<PAGE> 1
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): May 31, 1996
Tigera Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-12113 94-2691724
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
667 Madison Avenue, New York, New York 10021
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including Area Code: (212) 644-8880
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
Pursuant to Item 7(a)(4) and Item 7(b)(2) of Form 8-K as
promulgated by the Securities and Exchange Commission, the registrant is hereby
providing the financial statements and pro forma financial information required
by Item 7 of Form 8-K by this amendment to the registrant's Current Report on
Form 8-K dated May 31, 1996. In addition, this amendment clarifies, supplements
and restates the description of the transaction reported on such Current Report.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The following description amends, supplements and supersedes
the description of the transactions described in Item 2 of the Form 8-K dated
May 31, 1996, filed by the registrant on June 14, 1996.
On May 31, 1996, the Company acquired 85% of the outstanding
capital stock of CPI (the "CPI Acquisition"), a privately held company engaged
in the business of distribution, manufacturing and assembly of wire and cable,
from James S. Harrington, Duane A. Gawron, Trustee of the Living Trust of Duane
A. Gawron, Margo Gawron, John E. Pylak, Trustee of the John E. Pylak Living
Trust, Rebecca Pylak and Kurt Cieszkowski (collectively, the "Sellers"). As a
result of the transaction, Mr. Harrington became the President, Chief Executive
Officer and a director of the Company; Messrs. Gawron and Pylak became Senior
Vice Presidents and directors of the Company; and Mr. Cieszkowski became a
Senior Vice President of the Company. Margo Gawron is the wife of Duane A.
Gawron and Rebecca Pylak is the wife of John E. Pylak. The remaining 15% of the
outstanding capital stock of CPI continues to be held by the Sellers.
CPI, with corporate headquarters in Leominster, Massachusetts,
was formed by the merger of its three operating divisions in October 1995. CPI
consists of three operating divisions: Energy Electric Cable (distribution) in
Auburn Hills, Michigan; BSCC (manufacturing) in Leominster, Massachusetts; and
Energy Electric Assembly (assembly), also in Auburn Hills. In addition, CPI has
numerous distribution warehouses in the Southeast and Midwest.
In connection with the CPI Acquisition, the Sellers received:
(i) from CPI, in consideration for shares of CPI Common Stock held by them and
redeemed by CPI, (A) an aggregate of $7,622,919 (the "Redemption Amount"),
$250,000 of which was placed in escrow, (B) promissory notes due May 31, 2003 in
the aggregate principal amount of $6,000,000, (C) additional promissory notes
due May 31, 2003 in the aggregate principal amount of $3,000,000, payment of
which is contingent upon the achievement by CPI of certain financial targets,
and (D) the forgiveness of an aggregate of $2,000,000 in indebtedness of the
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<PAGE> 3
Sellers to CPI; and (ii) from Tigera, an aggregate of $7,990,000 (the "Purchase
Price"), $1,000,000 of which was placed in escrow. In addition, Tigera committed
to invest an additional $3,500,000 in preferred stock of CPI ("CPI Preferred
Stock") to fund future expansion, $1,350,000 of which was invested on the
closing date. The CPI Preferred Stock has a preference on liquidation equal to
its purchase price, is non-voting, is not entitled to dividends, and is subject
to mandatory redemption at its purchase price per share (i) after the payment of
the promissory notes issued to the Sellers in partial consideration for the
shares of CPI Common Stock redeemed by CPI, and (ii) subject to the consent of
CPI's lenders. Tigera has also invested $400,000 for a subordinated note payable
by CPI for working capital purposes.
The consideration paid in connection with the CPI Acquisition
was determined through negotiations between the parties. The Purchase Price was
paid out of Tigera's available cash. Prior to the transactions described herein,
there was no material relationship between CPI or any of the Sellers and the
registrant or any of the registrant's affiliates, any director or officer of the
registrant, or any associate of any such officer or director.
Pursuant to the Stockholders' Agreement dated as of May 17,
1996, by and among the Company, CPI and the Sellers and executed in connection
with the acquisition of CPI (the "Stockholders' Agreement"), the Company granted
to the Sellers a put option to sell their shares of CPI Common Stock to the
Company, and the Sellers granted the Company a call option to purchase Sellers'
shares of CPI Common Stock (collectively, the "Put/Call Options") at a price to
be determined based on the then market value of the shares of the Company's
Common Stock now outstanding subject to specified adjustments. The Put/Call
Options are exercisable in increments of one-third of Sellers' shares of CPI
common stock on each of the 54th, 60th and 66th month anniversary dates of the
closing of the CPI Transaction and become immediately exercisable in the event
of a merger, liquidation, sale of substantially all of the assets or change of
control of the Company.
