<PAGE> 1
FORM 10-K
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996).
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION FROM TO
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Commission File Number 0-10583
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FUQUA ENTERPRISES, INC.
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(Exact name of registrant, as specified in its charter)
DELAWARE 13-1988043
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE ATLANTIC CENTER, SUITE 5000
1201 W. PEACHTREE STREET, N.W., ATLANTA, GEORGIA 30309
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(Address of principal executive offices)
Registrant's telephone number, including area code: 404-815-2000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $2.50 par value New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
The aggregate market value of the voting stock of the registrant (based
upon the closing price on March 14, 1997 on the NYSE) held by non-affiliates
was $54,269,752.
The number of shares of Common Stock outstanding as of March 14, 1997 was
4,478,847.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive Proxy Statement to be filed
in connection with the Annual Meeting of Stockholders to be held on May 3, 1997
(the "Proxy Statement") are incorporated by reference into Part III of this
Report.
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FUQUA ENTERPRISES, INC.
INDEX TO REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Page
No.
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PART I
<S> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Medical Products Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Leather Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 6
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . 7
Item 6. Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . 12
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 12
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 12
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 12
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K . . . . . . . . . . . . . 13
OTHER SECTIONS
Section F Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . F-1/15
Section S Financial Statement Schedule - Item 14(a) . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
iii
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PART I
ITEM 1. BUSINESS
Fuqua Enterprises, Inc. ("Fuqua"), formerly Vista Resources, Inc., was
founded in 1881 and was incorporated in 1900 under the laws of West Virginia.
In 1965, it was reincorporated under Delaware law. Fuqua's principal executive
offices are located at One Atlantic Center, Suite 5000, 1201 W. Peachtree
Street, N.W., Atlanta, Georgia 30309.
Fuqua, through its subsidiaries, is a manufacturer of a variety of
products, including beds, patient aids, specialty seating, bathroom safety,
mobility products, vacuum systems, therapeutic support systems and heat and
cold packs for the acute, long-term and home health care markets and also
produces a broad line of leathers that are sold to manufacturers of shoes,
handbags, personal leather goods and furniture in both the United States and
foreign markets. FOR FINANCIAL INFORMATION REGARDING INDUSTRY SEGMENTS AND
FOREIGN AND DOMESTIC SALES, SEE NOTE 10 TO FUQUA'S CONSOLIDATED FINANCIAL
STATEMENTS.
During 1995, Fuqua acquired Basic American Medical Products, Inc.
("Basic"), and sold its insurance subsidiary, American Southern Insurance
Company ("American Southern"). In January 1996, Fuqua made the decision to
discontinue the operations of Kroy Tanning Company, Incorporated ("Kroy"),
which had historically been unprofitable. In April 1996, Fuqua acquired the
medical products operations of Lumex, Inc. (the "Lumex Division"). The Lumex
Division develops and markets a wide range of health care products including
specialty seating, bathroom safety, mobility products, health care beds and
therapeutic support systems. In February 1997, Fuqua acquired 100% of the
common stock and warrants of Prism Enterprises, Inc. ("Prism"). Prism, whose
1996 net sales were approximately $12,000,000, is a manufacturer of therapeutic
heat and cold packs for medical and consumer use and vacuum systems for
obstetrical and other applications.
MEDICAL PRODUCTS OPERATIONS
Fuqua acquired Basic in November 1995 and the Lumex Division in April 1996
which together represent Fuqua's Medical Products Operations through 1996. The
Medical Products Operations' business description which follows is before the
acquisition of Prism in February 1997. Prism's business is described
separately herein under "Acquisition of Prism".
The Medical Products Operations manufacture electric and manual acute and
long-term care beds and patient-room furniture, equipment and furnishings at
their facilities located in the United States and sell the majority of these
products directly to owners of acute and long-term care facilities.
Additionally, the Medical Products Operations manufacture home care beds at
facilities located in the United States which are sold principally through
independent dealers and distributors. The Medical Products Operations
manufacture, as well as import and assemble, specialty seating products,
wheelchairs, patient aids, bathroom safety and mobility products for the health
care markets. The Medical Products Operations' sales are principally to
customers within the United States. Management believes that the Medical
Products Operations are the leading supplier of long-term care facility beds
and specialty seating for dialysis clinics and that they have a relatively
small share of the acute care and home health care markets.
The Medical Products Operations encounter significant competition from a
number of manufacturers in each of their product lines and they compete on the
basis of product features and performance, on their ability to provide a full
range of products and design services for owners of long-term care facilities,
and their ability to deliver products and services at competitive prices. The
Medical Products Operations' business is not seasonal.
The Medical Products Operations' manufacturing processes include
fabrication, assembly and quality assurance. They purchase raw materials,
principally aluminum, steel and wood from a number of different vendors.
Additionally, they purchase electric motors and electronic controls from
independent third parties. The Medical Products Operations are not dependent
on any one vendor for their supply of raw materials. The impact of unfavorable
raw material price fluctuations on the Medical Products Operations is reduced
by their ability to pass along increases to their customers and the relatively
short time required to design, produce and deliver the order to a long-term
care facility, or to manufacture and deliver to independent dealers and home
health care providers.
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The Medical Products Operations conduct product research and development at
their manufacturing facilities. Amounts expended in 1996 were $592,000 and in
1995 were $0 (during the two month period included in Fuqua's Consolidated
Results of Operations). Patents and trademarks are important to the business
of the Medical Products Operations including the trademarks of Simmons(R),
Lumex(R), Akros(R), Easy Living(R), Orthobiotic(R) and Posture Glide(R) which
have been, and will continue to be, aggressively defended by the Medical
Products Operations.
Government regulations which affect the health care industry affect Fuqua's
Medical Products Operations. Medicare and Medicaid provide reimbursement for
the cost of medical equipment, beds and furnishings acquired by owner/operators
of acute care and long-term care facilities and by home health care providers.
Accordingly, changes to or delays in Medicare and Medicaid reimbursement can
affect the timing of payment received by the Medical Products Operations from
their customers and can exert downward pressure on prices which the Medical
Products Operations charge their customers for their products. Management
believes that recent changes and improvements in health care cost containment
and the current growth in managed care favor the Medical Products Operations as
a provider to the growing long-term care and home health care markets.
The United States Food and Drug Administration (the "FDA") regulates the
manufacture and sale of medical devices. The Medical Products Operations'
products are classified as Class I and Class II devices. In general Class I
devices must comply with certain general controls and with certain labeling and
record keeping requirements. Class II devices must comply with general
controls and certain performance standards and must receive pre-market approval
from the FDA. Management believes that the Medical Products Operations are
presently in material compliance with all applicable regulations promulgated by
the FDA and relevant state agencies.
The Medical Products Operations funded their working capital needs in 1996
through cash flow from operations and through borrowings under Fuqua's
Revolving Credit Facility, which Management believes will continue to be
adequate to cover working capital needs.
Acquisition of Prism: In February 1997, Fuqua acquired 100% of the common
stock and warrants of Prism. Prism manufactures therapeutic heat and cold
packs at its facility located in San Antonio, Texas and sells these products
through independent representatives to acute and long-term care markets. Prism
also manufactures vacuum systems for obstetrical use which are sold through
third-party distributors to acute care markets and manufactures vacuum systems
for consumer use at its facility located in Rancho Cucamonga, California, which
are sold through manufacturer representatives to automotive warehouse
distributors and international and independent retail customers. Prism is the
leading supplier of obstetrical vacuum systems and has a significant market
share of the heat and cold packs for acute and long-term care markets.
Prism encounters competition from a number of manufacturers in each of its
product lines and competes principally on the basis of product features and
performance at competitive prices. Prism's medical products are not seasonal;
however, sales of their consumer products, such as hand warmers and cold packs
and vacuum systems for non-medical use, are seasonal.
Prism's manufacturing processes include fabrication, assembly and quality
assurance. Prism purchases raw materials, principally sodium acetate and nylon
and vinyl bags, for heat and cold packs and purchases gauges and plastic resin
for the vacuum systems from a few large suppliers. Management believes that
there are alternative suppliers of all of its raw materials at competitive
prices.
Prism hires third-party contractors to perform its product research and
development; however, amounts incurred have not historically been significant.
Patent and trademarks are important to Prism's business, including
Mityvac(R), ZapPac(R), EZ Heat(R) and Aqua Cool(R). Management has in the
past, and will continue to aggressively defend its rights to these and other
of its patents and trademarks.
Prism's heat and cold packs are Class I devices and its vacuum systems for
obstetrical use are Class II devices regulated by the FDA. Management believes
that Prism is presently in material compliance with all applicable regulations
promulgated by the FDA and relevant state agencies.
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Prior to the acquisition by Fuqua, Prism financed its working capital needs
through cash flow from operations and through bank financing. Fuqua intends to
finance Prism's working capital needs through Fuqua's Revolving Credit
Facility.
LEATHER OPERATIONS
Fuqua's leather business is conducted through Irving Tanning Company and
its subsidiaries. In March 1996, Fuqua entered into an agreement to acquire a
70% interest in a joint venture which acquired a 50% interest in a tannery in
the People's Republic of China. In November 1996, Fuqua's interest in the
joint venture was reduced to 60% as a result of admitting a new venture
partner. Fuqua's investment and advances related to the joint venture at
December 31, 1996 were approximately $1,967,000. Through its joint venture,
Irving Tanning Company produces leathers in China and markets the products
throughout China and Southeast Asia. The joint venture, together with Irving
Tanning Company and its subsidiaries, make up Fuqua's leather business (the
"Leather Operations").
Tanned leathers are manufactured in a wide variety of textures, colors and
styles. Products are manufactured to customers' orders which avoids the
necessity of maintaining a large inventory of finished goods. The Leather
Operations sell directly to manufacturers, using independent agents and their
own sales force.
Until 1990, cowhides were purchased in the raw condition, and all tanning
and other processes necessary to produce the finished leather were performed by
the Leather Operations. In 1990, the Leather Operations began buying hides
that had already undergone the initial chrome tanning process from one
principal supplier, although alternate sources at competitive prices are
available. Costs of hides can vary substantially from year to year and within
a year due to supply and demand.
The Leather Operations implemented a modernization and expansion program,
expending over $13,850,000 during the five years from 1990 through 1994 for new
buildings, new equipment and improvement of the production facilities. This
program has produced greater efficiencies, better yields, higher and more
consistent quality, reduced manufacturing cycle times and lower inventories
than would otherwise have been achieved. Capital expenditures incurred in 1995
of $1,508,000 and in 1996 of $1,594,000 were at levels consistent with the
requirements of normal operations and were less than the depreciation expense
recorded in these respective years.
Patents, trademarks, licenses and franchises are not considered important
to the Leather Operations' business. Additionally the business is not regarded
as highly seasonal, although sales are generally lower in the first and fourth
quarters.
Research and development expenditures amounted to approximately $830,000 in
1996, $802,000 in 1995 and $800,000 in 1994.
The tanning industry, like many others in the United States, faces
ever-changing government standards and both state and Federal licensing
procedures. The changing licensing requirements necessitate updating that is
technically complex, and meeting the changing requirements could be costly and
time-consuming. The Town of Hartland, Maine charges the Leather Operations for
approximately 95% of the costs to operate the Town's water treatment facility
and landfill. These expenditures include amounts required to maintain state
and Federal water quality and environmental standards, which historically have
not been significant. Expenditures for environmental control purposes with
respect to Fuqua's continuing Leather Operations are not expected to be
material in 1997. Management believes that its continuing Leather Operations
are operating in substantial compliance with all relevant environmental
regulations.
In 1996, sales to one customer amounted to $15,722,000 and to another
$15,506,000. In 1995, sales to one customer amounted to $23,662,000 and sales
to another $15,938,000. In 1994, sales to one customer amounted to $20,007,000
and to another $17,426,000. The Leather Operations' business is not dependent
upon a single customer or a few customers; however, loss of one or both of the
Leather Operations' largest customers could have a material adverse affect on
future earnings. Foreign operations were not significant in 1996, but about
35% of the Leather Operations' 1996 sales were to customers in foreign
countries, compared to 27% in 1995 and 29% in 1994.
3
<PAGE> 7
The backlog of the Leather Operations' unshipped orders has historically
increased each year, however, the backlog has not proven to be an accurate
predictor of subsequent sales due to the negative impact of competitive pricing
pressures and the rapid changes in retail demand which affect the Leather
Operations' customers.
Fuqua's Leather Operations compete on the basis of quality, price, service
and product performance with many domestic and international producers of
natural leather and, to a lesser extent, synthetic materials used instead of
leather. Foreign competition is intense for the Leather Operations as well as
for other domestic tanneries, in part because foreign tanneries are allowed to
buy United States raw hides, but foreign countries normally do not permit their
raw hides to be exported. Lower labor costs and less stringent environmental
regulations overseas are factors in heightened competition. The Leather
Operations benefit from a dependable water supply and a loyal and stable labor
force.
The Leather Operations fund their working capital needs through cash flow
from operations and through borrowings under Fuqua's Revolving Credit Facility
which Management believes is adequate to cover the working capital needs of the
Leather Operations.
