<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15d OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended: June 30, 1994
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-8777
-----------------------------
Color Tile Employees Investment Plan
------------------------------------
Full title of the plan and address of the plan, if
different from that of the issuer named below:
Color Tile, Inc.
515 Houston Street
Fort Worth, TX 76102
Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
<PAGE>
Color Tile Employees
Investment Plan
Financial Statements and Additional
Information
June 30,1994 and 1993
<PAGE>
<TABLE><CAPTION>
Color Tile Employees Investment Plan
Table of Contents to Financial Statements and Additional Information
- --------------------------------------------------------------------
<S> <C>
Page
----
Financial Statements:
Report of Independent Accountants 1-2
Statement of Net Assets Available for Benefits June 30. 1994
and 1993 3
Statement of Changes in Net Assets Available for Benefits For
the Years Ended June 30, 1994 and 1993 4
4
Notes to Financial Statements 5-10
Additional Information:*
Schedule I - Schedule of Assets Held for Investment Purposes 11
* Other schedules required by Section 2520.103-10 of the
Department of Labor Rules and Regulations for Reporting
and Disclosure under ERISA have been omitted because
they are not applicable.
<PAGE>
Report of Independent Accountants
---------------------------------
December 19, 1994
To the Participants and Administrative Committee of the
Color Tile Employees Investment Plan
In our opinion, the accompanying statements of net assets available for
benefits, and the related statements of changes in net assets available for
benefits, present fairly, in all material respects, the financial status of the
Color Tile Employees Investment Plan at June 30, 1994 and 1993, and the changes
in its financial status for the years then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Plan's Administrative Committee; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by the Plan's
Administrative Committee, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As explained in Note 3, the financial statements include investments in real
estate, valued at $25,027,796, whose values have been estimated by the Plan's
Administrative Committee in accordance with the procedures described in Note 3.
We have tested the procedures used by the Administrative Committee in arriving
at their estimate of fair value and have tested underlying documentation. In the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. Because of the subjectivity inherent in any estimate of fair value
of real estate, and because the real estate related assets underlying the Plan's
investments are held for long-term operation and appreciation and, thus, are not
presently for sale, amounts ultimately realized from the real estate related
investments may vary significantly from the fair values presented, and the
differences could be material to the financial statements.
<PAGE>
To the Participants and Administrative Committee of the
Color Tile Employees Investment Plan
December 19. 1994
(Continued)
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedule I is presented for purposes of additional analysis and is not a
required part of the basic financial statements, but is additional information
required by ERISA. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
<PAGE>
Color Tile Employees Investment Plan
Statements of Net Assets Available for Benefits
June 30,1994 and 1993
- -----------------------------------------------------------------------
1994 1993
---- ----
Assets
Investments, at fair value (Note 3) $27,545,972 $27,306,240
Receivables:
Rental income 790,169 709,200
Employer contributions 228,552 140,464
Employee contributions 201,490 128,434
Other 16,318 15,975
---------- -----------
Total assets 28,782,501 28,300,313
Liabilities
Debt 8,714,200 9,771,937
Accounts payable to employer 220,287 219,078
Unearned rental income 233,021 -
Accrued interest payable 374,968 511,582
Income taxes payable 25,217 107,461
Deferred tax liability 58,768 34,365
----------- ----------
Total liabilities 9,626,461 10,644,423
----------- -----------
Net assets available for benefits $19,156,040 $17,655,890
=========== ===========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Color Tile Employees Investment Plan
Statements of Changes in Net Assets Available for Benefits
For the Years Ended June 30, 1994 and 1993
- -----------------------------------------------------------------------
1994 1993
---- ----
Additions to net assets attributed to:
Investment income:
Rental income from real estate $3,300,946 $3,270,556
Interest and dividend income 45,905 50,533
Net change in unrealized appreciation
(depreciation) of investments (97,657) 438,290
------------ -----------
Net investment income 3,249,194 3,759,379
Contributions:
Employer 839,015 745,985
Employee 1,818,227 1,601,798
------------ -----------
Total additions 5,906,436 6,107,162
------------ -----------
Deductions from net assets attributed to:
Withdrawal payments 2,630,161 3,606,813
Interest expense 1,533,907 1,747,188
Income tax expense 232,518 158,351
Other 9,700 -
------------ -----------
Total deductions 4,406,286 5,512,352
------------ -----------
Increase in net assets
available for benefits 1,500,150 594,810
Net assets available for benefits:
Beginning of year 17,655,890 17,061,080
------------ -----------
End of year $19,156,040 $17,655,890
============ ===========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
- -----------------------------------------------------------------------
Note 1 - Description of the Plan
The Color Tile Employees Investment Plan (the "Plan") is a defined contribution
plan the purpose of which is to provide employees of Color Tile, Inc. (the
"Company") with a consistent investment program for their retirement and an
opportunity to participate in the long-term growth of the Company. Each
participant elects to defer between 2% and 10% (between 2% and 5% in 1993) of
their gross salary which is paid into the Plan as a salary reduction
contribution for the account of the participant. The Company makes quarterly
contributions to the Plan equal to 50% of the first 5% contributed by each
participant. Participants are not subject to federal income tax on Company
contributions to the Plan or any gains from investments of the Plan until they
make withdrawals from the Plan.
