1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 30, 1998
UNIVERSAL FOREST PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
MICHIGAN 000-22684 381465835
(State or Other Jurisdiction (Commission File No.) (IRS Employer File No.)
of Incorporation) Identification No.)
2801 EAST BELTLINE, N.E., GRAND RAPIDS, MICHIGAN 49525
(Address of Principal Executive Offices) (Zip Code)
(616) 364-6161
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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This Amendment amends the Current Report on Form 8-K of Universal Forest
Products, Inc., dated April 13, 1998, relating to events occurring on March 30,
1998. As provided in Item 7(a)(4) of the instructions to Form 8-K, the Current
Report on Form 8-K excluded the required financial statements for Shoffner
Industries, Inc., the business acquired. This Amendment is filed to provide the
required audited consolidated financial statements of Shoffner Industries, Inc.
and the required consolidating condensed pro forma financial information.
The following information amends Item 7 of the Current Report on Form 8-K and
sets forth, in its entirety, the information as amended.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The following consolidated
financial statements of Shoffner Industries, Inc. are filed as part of
this Amendment to Current Report. Financial Statements for the three
months ended March 29, 1998 and March 31, 1997, labeled "Unaudited", have
been compiled and prepared by management:
Independent Auditors' Report
Consolidated Balance Sheets as of March 29, 1998 (Unaudited), December
31, 1997, and December 31, 1996
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1997 and December 31, 1996
Consolidated Statements of Income for the Three Months Ended March 29,
1998 and March 31, 1997 (Unaudited), and for the Years Ended December 31,
1997 and December 31, 1996
Consolidated Statements of Cash Flows for the Three Months Ended March
29, 1998 and March 31, 1997 (Unaudited), and for the Years Ended December
31, 1997 and December 31, 1996
Notes to Consolidated Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION. The following unaudited consolidating
pro forma financial information is filed as part of this Amendment to
Current Report:
Description of Consolidating Pro Forma Financial Information
Consolidating Condensed Pro Forma Balance Sheet as of March 28, 1998
Consolidating Condensed Pro Forma Statements of Earnings for the Three
Months Ended March 28, 1998 and for the Year Ended December 27, 1997
Notes to Consolidating Condensed Pro Forma Financial Statements
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(c) EXHIBITS.
2.1(1) Agreement and Plan of Reorganization dated as of March 30, 1998,
by and among Universal Forest Products, Inc., UFP Acquisition
Corp. II, Shoffner Industries, Inc., and the Shareholders of
Shoffner Industries, Inc., together with the Annexes thereto.
23 Consent of Apple, Bell, Johnson & Co., P.A.
- --------
(1) Previously filed with the Current Report on Form 8-K of Universal
Forest Products, Inc., dated April 13, 1998, relating to events occurring on
March 30, 1998.
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INDEPENDENT AUDITORS' REPORT
To the Officers and Directors
Shoffner Industries, Inc. and Subsidiaries
Route #1, Box 97
Burlington, North Carolina
We have audited the accompanying consolidated balance sheets of Shoffner
Industries, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 audits 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 aforementioned consolidated financial statements
present fairly, in all material respects, the financial position of Shoffner
Industries, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
As discussed in Note 10 to the financial statements, the Company changed
its method of valuing its inventory in 1996.
Yours very truly,
APPLE, BELL, JOHNSON & CO., P.A.
Certified Public Accountants
Burlington, North Carolina
January 26, 1998
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 29, December 31, December 31,
1998 1997 1996
----------- ------------ -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................... $ 514,271 $ 1,610,317 $ 630,374
Accounts receivable
Less allowance for doubtful accounts - $175,500 in
1998, $125,000 in 1997 and $80,000 in 1996................. 7,694,435 7,482,378 5,663,505
Accounts receivable - Officer.................................. 0 0 152,460
Inventories:
Raw materials............................................... 9,656,155 7,882,114 5,447,638
Finished goods.............................................. 1,744,265 1,148,580 900,852
Prepaid expenses............................................... 57,158 20,333 0
Income tax refund.............................................. 0 0 408,221
Deferred income tax............................................ 0 0 208,745
------------ ------------ -------------
TOTAL CURRENT ASSETS........................................ 19,666,284 18,143,722 13,411,795
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements..................................... 4,759,477 4,548,208 3,026,770
Buildings...................................................... 8,185,485 8,177,290 7,689,526
Automobiles and trucks......................................... 4,595,976 4,568,843 4,158,197
Machinery and equipment........................................ 13,733,035 13,659,210 9,309,535
Office furniture, fixtures and equipment....................... 2,849,590 2,726,749 2,330,360
Other.......................................................... 3,459,078 3,328,023 2,736,219
------------ ------------ -------------
37,582,641 37,008,323 29,250,607
LESS: Accumulated depreciation................................ 12,695,058 12,424,787 10,306,417
------------ ------------ -------------
NET PROPERTY, PLANT AND EQUIPMENT........................... 24,887,583 24,583,536 18,944,190
OTHER ASSETS
Cash surrender value of life insurance, net.................... 1,837,570 1,730,631 1,430,157
Other.......................................................... 11,715 11,715 11,715
------------ ------------ -------------
TOTAL OTHER ASSETS.......................................... 1,849,285 1,742,346 1,441,872
------------ ------------ -------------
TOTAL ASSETS......................................................... $46,403,152 $44,469,604 $33,797,857
============ ============ =============
See accompanying notes and independent auditors' report.
