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)
June 8, 1995
DOUGLAS & LOMASON COMPANY
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(Exact name of registrant as specified in its charter)
Michigan 0-627 38-0495110
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
24600 Hallwood Court, Farmington Hills, Michigan 48335-1671
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code (810) 478-7800
<PAGE>
FORM 8-K/A
Item 7.
Financial Statements, Pro Forma Combined and Condensed Financial Information
and Exhibits
On June 8, 1995, Douglas & Lomason Company (the "Company") acquired all of the
issued and outstanding capital stock of Bestop, Inc. ("BESTOP"). BESTOP is the
leading designer and manufacturer in North America of soft tops and
accessories for small sport utility vehicles. BESTOP sells its products
domestically and internationally to original equipment manufacturer ("OEM")
companies and in the aftermarket.
The cash purchase price for BESTOP's stock was $43,952,272. The Company
financed the acquisition with a new term note for $25 million with two banks
with quarterly principal payments commencing July 1, 1999, and a maturity date
of June 8, 2003. The balance of the purchase price was funded by utilizing
available capacity under its amended and restated revolving credit agreement.
(a) Financial Statements of Business Acquired
Page
Audited financial statements of Bestop, Inc.
Report of Independent Public Accountants 3
Balance sheets - December 31, 1994 and December 25, 1993 4
Statements of operations for the three years ended
December 31, 1994 6
Statements of Shareholders' equity (deficit) for the three
years ended December 31, 1994 7
Statements of cash flows for the three years ended
December 31, 1994 8
Notes to financial statements 10
Unaudited interim financial statements of Bestop, Inc.
Balance sheets April 1, 1995 and December 31, 1994 19
Statements of operations for the three months ended
April 1, 1995 and March 26, 1994 21
Statements of cash flows for the three months ended April 1, 1995
and March 26, 1994 22
Notes to financial statements 24
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<PAGE>
BESTOP, INC.
------------------
Consolidated Financial Statements
For the Three Years Ended December 31, 1994, 1993, 1992
--------------------------------------------------------
Together with
-------------
Report of Independent Public Accountants
----------------------------------------
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Bestop, Inc.:
We have audited the accompanying balance sheets of BESTOP, INC. (a Delaware
corporation) as of December 31, 1994 and December 25, 1993, and the related
statements of operations, stockholders' equity (deficit) and cash flows for
each of the three fiscal years in the period ended December 31, 1994. 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 Bestop, Inc. as of December
31, 1994 and December 25, 1993, and the results of its operations and its cash
flows for each of the three fiscal years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 10, 1995.
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<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
BALANCE SHEETS
December 31, December 25,
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 417,000 $ 660,000
Accounts receivable, net of allowance for doubtful
accounts of $32,000 and $150,000, respectively 7,842,000 6,432,000
Income tax receivable 142,000 --
Inventories (Note 3) 7,058,000 5,982,000
Contract engineering (Note 2) 1,462,000 1,926,000
Deferred income tax asset (Notes 2 and 9) 393,000 213,000
Other current assets 221,000 127,000
----------- -----------
Total current assets 17,535,000 15,340,000
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $4,745,000 and
$4,114,000, respectively (Notes 2 and 4) 3,480,000 2,764,000
GOODWILL, net of accumulated amortization of
$80,000 and $72,000, respectively (Note 2) 246,000 254,000
OTHER ASSETS 327,000 179,000
----------- -----------
Total assets $21,588,000 $18,537,000
=========== ===========
<FN>
The accompanying notes to financial statements are
an integral part of these balance sheets.
</TABLE>
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<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
BALANCE SHEETS
December 31, December 25,
1994 1993
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 3,981,000 $ 3,356,000
Accrued salaries, wages and bonuses 247,000 179,000
Accrued interest payable (Note 7) 18,000 14,000
Line of credit (Note 6) 916,000 2,159,000
Long-term debt, current portion (Note 7) 250,000 338,000
Other current liabilities 1,137,000 864,000
----------- -----------
Total current liabilities 6,549,000 6,910,000
----------- -----------
LONG-TERM DEBT (Note 7) 172,000 423,000
----------- -----------
DEFERRED INCOME TAX LIABILITY 252,000 196,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 5,000,000 shares
authorized; no shares issued or outstanding (Note 1) -- --
Common stock, $.002 par value; 10,000,000 shares
authorized; 3,447,237 and 3,259,342 issued and
outstanding, respectively (Notes 1 and 8) 7,000 6,000
Additional paid-in capital 7,707,000 7,670,000
Retained earnings 6,878,000 3,332,000
Cumulative translation adjustment 23,000 --
----------- -----------
Total stockholders' equity 14,615,000 11,008,000
----------- -----------
Total liabilities and stockholders' equity $21,588,000 $18,537,000
=========== ===========
<FN>
The accompanying notes to financial statements are
an integral part of these balance sheets.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF OPERATIONS
For the Year Ended
--------------------------------------------
December 31, December 25, December 26,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $54,018,000 $41,668,000 $36,349,000
COST OF GOODS SOLD 40,814,000 30,800,000 26,467,000
----------- ----------- -----------
13,204,000 10,868,000 9,882,000
----------- ----------- -----------
EXPENSES:
Selling and marketing 3,194,000 2,608,000 2,293,000
General and administrative 2,452,000 1,859,000 2,082,000
Engineering, research and development 1,494,000 939,000 953,000
Distributor settlement charges -- 304,000 --
----------- ----------- -----------
7,140,000 5,710,000 5,328,000
----------- ----------- -----------
INCOME FROM OPERATIONS 6,064,000 5,158,000 4,554,000
OTHER EXPENSES:
Interest expense 207,000 130,000 602,000
Other expense 25,000 26,000 115,000
