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) December 23, 1998
-------------------------------
Lund International Holdings, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-16319 41-1568618
- --------------------------------------------------------------------------------
(State of Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
911 Lund Boulevard, Anoka, Minnesota 55303
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including are code 612.576.4200
------------------------------
- --------------------------------------------------------------------------------
(Former Name or Address, if Changed Since Last Report)
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, pro forma financial information and exhibits, if any, or other
portions of its Report on Form 8-K filed on January 6, 1999.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Financial statements required to be filed pursuant to Item 7 of
Report on Form 8-K filed on January 6, 1999.
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 637,772
Accounts receivable, less allowance for doubtful
accounts of $550,000 12,780,383
Inventories 3,545,030
Prepaid expenses and other current assets 658,940
Deferred income taxes 1,009,691
-----------
Total current assets 18,631,816
Property and equipment, net 5,601,244
Goodwill, net 10,387,777
Deferred financing costs, net 441,345
Miscellaneous 87,396
-----------
$35,149,578
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 4,450,000
Accounts payable 1,846,775
Accrued expenses:
Payroll and related expenses 1,251,126
Other 2,680,517
Current portion of long-term debt 2,437,500
-----------
Total current liabilities 12,665,918
Long-term debt, less current portion 10,875,000
Notes payable 6,500,000
Deferred income taxes 666,170
-----------
Total liabilities 30,707,088
Commitments
Preferred stock 555,893
Additional paid-in capital 2,149,978
Net common stockholders' equity:
Class A common stock 54,000
Class B common stock 45,000
Retained earnings 1,637,619
-----------
Net common stockholders' equity: 1,736,619
-----------
$35,149,578
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended September 30,
1998 1997
------------------------------
Net sales $ 41,816,653 $ 37,454,864
Cost of goods sold 24,115,247 21,048,771
------------------------------
Gross profit 17,701,406 16,406,093
Costs and expenses:
General and administrative expenses 3,410,543 3,578,574
Selling expenses 3,533,016 3,299,240
Shipping expenses 3,200,286 3,392,759
Amortization of intangibles 794,367 794,367
Other 366,763 252,250
------------------------------
Total costs and expenses 11,304,975 11,317,190
------------------------------
Operating income 6,396,431 5,088,903
Other expenses:
Interest expense 1,897,810 2,016,805
------------------------------
Income before income taxes 4,498,621 3,072,098
Income taxes 1,142,492 732,145
------------------------------
Net income $ 3,356,129 $ 2,339,953
==============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
-------------------------------
<S> <C> <C>
Operating activities:
Net income $ 3,356,129 $ 2,339,953
Adjustments to reconcile net income to cash used
in operating activities:
Depreciation and amortization 1,904,102 1,766,262
Loss on sale of assets 278,026 46,209
Changes in operating assets and liabilities:
Trade accounts receivable 166,891 (3,892,559)
Inventories (355,248) (450,687)
Prepaid expenses and other assets (1,020,139) (420,699)
Trade accounts payable 1,092,770 95,749
Accrued expenses 1,303,644 (1,955,358)
-----------------------------
Cash provided (used in) operating activities 6,726,175 (2,471,130)
Investing activities:
Net additions to property and equipment (1,396,453) (1,499,906)
Proceeds from sale of assets 1,000 --
-----------------------------
Cash used in investing activities (1,395,453) (1,499,906)
Financing activities:
Principal payments on long-term debt (1,687,500) (500,000)
Revolving line of credit, net (3,200,000) 4,050,000
-----------------------------
Cash (used) provided by financing activities (4,887,500) 3,550,000
-----------------------------
Net increase (decrease) in cash and cash equivalents 443,222 (421,036)
Cash and cash equivalents at beginning of year 194,550 614,422
-----------------------------
Cash and cash equivalents at end of year $ 637,772 $ 193,386
=============================
Supplemental disclosures:
Interest paid $ 1,714,672 $ 1,815,697
=============================
Income taxes paid (net of refunds) $ 722,326 $ 389,216
=============================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Ventshade
Holdings, Inc. and its wholly-owned subsidiary, Auto Ventshade Company
(collectively the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information. In the opinion
of management, all adjustments (which were of a normal recurring nature)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. For further information, refer to the audited consolidated financial
statements and footnotes thereto that are included in this Form 8 K/A.
NOTE 2 INVENTORIES
Inventories consist of the following at September 30, 1998:
September 30,
1998
------------
(unaudited)
Raw materials $1,166,891
Work in process 535,141
Finished goods 1,842,998
------------
$3,545,030
============
NOTE 3 COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Changes in stockholders' equity (deficit) during the nine months ended September
30, 1998 were as follows:
Common stockholders' deficit at December 31, 1997 $(1,501,117)
Preferred stock dividend (118,393)
Net income 3,356,129
-----------
Common stockholders' equity balance at
September 30, 1998 $ 1,736,619
===========
<PAGE>
NOTE 4 SUBSEQUENT EVENTS
On December 23, 1998, the Company was acquired by Lund International Holdings,
Inc. for total consideration of approximately $66.9 million. The acquisition has
been accounted for under the purchase method of accounting.
