<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
-------------------------
MAY 31, 1996
(Date of Report)
NCI BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19885 76-0127701
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
7301 FAIRVIEW
HOUSTON, TEXAS 77041
(Address of principal executive offices)
(713) 466-7788
(Registrant's telephone number,
including area code)
<PAGE> 2
As indicated in the Registrant's Form 8-K dated April 1, 1996, the
financial statements and pro forma financial information required to be filed
therewith were unavailable at such time. Such financial statements and pro
forma financial information are now available. Accordingly, Item 7 of the Form
8-K dated April 1, 1996 is hereby amended to read in its entirety as follows:
ITEM 7: FINANCIAL STATEMENTS, AND EXHIBITS
(a) Financial Statements of Business Acquired.
The following Audited Financial Statements of Mesco Metal
Buildings, a division of Anderson Industries, Inc., for fiscal
years ended December 31, 1994 and December 31, 1995, which are
attached hereto and made a part hereof:
(i) Report of Independent Auditors;
(ii) Statement of Net Assets;
(iii) Statement of Divisional Operating Profit and Changes
in Net Assets;
(iv) Statement of Cash Flows; and
(v) Notes to Financial Statements.
(b) Pro Forma Financial Information.
The following Unaudited Pro Forma financial information of NCI
Building Systems, Inc., which are attached hereto and made a
part hereof:
(i) Unaudited Pro Forma Condensed Consolidated Financial
Data;
(ii) Pro Forma Condensed Consolidated Balance Sheet
(unaudited) January 31, 1996;
(iii) Pro Forma Condensed Consolidated Statement of Income
(unaudited) Year Ended October 31, 1995; and
(iv) Pro Forma Condensed Consolidated Statement of Income
(unaudited) Three Months Ended January 31, 1996.
(c) Exhibits. The following exhibits are incorporated herein by
reference from the Registrant's Form 8-K dated April 1, 1996:
2 Asset Purchase Agreement, dated April 1, 1996, by and
among Anderson Industries, Inc., Charles W. Anderson,
Thomas L. Anderson, Jr., John T. Eubanks, Robert K.
Landon, NCI and the Registrant
20.1 Press Release dated February 26, 1996, issued by the
Registrant
20.2 Press Release dated April 2, 1996, issued by the
Registrant
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NCI BUILDING SYSTEMS, INC.
(Registrant)
By: /s/ Robert J. Medlock
-------------------------------------
Robert J. Medlock, Vice President
and Chief Financial Officer
Date: May 31, 1996
<PAGE> 4
MESCO METAL BUILDINGS
(A DIVISION OF ANDERSON INDUSTRIES, INC.)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1994
<PAGE> 5
MESCO METAL BUILDINGS
(A DIVISION OF ANDERSON INDUSTRIES, INC.)
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors..................................................................... 1
Statement of Net Assets............................................................................ 2
Statement of Divisional Operating Profit
and Changes in Net Assets........................................................................ 4
Statement of Cash Flows............................................................................ 5
Notes to Financial Statements...................................................................... 6
</TABLE>
<PAGE> 6
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Anderson Industries, Inc.
We have audited the accompanying statements of net assets of Mesco Metal
Buildings (a division of Anderson Industries, Inc.) as of December 31, 1994 and
the related statements of divisional operating profit and changes in net
assets, and cash flows for the year then ended. These financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mesco Metal Buildings (a
division of Anderson Industries, Inc.) at December 31, 1994, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
CHESHIER & FULLER, L.L.P.
Dallas, Texas
April 11, 1996
<PAGE> 7
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Net Assets
December 31, 1994
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash $ 1,423,180
Accounts and notes receivable, net 2,749,658
Inventories 3,012,595
Prepaid expenses 173,189
-----------
Total current assets 7,358,622
Property, plant, and equipment, at cost:
Land and buildings 4,381,508
Machinery and equipment 5,950,943
-----------
10,332,451
Accumulated depreciation 7,081,734
-----------
3,250,717
Other assets 49,045
-----------
Total assets $10,658,384
===========
</TABLE>
See accompanying notes to financial statements.