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 5,832,000 5,002,000 3,837,000
PROVISION FOR INCOME TAXES (Note 9) 2,286,000 1,951,000 994,000
----------- ----------- -----------
NET INCOME $ 3,546,000 $ 3,051,000 $ 2,843,000
=========== =========== ===========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE (Note 2) $ 1.03 $ .89 $ .99
=========== =========== ===========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 3,445,969 3,442,644 2,863,987
=========== =========== ===========
<FN>
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
Common Stock Additional Retained Cumulative
------------------- Paid-In Earnings Translation
Shares Amount Capital (Deficit) Adjustment
--------- ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCES, December 28, 1991 1,177,680 $2,000 $ 412,000 $(2,562,000) $ --
Net income -- -- -- 2,843,000 --
Warrant exchange (Note 8) 1,095,958 2,000 (2,000) -- --
Public stock sale, net of
expenses (Note 1) 925,000 2,000 7,364,000 -- --
Stock options exercised 23,364 1,000 -- --
Unearned compensation expense
due to officer's resignation -- -- (109,000) -- --
--------- ----- ---------- ----------- -------
BALANCES, December 26, 1992 3,222,002 6,000 7,666,000 281,000 --
Net income -- -- -- 3,051,000 --
Stock options exercised 37,340 -- 4,000 -- --
--------- ----- ---------- ----------- -------
BALANCES, December 25, 1993 3,259,342 6,000 7,670,000 3,332,000 --
Net income -- -- -- 3,546,000 --
Stock options exercised 183,760 1,000 3,000 -- --
Stock purchase investment
plan (Note 12) 4,135 -- 34,000 -- --
Cumulative translation
adjustment -- -- -- -- 23,000
--------- ----- ---------- ----------- -------
BALANCES, December 31, 1994 3,447,237 $7,000 $7,707,000 $ 6,878,000 $23,000
========= ====== ========== =========== =======
<FN>
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
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<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
------------------------------------------------
December 31, December 25, December 26,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,546,000 $ 3,051,000 $ 2,843,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities-
Depreciation and amortization 688,000 675,000 620,000
Provision for losses on accounts
receivable 159,000 -- --
(Gain) loss on sale of property
and equipment (14,000) 3,000 (8,000)
Deferred income taxes (124,000) (57,000) --
Stock compensation expense -- -- 22,000
Change in assets and liabilities-
Accounts receivable (1,569,000) (391,000) (1,702,000)
Income tax receivable (142,000) -- --
Inventories (1,076,000) (1,637,000) (1,583,000)
Contract engineering 464,000 (789,000) (1,030,000)
Trade accounts payable, accrued
and other current liabilities 970,000 (1,625,000) 1,945,000
Other assets (257,000) (92,000) (174,000)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 2,645,000 (862,000) 933,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,395,000) (808,000) (1,424,000)
Proceeds from sale of other property and
equipment 28,000 7,000 10,000
----------- ----------- -----------
Net cash used in investing activities (1,367,000) (801,000) (1,414,000)
----------- ----------- -----------
<FN>
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
-8-
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
------------------------------------------------
December 31, December 25, December 26,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under line
of credit $(1,243,000) $ 1,744,000 $(1,574,000)
Payments of capital lease obligations (3,000) (8,000) (21,000)
Proceeds from issuance of long-term debt -- -- 700,000
Repayments of debt-
Bank term loans (336,000) (491,000) (371,000)
Subordinated debt -- -- (5,000,000)
Former stockholder -- -- (50,000)
Sale of common stock 38,000 4,000 7,367,000
----------- ----------- -----------
Net cash (used in) provided by
financing activities (1,544,000) 1,249,000 1,051,000
----------- ----------- -----------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH 23,000 -- --
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH (243,000) (414,000) 570,000
CASH AND CASH EQUIVALENTS,
beginning of year 660,000 1,074,000 504,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
end of year $ 417,000 $ 660,000 $ 1,074,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for-
Interest to subordinated debt holders $ -- $ -- $ 504,000
=========== =========== ===========
Other interest $ 203,000 $ 153,000 $ 180,000
=========== =========== ===========
Income taxes $ 2,436,000 $ 2,272,000 $ 750,000
=========== =========== ===========
<FN>
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
-9-
<PAGE>
BESTOP, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(1) ORGANIZATION AND OPERATIONS
Bestop, Inc. (the "Company"), was formed in 1986. The Company's operations
include the development, manufacturing and distribution of soft tops and
accessories for four-wheel drive recreational utility vehicles. A significant
portion of the Company's business results from providing soft tops to major
automobile manufacturers. During 1994, 1993 and 1992, sales of approximately
$18.6 million, $16.6 million and $12.3 million, respectively, were made to one
of these manufacturers. In 1994, 1993 and 1992, sales to another North
American automobile manufacturer totaled $7.7 million, $3.6 million and $3.0
million, respectively. Total export sales to international customers were $5.7
million, $4.2 million and $5.5 million, in 1994, 1993 and 1992, respectively.
In August 1992, the Company completed an initial public offering of 925,000
shares of common stock for net proceeds of $7,367,000 after underwriting
discounts, commissions and offering costs of $959,000.
To facilitate the initial public offering, in June 1992 the Company approved a
five-for-one stock split and reduced the par value of the common stock from
$.01 per share to $.002 per share. In addition, the Company's Board of
Directors approved a Restated Certificate of Incorporation which increased the
authorized common stock from 1,250,000 shares, $.01 par value to 10,000,000
shares, $.002 par value. These items have been retroactively reflected as
outstanding for all periods presented in the accompanying financial
statements. The Restated Certificate of Incorporation also increased the
Company's authorized preferred stock to 5,000,000 shares, $1.00 par value,
although none had been issued as of December 31, 1994.
