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 11, 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)
2300 South 1070 West, 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 5. Other Events
------------
On June 11, 1996, the Registrant entered into an agreement (the "Purchase
Agreement") with Lucio Roffi and Gregor Furrer & Partner Holding AG ("GF")
whereby the Registrant will purchase an aggregate of 270 shares of DNR
Sportsystem Ltd., a privately-held Swiss corporation ("DNR"), from Mr. Roffi
and GF for a purchase price of CHF 73,241.41 per share (U.S. $61,034.51), or a
total purchase price of CHF 19,775,180.70 (U.S. $16,479,317.25). In addition,
on June 11, 1996, the Registrant and Mr. Roffi entered into a letter agreement
(the "Letter Agreement"), whereby the Registrant will acquire an additional 60
shares of DNR, or 10% of the total outstanding shares thereof, from Mr. Roffi
for the same per share purchase price as set forth in the Purchase Agreement,
or a total purchase price of CHF 4,394,484.60 (U.S. $3,662,070.50). The U.S.
dollar amounts are based on a conversion rate of CHF 1.20 per U.S. $1.00, which
was the approximate conversion rate on March 31, 1996, the end of the
Registrant's last fiscal year.
The Registrant, which currently owns 150 shares, or 25% of the outstanding
shares, of DNR will hold an 80% interest in DNR upon consummation of the
transactions contemplated in the Purchase Agreement and the Letter Agreement.
Mr. Roffi and GF each intend to sell 165 shares of DNR to the Registrant and
following the acquisitions will each hold a 10% interest in DNR. The Registrant
expects to consummate the acquisitions on or before June 26, 1996.
On June 12, 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
------------------------------------------------------------------
2(a) Share Purchase and Shareholders Agreement among Lucio Roffi,
Gregor Furrer & Partner Holding AG and Marker International,
dated June 11, 1996.
2(b) Letter Agreement between Lucio Roffi and Marker International, dated
June 11, 1996.
20(a) News Release, dated June 12, 1996.
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<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: June 19, 1996
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<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
2(b) Letter Agreement between Lucio
Roffi and Marker International,
dated June 11, 1996
20(a) News Release, dated
June 5, 1996
-i-
EXHIBIT 2(a)
SHARE PURCHASE AND SHAREHOLDERS AGREEMENT
between
Lucio Roffi, Muhlebachstrasse 32, P.O. Box 8032, Zurich, Switzerland ("Roffi")
Gregor Furrer & Partner Holding AG, Ruessenstrasse 6, 6341 Baar, Switzerland
("GF")
and
Marker International, P.O. Box 26548, Salt Lake City, Utah 84126 ("Marker
International")
WHEREAS, Roffi and GF each own 37.5% and Marker owns 25% of the shares in DNR
Sportsystem Ltd. ("DNR"), a corporation organized and existing under the laws of
Switzerland with domicile in Feldmeilen, Canton of Zurich, Switzerland with a
fully paid in share capital of CHF 600,000 divided into 600 shares with a par
value of CHF 1,000 each ("DNR-shares");
WHEREAS, DNR is engaged in the business of designing, producing and marketing
snowboards and snowboard related goods (bindings, boots, clothing, etc.); and
WHEREAS, Roffi and GF each desire to sell a portion of their DNR shares to
Marker International, and Marker International desires to purchase such shares;
NOW, THEREFORE, the parties agree as follows:
1. Purchase, Purchase Price and Closing
1.1 Roffi and GF each hereby agree to sell individually and Marker
International hereby agrees to purchase on its own or through one of its
wholly owned subsidiaries (Marker International together with its
subsidiaries hereinafter referred to as "Marker") 270 shares (together
the "Transaction-Shares") for a purchase price of CHF 73,241.41 per
share. The total purchase price for the Transaction Shares is CHF
19,775,180.70. The purchase price is payable in two segments, one to
Roffi in the amount of CHF 7,690,348.05 in exchange for 105 shares and
one to GF in the amount of CHF 12,084,832.65 in exchange for 165 shares.
<PAGE>
1.2 The closing of this Agreement shall take place at such time as shall be
mutually agreed upon by the parties, but in no event later than July 31,
1996, unless extended at the written request of Marker for up to an
additional 30 (thirty) days, at the offices of DNR in Zurich, Switzer-
land.
1.3 Marker's obligations pursuant to this Agreement shall be conditioned
upon the representations and warranties contained in Clause 2 of this
Agreement being true and correct at the time of this Agreement and at
the time of the closing, unless waived by Marker.
