SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 17, 1996
------------------------
GUILFORD MILLS, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-6922 13-1995928
- -------------------------------- ------------------------------------- ---------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification Number)
4925 West Market Street, Greensboro, N.C. 27407
- ----------------------------------------------- ------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (910) 316-4000
------------------------
<PAGE>
Item 7. Financial Statements and Exhibits
On January 17, 1996, Guilford Mills, Inc. completed the acquisition of Hofmann
Laces, Ltd. and affiliates pursuant to a stock purchase agreement. On February
1, 1996, Guilford Mills, Inc. filed a description of the acquisition under Item
2 of Form 8-K, and is hereby filing the financial information required under
Item 7 with this Form 8-K/A. (a) Financial Statements of businesses acquired.
Page Number
Report of Independent Public Accountants. . . . . . . . . . . . . . F-2
Combined Balance Sheet of Hofmann Laces, Ltd. and Affiliates as of
December 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Combined Statement of Income and Retained Earnings of Hofmann
Laces, Ltd. and Affiliates For the Year ended December 31, 1995. . F-4
Combined Statement of Cash Flows of Hofmann Laces, Ltd.
and Affiliates For the Year ended December 31, 1995. . . . . .F-5
Notes to Combined Financial Statements of Hofmann Laces, Ltd.
and Affiliates - December 31, 1995. . . . . . . . . . F-6 - F-13
(b) The pro forma financial information furnished
herein reflects the effect of the Acquisition on
the consolidated financial statements of Guilford
Mills, Inc.
Page
Number
Unaudited Pro Forma Consolidated Financial Data . . . . . . . . . . . . F-14
Unaudited Pro Forma Consolidated Statement of Income For
the Year Ended October 1, 1995. . . . . . . . . . . . . . . . . .F-14
Unaudited Pro Forma Consolidated Statement of Income For
the Three Months Ended December 31, 1995. . . . . . . . . . . . . F-15
Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . F-16
1
<PAGE>
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.
GUILFORD MILLS, INC.
(Registrant)
Date: April 1, 1996 By: /s/ Terrence E. Geremski
--------------------------------
Terrence E. Geremski
Vice President/Chief Financial Officer
and Treasurer
2
<PAGE>
Hofmann Laces, Ltd. and Affiliates
Combined Financial Statements as of December 31, 1995
Together with Auditors' Report
F-1
<PAGE>
Report of Independent Public Accountants
To The Stockholder and Board of Directors of
Hofmann Laces, Ltd. and Affiliates:
We have audited the accompanying combined balance sheet of Hofmann Laces, Ltd.
(a New York Corporation) and Affiliates (Curtains and Fabrics, Inc. and Raschel
Fashion Interknitting, Ltd.) (herein after referred to collectively as the
Companies) as of December 31, 1995, and the related combined statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these 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.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Hofmann
Laces, Ltd. and Affiliates as of December 31, 1995, and the results of their
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
March 22, 1996.
F-2
<PAGE>
Hofmann Laces, Ltd. and Affiliates
Combined Balance Sheet -- December 31, 1995
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 22,628
Accounts receivable, net 10,058
Inventories 28,952
Other current assets 161
Total current assets 61,799
Property and equipment , net 54,736
Cash surrender value of life insurance 187
Other assets 202
$116,924
Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt $ 6,461
Borrowings under lines of credit 25,702
Accounts payable 4,885
Accrued liabilities 2,348
Total current liabilities 39,396
Long-term debt 35,406
Deferred income taxes 192
Commitments and contingencies (Notes 9 and 10)
Stockholder's equity:
Common stock 0
Additional paid-in capital 10,867
Retained earnings 31,063
Total stockholder's equity 41,930
$116,924
The accompanying notes to financial statements
are an integral part of this balance sheet.