(2) SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company reports on a 52-week fiscal year ending on the last Saturday of
the calendar year. Thus, every sixth fiscal year will consist of 53 weeks.
Fiscal 1994 was a 53-week year, while all other fiscal years in the
accompanying financial statements consist of 52 weeks.
-10-
<PAGE>
Inventory Valuation
Inventories include costs of materials, direct labor and manufacturing
overhead and are stated at the lower of cost (first-in, first-out) or market.
Depreciation
Property and equipment is depreciated on a straight-line basis over its
estimated useful life, as follows:
<TABLE>
<S> <C>
Production equipment 6-7 years
Trucks and automobiles 3-5 years
Office equipment and fixtures 5-7 years
</TABLE>
Leasehold improvements are amortized over the shorter of their useful life or
the life of the lease.
Goodwill
The excess of purchase price over the fair value of the net assets acquired on
formation of the Company represents goodwill and is being amortized on a
straight-line basis over a 40-year period.
Negative Cash Balances
Outstanding bank checks in excess of deposits on hand of $723,000 and $544,000
at December 31, 1994 and December 25, 1993, respectively, resulting from a
zero balance checking account arrangement, have been reclassified to trade
accounts payable in the accompanying balance sheets.
Income Taxes
Effective December 27, 1992, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes". SFAS 109 requires use of the liability method of accounting. Deferred
tax liabilities are measured by applying the provisions of enacted tax laws to
determine the amount of taxes payable or refundable currently or in future
years related to cumulative temporary differences between the tax basis of
assets and liabilities and amounts reported in the Company's balance sheet.
The net change during each period in the deferred liability determines the
periodic provision for deferred taxes (see Note 9). The adoption of SFAS 109
did not have a material cumulative effect on the Company's financial position
or results of operations.
Foreign Currency Translation and Transactions
The Company translates balance sheet accounts of its European branch using the
year-end exchange rate, and income statement items at the average exchange
rate for the year. Any resulting translation adjustments are reflected as a
separate component of stockholders' equity. Foreign currency transaction
adjustments are recognized in the statement of operations in the period
incurred.
-11-
<PAGE>
Concentration of Credit Risk
The Company provides credit, in the normal course of business, to large
domestic and international original equipment automobile manufacturers and
automotive aftermarket companies. To limit the Company's credit risk,
management performs ongoing credit evaluations of its customers and maintains
reserves for potentially uncollectible accounts. Although the Company is
directly impacted by economic conditions in the automotive industry,
management does not believe significant credit risk exists at December 31,
1994.
Research and Development
Unless reimbursable, research and development costs are expensed as incurred
and include salaries, supplies and other direct costs. The Company has entered
into engineering agreements with various original equipment automobile
manufacturers to develop products. These costs are reimbursable by the
manufacturers and are recorded as current assets in the accompanying balance
sheets.
Net Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during each
period. All outstanding stock options and warrants are considered common stock
equivalents for purposes of computing net income per share.
All net income per share data have been adjusted to reflect the five-for-one
stock split approved by stockholders in June 1992.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, December 25,
1994 1993
----------- -----------
<S> <C> <C>
Raw materials $ 2,302,000 $ 1,446,000
Work-in-process 1,260,000 1,359,000
Finished goods 3,645,000 3,309,000
----------- -----------
7,207,000 6,114,000
Less- Reserve for excess and
obsolete inventory (149,000) (132,000)
----------- -----------
$ 7,058,000 $ 5,982,000
=========== ===========
</TABLE>
-12-
<PAGE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, December 25,
1994 1993
----------- -----------
<S> <C> <C>
Production equipment $ 5,708,000 $ 4,811,000
Leasehold improvements 810,000 810,000
Office equipment and vehicles 1,707,000 1,257,000
----------- -----------
8,225,000 6,878,000
Less- Accumulated depreciation
and amortization (4,745,000) (4,114,000)
----------- -----------
$ 3,480,000 $ 2,764,000
=========== ===========
</TABLE>
(5) RELATED PARTY TRANSACTIONS
The Company has an agreement with an affiliate of a director under which the
Company pays this affiliate $5,000 per month in exchange for consulting
services provided by the director. In addition, the agreement provides for
additional payments and bonuses based on achievement of mutually agreed-upon
objectives. Amounts paid for such consulting services were $60,000, $60,000
and $110,000 for the periods ended December 31, 1994, December 25, 1993, and
December 26, 1992, respectively. In 1994 and 1993, the Company's Board of
Directors granted 4,500 and 5,000 stock options, respectively, at market price
to this director under the terms of the agreement.
On April 13, 1994, the Board of Directors approved a loan to a key officer who
is also a shareholder and board member. The loan avoids the need for the
officer to sell Company stock in order to pay alternative minimum tax on the
exercise of stock options and thus provides incentive to the officer resulting
from continued ownership of stock in the Company. The loan agreement provides
for the officer to borrow up to $100,000 in the aggregate through December 31,
1994, and up to $350,000 in the aggregate on or prior to April 15, 1995. The
maturity date of the loan is April 15, 2000, with monthly interest payments at
the same rate that the Company pays on its revolving line of credit. The loan
is collateralized with the officer's common stock. As of December 31, 1994,
the officer had borrowed $33,000 under this loan agreement.
(6) LINE OF CREDIT
The Company has a revolving line of credit with a bank bearing interest at
prime (8.5% at December 31, 1994), payable monthly, which matures June 30,
1995. The weighted average interest rate on short-term borrowings outstanding
as of December 31, 1994 and December 25, 1993 were 7.4% and 6.4%,
respectively. The available line of credit is based on and secured primarily
by the Company's inventories, accounts receivable, general intangibles, and
equipment and fixtures. The amount of the revolving line of credit available
each month is determined by a borrowing base calculation which indicated
maximum availability of $6,000,000 at December 31, 1994, of which $916,000 had
been borrowed and maximum availability of $6,000,000 at December 25, 1993, of
which $2,159,000 had been borrowed. The Company pays a fee of 1/8% on the
unused line of credit.
