<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 ON
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): AUGUST 19, 1999
POLYVISION CORPORATION
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
NEW YORK 1-10555 13-3482597
- ---------------------------- ------------ -------------------
<S> <C> <C>
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
</TABLE>
4888 SOUTH OLD PEACHTREE ROAD, NORCROSS, GEORGIA 30071
------------------------------------------------ -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 447-5043
--------------
<PAGE>
CURRENT REPORT ON FORM 8-K/A
POLYVISION CORPORATION
August 19, 1999
This Amendment No. 1 amends Item 7 of the Current Report on Form 8-K dated
August 19, 1999 (the "Current Report"), of PolyVision Corporation
("PolyVision"), a New York corporation (the "Company"), filed with the
Securities and Exchange Commission on September 3, 1999, relating to the
Company's acquisition of A. Lawer Corporation, also known as Nelson Adams
("NACO"), to include the information set forth below:
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
In accordance with Item 7(a), attached as Exhibit 99.2 are the audited
balance sheets of NACO as of December 31, 1998 and 1997 and the related
audited statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1998, 1997 and 1996 and the accompanying notes.
Attached as Exhibit 99.3 are the unaudited balance sheets of NACO as of June
30, 1999 and December 31, 1998 and the related unaudited statements of
operations and cash flows for the six months ended June 30, 1999 and 1998 and
the accompanying notes.
(b) PRO FORMA FINANCIAL INFORMATION.
In accordance with Item 7(b), attached as Exhibit 99.4 are the unaudited pro
forma financial statements and accompanying notes for PolyVision and NACO
combined. The pro forma financial information included herein reflects the
pro forma effects of the acquisitions of Alliance International Group
("Alliance"), acquired on November 20, 1998 and NACO, acquired on August 19,
1999 as if such transactions had occurred on January 1, 1998. Such pro forma
financial statements (including appropriate pro forma adjustments) reflect
(a) the condensed consolidated statement of operations of PolyVision for the
eight months ended December 31, 1998 (see the consolidated financial
statements of PolyVision on Form 10-K for the eight month period ended
December 31, 1998), the unaudited condensed consolidated statement of
operations of PolyVision for the four months ended April 30, 1998, the
unaudited condensed statement of operations of Alliance for the ten months
ended October 31, 1999 and the audited condensed statement of operations of
NACO for the fiscal year ended December 31, 1998, and (b) the unaudited
condensed consolidated balance sheet and statement of operations of
PolyVision as of June 30, 1999 and for the six months then ended combined
with the unaudited condensed consolidated balance sheet and statement of
operations of NACO as of June 30, 1999 and for the six months then ended.
<PAGE>
The unaudited pro forma balance sheet of PolyVision at June 30, 1999 and the
pro forma statements of operations are based upon preliminary estimates of
values, transaction costs, and preliminary appraisals associated with
PolyVision's acquisition of NACO. The actual recording of the transactions
will be based on final appraisals, values and transaction costs. Accordingly,
the actual recording of the transactions can be expected to differ from the
financial statements presented herein.
The pro forma statements of operations do not necessarily represent the
results of operations that might have occurred had the transactions been
consummated as of the dates referred to above, nor are they necessarily
indicative of future operations of PolyVision. Such pro forma statements
should be read in conjunction with the Consolidated Financial Statements of
PolyVision filed in its most recent report on Form 10-K, together with the
respective notes thereto.
(c) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
99.2 Audited balance sheets of NACO as of December 31, 1998 and
1997 and the related audited statements of income,
stockholders' equity, and cash flows for the years ended
December 31, 1998, 1997 and 1996 and the accompanying notes.
99.3 Unaudited balance sheet of NACO as of June 30, 1999 and
December 31, 1998 and the related unaudited statements of
operations and cash flows for the six month periods ended
June 30, 1999 and 1998.
99.4 Unaudited pro forma financial statements and accompanying
notes for PolyVision, Alliance, and NACO combined.
</TABLE>
<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 hereunto duly authorized.
POLYVISION CORPORATION
Dated: November 2, 1999 By: /s/ GARY L. EDWARDS
---------------------------------
Gary L. Edwards
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
99.2 Audited balance sheets of NACO as of December 31, 1998 and
1997 and the related audited statements of income, stockholders'
equity, and cash flows for the years ended December 31, 1998,
1997 and 1996 and the accompanying notes.
99.3 Unaudited balance sheet of NACO as of June 30, 1999 and
December 31, 1998 and the related unaudited statements of
operations and cash flows for the six month periods ended June 30,
1999 and 1998.
99.4 Unaudited pro forma financial statements and accompanying
notes for PolyVision, Alliance, and NACO combined.
