-----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, KK+ETciPppdbun/F/f8VTsS8ernXzULBOAPgF3gIpsN0d2Jryg9Xz2ZRbXt/EwSJ DOJtLmPWMZMvmUqEDcAgMg== 0000768158-95-000005.txt : 19951208 0000768158-95-000005.hdr.sgml : 19951208 ACCESSION NUMBER: 0000768158-95-000005 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19951207 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH STAR UNIVERSAL INC CENTRAL INDEX KEY: 0000768158 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 410498850 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-46418 FILM NUMBER: 95599901 BUSINESS ADDRESS: STREET 1: 5353 WAYZATA BLVD STREET 2: PARK NATIONAL BANK BLDG STE 610 CITY: MINNEAPOLIS STATE: MN ZIP: 55416 BUSINESS PHONE: 612-941-76 MAIL ADDRESS: STREET 1: 610 PARK NATIONAL BANK BUILDING STREET 2: 5353 WAYZATA BOULEVARD CITY: MINNEAPOLIS STATE: MN ZIP: 55416 424B3 1 FORM 424B3 $40,000,000 NORTH STAR UNIVERSAL, INC. SIX AND TWELVE MONTH SUBORDINATED EXTENDIBLE TIME CERTIFICATES TWO, FIVE AND TEN YEAR SUBORDINATED FIXED-TERM TIME CERTIFICATES PROSPECTUS SUPPLEMENT NO. 2 TO PROSPECTUS DATED MAY 15, 1995 The following information dated November 13, 1995, amends and updates the Prospectus of North Star Universal, Inc., dated May 15, 1995 (the "Prospectus"), and should be read in conjunction therewith. Please keep this Prospectus Supplement with your Prospectus for future reference. The date of this Prospectus Supplement is November 13, 1995 North Star Universal, Inc. and Subsidiaries SUMMARY FINANCIAL DATA (In thousands, except per share and ratio amounts) The following table sets forth certain summary financial data for the Company and should be read in conjunction with the Condensed Consolidated Financial Statements of the Company included in this Prospectus Supplement.
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) --------------------------- OPERATIONS: 1995 1994 ----------- ----------- Revenues $ 40,593 $ 34,820 Operating income (loss) 453 (483) Income from continuing operations 2,060 1,037 Discontinued operations (3,025) (922) Net income (loss) (965) 115 ----------- ----------- ----------- ----------- Income (loss) per share: Continuing operations $ .22 $ .11 Discontinuing operations (.32) (.10) ----------- ----------- Income (loss) per share $ (.10) $ .01 ----------- ----------- ----------- ----------- Ratio of earnings to fixed charges .19X ----------- -----------
September 30, 1995 December 31, FINANCIAL POSITION: (Unaudited) 1994 ----------- ----------- Total assets $ 109,682 $ 111,093 Long-term debt 44,522 45,061 Shareholders' equity 33,439 34,196 ----------- ----------- ----------- -----------
North Star Universal, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL North Star Universal, Inc. ("North Star" or "the Company") is a holding company. The Company's three key holdings consist of Michael Foods, Inc. ("Michael Foods"), CorVel Corporation ("CorVel") and its computer businesses. At September 30, 1995, the Company owned a 38% interest in Michael Foods and a 35% ownership interest in CorVel. The common stock of each of Michael Foods and CorVel is included on the NASDAQ National Market System under the symbols MIKL and CRVL. The Company's investments in Michael Foods and CorVel are accounted for as unconsolidated subsidiaries using the equity method of accounting. On May 5, 1995, the Company sold C.E. Services, Inc. through the sale of its shares of Dalworth Holdings, Inc., a holding company for C.E. Services, Inc., Bridging Solutions Corporation, Commercial Computer Services, Inc. and C.E. Services (Europe) Limited (collectively "C.E. Services") for approximately $2.5 million cash. C.E. Services is a third-party provider of systems, parts and services for mainframe computers and peripherals. Following the sale of C.E. Services, the Company's continuing operations consist of Americable, Inc. ("Americable") and Transition Networks, Inc., formerly Transition Engineering ("Transition"). Americable is a provider of connectivity and networking products and services. Transition designs, manufactures and markets connectivity devices used in local area network ("LAN") applications. The following are unaudited summarized operating results for each of the Company's continuing operations for the three and nine months ended September 30 (in thousands).
