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
SECURITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
MAY 17, 1996
Date of Report (Date of earliest event reported)
DELAWARE 1-7921 13-3003070
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
1111 NORTH LOOP WEST, SUITE 400, HOUSTON, TEXAS 77008
(Address of principal executive offices) (Zip Code)
(713) 880-7100
(Registrant's telephone number, including area code)
-1-
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported in a Form 8-K filed on June 3, 1996, on May 17,
1996, Possible Dreams, Ltd., a Delaware corpora tion and a subsidiary of P.D.
Holdings, Inc., a Delaware corpora tion and a subsidiary of Security Capital
Corporation, a Delaware corporation ("Security Capital"), acquired substantially
all of the assets and assumed certain liabilities of Possible Dreams Ltd., a
Massachusetts corporation, and Columbia National Corpora tion, a Massachusetts
corporation (collectively, the "Sellers").
The assets purchased consisted of the assets used by the Sellers in the
conduct of their respective businesses, in cluding cash, accounts receivable,
inventories, prepaid expenses, real estate, furniture, fixtures, computer and
intellectual prop erty rights and other intangibles. Prior to the acquisition,
the Sellers were engaged in the business of designing, importing, warehousing
and distributing collectible Christmas figurines and ornaments and, to a lesser
extent, religious statues. Sellers had sales of approximately $18,900,000 in
1995. Since the acqui sition, Possible Dreams has been carrying on the business
pre viously conducted by the Sellers.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
The following combined financial statements and notes there to of the
Sellers are included as Appendix I to this Form 8-K/A and are filed herewith:
(i) Independent Auditors' Report.
(ii) Combined balance sheets as of December 31, 1994 and 1995 and
as of March 31, 1996 (unaudited).
(iii) Combined statements of income (loss) for the years ended
December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1995 (unaudited) and 1996 (unaudited).
(iv) Combined statements of retained earnings for the years ended
December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1995 (unaudited) and 1996 (unaudited).
-2-
(v) Combined statements of cash flows for the years ended
December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1995 (unaudited) and 1996 (unaudited).
(vi) Notes to combined financial statements for the years ended
December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1995 (unaudited) and 1996 (unaudited).
(b) Pro forma financial information.
The following pro forma financial information and notes thereto of
Security Capital are included as Appendix II to this Form 8-K/A and are filed
herewith:
(i) Introduction to pro forma financial information.
(ii) Pro forma combined balance sheet as of March 31, 1996
(unaudited).
(iii) Pro forma combined statement of operations for the fiscal year
ended September 30, 1995 (unaudited).
(iv) Pro forma combined statement of operations for the six months
ended March 31, 1996 (unaudited).
(v) Notes to pro forma financial information.
(c) Exhibits.
None.
-3-
SIGNATURE
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.
SECURITY CAPITAL CORPORATION
(Registrant)
Dated: July 30, 1996 By: /s/LARRY M. KARREN
Larry M. Karren
Vice President
-4-
Appendix I
Independent Auditors' Report
Board of Directors
Possible Dreams Ltd. and
Columbia National Corporation
Foxboro, Massachusetts
We have audited the accompanying combined balance sheets of Possible Dreams Ltd.
and Columbia National Corporation as of December 31, 1995 and 1994, and the
related combined statements of income (loss), retained earnings and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Companies' 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Possible Dreams Ltd.
and Columbia National Corporation as of December 31, 1995 and 1994, and the
results of their operations and cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 2, the Company changed its method of accounting for certain
receivables in 1995.
