<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
AMENDMENT NO. 2
TO
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, 1993
THE ACTAVA GROUP INC.
(Exact name of registrant as specified in its charter)
FUQUA INDUSTRIES, INC.
(Former name, former address and former fiscal year, if changed since last
report)
<TABLE>
<S> <C> <C>
DELAWARE 1-5706 58-0971455
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4900 GEORGIA-PACIFIC CENTER, ATLANTA, GEORGIA 30303
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 404/658-9000
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<PAGE> 2
ITEM 7:
(a) Financial Statements of Businesses Acquired
The following financial statements are herewith provided for Diversified
Products Corporation and Subsidiary:
[ ] Consolidated Financial Statements as of and for the year ended June 27,
1992, including the Independent Auditors' Report.
[ ] Unaudited Consolidated Balance Sheet as of March 27, 1993.
[ ] Unaudited Consolidated Income Statement for the Year to Date as of
March 27, 1993 and March 28, 1992.
[ ] Unaudited Consolidated Statement of Cash Flows for the Year to Date as
of March 27, 1993 and March 28, 1992.
1
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Diversified Products Corporation:
We have audited the accompanying consolidated balance sheet of Diversified
Products Corporation and subsidiary as of June 27, 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As discussed in note 1 to the consolidated financial statements, the
Company's stockholder consented to a quasi-reorganization plan effective at the
beginning of 1992 which required the Company to state the assets and liabilities
at their fair values and eliminate the accumulated deficit against additional
paid-in-capital. In addition, retained earnings has been dated June 30, 1991.
As discussed in note 4 to the consolidated financial statements, the
Company has been in default under certain financial covenants in the Finance and
Security Agreement during 1992. The aforementioned events of default have not
been cured nor has a waiver letter been received. Under such circumstances,
generally accepted accounting principles require that such debt be classified as
a current liability. The accompanying consolidated balance sheet at June 27,
1992 reflects the aforementioned long-term debt as a current liability.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Diversified
Products Corporation and subsidiary as of June 27, 1992, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company's
default under its Finance and Security Agreement as discussed in note 4 to the
consolidated financial statements and in the second preceding paragraph, as well
as the Company's operating performance and its need for liquidity, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in note 17 to the
consolidated financial statements. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
KPMG PEAT MARWICK
Atlanta Georgia
August 14, 1992, except
for note 17, as to which
the date is June 8, 1993
2
<PAGE> 4
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 27, 1992
<TABLE>
<S> <C>
ASSETS (NOTE 4)
Current Assets:
Accounts receivable, primarily trade, less allowances of $10,053,603 (note 16)................ $ 7,725,641
Inventories:
Finished goods.............................................................................. 12,103,944
Work in process............................................................................. 2,898,647
Raw materials............................................................................... 1,922,455
Supplies.................................................................................... 522,270
-----------
Total inventories....................................................................... 17,447,316
-----------
Refundable income taxes....................................................................... 1,444,368
Prepaid expenses and other current assets..................................................... 863,284
-----------
Total current assets.................................................................... 27,480,609
-----------
Investment (note 13)............................................................................ 1,028,451
Property, plant, and equipment (note 3):
Land.......................................................................................... 1,266,600
Buildings and leasehold improvements.......................................................... 12,394,064
Machinery and equipment....................................................................... 17,909,271
Dies and molds................................................................................ 7,068,526
Furniture and fixtures........................................................................ 2,012,588
Automobiles and trucks........................................................................ 569,763
Construction in progress...................................................................... 1,163,283
-----------
42,384,095
Less accumulated depreciation and amortization................................................ 3,256,484
-----------
Net property, plant, and equipment...................................................... 39,127,611
-----------
Patents, net of accumulated amortization of $1,358,970.......................................... 16,624,467
Deferred loan costs, net of accumulated amortization of $494,750................................ 1,422,413
-----------
$85,683,551
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Outstanding checks in excess of cash on deposit (note 4)...................................... $ 2,534,223
Current maturities of long-term debt (note 4)................................................. 5,116,725
Long-term debt in default (note 4)............................................................ 36,802,096
Accounts payable.............................................................................. 4,566,288
Accrued payroll and related expenses.......................................................... 3,927,177
Accrued insurance costs....................................................................... 3,326,391
Accrued patent litigation costs............................................................... 2,290,168
Other current liabilities..................................................................... 2,496,879
-----------
Total current liabilities............................................................... 61,059,947
Long-term debt, less current maturities and long-term debt in default (note 4).................. 763,859
Deferred income taxes (note 7).................................................................. 100,000
-----------
Total liabilities....................................................................... 61,923,806
-----------
Redeemable Class A serial preferred stock, cumulative, $.01 par value (aggregate liquidation
preference and redemption value of $10,815,636 at June 27, 1992). Authorized 30,000 shares;
issued and outstanding 10,816 shares (note 5)................................................. 19,119,235
Capital stock purchase put warrants (note 4).................................................... --
Stockholders' equity (notes 1, 4, and 6):
Class B serial preferred stock, cumulative, $.01 par value (aggregate liquidation preference
of $37,003,041 at June 27, 1992). Authorized 970,000 shares; issued and outstanding 37,003
shares...................................................................................... 370
Common stock:
Class A nonvoting common stock, $.01 par value. Authorized 1,000,000 shares; issued and
outstanding 1,000 shares................................................................... 10
Class B voting common stock, $.01 par value. Authorized 350,000 shares; issued 500 shares... 5
Additional paid-in capital.................................................................... 1,617,658
Retained earnings since June 30, 1991......................................................... 3,209,467
-----------
4,827,510
-----------
Less treasury stock, 167 Class B voting common shares, at cost................................ 187,000
