-----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, Ci3l35pgf1L1x/1DH30GG4VbGXc/XjqVBBorGDi/+Qrs9bluwkLSMzhhI3a+kJ26 5hDcNiHW9GMj8U4dO60T4w== 0000914233-97-000155.txt : 19971015 0000914233-97-000155.hdr.sgml : 19971015 ACCESSION NUMBER: 0000914233-97-000155 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970720 ITEM INFORMATION: FILED AS OF DATE: 19971014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UTAH MEDICAL PRODUCTS INC CENTRAL INDEX KEY: 0000706698 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 870342734 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-12575 FILM NUMBER: 97695215 BUSINESS ADDRESS: STREET 1: 7043 S 300 WEST CITY: MIDVALE STATE: UT ZIP: 84047 BUSINESS PHONE: 8015661200 8-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 2 ----------------------------------- Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (date of earliest event reported): JULY 20, 1997 Commission File No. 1-12575 UTAH MEDICAL PRODUCTS, INC. ---------------------------------------------------- (Exact name of Registrant as specified in its charter) UTAH 87-0342734 ------------------------------ ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7043 South 300 West Midvale, Utah 84047 -------------------------------------- Address of principal executive offices Registrant's telephone number: (801) 566-1200 (PAGE> AMENDMENT NO. 2 Utah Medical Products, Inc. ("UM" or the "Company") hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K dated July 20, 1997, as follows: Item 7. Financial statements and exhibits Item 7(a): Financial statements of businesses acquired Columbia Medical, Inc. ("CMI") audited balance sheet as of December 31, 1996, and the related statements of income and retained earnings, and of cash flows for the year ended December 31, 1996 and related notes and report of independent auditors. CMI unaudited balance sheet as of June 30, 1997 and unaudited statements of income and retained earnings and of cash flows for the six month periods ended June 30, 1997 and 1996. Item 7(b): Pro forma financial information. Pro forma consolidated balance sheet of UM as of June 30, 1997 and pro forma consolidated statements of income for the year ended December 31, 1996 and the six month period ended June 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchanges Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UTAH MEDICAL PRODUCTS, INC. Registrant Date: October 7, 1997 By: /s/ Kevin L. Cornwell CEO and CFO ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) The CMI audited balance sheet as of December 31, 1996 and the related statements of income and retained earnings and of cash flows for the year ended December 31, 1996, and the related notes and report of independent auditors, along with the CMI unaudited balance sheet as of June 30, 1997 and the unaudited statements of income and retained earnings and of cash flows for the six month periods ended June 30, 1997 and 1996 are included herein. INDEPENDENT AUDITORS' REPORT To the Board of Directors of Columbia Medical, Inc.: We have audited the accompanying balance sheet of Columbia Medical, Inc.(CMI) as of December 31, 1996, and the related statements of income and retained earnings and of cash flows for the year then ended. These financial statements are the responsibility of CMI's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of CMI at December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Salt Lake City, Utah August 22, 1997 COLUMBIA MEDICAL, INC. BALANCE SHEETS JUNE 30, 1997 DECEMBER 31, (UNAUDITED) 1996 ------------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $860,268 $468,686 Accounts receivable 477,746 426,124 Inventory 752,317 716,558 Prepaid expenses and other current assets 20,475 48,030 Deferred income taxes - current 15,518 13,342 --------- --------- Total current assets 2,126,324 1,672,740 PROPERTY AND EQUIPMENT - Net 397,889 457,381 DEFERRED INCOME TAXES - Long term 12,395 12,395 OTHER ASSETS - Net 6,967 7,190 --------- --------- TOTAL $2,543,575 $2,149,706 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 93,686 $ 37,792 Accrued expenses 108,130 101,466 Income taxes payable 93,773 12,195 Current portion of long-term debt 19,452 58,574 --------- --------- Total current liabilities 315,041 210,027 LONG-TERM DEBT 10,204 11,798 --------- --------- Total liabilities 325,245 221,825 --------- --------- COMMITMENTS (Note 6) STOCKHOLDERS' EQUITY: Common stock, no par value, 100 shares authorized, issued, and outstanding 66,000 66,000 Retained earnings 2,152,330 1,861,881 --------- --------- Total stockholders' equity 2,218,330 1,927,881 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,543,575 $ 2,149,706 ========= ========= See notes to financial statements. COLUMBIA MEDICAL, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS YEAR ENDED SIX MONTHS ENDED JUNE 30, DECEMBER 31, 1997 1996 1996 ----------- ------------ ------------ (UNAUDITED) (UNAUDITED) NET SALES $ 2,308,533 $ 1,898,144 $ 3,953,669 COST OF SALES 1,042,726 856,164 1,732,392 ----------- ----------- ----------- GROSS PROFIT 1,265,807 1,041,980 2,221,277 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 751,476 707,047 1,614,418 ----------- ----------- ----------- OPERATING INCOME 514,331 334,933 606,859 ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (2,107) (8,098) (14,677) Loss on disposal of assets (341) (341) Other, net 9,328 8,926 20,132 ----------- ----------- ----------- Total other income - net 7,221 487 5,114 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 521,552 335,420 611,973 PROVISION FOR INCOME TAXES 231,103 130,520 246,087 ----------- ----------- ----------- NET INCOME 290,449 204,900 365,886 RETAINED EARNINGS, Beginning of period 1,861,881 1,495,995 1,495,995 ----------- ----------- ----------- RETAINED EARNINGS, End of period $ 2,152,330 $ 1,700,895 $ 1,861,881 ----------- ----------- ----------- See notes to financial statements COLUMBIA MEDICAL, INC. STATEMENTS OF CASH FLOWS SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 1997 1996 1996 ----------- ---------- ----------- (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 290,449 $ 204,900 $ 365,886 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 82,730 99,764 196,274 Deferred income tax benefit (2,176) (3,358) (6,061) Loss on disposal of assets 341 341 Changes in operating assets and liabilities: Accounts receivable (51,622) (522) 17,491 Inventory (35,759) 70,470 82,271 Prepaid expenses and other current assets 27,555 25,011 8,849 Other assets 223 (343) 596 Accounts payable 55,894 27,602 (14,965) Accrued expenses 6,664 (31,257) (21,346) Income taxes payable 81,578 (156,095) (163,543) --------- --------- --------- Net cash provided by operating activities 455,536 236,513 465,793 CASH FLOW FROM INVESTING ACTIVITIES - Purchase of property and equipment (23,238) (7,959) (11,677) --------- --------- --------- CASH FLOW FROM FINANCING ACTIVITIES - Payments on long-term debt (40,716) (80,033) (142,686) --------- --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS 391,582 148,521 311,430 CASH AND CASH EQUIVALENTS, Beginning of period 468,686 157,256 157,256 --------- --------- --------- CASH AND CASH EQUIVALENTS, End of period $ 860,268 $ 305,777 $ 468,686 --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during period for: Interest $ 2,107 $ 8,098 $ 14,677 ========= ========= ========= Income taxes $ 151,700 $ 289,974 $ 415,692 ========= ========= ========= SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Equipment was acquired for $18,269 during the six month period ended June 30, 1996 in exchange for a capital lease of $16,995 plus a credit of of $1,274 received for the trade-in of equipment. See notes to financial statements. COLUMBIA MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS - Columbia Medical, Inc. (CMI) was incorporated in the State of Oregon in 1984. CMI's primary business is the manufacture and sale of disposable medical devices used in the health care industry throughout the United States. 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. CARRYING VALUE OF LONG-TERM ASSETS - CMI evaluates the carrying value of long-term assets based upon current and anticipated undiscounted cash flows, and recognizes an impairment when such estimated cash flows will be less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair value. CASH AND CASH EQUIVALENTS - For financial reporting purposes, CMI considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. CONCENTRATION OF CREDIT RISK - CMI maintains bank accounts which may exceed depository insurance limits and therefore exposes CMI to credit risk. CMI restricts its cash deposits to financial institutions with high credit standing