SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 13, 1997
-------------
NEW ENGLAND BUSINESS SERVICE, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 001-11427 04-2942374
-------- ---------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Main Street, Groton, MA 01471
--------------------------- -----
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (508) 448-6111
--------------
<PAGE
The undersigned Registrant hereby amends Item 7 of its
Current Report on Form 8-K dated April 15, 1997 to read in
its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Chiswick Trading, Inc.
Financial Statements for the Years Ended
December 31, 1996 and 1995
and Independent Auditors' Report
Chiswick Trading, Inc.
Unaudited Financial Statements for the Three Months Ended
March 31, 1997
(b) Pro Forma Financial Information
Pro Forma Combined Condensed Financial Statements
Pro Forma Combined Condensed Consolidated Balance Sheet
Pro Forma Combined Consolidated Statement of Income for the
Year Ended June 29, 1996
Pro Forma Combined Consolidated Statement of Income for the
Nine Months Ended March 29, 1997
Notes to Pro Forma Combined Condensed Financial Statements
(c) Exhibits
Exhibit
Number
* 2.1 Asset Purchase Agreement by and among New England Business
Service, Inc. Chiswick Trading, Inc. and Theodore Pasquarello
dated as of March 31, 1997.
* 2.2 Agreement to Furnish Copies of Omitted Schedules and Exhibits
to Asset Purchase Agreement.
* 10.1 Revolving Credit Agreement dated as of March 26, 1997,
by and among New England Business Service, Inc., The First National
Bank of Boston and Fleet National Bank (together with certain other
financial institutions, the "Banks"), The First National Bank of
Boston, as agent for the Banks, and Fleet National Bank, as
documentation agent for the Banks.
24.1 Independent Auditors' Consent
* Previously filed on Form 8-K dated April 15, 1997
<PAGE>
CHISWICK TRADING, INC.
TABLE OF CONTENTS
- - ----------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995:
Balance Sheets 2
Statements of Income 3
Statements of Cash Flows 4
Notes to Financial Statements 5-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder
of Chiswick Trading, Inc.
We have audited the accompanying balance sheets of Chiswick Trading,
Inc. (the "Company") as of December 31, 1996 and 1995 and the related
statements of income and retained earnings and cash flows for the
years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Chiswick
Trading, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in Note 10, the accompanying financial statements for 1996
and 1995 have been restated.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 25, 1997
<PAGE>
<TABLE>
CHISWICK TRADING, INC.
BALANCE SHEETS (As restated)
DECEMBER 31, 1996 AND 1995
__________________________________________________________________________________________________________________________
<CAPTION>
LIABILITIES AND STOCKHOLDER'S
ASSETS 1996 1995 EQUITY 1996 1995
<S> <C> <C> <S> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 2,103,211 $ 1,367,364 Accounts payable $ 1,176,775 $ 1,102,648
Accrued expenses 2,089,550 2,018,521
Other accrued liabilities 1,700,000 1,500,000
Accounts receivable Notes payable 114,287 155,233
(less allowance ----------- -----------
for doubtful accounts
of $164,000 in 1996 4,412,162 3,963,520
and $79,000 in 1995) Total current liabilities 5,080,612 4,776,402
Inventory 3,824,150 3,351,120
Other receivables and
notes receivable 41,265 68,140 LONG-TERM LIABILITIES - Notes payable 94,986 209,271
Deferred tax assets 115,974 94,254 ----------- -----------
Due from related party 15,327 20,600 Total liabilities 5,175,598 4,985,673
Deferred mail advertising ----------- -----------
and prepaid expenses 1,344,711 1,347,066 COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
----------- ------------ Common stock, no par value;
Total current assets 11,856,800 10,212,064 authorized - 12,500 shares; 15,000 15,000
----------- ------------ issued - 200 shares
Additional paid-in capital 50,000 50,000
PROPERTY AND EQUIPMENT, Net 1,103,477 1,128,015 Retained earnings 8,826,842 7,403,788
----------- ------------ ----------- -----------
OTHER ASSETS: 107,163 114,382 Total 8,891,842 7,468,788
Less - treasury stock
(100 shares) at cost (1,000,000) (1,000,000)
----------- ----------
Total stockholder's equity 7,891,842 6,468,788
------------ ------------ ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S
TOTAL ASSETS $ 13,067,440 $ 11,454,461 EQUITY $13,067,440 $11,454,461
============ ============ =========== ===========
</TABLE>
See notes to financial statements.
