SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report(Date of earliest event reported): March 18, 1998
(January 2, 1998)
----------------
Berger Holdings, Ltd.
- -----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 000-12362 23-2160077
- -----------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
805 Pennsylvania Boulevard, Feasterville, PA 19053
- -----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(215) 355-1200
--------------
<PAGE>
Item 2. Acquisition of Assets.
---------------------
On January 2, 1998 the Registrant filed with the Securities and Exchange
Commission a Current Report on Form 8-K (the "January 8-K") regarding its
acquisition of a portion of the assets of Benjamin Obdyke Incorporated, a
Pennsylvania corporation ("Obdyke"), pursuant to a certain Asset Purchase
Agreement (the "Agreement"), dated as of December 3, 1997, by and among the
Registrant, Obdyke and the shareholders of Obdyke.
In accordance with Rule 3-05(b)(i) and Article 11 under Regulation S-X, as
referenced by Items 7(a) and 7(b) of Form 8-K, the Registrant is required to
furnish (i) the below-listed financial statements of Obdyke and (ii) certain pro
forma information with regard to the Registrant in filing its Form 8-K. The
Registrant hereby amends the January 8-K to file such financial statements and
pro forma information, in accordance with Item 7(a)(4) of Form 8-K.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a.) Financial Statements of business acquired.
The required audited financial statements of Benjamin Obdyke, Inc. are attached
to this document.
(b.) Pro forma financial information.
The following unaudited pro forma condensed combined balance sheets as of
December 31, 1997 and the unaudited pro forma condensed combined statements of
operation for the year ended December 31, 1997, give effect to the acquisition
of Obdyke's business segment as if it had occurred on January 1, 1997. The
unaudited pro forma information is based on the historical financial statements
of the Registrant and Benjamin Obdyke, Inc. giving effect to the transaction as
an asset purchase.
The unaudited pro forma statements have been prepared by the Registrant's
management based upon the financial information of the Registrant and Obdyke.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the financial position or results of operations which
would actually have been reported had the acquisition been in effect during
these periods or may be reported in the future. These unaudited pro forma
financial statements should be read in conjunction with the separate notes to
unaudited financial statements and related notes thereto of the Registrant and
Obdyke.
(c.) Exhibits
23.1 Consent of Independent Public Accounts
<PAGE>
<TABLE>
Pro Forma Condensed Combined Balance Sheets
of the Registrant and Benjamin Obdyke
As of December 1997
(Unaudited)
<CAPTION>
Historical Historical Pro Forma Pro Forma
Registrant B. Obdyke (a) Adjustments Results
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $4,411,347 - (3,961,725) $449,622
Accounts Receivable 1,655,327 1,237,646 $2,892,973
Inventories 2,652,466 1,626,074 $766,075 (b) $5,044,615
Prepaid and other expenses 372,721 74,542 $447,263
Deferred income taxes 800,000 - $800,000
--------------------------------------- --------------------
Total current assets 9,891,861 2,938,262 $9,634,473
Property, plant and equipment, net 6,110,128 4,502,293 (3,240,659) (b) $7,371,762
Other assets 1,526,575 17,535 2,333,333 (g) $3,877,443
Deferred income taxes 700,000 - $700,000
Goodwill 1,522,649 - 4,746,034 (h) $6,268,683
---------------------------------------------------------- --------------------
TOTAL ASSETS $19,751,213 $7,458,090 643,058 $27,852,361
===================================================================================
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Current portion of long-term obligations 522,679 $329,968 (329,968) (f) $522,679
Accounts Payable 251,093 695,247 (695,247) (f) $251,093
Accrued expenses 462,023 509,271 (509,271) (f) $462,023
Intra-company payable - 810,086 (810,086) (f) $0
---------------------------------------------------------- --------------------
Total current liabilities 1,235,795 2,344,572 (2,344,572) $1,235,795
Long-term debt, net of current portion 6,022,147 2,577,164 920,434 (c) $9,519,745
---------------------------------------------------------- --------------------
Total liabilities 7,257,942 4,921,736 (1,424,138) $10,755,540
Stockholders' equity 12,493,271 2,536,354 2,067,196 (j) $17,096,821
-----------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $19,751,213 $7,458,090 643,058 $27,852,361
===================================================================================
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
<TABLE>
Pro Forma Condensed Combined Statements of Operations
of the Registrant and Benjamin Obdyke
Year ended December 31, 1997
(Unaudited)
<CAPTION>
Historical Historical Pro Forma Pro Forma
Registrant B. Obdyke (a) Adjustments Results
<S> <C> <C> <C> <C>
Net Sales $20,748,017 $19,318,726 $40,066,743
Cost of Sales 16,196,776 16,484,724 140,181 (d) 32,821,681
---------------------------------------------------------- --------------------
Gross profit 4,551,241 2,834,002 ($140,181) 7,245,062
---------------------------------------------------------- --------------------
Selling administrative and general
expenses 2,963,614 3,008,456 (879,060) (i) 5,093,010
---------------------------------------------------------- --------------------
Income (loss) from operations 1,587,627 (174,454) 738,879 2,152,052
---------------------------------------------------------- --------------------
Other (expense) income:
Interest expense (581,624) (346,693) (171,683) (e) (1,100,000)
Other income, net 14,374 9,580 23,954
---------------------------------------------------------- --------------------
Income (loss) before income taxes $1,020,377 ($511,567) 567,196 1,076,006
Provision for income tax benefit 1,000,000 - - (k) 1,000,000
---------------------------------------------------------- --------------------
Net income (loss) $2,020,377 ($511,567) $567,196 $2,076,006
========================================================== ====================
</TABLE>
* Economies of scale for Cost of Sales including, purchasing, distribution,
warehousing and direct labor of the combined companies are not reflected in the
financial statements above.
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
Berger Holdings, Ltd.
Notes to Pro Forma Condensed Combined Financial Statements
(a) Certain reclassifications were made to conform to the Registrant's headings.
(b) Adjustments to the Obdyke assets based on appraisals of the particular
assets which were acquired.
(c) Net increase in long-term debt resulting from the following:
Additional debt incurred in connection with the acquisition $3,497,598
Less Obdyke's debt, not assumed by Registrant (2,577,164)
-------------
Net increase $ 920,434
=============
(d) Additional depreciation expense for the assets acquired from Obdyke,
assuming the purchase had taken place on January 1, 1997. Depreciation of
purchased assets was based on a 10-year life.