<PAGE>
Consolidated Financial Statements
Ventshade Holdings, Inc.
and Subsidiary
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1997, 1996 and 1995
CONTENTS
Report of Independent Auditors................................................1
Consolidated Financial Statements
Consolidated Balance Sheets...................................................2
Consolidated Statements of Operations.........................................4
Consolidated Statements of Net Common Stockholders' Deficit...................5
Consolidated Statements of Cash Flows.........................................6
Notes to Consolidated Financial Statements....................................7
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Ventshade Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Ventshade
Holdings, Inc. and Subsidiary as of December 31, 1997 and 1996 and the related
consolidated statements of operations, net common stockholders' deficit and cash
flows for each of the three years in the period ended December 31, 1997. 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial position of
Ventshade Holdings, Inc. and Subsidiary at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 19, 1998
1
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 194,550 $ 614,422
Accounts receivable, less allowance for doubtful
accounts of $550,000 and $445,000 at
December 31, 1997 and 1996, respectively 12,812,049 9,308,260
Inventories 3,189,782 3,288,558
Prepaid expenses 160,791 55,584
Income tax receivable 478,700 175,000
----------------------------
Total current assets 16,835,872 13,441,824
Property and equipment, net of accumulated
depreciation and amortization 5,593,552 4,535,655
Other:
Goodwill, net of accumulated amortization of
$2,836,644 and $1,913,286 at
December 31, 1997 and 1996, respectively 11,080,295 12,003,653
Deferred financing costs, net of accumulated
amortization of $414,468 and $278,669 at
December 31, 1997 and 1996, respectively 543,194 678,993
Miscellaneous 97,036 457,435
----------------------------
11,720,525 13,140,081
----------------------------
$ 34,149,949 $ 31,117,560
============================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------
<S> <C> <C>
LIABILITIES AND NET COMMON STOCKHOLDERS'
DEFICIT
Current liabilities:
Revolving line of credit $ 7,650,000 $ 2,950,000
Accounts payable 754,643 1,452,981
Accrued expenses:
Payroll and related expenses 799,538 776,806
Accrued market development costs 86,000 2,386,000
Accrued returns 975,000 400,000
Other 1,298,406 1,216,711
Current portion of long-term debt 2,250,000 1,000,000
-----------------------------
Total current liabilities 13,813,587 10,182,498
Long-term debt, less current portion 12,750,000 15,000,000
Notes payable due to related party 6,500,000 6,500,000
Commitments
Redeemable nonvoting cumulative preferred
stock, $.01 par value ($1,000 liquidation value);
10,000 shares authorized; 2,150 shares issued
and outstanding 437,501 287,723
Redeemable special voting preferred stock, $.01
par value ($1,000 liquidation value); 1 share
authorized issued and outstanding -- --
Additional paid-in capital 2,149,978 2,149,978
Net common stockholders' deficit:
Class A voting common stock, $1.00 par value;
200,000 shares authorized; 54,000 shares and
55,000 shares issued and outstanding at
December 31, 1997 and 1996, respectively 54,000 55,000
Class B nonvoting common stock, $1.00 par
value; 200,000 shares authorized; 45,000
shares issued and outstanding at
December 31, 1997 and 1996 45,000 45,000
Deficit (1,600,117) (3,102,639)
-----------------------------
Net common stockholders' deficit (1,501,117) (3,002,639)
-----------------------------
$ 34,149,949 $ 31,117,560
=============================
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Net sales $ 48,686,086 $ 40,300,252 $ 28,255,759
Cost of goods sold 28,594,515 22,461,034 15,950,962
--------------------------------------------
Gross profit 20,091,571 17,839,218 12,304,797
General and administrative expenses 4,187,460 3,861,525 3,700,996
Selling expenses 4,551,432 4,518,296 3,174,940
Shipping expenses 4,468,331 2,952,968 1,973,665
Amortization of intangibles 1,059,157 1,032,925 1,044,111
Market development costs 784,943 4,261,155 --
Other 608,578 502,515 250,000
--------------------------------------------
Operating income 4,431,670 709,834 2,161,085
--------------------------------------------
Other expenses:
Interest expense 2,750,512 2,449,410 2,639,845
--------------------------------------------
Income (loss) before income taxes 1,681,158 (1,739,576) (478,760)
Income taxes 28,858 64,142 --
--------------------------------------------
Net income (loss) $ 1,652,300 $ (1,803,718) $ (478,760)
============================================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF NET COMMON STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------
CLASS A CLASS B
--------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995
Conversion of Class B
common stock to Class A 10,000 $10,000 90,000 $90,000 $(546,435) $(446,435)
common stock 45,000 45,000 (45,000) (45,000) -- --
Net loss -- -- -- -- (478,760) (478,760)
Accrued dividends on redeemable
preferred stock -- -- -- -- (132,788) (132,788)
--------------------------------------------------------------------------------------
Balance at December 31, 1995 55,000 55,000 45,000 45,000 (1,157,983) (1,057,983)
Net loss -- -- -- -- (1,803,718) (1,803,718)
Accrued dividends on redeemable
preferred stock -- -- -- -- (140,938) (140,938)
--------------------------------------------------------------------------------------
Balance at December 31, 1996 55,000 55,000 45,000 45,000 (3,102,639) (3,002,639)
Net income -- -- -- -- 1,652,300 1,652,300
Redemption of Class A
common stock (1,000) (1,000) -- -- -- (1,000)
Accrued dividends on redeemable
preferred stock -- -- -- -- (149,778) (149,778)
--------------------------------------------------------------------------------------
Balance at December 31, 1997 54,000 $ 54,000 45,000 $ 45,000 $(1,600,117) $(1,501,117)
======================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,652,300 $ (1,803,718) $ (478,760)
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Depreciation and amortization 2,423,365 2,117,083 2,175,408
Loss on sale of assets 51,785 -- --
Changes in operating assets and liabilities:
Trade accounts receivable (3,503,789) (3,636,955) (1,378,152)
Inventories 98,776 (988,952) 810,105
Income tax receivable (303,700) (175,000) --
Prepaid expenses and other assets (116,993) (179,160) (118,720)
Trade accounts payable (698,338) 735,670 439,547
Accrued expenses (1,620,573) 3,707,723 279,774
----------------------------------------------
Cash provided by (used in) operating activities (2,017,167) (223,309) 1,729,202
INVESTING ACTIVITIES
Net additions to property and equipment (2,105,705) (833,387) (607,289)
Proceeds from sale of assets 4,000 -- --
----------------------------------------------
Cash used in investing activities (2,101,705) (833,387) (607,289)
FINANCING ACTIVITIES
Principal payments on long-term debt (1,000,000) (1,500,000) (1,000,000)
Revolving line of credit net borrowings 4,700,000 2,050,000 (100,000)
Redemption of stock (1,000) -- --
Deferred financing costs -- -- (59,291)
----------------------------------------------
Cash provided by (used in) financing activities 3,699,000 550,000 (1,159,291)
----------------------------------------------
Net decrease in cash and cash equivalents (419,872) (506,696) (37,378)
Cash and cash equivalents at beginning of year 614,422 1,121,118 1,158,496
----------------------------------------------
Cash and cash equivalents at end of year $ 194,550 $ 614,422 $ 1,121,118
==============================================
Supplemental disclosures:
Interest paid $ 2,725,000 $ 2,432,000 $ 2,625,000
===============================================
Income taxes paid (net of refunds) $ 363,000 $ 239,000 $ 0
===============================================
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. NATURE OF BUSINESS
Ventshade Holdings, Inc. and its wholly-owned subsidiary, Auto Ventshade Company
(collectively the "Company") were incorporated on November 2, 1994 in the State
of Delaware. The Company manufactures and sells various consumer products in the
automobile and light truck accessory markets to automobile manufacturers and
local, national and international distributors and retailers. Trade receivables
are unsecured, and the Company is at risk to the extent such amounts become
uncollectible.