-----------
Total stockholders' equity.............................................................. 4,640,510
Commitments and contingencies (notes 4, 8, 9, and 15)
-----------
$85,683,551
===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 27, 1992
<TABLE>
<S> <C>
Net sales (note 12)............................................................ $175,501,647
Cost of sales (note 3)......................................................... 147,320,495
------------
Gross profit......................................................... 28,181,152
Selling, general, and administrative expenses (notes 10 and 14)................ 17,051,449
------------
Operating income..................................................... 11,129,703
Other expense:
Interest expense and amortization of debt discount........................... 5,571,461
Amortization of deferred loan costs and debt restructuring fees.............. 494,752
------------
Earnings before income taxes......................................... 5,063,490
Income taxes (note 7).......................................................... 1,854,000
------------
Net earnings......................................................... $ 3,209,490
===========
Net loss available to common shareholders............................ $ (1,167,732)
===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED JUNE 27, 1992
<TABLE>
<CAPTION>
CLASS B SERIAL CLASS A NONVOTING
PREFERRED STOCK COMMON STOCK
----------------- -----------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at June 29, 1991....................................... 34,707 $347 1,000 $ 10
Effects of quasi-reorganization plan (note 1).................. -- -- -- --
Issuances of Class B serial preferred stock dividends (note
6)........................................................... 2,296 23 -- --
Sale of discontinued U.K. subsidiary (note 13)................. -- -- -- --
Repurchase of 167 shares of Class B voting common stock, at
cost......................................................... -- -- -- --
Charge in lieu of income taxes (note 7)........................ -- -- -- --
Net earnings................................................... -- -- -- --
------ ------ ------ ------
Balance at June 27, 1992....................................... 37,003 $370 1,000 $ 10
====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE
CLASS B VOTING FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
----------------- PAID-IN TRANSLATION
SHARES AMOUNT CAPITAL ADJUSTMENT
------ ------ ----------- ----------
<S> <C> <C> <C> <C>
Balance at June 29, 1991................................ 500 $5 52,189,585 786,019
Effects of quasi-reorganization plan (note 1)........... -- -- (52,125,927) --
Issuances of Class B serial preferred stock dividends
(note 6).............................................. -- -- -- --
Sale of discontinued U.K. subsidiary (note 13).......... -- -- -- (786,019)
Repurchase of 167 shares of Class B voting common stock,
at cost............................................... -- -- -- --
Charge in lieu of income taxes (note 7)................. -- -- 1,554,000 --
Net earnings............................................ -- -- -- --
--
------ ----------- ----------
Balance at June 27, 1992................................ 500 $5 1,617,658 --
====== ======= ============ ==========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT RETAINED
ELIMINATED AT EARNINGS TOTAL
JUNE 30, SINCE TREASURY STOCKHOLDERS'
1991 JUNE 30, 1991 STOCK EQUITY
------------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Balance at June 29, 1991.......................... (52,125,927) -- -- 850,039
Effects of quasi-reorganization plan (note 1)..... 52,125,927 -- -- --
Issuances of Class B serial preferred stock
dividends (note 6).............................. -- (23) -- --
Sale of discontinued U.K. subsidiary (note 13).... -- -- -- (786,019)
Repurchase of 167 shares of Class B voting common
stock, at cost.................................. -- -- (187,000) (187,000)
Charge in lieu of income taxes (note 7)........... -- -- -- 1,554,000
Net earnings...................................... -- 3,209,490 -- 3,209,490
------------- ------------- -------- -------------
Balance at June 27, 1992.......................... -- 3,209,467 (187,000) 4,640,510
============ ============ ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 27, 1992
<TABLE>
<S> <C>
Cash flows from operating activities:
Net earnings................................................................. $ 3,209,490
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization of property, plant, and equipment......... 3,336,722
Amortization of deferred loan costs and patents......................... 1,858,320
Gain on sale of property, plant, and equipment.......................... (103,203)
Discontinued operations................................................. (469,556)
Charge in lieu of income taxes.......................................... 1,554,000
Deferred income taxes................................................... 100,000
Changes in assets and liabilities:
Accounts receivable.................................................. 6,520,561
Inventories.......................................................... 3,956,044
Refundable income taxes.............................................. (1,444,368)
Prepaid expenses and other current assets............................ (198,205)
Accounts payable..................................................... (14,449,062)
Accrued payroll and related expenses................................. 548,705
Accrued insurance costs.............................................. (63,922)
Accrued patent litigation costs...................................... (506,878)
Other current liabilities............................................ (1,364,621)
Other liabilities.................................................... (417,363)
------------
Net cash provided by operating activities............................ 2,066,664
------------
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment......................... 346,655
Payment for investment in preferred stock.................................... (1,500,000)
Additions to property, plant, and equipment.................................. (3,977,576)
------------
Net cash used in investing activities................................ (5,130,921)
------------
Cash flows from financing activities:
Outstanding checks in excess of cash on deposit.............................. 1,399,839
Net payment on revolving note................................................ (8,250,168)
Proceeds from issuance of common and preferred stock......................... 10,510,000
Proceeds from issuance on long-term debt..................................... 41,579
Purchases of treasury stock.................................................. (187,000)
Payments on senior term loan and other long-term debt........................ (449,993)
------------
Net cash provided by financing activities............................ 3,064,257
------------
Net change in cash............................................................. --
Cash at beginning at period.................................................... --
------------
Cash at end of period.......................................................... $ --
===========
Supplemental cash flow information:
Cash paid during the year:
Interest.................................................................. $ 5,942,348
===========
Income taxes.............................................................. $ 1,644,368
===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 8
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1992
(1) QUASI-REORGANIZATION/CAPITAL RESTRUCTURING
Effective as of the beginning of 1992, Diversified Products Corporation's
Class B voting common stockholder consented to a quasi-reorganization plan. As
of the beginning of 1992, Diversified Products Corporation believes the carrying
value of its assets and liabilities approximates their fair values; therefore,
no additional fair value adjustments were recorded as of the beginning of 1992.
