-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DT6v9XLm+N8Dg+atL46tidAeoarMV5lJSasRDMJg/wopaIuUd5S9iIEYQEvBp6gf b9lBEQvyKKPjAVg3Qk+Mqw== 0000205700-97-000006.txt : 19970630 0000205700-97-000006.hdr.sgml : 19970630 ACCESSION NUMBER: 0000205700-97-000006 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970613 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970613 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND BUSINESS SERVICE INC CENTRAL INDEX KEY: 0000205700 STANDARD INDUSTRIAL CLASSIFICATION: 2761 IRS NUMBER: 042942374 STATE OF INCORPORATION: DE FISCAL YEAR END: 0627 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11427 FILM NUMBER: 97624041 BUSINESS ADDRESS: STREET 1: 500 MAIN ST CITY: GROTON STATE: MA ZIP: 01471 BUSINESS PHONE: 5084486111 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: June 13, 1997 ------------- NEW ENGLAND BUSINESS SERVICE, INC. ----------------------------------- (Exact name of registrant as specified in its charter) Delaware 001-11427 04-2942374 -------- ---------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 500 Main Street, Groton, MA 01471 --------------------------- ----- (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: (508) 448-6111 -------------- CHISWICK TRADING, INC. TABLE OF CONTENTS - - ---------------------------------------------------- Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995: Balance Sheets 2 Statements of Income 3 Statements of Cash Flows 4 Notes to Financial Statements 5-9 INDEPENDENT AUDITORS' REPORT To the Stockholder of Chiswick Trading, Inc. We have audited the accompanying balance sheets of Chiswick Trading, Inc. (the "Company") as of December 31, 1996 and 1995 and the related statements of income and retained 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 financial position of Chiswick Trading, Inc. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 10, the accompanying financial statements for 1996 and 1995 have been restated. /s/ DELOITTE & TOUCHE LLP Boston, Massachusetts April 25, 1997 CHISWICK TRADING, INC. BALANCE SHEETS (As restated) DECEMBER 31, 1996 AND 1995 __________________________________________________________________________________________________________________________
LIABILITIES AND STOCKHOLDER'S ASSETS 1996 1995 EQUITY 1996 1995 CURRENT ASSETS: CURRENT LIABILITIES: Cash $ 2,103,211 $ 1,367,364 Accounts payable $ 1,176,775 $ 1,102,648 Accrued expenses 2,089,550 2,018,521 Other accrued liabilities 1,700,000 1,500,000 Accounts receivable Notes payable 114,287 155,233 (less allowance ----------- ----------- for doubtful accounts of $164,000 in 1996 4,412,162 3,963,520 and $79,000 in 1995) Total current liabilities 5,080,612 4,776,402 Inventory 3,824,150 3,351,120 Other receivables and notes receivable 41,265 68,140 LONG-TERM LIABILITIES - Notes payable 94,986 209,271 Deferred tax assets 115,974 94,254 ----------- ----------- Due from related party 15,327 20,600 Total liabilities 5,175,598 4,985,673 Deferred mail advertising ----------- ----------- and prepaid expenses 1,344,711 1,347,066 COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY: ----------- ------------ Common stock, no par value; Total current assets 11,856,800 10,212,064 authorized - 12,500 shares; 15,000 15,000 ----------- ------------ issued - 200 shares Additional paid-in capital 50,000 50,000 PROPERTY AND EQUIPMENT, Net 1,103,477 1,128,015 Retained earnings 8,826,842 7,403,788 ----------- ------------ ----------- ----------- OTHER ASSETS: 107,163 114,382 Total 8,891,842 7,468,788 Less - treasury stock (100 shares) at cost (1,000,000) (1,000,000) ----------- ---------- Total stockholder's equity 7,891,842 6,468,788 ------------ ------------ ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S TOTAL ASSETS $ 13,067,440 $ 11,454,461 EQUITY $13,067,440 $11,454,461 ============ ============ =========== ===========
See notes to financial statements. CHISWICK TRADING, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS (As restated) YEARS ENDED DECEMBER 31, 1996 AND 1995 ________________________________________________________ 1996 1995 SALES $45,124,788 $39,662,974 COST OF SALES 21,661,346 18,881,252 ----------- ----------- GROSS PROFIT 23,463,442 20,781,722 OPERATING EXPENSES 19,367,138 17,143,431 ----------- ----------- INCOME FROM OPERATIONS 4,096,304 3,638,291 OTHER INCOME (EXPENSE) (7,018) 13,070 ----------- ----------- INCOME BEFORE INCOME TAXES 4,089,286 3,651,361 INCOME TAXES 204,525 186,637 ----------- ----------- NET INCOME 3,884,761 3,464,724 RETAINED EARNINGS, BEGINNING OF YEAR, AS RESTATED 7,403,788 5,955,615 DIVIDENDS PAID (2,461,707) (2,016,551) ----------- ----------- RETAINED EARNINGS, END OF YEAR $8,826,842 $7,403,788 =========== =========== See notes to financial statements. CHISWICK TRADING, INC. STATEMENTS OF CASH FLOWS (As restated) YEARS ENDED DECEMBER 31, 1996 AND 1995 ________________________________________________________________________