Page 2
<PAGE> 8
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statement of Net Assets
December 31, 1994
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Current liabilities:
Accounts payable $ 790,455
Salaries and wages payable 287,712
Taxes, other than income 184,647
Sales taxes payable 195,478
Product warranty reserve 197,788
Other accrued liabilities 301,268
-----------
Total current liabilities 1,957,348
Commitments and contingencies
Net assets 8,701,036
-----------
Total liabilities and net assets $10,658,384
===========
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE> 9
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Divisional Operating Profit and
Changes in Net Assets
Year Ended December 31, 1994
<TABLE>
<S> <C>
Net Sales $32,236,320
Cost of sales 23,200,154
-----------
9,036,166
Operating Expenses:
Selling and administrative 3,859,350
Corporate management fee 1,069,043
-----------
4,928,393
-----------
Net income from continuing operations 4,107,773
Loss on sale of property, plant and equipment (303,981)
-----------
Net income 3,803,792
Beginning net assets 8,228,506
Equity distributions paid to Anderson (3,331,262)
-----------
Ending net assets $ 8,701,036
===========
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE> 10
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Cash Flows
Year Ended December 31, 1994
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 3,803,792
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 304,455
Loss (gain) on sale of property, plant, and equipment 303,981
Changes in operating assets and liabilities:
Accounts receivable (443,511)
Inventories (682,822)
Prepaid expenses and other assets (71,708)
Accounts payable 249,522
Salaries and wages payable 75,721
Taxes, other than income and other
accrued liabilities 131,524
-----------
Net cash provided by operating activities 3,670,954
-----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (283,897)
Proceeds from sale of property, plant and equipment 131,078
-----------
Net cash (used) in continuing investing activities (152,819)
-----------
FINANCING ACTIVITIES
Equity distributions to Anderson (3,331,262)
-----------
Net cash (used) in financing activities (3,331,262)
-----------
Increase in cash 186,873
Cash at beginning of year 1,236,307
-----------
Cash at end of year $ 1,423,180
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ -0-
===========
Cash paid for income taxes $ -0-
===========
</TABLE>
See accompanying notes to financial statements.
Page 5
<PAGE> 11
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1994
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
THE DIVISION: Mesco Metal Buildings ("Mesco") is a division
of Anderson Industries, Inc. (Anderson) and is located in
Texas and South Carolina. Mesco designs, manufactures and
markets metal building systems and components for commercial,
industrial and community building uses throughout the
Southwest and Southeast. Mesco accounts for approximately 75%
of Anderson's revenue.
BASIS OF PRESENTATION: The accompanying Statements of Net
Assets and Statements of Divisional Operating Profit have been
prepared from the books and records maintained by Mesco and
Anderson. These financial statements represent those assets,
liabilities, revenues and expenses of Mesco.
The financial information included herein includes numerous
allocations and may not necessarily reflect the financial
position, results of operations or cash flows of Mesco in the
future, or the financial position, results of operations or
cash flows of Mesco had it existed as a separate, stand-alone
company during the period presented.
Mesco has various business transactions with Anderson and its
subsidiaries. See Note 3, Allocation of Corporate Expenses,
for a discussion of Mesco's relationship with these entities.
DEPRECIATION AND MAINTENANCE: Depreciation is provided using
the straight-line method based on the following estimated
useful lives:
<TABLE>
<CAPTION>
YEAR
------
<S> <C>
Buildings and improvements 7 to 20
Machinery and equipment 3 to 15
</TABLE>
Depreciation expense was $304,455 for the year ending December
31, 1994. Maintenance and repairs are charged to expense as
incurred. Renewals and betterments are capitalized as
additions to the appropriate asset accounts. When an asset is
sold or retired, the cost and related accumulated depreciation
are removed from the respective accounts, and any resulting
gain or loss is reported in income.
Page 6
<PAGE> 12
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1994
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE: Financial instruments that are
potentially subject to concentrations of credit risk consist
principally of accounts receivable. Mesco extends credit to
its customers, substantially all of whom are located in the
southern United States, based on their financial stability.
At December 31, 1994, no receivable from any customer exceeded
12% of Mesco's total trade receivables. Although management
of Mesco believes the receivables are substantially
collectible, at December 31, 1994, an allowance of $59,800 had
been provided for uncollectible accounts receivable.
INVENTORIES: Raw materials are priced at cost, determined on
the last-in, first-out (LIFO) basis, which is not in excess of
market.
