<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 3, 1996
FUQUA ENTERPRISES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-10583 13-1988043
- ------------------------------- ----------------------- ------------------------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
</TABLE>
One Atlantic Center, Suite 5000
1201 W. Peachtree Street, N.W., Atlanta, Georgia 30309
------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 404-815-2000
-------------
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The audited financial statements for each of the three years in the
period ended December 31, 1995 and the unaudited financial statements for the
three months ended March 31, 1996 of the Lumex Division of Lumex, Inc.
(the "Lumex Division") are included herein.
(b) Unaudited Pro Forma Financial Information.
The unaudited Pro Forma Condensed Statements of Operations for the
three months ended March 31, 1996 and for the year ended December 31, 1995 give
effect to the acquisition by Fuqua Enterprises, Inc. ("Fuqua") through its
wholly-owned subsidiaries, Lumex Medical Products, Inc. and MUL Acquisition
Corp. II, of the Lumex Division (the "Acquisition") as if the Acquisition was
consummated on January 1, 1996 and January 1, 1995, respectively. The unaudited
Pro Forma Condensed Balance Sheet at March 31, 1996 gives effect to the
Acquisition as if the Acquisition was consummated on March 31, 1996. The
unaudited Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1995 also gives effect to the November 1995 acquisition of
all of the outstanding shares of capital stock of Basic American Medical
Products, Inc. and to the December 1995 sale of 100% of the stock of American
Southern Insurance Company as if those transactions had been consummated on
January 1, 1995. The unaudited pro forma information should be read in
conjunction with the following: (a) the consolidated financial statements of
Fuqua which are included in Fuqua's Form 10-K for the year ended December 31,
1996, which is expected to be filed on or before March 24, 1997, (b) the
condensed consolidated financial statements included in Fuqua's quarterly report
on Form 10-Q for the quarter ended March 31, 1996, (c) Fuqua's Current Report on
Form 8-K, dated April 3, 1996, and (d) the audited financial statements for each
of the three years in the period ended December 31, 1995 and the unaudited
financial statements of the Lumex Division for the three months ended March 31,
1996 included in this Current Report on Form 8-K/A. The unaudited pro forma
financial information contained herein is not necessarily indicative of actual
or future operating results or financial position that would have occurred or
will occur as a result of the Acquisition.
(c) Exhibits.
23 Consent of Independent Auditors
2
<PAGE> 3
Item 7(a)
FINANCIAL STATEMENTS
LUMEX DIVISION OF LUMEX, INC.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND UNAUDITED FOR THE
THREE MONTHS ENDED WITH MARCH 31, 1996
REPORT OF INDEPENDENT AUDITORS
3
<PAGE> 4
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTENTS
PAGE
NO.
----
<S> <C>
Report of Independent Auditors.................................... 5
Financial Statements:
Balance Sheets............................................... 6
Statements of Operations..................................... 7
Statements of Cash Flows..................................... 8
Notes to Financial Statements................................ 9
Unaudited ProForma Financial Information.......................... 14
</TABLE>
4
<PAGE> 5
Item 7(a)
REPORT OF INDEPENDENT AUDITORS
Fuqua Enterprises, Inc.
We have audited the accompanying balance sheets of the Lumex Division of Lumex,
Inc. (the "Lumex Division") as of December 31, 1995 and 1994, and the related
statements of operations and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of, and all references to management in the accompanying
footnotes refer to, the management of Fuqua Enterprises, Inc. 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 the Lumex Division at December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
March 13, 1996, except for Note 1,
as to which the date is
March 13, 1997
5
<PAGE> 6
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
---------------------------------------------------
(Unaudited)
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 7,182 $ 7,184 $ 4,927
Trade accounts receivable 10,229,774 12,281,563 11,295,873
Inventories 10,390,732 9,410,029 5,410,024
Net lease receivables 2,878,099 3,298,111 1,603,271
Prepaid expenses and other current assets 576,113 532,522 1,219,479
---------------------------------------------------
Total Current Assets 24,081,900 25,529,409 19,533,574
Property, plant and equipment
Land 308,594 308,594 308,594
Buildings and improvements 10,275,867 9,748,671 7,159,034
Machinery and equipment 15,012,948 14,633,519 11,401,736
Construction in progress - 230,913 97,662
---------------------------------------------------
