<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 8-K/A
(AMENDMENT NO. 1)
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 24, 1995
-------------
VALLEN CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Texas 0-10796 74-1366847
---------------------- ---------------- ----------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification Number)
incorporation)
13333 Northwest Freeway, Houston, Texas 77040
----------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code (713) 462-8700
--------------
1
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and exhibits
(a) Financial statements of business acquired. Attached hereto as Schedule
A are the audited Financial Statements of Safety Centers, Inc. for the fiscal
years ending July 31, 1994 and July 31, 1993; Statements of Cash Flows for the
fiscal years ended July 31, 1994 and July 31, 1993; the related Notes to
Financial Statements; and the Independent Auditor's Report of Miller, Cooper and
Co., Ltd. concerning the above referenced Financial Statements, Balance Sheets,
Statements of Cash Flows and Notes.
(b) Pro forma financial information. For Vallen Corporation and
Subsidiaries, attached hereto as Schedule B are the Unaudited Pro Forma
Consolidated Condensed Financial Information for the year ended May 31, 1995 and
the related Notes to the Unaudited Pro Forma Consolidated Condensed Financial
Information for such periods.
(c) Exhibits:
(2.1) Asset Sale and Purchase Agreement dated as of June 16, 1995
among Vallen Corporation, Safety Centers, Inc., Neil Sheppard
and Roslyn Sheppard. *
(2.2) First Amendment dated as of July 21, 1995 among Vallen
Corporation, Safety Centers, Inc., Neil Sheppard and Roslyn
Sheppard.*
(2.3) Consulting Agreement dated as of July 24, 1995 between Vallen
Corporation and Safety Centers, Inc.*
(23) Consent of Miller, Cooper and Co., Ltd. **
-----------
* Previously filed.
** Filed herewith
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.
VALLEN CORPORATION
Date: September 13, 1995 By: /s/ James W. Thompson
---------------------------
James W. Thompson, President
2
<PAGE>
SCHEDULE A
FINANCIAL STATEMENTS OF SCI
SAFETY CENTERS, INC.
SOUTH HOLLAND, ILLINOIS, USA
ANNUAL REPORT 1994
3
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
ANNUAL ACCOUNTS
Financial statements 1994
Balance Sheet 1
Profit and loss account 2
Statement of cash flows 3
Notes to the financial statements 4
Auditors' report 16
</TABLE>
4
<PAGE>
BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
JULY 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 964,211 $ 174,967
Notes receivable - current portion 31,504 64,104
Accounts receivable, net of allowance
for doubtful accounts of $90,000 in
1994 and $18,000 in 1993 4,219,863 3,021,579
Inventories 6,161,011 5,312,197
Advances to stockholder 329,517 218,878
Due from employees and others 97,604 22,292
Refundable income taxes 93,322 159,320
Marketable equity securities 10,114 9,114
Prepaid expenses 17,205 27,211
----------- -----------
Total current assets $11,924,351 $ 9,009,662
----------- -----------
PROPERTY AND EQUIPMENT
Computer equipment $ 694,281 $ 679,596
Computer equipment under capital lease 235,745 204,072
Transportation equipment 230,002 401,208
Office furniture and equipment 690,613 612,518
Warehouse equipment 300,094 293,156
Leasehold improvements 737,428 725,118
----------- -----------
2,888,163 2,915,668
Less accumulated depreciation and
amortization 2,167,144 1,999,518
----------- -----------
$ 721,019 $ 916,150
----------- -----------
OTHER ASSETS
Deposits $ 70,771 $ 65,529
Notes receivable, less current portion - 33,769
----------- -----------
70,771 $ 99,298
----------- -----------
$12,716,141 $10,025,110
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Note payable - bank $ 5,000,000 $ 4,250,000
Current maturities of long-term
obligations 105,864 88,728
Accounts payable 3,462,354 1,809,954
Accrued expenses
Salaries and commissions 205,781 150,886
Property tax 77,405 67,880
Sales tax 106,874 44,958
Interest 9,530 6,035
Income tax payable - 8,712
Excess of fair value over cost of
assets acquired, net of accumulated
amortization of $206,400 103,600 -
----------- -----------
Total current liabilities 9,071,408 6,427,153
----------- -----------
LONG-TERM OBLIGATIONS, less
current maturities 1,034,320 72,913
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock - no par value;
authorized 100,000 shares, issued and
outstanding 10,000 shares 4,000 4,000
Common stock - no par value;