1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,884,761 $3,464,724 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 494,789 517,435 Bad debts 84,898 45,410 Deferred taxes (21,720) (16,565) (Gain) loss on asset disposal 11,223 (4,007) Changes in: Accounts receivable, trade (533,540) (535,456) Inventory (473,030) (414,314) Deferred mail advertising and prepaid expenses 2,355 (289,396) Other assets 5,580 (19,569) Accounts payable, accrued expenses and other accrued liabilities 345,156 614,565 ---------- ---------- Net cash provided by operating activities 3,800,472 3,362,827 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITES: Purchase of property, equipment and software (474,255) (600,314) Proceeds from sale of equipment - 7,435 Collection on notes receivable 26,568 - ---------- ---------- Net cash used for investing activities (447,687) (592,879) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes payable - 112,500 Principal payments on notes payable (155,231) (363,993) Dividends paid (2,461,707) (2,016,551) ---------- ---------- Net cash used for financing activities (2,616,938) (2,268,044) ---------- ---------- NET INCREASE IN CASH 735,847 501,904 CASH AND EQUIVALENTS, Beginning of year 1,367,364 865,460 ---------- ----------- CASH AND EQUIVALENTS, End of year $2,103,211 $1,367,364 ========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash paid during the period for: Interest $ 32,260 $ 54,105 ========== =========== Income Taxes $ 226,245 $ 203,202 ========== ===========
See notes to financial statements CHISWICK TRADING, INC. NOTES TO FINANCIAL STATEMENTS (As restated) YEARS ENDED DECEMBER 31, 1996 AND 1995 - - --------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity - Chiswick Trading, Inc. (the "Company") was established under the laws of the Commonwealth of Massachusetts on August 20, 1974. The Company operates primarily in a single industry segment consisting of the sale of industrial packaging, shipping and warehouse supplies and gift wrap packaging products through catalogs throughout the United States and Canada. Currency Translation - Because of the nature of the Company's Canadian operations, the U.S. dollar has been designated as the functional currency. Accordingly, gains or losses from foreign currency translations and from changes in exchange rates on foreign currency balances are recognized in income in the year they occur. These were nominal for the years ended December 31, 1996 and 1995. Income Taxes - Effective February 1,1986, the Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal corporate income taxes. Instead, the stockholder is liable for individual federal income taxes on the Company's taxable income. The Company is, however, subject to state income taxes. Deferred income taxes have been provided to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. These differences primarily result from reserves and certain accruals. Cash and Equivalents - Cash and equivalents include time deposits, certificates of deposit, money market funds, and highly liquid debt instruments which mature within three months or less at the date of their acquisition. Inventory - Inventory, which consists of industrial and retail packaging, shipping and supplies goods, is stated at the lower of cost or market. Cost is determined by using the average cost method. Property, Equipment and Depreciation - Property and equipment are carried at cost. Depreciation is computed using straight-line and accelerated methods over the estimated economic useful lives of the assets (five to ten years). Revenue Recognition - Revenue is recognized from sales when a product is shipped. Direct Mail Advertising - The Company applies the provision of Statement of Position ("SOP") No. 93-7, "Reporting on Advertising Costs." The Company expenses the production costs of advertising the first time the advertising takes place, except for direct response advertising which is capitalized and amortized over the future period of its expected benefit. Direct-response advertising consists primarily of product catalogs and associated mailing costs. Advertising expense included in operating expenses was approximately $4,967,000 in 1996 and $4,697,000 in 1995. Fair Value of Financial Instruments - As of December 31, 1996 and 1995, the carrying value of all financial instruments approximates fair value. Concentration of Credit Risk - The Company extends credit to approximately 250,000 geographically dispersed customers on an unsecured basis in the normal course of business. No individual industry or industry segment is significant to the Company's customer base. The Company has, in place, policies governing the extension of credit and collection of amounts due from customers. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Use of Estimates - In the process of preparing its financial statements, management makes informed estimates and judgments. The primary estimates underlying the Company's financial statements include allowances for doubtful accounts, inventory obsolescence, deferrals of direct mail advertising costs and other matters. Actual results could differ from those estimates and thus impact results reported in future periods. 2. CONCENTRATION OF CREDIT RISK ARISING FROM CASH DEPOSITS IN EXCESS OF INSURED LIMITS The Company maintains cash balances at two financial institutions located in Massachusetts and one located in Canada. Accounts at each Massachusetts institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The account in Canada is insured by the Canadian Deposit Insurance Corporation up to $60,000. At December 31, 1996 and 1995 the Company's cash balances exceeded the insured limits by $1,442,686 and $1,232,525, respectively. 3. PROPERTY AND EQUIPMENT
1996 1995 Vehicles $ 124,202 $ 124,202 Office equipment and furnishings 2,122,494 2,132,828 Warehouse equipment 691,200 709,411 Leasehold improvements 330,531 307,974 ---------- ---------- Total 3,268,427 3,274,415 Less - accumulated depreciation and amortization 2,164,950 2,146,400 ---------- ---------- Net property and equipment $1,103,477 $1,128,015 ========== ==========
4. NOTES PAYABLE Notes payable consisted of the following at December 31:
1996 1995 Collateralized promissory notes bearing interest at rates from 6.80% to 8.12%, payable in monthly installments $ 78,023 $143,656 Noncollateralized promissory notes bearing interest at rates from 9.23% to 10.15%, payable in monthly installments 131,250 220,848 -------- -------- 209,273 364,504 Less current portion 114,287 155,233 -------- ------- Long-term portion $94,986 $209,271 ======== ========
Maturities are as follows:
1997 $114,287 1998 87,475 1999 7,511 -------- $209,273 ========
5. REVOLVING LINE OF CREDIT The Company has a revolving line of credit with a bank in the amount of $3,000,000, which is collateralized by accounts receivable, inventory and equipment. Interest is paid monthly at that bank's base rate (which on December 31, 1996 was 8.25%). At December 31, 1996 and 1995, there were no borrowings under this facility. This facility expires on May 31, 1997. 6. PROFIT SHARING PLAN On January 1, 1994, the Company adopted a salary reduction/profit-sharing plan (the "plan") under the provisions of Section 401(k) of the Internal Revenue Code. The plan covers substantially all full-time employees who have completed one year of service with the Company. Contributions under the plan are discretionary and are determined annually by the Company's Board of Directors. Contributions totaled $53,301 and $42,576, in 1996 and 1995, respectively. 7. COMMITMENTS AND CONTINGENCIES The Company has entered into agreements with key management employees. The Company is obligated to pay these employees certain amounts from the proceeds in the event the Company is sold. These amounts are determined based on a vesting percentage and a percentage of the difference between the proceeds and a base amount of $21,000,000. It is anticipated that approximately $5,000,000 will be paid pursuant to the sale described in Note 9. 1997 $ 41,036 1998 41,006 1999 31,002 2000 17,964 2001 416 -------- Total $131,424 ======== Rental expense under the above operating leases totaled $72,650 and $38,580 for the years ended December 31, 1996 and 1995, respectively. 8. RELATED-PARTY TRANSACTIONS The Company's office and warehouse facilities are leased from E.B. Realty Associates Limited Partnership. The lease requires that the Company pay for utilities, taxes, insurance and maintenance expenses. This lease expires in 2005. The only partners of E.B. Realty Associates Limited Partnership are the Company's sole stockholder and his spouse. For the years ended December 31, 1996 and 1995, the Company paid rent each year in the amount of $720,000 under this lease. Future minimum lease payments are as follows:
1997 $ 720,000 1998 720,000 1999 720,000 2000 720,000 2001 720,000 2002 and thereafter 2,880,000 --------- Total $6,480,000 ==========
The Company rents additional warehouse space from The Paris Trust, which is owned by the sole stockholder. For the years ended December 31, 1996 and 1995, the Company paid rent each year in the amount of $260,000 under this lease. In April of 1997, in connection with the Company's sale of its assets (see Note 9), this lease agreement was discontinued without penalties or costs. The Company is also contingently liable as a guarantor on behalf of E.B. Realty Associates Limited Partnership for the following items: a. A standby letter of credit to its primary bank dated January 20, 1989 in the amount of $100,000. b. A note dated February 26, 1988 in the amount of $100,000. The maturity date, January 19, 1992, has been extended by agreement of both parties to the note. 8. RELATED-PARTY TRANSACTIONS (CONTINUED) The Company is contingently liable as a guarantor on a mortgage note granted by The Paris Trust, a related party, to a bank in the amount of $7,200,000. As of December 31, 1996, the balance was $5,616,000. 9. POST-BALANCE SHEET EVENTS On March 31, 1997, New England Business Service, Inc. ("NEBS") purchased substantially all of the Company's assets and assumed certain of its liabilities. The consideration paid included cash and common stock. This consideration totaled approximately $43,000,000. In connection with this transaction, all leasing and rental arrangements described in Note 8, respectively, were renegotiated. The accompanying financial statements do not include the effects of the transaction with NEBS. 10. RESTATEMENT These financial statements have been restated for both 1995 and 1996 so as to properly account for (i) deferred advertising pursuant to SOP No. 93-7; (ii) valuation allowances for accounts receivable and inventory; (iii) the accrual of vacation time; and (iv) certain liabilities which had been previously written off. 1995 net income was accordingly decreased by $314,747 and 1996 net income was decreased by $412,665. Retained earnings as of January 1, 1995 was decreased by $1,476,087. CHISWICK TRADING, INC. BALANCE SHEET MARCH 31, 1997 UNAUDITED __________________________________________________________________________________________________________________________
LIABILITIES AND STOCKHOLDER'S ASSETS 1997 EQUITY 1997 CURRENT ASSETS: CURRENT LIABILITIES: Cash $ 1,542,225 Accounts payable $ 1,457,598 Accounts receivable Accrued expenses 1,381,332 (less allowance for Other accrued liabilities 1,700,000 doubtful accounts Notes payable 105,350 of $254,000 in 1997) 4,649,941 ----------- Total current liabilities 4,644,280 Inventory 4,086,499 Other receivables and notes receivable 38,996 LONG-TERM LIABILITIES - Notes payable 51,584 Deferred tax assets 123,164 ----------- Due from related party 15,327 Total liabilities 4,695,864 Deferred mail advertising ----------- and prepaid expenses 1,410,603 COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY: ----------- Common stock, no par value; Total current assets 11,866,755 authorized - 12,500 shares; 15,000 ----------- issued - 200 shares Additional paid-in capital 50,000 PROPERTY AND EQUIPMENT, Net 1,082,950 Retained earnings 9,299,550 ----------- ----------- OTHER ASSETS: 110,709 Total 9,364,550 Less - treasury stock (100 shares) at cost (1,000,000) ----------- Total stockholder's equity 8,364,550 ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDER'S TOTAL ASSETS $ 13,060,414 EQUITY $13,060,414 ============ ===========
See notes to financial statements. CHISWICK TRADING, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS THREE MONTHS ENDED MARCH 31, 1997 UNAUDITED ________________________________________________________
1997 SALES $11,643,988 COST OF SALES 5,667,438 ----------- GROSS PROFIT 5,976,550 OPERATING EXPENSES 4,913,884 ----------- INCOME FROM OPERATIONS 1,062,666 OTHER INCOME (EXPENSE) 104,541 ----------- INCOME BEFORE INCOME TAXES 1,167,207 INCOME TAXES 62,499 ----------- NET INCOME 1,104,708 RETAINED EARNINGS, BEGINNING OF YEAR, 8,826,842 DIVIDENDS PAID (632,000) ----------- RETAINED EARNINGS, END OF YEAR $9,299,550 ===========
See notes to financial statements. CHISWICK TRADING, INC. STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1997 UNAUDITED ________________________________________________________________________
