<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20579
_______________________
FORM 8-K/A
CURRENT REPORT
(AMENDMENT NO. 1 TO
FORM 8-K)
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 4, 1995
AMERICAN BILTRITE INC.
- -------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 1-4773 04-1701350
- -------------------------------------------------------------------------
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
57 River Street, Wellesley Hills, MA 02181
- -------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (617) 237-6655
N/A
- -----------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements of Business Acquired. Financial statements of
-----------------------------------------
the business acquired are filed as Exhibit 99.1 hereto.
(b) Pro Forma Financial Information. Pro forma financial information is
-------------------------------
filed as Exhibit 99.2 hereto.
(c) Exhibits.
--------
2.1 Purchase Agreement dated as of March 31, 1995 by and among
Ocean State Jewelry Inc., a Rhode Island corporation ("Ocean
State"), and certain limited partners of K&M Associates L.P.,
a Rhode Island limited partnership ("K&M") (previously
filed).
2.2 Agreement and Plan of Merger dated as of April 1, 1995 by and
among American Biltrite Inc., a Delaware corporation (the
"Company"), Jewelco Acquisition Co., Inc., AIMPAR, Inc.,
Arthur I. Maier, Bruce Maier and Edythe J. Wagner (previously
filed).
2.3 Option Agreement dated as of April 1, 1995 by and among
Ocean State and certain limited partners of K&M (previously
filed).
2.4 Agreement and Plan of Merger dated as of May 3, 1995 by and
among the Company, Zirconia Acquisition Co., Inc., Wilbur A.
Cowett Incorporated and Wilbur A. Cowett (previously filed).
23.1 Written Consent of Deloitte & Touche LLP (filed herewith).
99.1 Financial Statements of Business Acquired (filed herewith).
99.2 Pro Forma Financial Information (filed herewith).
2
<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.
AMERICAN BILTRITE INC.
----------------------
(Registrant)
By: /s/ Gilbert K. Gailius
----------------------
Gilbert K. Gailius
Vice President, Finance,
Chief Financial Officer
and Director
(principal financial
and accounting officer)
July 18, 1995
- -----------------
(Date)
3
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit Page
No. Exhibit Description No.
- ------- ------------------- ----
<S> <C> <C>
2.1 Purchase Agreement dated as of March
31, 1995 by and among Ocean State and
certain limited partners of K&M
(previously filed).
2.2 Agreement and Plan of Merger dated as
of April 1, 1995 by and among the
Company, Jewelco Acquisition Co., Inc.,
AIMPAR, Inc., Arthur I. Maier, Bruce
Maier and Edythe J. Wagner (previously
filed).
2.3 Option Agreement dated as of April 1,
1995 by and among Ocean State and
certain limited partners of K&M
(previously filed).
2.4 Agreement and Plan of Merger dated as
of May 3, 1995 by and among the
Company, Zirconia Acquisition Co.,
Inc., Wilbur A. Cowett Incorporated and
Wilbur A. Cowett (previously filed).
23.1 Written Consent of Deloitte & Touche LLP
(filed herewith).
99.1 Financial Statements of Business
Acquired (filed herewith).
99.2 Pro Forma Financial Information (filed
herewith).
