SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K / A-2
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 19, 2000
IMPERIAL INDUSTRIES, INC.
(Exact Name of registrant as specified in charter)
<TABLE>
<CAPTION>
DELAWARE 1-7190 65-0854631
- -------------------------------- -------------------------------- ------------------------
<S> <C> <C>
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
</TABLE>
1259 Northwest 21st Street, Pompano Beach, Florida 33069
--------------------------------------------------------
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (954) 917-4114
--------------
Not Applicable
----------------------------------------------------------------
(Former Name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits:
(a) The following financial statements of A & R Supply, Inc. and Affiliates
("A & R" or the "Company") are included herein:
<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Report for A & R Supply, Inc. F-1
Financial Statements of A & R Supply, Inc.
Balance Sheet as of November 30, 1999 F-2
Statement of Income and Retained Earnings for the year ended November 30, 1999 F-3
Statement of Cash Flows for the year ended November 30, 1999 F-4
Notes to financial statements F-6
Independent Auditor's Report for A & R of Foley, Inc. F-13
Financial Statements of A & R of Foley, Inc.
Balance Sheet as of December 31, 1999 F-14
Statement of Income for the year ended December 31, 1999 F-15
Statement of Stockholders' Equity for the year ended December 31, 1999 F-16
Statement of Cash Flows for the year ended December 31, 1999 F-17
Notes to financial statements F-18
Independent Auditor's Report for A & R of Destin, Inc. F-23
Financial Statements of A & R of Destin, Inc.
Balance Sheet as of December 31, 1999 F-24
Statement of Operations from July 1, 1999 (Inception) through December 31, 1999 F-25
Statement of Stockholder's Equity from July 1, 1999 through December 31, 1999 F-26
Statement of Cash Flows from July 1, 1999 through December 31, 1999 F-27
Notes to financial statements F-28
(b) Pro forma financial information.
Imperial Industries, Inc. Unaudited Pro Forma Consolidated
Financial Information F-36
Imperial Industries, Inc.'s ("Imperial Industries") pro forma
condensed consolidated balance sheet as of December 31, 1999
(unaudited) and related notes thereto. F-37
Imperial Industries' pro forma condensed consolidated statement of
operations for the year ended December 31, 1999 (unaudited) and
related notes thereto. F-39
</TABLE>
- 2 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
IMPERIAL INDUSTRIES, INC.
(Registrant)
Dated: April 10, 2000 By: /s/ HOWARD L. EHLER, JR.
-------------------------
HOWARD L. EHLER, JR.
Executive Vice President/
Chief Financial Officer
-3-
<PAGE>
[Letterhead of O'Sullivan Hicks Patton, LLP]
Independent Auditor's Report
----------------------------
Board of Directors
A & R Supply, Inc.
We have audited the accompanying balance sheet of A & R Supply, Inc. (a Florida
"C" corporation) as of November 30, 1999, and the related statements of income
and retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of A & R Supply, Inc. as of
November 30, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ O'Sullivan Hicks Patton, LLP
February 18, 2000
F-1
<PAGE>
A & R Supply, Inc.
BALANCE SHEET
November 30, 1999
===============================================================================
ASSETS
CURRENT ASSETS
Cash $ 40,583
Accounts receivable 234,018
Due from related parties 36,324
Due from shareholder 97,084
Advances 3,989
Inventory 272,059
Deferred tax asset 49,411
-------------
Total current assets 733,468
PROPERTY AND EQUIPMENT, net 377,884
-------------
$ 1,111,352
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank lines of credit $ 113,580
Current maturities of long-term debt 127,525
Current maturities of capital lease obligations 27,625
Accounts payable 371,899
Due from related parties 2,404
Accrued liabilities 11,083
-------------
Total current liabilities 654,116
LONG-TERM DEBT, net of current maturities
Notes payable 321,829
Capital lease obligations 101,823
-------------
Total long-term debt, net of current maturities 423,652
STOCKHOLDERS' EQUITY
Common stock: par value $1 per share, 100 shares
authorized, 100 shares issued and outstanding 100
Retained earnings 33,484
-------------
33,584
-------------
$ 1,111,352
=============
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
A & R Supply, Inc.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the year ended November 30, 1999
===============================================================================
SALES, net $2,935,281
COST OF SALES 2,378,179
-------------
Gross profit 557,102
OPERATING EXPENSES
Selling, general and administrative 438,686
Depreciation 61,950
-------------
500,636
-------------
Operating profit 56,466
OTHER INCOME(EXPENSES)
Interest (61,029)
Other income 6,009
Gain on disposal of assets 46,239
-------------
Net other expenses (8,781)
-------------
Income before income taxes 47,685
PROVISION FOR INCOME TAXES (18,786)
-------------
NET INCOME 28,899
RETAINED EARNINGS, BEGINNING OF YEAR 4,585
-------------
RETAINED EARNINGS, END OF YEAR $ 33,484
=============
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
A & R Supply, Inc.
