UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: November 20, 1998
Anicom, Inc.
-----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-25364 36-3885212
--------------------------- ----------- -----------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.
6133 North River Road, Suite 1000, Rosemont, Illinois 60018
----------------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 518-8700
<PAGE>
The undersigned registrant, in order to provide the financial statements
required to be included in the Current Report on Form 8-K dated October 5, 1998
in connection with the acquisition of substantially all the assets of Texcan
Cables Inc., Texcan Cables International, Inc. and Texcan Cables Limited (the
"Texcan Entities"), hereby amends the following item, or other portions of such
Current Report on Form 8-K set forth in the pages attached hereto.
Item 7. Financial Statements and Exhibits
- --------------------------------------------
The financial statements and information in the following table of contents and
attached hereto are hereby filed with the Commission in accordance with the
above referenced item.
1
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
The following financial statements of the Texcan Entities, are
submitted herewith on the indicated pages.
Page
----
Auditors' Report 8
Combined Balance Sheets as of March 31, 1998 and 1997 9
Combined Statements of Earnings for the years ended
March 31, 1998, 1997 and 1996 10
Combined Statements of Retained Earnings (Deficit)
for the years ended March 31, 1998, 1997 and 1996 11
Combined Statements of Cash Flows
for the years ended March 31, 1998, 1997 and 1996 12
Notes to Combined Financial Statements 13
(b) Pro Forma Financial Information
The following unaudited pro forma condensed combined financial
information of Anicom, Inc., the Texcan Entities and Other
Acquisitions were filed in the Registrant's report on Form 8-K/A dated
October 29, 1998.
Pro forma Unaudited Condensed Combined Financial
Information *
Pro forma Unaudited Condensed Combined Balance Sheet as
of June 30, 1998 *
Notes to Pro Forma Unaudited Condensed Combined Balance
Sheet, June 30, 1998 *
Pro Forma Unaudited Condensed Combined Statement of
Income for the six months ended June 30, 1998 *
Notes to Pro Forma Unaudited Condensed Combined
Statement of Income for the six months ended June 30,
1998 *
Pro Forma Unaudited Condensed Combined Statement of
Income for the year ended December 31, 1997 *
Notes to Pro Forma Unaudited Condensed Combined
Statement of Income for the year ended December 31,
1997 *
____________________________________
* Incorporated by reference to the Company's Current
Report on Form 8-K/A dated October 29, 1998.
2
<PAGE>
(c) Exhibits
2.1** Asset Purchase Agreement by and among Anicom, Inc., Anicom
Multimedia Wiring Systems Incorporated, Texcan Cables Inc.,
Texcan Cables International, Inc., and Texcan Cables Limited,
dated as of September 21, 1998.
4.1** Certificate of Designations, Preferences and Rights of Series
B convertible preferred stock of Anicom, Inc.
4.2** Registration Rights Agreement by and between Anicom, Inc.,
Texcan Cables Inc., and Texcan Cables Limited, dated September
21, 1998.
23.1 Consent of KPMG LLP.
____________________________________
** Incorporated by reference to the same Exhibit number of the
Company's Current Report on Form 8-K dated October 5, 1998.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ANICOM, INC.
Dated: November 20, 1998 By: /S/DONALD C. WELCHKO
-------------------------
Donald C. Welchko
Vice President,
Chief Financial Officer
4
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
5
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Combined Financial Statements
Years ended March 31, 1998, 1997 and 1996
6
<PAGE>
INDEX
Page
----
Auditors' Report 8
Combined Financial Statements
Combined Balance Sheets 9
Combined Statements of Earnings 10
Combined Statements of Retained Earnings (Deficit) 11
Combined Statements of Cash Flows 12
Notes to Combined Financial Statements 13
7
<PAGE>
AUDITORS' REPORT TO THE DIRECTORS
We have audited the combined balance sheets of Texcan Cables Inc. and Texcan
Cables Limited (collectively the "Company") as at March 31, 1998 and 1997 and
the combined statements of earnings, retained earnings (deficit) and cash flows
for each of the years in the three year period ended March 31, 1998. These
combined 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 an audit to obtain
reasonable assurance 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.