February 8, 1996
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
(Unaudited)
1994 1995 MARCH 31, 1996
----------- ----------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash 227,114 544,132 69,810
Accounts receivable, trade, less allowance for doubtful accounts (1995,
$100,005; 1994, $137,000; March 31, 1996, $122,061) 1,885,182 2,795,632 1,760,392
Inventories 4,880,856 4,151,632 4,318,856
Prepaid expenses and other 186,887 329,015 536,625
----------- ----------- -----------
Total current assets 7,180,039 7,820,411 6,685,683
Property and equipment, less accumulated depreciation 657,987 609,861 602,602
----------- ----------- -----------
7,838,026 8,430,272 7,288,285
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable, bank 1,795,000 2,375,000 2,100,000
Current portion of long-term debt 66,667 66,667 66,667
Accounts payable, trade 249,802 222,872 124,025
Accrued expenses 179,644 120,704 146,339
----------- ----------- -----------
Total current liabilities 2,291,113 2,785,243 2,437,031
----------- ----------- -----------
Long-term debt, less current portion 2,123,916 1,353,565 1,246,834
----------- ----------- -----------
Commitments (Notes 4 and 6)
Shareholders' equity:
Common stock 92,230 92,230 92,230
Retained earnings 3,330,767 4,199,234 3,512,190
----------- ----------- -----------
3,422,997 4,291,464 3,604,420
----------- ----------- -----------
7,838,026 8,430,272 7,288,285
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
COMBINED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
YEARS ENDED DECEMBER 31, MARCH 31,
1993 1994 1995 1995 1996
------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net sales 17,411,005 18,662,312 18,905,717 1,450,139 1,681,756
------------ ----------- ----------- ----------- -----------
Cost of sales:
Inventories, beginning 3,899,535 4,877,681 4,880,856 4,880,856 4,151,632
Purchases 8,509,652 8,011,665 7,962,185 1,077,757 1,143,253
Freight-in 624,073 596,769 591,819 86,380 77,957
Duty and brokerage 716,942 567,534 93,381 4,465 11,222
------------ ----------- ----------- ----------- -----------
13,750,202 14,053,649 13,528,241 6,049,458 5,384,064
Less inventories, ending 4,877,681 4,880,856 4,151,632 5,271,598 4,318,856
------------ ----------- ----------- ----------- -----------
8,872,521 9,172,793 9,376,609 777,860 1,065,208
------------ ----------- ----------- ----------- -----------
Gross profit 8,538,484 9,489,519 9,529,108 672,279 616,548
------------ ----------- ----------- ----------- -----------
Operating expenses:
Warehouse and shipping 1,149,773 1,287,863 1,307,440 168,820 193,422
Selling 3,614,619 3,595,240 3,655,385 444,209 533,365
General and administrative 3,111,307 2,921,761 2,941,610 695,953 489,342
------------ ----------- ----------- ----------- -----------
7,875,699 7,804,864 7,904,435 1,308,982 1,216,129
Income (loss) from operations 662,785 1,684,655 1,624,673 (636,703) (599,581)
Interest expense, net 438,678 507,932 533,583 57,398 53,988
------------ ----------- ----------- ----------- -----------
Income (loss) before income tax expense (benefit)
and cumulative effect of a change in
accounting principle 224,107 1,176,723 1,091,090 (694,101) (653,569)
Income tax expense (benefit) 25,996 81,170 64,129 (28,149) (26,325)
------------ ----------- ----------- ----------- -----------
Income (loss) before cumulative effect of a change in
accounting principle 198,111 1,095,553 1,026,961 (665,952) (627,244)
Cumulative effect of a change in accounting principle 259,744
------------ ----------- ----------- ----------- -----------
Net income (loss) 198,111 1,095,553 1,286,705 (665,952) (627,244)
============ =========== =========== =========== ===========
</TABLE>
See notes to combined financial statements.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
COMBINED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
(Unaudited)
Years ended December 31, Three months ended March 31,
--------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ 2,037,103 $ 2,235,214 $ 3,330,767 $ 3,330,767 $ 4,199,234
Net income (loss) ........... 198,111 1,095,553 1,286,705 (665,952) (627,244)
Distributions to shareholders -- -- (418,238) -- (59,800)
----------- ----------- ----------- ----------- -----------
Balance, end of period ...... $ 2,235,214 $ 3,330,767 $ 4,199,234 $ 2,664,815 $ 3,512,190
</TABLE>
See notes to combined financial statements.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- ----------------------------
1993 1994 1995 1995 1996
---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities: 198,111 1,095,553 1,286,705 (665,952) (627,244)
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Cumulative effect of a change in accounting principle (259,744)
Depreciation 93,331 92,904 74,868 20,250 15,793
Provision for losses on accounts receivable 99,568 106,418 25,613 2,216 22,056
Loss on sale of property and equipment 4,676 3,014
Changes in assets and liabilities:
Increase in:
Accounts receivable (333,241) (734,319)
Inventories (978,146) (3,175) (390,742) (167,224)
Prepaid expenses and other (9,059) (84,128) (353,823) (207,610)
Accounts payable 123,145
