UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) May 26, 2000
FORMICA CORPORATION
(Exact name of registrant as specified in its character)
Commission File Number: 333-76683
Delaware 34-104-6753
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 Independence Boulevard
Warren, NJ 07059
(908) 647-8700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
This Amendment No. 1 to the Current Report of Formica Corporation (the
"Company") on Form 8-K dated May 26, 2000 relates to the Company's completion
of the acquisition of Decorative Surfaces Holding AB. The purpose of this
Amendment is to provide an audited balance sheet and statement of net revenues
over direct expenses, as well as unaudited pro forma financial information,
which was impracticable to provide at the time of the initial filing of the
Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND SCHEDULES
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The historical Balance Sheet and Statement of Net Revenues over Direct
Expenses of PSM as of and for the year ended December 31, 1999 are
included herein as Exhibit 2.1.
(b) PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited
Condensed Combined Statement of Operations as of and for the three months
ended March 31, 2000 and the Unaudited Pro Forma Condensed Combined
Statement of Operations for the year ended December 31, 1999 are included
herein. The unaudited condensed combined pro forma financial information
has been prepared using the audited statement of Net Revenues over Direct
Expenses for PSM for the year ended December 31, 1999, and the unaudited
Balance Sheet and Statement of Net Revenues over Direct Expenses for PSM
as of and for the three month period ended March 31, 2000.
(c) EXHIBITS See Index to Exhibits on Page 9.
1
<PAGE>
PART A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statement of
operations gives effect to the acquisition of Perstorp Surface Materials AB
("PSM") by Decorative Surfaces Holding AB ("DSH") on March 31, 2000 applying
the purchase method of accounting to give effect to this transaction as if it
had occurred on January 1, 1999. The unaudited pro forma condensed combined
balance sheet gives effect to this transaction as if it had occurred on March
31, 2000.
The contribution of the stock of DSH's 100% parent to Formica by FM
Holdings ("Holdings") on May 26, 2000 was accounted for on an as-if pooling
basis because it was a combination of entities under common control.
Accordingly, Formica's historical financial statements include PSM's results of
operation and cash flows after reflecting the acquisition and related purchase
accounting by DSH on March 31, 2000 for all periods beginning April 1, 2000.
For pro forma purposes, (a) Formica's unaudited consolidated balance sheet
as of March 31, 2000 has been combined with PSM's unaudited balance sheet as of
March 31, 2000 as if the merger had occurred on March 31, 2000, (b) Formica's
unaudited condensed consolidated statement of operations for the three month
period ended March 31, 2000 has been combined with PSM's unaudited statement of
revenues over direct expenses for the same period as if the acquisition had
occurred on January 1, 1999 and (c) Formica's audited consolidated statement of
operations for the year ended December 31, 1999 has been combined with PSM's
audited statement of revenues over direct expenses for the year ended December
31, 1999 as if the acquisition had occurred on January 1, 1999. The pro forma
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results or financial position that would have
occurred if the acquisition had been consummated on January 1, 1999 or March
31, 2000, respectively, nor is it necessarily indicative of future operating
results or financial position.
The unaudited pro forma condensed combined financial information has been
prepared on the basis and assumptions described in the notes thereto and
includes assumptions relating to the allocation of the consideration paid by
DSH for the assets and liabilities of PSM based on preliminary estimates of the
fair value of such assets and liabilities. Due to the capital-intensive nature
of the PSM business, the excess of the purchase price over the book value of
net assets acquired has been primarily allocated to property, plant and
equipment. A formal appraisal of the assets and liabilities is currently
ongoing. Accordingly, the actual allocation of such consideration may differ
from that reflected in the unaudited pro forma condensed combined financial
information after the completion of independent valuations and other procedures
to be performed. In the opinion of Formica, all adjustments necessary to
present fairly such unaudited pro forma condensed combined financial
information have been based on the terms and structure of the acquisition.
The historical financial statements of PSM are not intended to be a
complete presentation in accordance with generally accepted accounting
principles. Interest expense and the provision for income taxes are excluded
from the historical presentation and corporate charges for information
technology, corporate management, engineering and other such costs that were
incurred on a company-wide basis and benefited multiple divisions in Perstorp
AB (the former ultimate parent of PSM) were not allocated as any allocation of
such costs would be arbitrary and misleading.
The pro forma adjustments include management's estimate of interest
expense associated with the acquisition financing and a provision for income
taxes based on the estimated effective tax rate of PSM. However, no adjustments
have been made to include the interest expense related to seasonal borrowings
under Formica's revolving credit facility to support anticipated working
capital needs of PSM.