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------------- 1995 1994 1995 1994 --------------------------------------------- Revenues Americable $ 11,281 $ 10,842 $ 31,050 $ 27,704 Transition Networks 3,567 2,964 10,656 8,281 Eliminations (509) (468) (1,113) (1,165) --------------------------------------------- $ 14,339 $ 13,338 $ 40,593 $ 34,820 --------------------------------------------- --------------------------------------------- Gross Profit Americable $ 2,553 $ 2,283 $ 7,551 $ 6,367 Transition Networks 1,377 1,148 3,967 3,252 --------------------------------------------- $ 3,930 $ 3,431 $ 11,518 $ 9,619 --------------------------------------------- --------------------------------------------- Selling, General and Administrative Expenses Americable $ 2,267 $ 2,099 $ 6,658 $ 6,368 Transition Networks 1,176 1,054 3,328 2,945 Corporate 398 212 1,079 789 --------------------------------------------- $ 3,841 $ 3,365 $ 11,065 $ 10,102 --------------------------------------------- --------------------------------------------- Operating Income (Loss) Americable $ 286 $ 184 $ 893 $ (1) Transition Networks 201 94 639 307 Corporate (398) (212) (1,079) (789) --------------------------------------------- $ 89 $ 66 $ 453 $ (483) --------------------------------------------- ---------------------------------------------
North Star Universal, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1995 vs. THREE MONTHS ENDED SEPTEMBER 30, 1994 Consolidated revenues increased $1 million or 7.5%, to $14.3 million from $13.3 million in 1994. Revenues at Americable increased approximately $439,000 or 4%, to $11.3 million. This includes increased revenues of approximately $890,000 resulting from higher demand of networking products and services. Offsetting these increases was approximately $450,000 of decreased sales of cable assemblies and other connectivity products due primarily to lower mix of volume to contractors and resellers. Revenues at Transition increased approximately $603,000 or 20%, to $3.6 million which includes increased sales of approximately $345,000 or 17%, to domestic customers and approximately $258,000 or 26% to international customers. Overall, these increases are primarily a result of new product introductions and higher product demand from both new and existing customers. Sales from new product introductions and enhancements accounted for approximately $1.1 million or 32% of net sales for the period. Consolidated gross profit, as a percent of revenues, increased to 27.4% in 1995 as compared to 25.7% in 1994. Increased margins at Americable are primarily attributable to a higher mix of value-added networking service revenue and, to a lesser extent, improved pricing of cable assemblies. Margins at Transition were relatively unchanged between years. The Company's selling, general and administrative expenses increased $476,000 or 14.1%, to $3.8 million from $3.4 million in 1994. Operating expenses at Americable increased approximately 8% for the period which is primarily a result of higher sales commissions and the addition of technical and engineering personnel. Transition had increased operating expenses of approximately $122,000 or 11.6%, which reflects costs related to moving to a new facility, along with higher promotional and advertising expenses associated with new product introductions and company name change. In addition, corporate expenses increased approximately $186,000 due primarily to higher professional fees. Net interest expense decreased $36,000 to $1,045,000 from $1,081,000 in 1994, due primarily to lower borrowing levels at Americable and Transition between years. The income tax benefits of $325,000 in 1995 and $400,000 in 1994 relate to the elimination of deferred tax liabilities that will reverse as net operating losses available for carryforward are utilized in future periods. To the extent loss carryforwards are realized in the future, deferred taxes will be reinstated. North Star Universal, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (CONTINUED) Equity in earnings of unconsolidated subsidiaries increased $200,000 to $1,353,000 from $1,153,000 in the previous year. This includes increases of $134,000 and $66,000 in the equity in earnings of Michael Foods and CorVel Corporation, respectively, which is a result of higher earnings at each of these companies. Further information with respect to the results of operations of Michael Foods and CorVel is contained in the Management's Discussion and Analysis of Financial Condition and Results of Operation section of their respective quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission. The