DISCONTINUED OPERATIONS
Fuqua sold its insurance subsidiary, American Southern, in December 1995
and, as a result, Fuqua no longer has any continuing insurance operations.
American Southern was a multi-line property and casualty company primarily
engaged in the sale of automobile insurance. Additionally, in January 1996,
Fuqua made the decision to discontinue the operations of Kroy, its tanning
operation located in East Wilton, Maine. Separate and distinct from Fuqua's
continuing leather business, Kroy produced sheep skin and deer skin leathers
which were sold principally to garment manufacturers. The results of
operations and the estimated loss on disposal of Kroy and American Southern
have been reflected in the 1995 financial statements as discontinued
operations.
In connection with Fuqua's decision to discontinue the operations of Kroy,
$4,800,000, before the benefit of income taxes, was accrued in 1995 to write
down assets to their net estimated realizable values and to pay for
obligations, including environmental costs, which may arise in connection with
the wind down of operations and the closing of Kroy's facility in East Wilton,
Maine. SEE NOTE 3 TO FUQUA'S CONSOLIDATED FINANCIAL STATEMENTS FOR A FURTHER
DESCRIPTION OF DISCONTINUED OPERATIONS.
EMPLOYEES
As of December 31, 1996, Fuqua and its subsidiaries employed 1,154 people.
4
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ITEM 2. PROPERTIES
The principal manufacturing and distribution facilities of the Leather
Operations, Medical Products Operations (including Prism) and Fuqua's corporate
office, substantially all of which are fully utilized (except as otherwise
indicated) and suitable for the purpose intended, are as follows:
<TABLE>
<CAPTION>
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LOCATION SQUARE FEET LEASE EXPIRATION CHARACTER OF USE
DATE
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<S> <C> <C> <C>
Atlanta, Georgia 11,783 4-30-2000 Corporate Office
Atlanta, Georgia 50,000 Owned Medical Products Operations' Office and
Showroom
Bay Shore, New York 130,000 Owned Medical Products Operations' Manufacturing
Bay Shore, New York 170,000 Owned For Sale
Downey, California 23,000 1-31-2000 Medical Products Operations' Warehouse and
Distribution
Ellsworth, Maine(1) 76,000 Owned Idle - For Sale
East Wilton, Maine(2) 54,100 Owned Idle - For Sale
Fond du Lac, Wisconsin 133,000 Owned Medical Products Operations' Manufacturing
Hartland, Maine 444,000 Owned Leather Operations' Tannery & Fabrication
Johnstown, New York 42,000 12-1-2010 Medical Products Operations' Manufacturing
Lancaster, Pennsylvania(3) 191,000 5-31-2000 Idle - For Sublease
Lawrenceville, Georgia 50,000 Owned Medical Products Operations' Manufacturing
Memphis, Tennessee 21,000 Month-to-Month Medical Products Operations' Warehouse and
Distribution
Rancho Cucamonga, Medical Products Operations' Manufacturing
California 24,000 12-31-97 Medical Products Operations' Office and
San Antonio, Texas 23,000 2-28-98 Manufacturing
Toccoa, Georgia(2) 35,000 Owned Idle- For Sale
Tupelo, Mississippi 45,000 Month-to-month Medical Products Operations' Manufacturing
==========================================================================================================
</TABLE>
(1) Operations at this plant have been suspended for a number of years.
(2) The decision was made to discontinue operations at this facility during
1996.
(3) The decision was made to exit activity at this facility in connection with
Fuqua's acquisition of the Lumex Division.
ITEM 3. LEGAL PROCEEDINGS
Environmental Contingency: In March 1994, the office of the District
Attorney of 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.
In connection with Fuqua's April 1996 acquisition of the Lumex Division,
Fuqua assumed the obligations associated with this environmental matter. At
December 31, 1996, the Lumex Division had $1,713,000 in reserves for
remediation costs, including additional investigation costs which will be
required. 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 judgment of independent consultants and counsel. Where
available information was sufficient to estimate the amount of liability, that
estimate has been used. Where information was only sufficient to establish a
range of probable liability and no point within the range is more likely than
another, the lower end of the range has been used. The Lumex Division has not
assumed that any such costs would be recoverable from third parties nor has the
Lumex Division discounted any of its cost estimates, although a portion of the
remediation work plan will be performed over a period of years.
The amounts of environmental 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 are not probable but
for which there exists at least a reasonable possibility of occurrence, exceeds
the reserves recorded by the Lumex Division at December 31, 1996 by $1,600,000.
5
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Arbitration of Purchase Price: In connection with Fuqua's acquisition of
the Lumex Division, the purchase price is subject to a final adjustment as
provided for in the asset sale agreement between Fuqua and Cybex International,
Inc. (formerly known as Lumex, Inc.) (the "Seller"). The Seller has been
notified that Fuqua disagrees with the Seller's proposed purchase price
adjustment and that the dispute will be resolved through arbitration. The
ultimate outcome in arbitration will change the purchase price and the
allocation thereof by Fuqua to the net assets acquired. The amount of such
adjustment is not presently determinable but could be significant. SEE NOTE 2
TO FUQUA'S CONSOLIDATED FINANCIAL STATEMENTS.
Other: The nature of Fuqua's business results in claims or litigation
which Management believes to be routine and incidental to Fuqua's business.
Fuqua maintains insurance in such amounts and with such coverages and
deductibles as Management believes are reasonable and prudent, although in
certain actions, plaintiffs request damages that may not be covered by
insurance. Management does not believe that the outcome of any such pending
claims and litigation will have an material adverse effect upon Fuqua's results
of operations or financial condition, although no assurance can be given as to
the ultimate outcome of any such claim or litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the three
months ended December 31, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Fuqua as of the date hereof elected to serve
until the next annual meeting of the Board of Directors of Fuqua are as
follows:
<TABLE>
<CAPTION>
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POSITION HELD
NAME AGE OFFICE SINCE
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<S> <C> <C> <C>
J. B. Fuqua 78 Chairman of the Board April 1989
J. Rex Fuqua 47 Vice Chairman of the Board August 1995
Lawrence P. Klamon 60 President and Chief Executive Officer August 1995
John J. Huntz, Jr. 46 Executive Vice President and Chief August 1995
Operating Officer
Brady W. Mullinax, Jr. 43 Vice President-Finance, Treasurer and Chief March 1994
Financial Officer
==============================================================================================================
</TABLE>
J. Rex Fuqua, Vice Chairman of the Board, is the son of J. B. Fuqua, the
Chairman of the Board.
From July 1989 to March 199l, Mr. J. B. Fuqua served as Senior Chairman of
Fuqua Industries, Inc.; prior to that he was the founder, Chairman of the Board
and Chief Executive Officer of Fuqua Industries, Inc. from September 1965 to
July 1989. Since 1985, Mr. J. Rex Fuqua has served as President and Chief
Executive Officer of Realan Capital Corporation, a privately-held investment
corporation located in Atlanta, Georgia. From 1991 to July 1995, Mr. Klamon
served as Senior Counsel of Alston & Bird, a prominent Atlanta law firm; prior
to that, from 1968 to 1991, he was associated with Fuqua Industries, Inc., a
diversified holding company, rising from General Counsel to President and Chief
Executive Officer and a member of the Board of Directors. From February 1994
to July 1995, Mr. Huntz served as Senior Vice President of Fuqua; from
September 1989 to January 1994, Mr. Huntz served as the Managing Partner of
Noble Ventures International, Inc., a venture investment and advisory firm,
located in Atlanta, Georgia; prior to that, from October 1984 to September
1989, he served as Director of Capital Resources of Arthur Young & Company, an
accounting firm. From January 1994 to March 1994, Mr. Mullinax served as a
financial consultant to Fuqua; and prior to that, from July 1987 to June 1993,
he was a partner with Price Waterhouse, an accounting firm.
6
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) Principal Market
Fuqua's Common Stock is traded on the New York Stock Exchange (symbol
FQE).
(b) Stock Price and Dividend Information
The following table summarizes the high and low market price for 1996
and 1995 as reported in The Wall Street Journal. The closing price of the
Common Stock on March 14, 1997 was $22.25.
<TABLE>
<CAPTION>
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MARKET PRICE OF COMMON STOCK
QUARTER 1996 1995
ENDED HIGH LOW HIGH LOW
========================================================================================
<S> <C> <C> <C> <C>
March 31 $25.875 $18.25 $24.50 $20.00
June 30 29.50 25.625 23.375 18.75
September 30 28.875 22.875 24.75 20.125
December 31 24.625 23.375 24.125 18.25
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</TABLE>
Fuqua has not paid cash dividends since 1988, and the Board of
Directors does not anticipate that cash dividends will be paid in the
foreseeable future. Fuqua's Revolving Credit Facility also restricts the
amount of dividends which can be paid. SEE NOTE 8 TO FUQUA'S CONSOLIDATED
FINANCIAL STATEMENTS.
(c) Approximate Number of Holders of Common Stock:
As of March 14, 1997, there were 782 stockholders of record of Fuqua's
Common Stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
(Dollars in thousands, except share data) 1996(4) 1995(1) 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS(2)
Net sales $ 181,543 $ 117,128 $ 118,011 $ 105,785 $ 76,226
Income from continuing
operations 7,273 5,250 5,822(3) 3,775 1,030
Per share:
Income from continuing
operations $ 1.60 $ 1.32 $ 1.51(3) $ .98 $ .27
- - --------------------------------------------------------------------------------------------------------------------------
YEAR-END DATA
Total assets $ 151,411 $ 136,762 $ 158,101 $ 140,299 $ 127,227
Long-term debt obligations 30,686 22,041 14,445 11,639 10,808
Stockholders' equity 89,280 81,888 64,322 57,378 48,665
Stockholders' equity per share $ 19.93 $ 18.43 $ 17.10 $ 15.31 $ 13.10
Common shares outstanding 4,478,847 4,442,174 3,762,424 3,748,374 3,713,870
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
1. Includes Basic for the two month period ended December 31, 1995.
2. See footnotes to Consolidated Financial Statements for information on
discontinued operations.
3. Includes $544 ($.14 per share) for favorable adjustment of income tax
contingencies.
4. Includes the Lumex Division for the nine month period ended December 31,
1996.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
ACQUISITIONS: In November 1995, Fuqua acquired 100% of the common stock of
Basic American Medical Products, Inc. ("Basic"). Basic, through its
divisions, Simmons Healthcare, Omni Manufacturing and SSC Medical, is a
manufacturer and distributor of medical equipment and furnishings for the
acute, long-term and home health care markets. Basic's results of operations
were included in the consolidated results of Fuqua for the last two months of
1995.
On April 3, 1996, Fuqua acquired the medical products operations of Lumex,
Inc. (the "Lumex Division") for approximately $40,750,000. As provided in the
asset sale agreement, the purchase price is subject to a final adjustment, the
amount of which is in dispute and is being resolved by arbitration. The Lumex
Division develops and markets a wide range of health care products including
specialty seating, bathroom safety, mobility products, health care beds and
therapeutic support systems. The Lumex Division is headquartered in Bay Shore,
Long Island, New York and markets the majority of its products to the home
health care market and the remainder to institutional markets, including acute
care and extended care facilities and dialysis clinics. The Lumex Division's
results of operations have been included in the consolidated results of Fuqua
for the last nine months of 1996.
On February 26, 1997, Fuqua acquired 100% of the common stock and warrants
of Prism Enterprises, Inc. ("Prism") for approximately $19,500,000. Prism,
whose 1996 net sales were approximately $12,000,000, is a manufacturer of
therapeutic heat and cold packs for medical and consumer use and vacuum
systems for obstetrical and other applications. Prism's operating facilities
are located in San Antonio, Texas and Rancho Cucamonga, California.
In March 1996, Fuqua, through its Leather Operations, entered into an
agreement to acquire 70% of a joint venture which acquired a 50% interest in a
tannery in the People's Republic of China. In November 1996, the Leather
Operations' interest in the joint venture was reduced to 60% as a result of
admitting a new venture partner. Investment and advances related to the joint
venture at December 31, 1996 were $1,967,000. Through its joint venture, the
Leather Operations produce leather in China and market the products throughout
China and Southeast Asia.
MEDICAL PRODUCTS OPERATIONS: Net sales for the Medical Products Operations
were $73,711,000 for 1996 and $5,198,000 for 1995. Gross profit margins were
29.9% in 1996 and 27.4% in 1995 and net profit margins were 6.4% in 1996 and
7.7% in 1995. However, the results of Basic are included only for two months
in 1995 and the results of the Lumex Division are included only for nine months
in 1996. As a result the increases in net sales and the changes in margin
percentages are not comparable.
LEATHER OPERATIONS: Net sales of the Leather Operations were 3.7% lower in
1996 than in 1995; 1995 net sales were 5.1% lower in 1995 than in 1994. The
decreases in net sales from 1995 to 1996 and from 1994 to 1995 reflected volume
declines which could not be offset by price increases. During much of 1996 and
1995, the demand for leather was adversely affected by weak retail sales of
shoes and other leather products. Additionally, hide prices during the last
half of 1995 and the first half of 1996 were unusually low which resulted in
lower prices charged to customers in these periods. Sales to customers in
foreign countries were $38,294,000 in 1996 as compared to $30,662,000 in 1995
and $34,516,000 in 1994. Sales to customers in foreign countries represented
35.5%, 27.4% and 29.3% of the Leather Operations' net sales. The increases in
foreign sales from 1995 to 1996 reflect principally the growth in foreign
markets and the success of the Leather Operations' marketing efforts.
