<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
June 29, 1998
Date of report (Date of earliest event reported)
MACKIE DESIGNS INC.
(Exact Name of Registrant as Specified in Its Charter)
Washington 0-26524 91-1432133
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification Number)
Incorporation)
16220 Wood-Red Road, N.E.
Woodinville, Washington 98072
(Address of Principal Executive Offices) (Zip Code)
(425) 487-4333
(Registrant's Telephone Number,
Including Area Code)
Former Name or Former Address, if Changed Since Last Report: N/A
<PAGE>
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by
Mackie Designs Inc. on July 14, 1998 solely to add the financial statements of
the business acquired required by Item 7(a) and the pro forma financial
information required by Item 7(b).
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(a) Financial Statements of the Business Acquired
The required financial statements of the business acquired are set forth below.
<PAGE>
RCF SPA AND SUBSIDIARIES
Combined Financial Statements
With Independent Auditor's Report Thereon
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditor's Report F-1
Consolidated Financial Statements at December 31, 1997 and 1996
Consolidated Balance Sheets F-2
Consolidated Statements of Earnings F-3
Consolidated Statements of Cash Flows F-4
Notes to Consolidated Financial Statements F-5
Notes to Consolidated Accounts F-6
Consolidated Financial Statements at March 31, 1998
Consolidated Balance Sheets F-7
Consolidated Statements of Income F-8
Consolidated Statements of Cash Flows F-9
Notes to Consolidated Financial Statements F-10
</TABLE>
<PAGE>
F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Radio Cine Forniture (RCF) S.p.A.
Via G.Notari 1/A
42029 S.Maurizio (RE)
We have audited the accompanying consolidated balance sheets of Radio Cine
Forniture (RCF) S.p.A. (an Italian corporation), and subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of earnings 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 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 Radio Cine
Forniture (RCF) S.p.A. and subsidiaries as of December 31, 1997 and 1996, and
the consolidated results of their operations and their consolidated cash-flows
for the years then ended, in conformity with accounting principles generally
accepted in the U.S.A.
Milan, March 27, 1998
GRANT THORNTON S.p.A.
Carlo Andreis
(Partner)
<PAGE>
F-2
RCF SPA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1997 AND 1996
(AMOUNTS EXPRESSED IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ------
<S> <C> <C>
CURRENT ASSETS:
Cash 1,182 1,261
Securities 816 791
Accounts and other receivables, net 29,165 23,425
Inventory 28,113 22,746
Prepayments 380 395
Deferred taxes 874 967
------ ------
60,530 49,585
------ ------
BONDS AND OTHER NON-CURRENT ASSETS 6,435 5,352
PROPERTY, PLANT AND EQUIPMENT 9,818 8,596
OTHER ASSETS 967 1,166
DEFERRED TAXES 804 1,280
------ ------
TOTAL ASSETS 78,554 65,979
------ ------
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Banks and other financers 24,583 17,578
Current maturities of long term loans 2,008 1,405
Accounts payable 17,915 14,014
Taxes payable 1,372 865
Other payables and accrued expenses 5,252 4,398
------ ------
51,130 38,260
------ ------
LONG TERM DEBTS 15,051 15,051
AGENTS TERMINATION INDEMNITY 1,053 944
EMPLOYEES SEVERANCE INDEMNITY 5,946 5,612
DEFERRED TAXES 424 187
DEFERRED INCOME: GOVERNMENT GRANTS 233 250
OTHER NON CURRENT LIABILITIES 91 310
MINORITY INTERESTS 112 208
SHAREHOLDERS' EQUITY:
Share capital 2,600 2,600
Retained earnings 2,226 2,346
Profit of the year (312) 211
------ ------
4,514 5,157
------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 78,554 65,979
------ ------
------ ------
</TABLE>
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE SHEETS
<PAGE>
F-3
RCF SPA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996
(AMOUNTS EXPRESSED IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Net sales 77,708 66,649
Other income 2,335 1,344
------ ------
TOTAL NET SALES 80,043 67,993
------ ------
COSTS AND EXPENSES:
Purchase and inventory variance 30,888 26,276
Third parties services 18,537 15,226
Personnel 19,239 18,350
