<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
FILED PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 15, 1996
-----------------
SYRATECH CORPORATION
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-12624 13-3354944
-------- ------- ----------
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
175 MCCLELLAN HIGHWAY
EAST BOSTON, MA
---------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 561-2200
--------------
<PAGE> 2
Item 7. Financial Statements and Exhibits
---------------------------------
Financial statements of the business acquired and pro forma financial
information are filed herewith under Item 7 as an amendment to the
Syratech Corporation Form 8-K, dated February 15, 1996, concerning the
acquisition of Rauch Industries, Inc. This Form 8-K/A supersedes the
Form 8K/A filed on April 29, 1996.
(a) Financial statements of businesses acquired.
(1) The financial statements required pursuant to Article 3,
210-3.05 (b) for the year ended December 31, 1995 are
attached on pages F-1 to F-15 and the financial statements
for the year ended December 31,1994 are incorporated herein
by reference from Exhibit 13 to Form 10-K of Rauch
Industries, Inc.("Rauch") dated March 28, 1995.
(2) Pursuant to Rule 2-02 of Regulation S-X [17 CFR 210.2-02] a
manually signed accountants report for the year ended
December 31, 1995 is attached on page F-3.
(b) Pro forma financial information.
The following pro forma unaudited condensed consolidated
financial information of Rauch is attached on pages F-16 to F-20.
(i) Pro Forma Unaudited Condensed Consolidated Income Statement
For the Year Ended December 31, 1995.
(ii) Pro Forma Unaudited Condensed Consolidated Balance Sheet at
December 31, 1995.
(iii) Notes to Pro Forma Unaudited Condensed Consolidated
Financial Statements.
(c) Exhibits:
None.
1.
<PAGE> 3
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 thereunto duly authorized.
Date: February 27, 1997 SYRATECH CORPORATION
By: /s/ E. Merle Randolph
-----------------------
Name: E. Merle Randolph
Title: Vice President,
Chief Financial Officer and
Treasurer
2.
<PAGE> 4
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS OF
RAUCH INDUSTRIES, INC.
for the years ended December 31, 1995, 1994 and 1993
F-1
<PAGE> 5
C O N T E N T S
-------
Pages
-----
Report of Independent Accountants 1
Consolidated Financial Statements:
Balance Sheets 2
Statements of Income 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-13
F-2
<PAGE> 6
COOPERS COOPERS & LYBRAND L.L.P.
& LYBRAND a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
Rauch Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Rauch
Industries, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. 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 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rauch Industries,
Inc. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Charlotte, North Carolina
March 12, 1996
F-3
<PAGE> 7
<TABLE>
RAUCH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
----
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 188,496 $ 1,695,120
Accounts receivable (net of allowance for uncollectible accounts
of $248,000 and $235,000) 23,227,755 20,167,583
Recoverable from insurance carrier (Note 2) 837,902 3,590,490
Inventories 15,992,480 10,104,166
Deferred income taxes 100,000 474,000
Prepaid taxes and other 1,027,301 788,374
----------- -----------
Total current assets 41,373,934 36,819,733
----------- -----------
Property and equipment, at cost:
Land and improvements 448,113 309,939
Buildings 5,503,545 4,309,644
Machinery and equipment 8,691,475 7,861,461
Construction in progress 719,739 469,385
----------- -----------
15,362,872 12,950,427
Less accumulated depreciation 7,839,435 7,352,655
----------- -----------
7,523,437 5,597,772
----------- -----------
Goodwill, net of accumulated amortization of $81,250 3,168,750
----------- -----------
Other assets 352,398 326,822
----------- -----------
Total assets $52,418,519 $42,744,327
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,200,000 $ 661,820
Notes payable, bank 6,808,000 9,405,000
Accounts payable, trade 1,032,742 1,344,626
Accrued liabilities 2,251,570 834,477
Accrued income taxes 28,400
----------- -----------
Total current liabilities 11,320,712 12,245,923
----------- -----------