(e) Interest expense relating to the purchase of Obdyke, assuming and interest
rate of 11% annually.
(f) Removal of Obdyke's liabilities which are not being assumed by the
Registrant.
(g) Other assets acquired from Obdyke are as follows:
Other assets purchased $2,500,000
Less annual amortization ( 166,667)
-------------
Net increase $2,333,333
=============
(h) Goodwill resulting from the purchase of Obdyke's assets is as follows:
Goodwill from acquisition $5,085,036
Less annual amortization ( 339,002)
-------------
Net increase $4,746,034
=============
(i) Reduction of certain Obdyke administrative and general expenses net of
additional amortization as follows:
Reduction of expenses $1,384,729
Less amortization of other assets and goodwill ( 505,669)
-------------
Net decrease $ 879,060
=============
Other assets and goodwill are amortized over a 15-year life.
(j) Includes additional net income of $567,196 and $1,500,000 of preferred stock
issued in connection with the acquisition.
(k) No adjustments were made to the income tax benefit for Benjamin Obdyke's
1997 loss.
<PAGE>
Independent Auditor's Report
To the Shareholders
Benjamin Obdyke Incorporated
Warminster, Pennsylvania
We have audited the accompanying combined balance sheets of the Roof Drainage
and Exterior Trim Divisions of Benjamin Obdyke Incorporated as of December 31,
1997 and 1996, and the related combined statements of operations and divisional
equity, and cash flows for the years then ended. These combined financial
statements are the responsibility of the Divisions' management. Our
responsibility is to express an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Roof Drainage
and Exterior Trim Divisions of Benjamin Obdyke Incorporated as of December 31,
1997 and 1996, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
The accompanying combined financial statements are those of the Roof Drainage
and Exterior Trim Divisions of Benjamin Obdyke Incorporated only and are not
those of Benjamin Obdyke Incorporated. The assumptions and methodology used to
allocate assets, liabilities, divisional equity, revenue and expenses to the
Divisions are discussed in Note 1 to the combined financial statements.
Horsham, Pennsylvania
February 6, 1998
Kreischer, Miller & Co.
<PAGE>
<TABLE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Combined Balance Sheets
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<CAPTION>
1997 1996
----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Accounts and notes receivable, net of
allowance for doubtful accounts of
$28,180 and $25,079, respectively $ 1,237,646 $1,433,349
Inventories 1,626,074 2,563,536
Prepaid expenses and other current
assets 74,542 127,621
----------------------------------------
Total current assets 2,938,262 4,124,506
Property, plant and equipment, net 4,502,293 4,845,266
Other assets 17,535 23,203
----------------------------------------
TOTAL ASSETS $ 7,458,090 $ 8,992,975
----------------------------------------
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Current portion of long-term obligations $ 329,968 $ 352,651
Accounts payable 695,247 1,013,739
Accrued expenses 509,271 340,746
Intra-company payable 810,086 1,131,937
----------------------------------------
Total current liabilities 2,344,572 2,839,073
Long-term obligations, net of current portion 2,577,164 3,105,981
----------------------------------------
Total liabilities 4,921,736 5,945,054
Divisional equity 2,536,354 3,047,921
----------------------------------------
TOTAL LIABILITIES AND
DIVISIONAL EQUITY $ 7,458,090 $ 8,992,975
----------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
<TABLE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Combined Statements of Operations and Divisional Equity
Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<CAPTION>
1997 1996
------------------------------------------
<S> <C> <C>
Net sales $ 19,318,726 $ 21,404,418
Cost of sales 15,416,857 16,575,863
------------------------------------------
Gross profit 3,901,869 4,828,555
------------------------------------------
Operating expenses:
Warehouse and delivery expenses 1,067,867 1,032,154
Selling and marketing expenses 1,623,727 1,251,842
Administrative and general expenses 1,384,729 1,431,301
------------------------------------------
Total operating expenses 4,076,323 3,715,297
------------------------------------------
Income (loss) from operations (174,454) 1,113,258
------------------------------------------
Other (income) expense:
Interest 346,693 421,819
Other, net (9,580) 4,120
------------------------------------------
337,113 425,939
------------------------------------------
Net income (loss) (511,567) 687,319
Divisional equity:
Beginning of year 3,047,921 2,360,602
------------------------------------------
End of year $ 2,536,354 $ 3,047,921
------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
<TABLE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Combined Statements of Cash Flows
Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<CAPTION>
1997 1996
----------------------------------------
<S> <C> <C>
Net income (loss) $ (511,567) $ 687,319
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 484,231 519,048
Provision for losses on accounts receivable 41,548 27,529
Loss on disposal of equipment 11,964 10,091
Changes in assets and liabilities:
Decrease in accounts and notes receivable 154,155 117,145
Decrease in inventories 937,462 612,492
(Increase) decrease in prepaid expenses and
other current assets 53,079 (33,466)
Increase (decrease) in accounts payable (318,492) 91,068
Increase in accrued expenses 168,525 165,176
----------------------------------------
Net cash provided by operating activities 1,020,905 2,196,402
----------------------------------------
Cash flows from investing activities:
Capital expenditures (176,104) (914,168)
Proceeds from sale of equipment 26,755 5,620
(Increase) decrease in other assets 1,795 (12,349)
----------------------------------------
Net cash used in investing activities (147,554) (920,897)
----------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term
obligations and notes payable - 2,910,694
Principal payments of long-term
obligations and notes payable (539,787) (1,771,758)
Decrease in intra-company payable, net (321,851) (2,394,030)
Decrease in deferred compensation liability (11,713) (20,411)
----------------------------------------
Net cash used in financing activities (873,351) (1,275,505)
----------------------------------------
Net change in cash - -
Cash, beginning of year - -
----------------------------------------
Cash, end of year $ - $ -
----------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Notes to Combined Financial Statements
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
(1) Description of Business and Presentation of Accompanying Financial
Statements
Benjamin Obdyke Incorporated (the Company) manufactures, markets, and
distributes roof drainage, exterior trim, ventilation, and other building
products. The Company grants credit to its customers which are primarily
wholesale and retail distributors, located mostly in the Northeast,
Mid-Atlantic, and Mid-West regions. Generally, the Company requires no
collateral from its customers.