In our opinion, these combined financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 1998
and 1997 and the results of its operations and its cash flows for each of the
years in the three year period ended March 31, 1998, in accordance with
generally accepted accounting principles in the United States.
/S/KPMG LLP
Chartered Accountants
Richmond, Canada
August 25, 1998 except as to note 12 which is as of September 21, 1998
8
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Combined Balance Sheets
(Expressed in United States Dollars)
March 31, 1998 and 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
March 31, March 31,
1998 1997
- ---------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets
Cash $ 10,280,856 $ 5,927,177
Accounts receivable, less allowance for doubtful accounts of
$465,886 and $161,071 respectively 16,979,309 18,738,304
Inventories 24,079,699 22,228,945
Prepaid expenses 476,048 350,553
- ---------------------------------------------------------------------------------------------------------------
51,815,912 47,244,979
Due from affiliated company (note 2) 873,927 435,290
Investments (note 4) 1,146,351 1,178,525
Property, plant and equipment (note 3) 1,671,311 1,671,503
Deferred income taxes (note 11) 67,263 51,796
Goodwill 42,259 57,787
- ---------------------------------------------------------------------------------------------------------------
$ 55,617,023 $ 50,639,880
- ---------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity
Current liabilities
Short-term notes payable (note 5) $ 22,023,591 $ 20,216,610
Accounts payable and accrued liabilities 8,777,353 11,173,902
Customer deposits 899,758 1,141,081
Taxes payable 961,544 99,261
Due to affiliated companies (note 7) 1,564,580 119,845
Current portion of obligation under capital lease (note 6) 89,369 130,993
- ---------------------------------------------------------------------------------------------------------------
34,316,195 32,881,692
Obligations under capital lease (note 6) 56,695 150,678
Note payable to parent company (note 8) 917,870 941,341
Commitments (note 10)
Stockholder's equity
Authorized - Texcan Cables Limited
Unlimited number of:
Class A voting common shares without par value
Class B non-voting shares without par value
Class C non-voting preferred shares carrying a non-cumulative
dividend entitlement of 3% per annum and redeemable at an option
of shareholder or at the option of the Company at a redemption
price of $1,000 per share (note 9)
Issued - Texcan Cables Limited
101 Class A voting common shares 12,805,145 12,805,145
Authorized - Texcan Cables Inc.
200,000 shares of common stock at a par value of $1 per share
1,000,000 shares of non-cumulative 8% preferred stock at a par
value of $1 and redeemable at $1 (note 9)
Issued - Texcan Cables Inc.
195,000 (1997 - 150,000) common shares 2,545,015 2,545,015
Retained earnings 5,508,517 1,428,933
Accumulated other comprehensive income
Cumulative translation adjustments (532,414) (112,924)
- ---------------------------------------------------------------------------------------------------------------
20,326,263 16,666,169
Subsequent event (note 12)
- ---------------------------------------------------------------------------------------------------------------
$ 55,617,023 $ 50,639,880
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Combined Statements of Earnings
(Expressed in United States Dollars)
Years ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 121,887,240 $ 108,760,477 $ 98,639,131
Cost of sales 98,011,892 87,510,291 79,814,264
- ----------------------------------------------------------------------------------------------------------------
Gross profit 23,875,348 21,250,186 18,824,867
Selling, general and administrative 16,687,685 15,805,409 14,160,773
Depreciation and amortization 700,976 546,761 426,957
Management fee (note 8) 149,679 154,298 177,122
Large corporation tax 57,063 52,483 52,872
- ----------------------------------------------------------------------------------------------------------------
17,595,403 16,558,951 14,817,724
- ----------------------------------------------------------------------------------------------------------------
Operating income 6,279,945 4,691,235 4,007,143
Other income (expense)
Interest and bank charges (861,313) (910,325) (872,726)
Foreign exchange gain (loss) (147,370) 108,526 259,473
Other income (expense) 57,684 (256,355) -
- ----------------------------------------------------------------------------------------------------------------
(950,999) (1,058,154) (613,253)
- ----------------------------------------------------------------------------------------------------------------
Earnings before income taxes 5,328,946 3,633,081 3,393,890
