SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) March 6, 1995
ALBA-WALDENSIAN, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-6150 56-0359780
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
201 St. Germain Avenue, S.W., P.O. Box 100, Valdese, NC 28690
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 874-2191
Not applicable
(Former name or former address, if changed since last report.)
Page 1 of 19 Pages
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Page 2 of 19 Pages
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Kayser-Roth Corporation:
We have audited the accompanying statements of assets available for sale of
the Balfour Healthcare Products Division (the Division) of Kayser-Roth
Corporation (a Delaware corporation) (the Company) as of December 31, 1994, and
January 28, 1994, and the related statements of revenues and selected expenses
for the period from January 29, 1994, to December 31, 1994, and for each of the
two fiscal years in the period ended January 28, 1994. These financial
statements are the responsibility of the Companyis 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.
The accompanying statements of assets available for sale and the statements
of revenues and selected expenses have been prepared pursuant to the Asset
Purchase Agreement dated March 6, 1995, between Kayser-Roth Corporation and
Alba-Waldensian, Inc. as discussed in Note 2 and are not intended to be a
complete presentation of the assets, liabilities, revenues or expenses of
Kayser-Roth Corporation.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets of the Balfour Healthcare Products Division of
Kayser-Roth Corporation available for sale and the related revenues and selected
expenses pursuant to the Asset Purchase Agreement dated March 6, 1995, on the
basis of accounting as described in Note 3 to the financial statements.
(Signature of Arthur Andersen LLP appears here)
Charlotte, North Carolina,
May 4, 1995.
Page 3 of 19 Pages
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BALFOUR HEALTHCARE PRODUCTS DIVISION OF
KAYSER-ROTH CORPORATION
STATEMENTS OF ASSETS AVAILABLE FOR SALE
AS OF DECEMBER 31, 1994, AND JANUARY 28, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
BASIS BASIS
(NOTES 1 AND 3) (NOTES 1 AND 3)
DECEMBER 31, JANUARY 28,
1994 1994
<S> <C> <C>
ACCOUNTS RECEIVABLE (Note 5) $ 1,796 $ 1,501
INVENTORIES, net (Notes 4 and 6) 1,162 945
SUPPLIES INVENTORIES AND PREPAID EXPENSES (Note 4) 50 54
Total current assets 3,008 2,500
PROPERTY, PLANT AND EQUIPMENT, net (Notes 4 and 7) 4,075 1,541
Total assets available for sale $ 7,083 $ 4,041
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
Page 4 of 19 Pages
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BALFOUR HEALTHCARE PRODUCTS DIVISION OF
KAYSER-ROTH CORPORATION
STATEMENTS OF REVENUES AND SELECTED EXPENSES
FOR THE PERIOD FROM JANUARY 29, 1994, TO DECEMBER 31, 1994, AND
EACH OF THE TWO FISCAL YEARS IN THE PERIOD ENDED JANUARY 28, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR BASIS PREDECESSOR BASIS
(NOTES 1 AND 3) (NOTES 1 AND 3)
DECEMBER 31, JANUARY 28, JANUARY 30,
1994 (11 MONTHS) 1994 1993
<S> <C> <C> <C>
NET SALES (Note 5) $13,785 $14,189 $13,891
COST OF SALES (Note 10) 10,345 11,269 11,132
Gross profit 3,440 2,920 2,759
SELLING, MARKETING AND DISTRIBUTION
EXPENSES (Note 11):
Marketing 25 11 33
Selling 751 785 671
Distribution 532 595 561
1,308 1,391 1,265
OPERATING INCOME BEFORE INTEREST AND TAXES
(Note 10) $ 2,132 $ 1,529 $ 1,494
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
Page 5 of 19 Pages
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BALFOUR HEALTHCARE PRODUCTS DIVISION OF
KAYSER-ROTH CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, AND JANUARY 28, 1994
(IN THOUSANDS)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Kayser-Roth Corporation (Kayser-Roth -- or the Company) was incorporated in
Delaware in August 1985 and was subsequently acquired by Collins & Aikman Group,
Inc. (Group or Seller) on August 1, 1985. The Company manufactures and markets
a complete line of brand name and private label menis and womenis hosiery and
hosiery-related products. The Balfour Healthcare Products Division (the
Division) manufactures apparel products for the health care industry such as
footies, cuffs, cloth gloves, joint pads for patients, etc. in the Companyis
Rockwood, Tennessee manufacturing facility. The Divisionis products are sold
primarily to medical supply companies.