Administration of the Plan is the responsibility of an Administrative Committee
consisting of three individuals appointed by the Company's Board of Directors.
Employees become 20% vested in the Company contribution portion of their account
for each year of service with the Company, and become fully vested after five
years of service.
Upon reaching age 59-1/2, upon death or disability, or upon termination of
employment, the accumulated benefits in a participant's account are to be paid
to the participant or his beneficiaries either in a lump sum or other mode of
settlement. Prior to these events, withdrawals can only be made in a financial
hardship situation. An employee may elect a limited withdrawal of his Company
and voluntary contributions that are not attributable to contributions made
within twenty-four months preceding the withdrawal. Voluntary contributions are
available for withdrawal at any time. Forfeitures applicable to withdrawals
occur from the non vested portion of the participants' account value from
employer contributions.
The above description provides only general information. Participants should
refer to the Summary Plan Description of the Plan document for a more complete
explanation of the Plan's provisions.
The Company has the right, under the Plan, to amend or terminate the Plan,
subject to provisions set forth in the Employee Retirement Income Security Act
of 1974 (ERISA). Amendment of the Plan may not deprive participants of their
vested interests or divert Plan assets from the exclusive benefit of the
participants or their beneficiaries. In the event of termination or partial
termination of the Plan, or upon complete discontinuance of employer
contributions, the accounts of each participant shall be non forfeitable. In the
event of termination of
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
(continued)
- -----------------------------------------------------------------------
the Plan, the assets of the Plan shall be allocated to participants and
beneficiaries and distributed in accordance with the provisions of Section
403(d)(2) of ERISA and any regulations promulgated thereunder, provided however,
the amounts deferred under Section 401 (k) of the Code shall not be distributed
earlier than normal retirement age, death, disability, separation from service,
hardship or attainment of age 59-1/2. The Company has no intentions of
discontinuing the Plan at the present.
Note 2 - Summary of Significant Accounting Policies
Method of accounting - The Plan's financial statements are prepared on the
accrual basis of accounting.
Investments - All securities investments are stated at current value as
determined by quoted prices in an active market. Investments in real estate are
stated at estimated fair value (see Note 3).
The net unrealized appreciation (depreciation) on investments as reported in the
Statement of Changes in Net Assets Available for Benefits represents the net
change in the value of investments held
during the year, adjusted for investments sold. Realized gains or (losses), if
any, on the sale of investments are calculated based on historical costs.
Rental income - As of June 30, 1994, all real estate leases are classified as
operating leases. The accompanying Statements of Changes in Net Assets Available
for Benefits reflect rental income on a straight-line basis over the term of the
lease for all non cancelable future minimum lease payments. Additional rental
income is contingent upon the lessor's level of sales and is recognized only
upon the achievement of the defined sales levels.
Contributions, deposits and forfeitures - Participants' deposits and the
matching Company contributions are recorded in the period that the participants'
deposits are withheld from their compensation. Matching Company contributions
are calculated assuming participants are 100% vested. Upon termination or
withdrawal of a less than 100% vested participant, the non vested portion of the
Company contribution is forfeited and is applied towards future Company
contributions.
Benefits - The Plan recognizes benefits payable to participants at the point the
benefit has been paid. Form 5500 recognizes benefits payable as a liability to
the Statement of Net Assets Available for Benefits. Benefits payable for claims
processed and approved for payment by the Plan at June 30, 1994 and 1993 are
$522,826 and $935,714, respectively.
