FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Shelter Components Corporation
(Exact name of registrant as specified in charter)
AMENDMENT NO. 2
The undersigned registrant hereby amends the following item of its
Current Report dated January 27, 1995 on Form 8-K as set forth in the pages
attached hereto. Item 7(a) has been amended to provide the financial
statements of BABSCO, Inc. for calendar year 1993 in accordance with
Rule 3-05 of Regulation S-X.
Item 7. Financial Statements
(a) Financial statements of business acquired:
BABSCO Inc. 1994 Financial Statements - Audited
- Report of Independent Auditors
- Statement of Income and Retained Earnings
for the Year Ended December 31, 1994
- Balance Sheet as of December 31, 1994
- Statement of Cash Flows for the Year Ended
December 31, 1994
- Notes to Financial Statements
BABSCO Inc. 1993 Financial Statements - Audited
- Report of Independent Auditors
- Statement of Income and Retained Earnings
for the Year Ended December 31, 1993
- Balance Sheet as of December 31, 1993
- Statement of Cash Flows for the Year Ended
December 31, 1993
- Notes to Financial Statements
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHELTER COMPONENTS CORPORATION
(Registrant)
Date: September 29, 1995 By: Mark C. Neilson
Secretary-Treasurer, Principal
Financial and Accounting Officer
and Director
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
BABSCO, Inc.
Elkhart, Indiana
We have audited the accompanying balance sheet of BABSCO, Inc. as of
December 31, 1994, and the related statements of income and retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BABSCO, Inc. as of
December 31, 1994, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
As discussed in Note 7 to the financial statements, the Company has signed a
binding agreement to sell substantially all the assets of the Company.
Crowe, Chizek and Company
Elkhart, Indiana
January 14, 1995
BABSCO, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year ended December 31, 1994
Amount
-----------
Sales $46,918,275
Cost of goods sold 38,469,273
-----------
Gross margin 8,449,002
Operating expenses 6,578,479
-----------
Income from operations before
Galleries division 1,870,523
Loss from operations --
Galleries division (Note 2) 160,732
-----------
Income from operations 1,709,791
Other income (expense)
Interest income 35,006
Interest expense (303,831)
Other expense (45,393)
----------
(314,218)
----------
Net income 1,395,573
Retained earnings at
beginning of year 1,988,768
Dividends declared (1,285,299)
------------
Retained earnings at
end of year $ 2,099,042
===========
See accompanying notes to financial statements.
BABSCO, INC.
BALANCE SHEET
December 31, 1994
ASSETS
Current assets
Cash $ 2,147
Accounts receivable 2,423,351
Notes and loans receivable 109,877
Inventories 6,973,816
Prepaid expenses 90,789
-----------
Total current assets 9,599,980
Improvements and equipment
Leasehold improvements 179,420
Office equipment 452,378
Transportation equipment 560,455
Machinery and equipment 481,842
-----------
1,674,095
Accumulated depreciation 870,025
-----------
804,070
-----------
$10,404,050
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Note payable to bank (Note 3) $ 2,500,000
Current portion of long-term debt (Note 4) 264,898
Checks written in excess of bank balance 510,939
Accounts payable 3,809,823
Accrued salaries, wages and related taxes 158,688
Accrued profit sharing contribution (Note 6) 48,077
Other current liabilities 549,963
-----------
Total current liabilities $ 7,842,388
Long-term debt (Note 4) 331,008
Shareholder's equity
Common stock, no par value; 1,000 shares
authorized; 200 shares issued and outstanding 131,612
Retained earnings 2,099,042
-----------
2,230,654
-----------
$10,404,050
===========
See accompanying notes to financial statements.
BABSCO, INC.