Long-term debt 11,300,000 4,375,000
----------- -----------
Deferred income taxes 1,764,000 187,000
----------- -----------
Stockholders' equity:
Common stock, $1.00 par value; authorized, 10,000,000 shares;
issued and outstanding 3,695,563 shares 3,695,563 3,695,563
Additional paid-in capital 3,094,464 3,094,464
Retained earnings 21,243,780 19,146,377
----------- -----------
Total stockholders' equity 28,033,807 25,936,404
----------- -----------
Total liabilities and stockholders' equity $52,418,519 $42,744,327
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 8
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1995, 1994, and 1993
----
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $58,918,735 $45,035,247 $44,693,521
Cost of sales 47,755,773 35,749,187 32,547,864
----------- ----------- -----------
Gross profit 11,162,962 9,286,060 12,145,657
Selling, general and administrative expenses 11,794,984 8,788,100 7,719,675
----------- ----------- -----------
Operating income (loss) (632,022) 497,960 4,425,982
Interest expense (1,304,816) (787,821) (309,331)
Gain on insurance settlement 6,274,730
Other income 157,156 77,596 724,702
----------- ----------- -----------
Income (loss) before income taxes 4,495,048 (212,265) 4,841,353
----------- ----------- -----------
Provision (benefit) for income taxes:
Current 151,000 16,500 1,722,000
Deferred 1,951,000 (178,000) (7,000)
----------- ----------- -----------
2,102,000 (161,500) 1,715,000
----------- ----------- -----------
Net income (loss) before cumula-
tive effect of accounting change 2,393,048 (50,765) 3,126,353
Cumulative effect of accounting change 64,310
----------- ----------- -----------
Net income (loss) $ 2,393,048 $ (50,765) $ 3,190,663
=========== =========== ===========
Earnings per share:
Net income (loss) before cumulative effect of
accounting change $ .65 $ (.01) $ .84
Cumulative effect of accounting change .02
----------- ----------- -----------
Net income (loss) per common share $ .65 $ (.01) $ .86
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 9
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1995, 1994 and 1993
----
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ --------- -------- -----
<S> <C> <C> <C> <C>
Balances, January 1, 1993 $3,695,563 $3,094,464 $16,524,109 $23,314,136
Net income for the year 3,190,663 3,190,663
Dividends paid ($.09 per share) (234,181) (234,181)
---------- ---------- ----------- -----------
Balances, December 31, 1993 3,695,563 3,094,464 19,480,591 26,270,618
Net loss for the year (50,765) (50,765)
Dividends paid ($.08 per share) (283,449) (283,449)
---------- ---------- ----------- -----------
Balances, December 31, 1994 3,695,563 3,094,464 19,146,377 25,936,404
Net income for the year 2,393,048 2,393,048
Dividends paid ($.08 per share) (295,645) (295,645)
---------- ---------- ----------- -----------
Balances, December 31, 1995 $3,695,563 $3,094,464 $21,243,780 $28,033,807
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 10
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994, and 1993
----
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,393,048 $ (50,765) $ 3,190,663
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities,
net of effects of acquisitions of new business:
Depreciation 529,407 519,866 482,081
Amortization 108,808 22,530
Gain on settlement of insurance claim for equipment (4,358,993)
Loss on sale of equipment 19,377
Cumulative effect of accounting change (64,310)
Deferred income taxes 1,951,000 (178,000) (7,000)
Recoverable from insurance carrier 2,311,581 (2,425,934)
Changes in operating assets and liabilities:
Accounts receivable (2,431,014) (4,894,928) (3,668,115)
Inventories (5,048,050) 2,125,659 441,637
Prepaid expenses (236,983) (605,506) 148,859
Accounts payable (728,228) (145,910) 30,020
Accrued liabilities 971,112 (189,395) 214,729
Accrued income taxes 28,400 754,454 147,846
Other assets (30,581) 25,447 (258,470)
------------ ------------ ------------
Net cash provided by (used in) operating
activities (4,521,116) (6,551,390) 657,940
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from settlement of insurance claim for
equipment 4,800,000
Proceeds from sale of equipment 29,300
Purchase of property and equipment (2,483,082) (3,489,618) (636,634)
Acquisitions of new business, net of cash acquired (3,902,261) (1,226,508)