authorized 10,000,000 shares, issued
and outstanding 1,000,000 shares 6,000 6,000
Retained earnings 2,600,413 3,515,044
----------- -----------
2,610,413 3,525,044
----------- -----------
$12,716,141 $10,025,110
=========== ===========
</TABLE>
6
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
Percent to Percent to
Amount Net Sales Amount Net Sales
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Net Sales $23,947,275 100.00% $18,452,915 100.00
Cost of Sales 18,639,998 77.84 13,787,468 74.72
----------- ------- ----------- ------
Gross Profit 5,307,277 22.16 4,665,447 25.28
----------- ------- ----------- ------
Operating expenses
Selling 3,540,860 14.79 2,647,890 14.35
General & administrative 2,686,280 11.21 2,332,446 12.64
----------- ------- ----------- ------
6,227,149 26.00 4,980,336 26.99
----------- ------- ----------- ------
Operating loss (919,872) (3.84) (314,889) (1.71)
----------- ------- ----------- ------
Other income (expense)
Interest income 7,933 0.03 16,239 0.09
Interest expense (368,642) (1.54) (286,685) (1.55)
Special contract income 170,026 0.71 188,785 1.02
Gain (loss) on disposal of
fixed assets (13,822) (0.06) 10,689 0.06
Other 3,346 0.01 28,307 0.15
Amortization of excess
of fair value over
cost of assets
acquired 206,400 0.86 - -
----------- ------- ----------- ------
5,241 0.01 (42,665) (0.23)
----------- ------- ----------- ------
Loss before income taxes
and effect of change in
accounting principle (914,631) (3.83) (357,554) (1.94)
Income tax benefit - current - - 26,195 0.14
----------- ------- ----------- ------
Loss before effect of change
in accounting principle (914,631) (3.83) (331,359) (1.80)
Cumulative effect on prior
years of change in
accounting principle - - (57,000) (0.31)
----------- ------- ----------- ------
NET LOSS (914,631) (3.83) (388,359) (2.11)
Retained earnings,
beginning of year 3,515,044 14.68 3,903,403 21.15
----------- ------- ----------- ------
Retained earnings,
end of year $ 2,600,413 10.85% $ 3,515,044 19.04%
=========== ======= =========== ======
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JULY 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (914,631) $(388,359)
----------- ---------
Adjustments to reconcile net loss to
net cash used in operating
activities
Bad debts 72,000 -
Depreciation and amortization 314,237 264,640
Amortization of excess of fair
value over cost of assets
acquired (206,400) -
Deferred income taxes - 57,000
Gain on disposal of property
and equipment (13,822) (10,689)
Marketable equity securities
received as settlement - (9,114)
(Increase) decrease in assets
Accounts receivable, net (1,270,284) (438,035)
Inventories (848,814) 91,183
Prepaid expenses 10,006 (27,211)
Refundable income taxes 65,998 115,055
Deposits (5,242) (1,502)
Increase (decrease) in
liabilities
Accounts payable 1,652,400 187,186
Accrued expenses 129,831 13,878
Income tax payable (8,712) 8,712
Excess of fair value over cost
of assets acquired 310,000 -
----------- ---------
201,198 251,103
----------- ---------
Net cash used in operating
activities $ (713,433) $(137,256)
----------- ---------
Cash flows from investing activities
Advances to officer (110,639) (25,000)
Repayment from officer - 8,732
Purchase of property and equipment (121,316) (340,560)
Proceeds from sale of property and
equipment 47,705 15,350
Purchase of investments (1,000) -
Advances from employees and others (75,312) 8,503
Principal payments received on notes
receivable 66,369 70,370
----------- ---------
Net cash used in investing
activities $ (194,193) $(262,605)
----------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
JULY 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from financing activities
Proceeds from long-term debt and note
payable - bank 750,000 300,000
Proceeds from notes payable -
shareholder 900,000 -
Refinance of capital lease 285,928 -
Principal payments on long-term debt (239,058) (79,922)
---------- ---------
Net cash provided by financing
activities 1,696,870 220,078
---------- ---------
NET INCREASE (DECREASE) IN CASH 789,244 (179,783)
Cash and cash equivalents at beginning
of year 174,967 354,750
---------- ---------
Cash and cash equivalents at end of year $ 964,211 $ 174,967
========== =========
Supplementary disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 365,147 $ 284,950
Income taxes 8,712 15,840
Noncash operating and investing
activities
Inventory with a cost of $99,445 was
transferred to an officer during the
year ended July 31, 1994.
