-----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, MFYCBUr4i1ZlvaU29CDF7J6iZOMLPzA757CGpsYqf75tlRISClyXDkXZbGBfCzGL D71bnwJNnWCfPhSgJIBY4Q== 0000815910-01-000009.txt : 20010326 0000815910-01-000009.hdr.sgml : 20010326 ACCESSION NUMBER: 0000815910-01-000009 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010323 ITEM INFORMATION: FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROLOGIC INSTRUMENTS INC CENTRAL INDEX KEY: 0000815910 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 221866172 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24712 FILM NUMBER: 1577776 BUSINESS ADDRESS: STREET 1: COLES ROAD AT RTE 42 CITY: BLACKWOOD STATE: NJ ZIP: 08012 BUSINESS PHONE: 609-228-8100 MAIL ADDRESS: STREET 1: COLES ROAD ROUTE 42 CITY: BLACKWOOD STATE: NJ ZIP: 08012 8-K/A 1 0001.txt FORM 8-K/A 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 Date of Report - January 8, 2001 (Date of earliest event reported) METROLOGIC INSTRUMENTS, INC. (Exact name of Registrant as specified in its charter) New Jersey 0-24172 22-1866172 (State of incorporation) (Commission file number) (IRS employer identification number) 90 Coles Road, Blackwood, New Jersey, 08012 (Address of principal executive offices, zip code) Area Code (856) 228-8100 (Telephone number) Item 7. Financial Statements and Exhibits Registrant is filing this amendment to its Form 8-K Current Report, which was filed initially with the Securities and Exchange Commission on January 23, 2001, for the purpose of reporting under this Item 7 (i) the historical financial statements of the acquired business; and (ii) the pro forma financial information. a. Financial statements of business acquired: Report of Independent Accountants Balance Sheet as of December 31, 1999 Statement of Operations for the year ended December 31, 1999 Statement of Cash Flows for the year ended December 31, 1999 Notes to Financial Statements as of December 31, 1999 Balance Sheet as of September 30, 2000 (unaudited) Statements of Operations for the nine months ended September 30, 2000 and 1999 (unaudited) Statement of Cash Flows for the nine months ended September 30, 2000 and 1999 (unaudited) Notes to Financial Statements as of September 30, 2000 and 1999 (unaudited) b. Pro forma financial information: Pro Forma Combined Balance Sheet as of September 30, 2000 (unaudited) Pro Forma Combined Statement of Operations for the year ended December 31, 1999 (unaudited) ProForma Combined Statement of Operations for the nine months ended September 30, 2000 (unaudited). c. Exhibits: Exhibit Number Exhibit Description (2) Stock Purchase Agreement, dated December 22, 2000, by and among United Technologies Optical Systems, Inc., Hamilton Sundstrand Corporation, MTLG Investments Inc. and Metrologic Instruments, Inc.* (23.1) Consent of PricewaterhouseCoopers LLP (99.1) Credit Agreement, dated January 8, 2001, by and among Metrologic Instruments, Inc., Adaptive Optics Associates, Inc., the Guarantors named therein, PNC Bank, National Association, as agent to the Banks and the Banks named therein.* (99.2) Subordinated Promissory Note in the amount of $5 million, dated January 8, 2001, executed by MTLG Investments Inc. in favor of United Technology Optical Systems, Inc.* (99.3) Subordinated Promissory Note in the amount of $6 million, dated January 8, 2001, executed by MTLG Investments Inc. in favor of United Technology Optical Systems, Inc.* (99.4) Subordination, Nondisturbance and Attornment Agreement, dated January 8, 2001, by and among Metrologic Instruments, Inc., C. Harry Knowles, Janet Knowles, Metrologic Instruments, Inc. and PNC Bank, National Association, as Agent.* (99.5) Security Agreement, dated January 8, 2001, by and among Metrologic Instruments, Inc., C. Harry Knowles and Janet Knowles.* *These exhibits are incorporated by reference to the initial filing of the Registrant's Form 8-K Current Report filed with the Securities and Exchange Commission on January 23, 2001. Report of Independent Accountants To the Board of Directors and Stockholder of Adaptive Optics Associates, Inc.: In our opinion, the accompanying balance sheet and the related statements of operations and cash flows present fairly, in all material respects, the financial position of Adaptive Optics Associates, Inc. (a wholly-owned subsidiary of United Technologies Optical Systems, Inc.) (the "Company") at December 31, 1999, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the management of the Company; our responsibility is to express an opinion on these statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, 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 our opinion. The accompanying financial statements relate to the stand-alone operations of Adaptive Optics Associates, Inc., which include the allocation of certain costs and expenses as described further in the notes to the financial statements. Such financial statements are not necessarily indicative of the financial position, results of operations and cash flows of Adaptive Optics Associates, Inc. in the future or indicative of the results that would have been reported if Adaptive Optics Associates, Inc. had operated as a separate entity. PricewaterhouseCoopers LLP October 25, 2000 Boston, MA Adaptive Optics Associates, Inc. Balance Sheet For the Year Ended December 31, 1999 ----------------- Assets Current assets: Accounts receivable $ 3,543,833 Unbilled accounts receivable 1,103,739 Deferred