In addition, pursuant to the Stockholders Agreement, effective
at the closing of the CPI Acquisition, the Company caused the number of
directors constituting the entire Board of Directors of the Company to be
increased by three and caused the vacancies created thereby to be filled by the
election of Messrs. James S. Harrington, Duane A. Gawron and John E. Pylak (the
"CPI Nominees"). The Company has agreed to include the CPI Nominees (or such of
the CPI Nominees that remain employees of CPI or the Company) in the
management's slate of nominees for election as directors at any meeting of
shareholders at which directors are to be elected and to recommend to the
Company's shareholders the election of such nominees.
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<PAGE> 4
The Stockholders Agreement contains additional provisions
including, among others, provisions relating to the Company's investment of
$3,500,000 in CPI Preferred Stock (of which, as described above, $1,350,000 was
invested on the closing date), restrictions on the transferability of shares of
CPI stock held by the Company and by the Sellers, "tag along" rights which
entitle the Sellers to sell, and "drag along" rights which require the Sellers
to sell, their shares of CPI Common Stock in the event of a proposed transfer by
the Company of all of its shares of CPI Common Stock, participation rights in
favor of the Sellers in any future issuances of capital stock (or options or
warrants convertible into capital stock) of CPI for cash or in any additional
entity organized by the Company to make acquisitions in the wire and cable
industry, and restrictions on the Company's ability to acquire any business not
engaged in the wire and cable industry without the consent of the holders of a
majority of the shares of CPI Common Stock held by the Sellers.
Concurrently with the CPI Acquisition, CPI entered into an
employment agreement with each of James S. Harrington, Duane A. Gawron, John E.
Pylak and Kurt Cieszkowski which, in each case provides that they will be
employed for a period of three years from May 31, 1996 at an annual salary of
$175,000 per year plus an annual cash bonus (subject to a maximum of the annual
base salary for such year or partial year) equal to five percent of the amount
by which the "Adjusted Bonus EBITDA" (as defined) for such year, or partial
year, exceeds the "Adjusted Bonus EBITDA" for the prior year or part thereof.
The employment agreements provide for payment of both salary and bonus for the
full three-year term if the executive is discharged other than for cause, death
or disability, and, in the case of the death or disability of the executive, for
the payment of salary for the full three-year term and bonus for the year in
which the executive dies or becomes disabled. If the employee is terminated for
cause or resigns in breach of the employment agreement, no further salary is
payable and any bonus for the year of termination is forfeited. The employment
agreements also include provisions on non-competition, non-solicitation,
confidentially and proprietary information and are automatically renewable for
terms of one year unless either party gives no less than 60 days prior written
notice of its intention not to renew the agreement.
In connection with the CPI Acquisition, the Company issued an
aggregate of 1,888,593 options, subject to shareholder approval, to officers and
employees of CPI, including an option covering 362,677 shares to Mr. Harrington,
an option covering 344,172 shares to each of Messrs. Gawron and Pylak, and an
option covering 182,572 shares to Mr. Cieszkowski. The options are not
exercisable until July 8, 1999, but will become fully exercisable if there is a
"change of control," as defined. The right to exercise the options is subject to
vesting schedules set forth in the option agreements. If an optionee dies,
becomes disabled or
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<PAGE> 5
is terminated other than for cause, the option will become fully vested and may
be exercised for a specified period commencing on the later of the date of such
event and July 8, 1999; if the optionee resigns or is terminated for cause the
option may be exercised, to the extent vested on the date of such resignation or
termination, for a specified period commencing on the later of the date of such
event and July 8, 1999. If the 1996 Plan is not approved by the shareholders or
if an event, such as a change of control, occurs prior to such approval, under
the terms of the purchase agreement executed in connection with the CPI
Acquisition, the Company is obligated to issue stock purchase warrants to each
option holder, including Messrs. Harrington, Gawron, Pylak and Cieszkowski, and
on the same terms and conditions as the options previously issued to each of
them.
Simultaneously with the closing of the CPI Acquisition, CPI
refinanced its senior credit facility with the First National Bank of Boston and
NBD Bank to increase the amount available for borrowing thereunder to
approximately $45,000,000. At the closing, a total of approximately $32,000,000,
including the Redemption Amount, was outstanding under such credit facility. The
credit facility is secured, in part, by CPI's assets and a pledge of the
registrant's capital stock of CPI.