loss from discontinued operations for 1994 includes the operating and disposition losses of C.E. Services which was sold May 5, 1995 (see Note 2 to the Notes to Condensed Consolidated Financial Statements). North Star Universal, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (CONTINUED) NINE MONTHS ENDED SEPTEMBER 30, 1995 vs. NINE MONTHS ENDED SEPTEMBER 30, 1994 Consolidated revenues increased $5.8 million or 16.6%, to $40.6 million from $34.8 million in 1994. Revenues at Americable increased approximately $3.3 million or 12.1%, to $31.1 million. This includes increased revenues of approximately $3.5 million resulting from higher demand from networking products and services. Of this amount, approximately $2.7 million of sales were attributable to higher volume of networking products with a large end user customer of which such increase may not continue for the remainder of 1995. Offsetting these increases was approximately $200,000 of decreased sales of other connectivity products due to lower mix of volume to contractors and resellers. Revenues at Transition increased approximately $2.4 million or 29%, to $10.7 million which includes increased sales of approximately $1.3 million or 24%, to domestic customers and approximately $1.1 million or 37% to international customers. Overall, these increases are primarily a result of new product introductions and higher product demand from both new and existing customers. Sales from new product introductions and enhancements accounted for approximately $4.4 million or 41% of net sales for the period. Transition's ability to maintain its present level of sales and its continued sales growth is highly dependent upon its ability to offer new products that meet customer's demands in a rapidly changing market, particularly in light of the relatively short life cycle of its products. Consolidated gross profit, as a percent of revenues, increased to 28.4% in 1995 as compared to 27.6% in 1994. Increased margins at Americable are primarily attributable to a higher mix of value-added networking service revenue, and, to a lesser extent, improved manufacturing efficiencies within its cable assembly operation. Decreased margins at Transition was a result of lower pricing on certain product lines due to increased competition. The Company's selling, general and administrative expenses increased $963,000 or 9.5%, to $11.1 million from $10.1 million in 1994. Operating expenses at Americable increased approximately $290,000 or 4.6% for the period which is primarily a result of higher sales salaries and commissions and the addition of technical and engineering personnel. These increases were offset by an overall general and administrative expense reduction effected in both the third quarter of 1994 and second quarter of 1995. Americable expects, however, that its sales and marketing expenses, as a percentage of revenues, may increase during the year through the addition of sales and technical personnel in new geographic locations. These anticipated increases in operating expenses may result in lower operating profits at Americable, if the company is unable to maintain current gross profit margins and continued sales growth. North Star Universal, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (CONTINUED) Transition had increased operating expenses of approximately $383,000 or 13%, which is primarily due to increased sales and marketing expenses associated with its distributor conference, advertising and participation in trade shows. In addition, this increase reflects the addition of administrative and technical support personnel and related facility expenses needed to support its overall growth. Transition believes that its research and development expenses will increase in order to achieve market acceptance of new products. There can be no assurances, however, that its research and development efforts will result in commercially successful new products in the future. In addition Transition believes that sales and marketing expenses may continue to increase in terms of absolute dollars in an effort to differentiate its products and enhance its competitive position. These anticipated increases in operating expenses may result in lower operating profit at Transition, if the company is unable to maintain its current gross profit margins and continued sales growth. Corporate expenses increased approximately $290,000, or 37% primarily due to higher professional fees. The income tax benefits of $860,000 in 1995 and $1,340,000 in 1994 relate to the elimination of deferred tax liabilities that