STATEMENT OF CASH FLOWS
Year ended December 31, 1994
Cash flows from operating activities
Net income $1,395,573
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 235,313
Amortization 41,250
Provision for losses on accounts receivable 52,047
Loss on disposal of assets 50,482
Change in assets and liabilities, net of effects
from divestiture of Galleries division
Accounts receivable (203,472)
Inventories (1,300,451)
Prepaid expenses (33,493)
Accounts payable 932,364
Accrued expenses 25,193
---------
Net cash from operating activities 1,194,806
Cash flows from investing activities
Capital expenditures (261,114)
Proceeds from sale of equipment 3,500
Proceeds from notes receivable 354,077
----------
Net cash from investing activities 96,463
Cash flows from financing activities
Checks written in excess of bank balance 353,418
Payments under line of credit agreement (317,000)
Principal borrowings on long-term debt 174,000
Principal payments on long-term debt (375,918)
Dividends paid (1,126,021)
----------
Net cash from financing activities (1,291,521)
----------
Net change in cash (252)
Cash at beginning of year 2,399
----------
Cash at end of year $ 2,147
==========
Supplemental schedule of noncash investing and financing activities
During the year, the Company distributed certain assets and
liabilities of its BABSCO Galleries division (Note 2).
See accompanying notes to financial statements.
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Operations: The Company sells on a wholesale basis, various electrical
supplies to the recreational vehicle, manufactured housing and construction
industries principally in Northern Indiana and Pennsylvania.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) method for all inventories.
During 1994, the Company changed its method of determining the cost of its
copper wire inventory from last-in, first-out (LIFO) to FIFO. The Company
believes the FIFO method better matches expenses to the period revenues are
earned. The effect of this change in accounting method on the Company's
financial statements was immaterial.
Improvements, Equipment and Depreciation: Assets are stated at cost.
Expenditures that significantly extend the lives of assets and major
improvements are capitalized. Depreciation is computed according to the
estimated useful lives of the respective assets using a combination of
straight-line and accelerated methods.
Income Taxes: The Company, with the consent of the sole shareholder, has
elected to have its income taxed under Section 1362 of the Internal Revenue
Code and a similar section of the state income tax law which provides that,
in lieu of corporation income taxes, the shareholder is taxed on the
Company's taxable income. Therefore, no provision for corporate income taxes
has been recognized by the Company.
NOTE 2 - DIVESTITURE OF BUSINESS
Effective December 1, 1994 the Company distributed certain operating assets
and liabilities of its Babsco Galleries division to the sole shareholder of
the Company. The distribution was accounted for as a dividend using the book
value of the assets and liabilities which approximated the fair market value.
(Continued)
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 2 - DIVESTITURE OF BUSINESS (Continued)
A summary of the book value of the assets and liabilities distributed is
presented below:
Assets
Cash $ 300
Accounts receivable 47,956
Inventories 148,249
Property and equipment 35,296
Other 72,137
Liabilities
Accounts payable 142,409
Other 1,951
--------
Net assets distributed $159,578
========
The statement of income includes the income and expenses of this division for
the eleven months prior to the divestiture. Sales of the division were
considered immaterial.
NOTE 3 - NOTE PAYABLE TO BANK
The note payable to bank consists of a prime rate demand note payable to
Society National Bank, Elkhart, Indiana. Under the current note agreement,
the Company has a $6,000,000 line of credit available at the Company's
request, which is secured by inventory, accounts receivable, equipment and
personally guaranteed, along with all Society National Bank debt (Note 4), up
to $1,000,000 by the sole shareholder of the Company. At December 31, 1994,
$3,500,000 of the line of credit was available.
(Continued)
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 4 - LONG-TERM DEBT
Long-term debt at December 31, 1994 consists of the following:
1% over prime note payable to Society National Bank, dated
August 22, 1991; due in monthly installments of $13,278
plus interest through August 1997; secured by
inventory, accounts receivable and equipment $336,611
Prime rate note payable to Society National Bank, dated
June 21, 1994; due in monthly installments of $2,667 plus
interest through June 1999; secured by inventory, accounts
receivable and equipment 141,334
8% installment contract payable to Society National Bank;
due in monthly installments of $796, including interest
through February 1995; secured by a vehicle 1,572
7.5% note payable to Society National Bank, dated
September 16, 1993; due in monthly installments of $2,181
including interest through September 1996; secured by
accounts receivable, equipment and inventory 41,900
7.75% note payable to Society National Bank, dated June 11,
1993; due in monthly installments of $4,407 including
interest through June 1996; secured by equipment 74,489
--------
595,906
Current maturities of long-term debt 264,898
--------
$331,008
========
The Society National Bank debt, including the line of credit (Note 3), is
personally guaranteed up to $1,000,000 by the sole shareholder of the Company.