<PAGE
<TABLE>
CHISWICK TRADING, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS (As restated)
YEARS ENDED DECEMBER 31, 1996 AND 1995
________________________________________________________
<CAPTION>
1996 1995
<S> <C> <C>
SALES $45,124,788 $39,662,974
COST OF SALES 21,661,346 18,881,252
----------- -----------
GROSS PROFIT 23,463,442 20,781,722
OPERATING EXPENSES 19,367,138 17,143,431
----------- -----------
INCOME FROM OPERATIONS 4,096,304 3,638,291
OTHER INCOME (EXPENSE) (7,018) 13,070
----------- -----------
INCOME BEFORE INCOME TAXES 4,089,286 3,651,361
INCOME TAXES 204,525 186,637
----------- -----------
NET INCOME 3,884,761 3,464,724
RETAINED EARNINGS, BEGINNING
OF YEAR, AS RESTATED 7,403,788 5,955,615
DIVIDENDS PAID (2,461,707) (2,016,551)
----------- -----------
RETAINED EARNINGS, END OF YEAR $8,826,842 $7,403,788
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
CHISWICK TRADING, INC.
STATEMENTS OF CASH FLOWS (As restated)
YEARS ENDED DECEMBER 31, 1996 AND 1995
________________________________________________________________________
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,884,761 $3,464,724
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 494,789 517,435
Bad debts 84,898 45,410
Deferred taxes (21,720) (16,565)
(Gain) loss on asset disposal 11,223 (4,007)
Changes in:
Accounts receivable, trade (533,540) (535,456)
Inventory (473,030) (414,314)
Deferred mail advertising and prepaid expenses 2,355 (289,396)
Other assets 5,580 (19,569)
Accounts payable, accrued expenses and other
accrued liabilities 345,156 614,565
---------- ----------
Net cash provided by operating activities 3,800,472 3,362,827
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of property, equipment and software (474,255) (600,314)
Proceeds from sale of equipment - 7,435
Collection on notes receivable 26,568 -
---------- ----------
Net cash used for investing activities (447,687) (592,879)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable - 112,500
Principal payments on notes payable (155,231) (363,993)
Dividends paid (2,461,707) (2,016,551)
---------- ----------
Net cash used for financing activities (2,616,938) (2,268,044)
---------- ----------
NET INCREASE IN CASH 735,847 501,904
CASH AND EQUIVALENTS, Beginning of year 1,367,364 865,460
---------- -----------
CASH AND EQUIVALENTS, End of year $2,103,211 $1,367,364
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during the period for:
Interest $ 32,260 $ 54,105
========== ===========
Income Taxes $ 226,245 $ 203,202
========== ===========
</TABLE>
See notes to financial statements
<PAGE>
CHISWICK TRADING, INC.
NOTES TO FINANCIAL STATEMENTS (As restated)
YEARS ENDED DECEMBER 31, 1996 AND 1995
- - ---------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity - Chiswick Trading, Inc. (the "Company") was established
under the laws of the Commonwealth of Massachusetts on August 20, 1974.
The Company operates primarily in a single industry segment consisting of
the sale of industrial packaging, shipping and warehouse supplies and gift
wrap packaging products through catalogs throughout the United States and
Canada.
Currency Translation - Because of the nature of the Company's Canadian
operations, the U.S. dollar has been designated as the functional
currency. Accordingly, gains or losses from foreign currency translations
and from changes in exchange rates on foreign currency balances are
recognized in income in the year they occur. These were nominal for the
years ended December 31, 1996 and 1995.
Income Taxes - Effective February 1,1986, the Company elected to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company does not pay federal corporate income taxes.
Instead, the stockholder is liable for individual federal income taxes on
the Company's taxable income.
The Company is, however, subject to state income taxes. Deferred income
taxes have been provided to reflect the tax consequences on future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts. These differences primarily result from
reserves and certain accruals.
Cash and Equivalents - Cash and equivalents include time deposits,
certificates of deposit, money market funds, and highly liquid debt
instruments which mature within three months or less at the date of their
acquisition.
Inventory - Inventory, which consists of industrial and retail packaging,
shipping and supplies goods, is stated at the lower of cost or market.
Cost is determined by using the average cost method.
Property, Equipment and Depreciation - Property and equipment are carried
at cost. Depreciation is computed using straight-line and accelerated
methods over the estimated economic useful lives of the assets (five to
ten years).
