-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ORzgU8EkOQLxEGdlItT6xzwM+Eq9civtwrX2cyPg5OGMJeN8jhwsBtIuF7SarSbn QS9kFSuRCBodutbQG2dwbg== 0001029869-99-000444.txt : 19990419 0001029869-99-000444.hdr.sgml : 19990419 ACCESSION NUMBER: 0001029869-99-000444 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980611 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENRAD INC CENTRAL INDEX KEY: 0000040972 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 041360950 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-08045 FILM NUMBER: 99595974 BUSINESS ADDRESS: STREET 1: 7 TECHNOLOGY PARK DR CITY: WESTFORD STATE: MA ZIP: 01886-0033 BUSINESS PHONE: 9785897000 MAIL ADDRESS: STREET 1: 7 TECHNOLOGY PARK DRIVE CITY: WESTFORD STATE: MA ZIP: 01886-0033 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL RADIO CO DATE OF NAME CHANGE: 19760210 8-K/A 1 CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K/A ---------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 June 11, 1998 Date of Report (Date of earliest event reported) GENRAD, INC. (Exact name of registrant as specified in its charter) Massachusetts 001-08045 04-1360950 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 7 Technology Park Drive Westford, MA 01886-0033 (978) 589-7000 (Address of principal executive offices, including zip code and telephone number) N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Restatement of Financial Statements and Changes to Certain Information The undersigned registrant hereby amends in its entirety Item 7(b) of its Current Report on Form 8-K/A as of June 11, 1998. In April 1998, GenRad, Inc. ("the Company") acquired Industrial Computer Corporation ("ICC") for approximately $38.2 million in a business combination accounted for as a purchase. The Company allocated $21.7 million of the purchase price to acquired in-process research and development. Subsequent to the acquisition, in a letter dated September 9, 1998 to the American Institute of Certified Public Accountants, the Chief Accountant of the Securities and Exchange Commission ("the SEC") reiterated the views of the staff of the SEC ("the Staff") on certain appraisal practices employed in the determination of the fair value of acquired in-process research and development and other intangible assets resulting from purchase business combinations. The Company has had discussions with the Staff concerning the valuation of acquired in-process research and development and other intangible assets resulting from its acquisition of ICC, and as a result of these discussions, the Company has implemented a valuation methodology suggested by the SEC. The Company has restated its previously issued results to reflect the discussions with the Staff and to apply the appropriate guidance and policies. The purchase price of ICC has been allocated by the Company based upon the application of the recent guidance and, accordingly, the financial statements in this Current Report on Form 8-K/A have been restated. After applying the appropriate guidance and policy, the allocation of the ICC purchase price was changed for acquired in-process research and development from $21.7 million to $8.4 million and for developed technology from $4.9 million to $11.4 million, resulting in a change to goodwill from $10.2 million to $17.0 million. THIS FORM 8-K HAS BEEN AMENDED TO INCLUDE THE FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION OMITTED FROM THE INITIAL REPORT ON FORM 8-K FILED ON JUNE 22, 1998. ITEM 5. OTHER EVENTS. On June 11, 1998, GenRad, Inc. (the "Company") announced that its Board of Directors has approved a stock repurchase program of up to 2,500,000 shares, or approximately 8% of the issued and outstanding Common Stock of the Company. Commencement of the stock repurchase program will require the Company to account for the acquisition of Industrial Computer Corporation ("ICC"), completed on April 7, 1998, as a purchase rather than a pooling of interests. The Company also announced that as a result of this and other initiatives, the Company will record a one-time non-recurring charge of approximately $40,000,000 in the fiscal quarter which will end July 4, 1998. These charges will include a write-off of in-process research and development at ICC; a goodwill impairment loss relating to certain other past acquisitions of the Company; and anticipated severance costs of a reduction in the work force of approximately 10% during the fiscal quarter. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of business acquired. Report of Independent Accountants To the Board of Directors and Stockholders of Industrial Computer Corporation In our opinion, the accompanying balance sheet and the related statements of operations, of changes in stockholders' equity (deficit) and of cash flows present fairly, in all material respects, the financial position of Industrial Computer Corporation at December 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts July 2, 1998 Industrial Computer Corporation Balance Sheet - ------------------------------------------------------------------------------
December 31, March 31, 1997 1998 Assets (Unaudited) Current assets: Cash and cash equivalents $ 552,416 $ 625,682 Accounts receivable, less allowance of $140,705 at December 31, 1997 and March 31, 1998 2,604,064 2,951,895 Prepaid expenses and other current assets 32,187 21,281 ------------- -------------- Total current assets 3,188,667 3,598,858 Fixed assets 299,885 341,356 Capitalized software development costs 388,151 321,384 Notes receivable from related parties 63,227 64,317 Other assets 10,000 10,000 ------------- -------------- Total assets $ 3,949,930 $ 4,335,915 ------------- -------------- Liabilities and Stockholders' Equity (Deficit) Current liabilities: Current portion of notes payable $ 18,280 $ 24,825 Accounts payable 227,120 498,156 Accrued expenses 1,042,450 1,042,450 Accrued compensation 339,982 58,578 Income taxes payable 224,037 197,837 Deferred revenue 1,044,252 1,192,377 ------------- -------------- Total current liabilities 2,896,121 3,014,223 ------------- -------------- Long-term liabilities Notes payable 43,427 28,651 Deferred compensation 1,047,795 1,343,992 Other long-term liabilities 36,802 37,886 ------------- -------------- Total long-term liabilities 1,128,024 1,410,529 ------------- -------------- Commitments and Contingencies Stockholders' Deficit Common stock, $0.028572 par value; 100,000 shares authorized; 93,973 shares issued and 86,873 shares outstanding at December 31, 1997 and March 31, 1998 2,685 2,685 Less: Treasury stock, 7,100 shares at December 31, 1997 and March 31, 1998 (39,994) (39,994) Additional paid-in capital 130,130 130,130 Accumulated Deficit (165,047) (179,969) Unrealized loss on available-for-sale securities (1,989) (1,689) ------------- -------------- Total Stockholders' Deficit (74,215) (88,837) ------------- -------------- Total Liabilities and Stockholders' Deficit $ 3,949,930 $ 4,335,915 ------------- --------------
The accompanying notes are an integral part of these financial statements. Industrial Computer Corporation Statement of Operations - ------------------------------------------------------------------------------
Three Months Three Months Year ended Ended Ended December 31, March 31, March 31, 1997 1998 1997 (Unaudited) (Unaudited) Sales: Sales of products $ 4,159,201 $ 977,680 $ 1,223,218 Sales of services 5,924,217 1,870,556 1,316,131 -------------- ------------- -------------- Total sales 10,083,418 2,848,236 2,539,349 Cost of sales: Cost of products sold 931,381 297,800 486,691 Cost of services sold 3,241,997 713,991 663,170 -------------- ------------- -------------- Total cost of sales 4,173,378 1,011,791 1,149,861 Gross margin 5,910,040 1,836,445 1,389,488 -------------- ------------- -------------- Selling, general and administrative 3,288,989 1,249,204 743,817 Research and development 2,392,539 615,824 506,487 -------------- ------------- -------------- Total operating expenses 5,681,528 1,865,028 1,250,304 -------------- ------------- -------------- Operating income (loss) 228,512 (28,583) 139,184 -------------- ------------- -------------- Other (expense) income Interest, net (1,125) 13,661 (8,222) Other, net 740 - 208 -------------- ------------- -------------- Total other (expense) income (385) 13,661 (8,014) Income (loss) before income taxes 228,127 (14,922) 131,170 Provision for income taxes 343,710 - 197,629 -------------- ------------- -------------- Net loss $ (115,583) $ (14,922) $ (66,459) -------------- ------------- -------------- Basic and diluted loss per common share (1.33) (0.17) (0.77) Weighted average common shares outstanding 86,873 86,873 86,873