-13-
<PAGE>
The Company also has a $1,500,000 term equipment line that bears interest at
prime plus 1/4% (8.75% at December 31, 1994), which expires June 30, 1995. At
December 31, 1994, the Company had not drawn any of this line.
Management expects that these lines of credit will be extended to future
periods.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, December 25,
1994 1993
---------- ----------
<S> <C> <C>
Term loan payable to a bank, interest at
prime plus 1/4% and 3/4%, respectively,
payable monthly, principal due in variable
monthly installments ranging from $34,485
to $5,296 with balance due November 30,
1996 $ 127,000 $ 276,000
Term loan payable to a bank, interest at
prime plus 1/4% and 3/4%, respectively,
payable monthly, principal due in monthly
installments of $15,555, due June 30, 1996 295,000 482,000
Other -- 3,000
---------- ----------
422,000 761,000
Less- Current maturities (250,000) (338,000)
---------- ----------
$ 172,000 $ 423,000
========== ==========
</TABLE>
The term loans are secured by all accounts receivable, general intangibles,
inventories, equipment and fixtures and are cross-collateralized with the
revolving lines of credit previously discussed.
Other long-term debt at December 25, 1993 consisted of various capital leases
secured by leased equipment.
-14-
<PAGE>
(8) STOCK WARRANTS AND OPTIONS
Warrants for 1,000,000 shares and 96,205 shares were issued in 1986 and 1989,
exercisable at a price of $.002 per share (after the five-for-one stock
split). Under the Warrant Exchange Agreement, concurrently with the closing of
the Company's initial public offering, the warrant holders received 1,095,958
shares of the Company's common stock in return for the warrants. This number
of shares represented the number of shares purchasable under the warrants
minus a number of shares of the Company's common stock equal in value to the
exercise price, using for this calculation the initial public offering price
of the common stock.
The stockholders have approved a stock option plan which authorizes up to
355,430 common shares (after the five-for-one stock split) to be issued upon
the exercise of options granted to directors, officers and key employees.
Options are granted at a price determined by the Board of Directors and must
be exercised within a period of time fixed by the Board of Directors, not to
exceed 10 years from the grant date. The options are generally exercisable in
accordance with a predetermined five-year vesting schedule.
The following table summarizes the total stock options activity:
<TABLE>
<CAPTION>
Shares Price Range
-------- ------------
<S> <C> <C>
Outstanding at December 28, 1991 278,790 $ .02 - .20
Exercised (23,364) .02 - .20
Terminated (34,326) .08
-------- ------------
Outstanding at December 26, 1992 221,100 .02 - .20
Granted 22,000 9.47
Exercised (37,340) .02 - .20
-------- ------------
Outstanding at December 25, 1993 205,760 .02 - 9.47
Granted 35,000 9.85
Exercised (183,760) .02
Terminated (800) 9.47
-------- ------------
Outstanding at December 31, 1994 56,200 $9.47 - 9.85
======== ============
</TABLE>
Of the 56,200 options outstanding, 4,240 were exercisable under the plan's
vesting schedule at December 31, 1994.
For options granted during 1991 which weren't subsequently forfeited (19,070
shares after the five-for-one stock split), compensation expense of $136,000,
based on an estimated fair market value of $7.20 per share was being amortized
over the five-year vesting term of the options. In 1992, the unvested portion
of these options was forfeited and the unamortized compensation expense was
reversed.
-15-
<PAGE>
(9) INCOME TAXES
At December 31, 1994, the Company has no available net operating loss or
alternative minimum tax credit carryforwards.
Deferred tax assets and (liabilities) were as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
----------- ------------
<S> <C> <C>
Deferred Tax Liabilities-
Accelerated tax depreciation $ (252,000) $ (196,000)
---------- ----------
Deferred Tax Assets-
Inventory costs capitalized for tax 302,000 123,000
Reserves and accruals not deducted for tax-
Accounts receivable allowance for
doubtful accounts 12,000 59,000
Accrued liabilities 149,000 101,000
---------- ----------
463,000 283,000
Valuation allowance (70,000) (70,000)
---------- ----------
393,000 213,000
---------- ----------
Net deferred tax asset $ 141,000 $ 17,000
========== ==========
</TABLE>
In management's opinion, it is more likely than not that the Company will
utilize the net deferred tax asset.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
For the Year Ended
---------------------------------------------
December 31, December 25, December 26,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Current-
Federal $ 2,106,000 $ 1,701,000 $ 861,000
State 304,000 307,000 133,000
----------- ----------- -----------
2,410,000 2,008,000 994,000
Deferred-
Federal (124,000) (57,000) --
----------- ----------- -----------
$ 2,286,000 $ 1,951,000 $ 994,000
=========== =========== ===========
</TABLE>
-16-
<PAGE>
The difference between the statutory federal income tax rate and the Company's
effective income tax rate is summarized as follows:
<TABLE>
<CAPTION>
For the Year Ended
-------------------------------------------
December 31, December 25, December 26,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Federal income tax rate 34.0% 34.0% 34.0%
Increase (decrease) as a
result of-
Utilization of net
operating losses -- -- (11.2)
Alternative minimum
tax benefit -- -- (1.6)
State income taxes 5.2 5.0 3.5
Other -- -- 1.2
---- ---- -----
Effective tax rate 39.2% 39.0% 25.9%
==== ==== =====
</TABLE>
At December 31, 1994, December 25, 1993, and December 26, 1992, the Company
had current federal income taxes payable of $6,000, $51,000 and $154,000,
respectively, which are included in other current liabilities in the
accompanying balance sheets.
