<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 1, 1996
FIBREBOARD CORPORATION
----------------------
(exact name of registrant as specified in charter)
Delaware 0-016951 94-0751580
-----------------------------------------------------------------
(State or other jurisdic- (Commission (IRS Employer Iden-
tion of incorporation) file number) tification No.)
2121 North California Blvd., #560, Walnut Creek, CA 94596
----------------------------------------------------------
(Address of principal executive offices)
(510) 274-0700
--------------
(Registrant's telephone number, including area code)
None
------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The undersigned registrant hereby amends the following items of its Current
Report on Form 8-K dated July 1, 1996:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF STONE PRODUCTS CORPORATION:
Page
----
Report of Independent Accountants 4
Consolidated Balance Sheets as of March 31, 1996 and 1995 5
Consolidated Statements of Income and Retained Earnings for
the years ended March 31, 1996 and 1995 6
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 8
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION:
Pro Forma Combined Balance Sheet as of March 31, 1996 20
Pro Forma Combined Income Statement for the twelve
month period ended December 31, 1995 21
Pro Forma Combined Income Statement for the three
month period ended March 31, 1996 22
Notes to Pro Forma Combined Financial Statements 23
(c) EXHIBITS:
Exhibit 23 Consent of Price Waterhouse LLP 25
2
<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.
FIBREBOARD CORPORATION
----------------------
(Registrant)
Dated: August 8, 1996 By: /s/ Garold E. Swan
--------------------------------
Garold E. Swan
Vice President and Controller
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Stone Products Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Stone
Products Corporation and its subsidiary at March 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
San Francisco, California
June 12, 1996
4
<PAGE>
<TABLE>
<CAPTION>
STONE PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------
MARCH 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash $ 20,400 $ 29,900
Accounts receivable, net 6,926,200 5,074,300
Inventories 5,089,300 4,730,200
Other current assets 1,241,700 693,200
----------- ----------
Total current assets 13,277,600 10,527,600
Property, plant and equipment, net 4,445,600 2,473,000
Goodwill and other intangible assets, net 6,385,800 6,668,500
Other assets 183,400 441,500
----------- ----------
$24,292,400 $20,110,600
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings $3,028,600 $3,757,500
Accounts payable 3,272,000 2,270,100
Accrued liabilities 2,363,000 1,848,700
Current portion of long-term debt 809,700 772,600
----------- ----------
Total current liabilities 9,473,300 8,648,900
Long-term debt, less current portion 1,082,200 1,866,000
Deferred income taxes, less current portion 105,100 101,600
----------- ----------
Total liabilities 10,660,600 10,616,500
----------- ----------
Commitments and contingencies
Shareholders' equity:
Preferred stock - Series A, no par value, 1,000,000
shares authorized, 56,000 issued and outstanding 8,000,000 8,000,000
Preferred stock - Series B, no par value, 8,888
authorized, issued and outstanding 2,463,700
Common stock, no par value, 1,000,000 shares
authorized, 24,000 issued and outstanding 1,000 1,000
Retained earnings 3,167,100 1,493,100
----------- ----------
Total shareholders' equity 13,631,800 9,494,100
----------- ----------
$24,292,400 $20,110,600
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
STONE PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
- ---------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
1996 1995
<S> <C> <C>
Net sales $34,073,800 $25,517,600
Cost of sales 18,375,500 13,076,400
----------- ----------
Gross profit 15,698,300 12,441,200
----------- ----------
Costs and expenses:
Selling 5,838,100 4,454,400
Distribution and transportation 3,318,000 2,859,200
General and administrative 2,953,300 2,055,100
Amortization 291,300 222,500
Non-competition agreements 340,000 310,000
Royalty income (80,400)
Interest expense 332,700 549,500
Interest income (31,900) (49,800)
Other (income) expense, net (83,800) 21,800
----------- ----------
12,877,300 10,422,700
----------- ----------
Income before income taxes 2,821,000 2,018,500
Provision for income taxes 1,147,000 856,200
----------- ----------
Net income 1,674,000 1,162,300
Retained earnings, beginning of year 1,493,100 330,800
----------- ----------
