SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 3, 1997
CENTRAL TRACTOR FARM & COUNTRY, INC.
(Exact name of registrant as specified in charter)
Delaware 0-24902 42-1425562
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
3915 Delaware Avenue, Des Moines, Iowa 50316-0330
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (515) 266-3101
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of the Business Acquired.
COUNTRY GENERAL, INC. Page
Independent Auditors' Report F-2
Balance Sheets - May 24, 1997 and May 25, 1996 F-3
Statements of Income - Years ended May 24, 1997 and May 25, 1996 F-4
Statements of Stockholder's Equity - Years ended May 24, 1997
and May 25, 1996 F-5
Statements of Cash Flows - Years ended May 24, 1997 and May 25, 1996 F-6
Notes to Financial Statements F-7
(b) Pro Forma Financial Information
CENTRAL TRACTOR FARM & COUNTRY, INC.
Unaudited Pro Forma Condensed Consolidated Statement
of Income Data F-13
Notes to Pro Forma Condensed Consolidated Financial Statements F-14
(c) Exhibits.
The following documents are filed as exhibits to this report:
Exhibit No. Description
2.1 Stock Purchase Agreement, dated as of June 26, 1997, by and
between the Company and ConAgra, Inc.*
99.1 Amended and Restated Credit Agreement, dated as of July 3, 1997*
- -------------
* Previously filed
2
<PAGE>
COUNTRY GENERAL, INC.
(A WHOLLY OWNED SUBSIDIARY OF
CONAGRA, INC.)
Financial Statements for the
Years Ended May 24, 1997 and May 25, 1996
and Independent Auditors' Report
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
Country General, Inc.
We have audited the accompanying balance sheets of Country General, Inc. (a
wholly owned subsidiary of ConAgra, Inc.) as of May 24, 1997 and May 25, 1996
and the related statements of income, stockholder's equity, and cash flows for
the years 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 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
balance sheet presentation. We believe that our audits provide a reasonable
basis for our opinion. In our opinion, such financial statements present fairly,
in all material respects, the financial position of Country General, Inc. at May
24, 1997 and May 25, 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Delliotte & Touche LLP
June 27, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
COUNTRY GENERAL, INC.
(A Wholly Owned Subsidiary of ConAgra, Inc.)
BALANCE SHEETS
MAY 24, 1997 AND MAY 25, 1996
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,124,742 $ 2,316,526
Accounts receivable, net of allowance for doubtful accounts
of $127,600 and $80,000, respectively 5,738,485 5,971,253
Inventory 98,332,540 117,930,606
Prepaid expenses 665,672 757,528
Current deferred income tax benefits (Note C) 3,126,499 2,176,251
------------- -------------
Total Current Assets 108,987,938 129,152,164
PROPERTY AND EQUIPMENT (Note B) 46,395,656 45,463,329
Less accumulated depreciation (29,674,870) (27,253,873)
------------- -------------
Net Property and Equipment 16,720,786 18,209,456
OTHER ASSETS:
Deferred income tax benefit (Note C) -- 2,209,817
Other 182,353 169,817
------------- -------------
$ 125,891,077 $ 149,741,254
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 41,404,108 $ 49,757,850
Accrued liabilities 8,919,633 9,961,886
------------- -------------
Total Current Liabilities 50,323,741 59,719,736
DUE TO RELATED PARTIES 10,215,849 29,657,988
DEFERRED TAX LIABILITY (Note C) 252,382 --
RESTRUCTURING CHARGE RESERVE (Note G) 1,039,848 2,658,984
------------- -------------
Total Liabilities 61,831,820 92,036,708
COMMITMENTS (Note E)
STOCKHOLDER'S EQUITY:
Common stock ($1 par value, 1,000 shares authorized, issued
and outstanding) 1,000 1,000
Contributed capital 54,195,206 54,195,206
Retained earnings 9,863,051 3,508,340
------------- -------------
64,059,257 57,704,546
------------- -------------
$ 125,891,077 $ 149,741,254
============= =============
</TABLE>
See notes to financial statements.