The Company was formed to acquire the net operating assets of the Auto Ventshade
division of Liberty Specialties, Inc. The net operating assets were acquired on
November 21, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Auto Ventshade Company. All significant
intercompany balances and transactions have been eliminated in consolidation.
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable and notes payable approximate
their estimated fair market values.
USE OF ESTIMATES
The preparation of the consolidated financial statements requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost, as determined by the first-in,
first-out (FIFO) method, or market. Inventories consist of raw materials,
work-in process and finished goods. Raw materials consist primarily of packaging
materials, plastics and stainless steel.
7
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is calculated
over the estimated useful lives of the various assets, ranging from two to ten
years, on the straight-line method for financial reporting purposes. Leasehold
improvements are amortized over the assets' useful lives or the life of the
lease, whichever is shorter. Accelerated methods are utilized for income tax
reporting purposes.
The Company's policy is to expense costs associated with the internal
development of light duty molds, dies and patterns in the period in which such
costs are incurred. Costs associated with the internal development of heavy duty
molds are capitalized and depreciated over their estimated useful lives ranging
from 3 to 5 years.
GOODWILL
Goodwill is amortized using the straight-line method over 15 years.
Management continuously monitors and evaluates the realizability of goodwill
acquired to determine whether its carrying value has been impaired. The Company
believes that the carrying value of goodwill is not impaired.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the 7-year life of the original term
loan (see Note 5).
8
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Sales are recorded, net of any related credits for customer cooperative
advertising, when the product is shipped to the customer. The Company's product
return policy limits customer returns in any given year to a defined percentage
of a customer's prior year net sales. Returns are accepted throughout the year
and in years subsequent to the product sale.
MARKET DEVELOPMENT COSTS
During 1997, 1996 and 1995, the Company incurred approximately $785,000, $4.3
million and $0, respectively, in market development costs associated with
expanding the Company's product lines and distribution channels. Such costs
included the agreement to pay non-refundable accommodation fees, retainer fees
and credits to accept returns of competitors' merchandise. These costs were
incurred in anticipation of future business and were expensed as incurred.
ADVERTISING COSTS
All costs of advertising are expensed by the Company in the period the costs are
incurred. Advertising expense approximated $1.9 million, $1.8 million and 1.3
million for the years ended December 31, 1997, 1996 and 1995, respectively.
STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
RECLASSIFICATION
Certain reclassifications were made to the prior years' financial statements to
conform with current year presentation.
9
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories consist of the following at December 31, 1997 and 1996:
1997 1996
-------------------------
Raw materials $1,196,801 $1,275,590
Work in process 438,213 710,166
Finished goods 1,554,768 1,302,802
-------------------------
$3,189,782 $3,288,558
=========================
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1997 and 1996:
1997 1996
-------------------------
Molds, dies and patterns $3,215,243 $3,075,006
Machinery and equipment 4,802,673 2,912,415
Furniture, fixtures, computer equipment
and data processing equipment 616,762 458,512
Leasehold improvements 292,524 232,961
Transportation equipment 219,759 128,281
-------------------------
9,146,961 6,807,175
Less accumulated depreciation and
amortization 3,553,409 2,271,520
-------------------------
$5,593,552 $4,535,655
=========================
10
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT, NOTES PAYABLE AND REVOLVING LINE OF CREDIT
Long-term debt and notes payable consist of the following at December 31, 1997
and 1996:
1997 1996
--------------------------
Term loan ("Term Loan") payable to the bank in
principal payments ranging from $250,000 to
$1,000,000 per quarter beginning
March 31, 1995 through September 30, 2001
and a balloon payment of $4,250,000 due
November 21, 2001. Interest accrues at the
prime rate plus 1.25% or the LIBOR rate plus
2.5%. The rate is chosen at the Company's
option and was 9.5% at December 31, 1997 $15,000,000 $16,000,000
13.125% Senior Subordinated Notes, interest is
payable semi-annually, with annual principal
payments of $1,625,000 on October 31, 2002
and October 31, 2003 and a payment of
$3,250,000 on October 31, 2004 6,500,000 6,500,000
--------------------------
Total long-term debt and notes payable 21,500,000 22,500,000
Less current portion 2,250,000 1,000,000
--------------------------
$19,250,000 $21,500,000
==========================
Aggregate annual maturities of long-term debt and notes payable at December 31,
1997 are as follows:
1998 $ 2,250,000
1999 2,500,000
2000 3,000,000
2001 7,250,000
2002 1,625,000
Thereafter 4,875,000
-----------
$21,500,000
===========
11
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT, NOTES PAYABLE AND REVOLVING LINE OF CREDIT (CONTINUED)
Effective April 18, 1997 the Term Loan was amended to defer $1 million in
principal payments until November 21, 2001. Such amounts were formerly scheduled
to be paid during 1997. Accordingly these amounts are classified as long-term
debt in the accompanying consolidated financial statements.
