U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 21, 1997
Courier Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as Specified in Charter)
Massachusetts
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-7597 04-2502514
- ------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
15 Wellman Avenue, North Chelmsford, Massachusetts 01863-1334
- --------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (978) 251-6000
---------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OF ASSETS.
On July 21, 1997, the Company acquired all of the outstanding capital
stock of Book-mart Press, Inc. ("Book-mart"), a North Bergen, New Jersey book
manufacturer specializing in short to medium runs of softcover and hardcover
books. The Company paid approximately $12.7 million in cash to the former
stockholders of Book-mart for their shares of capital stock. At the time of the
closing, Book-mart had approximately $2.3 million of outstanding bank
indebtedness which was subsequently paid in full. In connection with the
acquisition, 11,111 shares of Courier common stock (based upon a valuation of
$18 per share) were issued to two key executives of Book-mart for non-compete
agreements. In addition, one of such executives was issued 16,667 shares
(subject to a four-year vesting schedule) in connection with an employment
agreement. The acquisition will be accounted for as a purchase and, accordingly,
the results of operations will be included in the consolidated financial
statements from July 21, 1997 forward.
The purchase price was determined in an arm's-length negotiation and
was financed using the Company's existing credit facility with BankBoston, N.A.
and State Street Bank and Trust Company. The amount available under this
facility was extended from $20 million to $30 million in contemplation of the
transaction. The facility was also used by the Company to repay the
approximately $2.3 million of Book-mart's existing bank debt subsequent to the
consummation of the acquisition.
In connection with the acquisition, a long-term lease agreement for
Book-mart's facility in New Jersey was executed by Book-mart. The lessor is a
corporation owned by two of the former stockholders of Book-mart, one of whom
remains as a key executive of Book-mart.
It is intended that Book-mart will continue to operate as a book
manufacturer specializing in short to medium runs of softcover and hardcover
books.
2
<TABLE>
<CAPTION>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<S> <C>
(a) Financial Statements of Business Acquired
(i) Financial Statements of Book-mart Press, Inc. for the
years ended September 30, 1996 and 1995 with the
Report of Ernst & Young LLP, Independent Auditors; F-1 to F-14
(ii) Unaudited Condensed Balance Sheet of Book-mart
Press, Inc. at June 30, 1997; F-15
(iii) Unaudited Condensed Statements of Income, Retained
Earnings and Cash Flows of Book-mart Press, Inc. for
the nine months ended June 30, 1997; F-16
(iv) Notes to Condensed Financial Statements of Book-mart
Press, Inc. (unaudited) for the nine months ended
June 30, 1997. F-17
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Condensed Combined Balance
Sheet as of June 28, 1997; F-19
(ii) Unaudited Pro Forma Condensed Combined Statement of
Income for the year ended September 28, 1996; F-20
(iii) Unaudited Pro Forma Condensed Combined Statement of
Income for the nine months ended June 28, 1997; F-21
(iv) Notes to Unaudited Pro Forma Combined Financial
Statements F-22
(c) Exhibits
See Exhibit Index attached hereto.
</TABLE>
3
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.
COURIER CORPORATION
-------------------------
(Registrant)
Date: October 6, 1997 By: /s/ Robert P. Story, Jr.
------------------------------ -----------------------
Robert P. Story, Jr.
Senior Vice President and
Chief Financial Officer
4
EXHIBIT INDEX
2.1 Stock Purchase Agreement by and among Courier Corporation and
the stockholders of Book-mart Press, Inc., dated as of July
21, 1997 (filed as Exhibit 2.1 to Form 8-K filed on August 5,
1997).
28 Financial Data Schedule.
5
Book-mart Press, Inc.
Financial Statements
Years Ended September 30, 1996 and 1995
Index
Report of Independent Auditors .............................. F-2
Balance Sheets .............................................. F-3 to F-4
Statements of Income and Retained Earnings .................. F-5
Statements of Cash Flows .................................... F-6
Notes to Financial Statements ............................... F-7 to F-14
F-1
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Book-mart Press, Inc.
We have audited the accompanying balance sheets of Book-mart Press, Inc. as of
September 30, 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 Book-mart Press, Inc. at
September 30, 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.
Ernst & Young LLP
New York, New York
November 5, 1996
F-2
Book-mart Press, Inc.
