<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
-----------------
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 1, 1996
--------------------
NORWOOD PROMOTIONAL PRODUCTS, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF TEXAS 0-21800 74-2553074
----------------------------- ----------- --------------------
(State or other jurisdiction (Commission (IRS. Employer
of incorporation) file no.) identification no.
70 N. E. LOOP 410 #295 SAN ANTONIO, TEXAS 78216
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (210) 341-9440
------------------
<PAGE> 2
As reported in the Registrant's Current Report on Form 8-K dated April 15,
1995, the Registrant completed on April 1, 1995, its acquisition of the assets
of Alpha Products Business. ("Seller"). The consideration paid for Seller's
acquired assets was $6.7 million cash, which was drawn under the Company's
existing debt facilities, plus the assumption of certain operating liabilities.
As indicated in the previously filed Form 8-K, the audited financial statement
and pro forma financial information requirements of Item 7 were to be filed by
amendment. With this Amendment No. 1 on Form 8-K/A, Item 7 of the Registrant's
Current Report on Form 8-K dated April 15, 1995 is hereby restated and amended
to correctly state the information required under Items 7(a) and 7(b).
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
The Registrant's acquisition of the assets of Alpha Products Business
included the following business units -
1. Assets of Alpha Products Business
(i) The following items are incorporated herein by reference as
Exhibit 1 hereto:
1. The audited financial statements as of March 31, 1996 and
April 30, 1995 together with Report of Independent Public
Accountants.
<PAGE> 3
(b) Pro Forma Financial Information Page
Set forth on the following pages are the Pro Forma
Condensed Consolidated Statements of Income of the
Registrant, required to be set forth in the Registrant's
Current Report on Form 8-K dated April 15 1995, which
Report describes the acquisition of Alpha Products, Inc.
by the Registrant and is amended by this Form 8-K/A.
The Pro Forma Condensed Consolidated Balance Sheet of the
Registrant as of September 2, 1995 presents the financial
position of the registrant as if the registrant had
acquired Alpha Products Business as of March 2, 1996.
Such balance sheet combines, with appropriate
adjustments, the Registrant's unaudited Condensed Balance
Sheet as of September 2, 1995 and Alpha Product
Business's Condensed Balance sheet as of March 31, 1996.
The acquisition will be accounted for as a purchase and
the results of operations of Alpha Products Business will
be included in the Registrant's Consolidated Statement of
Income beginning April 1, 1996. 5
The Pro Forma Condensed Consolidated Statement of Income
for the six month period ended March 2, 1996 presents the
results of operations for that period as if the
Registrant had acquired TEE-OFF Enterprises, Inc., Ocean
Specialty Products, Inc. and Alpha Products Business as
of September 3, 1995, the beginning of fiscal 1996. Such
Pro Forma Condensed Consolidated Statement of Income
combines, with appropriate adjustments, the Registrant's
unaudited results of operations for the six month period
ended March 2, 1996 with Alpha Products Business's
unaudited results of operations for the six months ended
February 29, 1995. 7
The Pro Forma Consolidated Statement of Income for the
fiscal year ended September 2, 1995 presents the results
of operations of the Registrant for such year as if the
Registrant had acquired The Bob Allen Companies, Inc.,
Designer Plastics, Inc., BTS Group, Inc., Ocean Specialty
Manufacturing Corporation, TEE-OFF Enterprises, Inc. and
Alpha Products Business as of September 4, 1994, the
beginning of fiscal 1995. Such Pro Forma Condensed
Consolidated Statement of Income combines, with
appropriate adjustments, the Registrant's results of
operations for its fiscal year ended September 2, 1995,
and Alpha Products Business's unaudited results of
operations for the twelve months ended August 31, 1995. 9
The Pro Forma financial statements have been prepared on the
basis of preliminary assumptions and estimates which are subject
to change. The pro forma financial statements may not be
indicative of the results that actually would have been achieved
if the acquisition of Alpha Products Business had been effected
on the dates indicated or which may be achieved in the future.
The pro forma financial statements should be read in conjunction
with the Consolidated Financial Statements of the Registrant,
and the separate audited financial statements for Alpha Products
Business.
(c) Exhibits
1. The audited financial statements as of March 31, 1996 and
April 30, 1995 together with Report of Independent Auditors'
Report.