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 29, December 31, December 31,
1998 1997 1996
---------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.............................. $ 353,405 $ 353,405 $ 1,122,946
Accounts payable and other accrued liabilities................. 2,654,540 2,114,080 1,374,110
Accrued wages and benefits..................................... 768,916 1,657,703 2,253,982
Accrued federal and state income tax........................... 187,444 132,131 0
------------ ------------ ------------
TOTAL CURRENT LIABILITIES................................... 3,964,305 4,257,319 4,751,038
NONCURRENT INCOME TAX PAYABLE........................................ 129,049 241,897 362,846
LONG-TERM DEBT....................................................... 21,066,273 13,156,408 6,762,268
DEFERRED INCOME TAXES................................................ 0 0 1,834,625
DEFERRED COMPENSATION................................................ 360,778 360,778 277,176
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock
Voting - $0.10 par 100,000 shares authorized,
25,000 shares outstanding................................ 2,500 2,500 2,500
Nonvoting - $0.10 par 1,900,000 shares authorized,
475,000 shares outstanding............................... 47,500 47,500 47,500
Retained earnings.............................................. 20,832,747 26,403,202 19,759,904
------------ ------------ ----------
TOTAL SHAREHOLDERS' EQUITY.................................. 20,882,747 26,453,202 19,809,904
------------ ------------ ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY............................. $46,403,152 $44,469,604 $33,797,857
=========== =========== ===========
See accompanying notes and independent auditors' report.
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1997 and 1996
Class A Class A Class B Class B
Voting Voting Non-Voting Non-Voting
Shares Common Shares Common Shares Common Retained
Outstanding Stock Outstanding Stock Outstanding Stock Earnings Total
----------- ------ ----------- ---------- ----------- ------ -------- -----
BALANCE,
JANUARY 1, 1996,
AS PREVIOUSLY REPORTED....... 533,956 $53,396 $17,955,958 $18,009,354
ADD:
Adjustment for the
cumulative effect
on prior years of
applying retroactively
the new method of
accounting for
inventories (Note 10)..... 368,178 368,178
------ ------ ------- ------- ------- -------- ----------- -----------
BALANCE,
JANUARY 1, 1996,
AS ADJUSTED.................. 0 0 0 0 533,956 53,396 18,324,136 18,377,532
ADD:
Net income for 1996....... 4,992,279 4,992,279
DEDUCT:
Dividends paid............ (1,200,000) (1,200,000)
Redemption of
common stock.............. (33,956) (3,396) (2,356,511) (2,359,907)
RECAPITALIZATION............. 25,000 2,500 475,000 47,500 (500,000) (50,000) 0 0
------ ------ ------- ------- ------- -------- ----------- -----------
BALANCE,
DECEMBER 31, 1996............ 25,000 2,500 475,000 47,500 0 0 19,759,904 19,809,904
------ ------ ------- ------- ------- -------- ----------- -----------
ADD:
Net income for 1997....... 10,758,298 10,758,298
DEDUCT:
Dividends paid............ (4,115,000) (4,115,000)
------ ------ ------- ------- ------- -------- ----------- -----------
BALANCE,
DECEMBER 31, 1997............ 25,000 $2,500 475,000 $47,500 0 $ 0 $26,403,202 $26,453,202
====== ====== ======= ======= ======= ======== =========== ===========
See accompanying notes and independent auditors' report.
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Years Ended
------------------------ -------------------------
March 29, March 31, December 31, December 31,
1998 1997 1997 1996
-------- --------- ----------- ------------
SALES (Net of discounts, returns
and allowances).................................. $17,230,929 $16,987,316 $91,027,391 $75,430,340
COST OF GOODS SOLD................................. 12,577,135 12,575,959 64,329,666 51,824,450
----------- ----------- ----------- -----------
GROSS PROFIT....................................... 4,653,794 4,411,357 26,697,725 23,605,890
OPERATING EXPENSES:
General and administrative.................... 5,503,447 1,624,139 9,992,076 9,475,179
Selling....................................... 1,716,369 1,403,904 6,854,063 5,930,937
----------- ----------- ----------- -----------
7,219,816 3,028,043 16,846,139 15,406,116
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS)............................ (2,566,022) 1,383,314 9,851,586 8,199,774
OTHER INCOME :
Interest expense.............................. (309,039) (181,979) (891,619) (438,146)
Interest income............................... 32,124 18,109 108,961 220,503
Gain (Loss) on sale of plant assets........... (110,260) 11,128 70,756 101,055
Other......................................... 4,292 7,564 33,234 41,544
----------- ----------- ----------- -----------
(382,883) (145,178) (678,668) (75,044)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES....................................... (2,948,905) 1,238,136 9,172,918 8,124,730
PROVISION FOR INCOME TAXES:
Current....................................... 50,597 0 40,500 3,009,987
Deferred provision (benefit).................. 0 0 (1,625,880) 122,464
----------- ----------- ----------- -----------
50,597 0 (1,585,380) 3,132,451
----------- ----------- ----------- -----------
NET INCOME (LOSS).................................. ($2,999,502) $1,238,136 $10,758,298 $ 4,992,279
=========== =========== =========== ===========
See accompanying notes and independent auditors' report.