The Term Loan is collateralized by all of the Company's assets. The Company is
required to prepay principal under the Term Loan if certain cash flow
requirements are exceeded. No such cash flow requirements were exceeded for the
years ended December 31, 1997 and 1996.
Under the Senior Subordinated Note agreement, payments to the noteholder are
subject to certain limitations until the Credit Line and Term Loan have been
repaid. The holder of the Senior Subordinated Note (the "Holder") owned 45,000
shares of the Company's Class B nonvoting common stock and 2,000 shares of the
nonvoting preferred stock at December 31, 1994. In accordance with the Company's
Amended and Restated Certificate of Incorporation, the Holder converted the
45,000 shares of the Company's Class B nonvoting common stock to an equal number
of shares of the Company's Class A voting common stock as permitted upon the
occurrence of a Permitted Control Event, as defined. The Holder continues to own
45,000 shares of the Company's Class A voting common stock and 2,000 shares of
the nonvoting preferred stock at December 31, 1997. The noteholder has a
secondary security interest in stock owned by Ventshade Holdings, Inc.
During 1996 the Company had a revolving line of credit ("Credit Line") with a
bank that allowed for borrowings not to exceed $6.5 million. Effective April 18,
1997 availability under the Credit Line increased from $6.5 million to $9.5
million. Borrowings under this Credit Line bear interest at the Prime rate plus
1.25% or LIBOR rate plus 2.5%, at the Company's option. The interest rate on
borrowings under the Credit Line at December 31, 1997 was 9.5%. The Company must
pay a quarterly fee of 0.5% on any unused portion of the Credit Line. Interest
on advances is payable monthly or quarterly at the Company's option. The total
advances under the Credit Line are limited to certain percentages of accounts
receivable and inventories. At December 31, 1997 an aggregate amount of
approximately $1.9 million was considered available, as defined. All outstanding
borrowings are due upon maturity of the Credit Line on November 21, 2001. The
Credit Line is collateralized by all of the Company's assets.
12
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT, NOTES PAYABLE AND REVOLVING LINE OF CREDIT (CONTINUED)
The Term Loan and Credit Line contain numerous restrictive covenants, including,
but not limited to, maintenance of certain financial ratios. The Company was in
compliance with the terms and restrictions of such covenants at December 31,
1997 and 1996.
6. INCOME TAXES
Deferred income taxes reflect the net effect of temporary differences between
the carrying amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.
The Company has approximately $1.3 million of net operating losses available to
offset against future taxable income, subject to certain limitations. Such
losses expire in 2010 through 2012.
Income taxes for the years ended December 31, 1997 and 1996 primarily relate to
federal alternative minimum taxes.
The tax effects of the types of temporary differences which give rise to
deferred income tax assets (liabilities) are as follows at December 31, 1997 and
1996:
1997 1996
--------------------------
Net operating loss carryforwards $ 502,000 $ 298,000
Reserves not currently deductible 518,000 1,193,000
Other 464,000 263,000
--------------------------
Gross deferred income tax assets 1,484,000 1,754,000
Valuation allowance (416,000) (995,000)
--------------------------
Net deferred income tax assets 1,068,000 759,000
Accelerated depreciation and amortization (1,068,000) (759,000)
--------------------------
Net deferred income tax asset $ -- $ --
==========================
A reconciliation of the provision for income taxes to the Federal statutory rate
of 34% is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Tax expense (benefit) at statutory rate $ 572,000 $(591,000) $(163,000)
State taxes, net of Federal tax expense (benefit) 74,000 (70,000) (19,000)
Other items (38,000) 97,000 16,000
Valuation allowance (579,000) 628,000 166,000
--------- --------- ---------
29,000 64,000 --
========= ========= =========
</TABLE>
13
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS
LEASE COMMITMENTS
The Company leases its office and production facility under noncancelable
operating lease agreements. Total future minimum rental commitments under these
agreements at December 31, 1997 are as follows:
1998 $ 521,333
1999 472,500
2000 78,750
----------
$1,072,583
==========
Rent expense approximated $576,000, $471,000 and $423,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
EMPLOYMENT AND NONCOMPETE AGREEMENT
Certain key executives had employment contracts including annual bonuses equal
to a defined percentage of the adjusted operating profit, as defined, which
expired in 1997. The contracts entitled each executive to receive an annual
salary and bonus throughout the contract period. Such contracts have not been
renewed to date. Additionally, one executive had a noncompete agreement under
which the Company would pay him $100,000 annually for five years following
termination, as defined.
14
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTION
The Company entered into a management consulting agreement with an affiliate to
render consulting services in connection with its financial and business
affairs. The management fees are $250,000 annually. During each of the years
ended December 31, 1997, 1996 and 1995, $250,000 is included in other expenses
in the consolidated statements of operations related to this agreement.
9. PREFERRED STOCK
The Company is authorized to issue 10,000 shares of $.01 par value nonvoting
cumulative preferred stock and one share of $.01 par value special voting
preferred stock. At inception, the Company issued 2,150 shares of nonvoting
cumulative preferred stock and one share of special voting preferred stock for
cash. The nonvoting cumulative preferred stock is entitled to a 6% annual
dividend. At December 31, 1997 and 1996, unpaid dividends approximated $438,000
and $288,000, respectively. On October 31, 2005, subject to certain provisions
as set forth in the Amended and Restated Certificate of Incorporation, the
Company shall purchase and redeem, at the redemption price as defined ($1,000
per share plus any accrued and unpaid dividends on the nonvoting cumulative
preferred stock), all of the outstanding shares of the nonvoting cumulative
preferred stock and the special voting preferred stock.