(10) COMMITMENTS
The Company rents certain facilities and equipment under various noncancelable
operating leases. Rental commitments at December 31, 1994, under these leases,
exclusive of property taxes and insurance, are as follows:
<TABLE>
<S> <C>
Year-
1995 $ 849,000
1996 838,000
1997 195,000
1998 93,000
1999 4,000
----------
$1,979,000
==========
</TABLE>
Rental expense for all operating leases was $788,000, $716,000 and $532,000,
for the periods ended December 31, 1994, December 25, 1993 and December 26,
1992, respectively.
-17-
<PAGE>
(11) CONTINGENCIES
The Company is involved in several litigation matters arising in the normal
course of business. Management does not expect the eventual resolution of
these matters will have a material effect on the Company's financial position.
(12) EMPLOYEE BENEFIT PLANS
Effective July 1, 1990, the Company, as Plan Administrator, established the
Bestop, Inc. Retirement Savings Plan (the "401(k) Plan") subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
The 401(k) Plan is an Internal Revenue Code Section 401(k) plan, commonly
known as a salary reduction retirement plan. Employees who are 21 years or
older and have completed one year of service are eligible for the 401(k) Plan.
The Company matches 25% of participant contributions, limited to 5% of each
participant's compensation, and may contribute discretionary additional
amounts to the 401(k) Plan. The Company's matching contributions are vested at
the rate of 33-1/3% after one year of service, 66-2/3% after two years of
service, and 100% after three years. Total Company contributions were $60,000,
$31,000 and $21,000 for the period ended December 31, 1994, December 25, 1993,
and December 26, 1992, respectively.
Effective January 1, 1994, the Board of Directors and stockholders' approved a
five-year Qualified Stock Purchase Investment Plan. Under the terms of the
plan, 100,000 shares of the Company's common stock have been authorized for
purchase by eligible employees as specified by the Board of Directors. An
eligible employee shall be granted the right to purchase shares with a
percentage of such employees' earnings at 85% of the lower of the market price
of the common stock on the first or last day of each Plan year. For the year
ended December 31, 1994, 4,315 shares were issued pursuant to this plan.
(13) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables present selected 1994 and 1993 quarterly financial data:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1994
-------------------------------------------------------
March 26 June 25 September 24 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $11,125 $14,050 $13,366 $15,477
Gross profit 2,776 3,827 3,322 3,279
Net income 588 1,172 890 896
Net income per share .17 .34 .26 .26
<CAPTION>
For the Year Ended December 25, 1993
-------------------------------------------------------
March 27 June 26 September 25 December 25
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 8,894 $11,992 $10,375 $10,407
Gross profit 2,155 3,225 3,040 2,448
Net income 482 967 861 741
Net income per share .14 .28 .25 .22
</TABLE>
-18-
<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
BALANCE SHEETS
April 1, December 31,
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 463,000 $ 417,000
Accounts receivable, net of allowance for doubtful
accounts of $74,000 and $32,000, respectively 10,187,000 7,809,000
Income tax receivable -- 142,000
Inventories (Note 2) 8,910,000 7,058,000
Contract engineering 1,934,000 1,462,000
Deferred income tax asset (Note 5) 393,000 393,000
Other current assets 279,000 221,000
------------ ------------
Total current assets 22,166,000 17,502,000
RELATED PARTY RECEIVABLE (Note 6) 61,000 33,000
PROPERTY AND EQUIPMENT, net of $4,943,000 and
$4,745,000 accumulated depreciation and amortization,
respectively 3,495,000 3,480,000
GOODWILL, net of accumulated amortization of $82,000
and $80,000, respectively 244,000 246,000
OTHER ASSETS 321,000 327,000
------------ ------------
Total assets $ 26,287,000 $ 21,588,000
============ ============
<FN>
See accompanying notes to Financial Statements
</TABLE>
-19-
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
BALANCE SHEETS
April 1, December 31,
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 6,349,000 $ 3,981,000
Accrued salaries and wages 385,000 247,000
Accrued interest payable 5,000 18,000
Line of credit (Note 3) 2,020,000 916,000
Long-term debt, current portion 234,000 250,000
Other accrued liabilities 1,332,000 1,137,000
------------ ------------
Total current liabilities 10,325,000 6,549,000
------------ ------------
LONG-TERM DEBT 105,000 172,000
------------ ------------
DEFERRED INCOME TAXES (Note 5) 252,000 252,000
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 par value; 5,000,000 shares authorized;
no shares issued or outstanding -- --
Common Stock, $.002 par value; 10,000,000 shares authorized;
3,447,237 and 3,447,237 issued and outstanding, respectively 7,000 7,000
Additional paid-in capital 7,707,000 7,707,000
Retained Earnings 7,707,000 6,878,000
Cumulative translation adjustments 184,000 23,000
------------ ------------
Total stockholders' equity 15,605,000 14,615,000
------------ ------------
Total liabilities and stockholders' equity $ 26,287,000 $ 21,588,000
============ ============
<FN>
See accompanying notes to Financial Statements
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
------------------------------
April 1, March 26,
1995 1994
------------ ------------
<S> <C> <C>
NET SALES $ 15,859,000 $ 11,125,000
COST OF GOODS SOLD 12,035,000 8,349,000
------------ ------------
3,824,000 2,776,000
------------ ------------
OPERATING EXPENSES:
Selling and marketing 970,000 702,000
General and administrative 845,000 653,000
Engineering, research
and development 593,000 406,000
------------ ------------
2,408,000 1,761,000
------------ ------------
INCOME FROM OPERATIONS 1,416,000 1,015,000
OTHER EXPENSES (INCOME):
Interest 45,000 46,000
Other 8,000 0
------------ ------------
INCOME BEFORE INCOME TAXES 1,363,000 969,000
PROVISION FOR INCOME TAXES (534,000) (381,000)
------------ ------------
NET INCOME $ 829,000 $ 588,000
============ ============
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE (Note 4) $ 0.24 $ 0.17
