Document/Exhibit Description Pages Size
1: 10KSB Annual Report -- Small Business 41 172K
3: EX-10 1996, Stock Incentive Plan 30 127K
2: EX-10 Executive Employment Agreement 12 51K
4: EX-21 List of Subsidiaries 1 5K
5: EX-23.1 Consent of Independent Accountants 1 6K
6: EX-27 FDS -- Form 10-Qsb 1 9K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
Commission File Number 0-25364
ANICOM, INC.
(Name of small business issuer in its charter)
Delaware 36-3885212
(State of incorporation) (IRS Employer Identification No.)
6133 North River Road, Suite 1000, Rosemont, Illinois 60018-5171
(Address of principal executive offices, including zip code)
(847) 518-8700
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
(Title of Class)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
The issuer's revenues for the fiscal year ended December 31, 1996: $115,993,079
The aggregate market value of the voting stock held by non-affiliates, based on
the closing price of the registrant's Common Stock on March 14, 1997:
$137,998,275
The number of shares outstanding of the registrant's Common Stock as of
March 14, 1997: 15,811,105
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the issuer's Notice of Annual Meeting of Stockholders and
Proxy Statement for its Annual Meeting of Stockholders to be held on May 21 1997
are incorporated by reference into Part III of this report.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
TABLE OF CONTENTS
[Enlarge/Download Table]
ITEM PAGE
---- ----
PART I
ITEM 1. DESCRIPTION OF BUSINESS....................................................................... 1
ITEM 2. DESCRIPTION OF PROPERTY....................................................................... 7
ITEM 3. LEGAL PROCEEDINGS............................................................................. 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................... 8
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...................................... 8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 9
ITEM 7. FINANCIAL STATEMENTS.......................................................................... 13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......... 13
PART II
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT............................................................ 14
ITEM 10. EXECUTIVE COMPENSATION........................................................................ 14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................ 14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................ 14
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................................................. 15
SIGNATURES...................................................................................................... 16
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS......................................................................F-1
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Anicom, Inc. ("Anicom" or the "Company") specializes in the sale and
distribution of communications related wire, cable, fiber optics and computer
network and connectivity products. The products offered by Anicom generally fall
into four categories: (i) voice and data communications and fiber optics, (ii)
sound, security, fire, alarm and energy management systems, (iii) electronic
cable and (iv) industrial cable, wiring and assemblies for automation, computers
and robotics. The fastest growing products for the Company are in voice and data
communications and fiber optics, including an assortment of transmission media
(copper and fiber optic cable), components (blocks, brackets, jacks, patch
cords, patch panels, connectors and stackable hubs), related hardware and cable
assemblies.
Since its inception in 1993, the Company has grown very rapidly through internal
expansion and acquisitions. From its initial public offering in February 1995,
the Company has grown from 7 to 41 locations.
In 1995, the Company successfully acquired two companies: Pinnacle Wire and
Cable, Inc., in July, 1995 and Morgan Hill Supply Company, Inc., in October,
1995. During 1996, the Company successfully completed five acquisitions:
Medisco, Inc., acquired in February 1996, Northern Wire & Cable, Inc., acquired
in mid-March 1996, Southern Alarm Supply, Inc., acquired in May 1996, and
Norfolk Wire & Electronics, Inc., and Western Wire & Alarm Products, Inc., both
acquired in September 1996. In February 1997, the Company acquired Carolina
Cable & Connector, Inc. Since July 1995, Anicom has successfully consummated
eight corporate acquisitions with aggregate sales of approximately $126.4
million based on the acquired companies operating results for their last fiscal
year.
Anicom is a national leader in the sale and distribution of multimedia wiring
products. The Company has assembled an experienced management team and has
invested in the development of an information technology and distribution system
which management believes can support substantial growth. The five person
management team that formed Anicom collectively has more than 100 years of
experience in the sale and distribution of multimedia wiring products. The
Company's Chairman of the Board, Alan B. Anixter, and Board member William R.
Anixter, were the co-founders of Anixter Bros., Inc., an international
specialist in the distribution of wire, cable and related products. Alan B.
Anixter served as the Chairman and Chief Executive Officer of Anixter Bros.,
Inc., until 1988. During his career at Anixter Bros., Inc., that company
consummated more than 40 corporate acquisitions and by 1988, had grown to over
$1.0 billion in annual net sales. In addition, the Company's Chairman and Chief
Executive Officer, Scott C. Anixter, previously was a director of Anixter Bros.,
Inc., and the Company's President, Carl E. Putnam, previously was a Regional
Vice President of Anixter Bros., Inc., responsible for a division with
approximately $200 million in annual net sales. The Company believes that the
extensive industry experience of its management team and sales personnel has
enabled it to establish and maintain strong relationships with major vendors and
customers and that such experience will continue to serve as a valuable asset in
the implementation of Anicom's integrated growth strategy.
Background
Several of the industries serviced by Anicom have experienced significant growth
in recent years and are expected to continue to grow at a rapid pace. As these
industries continue to evolve, management believes that the demand for products
offered by the Company will also continue to grow. Because the Company is not a
manufacturer, management believes that it can readily respond to the changing
demands of the industries it serves and is not reliant upon the success of a
particular product or product category. The products distributed by the Company
are components utilized by contractors and end-users in the installation or
upgrading of highly technical communications systems. As such, the Company's
products often are subject to strict technical specifications. The degree to
which products adhere to these technical specifications, such as class of cable
or specific connector impedance specifications, is a significant factor in
differentiating among products. Accordingly, distributors primarily distinguish
themselves by the depth and breadth of products offered and their knowledge of
these products. Anicom's sales personnel, who average approximately ten years of
experience in the sale and distribution of multimedia wiring products, work with
Anicom's customers and vendors to match products to the technical specifications
supplied by its customers. Management believes that this level of service is
important in attracting and retaining customers as well as distinguishing itself
as a provider of products, service and value.
The growing market for the distribution of communications related wire, cable,
fiber optics and computer network and connectivity products is highly
fragmented, with few companies maintaining greater than $50 million in annual
net sales. Management believes that no company accounts for more than 5% of
total sales of multimedia wiring products and the ten largest distributors of
multimedia wiring products, in the aggregate, represent less than 10% of such
sales. In addition to a few national companies, most of the Company's
competitors are regional distribution companies with less than $50 million in
annual net sales. Anicom's integrated growth strategy focuses on increasing
revenue through acquisitions and internal growth into targeted geographical
markets while continuing to achieve profitability in existing and acquired
operations through the implementation of financial and operational controls.
Voice and Data Communications and Fiber Optics
Anicom's customer base consists of a wide array of businesses, including
contractors, systems integrators, security/fire alarm companies, regional Bell
operating companies, distributors, utilities, telecommunications and sound
contractors, wireless specialists, construction companies, universities and
governmental agencies. These customers utilize the products offered by Anicom in
a multitude of existing applications. In addition, a large number of leading
telecommunications, computer, computer software and entertainment companies have
committed significant resources to developing plans for the delivery of
broadband communications services which are expected to increase the use of
protocols including Ethernet(R) and Fast Ethernet(R) networks, as well as
asynchronous transfer mode ("ATM") technology. New systems and technology such
as these are anticipated to involve the use of fiber optic cable, copper cable
or wires manufactured to specifications different from those currently in use.
At the same time, the proliferation of personal computers and advances in
networking technology have resulted in increased demand for interconnected local
area network ("LAN") and wide area network ("WAN") systems that utilize the
products offered by Anicom. The growth of these types of networks has resulted
in a separate purchasing process for electronic data transmission cable and
components utilized in these networks. Anicom coordinates with end-users,
systems integrators and network cable manufacturers in determining
specifications of the cable required for a particular network.
Sound, Security, Fire, Alarm and Energy Management Systems
The demand for the multimedia wiring products offered by Anicom for use in these
types of systems has increased in recent years as a result of technological
advances in commercial building automation, greater concern regarding the safety
features of commercial buildings and the increased demand for residential
security systems. The growth in this market generally is regarded as the result
of increased concern about crime, as well as the result of technological
advances that have allowed manufacturers to improve reliability and features
while lowering the installed costs of such systems. Similarly, publicly and
privately owned buildings, such as office buildings, stadiums, hospitals and
correctional facilities, also continue to use more sophisticated computer,
security, communications and sound systems that incorporate the types of
multimedia wiring products offered by Anicom. The systems used by contractors
and systems integrators in these types of facilities not only offer greater
building automation and more sophisticated communication systems but also are
designed to meet the increasingly stringent safety requirements imposed by local
and national building codes.
Electronic and Industrial Cable
Anicom also offers wire and cable products for use in a wide variety of
electrical and electronic systems. Anicom sells these products to contractors,
end-users, systems integrators and original equipment manufacturers ("OEMs").
The wire and cable products are used in the manufacturing of electrical and
electronic equipment, as well as the replacement of wire and cable in existing
systems. Anicom also sells and distributes wire and cable products for
industrial use in the automotive, mining, marine, petro-chemical, paper and pulp
and other natural resource industries.
