SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 1999
Swiss Army Brands, Inc.
(exact name of registrant as specified in its charter)
Delaware 0-12823 13-2797726
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
One Research Drive, Shelton, CT 06484
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including Area Code: (203) 929-6391
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisitions or Disposition of Assets
On May 3, 1999, Swiss Army Brands, Inc., a Delaware corporation (the
"Company"), filed a Current Report on Form 8-K disclosing that on April 16,
1999, the Company and Bear Cutlery, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company (the "Buyer"), entered into an Asset Purchase
Agreement (the "Agreement") with Bear MGC Cutlery, Inc., an Alabama corporation
(the "Seller"), and the shareholders (the "Shareholders") of the Seller,
pursuant to which the Buyer acquired substantially all of the assets (other than
certain patent rights, which Seller has licensed to Buyer) and assumed certain
of the liabilities of the Seller. This Current Report on Form 8-K/A is being
filed to present and disclose the financial statements and pro forma financial
information required to be filed in connection with the acquisition of Bear MGC
Cutlery, Inc.
In consideration for the acquisition of the assets, the Buyer paid the
Seller $6,970,000 in cash upon execution of the Agreement. In further
consideration of the acquired assets, on each of April 16, 2000, 2001 and 2002,
the Buyer shall transfer to the Seller 52,868 shares of the Company's common
stock, par value $.10 per share ("Common Stock"), valued at $500,000 (based on
the average daily closing price of the Common Stock during the 30 trading days
prior to April 16, 1999). Pursuant to the Agreement, the Buyer may also pay the
Seller up to an additional $2,500,000 in either cash or a combination of cash
and shares as determined in accordance with the Agreement, if the Buyer attains
certain earnings targets for the year ending December 31, 1999. The Buyer's
obligation to deliver up to $1 million in value of the Common Stock is subject
to certain conditions set forth in the Agreement.
The source of funds for the acquisition was a bank line of credit. The
purchase price was determined on the basis of arm's length negotiations between
the Buyer and the Seller.
The business and assets of the Seller acquired pursuant to the Agreement
include the fixed assets and certain of the intellectual property used for the
manufacture and marketing of multi-tools and knives to retail customers and
original equipment suppliers to industrial markets. These assets will continue
to be used for these purposes by the Company.
2
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
The following financial statements relate to Bear MGC Cutlery, Inc.
Report of Independent Public Accountants.
Balance Sheet as of December 31, 1998.
Statement of Operations for the year ended December 31, 1998.
Statement of Retained Earnings for the year ended December 31, 1998.
Statement of Cash Flows for the year ended December 31, 1998.
Notes to Financial Statements.
(b) Pro Forma Financial Information.
Pro Forma Consolidated Balance Sheet as of March 31, 1999 (unaudited).
Pro Forma Consolidated Statement of Operations for the three
months ended March 31, 1999 (unaudited).
Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998 (unaudited).
Notes to Unaudited Pro Forma Consolidated Financial Statements.
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Bear MGC Cutlery, Inc.:
We have audited the accompanying balance sheet of Bear MGC Cutlery, Inc., (an
Alabama corporation) as of December 31, 1998, and the related statements of
operations, retained earnings, and cash flows for year ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bear MGC Cutlery, Inc., as of
December 31, 1998, and the results of its operations and cash flows for the year
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Stamford, Connecticut,
May 15, 1999
ARTHUR ANDERSEN LLP
4
<PAGE>
<TABLE>
<CAPTION>
BEAR MGC CUTLERY, INC.