and which are members of the Federal Deposit Insurance Corporation. INVENTORY - Inventory consists of raw materials, work-in-process, and finished goods, which are valued at the lower of first-in, first-out cost or market. PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the following estimated useful lives: CATEGORY USEFUL LIFE Manufacturing equipment 5 - 7 years Transportation equipment 3 - 5 years Furniture and fixtures 5 - 7 years Leasehold improvements 10 years INCOME TAXES - CMI recognizes deferred tax liabilities for the expected future tax consequences of temporary differences between the financial statement bases and the tax bases of CMI's assets and liabilities using the enacted tax rates in effect at year end. INTERIM FINANCIAL INFORMATION - In the opinion of management, the unaudited information presented as of June 30, 1997 and for the six month periods ended June 30, 1997 and 1996 reflect all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation of the interim period financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full year. 2. INVENTORY Inventory consists of the following at December 31, 1996: Raw materials $ 180,398 Work in process 274,177 Finished goods 261,983 ---------- Total $ 716,558 ========== 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1996: Manufacturing equipment $ 1,244,794 Transportation equipment 16,008 Furniture and equipment 217,928 Leasehold improvements 49,961 ---------- Total 1,528,691 Less accumulated depreciation (1,071,310) ----------- Total $ 457,381 =========== 4. ACCRUED EXPENSES Accrued expenses consist of the following at December 31, 1996: Accrued commissions $ 40,555 Accrued payroll and related payroll taxes 39,687 Accrued vacation 21,224 ---------- Total $ 101,466 ========== 5. LONG-TERM DEBT Long-term debt consists of the following at December 31, 1996: Wells Fargo Bank, due in monthly payments of $3,998, including interest at 9.75% through November 1997; collateralized with machinery and equipment $37,739 Wells Fargo Bank, due in monthly payments of $2,652 including interest at 9.75% through May 1997; collateralized with machinery 12,826 Wells Fargo Bank, due in monthly payments of $520, including interest at 9.5% through August 1997; collateralized with machinery 5,129 Obligations under capital lease (Note 6) 14,678 ------- Total 70,372 Less current portion (58,574) ------- Total $11,798 ======= Contractual maturities of long-term debt are as follows: Year ending December 31: 1997 $ 58,574 1998 3,299 1999 3,780 2000 4,331 2001 388 --------- Total $ 70,372 ========= 6. COMMITMENTS As of December 31, 1996, CMI had an operating lease which relates to its office, manufacturing facility and warehouse in Redmond, Oregon. Total rental expense was approximately $90,000 for the year ended December 31, 1996. Assets under capital lease obligations, included with property at December 31, 1996, were as follows: Equipment $ 23,690 Less accumulated depreciation (3,399) --------- Total $ 20,291 ========= At December 31, 1996, future minimum rental payments under capital and operating leases are as follows: OPERATING CAPITAL LEASES LEASE --------- ------- Year ending December 31: 1997 $ 80,964 $ 4,711 1998 80,964 4,711 1999 33,735 4,711 2000 4,711 2001 393 --------- -------- Total $ 195,663 $ 19,237 ========= Less amount representing interest at 13.7% (4,559) -------- Present value of future minimum capital lease obligations 14,678 (Note 5) Current portion (2,880) -------- Total $11,798 ======== 7. INCOME TAXES Income tax expense (benefit) consists of the following at December 31, 1996: Current: Federal $208,971 State 43,177 Deferred: Federal (5,228) State (833) -------- Total $246,087 Computed "expected" income taxes on income for financial reporting purposes are reconciled to income tax expense as follows: Federal income tax expense at the statutory rate (34%) $ 214,407 State income taxes, net of federal benefit 27,948 Other 3,732 ---------- Income tax expense $ 246,087 The components of the deferred tax assets are as follows at December 31, 1996 Current Deferred Tax Asset: Accrued vacation $ 8,617 Inventory reserve 3,673 Other 1,052 --------- Total $ 13,342 --------- Long-Term Deferred Tax Asset - Difference in tax basis of property and equipment $ 12,395 --------- 8. SUBSEQUENT EVENT On July 20, 1997, CMI entered into a Stock Purchase