The Acquisition Strategy Anicom has implemented an integrated growth strategy
focusing on increasing revenues through acquisitions and internal growth in
targeted geographical markets while continuing to achieve profitability in
existing and acquired operations through the implementation of financial and
operational controls. Generally, Anicom seeks to acquire an established,
high-quality company in a targeted geographical market. Anicom also may pursue
companies with substantially greater revenues than those of the Company. Anicom
generally expects to retain the management and sales personnel of the acquired
company while seeking to increase its net sales through the availability of a
greater selection and depth of inventory and to improve its profitability by
achieving economies of scale through the use of the Company's integrated
inventory and information systems. Anicom believes that management's industry
experience and Anicom's inventory and information systems make it an attractive
acquirer, particularly for those companies whose owners desire to remain
involved in day-to-day operations. As consideration for future acquisitions,
Anicom plans to continue to use various combinations of cash, securities and
notes.
The Products and Services
Anicom offers a wide selection of communications related wire, cable, fiber
optics and computer network and connectivity products supplied by over 300
manufacturers. Anicom focuses on carrying quality, name brand products that meet
or exceed industry standards. The products offered by Anicom generally fall into
four categories: (i) voice and data communications and fiber optics, (ii) sound,
security, fire, alarm and energy management systems, (iii) electronic cable and
(iv) industrial cable, wiring and assemblies for automation, computers and
robotics.
The fastest growing products for Anicom are in voice and data communications and
fiber optics. Management estimates that less than 20% of the voice and data
transmission systems currently in existence utilize fiber optic cable, and
management believes that the replacement of existing cable with fiber optic
cable represents a significant opportunity for the Company. Anicom sells single,
duplex and multifiber cables for internal and external data communication use in
the computer network, computer interconnect and building automation and safety
markets.
The Company also offers custom and standard cables, both shielded and
unshielded, to transmit data for LAN and WAN systems. Anicom offers a wide
variety of electronic multiconductor cables for the computer, security,
instrumentation and interconnection markets, wire and cable constructions (such
as a variety of shielded and unshielded twisted pairs), and ancillary products
such as blocks, brackets, jacks, patch cords, patch panels, connectors,
stackable hubs, and related hardware and cable assemblies.
The Company carries a wide selection of wire, cable, fiber optics and related
computer network and connectivity products used in sound, security, alarm and
energy management systems and signaling equipment for fire and life-safety
systems. These products include many of the same components used in voice and
data communication. Anicom sells these products to low voltage contractors, OEMs
and commercial end-users.
Anicom also sells and distributes wire and cable products for use in a wide
variety of electrical and electronic systems. Anicom sells these products to
contractors, end-users, systems integrators and OEMs. Anicom also sells and
distributes wire and cable products for industrial use, including portable
cords, power cables, control and instrumentation cables, mining and welding
cables, armored and high voltage cables and building wire. In addition, through
certain acquisitions completed during 1996, the Company acquired three assembly
operations. These assembly operations produce two lines of connector cable
products and a line of copper and fiber optic cable cutting and splicing kits.
On December 31, 1996, the splicing kit line and one of the connector cable
product lines were sold. On March 7, 1997, the remaining line of connector cable
products was sold.
In addition to providing multimedia wiring products to customers on a timely
basis, Anicom provides value-added, specialized services to its customers,
including cutting and re-spooling services, technical support and cable
assemblies, in response to specific customer requests. One of Anicom's more
popular value-added features is Exacpac(R), which marks packages of wire or
cable in one foot increments beginning at the base of the package. This feature
allows the end-user to monitor the remaining length of wire or cable in a
package without having to keep track of the length of wire or cable used. Anicom
also has the ability to procure selected specialty items not readily available
to customers, and, through its experienced sales personnel, Anicom is able to
offer its customers technical assistance and support in the selection of
appropriate products. Certain of Anicom's more experienced sales personnel have
developed extensive knowledge in specific product categories (e.g., fiber
optics). Anicom's sales personnel are trained to seek out assistance from those
salespersons who have developed this degree of knowledge in handling their
customers' accounts. Management believes that Anicom more aggressively seeks to
capitalize on this expertise and experience than some of the larger, national
and regional distributors of multimedia wiring products with which it competes.
Sales and Marketing
Anicom is committed to making it easier and more cost effective for its
customers to acquire wire, cable, fiber optics and computer network and
connectivity products. Anicom has established strong customer relationships
through an extensive and experienced sales and marketing force of approximately
260 people operating nationally out of its 41 locations.
Anicom has seven Regional Vice Presidents with an average of approximately ten
years of experience in the sale and distribution of multimedia wiring products.
The sales and marketing force is responsible for establishing and maintaining
long-term relationships with customers and industry referral sources, soliciting
new business from prospective customers and responding to incoming inquiries and
orders. Anicom monitors customer satisfaction through internal controls and
regular interaction with its customers.
Anicom identifies potential customers through telemarketing efforts, responses
to direct marketing materials, periodic advertisements in trade journals and
industry trade shows. Anicom also receives numerous referrals from customers and
vendors. Anicom periodically provides product and service information to its
customers by distributing promotional literature and product catalogs to
existing and potential customers. Sales and marketing representatives follow-up
on customer inquiries through further distribution of Anicom's informational
materials and on-site visits. Once a customer relationship has been established,
Anicom focuses on identifying opportunities to market a broader array of
products to the customer.
Anicom rewards its sales and marketing force through an incentive-based bonus
program. Under this program, quantifiable performance goals are established each
year by Anicom and each employee. In addition, Anicom seeks to achieve
Company-wide objectives and encourage a "team" concept by rewarding its sales
personnel through supplementary discretionary bonuses based on Company-wide or
location-based goals.
Suppliers and Inventory
Management believes that Anicom is not dependent on any particular supplier.
Anicom offers a large number of products manufactured by a variety of vendors.
Management believes that vendor relationships are critical to Anicom's success,
and Anicom focuses sharply on maintaining such relationships. Purchasing
decisions generally are made at Anicom's headquarters in the Chicago area and
manufacturers are instructed to ship inventory to the sales and warehouse
locations (or, in some cases, directly to customers) specified by Anicom.
Management believes that Anicom has a good working relationship with its
existing suppliers. Management believes that Anicom could obtain competitive
products of comparable quality from other suppliers and does not believe that
the loss of any one supplier would have a material adverse impact on Anicom's
results of operations or financial condition.
Anicom's objective is to provide its customers with a continuity of supply and
delivery scheduling that responds to their needs without requiring excessive
levels of inventory. Anicom's fully integrated on-line computer network enables
it to customarily provide same day shipping on any stock item. Management also
can generate real-time information on inventory levels using this on-line
system. While the depth and breadth of products offered has increased over the
last two years, the emphasis on strict inventory control has allowed the Company
to maintain its order completion rate and to support its increasing sales levels
without increases in relative inventory levels. The Company continues to improve
its inventory management systems, including hiring a Vice President of
Purchasing with 15 years of experience, who reports directly to Anicom's
President, Carl Putnam, imposing stricter controls on the discretion of Anicom's
sales personnel and improving the forecasting and monitoring capabilities of its
inventory management software. Anicom has not experienced any significant
inventory obsolescence.
The Management Information Systems
Anicom utilizes a custom-designed information technology system which integrates
sales, inventory control and purchasing, financial control and internal
communications while providing real-time monitoring of inventory levels and
shipping status at all of Anicom's sales and distribution centers. This system
enables management to respond quickly and efficiently to customer demands. All
of Anicom's locations are networked into the information technology system and
integrated with Anicom's centralized processing system. This system has allowed
Anicom to quickly integrate the operations of its acquisitions and generally has
helped maximize productivity which management believes translates into a lower
effective cost to customers. This system also contributes to Anicom's ability to
increase sales productivity by enabling the sales force to provide customers
with personalized service drawing on information contained in the database, and
allows non-technically trained personnel to provide technical product
information in marketing the products offered by Anicom.
Customers
Anicom's customer base consists of a wide array of businesses, including auto
manufacturers, contractors, systems integrators, security/fire alarm companies,
regional Bell operating companies, distributors, utilities, telecommunications
and sound contractors, wireless specialists, construction companies,
universities and governmental agencies. No customer accounted for more than 10%
of Anicom's net sales during either of the past two years, and management
believes that Anicom is not dependent on any particular customer. With Anicom's
increasing national presence and inventory selection, management will continue
to focus more of its efforts on the development of sales to a larger number of
national customers.
Competition
The market for multimedia wiring products is highly competitive and fragmented.
To compete successfully, management believes that the Company will need to
continue to distribute a broad range of technologically advanced products,
provide competitive pricing while maintaining its margins, provide prompt
delivery of products, deliver responsive customer service, establish and
maintain strong relationships with suppliers and customers, and attract and
retain highly qualified personnel. Anicom faces substantial competition from
several national and regional distributors that have greater financial,
technical and marketing resources and distribution capabilities than the Company
and from manufacturers who sell directly to end-users for certain large-scale
projects.
