SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) June 26, 1996
----------------------
Marker International
--------------------
(Exact name of registrant as specified in its charter)
Utah 0-24556 87-0372759
- ------------------------------- ------------- -------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) ID Number)
1070 West 2300 South, Salt Lake City, Utah 84119
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (801) 972-2100
--------------
N/A
- ---------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On June 26, 1996, the Registrant acquired an additional 55% of the
outstanding shares of DNR Sportsystem Ltd., a privately-held Swiss corporation
("DNR"), in which the Registrant now holds an 80% interest. The Registrant
acquired the additional 55% interest by purchasing 330 common shares of DNR from
the other two equity holders of DNR, with 165 of such shares being purchased
from each of Lucio Roffi and Gregor Furrer & Partner Holding AG ("Gregor
Furrer").
DNR is a leading developer, marketer and distributor of snowboards,
snowboard boots, snowboard bindings and other related products. Mr. Roffi is
the President and Chairman of the Board of DNR. Gregor Furrer is the parent of
a German ski and snowboard manufacturer that is the current exclusive supplier
of snowboards to DNR.
The aggregate purchase price for the additional 55% interest was CHF
24,169,665.30 (U.S. $19,408,709.55 based upon the rate of exchange
of CHF 1.2453 to U.S. $1.00 agreed to by the Company in a forward foreign
currency contract entered into by the Company on June 28, 1996). The
consideration for the additional acquisition was determined by arms' length
negotiations amongst the parties.
The purchase price for the additional shares was paid by delivery, on the
acquisition date, of a short-term promissory note executed by the Company to
each of Mr. Roffi and Gregor Furrer. Each such note is in the amount of CHF
12,084,832.65 and is due and payable in full upon the earlier of (i) August 31,
1996 or (ii) consummation of the proposed public offering by the Registrant of
2,500,000 shares of its Common Stock, as described in its Registration Statement
on Form S-1 (File No. 333-6299) filed with the Securities and Exchange
Commission (the "Commission") on June 19, 1996 (the "Offering"). The Registrant
expects to use substantially all of the proceeds of the Offering to pay such
promissory notes. To the extent the proceeds of the Offering are insufficient
to enable the Registrant to pay the entire amount of the promissory notes, the
Registrant expects to pay the difference with funds borrowed through its short-
term credit facilities.
The purchase of the additional shares was made pursuant to (i) a purchase
agreement, dated June 11, 1996, among the Registrant, Lucio Roffi and Gregor
Furrer and (ii) a letter agreement dated June 11, 1996 between the Registrant
and Mr. Roffi, each such agreement as previously described in the Registrant's
Current Report on Form 8-K filed with the Commission on June 19, 1996.
Upon the consummation of the additional acquisition, the Registrant granted
a revocable proxy to Mr. Roffi entitling him to assume voting control of DNR.
While the proxy remains in effect,
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<PAGE>
Mr. Roffi, who now owns 10% of the common shares of DNR, will control 51% of the
vote of the DNR shares.
On June 28, 1996, the Registrant also issued the news release set forth as
Exhibit 20(a) hereto.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
------------------------------------------------------
(a) Financial Statements
--------------------
The following Financial Statements for DNR Sportsystem Ltd., together with
the manually executed accountant's report relating thereto, can also be found on
pages F-22 through F-29 of the Registrant's Registration Statement on Form S-1
(File No. 333-6299) filed with the Commission on June 19, 1996:
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DNR Sportsystem Ltd.:
We have audited the accompanying consolidated balance sheets of DNR
Sportsystem Ltd. (a Swiss corporation) and subsidiaries as of December 31, 1994
and 1995, and the related consolidated statements of income and retained
earnings and cash flows for each of the three years in the period ended December
31, 1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of DNR Sportsystem
Ltd. and subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles in
the US.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
May 17, 1996
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<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 8,531 $12,786
Accounts receivable, less allowance for doubtful accounts
of $119 and $135, respectively....................................... 3,459 1,682
Inventories............................................................ 53 198
Prepaids and other current assets...................................... 442 996
------- -------
Total current assets............................................... 12,485 15,662
------- -------
PROPERTY AND EQUIPMENT, at cost:
Office equipment....................................................... 340 822
Vehicles............................................................... 254 343
------- -------
594 1,165
Less--accumulated depreciation and amortization........................ (309) (541)
------- -------
Net property and equipment......................................... 285 624
------- -------
OTHER ASSETS............................................................. 5 30
------- -------
$12,775 $16,316
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................................... $ 3,482 $ 3,720
Accrued liabilities.................................................... 1,167 1,870
Income taxes payable................................................... 1,966 1,864
Payable to related party............................................... -- 540