</TABLE>
4
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
American Biltrite Inc. on Form S-8 of our report on the financial statements of
K&M Associates, L.P dated May 26, 1995, appearing in this Current Report on Form
8-K/A filed by American Biltrite Inc. on July 18, 1995.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 14, 1995
<PAGE>
Exhibit 99.1
INDEPENDENT AUDITORS' REPORT
K & M Associates L.P. (a Limited Partnership):
We have audited the accompanying balance sheets of K & M Associates L.P. (a
Limited Partnership) as of March 31, 1995 and 1994, and the related statements
of operations, partnership capital, and cash flows for each of the three years
in the period ended March 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of K & M Associates L.P. at March 31, 1995 and
1994, and the results of its operations and its cash flows for each of the three
years in the period ended March 31, 1995 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 26, 1995
<PAGE>
K & M ASSOCIATES L.P.(A LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 907,799.89 $ 3,534,970.94
Accounts receivable, trade (net of allowance
for uncollectible accounts of $194,782.82
in 1995 and $519,069.86 in 1994) 7,657,489.49 8,895,065.59
Inventories (Notes 2 and 5) 10,895,050.17 7,128,877.77
Prepayments and other current assets 129,632.52 166,860.24
Capital contributions receivable - 114,158.43
---------------- ----------------
Total current assets 19,589,972.07 19,839,932.97
---------------- ----------------
EQUIPMENT (Note 2):
Office and computer equipment 1,210,045.50 1,243,324.54
Warehouse equipment 585,042.23 452,068.14
---------------- ----------------
Total 1,795,087.73 1,695,392.68
Less accumulated depreciation and
amortization 1,221,430.02 1,367,203.18
---------------- ----------------
Equipment, net 573,657.71 328,189.50
---------------- ----------------
OTHER ASSETS - Principally trademarks 34,339.00 33,002.05
---------------- ----------------
TOTAL $ 20,197,968.78 $ 20,201,124.52
================ ================
<CAPTION>
LIABILITIES AND PARTNERSHIP CAPITAL 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable, trade $ 1,526,860.65 $ 1,487,692.39
Advances from related parties (Note 4) 2,500,000.00 -
Subordinated notes payable to affiliated
parties (Note 4) 3,600,000.00 -
Distributions payable to partners (Note 3) 2,826,615.04 2,011,683.79
Liability for customer markdown credits,
promotional allowances, returns, deferred
jewelry service revenue, and other deferred
credits (Note 2) 3,166,469.13 6,222,522.26
Accrued expenses 233,023.96 604,530.79
---------------- ----------------
Total current liabilities 13,852,968.78 10,326,429.23
NONCURRENT LIABILITY - Subordinated
notes payable to affiliated parties (Note 4) - 3,600,000.00
COMMITMENTS AND CONTINGENCIES
(Notes 6 and 8)
PARTNERSHIP CAPITAL (See Statements
of Partnership Capital)(Notes 2 and 3) 6,345,000.00 6,274,695.29
---------------- ----------------
TOTAL $ 20,197,968.78 $ 20,201,124.52
================ ================
</TABLE>
See notes to financial statements.
<PAGE>
K & M ASSOCIATES L.P. (A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES (Note 2):
Sales $53,716,907.16 $51,238,467.68 $43,735,884.13
Less markdown credits, promotional allowances, returns, and
deferred jewelry service revenue 8,109,978.34 9,733,891.30 10,794,170.78
-------------- -------------- --------------
Net revenues 45,606,928.82 41,504,576.38 32,941,713.35
COST OF REVENUES 25,790,868.50 21,602,198.77 17,542,328.52
-------------- -------------- --------------
GROSS MARGIN 19,816,060.32 19,902,377.61 15,399,384.83
OPERATING EXPENSES (includes reimbursements to a partner and
rent to a related party aggregating $1,798,745.43, $1,616,479.44
and $1,738,469.71 in 1995, 1994 and 1993, respectively) 15,866,245.17 15,407,731.40 15,636,870.29
GENERAL PARTNERS' COMPENSATION (Note 3) 456,500.01 456,500.00 415,000.00
-------------- -------------- --------------
OPERATING INCOME (LOSS) FROM JEWELRY SALES AND
SERVICE 3,493,315.14 4,038,146.21 (652,485.46)
-------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest income 86,076.60 68,925.47 25,658.96
Interest expense - related parties (Note 4) (559,350.65) (404,277.07) (307,293.96)
Interest on partners capital (Note 2) (660,710.06) (378,151.54) (468,815.23)
Other income 467,284.01 132,963.84 308,054.66
-------------- -------------- --------------
Other income (expense), net (666,700.10) (580,539.30) (442,395.57)
-------------- -------------- --------------
NET INCOME (LOSS) $ 2,826,615.04 $ 3,457,606.91 $(1,094,881.03)
============== ============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
K & M ASSOCIATES L.P.(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERSHIP CAPITAL
YEARS ENDED MARCH 31, 1995,1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
BALANCES, APRIL 1, 1992 $ 628,921.82 $ 5,100,619.02 $ 5,729,540.84
Capital contributions - 127,926.27 127,926.27
Capital distributions to limited partner - (47,972.34) (47,972.34)
Net loss (117,699.71) (977,181.32) (1,094,881.03)
------------ -------------- --------------
BALANCES, MARCH 31, 1993 511,222.11 4,203,391.63 4,714,613.74
Capital contributions 86,741.41 27,417.02 114,158.43
Net income 366,692.75 3,090,914.16 3,457,606.91
Distributions to partners (120,999.76) (1,890,684.03) (2,011,683.79)
------------ -------------- --------------
BALANCES, MARCH 31, 1994 843,656.51 5,431,038.78 6,274,695.29
Capital contributions - 70,304.71 70,304.71
Net income 339,193.80 2,487,421.24 2,826,615.04
Distributions to partners (339,193.80) (2,487,421.24) (2,826,615.04)
------------ -------------- --------------
BALANCES, MARCH 31, 1995 $ 843,656.51 $ 5,501,343.49 $ 6,345,000.00
------------ -------------- --------------
</TABLE>
See notes to financial statements.