Loans to affiliate (4,616,994)
Repayment of loans by affiliate 3,226,870
------------ ------------ ------------
Net cash used in investing activities (1,556,043) (3,489,618) (3,253,266)
------------ ------------ ------------
Cash flows from financing activities:
Dividends paid (295,645) (283,449) (234,181)
Payments on long-term debt (461,820) (480,000) (400,000)
Proceeds from long-term debt 7,925,000 3,560,000
Repayments of notes payable (49,657,000) (39,940,000) (28,339,000)
Proceeds from notes payable 47,060,000 38,845,000 33,708,000
------------ ------------ ------------
Net cash provided by financing activities 4,570,535 1,701,551 4,734,819
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (1,506,624) (8,339,457) 2,139,493
Cash and cash equivalents at beginning of year 1,695,120 10,034,577 7,895,084
------------ ------------ ------------
Cash and cash equivalents at end of year $ 188,496 $ 1,695,120 $ 10,034,577
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---
1. Accounting Policies:
-------------------
BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of Rauch Industries, Inc. and its Subsidiaries, Northstar
Corporation, RI Acquisition, Inc. (d/b/a Holiday Products) and Rochard,
Inc. In consolidation, all significant intercompany balances and
transactions are eliminated.
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 at
the dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from
those estimates (see Note 2).
INCOME RECOGNITION - Sales are invoiced and income is recognized in the
financial statements when merchandise is shipped.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the last-in, first-out ("LIFO") method.
PROPERTY, EQUIPMENT AND DEPRECIATION - Property and equipment are carried
at cost. Depreciation is computed primarily using the straight-line method.
The estimated useful lives of the respective assets used in computing
depreciation are as follows:
Buildings 15 - 40 years
Machinery and equipment 3 - 10 years
Expenditures for maintenance and repairs are charged directly to the
appropriate operating account at the time the expense is incurred.
Expenditures determined to represent additions and betterments are cap
italized.
INTANGIBLE ASSETS - Excess of acquired assets over fair value (goodwill) is
amortized using the straight-line method over thirty (30) years.
STATEMENTS OF CASH FLOWS - Cash and cash equivalents include all highly
liquid investments purchased with an original maturity of three months or
less.
<TABLE>
Cash paid during the year for interest (net of capitalized interest of
$50,000 in 1994) and income taxes was as follows:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest $1,203,000 $830,000 $ 402,000
Income taxes 679,000 770,000 1,652,000
</TABLE>
F-8
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
1. Accounting Policies, continued:
-------------------
CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS - Financial
instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments with high
credit quality financial institutions. At December 31, 1995 and 1994,
substantially all cash and cash equivalents were maintained by a single
major financial institution. The Company markets its products primarily to
customers in the retail sector. The Company closely monitors the
creditworthiness of its customers and generally requires no collateral from
its customers. Insurance is maintained to reduce overall credit risk. The
Company's ability to collect outstanding trade receivables is dependent
upon the retail economic environment. The Company does not believe that it
is dependent on any single customer. Sales to two customers accounted for
approximately 33% of sales in 1995, 32% of sales in 1994 and 27% of sales
in 1993. Accounts receivable from two customers accounted for approximately
62% and 56% of total accounts receivable at December 31, 1995 and 1994,
respectively.
INCOME TAXES - The Company recognizes deferred tax liabilities and assets
for the expected future tax consequences of events that have been included
in either the financial statements or tax returns, but not both. Deferred
tax liabilities and assets are determined based on the difference between
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the difference is expected to
reverse.