Retained earnings, end of year $3,167,100 $1,493,100
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
STONE PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,674,000 $1,162,300
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of goodwill and other intangible assets 297,300 292,300
Depreciation 695,500 560,700
Loss on write-off of equipment 2,600
Deferred income taxes (164,700) 32,600
Non-cash compensation expense 430,000
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable (1,851,900) (916,600)
Inventories (359,100) (440,600)
Other current assets (548,500) (125,800)
Other assets 258,100 104,700
Accounts payable 1,001,900 640,500
Accrued liabilities 252,500 (35,300)
----------- ----------
Cash flows provided by operating activities 1,687,700 1,274,800
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized trademark costs (14,600)
Purchase of Carriage Hill Stone
Company, net of cash acquired (238,700)
Purchase of equipment (2,670,700) (801,300)
----------- ----------
Cash flows used in investing activities (2,685,300) (1,040,000)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock, net of issuance costs 2,463,700
Proceeds from long-term debt 73,600
Payments of long-term debt (746,700) (1,074,100)
Proceeds from (payment on) short-term bank borrowings (728,900) 794,000
----------- ----------
Cash flows provided by (used in) financing activities 988,100 (206,500)
----------- ----------
Net change in cash (9,500) 28,300
Cash at beginning of year 29,900 1,600
----------- ----------
Cash at end of year $20,400 $29,900
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to the consolidated financial statements.
7
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
On August 28, 1991, Saxum House, Limited purchased from the former
shareholders of Stucco Stone Products, Inc. all of their outstanding common
stock. The Company was subsequently renamed Stone Products Corporation
(the "Company"). The Company manufactures precast stone products and sells
its products worldwide, mainly to the construction industry.
The Company sells the majority of its products within the United States.
Such sales represented 83% of net sales for the year ended March 31, 1996.
Sales within California represented 20% of net sales during fiscal 1996.
The Company also sells its products in foreign markets through
distributors. Sales to the Company's sole distributor in Japan, Kowa
Company, Ltd. ("Kowa"), represented 10% of net sales for the year ended
March 31, 1996 (Note 10).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Stone
Products Corporation and its wholly-owned subsidiary, Carriage Hill Stone
Company. All material intercompany transactions and balances have been
eliminated in consolidation.
ACQUISITIONS AND INVESTMENTS
As part of the purchase of Stucco Stone Products, Inc., the Company entered
into non-compete agreements with several former shareholders/key employees
which require the Company to pay a total of $1,500,000 in consideration for
the former shareholders/key employees' agreement not to compete with the
Company for a period of five years. This amount is payable in five equal
annual installments each August 28.
In June 1993, the Company entered into a joint venture agreement with
Industrias Perdura to form Perdura Stone, a company incorporated in Mexico.
Perdura Stone manufactures and markets Cultured Stone-Registered Trademark-
products in Mexico. At March 31, 1996 and 1995, the Company's 40% equity
interest in Perdura Stone totaled $162,900, which represents the value of
molds and technology contributed to the joint venture. The Company
believes the devaluation of the Mexican peso has not significantly impacted
the carrying value of this investment.
In March 1995, the Company acquired all of the outstanding capital stock of
Carriage Hill Stone Company ("Carriage Hill"), a company incorporated in
Ohio, for $300,000 cash. Carriage Hill manufactures and markets stone
products which have commercial and residential applications. The
acquisition was accounted for using the purchase method, accordingly, the
purchase price was allocated to assets acquired and liabilities assumed
based upon their relative estimated fair value. The excess of the purchase
price over the estimated fair value of the net assets acquired of $130,000
was recorded as goodwill. The Company also entered into a seven-year non-
compete agreement with the former shareholders of Carriage Hill which
requires the Company to pay a total of $210,000 to the former shareholders.
This amount is payable in seven equal annual installments each March 1.