A life insurance policy in the amount of $1,000,000 on the life of the sole
shareholder is also assigned as security on the notes payable to Society
National Bank. The credit agreement under which the notes payable to Society
National Bank were made is subject to certain loan covenants. At
December 31, 1994, the Company was in compliance with these covenants.
Long-term debt is due as follows:
1995 264,898
1996 235,743
1997 49,943
1998 32,004
1999 13,317
Interest paid during the year totaled $309,215 for the year ended
December 31, 1994.
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 5 - LEASE COMMITMENTS
The Company currently leases five warehouse/office facilities in Elkhart,
Indiana, and a warehouse/office facility in Warsaw, Indiana, from the sole
shareholder of the Company on an annual renewable lease basis. Monthly rental
is $61,610 plus payment of real estate taxes, maintenance costs and insurance
on the facilities. Total rental expense for office and warehouse facilities
amounted to $809,534 for the year ended December 31, 1994.
The Company leases a warehouse facility in Plymouth, Indiana. Monthly rental
is $1,430 and the lease term is presently month to month, with options to
renew. Total rental expense amounted to $17,160 for the year ended
December 31, 1994.
The Company leases a warehouse facility in Mt. Joy, Pennsylvania. Monthly
rental is $6,024 and the lease term is presently one year, with an option to
renew. Total rental expense for the year ended December 31, 1994 amounted to
$53,202.
NOTE 6 - PROFIT SHARING PLAN
The Company has a profit sharing plan covering full time employees with a
minimum of one year of continuous service. The contributions by the Company
to the plan, if any, are determined annually by the Board of Directors. The
profit sharing expense for the year ended December 31, 1994 was $48,927.
NOTE 7 - SUBSEQUENT EVENT
On January 12, 1995, management signed a binding agreement to sell
substantially all the assets of the Company. Management anticipates the
transaction will be completed by January 31, 1995.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
BABSCO, Inc.
Elkhart, Indiana
We have audited the accompanying balance sheet of BABSCO, Inc. as of
December 31, 1993, and the related statements of income and retained
earnings and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BABSCO, Inc. as of
December 31, 1993 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
Crowe, Chizek and Company
Elkhart, Indiana
February 4, 1994, except for Note 6
as to which the date is April 12, 1994
BABSCO, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year ended December 31, 1993
1993
----
Amount
-----------
Sales $38,206,535
Cost of goods sold 31,094,007
-----------
Gross margin 7,112,528
Operating expenses 6,154,811
-----------
Income from operations 957,717
Other income (expense)
Interest income 30,106
Interest expense (244,005)
Other income (expense) (32,926)
-----------
(246,825)
-----------
Net Income 710,892
Retained earnings at
beginning of year 1,635,876
Dividends declared (358,000)
-----------
Retained earnings at
end of year $ 1,988,768
===========
See accompanying notes to financial statements.
BABSCO, INC.
BALANCE SHEET
December 31, 1993
ASSETS 1993
----------
Current assets
Cash $ 2,399
Accounts receivable (after allowance for doubtful
accounts of $23,000) 2,319,882
Note receivable - shareholder (Note 3) 286,000
Notes and loans receivable 177,954
Inventories (Note 4) 5,821,614
Prepaid expenses 76,933
----------
Total current assets 8,684,782
Improvements and equipment
Leasehold improvements 258,393
Office equipment 481,418
Transportation equipment 462,572
Machinery and equipment 472,041
----------
1,674,424
Accumulated depreciation 806,877
----------
867,547
Other assets, less accumulated amortization 93,750
----------
$9,646,079
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Note payable to bank (Note 5) $2,817,000
Current portion of long-term debt (Note 6) 267,116
Checks written in excess of bank balance 157,521
Accounts payable 3,019,868
Accrued salaries, wages and related taxes 148,451
Accrued profit sharing contribution (Note 8) 46,460
Other current liabilities 538,576
----------
Total current liabilities 6,994,992
Long-term debt (Note 6) 530,707
Shareholder's equity
Common stock, no par value; 1,000 shares
authorized; 200 shares issued and outstanding 131,612
Retained earnings 1,988,768
----------
2,120,380
----------
$9,646,079
==========
See accompanying notes to financial statements.