F-3
<PAGE>
Hofmann Laces, Ltd. and Affiliates
Combined Statement of Income and Retained Earnings
For the Year Ended December 31, 1995
(in thousands)
Net sales $77,199
Costs and expenses:
Cost of goods sold 52,211
Selling and administrative 9,517
61,728
Operating income 15,471
Other expenses (income):
Interest expense 3,382
Gain on dispositions of property and equipment (1,350)
Other, net 24
2,056
Income before provision for income taxes 13,415
Provision for income taxes 309
Net income 13,106
Retained earnings, January 1, 1995 18,802
S Corporation distributions (1,652)
Reversal of deferred income taxes 807
Retained earnings, December 31, 1995 $31,063
The accompanying notes to financial statements
are an integral part of this statement.
F-4
<PAGE>
Hofmann Laces, Ltd. and Affiliates
Combined Statement of Cash Flows
For the Year Ended December 31, 1995
(in thousands)
Cash flows from operating activities:
Net income $13,106
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 8,651
Gain on disposition of property and equipment (1,350)
Deferred income taxes 55
Increase in cash surrender value of life insurance (68)
Change in:
Accounts receivable (224)
Inventories (6,785)
Other current assets (4)
Accounts payable (112)
Accrued liabilities 767
Net cash provided by operating activities 14,036
Cash flows from investing activities:
Capital expenditures (22,995)
Issuance of note receivable (35)
Proceeds from dispositions of property and equipment 1,560
Proceeds from repayments of note receivable 29
Net cash used in investing activities
(21,441)
Cash flows from financing activities:
Lines of credit borrowings (repayments), net 16,418
Proceeds from issuance of long-term debt 17,112
Payments of long-term debt (6,147)
S Corporation distributions (1,652)
Net cash provided by financing activities
25,731
Net increase in cash and cash equivalents 18,326
Cash and cash equivalents, January 1, 1995 4,302
Cash and cash equivalents, December 31, 1995
$22,628
Supplemental disclosures of cash information - Cash paid during
the year for:
Interest $ 3,144
Income taxes 96
Schedule of noncash activities - Reversal of deferred income taxes 807
The accompanying notes to financial statements
are an integral part of this statement.
F-5
<PAGE>
Hofmann Laces, Ltd. and Affiliates
Notes to Combined Financial Statements
December 31, 1995
(dollars in thousands)
1. Description of Business and Summary of Significant Accounting Policies:
Description of Business
Hofmann Laces, Ltd. and Affiliates (the Companies) are engaged in the production
of warp knitted fabrics, including lace and plain-stretch fabrics, sold
primarily to manufacturers in the home furnishings, apparel, intimate apparel
and industrial/technical markets and the production of curtains, shower curtains
and bedding products of knitted fabric sold primarily to the retail industry
including the department store, discount store and variety store segments. Sales
are primarily domestic with a small percentage of sales to foreign countries.
The Companies also operate five outlet stores where certain of its products are
sold directly to consumers.
Principles of Combination
The combined financial statements include the accounts of the following
companies which are related through common ownership:
Hofmann Laces, Ltd.
Curtains and Fabrics, Inc.
Raschel Fashion Interknitting, Ltd.
Cobleskill Novelty Fibers, Inc. (merged into Raschel Fashion Interknitting,
Ltd., in May 1995), and its wholly owned subsidiaries-
American Rehers Zwirne Corp. (dissolved in May 1995)
American Rehers Zwirne, Limited Partnership (dissolved in May 1995)
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.
Actual results may differ from those estimates.
Cash and Cash Equivalents
All investments purchased with an original maturity of three months or less are
considered to be cash equivalents. The carrying amount of cash equivalents
approximates fair value.
F-6
<PAGE>
Accounts Receivable and Concentration of Credit Risk
The Companies sell fabric products to manufacturers of home furnishings and
intimate apparel and sell curtains and other home furnishings of knitted fabric
to major retailers throughout the United States. Sales to two major retailers
amounted to approximately 43% of the Companies' total net sales in 1995. The
Companies grant credit terms to customers after an evaluation of their financial
condition. The Companies maintain a credit insurance policy, with a financially
sound insurance company, that covers the majority of all outstanding accounts,
subject to specified credit limits. Allowances for uncollectible accounts were
$454 at December 31, 1995.