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Years Ended
--------------------------- -----------------------------------
March 29, March 31, December 31, December 31,
1998 1997 1997 1996
--------- --------- ---------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income ................................... ($2,999,502) $ 1,238,136 $10,758,298 $ 4,992,279
Adjustments to reconcile net income to
net cash provided by operations
Depreciation.............................. 633,882 452,266 2,351,605 1,696,598
Deferred income taxes..................... 0 0 (1,625,880) 25,461
Deferred compensation..................... 0 0 83,602 87,497
Loss (gain) on sales of property,
plant & equipment....................... 110,260 (11,128) (70,756) (101,055)
Changes in:
Accounts receivable..................... (212,057) (1,002,949) (1,666,413) (469,586)
Income tax refund....................... 0 0 408,221 (408,221)
Inventories............................. (2,369,725) (2,475,789) (2,682,204) (631,151)
Prepaid expenses........................ (36,825) 239,164 (20,333) 0
Accounts payable and other
accrued liabilities................... 540,460 533,886 739,970 (325,832)
Accrued wages and benefits.............. (888,787) (1,934,823) (596,279) 421,090
Accrued federal and state
income taxes.......................... 55,313 (6,006) 132,131 (73,115)
Noncurrent income taxes payable......... (112,848) 0 (120,949) 362,846
----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES.......................... (5,279,829) (2,967,243) 7,691,013 5,576,811
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds of long-term borrowings.............. 10,200,000 4,950,000 5,899,216 1,500,000
Payments of long-term borrowings.............. (2,290,135) (294,243) (274,617) (1,144,260)
Dividends paid................................ (2,570,953) 0 (4,115,000) (1,200,000)
----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES ......................... 5,338,912 4,655,757 1,509,599 (844,260)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant & equipment....... (1,048,189) (2,027,287) (8,024,618) (5,811,071)
Proceeds from property, plant and
equipment sales............................. 0 0 104,423 422,300
Redemption of common stock.................... 0 0 0 (2,359,907)
Increase in cash value of life insurance...... (106,939) (81,615) (300,474) (527,196)
Other......................................... 0 0 0 2,600
----------- ----------- ----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES.......................... (1,155,128) (2,108,902) (8,220,669) (8,273,274)
----------- ----------- ----------- -----------
See accompanying notes and independent auditors' report.
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Years Ended
------------------------ --------------------------
March 29, March 31, December 31, December 31,
1998 1997 1997 1996
--------- --------- ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............................... ($1,096,045) ($420,388) $ 979,943 ($3,540,723)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD................................ 1,610,317 630,374 630,374 4,171,097
---------- --------- ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD...................................... $ 514,272 $209,986 $ 1,610,317 $ 630,374
========== ======== =========== ==========
SUPPLEMENTARY DISCLOSURES
Operating activities reflect:
Interest paid............................... $ 309,038 $181,978 $ 942,647 $ 583,964
Income taxes paid (refunded) ............... $ 120,949 $ 6,006 ($ 368,902) $3,238,916
See accompanying notes and independent auditors' report.
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SHOFFNER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Shoffner Industries, Inc. (the "Company") manufactures roof and
floor trusses for the site-built residential housing market. The Company
operates fourteen facilities throughout the Southeastern United States
and comprises a single industry segment. No single customer represents
more than ten percent of net sales.
METHOD OF CONSOLIDATION
The attached consolidated statements include the results of
operations of the Company (Shoffner Industries, Inc.) and all of its
wholly-owned subsidiaries (Shoffner Industries of Virginia, Inc.,
Shoffner Industries of Tennessee, Inc.). All significant intercompany
transactions and balances have been eliminated. On December 31, 1996, the
wholly-owned subsidiaries were merged with Shoffner Industries, Inc.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company
considers cash and other demand deposits as cash equivalents.