The accompanying notes are an integral part of these financial statements. Industrial Computer Corporation Statement of Changes in Stockholders' Equity (Deficit) - ------------------------------------------------------------------------------
Additional Common Stock Treasury Paid-in Shares Amount Stock Capital Balance at December 31, 1996 86,873 $ 2,685 $ (39,994) $ 130,130 Net loss - - - - ---------------- --------------- ---------------- ---------------- Balance at December 31, 1997 86,873 2,685 (39,994) 130,130 Net loss (unaudited) - - - - ---------------- --------------- ---------------- ---------------- Balance at March 31, 1998 (unaudited) 86,873 $ 2,685 $ (39,994) $ 130,130 ---------------- --------------- ---------------- ---------------- Unrealized loss on Accumulated investments deficit held for sale Total Balance at December 31, 1996 $ (49,464) $ (1,901) $ 41,456 Net loss (115,583) (88) (115,671) --------------- ---------------- ---------------- Balance at December 31, 1997 (165,047) (1,989) (74,215) Net loss (unaudited) (14,922) 300 (14,622) --------------- ---------------- ---------------- Balance at March 31, 1998 (unaudited) $ (179,969) $ (1,689) $ (88,837) --------------- ---------------- ----------------
The accompanying notes are an integral part of these financial statements. Industrial Computer Corporation Statement of Cash Flows - ------------------------------------------------------------------------------
Three Months Three Months Year ended Ended Ended December 31, March 31, March 31, 1997 1998 1997 (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $ (115,583) $ (14,922) $ (66,459) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 324,342 91,333 72,004 Bad debt expense 91,850 - 76,145 Changes in assets and liabilities: (Increase) decrease in accounts receivable (1,228,793) (347,831) 42,976 Decrease (increase) in other, net 15,595 12,290 (20,463) (Decrease) increase in accounts payable (12,800) 271,036 5,178 Increase in accrued expenses 405,734 - 80,396 Increase (decrease) in accrued compensation 234,797 (281,404) (22,195) Increase (decrease) in income taxes payable 180,883 (26,200) 190,843 Increase in deferred revenue 355,776 148,125 259,674 Increase in deferred compensation 623,247 296,197 110,000 --------------- --------------- ---------------- Net cash provided by operating activities 875,048 148,624 728,099 --------------- --------------- ---------------- Cash flows from investing activities: Purchases of fixed assets (155,857) (66,037) (70,373) Capitalized software development costs (138,100) - (34,525) Notes issued to officers (58,222) (1,090) (601) --------------- --------------- ---------------- Net cash used for investing activities (352,179) (67,127) (105,499) --------------- --------------- ---------------- Cash flows from financing activities: Proceeds from issuance of long term debt 19,635 - 19,635 Principal payments on long term debt (186,376) (8,231) (9,912) --------------- --------------- ---------------- Net cash (used for) provided by financing activities (166,741) (8,231) 9,723 --------------- --------------- ---------------- Net increase in cash and cash equivalents 356,128 73,266 632,323 Cash and cash equivalents, beginning of period 196,288 552,416 196,288 --------------- --------------- ---------------- Cash and cash equivalents, end of period 552,416 625,682 828,611 --------------- --------------- ----------------
The accompanying notes are an integral part of these financial statements. Industrial Computer Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ 1. Nature of Business Industrial Computer Corporation ("ICC" or the "Company") was incorporated as a Georgia corporation in 1980. The Company develops and markets real-time manufacturing execution systems for discrete manufacturing environments. With respect to the financial information for the interim periods included in this report, which is unaudited, the management of the Company believes that all adjustments necessary for a fair presentation of the results for such interim periods have been included. All adjustments are of a normal and recurring nature. The results of any interim period are not necessarily indicative of the results for the entire year. 2. Summary of Significant Accounting Policies 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 the 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. Cash, Cash Equivalents, and Marketable Securities All