Balance Sheets
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 104,253 $ 83,675
Accounts receivable 3,215,077 2,887,107
Inventories:
Work in process 215,761 282,377
Raw materials 513,789 529,251
Supplies 241,970 239,594
------------------------------------
971,520 1,051,222
Prepaid expenses and other current assets 47,506 151,857
------------------------------------
Total current assets 4,338,356 4,173,861
Property, plant and equipment:
Equipment 3,038,663 2,903,378
Furniture and fixtures 233,630 200,708
Leasehold improvements 997,343 884,816
------------------------------------
4,269,636 3,988,902
Accumulated depreciation and amortization 2,808,326 2,366,463
------------------------------------
1,461,310 1,622,439
Intangible assets, net of accumulated amortization of $1,557,663 in
1996 and $1,254,274 in 1995 698,121 981,510
Goodwill, net of accumulated amortization of $128,479 in 1996 and
$126,475 in 1995 65,845 67,849
Deferred tax asset -- 245,000
Other assets 30,000 30,000
------------------------------------
Total assets $6,593,632 $7,120,659
====================================
</TABLE>
See accompanying notes.
F-3
Book-mart Press, Inc.
Balance Sheets
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
-------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 286,995 $ 206,185
Accrued expenses 98,811 132,621
Income taxes payable 215,679 73,000
Current portion of long-term debt 1,499,000 1,500,000
-------------------------------------
Total current liabilities 2,100,485 1,911,806
Long-term debt 1,630,000 4,095,707
Deferred tax liability 2,000 --
-------------------------------------
3,732,485 6,007,513
Commitments
Shareholders' equity:
Preferred stock, $.0001 par value, 1,000 shares authorized and
unissued -- --
Common stock, $.0001 par value, 2,000 shares authorized, 1,000
shares issued and outstanding -- --
Additional paid-in capital 1,237,500 1,237,500
Carryover basis adjustment (3,153,943) (3,153,943)
Retained earnings 4,777,590 3,029,589
-------------------------------------
2,861,147 1,113,146
-------------------------------------
Total liabilities and shareholders' equity $ 6,593,632 $ 7,120,659
=====================================
</TABLE>
See accompanying notes.
F-4
Book-mart Press, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1995
----------------------------------------------
<S> <C> <C>
Net sales $ 11,713,347 $ 10,544,651
Cost of sales 5,948,852 5,516,781
----------------------------------------------
Gross profit 5,764,495 5,027,870
Selling, general and administrative expenses 2,427,533 2,161,007
----------------------------------------------
Operating income 3,336,962 2,866,863
Other expenses:
Interest expense (427,101) (694,666)
Other (103,860) (25,000)
----------------------------------------------
(530,961) (719,666)
----------------------------------------------
Income before extraordinary item and provision for income
taxes 2,806,001 2,147,197
Provision for income taxes 1,058,000 608,000
----------------------------------------------
Income before extraordinary item 1,748,001 1,539,197
Extraordinary item:
Loss on early extinguishment of debt -- (54,471)
----------------------------------------------
Net income 1,748,001 1,484,726
Retained earnings, beginning of year 3,029,589 1,544,863
----------------------------------------------
Retained earnings, end of year $ 4,777,590 $ 3,029,589
==============================================
</TABLE>
See accompanying notes.
F-5
Book-mart Press, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1995
----------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,748,001 $ 1,484,726
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 747,256 632,049
Extraordinary loss on early extinguishment of debt -- 54,471
Deferral of interest payments 145,777 242,961
Notes issued in lieu of rent payments 72,150 246,242
Deferred income taxes 247,000 56,000
Write-off of bad debts 33,651 19,011
Changes in operating assets and liabilities:
Accounts receivable (361,621) (871,701)
Inventories 79,702 (58,062)
Prepaid expenses and other current assets 104,351 48,759
Accounts payable 80,810 9,883
Accrued expenses (33,810) 12,055
Income taxes payable 142,679 (113,000)
----------------------------------------
Net cash provided by operating activities 3,005,946 1,763,394
INVESTING ACTIVITIES
Capital expenditures (280,734) (9,213)
----------------------------------------
Net cash used in investing activities (280,734) (9,213)
FINANCING ACTIVITIES
Repayment of subordinated note, including deferred interest and
purchase of warrants -- (4,874,997)
Repayment of subordinated notes to related parties, including
deferred interest (2,338,634) --
Proceeds from term loan 1,275,000 3,800,000
Repayments of term loan and revolver (3,326,000) (1,075,000)
Net borrowings on revolver 1,705,000 550,000
Additions to deferred financing costs (20,000) (184,699)
----------------------------------------
Net cash used in financing activities (2,704,634) (1,784,696)
----------------------------------------
Net increase (decrease) in cash 20,578 (30,515)
Cash at beginning of year 83,675 114,190
----------------------------------------
Cash at end of year $ 104,253 $ 83,675
========================================
</TABLE>
See accompanying notes.