SUBCHAPTER S: Anderson operates under Subchapter S of the
Internal Revenue Code and, consequently, is not subject to
federal income tax. The stockholders include Anderson's
income in their own income for tax purposes. Anderson pays
dividends to its stockholders to cover their estimated tax
liabilities associated with their proportionate shares of
Anderson's income.
ACCOUNTING ESTIMATES: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK: Mesco maintains cash deposits
with financial institutions in excess of federal insured
limits. Accounts at each institution are insured by the
Federal Deposit Insurance Corporation up to $100,000.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
Mesco's financial instruments consist primarily of cash and
accounts receivable. The carrying values reported in the
statements of net assets for cash and accounts receivable
approximate fair value.
Page 7
<PAGE> 13
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1994
2. INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<S> <C>
Raw materials $ 2,281,513
Work in process 638,433
Finished goods 92,649
-----------
$ 3,012,595
===========
</TABLE>
If the FIFO method of inventory accounting had been
used for raw materials, inventories would have been
approximately $240,000 higher than reported at December 31,
1994.
3. ALLOCATION OF CORPORATE EXPENSES
During the year ended 1994 Anderson charged a corporate fee of
$1,069,043 to Mesco for officer salaries, bonuses and
benefits, professional fees, rent, depreciation and interest.
Management believes that amounts allocated are reasonable
under the circumstances and accurately reflect the expenses of
Mesco on a stand alone basis.
4. LONG-TERM DEBT
In July 1992, Anderson obtained a term loan for $5,000,000
from a bank. The unpaid balance at December 31, 1994, for the
term note was $2,725,190. The loan was collateralized by
Anderson's accounts receivable, inventories, and property,
plant, and equipment and was guaranteed by Anderson's majority
stockholder. The loan was also cross-collateralized with the
revolving line of credit described below.
In 1993, Anderson obtained a revolving line of credit of
$3,500,000, from a bank. The unpaid balance of the revolving
line of credit was $1,664,100 at December 31, 1994. The
revolving line of credit was cross-collateralized with the
term note described above.
On January 1, 1995 Anderson reinstated and increased its
long-term debt. Under the restatement, the line of credit and
the term loan were combined into a single revolving line of
credit ("line") in the amount of $6,000,000 due on or before
July 30, 1996. Interest is to be computed by a formula
relating cash flow to earnings before interest, taxes,
depreciation and amortization. Under the formula, interest
may vary between prime and prime plus 1.25%. The line is
collateralized by Anderson's accounts receivable, inventories,
and property, plant and equipment and is guaranteed by
Anderson's shareholders. The unpaid balance of the line was
$1,939,277 at December 31, 1994.
Page 8
<PAGE> 14
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1994
4. LONG-TERM DEBT, continued
On March 7, 1996 Anderson renegotiated the line to mature on
May 31, 1998.
Interest paid on the bank debt described above was $429,000
for the year ended December 31, 1994.
5. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLANS: All employees of Anderson are covered by
profit sharing plans whereby contributions can, at the
discretion of the Board of Directors, be made from current or
accumulated earnings but cannot exceed 25% of the total
compensation paid or accrued to participating employees.
Anderson contributed $75,000 for 1994 for employees of Mesco.
During 1995, Anderson elected to terminate the profit sharing
plan, at which time all participants in the plan became 100%
vested.
401(K) PLAN: Beginning January 1, 1995 Anderson established a
401(k) Plan (the "Plan") for the benefit of its employees.
All employees of Anderson who have completed one year of
service are eligible to participate in the Plan. All amounts
contributed by participants are fully vested. Anderson is
required to make a matching contribution of 50% for each $1.00
contributed, up to 6% of an employee's annual compensation.
The Plan also provides for Anderson to make additional
contributions at the discretion of the Board of Directors.
SALARY CONTINUATION AGREEMENT: Effective January 1, 1995, in
the event of death or disability of certain key officers of
the Company, the following compensation agreement would become
effective until sale or liquidation of the Company.
<TABLE>
<S> <C>
1st year after death or disability 100% of Salary
2nd year after death or disability 75% of Salary
3rd year after death or disability
and each year thereafter until sale
or liquidation 50% of Salary
</TABLE>
6. LEASES
Principal operating leases are for buildings, office space,
office equipment, computer equipment, and transportation
equipment. Rental expenses for such leases amounted to
$415,000 for the year ended December 31, 1994. All leases are
renegotiable at or near their expiration dates.