------- -------
Total current liabilities.......................................... 6,615 7,994
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock........................................................... 432 432
Retained earnings...................................................... 5,215 6,531
Cumulative foreign currency translation adjustments.................... 513 1,359
------- -------
Total shareholders' equity......................................... 6,160 8,322
------- -------
$12,775 $16,316
------- -------
------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
-5-
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-----------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net sales...................................................... $18,779 $26,499 $44,038
Cost of sales.................................................. 11,960 16,372 29,048
------- ------- -------
Gross profit................................................... 6,819 10,127 14,990
------- ------- -------
Operating expenses:
Selling...................................................... 1,489 2,211 3,907
General and administrative................................... 1,106 2,413 2,350
Research and development..................................... 776 923 2,001
------- ------- -------
3,371 5,547 8,258
------- ------- -------
Operating income............................................... 3,448 4,580 6,732
------- ------- -------
Other income (expense):
Interest income.............................................. 262 291 245
Other, net................................................... (339) 83 153
------- ------- -------
(77) 374 398
------- ------- -------
Income before provision for income taxes....................... 3,371 4,954 7,130
Provision for income taxes..................................... 791 1,115 1,547
------- ------- -------
Net income..................................................... 2,580 3,839 5,583
Retained earnings beginning of year............................ 1,220 3,598 5,215
Dividends...................................................... (202) (2,222) (4,267)
------- ------- -------
Retained earnings end of year.................................. $ 3,598 $ 5,215 $ 6,531
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
-6-
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
----------------------------
1993 1994 1995
------ ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $2,580 $ 3,839 $ 5,583
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 61 167 188
Change in assets and liabilities:
Accounts receivable, net................................. (101) (2,327) 2,208
Inventories.............................................. 736 1,664 (137)
Prepaids and other assets................................ (168) (170) (510)
Accounts payable......................................... (481) (480) (226)
Accrued liabilities...................................... (453) 408 1,070
Income taxes payable..................................... 346 943 (360)
------ ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................... 2,520 4,044 7,816
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................... (76) (334) (485)
------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends......................................... -- (2,424) (4,267)
------ ------- -------
Effect of foreign exchange rate changes on cash................ (63) 853 1,191
------ ------- -------
Net increase in cash and cash equivalents...................... 2,381 2,139 4,255
Cash and cash equivalents at beginning of year................. 4,011 6,392 8,531
------ ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $6,392 $ 8,531 $12,786
------ ------- -------
------ ------- -------
SUPPLEMENTAL DISCLOSURES:
Cash paid for income taxes................................... $ 419 $ 500 $ 1,777
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
-7-
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
DNR Sportsystem Ltd. (the "Company"), a corporation domiciled in
Switzerland, develops, markets and distributes snowboards, snowboard boots,
snowboard bindings and other related products primarily under the trade names of
"DNR", "Santa Cruz" and "Sims". The Company markets and distributes these
products through distributors in North America, Europe and Asia.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Consolidation
The consolidated financial statements include the accounts of DNR
Sportsystem, Ltd. and its subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
Foreign Currency Translation
The functional currency for the Company is Swiss Francs. The consolidated
financial statements are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52. Assets and
liabilities are translated into U.S. dollars at the applicable rates of exchange
at the end of a reporting period. Income and expense items are translated at the
weighted average rates of exchange prevailing during the period. Translation
gains and losses are reflected as a separate component of shareholders' equity.
Cash Equivalents
Cash equivalents consist of time deposits and money market funds with
original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost and depreciated using
accelerated methods over their estimated useful lives ranging from 2 to 5 years.
Major renewals and betterments are capitalized, while costs for minor
replacements, maintenance and repairs are charged to expense as incurred.
Income Taxes
The Company recognizes deferred tax assets or liabilities for expected
future tax consequences of events that have been recognized in the financial
statements or tax returns. Under this method, deferred tax assets or liabilities
are determined based upon the difference between financial statement and
-8-
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
income tax bases of assets and liabilities using the enacted tax rates expected
to apply when differences are expected to be settled or realized.