income taxes 247,061 Inventories 1,750,290 Prepaid expenses 45,326 --------------- Total current assets 6,690,249 Property and equipment, net 4,038,931 Deferred income taxes 994,547 Other assets 39,717 --------------- Total assets $ 11,763,444 =============== Liabilities and Stockholder's Equity Current liabilities: Cash overdraft $ 108,419 Accounts payable 458,433 Accrued expenses 297,707 Accrued payroll and employee benefits 398,430 Income taxes payable 261,018 Deferred revenue 675,750 --------------- Total current liabilities 2,199,757 --------------- Commitments and contingencies (Note 7) Stockholder's equity: Common stock, $10 par value, 100 1,000 shares authorized, issued and outstanding Additional paid-in capital 618,190 Parent company investment 4,645,284 Retained earnings 4,299,213 --------------- Total stockholder's equity 9,563,687 --------------- Total liabilities and stockholder's equity $ 11,763,444 =============== The accompanying notes are an integral part of these financial statements. Adaptive Optics Associates, Inc. Statement of Operations For the Year Ended December 31, 1999 ----------------- Sales $ 21,720,982 Cost of goods sold 14,609,577 ---------------- Gross profit 7,111,405 Research and development expenses 889,910 Selling, general and administrative expenses 3,513,050 ---------------- Operating income 2,708,445 Loss on disposal of fixed assets (571,283) ---------------- Income before provision for income taxes 2,137,162 Provision for income taxes 798,110 ---------------- Net income $ 1,339,052 ================ The accompanying notes are an integral part of these financial statements. Adaptive Optics Associates, Inc. Statement of Cash Flows For the Year Ended December 31, 1999 ----------------- Cash flows from operating activities: Net income $ 1,339,052 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,110,702 Loss on disposal of fixed assets 571,283 Deferred income taxes 18,176 Changes in assets and liabilities: Accounts receivable (226,151) Unbilled accounts receivable (365,325) Inventories 271,051 Prepaid expenses (1,387) Other assets (251) Accounts payable 310,568 Accrued expenses 237,427 Accrued payroll and employee benefits (80,140) Income taxes payable (156,267) Deferred revenue (552,335) ------------- Total adjustments 1,137,351 ------------- Net cash provided by operating activities 2,476,403 ------------- Cash flows from investing activities: Purchases of property and equipment (3,054,927) ------------- Net cash used in investing activities (3,054,927) ------------- Cash flows from financing activities: Increase (decrease) in cash overdraft 30,296 Change in parent company investment 548,228 ------------- Net cash provided by financing activities 578,524 ------------- Net increase in cash - Cash and cash equivalents, beginning of year - ------------- Cash and cash equivalents, end of year $ - ------------- Supplemental disclosures of cash flow information: Cash paid for taxes $ 1,019,500 ============= The accompanying notes are an integral part of these financial statements. Adaptive Optics Associates, Inc. Notes to Financial Statements December 31, 1999 1. Basis of Presentation and Organization Adaptive Optics Associates, Inc. ("AOA" or the "Company"), a Delaware corporation, is engaged in developing, manufacturing, marketing and distributing custom optical systems which include precision laser beam delivery, high speed imaging control and data processing, industrial inspection, and scanning and dimensioning systems (collectively "electro-optical systems") for the aerospace and defense industry in the United States and Canada. The Company is a wholly-owned subsidiary of United Technologies Optical Systems, Inc., a wholly-owned subsidiary of United Technologies Corporation ("UTC") and is operated as a division of Hamilton Sundstrand Corporation ("Hamilton Sundstrand"). The Company's financial statements reflect the application of certain cash management and allocation policies. UTC manages most treasury activities on a centralized basis including the investing of the Company's surplus cash and the funding of the Company's cash disbursements. The arrangement described above has been accounted for through the parent company investment account. In addition, certain costs related to employee benefit programs, including employee insurance programs are funded by UTC and charged to AOA. These allocated costs are charged to AOA and recorded as an offsetting credit in the parent company investment account. The costs related to employee benefit programs such as pension and postretirement health care benefits are allocated to AOA on an actuarial basis using participant and plan design data. Furthermore, Hamilton Sundstrand provides administrative management, legal, HR, information systems and communication services. The costs of these services are allocated based on a two-year average of sales plus cost of sales as compared to the sales plus cost of sales of Hamilton Sundstrand. All of the allocations and estimates in the Company's financial statements are based on assumptions that UTC and AOA management believe are reasonable under the circumstances. The Company's financial statements are not necessarily indicative of the financial position, results of operations and cash flows in the future or the results that would have been reported on a stand-alone basis. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Risks and Uncertainties The business environment in which the Company operates is subject to rapidly changing conditions. Certain assets include estimates that are particularly sensitive to changes in the near term. Inventories and related specialized manufacturing equipment may be subject to such rapid technological change. Revenue Recognition Revenue is recognized on a percentage of completion basis (generally using the cost-to-cost method) for long-term contracts and upon delivery for short-term contracts. Unbilled accounts receivable represent the excess of costs incurred and estimated earnings recognized to date over billings to date on certain contracts. Deferred contract revenue represents the excess of billings to date over costs incurred and estimated earnings recognized to date on certain contracts. Subject to certain restrictions, the Company warrants some products for defects in materials and workmanship for a period of one year. Accruals for estimated future product warranty costs are provided at the time sales are recognized based upon the Company's historical claim experience. Warranty expenses were approximately $32,000 for the year ended December 31, 1999. Inventories Inventories include direct material, direct labor and manufacturing overhead and are accounted for at the lower-of-cost or market using the average cost method, which approximated actual. The Company evaluates the need for reserves associated with obsolete, slow-moving and nonsaleable inventory by estimating net realizable values. Inventoried costs in excess of requirements for contracts and current or anticipated orders have been reserved and written-off in the period that such inventory was considered excess. Property and Equipment Property and equipment are stated at cost. Depreciation is computed on the straight-line basis over the following estimated useful lives: Leasehold improvements Shorter of lease term or 12 years Furniture and fixtures 10 years Office equipment 10 years Lab equipment 8 years Computers and software 3 years Maintenance and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and the net gain or loss is included in the determination of net income. Research and Development Research and development costs not specifically covered by contracts are charged to expense as incurred. Income Taxes AOA was included in the consolidated U.S. federal income tax return of UTC. Under an agreement with UTC, income taxes are allocated to members of the consolidated group based upon amounts they would pay or receive as if they filed a separate income tax return. The provision for income taxes of the Company has been prepared as if a separate U.S. federal income tax return had been prepared on a stand-alone basis. Deferred income taxes are provided on the differences in the book and tax bases of assets and liabilities at the statutory tax rates expected to be in effect when such differences are reversed. A valuation allowance is provided on the tax benefits otherwise associated with certain tax attributes unless it is considered more likely than not that the benefits will be realized. UTC incurs federal and certain state taxes on behalf of AOA with an allocation of such taxes to the Company. Fair Value of Financial Information The carrying amounts of the Company's financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, approximate fair value. Long-Lived Assets The Company evaluates the carrying value of its long-lived assets under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". In accordance with SFAS 121, when appropriate, the Company estimates the future undiscounted cash flows of the operations to which the long-lived assets relate to ensure that the carrying value has not been impaired. Management believes no such impairment exists at December 31, 1999. Significant Customers The Company had direct sales to three customers that accounted for approximately $18.6 million of total sales for the year ended December 31, 1999. No other customers accounted for more than 10% of total sales for any period presented. 3. Related Party Transactions The financial statements include significant transactions with UTC and Hamilton Sundstrand involving functions and services that were provided to the Company, the most significant of which are discussed below. Centralized Treasury Functions and Financing UTC provides centralized treasury functions and financing, including all investing and borrowing activities for AOA. As part of this practice, surplus cash is remitted to UTC and UTC advances cash, as necessary, to AOA. No interest is charged or paid on these amounts. A reconciliation of the Parent Company investment account activity for the Company is as follows: Year ended December 31, 1999 Balance, beginning of year $ 4,097,056 Net intercompany transactions 548,228 ------------- Balance, end of year $ 4,645,284 ============= Tax Arrangement See discussion in Note 2 under Income Taxes Insurance Programs AOA participates in UTC developed and administered employee insurance programs, including group medical, workers compensation, property, general and product liability coverage. Costs allocated to the Company relating to these programs were approximately $971,900 for the year ended December 31, 1999. Under these insurance programs, any group company submitting a claim would be liable to pay any deductible amount required under the policy coverage, depending upon type. It is likely that as a