BALANCE SHEET
DECEMBER 31, 1998
(in thousands)
ASSETS
------
1998
------------
<S> <C>
Current assets:
Cash and cash equivalents $ 389
Accounts receivable 1,399
Inventories 1,350
--------
Total current assets 3,138
Fixed Assets, net 521
--------
Total Assets $3,659
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 461
Accrued liabilities 101
--------
Total current liabilities 562
--------
Commitments (Note 5)
Stockholders' equity:
Common stock, par value $.10 per
share: 270 shares authorized,
issued and outstanding 3
Retained earnings 3,094
--------
Total stockholders' equity 3,097
--------
Total Liabilities and Stockholders' Equity $3,659
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
5
<PAGE>
<TABLE>
<CAPTION>
BEAR MGC CUTLERY, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
1998
----
<S> <C>
Net sales $6,892
Cost of sales 4,277
-------
Gross profit 2,615
Selling, general and administrative expenses 1,068
-------
Operating income 1,547
Interest income and other, net 26
-------
Net income $1,573
=======
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
6
<PAGE>
<TABLE>
<CAPTION>
BEAR MGC CUTLERY, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
<S> <C>
Retained Earnings, January 1, 1998 $2,825
Net income 1,573
Distribution to stockholders (1,304)
--------
Retained Earnings, December 31, 1998 $3,094
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
7
<PAGE>
<TABLE>
<CAPTION>
BEAR MGC CUTLERY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
1998
------------
<S> <C>
Cash flows from operating activities:
Net income $1,573
Adjustment to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 147
Changes in other current assets and liabilities:
Accounts receivable 182
Inventories (267)
Prepaid and other 6
Accounts payable (205)
Accrued liabilities (81)
--------
Net cash provided from operating activities 1,355
--------
Cash flows from investing activities:
Capital expenditures (66)
--------
Net cash provided from investing activities (66)
--------
Cash flows from financing activities:
Distribution to stockholders (1,304)
Borrowings under line of credit 250
Repayments under line of credit (250)
--------
Net cash provided from financing activities (1,304)
--------
Net decrease in cash (15)
Cash, beginning of period 404
--------
Cash, end of period $ 389
========
Cash paid during the period:
Interest $ 3
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
8
<PAGE>
BEAR MGC CUTLERY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
The Company
-----------
Bear MGC Cutlery, Inc., (the "Company") was organized as an Alabama
corporation on January 10, 1991. The Company has one business segment:
manufacturer and marketer of multi-tools and knives.
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.
Fixed Assets
------------
Fixed Assets are recorded at cost. Additions are capitalized, whereas
maintenance and repairs are charged to expense as incurred.
Depreciation and Amortization
-----------------------------
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Machinery and equipment 5-12
Furniture and fixtures 5
Tooling 3
</TABLE>
Income Taxes
------------
The Company has been organized for federal and state income tax purposes as
an S Corporation under Subchapter S of the Internal Revenue Code of 1986,
as amended, and comparable state laws. As a result, the earnings of the
Company are included in the taxable income of the Company's stockholders at
their individual federal and state income tax rates, rather than that of
the Company.
9
<PAGE>
2. INVENTORIES
- ---------------
Inventories are valued at the lower of cost or market determined by the
FIFO (first-in, first-out) method. Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
(in thousands)
<S> <C>
Raw materials $1,084
Work-in process 111
Finished goods 155
-------
$1,350
=======
</TABLE>
3. FIXED ASSETS
- ---------------
Fixed Assets consist of the following:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
(in thousands)
<S> <C>
Machinery and equipment $ 835
Furniture and fixtures 98
Tooling 446
-------
1,379
Less: accumulated depreciation (858)
-------
Plant and equipment, net $ 521
=======
</TABLE>
4. LINE OF CREDIT
- -----------------
The Company has an $850,000 revolving line of credit with one bank.
Borrowings under the line of credit bear interest at LIBOR plus 2.0%, and any
amounts outstanding under the line of credit are due no later than May 31, 1999.
The line of credit is secured by substantially all the assets of the Company.
There were no amounts outstanding under the line of credit at December 31,
1998.
5. OPERATING LEASE
- ------------------
The Company leases its manufacturing facility for $78,000 per annum from a
partnership, which is owned by the stockholders of the Company. The lease
expires in the year 2014.
6. SIGNIFICANT CUSTOMERS
- -------------------------
Sales to two customers accounted for 49% and 23% of the Company's sales in
the year ended December 31, 1998, respectively. Loss of, or the failure to
replace, any significant portion of sales to these two customers could have a
material adverse effect on the results of the operations of the Company.
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<PAGE>
7. SUBSEQUENT EVENT
- --------------------
On April 16, 1999, Swiss Army Brands, Inc. ("SABI") and Bear Cutlery, Inc.,
a Delaware corporation and a wholly owned subsidiary of SABI (the "Buyer"),
entered into an Asset Purchase Agreement (the "Agreement") with the Company and
the stockholders (the "Shareholders") of the Company, pursuant to which the
Buyer acquired substantially all of the assets and assumed certain of the
liabilities of the Company. In consideration for the acquisition of the assets,
the Buyer paid the Company $6,970,000 in cash upon execution of the Agreement.