Trade Names
Anicom maintains a number of registered trademarks and trade names in connection
with its business activities, including "Anicom(R)", "Exacpac(R)" and
"RAPI-Change(R)." Anicom's policy is to file for trademark and trade name
protection for its trademarks and trade names.
Employees
As of March 14, 1997, Anicom employed approximately 490 persons. None of the
employees are covered by collective bargaining agreements. Anicom believes that
it has good relations with its employees.
Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
The statements contained in Item 1 (Description of Business) and Item 6
(Management's Discussion and Analysis of Financial Condition and Results of
Operations) that are not historical facts may be forward-looking statements that
are subject to a variety of risks and uncertainties more fully described in
Anicom's filings with the Securities and Exchange Commission including, without
limitation, those described under "Risk Factors" in Anicom's Resale Prospectus
dated November 15, 1996. Anicom cautions readers that these risks and
uncertainties could cause Anicom's actual results in 1997 and beyond to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, Anicom. These risks and uncertainties include, without limitation,
Anicom's limited operating history on which expectations regarding its future
performance can be based, general economic and business conditions affecting the
industries of Anicom's customers in existing and new geographical markets,
competition from, among others, national and regional distributors that have
greater financial, technical and marketing resources and distribution
capabilities than Anicom, the availability of sufficient capital, Anicom's
ability to identify the right product mix and to maintain sufficient inventory
to meet customer demand, Anicom's ability to successfully acquire and integrate
the operations of additional businesses and Anicom's ability to operate
effectively in geographical areas in which it has no prior experience.
ITEM 2. DESCRIPTION OF PROPERTY
As of March 14, 1997, Anicom conducted its operations from 41 different
locations, all of which are leased. Each of its locations consists of a sales
office and a warehouse, except for its locations in Tucson, Arizona; Cerritos,
California; Rosemont, Illinois; Baton Rouge, Louisiana; Framingham,
Massachusetts; and Tinton Falls, New Jersey which do not include any warehouse
space. As of March 14, 1997, Anicom operated out of the following locations:
Baton Rouge, LA Elk Grove Village, IL Plano, TX
Birmingham, AL Framingham, MA Pompano Beach, FL
Bridgeton, MO Gaithersburg, MD Raleigh, NC
Broadview Hts., OH Greensboro, NC Richmond, VA
Cerritos, CA Greenville, SC Rochester, NY
Charleston, SC Houston, TX Rosemont, IL
Charlotte, NC Indianapolis, IN San Diego, CA
Charlottesville, VA Kingston, NY Tampa, FL
Cincinnati, OH Knoxville, TN Tinton Falls, NJ
Columbia, SC Las Vegas, NV Troy, MI
Columbus, OH Nashville, TN Tucson, AZ
Denver, CO Newport News, VA Tukwila, WA
Eagan, MN Norcross, GA Virginia Beach, VA
Phoenix, AZ Washington, PA
Anicom's aggregate executive office and sales office space as of March 14, 1997
is approximately 138,000 square feet and its aggregate warehouse space is
approximately 310,000 square feet. Generally, Anicom maintains short term leases
for its sales offices and warehouses, with options to renew, where possible.
Anicom believes that its facilities are adequate for its current and present
foreseeable needs in these geographical markets; however, the Company will
continue to increase space as the need arises. Management believes that adequate
replacement space is readily available in each market.
ITEM 3. LEGAL PROCEEDINGS
Anicom is not a party to any material legal proceeding nor, to Anicom's
knowledge, is any material legal proceeding threatened against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during Anicom's fiscal
quarter ended December 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On September 25, 1996, the number of authorized shares of common stock was
increased from 10,000,000 to 30,000,000 following approval of such action by the
Company's stockholders at a special meeting. Following such action, a 2-for-1
stock split effected in the form of a 100% stock dividend was declared for
holders of record as of October 1, 1996, payable October 7, 1996. All periods
and sales prices presented have been restated to retroactively reflect the 100%
stock dividend.
Since November 21, 1995, Anicom's Common Stock has been quoted on the Nasdaq
National Market under the symbol "ANIC". From February 22, 1995, the date of
Anicom's initial public offering, through November 20, 1995, Anicom's Common
Stock was listed on the Nasdaq SmallCap Market under the symbol "ANIC". The
following table sets forth, for the periods indicated, the range of high and low
last sale prices for the Common Stock as reported on the Nasdaq National Market
and on the Nasdaq SmallCap Market:
1996 1995
High Low High Low
1st quarter 7 5/8 4 3/8 4 1/4 3 3/16
2nd quarter 10 1/8 6 3/8 5 5/16 3 7/8
3rd quarter 9 1/8 6 9/16 7 1/4 4 1/16
4th quarter 10 1/8 7 7/8 6 3/8 4 1/2
As of March 14, 1997, the approximate number of record holders of Anicom's
Common Stock was 736.
As an S Corporation, Anicom made annual S Corporation distributions to its
stockholders. During 1995, cash distributions of $163,032 were declared payable
to the S Corporation Stockholders of Anicom to fund their estimated tax payments
due with respect to the taxable income of Anicom.
Except for S Corporation distributions in 1995, Anicom did not pay cash
dividends or distributions on its capital stock during 1995 or 1996. Anicom
anticipates that it will retain any future earnings to finance the continuing
growth and development of its business. Accordingly, Anicom does not anticipate
paying cash dividends on its Common Stock in the foreseeable future. The payment
of any future dividends will be at the discretion of Anicom's Board of Directors
and will depend upon, among other things, future earnings, the success of
Anicom's development activities, capital requirements, restrictions in financing
arrangements, the general financial condition of Anicom and general business
conditions. At present, Anicom's ability to declare or pay dividends is limited
under its bank line of credit, which provides that Anicom may not declare or pay
any dividends on its Common Stock if at the time of such declaration or payment,
any event of default shall have occurred or be continuing.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth selected income statement data of Anicom
expressed as a percentage of net sales for the periods indicated:
1996 1995
Income Statement Data:
Net sales........................................ 100.0% 100.0%
Cost of goods sold............................... 75.4 76.3
--------- --------
Gross profit..................................... 24.6 23.7
--------- --------
Operating expenses and other:
Selling expenses............................... 11.3 10.4
General and administrative expenses............ 10.7 9.6
Gain on sale of product line................... (.8) --
--------- --------
Operating income................................. 3.4 3.7
Interest (expense)............................... (.2) (.2)
Interest income.................................. .5 .9
--------- --------
Income before income taxes....................... 3.7 4.3
Income taxes..................................... 1.4 1.7
--------- --------
Net income....................................... 2.3% 2.6%
========= ========
------------------
Note: Percentages may not sum due to rounding.
Results of Operations
Year ended December 31, 1996 compared to year ended December 31, 1995
For the year ended December 31, 1996, the Company established record net sales,
net income and earnings per share ("EPS"). On a comparable basis with 1995, net
sales increased by more than 295% to $116.0 million, net income increased
approximately 243% to $2.6 million and EPS increased 43% to $0.20 per share.
These improvements follow record 1995 results of $29.4 million in net sales, net
income of $764,000 and EPS of $0.14 per share (based on 46% fewer weighted
average shares outstanding).
The increase in net sales is primarily attributed to acquisitions completed in
the fourth quarter of 1995 and throughout 1996. The remainder of the improvement
is attributed to the Company's expanding breadth and depth of product offerings
which has lead to increased market share, expanded market penetration and
increased volume with many existing customers.
For the year ended December 31, 1996, Anicom's gross profit as a percentage of
net sales increased to 24.6% compared to the 23.7% level achieved in 1995. The
improvement is principally a result of economic efficiencies achieved from
increased purchasing volume with vendors and centralizing the purchasing
function. These factors, combined with the acquired sales volume, resulted in
gross profit increasing more than fourfold to $28.6 million in 1996 as compared
to $7.0 million in 1995.
Selling expenses increased from $3.1 million or 10.4% of net sales in 1995 to
$13.1 million or 11.3% of net sales in 1996. The Company's acquisitions in 1996
resulted in an increase in sales headcount and other variable selling expenses.
For 1996, the change in selling expenses as a percentage of net sales resulted
from the historically higher selling expenses of Northern Wire & Cable; however,
selling expense as a percentage of net sales has decreased in each quarter
subsequent to the Northern acquisition.
General and administrative expenses increased from $2.8 million in 1995 to $12.4
million in 1996. The Company's acquisitions in 1996 resulted in an increase in
general and administrative expenses. As a percentage of net sales, general and
administrative expenses increased to 10.7% from 9.6% in 1995 due primarily to
amortization of goodwill resulting from acquisitions, non-recurring acquisition
and integration expenses, increased warehousing and distribution costs primarily
associated with industrial cable (a product line the Company acquired in its
acquisition of Northern Wire & Cable) and increased costs associated with
Anicom's successful implementation of its integrated growth strategy.
