
may be based on appraisal, market values of similar assets, or estimated
undiscounted future cash flows resulting from use and ultimate disposition of
the asset.
Research and Development Costs: The Company's construction products
subsidiary performs research and development on present and future products
and all costs are expensed as incurred. Total expenditures amounted to $489
and $647 for the years ended December 31, 1995 and 1994, and $363 for the 10
months ended December 31, 1993.
Per Common Share Amounts: Per common share amounts are computed after
preferred dividend requirements on the basis of the weighted average number of
shares of Common Stock outstanding.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Standards: In March 1995, the Financial Accounting
Standards Board issued SFAS No. 121 - "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of." SFAS No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles
to be disposed of. The Company is required to adopt the provisions of SFAS
No. 121 for 1996, and the Company has determined the effect upon its adoption
to be immaterial to results of operations.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1995 presentation.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE B--BUSINESS COMBINATIONS
Business Combination with Buckeye. Buckeye Business Products, Inc.
("Buckeye") manufactures and nationally markets, primarily to end users,
computer data processing supplies, including computer ribbons, laser toner,
ink jet cartridges, magnetic media, and computer paper, using an in-house
telemarketing staff. On January 1, 1994, the business of Buckeye was
transferred to the Company by Pubco. Buckeye had merged (the "Merger") with
and into a wholly-owned Pubco subsidiary immediately prior to the transfer of
Buckeye's business to the Company. As consideration for Buckeye, Robert H.
Kanner, Buckeye's sole stockholder who is also Pubco's and the Company's
Chairman, President and CEO and Pubco's controlling stockholder, received
1,820,724 newly issued shares of Pubco's Common Stock and 70,000 shares of a
newly-created Preferred Stock of Pubco with a face value of $100 per share.
In consideration for the Buckeye business, Pubco received 194,600 shares of a
newly-created Preferred Stock of the Company with a face value of $100 per
share. The Buckeye business is being operated as a division of the Company.
Acquisition of Aspen. On July 12, 1993, the Company purchased an
approximately 41% ownership interest in Aspen Imaging International, Inc.
("Aspen"), a publicly-held (NASDAQ Small Cap) corporation headquartered in
Boulder, Colorado. Aspen manufactures ribbons, toner and other supplies for
impact and non-impact printing devices. The Company paid approximately $2,858
for its equity interest and accounted for its investment in Aspen on the
equity method through year-end 1995. The Company's Statements of Operations
include its share of the earnings or losses of Aspen from July 12, 1993
through year-end 1995, which are insignificant and are included in "Other
Income, Net" in the Consolidated Statements of Operations.
At year-end 1995, the Company acquired additional shares in Aspen bringing its
interest to approximately 62% at December 31, 1995. The total purchase price,
which is comprised of the $665 additional investment made in 1995 and the
equity investment account balance of approximately $2,689, was allocated based
upon the fair values of the assets and liabilities acquired. Summarized below
are the unaudited consolidated results of operations of the Company, including
Aspen on a pro forma basis, assuming the acquisition of 62% of Aspen's stock
had occurred at the beginning of each respective year. These results include
certain adjustments, principally depreciation and amortization expense, and
are not necessarily indicative of what the results would have been had the
Company owned Aspen's business during these periods.
Year Ended December 3l
1995 1994
Net sales $ 52,260 $ 53,323
Income from continuing operations $ 5,024 $ 4,047
Net income (loss) from continuing
operations per common share (net of
Preferred Stock dividend requirements) $ .09 $ .04
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE B--BUSINESS COMBINATIONS--CONTINUED
The Company's financial statements include transactions with Aspen prior to
year-end 1995. Product sales to and purchases from Aspen approximated $1,001
and $147, respectively, for the year ended December 31, 1995, $1,486 and $296,
respectively, for the year ended December 31, 1994, and $270 and $70,
respectively, for the six months ended December 31, 1993. All such
transactions were at cost. In addition, during 1994, to replace Aspen's toner
filling operation which was eliminated when Aspen sold its Colorado building,
the Company constructed a toner filling room for Aspen's use at the Company's
facility costing approximately $40, which amount was reimbursed to the Company
by Aspen. Company personnel performed a variety of manufacturing, accounting,
shipping and other support services for Aspen at the Company's cost. During
1995 and 1994, these costs approximated $157 and $136, respectively, which
amounts were reimbursed to the Company by Aspen.
Acquisition of Allied. On March 1, 1993, Allied Construction Products, Inc.
("Allied"), an 85% owned subsidiary of the Company, purchased the assets and
business of a fabricator, assembler and distributor of construction products
for the construction and related industries. The Company paid $3,000 for its
equity interest in the subsidiary. The purchase price was allocated based
upon the fair values of the assets and liabilities acquired. The results of
operations of Allied have been included in the consolidated financial
statements of the Company since the date of acquisition.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE C--DISCONTINUED OPERATIONS
At September 30, 1994, the Company discontinued the operations of its retail
and apparel manufacturing segments. Accordingly, a charge was made in 1994
for such discontinued operations related to the write-down of net assets to
their net realizable value and to provide for operating losses during the
phaseout period. Operations of the retail and apparel manufacturing segment
in 1994 resulted in a loss of approximately $2,914 through the measurement
date. Operations of the retail and apparel manufacturing segment for the
fourth quarter of 1994 resulted in a loss of approximately $2,124 which was
charged against the reserve for discontinued operations. In 1995, the Company
reduced the reserve by $1,100 primarily related to actual results being more
favorable than anticipated when the accrual was established in 1994. The
remaining reserve balance of $1,805 at December 31, 1995, is believed to be
sufficient to provide primarily for the costs of future lease, employee and
other liabilities.
During 1993, the Company discontinued the operations of its commercial
printing segment. Accordingly, a charge was made in 1993 for such
discontinued operations relating to the write-down of net assets to their net
realizable value and to provide for operating losses during the phaseout
period. The Company ceased its printing operations at the end of the 1994
first quarter and liquidated most of its commercial printing assets by early
1995.
Results of these discontinued operations include:
Year Ended December 3l
1995 1994 1993
Sales $ - $ 40,702 $84,293
========= ========= ========
(Loss) income from operations - $ (2,901) $ 1,344
Income tax expense (benefit) - 13 (19)
--------- --------- --------
(Loss) income from operations - (2,914) 1,363
Income (loss) on disposals
(no tax effect) 1,100 (14,980) (4,000)
--------- --------- --------
Income (loss) from discontinued
operations $ 1,100 $(17,894) $(2,637)
========= ========= ========
23
<PAGE>
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE D--MARKETABLE SECURITIES
The following is a summary of marketable securities available for sale at
December 31, 1995:
<CAPTIONS>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains (Loss) Value
<S> <C> <C> <C> <C>
US Corporate Equity
Securities $ 4,425 $ 176 $ (140) $ 4,461
US Corporate Debt Securities 3,056 30 - 3,086
Foreign Government
Debt Securities 3,554 735 - 4,289
--------- --------- ---------- ---------
$ 11,035 $ 941 $ (140) $ 11,836
========= ========= ========== =========
</TABLE>
The gross realized gains on sales of securities available for sale totaled
$75. The net adjustment to unrealized holding gains on securities
available for sale included as a separate component of stockholders' equity
totaled $801 in 1995.
The cost and estimated fair value of debt securities at December 31, 1995,
by estimated maturity, are shown below. Expected maturities may differ
from contractual maturities because the issuers of the securities may have
the right to prepay obligations without prepayment penalties.
Estimated
Fair
Cost Value
Due after one year through three years $ 1,083 $ 1,089
Due after three years 5,527 6,286
--------- ---------
$ 6,610 $ 7,375
========= =========
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE E--STOCKHOLDERS' EQUITY
Pubco owns approximately 90% of the Company's Common Stock and all of the
Company's Preferred Stock.
The Company issued a newly created class of Preferred Stock Series B to
Pubco on January 1, 1994 in connection with the transfer of the business of
Buckeye Business Products, Inc. ("Buckeye") to the Company. See Note B.
The Company's Preferred Stock Series A is subject to redemption, in whole
or in part, at the Company's option. In addition to any unpaid cumulative
dividends, the redemption price includes a premium of three percent of face
value during 1995, reducing to face value during 1998 and thereafter.
The Company's Preferred Stock Series B is subject to redemption, in whole
or in part, at the Company's option. The redemption price includes the
face value plus any unpaid cumulative dividends.
In the event of the liquidation of the Company, holders of Preferred Stock
are entitled to a distribution equal to the face value of the Preferred
Stock (and any unpaid cumulative dividends) before any amount may be paid
on Common Stock.