Income taxes (recovery)
Current 1,264,829 256,332 47,232
Deferred (15,467) 3,646 1,206,418
- ----------------------------------------------------------------------------------------------------------------
1,249,362 259,978 1,253,650
- ----------------------------------------------------------------------------------------------------------------
Net earnings $ 4,079,584 $ 3,373,103 $ 2,140,240
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
10
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Combined Statements of Retained Earnings (Deficit)
(Expressed in United States Dollars)
Years ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retained earnings (deficit), beginning of year $ 1,428,933 $ (1,944,170) $ 10,886,115
Net earnings 4,079,584 3,373,103 2,140,240
Dividends paid - - (14,970,525)
- ---------------------------------------------------------------------------------------------------------------
Retained earnings (deficit), end of year $ 5,508,517 $ 1,428,933 $ (1,944,170)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
11
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Combined Statements of Cash Flows
(Expressed in United States Dollars)
Years ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
<S> <C> <C> <C>
Operating activities
Net earnings $ 4,079,584 $ 3,373,103 $ 2,140,240
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 700,976 546,761 426,957
Deferred income taxes (15,467) 3,646 1,206,418
Changes in operating assets and liabilities
Accounts receivable 1,758,995 (5,780,586) 1,812,605
Inventories (1,850,754) (2,803,259) (2,270,545)
Prepaid expenses (125,495) (75,277) (8,362)
Accounts payable and accrued liabilities (2,396,549) 2,921,540 6,703
Customer deposits (241,323) (184,965) (8,430)
Taxes payable 862,283 98,661 -
- ----------------------------------------------------------------------------------------------------------------
2,772,250 (1,900,376) 3,305,586
Investing activities
Proceeds from sale of investment 32,174 414,396 -
Purchase of investment - - (1,111,344)
Purchase of property, plant and equipment (661,791) (1,008,246) (740,794)
- ----------------------------------------------------------------------------------------------------------------
(629,617) (593,850) (1,852,138)
Financing activities
Principal payments on short-term notes payable to
bank (4,754,816) - (952,439)
Proceeds from issuance of short-term notes payable
from bank 6,561,797 9,145,962 282,142
Borrowings from affiliated companies 1,140,812 75,699 44,147
Repayments to affiliated companies (41,490) - -
Borrowings from parent company - - 1,454,472
Repayments to parent company - (328,705) (184,426)
Borrowings to affiliated company (244,603) (435,290) (376,532)
Repayments from affiliated company 630,540 376,532 14,839
Payments on capitalized lease obligations (135,607) (51,394) (16,396)
Increase (decrease) in share capital - (349,149) 12,917,419
Dividends paid - - (14,970,525)
- ----------------------------------------------------------------------------------------------------------------
3,156,633 8,433,655 (1,787,299)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 5,299,266 5,939,429 (333,851)
Translation adjustment (945,587) (272,981) 351,477
Cash, beginning of year 5,927,177 260,729 243,103
- ----------------------------------------------------------------------------------------------------------------
Cash, end of year $ 10,280,856 $ 5,927,177 $ 260,729
- ----------------------------------------------------------------------------------------------------------------
Supplemental cash flow information
Cash paid for interest $ 802,005 $ 749,755 $ 851,296
Cash paid for income taxes $ 386,202 $ 153,603 $ 47,090
</TABLE>
See accompanying notes to combined financial statements.
12
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
1. Significant accounting policies
(a) General description
Texcan Cables Limited (formerly 3225194 Canada Inc.) was incorporated on
February 5, 1996 under the laws of Canada, 234711 Canada Inc. (formerly
Texcan Cables Limited) was incorporated on September 9, 1977 under the laws
of Canada, Texcan Cables Inc., was incorporated on June 24, 1986 under the
laws of Nevada and Texcan Cables International, Inc. was incorporated on
April 29, 1996 under the laws of Nevada. The principal business activity is
the distribution of wire, cable and data products.
On March 31, 1996, Texcan Cables Limited (formerly 3225194 Canada Inc.)
acquired all of the assets and liabilities of 234711 Canada Inc. (formerly
Texcan Cables Limited), an entity under common control, for a note payable.
This transaction has been recorded at historical cost in a manner similar
to a pooling of interest.