Computer equipment of $31,673 and
$138,435 was acquired under capital
leases during the years ended
July 31, 1994 and 1993,
respectively.
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 AND 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
1. Nature of Business
The Company sells safety equipment and convenience items to industrial
corporate customers (80% of business) from stores located at the customers'
plants, and to numerous wholesale customers (20% of business) directly out
of the Company's South Holland, Illinois warehouse. Customers are
concentrated in the midwest and are primarily in the automotive, steel and
heavy machinery industries.
2. Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less
to be cash equivalents.
3. Inventory
Inventory is valued at the lower of cost (computed on the first-in, first-
out method) or market. Inventory is marked down to market in the period in
which it is determined that cost exceeds market. The Company maintains
significant quantities of certain items in excess of amounts expected to be
sold during the current period to allow flexibility in meeting customer
requirements. The Company classifies all inventory as a current asset due
to a policy of evaluating such items for return or exchange based on
management's decisions as to appropriate stocks to be maintained in meeting
customer needs.
4. Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are provided on the straight-line and accelerated methods over the
estimated useful lives of the respective assets as follows:
<TABLE>
<CAPTION>
Years
------
<S> <C>
Computer equipment 5 - 7
Transportation equipment 5
Office furniture and equipment 5 - 10
Warehouse equipment 5 - 7
Leasehold improvements 31 - 39
</TABLE>
Maintenance and repairs are charged to expense as incurred; major renewals
and betterments are capitalized.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 AND 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)
5. Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes are recognized for differences between the basis of
assets and liabilities for financial statement and income tax purposes.
The differences relate primarily to the expensing of certain costs for
financial reporting purposes while capitalizing them as part of inventory
for income tax reporting purposes. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered or settled.
NOTE B - EXCESS OF FAIR VALUE OF ASSETS ACQUIRED OVER COST
On August 18, 1993, the Company purchased certain assets for $70,000 from
Franklin Bank, N.A., at a public bulk sale. The assets include inventory, trade
names and customer lists of Motown Glove and Safety, Inc. The Company is
operating Motown as a division of the Company.
The fair market value of the assets purchased (primarily inventory) approximated
$380,000. The Company amortizes the excess of the fair market value above cost
based on usage. The unamortized balance is presented as a current liability and
the amount amortized is shown as other income as follows:
<TABLE>
<S> <C>
Excess of fair market value assets acquired
over cost August 18, 1993 $310,000
Current year amortization based on 206,400
usage --------
Unamortized liability at July 31, $103,600
1994 ========
</TABLE>
NOTE C - NOTES RECEIVABLE
Notes receivable, which are all uncollateralized, at July 31, 1994 and 1993
consist of the following:
<TABLE>
<CAPTION>
JULY 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
Purchaser of Louisiana and Texas Assets -
Payable in 60 equal monthly installments
beginning on February 1, 1990; principal
plus interest at prime (7 1/4% at
July 31, 1994) plus 1% $15,718 $ 58,542
Purchaser of Ohio Assets - Payable in
60 equal monthly installments beginning
on February 1, 1990; principal plus
interest at prime (7 1/4% at July 31,
1994) plus 1%. 15,786 39,331
------- --------
31,504 97,873
Less current portion 31,504 64,104
------- --------
$ - $ 33,769
======= ========
</TABLE>
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 AND 1993
NOTE D - NOTE PAYABLE - BANK
Note payable - bank at July 31, 1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
JULY 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
$6,000,000 line of credit with a bank,
due on demand, collateralized by
substantially all of the Company's
assets. The line of credit is comprised
of two loans, one with borrowing limits
restricted by a percentage of the quali-
fying accounts receivable and the other
restricted by a percentage of
inventories. Interest on the accounts
receivable loan is at prime (7 1/4% at
July 31, 1994) plus .25%, interest on the
inventory loan is at prime plus .75%.