highly liquid investments with an initial maturity of three months or less are considered to be cash equivalents. The Company invests excess cash primarily in money market funds of major financial institutions. Accordingly, these investments are subject to minimal credit and market risk. At December 31, 1997, the Company's cash equivalents are classified as available-for-sale and include $517,884 of money market funds. These investments are stated at cost plus accrued interest, which approximates fair market value. At December 31, 1997, the Company also holds corporate equity securities with an original cost of $2,364 and a market value of $375, which are included in prepaid expenses and other current assets on the balance sheet. These securities are classified as available-for-sale securities and, accordingly, the unrealized loss has been included as a component of stockholder's equity. Accounts Receivable, Concentration of Credit Risk, and Significant Customers Financial instruments which potentially expose the Company to concentrations of credit risk include accounts receivable. The Company does not require collateral but closely monitors amounts receivable from customers. The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management expectations. Revenue of approximately $1,835,000 (18%), $1,489,000 (15%), $1,299,000 (13%), and $1,273,000 (13%) was attributable to four separate customers in fiscal 1997. Fixed Assets Fixed assets are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Maintenance and repair expenditures are charged to expense as incurred. Industrial Computer Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ Capitalized Software Development Costs Costs associated with the development of computer software are expensed as incurred prior to the establishment of technological feasibility (as defined by Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed"). Costs incurred subsequent to the establishment of technological feasibility and prior to the general release of the products are capitalized. Capitalized software development costs are amortized to cost of sales over the estimated useful life of the related products, generally three years. During the year ended December 31, 1997, the Company capitalized $138,094 of software development costs. At December 31, 1997, net software development costs were $388,151, net of accumulated amortization of $413,033. Amortization expense for the year ended December 31, 1997 was $221,029. Revenue Recognition Revenue from software licenses is recognized upon shipment provided that no significant Company obligations or uncertainties remain and collection of the related receivable is probable. Service revenue is recognized ratably over the period the services are performed for post-contract customer support or as services are performed for implementation contracts and training. Payments received in advance of revenue recognition are recorded as deferred revenue. 3. Net Income per Common and Common Equivalent Share In February, 1997, Statement of Financial Accounting Standard No. 128, "Earnings per Share" (SFAS No. 128), was issued which supercedes the old methodology for calculation of EPS, as promulgated under APB Opinion No. 15. SFAS No. 128 requires presentation of "basic" earnings per share (which excludes dilution as a result of unexercised stock options and convertible subordinated debentures) and "diluted" earnings per share. In the absence of dilutive securities, the Company's basic and diluted earnings per share are the same for all periods. 2 Industrial Computer Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ 4. Fixed Assets Fixed assets at December 31, 1997 consist of the following: Estimated useful life December 31, (years) 1997 Computer equipment 5 $ 690,927 Furniture and fixtures 7 75,430 Office equipment 7 102,707 Leasehold improvements 10 4,827 ------------- 873,891 Less accumulated depreciation 574,006 ------------- $ 299,885 ------------- Depreciation expense for the year ended December 31, 1997 was $103,313. 5. Notes Receivable From Related Parties Notes receivable from related parties at December 31, 1997 consist of two notes in the amounts of $49,520 and $13,707 due from two shareholders who are also officers of the Company. Both notes bear interest at 7.11% and are due on July 10, 2007 and, accordingly, are classified as non-current assets at December 31, 1997. 