F-3
<PAGE>
COUNTRY GENERAL, INC.
(A Wholly Owned Subsidiary of ConAgra, Inc.)
STATEMENTS OF INCOME
YEARS ENDED MAY 24, 1997 AND MAY 25, 1996
1997 1996
SALES $ 289,205,224 $ 296,631,763
COST OF SALES 202,745,078 208,194,947
------------- -------------
GROSS PROFIT 86,460,146 88,436,816
OTHER REVENUES - NET 3,041,421 2,746,327
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES 69,937,059 75,134,472
DEPRECIATION AND AMORTIZATION 3,414,402 3,465,843
RESTRUCTURING CHARGE (Note G) -- 7,203,984
------------- -------------
Income from Operations 16,150,106 5,378,844
OTHER INCOME/(EXPENSE):
Interest expense (Note D) (5,688,263) (6,535,746)
Other, net (9,748) 3,004
------------- -------------
Total Other Income/(Expense) (5,698,011) (6,532,742)
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES 10,452,095 (1,153,898)
PROVISION FOR INCOME TAXES (BENEFIT) (Note C) 4,097,384 (464,026)
------------- -------------
NET INCOME (LOSS) $ 6,354,711 $ (689,872)
============= =============
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
COUNTRY GENERAL, INC.
(A Wholly Owned Subsidiary of ConAgra, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED MAY 24, 1997 AND MAY 25, 1996
Common Contributed Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C>
BALANCE, May 27, 1995 $ 1,000 $ 54,195,206 $ 4,198,212 $ 58,394,418
Net loss -- -- (689,872) (689,872)
------------ ------------ ------------ ------------
BALANCE, May 25, 1996 1,000 54,195,206 3,508,340 57,704,546
Net income -- -- 6,354,711 6,354,711
------------ ------------ ------------ ------------
BALANCE, May 24, 1997 $ 1,000 $ 54,195,206 $ 9,863,051 $ 64,059,257
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
COUNTRY GENERAL, INC.
(A Wholly Owned Subsidiary of ConAgra, Inc.)
STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 24, 1997 AND MAY 25, 1996
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,354,711 $ (689,872)
Adjustments to reconcile net income to net cash provided
by operating activities:
Restructuring reserve -- 7,203,984
Depreciation and amortization 3,414,402 3,465,843
Deferred income tax benefit 1,511,951 (2,762,355)
(Gain) loss on disposition of assets 9,748 (3,004)
Changes in operating assets and liabilities:
Accounts receivable 232,768 240,736
Inventory 19,598,066 (1,058,460)
Prepaid expenses 91,856 602,805
Accounts payable (8,353,742) (11,300,231)
Accrued liabilities (2,863,240) (326,874)
Other, net (15,869) (23,665)
------------ ------------
Net Cash Flows From Operating Activities 19,980,651 (4,651,093)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,789,242) (3,065,122)
Proceeds from sale of property, plant and equipment 58,946 6,951
------------ ------------
Net Cash Flows From Investing Activities (1,730,296) (3,058,171)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in due to related parties (19,442,139) 7,864,220
------------ ------------
Net Cash Flows From Financing Activities (19,442,139) 7,864,220
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,191,784) 154,956
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,316,526 2,161,570
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,124,742 $ 2,316,526
============ ============
</TABLE>
See notes to financial statements.
F-6
<PAGE>
COUNTRY GENERAL, INC.
(A Wholly Owned Subsidiary of ConAgra, Inc.)
Notes to Financial Statements
Years Ended May 24, 1997 and May 25, 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business - Country General, Inc. (the Company), a wholly
owned subsidiary of ConAgra, Inc., is a retailer of farm, ranch and home
supplies operating in 114 stores located in twelve states throughout the central
United States, Georgia and Florida. As of and prior to May 28, 1994, the Company
was a division of ConAgra, Inc. Effective the beginning of fiscal 1995, the net
assets of the Company were transferred to a Delaware Corporation and the Company
became a wholly owned subsidiary of ConAgra, Inc.