Accrued expenses 54,539 146,465 25,635
Decrease in:
Accounts receivable 180,549 921,776 1,013,184
Inventories 729,224
Prepaid expenses and other 62,349
Accounts payable, trade (65,187) (62,601) (26,930) (98,847)
Accrued expenses (17,503) (58,940)
---------- --------- -------- -------- ---------
Net cash provided by (used in) operating activities (935,408) 1,457,508 952,349 (196,665) (24,257)
---------- --------- -------- -------- ---------
Cash flows from investing activities:
Purchase of property and equipment (97,751) (28,959) (26,742) (9,413) (8,534)
Proceeds from sale of property and equipment 20,683 12,000
---------- --------- -------- -------- ---------
Net cash used in investing activities (77,068) (16,959) (26,742) (9,413) (8,534)
---------- --------- -------- -------- ---------
Cash flows from financing activities:
Proceeds from refinancing of mortgage note payable 1,000,000
Payments on mortgage note payable (53,340) (736,656) (61,111) (16,667) (16,667)
Net borrowings (payments) under:
Note payable, bank 1,290,000 (1,995,000) 580,000 155,000 (275,000)
Due to shareholders 109,943 22,260 (709,240) (100,869) (90,064)
Distributions (418,238) (59,800)
---------- --------- -------- -------- ---------
Net cash provided by (used in) financing activities 1,346,603 (1,709,396) (608,589) 37,464 (441,531)
---------- --------- -------- -------- ---------
</TABLE>
(continued)
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
(Unaudited)
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------- ---------------------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net increase (decrease) in cash 334,127 (268,847) 317,018 (168,614) (474,322)
Cash, beginning of period 161,834 495,961 227,114 227,114 544,132
-------- -------- -------- -------- --------
Cash, end of period 495,961 227,114 544,132 58,500 69,810
========= ========= ======== ======== =========
Supplemental disclosures:
Cash paid for:
Interest
446,041 480,026 550,105 90,717 55,613
State income taxes ========== ========== ========= ======== =========
11,385 47,619 109,721 74,400 38,550
========== ========== ========= ======== =========
</TABLE>
See notes to combined financial statements.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995, AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
1. Basis of presentation and summary of significant accounting policies:
Basis of presentation:
The accompanying combined financial statements include the accounts and
transactions of Possible Dreams Ltd. and Columbia National Corporation,
companies related through common ownership and management (the
Companies).
The information for the three months ended March 31, 1995 and 1996, is
unaudited but includes all adjustments (consisting of normal recurring
accruals) which management considers necessary for a fair presentation
of the results of operations for those periods. Interim results are not
necessarily indicative of results for the entire year.
Description of business:
The Companies operate as importers and distributors of giftware and
religious articles with sales to retail customers throughout the United
States.
Principles of combination:
All significant intercompany accounts and transactions have been
eliminated in combination.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Sources of supply:
Possible Dreams Ltd. and Columbia National Corporation acquire a
significant portion of their inventory from China and Italy,
respectively. Although other sources of supply could be located, a
change in suppliers would cause delays which could ultimately affect
operating results. In addition, unanticipated political and economic
events in foreign countries could disrupt the Companies' operations.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995, AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
1. Basis of presentation and summary of significant accounting policies
(continued):
Cash and cash equivalents:
The Companies consider all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. There were
no cash equivalents at December 31, 1995 or 1994 or March 31, 1996.
AtDecember 31, 1995, the Companies had $707,876 of cash on deposit with a
bank in excess of the amount insured by the Federal Deposit Insurance
Corporation.
Inventories:
Inventories consist of finished goods purchased for resale and are stated
at the lower of cost (first-in, first-out) or market.
Property and equipment:
Property and equipment are stated at cost. Depreciation is provided using
both the straight-line and declining balance methods over the estimated
useful lives of the respective assets.
Income taxes:
The Companies have elected to be taxed under Subchapter S of the Internal
Revenue Code. Accordingly, no federal income tax provision has been
included in the combined financial statements since the shareholders of
the Companies have consented to include a pro rata share of each
company's taxable income in their individual income tax returns.
2. Cumulative effect of a change in accounting principle:
In1995, the Companies changed their method of accounting for accounts
receivable due from sales representatives and certain expenses.
