8-K/A 1 b415708ke8-ka.txt FISHER SCIENTIFIC INTERNATIONAL INC. United States 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 (Date of Earliest Event Reported): November 5, 2001 FISHER SCIENTIFIC INTERNATIONAL INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 1-10920 02-0451017 (Commission File No.) (IRS Employer Identification No.) One Liberty Lane, Hampton, New Hampshire 03842 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (603) 926-5911 Not Applicable (Former name or former address, if changed since last report) Fisher Scientific International Inc. Form 8-K/A INDEX Page No. Item 2 Acquisition or Disposition of Assets 1 Item 7 Financial Statements and Exhibits (a) Financial Statements of Acquired Business 1 (b) Pro Forma Financial Information Unaudited Pro Forma Combined Statement of Operations- For the nine months ended September 30, 2001 3 For the year ended December 31, 2000 4 Unaudited Pro Forma Combined Balance Sheet - September 30, 2001 5 Notes to Unaudited Pro Forma Financial Information 6 (c) Exhibits 9 On November 13, 2001, Fisher Scientific International Inc. (the "Company" or "Fisher") filed a report on Form 8-K with the Securities and Exchange Commission reporting the acquisition described in Item 2 (the "Original Form 8-K"). This current report on Form 8-K/A amends the Original Form 8-K to include the financial statements and exhibits required by Item 7. Item 2. Acquisition or Disposition of Assets. On November 5, 2001, Fisher through its wholly-owned indirect subsidiary Fisher Clinical Services Inc., acquired 100% of the share capital of Cole-Parmer Instrument Company (an Illinois corporation), Labcor Technical Sales, Inc. (an Ontario corporation) and Specialty Motors, Inc. (a California corporation) (collectively "Cole-Parmer") in a cash transaction for a total purchase price of approximately $208.5 million, net of cash acquired. Headquartered in Vernon Hills, Illinois, Cole-Parmer is a leading worldwide distributor of specialty technical instruments, appliances, equipment and supplies, to industrial, bioscience, academic and governmental customers, with fiscal 2001 revenues of approximately $176 million. Additionally, Cole-Parmer manufactures and distributes peristaltic pumps and related fluid management instrumentation. The sellers were Jerome J. Cole, John C. Parmer and members of their families. The transaction was effected through a stock purchase agreement providing for the purchase price to be paid in cash at the closing. The final purchase price was determined by subtracting from the base purchase price the amount of net debt at the closing. Fisher financed the purchase with available cash and through the sale of accounts receivable under the Company's existing accounts receivable securitization facility. The acquisition qualified for a joint election tax benefit under section 338(h) (10) of the Internal Revenue Code, providing $30 million in tax benefits on a present-value basis. As a result, the purchase price for this transaction was effectively reduced to approximately $178.5 million. Fisher believes that, net of integration costs and other acquisition related expenses, the acquisition will have no impact on Fisher's 2001 earnings and be three cents accretive to its earnings per share in 2002. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Acquired Business The combined financial statements of Cole-Parmer Instrument Company and Affiliates are attached hereto as listed in the index on page F-1 herein. (b) Pro Forma Financial Information The unaudited pro forma financial information presented includes the reported results for Fisher as reported in the Company's Form 10-K or 10-Q, as applicable, for the periods presented. The unaudited pro forma financial information also includes the combined financial results for Cole-Parmer and Vista Properties, L.P., a special purpose entity not acquired by Fisher in the transaction ("Vista" and together with Cole-Parmer, the "C-P Entities"), for the periods presented. On November 5, 2001, the Company acquired Cole-Parmer in a cash transaction for a total purchase price of approximately $208.5 million, net of cash acquired. The Company financed the acquisition using cash available from the Company's public offering in May 2001 and from the sale of accounts receivable through the Company's receivables securitization facility. The unaudited pro forma combined balance sheet as of September 30, 2001 set forth below gives effect to the acquisition of Cole-Parmer by Fisher of 100% of the share capital pursuant to the Purchase Agreement dated September 4, 2001, as if such transaction had occurred on September 30, 2001. The acquisition was accounted for in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"). Estimates of acquisition liabilities relating to the integration of Cole-Parmer with Fisher's operations have not been reflected in the unaudited pro forma combined balance sheet. The unaudited pro forma combined statements of operations for the nine months ended September 30, 2001 and for the year ended December 31, 2000, set forth below give effect to the acquisition, as if the transaction had occurred as of January 1, 2000. Potential cost savings from combining the operations have not been reflected in the unaudited pro forma combined statements of operations as there can be no assurance that any such cost savings will occur. Additionally, anticipated costs to integrate the operations and charges due to estimated fair value increase to inventory have not been reflected in the unaudited pro forma combined statements of operations. The unaudited pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. All information and financial data concerning Cole-Parmer included in the unaudited pro forma financial information has been provided to Fisher by Cole-Parmer. The unaudited pro forma financial information is provided for informational purposes only and does not purport to be indicative of Fisher's results of operations that would actually have been achieved had the acquisition been completed as of or for the periods presented, or that may be obtained in the future. The pro forma financial information should be read in conjunction with the audited and unaudited historical financial statements of Fisher and related notes thereto previously reported on Form 10-K and Form 10-Q, and of the C-P Entities and related notes thereto included herein. FISHER SCIENTIFIC INTERNATIONAL INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2001 (IN MILLIONS, EXCEPT PER SHARE DATA)
Historical Historical Pro Forma Pro Forma Fisher C-P Entities Adjustments Combined ---------- ------------ ----------- --------- Sales $ 2,125.3 $ 134.6 $ (3.7)(a) $ 2,256.2 Cost of sales 1,585.6 76.3 (3.7)(a) 1,658.2 Selling, general and administrative expense 400.0 45.2 2.4 (b) 447.6 Restructuring and other charges 51.6 -- -- 51.6 --------- ------- -------- --------- Income from operations 88.1 13.1 (2.4) 98.8 Interest expense 74.9 0.5 1.3 (c) 76.7 Other (income) expense, net 1.6 (0.2) 5.5 (c) 6.9 --------- ------- -------- --------- Income before income taxes 11.6 12.8 (9.2) 15.2 Income tax provision 6.2 0.7 0.2 (d) 7.1 --------- ------- -------- --------- Net income $ 5.4 $ 12.1 $ (9.4) $ 8.1 ========= ======= ======== ========= Net income per common share: Basic $ 0.11 $ 0.17 ========= ========= Diluted $ 0.10 $ 0.16 ========= ========= Weighted average common shares outstanding: Basic 47.8 47.8 ========= ========= Diluted 51.6 51.6 ========= =========