In further consideration of the acquired assets, on each of April 16, 2000, 2001
and 2002, SABI shall transfer to the Company 52,868 shares of the SABI's common
stock, par value $.10 per share ("Common Stock"), valued at $500,000 (based on
the average daily closing price of the Common Stock during the 30 trading days
prior to April 16, 1999). Pursuant to the Agreement, SABI may also pay the
Company up to an additional $2,500,000 in either cash or a combination of cash
and shares as determined in accordance with the Agreement, if the Company
attains certain earnings targets for the year ending December 31, 1999.
11
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet as of March 31, 1999,
the unaudited pro forma consolidated statement of income for the three months
ended March 31, 1999, and the unaudited pro forma consolidated statement of
income for the year ended December 31, 1998, are based upon the historical
consolidated financial statements of Swiss Army Brands, Inc. and subsidiaries
(the "Company") and the financial statements of Bear MGC Cutlery, Inc. ("Bear").
The unaudited pro forma consolidated statements of income have been prepared
after giving effect to pro forma adjustments described in the notes thereto as
if the acquisition of Bear occurred on January 1 of the respective periods, and
the unaudited pro forma consolidated balance sheet has been prepared as if the
acquisition of Bear occurred on March 31, 1999.
The unaudited pro forma consolidated statements of income and balance sheet
do not purport to represent what the results of operations of the Company would
actually have been if the events described in the notes thereto had in fact
occurred at the beginning of such period, or to project the results of
operations of the Company for any future date or period.
The unaudited pro forma consolidated statements of income and balance sheet
should be read in conjunction with the Company's financial statements including
the notes thereto included in the Company's report on Form 10-K for the year
ended December 31, 1998 and Bear's financial statements including the notes
thereto included elsewhere in this Form 8-K/A filing.
12
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)
Swiss Army Bear MGC Pro Forma
Brands, Inc. Cutlery, Inc. Adjustments Pro Forma
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 5,169 $ 222 $ - $ 5,391
Accounts receivable 23,000 1,245 - 24,245
Inventories 34,809 1,345 35 (a) 36,189
Deferred income taxes 2,214 - - 2,214
Prepaid and other 4,534 10 - 4,544
--------- --------- -------- ----------
Total current assets 69,726 2,822 35 72,583
Deferred income taxes 1,076 - - 1,076
Property, plant and equipment, net 3,569 501 524 (a) 4,594
Investments 7,197 - - 7,197
Foreign distribution rights, net 2,708 - - 2,708
Goodwill and other assets 13,020 - 6,169 (a) 19,189
--------- --------- --------- ----------
Total Assets $97,296 $3,323 $6,728 $107,347
========= ========= ========= ==========
Swiss Army Bear MGC Pro Forma
Brands, Inc. Cutlery, Inc. Adjustments Pro Forma
------------ ------------- ----------- ---------
Current liabilities:
Line of credit $ 6,060 $ 298 $7,731 (e) $14,089
Accounts payable 10,956 472 - 11,428
Accrued liabilities 7,144 50 - 7,194
--------- ---------- --------- ---------
Total current liabilities 24,160 820 7,731 32,711
Stockholders' equity:
Common stock 886 3 (3)(f) 886
Additional paid-in capital 46,525 - 1,500 (e) 48,025
Accumulated other comprehensive
income (loss) (556) - - (556)
Retained earnings 35,103 2,500 (2,500)(f) 35,103
--------- ---------- --------- ---------
81,958 2,503 (1,003) 83,458
Less: Treasury stock (8,642) - - (8,642)
Deferred compensation (180) - - (180)
--------- ---------- --------- ---------
Total stockholders' equity 73,136 2,503 (1,003) 74,636
--------- ---------- --------- ---------
Total Liabilities and Stockholders'
Equity $97,296 $3,323 $6,728 $107,347
========= ========== ========= =========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Swiss Army Bear MGC Pro Forma
Brands, Inc. Cutlery, Inc. Adjustments Pro Forma
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $23,570 $ 1,736 $ - $ 25,306
Cost of sales 14,621 1,036 42 (b) 15,699
--------- ---------- -------- -----------
Gross profit 8,949 700 (42) 9,607
Selling, general and
administrative expenses 9,990 264 77 (b) 10,331
--------- ---------- -------- -----------
Operating income (loss) (1,041) 436 (119) (724)
Interest income and other, net 7 13 (116)(c) (96)
Gain on sale of investment 420 - - 420
--------- ---------- -------- -----------
Total other income, net 427 13 (116) 324
--------- ---------- -------- -----------
Income (loss) before income taxes (614) 449 (235) (400)
Income tax provision (benefit) (261) - 86 (d) (175)
--------- ---------- -------- -----------
