Attached files
file | filename |
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8-K/A - 8-K/A - Atkore International Holdings Inc. | a8-kaheritageplastics.htm |
EX-99.4 - HERITAGE PLASTICS PRO FORMA - Atkore International Holdings Inc. | exhibit994proforma.htm |
EX-99.2 - HERITAGE PLASTICS AUDITED FINANCIAL STATEMENTS 2011 AND 2012 - Atkore International Holdings Inc. | exhibit992heritageplastics.htm |
EX-99.3 - HERITAGE PLASTICS UNAUDITED FINANCIAL STATEMENTS - Atkore International Holdings Inc. | exhibit993heritageplastics.htm |
Heritage Plastics, Inc.
and Related Companies
Consolidated Financial Statements
December 31, 2010
HERITAGE PLASTICS, INC.
AND RELATED COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
CONTENTS
PAGE | |
Independent Auditor’s Report | 1-2 |
Consolidated Balance Sheet | 3 |
Consolidated Statement of Income | 4 |
Consolidated Statement of Retained Earnings and Members’ Equity | 5 |
Consolidated Statement of Cash Flows | 6 |
Consolidated Notes to Financial Statements | 7-12 |
November 8, 2013
To the Board of Directors
Heritage Plastics, Inc. and Related Companies
Heritage Plastics, Inc. and Related Companies
Carrollton, Ohio
INDEPENDENT AUDITOR'S REPORT
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Heritage Plastics, Inc. and Related Companies which comprise the consolidated balance sheet as of December 31, 2010, and the related consolidated statements of income, retained earnings and members’ equity, and cash flows for the year then ended and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
1
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heritage Plastics, Inc. and Related Companies as of December 31, 2010, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matter
Other Matter
In our report dated May 6, 2011, we issued an opinion on the consolidated balance sheet as of December 2010 only, as we were not engaged to audit the consolidated statements of income, retained earnings and members’ equity, or cash flows for the year then ended. We did review the consolidated statements of income, retained earnings and members’ equity, and cash flows for the year ended December 31, 2010, and reported on those statements, in part, as follows:
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated statements of income, equity, and cash flows in order for them to be in conformity with accounting principles generally accepted in the United States of America.
Due to subsequently being engaged to perform an audit of the consolidated statements of income, retained earnings and members’ equity, and cash flows, our present opinion on the 2010 financial statements, as presented herein, is different from that expressed in our previous report.
New Philadelphia, Ohio
New Philadelphia, Ohio
May 6, 2011, except for the Consolidated Statements of Income, Retained Earnings and Members’ Equity, and Cash Flows, and Note 8, as to which the date is November 8, 2013.
2
HERITAGE PLASTICS, INC. AND RELATED COMPANIES | |||
CONSOLIDATED BALANCE SHEET | |||
AS OF DECEMBER 31, 2010 | |||
ASSETS | |||
CURRENT ASSETS: | |||
Cash | $ | 627,580 | |
Accounts receivable - trade | 9,783,558 | ||
Inventory | 8,761,020 | ||
Prepaid expenses | 205,440 | ||
Total current assets | 19,377,598 | ||
PROPERTY AND EQUIPMENT: | |||
Buildings | 5,802,048 | ||
Land improvements | 806,814 | ||
Building improvements | 266,685 | ||
Parking lot | 321,532 | ||
Machinery and equipment | 10,954,713 | ||
Office furniture and equipment | 58,199 | ||
Leasehold improvements | 1,348,967 | ||
Warehouse equipment | 182,805 | ||
Vehicles | 362,885 | ||
Computer equipment | 68,601 | ||
20,173,249 | |||
Less: accumulated depreciation | 10,661,616 | ||
9,511,633 | |||
Land | 357,817 | ||
Construction-in-progress | 87,664 | ||
9,957,114 | |||
OTHER ASSETS: | |||
Accounts receivable - members' | 1,257,450 | ||
- related companies | 635,875 | ||
Note receivable | 100,000 | ||
Other | 72,983 | ||
Total other assets | 2,066,308 | ||
Total assets | $ | 31,401,020 |
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HERITAGE PLASTICS, INC. AND RELATED COMPANIES | |||
CONSOLIDATED BALANCE SHEET | |||
AS OF DECEMBER 31, 2010 | |||
LIABILITIES, SHAREHOLDERS' AND MEMBERS' EQUITY | |||