Management believes that these changes result in a better matching of
revenue and expenses. The impact of this change on results of operations
for 1995, 1994 and 1993 was not material.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995, AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
3. Property and equipment:
DECEMBER 31, (Unaudited)
------------------------- March 31,
1994 1995 1996
-------- -------- -------------
Land and land improvements 240,924 240,924 240,924
Building 602,888 602,888 602,888
Computer equipment 323,555 341,985 347,684
Furniture and fixtures 165,722 173,379 176,214
Other machinery and equipment 137,016 137,671 137,671
-------- -------- ----------
1,470,105 1,496,847 1,505,381
Less accumulated depreciation 812,118 886,986 902,779
-------- -------- ----------
657,987 609,861 602,602
======== ======== ==========
4. Note payable, bank:
The Companies maintain a revolving line of credit in the maximum amount of
the lesser of $11,000,000 or the sum of eligible accounts receivable and
inventories based on a specific formula. The line bears interest at 3/4%
above the bank's prime rate from March 15 through September 30, and
thereafter at 1/2% above the bank's prime rate (9% at December 31, 1995
and 1994 and March 31, 1996).
Under the terms of the revolving line of credit, the Companies can draw
upon letters of credit of up to $1,000,000. At December 31, 1995 and
1994, the Companies had outstanding letters of credit of $20,000 and
$55,000, respectively.
The line of credit and a mortgage note (see Note 5) are secured by
substantially all of the Companies' assets and a limited guarantee of
the principal shareholder. The financing agreements contain certain
restrictive covenants including, among others, the maintenance of
sufficient insurance and specified financial statement ratios, as well
as limitations on additional indebtedness.
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995, AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
5. Long-term debt:
<TABLE>
<CAPTION>
DECEMBER 31, (Unaudited)
---------------------------- March 31,
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Mortgage note payable, interest at prime plus 1% (9.5% at December 31,
1995 and 1994), payable in monthly installments of $5,556 plus interest
with a final payment of $672,222 in October 1999 $ 983,334 $ 922,223 $ 905,556
Due to shareholders, noninterest-bearing, no definite repayment date,
subordinate to note payable, bank and mortgage note payable 1,207,249 498,009 407,945
---------- ---------- -----------
2,190,583 1,420,232 1,313,501
Less current portion 66,667 66,667 66,667
---------- ---------- -----------
$2,123,916 $1,353,565 $1,246,834
========== ========== ===========
</TABLE>
Annual maturities of the mortgage note payable through 1998 are $66,667
with $716,666 due in 1999.
6. Commitments and related party transactions:
The Companies maintain certain agreements with giftware designers which
require payment of royalties based upon a percentage of net sales of
certain products and other formulas as stated in the agreements. The
royalty expense under these agreements amounted to $232,404, $273,293
and $274,062 in 1995, 1994 and 1993, respectively. For the three months
ended March 31, 1996 and 1995, royalty expense (unaudited) amounted to
$18,446 and $17,730, respectively.
7. Common stock:
Columbia National Corporation, no par; authorized
1,000 shares; issued and outstanding 100 shares $ 87,230
Possible Dreams Ltd., no par; authorized 12,500
shares; issued and outstanding 5,000 shares 5,000
$ 92,230
========
POSSIBLE DREAMS LTD. AND COLUMBIA NATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995, AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
8. Profit sharing plan:
In1994, the Companies established a profit sharing plan which covers
substantially all of their employees. Contributions to the plan are
discretionary and none were made for the years ended 1994 and 1995 or
for the three months ended March 31, 1995 and 1996. For the year ended
December 31, 1993, contributions amounted to $53,000.
9. Fair value of financial instruments:
The fair values of cash, accounts receivable, accounts payable and accrued
expenses approximate their carrying amounts at December 31, 1995 due to
the short maturities of such instruments.
The fair values of note payable, bank, and mortgage note payable also
approximate the carrying amounts of such instruments at December 31,
1995, based on current rates at which the Companies could borrow funds
with similar remaining maturities. The fair value of due to shareholders
is impracticable to estimate due to the nature of related party
transactions.
All of the Companies' financial instruments are held for nontrading
purposes.
APPENDIX II
SECURITY CAPITAL CORPORATION
PRO FORMA FINANCIAL INFORMATION
INTRODUCTION:
On May 17, 1996, Possible Dreams, Ltd. ("Possible Dreams"), a Delaware
corporation and a wholly owned subsidiary of P.D. Holdings, Inc., a 90% owned
subsidiary of Security Capital Corporation ("Security Capital " or the
"Registrant"), acquired substantially all of the assets and assumed certain
liabilities (the "acquisition") of Possible Dreams, Ltd., (Old Possible
Dreams"), - a Massachusetts corporation, and Columbia National Corporation. The
acquisition will be accounted for as a purchase in accordance with the
provisions of Accounting Principles Board Opinion No. 16.