The Company's non-voting Preferred Stock Series A requires cumulative
annual dividends on the $20 face value per share at four percent above the
averaged base lending rate of three large commercial banks. The Company's
non-voting Preferred Stock Series B required cumulative annual dividends on
the $100 face value per share at four percent above the average base
lending rate of three large commercial banks. No dividend may be paid on
Common Stock while there is any dividend arrearage on the Preferred Stock.
In 1994, the Company paid $700 ($3.60 per share) of Series B preferred
stock dividends, which were treated as a return of capital. In 1995, the
Company paid $650 ($3.34 per share) of Series B preferred stock dividends,
which were treated as a return of capital. As of December 31, 1995,
$10,523 of cumulative dividends ($11.60 per share) on the Series A and
$3,029 of cumulative dividends ($15.57 per share) on the Series B were
undeclared and unpaid on the Preferred Stock.
Stockholders' equity of $24,749 at December 31, 1995 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity, the following amounts applicable to Preferred stockholders must be
subtracted from total stockholders' equity: (i) face value of the Series A
Preferred Stock ($18,145), (ii) the face value of the Series B Preferred
Stock ($19,460), (iii) Series A Preferred Stock redemption premium ($544 at
December 31, 1995) and (iv) unpaid cumulative Series A and Series B
Preferred Stock dividends ($13,552 at December 31, 1995).
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE E--STOCKHOLDERS' EQUITY--CONTINUED
The Company has an Incentive Plan that allows the granting of stock options
and stock awards to officers and key employees of the Company. Up to
67,500 shares of Common Stock are available under the Incentive Plan.
Stock options are generally not exercisable until five years after grant
and then vest over time. The exercise price per share must generally be at
least equal to the fair market value per share on the date of the
respective grant. All shares subject to a stock award are deemed
Restricted Stock until the fifth anniversary of the date of the award and
then lose such restricted qualification over time. Shares of Restricted
Stock are subject to forfeiture following termination of employment and
other events. No options or stock awards have been granted under such plan.
NOTE F--RETIREMENT PLANS
The Company maintains two discretionary non-qualified profit sharing plans
to provide retirement benefits for certain of its key employees. The
assets are segregated, but are included in Other Assets. The liabilities
associated with these plans are included in Other Liabilities. In 1993,
Allied adopted a 401(k) plan, with discretionary Company contributions.
Expenses under the foregoing plans aggregated approximately $346, $322 and
$316 for the years ended December 3l, 1995, l994 and l993, respectively.
The Company makes contributions to union-sponsored, collectively-bargained,
multiemployer defined benefit pension plans. The Company contributed and
charged to expense $8, $151 and $327 for the years ended December 3l, l995,
l994 and 1993, respectively, for such plans. These contributions are
determined in accordance with the provisions of negotiated labor contracts
and generally are based on the amount of time worked. Information as to
the Company's portion of the accumulated plan benefits, plan net assets and
unfunded vested benefits, if any, is not determinable. In the event of a
withdrawal from one or more of the plans, the Company may be subject to a
withdrawal liability under the provisions of the Multiemployer Pension Plan
Amendments Act of 1980. The discontinuance of the commercial printing
segment has triggered withdrawal liability which was provided for in the
charge for discontinued operations in 1993. Management does not intend to
take any action which would subject the Company to any such liability under
any other multiemployer pension plans.
The Company maintains a noncontributory defined benefit pension plan
covering employees who are under a collective bargaining agreement and
sponsors a pension plan for terminated employees of a former operation of a
predecessor company. The excess actuarial present value of accumulated
plan benefits over net assets available for benefits under these plans was
approximately $365 and $370 at December 31, 1995 and 1994, respectively,
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE F--RETIREMENT PLANS--CONTINUED
which amounts have been reflected in the accompanying balance sheets.
Expenses under these plans were approximately $50, $48 and $54 for 1995, 1994
and 1993, respectively.
The Company provides life insurance benefits and/or contributes to the cost of
medical insurance for certain retired salaried and commission basis
employees. The accumulated postretirement benefit obligation and related
expense recorded for each year are not material to the balance sheet or the
results of operations.
NOTE G--FINANCING ARRANGEMENTS
The Company had a demand note payable to Robert H. Kanner, the Company's
Chairman, President & CEO, with a balance of $289 and $1,911 at December 31,
1995 and 1994, respectively. Interest on the unpaid balance is payable
monthly at rates up to 2% above Society National Bank's base lending rate
("BLR"). Interest expense for the Company was $51, $177 and $127 in the years
ended December 31, 1995, December 31, 1994, and December 31, 1993,
respectively.
The Company has a $2,500 demand credit facility at BLR plus .5% with no
outstanding balance at December 31, 1995. The Company has a $3,000 revolving
credit facility at LIBOR plus 2.5% or BLR, at the option of the Company,
expiring in 1997, with $1,677 outstanding at December 31, 1995. The Company
has a term note at BLR plus 1% due in 1996 with $36 outstanding at December
31, 1995. A portion of the debt is collateralized by assets with aggregate
carrying values of $13,734 at December 31, 1995.
Debt maturities for the years l996 through l999 are $58, $1,705, $28 and $9,
respectively.
Interest payments by the Company were $233, $834 and $1,122 for the years
ended December 31, 1995, 1994 and 1993, respectively.
Interest expense was $137, $439 and $628 for the years ended December 31,
1995, 1994 and 1993, respectively.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE H--OTHER INFORMATION
December 31
l995 1994
Inventories:
Raw materials and supplies $ 4,532 $ 4,912
Work-in-process 484 622
Finished goods and merchandise 2,431 1,724
--------- ---------
$ 7,447 $ 7,258
========= =========
Property and equipment:
Land and buildings $ 1,170 $ 3,234
Machinery, equipment and fixtures 11,865 13,731
Leasehold improvements 3,096 3,128
Construction in progress 97 38
--------- ---------
16,228 20,131
Less accumulated depreciation,
amortization and allowance to
reduce fixed assets to net
realizable value (9,243) (11,403)
--------- ---------
$ 6,985 $ 8,728
========= =========
Accrued liabilities:
Payroll and other employee benefits $ 2,207 $ 2,243
Accrued taxes 529 776
Accrual for discontinued businesses 1,717 2,766
Other 3,189 2,939
--------- ---------
$ 7,642 $ 8,724
========= =========
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE I--INCOME TAXES
Since 1992, the Company has been included in Pubco's consolidated federal
income tax return. The Company has recorded its share of the respective
consolidated groups' tax liability for each year based upon a tax sharing
agreement.
The provision for income taxes for continuing operations consists of the
following:
Year Ended December 3l
1995 1994 1993
Federal currently payable $ 90 $ - $ (77)
State and local currently payable 14 18 84
------- ------- -------
$ 104 $ 18 $ 7
======= ======= =======
Income taxes paid by (refunded to) the Company were $80, $(77) and $37 for
1995, 1994 and 1993, respectively.
A reconciliation of the statutory federal income tax rate to the effective
rate for continuing operations is as follows:
Year Ended December 3l
1995 1994 1993
Statutory federal rate 34.0% 34.0% 34.0%
State and local taxes .2 .3 1.7
Write-off of intangible - - 10.9
Utilization of net operating
loss carryforwards (33.5) (34.1) (10.0)
Subchapter S corporation income
(not subject to tax) - - (37.4)
Other 1.4 .2 1.0
------ ------ ------
2.1% .4% .2%
====== ====== ======
At December 31, 1995, the Company had available net operating loss
carryforwards of approximately $21,500 for federal income tax purposes.