This line of credit is guaranteed by the
Company's majority stockholder, up to
$1,000,000. $5,000,000 $4,250,000
</TABLE>
NOTE E - LONG TERM DEBT
Long-term debt at July 31, 1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
JULY 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Note payable to stockholder, with
interest at prime (7.25% at July 31,
1994) payable quarterly, and principal
due January, 1999, unsecured. $ 900,000 $ -
Obligation under capital lease for
computer hardware and software to
affiliated entity, payable in monthly
installments of $8,822 interest at
prime plus 1% (7.25% at July 31, 1994,
through September, 1996. 240,184 -
Obligation under capital lease for
computer hardware and software,
payable in monthly installments of
$8,460 including interest at 9.54% for
the hardware capital lease and at
10.65% for the software capital lease,
through April, 1995. Remaining
balance was prepaid in October, 1993. - 161,641
---------- ----------
1,140,184 161,641
Less current portion 105,864 88,728
---------- ----------
$1,034,320 $ 72,913
========== ==========
</TABLE>
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 AND 1993
NOTE E - LONG TERM DEBT (Continued)
The maturities on long-term debt for the year subsequent to July 31, 1994 are as
follows:
<TABLE>
<S> <C>
1995 $ 105,864
1996 105,864
1997 28,456
1998 -
1999 900,000
----------
$1,140,184
==========
</TABLE>
NOTE F - EMPLOYEE BENEFIT PLANS
The Company contributes 3% of eligible employees' salaries, up to Internal
Revenue Service limits. For the years ended July 31, 1994 and 1993,
contributions to the plan charged to operations were $66,206 and $59,011,
respectively.
NOTE G - LEASE COMMITMENTS
The Company leases autos and equipment under operating leases that expire at
various dates through 1998. Rental expense under the lease was $94,382 and
$47,390 for the years ended July 31, 1994 and 1993 respectively. The Company
also leases computer equipment under a capital lease from an entity affiliated
through common ownership, described in Note D. The assets and liabilities under
capital leases are recorded at the present value of the minimum lease payments.
Amortization of assets under capital leases is included in depreciation expense.
The cost of assets under capital leases was $567,127 and $535,454 at July 31,
1994 and 1993 respectively; accumulated depreciation was $343,923 and $428,261
at July 31, 1994 and 1993, respectively.
Minimum annual rentals for the five years subsequent to July 31, 1994 are:
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING LEASE
------------- ---------------
<S> <C> <C>
1995 $105,864 $ 86,297
1996 105,864 66,501
1997 28,456 23,658
1998 - 5,035
-------- --------
Total minimum lease payments $240,184 $181,491
======== ========
</TABLE>
Under the capital lease, additional amounts representing interest at 1% above
prime (7.25% at July 31, 1994) on the remaining lease balance are due monthly.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 AND 1993
NOTE H - RELATED PARTY TRANSACTIONS
1. Advances to Stockholder
Stockholder advances amounted to $329,517 and $218,878 at July 31, 1994 and
1993, respectively. The advances are non-interest bearing and due on
demand.
2. Obligations to Related Parties
As described in Note E, the Company is obligated to the stockholder and
related entity under a note payable and capital lease.
3. Facility Lease with Stockholder
The Company leases its corporate office and warehouse facilities from the
majority stockholder on a month-to-month basis. The Company is responsible
for real estate taxes, maintenance and insurance. Rentals paid to the
stockholder totaled $120,000 for the years ended July 31, 1994 and 1993,
respectively.
4. Purchase of Minority Stock
The majority stockholder as of the beginning of the current fiscal year
purchased all outstanding minority common stock during 1994.
5. Purchases of Affiliated Entity
During 1994, the Company purchased $449,210 in inventory from an affiliate.
The amount due the affiliate at July 31, 1994 was $231,001.
6. Management Fee Income from Affiliates
In compensation for administrative services provided, the Company charged
$73,884 to affiliates as management fees.
NOTE I - PREFERRED STOCK
The preferred stockholders have a preference on liquidation of $4,500,000. The
stock has no stated dividend rate and is non-cumulative.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 AND 1993
NOTE J - INCOME TAXES
Effective August 1, 1992, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The cumulative effect of the
change in accounting principle is included in the statement of operations for
1993. The Company's deferred tax asset and valuation allowance at July 31, are
as follows:
<TABLE>
<CAPTION>
JULY 31,
-------------------
1994 1993
--------- --------
<S> <C> <C>
Deferred tax asset $453,000 $57,000
Less valuation allowance 453,000 57,000
-------- -------
Net deferred tax asset $ - $ -
--------- --------
</TABLE>
The Company has a net operating loss carry forward of $750,000 which can be used
to reduce taxable income in future years. The carry forward expires in 2009.