</TABLE>
<PAGE>
Exhibit 99.2
A. LAWER CORPORATION
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998, 1997, AND 1996
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To A. Lawer Corporation:
We have audited the accompanying balance sheets of A. LAWER CORPORATION (a
California corporation) as of December 31, 1998 and 1997 and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998. 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 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 audits provide 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 A. Lawer Corporation as of
December 31, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 15, 1999
<PAGE>
A. LAWER CORPORATION
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
------------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,307 $ 121,875
Trade accounts receivable, net of allowance for doubtful accounts of
$57,600 and $77,400 in 1998 and 1997, respectively 4,742,560 2,994,127
Inventories 2,143,014 1,582,098
Costs and estimated earnings in excess of billings on uncompleted
contracts 871,494 705,910
Prepaid expenses and other current assets 70,428 47,017
------------- -----------
Total current assets 7,830,803 5,451,027
------------- -----------
VEHICLES, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS, NET
996,319 1,061,097
------------- -----------
OTHER ASSETS:
Goodwill, net 65,934 72,967
Other assets 8,236 46,112
------------- -----------
Total other assets 74,170 119,079
------------- -----------
Total assets $8,901,292 $6,631,203
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 833,812 $ 617,954
Trade accounts payable 1,846,929 1,568,331
Stockholder distributions payable 288,600 0
Accrued expenses 1,364,826 1,066,206
Billings in excess of costs and estimated earnings on uncompleted
contracts 667,797 540,915
------------- -----------
Total current liabilities 5,001,964 3,793,406
------------- -----------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 801,627 893,884
------------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 1,000 shares issued
and outstanding in 1998 and 1997 0 0
Contributed capital 280,000 280,000
Retained earnings 2,817,701 1,663,913
------------- -----------
Total stockholders' equity 3,097,701 1,943,913
------------- -----------
Total liabilities and stockholders' equity $8,901,292 $6,631,203
============= ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
A. LAWER CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $26,973,535 $22,974,301 $16,174,173
COST OF SALES 19,752,052 17,987,710 13,096,141
----------- ----------- -----------
GROSS PROFIT 7,221,483 4,986,591 3,078,032
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 4,941,336 3,479,682 2,424,265
----------- ----------- -----------
INCOME FROM OPERATIONS 2,280,147 1,506,909 653,767
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest expense (191,191) (166,319) (110,439)
Interest income 148 1,860 2,344
Miscellaneous income (expense) (19,140) 1,400 (3,837)
----------- ----------- -----------
Total other expenses (210,183) (163,059) (111,932)
----------- ----------- -----------
NET INCOME $ 2,069,964 $ 1,343,850 $ 541,835
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
A. LAWER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
NUMBER CONTRIBUTED RETAINED
OF SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- ----- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 1,000 $0 $280,000 $ 870,481 $ 1,150,481
Distributions to stockholders 0 0 0 (281,592) (281,592)
Net income 0 0 0 541,835 541,835
-------- ----- ------------ ---------- ----------
BALANCE, DECEMBER 31, 1996 1,000 0 280,000 1,130,724 1,410,724
Distributions to stockholders 0 0 0 (810,661) (810,661)
Net income 0 0 0 1,343,850 1,343,850
-------- ----- ------------ ---------- ----------
BALANCE, DECEMBER 31, 1997 1,000 0 280,000 1,663,913 1,943,913
Distributions to stockholders 0 0 0 (916,176) (916,176)
Net income 0 0 0 2,069,964 2,069,964
-------- ----- ------------ ---------- ----------
BALANCE, DECEMBER 31, 1998 1,000 $0 $280,000 $2,817,701 $3,097,701
======== ===== ============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
A. LAWER CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,069,964 $1,343,850 $ 541,835
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization expense 274,181 255,828 169,964
Loss (gain) on sale of assets 60,054 (1,400) 3,837
Changes in assets and liabilities, net of effects of
acquisition:
Accounts receivable (1,748,433) (740,892) (188,523)
Inventory (560,916) (197,574) (1,787)
Other assets (151,119) (335,547) (141,207)
Trade accounts payable 278,598 244,343 346,173
Accrued expenses 298,620 354,975 236,424
Other liabilities 126,882 227,184 109,806
---------- ---------- -----------
Net cash provided by operating activities 647,831 1,150,767 1,076,522
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of vehicles, equipment and leasehold improvements (269,008) (573,854) (293,665)
Purchase of business 0 0 (91,789)
Proceeds from sale of vehicles and equipment 6,584 6,441 38,194
---------- ---------- -----------
Net cash used in investing activities (262,424) (567,413) (347,260)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) on line of credit, net 126,669 99,840 (145,000)
Repayments on stockholders, and related-party loans (24,001) (20,134) (20,011)
Borrowings on stockholders, and related-party loans 65,443 0 0
Proceeds from long-term debt 64,648 47,575 38,909
Repayments on long-term debt (109,158) (103,852) (82,852)
Distributions to stockholders (627,576) (810,661) (281,592)
---------- ---------- -----------
Net cash used in financing activities (503,975) (787,232) (490,546)
---------- ---------- -----------
NET CHANGE IN CASH (118,568) (203,878) 238,716
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 121,875 325,753 87,037
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,307 $ 121,875 $ 325,753
---------- ---------- -----------
---------- ---------- -----------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 191,191 $ 166,319 $ 110,439
---------- ---------- -----------
---------- ---------- -----------
NONCASH INVESTING ACTIVITIES:
Acquisition of business:
Assets $ 91,789
Liabilities assumed 0
-----------
NET CASH PAID $ 91,789
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
A. LAWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
1. NATURE OF BUSINESS
A. Lawer Corporation (the "Company"), which was incorporated in 1991, is a
national manufacturer and distributor of visual display products based in
Corona, California. The Company's products are marketed principally to
schools and commercial customers by a direct bidding process and through a
network of distributors.