<PAGE>
K & M ASSOCIATES L.P. (A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,826,615.04 $ 3,457,606.91 $(1,094,881.03)
Adjustments to reconcile net income (loss)
to cash provided by (used for) operating activities:
Depreciation and amortization 231,771.52 182,134.03 191,652.33
Loss on asset disposals 9,007.48 - 5,830.07
Increase (decrease) in cash from changes in current assets
and liabilities:
Accounts receivable, trade 1,237,576.10 1,752,914.43 (3,705,833.08)
Inventories (3,766,172.40) (1,453,882.40) 309,505.51
Prepayments and other current assets 37,227.72 (17,012.63) (24,680.07)
Capital contributions receivable 114,158.43 (114,158.43) 47,972.34
Accounts payable, trade 39,168.26 (264,984.06) (38,429.32)
Advances from related parties 2,500,000.00 (3,215,000.00) 2,822,429.40
Distributions payable to partners (2,011,683.79) - (47,972.34)
Liability for customer markdown credits, etc. (3,056,053.13) 2,402,515.30 211,187.41
Accrued expenses (371,506.83) 114,268.21 (40,559.52)
-------------- -------------- --------------
Cash provided by (used for) operating activities (2,209,891.60) 2,844,401.36 (1,363,778.30)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (486,247.21) (112,589.62) (147,329.09)
(Increase) decrease in trademarks (1,336.95) 1,606.30 (9,803.11)
-------------- -------------- --------------
Cash used for investing activities (487,584.16) (110,983.32) (157,132.20)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution 70,304.71 114,158.43 127,926.27
Capital distributions - - (47,972.34)
Deferred subordinated loans from
affiliated parties - - 1,100,000.00
Due from related party - - 900,000.00
-------------- -------------- --------------
Cash provided by financing activities 70,304.71 114,158.43 2,079,953.93
-------------- -------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,627,171.05) 2,847,576.47 559,043.43
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,534,970.94 687,394.47 128,351.04
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 907,799.89 $ 3,534,970.94 $ 687,394.47
============== ============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
K & M ASSOCIATES L.P. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. PARTNERSHIP AGREEMENT
Effective April 1, 1988, subject to the Restated Agreement of Limited
Partnership (the "Restated Agreement"), the Partnership was recapitalized as
the result of the withdrawal of certain partners, the admission of new
partners, changes in partner status and distributions as provided in the
prior agreement. The Restated Agreement provides for the termination of the
Partnership no later than March 31, 1996 (see Note 9).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUES - The Partnership sells costume jewelry to retail accounts
(primarily mass merchandising chains) on both a direct and service basis.
Sales revenues are recognized when the products are shipped, and the related
service revenues are recognized when the service is performed. Sales
allowances for expected returns, markdowns, and adjustments are recorded
when the related revenues are recognized.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of cash and
highly liquid investments with maturities not exceeding three months.
Interest payments for the years ended March 31, 1995, 1994 and 1993 are
substantially the same as amounts recorded as interest expense in the
statements of operations.
INVENTORIES - The Partnership values its inventories at the lower of cost,
determined on a first-in, first-out basis, or market.
EQUIPMENT - Depreciation and amortization is provided based on the estimated
useful lives of the assets and is computed using an accelerated method.
Fully depreciated or amortized assets are removed from the Partnership's
accounting records.
PARTNERSHIP CAPITAL - Partnership capital accounts earned interest at the
prime rate plus 2% (11% at March 31, 1995), as defined in the Restated
Agreement. Such interest payments are recognized as expense in determining
net income or loss.
