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
Date of Report (Date of earliest event reported):
February 9, 1996
INBRAND CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 0-22144 58-113677
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1169 Canton Road, Marietta, Georgia 30066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 422-3036
<PAGE>
INBRAND Corporation Form 8-K/A
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 9, 1996, INBRAND Corporation ("INBRAND")
through its new subsidiary, INBRAND France S.A. (the "Company")
was awarded substantially all of the assets of Celatose, S.A., a
societe anonyme formed under the laws of France ("Celatose") and
certain of its subsidiaries (Celatose and these certain
subsidiaries are herein collectively referred to as the "Celatose
Group"). The Celatose Group was in bankruptcy under the laws of
France.
The Company was awarded the assets of Celatose from the
French bankruptcy court for approximately $4,800,000, a
significant portion of which may be paid over a twenty-eight
month period, without interest, to the French bankruptcy court.
INBRAND borrowed the initial portion of the purchase
consideration from its lender, SouthTrust Bank of Georgia, N.A.,
and contributed this amount to the Company to complete the
purchase. The Company assumed no significant debt obligations of
the Celatose Group in the transaction.
The Celatose Group manufactured adult incontinence
products and disposable baby diapers which were marketed
primarily under retailers' private labels in Europe. INBRAND
continues the separate operation of the Celatose Group plant
assets through the Company which is providing INBRAND with
additional manufacturing and distribution operations in Lille,
France as well as a small presence in Montpelier, France.
Additional information concerning this transaction, as
well as documentation related to it, is included in INBRAND's
Form 8-K dated February 9, 1996, as amended on April 23, 1996.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The following financial statements of Celatose, S.A.
acquired by Registrant as previously described in Item 2
of the Initial Report on Form 8-K, are filed herewith:
Report of Independent Auditors F-2
Consolidated Statement of Income for the Year Ended
December 31, 1995 F-3
Consolidated Balance Sheet for the Year Ended December
31, 1995 F-4
Consolidated Statement of Deficiency in Assets for the
Year Ended December 31, 1995 F-6
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1995 F-7
Notes to the Consolidated Financial Statements F-8
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The audit was conducted in accordance with generally
accepted auditing standards in France as issued by the
applicable legal and professional bodies. The
consolidated financial statements have been prepared in
accordance with French accounting regulations as
disclosed in note 1.1 to the consolidated financial
statements. The French accounting principles used in
preparation of the consolidated financial statements are
enumerated in note 1. These French accounting
principles differ in certain respects from generally
accepted accounting principles in the United States.
The differences with regard to net loss and deficiency
in assets are presented in note 2.
(b) Pro Forma Financial Information
The Pro Forma Financial Information was prepared to
illustrate the Registrant's acquisition on February 8,
1996 of certain assets and liabilities of Celatose, S.A.
and JAG, S.A. from a bankruptcy trustee under the laws
of France. Upon the court's approval of the
transaction, INBRAND France, S.A. was created by the
Registrant to manage this acquisition.
The assets acquired consisted primarily of fixed
assets, inventories and Celatose, S.A.'s investment in a
wholly-owned subsidiary (Laboratoires Alaune, S.A.R.L.).
The majority of the existing employees of the companies
were retained. Certain liabilities of Celatose, S.A.
and JAG, S.A. were assumed relating to vacation pay and
retirement payments under a social pension scheme.
In connection with the acquisition, the Registrant
plans to dispose of certain assets. The estimated costs
of disposing of those assets, and the amortization of
such costs, are reflected in the Pro Forma Financial
Information.
The unaudited Pro Forma Consolidated Balance Sheet has
been prepared as if the transactions occurred on
December 30, 1995. The unaudited Pro Forma Consolidated
Statements of Income for a twelve month period ended
July 1, 1995 and for a six month period ended December
30, 1995 have been prepared as if such transactions
occurred at the beginning of the periods. The pro forma
consolidated financial information set forth below is
unaudited and is not necessarily indicative of the
results that would have occurred if the transactions had
been consummated for balance sheet purposes on December
30, 1995, and for income statement purposes at the
beginning of the periods presented.
Pro Forma Consolidated Balance Sheet as of December 30,
1995 (unaudited) F-20
Pro Forma Consolidated Statement of Operations for a
Twelve Month Period Ended July 1, 1995 (unaudited) F-22
Pro Forma Consolidated Statement of Operations for a Six
Month Period Ended December 30, 1995 (unaudited) F-23
Notes to Pro Forma Consolidated Financial Statements
(unaudited) F-24
The pro forma consolidated financial statements have
been prepared consistent with the Registrant's audited
financial statements as of July 1, 1995 and for the year
then ended.