NOTE 3. MAJOR SUPPLIERS, SIGNIFICANT CUSTOMERS AND GEOGRAPHICAL
INFORMATION
Significant Suppliers
The Company has an exclusive agreement with a shareholder to manufacture
snowboards for the Company. The agreement requires that all snowboards be
manufactured by this shareholder. The agreement can only be terminated upon the
earlier of the occurrence of certain events as outlined in the agreement or
September 1999 (see Note 8).
The Company has an agreement with a shareholder to develop and manufacture
snowboard bindings exclusively for the Company. The agreement requires the
Company to obtain advance approval from the Company before snowboard bindings
can be manufactured by other parties. This agreement expires in September 2000
(see Note 8).
Significant Customers
For the years ended December 31, 1993 and 1994, three customers accounted
for 15, 11 and 15 percent, and 18, 9 and 17 percent, respectively, of net sales.
For the year ended December 31, 1995 these same customers accounted for 26, 15,
and 14 percent of net sales, respectively.
Geographical Information
For the years ended December 31, 1993, 1994 and 1995, the Company had sales
to the following geographical regions (in thousands).
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
North America.................................................. $ 4,791 $ 6,087 $10,633
Europe......................................................... 8,092 12,992 15,536
Asia........................................................... 5,896 7,420 17,869
------- ------- -------
Total........................................................ $18,779 $26,499 $44,038
------- ------- -------
------- ------- -------
</TABLE>
All of the Company's identifiable assets are located in Europe.
NOTE 4. LINE OF CREDIT
The Company has a line of credit arrangement with a bank which provides for
maximum borrowings of Swiss Francs 4,200,000 (approximately $3,600,000 at
December 31, 1995). Interest on borrowings is at the bank's established rate.
For the years ended December 31, 1994 and 1995, the credit lines were not used.
The agreement requires that the Company maintain certain financial covenants.
-9-
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31, 1993, 1994 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ------
<S> <C> <C> <C>
Current provision................................................... $848 $1,259 $1,481
Deferred provision (benefit)........................................ (57) (144) 66
---- ------ ------
Total provision................................................... $791 $1,115 $1,547
---- ------ ------
---- ------ ------
</TABLE>
NOTE 6. RESTRICTED RETAINED EARNINGS
As of December 31, 1995, approximately $791,000 of the Company's retained
earnings are restricted as to dividend payments.
NOTE 7. COMMITMENTS AND CONTINGENCIES
License Agreements
The Company has entered into license agreements to use the tradenames Sims
and Santa Cruz. The agreements require the Company to pay royalties ranging from
2 to 6 percent of gross sales for snowboards, bindings and accessories. The
agreements expire in 2001 with options for renewal. Under the Sims license
agreement, 60 percent of DNR's total sales must be comprised of Sims products.
Royalty expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $684,000, $813,000 and $1,834,000, respectively.
Leases
The Company is committed under various long-term noncancellable operating
leases for office space and certain equipment which require minimum annual
rentals as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
<S> <C>
1996............................................................... $189
1997............................................................... 220
1998............................................................... 148
1999............................................................... 145
2000............................................................... 145
Thereafter......................................................... 36
------
$883
------
------
</TABLE>
Lease expense for the years ended December 31, 1993, 1994 and 1995 totalled
approximately $77,000, $153,000 and $202,000, respectively.
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<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Legal Matters
The Company is subject to various legal matters associated with the risks
inherent in the sport of snowboarding which it considers normal for its business
activities. Management believes that these matters have been provided for and
will not have a material impact on the financial condition, liquidity, or
results of operations of the Company.
Based on a favorable settlement of a claim in early 1996, the Company
reduced its related liability as of December 31, 1995 by approximately $341,000.
Such amount is reflected as a reduction of general and administrative expenses
in 1995.
NOTE 8. RELATED PARTY TRANSACTIONS
During 1994 and 1995, the Company purchased snowboards totalling
approximately $6,010,000 and $18,281,000 from a certain shareholder under a
manufacturing contract (see Note 3). As of December 31, 1994 and 1995
approximately $1,543,000 and $1,288,000 was owed to this entity and included in
accounts payable.