BABSCO, INC.
STATEMENT OF CASH FLOWS
Year ended December 31, 1993
1993
----------
Cash flows from operating activities
Net income $ 710,892
Adjustments to reconcile net income to net cash
from operating activities
Depreciation 242,157
Amortization 41,250
Provision for losses on accounts receivable 17,613
Loss on disposal of assets 50,463
Change in assets and liabilities
Accounts receivable (629,527)
Inventories (1,922,550)
Prepaid expenses (25,928)
Checks written in excess of bank balance 157,521
Accounts payable 1,021,636
Accrued expenses 199,389
----------
Net cash from operating activities (137,084)
Cash flows from investing activities
Acquisition of business (Note 2) (163,679)
Noncompete agreements (Note 2) (135,000)
Capital expenditures (563,951)
Proceeds from sale of equipment 42,810
Proceeds from notes receivable 271,713
Issuance of notes receivable (628,347)
-----------
Net cash from investing activities (1,176,454)
Cash flows from financing activities
Net borrowings under line-of-credit
agreement 1,757,000
Proceeds from long-term debt 228,487
Principal payments on long-term debt (336,562)
Dividends paid (358,000)
----------
Net cash from financing activities 1,290,925
----------
Net change in cash (22,613)
Cash at beginning of year 25,012
----------
Cash at end of year $2,399
==========
See accompanying notes to financial statements.
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Operations: The Company sells on a wholesale basis, various electrical
supplies to the recreational vehicle, manufactured housing and construction
industries principally in Northern Indiana and Pennsylvania.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) method for all inventories except
copper wire, which is determined on the last-in, first-out (LIFO) method.
Improvements, Equipment and Depreciation: Assets are stated at cost.
Expenditures that significantly extend the lives of assets and major
improvements are capitalized. Depreciation is computed according to the
estimated useful lives of the respective assets using a combination of
straight-line and accelerated methods.
Other Assets: Other assets represent noncompete agreements with the former
owners of Goshen Lighting, Inc., which was acquired by the Company on
February 1, 1993 (Note 2). These assets are being amortized on a
straight-line basis over 36 months, which relates to the terms of these
agreements.
Income Taxes: The Company, with the consent of the sole shareholder, has
elected to have its income taxed under Section 1362 of the Internal Revenue
Code and a similar section of the state income tax law which provides that, in
lieu of corporation income taxes, the shareholder is taxed on the Company's
taxable income. Therefore, no provision for corporate income taxes has been
recognized by the Company.
NOTE 2 - ACQUISITION OF BUSINESS
Effective February 1, 1993 the Company acquired certain operating assets,
subject to the trade accounts payable, of Goshen Lighting, Inc. The
acquisition, which was accounted for as a purchase, was made at a cost of
$163,679. The assets and liabilities of the acquired company were recorded at
book value, which approximates fair market value.
(Continued)
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
NOTE 2 - ACQUISITION OF BUSINESS (Continued)
A summary of the fair value of assets acquired and liabilities assumed is
presented below:
Assets
Inventory $119,547
Accounts receivable 56,122
Property and equipment 25,473
Liabilities
Accounts payable (37,066)
Other (397)
--------
Net assets acquired $163,679
========
The 1993 statement of income includes the income and expenses of the acquired
company from the date of acquisition.
In connection with the acquisition, the Company entered into noncompete
agreements with the three former shareholders in the amount of $45,000 each.
The agreements are for three years.
NOTE 3 - NOTE RECEIVABLE - SHAREHOLDER
Note receivable - shareholder at December 31, 1993 consists of a prime plus
1/2% unsecured note receivable, due on demand, from the sole shareholder of
the Company.