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
(continued)
- -----------------------------------------------------------------------
Expenses of the Plan - Costs incurred in purchasing, selling and valuation of
securities or other assets of the Plan are paid for by the Plan. All other
expenses, including accounting, clerical, reporting, printing and postage, are
paid by the Company.
NOTE 3 - INVESTMENTS
Investments at June 30, 1994 and 1993, including individual investments in
excess of 5% of the Plan's total assets, consisted of the following:
</TABLE>
<TABLE>
<S><S> <C> <C> <C> <C>
1994 1993
--------------------- -----------------------
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
Securities:
Tandy Corporation, 60,856
shares common stock $ 63,142 $ 2,099,532 $ 63,142 $ 1,825,680
Real estate (45 properties) 22,330,635 25,027,796 22,330,635 25,399,305
Short-term money market fund -
Texas Commerce Bank,
Fort Worth 418,644 418,644 81,255 81,255
------------ ------------ ------------ ------------
$ 22,812,421 $ 27,545,972 $ 22,475,032 $ 27,306,240
============ ============ ============ ============
</TABLE>
The investment in the real estate is primarily determined using the income
capitalization approach. Under this method, the present value of the future
minimum rent under the lease term, including renewal options, estimated
percentage rent and estimated residual value of land, has been discounted to
obtain the present worth or current value of the properties. The Administrative
Committee believes the Company's valuation technique represents a good faith
estimate of the fair value of the properties.
In fiscal year 1993, the Plan financed the construction of a retail store which
is leased to the Company under a long-term non cancelable lease. Total
capitalized costs of the store amounted to $1,225,000, which approximates its
fair market value at June 30, 1994.
During fiscal year 1995, the Plan sold one of its properties to Color Tile
pursuant to the lease agreement for such property for $529,923, which is equal
to the fair value at June 30, 1994. The proceeds from
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
(continued)
- -----------------------------------------------------------------------
the sale of the property were used to pay a portion of the debt on the 14% note
(see Note 5).
Note 4 - Gains and Losses on Investments
The net change in unrealized appreciation in securities was $273,852 and
$334,708 for the year ended June 30, 1994 and 1993, respectively. The net change
in unrealized appreciation (depreciation) of real estate was $(371,509) and
$103,582 for the year ended June 30, 1994 and 1993, respectively.
NOTE 5 - DEBT
Debt consisted of the following at June 30, 1994 and 1993:
<TABLE>
<S> <C> <C>
1994 1993
---- ----
14% note, payable monthly in graduated
installments through November 2001,
secured by 28 real estate properties $7,760,991 $8,318,887
9.75% note, payable in monthly instal lments
of $10,594 through February 1, 2003 with
the remaining balance due in 2003,
secured by 1 real estate property and
related rental income 953,209 986,890
14.5% note, payable monthly in graduated
installments through September 1993,
secured by 16 real estate properties - 166,160
Draw on line of credit agreement; $500,000
credit line ($500,000 and $200,000
unused at June 30, 1994 and June 30,
1993, respectively) bearing interest at the
Citibank prime rate plus 1/2%; maturing in
February 1995; secured by 23,756 shares
of Tandy Corporation common stock - 300,000
Draw on additional line of credit agreement;
$500,000 credit line ($500,000 unused at
June 30, 1994 and 1993, respectively)
bearing interest at Citibank prime rate
plus 1%; maturing in August 1995;
secured by 37,100 shares of Tandy
Corporation common stock - -
---------- ----------
$8,714,200 $9,771,937
========== ==========
</TABLE>
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
(continued)
- -----------------------------------------------------------------------
The 14.5% and 14% notes are subject to additional interest in excess of the
stated rates. The additional interest is equal to the contingent rental amounts
(Note 6) paid on the real estate which collateralizes the notes and totaled
$277,154 and $406,662 for the years ended June 30, 1994 and 1993, respectively.
The 14.5% note was retired in September 1993.
During 1994, the properties securing the 14.5% note were released as collateral.
These properties had a fair value of $7,869,126 at June 30, 1994.