F-6
Book-mart Press, Inc.
Notes to Financial Statements
September 30, 1996
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
On August 18, 1989, Book-mart Acquisition Corp. ("BMAC"), which had been
recently formed and had no prior activity, purchased the assets and business of
Book-mart Press, Inc. and the stock of Crown Bookbindery, Inc. and Casebinders,
Inc. (collectively, the "Acquired Companies") for a total purchase price,
including acquisition costs, of $11,070,000. Immediately thereafter, BMAC and
the Acquired Companies merged and Casebinders, Inc., the surviving company,
changed its name to Book-mart Press, Inc. (the "Company"). The purchase price
was financed by $9,250,000 in loans which have either been repaid or refinanced,
and an equity contribution of $1,250,000. The owners of the Acquired Companies,
who were the management, purchased a 45% equity interest in the Company.
The Company allocated the purchase price of the acquired business among its
assets and liabilities based on their respective fair values. The excess of the
cost of the acquired net assets over their fair values was recorded as goodwill.
In allocating the purchase price of the business among its net assets, the
difference between the fair values and the business' historical recorded values
of the net assets has been proportionately reduced by $3,153,943 with such
amount being charged against the Company's shareholders' equity as a carryover
basis adjustment. Such amount represents the difference between the fair value
of continuing management's interest in the business acquired and continuing
management's 45% predecessor basis in such business.
The Company is engaged in the business of printing and binding hard and soft
cover books for customers located throughout the United States. Management
evaluates credit of its customers on a continuing basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company maintains its cash primarily in two financial institutions. The
Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents.
F-7
Book-mart Press, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE
The Company's accounts receivable are due primarily from customers in the
publishing and printing industries. Credit is extended based on an evaluation of
the customer's financial condition, and generally does not require collateral.
Credit losses have been immaterial.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheets for these instruments approximated their fair values.
Term loan: The carrying amount of the Company's term loan approximates its
fair value as the interest rate on such debt fluctuates upon changes in
underlying market rates and there is a relatively short period to its
maturity.
Revolving line of credit-bank: The carrying amount of the Company's
borrowing under its revolving line of credit approximates its fair value as
the interest rate on such debt fluctuates upon changes in underlying market
rates.
INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or market.
PROPERTY, PLANT AND EQUIPMENT
At August 18, 1989, equipment, furniture and fixtures and leasehold improvements
were recorded at their appraised values adjusted for the carryover basis
adjustment as part of the allocation of the total purchase price.
Property, plant and equipment acquired subsequent to August 18, 1989 have been
recorded at cost. The Company depreciates or amortizes property, plant and
equipment on a straight-line basis over their estimated lives ranging from five
to ten years.
F-8
Book-mart Press, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets consists of values assigned to noncompete agreements,
negatives, process set-up, customer lists and deferred financing costs and are
being amortized over lives ranging from three to twenty years.
GOODWILL
Goodwill represents the amount by which the costs of the acquired assets exceeds
the values assigned to the net tangible and identifiable intangible assets and
is being amortized over 40 years. For the year ended September 30, 1995,
goodwill was reduced by $301,000, to reflect the allocation of the income tax
benefits from the utilization of pre-acquisition net operating loss
carryforwards and deductible temporary differences in the bases of the acquired
assets.
INTEREST AND INCOME TAXES PAID
Interest paid for the years ended September 30, 1996 and 1995 was approximately
$1,116,000 and $2,327,000, respectively. Income taxes paid for the years ended
September 30, 1996 and 1995 was approximately $646,000 and $665,000,
respectively.
ESTIMATES AND ASSUMPTIONS
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 revenue and expenses during the reported period. Actual
results could differ from those estimates.