Revenue Recognition - Revenue is recognized from sales when a product is
shipped.
Direct Mail Advertising - The Company applies the provision of Statement
of Position ("SOP") No. 93-7, "Reporting on Advertising Costs." The
Company expenses the production costs of advertising the first time the
advertising takes place, except for direct response advertising which is
capitalized and amortized over the future period of its expected benefit.
Direct-response advertising consists primarily of product catalogs and
associated mailing costs. Advertising expense included in operating
expenses was approximately $4,967,000 in 1996 and $4,697,000 in 1995.
Fair Value of Financial Instruments - As of December 31, 1996 and 1995,
the carrying value of all financial instruments approximates fair value.
Concentration of Credit Risk - The Company extends credit to approximately
250,000 geographically dispersed customers on an unsecured basis in the
normal course of business. No individual industry or industry segment is
significant to the Company's customer base. The Company has, in place,
policies governing the extension of credit and collection of amounts due
from customers.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates - In the process of preparing its financial statements,
management makes informed estimates and judgments. The primary estimates
underlying the Company's financial statements include allowances for
doubtful accounts, inventory obsolescence, deferrals of direct mail
advertising costs and other matters. Actual results could differ from
those estimates and thus impact results reported in future periods.
2. CONCENTRATION OF CREDIT RISK ARISING FROM CASH DEPOSITS IN EXCESS OF
INSURED LIMITS
The Company maintains cash balances at two financial institutions located
in Massachusetts and one located in Canada. Accounts at each
Massachusetts institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. The account in Canada is insured by the
Canadian Deposit Insurance Corporation up to $60,000. At December 31,
1996 and 1995 the Company's cash balances exceeded the insured limits by
$1,442,686 and $1,232,525, respectively.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Vehicles $ 124,202 $ 124,202
Office equipment and furnishings 2,122,494 2,132,828
Warehouse equipment 691,200 709,411
Leasehold improvements 330,531 307,974
---------- ----------
Total 3,268,427 3,274,415
Less - accumulated depreciation
and amortization 2,164,950 2,146,400
---------- ----------
Net property and equipment $1,103,477 $1,128,015
========== ==========
</TABLE>
<PAGE>
4. NOTES PAYABLE
Notes payable consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Collateralized promissory notes bearing interest
at rates from 6.80% to 8.12%, payable in monthly
installments $ 78,023 $143,656
Noncollateralized promissory notes bearing interest
at rates from 9.23% to 10.15%, payable
in monthly installments 131,250 220,848
-------- --------
209,273 364,504
Less current portion 114,287 155,233
-------- -------
Long-term portion $94,986 $209,271
======== ========
</TABLE>
Maturities are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $114,287
1998 87,475
1999 7,511
--------
$209,273
========
</TABLE>
<PAGE>
5. REVOLVING LINE OF CREDIT
The Company has a revolving line of credit with a bank in the amount of
$3,000,000, which is collateralized by accounts receivable, inventory and
equipment. Interest is paid monthly at that bank's base rate (which on
December 31, 1996 was 8.25%). At December 31, 1996 and 1995, there were
no borrowings under this facility. This facility expires on May 31, 1997.
6. PROFIT SHARING PLAN
On January 1, 1994, the Company adopted a salary reduction/profit-sharing
plan (the "plan") under the provisions of Section 401(k) of the Internal
Revenue Code. The plan covers substantially all full-time employees who
have completed one year of service with the Company. Contributions under
the plan are discretionary and are determined annually by the Company's
Board of Directors. Contributions totaled $53,301 and $42,576, in 1996
and 1995, respectively.
7. COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements with key management employees.
The Company is obligated to pay these employees certain amounts from the
proceeds in the event the Company is sold. These amounts are determined
based on a vesting percentage and a percentage of the difference between
the proceeds and a base amount of $21,000,000. It is anticipated that
approximately $5,000,000 will be paid pursuant to the sale described in
Note 9.
<PAGE
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company leases certain warehouse space and office equipment from third
parties under long-term operating leases. Future minimum rental payments
required under operating leases that have an initial or remaining
noncancelable lease term in excess of one year, as of December 31, 1996
are:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 41,036
1998 41,006
1999 31,002
2000 17,964
2001 416
--------
Total $131,424
========
</TABLE>
Rental expense under the above operating leases totaled $72,650 and
$38,580 for the years ended December 31, 1996 and 1995, respectively.