Depreciation and amortization 1,890 1,723
Other operating expenses 4,642 3,811
------ ------
TOTAL COST AND EXPENSES 75,196 65,386
------ ------
OPERATING PROFIT 4,847 2,607
INTEREST CHARGES 3,156 2,648
OTHER INCOME 1,306 192
OTHER EXPENSES 1,219 103
------ ------
PROFIT BEFORE TAXES AND MINORITY
INTERESTS 1,778 48
TAXES:
Current (1,394) (528)
Deferred (654) 652
MINORITY INTERESTS (42) 39
------ ------
NET PROFIT (LOSS) (312) 211
------ ------
------ ------
</TABLE>
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED INCOME STATEMENTS
<PAGE>
F-4
RCF SPA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 1997 AND 1996
(AMOUNTS EXPRESSED IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities
NET INCOME (LOSS) (312) 211
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,890 1,723
Provision for severance employees indemnity 966 932
Provision for agent termination indemnity 96 124
Other provision 46 310
Gain (loss) on sale of property, plant and equipment (710) (50)
Changes in operating assets and liabilities:
Accounts and other receivables net (5,740) (1,440)
Inventories (5,367) (3,302)
Prepayments 15 (102)
Deferred taxes 806 (746)
Other non current assets (362) 43
Accounts payable and accrued expenses 5,262 (1,159)
Deferred income: Government grant (17) (49)
Other non current liabilities (219) (65)
------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,334) (3,781)
Cash flows from investing activities:
Acquisitions of property, plant and equipment (3,679) (3,589)
Acquisitions of securities and bonds (755) (640)
Acquisitions of software, advertising, and other intangibles (208) (912)
Proceeds from sale of property, plant and equipment 1,684 91
Other (19) 30
------ ------
NET CASH USED IN INVESTING ACTIVITIES (2,977) (5,020)
Cash flows from financing activities:
Increase (decrease) in bank indebtedness 7,005 8,626
Increase (decrease) in securities and bonds (755) (640)
Payment of severance indemnities (632) (900)
Payment of other indemnities (33) (140)
Repayment of long term loans (1,631) (2,027)
Distribution of dividend (312) (312)
Proceeds from long term loans 2,243 3,451
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,640 8,698
DECREASE IN MINORITY INTEREST ( 96) (67)
------ ------
NET INCREASE (DECREASE) IN CASH (79) 41
Cash at beginning of the year 1,261 1,220
------ ------
CASH AT THE END OF THE YEAR 1,182 1,261
------ ------
------ ------
</TABLE>
<PAGE>
F-5
R.C.F. S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
CONSOLIDATION AREA AND PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
Consolidation area was determined by referring to the legal control which the
Holding itself exercises over the Companies in the Group. Thus, the
consolidated financial statements are made up of the financial statements of
R.C.F. - Radio Cine Forniture S.p.A. (Parent Company), together with those of
the subsidiaries in which the Parent Company holds the majority vote. These are
consolidated on a line-by-line basis. Apart from the Parent Company, the
consolidation at 31 December, 1997, includes the following Companies:
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY % OF GROUP INTEREST
- ------------------ -------------------
1997 1996
---- ----
<S> <C> <C>
AVM S.r.l. 99,976 99,976
Electronica International S.r.l. 100 100
R.C.F. Artesuono S.r.l. 99,778 99,778
R.C.F. France SA 9,993 52
R.C.F. Electronics (U.K.) Ltd. 70 70
R.C.F. North America Inc. 100 100
R.C.F. China Ltd. 99 99
</TABLE>
The financial statements at 31 December, 1997, utilised for the consolidation
are those formulated by the Companies' Board of Directors, except for the
accounts of R.C.F. North America Inc., which have been adjusted for
consolidation purposes of approximately Lit. 174 millions (Lit. 201 millions at
31 December, 1996), represented by start-up expenses, not deferred in subsidiary
statutory accounts, but reflected in intangible assets in the consolidated
financial statements.
In addition, statutory consolidated financial statements have been adjusted, and
presented in a different format, to reflect accounting principles generally
accepted in the USA.
The effect of this adjustment is disclosed in the following notes.