<PAGE>
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.
INBRAND CORPORATION
By: /s/ James R. Johnson
James R. Johnson, Senior Vice President,
Chief Financial Officer and Secretary
Dated: September 19, 1996
<PAGE>
CELATOSE, S.A.
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
with
REPORT OF INDEPENDENT AUDITORS
F-1
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
INBRAND Corporation
We have audited the accompanying consolidated balance sheet of
Celatose, S.A. as of December 31, 1995 and the related
consolidated statements of income, deficiency in 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.
As described in Note 1.1 to the financial statements on January
1, 1995, assets and liabilities are valued at historical cost.
In November 1995, Celatose, S.A. was put under the direction of a
bankruptcy trustee. As a result, assets with a known purchaser
and price have been valued at their fair value at December 31,
1995 as measured by the acquisition price. Pending the
completion of the liquidation process, at which time the ultimate
amount of settlement will be known, liabilities have been
recorded at their book value at December 31, 1995.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the assets in
liquidation and the consolidated financial position of Celatose,
S.A. at December 31, 1995, and the consolidated results of its
operations and cash flows for the year then ended, in conformity
with generally accepted accounting principles as described in
Note 1.
ERNST & YOUNG Audit
Fabienne Degrave
June 26, 1996
F-2
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CELATOSE, S.A.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
December 31,
1995 1995
Notes USD(1) FRF
Sales 91,217 447,577
Other income from operations 7,728 37,920
Total operating income 98,945 485,497
Materials purchased for production and sale 98,462 483,129
Personnel costs 14,389 70,603
Taxes other than income taxes 965 4,733
Depreciation and amortization expenses 4,923 24,154
Total operating expenses 118,739 582,619
Operating loss (19,794) (97,122)
Other expense
Interest 3,833 18,810
Foreign exchange loss 216 1,060
Loss on sale of fixed assets 1,241 6,089
Other expense, net 3 10,309 50,584
Income before income taxes (35,393) (173,665)
Income taxes - -
Net loss (35,393) (173,665)
Net loss per share (14.15) (69.43)
Average number of common shares outstanding 2,501,426 2,501,426
(1)The financial information expressed in U.S. dollars is
presented solely for the convenience of the reader and is
translated from French francs at the noon buying rate in New
York on December 29, 1995, which was FRF.4.90675 for each
U.S. dollar.
See notes to the consolidated financial statements.
F-3
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CELATOSE, S.A.
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
December 31,
1995 1995
Notes USD(1) FRF
ASSETS
Intangible assets, at cost, less accumulated amortization
of 0 in 1995 23 113
Property and equipment, net 4 6,126 30,064
Investments and other non-current assets 3,323 16,307
Total non-current assets 9,472 46,484
Inventories and work in progress 5 4,196 20,591
Trade receivables, net 6 11,754 57,673
Income tax carryback receivable 373 1,829
VAT receivable 938 4,603
Cash and cash equivalents 1,661 8,147
Prepaid expenses and other current assets 876 4,297
Total current assets 19,798 97,140
Total assets 29,270 143,624
(1)The financial information expressed in U.S. dollars is
presented solely for the convenience of the reader and is
translated from French francs at the noon buying rate in New
York on December 29, 1995, which was FRF.4.90675 for each
U.S. dollar.
See notes to the consolidated financial statements.
F-4
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CELATOSE, S.A.
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
December 31,
1995 1995
Notes USD(1) FRF
LIABILITIES AND DEFICIENCY IN ASSETS
Deficiency in assets
Common stock, FRF.30 par value, 2,501,426 shares issued 15,294 75,043
Additional paid-in capital 11,274 55,318
Retained earnings (66,713)(327,344)
Total deficiency in assets (40,145)(196,983)
Noncurrent liabilities 12 4,133 20,281
Current liabilities
Bank overdraft and short-term borrowings 4,101 20,124
Current portion of long-term debt 7 25,363 124,453
Current portion of capital lease obligations 8 3,085 15,135
Accounts payable 18,726 91,882
Accrued interest 7,022 34,457
Other accrued expenses 9 6,985 34,275
Total current liabilities 65,282 320,326
Total liabilities and deficiency in assets 29,270 143,624
(1)The financial information expressed in U.S. dollars is
presented solely for the convenience of the reader and is
translated from French francs at the noon buying rate in New
York on December 29, 1995, which was FRF.4.90675 for each
U.S. dollar.