STATEMENT OF CASH FLOWS
For the year ended November 30, 1999
===============================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 28,899
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 61,950
Bad debt expense, net of recoveries 24,089
Gain on disposal of assets (46,239)
Deferred taxes 18,786
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (46,787)
Due from related parties (13,357)
Advances 7,353
Due from shareholder 4,082
Inventory (47,331)
Other assets 1,113
Increase (decrease) in:
Accounts payable 114,847
Due from related parties (9,541)
Accrued liabilities 5,939
-------------
Net cash provided by operating activities 103,803
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 49,794
Purchases of property and equipment (22,158)
-------------
Net cash provided by investing activities 27,636
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank lines of credit 19,000
Payments on bank lines of credit (45,420)
Proceeds from notes payable 24,096
Payments on notes payable (76,324)
Payments on capital lease obligations (28,363)
-------------
Net cash used for financing activities (107,011)
-------------
NET INCREASE IN CASH 24,429
CASH, BEGINNING OF YEAR 16,154
-------------
CASH, END OF YEAR $ 40,583
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 61,029
Capital lease purchase of property and equipment $145,206
F-5
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows.
1. Description of Operations
A & R Supply, Inc. is a Florida "C" corporation incorporated in 1983. The
Company engages in wholesale of building materials and supplies in
Pensacola, Florida and the surrounding area.
2. 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;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Cash and Cash Equivalents
For purposes of the statement of cash flows, management considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
4. Inventory
Inventory of building materials is valued using the first-in, first-out
(FIFO) method.
5. Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided for in
amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives. Accelerated depreciation methods are
used for both book and tax purposes. The cost of leased assets is amortized
using the accelerated method over the term of the lease. The estimated lives
used in determining depreciation are:
Machinery and equipment 5 - 7 years
Vehicles 5 years
Building and improvements 10 - 39 years
F-6
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
6. Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus the effects
of deferred taxes related primarily to differences between the basis of
assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred taxes are
recognized as current or non-current depending on the classification of the
assets and liabilities to which they relate. Deferred taxes arising from
temporary differences that are not related to an asset or liability are
classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse. The Company's deferred taxes
result from differences in the methods used for recognition of net operating
loss carryforward for financial reporting and tax reporting purposes.
7. Advertising
Advertising costs are expensed as incurred and was $5,662 at November 30,
1999.
NOTE B - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at November 30, 1999:
Land $ 30,000
Building and improvements 234,734
Machinery and equipment 85,997
Vehicles 260,680
-------------
611,411
Less accumulated depreciation (233,527)
-------------
$ 377,884
=============
Depreciation expense for the year ended November 30, 1999 was $61,950.
F-7
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE C - BANK LINE OF CREDIT
The Company has a line of credit with a bank in which it may borrow up to
$50,000. Borrowings under the line bear interest at 8.75%. Principal amounts
are due monthly. The line of credit is secured by receivables and inventory
of the Company. At November 30, 1999, the amount outstanding was $35,648.
The Company has another line of credit with a bank in which it may borrow up
to $100,000. Borrowings under the line bear a variable interest rate, 8% at
November 30, 1999. Principle and interest payments of 1.5% of the
outstanding balance are due on a monthly basis. The line of credit is
secured by a mortgage on the personal property of a stockholder. At November
30, 1999, the amount outstanding was $77,932.
NOTE D - LONG-TERM DEBT
<TABLE>
<S> <C>
Long-term debt at November 30, 1999 is summarized as follows:
Note payable to a bank due in monthly installments
of $617 including interest at 10.95% through
June 2002; secured by a vehicle. $ 16,585
Note payable to a bank due in monthly installments of $708 including
interest at 14.75% through September 2001;
secured by a truck. 13,570
Note payable to a bank due in monthly installments of $477 including
interest at 6.99% through August 2004;
secured by a vehicle. 23,078
Note payable to finance company due in monthly installments of $384
including interest at 8.9% through October 2000;
secured by equipment. 4,040
Note payable to a bank due in monthly installments of $2,648 including
interest at 9.5% with a balloon payment due
September 2000; secured by inventory and accounts receivable. 81,438
</TABLE>
F-8
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE D - LONG-TERM DEBT -- (Continued)
Note payable to a bank due in monthly installments
of $2,416 including interest at 8.5% with a balloon
payment due June 2003; secured by mortgage. 231,064
Note payable to a bank due in monthly
installments of $1,641 including
interest at 6.1% through July 2004;
secured by a stockholder's certificate of deposit. 79,579
-----------
449,354
Less current maturities (127,525)
-----------
$ 321,829
===========
Following are future maturities of long-term debt:
2000 $ 127,525
2001 44,514
2002 37,782
2003 222,787
2004 16,746
-----------
$ 449,354
===========
NOTE E - CAPITAL LEASE OBLIGATIONS
The Company has entered into three leases for machinery, equipment and
vehicles. The leases are classified as capital leases. Accordingly, assets
have been capitalized and have the following book value at November 30,
1999:
Capitalized cost $ 165,943
Accumulated depreciation (42,934)
----------------
Net Book Value $ 123,009
=================
Total depreciation expense for these vehicles for the year ended November
30, 1999 was $33,603. This depreciation is included in the total
depreciation expense.
F-9
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE E - CAPITAL LEASE OBLIGATIONS -- (Continued)
The following is a schedule of the minimum payments required under the
leases together with their present value at November 30, 1999.