<PAGE> 4
PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 2, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NORWOOD OCEAN ADJUSTMENTS NORWOOD TEE-OFF ADJUSTMENTS
(A) (B) INC. (DECR). PRO FORMA (C) INC. (DECR).
------- ------ ----------- --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,174 ($95) $94 (j) $2,173 $865 ($415)(j)
Accounts receivable 17,001 1,074 (143)(j) 17,932 567
Other receivables 492 0 492 0
Inventories 23,913 733 79 (j) 24,725 1,125
Prepaid expenses and other assets 1,916 73 (21)(j) 1,968 47
------- ------ ----------- --------- ------ -----------
Total current assets 45,496 1,785 9 47,290 2,604 (415)
Property, plant and equipment, net 12,090 942 (290)(e) 12,742 338 272 (e)
Deferred taxes 249 (39) 39 (j) 249 0 0
Goodwill 30,443 0 1,459 (f) 31,902 0 5,446 (f)
Other assets 6,581 99 909 (f) 7,589 0 1,000 (f)
------- ------ ----------- --------- ------ -----------
Total assets $94,859 $2,787 $2,126 $99,772 $2,942 $6,303
======= ====== =========== ========= ====== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $5,803 $1,131 $91 (g) $7,025 $1,535 ($5)(g)
Accrued liabilities 4,246 147 49 (g) 4,442 628 (562)(g)
Income taxes payable 866 (58) 58 (k) 866 0
Current maturities of long-term debt 3,232 0 3,232 0
Current portion of lease obligation 266 0 266 0
------- ------ ----------- --------- ------ -----------
Total current liabilities 14,413 1,220 198 15,831 2,163 (567)
Long term debt 59,210 1,562 1,933 (h) 62,705 0 7,649 (h)
Capital lease obligation 202 0 202
Shareholders' equity:
Common stock 19,617 2 (2)(i) 19,617 1 (1)(i)
Additional paid-in-capital 369 0 369 5 (5)(i)
Treasury stock (8) 0 (8)
Retained Earnings 1,310 3 (3)(i) 1,310 773 (773)(i)
------- ------ ----------- --------- ------ -----------
21,288 5 (5) 21,288 779 (779)
Less receivables for prch. of common stock 254 254
------- ------ ----------- --------- ------ -----------
Total shareholders' equity 21,034 5 (5) 21,034 779 (779)
------- ------ ----------- --------- ------ -----------
Total liabilities and shareholders' equity $94,859 $2,787 $2,126 $99,772 $2,942 $6,303
======= ====== =========== ========= ====== ===========
<CAPTION>
PRO FORMA
NORWOOD ALPHA ADJUSTMENTS NORWOOD
PRO FORMA (D) INC. (DECR). PRO FORMA
--------- ------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,623 $0 $0 $2,623
Accounts receivable 18,499 2,017 20,516
Other receivables 492 0 492
Inventories 25,850 3,017 28,867
Prepaid expenses and other assets 2,015 176 2,191
--------- ------- ------------ ---------
Total current assets 49,479 5,210 0 54,689
Property, plant and equipment, net 13,352 5,734 (951)(e) 18,135
Deferred taxes 249 0 0 249
Goodwill 37,348 0 0 37,348
Other assets 8,589 0 0 8,589
--------- ------- ------------ ---------
Total assets $109,017 $10,944 ($951) $119,010
========= ======= =========== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $8,555 $1,435 $0 $9,990
Accrued liabilities 4,508 263 150 (g) 4,921
Income taxes payable 866 0 866
Current maturities of long-term debt 3,232 349 3,581
Current portion of lease obligation 266 264 530
--------- ------- ------------ ---------
Total current liabilities 17,427 2,311 150 19,888
Long term debt 70,354 356 6,675 (h) 77,385
Capital lease obligation 202 501 703
Shareholders' equity:
Common stock 19,617 7,776 (7,776)(i) 19,617
Additional paid-in-capital 369 0 369
Treasury stock (8) 0 (8)
Retained Earnings 1,310 0 1,310
--------- ------- ------------ ---------
21,288 7,776 (7,776) 21,288
Less receivables for prch. of common stock 254 254
--------- ------- ------------ ---------
Total shareholders' equity 21,034 7,776 (7,776) 21,034
--------- ------- ------------ ---------
Total liabilities and shareholders' equity $109,017 $10,944 ($951) $119,010
========= ======= =========== =========
</TABLE>
See notes on following page
<PAGE> 5
NORWOOD PROMOTIONAL PRODUCTS, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 2, 1995
(a) Represents the Registrant's consolidated financial position as reported in
Form 10-K as of September 2, 1995
(b) Represents Ocean Manufacturing Corporation's balance sheet as of November
20, 1995.