Inventories
Inventories are carried at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
Property and Equipment
Property is carried at cost, and depreciation is provided for financial
reporting primarily on the straight-line method. Accelerated methods are used
for income tax reporting. Depreciation rates are reviewed annually and revised,
if necessary, to reflect estimated remaining useful lives. The Financial
Accounting Standards Board recently issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This statement requires long-lived assets to be evaluated for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Companies will adopt SFAS No. 121 during
1996 and does not expect its provisions to have a material effect on the
Companies' consolidated results of operations in the year of adoption.
Income Taxes
The stockholder of the Companies has elected under Subchapter S of the Internal
Revenue Code to have the Companies income taxed directly to the stockholder.
Under this election, the corporate income or loss of the S Corporations is
allocated to their stockholder for inclusion in his personal federal income tax
returns and accordingly, no provision for federal income taxes is required in
the accompanying combined statement of income and retained earnings. In
addition, state income taxes are provided for any income attributable to states
that do not recognize S Corporation status.
Deferred income taxes are provided, when applicable, for timing differences
between the recognition of certain income and expense items for financial
reporting and income tax purposes. These differences relate primarily to
different depreciation methods used for financial accounting and for tax
purposes.
Foreign Currency Translation
Current assets and obligations denominated in foreign currencies are translated
at the rate of exchange in effect at the balance sheet date. Unrealized gains
and losses from foreign currency translation are included in the determination
of net income.
F-7
<PAGE>
Revenue Recognition
The Companies recognize sales when goods are shipped or when ownership is
assumed by the customer.
2. Inventories:
Inventories at December 31, 1995, consist of the following:
Raw materials $ 9,832
Work-in-process 12,653
Finished goods 5,544
Manufacturing supplies 923
Total inventories $28,952
3. Property and Equipment:
Property and equipment at December 31, 1995, consist of the following:
Land $ 401
Buildings 14,580
Machinery and equipment 75,467
Furniture, fixtures, computer equipment and automobiles
3,028
93,476
Less-Accumulated depreciation (41,004)
52,472
Construction in progress and machinery deposits 2,264
Total property and equipment, net $54,736
F-8
<PAGE>
4. Long-term Debt:
<TABLE>
<CAPTION>
<S> <C>
Long-term debt, which is collateralized by substantially all accounts receivable
and property and equipment, consist of:
Industrial Development Revenue bond, due in monthly payments of $5, through
November 1999, interest at 80% of the prime rate (8.5% at December 31, 1995),
collateralized by mortgage on certain real property $ 246
Bondpayable, due in annual payments of $555 in 1996 and $560 in 1997, interest
at 9.7% to 10%, collateralized by certain machinery and equipment, furniture and
fixtures and accounts receivable 1,115
Schoharie County Industrial Development Agency note, due in monthly payments of
$3 to $4 (including interest at 4% to 7% per annum), through July 1999 with a
remaining principal and interest balance of $351 due in August 1999,
collateralized by certain machinery and equipment 427
New York Job Development Authority note, due in monthly payments of $2
(including interest at 7% per annum), through February 1997, with a remaining
principal balance of $200 due in March 1997, collateralized by mortgage on
certain real property 216
Term note, due in monthly payments of $30 through March 1997, interest at 6.78%,
collateralized by certain equipment 425
Term notes, due in monthly payments of $63 through November 1997, interest at
6.94%, collateralized by certain equipment 1,375
Term note, due in monthly payments of $50 through August 1999, interest at
7.27%, collateralized by certain equipment 2,150
Herkimer County Industrial Development Agency note, due in annual payments of
$30 through 1997, non-interest bearing except that in event of default, interest
upon default will be 2% per annum on unpaid principal balance, unsecured 60
Termloan, due in monthly payments of $118 through November 2000, interest at the
prime rate, collateralized by certain machinery and equipment, repaid in January
1996 in connection with the acquisition of the Companies by Guilford Mills, Inc.