ACQUISITION OF KAYSER-ROTH
On January 28, 1994, Legwear Acquisition Corporation (Legwear) (a wholly
owned subsidiary of Legwear Holdings Corporation (Holdings)), acquired 100% of
the common stock of Kayser-Roth. The acquisition was accounted for under the
purchase method of accounting. Accordingly, the aggregate purchase price was
allocated based on the estimated fair value of assets acquired and liabilities
assumed. As part of the purchase allocation, property, plant and equipment of
the Division was recorded at fair value, which resulted in a step-up of
approximately $1,450.
2. ASSET PURCHASE AGREEMENT:
On March 6, 1995, the Company entered into an Asset Purchase Agreement (the
Agreement) whereby the operating assets of the Division and the manufacturing
facility were sold to Alba-Waldensian, Inc. (the Buyer) for $14,956. The
accompanying statements of assets available for sale and statements of revenues
and selected expenses have been prepared pursuant to the Agreement and include
only those assets purchased and liabilities assumed related to the Division, and
the manufacturing facility. Significant excluded assets under the Agreement
include cash, inventory and equipment related to the Companyis sock
manufacturing operation, certain computer hardware and software and intellectual
property. Substantially all related liabilities will not be assumed by the
Buyer, including accounts payable, accrued expenses and debt. The only
significant assumed liability is an obligation under an equipment lease (Notes
12 and 13).
The Agreement provides that the Buyer's indemnification claims must exceed
$250, subject to certain limitations, before they may be asserted against the
Company. The Company's maximum indemnification obligation is limited to $7,075.
Page 6 of 19 Pages
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2
3. BASIS OF PRESENTATION:
The accompanying financial statements have been prepared on the basis of
accounting as specified in the Agreement and include only those assets of the
Division and the related manufacturing facility, that were purchased by the
Buyer pursuant to the terms of the Agreement. The statements of assets
available for sale as of January 28, 1994, and related statements of revenues
and selected expenses for each of the two fiscal years in the period ended
January 28, 1994, are presented on the historical predecessor company basis.
The statement of assets available for sale as of December 31, 1994, and the
statement of revenues and selected expenses for the period from January 29,
1994, to December 31, 1994, are presented on the historical successor company
basis which reflects the purchase accounting adjustments resulting from the
acquisition of Kayser-Roth on January 28, 1994 (see Note 1).
The accompanying statements of revenues and selected expenses represent
those revenues and direct expenses of the Division, prior to the allocation of
corporate-level interest and taxes.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR
Through January 28, 1994, the Division's fiscal year ended on the last
Saturday in January. Fiscal 1993 reflects a 52-week year which ended on January
28, 1994. Following the acquisition, the Company adopted a fiscal year ending
on the last Saturday in December. As such, fiscal 1994 reflects a 48-week
period which ended on December 31, 1994.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market and include the costs of raw materials, direct labor and manufacturing
overhead. Allowances are established to reduce the cost of excess and obsolete
inventories to their estimated net realizable value.
SUPPLIES INVENTORIES
Supplies inventories consist primarily of repair parts and expendable
operating supplies and are carried at the lower of cost or net realizable value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at predecessor basis historical
cost at January 28, 1994, and at successor basis historical cost at December 31,
1994, which reflects the fair value adjustments resulting from the acquisition
of Kayser-Roth. Depreciation is recorded using the straight-line method for
financial reporting purposes over estimated useful lives ranging from 3 to 40
years.