CURRENT LIABILITIES: | |||
Accounts payable - trade | $ | 7,014,731 | |
Notes payable - line-of-credit | 4,911,341 | ||
Current portion of long-term debt | 957,373 | ||
Accrued commissions | 378,263 | ||
Accrued sales rebates | 841,341 | ||
Accrued wages | 222,200 | ||
Accrued other | 67,020 | ||
Total current liabilities | 14,392,269 | ||
LONG-TERM DEBT, net of current portion | 10,138,110 | ||
SHAREHOLDERS' AND MEMBERS' EQUITY: | |||
Common stock - no par value, 103,750 shares | |||
authorized, 2,850 shares issued and 2,450 | |||
shares outstanding | 212,505 | ||
Paid-in capital | 3,420,940 | ||
Treasury stock, 400 shares, at cost | (3,750,000 | ) | |
Retained earnings | 6,573,430 | ||
Members' equity | 413,766 | ||
Total shareholders' and members' equity | 6,870,641 | ||
Total liabilities and shareholders' and members' equity | $ | 31,401,020 |
4
HERITAGE PLASTICS, INC. AND RELATED COMPANIES | |||
CONSOLIDATED STATEMENT OF INCOME | |||
FOR THE YEAR ENDED DECEMBER 31, 2010 | |||
NET SALES | $ | 54,249,329 | |
COST OF GOODS SOLD | 45,746,001 | ||
Gross margin | 8,503,328 | ||
OPERATING EXPENSES: | |||
Selling/customer service | 324,485 | ||
Administration | 3,969,523 | ||
Shipping/receiving | 377,271 | ||
Interest expense | 544,773 | ||
Total operating expenses | 5,216,052 | ||
Net operating income | 3,287,276 | ||
OTHER INCOME | 514,138 | ||
OTHER EXPENSES | (253,141 | ) | |
Net income | $ | 3,548,273 |
5
HERITAGE PLASTICS, INC. AND RELATED COMPANIES | |||
CONSOLIDATED STATEMENT OF RETAINED EARNINGS AND MEMBERS' EQUITY | |||
FOR THE YEAR ENDED DECEMBER 31, 2010 | |||
RETAINED EARNINGS AND MEMBERS' EQUITY, beginning as previously stated | $ | 5,289,720 | |
PRIOR PERIOD ADJUSTMENTS | (1,474,113 | ) | |
RETAINED EARNINGS AND MEMBERS' EQUITY, beginning as adjusted | 3,815,607 | ||
NET INCOME | 3,548,273 | ||
DISTRIBUTIONS | (376,684 | ) | |
RETAINED EARNINGS AND MEMBERS' EQUITY, end of year | $ | 6,987,196 |
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HERITAGE PLASTICS, INC. AND RELATED COMPANIES | |||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||
FOR THE YEAR ENDED DECEMBER 31, 2010 | |||
CASH FLOW FROM OPERATING ACTIVITIES: | |||
Net income | $ | 3,548,273 | |
Adjustments to reconcile net income to net cash | |||
provided by operating activities: | |||
Depreciation and amortization | 995,952 | ||
(Increase) decrease in certain assets: | |||
Accounts receivable | (2,036,867 | ) | |
Inventories | (1,954,230 | ) | |
Prepaid expenses | 121,786 | ||
Accounts receivable - related companies | 284,204 | ||
Other | 14,263 | ||
Increase (decrease) in certain liabilities: | |||
Accounts payable | 1,387,905 | ||
Accrued expenses | 299,117 | ||
Net cash from operating activities | 2,660,403 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Purchase of property and equipment | (224,423 | ) | |
Increase in deposits and other | (87,664 | ) | |
Net cash from investing activities | (312,087 | ) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Net borrowings (payments) under line-of-credit agreements | (609,038 | ) | |
Payments on long-term debt | (1,042,171 | ) | |
Distributions to shareholders and members | (376,684 | ) | |
Net cash from financing activities | (2,027,893 | ) | |
Net increase in cash | 320,423 | ||
CASH, beginning of year | 307,157 | ||
CASH, end of year | $ | 627,580 |
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HERITAGE PLASTICS, INC. AND RELATED COMPANIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Heritage Plastics, Inc., Heritage Plastics South, Inc., Heritage Plastics Central, Inc., Heritage Plastics West, Inc., Heritage Plastics Molding, Inc. (the “Operating Companies”) manufacture PVC plastic pipe for a broad-based mix of industry and customers. The Operating Companies have production plants in Ohio, Florida, Texas and Utah. The Operating Companies grant credit to customers throughout the nation. Consequently, the Company’s ability to collect the amounts due from customers is affected by economic fluctuations in the industry.
Carroll Rentals, LLC, Florida Rentals, LLC, and Milford Rentals, LLC (the “LLC’s”) are engaged in the rental of real estate in Ohio, Florida and Utah.
