ITEM 1. BUSINESS
Willcox & Gibbs, Inc. (the "Company" or "W&G") is a New York corporation that was incorporated in 1866. Management believes that the Company is the fifth largest distributor of electrical parts and supplies in the United States, based on 1994 sales.
During the last several years, the Company has undertaken a major restructuring. On April 22, 1992, the Company, Rexel, S.A. ("Rexel"), International Technical Distributors, Inc. ("ITD"), a subsidiary of Rexel, and Southern Electric Supply Company, Inc. ("SES"), a subsidiary of ITD engaged in the distribution of electrical materials, entered into a Purchase Agreement (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company issued to Rexel and ITD 6,284,301 shares of Company Common Stock in exchange for all of the stock of SES and approximately $10 million in cash. In addition, pursuant to the Purchase Agreement, the Company declared a dividend consisting of one share of common stock of the Company's subsidiary Worldtex, Inc. ("Worldtex") for each share of Company Common Stock outstanding on November 23, 1992 (the "Distribution"). In August 1992, the Company transferred to Worldtex all of the stock of the Company's subsidiaries engaged in the manufacture of covered elastic yarn.
Also during 1992, the Company disposed of its data communications equipment distribution business, conducted by Data Net, Inc. and Dataspan Systems, Inc., and its Montrose Supply and Equipment Division, which distributed equipment to the knitting trade. In July 1994, the Company sold its apparel parts and supplies distribution businesses. As a result of these transactions and the Distribution, the Company is now engaged solely in the distribution of electrical goods and supplies.
In April 1993, the Company acquired Sacks Electrical Supply Co. ("Sacks"), a distributor of electrical supplies and components with three locations in Ohio, for $13,635,000. On December 17, 1993, the Company acquired Summers Group Inc., ("Summers"), a distributor of electrical parts and supplies with locations principally in Texas, Oklahoma, Louisiana, California and Arkansas. The consideration for the Summers acquisition was $60,000,000 in cash and a $25,000,000 three year note issued to the seller, plus contingent consideration to be determined based on Summers' profits before interest and taxes for 1993 and 1994, subject to a maximum purchase price of $120,000,000. In December 1994, the Company agreed to prepay such note and cancel the contingent consideration in exchange for cash payments that brought the total cash purchase price for Summers to $90,950,000 (including $0.7 million of acquisition costs).
In March, 1994, the Company sold 3,491,280 newly-issued shares of Company Common Stock to Rexel for $31,421,520 in cash. In connection with that sale, the size of the Company's Board of Directors was reduced from twelve to nine and two additional nominees of Rexel became directors of the Company. As a result, five of the Company's nine current directors are nominees of Rexel.
During the last half of 1994, the Company also realigned the management of its electrical distribution operations. The operations of the Company's principal subsidiaries, Summers, Sacks, SES and the Consolidated Electric Supply group ("CES"), were reorganized along geographic lines into two regions: the Eastern Region and the Western Region. In addition, substantially all of the Company's operating subsidiaries were merged into either SES, which operates the Eastern Region, or Summers, which operates the Western Region.
ELECTRICAL DISTRIBUTION OPERATIONS
The Company is engaged in the wholesale distribution of electrical parts and supplies, operating 171 electrical distribution locations in 19 states and the Bahamas. The Company manages its business through two principal regional organizations: the Eastern Region and the Western Region.
The Eastern Region operates 88 distribution centers in 11 states, of which 40 are in Florida, 14 in Ohio, 9 in Mississippi, 6 in Alabama, 4 in Louisiana, 4 in Georgia, 3 in Delaware, 2 in Maryland, 2 in Tennessee, 2 in Oklahoma, 1 in Virginia and 1 in Freeport, Grand Bahamas.
The Western Region operates 83 locations in 10 states, consisting of 39 in Texas, 12 in California, 9 in Louisiana, 7 in Oklahoma, 7 in Arkansas, 4 in Missouri, 2 in Arizona, and 1 in each of Colorado, Illinois and New Mexico.
Each of the Company's electrical distribution locations serves an area with approximately a 50 mile radius and serves the needs of electrical contractors engaged in construction work on commercial and residential structures. The Company also provides materials to industrial customers for maintenance and repairs and for the manufacture of equipment. In addition, the Company has two divisions focused on specialty markets: the DataCom division, which distributes products used to interconnect voice, data and video systems, and the Cummins division, which distributes supplies to the utility industry. These two divisions generated approximately 8% of the Company's sales in 1994.
In 1994, the Company served over 75,000 customers, with no single customer accounting for more than 3% of total annual sales. The Company's ten largest customers in 1994 represented less than 7.5% of sales. Management believes that approximately 50% of the Company's sales are from the construction-based electrical contractor market. The remainder are sold to industrial, governmental, municipal and utility company customers.
Management believes that the Company is the fifth largest distributor of electrical parts and supplies in the United States, although there are other companies which account for significantly greater national volume. The Company competes with national chains (some of which are affiliated with manufacturing companies) and other independent distributors operating single or multiple outlets. Because the electrical supply business is fragmented and highly competitive, service and price are essential components of success. A typical Willcox & Gibbs electrical distribution location consists of a 20,000 sq. ft. warehouse and office facility, ten inside and outside sales representatives, one technical specialist, six warehouse and delivery personnel, and four management and support personnel. An average branch has approximately 400 customers, maintains an inventory of about 15,000 items, and makes deliveries within a 50-mile radius. Small branches are often grouped to constitute a profit center.
The Company's extensive product line includes electrical supplies, such as cable, cords, boxes, covers, wiring devices, conduit, raceway duct, safety switches, motor controls, breakers, panels, lamps, fuses and related supplies and accessories, residential, commercial and industrial electrical fixtures and other special use fixtures, as well as materials and special cables for computers and advanced communications systems. The products sold by the Company are purchased from over 500 manufacturers and other suppliers, the two largest of which accounted in the aggregate for approximately 14% of the Company's total purchases during 1994, with none of the remainder accounting for more than 5%.
