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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 2
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
OCTOBER 31, 1996
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SPECIALTY PAPERBOARD, INC.
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<S> <C> <C>
DELAWARE 0-20231 82-0429330
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification
No.)
</TABLE>
161 BRUDIES ROAD, BRATTLEBORO, VERMONT 05302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(802) 257-0365
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The undersigned Company hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
November 13, 1996 as set forth in the pages attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business as acquired.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Arcon Coating Mills, Inc.
In our opinion, the accompanying statements of income and accumulated
deficit and of cash flows presents fairly, in all material respects, the results
of operations of Arcon Coating Mills, Inc. (the "Company") and its cash flows
for the period November 1, 1993 to April 14, 1994 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Jericho, New York
August 28, 1996
F-1
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ARCON COATING MILLS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
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<CAPTION>
FOR THE
PERIOD FROM
NOVEMBER 1, 1993
TO APRIL 14,
1994
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<S> <C>
Net sales....................................................................................... $ 9,112,477
Cost of goods sold.............................................................................. 6,943,801
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Gross profit............................................................................ 2,168,676
Selling, and administrative expenses............................................................ 904,768
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1,263,908
Other expenses (income)
Interest expense.............................................................................. 585,726
Interest income............................................................................... (6,568)
Amortization expense.......................................................................... 87,456
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Total other expenses.................................................................... 666,614
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Income before provision for income taxes................................................ 597,294
Provision for income taxes...................................................................... (270,226)
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Net income.............................................................................. $ 327,068
Accumulated deficit, beginning of period........................................................ (360,070)
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Accumulated deficit, end of period.............................................................. $ (33,002)
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The accompanying notes are an integral part of these financial statements.
F-2
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ARCON COATING MILLS, INC.
STATEMENT OF CASH FLOWS
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<CAPTION>
FOR THE
PERIOD FROM
NOVEMBER 1, 1993
TO APRIL 14,
1994
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<S> <C>
Cash flows from operating activities
Net income.................................................................................... $ 327,068
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization............................................................... 173,992
Amortization of prepaid interest............................................................ 64,568
(Increase) decrease in assets
Accounts receivable......................................................................... 226,338
Due from FSE Holdings, Inc.................................................................. 365,361
Inventories................................................................................. (438,994)
Prepaid expenses and other.................................................................. (10,633)
Increase (decrease) in liabilities
Accounts payable............................................................................ 641,264
Accrued expenses............................................................................ (276,119)
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Net cash provided by operating activities............................................... 1,072,845
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Cash flows from investing activities
Capital expenditures.......................................................................... (155,876)
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Net cash used in investing activities................................................... (155,876)
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Cash flows from financing activities
Due from FSE Holdings, Inc.................................................................... 727,031
Repayments of long-term debt.................................................................. (3,130,457)
Proceeds from long-term debt.................................................................. 1,408,059
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Net cash used in financing activities................................................... (995,367)
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Net decrease in cash and cash equivalents....................................................... (78,398)
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Cash and cash equivalents at beginning of period................................................ 1,486,457
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Cash and cash equivalents at end of period...................................................... $ 1,408,059
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Supplemental disclosure of cash flow information:
Interest paid................................................................................. $ 728,460
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Income taxes paid............................................................................. $ 22,557
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The accompanying notes are an integral part of these financial statements.
F-3
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ARCON COATING MILLS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND AND BASIS OF PRESENTATION
Arcon Coating Mills, Inc. (the "Company") is a leading producer of tapes and
edge covering materials which are used to bind, reinforce, protect and decorate
office and school supply products as well as checkbooks and hard and soft cover
books. Prior to the close of business on April 14, 1994, the Company was a
wholly-owned subsidiary of FSE Holdings, Inc. ("FSE"). At the close of business
on April 14, 1994 (the "Acquisition Date"), FSE assumed the Company's
intercompany balance (including those related to income taxes) and long-term
debt, net of cash on hand, and sold the outstanding stock of the Company to
Arcon Holdings Corp. The accompanying consolidated financial statements do not
reflect adjustments which resulted from the subsequent purchase transaction.
INVENTORIES
Approximately 31% of the Company's inventories are priced at the lower of
cost, determined by the last-in, first-out (LIFO) method, or market. The
remaining inventories are priced at the lower of cost determined by first-in,
first-out (FIFO) method, or market.