25,597,409 24,921,697 18,967,026
Less accumulated depreciation (12,627,735) (12,163,167) (10,427,990)
---------------------------------------------------
Net property, plant and equipment 12,969,674 12,758,530 8,539,036
Net lease receivables 3,545,736 6,807,398 6,311,204
Intangible assets, less accumulated
amortization of $2,703,001, $2,630,174
and $1,777,750, respectively 1,761,301 4,862,776 2,362,193
Other 235,181 232,522 52,517
---------------------------------------------------
Total Assets $ 42,593,792 $ 50,190,635 $ 36,798,524
---------------------------------------------------
LIABILITIES AND PARENT COMPANY'S EQUITY
AND ADVANCES, NET
Accounts payable $ 6,750,294 $ 8,277,504 $ 5,555,212
Accrued liabilities 4,866,176 5,053,803 4,153,257
---------------------------------------------------
Total Current Liabilities 11,616,470 13,331,307 9,708,469
Parent Company's Equity and Advances, Net 30,977,322 36,859,328 27,090,055
---------------------------------------------------
Total Liabilities and Parent Company's
Equity and Advances, Net $ 42,593,792 $ 50,190,635 $ 36,798,524
===================================================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993
-----------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 13,570,190 $ 60,590,972 $ 60,777,293 $ 54,188,695
Costs and Expenses:
Costs of sales 11,207,393 41,902,102 40,203,960 34,907,042
Shipping 843,874 3,420,064 3,259,905 2,937,482
Selling 1,428,520 6,921,030 6,439,939 5,746,782
Marketing 564,716 2,942,021 3,058,884 2,728,101
Product development 230,047 2,019,318 783,208 961,013
Administrative 7,313,820 4,708,558 4,013,040 3,890,393
Other (income) (394,460) (874,720) (510,300) (49,499)
Provision for environmental costs - - - 2,000,000
-----------------------------------------------------------------------------
Total Costs and Expenses 21,193,910 61,038,373 57,248,636 53,121,314
-----------------------------------------------------------------------------
(Loss) Income Before
Income Taxes (7,623,720) (447,401) 3,528,657 1,067,381
Income Tax (Provision)
Benefit 3,049,488 178,960 (1,411,462) (426,952)
-----------------------------------------------------------------------------
Net (Loss) Income $ (4,574,232) $ (268,441) $ 2,117,195 $ 640,429
=============================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993
-----------------------------------------------------------------
(Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net (loss) income $ (4,574,232) $ (268,441) $ 2,117,195 $ 640,429
Noncash items included in net
(loss) income:
Depreciation and amortization 766,005 2,590,748 1,568,912 1,256,338
Write-off of intangible assets 2,964,117 900,000 - -
Write-off of lease receivables 3,397,382 3,359,868 - -
Warranty provision 543,000 107,000 - -
Write-off of trade accounts
receivable 222,500 - - -
Changes in operating assets and
liabilities:
Accounts receivable 1,829,289 (985,690) (2,250,944) (716,202)
Inventories (1,203,571) (4,000,005) (1,172,839) 845,387
Other current assets (43,591) 686,957 (1,580) (868,123)
Lease receivables 420,012 (1,694,840) (889,439) (713,832)
Accounts payable (1,527,210) 2,722,292 254,405 1,734,149
Accrued liabilities (730,627) 793,546 (2,264,865) 3,869,059
----------------------------------------------------------------
Net Cash (Used in) Provided
By Operating Activities 2,063,074 4,211,435 (2,639,155) 6,047,205
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (675,712) (5,957,818) (1,527,959) (1,485,175)
Increase in intangible assets (164,079) (4,253,007) (665,475) (114,132)
----------------------------------------------------------------
Net Cash Used In
Investing Activities (839,791) (10,210,825) (2,193,434) (1,599,307)
----------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Parent company advances, net (1,307,774) 10,037,714 9,489,420 (2,756,087)
Increase in lease receivables 87,148 (3,856,062) (4,702,757) (1,608,447)
Other (2,659) (180,005) 45,158 (84,325)
----------------------------------------------------------------
Net Cash (Used in) Provided By
Financing Activities (1,223,285) 6,001,647 4,831,821 4,448,859
----------------------------------------------------------------
Net (Decrease) Increase In Cash
And Cash Equivalents (2) 2,257 (768) (961)
Cash And Cash Equivalents at
Beginning of Period 7,184 4,927 5,695 6,656
----------------------------------------------------------------
Cash And Cash Equivalents
at End of Period $ 7,182 $ 7,184 $ 4,927 $ 5,695
================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE FINANCIAL STATEMENTS AT MARCH 31, 1996 AND FOR
THE PERIOD THEN ENDED IS UNAUDITED)
- --------------------------------------------------------------------------------
1. ACQUISITION AND BASIS OF PRESENTATION
On April 3, 1996, Fuqua Enterprises, Inc. ("Fuqua") acquired the Lumex
Division of Lumex, Inc. for approximately $40,700,000 in cash, subject to a
final purchase price adjustment as provided in the asset sale agreement.