DISCONTINUED OPERATIONS
APPAREL PARTS AND SUPPLIES DISTRIBUTION
In July 1994, the Company sold its apparel parts and supplies distribution businesses, which are described below, for consideration valued at approximately $44 million.
The Company's former Sunbrand Division marketed to the apparel industry a wide range of sewing equipment parts, supplies and other equipment, including pressing and finishing equipment, fabric spreading machines and reconditioned equipment. Its product line included needles, tools, electric and electronic devices and warehouse equipment. Sunbrand's executive offices were located in Atlanta. Sunbrand had seven office/distribution centers located near major apparel manufacturing areas in Atlanta, El Paso, Fall River (Massachusetts), Miami, Mexico City, Nashville, and Santo Domingo (Dominican Republic).
The Company's former Unity Sewing Supply Division ("Unity"), an importer and distributor of non-trademarked ("generic") parts for industrial sewing machines, was headquartered in New York with branch offices in Los Angeles and Miami. It sold to dealers, not to manufacturers or end users. The majority of Unity's parts were manufactured in Japan, Germany and the United States.
The Company's former subsidiary, Willcox & Gibbs, Ltd., a wholly-owned United Kingdom subsidiary, marketed sewing equipment in certain Common Market countries and sold generic sewing equipment parts in the United Kingdom.
The Company's former subsidiary, Leadtec Systems, Inc. ("Leadtec"), distributed to the apparel industry a computer-based real-time production control system, marketed under the name "Satellite Plus", which utilized hardware manufactured by others and proprietary software designed by Leadtec.
COVERED ELASTIC YARN
Prior to 1993, the Company owned Worldtex and its subsidiaries, which engaged in the manufacture of covered elastic yarn. These operations were disposed of by the Company pursuant to the Distribution on November 12, 1992. While owned by the Company, Worldtex's principal product was nylon covered spandex used in the manufacture of women's pantyhose, which accounted for 58% of Worldtex's 1992 sales. Worldtex also sold covered spandex and covered latex rubber for use in the manufacture of men's, women's and children's socks.
EMPLOYEES
As of December 31, 1994, the Company had a total of approximately 2,800 employees. Approximately 45 employees are covered by collective bargaining agreements. The Company has experienced no significant labor problems during recent years and considers that its employee relations are good.
ITEM 2.
ITEM 2. PROPERTIES
The Company's executive offices are located in leased office space at 150 Alhambra Circle, Coral Gables, Florida. Of the Company's distribution centers, 42 are owned by subsidiaries of the Company and 129 are leased. These leases are classified as operating leases and expire in various years through 2002. The Company's distribution centers generally range from 4,000 to 105,000 square feet and include office and warehouse facilities. The average distribution center is approximately 20,000 square feet.
Eleven of the Company's distribution centers are leased from Robert Merson, a Senior Vice President of the Company and President of the Company's Eastern Region, and/or members of his or his wife's family, for terms extending through 2002. The Company believes that these leases are on terms at least as favorable as could have been obtained from an unaffiliated third party.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings as of the date of this Report to which the Company or any of its subsidiaries is a party or to which any of their property is subject.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the last quarter of the Company's fiscal year, no matters were submitted to a vote of the Company's security holders.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The officers of the Company are elected annually by the Board of Directors.
Mr. Viry also serves as a director of the Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange. The following table sets forth the high and low per share sales prices for the Common Stock on the New York Stock Exchange as reported by the Dow Jones Historical Stock Quote Reporter Service for each quarter since December 31, 1992.
At March 10, 1995, there were approximately 1,389 holders of record of Common Stock.
No dividends have been paid on the Company's Common Stock since the last quarter of 1991. Future payment of cash dividends by the Company will be dependent on such factors as business conditions, earnings and the financial condition of the Company.
The terms of the Company's 9.78% Senior Notes, dated as of April 2, 1991, as amended, restrict dividends and certain other payments with respect to the Company's capital stock if the sum thereof for the period since December 31, 1992, exceeds the sum of (i) 35% of net cash proceeds from the sale of stock and certain subordinated debt for such period, plus (ii) 35% of consolidated net income (as
defined) for such period. In addition, the Note Agreement and the Company's Revolving Credit and Reimbursement Agreement, dated as of December 17, 1993, require that the Company meet certain financial tests that could have the effect of restricting the Company's ability to pay dividends.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
The following tables set forth certain consolidated financial data of the Company and its subsidiaries for the five fiscal years ended December 31, 1994, which has been derived from the Company's audited financial statements, and should be read in conjunction with the Consolidated Financial Statements and Notes thereto of the Company appearing elsewhere in this Report on Form 10-K.
The selected financial data of the Company for the years set forth below are not directly comparable due to acquisitions and dispositions during such periods, including the distribution of Worldtex on November 12, 1992, the sale of the Apparel Division on July 13, 1994, and the acquisitions of SES on November 12, 1992, Sacks on April 12, 1993 and Summers on December 17, 1993.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT TRANSACTIONS
In April 1992, the Company, Rexel, S.A. (formerly known at Compagnie de Distribution de Materiel Electrique) ("Rexel"), International Technical Distributors, Inc. ("ITD"), a subsidiary of Rexel, and Southern Electric Supply Company, Inc. ("SES"), a subsidiary of ITD engaged in the distribution of electrical materials, entered into a Purchase Agreement (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company issued to Rexel and ITD 6,284,301 shares of Company Common Stock in exchange for all of the stock of SES and approximately $10 million in cash. In addition, pursuant to the Purchase Agreement, the Company declared a dividend consisting of one share of common stock of the Company's subsidiary Worldtex, Inc. ("Worldtex") for each share of Company Common Stock outstanding on November 23, 1992 (the "Distribution" and, together with such transactions with Rexel, the "1992 Transactions"). In August 1992, the Company transferred to Worldtex all of the stock of the Company's subsidiaries engaged in the manufacture of covered elastic yarn. Accordingly, these businesses are reflected as discontinued operations in the Company's Consolidated Financial Statements.