The gross profit margin percentage was 17.4% in 1996, 15.5% in 1995 and
14.9% in 1994. The increase in 1995 and 1996 reflects the favorable impact of
falling hide prices during the last half of 1995 which continued during the
first half of 1996 and improvements in operational efficiencies from 1994
through 1996.
The increase in selling and administrative expenses of the Leather
Operations from $6,580,000 in 1994, $6,926,000 in 1995 and $7,831,000 in 1996
was almost entirely related to expansion of the sales effort and higher levels
of selling costs on export sales during the periods from 1994 to 1996.
Net profit margin as a percentage of sales was 10.1% in 1996 and 9.3% in
1995 and 1994.
8
<PAGE> 12
CORPORATE OFFICE OPERATIONS: Investment income in 1996 was $1,939,000 as
compared to $828,000 in 1995 and $541,000 in 1994. The increases in investment
income resulted from higher amounts invested in 1996 and 1995 as compared to
1994. Additionally, the higher amounts of investment income in 1996 reflect
the return on the proceeds from the sale of Fuqua's insurance subsidiary on
December 31, 1995. Capital losses, net of gains, of $54,000 were included as a
reduction in investment income in 1996. Capital gains, net of losses, included
in investment income were $42,000 in 1995 and $0 in 1994.
General and administrative expenses for corporate office activities were
$804,000 higher in 1996 than in 1995 and 1995 amounts were $492,000 higher than
in 1994. The increases during the periods from 1994 to 1996 have been
primarily the result of increased corporate development activity.
INTEREST EXPENSE: Interest expense in 1996 was $1,576,000 higher than 1995 and
the 1995 amount was $169,000 higher than in 1994. These increases principally
reflect higher levels of borrowings associated with acquisitions in 1995 and
1996.
In June 1996, Fuqua amended its Revolving Credit Facility to expand the
maximum borrowing capacity from $60,000,000 to $100,000,000 and to add an
additional bank to the Revolving Credit Facility. The interest expense under
the Revolving Credit Facility is based on matrix pricing which ranges from
LIBOR plus 40 basis points to LIBOR plus 100 basis points.
INCOME TAXES RELATING TO CONTINUING OPERATIONS: The provision for income taxes
in 1996, 1995 and 1994 includes both Federal and state income taxes. The
combined Federal and state effective tax rate in 1996 was 36.7%, in 1995 was
33.9% and was 31.4% in 1994. The effective tax rate in 1994 was favorably
impacted by an adjustment ($544,000 or $.14 per share) for amounts that were no
longer considered necessary for loss contingencies for income taxes. Fuqua's
effective tax rates are consistently below the statutory rates due primarily to
significant sources of investment income that are exempt or substantially
excluded from income taxes and due to favorable tax planning benefits related
to foreign sales.
DIVIDENDS: Fuqua paid no dividends in 1996, 1995 or 1994. At this time, Fuqua
intends to retain all earnings for investments in its current business and for
corporate development opportunities. Additionally, Fuqua's Revolving Credit
Facility restricts the amount of dividends which can be paid.
DISCONTINUED OPERATIONS: During December 1995, Fuqua sold its insurance
subsidiary, American Southern Insurance Company ("American Southern") for
$34,000,000 to Atlantic American Corporation ("Atlantic American"), an Atlanta,
Georgia based publicly traded insurance company. The proceeds from the sale
included cash of $22,648,000 and a note receivable from the purchaser of
$11,352,000. The note accrued interest at prime, half of which was payable
quarterly and the other half of which was paid, together with principal, in
October 1996. The term and amount of the note receivable was the same as the
note payable which arose in connection with Fuqua's acquisition of American
Southern in 1991. In October 1996, the proceeds from Atlantic American's
payment of the note receivable were used to repay this note payable. The sale
of American Southern resulted in the earnings of American Southern being
reclassified as discontinued operations and in a loss on disposal from the sale
of $900,000 (net of taxes). The loss on disposal arose principally from the
increased cost basis which Fuqua had in the stock as a result of American
Southern's earning more than it paid in dividends since it was acquired by
Fuqua in 1991. During 1996, interest charges of $662,000 were incurred and
offset against the accrual established in 1995 to provide for the loss on
disposal of American Southern.
In January 1996, Fuqua made the decision to discontinue the operations of
Kroy Tanning Company, Incorporated, ("Kroy"), which historically had been
unprofitable. In accordance with generally accepted accounting principles
(Emerging Issues Task Force No. 95-18), Kroy was treated as a discontinued
operation in the December 31, 1995 consolidated financial statements. In
connection with Fuqua's decision to discontinue the operations of Kroy,
$4,800,000 (before the benefit of income taxes) was accrued at December 31,
1995 to write down assets to their net realizable values and to pay for
obligations, including environmental costs, in connection with the wind down of
operations and the closing of Kroy's facility in East Wilton, Maine. During
1996, $3,080,000 (before the benefit of income taxes) of such costs were
charged against this accrual. Operations at the East Wilton facility ceased in
the fourth quarter of 1996. SEE NOTE 3 TO FUQUA'S CONSOLIDATED FINANCIAL
STATEMENTS FOR A FURTHER DESCRIPTION OF THE RESULTS OF DISCONTINUED OPERATIONS.
9
<PAGE> 13
ACCOUNTING PRONOUNCEMENTS: Effective January 1, 1996, Fuqua adopted Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which required 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 amount. SFAS 121 also addressed the accounting for long-lived assets
that are expected to be disposed of. The adoption of SFAS 121 had no effect on
Fuqua's Consolidated Financial Statements.
Effective January 1, 1996, Fuqua adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock- Based Compensation" ("SFAS 123"),
which encouraged companies to recognize expense for stock-based awards based on
their fair market values on the dates of grant. As an alternative provided for
in SFAS 123, Fuqua has elected to account for its stock options in accordance
with APB Opinion No. 25 and related Interpretations. The disclosures required
by SFAS 123 are included in NOTE 9 TO FUQUA'S CONSOLIDATED FINANCIAL
STATEMENTS.
Effective January 1, 1994, Fuqua adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). In accordance with SFAS 115, prior period financial
statements have not been restated to reflect the change in accounting
principle. The cumulative effect on net income as of January 1, 1994 of
adopting SFAS 115 for investments which previously were classified as held to
maturity which were then classified as trading securities was immaterial. The
balance of stockholders' equity as of January 1, 1994 was increased by
$1,238,000, net of income taxes, to reflect the net unrealized gains on
investments previously classified as held to maturity which are now classified
as available for sale.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, Fuqua had $4,616,000 in cash and cash equivalents and
over $50,000,000 in unused borrowing capacity under Fuqua's Revolving Credit
Facility, after considering the amounts borrowed subsequent to December 31,
1996 to acquire Prism. In the event circumstances warrant, such as a large
acquisition, Fuqua may look to additional outside sources for funds.
MEDICAL PRODUCTS OPERATIONS: Inventories for the Medical Products Operations
were $17,279,000 at December 31, 1996 and $5,267,000 at December 31, 1995.
Accounts receivable were $16,870,000 at December 31, 1996 and were $5,740,000
at December 31, 1995. Lease receivables at December 31, 1996 were $4,650,000
and were $0 at December 31, 1995. These increases are due principally to the
acquisition of the Lumex Division.
Capital expenditures for the Medical Products Operations were $1,313,000 in
1996 and there were no capital expenditures incurred in 1995. Depreciation and
amortization was $2,274,000 for 1996 and $87,000 for 1995. These increases are
due to the acquisition of the companies included in Fuqua's Medical Products
Operations and the timing thereof.
LEATHER OPERATIONS: Accounts receivable increased 21.2% to $15,803,000 in 1996
and decreased 8.5% to $13,043,000 at December 31, 1995. Year-to-year increases
in inventories were 50.8% in 1996, rising to $24,780,000 and .8% in 1995,
rising to $16,428,000.
Fuqua's Leather Operations began a plant modernization program in 1990
which was completed in 1994. This program required capital expenditures
aggregating $13,850,000. Capital expenditures for 1996 were $1,594,000 and for
1995 were $1,508,000, and were less than the depreciation expense recorded in
these respective years.
ENVIRONMENTAL CONTINGENCIES: In March 1994, the office of the District
Attorney of 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.
In connection with Fuqua's April 1996 acquisition of the Lumex Division,
Fuqua assumed the obligations associated with this environmental matter. At
December 31, 1996, the Lumex Division had $1,713,000 in reserves for
remediation costs, including additional investigation costs which will be
required. Reserves are established when it is probable that a liability has
been incurred and such costs can be reasonably estimated. The Lumex Division's
10
<PAGE> 14
estimates of these costs were based upon currently enacted laws and regulations
and the professional judgment of independent consultants and counsel. Where
available information was sufficient to estimate the amount of liability, that
estimate has been used. Where information was only sufficient to establish a
range of probable liability and no point within the range is more likely than
another, the lower end of the range has been used. The Lumex Division has not
assumed that any such costs would be recoverable from third parties nor has the
Lumex Division discounted any of its cost estimates although a portion of the
remediation work plan will be performed over a period of years.
The amounts of these environmental 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 are not
probable but for which there exists at least a reasonable possibility of
occurrence, exceeds the reserves recorded by the Lumex Division at December 31,
1996 by $1,600,000.
In past years, certain of Fuqua's subsidiaries involved in the tanning of
leather ceased operations and were required to conduct environmental clean up
procedures under supervision of state environmental agencies. Additionally,
certain of Fuqua's subsidiaries, which were in businesses no longer conducted
by Fuqua, were named as Potentially Responsible Parties for sites where these
subsidiaries allegedly delivered waste products. The costs attributable to
these matters have not been material to Fuqua's results of operations or
financial position and Management does not expect that future amounts to be
incurred will materially exceed amounts already accrued or paid.
The tanning industry, like many others in the United States, faces
ever-changing government standards and both state and Federal licensing
procedures. The changing licensing requirements may necessitate updating
equipment and processes that are technically complex, and meeting the changing
requirements could be costly and time consuming. The Town of Hartland, Maine
charges the Leather Operations for approximately 95% of the costs to operate
the water treatment facility and landfill. These expenditures include amounts
required to maintain state and Federal water quality and environmental
standards, which historically have not been significant. Expenditures for
environmental control purposes with respect to Fuqua's continuing Leather
Operations are not expected to be material in 1997. Fuqua's management believes
that its continuing Leather Operations are operating in substantial compliance
with all relevant environmental regulations.
INFLATION, TRENDS AND RISK FACTORS: Fuqua's consolidated financial statements
are prepared on the basis of historical cost. While it is difficult to measure
the impact of inflation, Management believes that the effects of inflation on
Fuqua have not been significant. However, the Leather Operations can be
affected by the volatility of hide prices. Costs of hides can vary
substantially from year to year and within a year due to supply and demand. In
periods in which hide prices rise rapidly and are above the Leather Operations'
average cost of hides in raw material stocks or work in process, the Leather
Operations' gross profit margins benefit. Conversely, the opposite impact
occurs, in periods in which hide prices fall quickly and are below the average
cost of the hides in stock. Otherwise, to the extent that inflationary
pressures have an adverse effect through higher raw material and asset
replacement costs, Fuqua attempts to minimize these effects through cost
reductions and productivity improvements as well as price increases.
Management is unaware of any trends or conditions that could have a
material adverse effect on Fuqua's consolidated financial position, future
results of operations or liquidity. However, investors should also be aware of
factors which could have a negative impact on prospects and the consistency of
progress. These include political, economic or other factors such as inflation
rates, recessionary or expansive trends, taxes and regulations and laws
affecting business in each of Fuqua's markets; competitive product,
advertising, promotional and pricing activity, dependence on the rate of
development and degree of acceptance of new product introductions into the
marketplace, and the difficulty of forecasting sales at certain times in
certain of Fuqua's markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the consolidated financial statements of Fuqua and its
subsidiaries, consisting of the Consolidated Balance Sheets as of December 31,
1996 and 1995 and the related Consolidated Statements of Income, Consolidated
Statements of Cash Flows, and Consolidated Statements of Stockholders' Equity
for each of the three years in the period ended December 31, 1996, together
with the Notes to Consolidated Financial Statements. SEE SECTION F, OF THIS
REPORT, WHICH INFORMATION IS INCORPORATED INTO THIS ITEM 8 BY REFERENCE.
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<PAGE> 15
Reference is also made to information set forth in the section entitled
"Summary of Quarterly Data". SEE SECTION F, PAGE F-15 OF THIS REPORT, WHICH
INFORMATION IS INCORPORATED INTO THIS ITEM 8 BY REFERENCE.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Identification of Directors
The information regarding directors of Fuqua is set forth under the
section "Election of Directors" and in the first paragraph of "Other Matters"
in Fuqua's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Meeting of Stockholders
pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the "Proxy
Statement"), which sections are incorporated herein by reference.