- 5 -
<PAGE> 6
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
<TABLE>
(a) Financial statements of businesses acquired.
<S> <C>
Report of Independent Accountants................................................................ F-1
Balance Sheets as of December 31, 1995 and March
31, 1996......................................................................................... F-2
Statements of Income for years ended December 31,
1995 and December 31, 1994 and three-month
periods ended March 31, 1996 and March 31, 1995 ................................................. F-3
Statements of Stockholder Equity for years ended
December 31, 1995 and December 31, 1994.......................................................... F-4
Statements of Cash Flows for years ended December 31, 1995 and
December 31, 1994 and three-month
periods ended March 31, 1996 and March 31, 1995.................................................. F-5
Notes to Financial Statements.................................................................... F-6
(b) Pro forma financial information.
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) at March 31, 1996.................................................................... F-11
Pro Forma Condensed Consolidated Statement of
Operations (Unaudited) for the year ended
December 31, 1995................................................................................ F-12
Pro Forma Condensed Consolidated Statement of
Operations (Unaudited) for the three-month period
ended March 31, 1996............................................................................. F-13
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited)................................................................. F-14
(c) Exhibits
24 Consent of Independent Auditors ..................................................... F-17
</TABLE>
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<PAGE> 7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.
TIGERA GROUP, INC.
(Registrant)
By: /s/James S. Harrington
-----------------------
James S. Harrington
President and Chief
Executive Officer
Dated: August 14, 1996
- 7 -
<PAGE> 8
CONNECTIVITY PRODUCTS INCORPORATED
REPORT ON AUDIT OF BALANCE SHEET AT DECEMBER 31, 1995
AND RELATED STATEMENTS OF INCOME, STOCKHOLDERS' EQUITY
AND CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND UNAUDITED BALANCE SHEET AS OF MARCH 31, 1996
AND RELATED UNAUDITED STATEMENT OF INCOME AND CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
<PAGE> 9
CONNECTIVITY PRODUCTS INCORPORATED
CONTENTS
<TABLE>
<CAPTION>
PAGES
<S> <C>
Report of Independent Accountants.................................. F-1
Financial Statements:
Balance Sheets................................................. F-2
Statements of Income........................................... F-3
Statements of Stockholders' Equity............................. F-4
Statements of Cash Flows....................................... F-5
Notes to Financial Statements.................................. F-6-F-10
</TABLE>
<PAGE> 10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Connectivity Products Incorporated:
We have audited the accompanying balance sheet of Connectivity Products
Incorporated as of December 31, 1995 and the related statements of income,
stockholders' equity, and cash flows for the years ended December 31, 1995 and
1994. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Connectivity Products
Incorporated as of December 31, 1995, and the results of its operations and its
cash flows for the years ended December 31, 1995 and 1994 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
April 17, 1996
F-1
<PAGE> 11
CONNECTIVITY PRODUCTS INCORPORATED
BALANCE SHEETS
as of December 31, 1995 and March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Cash $ 302,313 $ 335,284
Accounts receivable:
Trade, net of allowance for doubtful accounts of $611,896 in 1995 13,312,020 13,281,160
Other 142,772 98,827
Inventories 11,176,770 11,689,637
Prepaid expenses and other assets 257,807 279,017
------------ ------------
Total current assets 25,191,682 25,683,925
------------ ------------
Property, plant and equipment:
Machinery and equipment 7,266,463 7,580,606
Transportation equipment 158,835 158,835
Office equipment 516,278 527,117
Leasehold improvements 378,347 395,209
------------ ------------
8,319,923 8,661,767
Less accumulated depreciation 2,697,018 2,921,082
------------ ------------
5,622,905 5,740,685
Deposits and other assets 284,072 308,896
Intangible assets 401,644 365,587
------------ ------------
$ 31,500,303 $ 32,099,093
============ ============
LIABILITIES
Trade accounts payable $ 10,598,936 $ 9,955,748
Notes payable and current portion of long-term debt 9,866 8,578
Accrued compensation and commissions 343,429 317,729
Accrued liabilities 1,354,171 2,082,090
------------ ------------
Total current liabilities 12,306,402 12,364,145
Notes payable, bank 22,100,000 21,950,000
------------ ------------
Total liabilities 34,406,402 34,314,145
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 3,000 shares authorized, 2,040 shares
issued in 1995 20 20
Paid-in capital 24,980 24,980
Retained earnings 2,907,066 383,444
Receivables from stockholders (5,838,165) (2,623,496)