(b) Combination and basis of presentation
The combined financial statements are prepared in accordance with U.S.
generally accepted accounting principles and are presented in U.S. dollars.
These combined financial statements include the consolidated financial
statements of Texcan Cables Limited, which includes its wholly-owned
subsidiary, Taseko Resources Inc. and its predecessor company 234711 Canada
Inc. and the consolidated financial statements of Texcan Cables Inc. which
include its wholly-owned subsidiary, Texcan Cables International, Inc. All
of these companies are wholly-owned subsidiaries of Tricontinental
Industries Inc. which is a Canadian company. All intercompany balances and
transactions have been eliminated.
(c) 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, particularly
accounts receivable, inventory, capital and other 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 the estimates.
(d) Inventories
Inventories, which consist primarily of finished goods, include wire, cable
and reels and are valued at the lower of cost, computed at the weighted
average, and net realizable value.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided
at the following straight-line rates per annum:
Furniture, fixtures and equipment 20 - 33 1/3%
Equipment held under capital lease 20%
13
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
1. Significant accounting policies, continued
(e) Property, plant and equipment, continued
Leasehold improvements are amortized on a straight-line basis over the term
of the lease.
Depreciation is pro-rated for the number of months in the year of addition.
(f) Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts to existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(g) Translation of foreign currencies
Assets and liabilities of foreign operations are translated from the
functional currency into U.S. dollars at the rate of exchange in effect at
the balance sheet date. Income and expense items are translated at rates
prevailing during the year. Gains and losses resulting from foreign
currency transactions are reflected in income for the year.
(h) Revenue recognition
Revenue is recoginzed when the product is shipped less provisions for
returns and allowances.
(i) Customer deposits
Texcan Cables Limited sells cable on company-owned reels on which it takes
a refundable deposit from its customers. It is the Company's practice to
take into income the difference between its cost and the deposit amount for
reels that have not been returned. The recognition of reel deposits as
sales is based on historical experience as to when returns are made, which
does not exceed fifteen months. At March 31, 1998 reel deposits from
customers not yet included in income amounted to $899,758 (1997 -
$1,141,081) which had a cost included in reel inventory of $516,247 (1997 -
$616,184).
(j) Accumulated other comprehensive loss
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("Statement 130"), which establishes standards for reporting and disclosure
of comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. Statement
130 is effective for fiscal years beginning after December 15, 1997 and
requires reclassification of financial statements for earlier periods to be
provided for comparative purposes. The Company has not determined the
manner in which it will present the information required by Statement 130
in its annual financial statements.
14
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
(k) Fair value of financial instruments
Carrying amounts of certain of the Company's financial instruments,
accounts receivable and accounts payable and accrued liabilities
approximate fair value due to their short maturities. Based on borrowing
rates currently available to the Company for loans with similar terms, the
carrying value of its long-term debt approximates fair value.
The fair value of balances due to and from affilitated companies are not
determinable due to their related party nature.
(l) Comparative figures
Certain of the prior year's figures have been reclassified to conform with
the current year's presentation.
2. Due from affiliated company
Due from affiliated company is from the parent company, bears interest at
9% per annum with no fixed terms of repayment and represents cash payments
to and cash payments from the parent company.
3. Property, plant and equipment
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Furniture, fixtures and equipment $ 2,502,481 $ 3,628,341
Leasehold improvements 496,472 400,479
Equipment held under capital lease 686,391 1,516,671
----------------------------------------------------------------------------------------------------------
3,685,344 5,545,491
Less accumulated depreciation and amortization (2,014,033) (3,873,988)
----------------------------------------------------------------------------------------------------------
$ 1,671,311 $ 1,671,503
----------------------------------------------------------------------------------------------------------
</TABLE>
Equipment held under capital lease includes computer, warehouse and office
equipment. During the year, Texcan Cables Inc. and Texcan Cables Limited
charged depreciation expense on equipment held under capital lease which
amounted to $3,937 (1997 - $6,482; 1996 - $17,699) and $97,103 (1997 -
$53,281; 1996 - $41,673) respectively.
