<PAGE>
- --------------------------------------------------------------------------------
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A-3
AMENDMENT 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): FEBRUARY 19, 1999
---------------------
MORGAN PRODUCTS LTD.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C>
Delaware 06-1095650
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
</TABLE>
Commission File Number 1-9843
469 McLaws Circle, Williamsburg, Virginia 23185
(Address of Principal Executive Offices) (Zip Code)
(757) 564-1700
(Registrant's telephone number, including area code)
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The undersigned registrant hereby amends the following items of its Current
Report on Form 8-K filed March 3, 1999.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The registrant hereby replaces Item 7 of the registrant's Current Report on
Form 8-K filed on March 3, 1999 (as amended by the registrant's amendments to
the Current Report on Form 8-K/A filed on April 5, 1999 and Form 8-K/A-2 filed
on June 3, 1999) with the following financial statements and pro forma financial
information:
(a) Financial Statements of Business Acquired
The following financial statements of Sash and Door Business of Adam
Wholesalers, Inc. are attached hereto as Appendix A:
1. Report of Independent Accountants
2. Combined Balance Sheets at December 31, 1998 and 1997
3. Combined Statements of Operations, Retained Earnings, and
Comprehensive Income for the two years ended December 31, 1998
4. Combined Statements of Cash Flows for the two years ended December
31, 1998
5. Notes to Combined Financial Statements
(b) Pro Forma Financial Information.
The following pro forma financial information is attached hereto as
Appendix B:
1. Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1998
2. Unaudited Pro Forma Balance Sheet at December 31, 1998
3. Notes to Unaudited Pro Forma Financial Statements.
(c) Exhibits
1. Consent of Deloitte & Touche LLP
*2. Agreement between Kentucky State District Council of Carpenters for
and on behalf of Local 2501 and Adam Wholesalers, Inc. dated July
21, 1998 through July 21, 2001.
*3. Agreement between Adam Wholesalers of Dayton, Inc. and Millmen's
Local 684 of the United Brotherhood of Carpenters and Joiners of
America, Great Lakes Regional Industrial Council dated May 1, 1998
to April 30, 2001.
*4. Agreement between Adam Wholesalers, Indianapolis, Inc. or its
successors, and the Chauffeurs, Teamsters, Warehousemen and Helpers,
Local Union No. 135, of Indianapolis, Indiana, affiliated with the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and
Helpers of America, or its successors, for the period March 3, 1996
to and including February 26, 2000.
*5. Contract between Adam Wholesalers of Cincinnati, Inc., United
Brotherhood of Carpenters and Joiners of America, AFL-CIO, Local
Union 415, Industrial, Ohio Carpenters Industrial Council Great
Lakes Regional Industrial Council dated November 21, 1995.
*6. Collective Bargaining Agreement between Adam Wholesalers and
Teamsters Local Union No. 676 dated August 9, 1996 through August 8,
1999.
*7. Agreement by and between Adam Wholesalers of Toledo, Inc. and
Millmen's Local Union No. 1359 (U.B. of C. & J. of A.) Affiliated
with the Great Lakes Regional Industrial Council effective May 1,
1997 to April 30, 2000.
<PAGE>
*8. Agreement by and between Adam Wholesalers of Toledo, Inc. and
Teamsters Union Local No. 20, affiliated with the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
effective May 1, 1997 to April 30, 2001.
*9. Agreement by and between Adam Wholesalers, Inc., or its successors,
and the Construction, Building Material, Ice and Coal, Laundry and
Dry Cleaning, Meat and Food Products Drivers, Helpers, Warehousemen,
Yardmen, Salesmen and Allied Workers, Local Union No. 682,
affiliated with the International Brotherhood of Teamsters, or its
successors, dated May 1, 1996 as extended by that certain memorandum
of agreement by and between Teamsters Local 682, St. Louis Missouri
and Morgan Products Ltd. dated May 13, 1999.
*10. Collective Bargaining Agreement between Carpenters' District Council
of Greater St. Louis and Adam Wholesalers, Inc. effective May 1,
1998 through April 30, 2001.
*11. Agreement between Morgan Products Ltd. Morgan Distribution Division
Decatur Distribution Center Decatur, Illinois and Teamster Local No.
279 of Decatur, Illinois Affiliated with the International
Brotherhood of Teamsters AFL-CIO dated July 15, 1998.
*12. Agreement by and between Morgan Products Ltd. and the United
Paperworkers International Union, Region IX, AFL-CIO, Local No. 7828
as extended by that certain memorandum of agreement between the
United Paperworkers International Union Region IX, AFL-CIO, Local
No. 7828, Decatur Illinois and Morgan Distribution, A Division of
Morgan Products Ltd. dated December 3, 1998.
- ------------------------
* Previously filed with Amendment No. 2, filed on June 3, 1999, to the Current
Report on Form 8-K filed on March 3, 1999.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C> <C>
MORGAN PRODUCTS LTD.
By: /s/ MITCHELL J. LAHR
------------------------------------------
Mitchell J. Lahr
Vice President, Chief Financial Officer
and Secretary
</TABLE>
Date: June 18, 1999
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Management of
Adam Wholesalers, Inc.