See accompanying notes to unaudited pro forma financial information. FISHER SCIENTIFIC INTERNATIONAL INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 (IN MILLIONS, EXCEPT PER SHARE DATA)
Historical Historical Pro Forma Pro Forma Fisher C-P Entities Adjustments Combined ---------- ------------ ----------- --------- Sales $ 2,622.3 $ 176.1 $ (4.4)(a) $ 2,794.0 Cost of sales 1,974.0 99.9 (4.4)(a) 2,069.5 Selling, general and administrative expense 494.0 55.6 3.1 (b) 552.7 Restructuring and other charges (credits) (2.0) -- -- (2.0) ---------- --------- -------- --------- Income from operations 156.3 20.6 (3.1) 173.8 Interest expense 99.1 0.1 3.2 (c) 102.4 Other (income) expense, net 19.4 (0.1) 9.5 (c) 28.8 ---------- --------- -------- --------- Income before income taxes 37.8 20.6 (15.8) 42.6 Income tax provision 15.1 0.8 0.3 (d) 16.2 ---------- --------- -------- --------- Net income $ 22.7 $ 19.8 $ (16.1) $ 26.4 ========== ========= ======== ========= Net income per common share: Basic $ 0.57 $ 0.66 ========= ========= Diluted $ 0.51 $ 0.59 ========= ========= Weighted average common shares outstanding: Basic 40.1 40.1 ========= ========= Diluted 44.4 44.4 ========= =========
See accompanying notes to unaudited pro forma financial information. FISHER SCIENTIFIC INTERNATIONAL INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 2001 (IN MILLIONS)
Historical Historical Pro Forma Pro Forma Fisher C-P Entities Adjustments Combined ---------- ------------ ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 229.8 $ 5.6 $ (161.9)(f) $ 73.5 Receivables, net 344.0 21.5 (50.5)(e,f) 315.0 Inventories 248.2 19.9 13.3 (h) 281.4 Other current assets 77.0 7.8 -- 84.8 -------- ------- -------- --------- Total current assets 899.0 54.8 (199.1) 754.7 Property, plant and equipment 305.8 22.1 (7.1)(g,h) 320.8 Goodwill 406.7 9.7 70.2 (h) 486.6 Other assets 167.5 8.9 61.1 (g,h) 237.5 -------- ------- -------- --------- Total assets $1,779.0 $ 95.5 $ (74.9) $ 1,799.6 ======== ======= ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 71.1 $ 1.2 $ (0.8)(g) $ 71.5 Accounts payable 328.0 9.9 (0.5)(e) 337.4 Accrued and other current liabilities 174.2 4.3 5.6 (f) 184.1 -------- ------- -------- --------- Total current liabilities 573.3 15.4 4.3 593.0 Long-term debt 974.9 11.1 (11.1)(g) 974.9 Other liabilities 218.7 0.9 -- 219.6 -------- ------- -------- --------- Total liabilities 1,766.9 27.4 (6.8) 1,787.5 -------- ------- -------- --------- Commitments and contingencies Stockholders' equity: Common stock 0.5 0.7 (0.7)(h) 0.5 Capital in excess of par value 656.3 1.5 (1.5)(h) 656.3 Retained earnings (accumulated deficit) (566.5) 83.4 (83.4)(h) (566.5) Accumulated other comprehensive loss (77.2) -- -- (77.2) Treasury Stock, at cost (1.0) (17.5) 17.5(h) (1.0) -------- ------- -------- --------- Total stockholders' equity 12.1 68.1 (68.1) 12.1 -------- ------- -------- --------- Total liabilities and stockholders' equity $1,779.0 $ 95.5 $ (74.9) $ 1,799.6 ======== ======= ======== =========
See accompanying notes to unaudited pro forma financial information. FISHER SCIENTIFIC INTERNATIONAL INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION Note 1 - Basis of Presentation The unaudited pro forma financial information presented includes the reported results for Fisher as reported in the Company's Form 10-K or Form 10-Q, as applicable, for the periods presented. The unaudited pro forma financial information also includes the combined financial results for C-P Entities, for the periods presented. On November 5, 2001, the Company, through a wholly-owned indirect subsidiary, acquired Cole-Parmer in a cash transaction for a total purchase price of approximately $208.5 million, net of cash acquired. The Company financed the acquisition using cash available from the Company's public offering in May 2001 and from the sale of accounts receivable through the Company's receivables securitization facility. The unaudited pro forma combined statement of operations for the nine months ended September 30, 2001 give effect of the transaction as if it had occurred on January 1, 2000. The historical statement of operations for Fisher is as filed in the Company's Form 10-Q for the quarter then ended. The historical statement of operations for the C-P Entities include the unaudited results for the nine months then ended. The C-P Entities results ended September 30, 2001 included the C-P Entities results for the three months ended March 31, 2001 of its fiscal year then ended and the six months ended September 30, 2001 included herein as listed in the index on page F-1. The unaudited pro forma combined statement of operations for the year ended December 31, 2000 give effect of the transaction as if it had occurred on January 1, 2000. The historical statement of operations for Fisher is for the Company's calendar year ended December 31, 2000 as filed in the Company's Form 10-K. The historical statement of operations for the C-P Entities is for the C-P Entities's audited fiscal year ended March 31, 2001 filed herein. The unaudited pro forma combined balance sheet gives effect of the transaction as if it had occurred on September 30, 2001. The unaudited pro forma financial information presented includes certain pro forma adjustments as discussed in Note 2 - Unaudited Pro Forma Adjustments. The unaudited pro forma financial information does not purport to be indicative of the Company's results of operations or financial position that would actually have been achieved had the transaction been completed for the periods presented, or that may be obtained in the future. The unaudited pro forma financial information should be read in conjunction with the audited and unaudited historical financial statements of Fisher and the C-P Entities referred to above. Note 2 - Unaudited Pro Forma Adjustments (a) Represents the elimination of sales and cost of sales for transactions between Fisher and Cole-Parmer for the periods presented. (b) Included in the $2.4 million and $3.1 million of pro forma adjustments to selling, general and administrative expense for the nine months ended September 30, 2001 and for the year ended December 31, 2000, respectively, are the following: An adjustment to eliminate depreciation expense of Vista of $0.2 million and $0.3 million for the nine months ended September 30, 2001 and for the year ended December 31, 2000, respectively. An adjustment to record approximately $1.3 million and $1.7 million of rent expense for lease payments to Vista for the nine months ended September 30, 2001 and for the year ended December 31, 2000, respectively. As part of the Sales Agreement, Fisher entered into a lease agreement with Vista for the facility located in Vernon Hills, Illinois. An adjustment to amortize identifiable intangible assets with finite useful lives and depreciate fair value adjustments to fixed assets over periods