Page 7 of 19 Pages
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3
5. REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK:
The Division recognizes revenue upon the shipment of products to its
customers.
The Company provides credit services for the Division. Substantially all
of the Division's accounts receivable are concentrated in the health care
industry. In the normal course of business, the Company extends credit, on open
accounts, to its customers after a credit analysis based on a number of
financial and other criteria. The Company performs ongoing credit evaluations
of its customers financial conditions, but generally does not require
collateral. Allowances are maintained for potential credit losses, and such
losses have been within management's expectations.
The Division has three significant customers whose net sales and accounts
receivable are 47%, 53% and 56%, and 34%, 35% and 40%, respectively, of the
Division's totals for periods ending December 31, 1994, January 28, 1994, and
January 30, 1993, respectively.
Under the Agreement, the Buyer may require the Company to repurchase at
face value uncollected accounts receivable after 120 days following the closing
date.
6.INVENTORIES:
Inventories consisted of the following at December 31, 1994, and January
28, 1994:
DECEMBER 31, JANUARY 28,
1994 1994
Raw materials $ 279 $ 274
Work in process 140 84
Finished goods 802 643
1,221 1,001
Less - Reserves (59) (56)
$1,162 $ 945
Page 8 of 19 Pages
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4
7. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment consists of the following:
(SUCCESSOR (PREDECESSOR
BASIS - NOTES 1 BASIS - NOTES 1
AND 3) AND 3)
DECEMBER 31, JANUARY 28,
1994 1994
[S] [C] [C]
Land and land improvements $ 96 $ 154
Buildings 2,500 1,854
Machinery and equipment 1,726 2,336
Construction in process 8 17
4,330 4,361
Less - Accumulated depreciation (255) (2,820)
$4,075 $ 1,541
Depreciation expense was $146, $158 and $174 for the periods ending December
31, 1994, January 28, 1994, and January 30, 1993, respectively. The
depreciation expense only relates to the portion of property, plant and
equipment used by the Division.
8. COMMITMENTS AND CONTINGENCIES:
LITIGATION
The Company is subject to various legal proceedings and claims arising in
the ordinary course of business. In management's opinion, the outcome of the
aforementioned matters is not likely to have a material adverse effect on the
Division's financial position or results of operations.
ENVIRONMENTAL MATTERS
The Division's operations are subject to environmental regulation in the
jurisdiction in which it operates. The Company believes that the Division's
operations currently comply in all material respects with the current
requirements of environmental laws and regulations.
Page 9 of 19 Pages
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5
9. EMPLOYEE BENEFIT PLANS:
PENSION PLAN
The Company has a defined benefit pension plan covering substantially all
employees who meet certain eligibility requirements, including the employees of
the Division. This liability was not assumed by the Buyer. Plan benefits are
based primarily on years of service and employee's compensation. Funding of
retirement costs for the plan complies with the minimum funding requirements
specified by the Employee Retirement Income Security Act. Estimated expenses of
the plan related to the Division and included in the accompanying statements of
revenues and selected expenses, amounted to $60, $75 and $67 for the periods
ended December 31, 1994, January 28, 1994, and January 30, 1993, respectively.
DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution plan covering employees who
meet certain eligibility requirements. Company contributions are based on a
formula as specified in the plan agreement. This liability was not assumed by
the Buyer. Estimated Company contributions for the Division related to this
plan and included in the accompanying statements of revenues and selected
expenses were $8, $10 and $8 for the periods ending December 31, 1994, January
28, 1994, and January 30, 1993, respectively.
10. ALLOCATED EXPENSES:
Corporate general and administrative expenses are allocated to the Division
based on plant production and labor dollars and are included in cost of sales.
Interest and taxes are not included in the corporate allocation.
11. SELLING AND DISTRIBUTION EXPENSES:
Selling and distribution expenses consist primarily of direct payroll and
other costs incurred by the Division and do not include any allocations from the
Company.