We have audited the combined balance sheets of the Sash and Door Business of
Adam Wholesalers, Inc. ("Sash and Door") as of December 31, 1998 and 1997, and
the related combined statements of operations, retained earnings, and
comprehensive income and of cash flows for the years then ended. These
statements are the responsibility of Adam Wholesalers, Inc. management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the combined financial statements referred to above
have been prepared from the Adam Wholesalers, Inc. consolidated financial
statements and allocations of certain costs and expenses have been made. These
allocations are not necessarily indicative of the cost and expenses that would
have been incurred by Sash and Door on a stand-alone basis.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sash and Door as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Cincinnati, Ohio
March 15, 1999
4
<PAGE>
SASH AND DOOR BUSINESS OF ADAM WHOLESALERS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(AMOUNTS IN 000'S)
<TABLE>
<CAPTION>
ASSETS 1998 1997
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash......................................................................................... $ 371 $ 223
Accounts receivable (less allowance for doubtful accounts of $761 in 1998 and $860 in 1997) 31,749 30,537
Inventories, net of LIFO reserve of $8,637 in 1998 and $10,223 in 1997....................... 34,504 39,762
Deferred income taxes (Note 5)............................................................... 834 1,010
Prepaid expenses............................................................................. 630 789
--------- ---------
Total current assets....................................................................... 68,088 72,321
--------- ---------
--------- ---------
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 4):
Land and improvements........................................................................ 324 458
Buildings and improvements................................................................... 4,151 4,151
Transportation and machinery................................................................. 11,762 11,194
Office and computer equipment................................................................ 2,172 1,775
Furniture and fixtures....................................................................... 1,495 1,474
--------- ---------
Total...................................................................................... 19,904 19,052
Less accumulated depreciation................................................................ (13,975) (13,339)
--------- ---------
Property, plant and equipment, net........................................................... 5,929 5,713
--------- ---------
--------- ---------
OTHER ASSETS:
Notes receivable--trade...................................................................... 3,827 899
Deferred expenses (Notes 2,8)................................................................ 122 165
Miscellaneous (Notes 2,8).................................................................... 515 1,158
--------- ---------
Total other assets......................................................................... 4,464 2,222
--------- ---------
TOTAL.......................................................................................... $ 78,481 $ 80,256
--------- ---------
--------- ---------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable (Note 4)........................................................................ $ 70 $ 70
Current maturities of long-term debt (Note 4)................................................ 184 171
Intercompany payable (Note 3)................................................................ 24,198 30,165
Federal income taxes payable................................................................. 1,082 346
Accounts payable............................................................................. 7,312 6,127
Accrued Liabilities:
Salaries and wages......................................................................... 1,354 1,110
Payroll taxes and other benefits........................................................... 890 897
Income and other taxes..................................................................... 709 594
Other...................................................................................... 186 100
--------- ---------
Total current liabilities................................................................ 35,985 39,580
--------- ---------
DEFERRED INCOME TAXES (NOTE 5)................................................................. 703 742
--------- ---------
LONG-TERM DEBT (less current maturities) (Note 4).............................................. 1,333 1,528
--------- ---------
PENSION (Note 8)............................................................................... 647 509
--------- ---------
GUARANTEES, COMMITMENTS AND CONTINGENCIES (Notes 4, 10)
SHAREHOLDERS' EQUITY:
Common stock................................................................................. 5,752 5,752
Preferred stock.............................................................................. 104 104
Accumulated other comprehensive income....................................................... (396) (234)
Retained earnings............................................................................ 37,424 35,346
Less treasury stock.......................................................................... (3,071) (3,071)
--------- ---------
Total shareholders' equity................................................................. 39,813 37,897
--------- ---------
TOTAL.................................................................................... $ 78,481 $ 80,256
--------- ---------
--------- ---------
</TABLE>
See notes to combined financial statements.
5
<PAGE>
SASH AND DOOR BUSINESS OF ADAM WHOLESALERS, INC.
COMBINED STATEMENTS OF OPERATIONS, RETAINED EARNINGS AND
COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN 000'S)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
NET SALES (Notes 2,11).................................................................... $ 356,956 $ 345,406
COST OF SALES (Notes 1,11)................................................................ 291,060 279,547
---------- ----------
GROSS PROFIT.............................................................................. 65,896 65,859
OPERATING EXPENSES (Notes 1,11)........................................................... 59,749 60,580
---------- ----------
INCOME FROM OPERATIONS.................................................................... 6,147 5,279
---------- ----------
OTHER INCOME (EXPENSE):
Other income............................................................................ 511 393
Interest expense (Note 3)............................................................... (2,940) (3,210)
---------- ----------
Total other income (expense).......................................................... (2,429) (2,817)
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES.................................................. 3,718 2,462
PROVISION FOR INCOME TAXES................................................................ 1,640 1,130
---------- ----------
NET INCOME................................................................................ 2,078 1,332
RETAINED EARNINGS, BEGINNING OF YEAR...................................................... 35,346 34,014
---------- ----------
RETAINED EARNINGS, END OF YEAR............................................................ $ 37,424 $ 35,346
---------- ----------
---------- ----------
OTHER COMPREHENSIVE INCOME -
Minimum pension liability adjustment.................................................... (162) (234)
---------- ----------
COMPREHENSIVE INCOME...................................................................... $ 1,916 $ 1,098
---------- ----------
---------- ----------
</TABLE>
See notes to combined financial statements.