Principles of Consolidation
The consolidated financial statements include the amounts of Heritage Plastics, Inc., Heritages Plastics South, Heritage Plastics Central, Heritage Plastics West and Heritage Plastics Moldings, all operating companies related through common ownership. In addition, Carroll Rentals, LLC, Florida Rentals, LLC and Milford Rentals, LLC various interest real estate companies are included. All significant intercompany transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue from sales at the time of shipment. Freight costs are included in cost of goods sold.
Trade Accounts Receivable
Trade receivables are carried at original invoice amount, less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, they have concluded that a $661,879 allowance for doubtful accounts was necessary at December 31, 2010.
A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days. Interest is charged on trade receivables that are outstanding for more than 30 days and is recognized as it is charged. After the receivable becomes past due, it is on nonaccrual status and accrual of interest is suspended.
See independent auditor’s report.
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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories consist of raw materials and finished goods and are stated at the lower of cost (first-in, first-out) or market value.
Inventories as of December 31, 2010 consisted of the following components:
Raw materials | $ | 2,589,179 | |
Supplies | 300,536 | ||
Finished goods | 5,871,305 | ||
Total inventories | $ | 8,761,020 |
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed primarily on the straight-line method over estimated useful lives.
Income Taxes
The Operating Companies, with the consent of their stockholders, have elected to have their income taxed as S corporations under Section 1362 of the Internal Revenue Code. As such, the Operating Companies do not pay corporate income taxes and are not allowed net operating tax loss carrybacks or carryovers as deductions. Instead, the stockholders include their proportionate share of the Operating Companies’ taxable income or loss in their individual income tax returns.
The LLC’s are limited liability companies, and in lieu of income taxes, the members of the limited liability companies are taxed on their proportionate share of the taxable income.
The entities adopted new guidance on accounting for uncertainty in income taxes effective for the year ended December 31, 2009. Management evaluated the entities’ tax positions and concluded that the entities had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. With few exceptions, the entities are no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2007.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Advertising
Advertising costs are expensed as incurred and amounted to approximately $15,000 for the year ended December 31, 2010.
See independent auditor’s report.
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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation
Depreciation of property and equipment are provided by use of straight line method over the following useful lives:
Buildings | 10 – 25 years |
Machinery and Equipment | 5 – 10 years |
Office Furniture and Equipment | 3 – 10 years |
Leasehold Improvements | 15 years |
Concentration of Credit Risk
For purposes of classification on the consolidated balance sheet and consolidated statement of cash flows, cash and cash equivalents include cash on hand and deposits in banks. The Company maintains cash balances in various financial institutions. At various times during the year, those balances may exceed the amount insured by the FDIC.
Subsequent Events
In evaluating events that may have a material impact on the financial statements, the Company has considered activities through May 6, 2011, the date the financial statements were originally available to be released. Additional consideration has been given to events through November 8, 2013, the date at which these re-issued financial statements were available to be released, and such events are discussed in Note 8.
NOTE 2: NOTES PAYABLE
Heritage Plastics, Inc. maintains a $3,500,000 line-of-credit with Huntington Bank secured by equipment, inventory and accounts receivable which bears interest at the rate of LIBOR plus 2.5 percent (2.76% percent at December 31, 2010). At December 31, 2010 there was no outstanding balance.
Heritage Plastics South, Inc. maintains a $3,500,000 line-of-credit with Huntington Bank secured by equipment, inventory and accounts receivable which bears interest at the rate of LIBOR plus 2.5 percent (2.76% percent at December 31, 2010). At December 31, 2010 the outstanding balance was $1,124,017.
Heritage Plastics Central, Inc. maintains a $5,000,000 line-of-credit with Huntington Bank secured by equipment, inventory and accounts receivable which bears interest at the rate of LIBOR plus 2.5 percent (2.76% percent at December 31, 2010). At December 31, 2010 the outstanding balance was $2,088,736.
Heritage Plastics West, Inc. maintains a $3,000,000 line-of-credit with Huntington Bank secured by equipment, inventory and accounts receivable which bears interest at the rate of LIBOR plus 2.5 percent (2.76% percent at December 31, 2010). At December 31, 2010 the outstanding balance was $1,698,588.
Heritage Plastics Molding, Inc. maintains a $500,000 line-of-credit with Huntington Bank secured by equipment, inventory and accounts receivable which bears interest at the rate of LIBOR plus 2.5 percent (2.76% percent at December 31, 2010). At December 31, 2010 there was no outstanding balance.
See independent auditor’s report.
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NOTE 2: NOTES PAYABLE (Continued)
The lines-of-credit and long-term debt (described in Note 3) contain covenants for debt coverage and minimum net worth. The entities are not in compliance with all requirements for 2010. The bank has waived the covenant violations for the 2010 year end.