F-9
Book-mart Press, Inc.
Notes to Financial Statements (continued)
3. LONG-TERM DEBT
Long-term debt at September 30, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------
<S> <C> <C>
Term loan $1,499,000 $2,925,000
Revolver 1,630,000 550,000
Junior Subordinated A Notes including accrued interest -- 551,702
Junior Subordinated B Notes including accrued interest -- 1,569,005
-----------------------------------
3,129,000 5,595,707
Less current portion of long-term debt 1,499,000 1,500,000
-----------------------------------
$1,630,000 $4,095,707
===================================
</TABLE>
SUBORDINATED NOTE
In connection with the borrowing under a Subordinated Note in 1989 (repaid in
1995), the noteholder received warrants to purchase 250 shares of the Company's
common stock. The warrants were valued at $250,000 which was treated as original
issue discount on the Subordinated Note and was recorded as additional paid-in
capital. Each warrant entitled the holder thereof to purchase one share of
Common Stock of the Company at a purchase price of $.01 subject to adjustment
under antidilution provisions. Pursuant to a December 1, 1994 agreement with the
noteholder, and in connection with the repayment of the subordinated note, the
amount of common stock issuable upon exercise of the warrants was reduced to 81
shares. The Company valued the portion of the warrants repurchased at $12,500.
The warrants expire on February 18, 1999. The Company has reserved 81 shares of
its unissued shares of common stock for the exercise of the warrants.
TERM LOAN AND REVOLVER
On December 1, 1994, the Company refinanced the Subordinated Note with a new
Term Loan and revolving line of credit (the "Revolver"). The repayment resulted
in an extraordinary loss of $54,471.
F-10
Book-mart Press, Inc.
Notes to Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
On March 27, 1996, the original loan agreement was amended. The outstanding
balance of the Term Loan was increased to $2,700,000 payable at $125,000 per
month. The Company has prepaid a portion of the Term Loan. The maximum borrowing
under the Revolver, as amended, is $2,000,000 or the borrowing base, as defined.
The Revolver expires on March 31, 1999, at which time the outstanding balance is
payable in full.
At management's discretion, the Term Loan and the Revolver, as amended, bear
interest at: 1) .75% plus the higher of a) the federal funds rate plus 1/2% or
b) the prime rate, payable monthly, or 2) LIBOR plus 2.50% payable monthly or
quarterly based on the interest period selected. The interest rate decreases
upon specified repayments and the existence of certain conditions, as defined.
The interest rates at September 30, 1996 and 1995 were 7.94% and 9.125%,
respectively.
The Term Loan and the Revolver are secured by all of the assets of the Company.
The Term Loan and the Revolver place restrictions on the ability of the Company
to incur additional indebtedness. Additionally, restrictions are placed on the
amount of dividends which may be declared by the Company, the consolidation or
merger of the Company's assets with another entity, capital expenditures and
other transactions. The Term Loan and the Revolver require the Company to
maintain certain levels of financial ratios including interest coverage ratio
(as defined), current ratio (as defined) and tangible net worth (as defined).
JUNIOR SUBORDINATED NOTES
On June 25, 1991, the Company's landlord, 2001 Realty Corp., a company owned by
certain management shareholders of the Company, converted past due rent payments
into the Company's Junior Subordinated A Note. Interest accrued monthly at a
rate of 13% per annum and was added to principal. In addition, the Company's
landlord deferred a portion of rent payments ($17,000 each month through March
31, 1995 and $24,050 each month from April 1, 1995 through December 31, 1995)
for which the Company issued additional Junior Subordinated B Notes.
F-11
Book-mart Press, Inc.
Notes to Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
On June 25, 1991, the Company borrowed $150,000 from its shareholders and issued
to them Junior Subordinated B Notes. Interest accrued monthly at a rate of 13%
per annum and is added to principal.
All of these Subordinated Notes and the interest accrued thereon were repaid on
March 27, 1996.
AGGREGATE PRINCIPAL PAYMENTS
The aggregate principal payments under long-term debt at September 30, 1996, for
the years ending September 30, are approximately as follows:
1997 $1,499,000
1998 -
1999 1,630,000
--------------
$3,129,000
==============
4. INCOME TAXES
The Company accounts for income taxes under the liability method as required by
Financial Accounting Standards Board issued Statement No. 109, "Accounting for
Income Taxes."