Also during 1992, the Company sold its data communications equipment distribution business and an apparel related unit. On July 13, 1994, the Company sold its apparel parts and supplies distribution businesses (the "Apparel Division") for consideration of approximately $44 million. Accordingly, the Apparel Division is shown as a discontinued operation in the Company's Consolidated Financial Statements.
In April 1993, the Company acquired Sacks Electrical Supply Co. ("Sacks"), a distributor of electrical supplies and components with three locations in Ohio, for $13.6 million. On December 17, 1993, the Company acquired Summers Group, Inc. ("Summers"), an electrical parts distributor, for $60 million in cash and a $25 million three year note issued to the seller, plus contingent consideration to be determined based on Summers' profits before interest and taxes for 1993 and 1994, subject to a maximum purchase price of $120 million. In December 1994, the Company agreed to prepay such note and cancel the contingent consideration in exchange for cash payments that brought the total cash purchase price for Summers to $90.95 million (including $0.7 million of acquisition costs).
On March 1, 1994, the Company sold 3,491,280 newly-issued shares of Company common stock to Rexel for a total purchase price of $31.4 million. Pursuant to the Company's agreement with Rexel, the size of the Company's Board of Directors was reduced from twelve to nine, five of whom are nominees of Rexel.
During the second half of 1994, the operations of the Company's principal subsidiaries, Summers, Sacks, SES and the Consolidated Electric Supply group ("CES"), were reorganized along geographical lines into two regions: the Eastern Region and the Western Region. As part of this process, the Company closed six redundant or underperforming locations and opened ten new distribution centers. In addition, the Company implemented cost reduction programs, including the consolidation and redesign of employee benefit and casualty insurance programs, established new management incentive programs focused on profit growth and asset management and commenced upgrade of its Eastern Region's computer management information system.
As a result of the aforementioned transactions and discontinuances, the Company is now engaged in only one business segment: the distribution of electrical parts and supplies, principally in the southern United States. Assuming the Sacks and Summers acquisitions had been consummated as of January 1, 1992 and the SES acquisition had been consummated as of January 1, 1991, the Company's unaudited pro forma sales would have been $958.5 million and $907.3 million in 1993 and 1992, respectively.
RESULTS OF CONTINUING OPERATIONS
The following table sets forth the percentages which certain income and expense items bear to net sales:
1994 V. 1993
Sales increased $544.0 million in 1994 to $1.066 billion. Sales for 1994 included a total of $560.8 million from Summers and Sacks, which were acquired in December 1993 and April 1993, respectively. Had these acquisitions occurred on January 1, 1993, pro forma 1993 sales would be $958.5 million. The pro forma sales increase in 1994 of 11.2% was attributable to favorable new home construction markets and growth of sales in the utility and data communications markets.
Gross margins declined in 1994 to 19.9% from 20.6% in 1993. This decline was primarily attributable to the 36% increase during 1994 in the price of copper, an important component of the goods distributed by the Company. Over half of this increase occurred in the last four months of the year. While inflation tends to improve the Company's margins, since so much of the increase in copper prices occurred late in the year, the improved margins could not offset the $7.2 million increase in LIFO reserves primarily caused by the inflation in copper wire prices.
Selling and administrative expense increased to $187.4 million in 1994 from $90.4 million in 1993, reflecting the additional operations added through the above-mentioned acquisitions. As a percentage of sales, such expenses were 17.6% in 1994 compared to 17.3% in 1993. Included in selling and administrative costs for 1994 were nonrecurring charges totaling $4.9 million consisting of charges primarily associated with the resignation of an officer of the company ($2.1 million), the relocation of the corporate office to Coral Gables, Florida ($0.7 million) and replacement of certain computer systems in the Company's Eastern Region ($2.1 million). These nonrecurring costs amounted to 0.5% of sales in 1994. Depreciation and amortization increased to $9.7 million in 1994 from $5.2 million in 1993, reflecting increased amortization of goodwill on the 1993 acquisitions of Sacks and Summers and the $2.1 million for replacement of computer systems.
Interest expense increased to $9.6 million in 1994 from $5.9 million in 1993. While the Company reduced its borrowings $77.1 million by the end of 1994, interest expense increased due to additional debt arising in 1993 in connection with the acquisitions of Sacks and Summers and the increase in interest rates on short-term debt. Additionally, discontinued operations absorbed $2.0 million in interest expense in 1994 compared to $3.9 million in 1993.
Other income-net increased to $1.0 million in 1994 from $0.7 million in 1993, primarily reflecting higher earnings from short-term investments during the second half of 1994.
Income from continuing operations increased to $9.3 million in 1994 from $6.9 million in 1993, reflecting the additional operations added through the acquisitions of Sacks and Summers in 1993.
1993 V. 1992
The Company's sales increased by $162.4 million in 1993, to $521.5 million. Excluding the impact of the acquisitions of SES, Sacks and Summers, full-year sales were up about 3.8%. CES's increase resulted primarily from the improving housing market, although commercial construction continued to lag. Full-year sales for SES, Sacks, and Summers as a group were up in 1993 compared with 1992, reflecting the continued market-share strength of these units in their respective geographic areas. Full year sales for these divisions totalled $601.3 million in 1993, including, as to Sacks and Summers, the period prior to acquisition. Certain geographic regions showed an upturn in 1993. However, no assurance can be given that this trend will continue. Declining copper prices and strong competition for market share continue to put pressure on the Company's gross margin, which increased slightly in 1993, to 20.6%.
Selling and administrative expenses increased $24.4 million in 1993, reflecting the additional operations added through the above-mentioned acquisitions. However, as a percentage of sales such expenses decreased to 17.3% in 1993 as compared to 18.3% in 1992, reflecting cost containment programs and a higher level of sales.
Interest expense in 1993 was $5.9 million, compared with $5.4 million a year ago. Although the Company reduced its debt at the end of 1992 in connection with the 1992 Transactions, it increased its borrowings in 1993 to fund the acquisitions of Sacks and Summers. Other income-net in 1993 was $0.7 million, compared to $0.1 million in 1992, reflecting principally earnings from short-term investments during the first half of 1993.