10. EMPLOYEE BENEFIT PLAN
The Company administers a benefit plan under Internal Revenue Code Section
401(k) which covers substantially all employees of the Company. The plan
provides for the Company to contribute $0.50 for each $1.00 contributed by the
employee up to 4% of the employee's salary. During the years ended December 31,
1997, 1996 and 1995, the Company contributed approximately $48,000, $51,000 and
$15,000, respectively.
11. MAJOR CUSTOMERS AND SUPPLIERS
The Company derived approximately 20% and 10% of sales in 1997 and 1996,
respectively, from one customer and 9% and 11% of sales in 1997 and 1996,
respectively, from another customer. Although not expected, loss of these
customers could significantly impact the Company's operations.
15
<PAGE>
VENTSHADE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. MAJOR CUSTOMERS AND SUPPLIERS (CONTINUED)
The Company purchases the majority of its plastic and packaging raw materials
from two suppliers. As these raw materials are readily available from other
suppliers, the Company believes loss of these vendors would not significantly
impact the Company's operations.
12. YEAR 2000 (UNAUDITED)
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. As a result, those
computer programs may have time-sensitive software that recognize a date using
"00" as the year 1900 rather than the year 2000. The Company has initiated an
assessment of the year 2000 issue by reviewing each item of computer software
and hardware utilized for year 2000 compliance. There can be no guarantee that
the systems of other companies on which the Company's systems rely will be
converted timely and would not have an adverse effect on the Company's systems.
The Company believes that the year 2000 issue will not pose significant
operational problems for its computer systems.
16
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information required to be filed pursuant to
Item 7 of Report on Form 8-K filed on January 6, 1999.
<PAGE>
On December 23, 1998, a wholly-owned subsidiary of Lund International Holdings,
Inc. (the "Company"), New Holdings, Inc., a Delaware corporation, acquired all
of the issued and outstanding capital stock of Ventshade Holdings, Inc.
("Ventshade") for an aggregate purchase price of $66,875,000 excluding direct
transaction costs and final adjustments. The funds for the purchase of the
outstanding capital stock were obtained from (i) an equity investment in the
Company of $25 million from an affiliate of Harvest Partners, Inc., entities of
Massachusetts Mutual Life Insurance Company, Liberty Mutual Insurance Company,
and BancBoston Capital, Inc., (ii) a loan to the Company of $25 million from
Heller Financial, Inc., (iii) a loan to the Company of $20 million from an
affiliate of Massachusetts Mutual Life Insurance Company and National City
Venture Corporation, and (iv) seller financing of $875,000 included for tax
credits which were due to the Company as a result of the acquisition. Complete
details of the funding arrangements for this transaction can be found in Form
8-K that was filed on January 6, 1999.
Ventshade Holdings, Inc. is a holding company with one subsidiary, Auto
Ventshade Company ("AVS"). AVS headquartered in Lawrenceville, Georgia, is a
manufacturer and supplier to the automotive aftermarket of shades, visors,
deflectors, and light covers used on pick-up trucks, sport utility vehicles,
minivans (collectively "light trucks"), and passenger cars. AVS is a supplier to
all major channels of distribution for automotive accessories, including
automotive retailers, mass merchandisers, leading three-step distributors, and
original equipment manufacturers. The Company intends to utilize management
expertise, assets, and distribution channels obtained in connection with the
acquisition for the continued production and distribution of accessories for
light trucks and passenger cars.
In a two-step transaction on December 30, 1997 and February 27, 1998, a
wholly-owned subsidiary of the Company acquired all the issued and outstanding
stock of Deflecta-Shield Corporation ("Deflecta-Shield") for per share
consideration of $16.00 or total consideration of $76.8 million excluding direct
transaction costs and final adjustments. Deflecta-Shield is a holding company
with subsidiaries involved in the manufacture and marketing of accessories for
light trucks and heavy trucks. Deflecta-Shield's principal product lines for
light trucks are bug deflectors, running boards, cab visors, taillight covers,
aluminum tool boxes, and suspension systems. For heavy trucks, Deflecta-Shield
is a supplier of winterfronts, bug screens, bug deflectors, rock guards, and
interior trim parts. For a complete synopsis of the Deflecta-Shield acquisition
by the Company, refer to Form 8-K/A filed on March 16, 1998.
The following pro forma condensed consolidated statements of operations for the
year ended June 30, 1997 and six months ended December 31, 1997 give effect to
the Deflecta-Shield and Ventshade acquisitions and the financing thereof as if
such transactions had occurred on July 1, 1996. The pro forma condensed
consolidated statements of operations for the nine months ended September 30,
1998 and the pro forma condensed balance sheet as of September 30, 1998 for the
Company includes Deflecta-Shield and thus the pro forma statement of operations
and balance sheet gives effect only to the acquisition and the financing of
Ventshade. The acquisitions were accounted for pursuant to the purchase method
of accounting.
<PAGE>
The pro forma financial data presented herein is based on management's estimate
of the effects of the acquisition and financing thereof. The pro forma financial
data is based upon current available information and certain assumptions that
the Company believes are reasonable. The registrant does not expect the receipt
of additional information to have a material adverse effect on the pro forma
financial data. The pro forma condensed consolidated balance sheet as of
September 30, 1998 and the statements of operations for the year ended June 30,
1997, six months ended December 31, 1997, and nine months ended September 30,
1998 are unaudited, but in the opinion of the Company include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the results of operations and financial position for the periods presented.
The pro forma condensed consolidated balance sheet as of September 30, 1998 and
the statements of operations for the year ended June 30, 1997, six months ended
December 31, 1997, and nine months ended September 30, 1998 are not necessarily
indicative of the results of operations or financial position that actually
would have been achieved had the transactions described been consummated as of
the dates indicated, or that may be achieved in the future.
<PAGE>
Lund International Holdings, Inc.