6. Phantom Stock Plan On December 15, 1993, the Company adopted the Industrial Computer Corporation Phantom Stock Plan (the "Plan"). The purpose of the Plan is to provide deferred compensation to key employees of ICC. Under the terms of the Plan, the Board of Directors has the authority to grant performance units at an initial base value determined in accordance with the Plan. All units vest immediately upon grant. The units are redeemable in cash upon sale of all of the Company's common stock to a third party or the issuance by the Company of stock for public sale. Upon these events, the units are redeemable at the third party purchase price or initial public offering price per share less the initial base value determined at the grant date. At December 31, 1997, there were 3,485 performance units outstanding. The Company recorded $623,247 of compensation expense during fiscal 1997 related to these units, resulting in total deferred compensation of $1,047,795 at December 31, 1997. All outstanding units were redeemed in April 1998 in connection with the sale of all of the Company's common stock as described in Note 12. 3 Industrial Computer Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ 7. Accrued Expenses Accrued expenses at December 31, 1997 consist of the following: Sales and use tax payable $ 1,000,000 Other 42,450 ----------- $ 1,042,450 ----------- 8. Notes Payable and Line of Credit The Company has outstanding promissory notes for the purchase of computer equipment and furniture and fixtures. The principal of the promissory notes is repayable in monthly installments, including interest at rates ranging from 9.25% to 9.75%. At December 31, 1997, the outstanding balance of the promissory notes was $61,707, of which $18,280 is classified as current. Annual maturities for the five years subsequent to December 31, 1997 are $18,280 for 1998, $32,087 for 1999, $10,609 for 2000, and $731 for 2001. The Company has a $500,000 credit facility. The credit facility expired on April 30, 1998 and interest is payable at 9.25%. There were no borrowings outstanding on the line of credit at December 31, 1997. Interest paid amounted to $17,823 for the year ended December 31, 1997. 9. Income Taxes The components of the provision for income taxes for the year ended December 31, 1997 are as follows: Current tax provision Federal $ 259,481 State 84,229 ------------ $ 343,710 ------------ 4 Industrial Computer Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ The Company's effective income tax rate varies from the federal statutory income tax rate for the year ended December 31, 1997 as follows: Federal income tax at statutory rate $ 77,563 State income taxes, net of federal benefit 55,591 Non-deductible meals and entertainment 8,654 Increase in valuation allowance 411,800 Utilization of research and development credits (209,898) ---------- $ 343,710 ---------- Deferred tax assets (liabilities) at December 31, 1997 consist of the following: Allowance for doubtful accounts $ 76,000 Accrued expenses 380,000 Deferred compensation 398,162 Capitalized software development costs (147,497) ----------- Net deferred tax assets 706,665 Valuation allowance (706,665) ----------- Net deferred tax assets $ - ----------- Deferred income taxes reflect the effect of temporary differences between the tax basis of assets and liabilities and the reported amounts of assets and liabilities for financial reporting purposes, net of any valuation allowance, under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The Company has provided a valuation allowance for the full amount of its net deferred tax assets since the Company believes that it is more likely than not that any future benefit from deductible temporary differences will not be realized. 10. 401(k) Savings Plan The Company has established a retirement savings plan under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers substantially all employees of the Company who meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company has not made any contributions to the 401(k) Plan through December 31, 1997. 