Utilization by the Company is subject to limitations based on the Company's
future income. The loss carryforwards, if not used, will expire as follows:
$1,100 in 1996, $3,800 in 1997, $1,200 in 1998, $2,000 in 1999, $4,100 in
2000, $300 in 2002, $1,200 in 2006, $1,800 in 2007, $1,400 in 2008, and $4,600
in 2009.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE I--INCOME TAXES--CONTINUED
In addition, for tax purposes, the Company has investment tax credit
carryforwards of approximately $100 which expire between 1996 and 2001 and
alternative minimum tax credit carryforwards of approximately $400.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities, for financial
reporting purposes, and the amounts used for income tax purposes. Significant
components of the Company's federal and state deferred tax assets and
liabilities are as follows:
1995 1994
Deferred tax assets:
Net operating loss carryforwards
and credits $ 8,600 $ 10,400
Accrual for discontinued operations 600 1,000
Deferred compensation 2,500 2,000
Other 2,900 3,400
--------- ---------
Total deferred tax assets 14,600 16,800
Deferred tax liabilities:
Tax over book depreciation 600 900
Other 100 -
--------- ---------
Total deferred tax liabilities 700 900
--------- ---------
Net deferred tax assets 13,900 15,900
Valuation allowance for
deferred tax assets (13,900) (15,900)
--------- ---------
Net deferred taxes $ - $ -
========= =========
The Company has not consistently generated pretax income and the potential
future tax benefits of the deferred tax assets, primarily net operating loss
carryforwards, may not be realized. Accordingly, a valuation allowance has
been provided equal to the net deferred tax assets related to these potential
future tax benefits.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE J--LEASING ARRANGEMENTS
As Lessee:
Brooks and Buckeye are parties to separate leasing arrangements for office and
factory space in an approximately 312,000 square foot building owned and
operated by a partnership that is controlled by the majority stockholder of
Pubco. Buckeye and Allied conduct substantially all of their business
activities from this building. Brooks has its corporate offices at this
building. The leases expire in 2005. The leases require annual payments
aggregating $538. Rent expense associated with these leases was $538 for each
of the years ended December 31, 1995, 1994 and 1993.
The Company and its subsidiaries lease certain facilities and equipment under
non-cancellable leases for periods ranging from l to 10 years. Total rental
expense from continuing operations under all operating leases is summarized
below:
Year Ended December 3l
1995 1994 1993
Minimum rentals $ 721 $ 696 $ 612
Sublease rental income (61) (60) (61)
------- ------- -------
$ 660 $ 636 $ 551
======= ======= =======
At December 3l, l995, the commitments under non-cancellable operating leases
are as follows:
Operating
Leases
l996 $ 639
l997 555
l998 554
1999 548
2000 542
Thereafter 1,882
-------
$4,720
=======
Future minimum sublease rentals to be received on facilities under
non-cancellable operating leases approximate $144 at December 3l, l995.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE J--LEASING ARRANGEMENTS--CONTINUED
As Lessor:
The Company leases certain land, building, equipment and a trade name asset
with an aggregate total net book value of $2,259 at December 31, 1995, under
an operating lease expiring in 2000. Upon expiration of the initial term, the
lessee has options to renew for periods up to 10 years.
At December 31, 1995, future minimum rentals to be received under the
operating lease follow:
1996 $ 741
1997 741
1998 741
1999 741
2000 741
Thereafter -
-------
$3,705
=======
32
<PAGE>
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE K--INDUSTRY SEGMENT INFORMATION
Summarized industry segment information is as follows:
<CAPTIONS>
Computer
Printer Construction
Supplies Products Corporate Consolidated
<S> <C> <C> <C> <C>
1995
Net sales $ 22,735 $ 24,855 $ - $ 47,590
Trade receivables 2,603 2,433 22 5,058
Income from continuing operations before
income taxes and minority interest 4,127 101 826 5,054
Identifiable assets 13,223 8,998 22,786 45,007
Capital expenditures 51 141 135 327
Depreciation and amortization 192 374 730 1,296
1994
Net sales $ 23,356 $ 22,660 $ - $ 46,016
Trade receivables 2,170 2,321 1,317 5,808
Income (loss) from continuing operations
before income taxes and minority
interest 3,966 632 (508) 4,090
Identifiable assets 6,124 9,551 25,815 41,490
Capital expenditures 245 663 2,893 3,801
Depreciation and amortization 215 352 803 1,370
1993
Net sales $ 23,391 $ 18,693 $ - $ 42,084
Trade receivables 2,120 2,162 8,445 12,727
Income (loss) from continuing operations
before income taxes and minority
interest 3,729 1,095 (1,516) 3,308
Identifiable assets 6,114 11,518 50,327 67,959
Capital expenditures 256 25 923 1,204
Depreciation and amortization 166 252 758 1,176
</TABLE>
Aspen was consolidated as part of the computer printer supplies segment
beginning December 31, 1995, and is included in the 1995 trade receivables and
identifiable asset amounts above. Corporate includes certain amounts related
to the previously discontinued segments.
33
<PAGE>
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
BOBBIE BROOKS, INCORPORATED AND SUBSIDIARIES
NOTE L--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The Company's unaudited quarterly results of operations in 1995 and 1994 are
set forth below.
<CAPTIONS>
1995
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $ 13,459 $ 13,304 $ 10,759 $ 10,068
======== ======== ======== =========
Gross profit $ 3,572 $ 3,729 $ 2,769 $ 2,676
======== ======== ======== =========
Income from:
Continuing operations $ 1,537 $ 1,493 $ 1,469 $ 421
Discontinued operations - - 1,100 -
-------- -------- -------- ---------
Net income $ 1,537 $ 1,493 $ 2,569 $ 421
======== ======== ======== =========
Income (loss) applicable
to Common Stockholders $ 419 $ 374 $ 1,405 $ (765)
======== ======== ======== =========
Net income (loss) per common
share from:
Continuing operations $ .08 $ .08 $ .06 $ (.15)
Discontinued operations - - .22 -
-------- -------- -------- ---------
Net income (loss) $ .08 $ .08 $ .28 $ (.15)
======== ======== ======== =========
1994
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Net sales $ 12,256 $ 12,425 $ 11,165 $ 10,170
======== ======== ======== ========
Gross profit $ 3,517 $ 3,768 $ 3,368 $ 2,961
======== ======== ======== ========
Income (loss) from:
Continuing operations $ 1,528 $ 1,500 $ 1,349 $ (341)
Discontinued operations (1,736) 170 (17,613) 1,285
--------- -------- --------- ---------
Net income (loss) $ (208) $ 1,670 $(16,264) $ 944
========= ======== ========= =========
Income (loss) applicable
to Common Stockholders $ (1,148) $ 730 $(17,242) $ (53)
========= ======== ========= =========
Net income (loss) per common
share from:
Continuing operations $ .12 $ .11 $ .07 $ (.26)
Discontinued operations (.35) .04 (3.57) .25
--------- -------- --------- ---------
Net income (loss) $ (.23) $ .15 $ (3.50) $ (.01)
========= ======== ========= =========
</TABLE>
During the third quarter of 1994, the Company discontinued its apparel and
retail segments resulting in a reclassification of all prior 1994 quarters, as
presented above.
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors and Executive Officers.
Stanley R. Browne, age 72, has been a Director of the Registrant
since October, 1985 and is a member of its Audit Committee. Mr. Browne
has been an independent business consultant since April, 1985. For more
than five years prior to that date, Mr. Browne was Washington (DC)
Counsel, Legal Department, of E. I. duPont de Nemours & Company, Inc.,
Wilmington, Delaware. Mr. Browne is also a Director of Pubco.
Stephen R. Kalette age 45, has been a Director and executive officer
of the Registrant since October, 1985. Mr. Kalette currently serves as
its Vice President, Administration, General Counsel and Secretary. Mr.
Kalette has been a Director and executive officer of Aspen since July,
1993. Mr. Kalette currently serves as its Vice President,
Administration, General Counsel and Secretary. Mr. Kalette is also a
Director of Pubco and its Vice President, Administration, General Counsel
and Secretary.
Robert H. Kanner, age 48, has been a Director and executive officer
of the Registrant since October, 1985. Mr. Kanner currently serves as
its Chairman, President and Chief Financial Officer. Mr. Kanner has been
a Director and executive officer of Aspen since July, 1993 and currently
serves as its Chairman. Mr. Kanner is also a Director of Pubco and its
Chairman, President and Chief Financial Officer. Mr. Kanner is also a
Director of Riser Foods, Inc., a grocery wholesaler and retailer, and
CleveTrust Realty Investors, which invests in real estate.
William A. Dillingham, age 52, has been President of Buckeye for more
than the past five years. Mr. Dillingham has been a Director and
executive officer of Aspen since July, 1993 and currently serves as its
President.
Leo L. Matthews, age 56, has been President of Allied since it was
acquired in March, 1993. Between 1987 and 1993, Mr. Matthews provided
consulting services in strategic planning, marketing, management and
finance.
Harold L. Inlow, age 62, had been the President and Chief Operating
Officer of the Registrant's former retail subsidiary until its closure in
1994.
32
<PAGE>
Family Relationships.
There are no familial relationships between any Director and
executive officer of the Registrant.
Board of Directors
The Board of Directors establishes broad corporate policies which are
carried out by the officers of the Registrant who are responsible for
day-to-day operations. In 1995, the Board held 3 meetings and took
action by unanimous written consent on 13 other occasions. No Director
was absent during the year from any of the meetings of the Board of
Directors or of any of the committees of the Board on which he served.