12. LEASE COMMITMENTS:
The Company is obligated under an operating lease on behalf of the Division
for certain knitting equipment used by the Division. The lease commenced in May
1993 for a term of 60 months and was assumed in the Agreement. The future
minimum lease payments at December 31, 1994, are as follows:
1995 $100
1996 100
1997 100
1998 33
Page 10 of 19 Pages
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6
Rent expense under the operating lease related to the Division and included
in the accompanying statements of revenues and selected expenses amounted to
$91, $75 and $0 for the periods ended December 31, 1994, January 28, 1994, and
January 30, 1993, respectively.
13. ASSUMED LIABILITIES:
As discussed in Note 2, certain liabilities were to be assumed in
connection with the Agreement. At December 31, 1994, and January 28, 1994,
accrual requirements related to the liabilities to be assumed were not
significant.
Page 11 of 19 Pages
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(b) Pro Forma Financial Information.
ALBA-WALDENSIAN, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On March 6, 1995, Alba-Waldensian, Inc. ("the Company")
acquired the operating assets and manufacturing facility of the
Balfour Healthcare Products Division of Kayser-Roth Corporation
("Balfour Healthcare Products") (the "Division") for a cash price
of $14,956,000, subject to certain post closing adjustments. The
Company financed the acquisition from borrowings under its credit
facility.
The acquisition will be accounted for as a purchase, with
net assets acquired recorded at estimated fair values, and the
result of the Division's operations included in the Company's
consolidated financial statements from the date of acquisition.
The accompanying condensed consolidated financial statements
illustrate the effect of the acquisition ("Pro Forma") on the
Company's financial position and results of operations. The
condensed consolidated balance sheet as of December 31, 1994 is
based on the historical balance sheets of the Company and the
Division as of that date and assumes the acquisition took place
on that date. The condensed consolidated statement of income for
the year ended December 31, 1994 of the Company is based on the
historical statement of income for that period. The condensed
consolidated statement of income for Division is based on the
historical statement of income for the twelve month period ended
January 28, 1995. The pro forma condensed consolidated statement
of income assumes the acquisition took place at the beginning of
the period.
The pro forma condensed consolidated financial statements
should be read in connection with the historical financial
statements of the Company and the Division.
Page 12 of 19 Pages
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PROFORMA
ALBA-WALDENSIAN, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1994
(in thousands)
<TABLE>
<CAPTION>
Alba-Waldensian, Balfour Pro Forma
Inc. Healthcare Adjustments
Products
Pro Forma
<S> <C> <C> <C> <C>
ASSETS
Accounts receivable, net $7,427 $1,796 $9,223
Inventories, net 17,264 1,162 18,426
Other current assets 711 50 44 (1) 805
Total current assets 25,402 3,008 28,454
Property, plant and equipment, net 11,605 4,075 (1,344)(1) 14,336
Cost in excess of net assets acquired 0 0 9,217 (1) 9,217
Other assets 723 0 723
Total assets $37,730 $7,083 $52,730
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings and lines of credit $1,178 $0 $1,178
Current maturities of long-term debt 500 0 1,388 (1) 1,888
Other current liabilities 3,857 0 3,857
Total current liabilities 5,535 0 6,923
Long-term debt 1,000 0 13,612 (1) 14,612
Other long-term liabilities 2,102 0 2,102
Total liabilities 8,637 0 23,637
Net assets 0 7,083 (7,083)(1) 0
Stockholders' equity 29,093 0 29,093
Total liabilities and stockholders' equity $37,730 $7,083 $52,730
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements (Unaudited)
Page 13 of 19 Pages
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PROFORMA
ALBA-WALDENSIAN, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Alba-Waldensian
Inc. Balfour Healthcare Products
Eleven month One month Twelve month
Year ended period ended period ended period ended
December 31, December 31, January 28, January 28, Pro Forma
1994 1994 1995 1995 Adjustments Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Net sales $56,507 $13,785 $1,236 $15,021 $71,528
Cost of sales 42,252 10,345 895 11,240 (51)(2) 53,441
Gross margin 14,255 3,440 341 3,781 18,087
Selling, general and administrative
expenses 11,008 1,308 100 1,408 600 (3) 13,016
Operating income 3,247 2,132 241 2,373 5,071
Interest expense 275 0 0 0 918 (4) 1,193
Other (income) expense (178) 0 0 0 (178)
Income before income taxes 3,150 2,132 241 2,373 4,056
Provision for income taxes 1,204 0 0 0 337 (5) 1,541
Net income $1,946 $2,132 $241 $2,373 $2,515
Net income per common share $1.05 $1.36
Weighted average number of
shares outstanding 1,848,671 1,848,671
</TABLE>
See Notes to Pro Forma Consolidated Financial Statement (Unaudited)
Page 14 of 19 Pages
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ALBA-WALDENSIAN, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
Note A - The pro forma adjustments to the condensed consolidated
balance sheet are as follows:
(1) To reflect the acquisition of Balfour Healthcare
Products and the allocation of the purchase price on
the basis of the estimated fair values of the assets
acquired.