The Company operates from three manufacturing facilities in Corona,
California; Indiana, Pennsylvania; and Pompano Beach, Florida. The Company
also has sales offices strategically located throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain 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. Accordingly, actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity at
acquisition of 90 days or less are considered to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market value, determined on
the first-in, first-out basis. Market is net realizable value for finished
goods and replacement cost for raw materials and work in process.
Inventories at December 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Raw materials $1,671,180 $1,531,389
Work in progress 318,128 21,773
Finished goods 153,706 28,936
---------- ----------
$2,143,014 $1,582,098
---------- ----------
---------- ----------
</TABLE>
<PAGE>
-2-
VEHICLES AND EQUIPMENT
Vehicles and equipment are stated at cost, less accumulated depreciation
and amortization. Expenditures for maintenance and repairs are charged
against operations. Renewals and betterments that materially extend the
lives of the assets are capitalized.
Depreciation is computed using the straight-line method based on the
estimated useful lives of the various assets. The estimated useful lives
of the assets are as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
USEFUL LIVES
-----------------------
<S> <C>
Vehicles Five years
Office furniture and equipment Five-seven years
Shop equipment Seven years
Leasehold improvements Up to ten years
</TABLE>
INTANGIBLE ASSETS
GOODWILL
The excess of the purchase price over the fair value of the net
identifiable assets of the businesses acquired is amortized
ratably over 15 years. The Company reviews goodwill to assess
recoverability whenever events or changes in circumstances
indicate that its carrying value may not be recoverable. In
performing such reviews, the Company estimates the future cash
flows expected to result from each entity. If the sum of the
expected future cash flows (undiscounted and without interest
charges) were to be less than the carrying amount, an impairment
loss would be recognized based on the difference between carrying
values and estimated fair market value. As a result of such
reviews, no impairment loss has been recognized. Accumulated
amortization of goodwill at December 31, 1998 and 1997 was
approximately $40,000 and $33,000, respectively.
COVENANTS NOT TO COMPETE
Covenants not to compete were recorded in connection with the
business acquisitions at a cost of $410,000. Amortization was
computed on a straight-line basis over the contractual period of
three years. The covenants were fully amortized at December 31,
1997.
COMPREHENSIVE INCOME
The Company reports comprehensive income in the statements of
operations. Net income is the sole component of comprehensive income.
INCOME TAXES
The Company, with the consent of its stockholders, elected to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company does not pay federal or state corporate
income taxes on its taxable income and is not allowed a net operating loss
carryforward or carryback as a deduction. Instead, the stockholders are
liable for individual federal income taxes on their respective shares of
the Company's taxable income and include their respective shares of the
Company's net operating loss in their individual income tax returns.
Accordingly, no provision for federal or state income taxes has been
included in these financial statements. Certain states impose a franchise
tax on the taxable income of the Company. Such
<PAGE>
-3-
taxes are included in selling, general, and administrative expenses on the
accompanying statements of operations.
The Company customarily makes cash distributions from earnings to the
stockholders for their liability arising from the taxable income passed
through to them.
WARRANTY CLAIMS
Provisions for warranty claims are recorded based on historical experience
(Note 4).
MEDICAL INSURANCE
During April 1998, the Company became partially self-insured for medical
and dental claims. The Company has accrued for its medical claims based on
an assessment of claims outstanding as well as an estimate, based on
experience, of incurred medical claims which have not yet been reported.
REVENUE RECOGNITION
The Company's revenues are from sales of specific products and
construction of custom installations under contracts. Revenues from sales
from specific products are recorded when title transfers, which is
typically when shipment occurs. Revenues from contracts are recorded on
the percentage-of-completion method of accounting, measured on the basis
of costs incurred to estimated total costs, which approximates contract
performance to date. Approximately 57%, 63%, and 65% of the Company's
revenues and approximately 54%, 58%, and 63% of the related costs of
revenue were from contracts for the years ended December 31, 1998, 1997,
and 1996, respectively. Provisions for losses on uncompleted contracts are
made in the period in which it is determined that a contract will
ultimately result in a loss.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of long-term debt approximate fair value based on the
borrowing rates currently available to the Company for loans with similar
terms and average maturities.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of trade receivables. The
Company's concentration of credit risk within the construction industry is
somewhat mitigated by the large number of customers comprising the
Company's customer base and their geographical dispersion. In addition, a
majority of the Company's revenue is derived from educational
institutions. Most public school projects require performance bonds from
general contractors that allow the Company to make bond claims or file
liens in the event of nonpayment for bonafide contract work performed.