During 1995, a shareholder of the Company performed certain binding
development services and charged the Company approximately $540,000 (see Note
3). As of December 31, 1995, this amount remains owing.
During 1993 the Company made product sales totalling approximately
$1,549,000 to companies owned at that time by certain shareholders of the
Company. During 1994 and 1995, the Company continued to sell to these companies.
However, the individuals were no longer shareholders of the Company.
NOTE 9. BENEFIT PLAN
The Company sponsors a defined contribution plan for substantially all full
time employees. The Company's contribution is discretionary and is based upon a
percentage of the eligible employees' salaries. For the years ended December 31,
1993, 1994 and 1995 Company contributions totalled $15,000, $248,000 and
$611,000, respectively.
NOTE 10. COMMON STOCK
The capital stock of Company consists of 600 registered and issued shares of
common stock with a nominal value of Swiss Francs 1,000 per share.
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<PAGE>
(b) Pro Forma Financial Statements
------------------------------
The following unaudited pro forma condensed consolidated financial data is
based upon the historical consolidated financial statements of the Company,
adjusted to give effect to the recent acquisition of an additional 55% of the
common shares of DNR Sportsystem.
The pro forma adjustments are based upon available information and certain
assumptions that management of the Company believes are reasonable. The
unaudited pro forma condensed consolidated statement of income is not
necessarily indicative of the future results of operations of the Company, its
financial position or the results of operations which may have occurred had this
transaction occurred on April 1, 1995. The unaudited pro forma adjustments are
described in the accompanying notes to the unaudited pro forma financial data.
-12-
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE><CAPTION>
HISTORICAL
-----------------------
DNR PRO FORMA
MARKER SPORTSYSTEM ADJUSTMENTS PRO FORMA
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents................. $ 6,189 $12,786 $ 18,975
Accounts receivable, net.................. 22,151 1,682 $ (540)(2b) 23,293
Inventories............................... 32,668 198 32,866
Prepaid and other......................... 3,584 996 4,580
------- ----------- ----------- ---------
Total current assets.................. 64,592 15,662 (540) 79,714
Property and Equipment, net................. 13,121 624 13,745
Investment in DNR Sportsystem............... 6,832 -- (6,832)(2a) --
Other assets................................ 2,720 30 19,583(2a) 22,333
------- ----------- ----------- ---------
Total assets.......................... $87,265 $16,316 $12,211 $ 115,792
------- ----------- ----------- ---------
------- ----------- ----------- ---------
Current Liabilities:
Notes payable to banks.................... $30,556 $-- $ 2,068(2a) $ 32,624
Current maturities of debt................ 11,076 -- 11,076
Related party payable..................... -- 540 (540)(2b) --
Accounts payable.......................... 2,899 3,720 6,619
Other current liabilities................. 6,514 3,734 10,248
------- ----------- ----------- ---------
Total current liabilities............. 51,045 7,994 1,528 60,567
------- ----------- ----------- ---------
Long-term Liabilities:
Long-term debt, net....................... 5,452 -- 5,452
Series A Bonds, net....................... 10,000 -- 10,000
------- ----------- ----------- ---------
Total long-term liabilities........... 15,452 -- 15,452
------- ----------- ----------- ---------
Minority interest........................... -- -- 1,664(2a) 1,664
------- ----------- ----------- ---------
Shareholders' Equity:
Common stock.............................. 84 432 (407)(2a) 109
Additional paid-in capital................ 21,531 -- 17,316(2a) 38,847
Retained earnings (deficit)............... (1,293) 6,531 (6,531)(2a) (1,293)
Cumulative foreign currency translation
adjustments................................. 446 1,359 (1,359)(2a) 446
------- ----------- ----------- ---------
Total shareholders' equity............ 20,768 8,322 9,019 38,109
------- ----------- ----------- ---------
Total liabilities and equity.......... $87,265 $16,316 $12,211 $ 115,792
------- ----------- ----------- ---------
------- ----------- ----------- ---------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial data.