============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 3,450,119 3,447,443
============ ============
</TABLE>
-21-
<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
------------------------------
April 1, March 26,
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 829,000 $ 588,000
Adjustments to reconcile net income to net cash used in
operating activities-
Depreciation and amortization 206,000 160,000
Change in assets and liabilities-
Accounts receivable (2,378,000) (1,599,000)
Income Tax Receivable 142,000 --
Inventories (1,852,000) (1,129,000)
Contract engineering (472,000) (177,000)
Trade accounts payable, accrued liabilities, and
other current liabilities 2,672,000 1,673,000
Other assets (52,000) (56,000)
------------ ------------
Net cash provided (used) by operating activities (905,000) (540,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (219,000) (336,000)
Proceeds from sale of other property and equipment -- --
------------ ------------
Net cash used by investing activities (219,000) (336,000)
------------ ------------
<FN>
See accompanying notes to Financial Statements
</TABLE>
-22-
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
BESTOP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
------------------------------
April 1, March 26,
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit $ 1,104,000 $ 651,000
Payments of capital lease obligations -- (2,000)
Repayments of long-term debt (67,000) (85,000)
Loan to related party (28,000) --
Exercise of stock options -- 2,000
------------ ------------
Net cash provided by financing activities 1,009,000 566,000
------------ ------------
Effect of exchange rate changes on cash 161,000 --
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 46,000 (310,000)
CASH AND CASH EQUIVALENTS, beginning of period 417,000 660,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 463,000 $ 350,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for-
Interest 40,000 45,000
Income taxes 0 70,000
<FN>
See accompanying notes to Financial Statements
</TABLE>
-23-
<PAGE>
BESTOP, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
In the opinion of management, the accompanying unaudited balance sheets and
statements of operations and cash flows contain all adjustments, consisting
only of normal recurring items, necessary to present fairly (i) the financial
position at April 1, 1995 and December 31, 1994, (ii) the results of
operations for the three months ended April 1, 1995 and March 26, 1994 and
(iii) the statements of cash flows for the three months ended April 1, 1995
and March 26, 1994.
Bestop, Inc. (the Company) translates balance sheet accounts of its European
operation using the period-end exchange rate for the period. Any resulting
translation adjustments are reflected as a separate component of stockholders'
equity. Foreign currency transaction adjustments are recognized in the
statement of operations in the period incurred.
The unaudited financial statements presented herein have been prepared in
accordance with instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles.
The results for the three months ended April 1, 1995 are not necessarily
indicative of the results for the entire year 1995.
2. INVENTORIES
Inventories consisted of the following components:
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Raw materials $ 2,333,000 $ 2,302,000
Work-in-process 1,912,000 1,260,000
Finished goods 4,872,000 3,645,000
------------ ------------
9,117,000 7,207,000
Less: Reserve for excess
and obsolete inventory (207,000) (149,000)
----------- -----------
$ 8,910,000 $ 7,058,000
=========== ===========
</TABLE>
3. BORROWINGS AND BANK CREDIT LINE
On June 17, 1994, the Company renewed its credit agreement with Colorado
National Bank. The term loans under this agreement bear interest at prime plus
1/4, and the revolving line of credit which matures June 30, 1995 bears
interest at the prime rate. The credit agreement also requires a fee of
one-eight of one percent on the average daily unused portion of the maximum
line of $6,000,000. With outstanding balances of $2,020,000 at April 1, 1995
and $916,000 at December 31, 1994, the Company had an available line of credit
of $3,980,000 and $5,084,000 respectively. As of April 1, 1995, the bank's
prime rate was 9.0%.
-24-
<PAGE>
Notes to Financial Statements (Continued)
4. EARNINGS PER SHARE
Net earnings per share is computed based on results of operations attributable
to the weighted average number of common and common stock equivalent shares
outstanding during each of the periods. Common share equivalents under the
employee Stock Purchase Plan and options of 2,882 shares at April 1, 1995 and
Options of 154,105 shares at March 26, 1994, have been treated as outstanding
common stock equivalents.
5. INCOME TAXES
The Company accounts for income taxes as required by Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). Under
SFAS 109, deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
For the first three months of 1995 and 1994, the Company's tax provision
approximated the combined federal and state statutory rates. The Company's
deferred tax assets and liabilities may be affected in the event that the
corporate statutory rates change in future periods.
6. RELATED PARTY RECEIVABLE
On April 13, 1994, the Board of Directors approved a loan to a key officer who
is also a shareholder and board member. The loan avoids the need for the
officer to sell Company stock in order to pay alternative minimum tax on the
exercise of stock options and thus provides incentive to the officer resulting
from continued ownership of stock in the Company. The loan agreement provides
for the officer to borrow up to $100,000 in the aggregate through December 31,
1994, and up to $350,000 in the aggregate on or prior to April 15, 1995. The
maturity date of the loan is April 15, 2000 with monthly interest payments at
the same rate that the Company pays on its revolving line of credit. The loan
is collateralized with the officer's common stock. As of April 1, 1995, the
officer borrowed $61,400 under this loan agreement.
6. SUBSEQUENT EVENTS
On May 3, 1995, the Company entered into an Agreement and Plan of Merger
providing for the acquisition of Bestop by Douglas & Lomason Company for
$12.75 in cash per share of Bestop common stock.