------------ ------------
(2,906,099) (2,215,052)
------------ ------------
$ 31,500,303 $ 32,099,093
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 12
CONNECTIVITY PRODUCTS INCORPORATED
STATEMENTS OF INCOME
for the years ended December 31,1994 and 1995 and the three months ended March
31, 1995 and 1996 (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, ---------------------------
1994 1995 1995 1996
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 70,184,688 $ 88,892,754 $ 20,443,039 $ 22,672,715
Cost of goods sold 52,604,807 65,294,310 14,833,910 16,398,284
------------ ------------ ------------ ------------
Gross profit 17,579,881 23,598,444 5,609,129 6,274,431
Selling, general and administrative
expenses 14,028,055 17,829,600 4,229,713 5,117,310
------------ ------------ ------------ ------------
Operating income 3,551,826 5,768,844 1,379,416 1,157,121
Other income (expenses):
Interest income 20,393 46,454 8,123 799
Interest expense (636,244) (1,083,965) (209,173) (451,547)
Other (23,653) (44,798) 238 5
------------ ------------ ------------ ------------
Net income $ 2,912,322 $ 4,686,535 $ 1,178,604 $ 706,378
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 13
CONNECTIVITY PRODUCTS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1994 and 1995
<TABLE>
<CAPTION>
COMMON STOCK RECEIVABLES
--------------------- PAID-IN RETAINED FROM
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDERS TOTAL
------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 25,000 $ 25,000 $ 401,170 $ 4,354,845 $ (227,244) $ 4,553,771
Adjust beginning balance to reflect 1995
merger (22,960) (24,980) 24,980 --
------- ----------- ----------- ----------- ----------- -----------
Balance, January 1, 1994, as adjusted 2,040 20 426,150 4,354,845 (227,244) 4,553,771
Distributions (2,623,950) (2,623,950)
Additional stockholders' receivables, net of
repayments (373,784) (373,784)
Net income 2,912,322 2,912,322
------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 2,040 20 426,150 4,643,217 (601,028) 4,468,359
Distribution to BSCC Group stockholder (1,900,000) (1,900,000)
Distributions (486,170) (4,384,296) (4,870,466)
Stockholder note payable converted to capital 85,000 85,000
Stockholders' receivables:
Additions, net of repayments (5,375,527) (5,375,527)
Dividends (138,390) 138,390 --
Net income 4,686,535 4,686,535
------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 2,040 $ 20 $ 24,980 $ 2,907,066 $(5,838,165) $(2,906,099)
======= =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 14
CONNECTIVITY PRODUCTS INCORPORATED
STATEMENTS OF CASH FLOWS
for the years ended December 31,1994 and 1995 and the three months ended March
31, 1995 and 1996 (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ------------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,912,322 $ 4,686,535 $ 1,178,604 $ 706,378
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 632,276 875,604 171,864 260,121
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (2,688,911) (2,361,637) (2,500,056) 48,663
Inventory (2,143,493) (4,468,494) (188,679) (512,867)
Prepaid expenses and other assets (63,190) (105,179) 44,200 4,933
Deposits and other assets (103,476) (74,292) (2,029) (24,825)
Increase (decrease) in:
Accounts payable 2,850,065 2,870,338 1,267,757 (643,188)
Accrued expenses 439,939 516,707 153,176 702,219
------------ ------------ ------------ ------------
Net cash provided by operating activities 1,835,532 1,939,582 124,837 541,434
------------ ------------ ------------ ------------
Cash flows from investing activities, purchases of property and
equipment (1,216,481) (2,723,708) (195,603) (341,844)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 2,992,178 22,100,000 -- --
Repayment of debt (521,761) (9,245,732) (261,235) (151,288)
Increases in receivables from stockholders, net (373,784) (5,375,527) (155,596) (15,331)
Distributions to stockholders (2,623,950) (6,770,466) (41,627) --
Payment of financing fees (342,703) -- --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities (527,317) 365,572 (458,458) (166,619)
------------ ------------ ------------ ------------
Net (decrease) increase in cash 91,734 (418,554) (529,224) 32,971
Cash, beginning of period 629,133 720,867 720,867 302,313
------------ ------------ ------------ ------------
Cash, end of period $ 720,867 $ 302,313 $ 191,643 335,284
============ ============ ============ ============
Supplemental disclosure of cash flow information, cash paid
during the year for, interest $ 625,403 $ 1,015,383 $ 205,041 $ 433,880
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 15
CONNECTIVITY PRODUCTS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Connectivity Products Incorporated (the "Company") was formed on October
3, 1995 as a result of the merger among BSCC Corporation ("BSCC"), BSCC
Group ("Group"), Energy Electric Cable, Inc. ("EEC") and Energy Electric
Assembly, Inc. ("EEA"). Under the terms of the merger agreements, the
common stock of BSCC, Group, EEA and EEC was canceled and converted into
a specified number of shares of the Company's common stock. In connection
with the transaction, the sole stockholder of Group (who was also a 50
percent stockholder in BSCC) received from the Company $1.9 million.
