United Capital Corp/DE – ‘8-K/A’ for 3/14/94 – EX-99.(B)

As of:  Tuesday, 5/31/94   ·   For:  3/14/94   ·   Accession #:  912057-94-1920   ·   File #:  1-10104

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                            2     10K 
 2: EX-99.(B)   Miscellaneous Exhibit                                 11     39K 

EX-99.(B)   —   Miscellaneous Exhibit

EX-99.(B)
1st Page of 11
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
 THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
 -----------------------------------------------

FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993
--------------------------------------------

 TOGETHER WITH
 -------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

EX-99.(B)
2nd Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 2nd
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

To the Stockholder of Kentile, Inc.:                                            

We have audited the accompanying statement of assets and liabilities of The     
Business Acquired from Kentile Floors, Inc. as described in Note 1 (the         
"Company" or "the Business Acquired") as of December 31, 1993, and the related  
statements of income and expenses, and cash flows for the year 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 audit.                                                                      

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of material           
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audit provides a reasonable basis for our opinion.          

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the assets and liabilities of The Business Acquired from 
Kentile Floors, Inc. as of December 31, 1993, and its income and expenses and   
cash flows for the year then ended in conformity with generally accepted        
accounting principles.                                                          

As discussed in Note 2, on November 20, 1992, Kentile Floors, Inc. ("KFI") filed
a voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code.  The accompanying financial statements have been prepared on a going      
concern basis, which contemplates continuity of operations, realization of      
assets and liquidation of liabilities in the ordinary course of business.  On   
March 14, 1994, certain assets were acquired and liabilities were assumed from  
KFI by Kentile, Inc. ("Kentile"), a wholly-owned subsidiary of United Capital   
Corp.  The accompanying financial statements of the Business Acquired also      
include certain liabilities subject to compromise which arose from the          
operations of the Business Acquired prior to the date that KFI filed for        
bankruptcy in the manner described in Notes 2 and 4.  The accompanying financial
statements do not reflect any adjustments relating to the ultimate disposition  
of liabilities subject to compromise or the effect of the acquisition of the    
Business Acquired by Kentile.                                                   

                                         ARTHUR ANDERSEN & CO.

Roseland, New Jersey                                                            
May 27, 1994                                                                    

EX-99.(B)
3rd Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 3rd
 THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
 -----------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES -- DECEMBER 31, 1993
--------------------------------------------------------

(in thousands)
--------------

                                                        [Enlarge/Download Table]


                                                               ASSETS                  
                                                               -----                   
                                                                                       
CURRENT ASSETS:                                                                        
     Cash                                                                         $209 
     Accounts and notes receivable, net of allowance for doubtful accounts of          
          approximately $2,153                                                   4,639 
     Inventories                                                                 4,613 
     Prepaid expenses and other current assets                                     302 
                                                                                ------ 
               Total current assets                                              9,763 

PROPERTY, PLANT AND EQUIPMENT, net                                               2,911 

PREPAID PENSION COSTS                                                            2,599 
                                                                               ------- 

                                                                               $15,273 
                                                                               ------- 
                                                                               ------- 

                                                             LIABILITIES               
                                                             -----------               
CURRENT LIABILITIES:                                                                   
     Accounts payable and accrued liabilities not subject to compromise         $2,565 
     Revolving line of credit subject to compromise                              7,847 
     Advances from United Capital Corp. not subject to compromise                  775 
                                                                               ------- 

               Total current liabilities                                        11,187 

LIABILITIES SUBJECT TO COMPROMISE                                               13,919 

COMMITMENTS AND CONTINGENCIES                                                          

EXCESS OF LIABILITIES OVER ASSETS                                               (9,833)
                                                                               ------- 

                                                                               $15,273 
                                                                               ------- 
                                                                               ------- 

The accompanying notes to financial statements
 are an integral part of this statement.