separate company, the Company would be subject to differing levels of insurance premiums, coverages and deductibles. Employee Pension Plans The Company participates in two defined benefit pension plans covering substantially all employees. For salaried employees, plan benefits are generally based on years of service and the employee's compensation during the last several years of employment. For hourly employees, plan benefits are generally based on years of service and the benefit level established by UTC. For purposes of the financial statements, the Company is considered to be a participant in multi-employer plans. Such costs and plan administrative costs allocated to the Company, approximated $424,000 for the year ended December 31, 1999. Postretirement Health and Welfare Benefit Liability Eligible retirees of AOA participate in the UTC retiree medical plan. This plan provides post-retirement medical benefits until age 65, with premiums based on service credits. Spouses and dependents are also eligible for coverage. No AOA retirees are currently enrolled in the Plan. Eligible retirees of the Company participate in the UTC retiree life insurance plan, which is an employee-pay-all plan. For purposes of the financial statements, the Company is considered to be a participant in multi-employer plans. Such costs and plan administrative costs allocated to the Company approximated $29,700 year ended December 31, 1999. Employee Savings Plan The Company participates in UTC's Employee Stock Ownership Plan. The amounts expensed relative to the Company's employee's participation in that plan totaled approximately $222,300 for the year ended December 31, 1999. 4. Inventories December 31, 1999 ----------------- Raw materials $ 1,111,681 Work-in-process 196,660 Contract costs 583,743 Finished goods 192,781 ----------- 2,084,865 Less: inventory reserves 334,575 ----------- $ 1,750,290 =========== 5. Property and Equipment December 31, 1999 ----------------- Leasehold improvements $ 2,453,550 Office equipment 211,576 Lab equipment 3,217,540 Computer equipment and software 2,642,116 Furniture and fixtures 497,563 Construction in-progress 20,892 ------------ 9,043,237 Less: accumulated depreciation 5,004,306 ------------ $ 4,038,931 ============ 6. Income Taxes The income tax provision recorded for the year ended December 31, 1999 is as follows: Current: Federal $ 687,426 State 92,508 ------------ 779,934 ------------ Deferred: Federal 13,982 State 4,194 ------------ 18,176 ------------ Provision for income taxes $ 798,110 ============ A reconciliation of the statutory U.S. federal income tax rate to the Company's effective tax rate is as follows: 1999 Statutory U.S. federal income tax rate 35.00% State taxes, net of federal benefit 6.17 Other, nondeductible items (3.65) ------------- Effective tax rate 37.52% ============= The components of deferred income taxes at December 31, 1999 are as follows: Deferred tax assets: Property and equipment $ 2,996 Reserves 262,676 Pension 748,916 Other retirement benefits 241,421 Employee benefits 16,470 -------------- Deferred tax assets 1,272,479 Deferred tax liabilities: Property and equipment (25,618) Employee benefits (4,859) Other (394) -------------- Deferred tax liabilities (30,871) Valuation allowance - -------------- Net deferred tax asset $ 1,241,608 ============== Deferred tax assets (liabilities) reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized; accordingly, no valuation allowance has been recorded for net deferred tax assets. 7. Commitments AOA has various lease agreements for office space and equipment. These lease agreements expire at various dates through 2010. Total rental expense for the year ended December 31, 1999 was $603,475. The following is a schedule of the future minimum lease payments. 2000 $ 1,363,918 2001 1,268,582 2002 1,173,164 2003 1,173,164 2004 1,236,237 Thereafter 8,275,221 8. Subsequent Event During the third quarter of 2000, United Technologies Corporation entered into negotiations with a third party regarding the sale of the Company. The anticipated transaction would result in the purchase of all the outstanding stock of the Company. Effective 2000, the Company outsourced its ITS function and sold its computer equipment to an unrelated party. The Company subsequently will lease this equipment during 2000 from the unrelated party. Adaptive Optics Associates, Inc. Balance Sheets September 30, 2000 1999 (Unaudited) (Unaudited) Assets ------------ ------------- Current assets: Accounts receivable $ 3,013,096 $ 2,916,308 Unbilled accounts receivable 1,216,398 1,820,872 Deferred income taxes 289,994 245,833 Inventories 2,894,966 1,451,315 Prepaid expenses 44,376 203,303 ------------ ------------- Total current assets 7,458,830 6,637,631 Property and equipment, net 4,057,924 3,448,443 Deferred income taxes 1,145,958 910,761 Other assets 35,927 39,717 ------------ ------------- Total assets $ 12,698,639 $ 11,036,552 ============ ============= Liabilities and Stockholder's Equity Current liabilities: Cash overdraft $ 225,397 $ 308,631 Accounts payable 412,258 458,937 Accrued expenses 631,997 331,767 Accrued payroll and employee benefits 580,216 529,921 Income taxes payable 70,281 438,038 Deferred revenue 908,141 931,129 ------------ ------------- Total current liabilities 2,828,290 2,998,423 ------------ ------------- Commitments and contingencies Stockholder's equity: Common stock, $10 par value, 