6
<PAGE>
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN 000'S)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................................... $ 2,078 $ 1,332
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation............................................................................... 1,105 972
Gain on sale of property, plant and equipment.............................................. (200) (22)
Deferred income taxes...................................................................... 65 1,659
Change in assets and liabilities:
Accounts receivable...................................................................... (1,212) 3,963
Notes receivable--trade.................................................................. (2,928) (490)
Inventory................................................................................ 5,258 1,504
Prepaid expenses......................................................................... 159 (449)
Other assets............................................................................. 734 (651)
Accounts payable......................................................................... 1,921 (1,701)
Accrued expenses......................................................................... 438 425
--------- ---------
Net cash provided by operating activities.............................................. 7,418 6,542
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment........................................... 214 24
Capital expenditures.......................................................................... (1,335) (851)
--------- ---------
Net cash used in investing activities.................................................. (1,121) (827)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on related party notes............................................................... (50) (49)
Net payments to Parent........................................................................ (5,967) (5,631)
Repayment of long-term debt................................................................... (132) (94)
--------- ---------
Net cash used in financing activities.................................................. (6,149) (5,774)
--------- ---------
NET CHANGE IN CASH............................................................................. 148 (59)
CASH, Beginning of year........................................................................ 223 282
--------- ---------
CASH, End of year.............................................................................. $ 371 $ 223
--------- ---------
--------- ---------
</TABLE>
See notes to combined financial statements.
7
<PAGE>
SASH AND DOOR BUSINESS OF ADAM WHOLESALERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(DOLLARS IN 000'S)
1. BASIS OF PRESENTATION
On February 19, 1999, Adam Wholesalers, Inc. and certain subsidiaries (the
"Company") sold certain assets and specific liabilities of the Company's sash
and door businesses ("Sash and Door") to Morgan Products, Ltd. ("Morgan") (see
Note 12). The Company's Sash and Door business is comprised of the financial
results of the thirteen subsidiaries of Adam Wholesalers, Inc. listed below. The
authorized, issued and outstanding common shares of the thirteen subsidiaries at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
COMMON TREASURY
AUTHORIZED ISSUED OUTSTANDING STOCK STOCK
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Adam Wholesalers of Louisville, Inc...................... 1,000 600 600 $ 300
Adam Wholesalers of Cincinnati, Inc...................... 3,000 2,290 2,140 991 $ 276
Adam Wholesalers of Indianapolis, Inc.................... 1,000 400 369 400 253
Adam Wholesalers of Toledo, Inc.......................... 1,000 905 862 432 26
Adam Wholesalers of Dayton, Inc.......................... 1,000 568 230 36 2,284
Adam Wholesalers of Nitro, Inc........................... 10,000 5,250 5,250 642
Adam Wholesalers of St. Louis, Inc....................... 1,000 784 704 750 232
Adam Wholesalers of Denver, Inc.......................... 50,000 1,000 1,000 600
Adam Wholesalers of Phoenix, Inc......................... 50,000 10,000 10,000 1,000
Adam Wholesalers of Kirkwood, Inc........................ 100 100 100 1
Adam Wholesalers of Carlisle, Inc........................ 5,000 100 100
Adam Wholesalers of Woodbury Heights, Inc................ 5,000 100 100 100
Adam Wholesalers of Lynchburg, Inc....................... 5,000 500 500 500
----------- --------- ----------- ----------- -----------
Total.................................................... $ 5,752 $ 3,071
----------- -----------
----------- -----------
</TABLE>
Adam Wholesalers of Dayton, Inc. also has 10,000 shares of 5%
Non-Cumulative, Non-Voting Preferred Stock, which is callable after five years
of the date of issue, at any time, at the option of the Board of Directors at
the redemption price of $105 per share. As of December 31, 1998, there are 1,950
shares issued and 840 shares outstanding.
The accompanying combined financial statements have been prepared from the
Adam Wholesalers, Inc. consolidated financial statements and allocation of
certain costs, purchase rebates and expenses have been made. These allocations
are not necessarily indicative of the costs and expenses that would have been
incurred by Sash and Door on stand-alone basis (See Note 11).
The accompanying combined financial statements are presented in accordance
with generally accepted accounting principles. All significant intercompany
transactions, profits, and balances between the Sash and Door entities have been
eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business--The Sash and Door business is the
wholesale distribution of doors and windows for the construction and remodeling
industry with principal locations in the Midwest and Midatlantic United States.
In view of the nature of its products and the method of
8
<PAGE>
distribution, management believes that, for the periods reported, the Sash and
Door business constitutes a single industry segment.
Sales in the Midwest approximated 55% of the total sales in both 1998 and
1997, while accounts receivable approximated 56% and 49% at December 31, 1998
and 1997, respectively. Sales in the Midatlantic approximated 45% of the total
sales in both 1998 and 1997, while accounts receivable approximated 44% and 51%
at December 31, 1998 and 1997, respectively. Warehouse sales were $232,661 and
$226,971 for the years ending December 31, 1998 and 1997, respectively. Direct
sales were $123,371 and $117,929 for the years ending December 31, 1998 and
1997, respectively.
Accounts Receivable & Notes Receivable--Total accounts receivable and note
receivable balance includes one customer for which the total outstanding balance
approximated 12% and 11% of total outstanding short and long-term receivable at
December 31, 1998 and 1997, respectively.
Inventory--Inventory is valued at lower of cost or market using the last-in,
first-out (LIFO) method. If the Companies had followed the first-in, first-out
method (FIFO), inventories would have been $8,637 and $10,223 higher in 1998 and
1997, respectively. Cost of goods sold would have been $1,586 and $1,441 higher
had the FIFO method been used in 1998 and 1997, respectively.
Property, Plant and Equipment--Property, plant and equipment are recorded at
cost. Depreciation and amortization are calculated using straight-line and
accelerated methods over the estimated useful lives of the respective assets,
which generally are 39 years for buildings, 15 years for building improvements
and range from 3 to 7 years for machinery and equipment. Expenditures which
substantially increase value or extend useful life are capitalized. Expenditures
for maintenance and repairs are charged against income as incurred.
Revenue Recognition--The Company recognizes revenue upon delivery of goods
to a customer.