1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,104,708 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 99,005 Bad debts 127,089 Deferred taxes (7,190) Changes in: Accounts receivable, trade (364,868) Inventory (262,349) Deferred mail advertising and prepaid expenses (72,984) Other assets 3,546 Accounts payable, accrued expenses and other accrued liabilities (427,395) ---------- Net cash provided by operating activities 199,562 ---------- CASH FLOWS FROM INVESTING ACTIVITES: Purchase of property, equipment and software (78,478) Collection on notes receivable 2,269 ---------- Net cash used for investing activities (76,209) ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable (52,339) Dividends paid (632,000) ---------- Net cash used for financing activities (684,339) ---------- NET DECREASE IN CASH (560,986) CASH AND EQUIVALENTS, Beginning of year 2,103,211 ---------- CASH AND EQUIVALENTS, End of year $1,542,225 ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash paid during the period for: Interest $ 17,000 ========== Income Taxes $ 90,000 ==========
See notes to financial statements CHISWICK TRADING, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1997 - - ---------------------------------------------------------- 1. BASIS OF PRESENTATION The financial statements for the three months ended March 31, 1997 are unaudited but reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim period reflected. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The results of operations for the interim period reported herein are not necessarily indicative of results to be expected for the full year. The financial statements included herein should be read in conjunction with the financial statements and notes thereto, and the Independent Auditors' Report included elsewhere in this Form 8K/A for Chiswick Trading, Inc. (the "Company") for the years ended December 31, 1995 and 1996. Reference is made to the accounting policies of the Company described in the notes to such financial statements. The Company has consistently followed those policies in preparing these financial statements. (b) Pro Forma Financial Information PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS On March 31, 1997, New England Business Service, Inc. (the "Company") acquired substantially all of the assets and certain liabilities of Chiswick Trading, Inc. ("Chiswick") for cash consideration of approximately $34,600,019, net of cash acquired, and $ 8,400,000 in shares of Company common stock, for an aggregate purchase price, net of cash acquired, of $43,000,019. The following pro forma combined condensed financial statements are unaudited and have been prepared to give effect to (i) the acquisition of Chiswick under the purchase method of accounting, (ii) the arrangements required to finance such acquisition consisting of a loan to the Company of $30,000,000 under its revolving line of credit and the issuance of 365,217 shares of Company common stock, and (iii) adjustments based on available information and upon certain assumptions management believes are reasonable under the circumstances, as if this transaction had occurred on March 29, 1997 in the case of the combined condensed balance sheet, or on July 1, 1995 in the case of the pro forma combined condensed statements of income. The pro forma information does not purport to be indicative of the financial position or results of operations that would have been attained had the transaction occurred on the dates indicated, nor to project the Company's results of operations for any future period. The pro forma combined condensed financial statements should be read in conjunction with the separate audited financial statements and notes thereto of the Company included in its Form 10-K for the year ended June 29, 1996 and the audited financial statements and notes thereto of Chiswick included in this Form 8- K/A. PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET MARCH 29, 1997 (Unaudited) (In Thousands)