Page 9
<PAGE> 15
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1994
6. LEASES
Future minimum rental payments required under operating leases
that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
<S> <C>
1995 $ 320,630
1996 194,818
1997 139,354
1998 114,775
1999 26,081
-----------
$ 795,658
===========
</TABLE>
7. SUBSEQUENT EVENT
On April 1, 1996, Mesco was sold by Anderson to NCI Building
Systems, L.P. The general terms of the sale were as follows:
(1) All significant operating assets of Mesco, other than
cash, certain real estate with a net book value of
approximately $243,600 as of December 31, 1995, and
receivables from affiliates were sold.
(2) NCI Building Systems, L.P. assumed all significant
operating liabilities of Mesco other than the notes
payable to the bank as disclosed in Note 4 and all
outstanding subordinated debt as explained in Note 5.
(3) Anderson received, before adjustment if any,
$21,000,000 for the assets sold subject to the
liabilities assumed by NCI Building Systems, L.P.
(4) The $21,000,000 was received by Anderson as follows:
(a) $19,000,000 on April 1, 1996.
(b) $500,000 pending no downward price
adjustment.
(c) $1,500,000 principal amount of 7%
subordinated debenture issued by NCI Building
Systems, Inc. Interest is payable quarterly
and the principal matures April 1, 2001. The
outstanding principal is convertible, at the
holder's option, to common stock of the
issuer at the rate of $29.925 per share at
any time after April 1, 1997, and on or
before April 1, 2001.
Page 10
<PAGE> 16
MESCO METAL BUILDINGS
(A DIVISION OF ANDERSON INDUSTRIES, INC.)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE> 17
MESCO METAL BUILDINGS
(A DIVISION OF ANDERSON INDUSTRIES, INC.)
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors..................................................................... 1
Statement of Net Assets............................................................................ 2
Statement of Divisional Operating Profit
and Changes in Net Assets........................................................................ 4
Statement of Cash Flows............................................................................ 5
Notes to Financial Statements...................................................................... 7
</TABLE>
<PAGE> 18
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Anderson Industries, Inc.
We have audited the accompanying statements of net assets of Mesco Metal
Buildings (a division of Anderson Industries, Inc.) as of December 31, 1995 and
the related statements of divisional operating profit and changes in net
assets, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mesco Metal Buildings (a
division of Anderson Industries, Inc.) at December 31, 1995, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
CHESHIER & FULLER, L.L.P.
Dallas, Texas
April 11, 1996
<PAGE> 19
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Net Assets
December 31, 1995
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash $ 2,015,218
Accounts and notes receivable, net 2,326,831
Inventories 2,928,147
Prepaid expenses 206,538
-----------
Total current assets 7,476,734
Property, plant, and equipment, at cost:
Land and buildings 6,454,713
Machinery and equipment 7,519,949
-----------
13,974,662
Accumulated depreciation 7,673,914
-----------
6,300,748
Other assets 63,362
-----------
Total assets $13,840,844
===========
</TABLE>
See accompanying notes to financial statements.
Page 2
<PAGE> 20
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statement of Net Assets
December 31, 1995
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Current liabilities:
Accounts payable $ 934,041
Salaries and wages payable 345,624
Taxes, other than income 177,085
Sales taxes payable 101,982
Product warranty reserve 210,432
Other accrued liabilities 269,496
-----------
Total current liabilities 2,038,660
Commitments and contingencies
Net assets 11,802,184
-----------
Total liabilities and net assets $13,840,844
===========
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE> 21
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Divisional Operating Profit and
Changes in Net Assets
Year Ended December 31, 1995
<TABLE>
<S> <C>
Net sales $37,128,942
Cost of sales 26,048,585
-----------
11,080,357
Operating Expenses:
Selling and administrative 4,218,080
Corporate management fee 1,634,132
-----------
5,852,212
-----------
Net income 5,228,145
Beginning net assets 8,701,036
Cost adjustment from stock redemption 3,352,018
Equity distributions paid to Anderson (5,479,015)
-----------
Ending net assets $11,802,184
===========
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE> 22
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Cash Flows
Year Ending December 31, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 5,228,145
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 619,913
Loss (gain) on sale of property, plant, and
equipment (600)
Changes in operating assets and liabilities:
Accounts receivable 422,828
Inventories 84,448
Prepaid expenses and other assets (47,667)
Accounts payable 143,586
Salaries and wages payable 57,912
Taxes, other than income and other
accrued liabilities (120,186)
-----------
Net cash provided by operating activities 6,388,379
-----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (333,436)
Proceeds from sale of property, plant and equipment 16,110
-----------
Net cash (used) in continuing investing activities (317,326)
-----------
FINANCING ACTIVITIES
Equity distributions to Anderson (5,479,015)
-----------
Net cash (used) in financing activities (5,479,015)
-----------
Increase in cash 592,038
Cash at beginning of year 1,423,180
-----------
Cash at end of year $ 2,015,218
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ -0-
===========
Cash paid for income taxes $ -0-
===========
</TABLE>
See accompanying notes to financial statements.