EARNINGS PER COMMON SHARE - Earnings per common share is based on the
weighted average number of shares outstanding each year (3,695,563 in 1995,
1994 and 1993.)
RECLASSIFICATIONS - Certain amounts in the 1994 financial statements have
been reclassified to conform with 1995 presentation.
2. Recoverable from Insurance Carrier:
----------------------------------
On October 19, 1994, a fire destroyed the Company's 677,000 square-foot
facility located in Cramerton, North Carolina. The building warehoused a
substantial portion of the Company's finished goods inventory for the 1994
Christmas season in anticipation of shipment to customers. The building was
also used to manufacture garland and non-woven fabric. The Company had
insurance on the building, equipment and raw materials at replacement
value. The finished goods inventory was insured at net selling pric e. In
addition, the Company also carried business interruption insurance. The
Company's insurance coverage limits total recovery in one policy year to an
amount not to exceed approximately $60,000,000.
F-9
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
2. Recoverable from Insurance Carrier, continued:
----------------------------------
During 1995, the Company settled with the insurance carrier on the
inventory and equipment claims for $19.8 million, including a $10 million
advance received in 1994, resulting in a gain of $6,274,730. As of December
31, 1995, the Company has amounts recoverable from the insurance carrier
totaling $837,902 in excess of amounts received. This amount represents the
net book value of the building destroyed and business interruption costs
incurred. The final resolution of the remaining insurance claim is
dependent upon future events, the outcome of which are not fully
determinable at the present time. Accordingly, no additional amount due
from the insurance carrier has been recorded as of December 31, 1995.
3. Inventories:
-----------
<TABLE>
Inventories are summarized as follows as of December 31:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 6,317,427 $ 5,244,846
Work-in-process 2,286,734 2,032,965
Finished goods 8,373,781 3,150,433
----------- -----------
16,977,942 10,408,244
Less, excess of FIFO over LIFO cost 985,462 304,078
----------- -----------
$15,992,480 $10,104,166
=========== ===========
</TABLE>
The Company is dependent on a single supplier of raw material glass.
4. Accrued Liabilities:
-------------------
<TABLE>
Accrued liabilities are summarized as follows as of December 31:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Salaries and wages $1,133,384 $342,541
Profit sharing and ESOP 221,224
Other 896,962 491,936
---------- --------
$2,251,570 $834,477
========== ========
</TABLE>
F-10
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
5. Long-Term Debt and Notes Payable:
--------------------------------
<TABLE>
A summary of long-term debt at December 31 follows:
1995 1994
---- ----
<S> <C> <C>
Term note payable under bank loan agreement, due in quarterly
installments of $300,000, plus a final payment in 2000, with
interest approximately at the bank's certificate of deposit rate $12,500,000 $
Term note payable under bank loan agreement, due in quarterly
installments of $125,000, plus a final payment in 1999, with
interest approximately at the bank's certificate of deposit rate 4,875,000
Industrial revenue bond, due in quarterly installments of $55,000
to 1995 with interest at 75% of the prime rate 161,820
----------- ----------
12,500,000 5,036,820
Less amount due within one year 1,200,000 661,820
----------- ----------
$11,300,000 $4,375,000
=========== ==========
</TABLE>
During 1995, the Company entered into a new loan agreement allowing
long-term borrowings up to $12.8 million and short-term borrowings up to
$40.0 million. Short-term borrowings bear interest at approximately the
bank's certificate of deposit rate. Maximum short-term borrowings
outstanding at any time during the year was $26.1 million in 1995, $30.8
million in 1994 and $22.4 million in 1993. Daily average borrowings were
$10.6 million in 1995, and 1994 and $7.0 million in 1993 at daily weighted
average interest rates of 6.6%, 5.8% and 4.0%, respectively. The bank's
certificate of deposit rate was 5.9% at December 31, 1995.
