-----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, HKhvuWPCRwR1+qfPMUN9a/Jh7sA3RYOlhuTcnouk8qBZJYIUIUR4x5Z4X7IriZQZ ZOdIJ78mMHwiGi+Hjp+FjA== 0000047035-99-000006.txt : 19990305 0000047035-99-000006.hdr.sgml : 19990305 ACCESSION NUMBER: 0000047035-99-000006 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990106 ITEM INFORMATION: FILED AS OF DATE: 19990304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERLEY INDUSTRIES INC /NEW CENTRAL INDEX KEY: 0000047035 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 232413500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-72427 FILM NUMBER: 99557249 BUSINESS ADDRESS: STREET 1: 10 INDUSTRY DR CITY: LANCASTER STATE: PA ZIP: 17603 BUSINESS PHONE: 7173972777 MAIL ADDRESS: STREET 1: 10 INDUSTRY DRIVE CITY: LANCASTER STATE: PA ZIP: 17603 FORMER COMPANY: FORMER CONFORMED NAME: HERLEY MICROWAVE SYSTEMS INC DATE OF NAME CHANGE: 19900510 FORMER COMPANY: FORMER CONFORMED NAME: HERLEY INDUSTRIES INC DATE OF NAME CHANGE: 19831103 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A-1 AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: January 6, 1999 (Date of earliest event reported) HERLEY INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 0-5411 23-2413500 - ---------------------------- -------------- ----------------------- State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification Number) 10 Industry Drive, Lancaster, Pennsylvania 17603 ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (717) 397-2777 --------------- --------------------------------------------------------------- (Former name of former address, if changed since last report.) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS (a) On January 6, 1999, the Registrant acquired all of the issued and outstanding shares of common stock of General Microwave Corporation ("GMC") due to the consummation of a merger between GMC and GMC Acquisition Corporation ("Acquisition"), a wholly-owned subsidiary of the Registrant. The merger was effected pursuant to the terms and provisions of an Agreement and Plan of Merger dated as of August 21, 1998 by and among GMC, eleven GMC shareholders, the Registrant and Acquisition. Pursuant to the terms of the Merger Agreement, each former shareholder of GMC is entitled to receive $18.00 in cash and a three-year warrant to purchase one share of the Registrant's common stock at a price of $14.40 per share if the Warrant is exercised on or before January 11, 1999, and $15.60 per share if the Warrant is exercised after January 11, 1999. The cash portion of the purchase price was financed by borrowing under the Registrant's existing line of credit facility with its bank. (b) GMC's facilities are used by it in the design, development, manufacture and marketing of microwave and electronic systems, equipment and components. The Registrant is currently negotiating the sale of GMC's property in Amityville, N. Y. with the intentions of relocating the plant to a nearby leased facility. The Registrant intends to continue operations at its other facilities, including under leases thereof. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired The following financial statements are incorporated by reference herein: (1) The Consolidated Financial Statements on pp. 19 to 45 in the Annual Report on Form 10-K of General Microwave Corporation and Subsidiaries for the fiscal years ended February 28, 1998 and 1997 (previously filed with the Commission on May 28, 1998, Commission File No. 001-08821, and incorporated by reference herein); (2) The unaudited interim Consolidated Financial Statements on pp. 1 to 10 in the Quarterly Report on Form 10-Q of General Microwave Corporation and Subsidiaries for the fiscal quarter ended August 29, 1998 (previously filed with the Commission on October 13, 1998, Commission File No.001-08821, and incorporated by reference herein). (b) Pro Forma Financial Information The following unaudited pro forma combined condensed financial information of Herley Industries, Inc. is filed herewith and is set forth on pages 5 through 11: Unaudited Pro Forma Combined Condensed Financial Information: (1) Unaudited Pro Forma Combined Condensed Balance Sheet as of November 1, 1998; (2) Unaudited Pro Forma Combined Condensed Statement of Income for the year ended August 2, 1998 and the three months ended November 1, 1998, and -2- (3) Notes to Unaudited Pro Forma Combined Condensed Financial Statements. (c) Exhibits. 23.1* Consent of KPMG LLP. * Filed herewith. -3- 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 hereunto duly authorized. HERLEY INDUSTRIES, INC. By: /s/ Myron Levy ----------------------------- Myron Levy, President By: /s/ Anello C. Garefino ----------------------------- Anello C. Garefino Principal Financial Officer DATE: March 4, 1999 -4- UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS The following unaudited pro forma combined condensed financial statements were prepared to illustrate the estimated effects of (i) Herley's acquisition of General Microwave Corporation ("GMC") accounted for under the purchase method of accounting, (ii) the borrowing of approximately $10,408,000 under Herley's bank credit facility which provides for aggregate borrowings of up to $20,000,000, and (iii) the use of the proceeds from the credit