The allocation of purchase price to the tangible and intangible assets acquired,
as reflected in the Pro Forma Combined Financial Statements, was based upon
preliminary determination of the fair value of the tangible assets. As such, the
final allocation of purchase price may differ from that presented herein.
The accompanying Pro Forma Combined Balance Sheet as of March 31, 1996 is
intended to reflect the acquisition as if it had occurred on March 31, 1996.
The accompanying Pro Forma Combined Statements of Operations for the year ended
September 30, 1995 and for the six months ended March 31, 1996, are intended to
reflect the acquisition as if it had occurred at the beginning of the respective
fiscal periods presented.
The accompanying Pro Forma Combined Financial Information does not purport to be
indicative of the results of operations and financial condition that would have
been achieved had the acquisition actually been consummated at the beginning of
the respective fiscal periods presented. In addition, the accompanying Pro Forma
Combined Financial Information does not purport to be indicative of the results
of operations which may be achieved in the future.
The accompanying Pro Forma Combined Financial Information has been prepared
using the assumptions set forth in the accompanying Notes to the Pro Forma
Combined Financial Information and should be read in conjunction with the
audited Consolidated Financial Statements and Notes thereto contained in the
Registrant's Annual Report on Form 10-K for the year ended September 30, 1995
and the unaudited Consolidated Financial Statements and Notes thereto contained
in the Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1996.
<TABLE>
<CAPTION>
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
HISTORICAL
----------------------
Security
Capital Possible PRO FORMA PRO FORMA
Corporation Dreams, Ltd. ADJUSTMENTS COMBINED
--------------------------------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ............................................ $ 9,949 $ 70 (2,700)(a) $ 7,319
Restricted cash ...................................................... -- 736 (b) 736
Accounts recievable- trade ........................................... $ -- 1,760 1,760
Accounts receivable - Joint enterprise ............................... 13 13
Inventory ............................................................ 4,319 (200)(c) 4,119
Other current assets ................................................. 66 537 34 (b) 637
--------------------------------------- ---------
Total current assets ................................ 10,028 6,686 (2,130) 14,584
Investments, net ........................................................... --
Property and equipment, net ................................................ 11 602 498 (d) 1,111
Goodwill, net .............................................................. -- -- 9,320 (e) 9,320
Deferred Financing Fees .................................................... -- -- 500 (f) 500
Liscenses and other assets ................................................. 285 -- 285
Investment in and advances to joint enterprise ............................. 762 -- 762
--------------------------------------- ---------
Total assets .................................... $ 11,086 $ 7,288 8,188 $ 26,562
======================================= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, bank .................................................. $ -- $ 2,100 $ 1,072 (g) $ 3,172
Current portion of long-term debt .................................... -- 67 683 (g) 750
Accounts payable ..................................................... -- 124 124
Payable FGS and designees ............................................ 166 -- 166
Accrued interest payable and other liabilities ....................... 363 146 25 (i) 534
--------------------------------------- ---------
Total current liabilities .............................. 529 2,437 1,780 4,746
Long-term debt, less current portion ....................................... -- 1,247 6,824 (g) 8,071
--------------------------------------- ---------
Subordinated debt .......................................................... -- -- 2,460 (h) 2,460
--------------------------------------- ---------
Minority Interest .......................................................... -- -- 300 (a) 300
--------------------------------------- ---------
Total liabilities .................................. 529 3,684 11,364 15,577
--------------------------------------- ---------
Class A reedemable preferred stock, $.01par value, 50,000 shares authorized,
30,000 shares issued (including dividends in arrears
of $1,200) ........................................................... 4,200 4,200
--------------------------------------- ---------
Stockholders' equity
Common stock, $.01 par value, 7,500 shares authorized,
4,512 shares issued ................................................