5 Industrial Computer Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ 11. Commitments and Contingencies The Company leases its office space and certain office equipment under noncancelable operating leases. Total rent expense under these operating leases was approximately $483,514 for the year ended December 31, 1997. Future minimum lease commitments at December 31, 1997 are as follows: Year ending December 31, 1998 $ 467,788 1999 447,921 2000 449,248 2001 75,035 ---------- $ 1,439,992 ----------- The Company has granted exclusive rights to a third party to license its products in certain geographic territories as defined in the agreement. In connection with this arrangement, the Company is required to pay royalties on certain sales made by this third party. 12. Subsequent Event On April 7, 1998, the Company was acquired by GenRad, Inc. ("GenRad") pursuant to an Agreement and Plan of Merger (the "Merger Agreement"). Under the terms of the Merger Agreement, GenRad acquired all of the outstanding voting common stock of the Company in exchange for 1,237,917 shares of GenRad common stock. 6 (b) Pro forma financial information. GENRAD, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations that actually would have been realized had GenRad, Inc. ("GenRad") and Industrial Computer Corporation ("ICC") been a combined company during the specified periods. Additionally, they are not indicative of the results of future combined operations. The following pro forma combined financial statements give effect to the business combination of GenRad and ICC using the purchase method of accounting. The pro forma combined financial statements utilize the audited financial statements of GenRad for the fiscal year ended January 3, 1998 and of ICC for the fiscal year ended December 31, 1997, and the unaudited financial statements of GenRad for the three months ended April 4, 1998 and of ICC for the three months ended March 31, 1998. The pro forma combined statements of operation assume that the acquisition took place as of the beginning of the periods presented. The pro forma combined balance sheet assumes that the acquisition took place as of the end of the interim period. The unaudited pro forma combined financial statements have been prepared by management and should be read in conjunction with the historical financial statements of GenRad and ICC. The unaudited pro forma combined financial statements are based on certain assumptions and preliminary estimates which may be subject to change. GenRad, Inc. and Industrial Computer Corporation UNAUDITED PRO FORMA COMBINED BALANCE SHEET (In thousands, except share and per share amounts) (Unaudited)
Three Months Ended ----------------------------------------------------------------- GenRad ICC April 4, March 31, 1998 1998 Debit Credit Pro Forma -------- -------- --------- ------ -------- Assets Cash and equivalents $ 16,299 $ 626 $ 16,925 Accounts receivable, net 64,944 2,952 67,896 Inventories 37,721 - 37,721 Other current assets 4,967 21 4,988 -------- -------- -------- Total current assets 123,931 3,599 127,530 -------- -------- -------- Property, plant and equipment 36,080 341 36,421 Deferred tax asset 15,368 - 15,368 Intangible assets 7,855 321 (5) 30,041 (4) 321 37,896 Other assets 1,419 75 1,494 -------- -------- -------- $184,653 $ 4,336 $218,709 ======== ======== ======== Liabilities and Stockholders' Equity Current Liabilities: Trade accounts payable $ 11,967 $ 498 $ 12,465 Accrued liabilities 11,817 2,234 (1) 1,455 15,506 Accrued compensation and employee benefits 4,461 59 4,520 Income taxes payable 904 198 1,102 Current portion of long-term debt 2,440 25 2,465 -------- -------- -------- Total current liabilities 31,589 3,014 36,058 -------- -------- -------- Long-term Liabilities: Long-term debt 7,931 29 7,960 Accrued pensions and benefits 10,869 1,344 12,213 Future lease costs of unused facilities 4,111 - 4,111 Other long-term liabilities 4,209 38 4,247 -------- -------- -------- Total long-term liabilities 27,120 1,411 28,531 -------- -------- -------- Stockholders' Equity Common stock 27,592 3 (2) 3 (2) 1,238 28,830 Treasury stock - (40) (2) 40 - Additional paid-in capital 174,112 130 (2) 130 (2) 35,358 209,470 Accumulated deficit (73,583) (180)(3) 8,420 (2) 180 (82,003) Cumulative translation adjustment and unrealized loss on available-for-sale securities (2,177) (2) (2) 2 (2,177) -------- -------- -------- Total stockholders' equity 125,944 (89) 154,120 -------- -------- -------- $184,653 $ 4,336 $218,709 ======== ======== ======== -------- -------- $ 38,594 $ 38,594 ======== ========