facility, as described in the notes to the unaudited pro forma combined condensed financial statements (collectively, the "Pro Forma Transactions"). The unaudited pro forma combined condensed balance sheet combines Herley's November 1, 1998 consolidated balance sheet with GMC's November 28, 1998 consolidated balance sheet and gives effect to the Pro Forma Transactions as if they had occurred on November 1, 1998, the last day of Herley's most recently completed fiscal quarter. The unaudited pro forma combined condensed statements of income combine Herley's historical results for the fiscal year ended August 2, 1998, and three months ended November 1, 1998 with the historical results of GMC for the twelve-month period ended August 29, 1998 and three months ended November 28, 1998 giving effect to the Pro Forma Transactions as if they had occurred as of August 4, 1997, the first day of Herley's most recently completed fiscal year. Herley's most recently completed fiscal year ended on August 2, 1998, the most recently completed fiscal year of GMC ended on February 28, 1998. The unaudited pro forma combined condensed financial statements were prepared utilizing the accounting principles of the respective entities as outlined in each entity's historical financial statements. The pro forma adjustments are based upon available information and certain assumptions that Herley believes are reasonable under the circumstances. The allocation of purchase price will be revised when additional information concerning asset and liability valuations is obtained. Adjustments, which could be significant, will be made during the allocation period based on detailed reviews of the fair values of assets acquired and liabilities assumed and could result in a substantial change in the excess of cost over the fair value of net assets acquired. The unaudited pro forma combined condensed financial statements do not reflect the cost savings and synergies which might be achieved from the merger. The unaudited pro forma combined condensed financial statements do not purport to be indicative of the operating results or financial position that would have been achieved had the merger been effected on the date or dates indicated or the results which may be obtained in the future. These pro forma combined condensed statements are based on, and should be read in conjunction with, the audited consolidated financial statements, including the notes thereto, of Herley and GMC. The audited consolidated financial statements of GMC are incorporated herein by reference. -5-
HERLEY INDUSTRIES, INC. AND GENERAL MICROWAVE CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME GMC Herley For the For the Fiscal Twelve-Month Year Ended Period Ended August 2, August 29, Pro Forma Pro Forma 1998 1998 Adjustments Combined ---- ---- ----------- -------- (In thousands, except share and per share data) Net sales $ 40,798 $ 22,679 $ 63,477 Cost of products sold 24,169 14,090 238 (8) 38,497 Selling and administrative expenses 8,339 6,161 311 (7) 14,811 -------- -------- ------ Operating income 8,290 2,428 10,169 -------- -------- ------ Other income (expense): Interest expense (446) (94) (666) (9) (1,206) Dividend and interest income 453 169 (340) (10) 282 Other 133 (82) 51 -------- -------- ------- 140 (7) (873) -------- -------- ------- Income before income taxes 8,430 2,421 9,296 Provision for income taxes 2,934 191 (14) (435) (11) 2,690 -------- -------- ------- Income from continuing operations $ 5,496 $ 2,230 $ 6,606 ======== ======== ======= Earnings per common share-Basic $ 1.11 $ 1.84 $ 1.33 ===== ===== ===== Basic weighted average common shares 4,969,248 1,210,210 4,969,248 ========= ========= ========= Earnings per common share-Diluted $ 1.02 $ 1.79 $ 1.22 ===== ===== ===== Diluted weighted average common shares 5,407,283 1,244,322 5,407,283 ========= ========= =========
-6-
HERLEY INDUSTRIES, INC. AND GENERAL MICROWAVE CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME (Continued) GMC Herley For the For the Fiscal Three-Month Quarter Ended Period Ended November 1, November 28, Pro Forma Pro Forma 1998 1998 Adjustments Combined ---- ---- ----------- -------- (In thousands, except share and per share data) Net sales $ 11,651 $ 5,847 $ 17,498 Cost of products sold 6,771 3,815 60 (8) 10,646 Selling and administrative expenses 2,124 1,792 78 (7) (442) (13) 3,552 ------ ------ ------ Operating income 2,756 240 3,300 ------ ------ ------ Other income (expense): Interest expense (102) (12) (167) (9) (281) Dividend and interest income 103 41 (85) (10) 59 Other - (12) (12) ------ ------ ------ 1 17 (234) ------ ------ ------ Income before income taxes 2,757 257 3,066 Provision for income taxes 965 85 (14) (109) (11) 146 (13) 1,087 ------ ------ ------ Income from continuing operations $ 1,792 $ 172 $ 1,979 ====== ====== ====== Earnings per common share-Basic $ .34 $ .14 $ .37 ==== ==== ==== Basic weighted average common shares 5,295,245 1,212,348 5,295,245 ========= ========= ========= Earnings per common share-Diluted $ .32 $ .13 $ .36 ==== ==== ==== Diluted weighted average common shares 5,538,266 1,291,868 5,538,266 ========= ========= =========
-7-