Fiscal Year - Country General, Inc. (the Company) has its fiscal year end on the
Saturday closest to ConAgra, Inc.'s year end, which is the last Sunday in May.
Inventories - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Included in inventory are costs
to procure, warehouse and place the inventory in stores, which totalled
approximately $4,310,000 and $5,916,000 at May 24, 1997 and May 25, 1996,
respectively.
Other Revenues - Other revenues consist primarily of gasoline sales, which are
reported net of the cost of the gasoline of $25,347,550 and $24,433,202 at May
24, 1997 and May 25, 1996, respectively. Other revenues also include income from
finance charges on accounts receivable of $135,872 and $124,212 in fiscal 1997
and 1996, respectively.
Pre-Opening Expenses - Costs associated with the opening of new stores are
capitalized and amortized over the first full year of the store's operations.
These costs are carried as prepaid expenses prior to the store opening.
Depreciation and Amortization - Property and equipment are stated on the basis
of historical cost. Depreciation is computed using the straight-line method
based upon the estimated useful lives of the assets as follows:
Buildings and improvements 31 years
Leasehold improvements Life of the lease
Equipment 3-7 years
Income Taxes - The Company files consolidated federal and state income tax
returns with its parent, ConAgra, Inc. Deferred income taxes are provided for
those items reported in different periods for income tax and financial statement
purposes in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109.
Use of Estimates - Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates or assumptions affect reported amounts of
assets, liabilities, revenue and expenses as reflected in the financial
statements. Actual results could differ from estimates.
F-7
<PAGE>
B. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
1997 1996
Land $ 1,961,540 $ 1,961,540
Buildings and improvements 16,821,705 16,126,937
Leasehold improvements 2,791,007 2,851,051
Office furniture and equipment 2,898,685 2,665,205
Store and distribution equipment 20,577,320 20,259,066
Transportation equipment 287,394 358,815
Construction in progress 1,058,005 1,240,715
----------- -----------
$46,395,656 $45,463,329
=========== ===========
C. INCOME TAXES
The provision for income taxes (benefit) includes the following:
1997 1996
Current:
Federal $ 2,223,468 $ 2,058,272
State 361,965 240,057
----------- -----------
2,585,433 2,298,329
Deferred:
Federal 1,360,755 (2,486,120)
State 151,196 (276,235)
----------- -----------
1,511,951 (2,762,355)
----------- -----------
$ 4,097,384 $ (464,026)
=========== ===========
Income taxes computed by applying statutory rates to income before taxes are
reconciled to the provision for income taxes set forth in the financial
statements as follows:
1997 1996
Computed U.S. federal income taxes (benefit) $3,553,712 $ (392,325)
State income taxes, net (benefit) 543,672 (71,701)
---------- ----------
Income taxes provided $4,097,384 $ (464,026)
========== ==========
F-8
<PAGE>
The tax effect of temporary differences that give rise to significant portions
of deferred tax assets and liabilities consist of the following at May 24, 1997
and May 25, 1996:
1997 1996
Current:
Inventory $ 1,646,858 $ 1,027,202
Accrued expenses 1,479,641 1,149,049
----------- -----------
$ 3,126,499 $ 2,176,251
=========== ===========
Long-Term:
Depreciation $ (657,922) $ (599,737)
Restructuring charge reserve 405,540 2,809,554
----------- -----------
$ (252,382) $ 2,209,817
=========== ===========
D. RELATED PARTY TRANSACTIONS
The Company conducts various business transactions with ConAgra, its parent
company, and several of its affiliated companies. These transactions include
sales to and purchases from other ConAgra companies. Total sales to related
companies were insignificant in both fiscal years 1997 and 1996.
ConAgra provides the Company cash management and treasury services. ConAgra
charges the Company interest on the Company's base division investment, which
represents the amount of capital permanently employed by the Company. Base
division investment is calculated as working capital, exclusive of cash and
deferred taxes, plus property and equipment plus other assets. At May 24, 1997
and May 25, 1996 the base division investment borrowings totalled $63,972,000
and $80,117,000, respectively. The interest rates on these borrowings ranged
from 5.5% to 5.9% during fiscal 1997 and 5.5% to 6.1% during 1996.