NOTE K - SIGNIFICANT BUSINESS RELATIONSHIPS
Sales for the year ended July 31, 1994 and 1993 for the major customers of the
Company are as follows:
<TABLE>
<CAPTION>
JULY 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
USX Corporation $ 4,550,000 $4,100,000
General Motors 6,200,000 3,400,000
Caterpillar 1,930,000 1,900,000
----------- ----------
$12,680,000 $9,400,000
=========== ==========
</TABLE>
Accounts receivable related to the customers above amounted to $2,510,397 and
$1,130,946 at July 31, 1994 and 1993, respectively.
NOTE L - CONCENTRATION OF CREDIT RISK - CASH
The Company maintains cash balances at several financial institutions located
throughout the Midwest. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. At July 31, 1994, the Company's
uninsured cash balances total $827,499.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Safety Centers, Inc.
South Holland, Illinois
We have audited the balance sheets of Safety Centers, Inc. as of July 31, 1994
and 1993, and the related statements of operations 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 Safety Centers, Inc., as of
July 31, 1994 and 1993, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
MILLER, COOPER AND CO., LTD.
___________________________________
Certified Public Accountants
Northbrook, Illinois
December 30, 1994
16
<PAGE>
SCHEDULE B
PRO FORMA FINANCIAL STATEMENTS
VALLEN CORPORATION
INTRODUCTION TO PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL INFORMATION
(unaudited)
The following pro forma consolidated condensed statements of financial position
and operations of Vallen Corporation (the "COMPANY") AS OF AND FOR THE YEAR
ENDED MAY 31, 1995, AND SAFETY CENTERS, INC. ("SCI") FOR THE PERIOD ENDED JULY
24, 1995, PRESENT THE RESULTS OF OPERATIONS ASSUMING THE PURCHASE OF SCI, HAD
CONSUMMATED AS OF THE BEGINNING OF THE PERIODS INDICATED. THE STATEMENTS
INCLUDE ALL MATERIAL ADJUSTMENTS NECESSARY TO PRESENT THE HISTORICAL RESULTS TO
REFLECT THESE ASSUMPTIONS.
The pro forma information does not purport to be indicative of the results of
operations which would have actually occurred if the acquisition had been made
on the dates indicated or which may be expected to occur in the future by reason
of such acquisitions.
The pro forma financial information should be read in conjunction with the Form
8-K Current Report dated July 24, 1995, and the Company's historical
consolidated financial statements and notes thereto contained in the 1995 Annual
Report on Form 10-K.
17
<PAGE>
VALLEN CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENT
OF FINANCIAL POSITION
(Thousands of Dollars)
<TABLE>
<CAPTION>
VALLEN SAFETY
CORPORATION CENTERS, INC.
AS OF AS OF PRO FORMA PRO FORMA
MAY 31, 1995 JULY 24, 1995 ADJUSTMENTS CONSOLIDATED
(As Reported) (Unaudited) (Unaudited) (Unaudited)
------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and investments $10,261 $ (83) $(1,112)(e)(f) $ 9,066
Accounts receivable, net of
provision 26,039 4,498 (440)(e) 30,098
INVENTORY:
Raw materials 1,241 0 0 1,241
Work in process 792 0 0 792
Finished goods 21,993 5,685 (353)(e) 27,324
------- ------- ------------- -------
Total inventory 24,026 5,685 (353) 29,358
Prepaid expenses 2,977 26 0 3,003
------- ------- ------- -------
Total current assets 63,303 10,126 (1,905) 71,524
Property, plant and equipment 40,501 2,895 104(e) 43,500
Accumulated depreciation 19,558 2,411 0 21,969
------- ------- ------- -------
Net property, plant and equipment 20,943 484 104 21,530
Intangible assets 1,235 0 64 (f) 1,298
Other assets 2,103 71 (50)(e) 2,124
Investment in Mexico 3,070 0 0 3,070
------- ------- ------- -------
Total assets $90,654 $10,680 $(1,788) $99,546
======= ======= ======= =======
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion lt debt $ 161 $ 5,132 $ 0 $ 5,293
Accounts payable 8,587 2,521 (45)(e) 11,063
Accrued incentive bonuses 697 12 0 709
Accrued profit sharing 401 30 (30)(e) 401
Other accrued expenses 1,556 204 654 (e)(g) 2,415
Income taxes payable 180 (28) 28 (e) 180
------- ------- ------- -------
Total current liabilities 11,582 7,871 607 20,060
Long-term debt 5,194 679 (679)(e) 5,194
Deferred income taxes 1,196 0 0 1,196
------- ------- ------- -------
Total liabilities 17,972 8,550 (72) 26,450
STOCKHOLDERS' EQUITY:
Preferred stock 0 4 (4)(e) 0
Common stock 4,858 6 5 (e)(f) 4,869
Additional paid in capital 3,955 0 379 (f) 4,334
Translation loss-Mexico (417) 0 0 (417)
Retained earnings 67,027 2,120 (2,120)(e) 67,027
Treasury stock (2,741) 0 24 (f) (2,718)
------- ------- ------- -------
Total stock equity 72,682 2,130 (1,715) 73,096
------- ------- ------- -------
Total liability and stock equity $90,654 $10,680 $ 1,788 $99,546
======= ======= ======= =======
</TABLE>
18
<PAGE>
VALLEN CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Thousands of Dollars Except for Per Share Amounts)
<TABLE>
<CAPTION>
VALLEN SAFETY
CORPORATION CENTERS, INC.