(c) Represents TEE-OFF Enterprises Inc.'s balance sheet as of January 23, 1996.
(d) Represents Alpha Product's Business balance sheet as of March 31, 1996.
(e) To adjust fixed assets to their estimated fair value or decrease for
negative goodwill.
(f) To record non-compete and excess of purchase price paid over estimated fair
value of assets acquired.
(g) To record accrual of acquisition related costs offset by liabilities
retained by seller.
(h) Funds used to acquire Ocean Specialty Manufacturing Corporation, TEE-OFF
Enterprises, Inc. and Alpha Products Business and to pay certain acquisition
related costs assumed to have been provided from borrowings under the
Registrant's credit facilities or through issuance of promissory notes to
former shareholders'.
(i) Represents the elimination of Ocean Specialty Manufacturing Corporation,
TEE-OFF Enterprises Inc.'s and Alpha Products Business's stockholders'
equity.
(j) Represents assets retained by selling shareholders'.
(k) Represents retained tax liabilities or retained payables of selling
shareholders'.
<PAGE> 6
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
YEAR TO DATE SECOND QUARTER ENDED MARCH 2, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
TEE- ACQUISITION FOR THE
NORWOOD OCEAN(A) OFF(B) ALPHA (C) ADJUSTMENTS ACQUISITIONS
--------- ---------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales $63,454 $1,836 $2,573 $9,373 $77,236
Cost of sales 44,369 1,437 2,076 8,455 (571)(d) 55,766
-------- --------- -------- --------- --------- ----------
Gross profit 19,085 399 497 918 571 21,470
Operating expenses:
Selling 4,890 65 61 832 (124)(d) 5,724
Sales administration 2,689 38 30 429 3,186
General and administrative 5,600 291 228 494 (224)(d) 6,389
Amortization 1,562 0 212 (e) 1,774
-------- --------- -------- --------- --------- ----------
Total operating expenses 14,741 394 319 1,755 (136) 17,073
Income from operations 4,344 5 178 (837) 707 4,397
Interest expense 1,869 53 0 68 442 (f) 2,432
-------- --------- -------- --------- --------- ----------
Income before income taxes 2,475 (48) 178 (905) 265 1,965
Provision for income taxes 1,030 (20) 0 0 (211)(g) 799
-------- --------- -------- --------- --------- ----------
Net Income $1,445 ($28) $178 ($905) $476 1,166
======== ========= ======== ========= ========= ==========
Net income per common share:
Primary shares $0.33 $0.27
======== =========
Fully diluted shares $0.33 $0.27
======== =========
Weighted average common
shares and equivalents:
Primary shares 4,383 4,383
======== =========
Fully diluted shares 4,383 4,383
======== =========
</TABLE>
See notes on following page
<PAGE> 7
NORWOOD PROMOTIONAL PRODUCTS, INC.
NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE SECOND QUARTER ENDED MARCH 2, 1996
(a) Key acquired the assets of Ocean Specialty Manufacturing Corporation on
November 20, 1995.
(b) ArtMold acquired the assets of TEE-OFF Enterprises, Inc. on January 23,
1996.
(c) Radio Cap Company, Inc. acquired the assets of Alpha Products, Inc. on
April 1, 1996.
(d) Reflects estimated cost savings in salaries and wages and a bonus, all of
which were directly attributable to the Ocean and TEE-OFF Acquisitions,
depreciation expense savings due to the establishment of fair values of net
fixed assets below historical costs, rent reductions and reduction of
corporate allocations from the former parent to Alpha Products, Inc., as
follows:
<TABLE>
<S> <C>
Cost of sales:
Depreciation $327
Rent reduction 115
Corporate allocation 129
-----
$571
=====
Selling expenses:
Corporate allocation $105
Salaries wages and other 19
-----
$124
=====
General and administrative:
Salaries and wages $ 96
Depreciation 66
Corporate allocation 32
Other 30
-----
$224
=====
</TABLE>
(e) Reflects the amortization of the excess of purchase price paid over
estimated fair value of assets acquired and the amortization of various
non-compete agreements entered into in connection with the acquisitions.