Ultimately, the taxing authority of municipalities and public school
districts provides much of the funding for the Company's business. In
the opinion of management, no concentration of credit risk exists at
December 31, 1998 and 1997.
<PAGE>
-4-
3. VEHICLES, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Vehicles, equipment, and leasehold improvements are as follows at December
31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Vehicles $ 293,817 $ 248,830
Office furniture and equipment 403,459 363,082
Shop equipment 458,814 437,793
Leasehold improvements 548,823 485,897
------------ -----------
1,704,913 1,535,602
Less accumulated depreciation and amortization (708,594) (474,505)
------------ -----------
Vehicles, equipment, and leasehold improvements, net $ 996,319 $1,061,097
------------ -----------
------------ -----------
</TABLE>
Deprecation and amortization expense for the years ended December 31,
1998, 1997, and 1996 was approximately $267,000, $214,000, and $153,000,
respectively.
4. ACCRUED EXPENSES
Accrued expenses are as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Accrued salaries, wages, and benefits $ 593,658 $ 484,523
Accrued warranty 198,128 173,173
Accrued pension cost (Note 9) 150,987 121,235
Other 422,053 287,275
---------- ----------
$1,364,826 $1,066,206
---------- ----------
---------- ----------
</TABLE>
5. CONTRACTS IN PROGRESS
The status of contract costs on uncompleted construction contracts was as
follows at December 31, 1998:
<TABLE>
<CAPTION>
COSTS AND BILLINGS IN
ESTIMATED EXCESS OF
EARNINGS IN COSTS AND
EXCESS OF ESTIMATED
BILLINGS EARNINGS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Cost and estimated earnings $ 2,663,385 $ 1,347,570 $ 4,010,955
Billings 1,791,891 2,015,367 3,807,258
----------- ----------- -----------
$ 871,494 $ (667,797) $ 203,697
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
-5-
The status of contract costs on uncompleted construction contracts was as
follows at December 31, 1997:
<TABLE>
<CAPTION>
COSTS AND BILLINGS IN
ESTIMATED EXCESS OF
EARNINGS IN COSTS AND
EXCESS OF ESTIMATED
BILLINGS EARNINGS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Cost and estimated earnings $ 2,157,341 $ 1,091,532 $ 3,248,873
Billings 1,451,431 1,632,447 3,083,878
----------- ----------- -----------
$ 705,910 $ (540,915) $ 164,995
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Accounts receivable at December 31, 1998 and 1997 included amounts billed
but not yet paid by customers under retainage provisions of approximately
$1,069,000 and $546,000, respectively. Such amounts are generally due
within one year.
6. ACQUISITION OF AKI SYSTEMS
On September 16, 1996, the Company purchased certain assets of A.K.I. Inc.
("AKI") for approximately $947,000, payable in the form of a $200,000
promissory note due in 2001, a $200,000 promissory note due in 1997, a
$455,000 note payable due in 2001, and $92,000 in cash. Following the
purchase, AKI became a division of the Company.
The acquisition was accounted for using the purchase accounting method,
and accordingly, the results of operations of AKI were included in the
financial statements on a prospective basis from the date of the
acquisition. The purchase price was allocated based on the fair values of
the assets acquired at the date of the acquisition. The excess of the
purchase price over the assets acquired was approximately $30,000 and is
being amortized on a straight-line basis over 15 years.
7. DEBT
Debt consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Revolving line of credit $ 226,510 $ 99,840
Note payable to a bank, payable in monthly installments of $9,688 including
interest at the bank's reference rate plus 1% (currently 9.25%), final
payment due October 2001, secured by a UCC-1 filing covering certain
assets, personally guaranteed by the stockholders, includes subordination
of stockholders' loans 280,408 364,417
</TABLE>
<PAGE>
-6-
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Note payable to a bank, payable in monthly installments of $622 including
interest at 9%, final payment due August 2002, collateralized by a vehicle 23,247 28,548
Note payable to a bank, payable in monthly installments of $413 including
interest at 8.75%, final payment due May 2001, collateralized by a vehicle 10,756 14,586
Note payable to a bank, payable in monthly installments of $390 including
interest at 8.75%, final payment due April 2001, collateralized by a
vehicle 9,849 13,494
Note payable to a bank, payable in monthly installments of $443 including
interest at 9.75%, final payment due April 2001, collateralized by a
vehicle 11,074 15,112
Two notes payable to a bank, payable in monthly installments of $610 each
including interest at 9%, final payment due May 2001, collateralized by two
vehicles 35,010 0
Note payable to a bank, payable in monthly installments of $663 including
interest at 7.5%, final payment due December 2001, collateralized by a truck 21,302 0
--------- -------
618,156 535,997
Notes to stockholders and related party (Note 10) 1,017,283 975,841
--------- -------
Total debt 1,635,439 1,511,838
Less current portion (833,812) (617,954)
--------- -------
Long-term debt $ 801,627 $ 893,884
--------- -------
--------- -------
</TABLE>
The line-of-credit agreement, as amended, allows the Company to borrow up
to $2,000,000. Interest is calculated at the bank's reference rate plus
.5% (8.25% at December 31, 1998) and is payable monthly.