8
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
CONCENTRATION OF CREDIT RISK
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
Reserves are maintained for potential credit losses; to date, such losses
have been insignificant and within management's expectations.
INVENTORIES
Raw materials and finished goods are stated at the lower of cost or market.
Cost is determined using the last-in, first-out (LIFO) method. Molds used
in the manufacturing process are included in inventory at cost, and are
generally amortized to cost of goods sold over a period not exceeding
eighteen months.
PROPERTY, PLANT AND EQUIPMENT
Depreciation is computed using straight-line and accelerated methods over
the estimated useful lives of the assets ranging from three to ten years.
The building will be depreciated using the straight-line method over
forty years. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is included in income for the period. The
cost of maintenance and repairs is charged to income as incurred; costs
relating to significant renewals and betterments are capitalized.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill, trademarks, patents, debt
issuance costs, and organization costs and are carried at cost less
accumulated amortization. Goodwill is amortized on a straight-line basis
over a period ranging from 15 to 40 years. Debt issuance costs and
organization costs are amortized on a straight-line basis over the debt
term and 5 years, respectively. Trademarks and patents are amortized on
a straight-line basis over 7 to 20 years. The Company evaluates goodwill
and other intangible assets for impairment by analyzing the operating
results, trends and prospects of its acquired businesses as well as
comparing them to competitors. Based upon these evaluations, the Company
has determined that no impairment has occurred.
ADVERTISING COSTS
The Company expenses the cost of advertising when incurred. Sales
materials, such as brochures and catalogues, are expensed as they are
distributed or when they are determined to have no future use. Prepaid
sales materials included in other current assets is $461,000 and $183,600
at March 31, 1996 and 1995, respectively. Advertising expense was $396,300
and $321,600 during the years ended March 31, 1996 and 1995, respectively.
9
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
INCOME TAXES
The Company records income taxes using the liability method which requires
the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the financial
statement and tax basis of assets and liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include long-term debt. The carrying
amount of long-term debt approximates fair value at March 31, 1996 based on
the current rates available to the Company for debt with similar terms.
FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the financial statements at
March 31, 1995 to conform with the March 31, 1996 presentation.
2. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
MARCH 31,
1996 1995
Trade accounts receivable $7,137,200 $5,203,400
Trade notes receivable 117,900
---------- ----------
7,137,200 5,321,300
Less sales discounts reserve (156,000) (130,000)
Less allowance for doubtful accounts (55,000) (117,000)
---------- ----------
$6,926,200 $5,074,300
---------- ----------
---------- ----------
10
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INVENTORIES
Inventories consist of the following:
MARCH 31,
1996 1995
Raw materials $633,300 $720,700
Finished goods 2,504,100 2,412,000
Molds, net 1,842,800 1,392,500
Other 109,100 205,000
---------- ----------
$5,089,300 $4,730,200
---------- ----------
---------- ----------
Under the first-in, first-out (FIFO) method, which approximates current
cost, total inventory would have approximated $4,709,400 and $4,307,500 at
March 31, 1996 and 1995, respectively.