The accompanying notes are an integral part of these pro forma combined financial statements. GenRad, Inc. and Industrial Computer Corporation UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (In thousands, except share and per share amounts) (Unaudited)
Three months ended ------------------------------------------------------------------- GenRad ICC April 4, March 31, 1998 1998 Debit Credit Pro Forma ---------- -------- ----- ------ ------------ Sales: Sales of products $ 35,590 $ 978 $ 36,568 Sales of services 13,484 1,870 15,354 ---------- -------- ---------- Total sales 49,074 2,848 51,922 ---------- -------- ---------- Cost of Sales: Cost of products sold 15,100 298 406 (4) 67 15,737 Cost of services sold 8,702 714 9,416 ---------- -------- ---------- Total cost of sales 23,802 1,012 25,153 ---------- -------- ---------- Gross margin 25,272 1,836 26,769 Selling, general and administrative 18,434 1,248 (5) 566 20,248 Research and development 4,919 616 5,535 ---------- -------- ---------- Total operating expenses 23,353 1,864 25,783 ---------- -------- ---------- Operating income 1,919 (28) 986 Other income (expenses): Interest income 217 13 230 Interest expense (326) - (326) Other, net (311) - (311) ---------- -------- ---------- Total other (expenses) income (420) 13 (407) ---------- -------- ---------- Income before taxes 1,499 (15) 579 Income tax (benefit) expense (7,410) - (7,410) ---------- -------- ---------- Net Income $ 8,909 $ (15) $ 7,989 ========== ======== ========== Net income per common and common equivalent shares: Basic $ 0.33 $ (0.17) $ 0.28 ========== ======== ========== Diluted $ 0.30 $ (0.17) $ 0.26 ========== ======== ========== Weighted average common and common equivalent shares used in computing per share amounts: Basic 27,395,000 87,000 28,633,000 ========== ======== ========== Diluted 29,621,000 87,000 30,859,000 ========== ======== ==========
The accompanying notes are an integral part of these pro forma combined financial statements. GenRad, Inc. and Industrial Computer Corporation UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (In thousands, except share and per share amounts) (Unaudited)
Twelve months ended --------------------------------------------------------------------------- GenRad ICC January 3, December 31, 1998 1997 Debit Credit Pro Forma ------------ ----------- ----- ------ ------------ Sales: Sales of products $ 179,672 $ 4,159 $ 183,831 Sales of services 57,089 5,924 63,013 ---------- ------- ---------- Total sales 236,761 10,083 246,844 ---------- ------- ---------- Cost of Sales: Cost of products sold 78,515 931 1,624 (5) 81,070 Cost of services sold 31,482 3,242 (4) 83 34,641 ---------- ------- ---------- Total cost of sales 109,997 4,173 115,711 ---------- ------- ---------- Gross margin 126,764 5,910 131,133 Selling, general and administrative 68,376 3,289 (5) 2,264 73,929 Research and development 19,902 2,393 22,295 ---------- ------- ---------- Total operating expenses 88,278 5,682 96,224 ---------- ------- ---------- Operating income 38,486 228 34,909 Other income (expenses): Interest income 530 - 530 Interest expense (793) (1) (794) Other, net (477) 1 (476) ---------- ------- ---------- Total other (expenses) income (740) - (740) ---------- ------- ---------- Income before taxes 37,746 228 34,169 Income tax (benefit) expense (3,549) 344 (3,205) ---------- ------- ---------- Net Income $ 41,295 $ (116) $ 37,374 ========== ======= ========== Net income (loss) per common and common equivalent shares: Basic $ 1.54 $ (1.33) $ 1.33 ========== ======= ========== Diluted $ 1.43 $ (1.33) $ 1.24 ========== ======= ========== Weighted average common and common equivalent shares used in computing per share amounts: Basic 26,814,000 87,000 28,052,000 ========== ======= ========== Diluted 28,788,000 87,000 30,026,000 ========== ======= ==========