The line of credit is collateralized by substantially all of the assets of
the Company and matured April 30, 1999. Subsequent to April 30, 1999, the
company extended the maturity date of the line of credit to October 31,
1999. In connection with the acquisition discussed in Note 12, the
outstanding balance on the line of credit was repaid as part of the
acquisition. In addition, the line of credit contains restrictive
covenants which, among other things, require the Company to maintain a
minimum tangible net worth, as defined, and to maintain certain financial
ratios, as defined. Other restrictions include limitations on
indebtedness and investments. The Company was in compliance with the
restrictive covenants at December 31, 1998 and 1997. At December 31, 1998,
available borrowings were approximately $1,774,000.
<PAGE>
-7-
At December 31, 1998, the scheduled maturity of long-term debt, including
stockholders' and related-party debt, is as follows:
<TABLE>
<S> <C>
1999 $ 833,812
2000 315,715
2001 106,187
2002 179,725
Thereafter 200,000
----------
$1,635,439
----------
----------
</TABLE>
8. ADVERTISING COSTS
The Company expenses advertising costs when they are incurred. Advertising
expense amounted to approximately $226,000, $155,000, and $134,000 in
1998, 1997, and 1996, respectively.
9. EMPLOYEE BENEFIT PLANS
Effective January 1, 1996, the Company offered substantially all of its
nonunion employees a qualified contributory 401(k) plan. Participation is
based on years of service and provides for full vesting after five years.
The Company's annual funding is discretionary and limited to the maximum
amount deductible for federal tax purposes. The Company's contributions to
the 401(k) plan for the years ended December 31, 1998, 1997, and 1996 were
approximately $150,000, $121,000, and $42,000, respectively.
A number of the Company's employees are covered by union-sponsored,
collectively bargained multiemployer pension plans. The Company
contributed and charged to expense approximately $453,000, $430,000, and
$297,000 for the years ended December 31, 1998, 1997, and 1996,
respectively. These contributions are determined in accordance with the
provisions of the negotiated labor contracts and are generally based on
the number of man-hours worked.
10. RELATED-PARTY TRANSACTIONS
Notes to stockholders and related party as of December 31, 1998 and 1997
consisted of the following:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Stockholders:
Unsecured note payable to stockholders with principal and interest on
demand, with interest at 10% per annum $ 256,894 $256,894
Unsecured note payable to stockholders with principal and interest on
demand, with interest at 10% per annum 130,000 130,000
</TABLE>
<PAGE>
-8-
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Unsecured note payable to a stockholder due June 6, 2000, with interest at
10% per annum $ 170,000 $170,000
Unsecured note payable to stockholders due October 15, 2002, with interest
at 10% per annum 176,399 176,399
Unsecured note payable to stockholders due August 19, 1999, with interest
at 10% per annum 65,443 0
Unsecured note payable to stockholders due August 28, 2006, with interest
at 10% per annum 200,000 200,000
----------- ----------
998,736 933,293
Related party:
Unsecured note payable to Michael and Marcella Lawer, due in monthly
installments of $2,125, including interest at 10%, final payment due
October 20, 1999 18,547 42,548
----------- ----------
$1,017,283 $975,841
----------- ----------
----------- ----------
</TABLE>
The Company leases three manufacturing facilities and three sales offices
from related parties under noncancelable operating leases which expire at
various times through 2016. Rental expense under these noncancelable
leases amounted to approximately $368,000, $209,000, and $60,000 in 1998,
1997, and 1996, respectively (Note 11).
In the opinion of management, the terms of these leases and the interest
rates on the stockholders' and related-party notes are as favorable as
those which could be obtained from unrelated lessors and creditors.
11. COMMITMENTS AND CONTINGENCIES
The Company conducts its operations from facilities and sales offices that
are leased under noncancelable operating leases in various locations
ranging from 6 months to 18 years. The Company also leases vehicles and
equipment under operating leases that expire over the next one to three
years. Annual rentals under these leases, including related-party leases,
were approximately $494,000, $372,000, and $211,000 for 1998, 1997, and
1996, respectively. Future minimum lease payments under noncancelable
leases, including related-party leases, at December 31, 1998 are as
follows:
<PAGE>
-9-
<TABLE>
<S> <C>
1999 $ 538,430
2000 454,061
2001 361,846
2002 286,816
Thereafter 2,686,760
----------
$4,327,913
----------
----------
</TABLE>
Approximately 24% of the Company's total labor force is covered by
collective bargaining agreements. Five collective bargaining agreements
representing 24% of the Company's total labor force will expire within one
year. In connection with the acquisition discussed in Note 12, the Company
entered into new collective bargaining agreements with its labor force
expiring in 2001.