15
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
4. Investments
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment in 123,296 preferred shares
of Taseko Resources Inc., a wholly-owned subsidiary of
Taseko Mines Limited, the latter being a public company $ 1,146,351 $ 1,178,525
----------------------------------------------------------------------------------------------------------
</TABLE>
The Company accounts for its investment on the lower of cost or net
realizable value.
5. Short-term notes payable
Short-term notes payable consists of:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. funds, interest at U.S. base prime plus 1/4% $ - $ 4,725,021
Cdn funds, interest at Cdn prime plus 1/4% (4.81%
at March 31, 1998) 4,034 33,830
Demand loan - Cdn funds, interest at rates based on
Cdn prime (4.81% at March 31, 1998) 6,745,977 6,791,974
Demand loan - U.S. funds, interest at U.S. base prime
(4.95% at March 31, 1998) 2,413,036 720,105
Banker's acceptances - Cdn funds, 91 day term, expires
June 18, 1998, bears interest at 5.6% 7,747,570 7,945,680
Banker's acceptances - Cdn funds, 62 day term, expires
April 7, 1998, bears interest at 5.69% 2,112,974 -
LIBOR - U.S. funds, 60 day term, expires April 3, 1998,
bearing interest at 6.38% 3,000,000 -
- ---------------------------------------------------------------------------------------------------------------
$ 22,023,591 $ 20,216,610
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Short-term notes payable are secured by a general assignment of book debts
and inventory, and guarantees and postponement of claims from each of the
Company and the parent company.
6. Obligations under capital lease
The Company leases warehouse equipment which is accounted for as a capital
lease.
---------------------------------------------------------------------------
1999 $ 98,738
2000 45,088
2001 12,293
2002 3,413
---------------------------------------------------------------------------
Total minimum lease payments 159,532
Less amount representing interest at 9.8% - 13% (13,468)
---------------------------------------------------------------------------
Present value of minimum lease payments 146,064
Less current portion (89,369)
---------------------------------------------------------------------------
$ 56,695
---------------------------------------------------------------------------
16
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
7. Due to affiliated companies
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due to affiliated company, TCL Resources Ltd. (a company
under common control with the parent company)
non-interest bearing with no specific terms of repayment $ 348,400 $ -
Payable to affiliated companies, TCL Resources Ltd. (a
company under common control with the parent company)
and Tricontinental Industries Ltd. (the parent company),
non-interest bearing, with no fixed terms of repayment 131,520 119,845
Note payable to affiliated company, TCL Resources Ltd. (a
company under common control with the parent company)
is due on demand and bears interest at the
Royal Bank prime rate plus 1% per annum
(4.5% at March 31, 1998) 1,084,660 -
----------------------------------------------------------------------------------------------------------
$ 1,564,580 $ 119,845
----------------------------------------------------------------------------------------------------------
</TABLE>
The amounts due to affiliated company represent cash transactions and are
unsecured.
8. Note payable to parent company
The note payable to Tricontinental Industries Ltd. bears interest at 9% per
annum and includes management fees and cash transactions.
Management fees of $149,679 (1997 - $154,298; 1996 - $177,822) were to the
parent company.
9. Share capital
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issued - Texcan Cables Limited
101 Class A voting common shares $ 12,805,145 $ 12,805,145
Issued - Texcan Cables Inc.
195,000 (1997 - 150,000) common shares 2,545,015 2,545,015
----------------------------------------------------------------------------------------------------------
$ 15,350,160 $ 15,350,160
----------------------------------------------------------------------------------------------------------
</TABLE>
At February 2, 1998, 45,000 shares were issued by Texcan Cables Inc. to
Texcan Cables Limited and have been eliminated in these combined financial
statements.
17
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
10. Commitments
The Company has operating leases for the rental of their premises.
Future minimum payments, by year and in aggregate, under operating leases
are as follows:
1999 $ 957,789
2000 898,170
2001 780,796
2002 586,420
2003 509,968
---------------------------------------------------------------------------
Total minimum lease payments $ 3,733,143
---------------------------------------------------------------------------
During the year, Texcan Cables Limited and Texcan Cables Inc. incurred a
rental expense for premises which amounted to $481,582 (1997 - $706,556;
1996 - $702,947).