The provision for income taxes consists of the following:
Year Ended September 30,
1996 1995
---------------------------------------
Current:
Federal $ 572,000 $ 373,000
State 239,000 179,000
---------------------------------------
811,000 552,000
Deferred tax 247,000 56,000
---------------------------------------
$1,058,000 $ 608,000
=======================================
F-12
Book-mart Press, Inc.
Notes to Financial Statements (continued)
4. INCOME TAXES (CONTINUED)
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. At September 30, 1996,
temporary differences that give rise to deferred tax liabilities consisted of
tax depreciation in excess of book. At September 30, 1995, deferred tax assets
consisted of tax credits generated from payments of alternative minimum tax.
During the year ended September 30, 1996, the Company utilized such tax credit.
During the year ended September 30, 1995, the Company recognized approximately
$84,000 in income tax benefits from the utilization of prior years' net
operating loss carryforwards.
During fiscal 1995, the Company allocated tax benefits of certain items to
goodwill. Such allocations resulted in a reduction to goodwill of $301,000 in
fiscal 1995.
5. COMMITMENTS AND OTHER ITEMS
a. The Company leases its office and plant facility from 2001 Realty Corp.
(see Note 3). The lease agreement, which expires on March 31, 1999, allows
the Company to terminate the lease upon six-months notice. The lease
requires annual payments of approximately $501,000 through March 1997 with
annual 5% increases thereafter. Rent expense for the years ended September
30, 1996 and 1995 was $509,000 and $457,000, respectively.
b. The Company entered into employment agreements, expiring through December
31, 1998, which provide for aggregate annual compensation of $400,000.
c. The Company had two customers which accounted for 28% of sales and one
customer which accounted for 16% of sales for the years ended September 30,
1996 and 1995, respectively. Three customers accounted for 32% of accounts
receivable and two customers accounted for 21% of accounts receivable at
September 30, 1996 and 1995, respectively.
F-13
Book-mart Press, Inc.
Notes to Financial Statements (continued)
5. COMMITMENTS AND OTHER ITEMS (CONTINUED)
d. The Company leases production equipment under noncancellable operating
leases expiring at various dates through September 30, 2001. Future minimum
rental payments for the years ended September 30 are approximately as
follows:
1997 ............................................. $ 40,000
1998 ............................................. 40,000
1999 ............................................. 40,000
2000 ............................................. 40,000
2001 ............................................. 40,000
----------
$ 200,000
==========
F-14
BOOK-MART PRESS INC.
UNAUDITED CONDENSED BALANCE SHEET
June 30, 1997
(Dollars in thousands)
ASSETS
Current assets:
Cash $1
Accounts receivable 3,158
Inventories 856
Deferred income taxes 65
Other current assets 29
---------
Total current assets 4,109
Property, plant and equipment, net of
accumulated depreciation of $3,176,000 1,280
Goodwill and other intangibles, net of accumulated
amortization of $1,814,000 635
Other assets 30
---------
Total assets $6,054
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $299
Accounts payable 193
Income taxes payable 101
Other current liabilities 348
---------
Total current liabilities 941
Long-term debt 1,376
Deferred income taxes 2
---------
Total liabilities 2,319
---------
Stockholders' equity 3,735
---------
Total liabilities and stockholders' equity $6,054
=========
The accompanying notes are an integral part of this statement.
F-15
BOOK-MART PRESS, INC.
UNAUDITED CONDENSED STATEMENT OF
INCOME AND RETAINED EARNINGS
For the nine months ended June 30, 1997
(Dollars in thousands)
Net sales $7,754
Cost of sales 4,125
---------
Gross profit 3,629
Selling and administrative expenses 1,993
Interest expense 149
Other expense 33
---------
Income before provision for income taxes 1,454
Provision for income taxes 580
---------
Net income 874
Retained earnings, beginning of period 4,778
---------
Retained earnings, end of period $5,652
=========
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For the nine months ended June 30, 1997
(Dollars in thousands)
Cash provided from operating activities $1,539
---------
Investment activities:
Capital expenditures (188)
---------
Financing activities:
Decrease in term loan and revolver (1,454)
---------
Decrease in cash and cash equivalents (103)
Cash at the beginning of the period 104
---------
Cash at the end of the period $1
=========
The accompanying notes are an integral part of these statements.