Income from continuing operations increased $19.3 million to $6.9 million in 1993, reflecting principally the costs for 1992 Transactions and restructuring charges that were accrued in 1992.
DISCONTINUED OPERATIONS
As discussed above, the results of the Apparel Division and Worldtex are included in the financial statements as discontinued operations. Summarized results are as follows (000's):
The Apparel Division was sold July 13, 1994 and accordingly, sales and net income of the Apparel Division reflect activity through that date.
INCOME TAXES
The Company had effective income tax rates of 44%, 43% and (6.3)% in 1994, 1993, and 1992. The 1994 rate reflects the impact of state and local taxes, non-deductible goodwill amortization and increase in the deferred tax asset valuation allowance, reduced by the current deductibility of certain prior year transaction costs. The 1993 rate reflects the above as well as a reduction due to the impact of the utilitzation of federal capital loss carryforwards and an increase in the federal corporate income tax rate.
Effective January 1, 1993, the Company changed its method of accounting from the deferred method to the liability method required by SFAS No. 109, "Accounting for Income Taxes" (see Note 10 of the Notes to the Consolidated Financial Statements). As permitted under Statement 109, prior years' financial statements have not been restated. The cumulative effect of adopting Statement 109 as of January 1, 1993 was to increase net income by $660,000 or $.03 per share for 1993.
As of December 31, 1994 and 1993, the Company had recognized deferred tax assets of $10.2 million and $11.3 million, respectively, arising primarily from basis differences between the recorded value for financial reporting purposes and tax basis of accounts receivable, inventory and various liabilities and reserves, including restructuring and transaction costs. Such deferred tax assets have been reduced by a valuation allowance of $1.3 million and $1.1 million in 1994 and 1993, respectively. In addition, the Company has recognized deferred tax liabilities totaling $9.4 million and $7.8 million in 1994 and 1993, respectively, arising principally from a higher recorded value over tax basis of property, plant and equipment and certain acquisitions.
LIQUIDITY; CAPITAL RESOURCES
At December 31, 1994, the Company had $23.8 million in cash and cash equivalents, compared to $19.1 million at December 31, 1993, and had $119.7 million of indebtedness for borrowed money (including current installments and short-term debt), compared to $196.7 million at December 31, 1993. Total assets decreased $14.0 million as of the end of 1994 to $414.5 million, primarily due to the disposition of the Apparel Division as discussed below.
During 1994, the Company generated $33.1 million in cash from its operating activities compared to $5.8 million in 1993, primarily reflecting improvement in various working capital items and a full year's operating income from the 1993 acquisitions of Sacks and Summers. Net cash provided by investing activities in 1994 totalled $17.6 million, reflecting net cash proceeds from the disposal of the Apparel Division of $37.2 million, offset by net capital expenditures of $12.1 million, the $5.3 million payment to terminate contingent purchase price obligations in connection with the Summers acquisition and other payments of $2.2 million. Capital expenditures increased $6.7 million in 1994 to $12.1 million, reflecting the full year impact of the 1993 acquisitions of Sacks and Summers and investment in additional computer equipment and software associated with the replacement of certain computer systems in the Eastern Region. Net cash used in investing activities in 1993 of $62.8 million reflects the Company's acquisitions of Sacks and Summers, which utilized $68.3 million, offset partially by proceeds from sales of short-term investments of $12.9 million.
Net cash used in financing activities in 1994 totalled $46.0 million, reflecting primarily the payment of debt from the proceeds of the issuance of common stock to Rexel in March 1994, and the sale of the Apparel Division. Net cash provided by financing activities in 1993 totalled $60.6 million, reflecting borrowings under credit arrangements to fund the 1993 acquisitions of Sacks and Summers.
The Company had a current ratio of 1.6 at December 31, 1994 compared to 1.3 at December 31, 1993. The improvement is primarily the result of improvement in inventory days to 76 days in 1994 from 84 days in 1993 and reduction in short-term debt in 1994. The number of days sales represented by trade accounts receivable were 48 at December 31, 1994 compared to 50 at December 31, 1993. Trade working capital turnover for the year 1994 improved to 7.1 from 6.2 in 1993.
The ratio of borrowings (debt) to stockholders' equity improved to .9 at December 31, 1994 from 2.1 at December 31, 1993, reflecting improved operating cash flow and the reduction of borrowings from the proceeds of the common stock issuance to Rexel and the sale of the Apparel Division in 1994.
In April 1993, the Company acquired Sacks for $13.6 million in cash, and in December 1993, the Company acquired Summers for $60 million in cash and a $25 million three year note, plus contingent consideration, subject to a maximum purchase price of $120 million. In December 1994, the Company agreed to prepay such note and cancel the contingent consideration in exchange for cash payments that brought the total cash purchase price for Summers to $90.95 million (including $0.7 million of acquisition costs). The Company regularly reviews possible acquisitions of businesses, and may from time to time in the future acquire other businesses. The Company otherwise currently expects that its capital expenditures during 1995 will be consistent with historical requirements for the electrical distribution business.
The Company is party to the Revolving Credit and Reimbursement Agreement, dated as of December 17, 1993 (the "Credit Agreement"), with NationsBank of Florida, N. A., and Credit Lyonnais New York Branch. The Credit Agreement was amended on March 30, 1995 and currently provides for borrowings from time to time through March 31, 2000 of up to $40 million. Borrowings under the Credit Agreement bear interest at NationsBank's prime rate, or at a rate based on rates in the certificate of deposit market or LIBOR, plus a margin, which margin varies depending on the Company's financial performance. The Credit Agreement includes various covenants, including restrictions on liens, debt and lease obligations and requirements that certain financial ratios be maintained.
The Company's working capital requirements are generally met by internally generated funds and short-term borrowings. Management believes sufficient cash resources will be available to support its long-term growth strategies through internally generated funds, credit arrangements and the ability of the company to obtain additional financing. However, no assurance can be given that financing will continue to be available on attractive terms.