The accumulated deficit amounted to $52,125,927 as of June 29, 1991 and has been
netted against additional paid-in capital as of the beginning of 1992. As a
result, retained earnings have been dated to reflect amounts since June 30,
1991.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of
Diversified Products Corporation and its wholly owned subsidiary,
Diversified Trucking Corp. (collectively the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
The Company is principally engaged in the business of manufacturing
and distributing home fitness equipment to mass merchandisers and smaller
retailers primarily in the United States.
The Company utilizes a 52/53-week fiscal year. The consolidated
financial statements for 1992 reflect a 52-week year.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(c) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation on
property, plant, and equipment is calculated on the straight-line basis
over the estimated remaining useful lives of the respective assets.
Leasehold improvements are amortized using the straight-line basis over the
shorter of the lease term or estimated useful life of the respective asset.
(d) Deferred Loan Costs
Deferred loan costs represent loan origination fees and expenses
incurred to originate the credit facility. These costs are being amortized
over the remaining term of the finance and security agreement.
(e) Patents
Patents are stated at cost. The cost of patents is amortized using the
straight-line method over the estimated remaining useful lives of the
respective assets which range from six to 16 years.
(f) Foreign Currency Translation
Cumulative foreign currency translation adjustments had previously
represented the effects of translating the financial statements of the
foreign subsidiary. The Company had included the cumulative foreign
currency translation adjustment as a component of stockholders' equity.
(g) Income Taxes
Deferred income taxes are recognized for income and expense items that
are reported in different years for financial reporting purposes and income
tax purposes.
7
<PAGE> 9
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) CHANGE IN ESTIMATED USEFUL LIVES
Effective June 30, 1991, the Company revised the estimated useful lives for
all categories of its property, plant, and equipment based upon management's
expectations of the extended economic benefit. The change in estimated useful
lives had the effect of reducing depreciation expense by $3,198,000 and
increasing net earnings by $2,998,000 had the Company not revised its useful
lives for property, plant, and equipment but after giving effect to the
quasi-reorganization plan.
(4) LONG-TERM DEBT
Long-term debt at June 27, 1992 consists of the following:
<TABLE>
<S> <C>
Senior term loan at prime plus 2 1/4% due in quarterly installments of
$1,250,000 beginning September 1, 1992 through March 1, 1998 and a
final payment of $6,605,783 due June 1, 1998 with interest payable
monthly............................................................... $35,355,783
Revolving note at prime plus 1.75% due June 30, 1994 with interest
payable monthly....................................................... 6,446,313
8.75% Industrial Development Bonds, due in annual installments of
$100,000 and a final payment of $450,000 in 1997...................... 850,000
Other................................................................... 30,584
-----------
42,682,680
Less current maturities................................................. 5,116,725
Less long-term debt in default.......................................... 36,802,096
-----------
Long-term debt, less current maturities and long-term debt in
default............................................................ $ 763,859
==========
</TABLE>
The future required repayments of long-term debt for each of the next five
years and thereafter are as follows:
<TABLE>
<S> <C>
June 26, 1993........................................................... $ 5,116,725
July 2, 1994............................................................ 11,560,172(A)
July 1, 1995............................................................ 5,100,000
June 29, 1996........................................................... 5,100,000
June 28, 1997........................................................... 5,450,000
Thereafter.............................................................. 10,355,783
-----------
$42,682,680
==========
</TABLE>
- ---------------
(A) The required repayments of long-term debt for the year ended July 2, 1994
include the repayment of the $6,446,313 revolving note which expires June
30, 1994.
In addition, the Company is required to pay an amount equal to 50% of the
annual excess cash flows, as defined in the Finance and Security Agreement, as
amended, within 90 days after each fiscal year ending on or about June 30.
Amended Finance and Security Agreement
The Company maintains an amended Finance and Security Agreement
(Agreement) with its lender. The Agreement, as amended, provides the
Company with a credit facility consisting of a $60,000,000 revolving note
and a senior term loan. The revolving note expires June 30, 1994.
The borrowings available under the Agreement are subject to certain
percentage limitations on eligible collateral. The Agreement is secured by
the Company's assets, including accounts receivable,
8
<PAGE> 10
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
inventories, property, plant, and equipment, and patents. The Agreement
requires an unused facility fee of 1/2%. Costs associated with originating
the Agreement are included as deferred loan costs in the accompanying
consolidated balance sheets and are being amortized over the revised term
of the Agreement.
As required by the Agreement, the Company has an interest rate
protection agreement which provides a maximum interest rate of 12.75% on
$29,250,000 at June 27, 1992. The interest rate protection agreement
expires on September 1, 1992.
The Agreement contains numerous covenants, including but not limited
to: maintenance of specified financial ratios, limitations on capital
additions and disposals, borrowings, leases, and net worth. In the event of
default, the lender has the option to charge an additional 2% interest
during the post default period until the outstanding principal amount of
the obligations is paid in full or the default is remedied. At June 27,
1992, the Company was not in compliance with certain of the Agreement's
covenants and had not received waivers for these events of noncompliance.
As a result of such default, the lender has certain rights which could have
a material adverse effect on the Company. As discussed in note 17, the
lender has assumed control of the Board of Directors through its majority
voting privilege of the Class A serial preferred stock (see note 5). The
accompanying consolidated financial statements at June 27, 1992 reflect the
debt reclassification associated with such default to a current liability.
The amended Agreement does not provide for prepayment premiums for the
revolving note or senior term loan but, in the event the senior term loan
is prepaid, the revolving note must also be prepaid.
Two capital stock purchase put warrants were issued to the lender in
connection with the restructuring in 1991 which entitles the lender to
purchase, in whole or in part, a quantity of Class A and B common stocks
equivalent to 74.5% on a fully diluted basis initially, and an additional
16.5% on a fully diluted basis if the entire amounts owed to the lender,
including Class A and B serial preferred stock, are not repaid by July 12,
1993. If the preceding amounts are repaid, the Company may cancel the 16.5%
capital stock put warrant. The capital stock put warrants expire July 12,
2011 and can be exercised at $75 per percentage. The capital stock put
warrants provide for a "put" feature which would require the Company to
repurchase the capital stock put warrants from the lender at fair value. At
June 29, 1991, the capital stock put warrants were determined to have no
fair value based upon an independent appraisal. At June 29, 1992, in the
opinion of the Company's management, the capital stock put warrants
continue to have no fair value.