The bank loan agreement contains various covenants, the most restrictive
being a limitation on leasing activities.
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the carrying value of
long-term debt approximates the fair value at December 31, 1995.
<TABLE>
Future maturities of long-term debt are as follows:
<S> <C>
1996 $ 1,200,000
1997 1,200,000
1998 1,200,000
1999 1,200,000
2000 7,700,000
-----------
$12,500,000
===========
</TABLE>
F-11
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
6. Employee Benefit Plans:
----------------------
The Company maintains a 401(k) profit-sharing plan covering substantially
all employees with more than one year of continuous service. Qualified
employees may contribute up to 15% of their eligible compensation to the
plan. The Company matches 50% of this contribution up to $520 per employee,
with the balance of the contribution matched at 25%. In addition,
discretionary contributions may be made by the Company. Company
contributions were approximately $333,000 for 1995, $57,000 for 1994 and
$165,000 for 1993.
The Company has an Employee Stock Ownership Plan covering substantially all
employees with more than one year of continuous service. Contributions to
the plan were $50,000 in 1995 and 1993. No contributions were made to the
Plan in 1994.
7. Income Taxes:
------------
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 44,000 $ 15,000 $1,536,000
State 107,000 1,500 186,000
---------- --------- ----------
151,000 16,500 1,722,000
---------- --------- ----------
Deferred:
Federal 1,803,000 (179,000) (17,000)
State 148,000 1,000 10,000
---------- --------- ----------
1,951,000 (178,000) (7,000)
---------- --------- ----------
$2,102,000 $(161,500) $1,715,000
========== ========= ==========
</TABLE>
<TABLE>
The following schedule summarizes the principle differences between income
taxes at the federal statutory rate and that reflected in the financial
statements:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate 34.0% (34.0)% 34.0%
State income taxes, net of federal tax benefit 3.8 0.5 2.5
Targeted jobs credit 0.3 (5.4)
Contributions (2.8) (34.1)
Tax exempt interest (0.1) (4.5)
Valuation allowance 11.5
Other 0.1 1.4 (0.6)
---- ---- ----
46.8% (76.1)% 35.9%
==== ==== ====
</TABLE>
F-12
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
7. Income Taxes, continued:
------------
<TABLE>
The following is a summary of deferred tax assets and liabilities at
December 31:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets, current:
Accounts receivable $ 90,000 $ 90,000
Inventory 260,000 149,000
Contribution carryover 515,000 183,000
Accrued expenses 67,000 52,000
Business interruption costs (317,000)
----------- ---------
Total deferred tax asset 615,000 474,000
Valuation allowance (515,000)
----------- ---------
Net deferred tax assets, current 100,000 474,000
----------- ---------
Deferred tax liabilities, noncurrent:
Goodwill (32,000)
Depreciation (1,864,000) (187,000)
AMT credit carryforward 132,000
----------- ---------
Net deferred tax liabilities, noncurrent (1,764,000) (187,000)
----------- ---------
Net deferred income taxes $(1,664,000) $ 287,000
=========== =========
</TABLE>
The valuation allowance relates to the contribution carryover that is not
expected to be realized.
8. Acquisitions:
------------
On May 5, 1995, the Company completed the purchase of all outstanding stock
of Rochard, Inc. ("Rochard"), a privately held importer and distributor of
porcelain giftware and china. The purchase price was $4 million. The
acquisition has been accounted for as a purchase, and the acquired net
assets of Rochard are included in the Company's balance sheet at December
31, 1995. The purchase price has been allocated to the assets and
liabilities of Rochard based on their estimated respective fair values.