Pro Forma NEBS Chiswick Adjustments Pro Forma (1) (1) (2)(3) Combined -------- -------- ----------- --------- ASSETS Current Assets Cash and cash equivalents $ 8,074 $ 1,542 $ (6,161) $ 3,455 Short term investments 852 852 Accounts receivable - net 29,243 5,074 34,317 Inventories 8,734 4,086 12,820 Direct mail advertising and prepaid exps 6,336 1,349 7,685 Deferred income tax benefit 9,448 9,448 -------- -------- -------- -------- Total current assets 62,687 12,051 (6,161) 68,577 Property and equipment - net 30,728 1,109 (90) 31,747 Property held for sale 631 631 Goodwill 5,775 5,775 Excess of Purchase Price over net asset value - Chiswick 34,687 34,687 Other Assets - net 652 652 -------- -------- -------- -------- TOTAL ASSETS $100,473 $ 13,160 $ 28,436 $142,069 ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 12,488 $ 2,360 $ 400 $ 15,248 Notes Payable 157 30,000 30,157 Accrued expenses 21,602 279 21,881 -------- -------- -------- -------- Total current liabilities 34,090 2,796 30,400 67,286 Deferred Income Taxes 391 391 STOCKHOLDERS' EQUITY Common stock 14,102 15 350 14,467 Additional paid-in capital 15,218 50 7,985 23,253 Cumulative foreign currency translation adj (1,677) (1,677) Retained earnings 54,469 10,299 (10,299) 54,469 -------- -------- -------- -------- Total 82,112 10,364 (1,964) 90,512 Less: Treasury stock 16,120 16,120 -------- -------- -------- -------- Stockholders' Equity 65,992 10,364 (1,964) 74,392 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $100,473 $ 13,160 $ 28,436 142,069 ======== ======== ========= ========
See Notes to Pro Forma Combined Condensed Financial Statements PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended June 29, 1996 (unaudited) Pro Forma NEBS Chiswick Adjustments Pro Forma (1) (1) (4) Combined --------- --------- --------- --------- NET SALES $254,954 $41,398 $ $296,352 OPERATING EXPENSES: Cost of sales 95,598 23,067 118,665 Selling and advertising 93,179 12,622 1,200 107,001 General and administrative 43,713 1,798 221 45,732 Exit costs 3,044 3,044 -------- -------- -------- -------- Total operating expenses 235,534 37,487 1,421 274,442 INCOME FROM OPERATIONS 19,420 3,911 (1,421) 21,910 OTHER INCOME/(EXPENSE): 1,635 (27) (1,910) (302) -------- -------- -------- -------- INCOME BEFORE TAXES 21,055 3,884 (3,331) 21,608 PROVISION FOR INCOME TAXES 8,306 220 8,526 -------- -------- -------- -------- NET INCOME BEFORE LOSS ON EQUITY METHOD INVESTMENT 12,749 3,664 (3,331) 13,082 Loss on equity method investment (820) (820) -------- -------- -------- -------- NET INCOME $ 11,929 $ 3,664 $ (3,331) $ 12,262 ======== ======== ======== ======== PER SHARE AMOUNTS: Net Income .81 .81 ======== ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING 14,773 365 15,138 ======== ======== ======== ======== See Notes to Pro Forma Combined Condensed Financial Statements PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME For the Nine Months Ended March 29, 1997 (unaudited)
Pro Forma NEBS Chiswick Adjustments Pro Forma (1) (1) (4) --------- -------- --------- --------- NET SALES $188,032 $ 35,766 $ $223,798 OPERATING EXPENSES: Cost of sales 65,293 20,298 85,591 Selling and advertising 65,413 9,404 900 75,717 General and administrative 34,686 2,702 166 37,554 Exit costs 4,543 4,543 -------- -------- -------- -------- Total operating expenses 169,935 32,404 1,066 203,405 INCOME FROM OPERATIONS 18,097 3,362 (1,066) 20,393 OTHER INCOME/(EXPENSE): 2,488 12 (1,370) 1,130 -------- -------- -------- -------- INCOME BEFORE TAXES 20,585 3,374 (2,436) 21,523 PROVISION FOR INCOME TAXES 8,203 187 188 8,578 -------- -------- -------- -------- NET INCOME $ 12,382 $ 3,187 $ (2,624) $ 12,945 ======== ======== ======== ======== PER SHARE AMOUNTS: Net Income .91 .93 ======== ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING 13,570 365 13,935 ======== ======== ======== ========
See Notes to Pro Forma Combined Condensed Financial Statements Notes to Pro Forma Combined Condensed Financial Statements 1. On March 31, 1997, New England Business Service, Inc. ("the Company") acquired substantially all of the assets and assumed certain liabilities of Chiswick Trading, Inc. ("Chiswick") under the terms of an Asset Purchase Agreement (the "Agreement") for consideration of approximately $34,600,019 in cash, net of cash acquired, and approximately $8,400,000 in shares of Company common stock, for an aggregate purchase price, net of cash acquired, of $43,000,019. The source of the cash for the purchase price was a loan for $30,000,000 made to the Company in the ordinary course of business under its revolving line of credit with The First National Bank of Boston and Fleet National Bank, as lenders and agents thereunder, and certain other financial institutions. Chiswick markets a line of retail and industrial packaging, shipping and warehouse supplies sold primarily to small wholesalers, manufacturers and retailers. The Company intends to continue to use the assets acquired from Chiswick for these purposes. Chiswick's headquarters are located in Sudbury, Massachusetts, where Chiswick will continue to operate as a division of the Company. The Pro Forma Combined Condensed Balance Sheet has been prepared based on the Company's March 29, 1997 unaudited consolidated balance sheet and Chiswick's unaudited balance sheet as of the same date. Certain assets and liabilities excluded under the terms of the Agreement have been excluded from Chiswick's historical balance sheet. The Pro Forma Combined Consolidated Statements of Income include the Company's historical results for the applicable periods as previously reported and Chiswick's results for the same periods, derived from management's internal financial statements. 