As a provision of the Agreement, customer payments are remitted daily
to the lender and the Company's cash disbursements are funded as the checks
are presented to the bank for payment. As a result, outstanding checks are
in excess of cash on deposit at June 27, 1992 and are presented as such in
the accompanying consolidated balance sheet.
(5) MANDATORY REDEEMABLE PREFERRED STOCK
The Company's cumulative Class A serial preferred stock was issued in
connection with the restructuring to the lender in return for $10,000,000. The
Class A serial preferred stock had a carrying value of $19,119,235 at time of
issuance representing the gross undiscounted cash flows until mandatory
redemption. The Company accounted for the issuance of the Class A serial
preferred stock as a troubled debt restructuring since this class of preferred
stock is mandatorily redeemable. The carrying value of the Class A serial
preferred stock will remain unchanged until redemption, but the aggregate
liquidation preference will increase ratably until the redemption date at which
time both amounts shall be equivalent. Dividends in the form of additional
shares of stock are payable at a 2.75% rate per quarter (11.46% effective rate
per annum) until June 30, 1997 (mandatory redemption). The accumulated dividends
at June 27, 1992 are $815,636.
9
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DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Class A serial preferred stock becomes the class of stock with majority
voting rights if an event of default occurs as defined by the Agreement, as
amended. In addition, the Class A serial preferred stockholder, at their option,
may convert the stock into a senior term loan with the same rights and
privileges as the senior term loan as defined by the Agreement.
(6) CLASS B SERIAL PREFERRED STOCK
The Class B serial preferred stock is cumulative with dividends payable in
additional shares of Class B serial preferred stock at a rate of 2.25% per
quarter (9.31% effective rate per annum). The Class B serial preferred stock has
no voting rights and imposes restrictions on the payment of cash dividends to
classes of common stock if shares of Class B serial preferred stock are
outstanding.
(7) INCOME TAXES
Income taxes consist of the following:
<TABLE>
<S> <C>
Current.................................................................. $ 200,000
Deferred................................................................. 100,000
Charge in lieu of income taxes........................................... 1,554,000
----------
$1,854,000
=========
</TABLE>
The actual income tax expense for 1992 differs from the expected income tax
that would result from applying the Federal statutory income tax rate of 34% to
earnings before income taxes as follows:
<TABLE>
<S> <C>
Expected income tax expense.............................................. $1,721,587
State income taxes, net of Federal income tax benefit.................... 132,000
Other.................................................................... 413
----------
$1,854,000
=========
</TABLE>
Due to the quasi-reorganization plan and debt/equity restructuring
resulting in a change in ownership in excess of 50% for income tax purposes,
limitations resulted on the future utilization of net operating loss
carryforwards generated in 1991 and prior periods. As a result, the Company has
bases differences between its financial statement carrying amounts and its
income tax reporting amounts. The 1992 effect of the realization of certain
financial and tax reporting differences have been reflected as a charge in lieu
of income taxes with a corresponding increase in additional paid-in capital.
The significant differences between financial and taxable income/loss are
primarily due to depreciation and inventory lower of cost or market provisions.
For income tax reporting purposes, the Company has an operating loss
carryforward of $10,702,000 which is available to offset future taxable income,
in any, through 2007.
10
<PAGE> 12
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) LEASES
The Company is obligated under various operating leases for machinery and
transportation equipment and office space that expire at various dates over the
next four years. At June 27, 1992, the approximate future minimum lease payments
under noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
MINIMUM LEASE PAYMENTS
----------------------
<S> <C>
1993............................................................ $1,492,000
1994............................................................ 1,102,000
1995............................................................ 303,000
1996............................................................ 13,000
----------------------
$2,910,000
==================
</TABLE>
Rental expense for operating leases for the year ended June 27, 1992 was
approximately $1,559,000.
(9) COMMITMENTS
The Company has an agreement with its lender which provides the Company
with letters of credit. The Company is charged a fee at 2% on the undrawn
letters of credit which at June 27, 1992 amounted to $3,665,000.
(10) RELATED PARTY TRANSACTIONS
The Company has a combined management fee expense of $300,000 for the year
ended June 27, 1992 to a stockholder and affiliates.
The Company paid an affiliate for marketing services $125,000 for the year
ended June 27, 1992. Such payments were made pursuant to a consulting agreement.
(11) PROFIT SHARING PLAN
The Company sponsors a profit sharing plan for all employees who meet
stated length of service requirements. Contributions to the plan are made at the
discretion of the Board of Directors up to a maximum level as defined in the
plan. Profit sharing expense was $850,000 for the year ended June 27, 1992.
(12) MAJOR CUSTOMERS
The Company has three major mass merchandiser customers comprising
approximately 53% of the Company's net sales for the year ended June 27, 1992.
(13) DISCONTINUED OPERATIONS
In February 1992, the Company completed a sale of Diversified Products
Corporation-U.K. in the United Kingdom and a majority owned subsidiary,
Diversified Products Corporation GmbH in western Europe in consideration for
preferred stock in the purchaser's new entity. The sale resulted in a gain of
$472,000 which was accounted for as a reduction in the basis of the preferred
stock investment since the new entity is highly leveraged.
(14) RESEARCH AND DEVELOPMENT
Research and development costs amounted to approximately $1,881,000 for the
year ended June 27, 1992, and are included in selling, general and
administrative expenses.
11
<PAGE> 13
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) CONTINGENT LIABILITIES
There are various claims and pending actions against the Company with
respect to commercial matters, including product liability and patent matters
arising out of the conduct of the business. Although the amount of the ultimate
liability in excess of insurance coverage, if any, with respect to these matters
is not presently determinable, the Company believes that such liability would
not materially affect its consolidated financial position, results of operations
or liquidity.