<PAGE>
CONSOLIDATION PRINCIPLES
The most important principles applied, are as follows:
a) ELIMINATION OF INVESTMENTS
Carrying value of investments is eliminated in consolidation by
offsetting the related shareholders' equity without any consolidation
differences.
Assets and liabilities of the subsidiaries are consolidated on a
line-by-line basis.
b) TRANSACTIONS BETWEEN GROUP COMPANIES AND MINORITY INTERESTS
- Any significant intercompany receivables, payables, revenues and
expenses arising between Companies consolidated on a line-by-line basis,
are eliminated.
- Dividends from Companies within the Group have been eliminated.
- The portion of the shareholders' equity attributable to minority
interests has been stated separately in the liabilities section of the
balance sheet and the net profit pertaining to minority shareholders has
been recorded separately in the income statement.
c) CONVERSION INTO LIRE OF THE SUBSIDIARIES' FINANCIAL STATEMENTS EXPRESSED IN
FOREIGN CURRENCY
Assets and liabilities of foreign subsidiaries are translated into
Italian Lire at year-end exchange rates. Income and expense items are
translated at the average rates of exchange prevailing during the year, and
the resulting unrealised profit on conversion, the amount of which is not
significant, is charged to operations.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The companies follow the accrual basis of accounting in preparing their
financial statements.
The overall valuation policy follows the historical cost convention. The most
important accounting principles adopted for the preparation of consolidated
financial statements at 31 December 1997, are summarised below. These have been
applied consistently with those of the previous year.
- - SECURITIES AND BONDS
Securities and bonds are valued at the lower of cost and market price.
- - INVENTORIES
Inventories are stated at the lower of cost, basically determined by the
weighted average method, or
<PAGE>
market.
- - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
over the estimated useful lives of the related assets, using in straight
line method.
Maintenance and repairs are charged to operations when incurred. Betterment
and renewals are capitalised.
When property, plant, and equipment are sold or otherwise disposed of, the
asset account and related accumulated depreciation account are relieved and
any gain or loss is included in operations.
- - OTHER ASSETS
Deferred changes are stated at cost, and are amortised using the
straight-line method over a five years period.
- - CURRENCY TRANSLATIONS
Gains and losses from foreign currency transaction denominated in a
currency other than Italian Lire are included in the results of operations.
- - PROVISION FOR TAXES, CURRENT AND DEFERRED
The group has operations in various countries which have differing tax laws
and rates. Consequently, the effective tax rate on consolidated income may
vary from year to year, according to the source of earnings. Corporate
income tax rate in Italy is 53.2% for the year up to December 31, 1997 and
will be 41.25%, on a different basis of computation, from January 1, 1998
(IRPEG 37% and IRAP 4.25%).
Statutory accounts of Group Companies do not include deferred income tax
assets which should be computed annually for differences between the
financial statement and tax basis of assets and liabilities that will
result in taxable or deductible amounts in future years.
In accordance with a conservative approach due to uncertainties of future
recoverability of these assets, consolidated financial statements do not
reflect any deferred tax assets, except for those arising from
consolidation entries and adjustments made to reflect accounting principles
generally accepted in the USA.
The tax provision for 1997 differs from the statutory rate of 53.2%
principally due to losses on consolidated subsidiaries not benefited in the
current period, permanent differences and effects of tax rate changes. The
tax provision for 1996 differs from the statutory tax rate principally due
to permanent differences and the tax effect of a special deduction
allowable only in 1996.
<PAGE>
- - EMPLOYEES SEVERANCE INDEMNITY
The provision is calculated to reflect the liability accrued for all
employees of the Group's Companies, as at December 31, 1997 and 1996, as
provided by law and by the relevant labour contract.
- - GOVERNMENT GRANTS
Government grants received for the purchase of fixed assets, are
recorded as equity account and charged to operations for 50% of total
amounts.
- - ACCRUALS AND PREPAYMENTS
The above are calculated on the basis of the period to which they
refer. The assessment of the accruals and prepayments has been agreed with
the Board of Statutory Auditors for the Group's Italian Companies.
<PAGE>
F-6
NOTES TO CONSOLIDATED ACCOUNTS
TRADE AND OTHER ACCOUNTS RECEIVABLE
Trade accounts receivable are reported net of an allowance for doubtful accounts
of Lit.1.125 millions and Lit. 798, at December 31, 1997 and 1996, respectively.