Unaudited Pro-Forma Condensed Consolidated Balance Sheet
September 30, 1998
($ in 000's)
<TABLE>
<CAPTION>
Lund International Ventshade Pro Forma Pro Forma
Historical (1) Historical (2) Adjustments Consolidated
-------------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $ 565 $ 638 $ -- $ 1,203
Restricted cash 24 -- 24
Accounts receivable, net 22,923 12,780 35,703
Inventories 17,635 3,545 671 (3) 21,851
Deferred income taxes 3,107 1,010 296 (4) 4,413
Other current assets 2,743 659 3,402
-------- ------- -------- --------
Total current assets 46,997 18,632 967 66,596
Property and equipment, net 21,054 5,601 2,018 (5) 28,673
Intangibles, net 67,004 10,389 44,221 (6) 121,614
Restricted cash and marketable securities 547 -- 547
Other assets 2,018 528 2,040 (7) 4,145
(441)(8)
-------- ------- -------- --------
$137,620 $35,150 $ 48,805 $221,575
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ -- $ 4,450 $ (4,450)(9) $ --
Accounts payable, trade 8,563 1,847 10,410
Accrued expenses 7,035 3,932 804 (10) 13,153
1,382 (11)
Long-term debt, current portion 55,227 2,437 800 (12) 56,027
(2,437)(9)
-------- ------- -------- --------
Total current liabilities 70,825 12,666 (3,901) 79,590
Long-term debt, less current portion 3,110 17,375 44,200 (12) 44,710
(17,375)(9)
(2,600)(13)
Deferred income taxes 2,360 666 5,509 (4) 8,535
Other liabilities 110 -- 110
-------- ------- -------- --------
Total liabilities 76,405 30,707 25,833 132,945
Stockholders' equity:
Preferred stock -- 556 2 (14) 2
(556)(15)
Class A common stock 526 54 105 (14) 631
(54)(15)
Class B common stock 15 45 (45)(15) 15
Additional paid-in capital 30,856 2,150 24,708 (14) 58,164
2,600 (13)
(2,150)(15)
Retained earnings 29,818 1,638 (1,638)(15) 29,818
-------- ------- -------- --------
Total stockholders' equity 61,215 4,443 22,972 88,630
-------- ------- -------- --------
$137,620 $35,150 $ 48,805 $221,575
======== ======= ======== ========
</TABLE>
<PAGE>
The following footnotes describe the adjustments to the historical financial
statements to arrive at the condensed pro forma consolidated balance sheet at
September 30, 1998. In preparing such adjustments, the assumed purchase price is
as follows ($ in 000's):
Acquisition of stock of Ventshade Holdings, Inc. $66,875
Direct transaction costs 1,758
Working capital adjustment 524
-------
$69,157
=======
The purchase price has been allocated to assets and liabilities as indicated in
the following summary opening balance sheet of Ventshade Holdings, Inc. ($ in
000's):
Current assets $19,599
Property and equipment, net 7,619
Identifiable Intangibles, net 12,201
Goodwill 42,409
Other assets 87
-------
Total assets 81,915
-------
Current liabilities $ 6,583
Deferred income taxes 6,175
-------
Total liabilities 12,758
-------
Net assets $69,157
=======
(1) The unaudited historical consolidated balance sheet of the Company as
of September 30, 1998 as reported and filed with the Securities and
Exchange Commission in the Company's Form 10-Q for the quarterly period
ending September 30, 1998.
(2) The unaudited historical balance sheet of Ventshade as of September 30,
1998. Reclassifications have been made to Ventshade's balance sheet in
order for consistent presentation with the Company.
(3) Represents fair market value adjustment to inventories.
(4) Represents deferred tax adjustments resulting from balance sheet
purchase accounting adjustments.
(5) Represents fair market value adjustments to molds and dies.
(6) Represents the increase in intangibles to reflect the goodwill of
approximately $42.4 million and fair market value adjustments to work
force in-place, customer lists, and non-compete agreement of $2.9
million, $8.8 million, and $501,275, respectively.
<PAGE>
(7) Represents financing costs that were incurred and deferred in
connection with the debt to finance the acquisition.
(8) Represents the write-off of deferred financing costs resulting from the
early repayment of Ventshade's debt.
(9) Represents Ventshade's debt repaid in connection with the acquisition.
(10) Represents an accrual for estimated market development costs and
non-compete payments related to the consolidation of the business of
the Company and Ventshade.
(11) Represents the accrual of the Company's unpaid deal fees and expenses.
(12) Represents the debt incurred to finance the acquisition.
(13) Represents the fair value of share warrants issued in connection with
subordinated debt incurred to finance the acquisition.
(14) Represents common and preferred stock issued in connection with a $25
million equity contribution to the Company. The equity contribution of
$25 million is reduced by costs of $185,000 incurred in connection with
the equity contribution.
(15) Represents the elimination of Ventshade's shareholders' equity.
<PAGE>
Lund International Holdings, Inc.
Unaudited Pro-Forma Condensed Consolidated Statement of Operations
For The Nine Months Ending September 30, 1998
($ in 000's, except earnings per share)
<TABLE>
<CAPTION>
Ventshade
Lund Ventshade Pro Forma Pro Forma
Historical(1) Historical(2) Adjustments Consolidated
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 86,424 $ 43,177 $ 129,601
Cost of goods sold 61,150 26,963 378 (3) 88,491
-------------------------------------------------- -------------
Gross profit 25,274 16,214 (378) 41,110
Operating expenses
General and administrative 8,416 3,244 11,660
Selling and marketing 10,275 5,083 15,358
Research and development 2,187 330 2,517
Amortization 1,758 794 1,244 (4) 3,796
-------------------------------------------------- -------------
Total operating expenses 22,636 9,451 1,244 33,331
-------------------------------------------------- -------------
Income from operations 2,638 6,763 (1,622) 7,779
Other income (expense)
Interest expense (4,118) (1,898) (2,012)(5) (8,028)
Interest income 104 -- 104
Other, net (3) (366) (369)
-------------------------------------------------- -------------
Other income (expense) (4,017) (2,264) (2,012) (8,293)
-------------------------------------------------- -------------
Income (loss )before income taxes (1,379) 4,499 (3,634) (514)
Income tax (benefit) expense (52) 1,486 (1,204)(6) 230
-------------------------------------------------- -------------
Net income (loss) $ (1,327) $ 3,013 $ (2,430) $ (744)
================================================== =============
Net loss per share $ (0.22) $ (0.10)
============= =============
Common weighted average
shares (basic) 6,150 1,047 (7) 7,197
============= ============= =============
</TABLE>
<PAGE>
(1) Represents the unaudited historical statement of operations of the Company
for the nine months ended September 30, 1998 as reported and filed with the
Securities and Exchange Commission in the Company's Form 10-Q for the
quarterly period ending September 30, 1998.