(b) Identification of Executive Officers
The information regarding executive officers of the Registrant is
included in Part I of this report under the caption "Executive Officers of the
Registrant", which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information set forth under the caption "Executive
Compensation and Other Information" and "Election of Directors - Fees for
Directors" in the Proxy Statement, which information is incorporated herein by
reference; provided that in no event shall the information set forth under the
caption "Executive Compensation and Other Information - Report on Executive
Compensation" be incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information set forth under the caption "Ownership
of Common Stock" in the Proxy Statement, which information is incorporated
herein by reference.
Fuqua does not know of any contractual arrangements which may at a
subsequent date result in a change in control of Fuqua.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the information set forth under the caption "Executive
Compensation and Other Information - Transactions with Management" in the Proxy
Statement which information is incorporated herein by reference.
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<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The response to this portion of Item 14 is submitted as a separate
section of this report, such section being incorporated herein by reference.
(See Section F)
(a)(2) Schedules
The response to this portion of Item 14 is submitted as a separate
section of this report, such section being incorporated herein by reference.
(See Section S)
(a)(3) Listing of Exhibits
<TABLE>
<CAPTION>
Exhibits Incorporated Herein by Reference
--------------------------------------------------------------
Designation Document with Which Exhibit Designation of Such
of Exhibit in Description of Was Previously Filed with Exhibit in That
This Form 10-K Exhibits Commission Document
- - -------------- ------------------------------------- -------------------------------- ----------------------
<S> <C> <C> <C>
2(a) Stock Purchase Agreement among Fuqua, Interim Report on Form 8-K dated Exhibit 2(i)
Concorde Finance & Investment, Inc. October 11, 1991
InterRedec, Inc, InterRedec Southern
Company, Inc. and American Southern
dated September 17,1991
2(b) Agreement and Plan of Merger By and Quarterly Report on Form 10-Q Exhibit 2(a)
Among Basic American Medical Products, for the three months ended
Inc., BA Acquisition Corporation and September 30, 1995
Fuqua and with respect to Articles 7,
12 and 13 thereof, Gene J. Minotto
dated as of October 6, 1995
2(c) Stock Purchase Agreement between Quarterly Report on Form 10-Q Exhibit 2(b)
Atlantic American Corporation and for the three months ended
Fuqua dated as of October 16, 1995 September 30, 1995
2(d) Asset Sale Agreement By and Between Annual Report on Form 10-K Exhibit 2(d)
Lumex, Inc., MUL Acquisition Corp. I, for the year ended December 31,
MUL Acquisition Corp. II, and Fuqua 1995
dated March 13, 1996 (Fuqua agrees to
furnish a copy of any omitted schedule
to the Commission upon request)
2(e) Stock Purchase Agreement dated as of Interim Report on Form 8-K dated Exhibit 2
February 26, 1997, between Fuqua and February 26, 1997.
the persons listed as Sellers on the
signature pages of the Stock Purchase
Agreement. (Fuqua agrees to supple-
mentally furnish a copy of any
omitted schedules and exhibits to the
Commission upon request.)
3(a) Amended and Restated Certificate of Registration Statements on Form S-8, Exhibit 4(a)
Incorporation of Fuqua Nos. 333-05461 and 333-05485, dated
June 7, 1996
3(b) Bylaws of Fuqua Registration Statements on Form S-8, Exhibit 4(b)
Nos. 333-05461 and 333-05485, dated
June 7, 1996
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
Exhibits Incorporated Herein by Reference
--------------------------------------------------------------
Designation Document with Which Exhibit Designation of Such
of Exhibit in Description of Was Previously Filed with Exhibit in That
This Form 10-K Exhibits Commission Document
- - -------------- ------------------------------------- -------------------------------- ----------------------
<S> <C> <C> <C>
4(a) Agreement between Town of Hartland, Quarterly Report on Form 10-Q Exhibit 4(d)
Maine and Irving Tanning Company for the three months ended
dated September 26, 1994 related to September 30, 1994
General Obligations Bonds
10(a) Management Agreement between Annual Report on Form 10-K Exhibit 10(b)
Fuqua and Fuqua National Corporation for the year ended December 31,
dated April 10, 1989 1989
10(b) Assignment to Fuqua Capital Corpo- Annual Report on Form 10-K Exhibit 10(b)(1)
ration of the Management Agreement for the year ended December 31,
between Fuqua and Fuqua National 1990
Corporation
10(c) First Amendment to Management Agree- Quarterly Report on Form 10-Q Exhibit 10(b)(2)
ment between Fuqua Capital Corpo- for the three months ended
ration and Fuqua dated September 14, September 30, 1994
1994
10(d)* 1989 Stock Option Plan of Fuqua Annual Report on Form 10-K Exhibit 10(c)
for the year ended December 31,
1989
10(e)* 1992 Stock Option Plan of Fuqua Registration Statement on Form Exhibit 28
S-8 (Registration No. 33-54164)
10(f)* 1995 Long-Term Incentive Plan of Proxy Statement dated April 16, Exhibit A
Fuqua 1996
10(g)* 1995 Stock Option Plan for Outside Proxy Statement dated April 16, Exhibit B
Directors of Fuqua 1996
10(h) Lease Agreement between Fuqua (Lessee) Annual Report on Form 10-K Exhibit 10(f)
and Sumitomo Life Realty (N.Y.) Inc. for the year ended December 31,
(Lessor) dated January 17, 1990 1990
10(i) First Amendment to the Lease Agreement Annual Report on Form 10-K Exhibit 10(g)
between Fuqua (Lessee) and Sumitomo for the year ended December 31,
Life Realty (N.Y.) Inc. (Lessor) 1990
dated September 6, 1990
10(j) Second Amendment to Lease Agreement Annual Report on Form 10-K Exhibit 10(p)
between Fuqua (Lessee) and Sumitomo for the year ended December 31,
Life Realty (N.Y.) Inc. (Lessor) 1991
dated February 21, 1992
10(k) Third Amendment to Lease Agreement Quarterly Report on Form 10-Q Exhibit 10(i)(1)
between Fuqua (Lessee) and Sumitomo for the three months ended
Life Realty (N.Y.) Inc. (Lessor) September 30, 1994
dated October 28, 1994
10(l) Sublease Agreement between Fuqua Annual Report on Form 10-K Exhibit 10(l)
and Fuqua Capital Corporation, for the year ended December 31,
dated October 31, 1994 1994
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
Exhibits Incorporated Herein by Reference
--------------------------------------------------------------
Designation Document with Which Exhibit Designation of Such
of Exhibit in Description of Was Previously Filed with Exhibit in That
This Form 10-K Exhibits Commission Document
- - -------------- ------------------------------------- -------------------------------- ----------------------
<S> <C> <C> <C>
10(m) Lease Agreement between Empire State Annual Report on Form 10-K Exhibit 10(q)
Building Company (Lessor) and Fuqua for the year ended December 31,
(Lessee) dated March 1, 1993 along 1993
with Lease Modification Agreement
and Space Deletion Agreement
dated February 18, 1994
10(n) Registration Rights Agreement between Quarterly Report on Form 10-Q Exhibit 10(a)
Fuqua and Gene J. Minotto dated for the three months ended
November 8, 1995 September 30, 1995
10(o) Unconditional Guarantee of Performance Annual Report on Form 10-K Exhibit 10(s)
of Fuqua in favor of Super Sagless, Inc. for the year ended December 31,
dated November 15, 1995 1995
10(p) Covenant Not to Compete by and Interim Report on Form 8-K/A dated Exhibit 10(a)
among Lumex, Inc., Lumex Medical April 3, 1996
Products, Inc., MUL Acquisition
Corp. and Fuqua, dated April 3, 1996
10(q) Collective Bargaining Agreement dated Quarterly Report on Form 10-Q Exhibit 10(b)
January 31, 1996, between Local 422-S, for the three months ended
Production Service and Sales District June 30, 1996
Council, IUC, AFL-CIO, which was
assigned to Lumex Medical Products,
Inc. in the Asset Sale Agreement by
and between Lumex, Inc., Lumex
Medical Products, Inc., MUL Acquisi-
tion Corp. II and Fuqua dated
March 13, 1996
10(r)* Fuqua Enterprises, Inc. Savings and Retire- Interim Report on Form 8-K dated Exhibit 10(a)
ment Plan and Trust effective April 3, 1996 April 3, 1996
(a tax-qualified 401(k) plan) with SunTrust
Bank, Atlanta, serving as Trustee
10(s) Fuqua Enterprises, Inc. Savings and Retire- Interim Report on Form 8-K dated Exhibit 10(b)
ment Plan and Trust for Union Employees April 3, 1996
effective April 3, 1996 (a tax-qualified
401(k) plan) with SunTrust Bank, Atlanta,
serving as Trustee
10(t) Amended and Restated Credit Agreement Quarterly Report on Form 10-Q Exhibit 10(a)
between SunTrust Bank, Atlanta, as Agent, for the three months ended June 30,
SunTrust Bank, Atlanta, Wachovia Bank of 1996
Georgia, N.A., Fleet Bank of Maine, First
Union National Bank of Georgia and Fuqua
dated as of June 28, 1996
10(u) Term Loan Agreement by and among Annual Report on Form 10-K Exhibit 4(b)
SunTrust Bank, Atlanta, Fuqua and Basic for the year ended December 31,
dated January 18, 1996 (Fuqua agrees to 1995
furnish a copy of any omitted schedules
to the Commission upon request)
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
Exhibits Incorporated Herein by Reference
--------------------------------------------------------------
Designation Document with Which Exhibit Designation of Such
of Exhibit in Description of Was Previously Filed with Exhibit in That
This Form 10-K Exhibits Commission Document
- - -------------- ------------------------------------- -------------------------------- ----------------------
<S> <C> <C> <C>
10(v) Letter of Credit Agreement between Quarterly Report on Form 10-Q for Exhibit 10(a)
SunTrust Bank, Atlanta and Fuqua dated the three months ended September 30,
as of November 8, 1996 (Fuqua agrees to 1996
furnish a copy of any omitted schedule to
the Commission upon request)
10(w) Escrow Agreement dated as of February 26, Interim Report on Form 8-K dated Exhibit 99
1997, by and among BT Capital Partners, February 26, 1997
Inc. ("BT"), Merle M. Smith, (individually
and, together with BT, "Sellers"), Merle M.
Smith in the capacity as agent for Sellers,
Fuqua and Texas Commerce Bank National
Association.
10(x) Line of Credit Agreement by and among
SunTrust Bank, Atlanta, as Agent, SunTrust
Bank, Atlanta, Wachovia Bank of Georgia,
N.A., Fleet Bank of Maine, First Union
National Bank of Georgia and Fuqua dated
as of January 27, 1997
11 Statement of Computation of Earnings
per share
21 Subsidiaries of Fuqua
23 Consent of Ernst & Young LLP
24 Powers-of-Attorney and Certified
Copy of resolution of the Board
of Directors dated March 12, 1997
27 Financial Data Schedule (for SEC use only)
Article 5
</TABLE>
- - --------------------------------------
(b) Reports on Form 8-K
During the three months ended December 31, 1996, Fuqua did not file
any report on Form 8-K. In February 1997, Fuqua filed a Form 8-K
related to the acquisition of Prism Enterprises, Inc. In March 1997,
Fuqua filed a Form 8-K/A, Amendment No. 2 amending its April 3, 1996
filing on Form 8-K related to the acquisition of the Lumex Division.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedule
The response to this portion of Item 14 is submitted as a separate
section of this report.
- - --------------------------------------
* Management contract or compensatory plan required to be filed pursuant to
Item 14(c) of this report.
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<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FUQUA ENTERPRISES, INC.
By: /s/ Brady W. Mullinax, Jr.
------------------------------------
Vice President-Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------------------------------- ------------------------------------------- -------------------------
<S> <C> <C>
J. B. FUQUA* Chairman of the Board March 21, 1997
J. REX FUQUA* Vice Chairman of the Board March 21, 1997
W. CLAY HAMNER* Director March 21, 1997
FRANK W. HULSE IV* Director March 21, 1997
RICHARD C. LAROCHELLE* Director March 21, 1997
GENE J. MINOTTO* Director March 21, 1997
CLARK L. REED* Director March 21, 1997
D. RAYMOND RIDDLE* Director March 21, 1997
LAWRENCE P. KLAMON* President and Chief Executive Officer March 21, 1997
(Principal Executive Officer) and
Director
BRADY W. MULLINAX, JR.* Vice President-Finance, Treasurer, and March 21, 1997
Chief Financial Officer (Principal
Financial Officer and Principal Accounting
Officer)
</TABLE>
FUQUA ENTERPRISES, INC.
*By: /s/ Mildred H. Hutcheson
-----------------------------------
Mildred H. Hutcheson
Attorney-in-fact
17
<PAGE> 21
FUQUA ENTERPRISES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
ITEM 8
REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY DATA
SECTION F
<PAGE> 22
FORM 10-K
FUQUA ENTERPRISES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1996
ITEM 8
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
AND
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Income
for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Summary of Quarterly Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
</TABLE>
*******
The financial statement schedule under Item 14(a) may be found under Section S
of this report.