will reverse as net operating losses available for carryforward are utilized in future periods. To the extent loss carryforwards are realized in the future, deferred taxes will be reinstated. Equity in earnings of unconsolidated subsidiaries increased $547,000 to $3,885,000 from $3,338,000 in the previous year. This includes increases of $364,000 and $183,000 in the equity in earnings of Michael Foods and CorVel Corporation, respectively, which is a result of higher earnings at each of these companies. Further information with respect to the results of operations of Michael Foods and CorVel is contained in the Management's Discussion and Analysis of Financial Condition and Results of Operation section of their respective annual and quarterly reports as filed on Forms 10-K and 10-Q with the Securities and Exchange Commission. The loss from discontinued operations for the period includes the operating and disposition losses of C.E. Services which was sold May 5, 1995 (see Note 2 to the Notes to Condensed Consolidated Financial Statements). The loss from operations, net of income tax benefits, was $934,000 in 1995 versus $922,000 in 1994 which is attributable to the significant reduction in the domestic and international demand for used mainframe systems and features at C.E. Services. For the quarter ended June 30, 1995, the Company recorded a loss on disposition of approximately $2.1 million, net of an income tax benefit of $1.3 million, related to this sale. North Star Universal, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CAPITAL RESOURCES AND LIQUIDITY Historically, the Company has experienced cash flow deficits from operations. Cash used in operations was $3.4 million for the nine months ended September 30, 1995, as compared to $5.1 million in 1994. The Company expects operating cash flow deficits to continue. The Company does not have the use of cash flow generated by Michael Foods other than proceeds from quarterly dividends. In each of the nine month periods ended September 30, 1995 and 1994, the Company received dividends of $1,103,000. There can be no assurance that Michael Foods will continue to declare such dividends. Likewise, since CorVel's initial public offering in July 1991, the Company has not had the use of cash generated by CorVel and its subsidiaries. Since its initial public offering, CorVel has not declared any dividends, and has indicated that it does not anticipate doing so for the foreseeable future. The Company maintains a program whereby it sells subordinated debentures of various maturities to primarily individual investors. The debentures are offered on a continuous basis at interest rates that change from time to time depending on market conditions. Historically, a substantial portion of maturing debentures have been reinvested in new debentures. At September 30, 1995, the Company had approximately $42.4 million principal amount of subordinated debentures outstanding. For the nine months ended September 30, 1995, approximately $4.6 million or 55% of debenture maturities were reinvested in new debentures. Included within long-term debt repayments for the nine months ended September 30, 1995, is approximately $3.7 million of redemptions of subordinated debentures. Proceeds from long-term debt include approximately $3.2 million of new debentures sold along with approximately $1.4 million of compounded interest on debentures. The net activity under the debenture program for the period ended September 30, 1995 resulted in net cash proceeds to the Company of approximately $938,000. Americable and Transition maintain a revolving line of credit and term loan facility which provides borrowings up to $5.5 million due in May 1996. Borrowings under the revolving credit facility are based on eligible accounts receivable and inventory with interest at prime plus 1.5%, (10.25% at September 30, 1995). At September 30, 1995, there were outstanding borrowings of $983,000 under the revolving line of credit and $1.2 million under the term loan. At September 30, 1995, North Star had no borrowings outstanding under its $6.5 million revolving credit facility and approximately $3.9 million of cash and cash equivalents, excluding cash of its operating subsidiaries. As previously discussed, on May 5, 1995, the Company sold C.E. Services for $2.5 million cash. The Company believes that its available cash and cash equivalents along with its debenture program and amounts available under its revolving credit facility and the credit facilities of its operating companies, will be adequate to meet expected cash requirements for the remainder of the year. North Star Universal, Inc. and Subsidiaries INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Page Condensed Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 10 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1995 and 1994 11 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994 12 Notes to Condensed Consolidated Financial Statements 13 North Star Universal, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share data)