Management of Formica has not yet completed a comprehensive review of the
additional general and administrative costs which will be incurred to replace
the activities performed by Perstorp AB; however, included in the column
labeled "Forward Looking Adjustments" are management's best estimate of the
additional costs which would have been incurred had the merger taken place as
of January 1, 1999. The Forward Looking Adjustments primarily reflect increased
corporate staffing and other expense levels and outside services estimated at
$1 million annually and the related estimated tax benefit of $0.4 million. The
Forward Looking Adjustments do not reflect the costs of restructuring
activities that management of Formica plans to undertake, nor do the Forward
Looking Adjustments include synergies or anticipated cost savings which
management expects to result from the planned restructuring activities.
These pro forma condensed combined financial statements should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of Formica, included in the Form 10-K, for the year
ended December 31, 1999 and the Form 10-Q for the quarter ended March 31, 2000.
2
<PAGE>
Item 7: Financial Statements
(b1) PRO FORMA FINANCIAL INFORMATION
FORMICA CORPORATION
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2000
(dollars in millions)
<TABLE>
Historical
----------------- Pro Forma Reference Pro Forma
Formica PSM Adjustments Note 3 Combined
------- --- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
---------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 7.3 $ 2.0 $ 6.1 (A) $ 15.4
Accounts receivable, net 82.5 54.5 (2.7) (B) 134.3
Inventories 119.8 50.3 -- 170.1
Prepaid expenses and other current
assets 12.7 12.6 -- 25.3
Deferred income taxes 14.8 -- -- 14.8
------ ------ ------ ------
Total current assets 237.1 119.4 3.4 359.9
PROPERTY, PLANT AND EQUIPMENT, net 301.0 63.5 53.3 (C) 417.8
OTHER ASSETS:
Intangible assets, net 156.7 1.6 14.1 (D) 172.4
Other noncurrent assets 11.6 0.1 7.4 (E) 19.1
------ ------ ------ ------
Total assets $706.4 $184.6 $ 78.2 $969.2
====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 28.0 $ 76.7 $(76.1) (F) $ 28.6
Accounts payable 43.0 21.8 -- 64.8
Deferred income taxes-current -- 1.3 -- 1.3
Income taxes payable -- 2.5 -- 2.5
Accrued expenses 53.6 11.8 16.3 (G) 81.7
------ ------ ------ ------
Total current liabilities 124.6 114.1 (59.8) 178.9
LONG-TERM DEBT 369.7 -- 110.0 (H) 479.7
DEFERRED INCOME TAXES 124.1 -- 14.1 (I) 138.2
OTHER LIABILTIES 29.5 4.4 -- 33.9
------ ------ ------ ------
Total liabilities 647.9 118.5 64.3 830.7
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - par value $.01 per share -
authorized 1,000 shares, none issued or
outstanding -- -- --
Common stock - par value $.01 per share -
authorized 2,000 shares, issued and
outstanding 100 shares 0.1 -- 0.1
Additional paid-in capital 137.0 66.1 13.9 217.0
Accumulated deficit (71.2) -- (71.2)
Accumulated other comprehensive income (7.4) -- (7.4)
------ ------ ------ ------
Total stockholders' equity 58.5 66.1 13.9 138.5
------ ------ ------ ------
Total liabilities and stockholders' equity $706.4 $184.6 $ 78.2 $969.2
====== ====== ====== ======
</TABLE>
See notes to the unaudited pro forma condensed combined financial statements.