On December 31, 1996, the Company sold its copper and fiber optic cutting and
splicing kit product line and its low voltage cable and fiber optic connector
product line, in two separate transactions. Both of these assembled product
lines were acquired as a part of the Norfolk Wire & Electronics, Inc.
acquisition and were sold as the Company continues to maintain its focus as a
distribution specialist. The Company recognized a pre-tax gain of approximately
$878,000, net of transaction expenses on these sales. As a result of
acquisitions in 1996, the Company also incurred approximately $823,000 of
non-recurring, post-acquisition integration costs.
Interest income increased by approximately $308,000 or 120% to $565,000 in 1996
from $256,000 in 1995 as the Company invested the funds raised in its November
1995 follow-on offering and its September 1996 private placement of equity
pending use of such funds to finance acquisitions and working capital
requirements.
In 1996, interest expense rose by $183,000 to $256,000 The increase was a result
of interest incurred on debt issued in certain acquisitions completed during
1996 and other debt assumed in acquisitions.
The provision for income taxes increased to $1.6 million in 1996 from $764,000
in 1995 as a result of the $3.0 million increase in income before taxes. As a
percentage of income before income taxes, the provision decreased to 38.2% in
1996 from 39.2% in 1995. This decrease is primarily attributable to income
earned on tax-exempt securities.
Liquidity and Capital Resources
As of December 31, 1996, Anicom had working capital of approximately $33.4
million as compared to $34.3 million as of December 31, 1995. At December 31,
1995, working capital was favorably impacted by funds raised in the Company's
November 1995 follow-on offering which were not utilized until 1996. The timing
of the use of these amounts accounts for the decrease in working capital.
At December 31, 1996, the Company had cash and cash equivalents of $195,000 and
marketable securities of $4.3 million. In addition, the Company has a $10.0
million unsecured revolving credit facility (the "Facility") with Harris Trust &
Savings Bank which expires on July 31, 1998. The Facility's rate of interest is
LIBOR plus 1.0% or the lender's Domestic Base Rate, as defined, less 0.5%. The
Facility contains customary representations, warranties and covenants. As of
December 31, 1996, the Company had no amount outstanding under the Facility.
Management believes that existing cash, cash equivalents, marketable securities
and cash flows from operations supplemented, if necessary, by draws on the
Facility will be sufficient to fund current operations, and its planned
integrated growth strategy. The Company does not currently have any significant
long-term capital requirements which it believes can not be funded from the
sources discussed above. However, in connection with its acquisition and
integrated growth strategy, the Company's capital requirements may change based
upon various factors, primarily related to the timing of acquisitions and the
consideration to be used as purchase price. Accordingly, the Company continues
to examine opportunities to raise funds through the issuance of additional
equity or debt securities through private placements or public offerings.
For the year ended December 31, 1996, operating activities generated $9.1
million compared with the use of $30.4 million in 1995. The significant change
between years is principally a result of the accounting required for the
Company's portfolio of marketable securities. In 1996, the Company liquidated a
significant portion of these investments to fund acquisitions and working
capital requirements.
Excluding the impact of these investments, Anicom used $12.1 million in
operating activities in 1996 compared with the use of $4.9 million in 1995. The
use of cash in operations in 1996 is a result of the substantial growth
experienced during the year, primarily replenishing working capital deficiencies
of acquired companies and funding business integration liabilities. This working
capital expansion resulted in a $6.6 million increase in accounts receivable and
a $5.9 million increase in inventory in 1996 as the Company integrated its
acquisitions and expanded the depth of its product offerings. The investment in
these operating assets was partially offset by a $2.4 million increase, after
excluding non-cash transactions, in accounts payable. Finally, the use of cash
attributed to accrued expenses is principally a result of the Company funding
approximately $3.6 million of business integration liabilities established in
connection with the 1996 acquisitions.
Investing activities utilized approximately $15.3 million and $1.8 million in
1996 and 1995, respectively. During 1996, Anicom completed the acquisition of
Medisco, Inc. of Indianapolis, Indiana; Northern Wire & Cable, Inc. of Troy,
Michigan; Southern Alarm Supply, Inc. of Nashville, Tennessee; Norfolk Wire &
Electronics, Inc. of Virginia Beach, Virginia; and Western Wire & Alarm
Products, Inc. of Denver, Colorado. Cash paid for 1996 acquisitions totaled
approximately $14.2 million. During 1995, the acquisition of Pinnacle Wire &
Cable, Inc. of Columbus, Ohio; and Morgan Hill Supply Company of Framingham, New
York used approximately $1.4 million in cash.
For the year ended December 31, 1996, net financing activities generated $6.3
million. Financing activities in 1996 included $15.1 million in net proceeds
generated from the issuance of common stock in a private placement and $4.2
million drawn on its Facility. These proceeds were partially offset by the use
of cash to repay the $4.2 million draw on the Facility and $8.7 million of bank
debt assumed in the Company's 1996 acquisitions. In 1995, the Company raised
approximately $35.6 million in net proceeds from the issuance of common stock in
its initial public offering and its follow-on offering. In addition, the Company
borrowed $727,000 against its previous credit facility prior to its initial
public offering. Uses of cash for financing activities in 1995 included the
repayment of all amounts due under its credit facility and bank debt assumed as
a part of its 1995 acquisitions. Also, during the first quarter of 1995, Anicom
issued distributions to its Subchapter S Stockholders totaling approximately
$163,000. The distribution was used to fund the tax liabilities arising from net
income of the Company prior to the termination of its S corporation election.
Inflation
Although the operations of Anicom are influenced by general economic conditions,
Anicom does not believe that inflation had a material effect on the results of
the operations during 1996.
Seasonality
In the fourth quarter, Anicom has historically experienced, and expects to
experience in future years, a modest decrease in the level of activity among
many of its customers around the Thanksgiving and Christmas holidays.
Impact of Not Yet Effective Rules
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 specifies the computation, presentation, and disclosure requirements for
earnings per share. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. The Company
will adopt SFAS 128 for the year ended December 31, 1997. Management has not yet
determined the impact of implementing this standard.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements appear on pages F-1 through F-21.
Page
----
Report of Independent Accountants...................................... F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995......... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996 and 1995......................................... F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1996 and 1995..................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995......................................... F-6
Notes to Consolidated Financial Statements........................... F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Information with respect to the directors and officers of Anicom is hereby
incorporated herein by reference to "Election of Directors - Nominees",
"Election of Directors - Other Directors" and "Executive Officers and
Significant Employees" in Anicom's Notice of Annual Meeting of Stockholders and
Proxy Statement for its Annual Meeting of Stockholders to be held on May 21,
1997 (the "1997 Proxy Statement"), which is expected to be filed with the
Commission in definitive form no later than April 30, 1997.
Information with respect to required Section 16(a) disclosure is incorporated
herein by reference to the section "Compliance with Section 16(a) of the
Securities Exchange Act of 1934," in the 1997 Proxy Statement, which is expected
to be filed with the Commission in definitive form no later than April 30,
1997.
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to executive compensation is hereby incorporated herein
by reference to "Executive Compensation" in the 1997 Proxy Statement, which is
expected to be filed with the Commission in definitive form no later than April
30, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners and
management is hereby incorporated herein by reference to "Security Ownership of
Principal Stockholders and Management" in the 1997 Proxy Statement, which is
expected to be filed with the Commission in definitive form no later than April
30, 1997.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions is
hereby incorporated herein by reference to "Certain Transactions" in the 1997
Proxy Statement, which is expected to be filed with the Commission in definitive
form no later than April 30, 1997.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed with the report or incorporated
herein by reference as set forth below.
Exhibit No.
2.1** Agreement and Plan of Merger, dated as of July 18, 1995, among
Anicom, Pinnacle Wire & Cable, Inc., Raymond J. Costello and
Robert A. Holous.
2.2*** Stock Purchase Agreement, dated September 19, 1995, among
Anicom, Morgan Hill, Inc. and Kenneth Jay Burgess.
2.3**** Asset Purchase Agreement, dated as of March 4, 1996, among
Anicom, Inc., Northern Wire & Cable, Inc., and Copperhead
Acquisition Corp.
2.4***** Agreement and Plan of Reorganization, by and among Anicom, Inc.,
Anicom-Southeast, Inc., Norfolk Wire & Electronics, Inc., and
Ronald A. Hurley, Robert H. Jennings, Stephen M. Mobley and
Vonda M. Hall, dated as of August 30, 1996.
3.1* Restated Certificate of Incorporation of Anicom.
3.2* Restated Bylaws of Anicom.
3.3****** Certificate of Amendment of Certificate of Incorporation of
Anicom.
4.1* Specimen Stock Certificate representing Common Stock.
10.1* Credit Agreement, dated June 30, 1993, between Registrant and
Harris Trust and Savings Bank, as amended.
10.2* Commercial Lease Agreement, dated April 30, 1993, between Anicom
and Harris Trust and Savings Bank.