2000 $ 37,361
2001 36,055
2002 28,499
2003 52,797
-------------
Total minimum lease payments 154,712
Amount representing interest (25,264)
-------------
Present Value of Lease Obligation $ 129,448
=============
Interest expense on the capital leases for the year ended November 30, 1999
was $11,015.
NOTE F - RELATED PARTIES
Affiliated entities conducting business with A & R Supply, Inc. for the year
ended November 30, 1999 are as follows:
A & R of Destin, Inc. is a "C" corporation owned by the Company's
president.
A & R of Foley, Inc. is an "S" corporation owned 51% by the Company's
president.
A & R of Mississippi, Inc. is a "C" corporation owned 50% by the
Company's president.
A & R of Fort Walton, Inc. is a "C" corporation previously owned 100% by
the Company's president.
A & R Vacuum, Inc. is an "S" corporation owned 50% by the Company's
president.
RAJ, Inc. is an "S" corporation owned by the Company's president.
F-10
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE F - RELATED PARTIES -- (Continued)
At November 30, 1999, the Company had balances due from related parties for
advances and sales of inventory as follows:
A & R of Destin, Inc. $ 19,884
A & R of Foley, Inc. 13,950
RAJ, Inc. 2,490
Due from shareholder 97,084
-------------
$ 133,408
=============
At November 30, 1999, the Company owed related parties for advances,
consulting fees, and purchases of inventory as follows:
A & R of Mississippi, Inc. $ 2,404
=============
For the year ended November 30, 1999, the Company had sales to related
parties as follows:
A & R of Destin, Inc. $ 83,841
A & R of Foley, Inc. 123,508
A & R of Fort Walton, Inc. 691
A & R Vacuum, Inc. 79
-------------
$ 208,119
=============
For the year ended November 30, 1999, the Company had purchases from related
parties as follows:
A & R of Destin, Inc. $ 19,369
A & R of Foley, Inc. 76,451
A & R of Mississippi, Inc. 4,767
A & R of Fort Walton, Inc. 35
------------
$ 100,622
============
Consulting fees paid to RAJ, Inc. totaled $21,865 for the year ended
November 30, 1999.
F-11
<PAGE>
A & R Supply, Inc.
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
===============================================================================
NOTE G - INCOME TAX
Deferred taxes consisted of the following components as of December 31,
1999:
<TABLE>
<CAPTION>
Current
---------------------------------------------
Federal State Total
--------- -------- ---------
<S> <C> <C> <C>
Net operating loss carryforward $ 42,189 $ 7,222 $ 49,411
Valuation allowance -- -- --
--------- -------- ---------
Deferred tax asset (liability) $ 42,189 $ 7,222 $ 49,411
========= ======== =========
<CAPTION>
<S> <C>
Income tax expense consists of the
following components:
Deferred federal tax $ 16,040
Deferred state tax 2,746
-----------
Net income tax $ 18,786
===========
</TABLE>
NOTE H - OPERATING LEASE
The Company leases equipment under operating leases at $246 a month through
April 2000. Lease expense for all operating leases for the year ended
November 30, 1999 was $3,905. Minimum future rental payments under these
operating leases are $2,034 for the year ending November 30, 2000.
NOTE I - CONCENTRATIONS OF CREDIT RISK
A material portion of the Company's sales are generated from business
performed with approximately six customers. These sales totaled $783,743
during 1999, or 27% of total sales.
NOTE J - SUBSEQUENT EVENT
In January 2000, the Company sold all of its operating assets under an asset
purchase agreement and ceased operations.
F-12
<PAGE>
[LETTERHEAD OF O'SULLIVAN HICKS PATTON, LLP]
Independent Auditor's Report
----------------------------
Board of Directors
A & R of Foley, Inc.
We have audited the accompanying balance sheet of A & R of Foley, Inc. (a
Florida "S" corporation) as of December 31, 1999, and the related statements of
income, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of A & R of Foley, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ O'Sullivan Hicks Patton, LLP
February 4, 2000
F-13
<PAGE>
A & R of Foley, Inc.
BALANCE SHEET
December 31, 1999
========================================================================
ASSETS
CURRENT ASSETS
Cash $ 26,773
Accounts receivable 174,276
Due from related parties 678
Inventory 89,980
------------
Total current assets 291,707
PROPERTY AND EQUIPMENT, net 53,373
------------
$ 345,080
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 39,288
Current maturities of long-term debt 39,342
Accounts payable 151,246
Due to related parties 18,199
Accrued payroll taxes 8,671
Sales tax payable 13,415
------------
Total current liabilities 270,161
LONG-TERM DEBT, net of current maturities 59,165
STOCKHOLDERS' EQUITY
Common stock: par value $1 per share, 100 shares authorized,
19 shares issued and outstanding 19
Retained earnings 15,735
------------
15,754
------------
$ 345,080
============
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
A & R of Foley, Inc.