Agreement with Utah Medical Products, Inc. (UM) whereby UM purchased all of the common stock of CMI. * * * * * * (b) The accompanying unaudited pro forma consolidated balance sheet as of June 30, 1997 and unaudited pro forma statements of income for the year ended December 31, 1996 and the six month period ended June 30, 1997 are presented to reflect the acquisition of all of the outstanding common shares of CMI by UM (the "Acquisition") for a purchase price of $8.16 million, including consideration for patents rights and non-competition agreements. The Acquisition was effected pursuant to a Stock Purchase Agreement, dated as of July 20, 1997. The Acquisition was accounted for using the "purchase" method of accounting. The accompanying unaudited pro forma financial statements reflect the effects of a preliminary allocation of the purchase price. The accompanying unaudited pro forma consolidated financial statements should be read in conjunction with the respective companies' historical consolidated financial statements and notes thereto. The unaudited pro forma consolidated financial statements are presented for information purposes only and are not necessarily indicative of actual results, nor do they purport to represent results of future operations of the merged companies. The pro forma consolidated balance sheet assumes the Acquisition occurred on June 30, 1997. The pro forma consolidated statements of income present UM's historical consolidated statements of income for the year ended December 31, 1996 and the six months ended June 30, 1997, along with CMI's statements of income for the same periods adjusted to give effect to the Acquisition as if the Acquisition had occurred on January 1, 1996. Unaudited pro forma consolidated financial information presented herein reflects adjustments for (i) the estimated allocation of the purchase price to the fair value of assets acquired, including goodwill, and liabilities assumed, and (ii) the effect of recurring charges related to the Acquisition, primarily the amortization of goodwill, recording of interest expense on borrowings to finance the Acquisition and the increase in depreciation expense due to the write-up to fair value of fixed assets. The amount of the purchase price is subject to post-closing adjustments based on certain indemnities from CMI's prior owners. The preliminary allocation of the purchase price resulted in approximately $5.0 million in goodwill. The actual amount of goodwill recorded may vary based upon the final purchase price allocation resulting from completion of the merger plan and asset valuations. Changes in goodwill and the related amortization expense resulting from these activities may be material.
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 UTAH MEDICAL PRODUCTS, PRO FORMA INC., AND COLUMBIA PURCHASE ADJUSTED SUBSIDIARY MEDICAL,INC. ADJUSTMENTS NOTES BALANCE ASSETS ------------ ---------- ----------- ----- ----------- CURRENT ASSETS: Cash and cash equivalents $2,439,956 $ 860,268 $(2,160,000) (C) $1,140,224 Accounts receivable 3,804,856 477,746 4,282,602 Inventory 6,389,444 752,317 52,000 (D) 7,193,761 Other 925,376 35,993 961,369 ---------- ---------- ----------- ---------- Total current assets 13,559,632 2,126,324 (2,108,000) 13,577,956 PROPERTY AND EQUIPMENT - Net 13,170,250 397,889 660,000 (E) 14,228,139 OTHER ASSETS: Intangible assets - net 900,757 250,000 (F) 1,150,757 Goodwill 4,979,670 (G) 4,979,670 Other 19,362 19,362 ---------- ---------- ----------- ---------- TOTAL $27,630,639 $2,543,575 $3,781,670 $33,955,884 ---------- ---------- ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $1,684,560 $ 93,686 $1,778,246 Accrued expenses 1,617,176 201,903 1,819,079 Other 85,600 19,452 105,052 ---------- ---------- ----------- ---------- Total current liabilities 3,387,336 315,041 3,702,377 LONG-TERM DEBT 2,150,000 (B) 10,204 $6,000,000 (H) 8,160,204 OTHER LONG-TERM LIABILITIES 509,395 509,395 ---------- ---------- ----------- ---------- Total liabilities 6,046,731 325,245 6,000,000 12,371,976 STOCKHOLDERS' EQUITY 21,583,908 2,218,330 (2,218,330) (I) 21,583,908 ---------- ---------- ----------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,630,639 $2,543,575 $3,781,670 $33,955,884 ---------- ---------- ----------- ----------
See notes to the unaudited pro forma consolidated financial statements.