(16) CONCENTRATIONS OF CREDIT RISK
The Company has accounts receivable due from three mass merchandisers which
their accounts each exceed 10% of total accounts receivable at June 27, 1992.
The amounts due from these customers were $5,201,266 at June 27, 1992.
(17) SUBSEQUENT EVENT
Subsequent to year-end, the lender under its rights as the holder of Class
A serial preferred stock assumed control of the Board of Directors. On June 8,
1993, the Company consummated the sale of substantially all the assets and
transfer the liabilities related to the business of the Company, except for the
senior term loan.
12
<PAGE> 14
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF MARCH 27, 1993
(000'S OMITTED)
<TABLE>
<S> <C>
ASSETS
Cash....................................................................................... $ 498.6
Accounts Receivable
Trade.................................................................................... 36,670.5
Other.................................................................................... 972.3
Reserves................................................................................. (11,521.5)
----------
Total Accounts Receivable......................................................... 26,121.3
----------
Inventories
Raw Material............................................................................. 2,507.4
Work In Process.......................................................................... 2,389.4
Finished Goods........................................................................... 11,115.7
Supply Inventory......................................................................... 535.3
Inventory Reserves....................................................................... (844.2)
----------
Total Inventory................................................................... 15,703.6
----------
Prepaid Expenses........................................................................... 710.1
----------
Total Current Assets.............................................................. 43,033.6
----------
Investments................................................................................ 1,127.8
Property Plant & Equipment
Cost..................................................................................... 44,311.4
Accumulated Depreciation................................................................. (6,009.7)
----------
Net Property, Plant & Equipment................................................... 38,301.7
----------
Intangibles
Cost..................................................................................... 22,350.8
Accumulated Amortization................................................................. (5,694.2)
----------
Net Intangibles.......................................................................... 16,656.6
----------
Deferred Charges......................................................................... 17.5
----------
Total Assets...................................................................... $ 99,137.2
==========
</TABLE>
13
<PAGE> 15
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF MARCH 27, 1993
(000'S OMITTED)
<TABLE>
<S> <C>
LIABILITIES
Cash Overdraft............................................................................ $ 10,042.4
Current Portion Long-term Debt............................................................ 7,616.6
Accounts Payable
Trade................................................................................... 7,377.4
Other................................................................................... 599.2
-----------
Total Accounts Payable........................................................... 7,976.6
-----------
Taxes Payable And Accrued
State Income............................................................................ 4.8
Other Tax Payable....................................................................... 220.7
-----------
Total Tax Payable................................................................ 225.5
-----------
Other Accrued Liabilities
Payroll................................................................................. 861.9
Profit Sharing & Bonus.................................................................. 630.1
Interest................................................................................ 5.5
Other................................................................................... 10,128.6
-----------
Total Other Liabilities.......................................................... 11,626.1
-----------
Long-term debt in default................................................................. 48,606.9
-----------
Total Current Liabilities........................................................ 86,094.1
-----------
Long Term Debt
Industrial Development Bonds............................................................ 652.8
-----------
Total Long Term Debt............................................................. 652.8
-----------
Other Long Term Liabilities
Deferred Income Tax..................................................................... 100.0
-----------
Total Other Long Term............................................................ 100.0
-----------
Total Liabilities................................................................ 86,846.9
-----------
Class A Preferred Stock................................................................... 19,119.2
Shareholders' Deficit:
Class B Preferred Stock................................................................... .3
Common Stock.............................................................................. .1
Treasury Stock............................................................................ (187.0)
Additional Paid-in Capital................................................................ 1,617.6
Retained Earnings
Beginning Balance....................................................................... 3,209.5
Current Year Loss....................................................................... (11,469.4)
Dividends Declared...................................................................... --
End Of Period........................................................................... (8,259.9)
-----------
Total Shareholders' Deficit...................................................... (6,828.9)
-----------
Total Liabilities And Shareholders' Deficit...................................... $ 99,137.2
============
</TABLE>
14
<PAGE> 16
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR TO DATE AS OF MARCH 27, 1993 AND MARCH 28, 1992
(000'S OMITTED)
<TABLE>
<CAPTION>
MARCH 27, 1993 MARCH 28, 1992
-------------- --------------
<S> <C> <C>
Gross Sales................................................. $150,837.5 $170,556.2
Returns and allowances.................................... 9,120.7 12,975.7
Discounts and other....................................... 730.7 682.9
-------------- --------------
Net Sales......................................... 140,986.1 156,897.6
Cost of Goods sold
Material.................................................. 83,606.5 75,833.1
Labor..................................................... 10,897.1 15,859.3
Overhead.................................................. 35,089.7 37,325.5
-------------- --------------
Total Cost of Goods Sold.......................... 129,593.3 129,017.9
Gross Margin................................................ 11,392.8 27,879.7
Expenses
Distribution Expense...................................... 949.9 628.5
Selling and marketing..................................... 7,037.9 4,109.8
Advertising............................................... 1,851.4 1.2
Product development....................................... 1,145.7 1,373.2
Administrative expense.................................... 7,206.0 4,777.0
Other operating (income).................................. (1,309.0) (246.3)
Amortization and management fees.......................... 1,573.7 2,372.3
-------------- --------------
Total Expenses.............................................. 18,455.6 13,015.7
-------------- --------------
Operating Income (Loss)..................................... (7,062.8) 14,864.0
Interest Expense............................................ 3,904.9 4,547.8
Other expense............................................... 372.0 371.0
-------------- --------------
Earnings Before Tax......................................... (11,339.7) 9,945.2
Provision for Taxes......................................... 129.7 3,182.6
-------------- --------------
Net Income (Loss)........................................... $(11,469.4) $ 6,762.6
=========== ===========
Net Income (Loss) Available to Common Shareholders.......... $(15,920.0) $ 3,479.7
=========== ===========
</TABLE>
15
<PAGE> 17
DIVERSIFIED PRODUCTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR TO DATE AS OF MARCH 27, 1993 AND MARCH 28, 1992
(000'S OMITTED)
<TABLE>
<CAPTION>
MARCH 27, 1993 MARCH 28, 1992
-------------- --------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net Income (Loss)......................................... $ (11,469.4) $ 6,762.6
Items providing (not providing) cash from operations...... (649.8) 4,018.2
-------------- --------------
Net Cash Provided (Used) by Operating Activities.......... (12,119.2) 10,780.8
-------------- --------------
Cash Flow from Investing Activities:
Payments for property, plant and equipment................ (2,225.9) (2,680.6)
Proceeds from disposals of property, plant and
equipment.............................................. 250.8 114.9
Disposal of U.K. operations............................... -- (1,900.6)
Other investing activities -- net......................... (99.3) --
-------------- --------------
Net Cash Provided (Used) by Investing Activities.......... (2,074.4) (4,466.3)
-------------- --------------
Cash Flow from Financing Activities:
Payments for treasury stock............................... -- (187.0)
Payment on long-term liabilities.......................... -- (417.4)
Debt reduction............................................ (290.0) (236.9)
Other financing activities -- net......................... -- (13.5)
-------------- --------------
Net Cash Provided (Used) by Investing Activities.......... (290.0) (854.8)
-------------- --------------
Increase (Decrease) in Cash................................. $ (14,483.6) $ 5,459.7
=========== ===========
</TABLE>
16
<PAGE> 18
ITEM 7:
(b) Pro Forma Financial Information
THE ACTAVA GROUP INC.