INVENTORIES
Inventories are stated at the lower of average cost or market and
consist of raw materials, manufactured goods, and purchased goods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Expenditures for
renewals and betterments are capitalized, and maintenance and repairs are
expensed as incurred. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets as
follows:
Land improvements...................................... 10 to 35 years
Buildings and improvements............................. 10 to 40 years
Automobiles and trucks................................. 6 to 10 years
Machinery and equipment................................ 6 to 15 years
Office furniture, fixtures and equipment............... 3 to 10 years
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INTEREST DURING CONSTRUCTION
Interest cost incurred during the construction period of property
and equipment is capitalized as a cost of the property and equipment. The
cost capitalized during 1997 and 1996 amounts to $51,028 and $145,818,
respectively.
INCOME TAXES
The Company elected S corporation status effective January 1,
1997. The difference between LIFO and FIFO inventory at December 31, 1996
was subject to LIFO reserve recapture in the final C-corporation year.
Earnings and losses after that date will be included in the personal
income tax returns of the shareholders and taxed depending on their
personal tax strategies.
REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Revenue is recognized at the time the product is shipped to the
customer. The Company accrues for bad debt expense based on its history
of accounts receivable write-offs to sales. Individual accounts
receivable balances are evaluated and those balances considered to be
uncollectible are recorded to the allowance. Collections of amounts
previously written off are recorded as an increase to the allowance. Bad
debt expense amounted to $83,592 and $18,339 for 1997 and 1996,
respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the December 31, 1996,
financial statements to conform with the December 31, 1997, financial
statement presentation. Such reclassifi- cations have no effect on net
income as previously reported.
2. LONG-TERM DEBT
The Company had borrowings with First Union National Bank secured
by all accounts receivable, inventories, machinery and equipment, and
certain land and buildings. In February 1996, the Company entered into an
interest rate swap agreement with First Union National Bank. The Company
exchanged $3,000,000 of its variable rate debt for fixed rate debt. At
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December 31, 1997, the debt is payable at an effective fixed rate of
6.62%. This agreement will terminate March 1, 1999.
Below is a summary of the Company's long-term debt as of December
31, 1997 and 1996.
1997 1996
---- ----
FIRST UNION NATIONAL BANK
Equipment and working capital lines-of-credit ($13,000,000
limit); interest is due monthly at LIBOR + 1.25% (7.22% at
December 31, 1997)
and the principal is payable June 1999.............................. $ 9,000,000 $6,352,234
Real estate loan; $9,150 plus interest due monthly at LIBOR +
1.25% (7.22% at December 31, 1997) and the balance of the
principal is payable
April 1999.......................................................... 1,233,250 1,343,050
WEYERHAEUSER
Real estate loan, secured by land and a building;
$5,787 due monthly including interest at 7.75%
through February 2000............................................... 133,213 189,930
Obligations under capital lease; interest imputed at 7.58%
(see Note 7)....................................................... 3,143,350 0
----------- ----------
13,509,813 7,885,214
Less: Current maturities............................................. 353,405 1,122,946
----------- ----------
$13,156,408 $6,762,268
=========== ==========
The bank term loan and lines of credit require the maintenance of
certain financial ratios and place certain limits on business alteration.
Current maturities of the Company's long-term debt are as follows:
1998................................................................ $ 353,405
1999................................................................ 10,410,587
2000................................................................ 240,341
2001................................................................ 246,847
2002................................................................ 2,258,633
Thereafter.......................................................... 0
-------------
$ 13,509,813
=============
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At December 31, 1997 and 1996, the Company had $590,000 of
outstanding letters of credit.
3. DEFINED CONTRIBUTION PLAN
During 1993, the Company established the Shoffner Industries, Inc.
401 (k) Plan. Under the Plan, eligible employees may elect to defer up to
ten percent of compensation for the year, subject to Internal Revenue
Service limits. The Company contributes a matching fifty percent of the
first six percent of employee compensation deferral. The Company may make
additional contributions to the Plan. In 1997 and 1996, the Company
contributed $417,085 and $375,941 respectively, to the Plan.
4. DEFERRED BONUS ARRANGEMENT
The Company maintains a non-qualified deferred bonus arrangement
for certain key employees. Additions to the deferred bonus accounts are
based annually on the Company's profits. The amount accrued in the
accounts for the years ended December 31, 1997 and 1996 totaled $124,884
and $115,335. The nonvested deferred account balances amount to $360,778
and $277,176 at December 31, 1997 and 1996, respectively.
5. LINE OF CREDIT
On May 1, 1997, the Company entered into a lending arrangement
with its principal shareholder. The Company may borrow seasonal working
capital needs from Carroll M. Shoffner under a $5,000,000 line of credit,
which provides for payment of interest at the Prime Rate of First Union
National Bank of North Carolina as that rate may change from time to
time. The Company has no loans outstanding under this line of credit as
of December 31, 1997.