Deferred Expenses--Deferred expenses consist of an asset established to
record the minimum pension liability required under SFAS 87 (See Note 8).
Miscellaneous Other Assets--Miscellaneous other assets consist primarily of
prepaid pension costs.
Fair Value of Financial Instruments--Cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses are reflected in the
financial statements at fair value because of the short-term maturity of those
instruments. The fair value of Sash and Door's notes payable and long-term debt
is discussed in Note 4 to the combined financial statements.
Long-Lived Assets--Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment losses on
assets to be held and used are recognized based on the excess of the asset's
carrying amount over the value of the asset. Long-lived assets to be disposed of
are reported at the lower of carrying amount or the fair value less cost to
sell.
Advertising and Promotions--All costs associated with advertising and
promoting products are expensed in the year incurred. Advertising and promotions
expense, including expense of customer rebates, was $3,134 and $2,120 in 1998
and 1997, respectively.
Vendor Rebates--Vendors provide the Company with volume purchase rebates.
Rebates applicable to the Sash and Door operations totaled $1,951 and $1,722 in
1998 and 1997, respectively. These amounts have been reflected within the
accompanying financial statements.
Accounting Policies--In 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income" & No. 132, "Employers' Disclosure About Pensions and Other
Postretirement Benefits." These statements, which were adopted in 1998, expand
or modify disclosures and, accordingly, had no impact on the Sash and Door's
financial position, results of operations or cash flows.
9
<PAGE>
Sash and Door has not completed the process of evaluating the impact that
will result from adopting SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities". Sash and Door is therefore unable to disclose the
impact that adopting SFAS No. 133 will have on its financial position and
results of operations when such statement is adopted. The statement is effective
for years beginning after December 15, 1998.
Use of Estimates--The preparation of the 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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
3. INTERCOMPANY PAYABLE
The Company, through its bank credit facility, provided funding for the
daily operations of Sash and Door. Interest expense recognized by the respective
Sash and Door entities is based on the respective entities monthly intercompany
balance primarily at a rate equal to LIBOR (5.07% at December 31, 1998) plus 225
basis points and is included in the net interest expense balances within the
accompanying financial statements. Net related party interest expense equaled
$2,456 and $2,803 in 1998 and 1997, respectively.
4. NOTES PAYABLE AND LONG-TERM DEBT
Note payable, totaling $70, consists of a short-term demand note due to a
related party with a stated interest rate of 13%. Sash and Door's long-term debt
consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Mortgage, secured by property, with monthly payments of $20, including interest at 8.5%,
through 2006................................................................................. $ 1,270 $ 1,402
Related Party Notes, with varying repayment terms, including interest at 6%, maturing 2002
through 2005................................................................................. 247 297
--------- ---------
Total.................................................................................. 1,517 1,699
Less: Current maturities....................................................................... 184 171
--------- ---------
Total.................................................................................. $ 1,333 $ 1,528
--------- ---------
--------- ---------
</TABLE>
The Company has outstanding unsecured lines of credit with a bank due March
31, 1999 for which the operations of the Sash and Door business serve as a
guarantee to the lines of credit.
Principal payments on long-term debt are as follows:
<TABLE>
<S> <C>
1999................................................................ $ 184
2000................................................................ 197
2001................................................................ 193
2002................................................................ 198
2003................................................................ 213
Remainder........................................................... 532
---------
Total........................................................... $ 1,517
---------
---------
</TABLE>
Management believes the fair values of the notes payable and long-term debt
approximates their carrying value at December 31, 1998 and 1997, since the rates
approximate current rates available for debt with similar terms and maturities.
10
<PAGE>
5. INCOME TAXES
The operations of Sash and Door are included in the consolidated United
States federal, state and local income tax returns of the Company. Deferred
income tax assets and liabilities are computed annually for differences between
the financial statement and tax bases of assets and liabilities that will result
in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
The provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Current tax expense:
Federal.................................................................. $ 1,171 $ 719
State.................................................................... 332 333
Total current tax expense................................................ 1,503 1,052
Deferred tax expense:
Federal.................................................................. 137 78
--------- ---------
Income tax provision....................................................... $ 1,640 $ 1,130
--------- ---------
--------- ---------
</TABLE>
The difference between the statutory rate for federal income tax and the
effective income tax rate is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Statutory federal income tax rate......................................... 34.00% 34.00%
Effect of:
State and local taxes................................................... 8.92% 8.94%
Miscellaneous........................................................... 1.18% 2.98%
--------- ---------
Effective income tax rate................................................. 44.10% 45.92%
</TABLE>
11
<PAGE>
The components of deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Deferred tax assets:
Inventory capitalization.................................................... $ 427 $ 454
Cash discounts.............................................................. 154 177
Workers compensation reserve................................................ 218 268
Other temporary differences, net............................................ 53 166
--------- ---------
Total deferred tax assets............................................... 852 1,065
--------- ---------
Deferred tax liabilities:
Accelerated depreciation and amortization................................... (422) (409)
Pension expense............................................................. (299) (388)
--------- ---------
Total deferred tax liabilities.......................................... (721) (797)
--------- ---------
Net deferred tax asset........................................................ $ 131 $ 268
--------- ---------
--------- ---------
</TABLE>
6. LEASES
Sash and Door leases some of its facilities under agreements classified as
operating leases. Rent expense for the years ended December 31, 1998 and 1997
was $4,295 and $4,182, respectively, of which $2,620 was for leases with a
lessor that is related to Sash and Door through common ownership in both 1998
and 1997.