See notes to the consolidated financial statements.
F-5
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CELATOSE, S.A.
CONSOLIDATED STATEMENT OF DEFICIENCY IN ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
Number Additional
of shares Common paid-in Retained
issued stock capital deficit Total
FRF FRF FRF FRF FRF
Balances at
December 31, 1994 2,501,426 75,043 55,318 (153,679) (23,318)
Net loss for 199 0 (173,665) (173,665)
Balances at
December 31, 1995 2,501,426 75,043 55,318 (327,344) (196,983)
Balances at
December 31, 1995
(in thousands of
US dollars) (1) 2,501,426 15,294 11,274 (66,713) (40,145)
(1)The financial information expressed in U.S. dollars is
presented solely for the convenience of the reader and is
translated from French francs at the noon buying rate in New
York on December 29, 1995, which was FRF.4.90675 for each
U.S. dollar.
See notes to the consolidated financial statements.
F-6
<PAGE>
CELATOSE, S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
December 31,
1995 1995
USD(1) FRF
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) (35,393) (173,665)
Adjustments to reconcile net income to cash:
- Depreciation 3,902 19,148
- Amortization 81 397
- Deferred charges 7,603 37,305
- Gain on sale of assets 1,241 6,089
- Other non cash operations (778) (3,820)
Changes in operating assets and liabilities:
- Receivables 9,436 46,302
- Inventories 8,831 43,330
- Other 11,512 56,488
- Accounts payable and accrued expenses (2,573) (12,625)
Net cash provided by operating activities 3,862 18,949
CASH FLOW FROM INVESTING ACTIVITIES
Payments to acquire property and equipment (1,144) (5,617)
Proceeds from sale of equipment 2,626 12,887
Principal payments under capital lease obligations (147) (720)
Net cash provided by financing activities 1,335 6,550
CASH FLOW FROM FINANCING ACTIVITIES
Bank overdraft 189 926
Principal payments on long-term debt (9,136) (44,828)
Net cash used by financing activities (8,947) (43,902)
NET DECREASE IN CASH (3,750) (18,403)
Cash and cash equivalents, beginning of the year 5,411 26,550
CASH AND CASH EQUIVALENTS, END OF THE YEAR 1,661 8,147
(1)The financial information expressed in U.S. dollars is
presented solely for the convenience of the reader and is
translated from French francs at the noon buying rate in New
York on December 29, 1995, which was FRF.4.90675 for each
U.S. dollar.
See notes to the consolidated financial statements.
F-7
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CELATOSE, S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS EXPRESSED IN THOUSANDS OF FRENCH FRANCS,
UNLESS OTHERWISE NOTED, EXCEPT SHARE AND PER-SHARE DATA)
1. ACCOUNTING POLICIES
1.1 BASIS OF PRESENTATION
Celatose, S.A. was created in 1934 and specializes in the
production of hygiene products for specific uses: baby diapers
sold under distributors' brand names in France, and baby diapers
exported both under distributors' brand names and Celatose's own
brand, and adult incontinence products sold under both
distributors' brands and the Celatose brand. Celatose, S.A.
stock is 88.35% owned by the holding company Financiere Celatose
with the remaining shares being held by other outside investors.
Since 1988, Celatose, S.A. has been confronted with considerable
economic difficulties, and in November 1995, was put under the
direction of a bankruptcy trustee.
In early 1996, investors (Inbrand Corporation, a corporation
organized under the laws of Georgia, USA and Jan Van Grinsven, an
individual residing in the Netherlands), made an offer to
purchase from the Celatose, S.A. trustee a portion of the assets
of Celatose, S.A. and JAG, S.A. (a former subsidiary of Celatose,
S.A.). This offer included the retention of the majority of the
existing employees of these two companies. After approval of
this offer by the Court (February 8, 1966), Inbrand France, S.A.
a societe anonyme organized under the laws of France, was created
by the investors. The assets purchased consist primarily of
fixed assets, inventories and an investment in a wholly-owned
subsidiary of Celatose, S.A. (Laboratoires Alaune, S.A.R.L.).
