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. 1
The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its
Current Report dated January 27, 1995 on Form 8-K as set forth in
the pages attached hereto:
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits Page
(a) Financial statements of business acquired:
BABSCO Inc. Financial Statements - Audited
- Report of Independent Auditors 2
- Balance Sheet as of December 31, 1994 3
- Statement of Income and Retained Earnings
for the Year Ended December 31, 1994 4
- Statement of Cash Flows for the Year Ended
December 31, 1994 5
- Notes to Financial Statements 6-9
(b) Pro forma financial information:
Pro Forma Consolidated Financial Statements of
Shelter Components Corporation:
- Pro Forma Consolidated Balance Sheet as of
December 31, 1994 10-11
- Notes to Pro Forma Consolidated Balance Sheet 12
- Pro Forma Consolidated Statement of Income
for the Year Ended December 31, 1994 13
- Notes to Pro Forma Consolidated Statement
of Income 14
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: March 31, 1995 By: /s/ Mark C. Neilson
Secretary-Treasurer,
Principal Financial and
Accounting Officer and
Director
<PAGE>
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 <PAGE>
<TABLE>
<CAPTION>
BABSCO, INC.
BALANCE SHEET
December 31, 1994
ASSETS
<S> <C>
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
===========
</TABLE>
See accompanying notes to financial statements.
BABSCO, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year ended December 31, 1994
% to
Amount Sales
Sales $46,918,275 100.00%
Cost of goods sold 38,469,273 81.99
----------- ------
Gross margin 8,449,002 18.01
Operating expenses 6,578,479 14.02
----------- ------
Income from operations before
Galleries division 1,870,523 3.99
Loss from operations --
Galleries division (Note 2) 160,732 .34
----------- ------
Income from operations 1,709,791 3.65
Other income (expense)
Interest income 35,006 .07
Interest expense (303,831) (.65)
Other expense (45,393) (.10)
----------- ------
(314,218) (.68)
----------- ------
Net income 1,395,573 2.97%
=======
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. <PAGE>
<TABLE>
<CAPTION>
BABSCO, INC.
STATEMENT OF CASH FLOWS
Year ended December 31, 1994
Cash flows from operating activities
<S> <C>
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).
</TABLE> <PAGE>
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) <PAGE>
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) <PAGE>
BABSCO, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 4 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt at December 31, 1994 consists of the following:
<S> <C>
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
========
</TABLE>
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.
Item 7(b) Pro Forma Financial Information
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Financial Statements
On January 27, 1995, the Shelter Components Corporation
("Shelter"), through its newly-formed wholly-owned subsidiary,
Nubabsco, Inc. ("Nubabsco"), acquired the business operations and
operating assets of BABSCO, Inc. ("BABSCO"), located in Elkhart,
Indiana, and having additional operations in Plymouth and Warsaw,
Indiana and Mt. Joy, Pennsylvania. BABSCO is a wholesale
distributor of a full line of electrical products to the
recreational vehicle, manufactured housing and modular housing
industries, and to electrical contractors in the Northern Indiana
and Southern Michigan region. Subsequent to the acquisition,
Shelter changed the name of Nubabsco to BABSCO, Inc. and is using
the acquired assets in the operations of the present business.
Concurrent with the acquisition of BABSCO, Shelter also acquired
certain real estate for $1.6 million from the sole shareholder of
BABSCO for cash of $408,000 and the assumption of a $1.154
million, 7.84% mortgage on the acquired real estate.
The pro forma financial statements are required by the rules of
the Securities and Exchange Commission and are provided for
comparative purposes only. The unaudited pro forma financial
information, including the historical results of the acquired
business, is not necessarily indicative of the consolidated
results that would have occurred had the acquisition taken place
on January 1, 1994, nor is it necessarily indicative of results
that may occur in the future.