Minimum future rental payments under noncancellable operating leases having
remaining terms in excess of one year as of December 31, 1998 are:
<TABLE>
<CAPTION>
RELATED OTHER
YEAR ENDING DECEMBER 31, PARTY LEASES TOTAL
- -------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
1999.......................................................... $ 2,620 $ 392 $ 3,012
2000.......................................................... 2,450 413 2,863
2001.......................................................... 2,348 416 2,764
2002.......................................................... 2,092 418 2,510
2003.......................................................... 1,595 420 2,015
Thereafter.................................................... 2,601 1,899 4,500
--------- --------- ---------
Total minimum future rental payments.......................... $ 13,706 $ 3,958 $ 17,664
--------- --------- ---------
--------- --------- ---------
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company has a Voluntary Employee Beneficiary Association (VEBA) trust.
The VEBA trust, Adam Wholesalers Health Benefit Plan ("Plan"), was created to
provide the payment of certain employee health benefits. All active full-time
employees are eligible. Adam Wholesalers, Inc. is both the sponsor and
administrator of the Plan. The cost of the Plan is paid by contributions from
the plan sponsor, which are based on historical benefits paid experience. The
Company, through the intercompany accounts, allocates costs for the Plan to Sash
and Door. All benefits are paid by the Plan directly from assets of the Plan.
Benefits payable from Plan assets to any one person are limited to $130 during
any one year through the use of a stop-loss insurance policy.
Self-insurance cost for workers compensation are accrued based upon the
aggregate of the liability for reported claims and an estimated liability for
claims incurred but not yet reported.
12
<PAGE>
8. EMPLOYEE PENSION PLANS
Sash and Door is included in defined benefit pension plans sponsored by the
Company which cover certain full-time hourly and salaried employees and certain
union employees. The Company is the sponsor and administrator for these plans.
The Company generally follows the policy of funding an amount between the
actuarially computed maximum and minimum contributions.
Pension expense is composed of several components that reflect various
aspects of the Company's financial arrangements as well as the cost of benefits
earned by employees. The components are determined using the projected unit
credit actuarial cost method and are based on certain actuarial assumptions.
The following table reconciles the Sash and Door funded status of the
defined benefit plans with amounts recognized in Sash and Door's balance sheet's
at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
PENSION BENEFITS
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Change in benefits obligation:
Benefit obligation at beginning of year............................... $ 12,235 $ 10,302
Service cost.......................................................... 640 547
Interest cost......................................................... 859 751
Actuarial loss........................................................ 841 1,146
Benefits paid......................................................... (512) (511)
--------- ---------
Benefit obligation at end of year................................... 14,063 12,235
--------- ---------
--------- ---------
Change in plan assets:
Fair value of plan assets at beginning of year........................ 11,862 10,136
Actual return on plan assets.......................................... 1,305 1,644
Employer contributions................................................ 241 593
Benefits paid......................................................... (512) (511)
--------- ---------
Fair value of plan assets at end of year............................ 12,896 11,862
--------- ---------
--------- ---------
Funded status........................................................... (1,167) (373)
Unrecognized net actuarial loss......................................... 1,661 1,100
Unrecognized prior service cost......................................... 291 336
Unrecognized net obligation at date of initial application.............. 61 82
Amount required to recognize minimum liability.......................... (518) (398)
--------- ---------
Net amount recognized............................................... $ 328 $ 747
--------- ---------
--------- ---------
Amounts recognized in the balance sheets consist of:
Prepaid benefit cost.................................................. $ 457 $ 857
Accrued benefit liability............................................. (647) (509)
Intangible asset...................................................... 122 165
Accumulated other comprehensive income................................ 396 234
--------- ---------
Net amount recognized............................................... $ 328 $ 747
--------- ---------
--------- ---------
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for pension plans with an accumulated benefit obligation in
excess of plan assets were $1,543, $1,543 and $1,415 respectively, for 1998 and
$1,146, $1,146 and $1,035, respectively, for 1997.
13
<PAGE>
Assumptions used in the accounting were as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Discount rate............................................................... 6.75% 7.25%
Rate of increase in compensation levels..................................... 4.50% 4.50%
Expected return on plan assets.............................................. 8.50% 8.50%
Components of net periodic benefit cost:
Service cost.............................................................. $ 640 $ 547
Interest cost............................................................. 859 751
Expected return on assets................................................. (1,036) (853)
Amortization of prior service cost........................................ 45 45
Amortization of unrecognized net obligation............................... 21 21
Recognized net actuarial loss............................................. 11 11
--------- ---------
Net periodic benefit cost............................................... $ 540 $ 522
--------- ---------
--------- ---------
</TABLE>
Benefits under some of the plans covering hourly and union employees are not
based on wages and therefore future wage adjustments have no effect on the
projected benefit obligation for these hourly plans.
9. MULTI-EMPLOYER PENSION PLANS
Sash and Door contributes to several multi-employer pension plans. These
plans cover substantially all of its Teamster and Carpenters Union employees.
Amounts charged to pension expense and contributed (or to be contributed) to the
plans for the Sash and Door Business in 1998 and 1997 totaled $401 and $336,
respectively.
10. COMMITMENTS AND CONTINGENCIES
Sash and Door is involved in litigation incidental to its business. Such
litigation is not considered by management to be significant.
Andersen Corporation ("Andersen"), whose products accounted for net sales
for Sash and Door of 43% and 42% in 1998 and 1997, respectively, distributes its
products only through independent distributors such as the Company. The
agreements with Andersen provide that Andersen can terminate any of the
distributorships at any time upon a 60-day notice. A termination or significant
modification of the distribution relationship with Andersen could have a
material adverse effect on revenues and earnings.