There are certain restrictions on the sale of the Company's common stock
and requirements for the Company to repurchase the common stock under
certain conditions.
BSCC, Group, EEA and EEC were controlled by the same stockholder group
prior to the merger and, therefore, the transaction has been accounted
for similar to a "pooling of interests". Accordingly, the carryover basis
of the assets and liabilities is presented herein, and the $1.9 million
paid for the common stock of Group has been shown as a stockholder
distribution. In accordance with pooling accounting, the financial
statements presented include the accounts of BSCC, Group, EEA and EEC as
if the merger occurred as of the first day of the earliest financial
statement period presented. All material intercompany accounts and
transactions have been eliminated.
2. NATURE OF OPERATIONS:
The primary business of the Company is the distribution and manufacture
of wire and cable products. The Company's operations include the
distribution of a full line of wire and cable products for the computer
networking market and the security, signal and sound markets, as well as
the manufacture and assembly of wire and cable products. Principal
manufacturing markets include security, factory automation, signal and
sound.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. INVENTORIES: Inventories are stated at the lower of cost or market,
with cost determined on the first-in, first-out basis. Inventoriable
costs include materials, direct labor and applicable manufacturing
overhead.
F-6
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
b. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are
recorded at cost less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the individual assets. Costs of major renewals and additions
are capitalized, while expenditures for repairs and maintenance costs
are expensed as incurred. Upon retirement or disposal of property and
equipment, the cost and accumulated depreciation are removed from the
accounts, and any gain or loss is included in the determination of net
income.
c. INCOME TAXES: The Company has elected to be treated as an
S-corporation, under Section 1362 of the Internal Revenue Code. All
merged companies (except for Group) had also elected to be treated as
an S-Corporation. Accordingly, no income tax provision has been
included in the financial statements since income of the Company
(except for Group) is required to be reported in the stockholders'
income tax returns. There were no material income tax liabilities
related to Group. Under the terms of the merger agreement, a
stockholder will receive an annual distribution expected to be
approximately 45 percent of taxable income in order to cover the
individual's income tax liability. A distribution of $2.1 million was
made in April 1996.
d. 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.
e. FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company has evaluated the
fair value of its financial instruments based on the current interest
rate environment and current pricing of debt instruments with
comparable terms. The carrying value of debt and other financial
instruments are considered to approximate fair value.
f. INTERIM INFORMATION (UNAUDITED): In the opinion of management, the
financial statements as of March 31, 1996 and for the three months
ending March 31, 1996 and 1995, include all adjustments, consisting of
normal recurring items, necessary for a fair presentation of financial
position and results of operations. The results of operations are not
necessarily indicative of the results which may be expected for the
full year.
F-7
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. STOCKHOLDER RECEIVABLES:
Stockholder receivables (all unsecured) at December 31, 1995 consist of
the following:
<TABLE>
<S> <C>
Advances to stockholders, distributed as a dividend on January 1, 1996 $ 3,230,000
Advances to stockholders, noninterest-bearing 2,000,000
Stockholder notes, interest at the applicable federal tax rate (nine
percent at December 31, 1995), due on demand 608,165
-----------
$ 5,838,165
===========
</TABLE>
5. INVENTORIES:
<TABLE>
Inventories at December 31, 1995 consist of the following components:
<S> <C>
Raw materials $ 2,523,126
Work in process 455,701
Finished goods 8,197,943
-----------
$11,176,770
===========
</TABLE>
6. INTANGIBLE ASSETS:
<TABLE>
<S> <C>
Intangible assets at December 31, 1995 consist of the following:
Bank fees (three-year amortization) $ 342,703
Covenant-not-to-compete (five-year amortization) 150,000
-----------
492,703
Accumulated amortization 91,059
-----------
$ 401,644
===========
</TABLE>
F-8
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. DEBT:
Debt at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
Revolving credit (see below) $22,100,000
Other 9,866
-----------
22,109,866
Less current maturities 9,866
-----------
$22,100,000
===========
</TABLE>
In connection with the 1995 merger, essentially all prior debt was
refinanced and replaced with a $30 million revolving credit agreement
(which includes a $6.5 million overadvance) which is advanced based upon a
percentage of eligible inventory, accounts receivable and equipment.