(FORMERLY FUQUA INDUSTRIES, INC.)
PRO FORMA BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The following Pro Forma Balance Sheet reflects the consolidated balance
sheet of the Company as of March 31, 1993, and the adjustments necessary to
reflect the balance sheet as it might have been affected if the transaction in
which the assets of DP were acquired had been consummated on March 31, 1993. The
transaction will be accounted for as a purchase with the net assets recorded at
their acquisition cost and consolidated with those of the Company. The
statements are based on the assumptions explained herein. The pro forma
information presented should be read in conjunction with the separate
consolidated financial statements and notes thereto of the Company and DP and
the Pro Forma Statements of Continuing Operations and notes thereto.
17
<PAGE> 19
THE ACTAVA GROUP INC.
(FORMERLY FUQUA INDUSTRIES, INC.)
PRO FORMA BALANCE SHEET
MARCH 31, 1993
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION> ADJUSTMENTS
FOR
DP ACTAVA ACQUISITION PRO FORMA
------- ---------- ----------- ----------
JUNE 8, MARCH 31, MARCH 31,
1993 1993 1993
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................ $ 2,214 $ 17,238 $ (11,630)(1) $ 0
(7,822)(5) --
Short-term investments.......................... -- 42,522 -- 42,522
Receivables..................................... 11,821 252,188 -- 264,009
Inventories..................................... 17,050 71,127 -- 88,177
Prepaid expenses................................ 604 34,993 -- 35,597
Future income tax benefits...................... -- 44,887 -- 44,887
------- ---------- ----------- ----------
Total current assets.................. 31,689 462,955 (19,452) 475,192
Property, plant and equipment................... 44,110 415,777 (7,956)(2) 451,931
Less allowances for depreciation................ (6,243) (175,640) 6,243(2) (175,640)
------- ---------- ----------- ----------
37,867 240,137 (1,713) 276,291
Notes receivable from Triton Group Ltd.......... -- 31,726 -- 31,726
Other assets.................................... 1,146 48,704 (1,028)(3) 48,822
Long-term investments........................... -- 25,384 -- 25,384
Intangibles..................................... 16,336 396,990 (16,336)(4) 396,990
------- ---------- ----------- ----------
Total assets.......................... $87,038 $1,205,896 $ (38,529) $1,254,405
======= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other
current liabilities........................... $25,979 $ 200,171 $ 318(6) $ 218,646
(7,822)(5)
Notes payable................................... 45,712 95,632 (27,678)(7) 113,666
Current portion of long-term debt............... 7,600 12,375 (7,600)(7) 12,375
------- ---------- ----------- ----------
Total current liabilities............. 79,291 308,178 (42,782) 344,687
Deferred income taxes........................... -- 63,152 -- 63,152
Long-term debt.................................. 749 217,628 (749)(7) 217,628
Subordinated debt............................... -- 190,690 -- 190,690
Minority interest in photofinishing
subsidiary.................................... -- 195,685 -- 195,685
Preferred Stock-Class A......................... 19,119 -- (19,119)(8) 0
Redeemable Common Stock......................... -- -- 12,000(1) 12,000
Stockholders' equity
Common Stock.................................... 1 22,768 (1)(8) 22,768
Additional capital.............................. 1,618 45,519 (1,618)(8) 45,519
Retained earnings............................... (13,553) 283,825 13,553(8) 283,825
Less treasury stock -- at cost.................. (187) (121,549) 187(8) (121,549)
------- ---------- ----------- ----------
Total equity.................................... (12,121) 230,563 12,121 230,563
------- ---------- ----------- ----------
Total liabilities and stockholders'
equity.............................. $87,038 $1,205,896 $ (38,529) $1,254,405
======= ========= ========= =========
</TABLE>
18
<PAGE> 20
THE ACTAVA GROUP INC.
(FORMERLY FUQUA INDUSTRIES, INC.)