<TABLE>
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Rochard had been acquired as of
the beginning of the following periods:
<CAPTION>
1995 1994
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Sales $60,176,000 $49,784,000
Net income 2,679,000 74,000
Net income per share .72 .02
</TABLE>
F-13
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
8. Acquisitions, continued:
------------
On December 31, 1993, the Company completed the purchase of substantially
all the net assets of Holiday Products, Inc. ("Holiday"), a privately held
manufacturer of Christmas related products. The purchase price consisted of
approximately $1.2 million in cash, assumption of liabilities totaling $0.5
million, and the forgiveness of debt owed from Holiday to the Company in
the amount of approximately $1.5 million. The acquisition has been
accounted for as a purchase, and the acquired net assets of Holiday are
included in the Company's balance sheet at December 31, 1993. The purchase
price has been allocated to the assets and liabilities of Holiday based on
their estimated respective fair values.
<TABLE>
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Holiday had been acquired as of
the beginning of the periods presented:
<CAPTION>
1993
(Unaudited)
-----------
<S> <C>
Sales $51,324,000
Net income 3,191,000
Net income per share .86
</TABLE>
9. Stock Options:
-------------
The Company has a stock option plan for which 202,500 shares of common
stock are reserved for grant to key personnel. Under the plan, the option
price may not be less than the fair market value of the stock at the time
the options are granted. The period during which options are exercisable is
fixed by the board of directors at the time of grant, but is not to exceed
ten years plus one month.
During 1995 options for 3,500 shares were granted under the plan. As of
December 31, 1995, options for 172,750 shares had been granted, none of
which were exercised. Of the options outstanding as of December 31, 1995,
35,250 shares are exercisable at $7.67 per share, 20,000 shares are
exercisable at $8.63 per share and 17,000 shares are exercisable at $9.50
per share.
10. Supplementary Income Statement Information:
------------------------------------------
The statements of income include maintenance and repairs charged to costs
and expenses of $666,000 in 1995, $811,000 in 1994 and $832,000 in 1993.
F-14
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----
10. Supplementary Income Statement Information, continued:
------------------------------------------
Costs incurred for product research and development were $198,000 in 1995,
$334,700 in 1994 and $302,400 in 1993.
11. Leases and Commitments:
---------------------
The Company leases various properties under operating leases. Rent expense
under these leases was approximately $1,411,000 in 1995, $465,000 in 1994
and $225,000 in 1993.
<TABLE>
The following is a schedule of future minimum rental payments required
under operating leases that have initial or remaining noncancelable terms
in excess of one year.
<S> <C>
1996 $ 946,862
1997 284,971
1998 157,941
1999 51,011
2000 51,011
Thereafter 68,015
----------
$1,559,811
==========
</TABLE>
12. Accounting for the Impairment of Long-Lived Assets and for Long-Lived
---------------------------------------------------------------------
Assets to be Disposed Of:
------------------------
Effective January 1, 1996, the Company will be required to implement SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". SFAS No. 121 requires that an
impairment loss be recorded for long-lived assets, such as property and
equipment, or goodwill, if circumstances indicate that the carrying value
of an asset may not be recoverable. The impact of adopting this
pronouncement has not been determined, but is not expected to be material
to the Company's financial statements.
13. Subsequent Event, Sale of Company:
---------------------------------
On February 15, 1996 the board of directors and stockholders approved the
sale of all outstanding stock of the company for approximately $48 million
($13 per share). In addition to the shares purchased, the acquiring company
purchased from the employees all stock options and stock appreciation
rights outstanding at December 31, 1995.
F-15
<PAGE> 19
SYRATECH CORPORATION AND SUBSIDIARIES
Pro Forma Unaudited Condensed Consolidated Financial Information
(in thousands)
The following pro forma unaudited condensed consolidated financial
information is provided as required by Regulation S-X of the Securities and
Exchange Commission.