ranging from 3 - 24 years for intangible assets and 1 to 15 years for fixed assets. The depreciation and amortization expense adjustment was $1.3 million and $1.7 million for the nine months ended September 30, 2001 and for the year ended December 31, 2000, respectively. Goodwill and intangible assets related to this transaction have been accounted for in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 provides for the nonamortization of goodwill and other indefinite lived intangible assets. Accordingly, the unaudited pro forma adjustments do not include amortization of goodwill and indefinite lived intangible assets. (c) Represents an adjustment for the financing of the purchase price of $208.5 million funded through the sale of $50.0 million in receivables under the Company's receivable securitization facility and existing cash on hand. The loss on the sale of receivables, which is included in interest expense, was calculated based on an implied rate of 4.4% and 6.3% for the nine months ended September 30, 2001 and for the year ended December 31, 2000, respectively. The foregone interest income was calculated based on a 4.6% and 6.0% interest rate for the nine months ended September 30, 2001 and for the year ended December 31, 2000, respectively. (d) Represents an adjustment for the tax effect on the Cole-Parmer historical financial results and related unaudited pro forma adjustments at the combined U.S. federal and state statutory tax rate of 37%. The tax effect of the remaining unaudited pro forma adjustments has been calculated using Fisher's effective tax rate of 40%. Since Cole-Parmer was organized as a Subchapter S Corporation, the Company's historical statements make no provisions for federal income taxes and for certain state income taxes where a Subchapter S election has been made. (e) Represents an adjustment to eliminate accounts receivables and accounts payable between Fisher and Cole-Parmer at September 30, 2001. (f) Represents an adjustment to reflect the funding of the purchase price as Fisher used available cash of $161.8 million from the Company's public offering in May 2001 and $50.0 million from the sale of accounts receivable through the Company's receivables securitization facility. The unaudited pro forma adjustment also reflects $0.1 million of cash for Vista, which was not acquired as part of the transaction. The pro forma combined balance sheet also reflects $5.6 million of accrued transaction costs. (g) Represents an adjustment to eliminate assets and liabilities not acquired by Fisher, including $4.8 million cash surrender value for certain executive life insurance policies, certain debt obligations and Vista that held net property of $14.4 million and debt obligations of $11.4 million. (h) Represents an adjustment to allocate excess purchase price over the book value of the net assets acquired of $156.7 million, including fair value adjustments for inventory, property, plant and equipment intangible assets and goodwill. The allocation of purchase price has been made based upon management estimates and third party valuations that have not been finalized. Accordingly, the allocation of purchase price is preliminary. Note 3 - Unaudited Pro Forma Earnings Per Share Unaudited pro forma earnings per share is computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). Unaudited pro forma basic net income per share is computed by dividing pro forma net income by Fisher's historical weighted average number of shares of common stock outstanding during the period. Unaudited pro forma diluted net income per share is computed by dividing pro forma net income by Fisher's historical weighted average number of shares of common stock outstanding during the period, including potential common shares from conversion of stock options and warrants using the treasury stock method, if dilutive. The following table sets forth unaudited pro forma basic and diluted net income per share computational data for the periods presented (in millions, except per share amounts):
Nine Months Year Ended Ended September 30, December 31, 2001 2000 ------------- ------------ Unaudited pro forma net income............ $ 8.1 $ 26.4 ========== ======== Weighted average shares of common stock outstanding used in the computation of basic earnings per share................................... 47.8 40.1 Common stock equivalents(a)............... 3.8 4.3 --------- -------- Shares used in the computation of diluted earnings per share...................... 51.6 44.4 ========== ======== Unaudited pro forma basic net income per share................................... $ 0.17 $ 0.66 ========== ======== Unaudited pro forma diluted net income per share............................... $ 0.16 $ 0.59 ========== ========
(a) The amount of outstanding antidilutive common stock options and warrants excluded from the computation of unaudited pro forma diluted net income per share for the nine months ended September 30, 2001 and for the year ended December 31, 2000 was 0.9 million and 0.2 million, respectively. The unaudited pro forma basic and diluted net income per share does not purport to be indicative of the Company's basic and diluted earnings per share that would actually have been achieved had the transaction been completed for the periods presented, or that may be obtained in the future. (c) Exhibits 2.1 Stock Purchase Agreement by and among Fisher Scientific International Inc. and the shareholders of Cole-Parmer Instrument Company, Labcor Technical Sales, Inc. and Specialty Motors, Inc. dated as of September 4, 2001. (Previously filed by the registrant in Form 8-K dated November 13, 2001 and incorporated herein by reference.) 23.1 Consent of Deloitte & Touche LLP 23.2 Consent of Warady & Davis LLP Signature Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly cause this report to be signed on its behalf by the undersigned hereto duly authorized. Fisher Scientific International Inc. By: /s/ Todd M. DuChene ----------------------------------- Name: Todd M. DuChene Title: Vice President, General Counsel and Secretary Dated: January 11, 2002 FISHER SCIENTIFIC INTERNATIONAL INC. INDEX TO FINANCIAL STATEMENTS OF ACQUIRED BUSINESS COLE-PARMER INSTRUMENT COMPANY AND AFFILIATES INDEPENDENT AUDITORS' REPORT.......................................... F-2 INDEPENDENT AUDITORS' REPORT.......................................... F-3 COMBINED STATEMENT OF INCOME.......................................... F-4 COMBINED BALANCE SHEET................................................ F-5 COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL............................................... F-6 COMBINED STATEMENT OF CASH FLOWS...................................... F-7 NOTES TO FINANCIAL STATEMENTS......................................... F-8 F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Cole-Parmer Instrument Company Vernon Hills, Illinois We have audited the accompanying combined balance sheet of Cole-Parmer Instrument Company and affiliates (as defined in Note 1 and hereinafter referred to as the "Company"), all of which are under common ownership and common management, as of March 31, 2001, and the related combined statements of income, stockholders' equity and partner's capital and of cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 combined financial position of the Cole-Palmer Instrument Company and affiliates at March 31, 2001, and the combined results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP October 15, 2001 (November 5, 2001 as to Note 2) Pittsburgh, Pennsylvania F-2 INDEPENDENT AUDITORS' REPORT Board of Directors Cole-Parmer Instrument Company Vernon Hills, Illinois We have audited the accompanying combined balance sheet of Cole-Parmer Instrument Company and affiliates (as defined in Note 1 and hereinafter referred to as the "Company"), all of which are under common ownership and common management, as of March 31, 2000, and the related combined statements of income, stockholders' equity and partner's capital and of cash flows for the years ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the combined financial position of the Cole-Palmer Instrument Company and affiliates at March 31, 2000, and the combined results of their operations and their cash flows for the years ended March 31, 2000 and 1999 in conformity with accounting principles generally accepted in the United States of America. /s/ Warady & Davis LLP October 3, 2001 Deerfield, Illinois F-3 COLE-PARMER INSTRUMENT COMPANY AND AFFILIATES COMBINED STATEMENT OF INCOME (In Thousands) --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, ------------------------------------- ------------------- 2001 2000 1999 2001 2000 -------- -------- -------- ------- ------- (UNAUDITED) ------------------- Sales $176,102 $165,408 $160,238 $86,942 $84,805 Cost of sales 99,935 93,657 90,369 48,604 47,472 Selling, general and administrative expense 55,551 57,892 53,946 29,858 27,595 Write-off of Sci-Tech International, Inc. -- 4,104 -- -- -- -------- -------- -------- ------- ------- Income from operations 20,616 9,755 15,923 8,480 9,738 Other (income) expense, net 33 21 99 344 (142) -------- -------- -------- ------- ------- Income before income tax provision 20,583 9,734 15,824 8,136 9,880 Income tax provision 800 509 342 442 301 -------- -------- -------- ------- ------- Net income $ 19,783 $ 9,225 $ 15,482 $ 7,694 $ 9,579 ======== ======== ======== ======= =======
See notes to combined financial statements. F-4 COLE-PARMER INSTRUMENT COMPANY AND AFFILIATES COMBINED BALANCE SHEET (IN THOUSANDS EXCEPT SHARE DATA) --------------------------------------------------------------------------------
March 31, September 30, -------------------------- ------------- 2001 2000 2001 --------- -------- ------------- (Unaudited) ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,597 $ 7,601 $ 5,570 Accounts receivable, net of allowance for doubtful accounts of $700, $740 and $599, respectively 23,864 21,884 21,464 Inventories 18,019 14,046 19,897 Investments in securities 3,205 2,963 -- Other current assets 6,262 6,312 7,803 --------- -------- -------- Total current assets 56,947 52,806 54,734 --------- -------- -------- PROPERTY, PLANT AND EQUIPMENT 23,170 23,627 22,099 GOODWILL, net of accumulated amortization 10,156 8,136 9,752 OTHER ASSETS, net of accumulated amortization 11,270 9,567 8,906 --------- -------- -------- $ 101,543 $ 94,136 $ 95,491 ========= ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL CURRENT LIABILITIES: Accounts payable $ 11,072 $ 10,385 $ 9,867 Current maturities of long-term debt 1,042 714 1,159 Accrued and other current liabilities 3,993 4,138 15,364 --------- -------- -------- Total current liabilities 16,107 15,237 13,364 --------- -------- -------- LONG-TERM LIABILITIES: Long-term debt, less current maturities 114 847 11,114 Other liabilities 700 477 822 --------- -------- -------- Total long-term liabilities 814 1,324 11,936 --------- -------- -------- MINORITY INTEREST 58 158 58 --------- -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL: Common stock - Cole-Parmer Instrument Company (no par value; 800,000 shares authorized, 400,000, 400,000 and 345,400 shares outstanding at March 31, 2001, March 31, 2000 and September 30, 2001, respectively) $ 40 $ 40 $ 40 Common stock - Cole-Parmer Instrument Company (treasury stock; at cost; 54,600 shares at September 30, 2001) -- -- (17,527) Common stock - Specialty Motors, Inc. (no par value; 10,000 shares authorized; 2,000 shares issued) 600 600 600 Common stock - Labcor Technical Sales, Inc. (no par value; unlimited number of shares authorized; 200 shares outstanding) 20 20 20 Class A stock - Labcor Technical Sales, Inc. (no par value; unlimited number of shares authorized; no shares outstanding) -- -- -- Capital in excess of par value 1,531 1,531 1,531 Partner's capital - Vista Properties, L.P. 3,075 3,147 3,038 Accumulated other comprehensive loss (236) (145) (44) Retained earnings 79,534 72,224 80,475 --------- -------- -------- Total stockholders' equity and partner's capital 84,564 77,417 68,133 --------- -------- -------- $ 101,543 $ 94,136 $ 95,491 ========= ======== ========
See notes to combined financial statements. (Concluded) F-5 COLE-PARMER INSTRUMENT COMPANY AND AFFILIATES COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL (IN THOUSANDS EXCEPT SHARE AMOUNTS) --------------------------------------------------------------------------------
COMMON STOCK -------------------------------------------------------------------------------- COLE-PARMER COLE-PARMER INSTRUMENT LABCOR INSTRUMENT COMPANY SPECIALTY TECHNICAL COMPANY (ISSUED) (TREASURY, AT COST) MOTORS SALES, INC. ----------------- ------------------- ------------------ ----------------- SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS ------- ------- ------- -------- ------- ------- ------- ------- BALANCE, APRIL 1, 1998 400,000 $ 40 -- $ -- 2,000 $ 600 200 $ 20 Net income -- -- -- -- -- -- -- -- Other comprehensive income: Unrealized gain on investment securities -- -- -- -- -- -- -- -- Foreign currency translation adjustments -- -- -- -- -- -- -- -- Other -- -- -- -- -- -- -- -- Other comprehensive loss -- -- -- -- Comprehensive income -- -- -- -- -- -- -- -- Dividends paid -- -- -- -- -- -- -- -- Conversion of Notes Payable to Stockholders to Capital in Excess of Par -- -- -- -- -- -- -- -- ------- ------- ------- -------- ------- ------- ------- ------- BALANCE, MARCH 31, 1999 400,000 40 -- -- 2,000 600 200 20 Net income -- -- -- -- -- -- -- -- Other comprehensive income: Unrealized gain on investment securities -- -- -- -- -- -- -- -- Foreign currency translation adjustments -- -- -- -- -- -- -- -- Other -- -- -- -- -- -- -- -- Other comprehensive loss -- -- -- -- -- -- -- -- Comprehensive income -- -- -- -- -- -- -- -- Dividends paid -- -- -- -- -- -- -- -- ------- ------- ------- -------- ------- ------- ------- ------- BALANCE, March 31, 2000 400,000 40 -- -- 2,000 600 200 20 Net income -- -- -- -- -- -- -- -- Other comprehensive income: Unrealized gain on investment securities -- -- -- -- -- -- -- -- Foreign currency translation adjustments -- -- -- -- -- -- -- -- Other comprehensive loss -- -- -- -- -- -- -- -- Comprehensive income -- -- -- -- -- -- -- -- Dividends paid -- -- -- -- -- -- -- -- ------- ------- ------- -------- ------- ------- ------- ------- BALANCE, MARCH 31, 2001 400,000 