The Company was charged $181,424 and $525,038 for certain computer processing,
printing, payroll processing, telephone services and other services provided by
ConAgra during fiscal years 1997 and 1996, respectively. The Company
participates in ConAgra's insurance programs, including workers' compensation,
property, general and auto liability. These insurance programs require the
Company to pay premiums and assume losses up to levels specified in the
programs. The Company was charged $605,031 and $738,412 from ConAgra for these
insurance coverages in fiscal years 1997 and 1996, respectively. The cost of the
insurance premiums and other services provided by ConAgra are classified in
operating, selling and administrative expenses.
F-9
<PAGE>
E. LEASE COMMITMENTS
The Company conducts a number of its operations in leased facilities under
numerous noncancelable operating leases expiring at various dates through March
30, 2007. Most of the Company's stores have lease terms of 5-10 years and
generally contain renewal options. Total rent expense under these leases
approximated $4,900,000 and $5,600,000 in fiscal years 1997 and 1996,
respectively. Certain leases are based on a minimum annual rental, plus a
percentage of sales in excess of a specified amount. Total payments under such
additional percentage rentals were insignificant to the Company's financial
position and results of operations for fiscal years 1997 and 1996. Total future
minimum rental commitments under these operating leases are as follows:
1998 $ 4,603,221
1999 4,300,550
2000 3,360,730
2001 2,330,284
2002 1,942,452
2003 and thereafter 1,224,220
-----------
$17,761,457
===========
F. EMPLOYEE BENEFIT PLANS
The Company participates in ConAgra's multi-employer defined contribution plan,
defined benefit pension plan and postretirement benefit plan. The defined
contribution plan is a 401(k) profit sharing plan covering eligible employees
who elect to participate. Contributions are based on the amount of employee
deferrals and the employers matching formula. The Company's matching
contribution relates to the employees' deferrals up to a maximum of 3% of
employees' compensation for 1997 and 1996. Total expense incurred under this
plan was $330,398 and $331,271 in fiscal 1997 and 1996, respectively. The
defined benefit pension plan provides retirement income for eligible salaried
and hourly employees. Benefits are based on years of credited service and
average compensation or stated amounts for each year of service. The
postretirement benefit plans provide certain medical and dental benefits to
qualifying employees. Total expense incurred under the pension and
postretirement benefit plans was $936,981 and $709,597 in fiscal 1997 and 1996,
respectively.
G. RESTRUCTURING CHARGE
In the fourth quarter of fiscal 1996, the Company adopted a restructuring plan.
The restructuring involved closing all of the Company's stores located in
California, a related distribution center, and two midwestern stores. Costs
included in the restructuring charge at May 25, 1996 include the following:
Severance and related costs $ 829,000
Future lease commitments 1,460,000
Inventory clearance markdowns 4,290,000
Write off of leasehold improvements 255,000
Other cash costs 369,984
----------
$7,203,984
==========
There were no adjustments made during fiscal 1997 to the restructuring charge
reserve other than cash inflows and outflows related to the store closings. The
restructuring plan is expected to be substantially completed in fiscal 1998.
F-10
<PAGE>
H. SUBSEQUENT EVENT
On June 26, 1997, ConAgra, Inc. entered into an agreement to sell all of the
issued and outstanding shares of capital stock of the Company to Central Tractor
Farm & Country, Inc. The transaction is expected to close on July 3, 1997.
F-11
<PAGE>
CENTRAL TRACTOR FARM AND COUNTRY, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On July 3, 1997, Central Tractor Farm & Country, Inc. ("CT" or the
"Company") acquired all the outstanding capital stock of Country General, Inc.