Committees of the Board of Directors
The Registrant has a standing Audit Committee. The Audit Committee,
which met once in 1995, consists of the Director not otherwise employed
by the Registrant. The Audit Committee (i) reviews the internal controls
of the Registrant Company and its financial reporting; (ii) meets with
the Treasurer and such other officers as it, from time to time, deems
necessary; (iii) meets with the Registrant's independent public
accountants and reviews the scope and results of auditing procedures, the
degree of such auditors' independence, audit and non-audit fees charged
by such accountants, and the adequacy of the Registrant's internal
accounting controls; and (iv) recommends to the Board the appointment of
the independent accountants.
36
<PAGE>
<TABLE>
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table discloses compensation paid or accrued, during each of the Company's last three
fiscal years, to the Registrant's Chief Executive Officer and to its other executive officers.
<CAPTIONS>
Long-Term Compensation
Annual Compensation Awards Payouts
Name and Other Annual Restricted LTIP All Other
Principal Bonus Compensation Stock Options Payouts Compensation
Position Year Salary($) ($) ($) Awards ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Kanner(1)
Chairman, CEO, 1995 $425,000 --- $59,836(2) --- --- --- $188,973(3,4)
President & 1994 425,000 --- 56,145 --- --- --- 190,420
CFO 1993 425,000 --- 49,987 --- --- --- 92,108
Stephen R. Kalette
VP-Admin., 1995 $270,000 --- $25,776(5) --- --- --- $ 35,815(4)
General Counsel 1994 270,000 --- 22,958 --- --- --- 35,640
& Secretary 1993 270,000 --- 23,761 --- --- --- 35,492
William A. Dillingham(6)
President of 1994 $450,000 --- $ 5,946(6) --- --- --- $ 30,000(7)
Buckeye Division 1993 450,000 --- 6,105 --- --- --- 30,000
1992 450,000 --- 6,504 --- --- --- 30,000
Leo L. Matthews(8)
President of 1995 $120,000 $ 10,000 $ 4,817(9) --- --- --- $ 7,200(10)
Allied 1994 120,000 22,000 6,314 --- --- --- 3,600
1993 100,000 20,000 912 --- --- ---
Harold L. Inlow(11)
President & COO 1995 $225,000 $ 0 $ 7,235(12) --- --- --- ---
of Retail 1994 225,000 120,140 29,642 --- --- --- ---
Subsidiary 1993 225,000 39,966 26,624 --- --- --- ---
37
<PAGE>
<FN>
(1) Mr. Kanner deferred his entire Salary for each of the years reported under the terms of
deferred compensation plans established for his benefit. The amounts reported for each
year are the amounts deferred for that year. As compensation is earned by Mr. Kanner, it
is paid by the Company to deferred compensation trusts. These amounts will be
distributed to Mr. Kanner by the trusts in accordance with the terms of the deferred
compensation plans. The assets and corresponding liabilities of the trusts are not
carried on the Company's balance sheet.
(2) Of the amount shown in the table, $55,870 in 1995, $50,870 in 1994 and $45,870 in 1993
represents the premiums on life insurance paid for by the Company on Mr. Kanner's life,
and for which the Company is not a beneficiary; and $ 3,966 in 1995, $5,275 in 1994 and
$4,117 in 1993 represents the cost of providing Mr. Kanner with use of an automobile
during the year.
(3) Of the amount reflected, $130,000 in 1995, $132,100 in 1994 and $34,100 in 1993
represents an advance by the Company toward the payment of the premium on life insurance
on Mr. Kanner's life and for which the Company is not the beneficiary. The advance will
be repaid to the Company out of the death proceeds from such policy.
(4) In 1988, the Company adopted a non-qualified plan to provide retirement benefits for
executive officers and other key employees. The plan provides benefits upon retirement,
death or disability of the participant and benefits are subject to a restrictive vesting
schedule. $58,873 in 1995, $58,008 in 1994 and $58,320 in 1993 of the amounts shown in
the table for Mr. Kanner and all of the amount shown in the table for Mr. Kalette are
amounts contributed to such plan for the benefit of such executive officers with respect
to the years noted. Vesting of benefits under the plan is phased in over 20 years and
only a portion of the amount contributed for each year has fully vested.
(5) Of the amount shown in the table, $20,546 in 1995, $19,076 in 1994 and $19,649 in 1993
represents the premiums on life insurance paid for by the Company on Mr. Kalette's life,
and for which the Company is not a beneficiary; and $4,023 in 1995, $3,883 in 1994 and
$2,808 in 1993 represents the cost of providing Mr. Kalette with use of an automobile
during the year.
(6) All amounts shown as paid to or for Mr. Dillingham were paid by Buckeye. Of the amount
shown in the table, $3,205 in 1995, $2,955 in 1994 and $2,695 in 1993 represents the
premiums on life insurance paid for by the Company on Mr. Dillingham's life, and for
which the Company is not a beneficiary; and $2,741 in 1995, $3,150 in 1994 and $3,809 in
1993 represents the cost of providing Mr. Dillingham with use of an automobile during the
year.
(7) In 1988, Buckeye adopted a non-qualified plan to provide retirement benefits for
executive officers and other key employees. The plan provides benefits upon retirement,
death or disability of the participant and benefits are subject to a restrictive vesting
schedule. All of the amount shown in the table for Mr. Dillingham are amounts
contributed to such plan for the benefit of such executive officer with respect to the
years noted. Vesting of benefits under the plan is phased in over 20 years and only a
portion of the amount contributed for each year has fully vested.
(8) All amounts shown as paid to or for Mr. Matthews were paid by Allied. Mr. Matthews has
an employment agreement with Allied providing for a minimum $120,000 per year base
salary; a share of Allied's earnings in excess of its operating plan earnings, if any,
and discretionary bonuses (as were paid in 1993 and 1994).
38
<PAGE>
(9) Of the amount shown in the table, $1,710 in 1995, $1,710 in 1994 and $912 in 1993
represents the premiums on life insurance paid for by Allied on Mr. Matthew's life,
and for which Allied is not a beneficiary; and $3,107 in 1995, $4,604 in 1994
represents the cost of providing Mr. Matthews with use of an automobile during that
year.
(10) In 1993, Allied adopted a 401-K plan to provide retirement benefits for Allied's
employees, including officers. Participating employees make voluntary contributions
to the Plan, a portion of which Allied matches. All of the amount shown in the
table for Mr. Matthews was contributed by the Company to such plan. Vesting of
benefits under the plan is phased in over three years.
(11) All amounts shown as paid to or for Mr. Inlow were paid by the retail subsidiary.
Mr. Inlow's salary and bonus compensation were paid pursuant to the terms of an
employment agreement between Mr. Inlow and the Company's retail subsidiary.
Following the December, 1994 closing of the retail subsidiary, Mr. Inlow is entitled
to a 3-year salary continuation.
(12) Of the amount shown in the table, $1,763 in 1995, $12,290 in 1994 and $10,833 in
1993 represents the premiums on life insurance paid for by the Company on Mr.
Inlow's life, and for which the Company is not a beneficiary; $5,472 in 1995, $5,434
in 1994 and $3,873 in 1993 represents the cost of providing Mr. Inlow with use of an
automobile during the year; and $11,918 each in the years 1994 and 1993 represents
deferred compensation.
Unless covered by an employment agreement with the Company, officers serve for one year terms
or until their respective successors are duly elected and qualified.
</TABLE>
Compensation of Directors
The Registrant pays its outside Directors an annual fee of $15,000,
payable monthly. The Registrant also reimburses its Directors for any
expense reasonably incurred while performing services for the
Registrant. Directors who are employees of the Registrant or otherwise
receive compensation from the Registrant do not receive any fee for
acting as Directors of the Registrant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As Directors of the Registrant, Mr. Kanner and Mr. Kalette
participate in Board of Directors' deliberations and decisions concerning
executive officer compensation. Mr. Kanner and Mr. Kalette are executive
officers of the Registrant.
39
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 1, 1996, (a) the number of
shares of the Company's Common Stock owned, directly or indirectly, by
each Director of the Company and by all Directors and officers as a
group, and (b) the number of shares of the Company's Common Stock held by
each person who was known by the Company to beneficially own more than 5%
of the Company's Common Stock:
Amount and Nature Percent of
Name of Holder (1) of Beneficial Ownership(2) Outstanding Shares
Robert H. Kanner 4,480,086 (3) 90.8
Stephen R. Kalette 1,000 (3) Less than 1%
Stanley R. Browne -- (3) --
William A. Dillingham(4) 500 Less than 1%
Leo L. Matthews(5) -- --
Harold L. Inlow 9,000 Less than 1%
All Directors and executive
officers as a group
(6 in number) 4,481,086 (3) 90.8
(1) Addresses are 3830 Kelley Avenue, Cleveland, Ohio 44114 for all named
persons.