8. RELATED-PARTY TRANSACTIONS
The Company's office and warehouse facilities are leased from E.B. Realty
Associates Limited Partnership. The lease requires that the Company pay
for utilities, taxes, insurance and maintenance expenses. This lease
expires in 2005. The only partners of E.B. Realty Associates Limited
Partnership are the Company's sole stockholder and his spouse. For the
years ended December 31, 1996 and 1995, the Company paid rent each year in
the amount of $720,000 under this lease. Future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 720,000
1998 720,000
1999 720,000
2000 720,000
2001 720,000
2002 and thereafter 2,880,000
---------
Total $6,480,000
==========
</TABLE>
The Company rents additional warehouse space from The Paris Trust, which
is owned by the sole stockholder. For the years ended December 31, 1996
and 1995, the Company paid rent each year in the amount of $260,000 under
this lease. In April of 1997, in connection with the Company's sale of its
assets (see Note 9), this lease agreement was discontinued without
penalties or costs.
The Company is also contingently liable as a guarantor on behalf of E.B.
Realty Associates Limited Partnership for the following items:
a. A standby letter of credit to its primary bank dated January 20,
1989 in the amount of $100,000.
b. A note dated February 26, 1988 in the amount of $100,000. The
maturity date, January 19, 1992, has been extended by agreement of both
parties to the note.
<PAGE>
8. RELATED-PARTY TRANSACTIONS (CONTINUED)
The Company is contingently liable as a guarantor on a mortgage note
granted by The Paris Trust, a related party, to a bank in the amount of
$7,200,000. As of December 31, 1996, the balance was $5,616,000.
9. POST-BALANCE SHEET EVENTS
On March 31, 1997, New England Business Service, Inc. ("NEBS") purchased
substantially all of the Company's assets and assumed certain of its
liabilities. The consideration paid included cash and common stock. This
consideration totaled approximately $43,000,000. In connection with this
transaction, all leasing and rental arrangements described in Note 8,
respectively, were renegotiated. The accompanying financial statements do
not include the effects of the transaction with NEBS.
10. RESTATEMENT
These financial statements have been restated for both 1995 and 1996 so as
to properly account for (i) deferred advertising pursuant to SOP No. 93-7;
(ii) valuation allowances for accounts receivable and inventory; (iii) the
accrual of vacation time; and (iv) certain liabilities which had been
previously written off.
1995 net income was accordingly decreased by $314,747 and 1996 net income
was decreased by $412,665. Retained earnings as of January 1, 1995 was
decreased by $1,476,087.
<PAGE>
<TABLE>
CHISWICK TRADING, INC.
BALANCE SHEET
MARCH 31, 1997
UNAUDITED
__________________________________________________________________________________________________________________________
<CAPTION>
LIABILITIES AND STOCKHOLDER'S
ASSETS 1997 EQUITY 1997
<S> <C> <S> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 1,542,225 Accounts payable $ 1,457,598
Accounts receivable Accrued expenses 1,381,332
(less allowance for Other accrued liabilities 1,700,000
doubtful accounts Notes payable 105,350
of $254,000 in 1997) 4,649,941 -----------
Total current liabilities 4,644,280
Inventory 4,086,499
Other receivables and
notes receivable 38,996 LONG-TERM LIABILITIES - Notes payable 51,584
Deferred tax assets 123,164 -----------
Due from related party 15,327 Total liabilities 4,695,864
Deferred mail advertising -----------
and prepaid expenses 1,410,603 COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
----------- Common stock, no par value;
Total current assets 11,866,755 authorized - 12,500 shares; 15,000
----------- issued - 200 shares
Additional paid-in capital 50,000
PROPERTY AND EQUIPMENT, Net 1,082,950 Retained earnings 9,299,550
----------- -----------
OTHER ASSETS: 110,709 Total 9,364,550
Less - treasury stock
(100 shares) at cost (1,000,000)
-----------
Total stockholder's equity 8,364,550
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDER'S
TOTAL ASSETS $ 13,060,414 EQUITY $13,060,414
============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
CHISWICK TRADING, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1997
UNAUDITED
________________________________________________________
<CAPTION>
1997
<S> <C>
SALES $11,643,988
COST OF SALES 5,667,438
-----------
GROSS PROFIT 5,976,550
OPERATING EXPENSES 4,913,884