(i)
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Fuqua Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of Fuqua
Enterprises, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule referred to in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Fuqua Enterprises, Inc. at December 31, 1996 and 1995, and the consolidated
results of its operations and cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, in 1994,
the Company changed its method of accounting for certain investments in debt
and equity securities to comply with Statement of Financial Accounting
Standards No. 115.
/s/ Ernst & Young LLP
----------------------------
ERNST & YOUNG LLP
Atlanta, Georgia
February 20, 1997,
except for the last
paragraph of Note 2,
as to which the date
is February 26, 1997
F-1
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31, (Dollars in thousands) 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,616 $ 29,000
Investments available for sale - 12,550
Receivables -
Trade accounts, less allowance of $250 (1995, $200) 33,871 19,102
Note receivable from sale of subsidiary - 11,352
Lease receivables, less allowance of $350 (1995, $0) 1,147 -
Inventories 42,059 21,695
Prepaid expenses and other assets 2,620 910
Deferred income taxes 3,477 3,614
----------------------------------
Total Current Assets 87,790 98,223
----------------------------------
Property, plant and equipment 48,927 32,303
Less accumulated depreciation (15,166) (10,841)
----------------------------------
Net Property, Plant and Equipment 33,761 21,462
----------------------------------
Intangible assets, less accumulated amortization of $399 (1995, $25) 20,014 5,013
Lease receivables 3,503 -
Deferred income taxes - 1,066
Other assets 1,408 95
----------------------------------
Total Assets of Continuing Operations 146,476 125,859
Total Assets of Discontinued Operations 4,935 10,903
----------------------------------
Total Assets $ 151,411 $ 136,762
==================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-2
<PAGE> 25
CONSOLIDATED BALANCE SHEETS - continued
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31, (Dollars in thousands, except share data) 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ - $ 2,064
Accounts payable and accrued expenses 29,992 18,800
Long-term liabilities due within one year 1,453 11,668
----------------------------------
Total Current Liabilities 31,445 32,532
Long-term debt obligations 30,686 22,041
----------------------------------
Total Liabilities of Continuing Operations 62,131 54,573
Total Liabilities of Discontinued Operations - 301
----------------------------------
Total Liabilities 62,131 54,874
----------------------------------
Stockholders' equity
Preference stock, $1 par value:
authorized 8,000,000 shares; none issued - -
Common stock, $2.50 par value:
authorized 20,000,000 shares; issued
4,523,669 shares; (1995, 4,443,169 shares) 11,309 11,108
Additional paid-in capital 24,847 24,074
Retained earnings 53,971 46,698
Unrealized gains (losses) on investments - 28
----------------------------------
90,127 81,908
Treasury stock, at cost: 44,822 shares; (1995, 995 shares) (847) (20)
----------------------------------
Total Stockholders' Equity 89,280 81,888
----------------------------------
Total Liabilities and Stockholders' Equity $ 151,411 $ 136,762
==================================
</TABLE>
See accompanying Notes to Consolidated Balance Sheet
F-3
<PAGE> 26
CONSOLIDATED STATEMENTS OF INCOME
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands, except per share data) 1996 1995 1994
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $181,543 $117,128 $118,011
Investment income 1,939 828 541
-----------------------------------------------------------
Total revenues 183,482 117,956 118,552
-----------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 140,773 98,356 100,446
Selling, general and administrative expenses 28,757 10,757 8,897
Interest expense 2,470 894 725
-----------------------------------------------------------
Total costs and expenses 172,000 110,007 110,068
-----------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 11,482 7,949 8,484
INCOME TAXES 4,209 2,699 2,662
-----------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 7,273 5,250 5,822
-----------------------------------------------------------
DISCONTINUED OPERATIONS:
Income from discontinued operations
(Net of income taxes (benefits) of 0, ($103)
and $1,215, respectively) - 1,160 3,751
Loss on disposal of discontinued operations
including earnings net of taxes during the
phase out period (Net of income tax benefits
of $2,753) - (3,900) -
-----------------------------------------------------------
- (2,740) 3,751
-----------------------------------------------------------
NET INCOME $ 7,273 $ 2,510 $ 9,573
===========================================================
PER SHARE:
Income from Continuing Operations $ 1.60 $ 1.32 $ 1.51
-----------------------------------------------------------
Net Income $ 1.60 $ .63 $ 2.48
-----------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands) 1996 1995 1994
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 7,273 $ 5,250 $ 5,822
Adjustments:
Depreciation and amortization 4,196 1,931 1,603
Deferred income taxes 1,203 464 (88)
Loss on sales of available for sale investments 54 - -
Changes in Assets and Liabilities:
Trade accounts receivables (4,485) 886 (716)
Lease receivables 1,551 - -
Prepaid expenses (1,134) - -
Inventories (7,736) (130) (1,889)
Other assets (1,078) (225) 39
Income taxes - (1,112) (724)
Payables, accrued expenses, and other liabilities (5,010) (1,624) (3,628)
----------------------------------------------------------
Net cash provided by (used in) continuing operations (5,166) 5,440 419
----------------------------------------------------------
Income from discontinued operations - 1,160 3,751
Loss on disposal of discontinued operations - (3,900) -
Net items providing cash from discontinued operations 4,160 (194) 583
----------------------------------------------------------
Net cash provided by (used in) discontinued operations 4,160 (2,934) 4,334
----------------------------------------------------------
Net cash provided by (used in) all operations (1,006) 2,506 4,753
----------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from the sale of discontinued operations 11,352 22,648 -
Purchase of business, net of cash acquired (7,743) (2,263) -
Sales of available for sale investments 32,798 3,306 100
Purchases of available for sale investments (20,302) (5,272) (6,630)
Sales of property, plant and equipment - - 31
Purchases of property, plant and equipment (2,996) (1,509) (4,024)
Total from discontinued operations - - (4,525)
----------------------------------------------------------
Net cash provided by (used in) investing activities 13,109 16,910 (15,048)
----------------------------------------------------------
FINANCING ACTIVITIES:
Net increase (decrease) in notes payable (2,064) (11,750) 5,750
Payment of long-term liabilities (34,570) (3,521) (1,273)
Additional long-term liabilities - 19,615 3,079
Exercise of stock options 974 1,009 248
Acquired shares for treasury (827) - (190)
----------------------------------------------------------
Net cash provided by (used in) financing activities (36,487) 5,353 7,614
----------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (28,544) 24,769 (2,681)
Increase in Cash and Cash Equivalents
from discontinued operations 4,160 - 2,445
Cash and cash equivalents at beginning of year 29,000 4,231 4,467
----------------------------------------------------------
Cash and cash equivalents at end of the year 4,616 $ 29,000 $ 4,231
==========================================================================================================================
CASH PAID DURING THE YEAR FOR:
Interest $ 2,975 $ 2,116 $ 1,185
Income taxes 3,506 4,515 5,266
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Contingent payment related to meeting certain earn out
objectives (American Southern) - - 1,000
Issuance of stock or debt in connection with acquisitions 33,000 11,550 -
Assumption of note receivable from sale of American Southern - 11,352 -
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 28
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL GAINS
COMMON PAID-IN RETAINED (LOSSES) ON TREASURY
(Dollars in thousands) STOCK CAPITAL EARNINGS INVESTMENTS STOCK TOTAL
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 9,510 $ 14,075 $ 34,615 $ 218 $ (1,040) $ 57,378
Net income - - 9,573 - - 9,573
Exercise of stock options 69 299 - - (120) 248
Acquired shares for treasury - - - - (190) (190)
Adjustment to beginning balance
for change in accounting
method, net of tax - - - 1,238 - 1,238
Unrealized losses on investments - - - (3,925) - (3,925)
- - ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 9,579 14,374 44,188 (2,469) (1,350) 64,322
Net income - - 2,510 - - 2,510
Exercise of stock options 205 871 - - (67) 1,009
Issuance of stock in connection
with acquisition 1,324 8,829 - - 1,397 11,550
Unrealized gains on investments - - - 2,497 - 2,497
- - ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 11,108 24,074 46,698 28 (20) 81,888
Net income - - 7,273 - - 7,273
Exercise of stock options 201 773 - - - 974
Acquired shares for treasury - - - - (827) (827)
Unrealized losses on investments - - - (28) - (28)
- - ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ 11,309 $ 24,847 $ 53,971 $ - $ (847) $ 89,280
======================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: Fuqua Enterprises, Inc. ("Fuqua") is a manufacturer of a variety of
products, including beds, patient aids, specialty seating, bathroom safety,
mobility products and therapeutic support systems for the acute, long-term and
home health care markets. Additionally, Fuqua produces a broad line of
leathers that are sold to manufacturers of shoes, handbags, personal leather
goods and furniture in both the United States and foreign markets.
Fuqua sold its insurance subsidiary, American Southern Insurance Company
("American Southern") during 1995 and, in January 1996, made the decision to
discontinue the operations of Kroy Tanning Company, Incorporated ("Kroy"),
which historically had been unprofitable. Additionally, Fuqua acquired Basic
American Medical Products, Inc. ("Basic") in November 1995 and the medical
products division of Lumex, Inc. (the "Lumex Division") in April 1996
(together, the "Medical Products Operations").
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Fuqua and all of its wholly and majority owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.
ACCOUNTING CHANGES: Effective January 1, 1996, Fuqua adopted Statement of
Financial Accounting Standards 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 adoption of SFAS 121 had no effect on
Fuqua's Consolidated Financial Statements.
Effective January 1, 1996, Fuqua adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
which encouraged companies to recognize expense for stock-based awards based on
their fair market values on the dates of grant. As an alternative provided for
in SFAS 123, Fuqua has elected to account for its stock options in accordance
with APB Opinion No. 25 and related Interpretations ("APB 25"). The
disclosures required by SFAS 123 are included in Note 9 to the Consolidated
Financial Statements.
Effective January 1, 1994, Fuqua adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). In accordance with SFAS 115, prior period financial
statements were not restated to reflect the change in accounting principle.
The cumulative effect on net income as of January 1, 1994 of adopting SFAS 115
for investments which previously were classified as held to maturity and which
were then classified as trading securities was immaterial. The balance of
stockholders' equity as of January 1, 1994 was increased by $1,238,000, net of
income taxes, to reflect the net unrealized gains on investments previously
classified as held to maturity which were reclassified as available for sale.
INCOME PER SHARE: Income per share is based upon 4,554,276 shares in 1996,
3,962,876 in 1995 and 3,860,324 in 1994, representing the weighted-average
number of shares outstanding during the year, plus common stock equivalents.
Common stock equivalents include option shares granted under Fuqua's stock
option plans.
FINANCIAL INSTRUMENTS: Financial instruments which potentially subject Fuqua
to concentrations of credit risk are primarily cash equivalents and short-term
investments in investment grade, short-term debt instruments and preferred
stocks. Concentrations of credit risk with respect to trade accounts
receivable and lease receivables are limited due to the large number of
customers in Fuqua's customer base and their dispersion across different
geographic areas. Fuqua maintains an allowance for doubtful accounts based
upon the expected collectibility of its trade accounts and lease receivables.
ADVERTISING COSTS: Fuqua, through its subsidiaries, expenses advertising costs
when incurred. The amounts of such costs were insignificant in 1996, 1995 and
1994.
CASH AND CASH EQUIVALENTS: For purposes of the consolidated balance sheets and
statements of cash flows, Fuqua considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents (1996
- - - $4,616,000, 1995-$29,000,000). The cash proceeds of $22,648,000 from the
sale of American Southern on December 31, 1995 were invested in cash
equivalents collateralized by U.S. Treasury obligations. The carrying amounts
reported in the balance sheets for cash and cash equivalents approximate their
fair values.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
determined as follows: raw materials and supplies-first-in, first-out; work in
process and finished goods-average.
F-7
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment to be used in
operations are stated at cost. Depreciation is provided principally by the
straight-line method over estimated useful lives which range as follows:
buildings and improvements: 10-40 years; machinery and office equipment: 5-15
years; and automobiles and trucks: 5-10 years.
REVENUE RECOGNITION: Sales are recorded when goods are shipped and the
customers are obligated to pay.
RESEARCH AND DEVELOPMENT: Research and development costs are expensed as
incurred and were $1,422,000, $802,000 and $800,000 in 1996, 1995 and 1994,
respectively.
SHORT-TERM BORROWINGS: The weighted average interest rate on short-term
borrowings was 7.4% and 6.8% during 1995 and 1994, respectively. There were no
short-term borrowings in 1996.
USE OF ESTIMATES: The preparation of the 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.
2. ACQUISITIONS
On November 8, 1995, Fuqua acquired Basic. Basic, whose divisions include
Simmons Healthcare, Omni Manufacturing and SSC Medical, is a manufacturer and
distributor of medical equipment and furnishings for the acute, long-term and
home health care markets.