EX-99.(B)
4th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 4th
 THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
 -----------------------------------------------

STATEMENT OF INCOME AND EXPENSES
--------------------------------

FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------

(in thousands)
--------------

                                                                [Download Table]


                                                                            
NET SALES                                                           $50,314 
                                                                    ------- 
COSTS AND EXPENSES:                                                         
     Cost of goods sold                                              38,988 
     Selling expenses                                                 8,012 
     General and administrative expenses                              3,345 
                                                                    ------- 
          Total costs and expenses                                   50,345 

OPERATING LOSS                                                          (31)

INTEREST EXPENSE                                                        921 
                                                                    ------- 

          Excess of expenses over income                              ($952)
                                                                    ------- 
                                                                    ------- 

The accompanying notes to financial statements
 are an integral part of this statement.

EX-99.(B)
5th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 5th
 THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
 -----------------------------------------------

 STATEMENT OF CASH FLOWS
 -----------------------

FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------

(in thousands)
 -------------

                                                                [Download Table]


                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                                             
  Excess of expenses over income                                            ($952)
  Adjustments to reconcile excess of expenses over income to                      
   net cash used in operating activities-                                         

     Depreciation and amortization                                            567 
     (Increase) decrease in assets-                                               
       Accounts and notes receivable, net                                    (938)
       Inventories                                                            148 
       Prepaid expenses and other current assets                              128 
       Prepaid pension costs                                                 (377)
     Increase (decrease) in liabilities-                                          
       Accounts payable and accrued liabilities not subject to compromise     269 
       Liabilities subject to compromise                                      169 
                                                                           -------
          Net cash used in operating activities                              (986)
                                                                           -------

CASH FLOWS USED IN INVESTING ACTIVITIES -- Acquisition of                         
  property, plant and equipment                                              (214)
                                                                           -------

CASH FLOWS FROM FINANCING ACTIVITIES:                                             
  Net borrowings under revolving line of credit subject to compromise       1,377 
  Distributions to fund operations not acquired                              (902)
  Advances from United Capital Corp. not subject to compromise                775 
                                                                           -------

          Net cash provided by financing activities                         1,250 
                                                                           -------

          Net decrease in cash                                                (50)

CASH, beginning of year                                                       259 
                                                                           -------

CASH, end of year                                                            $209 
                                                                           -------
                                                                           -------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                
  Cash paid during the year for-                                                  
   Interest                                                                  $715 
                                                                           -------
                                                                           -------

The accompanying notes to financial statements
 are an integral part of this statement.

EX-99.(B)
6th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 6th
 THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
 -----------------------------------------------

 NOTES TO FINANCIAL STATEMENTS
 -----------------------------

 DECEMBER 31, 1993
 -----------------

 (dollars in thousands, except per share data)
 ---------------------------------------------

(1) FORMATION OF THE COMPANY:                                                   
-------------------------                                               

     Kentile, Inc. ("Kentile"), formerly known as Kentile Acquisition Corp., was
   formed on July 8, 1993 and is a wholly-owned subsidiary of United Capital
   Corp. ("UCC").  The authorized capital stock of Kentile consists of 1,000
shares of common stock (par value $.01 per share) and 2,000 shares of 
   preferred stock (par value $.01 per share, 8% cumulative, convertible) of
     which 100 shares of common stock were outstanding at December 31, 1993.  On
March 14, 1994, 875 preferred shares were issued.                     

  Pursuant to an order approved by the Bankruptcy Court, on March 14, 1994
Kentile purchased substantially all of the operating assets of Kentile
  Floors, Inc. ("KFI") for approximately $9.6 million (the "Acquisition").
The purchase price was comprised of approximately $6.5 million in bank
   financing and approximately $3.1 million in cash including cash paid by a
    subsidiary of UCC to permit the transfer of ownership of Kentile's Chicago
facility.                                                             

     Kentile did not assume any liabilities of KFI relating to product liability
  claims for asbestos related matters, potential environmental liabilities
that may exist at KFI's manufacturing facilities or other amounts     
outstanding prior to KFI's bankruptcy filing, including trade accounts
     payable, self-insurance obligations of KFI and certain secured indebtedness
and accrued liabilities.                                              