The 1995 financial statements include charges totaling $3,045,000 which
relate to trade accounts and lease receivables ($1,904,000), warranty
reserves ($107,000), intangible assets ($900,000) and inventory
obsolescence ($134,000). Subsequent to March 13, 1996, these charges were
determined appropriate to be included in the 1995 financial statements.
The accompanying financial statements reflect the financial position and
results of operations and cash flows of the Lumex Division of Cybex
International, Inc. (formerly Lumex Inc., the "Parent") and the lease
receivables related to low air loss bed systems sold by the Lumex Division
and financed by Cybex Financial Corp., an affiliated company (collectively,
the "Lumex Division") and have been prepared to meet the requirements of
Regulation S-X for the financial statements of a business acquired. These
financial statements do not reflect any adjustments related to the Fuqua
allocation of the purchase price which Fuqua paid for the Lumex Division.
2. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
OTHER MATTERS
The Lumex Division develops and markets a wide range of health care
products including specialty seating, bath safety, mobility products,
health care beds and therapeutic support systems for the acute, long-term
and home care markets.
Cash and cash equivalents: All highly liquid investments with an original
maturity of three months or less when purchased are considered to be cash
equivalents.
Inventories: Inventories are stated at the lower of cost or market.
Inventory costs have been determined by the last-in first-out (LIFO)
method.
Property, plant and equipment: Property, plant and equipment, including
expenditures for renewals and betterments, are recorded at cost.
Depreciation is computed using the straight-line method over the assets
estimated useful lives (buildings-40 years; building improvements-15 years;
machinery and equipment-3 to 10 years).
Intangibles: Intangibles consist principally of patents, excess cost over
assets acquired and trademarks which are recorded at cost and amortized
over the estimated useful lives by the straight-line method for periods
ranging from 5 to 30 years. The amounts of recorded intangibles determined
to be unrecoverable are charged to results of operations in the period such
determination is made (See Note 7).
Advertising costs: The Lumex Division expenses advertising costs when
incurred. The amounts of such costs were insignificant in each of the
periods presented in these financial statements.
Revenue recognition: Sales are recorded when goods are shipped.
Product development: Product development costs are expensed as they are
incurred. During 1995, the Lumex Division expensed $900,000 of the amounts
paid to Airbed Corporation, representing purchased research and development
costs.
Income taxes: The Lumex Division's deferred tax assets/liabilities are
recorded at the Parent Company level. The provision/benefit for income
taxes has been determined on a Lumex Division stand alone basis.
9
<PAGE> 10
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE FINANCIAL STATEMENTS AT MARCH 31, 1996 AND FOR
THE PERIOD THEN ENDED IS UNAUDITED)
- --------------------------------------------------------------------------------
Recent pronouncements: In March 1995, the Financial Accounting Standards
Board issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS
121"), which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amounts. SFAS 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Lumex
Division adopted SFAS 121 in the first quarter of 1996. The adoption of
SFAS 121 did not impact the financial results of the Lumex Division. As
described in Note 7, the $2,864,000 adjustment to certain intangibles in
the first quarter of 1996 was required by generally accepted accounting
principles which applied before the adoption of SFAS 121.
Allocation of corporate charges: The Lumex Division's financial statements
reflect operating expenses incurred by the Parent which have been allocated
to the Lumex Division for each of the periods presented. These allocated
expenses represent costs for executive management services and were
determined based on the proportion of the Lumex Division sales and staff
levels to the total incurred by Parent on a consolidated basis for 1993 and
1994. For the calendar year 1995, the Parent modified the method of
estimating the amount to be allocated to reflect the expenses that would be
incurred by the Lumex Division on a stand alone basis. The amounts
allocated to the Lumex Division were $135,682, $781,143 and $820,730 for
December 31, 1995, 1994 and 1993, respectively.
Parent Company's Equity and Advances, Net: The Parent Company's Equity and
Advances, Net, represents the Parent's accumulated equity in the Lumex
Division as well as the net payable/receivable balances due to/from the
Parent resulting from cash transfers and allocated expenses.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results inevitably will differ
from those estimates and such differences may be material to the financial
statements.
3. LEASES
As Lessor: The Lumex Division offers lease financing to distributors of its
low air loss bed systems under the terms of either a fixed payment lease or
shared revenue lease contract, both of which are accounted for as sales
type leases. Standard lease contracts contain fixed monthly payments and
are generally for 36-48 months at which time title transfers to the lessee.
Under shared revenue lease contracts the lessee pays the greater of a fixed
percentage of monthly revenue collected from rentals of the equipment or a
minimum monthly payment. Shared revenue lease contracts are generally for
60 months at which time title does not pass to the lessee. Leases are
secured by the equipment leased including any revenues derived therefrom.