INCOME TAXES
Prior to the Acquisition Date, the Company filed a consolidated Federal
income tax return with FSE. Its liability or benefit related to Federal income
taxes has been computed on a separate company basis and is payable to or
receivable from FSE, subject to limitations based on the consolidated Federal
return.
Income taxes have been provided for in conformity with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes"
(SFAS 109). This statement requires recognition of deferred income taxes
utilizing a liability based approach.
PROPERTY AND DEPRECIATION
Depreciation is provided over the estimated useful lives of the applicable
assets using the straight-line method. The depreciable lives used are:
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Machinery and equipment.......................................... 5 years
Leasehold improvements........................................... 10 years
Furniture and fixtures........................................... 5 years
Automobiles...................................................... 3 years
31.5
Building......................................................... years
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Property and equipment includes the cost of additions and those improvements
which increase the capacity or lengthen the useful lives of the assets. Repair
and maintenance costs are expensed as incurred.
OTHER ASSETS
Amortization of goodwill is being charged to operations on a straight-line
basis over 40 years. Amortization of deferred financing costs is being charged
to operations over the term of the related debt.
F-4
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ARCON COATING MILLS, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
2. RELATED PARTY TRANSACTIONS
In October 1993, FSE contributed additional intercompany notes due from an
affiliate in the amount of $1,258,706 to the Company. The total intercompany
notes receivable at November 1, 1993 were $1,629,300. In December 1993,
approximately $1,550,000 of these notes were repaid.
In December 1993, the Company borrowed $414,341 from FSE under a $1,000,000
revolving credit agreement. The principal amount was due to be repaid in
November 1995 with interest payable annually at 3.83%. The proceeds were used to
repay long-term debt.
3. INCOME TAXES
The provision for income taxes consists of the following:
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Current:
Federal......................................................... $ 90,623
State........................................................... 29,474
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130,800
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Deferred:
Federal......................................................... $ 118,920
State........................................................... 31,479
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139,426
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$ 270,226
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The tax provision recorded on the Company's net income is higher than
Federal and State statutory rates due primarily to $79,965 of non-deductible
amortization of goodwill. The main components of deferred tax expense relate to
the reversal of temporary differences related to a non-compete covenant and
bonus and other compensation accruals.
4. EMPLOYEE BENEFIT PLANS
Effective November 1, 1993, the Company's eligible employees participated in
the Arcon Profit Sharing Plan and Trust which covers all employees with at least
six months of service and having attained the age of 20 1/2 years. The costs of
the plan are funded currently. Total costs charged to operations for the period
were approximately $21,983.
F-5
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ARCON COATING MILLS, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. LEASE COMMITMENTS
The Company leases an office and manufacturing facility located in
Oceanside, New York, from a partnership owned by the estate of a stockholder of
FSE. The lease expires in fiscal 1998 and is renewable thereafter. Rent expense
under this lease was $104,749 during the period.
Minimum annual rentals under all of the Company's operating leases are as
follows:
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<S> <C>
April 14 to October 31, 1994...................................... $ 118,307
Fiscal year ended October 31, 1995................................ 223,056
Fiscal year ended October 31, 1996................................ 223,056
Fiscal year ended October 31, 1997................................ 223,056
Fiscal year ended October 31, 1998................................ 130,116
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6. COMMITMENTS AND CONTINGENCIES
The Company's principal raw material, Tyvek-Registered Trademark-, is
proprietary to a single vendor. For the period November 1, 1993 to April 14,
1994, Tyvek-Registered Trademark- purchases represented approximately 50% of
total raw material purchases. Another vendor accounted for 12% of total raw
material purchases for the same period.
7. SUBSEQUENT EVENTS
At the close of business on April 14, 1994, 100% of the Company's common
stock was purchased by Arcon Holding Corp. for a purchase price of $17,349,000.
Pursuant to a Stock Purchase Agreement dated as of August 28, 1996,
Specialty Paperboard, Inc. has agreed to purchase all of the issued and
outstanding capital stock of Arcon Holdings Corp.
F-6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPECIALTY PAPERBOARD, INC.
By: /s/ BRUCE P. MOORE
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Bruce P. Moore
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date January 23, 1997