Class A Common Stock, $.01 par value, 10,000,000 authorized
4,378,671 shares issued ............................................ 350 350
Common stock, Possible Dreams ........................................ 92 (92)(j) --
Preferred stock, $.01 par value, 2,500,000
shares authorized, none issued .................................... -- --
Paid-in capital ...................................................... 62,238 62,238
Paid-in capital, detachable warrants ................................. 428 (g) 428
Retained Earnings, Possible Dreams ................................... 3,512 (3,512)(j) --
Accumulated deficit Security Capital Corporation ..................... (51,016) (51,016)
--------------------------------------- ---------
Total ........................................ 11,572 3,604 (3,176) 12,000
Less: Treasury stock, at cost 318,576 shares ......................... (5,215) -- (5,215)
--------------------------------------- ---------
Total stockholders' equity ............................. 6,357 3,604 (3,176) 6,785
--------------------------------------- ---------
Total liabilities and stockholders' equity ..................... $ 11,086 $ 7,288 $ 8,188 $ 26,562
======================================= =========
</TABLE>
See Notes to Pro Forma Financial Information
<TABLE>
<CAPTION>
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
HISTORICAL
-------------------------
Security
Capital Possible PROFORMA
Corporation Dreams, Ltd. ADJUSTMENTS COMBINED
------------------------------------------- --------
<S> <C> <C> <C> <C>
REVENUES
Product Sales - net $ -- $ 7,021 $ -- $ 7,021
Other -- -- -- --
------------------------------------------- --------
Total operating revenues $ -- $ 7,021 $ -- $ 7,021
COST OF GOODS SOLD $ -- 3,595 3,595
------------------------------------------- --------
GROSS PROFIT $ -- $ 3,426 $ -- $ 3,426
(233)(a)
(88)(b)
385 (d)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (282) (3,357) (3,575)
------------------------------------------- --------
OPERATING INCOME (LOSS) (282) 69 64 (149)
OTHER INCOME/(EXPENSES)
Income from joint enterprises 239 239
Interest income 284 (73)(f) 211
Interest expense -- (209) (616)(c) (825)
Other Income 20 -- 20
------------------------------------------- --------
Total other income/(expenses) 543 (209) (689) (355)
MINORITY INTEREST 76 (e) 76
------------------------------------------- --------
INCOME(LOSS) BEFORE PROVISION FOR INCOME TAXES 261 (140) (549) (428)
INCOME TAXES -- (19) -- (19)
------------------------------------------- --------
NET INCOME (LOSS) $ 261 $ (121) (549) $ (409)
LESS PREFERRED STOCK DIVIDENDS $ (225) $ -- -- (225)
------------------------------------------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 36 $ (121) $ (549) $ (634)
=========================================== ========
NET INCOME (LOSS) PER SHARE $ 0.01 $ (0.16)
WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENT SHARES --
OUTSTANDING 4,061 4,061
</TABLE>
See Notes to Pro Forma Financial Information
<TABLE>
<CAPTION>
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
HISTORICAL
--------------------------
Security
Capital Possible PROFORMA
Corporation Dreams, Ltd. ADJUSTMENTS COMBINED
--------------------------------------------- --------
<S> <C> <C> <C> <C>
REVENUES
Product Sales - net $ -- $ 20,644 $ -- $ 20,644
Other 11 -- -- 11
--------------------------------------------- --------
Total operating revenues $ 11 $ 20,644 $ -- $ 20,655
COST OF GOODS SOLD $ -- 9,776 9,776
--------------------------------------------- --------
GROSS PROFIT $ 11 $ 10,868 $ -- $ 10,879
(466)(a)
(175)(b)
1,293 (d)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (695) (8,458) (8,501)
--------------------------------------------- --------
OPERATING INCOME (LOSS) (684) 2,410 652 2,378
OTHER INCOME/(EXPENSES)
Income from joint enterprises 415 415
Interest income 513 (146)(f) 367
Interest expense -- (541) (1,474)(c) (2,015)
--------------------------------------------- --------
Total other income/(expenses) 928 (541) (1,620) (1,233)
MINORITY INTEREST (90)(e) (90)
--------------------------------------------- --------
INCOME(LOSS) BEFORE PROVISION FOR INCOME TAXES 244 1,869 (1,058) 1,055
INCOME TAXES -- (104) -- (104)
--------------------------------------------- --------
NET INCOME (LOSS) $ 244 $ 1,765 $(1,058) $ 951
LESS PREFERRED STOCK DIVIDENDS $ (450) $ -- $ -- (450)
--------------------------------------------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ (206) $ 1,765 $(1,058) $ 501
============================================= ========
NET INCOME (LOSS) PER SHARE $ (0.05) $ 0.12
WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENT SHARES --
OUTSTANDING 4,061 4,061
</TABLE>
See Notes to Pro Forma Financial Information
SECURITY CAPITAL CORPORATION
NOTES TO PRO FORMA FINANCIAL INFORMATION
The following describe the pro forma adjustments made to the accompanying Pro
Forma Combined Balance Sheet and Statements of Operations.