1.4 At closing Marker shall make the Payments ("Payments") step-by-step by
bank transfer against delivery of the Transaction-Shares duly endorsed
in blank and a duly executed resolution of the board of directors of DNR
("Board") approving the registration of Marker in the share register of
DNR.
2. Representations and Warranties
Roffi and GF individually make the following representations and
warranties:
2.1 Roffi owns - 105 and GF owns - 165 of the Transaction-Shares sold
hereunder free and clear of any encumbrances.
2.2 There are no shares of DNR validly issued and outstanding other than the
DNR-shares.
2.3 DNR is a corporation duly organized and existing under the laws of
Switzerland and qualified to do business wherever it presently does
business.
2.4 There are 600 registered DNR-shares with a par value of CHF 1,000
outstanding.
2.5 Roffi and GF each have the power and authority to enter into this
Agreement and to transfer the Transaction-Shares.
Roffi and GF individually to the best of their knowledge make the
following representations and warranties:
2.6 The books of accounts and financial records of DNR are complete and have
been properly and accurately kept in accordance with the laws of
Switzerland.
2.7 The 1993, 1994 and 1995 audited financial statements as reflected in
Annex 1 (the "Financials") have been prepared in accordance with the
laws of Switzerland and
-2-
<PAGE>
present fairly and accurately the financial position of DNR as of
December 31, 1995 and the results of operations for the period indicated
in accordance with Swiss accounting provisions applied on a consistent
basis, subject to the notes and explanations as reflected in Annex 1.
2.8 Except as may have been provided in writing to Marker prior to the date
of this Agreement, since December 31, 1995 there has not been any actual
or threatened development which could reasonably be anticipated to have
a material adverse effect on DNR's financial or business position and
the business of DNR has been conducted in the ordinary course.
2.9 All fixed assets of DNR are properly maintained and in serviceable
condition, normal wear and tear excepted.
2.10 Except as may have been provided in writing to Marker prior to the date
of this Agreement, DNR is not involved in, and has not been threatened
to be involved in any legal proceedings of a material nature.
2.11 None of the key personnel has tendered his/her resignation.
2.12 All declarations for taxes have been duly filed or extensions have been
granted and are accurate in all material respects; all taxes of DNR in
respect of any period up to December 31, 1993, have been finally
accessed and all taxes of DNR have been paid or adequately provided for
in the Financials.
2.13 DNR maintains such pension arrangements for its personnel as are
required by law.
2.14 All of the trademarks, copyrights and patents used by DNR in its
business are either validly owned by DNR or licensed to DNR and are
currently in full force and effect. No such trademarks, copyrights and
patents infringe upon any rights held by others.
2.15 All information provided to Marker or any of its representatives in
connection with the negotiation of this Agreement or any other
collateral agreement in connection with the sale of the Transaction-
Shares is true and correct.
-3-
<PAGE>
3. Shareholders Agreement by and among Roffi, GF and Marker (the
"Shareholders")
3.1 In principle the parties agree that for years ending December 31, 1997,
1998 and 1999, a dividend ranging from 20 percent to 40 percent of the
after tax net income of DNR may be declared and paid to the parties
based on proportionate ownership of DNR at the time of declaration, if
there is adequate cash that is not needed for the future funding of DNR.
3.2 The parties agree that during the term of this Shareholder Agreement the
Board of Directors shall be comprised of three representatives
designated by Marker, two of which shall be Swiss citizens resident in
Switzerland, one representative designated by Roffi and one represen-
tative designated by GF, who shall be a Swiss citizen resident in
Switzerland, provided that so long as Roffi shall have the right to vote
any of the DNR-shares owned by Marker, the Board of Directors shall be
comprised of three representatives designated by Roffi, two of whom
shall be Swiss citizens resident in Switzerland, one representative
designated by Marker and one representative designated by GF, who shall
be a Swiss citizen resident in Switzerland.
The parties to this Agreement shall exercise their respective voting
rights in DNR's shareholders meetings to give effect to this sub-clause.
3.3 None of the Shareholders shall sell, transfer, convey, pledge,
hypothecate or otherwise dispose of any of its present or future shares
in DNR (the "Shares") or any rights associated therewith (collectively
"Transfer") unless the procedures pursuant to sub-clause 3.4 of this
Agreement have been observed, provided that any Shareholder who is a
corporation (the "Transferring Shareholder") may transfer any of its
shares to any other corporation which is completely owned by or owns
completely the Transferring Shareholder and which previous to the Trans-
fer shall sign this Shareholders Agreement, provided further that Marker
may, from time to time, grant Roffi the right to vote any of the DNR-
shares owned by Marker without observing the procedures set forth in
sub-clause 3.4 of this Agreement.