The Company continually reviews the impact of inflation. Pricing policies are reviewed regularly and, to the extent permitted by competition, the Company passes increased costs on by increasing the sales price. The Company will continue to monitor the impact of inflation and will consider these matters in setting its pricing policies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements, supplementary financial information and schedules are filed as part of this Report:
Report of Independent Accountants
Financial Statements:
Consolidated Balance Sheets, December 31, 1994 and 1993 Consolidated Statements of Income, Years Ended December 31, 1994, 1993 and 1992 Consolidated Statement of Changes in Stockholders' Equity, Years Ended December 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows, Years Ended December 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements
Supplementary Financial Information
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts, Years Ended December 31, 1994, 1993 and 1992
All schedules not mentioned above are omitted for the reason that they are not required or are not applicable, or the information is included in the Consolidated Financial Statements or the Notes thereto.
The foregoing financial statements are incorporated by reference in certain registration statements on Form S-8 of the Company and the prospectuses relating thereto in reliance upon the report of Coopers & Lybrand L. L. P. pertaining to such financial statements given upon the authority of such firm as experts in accounting and auditing.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Willcox & Gibbs, Inc.:
We have audited the consolidated financial statements and the financial statement schedule of Willcox & Gibbs, Inc. and subsidiaries listed in Item 8 of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Willcox & Gibbs, Inc. and subsidiaries as of December 31, 1994 and 1993 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
As discussed in Note 10 of the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes.
/s/ Coopers & Lybrand L. L. P. -------------------------------------- Coopers & Lybrand L. L. P.
Miami, Florida March 15, 1995 except as to the information presented in Note 5 for which the date is March 30, 1995.
WILLCOX & GIBBS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (DOLLARS IN THOUSANDS) ASSETS
See accompanying notes to consolidated financial statements.
WILLCOX & GIBBS, INC. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See accompanying notes to consolidated financial statements.
WILLCOX & GIBBS, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS)
See accompanying notes to consolidated financial statements.
WILLCOX & GIBBS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS)
See accompanying notes to consolidated financial statements.
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CONSOLIDATION
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated.
(b) CASH EQUIVALENTS
Highly liquid investments with a maturity of three months or less when purchased are generally considered to be cash equivalents.
(c) INVENTORIES
Inventories are stated at the lower of LIFO cost or market for continuing operations. Had the FIFO method been used to value inventories, total inventories would have increased $12,867 and $5,632 at December 31, 1994 and 1993, respectively.
For the discontinued operations, inventories were stated at the lower of FIFO cost or market and were included in Net Assets of Discontinued Operations at December 31, 1993.
(d) INVESTMENTS AND NONCURRENT RECEIVABLES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which addresses the accounting and reporting for investments in equity securities that have readily determinable fair value and for all investments in debt securities. The Standard classifies investments into one of three categories: Held-to-maturity, Available-for-sale, and Trading.
At December 31, 1994, the Company has classified its investments in debt securities as "Trading". These investments are included as part of Cash and Cash Equivalents based on their liquidity. Investments in equity securities have been classified as "Available-for-sale". The fair value of these securities at year end was approximately $625. The Company does not believe that adoption of this new Standard has had a significant effect on its financial statements.
(e) DEPRECIATION AND AMORTIZATION
Depreciation, computed by means of straight-line and accelerated methods, is based on the estimated useful lives of the related assets. Leasehold improvements are amortized over their respective lease terms or their estimated useful lives, if shorter.
Cost in excess of net assets of acquired businesses ("goodwill") is amortized over 40 years. At each balance sheet date, the Company reviews the carrying value of goodwill in relation to current and expected operating results of the businesses which benefit therefrom in order to assess whether there has been a permanent impairment of goodwill.
(f) FORWARD EXCHANGE CONTRACTS
Solely in connection with the apparel parts and supplies distribution business, which was sold on July 13, 1994, the Company entered into forward exchange contracts in limited circumstances as a hedge against purchases with extended terms denominated in foreign currency. These contracts were used by the Company to minimize exposure and reduce risk from exchange rate fluctuations in the regular course of its foreign apparel business. Gains and losses on forward contracts were deferred and included in the measurement of the related foreign currency transaction. Cash provided and used for forward contracts is included in the cash flows resulting from changes in accounts and notes payable -- trade.
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) INCOME TAXES
No provision is made for income taxes which may be payable if undistributed earnings of foreign subsidiaries were to be paid as dividends to the Company, since the Company intends that such earnings will continue to be invested in those countries. At December 31, 1993, the cumulative amount of foreign undistributed earnings amounted to approximately $630. Foreign tax credits may be available as a reduction of United States income taxes in the event of such distributions.
(h) EARNINGS PER SHARE
Primary earnings per share are based on the weighted average number of common and common equivalent shares outstanding during the year.
(i) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1994 presentation.
2. SIGNIFICANT TRANSACTIONS On November 12, 1992, pursuant to a Purchase Agreement dated April 22, 1992 among the Company, Rexel, S.A. (formerly known as Compagnie de Distribution de Materiel Electrique) ("Rexel"), International Technical Distributors, Inc. ("ITD"), a subsidiary of Rexel, and Southern Electric Supply Company ("SES"), a subsidiary of ITD engaged in the distribution of electrical components and supplies, the Company issued to Rexel and ITD 6,284,301 shares of the Company's common stock. In exchange for such stock issuance, the Company received $9,885 in cash and all the capital stock of SES. The SES acquisition was accounted for by the purchase method (see Note 3). Common stock and capital surplus have been adjusted for the proceeds received from the common stock issuance less issue costs of $2,056.
Pursuant to an Investment Agreement entered into in connection with the Purchase Agreement, Rexel agreed to certain limitations on its ownership of the outstanding common stock of the Company and to certain other restrictions during the five years after closing. On March 1, 1994, the Company sold to Rexel 3,491,280 newly issued shares of Company common stock for a total cash purchase price of $31,422, which was used to repay short-term debt. As a result, Rexel increased its beneficial ownership of the outstanding common stock of the Company from 30% to 40%. In connection with that purchase, the Company, Rexel and ITD executed an amendment to the Investment Agreement which, among other things, permited Rexel to increase its beneficial ownership of Company common stock to 45% and provided for termination of the Investment Agreement on December 31, 1994. As of February 6, 1995, Rexel had further increased its beneficial ownership to approximately 43.7%.