11. RELATED PARTY TRANSACTIONS
Sash and Door is part of Adam Wholesalers, Inc. business of wholesale
distribution of doors and windows for the construction and remodeling industry,
and distribution of various other building products. As part of this process,
Sash and Door received and shipped product among various Adam Wholesalers, Inc.
subsidiaries. Included in the accompanying financial statements are the
following related party transactions:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Purchases.................................................................. $ 3,439 $ 3,800
Sales...................................................................... 927 500
Accounts Receivable........................................................ 158 263
Accounts Payable........................................................... 172 141
</TABLE>
14
<PAGE>
The Company has allocated a portion of total Company management expenses
incurred to Sash and Door based on a defined percentage of annual cost of sales.
The amount, which approximated $3,636 and $4,756 in 1998 and 1997, respectively,
is included within "Operating Expenses" in the statements of operations,
retained earnings and comprehensive income. In the opinion of management, such
allocation method is reasonable to cover the services provided to Sash and Door;
however, it is not necessarily indicative of what Sash and Door would have
incurred on a stand-alone basis.
12. SUBSEQUENT EVENTS
Effective January 1, 1999, the Company entered into an Asset Purchase
Agreement (the "Agreement") with Morgan, whereby Morgan will purchase certain
assets and assume certain liabilities. The closing date for the Agreement was
February 19, 1999.
On March 10, 1999 Andersen announced the intent to purchase Morgan.
* * * * * *
15
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following sets forth the Company's Unaudited Pro Forma Statement of
Operations and the Company's Unaudited Pro Forma Balance Sheet, in each case
giving effect to the acquisition of the Sash and Door Business of Adam
Wholesalers, Inc. ("Adam Acquisition") described in Note 1 hereto as if the
acquisition had been consummated as of January 1, 1998 (in the case of the
Unaudited Pro Forma Statement of Operations) and on December 31, 1998 (in the
case of the Unaudited Pro Forma Balance Sheet). The Unaudited Pro Forma
Financial Statements of the Company do not purport to present the financial
position or results of operations of the Company had the acquisition assumed
herein occurred on the dates indicated, nor are they necessarily indicative of
the results of operations which may be expected to occur in the future.
The Adam Acquisition will be accounted for by the Company as a purchase
whereby the basis of accounting for Adam's assets and liabilities will be based
upon their fair value at the date of the Acquisition. Pro forma adjustments,
including the preliminary purchase price allocation resulting from the Adam
Acquisition as described in Note 1 of the Notes to the Unaudited Pro Forma
Financial Statements, represent the Company's preliminary determination of these
adjustments and are based upon preliminary information, assumptions and
operating decisions which the Company considers reasonable under the
circumstances. Final amounts may differ from those set forth herein.
On March 10, 1999, Morgan entered into an Agreement of Merger with Andersen
Windows and its wholly-owned subsidiary, Andersen Sub, pursuant to which
Andersen Sub and Morgan will be merged, resulting in Morgan, as the surviving
corporation, becoming a wholly-owned subsidiary of Andersen Windows. The
consideration to be received by Morgan's stockholders in the Merger will be
$4.00 per share of Morgan common stock, subject to adjustment until the
effective date of closing, under certain limited circumstances. The Merger is
subject to, among other things, approval of the stockholders of Morgan and the
applicable regulatory agencies. This pending transaction has not been reflected
in the Unaudited Pro Forma Financial Statements.
16
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MORGAN ADAM ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................... 383,151 356,956 740,107
Cost of goods sold........................................... 328,569 291,060 1,779 )(5 621,408
--------- --------- ----------- -----------
Gross profit............................................. 54,582 65,896 (1,779) 118,699
--------- --------- ----------- -----------
Operating expenses........................................... 51,636 59,749 420(4) 111,805
--------- --------- ----------- -----------
Operating income............................................. 2,946 6,147 (2,199) 6,894
--------- --------- ----------- -----------
Other income (expense):
Interest................................................. (2,427) (2,940) (1,202)(6) (6,569)
Other.................................................... 378 511 -- 889
--------- --------- ----------- -----------
(2,049) (2,429) (1,202) (5,680)
Income before income taxes................................... 897 3,718 (3,401) 1,214
Provision (benefit) for income taxes......................... (104) 1,640 (1,640)(7) (104)
--------- --------- ----------- -----------
Net income................................................... 1,001 2,078 (1,761) 1,318
--------- --------- ----------- -----------
Basic earnings per common share.............................. 0.10 0.13
--------- -----------
Diluted earnings per common share............................ 0.10 0.13
--------- -----------
Basic shares outstanding..................................... 10,359 10,359
--------- -----------
Diluted shares outstanding................................... 10,389 10,389
--------- -----------
</TABLE>
17
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MORGAN ADAM ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents...................................... 3,650 371 (371)(1) 3,650
Accounts receivable, net....................................... 31,594 31,749 (31,749)(1) 31,594
Inventories.................................................... 34,290 34,504 6,133(1) 74,927
Deferred income taxes.......................................... -- 834 (834)(1) --
Other current assets........................................... 507 630 (630)(1) 507
--------- --------- ----------- -----------
Total current assets......................................... 70,041 68,088 (27,451) 110,678
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Property, Plant and Equipment, net............................... 8,274 5,929 966(1) 15,169
Goodwill, net.................................................... 6,222 -- 8,000(3) 14,222
Other Assets..................................................... 7,926 4,464 (3,964)(8) 8,426
--------- --------- ----------- -----------