F-16
NOTES TO CONDENSED FINANCIAL STATEMENTS OF BOOK-MART PRESS, INC.
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED CONDENSED FINANCIAL STATEMENTS: The condensed balance sheet as of June
30, 1997 and the statements of income, retained earnings and cash flow for the
nine-month period then ended are unaudited and, in the opinion of management,
all adjustments necessary for a fair presentation of such financial statements
have been recorded. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements and
related notes of Book-mart Press, Inc. ("Book-mart") for the years ended
September 30, 1996 and 1995, which appear elsewhere in this report.
INVENTORIES: Inventories are stated at the lower of cost or market on a
first-in, first-out basis and consisted of the following at June 30, 1997:
Raw materials .................. $649,000
Work in process ................ 207,000
--------
Total ....................... $856,000
========
B. INCOME TAXES
Book-mart accounted for income taxes under the liability method as required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The provision for income taxes for the nine months ended June 30, 1997
consisted of the following:
Current:
Federal ............................ $500,000
State .............................. 145,000
--------
645,000
Deferred:
Federal ............................ (51,000)
State .............................. (14,000)
--------
(65,000)
--------
Total ................................... $580,000
========
C. COMMITMENTS
Book-mart leases its office and plant facility from 2001 Realty Corp. The lessor
is a corporation owned by two of the former stockholders of Book-mart, one of
whom remains as a key executive of Book-mart. The lease agreement expires five
years from the date of the acquisition of Book-mart on July 21, 1997. The lease
requires annual payments of approximately $216,000.
F-17
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information presented
herein gives effect to the Company's acquisition of all of the outstanding stock
of Book-mart Press, Inc., ("Book-mart") which was completed on July 21, 1997.
The pro forma financial information is based on the historical financial
statements of the Company and Book-mart. The Company's fiscal year end is the
last Saturday of September and Book-mart has a September 30 year end.
The acquisition of Book-mart has been accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values, which are subject to further
adjustment, based upon appraisals and other analyses, with appropriate
recognition given to the effect of the Company's borrowing rates and income
taxes. Management does not expect that the final allocation of the purchase
price for the acquisition of Book-mart will differ materially from the
allocations set forth in the unaudited pro forma financial information presented
herein.
The unaudited pro forma condensed combined balance sheet as of June 28, 1997
gives effect to the acquisition of Book-mart as if it had been consummated on
June 28, 1997. This balance sheet combines the unaudited historical balance
sheets at June 28, 1997 for the Company and June 30, 1997 for Book-mart.
The unaudited pro forma condensed combined income statements for the year ended
September 28, 1996 gives effect to the acquisition of Book-mart as if it had
been consummated on October 1, 1995. This pro forma income statement combines
the income statement for the year ended September 28, 1996 of the Company and
the income statement for the year ended September 30, 1996 of Book-mart.
The unaudited pro forma condensed combined income statements for the nine months
ended June 28, 1997 gives effect to the acquisition of Book-mart as if it had
been consummated on September 29, 1996. This pro forma condensed income
statement combines the unaudited income statement for the nine months ended June
28, 1997 of the Company and the unaudited income statement for the nine months
ended June 30, 1997 of Book-mart.
The pro forma adjustments are based upon available information and assumptions
that management believes are reasonable. The unaudited pro forma condensed
combined financial statements do not purport to present the financial position
or results of operations of the Company had the acquisition of Book-mart
occurred on the dates specified, nor are they necessarily indicative of the
results of operations that may be achieved in the future. The unaudited pro
forma condensed combined statements of income do not reflect any adjustments for
synergies that management expects to realize commencing upon consummation of the
acquisition. No assurances can be made as to the amount of cost savings or
revenue enhancements, if any, that actually will be realized.