F-8
<PAGE>
The accompanying consolidated financial statements represent the
financial statements of Celatose, S.A. and the two above-
mentioned subsidiaries, for the year ended December 31, 1995
presented as if the newly formed Group ("the Group") had existed
as an independent entity. All significant intercompany balances
and transactions, and investments in former subsidiaries of
Celatose, S.A. have been eliminated. On January 1, 1995 the
Group was operating on a going concern basis. At this date,
assets and liabilities were recorded at historical value. As of
December 31, 1995, the Group was no longer considered a going
concern as it was put under liquidation. Due to this evolution,
substantially all the assets at December 31, 1995 were to be
subsequently purchased by Inbrand Corporation and are valued at
an adjusted acquisition cost. Liabilities continue to reflect
book value as the ultimate repayment amount is pending completion
of the liquidation process.
The consolidated financial statements have been prepared in
accordance with French accounting regulations applied on a
consistent basis for the period presented. The French accounting
principles used, described below, require the use of management's
estimates, and differ in certain respects from generally accepted
accounting principles in the United States. The differences with
regard to net loss and deficiency in assets are presented in Note
2.
The financial information expressed in US dollars is presented
solely for the convenience of the reader and is translated from
French francs at the noon buying rate in New York on December 29,
1995 which was FRF.4.90675 for each US dollar.
1.2 PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements are comprised
of the accounts of Celatose, S.A., and its two wholly-owned
subsidiaries, Laboratoires Alaune, S.A.R.L. and JAG, S.A. All
significant intercompany transactions have been eliminated.
1.3 FOREIGN CURRENCY TRANSACTIONS
At year-end, the monetary balances denominated in foreign
currencies are translated at the closing rates. The resulting
foreign exchange differences together with the exchange gains and
losses on transactions in foreign currencies for the year are
recognized as income.
F-9
<PAGE>
1.4 TRADE RECEIVABLES
Trade receivables are valued at historical cost, with an
allowance for doubtful accounts based on the estimated credit
risk of the Group's customers. Receivables sold to third parties
are excluded from Group assets when the risks and rewards
associated with the receivables are also transferred to said
third parties.
1.5 INVENTORIES
Finished goods are valued at production cost which includes raw
material costs and direct and indirect production charges.
Finished goods are carried at the lower of cost or market.
Allowances for slow moving inventories and obsolete items are
provided to reflect possible loss of value. At December 31, 1995
an additional provision was recorded against inventories to
reflect their fair value as measured by the purchase price paid
by Inbrand.
1.6 PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and includes buildings
and machinery acquired under capital lease arrangements.
Depreciation is based on the straight-line method over the
estimated useful lives of the depreciable assets. Depreciation
of capital leases is included in depreciation expense. Estimated
useful lives of depreciable assets are as follows:
Class Useful Life Method
Buildings and improvements 20 to 33.3years Straight-line
Machinery and equipment 5 to 8 years Straight-line
Transportation equipment 4 to 5 years Straight-line
Office equipment and furniture 5 to 10 years Straight-line
1.7 INTANGIBLE ASSETS
Intangible assets consist primarily of patents, licenses and
business intangibles. These intangible assets are amortized on a
straight-line basis over 1 to 5 years.
1.8 REVENUE RECOGNITION
The Group records revenue upon shipment or transfer of title to
the customer.
F-10
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1.9 INCOME TAXES
The Group provides for deferred income taxes on temporary
differences between amounts for financial and tax reporting.
Deferred tax assets are recognized if it is more likely than not
that some portion or all of the deferred tax asset will be
realized. The Group uses the liability method under which
deferred taxes are calculated applying legislated tax rates in
effect when the temporary differences will reverse.
1.10 TERMINATION INDEMNITIES
Termination indemnities are one-time payments due employees upon
retirement. The obligation for this indemnity is calculated
based on an evaluation giving consideration to estimated final
salary and age at retirement, and is recognized in income when
paid. The amount of actuarially computed termination indemnities
as of December 31, 1995 is disclosed in Note 13.
1.11 CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit at banks and
all highly liquid investments with insignificant interest rate
risk and purchased with an original maturity of three months or
less.
2. SIGNIFICANT DIFFERENCES BETWEEN FRENCH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Group financial statements comply with French accounting
regulations which differ in certain respects from those
applicable in the United States. The significant differences
that affect the consolidated net loss and deficiency in assets of
the Group are described below.
2.1 RESTRUCTURING COSTS
At the end of 1994, the Group recorded a restructuring provision
amounting to FRF.4,000 thousands. In 1995, the Group reversed
the entry. Under US GAAP, restructuring provisions may only be
recorded to recognize known specific liabilities or impairment of
existing assets. As of December 31, 1994, the Group had not
specifically identified the nature or location of the
restructuring measures to be adopted.