NOTE 4 - INVENTORIES
1993
----------
Inventories - FIFO method $ 4,579,450
Inventories - LIFO method 1,242,164
----------
$5,821,614
==========
The effect of determining cost of copper wire inventories by the LIFO method
as compared with the FIFO method was to increase inventories by $1,000 at
December 31, 1993 and increase net income by $70,000 in 1993.
(Continued)
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
NOTE 5 - NOTE PAYABLE TO BANK
The note payable to bank consists of a prime rate demand note payable to
Society Bank, Elkhart, Indiana at December 31, 1993. Under the current note
agreement, the Company has a $5,000,000 line of credit available at the
Company's request, which is secured by inventory, accounts receivable,
equipment and personally guaranteed , along with all Society Bank debt (Note
6), up to $1,000,000 by the sole shareholder of the Company. At December 31,
1993, $2,183,000 of the line of credit was available.
NOTE 6 - LONG-TERM DEBT
Long-term debt at December 31, 1993 consists of the following:
1993
--------
1% over prime note payable to Society Bank,
Elkhart, Indiana, dated August 22, 1991; due
in monthly installments of $13,278 plus interest
through August 1997; secured by inventory, accounts
receivable and equipment $570,944
8.19% to 8.99% installment contracts payable
to various financial institutions; due in monthly
installments totaling $2,457 for 1993,
including interest through February 1995;
secured by vehicles 26,992
8% note payable to Society Bank, Elkhart, Indiana,
dated November 23, 1992, due in monthly installments
of $1,583, including interest through December 1994;
secured by equipment 16,774
(Continued)
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
NOTE 6 - LONG TERM DEBT (Continued)
1993
--------
7.5% note payable to Society Bank, South Bend, Indiana,
dated September 16, 1993; due in monthly installments
of $2,181 including interest through September 1996;
secured by accounts receivable, equipment and inventory $ 63,531
7.75% note payable to Society Bank, South Bend, Indiana,
dated June 11, 1993; due in monthly installments of
$4,407 including interest through June 1996;
secured by equipment 119,582
--------
797,823
Current maturities of long-term debt 267,116
--------
$530,707
========
The Society Bank debt, including the line of credit (Note 5), is personally
guaranteed up to $1,000,000 by the sole shareholder of the Company.
A life insurance policy in the amount of $1,000,000 on the life of the sole
shareholder is also assigned as security on the notes payable to Society
National Bank. The credit agreement under which the notes payable to Society
National Bank were made is subject to certain loan covenants. At
December 31, 1993, the Company was in compliance with these covenants or
obtained waivers of these covenants on April 12, 1994.
Long-term debt is due as follows:
1994 $267,116
1995 233,995
1996 203,775
1997 92,937
Interest paid during the year ended December 31, 1993 totaled $229,000.
(Continued)
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
NOTE 7 - LEASE COMMITMENTS
The Company currently leases five warehouse/office facilities in Elkhart,
Indiana, and a warehouse/office facility in Warsaw, Indiana, from the sole
shareholder of the Company on an annual renewable lease basis. Monthly rental
is $61,610 plus payment of real estate taxes, maintenance costs and insurance
on the facilities. Management presently intends to continue leasing three of
these facilities for the next five years at an annual rental of approximately
$336,000, or approximately $1,680,000 over this period. Total rental expense
for office and warehouse facilities amounted to $720,217 for the year ended
December 31, 1993.
The Company leases a warehouse facility in Plymouth, Indiana. Monthly rental
is $1,300 and the lease term is presently one year, with options to renew.
Total rental expense amounted to $15,600 for the year ended December 31, 1993.
The Company leases a warehouse facility in Mt. Joy, Pennsylvania. Monthly
rental is $2,844 and the lease term is presently one year, with an option to
renew. Total rental expense for the year ended December 31, 1993 amounted to
$34,125.
NOTE 8 - PROFIT SHARING PLAN
The Company has a profit sharing plan covering full time employees with a
minimum of one year of continuous service. The contributions by the Company
to the plan, if any, are determined annually by the Board of Directors. The
profit sharing expense for the year ended December 31, 1993 was $46,460.