40 -- -- 2,000 600 200 20 Net income (unaudited) -- -- -- -- -- -- -- -- Other comprehensive income: Unrealized gain on investment securities (unaudited) -- -- -- -- -- -- -- -- Foreign currency translation adjustments (unaudited) -- -- -- -- -- -- -- -- Other comprehensive loss (unaudited) -- -- -- -- -- -- -- -- Comprehensive income (unaudited) -- -- -- -- -- -- -- -- Dividends paid (unaudited) -- -- -- -- -- -- -- -- Redemption of common shares for cash and certain notes and interest receivable -- -- (54,600) (17,527) -- -- -- -- ------- ------- ------- -------- ------- ------- ------- ------- BALANCE, SEPTEMBER 30, 2001 (UNAUDITED) 400,000 $ 40 (54,600) $(17,527) 2,000 $ 600 200 $ 20 ======= ======= ======= ======== ======= ======= ======= ======= CLASS A STOCK --------------- TOTAL LABCOR STOCKHOLDERS' TECHNICAL CAPITAL PARTNER'S ACCUMULATED EQUITY SALES, INC. IN CAPITAL-VISTA OTHER AND --------------- EXCESS PROPERTIES COMPREHENSIVE RETAINED COMPREHENSIVE PARTNER'S SHARES DOLLARS OF PAR L.P. LOSS EARNINGS INCOME CAPITAL ------ ------- ------- ------------- ------------- -------- ------------- ------------- BALANCE, APRIL 1, 1998 -- $ -- $ 1,000 $ 3,424 $ (77) $ 71,797 $ 76,804 Net income -- -- -- 364 -- 15,118 $15,482 15,482 Other comprehensive income: Unrealized gain on investment securities -- -- -- -- 40 -- 40 40 Foreign currency translation adjustments -- -- -- -- (55) -- (55) (55) Other -- -- -- -- 8 -- 8 8 ------- Other comprehensive loss (7) -- ------- Comprehensive income -- -- -- -- -- -- $15,475 -- ======= Dividends paid -- -- -- (509) -- (12,000) (12,509) Conversion of Notes Payable to Stockholders to Capital in Excess of Par -- -- 531 -- -- -- 531 ----- ----- ------- ------- ------- -------- BALANCE, MARCH 31, 1999 -- -- 1,531 3,279 (84) 74,915 80,301 Net income -- -- -- 416 -- 8,809 9,225 9,225 Other comprehensive income: Unrealized loss on investment securities -- -- -- -- (46) -- (46) (46) Foreign currency translation adjustments -- -- -- -- (37) -- (37) (37) Other -- -- -- -- 22 -- 22 22 ------- Other comprehensive loss -- -- -- -- -- -- (61) -- ------- Comprehensive income -- -- -- -- -- -- $ 9,164 -- ======= Dividends paid -- -- -- (548) -- (11,500) (12,048) ----- ----- ------- ------- ------- -------- -------- BALANCE, March 31, 2000 -- -- 1,531 3,147 (145) 72,224 77,417 Net income -- -- -- 473 -- 19,310 $19,783 19,783 Other comprehensive income: Unrealized gain on investment securities -- -- -- -- 50 -- 50 50 Foreign currency translation adjustments -- -- -- -- (141) -- (141) (141) ------- Other comprehensive loss -- -- -- -- -- -- (91) -- ------- Comprehensive income -- -- -- -- -- -- $19,692 -- ======= Dividends paid -- -- -- (545) -- (12,000) (12,545) ----- ----- ------- ------- ------- -------- -------- BALANCE, MARCH 31, 2001 -- -- 1,531 3,075 (236) 79,534 84,564 Net income (unaudited) -- -- -- 253 -- 7,441 $ 7,694 7,694 Other comprehensive income: Unrealized gain on investment securities (unaudited) -- -- -- -- 223 -- 223 223 Foreign currency translation adjustments (unaudited) -- -- -- -- (31) -- (31) (31) ------- Other comprehensive income (unaudited) -- -- -- -- -- -- 192 -- ------- Comprehensive income (unaudited) -- -- -- -- -- -- $ 7,886 -- ======= Dividends paid (unaudited) -- -- -- (290) -- (6,500) (6,790) Redemption of common shares for cash and certain notes and interest receivable -- -- -- -- -- -- (17,527) ----- ----- ------- ------- ------- -------- -------- BALANCE, SEPTEMBER 30, 2001 (UNAUDITED) $ -- $ -- $ 1,531 $ 3,038 $ (44) $ 80,475 $ 68,133 ===== ===== ======= ======= ======= ======== ========
See notes to combined financial statements. F-6 COLE-PARMER INSTRUMENT COMPANY AND AFFILIATES COMBINED STATEMENT OF CASH FLOWS (IN THOUSANDS) --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, ---------------------------------- ---------------------- 2001 2000 1999 2001 2000 -------- -------- -------- -------- -------- (Unaudited) ---------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 19,783 $ 9,225 $ 15,482 $ 7,694 $ 9,579 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,312 8,172 7,432 4,772 4,301 Write-off of Sci-Tech International, Inc. -- 4,104 -- -- -- Changes in operating assets and liabilities: Accounts receivable (1,817) (873) 438 2,549 (780) Inventories (3,815) 1,380 342 221 431 Other current assets (6,371) (3,468) (6,287) (1,734) (5,925) Accounts payable 348 1,419 (327) (3,205) 662 Accrued and other current liabilities 30 (874) 391 345 1,040 Enhanced tax deposit -- 453 538 -- -- Other 119 154 42 135 185 -------- -------- -------- -------- -------- Net cash provided by operating activities 17,589 19,692 18,051 10,777 9,493 -------- -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of additional Eutech interest, net of cash purchased (3,219) (3,367) -- -- -- Purchase of common stock of Sci-Tech International, Inc. -- (4,104) -- -- -- Proceeds from sale of investments in securities 3,356 2,510 1,710 3,189 700 Purchase of investments in securities (3,550) (460) (3,419) -- (3,550) Capital expenditures (3,119) (2,431) (2,527) (629) (1,294) Increase in cash value of executive life insurance (178) (183) (188) (163) (166) -------- -------- -------- -------- -------- Net cash (used in) provided by investing activities (6,710) (8,035) (4,424) 2,397 (4,310) -------- -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt (payments) borrowings - net (391) (397) 180 (354) (344) Redemption of CPIC common stock -- -- -- (5,991) -- Payments of distributions (12,545) (12,048) (12,510) (6,790) (9,016) -------- -------- -------- -------- -------- Cash used in financing activities (12,936) (12,445) (12,330) (13,135) (9,360) -------- -------- -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 53 39 (80) (66) 30 -------- -------- -------- -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,004) (749) 1,217 (27) (4,147) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,601 8,350 7,133 5,597 7,601 -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,597 $ 7,601 $ 8,350 $ 5,570 $ 3,454 ======== ======== ======== ======== ========
See notes to combined financial statements. F-7 COLE-PARMER INSTRUMENT COMPANY AND AFFILIATES NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 IS UNAUDITED) -------------------------------------------------------------------------------- 1. BACKGROUND AND PRINCIPLES OF COMBINATION Cole-Parmer Instrument Company and affiliates is a worldwide distributor of specialty technical instruments, appliances, equipment and supplies to industrial/bioscience, academic and government customers. Additionally, the Company manufactures peristaltic pumps and related fluid management instrumentation. The combined financial statements contain the accounts of Cole-Parmer Instrument Company ("CPIC"), CPIC's majority-owned subsidiaries, Eutech Instruments PTE LTD and Subsidiaries ("Eutech") and Cole-Parmer Instrument Company Limited ("CP-UK"), and three affiliated companies, Speciality Motors, Inc. ("SMI"), Labcor Technical Sales, Inc. ("Labcor") and Vista Properties, L.P. ("Vista"). Each of these entities is affiliated either through common ownership or control and are collectively hereinafter referred to as the "Company." Intercompany and affiliate accounts and transactions are eliminated. 