4. OTHER CURRENT ASSETS
Other current assets consist of the following:
MARCH 31,
1996 1995
Worker's compensation insurance refund
receivable $199,100 $146,900
Due from employees 13,500 24,800
Due from shareholders 81,600
Income taxes refundable 134,700
Prepaid sales materials 461,000 183,600
Other 351,800 337,900
---------- ----------
$1,241,700 $693,200
---------- ----------
---------- ----------
11
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
MARCH 31,
1996 1995
Leasehold improvements $673,000 $633,400
Machinery and equipment 3,729,200 2,136,100
Mold masters 944,700 863,700
Vehicles 61,100 82,400
Office equipment 818,100 417,700
Building 525,000
Construction in progress 314,500 361,000
---------- ----------
7,065,600 4,494,300
Less accumulated depreciation (2,620,000) (2,021,300)
---------- ----------
$4,445,600 $2,473,000
---------- ----------
---------- ----------
6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
MARCH 31,
1996 1995
Goodwill $7,003,600 $7,003,600
Debt issuance costs 293,800 293,800
Organization costs 258,800 258,800
Trademarks and patents 108,300 93,700
---------- ----------
7,664,500 7,649,900
Less accumulated amortization (1,278,700) (981,400)
---------- ----------
$6,385,800 $6,668,500
---------- ----------
---------- ----------
12
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
7. OTHER ASSETS
Other assets consist of the following:
MARCH 31,
1996 1995
Investment in Perdura Stone $162,900 $162,900
Workers' compensation insurance refund receivable 193,100
Other 20,500 85,500
-------- --------
$183,400 $441,500
-------- --------
-------- --------
8. DEBT
Until August 1995, the Company had a financing arrangement with a bank
which provided a working capital line of credit and two term loans. The
working capital line of credit permitted borrowings up to a maximum of
$5,500,000 at an interest rate of 1% above the bank's prime rate. The two
term loans provided for borrowings up to $3,750,000 and $750,000,
respectively, at interest rates of 7.75% and 1.5% above the bank's prime
rate, respectively.
In August 1995, the Company renegotiated the terms of the working capital
line of credit and the $750,000 term loan. The terms of these new
financing arrangements and the $3,750,000 term loan are described below.
Under the new working capital line of credit, borrowings equal to the
lesser of $5,500,000 or the borrowing base, consisting of 80% of qualifying
accounts receivable and 36% of inventories up to a maximum of $1,000,000,
are available. Interest, charged on the outstanding balance at .5% above
the bank's prime rate (8.75% at March 31, 1996), is payable monthly. The
Company's trade accounts receivables and inventories are pledged to secure
any balances outstanding under the new arrangement. The Company had
$3,028,600 outstanding under the line of credit at March 31, 1996.
The $750,000 term loan was renegotiated to provide for $2,000,000 of
available borrowings to finance capital equipment requirements. At the
Company's option, interest is charged at either 3% above the bank's cost of
funds, as defined, or .75% above the bank's prime rate (9% at March 31,
1996), and is payable monthly until maturity of the term loan on December
1, 1996. At March 31, 1996, the Company had $50,300 outstanding under this
term loan.
The $3,750,000 term loan requires monthly principal payments of $62,500
until maturity on August 31, 1998. Interest, charged at 7.75%, is payable
monthly. Approximately 24,000 shares of the Company's issued and
outstanding common stock and 51,000 shares of Series A convertible
preferred stock are pledged to secure any balances outstanding. At March
31, 1996, the Company had $1,841,600 outstanding under this term loan.
13
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Aggregate maturities under the term loan agreements are as follows:
YEAR ENDING MARCH 31,
1997 $809,700
1998 758,900
1999 323,300
----------
$1,891,900
----------
----------
The financing arrangements contain covenants which require the Company to
maintain certain minimum financial ratios. The Company was in compliance
with these covenants at March 31, 1996.
9. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
MARCH 31,
1996 1995
Accrued management bonuses and payroll $ 882,000 $ 723,400
Accrued compensation expense 430,000
Vacation and sick pay 363,600 277,100
Accrued payroll taxes 221,400 156,300
Deferred income taxes - current portion 172,000 340,200
Income taxes payable 32,600
Accrued covenant not to compete 185,000 175,000
Other current liabilities 109,000 144,100
---------- ----------
$2,363,000 $1,848,700
---------- ----------
---------- ----------
10. SHAREHOLDERS' EQUITY
The Series A preferred stock has equal voting rights with the Company's
common stock and is convertible into common stock at the option of the
shareholder. The holders of the preferred stock are entitled to receive
non-cumulative dividends whenever funds are legally available and when the
Board of Directors declares a dividend on the common stock. Each share of
Series A convertible preferred stock is convertible to 2.4286 shares
(subject to adjustment) of the Company's common stock and has a liquidation
preference of $142.86 per share plus all declared and unpaid dividends.