Net income (loss) ($353) $ 449 ($321) ($225)
========= ========== ======== ===========
Basic and diluted earnings per share ($0.04) ($0.03)
========= ===========
Weighted average number of shares
outstanding:
Basic 7,885 7,885
========= ===========
Diluted 7,885 7,885
========= ===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Swiss Army Bear MGC Pro Forma
Brands, Inc. Cutlery, Inc. Adjustments Pro Forma
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $127,851 $6,892 - $134,743
Cost of sales 77,869 4,277 45 (b) 82,191
--------- -------- ------- ---------
Gross profit 49,982 2,615 (45) 52,552
Selling, general, administrative
expenses 49,005 1,068 308 (b) 50,381
--------- -------- ------- ---------
Operating income (loss) 977 1,547 (353) 2,171
Interest income and other, net 55 26 (540)(c) (459)
Gain on sale of investment 1,651 - - 1,651
--------- -------- ------- ---------
Total interest and other income, net 1,706 26 (540) 1,192
--------- -------- ------- ---------
Income (loss) before income taxes 2,683 1,573 (893) 3,363
Income tax provision (benefit) 1,220 - 272 (d) 1,492
--------- -------- --------- ---------
Net income (loss) $1,463 $1,573 ($1,165) $1,871
========= ======== ========= =========
Earnings per share:
Basic $ 0.18 $ 0.23
========= =========
Diluted $ 0.18 $ 0.22
========= =========
Weighted average number of shares
outstanding:
Basic 8,138 8,138
========= =========
Diluted 8,236 8,395
========= =========
</TABLE>
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
1. The pro forma results presented are based on a preliminary allocation of
purchase price according to the purchase method of accounting. The
aggregate purchase price has been allocated to the assets and liabilities
of Bear MGC Cutlery, Inc. ("Bear") based on preliminary estimates of fair
market value. Any adjustments resulting from the final purchase price
allocation, which could result in changes to the carrying values of assets
and liabilities, including goodwill, are not expected to be material to the
financial statements. The purchase price has resulted in acquired goodwill
and other intangible assets of approximately $6.2 million, which is being
amortized on a straight-line basis over 20 years. The following is a
summary of the preliminary allocation (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash................................. $ 315
Accounts receivable.................... 1,215
Inventory.......................... 1,496
Other current assets....... .......... 13
Plant and equipment................... 1,025
Intangible assets and goodwill...... 6,159
Accrued expenses and other liabilities... (396)
Debt..................................... (298)
-------
$9,529
=======
</TABLE>
2. The following are the pro forma adjustments for December 31, 1998 and
March 31, 1999:
(a) Adjustment to record the assets of Bear based upon their estimated fair
values.
(b) Adjustment for goodwill amortization related to the acquisition of
Bear, and adjustment for depreciation and cost of sales of fixed assets and
inventory acquired based on their estimated fair values.
(c) Interest expense related to borrowings under the Swiss Army Brands,
Inc. ("SABI") line of credit to fund the acquisition of Bear.
(d) Income tax effect of pro forma adjustments and to record an income tax
provision for Bear. Bear had been organized as an S Corporation and had not
recorded an income tax provision as the earnings of Bear had been included
in the taxable income of its stockholders.
(e) Recording of debt and equity related to the acquisition of Bear.
(f) Adjustment to consolidate the financial results of Bear and SABI.
3. Pursuant to the Asset Purchase Agreement, SABI may pay Bear up to an
additional $2,500,000 in either cash or a combination of cash and shares of
SABI common stock as determined in accordance with the Agreement if Bear
attains certain earnings target. No adjustments have been included in the
unaudited pro forma statements related to the above amounts.
16
<PAGE>
EXHIBITS:
2. Asset Purchase Agreement, dated as of April 16, 1999, by and among the
Company, the Buyer, the Seller, and the Shareholders. A list of exhibits
and schedules to the Asset Purchase Agreement is set forth therein. The
Company agrees to furnish to the Commission supplementally, upon request, a
copy of any such exhibits or schedules not otherwise filed herewith.*
99.1 Other Exhibits.
Press release of Company dated April 16, 1999 relating to the acquisition
of the assets of the Seller.*
* Indicates Exhibit was filed with on May 3, 1999 with the Company's
Current Report on Form 8-K.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SWISS ARMY BRANDS, INC.
(Registrant)
Dated: July 30, 1999 By: /s/ J. Merrick Taggart
Name: J. Merrick Taggart
Title: President and Chief Executive Officer
18