F-11
<PAGE>
2.2 TERMINATION INDEMNITY
In France, legislation requires that lump sum retirement
indemnities be paid to all employees based upon their years of
service and compensation at retirement. Under US GAAP, the
actuarial liability of this unfunded obligation would be recorded
as a liability which at December 31, 1995 amounts to FRF.1,225
thousands.
Reconciliation to US GAAP
Following is a summary of the significant adjustments to net loss
for the year ended December 31, 1995 and the deficiency in assets
as of December 31, 1995 which would be required if US GAAP had
been applied.
December 31,
1995 1995
Notes USD(1) FRF
Net loss as reported in the consolidated income
statements under French GAAP (35,393) (173,665)
Adjustments to comply with US GAAP:
Restructuring costs 2.1 (815) (4,000)
Termination indemnity 2.2 (3) (16)
Approximate net loss in accordance with US
GAAP (36,211) (177,681)
Approximate net loss per share in accordance
with US GAAP (14.48) (71.03)
Deficiency in assets as reported under
French GAAP (40,145) (196,983)
Adjustments to comply with US GAAP:
Restructuring costs 2.1 - -
Termination indemnity 2.2 (250) (1,225)
Approximate deficiency in assets in accordance
with US GAAP (40,395) (198,208)
(1)The financial information expressed in U.S. dollars is
presented solely for the convenience of the reader and is
translated from French francs at the noon buying rate in New
York on December 29, 1995, which was FRF.4.90675 for each
U.S. dollar.
F-12
<PAGE>
3. OTHER EXPENSE (INCOME)
1995
Restructuring costs 13,480
Income from forgiveness of debt (59,695)
Write-down of fixed assets 55,542
Provision for reducing inventories to fair value 13,869
Special allowance for uncollectible receivables 16,056
Other expense 11,332
50,584
Restructuring costs relate primarily to termination costs and the
write-off of fixed assets no longer to be kept in service due to
the restructuring plan.
For supplementary information on the forgiveness of debt, see
Note 7.
The write-down of fixed assets and provisions for reducing
inventories to fair value have been determined by the acquisition
price paid by Inbrand.
The special allowance for uncollectible receivables relates to
receivables due from former subsidiaries which have not been
acquired by Inbrand (see Note 1.1).
4. PROPERTY AND EQUIPMENT
1995
Buildings and improvements 6,006
Leased building 12,323
Machinery and equipment 195,657
Leased machinery 10,227
224,213
Less: Accumulated depreciation (194,149)
30,064
Total charges for depreciation of property and equipment amounted
to FRF.19,148 thousands in 1995.
F-13
<PAGE>
5. INVENTORIES
1995
Raw materials and supplies 28,603
Merchandise purchased for sale 6,191
Finished goods 17,266
Less: Allowance for slow moving and potentially
obsolete items (31,469)
20,591
The allowance includes the additional provision of FRF.13,869
thousands (see Note 3) recorded to reflect inventories at fair
value as measured by the acquisition price paid by Inbrand.
6. RECEIVABLES
1995
Trade receivables 75,532
Less: Allowance for doubtful accounts (17,859)
57,673
The Group establishes an allowance for doubtful accounts based
upon the estimated credit risk of its customers.
In February 1995, the Group entered into a contract with Societe
Francaise de Factoring (SFF). Under this agreement, SFF has
committed to purchase, with limited recourse, all rights, title
and interest in selected accounts receivable of the Group. This
contract applies only to those receivables originating through
transactions in France.
The Group has a factoring contract also with SLIFAC, but which
relates only to those receivables originating from export sales.
As of December 31, 1995 the receivable balances from SFF and
SLIFAC are FRF.11,659 thousands and FRF.7,802 thousands,
respectively.
F-14
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7. LONG-TERM DEBT
1995
Total restructured debt with financial institutions
Borrowings bearing interest at the bank's base rate or PIBOR
(Paris Interbank Offering Rate) plus applicable margin,
due in installments through 2001 54,786
Financiere Celatose
Convertible bonds at an interest rate of 2%, due December 31,
2001 with optional early repayment through December 31, 1997
13,552
Loans bearing 11.72% interest, due in installments through 2001 24,946
Other restructured debt (trade payables, vacation pay, fiscal
debt, and other) bearing 0% interest due in installments
through 2006 22,326
Other debt with financial institutions, non-interest bearing, due
in installments through 1999 2,079
Other 6,764
124,453
Less: current maturities 124,453
-
On January 1, 1994 the Group issued FRF.13,552 thousands of debt
in the form of convertible bonds. The bonds were fully
underwritten by the SDR de Nord-Pas-de-Calais and bear interest
at 2% annually, payable each December 31. This debt is due to be
paid December 31, 2001. However, the Group has the right to
prepay the debt before December 31, 1997 for FRF.13,552
thousands.