6. RELATED PARTY TRANSACTIONS
The principal shareholder of the Company purchases building
materials, trusses, etc. from the Company for various businesses that the
shareholder owns. During 1997 and 1996, these purchases amounted to
$705,563 and $166,122, respectively. The balance sheets include accounts
receivable balances from the principal shareholder of $ 0 and $152,460
for 1997 and 1996, respectively.
On January 2, 1996, the Company sold all of the equipment
associated with its farming operations to Shoffner Ranch, Inc. a
corporation owned by the principal shareholder, for $387,500.
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The Company leases certain real property from Shoffner
Investments, LLC (see Note 7).
7. LEASE COMMITMENTS
The Company has three long-term leases with Shoffner Investments,
LLC, which is owned by the Company's principal shareholder and family
members. The leases are ten-year operating agreements expiring in 2006
and 2007. Options exist to extend each lease for four separate
consecutive five year terms.
During the years ended December 31, 1997 and 1996 rentals under
long-term lease obligations were $698,000 and $240,000, respectively.
Future lease obligations over the primary terms of the Company's
long-term leases as of December 31, 1997 are:
Years Ended
December 31,.......................................... Amount
------------ --------
1998.................................................. $ 768,000
1999.................................................. 768,000
2000.................................................. 768,000
2001.................................................. 768,000
2002.................................................. 768,000
Thereafter............................................ 2,902,000
-----------
Total................................................. $6,742,000
==========
The Company is the lessee of an aircraft recorded under a capital
lease. The lease is non-cancelable and expires May 2002. Minimum future
lease payments under the capital lease agreements are as follows:
Year Amount
---- ---------
1998.................................................. $ 428,333
1999.................................................. 428,333
2000.................................................. 428,333
2001.................................................. 428,333
2002.................................................. 2,328,618
-----------
Total minimum lease payments.......................... $4,041,950
Less amount representing interest..................... 898,600
------------
Present value of minimum lease payments............... $3,143,350
==========
In addition to the minimum lease payments, the Company is
responsible for all taxes, insurance and maintenance of the aircraft.
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As of December 31, 1997, the cost of the aircraft recorded under
the capital lease was $3,251,450, the accumulated amortization was
$135,477, and the net book value was $3,115,973. Amortization of leased
property is included in depreciation expense.
8. CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash balances at a financial institution
located in Burlington, North Carolina. Accounts are insured by the
Federal Deposit Insurance Corporation up to $100,000. At December 31,
1997 and 1996, the Company's uninsured cash balances totaled $1,497,017
and $514,574, respectively. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit
risk to cash.
Credit sales are made to the Company's customers in the ordinary
course of business. Generally, these sales are unsecured to the extent
that State lien laws are unrecognized.
9. INCOME TAXES
As discussed in Note 1, the Company changed its tax status from
taxable to a pass-through entity effective as of January 1, 1997.
Accordingly, the net deferred tax liability at the date that the election
for the change was filed has been eliminated through an adjustment to the
deferred tax provision.
Income tax provisions for the years ended December 31, 1997 and
1996, are summarized as follows:
1997 1996
---- ----
Currently payable:
Federal............................................. $2,482,660
State and local..................................... $ 40,500 527,327
----------- ------------
40,500 3,009,987
----------- ------------
Net deferred:
Federal............................................. (287,509) 94,906
State and local..................................... (1,338,371) 27,558
------------ -------------
(1,625,880) 122,464
----------- ------------
($1,585,380) $3,132,451
============ ============
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The effective income tax rate is different from the statutory
federal income tax rate for the years ended December 31, 1997 and 1996
for the following reasons:
1997 1996
---- ----
Statutory federal income tax rate...................... 0.0% 34.0%
State and local........................................ 0.4 4.6
Effect of S-election................................... (17.7) 0.0
------ -----
Effective income tax rate.............................. (17.3%) 38.6%
====== =====
At December 31, 1997, no deferred tax assets or liabilities exist
due to the S-election.
Temporary differences which give rise to deferred tax assets and
liabilities at December 31, 1996 are as follows:
Deferred Deferred
Tax Assets Tax Liabilities
----------- ----------------
Accrued bonuses............................................ $177,453
Depreciation and basis..................................... $1,834,625
Allowance for bad debts.................................... 31,292
-------- ----------
$208,745 $1,834,625
======== ==========
In January 1998, the Company paid a dividend to its shareholders
totaling approximately $2,500,000 to compensate the shareholders for the
federal and state income taxes they are required to pay by April 15,
1998. The dividend is considered to be a non-taxable distribution from an
S corporation for tax purposes.
10. CHANGE IN METHOD OF ACCOUNTING FOR INVENTORIES
The Company changed its accounting for inventories to the
first-in, first-out (FIFO) method in 1996. Prior to 1978, the Company had
accounted for inventories by the first-in, first-out (FIFO) method.