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 UTAH MEDICAL PRODUCTS, PRO FORMA INC., AND COLUMBIA PURCHASE ADJUSTED SUBSIDIARY MEDICAL,INC. ADJUSTMENTS NOTES BALANCE ------------ ---------- ----------- ----- ----------- NET SALES $38,672,632 $3,953,669 $42,626,301 COST OF SALES 19,549,252 1,732,392 $ 59,596 (J) 21,341,240 ----------- ---------- -------- ----------- GROSS PROFIT 19,123,380 2,221,277 (59,596) 21,285,061 ----------- ---------- -------- ----------- EXPENSES: Selling, general, and administrative 7,056,657 1,583,014 8,639,671 Depreciation and amortization 257,328 31,404 359,924 (J) 648,656 ----------- ---------- -------- ----------- Total 7,313,985 1,614,418 359,924 9,288,327 ----------- ---------- -------- ----------- OPERATING INCOME 11,809,395 606,859 (419,520) 11,996,734 OTHER INCOME 1,834,337 5,114 (427,200) (K) 1,412,251 ----------- ---------- -------- ----------- INCOME BEFORE TAXES 13,643,732 611,973 (846,720) 13,408,985 PROVISION FOR INCOME TAXES 4,889,841 246,087 (153,792) (L) 4,982,136 ----------- ---------- -------- ----------- NET INCOME $8,753,891 $365,886 $(692,928) $8,426,849 ----------- ---------- -------- ----------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 0.93 $ 0.89 ---------- ---------- EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION $ 0.93 $ 0.89 ---------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES 9,451,581 9,451,581 ---------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES ASSUMING FULL DILUTION 9,451,581 9,451,581 ---------- ----------
See notes to the unaudited pro forma consolidated financial statements.
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997 UTAH MEDICAL PRODUCTS, PRO FORMA INC., AND COLUMBIA PURCHASE ADJUSTED SUBSIDIARY MEDICAL,INC. ADJUSTMENTS NOTES BALANCE ------------ ---------- ----------- ----- ----------- NET SALES $10,273,971 $ 2,308,533 $12,582,504 COST OF SALES 4,895,164 1,042,726 $ 42,740 (J) 5,980,630 ---------- ----------- -------- ----------- GROSS PROFIT 5,378,807 1,265,807 (42,740) 6,601,874 ---------- ----------- -------- ----------- EXPENSES: Selling, general, and administrative 3,065,445 738,239 3,803,684 Depreciation and amortization 137,740 13,237 182,427 333,404 ---------- ----------- -------- ----------- Total 3,203,185 751,476 182,427 4,137,088 ---------- ----------- -------- ------------ OPERATING INCOME 2,175,622 514,331 (225,167) 2,464,786 OTHER INCOME 821,901 7,221 (213,600) (K) 615,522 ---------- ----------- -------- ----------- INCOME BEFORE TAXES 2,997,523 521,552 (438,767) 3,080,308 PROVISION FOR INCOME TAXES 1,062,153 231,103 (76,896) (L) 1,216,360 ---------- ----------- -------- ----------- NET INCOME $1,935,370 $ 290,449 $(361,871) $1,863,948 ---------- ----------- -------- ----------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 0.22 $ 0.22 ---------- ----------- EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION $ 0.22 $ 0.22 ---------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES 8,612,269 8,612,269 ---------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES ASSUMING FULL DILUTION 8,612,269 8,612,269 ---------- -----------