The accompanying combined financial statements present the financial position,
results of operations, and cash flows of the "carved-out" operations of the Roof
Drainage and Exterior Trim Divisions (the Divisions) of the Company. The
Divisions do not constitute a separate legal entity, but rather operating units
of the Company. Certain assets of the Divisions were sold on January 2, 1998
(see Note 10).
To the extent practicable, management of the Company has segregated assets,
liabilities, revenues, and expenses of the Divisions from the other assets,
liabilities, revenues, and expenses of the Company. In the event where assets
and liabilities were not specifically attributable to the Divisions or the
Company's other operations, management allocated such amounts to the Divisions
based upon a three-factor formula representing the proportionate share of the
Divisions' sales, payroll, and net property, plant, and equipment to that of the
Company as a whole. Divisional equity is recorded in the accompanying combined
balance sheets to reflect the excess of divisional assets over divisional
liabilities.
Management specifically identified net sales and the related cost of sales by
product line and, accordingly, such amounts of the Divisions are reflected in
the accompanying combined statements of operations. Management allocated
operating expenses based upon the estimated proportional share of the resources
consumed by the Divisions. Management allocated interest expense based upon
specifically identifiable debt, including the intra-company payable.
(2) Summary of Significant Accounting Policies
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 and 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.
Continued...
<PAGE>
(2) Summary of Significant Accounting Policies, Continued
Inventories
Inventories of the Divisions are valued at the lower of cost or market. Cost is
determined on the last-in, first-out method (LIFO) for raw materials and
manufactured goods, and the first-in, first-out method (FIFO) for resale items.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of property, plant
and equipment is depreciated on the straight-line method over the estimated
useful lives of the assets. When property is retired or otherwise disposed of,
the cost of the property and related accumulated depreciation are removed from
the accounts and any resultant gains or losses are reflected in income for the
period. Maintenance and repairs are charged to expense as incurred; major
renewals and betterments are capitalized.
Included in the accompanying combined balance sheets is management's
determination of the Divisions' undivided interest in land and improvements and
building and improvements (see Note 4). Management has allocated to the
Divisions a proportionate share of these assets based upon an estimate of the
percentage utilized by the Divisions for their business operations.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code and under similar provisions of state law. The results of
operations of the Company will be reflected on the individual income tax returns
of the shareholders based upon their proportionate ownership interests.
Accordingly, the Company does not provide for federal or state income tax
liabilities on its earnings in the accompanying financial statements. The
Company, however, expects to distribute to the shareholders an amount sufficient
to pay the taxes created by corporate income.
Concentration of Credit Risk
Financial instruments which potentially subject the Divisions to a concentration
of credit risk, as defined by the Statement of Financial Standards No. 105, are
primarily trade receivables. Trade receivables generally have short payment
terms, are due from a large number of customers, and are dispersed across
different geographic areas.
Continued...
<PAGE>
(2) Summary of Significant Accounting Policies, Continued
Interest Rate Swaps
Interest rate swaps, which are principally used by the Company in the management
of interest rate exposure, are accounted for on an accrual basis. Amounts to be
paid or received under interest rate swap agreements are recognized as interest
income or expense in the periods in which they accrue.
(3) Inventories
Inventories comprise the following at December 31:
1997 1996
---------------------------------------
LIFO:
Raw materials $ 853,204 $ 1,538,659
Finished goods 508,893 773,147
---------------------------------------
1,362,097 2,311,806
FIFO:
Resale items 263,977 251,730
---------------------------------------
$ 1,626,074 $ 2,563,536
=======================================
If LIFO inventories were valued at costs determined on the FIFO method, they
would have been greater by approximately $707,000 and $790,000 at December 31,
1997 and 1996, respectively.
During 1997, LIFO inventory layers which were carried at costs prevailing in
prior periods declined. The effect of the inventory reduction was an incremental
decrease to cost of sales of approximately $123,000.
<PAGE>
(4) Property, Plant and Equipment
Major classes of property, plant and equipment comprise the following at
December 31:
1997 1996
---------------------------------------
Undivided interest in:
Land and improvements $ 435,515 $ 438,326
Building and improvements 3,769,263 3,810,665
Machinery and equipment 5,357,660 5,280,245
Furniture and fixtures 93,222 69,536
---------------------------------------
9,655,660 9,598,772
Accumulated depreciation
and amortization (5,153,367) (4,753,506)
---------------------------------------
$ 4,502,293 $ 4,845,266
=======================================
The Company recorded depreciation expense of approximately $601,000 and $546,000
during 1997 and 1996, respectively. Depreciation expense allocated to the
Divisions was approximately $480,000 and $516,000 in 1997 and 1996,
respectively.
(5) Current Portion of Long-Term Obligations
Current portion of the Company's long-term obligations comprise the following at
December 31:
1997 1996
--------------------------------------
Notes payable $ 408,954 $ 404,149
Deferred compensation 15,606 21,270
--------------------------------------
$ 424,560 $ 425,419
======================================
The current portion of the Division's allocation of the Company's long-term
obligations comprise the following at December 31:
1997 1996
--------------------------------------
Notes payable $ 319,931 $ 342,131
Deferred compensation 10,037 10,520
--------------------------------------
$ 329,968 $ 352,651
======================================
<PAGE>
(5) Current Portion of Long-Term Obligations, Continued
Included in current liabilities in the accompanying combined balance sheets is
an intra-company payable of $810,086 and $1,131,937 at December 31, 1997 and
1996, respectively. The intra-company payable represents management's
determination of the Divisions' allocable portion of the Company's outstanding
revolving line of credit at December 31, 1997 and 1996, as well as management's
estimate of cash consumed by the Divisions which was funded by the Company. The
effective interest rate charged on the intra-company payable was approximately
8%.