(2) Represents the unaudited historical statement of operations of Ventshade
for the nine months ended September 30, 1998. Reclassifications have been
made to this Ventshade statement of operations in order for there to be
consistent presentation with the Company.
(3) Represents increased depreciation of molds and dies (4 years).
(4) Represents increased amortization of goodwill (40 years), work force (5
years), non-compete (6 years), and customer list (10 years).
(5) Represents interest expense related to indebtedness incurred to complete
the acquisition and amortization of related deferred financing costs,
offset by interest expense on Ventshade's debt and related deferred
financing costs retired in connection with the acquisition. Pro forma
interest expense was calculated based on average debt outstanding using the
current interest rates on acquisition debt.
(6) Represents the tax effect of the pro forma purchase accounting adjustments
at the consolidated Company and Ventshade tax rate.
(7) Represents common shares issued in connection with the $25 million equity
investment.
<PAGE>
Lund International Holdings, Inc.
Unaudited Pro-Forma Condensed Consolidated Statement of Operations
For The Six Months Ending December 31, 1997
($ in 000's, except earnings per share)
<TABLE>
<CAPTION>
Deflecta-Shield Ventshade
Lund Deflecta-Shield Ventshade Pro Forma Pro Forma Pro Forma
Historical(1) Historical(2) Hisorical(3) Adjustments Adjustments Consolidated
------------- ------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 19,523 $ 36,464 $ 25,458 $ 81,445
Cost of goods sold 12,946 24,165 16,700 1,129 (4) 252 (11) 55,192
------------------------------------------------------------- ---------- -----------
Gross profit 6,577 12,299 8,758 (1,129) (252) 26,253
Operating expenses
General and administrative 2,066 3,639 2,094 (781)(5) 7,018
Selling and marketing 3,103 5,393 4,729 (1,129)(4) 12,096
Research and development 722 -- 240 781 (5) 1,743
Non-recurring transaction 1,174 1,099 -- 2,273
Amortization 80 221 529 973 (6) 830 (12) 2,633
------------------------------------------------------------- ---------- -----------
Total operating expenses 7,145 10,352 7,592 (156) 830 25,763
------------------------------------------------------------- ---------- -----------
(Loss) income from operations (568) 1,947 1,166 (973) (1,082) 490
Other income (expense)
Interest expense (159) (244) (1,430) (2,214)(7) (589)(13) (4,636)
Inerest income 306 -- -- (306)(8) 0
Other, net (63) -- (220) (283)
------------------------------------------------------------- ---------- -----------
Other income (expense) 84 (244) (1,650) (2,520) (589) (4,919)
------------------------------------------------------------- ---------- -----------
Income (loss) before income taxes (484) 1,703 (484) (3,493) (1,671) (4,429)
Income tax (benefit) expense (121) 740 (253) (2,088)(9) 282 (14) (1,440)
------------------------------------------------------------- ---------- -----------
Net (loss) income $ (363) $ 963 $ (231) $ (1,405) $ (1,953) $ (2,989)
============================================================= ========== ===========
Net (loss) income per share $ (0.08) $ (0.38)
========== ===========
Common weighted average
shares (basic) 4,386 2,368 (10) 1,047 (15) 7,801
========== ========== =========== ===========
</TABLE>
<PAGE>
(1) The historical statement of operations of the Company for the six months
ended December 31, 1997 as reported and filed with the Securities and
Exchange Commission in the Company's Form 10-K for the transitional period
from July 1, 1997 to December 31, 1997.
(2) The unaudited historical statement of operations of Deflecta-Shield
Corporation and its subsidiaries for the six months ended December 31,
1997.
(3) The unaudited historical statement of operations of Ventshade for the six
months ended December 31, 1997. Reclassifications have been made to this
Ventshade statement of operations in order for consistent presentation with
the Company.
(4) Reclassification of freight expense from selling and marketing expense to
cost of goods sold for consistent presentation with the Company.
(5) Reclassification of research and development expense from general and
administrative to a separate research and development category for
consistent presentation with the Company.
(6) Represents increased amortization of goodwill (40 years), customer lists
(10 years), and patents (6 years).
(7) Represents interest expense related to indebtedness incurred to complete
the acquisition and amortization of related deferred financing costs,
offset by interest expense on Deflecta-Shield debt and related deferred
financing costs retired in connection with the acquisition. Pro forma
interest expense was calculated based on average debt outstanding using the
interest rates on acquisition debt in effect on the date of acquisition.
(8) Elimination of interest income from marketable securities used to finance
the Deflecta-Shield acquisition.
(9) Represents the tax effect of the pro forma purchase accounting adjustments
at the consolidated tax rate for the Company and Deflecta-Shield.
(10) Represents common shares issued in connection with a $30 million equity
investment.
(11) Represents increased depreciation of molds and dies (4 years).
(12) Represents increased amortization of goodwill (40 years), work force (5
years), non-compete (6 years), and customer list (10 years).
<PAGE>
(13) Represents interest expense related to indebtedness incurred to complete
the acquisition and amortization of related deferred financing costs,
offset by interest expense on Ventshade's debt and related deferred
financing costs retired in connection with the acquisition. Pro forma
interest expense was calculated based on average debt outstanding using the
current interest rates on acquisition debt.