In connection with the November 12, 1992 transaction, the Company distributed Worldtex, Inc. ("Worldtex"), its covered yarn manufacturing segment, as a dividend to its stockholders during the fourth quarter of 1992. Worldtex owns the former subsidiaries of the Company engaged in the manufacture of covered yarn. Effective with the dividend, retained earnings was charged $58,547 for the book value of the net assets distributed, including assets of $152,407 and liabilities of $93,860. Liabilities included $32,000 of debt assumed by Worldtex which was previously outstanding under the Company's prior revolving credit arrangement. The results of the covered yarn operation for 1992 are included in the Consolidated Statements of Income as discontinued operations (see Note 4).
Results for 1992 include transaction-related costs of $15,344, including certain investment advisor services, legal and accounting fees and executive incentive payments, in connection with these transactions.
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS On April 12, 1993 the Company acquired the common stock of Sacks Electrical Supply Co. ("Sacks"), a distributor of electrical supplies and components with three locations in Ohio, for $13.9 million (including $0.3 million of acquisition costs).
On December 17, 1993, the Company acquired the common stock of Summers Group, Inc. ("Summers") for $60 million in cash and a $25 million three-year note issued to the seller, plus contingent consideration to be determined based on defined profits of Summers, subject to a maximum purchase price of $120 million. On December 22, 1994, the Company reached an agreement pursuant to which the Company paid $5.25 million in cash and agreed to pay the balance of the $25 million note ($16.7 million) prior to June 30, 1995, and the contingent consideration was cancelled. The additional payments, plus $0.7 million of acquisition costs, bring the total purchase price to $90.95 million. Summers is a distributor of electrical parts and supplies with locations principally in Texas, Oklahoma, Louisiana, California and Arkansas.
Each of these 1993 acquisitions has been recorded as a purchase, and the excess of the total purchase price over the fair value of the net assets acquired ($7.1 million for Sacks and $25.6 million for Summers) is being amortized over 40 years. Sacks' and Summers' results of operations are included in the Company's financial statements from the respective dates of acquisition.
As discussed in Note 2 of the Notes to Consolidated Financial Statements, the Company acquired all of the issued capital stock of SES in exchange for the issuance of 4,636,994 shares of the Company's common stock. The total purchase price was $21,370, representing market value of the shares and certain closing costs. The shares include 628,430 shares issued in 1993. SES' results of operations are included in the Company's financial statements from the date of acquisition. The acquisition has been recorded as a purchase and the excess of the total purchase price over the fair value of the net assets acquired ($10,475) is being amortized over 40 years.
The following table summarizes the effect on consolidated sales and income (loss) from continuing operations of the Company for 1993 and 1992, on an unaudited pro forma basis, assuming the Sacks and Summers acquisitions had been consummated as of January 1, 1992 and the SES acquisition had been consummated as of January 1, 1991.
The pro forma results above are not necessarily indicative of what actually would have occurred if the acquisitions had been in effect at the beginning of each period or are they necessarily indicative of future consolidated results.
4. DISCONTINUED OPERATIONS In the fourth quarter of 1993, the Company decided to sell its apparel parts and supplies distribution business ("Apparel") and engaged an investment banking firm, of which a director of the Company is president, to seek a purchaser. The sale was consummated on July 13, 1994 for consideration valued at approximately $44.0 million, consisting of cash of $38.6 million ($37.2 million net of costs), a $3 million subordinated note from the buyer valued at $2.3 million, warrants to purchase approximately 15% of the buyer valued at $0.7 million and 324,814 shares of Company common stock valued at $2.1 million. The net proceeds from the sale approximated book value of the net assets sold,
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. DISCONTINUED OPERATIONS (CONTINUED) but resulted in a loss on disposal of $0.7 million, net of taxes, due primarily to the recognition of previously established deferred foreign translation adjustments. In connection with the sale, the investment banking firm was paid $0.5 million. Accordingly, this business is included in the Consolidated Statements of Income as discontinued operations for all periods presented. As discussed in Note 2, the covered yarn operation is included as discontinued operations in 1992. Summarized results of the discontinued operations (excluding the loss on disposal) are as follows:
Interest expense of $1,983, $3,927 and $4,078 for the years ended December 31, 1994, 1993 and 1992, respectively, have been allocated to Apparel operating results based upon net assets of the Apparel operation. Interest expense of $1,148 for the year ended December 31, 1992 has been allocated to covered yarn operating results determined by applying the Company weighted average borrowing rate during the period to weighted average levels of the Company corporate debt to be assumed by Worldtex.
The assets of the apparel operations at December 31, 1993 are included in the accompanying Consolidated Balance Sheet as "Net assets of discontinued operations" and are as follows:
The Company's continuing operations consist solely of the distribution of electrical parts and supplies, principally in the southern United States.
5. SHORT-TERM DEBT The Company entered into a Revolving Credit and Reimbursement Agreement, dated as of December 17, 1993 (the "Credit Agreement"), with NationsBank of Florida, N.A., and Credit Lyonnais New York Branch. The Credit Agreement originally provided for borrowings from time to time through December 1997 of up to the lesser of (i) $90 million ($50 million as of July 13, 1994) and (ii) the sum of 80% of eligible accounts receivable and 50% of eligible inventory. The Credit Agreement
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. SHORT-TERM DEBT (CONTINUED) was amended on March 30, 1995 to provide for borrowings through March 31, 2000 of up to $40 million with no limitation due to levels of accounts receivable and inventory. Borrowings under the Credit Agreement bear interest at NationsBank's prime rate, or at a rate based on rates in the certificate of deposit market or LIBOR, plus a margin, which margin varies depending on the Company's financial performance. The Credit Agreement includes various covenants, including restrictions on liens, debt and lease obligations and requirements that certain financial ratios be maintained.