   The accompanying financial statements have been prepared on a basis which
    reflects the historical results of KFI's operations which were acquired by
   Kentile (the "Business Acquired" or the "Company").  These results do not
     include costs of the bankruptcy, discussed in Note 2, incurred by KFI since
    future costs are not expected to be significant and will be borne directly
by KFI and are not a part of the future operations of the Business    
   Acquired.  Certain allocations between the Business Acquired and KFI have
     been reflected in the historical financial statements based on methods that
  management believes to be reasonable.  These financial statements do not
give effect to the acquisition of the Business Acquired by Kentile.   

EX-99.(B)
7th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 7th
 -2-

(2) CHAPTER 11 BANKRUPTCY FILING:                                               
-----------------------------                                           

    On November 20, 1992 (the "Petition Date"), KFI filed a voluntary petition
   for relief under Chapter 11 of the United States Bankruptcy Code with the
     United States Bankruptcy Court for the Southern District of New York. Under
    Chapter 11, certain claims against KFI in existence prior to the filing of
    the petition for relief are stayed while KFI continues business operations
     as Debtors-in-Possession.  The estimated portion of these claims related to
   the Business Acquired are reflected in the accompanying December 31, 1993
    statement of assets and liabilities as "liabilities subject to compromise"
and were not assumed by Kentile in connection with the Acquisition.   
  Additional claims may arise subsequent to the filing date resulting from
rejection of executory contracts, including leases, and from the      
     determination by the Court (or agreed to by parties-in-interest) of allowed
claims for contingencies and other disputed amounts.  Such additional 
claims, if any, will also be considered as liabilities subject to     
    compromise.  Claims secured against KFI's assets (secured claims) are also
    stayed, although the holders of such claims are secured primarily by liens
  on certain of KFI's accounts receivable, inventories and property, plant
and equipment.                                                        

     The accompanying financial statements have been prepared on a going concern
   basis, which contemplates continuity of operations, realization of assets
 and liquidation of liabilities in the ordinary course of business.  The
   accompanying financial statements do not reflect any adjustments relating
to the ultimate disposition of liabilities subject to compromise.     

(3) SUMMARY OF SIGNIFICANT                                                      
ACCOUNTING POLICIES:                                                  
----------------------                                                  

Business-                                                             
---------                                                             

 The Company is a major manufacturer and supplier of resilient
  vinyl flooring and is comprised of the operations of KFI which
   were acquired in March 1994 (see Note 1).  These operations are
    presently conducted from a 315,000 square-foot manufacturing and
   headquarters facility located in Chicago, Illinois and numerous
sales offices located throughout the United States.  The    
  Company's products include resilient vinyl tile for use in the
    commercial flooring industry, a line of vinyl wall base products
marketed under the Kencove brand name and other supporting  
products which include adhesives, cleaners and waxes.       

Inventories-                                                          
------------                                                          

   Inventories are valued at the lower of cost or market.  Cost is
determined using the first-in, first-out (FIFO) method.     

EX-99.(B)
8th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 8th
 -3-

                                                                [Download Table]


                                                                       
Inventories, at December 31, 1993, consist of the following-           

     Finished goods                                              $3,245
     Work in process                                                514
     Raw materials                                                  854
                                                                 ------
                                                                 $4,613
                                                                 ------
                                                                 ------

Property, Plant and Equipment-                                                  
------------------------------                                                  

                                                                [Download Table]


Property, plant and equipment is stated at cost and is comprised of the
following categories as of December 31, 1993-                          

                                                                       
     Land                                                        $415  
     Building and improvements                                  3,648  
     Machinery and equipment                                   19,962  
                                                              -------  
          Total                                                24,025  

     Less-  Accumulated depreciation                          (21,114) 
                                                             --------- 
                                                               $2,911  
                                                             --------- 
                                                             --------- 

     Depreciation has been computed by the straight-line method during
1993 and was based upon estimated useful lives as follows-  

                                                                [Download Table]