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<PAGE>
(b2) PRO FORMA FINANCIAL INFORMATION
FORMICA CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 2000
(dollars in millions)
<TABLE>
Historical Forward Looking
------------------- Proforma Reference Proforma -------------------
Formica PSM (1) Total Adjustments Note 3 Combined Adjustments Total
------- ------- ----- ----------- --------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $141.1 $ 53.1 $194.2 $194.2 $194.2
Cost of Products Sold 101.5 41.3 142.8 $ 0.9 (J) 143.7 143.7
Inventory Markdown from Restructuring 1.9 1.9 1.9 1.9
------- ------- ------ ------- ------ ------
Gross Profit 37.7 11.8 49.5 (0.9) 48.6 48.6
Selling, General and Administrative
Expenses 39.7 11.5 51.2 0.2 (K) 51.4 $ 0.3 51.7
Provision for Restructuring 4.1 4.1 4.1 4.1
Cost of Terminated Acquisition 0.4 0.4 0.4 0.4
------- ------- ------ ------- ------ ------- ------
Operating (loss) income (6.5) 0.3 (6.2) (1.1) (7.3) (0.3) (7.6)
(0.3) (L)
(2.8) (M)
Interest Expense (10.0) (10.0) (0.2) (N) (13.3) (13.3)
Other Income 0.6 0.6 0.6 0.6
------- ------- ------ ------- ------ ------- ------
Loss Before Provision for Income Taxes (15.9) 0.3 (15.6) (4.4) (20.0) (0.3) (20.3)
Income Tax (Provision) Benefit 1.7 (O)
(0.9) -- (0.9) (0.1) (P) 0.7 0.1 0.8
------- ------- ------ ------- ------ ------ ------
Net Loss $(16.8) $ 0.3 $(16.5) $ (2.8) $(19.3) $ (0.2) $(19.5)
======= ======= ====== ======= ====== ====== ======
</TABLE>
See notes to the unaudited pro forma condensed combined financial statements.
4
<PAGE>
(b3) PRO FORMA FINANCIAL INFORMATION
FORMICA CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(dollars in millions)
<TABLE>
Historical Forward Looking
------------------- Proforma Reference Proforma -------------------
Formica PSM (1) Total Adjustments Note 3 Combined Adjustments Total
------- ------- ----- ----------- --------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $585.2 $233.9 $819.1 $819.1 $819.1
Cost of Products Sold 418.8 177.9 596.7 $ 3.6 (J) 600.3 600.3
------ ------ ------ ------ ------ ------ ------
Gross Profit 166.4 56.0 222.4 (3.6) 218.8 218.8
Selling, General and Administrative
Expenses 148.0 43.5 191.5 0.9 (K) 192.4 $ 1.0 193.4
Cost of Terminated Acquisition 0.8 0.8 0.8 0.8
Cost to Terminate Supply Contract 26.2 26.2 26.2 26.2
------ ------ ------ ------ ------ ------ ------
Operating (loss) income (8.6) 12.5 3.9 (4.5) (0.6) (1.0) (1.6)
(1.2) (L)
(11.3) (M)
Interest Expense (37.4) (37.4) (0.7) (N) (50.6) (50.6)
Other Income 2.5 2.5 2.5 2.5
------ ------ ------ ------ ------ ------ ------
Loss Before Provision for Income Taxes (43.5) 12.5 (31.0) (17.7) (48.7) (1.0) (49.7)
Income Tax Benefit (Provision) 6.7 (O)
11.4 11.4 (5.1) (P) 13.0 0.4 13.4
------ ------ ------ ------ ------ ------ ------
Net Loss $(32.1) $ 12.5 $(19.6) $(16.1) $(35.7) $ (0.6) $(36.3)
====== ====== ====== ====== ====== ====== ======
</TABLE>
See notes to the unaudited pro forma condensed combined financial statements.
5
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 - Acquisition of Perstorp Surface Materials AB
The unaudited pro forma condensed combined financial statements give
effect to the acquisition of the Perstorp Surface Materials ("PSM") business
of Perstorp AB, a Swedish corporation, by Formica, applying the purchase
method of accounting. The transaction is structured as an acquisition of all
the issued shares of PSM by DSH. DSH, an investment company formed by DLJ
Merchant Banking Partners ("DLJ") and CVC Capital Partners Limited ("CVC"),
was an indirect wholly-owned subsidiary of FM Holdings, Inc. ("Holdings"), the
parent of Formica corporation. DLJ and CVC are equity investors in Formica
Corporation.
The Perstorp Surface Materials financials were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in filings pursuant to the Securities Act of 1933 and
Securities Exchange Act of 1934 by Formica Corporation and are not intended to
be a complete presentation of the PSM financial statements in accordance with
generally accepted accounting principles, as described in Note 1 of the
audited financial statements of Perstorp Surface Materials AB, which are
included herein as Exhibit 2.1.
Based upon a preliminary valuation of tangible and intangible assets,
Formica has allocated the total cost of the acquisition of PSM as follows (in
millions):
Acquisition Consideration $175.5
Estimated Fees and Expenses 2.0
------
Total Consideration $177.5
======
Payment of Debt $ 76.1
Net Tangible Assets 85.7
Goodwill and Other Intangible Assets 15.7
------
$177.5
======
As a result of the acquisition, Formica is currently reviewing all
operations within PSM. The Company anticipates recording a charge of
approximately $2.2 million in the second quarter to reflect the estimated
impact following this review primarily related to doubtful accounts and
inventory write-offs.