PRO FORMA COMBINED BALANCE SHEET - MARCH 31, 1996:
(a) Represents Security Capital Corporation's 90% equity investment ($2,700,000)
in PD Holdings, Inc. and the related 10% investment ($300,000) of the minority
shareholder (included in minority interest). The proceeds from the investment
were used to fund a portion of the acquisition.
(b) Pro Forma adjustment records restricted deposits made and prepayments made
from the proceeds of the debt. The compensating balance is required to letters
of credit which were outstanding at acquisition date under Old Possible Dreams
Ltd.'s bank credit agreement.
(c) Pro Forma adjustment reduces inventory to fair market value as of
acquisition date.
(d) Pro Forma adjustment allocates a portion of the excess of purchase price
over book value to property and equipment. The allocation is based on
preliminary estimates of fair value of the assets.
(e) Amount represents the excess of purchase price over the preliminary fair
value of tangible assets acquired. The excess purchase price will be amortized
over 20 years. The purchase price and excess are calculated as follows:
(In Thousands)
Cash paid to sellers $9,878
Assumption of debt 4,036
Subordinated debt - Issued to sellers 2,460
Acquisition costs (including bank fees) 729
Liabilities assumed as of March 31, 1996 337
Total purchase price 17,440
Less: fair value of tangible assets 8,120
------
Excess purchase price $9,320
(f) Pro Forma adjustment represents legal and bank fees incurred in order to
obtain financing for the acquisition. The costs will be amortized over the life
of the long-term debt using the effective interest rate methodology.
(g) Pro Forma adjustment represents the incremental increase in the debt over
the historical amounts. Note that the former debt agreements were canceled and
all amounts were repaid at the closing with the proceeds from the new debt
agreements. In conjunction with obtaining the new debt, PD Holdings, Inc. issued
200 warrants for the purchase of 200 shares of non-voting common stock. The
warrants are detachable and have been assigned a value of approximately
$428,000. The value assigned to the warrants has been accounted for as original
issue discount and will be amortized over the life of the debt using the
effective interest rate methodology. The value of the warrants has been
accounted for as minority interest.
(h) Pro Forma adjustment represents the issuance of subordinated debt to former
shareholders as part of the consideration for the acquisition.
(i) Pro Forma adjustment represents a preliminary estimate of acquisition costs
not paid at the closing.
(j) Pro Forma adjustment eliminates the historical equity of Old Possible
Dreams.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS - FOR THE SIX MONTHS ENDED MARCH 31,
1996 AND YEAR ENDED SEPTEMBER 30, 1995:
(a) Pro Forma adjustment records the amortization of goodwill for the respective
periods based upon a twenty-year life.
(b) Pro Forma adjustment accounts for the $175,000 management fee to be charged
by Capital Partners to Security Capital Corporation on an annual basis for
management services rendered in connection with the operation of Possible
Dreams.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS - FOR THE SIX MONTHS ENDED MARCH 31,
1996 AND YEAR ENDED SEPTEMBER 30, 1995 (CONTINUED):
(c) Pro Forma adjustment accounts for the incremental increase in interest
charges, including the amortization of original-issue discount and deferred
financing costs, over historical interest charges.
(d) Pro Forma adjustment records the elimination of certain salaries and bonuses
to former shareholders and certain family members. Old Possible Dreams had
elected S Corporation status for tax purposes therefore these amounts represent
in part amounts paid to offset personal tax liabilities. These former
shareholders and their family members will not be employed by Possible Dreams
subsequent to the acquisition. The management provided by Capital Partner's is
expected to replace that provided by the former shareholders (see note b above).
(e) Pro Forma adjustment represents the minority shareholders 10% share of the
Pro Forma income (loss) of Possible Dreams.
(f) Pro Forma adjustment eliminates the portion of Security Capital's interest
income for the year ended September 30, 1995 and the six months ended March 31,
1996 relation to the cash investment by the Registrant in P.D.
Holdings, Inc.. Cash invested was used to fund a portion of the acquisition.