The excess of purchase price paid over estimated fair value of assets
acquired is amortized over 15 years, the non-compete agreements in
connection with the Ocean and TEE-OFF acquisitions are amortized over the
ten year term of the respective agreements.
(f) Adjusts interest expense for the financing of the acquisition of Ocean,
TEE-OFF and Alpha at the Company's effective borrowing rate of 7.5% per
annum.
(g) Reflects income tax effect for the pro forma adjustments.
<PAGE> 8
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 2, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
BOB DESIGNER TEE- ACQUISITION FOR THE
NORWOOD ALLEN(A) LINE(B) OCEAN(C) BTS(D) OFF (E) ALPHA(F) ADJUSTMENTS ACQUISITIONS
-------- ------- --------- --------- -------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $103,860 $7,949 $5,379 $7,327 $7,346 $9,079 $19,610 $160,550
Cost of sales 70,963 4,875 3,481 5,737 4,796 7,174 17,106 (2,049)(g) 112,083
-------- ------ -------- -------- ------- --------- -------- -------- --------
Gross profit 32,897 3,074 1,898 1,590 2,550 1,905 2,504 2,049 48,467
Operating expenses:
Selling 7,459 918 377 272 863 151 2,560 (146)(g) 12,454
Sales administration 3,831 473 296 139 253 78 1,318 6,388
General and administrative 9,037 1,498 1,140 1,334 1,151 477 2,418 (2,583)(g) 14,472
Amortization 2,119 0 0 0 0 1,690 (h) 3,809
-------- ------ -------- -------- ------- --------- -------- -------- --------
Total operating expenses 22,446 2,889 1,813 1,745 2,267 706 6,296 (1,039) 37,123
Income from operations 10,451 185 85 (155) 283 1,199 (3,792) 3,088 11,344
Interest expense 3,619 132 85 194 211 6 729 1,612 (i) 6,588
-------- ------ -------- -------- ------- --------- -------- -------- --------
Income before income taxes 6,832 53 0 (349) 72 1,193 (4,521) 1,476 4,756
Provision for income taxes 2,800 0 3 16 24 0 0 (890)(j) 1,953
-------- ------ -------- -------- ------- --------- -------- -------- --------
Net Income $4,032 $53 ($3) ($365) $48 $1,193 ($4,521) $2,366 $2,803
======== ====== ======== ======== ======= ========= ======== ======== ========
Net income per common share:
Primary shares $1.11 $0.77
======== ========
Fully diluted shares $1.10 $0.76
======== ========
Weighted average common
shares and equivalents:
Primary shares 3,636 3,636
======== ========
Fully diluted shares 3,668 3,668
======== ========
</TABLE>
See notes on following page
<PAGE> 9
NORWOOD PROMOTIONAL PRODUCTS, INC.
NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 2, 1995
(a) Air-Tex acquired the assets of The Bob Allen Companies, Inc. on March 1,
1995.
(b) Air-Tex acquired the assets of Designer Plastics, Inc. on June 9, 1995.
(c) Key acquired the assets of Ocean Specialty Manufacturing Corporation on
November 20, 1995.
(d) Barlow acquired the assets of BTS Group on July 28, 1995.
(e) ArtMold acquired the assets of TEE-OFF Enterprises, Inc. on January 23,
1996.
(f) Radio Cap Company, Inc. acquired the assets of Alpha Products, Inc. on
April 1, 1996.