September 30, December 31, 1995 1994 ----------------------------------- ASSETS Current Assets Cash and cash equivalents $ 4,117 $ 5,102 Accounts receivable, net 8,718 8,980 Inventories 6,679 7,994 Prepaid expenses and other current assets 1,265 1,293 ---------------------------------- Total current assets 20,779 23,369 Property and equipment, net 1,547 3,747 Investment in unconsolidated subsidiaries 81,170 75,663 Goodwill, net 4,999 6,816 Other assets 1,187 1,498 ---------------------------------- $ 109,682 $ 111,093 ---------------------------------- ---------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable to bank $ - $ 600 Current portion of long-term debt 12,344 12,518 Accounts payable and accrued expenses 10,226 9,678 Income taxes payable 296 333 ---------------------------------- Total current liabilities 22,866 23,129 Long-term debt, net of current maturities 32,178 32,543 Deferred income taxes 21,199 21,225 Shareholders' Equity Common stock, $.25 par value 100,000,000 shares authorized, 9,438,000 issued and outstanding 2,360 2,360 Additional paid-in-capital 31,095 31,015 Retained earnings (deficit) (16) 949 Foreign currency translation adjustment - (128) ---------------------------------- Total shareholders' equity 33,439 34,196 ---------------------------------- $ 109,682 $ 111,093 ---------------------------------- ----------------------------------
See accompanying notes to condensed consolidated financial statements. North Star Universal, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, ----------------------------------------------- 1995 1994 1995 1994 ----------------------------------------------- Revenues $ 14,339 $ 13,338 $ 40,593 $ 34,820 Operating and product costs 10,409 9,907 29,075 25,201 ----------------------------------------------- Gross profit 3,930 3,431 11,518 9,619 Selling, general, and administrative expenses 3,841 3,365 11,065 10,102 ----------------------------------------------- Operating income (loss) 89 66 453 (483) Interest expense, net (1,045) (1,081) (3,138) (3,158) ----------------------------------------------- Loss before income taxes and equity in earnings of unconsolidated subsidiaries (956) (1,015) (2,685) (3,641) Income tax benefit (325) (400) (860) (1,340) ----------------------------------------------- Loss before equity in earnings of unconsolidated subsidiaries (631) (615) (1,825) (2,301) Equity in earnings of unconsolidated subsidiaries 1,353 1,153 3,885 3,338 ----------------------------------------------- Income from continuing operations 722 538 2,060 1,037 Discontinued operations Loss from operations, net of income tax benefits - (481) (934) (922) Loss on disposition, net of income tax benefit - - (2,091) - ----------------------------------------------- - (481) (3,025) (922) ----------------------------------------------- Net income (loss) $ 722 $ 57 $ (965) $ 115 ----------------------------------------------- ----------------------------------------------- Income (loss) per share Continuing operations $ 0.07 $ 0.06 $ 0.22 $ 0.11 Discontinued operations - (0.05) (0.32) (0.10) ----------------------------------------------- Income (loss) per share $ 0.07 $ 0.01 $ (0.10) $ 0.01 ----------------------------------------------- ----------------------------------------------- Weighted average shares outstanding 9,838,400 9,846,400 9,438,000 9,704,200 ----------------------------------------------- -----------------------------------------------
See accompanying notes to condensed consolidated financial statements. North Star Universal, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, (Unaudited) (In thousands)
1995 1994 ---------------------------------- Net cash used in operating activities $ (3,402) $ (5,131) Cash flows from investing activities Capital expenditures (458) (591) Proceeds from divestiture 2,500 - Other (221) 279 ---------------------------------- Net cash provided by (used in) investing activities 1,821 (312) ---------------------------------- Cash flow from financing activities Proceeds from long-term debt 45,958 29,182 Payments on long-term debt (46,465) (28,194) Proceeds from notes payable - 3,703 Payments on notes payable - (3,075) Cash dividends received from Michael Foods 1,103 1,103 ---------------------------------- Net cash provided by financing activities 596 2,719 ---------------------------------- Net decrease in cash and cash equivalents (985) (2,724) Cash and cash equivalents at beginning of period 5,102 6,981 ---------------------------------- Cash and cash equivalents at end of period $ 4,117 $ 4,257 ---------------------------------- ----------------------------------