10.3******* Form of 1995 Stock Incentive Plan as Amended and Restated.
10.4******* Credit Agreement, dated as of February 6, 1996, between Anicom
and Harris Trust and Savings Bank.
10.6* Shareholders Agreement
10.8* Form of Tax Indemnification Agreement
10.9* Form of Employment Agreement between Anicom and Scott C. Anixter
10.10* Form of Employment Agreement between Anicom and Carl E. Putnam.
10.11* Form of Employment Agreement between Anicom and Robert L.
Swanson
10.12****** Form of Amended and Restated 1995 Directors Stock Option Plan.
10.13**** Form of Employment Agreement between Anicom and Robert
Brzustewicz.
10.14**** Form of Employment Agreement between Anicom and Glen Nast.
10.15**** Non-Negotiable Note issued to Northern Wire & Cable, Inc.
10.16**** Guaranty by Anicom to Northern Wire & Cable, Inc.
10.18 1996 Stock Incentive Plan
10.17 Form of Employment Agreement between Anicom and Donald Welchko
23.1 Consent of Independent Accountants
21 List of Subsidiaries.
27 Financial Data Schedule
------------------
* Previously filed as an Exhibit to Anicom's Registration
Statement on Form SB-2, registration no. 33-87736C and
incorporated herein by refrence thereto.
** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated August 10, 1995 and incorporated herein by
refrence.
*** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated October 16, 1995 and incorporated herein by
refrence.
**** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated March 12, 1996 and incorporated herein by
reference.
***** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated August 30, 1996 and incorporated herein by
reference.
****** Previously filed as an Exhibit to Anicom's current report on
Form 10-QSB, for the quarter ended September 30, 1996 and
incorporated herein by reference.
******* Previously filed as an Exhibit to Anicom's Annual report on
Form 10-KSB, for the year ended December 31, 1996 and
incorporated herein by reference.
(b) Reports on Form 8-K. The following Reports on Form 8-K or
Form 8-K/A were filed during the last quarter of 1996.
Form 8-K/A, dated November 1, 1996 (Norfolk Wire & Electronics, Inc.)
Form 8-K, dated November 5, 1996 (Press Release)
Form 8-K/A, dated November 5, 1996 (Norfolk Wire & Electronics, Inc.)
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 20th day of March, 1997.
ANICOM, INC.
By: /s/ SCOTT C. ANIXTER
--------------------
Scott C. Anixter
Chairman and Chief Executive Officer
This report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
------------------------- ---------------------------- ------------------
Chairman and Chief Executive March 20, 1997
/s/ Scott C. Anixter Officer (Principal Executive
------------------------ Officer)
Scott C. Anixter
/s/ Alan B. Anixter Chairman of the Board March 20, 1997
------------------------
Alan B. Anixter
President and Chief Operating March 20, 1997
/s/ Carl E. Putnam Officer and a Director
------------------------
Carl E. Putnam
Vice President, Chief Financial March 20, 1997
Officer and a Director (Principal
/s/ Donald C. Welchko Financial and Accounting Officer)
------------------------
Donald C. Welchko
/s/ Lee B. Stern Director March 20, 1997
------------------------
Lee B. Stern
/s/ Michael Segal Director March 20, 1997
------------------------
Michael Segal
ANICOM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants...................................... F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995......... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996 and 1995......................................... F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1996 and 1995..................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995......................................... F-6
Notes to Consolidated Financial Statements........................... F-7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and the Board of Directors of ANICOM, Inc.:
We have audited the accompanying consolidated balance sheets of Anicom, Inc. as
of December 31, 1996 and 1995 and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 policies 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Anicom,
Inc. as of December 31, 1996 and 1995 and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
January 31, 1997
ANICOM, INC.
Consolidated Balance Sheets
December 31, 1996 and 1995
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 195,050 $3,250
Marketable securities 4,344,842 25,536,282
Accounts receivable, less allowance for
doubtful accounts of $980,000 and
$120,000, respectively 26,972,035 6,647,632
Inventory 23,452,592 5,245,893
Prepaid expenses 594,113 253,596
Notes receivable, current portion 195,069 --
Deferred income taxes 1,557,150 31,000
Other current assets 227,704 19,794
----------- -----------
Total current assets 57,538,555 37,737,447
----------- -----------
Property and equipment, net 2,819,809 651,900
Notes receivable 800,000 --
Goodwill, net of accumulated amortization of
$478,000 and $23,260, respectively 26,770,603 2,770,541
Other assets 24,890 9,187
----------- -----------
Total assets $87,953,857 $41,169,075
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $20,727,152 $ 2,532,714
Accrued expenses 1,818,283 489,226
Long-term debt, current portion 1,597,616 409,679
----------- -----------
Total current liabilities 24,143,051 3,431,619
----------- -----------
Long-term debt, net of current portion 3,012,784 576,529
Deferred income taxes 164,835 20,000
Other liabilities 773,910 --
----------- -----------
Total liabilities 28,094,580 4,028,148
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $.001 per share;
30,000,000 and 20,000,000 shares authorized,
respectively; 15,559,805 and 12,212,728 shares
issued andoutstanding, respectively 7,530 5,906
Preferred stock, par value $.01 per share;
1,000,000 shares authorized;
no shares issued and outstanding -- --
Additional paid-in capital 56,464,954 36,370,738
Retained earnings 3,386,793 764,283
----------- -----------
Total stockholders' equity 59,859,277 37,140,927
----------- -----------
Total liabilities and stockholders' equity $87,953,857 $41,169,075
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
ANICOM, INC.
Consolidated Statements of Income
For the Years Ended December 31, 1996 and 1995
1996 1995
Net sales $ 115,993,079 $ 29,357,597
Cost of sales 87,441,698 22,404,331
------------- -------------
Gross profit 28,551,381 6,953,266
------------- -------------
Operating expenses and other:
Selling 13,067,855 3,058,268
General and administrative 12,425,713 2,821,938
Gain on sale of assembly product lines (878,315) --
------------- -------------
Total operating expenses and other 24,615,253 5,880,206
------------- -------------
Income from operations 3,936,128 1,073,060
------------- -------------
Other income (expense):
Interest income 564,560 256,310
Interest expense (256,086) (72,887)
------------- -------------
Total other income (expense) 308,474 183,423
------------- -------------
Income before income taxes 4,244,602 1,256,483
------------- -------------
Provision for income taxes 1,622,092 492,200
------------- -------------
Net income $ 2,622,510 $ 764,283
============= =============
Earnings per common share $ .20 $ 0.14
============= =============
Weighted average common shares outstanding 13,384,251 5,540,140
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
ANICOM, INC.
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1996 and 1995
[Enlarge/Download Table]
Common Stock
------------------------- Additional Total
Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
Balance, January 1, 1995 2,400,000 $1,000 $156,075 $157,075
Distribution to former Subchapter S $ (6,957) (156,075) (163,032)
shareholders
Proceeds from issuance of common stock, net
of offering costs 9,660,000 4,830 35,577,772 35,582,602
Issuance of common stock for acquisitions 152,728 76 799,923 799,999
Net income 764,283 764,283
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 12,212,728 5,906 36,370,738 764,283 37,140,927
Proceeds from issuance of common stock, net
of offering costs 2,423,080 1,212 15,052,920 15,054,132
Issuance of common stock for acquisitions 871,792 435 5,537,026 5,537,461
Exercise of stock options 8,480 4 11,096 11,100
Exercise of warrants to purchase common
stock 98,520 _ _ _
Receipt and cancellation of common stock
received in sale of a business (54,795) (27) (506,826) (506,853)
Net income 2,622,510 2,622,510
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1996 15,559,805 $ 7,530 $ 56,464,954 $ 3,386,793 $ 59,859,277
============ ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
ANICOM, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income $2,622,507 $764,283
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 441,341 119,678
Amortization 482,475 26,939
Deferred income taxes 527,500 (11,000)
Gain on sale of product lines (878,315) --
Increase (decrease) in cash attributable to
changes in assets and liabilities
Marketable securities 21,191,440 (25,536,282)
Accounts receivable (6,630,839) (1,729,240)
Inventories (5,912,104) (1,936,649)
Prepaid expenses (205,998) (179,856)
Other current assets (77,620) 14,389
Accounts payable 2,366,149 (1,861,299)
Accrued expenses (4,799,694) (55,614)
------------ -------------
Net cash provided by
(used in) operating activities 9,126,842 (30,384,651)
------------ -------------
Cash flows from investing activities:
Purchase of property and equipment (1,105,689) (394,550)
Cash paid for acquired companies (14,200,545) (1,433,994)
------------ -------------
Net cash used in investing activities (15,306,234) (1,828,544)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of offering costs 15,054,132 35,575,644
Proceeds from long-term debt 4,190,000 727,448
Payment of long-term debt and assumed bank debt (12,884,040) (3,926,365)
Exercise of stock options 11,100 --
Payment of S corporation distribution -- (163,032)
------------ -------------
Net cash provided by financing activities 6,371,192 32,213,695
------------ -------------
Net increase in cash and cash equivalents 191,800 500
Cash and cash equivalents, beginning of year 3,250 2,750
------------ -------------
Cash and cash equivalents, end of year $195,050 $3,250
============ =============
Supplemental Cash Flow Information:
Cash paid for interest $80,885 $54,053
============ =============
Cash paid for income taxes $1,381,893 $591,701
============ =============
The accompanying notes are an integral part of these consolidated financial
statements.