(see Note 11) 6,847
Termnote, due in monthly payments of $168 through December 2001, interest at the
prime rate, collateralized by mortgages on certain real property and personal
property of the stockholder, repaid in January 1996 in connection with the
acquisition of the Companies by Guilford Mills, Inc. (see Note 11) 11,895
Termloan, due in monthly payments of $104 from July 1996 to June 2002, interest
at the prime rate, collateralized by certain equipment, repaid in January 1996
in connection with the acquisition of the Companies by Guilford Mills, Inc. (see
Note 11) 7,461
Equipment note, due in monthly payments of $84 beginning January 1997 through
December 2001, interest at the prime rate, collateralized by certain equipment,
repaid in January 1996 in connection with the acquisition of the Companies by
Guilford Mills, Inc. (see Note 11) 5,011
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Equipment note, payable to Mayer Textile that was to be refinanced as part of
the $5,011 term note above, repaid in February 1996 in connection with the
acquisition of the Companies by Guilford Mills, Inc. (see Note 11) $ 4,598
Other, repaid in January 1996 in connection with the acquisition of the
Companies by Guilford Mills, Inc. (see Note 11) 41
Total 41,867
Less - Current portion (6,461)
Long-term debt $35,406
</TABLE>
The fair value of long-term debt of the Companies approximates the carrying
values.
Maturities of long-term debt, not considering amounts repaid in January and
February 1996 in connection with the acquisition of the Companies by Guilford
Mills, Inc. (see Note 11), are as follows:
Year
1996 $ 6,461
1997 8,774
1998 7,298
1999 7,371
2000 6,363
Thereafter 5,600
$41,867
Certain of the above obligations contain negative covenants relating to net
working capital and stockholder's equity, along with various other restrictions.
The Companies were in compliance with these covenants or have obtained the
necessary waivers to such covenants at December 31, 1995.
5. Lines of Credit:
The Companies have bank lines of credit with aggregate borrowing limits of
$11,000. Borrowings under the lines of credit bear interest at various variable
market rates and are secured by accounts receivable. Borrowings are limited to
75% - 80% of eligible collateral. As of December 31, 1995, $3,780 was
outstanding under the lines of credit. All amounts outstanding were repaid in
January 1996 in connection with the acquisition of the Companies by Guilford
Mills, Inc. (see Note 11).
F-10
<PAGE>
The Companies also have a DM 31,000,000 revolving credit line with
Landesgirokasse of Germany. The revolving credit line bears interest at variable
market rates (4.9% at December 31, 1995) and expires December 1, 1996.
Borrowings under the revolving credit line are collateralized by a restricted
cash account deposited with Landesgirokasse of Germany. As of December 31, 1995,
outstanding borrowings under the revolving credit line were $21,922 and related
restricted cash deposits of $22,274 are included in cash and cash equivalents in
the accompanying combined balance sheet. Borrowings under this revolving credit
line were repaid with the restricted cash deposits, and the revolving credit
line was terminated in January 1996 in connection with the acquisition of the
Companies by Guilford Mills, Inc. (see Note 11).
6. Income Taxes:
A portion of state income taxes for certain states in which the Companies
operate are payable directly by the Companies and, as such, the provision for
income taxes included in the accompanying combined statement of income and
retained earnings is for these state income taxes only and does not include
federal and certain state income taxes of approximately $5,200 for 1995, which
otherwise would have been payable if the Companies had not elected Subchapter S
status under the Internal Revenue Code.
Distributions are generally paid in amounts approximating the stockholder's
personal income tax liabilities resulting from the current S Corporation
earnings. Distributions of $16,500, which represents the stockholder's
accumulated S Corporation earnings, were made in January 1996 in connection with
the acquisition of the Companies by Guilford Mills, Inc. (see Note 11).
Prior to its merger into Raschel Fashion Interknitting, Ltd. (an S Corporation)
in May 1995, Cobleskill Novelty Fibers, Inc. and subsidiaries were taxable
entities for federal and state income tax purposes. The accompanying combined
statement of operations and retained earnings includes provision for federal and
state income taxes for these entities through the date of merger. Due to the
merger, the amount of previously recorded deferred income taxes exceeds the
expected future liability to the Companies by $807. This amount has been
reversed and added directly to retained earnings in the accompanying combined
financial statements.