6. LONG-TERM DEBT Long-term debt, less current installments, consists of:
The 9.78% Senior Notes are payable ratably over a seven-year period commencing March 15, 1995 with interest payable semiannually at a rate of 9.78% per annum. Under the terms of the Senior Notes (as amended), the Company may pay dividends and make other restricted payments (as defined) to the extent of 35% of consolidated net income (as defined) plus certain other amounts and is subject to certain restrictions on the incurrence of additional debt and other transactions and to other covenants calling for minimum levels of working capital and certain financial ratios.
The 7% Convertible Subordinated Debentures are due August 1, 2014 with interest payable semiannually on February 1 and August 1. The debentures are convertible into common stock of the Company at $9.57 per share and are subject to a sinking fund, commencing August 1, 2000, calculated to retire 70% of the debentures prior to final maturity. The debentures are subordinated to present and future senior indebtedness (as defined) of the Company. In certain circumstances involving the occurrence of a Risk Event (as defined) prior to August 1, 1999, the Company will be required to offer to repurchase all or part of the debentures at 100% of their principal amount plus accrued interest. The Company has the option to pay the repurchase price in cash or shares of its common stock. At December 31, 1994, approximately 8,511,000 shares would have been necessary to repurchase the debentures.
The 4.375% Senior Note was issued to the seller in connection with the Summers acquisition and is payable with interest at 4.375% per annum prior to June 30, 1995 (see Note 3).
The mortgage notes payable were prepaid in full on October 31, 1994.
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT (CONTINUED) Long-term debt maturities during the next five years are as follows:
Based on borrowing rates currently available to the Company for long-term debt with similar terms and average maturities, and the quoted market price of Company's Convertible Debentures, the fair value of the Company's indebtedness was approximately $113,000 as of December 31, 1994 and 1993.
7. STOCKHOLDERS' EQUITY The authorized capital stock of the Company is 37,600,000 shares, consisting of 600,000 shares of Preferred Stock with a par value of $12 per share, 2,000,000 shares of Preference Stock with a par value of $1 per share and 35,000,000 shares of Common Stock with a par value of $1 per share. The Board of Directors may issue the Preference Stock from time to time in one or more series and fix the dividend rates, voting rights and liquidation preferences and establish redemption, sinking fund, conversion, exchange and other relative rights, preferences and limitations of a particular series.
Shares of common stock as at December 31, 1994 are reserved for:
8. STOCK OPTION PLANS, STOCK ACQUISITION PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN Under the Company's 1988 and 1985 Stock Option Plans, options to purchase up to 1,266,667 shares and 829,630 shares of common stock, respectively, were available to be granted to key employees of the Company. The 1985 plan terminated on January 15, 1995. The 1988 Plan also provides that each director of the Company, other than one who is an officer or employee, be granted a non-qualified stock option to purchase 10,000 shares of Company common stock. For each plan, the option period is either ten or eleven years from the date of grant, and options may be exercised at various times depending on the provisions of the grant.
Information regarding the Company's stock option plans is summarized below:
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. STOCK OPTION PLANS, STOCK ACQUISITION PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN (CONTINUED) All options were granted at market value on the date of grant.
As of December 31, 1994, options for the purchase of 245,753 shares were available for future grant under the 1988 plan.
The Company's Employee Stock Ownership Plan, which became effective in 1981, provides eligible employees with an opportunity to purchase the Company's common stock through payroll deductions, which are matched by the Company, subject to certain limitations. Contributions to the plan are invested by an independent trustee in common stock of the Company. Stock attributable to Company contributions vests at the rate of 10% for each twelve months of contributions by the employee, with 100% vesting after five years of service. The Company's contributions to the plan, net of forfeitures, charged to income for 1994, 1993 and 1992 were $592, $695 and $758, respectively. Effective January 1, 1995, this plan was merged into a new plan known as the Willcox & Gibbs, Inc. Section 401(k) Savings Plan.
9. PENSION AND PROFIT-SHARING PLANS AND POSTRETIREMENT BENEFIT PLANS The Company has a qualified noncontributory defined benefit pension plan covering certain eligible domestic employees. The Company also had a qualified noncontributory defined benefit pension plan covering certain eligible domestic employees in the discontinued apparel operation. As part of the agreement to sell the apparel operation, the purchaser assumed all obligations under this plan. The Company's funding policy is to contribute annually the maximum amount that can be deducted for Federal income tax purposes. The Company also has a non-qualified defined benefit supplemental retirement plan covering key employees, which is not funded. The benefits of all plans are based on years of service and defined levels of compensation.
The Company also had a defined benefit plan maintained for eligible employees of certain United Kingdom subsidiaries included in the discontinued apparel operation. The plan is funded annually for the maximum amount permitted by statute. The benefits are based on years of service and defined levels of compensation.
Under the collective bargaining agreement of the textile industry in France, employees of a subsidiary Worldtex are entitled to a lump-sum payment at retirement based on their length of service at retirement and final pay. All obligations under this plan were assumed by Worldtex in connection with the dividend.
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. PENSION AND PROFIT-SHARING PLANS AND POSTRETIREMENT BENEFIT PLANS (CONTINUED) The following table sets forth the plans' funded status at December 31, 1994 and 1993:
The qualified domestic plan assets include guaranteed investment contracts, mutual and money market funds, government securities, whole life insurance policies and common stock of the Company and Worldtex (such stock with a combined market value of $520 at December 31, 1993). The United Kingdom plan assets are comprised of certain deferred annuity contracts.
Net periodic pension cost for 1994 (excluding the United Kingdom Plan assumed in the Apparel sale), 1993 and 1992 included the following components:
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. PENSION AND PROFIT-SHARING PLANS AND POSTRETIREMENT BENEFIT PLANS (CONTINUED) The actuarial assumptions used for each of the plans for 1994, 1993 and 1992 are as follows:
For the non-qualified domestic plan, no salary increase was assumed as the Company has frozen salaries under the plan at current levels. Liabilities under this plan attributable to Worldtex employees were assumed by Worldtex in connection with the dividend of Worldtex.