14
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
On May 23, 1995, the Company entered into a stock purchase agreement (the
"Stock Agreement") with one of its customers, Kowa, a Japanese corporation,
whereby Kowa acquired a ten percent equity interest in the Company for
$2,463,700, net of issuance costs of $36,300. Pursuant to the Stock
Agreement, Kowa acquired 8,888 shares of the Company's Series B convertible
preferred stock. The Series B preferred stock has equal voting rights with
the Company's common stock and is convertible into common stock at the
option of the shareholder. The holders of the preferred stock are entitled
to receive noncumulative dividends whenever funds are legally available and
when the Board of Directors declares a dividend on the common stock. Each
share of Series B convertible preferred stock is convertible to 2.002 shares
of the Company's common stock, subject to adjustment under certain
conditions, and has a liquidation preference of $281.28 per share plus all
declared and unpaid dividends. Sales to Kowa were $3,487,100 and $1,746,000
during fiscal 1996 and 1995, respectively, and accounts receivable at March
31, 1996 were $539,800.
The liquidation preference of the holders of Series A and Series B
convertible preferred stock are equal in rank. The Series A and Series B
preferred stock will be automatically converted into common stock upon the
consummation of the sale of the Company's common stock (Note 15) or upon
the approval of the majority of holders of outstanding preferred stock.
11. INCOME TAXES
The provision for income taxes consists of the following:
YEAR ENDED MARCH 31,
1996 1995
Current:
Federal $1,073,500 $ 637,000
State 238,200 186,600
---------- ----------
1,311,700 823,600
---------- ----------
Deferred:
Federal (155,200) 40,900
State (9,500) (8,300)
---------- ----------
(164,700) 32,600
---------- ----------
$1,147,000 $ 856,200
---------- ----------
---------- ----------
15
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Deferred tax assets and liabilities consist of the following:
MARCH 31,
1996 1995
Deferred tax assets $ 473,500 $ 273,400
Deferred tax liabilities (750,600) (715,200)
---------- ----------
Net deferred tax liability $ (277,100) $ (441,800)
---------- ----------
---------- ----------
The net deferred income tax liability consists of the following:
MARCH 31,
1996 1995
LIFO inventories $(646,800) $(615,000)
Depreciation (103,800) (100,200)
----------- -----------
Gross deferred tax liabilities (750,600) (715,200)
----------- -----------
Sales discount provision 67,100 56,300
Accrued vacation and sick pay 83,800 46,300
Accrued compensation 186,300
State income taxes 97,300 82,500
Bad debt reserve 20,800 47,600
Other 18,200 40,700
----------- -----------
Gross deferred tax assets 473,500 273,400
----------- -----------
Net deferred tax liability $(277,100) $(441,800)
----------- -----------
----------- -----------
The provision for income taxes differs from the amount computed by applying the
applicable U.S. statutory federal income tax rate to pretax income as a result
of the following differences:
YEAR ENDED MARCH 31,
1996 1995
Federal income taxes at
the U.S. statutory rate 34.0% 34.0%
State income taxes, net of
federal income tax benefit 5.4 5.8
Amortization of goodwill 2.1 2.9
Other (0.8) (0.3)
--------- ---------
40.7% 42.4%
--------- ---------
--------- ---------
16
<PAGE>
12. EMPLOYEE BENEFIT PLANS
SAVINGS PLAN
The Company adopted a 401(k) Savings Plan (the "Savings Plan") on October
1, 1991. The Savings Plan covers substantially all employees who have
achieved one year of service. The Company matches employee contributions
to a maximum of 4% of the employees' compensation. Company contributions
to the Savings Plan were $176,400 and $151,700 for the years ended March
31, 1996 and 1995, respectively.
LONG-TERM INCENTIVE PLAN
The Company has a Long-term Incentive Compensation Plan (the "Incentive
Plan") which provides for the award of units, representing hypothetical
investments in shares of the Company's common stock, to former shareholders
and certain current employees. Awards are based upon increases in the
estimated fair value of the Company, as determined by the Board of
Directors. The units vest over a five year period and are payable at
retirement, death or at the date of any sale of the Company.