The Company is subject to routine lawsuits incidental to its business. In
the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or
threatened litigation, claims, and assessments will have no material
adverse effect on the Company's consolidated financial position,
liquidity, or results of operations.
12. SUBSEQUENT EVENT
On August 19, 1999, all of the outstanding stock of the Company was
purchased by PolyVision Corporation ("PolyVision"), a New York
corporation, for approximately $30,000,000 in a combination of cash and
preferred stock of PolyVision. The transaction will be accounted for as a
purchase, and as such, the purchase price will be allocated based on the
fair values of the assets and liabilities at the date of the acquisition.
<PAGE>
EXHIBIT 99.3
A. LAWER CORPORATION
INTERIM FINANCIALS AS OF
JUNE 30, 1999 AND 1998
<PAGE>
A. LAWER CORPORATION
BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,274 $ 3,307
Trade accounts receivable, net of allowance for doubtful accounts
of $125,000 and $57,600 at 1999 and 1998, respectively 6,815,648 4,742,560
Inventories 3,739,393 2,143,014
Costs and estimated earnings in excess of billings on uncompleted
contracts 949,928 871,494
Prepaid expenses and other current assets 176,562 70,428
--------------- ---------------
Total current assets 11,703,805 7,830,803
--------------- ---------------
VEHICLES, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS,
NET
926,442 996,319
--------------- ---------------
OTHER ASSETS:
Goodwill, net 62,363 65,934
Other assets 9,524 8,236
--------------- ---------------
Total other assets 71,887 74,170
--------------- ---------------
Total assets $12,702,134 $ 8,901,292
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,605,511 $ 833,812
Trade accounts payable 3,618,113 1,846,929
Accrued expenses 1,261,591 1,364,826
Billings in excess of costs and estimated earnings on uncompleted
contracts 727,890 667,797
--------------- ---------------
Total current liabilities 8,213,105 5,001,964
--------------- ---------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 1,041,198 801,627
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 1,000 shares issued
and outstanding in 1999 and 1998 0 0
Contributed capital 280,000 280,000
Retained earnings 3,167,831 2,817,701
--------------- ---------------
Total stockholders' equity 3,447,831 3,097,701
--------------- ---------------
Total liabilities and stockholders' equity $12,702,134 $ 8,901,292
=============== ===============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
A. LAWER CORPORATION
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
NET SALES $13,665,503 $12,332,472
COST OF SALES 9,317,368 8,932,609
--------------- ---------------
GROSS PROFIT 4,348,135 3,399,863
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 2,767,441 2,422,672
--------------- ---------------
INCOME FROM OPERATIONS 1,580,694 977,191
--------------- ---------------
OTHER INCOME (EXPENSES):
Interest expense (66,004) (66,258)
Miscellaneous income - 12,639
--------------- ---------------
Total other expenses (66,004) (53,619)
--------------- ---------------
NET INCOME $ 1,518,325 $ 923,572
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
A. LAWER CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,518,325 $ 923,572
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization expense 138,988 137,231
Changes in assets and liabilities:
Accounts receivable (2,073,088) (2,485,232)
Inventory (1,596,379) (1,680,622)
Other assets (187,938) (67,198)
Trade accounts payable 1,771,184 2,645,910
Accrued expenses (103,235) 271,790
Other liabilities 60,093 48,682
--------------- ---------------
Net cash used in operating activities (472,050) (205,867)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of vehicles, equipment and leasehold improvements (63,458) (120,137)
--------------- ---------------
Net cash used in investing activities (63,458) (120,137)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on line of credit, net 1,503,139 1,004,183
Repayments on stockholders, and related-party loans (94,965) (12,513)
Borrowings on stockholders, and related-party loans 650,000 -
Proceeds from long-term debt - 64,648
Repayments on long-term debt (46,904) (72,628)
Distributions to stockholders (1,456,795) (469,316)
--------------- ---------------
Net cash provided by financing activities 554,475 514,374
--------------- ---------------
NET CHANGE IN CASH 18,967 188,370
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,307 121,875
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 22,274 $ 310,245
=============== ===============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 66,004 $ 66,258
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
A. LAWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the audited financial statements as of December 31, 1998
and 1997 and therefore, do not included all information and footnotes
required by generally accepted accounting principles. However, in the
opinion of management, all adjustments (which, except as disclosed
elsewhere herein, consist only of normal recurring accruals) necessary for
a fair presentation of the results of operations for the relevant periods
have been made. Results for the interim periods are not necessarily
indicative of the results to be expected for the year. These unaudited
financial statements should be read in conjunction with the summary of
significant accounting policies and the notes to the audited financial
statements of A. Lawer Corporation as of December 31, 1998 and 1997.