(2) Each owner has sole voting and investment power with respect to the
shares beneficially owned by him unless otherwise stated.
(3) Pubco Corporation ("Pubco") owns 4,466,640 shares of Common Stock of
record. Mr. Browne, Mr. Kanner and Mr. Kalette are Directors and Mr.
Kanner and Mr. Kalette are executive officers of Pubco and by such
positions may be deemed to affect control of the Company. Mr. Kanner
is Pubco's largest stockholder and is entitled to exercise
approximately 85% of the voting power of all Pubco common shares. As
a consequence, Mr. Kanner may be deemed to have shared voting power
with Pubco over 4,466,640 shares of Common Stock of the Company. In
addition, the number shown in the above table includes 13,446 shares
owned by Mr. Kanner as custodian for his children and as to which
shares he disclaims beneficial ownership.
(4) Mr. Dillingham owns 1000 shares (less than 1%) of the Common Stock of
Aspen.
(5) Mr. Matthews owns approximately 3.6% of the Common Stock of Allied.
Warrants and Options to Purchase Securities.
No warrants, options or rights to purchase the Registrant's Common
Stock were granted by the Company to, or exercised by, any officer or
Director of the Registrant during 1995.
40
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On January 1, 1994, Pubco transferred to the Company the business of
Buckeye in exchange for 194,600 shares of newly-created Preferred Stock
of the Company with a face value of $100 per share. Immediately prior
thereto, Buckeye had been merged into a subsidiary of Pubco and Mr.
Kanner, Buckeye's sole stockholder, had received 1,820,724 newly issued
shares of Pubco Common Stock and 70,000 shares of new-created Pubco
Preferred Stock with a face value of $100 per share in such merger.
Buckeye was then the owner of approximately 41% of the capital stock of
Aspen. Since that date, ownership in Aspen has increased to
approximately 62%.
The Company leases 306,650 square feet of a general purpose 312,000
square foot building in Cleveland, Ohio (the "Building") on a triple net
basis. The premises are used for executive and administrative
facilities, Buckeye's manufacturing and administrative operations and
Allied's manufacturing and administrative operations. The Company
subleases a portion of the building to an unrelated party. The annual
rental for the Building is approximately $537,700. The Partnership that
owns the Building is 80% owned and controlled by Mr. Kanner. Mr.
Dillingham, Mr. Kalette and five other individuals have a minority
interest in the Partnership.
Mr. Kanner made loans to Buckeye attributable to pre-1994
operations. The Company repaid $1,911,000 of these loans during 1995.
At December 31, 1995, the Company still owed Mr. Kanner $289,000. Until
repaid, these loans bear interest at 2% above the base lending rate
charged by the Company's lending bank.
Pubco owed the Company $1,167,000 at December 31, 1994 and $2,236,000
at December 31, 1995, primarily on account of Pubco's share of management
services provided by the Company. Unpaid amounts currently bear interest
at a rate equal to the base lending rate charged by the Company's lending
bank.
41
<PAGE>
PART IV
ITEM l4. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) l. List of Financial Statements
Page Number
Consolidated Balance Sheets at December 31,
1995 and 1994............................................... 14
Consolidated Statements of Operations for each of
the three years in the period ended December 31, 1995....... 16
Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended
December 31, 1995........................................... 17
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1995....... 18
Notes to Consolidated Financial Statements.................. 19
2. List of Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts............. S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
3. List of Exhibits
Exhibit
No. Description
10.19 June 30, 1995 (Fifth) Amendment to Credit Facility and
Security Agreement dated March 1, 1993 between Allied
Construction Products, Inc. and Society National Bank.
21 Subsidiaries of the Registrant.
42
<PAGE>
The following exhibits were previously filed with the Commission as
indicated in the bracketed [] references and are hereby incorporated by
reference.
Exhibit
No. Description
3.1 Certificate of Incorporation of the Registrant [Proxy
Statement dated May 18, 1987 for July 2, 1987 Annual
Meeting of Shareholders, Exhibit B, Form 10-Q for
quarter ended September 30, 1988, Exhibit 1 and
Information Statement dated June 27, 1990 for August
14, 1990 Annual Meeting of Stockholders, Appendix I].
3.2 By-laws of the Registrant [Proxy Statement dated May
18, 1987 for July 2, 1987 Annual Meeting of
Shareholders, Exhibit C].
10.1 Security Agreement dated February 24, 1986 between
Bobbie Brooks, Incorporated and AmeriTrust Company
National Association, as amended [Form 10-K for year
ended December 31, 1987, Exhibit 10.10].
10.3 Term Note Agreement dated August 2, 1988 between Buxton
& Skinner Printing Company and AmeriTrust Company
National Association, as amended [Form 10-K for year
ended December 31, 1988, Exhibit 10.3].
10.5 Security Agreements dated August 2, 1988 between Buxton
& Skinner Printing Company and AmeriTrust Company
National Association [Form 10-K for year ended December
31, 1988, Exhibit 10.5].
10.12 Lease Agreement dated November 29, 1985, by and between
the Registrant and Kelley Avenue Partnership, as
amended [Form 10-K for year ended December 31, 1988,
Exhibit 10.12].
10.16 Term Note Agreement dated April 26, 1989 between Buxton
& Skinner Printing Company and AmeriTrust Company
National Association. [Form 10-K for year ended
December 31, 1989, Exhibit 10.16].
10.17 Credit Facility and Security Agreement dated March 1,
1993 between Allied Construction Products, Inc. and
Society National Bank [Form 10-K for year ended
December 31, 1993, Exhibit 10.17].
43
<PAGE>
10.18 Amendments to Credit Facility and Security Agreement
dated March 1, 1993 between Allied Construction
Products, Inc. and Society National Bank [Form 10-K for
year ended December 31, 1994, Exhibit 10.18].
(b) Reports on Form 8-K Filed during Fourth Quarter
None.
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities
Exchange Act of l934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BOBBIE BROOKS, INCORPORATED
By: /s/ Robert H. Kanner
--------------------------------
Chairman of the Board, President
Chief Executive Officer
and Chief Financial Officer
Date: March 12, l996
Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of the
Registrant, on the date indicated above:
/s/ Robert H. Kanner
--------------------------
Robert H. Kanner, Director
/s/ Stephen R. Kalette
----------------------------
Stephen R. Kalette, Director
/s/ Stanley R. Browne
----------------------------
Stanley R. Browne, Director
45
<PAGE>
<TABLE>
BOBBIE BROOKS, INCORPORATED
AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(000's)
<CAPTIONS>
Column A Column B Column C Column D Column E
Balance at Additions Balance at
Beginning Charged to: End of
Description of Period Cost/Expense Other Deductions Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts-trade receivables
Year ended
December 31, 1995 $1,250 $ 44 $ 66 (B) $ 480 (A) $ 279
601 (D)
Year ended
December 31, 1994 $1,078 $ 794 $ - $ 608 (A) $1,250
14 (C)
Year ended
December 31, 1993 $ 587 $ 543 $ 327 (B) $ 379 (A) $1,078
<FN>
(A) Bad-debt writeoffs.
(B) Allowances for doubtful accounts acquired.
(C) Sale of receivables.
(D) Recoveries of accounts previously reserved.
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
3.1 Certificate of Incorporation of the
Registrant, [Proxy Statement dated May 18,
1987 for July 2, 1987 Annual Meeting of
Shareholders, Exhibit B and Form 10-Q for
quarter ended September 30, 1988, Exhibit 1
and Information Statement dated June 27, 1990
for August 14, 1990 Annual Meeting of
Stockholders, Appendix I].
3.2 By-Laws of the Registrant [Proxy Statement
dated May 18, 1987 for July 2, 1987 Annual
Meeting of Shareholders, Exhibit C].
10.1 Security Agreement dated February 24, 1986
between Bobbie Brooks, Incorporated and
AmeriTrust Company National Association, as
amended [Form 10-K for year ended December 31,
1987, Exhibit 10.10].
10.3 Term Note Agreement dated August 2, 1988
between Buxton & Skinner Printing Company and
AmeriTrust Company National Association, as
amended [Form 10-K for year ended December 31,
1988, Exhibit 10.3].