HERLEY INDUSTRIES, INC. AND GENERAL MICROWAVE CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET Herley GMC November 1, November 28, Pro Forma Pro Forma 1998 1998 Adjustments Combined ------------ ----------- ----------- -------- (In thousands) Assets Current Assets: Cash and cash equivalents $ 4,183 $ 3,384 $ (6,400) (4) $ 1,167 Accounts receivable, net 7,285 4,250 - 11,535 Costs incurred and income recognized in excess of billings on uncompleted contracts 2,937 - - 2,937 Prepaid expenses and other current assets 247 291 - 538 Inventories 14,654 5,681 - 20,335 Deferred taxes 2,365 794 120 (3) 3,279 ------- ------- ------- Total current assets 31,671 14,400 39,791 ------- ------- ------- Property, plant and equipment, net 12,258 5,934 4,268 (3) 22,460 Intangible assets 5,988 675 6,998 (3) 13,661 Other assets 9,082 55 (6,298) (4) 2,839 ------- ------- ------- Total assets $ 58,999 $ 21,064 $ 78,751 ======= ======= ======= Liabilities and shareholder's equity Current liabilities: Current portion of long-term debt $ 406 $ 663 - $ 1,069 Accounts payable and accrued expenses 6,825 4,067 300 (3) 11,192 Reserve for contract losses 1,086 - - 1,086 Advance payments on contracts 1,595 75 - 1,670 ------- ------- ------- Total current liabilities 9,912 4,805 15,017 ------- ------- ------- Long-term debt 3,402 181 10,408 (5) 13,991 Deferred income taxes 3,477 590 1,961 (3) 6,028 Minority interest - 57 - 57 ------- ------- ------- Total liabilities 16,791 5,633 35,093 ------- ------- ------- Shareholders' Equity: Common stock 529 17 (17) (6) 529 Additional paid-in-capital 20,297 9,651 (8,201) (6) 21,747 Retained earnings 21,382 8,952 (8,952) (6) 21,382 Less treasury stock at cost - (3,189) 3,189 (6) - ------- ------- ------- Total shareholders' equity 42,208 15,431 43,658 ------- ------- ------- Total liabilities and shareholders' equity $ 58,999 $ 21,064 $ 78,751 ======= ======= =======
-8- NOTES TO THE PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. The unaudited pro forma combined condensed financial statements reflect the acquisition by Herley of all of the issued and outstanding common stock of General Microwave Corporation ("GMC"), including outstanding stock options, for $18.00 per share and 966,675 three-year Warrants to purchase one share of Herley's common stock. The Warrants are exercisable at $15.60 per share of common stock of Herley and expire in January, 2002. The Warrants were valued at an estimated fair market value of $1.50 per Warrant at the date of closing, based on the trading price of similar warrants currently on the market. The aggregate estimated purchase price is calculated as follows (in thousands, except per share and per share data): 365,600 shares previously acquired in the open market $ 6,273 848,675 shares at $18.00 per share 15,276 118,000 stock options at $18.00 per share, net of exercise price 1,279 966,675 Warrants at $1.50 1,450 Estimated transaction expenses 278 ------ Estimated purchase price $24,556 ====== 2. Herley's fiscal year ends on the Sunday closest to July 31. In the accompanying unaudited combined condensed pro forma statements of income the results of Herley's fiscal year ended August 2, 1998, and its first quarter fiscal 1999 ended November 1, 1998, have been combined with the unaudited results of GMC for the twelve-month period ended August 29, 1998, and three-month period ended November 28, 1998, respectively. The unaudited pro forma combined condensed financial statements have been derived from the audited consolidated financial statements of Herley as of and for the fiscal year ended August 2, 1998, and the unaudited consolidated financial statements as of and for the quarter ended November 1, 1998; and from the unaudited consolidated financial statements of GMC as of and for the twelve-month period ended August 29, 1998, and three-month period ended November 28, 1998. GMC's fiscal year ends on February 28, however, in order to present GMC's operating results on a basis more consistent with Herley's fiscal year, the unaudited consolidated statement of operations of GMC for the twelve-month period ended August 29, 1998, and three-month period ended November 28, 1998, were used. The GMC unaudited consolidated statement of operations for the twelve-month period ended August 29, 1998 was derived from the unaudited interim consolidated financial statements of GMC for the three-month periods ended November 29, 1997, February 28, 1998, May 30, 1998 and August 29, 1998. 3. This adjustment reflects the excess of cost over the fair value of net assets acquired, and is calculated as follows (in thousands except per share data): Estimated purchase price $ 24,556 Preliminary purchase accounting adjustments: Fair value adjustment to property, plant and equipment (4,268) Fair value adjustment to patents (633) Accrual of pension costs 300 Deferred tax impact of fair value adjustments 1,841 Net assets of GMC acquired (excluding intangible assets of $547) as of November 28, 1998 (14,884) ------ Excess of cost over the fair value of net assets acquired $ 6,912 ====== -9- The total consideration will be allocated to the assets and liabilities of GMC based on their estimated fair value. A preliminary allocation by Herley of the purchase price has been presented in the pro forma combined condensed financial statements in which the historical GMC property, plant and equipment, and patents, have been adjusted