Pro Forma Consolidated Balance Sheet
The following unaudited pro forma consolidated balance sheet as
of December 31, 1994 has been prepared to reflect, for accounting
purposes, the transaction between Shelter and BABSCO, as if the
transaction had occurred on December 31, 1994, after giving
effect to the pro forma purchase adjustments described in the
notes which follow. These pro forma purchase adjustments are
based on the assumptions and estimates made for the purpose of
preparing this pro forma consolidated balance sheet. The final
purchase adjustments to the accounts of BABSCO may vary, based
upon changes in estimated values resulting from final reports of
independent appraisals and other factors impacting the net assets
of the acquired company. In the opinion of Shelter's management,
the estimates used in the preparation of this pro forma
consolidated balance sheet are reasonable under the
circumstances. Shelter will account for the acquisition of
BABSCO using the purchase method. <PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 1994
(000's Omitted)
<TABLE>
<CAPTION>
Acquisition of
BABSCO
Historical Pro Forma Pro Forma
Shelter BABSCO, Adjust- Consoli-
ASSETS Components Inc. ments dated
(Unaudited)
CURRENT ASSETS
<S> <C> <C> <C> <C> <C>
Cash $ 19 $ 2 $ - $ 21
Trade receivables, net 20,985 2,533 (A) 630 24,148
Inventories 44,766 6,974 (B) (50) 51,690
Prepaid expenses and other 258 91 (C) (50) 299
Deferred income taxes 1,285 - - 1,285
------- -------- ------- --------
Total current assets 67,313 9,600 530 77,443
PROPERTY, PLANT AND EQUIPMENT, net 14,403 804 (D) 1,562 16,769
COST IN EXCESS OF NET ASSETS
ACQUIRED,
net of accumulated amortization 4,290 - (E) 7,411 11,701
OTHER ASSETS 1,326 - - 1,326
------- ------- ------- --------
Total assets $87,332 $10,404 $ 9,503 $107,239
======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ - $ 2,500 (F) $(2,500) $ 6,331
(G) 6,331
Current maturities of
long-term debt 1,810 265 (F) (265) 1,810
Accounts payable, trade 19,991 4,321 - 24,312
Accrued expenses and
income taxes payable 4,736 756 (H) 115 5,607
------- ------- ------- --------
Total current liabilities 26,537 7,842 3,681 38,060
------- ------- ------- --------
(F) 2,765
(G) 800
LONG-TERM DEBT 21,824 331 (I) 1,562 27,282
------- ------- ------- --------
DEFERRED INCOME TAXES 855 - - 855
------- ------- ------- --------
STOCKHOLDERS' EQUITY
Preferred Stock - - - -
Common Stock 58 132 (K) (132) 58
(L) 3 3
Additional paid-in capital 8,399 - (L) 2,923 11,322
Retained earnings 29,867 2,099 (K) (2,099) 29,867
------- ------- ------- --------
38,324 2,231 695 41,250
Less, Treasury stock, at cost 208 - - 208
------- ------- -------- --------
Total stockholders' equity 38,116 2,231 695 41,042
------- ------- -------- --------
Total liabilities and
stockholders' equity $87,332 $10,404 $ 9,503 $107,239
======= ======= ======= ========
</TABLE> <PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
For purposes of this pro forma consolidated balance sheet, it is
assumed that the acquisition by Shelter of BABSCO's assets and
the assumption of liabilities occurred on December 31, 1994. The
acquisition of real estate from BABSCO's sole stockholder is also
assumed to have occurred on December 31, 1994.
Cost of acquisition:
Notes issued to seller at closing $ 7,131,000
Stock issued to seller at closing 2,926,000
Assumed liabilities 8,173,000
Cash and assumption of mortgage for
purchase of real estate 1,562,000
Estimated acquisition costs 15,000
-----------
Total cost of acquisition 19,807,000
-----------
Assets acquired:
Book value of BABSCO's assets as of
December 31, 1994 $10,404,000
Fair value adjustments to reflect
increase (decrease) in book value:
Receivables 630,000
Inventories (50,000)
Prepaid expenses and other assets (50,000)
Accrued expenses (100,000)
Fair value of acquired real estate 1,562,000
----------
Total assets acquired, as adjusted 12,396,000
-----------
Excess of cost over fair value of assets acquired $7,411,000
==========
The following is a brief description of the pro forma
adjustments:
(A) To record receivables for vendor rebates (not previously
recorded by seller) to conform with Shelter's method of
accounting.
(B) To adjust inventories to estimated fair value.
(C) To adjust prepaid expenses to estimated fair value.