As of March 31, 1996, the Company had awarded 6 units in connection with
the Incentive Plan. These units are 80% vested as of March 31, 1996.
Compensation expense related to these awards was approximately $430,000
during fiscal 1996. Compensation expensed related to these awards was not
significant during fiscal 1995.
The value of these units increases upon any sale of the Company, as defined
in the Incentive Plan agreement. On June 5, 1996, the Company's
shareholders entered into a stock purchase agreement with a third party to
sell the capital stock of the Company for $48,500,000 (Note 15).
Management estimates that approximately $2.2 million will be payable to
holders of these units upon closing of the stock purchase agreement.
13. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its principal facility from a former shareholder under a
non-cancelable operating lease which extends through June 30, 2001 and
contains a renewal option for two five-year periods. Under the terms of
the lease, the Company pays rent totaling approximately $516,000 annually.
The Company leases a building in Sacramento, California under a non-
cancelable operating lease which extends through April 1997. Under the
terms of the lease, annual rent of $25,000 is paid quarterly in arrears.
Total rental expense for the years ended March 31, 1996 and 1995 totaled
$718,700 and $681,000, respectively.
17
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
At March 31, 1996, aggregate future minimum lease commitments under non-
cancelable operating leases are as follows:
YEAR ENDING MARCH 31,
1997 $ 709,800
1998 576,800
1999 564,100
2000 564,100
2001 146,100
----------
$2,560,900
----------
----------
PURCHASE COMMITMENTS
In March 1996, the Company entered into a purchase commitment of $252,000
for production equipment to expand its manufacturing facility located in
Napa, California.
LITIGATION
The Company is subject to litigation in the ordinary course of business.
In the opinion of management, there is no existing litigation that would
have a material adverse effect on the Company's financial position, results
of operations or cash flows.
14. SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED MARCH 31,
1996 1995
Cash payments for:
Interest $ 322,700 $ 507,600
---------- ----------
---------- ----------
Income taxes $1,479,000 $978,200
---------- ----------
---------- ----------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
The Company acquired all of the outstanding capital stock of Carriage Hill
Stone Company for $300,000 in March 1995. In conjunction with the
acquisition, assets were acquired and liabilities were assumed as follows:
Estimated fair value of assets acquired $ 729,600
Cash paid for the capital stock (300,000)
----------
Liabilities assumed $ 429,600
----------
----------
18
<PAGE>
STONE PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
15. SUBSEQUENT EVENT
On June 5, 1996, the Company's shareholders entered into a stock purchase
agreement with a third party, Fibreboard Corporation ("Fibreboard"),
whereby Fibreboard will purchase all of the capital stock of the Company
for $48,500,000, less certain costs, as defined, including amounts payable
under the Incentive Plan (Note 12). The purchase price is subject to an
adjustment to the extent that shareholders' equity at June 30, 1996 differs
from $13,957,000. The purchase is expected to close on July 1, 1996.