INVENTORIES
Inventories at December 31, 1997 and 1996, are composed as follows (amounts are
expressed in millions of Lire):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw material 11.845 10.152
Work-in-process 2.485 2.172
Finished goods 14.939 11.113
------- ------
29.269 23.437
Less provision for obsolete inventories (1.156) (691)
------- ------
Total 28.113 22.746
------- ------
------- ------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1997 and 1996, are composed as
follows (amounts are expressed in millions of Lire):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
COST
Land and buildings 6.932 7.091
Machinery and equipment 14.646 13.804
Other fixed assets 3.334 3.174
------- -------
24.912 24.069
Less accumulated depreciation (15.094) (15.473)
------- -------
Net book value 9.818 8.596
------- -------
------- -------
</TABLE>
<PAGE>
OTHER ASSETS
Other assets are as follows (amounts are expressed in millions of Lit.):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Advertising 519 527
Software 125 199
Start-up cost RCF North America Inc. 174 201
Licence and patents 13 34
Other 136 205
------ -----
Total 967 1.166
------ -----
------ -----
</TABLE>
LONG TERM DEBTS
Borrowings as of 31 December, 1997 and 1996, are the following (amounts are
expressed in millions of Lit.):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
- - Mortgages, at various rates of interest,
ranging from 3% to 9.4% 10.619 10.385
- - Other borrowings, at various rates of
interest, ranging from 7.35% to 14% 6.440 6.071
------ ------
17.059 16.456
Less: current portion - 2.008 - 1.405
------ ------
Total 15.051 15.051
------ ------
------ ------
</TABLE>
Following are maturities for each of the next five years (amounts in millions of
Lit.):
<TABLE>
<S> <C>
1998 3.338
1999 3.622
2000 2.050
2001 1.854
2002 1.753
------
Total 12.617
------
------
</TABLE>
RELATED PARTIES TRANSACTIONS
RCF S.p.A. during the year 1997 has made certain transactions with AEB S.r.l.,
the President and General Manager of which is the General Manager of RCF S.p.A..
RCF S.p.A. sold and
<PAGE>
purchased products to/from AEB during 1997, aggregating approximately 46
millions and Lit. 1.461 millions respectively. At December 31, 1997, payables
and receivables to/from AEB amount to respectively Lit. 523 millions and Lit.
31 millions.
The Subsidiary RCF North America Inc. is reimbursed for rent and general
expenses from Vesta Management Services Inc. ("VESTA"), 100% owned by a Director
and Secretary of the Company as of December 31, 1997. For the years 1997 and
1996, above costs amounted to approximately $143,000 and $22,000, respectively.
Included in the accounts payable at December 31, 1997, are $12,000 due to Vesta
and included in the accounts receivable at December 31, 1996, are $22,000 due
from Vesta.
RETAINED EARNINGS
Movements of this account in 1997 are as follows (amounts are expressed in
millions of Lire):
<TABLE>
<CAPTION>
MILLIONS OF LIRE
----------------
<S> <C>
Opening balance 2.557
Dividends (312)
Government grants 62
Write-off of Goodwill (81)
-----
Ending balance 2.226
-----
-----
</TABLE>
COMMITMENTS AND CONTINGENT LIABILITIES
The most important commitment and contingent liabilities, are the following
(millions of Lit.):
<TABLE>
<CAPTION>
- - Leasing payments to expire (capital quotes and interest) 1997 1996
---- ----
<S> <C> <C>
within one year 195 240
between two and five years 75 255
more than five years - -
---- ----
270 495
---- ----
---- ----
</TABLE>
<TABLE>
<CAPTION>
- - Commitment under operating leases
At December 31, 1997, Group Companies had annual
commitments under operating leases for office - and
warehouse space, as follows : 1997 1996
---- ----
<S> <C> <C>
within one year 10 -
between two and five years 235 110
more than five years 58 -
---- ----
303 110
---- ----
---- ----
</TABLE>
<PAGE>
F-7
RADIO CINE FORNITURE S.P.A.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998
(AMOUNTS EXPRESSED IN MILLIONS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 902,081
Marketable securities 702,672
Accounts receivable, less allowance for doubtful accounts 13,271,853
Inventories 15,811,934
Prepaid expenses and other current assets 476,931
Deferred taxes 531,396
------------
Total current assets 31,696,867
Property, plant and equipment, net of accumulated depreciation 5,729,272
Bonds and other assets 4,082,170
Deferred taxes 375,957
------------
Total assets $ 41,884,266
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,922,895
Bank line of credit and other short term debt 13,005,358
Commissions payable 957,756
Accrued payroll and related taxes 1,125,596
Other accrued liabilities 2,571,066
Taxes payable 1,508,724
Current portion of long term debt 1,446,337
------------
Total current liabilities 28,537,732
Long term debt 6,973,762
Employee severance and agent termination liabilities 3,612,412
Deferred taxes 231,652
Other deferred items 125,000
Minority interest 78,469
Shareholders' equity:
Common stock 1,420,765
Retained earnings 904,474
------------
Total shareholders' equity 2,325,239
------------
Total liabilities and shareholders' equity $ 41,884,266
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
F-8
RADIO CINE FORNITURE S.P.A.