-----------
INCOME FROM OPERATIONS 1,062,666
OTHER INCOME (EXPENSE) 104,541
-----------
INCOME BEFORE INCOME TAXES 1,167,207
INCOME TAXES 62,499
-----------
NET INCOME 1,104,708
RETAINED EARNINGS, BEGINNING
OF YEAR, 8,826,842
DIVIDENDS PAID (632,000)
-----------
RETAINED EARNINGS, END OF YEAR $9,299,550
===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
CHISWICK TRADING, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997
UNAUDITED
________________________________________________________________________
<CAPTION>
1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,104,708
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 99,005
Bad debts 127,089
Deferred taxes (7,190)
Changes in:
Accounts receivable, trade (364,868)
Inventory (262,349)
Deferred mail advertising and prepaid expenses (72,984)
Other assets 3,546
Accounts payable, accrued expenses and other
accrued liabilities (427,395)
----------
Net cash provided by operating activities 199,562
----------
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of property, equipment and software (78,478)
Collection on notes receivable 2,269
----------
Net cash used for investing activities (76,209)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (52,339)
Dividends paid (632,000)
----------
Net cash used for financing activities (684,339)
----------
NET DECREASE IN CASH (560,986)
CASH AND EQUIVALENTS, Beginning of year 2,103,211
----------
CASH AND EQUIVALENTS, End of year $1,542,225
==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during the period for:
Interest $ 17,000
==========
Income Taxes $ 90,000
==========
</TABLE>
See notes to financial statements
<PAGE>
CHISWICK TRADING, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
- - ----------------------------------------------------------
1. BASIS OF PRESENTATION
The financial statements for the three months ended March 31, 1997 are
unaudited but reflect all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
statement of the results of the interim period reflected. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. The results of operations for the interim
period reported herein are not necessarily indicative of results to be
expected for the full year.
The financial statements included herein should be read in conjunction with
the financial statements and notes thereto, and the Independent Auditors'
Report included elsewhere in this Form 8K/A for Chiswick Trading, Inc. (the
"Company") for the years ended December 31, 1995 and 1996. Reference is
made to the accounting policies of the Company described in the notes to
such financial statements. The Company has consistently followed those
policies in preparing these financial statements.
<PAGE>
(b) Pro Forma Financial Information
PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
On March 31, 1997, New England Business Service, Inc. (the "Company")
acquired substantially all of the assets and certain liabilities of
Chiswick Trading, Inc. ("Chiswick") for cash consideration of approximately
$34,600,019, net of cash acquired, and $ 8,400,000 in shares of Company
common stock, for an aggregate purchase price, net of cash acquired, of
$43,000,019.
The following pro forma combined condensed financial statements are
unaudited and have been prepared to give effect to (i) the acquisition of
Chiswick under the purchase method of accounting, (ii) the arrangements
required to finance such acquisition consisting of a loan to the Company of
$30,000,000 under its revolving line of credit and the issuance of 365,217
shares of Company common stock, and (iii) adjustments based on available
information and upon certain assumptions management believes are reasonable
under the circumstances, as if this transaction had occurred on March 29,
1997 in the case of the combined condensed balance sheet, or on July 1,
1995 in the case of the pro forma combined condensed statements of income.
The pro forma information does not purport to be indicative of the
financial position or results of operations that would have been attained
had the transaction occurred on the dates indicated, nor to project the
Company's results of operations for any future period. The pro forma
combined condensed financial statements should be read in conjunction with
the separate audited financial statements and notes thereto of the Company
included in its Form 10-K for the year ended June 29, 1996 and the audited
financial statements and notes thereto of Chiswick included in this Form 8-
K/A.