(6) Long-Term Obligations
Long-term obligations of the Company comprise the following at December 31:
1997 1996
----------------------------------------
Notes payable $ 3,673,771 $ 4,080,343
Deferred compensation 15,606 32,547
----------------------------------------
3,689,377 4,112,890
Less: current portion (424,560) (425,419)
----------------------------------------
Long-term obligations $ 3,264,817 $ 3,687,471
========================================
Long-term obligations of the Company which have been allocated to the Divisions
comprise the following at December 31:
1997 1996
----------------------------------------
Notes payable $ 2,897,095 $ 3,436,885
Deferred compensation 10,037 21,747
----------------------------------------
2,907,132 3,458,632
Less: current portion (329,968) (352,651)
----------------------------------------
Long-term obligations $ 2,577,164 $ 3,105,981
========================================
Continued...
<PAGE>
(6) Long-Term Obligations, Continued
Notes payable of the Company comprise the following at December 31:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------
<S> <C> <C>
Note payable bearing interest at 3% per annum
and payable in 36 monthly installments of $872
including interest; commencing February 6, 1996. $ 10,301 $ 20,309
Note payable bearing interest at 5% per annum
and payable in 36 monthly installments of $900
including interest; commencing July 1, 1996. 17,117 25,277
Equipment Term Loan 487,500 637,500
Construction Term Loan 1,060,000 1,140,000
Consolidation Term Loan 2,098,853 2,257,257
----------------------------------------
$ 3,673,771 $ 4,080,343
========================================
</TABLE>
On March 28, 1996, the Company entered into a new banking agreement,
subsequently amended, consisting of four separate borrowing facilities with its
primary bank. Under the first facility, the Company entered into a Revolving
Credit for general working capital needs under which the Company may borrow up
to an aggregate of $2,500,000. The Company may not have outstanding amounts
greater than 80% of eligible accounts receivable outstanding less than 90 days
plus 35% of inventory (45% for the period from March 1 through July 31 of each
year), valued on a FIFO basis, provided that advances on inventory do not exceed
$1,400,000. No amounts were outstanding on the line at December 31, 1997 and
1996. A commitment fee of one-fifth of one percent is charged annually on the
unused portion of the line. This facility is for the period through December 31,
1998, at which time the balance then outstanding is payable in full. However, in
the event the Company is not in default and the outstanding principal amount
exceeds $1,000,000, the Company may elect to repay all or part of the principal
balance outstanding in twelve equal quarterly installments of principal
commencing January 1, 1999. Interest on the unpaid principal balance of the
Revolving Credit Facility will accrue at a rate or rates selected by the Company
from either the bank's prime rate, or rates based upon the bank's Revolving
Credit London Interbank Offering Rate (LIBOR) or the bank's Revolving Credit
Overnight Borrowing Rate (OBR). The rates based upon the bank's Revolving Credit
LIBOR and OBR are subject to reduction based upon the Company's ratio of
liabilities to tangible net worth.
Continued...
<PAGE>
(6) Long-Term Obligations, Continued
At December 31, 1997, the Company selected the bank's revolving credit OBR,
which was 7.75%.
Under the second facility, the Company entered into an Equipment Term Loan
Funding Facility whereby the Company may borrow up to $750,000, of which
$550,000 of the proceeds can be used for new MIS hardware and software and
$200,000 of the proceeds can be used for furniture and fixtures. Advances under
this facility are payable in twenty quarterly installments equal to 1/20 of the
principal balance, plus interest.
Interest on the unpaid principal balance of the Equipment Term Loans will accrue
at a rate or rates selected by the Company from either the bank's prime rate, or
rates based upon the bank's Equipment Term LIBOR or the bank's Equipment Term
Loan OBR. The rates based upon the bank's Equipment Term Loan LIBOR and OBR are
subject to reduction based upon the Company's ratio of liabilities to tangible
net worth.
At December 31, 1997, the Company selected the bank's Equipment Term Loan OBR,
which was 7.60%.
Under the third facility, the Company entered into a Construction Term Loan
Facility whereby the Company may borrow up to $1,200,000 to fund Company
improvements. Advances under this facility are payable in sixty quarterly
installments equal to 1/60 of the aggregate principal balance.
Interest on the unpaid principal balance of the Construction Term Loan will
accrue at a rate or rates selected by the Company from either the bank's
Construction Term Loan Prime Rate, Construction Term Loan As-Offered Fixed Rate,
or rates based upon the bank's Construction Term Loan LIBOR or the bank's
Construction Term Loan OBR. The rates based upon the bank's Construction Term
Loan LIBOR and OBR are subject to reduction based upon the Company's ratio of
liabilities to tangible net worth.
At December 31, 1997, the Company selected the bank's Construction Term Loan
OBR, which was 8.10%.
Under the fourth facility, the Company consolidated amounts previously due to
the bank and entered into a Consolidated Term Loan Facility. Under terms of this
facility, the Company pays the principal amount due in sixty equal quarterly
installments of $39,601.
Continued...
<PAGE>
(6) Long-Term Obligations, Continued
Interest on the unpaid principal balance of the Consolidated Term Loan will
accrue at a rate or rates selected by the Company from either the bank's
Consolidated Term Loan Prime Rate, As-Offered Fixed Rate, or rates based upon
the bank's Consolidated Term Loan LIBOR or the bank's Consolidated Term Loan
OBR. The rates based upon the Consolidated Term Loan LIBOR and OBR are subject
to reduction based upon the Company's ratio of liabilities to tangible net
worth.
At December 31, 1997, the Company selected the bank's Consolidated Term Loan
OBR, which was 8.10%.
Effective May 1, 1997, the Company entered into an interest rate Swap Agreement
to reduce the impact of changes in interest rates on its Consolidated Term Loan
debt. The Swap Agreement is a contract to exchange the bank's floating
Consolidated Term Loan OBR rate for fixed interest rate payments over the
remaining life of the Consolidated Term Loan without the exchange of the
underlying notional amount. The notional amount of an interest rate swap
agreement is used to measure interest to be paid or received and does not
represent the amount of exposure to credit loss. At December 31, 1997, the
Company's interest rate payable to the bank was 8.06% and the interest rate
receivable related to the swap was 8.10% on a notional amount of approximately
$2,100,000.
All facilities contain restrictive covenants which include provisions for the
maintenance of maximum debt to tangible net worth, working capital and debt
coverage. All facilities are collateralized by the Company's accounts
receivable, general intangibles, inventories, and property, plant and equipment
located at its principal manufacturing and warehousing location, and an
investment account with a minimum balance of $1,000,000.