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS EXPRESSED IN MILLIONS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1998 1997
<S> <C> <C>
Net sales $11,437,181 $ 9,891,040
Cost of goods sold 6,875,428 6,142,732
----------- -----------
Gross profit 4,561,753 3,748,308
Operating expenses:
Marketing and sales 2,053,865 2,034,515
Administrative 1,646,503 1,583,133
Research and development 228,616 263,239
----------- -----------
Total operating expenses 3,928,984 3,880,887
----------- -----------
Operating income 632,769 (132,579)
Interest expense (364,742) (376,847)
Other income 27,627 111,092
----------- -----------
Income before income taxes and minority interest 295,654 (398,334)
Income tax provision 229,122 14,605
----------- -----------
Income before minority interest 66,532 (412,939)
Minority interest (10,113) (22,947)
----------- -----------
Net income $ 56,419 $ (435,886)
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
F-9
MACKIE DESIGNS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 56,419 $ (435,886)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 435,642 424,293
Deferred income taxes 9,545 439,087
Termination indemnities (212,178) 177,222
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 2,665,306 (1,307,188)
Increase in inventory (449,639) (331,359)
Increase in prepaid expenses and other assets (269,280) (472,555)
Increase in accounts payable and accrued expenses 429,173 1,053,446
Increase in other items 15,638 53,523
------------ ------------
Net cash provided by operating activities 2,680,626 (399,416)
INVESTING ACTIVITIES
Purchases of marketable securities and long-term bonds (327,735) (1,127,395)
Purchases of furniture and equipment (784,244) (465,847)
------------ ------------
Net cash used in investing activities (1,111,979) (1,593,2424)
FINANCING ACTIVITIES
Net change in short-term debt (427,975) 1,834,277
Proceeds from long-term debt 18,721 --
Repayment of long-term debt (920,481) (201,143)
------------ ------------
Net cash provided by (used in) financing activities (1,329,735) 1,633,134
------------ ------------
Increase (decrease) in minority interest 17,266 (68,025)
Translation adjustments (20,013) (68,966)
------------ ------------
Net increase (decrease) in cash and cash equivalents 236,165 (497,515)
Cash and cash equivalents at beginning of period 665,916 829,606
------------ ------------
Cash and cash equivalents at end of period $ 902,081 $ 332,091
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
F-10
RADIO CINE FORNITURE S.P.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Radio Cine Forniture S.p.A.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial statements. Accordingly, they do
not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Company's management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation have been included. The
results of operations for the three month period ended March 31, 1998 are not
necessarily indicative of future financial results. For further information,
refer to the Company's financial statements and footnotes thereto for the year
ended December 31, 1997 included in this Form 8-K.
2. INVENTORIES
Inventories at March 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Raw materials $ 6,324,773
Work in process 1,423,074
Finished goods 8,064,087
------------
$ 15,811,934
------------
------------
</TABLE>
<PAGE>
(b) Pro Forma Financial Information
On June 29, 1998, Mackie Designs Inc. (the "Company") acquired 100% of the
outstanding stock of Radio Cine Forniture S.p.A. ("RCF") for $13,755,000 in cash
in a transaction accounted for as a purchase.