F-18
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
June 28, 1997
(Dollars in thousands)
Pro Forma
Adjustments
Courier Book-mart ------------- Pro Forma
ASSETS Corporation Press, Inc. Dr(Cr) Combined
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $25 $1 $26
Accounts receivable, less allowance
for uncollectible accounts 21,980 3,158 25,138
Inventories 10,755 856 11,611
Deferred income taxes 1,502 65 1,567
Other current assets 749 29 778
------------ ------------ ------------- ------------
Total current assets 35,011 4,109 39,120
Property, plant and equipment, net 34,463 1,280 1,494 (1) 37,237
Real estate held for sale or lease, net 2,782 - 2,782
Goodwill and other intangibles, net 1,204 635 9,122 (2) 10,961
Other assets 497 30 527
------------ ------------ ------------- ------------
Total assets $73,957 $6,054 $10,616 $90,627
============ ============ ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $366 $299 $665
Accounts payable 8,458 193 8,651
Accrued taxes 4,403 101 4,504
Other current liabilities 8,078 348 650 (3) 9,076
------------ ------------ ------------- ------------
Total current liabilities 21,305 941 650 22,896
Long-term debt 8,183 1,376 12,701 (4) 22,260
Deferred income taxes 3,344 2 800 (1) 4,146
Other liabilities 1,314 - 1,314
------------ ------------ ------------- ------------
Total liabilities 34,146 2,319 14,151 50,616
------------ ------------ ------------- ------------
Stockholders' equity:
Common stock 4,500 - 4,500
Additional paid-in capital 9,072 1,237 (1,140)(5) 9,169
Carryover basis adjustment - (3,154) 3,154 (5) 0
Retained earnings 50,559 5,652 (5,652)(5) 50,559
Treasury stock (24,320) - 103 (5) (24,217)
------------ ------------ ------------- ------------
Total stockholders' equity 39,811 3,735 (3,535) 40,011
------------ ------------ ------------- ------------
Total liabilities and stockholders' equity $73,957 $6,054 $10,616 $90,627
============ ============ ============= ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
For the year ended September 28, 1996
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C>
Courier Book-mart Pro Forma Pro Forma
Corporation Press, Inc. Adjustments Combined
------------ ------------ ------------- ------------
Net sales $125,232 $11,713 $136,945
Cost of sales 102,594 5,949 (285)(7) 108,258
------------ ------------ ------------- ------------
Gross profit 22,638 5,764 285 28,687
Selling and administrative expenses 18,647 2,427 946 (1),(2),(6) 22,020
Interest expense 840 427 889 (4) 2,156
Other expense 267 104 371
------------ ------------ ------------- ------------
Income before taxes 2,884 2,806 (1,550) 4,140
Provision for income taxes 334 1,058 (400)(8) 992
------------ ------------ ------------- ------------
Net income $2,550 $1,748 ($1,150) $3,148
============ ============ ============= ============
Net income per share $1.23 $1.50
============ ============
Weighted average shares outstanding 2,072,000 28,000 (9) 2,100,000
</TABLE>
The accompanying notes are an integral part of this statement.
F-20
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
For the nine months ended June 28, 1997
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Courier Book-mart Pro Forma Pro Forma
Corporation Press, Inc. Adjustments Combined
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $95,271 $7,754 $103,025
Cost of sales 75,672 4,125 (214)(7) 79,583
----------- ------------ ------------- ------------
Gross profit 19,599 3,629 214 23,442
Selling and administrative expenses 15,394 1,993 710 (1),(2),(6) 18,097
Interest expense 531 149 667 (4) 1,347
Other expense (income) (21) 33 12
----------- ------------ ------------- ------------
Income before taxes 3,695 1,454 (1,163) 3,986
Provision for income taxes 1,123 580 (300)(8) 1,403
----------- ------------ ------------- ------------
Net income $2,572 $874 ($863) $2,583
=========== ============ ============= ============
Net income per share $1.26 $1.25
=========== ============
Weighted average shares outstanding 2,041,000 28,000 (9) 2,069,000
</TABLE>
The accompanying notes are an integral part of this statement.
F-21
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Represents the adjustment to fair value of acquired machinery, equipment,
furniture, fixtures and leasehold improvements based upon an independent
appraisal and the related deferred taxes. In addition, depreciation
expense has been adjusted to reflect the impact of the fair value
appraisal.
(2) Represents the fair value of goodwill and non-compete agreements
established in connection with the acquisition. Related amortization
expense is reflected over 20 years for the goodwill. Also, 11,111 shares
of common stock were issued to two key executives of Book-mart Press, Inc.
for the non-compete agreements which are being amortized over a four-year
period.
(3) Represents an amount accrued for certain expenses payable in connection
with the acquisition.