The purchase price consisted of $2,500,000 in cash and 600,000 shares of
Fuqua's common stock. The shares issued were not registered under the
Securities Act of 1933 and, accordingly, are restricted as to resale. Under
the terms of the acquisition, there are demand and "piggyback" registration
rights with respect to these shares. The transaction was accounted for using
the purchase method; accordingly, the assets and liabilities of Basic have been
recorded at their estimated fair values at the date of acquisition. The excess
of purchase price over the net assets acquired of $5,038,000 has been assigned
to goodwill and is being amortized on a straight-line basis over 30 years.
On April 3, 1996, Fuqua acquired the Lumex Division. The Lumex Division is
a manufacturer of medical equipment, including beds, specialty seating
products, patient aids, bathroom safety, mobility products and therapeutic
support surfaces for the acute, long-term and home health care markets.
The purchase price for the Lumex Division was $40,750,000, subject to a
final purchase price adjustment as provided in the asset sale agreement. The
final purchase price adjustment is in dispute and is currently being resolved
through arbitration. The ultimate outcome in arbitration of the purchase price
adjustment will change the final purchase price and the allocation thereof to
the net assets acquired.
The purchase price paid by Fuqua for the Lumex Division was financed with
internal funds and borrowings of $33,000,000 under Fuqua's Revolving Credit
Facility. The excess of purchase price over the net assets acquired of
$15,375,000 was assigned to goodwill and is being amortized on a straight-line
basis over 30 years. Included in the purchase price allocation were accruals
of $2,300,000 for exiting activities, consisting principally of future lease
costs for duplicate facilities.
The results of operations of Basic have been included in the Consolidated
Financial Statements for the two month period since the date of acquisition in
1995 and for the full year in 1996. The results of operations of the Lumex
Division have been included in the Consolidated Financial Statements for the
nine month period since the date of acquisition in 1996. The following
unaudited pro forma summary presents Fuqua's consolidated results from
continuing operations as if the acquisitions had occurred on the first day of
the full year preceding their respective acquisition dates. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of what would have occurred had the acquisitions actually been
made as of that date or of results which may occur in the future.
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
(Dollars in thousands,
except per share date)
- - ---------------------------------------------------------
<S> <C> <C> <C>
Net sales $195,113 $198,365 $141,263
Income from continuing
operations 2,425 4,519 6,406
Per share:
Income from continuing
operations $ .53 $ 1.14 $ 1.44
</TABLE>
F-8
<PAGE> 31
In March 1996, Fuqua, through its Leather Operations, entered into an
agreement to acquire a 70% interest in a joint venture which acquired a 50%
interest in a tannery in the People's Republic of China. In November 1996, the
Leather Operations' interest in the joint venture was reduced to 60% as a
result of admitting a new venture partner. Investment and advances related to
the joint venture at December 31, 1996 were $1,967,000. The results of
operations of the joint venture were not significant to the 1996 Consolidated
Financial Statements.
SUBSEQUENT EVENT - ACQUISITION OF PRISM: On February 26, 1997, Fuqua acquired
100% of the outstanding common stock and warrants of Prism Enterprises, Inc.
("Prism"). Prism, whose 1996 net sales were $12,000,000, is a manufacturer of
therapeutic heat and cold packs for medical and consumer uses and vacuum
systems for obstetrical and other applications. Prism's operating facilities
are located in San Antonio, Texas and Rancho Cucamonga, California. The
purchase price was $19,500,000 and was financed with borrowings under Fuqua's
Revolving Credit Facility.
3. DISCONTINUED OPERATIONS
In December 1995, Fuqua sold its insurance subsidiary, American Southern, for
$34,000,000 to Atlantic American Corporation, an Atlanta, Georgia based
publicly traded insurance company. The proceeds from the sale included cash of
$22,648,000 and a note receivable from the purchaser of $11,352,000. The note
receivable accrued interest at
F-9
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
prime, half of which was payable quarterly and half of which was paid, together
with the principal, in October 1996. The note receivable had indemnification
and certain offset rights which were similar to the provisions of the note
payable issued to the seller when Fuqua acquired American Southern in 1991. In
October 1996, the proceeds from Atlantic American's payment of the note
receivable were used to repay this note payable. The sale transaction resulted
in a pretax loss on disposal of $3,553,000, less earnings (net of taxes) during
the phase out period of the fourth quarter of 1995 of $1,303,000 and less
estimated tax benefits of $1,350,000. During 1996, interest charges of
$662,000 were incurred and offset against the accrual established in 1995 to
provide for the loss on disposal of American Southern.
In January 1996, Fuqua made the decision to discontinue the operations of
Kroy, which historically had been unprofitable. In accordance with generally
accepted accounting principles (Emerging Issues Task Force No. 95-18), Kroy was
treated as a discontinued operation in 1995 and preceding years' Consolidated
Financial Statements.
The pretax loss on disposal of Kroy was $4,800,000, less estimated tax
benefits of $1,800,000. This accrual provided for reserves necessary to write
down assets (consisting principally of receivables, inventory and property,
plant and equipment) to their net realizable values and to pay for obligations,
including environmental costs, required in connection with the wind down of
operations. During 1996, $3,080,000 (before the benefit of income taxes) of
such costs were charged against this accrual. Operations at the East Wilton
facility ceased in the fourth quarter of 1996.
Discontinued operations include estimates of the amounts expected to be
realized from Kroy's assets and future obligations. While the amounts Fuqua
will ultimately realize or be obligated for could differ from the amounts
assumed in arriving at the loss on disposal of Kroy. Management believes that
the reserves established at December 31, 1995, continue to appear reasonable.
The results of operations of American Southern and its subsidiaries through
September 30, 1995 and for Kroy through December 31, 1995 have been classified
as income from discontinued operations as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994
(Dollars in thousands)
- - ---------------------------------------------------------
<S> <C> <C>
Revenues $45,932 $49,406
Costs and expenses 44,875 44,440
------- -------
Income before income taxes 1,057 4,966
Income tax (benefit) provision (103) 1,215
------- -------
Income from discontinued
operations $ 1,160 $ 3,751
======= =======
</TABLE>
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
(Dollars in thousands)
- - ---------------------------------------------------------
<S> <C> <C>
Finished goods $16,238 $ 6,598
Work in process 12,338 6,738
Raw materials and supplies 13,483 8,359
------- -------
$42,059 $21,695
======= =======
</TABLE>
F-10
<PAGE> 33
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
(Dollars in thousands)
- - ----------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 664 $ 257
Buildings and improvements 18,753 12,803
Machinery and office equipment 23,386 18,399
Automobiles and trucks 1,044 844
Building held for sale 5,080 -
------- -------
$48,927 $32,303
======= =======
</TABLE>
6. LEASE RECEIVABLES
The Lumex Division offered 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 were accounted for as sales type leases.
Standard lease contracts contained fixed monthly payments and were generally
for 36-48 months, at which time title passes to the lessee. Under shared
revenue lease contracts, the lessee paid the greater of: a fixed percentage of
monthly revenue collected from rentals of the equipment or a minimum monthly
payment. Shared revenue lease contracts were 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 were
comprised of the following:
<TABLE>
<CAPTION>
December 31, 1996
(Dollars in thousands)
- - ---------------------------------------------------------
<S> <C>
Minimum lease payments receivable $ 6,491
Less unearned interest income (1,522)
Less allowance for uncollectible accounts (319)
Less current portion (1,147)
-------
Non-current portion $ 3,503
=======
</TABLE>
Minimum lease payments receivable are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands) Total
- - ---------------------------------------------------------
<S> <C>
1997 $1,147
1998 1,399
1999 1,377
2000 727
------
$4,650
======
</TABLE>
F-11
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
(Dollars in thousands)
- - -----------------------------------------------------------------
<S> <C> <C>
Accounts payable $10,916 $ 5,390
Accrued compensation 2,335 1,536
Accrued insurance 639 996
Accrued profit-sharing plan 511 381
Accrual for discontinued operations 2,405 6,147
Other accrued expenses 13,186 4,350
------- -------
$29,992 $18,800
======= =======
</TABLE>
8. LONG-TERM DEBT OBLIGATIONS
Long-term debt obligations consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
(Dollars in thousands)
- - -----------------------------------------------------------------
<S> <C> <C>
Revolving Credit Facility, interest at
LIBOR + .5%, due in 1999 $28,000 $18,500
Industrial revenue obligations, secured
by improvements, 4.5% to 6.9%, due
to 2004 1,126 1,335
Step down revolver payable in monthly
installments, interest at 8.75% through
April 1997 when balance is due - 745
Master draw note with interest payable at
7.5% through April 1997 when balance
is due - 937
Term loan, payable in monthly installments,
interest at LIBOR +.55%, remaining
principal due January 2001 1,535 -
Term note, payable in monthly installments,
interest at 8.75% through May 2000 - 120
Note payable in monthly installments,
interest at 8% through June 2007, callable
at the option of the lender within a 90-day
period beginning July 1998, July 2001 or
or July 2002 - 360
Liability for future payments under employ-
ment contracts 25 44
------- -------
$30,686 $22,041
======= =======
</TABLE>
On June 28, 1996, Fuqua amended its Revolving Credit Facility to expand the
maximum borrowing amount from $60,000,000 to $100,000,000 and to add an
additional bank to the facility. The Revolving Credit Facility has a three-
year term and is to be used for working capital and to provide funds for
corporate development activities. The interest rate under the Revolving Credit
Facility is based on matrix pricing which ranges from LIBOR plus 40 basis
points to LIBOR plus 100 basis points, plus a charge on the unused commitment
of 12.5 basis points to 25 basis points. The Revolving Credit Facility
includes normal and customary restrictive covenants regarding funded debt to
capital, funded debt to cash flow, interest coverage, and dividend payments.
Management believes that, at December 31, 1996, Fuqua is in compliance with the
covenants of the Revolving Credit Facility and with the covenants of other
Fuqua debt agreements.
The aggregate maturity requirements for the next five years in respect to
the current and non-current portions of long-term debt obligations at December
31, 1996 are as follows (dollars in thousands): 1997-$1,453; 1998-$290; 1999-
$28,292; 2000-$295; 2001-$1,357; and thereafter $452. The carrying amounts of
long-term liabilities approximate their fair values.
F-12
<PAGE> 35
9. STOCK OPTIONS
On June 29, 1989, the Board of Directors approved a nonqualified stock option
plan for key employees (the "1989 Plan"), reserving 300,000 shares of Common
Stock for issuance under the 1989 Plan. The options are granted at prices and
under terms determined by the Stock Option Committee of the Board of Directors.
All options expired five years from the date of grant.
On January 21, 1992, the Board of Directors approved a stock option plan
(the "1992 Plan"), reserving 300,000 shares of Common Stock for issuance under
the 1992 Plan. The 1992 Plan, which was approved by the stockholders on May
16, 1992, provides for the granting of options to officers, directors, key
employees, consultants, advisors and others providing goods and services to
Fuqua. The options are granted at prices and under terms determined by the
Stock Option Committee of the Board of Directors. All options expire five to
ten years from the date of grant.
In November 1995, the Board of Directors approved the 1995 Long-Term
Incentive Plan (the "Incentive Plan"), reserving 300,000 shares of Common Stock
for issuance under the Incentive Plan. The Incentive Plan, which was approved
by the stockholders on June 1, 1996, provides for the granting of awards to
officers and key employees of Fuqua. The awards are granted at prices and
under terms determined by the Stock Option Committee of the Board of Directors.
All awards expire from five to ten years from the date of grant.
Also in November 1995, the Board of Directors approved the 1995 Stock
Option Plan for Outside Directors (the "Directors' Plan"), reserving 50,000
shares of Common Stock for issuance under the Directors' Plan. The options are
automatically granted to directors annually. The Directors' Plan was approved
by the stockholders on June 1, 1996.
At December 31, 1996 and 1995, there were 217,600 and 364,000 shares of
common stock, respectively, reserved for future grants in connection with
Fuqua's stock option plans.
F-13
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
A summary of stock option activity under the above-described plans is as
follows:
<TABLE>
<CAPTION>
Weighted-
Price Average
Shares Range Price
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1993 227,175 $8.50-$20.38
Granted 20,000 $20.38
Exercised (27,675) $8.50
Cancelled (2,000) $20.38
-------
Balance at December 31, 1994 217,500 $8.50-$21.00 $11.47
Granted 254,000 $18.38-$20.50 $19.63
Exercised (82,000) $8.50 $ 8.50
Cancelled (5,000) $20.38 $20.38
-------
Balance at December 31, 19953 384,500 $8.50-$21.00 $17.38
Granted 146,400 $21.25-$24.00 $21.72
Exercised (80,500) $8.50-$9.50 $ 9.01
-------
Balance at December 31, 1996 450,400 $9.50-$24.00 $20.29
-------
</TABLE>
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding
- - ---------------------------------------------------------------------------
Range of Number of Weighted- Weighted-
Exercise Options Average Average
Price Outstanding Remaining Life Exercise Price
- - ---------------------------------------------------------------------------
<S> <C> <C>
$9.50 5,000 1 year $ 9.50
$18.38-$24.00 445,400 5 years $20.41
-------
450,400
=======
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
- - ---------------------------------------------------------------------------
Range of Number of Weighted-
Exercise Options Average
Price Exercisable Exercise Price
- - ---------------------------------------------------------------------------
<S> <C> <C>
$9.50 5,000 $ 9.50
$18.38-$24.00 190,333 $20.09
-------
195,333
=======
</TABLE>
Fuqua elected to follow APB 25 in accounting for its stock options because,
as discussed below, the alternative fair value accounting provided for under
SFAS 123 requires use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, because the exercise
price of Fuqua's stock options equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income is required by SFAS 123, which
also requires that the information be determined as if Fuqua has accounted for
its employee stock options granted subsequent to December 31, 1994 under the
fair value method. The fair value for these options was estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions.