13
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE><CAPTION>
HISTORICAL
----------------------
DNR PRO FORMA
MARKER SPORTSYSTEM ADJUSTMENTS PRO FORMA
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $87,911 $44,038 $131,949
Cost of sales.................................. 52,608 29,048 81,656
------- ----------- ---------
Gross profit................................... 35,303 14,990 50,293
Operating expenses............................. 29,479 8,258 $ 818(2c) 38,555
------- ----------- ----------- ---------
Operating income............................... 5,824 6,732 (818) 11,738
Other income (expense), net.................... (1,526) 398 (1,595)(2e) (2,888)
(165)(2d)
------- ----------- ----------- ---------
Income before income taxes, minority interest
and cumulative effect of accounting change... 4,298 7,130 (2,578) 8,850
Provision for income taxes..................... (609) (1,547) (2,156)
Minority interest.............................. -- -- (1,117)(2d) (1,117)
Cumulative effect of accounting change......... (266) -- (266)
------- ----------- ----------- ---------
Net income..................................... $ 3,423 $ 5,583 $ (3,695) $ 5,311
------- ----------- ----------- ---------
------- ----------- ----------- ---------
Income per common share before cumulative
effect of accounting change.................. $ 0.43 $ 0.50
Accounting change per common share............. (0.03) (0.02)
------- ---------
Net income per common share.................... $ 0.40 $ 0.48
------- ---------
------- ---------
Weighted average common shares outstanding..... 8,595 2,500(2f) 11,095
------- ----------- ---------
------- ----------- ---------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial data.
14
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(1) BASIS OF PRESENTATION
The accompanying pro forma condensed consolidated balance sheet and
statement of income are presented to give effect to the acquisition of an
additional 55% of the common stock of DNR Sportsystem, a Swiss corporation,
which closed on June 26, 1996. In June 1995, the Company through a
wholly-owned subsidiary acquired 25% of DNR Sportsystem's common stock. This
presentation assumes that the additional acquisition occurred as of March 31,
1996 for purposes of the pro forma condensed balance sheet. For purposes of the
pro forma condensed statement of income, this presentation assumes that the
Company acquired its total 80% common stock ownership interest in DNR
Sportsystem as of April 1, 1995, the beginning of Marker's fiscal 1996 year.
The historical income statement period for DNR Sportsystem is for the year
ended December 31, 1995. The historical balance sheet of DNR Sportsystem is as
of December 31, 1995.
The purchase method of accounting has been used in preparing the pro forma
condensed consolidated financial data.
(2) PRO FORMA ADJUSTMENTS
Balance Sheet Adjustments
(a) In June 1995, Marker acquired 25% of the common shares of DNR
Sportsystem for Swiss Francs 6.2 million (U.S. $5.4 million). In June 1996, the
Company acquired an additional 55% for Swiss Francs 24.2 million (U.S. $19.4
million). The June 1996 acquisition amount in Dollars is based on an exchange
rate of 1.2453 Swiss Francs per Dollar which is the rate of exchange agreed to
by the Company in a forward foreign currency exchange contract entered into by
the Company on June 28, 1996. The $19.4 million purchase price is expected to
be paid primarily from the proceeds of the issuance of approximately 2,500,000
shares of Common Stock at an assumed offering price of $7.75 per share. The
balance of the purchase price will be funded through the issuance of short-term
debt of approximately $2.1 million. The total purchase price of $24.8 million
for the 80% has been allocated as follows (in thousands):
Tangible net assets.............................................. $ 5,218
Intangible assets (goodwill, tradenames and licenses)............ 19,583
-------
$24,801
-------
-------
This adjustment (i) eliminates the Company's investment in DNR Sportsystem
for its 25% ownership as of March 31, 1996 of $6,832,000, (ii) records
intangible assets totaling $19,583,000, (iii) reflects the issuance of 2,500,000
shares of Common Stock with estimated net proceeds of approximately $17,341,000
and the use of such proceeds to fund the majority of the purchase price, (iv)
records the issuance of approximately $2,068,000 of short-term debt to fund the
balance of the purchase price and (v) consolidates the accounts of DNR
Sportsystem and Marker by eliminating DNR Sportsystem's equity accounts and
recording minority interest of $1,664,000.
(b) Adjustment to eliminate intercompany payables and receivables of
approximately $540,000 related to a snowboard binding development services
agreement between Marker and DNR Sportsystem. See Note 8 to DNR Sportsystem's
consolidated financial statements.
15
<PAGE>
Statement of Income Adjustments
(c) Adjustment to reflect total amortization expense of $818,000 relating to
intangibles using amortization periods of 3 to 30 years.