19
<PAGE>
FIBREBOARD CORPORATION
Pro Forma Combined Balance Sheet
Reflecting the Acquisition of Stone Products Corporation
As of March 31, 1996
(Unaudited)
(in 000's)
<TABLE>
<CAPTION>
Fibreboard Stone Pro forma Adj. Pro forma
Corporation Products Adjustments Key Combined
----------- -------- ----------- ---- ---------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash 41,438 20 41,458
Receivables 49,716 6,926 429 (1) 57,071
Current portion notes receivable 2,042 2,042
Inventories 62,534 5,089 1,312 (1,2) 68,935
Other current assets 15,879 1,242 (1,402) (1,6) 15,719
----------- -------- ----------- ---------
Total current assets 171,609 13,277 339 185,225
Property, plant and equipment, net 100,544 4,446 741 (3) 105,731
Notes receivable 6,007 6,007
Goodwill 90,211 6,386 33,819 (4) 130,416
Other assets 17,176 183 93 (1) 17,452
----------- -------- ----------- ---------
Total operating assets 385,547 24,292 34,992 444,831
Asbestos-related assets 825,804 825,804
----------- -------- ----------- ---------
Total assets 1,211,351 24,292 34,992 1,270,635
----------- -------- ----------- ---------
----------- -------- ----------- ---------
Current liabilities:
Notes payable to bank 1,760 3,028 (3,028) (5) 1,760
Current portion of debt 1,344 810 (810) (5) 1,344
Accounts payable and accruals 64,843 5,635 (172) (1) 70,306
Reserve for asbestos-related costs 2,700 2,700
----------- -------- ----------- ---------
Total current liabilities 70,647 9,473 (4,010) 76,110
Long-term debt 29,356 1,082 52,338 (5) 82,776
Reserve for asbestos-related costs 8,245 8,245
Other long-term liabilities 11,881 11,881
Deferred income taxes 13,986 105 296 (6) 14,387
----------- -------- ----------- ---------
Total operating liabilities 134,115 10,660 48,624 193,399
Minority interest 191 191
Asbestos-related liabilities 831,401 831,401
Stockholders' equity 245,644 13,632 (13,632) (7) 245,644
----------- -------- ----------- ---------
Total liabilities and stockholders' equity 1,211,351 24,292 34,992 1,270,635
----------- -------- ----------- ---------
----------- -------- ----------- ---------
</TABLE>
See accompanying notes.
20
<PAGE>
FIBREBOARD CORPORATION
Pro Forma Combined Income Statement
Reflecting the Acquisition of Stone Products Corporation
Year Ended December 31, 1995
(Unaudited)
(in 000's, except per share data)
<TABLE>
<CAPTION>
Fibreboard Stone Pro forma Adj. Pro forma
Corporation Products Adjustments Key Combined
----------- -------- ----------- ---- ---------
<S> <C> <C> <C> <C> <C>
Net sales 380,806 34,154 414,960
Cost of sales (278,556) (18,742) (72) (a) (297,370)
----------- -------- ----------- ---------
Gross margin 102,250 15,412 (72) 117,590
Selling and administrative costs (76,909) (12,109) (89,018)
Goodwill amortization (2,370) (181) (1,159) (a) (3,710)
Asbestos-related items 4,000 4,000
Interest expense, net (6,476) (333) (3,451) (b) (10,260)
Interest and other income 3,101 32 3,133
----------- -------- ----------- ---------
Income from continuing operations
before income taxes 23,596 2,821 (4,682) 21,735
Income taxes (9,072) (1,147) 1,355 (c) (8,864)
----------- -------- ----------- ---------
Income from continuing operations 14,524 1,674 (3,327) 12,871
----------- -------- ----------- ---------
----------- -------- ----------- ---------
Earnings per share from continuing
operations: 1.62 1.43
----------- -------- ----------- ---------
----------- -------- ----------- ---------
Common equivalent shares outstanding: 8,979 8,979
</TABLE>
See accompanying notes.
21
<PAGE>
FIBREBOARD CORPORATION
Pro Forma Combined Income Statement
Reflecting the Acquisition of Stone Products Corporation
Three Months Ended March 31, 1996
(Unaudited)
(in 000's, except per share data)
<TABLE>
<CAPTION>
Fibreboard Stone Pro forma Adj. Pro forma
Corporation Products Adjustments Key Combined
----------- -------- ----------- ---- ---------
<S> <C> <C> <C> <C> <C>
Net sales 111,112 9,302 120,414
Cost of sales (77,036) (5,226) (18) (a) (82,280)
----------- -------- ----------- ---- ---------
Gross margin 34,076 4,076 (18) 38,134
Selling and administrative costs (24,340) (3,651) (27,991)
Goodwill amortization (770) (45) (290) (a) (1,105)
Interest expense, net (622) (73) (806) (b) (1,501)
Interest and other income 284 7 291
----------- -------- ----------- ---- ---------
Income before income taxes 8,628 314 (1,114) 7,828
Income taxes (3,451) (89) 275 (c) (3,265)
----------- -------- ----------- ---- ---------
Net income 5,177 225 (839) 4,563
----------- -------- ----------- ---- ---------
----------- -------- ----------- ---- ---------
Earnings per share: 0.58 0.51
Common equivalent shares outstanding: 8,883 8,883
</TABLE>
See accompanying notes.