Pursuant to the Agreement, dated as of December 7, 1995, among Syratech
Corporation (the "Registrant"), SYR Acquisition, Inc. ("SYR"), and Rauch
Industries, Inc. ("Rauch"), (the "Agreement"), on February 15, 1996, the
Registrant through its wholly-owned subsidiary SYR acquired the outstanding
shares of Rauch. The consideration was $13 per share of Rauch common stock owned
by shareholders of record on January 16, 1996. The transaction was paid with
approximately $47.8 million in cash by the Registrant from funds available under
a letter of credit with the Wachovia Bank of North Carolina, N.A.
The following pro forma unaudited condensed consolidated financial
statements give effect to the acquisition of Rauch and are based on the
assumptions set forth below and in the notes to the pro forma unaudited
condensed consolidated financial statements. The pro forma unaudited condensed
consolidated income statement for the year ended December 31, 1995 reflects the
acquisition as if it occurred on January 1, 1995. The pro forma unaudited
condensed consolidated balance sheet as of December 31, 1995 reflects the
acquisition as if it occurred on December 31, 1995. The pro forma unaudited
financial information may not be indicative of the results of operations or the
financial position which would have been attained had the acquisition been
consummated on either of the foregoing dates or which may be attained in the
future.
The pro forma unaudited condensed consolidated financial statements should
be read in conjunction with the historical consolidated financial statements of
the Registrant, as filed with the Securities and Exchange Commission.
F-16
<PAGE> 20
<TABLE>
SYRATECH CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<CAPTION>
Historical Historical
Syratech Rauch (A) Adjustments Pro Forma
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales ................................... $169,520 $58,919 $ $228,439
Cost of sales ............................... 119,836 47,756 1,604 (B) 170,007
811 (C)
-------- ------- ------- --------
Gross profit ........................... 49,684 11,163 (2,415) 58,432
Selling, general and administrative
expenses .................................. 34,239 11,795 (1,604)(B) 44,227
241 (D)
(444)(E)
-------- ------- ------- --------
Income (loss) from operations .......... 15,445 (632) (608) 14,205
Interest expense ............................ (287) (1,305) (1,592)
Interest income ............................. 4,881 (363)(F) 4,518
Gain on insurance settlement ................ 6,275 6,275
Other income ................................ 157 157
-------- ------- ------- --------
Income before
provision for income taxes ........... 20,039 4,495 (971) 23,563
Provision for income taxes .................. 6,863 2,102 (718)(G) 8,247
-------- ------- ------- --------
Income from continuing operations ...... $ 13,176 $ 2,393 $ (253) $ 15,316
======== ======= ======= ========
</TABLE>
See notes to pro forma unaudited condensed consolidated financial statements.
F-17
<PAGE> 21
<TABLE>
SYRATECH CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<CAPTION>
HISTORICAL
SYRATECH HISTORICAL PRO FORMA
CORPORATION RAUCH (H) ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents ....................... $ 78,493 $ 189 $(19,065)(I) $ 59,617
Marketable securities ...................... 30,561 (30,561)(I) 0
Accounts receivable, net ................... 31,893 23,228 (607)(J) 54,514
Insurance receivable ....................... 838 22,839 (J) 23,677
Inventories ................................ 41,151 15,992 (2,069)(J) 55,074
Deferred income taxes ...................... 5,105 100 2,418 (K) 7,623
Prepaid expenses and other ................. 1,602 1,027 2,629
Net assets of discontinued operations ...... 1,834 1,834
-------- ------- -------- --------
Total current assets ..................... 190,639 41,374 (27,045) 204,968
Property, plant and equipment, net ............ 29,560 7,523 15,539 (J) 52,622
Purchase price in excess of net assets
acquired.................................... 3,169 2,393 (L) 5,562
Other assets .................................. 367 352 (260)(J) 459
-------- ------- -------- --------
Total .................................... $220,566 $52,418 $ (9,373) $263,611
======== ======= ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Revolving loan and notes payable ........... $ 51,735 $ 6,808 $ $ 58,543
Current long-term debt ..................... 1,200 1,200
Accounts payable ........................... 6,438 1,032 7,470
Accrued expenses ........................... 4,436 2,252 3,053 (J),(M) 9,741
Accrued compensation ....................... 2,478 398 (M) 2,876
Accrued advertising ........................ 1,991 1,991
Income taxes payable ....................... 1,511 28 1,486 (K) 3,025
-------- ------- -------- --------
Total current liabilities ................ 68,589 11,320 4,937 84,846
Long-term debt ................................ 11,300 11,300
Deferred income taxes ......................... 3,657 1,764 13,724 (K) 19,145
Pension liability ............................. 1,724 1,724
STOCKHOLDERS' EQUITY
Preferred stock ...............................