The aggregate amounts of long-term obligations of the Company maturing in each
of the next five years and thereafter are as follows:
1997 $ 424,560
1998 395,271
1999 388,404
2000 275,904
2001 238,404
Thereafter 1,966,834
-----------------
$ 3,689,377
=================
Cash paid for interest by the Company was approximately $304,000 and $427,000 in
1997 and 1996, respectively.
Continued...
<PAGE>
(6) Long-Term Obligations, Continued
Deferred Compensation
The Company has deferred compensation agreements with three former officers. One
agreement expired in 1997 and the other two agreements expire in 1998. The
Company provided for the present value of the payments by charges to income over
the years prior to the retirement of these former officers. Management has
allocated $10,037 and $21,747 to the Divisions at December 31, 1997 and 1996,
respectively.
(7) Operating Lease Commitments
The Company rents certain transportation equipment under operating leases
expiring at various dates through 2002.
Payments are based on a minimum rental plus additional rent based on mileage.
The following is a schedule of the Company's future minimum lease payments, as
well as those that management has attributed to the Divisions, as of December
31, 1997:
Company Divisions
------------------------------------
1998 $ 97,000 $ 59,000
1999 88,000 54,000
2000 62,000 39,000
2001 19,000 12,000
2002 14,000 9,000
The Company recorded rental expense for all operating leases of approximately
$303,000 and $341,000 in 1997 and 1996, respectively. Rental expense allocable
to the Divisions for 1997 and 1996 was approximately $175,000 and $202,000,
respectively.
(8) Related-Party Transactions
One of the Company's officers is a partner in a firm which provides various
manufacturing and other services to the Divisions. These services aggregated
approximately $498,000 and $513,000 in 1997 and 1996, respectively.
At December 31, 1997, the Company has a $50,000 note receivable from this
related firm. The note is unsecured and bears interest at 8% per annum. The note
was repaid in January 1998.
<PAGE>
(9) Employee Benefit Plans
The Company sponsors a combined profit sharing/retirement plan (the Plan) which
covers nonunion employees with at least one year of service. Employees can
contribute up to 15% of their gross pay to the Plan. The Company will match 50%
of employee contributions up to 3% of the employee's gross pay. In addition, all
eligible employees in the Plan participate in a year-end discretionary
contribution by the Company based on their gross pay as a percentage of the
total gross pay of participants in the Plan. The Company's total contributions
under the Plan were approximately $120,000 and $136,000 in 1997 and 1996,
respectively, of which $84,000 and $91,000 were allocated by management based
upon base salaries to the Divisions in 1997 and 1996, respectively.
Effective February 1, 1992, the Company established a combined profit
sharing/retirement plan (the Union Plan) covering union employees with a minimum
of one year of service. Employees can contribute up to 15% of their gross pay,
with the Company matching 50% of employee contributions up to 3% of their gross
pay. In addition, eligible employees of the Union Plan participate in a year-end
core contribution by the Company of up to 3% based on their gross pay as a
percentage of the total gross pay of eligible participants. The Company's total
contributions under the Union Plan were approximately $46,000 and $48,000 for
1997 and 1996, respectively, of which $32,000 was allocated by management based
upon base salaries to the Divisions in each of 1997 and 1996.
(10) Sale of Assets of the Divisions
On January 2, 1998, the Company sold the businesses operated by the Divisions
which included, among other things, certain of the Divisions' assets, primarily
inventory and machinery and equipment, for approximately $11,400,000.
<PAGE>
Independent Auditor's Report
To the Shareholders
Benjamin Obdyke Incorporated
Warminster, Pennsylvania
We have audited the accompanying combined balance sheets of the Roof Drainage
and Exterior Trim Divisions of Benjamin Obdyke Incorporated as of December 31,
1996 and 1995, and the related combined statements of operations and divisional
equity, and cash flows for the years then ended. These combined financial
statements are the responsibility of the Divisions' management. Our
responsibility is to express an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Roof Drainage
and Exterior Trim Divisions of Benjamin Obdyke Incorporated as of December 31,
1996 and 1995, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
The accompanying combined financial statements are those of the Roof Drainage
and Exterior Trim Divisions of Benjamin Obdyke Incorporated only and are not
those of Benjamin Obdyke Incorporated. The assumptions and methodology used to
allocate assets, liabilities, divisional equity, revenue and expenses to the
Divisions are discussed in Note 1 to the combined financial statements.
Horsham, Pennsylvania
January 14, 1998
Kreischer, Miller & Co.