100 shares authorized, issued and outstanding 1,000 1,000 Additional paid-in capital 618,190 618,190 Parent company investment 4,435,551 3,570,750 Retained earnings 4,815,608 3,848,189 ------------ ------------- Total stockholder's equity 9,870,349 8,038,129 ------------ ------------- Total liabilities and stockholder's equity $ 12,698,639 $ 11,036,552 ============ ============= The accompanying notes are an integral part of these financial statements. Adaptive Optics Associates, Inc. Statements of Operations For the Nine Months Ended September 30, 2000 1999 (Unaudited) (Unaudited) ------------- ------------- Sales $ 15,995,222 $ 16,024,282 Cost of goods sold 11,010,753 10,728,029 ------------- ------------- Gross profit 4,984,469 5,296,253 Research and development expenses 764,782 694,336 Selling, general and administrative expenses 3,097,460 3,084,522 ------------- ------------- Income before provision for income taxes 1,122,227 1,517,395 Provision for income taxes 460,113 568,113 ------------- ------------- Net income $ 662,114 $ 949,282 ============= ============= The accompanying notes are an integral part of these financial statements. Adaptive Optics Associates, Inc. Statements of Cash Flows For the Nine Months Ended September 30, 2000 1999 (Unaudited) (Unaudited) ------------- ----------- Cash flows from operating activities: Net income $ 662,114 $ 949,282 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 616,202 833,029 Loss on disposal of fixed assets - 172,699 Deferred income taxes (194,344) 103,190 Changes in assets and liabilities: Accounts receivable 530,737 401,374 Unbilled accounts receivable (112,659) (1,082,458) Inventories (1,144,676) 570,026 Prepaid expenses 950 (159,364) Other assets 3,790 (251) Accounts payable (46,175) 311,072 Accrued expenses 334,290 271,487 Accrued payroll and employee benefits 181,786 51,351 Income taxes payable (336,456) (40,502) Deferred revenue 232,391 (296,956) ------------- ----------- Total adjustments 65,836 1,134,697 ------------- ----------- Net cash provided by operating activities 727,950 2,083,979 ------------- ----------- Cash flows from investing activities: Purchases of property and equipment (635,195) (1,788,181) ------------- ----------- Net cash used in investing activities (635,195) (1,788,181) ------------- ----------- Cash flows from financing activities: Increase in cash overdraft 116,978 230,508 Change in parent company investment (209,733) (526,306) ------------- ----------- Net cash used in financing activities (92,755) (295,798) ------------- ----------- Net increase in cash - - Cash and cash equivalents, beginning of year - - ------------- ----------- Cash and cash equivalents, end of year $ - $ - ============= =========== The accompanying notes are an integral part of these financial statements. Adaptive Optics Associates, Inc. Notes to Financial Statements September 30, 2000 (unaudited) 1. Basis of Presentation and Organization Adaptive Optics Associates, Inc. ("AOA" or the "Company"), a Delaware corporation, is engaged in developing, manufacturing, marketing and distributing custom optical systems which include precision laser beam delivery, high speed imaging control and data processing, industrial inspection, and scanning and dimensioning systems (collectively "electro-optical systems") for the aerospace and defense industry in the United States and Canada. The Company is a wholly-owned subsidiary of United Technologies Optical Systems, Inc., a wholly-owned subsidiary of United Technologies Corporation ("UTC") and is operated as a division of Hamilton Sundstrand Corporation ("Hamilton Sundstrand"). The Company's financial statements reflect the application of certain cash management and allocation policies. UTC manages most treasury activities on a centralized basis including the investing of the Company's surplus cash and the funding of the Company's cash disbursements. The arrangement described above has been accounted for through the parent company investment account. In addition, certain costs related to employee benefit programs, including employee insurance programs are funded by UTC and charged to AOA. These allocated costs are charged to AOA and recorded as an offsetting credit in the parent company investment account. The costs related to employee benefit programs such as pension and postretirement health care benefits are allocated to AOA on an actuarial basis using participant and plan design data. Furthermore, Hamilton Sundstrand provides administrative management, legal, HR, information systems and communication services. The costs of these services are allocated based on a two-year average of sales plus cost of sales as compared to the sales plus cost of sales of Hamilton Sundstrand. All of the allocations and estimates in the Company's financial statements are based on assumptions that UTC and AOA management believe are reasonable under the circumstances. The Company's financial statements are not necessarily indicative of the financial position, results of operations and cash flows in the future or the results that would have been reported on a stand-alone basis. 2. Interim Financial Information The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of the interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. 