NOTES TO PRO FORMA BALANCE SHEET
(UNAUDITED)
The Pro Forma Balance Sheet as of March 31, 1993 assumes that the
acquisition of DP occurred on March 31, 1993. The DP historical information is
as of the June 8, 1993, acquisition date which represents the actual
acquisition. The acquisition will be accounted for using the purchase method
such that the net assets acquired (assets acquired less liabilities assumed)
will be recorded at their respective fair values, as determined by appraisals
and studies undertaken as of the effective date of the acquisition. The total
acquisition cost does not exceed the fair value of the net assets acquired,
therefore, there will be no goodwill recorded. The accounts of the Company's
subsidiary which acquired the assets will be consolidated with those of the
Company. The information presented below should be read in conjunction with the
separate consolidated financial statements and notes thereto of the Company and
DP and the Pro Forma Statements of Continuing Operations and notes thereto. The
format of the pro forma statements is to adjust the combined total of the DP and
Actava financial information as presented in their respective columns as
required to reflect the purchase price allocation.
The Pro Forma Balance Sheet as of March 31, 1993 presents the acquisition
of DP assets and assumption of DP liabilities by the Company in exchange for
cash of $11,629,500 and 1,090,909 shares of the Company's Common Stock valued at
$12,000,000; total value of cash and common stock was $23,629,500 while total
liabilities assumed were $44,331,000. The DP assets acquired and allocated
purchase price were cash of $2,214,000; accounts receivable of $11,821,000;
inventories of $17,050,000; prepaid expenses of $604,000; property, plant and
equipment of $36,154,000; other assets of $118,000; and, intangibles with zero
value. The DP liabilities assumed and recorded were accounts payable and accrued
expenses of $26,297,000 (including bank overdrafts of $8,566,000) and notes
payable of $18,034,000.
(1) Adjustment to reflect the disbursement of cash of $11,629,500 and
the issuance of 1,090,909 shares of Actava redeemable common stock valued
at $12,000,000 by Actava which represents a capital contribution to DP of
$23,629,500 and represents Actava's investment in DP which is eliminated in
consolidation.
(2) Adjustment to reflect the DP plant, property and equipment at its
allocated purchase price of $36,154,000. This resulted in a net write-down
of net property, plant and equipment of $1,713,000 after adjusting the
gross book value by $7,956,000 from $44,110,000 to $36,154,000 and
eliminating the reserve for depreciation of $6,243,000 which was applicable
to DP.
(3) Adjustment to reduce the DP other assets to their allocated
purchase price of $118,000 by reducing the value of $1,146,000 on the books
of the selling corporation by $1,028,000.
(4) Adjustment to writedown acquired DP intangibles from $16,336,000
to their allocated purchase price of zero.
(5) Reclassification of cash of $7,822,000 remaining after combining
DP's cash of $2,214,000 and Actava's cash of $17,238,000 and adjusting for
$11,629,500 disbursed per footnote (1). This entry is required to reflect
in accrued expenses net cash and acquired bank overdrafts.
(6) Adjustment to reflect $21,000 of accounts payable not assumed in
transaction and $339,000 of contingent liabilities associated with the
purchase, including costs of closing certain production facilities; net
adjustment is $318,000.
(7) Adjustment to reflect that a note payable of $18,034,000 was
assumed pursuant to the acquisition while liabilities not assumed were
other notes payable of $27,678,000, the current portion of long-term debt
of $7,600,000, and long-term debt of $749,000. The adjustment of
$27,678,000 for notes payable reflects that, of the $45,712,000 recorded,
only $18,034,000 was assumed.
19
<PAGE> 21
(8) Adjustment to reflect that Preferred Stock -- Class A of
$19,119,000, Common Stock of $1,000, Additional Capital of $1,618,000,
Retained Earnings of $13,553,000 and Treasury Stock of $187,000 related to
the selling corporation and were not transferred pursuant to the
acquisition.
20
<PAGE> 22
THE ACTAVA GROUP INC.
(FORMERLY FUQUA INDUSTRIES, INC.)
PRO FORMA STATEMENTS OF CONTINUING OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The following Pro Forma Statements of Continuing Operations reflect the
consolidated results of operations of the Company for the year ended December
31, 1992 and the quarter ended March 31, 1993 after giving effect to the
acquisition of certain assets and liabilities of DP as if the acquisition had
taken place at the beginning of 1992. The statements are based on the
assumptions explained herein. The acquisition will be accounted for using the
purchase method such that the net assets acquired (assets acquired less
liabilities assumed) will be recorded at their respective fair values. The total
acquisition cost does not exceed the fair value of the net assets acquired,
therefore, there will be no goodwill recorded. The accounts of the Company's
subsidiary which acquired the assets will be consolidated with those of the
Company. These pro forma statements do not necessarily reflect the results of
operations as they would have been if the Company had acquired the assets during
the periods. The information presented below should be read in conjunction with
the separate consolidated financial statements and notes thereto of the Company
and DP and the Pro Forma Balance Sheet and notes thereto. The format of the pro
forma statements is to adjust the combined total of the DP and Actava financial
information as presented in their respective columns as required to reflect
consolidated income.
THE ACTAVA GROUP INC.
(FORMERLY FUQUA INDUSTRIES, INC.)