<PAGE>
<TABLE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Combined Balance Sheets
December 31, 1996 and 1995
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, net of
allowance for doubtful accounts of
$31,216 and $25,079, respectively $1,433,349 $1,578,023
Inventories 2,563,536 3,176,028
Prepaid expenses and other current
assets 127,621 94,155
----------------------------------------
Total current assets 4,124,506 4,848,206
Property, plant and equipment, net 4,845,266 4,462,836
Other assets 23,203 13,875
----------------------------------------
TOTAL ASSETS $ 8,992,975 $ 9,324,917
========================================
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Current portion of long-term obligations $ 352,651 $ 516,609
Accounts payable 1,013,739 922,671
Accrued expenses 340,746 175,570
Intra-company payable 1,131,937 3,525,967
----------------------------------------
Total current liabilities 2,839,073 5,140,817
Long-term obligations, net of current portion 3,105,981 1,823,498
----------------------------------------
Total liabilities 5,945,054 6,964,315
Divisional equity 3,047,921 2,360,602
----------------------------------------
TOTAL LIABILITIES AND
DIVISIONAL EQUITY $ 8,992,975 $ 9,324,917
========================================
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
<TABLE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Combined Statements of Operations and Divisional Equity
Years Ended December 31, 1996 and 1995
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
------------------------------------------
<S> <C> <C>
Net sales $ 21,404,418 $ 19,914,967
Cost of sales 16,575,863 16,863,479
------------------------------------------
Gross profit 4,828,555 3,051,488
------------------------------------------
Operating expenses:
Warehouse and delivery expenses 1,032,154 1,321,091
Selling and marketing expenses 1,251,842 1,299,561
Administrative and general expenses 1,431,301 1,371,036
------------------------------------------
Total operating expenses 3,715,297 3,991,688
------------------------------------------
Income (loss) from operations 1,113,258 (940,200)
------------------------------------------
Other expenses:
Interest 421,819 496,464
Other, net 4,120 71,247
------------------------------------------
425,939 567,711
------------------------------------------
Net income (loss) 687,319 (1,507,911)
Divisional equity:
Beginning of year 2,360,602 3,868,513
------------------------------------------
End of year $ 3,047,921 $ 2,360,602
==========================================
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
<TABLE>
ROOF DRAINAGE AND EXTERIOR TRIM DIVISIONS
OF BENJAMIN OBDYKE INCORPORATED
Combined Statements of Cash Flows
Years Ended December 31, 1996 and 1995
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
------------------------------------------
<S> <C> <C>
Net income (loss) $ 687,319 $ (1,507,911)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 519,048 422,314
Provision for losses on accounts receivable 27,529 106,232
Loss on disposal of equipment 10,091 -
Changes in assets and liabilities:
Decrease in accounts receivable 117,145 222,431
(Increase) decrease in inventories 612,492 (662,391)
(Increase) decrease in prepaid expenses and
other current assets (33,466) 9,843
Increase (decrease) in accounts payable 91,068 (44,786)
Increase (decrease) in accrued expenses 165,176 (187,921)
------------------------------------------
Net cash provided by (used in) operating activities 2,196,402 (1,642,189)
------------------------------------------
Cash flows from investing activities:
Capital expenditures (914,168) (626,512)
Proceeds from sale of equipment 5,620 -
(Increase) decrease in other assets (12,349) 27,425
------------------------------------------
Net cash used in investing activities (920,897) (599,087)
------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term
obligations and notes payable 2,910,694 15,345
Principal payments of long-term
obligations and notes payable (1,771,758) (514,284)
Increase (decrease) in intra-company payable, net (2,394,030) 2,760,076
Decrease in deferred compensation liability (20,411) (19,861)
------------------------------------------
Net cash provided by (used in)
financing activities (1,275,505) 2,241,276
------------------------------------------
Net change in cash - -
Cash, beginning of year - -
------------------------------------------
Cash, end of year $ - $ -
==========================================
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
(1) Description of Business and Presentation of Accompanying Financial
Statements
Benjamin Obdyke Incorporated (the Company) manufactures, markets, and
distributes roof drainage, exterior trim, ventilation, and other building
products. The Company grants credit to its customers which are primarily
wholesale and retail distributors, located mostly in the Northeast,
Mid-Atlantic, and Mid-West regions. Generally, the Company requires no
collateral from its customers.
The accompanying combined financial statements present the financial position,
results of operations, and cash flows of the "carved-out" operations of the Roof
Drainage and Exterior Trim Divisions (the Divisions) of the Company. The
Divisions do not constitute a separate legal entity, but rather operating units
of the Company. Certain assets of the Divisions were sold on January 2, 1998
(see Note 10).
To the extent practicable, management of the Company has segregated assets,
liabilities, revenues, and expenses of the Divisions from the other assets,
liabilities, revenues, and expenses of the Company. In the event where assets
and liabilities were not specifically attributable to the Divisions or the
Company's other operations, management allocated such amounts to the Divisions
based upon a three-factor formula representing the proportionate share of the
Divisions' sales, payroll, and net property, plant, and equipment to that of the
Company as a whole. Divisional equity is recorded in the accompanying combined
balance sheets to reflect the excess of divisional assets over divisional
liabilities.
Management specifically identified net sales and the related cost of sales by
product line and, accordingly, such amounts of the Divisions are reflected in
the accompanying combined statements of operations. Management allocated
operating expenses based upon the estimated proportional share of the resources
consumed by the Divisions. Management allocated interest expense based upon
specifically identifiable debt, including the intra-company payable.
(2) Summary of Significant Accounting Policies
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 and 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.
Continued...
<PAGE>
(2) Summary of Significant Accounting Policies, Continued
Inventories
Inventories of the Divisions are valued at the lower of cost or market. Cost is
determined on the last-in, first-out method (LIFO) for raw materials and
manufactured goods, and the first-in, first-out method (FIFO) for resale items.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of property, plant
and equipment is depreciated on the straight-line method over the estimated
useful lives of the assets. When property is retired or otherwise disposed of,
the cost of the property and related accumulated depreciation are removed from
the accounts and any resultant gains or losses are reflected in income for the
period. Maintenance and repairs are charged to expense as incurred; major
renewals and betterments are capitalized.
Included in the accompanying combined balance sheets is management's
determination of the Divisions' undivided interest in land and improvements and
building and improvements (see Note 4). Management has allocated to the
Divisions a proportionate share of these assets based upon an estimate of the
percentage utilized by the Divisions for their business operations.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code and under similar provisions of state law. The results of
operations of the Company will be reflected on the individual income tax returns
of the shareholders based upon their proportionate ownership interests.
Accordingly, the Company does not provide for federal or state income tax
liabilities on its earnings in the accompanying financial statements. The
Company, however, expects to distribute to the shareholders an amount sufficient
to pay the taxes created by corporate income.
Concentration of Credit Risk
Financial instruments which potentially subject the Divisions to a concentration
of credit risk, as defined by the Statement of Financial Standards No. 105, are
primarily trade receivables. Trade receivables generally have short payment
terms, are due from a large number of customers, and are dispersed across
different geographic areas. <PAGE>
(3) Inventories
Inventories comprise the following at December 31:
1996 1995
---------------------------------------
LIFO:
Raw materials $ 1,538,659 $ 1,955,244
Finished goods 773,147 923,516
---------------------------------------
2,311,806 2,878,760
FIFO:
Resale items 251,730 297,268
---------------------------------------
$ 2,563,536 $ 3,176,028
=======================================
If LIFO inventories were valued at costs determined on the FIFO method, they
would have been greater by approximately $790,000 and $1,195,000 at December 31,
1996 and 1995, respectively.