(14) Represents the tax effect of the pro forma purchase accounting adjustments
at the consolidated Company level.
(15) Represents common shares issued in connection with the $25 million equity
investment.
<PAGE>
Lund International Holdings, Inc.
Unaudited Pro-Forma Condensed Consolidated Statement of Operations
For The Twelve Months Ending June 30, 1997
($ in 000's, except earnings per share)
<TABLE>
<CAPTION>
Deflecta-Shield Ventshade
Lund Deflecta-Shield Ventshade Pro Forma Pro Forma Pro Forma
Historical(1) Historical(2) Historical(3) Adjustments Adjustments Consolidated
------------- ------------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 43,305 $ 71,377 $ 47,748 $ 162,430
Cost of goods sold 28,531 46,096 29,455 2,182 (4) 504 (12) 108,088
649 (5) 671 (5)
---------------------------------------------------------- ----------- -----------
Gross profit 14,774 25,281 18,293 (2,831) (1,175) 54,342
Operating expenses
General and administrative 4,247 7,585 4,200 (1,303)(6) -- 14,729
Selling and marketing 6,332 9,104 11,163 (2,182)(4) -- 24,417
Research and development 1,290 -- 421 1,303 (6) 3,014
Amortization 139 446 923 1,946 (7) 1,659 (13) 5,113
---------------------------------------------------------- ----------- -----------
Total operating expenses 12,008 17,135 16,707 (236) 1,659 47,273
---------------------------------------------------------- ----------- -----------
Income from operations 2,766 8,146 1,586 (2,595) (2,834) 7,069
---------------------------------------------------------- ----------- -----------
Other income (expense)
Interest expense (293) (756) (2,678) (3,944)(8) (2,670)(14) (10,341)
Interest income 695 -- -- (695)(9) -- (0)
Other, net (38) -- (392) -- (430)
---------------------------------------------------------- ----------- -----------
Other income (expense) 364 (756) (3,070) (4,639) (2,670) (10,771)
---------------------------------------------------------- ----------- -----------
Income (loss) before income taxes 3,130 7,390 (1,484) (7,234) (5,504) (3,702)
Income tax (benefit) expense 934 2,975 336 (2,117)(10) (2,997)(15) (869)
---------------------------------------------------------- ----------- -----------
Net income (loss) $ 2,196 $ 4,415 $ (1,820) $ (5,117) $ (2,507) $ (2,833)
========================================================== =========== ===========
Net income (loss) per share $ 0.50 $ (0.36)
=========== ===========
Common weighted average
equivalent shares (basic and diluted) 4,394 2,368 (11) 1,047 (16) 7,809
=========== ========== =========== ============
</TABLE>
<PAGE>
(1) The historical statement of operations of the Company for the twelve
months ended June 30, 1997 as reported and filed with the Securities
and Exchange Commission in the Company's Form 10-K.
(2) The unaudited historical statement of operations of Deflecta-Shield for the
twelve months ended June 30, 1997 as derived from reported results in
Deflecta-Shield's Form 10-Q for the quarterly period ending June 30, 1997,
Form 10-Q for the quarterly period ending June 30, 1996, and Form 10-K for
the year ended December 31, 1996 as filed with the Securities and Exchange
Commission.
(3) The unaudited historical statement of operations of Ventshade for the
twelve months ended June 30, 1997. Reclassifications have been made to this
Ventshade statement of operations in order for consistent presentaton with
the Company.
(4) Reclassification of freight expense from selling and marketing expense to
cost of goods sold for consistent presentation with the Company.
(5) Represents cost of goods sold related to the fair market value adjustment
to inventories.
(6) Reclassification of research and development expense from general and
administrative to a separate research and development category for
consistent presentation with the Company.
(7) Represents increased amortization of goodwill (40 years), customer lists
(10 years), and patents (6 years).
(8) Represents interest expense related to indebtedness incurred to complete
the acquisition and amortization of related deferred financing costs,
offset by interest expense on Deflecta-Shield debt and related deferred
financing costs retired in connection with the acquisition. Pro forma
interest expense was calculated based on average debt outstanding using the
current interest rates on acquisition debt.
(9) Elimination of interest income from marketable securities used to finance
the Deflecta-Shield acquisition.
(10) Represents the tax effect of the pro forma purchase accounting adjustments
at the consolidated tax rate for the Company.
(11) Common shares issued in connection with a $30 million equity investment.
(12) Represents increased depreciation of molds and dies (4 years).
<PAGE>
(13) Represents increased amortization of goodwill (40 years), work force (5
years), non-compete (6 years), and customer list (10 years).
(14) Represents interest expense related to indebtedness incurred to complete
the acquisition and amortization of related deferred financing costs,
offset by interest expense on Ventshade's debt and related deferred
financing costs retired in connection with the acquisition. Pro forma
interest expense was calculated based on average debt outstanding using the
current interest rates on acquisition debt.
(15) Represents the tax effect of the pro forma purchase accounting adjustments
at the consolidated Company level.
(16) Common shares were issued in connection with the $25 million equity
investment.
<PAGE>
(c) EXHIBITS.
23.1 Consent of Ernst & Young LLP
<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.
LUND INTERNATIONAL HOLDINGS, INC.
Dated: March 8, 1999 By: /s/ Dennis W. Vollmershausen
----------------------------------------
Dennis W. Vollmershausen
Its Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
23.1 Consent of Ernst & Young LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (No. 33-78140), Registration Statement on Form S-8 (No. 333-46263),
Registration Statement on Form S-8 (No. 33-64083) and Registration Statement on
Form S-8 (No. 33-37160) of Lund International Holdings, Inc. of our report dated
March 19, 1998 relating to the consolidated financial statements of Ventshade
Holdings, Inc. and Subsidiary which appear in the Current Report on Form 8-K/A
of Lund International Holdings, Inc. dated March 8, 1999.
ERNST & YOUNG LLP
Atlanta, Georgia
March 8, 1999