10.5 Security Agreements dated August 2, 1988
between Buxton & Skinner Printing Company and
AmeriTrust Company National Association [Form
10-K for year ended December 31, 1988, Exhibit
10.5].
10.12 Lease Agreement dated November 29, 1985, by
and between the Registrant and Kelley Avenue
Partnership, as amended [Form 10-K for year
ended December 31, 1988, Exhibit 10.12].
10.16 Term Note Agreement dated April 26, 1989
between Buxton & Skinner Printing Company and
AmeriTrust Company National Association [Form
10-K for year ended December 31, 1989, Exhibit
10.16].
<PAGE>
Exhibit No. Description Page No.
10.17 Credit Facility and Security Agreement dated
March 1, 1993 between Allied Construction
Products, Inc. and Society National Bank [Form
10-K for year ended December 31, 1993, Exhibit
10.17].
10.18 Amendments to Credit Facility and Security
Agreement dated March 1, 1993 between Allied
Construction Products, Inc. and Society
National Bank [Form 10-K for year ended
December 31, 1994, Exhibit 10.18].
10.19 June 30, 1995 (Fifth) Amendment to Credit
Facility and Security Agreement dated March 1,
1993 between Allied Construction Products,
Inc. and Society National Bank.
21 Subsidiaries of the Registrant.
<PAGE>
EXHIBIT 10.19
FIFTH AMENDMENT TO
CREDIT FACILITY AND SECURITY AGREEMENT
WHEREAS, ALLIED CONSTRUCTION PRODUCTS, INC. (herein called the
"Borrower") and SOCIETY NATIONAL BANK (herein called the "Bank") entered
into a certain Credit Facility and Security Agreement dated March 1, 1993
which was previously amended (as amended herein called the "Agreement"),
and
WHEREAS, the Borrower and the Bank have agreed to further amend the
Agreement.
NOW, THEREFORE, for valuable consideration received to their mutual
satisfaction, the Borrower and the Bank hereby agree as follows:
1. The definition of "Borrowing Base" appearing in Section 1.2 of
the Agreement is hereby amended to delete it in its entirety and to
substitute therefor the following:
"'Borrowing Base' means an amount not in excess of the sum of
the following:
(a) seventy-five percent (75%) of the amount due and owing on
Eligible Accounts Receivable, plus
(b) up to the lesser of (i) $3,000,000 or (ii) up to
seventy-five percent (75%) of the amount due and owing on the
sum of Eligible Notes Receivable and Eligible Dating
Receivables, plus
(c) the lesser of (1) forty percent (40%) of the cost on a
first-in, first-out inventory cost basis or market value
(whichever is lower) of Borrower's Eligible Parts Inventory
during the preceding month, (ii) fifty percent (50%) of the cost
on a first-in, first-out inventory cost basis or market value
(whichever is lower) of Borrower's Eligible Finished Goods
Inventory, or (iii) Two Million Dollars ($2,000,000), less
(d) Ineligible FFC Receivables in the form of an availability
block against the Borrowing Base for such amount."
2. The definition of "Termination Date" appearing in Section 1.2 of
the Agreement is hereby amended to delete it in its entirety and to
substitute therefor the following:
"'Termination Date' means June 30, 1997, or such earlier date on
which the commitment of Bank to make Advances pursuant to
Section 2.1 of this Agreement shall have been terminated
pursuant to Sections 10 or 14 of this Agreement."
EX10.19 - 1
<PAGE>
3. Section 1.2 of the Agreement is hereby amended by adding
the following definitions:
"'Interest Period' means, with respect to any Libor Rate Loan, the
period commencing on the date such Loan is made, continued, or
converted and ending on the last day of such period as selected by
the Borrower pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period
as selected by the Borrower pursuant to the provisions below. The
duration of each Interest Period for any Libor Rate Loan shall be 1
month, 2 months, or 3 months, in each case as the Borrower may select
upon notice, as set forth in Section 2.1(b), provided that:
'Libor Rate' means, for any Interest Period for any Libor Rate Loan,
an interest rate per annum (rounded upwards to the next higher whole
multiple of 1/16% if such rate is not such a multiple) equal at all
times during such Interest Period to the quotient of (a) the rate per
annum (rounded upwards to the next higher whole multiple of 1/16% if
such rate is not such a multiple) at which deposits in United States
dollars are offered at 11:00 a.m. (London, England time) (or as soon
thereafter as is reasonably practicable) by prime banks in the London
interbank eurodollar market two Business Days prior to the first day
of such Interest Period in an amount and maturity of such Libor Rate
Loan, divided by (b) a number equal to 1.00 minus the aggregate
(without duplication) of the rates (expressed as a decimal fraction)
of the Libor Reserve Requirements current on the date two Business
Days prior to the first day of such Interest Period.
'Libor Rate Loan' means any Advance that bears interest with
reference to the Libor Rate.
'Libor Reserve Requirements' means, for any Interest Period for any
Libor Rate Loan, the maximum reserves (whether basic, supplemental,
marginal, emergency, or otherwise) prescribed by the Board of
Governors of the Federal Reserve System (or any successor) with
respect to liabilities or assets consisting of or including
'Eurocurrency liabilities' (as defined in Regulation D of the Board
of Governors of the Federal Reserve System) having a term equal to
such Interest Period.
'Prime Rate Loan' means any Advance that bears interest with
reference to the Prime Rate.
'Special Dividend' means a cash dividend in an amount not to exceed
One Million Dollars ($1,000,000), which may be paid exclusively
during the month of December, 1995."
4. The sixth line of Section 2.1(a) of the Agreement is hereby
amended to delete the words "Three Million Dollars ($3,000,000)" and to
substitute therefor the words "Four Million Five Hundred Thousand Dollars
($4,500,000)".
EX10.19 - 2
<PAGE>
5. Section 2.1(b) of the Agreement is hereby amended by deleting in
its entirety and substituting the following in place thereof:
"(b) As compensation for the Advances made by Bank, Borrower
undertakes and agrees to pay to Bank with respect to each Advance
interest at an annual rate to be elected by Borrower equal to either
the Libor Rate plus two and one-half percent (2-1/2%) or the Prime
Rate. Interest on Advances shall be payable monthly in arrears
commencing on the first day of the month following the month in which
such Advance is made and continuing on the first day of each
consecutive month thereafter by debiting the Operating Account.
Interest on the Advances shall accrue upon the average daily balance
in Borrower's Loan Account during the preceding month with respect to
all Advances. Bank shall use its best efforts to give Borrower
notice prior to debiting the Operating Account."
6. The Agreement is hereby amended by a new Section 2.5 reading as
follows:
"2.5. (i) Advances. Advances shall be made pursuant to
Borrower's written, telegraphic, or telephonic
request therefor (a "Request for a Advance"), given
by Borrower to Bank (upon three Business Days notice
for a Libor Rate Loan) stating the date of the
proposed borrowing, the amount of Bank's Advance,
whether it will be a Prime Rate Loan, or Libor Rate
Loan, the applicable Interest Period, if any, and
the total amount to be borrowed. Each written
Request for a Advance shall be signed by an
authorized person of Borrower and accompanied by a
Borrower's Certificate, and each telephonic request
for a Advance shall be made, and confirmed in
writing thereafter, by such an authorized person and
accompanied by a Borrower's Certificate. No Request
for a Advance shall become effective until actually
received by Bank. Each Libor Rate Loan shall not be
an amount less than $100,000.
(ii) Change in Interest Rates. The interest rate elected
by the Borrower under this Section 2.5 shall, as to
each Advance, remain in effect until changed by the
Borrower by written notice to Bank on or prior to
the date of change or, in the case of Prime Rate
Loans until changed by the terms thereof; provided
however, (a) that a change to the Libor Rate, or the
election of a Libor Rate Loan, can be effected only
upon three (3) Business Days' notice (with notice to
be received by Bank not later than 11:00 a.m.
Cleveland, Ohio time on such day), and (b) when the
rate of interest is the Libor Rate it may be changed
to a Prime Rate Loan before the end of the
applicable Interest Period subject, however, to
payment of any applicable additional amount required
by Section 2.5(v) hereof (but without requiring
prepayment of the effected borrowing);
EX10.19 - 3
<PAGE>
(iii) Limitations in Interest Rate Selections. The
Borrower may not elect the Libor Rate if U.S. dollar
deposits are not available to any Bank in the London
Eurodollar Interbank Market for the period and in
the amount requested by the Borrower;
(iv) Special Provisions for Libor Rate Loans and Taxes.