F-11
<PAGE>
7. Capital Stock:
Capital stock at December 31, 1995, consists of the following:
<TABLE>
<CAPTION>
Par Value Shares Shares
Authorized Outstanding
<S> <C> <C> <C>
Hofmann Laces, Ltd., common stock $0 200 200
Curtains and Fabrics, Inc., common stock,
Class A voting 0 400 376
Curtains and Fabrics, Inc., common stock,
Class B nonvoting 0 200 24
Raschel Fashion Interknitting, Ltd., common
stock 0 800 698
</TABLE>
8. Defined Contribution Plan:
The Companies maintain a qualified defined contribution plan for all eligible
full-time employees. Contributions to the plan are determined annually by the
Board of Directors of the Companies. During 1995, expenses related to the plan
were $517.
9. Commitments:
The Companies lease various knitting equipment, automobiles and warehouse,
stores, showroom and office space under non-cancelable operating leases through
2001. Future minimum lease payments are as follows:
Year
1996 $1,036
1997 967
1998 830
1999 779
2000 756
Thereafter 126
$4,494
Rent expense for all operating leases was $819 for the year ended December 31,
1995.
F-12
<PAGE>
10. Contingencies:
The Companies are involved in various litigation and environmental matters
arising in the ordinary course of business. Although the final outcome of these
legal and environmental matters cannot be determined, based on the facts
presently known, it is management's opinion that the final resolution of these
matters will not have a material adverse effect on the Companies' financial
position or future results of operations.
11. Subsequent Event:
On January 12, 1996, 100% of the outstanding common stock of the Companies was
sold to Guilford Mills, Inc., an SEC registrant that produces, processes and
sells warp and circular knit fabrics and woven velours. The purchase price
consists of a cash payment equal to the combined net worth of the Companies as
of December 31, 1995, 200,000 shares of Guilford Mills, Inc. common stock and a
contingent payment in accordance with a formula based on Guilford Mills, Inc.'s
price-earnings multiple and the Companies' average annual after-tax net income
for the five-year period ending on December 31, 2000.
F-13
<PAGE>
Unaudited Pro Forma Financial Data
The following unaudited pro forma consolidated statements of income for the year
ended October 1, 1995 and the three months ended December 31, 1995 and the
unaudited pro forma consolidated balance sheet as of December 31, 1995 were
prepared to illustrate the estimated effects of the Acquisition. The unaudited
pro forma consolidated statements of income present the consolidated results of
operations of Guilford Mills, Inc. (the Company) as if the Acquisition had
occurred as of the beginning of each period presented. The unaudited pro forma
consolidated balance sheet as of December 31, 1995 reflects the Acquisition as
if it had occurred on that date. The unaudited pro forma consolidated financial
statements are based upon the respective historical financial statements. The
pro forma consolidated financial data does not purport to represent what the
Company's financial position or results of operations would actually have been
if the Acquisition had occurred on December 31, 1995 or as of the beginning of
each period presented nor does the pro forma consolidated financial data purport
to be indicative of future results. The pro forma consolidated financial data
should be read in conjunction with the audited consolidated financial statements
of the Company filed with the Securities Exchange Commission in its Annual
Report on Form 10-K for the fiscal year ended October 1, 1995 and the unaudited
condensed consolidated financial statements of the Company filed with the
Securities Exchange Commission in its Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995 and the notes thereto.