("CG") from ConAgra, Inc. ("ConAgra") in exchange for $135,000,000 in cash,
subject to post-closing adjustment ( the "Acquisition"). As a result of the
Acquisition CG became a wholly-owned subsidiary of CT. The funds required to
purchase CG came from a new line of credit and a capital contribution of
$49,750,000. Concurrent with acquisition, the Company entered into a New Credit
Facility with a bank which consist of a $50,000,000 term loan facility, which
was fully funded. and a $ 100,000,000 revolving credit facility. The amounts
originally funded and drawn under the New Credit Facility were used, in part, to
prepay outstanding borrowings under the Company's prior line of credit
agreement. The Pro forma adjustments are based upon available data and certain
assumptions that the Company believes are reasonable. The allocation of the
total purchase price to the tangible and intangible assets and the liabilities
of the company is preliminary . However, the Company does not expect that the
final allocation of the purchase price will materially alter the pro forma
results of operations.
The acquisition will be accounted for as a purchase, with the assets
acquired and liabilities assumed recorded at fair values, and the results of
CG's operations included in the Company's consolidated financial statements from
the date of acquisition.
The accompanying condensed consolidated financial statements illustrate
the effect of the acquisition ("Pro Forma") on the Company's results of
operations. The condensed consolidated statements of income for the year ended
November 2, 1996 and the nine months ended August 2, 1997 are based on the
historical statements of income of the CT and CG for those periods. The pro
forma condensed consolidated statements of income assume the acquisition took
place on October 29, 1995.
The pro forma financial statements are not necessarily indicative of
the Company's results of operations that might have occurred had the transaction
been completed as of the date indicated above and do not purport to represent
what the Company's consolidated results of operations might be for any future
period.
The accompanying condensed consolidated pro forma financial statements
should be read in connection with the historical statements of CT and CG.
F-12
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM AND COUNTRY, INC. (LT)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME DATA
(in thousands of dollars, except per share data)
Pro Forma
CT for
year Ended Pro Forma
Pro Forma November 2, Historical Adjustments for
Big Bear 1996 Country Country General
Historical for Period Pro Forma Giving General Acquisition Pro Forma
CT for Year of Seven Adjustments Effect to for the for CT for Year
Ended Months Ended for Acquisi- Big Bear Year Ended Year Ended Year Ended
November 2, May 31, tion of CT and JWCAC November 2, November 2, November 2,
1996 1996 by JWCAC Acquisition 1996 1996 1996
(3) (6) (2)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales 293,020 14,827 307,847 305,694 613,541
Cost of Sales 207,228 10,949 218,177 224,109 442,286
-------- ------- -------- -------- -------- -------- --------
Gross Profit 85,792 3,878 0 89,670 81,585 0 171,255
Selling, general and
adm expenses 68,197 3,201 240 (7) 71,638 68,396 (4,247)(12) 135,787
Amortization of
intangibles 938 78 (4) 1,166 2,182 1,293 (13) 3,475
-------- ------- -------- -------- -------- -------- --------
Operating income 16,657 599 (1,406) 15,850 13,189 2,954 31,993
Interest Expense 1,663 11,109 (9) 12,772 6,344 2,081 (14) 21,197
-------- ------- -------- -------- -------- -------- --------
Income before inc taxes 14,994 599 (12,515) 3,078 6,845 873 10,796
Income taxes 6,250 239 (5) (4,540)(10) 1,949 2,997 349 (15) 5,296
-------- ------- -------- -------- -------- -------- --------
Net income 8,744 360 (7,975) 1,129 3,848 524 5,500
======== ======= ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges (11) 5.3 x 1.4 x
======== ========
<CAPTION>
Pro Forma CT
for Nine Pro Forma
Months Ended Historical Adjustments for
Historical Pro Forma August 2, 1997 Country Country General
CT for Nine Adjustments Giving Effect General Acquisition Pro Forma CT
Months Ended for Acquisition to Big Bear for the Nine for Nine for Nine
August 2, of CT and JWCAC Months Ended Months Ended Months Ended
1997 by JWCAC Acquisition August 2, 1997 August 2, 1997 August 2, 1997