                                                                  
Buildings and improvements                             20-45 years
Machinery and equipment                                 5-12 years

Income Taxes-                                                                   
-------------                                                                   

At December 31, 1993, KFI has net operating loss carryforwards and    
certain tax credits available to offset its future taxable income for 
financial reporting purposes.  Such tax attributes are not available  
to the Business Acquired.  Accordingly, no income tax benefit has been
recorded in the accompanying financial statements during 1993 and no  
income taxes were paid in 1993.                                       

Prepaid Expenses and Other Current Assets-                                      
------------------------------------------                                      

The Company capitalizes certain promotional materials (i.e., displays,
    catalogs, product samples, etc.) as prepaid assets until the materials are
distributed to the market place.  Selling expense is recorded when    
materials are distributed.                                            

Concentrations of Credit Risk-                                                  
------------------------------                                                  

    The Company manufactures and sells its products to wholesale distributors.
     Substantially all end sales are to the commercial real estate industry. All
   of the Company's distributors are located in the United States.  In terms
 of sales, the majority are located on the east coast.  Sales to the ten
    largest distributors, in terms of sales, accounted for 47% of net sales in
     1993.  Four of these distributors each account for more than 5% of 1993 net
sales.  Sales to these four customers totaled $15,697 in 1993.        

EX-99.(B)
9th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 9th
 -4-

(4) LIABILITIES SUBJECT TO COMPROMISE:                                          
----------------------------------                                      

   As a result of the Chapter 11 filing (see Note 2), enforcement of certain
   claims (liabilities subject to compromise) against KFI in existence prior
   to the Petition Date are stayed pending a determination of the Bankruptcy
Court.                                                                

   At December 31, 1993, the Company's liabilities subject to compromise are
stated at management's estimate of the total amount of allowed claims 
     applicable to the Business Acquired and not at the amounts for which claims
 may be settled.  Such amounts subject to compromise were not assumed by
 Kentile in the Acquisition.  The amounts listed below may be subject to
future adjustments depending on further developments with respect to  
disputes or unresolved claims.                                        

                                                                [Download Table]


                                                                       
Estimated claims-                                                      
  Trade accounts payable and accrued liabilities               $12,104 
  Amounts due to secured lender (Note 5)                         1,815 
                                                               ------- 
     Liabilities subject to compromise                         $13,919 
                                                               --------
                                                               --------


The amounts due to the secured lender by the Company are comprised of 
  $1,589 of principal and $226 of accrued and unpaid interest (12% for the
     year ended December 31, 1993).  Such amounts represent the portion of total
indebtedness which was allocated to the Business Acquired on a basis  
  management believes to be reasonable.  As of December 31, 1993, KFI owed
$6,356 of total principal and interest of $903 to the secured lender  
 including such amounts apportioned to the Company as noted above.  Such
   amounts were collateralized by first mortgages on KFI's South Plainfield,
 New Jersey facility and the Company's Chicago, Illinois, facility and a
subordinated security interest in the Company's accounts receivable,  
inventories and equipment.  KFI was not in compliance with certain    
   provisions of the loan agreement at December 31, 1993.  In February 1994,
  the secured lender sold its position in such debt to a subsidiary of UCC
    for $3 million.  As a result, Kentile was able to complete the purchase of
   the Chicago facility in connection with the Acquisition discussed in Note
   1.  UCC has an outstanding claim against KFI in its Chapter 11 bankruptcy
proceedings.                                                          

(5) REVOLVING LINE OF CREDIT                                                    
SUBJECT TO COMPROMISE:                                                
------------------------                                                

KFI had a revolving credit agreement with Congress Financial Corp.    
    ("Congress") which provided maximum borrowings of up to $10,000,000.  Such
borrowings were collateralized by all of KFI's accounts receivable,   
   inventories and equipment including the assets acquired by Kentile in the
Acquisition.  As of December 31, 1993, KFI owed Congress $7,847 in    
 connection with borrowings outstanding under the loan including amounts
   advanced pursuant to the $2 million letter of credit provided by UCC (see
     Note 7).  Interest expense included in the accompanying statement of income
     and expenses was based upon the application of the borrowing formula to the
related assets of the Business Acquired.                              