Beginning January 1, 1998, the holders of these bonds have the
right to convert their bonds into shares newly issued by the
Company with a per share value of FRF.30, on a one for one basis
with no other payment required. These new shares have no
underlying obligations and carry the same right to dividends as
if owned from the beginning of the period.
F-15
<PAGE>
At the end of 1994, Financiere Celatose, which holds an 85%
interest in the Group, acquired all of the Group's convertible
bonds underwritten by the SDR de Nord-Pas-de-Calais for
FRF.13,552 thousands.
Beginning October 24, 1990, the date of the acceptance by the
court of an earlier bankruptcy filing of Group Celatose, the
details of the bankruptcy stipulated that all outstanding long-
term debt be repaid equally over ten years at the original
interest rate. In 1993, Celatose made significant capital
investments and consequently, entered into negotiations with its
creditors to restructure the repayment of debt outstanding at the
date of bankruptcy. It was agreed with the majority of these
creditors that the interest related to the payments 1993, 1994,
and 1995 would be delayed until the years 1999, 2000 and 2001.
There were further negotiations in 1994 and 1995 which reduced
debt at the end of 1995 by approximately FRF.125,000 thousands
and resulted in a gain of FRF.59,695 thousands, or FRF.23.86 per
share (see Note 3). All remaining debt has been classified as
current as of February 8, 1996 as it was known that the Group
would be legally declared bankrupt, and is valued at its nominal
amount pending the completion of the liquidation process at which
time the ultimate amount of settlement will be known.
8. CAPITAL LEASE OBLIGATIONS
Capital lease obligations are comprised of a building lease and
an equipment lease, both of which are non-cancellable. At
December 31, 1995, all future minimum lease payments have been
considered current due to the bankruptcy of the Group, and are
shown at their book value.
F-16
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9. OTHER ACCRUED EXPENSES
1995
Social security 6,020
Accrued vacation and other personnel costs 4,240
Miscellaneous taxes 3,082
Suppliers of fixed assets 5,795
Other creditors and sundry debts 15,138
34,275
10.INCOME TAXES
As of December 31, 1995, the Group had tax loss carryforwards of
FRF.233,170 thousands. Due to the Group being in liquidation, it
was considered more likely than not that these carryforwards
would not be utilized, and they are in no way recoverable by the
acquiring company. The tax loss carryforwards were not recorded
as deferred tax assets, and consequently, no valuation allowance
has been recorded against them.
11.FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group's financial instruments consist primarily of cash,
trade receivables, trade payables and debt instruments. The book
value of cash, trade receivables and trade payables are
considered to be representative of their respective fair values.
However, due to the bankruptcy of the Group, debt instruments as
of December 31, 1995 are shown at their book value which does not
necessarily approximate fair value as determination of this value
is pending the completion of the liquidation process.
F-17
<PAGE>
12.NONCURRENT LIABILITIES
1995
Provision for repayment of subsidy 4,000
Provision for litigation 3,820
Other 12,461
20,281
13.COMMITMENTS AND CONTINGENCIES
OFF-BALANCE SHEET COMMITMENTS
The amount of actuarially computed pension rights at December 31,
1995 is FRF.1,225 thousands.
LITIGATION
In 1989, Peaudouce, manufacturer of baby diapers, sued the Group
for FRF.500 thousands in punitive damages claiming that the Group
copied two of its patents related to disposable diapers. The
lawsuit also prohibits the Group from manufacturing and selling
diapers related to these two patents, or be required to pay a
compensation penalty. In 1989, an additional claim of
FRF.200,000 thousands was filed by Peaudouce. In 1995, the Group
was ordered to pay FRF.2,000 thousands in damages to Peaudouce.
The Group is currently contesting this ruling, yet the penalty
has been fully provided for.
14.MAJOR CUSTOMERS
In 1995, the Group had significant sales to only one customer
which amounted to FRF.65,582 thousands and represented 14.7% of
total sales. Accounts receivable from this customer totaled
FRF.3,184 thousands or 5.5% of outstanding net trade receivables
as of December 31, 1995.