(4) Property, Plant and Equipment
Major classes of property, plant and equipment comprise the following at
December 31:
1996 1995
---------------------------------------
Undivided interest in:
Land and improvements $ 438,326 $ 445,824
Building and improvements 3,810,665 3,371,917
Machinery and equipment 5,280,245 4,654,420
Furniture and fixtures 69,536 53,102
---------------------------------------
9,598,772 8,525,263
Accumulated depreciation
and amortization (4,753,506) (4,062,427)
---------------------------------------
$ 4,845,266 $ 4,462,836
=======================================
The Company recorded depreciation expense of approximately $546,000 and $470,000
during 1996 and 1995, respectively. Depreciation expense allocated to the
Divisions was approximately $516,000 and $415,000 in 1996 and 1995,
respectively. <PAGE>
(5) Current Portion of Long-Term Obligations
Current portion of the Company's long-term obligations comprise the following at
December 31:
1996 1995
--------------------------------------
Notes payable $ 404,149 $ 3,303,346
Deferred compensation 21,270 27,784
--------------------------------------
$ 425,419 $ 3,331,130
======================================
The current portion of the Division's allocation of the Company's long-term
obligations comprise the following at December 31:
1996 1995
--------------------------------------
Notes payable $ 342,131 $ 497,194
Deferred compensation 10,520 19,415
--------------------------------------
$ 352,651 $ 516,609
======================================
Included in current liabilities in the accompanying combined balance sheets is
an intra-company payable of $1,131,937 and $3,525,967 at December 31, 1996 and
1995, respectively. The intra-company payable represents management's
determination of the Divisions' allocable portion of the Company's outstanding
revolving line of credit at December 31, 1996 and 1995, as well as management's
estimate of cash consumed by the Divisions which was funded by the Company. The
effective interest rate charged on the intra-company payable was approximately
8%.
(6) Long-Term Obligations
Long-term obligations of the Company comprise the following at December 31:
1996 1995
--------------------------------------
Notes payable $ 4,080,343 $ 5,285,921
Deferred compensation 32,547 60,331
--------------------------------------
4,112,890 5,346,252
Less: current portion (425,419) (3,331,130)
--------------------------------------
Long-term obligations $ 3,687,471 $ 2,015,122
======================================
<PAGE>
(6) Long-Term Obligations, Continued
Long-term obligations of the Company which have been allocated to the Divisions
comprise the following at December 31:
1996 1995
--------------------------------------
Notes payable $ 3,436,885 $ 2,297,948
Deferred compensation 21,747 42,159
--------------------------------------
3,458,632 2,340,107
Less: current portion (352,651) (516,609)
--------------------------------------
Long-term obligations $ 3,105,981 $ 1,823,498
======================================
<PAGE>
(6) Long-Term Obligations, Continued
Notes payable of the Company comprise the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------
<S> <C> <C>
Notes payable. $ - $ 1,395,777
Revolving credit and term loan. - 2,755,000
Notes payable in aggregate monthly principal installments of $20,787 plus
interest at 8.25% with a final aggregate payment of $519,677
in June 1997. - 873,057
Notes payable in aggregate monthly principal installments of $4,886 plus
interest at 8.47% with final payments of $61,173 in November
1997 and $61,022 in December 1997. - 232,087
Note payable bearing interest at 3% per annum
and payable in 36 monthly installments of $872
including interest; commencing February 6, 1996. 20,309 30,000
Note payable bearing interest at 5% per annum
and payable in 36 monthly installments of $900
including interest; commencing July 1, 1996. 25,277 -
Equipment Term Loan 637,500 -
Construction Term Loan 1,140,000 -
Consolidation Term Loan 2,257,257 -
----------------------------------------
$ 4,080,343 $ 5,285,921
========================================
</TABLE>
<PAGE>
(6) Long-Term Obligations, Continued
On March 28, 1996, the Company entered into a new banking agreement consisting
of four separate borrowing facilities with its primary bank. Under the first
facility, the Company entered into a Revolving Credit for general working
capital needs under which the Company may borrow up to an aggregate of
$5,000,000. The Company may not have outstanding amounts greater than 80% of
eligible accounts receivable outstanding less than 90 days plus 35% of inventory
(45% for the period from March 1 through July 31 of each year), valued on a FIFO
basis, provided that advances on inventory do not exceed $2,800,000. A
commitment fee of one-fifth of one percent is charged annually on the unused
portion of the line. This facility is for the period through December 31, 1998,
at which time the balance then outstanding is payable in full. However, in the
event the Company is not in default and the outstanding principal amount exceeds
$1,000,000, the Company may elect to repay all or part of the principal balance
outstanding in twelve equal quarterly installments of principal commencing
January 1, 1999.
Interest on the unpaid principal balance of the Revolving Credit Facility will
accrue at a rate or rates selected by the Company from either the bank's prime
rate, or rates based upon the bank's Revolving Credit London Interbank Offering
Rate (LIBOR) or the bank's Revolving Credit Overnight Borrowing Rate (OBR). The
rates based upon the bank's Revolving Credit LIBOR and OBR are subject to
reduction based upon the Company's ratio of liabilities to tangible net worth.
At December 31, 1996, the Company selected the bank's revolving credit OBR,
which was 8%.
Under the second facility, the Company entered into an Equipment Term Loan
Funding Facility whereby the Company may borrow up to $750,000, of which
$550,000 of the proceeds can be used for new MIS hardware and software and
$200,000 of the proceeds can be used for furniture and fixtures. Advances under
this facility are payable in twenty quarterly installments equal to 1/20 of the
principal balance, plus interest.
Interest on the unpaid principal balance of the Equipment Term Loans will accrue
at a rate or rates selected by the Company from either the bank's prime rate, or
rates based upon the bank's Equipment Term LIBOR or the bank's Equipment Term
Loan OBR. The rates based upon the bank's Equipment Term Loan LIBOR and OBR are
subject to reduction based upon the Company's ratio of liabilities to tangible
net worth.
Continued...
<PAGE>
(6) Long-Term Obligations, Continued
At December 31, 1996, the Company selected the bank's Equipment Term Loan OBR,
which was 7.85%.
Under the third facility, the Company entered into a Construction Term Loan
Facility whereby the Company may borrow up to $1,200,000 to fund Company
improvements. Advances under this facility are payable in sixty quarterly
installments equal to 1/60 of the aggregate principal balance.
Interest on the unpaid principal balance of the Construction Term Loan will
accrue at a rate or rates selected by the Company from either the bank's
Construction Term Loan Prime Rate, Construction Term Loan As-Offered Fixed Rate,
or rates based upon the bank's Construction Term Loan LIBOR or the bank's
Construction Term Loan OBR. The rates based upon the bank's Construction Term
Loan LIBOR and OBR are subject to reduction based upon the Company's ratio of
liabilities to tangible net worth.