During the period from 1978 to 1996, the inventories were determined by
the last-in, first-out (LIFO) method. The new method of accounting for
inventories was adopted after several years of low inflation. The LIFO
method was adopted in 1978 in response to high inflation and the
potential impact of overstated profits in high inflation years. The
financial statements of prior years have been restated to apply the new
method retroactively. For income tax purposes, the new method was also
adopted. The effect of the accounting change on the net income of 1996 is
an increase of $570,954.
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18
11. COMMITMENTS AND CONTINGENCIES
Various lawsuits and claims, including those involving ordinary
routine litigation incidental to its business, to which the Company is a
party, are pending, or have been asserted, against the Company. Although
the outcome of these matters cannot be predicted with certainty, and some
of them may be disposed of unfavorably to the Company, management has no
reason to believe that their disposition will have a material adverse
effect on the consolidated financial position, operating results or
liquidity of the Company.
12. EVENT SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT
(UNAUDITED)
On March 30, 1998, the Company merged into UFP Acquisition Corp.
II, a wholly-owned subsidiary of Universal Forest Products, Inc. Due to
the merger, the Company was in default of the Promissory Note and Loan
Agreement with First Union National Bank. The bank has waived those
covenants.
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19
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
Effective March 30, 1998, Universal Forest Products, Inc. (the "Company"),
through its wholly owned subsidiary UFP Acquisition Corp. II, acquired Shoffner
Industries, Inc. ("Shoffner"), a North Carolina corporation. Shoffner is a
supplier of roof and floor trusses to the site-built residential housing market
with 14 facilities in 7 states. The assets of Shoffner include property, plant
and equipment which the Company intends to continue to use for the manufacture
and supply of roof and floor trusses.
The acquisition was effected pursuant to an Agreement and Plan of Reorganization
and accompanying Plan of Merger, both dated as of March 30, 1998, by and among
the Company, UFP Acquisition Corp. II, Shoffner Industries, Inc., Mr. Carroll
Shoffner and the shareholders of Shoffner Industries, Inc. Pursuant to the
Agreement and Plan of Reorganization, Shoffner Industries, Inc. was merged with
and into UFP Acquisition Corp. II, a Michigan corporation and a wholly owned
subsidiary of the Company. On March 30, 1998, UFP Acquisition Corp. II changed
its name to Shoffner Industries, Inc.
The following unaudited consolidating condensed pro forma balance sheet as of
March 28, 1998 is based upon the historical consolidated balance sheet of the
Company and the consolidated balance sheet of Shoffner as of March 29, 1998,
after giving effect to the acquisition as if such transaction had occurred on
March 28, 1998.
The following unaudited consolidating condensed pro forma statements of earnings
for the three months ended March 28, 1998 and for the year ended December 27,
1997 are based upon the historical consolidated statements of earnings of the
Company and the consolidated statements of earnings of Shoffner for those
periods, after giving effect to the acquisition as if such transaction had been
completed as of the beginning of the period being presented.
The consolidating condensed pro forma statements of earnings are not necessarily
indicative of the results that actually would have occurred had the acquisition
been completed as of the beginning of the period presented, nor are they
necessarily indicative of future operating results.
The consolidating pro forma adjustments are described in the accompanying notes
to the consolidating condensed pro forma financial statements. The consolidating
condensed pro forma financial statements should be read in conjunction with the
notes thereto and the consolidated financial statements of the Company included
in the Company's Annual Report to Shareholders on Form 10-K for the fiscal year
ended December 27, 1997 and Quarterly Report on Form 10-Q for the three months
ended March 28, 1998, and the consolidated financial statements of Shoffner
Industries, Inc. presented elsewhere in this Amendment to Current Report on Form
8-K.