PRO FORMA STATEMENT OF CONTINUING OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
----------------------------------------------------
ADJUSTMENTS
FOR
DP ACTAVA ACQUISITION PRO FORMA
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Sales......................................................... $156,250 $1,148,743 $ $1,304,993
Cost and Expenses
Costs of products sold.......................................... 141,156 743,130 884,286
Selling, general & administrative............................... 20,916 333,477 (1,641)(3) 352,752
-------- ---------- ----------- ----------
Total operating expenses.................................. 162,072 1,076,607 (1,641) 1,237,038
-------- ---------- ----------- ----------
Operating Profit (Loss)........................................... (5,822) 72,136 1,641 67,955
Interest (expense)................................................ (4,987) (33,454) (38,441 )
Other income (expense) -- net..................................... (444) 6,099 (634)(2) 5,021
-------- ---------- ----------- ----------
Income Before Income Taxes, Minority Interest & Cumulative
Effect of Change in Accounting Principle...................... (11,253) 44,781 1,007 34,535
Income Tax Expense (Benefit)...................................... (2,740) 23,328 2,740(1) 23,328
-------- ---------- ----------- ----------
Income Before Minority Interest & Cumulative Effect of Change in
Accounting Principle.......................................... (8,513) 21,453 (1,733) 11,207
Minority Interest................................................. -- (10,888) -- (10,888 )
-------- ---------- ----------- ----------
Income from Continuing Operations............................... $ (8,513) $ 10,565 $ (1,733) $ 319
======== ========= =========== ==========
Average Common and Common Equivalent Shares:
Primary......................................................... 16,544 17,635
Fully Diluted................................................... 18,346 19,437
Earnings Per Share of Common Stock:(4)
Primary-Income from Continuing Operations....................... N/A $ .64 $ .02
Fully Diluted-Income from Continuing Operations................. N/A $ .76 $ .19
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1993
-----------------------------------------
ADJUSTMENTS
FOR
DP ACTAVA ACQUISITION PRO FORMA
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Sales......................................................... $ 42,440 $ 263,887 $ 306,327
Cost and Expenses
Costs of products sold.......................................... 39,749 202,485 242,234
Selling, general & administrative............................... 6,227 63,905 (235)(3) 69,897
-------- ---------- ----------- ----------
Total operating expenses.................................. 45,976 266,390 (235) 312,131
-------- ---------- ----------- ----------
Operating (Loss).......................................... (3,536) (2,503) 235 (5,804 )
Interest (expense).............................................. (1,074) (10,129) (11,203 )
Other income -- net............................................. (124) 1,733 (158)(2) 1,451
-------- ---------- ----------- ----------
(Loss) Before Income Taxes, Minority Interest & Cumulative
Effect of Change in Accounting Principle...................... (4,734) (10,899) 77 (15,556 )
Income Tax Expense (Benefit).................................... 22 (4,165) (22)(1) (4,165 )
-------- ---------- ----------- ----------
(Loss) Before Minority Interest & Cumulative Effect of Change in
Accounting Principle.......................................... (4,756) (6,734) 99 (11,391 )
Minority Interest................................................. -- 1,860 -- 1,860
-------- ---------- ----------- ----------
(Loss) from Continuing Operations................................. $ (4,756) $ (4,874) $ 99 $ (9,531 )
======== ========= =========== ==========
Average Common and Common Equivalent Shares:
Primary......................................................... 16,544 17,635
Fully Diluted................................................... 18,346 19,437
(Loss) Per Share of Common Stock:(4)
Primary -- (Loss) from Continuing Operations.................... N/A $ (.29) $ (.54 )
Fully Diluted -- (Loss) from Continuing Operations.............. N/A $ (.22) $ (.45 )
</TABLE>
22
<PAGE> 24
THE ACTAVA GROUP INC.
(FORMERLY FUQUA INDUSTRIES, INC.)
NOTES TO PRO FORMA STATEMENTS OF CONTINUING OPERATIONS
(UNAUDITED)
The Pro Forma Statements of Continuing Operations are based upon the
Company's consolidation of the subsidiary which was formed to acquire the assets
of DP. As explained in NOTES TO PRO FORMA BALANCE SHEET, the assets and
liabilities will be recorded at their respective fair market values based upon
appraisals and studies undertaken as of the effective date of the acquisition.
The actual determination of fair values and the resulting allocation of the
purchase price may have an impact on the pro forma results of operations which
is different from that reflected in the accompanying Pro Forma Statements of
Continuing Operations.
The actual income (loss) from continuing operations of DP for periods
herein presented have been used to make the pro forma adjustments. Income (loss)
from continuing operations for this pro forma adjustment does not include taxes.
As DP had a June fiscal year-end and the Company has a December 31 year-end, the
income (loss) from continuing operations of DP for the interim periods which
comprise a calendar year have been used for the pro forma adjustments. Thus, for
the year ended December 31, 1992, results for the period from June 29, 1991 to
December 31, 1991 (sales and income of $117,529,000 and $9,711,000,
respectively) have been excluded from the DP fiscal year-end results and results
for the period beginning June 29, 1992 through December 31, 1992 (sales and loss
of $98,277,000 and ($2,957,000), respectively) have been included. The pro forma
results for the quarter ended March 31, 1993 include DP's loss for that interim
period (sales and loss of $42,440,000 and ($4,756,000), respectively).
(1) The DP tax benefit is eliminated as no additional benefit may be
recognized for the periods. The Company has recognized tax benefits in
prior periods and no further tax benefit can be recognized for this year.
There would be no consolidated tax expense in this period.
(2) Adjustment to reduce investment income by the amount earned on
investments which would have been unavailable due to payment of cash
portion of purchase price.
(3) For December 31, 1992 and March 31, 1993, amortization expense of
$1,359,000 and $340,000, respectively, has been excluded from actual income
(loss) for pro forma information as the associated intangibles were written
off for purchase price allocation purposes. Also, minority shareholder
management fee expense of $282,000 and income of $105,000 have been
excluded for each respective period.
(4) Primary earnings per share is computed by dividing adjusted income
(loss) from continuing operations by the average number of common and
common equivalent shares outstanding during the period. The number of
shares used in this calculation is based on the weighted average number of
shares outstanding during the period adjusted to give effect to the shares
issued had this transaction taken place at the beginning of the period
presented. Fully diluted earnings per share is computed using such average
shares as adjusted by the assumed conversion of 6 1/2% Debentures for the
period presented. Income (loss) from Continuing Operations is adjusted by
interest (net of applicable income taxes) on the 6 1/2% Debentures.
23
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this Amendment No. 2 to Form 8K filed for June 8,
1993, to be signed on its behalf by the undersigned hereunto duly authorized.
THE ACTAVA GROUP INC.
(Formerly Fuqua Industries, Inc.)
Registrant
/s/ FREDERICK B. BEILSTEIN, III
--------------------------------------
Frederick B. Beilstein, III
Senior Vice President and
Chief Financial Officer
Dated: October 7, 1994
24