F-18
<PAGE>
15.RELATED PARTY TRANSACTIONS
Related party balances as of December 31, 1995 and transactions
during the year ended December 31, 1995 are:
1995
Financiere Celatose
Accounts payable 4,089
Long-term debt:
Current maturities 38,498
Long-term portion -
The Group paid management fees to Financiere Celatose amounting
to FRF.1,835 thousands during the year ended December 31, 1995.
Additionally, Celatose S.A. recorded accrued interest payable on
the debt from Financiere Celatose of FRF.3,195 thousands for the
year ended December 31, 1995.
16.PERSONNEL
The number of personnel employed by the Group as of December 31,
1995 was 347.
17.SEGMENT AND GEOGRAPHIC INFORMATION
The Group operates in a single segment, the manufacturing and
sales of baby and adult hygiene products. Sales are made both
within and outside France.
1995
France 219,696
Export 227,881
447,577
F-19
<PAGE>
INBRAND CORPORATION AND SUBSIDIARIES
CELATOSE, S. A. ACQUISITION
PRO FORMA CONSOLIDATED BALANCE SHEET (unaudited)
December 30, 1995
(in thousands)
Historical Historical Pro
INBRAND Celatose, Forma Pro
Corp. S.A. Notes Adjustments Forma
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ - $ 1,661 1 $( 1,423) $ 238
Receivables 10,873 11,754 1 (10,667) 11,960
Finished Goods Inventory 3,990 2,253 - 6,243
Raw Materials Inventory 5,057 1,943 - 7,000
Income Taxes Receivable - 373 1 ( 373) -
Deferred Income Taxes 616 - - 616
Other 1,035 1,814 1 ( 1,714) 1,135
Total Current Assets 21,571 19,798 (14,177) 27,192
PROPERTY AND
EQUIPMENT, net 38,724 6,126 3 400 44,797
4 600
6 118
7 ( 463)
8 ( 708)
OTHER ASSETS
Intangible Assets, net 10,447 23 1 ( 23) 10,447
Investment in Subsidiary - - 2 4,847 -
8 ( 4,847)
Other Non-Current Assets - 3,323 1 ( 3,303) 20
Total Other Assets 10,447 3,346 ( 3,326) 10,467
TOTAL ASSETS $ 70,742 $ 29,270 $(17,556) $ 82,456
F-20
<PAGE>
INBRAND CORPORATION AND SUBSIDIARIES
CELATOSE, S. A. ACQUISITION
PRO FORMA CONSOLIDATED BALANCE SHEET (unaudited)
December 30, 1995
(in thousands)
Historical Historical Pro
INBRAND Celatose, Forma Pro
Corp. S.A. Notes Adjustments Forma
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft and
Short-Term Borrowings $ 818 $ 4,101 1 $( 4,101) $ 818
Current Portion of
Long-Term Debt 664 25,363 1 (25,363) 3,894
2 3,230
Current Portion of Capital
Lease Obligations 188 508 - 696
Accounts Payable 6,118 18,726 1 (17,344) 7,618
6 118
Accrued Expenses 5,514 11,916 1 (11,796) 6,634
3 400
4 600
Accrued Compensation 230 2,091 1 ( 2,091) 230
Termination Indemnities - - 5 866 866
Income Taxes Payable 140 - - 140
Total Current Liabilities 13,672 62,705 (55,481) 20,896
LONG-TERM LIABILITIES
Long-Term Debt 16,565 - 2 1,617 18,182
Capital Lease Obligations 280 2,577 7 ( 107) 2,750
Termination Indemnities - 250 - 250
Deferred Income Taxes 2,096 - - 2,096
Deferred Income 707 - - 707
Other Long-Term Liabilities - 4,133 1 ( 3,980) 153
Total L-T Liabilities 19,648 6,960 ( 2,470) 24,138
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock - - - -
Common Stock 784 15,294 8 (15,294) 784
Paid-In Capital 17,137 11,274 8 (11,274) 17,137
Retained Earnings(Deficit)19,421 (66,963) 1 47,172 19,421
5 ( 866)
7 ( 356)
8 21,013
Translation Adjustments 80 - - 80
Total Shareholders'
Equity (Deficit) 37,422 (40,395) 40,395 37,422
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 70,742 $ 29,270 $(17,556) $ 82,456
F-21
<PAGE>
INBRAND CORPORATION AND SUBSIDIARIES
CELATOSE, S. A. ACQUISITION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
Twelve Month Period Ended July 1, 1995
(in thousands, except per share data)
Historical Historical Pro
INBRAND Celatose, Forma Pro
Corp. S.A. Notes Adjustments Forma
NET SALES $ 85,044 $ 105,446 $ - $ 190,490