22
<PAGE>
FIBREBOARD CORPORATION
Notes to Pro Forma Combined Financial Statements
Reflecting the Acquisition of Stone Products Corporation
(Unaudited)
(In 000's)
1. Principles of Presentation:
On July 1, 1996 Fibreboard Corporation (Fibreboard) acquired all of the
outstanding stock of Stone Products Corporation (Stone), a manufacturer of stone
building products for $48,500 in cash, subject to purchase price adjustments and
the assumption of debt. The allocation of purchase price resulted in goodwill
of approximately $40,200 which will be amortized over 30 years.
The unaudited pro forma combined balance sheet as of March 31, 1996 gives
effect to the transaction as though it had occurred on March 31, 1996 and is
based on the historical balance sheet of Fibreboard as of March 31, 1996 and
the historical balance sheet of Stone as of March 31, 1996.
The unaudited pro forma combined income statements for the year ended December
31, 1995 and the three months ended March 31, 1996 give effect to the
transaction as though it had occurred on January 1, 1995 and January 1, 1996.
The pro forma combined income statements are based on the historical income
statements of Fibreboard for the year ended December 31, 1995 and for the three
months ended March 31, 1996, and the historical income statements of Stone for
the year ended March 31, 1996 and the three months ended March 31, 1996. In
addition, certain amounts contained in the financial statements of Stone have
been reclassified to conform with Fibreboard's presentation.
The unaudited pro forma combined financial statements give effect to the
acquisition transaction using the purchase method of accounting and the
adjustments described in Note 2.
Because the pro forma statements include only the adjustments described in Note
2, they should not be considered indicative of the results that would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. No attempt has been made to quantify in the pro
forma statements additional costs which may be incurred as a result of the
combination.
The pro forma statements should be read in conjunction with the consolidated
financial statements of Fibreboard and Stone.
23
<PAGE>
FIBREBOARD CORPORATION
Notes to Pro Forma Combined Financial Statements
Reflecting the Acquisition of Stone Products Corporation
(Unaudited)
(In 000's)
2. Pro Forma Adjustments:
The following adjustments are incorporated in the pro forma combined income
statements:
Inc/(Dec) Reported Inc/(Dec) Reported
Year Ended Quarter Ended
12/31/95 3/31/96
-------- -------
a. Adjust depreciation and
amortization to reflect revised basis of
property, plant and equipment and (1,231) (308)
revised goodwill amortization.
b. Adjust interest expense to reflect
the acquisition as if it had been
purchased with Fibreboard's credit (3,451) (806)
facility at rates which would have
been in effect.
c. Adjust income tax provision to
consider items a. and b. above. 1,355 275
The following adjustments are incorporated in the pro forma combined balance
sheet:
1. Reclass amounts to conform with Fibreboard's presentation.
2. Adjust inventories to net realizable value.
3. Adjust property, plant and equipment to appraised fair market value.
4. Adjust goodwill to reflect the excess of the purchase price of Stone over
the net assets acquired.
5. Adjust debt to reflect the acquisition as though financed with Fibreboard's
credit facility and the payment of Stone's outstanding indebtedness
subsequent to acquisition.
6. Adjust deferred income taxes to reflect the increase in the financial basis
of assets acquired as compared to their tax basis.
7. Adjust stockholders' equity to reflect Stone as a wholly-owned subsidiary.
24
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-60412, No. 33-26449 and No. 33-26450) of
Fibreboard Corporation of our report dated June 12, 1996 relating to the
consolidated financial statements of Stone Products Corporation appearing on
page 4 of this Form 8-K/A.
/s/ PRICE WATERHOUSE LLP
San Francisco, California
August 8, 1996
25