Common stock .................................. 87 3,696 (3,696)(N) 87
Additional paid-in capital .................... 9,699 3,094 (3,094)(N) 9,699
Retained earnings ............................. 136,728 21,244 (21,244)(N) 136,728
Cumulative translation adjustment ............. 85 85
Less: Treasury stock .......................... (3) (3)
-------- ------- -------- --------
Total stockholders' equity ............... 146,596 28,034 (28,034) 146,596
-------- ------- -------- --------
Total .................................... $220,566 $52,418 $ (9,373) $263,611
======== ======= ======== ========
</TABLE>
See notes to pro forma unaudited condensed consolidated financial statements.
F-18
<PAGE> 22
SYRATECH CORPORATION AND SUBSIDIARIES
Notes To Pro Forma Unaudited Condensed Consolidated Financial Statements
(in thousands)
The purchase of Rauch Industries, Inc. ("Rauch") on February 15, 1996 has been
recorded in the pro forma unaudited condensed consolidated financial statements
under the purchase method of accounting. The purchase price has been allocated
to tangible assets and liabilities based on the fair value of these assets. The
purchase price in excess of net assets acquired has been recorded in the pro
forma unaudited condensed consolidated balance sheet. The allocation of purchase
price was adjusted during 1996 when the Company received $23,771 in connection
with an insurance claim relating to a 1994 fire at Rauch.
(A) Reflects the operations of Rauch for the year ended December 31, 1995.
(B) Reflects a reclassification of Rauch warehouse and distribution costs to
conform to the Company's accounting of such costs.
(C) Reflects additional depreciation expense as a result of the allocation of a
portion of the Rauch purchase price to property, plant and equipment.
(D) Reflects amortization expense as a result of amortizing, over 30 years, the
$7,224 allocation of Rauch purchase price in excess of net assets acquired.
(E) Reflects an adjustment for certain acquisition related costs incurred by
Rauch.
(F) Reflects a reduction in interest income (at an assumed interest rate of
5.8%) as a result of a decrease in cash and equivalents and marketable
securities of $49,626 for the purchase of Rauch common stock at $13 per
share plus related costs and expenses.
(G) Reflects income taxes at an effective rate of 35%.
(H) Reflects the financial position of Rauch at December 31, 1995.
(I) Reflects a reduction in cash and equivalents and marketable securities of
$49,626 for the purchase of Rauch common stock.
F-19
<PAGE> 23
(J) Reflects adjustments to record the allocation of purchase price to the
following assets and liabilities in accordance with the purchase method of
accounting. Reflects the insurance claim receivable which was collected by
the Company subsequent to the acquisition date.
Increase/
(Decrease)
----------
Accounts receivable $ (607)
Insurance receivable 22,839
Inventories (2,069)
Property, plant and equipment, net 15,539
Other assets (260)
Accrued liabilities 3,451
(K) Reflects an adjustment to deferred income taxes and income taxes payable
for the effect of the adjustments.
(L) Reflects an adjustment to record the purchase price in excess of net assets
acquired.
(M) Reflects as reclassification of accrued compensation of $398 from accrued
expenses to conform with the Company's presentation of accrued
compensation.
(N) Reflects an adjustment to eliminate Rauch's stockholders' equity.
F-20