2. SUBSEQUENT EVENTS On September 4, 2001, the stockholders of the Company executed an agreement (the "Sales Agreement") to sell their ownership interest in each of the entities presented in the combined financial statements except Vista. This transaction closed on November 5, 2001. As required by the Sales Agreement, CPIC distributed to its stockholders cash of $6,142 and its ownership interests in certain executive life insurance policies that, on the date of distribution, had a cash surrender value of $4,858. Additionally, as required by the Sales Agreement, CPIC amended the related party lease for its Vernon Hills facility with Vista. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INTERIM FINANCIAL STATEMENTS (UNAUDITED) - The interim financial statements included herein have been prepared by the Company without audit. The financial statements presented herein reflect all adjustments (consisting only of normal-recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of the results to be expected for the full year. F-8 CASH EQUIVALENTS - Cash and cash equivalents consist primarily of highly liquid investments with insignificant interest rate risk and original maturities of three months or less at the date of acquisition. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and its cash equivalents. INVENTORIES - Inventories are valued at the lower of cost or market, cost being determined principally by the last-in, first-out ("LIFO") method for the majority of the domestic inventory and by the first-in, first-out ("FIFO") method for inventory held by foreign subsidiaries. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is recorded at cost and is generally depreciated based upon the following estimated useful lives; buildings and improvements 3 to 40 years, and machinery, equipment and other 3 to 10 years. Depreciation is computed principally using the straight-line and accelerated methods. Depreciation expense was $3,578, $3,048 and $3,090 for the three years in the period ended March 31, 2001, respectively. GOODWILL - Goodwill is amortized on a straight-line basis over 10 to 15 years. The amount presented is net of accumulated amortization of $2,286, and $1,596 at March 31, 2001 and 2000, respectively. Amortization expense was $695, $658 and $437 for the three years in the period ended March 31, 2001, respectively. OTHER INTANGIBLE ASSETS - Net other intangible assets, included within other assets, consist primarily of patents and non-compete agreements of $612 and $736 at March 31, 2001 and 2000, respectively, are amortized on a straight-line basis over their estimated useful lives, ranging up to 15 years and are stated net of accumulated amortization of $821 and $696 at March 31, 2001 and 2000, respectively. During the three years in the period ended March 31, 2001, the Company recorded amortization expense of $125, $128 and $31. IMPAIRMENT OF LONG-LIVED ASSETS - Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present or the anticipated undiscounted operating cash flows generated by those assets are less than the assets' carrying value. An impairment charge is recorded for the difference between the fair value and carrying value of the asset. During the year ended March 31, 2000, CPIC purchased Sci-Tech International, Inc. Subsequent to the purchase, CPIC liquidated the subsidiary and incurred a write-off of $4,104. ADVERTISING - The Company expenses advertising costs as incurred, except for certain direct-response advertising, which is capitalized and amortized over its expected period of future benefit. Direct response advertising consists of catalog production and mailing costs that are amortized from the date catalogs are mailed. Advertising expenses, including internal employment costs for marketing personnel and amortization of capitalized direct response advertising, were $15,467, $14,803 and $12,995 for the three years in the period ended March 31, 2001, respectively. F-9 EUTECH FINANCIAL RESULTS - Prior to April 1, 1999, CPIC owned a 44% interest in Eutech and accordingly accounted for the investment using the equity method. Under the equity method, the investment was carried at cost and adjusted for CPIC's proportionate share of undistributed earnings or losses and amortization of purchased goodwill. On April 1, 1999, CPIC acquired a controlling interest of Eutech and from that date consolidated Eutech's financial results and recorded as minority interest the net assets of Eutech owned by entities outside of the combined group. The financial statements include the effect of the minority interest bearing its share of income and losses by Eutech to the extent of its share of net assets. REVENUE RECOGNITION - The Company recognizes revenue from product sales consistent with the related shipping terms, generally at the time products are shipped and title is transferred. SELF-INSURANCE - CPIC is self-insured for employee hospitalization up to maximum limits per incident of $75. Losses incurred over this limit are covered by supplemental catastrophic policies up to specified limits with an independent insurer. Accrued insurance costs include estimates of the Company's ultimate costs for both reported claims and claims incurred but not reported. STOCK-BASED COMPENSATION - The Company has elected, as permitted by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to follow the intrinsic value based method of accounting for stock awards consistent with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" and to provide the pro forma disclosures of net income as if the fair value based method had been applied. Under the intrinsic method, compensation cost for stock awards issued to employees under fixed plans is measured by the excess, if any, of the fair value of the Company's stock at the measurement date (generally the date of grant) over the exercise price. The Black-Scholes option-pricing model was used to compute the fair value of each award granted for purposes of the pro forma disclosures required by SFAS No. 123. FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the Company's foreign subsidiaries, where the functional currency is the local currency, are translated into U.S. dollars using year-end exchange rates. Revenues and expenses of foreign subsidiaries are translated at the average exchange rates in effect during the year. Adjustments resulting from financial statement translations are included in a separate component of stockholders' equity. Gains and losses resulting from foreign currency transactions are reported on the income statement line item "other expense," when recognized. FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments consist primarily of cash in banks, investments in securities, receivables, payables and debt. The carrying amounts for cash and cash equivalents, investments in securities, receivables and payables approximate fair value due to the short-term nature of these instruments. The fair value of third-party debt approximates the net carrying value due primarily to the variable interest rate provisions in each of the debt instruments. Management believes it is not practical to estimate the fair value of the notes payable to shareholders due to the related party nature of the instruments. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. F-10 INVESTMENTS IN SECURITIES - The Company classifies all its investments, which consist primarily of debt securities, as available-for-sale securities. Available-for-sale securities are recorded at fair value in investments on the balance sheet, with the change in fair value during the period excluded from earnings and recorded as a separate component of comprehensive income. Cost for the related securities is determined by the specific identification method. RESEARCH AND DEVELOPMENT - Research and development costs are charged to operations in the year in which such expenses are incurred. Expenses were $3,963, $3,853 and $3,223 for the three years in the period ended March 31, 2001, respectively. NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," subsequently amended by SFAS No. 137 and No. 138, which will be effective for the Company beginning April 1, 2001. SFAS No. 133 requires the Company to record all derivatives on the balance sheet at fair value. Changes in derivative fair values will either be recognized in earnings as offsets to the changes in fair value of related hedged assets, liabilities and firm commitments or, for forecasted transactions, deferred and recorded as a component of other accumulated comprehensive income until the hedged transactions occur and are recognized in earnings. The ineffective portion of a hedging derivative's change in fair value will be immediately recognized in earnings. The adoption of SFAS No. 133, as amended, on April 1, 2001 resulted in no transition adjustment. In July 2001, FASB issued SFAS No. 141, "Business Combinations." SFAS No. 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. SFAS No. 141 also specifies the types of acquired intangible assets that are required to be included in goodwill. Additional provisions of SFAS No. 141 include the reclassification of certain existing recognized intangibles to goodwill and reclassification of certain intangibles out of previously reported goodwill upon adoption. Management has not completed its evaluation of the impact that implementation of SFAS No. 141 is expected to have on the Company's financial condition or results of operations. In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which is effective for fiscal years beginning after December 15, 2001. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill, and the testing for impairment of existing goodwill and other intangibles. Management has not completed its evaluation of the impact that implementation of SFAS No. 142 is expected to have on the Company's financial condition or results of operations. F-11 4. INVESTMENTS IN SECURITIES The following is a summary of investments in debt securities classified as available for sale as of March 31, 2001: FAIR AMORTIZED UNREALIZED VALUE COST GAIN ------ --------- ---------- Maturing in Year Ending March 31 2002 $1,565 $1,556 $ 9 2003 1,640 1,603 37 ------ ------ ---- $3,205 $3,159 $ 46 ====== ====== ==== The following is a summary of investments in debt securities classified as available for sale as of March 31, 2000: FAIR AMORTIZED UNREALIZED VALUE COST LOSS ------ --------- ---------- Maturing in Year Ending March 31 2001 $2,008 $2,008 $ -- 2002 955 959 (4) ------ ------ ---- $2,963 $2,967 $ (4) ====== ====== ==== During the six months ended September 30, 2001, the Company liquidated its investment portfolio. Proceeds from the sale of the investments were $3,189. 5. INVENTORIES The following is a summary of inventories by major category: MARCH 31, SEPTEMBER 30, --------------------- ------------- 2001 2000 2001 ------- ------- ------------- Raw materials $ 5,147 $ 3,454 $ 5,314 Work in process 622 637 618 Finished products 12,250 9,955 13,965 ------- ------- ------- Total $18,019 $14,046 $19,897 ======= ======= ======= Inventories valued using the LIFO method amounted to $15,448 and $11,437 at March 31, 2001 and 2000, respectively, which were below estimated replacement cost by approximately $12,700 and $12,311 as of March 31, 2001 and 2000, respectively. F-12 6. OTHER CURRENT ASSETS The following is a summary of other current assets: MARCH 31, --------------------- 2001 2000 ------- ------- Deferred catalog costs - current $ 5,023 $ 4,900 Other 1,239 1,412 ------- ------- $ 6,262 $ 6,312 ======= ======= 7. PROPERTY, PLANT AND EQUIPMENT The following is a summary of property, plant and equipment by major class of asset: MARCH 31, --------------------- 2001 2000 ------- ------- Land, buildings and improvements $19,477 $19,048 Machinery, equipment and other 28,818 26,598 ------- ------- 48,295 45,646 Accumulated depreciation and amortization (25,125) (22,019) ------- ------- Property, plant and equipment, net $23,170 $23,627 ======= ======= F-13 8. OTHER ASSETS The following is a summary of other assets, net: MARCH 31, --------------------- 2001 2000 ------- ------- Cash value of executive life insurance $ 4,729 $ 4,551 Other, net 6,541 5,016 ------- ------- $11,270 $ 9,567 ======= ======= 9. ACCRUED AND OTHER CURRENT LIABILITIES The following is a summary of accrued and other current liabilities: MARCH 31, --------------------- 2001 2000 ------- ------- Wages and benefits $ 2,722 $ 2,611 Income taxes 803 511 Other 468 1,016 ------- ------- $ 3,993 $ 4,138 ======= ======= 10. COMMITMENTS AND CONTINGENCIES There are various lawsuits and claims pending against the Company involving contract, product liability and other issues. In view of the Company's financial condition and the accruals established for related matters, based on management's knowledge to date, management does not believe that the ultimate liability, if any, related to these matters will have a material adverse effect on the Company's financial condition, results of operations or cash flows. F-14 11. INCOME TAXES AND ENHANCED TAX DEPOSIT In accordance with an election effective April 1, 1982, under the provisions of Subchapter S of the Internal Revenue Code, the stockholders report S corporation income on their individual income tax returns. Accordingly, no provision or liability for federal income taxes is shown in the financial statements. However, the Company is liable for the Illinois Replacement Tax, Singapore Enterprise Tax and other foreign income taxes. For states which do not recognize CPIC's S Corporation election and for all foreign entities, the Company utilizes the provisions of SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Under the Tax Reform Act of 1986, S corporations who elected to maintain a fiscal year other than December 31 are required to make an enhanced tax deposit for the deferral period (April 1 to December 31). The enhanced tax deposit will be adjusted annually based on the prior year's taxable income. Current income taxes payable are included in the accompanying combined balance sheet within accrued and other current liabilities: MARCH 31, --------------------- 2001 2000 ------- ------- Current liabilities: Illinois replacement tax $ 363 $ 221 Singapore enterprise tax 368 245 Other taxes, primarily Canadian 72 45 ------- ------- $ 803 $ 511 ======= ======= Deferred tax liabilities: Singapore enterprise tax $ 207 $ 214 Other taxes, primarily Canadian 94 38 ------- ------- $ 301 $ 252 ======= ======= Temporary differences giving rise to the deferred tax liability on Eutech primarily relate to differences between financial and Singapore tax reporting for development costs and depreciation. F-15 Income tax expense consists of: YEAR ENDED MARCH 31, ----------------------- 2001 2000 1999 ---- ---- ---- Illinois replacement tax $320 $149 $208 Singapore enterprise tax 353 283 -- Other taxes, primarily Canadian 127 77 134 ---- ---- ---- $800 $509 $342 ==== ==== ==== 12. DEBT The following is a summary of debt obligations: MARCH 31, SEPTEMBER 30, ------------------ ------------ 2001 2000 2001 ------ ------- ------------ Note payable - Bel-Art Products, payable in five annual principal installments of $50 plus interest at LIBOR (4.71% at March 31, 2001) (CPIC) $ 50 $ 100 $ -- Note payable - bank, payable in monthly principal installments of $10 plus interest at 30 Day LIBOR (5.08% at March 31, 2001 plus 1%) (SMI) 210 330 150 Line of credit - bank (SMI) 360 330 220 Line of credit - bank (Eutech) -- 175 -- Note payable - shareholders (SMI) 500 500 500 Notes payable - shareholders, payable in monthly installments of principal and interest of $97 including interest at 7.93% (Vista) -- -- 11,383 Capital leases 36 126 20 Current maturities (1,042) (714) (1,159) ------ ------ ------- Long-term debt $ 114 $ 847 $11,114 ====== ====== ======= F-16 The Company has an unsecured $10,000 line of credit that expires July 31, 2002. The line of credit agreement includes certain restrictive financial covenants. Interest is charged at the Company's option using the following rates: Prime (8% at March 31, 2001), daily LIBOR rate (4.88% to 5.08% at March 31, 2001, depending on the term) plus .75%, or cost of funds rate as defined in the agreement (5.28% at March 31, 2001) plus .80%. There were no borrowings outstanding under this line of credit as of March 31, 2001 and September 30, 2001. Eutech has a $1,108 line of credit, based upon exchange rates at March 31, 2001, which matures February 12, 2002 and is guaranteed by CPIC. Interest is charged at the bank's cost of funds (1.5% at March 31, 2001) plus 1.25% for direct borrowings and 0.125% on the unused portion of the facility. There were no borrowings outstanding under this line of credit as of September 30, 2001. SMI has a $500 revolving line of credit and a $500 term note, which are collateralized by the assets of SMI. The revolving line of credit, matures on March 31, 2002. Interest on the revolving line of credit is due monthly at the Company's option using the following rates: Prime (8.0% at March 31, 2001), or cost of funds rate as defined in the agreement (5.28% at March 31, 2001) plus 1%. The term note matures on October 1, 2002. On August 29, 1998, CPIC executed a put agreement with SMI and a bank which effectively obligates CPIC as a guarantor of SMI's bank loan. SMI has two notes payable to certain shareholders of CPIC, who are also shareholders in SMI. Each note is for $250 and is payable upon demand. Interest on the notes is payable annually on or before October 31 of each year and is calculated based upon the Federal short-term rate under Section 1274(d) of the Internal Revenue Code calculated as of each November 1 and May 1 and adjusted upward to the nearest one-half percentage point. On April 18, 2001, CPIC redeemed 54,600 common shares for $17,527. The purchase price, which approximated fair value at the date of the transaction, consisted of the non-cash transfer of the note receivable from Vista held by CPIC in the amount of $11,536 and cash of $5,991. The note payable by Vista is payable monthly through July 2005, at which time the outstanding principal balance is due. The note is secured by a mortgage on Vista's real estate and improvements which constitute the CPIC's primary distribution facility. Debt maturities are as follows: Year Ending ----------------------- March 31, September 30, -------- ------------ 2002 $ 1,042 $ 1,159 2003 114 259 2004 -- 320 2005 -- 10,535 F-17 13. RESTRICTED STOCK - STOCK OPTIONS In accordance with an amended employment agreement with a director of Eutech, the Company granted and the director concurrently exercised options for 150,000 redeemable preference shares of Eutech for $85 on March 12, 2001. The stock is restricted, is not convertible into ordinary shares and contains no voting rights. The stock plan is deemed to be compensatory with a term expiring on March 31, 2006. At the option of Eutech or the director, as defined, 20,000 shares are redeemable each year within 15 days after the issuance of the audited financial statements, beginning March 31, 2002. The remaining 50,000 shares are redeemable as mutually agreed upon in writing and may occur at a date not earlier than March 31, 2006. The redemption price of the shares is derived from a formula based upon 125% of the net worth per share of Eutech, not to exceed approximately $2,912. The fair value of the redeemable preference shares as of March 31, 2001 has been determined to be approximately $399. Compensation costs charged to operations were $87, $78 and $44 for the three years in the period ended March 31, 2001, respectively. No other stock options were granted, exercised, forfeited or are outstanding as of March 31, 2001 or September 30, 2001. 14. STOCK PURCHASE PLAN On January 26, 2001, a European subsidiary of Eutech ("Eutech Europe") executed a shareholder agreement with Eutech and the minority shareholder that among other things stipulates the terms for purchase or redemption of the minority's shares. On March 31, 2006 and thereafter, the parties have options, as defined, to begin the purchase or redemption of a limited number of shares each year that will effectively purchase the minority interest over a period of approximately five to ten years. 15. PROFIT SHARING PLAN The Company maintains a profit sharing plan covering substantially all domestic employees after a specified period of service. It includes a salary deferral option, which qualifies under Section 401(k) of the Internal Revenue Code. Participants can defer up to 4% of their salary upon which the Company will match $.50 to every $1.00 deferred. Participants can defer an additional 8% of salary, which is not matched by the Company. Additionally, the Company may make, at the Company's discretion, profit sharing contributions. All salary deferral matching contributions made by the Company are immediately vested while profit sharing contributions vest over a seven year period. Profit sharing expense totaled $1,856, $1,881 and $1,815 during the three years in the period ended March 31, 2001, respectively. F-18 16. LEASES The Company leases certain office facilities and equipment under operating lease arrangements. Future minimum payments for noncancelable operating leases are approximately $728, $726, $464, $117 and $63 for the five years in the period ended March 31, 2006. Rent expense under the operating leases was $774, $736 and $508 for the three years in the period ended March 31, 2001. * * * * * * F-19