3.4 If a Shareholder intends to dispose of all or a portion of his Shares,
it (the "Selling Shareholder") shall so notify the Chairman in writing
indicating the selling price ("Indicated Price"). The Chairman shall
immediately put the other Shareholders on notice of such offer each of
whom shall have the right to purchase the offered
-4-
<PAGE>
Shares in proportion to their shareholdings for the Indicated Price by
giving written receipt of the notice of the Chairman.
If one or more of the other Shareholders are willing to purchase the
Shares but do not agree to the Indicated Price or if such a price has
not been indicated, they shall so notify the Chairman and the Selling
Shareholder in writing and the Chairman shall cause the price to be
determined in a written expert opinion ("Expert Opinion") by Revisuisse
Price Waterhouse AG, Zurich, as expert (the "Expert") based on the
following formula:
Net asset value as evidenced by the last annual
financial statements which are approved by the
DNR-shareholders' meeting at the time the Expert
is rendering his opinion;
plus
8 x average annual earnings (except extraordinary
earnings such as proceeds from the sale of assets) of
the last two business years as evidenced by the annual
financial statements of these business years which are
approved by the DNR-shareholders' meeting at the time
the Expert is rendering his opinion.
The costs of the Expert Opinion are to be borne by DNR. The Expert
Opinion shall be binding upon all Shareholders and the Chairman shall
forward a copy thereof to all the Shareholders. Within 10 (ten) days
after receipt of the Expert Opinion the Selling Shareholder shall give
written notice to the Chairman as to whether he still desires to sell.
If this is the case, the Chairman shall immediately so notify the other
Shareholders and the other Shareholders have the right to purchase the
offered shares in proportion to their shareholdings at the price
determined by the Expert Opinion ("Expert Price") by giving written
notice to the Chairman and the Selling Shareholder within 30 (thirty)
days. Unexercised preemptive rights may be exercised by the other
Shareholders. If not all the Shares of the Selling Shareholder have
been taken up by the other Shareholders, the Selling Shareholder may
within 30 (thirty) days from the respective notice of the Chairman
either declare that he does no longer intend to sell his Shares or sell
all his shares within 6 (six) months to one or more third parties, such
third parties to be registered in the share register of DNR.
-5-
<PAGE>
3.5 If a Shareholder becomes incapable, insolvent, bankrupt or receivership
procedures are opened, the Shareholder shall notify the other
Shareholders who shall be entitled to purchase the Shares of such
Shareholder within 90 (ninety) days following the receipt of
notification in proportion to their Shareholdings and pursuant to the
procedure agreed to in sub-clause 3.4 mutatis mutandis.
3.6 If a Shareholder, who is a natural person, dies, the heir(s) of the
deceased shareholder shall acquire his Shares and the parties shall
register such heir(s) in the share register of DNR subject to the
heir(s) joining this Shareholders Agreement.
3.7 The Shareholders shall have access to DNR's books of accounts during
normal business hours and upon reasonable prior notice.
3.8 Amendments and modifications of this Shareholders Agreement shall be
binding only if made in writing and signed by all parties. Annexes form
an integral part of this Agreement.
3.9 The Shareholders Agreement contained in this clause 3 shall continue in
full force and effect for an initial term until June 30, 2015 and shall
thereafter continue for further terms of 5 (five) years unless
terminated at the end of each term by either party by giving 6 (six)
months prior written notice. Notwithstanding the above, this
Shareholders Agreement shall terminate immediately if one of the
following two events occurs:
(1) if the Shareholders cease to own in the aggregate 51% of the
shares, or
(2) Upon dissolution of DNR.
This Agreement shall terminate with respect to any party who ceases to
be a shareholder of DNR.
3.10 The parties agree that at or before the closing of the sale of the
Transaction-Shares pursuant to this Agreement, they shall cause the
appropriate parties to enter into an agreement substantially in the form
of the Roffi Agreement as contained in Annex 2.
3.11 Upon the closing of the purchase by Marker pursuant to this Agreement,
any Shareholders Agreement previously entered into by any or all of the
parties shall terminate and have no further force or effect.
-6-
<PAGE>
4. Choice of Law Arbitration
This Agreement is subject to the laws of Switzerland.
All disputes arising out of or in connection with this Agreement shall
be exclusively resolved by a three person arbitral tribunal in
accordance with the international Arbitration Rules of Zurich Chamber of
Commerce. The place of arbitration shall be Zurich and the arbitration
shall be conducted in English. All members of the arbitral tribunal
shall be less than 60 years of age at the time of appointment.