STATEMENT OF INCOME
For the year ended December 31, 1999
================================================================
SALES, net $1,886,883
COST OF GOODS SOLD 1,450,566
-----------
GROSS PROFIT 436,317
OPERATING EXPENSES
Selling, general and administrative 346,643
Depreciation 9,124
-----------
355,767
-----------
Operating profit 80,550
OTHER EXPENSES
Interest 18,663
-----------
NET INCOME 61,887
===========
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
A & R of Foley, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1999
==========================================================================
Total
Common Retained Stockholders'
Stock Earnings Equity
------------ ------------ -------------
Balance at December 31, 1998 $ 10 $ (46,152) $ (46,142)
Issuance of common stock 9 -- 9
Net Income -- 61,887 61,887
------------ ------------ -------------
Balance at December 31, 1999 $ 19 $ 15,735 $ 15,754
============ ============ =============
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
A & R of Foley, Inc.
STATEMENT OF CASH FLOWS
For the year ended December 31, 1999
============================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 61,887
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,124
Bad debt expense, net of recoveries 18,249
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (65,819)
Due from related party (76)
Advances 1,030
Inventory (906)
Increase (decrease) in:
Accounts payable 4,043
Due to related party 13,490
Accrued payroll taxes 3,781
Sales tax payable 3,478
-----------
Net cash provided by operating activities 48,281
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank line of credit 5,000
Payments on bank line of credit (9,496)
Principal payments on long-term debt (36,497)
Issuance of common stock 9
-----------
Net cash used for financing activities (40,984)
-----------
NET INCREASE IN CASH 7,297
CASH, BEGINNING OF YEAR 19,476
-----------
CASH, END OF YEAR $ 26,773
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 18,663
===========
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
A & R of Foley, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
==============================================================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows.
1. Description of Operations
A & R of Foley, Inc. is a Florida "S" corporation incorporated in August
1997. The Company engages in wholesale of building materials and supplies in
Foley, Alabama and the surrounding area.
2. 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; disclosure of
contingent assets and liabilities at the date of the financial statements;
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. Cash and Cash Equivalents
For purposes of the statement of cash flows, management considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
4. Inventory
Inventory of building materials and supplies is valued by the first-in
first-out method (FIFO).
5. Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided for in
amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives. The straight-line method of depreciation
is followed for substantially all assets for financial reporting purposes,
while accelerated methods are used for tax purposes. The estimated lives used
in determining depreciation are:
Machinery and equipment 7 years
Vehicles 5 - 10 years
F-18
<PAGE>
A & R of Foley, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
==============================================================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
6. Income Taxes
In 1997 the Company made an election to be taxed as a Subchapter S
corporation. Accordingly, the accompanying financial statements include no
provision for federal income taxes as the shareholders are taxed personally
on the Company's earnings
NOTE B - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31, 1999:
Machinery and equipment $13,365
Vehicles 54,076
-------
67,441
Less accumulated depreciation (14,068)
-------
$53,373
=======
Depreciation expense for the year ended December 31, 1999 was $9,124.
NOTE C - BANK LINE OF CREDIT
The Company has a line of credit with a bank in which it may borrow up to
$50,000. Borrowings under the line bear interest at 8.75%, payable monthly.
Principal amounts are due on demand. The line of credit is secured by
receivables, inventory, and equipment. At December 31, 1999, the amount
outstanding was $39,288.
NOTE D - LONG-TERM DEBT
Long-term debt at December 31, 1999 is summarized as follows:
Note payable to bank due in monthly installments
of $2,107 including interest at 9.5% through
September 2002; secured by receivables, inventory, & equipment. $ 60,589
F-19
<PAGE>
A & R of Foley, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
==============================================================================
NOTE D - LONG-TERM DEBT -- (Continued)
Note payable to bank due in monthly installments
of $1,158 including interest at 9.5% through August 2001;
secured by a truck and a crane. 21,259
Note payable to finance company due in monthly installments
of $369 including interest at 8.9% through October 2000;
secured by forklift truck. 3,543
Note payable to bank due in monthly installments
of $339 including interest at 9.09% through October 2003;
secured by a truck. 13,116
-------
98,507
Less current maturities (39,342)
-------
$59,165
=======
Following are future maturities of long-term debt:
2000 $39,342
2001 34,556
2002 21,363
2003 3,246
-------
$98,507
=======
NOTE E - RELATED PARTIES
Affiliated entities conducting business with A &R of Foley, Inc. during
1999 are as follows:
A & R Supply, Inc. is a "C" corporation owned 75% by the Company's
president.
A & R of Destin, Inc. is a "C" corporation owned by the Company's
president.
A & R of Mississippi, Inc. is a "C" corporation owned 50% by the Company's
president.
A & R of Fort Walton, Inc. is a "C" corporation previously owned 100%
by the Company's president.
F-20
<PAGE>
A & R of Foley, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
==============================================================================
NOTE E - RELATED PARTIES -- (Continued)
A & R Vacuum, Inc. is an "S" corporation owned 50% by the Company's
president.
RAJ, Inc. is an "S" corporation owned by the Company's president.