For the United Kingdom plan, the assumed discount rate at December 31, 1993 and 1992 was 9.0% and 10.0%, respectively. The rate of increase in future compensation levels was 9.0% for both years and the expected long-term rate of return on assets was 9.0% at December 31, 1993 and 10.0% at December 31, 1992.
For the French plan, the assumed discount rate and rate of increase in future compensation levels were 9.0% and 5.0%, respectively.
Certain subsidiaries have noncontributory profit-sharing plans and defined contribution pension plans providing for minimum contributions based upon defined levels of subsidiary income or employee compensation.
In 1995, all defined benefits and profit sharing plans have been merged into a new Willcox & Gibbs, Inc. Section 401(k).
Pension and profit-sharing expense for the years ended December 31, 1994, 1993 and 1992 amounted to approximately $2,880, $1,338 and $2,141, respectively.
A subsidiary of the Company, acquired in 1993, provides certain health care benefits for eligible retired employees. The status of the plan at December 31, 1994 and 1993 is as follows:
The postretirement benefit cost in 1994 and 1993 included the following components:
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. PENSION AND PROFIT-SHARING PLANS AND POSTRETIREMENT BENEFIT PLANS (CONTINUED) The plan is unfunded. The discount rate used in determining APBO was 8.25% and 7.25% at December 31, 1994 and 1993, respectively. The assumed health care trend rate assumed for 1995 was 11.5%. Increasing assumed health care trends one percentage point will increase the APBO by $83 as of December 31, 1994.
10. INCOME TAXES Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Under Statement 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated.
As permitted by Statement 109, the Company has elected not to restate the financial statements of any prior years. The effect of the change on pretax income from continuing operations for the year ended December 31, 1993 was not material; however, the cumulative effect of the change as of January 1, 1993 increased net income by $660 or $.03 per share.
The Company and its U.S. subsidiaries file Federal income tax returns on a consolidated basis. The provision (benefit) for income taxes has been classified as follows in the consolidated statements of income:
The provision (benefit) for income taxes is comprised of the following:
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. INCOME TAXES (CONTINUED) Deferred income taxes result from temporary differences in the recognition of revenue and expenses for financial statement and income tax reporting purposes. The tax effects of each as of December 31, 1994 and 1993 are as follows:
The change in the valuation allowance between 1994 and 1993 of $185 resulted from updating estimates of state and local net operating losses.
Income (loss) before income taxes is comprised of the following:
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. INCOME TAXES (CONTINUED) A reconciliation for 1994, 1993 and 1992 between the amount computed using the Federal income tax rate and the effective rate of tax on income (loss), including discontinued operations, but excluding extraordinary charge, is as follows:
11. COMMITMENTS AND CONTINGENCIES At December 31, 1994, annual minimum rental commitments under noncancelable operating leases, primarily for real property, are summarized as follows:
The minimum annual commitments include amounts payable to an officer of the Company and/or members of his and his wife's family and amounts payable to an officer of a subsidiary as follows: 1995 - $855; 1996 - $731; 1997 - $671; 1998 -$630; 1999 - $630; thereafter - $1,417.
Total rent expense charged to operations for the years ended December 31, 1994, 1993 and 1992 amounted to approximately $9,498, $6,589 and $5,148, respectively.
In the normal course of business, the Company is sometimes named as a defendant in litigation. In the opinion of management, based upon the advice of counsel, any uninsured liability which may result from the resolution of any present litigation or asserted claim will not have a material effect on the Company's financial position or results of operations.
WILLCOX & GIBBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. ACCOUNTS AND NOTES PAYABLE -- TRADE, AND OTHER LIABILITIES Accounts and notes payable -- trade and other liabilities consist of the following:
13. RESULTS OF OPERATIONS In connection with the resignation of an executive of the Company on March 18, 1994, the Company entered into an agreement with such executive that provided, among other things, certain payments and acceleration of certain other payments in connection with the executive's related employment agreement. Results for 1994 include charges of $1.7 million in connection with this agreement.
The Company has recorded charges to operations of $5,586 for the years ended December 31, 1992 related to certain restructuring actions initiated by the Company ($1,248 is included in discontinued apparel operations).
In 1992, the Company sold its data communications equipment distribution business and an apparel-related unit in return for $3,350 in cash, $1,858 of short and long-term notes and a marketable equity security with a fair market value of $1,500. The disposal of these businesses relate to actions originally initiated in 1991. The Company also initiated other restructuring actions, including the disposal of other operations, that do not relate to the Company's core business.
In 1992, certain restructuring actions initiated in 1991 and 1990 required more costs to implement than originally expected. The additional costs, included in the restructuring charges for this period, changed based on the revised estimates and experience to date.
WILLCOX & GIBBS, INC. SUPPLEMENTARY FINANCIAL INFORMATION YEARS ENDED DECEMBER 31, 1994 AND 1993 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SCHEDULE II WILLCOX & GIBBS, INC. VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information responsive to the Items comprising this Part III that is contained in the Company's definitive proxy statement for its 1995 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, which is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES
The financial statements and financial statement schedules included in this Report are listed in the introductory portion of Item 8.
EXHIBITS
The following exhibits are filed as part of this Report (for convenience of reference, exhibits are listed according to numbers assigned in the exhibit tables of Item 601 of Regulation S-K under the Securities Exchange Act of 1934 and management contracts and compensatory plans are indicated by an asterisk):
8-K REPORTS
During the last quarter of the Company's 1994 fiscal year, the Company did not file a Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 30, 1995 WILLCOX & GIBBS, INC.
By: ______/s/_ALLAN M. GONOPOLSKY_____ Allan M. Gonopolsky VICE PRESIDENT AND CORPORATE CONTROLLER
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 1995 by the following persons on behalf of the registrant and in the capacities indicated.
INDEX TO EXHIBITS
8-K REPORTS
During the last quarter of the Company's 1994 fiscal year, the Company did not file a Current Report on Form 8-K.