Maturities of debt, for each respective year, ending June 30 are as follows:
1995 $ 677,987
1996 777,444
1997 891,573
1998 1,022,547
1999 1,172,864
Thereafter 4,171,785
-----------
$ 8,714,200
===========
NOTE 6 - INCOME TAXES
The U.S. Treasury Department has informed the Administrative Committee that the
Plan and amendments to the Plan are qualified under Section 401 (a) of the
Internal Revenue Code and is therefore exempt from federal income taxes under
Section 501 (a) of the Code. The Internal Revenue Service granted a favorable
letter of determination to the Plan in 1986. Management believes that the Plan
is qualified under section 401 (a) and 401 (k) of the Internal Revenue Code and
therefore is exempt from taxation under section 501 (c). Employees participating
in the Plan are taxed at the time of distribution on the amount on which
applicable taxes have not been paid.
In accordance with Section 501 (b), the Plan is subject to income taxes on any
unrelated trade or business income earned on debt-financed property as defined
by the Internal Revenue Code. The income tax expense on the unrelated trade or
business income was $232,518 and $158,351 for the years ended June 30, 1994 and
1993, respectively, and was recorded as a liability of the Plan during the
respective fiscal years.
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
(continued)
- -----------------------------------------------------------------------
Note 7 - Party-in-lnterest Transactions
The Plan leases all of its real estate (retail outlets) to Color Tile, Inc.
("lessee"), the employer of the participants of the Plan, under long-term non
cancelable leases which include certain renewal options. The lease agreements
also include a provision for abandonment of the leased property by the lessee.
Under the provision of the lease, if a leased property is abandoned, the lessee
may substitute a property of greater or equal value with the Plan or purchase
the leased property at a price determined in accordance with the lease
agreement. The Plan earned $3,300,946 and $3,270,556 in rental income from these
leases for the years ended June 30, 1994 and 1993, respectively. Of these
amounts, $361,098 and $406,662 represented rental income which was contingent
upon the lessee's gross sales.
Future minimum rental income is as follows:
Year ending June 30, Amount
- -------------------- ----------
1995 $2,814,157
1996 2,800,729
1997 2,372,288
1998 2,169,559
1999 2,178,813
Thereafter 7,262,752
-----------
$19,598,298
===========
NOTE 8 - NET ASSET VALUE PER UNIT (UNAUDITED)
The Plan assigns units to allocate the total assets of the Plan to the
participants. In accordance with the Plan agreement, the net asset value per
unit to be distributed in the event of retirement, termination of employment or
withdrawal is calculated as the previous quarter's ending total units divided
into the current quarter's ending
<PAGE>
Color Tile Employees Investment Plan
Notes to Financial Statements
June 30,1994 and 1993
(continued)
- -----------------------------------------------------------------------
net assets. The total number of units allocated and the net asset value per unit
for each quarter for the two years ended June 30, 1994, as calculated by the
Plan, are:
Net Asset Number
Quarter ended value per unit of units
- -------------- -------------- --------
June 30, 1992 $ 518.26 31,868
September 30, 1992 534.25 30,234
December 31, 1992 552.16 29,554
March 31, 1993 563.75 29,749
June 30, 1993 577.08 29,484
September 30, 1993 608.00 28,720
December 31, 1993 649.96 28,896
March 31, 1994 637.01 29,217
June 30, 1994 648.94 29,471
<PAGE>
<TABLE><CAPTION>
Color Tile Employees Investment Plan
Item 27a Form 5500 - Schedule of Assets
Held for Investment Purposes Additional Information
June 30, 1994 Schedule I
- ----------------------------------------------------------------------------------------
<S> <S> <C> <C>
Identity of Cost Current
Issue, Borrower or Lessor Description of Investment of Asset Value
- ------------------------- -------------------------------- -------- ----------
Tandy Corporation 60,856 shares of common stock $ 63,142 $ 2,099,532
Real estate * 45 properties, leased to Color
Tile, Inc. 22,330,635 25,027,796
Texas Commerce Bank,
Fort Worth Short-term money market fund 418,644 418,644
----------- -----------
Total investments $22,812,421 $27,545,972
=========== ===========
* Party-in-interest
</TABLE>
<PAGE>
SIGNATURE
The Plan. pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed by the undersigned thereunto duly
authorized.
COLOR TILE EMPLOYEES
INVESTMENT PLAN
Dated: January 10, 1995 By: /s WILLIAM H. PAVONY
William H. Pavony
Administrative Committee Member