At December 31, 1996, the Company selected the bank's Construction Term Loan
OBR, which was 8.35%.
Under the fourth facility, the Company consolidated amounts previously due to
the bank and entered into a Consolidated Term Loan Facility. Under terms of this
facility, the Company pays the principal amount due in sixty equal quarterly
installments of $39,601.
Interest on the unpaid principal balance of the Consolidated Term Loan will
accrue at a rate or rates selected by the Company from either the bank's
Consolidated Term Loan Prime Rate, As-Offered Fixed Rate, or rates based upon
the bank's Consolidated Term Loan LIBOR or the bank's Consolidated Term Loan
OBR. The rates based upon the Consolidated Term Loan LIBOR and OBR are subject
to reduction based upon the Company's ratio of liabilities to tangible net
worth.
At December 31, 1996, the Company selected the bank's Consolidated Term Loan
OBR, which was 8.35%.
All facilities contain restrictive covenants which include provisions for the
maintenance of minimum debt to tangible net worth, working capital and debt
coverage. All facilities are collateralized by the Company's accounts
receivable, general intangibles, inventories, and property, plant and equipment
located at its principal manufacturing and warehousing locations.
Continued...
<PAGE>
(6) Long-Term Obligations, Continued
The aggregate amounts of long-term obligations of the Company maturing in each
of the next five years and thereafter are as follows:
1997 $ 425,419
1998 429,522
1999 388,404
2000 388,404
2001 275,904
Thereafter 2,205,237
-----------------
$ 4,112,890
=================
Substantially all assets are pledged as collateral under existing agreements.
Cash paid for interest by the Company was approximately $427,000 and $503,000 in
1996 and 1995, respectively.
Deferred Compensation
The Company has deferred compensation agreements with three former officers. One
agreement expires in 1997 and the other two agreements expire in 1998. The
Company provided for the present value of the payments by charges to income over
the years prior to the retirement of these former officers. Management has
allocated $21,747 and $42,159 to the Divisions at December 31, 1996 and 1995,
respectively.
(7) Operating Lease Commitments
The Company rents certain transportation equipment under operating leases
expiring at various dates through 2002.
Continued...
<PAGE>
(7) Operating Lease Commitments, Continued
Payments are based on a minimum rental plus additional rent based on mileage.
The following is a schedule of the Company's future minimum lease payments, as
well as those that management has attributed to the Divisions, as of December
31, 1996:
Company Divisions
------------------------------------
1997 $ 222,000 $ 142,000
1998 193,000 127,000
1999 132,000 87,000
2000 90,000 60,000
2001 19,000 13,000
Thereafter 14,000 9,000
------------------------------------
$ 670,000 $ 438,000
====================================
The Company recorded rental expense for all operating leases of approximately
$341,000 and $376,000 in 1996 and 1995, respectively. Rental expense allocable
to the Divisions for 1996 and 1995 was approximately $202,000 and $295,000,
respectively.
(8) Related-Party Transactions
One of the Company's officers is a partner in a firm which provides various
manufacturing and other services to the Divisions. These services aggregated
approximately $513,000 and $480,000 in 1996 and 1995, respectively.
(9) Employee Benefit Plans
The Company sponsors a combined profit sharing/retirement plan (the Plan) which
covers nonunion employees with at least one year of service. Employees can
contribute up to 15% of their gross pay to the Plan. The Company will match 50%
of employee contributions up to 3% of the employee's gross pay. In addition, all
eligible employees in the Plan participate in a year-end discretionary
contribution by the Company based on their gross pay as a percentage of the
total gross pay of participants in the Plan. The Company's total contributions
under the Plan were approximately $136,000 and $97,000 in 1996 and 1995,
respectively, of which $91,000 and $67,000 were allocated by management based
upon base salaries to the Divisions in 1996 and 1995, respectively.
Continued...
<PAGE>
(9) Employee Benefit Plans, Continued
Effective February 1, 1992, the Company established a combined profit
sharing/retirement plan (the Union Plan) covering union employees with a minimum
of one year of service. Employees can contribute up to 15% of their gross pay,
with the Company matching 50% of employee contributions up to 3% of their gross
pay. In addition, eligible employees of the Union Plan participate in a year-end
core contribution by the Company of up to 3% based on their gross pay as a
percentage of the total gross pay of eligible participants. The Company's total
contributions under the Union Plan were approximately $48,000 and $46,000 for
1996 and 1995, respectively, of which $32,000 was allocated by management based
upon base salaries to the Divisions in each of 1996 and 1995.
(10) Sale of Assets of the Divisions
On January 2, 1998, the Company sold the businesses operated by the Divisions
which included, among other things, certain of the Divisions' recorded assets,
primarily inventory and machinery and equipment, for approximately $11,400,000.
<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 hereunto duly authorized.
BERGER HOLDINGS, LTD.
Dated: March 18, 1998 By: JOSEPH F. WEIDERMAN
---------------------------
Joseph F. Weiderman
President
<PAGE>
Exhibit Index
Exhibit 23.1 Consent of Independent Public Accounts
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
Berger Holdings, Ltd. and Subsidiaries
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-3(No. 333-15725) and related Prospectus of
Berger Holdings, Ltd. (the "Company"), to the incorporation by reference in
the Registration Statement on Form S-3(No. 333-30511) and related Prospectus
of the Company and to the incorporation by reference in the Registration
Statement on Form S-8(No. 333-24917) and related Prospectus of the Company, of
(i) our report dated February 6, 1998 on our audit of the combined balance
sheets of the Roof Drainage and Exterior Trim Divisions of Benjamin Obdyke
Incorporated as of December 31, 1997 and 1996, and the related combined
statements of operations and divisional equity, and cash flows for the years
then ended and (ii) our report dated January 14, 1998 on our audit of the
combined balance sheets of the Roof Drainage and Exterior Trim Divisions of
Benjamin Obdyke Incorporated as of December 31, 1996 and 1995, and the related
combined statements of operations and divisional equity, and cash flows for
the years then ended.
/s/ Kreischer, Miller & Co.
Kreischer, Miller & Co.
Horsham, Pennsylvania
March 18, 1998