At December 31, 1999, the Company had balances due from related parties for
sales of inventory as follows:
A & R of Destin, Inc. $ 402
A & R of Mississippi, Inc. 276
----------
$ 678
==========
At December 31, 1999, the Company owed related parties for advances and
purchases of inventory as follows:
A & R Supply, Inc. $ 18,199
==========
At December 31, 1999, the Company had sales to related parties as follows:
A & R Supply, Inc. $ 71,804
A & R of Destin, Inc. 5,376
A & R of Mississippi, Inc. 754
----------
$ 77,934
==========
At December 31, 1999, the Company had purchases from related parties as
follows:
A & R Supply, Inc. $ 17,205
A & R of Destin, Inc. 4,706
A & R of Fort Walton, Inc. 1,944
----------
$ 123,855
==========
Consulting fees paid to RAJ, Inc. totaled $17,481 for the year ended
December 31, 1999.
F-21
<PAGE>
A & R of Foley, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
==============================================================================
NOTE F - OPERATING LEASE
The Company leases a commercial building and a parking lot under an operating
lease at $2,500 per month. The lease expires December 2002. Total rent paid
during 1999 was $30,000.
Minimum future rental payments under this operating lease are as follows:
2000 $ 30,000
2001 30,000
2002 30,000
---------
$ 90,000
NOTE G - SUBSEQUENT EVENT
In January 2000, the Company sold all of its operating assets under an asset
purchase agreement and ceased operations.
F-22
<PAGE>
[LOGO O'SULLIVAN HICKS PATTON, LLP]
Independent Auditor's Report
Board of Directors
A & R of Destin, Inc.
We have audited the accompanying balance sheet of A & R of Destin, Inc. (a
Florida "C" corporation) as of December 31, 1999, and the related statements of
operations, stockholder's equity and cash flows for the period from July 1, 1999
(inception) through December 31, 1999. These financial statements are the
responsibility of the Company's 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of A & R of Destin, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
period from July 1, 1999 (inception) through December 31, 1999 in conformity
with generally accepted accounting principles.
/s/ O'Sullivan Hicks Patton, LLP
February 12, 2000
F-23
<PAGE>
A & R of Destin, Inc.
BALANCE SHEET
December 31, 1999
================================================================================
ASSETS
CURRENT ASSETS
Cash $ 3,816
Accounts receivable 238,607
Due from stockholder 328,642
Inventory 168,426
Deferred tax asset 12,609
---------
Total current assets 752,100
PROPERTY AND EQUIPMENT, net 105,238
OTHER ASSETS 6,477
---------
$ 863,815
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Bank line of credit $ 17,853
Current maturities of notes payable 246,430
Current maturities of capital lease obligations 16,034
Accounts payable 419,553
Due to related parties 21,752
Accrued payroll taxes 5,362
Sales tax payable 9,083
---------
Total current liabilities 736,067
LONG-TERM DEBT, net of current maturities
Notes payable 103,999
Capital lease obligations 41,217
---------
Total long-term debt, net of current maturities 145,216
DEFERRED INCOME TAXES 4,773
STOCKHOLDER'S EQUITY
Common stock: par value $1 per share, 100 shares authorized,
100 shares issued and outstanding 100
Retained earnings (22,341)
---------
Total stockholder's equity (22,241)
---------
$ 863,815
=========
The accompanying notes are an intregal part of these financial statements.
F-24
<PAGE>
A & R of Destin, Inc.
STATEMENT OF OPERATIONS
From July 1, 1999 (Inception) through December 31, 1999
================================================================================
SALES, net 973,122
COST OF SALES 718,497
--------
Gross profit 254,625
OPERATING EXPENSES
Selling, general and administrative 257,967
Depreciation 8,997
--------
266,964
--------
Operating loss (12,339)
OTHER INCOME (EXPENSES)
Interest (18,350)
Other Income 512
--------
Net other expenses (17,838)
--------
Loss before income taxes (30,177)
INCOME TAX BENEFIT 7,836
--------
NET LOSS (22,341)
========
The accompanying notes are an intregal part of these financial statements.
F-25
<PAGE>
A & R of Destin, Inc.
STATEMENT OF STOCKHOLDER'S EQUITY
From July 1, 1999 (Inception) through December 31, 1999
================================================================================
<TABLE>
<CAPTION>
Total
Common Retained Stockholder's
Stock Earnings Equity
--------- --------- ---------
<S> <C> <C> <C>
Issuance of Comman Stock $ 100 $ -- $ 100
Net Loss -- (22,341) (22,341)
-------- -------- --------
Balance at December 31, 1999 $ -- $(22,341) $(22,341)
======== ======== ========
</TABLE>
The accompanying notes are an intregal part of these financial statements.
F-26
<PAGE>
A & R of Destin, Inc.
STATEMENT OF CASH FLOWS
From July 1, 1999 (Inception) through December 31, 1999
================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (22,341)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 8,997
Bad debt expense, net of recoveries 32,764
Deferred taxes (7,837)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (67,000)
Due from stockholder 11,244
Due from related party 684
Inventory (32,863)
Increase (decrease) in:
Accounts payable 108,849
Related party payables 6,760
Accrued payroll taxes 26
Sales tax payable (1,826)
---------
Net cash provided by operating activities 37,457
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on bank line of credit (5,000)
Principal payments on notes payable (26,072)
Principal payments on capital lease obligations (4,046)
---------
Net cash used for financing activities (35,118)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization of corporation by stockholder 1,477
---------
NET INCREASE (DECREASE) IN CASH 3,816
CASH, BEGINNING OF YEAR --
---------
CASH, END OF YEAR $ 3,816
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 18,350
Cash paid during the year for taxes $ 392
NONCASH INVESTING ACTIVITIES
Capital lease purchase of property and equipment $ 53,309
The accompanying notes are an intregal part of these financial statements.