YEAR ENDED PERIOD ENDED PRO FORMA PRO FORMA
MAY 31, 1995 JULY 24, 1995 ADJUSTMENTS CONSOLIDATED
(As Reported) (Unaudited) (Unaudited) (Unaudited)
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $203,284 $26,668 $229,952
Cost of sales 150,112 21,226 171,239
-------- ------- ----- --------
Gross profit 53,173 5,542 - 58,714
Selling, general and
administrative expenses 42,123 5,551 47,674
-------- ------- ----- --------
Operating income (loss) 11,050 (109) - 11,039
Other income (expense), net 200 (372) (54)(a) (324)
(13)(b)
37 (c)
-------- ------- ----- --------
Earnings before income taxes 11,250 (481) (30) 10,715
Income taxes 4,108 - (187)(d) 3,921
-------- ------- ----- --------
Net earnings $ 7,142 $ (481) $ 156 $ 6,793
Primary earnings per share $1.00 - - $0.95
Weighted average number of
common shares outstanding 7,108 - 22 7,126
</TABLE>
See the accompanying notes to the pro forma financial information.
19
<PAGE>
VALLEN CORPORATION
NOTES TO PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL INFORMATION
(Unaudited)
The pro forma consolidated condensed statements of financial position and
operations as of and for the year ended May 31, 1995, is derived from the
Company's historical consolidated statements of financial position and
operations included in the 1995 Annual Report on Form 10-K and Safety Centers,
Inc.'s unaudited statements of financial position and operations for the period
August 1, 1994 through July 24, 1995.
The pro forma financial information should be read in conjunction with the 8-K
Current Report dated July 24, 1995 and the Company's historical consolidated
financial statements and notes thereto contained in the 1995 Annual Report on
Form 10-K.
The pro forma information does not purport to be indicative of the results of
operations which would have occurred had the acquisition been consummated on the
dates indicated, or which may be expected to occur in the future by reason of
such acquisition.
(a) Pro forma reduction of interest income recognized by the Company, resulting
from available cash being used to finance the acquisition of SCI, instead
of earning interest income on short-term investments.
(b) Pro forma adjustment to reflect the amortization expense associated with
the non-compete agreement acquired.
(c) Pro forma adjustment reduction of interest expense resulting from a lower
interest rate available on the $5 million note payable assumed by the
Company.
(d) Pro forma income tax expense (credit) is recorded at the effective rate
incurred by the Company, which was 36.5% for the period.
(e) Pro forma adjustments to reflect only assets and liabilities that were
purchased as stated in Form 8-K Current Report dated July 24, 1995.
(f) Pro forma adjustment to reflect cash paid and stock distributed at the time
of acquisition.
(g) Pro forma adjustment to reflect the accounts receivable "holdback" amount
which may be due to the seller at the intermediate or final post-closing
(180 days from Closing Date of July 24, 1995).
20
<PAGE>
EXHIBIT 23
[LETTERHEAD OF MILLER COOPER & CO., LTD. APPEARS HERE]
September 8, 1995
Securities and Exchange Commission
Washington, D.C. 20549
To Whom It May Concern:
Miller, Cooper & Co., Ltd. consents to the inclusion of its audit report on
Safety Centers, Inc. at July 31, 1994 and 1993 and for the years then ended
in the Form 8-K/A Amendment to Application Report of Vallen Corporation dated
July 24, 1995.
Very truly yours,
MILLER, COOPER & CO., LTD.
/s/ Philip H. Graff
Philip H. Graff, Principal
PHG:sg