Lease receivables at December 31, 1995 and 1994 and March 31, 1996 was
comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C>
Gross minimum lease payments receivable $ 16,615,724 $ 17,168,793 $ 10,830,660
Less unearned interest income (3,307,398) (3,576,172) (2,649,240)
Less reserve for returns (6,034,382) (2,799,000) -
Less allowance for uncollectible accounts
and lease receivables (850,109) (688,112) (266,945)
------------- ------------ ------------
6,423,835 10,105,509 7,914,475
Current portion (2,878,099) (3,298,111) (1,603,271)
------------- ------------ ------------
Non-current portion $ 3,545,736 $ 6,807,398 $ 6,311,204
------------- ------------ ------------
</TABLE>
10
<PAGE> 11
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE FINANCIAL STATEMENTS AT MARCH 31, 1996 AND FOR
THE PERIOD THEN ENDED IS UNAUDITED)
- --------------------------------------------------------------------------------
Gross minimum lease payments receivable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, TOTAL
------------ -----
<S> <C>
1996 $ 4,241,969
1997 4,293,068
1998 4,189,388
1999 3,122,378
2000 1,252,162
Thereafter 69,828
-------------
$ 17,168,793
-------------
</TABLE>
As Lessee: The Lumex Division has lease commitments expiring at various
dates through 2000, principally for facilities and data processing
equipment under non-cancelable operating leases. Future minimum payments
under these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, TOTAL
------------ -----
<S> <C>
1996 $ 645,829
1997 506,675
1998 472,620
1999 471,072
2000 292,284
-------------
$ 2,388,480
-------------
</TABLE>
Rent expense under operating leases for the years 1995, 1994 and 1993 was
$458,406, $335,448 and $316,782, respectively, and for the three months
ended March 31, 1996 was $173,640.
4. OTHER INFORMATION
Receivables: Trade accounts receivable are stated net of allowances for
doubtful accounts of $195,983 at December 31, 1995 and $106,449 at December
31, 1994 and $440,344 at March 31, 1996. The provision for bad debts for
the years ended December 31, 1995, 1994 and 1993 was $158,822, $236,414 and
$81,498, respectively, and was $327,851 for the three months ended March
31, 1996.
Inventories: Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
Finished goods $ 8,657,092 $ 5,487,990 $ 2,947,058
Work in process 4,746,188 1,495,147 1,662,524
Raw materials 359,046 5,798,486 3,920,527
LIFO reserve (3,371,594) (3,371,594) (3,120,085)
------------- ----------- -----------
$ 10,390,732 $ 9,410,029 $ 5,410,024
------------- ----------- -----------
</TABLE>
11
<PAGE> 12
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE FINANCIAL STATEMENTS AT MARCH 31, 1996 AND FOR
THE PERIOD THEN ENDED IS UNAUDITED)
- --------------------------------------------------------------------------------
Accrued Liabilities: Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
Salaries, bonuses and commissions $ 222,359 $ 392,321 $ 427,250
Accrued vacation 500,669 443,568 419,651
Retirement contributions 282,526 282,529 212,550
Self insurance obligations 1,026,600 1,026,600 1,256,213
Payable under Airbed Assets Purchase
Agreement 522,551 1,212,551 -
Environmental remediation 1,308,994 1,331,546 1,663,000
Warranty Obligations 794,200 204,000 -
Other 208,277 160,688 174,593
------------- ----------- -----------
$ 4,866,176 $ 5,053,803 $ 4,153,257
------------- ----------- -----------
</TABLE>
5. ENVIRONMENTAL COSTS
In March 1994, the Office of the District Attorney Suffolk County, Long
Island, New York initiated an investigation to determine whether regulated
substances had been discharged from one of the Lumex Division's Bay Shore
facilities in excess of permitted levels. An environmental consulting firm
was engaged by the Lumex Division to conduct a more comprehensive site
investigation, develop a remediation work plan and provide a remediation
cost estimate. These activities were performed to determine the nature and
extent of contaminants present on the site and to evaluate their potential
off-site extent.
At December 31, 1995, the Lumex Division had $1.3 million in reserves for
remediation costs, including additional investigation costs which are
probable of occurring. Reserves are established when it is probable that a
liability has been incurred and such costs can be reasonably estimated. The
Lumex Division's estimates of these costs were based upon currently enacted
laws and regulations and the professional judgement of consultants and
counsel. Where the available information was sufficient to estimate the
amount of the liability, that estimate has been used. Where the information
was only sufficient to establish a range of probable liability and no point
within the range was more likely than another, the lower end of the range
has been used. The Lumex Division has not assumed any such costs will be
recoverable from third parties nor has the Lumex Division discounted any of
its cost estimates although a portion of the remediation work plan would be
performed over a period of years.