NOTE 3: LONG-TERM DEBT
The following is a summary of long-term debt as of December 31, 2010:
Note payable to bank bearing interest at LIBOR plus 2.50% (2.76% for December 2010), payable in monthly installments of $9,045 including interest through May 2013 with final balloon payment, collateralized by property and assets of related entities. | $ | 765,268 | |
Note payable to bank bearing interest at LIBOR plus 2.50% (2.76% for December 2010), payable in monthly installments of $15,459 including interest through May 2013 with final balloon payment, collateralized by property and assets of related entities. | 1,307,483 | ||
Note payable to bank bearing interest at LIBOR plus 2.50% (2.76% for December 2010), payable in monthly installments of $11,303 including interest through May 2013 with final balloon payment, collateralized by property and assets of related entities. | 956,564 | ||
Note payable to bank bearing interest at LIBOR plus 1.85% (2.76% for December 2010), payable in monthly installments of $10,060 including interest through November 2013 with final balloon payment, collateralized by property and assets of related entities. | 810,224 | ||
Note payable to bank bearing interest at LIBOR plus 2.50% (2.76% for December 2010), payable in monthly installments of $4,521 including interest through May 2013 with final balloon payment, collateralized by property and assets of related entities | 382,630 | ||
Note payable to bank bearing interest at LIBOR plus 2.50% (2.76% for December 2010), payable in monthly installments of $30,393 including interest through November 2013 with final balloon payment, collateralized by property and assets of related entities. | 3,185,858 | ||
Note payable to bank bearing interest at LIBOR plus 2.50% (2.76% for December 2010), payable in monthly installments of $17,379 through June 2013 with final balloon payment, collateralized by property and assets of related entities. | 3,128,378 | ||
Note payable to bank bearing interest at 8%, payable in monthly installments of $7,745 through December 2012, collateralized by assets of related entities. | 293,446 | ||
Note payable to bank bearing interest at 8.75%, payable in monthly installments of $3,522 through March 2015, collateralized by property and assets of related entities. | 150,632 | ||
Note payable to Officers. Due on demand. | 115,000 | ||
11,095,483 | |||
Less: principal due within one year | (957,373 | ) | |
$ | 10,138,110 |
See independent auditor’s report.
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NOTE 3: LONG-TERM DEBT (Continued)
Future scheduled maturities of long-term debt are as follows:
Year ending December 31, 2011 | $ | 957,373 | |
2012 | 1,030,188 | ||
2013 | 8,943,044 | ||
2014 | 39,464 | ||
2015 | 10,414 | ||
Thereafter | 115,000 | ||
$ | 11,095,483 |
Interest paid amounted to $544,773 in 2010.
NOTE 4: EMPLOYEE BENEFIT PLANS
The Operating Companies sponsor a 401(k) plan which covers all eligible employees who meet minimum age and length of service requirements. Contributions to the plan are determined at the discretion of the board of directors. No contributions were made for the year ending December 31, 2010.
NOTE 5: FINANCIAL INSTRUMENTS
In the ordinary course of business with vendors, the Operating Companies are contingently liable for performance under standby letters of credit which totaled $105,000 at December 31, 2010. Management does not expect any material losses from these instruments since performance is not likely to be required.
See independent auditor’s report.
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NOTE 6: DESCRIPTION OF LEASING ARRANGEMENTS
Heritage Plastics Central, Inc. leases the following facility from an affiliated company:
Weatherford, Texas
The Company leases land and a building from a related entity, Loan Star Rentals, LLC, under a ten-year agreement expiring in 2012. The lease is treated as an operating lease for financial statement purposes. The Company also leases equipment under month-to-month operating lease agreements. Charges to operations amounted to $300,000 at December 31, 2010.
Following is a summary of future minimum lease payments under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 2010:
Year ending | 2011 | $ | 355,200 | |
2012 | 355,200 |
Heritage Plastics, Inc., Heritage Plastics South, Inc. and Heritage Plastics Central, Inc. lease facilities from related companies. Revenues and expenses have been eliminated in the consolidated statements. There are no formal lease agreements in place between the operating companies and real estate entities.
NOTE 7: PRIOR PERIOD ADJUSTMENT
During 2010, it was discovered that accounts payable as of December 31, 2009 was understated by $1,474,113. The total of the prior period error correction of $1,474,113 has been shown as an adjustment to opening retained earnings.
NOTE 8: SUBSEQUENT EVENT
For purposes of these re-issued financial statements, the Company has re-evaluated subsequent events from the date of the most recently audited financial statements, December 31, 2012. During 2013, Heritage entered into an agreement to sell substantially all the assets of Heritage and related companies. The transaction closed on September 17, 2013.
See independent auditor’s report.
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