(g) Reflects estimated cost savings in salaries and wages and a bonus, all of
which were directly attributable to the Bob Allen, Designer Line, BTS, Ocean
and TEE-OFF acquisitions, depreciation expense savings due to the
establishment of fair values of net fixed assets below historical costs,
cost savings from expenses directly related to a certain joint venture,
(which was not included in the BTS acquisition), rent reductions, closing
costs related to the purchase of Alpha Products by the former owner and
reduction of corporate allocations from the former parent to Alpha Products,
Inc., as follows:
<TABLE>
<S> <C>
Cost of sales:
Depreciation $ 1,495
Rent reduction 278
Corporate allocation 276
-------
$ 2,049
=======
Selling expenses:
Corporate allocation $ 129
Salaries wages and other 17
-------
$ 146
=======
General and administrative:
Salaries and wages $ 1,028
Bonus 1,014
Depreciation 183
Corporate allocation (380)
Closing costs 523
Other 215
-------
$ 2,583
=======
</TABLE>
(h) Reflects the amortization of the excess of purchase price paid over
estimated fair value of assets acquired and the amortization of various
non-compete agreements entered into in connection with the acquisitions.
The excess of purchase price paid over estimated fair value of assets
acquired is amortized over 15 years, the non-compete agreements in
connection with the Ocean and TEE-OFF acquisitions are amortized over the
ten year term of the respective agreements.
(i) Adjusts interest expense for the financing of the acquisition of Ocean,
TEE-OFF and Alpha at the Company's effective borrowing rate of 7.5% per
annum.
(j) Reflects income tax effect for the pro forma adjustments.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 14, 1996 By: /s/ J. Max Waits
-----------------
J. Max Waits
Secretary
<PAGE> 11
Norwood Promotional Products, Inc.
Form 8-K
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description of Exhibit Page
- - ----------- ---------------------- ------------
99.1 The audited financial statements as of March 31,
1996 and April 30, 1995 together with Report of
Independent Auditors' Report. 15
<PAGE> 1
EXHIBIT 99.1
ARTHUR ANDERSEN LLP
ALPHA PRODUCTS BUSINESS
FINANCIAL STATEMENTS AS OF MARCH 31, 1996
AND APRIL 30, 1995
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of
Alpha Products, Inc.
We have audited the accompanying statements of acquired assets and
assumed liabilities (see note 1) of ALPHA PRODUCTS BUSINESS, as of March
31, 1996 and April 30, 1995, and the related statements of revenues and
expenses before income taxes and cash flows for the eleven months ended
March 31, 1996 and the four months, sixteen days ended April 30, 1995.
These financial statements are the responsibility of the Alpha Products
Business' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the acquired assets and assumed
liabilities of the Alpha Products Business as of March 31, 1996 and April
30, 1995, and its revenues and expenses before income taxes and its cash
flows for the eleven months ended March 31, 1996 and the four months,
sixteen days ended April 30, 1995, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Nashville, Tennessee
April 26, 1996
<PAGE> 3
ALPHA PRODUCTS BUSINESS
STATEMENTS OF ACQUIRED ASSETS AND ASSUMED LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, APRIL 30,
ASSETS 1996 1995
- - ------------------------------------------------- ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable, less allowances of $158,043
and $186,958, respectively $ 2,016,774 $ 3,377,178
Inventories, net 3,016,646 3,905,065
Prepaids and other current assets 176,203 200,644
----------- -----------
Total current assets 5,209,623 7,482,887
----------- -----------
PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements 278,249 275,071
Machinery and equipment 2,486,235 2,486,225
Furniture and fixtures 566,553 566,553
Computer Equipment 905,498 814,779
Molds 3,243,070 2,839,096
----------- -----------
7,479,605 6,981,724
Less accumulated depreciation and amortization (1,745,370) (513,499)
----------- -----------
Net property and equipment 5,734,235 6,468,225
----------- -----------
Total assets $10,943,858 $13,951,112
=========== ===========
LIABILITIES
- - -------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,434,892 $ 2,019,694
Accrued liabilities 263,080 402,669
Current portion of capital lease obligations 264,062 246,110
Current portion of long-term debt 349,393 877,113
----------- -----------
Total current liabilities 2,311,427 3,545,586
----------- -----------
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 501,011 760,019
LONG-TERM DEBT, NET OF CURRENT PORTION 355,811 552,544
INVESTMENT BY ALPHA PRODUCTS, INC. 7,775,609 9,092,963