The amounts of these liabilities are difficult to estimate due to such
factors as the extent to which remedial actions may be required, laws and
regulations change or the actual costs of remediation differ when the final
work plan is performed. The estimate of the costs, which is not probable
but for which there exists at least a reasonable possibility of occurrence,
exceeds the current reserves by $2.2 million.
6. BENEFIT PLANS
The Lumex Division has a non-contributory defined contribution retirement
plan (the "Retirement Plan") covering substantially all employees.
Contributions to the Retirement Plan are based upon annual compensation for
those persons employed (as defined) at December 31 and are funded annually.
The Retirement Plan expense was $282,528, $259,755 and $237,116 for the
years 1995, 1994 and 1993, respectively.
12
<PAGE> 13
Item 7(a)
LUMEX DIVISION OF LUMEX, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE FINANCIAL STATEMENTS AT MARCH 31, 1996 AND FOR
THE PERIOD THEN ENDED IS UNAUDITED)
- --------------------------------------------------------------------------------
7. INTERIM FINANCIAL INFORMATION - INTANGIBLE ASSETS AND LEASE RECEIVABLES
The accompanying unaudited interim financial information of the Lumex
Division reflects all adjustments which are, in the opinion of Management,
necessary for a fair presentation of the financial position and results of
operations at and for the three months ended March 31, 1996. Such interim
results are not necessarily indicative of the results which may be expected
for the entire fiscal year. The accompanying unaudited interim financial
information does not include comparative information for the three months
ended March 31, 1995 because sufficient data are not available to
Management to enable it to prepare the financial information for such
interim period.
In February 1995, the Lumex Division acquired certain assets of Airbed
Corporation ("Airbed") ("Acquisition Agreement") including all the rights,
title and interest in the technology utilized in the Akrotech bed systems
distributed by the Lumex Division under existing distributor agreements.
Concurrently, the Lumex Division and Airbed entered into an exclusive
Manufacturing Agreement pursuant to which Airbed would continue to
manufacture the air control unit of the bed systems subject to certain
conditions of product quality, delivery terms and pricing. The purchase
price for these assets was $2.25 million plus certain contingent payments.
Contingent payments were payable based upon the occurrence of certain
events as described in the Acquisition Agreement. At December 31, 1995,
contingent payments totaling $150,000 had been paid. A dispute arose
between the Lumex Division and Airbed over the remaining contingent
payments which was resolved under the terms of a Settlement Agreement
entered into on March 29, 1996. In accordance with the Settlement
Agreement, the Lumex Division agreed to make payments totaling $1,900,000,
less amounts previously loaned to Airbed of $497,449. The balance due was
payable in weekly installments through April 29, 1996 totaling $1,160,000
with the balance due the earlier of three days after closing of the sale of
the Lumex Division or May 3, 1996. The payments made pursuant to the
Acquisition Agreement and Settlement Agreement, which were not related to
purchased research and development, were included in intangible assets in
the accompanying December 31, 1995 balance sheet.
Subsequent to December 31, 1995, Management determined that the
distributors through which Lumex sold the low air loss bed systems were
returning large numbers of the bed systems. As a result, Management
evaluated the recoverability of the intangible asset arising from the
Acquisition and Settlements Agreements and, in accordance with Accounting
Principles Board Opinion No. 17, wrote-off the remaining unamortized
intangible asset balance of approximately $2,864,000 in the first quarter
of 1996. Additionally, Management also determined that an intangible asset
totaling $100,000, representing a license paid for rights to incorporate
certain technology into a product line, was not feasible and was written
off in the first quarter of 1996.
Additionally, subsequent to December 31, 1995, Management identified
distributors who were not going to be able to pay their lease obligations
to the Lumex Division or would be able to do so only after adjustment of
the terms of the lease or return of low air loss bed systems. As a result,
an allowance for doubtful accounts was established in the first quarter of
1996 to reserve for net lease receivables ($3,397,382) and trade accounts
receivable ($222,500) which were outstanding at December 31, 1995.