INCOME TAXES - Under current income tax laws, the Partnership is not subject
to federal or state income taxes; accordingly, the Partnership does not
provide for income taxes. Any income or loss for tax purposes is included in
the tax returns of the partners.
3. ALLOCATION AND DISTRIBUTION OF PARTNERSHIP INCOME OR LOSS
Allocation of income or loss is governed by the terms of the Partnership
Agreement in effect in a given year. The allocation of income or loss is
made after deducting general partners' compensation and interest on
partners' capital, as stipulated in the Amended and Restated Agreement.
<PAGE>
3. ALLOCATION AND DISTRIBUTION OF PARTNERSHIP INCOME OR LOSS (CONTINUED)
The terms of the Restated Agreement require that distributions be made to
the partners in amounts not less than 50% of the Partnership's income for
the year (after deducting general partners' compensation and interest on
partners' capital). In June 1995, the general partners determined the amount
of capital distributions payable for the year ended March 31, 1995 to be
$2,826,615.04. In May 1994, the general partners determined the amount of
capital distributions payable for the year ended March 31, 1994 to be
$2,011,683.79.
4. RELATED PARTIES
At March 31, 1995 and 1994, there were subordinated notes payable to
affiliated parties of $3,600,000.00, which mature on September 15, 1995.
Such notes bear interest at the prime rate plus 1% determined monthly (10.0%
at March 31, 1995); these notes are subordinated to current and future
obligations to financial institutions. Interest expense related to these
notes aggregated $321,749.97, $252,750.10 and $178,125.04 in 1995, 1994 and
1993, respectively.
Affiliates of the general partners make advances to the Partnership to fund
working capital requirements. These advances bear interest at the prime
rate. Of the aggregate amounts advanced, $2,500,000.00 was outstanding at
March 31, 1995 and none were outstanding at March 31, 1994. Interest expense
related to these advances was $237,600.68 and $151,526.97 in 1995 and 1994,
respectively.
The Partnership leases a facility under a ten-year noncancelable lease from
425 Dexter Associates (a limited partnership), which is owned by affiliates
of the partners (see Note 6).
An affiliate of a general partner acts as a marketing agent for the
Partnership and is reimbursed for all reasonable expenses incurred as an
agent. During the years ended March 31, 1995, 1994 and 1993, the Partnership
recorded expenses of $1,607,875.99, $1,425,609.00 and $1,547,599.27,
respectively, for such reimbursements.
5. INVENTORIES
Inventories consisted of the following at March 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Merchandise $ 9,975,648.83 $ 6,522,506.66
Supplies 736,471.06 446,397.37
Display fixtures 182,930.28 159,973.74
-------------- --------------
Total $10,895,050.17 $ 7,128,877.77
============== ==============
</TABLE>
<PAGE>
6. LEASES
The Partnership leases certain plant and office facilities and automobiles
under noncancelable operating leases. Under the terms of a lease with 425
Dexter Associates (the "Dexter Lease") (see Note 4), the Partnership pays
rent of $190,870.44 annually, as well as all costs and expenses of operating
and maintaining the leased premises. At March 31, 1995, future minimum
payments under all noncancelable leases, including the Dexter Lease, are as
follows:
1996 $179,152.83
1997 36,000.00
1998 36,000.00
1999 36,000.00
-----------
Total $287,152.83
===========
The Dexter Lease expires on December 31, 1995 and is subject to renewal in
five-year increments up to thirty years at the Partnership's option.
Rental expense under all operating leases for the years ended March 31,
1995, 1994 and 1993 was $334,652.26, $363,066.06 and $322,996.75,
respectively.
7. LETTERS OF CREDIT
On April 24, 1994, the Partnership entered into a demand discretionary line-
of-credit agreement with a bank in order to facilitate business with foreign
vendors. Under the terms of the agreement, the Partnership agreed to
purchase $525,000.00 in short-term Treasury Bills, which were pledged as
collateral against the $500,000.00 line of credit and were held by the bank.
At March 31, 1995, open letters of credit aggregated $53,046.00.
8. CONTINGENCIES
From time to time the Partnership becomes involved in litigation, which
occurs in the normal course of business. In the opinion of management,
there are no pending matters which, either individually or in the aggregate,
could have a material effect on financial position or the results of
operations.