-19-
20
UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATING CONDENSED PRO FORMA BALANCE SHEET
MARCH 28, 1998 (UNAUDITED)
(1) (2) (3)
The Shoffner Pro Forma Pro Forma
Company Industries Adjustments Combined
-------- ---------- ----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 8,199,973 $ 514,271 ($ 500) $ 8,713,744
Accounts receivable............................... 61,608,399 7,694,436 69,302,835
Inventories:
Raw materials................................... 46,366,161 9,656,155 (741,965) 55,280,351
Finished goods.................................. 88,812,150 1,744,264 90,556,414
-------------- -------------- ------------- ----------------
135,178,311 11,400,419 (741,965) 145,836,765
Other current assets.............................. 6,268,960 57,158 387,568 6,713,686
-------------- -------------- ------------ --------------
TOTAL CURRENT ASSETS.......................... 211,255,643 19,666,284 (354,897) 230,567,030
OTHER ASSETS........................................... 4,486,261 1,849,285 (1,837,569) 4,497,977
GOODWILL AND NON-COMPETE
AGREEMENTS, NET........................................ 15,624,792 66,788,198 82,412,990
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost............ 124,331,630 37,582,641 237,800 162,152,071
Accumulated depreciation and amortization......... (54,082,652) (12,695.058) 12,695,058 (54,082,652)
-------------- -------------- ------------ --------------
PROPERTY, PLANT AND
EQUIPMENT, NET................................ 70,248,978 24,887,583 12,932,858 108,069,419
-------------- -------------- ------------ --------------
$ 301,615,674 $ 46,403,152 $ 77,528,590 $ 425,547,416
============== ============== ============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable..................................... $ 73,400,000 $ 43,016,540 $ 116,416,540
Accounts payable.................................. 38,260,663 $ 2,654,540 40,915,203
Accrued liabilities:
Compensation and benefits....................... 11,126,726 768,916 500,000 12,395,642
Other........................................... 4,193,400 187,444 4,380,844
Current portion of long-term debt and capital
lease obligations............................... 12,785,740 353,405 13,139,145
-------------- -------------- ------------ --------------
TOTAL CURRENT LIABILITIES..................... 139,766,529 3,964,305 43,516,540 187,247,374
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion..................... 36,367,587 21,066,273 57,433,860
DEFERRED INCOME TAXES.................................. 1,766,715 129,049 5,394,797 7,290,561
OTHER LIABILITIES...................................... 3,851,821 360,778 4,212,599
SHAREHOLDERS' EQUITY:
Common stock...................................... 17,576,847 50,000 2,950,000 20,576,847
Additional paid-in capital........................ 29,905,770 46,500,000 76,405,770
Retained earnings................................. 73,830,004 20,832,747 (20,832,747) 73,830,004
Foreign currency translation adjustment........... (615,765) (615,765)
-------------- -------------- ------------ --------------
120,696,856 20,882,747 28,617,253 170,196,856
Officers' stock notes receivable.................. (833,834) (833,834)
-------------- -------------- ------------ --------------
119,863,022 20,882,747 28,617,253 169,363,022
-------------- -------------- ------------ --------------
$ 301,615,674 $ 46,403,152 $ 77,528,590 $ 425,547,416
============== ============== ============ ==============
See Notes to Consolidating Condensed Pro Forma Financial Statements.
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21
UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF EARNINGS
MARCH 28, 1998
(UNAUDITED)
(1) (2)
The Shoffner Pro Forma Pro Forma
Company Industries Adjustments Notes Combined
------- ---------- ------------------ --------
NET SALES...................................... $ 238,197,183 $ 17,230,929 ($ 562,000) (4) $ 254,866,112
COST OF GOODS SOLD............................. 213,624,610 12,577,135 (668,000) (4) 225,533,745
-------------- --------------- ------------- --------------
GROSS PROFIT................................... 24,572,573 4,653,794 106,000 29,332,367
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES........................ 17,269,619 7,219,816 (3,176,000) (4) 21,313,435
-------------- --------------- ------------- --------------
EARNINGS FROM OPERATIONS....................... 7,302,954 (2,566,022) 3,282,000 8,018,932
OTHER EXPENSE (INCOME):
Interest expense.......................... 1,671,632 309,039 645,000 (5) 2,625,671
Interest income........................... (34,569) (32,124) (66,693)
Other, net................................ (44,327) 105,968 61,641
-------------- --------------- ------------- --------------
TOTAL OTHER EXPENSE..................... 1,592,736 382,883 645,000 2,620,619
-------------- --------------- ------------- --------------
EARNINGS (LOSS) BEFORE INCOME
TAXES ...................................... 5,710,218 (2,948,905) 2,637,000 5,398,313
INCOME TAXES................................... 2,133,000 50,597 (12,000) (6) 2,171,597
-------------- --------------- ------------- --------------
NET EARNINGS (LOSS)............................ $ 3,577,218 ($ 2,999,502) $ 2,649,000 $ 3,226,716
============== =============== ============== ==============
EARNINGS PER SHARE - BASIC..................... $ 0.20 $ 0.16
EARNINGS PER SHARE - DILUTED................... $ 0.20 $ 0.15
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC............................ 17,575,000 3,000,000 20,575,000
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED.......................... 18,271,000 3,000,000 21,271,000
See Notes to Consolidating Condensed Pro Forma Financial Statements.