F-27
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE A - FORMATION
In July 1999, the shareholder incorporated A & R of Destin, Inc. by
transferring in the following assets and liabilities in exchange for the
common stock of the Company.
Cash $ 1,477
Accounts receivable 198,458
Advances 5,913
Related party receivable 340,570
Inventory 135,563
Property and equipment 60,925
Other assets 6,477
--------
Total Assets 749,383
--------
Bank line of credit 22,853
Notes payable 376,501
Capital leases 7,988
Accounts payable 310,704
Due to related party 14,992
Accrued expenses 16,245
--------
Total Liabilities 749,283
--------
Common Stock $ 100
========
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows.
1. Description of Operations
A & R of Destin, Inc. is a Florida "C" corporation incorporated in July
1999. The Company engages in wholesale of building materials and supplies in
Destin, Florida and the surrounding area.
The accompanying notes are an intregal part of these financial statements.
F-28
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
2. 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;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Cash and Cash Equivalents
For purposes of the statement of cash flows, management considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
4. Inventory
Inventory of building materials is valued at cost using the first in, first
out method.
5. Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided for in
amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives. The straight-line method of depreciation
is followed for substantially all assets for financial reporting purposes,
while accelerated methods are used for tax purposes. The estimated lives
used in determining depreciation are:
Machinery and equipment 7 years
Furniture and fixtures 7 years
Vehicles 5 - 10 years
6. Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus the effects
of deferred taxes related primarily to differences between the basis of
assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred taxes
F-29
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
are recognized as current or non-current depending on the classification of
the assets and liabilities to which they relate. Deferred taxes arising from
temporary differences that are not related to an asset or liability are
classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse. The Company's deferred taxes
result from differences in the methods used for recognition of depreciation
and net operating loss carryforward for financial reporting and tax
reporting purposes.
7. Advertising Costs
Advertising costs are expensed as incurred and were $274 for the period from
July 1, 1999 (inception) through December 31, 1999.
NOTE C - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31, 1999:
Machinery and equipment $ 39,756
Furniture and fixtures 3,670
Vehicles 92,054
---------
135,480
Less accumulated depreciation (30,242)
---------
$ 105,238
=========
Depreciation expense for the period from July 1, 1999 (inception) through
December 31, 1999 was $8,997.
NOTE D - BANK LINE OF CREDIT
The Company has a line of credit with a bank in which it may borrow up to
$100,000. Borrowings under the line bear interest at a variable monthly rate
(8% at December 31, 1999). Principal amounts are due on demand. The line of
credit is secured by receivables, inventory, and equipment. At December 31,
1999, the amount outstanding was $17,853.
F-30
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE E - LONG-TERM DEBT
<TABLE>
<S> <C>
Long-term debt at December 31, 1999 is summarized as follows:
Note payable to bank due in monthly installments of $3,211 including
interest at 9.5% through April 2000; secured by property, certificate of
deposit, assignment of note, and personal
guarantee of Company's president. $ 186,742
Note payable to bank due in monthly installments of $1,261 including
interest at 9.5% through August 2000; secured by
a crane and personal guarantee of Company's president. 35,364
Note payable to bank due in monthly installments of $2,655 including
interest at 9.5% through July 2004; secured by
property and equipment. 117,567
Note payable to bank due in monthly installments of $304 including interest
at 9.91% through June 2003; secured by
a truck and personal guarantee of Company's president. 10,756
-----------
350,429
Less current maturities (246,430)
-----------
$ 103,999
===========
Following are future maturities of long-term debt:
2000 $ 246,430
2001 26,751
2002 29,419
2003 30,489
2004 17,340
-----------
$ 350,429
===========
</TABLE>
F-31
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE F - CAPITAL LEASE OBLIGATIONS
The Company has entered into three leases for vehicles. The leases are
classified as capital leases. Accordingly, assets have been capitalized and
have the following book value at December 31, 1999:
Capitalized cost $ 64,283
Accumulated depreciation (2,656)
----------------
Net Book Value $ 61,627
=================
Total depreciation expense for these vehicles for the period from July 1,
1999 (inception) through December 31, 1999 was $2,656. This depreciation is
included in the total depreciation expense.
The following is a schedule of the minimum payments required under the
leases together with their present value at December 31, 1999.
2000 $ 20,797
2001 17,561
2002 16,020
2003 13,349
-----------
Total minimum lease payments 67,727
Amount representing interest (10,476)
-----------
Present Value of Lease Obligation $ 57,251
===========
Interest expense on the capital leases for the period from July 1, 1999
(inception) through December 31, 1999 was $1,011.
NOTE G - RELATED PARTIES
Affiliated entities conducting business with A & R of Destin, Inc. for the
period from July 1, 1999 (inception) through December 31, 1999 are as
follows:
A & R Supply, Inc. is a "C" corporation owned 75% by the Company's
president.