9. SUBSEQUENT EVENTS
Subsequent to April 1, 1995, American Biltrite Inc. (through its
subsidiary, Ocean State Jewelry, Inc.) (collectively, "American Biltrite"),
acquired the controlling general partner. At the same time, other partners
also transferred their interests, in part or in whole, to American
Biltrite, and the status of the remaining general partner was changed to
that of a limited partner. As a result of these transactions, American
Biltrite now controls 65.5% of the total interest in the Partnership. In
addition, agreements have been put in place which would allow American
Biltrite to acquire the remaining independent interests over the next four
years.
<PAGE>
9. SUBSEQUENT EVENTS (CONTINUED)
Contemporaneously with the transfer of interests to American Biltrite, a new
Partnership agreement was executed (the "Amended and Restated Agreement"),
the provisions of which are effective as of April 1, 1995. Among the
provisions of the Amended and Restated Agreement are a reduction in
authorized capital of the Partnership at April 1, 1995 to $2,000,000.00 (to
be accomplished through distributions to the partners), elimination of
interest payments on capital accounts, a change in the percentage of income
which must be distributed at the end of fiscal years subsequent to March 31,
1995 to 40%, a change in the Partnership's fiscal year end to December 31,
and termination of the Partnership no later than December 31, 2005. In
addition, the Amended and Restated Agreement required that 100% of income
for the year ended March 31, 1995 be distributed to the partners holding
interests as of that date.
* * * * * *
<PAGE>
Exhibit 99.2
American Biltrite Inc.
Unaudited Pro Forma Combined Balance Sheet
April 1, 1995
(in thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------- ----------------------------------------
ABI K&M Combined
April 1, 1995 March 31, 1995 Adjustments (Note B) Companies
--------------- ---------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 5,587 $ 908 $ 6,495
Short-term investments 14,000 14,000
Accounts receivable, net 39,559 7,657 47,216
Inventories 75,421 10,895 86,316
Deferred income taxes 4,936 4,936
Prepaid expenses & other current assets 2,709 130 2,839
----------------- -------------- -------------
Total current assets 142,212 19,590 161,802
Property, plant and equipment, net 98,229 574 98,803
Investments in associated companies 1,662 $ 3,649 [1] 1,100
(4,211) [3]
Goodwill, net 13,439 9,287 [1] 22,836
110 [2]
Deferred income taxes 16,274 16,274
Other assets 9,336 34 9,370
----------------- -------------- ------------- -------------
Total assets $281,152 $20,198 $ 8,835 $310,185
================= ============== ============= =============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 24,450 $ 1,527 $ 25,977
Accrued expenses 33,913 3,399 $ 110 [2] 37,422
Distributions payable 2,827 2,827
Income taxes payable 4,133 4,133
Due to affiliates 2,500 2,500
Notes payable to affiliates 3,600 3,600
Notes payable 6,271 [1] 6,271
Current portion of long-term debt 2,106 2,515 [1] 4,621
----------------- -------------- ------------- -------------
Total current liabilities 64,602 13,853 8,896 87,351
Long-term debt 92,053 3,209 [1] 95,262
Pensions 14,766 14,766
Deferred income taxes 15,794 15,794
Accrued postretirement benefit obligation 10,755 10,755
Other liabilities 20,139 20,139
Outside interests 9,360 2,134 [3] 11,494
----------------- -------------- ------------- -------------
Total liabilities 227,469 13,853 14,239 255,561
Stockholders' Equity
Common stock 18,997 18,997
Retained earnings 49,063 49,063
Equity adjustment from translation (2,305) (2,305)
Less cost of shares in treasury (12,072) 941 [1] (11,131)
Partnership capital 6,345 (6,345) [3]
----------------- -------------- ------------- -------------
Total Stockholders' Equity 53,683 6,345 (5,404) 54,624
----------------- -------------- ------------- -------------
Total Liabilities & Stockholders' Equity $281,152 $20,198 $ 8,835 $310,185
================= ============== ============= =============
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
<PAGE>
American Biltrite Inc.