to their estimated fair value. The impact of this fair value adjustment has also been reflected in pro forma deferred tax balances. An additional adjustment of the purchase price has been made to accrue for estimated costs associated with a freeze in benefits under GMC's pension plan. The deferred tax impact of this adjustment has also been reflected in the pro forma combined condensed financial statements. The excess of consideration over the adjusted fair value of GMC net assets acquired has been preliminarily allocated to goodwill. A final allocation of the purchase price to the GMC assets acquired and liabilities assumed is dependent upon certain valuations and studies that have not progressed to a stage where there is sufficient information to make such an allocation in the accompanying pro forma financial information The allocation of the purchase price of GMC will be revised when additional information concerning asset and liability valuations is obtained. Adjustments, which could be significant, will be made during the allocation period based on detailed reviews of the fair values of assets acquired and liabilities assumed and could result in a substantial change in excess of cost over fair value of assets acquired. 4. This entry represents the payment of cash from current available funds to the shareholders of the GMC common stock of $6,400,000, the acquisition of 365,610 shares of GMC common stock in the open market, prior to the acquisition, at an aggregate cost of approximately $6,273,000, and $25,000 of acquisition expenses. 5. This adjustment represents additional borrowings under Herley's line of credit facility of $10,408,000 for the purpose of financing the remaining cash portion of the estimated purchase price. 6. These adjustments represent the elimination of GMC's shareholders' equity accounts. Also reflected within the adjustment to additional paid-in capital is the recording of the estimated fair value of the Warrants of $1,450,000 granted as part of the purchase price. The unaudited pro forma combined condensed financial statements do not assume the exercise of any Warrants (see Note 1). 7. This entry reflects the adjustments to amortization for the effects of the excess of consideration over net assets acquired, and for the valuation adjustment to the patents. For purposes of the pro forma combined condensed financial statements, the Herley management expects that amounts allocated to costs in excess of fair value of net assets acquired will be amortized over 20 years on a straight-line basis. The patents are amortized over the average remaining lives of the patents of approximately 14 years (see Note 3). 8. This entry reflects the adjustment to depreciation expense for the effect of the fair value adjustment of GMC's property, plant and equipment based on a preliminary valuation of the fair value (see Note 3). 9. These adjustments represent the recognition of interest expense on the additional borrowings of Herley to finance the estimated purchase price (see Note 5). The interest expense was calculated based on Herley's incremental borrowing rate under its line of credit facility at the Federal Funds Target Rate plus 1.65% or approximately 6.4%. A change of 1/8% in the -10- incremental rate would affect interest expense by $13,010 for the fiscal year, and $3,252 for the quarter. 10. The adjustment reflects the loss of interest income generated from the cash and cash equivalents that were used to purchase the GMC common stock (see Note 4). 11. This entry represents the tax benefit of $435,000 and $109,000 for the year and fiscal quarter, respectively, related to the pro forma adjustments, excluding nondeductible goodwill amortization. 12. Pro forma per share data are based on the number of Herley common and common equivalent shares that would have been outstanding had the Herley/GMC merger occurred on the earliest date presented. 13. This adjustment represents the elimination of one time expenses of approximately $442,000, and the related tax effect of approximately $146,000, incurred by GMC during the three-month period ended November 28, 1998, in connection with the acquisition of GMC by Herley. 14. The effective tax rate for GMC is lower than the statutory rate due to the reversal of a valuation allowance of $698,000 during the twelve months presented that was previously provided against deferred tax assets. 15. Certain amounts have been reclassified to conform to the pro forma presentation. -11- EX-23 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.1 Consent of Independent Public Accountants The Board of Directors General Microwave Corporation: We consent to incorporation by reference in the Form 8-K of Herley Industries, Inc. dated March 4, 1999 of our report dated May 11, 1998, which is based partially upon the report of other auditors, with respect to the consolidated balance sheets of General Microwave Corporation and subsidiaries as of February 28, 1998 and 1997, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended February 28, 1998, which report appears in the February 28, 1998 annual report on Form 10-K of General Microwave Corporation and subsidiaries. /s/ KPMG LLP --------------------- KPMG LLP Melville, New York March 2, 1999 -12- -----END PRIVACY-ENHANCED MESSAGE-----