2. The pro forma adjustments to the Combined Condensed Balance Sheets are set forth below: a) The gross purchase price of $44,561,000 was funded by the issuance of 365,217 shares of NEBS common stock valued at $8,400,000, and by the borrowing of $30,000,000 in cash under a revolving line of credit. The balance was funded by NEBS cash on hand. b) The stockholder's equity amounts of Chiswick Trading Inc. have been eliminated as required under the purchase method of accounting. c) Estimated transaction costs of $400,000 have been accrued and added to the excess of purchase price over the net value of assets acquired. d) Fixed assets have been adjusted to reflect fair market values, resulting in a $90,000 reduction of the historical amounts acquired. 3. For purposes of these pro forma financial statements, the excess of the purchase price over the net value of acquired assets has been shown as a single item on the pro forma combined condensed balance sheet. The final allocation of the excess of purchase price over net assets acquired is subject to appraisals, evaluations and other studies of the fair value of Chiswick's assets and liabilities. The pro forma combined condensed balance sheet ascribes value to Chiswick's customer list, a non-compete agreement and goodwill with amortization periods for such intangibles ranging between 5 and 40 years. 4. The pro forma adjustments to the Combined Consolidated Statements of Income for the Year Ended June 29, 1996 and the Nine Months ended March 29, 1997 are set forth below by line item: a) Selling and advertising - to record estimated amortization expense of the customer list and non-compete intangible assets. b) General and administrative - to record estimated amortization expense of acquisition related goodwill (1996 - $706,000, 1997 - $530,000), to eliminate payroll expense for non-acquired personnel (1996 - $80,000, 1997 - $60,000) and to lower expenses to reflect employment and lease agreements created at the time of closing (1996 - $405,000, 1997 - $304,000). c) Other Income/(Expense) - to record interest expense at 7.25% on new borrowings based on anticipated balances outstanding and to reflect lost interest income at 6.00% on net cash outlays. d) Provision for Income Taxes - to record income taxes on the net effect of Chiswick's profits and the pro forma adjustments at NEBS' effective rate. e) Weighted Average Shares Outstanding - to adjust for share issuance. 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. NEW ENGLAND BUSINESS SERVICE, INC. --------------------------------- Registrant DATED: June 13, 1997 By: /s/ John F. Fairbanks ------------- --------------------- John F. Fairbanks VP, Chief Financial Officer EXHIBIT INDEX ------------- Exhibit Number * 2.1 Asset Purchase Agreement by and among New England Business Service, Inc. Chiswick Trading, Inc. and Theodore Pasquarello dated as of March 31, 1997. * 2.2 Agreement to Furnish Copies of Omitted Schedules and Exhibits to Asset Purchase Agreement. * 10.1 Revolving Credit Agreement dated as of March 26, 1997, by and among New England Business Service, Inc., The First National Bank of Boston and Fleet National Bank (together with certain other financial institutions, the "Banks"), The First National Bank of Boston, as agent for the Banks, and Fleet National Bank, as documentation agent for the Banks. 24.1 Independent Auditors' Consent * Previously filed on Form 8-K dated April 15, 1997 EX-24 2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 33-43900, 33-38925, and 33-56227 of New England Business Service, Inc. on Form S-8 of our report dated April 25, 1997 on the financial statements of Chiswick Trading, Inc. for the years ended December 31, 1995 and 1996, appearing in this filing on Form 8-K/A of New England Business Service, Inc. /s/ DELOITTE & TOUCHE LLP June 13, 1997 Boston, Massachusetts -----END PRIVACY-ENHANCED MESSAGE-----