Unaudited Pro Forma Consolidated Statement of Income
For the Year Ended October 1, 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
Combined Pro Forma
Consolidated Hofmann Laces, Ltd. Consolidated
Guilford Mills, Inc. and Affiliates Statement
For the Year Ended For the Year Ended Pro Forma of
October 1, 1995 December 31, 1995 Adjustments Income
<S> <C> <C> <C> <C>
---------------------- ---------------------- -------------------- ---------------------
Net Sales $782,518 $ 77,199 $ -- $859,717
Cost and Expenses:
Cost of goods sold 644,344 52,211 286 (1) 696,841
Selling and administrative 70,358 9,517 251 (2) 80,126
---------------------- ---------------------- -------------- ----- ---------------------
714,702 61,728 537 776,967
---------------------- ---------------------- -------------- ----- ---------------------
Operating Income 67,816 15,471 (537) 82,750
Other Expenses:
Interest Expense 14,122 3,382 1,676 (3) 19,180
Other Expenses (income),net 3,506 (1,326) -- 2,180
---------------------- ---------------------- -------------- ----- ---------------------
17,628 2,056 1,676 21,360
---------------------- ---------------------- -------------- ----- ---------------------
Income Before Income Taxes 50,188 13,415 (2,213) 61,390
Income Taxes 16,552 309 4,317 (4) 21,178
---------------------- ---------------------- -------------- ----- ---------------------
Net Income $ 33,636 $ 13,106 $ (6,530) $ 40,212
====================== ====================== ============== ===== =====================
Average Shares Outstanding 13,983,000 -- 200,000 (5) 14,183,000
Net Income per Share $2.41 -- -- $2.84
---------------------- ---------------------- -------------- ----- ---------------------
</TABLE>
(1) Represents depreciation expense as a result of excess purchase price over
book value allocation.
(2) Represents the amortization of goodwill on a 40 year life and other
intangibles on an average 5 year life as a result of excess purchase price over
book value allocation.
(3) Represents interest expense on the borrowings related to the purchase price
of $41.9 million, partially offset by $ 0.7 million interest savings resulting
from the refinancing of approximately $36 million of Hofmann Laces, Ltd. and
affiliates debt. The borrowings are from the $150 million credit facility at an
interest rate of 5.68%.
(4) Represents additional income tax provision of $5.2 million that results from
changing the income tax filing status of Hofmann Laces, Ltd. and affiliates from
S-Corporation to C-Corporation , offset by a reduction of income tax provision
related to the pro forma net increase in depreciation expense, amortization
expense and interest expense.
(5) Represents 200,000 shares of Guilford Mills, Inc. common stock delivered to
the seller at the closing date.
<PAGE>
F-14
Unaudited Pro Forma Consolidated Statement of Income
For the Three Months Ended December 31, 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
Consolidated Combined Pro Forma
Guilford Mills, Inc. Hofmann Laces, Ltd. Consolidated
For the Three and Affiliates For Statement
Months Ended the Pro Forma of
December 31, 1995 Three Months Ended Adjustments Income
December 31, 1995
----------------------- ---------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net Sales $174,185 $18,665 $ -- $192,850
Cost and Expenses:
Cost of goods sold 146,586 14,046 72 (1) 160,704
Selling and administrative 19,091 2,406 63 (2) 21,560
----------------------- ---------------------- ---------- ----- ----------------
165,677 16,452 135 182,264
----------------------- ---------------------- ---------- ----- ----------------
Operating Income 8,508 2,213 (135) 10,586
Other Expense:
Interest Expense 3,400 940 419 (3) 4,759
Other Expenses (income), net 1,010 (58) -- 952
----------------------- ---------------------- ---------- ----- - ---------------
4,410 882 419 5,711
----------------------- ---------------------- ---------- ----- ----------------
Income Before Income Taxes 4,098 1,331 (554) 4,875
Income Taxes 1,350 92 229 (4) 1,671
----------------------- ---------------------- ---------- ----- ----------------
Net Income $ 2,748 $ 1,239 $(783) $ 3,204
======================= ====================== ========== ===== ================
Average Shares Outstanding 14,082,000 -- 200,000 (5) 14,282,000
Net Income per Share $ .20 -- -- $.22
----------------------- ---------------------- ---------- ----- ---------------
</TABLE>
(1) Represents depreciation expense as a result of excess purchase price over
book value allocation.
(2) Represents the amortization of goodwill on a 40 year life and other
intangibles on an average 5 year life as a result of excess purchase price over
book value allocation.
(3) Represents interest expense on the borrowings related to the purchase price
of $41.9 million, partially offset by $0.2 million interest savings resulting
from the refinancing of approximately $36 million of Hofmann Laces, Ltd. and
affiliates debt. The borrowings are from the $150 million credit facility at an
interest rate of 5.68%.
(4) Represents additional income tax provision of $0.5 million that results from
changing the income tax filing status of Hofmann Laces, Ltd. and affiliates from
S-Corporation to C-Corporation, offset by a reduction of income tax provision
related to the pro forma net increase in depreciation expense, amortization
expense and interest expense.