Total Assets................................................. 92,463 78,481 (22,449) 148,495
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt................................................ -- 70 (70)(1) --
Current maturities of long-term debt........................... 1,196 184 (184)(1) 1,196
Intercompany payable........................................... -- 24,198 (24,198)(1) --
Accounts payable............................................... 16,725 7,312 (7,312)(1) 16,725
Other current liabilities...................................... 7,467 4,221 (2,271)(9) 9,417
--------- --------- ----------- -----------
Total current liabilities.................................... 25,388 35,985 (34,035) 27,338
--------- --------- ----------- -----------
Long-Term Obligations............................................ 23,632 2,683 51,399 (10 77,714
--------- --------- ----------- -----------
Stockholders' Equity
Common stock................................................... 1,036 5,752 (5,752) 1,036
Preferred Stock................................................ -- 104 (104) --
Accumulated other comprehensive income......................... -- (396) 396 --
Paid-in capital................................................ 43,424 -- -- 43,424
Retained earnings (accumulated deficit)........................ (969) 37,424 (37,424) (969)
--------- --------- ----------- -----------
43,491 42,884 (42,884) 43,491
--------- --------- ----------- -----------
Treasury stock................................................. (48) (3,071) 3,071 (48)
--------- --------- ----------- -----------
Total stockholders' equity................................... 43,443 39,813 (39,813)(1) 43,443
--------- --------- ----------- -----------
Total Liabilities and Stockholders' Equity..................... 92,463 78,481 (22,449) 148,495
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. The Company's Unaudited Pro Forma Financial Statements assume the Adam
Acquisition occurred (1) as of January 1, 1998 for the purposes of the Unaudited
Pro Forma Statements of Operations and (2) on December 31, 1998 for purposes of
the Unaudited Pro Forma Balance Sheet:
Under the terms of the Asset Purchase Agreement, certain assets of Adam were
excluded and certain liabilities were not assumed. Accordingly, the pro forma
adjustments reflect decreases in cash ($371), accounts receivable ($31,749),
deferred income taxes ($834), other current assets ($630), other assets
($4,464), short-term debt ($70), current maturities of long term debt ($184),
intercompany payables ($24,198), accounts payable ($7,312), other current
liabilities ($4,221), long-term debt ($2,683) along with a corresponding
increase to Adam's stockholder's equity ($620).
The Adam Acquisition was financed through borrowings of $54,282 under the
Company's existing credit facility.
The excess of cost over fair value of net assets acquired resulting from the
preliminary purchase price allocation is assumed to be as follows:
<TABLE>
<S> <C>
Pro forma purchase price
Purchase price per the Asset Purchase Agreement................... $ 53,782
Additional purchase price granted in lieu of stock options........ 300
Acquisition costs................................................. 200
---------
Total pro forma purchase price.................................. 54,282
---------
Pro forma historical net book value of assets acquired Book value
per historical financial statements 39,813
Net assets and liabilities excluded as described above............ 620
---------
Total pro forma historical net book value of assets acquired.... 40,433
---------
Excess of purchase price over net book value of assets acquired..... 13,849
Allocated to:
Inventories..................................................... 6,133
Machinery and equipment......................................... 966
Intangible assets............................................... 500
---------
Remaining excess of cost over fair value of net assets acquired
(goodwill).......................................................... $ 6,250
---------
---------
</TABLE>
The foregoing preliminary purchase price allocation is based on available
information and certain assumptions the Company considers reasonable. The final
purchase price allocation will be based upon a determination of the fair value
of the net assets acquired at the date of the Adam Acquisition as determined by
valuations or other studies. The final purchase price allocation may differ from
the preliminary allocation.
2. In conjunction with the Adam Acquisition, Morgan has established opening
balance sheet reserves in accordance with EITF 95-3, "Recognition of Liabilities
in Connection with a Purchase Business Combination," in the amount of $1,750,
which represents estimated costs principally for facilities consolidation and
severance. Accordingly, an additional $1,750 has been included within Other
Current Liabilities and Goodwill.
19
<PAGE>
3. The pro forma adjustment to goodwill assumes:
<TABLE>
<S> <C>
Excess of cost over the fair value of net assets acquired........... $ 6,250
Establishment of opening balance sheet reserves..................... 1,750
---------
$ 8,000
---------
---------
</TABLE>
4. The pro forma adjustment to reflect the effect of the preliminary
purchase price allocation on cost of goods sold and general and administrative
expense assumes:
<TABLE>
<S> <C>
Cost of goods sold --
Depreciation of amounts allocated to machinery and equipment over 5
years.............................................................. $ 193
---------
---------
General and administrative expenses --
Amortization of amounts allocated to other intangible assets over 5
years.............................................................. 100
Amortization of goodwill over 25 years............................... 320
---------
$ 420
---------
---------
</TABLE>
5. The Company has elected the FIFO inventory method for the costing of
inventory; as such, the LIFO effect on cost of goods sold of $1,586 for the year
ended December 31, 1998 was eliminated.
<TABLE>
<S> <C>
6. The pro forma adjustment to interest expense assumes: Additional interest
expense related to $54,282 of net additional borrowings under the Company's credit
facility............................................................................ $ 4,142
Elimination of Adam's interest expense.............................................. (2,940)
---------
$ 1,202
---------
---------
</TABLE>
Interest expense is calculated assuming a rate of 7.63% at the date of the
Adam Acquisition. A 1/8 percent increase (or decrease) in such rate would
increase (or decrease) annual interest expense by approximately $70.
7. The pro forma adjustment to the provision for income taxes assumes no
federal or state income taxes as income would be offset by the Company's
existing net operating loss position.