Page 5
<PAGE> 23
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Statements of Cash Flows
Year Ending December 31, 1995
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Property, plant and equipment cost was increased by $3,352,018 upon redemption
of Anderson treasury stock on January 1, 1995.
See accompanying notes to financial statements.
Page 6
<PAGE> 24
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1995
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
THE DIVISION: Mesco Metal Buildings ("Mesco") is a division
of Anderson Industries, Inc. (Anderson) and is located in
Texas and South Carolina. Mesco designs, manufactures and
markets metal building systems and components for commercial,
industrial and community building uses throughout the
Southwest and Southeast. Mesco accounts for approximately 75%
of the Anderson's revenue.
On January 1, 1995 Anderson redeemed 802,891 shares of its
outstanding stock in exchange for notes totaling $16,602,762,
cash of $268,750 and other corporate assets with a book value
of $390,644 for a total purchase price of $17,262,156. As a
result of the redemption of the shares of certain
shareholders, a new group of shareholders obtained majority
ownership of Anderson. Thus, the acquisition has been
reflected using the purchase method of accounting.
Accordingly, Anderson has allocated the purchase price,
effective January 1, 1995, as follows: (1) $3,132,600
reflected as acquisition of goodwill, (2) $3,858,011 reflected
as an acquisition of property, plant and equipment, and (3)
$10,271,545 reflected as a reduction in stockholders' equity.
Of the $3,858,011 reflected as an acquisition of property,
plant and equipment, $3,352,018 was allocated to property,
plant and equipment held by Mesco with a corresponding
increase in the net assets of Mesco.
BASIS OF PRESENTATION: The accompanying Statements of Net
Assets and Statements of Divisional Operating Profit have been
prepared from the books and records maintained by Mesco and
Anderson. These financial statements represent those assets,
liabilities, revenues and expenses of Mesco that will be
included in the proposed sale by Anderson to NCI Building
Systems, L.P.
The financial information included herein includes numerous
allocations and may not necessarily reflect the financial
position, results of operations or cash flows of Mesco in the
future, or the financial position, results of operations or
cash flows of Mesco had it existed as a separate, stand-alone
company during the periods presented.
Mesco has various business transactions with Anderson and its
subsidiaries. See Note 3, Allocation of Corporate Expenses,
for a discussion of Mesco's relationship with these entities.
DEPRECIATION AND MAINTENANCE: Depreciation is provided using
the straight-line method based on the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and improvements 7 to 20
Machinery and equipment 3 to 15
</TABLE>
Page 7
<PAGE> 25
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1995
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
Depreciation expense was $619,913 for the year ending December
31, 1995. Maintenance and repairs are charged to expense as
incurred. Renewals and betterments are capitalized as
additions to the appropriate asset accounts. When an asset is
sold or retired, the cost and related accumulated depreciation
are removed from the respective accounts, and any resulting
gain or loss is reported in income.
ACCOUNTS RECEIVABLE: Financial instruments that are
potentially subject to concentrations of credit risk consist
principally of accounts receivable. Mesco extends credit to
its customers, substantially all of whom are located in the
southern United States, based on their financial stability.
At December 31, 1995 no receivable from any customer exceeded
10% of Mesco's total trade receivables. Although management
of Mesco believes the receivables are substantially
collectible, at December 31, 1995 an allowance of $61,300 had
been provided for uncollectible accounts receivable.
INVENTORIES: Raw materials are priced at cost, determined on
the last-in, first-out (LIFO) basis, which is not in excess of
market.