Unaudited Pro Forma Combined Statement of Earnings
For the quarter ended April 1,1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------------- ---------------------------------------
K&M
ABI Quarter Ended
Quarter Ended March 31, Quarter
April 1, 1995 1995 Adjustments (Note B) Combined
--------------- --------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $89,691 $7,725 $97,416
Interest and other income 2,267 241 2,508
--------------- --------------- -------------
91,958 7,966 99,924
Costs and expenses:
Cost of products sold 62,162 3,846 66,008
Selling, general and administrative
expenses 21,679 3,798 $ 116 [4] 25,479
(114) [5]
Interest 2,156 140 114 [6] 2,553
143 [7]
Other 172 (172) [11]
--------------- --------------- ------------- -------------
85,997 7,956 87 94,040
--------------- --------------- ------------- -------------
Earnings before income taxes and
other items 5,961 10 (87) 5,884
Provision for income taxes 2,531 (67) [8] 2,464
Income attributable to outside
interests 1,411 102 [9] 1,513
--------------- --------------- ------------- -------------
Net earnings $ 2,019 $ 10 $(122) $ 1,907
=============== =============== ============= =============
Per share of common stock:
Primary $0.53 $0.50
Fully diluted $0.53 $0.50
Number of common shares
outstanding for purposes of
computing net income per
common share:
Primary 3,819 32 [10] 3,851
=============== ============= =============
Fully diluted 3,819 32 [10] 3,851
=============== ============= =============
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
<PAGE>
American Biltrite Inc.
Unaudited Pro Forma Combined Statement of Earnings
For the year ended December 31,1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma Historical
----------------------------- --------------------------------------- ------------
ABI Congoleum K&M
Year Ended Year Ended Year Ended
December 31, December 31, Year March 31,
1994 1994 Adjustments (Note B) Combined 1995
-------------- -------------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $106,145 $265,784 ($ 8,222) [a] $363,707 $45,607
Interest and other income 1,455 1,184 (39) [b] 2,600 553
-------------- -------------- ------------- ---------- ------------
107,600 266,968 (8,261) 366,307 46,160
Costs and expenses:
Cost of products sold 75,870 173,184 (8,222) [a] 240,832 25,791
Selling, general and administrative
expenses 23,410 58,190 (500) [c] 81,100 16,323
Interest 606 6,968 7,574 559
660
Other
-------------- -------------- ------------- ---------- ------------
99,886 238,342 (8,722) 329,506 43,333
Earnings before income taxes and
other items 7,714 28,626 461 36,801 2,827
Provision for income taxes 2,814 11,131 956 [d] 14,901
Equity Earnings/Income
attributable to outside interests 7,361 (17,000) [e] (9,639)
-------------- -------------- ------------- ---------- ------------
Net earnings $ 12,261 17,495 ($17,495) $ 12,261 $ 2,827
============== ============== ============= ========== ============
Per share of common stock:
Primary $3.25
Fully diluted $3.24
Number of common shares
outstanding for purposes of
computing net income per
common share:
Primary 3,769
==============
Fully diluted 3,779
==============
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
<PAGE>
(Continued from Previous Page)
<TABLE>
<CAPTION>
Pro Forma
---------------------------------------
Year
Adjustments (Note B) Combined
------------- ---------- ----------
<S> <C> <C> <C>
Net sales $409,314
Interest and other income 3,153
------------- ----------
412,467
Costs and expenses:
Cost of products sold 266,623
Selling, general and administrative
expenses $ 470 [4] 97,436
(457) [5]
Interest 455 [6] 9,160
572 [7]
Other (660) [11]
------------- ----------
380 373,219
Earnings before income taxes and
other items (380) 39,248
Provision for income taxes 397 [8] 15,298
Equity Earnings/Income
attributable to outside interests (1361) [9] (11,000)
------------- ----------
Net earnings ($2,138) $ 12,950
============= ==========
Per share of common stock:
Primary $3.41
Fully diluted $3.40
Number of common shares
outstanding for purposes of
computing net income per
common share:
Primary 32 [10] 3,801
============= ==========
Fully diluted 32 [10] 3,811
============= ==========
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
<PAGE>
AMERICAN BILTRITE INC.