Note 2 - Pro Forma adjustments -- Perstorp Surface Materials AB
The unaudited pro forma condensed combined balance sheets include the
adjustments necessary to give effect to the acquisition as if it had occurred
on March 31, 2000 and to reflect the allocation of the acquisition cost to the
fair value of tangible and intangible assets acquired and liabilities assumed.
Adjustments included in the pro forma condensed combined balance sheet are
summarized as follows:
(A) Represents the net cash proceeds from the acquisition financing after
payment of the purchase consideration and related costs.
(B) Primarily represents the write-off of an uncollectible accounts receivable
resulting from the Company's decision to discontinue financing shipments
to a customer.
(C) Allocation of excess estimated fair value of property, plant and equipment
over historical book value.
(D) Allocation of excess purchase price to goodwill.
(E) Represents the capitalization of deferred financing and transaction costs
related to the acquisition financing.
(F) Represents repayment of intercompany indebtedness of $64.0 million and
external indebtedness of $12.1 million.
(G) Represents accrual of estimated transaction and restructuring costs
related to the purchase.
6
<PAGE>
(H) Acquisition financing consisting of term loans maturing April 30, 2006 at
a rate of 10.25% (LIBOR plus 3.5%).
(I) Recognition of additional deferred tax liability for the difference
between the financial reporting and tax bases of purchased tangible and
intangible assets (other than goodwill).
Adjustments included in the unaudited pro forma consolidated statements of
operations for the year ended December 31, 1999 and the three months ended
March 31, 2000 are summarized as follows:
(J) Represents additional depreciation related to property, plant and
equipment, which is depreciated over 15 years.
(K) Represents amortization of goodwill which is amortized over a period of 15
years.
(L) Represents amortization of deferred financing costs related to the term
loans which are amortized over 6 years.
(M) Represents the net increase in interest expense attributable to the $140.0
million of term loans, less $30 million of repaid revolving loans, at a
rate of 10.25% issued in connection with the acquisition.
(N) Represents the net increase in interest expense attributable to the
existing facilities based on average balances outstanding during the
respective periods resulting from an increase in the current interest
rate.
(O) Represents income tax benefit related to pro forma adjustments I, K, L and
M at an estimated effective tax rate of 40%.
(P) Represents income tax provision (benefit) related to PSM's net income
(loss) using an effective tax rate of 40%.
Note 3 - Forward Looking Adjustments
The historical financial statements of PSM are not intended to be a
complete presentation in accordance with generally accepted accounting
principles. Interest expense and the provision for income taxes are excluded
from the historical presentation and corporate charges for information
technology, corporate management, engineering and other such costs that were
incurred on a company-wide basis and benefited multiple divisions in Perstorp
AB (the former ultimate parent of PSM) were not allocated, as any allocation
of such costs would be arbitrary and misleading.
The pro forma adjustments include management's estimate of interest
expense associated with the acquisition financing and a provision for income
taxes based on the estimated effective tax rate of PSM.
Management of Formica has not yet completed a comprehensive review of the
additional general and administrative costs which will be incurred to replace
the activities performed by Perstorp AB, however, included in the column
labeled "Forward Looking Adjustments" are management's best estimate of the
additional costs which would have been incurred had the merger taken place as
of January 1, 1999. The Forward Looking Adjustments primarily reflect
increased corporate staffing costs and other expense levels and outside
services estimated at $1 million annually and the related estimated tax
benefit of $0.4 million. The Forward Looking Adjustments do not reflect the
costs of rationalization activities that management of Formica plans to
undertake, nor do the Forward Looking Adjustments include synergies or
anticipated cost savings which management expects to result from the planned
rationalization activities.
7
<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, thereunto duly authorized.
Formica Corporation
Dated: August 1, 2000 By: /s/ David T. Schneider
-------------------------
David T. Schneider
Vice President and Chief
Financial Officer
8
<PAGE>
Item 7(c) EXHIBITS
Exhibit
Number Exhibit Description
------- -------------------
2.1 Audited Financial Statements of Perstorp Surface Materials for the
Year Ended December 31, 1999
2.2 Second Amended and Restated Credit Agreement dated May 26, 2000
between the Company and Various Financial Institutions, DLJ Capital
Funding, Inc., Bankers Trust Company and Credit Suisse First Boston.