F-14
<PAGE> 37
<TABLE>
<CAPTION>
Assumptions 1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C>
Risk free interest rates 5.91% 6.13%
Dividend yield None None
Market volatility factors .38 .37
Life of options 5 years 7 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair values of the
options are amortized to expense over the options' vesting periods. The
weighted-average fair values of options granted during 1996 and 1995 equaled
$9.93 and $9.25, respectively. Fuqua's pro forma net income information
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Pro Forma Net Income $6,942,000 $1,456,000
Pro Forma Net Income Per Share $ 1.52 $ .37
</TABLE>
Since SFAS 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effect will not be fully reflected in Fuqua's
historical results until 2000, the date through which options vest.
10. SALES AND SEGMENT INFORMATION
Fuqua's foreign operations were not significant in 1996. Sales of the Leather
Operations and Medical Products Operations to customers outside the United
States, which have been classified by country where such amounts exceed 10% of
net sales and otherwise geographically are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
(Dollars in thousands)
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Hong Kong $22,281 $15,819 $16,457
North America 3,512 3,075 7,584
Europe 3,197 2,687 3,467
Asia, other than Hong Kong 7,390 5,148 6,773
Other 1,914 3,933 235
------- ------- -------
$38,294 $30,662 $34,516
======= ======= =======
</TABLE>
In 1996, sales of leather to one customer amounted to $15,722,000 and to
another $15,506,000. In 1995, sales of leather to one customer amounted to
$23,662,000 and to another $15,938,000. In 1994, sales of leather to one
customer amounted to $20,007,000 and to another $17,426,000.
Beginning in 1990, the Leather Operations began buying hides, that had
already undergone the initial chrome tanning process, from one principal
supplier. Management believes that alternatives sources of supply at
competitive prices are available.
Fuqua's continuing operations are carried on through its subsidiaries which
operate in two distinct business segments, Leather Operations and Medical
Products Operations. The Medical Products Operations became part of Fuqua
through the acquisition of Basic in November 1995 and the Lumex Division in
April 1996.
F-15
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
Operating results and other financial data are presented as follows for
each business segment which, at December 31, 1996, remain as continuing
operations of Fuqua:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
(Dollars in thousands)
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Leather Operations $ 107,832 $ 111,930 $ 118,011
Medical Products Operations 73,711 5,198 -
--------- --------- ---------
Consolidated $ 181,543 $ 117,128 $ 118,011
========= ========= =========
Operating profit (loss):
Leather Operations $ 10,914 $ 10,423 $ 10,985
Medical Products Operations 4,720 401 -
Corporate (1,682) (1,981) (1,776)
--------- --------- ---------
Consolidated $ 13,952 $ 8,843 $ 9,209
========= ========= =========
Identifiable assets:
Leather Operations $ 57,163 $ 44,474 $ 44,724
Medical Products Operations 80,491 26,719 -
Corporate 8,822 54,666 15,788
--------- --------- ---------
Consolidated $ 146,476 $ 125,859 $ 60,512
========= ========= =========
Capital expenditures:
Leather Operations $ 1,594 $ 1,509 $ 4,024
Medical Products Operations 1,313 619 -
Corporate 89 - -
--------- --------- ---------
Consolidated $ 2,996 $ 2,128 $ 4,024
========= ========= =========
Depreciation and Amortization:
Leather Operations $ 1,702 $ 1,582 $ 1,387
Medical Products Operations 2,274 113 -
Corporate 220 236 216
--------- --------- ---------
Consolidated $ 4,196 $ 1,931 $ 1,603
========= ========= =========
</TABLE>
There were no intersegment sales during 1996, 1995 or 1994.
Operating profit (loss) by segment represents net sales less direct
operating expenses. No allocation has been made for general corporate
expenses, interest income from corporate investments or any foreign or domestic
taxes. Identifiable assets are tangible and intangible assets used exclusively
in the operations of each business segment. Corporate assets represent cash,
investments and leasehold improvements, furniture and fixtures associated with
Fuqua's corporate office.
11. GENERAL AND ADMINISTRATIVE EXPENSES
In September 1994, Fuqua amended the Management Agreement ("Agreement") with
Fuqua Capital Corporation ("Capital"), a corporation wholly-owned by J. B.
Fuqua, Chairman of the Board, and J. Rex Fuqua, Vice Chairman of the Board.
Under the Agreement, Capital provides investment services and performs certain
managerial and administrative duties. The term of the Agreement is through
June 1, 2000 and provides for a management fee of $360,000 for each year of the
noncancellable term.
In October 1994, Fuqua amended its lease for corporate office space to
extend the term for five years. Concurrently, Fuqua entered into a new
sublease with a similar five year term with Capital for the portion of space
which Capital uses. The sublease provides that if Fuqua moves out of the space
it shares with Capital, or there is a change in control of Fuqua, Capital has
the option of taking over the area now occupied by Fuqua on terms favorable to
Capital.
F-16
<PAGE> 39
12. RETIREMENT PLANS
Fuqua adopted a qualified defined contribution plan, effective January 1, 1993,
covering all of the employees of the parent company and the leather
subsidiaries and incorporating the profit-sharing plans of the leather
subsidiaries. This plan provided a profit-sharing component with contributions
to each employee based on his or her compensation and with the total
contribution determined annually by the Board of Directors. The plan also
permitted employees to make tax-deferred contributions up to the maximum limits
allowed by the Internal Revenue Code, with Fuqua matching a portion of the
employee's contribution under a formula approved annually by the Board of
Directors.
In 1995, Basic had two defined contribution employee benefit plans for the
employees at its manufacturing facility in Fond du Lac, Wisconsin. One plan
allowed employees to make contributions by salary reduction pursuant to Section
401(k) of the Internal Revenue Code. The other plan was a money purchase plan
which provides for employer contributions equal to 4% of eligible employee
salaries. Employees became eligible to participate in the money purchase plan
after 12 months of service.
In 1995, employees at Basic's Georgia facilities participated in a profit
sharing plan. This plan provided for discretionary annual contributions by
Basic. Additionally, Basic adopted an employee benefit plan for its employees
at the Georgia facilities which allowed eligible employees to make
contributions by salary reduction pursuant to Section 401(k) of the Internal
Revenue Code.
On April 3, 1996, Fuqua adopted the Fuqua Enterprises, Inc. Savings and
Retirement Plans and Trusts which provided for tax-qualified 401(k) plans for
all of Fuqua's union and non-union employees (the "New Fuqua Plans"). The
non-union employees of the Lumex Division became the first participants in the
New Fuqua Plans concurrent with the acquisition of the Lumex Division in April
1996. All other Fuqua employees became participants in the New Fuqua Plans on
July 1, 1996 or thereafter when the existing plans covering Basic, the Leather
Operations and Fuqua's corporate office were merged into the New Fuqua Plans or
when the union employees of the Lumex Division became eligible to participate.
The New Fuqua Plans contain a profit-sharing component allowed by Internal
Revenue Code Section 401(a), with tax-deferred contributions to each
participant based on his or her compensation and with the total contribution
determined annually by the Board of Directors. The New Fuqua Plans also permit
employees to make tax-deferred contributions up to the maximum limits allowed
by Internal Revenue Code Section 401(k), with Fuqua matching 50% of the first
4% of participants' contributions to the New Fuqua Plans.
Total expense recognized under all of the above plans was 1996-$940,000,
1995-$309,000 and 1994-$372,000.
F-17
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
13. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of Fuqua's deferred income tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
(Dollars in thousands)
- - ------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax liabilities:
Tax over book depreciation $ 1,540 $ 1,851
------- -------
Deferred income tax liabilities $ 1,540 $ 1,851
======= =======
Deferred income tax assets:
Accrued liabilities $ 3,393 $ 3,243
Allowance for doubtful
accounts 485 80
Accrual for discontinued operations 1,139 3,189
Unrealized investment losses - 19
------- -------
Deferred income tax assets 5,017 6,531
------- -------
Net deferred income tax assets $ 3,477 $ 4,680
======= =======
</TABLE>
Significant components of the provisions (benefits) for income taxes for
continuing and discontinued operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
(Dollars in thousands)
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing Operations:
Current:
Federal $ 2,316 $ 2,016 $ 2,205
State 395 457 583
------- ------- -------
$ 2,711 $ 2,473 $ 2,788
======= ======= =======
Deferred:
Federal $ 1,342 $ 184 $ (100)
State 156 42 (26)
------- ------- -------
$ 1,498 $ 226 $ (126)
======= ======= =======
Discontinued Operations: $ - $(2,856) $ 1,215
======= ======= =======
</TABLE>
F-18
<PAGE> 41
In 1994, Fuqua made a favorable adjustment for amounts that were no longer
considered necessary for contingencies for income taxes resulting in a
reduction in income tax expense of $544,000 ($0.14 per share).
The provisions for income taxes for continuing operations differ from the
amounts computed by applying the U.S. Federal income statutory tax rates as
follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State income taxes,
net of federal tax benefit 3.2 4.0 4.2
Business tax credits - - (.2)
Dividend credits (.1) (1.1) (1.0)
Tax-exempt interest - (1.5) (.2)
Write-off of intangibles - .2 -
Foreign sales corporation
benefit (2.0) (1.7) -
Adjustment of
estimated liabilities
for prior years - - (6.4)
Other .6 (1.0) -
---- ---- ----
36.7% 33.9% 31.4%
==== ==== ====
</TABLE>
The provisions (benefits) for income taxes for discontinued operations
differ from those amounts computed by applying the U.S. Federal income
statutory tax rates due principally to tax-free interest income at American
Southern.
14. INVESTMENTS
There were no investments at December 31, 1996. All investments at December
31, 1995 were classified as available for sale as follows:
<TABLE>
<CAPTION>
December 31, 1995 Cost or Gross Gross Estimated
(Dollars in Amortized Unrealized Unrealized Fair
thousands) Cost Gains Losses Value
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Corporate Debt
Securities $ 2,524 $ 7 $ (80) $ 2,451
Debt Securities
issued by the
U.S. Treasury 6,010 34 - 6,044
Preferred Stocks 3,964 119 (28) 4,055
--------- ------ ------- --------
$ 12,498 $ 160 $ (108) $ 12,550
========= ====== ======= ========
</TABLE>
The proceeds from sales of available for sales securities were $32,798,000
in 1996. In 1996, gross realized gains were $155,000 and gross realized losses
were $209,000 on sales of available for sale securities. The proceeds from
sales of available for sale securities were $3,306,000 during 1995. In 1995,
gross realized gains were $53,000 and gross realized losses were $11,000 on
available for sale investments. The proceeds from sales of available for sale
securities were $100,000 for 1994. There were no gross realized gains or
losses on sales of available for sale securities in 1994. Cost is determined by
specific identification for purposes of calculating realized gains and losses.
There were no transfers of securities to or from the available for sale or
trading categories during 1996 and 1995. There were no sales of securities
classified as held to maturity during 1996 and 1995.
F-19
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
15. ENVIRONMENTAL CONTINGENCY:
In March 1994, the office of the District Attorney of 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.
In connection with Fuqua's April 1996 acquisition of the Lumex Division,
Fuqua assumed the obligations associated with this environmental matter. At
December 31, 1996, the Lumex Division had $1,713,000 in reserves for
remediation costs, including additional investigation costs which will be
required. 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 judgment of independent consultants and counsel. Where
available information was sufficient to estimate the amount of liability, that
estimate has been used. Where information was only sufficient to establish a
range of probable liability and no point within the range is more likely than
another, the lower end of the range has been used. The Lumex Division has not
assumed that any such costs would be recoverable from third parties nor has the
Lumex Division discounted any of its cost estimates, although a portion of the
remediation work plan will be performed over a period of years.
The amounts of environmental 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 are not probable but
for which there exists at least a reasonable possibility of occurrence, exceeds
the reserves recorded by the Lumex Division at December 31, 1996 by $1,600,000.
F-20
<PAGE> 43
SUMMARY OF QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
March June September December For the
(Dollars in thousands, except per share amounts) 31 30(2) 30(2) 31(2) Year
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 Net sales $ 30,500 $ 46,898 $ 49,655 $ 54,490 $ 181,543
Income before interest and taxes 2,960 3,530 4,136 3,326 13,952
Income from continuing operations 1,600 1,838 2,087 1,748 7,273
Income from continuing operations
per share 0.36 0.40 0.46 0.38 1.60
Net income per share 0.36 0.40 0.46 0.38 1.60
1995 Net sales $ 24,050 $ 33,692 $ 27,923 $ 31,463 $ 117,128
Income before interest and taxes 1,293 2,496 2,227 2,827 8,843
Income from continuing operations 662 1,349 1,321 1,918 5,250
Income from continuing operations
per share 0.17 0.35 0.34 0.45 1.32
Net income (loss) per share 0.37 0.47 0.17 (0.33) 0.63
</TABLE>
Notes:
1. No cash dividends were paid in either year. In 1996 and 1995, per share
amounts are calculated on a discrete quarterly basis and for the year are
based on the weighted-average shares for the four quarters of the year.