The accompanying unaudited pro forma balance sheet reflects the effects of the
acquisition of RCF on the Company's historical March 31, 1998 balance sheet as
if the transaction had been completed on March 31, 1998.
The accompanying unaudited pro forma statements of income for the three months
ended March 31, 1998 and the year ended December 31, 1997 reflect the effects of
the acquisition of RCF on the Company's historical statements of income as if
the transaction had been completed on January 1, 1998 and January 1, 1997,
respectively.
The unaudited pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the operating results that
would have occurred had the acquisition taken place on the basis assumed above.
In addition, the pro forma results are not intended to be a projection of the
future results and do not reflect any synergies that might have been achieved
from the combined operations. See the accompanying Notes to Pro Forma Financial
Statements for the assumptions used in the preparation of these statements.
These statements should be read in conjunction with the historical consolidated
financial statements of the Company and related notes included in the Company's
Form 10-K filed with the Securities and Exchange Commission and the historical
consolidated financial statements of RCF and related notes included elsewhere in
this Form 8-K.
MACKIE DESIGNS INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Mackie Designs Inc. RCF Adjustments (1) Company
------------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,567,315 $902,081 $(955,000) $2,514,396
Marketable securities 9,908,340 702,672 10,611,012
Accounts receivable, less allowance for
doubtful accounts 11,025,736 13,271,853 24,297,589
Inventories 18,565,557 15,811,934 34,377,491
Prepaid expenses and other current assets 1,156,669 476,931 1,633,600
Deferred taxes 749,000 531,396 1,280,396
----------------- ------------- ------------- --------------
Total current assets 43,972,617 31,696,867 (955,000) 74,714,484
Property, plant and equipment, net of accumulated
depreciation 10,198,071 5,729,272 7,183,708 23,111,051
Goodwill, net of accumulated amortization -- -- 7,814,864 7,814,864
Bonds and other assets 639,584 4,082,170 (448,686) 4,273,068
Deferred taxes -- 375,957 -- 375,957
----------------- ------------- ------------- --------------
<PAGE>
Total assets $54,810,272 $41,884,266 $13,594,886 $110,289,424
----------------- ------------- ------------- --------------
----------------- ------------- ------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,621,594 $7,922,895 $830,000 $12,374,489
Bank line of credit and other short term debt -- 13,005,358 13,005,358
Commissions payable 590,642 957,756 1,548,398
Accrued payroll and related taxes 1,131,716 1,125,596 2,257,312
Other accrued liabilities 1,560,294 4,079,790 5,640,084
Current portion of long term debt -- 1,446,337 1,446,337
----------------- ------------- ------------- --------------
Total current liabilities 6,904,246 28,537,732 830,000 36,271,978
Long term debt -- 6,973,762 12,800,000 19,773,762
Employee severance and agent termination liabilities -- 3,612,412 3,612,412
Deferred taxes 660,000 231,652 2,083,125 2,974,777
Other deferred items 91,000 125,000 216,000
Minority interest -- 78,469 78,469
Shareholders' equity:
Common stock 29,176,711 1,420,765 (1,420,765) 29,176,711
Retained earnings 17,978,315 904,474 (697,474) 18,185,315
----------------- ------------- ------------- --------------
Total shareholders' equity 47,155,026 2,325,239 (2,118,239) 47,362,026
----------------- ------------- ------------- --------------
Total liabilities and shareholders' equity $54,810,272 $41,884,266 $13,594,886 $110,289,424
----------------- ------------- ------------- --------------
----------------- ------------- ------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
MACKIE DESIGNS INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Mackie Pro Forma Pro Forma
Designs Inc. RCF Adjustments (2) Company
----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Net sales $17,354,240 $11,437,181 $28,791,421
Cost of goods sold 10,525,273 6,875,428 17,400,701
----------- ----------- ---------- -----------
Gross profit 6,828,967 4,561,753 11,390,720
Operating expenses:
Marketing and sales 2,604,808 2,053,865 4,658,673
Administrative 1,615,186 1,646,503 97,686 (a) 3,476,442
117,067 (b)
Research and development 1,101,236 228,616 1,329,852