See accompanying notes to condensed consolidated financial statements. North Star Universal, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation -- The accompanying unaudited condensed consolidated financial statements have been prepared by North Star Universal, Inc. ("North Star" or the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in the condensed consolidated financial statements includes normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Results for the three and nine months ended September 30 may not necessarily be indicative of the results to be expected for the full year. 2. Discontinued Operations -- On May 5, 1995, the Company completed the sale of its shares in Dalworth Holdings, Inc. and subsidiaries, including C.E. Services Inc. (collectively "C.E. Services") to Amdahl Corporation for $2.5 million cash. The loss on disposition was approximately $2.1 million, net of an income tax benefit of approximately $1.3 million. The accompanying condensed consolidated statements of operations have been restated for all periods presented to reflect C.E. Services as discontinued operations. The following are summarized results of operations and financial position for C.E. Services. Results for the period ended September 30, 1995 reflect the results of operations of C.E. Services through the date of sale (in thousands):
Results of Operations Nine Months Ended September 30, 1995 1994 ---------------------------------- Revenues $ 6,442 $ 37,317 Gross profit 1,233 5,369 Pretax loss (1,414) (1,062) Income tax benefit 480 140 Loss from operations (934) (922) Financial Position As of December 31, 1994 ---------------------------------- Current assets $ 4,786 Property and equipment, net 2,161 Goodwill and other assets 1,908 Total liabilities (2,799) ----------- Net assets of C.E. Services $ 6,056 ----------- -----------
North Star Universal, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Investment in Unconsolidated Subsidiaries -- The Company's unconsolidated subsidiaries consist of its investments in Michael Foods, Inc. ("Michael Foods") and CorVel Corporation ("CorVel"). CorVel has a fiscal year ended March 31. The following is summarized balance sheet and income statement information of the Company's unconsolidated subsidiaries as of, and for the nine month period ended September 30, 1995 (in thousands):
Michael Foods CorVel ---------------------------------- Current assets $ 95,891 $ 36,015 Noncurrent assets 242,649 13,337 Current liabilities 69,049 8,037 Noncurrent liabilities 93,877 896 Revenues 393,821 79,732 Gross profit 59,908 14,513 Net income 12,144 5,151
4. Inventories -- Inventories are stated at the lower of average cost (first-in, first-out) or market. Inventories consist of the following (in thousands):
September 30, December 31, 1995 1994 --------------------------------- Work in process and finished goods $ 5,230 $ 4,775 Purchased parts and supplies 1,449 3,219 --------------------------------- $ 6,679 $ 7,994 --------------------------------- ---------------------------------
5. Earnings Per Share -- Earnings per share are based on the average number of shares outstanding during the period after giving effect to the assumed exercise of outstanding stock options, except where the effects are antidilutive. 6. Income Taxes -- Deferred income taxes arise from temporary differences between financial and tax reporting. To the extent the Company's financial reporting basis in its investment in unconsolidated subsidiaries exceeds its tax basis, and is not expected to be realized in a tax-free manner, the Company records a deferred tax liability. At September 30, 1995, the deferred tax liability includes a cumulative tax effect of approximately $22.9 million and $5.7 million for the differences in the financial reporting and tax basis of the Company's investments in Michael Foods and CorVel, respectively. 7. Reclassifications -- Certain 1994 amounts have been reclassified to conform with the financial statement presentation used in 1995. Such reclassifications had no impact on previously reported retained earnings or net income. -----END PRIVACY-ENHANCED MESSAGE-----