(6) (2)
<S> <C> <C> <C> <C> <C> <C>
Net Sales 270,432 270,432 190,996 461,428
Cost of Sales 192,382 192,382 137,613 329,995
-------- -------- -------- ------- -------- --------
Gross Profit 78,050 0 78,050 53,383 0 131,433
Selling, general and
adm expenses 63,053 100 (7) 63,153 39,382 (3,185) 99,350
Amortization of
intangibles 1,339 297 (8) 1,636 970 (13) 2,606
-------- -------- -------- ------- -------- --------
Operating income 13,658 (397) 13,261 14,001 2,215 29,477
Interest Expense 11,586 (1,379) (9) 10,207 3,569 1,916 (14) 15,892
-------- -------- -------- ------- -------- --------
Income before inc taxes 2,072 982 3,054 10,432 299 13,785
Income taxes 1,281 512 (10) 1,793 4,197 120 (16) 6,110
-------- -------- -------- ------- -------- --------
Net income 791 470 1,251 6,235 179 7,675
======== ======== ======== ======= ======== ========
Ratio of earnings to fixed
charges (11) 5.3 x 1.8 x
========= ========
</TABLE>
F-13
<PAGE>
CENTRAL TRACTOR FARM AND COUNTRY. INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands)
(1) The proceeds to the Company from the July 3, 1997 refinancing was
$159.1 million before commissions and estimated expenses of the
offering. The proceeds were used to repay borrowings on the December
23,1996 Credit Facility, purchase capital of Country General and pay
transaction fees and expenses.
Sources of Funds:
Equity investment $ 49,750
Senior debt financing 50,000
Senior revolver financing 59,369
----------
$ 159,119
----------
Used of Funds:
Repayment of existing credit facilities $ 19,869
Purchase of Country General capital stock 135,000
Fees and expenses including $2,637
charged to operations 4,250
----------
$ 159,119
----------
(2) On June 22, 1996, the Company acquired the outstanding stock of Country
General, an agricultural specialties retailer, for approximately
$136,613.00, including transaction fees and expenses. A preliminary
allocation of the purchase price to the net assets acquired as is
follows:
Inventories $ 101,744
Accounts receivable, net of allowances for
doubtful accounts 5,795
Property and equipment 16,708
Other assets 902
Accounts payable and accrued expenses (40,242)
Goodwill 51,706
-----------
$ 136,613
-----------
(3) The Company acquired 31 retail stores and certain net operating assets
from Big Bear as of May 31, 1996 for $5,700. Results of operations of
these Big Bear stores for the period of seven months ended May 31, 1996
represents (i) historical store-level operating results for the
acquired retail stores and do not include any distribution,
merchandising or general and administrative costs and expenses of Big
Bear which were accounted for at the Big Bear corporate office level
and not allocated to the stores; and (ii) the following pro forma
F-14
<PAGE>
incremental costs which represent the additional costs to the Company
to provide distribution, merchandising and general and administrative
services to the 31 acquired Big Bear stores for the seven month period:
Cost of sales - distribution costs $ 227
Selling, general and administration 200
-----
$ 427
Actual results of operations of the Big Bear stores since the date of
acquisition are included in the consolidated results of operations of
the Company for the year ended November 2, 1996 and the thirty nine
weeks ended August 2, 1997.
(4) Represents pro forma amount of goodwill amortization relating to the
Big Bear acquisition for the seven months ended May 31, 1996.
(5) Represents pro forma income taxes relating to the pro forma adjustments
to income before income taxes of the acquired Big Bear stores for the
seven-month period ended May 31, 1996, computed using a marginal tax
rate of 40.0%.
(6) On November 27, 1996, the Board of Directors of the Company approved,
and the Company entered into a merger agreement ("The Merger
Agreement") with J.W. Childs Equity Partners, L.P. and two of its
affiliates (collectively "Childs") that provided for the acquisition of
the Company by Childs. The " Merger Agreement provided that following
the acquisition by Childs of all of the Company shares held by
affiliates of Butler Capital Corporation, an affiliate ("JWCAC") of
Childs would merge with and into the Company and acquire the remaining
shares of the Company held by public shareholders for $14.25 per share
in cash. The merger was completed on March 27, 1997.