3. Summary of Significant Accounting Policies Inventories Inventories include direct material, direct labor and manufacturing overhead and are accounted for at the lower-of-cost or market using the average cost method, which approximated actual. The Company evaluates the need for reserves associated with obsolete, slow-moving and nonsaleable inventory by estimating net realizable values. Inventoried costs in excess of requirements for contracts and current or anticipated orders have been reserved and written-off in the period that such inventory was considered excess. 4. Inventories September 30, 2000 1999 ---- ---- Raw materials $ 1,811,646 $ 785,862 Work-in-process 150,427 185,018 Contract costs 1,185,763 622,648 Finished goods 32,925 191,867 ------------ ---------- 3,180,761 1,785,395 Less: inventory reserves 285,795 334,080 ------------ ---------- $ 2,894,966 $ 1,451,315 ============ =========== UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following unaudited pro forma combined financial statements of Metrologic Instruments, Inc. and its subsidiaries ("Metrologic" or "Metrologic Instruments, Inc.") consists of (i) an unaudited pro forma combined balance sheet as of September 30, 2000, (ii) an unaudited pro forma combined statement of operations for the year ended December 31, 1999, and (iii) an unaudited pro forma combined statement of operations for the nine months ended September 30, 2000, collectively the "pro forma statements." The unaudited pro forma combined balance sheet as of September 30, 2000 combines the consolidated balance sheet of Metrologic as of September 30, 2000 and the balance sheet of Adaptive Optics Associates, Inc. ("AOA") as of September 30, 2000, as adjusted for the acquisition on January 8, 2001 in which Metrologic, through a wholly owned subsidiary, MTLG Investments Inc. ("MTLG"), acquired all of the outstanding common stock of AOA. The unaudited pro forma combined balance sheet is presented as if the acquisition was consummated on September 30, 2000. The unaudited pro forma combined statements of operations combine the historical consolidated statements of operations of Metrologic for the year ended December 31, 1999 and for the nine months ended September 30, 2000 and the statements of operations of AOA for the year ended December 31, 1999 and for the nine months ended September 30, 2000, as adjusted for the acquisition on January 8, 2001 in which Metrologic, through MTLG, acquired all of the outstanding common stock of AOA. The unaudited pro forma combined statements of operations are presented as if the acquisition was consummated on January 1, 1999 and January 1, 2000, respectively. The unaudited pro forma financial statements as described above should be read in conjunction with the separate historical financial statements of AOA and related notes thereto (included herein) and the historical consolidated financial statements of Metrologic, the related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in Metrologic's Annual Report on Form 10-K for the year ended December 31, 1999 and Metrologic's Quarterly Report on Form 10-Q for the period ended September 30, 2000, and with the accompanying notes to the unaudited pro forma financial statements. The unaudited pro forma financial statements are based upon currently available information and upon certain assumptions that Metrologic believes are reasonable under the circumstances. The unaudited pro forma financial statements do not purport to represent what Metrologic's financial position or results of operations would actually have been if the acquisition of AOA occurred at such date or at the beginning of the period indicated or to project Metrologic's financial position or results of operations at any future date or for any future period, nor do these pro forma combined financial statements give effect to any matters other than those described in the notes thereto. The final purchase price is subject to adjustment based upon a final determination of working capital. In addition, the allocation of the purchase price to these costs and liabilities of AOA are preliminary and the final allocations may differ from the amounts reflected herein. Metrologic believes that the acquisition of AOA will yield accretive combined results in 2001 of approximately $0.05 per share, after taking acquisition related costs into consideration. The discussion in this Form-8K/A includes forward-looking statements based on current management expectations. Factors which would cause the results to differ from these expectations include the following: Metrologic's ability to integrate AOA with other Metrologic subsidiaries, and realize anticipated impact on results of operations; foreign currency fluctuations with the U.S. dollar; the timing, introduction and market acceptance of Metrologic's new products; pricing pressures; competitive factors (including the results of the company's new marketing efforts); sales cycles of Metrologic's products; technological changes in the scanner industry, specifically holographic scanners; availability of patent protection for Metrologic's holographic scanners and other products; general economic conditions, and the disposition of legal issues. For additional factors, please see the company's reports filed with the Securities and Exchange Commission. Metrologic Instruments, Inc. Pro Forma Combined Balance Sheet September 30, 2000 (Unaudited) (in thousands) Historical Historical Pro Forma Metrologic(5) AOA(6) Adjustments Combined ---------- --- ----------- -------- Assets Current Assets Cash and cash