Date: June 11, 1996
----------------------
Lucio Roffi Marker International
/s/ Lucio Roffi /s/ Henry Tauber
- --------------------------- -----------------------------
Gregor Furrer & Partner Agreed and accepted by:
Holding AG Marker AG
By: /s/ Gregor Furrer
------------------------- -----------------------------
By: /s/ Dieter Cleven
-------------------------
Annex 1 1993, 1994 & 1995 DNR Sportsystem Ltd. Audited Financial Statements
Annex 2 Roffi Agreement
-7-
<PAGE>
ANNEX 1
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.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
May 17, 1996
<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.
2
<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.
3
<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.
4
<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", "Sims" and "Santa Cruz". 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 wholly owned 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
5
<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, 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.
6
<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, 1995, 1994 and 1993 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 Santa
Cruz and Sims. 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.
7
<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.
8
<PAGE>
ANNEX 2
[Translated from the original document pursuant to Rule 403(c) under the
Securities Act of 1933, as amended]
[DNR Sportsystem Ltd. LOGO]
Mr. Lucio Roffi
Im Hoellander 48
8706 Meilen
Feldmeilen, April 10, 1995
Dear Mr. Roffi:
We are pleased to confirm, for the sake of good form, your employment
relationship to our firm as follows:
Position: Chief Executive Officer/Chairman of the
Board
Working Hours: Working hours are determined by the needs of the firm.
Overtime will not be accounted for separately.
Vacation: Four weeks per year. Upon reaching age 50, 5 weeks per year.
Salary: Fr. 30,000 per month (based on a 12 month salary), less
employee contributions to the [AHV, ALV, NBU], sick day
compensation insurance and benefits.
Bonus: Fr. 316,000 per year, payable in December, less employee
contributions to the [AHV].
Expenses: Fr. 2,000 monthly representation expenses. In addition you
have a right to be reimbursed for all business-related
expenditures and expenses upon submission of supporting
documentation.
Fringe Benefits: For business purposes, a company car is
provided.
<PAGE>
Benefits: You are insured as per the legal requirements for employee
old age, life and disability benefits. The employee's
premium amounts to 50 percent of the total premium.
Notice: Fixed contract period until December 31, 1997. Resignation
at this time with six month's notice. Otherwise thereafter
followed by a two year extension with a six month's notice
requirement.
Other Terms: So long as nothing in this agreement states otherwise, the
provisions of Swiss obligation law apply.
To memorialize your agreement to these terms, please sign and return this
document.
Cordially,
DNR Sportsystem Ltd.
/s/ Gregor Furrer /s/ Andrea Rempfler
------------------ --------------------
Gregor Furrer Andrea Rempfler
Agreed:
Meilen, April 12, 1995
/s/ Lucio Roffi
- -------------------
Lucio Roffi
<PAGE>
[DNR Sportsystem Ltd. LOGO]
Herrn Lucio Roffi
Im Hollaender 48
8706 Meilen
Feldmeilen, 10. April 1995
Sehr geehrter Herr Roffi
Gerne bestaetigen wir Ihnen der guten Ordnung halber lhr Arbeitsverhaeltnis zu
unserer Firma wie folgt:
Position: Geschaeftsfuehrer
Arbeitszeit: Die Arbeitszeit richtet sich nach den Beduerfnissen der
Firma; Ueberzeit wird nicht separat abgegolten.
Ferien: 4 Wochen pro Jahr, ab dem 50. Altersjahr 5 Wochen
Salaer: Fr. 30'000.-- pro Monat (12 Monatssalaere), abzueglich
Arbeitnehmerbeitraege an die AHV, ALV, NBU,
Krankentaggeldversicherung und Personalvorsorge.
Bonus: Fr. 316'000.-- pro Jahr, zahlbar im Dezember, abzueglich
Arbeitnehmerbeitraege an die AHV.
Spesen: Fr. 2'000.--Repraesentationsspesen pro Monat. Zusaetzlich
haben Sie Anspruch auf Ersatz aller geschaeftsmaessig
begruendeten Auslagen und Spesen gegen Vorlage von Belegen.
Nebenleistungen: Fuer geschaeftliche Zwecke steht ein Firmenwagen zur
Verfuegung.
Personalvorsorge: Sie sind gemaess den gesetzlichen Bestimmungen ueber die
berufliche Alters-, Hinterlassenen- und Invalidenvorsorge
(BVG) versichert. Die Arbeitnehmerpraemie betraegt 50% der
anfallenden Gesamtpraemie.