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 29, 1997
(Unaudited)
(In Thousands)
<CAPTION>
Pro Forma
NEBS Chiswick Adjustments Pro Forma
(1) (1) (2)(3) Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 8,074 $ 1,542 $ (6,161) $ 3,455
Short term investments 852 852
Accounts receivable - net 29,243 5,074 34,317
Inventories 8,734 4,086 12,820
Direct mail advertising and prepaid exps 6,336 1,349 7,685
Deferred income tax benefit 9,448 9,448
-------- -------- -------- --------
Total current assets 62,687 12,051 (6,161) 68,577
Property and equipment - net 30,728 1,109 (90) 31,747
Property held for sale 631 631
Goodwill 5,775 5,775
Excess of Purchase Price over
net asset value - Chiswick 34,687 34,687
Other Assets - net 652 652
-------- -------- -------- --------
TOTAL ASSETS $100,473 $ 13,160 $ 28,436 $142,069
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 12,488 $ 2,360 $ 400 $ 15,248
Notes Payable 157 30,000 30,157
Accrued expenses 21,602 279 21,881
-------- -------- -------- --------
Total current liabilities 34,090 2,796 30,400 67,286
Deferred Income Taxes 391 391
STOCKHOLDERS' EQUITY
Common stock 14,102 15 350 14,467
Additional paid-in capital 15,218 50 7,985 23,253
Cumulative foreign currency translation adj (1,677) (1,677)
Retained earnings 54,469 10,299 (10,299) 54,469
-------- -------- -------- --------
Total 82,112 10,364 (1,964) 90,512
Less: Treasury stock 16,120 16,120
-------- -------- -------- --------
Stockholders' Equity 65,992 10,364 (1,964) 74,392
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $100,473 $ 13,160 $ 28,436 142,069
======== ======== ========= ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE
<TABLE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended June 29, 1996
(unaudited)
<CAPTION>
Pro Forma
NEBS Chiswick Adjustments Pro Forma
(1) (1) (4) Combined
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $254,954 $41,398 $ $296,352
OPERATING EXPENSES:
Cost of sales 95,598 23,067 118,665
Selling and advertising 93,179 12,622 1,200 107,001
General and administrative 43,713 1,798 221 45,732
Exit costs 3,044 3,044
-------- -------- -------- --------
Total operating expenses 235,534 37,487 1,421 274,442
INCOME FROM OPERATIONS 19,420 3,911 (1,421) 21,910
OTHER INCOME/(EXPENSE): 1,635 (27) (1,910) (302)
-------- -------- -------- --------
INCOME BEFORE TAXES 21,055 3,884 (3,331) 21,608
PROVISION FOR INCOME TAXES 8,306 220 8,526
-------- -------- -------- --------
NET INCOME BEFORE LOSS ON EQUITY
METHOD INVESTMENT 12,749 3,664 (3,331) 13,082
Loss on equity method investment (820) (820)
-------- -------- -------- --------
NET INCOME $ 11,929 $ 3,664 $ (3,331) $ 12,262
======== ======== ======== ========
PER SHARE AMOUNTS:
Net Income .81 .81
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 14,773 365 15,138
======== ======== ======== ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE>
<TABLE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended March 29, 1997
(unaudited)
<CAPTION>
Pro Forma
NEBS Chiswick Adjustments Pro Forma
(1) (1) (4)
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $188,032 $ 35,766 $ $223,798
OPERATING EXPENSES:
Cost of sales 65,293 20,298 85,591
Selling and advertising 65,413 9,404 900 75,717
General and administrative 34,686 2,702 166 37,554
Exit costs 4,543 4,543
-------- -------- -------- --------
Total operating expenses 169,935 32,404 1,066 203,405
INCOME FROM OPERATIONS 18,097 3,362 (1,066) 20,393
OTHER INCOME/(EXPENSE): 2,488 12 (1,370) 1,130
-------- -------- -------- --------
INCOME BEFORE TAXES 20,585 3,374 (2,436) 21,523
PROVISION FOR INCOME TAXES 8,203 187 188 8,578
-------- -------- -------- --------
NET INCOME $ 12,382 $ 3,187 $ (2,624) $ 12,945
======== ======== ======== ========
PER SHARE AMOUNTS:
Net Income .91 .93
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 13,570 365 13,935
======== ======== ======== ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE>
Notes to Pro Forma Combined Condensed Financial Statements
1. On March 31, 1997, New England Business Service, Inc. ("the Company")
acquired substantially all of the assets and assumed certain liabilities of
Chiswick Trading, Inc. ("Chiswick") under the terms of an Asset Purchase
Agreement (the "Agreement") for consideration of approximately $34,600,019
in cash, net of cash acquired, and approximately $8,400,000 in shares of
Company common stock, for an aggregate purchase price, net of cash
acquired, of $43,000,019. The source of the cash for the purchase price
was a loan for $30,000,000 made to the Company in the ordinary course of
business under its revolving line of credit with The First National Bank of
Boston and Fleet National Bank, as lenders and agents thereunder, and
certain other financial institutions.