   As of December 31, 1993, all amounts owed to Congress were related to the
Business Acquired.  In connection with the Acquisition, Kentile, Inc. 
repaid the full amount due to Congress through new financing from  a  
financial institution.  This new financing is secured by the accounts 
    receivable, inventories and equipment of Kentile.  This revolving facility
provides for maximum borrowings of the lessor of $7,000,000 or the    
   borrowing base, as defined, at the bank's prime lending rate plus 1-1/2%.
This facility is due in April 1996 and includes, among other things,  
 several financial covenants regarding capital expenditures and debt-to-
equity ratios.                                                        

EX-99.(B)
10th Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 10th
 -5-

(6) PENSION PLAN:                                                               

   The Company assumed the responsibilities of KFI's defined benefit pension
     plan for hourly employees (the "Plan").  The Company determined its pension
   expense and funded status as required under Financial Accounting Standard
No. 87.                                                               

The following table sets forth the Plan's funded status and amounts   
     recognized in the Company's acompanying statement of assets and liabilities
at December 31, 1993 as determined by the Company's actuary-          

                                                                [Download Table]


                                                                                
     Actuarial present value of benefit obligation-                             
       Vested benefit obligation                                      $7,369    
       Nonvested benefit obligation                                      282    
                                                                     -------    
               Accumulated benefit obligation                         $7,651    
                                                                     -------    
                                                                     -------    

     Plan assets at fair value, primarily stocks and bonds           $11,394    

     Projected benefit obligation                                     (7,651)   

     Plan assets in excess of projected benefit obligation             3,743    
     Unrecognized net gain                                              (604)   
     Unrecognized prior service cost                                   1,135    
     Unrecognized transition asset                                    (1,675)   
                                                                     -------    

               Prepaid pension costs                                  $2,599    
                                                                     -------    
                                                                     -------    

The estimated portion of net pension income in 1993 attributable to the Acquired
Business is comprised of the following-                                         

     Service cost -- benefits earned during the period                   $139   
     Interest cost on projected benefit obligation                        420   
     Actual return on plan assets                                        (749)  
     Net amortization and deferral                                        (85)  
                                                                       -------  

          Net pension income related to the Business Acquired           ($275)  
                                                                       -------  
                                                                       -------  


The actuarial assumptions used for determining the present value of accumulated 
benefit obligations, as measured on December 31, 1993, are as follows:  the     
weighted average assumed discount rate used was 7.5%, the weighted average      
expected long-term rate of return on plan assets was 10%, and as benefit levels 
are fixed and predetermined by the Plan, there is no assumed rate of increase in
future compensation levels.  Accordingly, the projected benefit obligation      
equals the accumulated benefit obligation.                                      

No contributions were made in 1993.                                             

EX-99.(B)
Last Page of 11
TOC
1st
Previous
Next
↓Bottom
Just 11th
 -6-

(7) RELATED PARTY TRANSACTIONS:                                                 
---------------------------                                             

    During 1993, UCC advanced $775,000 to KFI.  Such amount was applied to the
purchase price of the Company pursuant to the Acquisition discussed in
Note 1.                                                               

    Subsequent to KFI's bankruptcy filing in November 1992, UCC acquired a one
third equity interest in KFI together with an option to purchase an   
    additional interest in the future.  In consideration for this interest and
option in KFI, UCC provided a $2 million letter of credit to partially
  guarantee borrowings under KFI's revolving line of credit agreement with
     Congress.  The letter of credit arrangement was made pursuant to Bankruptcy
 Court approval on a priority basis.  This arrangement was terminated in
conjunction with the Acquisition.                                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K/A’ Filing		Date		First		Last			Other Filings
Filed on:		5/31/94
		5/27/94		2
For Period End:		3/14/94		2		6
		12/31/93		1		10			10-K,  10-K/A
		7/8/93		6
		11/20/92		2		7
									List all Filings