13
<PAGE> 14
Item 7(b)
UNAUDITED PRO FORMA FINANCIAL INFORMATION
FUQUA ENTERPRISES, INC,
AT MARCH 31, 1996
AND
FOR THE THREE MONTHS ENDED
MARCH 31, 1996
AND FOR THE
YEAR ENDED DECEMBER 31, 1995
14
<PAGE> 15
Item 7(b)
FUQUA ENTERPRISES, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
Description of the Transactions Reflected in the Unaudited Pro Forma Financial Information ..... 16
Unaudited Pro Forma Condensed Balance Sheet at March 31, 1996................................... 17-18
Notes to Unaudited Pro Forma Condensed Balance Sheet
at March 31, 1996......................................................................... 19
Unaudited Pro Forma Condensed Statements of Operations
For the Year Ended December 31, 1995...................................................... 20
For the Three Months Ended March 31, 1996................................................. 21
Notes to the Unaudited Pro Forma Condensed Statements of Operations............................. 22
</TABLE>
15
<PAGE> 16
Item 7(b)
FUQUA ENTERPRISES, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
DESCRIPTION OF THE TRANSACTIONS REFLECTED IN THE PRO FORMA FINANCIAL
INFORMATION.
On April 3, 1996, Fuqua Enterprises, Inc. ("Fuqua") through its wholly-owned
subsidiaries, Lumex Medical Products, Inc. and MUL Acquisition Corp. II,
consummated the acquisition (the "Acquisition") of the medical products
operations of Lumex, Inc. for approximately $40.7 million in cash, subject to a
final purchase price adjustment as provided in the asset sale agreement. Under
the terms of the asset sale agreement, if Fuqua does not agree with Cybex
International, Inc. (formerly known as Lumex, Inc., the "Seller", the "Parent")
on the final purchase price adjustment, the disputed items will be submitted to
arbitration by an independent accounting firm. Fuqua has notified the Seller
that it does not accept the Seller's calculation of the final purchase price
adjustment and that Fuqua intends to resolve the dispute through arbitration.
Fuqua believes that the result of arbitration will decrease the purchase price.
The Acquisition has been reflected in the unaudited pro forma financial
information as though there will be no adjustment to the purchase price and that
the Acquisition occurred on the first day of each period presented for the Pro
Forma Condensed Statements of Operations, and at March 31, 1996 for the Pro
Forma Condensed Balance Sheet.
Fuqua financed the Acquisition with $7.7 million of its own cash and $33.0
million of borrowings, under Fuqua's Revolving Credit Facility provided by
SunTrust Bank, Atlanta, as agent, Wachovia Bank of Georgia, N.A., First Union
National Bank of Georgia and Fleet Bank of Maine.
On November 8, 1995, Fuqua Enterprises, Inc. ("Fuqua") consummated the
acquisition of all of the outstanding shares of the capital stock of Basic
American Medical Products, Inc. ("Basic") as contemplated in the Agreement and
Plan of Merger, (the "Merger") dated as of October 6, 1995, by and among Basic,
BA Acquisition Corporation, Fuqua and with respect to certain provisions
thereof, Gene J. Minotto. Fuqua paid the shareholders of Basic approximately
$2,500,000 in cash and issued 600,000 shares of Fuqua Common Stock to Gene J.
Minotto, the controlling shareholder of Basic.
As reported on Fuqua's Current Report on Form 8-K, dated December 31, 1995,
Fuqua consummated the sale of 100% of the stock of its wholly-owned subsidiary,
American Southern Insurance Company ("American Southern"), to Atlantic American
Corporation ("Atlantic") on December 31, 1995. The sale price was $34,000,000
and consisted of approximately $22,648,000 in cash and a note of approximately
$11,352,000 due October, 1996. The note accrued interest at the prime rate;
one-half of the interest was payable quarterly and the remaining interest was
due in October, 1996.
The Acquisition, Merger and the sale of American Southern described above are
each reflected in the unaudited pro forma financial information included herein.
The unaudited pro forma financial information should be read in conjunction with
the historical financial statements of Fuqua and Lumex Division. The historical
balances represent the financial position and results of operations for each
company and have been prepared in accordance with generally accepted accounting
principles. The unaudited pro forma financial information is based on certain
assumptions and estimates which are subject to change. It does not purport to be
indicative of the financial position or results of operations that might have
occurred, nor are they necessarily indicative of future results.
16
<PAGE> 17
Item 7(b)
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL OF LUMEX
-------------------------- DIVISION
LUMEX PRO FORMA PRO FORMA
FUQUA DIVISION ADJUSTMENTS COMBINED
-----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 16,065 $ 7 $(7,700)(1) $ 6,372
(2,000)(1)
Investments available for sale 22,374 - - 22,374
Receivables, net 22,142 10,229 - 32,371
Note receivable from sale of subsidiary 11,762 - - 11,762
Inventories 21,555 10,614 3,371 (2) 34,183
(1,357)(3)
Prepaid expenses 779 576 - 1,355
Lease receivables - 2,878 - 2,878
Deferred income taxes 3,789 - - 3,789
-----------------------------------------------------------
Total Current Assets 98,466 24,304 (7,686) 115,084
-----------------------------------------------------------
Property, plant and equipment, net 20,845 12,969 927 (3) 34,741
Intangible assets, net 4,971 1,762 9,049 (4) 20,346
(1,762)(4)
6,326 (3)
Deferred income taxes 1,236 - - 1,236
Lease receivables - 3,323 - 3,323
Other assets 24 235 - 259
-----------------------------------------------------------
Total Assets of Continuing Operations 125,542 42,593 6,854 174,989
Total Assets of Discontinued Operations 12,047 - - 12,047
-----------------------------------------------------------
Total Assets $ 137,589 $ 42,593 $ 6,854 $ 187,036
===========================================================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Balance Sheet.