See notes to the unaudited pro forma consolidated financial statements. UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 (A) The unaudited pro forma balance sheet as of June 30, 1997 reflects the adjustments necessary to record the Acquisition as though it had occurred on June 30, 1997. The unaudited pro forma consolidated statements of income for the year ended December 31, 1996 and for the six month period ended June 30, 1997 have been prepared assuming the Acquisition had occurred January 1, 1996 and reflect the effects of certain adjustments to the historical consolidated financial statements that result from the Acquisition of CMI by UM. Based upon the terms of the Acquisition, the transaction is accounted for as a purchase of CMI by UM for financial reporting and accounting purposes. Accordingly, UM revalued the basis of CMI's acquired assets and assumed liabilities to fair value. The purchase price of CMI is equal to the cash paid to the previous shareholders of CMI, including consideration for patent rights and non-competition agreements. The difference between the purchase price and the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed is recorded as goodwill which will be amortized over a period of 15 years. The amount of the purchase price is subject to post-closing adjustments based on certain indemnities from CMI's prior owners. The preliminary allocation of the purchase price is subject to adjustments resulting from final asset valuations. The preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed is as follows: Purchase price $8,160,000 Fair value of assets acquired (3,505,600) Liabilities assumed 325,200 ---------- Cost in excess of net assets acquired $4,979,600 ========== THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 GIVES EFFECT TO THE FOLLOWING PRO FORMA ADJUSTMENTS: (B) Amount was previously reported by UM on Form 10-Q for quarter ended June 30, 1997 as a current liability. Amount borrowed under UM's revolving line of credit is due in March 1999 and has been reclassified as a long- term obligation. (C) Represents cash used in the purchase of CMI. (D) Represents the write-up of finished goods inventory to its estimated selling price less the estimated disposal and selling costs of such inventory as of the Acquisition date. (E) Represents the write-up of property and equipment to their estimated fair values as of the Acquisition date. (F) Represents $200,000 of patents and $50,000 of non-compete agreements acquired in connection with the Acquisition. The patents will be amortized over a period of 15 years and the non-compete agreements will be amortized over the lives of the agreements. (G) Represents goodwill resulting from the Acquisition which will be amortized over a period of 15 years. (H) Represents borrowings under UM's revolving line of credit used to finance the Acquisition. (I) Represents the elimination of CMI's common stock and retained earnings as of the Acquisition date. THE UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 GIVE EFFECT TO THE FOLLOWING PRO FORMA ADJUSTMENTS: (J) Represents the following for both the year ended December 31, 1996 and for the six months ended June 30,1997: (i) an increase in amortization expense of goodwill and patents, calculated as of January 1, 1996 over an estimated useful life of 15 years and (ii) an increase in depreciation expense resulting from the write-up of property and equipment to fair value. The net adjustment is computed approximately as follows: 1996 1997 --------- -------- Increase in goodwill amortization $332,000 $166,000 Increase in patent and non-compete agreement amortization 16,600 8,300 Increase in depreciation expense 70,900 50,900 -------- -------- Net adjustment $ 419,500 $ 225,200 ========= ========= (K) Represents an increase in total interest expense related to debt acquired to finance the Acquisition calculated as additional borrowings of $6 million multiplied by the actual interest rate on the revolving line of credit on July 20, 1997 of 7.12%. (L) Represents the estimated income tax benefit of the taxable purchase adjustments using an estimated effective tax rate of 36%. -----END PRIVACY-ENHANCED MESSAGE-----