A & R of Foley, Inc. is an "S" corporation owned 51% by the Company's
president.
A & R of Mississippi, Inc. is a "C" corporation owned 50% by the
Company's president.
F-32
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE G - RELATED PARTIES -- (Continued)
A & R of Fort Walton, Inc. is a "C" corporation previously owned 100%
by the Company's president.
A & R Vacuum, Inc. is an "S" corporation owned 50% by the Company's
president.
RAJ, Inc. is an "S" corporation owned by the Company's president.
At December 31, 1999, the Company had balances due from a stockholder for
advances of $323,642.
At December 31, 1999, the Company owed related parties for advances,
consulting fees, and purchases of inventory as follows:
RAJ, Inc. $ 3,164
A & R of Foley, Inc. 403
A & R of Pensacola, Inc. 18,185
--------------
$ 21,752
==============
For the period from July 1, 1999 (inception) through December 31, 1999, the
Company had sales to related parties as follows:
A & R Supply, Inc. $ 13,809
A & R of Foley, Inc. 4,706
--------------
$ 18,515
==============
For the period from July 1, 1999 (inception) through December 31, 1999, the
Company had purchases from related parties as follows:
A & R Supply, Inc. $ 63,290
A & R of Foley, Inc. 3,434
A & R of Mississippi, Inc. 3,793
--------------
$ 70,517
==============
Consulting fees paid to RAJ, Inc. totaled $11,289 for the period from July
1, 1999 (inception) through December 31, 1999.
F-33
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE H - OPERATING LEASE
The Company leases a vehicle under an operating lease at $719 per month
through September 2000. Lease expense for this operating lease for the
period from July 1, 1999 (inception) through December 31, 1999 was $1,982.
The Company leases an office building under an operating lease with monthly
payments of $4,160 through August 2002. The Company also leases additional
warehouse space under an operating lease with monthly payments of $2,675 per
month from July 1, 1999 (inception) through October 1999, and $2,850 from
November 1999 through October 2000. Total rents paid for the period July 1,
1999 (inception) through December 31, 1999 were $39,899.
Minimum future rental payments under these operating leases are as follows:
2000 $ 84,889
2001 49,920
2002 33,280
---------
$ 168,089
=========
NOTE I - INCOME TAX
Deferred taxes consisted of the following components as of December 31,
1999:
<TABLE>
<CAPTION>
Current
-----------------------------------------------------
Federal State Total
------- ----- -----
<S> <C> <C> <C>
Taxable depreciation difference $ 10,766 $ 1,843 $ 12,609
Net operating loss carryforward (4,075) (698) (4,773)
----------- ----------- -----------
6,691 1,145 7,836
Valuation allowance -- -- --
--------- ---------- ---------
Deferred tax asset (liability) $ 6,691 $ 1,145 $ 7,836
========= ======== =========
Income tax expense consists of the following components:
Deferred federal tax benefit $ 6,691
Deferred state tax benefit 1,145
-------------
Net income tax benefit $ 7,836
=============
</TABLE>
F-34
<PAGE>
A & R of Destin, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE J - SUBSEQUENT EVENT
In January 2000, the Company sold all of its operating assets under an asset
purchase agreement and ceased operations.
F-35
<PAGE>
IMPERIAL INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet of Imperial
Industries, Inc. (the "Company") at December 31, 1999 has been prepared to give
effect to the January 19, 2000 acquisition of A&R Supply, Inc., A&R of Foley,
Inc. and A&R of Destin, Inc. (collectively, "A&R") as if it had occurred on
December 31, 1999. The following Unaudited Pro Forma Consolidated Statement of
Operations of the Company for the year ended December 31, 1999, gives effect to
the acquisition of A&R on January 19, 2000 as if such transaction had occurred
as of January 1, 1999. The Unaudited Pro Forma Consolidated Financial
Information is intended for informational purposes only and is not necessarily
indicative of the results that would have occurred if the transaction had
occurred on the date indicated or which may be realized in the future. The
Unaudited Pro Forma Consolidated Financial Information should be read in
conjunction with the historical financial statements of the companies comprising
A&R and the Consolidated Financial Statements included in the Company's Form
10-K, filed on March 30, 2000.