Interest is payable monthly or quarterly and is equal to the higher of the
bank's base rate or one-half percent above the federal funds effective
rate, plus one-quarter percent. The Company may elect to convert all or a
portion of its borrowings to notes which bear interest at the Eurodollar
rate, plus 2.15 percent. Beginning in 1997 and under certain conditions,
the one-quarter percent add-on will be eliminated, and the 2.15 percent
add-on will be reduced to 1.75 percent. In addition, the Company must pay a
fee equal to one-eighth percent of the average unused availability and a
fee equal to one-quarter percent of the average outstanding overadvance.
Interest rates on the borrowings, at December 31, 1995, vary from 7.875
percent to 8.75 percent. Borrowings under the agreement are due in October
1998, are collateralized by essentially all assets of the Company and are
guaranteed by the stockholders. At December 31, 1995, there was $2.5
million of unused borrowings available.
The credit agreement contains various covenants related to maintenance of
minimum quarterly operating income, debt service coverage and net worth,
and to maintenance of a maximum ratio of funded debt to earnings before
interest, depreciation and amortization.
8. LEASES:
The Company leases its facilities and certain shop equipment, vehicles and
office equipment under various operating leases which expire on various
dates through 2000. Management expects that in the normal course of
business, leases that expire will be renewed or replaced by other leases.
F-9
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. LEASES, CONTINUED:
Future minimum payments under the operating leases are summarized as
follows:
<TABLE>
Years ending December 31:
<S> <C>
1996 $1,365,283
1997 1,189,812
1998 1,016,369
1999 530,509
2000 191,358
----------
Total minimum lease payments $4,293,331
==========
</TABLE>
Rent expense was approximately $913,000 and $1,096,000 for the
years ended December 31, 1994 and 1995, respectively.
9. EMPLOYEE BENEFIT PLANS:
The Company has a defined contribution profit-sharing plan for employees
of the EEC division. Contributions to the plan are discretionary. The
Company also maintains a defined contribution plan for employees of the
BSCC division. Employee contributions are matched when certain
eligibility requirements are met. The Company's contributions to the
plans were approximately $26,000 and $23,000 for 1994 and 1995,
respectively.
10. EMPLOYMENT AGREEMENTS:
In connection with the merger, the Company entered into one-year
employment agreements with four of the stockholders, which are
automatically renewed each year unless the stockholder's employment has
been terminated. All pay and benefits under the agreement shall cease
upon voluntary termination or termination for cause. In the event of
voluntary termination, the terminated stockholder agrees not to compete
with the Company for three years. In the event of involuntary
termination, the stockholder shall receive his base compensation for
three years. The agreement calls for the continuation of pay and benefit
in the event that the individual is unable to perform his duties by
reason of illness or incapacity.
F-10
<PAGE> 20
PRO FORMA FINANCIAL INFORMATION
TIGERA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------------
Tigera Connectivity
Group, Products
Inc. Incorporated Other Pro Forma
------------ ------------ ----------------- -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 161,000 $ 335,284 $ (161,000) (e) $ 335,284
United States Treasury Bills 11,141,000 (9,579,000) (e) 1,562,000
Restricted cash 1,000,000 1,000,000
Accounts receivable-net 13,379,987 620,310 (f) 14,000,297
Inventories 11,689,637 50,000 (a) 11,739,637
Other current assets 279,017 279,017
------------ ------------ ------------ -------------
TOTAL CURRENT ASSETS 12,302,000 25,683,925 (9,069,690) 28,916,235
Property, Plant and Equipment - net 5,740,685 1,200,000 (b) 6,940,685
Unallocated purchase price, including deferred tax asset 365,587 24,963,142 (c) 25,328,729
Other assets 128,000 308,896 436,896
------------ ------------ ------------ -------------
TOTAL ASSETS $ 12,430,000 $ 32,099,093 $ 17,093,452 $ 61,622,545
============ ============ ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ $ $ 930,000 (d) $ 930,000
Accounts payable and accrued liabilities 159,000 12,364,145 12,523,145
------------ ------------ ------------ -------------
Total Current Liabilities 159,000 12,364,145 930,000 13,453,145
Long-term debt 21,950,000 13,948,400 (d) 35,898,400
------------ ------------ ------------ -------------
TOTAL LIABILITIES 159,000 34,314,145 14,878,400 49,351,545
STOCKHOLDER'S EQUITY 12,271,000 (2,215,052) 2,215,052 (g) 12,271,000
------------ ------------ ------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,430,000 $ 32,099,093 $ 17,093,452 $ 61,622,545
============ ============ ============ =============
</TABLE>
See notes to unaudited pro forma financial statements.