ANICOM, INC.
Notes to Consolidated Financial Statements
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Anicom, Inc. and Subsidiaries (the "Company") specialize in the sale
and distribution of communications related wire, cable, fiber optics
and computer network and connectivity products.
The Company sells to a wide array of customers, including contractors,
systems integrators, security/fire alarm companies, regional Bell
operating companies, distributors, utilities, telecommunications and
sound contractors, wireless specialists, construction companies,
universities, governmental agencies and companies involved in the
automotive, mining, marine, petro-chemical, paper and pulp and other
natural resource industries. The Company's customers are located
throughout the United States of America and other parts of North
America. The Company generally sells to its customers on an unsecured
basis.
In connection with certain acquisitions completed during 1996 (See Note
8), the Company acquired three assembly operations. These operations
produce two lines of connector cable products and a line of copper and
fiber optic cable cutting and splicing kits which are sold through the
Company's distribution channels. On December 31, 1996, the splicing kit
line and one of the connector cable product lines were sold. Also see
Note 12 for subsequent event.
Consolidation
The accompanying consolidated financial statements consist of Anicom,
Inc. and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
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, disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
+
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
1. Nature of Business and Summary of Significant Accounting Policies,
continued
Marketable Securities
Management determines the appropriate classification of its investment
in debt and equity securities at the time of purchase and reevaluates
such determination at each balance sheet date. The Company's portfolio
of marketable securities is accounted for as trading securities, is
valued at fair value and consists primarily of preferred stock and
municipal bonds with varying maturities and short term liquidity. These
securities generally have maturities of 28 days or less and are rated
A1, P1 or AAA as the Company attempts to reduce its credit risk. Cost
approximates fair value for these investments.
Inventory
Inventory, which primarily consists of finished goods, is stated at the
lower of cost or market. Cost is determined by the weighted average
method.
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the
estimated useful life of the assets or the terms of the lease for
leasehold improvements, generally 3 to 7 years.
Major renewals and improvements are capitalized. Expenditures for
maintenance and repairs are expensed as incurred. Upon retirement or
other disposition of property, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is
recognized.
Goodwill
Goodwill arising from business combinations is amortized using the
straight-line method over forty years. The Company's evaluation of the
recoverability of goodwill includes operating performance and
undiscounted cash flows of the acquired business units.
Income Taxes
Subsequent to January 1, 1995, the Company applies an asset and
liability approach to accounting for income taxes. Deferred tax assets
and liabilities are established for the expected future tax
consequences of temporary differences between the financial statement
and tax bases of assets and liabilities, using enacted tax rates.
Prior to January 1, 1995, the Company's stockholders elected to be
treated as a Subchapter S Corporation for income tax purposes.
Accordingly the Company's stockholders were responsible for all federal
and certain state income tax liabilities arising from the Company's
operations. The Company's S Corporation status was terminated as of
January 1, 1995. A cash distribution of $163,032 was paid to the
Subchapter S Shareholders of the Company in 1995, representing tax
payments due with respect to the taxable income of the Company prior to
the termination of its S Corporation status.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
1. Nature of Business and Summary of Significant Accounting Policies,
continued
Revenue Recognition
Sales and the related cost of sales are recognized upon the shipment of
products.
Earnings Per Common Share
The computation of earnings per common share is based on the weighted
average number of common shares and common equivalents outstanding
during each period.
Stock-Based Compensation
During 1996, the Company was required to adopt Statement of Financial
Accounting Standards No 123, Accounting for Stock-Based Compensation
("SFAS No. 123") which encourages entities to adopt a fair value based
method of accounting for stock-based compensation plans in place of the
provisions of Accounting Principles Board Opinion No. 25 Accounting for
Stock Issued to Employees ("APB No. 25") for all arrangements under
which employees receive shares of stock or other equity instruments of
the employer.
As allowed by SFAS No. 123, the Company will continue to apply the
provisions of APB No. 25 in accounting for its stock-based employee
compensation arrangements and will disclose pro forma net income and
earnings per share information in its footnotes as if the fair value
method suggested in SFAS No. 123 had been applied.
The Company recognizes compensation cost for stock-based compensation
awards equal to the difference between the quoted market price of the
stock at the date of grant and the price to be paid by the employee
upon exercise in accordance with the provisions of APB No. 25. Based
upon the terms of Company's current stock option plans, the stock price
on the date of grant and price paid upon exercise are the same, thus no
compensation charge is required to be recognized.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
2. Notes Receivable
In connection with the sale of the cable cutting and splicing kit
product line, the Company accepted a $500,000 promissory note,
collateralized by the assets of the acquiring company. The note bears
interest at 7.5%. All principal and accrued interest is due and payable
on December 31, 1998.
In connection with the sale of a connector cable product line, the
Company accepted a $375,000 senior secured promissory note,
collateralized by the stock of the acquiring company and personally
guaranteed by its president. The note bears interest at 6%. The note
contains scheduled payments which are due and payable in five equal
installments of principal and interest beginning on December 31, 1997.
Payments may be deferred or accelerated based on the Company's
purchases from the acquiring company, as defined; however, all
outstanding principal and interest is due and payable in full on
December 31, 2001.
3. Property and Equipment
At December 31, property and equipment consisted of the following
components:
1996 1995
Machinery, equipment and vehicles $846,714 $233,031
Office equipment 928,452 320,279
Computer equipment and software 1,190,451 242,850
Leasehold improvements 410,974 34,296
Capital lease and other 139,031 75,916
------------- -------------
Total cost 3,515,622 906,372
Less: accumulated depreciation and
amortization (695,813) (254,472)
============= =============
Property and equipment, net $2,819,809 $651,900
============= =============
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
4. Long-Term Debt
At December 31, long-term debt consisted of the following:
1996 1995
Non-collateralized loans payable to
former shareholders of acquired
companies, each due in equal installments
(except as noted):
6.55% note due March 12, 1997 to 1999 $3,000,000
Prime rate note (8.5% at 12/31/96),
payable in monthly installments
through July 1, 2002 595,556
6.00% notes due May 30, 1997 to 1999 250,553
6.00% note due October 27, 1998 333,334 $500,000
6.75% notes due July 28, 1997 200,000 397,327
Other 230,958 88,881
----------- -----------
4,610,400 986,208
Less: current portion (1,597,616) (409,679)
----------- -----------
$3,012,784 $576,529
=========== ===========
The aggregate maturities in each of the five years ending December 31,
1997 to 2001 and thereafter are $1,597,616, $1,403,146, $1,228,139,
$146,334, $135,415 and $99,750, respectively.
At December 31,1996, the Company had a $10 million credit facility (the
"Credit Agreement"). The Credit Agreement is unsecured, contains
customary financial covenants (interest coverage, tangible net worth,
etc.) and expires on July 31, 1998. The Credit Agreement bears interest
at an annual rate to be determined from time to time based upon either
LIBOR plus 1.00% or the bank's Base Rate minus .50%. The Credit
Agreement replaced the Company's revolving line of credit which totaled
$4 million. At December 31, 1996 and 1995, no amount was outstanding
under either of these financing arrangements.
5. Common Stock
On September 25, 1996, the number of authorized shares of common stock
was increased from 10,000,000 to 30,000,000 following approval of such
action by the Company's stockholders at a special meeting. Following
such action, a 2-for-1 stock split effected in the form of a 100% stock
dividend was declared for holders of record as of October 1, 1996,
payable October 7, 1996. All share data and periods presented have been
restated to retroactively reflect the 100% stock dividend.
On September 16, 1996, the Company completed a private placement of
2,423,080 shares of its common stock at $ 6.50 per share. Net proceeds
to the Company after related costs and expenses were approximately
$15,100,000.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
5. Common Stock, continued
On November 27, 1995, the Company completed a follow-on public offering
of 6,000,000 shares of its common stock at $ 4.50 per share. On
November 29, 1995, the underwriters exercised their overallotment
option to purchase 900,000 shares of the Company's common stock. Net
proceeds to the Company, after underwriting discounts and other
offering costs and expenses were approximately $28,600,000.
On March 1, 1995, the Company completed an initial public offering of
2,400,000 shares of its common stock at $3.00 per share. On March 15,
1995, the underwriters exercised their over-allotment option to
purchase 360,000 additional shares of the Company's common stock. Net
proceeds to the Company after underwriting discounts and other offering
costs were approximately $7,000,000. In connection with the offering,
the Company reincorporated in the State of Delaware.