(d) Adjustment to record interest expense of approximately $165,000 related
to short-term debt issued to fund the additional acquisition. An assumed
interest rate of 8% was used for purposes of this pro forma adjustment.
(e) Adjustment to (i) eliminate the equity in earnings of DNR Sportsystem of
approximately $1,595,000 recorded by Marker for the year ended March 31, 1996
for its 25% ownership in DNR Sportsystem and (ii) to record minority interest of
$1,117,000 for the minority shareholders' 20% interest in DNR Sportsystem's
earnings.
(f) Adjustment to increase the number of weighted average common shares
outstanding by 2,500,000 for the Common Stock expected to be issued to finance
the DNR Equity Purchase.
16
<PAGE>
(c) Exhibits
--------
2(a) Share Purchase and Shareholders Agreement among Lucio Roffi,
Gregor Furrer & Partner Holding AG and Marker International,
dated June 11, 1996 (filed as Exhibit 2(a) to the Company's
Current Report on Form 8-K filed June 19, 1996 and incorporated
by reference herein).
2(b) Letter Agreement between Lucio Roffi and Marker International, dated
June 11, 1996 (filed as Exhibit 2(b) to the Company's Current Report
on Form 8-K filed June 19, 1996 and incorporated by reference herein).
2(c) Short-term Promissory Note for CHF 12,084,832.65 executed by the
Registrant and payable in full to Gregor Furrer & Partner Holding
AG on or prior to August 31, 1996.
2(d) Short-term Promissory Note for CHF 12,084,832.65 executed by the
Registrant and payable in full to Lucio Roffi on or prior to
August 31, 1996.
20(a) News Release, dated June 28, 1996.
-17-
<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 thereunto duly authorized.
MARKER INTERNATIONAL
By:/s/ Brad Stewart
-----------------------------
Name: Brad Stewart
Title: Chief Financial Officer
Dated: July 11, 1996
-18-
<PAGE>
EXHIBIT INDEX
-------------
Sequentially
Exhibit Description Numbered Page
- ------- ----------- -------------
2(a) Share Purchase and Share-
holders Agreement among
Lucio Roffi, Gregor
Furrer & Partner Holding
AG and Marker International,
dated June 11, 1996 (filed
as Exhibit 2(a) to the
Company's Current Report on
Form 8-K filed June 19, 1996
and incorporated by reference
herein).
2(b) Letter Agreement between Lucio
Roffi and Marker International,
dated June 11, 1996 (filed
as Exhibit 2(b) to the
Company's Current Report on
Form 8-K filed June 19, 1996
and incorporated by reference
herein).
2(c) Short-term Promissory Note
for CHF 12,084,832.65 executed
by the Registrant and payable
in full to Gregor Furrer & Partner
Holding AG on or prior to
August 31, 1996.
2(d) Short-term Promissory Note
for CHF 12,084,832.65 executed
by the Registrant and payable
in full to Lucio Roffi on or prior
to August 31, 1996.
20(a) News Release, dated June 28, 1996.
-i-
Exhibit 2(c)
PROMISSORY NOTE
CHF 12,084,832.65 June 26, 1996
FOR VALUE RECEIVED, the undersigned, MARKER INTERNATIONAL, a corporation
organized under the laws of the State of Utah, United States of America
("Marker"), hereby promises to pay to the order of GREGOR FURRER & PARTNER
HOLDING AG, a corporation organized and existing under the laws of Switzerland
("Gregor Furrer"), at its offices at Ruessenstrasse 6, 6341 Baar, Switzerland,
or such other place as Gregor Furrer may designate from time to time, in lawful
currency of Switzerland and in immediately available funds, the principal amount
of 12,084,832.65 Swiss Francs, upon the earlier of (i) August 31, 1996 or (ii)
the consummation of the public offering by Marker of 2,500,000 shares of its
Common Stock, (U.S.) $.01 par value per share, as filed with the United States
Securities and Exchange Commission on June 19, 1996.
If any amount is not paid in full when due hereunder, such unpaid amount
shall bear interest, to be paid upon demand, from the due date thereof until the
date of actual payment computed at the rate of 12% per annum.
No failure to exercise or delay in exercising any right shall act as a
waiver thereof; nor shall any single or partial exercise of any right or remedy
act as a waiver of any other right or remedy.