(D) To record acquisition of certain real estate owned by sole
stockholder of the seller.
(E) To record excess of cost over fair value of assets acquired
(goodwill).
(F) Retirement of $2.8 million of current debt of BABSCO.
(G) Issuance of $6.3 million of short-term notes and an $800,000
long-term promissory note to the seller in connection with
the acquisition.
(H) To record estimated acquisition costs and accrued expenses
not previously recorded to conform with Shelter's method of
accounting.
(I) To record $1.5 million in debt assumed in the acquisition of
certain real estate owned by the sole stockholder of the
seller.
(J) To record issuance of 269,058 shares of common stock to the
sole stockholder of the seller in connection with the
acquisition.
(K) To eliminate stockholder's equity accounts of BABSCO.
Pro Forma Consolidated Statement of Income
The following unaudited pro forma consolidated statement of
income for the year ended December 31, 1994 has been prepared to
reflect, for accounting purposes, the transaction between Shelter
and BABSCO, as if the transaction had occurred on January 1,
1994, after giving effect to the pro forma purchase adjustments
described in the notes which follow. These pro forma purchase
adjustments are based on the assumptions and estimates made for
the purpose of preparing this pro forma consolidated statement of
income. The final purchase adjustments to the accounts of BABSCO
may vary, based upon changes in estimated values resulting from
final reports of independent appraisals and other factors
impacting the net assets of the acquired company. In the opinion
of Shelter's management, the estimates used in the preparation of
this pro forma consolidated statement of income are reasonable
under the circumstances. Shelter will account for the
acquisition of BABSCO using the purchase method.
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 1994
(000's Omitted, except per share data)
<TABLE>
<CAPTION>
Acquisition of
Historical Results BABSCO
Shelter Pro forma Pro forma
Components BABSCO Adjustments Consolidated
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $333,104 $46,918 $ - $380,022
Cost of sales 281,808 38,469 (A) (200) 320,077
-------- ------- ------- --------
Gross profit 51,296 8,449 200 59,945
Other income, commissions 3,111 - - 3,111
-------- ------- ------ --------
54,407 8,449 200 63,056
Selling, general and
administrative expenses 39,136 6,578 (B) (340) 45,651
(C) (93)
(D) 370
-------- ------- ------ --------
Income from operations
before Galleries Division 15,271 1,871 263 17,405
Loss from operations of
Galleries Divisions - 161 (E) (161) -
-------- ------- ------ --------
Income from operations 15,271 1,710 424 17,405
Interest income 38 35 - 73
Other expense - (45) (C) 45 -
Interest expense (1,035) (304) (F) (750) (2,089)
-------- ------- ------ --------
Income before income taxes 14,274 1,396 (281) 15,389
Income taxes 5,577 - (G) 425 6,002
-------- ------- ------ --------
Net income $ 8,697 $ 1,396 $ (706) $ 9,387
======== ======== ====== ========
Earnings per common and
common equivalent share:
Primary $ 1.49 $ 1.54
======== ========
Fully diluted $ 1.49 $ 1.54
======== ========
The accompanying notes are a part of this pro forma condensed financial
statement.
</TABLE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For purposes of the pro forma consolidated statement of income
for the year ended December 31, 1994, it is assumed that Shelter
Components Corporation acquired the assets and assumed the
liabilities of BABSCO as of January 1, 1994.
The following is a brief description of the pro forma
adjustments:
(A) To adjust BABSCO's cost of sales to reflect vendor rebates
on an accrual basis.
(B) To eliminate 1994 rent expense related to certain real
estate acquired from the sole shareholder of BABSCO, net of
additional depreciation.
(C) To eliminate certain non-recurring expenses of BABSCO.
(D) To record amortization of goodwill over 20 years.
(E) To eliminate operating losses of BABSCO's Galleries Division
not acquired.
(F) To record additional interest expense on $8.3 million debt
incurred by Shelter in connection with the acquisition,
including the assumption of a mortgage on certain real
estate acquired concurrent with the acquisition of BABSCO.
(G) To record tax effect of above adjustments and income taxes
relating to the pre-tax income of BABSCO, Inc., which was
taxed as a "S" corporation under the Internal Revenue Code.