F-36
<PAGE>
Imperial Industries, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Acquisition Pro Forma
Company A&R Adjustments As Adjusted
-------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Assets (1) (2) (3)
- ------
Current assets:
Cash and cash equivalents $ 1,119,000 $ 72,000 $ (870,000) $ 321,000
Trade accounts receivable, net 2,677,000 647,000 (647,000) 2,677,000
Receivables from stockholder 426,000 (426,000) 0
Inventories 2,023,000 530,000 (2,000) 2,551,000
Deferred taxes 634,000 62,000 (62,000) 634,000
Other current assets 43,000 40,000 (40,000) 43,000
------------ ------------ ------------ ------------
Total current assets 6,496,000 1,777,000 (2,047,000) 6,226,000
------------ ------------ ------------ ------------
Property, plant and equipment, net 1,489,000 536,000 300,000 2,325,000
Deferred taxes 699,000 699,000
Goodwill 386,000 386,000
Other assets 84,000 6,000 (6,000) 84,000
------------ ------------ ------------ ------------
$ 8,768,000 $ 2,319,000 $ (1,367,000) $ 9,720,000
============ ============ ============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities
Notes payable $ 1,526,000 $ -- $ -- $ 1,526,000
Advances under lines of credit 171,000 (171,000) 0
Current portion of long-term debt 164,000 456,000 (151,000) 469,000
Accounts payable 902,000 944,000 (944,000) 902,000
Payable to stockholders 48,000 48,000
Accrued expenses and other liabilities 409,000 89,000 (89,000) 409,000
------------ ------------ ------------ ------------
Total current liabilities 3,049,000 1,660,000 (1,355,000) 3,354,000
------------ ------------ ------------ ------------
Long-term debt, less current maturities 1,328,000 632,000 (129,000) 1,831,000
Obligation for appraisal rights 877,000 877,000
------------ ------------ ------------ ------------
Total liabilities 5,254,000 2,292,000 (1,484,000) 6,062,000
============ ============ ============ ============
Commitments and contingencies
Stockholders' equity
Common stock 82,000 1,000 83,000
Additional paid-in capital 13,414,000 143,000 13,557,000
(Accumulated deficit)/retained earnings (9,982,000) 27,000 (27,000) (9,982,000)
------------ ------------ ------------ ------------
Total stockholders' equity 3,514,000 27,000 117,000 3,658,000
------------ ------------ ------------ ------------
$ 8,768,000 $ 2,319,000 $ (1,367,000) $ 9,720,000
============ ============ ============ ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet.
F-37
<PAGE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(1) Represents the historical consolidated balance sheet of the Company at
December 31, 1999.
(2) Represents the historical combined balance sheets of A&R Supply. Inc.
at November 30, 1999, A&R of Foley, Inc. at December 31, 1999 and A&R
of Destin, Inc. at December 31, 1999.
(3) Adjustments to record the purchase price of A&R including assets
purchased and liabilities assumed. The purchase price of $1,750,000
consists of $798,000 in cash, notes payable to A&R of $250,000
($150,000 current, $100,000 long-term), assumed debt of $558,000 and
($155,000 current, $403,000 long-term), and 225,000 shares of $.01 par
common stock valued at $144,000. The Company purchased all of A&R's
inventory, and property, plant and equipment with fair values of
$528,000 and $836,000, respectively. The Company assumed notes payable
and capital lease obligations with a total fair value of $558,000. The
pro forma adjustments include goodwill of $386,000.
F-38
<PAGE>
Imperial Industries, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
December 31, 1999
<TABLE>
<CAPTION>
Acquisition Pro Forma
Company A&R Adjustments As Adjusted
-------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
(1) (2)
Net sales $ 22,604,000 $ 5,795,000 $ (1,057,000) (3) $ 27,342,000
Cost of sales 15,198,000 4,547,000 (992,000) (3) 18,753,000
------------ ------------ ------------ ------------
Gross profit 7,406,000 1,248,000 (65,000) 8,589,000
Selling, general and administrative expenses 5,932,000 1,123,000 25,000 (4) 7,080,000
------------ ------------ ------------ ------------
Operating income 1,474,000 125,000 (90,000) 1,509,000
Other income (expense):
Interest expense (475,000) (98,000) 54,000 (5) (519,000)
Miscellaneous income 34,000 53,000 87,000
------------ ------------ ------------ ------------
(441,000) (45,000) 54,000 (432,000)
------------ ------------ ------------ ------------
Income before income taxes 1,033,000 80,000 (36,000) 1,077,000
Income tax benefit (expense)
Current (26,000) (26,000)
Deferred 213,000 (11,000) 202,000
------------ ------------ ------------ ------------
187,000 (11,000) 0 176,000
------------ ------------ ------------ ------------
Net income $ 1,220,000 $ 69,000 $ (36,000) $ 1,253,000
------------ ------------ ------------ ------------
Earnings per share
Basic 0.15 0.15
Diluted 0.15 0.15
Weighted-average shares outstanding 8,199,000 225,000 8,424,000
Weighted-average and potentially dilutive
shares outstanding 8,390,000 225,000 8,615,000
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations.
F-39
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statement of Operations
(1) Represents the historical consolidated statement of operations of the
Company for the year ended December 31, 1999.
(2) Represents the historical combined statements of operations of A&R
Supply, Inc. for the year ended November 30, 1999, A&R of Foley, Inc.
for the year ended December 31, 1999 and A&R of Destin, Inc. for the
period from July 1, 1999 (inception) to December 31, 1999.
(3) Adjustment to eliminate intercompany sales and cost of sales between
A&R Supply, Inc., A&R of Foley, Inc. and A&R of Destin, Inc.,
intercompany sales and cost of sales between the Company and A&R.
(4) Adjustments to record $10,000 of amortization expense on goodwill over
an estimated 40 year life, and to increase depreciation expense $15,000
based on the fair value of acquired property, plant and equipment.
(5) Adjustment to record interest at 8% on $100,000 note issued in the
acquisition less interest expense of $62,000 associated with A&R debt
not assumed.
F-40