Chiswick markets a line of retail and industrial packaging, shipping and
warehouse supplies sold primarily to small wholesalers, manufacturers and
retailers. The Company intends to continue to use the assets acquired from
Chiswick for these purposes. Chiswick's headquarters are located in
Sudbury, Massachusetts, where Chiswick will continue to operate as a
division of the Company.
The Pro Forma Combined Condensed Balance Sheet has been prepared based on
the Company's March 29, 1997 unaudited consolidated balance sheet and
Chiswick's unaudited balance sheet as of the same date. Certain assets and
liabilities excluded under the terms of the Agreement have been excluded
from Chiswick's historical balance sheet. The Pro Forma Combined
Consolidated Statements of Income include the Company's historical results
for the applicable periods as previously reported and Chiswick's results
for the same periods, derived from management's internal financial
statements.
2. The pro forma adjustments to the Combined Condensed Balance Sheets are
set forth below:
a) The gross purchase price of $44,561,000 was funded by the issuance
of 365,217 shares of NEBS common stock valued at $8,400,000, and by the
borrowing of $30,000,000 in cash under a revolving line of credit. The
balance was funded by NEBS cash on hand.
b) The stockholder's equity amounts of Chiswick Trading Inc. have
been eliminated as required under the purchase method of accounting.
c) Estimated transaction costs of $400,000 have been accrued and
added to the excess of purchase price over the net value of assets
acquired.
d) Fixed assets have been adjusted to reflect fair market values,
resulting in a $90,000 reduction of the historical amounts acquired.
3. For purposes of these pro forma financial statements, the excess of the
purchase price over the net value of acquired assets has been shown as a
single item on the pro forma combined condensed balance sheet. The final
allocation of the excess of purchase price over net assets acquired is
subject to appraisals, evaluations and other studies of the fair value of
Chiswick's assets and liabilities. The pro forma combined condensed
balance sheet ascribes value to Chiswick's customer list, a non-compete
agreement and goodwill with amortization periods for such intangibles
ranging between 5 and 40 years.
4. The pro forma adjustments to the Combined Consolidated Statements of
Income for the Year Ended June 29, 1996 and the Nine Months ended March 29,
1997 are set forth below by line item:
a) Selling and advertising - to record estimated amortization expense
of the customer list and non-compete intangible assets.
b) General and administrative - to record estimated amortization
expense of acquisition related goodwill (1996 - $706,000, 1997 - $530,000),
to eliminate payroll expense for non-acquired personnel (1996 - $80,000,
1997 - $60,000) and to lower expenses to reflect employment and lease
agreements created at the time of closing (1996 - $405,000, 1997 -
$304,000).
c) Other Income/(Expense) - to record interest expense at 7.25% on
new borrowings based on anticipated balances outstanding and to reflect
lost interest income at 6.00% on net cash outlays.
d) Provision for Income Taxes - to record income taxes on the net
effect of Chiswick's profits and the pro forma adjustments at NEBS'
effective rate.
e) Weighted Average Shares Outstanding - to adjust for share
issuance.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NEW ENGLAND BUSINESS SERVICE, INC.
---------------------------------
Registrant
DATED: June 13, 1997 By: /s/ John F. Fairbanks
------------- ---------------------
John F. Fairbanks
VP, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number
* 2.1 Asset Purchase Agreement by and among New England Business
Service, Inc. Chiswick Trading, Inc. and Theodore Pasquarello
dated as of March 31, 1997.
* 2.2 Agreement to Furnish Copies of Omitted Schedules and Exhibits
to Asset Purchase Agreement.
* 10.1 Revolving Credit Agreement dated as of March 26, 1997,
by and among New England Business Service, Inc., The First National
Bank of Boston and Fleet National Bank (together with certain other
financial institutions, the "Banks"), The First National Bank of
Boston, as agent for the Banks, and Fleet National Bank, as
documentation agent for the Banks.
24.1 Independent Auditors' Consent
* Previously filed on Form 8-K dated April 15, 1997
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements Nos. 33-43900, 33-38925, and 33-56227 of New
England Business Service, Inc. on Form S-8 of our report
dated April 25, 1997 on the financial statements of Chiswick
Trading, Inc. for the years ended December 31, 1995 and
1996, appearing in this filing on Form 8-K/A of New England
Business Service, Inc.
/s/ DELOITTE & TOUCHE LLP
June 13, 1997
Boston, Massachusetts