SUBCHAPTER S: Anderson operates under Subchapter S of the
Internal Revenue Code and, consequently, is not subject to
federal income tax. The stockholders include Anderson's
income in their own income for tax purposes. Anderson pays
dividends to its stockholders to cover their estimated tax
liabilities associated with their proportionate shares of
Anderson's income.
ACCOUNTING ESTIMATES: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK: Mesco maintains cash deposits
with financial institutions in excess of federal insured
limits. Accounts at each institution are insured by the
Federal Deposit Insurance Corporation up to $100,000.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
Mesco's financial instruments consist primarily of cash and
accounts receivable. The carrying values reported in the
statement of net assets approximate fair value.
Page 8
<PAGE> 26
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1995
2. INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<S> <C>
Raw materials $ 2,213,623
Work in process 634,231
Finished goods 80,293
-----------
$ 2,928,147
===========
</TABLE>
If the FIFO method of inventory accounting had been
used for raw materials, inventories would have been
approximately $272,000 higher than reported at December 31,
1995.
3. ALLOCATION OF CORPORATE EXPENSES
During 1995, Anderson charged a corporate fee of $1,634,132 to
Mesco for officer salaries, bonuses and benefits, professional
fees, rent, depreciation and interest. Management believes
that amounts allocated are reasonable under the circumstances
and accurately reflect the expenses of Mesco on a stand alone
basis.
4. LONG-TERM DEBT
On January 1, 1995 Anderson obtained a loan from a bank in the
amount of $6,000,000 due on or before July 30, 1996. Interest
is to be computed by a formula relating cash flow to earnings
before interest, taxes, depreciation and amortization. Under
the formula, interest may vary between prime and prime plus
1.25%. The line is collateralized by Anderson's accounts
receivable, inventories, and property, plant and equipment and
is guaranteed by Anderson's shareholders. The unpaid balance
of the line was $1,939,277 at December 31, 1995.
On March 7, 1996 Anderson renegotiated the line to mature on
May 31, 1998.
Interest paid on the bank debt described above was $313,000
for the year ended December 31, 1995.
Page 9
<PAGE> 27
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1995
5. SUBORDINATED DEBT
The notes issued by Anderson in connection with the stock
redemption explained in Note 1, are payable in annual
installments each December 31 through 2002. Interest, which
is payable monthly, ranges from 2% to 4 1/4% above prime,
subject to certain maximum and minimum rates. The notes are
collateralized by a security interest in all the assets of
Anderson. The security interest in accounts receivable and
inventory has been subordinated to the interest of the bank
for the line of credit described in Note 3. The aggregate
maturities of subordinated debt as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Year Amount
------ -----------
<S> <C>
1996 $ 1,558,684
1997 1,660,276
1998 2,365,023
1999 2,365,023
2000 2,365,024
Thereafter 4,730,048
-----------
$15,044,078
===========
</TABLE>
Interest paid on the above debt was $2,155,000 for the year
ended December 31, 1995.
6. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLANS: All employees of Anderson are covered by
profit sharing plans whereby contributions can, at the
discretion of the Board of Directors, be made from current or
accumulated earnings but cannot exceed 25% of the total
compensation paid or accrued to participating employees.
During 1995, Anderson elected to terminate the profit sharing
plan, at which time all participants in the plan became 100%
vested.
401(K) PLAN: Beginning January 1, 1995 Anderson established a
401(k) Plan (the "Plan") for the benefit of its employees.
All employees of Anderson who have completed one year of
service are eligible to participate in the Plan. All amounts
contributed by participants are fully vested. Anderson is
required to make a matching contribution of 50% for each $1.00
contributed, up to 6% of an employee's annual compensation.
During 1995, matching contributions under the Plan were
approximately $71,150 for employees of Mesco. The Plan also
provides for Anderson to make additional contributions at the
discretion of the Board of Directors. Discretionary
contributions to the Plan were approximately $44,200 for 1995
for employees of Mesco. Any liabilities associated with this
plan have been retained by Anderson in accordance with the
terms of the sale to NCI Building Systems, L.P. as disclosed
in Note 8.
Page 10
<PAGE> 28
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1995
6. EMPLOYEE BENEFIT PLANS, continued
SALARY CONTINUATION AGREEMENT: Effective January 1, 1995, in
the event of death or disability of certain key officers of
Anderson, the following compensation agreement would become
effective until sale or liquidation of Anderson.