The accompanying notes are an integral part of these pro forma combined financial statements. GENRAD, INC. AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS Note 1: Historical On April 7, 1998 GenRad acquired all of the then outstanding common shares of Industrial Computer Corporation ("ICC"). ICC is a software company providing real-time manufacturing execution systems to electronics manufacturers. ICC was established in 1980 and is located in Atlanta, Georgia. The acquisition will be accounted for as a purchase. On a combined basis, there were no material transactions between GenRad and ICC during the periods presented. There are no material differences between the accounting policies of GenRad and ICC. Certain reclassifications have been made to the GenRad statement of operations for the fiscal year ended January 3, 1998 to conform to the interim 1998 period. Note 2: Pro Forma Adjustments An independent third-party appraisal company conducted a valuation of the intangible assets acquired. The unaudited pro forma combined financial statements are based on certain assumptions and preliminary estimates which may be subject to change. The following pro forma adjustments were recorded: (1) Adjustment to record acquisition costs (legal fees, accounting fees and broker fees) of $1,455,000. (2) Adjustments to reflect the elimination of ICC stockholders' equity and to record the issuance of 1,237,917 shares of GenRad's common stock in a tax free reorganization. The total consideration for the acquisition of ICC was $36,596,000. (3) Management estimates that approximately $8.4 million of the purchase price represents purchased in-process technology that has not yet reached technological feasibility and has no alternative future use. This amount will be expensed as a non-recurring, non-tax deductible charge upon consummation of the acquisition. This amount has been reflected as a reduction to stockholders' equity and has not been included in the pro forma combined statements of operation due to its non-recurring nature. The pro forma per share impact would have been as follows:
Fiscal year ended Three months ended January 3, 1998 April 4, 1998 ----------------- ------------------ Basic ($0.30) ($0.29) Diluted ($0.28) ($0.27)
GENRAD, INC. AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (continued) The value was determined by estimating the future costs to develop the purchased in-process technology into commercially viable products; estimating the resulting net cash flows from such projects; and discounting the net cash flows back to their present value. (4) Write off the net book value of the capitalized software costs acquired and the elimination of the related amortization expense recorded in the statement of operations for the periods presented. (5) To record the intangible assets acquired and related amortization expense had the acquisition occurred at the beginning of the periods presented. Intangibles consist of the following: $11.4 million of purchased software (7 year useful life); acquired workforce of $1.3 million (3 year useful life); trade name of $0.4 million (3 year useful life); and goodwill of $17.0 million (10 year useful life). Intangibles will be amortized straight line over their estimated useful lives. Note 3: Pro Forma Net Income Per Share The shares used in computing pro forma net income per share assume that the acquisition had taken place as of the beginning of the respective periods. (c) Exhibits. 2. Agreement and Plan of Merger dated April 7, 1998 by and among GenRad, Inc., Industrial Computer Corporation, Frank B. Wingate, William E. Massaker, William E. Gaines and Heritage Investment Limited Partnership (incorporated by reference to the Company's Registration Statement on Form S-3 (File No. 333-57251)). 23. Consent of PricewaterhouseCoopers LLP. SIGNATURE Pursuant to the requirements 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. GENRAD, INC. By: /s/ Walter A. Shephard ----------------------------------- Walter A. Shephard Chief Financial Officer and Secretary Date: July 10, 1998 EX-23 2 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 ---------- Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 2-85614, No. 2-89950, No. 33-28715, No. 333-09675, No. 333-19685 and No. 333-57251) and the Registration Statements on Form S-8 (No. 333-69045, No. 333-69049, No. 333-64329, No. 333-43445, No. 2-92786, No. 2-92800, No. 33-1667, No. 33-10658, No. 33-53869, No. 33-35918, No. 33-53871, No. 33-53867, No. 33-42789, No. 33-52009, No. 33-60153 and No. 333-05235) of GenRad, Inc. of our report dated July 2, 1998 relating to the financial statements of Industrial Computer Corporation, which appears in this Current Report on Form 8-K of GenRad, Inc. dated April 16, 1999. /s/ PricewaterhouseCoopers LLP ------------------------------ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts April 14, 1999 -----END PRIVACY-ENHANCED MESSAGE-----