(5) Represents 200,000 shares of Guilford Mills, Inc. common stock delivered to
the seller at the closing date.
<PAGE>
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Combined Pro Forma
Consolidated Hofmann Laces, Consolidated
Guilford Mills, Ltd. and Affiliates Pro Forma Balance
Inc. December 31, 1995 Adjustments Sheet
December 31, 1995
------------------- -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 17,411 $ 22,628 $ -- $ 40,039
Accounts receivable, net 126,254 10,058 -- 136,312
Inventories 114,233 28,952 -- 143,185
Prepaid income taxes 5,927 -- -- 5,927
Other current assets 8,168 161 (487) (1) 7,842
------------------- -------------------- ----------- ----- -----------------
Total current assets 271,993 61,799 (487) 333,305
Property - net 238,354 54,736 2,000 (1) 295,090
Cash surrender value of life insurance,
net of policy loans 38,589 187 -- 38,776
Other 19,615 202 3,025 (1) 22,842
------------------- -------------------- ----------- ----- -----------------
Total assets 568,551 116,924 4,538 690,013
------------------- -------------------- ----------- ----- -----------------
Liabilities
Short-term borrowings 14,562 25,702 77,912 (2) 118,176
Current maturities of long-term debt 2,250 6,461 (3,891) (2) 4,820
Accounts payable 42,959 4,885 -- 47,844
Accrued expenses 32,918 2,348 513 (1) 35,779
------------------- -------------------- ----------- ----- -----------------
Total current liabilities 92,689 39,396 74,534 206,619
Long-term debt 164,809 35,406 (32,091) (2) 168,124
Deferred income taxes 18,011 192 -- 18,203
Other deferred liabilities 25,002 -- -- 25,002
Minority interest 1,780 -- -- 1,780
------------------- -------------------- ----------- ----- -----------------
Total liabilities 302,291 74,994 42,443 419,728
------------------- -------------------- ----------- ----- -----------------
Stockholders' Investment
Preferred stock -- -- -- --
Common stock 393 -- -- 393
Capital in excess of par 37,490 10,867 (8,466) (1) 39,891
Retained earnings 286,510 31,063 (31,063) (1) 286,510
Foreign currency translation loss (12,490) -- -- (12,490)
Unamortized stock compensation (926) -- -- (926)
Treasury stock, at cost (44,717) -- 1,624 (1) (43,093)
------------------- -------------------- ----------- ----- -----------------
Total stockholders' investment 266,260 41,930 $(37,905) 270,285
------------------- -------------------- ----------- ----- -----------------
Total liabilities and stockholders' $568,551 $116,924 4,538 $690,013
investment ------------------- -------------------- ----------- ----- -----------------
</TABLE>
(1) The purchase price consists of three components: (i) a cash payment equal to
the combined net worth of the Hofmann Laces, Ltd. and affiliates at December 31,
1995, less the loan referred to below (ii) 200,000 shares of Guilford's common
stock and (iii) a contingent payment based on a formula of Guilford's
price-earnings' multiple and the average annual after-tax net income for the
five year period ending on December 31, 2000 of Hofmann Laces, Ltd. and
affiliates. In addition, Guilford loaned $16.5 million to Hofmann Laces, Ltd.
and affiliates which was equal to accumulated adjustments account which was
distributed to the seller. The Company also incurred expense of $1.0 million of
professional fees relating to the acquisition. Also, since a determination
cannot be made as to the contingent payout, if any, no amounts have been
reflected in the pro forma adjustments.
The acquisition was accounted for using the purchase method of accounting.
Because information required to determine allocation of the purchase price, such
an appraisal of fixed assets and intangible assets, is incomplete at this time,
the excess purchase price over book value has been classified as fixed assets
and other assets which represents goodwill and other intangibles. This
allocation of the purchase price is based on historical costs and management's
estimates which may differ from the final allocation.
(2) Represents amount borrowed to fund the purchase price and refinance of
approximately $36 million of Hofmann Laces, Ltd. and affiliates debt.
F-16