F-11
<PAGE> 21
PRO FORMA FINANCIAL INFORMATION
TIGERA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------------
Tigera Connectivity
Group, Products
Inc. Incorporated Other Pro Forma
------------ ------------ ----------------- --------------
<S> <C> <C> <C> <C>
Net sales $ $ 88,892,754 $ $ 88,892,754
Cost of goods sold 65,294,310 84,000 (h) 65,378,310
------------- ------------- ------------- --------------
Gross profit 23,598,444 (84,000) 23,514,444
Selling, general and administrative expenses 853,000 17,829,600 736,000 (h) 19,418,600
------------- ------------- ------------- --------------
Operating income (853,000) 5,768,844 (820,000) 4,095,844
Other income (expenses):
Interest income 700,000 46,454 (624,000) (l) 122,454
Interest expense (1,083,965) (1,840,000) (i) (2,923,965)
Other (44,798) (44,798)
------------- ------------- ------------- --------------
Income (Loss) before income taxes and minority interest (153,000) 4,686,535 (3,284,000) 1,249,535
Provision for income taxes 562,300 (j) 562,300
------------- ------------- ------------- --------------
Income (Loss) before minority interest (153,000) 4,686,535 (3,846,300) 687,235
Minority interest in subsidiary (215,000) (k) (215,000)
------------- ------------- ------------- --------------
Net Income (Loss) $ (153,000) $ 4,686,535 $ (4,061,300) $ 472,235
============= ============= ============= ==============
Primary and Fully Diluted Net Income (Loss)Per Share (0.01) 0.02
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 21,499,858 21,499,858
Fully Diluted 21,757,411 21,757,411
</TABLE>
See notes to unaudited pro forma financial statements.
F-12
<PAGE> 22
PRO FORMA FINANCIAL INFORMATION
TIGERA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------------
Tigera Connectivity
Group, Products
Inc. Incorporated Other Pro Forma
------------ ------------ ----------------- --------------
<S> <C> <C> <C> <C>
Net sales $ $ 22,672,715 $ $ 22,672,715
Cost of goods sold 16,398,284 21,000 (h) 16,419,284
------------ ------------ ------------ --------------
Gross profit 6,274,431 (21,000) 6,253,431
Selling, general and administrative expenses 245,000 5,117,310 184,000 (h) 5,546,310
------------ ------------ ------------ --------------
Operating income (245,000) 1,157,121 (205,000) 707,121
Other income (expenses):
Interest income 162,000 799 (143,000) (l) 19,799
Interest expense (451,547) (286,000) (i) (737,547)
Other 5 5
------------ ------------ ------------ --------------
Income (loss) before income taxes and minority interest (83,000) 706,378 (634,000) (10,622)
Income tax benefit (4,800) (j) (4,800)
------------ ------------ ------------ --------------
Income (loss) before minority interest (83,000) 706,378 (629,200) (5,822)
Minority interest in subsidiary (30,000) (k) (30,000)
------------ ------------ ------------ --------------
Net Income (Loss) $ (83,000) $ 706,378 $ (659,200) $ (35,822)
============ ============ ============ ==============
Net Loss Per Share (0.00) (0.00)
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 23,752,422 23,752,422
Fully Diluted 24,073,692 24,073,692
</TABLE>
See notes to unaudited pro forma financial statements.
F-13
<PAGE> 23
TIGERA GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma consolidated statements of operations for the
three months ended March 31, 1996 and the year ended December 31, 1995
give effect to the acquisition ("Acquisition") of 85% of the capital
stock of Connectivity Products Incorporated ("CPI") by Tigera Group,
Inc. The Acquisition, which will be accounted for as a purchase, as
well as the October 3, 1995 merger (see Note 1 to the audited 1995
financial statements of CPI), are treated as if they had occurred on
January 1, 1995. It was assumed that the pro forma redemption price at
January 1, 1995 was approximately $3.2 million less than the actual
redemption price, reflecting lower working capital at January 1, 1995,
as compared to that used as a basis for the redemption.
The pro forma balance sheet as of March 31, 1996 gives effect to the
Acquisition as if it had occurred on March 31, 1996.