-25-
<PAGE>
FORM 8-K/A
Item 7.
Financial Statements, Pro Forma Combined and Condensed Financial Information
and Exhibits.
(b) Pro Forma Combined and Condensed Financial Information
Page
Pro Forma Combined and Condensed Statement of Earnings for the
three months ended March 31, 1995 (Unaudited) 27
Pro Forma Combined and Condensed Statement of Earnings for the
year ended December 31, 1994 28
Pro Forma Combined and Condensed Balance Sheet - March 31, 1995 29
Notes to Combined and Condensed Financial Statements 30
-26-
<PAGE>
<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Pro Forma Combined and Condensed Statement of Earnings
For the Three Months Ended March 31, 1995
(Unaudited)
Historical Pro Forma Adjustments Pro Forma
March 31 April 1
D&L CO. BESTOP Reclassification Other Combined
-------- -------- ---------------- ----- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 155,058,225 $ 15,859,000 $ 0 $ 0 $ 170,917,225
Cost of sales 143,759,735 12,035,000 593,000 413,153 156,800,888
------------- ------------- ------------- ------------- -------------
Gross profit 11,298,490 3,824,000 (593,000) (413,153) 14,116,337
Selling, general and
administrative expenses 6,062,712 2,408,000 (593,000) 260,680 8,138,392
------------- ------------- ------------- ------------- -------------
Operating income 5,235,778 1,416,000 0 (673,833) 5,977,945
Other income (expense):
Interest expense and other (695,788) (53,000) 0 (804,974) (1,553,762)
Interest income and other,
net 215,694 0 0 0 215,694
------------- ------------- ------------- ------------- -------------
(480,094) (53,000) 0 (804,974) (1,338,068)
------------- ------------- ------------- ------------- -------------
Earnings before
income taxes 4,755,684 1,363,000 0 (1,478,807) 4,639,877
Income tax expense 1,375,000 534,000 0 (530,000) 1,379,000
------------- ------------- ------------- ------------- -------------
Net earnings $ 3,380,684 $ 829,000 $ 0 $ (948,807) $ 3,260,877
============= ============= ============= ============= =============
Net earnings per share $ 0.80 $ 0.77
============= =============
Weighted average number
of shares 4,235,103 4,235,103
============= =============
<FN>
See notes to pro forma combined and condensed financial statements.
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Pro Forma Combined and Condensed Statement of Earnings
For the Year Ended December 31, 1994
Historical Pro Forma Adjustments Pro Forma
December 31, 1994
D&L CO. BESTOP Reclassification Other Combined
-------- -------- ---------------- ----- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 566,818,933 $ 54,018,000 $ 0 $ 0 $ 620,836,933
Cost of sales 523,576,928 40,814,000 1,494,000 1,776,370 567,661,298
------------- ------------- ------------- ------------- -------------
Gross profit 43,242,005 13,204,000 (1,494,000) (1,776,370) 53,175,635
Selling, general and
administrative expenses 21,889,605 7,140,000 (1,494,000) 1,212,449 28,748,054
------------- ------------- ------------- ------------- -------------
Operating income 21,352,400 6,064,000 0 (2,988,819) 24,427,581
Other income (expense):
Interest expense and other (2,619,609) (232,000) 0 (3,219,897) (6,071,506)
Interest income and other,
net 961,624 0 0 0 961,624
------------- ------------- ------------- ------------- -------------
(1,657,985) (232,000) 0 (3,219,897) (5,109,882)
Earnings before
income taxes 19,694,415 5,832,000 0 (6,208,716) 19,317,699
Income tax expense 7,208,000 2,286,000 0 (2,235,000) 7,259,000
------------- ------------- ------------- ------------- -------------
Net earnings $ 12,486,415 $ 3,546,000 $ 0 $ (3,973,716) $ 12,058,699
============= ============= ============= ============= =============
Net earnings per share $ 2.95 $ 2.85
============= =============
Weighted average number
of shares 4,228,120 4,228,120
============= =============
<FN>
See notes to pro forma combined and condensed financial statements.
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Pro Forma Combined and Condensed Balance Sheets
March 31, 1995
(Unaudited)
Historical Pro Forma
March 31 April 1
D&L CO. BESTOP ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Accounts receivable $ 91,234,731 $ 10,187,000 $ 0 $ 101,421,731
Inventories 20,267,015 8,910,000 0 29,177,015
Cash and other current
assets 5,102,827 3,069,000 0 8,171,827
------------- ------------- ------------- -------------
Total current assets 116,604,573 22,166,000 0 138,770,573
Property, plant and equipment,
less accumulated depreciation 66,132,095 3,495,000 2,606,000 72,233,095
Other assets 16,985,249 626,000 (169,000) 17,442,249
Intangibles 25,500,000 25,500,000
Goodwill 0 0 11,910,851 11,910,851
------------- ------------- ------------- -------------
Total assets $ 199,721,917 $ 26,287,000 $ 39,847,851 $ 265,856,768
============= ============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses $ 56,765,401 $ 10,091,000 $ 907,883 $ 67,764,284
Income taxes payable 3,204,815 0 0 3,204,815
Current installments of
long-term debt 5,657,969 234,000 0 5,891,969
------------- ------------- ------------- -------------
Total current liabilities 65,628,185 10,325,000 907,883 76,861,068
Long-term debt 32,393,750 105,000 43,952,272 76,451,022
Postretirement benefits 7,779,917 0 0 7,779,917
Other liabilities 6,542,359 252,000 10,592,696 17,387,055
Shareholders' equity:
Preferred stock 0 0 0 0
Common stock 8,485,940 7,000 (7,000) 8,485,940
Additional paid-in capital 28,092,006 7,707,000 (7,707,000) 28,092,006
Retained earnings 55,004,897 7,707,000 (7,707,000) 55,004,897
Translation adjustment (4,205,137) 184,000 (184,000) (4,205,137)
------------- ------------- ------------- -------------
Total shareholders' equity 87,377,706 15,605,000 (15,605,000) 87,377,706
------------- ------------- ------------- -------------
Total liabilities and
shareholders' equity $ 199,721,917 $ 26,287,000 $ 39,847,851 $ 265,856,768
============= ============= ============= =============
<FN>
See notes to pro forma combined and condensed financial statements.