(4) Represents the indebtedness incurred in connection with the acquisition,
including indebtedness of Book-mart Press, Inc. which was paid in full
subsequent to the acquisition using Courier Corporation's existing credit
facility. Related interest expense is reflected assuming an average
interest rate of 6.5%.
(5) Represents elimination of the Book-mart Press, Inc. stockholders' equity
accounts and the issuance of shares from Courier Corporation's treasury
stock in connection with the non-compete agreements.
(6) Additional compensation expense for key employees of Book-mart Press, Inc.
is reflected pursuant to the acquisition, including amortization of the
16,667 shares of stock granted in connection with the employment agreement
with a key executive of Book-mart Press, Inc., which is subject to a
four-year vesting schedule.
(7) An adjustment to rental expense is reflected for the new lease on the
office and plant facility of Book-mart Press, Inc. The lease agreement
expires five years from the date of the acquisition and requires annual
rental payments of approximately $216,000.
(8) Represents the tax effect of the pro forma adjustments at the blended
statutory rate of 40%.
(9) Represents shares of the Company's common stock issued in connection with
the acquisition.
F-22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS INFORMATION FROM THE HISTORICAL FINANCIAL STATEMENTS FOR
BOOK-MART PRESS, INC. INCLUDED IN FORM 8-K/A FILED BY COURIER CORPORATION ON
OCTOBER 6, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Sep-27-1997
<PERIOD-START> Oct-01-1996
<PERIOD-END> Jun-30-1997
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 3,158
<ALLOWANCES> 0
<INVENTORY> 856
<CURRENT-ASSETS> 4,109
<PP&E> 4,456
<DEPRECIATION> 3,176
<TOTAL-ASSETS> 6,054
<CURRENT-LIABILITIES> 941
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,735
<TOTAL-LIABILITY-AND-EQUITY> 6,054
<SALES> 7,754
<TOTAL-REVENUES> 7,754
<CGS> 4,125
<TOTAL-COSTS> 4,125
<OTHER-EXPENSES> 2,026
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 1,454
<INCOME-TAX> 580
<INCOME-CONTINUING> 874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 874
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS INFORMATION FROM THE HISTORICAL FINANCIAL STATEMENTS FOR
BOOK-MART PRESS, INC. INCLUDED IN FORM 8-K/A FILED BY COURIER CORPORATION ON
OCTOBER 6, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-01-1995
<PERIOD-END> Sep-30-1996
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 3,215
<ALLOWANCES> 0
<INVENTORY> 972
<CURRENT-ASSETS> 4,338
<PP&E> 4,270
<DEPRECIATION> 2,808
<TOTAL-ASSETS> 6,594
<CURRENT-LIABILITIES> 2,100
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,861
<TOTAL-LIABILITY-AND-EQUITY> 6,594
<SALES> 11,713
<TOTAL-REVENUES> 11,713
<CGS> 5,949
<TOTAL-COSTS> 5,949
<OTHER-EXPENSES> 2,531
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 427
<INCOME-PRETAX> 2,806
<INCOME-TAX> 1,058
<INCOME-CONTINUING> 1,748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,748
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS INFORMATION FROM THE HISTORICAL FINANCIAL STATEMENTS FOR
BOOK-MART PRESS, INC. INCLUDED IN FORM 8-K/A FILED BY COURIER CORPORATION ON
OCTOBER 6, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-START> Oct-01-1994
<PERIOD-END> Sep-30-1995
<CASH> 84
<SECURITIES> 0
<RECEIVABLES> 2,887
<ALLOWANCES> 0
<INVENTORY> 1,051
<CURRENT-ASSETS> 4,174
<PP&E> 3,989
<DEPRECIATION> 2,366
<TOTAL-ASSETS> 7,121
<CURRENT-LIABILITIES> 1,912
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,113
<TOTAL-LIABILITY-AND-EQUITY> 7,121
<SALES> 10,545
<TOTAL-REVENUES> 10,545
<CGS> 5,517
<TOTAL-COSTS> 5,517
<OTHER-EXPENSES> 2,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 695
<INCOME-PRETAX> 2,147
<INCOME-TAX> 608
<INCOME-CONTINUING> 1,539
<DISCONTINUED> 0
<EXTRAORDINARY> (54)
<CHANGES> 0
<NET-INCOME> 1,485
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