<PAGE>
2
Kuendigungsfristen: - Feste Vertragsdauer bis zum 31. Dezember 1997,
Kuendigung auf diesen Zeitpunkt mit einer
Kuendigungsfrist von 6 Monaten;
- nachfolgend jeweils Verlaengerung um zwei Jahre, mit
einer Kundigungsfrist von 6 Monaten.
Weitere
Bestimmungen: Soweit diese Vereinbarung nichts anderes vorsieht, gelten
die Bestimmungen des Schweizerischen Obligationenrechts.
Wir bitten Sie, zum Zeichen lhres Einverstaendnisses, die Kopie diese Schreibens
zu unterzeichnen und uns zu retournieren.
Mit freundlichen Gruessen
DNR Sportsystem Ltd.
/s/ Gregor Furrer /s/ Andrea Rempfler
-------------------- --------------------
Gregor Furrer Andrea Rempfler
Einverstanden:
Meilen, 12 April 1995
Lucio Roffi
- -----------------
/s/ Lucio Roffi
EXHIBIT 2(b)
Marker International
1070 West 2300 South
Salt Lake City, Utah 84119
June 11, 1996
Mr. Lucio Roffi
DNR Sportsystem Ltd.
Muhlebachstrasse 32
CH-8032 Zurich
Switzerland
Dear Lucio:
Reference is made to that certain Share Purchase and Shareholders
Agreement between Gregor Furrer & Partner Holding AG, Marker International and
you, dated June 11, 1996 (the "Purchase Agreement"). Unless otherwise
indicated, defined terms in this Letter Agreement shall have the meanings
ascribed to them in the Purchase Agreement.
The purpose of this Letter Agreement is to confirm in writing our
understanding pursuant to which you have agreed to sell and Marker has agreed to
purchase 60 DNR-shares for a purchase price of CHF 73,241.41 per share. The
total purchase price for the shares being sold and purchased pursuant to this
Letter Agreement is CHF 4,394,484.60.
The 60 DNR-shares being sold and purchased pursuant to this Letter
Agreement are in addition to the 105 DNR-shares you are selling pursuant to the
Purchase Agreement.
The terms and provisions of the Purchase Agreement shall apply to the
purchase and sale pursuant to this Letter Agreement mutatis mutandis.
------- --------
Please confirm your agreement by signing the attached copy of this
Letter Agreement and returning it to me.
Very truly yours,
MARKER INTERNATIONAL
By: /s/ Henry Tauber
-----------------------------
Henry Tauber
Chairman and CEO
Agreed to this 11 day
of June, 1996
/s/ Lucio Roffi
- -----------------------
Lucio Roffi
Exhibit 20(a)
June 12, 1996
FOR IMMEDIATE RELEASE
MARKER INTERNATIONAL TO OWN 80 PERCENT OF
DNR SPORTSYSTEM
Salt Lake City, Utah - Marker International (NASDAQ - MRKR) announced today that
it has agreed to purchase an additional 55% of DNR Sportsystem Ltd., of Zurich,
Switzerland bringing its total ownership to 80% of DNR.
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.
DNR Sportsystem, which receives approximately 95% of its revenues from the sale
of its hard goods products, including snowboards, snowboard boots and snowboard
bindings had, as of May 30, 1996, orders for delivery in the upcoming 1996/1997
season of more than $50.2 million, compared to orders of approximately $42.8
million as of May 30, 1995, for delivery in the 1995/1996 season.
Marker will purchase the additional 55% of DNR Sportsystem from DNR's current
shareholders for approximately $20.0 million. After the acquisition, Lucio
Roffi, of Zurich, Switzerland, will continue as Chairman, Chief Executive
Officer and a shareholder of DNR Sportsystem.
In commenting on the announcement, Marker's Chairman and CEO Hank Tauber said:
"DNR Sportsystem is one of the largest and most successful companies in the
snowboard industry today and we are excited about the opportunities presented by
this acquisition. Marker and DNR Sportsystem share similar business strategies
in that they both concentrate on the development, production and sales of high
quality, technologically advanced products."
Marker International, through its subsidiaries in the United States, Germany,
Japan, Austria, Canada and Switzerland, is a leading manufacturer and marketer
of alpine ski and snowboard bindings throughout the world, and had sales of
$87.9 million and net income of $3.4 million in its last fiscal year which ended
March 31, 1996.
# # #
For More Information Contact:
Marker International
Andrea Williams
801-972-2100