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22
UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF EARNINGS
DECEMBER 27, 1997
(UNAUDITED)
(1) (2)
The Shoffner Pro Forma Pro Forma
Company Industries Adjustments Notes Combined
------- ---------- ------------------ --------
NET SALES....................................... $ 1,066,300,174 $ 91,027,391 ($ 2,493,000) (4) $ 1,154,834,565
COST OF GOODS SOLD.............................. 970,821,283 64,329,666 (2,718,000) (4) 1,032,432,949
--------------- ------------- ------------ ---------------
GROSS PROFIT.................................... 95,478,891 26,697,725 225,000 122,401,616
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES......................... 63,462,136 16,846,139 (833,000) (4) 79,475,275
REORGANIZATION COSTS............................ 1,698,153 1,698,153
--------------- ------------- ------------ ---------------
EARNINGS FROM OPERATIONS........................ 30,318,602 9,851,586 1,058,000 41,228,188
OTHER EXPENSE (INCOME):
Interest expense........................... 4,305,088 891,619 2,581,000 (5) 7,777,707
Interest income............................ (367,556) (108,961) (476,517)
Other, net................................. 399,983 (103,990) 295,993
--------------- ------------- ------------ ---------------
TOTAL OTHER EXPENSE...................... 4,337,515 678,668 2,581,000 7,597,183
--------------- ------------- ------------ ---------------
EARNINGS (LOSS) BEFORE INCOME
TAXES ....................................... 25,981,087 9,172,918 (1,523,000) 33,631,005
INCOME TAXES.................................... 9,024,878 (1,585,380) 5,071,000 (6) 12,510,498
--------------- ------------- ------------ ---------------
NET EARNINGS (LOSS)............................. $ 16,956,209 $ 10,758,298 ($ 6,594,000) $ 21,120,507
=============== ============= ============ ===============
EARNINGS PER SHARE - BASIC...................... $ 0.97 $ 1.03
EARNINGS PER SHARE - DILUTED.................... $ 0.93 $ 0.99
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC............................. 17,528,000 3,000,000 20,528,000
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED........................... 18,234,000 3,000,000 21,234,000
See Notes to Consolidating Condensed Pro Forma Financial Statements.
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23
NOTES TO CONSOLIDATING CONDENSED
PRO FORM FINANCIAL STATEMENTS
(1) The Company's historical consolidated balance sheet as of March 28, 1998
and the historical consolidated statements of earnings for the three
months ended March 28, 1998 and the year ended December 27, 1997.
(2) Shoffner's historical consolidated balance sheet as of March 29, 1998 and
the historical consolidated statements of earnings for the three months
ended March 29, 1998 and the year ended December 31, 1997.
(3) Represents the consolidating condensed pro forma balance sheet
adjustments required to account for the acquisition as a purchase,
including the following:
- To eliminate cash, inventory, property, plant and equipment of a
sawmill operation, and cash surrender value of a life insurance policy.
These assets were sold by the Company to Shoffner's majority
shareholder.
- To adjust inventory acquired to its estimated fair value.
- To adjust property, plant and equipment acquired to its estimated fair
market value and eliminate historical accumulated depreciation.
- To record goodwill as the excess of the acquisition cost over the fair
value of the net assets acquired.
- To record the purchase of certain real estate which Shoffner leased
from a related party. o To reflect the financing transaction related to
the cash portion of the acquisition.
Approximately $43.0 million was obtained through the Company's
revolving credit facilities, which is classified as notes payable
within current liabilities.
- To record the issuance of 3,000,000 shares of the Company's common
stock as part of the consideration exchanged related to the
acquisition.
- To capitalize costs relating to the acquisition (e.g., professional
services).
- To record an asset and liability for deferred state and federal
income tax.
- To eliminate Shoffner's historical shareholders equity.
- To adjust certain liabilities to their estimated present values.
(4) Represents the consolidating condensed pro forma statement of earnings
adjustments required to account for the acquisition as a purchase,
including the following:
- To eliminate results of operations of Shoffner's sawmill facility,
which was subsequently sold by the Company, and certain activities the
Company does not intend to continue.
- To adjust depreciation expense reflecting the differences in the
Company's and Shoffner's depreciable basis of property, plant and
equipment.
- To eliminate rent expenses related to three facilities that were
purchased as part of the acquisition, that had previously been leased
by Shoffner from a related party.
-23-
24
- To record the amortization of goodwill and capitalized acquisition
costs over 40 years on a straight-line basis.
- To eliminate non-continuing miscellaneous expenses.
- To eliminate one-time executive bonus expense related to the historic
performance of Shoffner.
- To adjust the executive compensation expense from the amount recognized
by Shoffner to the current agreed upon compensation.
(5) To record interest expense associated with the financing of the
acquisition.
(6) To adjust the provision for State and Federal income taxes on Shoffner's
pre-tax earnings, including the effects of the pro forma adjustments.
-24-
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
UNIVERSAL FOREST PRODUCTS, INC.
By: /s/ Elizabeth A. Bowman
------------------------------
Elizabeth A. Bowman
Chief Financial Officer
Date: June 12, 1998
-25-
26
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ---------- -----------
EX-23 INDEPENDENT AUDITORS CONSENT
1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated January
26, 1998, relating to our audit of the financial statements of Shoffner
Industries, Inc., for the years ended December 31, 1997 and 1996, and
incorporated in the Amendment to Current Report on Form 8-K/A of Universal
Forest Products, Inc., dated June 12, 1998, in the Registration Statement No.
33-1465835 on Form S-8.
APPLE, BELL, JOHNSON & CO., P.A.
Certified Public Accountants
Burlington, North Carolina
June 12, 1998
-26-