17
<PAGE> 18
Item 7(b)
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL OF LUMEX
-------------------------- DIVISION
LUMEX PRO FORMA PRO FORMA
FUQUA DIVISION ADJUSTMENTS COMBINED
-----------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
Accounts payable and accrued expenses $ 18,539 $ 11,616 $ 4,831 (3) $ 34,986
Notes payable 250 - - 250
Long-term liabilities due within one year 12,516 - - 12,516
-----------------------------------------------------------
Total Current Liabilities 31,305 11,616 4,831 47,752
Long-term liabilities 22,773 - 33,000 (1) 55,773
-----------------------------------------------------------
Total Liabilities of Continuing Operations 54,078 11,616 37,831 103,525
Total Liabilities of Discontinued Operations 149 - - 149
-----------------------------------------------------------
Total Liabilities 54,227 11,616 37,831 103,674
-----------------------------------------------------------
STOCKHOLDERS' EQUITY
Parent Company's Equity and Advances, Net 30,977 3,371 (2) -
7,287 (4)
(42,700)(1)
1,065 (3)
Preference Stock, $1 par value:
authorized 8,000,000 shares; none issued - - - -
Common Stock, $2.50 par value:
authorized 20,000,000 shares; issued
4,523,169 11,308 - - 11,308
Additional paid-in capital 24,841 - - 24,841
Retained earnings 48,298 - - 48,298
Unrealized gains on investments (238) - - (238)
Treasury stock, at cost: 44,822 shares (847) - - (847)
-----------------------------------------------------------
Total Stockholders' Equity 83,362 30,977 (30,977) 83,362
-----------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 137,589 $ 42,593 $ 6,854 $ 187,036
-----------------------------------------------------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Balance Sheet.
18
<PAGE> 19
Item 7(b)
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(Dollars in Thousands)
- -------------------------------------------------------------------------------
(1) This adjustment represents the cash portion of the purchase price. The total
purchase price for the Lumex Division reflected in the pro forma condensed
balance sheet includes $33,000 of debt incurred to finance the Acquisition
under Fuqua's Revolving Credit Facility, $7,700 in cash paid to the Sellers,
$2,000 incurred in capitalizable transaction costs and the removal of the
Parent Company's Equity and Advances.
(2) This adjustment represents the removal of the LIFO reserve as inventory is
assumed to be valued at fair value.
(3) This represents amounts assigned to adjust property plant and equipment to
fair value; to establish valuation amounts assigned to finished goods, work
in process and raw materials concurrent with the shutdown of a bed
production facility consolidated into another location by Fuqua as a result
of the Acquisition; to satisfy obligations that will arise in the future
relative to redundant facilities, facilities to be sold, commitments
relative to reduction in workforce and other amounts representing costs
associated with the Acquisition; and to establish goodwill for such amounts.
(4) This adjustment represents the goodwill which results from the Acquisition.
19
<PAGE> 20
Item 7(b)
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995
(Dollars in Thousands, Except Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical
--------------------------------------------
Lumex
Fuqua Division Basic*
--------------------------------------------
Revenues:
<S> <C> <C> <C>
Net sales $ 117,128 $ 60,273 $ 20,964
Investment income 828 -
--------------------------------------------
Total revenues 117,956 60,273 20,964
--------------------------------------------
COSTS AND EXPENSES:
Cost of sales 98,356 41,679 15,636
Selling, general and administrative 10,757 19,041 3,989
Interest expense 894 146
--------------------------------------------
Total costs and expenses 110,007 60,720 19,771
--------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAX PROVISION (BENEFIT) 7,949 (447) 1,193
INCOME TAX PROVISION (BENEFIT) 2,699 (178) 410
--------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ 5,250 $ (269) $ 783
============================================
PER SHARE:
Income from continuing operations $ 1.32
---------
Common shares and equivalents 3,963
---------
<CAPTION>
Pro Forma Adjustments
---------------------------------------------
Sale of Merger Acquisition
American with of Lumex Pro Forma
Southern Basic Division Combined
----------------------------------------------------------------
Revenues:
<S> <C> <C> <C> <C>
Net sales $ $ $ $ 198,365
Investment income 663(1) (495)(6) 996
----------------------------------------------------------------
Total revenues 663 (495) 199,361
----------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 155,671
Selling, general and administrative 268 (3) (340)(7) 33,715
Interest expense 122 (4) 2,013 (8) 3,175
----------------------------------------------------------------
Total costs and expenses 390 1,673 192,561
----------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAX PROVISION (BENEFIT) 663 (390) (2,168) 6,800
INCOME TAX PROVISION (BENEFIT) 265(2) (48)(5) (867)(9) 2,281
----------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ 398 $ (342) $(1,301) $ 4,519
================================================================
PER SHARE:
Income from continuing operations $ 1.14
----------
Common shares and equivalents 3,963
----------
</TABLE>
* Represents the historical results for the ten months ended October 31, 1995
prior to the Merger.