<TABLE>
<S> <C>
1st year after death or disability 100% of Salary
2nd year after death or disability 75% of Salary
3rd year after death or disability
and each year thereafter until sale
or liquidation 50% of Salary
</TABLE>
7. LEASES
Principal operating leases are for buildings, office space,
office equipment, computer equipment, and transportation
equipment. Rental expenses for such leases amounted to
$424,900 for the year ended December 31, 1995. All leases are
renegotiable at or near their expiration dates.
Future minimum rental payments required under operating leases
that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
<S> <C>
1996 $ 292,242
1997 213,595
1998 165,216
1999 41,655
2000 5,356
-----------
$ 718,064
===========
</TABLE>
Page 11
<PAGE> 29
MESCO METAL BUILDINGS
(A Division of Anderson Industries, Inc.)
Notes to Financial Statements
December 31, 1995
8. SUBSEQUENT EVENT
On April 1, 1996, Mesco was sold by Anderson to NCI Building
Systems, L.P. The general terms of the sale were as follows:
(1) All significant operating assets of Mesco, other than
cash, certain real estate with a net book value of
approximately $243,600 as of December 31, 1995, and
receivables from affiliates were sold.
(2) NCI Building Systems, L.P. assumed all significant
operating liabilities of Mesco other than the notes
payable to the bank as disclosed in Note 4 and all
outstanding subordinated debt as explained in Note 5.
(3) Anderson received, before adjustment if any,
$21,000,000 for the assets sold subject to the
liabilities assumed by NCI Building Systems, L.P.
(4) The $21,000,000 was received by Anderson as follows:
(a) $19,000,000 on April 1, 1996.
(b) $500,000 pending no downward price
adjustment.
(c) $1,500,000 principal amount of 7%
subordinated debenture issued by NCI Building
Systems, Inc. Interest is payable quarterly
and the principal matures April 1, 2001. The
outstanding principal is convertible, at the
holder's option, to common stock of the
issuer at the rate of $29.925 per share at
any time after April 1, 1997, and on or
before April 1, 2001.
Page 12
<PAGE> 30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated statements of income
for the fiscal year ended October 31, 1995 and the three months ended January
31, 1996 have been prepared to give effect to the acquisition of Mesco Metal
Buildings, a division of Anderson Industries, Inc. ("Mesco") as if it had
occurred on November 1, 1994. The unaudited pro forma condensed consolidated
balance sheet gives effect to the acquisition of Mesco as if it had occurred on
January 31, 1996. The pro forma adjustments are based upon available
information and certain assumptions that the Registrant believes are reasonable.
The pro forma financial statements do not purport to represent what the
Registrant's results of operations or financial position would actually have
been had the acquisition of Mesco in fact occurred at or on such dates, or to
project the Registrant's results of operations for any future period or
financial position at any future date.
The pro forma information with respect to the acquisition of Mesco is based on
the historical financial statements of Mesco. The acquisition is accounted for
under the purchase method of accounting. The purchase price allocation is based
on preliminary estimates of the fair value of the net assets acquired and
liabilities assumed and is subject to adjustments as additional information
becomes available. For purposes of presenting pro forma results, no changes in
revenues or expenses have been made to reflect the result of any modification
to operations not directly attributable to the acquisition of Mesco.