Notes to Unaudited Pro Forma Combined Financial Statements
April 1, 1995
(in thousands)
Note A - Basis of Presentation
- ------------------------------
The unaudited pro forma combined financial statements are presented to give
effect to the acquisition on May 4, 1995, of a 57.5% interest in K&M
Associates L.P. ("K&M") by American Biltrite Inc. ("ABI") effective April 1,
1995. Through its wholly-owned subsidiary, Ocean State Jewelry, Inc., ABI
purchased an aggregate 50.5% limited partnership interest in K&M from several
limited partners for an aggregate amount of $11,033, of which $5,309 was in cash
and $5,724 was in the form of promissory notes issued by ABI. On April 1, 1995,
ABI also indirectly acquired the 7% sole general partnership interest in K&M for
$1,647, of which $706 was in cash and $941 was through the issuance of 32,178
shares of ABI's common stock.
The Unaudited Pro Forma Combined Statement of Earnings for the year ended
December 31, 1994 includes the historical results of operations of K&M for the
year ended March 31, 1995; the historical results of operations of ABI for the
year ended December 31, 1994; and pro forma adjustments to reflect the
acquisition of K&M as though it had occurred on January 1, 1994. Also included
in the Unaudited Pro Forma Combined Statement of Earnings for the year ended
December 31, 1994 are the historical results of operations of Congoleum
Corporation ("Congoleum") for the year ended December 31, 1994. Effective
February 1995, ABI obtained majority voting control over Congoleum and beginning
with the first quarter of 1995, ABI consolidates Congoleum into its financial
statements. Prior to 1995, ABI accounted for its investment in Congoleum using
the equity method. The pro forma adjustments pertaining to both Congoleum and
ABI reflect the change in control over Congoleum as though it had occurred on
January 1, 1994.
The Unaudited Pro Forma Combined Statement of Earnings for the quarter ended
April 1, 1995 includes the historical results of operations of K&M for the
quarter ended March 31, 1995; the historical results of operations of ABI for
the quarter ended April 1, 1995 (which include the results of operations of
Congoleum for the same period); and pro forma adjustments to reflect the
acquisition of K&M as though it had occurred on January 1, 1994.
Because the fiscal year ends of K&M and ABI are different, the results of
operations of K&M for the quarter ended April 1, 1995 are included in both the
Unaudited Pro Forma Combined Statement of Earnings for the year ended December
31, 1994 and the Unaudited Pro Forma Combined Statement of Earnings for the
quarter ended April 1, 1995.
The Unaudited Pro Forma Combined Balance Sheet is based upon the historical
balance sheets of K&M as of March 31, 1995, and ABI as of April 1, 1995. The
historical amounts have been adjusted to reflect the acquisition of K&M.
The pro forma data is presented for informational purposes only. Accordingly,
the pro forma data is not necessarily indicative of the operating results or
financial position that would have occurred had the acquisition been consummated
at January 1, 1994 and April 1, 1995, respectively, or of future operating
results or financial position. The unaudited pro forma combined financial
statements should be read in conjunction with the historical financial
statements of K&M and ABI.
<PAGE>
AMERICAN BILTRITE INC.
Notes to Unaudited Pro Forma Combined Financial Statements
April 1, 1995
(in thousands)
Note B - Adjustments
- --------------------
The following adjustments have been made in preparation of the unaudited pro
forma combined financial statements:
Pro forma adjustments between ABI and K&M:
[1] The following table depicts the calculation of ABI's purchase price, excess
of purchase price over the book value of the acquired assets, and the
preliminary allocation to the acquired assets. The determination of the
fair market value of the acquired assets and the allocation of the purchase
price to both tangible and intangible assets are currently being performed
and may vary from values presented below.
Excess of purchase price over the book value of the acquired assets is
calculated as follows: (The book value of acquired assets set forth below
represents the product of the book value of the assets as recorded by K&M
as of March 31, 1995 and 57.5%, the percentage of K&M's partnership
interest acquired by ABI in these transactions.)
<TABLE>
<CAPTION>
(in thousands):
<S> <C>
Total consideration paid by ABI $12,680
Transactions costs 256
Assumed liabilities of K&M 8,075
--------
21,011
Book value of the acquired assets of
K&M as of March 31, 1995 11,614
--------
Excess of purchase price over the book value of
the acquired assets $ 9,397
========
Allocation of purchase price:
Cash $ 522
Accounts receivable 4,403
Inventories 6,264
Other current assets 75
Equipment 330
Other assets 20
Goodwill 9,397
--------
$21,011
========
Total consideration paid by ABI consisted of:
Cash $ 6,015
Notes issued 5,724
Common Stock 941
--------
$12,680
========
</TABLE>
<PAGE>
AMERICAN BILTRITE INC.