Marker hereby waives presentment, demand for payment, notice of demand,
notice of dishonor, protest, notice of protest, and all other notices whatsoever
regarding this Note, and agrees to pay all costs of collection when incurred,
including reasonable attorneys' fees. No alteration, amendment or waiver of any
provision of this Note may be made without the written agreement of both Marker
and Gregor Furrer. This Note may not be changed or terminated orally.
This Note shall be construed in accordance with and governed by the laws of
Switzerland applicable to promissory notes executed and delivered in
Switzerland.
MARKER INTERNATIONAL
By: /s/ Henry E. Tauber
-------------------------------------
Henry E. Tauber
Chairman of the Board of Directors
and Chief Executive Officer
Exhibit 2(d)
PROMISSORY NOTE
CHF 12,084,832.65 June 26, 1996
FOR VALUE RECEIVED, the undersigned, MARKER INTERNATIONAL, a corporation
organized under the laws of the State of Utah, United States of America
("Marker"), hereby promises to pay to the order of LUCIO ROFFI, an individual
whose address is Muhlebachstrasse 31, P.O. Box 8032, Zurich, Switzerland
("Roffi"), or such other place as Roffi may designate from time to time, in
lawful currency of Switzerland and in immediately available funds, the principal
amount of 12,084,832.65 Swiss Francs, upon the earlier of (i) August 31, 1996 or
(ii) the consummation of the public offering by Marker of 2,500,000 shares of
its Common Stock, (U.S.) $.01 par value per share, as filed with the United
States Securities and Exchange Commission on June 19, 1996.
If any amount is not paid in full when due hereunder, such unpaid amount
shall bear interest, to be paid upon demand, from the due date thereof until the
date of actual payment computed at the rate of 12% per annum.
No failure to exercise or delay in exercising any right shall act as a
waiver thereof; nor shall any single or partial exercise of any right or remedy
act as a waiver of any other right or remedy.
Marker hereby waives presentment, demand for payment, notice of demand,
notice of dishonor, protest, notice of protest, and all other notices whatsoever
regarding this Note, and agrees to pay all costs of collection when incurred,
including reasonable attorneys' fees. No alteration, amendment or waiver of any
provision of this Note may be made without the written agreement of both Marker
and Roffi. This Note may not be changed or terminated orally.
This Note shall be construed in accordance with and governed by the laws of
Switzerland applicable to promissory notes executed and delivered in
Switzerland.
MARKER INTERNATIONAL
By: /s/ Henry E. Tauber
------------------------------------
Henry E. Tauber
Chairman of the Board of Directors
and Chief Executive Officer
Exhibit 20(a)
[MARKER LOGO]
June 28, 1996
FOR IMMEDIATE RELEASE
MARKER INTERNATIONAL COMPLETES 80 PERCENT
ACQUISITION OF DNR SPORTSYSTEM, LTD.
Salt Lake City, Utah - Marker International (NASDAQ - MRKR) announced today
that it has completed the acquisition of an additional 55 percent of DNR
Sportsystem, Ltd. of Zurich, Switzerland. Marker's total ownership of DNR
Sportsystem is now 80 percent. Market had previously announced on June 12, 1996
that it had entered into an agreement to acquire the additional interest.
DNR Sportsystem, a leader worldwide in the development, marketing and
distribution of snowboards, snowboard boots and snowboard bindings, had sales
of $44.0 million and net income of $5.6 million in its last fiscal year which
ended December 31, 1995.
On a pro forma basis, the results of the combined companies in Marker's fiscal
year which ended March 31, 1996, would have shown sales of $131.9 million and
earnings before interest, taxes, depreciation and amortization of $16.7 million.
Marker's acquisition of the additional 55 percent interest of DNR Sportsystem
was made from DNR's current shareholders. The final purchase price of the
additional interest was $19.4 million. DNR Sportsystem co-founder, Lucio Roffi,
of Zurich, Switzerland, will continue as Chairman, Chief Executive Officer
and a shareholder of DNR.
Marker International, through its subsidiaries in the United States, Germany,
Japan, Austria, Canada and Switzerland is a leading manufacturer and marketer
of ski and snowboard bindings.
# # #
For More Information Contact:
Marker International
Andrea Williams
(801) 972-2100
[MARKER LETTERHEAD]