----------- ----------- ---------- -----------
Total operating expenses 5,321,230 3,928,984 214,753 9,464,967
----------- ----------- ---------- -----------
Operating income 1,507,737 632,769 (214,753) 1,925,753
Interest income 167,727 -- 167,727
Interest expense -- (364,742) (250,719) (c) (615,461)
Other income (expense) (21,860) 27,627 5,767
----------- ----------- ---------- -----------
Income before income taxes & minority interest 1,653,604 295,654 (465,472) 1,483,786
Income tax provision 496,100 229,122 (103,422) (d) 621,800
----------- ----------- ---------- -----------
Income before minority interest 1,157,504 66,532 (362,050) 861,986
Minority interest -- (10,113) (10,113)
----------- ----------- ---------- -----------
Net income $ 1,157,504 $ 56,419 $ (362,050) $ 851,873
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Income per share:
Basic $ 0.09 $ 0.07
----------- -----------
----------- -----------
Diluted $ 0.09 $ 0.07
----------- -----------
----------- -----------
Shares used in computation of income per share:
Basic 12,682,012 12,682,012
----------- -----------
----------- -----------
Diluted 13,008,694 13,008,694
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
MACKIE DESIGNS INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Mackie Adjustments Pro Forma
Designs Inc. RCF (2) Company
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $74,889,420 $47,084,118 $121,973,538
Cost of goods sold 47,093,131 28,250,471 75,343,602
----------- ----------- ------------ ------------
Gross profit 27,796,289 18,833,647 46,629,936
Operating expenses:
Marketing and sales 9,938,507 8,475,141 18,413,648
Administrative 4,839,780 6,356,356 390,744 (a) 12,055,148
468,268 (b)
Research and development 5,892,178 1,150,974 7,043,152
----------- ----------- ------------ ------------
Total operating expenses 20,670,465 15,982,471 859,012 37,511,948
----------- ----------- ------------ ------------
Operating income 7,125,824 2,851,176 (859,012) 9,117,988
Interest income 790,687 -- 790,687
Interest expense -- (1,856,471) (1,002,876) (c) (2,859,347)
Other income (expense) (7,060) 51,176 44,116
----------- ----------- ------------ ------------
Income before income taxes & minority interest 7,909,451 1,045,881 (1,861,888) 7,093,444
Income tax provision 2,372,800 1,204,706 (413,688) (d) 3,163,818
----------- ----------- ------------ ------------
Income before minority interest 5,536,651 (158,825) (1,448,200) 3,929,626
Minority interest -- (24,706) (24,706)
----------- ----------- ------------ ------------
Net income $ 5,536,651 $ (183,531) $ (1,448,200) $ 3,904,920
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Income per share:
Basic $0.43 $0.30
----------- ------------
----------- ------------
Diluted $0.41 $0.29
----------- ------------
----------- ------------
Shares used in computation of
income per share:
Basic 12,825,949 12,825,949
----------- ------------
----------- ------------
Diluted 13,401,150 13,401,150
----------- ------------
----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
MACKIE DESIGNS INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) Pro forma adjustments have been made to the historical balance sheet to
reflect the payment of the purchase price for RCF, accrual of the related
acquisition costs, and elimination of the net equity of RCF. The excess of
the purchase price over the fair value of the net assets acquired has been
allocated to goodwill.
(2) Pro forma adjustments have been made to the historical statements of
operations to reflect the following:
(a) Amortization of goodwill generated in the acquisition using the
straight-line method over 20 years.
(b) Additional depreciation expense due to write-up in value of
depreciable fixed assets at time of acquisition.
(c) Interest expense from bank loan proceeds used to finance the
acquisition of RCF.
(d) Income taxes have been adjusted to reflect the tax effects of the pro
forma adjustments that are tax deductible.
<PAGE>
(c) Exhibits
Exhibit 23.1 -- Consent of Grant Thornton, S.p.A. Unreasonable effort or
expense would be involved to include this exhibit in this report. This
exhibit will be filed by amendment to this report on or before October 14,
1998.
<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.
MACKIE DESIGNS INC.
Date: September 11, 1998 /s/ William A. Garrard
------------------------------------
William A. Garrard, Vice President -
Chief Financial Officer