</TABLE>
-29-
<PAGE>
DOUGLAS & LOMASON COMPANY
Notes to Combined and Condensed Financial Statements
Note 1 - Basis of Presentation
The unaudited pro forma condensed combined financial statements are presented
for illustrative purposes only, giving effect to the acquisition, as described
and therefore are not necessarily indicative of the operating results and
financial position that might have been achieved had the combination occurred
as of an earlier date, nor are they necessarily indicative of operating
results and financial position which may occur in the future.
On June 8, 1995 Douglas & Lomason Company (the "Company") acquired the stock
of Bestop, Inc. ("Bestop"). Bestop is the leading designer and manufacturer in
North America of soft tops and accessories for small sport utility vehicles.
Bestop sells its products domestically and internationally to original
equipment manufacturer (OEM) companies and in the aftermarket. The purchase
agreement required a purchase price of approximately $43,952,000.
The acquisition will be accounted for in accordance with the purchase method
of accounting. The accompanying unaudited pro forma condensed combined
financial statements reflect the acquisition as if it occurred as of the
beginning of the periods presented for the income statements and as of March
31, 1995, for the balance sheet presented.
The actual results of Bestop will be consolidated with the Company from the
date of acquisition.
The pro forma balance sheet includes an allocation of the purchase price based
on an appraisal conducted by an outside professional appraisal firm.
Note - 2
Reclassification
Certain amounts recorded on Bestop, Inc. financial statements have been
reclassified to conform to the Company's presentation.
-30-
<PAGE>
Note - 3
Pro Forma adjustments to Pro Forma combined and condensed Statements of
Income.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1995 December 31, 1994
------------------ -----------------
Debit (Credit)
<S> <C> <C>
Cost of sales:
1. Depreciation expense related
to increase in carrying value
of property, plant and
equipment calculated on the
straight line method $ 52,569 $ 334,035
2. Amortization of intangibles over
lives ranging from 6 to 40 years
on a straight line basis 360,584 1,442,335
--------- -----------
$ 413,153 $ 1,776,370
========= ===========
Selling, general and administrative:
1. Depreciation expense related
to increase in carrying value
of property, plant and
equipment calculated on the
straight line method $ 5,199 $ 33,036
2. Amortization of intangibles over
lives ranging from 6 to 40 years
on a straight line basis 251,575 1,163,788
3. Amortization of debt origination fee
resulting from increase in debt to
fund acquisition, amortized on a
straight line basis over the term
of the loan 3,906 15,625
--------- -----------
$ 260,680 $ 1,212,449
========= ===========
Interest expense:
Increase in interest expense resulting
from new debt to finance acquisition at
an effective rate of 7.3% $ 804,974 $ 3,219,897
========= ===========
Income tax expense:
Decrease to income tax expense
associated with above adjustments
calculated at the Company's statutory
rate of 36% $(530,000) $(2,235,000)
========= ===========
</TABLE>
-31-
<PAGE>
Note - 4
Pro Forma adjustments to Pro Forma combined and condensed balance sheet.
<TABLE>
<CAPTION>
Debit (Credit)
-------------
<S> <C>
Increase in carrying value of property, plant
and equipment based on appraisal $ 2,606,000
Write off of goodwill recorded on Bestop, Inc.'s
books at the time of acquisition and recording of
debt origination fee incurred related to
new debt to fund acquisition (169,000)
Record identifiable intangible assets as determined
by appraisal 25,500,000
Record excess of cost over the fair value of net
assets acquired 11,910,851
Record liability for direct expenses related to
acquisition (907,883)
Record long term obligation used for purchase of
Bestop, Inc. (43,952,272)
Deferred taxes related to increase in carrying
value of tangible and identifiable intangible assets (10,592,696)
Elimination of Bestop, Inc.'s equity accounts 15,605,000
</TABLE>
Note - 5
Intangible Assets
The following intangible assets have been identified by independent appraisal
in conjunction with the purchase.
<TABLE>
<CAPTION>
Name Amount Life in Years
---- ------ -------------
<S> <C> <C>
Work force in place $ 3,600,000 6
Distributors/Customer list 8,100,000 25
Patents 6,600,000 9
Engineering drawings 1,100,000 10
Trade name 6,100,000 40
-----------
$25,500,000
</TABLE>
-32-
<PAGE>
FORM 8-K/A
Item 7.
Financial Statements, Pro Forma Combined and Condensed Financial Information
and Exhibits
(c) Exhibits
23 Consent of Arthur Andersen & Co. LLP
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 thereunto duly authorized.
DOUGLAS & LOMASON COMPANY
By: /s/ James J. Hoey
-----------------------
James J. Hoey
Senior Vice President
and Chief Financial
Officer
Dated: August 8, 1995
-33-
[ ARTHUR ANDERSEN LLP ]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accounts, we hereby consent to the use of our report
dated February 10, 1995 on the Bestop, Inc. financial statements included
in this Form 8-K filed with the Securities and Exchange Commission in
connection with the acquisition of Bestop, Inc. by Douglas & Lomason
Company. It should be noted that we have not audited any financial
statements of Bestop, Inc. subsequent to December 31, 1994 or performed
any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Denver, Colorado,
August 7, 1995.