equivalents $ 4,433 $ 4,433 Accounts receivable, net 26,164 $ 4,230 30,394 Inventory 25,632 2,895 28,527 Deferred income taxes 1,018 290 $ (290)(4) 1,018 Other current assets 1,264 44 _ 1,308 ---------- -------- ------- --------- Total current assets 58,511 7,459 (290) 65,680 Property, plant and equipment, net 10,250 4,058 14,308 Patents and trademarks, net 2,797 2,797 Holographic technology, net 629 629 Advance license fee, net 1,559 1,559 Goodwill, net 4,155 10,987(1) 15,142 Deferred income taxes - 1,146 (1,146)(4) 0 Security deposits and other assets 599 36 635 ---------- -------- ------- --------- Total assets 78,500 12,699 9,551 100,750 ========== ======== ======= ========= Liabilities & Shareholders' Equity Current liabilities Cash overdraft - 225 225 Line of credit 15,475 8,000(2) 23,475 Current portion of notes payable 2,348 2,348 Accounts payable 6,859 412 7,271 Accrued expenses 9,601 632 10,233 Other current liabilities - 1,559 422(3) 1,981 ---------- -------- ------- --------- Total current liabilities 34,283 2,828 8,422 45,533 Notes payable, net of current portion 7,727 11,000(2) 18,727 Deferred income taxes 556 556 Other liabilities 577 577 Shareholders' Equity Common stock 54 1 (1)(7) 54 Additional paid in capital 17,501 5,054 (5,054)(7) 17,501 Retained earnings 20,526 4,816 (4,816)(7) 20,526 Accumulated other comprehensive loss (2,724) (2,724) ----------- -------- --------- --------- Total shareholders' equity 35,357 9,871 (9,871) 35,357 ----------- -------- --------- --------- Total liabilities and equity $ 78,500 $ 12,699 $ 9,551 $ 100,750 =========== ======== ========== ========= The accompanying notes are an integral part of these pro forma combined financial statements. Notes to Unaudited Pro Forma Balance Sheet (1) Reflects the estimated purchase accounting adjustments for the AOA acquisition based upon Metrologic's preliminary estimate of the assets and liabilities assumed. For purchase accounting, AOA's assets have been recorded at their estimated fair market value subject to adjustments based upon the results of an independent appraisal. The estimated amounts recorded for assets and liabilities acquired from AOA are not expected to differ materially from the final assigned values. The calculation of excess purchase cost over fair value of net assets acquired is as follows: (in thousands) Additional debt borrowed to finance acquisition $ 19,000 Direct acquisition costs 422 ----------- Total purchase cost 19,422 Less: net book value of assets acquired 8,435 ----------- Excess purchase cost over fair value of assets acquired and liabilities assumed (goodwill) $ 10,987 ========== (2) Reflects additional borrowings of $19,000 to finance the AOA acquisition and direct acquisition costs. (3) Reflects the liability for direct acquisition costs of $422. (4) Reflects the elimination of deferred tax assets of AOA as a result of this taxable business combination. (5) This column represents the historical financial position of Metrologic Instruments, Inc. at September 30, 2000. (6) This column represents the historical financial position of Adaptive Optics Associates, Inc. at September 30, 2000. (7) Reflects the elimination of shareholders' equity of Adaptive Optics Associates, Inc. Metrologic Instruments, Inc. Pro Forma Combined Statement of Operations For the Year Ended December 31, 1999 (Unaudited) (in thousands, except per share data) Historical Historical Pro Forma Pro Forma Metrologic(4) AOA(5) Adjustments Combined ---------- --- ----------- -------- Sales $ 80,103 $ 21,720 $ 101,823 Cost of sales 46,710 14,609 61,319 --------- -------- --------- Gross profit 33,393 7,111 40,504 Operating Expenses: Selling, general and administrative 21,331 3,513 $ (235)(6) 24,609 Research and development 4,327 890 5,217 -------- ------- ------- --------- Operating income 7,735 2,708 235 10,678 Other income (expenses): Interest income 402 - 402 Interest expense (262) - (1,940)(2) (2,202) Foreign currency transaction loss (342) - (342) Other, net - (571) (571) Goodwill amortization - - (1,099)(1) (1,099) --------- ------- ------- --------- Income before provision for income taxes 7,533 2,137 (2,804) 6,866 Provision for income taxes 2,636 798 (894)(3) 2,540 --------- ------- ------- --------- Net income $ 4,897 $ 1,339 $(1,910) $ 4,326 ========= ======= ======= ========= Basic earnings per share Weighted average shares outstanding 5,412,564 5,412,564 ========= ========= Basic earnings per share 0.90 0.80 ========= ========= Diluted earnings per share Weighted average shares outstanding 5,412,564 5,412,564 Net effect of dilutive securities 47,630 47,630 --------- --------- Total shares outstanding used in computing diluted earnings per share 5,460,194 5,460,194 ========= ========= Diluted earnings per share 0.90 0.79 ========= ========= (1) Reflects an increase in amortization expense of $1,099 relating to the amortization of the acquired goodwill recorded in connection with the AOA acquisition. The acquired goodwill is based on estimated values and is amortized using the straight-line method over 10 years, the current estimated useful life. (2) Reflects the incremental interest expense of $1,940 incurred on the additional debt borrowed to finance the AOA acquisition. The weighted average interest rate on the additional debt was 10.21% per annum. (3) Reflects the tax effect of the pro forma interest expense adjustment and the reduction in income tax provision