----------- -----------
Total liabilities and investment by Alpha
Products, Inc. $10,943,858 $13,951,112
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
ALPHA PRODUCTS BUSINESS
STATEMENTS OF REVENUES AND EXPENSES BEFORE INCOME TAXES
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE ELEVEN MONTHS, SIXTEEN
MONTHS ENDED DAYS ENDED
MARCH 31, 1996 APRIL 30, 1995
-------------- ---------------
<S> <C> <C>
NET REVENUES $16,193,392 $ 6,263,787
COST OF GOODS SOLD 14,433,613 5,825,320
----------- -----------
Gross profit 1,759,779 438,467
----------- -----------
OPERATING EXPENSES:
Selling 2,140,617 861,846
General and administrative 1,190,951 704,858
Warehouse and shipping 530,889 192,448
----------- -----------
3,862,457 1,759,152
----------- -----------
Loss from operations (2,102,678) (1,320,685)
OTHER EXPENSES, NET (97,024) (66,099)
----------- -----------
NET LOSS BEFORE INCOME TAXES $(2,199,702) $(1,386,784)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
ALPHA PRODUCTS BUSINESS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE ELEVEN MONTHS, SIXTEEN
MONTHS ENDED DAYS ENDED
MARCH 31, 1996 APRIL 30, 1995
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss before income taxes $(2,199,702) $ (1,386,784)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,231,871 513,499
Change in assets and liabilities:
(Increase) decrease in accounts receivable 1,360,404 (3,362,946)
(Increase) decrease in inventories 888,419 (1,905,065)
(Increase) decrease in prepaid expenses and
other assets 24,441 (42,778)
Decrease in accounts payable (584,802) (9,506,893)
Decrease in accrued liabilities (139,589) (299,197)
----------- ------------
Net cash provided by (used in)
operating activities 581,042 (15,990,164)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (575,958) (336,195)
Proceeds from disposal of property and equipment 78,076 -
----------- ------------
Net cash used in investing activities (497,882) (336,195)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (965,509) (350,265)
Investment by Alpha 815,527 16,978,926
----------- ------------
Net cash provided by financing activities (149,982) 16,628,661
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (66,822) 302,302
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 314,008 $ 11,706
----------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR 247,186 314,008
LESS: CASH, NOT ACQUIRED BY RADIO CAP COMPANY, INC. (247,186) (314,008)
----------- ------------
CASH, PER STATEMENT OF ACQUIRED ASSETS AND ASSUMED
LIABILITIES $ - $ -
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 143,785 $ 83,577
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
ALPHA PRODUCTS BUSINESS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND APRIL 30, 1995
1. ORGANIZATION
The accompanying financial statements include the Alpha Products Business
("the Business") assets acquired and liabilities assumed by Radio Cap
Company, Inc., a subsidiary of Norwood Promotional Products, Inc., in a
purchase transaction, as more fully described in Note 8. The Business
includes certain assets and liabilities of Alpha Products, Inc. (a Georgia
corporation), a wholly-owned subsidiary of Aladdin Industries, Incorporated
("Aladdin"). Aladdin acquired the assets and liabilities of Alpha Products,
Inc. in a purchase transaction in December 1994. The Business principally
sells various types of beverage containers, (i.e. coffee mugs, sports
bottles, and other uninsulated mugs) that are screen printed with insignias
and logos of customers and events.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
As shown in Note 3, the Business's inventories are valued at lower of cost
(first-in, first-out (FIFO) basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Additions and improvements are
capitalized. Maintenance and general repairs are expensed as incurred.
Depreciation is included in cost of revenues and general and administrative
expense in the statements of revenues and expenses before income taxes and
is computed using the straight line method based on estimated useful lives
as follows:
<TABLE>
<CAPTION>
YEARS
------------
<S> <C>
Leasehold improvements 10
Machinery and equipment 7
Furniture and fixtures 7
Computer equipment 3
Molds 5
</TABLE>
<PAGE> 7
- 2 -
INCOME TAXES
Taxes related to the Business are included in the consolidated tax return of
Aladdin. The accompanying statements of revenues and expenses for the
eleven months and four months, sixteen days ended March 31, 1996 and April
30, 1995 are presented before income taxes. Accordingly, no provision or
allocation for taxes on income has been provided in these statements.
REVENUE RECOGNITION
Revenues are recognized at the time product is shipped.