<PAGE>
EXHIBIT 99.4
POLYVISION CORPORATION & SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDING DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
8-months ended 12/31/98 4-months ended 4/30/98 10-months ended 10/31/98
PolyVision Corporation PolyVision Corporation Alliance International
----------------------- ---------------------- ------------------------
<S> <C> <C> <C>
Net sales $ 33,877 $ 14,083 $ 53,096
Cost of goods sold 23,360 10,198 35,757
------------------- ------------------- ---------------------
Gross profit 10,517 3,885 17,339
Selling, general and administrative 6,969 3,905 11,021
Nonrecurring expenses 1,250 -
Amortization of goodwill 248 78 808
------------------- ------------------- ---------------------
Operating income (loss) 2,050 (98) 5,510
Interest expense (1,408) (500) (2,775)
Other expense (201) (890) 799
------------------- ------------------- ---------------------
Income (loss) before income taxes 441 (1,488) 3,534
(Provision)Benefit for income taxes (286) 48 (1,874)
------------------- ------------------- ---------------------
Net income (loss) from continuing operations 155 (1,440) 1,660
Preferred stock dividends (1,606) -
------------------- ------------------- ---------------------
Net income (loss) applicable to common shareholders $ (1,451) $ (1,440) $ 1,660
=================== =================== =====================
Net income (loss) per share of common stock:
Basic $ (0.15)
===================
Diluted $ (0.15)
===================
Average common shares outstanding:
Basic 9,506
===================
Diluted 9,506
===================
</TABLE>
<TABLE>
<CAPTION>
A. Lawer Corporation Pro Forma Adjustments Pro Forma
-------------------- --------------------- ----------
<S> <C> <C> <C>
Net sales $ 26,973 $ (2,584) (A) $125,445
Cost of goods sold 19,752 (2,412) (A) 86,981
326 (B)
--------------- -------------- ---------------
Gross profit 7,221 (498) 38,464
Selling, general and administrative 4,934 26,829
Nonrecurring expenses (1,250) (G) -
Amortization of goodwill 7 1,061 (C) 2,202
--------------- -------------- ---------------
Operating income (loss) 2,280 (309) 9,433
Interest expense (191) (4,568) (D) (9,442)
Other expense (19) (311)
--------------- -------------- ---------------
Income (loss) before income taxes 2,070 (4,877) (320)
(Provision)Benefit for income taxes - 2,208 (E) 96
--------------- -------------- ---------------
Net income (loss) from continuing operations 2,070 (2,669) (224)
Preferred stock dividends - (660) (F) (2,266)
--------------- -------------- ---------------
Net income (loss) applicable to common shareholders $ 2,070 $ (3,329) $ (2,490)
=============== ============== ===============
Net income (loss) per share of common stock:
Basic $ (0.18)
===============
Diluted $ (0.18)
===============
Average common shares outstanding:
Basic 4,543 (H) 14,049
============== ===============
Diluted 5,691 (H) 15,197
============== ===============
</TABLE>
<PAGE>
POLYVISION CORPORATION & SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDING JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PolyVision A. Lawer Pro Forma
Corporation Corporation Adjustments
------------- -------------- -------------
<S> <C> <C> <C>
Net sales $ 49,104 $ 13,666 $ (1,245) (A)
Cost of goods sold 31,975 9,317 $ (805) (A)
------------- -------------- -------------
Gross profit 17,129 4,349 (440)
Selling, general and administrative 10,229 2,767
Amortization of goodwill 832 - 300 (C)
------------- -------------- -------------
Operating income (loss) 6,068 1,582 (750)
Interest expense (4,215) (66) (445) (D)
Other income 273 4 -
------------- -------------- -------------
Income (loss) before income taxes 2,126 1,520 (1,195)
Provision for income taxes (847) - 109 (E)
------------- -------------- -------------
Net income (loss) 1,279 1,520 (1,086)
Preferred stock dividends (804) - (330) (F)
------------- -------------- -------------
Net income (loss) applicabe to common
shareholders $ 475 $ 1,520 $ (1,416)
============= ============== =============
Net income per share of common stock:
Basic $ 0.03
=============
Diluted $ 0.03
=============
Average common shares outstanding:
Basic 14,117
=============
Diluted 17,526
=============
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
--------------
<S> <C>
Net sales $ 61,525
Cost of goods sold 40,487
--------------
Gross profit 21,038
Selling, general and administrative 12,996
Amortization of goodwill 1,132
--------------
Operating income (loss) 6,910
Interest expense (4,726)
Other income 277
--------------
Income (loss) before income taxes 2,461
Provision for income taxes (738)
--------------
Net income (loss) 1,723
Preferred stock dividends (1,134)
--------------
Net income (loss) applicabe to common
shareholders $ 589
==============
Net income per share of common stock:
Basic $ 0.04
==============
Diluted $ 0.03
==============
Average common shares outstanding:
Basic 14,117
==============
Diluted 17,526
==============
</TABLE>
<PAGE>
POLYVISION CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PolyVision Corporation A. Lawer Corporation Pro Forma Adjustments
---------------------- -------------------- ---------------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,203 $ 22 $ (608) (K)
Accounts receivable, net 21,383 6,816 (610) (I)