<PAGE> 31
NCI BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JANUARY 31, 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS Historical
---------------- Pro forma Pro
Company Mesco Adjustments Forma
------- ------- ----------- -------
<S> <C> <C> <C> <C>
Current assets:
Cash 31,589 2,364 (2,364)(1) 11,839
(19,750)(4)
Accounts receivable 22,698 2,716 (34)(1) 25,380
Inventories 22,238 2,006 989 (2) 25,233
Other current assets 1,950 138 (59)(1) 2,029
------- ------- --------- -------
Total current assets 78,475 7,224 (21,218) 64,481
------- ------- --------- -------
Property, plant and equipment, net 28,606 1,557 6,034 (3) 36,197
Other assets 12,579 67 10,927 (4) 23,573
------- ------- --------- -------
119,660 8,848 (4,257) 124,251
======= ======= ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt 83 0 83
Accounts payable 14,132 1,092 (226)(1) 14,998
Other current liabilities 9,400 1,183 1,042 (4) 11,625
------- ------- --------- -------
Total current liabilities 23,615 2,275 816 26,706
------- ------- --------- -------
Long term debt, noncurrent portion 1,500 (4)
and deferred income taxes 1,458 (4,500) 4,500 (1) 2,958
------- ------- --------- -------
Stockholders' equity
Preferred stock, $1 par value
1,000,000 shares authorized, none ---
outstanding
Common stock, $.01 par value,
15,000,000 share authorized,
7,927,427 shares issued and 78 78
outstanding
Divisional net assets 11,073 (11,073)(1) ----
Additional paid in capital 46,566 46,566
Retained earnings 47,943 47,943
------- ------- --------- -------
Total stockholders' equity 94,587 11,073 (11,073) 94,587
------- ------- --------- -------
119,660 8,848 (4,257) 124,251
======= ======= ========= =======
</TABLE>
(1) To eliminate assets not acquired and liabilities not assumed
(2) To reflect the fair value of inventory based of the first-in, first method
of cost.
(3) To reflect the fair value of fixed assets acquired
(4) To reflect the use of excess cash to fund the acquisition, record estimated
liabilities and debt in connection with the transaction and record the
resulting goodwill from the transaction.
<PAGE> 32
NCI BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED OCTOBER 31, 1995
(in thousands, except share data)
<TABLE>
<CAPTION>
Historical(1)
---------------- Pro forma Pro
Company Mesco Adjustments Forma
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales 234,215 37,129 271,344
Cost of sales 169,815 26,049 195,864
-------- -------- -------- --------
Gross profit 64,400 11,080 75,480
Operating expenses 38,111 5,852 728 (2) 44,691
-------- -------- -------- --------
Income from operations 26,289 5,228 (728) 30,789
Interest expense (56) (105)(2) (161)
Other income 822 822
-------- -------- -------- --------
Income before income taxes 27,055 5,228 (833) 31,450
Provision for income taxes 10,023 1,625 (3) 11,648
-------- -------- -------- --------
Net income 17,032 5,228 (2,458) 19,802
======== ======== ======== ========
Net income per common and
common equivalent share 2.52 2.52
======== ========
Weighted average shares outstanding 6,765 1,087 (4) 7,852
======== ======== ========
</TABLE>
(1)Based on the financial statements of the Company and Mesco for the year
ended October 31, 1995 and December 31, 1995, respectively.
(2)Reflects additional interest expense resulting from the financing of a
portion of the purchase price of Mesco and the amortization of estimated
goodwill of approximately $11 million over a 15 year period.
(3)Reflects the estimated tax provision on the divisional income of Mesco and
the reduction in income taxes from the pro forma adjustments.
(4)Reflects the sale of common stock of Company in December, 1995 which
provided the cash to fund the acquisition. Pro forma adjustment assumes that
this transaction was completed on November 1, 1994.
<PAGE> 33
NCI BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
Historical(1)
---------------- Pro forma Pro
Company Mesco Adjustments Forma
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales 67,350 8,743 76,093
Cost of sales 49,966 5,919 55,885
-------- ------- -------- --------
Gross profit 17,384 2,824 20,208
Operating expenses 11,277 1,180 182 (2) 12,639
-------- ------- -------- --------
Income from operations 6,107 1,644 (182) 7,569
Interest expense (4) (26)(2) (30)
Other income 382 (110)(2) 272
-------- ------- -------- --------
Income before income taxes 6,485 1,644 (318) 7,811
Provision for income taxes 2,465 1,157 (3) 3,622
-------- ------- -------- --------
Net income 4,020 1,644 (1,475) 4,189
======== ======= ======== ========
Net income per common and
common equivalent share 0.53 0.55
======== ========
Weighted average shares outstanding 7,632 7,632
======== ========
</TABLE>
(1)Based on the financial statements of the Company and Mesco for the three
months ended January 31, 1996 and March 31, 1996, respectively.
(2)Reflects additional interest expense resulting from the financing of a
portion of the purchase price of Mesco, the amortization of estimated
goodwill of approximately $11 million over a 15 year period and the
reduction in interest income from the utilization of existing cash to fund
the purchase price.
(3)Reflects the estimated tax provision on the divisional income of Mesco and
the reduction in income taxes from the pro forma adjustments.