MANAGEMENT'S 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 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.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 1996 APRIL 30, 1995
-------------- --------------
<S> <C> <C>
Raw materials $ 2,439,188 $ 2,941,852
Finished goods 577,458 963,213
-------------- --------------
$ 3,016,646 $ 3,905,065
============== ==============
</TABLE>
Raw materials consist primarily of unprinted mugs, cups, sports bottles, and
various lids and straws. Finished goods are primarily screen printed and
thermal-labeled mugs and cups.
<PAGE> 8
- 3 -
4. LONG-TERM DEBT
Long-term debt obligations at March 31, 1996 and April 30, 1995 consist of
the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Note payable to GE Capital, secured by machinery and
equipment; fixed interest rate of 8.77%, principal and
interest payable in 60 monthly installments beginning
March 1, 1994. $ 303,281 $ 376,848
Note payable to GE Capital, secured by machinery and
equipment; fixed interest rate of 8.77%, principal and
interest payable in 60 monthly installments beginning
February 1, 1994. 175,377 219,095
Note payable to GE Capital, secured by machinery and
equipment; variable interest rate equal to the
published monthly average "Commercial Paper Rate"(5.39%
at March 31, 1996) plus 4.05% (9.44% at March 31,
1996). Term of note is 60 months with principal and
interest installments payable monthly beginning
September 1, 1992. 100,296 165,193
Note payable to HCFS Business Equipment Corporation,
secured by machinery and equipment; variable interest
rate as established by the "Corporate Base Rate" of
First National Bank of Chicago plus two percent (10.75%
at March 31, 1996). Term of note is 48 months with
principal and interest installments payable monthly
beginning July 1, 1992. 27,500 256,667
Equipment note payable to Williams Industries, Inc.,
secured by certain molds; amortized and payable at a
rate of $.03 per mug produced. 96,014 360,139
All other 2,736 51,715
--------- ---------
705,204 1,429,657
Less current portion (349,393) (877,113)
--------- ---------
Total long-term debt $ 355,811 $ 552,544
========= =========
</TABLE>
<PAGE> 9
- 4 -
5. COMMITMENTS AND CONTINGENCIES
The Business has various capital lease agreements for the leasing of
equipment and machinery. The interest rates on the capital leases vary
from approximately 8% to 15% as of March 31, 1996. The asset values of the
capital leased equipment are included in property and equipment. The net
book value of assets under capital lease obligations totaled approximately
$1,060,000 and $1,215,000 as of March 31, 1996 and April 30, 1995,
respectively.
Future minimum lease payments under the non-cancelable leases at March 31,
1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
1997 $ 319,055 $ 742,578
1998 299,981 715,389
1999 243,633 701,825
2000 1,587 675,042
2001 - 664,440
Thereafter - 1,827,210
--------- ----------
Total minimum lease payments 864,256 $5,326,484
==========
Less amount representing interest (99,183)
---------
Present value of future minimum lease
payments 765,073
Less current portion (264,062)
---------
$ 501,011
=========
</TABLE>
Rent expense for all operating leases totaled approximately $692,000 and
$267,000 for the eleven months ended March 31, 1996 and the four months,
sixteen days, ended April 30, 1995, respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
As required by Financial Accounting Standards No. 107 "Disclosures About
Fair Value of Financial Instruments", the Business has evaluated the fair
values of all financial instruments held using available market information.
As of March 31, 1996 and April 30, 1995, the carrying amounts for cash,
accounts receivable, and accounts payable are reasonable estimates of their
fair values due to their short-term nature. The carrying amounts for notes
payable are also reasonable estimates of their fair value, as the effective
interest rates on the notes approximate currently available financing rates.
<PAGE> 10
-5-
7. RELATED PARTY TRANSACTIONS
During the eleven month and the four month, sixteen day periods ended March
31, 1996 and April 30, 1995, respectively, the Business had significant
transactions with its indirect parent entity, Aladdin Industries, Inc. The
transactions included the sale of product to Aladdin at an approximate
thirty percent mark-up, which totaled approximately $2.6 million for the
eleven months ended March 31, 1996.
8. EVENTS SUBSEQUENT TO MARCH 31, 1996
Effective April 1, 1996, the Alpha Products Business was sold to Radio Cap
Company, Inc., a subsidiary of Norwood Promotional Productions, Inc. by
Alpha Products, Inc.