6. Income Taxes
The provision for income taxes for the years ended December 31,
1996 and 1995 is comprised of the following:
1996 1995
Current:
Federal $879,000 $421,100
State 215,592 82,100
--------------- --------------
1,094,592 503,200
--------------- --------------
Deferred:
Federal 442,500 (9,100)
State 85,000 (1,900)
--------------- --------------
527,500 (11,000)
--------------- --------------
$1,622,092 $492,200
=============== ==============
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
6. Income Taxes, continued
The following is a reconciliation of the provision for income taxes
computed at the federal statutory rate to the provision for income
taxes reported for the years ended December 31, 1996 and 1995:
1996 1995
Computed income taxes at federal
statutory rate $1,485,600 $427,204
State income taxes, net of federal benefit 190,000 59,811
Non-deductible goodwill amortization 128,700 26,205
Other non-deductible expenses 184,692 24,888
Non-taxable investment income (293,900) (45,908)
Other (73,000) --
------------- -----------
$1,622,092 $492,200
============= ===========
At December 31, 1996 and 1995, deferred income tax assets and
liabilities consisted of the following components:
1996 1995
Deferred income tax asset
(current):
Accounts receivable $42,600 $31,000
Inventory 401,500
Business integration liabilities, current 1,117,300
Other ( 4,250)
------------- -----------
1,557,150 31,000
------------- -----------
Deferred income tax liability
(non-current):
Property and equipment (126,375) (20,000)
Goodwill (309,000)
Gain on sale of product lines (51,300)
Business integration liabilities,
non-current 321,840
------------- -----------
(164,835) (20,000)
------------- -----------
Net deferred income tax asset $1,392,315 $11,000
============= ===========
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
7. Stock Options and Warrants
In January 1995, the Company adopted the 1995 Stock Incentive Plan (the
"1995 Plan") and the Directors' Option Plan (the "Directors Plan")
which authorize the granting of options to officers, key employees and
directors to purchase unissued common stock of the Company subject to
certain conditions, such as continued service. The 1995 Plan and the
Directors Plan authorized the granting of up to 1,200,000 and 100,000
options to purchase common stock, respectively. The option price of
options granted under either of these plans is equal to the fair market
value on the date of grant.
In February 1996, the Company adopted the 1996 Employee Stock Incentive
Plan (the "1996 Plan") which authorized the granting of an additional
1,200,000 options to purchase common stock of the Company. The adoption
of the 1996 Plan was approved by stockholders in May 1996.
The Company amended the Directors Plan to increase the total number of
shares of stock available for grant to directors to 200,000 shares in
May 1996. This amendment was approved by stockholders in September
1996.
All outstanding options vest ratably over periods ranging from 3 to 5
years.
A summary of information related to these options for the years ended
December 31, 1996 and 1995 follows:
[Enlarge/Download Table]
1996 1995
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
Outstanding, beginning of year 364,900 $3.71 -- --
Granted 1,309,495 8.02 364,900 $3.71
Exercised (6,483) 3.00 -- --
---------- ------- ---------- -------
Outstanding, end of year 1,667,912 $7.10 364,900 $3.71
========== ======= ========== =======
Available for grant, end of year 925,605 935,100
========== ==========
Price range at end of year $3.00 to $9.00 $3.00 to $4.50
============== ==============
Price range for exercised shares $3.00 --
========== ==========
Weighted-average fair value of options
granted during the year $3,251,632 $462,700
========== ==========
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
7. Stock Options and Warrants, continued
The following table summarizes information about fixed-price stock
options outstanding at December 31, 1996:
[Download Table]
Weighted Weighted
Number Number Average Remaining Average
Price Outstanding Excercisable Contractual Life Exercise Price
$3.00 to $4.50 359,417 89,367 3.02 years $3.72
$5.75 to $6.89 321,000 20,000 2.11 years 6.16
$7.88 to $9.00 987,495 40,333 3.93 years 8.64
------------ ------------ ------------
1,667,912 149,700 $7.10
============ ============ ============
SFAS No. 123 requires the Company to disclose pro forma net income and
earnings per share determined as if the Company had accounted for
stock-based compensation awards granted after December 31, 1994 under
the fair value method described in that statement. For purposes of this
disclosure, the fair value of options under SFAS No. 123 were estimated
at each grant date using a Black-Scholes option pricing model, the most
commonly used model, and the following assumptions: risk-free interest
rates from 5.66% to 7.2%, a dividend yield of zero, a volatility factor
of the expected market price of the Company's common stock of 25.94%,
and an expected option life of three to five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. The Company's employee stock
options have characteristics significantly different from those of
traded options, including vesting requirements and restrictions on
transfer. Because of these differences and the impact of the Company's
limited history, lack of comparable public companies, the Company's
rapid growth and the significant appreciation in stock price since its
initial public offering, management believes that the Black-Scholes
model may not provide a reliable measure of the fair value of the
Company's employee stock options.
The Company's results as reported and its pro forma results using the
valuation model discussed above are as follows:
1996 1995
Net income, as reported $2,622,510 $764,283
============= =============
Net income (loss), pro forma ($ 629,122) $301,583
============= =============
Earnings per common share, as reported $.20 $.14
============= =============
Earnings (loss) per common share, pro forma ($.05) $.05
============= =============
In connection with the initial public offering, the Company issued
warrants to purchase up to 240,000 shares of common stock at an
exercise price of $3.60 to the representatives of the underwriters.
These warrants are Excercisable for a five year period commencing on
February 22, 1996. During 1996, 162,000 of these warrants were
exercised.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
7. Stock Options and Warrants, continued
In connection with an acquisition, warrants to purchase 36,364 shares
of common stock were issued at an exercise price of $5.50. These
warrants become excercisable ratably over a three year period beginning
October 2, 1995.
8. Acquisitions and Dispositions
On September 3, 1996, the Company acquired substantially all of the
assets and assumed certain liabilities of Western Wire and Alarm
Products, Inc. ("Western") of Denver Colorado, a specialist in the sale
and distribution of security devices and wire. The purchase price was
$300,000 payable in cash and common stock. In connection with the
acquisition, the Company paid in full $50,000 of Western's bank
indebtedness.
On September 1, 1996, the Company acquired Norfolk Wire & Electronics,
Inc. ("Norfolk"), through the purchase of all issued and outstanding
shares of common stock. Norfolk's operations consisted principally of
the sale and distribution of voice and data wire, cable and ancillary
products. In addition to its four locations in the state of Virginia,
Norfolk had locations in Tinton Falls, New Jersey and Gaithersburg,
Maryland. In addition, Norfolk assembled low voltage cable and fiber
optic connectors and copper and fiber optic cutting and splicing kits.
The purchase price was $8 million payable in cash and common stock. At
the closing, the Company paid in full approximately $2.6 million of
Norfolk bank indebtedness.
On May 30, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Southern Alarm Supply Co., Inc.
("Southern") of Nashville, Tennessee, a specialist in the sale and
distribution of security devices and wire. The purchase price was
$350,000 payable in cash and common stock.
On March 12, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Northern Wire & Cable, Inc.
("Northern"), a specialist in the sale and distribution of wire, cable,
fiber optics and connectivity products for structured wiring, power
cables, cable connector assemblies for automation, computers and
robotics and value-added services for the Industrial Management and
Technology market. In addition to its distribution business, Northern
assembled certain computer, robotics and power cable connectors sold
through its distribution channels. Northern had branches in Troy,
Michigan; Cleveland, Ohio; Atlanta, Georgia; Tampa, Florida; and Las
Vegas, Nevada. The purchase price was $13.3 million payable in cash,
notes and common stock. In connection with the acquisition, the Company
assumed approximately $5.6 million of Northern bank indebtedness which
was paid in full at closing.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
8. Acquisitions and Dispositions, continued
On February 22, 1996, the Company acquired substantially all of the
assets and assumed certain liabilities of Medisco, Inc. ("Medisco") of
Indianapolis, Indiana, a distributor of wire and cable products. The
purchase price was $837,000 payable in cash.
On October 2, 1995, the Company acquired Morgan Hill Supply Co., Inc.
("Morgan Hill"), through the purchase of all Morgan Hill's issued and
outstanding shares of common stock. Morgan Hill had locations in
Kingston, New York and Boston, Massachusetts. The purchase price was
$1.5 million payable in cash, notes and common stock. After closing,
the Company repaid $200,000 of Morgan Hill bank indebtedness.
On July 31, 1995, the Company acquired Pinnacle Wire and Cable, Inc.
("Pinnacle") by a merger of Pinnacle into the Company. Pinnacle had
locations in Columbus, Ohio and Cincinnati, Ohio. The purchase price
was $1.4 million payable in cash, notes and common stock. After
closing, the Company repaid approximately $226,000 of Pinnacle bank
indebtedness.
All acquisitions have been recorded under the purchase method of
accounting. Accordingly, the results of operations of the acquired
businesses are included in the Company's consolidated results of
operations from the date of acquisition. The purchase price is
allocated to assets acquired and liabilities assumed based on the
estimated fair market value on the date of the acquisition.