based on an overall combined effective federal and state income tax rate of 37%. (4) This column represents the historical results of operations of Metrologic Instruments, Inc. for the periods presented. (5) This column represents the historical results of operations of Adaptive Optics Associates, Inc. for the periods presented. (6) Reflects a decrease in selling, general and administrative expenses as a result of eliminating parent company cost allocations. Metrologic Instruments, Inc. Pro Forma Combined Statement of Operations For the Nine Months Ended September 30, 2000 (Unaudited) (in thousands, except per share data) Historical Historical Pro Forma Pro Forma Metrologic(4) AOA(5) Adjustments Combined ---------- --- ----------- -------- Sales $ 67,913 $ 15,995 $ 83,908 Cost of sales 40,789 11,011 51,800 --------- -------- --------- Gross profit 27,124 4,984 32,108 Operating Expenses: Selling, general and administrative 18,486 3,097 $ (496)(6) 21,087 Research and development 3,916 765 4,681 -------- ------- ------- --------- Operating income 4,722 1,122 496 6,340 Other income (expenses): Interest income 201 - 201 Interest expense (846) - (1,466)(2) (2,312) Foreign currency transaction gain 73 - 73 Other, net (264) - (264) Goodwill amortization - - (824)(1) (824) --------- ------- ------- --------- Income before provision for income taxes 3,886 1,122 (1,794) 3,214 Provision for income taxes 1,326 460 (597)(3) 1,189 --------- ------- ------- --------- Net income $ 2,560 $ 662 $(1,197) $ 2,025 ========= ======= ======= ========= Basic earnings per share Weighted average shares outstanding 5,434,409 5,434,409 ========= ========= Basic earnings per share 0.47 0.37 ========= ========= Diluted earnings per share Weighted average shares outstanding 5,434,409 5,434,409 Net effect of dilutive securities 159,171 159,171 --------- --------- Total shares outstanding used in computing diluted earnings per share 5,593,580 5,593,580 ========= ========= Diluted earnings per share 0.46 0.36 ========= ========= (1) Reflects an increase in amortization expense of $824 relating to the amortization of the acquired goodwill recorded in connection with the AOA acquisition. The acquired goodwill is based on estimated values and is amortized using the straight-line method over 10 years, the current estimated useful life. (2) Reflects the incremental interest expense of $1,466 incurred on the additional debt borrowed to finance the AOA acquisition. The weighted average interest rate on the additional debt was 10.21% per annum. (3) Reflects the tax effect of the pro forma interest expense adjustment and the reduction in income tax provision based on an overall combined effective federal and state income tax rate of 37%. (4) This column represents the historical results of operations of Metrologic Instruments, Inc. for the periods presented. (5) This column represents the historical results of operations of Adaptive Optics Associates, Inc. for the periods presented. (6) Reflects a decrease in selling, general and administrative expenses as a result of eliminating parent company cost allocations. 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. METROLOGIC INSTRUMENTS, INC. By: /s/Thomas E. Mills IV ---------------------------------------------- Thomas E. Mills IV, President, Chief Operating Officer, and Chief Financial Officer March 23, 2001 EXHIBIT INDEX Exhibit Number Exhibit Description (2) Stock Purchase Agreement, dated December 22, 2000, by and among United Technologies Optical Systems, Inc., Hamilton Sundstrand Corporation, MTLG Investments Inc. and Metrologic Instruments, Inc.* 23.1 Consent of PricewaterhouseCoopers LLP (99.1) Credit Agreement, dated January 8, 2001, by and among Metrologic Instruments, Inc., Adaptive Optics Associates, Inc., the Guarantors named therein, PNC Bank, National Association, as agent to the Banks and the Banks named therein.* (99.2) Subordinated Promissory Note in the amount of $5 million, dated January 8, 2001, executed by MTLG Investments Inc. in favor of United Technology Optical Systems, Inc.* (99.3) Subordinated Promissory Note in the amount of $6 million, dated January 8, 2001, executed by MTLG Investments Inc. in favor of United Technology Optical Systems, Inc.* (99.4) Subordination, Nondisturbance and Attornment Agreement, dated January 8, 2001, by and among Metrologic Instruments, Inc., C. Harry Knowles, Janet Knowles, Metrologic Instruments, Inc. and PNC Bank, National Association, as Agent.* (99.5) Security Agreement, dated January 8, 2001, by and among Metrologic Instruments, Inc., C. Harry Knowles and Janet Knowles.* *These exhibits are incorporated by reference to the initial filing of the Registrant's Form 8-K Current Report filed with the Securities and Exchange Commission on January 23, 2001. Exhibit 23.1 Independent Auditors' Consent We consent to the incorporation by reference in the Registration Statement on Form S-8 (Registration No. 33-89376) pertaining to Metrologic Instruments, Inc. 1994 Incentive Plan and the Registration Statement on Form S-8 (Registration No. 33-86670) pertaining to Metrologic Instruments, Inc. Employee Stock Purchase Plan of our report dated October 25, 2000 with respect to the financial statements of Adaptive Optics Associates, Inc. for the year ended December 31, 1999 included in this Current Report on Form 8KA. March 23, 2001 PricewaterhouseCoopers Boston, MA -----END PRIVACY-ENHANCED MESSAGE-----