Inventories 14,097 3,739 67 (J)
Other current assets 3,541 1,126 495 (O)
--------------- -------------- ----------------
Total current assets 42,224 11,703 (656)
Property, plant and equipment, net 17,056 926
Goodwill, net 61,019 62 23,918 (J)
Other non-current assets 3,658 10 608 (K)
--------------- -------------- ----------------
Total assets $123,957 $ 12,701 $ 23,870
=============== ============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 135 $ - $ -
Current maturities of long-term debt 1,141 2,606 (2,567) (J)
1,326 (L)
Accounts payable 9,297 3,618 (610) (I)
Accrued expenses and other liabilities 11,790 1,988 1,055 (N)
--------------- -------------- ----------------
Total current liabilities 22,363 8,212 (796)
Long-term debt, less current maturities 71,755 1,041 (560) (J)
20,674 (L)
Other long-term liabilities 6,682 - -
--------------- -------------- ----------------
Total liabilities 100,800 9,253 19,318
Stockholders' equity 23,157 3,448 8,000 (M)
(3,448) (J)
Total liabilities and stockholders' equity $123,957 $ 12,701 $ 23,870
=============== ============== ================
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
---------------
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 2,617
Accounts receivable, net 27,589
Inventories 17,903
Other current assets 5,162
---------------
Total current assets 53,271
-
Property, plant and equipment, net 17,982
Goodwill, net 84,999
Other non-current assets 4,276
---------------
Total assets $160,528
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 135
Current maturities of long-term debt 2,506
Accounts payable 12,305
Accrued expenses and other liabilities 14,833
---------------
Total current liabilities 29,779
Long-term debt, less current maturities 92,910
Other long-term liabilities 6,682
---------------
Total liabilities 129,371
Stockholders' equity 31,157
Total liabilities and stockholders' equity $ 160,528
===============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial information.
<PAGE>
POLYVISION CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. ADJUSTMENTS TO PRO FORMA FINANCIALS
(A) Reflects the elimination of (i) intercompany sales and the related cost of
sales between PolyVision and Naco and (ii) elimination of intercompany
profit in inventory on-hand at NACO
(B) Reflects an increase in depreciation expense resulting from the allocation
of a portion of the Alliance purchase price
(C) Reflects the increase in amortization expense resulting from amortizing
the excess of the purchase price over the fair value of the net assets
acquired over 40 years.
(D) Reflects the increase in interest expense resulting from additional debt
incurred as a result of the acquisitions.
(E) Reflects pro forma adjustments to income tax expense resulting from the
transactions.
(F) Reflects the adjustment to preferred stock dividends resulting from the
issuance of Series C Cumulative Convertible Preferred Stock and Series D
Cumulative Convertible Preferred Stock in connection with the NACO and
the Alliance acquisitions and the issuance of Series B Convertible
Preferred Stock issued as a result of the Alpine exchange transaction
(see Note 7 to PolyVision's consolidated Form 10-K for the eight months
ending December 31, 1998)
(G) Reflects the elimination of the non-recurring charge recorded by
PolyVision in December 1998 in connection with Alliance acquisition (see
Note 7 to PolyVision's consolidated Form 10-k for the eight months ended
December 31, 1998)
(H) Reflects the adjustment to common and diluted stock outstanding from (i)
the issuance of common stock as a result of the Alpine exchange transaction
and (ii) the inclusion of PolyVision four month period ended April 30, 1998
(I) Reflects the elimination of intercompany accounts receivable and accounts
payable between PolyVision and NACO
(J) The following reflects the preliminary allocation of the purchase price to
the net assets acquired based upon estimated fair values of such assets:
<TABLE>
<CAPTION>
Amount
(in thousands)
<S> <C>
Estimated acquisiton cost, including expenses $ 31,055
Less: Historical book values of net assets at June 30, 1999 (3,448)
Deferred tax asset (495)
Write-up of inventory (67)
Debt retired and assumed, including accrued interest (3,127)
------------
Goodwill, amortized over 40 years $ 23,918
============
</TABLE>
(K) Reflects capitalization of deferred financing costs.
(L) Reflects adjustments to current and long-term debt resulting from
$22,000,000 in additional debt incurred as a result of the NACO
acquisition.
(M) Reflects the issuance of the $2,000,000 of Series C Cumulative Convertible
Preferred Stock and $6,000,000 of Series D Cumulative Convertible Preferred
Stock in connection with the NACO acquisition
(N) Reflects the accrual of estimated acquisition related expenses of the NACO
acquisition.
(O) Reflects additional deferred tax asset recorded as a result of the
allocation of a portion of the purchase price of the NACO acquisition
to acquired liabilities not currently deductible for income taxes
2. UNUSUAL ITEMS
The pro forma combined statements of operations do not include certain
non-recurring restructuring charges the Company expects to record during the
quarter ending December 31, 1999 as a result of a planned plant closure.