The following pro forma condensed consolidated financial information
assumes that all material acquisitions and the common stock
transactions discussed in Note 5, which were a significant source of
the funds used in the acquisitions, occurred on January 1, 1995. The
results do not purport to be indicative of what would have occurred had
the acquisitions been made on January 1, 1995 nor are they indicative
of the results which may occur in the future.
1996 1995
Net sales $148,728,053 $125,986,265
============== =============
Operating income $4,066,849 $3,403,011
============== =============
Net income $2,390,325 $1,968,833
============== =============
Earnings per common share $.15 $.13
============== =============
Pro forma weighted average common shares 15,475,231 15,475,231
============== =============
On December 31, 1996, the Company sold its copper and fiber optic
cutting and splicing kit product line (the "Kit Line") and its low
voltage cable and fiber optic connector product line (the "Connector
Line") in two separate transactions. The Kit Line was sold to a group
that included a former shareholder and former employees of Norfolk
while the low voltage Connector Line was sold to a group that included
former Norfolk employees.
The selling price for the Kit Line was approximately $1 million payable
in notes and Anicom common stock originally issued in the Norfolk
acquisition. The $375,000 selling price for the Connector Line was
payable in notes which are personally guaranteed by the president of
the acquiring company. The Company recognized a pre-tax gain of
$878,315, net of transaction expenses, on these two sales.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
8. Acquisitions and Dispositions, continued
In connection with these sales, the Company entered into Service and
Supply Agreements with the acquiring companies. These agreements
appoint the Company as the primary distributor to certain identified
customers for certain product lines to be sold. The agreements run for
two and five years, respectively, and are automatically extended for
similar periods unless terminated in accordance with the respective
agreements.
9. Commitments and Contingencies
Employment Agreements
The Company has entered into employment agreements with certain
officers. In the event of a change in control, as defined, the
employment agreements provide for severance payments if employment is
terminated. The aggregate base salary payable to these officers under
the employment agreements in 1996 was $753,250. In the event of a
change in control, the Company may become obligated to make payments to
these officers of up to approximately $4,800,000.
In connection with certain acquisitions, the Company entered into
employment agreements with certain former officers of the acquired
companies. The aggregate base salary payable to those employees who
became officers of the Company, two of which are now executive officers
of the Company, is approximately $763,000.
Operating Leases
The Company leases certain warehouse and office facilities and
equipment under operating leases. Rental expense under the leases was
approximately $1,418,500 and $364,000 for the years ended December 31,
1996 and 1995, respectively. Approximate minimum annual lease payments
required on noncancelable leases having initial or remaining lease
terms in excess of one year as of December 31, 1996 are as follows:
Year Amount
1997 $1,798,500
1998 1,353,204
1999 956,483
2000 524,033
2001 232,485
Thereafter 2,004
=============
$4,866,709
=============
The Company is also obligated to pay certain taxes and assessments
relating to these leases. Certain leases contain renewal options.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
9. Commitments and Contingencies, continued
Retirement Plan
Effective January 1, 1995, the Company adopted a defined contribution
retirement plan. Employer contributions under the plan are limited to
7% of compensation. As a result of the acquisition of Norfolk, the
Company has an additional defined contribution retirement plan which
requires Company contributions up to a maximum of 1% of the employees'
compensation. Total Company contributions to the plans were
approximately $103,800 and $20,300 in 1996 and 1995, respectively.
10. Supplemental Cash Flow Information
The following is a summary of the noncash investing and financing for
the years ended December 31, 1996 and 1995:
1996 1995
Acquisitions:
Fair value of assets acquired $54,871,008 $5,283,644
Business integration liabilities
established (5,218,674) --
Bank debt assumed (9,318,231) (426,007)
Other liabilities assumed (17,455,609) (1,726,317)
Long-term debt issued (3,000,000) (799,999)
Common stock issued (5,537,464) (897,327)
-------------- --------------
Cash paid 14,341,030 1,433,994
Less: cash acquired (140,485) --
-------------- --------------
Net cash paid for acquisitions $14,200,545 $1,433,994
============== ==============
Dispositions:
Value of assets sold, net of
transaction costs $403,540 --
============== ==============
Notes receivable accepted $875,000 --
============== ==============
Anicom common stock received $506,854 --
============== ==============
Assets acquired through capital lease -- $76,416
============== ==============
11. Other Related Party Transactions
One of the Company's directors is a Managing Director of an investment
banking firm which served as one of the underwriters of the Company's
follow-on offering in November 1995.
ANICOM, INC.
Notes to Consolidated Financial Statements, continued
12. Subsequent Events (unaudited)
On February 28, 1997, the Company acquired substantially all of the
assets and assumed certain liabilities of Carolina Cable & Connector,
Inc. ("Carolina Cable") of Raleigh, North Carolina. Carolina Cable is
a specialist in the sale and distribution of wire and cable, fiber
optics and computer network and connectivity products. Carolina Cable
has seven locations in the Carolinas and Tennessee and total revenues
of approximately $25 million. The purchase price consists of $3.5
million in cash and common stock. In addition, the Company assumed
approximately $3.5 million of Carolina Cable bank debt and notes.
On March 7, 1997, the Company sold its third assembled product line
which consisted of computer, robotics and power cable connectors. In
connection with the sale, the Company entered into a supply agreement
to act as the sole and exclusive distributor of certain products
assembled by the acquiring company. The selling price was payable in
cash and notes.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128"). SFAS 128 specifies the computation, presentation, and
disclosure requirements for earnings per share. SFAS 128 is effective
for financial statements issued for periods ending after December 15,
1997, including interim periods. The Company will adopt SFAS 128 for
the year ended December 31, 1997. Management has not yet determined the
impact of implementing this standard.
INDEX TO EXHIBITS
Exhibit No.
2.1** Agreement and Plan of Merger, dated as of July 18, 1995, among
Anicom, Pinnacle Wire & Cable, Inc., Raymond J. Costello and
Robert A. Holous.
2.2*** Stock Purchase Agreement, dated September 19, 1995, among
Anicom, Morgan Hill, Inc. and Kenneth Jay Burgess.
2.3**** Asset Purchase Agreement, dated as of March 4, 1996, among
Anicom, Inc., Northern Wire & Cable, Inc., and Copperhead
Acquisition Corp.
2.4***** Agreement and Plan of Reorganization, by and among Anicom, Inc.,
Anicom-Southeast, Inc., Norfolk Wire & Electronics, Inc., and
Ronald A. Hurley, Robert H. Jennings, Stephen M. Mobley and
Vonda M. Hall, dated as of August 30, 1996.
3.1* Restated Certificate of Incorporation of Anicom.
3.2* Restated Bylaws of Anicom.
3.3****** Certificate of Amendment of Certificate of Incorporation of
Anicom.
4.1* Specimen Stock Certificate representing Common Stock.
10.1* Credit Agreement, dated June 30, 1993, between Registrant and
Harris Trust and Savings Bank, as amended.
10.2* Commercial Lease Agreement, dated April 30, 1993, between Anicom
and Harris Trust and Savings Bank.
10.3******* Form of 1995 Stock Incentive Plan as Amended and Restated.
10.4******* Credit Agreement, dated as of February 6, 1996, between Anicom
and Harris Trust and Savings Bank.
10.6* Shareholders Agreement
10.8* Form of Tax Indemnification Agreement
10.9* Form of Employment Agreement between Anicom and Scott C. Anixter
10.10* Form of Employment Agreement between Anicom and Carl E. Putnam.
10.11* Form of Employment Agreement between Anicom and Robert L.
Swanson
10.12****** Form of Amended and Restated 1995 Directors Stock Option Plan.
10.13**** Form of Employment Agreement between Anicom and Robert
Brzustewicz.
10.14**** Form of Employment Agreement between Anicom and Glen Nast.
10.15**** Non-Negotiable Note issued to Northern Wire & Cable, Inc.
10.16**** Guaranty by Anicom to Northern Wire & Cable, Inc.
10.17 Form of Employment Agreement between Anicom and Donald Welchko
10.18 1996 Stock Incentive Plan
21 List of Subsidiaries.
23.1 Consent of Independent Accountants
27 Financial Data Schedule
------------------
* Previously filed as an Exhibit to Anicom's Registration
Statement on Form SB-2, registration no. 33-87736C and
incorporated herein by refrence thereto.
** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated August 10, 1995 and incorporated herein by
refrence.
*** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated October 16, 1995 and incorporated herein by
refrence.
**** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated March 12, 1996 and incorporated herein by
reference.
***** Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated August 30, 1996 and incorporated herein by
reference.
****** Previously filed as an Exhibit to Anicom's current report on
Form 10-QSB, for the quarter ended September 30, 1996 and
incorporated herein by reference.
******* Previously filed as an Exhibit to Anicom's Annual report on
Form 10-KSB, for the year ended December 31, 1996 and
incorporated herein by reference.
Dates Referenced Herein and Documents Incorporated by Reference
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