2. Includes Basic for the two-month period ended December 31, 1995 and the
Lumex Division for the nine-month period ended December 31, 1996.
- - --------------------------------------------------------------------------------
F-21
<PAGE> 44
FUQUA ENTERPRISES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
ITEM 14(A)
FINANCIAL STATEMENT SCHEDULE
SECTION S
<PAGE> 45
FORM 10-K
FUQUA ENTERPRISES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1996
ITEM 14(A)
LIST OF FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C> <C>
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and, therefore,
have been omitted.
(i)
<PAGE> 46
ITEM 14(A)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FUQUA ENTERPRISES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
==============================================================================================================
Col. A Col. B Col. C Col. D Col. E
==============================================================================================================
Additions
------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning Costs and Other Close
Description of Period Expenses Accounts Deductions of Period
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for
doubtful accounts:
Trade accounts receivable $ 200,000 $ 98,005 $ - $ 48,005(a) $ 250,000
========= ========= ========= ======== =========
Lease receivables - - 350,000(b) - $ 350,000
========= ========= ========= ======== =========
Year ended December 31, 1995:
Allowance for
doubtful accounts:
Trade accounts receivable $ 350,000 $ - - $150,000(a) $ 200,000
========= ========= ========= ======== =========
Year ended December 31, 1994:
Allowance for
doubtful accounts:
Trade accounts receivable $ 335,000 $ 74,483 - $ 59,483(a) $ 350,000
========= ========= ========= ======== =========
==============================================================================================================
</TABLE>
(a) Write-off of uncollectible accounts, net of recoveries.
(b) Recorded in the acquisition of the Lumex Division.
S-1
<PAGE> 1
EXHIBIT 10(x)
SunTrust Bank, Atlanta
Post Office Box 4418
Atlanta, GA 30302-4418
January 22, 1997
Fuqua Enterprises, Inc.
Suite 5000
One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Re: $5,000,000 Uncommitted Line of Credit from SunTrust Bank, Atlanta
Ladies and Gentlemen:
Reference is hereby made to that certain Uncommitted Line of
Credit Promissory Note, dated as of November 6, 1995 (the "Note"), made by
Fuqua Enterprises, Inc., a Delaware corporation (the "Borrower") in favor of
SunTrust Bank, Atlanta (the "Lender") in the stated amount of $5,000,000. All
terms used herein without definition shall have the meanings ascribed to such
terms in the Note.
The parties hereby agree to extend the final maturity date of
the Note (subject to earlier demand by the Lender and automatic acceleration
upon insolvency as set forth in the Note) until May 31, 1998. Except as
expressly set forth herein, this letter agreement shall not be deemed to modify
or amend any provisions of the Note, which the Borrower hereby confirms is in
full force and effect.
This letter agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto are
expressly superseded hereby. This letter agreement is governed by the laws of
the State of Georgia and shall inure to the benefit of, and be binding upon,
the successors and assigns of the Lender and the Borrower. This letter
agreement shall be deemed to effective when an executed counterpart is received
by the Lender from the Borrower.
Very truly yours,
SUNTRUST BANK, ATLANTA
By: /s/ R. Michael Dunlap
-------------------------------------
Title: Vice President
By: /s/ Jenna M. Hale
-------------------------------------
Title: Assistant Vice President
ACCEPTED AND AGREED:
FUQUA ENTERPRISES, INC.
By: /s/ Brady W. Mullinax, Jr.
----------------------------
Title: Vice President-Finance,
Treasurer and CFO
<PAGE> 1
EXHIBIT 11
FUQUA ENTERPRISES, INC.
NUMBER OF SHARES USED IN COMPUTING EARNINGS PER SHARE
DECEMBER 31, 1996
PRIMARY EARNINGS PER SHARE:
TREASURY STOCK METHOD:
<TABLE>
<CAPTION>
NUMBER OF
TRADING TOTAL TOTAL
MONTH DAYS HIGH LOW
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 23 $ 545.250 $ 544.000
November 20 483.375 482.125
December 19 462.000 459.375
-- --------- ---------
62 $ 1,490.625 $ 1,485.500 $2,976.125
== ========= ========= =========
AVERAGE: $2,976.125 divided by 62 divided by 2 = $24.001
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OPTION
OUTSTANDING SHARES PRICE EXTENSION
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5,000 $ 9.500 $ 47,500
25,000 20.375 509,375
121,400 21.250 2,579,750
5,000 21.000 105,000
15,000 20.625 309,375
4,000 18.625 74,500
150,000 20.500 3,075,000
100,000 18.375 1,837,500
25,000 24.00 600,000
------- -----------
Total 450,400 $ 9,138,000
======= ===========
- - --------------------------------------------------------------------------------------------------------------------
<S> <C>
Average Price (above) $ 24.001
-----------
Total Option Extension Divided by Average Price 380,734
Options Outstanding 450.400
-----------
Common Stock Equivalents 69,666
Average Shares Outstanding (see page 2) 4,478,847
-----------
Use for Primary Earnings Per Share 4th Quarter 4,548,513
Primary Shares 3rd Quarter 4,565,327
Primary Shares 2nd Quarter 4,603,552
Primary Shares 1st Quarter 4,499,711
-----------
Subtotal 18,217,103
-----------
Primary Shares Full Year (Average of Quarters) 4,554,276
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
-continued-
1
<PAGE> 2
FULLY DILUTED EARNINGS PER SHARE:
<TABLE>
<CAPTION>
AVERAGE NUMBER OF SHARES OUTSTANDING:
- - ---------------------------------------------------------------------------------------------------------------
BEGINNING ENDING NUMBER SHARES
DATE DATE OF DAYS OUTSTANDING EXTENSION
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10-1-96 10-31-96 31 4,478,847 138,844,257
11-1-96 11-30-96 30 4,478,847 134,365,410
12-1-96 12-31-96 31 4,478,847 138,844,257
-- -----------
92 412,053,924
== ===========
Average Number of Shares Outstanding:
Fourth Quarter (Extension Divided by Number of Days) 4,478,847
Fully Diluted Shares 3rd Quarter 4,478,847
Fully Diluted Shares 2nd Quarter 4,478,847
Fully Diluted Shares 1st Quarter 4,478,347
----------
Subtotal 17,914,888
----------
Fully Diluted Shares Full Year (Average of Quarters) 4,478,722
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOURTH FULL
QUARTER YEAR
<S> <C> <C>
Closing Price - 12-31-96 $ 24.250 $ 24.250
---------- ----------
Total Option Extension (from page 1) Divided by Closing Price 376,825 376,825
Options Outstanding 450,400 450,400
---------- ----------
Common Stock Equivalents 73,575 73,575
Average Shares Outstanding (from above) 4,478,847 4,478,722
---------- ----------
Fully Diluted Shares 4,552,422 4,552,297
Less Primary Shares (from page 1) 4,548,513 4,554,276
---------- ----------
Additional Shares 3,909 (1,979)
---------- ----------
Percentage .09% (.04%)
(Note: Anti-dilutive or less than 3.0%; no fully diluted presentation required.)
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 1
EXHIBIT 21
FUQUA ENTERPRISES, INC.
SUBSIDIARIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Date of % of
Name of Subsidiary Incorporated Incorporation Ownership
- - --------------------------------------------- ---------------------------- ----------------- ---------
<S> <C> <C> <C>
Basic American Medical Products, Inc. Georgia 7-30-76 100%
Basic American Sales and
Distribution Co., Inc. Delaware 9-17-96 100%
Hancock-Ellsworth Tanners, Inc.* Delaware 2-3-70 100%
Irving Tanning Company Delaware 3-30-62 100%
Irving Tanning Leather Co., Inc. Delaware 10-21-96 100%
Vista Leather International Corp. Barbados 7-18-94 100%
Kroy Tanning Company, Incorporated* Delaware 2-2-65 100%
Lumex Medical Products, Inc. Delaware 3-7-96 100%
Lumex Sales and Distribution Co., Inc. Delaware 9-17-96 100%
Seagrave Leather Corporation* Maine 10-1-79 100%
Wilton Tanning Company* Maine 6-29-59 100%
</TABLE>
* Inactive
<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. of our report dated February 20, 1997, except for the last paragraph of
Note 2, as to which the date is February 26, 1997, with respect to the
consolidated financial statements and schedule of Fuqua Enterprises, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
-----------------------------------
ERNST & YOUNG LLP
Atlanta, Georgia
March 21, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That each of the undersigned, officers
and/or directors of FUQUA ENTERPRISES, INC., a Delaware corporation
(hereinafter called the "Corporation"), does hereby constitute and appoint
Lawrence P. Klamon and Mildred H. Hutcheson, and each of them, his true and
lawful attorneys and agents, with full power to act without the others, for him
and in his name, place and stead, in any and all capacities, to do any and all
acts and things, and execute in his name any and all instruments, which said
attorneys and agents may deem necessary or advisable in order to enable the
Corporation to comply with the Securities Exchange Act of 1934, and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under said Act of the Corporation's Form 10-K Annual
Report for the year ending December 31, 1996, including specifically power and
authority to sign his name to said Form 10-K to be filed with the Securities
and Exchange Commission and any amendments thereto, and to attest the seal of
the Corporation thereon and to file the same with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm that said
attorneys and agents, and each of them, shall have, andW may exercise, without
the others, all the powers hereby confirmed.
IN WITNESS WHEREOF, each of the undersigned has signed his name hereto
on the 14th day of March, 1997.
<TABLE>
<S> <C>
/s/ J. B. Fuqua /s/ J. Rex Fuqua
- - ------------------------------------------------- ------------------------------------------------------------
J.B. Fuqua, Chairman of the Board of J. Rex Fuqua, Vice Chairman of the Board of
Directors Directors
/s/ L. P. Klamon /s/ Brady W. Mullinax, Jr.
- - ------------------------------------------------- ------------------------------------------------------------
Lawrence P. Klamon, Director, President and Brady W. Mullinax, Jr., Vice President-Finance, and Chief
Executive Officer (Principal Chief Financial Officer (Principal Financial Officer
Executive Officer) and Principal Accounting Officer)
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
/s/ W. Clay Hamner /s/ Frank W. Hulse IV
- - ------------------------------------------------- ------------------------------------------------------------
W. Clay Hamner, Director Frank W. Hulse IV, Director
/s/ Richard C. Larochelle /s/ Gene J. Minotto
- - ------------------------------------------------- ------------------------------------------------------------
Richard C. Larochelle, Director Gene J. Minotto, Director
/s/ Clark L. Reed /s/ D. Raymond Riddle
- - ------------------------------------------------- ------------------------------------------------------------
Clark L. Reed, Director D. Raymond, Riddle, Director
</TABLE>
2
<PAGE> 3
FUQUA ENTERPRISES, INC.
CERTIFICATE
I, John J. Huntz, Jr., hereby certify that I am a duly elected and
acting Executive Vice President of Fuqua Enterprises, Inc., a Delaware
corporation, and that attached hereto as Exhibit A is a true and correct copy
of a resolution adopted by unanimous written consent of the Board of Directors
of said corporation as of March 12, 1997, and that said resolution as of March
21, 1997 has not been rescinded, modified or amended and is in full force and
effect on the date hereof.
IN WITNESS WHEREOF, I have executed this certificate on behalf of
Fuqua Enterprises, Inc. and attached the corporate seal this 21st day of March
1997.
/s/ John J. Huntz,Jr.
--------------------------------------
John J. Huntz, Jr.
Executive Vice President
(Corporate Seal)
3
<PAGE> 4
EXHIBIT A
RESOLVED, That Mildred H. Hutcheson, Corporate Secretary of this
Corporation, be, and she hereby is, authorized and directed to sign
this Corporation's Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996, for
filing with the Securities and Exchange Commission, on behalf of this
Corporation, its Chief Executive Officer and its Chief Financial
Officer.
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,616
<SECURITIES> 0
<RECEIVABLES> 35,368
<ALLOWANCES> (600)
<INVENTORY> 42,059
<CURRENT-ASSETS> 87,790
<PP&E> 48,927
<DEPRECIATION> (15,166)
<TOTAL-ASSETS> 151,411
<CURRENT-LIABILITIES> 31,445
<BONDS> 30,686
0
0
<COMMON> 11,309
<OTHER-SE> 77,971
<TOTAL-LIABILITY-AND-EQUITY> 151,411
<SALES> 181,543
<TOTAL-REVENUES> 183,482
<CGS> 140,773
<TOTAL-COSTS> 169,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 98
<INTEREST-EXPENSE> 2,470
<INCOME-PRETAX> 11,482
<INCOME-TAX> 4,209
<INCOME-CONTINUING> 7,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,273
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 0
</TABLE>