11. Income taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Years ended March 31,
----------------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Canada $ 1,173,317 $ 240,666 $ 47,232
United States 91,512 15,666 -
----------------------------------------------------------------------------------------------------------
1,264,829 256,332 47,232
Deferred
Canada (15,467) 3,646 1,206,418
----------------------------------------------------------------------------------------------------------
Income tax provision $ 1,249,362 $ 259,978 $ 1,253,650
----------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
TEXCAN CABLES LIMITED
TEXCAN CABLES INC.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
- --------------------------------------------------------------------------------
11. Income taxes, continued
The following is a reconciliation of the provision for income taxes
computed at the federal and provincial statutory rates to the provision for
income taxes reported for the years ended March 31, 1998, 1997 and 1996.
Income tax expense varies from the amounts that would be computed by
applying the Canadian federal and provincial income tax rate of 45.6% (1997
- 45.6%; 1996 - 45.6%) to earnings before income taxes as shown in the
following table:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Combined Canadian federal and provincial
income taxes at statutory rate $ 2,429,999 $ 1,656,685 $ 1,547,614
Utilization of non-capital losses carried forward (315,766) - -
Utilization of net operating losses carried forward (207,367) (291,568) (122,489)
Permanent differences (1,104,396) (1,577,709) (248,992)
Other 459,703 474,763 77,517
Difference in tax rates (12,811) (2,193) -
----------------------------------------------------------------------------------------------------------
$ 1,249,362 $ 259,978 $ 1,253,650
----------------------------------------------------------------------------------------------------------
</TABLE>
Permanent differences relates to the allocation of Canadian exploration
development expenditures from an investment held by the Company.
Other consists primarily of Large Corporation tax and non-deductible
portion of meals and entertainment.
At March 31, 1998 and 1997 deferred income tax assets and liabilities
consisted of the following components:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Non-capital loss carryforward $ - $ 315,766
Net operating loss carryforward - 192,762
Capital leases 90,584 166,285
Other 42,162 -
Less valuation allowance - (566,102)
----------------------------------------------------------------------------------------------------------
132,746 108,711
Deferred tax liabilities
Tax depreciation in excess of accounting 38,702 21,057
Tax paid reserves 26,781 35,858
----------------------------------------------------------------------------------------------------------
65,483 56,915
-----------------------------------------------------------------------------------------------------------
$ 67,263 $ 51,796
----------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
TEXCAN CABLES LIMITED
texcan cables inc.
Notes to Combined Financial Statements, Continued
(Expressed in United States Dollars)
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12. Subsequent event
On September 21, 1998, Anicom, Inc. purchased substantially all of the
assets of Texcan Cables Inc., Texcan Cables International, Inc. and Texcan
Cables Limited, (collectively, the "Texcan Entities"). The assets acquired
include all property and assets used in the conduct of Texcan's wire, cable
and data product distribution business, including inventory, accounts
receivable, equipment, the name "Texcan Cables" and the goodwill associated
therewith.
Anicom, Inc. paid the Texcan Entities at the closing an aggregate purchase
price consisting of 1,403,509 shares of its common stock, 20,000 shares of
Series B convertible redeemable preferred stock, which are convertible into
an additional 1,403,508 shares of its common stock, and approximately U.S.
$27 million in cash. In addition, Anicom assumed approximately U.S. $12
million of bank debt.
20
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
Anicom, Inc.
We consent to incorporation by reference in the registration statement
(No. 333-61715) on Form S-3, registration statements (No. 333-50641, 333-41225,
333-30791 and 333-14719) on Form S-3/A and registration statements (No.
333-61719, 333-34357 and 333-10602) on Form S-8 of Anicom, Inc. of our report
dated August 25, 1998, except as to Note 12 which is as of September 21, 1998,
with respect to the combined balance sheets of Texcan Cables Inc. and Texcan
Cables Limited (collectively the "Company") as of March 31, 1998 and 1997 and
the related combined statements of earnings, retained earnings (deficit) and
cash flows for each of the years in the three year period ended March 31, 1998,
which report appears in the Form 8-K/A (Amendment No. 2) of Anicom, Inc. dated
November 20, 1998.
/S/KPMG LLP
Chartered Accountants
Richmond, Canada
November 20, 1998