Notes to Unaudited Pro Forma Combined Financial Statements
April 1, 1995
(in thousands)
[2] To accrue severance costs to be incurred in connection with the
acquisition.
[3] To eliminate the partnership capital accounts and record minority interest.
[4] To record amortization of goodwill using a 20 year amortization period.
[5] To eliminate general partners' compensation. General partner compensation
will be paid to ABI as owners of the general partnership interest, however,
all but an immaterial amount will be eliminated in consolidation.
[6] To record interest expense on $6,271 of debt incurred, in addition to the
promissory notes described in [7], to fund the acquisition. The debt
incurred by ABI in conjunction with the acquisition was in the form of 90
day notes payable to three banks at fixed rates of 6.83% and 6.9375%. The
adjustments reflect the interest expense incurred as if the notes were
renewed at the end of each 90 day period through the end of the periods
presented. Interest expense would change $2.0 and $7.8 for the quarter
ended April 1, 1995 and the year ended December 31, 1994, respectively, if
the interest rate differed by 1/8 percent.
[7] To record interest expense on $5,724 of promissory notes issued to certain
current and former partners of K&M in conjunction with the acquisition of
their interests, in part or in whole. Interest on the notes is based on The
First National Bank of Boston base lending rate plus 1%. The actual rate
charged for the period April 1, 1995 to June 30, 1995 was 10%. Interest
expense would change $1.8 and $7 for the quarter ended April 1, 1995 and
the year ended December 31, 1994, respectively, if the interest rate
differed by 1/8 percent.
[8] To record a provision for ABI's portion of K&M's current period income at
ABI's effective tax rate of 37.5% and 36.5% for the three months ended
April 1, 1995 and the year ended December 31, 1994, respectively.
[9] To record minority interest for the current period income.
[10] To record the issuance of additional shares of ABI Common Stock for the
purchase of the K&M interests.
[11] To eliminate interest on partner's capital which, under the terms of the
Restated Partnership Agreement, is no longer payable.
<PAGE>
AMERICAN BILTRITE INC.
Notes to Unaudited Pro Forma Combined Financial Statements
April 1, 1995
(in thousands)
Pro forma adjustments between ABI and Congoleum:
[a] To eliminate intercompany sales.
[b] To eliminate dividend on Congoleum preferred stock.
[c] To eliminate Congoleum bonuses paid to ABI.
[d] To adjust the tax provision for pro forma adjustments.
[e] To eliminate equity earnings and record income attributable to outside
interests.
Note C - Purchase of Additional Interests
- -----------------------------------------
ABI and a limited partner of K&M have entered into an agreement whereunder ABI
through one of its wholly owned subsidiaries will purchase an additional 5%
interest in K&M. The purchase of the limited partnership interest, for
approximately $1.2 million, is expected to be consummated in the third quarter
of 1995.
ABI, through one of its wholly-owned subsidiaries, and certain limited partners
of K&M have entered into an agreement whereby ABI has the option to buy (call
option) and the limited partners have the option to sell (put option) the
remaining limited partnership interests in K&M. The exercise price is dependent
upon various factors including whether the put or call option is exercised, the
year in which the option is exercised, who exercises their option, and the
balance in the seller's capital account. If all remaining interests are
purchased by ABI, the purchase price would be, at a minimum, approximately $5
million plus the balances in the capital accounts at a certain date as
determined by the terms of the option agreement.
Note D - Additional Payments
- ----------------------------
Certain partners of K&M who held an interest in K&M prior to the acquisition and
retained an interest in K&M subsequent to the acquisition (Special Limited
Partners) are entitled to receive certain payments on an annual basis until such
time as they dispose of their remaining interests. These annual payments,
referred to as "special returns", will equal the product of the aggregate
Special Limited Partners memorandum capital accounts, which approximate $4.7
million at the acquisition date, and a percentage which is one percent over The
First National Bank of Boston base lending rate (At April 1, 1995, The First
National Bank of Boston base lending rate was 9%). Each of the Special Limited
Partners is a party to the option agreement described in Note C.