The pro forma information for the three months ended March 31, 1996 is
based on unaudited financial statements after giving effect to the
transactions and the adjustments described in Note 2. The pro forma
information for the year ended December 31, 1995 is based on audited
financial statements of the two companies revised for the transactions
and the adjustments described in Note 2. The unaudited pro forma
consolidated financial statements include all adjustments, consisting
of normal recurring accruals, which Tigera Group, Inc. considers
necessary for a fair presentation of the results of operations for the
three months ended March 31, 1996.
The unaudited pro forma consolidated financial statements may not be
indicative of the results that actually would have been achieved if the
transaction had occurred on the date assumed and do not project Tigera
Group, Inc.'s financial position or results of operations at any future
date or period then ended.
2. PRO FORMA ADJUSTMENTS
The following pro forma adjustments related to the purchase are
estimates and will differ from the final amount allocated to the May
31, 1996 assets and liabilities. The final purchase price allocation
will be completed in connection with the preparation of Tigera's
financial statements for the year ended December 31, 1996.
(a) Adjusts inventory acquired to fair market value. The write-up
of inventory will be reflected in a higher cost of sales
during the year subsequent to the date of the
F-14
<PAGE> 24
Acquisition but the charge has been excluded from cost of
sales in the pro forma condensed consolidated statements of
operations.
(b) Adjusts property and equipment acquired to estimated fair
market value.
(c) Records unallocated purchase price related to the Acquisition,
including deferred tax asset.
(d) Records refinancing of debt, including additional bank debt
incurred as a result of the Acquisition, and issuance of
subordinated debt in connection with the Acquisition.
(e) Represents cash used for Tigera purchase of CPI, and payment
of various expenses and fees related to the Acquisition.
(f) Records notes receivable from minority interest in
consolidated subsidiary (CPI).
(g) Eliminates common stock, paid in capital, and retained
earnings accounts of CPI.
(h) Amortization of unallocated purchase price, and increase in
depreciation resulting from changes in the carrying amounts
and depreciable lives of property, plant and equipment.
(i) Increase in interest expense related to additional long-term
debt to fund the Acquisition, and increase in interest rate on
all bank debt.
(j) Provision for income taxes is based on an approximate 45%
aggregate federal and state effective tax rate which takes
into account an estimate for non-deductible goodwill
amortization.
(k) Records the 15% minority interest in the earnings of CPI.
(l) Decrease in interest income due to use of cash from sale of
United States Treasury Bills for Acquisition.
3. EMPLOYMENT AGREEMENTS
In connection with the Acquisition, the Company entered into three year
employment agreements with four of the stockholders. Under the terms of
the agreements, each stockholder will be paid a base salary of $175,000
per year plus an annual bonus (subject to a maximum amount equal to the
base salary) equal to 5% of the amount by which earnings before
interest, depreciation, taxes and amortization and after certain other
adjustments (Adjusted Bonus EBITDA as defined in the employment
agreements) exceeds Adjusted Bonus EBITDA for the prior year. Actual
compensation paid to the four stockholders exceeds the total base
salaries excluding any bonuses under this agreement
F-15
<PAGE> 25
by $865,273 and $175,000 for the year ended December 31, 1995 and the
three months ended March 31, 1996, respectively. These amounts have not
been reflected as a decrease in expense on the pro forma statements of
income.
4. RECONCILIATION OF CONNECTIVITY PRODUCTS INCORPORATED 1995 NET INCOME TO
ADJUSTED EBITDA
The following is a reconciliation of 1995 CPI net income to CPI
earnings before interest, depreciation, taxes and amortization (EBITDA)
before acquistion by Tigera:
<TABLE>
<S> <C>
CPI Net Income $4,686,535
Interest Expense (net of interest income) 1,037,511
Income Tax included in Selling, General and
Administrative Expense 192,006
Depreciation and Amortization 875,604
Salary Expense to Owners in Excess of $175,000 Each
(See Note 3) 865,273
Merger and Acquisition Expense 572,313
----------
CPI Adjusted EBITDA $8,229,242
==========
</TABLE>
F-16
<PAGE> 26
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Tigera Group, Inc. on Form S-8 (registration numbers 333-02655 and 33-65384) of
our report dated April 17, 1996, on our audits of the financial statements of
Connectivity Products Incorporated as of December 31, 1995, and for the years
ended December 31, 1995, and 1994, which report is included in this Form 8-K/A
of Tigera Group, Inc.
Coopers & Lybrand L.L.P.
Detroit, Michigan
August 13, 1996
F-17