The components of the purchase price and its
allocation to the assets of Balfour Health-
care Products are as follows (in thousands):
Components of purchase price:
Cash from variable loan rate term loan $15,000
Excess cash received from term loan proceeds ( 44)
Net purchase price to be allocated 14,956
Allocation of purchase price:
Stockholders' equity 7,083
Increase (decrease) to fair value:
Property, plant and equipment ( 1,344)
Cost in excess of net assets acquired $ 9,217
Note B - The pro forma adjustments to the condensed consolidated
statements of income are as follows:
(2) Adjustments to cost of sales:
Effect on historical expenses of the change in
the carrying amount of net assets resulting
from the allocation of the purchase price as
described in pro forma adjustment (1) to the
pro forma condensed consolidated balance sheet ($ 51)
(3) Adjustments to selling, general and administrative
expenses:
Amortization of excess cost over fair value of
net assets acquired over 15 years $ 600
(4) Adjustments to other (income) expense:
Interest on term loan at LIBOR plus 2%
(average of 6.41%) $ 918
(5) Adjustments to provision for income taxes:
To adjust tax expense to reflect the income tax effects
at the Company's effective tax rate of the pro forma
adjustments to income before income taxes. $ 337
Page 15 of 19 Pages
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(c) Exhibits
2 Asset Purchase Agreement dated as of March
6, 1995 between the Registrant and Kayser-
Roth Corporation (previously filed).
23.1 Consent of Arthur Andersen LLP.
Page 16 of 19 Pages
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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.
ALBA-WALDENSIAN, INC.
By: /s/ Thomas Nail
Thomas Nail
Treasurer, Secretary and Chief
Financial Officer
Dated: May 18, 1995
Page 17 of 19 Pages
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
EXHIBITS
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Date of Report Commission File Number
March 6, 1995 1-6150
ALBA-WALDENSIAN, INC.
EXHIBIT INDEX
Exhibit No Exhibit Description
2 Asset Purchase Agreement dated as of
March 6, 1995 between the Registrant
and Kayser-Roth Corporation. (previously
filed).
23.1 Consent of Arthur Andersen LLP
(page 19 of the sequentially numbered
pages).
Page 18 of 19 Pages
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated May 4, 1995, covering the Statements of Assets Available for Sale
of the Balfour Healthcare Products Division of Kayser-Roth Corporation as of
December 31, 1994, and January 28, 1994, and Statements of Revenues and Selected
Expenses for the period from January 29, 1994, to December 31, 1994, and each of
the two fiscal years in the period ended January 28, 1994, included in the Form
8-K/A Commission File Number 1-6150 filed by Alba-Waldensian, Inc.
It should be noted that we have not audited any financial statements of the
Balfour Healthcare Products Division of Kayser-Roth Corporation subsequent to
December 31, 1994, or performed any audit procedures subsequent to the date of
our report.
(Signature of Arthur Andersen LLP appears here)
Charlotte, North Carolina,
May 18, 1995.
Page 19 of 19 Pages
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