If the making or maintaining of a Libor Rate Loan
becomes illegal for Bank as a result of any change
in an applicable law, governmental regulation,
guideline or order or the interpretation thereof by
an authority charged with the administration
thereof, then upon notice thereof by Bank, the
Borrower (a) shall not cause a new Libor Rate Loan
to be made or elect another Libor Rate Interest
Period for an outstanding Libor Rate Loan for so
long as the making of a Libor Rate Loan by Bank
remains illegal, and (b) shall prepay, or select
another interest rate for, any then outstanding
Libor Rate Loans and pay any applicable additional
amount required by Section 2.5(vi) but without
giving effect to any notice requirements in each
case when and to the extent required by such change.
(v) Increased Costs. With respect to Libor Rate Loans,
if the effect of any change occurring after the date
of this Agreement in an applicable law, governmental
regulation, guideline or order or the interpretation
or application of any thereof by any authority
charged with the administration thereof is to
increase the actual cost to Bank of making or
maintaining such Libor Rate Loans (assuming for such
purpose that each such borrowing is funded by Bank
from sources referred to in the definition of the
interest rate applicable to such borrowing) such as,
but not limited to, any reserve, special deposit or
similar requirements against assets held by, or
deposits in or for the account of, or loans by, or
any other acquisition of funds for loans by Bank, or
to reduce the amount of any payment of principal or
of interest, in respect of any Libor Rate Loan,
received by Bank (including any reduction for
withholding taxes), the Borrower will, after demand
by Bank, pay to Bank such additional amounts as will
compensate Bank for such additional cost or
reduction, such payments to be made on the next date
when interest is payable to Bank pursuant to such
borrowings. The Borrower shall have the option,
upon being notified by Bank pursuant to this
Section, to change the interest rate on the affected
borrowings pursuant to Section 2.5(vi) but without
giving effect to the notice requirements provided
therein or make any prepayments permitted under this
EX10.19 - 4
<PAGE>
Agreement and, in each case, with payment of any
additional applicable amount required by Section
2.5(vi). If either (i) any law, rule, or regulation
now or hereafter in effect, and whether or not
presently applicable to Bank, or (ii) the compliance
with any guideline or request from any central bank
or other governmental authority (whether or not
having the force of law), affects or would affect
the amount of capital required or expected to be
maintained by Bank or any corporation controlling
Bank and Bank determines that the amount of such
capital is increased by or based upon the existence
of the Advances (or commitment to make the Advances)
and other extensions of credit (or commitments to
extend credit) of similar type, then, upon demand by
Bank, the Borrower shall pay to Bank from time to
time as specified by Bank additional amounts
sufficient to compensate Bank in the light of such
circumstances, to the extent that Bank reasonably
determines such increase in capital to be allocable
to the existence of Bank's Advances (or commitment
to make the Advances). A certificate of Bank
submitted to the Borrower as to such amounts shall
be conclusive and binding for all purposes, absent
manifest error. Upon notice from the Borrower to
Bank within five (5) Business Days after Bank
notifies the Borrower of any such additional costs
pursuant to this Section, the Borrower may either
(A) prepay in full all Advances of any types so
affected then outstanding, together with interest
accrued thereon to the date of such prepayment, or
(B) convert all Advances of any types so affected
then outstanding into Advances of any other type not
so affected upon not less than four (4) Business
Days' notice to Bank. If any such prepayment or
conversion of any Libor Rate Loan occurs on any day
other than the last day of the applicable Interest
Period for such Advance, the Borrower also shall pay
to Bank such additional amount sufficient to
indemnify Bank against any loss, cost, or expense
incurred by Bank as a result of such prepayment or
conversion, including, without limitation, any loss
(including loss of anticipated profits), cost, or
expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by
Bank to fund any such Loan, and a certificate as to
the amount of any such loss, cost, or expense
submitted by Bank to the Borrower shall be
conclusive and binding for all purposes, absent
manifest error.
EX10.19 - 5
<PAGE>
(vi) Indemnification. If the Borrower makes any payment
of principal with respect to any Libor Rate Loan on
any other date than the last day of an Interest
Period applicable thereto (whether pursuant to
Sections 2.1, 7, 8, and 10 hereof, or otherwise), or
if the Borrower fails to borrow any Libor Rate Loan
after notice has been given to Bank in accordance
with Section 2.5 or if the Borrower fails to make
any payment of principal or interest in respect of a
Libor Rate Loan or when due, the Borrower shall
reimburse Bank on demand for any resulting loss or
expense incurred by Bank, including without
limitation any loss incurred in obtaining,
liquidating or employing deposits from third
parties, whether or not Bank shall have funded or
committed to fund such Loan. A statement as to the
amount of such loss or expense, prepared in good
faith and in reasonable detail by Bank and submitted
by Bank to the Borrower, shall be conclusive and
binding for all purposes absent manifest error in
computation. Calculation of all amounts payable to
Bank under this Section shall be made as though Bank
shall have actually funded or committed to fund its
relevant Libor Rate Loan through the transfer of
such deposit from an offshore office of Bank to a
domestic office of Bank in the United States of
America; provided, however, that Bank may fund any
Libor Rate Loan in any manner it sees fit and the
foregoing assumption shall be utilized only for the
purpose of calculation of amounts payable under this
Section.
(vii) Contribution and Conversion of Loans. In the event
that the Borrower shall fail to give timely notice
of its election to convert or continue any Advance
as provided above, or in the event that any such
conversion or continuation shall be prohibited by
the terms of this Agreement, such Advance (unless
repaid) shall automatically be deemed to be
refinanced with a Prime Rate Loan at the end of the
Interest Period then in effect with respect to such
Advance. For purposes of this Section, notice
received by Bank after 11:00 a.m. on a Banking Day
shall be deemed to be received on the immediately
succeeding Banking Day.
(viii) Computation of Interest. Interest under this
Agreement shall be calculated on the basis of a year
of 360 days, for the actual number of days
(including the first day but excluding the last day)
elapsed. For any Prime Rate Loan, the rate will
increase or decrease on the day of, and by an amount
equal to, each increase or decrease in the Prime
Rate. The rate charged to Borrower under this
Agreement shall change when and as the Prime Rate is
changed.
EX10.19 - 6
<PAGE>
(ix) Default Interest Rate. After maturity (whether by
acceleration or otherwise), the unpaid principal and
accrued interest on any Advance shall bear interest
at a rate per annum equal to the greater of three
percent (3%) in excess of the interest rate prior to
default or twelve percent (12%). Prior to maturity,
if any payment of principal or interest is not paid
when due, Borrower shall pay a late fee of an amount
equal to the greater of ten percent (10%) of such
payment or one hundred dollars ($100).
Notwithstanding the Bank's remedies as set forth in
Section 10 hereof, prior to maturity hereof, upon
the occurrence of any Event of Default under this
Agreement and until such Event of Default is cured
by Borrower, at Bank's option and upon written
notice to Borrower, the unpaid principal and accrued
interest on any Advance shall bear interest at a
rate per annum equal to the greater of three percent
(3%) in excess of the interest rate prior to
default, or twelve percent (12%)."
7. Section 5.10 of the Agreement entitled "Cash Flow" shall be
amended to read as follows:
"5.10 Cash Flow Borrower shall at all times maintain a Cash Flow
Coverage Ratio of at least 1.1 to 1.0, calculated at the end of the
fiscal period of Borrower ending closest to the end of each calendar
quarter based upon a cumulative year calculation.
8. Section 6.4(d) of the Agreement is hereby amended by deleting it
in its entirety and substituting the following in place thereof:
"(d) pay or declare dividends in any fiscal year (except the
following (i) payments pursuant to a tax sharing arrangement with
Brooks Management Company in form and substance acceptable to Bank,
so long as the amount paid is equivalent to the amount that would
have been paid by Borrower in taxes, if it had filed a separate
return, (ii) a Special Dividend provided that such Special Dividend
could be paid exclusively during the month of December 1995 if all of
the following conditions are met: (1) no Event of Default (financial
or otherwise) exists prior to the payment of the Special Dividend;
(2) no Event of Default (financial or otherwise) exists after the
payment of the Special Dividend; with the exception of the Cash Flow
Coverage Ratio; and (3) excess availability under the Borrowing Base
during the preceding three (3) months prior to payment of the Special
Dividend (in addition to the month of December 1995) would have
exceeded Five Hundred Thousand Dollars ($500,000) on a look-back
basis, (iii) dividends may be declared after December 31, 1995 if no
Event of Default would exist after the payment of such dividends)."