8. The pro forma adjustment to other assets assumes:
<TABLE>
<S> <C>
Eliminate excluded assets in the Asset Purchase Agreement.......................... $ (4,464)
Record certain intangible assets................................................... 500
---------
$ (3,964)
---------
---------
</TABLE>
9. The pro forma adjustment to other current liabilities assumes:
<TABLE>
<S> <C>
Eliminate excluded liabilities in the Asset Purchase Agreement..................... $ (4,221)
Establishment of opening balance sheet reserves.................................... 1,750
Acquisition transaction costs...................................................... 200
---------
$ (2,271)
---------
---------
</TABLE>
20
<PAGE>
In connection with the acquisition of Adam, Morgan recorded a restructuring
charge of $1,750. The restructuring initiatives involve the consolidation of
three of Adam's facilities in territories in which Morgan currently has
operations resulting in a workforce reduction of approximately 100 employees.
The elements of the restructuring charge, all of which are expected to result in
cash outlays, include $750 for lease payments through the year 2010, $650 for
employee severance and termination benefits, and $350 for relocation costs. It
is expected that the restructuring actions will be substantially completed by
the end of fiscal 2000.
10. The pro forma adjustment to long-term obligations assumes:
Record net additional borrowings under the Company's credit facility:
<TABLE>
<S> <C>
Cash purchase price to seller.............................................. $ 53,782
Eliminate excluded debt in the Asset Purchase Agreement.................... (2,683)
Additional purchase price granted in lieu of stock options................. 300
---------
$ 51,399
---------
---------
</TABLE>
11. As a result of the acquisition of Adam on February 19, 1999, the Company
determined that Adam's management information system was a better strategic fit
for the combined businesses. Accordingly, the Company will take a charge of
approximately $2.5 million during the first quarter of 1999 relating to the
write-off of the costs incurred for the implementation of the proposed new
Morgan system. The pro forma disclosure does not include this charge due to its
non-recurring nature.
21
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Consent of Deloitte & Touche LLP
*2 Agreement between Kentucky State District Council of Carpenters for and on behalf of Local 2501 and
Adam Wholesalers, Inc. dated July 21, 1998 through July 21, 2001.
*3 Agreement between Adam Wholesalers of Dayton, Inc. and Millmen's Local 684 of the United Brotherhood
of Carpenters and Joiners of America, Great Lakes Regional Industrial Council dated May 1, 1998 to
April 30, 2001.
*4 Agreement between Adam Wholesalers, Indianapolis, Inc. or its successors, and the Chauffeurs,
Teamsters, Warehousemen and Helpers, Local Union No. 135, of Indianapolis, Indiana, affiliated with
the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, or its
successors, for the period March 3, 1996 to and including February 26, 2000.
*5 Contract between Adam Wholesalers of Cincinnati, Inc., United Brotherhood of Carpenters and Joiners
of America, AFL-CIO, Local Union 415, Industrial, Ohio Carpenters Industrial Council Great Lakes
Regional Industrial Council dated November 21, 1995.
*6 Collective Bargaining Agreement between Adam Wholesalers and Teamsters Local Union No. 676 dated
August 9, 1996 through August 8, 1999.
*7 Agreement by and between Adam Wholesalers of Toledo, Inc. and Millmen's Local Union No. 1359 (U.B. of
C. & J. of A.) Affiliated with the Great Lakes Regional Industrial Council effective May 1, 1997 to
April 30, 2000.
*8 Agreement by and between Adam Wholesalers of Toledo, Inc. and Teamsters Union Local No. 20,
affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
effective May 1, 1997 to April 30, 2001.
*9 Agreement by and between Adam Wholesalers, Inc., or its successors, and the Construction, Building
Material, Ice and Coal, Laundry and Dry Cleaning, Meat and Food Products Drivers, Helpers,
Warehousemen, Yardmen, Salesmen and Allied Workers, Local Union No. 682, affiliated with the
International Brotherhood of Teamsters, or its successors, dated May 1, 1996 as extended by that
certain memorandum of agreement by and between Teamsters Local 682, St. Louis Missouri and Morgan
Products Ltd. dated May 13, 1999.
*10 Collective Bargaining Agreement between Carpenters' District Council of Greater St. Louis and Adam
Wholesalers, Inc. effective May 1, 1998 through April 30, 2001.
*11 Agreement between Morgan Products Ltd. Morgan Distribution Division Decatur Distribution Center
Decatur, Illinois and Teamster Local No. 279 of Decatur, Illinois Affiliated with the International
Brotherhood of Teamsters AFL-CIO dated July 15, 1998.
*12 Agreement by and between Morgan Products Ltd. and the United Paperworkers International Union, Region
IX, AFL-CIO, Local No. 7828 as extended by that certain memorandum of agreement between the United
Paperworkers International Union Region IX, AFL-CIO, Local No. 7828, Decatur Illinois and Morgan
Distribution, A Division of Morgan Products Ltd. dated December 3, 1998.
</TABLE>
- ------------------------
* Previously filed with Amendment No. 2, filed on June 3, 1999, to the Current
Report on Form 8-K filed on March 3, 1999.
22
<PAGE>
EXHIBIT 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-13025 and No. 33-23419 of Morgan Products Ltd. on Form S-8 of our report,
dated March 15, 1999 on the Combined Financial Statements of the Sash and Door
Business of Adam Wholesalers, Inc. for the Years Ended December 31, 1998 and
1997, appearing in this Amendment to Current Report on Form 8-K/A-3 of Morgan
Products Ltd.
/s/ Deloitte & Touche LLP
- ------------------------------------
Cincinnati, Ohio
June 18, 1999