(7) Represents an annual management fee of $240,000 charged by J.W. Childs
Associates, L.P. ("Associates"); proportionate for the thirty nine
weeks ended August 2, 1997.
(8) Represents the incremental amounts of goodwill amortization (over a
period of 40 years) as a result of the increase in goodwill
attributable to the acquisition of the Company by JWCAC and the
subsequent merger of JWCAC into the Company; proportionate for the
thirty nine weeks ended August 2, 1997.
F-15
<PAGE>
(9) Represents the incremental amount of interest expense relating to the
JWCAC Acquisition computed as follows:
Thirty Nine Weeks
Year Ended Ended
November 2, 1996 August 2, 1997
Interest expense related to new debt:
New Revolving Credit Facility $ 177 $ 760
New Term Note 660 495
Senior Notes 11,156 8,367
Amortization of deferred financing costs 591 443
Interest on capital leases 188 141
-------- --------
12,772 10,207
Less interest on outstanding debt (1,663) (11,586)
-------- --------
Pro forma adjustment $ 11,109 $ (1,379)
-------- --------
Interest expense related to the New Revolving Credit Facility is
determined based on an annual average of approximately $2,150 of
borrowings outstanding for the year ended November 2, 1996 and $12,282
for the period ended August 2, 1997. Interest was calculated using the
following rates: (a) Revolving Credit Facility: 8.25% (b) New Term
Loan: 8.00% and (c) Senior Notes: 10.625%.
(10) Represents the reduction of income tax to record the income tax benefit
related to pro forma adjustments for the Associates management fees and
incremental interest expense, computed using an effective income tax
rate of 40.0%. No tax benefit was provided relating to the pro forma
adjustment for the incremental amount of goodwill amortization relating
to the JWCAC acquisition of the Company, since such amounts will not be
deductible for income tax purposes.
(11) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest
expense, amortization of deferred financing cost and 20% of the rent
expense from operating leases which the Company believes is a
reasonable approximation of the interest included in the rent.
(12) Represents the reduction of certain corporate general and
administrative cost and merchandising costs as a result of closing the
corporate office for Country General and consolidating these functions
at the Central Tractor corporate office. Cost savings include the
elimination of staff and corporate management, reduced building costs
and outside services.
Thirty Nine Weeks
Year Ended Ended
November 2, 1996 August 2, 1997
Cost savings 4,247 3,185
----- -----
(13) Represents the incremental amount of goodwill amortization (over a
period of 40 years) as a result of the increase in goodwill
attributable to the acquisition of Country General by the Company;
proportionate for the thirty nine weeks ended August 2, 1997.
F-16
<PAGE>
(14) Represents the incremental amount of interest expense to the CG
acquisition computed as follows:
<TABLE>
<CAPTION>
Thirty Nine Weeks
Year Ended Ended
November 2, 1996 August 2, 1997
<S> <C> <C>
Interest expense related to incremental debt:
Senior Revolving Credit Facility $ 4,425 $ 2,485
Senior Term Note 4,000 3,000
------- -------
8,425 5,485
Less interest on outstanding debt (6,344) (3,569)
------- -------
Pro Forma adjustment $ 2,081 $ 1,916
------- -------
</TABLE>
Interest expense related to the New Revolving Credit Facility is
determined based on an annual average of approximately $53,633 of
borrowings outstanding for the year ended November 2,1996 and $40,156
for the period ended August 2, 1996. Interest was calculated using the
following average rates: (a) Revolving Credit Facility: 8.25% (b) New
term loan: 8.00%
(15) Represents the additional income tax to record the income tax benefit
related to pro forma adjustments for incremental goodwill and interest
expense, computed using an effective income tax rate of 40%.
(16) Represents the additional income tax to record the income tax benefit
related to pro forma adjustments, computed using an effective income
tax rate of 40%.
F-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.
CENTRAL TRACTOR FARM & COUNTRY, INC.
/s/ Dean Longnecker
By: Dean Longnecker
Executive Vice President and
Chief Operations Officer
Date: September 16, 1997
3