EX10.19 - 7
<PAGE>
9. Section 6.6 of the Agreement entitled "Leverage" shall be
amended to read as follows:
"6.6 Leverage. Borrower shall not permit the ratio of its Adjusted
Debt to its Tangible Net Worth, measured and reviewed monthly, to
exceed 2.0 to 1.0."
10. The Borrower hereby agrees that it will, contemporaneously with
the execution of this Amendment to the Agreement, execute and deliver to
the Bank a new Revolving Credit Promissory Note in the form of Exhibit
A-1, attached hereto, to replace the Revolving Credit Promissory Note
currently held and owned by the Bank representing the Borrower's
borrowings under the Agreement.
11. In consideration for entering into this Amendment, Borrower
agrees to pay Bank on the date hereof a renewal fee of $1,000.
12. Except as herein specifically amended, directly or by reference,
all of the terms and conditions set forth in the Agreement are confirmed
and ratified and shall remain in full force and effect.
13. In consideration of this Amendment, Borrower hereby releases and
discharges the Bank and its shareholders, directors, officers, employees,
attorneys, affiliates and subsidiaries from any and all claims, demands,
liability, and causes of action whatsoever, now known or unknown, arising
out of or in any way related to the extension or administration of the
Loan, the Agreement or any mortgage or security interest related thereto.
14. Borrower hereby represents and warrants to Bank that (a)
Borrower has the legal power and authority to execute and deliver this
Amendment; (b) the officials executing this Amendment have been duly
authorized to execute and deliver the same and bind Borrower with respect
to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions
hereof do not violate or conflict with the organizational agreements of
Borrower or any law applicable to Borrower or result in a breach of any
provisions of or constitute a default under any other agreement,
instrument or document binding upon or enforceable against Borrower, and
(d) this Amendment constitutes a valid and binding obligation upon
Borrower in every respect.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Second
Amendment to the Agreement to be executed by their duly authorized
officers as of the 30th day of June, 1995.
BANK: BORROWER:
SOCIETY NATIONAL BANK ALLIED CONSTRUCTION PRODUCTS, INC.
EX10.19 - 8
<PAGE>
EXHIBIT A-l
REVOLVING CREDIT PROMISSORY NOTE
$4,500,000.00 , 1995
Cleveland, Ohio
FOR VALUE RECEIVED, ALLIED CONSTRUCTION PRODUCTS, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of SOCIETY
NATIONAL BANK (the "Holder") on June 30, 1997, or sooner as hereinafter
provided, the principal amount of Four Million Five Hundred Thousand and
no/100 Dollars ($4,500,000.00) or, if less, the aggregate unpaid
principal amount from time to time borrowed by the Borrower from the
Holder pursuant to the Credit Agreement (hereinafter defined). The
unpaid principal balance outstanding on this Revolving Credit Promiossory
Note from time to time (the "Outstanding Principal Balance") shall be
determined by the ledgers and records of the Holder as accurately
maintained.
This Revolving Credit Promissory Note is the "Revolving Note" defined
and referred to in, and is entitled to the benefits of, a certain Credit
Facility and Security Agreement dated March 1, 1993 (said Credit Facility
and Security Agreement as amended and including, as it may be from time
to time further amended, restated or otherwise modified, being herein
called the "Credit Agreement"), between the Borrower and the Holder, to
which reference is hereby made for a statement of the rights of the
Holder and the duties and obligations of the Borrower in relation
thereto, but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the Borrower to pay the principal of and interest on this
Revolving Credit Promissory Note when due. Capitalized terms used in
this Revolving Credit Promissory Note not defined hereinafter shall have
the respective meanings given to such terms in the Credit Agreement.
This Revolving Credit Promissory Note is being executed and delivered
in substitution for an existing Revolving Credit Promissory Note executed
by Borrower and dated June 1, 1994, and the execution and delivery of
this Revolving Credit Promissory Note shall not constitute a novation and
shall not terminate or otherwise affect the first lien and security
interest of the Bank in Borrower's property.
EX10.19 - 9
<PAGE>
The Outstanding Principal Balance of this Revolving Credit Promissory
Note shall bear interest from and including the date hereof until the
date of payment in full at the rate per annum as set forth in the Credit
Agreement. All interest on this Revolving Credit Promissory Note shall
be paid in accordance with the terms of the Credit Agreement. Interest
shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. All unpaid principal and interest on this
Revolving Credit Promissory Note shall be due on the maturity date hereof
as set forth in the Credit Agreement.
Reference is hereby made to the Credit Agreement which contains
provisions for the acceleration of the maturity hereof upon the happening
of certain stated events and for mandatory prepayments and voluntary
prepayments hereon. The term "Holder" includes the successors and
assigns of Holder.
This Revolving Credit Promissory Note is secured by collateral
assigned, pledged or granted to the Holder; reference is made to the
Credit Agreement and the documents and instruments assigning, pledging or
granting said collateral for a description of the Holder's rights with
respect thereto.
Payment of the principal of and interest on this Revolving Credit
Promissory Note shall be made in lawful money of the United States of
America, by federal funds wire transfer to the main office of Holder, 127
Public Square, Cleveland, Ohio 44114-1306, or at such other place or in
such other manner of payment as Holder or any subsequent holder hereof
shall have designated to the Borrower in writing.
The Borrower waives demand, presentment for payment, notice of
dishonor, protest, and notice of protest and diligence in collection and
bringing suit and agrees that Holder may extend the time for payment,
accept partial payment, take security therefor, or exchange or release
any collateral, without discharging or releasing the Borrower.
This Revolving Credit Promissory Note was executed in Cleveland,
Cuyahoga County, Ohio. The construction, validity, and enforceability of
this Revolving Credit Promissory Note shall be governed by the laws of
the State of Ohio.
The Borrower authorizes any attorney at law to appear before any
court of record, state or federal, in the county where this Revolving
Credit Promissory Note was executed or where the Borrower resides or may
be found, after the unpaid principal balance of this Revolving Credit
Promissory Note becomes due, either by lapse of time or by operation of
any provision for acceleration of maturity contained in the Credit
Agreement, and waive the issuance and service of process, admit the
maturity of this Revolving Credit Promissory Note, by reason of
acceleration or otherwise, and confess judgment against the Borrower in
favor of the holder of this Revolving Credit Promissory Note for the
amount then appearing due on this Revolving Credit Promissory Note,
together with interest thereon and costs of suit, and thereupon to
EX10.19 - 10
<PAGE>
release all errors and to waive all rights of appeal and stay of
execution. The foregoing warrant of attorney shall survive any judgment
and may be used from time to time without exhausting the right to further
use the warrant of attorney and, if any judgment be vacated for any
reason, the holder of this Revolving Credit Promissory Note nevertheless
may use the foregoing warrant of attorney to obtain an additional
judgment or judgments against the Borrower. Borrower agrees that the
holder's attorney may confess judgment pursuant to the foregoing warrant
of attorney. Borrower further agrees that the attorney confessing
judgment pursuant to the foregoing warrant of attorney may receive a
legal fee or other compensation from the holder.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST
YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO
COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
ALLIED CONSTRUCTION PRODUCTS, INC.
EX10.19 - 11
<PAGE>
EXHIBIT 21
BOBBIE BROOKS, INCORPORATED
Subsidiaries of the Registrant
The Registrant directly or indirectly owns 100% of the capital stock of
the following significant subsidiaries:
Subsidiaries State of Incorporation
Buckeye Business Products, Inc. Division of the Registrant
Brooks Management Company Ohio
The Registrant owns approximately 85% of the capital stock of Allied
Construction Products, Inc., a Delaware corporation.
The Registrant owns approximately 62% 0f the capital stock of Aspen
Imaging International, Inc., a Delaware corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 12/31/95 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED 12/31/95 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,878
<SECURITIES> 11,836
<RECEIVABLES> 5,337
<ALLOWANCES> 279
<INVENTORY> 7,447
<CURRENT-ASSETS> 35,185
<PP&E> 16,228
<DEPRECIATION> 9,243
<TOTAL-ASSETS> 45,007
<CURRENT-LIABILITIES> 12,722
<BONDS> 1,742
<COMMON> 5
0
1
<OTHER-SE> 24,743
<TOTAL-LIABILITY-AND-EQUITY> 45,007
<SALES> 47,590
<TOTAL-REVENUES> 47,590
<CGS> 34,844
<TOTAL-COSTS> 34,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,054
<INCOME-TAX> 104
<INCOME-CONTINUING> 4,920
<DISCONTINUED> 1,100
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,020
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