See Notes to Unaudited Pro Forma Condensed Statements of Operations.
20
<PAGE> 21
Item 7(b)
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Dollars in Thousands, Except Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL OF LUMEX
-------------------------- DIVISION
LUMEX PRO FORMA PRO FORMA
FUQUA DIVISION ADJUSTMENTS COMBINED
-----------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 30,500 $ 13,570 $ $ 44,070
Investment income 670 - (124)(6) 546
-----------------------------------------------------------
Total revenues 31,170 13,570 (124) 44,616
-----------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 25,062 11,207 36,269
Selling, general and administrative 3,148 9,987 (173)(7) 12,962
Interest expense 333 - 503 (8) 836
-----------------------------------------------------------
Total costs and expenses 28,543 21,194 330 50,067
-----------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX PROVISION (BENEFIT) 2,627 (7,624) (454) (5,451)
INCOME TAX PROVISION (BENEFIT) 1,027 (3,049) (181)(9) (2,203)
-----------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ 1,600 $ (4,575) $ (273) $ (3,248)
===========================================================
PER SHARE:
Income (loss) from continuing operations $ .36 $ (.73)
---------- -----------
Common shares and equivalents 4,500 4,477
---------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Statements of Income.
21
<PAGE> 22
Item 7(b)
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND
FOR THE YEAR ENDED DECEMBER 31, 1995
(Dollars in Thousands)
- --------------------------------------------------------------------------------
(1) This adjustment represents interest earned on the portion of the proceeds
from the sale of American Southern represented by a receivable note which
accrues interest at prime.
(2) This adjustment represents the income taxes which would result from the
additional interest income earned on the note receivable portion of the
proceeds from the sale of American Southern.
(3) This adjustment represents additional depreciation and amortization arising
from the write-up of goodwill and property, plant and equipment to fair
value, both of which are principally being amortized over 30 years.
(4) This adjustment represents interest expense arising from Fuqua's borrowing
the $2,500 cash portion of the Merger's consideration.
(5) This adjustment represents the income tax reduction which would result from
the additional interest on borrowings to finance the cash portion of the
Merger's consideration.
(6) This adjustment represents the reduction in interest income arising from the
use by Fuqua of its invested cash to consummate the cash portion of the
purchase price of the Acquisition.
(7) This adjustment represents the reduction in amortization arising from
goodwill which is being amortized over 30 years. Such reduction arises as a
result of ascribing no value to certain intangibles that were amortized over
shorter periods in the financial statements for Lumex Division.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Historical amortization $ 301 $ 853
Pro Forma amortization 128 513
----- -----
$ 173 $ 340
----- -----
</TABLE>
(8) This adjustment represents the interest expense arising from the portion of
the purchase price of the Acquisition which was borrowed under Fuqua's
Revolving Credit Facility.
(9) This adjustment represents the income tax reduction arising from the
additional interest on borrowings to consummate the Acquisition and
amortization expense on the goodwill.
22
<PAGE> 23
SIGNATURE
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.
FUQUA ENTERPRISES, INC.
(Registrant)
/s/ Brady W. Mullinax, Jr.
------------------------------------------------
Brady W. Mullinax, Jr., Vice President-Finance,
Treasurer and Chief Financial Officer (Principal
Financial and Accounting Officer and Executive
Officer duly authorized to sign on behalf of the
Registrant)
Date: March 20, 1997
23
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-36157, Form S-8 No. 33-54164, Form S-8 No. 333-05461 and Form
S-8 No. 333-05485) pertaining to the stock option plans of Fuqua Enterprises,
Inc. ("Fuqua") of our report dated March 13, 1996 except for Note 1 as to which
the date is March 13, 1997, with respect to the financial statements of the
Lumex Division of Lumex, Inc. included in Fuqua's Form 8-K/A dated April 3,
1997.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
New York, New York
March 20, 1997