COST OF SALES 56,527 96,608 9 ( 1,436) 151,923
11 104
12 120
Gross Profit 28,517 8,838 1,212 38,567
OPERATING EXPENSES
Sales, Marketing and
Distribution 11,288 13,606 - 24,894
General and Administrative 4,557 23,887 9 ( 368) 28,076
Restructuring Expense - 4,185 - 4,185
15,845 41,678 ( 368) 57,155
OPERATING INCOME (LOSS) 12,672 ( 32,840) 1,580 ( 18,588)
INTEREST EXPENSE 22 3,895 10 ( 3,711) 206
INCOME (LOSS) BEFORE
INCOME TAX PROVISION 12,650 ( 36,735) 5,291 ( 18,794)
Income Tax Provision
(Benefit) 5,060 ( 10) - 5,050
NET INCOME (LOSS) $ 7,590 $( 36,725) 13 $ 5,291 $( 23,844)
Primary and Fully Diluted Earnings
Per Share $ 0.96 $( 3.02)
Average Shares Outstanding -
Primary and Fully Diluted 7,908 7,908
F-22
<PAGE>
INBRAND CORPORATION AND SUBSIDIARIES
CELATOSE, S. A. ACQUISITION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
Six Month Period Ended December 30, 1995
(in thousands, except per share data)
Historical Historical Pro
INBRAND Celatose, Forma Pro
Corp. S.A. Notes Adjustments Forma
NET SALES $ 52,984 $ 38,841 $ - $ 91,825
COST OF SALES 38,242 46,991 9 ( 652) 84,693
11 52
12 60
Gross Profit 14,742 ( 8,150) 540 7,132
OPERATING EXPENSES
Sales, Marketing and
Distribution 6,880 4,459 - 11,339
General and Administrative 2,570 27,103 9 ( 168) 29,505
Restructuring Expense - 1,254 - 1,254
9,450 32,816 ( 168) 42,098
OPERATING INCOME (LOSS) 5,292 ( 40,966) 708 ( 34,966)
INTEREST EXPENSE 535 1,934 10 ( 1,805) 664
INCOME (LOSS) BEFORE
INCOME TAX PROVISION 4,757 ( 42,900) 2,513 ( 35,630)
Income Tax Provision
(Benefit) 2,122 - - 2,122
NET INCOME (LOSS) $ 2,635 $( 42,900) 13 $ 2,513 $( 37,752)
Primary and Fully Diluted Earnings
Per Share $ 0.34 $( 4.82)
Average Shares Outstanding -
Primary and Fully Diluted 7,840 7,840
F-23
<PAGE>
INBRAND CORPORATION AND SUBSIDIARIES
CELATOSE, S. A. ACQUISITION
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except per share data)
Note:The historical Celatose statements include adjustments to
convert the results of operations to U.S. generally accepted
accounting principles.
1. To reflect the elimination of assets not purchased and liabilities
not assumed in acquisition.
2. To reflect INBRAND Corp.'s investment in Celatose, S.A. and
subsidiary at the present value of future payments to the trustee
in bankruptcy ($4,847).
3. To reflect estimated legal and accounting costs associated with
acquisition.
4. To reflect estimated costs of disposing of certain assets.
5. To reflect termination indemnities for employees terminated
pursuant to the court judgement.
6. To reflect tax obligation for purchase of fixed assets.
7. To reflect lease assets and obligation at fair value at
acquisition for building and equipment assumed as part of the
court judgement.
8. To reflect the elimination of INBRAND Corp.'s investment in
subsidiary and the purchased equity of Celatose, S.A. and
subsidiary, and the reduction of non-current assets for the excess
of the book value of net assets acquired over the purchase price.
9. To reflect the reduction of depreciation and amortization expense
due to allocation of purchase price.
10.To reflect the reduction of interest expense for change in
structure of indebtedness due to acquisition.
11.To reflect amortization of legal and accounting costs over five-
year period.
12.To reflect depreciation of costs of disposing of certain assets.
13.Pursuant to Rule 11-02, the historical statement of operations of
Celatose, S.A. includes operations only through "income before
extraordinary item" and excludes presentation of the extraordinary
item, forgiveness of debt, (totaling $11,398, or $1.44 per share,
for the twelve month period and $3,496, or $0.44 per share, for
the six month period).
F-24
<PAGE>
